The Mumbai Bench of Income Tax Appellate Tribunal ( ITAT ) set aside the Commissioner Of Income Tax(Appeals)[ CIT(A)] order, observing that the reopening of assessment was based on incorrect facts and directed the Assessing Officer ( AO ) to delete the addition made under section 68 read with section 115BBE of the Income tax Act,1961.
Aadesh Commodities Pvt Ltd, the appellant-assessee, has been engaged in the business of trading and investment in shares filed its return of income (ROI) on 30/09/2013, declaring a loss of Rs.54,269. The return was scrutinized, and an order dated 30/03/2016 assessed the income as Rs. Nil.
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Later, information from DDIT (Inv.),Mumbai, indicated that the assessee was involved in receiving bogus long-term capital gains and losses through scrips of NYSSA Corporation Ltd and M/s ACI Infocom Ltd. Consequently, proceedings under section 147 were initiated, and a notice dated 18/03/2020 under section 148 was issued.
The AO noted that the assessee received bogus gains from trading in NYSSA Corporation Ltd. and M/s ACI Infocom Ltd., leading to an income of Rs.1,32,95,846 escaping assessment, which prompted the reopening of the assessment.
The AO, in an order dated 30/09/2021 under section 147 read with section 144B, found the assessee’s profit from trading in penny stocks of NYSSA Corporation Ltd and M/s ACI Infocom Ltd dubious. The AO added Rs.1,32,65,671 from these transactions as unexplained income under section 68 read with section 115BBE.
The CIT(A) upheld the AO’s addition, stating that the unaccounted income was not in assessee’s books and was incorrectly claimed as long-term capital gains. The assessee dissatisfied with the decision appealed before the tribunal.
The tribunal, on considering the submissions made, noted that the assessee, a share trader, sold shares of M/s ACI Infocom Ltd and NYSSA Corporation Ltd, with profits from these sales credited to the profit and loss account and declared as business income. The assessee claimed these profits were properly offered for tax as business income.
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On reviewing the audited financial statements for financial year(FY) 2012-13, the tribunal noted that the assessee declared a total turnover of Rs.11,74,47,670, primarily from the sale of shares. The only non-current investment listed was in Sunteck Reality Ltd. Additionally, the return of income for 2013-14 showed the assessee claimed an exemption of Rs.54,269 for long-term capital gains under section 10(38).
The bench found that the assessee treated shares of NYSSA Corporation Ltd and M/s ACI Infocom Ltd as stock-in-trade and correctly reported the profits. Thus, the reopening of the assessment based on incorrect claims was unjustified, leading to the quashing of the assessment order.
Additionally, it was contended that the assessee had reported and taxed the sale proceeds from M/s ACI Infocom Ltd and NYSSA Corporation Ltd. The AO added Rs.1,32,65,571 under section 68, but this amount should have been deducted from the income, making the addition tax-neutral.This approach is supported by Central Board Of Direct Taxes (CBDT) Circular No. 11 of 2019, and the CIT(A) did not contest it.
The two-member bench comprising Sandeep Singh Karhail (Judicial member) and Narendra Kumar Billaiya( Accountant Member) found the addition under section 68 read with section 115BBE unjustified and set aside the CIT(A)’s order and directed the AO to remove the addition
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