Umedmal, CHENNAI V. ITO Non Corporate Ward 6(3), CHENNAI

ITA 1342/CHNY/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2591 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 23-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B. SAGADEVAN
• Keywords: Capital Gains; Bogus
• Section: 12; 201

Judgement Text

, SMC , IN THE INCOME TAX APPELLATE TRIBUNAL A SMC BENCH : CHENNAI BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER ./ I.T.A.NO.1342/CHNY/2018 / ASSESSMENT YEAR :2015-16 SHRI UMEDMAL , 85,FIRST FLOOR,KHATOD PLAZA,, NSC BOSE ROAD, SOWCARPET, CHENNAI 600 079. VS. THE INCOME TAX OFFICER, NON-CORPORATE WARD -6(3), CHENNAI. [PAN AAAPU 5093 P ] ( / APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR.N.ARJUN RAJ,C.A FOR S.SRIDHAR,ADVOCATE /RESPONDENT BY : MR.B.SAGADEVAN,JCIT,D.R ! '# / DATE OF HEARING : 08 - 1 1 - 201 8 $% ! '# / DATE OF PRONOUNCEMENT : 08 - 1 1 - 201 8 / O R D E R THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-5, CHENNAI IN ITA NO.48/CIT(A)-5/2017-18 DATED 13.03.2018 FOR TH E ASSESSMENT YEAR 2015-16. 2. SHRI N.ARJUN RAJ REPRESENTED ON BEHALF OF THE A SSESSEE AND SHRI B.SAGADEVAN REPRESENTED ON BEHALF OF THE RE VENUE. 3. IT WAS SUBMITTED BY LD.A.R THAT THE ISSUE IN TH IS APPEAL WAS AGAINST THE ACTION OF THE LD.CIT(A) IN CONFIRMING T HE ADDITION MADE BY LD. ASSESSING OFFICER IN TREATING THE PURCHASE AND SALE OF SHARES BY THE ITA NO.1342/CHNY/2018 :- 2 -: ASSESSEE IN M/S.KAILASH AUTO FINANCE LTD., AS PENNY STOCK TRANSACTIONS. IT WAS THE PRAYER THAT THE CLAIM OF EXEMPTION U/S.1 0(38) OF THE ACT ON THE LONG TERM CAPITAL GAINS ON SALE OF SHARES MAY B E ALLOWED. 4. IN REPLY, IT WAS SUBMITTED BY LD.D.R THAT THE I SSUE WAS NOW SQUARELY COVERED BY THE DECISION OF CO-ORDINATE BEN CH OF THIS TRIBUNAL IN THE CASE OF SHRI HEERACHAND KANUNGA FOR ASSESSME NT YEASR 2010-11 & 2011-12 IN ITA NOS.2786 & 2787/MDS/2017 VIDE ORD ER DATED 03.05.2018 WHEREIN THE ISSUE HAS BEEN RESTORED TO T HE FILE OF LD. ASSESSING OFFICER WITH CERTAIN DIRECTIONS. IT WAS A SUBMISSION THAT ON IDENTICAL DIRECTIONS, THE ISSUE IN THIS APPEAL CAN ALSO BE RESTORED TO THE FILE OF LD. ASSESSING OFFICER. 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF ASSESSEES CASE SHOWS THAT IT IS SIMILAR TO THE FACTS IN THE C ASE OF SHRI HEERACHAND KANUNGA REFERRED TO SUPRA. CONSEQUENTLY AS WE HAVE ALREADY HELD IN THE CASE OF SHRI HEERACHAND KANUNGA REFERRED TO SUP RA, AS FOLLOWS:- 9. A PERUSAL OF THE FACTS IN THE PRESENT CASE ADM ITTEDLY GIVEN ROOM FOR SUSPICION. HOWEVER, ASSESSMENTS ARE NOT TO BE DONE ON THE BASIS OF MERE SUSPICION. IT HAS TO BE SUPPORTED BY FACTS AND THE FACTS ARE UNFORTUNATELY NOT FORTHCOMING IN THE ASSESSMENT ORD ER, IN THE ORDER OF THE LD.CIT(A) NOR FROM THE SIDE OF THE ASSESSEE. T HE MAIN FOUNDATION OF THE ASSESSMENT IN THE PRESENT CASE IS THE STATEM ENT OF ONE SHRI ASHOK KUMAR KAYAN WHO HAS ADMITTED TO HAVE PROVIDED BOGUS LONG TERM CAPITAL GAINS TO HIS CLIENTS. THE SAID SHRI A SHOK KUMAR KAYAN ALSO ALLEGEDLY SEEMS TO HAVE PROVIDED THE ASSESSEES NAM E AND PAN AS ONE ITA NO.1342/CHNY/2018 :- 3 -: OF THE BENEFICIARIES. HOWEVER, THIS STATEMENT GIVE N BY SHRI ASHOK KUMAR KAYAN CANNOT BE THE FOUNDATION FOR THE PURPOS E OF ASSESSMENT IN SO FAR AS SHRI ASHOK KUMAR KAYAN HAS NOT BEEN PROVI DED TO THE ASSESSEE FOR CROSS-EXAMINATION. IN THE ABSENCE OF OPPORTUNITY OF CROSS- EXAMINATION, THE STATEMENT REMAINS MERE INFORMATION AND SUCH INFORMATION CANNOT BE FOUNDATION FOR ASSESSMENT. 10. ADMITTEDLY, THE ASSESSEE HAS CLAIMED TO HAVE PU RCHASED 15000 SHARES FROM M/S.BPL @ RS.20/- PER SHARE TOTALING IN TO RS.3,00,000/-. THE ASSESSEE CLAIMS TO HAVE PAID CASH FOR THE PURCH ASE OF THESE SHARES. THE PRIMARY QUESTION WOULD BE AS TO WHERE THE PURCH ASE WAS DONE? IF THE PURCHASE HAS BEEN DONE IN KOLKATA, HOW WAS THE CASH TRANSFERRED? WHEN DID THE ASSESSEE RECEIVED THE SHARE CERTIFICAT ES AND THE SHARE TRANSFER FORMS? HOW DID THE ASSESSEE OVERCOME THE PROVISIONS OF SEC.40A(3)? WAS THERE ADEQUATE CASH AVAILABILITY I N THE BOOKS OF THE ASSESSEE ON 24.04.2008? DID THE ASSESSEE TRAVELLED TO KOLKATA? HOW WAS THE TRANSACTION DONE? WHO APPLIED FOR THE DEMA TING OF THE SHARES? WHEN WERE THEY DEMATED? WHEN WERE THE SHARES TRANS FERRED TO THE DEMAT ACCOUNT OF THE ASSESSEE? TO WHOM WERE THE SHA RES SOLD DURING THE ASSESSMENT YEARS 2010-11 & 2011-12? WHEN WERE THE CHEQUES RECEIVED BY THE ASSESSEE? FROM WHOM DID THE ASSESS EE RECEIVED THE CHEQUES? WAS THERE ANY CASH DEPOSIT IMMEDIATELY PRI OR TO THE ISSUING OF THE CHEQUE FROM THE BANK ACCOUNT OF THE PURCHASER O F THE SHARES OF THE ASSESSEE? 11. A PERUSAL OF THE ASSESSMENT ORDER AT PARA NO.7. 1 SHOWS THAT IN THE WRITTEN SUBMISSIONS, THE ASSESSEE STATES THAT H E HAS PURCHASED 15000 SHARES OF M/S.BPL FROM M/S.ABPL, KOLKATA. HO WEVER, IN PARA NO.8.3, IT IS MENTIONED THAT THE ASSESSEE IN GOOD F AITH HAS PURCHASED THE SHARES OF M/S.BPL FROM A SUB-BROKER IN HIS FRIE NDS CIRCLE. WHAT IS THE TRUE NATURE OF THE TRANSACTION? FROM WHOM DID T HE ASSESSEE ACTUALLY PURCHASE THE SHARES? DID THE ASSESSEE TAKE POSSESS ION OF THE SHARES IN ITA NO.1342/CHNY/2018 :- 4 -: ITS PHYSICAL FORM? IN PARA NO.8.1 OF THE ASSESSMEN T ORDER, IT IS MENTIONED THAT THE ASSESSEE IS AN INVESTOR AND HAS BEEN REGULARLY TRADING IN SHARES. IF THIS IS SO, DOES THE DEMAT A CCOUNT SHOW SUCH TRANSACTIONS BEING DONE BY THE ASSESSEE OR IS THIS THE ONLY ONE OF TRANSACTION. THUS, CLEARLY THE FACTS REQUIRED FOR ADJUDICATING THE APPEALS ARE NOT FORTHCOMING. THERE IS NO EVIDENCE WHATSOEV ER TO SHOW THAT THE ASSESSEE HAS HELD THE SHARES FOR MORE THAN 12 MONTH S. THIS IS BECAUSE ASSUMING THAT THE DEMAT HAS BEEN DONE AND THE SHARE S OF M/S.BPL HAS COME INTO THE ASSESSEES DEMAT ACCOUNT AND HAS IMME DIATELY FLOWN OUT. THEN THE FACTUM OF THE POSSESSION OF THE SHARES FOR MORE THAN 12 MONTHS HAVE TO BE PROVED BY THE ASSESSEE. THIS IS ALSO NOT FORTHCOMING. IN REPLY TO A SPECIFIC QUERY, AS THE DATE OF THE DEMAT OF SHARES, IT WAS SUBMITTED BY THE LD.AR THAT THE DEMA T WAS DONE ON VARIOUS DATES. THEN THE QUESTION RISES AS TO WHY T HERE IS SO MUCH OF DIFFERENCE IN THE DATES OF DEMATING WHEN 15000 SHAR ES HAVE BEEN PURCHASED TOGETHER ON 24.04.2008. NO DETAILS IN RE SPECT OF M/S.BPL COMPANY IS KNOWN, WHAT IS THE PRODUCT OF THE COMPAN Y WHICH HAD LEAD TO THE SHARE VALUE OF THE COMPANY TO GO UP FROM RS. 20/- TO RS.352/- IN A PERIOD OF TWO YEARS. THIS WOULD CLEARLY BE A CASE WHERE THE SHARE VALUE OF THE COMPANY WAS HITTING THE CIRCUIT BREAKE R OF THE STOCK EXCHANGE ON A DAILY BASIS AND OBVIOUSLY IT WOULD HA VE DRAWN ATTENTION. THIS BEING SO, AS THE FACTS ARE NOT COMING OUT OF T HE ASSESSMENT ORDER NOR THE ORDER OF THE LD.CIT(A) NOR FROM THE SIDE OF THE ASSESSEE, WE ARE OF THE VIEW THAT THE ISSUES IN THIS APPEAL MUST BE RESTORED TO THE FILE OF THE AO FOR RE-ADJUDICATION AFTER GRANTING THE ASSES SEE ADEQUATE OPPORTUNITY TO SUBSTANTIATE ITS CASE AND WE DO SO. 12.THE STATEMENT RECORDED BY THE REVENUE FROM SHRI ASHOK KUMAR KAYAN CANNOT BE USED AS AN EVIDENCE AGAINST THE ASS ESSEE IN SO FAR AS THE STATEMENT HAS NOT BEEN GIVEN TO THE ASSESSEE NO R HAS SHRI ASHOK KUMAR KAYAN BEEN PROVIDED TO THE ASSESSEE FOR CROSS -EXAMINATION. HOWEVER, THE ASSESSEE SHALL PROVE THE TRANSACTION O F THE LONG TERM ITA NO.1342/CHNY/2018 :- 5 -: CAPITAL GAINS IN RESPECT OF WHICH THE ASSESSEE HAS CLAIMED THE EXEMPTION U/S.10(38) BY PROVIDING ALL SUCH EVIDENCE S AS REQUIRED BY THE AO TO SUBSTANTIATE THE CLAIM AS ALSO BY PRODUCING T HE PERSONS THROUGH WHOM THE ASSESSEE HAS UNDERTAKEN THE TRANSACTION OF THE PURCHASE AND SALE OF THE SHARES WHICH WOULD INCLUDE THE SUB-BROK ER, FRIEND AND THE BROKER THROUGH WHOM THE TRANSACTION HAS BEEN DONE, BEFORE THE AO FOR EXAMINATION. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE CO -ORDINATE BENCH OF THIS TRIBUNAL, THE ISSUE IS RESTORED TO THE FILE OF LD. ASSESSING OFFICER FOR RE-ADJUDICATION ON IDENTICAL DIRECTIONS AS GIVEN IN THE CASE OF SHRI HEERACHAND KANUNGA REFERRED TO SUPRA. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT AFTER CONCLUSION OF HEARING ON 08 TH NOVEMBER, 2018, AT CHENNAI. SD/ - ( ) (GEORGE MATHAN) ! '# / JUDICIAL MEMBER & / CHENNAI ' / DATED: 08 TH NOVEMBER,2018. K S SUNDARAM (!)* +*! / COPY TO: 1 . / APPELLANT 3. ,!- . / CIT(A) 5. */0!1 / DR 2. / RESPONDENT 4. ,! / CIT 6. 023 / GF