Minal Shroff Vs ITO (ITAT Chennai)
ITAT Chennai held that material/ information referred by AO in reasons recorded cannot be held to be tangible material hence reopening of assessment under section 147 of the Income Tax Act without tangible material is invalid.
Facts- Post scrutiny assessment, the case of the assessee was reopened after the expiry of four years vide notice u/s. 148 of the Income Tax Act. Assessee mainly contested the reopening since the details with regard to LTCG/ exempt income of Rs. 96,73,796/- was already submitted by the assessee during original assessment. However, AO treated Rs.98 lakhs as unexplained cash credit u/s.68 of the Act and issued draft assessment order on 29.03.2022 proposing the addition and framed re-assessment order on 31.03.2022 u/s.147/143(3) of the Act.
Aggrieved by the order passed by the AO, the assessee preferred an appeal before the Ld. CIT(A). On appeal, the Ld. CIT(A)/NFAC dismissed the legal issue as well as grounds of appeal raised on merits by the assessee against the re-opening of assessment.
Conclusion- Held that the bald statement of AO in the “reasons recorded” that based on information received from office of CCIT, Coimbatore that assessee is a beneficiary in the penny-stock cases cannot be considered as a “tangible material” for reopening the No details about the contents of the purported information received from the office of CCIT, Coimbatore is stated in the “reasons recorded”. There is no mention about which all shares were classified as penny-stock; and what is the link between the shares that assessee sold and the alleged bogus claim made by assessee in this regard; and whether the stock-exchange found any mischief on the part of the assessee/broker regarding sale of shares; whether SEBI carried out any enquiry etc; No relevant information is discernable from reading of the reasons recorded, to connect assessee with any wrong doing to claim LTCG from one line statement given by the AO at Para No.2 of his reasons recorded, which is cryptic and is extremely scanty and vague; and abruptly holds assessee to have dealt with penny- stock to claim bogus LTCG. Thus we find that there is absolutely no relevant details available in the reasons recorded to form such adverse conclusion; and in the light of the same, the initiation of proceedings u/s. 147 of the Act by the AO cannot be held to be valid and justified in law.
