INCOME TAX OFFICER-1(1)(1), MUMBAI V. SOHNI DEPAK TANNA, MUMBAI

ITA 2245/MUM/2022

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 6009 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 02-10-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 05-09-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PASSING AN ASSESSMENT; CHECK; CERTIFICATE NUMBER; ISSUING NOTICE UNDER
• Keywords: Reopening of assessment; Unexplained cash credit; Business income; Search and seizure; Share purchase agreement; Earning of tax free income; Tangible material; Accommodation entries; Procedural lapse; Penny stocks; Reason to believe; Capital Gains; Bogus
• Section: 147; 68; 148; 10; 143(3); 64; 13; 22; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, AM AND SHRI SANDEEP SINGH KARHAIL, JM C.O.No. 135/Mum/2022 (Assessment Year 2014-15) Sohni Dipak Tanna 2 Nd Floor, Tanna House, 11A, Nathlal Parekh Marg, Mumbai-400001 Vs. ITO 1(1)(1), Mumbai 534, 5 th Floor, Aaykar Bhavan, M. K. Road, Mumbai-400020 (Appellant) (Respondent) PAN No. ACEPT3611J ITA No. 2245/Mum/2022 (Assessment Year 2014-15) ITO 1(1)(1), Mumbai 534, 5 th Floor, Aaykar Bhavan, M. K. Road, Mumbai-400020 Vs. Sohni Dipak Tanna 2 Nd Floor, Tanna House, 11A, Nathlal Parekh Marg, Mumbai-400001 (Appellant) (Respondent) PAN No. ACEPT3611J Assessee by : Shri. Madhur Agrawal & Pankaj Jain Revenue by : Shri. Kishor Dhule Date of hearing: 03.10.2023 Date of pronouncement : 30.10.2023 O R D E R PER PRASHANT MAHARISHI, AM: 01. This appeal is filed by the income tax officer – 1 (1) (1), Mumbai (the learned AO) (ITA number 2245/M/2022) and Mrs Sohni Deepak Tanna (the assessee) has filed cross objection number 135/M/2022 for assessment year 2014 – 15 against Page | 2 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna the appellate order passed by National faceless appeal Centre (and FAC capital), Delhi (the learned CIT – A) dated 11/7/2022 wherein the appeal filed by the assessee against the assessment order dated 18/12/2019 passed under section 143 (3) read with section 147 of The Income Tax Act, 1961 (the act) by the AO was partly allowed. 02. The learned AO aggrieved with appellate order has preferred appeal on following grounds:- 1. on the facts and in the circumstances of the case and in law, the learned CIT (appeals), national faceless appeal Centre, Delhi order in not adjudicating on the core issue of character of the script of looks health services Ltd 2. on the facts and in the circumstances of the case and in law, the learned CIT (appeals) erred in deleting the disallowance made by the AO of the assessee’s claim of long-term capital gain of ₹ 124,648,690/– overlooking the fact that the entire transactions were stage managed with the object to facilitate the assessee to plough back are unaccounted income in the form of fictitious long-term capital gain claimed as exempt under section 10 (38) of the income tax act 3. on the facts and in the circumstances of the case and in law, the learned CIT (appeals) Page | 3 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna erred in deleting the addition of ₹ 124,648,690/– made by the AO on account of unexplained cash credit under section 68 of the act, without considering the direct and circumstantial evidences on record 4. on the facts and in the circumstances of the case and in law the learned CIT (appeals) erred in ignoring the material on record and the surrounding circumstances which showed that the share price of Mrs looks health services Ltd was rigged on stock exchange and the assessee was one on several beneficiaries who indulged in dubious transactions thereby enabling her to declare undisclosed income in the garb of long- term capital gain exempt under section 10 (38) of the act 03. Assessee has also raised the ground in Cross objection that the National faceless appeal Centre erred in upholding the reopening of the assessment under section 148 by the income tax officer. The assessee submits that the reopening of assessment is not in accordance with the provisions of the act. The appellant submits that the order passed under section 143 (3) read with section 147 be quashed. 04. Brief facts noted from assessment proceedings shows that assessee is an individual deriving income from business and profession, capital gains and other Page | 4 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna sources. The assessee filed her return of income on 28/11/2014 declaring income of ₹ 8,932,890/–. These return was processed under section 143 (1) on 1/3/2016 and no scrutiny assessment took place. 05. Subsequently the assessment was reopened by issue of notice under section 148 of the Act on 5/3/2019. In response to that notice assessee submitted a letter dated 8/4/2019 informing that the return under section 148 has been filed on 5/4/2019. Assessee requested for the copy of the reasons recorded for the reopening, which was provided to the assessee on 16/05/2019. On 12 June 2019 assessee raised objection against the reopening of the assessment which was disposed of by an order dated 21/6/2019 and the notice under section 143 (2) was issued on 6/9/2019. 06. The reason of reopening of the assessment was recorded as under:- 1. Brief Details Of The Assessee: – The assessee is an individual assessed to tax in this charge. The assessee has filed return of income for assessment year 2014 – 15 on 28/11/2014 declaring income at ₹ 8,932,890/– and the same is processed under section 143 (1) on 1/3/2016 and refund was paid on 30/3/2016. No scrutiny assessment has been done in the year under consideration. Page | 5 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna 2. Brief details of information collected/received by the AO The information was received from Deputy Commissioner Of Income Tax, circle – 3 (3) Ahmedabad vide letter dated 24/4/2017 that during the course of assessment proceedings for assessment year 2014 – 15 in the case of Mr Varun Naginbhai Patel abnormality was observed in the claim of short-term capital loss (STCL) in the statement of total income. The claim of STCL was regarding purchase and sale of script namely Looks Health Services Ltd. It was also found that this was an arranged transactions by Mr. Patel to set off long-term capital gain of Rs 2.33 crore and thereby avoided payment of due tax. A detailed verification revealed that there was an abnormal spurt and thereafter decline in the price of the said script during the period 2012 – 16. A list of bulk deals in the script during the period 2012 – 16 was analysed and it was seen that there are 116 beneficiaries, including one Mrs. Sohni Deepak Tanna (PAN :ACETT3611J). Further report from investigation Wing, Ahmedabad dated 13/12/2016 is received wherein the rigging in the price of script namely M/s looks health services Ltd was intimated. Further, BSE limited intimated that investigation Page | 6 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna were carried out in the aforesaid script securities of the company looks health services (BSE script code 534422) for the period 8/1/2013 – 22/3/2014 and the report on the same was also submitted to SEBI. The analysis revealed a few categories of entities that entered into transactions. One such is the person with no buy but sell at higher brackets with an object of claiming short/long- term capital gain and purchase of shares are made through alleged off market transactions:- DATE TRANSACTION TYPE QUANTITY PRICE TOTAL REMARKS 9/05/2013 sell 1,33,600 283.2 3,78,35,520 As per available data, no purchase record found. Assuming the assessee has bought shares from of market, volume of accommodation entry is ₹ 121,658,000/– (gain) 17/9/2013 Sell 73,600 287 2,11,23,200 9/10/2013 Sell 99,200 290 2,87,63,040 9/11/2013 Sell 52,000 288.50 1,49,99,920 9/12/2013 Sell 64,000 295.9 1,89,36,00320 It is seen that the persons have sold large quantities of the script and no purchase that is available as per the bulk deals segment details provided by BSE limited. Thus, it is likely to have Page | 7 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna acquired the lot through of market during initial period on a very low price to evade payment of tax. The web data indicated that the script was trading below ₹ 50 during FY 2012 – 13. Similarly few other persons have purchased the larger chunk of the said script through bulk purchase, however no sales date are for the stock was found in bulk a transaction details. 3. Analysis of information collected/received On verification of data and matching it with the income tax return (ITR – 4) filed by the assessee for assessment year 2014 – 15. It is seen that the assessee had declared gross total income of ₹ 9,042,894/- for assessment year 2014 – 15 with nature of income as professional income. The profit and loss account indicates sales/income of Rs. 2.64 crores and expenses etc of ₹ 1.41 crores thus net profit of ₹ 68.70 lakhs. The assessee has reported huge sum as exempt income amounting to ₹ 12.66 crores and thus no taxes have been paid on the same. 4. Enquiries Made By The AO As Sequel To Information Collected/Received The scrutiny of the income tax return filed by the assessee indicates that exempt income as long- term capital gain (LTCG) from transaction on which STT is paid is ₹ 125,952,029/– which Page | 8 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna matches approximately with the aforesaid information received by the undersigned. Whereas the comparative analysis of the balance sheet of the assessee for FY 2012 – 13 to FY 2014 – 15 revealed that the investments dropped from ₹ 3.79 crores 20 in FY 2013 – 14 (current assessment year 2014 – 15) and again rose to 6.68 crore in succeeding financial year 2014 – 15. 5. Findings Of The AO In view of above, there is a failure on the part of the assessee to disclose fully and truly all the material facts necessary for the assessment. Further, the analysis of bank statement of HSBC Banks current account number 011320660001 reveal that there is a cumulative deposit of Rs 2 .83 crores during financial year 2013 – 14 relevant to the current assessment year 2014 – 15. Whereas the assessee has mentioned the total receipts as per the profit and loss account as Rs 2 .64 crore. Further, the amount of income earned during the year and claimed to be the exempt income is also not reflected in the bank statement available on record, thus the reason appellant variation in the amount is mentioned in the ITR, financial statements and the bank statement, which needs to be examined in detail. Further more the amount of bogus long-term Page | 9 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna capital gain coordinate with the modus operandi and the information received by the undersigned. 6. Reason to believe:- considering the facts narrated above and the circumstances of the case, I have reason to believe that the taxable income of the assessee amounting to at least ₹ 125,952,029/– being bogus long-term capital gain has escaped assessment for this year for assessment year 2014 – 15 within the meaning of section 147 of the income tax act, 1961. 7. Applicability of the provisions of section 147/151 of the facts of the case:- In this case a return of income was filed for the year under consideration but no scrutiny assessment under section 143 (3) of the act was made. Accordingly, in this case, the only requirement to initiate proceedings under section 147 is reason to believe which has been recorded above (above referred paragraphs). It is pertinent to mention here that in this case the assessee has filed return of income for the year under consideration but no assessment as stipulated under section 2 (40) of the act was made and the return of income was only processed under section 143 (1) of the act. In Page | 10 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna view of the above, provisions of clause (b) of explanation 2 to section 147 are applicable to facts of this case and in the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment. This case is within four years from the end of the assessment year under consideration. Hence necessary sanction to issue the notice under section 148 has been obtained separately from the joint broke additional Commissioner of income tax as per provisions of section 151 of the act.” 07. Assessee objected on 12 June 2019 to such reasons for reopening of assessment on following points:- i. Alleged price rigging stating that though the learned AO has stated that the alleged price rigging has been recorded from the report dated 13/12/2016 of the investigation wing of the bath, however copy of the same has not been provided to the assessee and further assessee’s knowledge says that no action has also been taken either by securities and exchange board of India or Bombay stock exchange in respect of the said allegation of price rigging. Therefore the assessment Page | 11 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna is reopened merely on the basis of the presumptions and surmises not on concrete evidences. It was further stated that the copy of the said report is also required to be provided to the assessee ii. Assessee submitted that it she has acquired the shares 4,50,000 shares of the company at ₹ 10 each during the month of February 2012 when the company was not yet listed on the stock exchange. Therefore, those shares were not available for online purchase. The consideration for purchase of the share was paid through banking channel. Further, the name of the company at that time was Monarch health services Ltd which was subsequently changed to looks health services Ltd on 8 March 2013. Thereafter this company got listed on the Bombay stock exchanges with a public offer of the securities. The assessee sold the shares in assessment year 2014 – 15 on BSE terminal through recognised broker in the open market at the price quoted on the terminal at the relevant time. Assessee also gave the name of the broker, number of shares sold, date of sale of security, settlement number and Page | 12 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna the amount received. Assessee substantiated the same with the application for purchase of shares under private placement, showing payment for purchase of shares, Demat account copies, bank statement copies along with the Ledger account of the broker, brokers note for sale of shares, details of letter indicating the change of name of the company. Therefore, assessee submitted that online purchase of shares would not have been made in this case. iii. The reopening is based on the information received during the assessment proceedings of third party wherein irregularity was found in claim of short- term capital gain. The reasons recorded by the AO based on third-party information does not indicate any relevant material based on which reasonable believe could have been formed. There is no taxes between the material and the information as well as the formation of the believe. iv. Large amount of exempt income is shown by the assessee as assessee has sold the shares. There is no evidence that Page | 13 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna purchase and sale of shares are part of price rigging/price manipulation. v. There is no material on the basis of which reasonable believe would have been formed for escapement of income and therefore reopening is on the basis of suspicion is and not on any concrete material. 08. The learned AO passed an order rejecting the objection on 21/6/2019, the AO provided the copy of the report under section 15 I of Securities And Board Of India Act read with rule 5 of SEBI (procedures for holding enquiry and imposing penalties by adjudicating officer) rules, 1995 dated 22 November 2017 by adjudication order number/JS/DRP/18/2017 in case of the assessee. It was further stated that the condition before issue of notice under section 147 is that the AO should have reason to believe that income chargeable to tax has escaped assessment and it does not require that at the very outset that there should be an established fact of a escapement. The AO further relied on the several judicial precedents and held that all the objections raised by the assessee are rejected. 09. Consequently, assessment proceedings took place where the assessee made the several submissions. AO issued notice under section 133 (6) to the looks Page | 14 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna health services Ltd on 7/11/2019 for which no reply was received. The AO further looked at the financial statement and other submission made by the assessee from time to time and consequently issued a show cause notice on 13/12/2019, which was replied by the assessee on 17/12/2019. The AO further noted that the official website of the Securities and Exchange Commission of India there is an adjudication order dated 22/11/2017 bearing number AO/JS/DRP/18/2017 in respect of the assessee in the matter of looks health services Ltd wherein during the period January 8, 2013 to March 22, 2014 it was observed that assessee had violated the provisions of The Securities And Exchange Board Of India and assessee was penalized a sum of Rs 450000/- under section 15 A (b) of SEBI Act, 1992 as it commensurate with the violations committed by the noticee. The AO stated that the submission of the assessee that she has not received any notice of communication from BSE/ SEBI that she had no role to play in the alleged price manipulation of shares of looks health services Ltd is not correct. The claim of the AO is that it is evident from the order of the SEBI that assessee has been held guilty and imposed apparently in the matter of said script looks health services Ltd which is subject matter of the instant assessment proceedings. Accordingly the contention of the assessee were rejected and addition on account of accommodation entry in the Page | 15 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna guise of bogus long-term capital gain claimed as income exempt under section 10 (38) of the act. The AO further noted that on the Ledger account submitted in respect of skyes and Ray equities private limited regarding total sales of ₹ 129,144,690/– and the purchase cost being ₹ 4,496,000 the total amount of accommodation entry of ₹ 124,648,690/– was added back to the total income of the assessee by passing an assessment order under section 143 (3) read with section 147 of the income tax act on 18/12/2019. 010. Assessee, aggrieved with the assessment order preferred an appeal before the learned CIT – A challenging the reopening of the assessment as well as the addition on the merit. The main contention of the assessee were:- i. the basis of reopening was not a consequence of a researcher investigation on the entry operator is engaged in the provision of accommodation entries ii. the company looks health services has not been mentioned in the department’s report on penny stock investigation iii. action taken by the securities and board of India against the appellant was not related to the rigging/manipulation of the prices Page | 16 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna iv. the shares of the company asked deleted listed on exchange and are being actively traded v. the AO has not been able to show any involvement of entry operator in this case vi. the SEBI has finalised the assessee only for procedural lapses stop vii. the above script has never been suspended by exchange/Sebi viii. the volatility of the script cannot lead to a conclusion that the same is bogus ix. neither of the brokers of the company has appeared in the investigation report of the revenue x. no opportunity of cross-examination is provided xi. assessee has purchased the shares under private placement when the company was not listed by submitting the copy of the bank statement, reflecting the payment for purchase of shares, Demat account statement, bank statement of the payment received, broker note for sale of shares, details of change of name of the company et C. xii. Assessee also submitted the trading/price movement in case of the above shares of company since 2012 to 2022. This data was Page | 17 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna also produced along with the number of shares and number of trades along with the total turnover in the company at the exchange. The assessee submits that though assessee is alleged to have sold shares at the rate of ₹ 290 per share whereas the price of that shares into 2013 and 14 reached up to ₹ 437/–. Therefore the shares of the assessee are sold at much lesser price than high prices for those years 011. The learned CIT – A noted that health services private limited is not at all mentioned in the department’s report on penny stock investigation and neither the script, nor the broker of the appellant features in the above report dated 27/4/2015. Further the reliance by the learned AO on the adjudication order of Securities and Exchange Commission of India against the assessee, he held that the above penalty of ₹ 4.50 lakhs has been levied on the assessee for violation of regulation 13 (3) of SEBI (provision of insider trading) regulations, 1992 and regulation number 29/2) of SEBI (substantial acquisition of shares and takeovers) regulations, 2011 for the reason that the shareholder holding voting right of 5% failed to intimate exchange in shareholding to the company and the exchange. However the assessee has made such disclosure but was not reflected on the website of SEBI and therefore the penalty was levied on Page | 18 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna assessee only for failure in compliance of disclosure norms and not for the purpose of price rigging in the price of looks health services Ltd. Looks health services are still listed on the exchange and are traded and never any violation was reported by the SEBI. Accordingly he deleted the addition of ₹ 124,648,619/–. With respect to reopening of the assessment and its validity he held that the issue is more academic in nature as he has already decided the issue on the merits of the case and therefore did not adjudicate on the same. Such appellate order was passed on 11/7/2022. Therefore, the learned assessing officer is aggrieved against the deletion of the addition and the assessee is aggrieved in Cross objection against CIT – A not deciding that reopening of the assessment is invalid. 012. Assessee has by way of a cross objection challenge the reopening of the assessment. The learned authorised representative referred to paper book page number 46 stating that the reasons clearly state that there is no application of mind by the learned assessing officer while recording the reasons for reopening of the assessment. It was stated that there is no scrutiny assessment took place in the case of the assessee and further the information is received from the various third parties have not been given to the assessee to rebut. He submitted that in the case of some third-party there was some Page | 19 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna information is on which the case of the assessee is reopened. There is no relationship between that assessee and the present assessee before us. He further stated that the learned assessing officer has mentioned the transaction. Of 8/1/2013 – 22/3/2014 which is investigated by the Bombay stock exchange however there is no such report available with the assessing officer or shared with the assessee. He further submitted that in the reasons recorded there is a terrible given wherein the transaction date of 17/9/2013 is mentioned however there is no such transaction entered into by the assessee. As the shares when purchased by the assessee were not listed, assessee purchased those shares off market and therefore the recording of the reasons by the assessing officer that there is only sale transaction in case of the assessee and there is no buy transaction is incorrect. Assessee has bought the shares and adequate details for the purchase price has already been provided to the assessing officer. He further referred to paragraph number three of the reasons recorded and stated that net profit of ₹ 68.70 lakhs is disclosed by the assessee which is also incorrect assessee has filed its return of income declaring total income of ₹ 9,042,890/–. He therefore submitted that the reasons recorded by the learned assessing officer shows clear nonapplication of mind and hence same deserves to be quashed. The learned CIT Page | 20 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna appeal did not decide this issue and therefore the assessee is in Cross objection. 013. The learned departmental representative vehemently submitted that the information was received by the learned assessing officer and therefore there has to be only a prima facie belief of escapement of income is required to be verified. At that particular time when the reasons were recorded, the learned assessing officer was not required to record the clear-cut and exact escapement of income, otherwise there is no requirement of making further assessment under section 147 of the act. He submitted that the return of income filed by the assessee was not scrutinised. After filing of the return of income there is a receipt of information that assessee is one of the beneficiaries of transaction in the above stated company wherein there is an abnormal rise and decline in the price of the above script. The return of income was verified and in paragraph number 3 the learned assessing officer has mentioned that assessee has reported huge exempt income amounting to ₹ 12.66 crore. Further the learned assessing officer in paragraph number 4 has made the enquiry on comparison of the various figures of the balance sheet. He further referred to paragraph number 5 stating that the bank statement of the assessee was also verified wherein it was found that there is a cumulative deposit of Rs 2 .83 Page | 21 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna crores whereas the total receipt as per the profit and loss account is only Rs2.64 crores. Thus the above exempt income is not reflected in the bank statement available on record. Therefore in paragraph number 6 he formed a reason to reopen the case of the assessee that the above sum of ₹ 12.59 crores has escaped the assessment. He therefore submitted that there is no infirmity in the reason recorded by the learned assessing officer. To support his contention he submitted that the decision of the honourable Supreme Court in case of Reymond and Kelvinator India are complied with. 014. Coming to the appeal of the learned assessing officer The learned CIT DR made a written submission dated 5/5/2023 wherein it was submitted that:- i. in fact the assessee has purchased the shares of Monarch health services Ltd which is mentioned in report of the investigation wing therefore the finding of the learned CIT – A shares of the company are not part of the investigation. He submitted that subsequently the name of this company as in changed to looks health services. ii. He further submitted that there is an adjudication order of the securities and board of India against the assessee Page | 22 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna wherein the assessee was penalized Rs 450000/- , therefore, the assessee is beneficiary. iii. He further referred to his return submission wherein he submitted that assessee has purchased a set of very low price and sold the shares at the very highest price. 015. First we come to the cross objection filed by the assessee which is challenging the reopening of the assessment as it is a jurisdictional ground. We find that for assessment year 2014 – 15 the assessee has filed its return of income at ₹ 8,932,890/–. This return of income was not assessed under section 143 (3) of the act. The notice under section 148 of the act was issued on 5/3/2019 which is within four years of the end of the assessment year in which the income was first assessable. For reopening of the assessment there was a tangible material available with the assessing officer in the form of information of assessment in case of another assessee received from Deputy Commissioner Of Income Tax, Circle 3 (3), Ahmedabad. Further, there was an abnormal fluctuation in the price of the script in which the assessee has offered long-term capital gain that is exempt from tax. Further the report from investigation Wing, dated 13/12/2016 was also made available to the assessing officer wherein price Page | 23 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna rigging in looks health services Ltd was intimated. On verification of the details of sale of shares, the learned assessing officer on examination did not find any details of purchases of shares. The learned assessing officer also referred to the return of income filed by the assessee. He also made verification of bank statement of the assessee wherein he did not find the necessary credit of the above sum. In view of the above facts, the learned assessing officer in the form of information from other sources had a tangible material to reopen the assessment. On the details available in the form of information, the learned assessing officer also made his own enquiry by verification of the return of income as well as the bank statement of the assessee. The assessee also made his own enquiry on the tangible material received by him for reopening of the assessment. At the time of recording the reason only the prima facie belief is to be formed that there is a escapement of income. On careful reading of the reasons recorded by the assessee placed before us we find that the learned assessing officer has complied with all the necessary requirements of the law. The reasons are to be seen in its substance. If there is some error in mentioning some information which is not so fatal, then, on trivial matters, the reasons recorded cannot be held to be invalid or nonapplication of mind cannot be inferred. The learned CIT – A did not adjudicate this Page | 24 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna issue holding it to be merely academic, on perusal of the reasons, we do not find that the reopening of the assessment is invalid for any reasons. Accordingly, we uphold that reopening of the assessment is invalid. The solitary ground raised in the cross objection of the assessee is dismissed. 016. Coming to the merits of the addition, we find that the learned CIT – A has deleted the same as under:- “5.1.3 All the facts and circumstances related to the impugned addition of Rs. 12,46,48,900 are duly considered. Facts of the case are that the Ld.AO by Order dt 18.12.2019 u/s 143(3) r.w.s. 147 determined the income of the Appellant at Rs. 13,35,81,580 in which addition was made u/s 68 on the account of Unexplained Cash Credit of Rs. 12,46,48,690 as, AO formed a belief that accommodation entry in the guise of bogus Long Term Capital Gain (LTCG) of Rs. 12,46,48,690 claimed as income exempt u/s 10(38) of the Act on sale of equity shares of M/s. Looks Healthcare Services Limited (LHSL) [earlier known as Monarch Healthcare Services Ltd.(MHSL)] andwhich is duly listed on recognised stock exchange. It was submitted by Ld. A/R of the lady appellant, through his 2 written submissions, that the company LHSL had not been mentioned in the department's report on penny stock investigation. The Appellant also submitted that Page | 25 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna neither the script in question nor the broker of the Appellant featured in the report dated 27.04.2015 Le Investigation report in the case of project Bogus LTCG/STCL through BSE Listed Penny Stocks. 5.1.4 The Ld. AO in his assessment order heavily relied on the adjudication order dated 22.11.2017 bearing no AO/JS/V/RP/18/2017 passed by SEBI (Page No.473-480 which was uploaded on ITBA in these appeal proceedings) levying apenaltyon the Appellant to prove his point that the Appellant was engaged in price rigging / bogus capital gains particularly in Para 7 of the Assessment Order, which has been reproduced also in sub para 5.1.1 of this appeal order. 5.1.5 On perusal of this adjudication order (Page No.473) it is noted that the order was passed for violation of Regulations 13(3), (Page No.489) of SEBI (Prohibition of Insider Trading) Regulations, 1992 and Regulation 29(2) (Page No.566) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. On perusal of said Regulations, it is appreciated that it merely cast an obligation on the shareholder holding voting right above 5% to intimate his change in shareholding to the Company and the Exchange. The appellant claimed in those proceedings that she did make the disclosure but was not reflected on official Website of SEBL Since her claim could not be Page | 26 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna proved she was imposed a penalty of Rs. 4,50,000 for failure in compliance of disclosure norms and nothing else and not at all for price rigging, which misappreciation led Ld.A.O. to believe that LTCG shown and claimed exempt was bogus, though, in fact, it was not so. 5.1.6 Copy of said adjudication order dated 27.11.2017 passed SEBI as also uploadedon ITBA (page no 473 to 480) was gone through carefully and it was found that it clearly showed as also vehemently argued by the Ld. A/R of the lady appellant that "Action taken by the SEBI against the Appellants was not related to the rigging/manipulation of the price" and it was only related to known disclosure of information about share holding patternetc. 5.1.6 It was lastly submitted that shares of Looks Health Services are still listed on exchange and are traded. It was noted from official websites that it is correct that the shares of Looks Health Services Ltd are still traded on stock exchange till date and no action has been taken against the company by SEBI or BSE which goes to prove that the company was not engaged in illegal activities of providing accommodation/ long term capital gains entry. The price movement and other relevant details (annual) from 2012 till date were provided in the 2nd written submission. On perusal of the above data, it is appreciated that the said script has been highly volatile. Page | 27 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna However, this, as has been rightly pointed out in the said submission also, is one of the very common features of a script which has a low market capitalization. The said script had/has been actively traded on exchange and never was it suspended by exchangeorSEBI for violation of any listing regulations as was the case with many penny stocks. 5.1.7 Further the lady appellant it was submitted was not engaged in any price rigging or accommodation of capital gains entry. That the department/ Ld. A.O. has not been able to show any involvement of entry operator in such activity. The SEBI order on which the AO did heavily relywas, in fact, passed for procedural lapse related to disclosure and was not related to price manipulation / rigging. The script had never been suspended by Exchange / SEBI and the same is traded till date. The volatility of the script could not lead to a conclusion that the same was bogus and was operated by entry operator. The script or the broker had not been featured in the investigation report of the department either. 5.1.8 In the light of such facts, I am afraid; there is no such occasion to confirm action of Ld. A.O. in making the impugned addition of Rs.12,46,48,690 and relief has to be given to the appellant individual as he is entitled for the same. The amount of addition being only based on mistaken belief and that too on basis of Page | 28 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna misappreciation of related facts is not confirmed and is directed to be deleted. The AO is directed to treat long-term capital gains on sale of shares as genuine and to allow the claim Cof exemption under section 10(38) of the Act. Therefore, Ground no. 2 is allowed.” 017. To appreciate that by the learned assessing officer has made addition in the hence of the assessee to is necessary to look at the assessment order wherein in paragraph number 7 the addition has been dealt with as under:- “7. However, from the perusal of reply the scene that the assessee is only reiterated the facts narrated earlier while filing initial objections to the reopening and also during the course of assessment. Further it is seen from the Internet search on the official website of the securities and the board of India (SEBI) there is an adjudication order dated 22/11/2017 bearing number AO/JS/VRP/18/2017 in respect of the assessee Ms. Sohini Deepak Tanna in the matter of looks health services Ltd. The said adjudication order has been passed in pursuance of the investigation by SEBI in the script of looks health services Ltd during the period January 8, 2013 to March 22, 2014 and observed that Ms Sohini Deepak Tanna had violated the provisions of SEBI regulations. Show cause notice was issued and reply Page | 29 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna was filed by the new PC and thereafter by the aforesaid order SEBI found that ms Sohni Deepak tanna has violated the regulation and imposed a penalty of ₹ 4,050,000 (Four lakhs Fifty Thousands Only ) under section 15 A (b) of SEBI Act, 1992 as it commensurate with the violations committed by the noticee. It is pertinent to mention here that the assessee has been filing submissions claiming that the “assessee submits that she has not received any notice or communication from BSE/ SEBI that she had any role to play in the alleged price manipulation of shares of Looks health services Ltd.” The same is seen from the perusal of 3.1 of the letter dated 12/6/2019 filing objections to the reopening of the assessment in para 2 point 4 of submission dated 20/11/2019. The facts however being otherwise as the assessee has had filed submission before SEBI investigators and the adjudication order has thereafter been passed in November, 2017. Thus, it is evident from the above that SEBI held assessee guilty and imposed penalty in the matter of the said script looks health services Ltd which is subject matter of the instant assessment proceedings. Accordingly the contentions raised by the assessee are hereby discarded after due consideration. Page | 30 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna 8. Addition on account of accommodation entry in the guise of bogus long-term capital gain claimed as income exempt under section 10 (38) of the act. As discussed in para above and further based on the Ledger account submitted in respect of Skyes & rays equities (I) private limited regarding total sales of ₹ 129,144,690/– and the purchase cost being 44,96,000/– (shares worth ₹ 4000 reflected as closing balance) the total amount of accommodation entry of ₹ 12,46,48,690/– is added back to the total income of the assessee for assessment year 2014 – 15.” 018. Therefore the main consideration for making the addition is on account of the Internet search carried on by the learned assessing officer at the official website of the securities and board of India where he finds an order dated 22/11/2017 analysing the assessee are sum of ₹ 4,50,000/-. We find that such order has been placed before us at page number 57 – 64 of the paper book. The above adjudication order had following three issues for consideration:- i. whether the notice has violated the provisions of the regulation 13 (3) read with 13 (5) of PIT regulations, 1992 and regulation 29 (2) of SAST regulations, 2011. Page | 31 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna ii. Does the violation, if any, on the part of the noticee attracts monetary penalty under section 15 A (b) of the SEBI Act, 1992Rs. iii. if so, what quantum of monetary penalty should be imposed on the notice considering the fact is stated in section 15 J of SEBI act 1992? 019. On the basis of the adjudication order, there is an allegation on the assessee that she has violated the provisions of regulation 13 (3) read with 13 (5 of CB (Prohibition of insider trading) regulations, 1992 and regulation 29 (2) of SEBI (substantial acquisition of shares in takeover) regulations, 2011. The allegation is that when the assessee has sold over lakh 49,600 shares the cumulative percentage of the shareholding triggered the transfer of 7.49% shares of the company in total and on two occasions it exceeded 5% of the total shareholding of the company therefore, as assessee has transacted in more than 5% of the share capital of the company, she should have filed disclosure to the company as well as to the securities and board of India. On all the three occasions in paragraph number three of that order it was found that declaration was filed late by the assessee. In response to the show cause notice, assessee submitted before the adjudicating authority that she has already filed disclosure along with her husband at appropriate time but same were Page | 32 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna not reflected on the website of the Bombay stock exchange pertaining to the assessee but the shares transferred by her husband were already disclosed on the website. The quarterly shareholding pattern filed by the company under clause 35 of the listing agreement and the reduction in the shareholding was already provided by the company in its disclosure to the public as well as to the securities and exchange board of India. Adjudicating authority did not consider the explanation of the assessee proper for the reason mentioned in para number 13 that assessee could not provide the evidence to support its stand that. The disclosure has been made and the admission of violation and the resultant delay in disclosure, was also admitted. Accordingly, the adjudicating authority imposed a penalty of ₹ 450,000/– whereas according to provisions of section 15 J read with section 15 A (b) where the penalty can be imposed not less than ₹ 1 lakh which may extend to ₹ 1 lakh per day during such failure subject to maximum of Rs 1 Crore. Therefore, the penalty was levied on assessee for failure to disclose to stock exchange when assessee sold shares more than certain percentage of the capital of the company. 020. On careful reading of the order of the adjudicating authority, which is the main base for making the addition in the hence of assessee, is for violation of Page | 33 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna late disclosure of the particular percentage of the shares of the company and not for any other reason. Therefore, in the adjudication order, there is no allegation of any other nature which even remotely shows that the capital gain earned by the assessee is not genuine. 021. Further regarding the acquisition of the shares, the assessee was allotted 4,50,000 shares of the company in March 2012 in private placement when the company was unlisted. Therefore naturally, during the trading period there is no purchase of shares by the assessee and hence there was no details available with the assessing officer. But that does not show, that, the transaction of the sale of the shares is not genuine. The purchase consideration was paid by the assessee by check number 212460 of Indian bank dated 2/2/2012 which was cleared in the bank statement of the assessee on 4/2/2012. Share certificate was issued to the assessee by certificate number 58. 022. For the sale consideration assessee has given the contract note of Skyes & rayes equities India private limited showing the date and time stamp of the securities traded. There is no allegation or enquiry of the learned assessing officer about the same. 023. The original acquisition of the shares were made by the assessee when the name of the above company Page | 34 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna is monarch health services (private) Ltd. No doubt the name of this company appears in the investigation report of the investigation wing. However when the shares were sold, the name of this company was looks health services Ltd. Naturally, there was no reference of sale of the shares in looks health services Ltd in the above report. 024. Regarding the claim of the learned assessing officer in the reasons were recorded that the consideration received by the assessee was not found credited in the bank account of assessee with HDFC bank, the assessee submitted that the above sum was credited in the account of the assessee in Indian bank account number 415206490 at Fort branch. The copy of the passbook submitted clearly shows that the above amount is credited in the bank account of the assessee. This bank account was jointly maintained by the assessee with her husband.. 025. Interestingly the price movement chart shown by the assessee of the above company from the Bombay stock exchange clearly shows that the high prices of the company quoted at that stock exchange was much higher than the price at which the assessee sold the shares. 026. Looking at the written submission made by the learned departmental representative wherein it is Page | 35 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna contended that the affluence commodities private limited is one of the company which is the exit providers and has purchased the shares sold by the assessee and her husband, we do not find that there is any reconciliation made of the trade transaction number as well as the buy transaction of affluence commodities private limited with the sale transaction of the assessee along with time and date stamp. Even in the written submission also the learned departmental representative has stated that this is a suspicious trading activity of the script because of the price movement. However, according to the departmental submission it is merely a suspicious trading. But that does not prove that the long-term capital gain earned by the assessee is bogus. 027. There is no allegation from the side of the revenue that the capital gain earned by the assessee is bogus except the adjudication order of Sebi. The learned departmental representative could only show us that the learned assessing officer on the basis of the price movement of that company was directed to reopen the case of the assessee by issuing notice under section 147 of the act. We do not find any infirmity in the reopening of assessment in case of assessee, we have upheld the same. But merely reopening of the case does not authorise the learned assessing officer to make an addition in the hands of the assessee without carrying out investigation as well as finding Page | 36 ITA No. 2245/Mum/2023 A.Y. 2014-15 Sohni Dipak Tanna with reasonable evidence with preponderance of the probability that the income shown by the assessee is not genuine. 028. In view of the above facts, we do not find any infirmity in the order of the learned CIT – A in deleting the addition in the hands of the assessee. 029. Accordingly all the grounds of the appeal of the learned assessing officer are dismissed. 030. In the result appeal of the learned assessing officer and cross objections of the assessee are dismissed. Order pronounced in the open court on 30.10.2023. Sd/- Sd/- (SANDEEP SINGH KARHAIL) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated:30.10.2023 Dragon Copy of the Order forwarded to : BY ORDER, 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai