SHRI BHARAT BHUSHAN MALIK, JAIPUR V. INCOME TAX OFFICER, WARD-1-5, JAIPUR

ITA 1195/JPR/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0944 (ITAT-JAIPUR)
• Duration Of Justice: 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 15-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J C KULHARI
• Keywords: Unexplained expenditure; Accommodation entries
• Section: 69C

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE -A, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 1195/JP/2018 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2014-15 SHRI BHARAT BHUSHAN MALIK, 7/247, VIDHYADHAR NAGAR, JAIPUR (RAJ) CUKE VS. INCOME TAX OFFICER, WARD-1(5), JAIPUR (RAJ0 LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ABHPM3453F VIHYKFKHZ@ APPELL ANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI MUKESH KHANDELWAL (CA) JKTLO DH VKSJ LS @ REVENUE BY : SHRI J. C. KULHARI (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 19/11/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 26/11/2018 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-1, JAIPUR DATED 14.08.2018 FOR A.Y. 2014-15 WHEREIN THE ASSESSEE HAS TAKEN THE FOLLOWING GROUND OF APPEAL: THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN S USTAINING THE ACTION OF THE LD. AO IN CONSIDERING THE SUM OF RS. 4,76,749/- (BEING 6 PERCENT OF SALE PRICE OF SHARES FOR RS. 79,49,149/-) AS ALLEGE D COMMISSION PAID FOR ARRANGING ALLEGED BOGUS LONG TERM CAPITAL GAINS AND TAXING THE SAME AS UNEXPLAINED EXPENDITURE U/S 69C OF THE INCOME TAX A CT, 1961. THE SAME MAY PLEASE BE DELETED. ITA NO. 1195/JP/2018 SHRI BHARAT BHUSHAN MALIK, JAIPUR VS. ITO, JAIPUR 2 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT D URING THE YEAR UNDER CONSIDERATION, THE APPELLANT HAS DECLARED LON G TERM CAPITAL GAINS OF RS. 77,65,273/- ON ACCOUNT OF SALE OF SHAR ES OF M/S CRESSAND SOLUTIONS LTD. WHICH WAS DISCLOSED BY THE APPELLANT AS ITS UNDISCLOSED INCOME IN IDS-2016. IT WAS ALSO STATED BY THE AO IN THE ASSESSMENT ORDER THAT A NUMBER OF BENEFICIARIES HAVE ADMITTED TO HAVING PAID COMMISSION @ 6% OF THE SALE VALUE OF SHARES AND CONSEQUENTLY, THE AO HAS MADE AN ADDITION OF RS. 4, 76,749/- TO THE INCOME OF THE APPELLANT. 3. DURING THE APPELLATE PROCEEDINGS BEFORE THE LD C IT(A), THE APPELLANT HAS NOT BROUGHT ON RECORD ANY MATERIA L TO CONTROVERT THE ADMISSIONS MADE BY THE VARIOUS BENEF ICIARIES FOR OBTAINING BOGUS LONG TERM CAPITAL GAINS, AS STATED IN THE ASSESSMENT ORDER. IT WAS FURTHER NOTED BY THE LD CI T(A) THAT A NUMBER OF PERSONS WERE INVOLVED IN THE UNSCRUPULOUS ACTIVITY OF PROVIDING ACCOMMODATION ENTRIES AND CERTAINLY, I T HAS SOME COST TO THE BENEFICIARY AND THUS, THE ADDITION OF R S. 4,76,749/- MADE BY THE AO WAS SUSTAINED. 4. DURING THE COURSE OF HEARING, THE LD AR SUBMITTE D THAT ON SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE, THE AD DITION MADE BY THE AO HAS BEEN REDUCED BY THE LD CIT(A) IN CASE OF FAMILY MEMBERS NAMELY VARUN MALIK AND NIRMAL MALIK FROM 6% TO 2%. IT WAS ACCORDINGLY SUBMITTED THAT THE ADDITION SO MADE BY THE AO MAY ACCORDINGLY BE DIRECTED TO BE REDUCED TO THE SA ME LEVEL OF 2%. ITA NO. 1195/JP/2018 SHRI BHARAT BHUSHAN MALIK, JAIPUR VS. ITO, JAIPUR 3 5. IN THIS REGARD, OUR REFERENCE WAS DRAWN TO THE DECISION OF THE LD CIT(A) IN CASE OF VARUN MALIK (APPEAL NO. 8 22/16-17 DATED 13.06.2018) WHEREIN AT PARA 3.3, IT WAS HELD AS UND ER: 3.3 I HAVE PERUSED THE FACTS OF THE CASE, THE ASSE SSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. THE FACTS OF THE CASE ARE THAT THE APPELLANT CLAIMED LONG-TERM CAPITAL GAINS AMOUNTING TO RS.76,19,747/- AS EXEMPT UNDER SECTION 10(38). THE SAME WERE DECLARED AS INCOME UNDER THE IDS 2016. IN THE ASSES SMENT PROCEEDINGS, THE AO NOTED THAT THE SHARE BROKERS HA D ADMITTED TO COMMISSION/BROKERAGE RANGING FROM 0.5 TO 8% IN PENN Y STOCK TRANSACTIONS AND THAT CERTAIN BROKERS AS ENUMERATED IN THE AO'S ORDER, HAD ACCEPTED CHARGING COMMISSION OF 6% AND H ENCE COMMISSION AT THE RATE OF 6% WAS ADDED UNDER SECTIO N 69C OF THE ACT. IN THE PRESENT PROCEEDINGS, IT WAS SUBMITTED THAT N O COMMISSION/BROKERAGE WAS PAID BY THE APPELLANT. IT WAS FURTHER STATED THAT THE AO HAD REFERRED TO THE STATEMENT OF THE BROKERS WHEREIN THEY HAD ADMITTED CHARGING COMMISSION BETWE EN 0.8 TO 6% BUT NO SUCH ADMISSION WAS MADE BY SHRI DEEPAK AG ARWAL AND SHRI MANISH UPPAL AND DEFINITELY NOT FOR THE SHARE IN WHICH THE APPELLANT DEALT.LT WAS ALSO CLAIMED THAT THE COMMIS SION AT THE RATE OF 6% IS EXCESSIVE AND UNJUSTIFIED. THE SUBMISSIONS OF THE APPELLANT ARE CONSIDERED, HOWEVER IT IS UNLIKELY TH AT A BROKER WILL ARRANGE BOGUS LONG TERM GAINS ENTRY WITHOUT ANY COM MISSION FOR THE SYNDICATE AND HIMSELF. IN VIEW OF THE SAME IT W OULD BE ITA NO. 1195/JP/2018 SHRI BHARAT BHUSHAN MALIK, JAIPUR VS. ITO, JAIPUR 4 REASONABLE TO ESTIMATE THE SAME AT 2% OF THE SALE V ALUE OF SHARES ON WHICH SUCH CAPITAL GAIN HAS BEEN CLAIMED. THE AD DITION IS SUSTAINED TO THAT EXTENT, GROUND OF APPEAL IS PARTL Y ALLOWED. 6. FURTHER, OUR REFERENCE WAS DRAWN TO THE DECISION OF THE LD CIT(A) IN CASE OF NIRMAL MALIK (APPEAL NO. 823/16- 17 DATED 13.06.2018) WHEREIN AT PARA 3.3, IT WAS HELD AS UND ER: 3.3 I HAVE PERUSED THE FACTS OF THE CASE, THE ASSE SSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. THE FACTS OF THE CASE ARE THAT THE APPELLANT CLAIMED LONG-TERM CAPITAL GAINS AMOUNTING TO RS. 76,19,747/- AS EXEMPT UNDER SECTION 10(38). THE SAME WERE DECLARED AS INCOME UNDER THE IDS 2016. IN THE ASSES SMENT PROCEEDINGS, THE AO NOTED THAT THE SHARE BROKERS HA D ADMITTED TO COMMISSION/BROKERAGE RANGING FROM 0.5 TO 8% IN PENN Y STOCK TRANSACTIONS AND THAT CERTAIN BROKERS AS ENUMERATED IN THE AO'S ORDER, HAD ACCEPTED CHARGING COMMISSION OF 6% AND H ENCE COMMISSION AT THE RATE OF 6% WAS ADDED UNDER SECTIO N 69C OF THE ACT. IN THE PRESENT PROCEEDINGS, IT WAS SUBMITTED THAT N O COMMISSION/BROKERAGE WAS PAID BY THE APPELLANT. IT WAS FURTHER STATED THAT THE AO HAD REFERRED TO THE STATEMENT OF THE BROKERS WHEREIN THEY HAD ADMITTED CHARGING COMMISSION BETWE EN 0.8 TO 6% BUT NO SUCH ADMISSION WAS MADE BY SHRI DEEPAK AG ARWAL AND SHRI MANISH UPPAL AND DEFINITELY NOT FOR THE SHARE IN WHICH THE APPELLANT DEALT.LT WAS ALSO CLAIMED THAT THE COMMIS SION AT THE RATE OF 6% IS EXCESSIVE AND UNJUSTIFIED. THE SUBMISSIONS OF THE APPELLANT ARE CONSIDERED, HOWEVER IT IS UNLIKELY TH AT A BROKER WILL ITA NO. 1195/JP/2018 SHRI BHARAT BHUSHAN MALIK, JAIPUR VS. ITO, JAIPUR 5 ARRANGE BOGUS LONG TERM GAINS ENTRY WITHOUT ANY COM MISSION FOR THE SYNDICATE AND HIMSELF. IN VIEW OF THE SAME IT W OULD BE REASONABLE TO ESTIMATE THE SAME AT 2% OF THE SALE V ALUE OF SHARES ON WHICH SUCH CAPITAL GAIN HAS BEEN CLAIMED. THE AD DITION IS SUSTAINED TO THAT EXTENT, GROUND OF APPEAL IS PARTL Y ALLOWED. 7. WE FIND THAT THE FACTS AND CIRCUMSTANCES OF THE ASSESSEES CASE ARE SIMILAR TO THAT OF VARUN MALIK AND NIRMAL MALIK WHEREIN LD CIT(A) HAS FOUND 2% COMMISSION HAS REASONABLE AS AGAINST 6 % ESTIMATED BY THE AO. ESTIMATION IS A FUNCTION OF GUESS WORK AND AT THE SAME TIME, THE ESTIMATION NEEDS TO FACTOR-IN THE ELEMENT OF RE ASONABILITY AND COMPARABILITY WITH SIMILAR IDENTIFIABLE CASES. WHER E UNDER SIMILAR FACTS AND CIRCUMSTANCES, COMMISSION HAS BEEN SUSTAINED @ 2% AND WHICH HAS BEEN ACCEPTED BY THE REVENUE, WE SEE NO JUSTIFI ABLE BASIS FOR MAKING THE ADDITION IN THE HANDS OF THE ASSESSEE @ 6%. IN THE RESULT, THE AO IS HEREBY DIRECTED TO CONSIDER THE COMMISSIO N EXPENDITURE @ 2% OF THE SALE VALUE OF THE SHARES AND THE GROUND OF APPEAL IS THUS PARTLY ALLOWED. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PART LY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 26/11/2 018. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 26/11/2018. ITA NO. 1195/JP/2018 SHRI BHARAT BHUSHAN MALIK, JAIPUR VS. ITO, JAIPUR 6 * GANESH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI BHARAT BHUSHAN MALIK, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- ITO, WARD-1(5), JAIPUR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 1195/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR