The Kolkata Bench of Income Tax Appellate Tribunal ( ITAT ) quashed the reassessment of ₹20.19 lakh Long Term Capital Gain ( LTCG ) as bogus due to lack of tangible evidence.
Pradip Kumar Jajodia (HUF),appellant-assessee,, disputed the addition of ₹20,19,000, which was made by treating the LTCG from share sales as bogus and denying the exemption, along with the legality of the reassessment.
The assessee counsel referred to the reasons for reopening the assessment, which stated that the appellant had traded ₹20,19,000 in penny stocks of Appu Marketing and Manufacturing Ltd./Ejecta Marketing Ltd. (SCRIP CODE 538653). The Assessing Officer(AO) reviewed the company’s financials and found the rise in share prices was unrelated to fundamentals, suggesting the shares were manipulated. The AO concluded that the trade was a sham meant to launder undisclosed income and issued a notice under Section 148 to reassess the ₹20,19,000.
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The counsel argued that the reasons for reopening the assessment were vague. He said the AO did not properly consider the information from the Investigation Wing and that the belief about the assessee’s income escaping assessment was unfounded, as there was no solid evidence to support it.
Read More:No Re-Assessment without new Tangible Material: Bombay HC
The tribunal reviewed the parties’ arguments and found that the AO’s reasons for reopening the assessment were not valid. The only information available to the AO was that the assessee had traded ₹20,19,000 in shares of Appu Marketing & Manufacturing Ltd./Ejecta Marketing Ltd., which was already on record. No new evidence was found to suggest the LTCG was bogus.
The two member bench comprising Sanjay Garg (Judicial Member) and Manish Borad(Accountant Member) noted that the AO had simply reexamined the financials of the company and made assumptions rather than using tangible evidence. It concluded that the reopening of the assessment was not based on valid grounds, and the assessment order was quashed.
In short,the appeal filed by the assessee was allowed.
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