Shri Vijay Sharma, Patiala V. ITO, W-4, Patiala

ITA 10/CHANDI/2020

AI Insights

The case involves appeals by Sanjay Parkash, the legal heir of the deceased assessee, against the orders of the CIT(A) for the assessment years 2015-16 and 2016-17. The primary issues were the additions made under section 147/148 for unexplained money and LTCG. The Tribunal examined whether the additions were justified, considering the evidence provided that the shares were sold on a recognized stock exchange and STT was paid, thus exempting the LTCG under section 10(38). The Tribunal also considered the procedural aspects of how the additions were made and the evidence submitted during the appellate proceedings.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 127557 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 18-01-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 02-01-2020
• Other Referred Cases: Shri Satyawan Vs. ITO, CIT Vs. Ramco International
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Share purchase agreement; Bonafide belief; Additional evidence; Revised return; Capital Gains
• Section: 147; 69; 148; 139; 80IB

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ “एस.एम.सी” , च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCHES, “SMC” CHANDIGARH ी व म संह यादव, लेखा सद%य BEFORE: SHRI. VIKRAM SINGH YADAV, AM ITA No. 10 & 11/Chd/2020 Assessment Year : 2015-16 & 2016-17 Sanjay Parkash Legal Heir of Shri Vijay Sharma S/o Shri Jagan Nath Sharma, 4060, Kasturba Lan, or Rose Garden, Arya Samaj, Patiala The ITO Ward-4, Patiala PAN NO: AKBPS9612H Appellant Respondent ! " Assessee by : Shri Vibhor Garg, CA # ! " Revenue by : Shri Akashdeep, JCIT, Sr. Dr $ % ! & Date of Hearing : 19/01/2023 '()* ! & Date of Pronouncement : 25/01/2023 आदेश/Order PER VIKRAM SINGH YADAV, AM: Both the above appeals have been filed by the Legal heir of the deceased assessee against the separate orders of the Ld. Commissioner of Income Tax, (Appeals), Patiala and Commissioner of Income Tax, (Appeals)-5, Ludhiana [hereinafter referred to as ‘CIT(A)’] respectively passed under section 250(6) of the Income Tax Act, 1961 (in short ‘the Act’) each dt. 28/10/2019. 2. In ITA No. 10/Chd/2020 for the A.Y. 2015-16, the assessee has taken the following grounds of appeal: “1. That the impugned appellate order is bad in law and facts to the extend the additions are confirmed 2. That the Ld. CIT(A) has wrongly and illegally confirmed the initiation of proceeding u/s 147/148 against the facts and circumstances of case. 3. That the Ld. CIT(A) has wrongly and illegally confirmed addition of Rs. 14,93,355/- on account of long term capital gain on sale of 1938 listed shares of 2 HDFC Bank through Recognised Stock Exchange on which STT has been paid ignoring the provision of section 10(38) of Income Tax Act. 4. That the Ld. CIT(A) has wrongly and illegally gave direction regarding the action to be taken for AY 2013-14 and AY 2016-17 with respect of loan provided to Sh. Nitin Gupta and Sh, Vijay Kumar respectively and further directed to examine the applicability of provisions of section 269SS/269T. 5. That the appellant craves permission to amend, add, delete and elaborate the ground of appeal.” 3. During the course of hearing, the Ld. AR submitted that the assessee has since expired on 18/01/2021 and has now been represented by his legal heir Shri Sanjay Parkash. It was submitted that during the year under consideration, the assessee who was a retired Senior citizen originally filed his return of income on 31/08/2015 declaring total income of Rs. 9,36,290/-. The case of the assessee was reopened by issuing notice under section 148 on 22/11/2017 doubting the source of advance of Rs. 9,00,000/- given to Shri Gurpreet Singh. In response, the assessee submitted that the return originally filed be treated as return filed in response to notice u/s 148 of the Act. Thereafter notices were issued and submissions were filed and thereafter the assessment was completed u/s 147 r/w 143(3) vide order dated 19/12/2018 wherein the AO made an addition of Rs. 9,00,000/- as unexplained money under section 69 of the Act and has made another addition of Rs. 14,93,355/- on account of Long Term Capital Gain (LTCG) and the assessed income was determined at Rs. 33,29,645/- as against the returned income of Rs. 9,36,290/-. 4. Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A) who has allowed part relief to the extent of Rs. 9,00,000/- and the remaining addition of Rs. 14,93,355/- has been sustained against which the assessee is in appeal before this Tribunal. 5. In the aforesaid background, it was submitted by the ld AR that where the very basis of reopening the case and the addition made by the AO amounting to Rs. 9,00,000/- has been deleted, there is no basis for making further addition 3 towards LTCG. In support reliance was placed on the Coordinate Delhi Benches decision in case of Shri Satyawan Vs. ITO in ITA No. 3423/Del/2019 vide order dt. 20/06/2022. 5.1 Further, our reference was drawn to the findings of the AO wherein the AO has noted that the assessee has sold certain shares during the year under consideration amounting to Rs. 14,99,625/- and the assessee was asked to state why LTCG has not been declared while filing the return of income. In response, the assessee submitted that the LTCG is exempt under section 10(38) of the Act. However, in view of the fact that the assessee could not produce any evidence whether the shares were sold through the recognized stock exchange, the AO made the addition of Rs. 14,93,355/- after allowing the indexed cost of Rs 6,270/- towards purchase of shares. 5.2 It was submitted that during the appellate proceedings, the assessee brought to the attention of ld CIT(A) that vide his submission dt. 17/12/2018, the assessee had informed the AO that the share were sold through broker, Geojit BNP Patiala Finanical Services Ltd. Patiala and information has been sought from the broker and to supply the requisite details, certain time was requested. It was further submitted to the AO that where so required, the information may also be obtained from the broker by the AO directly however no such efforts were made by the AO and he has made the impugned addition. It was further submitted that the assessee had since obtained the requisite information that the shares were sold on the recognized Stock Exchange and has suffered Security Transaction Tax (STT) and as the same could not be supplied during the course of assessment proceeding for reasons beyond the control of the assessee, the same may be admitted as additional evidence under Rule 46A and in this regard copy of the share certificate as well as certificate that the shares have suffered STT were submitted before the ld CIT(A) during the appellate proceedings. 4 5.3 It was further submitted that the additional evidence so submitted was sent to the AO for seeking his comments and in this regard, our reference was drawn to the remand report submitted by the AO wherein he has stated that the assessee has submitted the information with regard to STT payment. However the assessee has not declared the claim of exemption while filing the return of income for the impugned assessment year and in view of the same, the plea of the assessee may be rejected. Further, our reference was drawn to the submission filed in response to the remand report wherein it was stated that the assessee was under the bonafide belief that since LTCG were exempted under section 10(38) of the Act, the same were not reflected and disclosed inadvertently while filing the return of income. 5.4 It was further submitted that all requisite documents and information are on record, however, merely the fact that the claim has not been made in the return of income and going by the remand report, the ld CIT(A) has upheld the denial of claim of exemption under section 10(38) of the Act. 5.5 In support the reliance was placed on the decision of Hon’ble Punjab & Haryana High Court in the case of CIT Vs. Ramco International (2011) 332 ITR 0306 wherein it was held that where the assessee has duly furnished the documents and submitted Form No. 10CCB during assessment proceedings, claiming deduction under section 80-IB which was not claimed in the return of income, deduction is admissible even in the absence of revised return. 5.6 It was submitted in the instant case there is no requirement for filing any additional form and therefore the facts of the instant case are even better as compare to the facts before the Hon’ble High Court, hence, relying on the preposition laid down therein, the assessee be allowed necessary relief in the instant case. 5 6. Per contra, the Ld. DR drawn our reference to the findings of the ld CIT(A) which read as under: “ .......as regards the addition on account of Long Term Capital Gain of Rs. 14,93,355/-, the assessee has not submitted any evidence with regard to claim of exemption u/s 10(38) during the course of assessment proceedings and did not declare the sale / information regarding the sale of shares in the return filed for the Assessment Year 2015-16. A perusal of the ITR-V/return dated 31/08/2015 for the assessment year 2015-16 shows that under the head ‘exempt income’ the assessee has not shown any amount and the figure has been shown at zero. Similarly, no such exemption was claimed, neither the sales were declared in the return filed after the issue of notice u/s 148. As the assessee has not disclosed the sale of shares in the return filed initially u/s 139 or in response to notice u/s 148, the AO was right in making the addition as Long Term Capital Gain on account sale of shares which were stated to be the source of money for giving loan of Rs. 9,00,000/-. Under the facts & circumstances of the case, the addition of Rs. 14,93,355/- is confirmed.” 6.1 It was submitted by the ld DR that the assessee has not disclosed the sale of shares in the return filed initially u/s 139 or in response to notice u/s 148 and has not submitted any evidence with regard to claim of exemption u/s 10(38) during the course of assessment proceedings, therefore, the AO was right in making the addition as Long Term Capital Gain on account of sale of shares and in support, reliance was placed on the decision of Hon’ble Supreme Court in the case of Goetze (India) Ltd. Vs. CIT (2006) 284 ITR 323 wherein it was held that there is no power with the AO to entertain the claim for deduction otherwise than by filing the revised return. It was accordingly submitted that the ld CIT(A) has rightly sustained the addition and claim of exemption has been denied to the assessee. It was further submitted that the decision of the Hon’ble Punjab & Haryana High Court in the case of CIT Vs. Ramco International (supra) is distinguishable as the issue therein relates to claim of deduction u/s 80IB and not claim of exemption u/s 10(38) of the Act. He accordingly supported the order and findings of the ld CIT(A). 7. We have heard the rival contentions and purused the material available on record. The undisputed fact which are emerging from records before us are 6 that the shares of HDFC Bank Ltd have been sold on the recognized Stock Exchange, these sale transactions were subject to security transaction tax and which has been paid as evident from Form 10DB available on record. It is also an undisputed fact that these shares were held for more than 12 months as evident from the computation of long term capital gains undertaken by the Assessing officer where the shares have been stated to be purchased in financial year 2008-09 and benefit of indexed cost of acquisition has been granted by the Assessing officer while working out the long term capital gains. In view of the same, the assessee having satisfied the conditions for exemption is eligible for exemption under section 10(38) of the Act. 8. The aforesaid facts are not denied by ld CIT(A) in absence of any adverse finding recorded by the ld CIT(A). Therefore, the limited issue that arise for consideration is whether the ld CIT(A) was justified in denying the said claim of exemption by the assessee during the appellate proceedings. In this regard, it was submitted by the ld DR that since the assessee has not disclosed the sale of shares in the return of income and has not submitted any evidence with regard to claim of exemption u/s 10(38) during the course of assessment proceedings, the ld CIT(A) was justified in upholding the action of the AO in denial of claim of exemption under section 10(38) of the Act. 9. As we have noted above, during the appellate proceedings, necessary evidences with regard to claim of exemption u/s 10(38) have been brought on record by the assessee and which have also been verified by the AO during the remand proceedings, therefore, the contention of the ld DR that the evidences were not submitted during the assessment proceedings is right but at the same time, the question is what stops the ld CIT(A) in considering the said evidences during the appellate proceedings where the same have been admitted and subject to verification by the AO during the remand proceedings and the AO has given a clear finding that the information with regard to STT payment has 7 been submitted by the assessee. In absence of information, we understand that the AO may not in position to allow the claim of exemption , however, we fail to understand when all information is available on record during the appellate proceedings and the ld CIT(A) in his right and jurisdiction has allowed the assessee to submit the same by way of additional evidence and remand report of the AO has also been called, what stops the ld CIT(A) in considering the same while examining the claim of exemption by the assessee and exercising his appellate jurisdiction. 10. Now, coming to failure on part of the assessee to disclose and make a claim of exemption under section 10(38) while filing his return of income and reliance on the decision of the Hon’ble Supreme Court in case of Goetze (India) Ltd. Vs. CIT (supra). We find that the said decision relates to the power of the Assessing officer not to entertain claim during the assessment proceedings except by way of revised return of income. However, the said decision doesn’t restrict the power of the appellate authority, ld CIT(A) in the instant case to entertain and examine the claim of exemption. Here, the question is about the power and jurisdiction of the ld CIT(A) and not that of the AO. The AO is no doubt right in not entertaining such a claim of exemption not just because of the fact that no such claim was made in the return of income but also due to absence of relevant information which demonstrate the assessee’s eligibility for claim of exemption. However, where all relevant information is available on record during the appellate proceedings and on perusal thereof, no adverse finding has been recorded by the ld CIT(A) regarding eligibility conditions for claiming exemption under section 10(38) of the Act, merely the fact that such claim was not made in the return of income, we are of the considered view that the ld CIT(A) has failed to exercise his appellate jurisdiction under section 251(1) where the powers have been provided to him to confirm, reduce, enhance or annual the assessment. In this regard, useful reference can be drawn to the decision of the Hon’ble Bombay High Court in case of CIT v. Pruthvi Brokers & 8 Shareholders [2012] 23 taxmann.com 23 wherein referring to the decision of Hon’ble Supreme Court in case of Goetze (India) Ltd. Vs. CIT (supra), it was held as under: “23. It is clear to us that the Supreme Court did not hold anything contrary to what was held in the previous judgments to the effect that even if a claim is not made before the assessing officer, it can be made before the appellate authorities. The jurisdiction of the appellate authorities to entertain such a claim has not been negated by the Supreme Court in this judgment. In fact, the Supreme Court made it clear that the issue in the case was limited to the power of the assessing authority and that the judgment does not impinge on the power of the Tribunal under section 254.” 11. In light of the aforesaid discussions and in the entirety of facts and circumstances of the case, merely the fact that the claim has not been made in the return of income should not be the reason for denial of such claim during the appellate proceedings where otherwise on merit there is no dispute that the assessee is eligible for claim of exemption under section 10(38) of the Act. In the result, the addition of Rs 14,93,355/- sustained by the ld CIT(A) is hereby directed to be deleted and ground no. 3 of the assessee’s appeal is allowed. 12. No arguments have been raised regarding the other grounds of appeal. In any case, in view of aforesaid decision, where the addition has been deleted on merit, the other grounds of appeal have become infructious and are dismissed. 13. In the result, the appeal of the assessee is allowed. ITA No. 11/Chd/2020 14. In this appeal, the limited issue under dispute relates to the addition of Rs. 6,00,000/- under section 69 of the Act which was treated as unexplained money advanced by the assessee to Shri Nitin Gupta. 15. In this regard, briefly the facts of the case are that during the course of assessment proceedings the assessee was asked to explain the source of 9 Rs. 6,00,000/- alongwith evidence and mode of payment to Shri Nitin Gupta. The assessee submitted that the source of the advance is out of the sale proceeds of the shares amounting to Rs. 14,99,625/- which was sold in the immediately preceding financial year. The submissions so filed by the assessee were not found acceptable. As per the AO, the assessee has failed to submit any evidence from where he advanced the amount and whether in cash or through cheques. Further from the perusal of the bank statement of the assessee, it was noticed that there is no withdrawal of the amount of Rs. 6,00,000/- and therefore the explanation offered by the assessee was not found acceptable and the amount of Rs. 6,00,000/- was treated as unexplained money invoking the provisions of section 69 of the Act and same was brought to tax in the hands of the assessee. 16. Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A). The submissions made before the lower authorities were reiterated. It was submitted that the advance of Rs. 6,00,000/- to Shri Nitin Gupta was made out of sale proceeds of shares sold during the immediately preceding financial year. It was submitted that the AO has also admitted the receipt of the sale proceeds of Rs. 14,99,625/- during the previous assessment year 2015-16. It was submitted that inspite of this admitted fact, the AO has gave a finding that the assessee has failed to submit any source and evidence of making such advance to Shri Nitin Gupta. 17. Further, during the appellate proceedings, the remand report was called from the AO and after taking into account the rejoinder filed by the assessee, the Ld. CIT(A) has confirmed the addition made by the AO and the relevant findings read as under: “The facts of the case, basis of addition made by the AO and arguments of the AR during the course of appellate proceedings have been considered. During the appellate proceedings, the AR filed submission, a copy of which was sent to the AO for comments. In the report submitted during the appellate proceedings, the AO has mentioned that from the perusal of the court order, it was noticed 10 that the assessee paid Rs. 6,00,000/- on 14.09.2015 to Sh. Nitin Gupta but failed to disclose the source of advance of Rs. 6,00,000/- as on 14.09.2015. It is also mentioned that from the perusal of the bank account of the assessee, it was noticed that the assessee has withdrawn Rs. 2,00,000/- on 29.09.2015 but before this date, the assessee did not have sufficient money to advance to Sh. Nitin Gupta. The AR has filed a copy of the bank account statement but there are no withdrawals before the date of making advance of Rs. 6,00,000/- to Sh. Nitin Gupta. Accordingly, the source of funds remains unexplained. The argument about the sale proceed of shares credited in the bank account is not relevant because the sale proceeds were received through cheque/clearing and that also in the financial year 2014-15. It is relevant that there are no withdrawals before advancing the loan, to explain the payment of Rs. 6,00,000/- in cash to Sh. Nitin Gupta on 14.09.2015, Under the facts and the circumstances of the case, the addition made by the AO is found sustainable as the assessee has failed to explain the source of loan of Rs. 6,00,000/-paid to Sh. Nitin Gupta during the period under consideration.” 18. Against the said findings and order of the Ld. CIT(A), the assessee is in appeal. 19. During the course of hearing, it was submitted that the assessee was having sufficient cash in hand out of the sale proceeds and the withdrawal made by the assessee in the previous financial year and further there are withdrawals made during the year and in this regard, our reference was drawn to the cash flow summary prepared for F.Y. 2014-15 and 2015-16 which are placed at assessee’s paper book pages 54-56 wherein it was submitted during the F.Y. 2014-15 after taking into consideration the withdrawal and the deposits and taking care of house hold expenses, the assessee was having cash in hand of Rs. 11,24,000/- at the beginning of the year. Further, during the current financial year 2015-16, there were withdrawals on various dates amounting to Rs. 8,99,000/- and after taking care of the household expenses, the assessee was having sufficient balance out of which the advance of Rs. 6,00,000/- was made to Shri Nitin Gupta. 19.1 It was submitted that the AO has not rebutted the availability of money for giving advance to Shri Nitin Gupta and has not established that the money was not available with the assessee and the addition of Rs. 6,00,000/- was made 11 arbitrarily and purely on surmises and conjectures and the Ld. CIT(A) has merely upheld the findings of the AO without appreciating the availability of cash in the hands of the assessee. It was accordingly held that the addition so made and confirmed by the Ld. CIT(A) be directed to be deleted. 20. Per contra, the Ld. DR has relied on the order of the lower authorities. 21. We have heard the rival contentions and purused the material available on record. It is noted that the assessee is maintain three bank accounts with SBI and the sale proceeds from shares amounting to Rs 14,99,625/- have been credited in one of the assessee’s bank account in the previous financial year 2014-15 and taking the same into consideration, the assessee has prepared a cash flow statement showing withdrawal and deposits in his three bank accounts which shows cash in hand at the close of the previous financial year amounting to Rs 11,24,000/- which is available at the beginning of the current financial year 2015-16. Further, the assessee has prepared a cash flow statement for the current financial year showing withdrawals of Rs 899,000/- from his two bank accounts which after considering opening cash in hand of Rs 11,24,000/-, shows availability of cash in hand of Rs 20,23,000/- which is sufficient to advance Rs 6,00,000/- given to Shri Nitin Gupta. Therefore, we find that the explanation of the assessee acceptable that the money has been withdrawn from his bank accounts and advanced to Shri Nitin Gupta during the year and which has been demonstrated through the support of cash flow statements in absence of regular books of accounts. In light of the same, the addition of Rs 6,00,000/- is hereby directed to be deleted. In the result, ground no. 3 of the assessee’s appeal is allowed. 22. No arguments have been raised regarding the other grounds of appeal. In any case, in view of aforesaid decision, where the addition has been deleted on merit, the other grounds of appeal have become infructious and are dismissed. 12 23. In the result, the appeal of the assessee is allowed. 24. In the result, both the appeals of the assessee is allowed in light of aforesaid directions. (Order pronounced in the open Court on 25/01/2023 ) Sd/- व म संह यादव (VIKRAM SINGH YADAV) लेखा सद%य / ACCOUNTANT MEMBER AG Date: 25/01/2023 ( + ! , - . - Copy of the order forwarded to : 1. The Appellant 2. The Respondent 3. $ / CIT 4. $ / 0 1 The CIT(A) 5. - 2 ग 4 5 & 4 5 678 ग9 DR, ITAT, CHANDIGARH 6. ग 8 : % Guard File