AO can reopen case under sec 147 to assess alleged Bogus Capital gains from penny stocks : HC

Gujrat High Court in matter of PURVIBEN SNEHALBHAI PANCHHIGAR Versus ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 1(3)

Relevant text of Judgement is given below:

7. This aspect have also been reiterated by the Supreme Court in the later judgment in the case of Deputy Commissioner of Income Tax and another v. Zuari Estate Development and Investment Company Limited [(2015) 373 ITR 661 (SC)].

8. In the present case the Assessing Officer has heard the material on record which would prima facie suggest that the assessee had sold number of shares of a company which was found to be indulging in providing bogus claim of long term and short term capital gain. The company was prima facie found to be a shell company. The assessee had claimed exempt of long term capital gain of Rs.1.33 crores by way of sale of share of such company. The judgment in the case of Principal Commissioner of Income Tax, Rajkot-3 v. Gokul Ceramics [Taxman Vol. 241 {2016) 241], the Division Bench had examined the contention of the Assessing Officer proceeded on the basis of the information supplied by the department, and after referring to the several judgments, made following observations in para 9 which read thus:

It can thus be seen that the entire material collected by the DGCEI during the search, which included incriminating documents and other such relevant materials, was along with report and show-cause notice placed at the disposal of the Assessing Officer. These materials prima facie suggested suppression of sale consideration of the tiles manufactured by the assessee to evade excise duty. On the basis of such material, the Assessing Officer also formed a belief that income chargeable to tax had also escaped assessment. When thus the Assessing Officer had such material available with him which he perused, considered, applied his mind and recorded the finding of belief that income chargeable to tax had escaped assessment, the re-opening could not and should not have been declared as invalid, on the ground that he proceeded on the show-cause notice issued by the Excise Department which had yet not culminated into final order. At this stage the Assessing Officer was not required to hold conclusively that additions invariably be made. He truly had to form a bona fide belief that income had escaped assessment. In this context, we may refer to various decisions cited by the counsel for the Revenue.

9. In the result, the petition is dismissed.