ACIT Vs Bishan Jugraj Jain (ITAT Mumbai)
No Addition U/s 153A Without Incriminating Material – Penny Stock LTCG Addition Deleted in Unabated Year – ITAT Mumbai
AO made addition u/s 68 & 69C alleging bogus LTCG from penny stock transactions based on investigation wing report and IDS declaration by family members, despite search u/s 132 not yielding any incriminating material against assessee. CIT(A) deleted additions holding that impugned year was unabated and no addition can be made u/s 153A without seized material.
ITAT upheld CIT(A) observing that AO relied only on third-party investigation reports and statements without any incriminating material found during search. Tribunal applied principle laid down in Abhisar Buildwell Pvt. Ltd. that in unabated assessments, additions u/s 153A are invalid in absence of incriminating evidence. Accordingly, deletion of additions u/s 68 & 69C confirmed and Revenue appeal dismissed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal has been filed by the Revenue, challenging the order of the Learned Commissioner of Income Tax [‘Ld. CIT(A)’ for short] passed u/s. 250 of the Income Tax Act, 1961 (‘the Act’), pertaining to the Assessment Year (‘A.Y.’ for short) 2016-17.
2. The Revenue has raised the following grounds of appeal:
“1. Whether on the facts and circumstances of the case, the CIT(A) was correct in deleting the addition made under section 68 of the Income Tax Act, 1961, on account of unexplained cash credit arising from the sale of penny stocks, despite the assessee having declared the income under the Income Declaration Scheme, 2016?
2. Whether on the facts and circumstances of the case, the CIT(A) was correct in deleting the addition under Section 68 of the Income Tax Act, 1961, by disregarding the evidentiary findings and statements provided by the Directorate of investigation, which classified the transactions in penny stocks as accommodation entries?
3. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in deleting the addition under Section 69C of the Income Tax Act, 1961, towards commission expenditure alleged to have been paid for arranging accommodation entries, when the Investigation Wing’s report indicated a standard rate of commission in such transactions?
4. Whether on the facts and in the circumstances of the case, the CIT(A) was correct in disregarding the report and findings of the Investigation Wing, Kolkata 2, which identified the transactions in penny stocks as part of a larger syndicate providing accommodation entries, and in not treating the long-term capital gains as bogus?”
3. Brief facts of the case are that the assessee is an individual and a partner in M/s. Goldmedal Electricals Pvt. Ltd. The assessee had filed his return of income for the year under consideration declaring total income at Rs.1,32,65,210/- and the same was processed u/s 143(1) of the Act. Pursuant to the search and seizure action u/s 132 of the Act at the assessee’s premises dated 13.11.2019, notice u/s 153A of the Act was issued on 05.11.2022 and in response to which the assessee filed his return of income declaring same as that of the returned income. Notices u/s 143(2) & 142(1) of the Act were duly issued and served upon the assessee. The Learned Assessing Officer (“Ld. AO” for short) observed that the assessee has declared Long Term Capital Gain (“LTCG” for short) from sale of shares of Ojas Assets & Reconstruction Co. Ltd. amounting to Rs.41,41,673/- as being exempt income u/s 10(38) of the Act, which according to the Ld. AO was alleged to be a penny scrip. After considering the assessee’s submission the Ld. AO passed the assessment order dated 05.08.2021 u/s 153A of the Act determining total income at Rs.1,35,24,820/- after making an addition of 1,35,356/- u/s 68 of the Act as unexplained cash credit and Rs.1,24,250/- u/s 69C of the Act as unexplained expenditure pertaining to the commission expenditure incurred for availing accommodation entry from the alleged penny scrip.
