Anil Chothmal Patodia HUF Vs National Faceless Appeal Centre (ITAT Mumbai)
The ITAT Mumbai allowed the assessee’s appeal on legal grounds and quashed the reassessment proceedings initiated under Section 147 of the Income-tax Act, 1961 for A.Y. 2015-16. The assessee had filed its return on 31.03.2016 declaring total income of Rs.2,63,520/-, which was processed under Section 143(1). Subsequently, the Assessing Officer reopened the assessment under Section 147 after receiving information from the Kolkata Investigation Directorate concerning alleged accommodation entries and manipulation in 84 penny stock companies. The recorded reasons alleged that the assessee had obtained bogus Long Term Capital Gain of Rs.1,18,39,977/- through trading in EINS Edutech Ltd. for sale consideration of Rs.3,35,51,000/-.
The assessee challenged the validity of reopening and the addition of Rs.3,36,70,000/- made under Section 69 as unexplained investment. According to the assessee, the recorded reasons were factually incorrect because the Long Term Capital Gain of Rs.1,18,39,977/- had actually arisen from the sale of shares of M/s. Bhageria Dye Chem Ltd., and not EINS Edutech Ltd. The assessee had instead incurred a short-term capital loss of Rs.1,52,551/- on EINS Edutech Ltd. shares, which had not been claimed in the return.
During reassessment, the AO noted that the assessee had purchased 7,00,000 shares of EINS Edutech Ltd. for Rs.3,36,70,000/- and sold them for Rs.3,35,17,449/-, resulting in a short-term capital loss. The AO questioned the source of the purchase investment and, referring to the investigation concerning penny stocks and the statement of the Karta of the assessee HUF, treated Rs.3,36,70,000/- as unexplained investment under Section 69. The CIT(A) upheld the addition, observing that the assessee had not established a known source for the investment.
