Trishla Vyapaar Pvt Ltd Vs DCIT (ITAT Ranchi)
Reassessment of alleged bogus LTCG/STCG was remitted back for investigation regarding genuineness of the source of receipt of share subscriptions or share capital/premium
Conclusion: Since the order for addition of bogus LTCG/STCL was passed without making any enquiry, verification and investigation regarding genuineness of the source of receipt of share subscriptions or share capital/premium, CIT directed AO to frame the assessment de novo by making fresh enquiries regarding the genuineness of the share capital/share premium after affording proper and reasonable opportunity of being heard to assessee while framing the consequential assessment order.
Held: Assessee was a private limited company, and its account was selected for scrutiny through Computer Assisted Scrutiny Selection (CASS). Such scrutiny was due to suspicious transactions related to short-term capital loss and long-term capital gain on shares. AO, on further scrutiny, assessed assessee’s income to be ₹5 Crores and that assessee company had adopted a device to evade taxes. AO explained that the colourable device was a sham arrangement adopted by the taxpayer to avoid taxes. AO relied upon a decision by the Supreme Court in the case of McDowell & Co. that a colourable device comes within the purview of tax evasion. AO observed that assessee was a paper/bogus entity with no physical existence or business activity and was controlled mainly by Consortium Capital Pvt. Ltd or some other accommodation entry operators to facilitate the accommodation entry of pre-arranged bogus LTCG/STCL. AO also held that despite issuing notices under sections 143(2) and 142(1), assessee did not comply with those, and AO made additions to the income found in the assessee’s account. It was held that since the order was passed without making any enquiry, verification and investigation regarding genuineness of the source of receipt of share subscriptions or share capital/premium, CIT directed AO to frame the assessment de novo by making fresh enquiries regarding the genuineness of the share capital/share premium after affording proper and reasonable opportunity of being heard to assessee while framing the consequential assessment order. Since the instant appeal pertained to the A.Y. 2014-15 and the facts of the case were similar and also the modus operandi adopted by assessee company was the same, it was proper to remand the matter back to the file of CIT(A) to decide the issue afresh after giving due consideration of all issues involved in this case.
