Sh. Neeraj Jain, Ludhiana V. ITO, W-7(2), Ludhiana

ITA 1336/CHANDI/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2274 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 24-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Penny stocks; Set aside; Capital Gains; Bogus
• Section: 68; 20

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BE NCH SMC CHANDIGARH , ! BEFORE: SMT. DIVA SINGH, JUDICIAL MEMBER ./ ITA NO. 1335/CHD/2018 !' # $# / ASSESSMENT YEAR : 2015-16 SHRI SANJEEV GUPTA & SONS (HUF), 252-A, AGGAR NAGAR, LUDHIANA. VS THE ITO, WARD 6(3), LUDHIANA. ./ PAN NO: AALHS0466B / APPELLANT / RESPONDENT & ./ ITA NO. 1336/CHD/2018 !' # $# / ASSESSMENT YEAR : 2015-16 SHRI NEERAJ JAIN, PROP. M/S N.P. GARMENTS, 84-C, KITCHLU NAGAR, LUDHIANA. VS THE ITO, WARD 7(2), LUDHIANA. ./ PAN NO: AAYPJ5589R / APPELLANT / RESPONDENT / ASSESSEE BY : SHRI PANKAJ BHALLA, CA / REVENUE BY : SHRI MANJIT SINGH, CIT-DR SHRI ARVIND SUDERSHAN, SR.DR / DATE OF HEARING : 04.06.2019 !'#$%& / DATE OF PRONOUNCEMENT : 25.06.2019 %& / ORDER IN THESE TWO APPEALS FILED BY DIFFERENT ASSESSEES, THE CORRECTNESS OF THE SEPARATE ORDERS DATED 13.08.2018 OF CIT(A)-3 LUDHIA NA PERTAINING TO 2015-16 ASSESSMENT YEAR IS BEING ASSAILED. BOTH THESE APPEA LS ARE BEING DECIDED BY COMMON ORDER IN VIEW OF THE COMMON STAND OF THE PAR TIES BEFORE THE BENCH THAT ARGUMENTS ADVANCED IN ITA 1335/CHD/2018 WOULD ADDRESS THE ISSUES IN ITA 1336/CHD/2018 ALSO. ITA 1335 & 1336/CHD/2018 A.Y. 2015-16 PAGE 2 OF 6 2. THE LD. AR INVITING ATTENTION TO THE RECORD SUBM ITTED THAT OVER AND ABOVE THE ORIGINAL GROUNDS RAISED, THE ASSESSEES HAVE ALS O RAISED THE FOLLOWING IDENTICAL ADDITIONAL GROUND UNDER RULE 11 OF THE IT AT RULES, 1963 IN BOTH THE APPEALS : THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, ID CIT(A) ERRED IN SUSTAINING THE ACTION OF AO IN MAKING ADDI TION OF RS. 16,30,520/-WITHOUT APPRECIATING THAT SECTION 68 ARE NOT APPLICABLE TO SALE OF SHARES AS MENTIONED IN IMPUGNED ASSESSMENT ORDER. FURTHER THAT PROVISIONS OF SECTION 68 OF THE ACT ARE NOT APPLICABLE WITH RESPECT TO CREDITS IN SAVING BA NK ACCOUNT SANS ANY VALID AND PROPER BOOKS OF ACCOUNT.' 3. ADDRESSING THE ADDITIONAL GROUND, IT WAS HIS SUB MISSION THAT IT WAS A LEGAL GROUND WHICH HAD NOT BEEN RAISED BEFORE THE C IT(A) OR THE ITAT ORIGINALLY. IT WAS HIS ARGUMENT THAT RAISING OF TH E SAME WAS PERMISSIBLE AS NO VERIFICATION OF FACTS WAS REQUIRED. REFERRING TO TH E IMPUGNED ORDER, IT WAS HIS SUBMISSION THAT ARGUMENTS TO THE SAID EFFECT HAVE B EEN ADVANCED BEFORE THE CIT(A) IN BOTH THE APPEALS PRESUMABLY IN THE ABSENC E OF A GROUND IT WAS NOT ADJUDICATED UPON. RELYING UPON THE DECISION OF THE SUPREME COURT IN NTPC VS CIT 229 ITR 383 (S.C.) AND M/S ABHISHEK INDUSTRI ES LTD. VS CIT 290 ITR 656 (P&H) A PRAYER FOR ADMISSION OF THE SAID GROUND WAS RAISED. 4. APART FROM SEEKING ADMISSION OF THE ADDITIONA L GROUND, THE LD. AR ALSO INVITED ATTENTION TO THE GROUNDS RAISED ORIGINALLY MAKING A SPECIFIC REFERENCE TO GROUND NO. 2.3 IN BOTH THE APPEALS. IT WAS ARGUED THAT SINCE THE ORDER PASSED WAS IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTI CE, IT WAS BAD IN LAW AND MAY BE SET ASIDE BY QUASHING THE ASSESSMENT. THE RELEV ANT GROUND READS AS UNDER: 2.3 THAT THE LD. CIT(A) HAD ERRED IN LAW & FACTS T O CONFIRM THE ADDITION WITHOUT APPRECIATING THAT NEITHER ANY MATERIAL GATHER AT TH E BACK OF ASSESSEE WAS CONFRONTED NOR ANY OPPORTUNITY FOR CROSS EXAMINATION WAS RECORDED REND ERING THE ORDER A NULLITY. 4.1 REFERRING TO THE SAID GROUND, IT WAS SUBMITTED THAT OPPORTUNITY TO CROSS EXAMINE WAS SOUGHT RIGHT FROM THE ASSESSMENT STAGE AND THIS SHORTCOMING WAS AGITATED BEFORE THE CIT(A). THE CIT(A) HAS FAI LED TO ADDRESS THIS SHORTCOMING WHICH GOES TO THE ROOT OF THE MATTER. I NVITING ATTENTION TO THE RECORD IT WAS HIS SUBMISSION THAT WHEREAS THE AO DO ES NOT EVEN RECORD THE OBJECTIONS OF THE ASSESSEE. THE CIT(A), THOUGH REC ORDS THE OBJECTIONS OF THE ASSESSEE AT PAGE 7 OF HIS ORDER, HOWEVER, FAILS TO ADDRESS THESE OBJECTIONS AND PROCEEDS TO CARRY OUT A DISCUSSION ON THE CASE LAWS AND CONFIRMED THE ITA 1335 & 1336/CHD/2018 A.Y. 2015-16 PAGE 3 OF 6 ADDITION. ATTENTION WAS INVITED TO PAPER BOOK PAGE 281 WHICH IS REPLY OF THE ASSESSEE TO THE SHOW CAUSE NOTICE DATED 28.12.2017 ( PAGE 281 TO 284) WHEREIN THE ASSESSEE SPECIFICALLY OBJECTED TO THE Q UERIES RAISED ON THE FOLLOWING GROUND : IN THIS REGARD, IT IS MOST HUMBLY SUBMITTED THAT; THE INVESTIGATION CONDUCTED BY THE INCOME TAX DEPARTMENT IS AT THE BACK OF THE ASSESSE E. NEITHER ANY MATERIAL IS BEING CONFRONTED NOR ANY OPPORTUNITY IS GIVEN TO REBUT TH E SAME. SAME IS NOT ADMISSIBLE EVIDENCE AGAINST THE ASSESSEE. FURTHER YOUR HONOUR IS REQUESTED TO PROVIDE OPPORTUNITY OF CROSS EXAMIN ATION OF THE PEOPLE BASED UPON WHOSE STATEMENT THIS INFERENC E IS DRAWN. YOUR HONOUR HAS NOT GIVEN ANY REASON FOR DOUBTING T HE TRANSACTION WITH NOUVEOU GLOBAL VENTURES LTD. OR PEARL AGRICULTURE IN SO FAR REPORT OF INVESTIGATION IS CONCERN. (EMPHASIS SUPPLIED) 4.2 SIMILAR ARGUMENTS WERE ADVANCED BEFORE THE CIT( A) ALSO. RELEVANT EXTRACT, IT WAS SUBMITTED HAS BEEN REPRODUCED IN TH E ORDER ITSELF BY THE CIT(A) FROM THE LETTER DATED 24.05.2018. COPY AVAILABLE A T PAGE 206 ( PAGES 200 TO 211). 5. THE LD. CIT-DR OBJECTED TO THE RAISING OF THE SA ID GROUND, HOWEVER, THE FACT THAT ARGUMENTS ADDRESSING THE SAID GRIEVANCES WERE RAISED BEFORE THE CIT(A) AND WERE FOUND DISCUSSED AT PAGE 12 WERE NOT DISPUTED. RELEVANT DISCUSSION EXTRACTED FROM THE IMPUGNED ORDER HIGHLI GHTED BY THE LD. AR READS AS UNDER : DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AS SESSEE HAS VEHEMENTLY CONTESTED THE ADDITION WHEN HE WAS CONFRONTED BY THE ASSESSING OF FICER WITH REGARD TO ARRANGING LTCG, WHEN IT WAS ESTABLISHED BY THE ASSESSING OFFICER TH AT THE ASSESSEE HAS TAKEN ENTRIES FROM PENNY STOCKS COMPANIES WITH THE INTENT TO BRING ITS UNACC OUNTED MONEY IN ITS BOOKS OF ACCOUNTS. DURING THE COURSE OF APPELLATE PROCEEDINGS THE ASSE SSEE HAS BASICALLY AGITATED AGAINST ADDITION ON ACCOUNT OF SECTION 68, WHEREAS THE ASSESSEE CLAI MS, THAT IT HAS DECLARED THE SAME INCOME IN ITS RETURN OF INCOME AT NORMAL RATE OF CAPITAL GAIN CLAIMING IT EXEMPT U/S 10(38). 5.1. THE LD. CIT-DR ADDRESSING THE PRAYER FOR QUASH ING THE PROCEEDINGS IN TERMS OF GROUND NO. 2.3 THOUGH RELIED ON THE ORDER, HOWEVER, WAS UNABLE TO SHOW FROM A READING OF THE ORDER AS TO WHERE THE SP ECIFIC OBJECTIONS OF THE ASSESSEE IN THE RESPECTIVE APPEALS FOR SEEKING CROS S-EXAMINATION HAS BEEN ADDRESSED. IN THE CIRCUMSTANCES, IT WAS HIS PRAYER THAT THE ISSUE MAY BE REMANDED. 6. I HAVE HEARD THE SUBMISSIONS AND PERUSED THE MAT ERIAL AVAILABLE ON RECORD. THE RECORD SHOWS THAT THE ASSESSEE WAS PUT TO NOTICE OF THE FACT THAT ITA 1335 & 1336/CHD/2018 A.Y. 2015-16 PAGE 4 OF 6 THE LONG TERM CAPITAL GAIN TO THE TUNE OF RS. 19,08 ,600/- CONSIDERING THE REASONS SET OUT IN THE ASSESSMENT ORDER WERE QUESTI ONED BY THE AO. THE RETURNS ON INVESTMENTS WERE QUESTIONED AND CONSIDER ED TO BE MANAGED TRANSACTIONS ORGANIZED AND STRUCTURED IN A MANNER T O SHOW MANIPULATED GAINS STATED TO HAVE ARISEN FROM THE SPECIFIC COMPANIES I .E. M/S NOUVEAU MULTIME LTD., M/S NOUVEAU GLOBAL VENTURES LTD. AND M/S PEAR L AGRICULTURE. IT IS SEEN THAT ADMITTEDLY THE ASSESSEE SOUGHT AN OPPORTUNITY TO CROSS-EXAMINE THE PERSONS WHOSE STATEMENTS WERE RELIED UPON BY THE RE VENUE. RELEVANT EXTRACT FROM THE ASSESSMENT ORDER IS REPRODUCED HEREUNDER : 7. UNREALISTIC RETURNS OF INVESTMENTS. IT IS SEEN THAT THE ASSESSEE HAS SOLD 3280 SHARES OF M/S NOUVEAU GLOBAL VENTURES LTD, 1833 SHARES OF M/S PEARL AGRICULTURE LTD AND 1833 SHARES OF M/S PEARL ELECTRONICS LTD. FOR RS. 1,27,4 28/- , 7,39,872 /- AND 8,41,252/- PER SHARE RESPECTIVELY. HOWEVER, THE ACTUAL COST OF PURCHASE WAS ONLY RS. 59,820/-. THUS , YOU HAVE EARNED AROUND 2586% RETURN ON YOUR INITIAL INVESTMENT. 8. HERE IT IS PERTINENT TO MENTION THAT A SEARCH & SEI ZURE ACTION WAS CONDUCTED BY THE DIRECTORATE OF INCOME TAX [INVESTIGATION], KOLKATA IN 02/07/ 2013 ON ANAND SHARMA AND JANARDAN CHOKHANI GROUP, AND SUBSEQUENTLY ON THE DE EPAK PATWARL DESTINY SECURITY LTD GROUP. AS A RESULT OF THE SAID SEARCH & SEIZURE ACT ION , IT WAS GATHERED THAT CERTAIN PERSONS HAD BEEN INVOLVED IN MANIPULATION OF THE MARKET PRI CE OF SHARES OF SOME COMPANIES LISTED ON THE BSE NAMELY M/S PEARL ELECTRONICS LTD, SHREE SHA LEEN TEXTILES LIMITED, CRESSANDA SOLUTIONS LTD, ETC., IN ORDER TO PROVIDE ENTRIES OF BOGUS LONG TERM CAPITAL GAINS TO THE INTERESTED PERSONS. 6.1 IT IS SEEN THAT REFERENCE HAS BEEN MADE IN PARA 10.2 OF THE ASSESSMENT ORDER TO SOME INVESTIGATION CARRIED OUT BY THE DIRE CTORATE OF INVESTIGATION, KOLKATA QUA THE TRANSACTIONS IN 84 PENNY STOCK SHAR ES QUOTED ON THE BS EXCHANGE. IT WOULD BE APPROPRIATE TO REPRODUCE THE RELEVANT EXTRACT FROM THE ORDER: AS A RESULT OF INVESTIGATION INDIVIDUALS WHO HAVE BEEN TAKEN SUCH ENTRY OF BOGUS LTCG AMOUNTING TO SEVERAL CRORES HAVE BEEN IDENTIFIED. I T IS WORTH MENTIONING HERE THAT M/S NOUVEAU EQ. SHARES, M/S PEARL ELECTRONICS AND M/S P EARL AGRICULTURE HAVE BEEN LISTED IN THESE 84 PENNY STOCK SHARE COMPANIES. 6.2 IT IS SEEN THAT THE ASSESSEE HAS QUESTIONED THE EVIDENCES USED AGAINST HIM AND SOUGHT AN OPPORTUNITY TO CROSS-EXAMINE THE PERSONS WHOSE STATEMENTS ARE STATED TO HAVE BEEN RELIED UPON. RE LIANCE HAS BEEN PLACED UPON CIT VS SUNIL KUMAR JAIN 20 DTR 225 (P&H) AND K ISHAN CHAND CHELA RAM V CIT 125 ITR 713 (S.C). 6.3 IT IS SEEN ON A PERUSAL OF THE IMPUGNED ORDER T HAT THE SPECIFIC OBJECTION TO THE MAINTAINABILITY OF THE ORDER IN VIEW OF THE VIOLATION OF NATURAL PRINCIPLES ITA 1335 & 1336/CHD/2018 A.Y. 2015-16 PAGE 5 OF 6 HAS BEEN RAISED BY THE ASSESSEE WHICH HAS NOT BEEN ADDRESSED. HOWEVER FIRST ADDRESSING THE ADDITIONAL GROUND, I HOLD ON A CONSI DERATION OF THE PECULIAR FACTS AND CIRCUMSTANCES OF THE PRESENT CASE THAT SI NCE ARGUMENTS TO THE SAID EFFECT ARE FOUND TO HAVE BEEN RAISED BEFORE THE CIT (A) WHICH REMAIN UNADDRESSED IN THE CIRCUMSTANCES, IT IS DEEMED APPR OPRIATE TO ADMIT THE ADDITIONAL GROUND RAISED UNDER RULE 11 OF THE ITAT RULES, 1963. ACCORDINGLY, THE GROUND IS ADMITTED. IT IS FURTHER SEEN THAT OP PORTUNITY TO CROSS EXAMINE THE PERSONS WHOSE STATEMENT HAS BEEN RELIED UPON TO THE DETRIMENT OF THE ASSESSEE HAS ALSO NOT BEEN ADDRESSED BY THE CIT(A). THE ASSESSEE AS PER THE MATERIAL REFERRED TO BY THE LD. AR ADMITTEDLY SOUGH T SUCH AN OPPORTUNITY. ACCORDINGLY, CONSIDERING THE OVERALL FACTUAL MATRIX WHEREIN THE ISSUES REMAIN UNDECIDED IN THE IMPUGNED ORDER, IT IS DEEMED NECES SARY TO SET ASIDE THE SAME BACK TO THE FILE OF THE CIT(A) WITH THE DIRECTION T O PASS SPEAKING ORDER IN ACCORDANCE WITH LAW AFTER GIVING THE ASSESSEE A REA SONABLE OPPORTUNITY OF BEING HEARD. 7. THE ASSESSEE IN ITS OWN INTERESTS IS ADVISED TO MAKE FULL AND PROPER COMPLIANCE BEFORE THE SAID AUTHORITY AS FAILING WHI CH THE CIT(A) WOULD BE AT LIBERTY TO PASS A SPEAKING ORDER ON THE BASIS OF TH E MATERIAL AVAILABLE ON RECORD. SAID ORDER WAS PRONOUNCED IN THE OPEN COUR T AT THE TIME OF HEARING ITSELF. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . 9. SINCE THE ARGUMENTS IN ITA 1335/CHD/2018 ON BEHA LF OF THE PARTIES REMAIN IDENTICAL AS THE LTCG TRANSACTIONS WITH THE VERY SAME COMPANIES ARE QUESTIONED. OPPORTUNITY TO CROSS EXAMINE THE PARTIE S WHOSE STATEMENTS HAVE BEEN RELIED UPON IS A GROUND 2.3 RAISED IN THE PRES ENT PROCEEDINGS ALSO ALONGWITH THE ADDITIONAL GROUND RAISED. ACCORDINGLY , IN THE LIGHT OF THE ARGUMENTS OF THE PARTIES AS ADVANCED IN ITA 1336/CH D/2018 FOR SIMILAR REASONS, THE IMPUGNED ORDER HEREIN ALSO IS SET ASID E BACK TO THE CIT(A) WITH DIRECTION TO PASS A SPEAKING ORDER IN ACCORDANCE WI TH LAW. THE ASSESSEE, HEREIN ALSO IS ADVISED TO PARTICIPATE FULLY AND FAI RLY AS IN THE EVENTUALITY OF ABUSE OF THE TRUST REPOSTED, IT IS MADE CLEAR THE C IT(A) WOULD BE AT LIBERTY TO ITA 1335 & 1336/CHD/2018 A.Y. 2015-16 PAGE 6 OF 6 PASS AN ORDER ON THE BASIS OF THE MATERIAL AVAILABL E ON RECORD. SAID ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ITSELF. 10. IN THE RESULT, BOTH APPEALS OF THE ASSESSEES AR E ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JUNE,2019. SD/- ( ) (DIVA SINGH) ! / JUDICIAL MEMBER ' ' '( )* +*% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT -3. , / CIT4.] , ( )/ THE CIT(A)5. *-. / , /& , 012.3 / DR, ITAT, CHANDIGARH 6. .2 4 / GUARD FILE '( / BY ORDER, 5 / ASSISTANT REGISTRAR