The court upheld the Tribunal’s view that the reopening of proceedings was flawed, as the alleged transaction had already been disclosed in the books and in the Income Tax Return filed under Section 139(1)

In a recent case, the Calcutta High Court dismissed the appeal on finding that the Income Tax Appellate Tribunal ( ITAT ) invalidated the reassessment order passed under Income Tax Act, 1961 as alleged transaction was already shown on return filed. The revenue filed appeal under Section 260A of the Income Tax Act, 1961 (the Act) challenged the order dated September 12, 2023 passed by the tribunal for the assessment year 2012-13 which was in favour of  Fountain Vanijya Pvt.Limited, the assessee. The revenue challenged the order quashing the reopening proceedings on the ground that the assessee had suo moto added back long term capital gain/loss incurred during the year without considering the fact that long term capital gain of Rs.88, 73, 135/- on the sale of Penny Stock of Aagam Capital Limited cannot be treated as genuine and that the Assessing Officer has correctly reopened and added the entire sale proceeds of Rs.88,73,135/- from sale of penny stock of Aagam Capital Limited holding the same as bogus. Get a Copy of Income Tax Rules with FREE e-book access, Click here Though the department contended that the matter relates to penny stock, the issue which was decided by the Tribunal was whether the reopening of the assessment was valid. The assessee’s contention was that the reasons for reopening of the assessment was that the income of Rs.88,73,135/- had escaped assessment which is generated by the assessee from sale of penny stocks, which reasons was found to be factually incorrect since the assessee had not shown any income from long term capital gain/short term capital gain/business loss. The Tribunal came to the conclusion that the reason to believe is bad and consequently the reopening is illegal. Get a Copy of Income Tax Rules with FREE e-book access, Click here The court found that the tribunal was convinced the reason for reopening was bad in law. Apart from that the Tribunal has noted that the alleged transaction has already been brought into books of accounts and has been disclosed in Income Tax Return filed under Section 139(1) of the Act and, therefore, the very foundation of reopening of proceedings becomes bad in law. The division bench of Chief Justice T.S Sivagnanam and Justice Hiranmay Bhattacharyya dismissed the appeal as there is no question of law much less substantial questions of law arising for consideration in the appeal.