Income Tax Officer-2(1), Kanpur V. Shri Bharat Bhushan Gulati, Kanpur

ITA 120/LKW/2020

AI Insights

The case involves an appeal by the Income Tax Department against the order of the Commissioner of Income Tax (Appeals)-1, Kanpur, which had deleted an addition of Rs. 14,63,858 to the income of Shri Bharat Bhushan Gulati, claimed as Long Term Capital Gain (LTCG). The Assessing Officer had initially added this amount to the assessee's income under section 69A of the Income Tax Act, 1961, suspecting it to be unaccounted money disguised as LTCG from the sale of shares. The CIT(A) reversed this decision, noting the lack of direct evidence linking the assessee to any manipulative design or dubious arrangement. The Department's appeal to the Tribunal was dismissed due to a significant delay in filing, which was not adequately explained.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123045 (ITAT-LUCKNOW)
• Duration Of Justice: 3 year(s) 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 26-07-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 06-02-2020
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 143(3); 69A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH ‘SMC’, LUCKNOW BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA No.120/Lkw/2020 Assessment Year: 2014-15 Income Tax Officer-2(1), Kanpur PAN: Vs. Shri Bharat Bhushan Gulati, 120/255, Lajpat Nagar, Kanpur PAN: AGDPG 1090P (Appellant) (Respondent) O R D E R PER SUDHANSHU SRIVASTAVA, J.M.: 1. This appeal is preferred by the Department against the order dated 30.11.2018 passed by the Ld. Commissioner of Income Tax (Appeals)-1, Kanpur [hereinafter called the CIT(A)] for Assessment Year (AY) 2014-15. 2. The brief facts of the case are that the assessee had filed his Return of Income declaring total income of Rs.3,22,880/-. The assessee’s case was selected for complete scrutiny under CASS guidelines. During the course of Appellant by Shri Sanjeev Krishna Sharma, Addl. CIT (DR) Respondent by Shri Jitendra Kumar Yadav, Advocate Date of hearing 27/07/2023 Date of pronouncement 28/07/2023 I.T.A. No.120/Lkw/2020 2 scrutiny assessment proceedings, it was gathered that the assessee had earned Long Term Capital Gain of Rs.14,63,858/- on sale of shares of M/s Shree Shaleen Textiles Limited. Initially, the assessee had purchased these shares on 30.08.2012 at the rate of Rs.11.58 per share from a Kolkata based company M/s. Shivkhori Construction Pvt. Ltd. through off market transaction. After the purchase of 5200 shares, the said shares were split into 26000 shares and between December, 2013 and January, 2014, these 26000 shares were sold at rates varying from Rs.57.50 per share to Rs.59/- per share in 14 different transactions on different dates having different trade identities. The Long Term Capital Gain earned by the assessee was Rs.15,24,074/-, which was claimed as exempt u/s.10(38) of the Income Tax Act, 1961 (hereinafter called the ‘Act’). The assessee was required to produce relevant documents and the assessee produced documents like purchase bills, sales bills and Bank Statements relating to the transactions of the above said shares. However, the Assessing Officer was of the view that there was an abnormal increase in the share price within a period of one year and the gain in share price was I.T.A. No.120/Lkw/2020 3 approximately 25 to 26 times, which was part of a manipulative design to evade taxation. The Assessing Officer was of the view that sale of shares in this case was not a natural phenomenon but was an arrangement of dubious design to provide accommodation entry of Long Term Capital Gain and to introduce own unaccounted money as exempt income. The Assessing Officer proceeded to hold that the Long Term Capital Gain was assessee’s own unaccounted money and not Long Term Capital Gain and he proceeded to add the amount of Rs.14,63,858/- to the income of the assessee u/s. 69A of the Act. 3. Aggrieved, the assessee preferred an appeal before the ld. First Appellate Authority, who noted that the Assessing Officer had not brought out anything in the assessment order, which indicated that the assessee had been investigated or was found to be a part of any arrangement for generating bogus Long Term Capital Gain. The ld. CIT(A) observed that although there was a report of the Investigation Wing, on which the Assessing Officer had relied, nothing had been brought on record by the Assessing Officer to show that the persons investigated by the Wing including entry I.T.A. No.120/Lkw/2020 4 operators or stock brokers, had named the assessee as being in collusion with them. The ld. CIT(A) held that in absence of any finding specifically against the assessee in the report of the Investigation Wing, the assessee could not be held guilty of wrong acts of third parties investigated. Accordingly, the addition was directed to be deleted and the assessee’s appeal was allowed. 4. Aggrieved, the Department has now approached this Tribunal, and challenged the relief allowed by the ld. CIT(A) by raising the following grounds of appeal: “1. The Ld. Commissioner of Income Tax (Appeals)- 1, Kanpur has erred in law and on facts in deleting the addition of Rs. 14,63,858 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 I.T.A. No.120/Lkw/2020 5 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 29.12.2016 passed u/s 143(3) of 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 seen that the appeal of the Department is time barred by 363 days. The ld. Senior Departmental Representative drew our attention to an application filed by the Department in this regard, wherein, it has been prayed that the delay be condoned. As per this application for condonation of delay, it has been stated that the order of the ld. CIT(A) in this case was received in the office of the Ld. Principal Commissioner of Income Tax-1, Kanpur on 11.12.2018 and, accordingly, the last date for filing of the Departmental appeal before the ITAT was 09.02.2019. It has been further stated that proposal for filing of the appeal before the ITAT was sent to the Ld. Principal Commissioner of Income Tax-1, Kanpur, but since the tax effect involved in this case was only Rs.4,64,988/-, the ld. I.T.A. No.120/Lkw/2020 6 Principal Commissioner of Income Tax-1, Kanpur did not recommend the proposal for filing of appeal before the ITAT. It has been further stated that, subsequently, CBDT vide Circular No.23 of 2019 dated 06.09.2019 had mandated that notwithstanding anything contained in Circular issued u/s. 268A of the Act specifying monetary limits for filing of Departmental appeals before the ITAT, High Courts and SLPs/appeals before the Supreme Court, appeals may be filed on merits as an exception where the Board, by way of special order directs filing of appeal on merits in cases involved in organized tax evasion activity. The delay condonation application has also referred to OM dated 16.09.2019 issued by the CBDT, wherein, it has been stated that monetary limit shall not apply in the case of assessee claiming bogus Long Term Capital Gain/Short Term Capital Loss through penny stocks. It has been submitted in the delay condonation that, therefore, subsequent to the issuance of the Circular No.23/2019, dated 06.09.2019 and OM dated 16.09.2019, the Department had filed the appeal and, therefore, the delay caused in filing the appeal was I.T.A. No.120/Lkw/2020 7 beyond the control of the Department. It has been prayed that the delay be kindly condoned. 6. Per contra, the ld. Authorized Representative strongly opposed the Department’s prayer for condonation of delay. 7. We have heard both the parties on the issue of condonation of delay as prayed by the Income Tax Department. The facts in this case are undisputed, the appeal was filed on 07.02.2020. 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 said Circular and OM, the present Departmental appeal was filed on 07.02.2020 i.e. almost five months after the issuance of the said Circular. Filing of the appeal five months after the issuance of Circular has not been suitably explained by the Department. Therefore, we are I.T.A. No.120/Lkw/2020 8 unable to consider the prayer of the Department to condone the delay and we dismiss the appeal as being unadmitted and being barred by limitation. Accordingly, the appeal of the Department stands dismissed. 8. In the final result, the appeal filed by the Department stands dismissed. (Order pronounced in the open court on 28/07/2023) Sd/- (SUDHANSHU SRIVASTAVA) Judicial Member Dated: 28/07/2023 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