Shri Rishabh Jain, Kanpur V. JCIT(OSD), Circle-3, Kanpur

CO 3/LKW/2021

AI Insights

The case involves an appeal by the Department against the order of the Commissioner of Income Tax (Appeals)-I, Kanpur, which had allowed the assessee's appeal regarding the taxation of Short Term Capital Gains. The Department contended that the gains were unexplained income under Section 69 of the Income Tax Act, 1961, based on a report from the Investigation Wing about misuse of certain companies for providing bogus accommodation entries. The CIT(A) found no specific adverse material against the assessee's transactions. The Department's appeal was dismissed due to being filed beyond the permissible time limit, and the assessee's C.O. was dismissed as the grounds became academic following the dismissal of the Department's appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123044 (ITAT-LUCKNOW)
• Duration Of Justice: 2 year(s) 1 month(s) 20 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 20-07-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 02-07-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 30-05-2021
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Income from undisclosed sources; Period of limitation; Retrospective amendment; Tax effect; Time period of passing order; Condonation of delay; Capital Gains
• Section: 69; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH ‘SMC’, LUCKNOW BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER ITA No.166/Lkw/2020 Assessment Year: 2014-15 Joint Commissioner of Income Tax(OSD), Circle-3, Kanpur. Vs. Rishabh Jain, 7/190, Flat No.603, Nageshwar Villa, Swaroop Nagar, Kanpur. PAN : AJQPJ 0448J (Appellant) (Respondent) C.O. No. 03/Lkw/2021 (In ITA No.166/Lkw/2020) Assessment Year: 2014-15 Rishabh Jain, 7/190, Flat No.603, Nageshwar Villa, Swaroop Nagar, Kanpur. PAN : AJQPJ 0448J Vs. Joint Commissioner of Income Tax(OSD) Circle-3, Kanpur (Appellant) (Respondent) O R D E R PER SUDHANSHU SRIVASTAVA, J.M.: 1. The captioned appeal has been preferred by the Department against order dated 19.11.2018 passed by the Ld. Commissioner of Income Tax (Appeals)-I, Kanpur [hereinafter called the ‘CIT(A)’] for Assessment Year 2014-15, whereas the captioned Cross Objection has been preferred by the assessee. Appellant by Shri Jitendra Kumar Yadav, Advocate Respondent by Shri Ranjan Srivastava, (DR) Date of hearing 03/07/2023 Date of pronouncement 21/07/2023 I.T.A. No.166/Lkw/2020 CO No.03/Lkw/2021 2 2. The brief facts of the case are that during the year under consideration, the assessee had shown Short Term Capital Gain amounting to Rs.9,31,293/- on sale of shares of M/s. Nikki Global Finance Ltd. The assessee had purchased 4000 shares of the said company @ 141.25 per share in paper format on 14.09.2012 totaling to Rs.5,65,000/- through M/s. R.K. Shares Broker and the payment was made through cheque. Subsequently, 2000 shares were disposed off online in market on 02.04.2013 for a consideration of Rs.12,13,793/-. The Assessing Officer was of the view that there was an abnormal increase in the value of the share and, therefore, held that the amount received by the assessee in the form of Short Term Capital Gain of Rs.9,31,293/- was nothing, but unexplained income of the assessee, which was taxable in the hands of the assessee in terms of Section 69 of the Income Tax Act, 1961 (hereinafter called the ‘Act’) instead of being income taxable under the head Short Term Capital Gain. The action of the Assessing Officer was based on one report of the Investigation Wing, wherein, it was stated that there was some 84 odd companies, which were listed on the various stock exchanges and which were being misused for providing bogus accommodation entry of Long Term Capital Gains and Short Term Capital Loss etc. 3. Aggrieved, the assessee approached the ld. First Appellate Authority challenging the action of the Assessing Officer. In the impugned order, while allowing the assessee’s appeal, the ld. First Appellate Authority has stated that just because the assessee had traded in a scrip that was being used by a few bogus partiesfor illegal purposes would not make the transactions undertaken by the assessee as bogus making it liable for any addition in absence of anything specific or even remotely general against the assessee. The ld. CIT(A) noted that the Assessing Officer did not bring any adverse material on record against the specified transaction of sale/purchase of shares undertaken by the assessee to prove that they were not genuine. I.T.A. No.166/Lkw/2020 CO No.03/Lkw/2021 3 4. Against the above said order passed by the ld. CIT(A), the Department has preferred an appeal and the grounds raised by the Department are as under: “1. The Ld Commissioner of Income Tax (Appeals)-1. Kanpur has erred in Law and on facts in deleting the addition of Rs. 9,31,293/- without going into the merits of the case and ignoring the findings recorded by the assessing officer in assessment order that the sale of shares in this case is not a natural phenomenon but an arrangement of dubious design of providing accommodation entry of Long Term Capital Gain to introduce unaccounted own money as exempt income in the form of LTCG on sale of shares and the assessee being fully aware of it is also a part of this manipulation. 2. The Ld. Commissioner of Income Tax (Appeals)-1. Kanpur has erred in law and on facts without appreciating the facts that the issue involved pertains to organized scam/tax evasion activity and unique modus operandi of this embezzlement for which CBDT's Circular No. 23 of 2019 dated 06.09.2019 and subsequent O.M. dated 16.09.2019 mandate that the appeals may be filed on merits in case of the assessee claiming bogus LTCG/STCL through Penny Stocks. 3. That the order of the Ld. Commissioner of Income Tax (Appeals) is erroneous, unjust and bad in law be vacated and the order dated 30.12.2016 passed us 143(3) of the I.T. Act of the Assessing Officer be resorted. 4. That the appellant craves leave to modify any of the grounds of appeal mentioned above and/or to add any fresh grounds as and when it is required to do so.” 5. At the outset, it is noticed that the Department’s appeal is time barred by 382 days. The ld. Senior Departmental Representative drew our attention to letter dated 24.02.2020 filed on behalf of the Department praying for condonation of delay in filing of the appeal. The said letter is being reproduced hereinunder: “The assessee most respectfully begs to state and submit for the kind consideration of your Lordships, the following facts: I.T.A. No.166/Lkw/2020 CO No.03/Lkw/2021 4 1. That the appeal has been filed by the department on 26.02.2020 against the order of Ld. CIT (Appeals)-1, Kanpur, Dt. 19.11.2018 and the notice of appeal was received by assessee on 23.03.2021. 2. Accordingly the limitation to file the instant Cross Objection as per Income Tax Act was due to expire on 23.04.2021 3. That since 15.03.2020, the Hon'ble Supreme Court has extended limitation for filing appeals/cross objections etc. As per the Hon'ble Supreme Court Order in Suo Moto case No. 3 of 2020. 4. In view of the Judgment of Hon'ble Supreme Court, the limitation to file Cross Objection against the impugned order, was available when the Cross Objection was filed Le 31.05.2020 and there is no delay in filing the present Cross Objection before ITAT and objection taken by registry regarding delay in filing Cross Objection is misconceive. Respectfully submitted.” 5.1 The ld. Sr. Departmental Representative submitted that although the tax effect involved was only Rs.1,04,938/-, the Department had preferred this appeal after the expiry of the limitation period in view of CBDT Circular No.23 of 2019 dated 06.09.2019 and O.M. dated 16.09.2019 wherein the Board had directed that appeals may be filed on merits as an exception in cases involved in organized tax evasion activity. The ld. Senior Departmental Representative submitted that although the limitation for filing the appeal had expired on 09.02.2019, the appeal filed in pursuance to the above mentioned Circular and O.M. on 26.02.2020 should be considered as being within time and the appeal be admitted to be heard on merits. 6. Per contra, the ld. A.R. strongly opposed the prayer of the Department and submitted that the appeal filed beyond the limitation period was infructuous and was liable to be dismissed in limine. I.T.A. No.166/Lkw/2020 CO No.03/Lkw/2021 5 7. The grounds raised by the assessee in the CO are as under: “1. BECAUSE, on the facts and circumstances of the case, the present income tax appeal of Revenue filed against an order of CIT(A) Dt. 11.12.2018; in the year 2020, with a delay of more than one year and several months deserves to be dismissed, in limini as no plausible and bona-fide explanation has been cited by Revenue in support of the delay condonation applicant and in preferring the appeal with such inordinate delay. The Hon'ble SC has recently held that inordinate delay cannot be condoned even if the appeal has been filed by the Crown/State. 2. BECAUSE, without prejudice to the aforementioned grounds of the cross objection, on the facts and in the circumstances of the case, the appeal of the Revenue is not maintainable in view of the CBDT Circular on monetary limits applicable to appeals to be filed by Revenue before the Hon'ble ITAT. The appeal of Revenue is NOT maintainable in view of the averments contained in the monetary Circular. Further, reliance placed by Revenue on CBDT Circular No. 23 of 2019 Dt. 06.09.2019, is misconceived as the provisions of this Circular cannot be made applicable to the instant case since the appeal of the assessee, stood decided by the CIT(A), much prior to the issuance of the Circular No. 23 of 2019 and time to file appeal by Revenue against such decision of CIT(A) also expired, prior to the issuance of CBDT Circular, therefore any reliance on the said Circular is bad in law, it would tantamount to applying the Circular with RETROSPECTIVE effect, which is not provided in the Circular and in any case CBDT Circular could not have been applied with retrospective effect. 3. BECAUSE, on the facts and in the circumstances of the case, the appeal of Revenue is further not maintainable under law as there is no material cited in the grounds of appeal to refute the specific findings of the Ld. CIT(A) that there is NO adverse material available with Revenue to dislodge the claim of the assessee NOR has, in any of the grounds of appeal raised by Revenue, a plea been set-up that the Ld. CITIA) ignored any incriminating evidence, concerning the instant assessee, hence the appeal of Revenue deserves to be quashed. 4. BECAUSE, on the facts and in the circumstances of the case, the order passed by the Ld. CIT(A) is sustainable in law as there is no adverse material available with Revenue to dislodge the legitimate claim of the assessee, the assessee has duly adduced evidence in I.T.A. No.166/Lkw/2020 CO No.03/Lkw/2021 6 support of its claim which has not been found to be untrue and that Assessment order rested its findings purely on conjecture and surmises. The addition made is patently arbitrary and whimsical and hence liable to be deleted. Further the assessee is a regular investor in shares and the impugned transaction is not a solitary affair which may be looked at with suspicion. The Revenue has also not disputed other Capital Gains earned by the assessee in past and in future years and most significantly has also accepted Capital Gains on same script by other assessee's and now accepted by various benches of ITAT. 5. BECAUSE, on the facts and in the circumstances of the case, the order passed by the Ld. CITIA) is sustainable in law as the taxation of Short-Term Capital Gains as Income from other sources for Rs. 9,31,293/- is unsustainable in law having been made ignoring the fact that the sale of shares is duly evidenced with the following material as also the purchase which could not be refuted by the Assessing Officer with legal evidence- a. That large number of Shares of reputed companies, so to say, have experienced similar share-price graphs and ups and downs. Hence this is no reason to dispute the transaction. b. Shares were sold at published public prices and not privately negotiated. c. Securities Transaction Tax was paid. d. Transaction took place though Banking Channel. e. Shares continue to trade on the bourses. f. There are no adverse orders of SEBI. g. Transaction took place in the D-mat Account of the assessee through a broker. h. Many courts/tribunals transactions in same script approved transactions in same script. 1. BECAUSE, on the facts and in the circumstances of the case, the order passed by the Ld. CIT(A) is sustainable in law as the addition of Rs. 9,31,293/- is unsustainable in law having been made WITHOUT any material available on record which could incriminate the assessee or could even remotely demonstrate or establish that the assessee has channelised his unaccounted income via alleged I.T.A. No.166/Lkw/2020 CO No.03/Lkw/2021 7 circuitous route. The entire addition is based on generic observations and on unrelated reports. The financials of the script, in which assessee dealt are clearly above board. 2. BECAUSE, on the facts and in the circumstances of the case, the order passed by the Ld. CIT(A) is sustainable in law as the addition of Rs. 9,31,293/- is unsustainable in law having been made WITHOUT any material available on record which could incriminate the assessee or could even remotely demonstrate or establish that the assessee has channelised his unaccounted income via alleged circuitous route. The company in whose script, the assessee dealt with, continues to be listed on stock exchange and no adverse orders of SEBI have been cited. Further Registrar Of Companies (ROC) has also not taken any adverse action against such alleged bogus company. 3. BECAUSE, on the facts and in the circumstances of the case, the statement on oath of some 3rd person, recorded by the Investigation Wing of the Revenue, at the back of the assessee and which person has not been confronted and without offending any opportunity to Cross-Examine such person renders the Evidentiary value of such statement as Null and Void, qua the assessee. Further in the entire body of the statement, there is no mention or allegation about the transaction undertaken by the instant assesses and hence no cognisance of such statement could be taken under law. The entire addition is based on a statement of 3rd person which is inadmissible under law in the light of Evidence Act and other judicial pronouncements and the addition was hence liable to be deleted. 4. Because the order of the Ld. Assessing Officer is not based on correct facts and proper appreciation of law and is liable to be cancelled, as done by the Ld. CIT(A). 5. The humble assessee, craves for leave to add/amend any other ground with the prior permission of the Hon'ble Tribunal.” 8. Further, it is seen that the CO filed by the assessee is time barred by 37 days. As per the submission of the assessee, the notice of appeal filed by the Department was received by the assessee on 23.03.2021 and further, as per the assessee, the limitation to file the cross objection was I.T.A. No.166/Lkw/2020 CO No.03/Lkw/2021 8 due to expire on 23.04.2021. It has further been submitted by the assessee that w.e.f. 15.03.2020 the Hon'ble Apex Court had extended the limitation for filing appeals/Cross Objections etc. in view of COVID-2019 situation. It has been pleaded by the assessee that the Cross Objection was filed on 31.05.2021, which was covered by the limitation period extended by the Hon'ble Apex Court. As per the assessee, the C.O. is not time barred because the same was filed on 31.05.2021, whereas the limitation period was extended by the Hon'ble Apex Court till 31.03.2021. The ld. AR prayed for condonation of delay (if any) in this regard. 9. Per contra, the ld. Sr. D.R. has strongly assailed the assessee’s prayer for condonation of delay. 10. Having heard both the parties on the issue of condonation of delay in the Departmental appeal as well as the Cross Objection preferred by the assessee, it is undisputed that the appeal was filed by the Department on 26.02.2020. It is also undisputed that the order appealed against was received by the Department on 11.12.2018 and, therefore, the last date for filing the Departmental Appeal before the ITAT was 09.02.2019. Circular No. 23 of the CBDT is dated 06.09.2019 and the OM is dated 16.09.2019. Therefore, the Circular based on which the Department has filed this appeal was issued almost seven months after the expiry of the limitation period for filing of the appeal. It is further seen that even after the issuance of the Circular and OM, the present Departmental appeal was filed on 26.02.2020 i.e. almost more than five months after the issuance of the said Circular. Filing of appeal five months after the issuance of Circular has not been suitably explained by the Department. Therefore, we are unable to consider the prayer of the Department to condone the delay and we dismiss the appeal as being unadmitted, being barred by limitation. 11. Accordingly, the appeal of the Department stands dismissed. I.T.A. No.166/Lkw/2020 CO No.03/Lkw/2021 9 12. Coming to the C.O. filed by the assessee, it is seen that the assessee has relied upon the extension to the limitation period granted by the Hon'ble Apex Court and has thus suitably explained the delay. The grounds raised by the assessee are multifold and argumentative. Since we have already dismissed the appeal of the Department as being time barred, we do not deem it appropriate to adjudicate on the various grounds raised by the assessee in the CO as the same have become of mere academic interest in view of dismissal of the appeal of the Department. 13. Accordingly, the CO of the assessee also stands dismissed. 14. In the final result, both the appeals of the Department and CO of the assessee are dismissed. (Order pronounced in the open court on 21/07/2023) Sd/- Sd/- ( ANADEE NATH MISSHRA ) (SUDHANSHU SRIVASTAVA) Accountant Member Judicial Member Dated: 21/07/2023 Aks Copy of the order forwarded to : 1. The Appellant 2. The Respondent. 3. Concerned CIT 4. The CIT(A) 5. D.R., I.T.A.T., Lucknow Asstt. Registrar