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September 13, 2022

Reassessment notice must include relevant documents for penny stock/accommodation  entry

by CA Shivam Jaiswal in Income Tax, Legal Court Judgement

Reassessment notice must include relevant documents for penny stock/accommodation  entry

Facts and issues of the case

Present writ petition has been filed challenging the show cause notice dated 17th May, 2022 issued under Section 148A(b) of the Income Tax Act, 1961 [‘the Act’] as well as order dated 29th June, 2022 issued under Section 148A(d) of the Act for the Assessment Year 2014-15.

On 18th August, 2022, this Court had issued notice in the present writ petition. Today, Mr.Abhishek Maratha, learned counsel for the respondents- revenue, states that as per information received from Central Circle -2(1), Mumbai through Insight Portal, (a copy of which has been shown to this Court), the assessee has been found to be a beneficiary of accommodation entries from Mr.Naresh Manekchand Jain and his several associates who had been instrumental in manipulating prices of several penny stock scrips on the stock exchange.

He further states that the name of the assessee appears in the list of beneficiaries (at Sr.No.7779) who had done transaction in such scrips during the financial year under consideration i.e. financial year 2013-14. He has also shown the list of beneficiaries to this Court.

Observation by the court

This Court is of the view that the documents shown by Mr.Maratha today should have been enclosed with the notice issued under Section 148A(b) by the respondents-revenue to the petitioner. To balance the equities, this Court sets aside the order dated 29th June, 2022 issued under Section 148A(d) of the Act for the assessment year 2014-15 and directs the respondents-revenue to issue a supplementary notice under Section 148A(b) of the Act within four weeks enclosing all the relevant material, information and documents, including the two documents shown to this Court today after redacting third party information.

The petitioner is given liberty to file an additional reply/response within four weeks thereafter. Along with its reply/response, the petitioner shall enclose copies of its Demat Account and its Bank Account Statement. The Assessing Officer is directed to pass a fresh order under Section 148A(d) of the Act in accordance with law. This Court clarifies that it has not commented on the merits of the controversy. The rights and contentions of all the parties are left open.

Conclusion

With the aforesaid directions, the present writ petition along with applications stands disposed of.

Balesh-Jain-Sons-HUF-VS-ACIT-Delhi-High-Court..

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