Vilasben Anilbhai Kakadiya, Surat V. Income Tax Officer, Ward-3(3)(5), Surat

ITA 119/SRT/2023

AI Insights

The case involves Vilasben Anilbhai Kakadiya, who appealed against the order of the National Faceless Appeal Centre (NFAC) which upheld the addition of Rs.4,69,754 as income from the sale of penny stocks under the head 'income from other sources'. The original assessment was based on information from the Principal Chief Commissioner of Income Tax regarding manipulation of penny stocks, leading to a reassessment under section 147 of the Income Tax Act, 1961. The assessee initially admitted to the gains during the reassessment but later contested the nature of the income, claiming it was short-term capital loss (STCL) rather than long-term capital gains (LTCG). The Tribunal found that the lower authorities had not adequately examined the new submissions made by the assessee and thus restored the matter to the Assessing Officer for a fresh assessment.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 128371 (ITAT-SURAT)
• Duration Of Justice: 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 28-03-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 15-02-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASHISH P. BHOOLA
• Keywords: Business income; Earning of tax free income; Cost of acquisition; Capital Gains
• Section: 147; 148; 271(1)(c); 143(3); 143(2); 139(1)

Judgement Text

आयकर अपीलȣय अͬधकरण, स ु रत Ûयायपीठ, स ु रत IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT “SMC” BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER आ.अ.सं./ITA No.119/SRT/2023 (AY 2011-12) (Hearing in Physical Court) Vilasben Anilbhai Kakadiya, 184, Gautam Park Society, Opp. Sagar Samrat, L.H. Road, Kapodra, Surat-395006 PAN No: AYDPK 9281 C Vs Income Tax Officer, Ward-3(3)(5), Surat, Aaykar Bhavan, Majura Gate, Surat-395007 अपीलाथȸ/Appellant Ĥ×यथȸ /Respondent Ǔनधा[ǐरती कȧ ओर से /Assessee by Shri Ashish P. Bhoola, CA राजèव कȧ ओर से /Revenue by Shri Vinod Kumar, Sr-DR अपील पंजीकरण/Appeal instituted on 16.02.2023 सुनवाई की तारीख/Date of hearing 29.03.2023 उɮघोषणा कȧ तारȣख/Date of pronouncement 01.06.2023 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assessee is directed against the order of National Faceless Appeal Centre, Delhi [for short to as “NFAC/ or Ld. CIT(A)”] dated 10.01.2023 for assessment year 2011-12, which in turn arises from the addition made by the Income Tax Officer, Ward-3(3)(5), Surat / Assessing Officer in assessment order passed under section 143(3) r.w.s.147 of the Income Tax Act, 1961 (hereinafter referred ITA No.119/SRT/2023 (A.Y 11-12) Vilasben A. Kakadiya 2 to as ‘the Act’) dated 28.11.2018. The assessee has raised the following grounds of appeal:- “1. Addition of Rs.4,69,754/- on account of bogus LTCG in penny stock script M/s Comfort Intech. Ltd. (a) On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in not accepting the submission of the appellant that addition on account of bogus LTCG cannot be sustained when the appellant had not offered a single rupee of LTCG in her return of income. The learned Commissioner of Income-tax (Appeals) has conveniently upheld the addition without appreciating the fact that the addition was specifically made stating that bogus LTCG is being hereby withdrawn whereas in reality, no exempt LTCG was claimed by the appellant in her return of income. (b) On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in not appreciating the fact that the Assessing Officer had indeed made addition on account of bogus LTCG and not on account of sale proceeds received for the script M/s Comfort Intech Ltd. The said fact has been clearly mentioned in pra 6.2 of the assessment order. (c) On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in not appreciating the fact that the appellant had earned STCG of Rs.42,993/50 only on sale of shares of M/s Comfort Intech Ltd. (d) Notwithstanding the grounds as mentioned above, on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in not giving deduction of purchase cost of shares of M/s Comfort Intech Ltd. of Rs.4,26,760/50. (e) On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in upholding the addition on the basis of statement recorded by the appellant before the Assessing Officer since the said statement has already been retracted by the appellant. The said statement was given under stress not being fully aware of the matte. The Commissioner of Income-tax (Appeals) has not given any weightage to the fact that purchase & sale of shares were caried out through BSE, delivery of shares was also made / received in ITA No.119/SRT/2023 (A.Y 11-12) Vilasben A. Kakadiya 3 demat account with NSDL and neither the depository participant nor NSDL were under control or influence of the appellant. (f) On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in not appreciating the fact that the appellant had overall incurred STCL of Rs.1,98,166/28 while investing is shares which was not claimed as a loss in her return of income. 2. Miscellaneous: (a) The learned Commissioner of Income-tax (Appeals) has erred in not deleting the penalty u/s 271(1)(c) for concealment of income by furnishing inaccurate particulars of income officer as the additions on the basis of which penalty was invoked was not warranted for in view of submission made by the appellant. (b) The learned Commissioner of Income-tax (Appeals) has erred in not deleting penalty u/s 271F for failure to furnish return of income as required u/s 139(1) of the Income Tax Act, 1961. (c) The appellant craves to add, alter, delete or amend any other ground of appeal during the course of appeal proceedings.” 2. Brief facts are that assessee is an individual, filed her return of income for assessment year 2011-12 on 14.07.2011 declaring total income of Rs.1,52,773/-. In case of assessee information was received from the office of Principal Chief Commissioner of Income Tax, (PCCIT) vide letter dated 27.03.2013 in respect of penny stock manipulation of Comfort Intech Ltd., such information was based on search and seizure action conducted by Investigation, Wing Mumbai on 09.04.2015. During said search, it was found that various persons have taken bogus LTCG through penny ITA No.119/SRT/2023 (A.Y 11-12) Vilasben A. Kakadiya 4 stock of Comfort Intech Ltd. (BSE Code 531216). The assessee is one of the beneficiary of said penny stock for assessment year 2011-12 and have received on account sale of such scrips of Rs.4,69,754/-. The Assessing Officer noted that assessee filed her return of income for AY 2011-12 on 14.07.2011 declaring income of Rs.1,74,775/- including business income. Further on verification, it was found that no capital gains / exempt income was disclosed from any share transaction or otherwise. On the basis of such information, the Assessing Officer after recording reasons and reopened the case under section 147 of the Act. The Assessing Officer issued notice under section 148 on 28.03.2018, which was duly served upon the assessee. The Assessing Officer noted that several notices were issued to the assessee and subsequently penalty notice under section 271(1)(b) of the Act also issued to the assessee. In response to notice under section 148 of the Act but no return of income was filed by assessee. The Assessing Officer in para- 3 of assessment order noted that reasons recorded was furnished to assessee and assessee has not raised objection against reopening. The Assessing Officer after serving notice ITA No.119/SRT/2023 (A.Y 11-12) Vilasben A. Kakadiya 5 under section 143(2) proceeded for re-assessment. The Assessing Officer issued final show cause notice dated 23.10.2018 narrating the all factual background. The contents of notice are recorded in para-4.3 of assessment order. The Assessing Officer in para-5 of assessment order, noted that in response to notice dated 23.10.2018, the assessee appeared along with her husband, Anil Kakadiya, her Chartered Accountant, Umesh J Shah and filed application in Gujarati language dated 05.11.2018, wherein they admitted that assessee had traded in penny stock of Comfort Intech Ltd. and earning of capital gains of Rs.4,69,754/- and voluntarily offered such amount of taxation. The Assessing Officer has scanned copy of the application in para-5 his order. The Assessing Officer treated the said undisclosed capital gains as “income from other sources” and completed assessment order on 28.11.2018 under section 143(3) r.w.s 147 of the Act. 3. Aggrieved by the addition and action the assessee filed appeal before Ld. CIT(A). The appeal of assessee migrated before NFAC/Ld. CIT(A). Before NFAC/Ld. CIT(A) the challenged the addition of Rs. 4,69,754/- only. The assessee ITA No.119/SRT/2023 (A.Y 11-12) Vilasben A. Kakadiya 6 filed her written submission as recorded in para-4 of the order of NFAC/Ld. CIT(A). The assessee in her submission took a “U” turn and submitted that no exempt LTCG was earned by assessee though it was admitted that on consideration of Rs.4,69,754/- was received. The assessee claimed on sale of impugned scrips, she suffered Short Term Capital Gains (STCG) of Rs. 42,993/-. However, overall the assessee incurred Short Term Capital Loss (STCL) of Rs.1.98 crores. The assessee furnished summary of profit and loss for the period from 01.04.2010 to 31.03.2011. It was further claimed that Assessing Officer without taking into cognizance the basic fact that assessee has not claimed exempt LTCG and even not claimed STCL and added her entire sale consideration of Rs.4,69,754/-. The assessee also furnished details of scrip of LTCL during the financial year. 4. The ld CIT(A) after considering the submission of assessee and contents in the assessment order noted that during assessment proceedings various notices were issued by Assessing Officer to assessee and no response was made by her. In response to final show cause notice issued by ITA No.119/SRT/2023 (A.Y 11-12) Vilasben A. Kakadiya 7 Assessing Officer, the assessee appeared along with her husband, and accountant and filed letter in Gujarati language dated 05.11.2018 and admitted that assessee has traded in penny stock of Comfort Intech Ltd. and offered the gain for taxation. And on such acceptance, assessment was completed by Assessing Officer. Now before NFAC/Ld. CIT(A) the assessee submitted that no LTCG earned or disclosed by assessee in her return of income and furnished details of demat account showing scripts share recorded in NSDL record. The NFAC/Ld CIT(A) noted that during assessment, the assessee herself admitted the sale of impugned scrips and the addition was made on the basis of admission. Such fact was admitted in writing before Assessing Officer by assessee in presence of her husband and CA. On the basis of such observation, the NFAC/Ld. CIT(A) confirmed action of Assessing Officer. Further aggrieved the assessee has filed present appeal before Tribunal. 5. I have heard the submission of Ld. Authorized Representative (Ld. AR) for the assessee and Ld. Senior Departmental Representative (Ld. Sr-DR) for the Revenue. ITA No.119/SRT/2023 (A.Y 11-12) Vilasben A. Kakadiya 8 The Ld. AR for the assessee submits that NFAC/Ld. CIT(A) not accepted the submission of assessee that addition of bogus LTCG cannot be sustained against the assessee when assessee has not offered the LTCG in here return of income. The NFAC/ Ld. CIT(A) conveniently upheld the addition without appreciating the fact that addition was made by withdrawal of LTCG, in fact, no LTCG was claimed or earned by the assessee. The Ld. AR for the assessee submits that NFAC/Ld. CIT(A) failed to appreciate that assessee has suffered STCL on share of Comfort Intech Ltd. of Rs.42,993/-. The Ld. AR for the assessee submits that overall the assessee has suffered STCL for Rs.1,98 crores during the relevant financial year. The ld AR for the assessee furnished the following bifurcation in trading of scripts of Comfort Intech Ltd.: Sl.No. Description Qnty. Amount 1 Opening stock as on 01.04.2010 6450 121002.00 2 Add: Purchase 10000 302200.00 TOTAL 16450 423202.00 3 Less: Sales 16450 466195.50 Profit / (Loss) --- 42993.50 6. On the basis of aforesaid details, the Ld. AR for the assessee stressed that assessee suffered STCL as no LTCG was earned. So there was no occasion for claiming LTCG, which ITA No.119/SRT/2023 (A.Y 11-12) Vilasben A. Kakadiya 9 was added as income from other sources. When the ld AR for the assesse was confronted with the stand taken by assessee during the assessment proceedings, he submits that assessee was misguided by her accountant. The ld AR for the assessee prayed for deleting the entire addition. 7. On the other hand, Ld. Sr-DR for the Revenue submits that during the assessment assessee voluntarily accepted that she traded in the scripts of Comfort Intech Ltd. and offered the entire amount voluntarily before Assessing Officer. The assessee was assisted by her husband as well as her CA. Now before the Tribunal, the assessee is taking a new stand that no LTCG was earned. The Ld. Sr-DR for the Revenue submits that assessee has taken a “U” turn and he strongly relied on the order of Assessing Officer and prayed for dismissal of appeal. 8. I have considered the submissions of both the parties and have gone through the orders of lower authorities carefully. I find that case of assessee was reopened on the basis of information that assessee was one of the beneficiary who were indulging in a trading of scripts of Comfort Intech Ltd., which is a penny stock scripts. The Assessing Officer on ITA No.119/SRT/2023 (A.Y 11-12) Vilasben A. Kakadiya 10 recording the reasons for re-opening the case of assessee under section 147 of the Act. I find that assessee has not challenged the validity of re-opening or issuance of notice under section 148. Thus, so far as reopening is concerned such action of Assessing Officer has attained finality. Now dispute is only regarding the addition on penny stock as “income from other sources”. I further find that assessee before Assessing Officer admitted the fact that she received consideration on sale of impugned penny stock and offered it for tax. No details or bifurcation, cost of acquisition or date of purchase or sale and consideration thereof was furnished. Thus, the assessee conveniently prevented the assessing officer in making further investigation of facts. However, after passing the assessment order, the assessee filed appeal before NFAC/Ld. CIT(A) by taking “U” turn that she has not offered LTCG rather suffered LTCL on sale of impugned scripts. 9. I find that NFAC/Ld. CIT(A) instead of considering the facts of the case and submission of assessee upheld the action of Assessing Officer by taking view that assessee herself offered the sale consideration / received on sale of ITA No.119/SRT/2023 (A.Y 11-12) Vilasben A. Kakadiya 11 impugned share for taxation. Now, before Tribunal, the assessee again reiterated on similar submission as claimed before First Appellate Authority that assessee has also given the details of share of impugned penny stock as on 01.04.2010 and purchased during the period under consideration and sales claimed, that she suffered STCL and suffered loss in other scripts. Such conduct of the assessee is not worth appreciable. 10. Still considering the facts that such claim of assessee was not examined by lower authorities as the assessee has taken new stand for the first time before First Appellate Authority. Therefore, keeping the fact that tax is to be levied on real income, if any. Thus, issue / groundNo1 of appeal raised by assessee are restored back to the file of Assessing Officer to consider the issue afresh in accordance with law and decide on merit after verification all facts. The assessee is also directed to provide complete details and evidence and books of account to substantiate the claim. The assessee further directed to file all details without any further delay and not to take any ipsi dixit excuses or stand before Assessing Officer and to provide all information as when called for. In ITA No.119/SRT/2023 (A.Y 11-12) Vilasben A. Kakadiya 12 the result, this ground of appeal is allowed for statistical purposes. Other grounds of appeal raised by the assessee are consequential or premature. 11. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced on 01/06/2023 in open court. Sd/- (PAWAN SINGH) [Ɋाियक सद˟ JUDICIAL MEMBER] सूरत /Surat, Dated: 01/06/2023 Dkp. Out Sourcing Sr.P.S Copy to: 1. Appellant- 2. Respondent- 3. CIT(A)- 4. CIT By order 5. DR 6. Guard File // True Copy // Senior Private Secretary/ Private Secretary/Assistant Registrar, ITAT, Surat True copy/