The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) quashed the ₹10 lakh reassessment, ruling it invalid due to an intraday profit of Rs.49,792 falling below the threshold for reopening under Section 147 of Income Tax Act,1961.
Amish Manubhai Brahmbhatt,the appellant-assessee,was engaged in share trading and reported an income of Rs. 3,62,340 for the Assessment Year(AY) 2012-13. His original return was filed on 31.08.2012. The assessment was reopened based on information from the Mumbai Investigation Directorate, which conducted a search related to a syndicate led by Shri Naresh Jain, involved in manipulating share prices to generate bogus long-term capital gains and losses.
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The investigation identified 32,855 persons for AY 2012-13, with Rs. 1,326,99,87,079 worth of manipulated trades. The assessee sold shares worth Rs. 13,56,587 in Scan Steels Ltd., which were deemed sham transactions.
In response to a show-cause notice regarding an additional amount of Rs. 10,07,173 from these transactions, the assessee reaffirmed that he engaged in regular share trading through registered brokers, providing relevant documentation, including stock broker contract notes and bank statements to support his claims.
The Assessing Officer(AO) dismissed the assessee’s explanations and concluded that he was involved in non-genuine and bogus capital gains from the sale of shares in Scan Steel Ltd. Consequently, the entire sale amount of Rs. 10,07,173 was treated as unexplained cash credit under Section 68 of the Act.
The assessee appealed to the Commissioner of Income Tax(Appeals)[CIT(A)], who upheld the AO’s addition of Rs. 10,07,173 as unexplained credit, following the Calcutta High Court judgment in the case of Swati Bajaj and Others, and subsequently dismissed the assessee’s appeal.
Aggrieved by the same the assessee filed an appeal before the tribunal.
The tribunal on hearing the rival submissions, noted that the assessee engaged in share trading, purchasing 5,579 shares of the penny stock Scan Steel Ltd. on 22.07.2011 for Rs. 957,300.05 and later selling them intraday for Rs. 1,007,092.06, resulting in a nominal profit of Rs. 49,792.
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The bench observed that while the AO alleged the generation of bogus capital gains and losses, the profit was below the Rs. 100,000 threshold for reopening the assessment under Section 147 of the Act. Since the basis for reopening the assessment was found lacking, the Tribunal concluded that the reassessment made by the Assessing Officer was unsustainable and liable to be quashed.
The two member bench comprising T.R.Senthil Kumar(Judicial Member) and Annapurna Gupta(Accountant Member) allowed the appeal filed by the assessee.
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