Deputy Commissioner of Income-tax, V. Shri Sunil K. Karad, Pune

ITA 111/PUN/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 85282 (ITAT-PUNE)
• Duration Of Justice: 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-12-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 13-01-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Assessee Lawyers: GAJANAN K KORE
• Keywords: Income from undisclosed sources; Accommodation entries; Penny stocks
• Section: 143(3); 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.111/PN/2014 (ASSESSMENT YEAR: 2006-07) THE DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(1), PUNE . APPELLANT VS. SHRI SUNIL K. KARAD PLOT NO.18/19, RAJPATH HSG. SOCIETY, RAMKRISHNA PARAMHANS NAGAR, OPP. VANAZ FACTORY, PAUD ROAD, PUNE 411038 PAN: AGOPK6071H . RESPONDENT APPELLANT BY : SHRI B.C. MALAKAR RESPONDENT BY : SHRI GAJANAN K. KORE DATE OF HEARING : 16-12-2014 DATE OF PRONOUNCEMENT : 18-12-2014 ORDER PER SUSHMA CHOWLA, JM: THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF CIT(A)-II, PUNE DATED 23.09.2013 RELATING TO ASSESSMENT YEAR 2006- 07 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. C IT(A) ERRED IN TREATING LONG TERM CAPITAL GAIN OF RS.30,81,41 6/- AS UNDISCLOSED INCOME INSTEAD OF INCOME FROM OTHER SOUR CES EARNED OUT OF SALE OF THE TAINTED PENNY STOCKS BY FOLLOWING T HE ITATS DECISION IN ITA NO.1332/PN/08 FOR A.Y. 2005-06 IN THE C ASE OF SMT. SUREKHA B. MUNDADA AND ORS. 2. THE APPELLANT CRAVES TO LEAVE TO, TO ADD, TO ALTER OR A MEND ANY OF THE ABOVE GROUNDS OF APPEAL, IF ANY. ITA NO.111/PN/2014 SHRI SUNIL K. KARAD 2 3. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS WITH REG ARD TO THE TREATMENT OF LONG TERM CAPITAL GAIN AMOUNTING TO RS.30,81 ,416/- ARISING ON PENNY STOCK. 4. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESS EE AT THE OUTSET OF HEARING POINTED OUT THAT THE ISSUE IN THE PRE SENT APPEAL IS SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL IN BUNCH OF CASES WITH LEAD ORDER IN ITA NO.1332/PN/2008 IN THE CASE OF SMT. S UREKHA BHAGVATIPRASAD MUNDADA VS. ITO, & OTHERS, DATED 16.06.201 0. IT WAS FURTHER POINTED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE SAID DECISION HAS BEEN FURTHER FOLLOWED BY THE PUNE BENCH OF THE TRIBUNAL IN ITA NO.276/PN/09 IN THE CASE OF S MT. SUNITA M. KARAD VS. DY.CIT, & OTHERS, DATED 16.12.2010. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVE NUE HAS PLACED RELIANCE ON THE ORDER OF ASSESSING OFFICER. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD D ECLARED LONG TERM CAPITAL GAIN OF RS.30,81,416/-. THE ASSESSING OFFICER O N THE VERIFICATION OF THE ENTRIES NOTED THAT THE ASSESSEE HAD P URCHASED THE SHARES AT NOMINAL PRICE AND HAD SOLD THE SAME AT HIGHER RATE WITHIN SHORT TIME. CONSEQUENTLY, THE SAID TRANSACTION OF SALE AND PURCHA SE OF SHARES WAS TREATED AS SHAM TRANSACTION AND THE INCOM E ON THIS ACCOUNT WAS ADDED TO THE INCOME DECLARED BY THE ASSESSEE. ITA NO.111/PN/2014 SHRI SUNIL K. KARAD 3 7. THE CIT(A) AFTER CONSIDERING THE PLEA OF THE ASSESSEE VIDE PARA 3.2 AND 3.3 OBSERVED AS UNDER:- 3.2 I HAVE CONSIDERED THE SUBMISSION OF THE APPELLAN T AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE APPELLANT HAS RAISED 8 GROUNDS OF APPEAL AND THE ONLY ISSUE CONTEST ED IN GROUNDS NO.1 TO 6 IS IN RESPECT OF THE GENUINENESS O F THE TRANSACTIONS OF PURCHASE AND SALE OF SHARES AND THE LONG-TERM CAPITAL GAIN DISCLOSED AS A CONSEQUENCE OF SUCH TRANSA CTIONS. THERE WAS A SEARCH ACTION U/S 132 OF THE ACT IN THE CASE OF TRUSTEES OF MAHARASHTRA ACADEMY OF ENGINEERING & ED UCATIONAL RESEARCH, PUNE ON 20.07.2005 AND THE APPELLANT WAS DIRE CTOR OF ONE OF THE EDUCATIONAL INSTITUTIONS OF THE ABOVE TRUS T. DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR THE APP ELLANT HAD PURCHASED AND SOLD SHARES OF FAST TRACK & VICEHOT AN D ON ACCOUNT OF THE SAME HAD DECLARED LONG-TERM CAPITAL GAI N. ON VERIFICATION OF THE TRANSACTIONS ENTERED INTO BY THE APPELLANT, THE A.O. DURING THE ASSESSMENT PROCEEDINGS FOUND THE SAME TO BE SHAM & BOGUS TRANSACTIONS INDULGED IN ORDER TO GET ACCOMMODATION ENTRIES FROM THE BROKERS THE SOLE PURP OSE OF SHOWING HUGE LONG-TERM CAPITAL GAIN FROM PENNY STOCKS. AFTER NOTICING THE FACT THAT THE TRANSACTION OF LONG-TERM C APITAL GAIN RELATING TO PENNY STOCKS ABOUT WHICH SEBI, BSE, NSE E TC. HAD CARRIED OUT INVESTIGATIONS AND FOUND THAT THE MANAG EMENT OF THE CONCERNED COMPANIES ALONG WITH CERTAIN BROKERS HAD MA NIPULATED THE TRANSACTIONS AND SOLD BOGUS ENTRIES FOR LONG-TERM CAPITAL GAINS ENABLING THE PURCHASERS TO CONVERT THEIR UNACCOUNTED B LACK MONEY INTO EXEMPT WHITE MONEY WITHOUT PAYMENT OF TAXES AND THIS FACT WAS WELL KNOWN IN PUBLIC DOMAIN AS SUCH REPORTS PUBLI SHED IN ALMOST ALL NATIONAL DAILIES HAD EMBARKED UPON INVESTI GATION OF THE MATTER TO VERIFY THE SAME. AFTER EXAMINING THE RELEVANT DET AILS, THE INCOME SHOWN AS EXEMPT U/S 10(38) WAS HELD TO BE BOGU S AND, THEREFORE, THE SAID INCOME WAS ASSESSED UNDER THE HEA D OTHER SOURCES. ESTIMATED INCOME FOR MAKING UNACCOUNTED PAYME NT TO BROKERS FOR GIVEN THIS SERVICE WAS ALSO MADE. SIMILAR F ACTS WERE NOTED BY THE ASSESSING OFFICER IN THE YEAR UNDER CON SIDERATION OF LONG-TERM CAPITAL GAIN OF RS. 33,25,282/- ON SALE OF SHARES OF FAST TRACK AND VICEHOT SHOWN EXEMPT U/S 10(38) OF THE IT. ACT, WAS INCLUSIVE OF BROKERAGE. THE ASSESSING OFFICER HAS TRE ATED THE SAME AS BOGUS AND ASSESSED IT AS UNACCOUNTED INCOME UNDER OTHER SOURCES ALONG WITH ESTIMATE EXPENSES FOR ARRANGI NG THE SAME. 3.3 DURING THE APPELLATE PROCEEDINGS, THE APPELLANT SUBMIT TED THAT THE ISSUE INVOLVED IN ITS CASE WAS SIMILAR TO THA T IN THE CASE OF SMT. SUNITA M. KARAD AND SHRI MANGESH T. KARAD FOR A.YRS. 2004-05 AND 2005-06 DECIDED BY THE HON'BLE ITAT PUNE V IDE ITA NOS.276/278 AND 279/PN/09. ON PERUSAL OF ALL THE FACTS O F THE CASE AND THE ORDERS OF THE APPELLATE AUTHORITIES IN T HE RELATED CASES WHEREBY THE FINDINGS OF THE A.O. WERE UPHELD, I AM IN AGREEMENT WITH THE SAME. HOWEVER, ON PERUSAL OF THE ABO VE REFERRED ORDER OF THE ITAT, PUNE IN THE CASE OF SMT . SUNITA M. ITA NO.111/PN/2014 SHRI SUNIL K. KARAD 4 KARAD AND SHRI MANGESH T. KARAD, IN WHICH IT HAS BEEN DECIDED THAT THE LONG-TERM CAPITAL GAINS EARNED OUT OF THE PEN NY STOCKS HAVE ALREADY BEEN DECIDED IN THE CASE OF SMT. SUREKHA B. MUNDADA AND ORS. VIDE ITAT NO.1332/PN/08 FOR A.Y. 2005-0 6 AND 11 OTHER INCOME TAX APPEALS. THE ASSESSING OFFICE R WAS DIRECTED TO DECIDE THIS ISSUE IN THE LIGHT OF THE RA TIO LAID DOWN BY THE HON'BLE ITAT IN THE CASE OF SMT. SUREKHA B. MUNDAD A AFTER EXAMINING THE FACTS OF THIS CASE WITH THE FACTS OF T HE APPEAL DECIDED IN CASE OF MUNDADA AND GRANT RELIEF ACCORDI NGLY. SINCE THE FACTS OF THE PRESENT CASE ARE SIMILAR, JUDICIAL DIS CIPLINE AS HELD BY BOMBAY HIGH COURT IN THE CASE OF CIT VS THANA ELE CTRICITY SUPPLY LTD. (1994) 206 ITR 727 (BOM) AND THE DECISION O F THE JURISDICTIONAL TRIBUNAL IN THE CASE OF SMT. SUNITA M. K ARAD & SHRI MANGESH T. KARAD (CITED SUPRA), IS FOLLOWED IN THIS CA SE. THE ASSESSING OFFICER IS THUS DIRECTED TO TAKE A SIMILAR VIEW ON THIS ISSUE FOLLOWING THE ORDER OF THE ITAT (CITED SUPRA). 8. WE FIND THAT SIMILAR ISSUE OF THE ASSESSABILITY OF THE GAIN A RISING ON SALE OF SHARES AROSE BEFORE THE TRIBUNAL IN BUNCH OF CA SES WITH LEAD ORDER IN ITA NO.1332/PN/2008 IN THE CASE OF SMT. SUREKH A BHAGVATIPRASAD MUNDADA VS. ITO, & OTHERS, DATED 16.06.201 0 AND ALSO IN ITA NO.276/PN/09 IN THE CASE OF SMT. SUNITA M. KARA D VS. DY.CIT, & OTHERS, DATED 16.12.2010. THE TRIBUNAL IN THE F IRST ORDER DATED 16.06.2010 AFTER CONSIDERING THE ISSUE, REMITTED TH E ISSUE BACK TO THE FILE OF ASSESSING OFFICER FOR DECIDING THE ISSUE IN LINE W ITH DIRECTIONS THEREON. FOLLOWING THE SAME PARITY OF REASONING, WE SET ASIDE THE ISSUE TO THE FILE OF ASSESSING OFFICER AND THE ASSE SSEE IS DIRECTED TO FILE THE COPIES OF THE ABOVE REFERRED ORDER OF THE TRIBUNAL DATED 16.06.2010 BEFORE THE ASSESSING OFFICER DURING SET A SIDE PROCEEDINGS. THE ASSESSING OFFICER SHALL DECIDE THE ISSUE IN LINE WITH THE RATIO LAID DOWN BY THE TRIBUNAL VIDE ORDER DATED 16.06 .2010 AFTER AFFORDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSE E. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE THUS, ALLOW ED FOR STATISTICAL PURPOSES. ITA NO.111/PN/2014 SHRI SUNIL K. KARAD 5 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWED FOR S TATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF DECEMBER, 2014. SD/- SD/- (R.K. PANDA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 18 TH DECEMBER, 2014. GCVSR COPY OF THE ORDER IS FORWARDED TO : - 1) THE DEPARTMENT; 2) THE ASSESSEE; 3) THE CIT(A)-II, PUNE; 4) THE CIT-II, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE