The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has quashed the reassessment proceedings initiated solely based on the vague information received from the investigation wing.
The assesse, Gulshan Investment Co. Ltd. was a registered NonBanking Finance Company (‘NBFC’) and was engaged in the business of purchase and sale of shares, securities, commodities and mutual funds, trading in derivatives, future & option and also derivative of commodities in commodity exchanges.
The return of income for AY 2010-11 was filed and the original assessment was completed under Section 143(3) of the Income Tax Act determining the total income of the assessee.
The AO after taking into consideration all these details framed the assessment under Section 143(3) of the Income Act determining speculation loss and net speculation loss was arrived which was carried forward to next and also made disallowance under Section 14A of the Income Tax Act.
Subsequently, based on information received from the Investigation Wing, Kolkata, according to which certain entities were identified to be involved in facilitating bogus loss or profit to other real beneficiaries based on Forward Marketing Commission (FMC) report that members of National Multi Commodity Exchange (NMCE) were found to be involved in creating artificial volume and suspected evasion of Income Tax.
The AO initiated reassessment proceedings under Section 147 of the Income Tax Act alleging that the assessee company was one of the beneficiaries of accommodation entries made addition under Section 68 of the Income Tax Act.
Sashi Tulsiyan, appeared on behalf of the assessee and Parnashree Banerjee, appeared on behalf of the revenue.
The two-member Bench Of Chandra Mohan Garg, (Judicial Member) and M. Balaganesh, (Accountant Member) allowed the appeal filed by the assessee and quashed the reassessment order holding that, the reassessment proceedings were initiated based on vague information received from Investigation Wing, Kolkata which only gave reasons to suspect and not reason to believe.
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