Back
2026 Supreme(Online)(ITAT) 7589
INCOME TAX APPELLATE TRIBUNAL (KOLKATA BENCH)
George Mathan, Judicial Member, Rakesh Mishra, Accountant Member
DCIT, Circle-5(1), Kolkata – Appellant
Versus
Global Capital Markets Limited – Respondent
ITA No(s).: 1420/KOL/2025
For the Appellants/Petitioners: Pradip Dungdung, JCIT, Sr. DR.
For the Respondents: A.N. Keshari, FCA.
Reassessment additions on penny stock trades remanded to CIT(A) for speaking order on reopening validity, cross-examination rights, and sham transaction precedents, ensuring natural justice.
Headnote:(A) Income Tax Act, 1961 - Sections 147, 143(3), 250, 68 - Reassessment after 4 years - Penny stock trading losses and gains - Whether reopening valid without failure to disclose material facts - Original assessment scrutinized issue not before AO - No cross-examination opportunity or independent enquiry by AO - CIT(A) deleted additions holding no evidence of manipulation - Tribunal remands for speaking order on legal issues raised by Revenue including validity of reopening and judicial precedents on sham transactions. (Paras 1.1, 3, 5, 7)
(B) Natural Justice - Reliance on investigation reports - Statements not supplied for cross-examination - AO's mechanical reliance without own verification - Burden on assessee only after tangible evidence - Remand to CIT(A) for fresh adjudication with opportunities to both sides. (Paras 5.4.2, 5.4.3, 7)
Facts of the case:
Assessee company engaged in share trading filed return declaring loss. Original assessment u/s 143(3) accepted. Reopened u/s 147 post-4 years on investigation info alleging bogus losses/gains from penny stock trades. AO added back trading losses and treated net gains as unexplained credits. CIT(A) deleted additions holding no failure to disclose, no cross-exam, no independent enquiry, mere surmises.
Findings of Court:
No proper finding on legal issue of reopening validity and precedents cited by Revenue. Order of CIT(A) set aside.
Issues: Validity of reopening u/s 147 after 4 years without assessee's failure to disclose; propriety of additions based solely on investigation reports without cross-examination or AO's enquiry; application of principles on sham transactions.
Ratio Decidendi: Tribunal requires CIT(A) to address Revenue's legal grounds with speaking order, ensuring opportunities for submissions, compliance with rule 46A, without unnecessary adjournments.
Result: Revenue's appeal partly allowed for statistical purposes; remanded to CIT(A).
| Table of Content |
|---|
| 1. condonation of delay in filing appeal granted. (Para 1) |
| 2. revenue challenges cit(a)'s deletion of bogus loss additions. (Para 2) |
| 3. factual background of penny stock trading losses and reassessment. (Para 3) |
| 4. assessee's appeal grounds against additions. (Para 4 , 5) |
| 5. revenue rebuts cit(a) findings on disclosure and investigation. (Para 6) |
| 6. remand to cit(a) for speaking order on legal issues. (Para 7) |
ORDER
PER RAKESH MISHRA, ACCOUNTANT MEMBER:
This appeal filed by the Revenue is against the order of the Commissioner of Income Tax (Appeals)-20, Kolkata [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2012-13 dated 04.03.2025.
1.1 The Registry has informed that the appeal is barred by limitation by 30 days. The Revenue has filed a petition for condonation of delay explaining the reasons that the due date for filing the second appeal was 02.06.2025; however, till 12.06.2025 the case records were not readily available with the Department. On 25.06.2025, the certificate of filing the appeal was received from the office of the Pr. CIT-2, Kolkata. It was requested to condone the delay of 37 days in filing the appeal before the Hon'ble ITAT. After perusing the same, we are satisfied that the Revenue had a reasonable and sufficient cause and was prevented from filing the instant appeal within the statutory time limit. We, therefore, condone the delay and admit the appeal for adjudication.
2. The Revenue is in appeal before the Tribunal raising the following grounds of appeal:
“1. The Ld. CIT(A) erred in fact by holding that the issue of claim of the share trading loss was already examined in course of assessment proceeding completed u/s 143(3) of the Act when the issue of bogus LTCG or STCL or trading Loss was not before the AD for examination
2. The Ld. CIT(A) erred in fact as well as in law by holding that there was no failure on the part of assessee, who is disclosing fully and truly the relevant fact in this case when the issue of bogus LTCG or STCL or trading Loss was not before the AD for examination and when the said expression "failure to fully and truly disclose material facts also relate to the stage of the assessment proceedings as there can be omission and failure on the part of the assessee to disclose fully and truly material facts during the course of the assessment proceedings.
3. The Ld. CIT(A) erred in fact by holding that statements recorded of the various persons were not provided to the assessee for cross examination when AO did not rely on such statements or any part thereof and hence such statements do not warrant cross examination and when the reasons recorded for reopening were provided to the assessee in the course of assessment proceedings but the assessee never wanted any cross examination the matter
4. The Ld. CIT(A) erred in fact by holding that AD did not bother to conduct any enquiry to establish its claim when the Ld. CIT(A) failed to appreciate that Investigation Wing Mumbai/Kolkata are the part of the Income Tax Department, who have made detailed investigation prior to concluding that the shares are penny stocks.
5. The Ld. CIT(A) erred in fact by holding that there is no evidence on record to establish that the assessee has deliberately taken the fictitious trading loss by entering into any manipulation or scam when in spite of negative attributes and dismal fundamentals, the assessee purchased and sold the scrips of Rocken Fintech Limited and Banas Finance Limited.
6. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in facts and in law in not appreciating the judicial principles laid down in the matter of Pr. CIT Vs. Swati Bajaj reported in [2022] 139 taxmann.com 352 (Cal)/446 ITR 56 (Cal) wherein the Hon'ble High Court at Calcutta laid down guidelines on the manner in which the allegation against the assessee has to be considered.
7. Whether on the facts and circumstance
