Krishna Devi Agarwal, CHENNAI V. ITO Non Corporate Ward 10(3), CHENNAI

ITA 1412/CHNY/2018

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5648 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 27-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: N VIJAYAKUMAR
• Keywords: Principle of natural justice; Wrong claim; Capital Gains

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , , $ BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER ANDSHRI S. JAYARAMAN, ACCOUNTANT MEMBER /. I.T.A. NO. 1412/CHNY/2018 / ASSESSMENT YEAR : 2014-15 SMT. KRISHNA DEVI AGARWAL, FLAT NO. 9-A, ARIHANT ORCHARD, 54, FLOWERS ROAD, KILPAUK, CHENNAI 600 010. [PAN: AAQPK 7564H] VS. INCOME TAX OFFICER, NON-CORPORATE WARD -10(3), CHENNAI. ( / APPELLANT) ( %&' /RESPONDENT ) ASSESSEE BY : SHRI. N. VIJAYA KUMAR, CA REVENUE BY : SHRI. AR V SREENIVASAN, JCIT 0 /DATE OF HEARING : 28.11.2018 0 /DATE OF PRONOUNCEMENT : 28.11.2018 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER : THE ASSESSEE FILED THIS APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-12, CHENNAI IN ITA NO. 189/CIT(A)-12/2016-17 DATED 01.03.2018 FOR ASSESSME NT YEAR 2014-15. :-2-: ITA NO.1412/CHNY/2018 2. SMT. KRISHNA DEVI AGARWAL, THE ASSESSEE, AN INDI VIDUAL PURCHASED 7500 SHARES OF UNLISTED COMPANY, M/S. TRA NSCEND COMMERCE LTD., LATER AMALGAMATED WITH M/S S R K IND USTRIES LTD @ RS.10 PER SHARE ON 13.9.2012, OFF MARKETFROM SUBHMA NGAL SALES PVT LTD, KOLKATA . LATER , THE FACE VALUE OF SHARE WAS REDUCED FROM RS.10 PER SHARE TO RS.5 PER SHARE ON 15.10.2013, TH EREBY THE NUMBER OF SHARES INCREASED TO 33,000. SUBSEQUENTLY, SOLD THEM ON 16.12.13 THROUGH M/S MSE FINANCIAL SERVICES LTD., E ARNED A PROFIT OF RS. 63,85,291/-AND CLAIMED IT AS AN EXEMPTION U/S. 10(38). THE LD. ASSESSING OFFICER, ON THE BASIS OF INVESTIGATIONS D ONE BY THE REVENUE AND AFTER ANALYZING THESE TRANSACTIONS IN D ETAIL DENIED THE CLAIM OF EXEMPTION U/S. 10(38). AGGRIEVED, THE ASS ESSEE CARRIED THE MATTER ON APPEAL BEFORE THE CIT(A). THE LD. CIT(A) DISMISSED THE APPEAL OF ASSESSEE. AGGRIEVED AGAINST THAT ORDER, THE ASSESSEE FILED THIS APPEAL BEFORE THE TRIBUNAL. 3. IT WAS SUBMITTED BY LD. A.R THAT THE ISSUE IN THIS APPEAL WAS AGAINST THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE ADDITION MADE BY LD. ASSESSING OFFICER IN TREATING THE PURCHASE A ND SALE OF SHARES BY THE ASSESSEE IN M/S. TRANSCEND COMMERCE LTD., AS PENNY STOCK TRANSACTIONS. IT WAS THE PRAYER THAT THE CLAIM OF EXEMPTION U/S. :-3-: ITA NO.1412/CHNY/2018 10(38) OF THE ACT ON THE LONG TERM CAPITAL GAINS ON SALE OF SHARES MAY BE ALLOWED. 4. PER CONTRA, LD. D.R SUBMITTED THAT THE ISSUE W AS NOW SQUARELY COVERED BY THE DECISION OF CO-ORDINATE BENCH OF THI S TRIBUNAL IN THE CASE OF SHRIHEERACHANDKANUNGA FOR ASSESSMENT YEARS 2010-11 & 2011-12 IN ITA NOS. 2786 & 2787/MDS/2017 VIDE ORDER DATED 03.05.2018 WHEREIN THE ISSUE HAS BEEN RESTORED TO THE 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. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT IS NOTICED THAT THE ASSESSEE HAS NOT BEEN GIVEN ANY OPPORTUNITY TO PROVE THE GENUINENESS BUT THE ASSESSMENT HAS BEEN MADE BASED ON THE EVIDENCES COLLECTED BY THE REVENUE IN THE COURSE OF THE INVESTIGATION CONDUCTED BY THEM ON BROKERS / SHARE BROKING ENTITIES ETC. THIS IS NOT PERMISSIBLE. THIS BEING SO,IN THE INTEREST OF NATURAL JUSTICE, THE ISSUE OF THE GENUINENESS OFTHETRANSACT IONS REQUIRE RE- ADJUDICATION. SINCE, THE RIGHT TO EXEMPTION MUST BE ESTABLISHED BY THOSE WHO SEEK IT , THE ONUS THEREFORE LIES ON T HE ASSESSEE. IN ORDER TO CLAIM THE EXEMPTION FROM PAYMENT OF INCOME TAX, THE ASSESSEE HAD TO PUT BEFORE THE INCOME TAX AUTHORITI ES PROPER :-4-: ITA NO.1412/CHNY/2018 MATERIALS WHICH WOULD ENABLE TO COME TO A CONCLUSIO N. (35 ITR 312 (SC)).THUS, THE A O MUST KEEP IN MIND THAT THE ONUS OF PROVING THE EXEMPTION RESTS ON THE ASSESSEE. IF THE AO DOES HA VE ANY EVIDENCE TO THE CONTRARY, IT IS TO BE PUT TO THE ASSESSEEFOR HIS REBUTTAL. THE INTERNAL COMMUNICATIONS OF THE REVENUE ARE EVIDENCE S FOR DRAWING AN OPINION ON POSSIBLE WRONG CLAIMS BUT THEY ARE NO T THE FINAL EVIDENCE. FURTHER, PERUSAL OF ASSESSEES CASE SHOWS THAT IT IS SIMILAR TO THE FACTS IN THE CASE OF SHRIHEERACHAND KANUNGA REFERRED TO SUPRA. THE RELEVANT PORTIONS FROM THAT ORDER IS EXTRACTED AS UNDER :- 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 ASSESSEE S NAME AND PAN AS ONE OF THE BENEFICIARIES. HOWEVER, THIS STATEMENT GIVEN 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 PR OVIDED TO THE ASSESSEE FOR CROSS-EXAMINATION. IN THE ABSENCE OF OPPORTUNITY OF CROSS-EXAMINATION, THE STATEMENT REMAINS MERE INFOR MATION 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 PURCHASE WAS :-5-: ITA NO.1412/CHNY/2018 DONE? IF THE PURCHASE HAS BEEN DONE IN KOLKATA, HOW WAS THE CASH TRANSFERRED? WHEN DID THE ASSESSEE RECEIVED THE SHA RE CERTIFICATES AND THE SHARE TRANSFER FORMS? HOW DID THE ASSESSEE OVE RCOME THE PROVISIONS OF SEC.40A(3)? WAS THERE ADEQUATE CASH AVAILABILITY IN THE BOOKS OF THE ASSESSEE ON 24.04.2008? DID THE ASSES SEE TRAVELLED TO KOLKATA? HOW WAS THE TRANSACTION DONE? WHO APPLIE D FOR THE DEMATING OF THE SHARES? WHEN WERE THEY DEMATED? W HEN WERE THE SHARES TRANSFERRED TO THE DEMAT ACCOUNT OF THE ASSE SSEE? TO WHOM WERE THE SHARES SOLD DURING THE ASSESSMENT YEARS 20 10-11 & 2011-12? WHEN WERE THE CHEQUES RECEIVED BY THE ASSESSEE? FR OM WHOM DID THE ASSESSEE RECEIVED THE CHEQUES? WAS THERE ANY CASH D EPOSIT IMMEDIATELY PRIOR TO THE ISSUING OF THE CHEQUE FROM THE BANK ACCOUNT OF THE PURCHASER OF 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 TAK E POSSESSION OF THE SHARES IN ITS PHYSICAL FORM? IN PARA NO.8.1 OF THE ASSESSMENT ORDER, IT IS MENTIONED THAT THE ASSESSEE IS AN INVESTOR AND H AS 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 WHATSOEVER TO SHOW THAT THE ASSESSEE HAS HELD THE SHARES FOR MORE THAN 12 MONTHS. THIS IS BECAUSE ASSUMING THAT THE DEMAT HAS BEEN DONE AND T HE SHARES OF M/S.BPL HAS COME INTO THE ASSESSEESDEMAT ACCOUNT A ND HAS IMMEDIATELY FLOWN OUT. THEN THE FACTUM OF THE POSS ESSION OF THE SHARES FOR MORE THAN 12 MONTHS HAVE TO BE PROVED BY THE ASSESSEE. THIS IS ALSO NOT FORTHCOMING. IN REPLY TO A SPECIF IC QUERY, AS THE DATE OF THE DEMAT OF SHARES, IT WAS SUBMITTED BY THE LD.AR THAT THE DEMAT WAS DONE ON VARIOUS DATES. THEN THE QUESTION RISES AS TO WHY THERE IS SO MUCH OF DIFFERENCE IN THE DATES OF DEMATING WHEN 15 000 SHARES HAVE :-6-: ITA NO.1412/CHNY/2018 BEEN PURCHASED TOGETHER ON 24.04.2008. NO DETAILS IN RESPECT OF M/S.BPL COMPANY IS KNOWN, WHAT IS THE PRODUCT OF TH E COMPANY 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 CLEAR LY BE A CASE WHERE THE SHARE VALUE OF THE COMPANY WAS HITTING THE CIRC UIT BREAKER OF THE STOCK EXCHANGE ON A DAILY BASIS AND OBVIOUSLY IT WO ULD HAVE DRAWN ATTENTION. THIS BEING SO, AS THE FACTS ARE NOT COM ING OUT OF THE 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 ASSESSEE ADEQUATE OPPORTUNITY TO SUBSTANTIATE ITS C ASE 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 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 PRODUCI NG THE PERSONS THROUGH WHOM THE ASSESSEE HAS UNDERTAKEN THE TRANSA CTION OF THE PURCHASE AND SALE OF THE SHARES WHICH WOULD INCLUDE THE SUB-BROKER, FRIEND AND THE BROKER THROUGH WHOM THE TRANSACTION HAS BEEN DONE, BEFORE THE AO FOR EXAMINATION. RESPECTFULLY FOLLOWING THE ABOVE ORDER, THE ISSUE O F EXEMPTION IN THIS APPEAL IS RESTORED BACK TO THE FILE OF THE A O FOR RE-ADJUDICATION ON THE LINES INDICATED ABOVE. THEREFORE , THE AO SH ALL REQUIRE THE ASSESSEE; TO ESTABLISH WHO, WITH WHOM, HOW AND IN WHAT CIRCUMSTANCES THE IMPUGNED TRANSACTIONS WERE CARRIE D OUT ETC., TO PROVE THAT THE IMPUGNED TRANSACTIONS ARE ACTUAL , GENUINE ETC. THE ASSESSEE SHALL COMPLY TO THE A OS REQUIRE MENTS AS PER LAW. :-7-: ITA NO.1412/CHNY/2018 ON APPRECIATION OF ALL THE ABOVE ASPECTS, THE AO WO ULD DECIDE THE MATTER IN ACCORDANCE WITH LAW. THE AO IS ALSO FREE TO CONDUCT APPROPRIATE ENQUIRY AS DEEMED FIT, BUT SHALL FURNIS H ADEQUATE OPPORTUNITY TO THE ASSESSEE ON THE MATERIAL ETC T O BE USED AGAINST IT AND DECIDE THE MATTER IN ACCORDANCE WITH LAW. 6. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH NOVEMBER, 2018 AT CHENNAI. SD/- ( ) (GEORGE MATHAN) ! /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) ! /ACCOUNTANT MEMBER /CHENNAI, 5 /DATED: 28 TH NOVEMBER, 2018 JPV 0%7898 /COPY TO: 1. '/ APPELLANT 2. %&' /RESPONDENT 3. ; ) (/CIT(A) 4. ; /CIT 5. 8% /DR 6. /GF