AI Insights
The case revolves around the re-assessment of Jaibhagwan Banarasidas Jindal for the assessment year 2016-17, where the Income Tax Department alleged that he had traded in shares of a penny stock company, M/s Yamini Investments Co. Ltd., leading to unaccounted income. Initially, Jindal's return was accepted, but later, based on information from the Investigation Wing, the case was reopened. The Assessing Officer rejected the claim of exemption under section 10(38) for long-term capital gains, treating them as unexplained cash credits under section 68. The CIT(A) upheld this decision, which Jindal appealed to the Tribunal. The Tribunal, after examining the legal and factual matrix, found the reopening of the assessment and subsequent additions to be unjustified, leading to the allowance of Jindal's appeal.
Appeal Details
Counselvise Citation
[2025] 140 COUNSELVISE.COM (IT) 471208 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
CRN Number
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
27-02-2025
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Assessment Year
2016-2017
Judgement Text
"IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI R. K. PANDA, VICE PRESIDENT AND MS. ASTHA CHANDRA, JUDICIAL MEMBER ITA No.2016/PUN/2024 Assessment year : 2016-17 Jaibhagwan Banarasidas Jindal 29, New Mondha, Bus Stand, Jalna HO, Jalna – 431203 Vs. ITO, Ward-1, Jalna PAN: AAQPJ5374E (Appellant) (Respondent) Assessee by : Shri Jaiprakash Bairagra Department by : Shri Ramnath P Murkunde Date of hearing : 06-01-2025 Date of pronouncement : 27-02-2025 O R D E R PER R. K. PANDA, VP : This appeal filed by the assessee is directed against the order dated 02.08.2024 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2016-17. 2. Facts of the case, in brief, are that the assessee is an individual and filed his return of income on 28.01.2017 declaring total income of Rs.11,64,870/-. The return was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) and thereafter the order u/s 143(3) of the Act was passed on 09.12.2018 accepting the returned income of Rs.11,64,870/-. 3. Subsequently, information was received in insight portal from DDIT (Inv.). Unit 3-(3), Delhi that the assessee has traded in the scrips of shell company viz. 2 ITA No.2016/PUN/2024 M/s Yamini Investments Co. Ltd. (YICL). This is proved to be a penny stock company listed on BSE with Script Code (511012) and this company has been used to facilitate introduction of unaccounted income of members of beneficiaries in the form of exempt capital gain or short term capital loss in their books of account. The trading of equity shares in the scrip was earlier suspended and the suspension was revoked w.e.f. 29.05.2012. The assessee, initially invested in M/s ANAX COM TRADE LTD., which was later merged with M/s Yamini Investments Co. Ltd. (YICL). The assessee was found to have traded for an amount of Rs.88,11,440/- during the financial year 2015-16 relevant to assessment year 2016-17 and has claimed long term capital gain of Rs.85,38,145/- as exempt income u/s 10(38) of the Act. 4. Accordingly, the Assessing Officer reopened the case of the assessee u/s 147 after obtaining approval u/s 151 of the Act from the Competent Authority and issued notice u/s 148 of the Act to the assessee on 31.03.2021. The assessee in response to the same filed his return of income on 26.04.2021 admitting the total income at Rs.11,64,870/-. The Assessing Officer issued notice u/s 143(2) of the Act on 30.06.2021, in response to which the assessee vide letter dated 20.07.2021 filed objections against the reopening of assessment. The Assessing Officer disposed of the objections raised by the assessee vide office letter dated 02.03.2022. Subsequently, notice u/s 142(1) of the Act was issued and served on the assessee, in response to which the assessee filed the requisite details from time to time. The reasons for such reopening of assessment read as under: 3 ITA No.2016/PUN/2024 “ANNEXURE Name of the Assessee Jaibhagwan Banarasidas Jindal PAN of the Assessee AAQPJ5374E Assessment Year 2016-17 Details of the Assessing Officer having jurisdiction over the Assessee ITO 27(1)(5), Mumbai Reason for reopening of Assessment for A.Y.2016-17 u/s.147 of the I.T. Act, 1961 Brief background of the Assessee :- In this case assessee e-filed his return of income for A.Y.2016-17 on 28.01.2017 declaring total income Rs.11,64,870/-. The return of income was processed u/s. 143(1) of the I.T. Act, 19161. Assessment u/s 143(3) was completed on 09/12/2018, computing total income at Rs.11,64,870/- Reasons for the reopening In this case information has been received through insight portal from DDIT(Inv.) Unit 3(3), Delhi through insight portal that the assessee has traded the scrips of shell company viz, M/s. Yamini Investments Co. Ltd.(YICL). This is proved to be a penny stock company listed on BSE with Script Code (511012) and this company has been used to facilitate introduction of unaccounted income of members of beneficiaries in the form of exempt capital gain or short term capital loss in their books of accounts. YICL was incorporated in January, 1983 as an unlisted company under the name of Yamini Investments Company Ltd. and subsequently converted into public limited company and listed on BSE in January, 1984. The trading of equity shares in the scrip was earlier suspended and the suspension was revoked w.e.f. 29.05.2012. The assessee, initially invested in M/s.ANAX COM TRADE LTD., which was later merged with M/s. Yamini Investments Co. Ltd. (YICL), a BSE listed company. As per the merger plan, if any person subscribes for equity shares of ANAX COM TRADE LIMITED @Rs.10/- then scriber would get 1 share of ANAX COM TRADE LIMITED + 1 share of BSE Listed company and the sale price of BSE Listed company was equal to Rs.260/- thus get a gain of Rs.250/- per share. Later on, the Rs:10/- shares were spitted in Re.1/- paid up and number of shares were multiplied accordingly. Immediately after the company's amalgamation was approved by the Hon'ble High Court on 09.05.2014 the volume of the share trade increased manifold. The operators artificially rigged the price of the shares through circular trade with the help of share brokers and bogus clients to provide bogus Long Term Capital Gain/Short Term Capital Loss to various beneficiaries. The company ANAX COM TRADE LIMITED made private allotment of equity shares of Rs.10/- each. The company then merged to M/s. Yamini Investments Co. 4 ITA No.2016/PUN/2024 Ltd. and then the scrip was split on 19.02.2015 in the ratio of 10:1. Share price movement of the scrip from public domain shows a sharp price rise in the above scrip in F.Y. 2014-15 and 2015-16 and this sharp rise is not supported by the financials of the company. During the year under consideration the assessee has traded in this scrip for Rs.88,11,440/-. The share price of M/s. Yamini Investments Co. Ltd. rose from Rs.119.30 on 06/09/2013 to Rs.716/- on 18.03.2015 and then fell back to Rs.230.50 on 09.03.2016. However, the financials of M/s. Yamini Investments Co. Ltd. do not show any substantial change so as to support such a huge share price movement. The company does not have business worthwhile to justify the sharp rise in market price of shares. The assessee is one of the beneficiaries. The assessee has traded for an amount of Rs.88,11,440/- during the F.Y 2015-16 relevant to A.Y 2016-17 and has claimed LTCG of Rs. Rs.85,38,145/-. In view of the modus operandi as discussed above, the assessee has laundered his unaccounted income by trading in such penny stock to gain exempt income. Therefore, I have reason to believe that an amount of Rs.Rs.85,38,145/- has escaped assessment within the meaning section 147 of the Income Tax Act, 1961 due to the failure on the part of the assessee to disclose true and correct income in his return of income for A.Y.2016-17. The provisions of Explanation 1 to section 147 is squarely applicable in the case of the assessee. Applicability of the provisions of section 147/151 to the facts of the case:- In this case more than four years have not lapsed from the end of the assessment year under consideration. Hence the approval of the Jt. Commissioner of Income Tax-27(1), Mumbai is hereby sought for re-opening the case of the assessee for A.Y. 2016-17, as per provisions of section 151(2) r.w.s.149(1)(a) of the Income tax Act 1961.” 5. During the course of assessment proceedings the Assessing Officer noted that a search and survey operation u/s 132/133 of the Income Tax Act, 1961 was conducted on 16.05 2018 by the office of the DDIT (Inv.), Unit 3-(3), Delhi on Dutta and Tyagi group and during the post search enquiries of the case it was found that scrip of M/s Yamini Investment Company Limited \"YICL\" was managed and controlled to benefit certain pre-decided persons. He further noted that during the post search investigations, while reviewing the email id of ramanuj283 < ramanuj283@ yahoo.com>, an email dated 04.10.2012 with subject 5 ITA No.2016/PUN/2024 \"Fwd: ANAX\" sent by Aseem Gupta to Ram Avatar Agarwal @ramanuj283 < ramanuj283@ yahoo.com> was found. In the said email, Aseem Gupta attached a file \"NEW BSE SCHEME in which long term capital gain scheme has been mentioned. As per mentioned scheme, ANAX COM TRADE LIMITED will be merged into a BSE LISTED COMPANY and if any person subscribes for equity shares of ANAX COM TRADE LIMITED @ Rs.10 then subscriber will get 1 share of ANAX COM TRADE LIMITED = 1 share of BSE LISTED COMPANY and the sale price of BSE LISTED COMPANY: Rs. 260 and Net gain will be Rs.250 (sale price Rs.260-Purchase price Rs.10). Also application form for subscribing the shares was attached with the said email. The image of this file is reproduced by the Assessing Officer at page 3 of the assessment order. Subsequently, it was found that M/s. Anax Com Trade Ltd. has been merged with M/s. Yamini Investment Company Ltd. During search and survey proceedings at the business premise of Mr. Ram Avatar Agarwal multiple evidences related to M/s Yamini Investment Company Ltd. was found and impounded. 6. After thoroughly analyzing the details, the Assessing Officer noted that the scrip of M/s. Yamini Investment Company Ltd. was managed and controlled to benefit certain pre-decided persons. On the basis of the data analysis, he noted that the assessee is also among the beneficiaries who have received the non-genuine benefit of transactions in the scrip of M/s. Yamini Investment Company Ltd. and availed bogus long term capital gain. Accordingly, the Assessing Officer 6 ITA No.2016/PUN/2024 concluded that the assessee is one of the beneficiaries of obtaining accommodation entries of bogus long term capital gains operated by a group of persons acting as a syndicate in order to provide entries of tax exempt LTCG to the beneficiaries. The exchange of shares of M/s. Anax Com Trade Ltd. with those of M/s. Yamini Investments Company Ltd. was a manipulated affair to generate entries of bogus long term capital gain facilitating tax evasion. The assessee is one such person who has availed accommodation entries / bogus long term capital gains. He, therefore, rejected the claim of exemption u/s 10(38) of the Act on such bogus long term capital gain of Rs.85,38,145/- and added the same to the total income of the assessee treating the same as unexplained cash credit u/s 68 of the Act. He accordingly determined the total income of the assessee at Rs.97,03,015/-. 7. Before the Ld. CIT(A) / NFAC, it was argued that the assessee got allotted 20000 shares of Rs.10 each of Anax Com Trade limited in private placement on 15.09.2012. The same were registered in the name of the assessee on 15.09.2012 and credited in assessee’s demat account on 15.09.2012. The company M/s. Anax Com Trade Limited was amalgamated with M/s. Yamini Investments Co Ltd. by order of Hon. Mumbai High Court dated 09.05.2014. Further in the scheme of the amalgamation, shareholders of the Anax Com Trade Limited got the shares of M/s. Yamini Investment Co Ltd. in the ratio of 1: 0.83 and accordingly, the assessee got 160000 shares of M/s. Yamini Investment Co Ltd. The assessee sold the shares in the month of June, July and August 2015 and sale rate was between Rs.48 to 60 per share. Thus, the assessee earned long term capital gain of Rs.85,38,145/-. The 7 ITA No.2016/PUN/2024 payments are received through account payee cheques. Transaction of sale is done through stock exchange. They are confirmed by brokers and STT is also paid. 8. However, the Ld. CIT(A) / NFAC was not satisfied with the arguments advanced by the assessee and upheld the action of the Assessing Officer by observing as under: “5.3 I have gone through the grounds of appeal, assessment order and the submissions of the appellant along with the documentary evidences. It is confirmed by the appellant that the appellant had traded in the script of M/s. Yamini Investment Company Ltd. A search and survey operation u/s 132/133 of the Income tax Act 1961 was conducted by the investigation wing on Dutta and Tyagi group dated 16.5.2018 and during the post search enquiries of the case, it has been gathered that the scrip of the M/s. Yamini Investment Company was managed and controlled to benefit certain pre decided persons and the assessee is a beneficiary of Yamini Investments Co Ltd. Scrip in the case of Dutta and Tyagi group. Trade data of the scrip Yamini Investment Co Ltd. and trading patterns was analysed and analysis of this data has proved that the scrip of Yamini was controlled and managed by some individual whose aim was to provide long term capital gain / loss by received cash, This traded value was found suspicious and detailed investigation of this issue was undertaken by the DDIT (Inv). The information has been analysed and examined it has been found that Yamini Investment Co Ltd. (YICL) is a penny stock company wherein prices are artificially moved in a desired/required direction on time to time basis in order to benefit few respective identities. Hence, it is established that the assessee had sold shares of YICL to tune his own financial interest and claimed capital gain of Rs. 85,38,145/- as exempted from sale of shares of YICL. 5.3.1 It is further seen from the Investigation report that in this scheme, the shares of the penny stock companies are acquired by the beneficiaries of LTCG at very low prices through the route of preferential allotment and off market transactions, then granting the bonus shares and finally splitting face value of the shares so that value of a share was reduced to almost a small fraction of a rupee. These shares have a lock in period of 1 year as per Securities and Exchange Board of India. General public is not interested in these shares as these companies have no credentials and this helps the operator to keep a control on the price movement of the shares. Once the period of 1 year has passed and the share prices have been sufficiently rigged, the beneficiaries sell their shares at the inflated prices on the stock exchange. The purchase of shares is not made by the public but by the bogus entities managed and controlled by the promoter of the penny stock company or the operator which are referred to as exist providers. The unaccounted money of the beneficiaries is routed to these bogus entities exist 8 ITA No.2016/PUN/2024 providers and the shares held by the beneficiaries are bought by these bogus entities from the money which is the unaccounted money of the beneficiaries. 5.3.2 To understand the nature of transaction, it is imperative to look „through‟ the transactions. The documentation arranged by the appellant cannot be substitute for the truth which is emerging clearly from the circumstances surrounding the transaction. Hence, the principle of 'substance over form' is applicable in the instant case. There are various cases and relevant case laws where the Hon'ble Courts have lifted the corporate veil and look through the transactions thus, highlighting the 'substance over form'. The ratio of the decision in the case CIT vs Nova Promoters and Finlease Pvt. Ltd. 18 taxmann.com (Delhi) is of relevance here. The Hon'ble Delhi High Court made an important observation with respect to accommodation entry providers. It is clear from the assessment order that the appellant had adopted a suspect modus operandi which has been described in detail in the assessment order. 5.3.3 There are a plethora of case laws which are relevant in the matter of establishing the settled proposition of law that the income tax liability is ascertained on the basis of materials available on record, the surrounding circumstances, the relevant human conduct and the overall balance of probability. Reliance is placed on. a. Sumati Dayal Vs CIT (1995) 80 Taxmann 89 (SC) \"It is no doubt true that in all cases in which a receipt is sought to be taxed as income, the burden lies upon the Department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within an exemption provided by the act lies upon the assessee. But, in view of section 68 of the Act, where any sum is found credited in the book of the assessee for any previous year, the same may be charged to income-tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the assessing officer, not satisfactory. In such a case there is, prima facie, evidence against the assessee, viz., the receipt of money, and if he rails to rebut it the said evidence being un-rebutted, can be used against him by holding that it was a receipt of an income nature. While considering the explanation of the assessee the Department cannot, however, act unreasonable. …….As laid down by this court the apparent must be considered the real until it is shown that there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities. ……….Having regard to the conduct of the appellant as disclosed in her sworn statement as well as other material on the record an 9 ITA No.2016/PUN/2024 inference could reasonably be drawn that the winning tickets were purchased by the appellant after the event. We are, therefore, unable to agree with the view of the Chairman in his dissenting opinion. In our opinion, the majority opinion after considering the surrounding circumstances and applying the test of human probabilities has rightly concluded that the appellants claim about the mount being her winnings from races is not genuine. It cannot be said that the explanation offered by the appellant in respect of the said amounts has been rejected unreasonably and that the finding that the said amounts are income of the appellant from other sources is not based on evidence.\" b. CIT, WB-II Vs Durga Prasad More (1971) 82 ITR 540: \"As laid down by this court the apparent must be considered the real until it is shown that there are reason to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities...... Now we shall proceed to examine the validity of those grounds that appealed to the learned judges. It is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A-little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents.\" 5.3.4 Having being put to the test of fact finding, it is observed the transactions have failed the test, more so when read with the test of probability and human conduct, so essential, to arrive at facts. The confirmation documentation remains mere documents and self serving, and they fail as evidence. In the case of DCIT VS Smt. Phoolwati Devi (2009) 314 ITR (AT) 1 (Delhi) the Hon'ble judges have observed at page 9 that \"In our opinion, despite the documentation supporting the claim of the assessee superficially, the evidence cannot be accepted in view of the surrounding circumstances and human probabilities\" Taking a view of the matter, the assessee's claim that payments through bank the transactions genuine is rejected as being devoid of merit in the light of the surrounding circumstances. 5.3.5 It is seen that merely documenting transaction do not render them genuine, more so in the face of overwhelming findings that they have been and are established to be make-believe. A taxing authority has always to give precedence 10 ITA No.2016/PUN/2024 of substance over form, and is not bound to recognize a transaction merely because it may have been routed through a negotiable instrument in a bank. In this case, the substance proves that the transactions were bogus, and the form given to them was a receipt. Reliance is placed on the judicial precedent of Karanpura Development Co. Ltd. Vs CIT (SC) 44 ITR 362. 5.3.6 Further, considering the tax evasion in the instant case, it is pertinent to refer to ratio of the decision of the Hon'ble Supreme Court in case of Rajendran Chingaravelu Vs. R.K. Mishra (320 ITR 1), in which the Hon'ble Apex Court noted with grave concerned the rampant circulation of unaccounted money destroying the economy of our country. Further, the ratio of the decision of the Hon'ble Supreme Court in the case of Mc Dowell Vs CTO (154 ITR 148) is also relied upon. In this land mark decision, the Hon'ble Apex Court noted with concern the colourable devices of tax planning. Considering the gamut of issues dealt with in the assessment order with which the undersigned concurs, the decision of the assessing officer is upheld and Grounds No. 4 to 12 raised in this appeal are dismissed. 6 Lastly, the appellant craves to leave, adduce additional grounds. Since no such option has been exercised by the appellant during appeal proceedings, the same is dismissed as infructuous. 7. In the result, the appeal is dismissed.” 9. So far as the grounds challenging the validity of re-assessment proceedings are concerned, the Ld. CIT(A) / NFAC has dismissed the same by observing as under: 4.3 I have gone through the grounds of appeal, statement of facts, assessment order and the submission of the appellant. In this case, specific information has been received that the assessee is a beneficiary of LTC gain and has received Rs.85,38,145/- during the A.Y. 2016-17. Section 147 of the Act lays down that the reopening the assessment can be done by the Assessing Officer (AO) if he has 'reason to believe' that the income has escaped assessment. Escapement of income chargeable to tax can be due to not filing of return of income by the appellant despite having taxable income, receipt of information from other agencies, or failure on part of the AO during the initial assessment proceedings to account for a portion of the income or allowing of excess loss or depreciation etc. In such a case, the provisions of Section 147 would be applicable and the assessment can be reopened. Explanation 2 to Section 147 enlists other conditions under which the section is applicable (deeming provision); which is when the income has been assessed but there has been under-assessment, the income has been assessed at too low a rate, excessive relief has been provided and/or excessive loss, depreciation allowance or any other allowance has been computed under the provisions of the Act. The very fact that reasons are recorded and notice u/s 148 11 ITA No.2016/PUN/2024 was issued goes to show that the AO had applied his mind and was satisfied himself about the re-opening of the case. The IT Act envisages that the AO should only have a reason to believe to re-open a case, he need not establish beyond doubt that there is escapement of income before issuing the notice. 4.3.1 The AO is not required to carry out any investigation before reopening as held by Hon'ble Supreme Court in the case of Raymond Woollen Mills Ltd v ITO 236 ITR 34(SC). Hon'ble Apex Court held that in determining whether commencement of reassessment proceedings was valid, it has only to be seen whether there was prima facie some material on the basis of which the department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at the stage of reopening. In view of this, the action of the AO to re-open the case by issuing of notice u/s. 148 is held to be valid. Ground No. 1 to 3 are dismissed.” 10. Aggrieved with such order of the Ld. Addl./NFAC, the assessee is in appeal before the Tribunal by raising the following grounds: 1. The Learned CIT(A) erred in confirming the reopening of the assessment under section 147 of the Income Tax Act, 1961 merely on the basis of the information received through the Insight portal from DDIT(Inv.) Unit 3(3) Delhi and there was no independent application of mind by Assessing Officer to arrive reason to believe that income had escaped assessment. Further, the Learned assessing officer failed to demonstrate the live link between tangible material and formation of reason to believe that income had escaped assessment. 2. The Learned CIT(A) further erred in confirming an addition of capital gain on the sale of shares of M/s. Yamini Investment Company Limited of Rs.85,38,145/- which is declared as long-term capital gain exempt under section 10(38) of the Income Tax Act by holding as non genuine and unexplained cash credit under section 68. 3. The Learned CIT(A) further erred in not examining and giving any finding on various latest decision of Supreme Court and jurisdictional Bombay High Court relied on which are on similar issues & facts and wherein additions on account of long term capital gain on sale of alleged penny stock are deleted and relied on certain decisions which are not on the issue involved. 4. The Learned CIT(A) further erred in not examining and giving any finding on various latest decision of jurisdictional Bombay High Court and Supreme Court relied on which are on similar issues & facts and wherein additions on account of long term capital gain on sale of alleged penny stock are deleted and these are binding on the assessing officer. As per the 12 ITA No.2016/PUN/2024 Principle of Precedents, the decision taken by a jurisdictional High court is binding on the lower courts of the jurisdictional. Therefore, not following the decision of jurisdictional High Court is contempt of the court. 5. The Learned CIT(A) further erred in confirming the re-opening the assessment u/s 147 of the Income Tax Act, 1961 without verifying the details and documents available on the record of the appellant as assessment in the case of the appellant was completed u/s 143(3) of the Income tax Act, 1961 on 09-12-2018 and nothing new had happened between date of order of assessment sought to be reopened and date of formation of opinion by Assessing Officer that income had escaped from assessment. Therefore, reopening of assessment is merely on the basis of a mere change of opinion. 6. The Learned CIT(A) further erred in not considering the various documents including bank statements, share allotment letter, copy of demat account, bills, contract notes etc., in respect of the purchase of shares of Anax Com Trade Limited and sale of shares of M/s Yamini Investment Company Limited and based his findings merely on the basis of the alleged information received from the DDIT/ADIT(Inv.), 3(3), New Delhi through Insight Portal during the course of post search proceedings in the case of Dutta and Tyagi group. 7. The Learned CIT(A) further erred in disallowing appellant's claim of exemption under section 10(38) in respect of long term capital gain earned on the sale of shares of M/s Yamini Investment Company Limited by relying on the various irrelevant information mentioned in the assessment order which are not relevant for the transactions carried out through well managed and approved stock exchange wherein the prices are driven by various economic conditions, volume of transactions and financial health of the company. 8. The Learned CIT(A) further erred in making an addition u/s 68 on account of long term capital gain being the sale of shares of M/s Yamini Investment Company Limited declared by the appellant by relying on information received from the DDIT/ADIT(Inv.), 3(3), New Delhi through Insight Portal, which are not relating to the appellant, as name of the appellant not mentioned and appellant is not party and without providing copy of report or statement of third party recorded if any and not allowing opportunity to cross-examine the parties who had given any statement naming the appellant. 9. The Learned CIT(A) further erred in confirming the additions of long term capital gain under section 68 without bringing on record any material or evidence to prove that the long term capital gain declared by the Appellant is an accommodation entry against which appellant paid cash. 13 ITA No.2016/PUN/2024 11. The Ld. Counsel for the assessee strongly challenged the order of the Ld. CIT(A) / NFAC in confirming the validity of re-assessment proceedings as well as the addition on merit. So far as the validity of re-assessment proceedings is concerned, the Ld. Counsel for the assessee submitted that the Assessing Officer in the instant case has reopened the assessment on the basis of report of investigation wing and has not applied his own mind and the entire reopening of assessment was on account of borrowed satisfaction. 12. Referring to the decision of the Hon’ble Delhi High Court in the case of PCIT vs. RMG Polyvinyl (I) Ltd., 83 taxmann.com 348 (Del), he submitted that the Hon’ble High Court in the said decision has held that where information was received from investigation wing that assessee was beneficiary of accommodation entries but no further inquiry was undertaken by Assessing Officer, the said information could not be said to be tangible material per se and, thus, reassessment on said basis was not justified. 13. Referring to the decision of the Hon’ble Delhi High Court in the case of PCIT vs. Meenakshi Overseas (P) Ltd. 395 ITR 677 (Del), he submitted that the Hon’ble High Court in the said decision has held that where reassessment was resorted to on basis of information from DIT(Investigation) that assessee had received accommodation entry but there was no independent application of mind by Assessing Officer to tangible material and reasons failed to demonstrate live 14 ITA No.2016/PUN/2024 link between tangible material and formation of reason to believe that income had escaped assessment, reassessment was not justified. 14. Referring to the decision of the Hon’ble Delhi High Court in the case of Pr. CIT vs. G and G Pharma India Ltd., [2016] 384 ITR 147 (Del.), he submitted that the Hon’ble High Court in the said decision has held that prior to the reopening of the assessment, the Assessing Officer has to, applying his mind to the material, conclude that he has reason to believe that income of the assessee has escaped assessment. Unless the basic jurisdictional requirement is satisfied, a postmortem exercise of analyzing materials produced subsequent to the re-opening will not rescue an inherently defective reopening order from invalidity. 15. Referring to the decision of the Hon’ble Delhi High Court in the case of Sarthak Securities Co Pvt Ltd vs Income Tax Officer-Ward 7(3), 329 ITR 110 (Del.), he submitted that the Hon’ble High Court in the said decision has held that where there is no independent application of mind by the Assessing officer but acting under information from Inv. Wing, the notice u/s 147 has to be quashed. 16. Referring to the decision of the Hon’ble Bombay High Court in the case of PCIT v. Shodiman Investments (P) Ltd, 93 taxmann.com 153, he submitted that the Hon’ble High Court in the said decision has held that where Assessing Officer had issued a reassessment notice on the basis of intimation from DDIT (Inv.) about a particular entity entering into suspicious transactions, this was clearly in breach 15 ITA No.2016/PUN/2024 of settled position in law that re-opening notice has to be issued by Assessing Officer on his own satisfaction and not on borrowed satisfaction. 17. Referring to the decision of the Mumbai Bench of the Tribunal in the case of Leela Bhanji Gada & ANR v. ITO, ITA No. 2801/MUM/2014, 52 CCH 163, he submitted that the Tribunal in the said decision has held that when Assessing Officer while recording the reasons had failed to apply his mind and merely referred to the report of Investigation wing, initiation of reassessment proceedings was without application of appropriate mind hence reopening was invalid in eyes of law. 18. He also relied on the following decisions: i) Rajesh Goyal vs. DCIT vide ITA No.331/Del/2020 ii) Subhash Chandra Gupta vs. ACIT 168 taxmann.com 76 iii) ACIT vs. Keshavji Nongha Shah vide ITA No.862/MUM/2024, order dated 01.10.2024 iv) ACIT vs. Mrs Rehana Mohammed Ali Gheewala 2024-TIOL-1469-ITAT- MUM v) Nimish Chandrakant Mehta vs. ITO vide ITA No.4877/Mum/2023, order dated 24.09.2024 vi) Shobhit Gupta vs. ACIT, 168 taxmann.com 599 19. So far as the merit of the case is concerned, the Ld. Counsel for the assessee submitted that the assessee during the course of assessment proceedings has submitted the following documents: i) Bank statement reflecting payment made for purchase of shares ii) Bank statement reflecting consideration received on sale of shares iii) Demat account statement for the period of purchase and sale of shares iv) Share allotment letter on allotment of shares v) Contact notes of sale of shares 16 ITA No.2016/PUN/2024 20. He submitted that the Ld. CIT(A) / NFAC did not consider the various documents including bank statements, share allotment letter, copy of demat account, bills, contract notes etc., in respect of the purchase of shares of Anax Com Trade Limited and sale of shares of M/s Yamini Investment Company Limited and based his findings merely on the basis of the alleged information received from the DDIT/ADIT(Inv.), 3(3), New Delhi through Insight Portal during the course of post search proceedings in the case of Dutta and Tyagi group. 21. Referring to the order of the Ld. CIT(A) / NFAC in case of the son of assessee Shri Manoj Jaibhagwan Jindal, he submitted that the son of the assessee has also earned capital gain on account of sale of same shares and the Ld. CIT(A) / NFAC has deleted the addition made by the Assessing Officer. However, the Ld. CIT(A) / NFAC has not considered the same although the Revenue has accepted the order of the Ld. CIT(A) / NFAC in case of son of the assessee and has not filed any appeal despite the tax effect involved of Rs.56.52 lakh which is more than the prescribed monetary limit for filing of appeal at that that time. Further, the Ld. CIT(A) / NFAC has also not considered the various decisions of the Hon’ble jurisdictional High Court as well as the Hon'ble Supreme Court. He submitted that the investigation wing of the department has listed 84 scrips which were treated as penny stock shares on the basis of which the re-assessment proceedings have been initiated and those have been sustained. Referring to the decisions relied on by the Assessing Officer / Ld. CIT(A) / NFAC/ CIT-DR he submitted that in all these decisions the scrips that were involved are on account of 84 scrips pointed out by 17 ITA No.2016/PUN/2024 the investigation wing of the department. However, the assessee has not traded in any of those penny stock shares, therefore, the order of the Ld. CIT(A) / NFAC confirming the addition made by the Assessing Officer is not justified. 22. Referring to the decision of the Hon'ble Supreme Court in the case of Union of India vs. Kamlakshi Finance Corporation Ltd. (1992) 1992 taxmann.com 16 (SC), he submitted that the decision of the Hon’ble jurisdictional High Court would have higher precedence value on the Tribunal than the decision of Hon’ble non-jurisdictional High Court. Therefore, the Tribunal should follow the decision of the Hon’ble jurisdictional High Court so that the judicial discipline would be maintained in order to give effect to the orders of the higher appellate authorities. 23. Referring to the decision of the Hon'ble Supreme Court in the case of PCIT vs. Kishore Kumar Mohapatra, 162 taxmann.com 5 (SC), he submitted that the Hon'ble Supreme Court in the said decision has dismissed the SLP filed against the order of Hon’ble High Court that where Assessing Officer denied exemption claimed by the assessee under section 10(38) on long term capital gain on sale of shares on basis of statement of entry operators recorded on various dates in some other proceedings not connected with assessee and no opportunity to cross- examine so-called entry providers was given to assessee thereby violating principles of natural justice, the Tribunal was justified in deleting the addition made by the Assessing Officer. 18 ITA No.2016/PUN/2024 24. Referring to the decision of the Hon'ble Madhya Pradesh High Court in the case of Chief Commissioner of Income-tax Vs Nilesh Jain (HUF), 163 taxmann.com 229 dated 30-04-2024, he submitted that the Hon’ble High Court in the said decision has held that where assessee purchased shares of a company listed on Bombay Stock Exchange through a D-mat account, with payments made via banking channels and Security Transaction Tax paid, fulfilling all conditions for exemption under Section 10(38), Assessing Officer could not question genuineness of those shares or treat them as bogus to make an addition under Section 68. 25. Referring to the decision of the Hon'ble Supreme Court of India in the case of Principal Commissioner of Income-tax Vs Kuntala Mohapatra 160 taxmann.com 608, he submitted that the Hon’ble Supreme Court in the said decision has dismissed the SLP filed against order of Hon’ble High Court that where shares were purchased via Account Payee Cheques, held in a Demat Account for over 12 months, and sold through a recognized stock exchange after payment of security transaction tax assessee was eligible to claim exemption under section 10(38) for long-term capital gains. 26. Referring to the decision of Hon'ble Supreme Court of India in the case of Principal Commissioner of Income-tax-1 Vs Parasben Kasturchand Kochar 130 taxmann.com 177, he submitted that the Hon’ble Supreme Court in the said decision has dismissed the SLP filed against impugned order of High Court holding that where assessee-individual engaged in trading of shares had discharged 19 ITA No.2016/PUN/2024 his onus of establishing long term capital gains arising out of sale of different shares as fair and transparent by submitting records of purchase bills, sale bills, demat statement etc., same not being earned from bogus companies was eligible for exemption under section 10(38). 27. Referring to the decision of Hon'ble Supreme Court in the case of Principal Commissioner of Income-tax Vs Renu Aggarwal, 153 taxmann.com 579, he submitted that the Hon’ble Supreme Court in the said decision has dismissed the SLP filed against order of High Court that where Assessing Officer disallowed exemption claimed by assessee under section 10(38) and made additions, alleging involvement in penny stock which were being misused for providing bogus accommodation of LTCG, however, there was lack of adverse comments from stock exchange and officials of company involved in these transactions and no material relating to assessee was found in investigation wing report, additions made by Assessing Officer had rightly been deleted. 28. Referring to the decision of Hon'ble Supreme Court of India in the case of Principal Commissioner of Income-tax Vs Dipansu Mohapatra, 160 taxmann.com 289, he submitted that the Hon’ble Supreme Court in the said decision has held that where the Assessing Officer denied said claim and treated same as bogus on ground that receipts constituted accommodation entries taken by assessee, the Tribunal noted that all details of purchase and sales were placed before Assessing Officer along with contract notes for purchase and sale, demat account and bank 20 ITA No.2016/PUN/2024 statement and allowed the claim of assessee by holding that no incriminating materials were found during survey and statements relied upon were recorded much before date of survey conducted at premises of assessee. The Hon’ble High Court has held that the Tribunal was justified in allowing assessee's claim under section 10(38). 29. Referring to the decision of the Hon'ble Bombay High Court in the case of Pr. Commissioner of Income Tax-13 Vs Shyam R. Pawar, 54 taxmann.com 108, he submitted that the Hon’ble High Court in the said decision has held that where DMAT account and contract note showed details of share transaction and Assessing Officer had not proved said transaction as bogus, capital gain earned on said transaction could not be treated as unaccounted income under section 68. 30. Referring to the decision of the Hon'ble Bombay High Court in the case of Principal Commissioner of Income Tax-3 Vs Ziauddin A Siddique, ITA No.2012 of 2017, dated 04-03-2022, he submitted that the Hon’ble High Court in the said decision has held as under: “We have considered the impugned order with the assistance of the learned Counsels and we have no reason to interfere. There is a finding of fact by the Tribunal that the transaction of purchase and sale of the shares of the alleged penny stock of shares of Ramkrishna Fincap Ltd. (\"RFL\") is done through stock exchange and through the registered Stock Brokers. The payments have been made through banking channels and even Security Transaction Tax (\"STT\") has also been paid. The Assessing Officer also has not criticized the documentation involving the sale and purchase of shares. The Tribunal has also come to a finding that there is no allegation against assessee that it has participated in any price rigging in the market on the shares of RFL. 3. Therefore we find nothing perverse in the order of the Tribunal. 21 ITA No.2016/PUN/2024 4. Mr. Walve placed reliance on a judgment of the Apex Court in Principal Commissioner of Income-tax (Central)-1 vs. NRA Iron & Steel (P.) Ltd. 1 but that does not help the revenue in as much as the facts in that case were entirely different. 5. In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law.\" 31. Referring to the decision of the Hon'ble Bombay High Court in the case of Commissioner of Income Tax Vs Smt. Jamnadevi Agrawal, 20 taxmann.com 529, he drew the attention of the Bench to the following Head note: “Section 68 of the Income Tax Act, 1961 – Cash credit – Assessment year 2001-02 – Fact that assessees in group had purchased and sold shares of similar companies through same broker could not be a ground to hold that transactions were sham and bogus, especially when documentary evidence was produced to establish genuineness of claim.” 32. Referring to the decision of the Hon'ble Bombay High Court in the case of Principal Commissioner of Income Tax Vs Indravadan Jain HUF, ITA No.454 of 2018, dated 12-07-2023, he submitted that in this case the Revenue filed the appeal to contest orders passed by the ITAT, w.r.t. order passed by the CIT(A) for the relevant assessment year. It was the case of Revenue before the ITAT that the CIT[A] was wrong in deleting the addition made by the Assessing Officer (A.O.) in respect of long term capital gain treated by A.O. as unexplained cash credit under Section 68 of the Act. The assessee had shown sale proceeds of shares in scrip Ramkrishna Fincap Ltd. (RFL) as long term capital gain and claimed exemption under the Act. Respondent had claimed to have purchased this scrip at Rs.3.12/-per share in the year 2003 and sold the same in the year 2005 for Rs.155.04/- per share. It was Assessing Office's case that investigation has 22 ITA No.2016/PUN/2024 revealed that the scrip was a penny stock and the capital gain declared was held to be accommodation entries. A broker Basant Periwal & Co. (the said broker) through whom these transactions have been effected had appeared and it was evident that the broker had indulged in price manipulation through synchronized and cross deal in scrip of RFL. SEBI had also passed an order regarding irregularities and synchronized trades carried out in the scrip of RFL by the said broker. In view thereof, respondent's case was reopened under Section 148 of the Act. On appeal, the Hon’ble High Court observed the detailed findings of the CIT(A) and concluded that these findings were sound and based on thorough appreciation of the facts and circumstances of the matter at hand. Hence the Hon’ble High Court finds no error in the action of the Tribunal in upholding the findings of the CIT(A). 33. Referring to the decision of the Hon'ble Gujrat High Court in the case of the Principal Commissioner of Income Tax Vs Sandipkumar Parsottambhai Patel, 457 ITR 368, he submitted that the Hon’ble High Court in the said decision has held that where the Assessing Officer treated transactions in purchase and sale of share as sham transactions and sale proceeds of shares were treated as undisclosed income under section 68, since payments were received through account payee cheques and transactions were done through recognized stock exchange, and there was no evidence that assessee had paid cash in return of receipt through cheque Tribunal rightly deleted addition holding that transactions were genuine. 23 ITA No.2016/PUN/2024 34. Referring to the decision of the Hon'ble Delhi High Court in the case of Pr. Commissioner of Income Tax-12 Vs Karuna Garg, ITA 477/2022, dated 23-11- 2022, he submitted that the Hon’ble High Court in the said decision has held that though Revenue has mentioned in the present appeal that the issue involved is covered by the judgment of this Court in Suman Poddar v. ITO 423 ITR 480, wherein appeal of the Assessee was dismissed taking judicial notice of the fact that there was an astronomical increase in the share price of a company which was not commensurate with the financial parameters of the said company, yet this Court finds that a Coordinate Bench of this Court in PCIT vs. Smt. Krishna Devi [ITA 125/2022] & connected ITAs has upheld the Tribunal’s order which is impugned in the present appeal. He accordingly submitted that the re-assessment proceedings are invalid and the addition on merit also has to be deleted. 35. The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. CIT(A) / NFAC. Referring to the decision of the Pune Bench of the Tribunal in the case of ITO Vs. Splice Biotech Pvt. Ltd. vide ITA No.775/PUN/2023, order dated 27.09.2023, he submitted that the Tribunal in the said decision has upheld the order of the Ld. CIT(A) in confirming the disallowance of exemption u/s 10(38) on account of bogus long term capital gains made by the Assessing Officer. 36. Referring to the decision of the Pune Bench of the Tribunal in the case of Abhishek Ashok Lohade vs. ITO vide ITA No.816/PUN/2018, order dated 24 ITA No.2016/PUN/2024 22.11.2022, he submitted that here also the Tribunal has confirmed the order of the Ld. CIT(A) sustaining the disallowance made by the Assessing Officer on account of long term capital gains claimed as exempt u/s 10(38) of the Act. So far as validity of re-assessment proceedings are concerned, he relied on the findings of Ld. CIT(A) / NFAC. He accordingly submitted that the order of the Ld. CIT(A) / NFAC being in accordance with law should be upheld. 37. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer in the instant case, on the basis of information received in insight portal from DDIT (Inv) Wing, Unit-3, Delhi that the assessee has traded in the scrips of shell company viz. M/s. Yamini Investments Co. Ltd., which is proved to be a penny stock company listed on BSE and which has been used to facilitate introduction of unaccounted income of members of beneficiaries in the form of exempt capital gain, reopened the assessment u/s 147 of the Act. Rejecting the various explanations given by the assessee, the Assessing Officer rejected the claim of exemption u/s 10(38) of the Act on such bogus long term capital and made addition of Rs.85,38,145/- u/s 68 of the Act. We find before the Ld. CIT(A) / NFAC, the assessee apart from challenging the addition on merit, challenged the validity of re-assessment proceedings. We find the Ld. CIT(A) / NFAC upheld the validity of re-assessment proceedings and sustained the addition on merit, the reasons of which have been 25 ITA No.2016/PUN/2024 reproduced in the preceding paragraphs. It is the submission of the Ld. Counsel for the assessee that the initiation of re-assessment proceedings by the Assessing Officer are on the basis of information received in insight portal from the DDIT (Inv) Wing, Unit-3, Delhi and there is no independent application of mind by the Assessing Officer before reopening of the assessment. Since the re-assessment proceedings have been initiated on borrowed satisfaction and without independent application of mind by the Assessing Officer, such re-assessment proceedings are invalid. Even on merit also, it is the submission of the Ld. Counsel for the assessee that the assessee has filed bank statements reflecting the payments made for purchase of the shares, consideration received on sale of such shares, the Dmat account statement for the period of purchase and sale of shares, share allotment letter, bills, contract notes, payment of security transaction tax and other expenses and none of these documents have been proved to be false or untrue by the Assessing Officer. It is his submission that in view of the various decisions of the Hon’ble Bombay High Court and various other Hon’ble High Courts, the Ld. CIT(A) / NFAC is not justified in sustaining the addition made by the Assessing Officer u/s 68 of the Act by rejecting the claim of exemption u/s 10(38) of the Act. It is also his submission that the son of the assessee has also traded in the same shares and claimed exemption u/s 10(38) of the Act which was rejected by the Assessing Officer and on appeal filed by the son of the assessee, the Ld. CIT(A) deleted such disallowance. Although the tax amount involved was more than Rs.50 lakhs as was prevailing at that time (Rs.56.52 lakhs), the Revenue has not filed any appeal against the order of the Ld. CIT(A). Therefore, the facts being 26 ITA No.2016/PUN/2024 similar, the Ld. CIT(A) / NFAC should have allowed the claim of exemption u/s 10(38) of the Act. 38. We find some force in the above arguments of the Ld. Counsel for the assessee. The reasons for reopening of assessment have already been reproduced in para 4 of this order. A perusal of the same shows that the same is based on the information received through insight portal from the DDIT (Inv) Wing and there is absolutely no independent application of mind by the Assessing Officer. Under these circumstances, we have to see as to whether such reopening of the assessment is valid or not. We find the Hon’ble Delhi High Court in the case of Pr. CIT vs. G and G Pharma India Ltd. (supra) has observed as under: “12. In the present case, after setting out four entries, stated to have been received by the Assessee on a single date i.e. 10th February 2003, from four entities which were termed as accommodation entries, which information was given to him by the Directorate of Investigation, the AO stated: \"I have also perused various materials and report from Investigation Wing and on that basis it is evident that the assessee company has introduced its own unaccounted money in its bank account by way of above accommodation entries.\" The above conclusion is unhelpful in understanding whether the AO applied his mind to the materials that he talks about particularly since he did not describe what those materials were. Once the date on which the so called accommodation entries were provided is known, it would not have been difficult for the AO, if he had in fact undertaken the exercise, to make a reference to the manner in which those very entries were provided in the accounts of the Assessee, which must have been tendered along with the return, which was filed on 14th November 2004 and was processed under Section 143(3) of the Act. Without forming a prima facie opinion, on the basis of such material, it was not possible for the AO to have simply concluded: \"it is evident that the assessee company has introduced its own unaccounted money in its bank by way of accommodation entries\". In the considered view of the Court, in light of the law explained with sufficient clarity by the Supreme Court in the decisions discussed hereinbefore, the basic requirement that the AO must apply his mind to the materials in order to have reasons to believe that the income of the Assessee escaped assessment is missing in the present case. 27 ITA No.2016/PUN/2024 13. Mr. Sawhney took the Court through the order of the CIT(A) to show how the CIT (A) discussed the materials produced during the hearing of the appeal. The Court would like to observe that this is in the nature of a post mortem exercise after the event of reopening of the assessment has taken place. While the CIT may have proceeded on the basis that the reopening of the assessment was valid, this does not satisfy the requirement of law that prior to the reopening of the assessment, the AO has to, applying his mind to the materials, conclude that he has reason to believe that income of the Assessee has escaped assessment. Unless that basic jurisdictional requirement is satisfied a post mortem exercise of analysing materials produced subsequent to the reopening will not rescue an inherently defective reopening order from invalidity. 14. In the circumstances, the conclusion reached by the ITAT cannot be said to be erroneous. No substantial question of law arises. 15. The appeal is dismissed.” 39. We find the Hon’ble Bombay High Court in the case of PCIT v. Shodiman Investments (P) Ltd (supra) has held as under: “12 The reopening of an Assessment is an exercise of extraordinary power on the part of the Assessing Officer, as it leads to unsettling the settled issue/assessments. Therefore, the reasons to believe have to be necessarily recorded in terms of Section 148 of the Act, before reopening notice, is issued. These reasons, must indicate the material (whatever reasons) which form the basis of reopening Assessment and its reasons which would evidence the linkage/ nexus to the conclusion that income chargeable to tax has escaped Assessment. This is a settled position as observed by the Supreme Court in S. Narayanappa v/s. CIT 63 ITR 219, that it is open to examine whether the reason to believe has rational connection with the formation of the belief. To the same effect, the Apex Court in ITO v/s. Lakhmani Merwal Das 103 ITR 437 had laid down that the reasons to believe must have rational connection with or relevant bearing on the formation of belief i.e. there must be a live link between material coming the notice of the Assessing Officer and the formation of belief regarding escapement of income. If the aforesaid requirement are not met, the Assessee is entitled to challenge the very act of reopening of Assessment and assuming jurisdiction on the part of the Assessing Officer. 13 In this case, the reasons as made available to the Respondent Assessee as produced before the Tribunal merely indicates information received from the DIT (Investigation) about a particular entity, entering into suspicious transactions. However, that material is not further linked by any reason to 28 ITA No.2016/PUN/2024 come to the conclusion that the Respondent Assessee has indulged in any activity which could give rise to reason to believe on the part of the Assessing Officer that income chargeable to tax has escaped Assessment. It is for this reason that the recorded reasons even does not indicate the amount which according to the Assessing Officer, has escaped Assessment. This is an evidence of a fishing enquiry and not a reasonable belief that income chargeable to tax has escaped assessment. 14 Further, the reasons clearly shows that the Assessing Officer has not applied his mind to the information received by him from the DDIT (Inv.). The Assessing Officer has merely issued a reopening notice on the basis of intimation regarding reopening notice from the DDIT (Inv.) This is clearly in breach of the settled position in law that reopening notice has to be issued by the Assessing Office on his own satisfaction and not on borrowed satisfaction. 15 Therefore, in the above facts, the view taken by the impugned order of the Tribunal cannot be found fault with. This view of the Tribunal is in accordance with the settled position in law. 16 Therefore, the question as framed does not give rise to any substantial question of law. Thus, not entertained. 17 Accordingly, Appeal dismissed. No order as to costs.” 40. We find the Hon’ble Delhi High Court in the case of PCIT vs. RMG Polyvinyl (I) Ltd. (supra) while quashing the re-assessment proceedings where such reopening was based on the report of the Investigation Wing has observed as under: “12. Recently, in its decision dated 26th May, 2017 in ITA No.692/2016 (Principal Commissioner of Income Tax-6 v. Meenakshi Overseas Pvt. Ltd.), this Court discussed the legal position regarding reopening of assessments where the return filed at the initial stage was processed under Section 143(1) of the Act and not under Section 143(3) of the Act. The reasons for the reopening of the assessment in that case were more or less similar to the reasons in the present case, viz., information was received from the Investigation Wing regarding accommodation entries provided by a 'known' accommodation entry provider. There, on facts, the Court came to the conclusion that the reasons were, in fact, in the form of conclusions \"one after the other\" and that the satisfaction arrived at by the AO was a \"borrowed satisfaction\" and at best \"a reproduction of the conclusion in the investigation report.\" 29 ITA No.2016/PUN/2024 13. As in the above case, even in the present case, the Court is unable to discern the link between the tangible material and the formation of the reasons to believe that income had escaped assessment. In the present case too, the information received from the Investigation Wing cannot be said to be tangible material per se without a further inquiry being undertaken by the AO. In the present case the AO deprived himself of that opportunity by proceeding on the erroneous premise that Assessee had not filed a return when in fact it had. 14. To compound matters further the in the assessment order the AO has, instead of adding a sum of Rs.78 lakh, even going by the reasons for reopening of the assessment, added a sum of Rs.1.13 crore. On what basis such an addition was made has not been explained. 15. For the aforementioned reasons, the Court is satisfied that no error was committed by the ITAT in holding that reopening of the assessment under Section 147 of the Act was bad in law. 16. No substantial question of law arises from the impugned order of the ITAT.” 41. The various decisions relied on by the Ld. Counsel for the assessee on the issue of reopening on the basis of report of the Investigation wing and non application of independent mind by the Assessing Officer which amounts to borrowed satisfaction supports his case to the proposition that the reopening of the assessment merely on the basis of report of Investigation Wing and without independent application of mind by the Assessing Officer is void ab initio. Since admittedly in the instant case the assessment has been reopened on the basis of the information received through insight portal from DDIT (Inv), Delhi and without independent application of mind by the Assessing Officer, therefore, such re- assessment proceedings being not in accordance with law, have to be quashed. We, accordingly, quash the re-assessment proceedings and the ground raised by the assessee on this issue is allowed. Since the assessee succeeds on this legal ground, 30 ITA No.2016/PUN/2024 the other grounds challenging the addition on merit are not being adjudicated being academic in nature. 42. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 27th February, 2025. Sd/- Sd/- (ASTHA CHANDRA) (R. K. PANDA) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; दिन ांक Dated : 27th February, 2025 GCVSR आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: 1. अपीलार्थी / The Appellant; 2. प्रत्यर्थी / The Respondent 3. 4. The concerned Pr.CIT, Pune DR, ITAT, ‘A’ Bench, Pune 5. गार्ड फाईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अधिकरण ,पुणे / ITAT, Pune 31 ITA No.2016/PUN/2024 S.No. Details Date Initials Designation 1 Draft dictated on 27.01.2025 Sr. PS/PS 2 Draft placed before author 27.01.2025 Sr. PS/PS 3 Draft proposed & placed before the Second Member JM/AM 4 Draft discussed/approved by Second Member AM/AM 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order "
Other Referred Cases
PCIT vs. RMG Polyvinyl (I) Ltd., PCIT vs. Meenakshi Overseas (P) Ltd., PCIT vs. G and G Pharma India Ltd., PCIT vs. Shodiman Investments (P) Ltd, PCIT vs. Kishore Kumar Mohapatra, Chief Commissioner of Income-tax Vs Nilesh Jain (HUF), Principal Commissioner of Income-tax Vs Kuntala Mohapatra, Principal Commissioner of Income-tax Vs Parasben Kasturchand Kochar, Principal Commissioner of Income-tax Vs Dipansu Mohapatra, Principal Commissioner of Income-tax Vs Ziauddin A Siddique, Principal Commissioner of Income-tax Vs Sandipkumar Parsottambhai Patel, Principal Commissioner of Income-tax Vs Jamnadevi Agrawal, Principal Commissioner of Income-tax Vs Indravadan Jain HUF
Laws Referred To
Income Tax Act, 1961
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1:1 Consultation on Startup Fundraising
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Memorandum Amendment Resolution
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Declaration of Gift
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