Sushila Devi Khandelwal vs ITO Ward-34(3) New Delhi: Penny Stock Case for Assessment Year 2010-11

Sushila Devi Khandelwal vs ITO Ward-34(3) New Delhi: Penny Stock Case for Assessment Year 2010-11

Case Number: ITA 6354/DEL/2019

Appellant: Sushila Devi Khandelwal, New Delhi

Respondent: ITO Ward-34(3), New Delhi

Assessment Year: 2010-11

Order Type: Final Tribunal Order

Date of Filing: July 29, 2019

Date of Pronouncement: March 13, 2023

Background of the Case

Sushila Devi Khandelwal, a resident of New Delhi, filed an appeal against the reassessment order passed by the Income Tax Officer (ITO) Ward-34(3), New Delhi, for the assessment year 2010-11. The reassessment was conducted under section 147 read with section 143(3) of the Income Tax Act, 1961. The appeal was filed challenging the addition of Rs. 7,05,000 made by the Assessing Officer (AO) under section 68, as well as an addition of Rs. 7,050 under section 69C of the Act. The appellant argued that the reassessment was not in accordance with the provisions of the Income Tax Act and was therefore illegal.

Reason for Filing the Appeal

The appellant filed the appeal in response to the reassessment order that added Rs. 7,05,000 as income from undisclosed sources and Rs. 7,050 as unexplained expenditure. The AO based the reassessment on information received from the Principal Director of Income Tax (Investigation), Kolkata, which revealed that the appellant was involved in transactions related to penny stocks, specifically shares of M/s Bakra Pratishthan Ltd. (BPL). The investigation indicated that the appellant had sold 2000 shares of BPL and had not disclosed the long-term capital gain from the sale in her return of income. The AO, after conducting inquiries with the Calcutta Stock Exchange, confirmed the transactions and concluded that the appellant had concealed her income.

Proceedings Before the CIT(A)

The appellant initially approached the Commissioner of Income Tax (Appeals) [CIT(A)]-12, New Delhi, contesting the reassessment order. However, the CIT(A) upheld the additions made by the AO, noting that the appellant had failed to disclose the long-term capital gain and had concealed the particulars of her bank account used in the transactions. The CIT(A) also dismissed the appellant’s claim that the reassessment was conducted on a back-dated order without providing any supporting evidence.

Proceedings Before the ITAT

The appellant, dissatisfied with the CIT(A)’s decision, filed an appeal with the Income Tax Appellate Tribunal (ITAT) Delhi. The appeal was heard by the bench comprising Shri Shamim Yahya, Accountant Member. Despite several notices, the appellant did not appear for the hearing. The tribunal, after hearing the arguments presented by the Revenue represented by Shri Om Prakash, Senior DR, proceeded to decide the appeal based on the available records.

Tribunal’s Findings

The tribunal carefully reviewed the CIT(A)’s order and the submissions made by the Revenue. It found no infirmity in the CIT(A)’s decision and upheld the additions made by the AO. The tribunal agreed with the CIT(A) that the appellant had failed to disclose the income earned from the sale of BPL shares and had concealed the particulars of the transactions. The tribunal also dismissed the appellant’s claim that the reassessment order was back-dated, as there was no corroborating evidence to support this allegation.

The tribunal concluded that the reassessment was conducted in accordance with the provisions of the Income Tax Act, and the additions made by the AO were justified. The appeal was therefore dismissed.

Final Order

The final judgment reads:

“In the result, this appeal of the assessee stands dismissed.”

Conclusion

The case ITA No. 6354/DEL/2019, filed by Sushila Devi Khandelwal against the ITO Ward-34(3), New Delhi, for the assessment year 2010-11, was dismissed by the ITAT Delhi on March 13, 2023. The appeal was filed challenging the reassessment order that added Rs. 7,05,000 as income from undisclosed sources and Rs. 7,050 as unexplained expenditure related to penny stock transactions. The tribunal found no merit in the appellant’s arguments and upheld the CIT(A)’s decision to confirm the additions. This case highlights the importance of full and accurate disclosure in tax returns, particularly in relation to transactions involving penny stocks, which are often scrutinized by tax authorities for potential fraud and evasion.

The tribunal’s decision also underscores the procedural rigor of tax litigation, where appeals must be backed by substantive evidence and where procedural challenges, such as claims of back-dated orders, must be supported by credible proof. With the dismissal of this appeal, the reassessment order and the corresponding tax liabilities stand confirmed, bringing the matter to a close.

Sushila Devi Khandelwal vs ITO Ward-34(3) New Delhi: Penny Stock Case for Assessment Year 2010-11