TMI Blog2022 (1) TMI 347X X X X Extracts X X X X X X X X Extracts X X X X ..... 68, only effect will be that the income offered under business income would now be assessed under section 68 as income from other sources. It has been submitted that after set off of other losses the assessed income of the assessee would be the same as in the original assessment order. Hence, it is plea that when there is no change in income assessed the order of AO cannot be said to be prejudicial to the interest of revenue. The Ld.CIT has tried to respond to the submission by observing that as per section 115BBE income tax shall be collected at that of 60%, when the total income of the assessee includes such as the one here i.e under section 68 et cetera and that no deduction in respect of any expenditure or allowance or set off of loss shall be allowed to the assessee in computing as income referred here. Now, the assessment year under consideration is assessment year 2015-16, the CBDT circular referred by counsel of the assessee clearly provides that the amendment brought in by financial year 2016 in this regard is inserted with from 01.04.2017 and assessee is entitled to claim set off against income determined under section 115BBE of the Act till the AY 2016-17. Hence, even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Jagadamba Trade Links Ltd. and M/s Moryo Industries Ltd which were found dubious sham transaction as these brokers were involved in providing bogus accommodation entries. The report of the investigation wing w.r.t alleged penny stocks were very well available with AO and the original assessment order was passed with the knowledge of such information and after proper inquiry thereto. Therefore, such order could not be held to be prejudicial to the interest of the revenue. Copy of AIR information is already on record before Ld. Pr. CIT as well as the Ld. AO. 7 For that the Ld. Pr. CIT should not have invoked the provisions of sec. 263 without himself examining the details and evidences but no such examination was made and no lack of enquiry was found in the order of the Ld. AO. 8 For that on the facts and circumstances the order the Ld. Pr. CIT may be set aside. 3. The learned PCIT in this case noted the following back ground for issuing notice under section 263 of the Act :- 1. The return of income for this year had been filed by the assessee, declaring income of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g bogus LTCG entries. In view of the same, the transactions entered by you is to be treated as sham transaction and sale consideration has to be brought to tax u/s, 68 of the Act by treating the same as unexplained cash credits. 3. As pointed out by your good office in the said show cause notice, admittedly the assessee has sold shares of M/s MaaJagadambe Trade Links and M/s Moryo Industries Ltd for a consideration of ₹ 1,10,53,808/~. Pursuant to a specific inquiry by the Ld.AO under section 143(2) of the Act vide his letter dated 09.08.2017, the assessee vide his letter dated 27.09.2017 through order sheet submitted all the details including details for purchase of shares of M/s MaaJagadambe Trade Links and M/s Moryo Industries Ltd for an aggregate cost of ₹ 42,80, OOO/- respectively on 26.12.2012 and 12.05.2012. Copies of the said correspondence is enclosed herewith for your perusal. The said shares were forming part of the opening stock at the said cost in the P L A/C of the assesses for the relevant A Y. During the relevant year the said shares were sold for a total consideration of ₹ 1.10.53.808/- and the profit arising there from was credited to the P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e jurisdictional High Court or Supreme Court in the case of the assessee or any other person . However in the present case no such reference of decision of jurisdictional High Court or Supreme Court has been made w.r.t point of concern. 6. Moreover, attention of your honor is drawn to the fact that the gross profit arising from sale of the 2 scripts viz: M/s MaaJagadambe Trade Links and M/s Moryo Industries Ltd for a consideration of ₹ 1,10,53,808/- after deduction of cost of acquisition of ₹ 42,80, OOO/- has been offered to tax as business income and the assessee has not claimed same to be exempted 10(38) of the Act by way of LTCG as being point of concern in the show cause. 7. It may further be submitted that ail the documentary evidences w.r.t. the sale proceeds of ₹ 1,10,53.808/-being through registered share broker with SEBI on the floor of recognized stock exchange and through banking transactions has been/can be provided for to establish the identity of the payer and genuinty of the transaction as required by provisions of section 68 of the Act, referred to by your Honor in the show cause. Of course the creditworthiness of such payer is vouched by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 CTR 113 (SC) Section 263, read with section 148, of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interests of revenue - Assessment year 2000-01 - Whether an order of assessment passed by /TO can be interfered with only because another view is possible -Held, no As regards submission [C] above, learned counsel submitted that this Court gave the finding that the order of the Assessing Officer, Solan was bad but that such a question did not arise out of the appeal decided by the Income-tax Appellate Tribunal as the Tribunal had dealt with the question of jurisdiction only and hence this Court exceeded its appellate jurisdiction while holding that the order was bad on account of non-application of mind. The submission is factually incorrect. The Tribunal while accepting the appeal of the assessee held that the order had been passed by the Assessing Officer under section 263 of the Income-tax Act on the basis of the inquiry conducted by her and that the Commissioner of Income-tax could not have interfered with the said order merely because he formed a different view on scanning the record. Appellate Tribunal clearly said that the order of Assessing Officer was based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional information has been received subsequently from investigation department w.r.t. the alleged transactionsand the same was not available at the time of original assessment and hence the order is passed without proper inquiry. In this regard attention of your good office is drawn to the fact that as it is clear from the AIR information available with the Ld.AO at the time of the original assessment, the report of the investigation wing w.r.t. alleged penny stocks were very well available with him and the original assessment order was passed with the knowledge of such information and after proper inquiry thereto. Therefore such order could not be held to be prejudicial to the interest of the revenue. Copy of AIR information is enclosed herewith for your ready reference with special attention to page no 5. Without prejudice to the same a request is being made to provide us with copy of information received from investigation wing. 2. Attention of your good office is once again drawn to the fact that the income from the alleged penny stocks of ₹ 67,73,8087- has been offered by the assessee as business income liable for tax at full rate after adjusting therefrom busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch LTCG activities have been carried out and the modus operandi thereto. It also includes statement of various people who have confirmed and given name of beneficiaries/intermediaries. However nowhere in the report and/or in the statements/compilation of beneficiaries/ intermediaries, name of the assessee appears. c. Also as submitted even earlier the assessee during the relevant year although as dealt in scripts which are so called penny stocks, has not claimed benefit of LTCG/STCG and has offered profit from such scripts as business income which is taxable at normal rate of tax. 2. As required by your good office we would like to submit: a. Statement of scripts traded in by the assesse during the relevant year reflecting details of opening stock, purchases, sales and closing stock along with copy of the P L account of the assessee for trading in shares reflecting the net profit earned therefrom. Both these statements even were submitted during the original assessment proceedings. b. As submitted attention of your good office is once again drawn to the fact that the income from the alleged penny stocks of ₹ 67,73,808/-has been offered by the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was apparent that a common pattern and an established modus operandi was discernible indicating stock price manipulation and accommodation entry transactions in these penny stocks. For the sake of clarity, the same is mentioned as under: (i) Purchase of stock at rock bottom price (ii) No financial credibility of the company, whose shares were purchased by the assessee. (iii) Bell Pattern in share price movement, i.e. once price target is achieved the price falls back to minimum. (iv) No rhyme or reason for sudden spurt of share price, defying the share Index or similar share price movements. (v) Promoters of shares are also not from any established groups, in fact they are of people of no means. (vi) Price escalation through synchronised trading within limited parties, mostly entities controlled by the entry operators. (vii) Statement recorded during search or survey operations conducted by the Investigation Wing indicates that price of the shares were manipulated with the sole aim of providing bogus accommodation entries. 6. Thereafter, learned PCIT referred to certain case laws in this regard. He further observed as under :- 4. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and distinguishing the case laws referred by assessee, learned PCIT concluded as under :- 7. That the assessee had converted its unaccounted income being well established, it ought to have triggered a well-deserved enquiry on the nature and source of these credits appearing in the books of account. This was not done during the course of scrutiny assessment proceedings. Even assuming the correctness of strenuous assertion of the assessee that relevant material was then made available to the Assessing Officer, circumstances show the credits ought to have been examined vis-a-vis their genuineness in light of the well-established ambit of enquiry contemplated in section 68 of the Act. 8. Thus, whether the documents were or were not filed before the Assessing Officer is not germane to the revision proceedings. A perusal of assessment proceedings show that while making the assessment, the Assessing Officer has failed to examine the issues properly and has not applied his mind to facts and circumstances of the case for the purpose of determining the genuineness of the claims. The Assessing Officer was duty-bound to conduct a complete enquiry and consider the application of pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;Entry Operator charges' and its taxation, without conducting the requisite enquiries, has to be regarded as erroneous in so far as it is prejudicial to the interests of the revenue, within the meaning of section 263 of the Act. Accordingly, the assessment order dated 28/09/2017 passed by the AO under section 143(3) of the Act is set aside as per provisions of Explanation 2 to section 263(1) of the Act to the Assessing Officer. He is directed to conduct the requisite enquiries to arrive at the correct conclusion as per law and frame the order of assessment de novo, keeping in mind the observations made in the foregoing paragraphs. Needless to add, adequate opportunity of being heard will be afforded to the assessee to file details and furnish his explanation. 8. Against this order assessee is in appeal before us. 9. We have heard both the parties and perused the record. Learned counsel of the assessee submitted that the AO has made due inquiry. Ld. Counsel submitted that all the information with relationship to the assessee transactions were available with the AO. The assessee has submitted all necessary details and after examining the same the AO has passed the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Annexure D 4) Details of bank accounts held by the assessee during the year: Sr. No. Name of Bank Branch Type of Account Account Number 1 HDFC Bank MUMBAI -BORIVALI (WEST) Savings 01451000169331 2 ICICI Bank MUMBAI BORIVALI Savings 001801014045 3 Kotak Mahindra Bank MUMBAI -BORIVALI Savings 06650010001358 4 Uco Bank MUMBAI -BORIVALI Savings 11700100001267 Copies of bank statement is being attached as Annexure E 5) Notice u/s 148 has been received for the AY: 2014-15, for which the assessment is in process. 6) Reconciliation Statement of 26AS is being attached as Annexure - F 7) Reconciliation of Individual Transaction Statement is being attached as Annexure G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 2016 to remove any ambiguity of interpretation, the Board is of the view that since the term 'or set off of any loss' was specifically inserted only vide the Finance Act 2016, w.e.f. 01.04.2017, an assessee is entitled to claim set-off of loss against income determined under section 115BBE of the Act till the assessment year 2016- 17. 14. Referring to the above learned counsel submitted that learned CIT s reference to section 115BBE is not applicable for the assessment year and observations in this regard are also not correct, hence, he submitted that the order passed by learned CIT is not sustainable. 15. Per contra, learned Departmental Representative relied upon the orders of the authorities below. 16. Upon careful consideration, we find that the initial observation of Ld.CIT in this case that the assessee is engaged in the sale of shares of companies, which as per the enquiry of the department were found to be dubious and sham transaction. He noted that AO has not made proper enquiries and verification, which would have been made to ascertain the relevant facts for the purpose of deciding the issue at hand. 17. The Ld.CIT has noted the respons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee that even if the AO reassess the income pursuant to direction under section 263 and as the amount involved is assessed under section 68, only effect will be that the income offered under business income would now be assessed under section 68 as income from other sources. It has been submitted that after set off of other losses the assessed income of the assessee would be the same as in the original assessment order. Hence, it is plea that when there is no change in income assessed the order of AO cannot be said to be prejudicial to the interest of revenue. The Ld.CIT has tried to respond to the submission by observing that as per section 115BBE income tax shall be collected at that of 60%, when the total income of the assessee includes such as the one here i.e under section 68 et cetera and that no deduction in respect of any expenditure or allowance or set off of loss shall be allowed to the assessee in computing as income referred here. Now, the assessment year under consideration is assessment year 2015-16, the CBDT circular referred by counsel of the assessee clearly provides that the amendment brought in by financial year 2016 in this regard is inserted with from 01.04.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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