DR. NEHA SETH, MUMBAI V. CIT (A)NFAC, DELHI

ITA 1634/MUM/2023

AI Insights

Dr. Neha Seth appealed against the order of the Commissioner of Income Tax (Appeals)-29/National Faceless Appeal Centre, which upheld the additions made by the Assessing Officer (AO) under section 68 of the Income Tax Act, 1961. The AO had re-opened the assessment for AY 2012-13 based on information from the Directorate of Income Tax (Inv.), Mumbai, regarding a search and seizure operation that revealed manipulation of stock prices and provision of bogus entries of LTCG, STCL, and business losses. The AO found that Dr. Seth had traded in shares of M/s. Diamant Infrastructure Ltd., a penny stock involved in these manipulations, and made additions to her income accordingly. The CIT(A) upheld these additions, but the tribunal found that the specific evidence and claims presented by Dr. Seth were not adequately considered by the lower authorities, leading to the allowance of her appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 300170 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 30-08-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 10-05-2023
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Reason to believe
• Section: 147; 68; 148; 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SHRI N. K. CHOUDHRY, JM I.T.A. No. 1634/Mum/2023 Assessment Year: 2012-13) Dr. Neha Seth, 6 Ashirwad, Dr. A.B. Road, Worli, Mumbai-400018. PAN No. ARUPS2517D Vs. CIT(Appeals)/National Faceless Appeal Centre, Delhi. Appellant) : Respondent) Appellant/Assessee by : Sh. Ashwin Chhag, Ld. CA Revenue/Respondent by : Sh. Anurag Tripathi, Ld. DR Date of Hearing : 31.08.2023 Date of Pronouncement : 26.09.2023 O R D E R Per N. K. Choudhry, JM: The Assessee/Appellant herein has preferred this appeal against the order dated 15.03.2023 impugned herein, passed by Ld. Commissioner of Income Tax (Appeals)-29/National Faceless Appeal Centre (NFAC), Delhi {in short ‘Ld. Commissioner’} u/s 250 of the Income Tax Act 1961 (in short ‘the Act’). 2. In this case, the assessment of the Assessee was re-opened U/S 147 of the Act, by recording the reasons, on the information/ letter dated 27.03.2019 received from the office of Directorate of Income Tax (Inv.)- 2, Mumbai to the effect “that a search and seizure operation was carried out on many Industries and Hawala operators at various location across 2 ITA No. 1634/Mum/2023 Dr. Neha Seth the country on 19.03.2019 wherein it was found that these entry providers were involved in providing entries of bogus Long Term Capital Gains (in short ‘LTCG’), Short Term Capital Loss (in short ‘STCL’) and Business Losses through manipulation of stock prices on the stock exchanges. M/s Diamant Infrastructure Ltd. is one of the penny stock scrip which has been used by beneficiaries (sellers of shares) ........................................................................................................................................ ........................................................................................................................................ 2.1 The AO on the analysis of the said information received, found that the Assessee has traded in the shares of M/s. Diamant Infrastructure Ltd, the details of which are as follows: PAN Name of assessee Trade value ARUPS2517D Neha Vipen Seth 1,38,204 And therefore on above facts and on the basis of the information available, formed the reason to believe that income chargeable to tax, as indicated above, to the tune of Rs. 1,38,204/-, or any other income chargeable to tax, which comes to his notice subsequently in the course of proceedings for re- assessment, has escaped assessment for AY 2012-13 within the meaning of section 147 of the I.T Act, 1961 and therefore, he is satisfied that the Assessee has failed to disclose true and complete particulars of his income for the year under consideration. 2.2 Consequently, the notice under section 148 was issued to the Assessee, in response to which the Assessee filed its return of income on 08.04.2019 declaring total income of Rs. 12,58,290/-. Thereafter various statutory notices were issued to the Assessee, wherein the Assessee though vide letter dated 25.11.2019 specifically claimed/alleged that the 3 ITA No. 1634/Mum/2023 Dr. Neha Seth Assessee has not dealt into purchase or sale of shares of listed companies during Financial Year 2011-12, however, the AO by analyzing “the general preface of penny scrips, modus operandi of providing bogus accommodation entry of LTCG/STCL/ Business Loss, bogus LTCG, bogus STCL / Business Loss, pictorial depiction of the scheme (Bell Shaped Pattern, role of operators, role of promoters of the penny stock companies and analyzes and enquires in penny scrip of M/s Diamant Infrastructure Ltd.”, considered the only fact that the Assessee’s name is appearing in the list of persons, who has traded in the penny stock scrips and ultimately made the additions of Rs. 1,38,204/- under section 68 of the Act and Rs. 4146 @ 3% of Rs. 1,38,204/- as commission paid in getting accommodation entries. 3. The Assessee being aggrieved challenged the said addition as well as jurisdiction of the AO in passing the assessment order before the Ld. Commissioner, who simply by observing “that the issue of penny stock is spread across the country and modus operandi is well established now. From the discussion in earlier Paragraphs, it is evident that the Assessee’s case fits into the criteria of penny stock as brought by the AO in the assessment order. In the light of the above discussion, the Assessee’s argument that the transaction of shares in M/s Diamant Infrastructure Ltd. is a genuine transaction. In view of the above, the Assessee submission is considered and the same is not acceptable” ultimately upheld the said additions and dismissed the appeal of the Assessee. 4. I have heard the parties and perused the material available on record. I observe that both the authorities below in their orders analyzed the history of penny stock, modus operandi of providing bogus accommodation entry of LTCG/STCL and the role of operators and promoters of the penny stock companies, however, failed to consider the specific claim of the Assessee to the effect that Assessee has not dealt into purchase and sale of shares of the listed companies as alleged during 4 ITA No. 1634/Mum/2023 Dr. Neha Seth the FY 2011-12. It is not the case here that the Assessee has not produced the documentary evidences like bank statements, copies of Demat A/c and the return of income filed by the assesses, however, just on the single fact “that the Assessee’s name is appearing in the list of persons who have traded in M/s Diamant Infrastructure Ltd. and thus the Department has concrete information that the Assessee has traded in this scrip” made the additions, which in my considered opinion are un-sustainable, hence the same are deleted. 5. In the result, appeal filed by the Assessee is allowed. Order pronounced in the open court on 26-09-2023. Sd/- Sd/- (N. K. CHOUDHRY) Judicial Member SK, Sr.PS. Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. 5. Guard File CIT BY ORDER, (Dy./Asstt.Registrar) ITAT, Mumbai 5 ITA No. 1634/Mum/2023 Dr. Neha Seth Sr. No. Details Date Initial Designatio n 1 Draft dictated on (dictation sheets are attached with main file 18.09.23 Sr.PS/PS 2 Draft dictated on PC Sr.PS/PS 3 Draft Placed before author 21.09.23 Sr.PS/PS 4 Draft proposed & placed before the Second Member JM/AM 5 Draft discussed/approved by Second Member JM/AM 6 Approved Draft comes to the Sr.PS/PS Sr.PS/PS 7 Order pronouncement on Sr.PS/PS 8 File sent to the Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head clerk 10 Date on which file goes to the AR 11 Date of Dispatch of order