The Delhi bench Income Tax Appellate Tribunal ( ITAT ) quashed reassessment proceedings initiated on the basis of investigation report of Kolkata Wing without making enquiry of investment in stock exchange transactions.
The Assessee, Naz Shazia, filed the return of income for the Asst. Year 2014-15 on 24.12.2014 declaring taxable income of Rs. 9, 34, 420/-. This return was duly processed under Section 143(1) of the Act. No scrutiny assessment was framed by the revenue.
Thereafter, AO received information from the Kolkata Investigation Wing stating that they had identified 84 scrips as penny stocks and that the prices had been artificially rigged up by certain entry operators.
The AO alleged that assessee is also one of the beneficiaries of the artificially rigged up prices with the assistance of entry operators. Accordingly, a notice u/s 148 of the Act was issued to the assessee. The assessee made objections to the reasons recorded for reopening the assessment before the AO.
Without considering the objection the AO passed the reassessment order wherein the net sale consideration of Rs. 39, 51, 648/- was added as unexplained money u/s 69A of the Act in the hands of the assessee.
Aggrieved by the order, the assesee filed an appeal before the CIT(A). The CIT(A) dismissed the appeal filed by the assessee. Therefore, the assessee filed another appeal before the tribunal.
The tribunal observed that the no enquiries were carried out by the AO either on the broker or with the stock exchange with regard to transactions carried out by the assessee. The AO had merely relied on the Kolkata investigation report without linking the assessee with the various allegations leveled in the said investigation report. .
Further, the bench found that AO had not proved with any cogent evidence on record that the assessee was involved in converting his unaccounted income into exempt long term capital gains by conniving with the so called entry operators and brokers who were involved in artificial price rigging of shares. No evidence is brought on record to prove that the assessee was directly involved in price manipulation of the shares dealt by him in connivance with the brokers and entry operators.
Further the bench found that AO has made additions under Section 68 of the Income Tax Act, towards alleged ‘share application money’ received by the assessee, but there is no discussion in the assessment order ‘as to how’ said ‘share application money’ was received by the assessee, whether it is in the form of cash or through proper banking channel.
After considering the submission of both parties, the bench comprising M. Balaganesh, ( Accountant Member ) quashed reassessment proceedings initiated on the basis of investigation report of Kolkata Wing without making enquiry of investment in stock exchange transactions.
V. K. Tulsian, the counsel appeared for the assessee and Om Parkash, counsel appeared for revenue
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