“Dragged the assessee towards an unwarranted litigation on their whims and fancies”: ITAT deletes Addition on Whole Amount from Sale of Shares [Read Order]

The Mumbai bench of Income Tax Appellate Tribunal ( ITAT ) while deleting the addition on the whole amount from the sale of shares held that the both the authorities acted in a casual manner and dragged the assessee towards an unwarranted litigation on their whims and fancies.

The Assessee Nikunj Kaushik Shah, filed his return of income on 11.07.2011 declaring total income at Rs. 61,52,220/-. Case of the assessee was processed under Section 143(1) of the Income Tax Act. Subsequently, information has been received from the office of DDIT(Inv.), Mumbai, wherein it was informed that shares of a listed company M/s. VAS Infrastructure Ltd. is a penny stock and has been used by beneficiaries to launder money in the Garb of Long Term Capital Gains while claiming exemption under Section 10(38) of the Income Tax Act.

According to the information, the assessee was reopened under Section 147 of the Income Tax Act and notice under Section 148 of the Income Tax Act was issued on 29.03.2018, i.e. after 6 years from the end of the relevant assessment year.

The Reasons for reopening the case was that on the premise that assessee has dealt with the shares of M/s. VAS Infrastructure Ltd. a penny stock and assessee has been involved in the laundering of its unaccounted money in the garb of exemption provided in section 10(38) of the Income Tax Act. AO, accordingly made an addition of Rs. 4, 60,497/- being total sales value of shares.

Aggrieved by the order assessee filed appeal before the tribunal who dismissed the appeal Accordingly the assessee filed a second appeal before the tribunal.

It was observed by the tribunal that the whole action of AO was without application of mind and a fit case of either incompetence or biased intentions. Even if it is assumed that assessee was involved in spurious activities to claim exemption u/s. 10(38) of the Act, addition can’t exceed Rs. 5182.95/-.

Therefore  the CIT (A) simply brushed aside the explanations of the assessee alongwith evidences adduced and pronounced the order by cut and paste of what AO has done

After considering the issues Karnataka High Court in the case of Biocon Ltd the two member  bench comprising Aby T. Varkey, ( Judicial Member ) & Gagan Goyal, (Accountant Member) observed that both the authorities act in a casual manner and dragged the assessee towards an unwarranted litigation on their whims and fancies

Therefore it is found that whole proceedings in this matter carried out in an entirely irresponsible manner or that the authorities should be penalized in monetary terms on that count. Accordingly the bench deleted the Addition on whole Amount from the Sale of Shares

Rajesh Kothari,counsel for the assessee  and Ashok Kumar Ambastha, counsel for the revenue.

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