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

ITA 1418/CHNY/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9635 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2018
• 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
• Department Lawyers: S NATARAJA
• Assessee Lawyers: N VIJAY KUMAR
• Keywords: Unexplained cash credit; Opportunity of being heard

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI , . , # $ BEFORE SHRI JOGINDER SINGH, VICE PRESIDENT AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.1413/CHNY/2018 ( / ASSESSMENT YEAR: 2014-15) M/S. PANKAJ AGARWAL & SONS (HUF), 9A-54, ARIHANT ORCHID, FLOWERS ROAD, KILPAUK, CHENNAI 600 010 VS THE INCOME TAX OFFICER, NON-CORPORATE WARD 10(3), CHENNAI. PAN: AAKHP9439E ( /APPELLANT) ( /RESPONDENT) & ./ I.T.A.NO.1414/CHNY/2018 ( / ASSESSMENT YEAR: 2014-15) SMT. MAMTA AGARWAL 9A-54, ARIHANT ORCHID, FLOWERS ROAD, KILPAUK, CHENNAI 600 010 VS THE INCOME TAX OFFICER, NON-CORPORATE WARD 10(3), CHENNAI. PAN: AAGPD2614R ( /APPELLANT) ( /RESPONDENT) & ./ I.T.A.NO.1415/CHNY/2018 ( / ASSESSMENT YEAR: 2014-15) M/S. RAJNISH AGARWAL & SONS (HUF), 9A-54, ARIHANT ORCHID, FLOWERS ROAD, KILPAUK, CHENNAI 600 010 VS THE INCOME TAX OFFICER, NON-CORPORATE WARD 10(5), CHENNAI. PAN: AANHR4564B ( /APPELLANT) ( /RESPONDENT) & 2 ITA NOS. 1413 TO 1420/CHNY/2018 ./ I.T.A.NO.1416/CHNY/2018 ( / ASSESSMENT YEAR: 2014-15) SHRI RAMKISHAN AGARWAL, 9A-54, ARIHANT ORCHID, FLOWERS ROAD, KILPAUK, CHENNAI 600 010 VS THE ACIT, NON-CORPORATE CIRCLE 10(1), CHENNAI. PAN: AAKPR4148L ( /APPELLANT) ( /RESPONDENT) & ./ I.T.A.NO.1417/CHNY/2018 ( / ASSESSMENT YEAR: 2014-15) M/S. R K AGARWAL & SONS (HUF), 9A-54, ARIHANT ORCHID, FLOWERS ROAD, KILPAUK, CHENNAI 600 010 VS THE INCOME TAX OFFICER, NON-CORPORATE WARD 10(5), CHENNAI. PAN: AAFHR1747A ( /APPELLANT) ( /RESPONDENT) & ./ I.T.A.NO.1418/CHNY/2018 ( / ASSESSMENT YEAR: 2014-15) SMT. SAMPATTI AGARWAL, 9A-54, ARIHANT ORCHID, FLOWERS ROAD, KILPAUK, CHENNAI 600 010 VS THE INCOME TAX OFFICER, NON-CORPORATE WARD 10(3), CHENNAI. PAN: AZZPS9269D ( /APPELLANT) ( /RESPONDENT) & ./ I.T.A.NO.1419/CHNY/2018 ( / ASSESSMENT YEAR: 2014-15) SHRI RAJNISH AGARWAL, 9A-54, ARIHANT ORCHID, FLOWERS ROAD, KILPAUK, CHENNAI 600 010 VS THE INCOME TAX OFFICER, NON-CORPORATE CIRCLE 10(1), CHENNAI. PAN: AFRPA1436Q ( /APPELLANT) ( /RESPONDENT) 3 ITA NOS. 1413 TO 1420/CHNY/2018 & ./ I.T.A.NO.1420/CHNY/2018 ( / ASSESSMENT YEAR: 2014-15) SHRI PANKAJ KUMAR AGARWAL, 9A-54, ARIHANT ORCHID, FLOWERS ROAD, KILPAUK, CHENNAI 600 010 VS THE INCOME TAX OFFICER, NON-CORPORATE CIRCLE 10(1), CHENNAI. PAN: AAEPA4769Q ( /APPELLANT) ( /RESPONDENT) /APPELLANT BY : SHRI N. VIJAY KUMAR, CA /RESPONDENT BY : SHRI S. NATARAJA, JCIT /DATE OF HEARING : 04.12.2018 /DATE OF PRONOUNCEMENT : 06.12.2018 / O R D E R PER BENCH:- THESE APPEALS BY THE ASSESSEES ARE DIRECTED AGAINST THE ORDERS PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS)-12, CHENNAI AS DETAILED HEREIN BELOW FOR THE ASSESSMENT YEAR 2014-15 PASSED U/S.250(6) R.W.S.143(3) OF THE ACT :- 4 ITA NOS. 1413 TO 1420/CHNY/2018 SINCE THE ISSUES IN ALL THESE APPEALS ARE IDENTICA L, THEY HAVE BEEN TAKEN UP FOR HEARING TOGETHER AND DISPOSED OFF BY THIS COMMON ORDER. 2. THE ASSESSEES HAVE RAISED SEVERAL IDENTICAL GRO UNDS IN THEIR APPEALS HOWEVER THE FOLLOWING GROUNDS WERE ARGUED B EFORE US AT THE TIME OF HEARING:- (I) THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDIT ION MADE BY THE LD.AO U/S.68 OF THE ACT, BY REJECTING THE ASSESSEES CLAIM OF EXEMPTION U/S.10(38) OF THE ACT ON THE LONG TERM CA PITAL GAINS EARNED OUT OF THE PURCHASE & SALE OF EQUITY SHARES OF THE COMPANY M/S. SRK INDUSTRIES LTD., BY HOLDING THAT T HE APPEAL NO. ASSESSEE ORDER OF THE LD.CIT(A)-12, CHEN NAI NO. DATED ITA 1413 OF 2018 M/S. PANKAJ AGARWAL & SONS (HUF) ITA NO.192/CIT(A)- 12/2016-17 23.02.2018 ITA 1414 OF 2018 SMT. MAMTA AGARWAL ITA NO.185/CIT( A)- 12/2016-17 01.03.2018 ITA 1415 OF 2018 M/S. RAJNISH AGARWAL & SONS (HUF) ITA NO.191/CIT(A)- 12/2016-17 26.02.2018 ITA 1416 OF 2018 SHRI RAMKISHAN AGARWAL ITA NO.194/CIT(A)- 12/2016-17 27.03.2018 ITA 1417 OF 2018 M/S. R. K. AGARWAL & SONS (HUF) ITA NO.190/CIT(A)- 12/2016-17 26.02.2018 ITA 1418 OF 2018 SMT SAMPATTI AGARWAL ITA NO.187/CI T(A)- 12/2016-17 28.02.2018 ITA 1419 OF 2018 SHRI RAJNISH AGARWAL ITA NO.184/CI T(A)- 12/2016-17 27.02.2018 ITA 1420 OF 2018 SHRI PANKAJ KUMAR AGARWAL ITA NO.188/CIT(A)- 12/2016-17 26.02.2018 5 ITA NOS. 1413 TO 1420/CHNY/2018 TRANSACTIONS ARE SHAM AND TAILORED TO BRING THE UNA CCOUNTED MONEY AS THE LEGITIMATE GAIN IN THE GUISE OF LONG T ERM CAPITAL GAIN WHICH IS EXEMPT U/S.10(38) OF THE ACT. (II) IN THE CASE OF SHRI RAMKISHAN AGARWAL IN ITA NO.1416/CHNY/2018 THE ASSESSEE HAS RAISED THE GROUN D THAT THE LD.AO HAD ERRONEOUSLY ADOPTED THE TOTAL INCOME AS RS.5,95,016/- AS AGAINST RS.5,25,690/- DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME WHILE COMPUTING TH E INCOME OF THE ASSESSEE. (III) THE LD.AO HAD ERRONEOUSLY COMPUTED THE AGGREG ATE VALUE OF THE SALE OF SHARES OF M/S. SRK INDUSTRIES LTD., AS FOLLOWS WHILE COMPUTING THE LONG TERM CAPITAL GAIN: (IV) IN THE CASE OF RAJNISH AGARWAL IN ITA NO.1419/ CHNY/2018 THE ASSESSEE HAS RAISED THE GROUND THAT THE LD.CIT(A) H AS ERRED IN CONFIRMING THE ORDER OF THE LD.AO WHO HAD NOT ALLOW ED THE ASSESSEE / APPEAL NO. ACTUAL VALUE OF THE SHARES SOLD ERRONEOUS VALUE ADOPTED BY THE LD.AO SMT. SAMPATI AGARWAL ITA NO.1418/CHNY/2018 RS.63,46,801 RS.64,71,191 SHRI RAJNISH AGARWAL ITA NO.1419/CHNY/2018 RS.63,80,898 RS.66,77,520 SHRI PANKAJ AGARWAL ITA NO.1420/CHNY/2018 RS.62,97,298 RS.63,93,702 6 ITA NOS. 1413 TO 1420/CHNY/2018 BENEFIT OF SET-OFF OF LOSSES ON THE SALE OF SHARES AMOUNTING TO RS.6,01,730/- WHILE COMPUTING THE TOTAL INCOME. (V) THE ASSESSEES OBJECT TO THE LEVY OF INTEREST U/ S.234B & 234C OF THE ACT. 3. THE BRIEF FACTS IN ALL THESE APPEALS ARE THAT T HE ASSESSEES CASES WERE SELECTED FOR SCRUTINY AND ORDERS WERE PA SSED U/S.143(3) OF THE ACT ON 29.12.2016, WHEREIN THE LD.AO TREATED TH E PURCHASE AND SALE OF SHARES OF M/S. SRK INDUSTRIES LTD., AS SHAM TRANSACTION AND THEREBY THE CLAIM OF EXEMPTION U/S.10(38) OF THE AC T, WITH RESPECT TO THE LONG TERM CAPITAL GAIN EARNED BY THE ASSESSEES ON T HOSE TRANSACTIONS WERE DENIED AND THE SAME WAS TREATED AS UNEXPLAINED CASH CREDIT U/S.68 OF THE ACT. 4. WHILE DOING SO, THE LD.AO ANALYZING THE ISSUE I N DETAIL ARRIVED AT THE CONCLUSION THAT THE FOLLOWING FINDINGS OF THE WING CORROBORATES WITH THE FINDINGS OF THE SEBI:- (I) THE COMPANY IN WHICH THE ASSESSEES HAD PURCHASE D THE EQUITY SHARES HAD NO CREDITABILITY AND NO PRUDENT INVESTOR WOULD MAKE SUCH INVESTMENT. 7 ITA NOS. 1413 TO 1420/CHNY/2018 (II) AS PER THE FINDING OF THE INVESTIGATION REPORT OF THE INVESTIGATION WING, THE MEMBERS WHO PARTICIPATED IN THE TRADING O F THE SCRIP DURING MID-2013 TO MID-2014 WERE PART OF THE SYNDIC ATE OF BROKERS AND BROKERING ENTITIES INDULGING IN PRICE R IGGING. (III) THE ULTIMATE BENEFICIARY OF ALL THE PRICE MAN IPULATION IS THE BENEFICIARIES LIKE THE ASSESSEES WHO SOLD THE SHARE S WHEN THE SHARE PRICE WAS SUFFICIENTLY BROUGHT TO A HIGH LEVE L AND COULD TAKE THE BENEFIT OF SECTION 10(38) OF THE ACT. (IV) FOR FACILITATING SUCH BOGUS ENTRIES, THE BROKE RS WERE PAID COMMISSION IN CASH GENERALLY AROUND 6% OF THE VALUE OF THE TRANSACTION OR RS.0.50 TO RS.1/- FOR EVERY RS.100/- TRANSACTED. (V) BUT FOR THE PRICE RIGGING AND MANIPULATIVE ACTI ONS OF THE BROKERS THE ASSESSEE WOULD NOT HAVE EARNED SUCH LONG TERM C APITAL GAIN. (VI) THE MOTIVE OF THE PRICE MANIPULATION IS ONLY T O BRING OUT THEIR BLACK MONEY AS LEGITIMATELY EARNED LONG TERM CAPITA L GAIN FOR WHICH EXEMPTION U/S.10(38) OF THE ACT IS AVAILABLE. 5. THE LD.AO FURTHER RELIED ON THE FOLLOWING DECIS IONS WHILE DECIDING THE CASES AGAINST THE ASSESSEES:- 8 ITA NOS. 1413 TO 1420/CHNY/2018 (I) THE HONBLE APEX COURT IN THE CASE SUMATHI DAYA L REPORTED IN 214 ITR 801, IT WAS HELD THAT IN OUR OPINION, THE MAJORITY OPINION AFTER CONSIDERING SURROUNDING CIRCUMSTANCES AND APP LYING THE TEST OF HUMAN PROBABILITIES HAS RIGHTLY CONCLUDED THAT THE APPELLANTS CLAIM ABOUT THE AMOUNT BEING HER WINNING FROM RACES IS NO T GENUINE. IT CANNOT BE SAID THAT THE EXPLANATION OFFERED BY THE APPELLANT IN RESPECT OF THE SAID AMOUNTS HAS BEEN REJECTED UNREASONABLY AND THAT THE FINDING THAT THE SAID AMOUNTS ARE INCOME OF THE APP ELLANT FROM OTHER SOURCES IS BASED ON EVIDENCE . (II) THE HONBLE APEX COURT IN THE CASE M/S. DURGA PRASAD MORE REPORTED IN 82 ITR 540, IT WAS HELD THAT SCIENCE HAS NOT YET INVENTED ANY INSTRUMENT TO TEST THE RELIABILITY OF THE EVIDENCE PLACED BEFORE A COURT OR TRIBUNAL, THEREFORE THE COURTS AN D TRIBUNALS HAVE TO JUDGE THE EVIDENCE BEFORE THEM BY APPLYING THE T EST OF HUMAN PROBABILITIES. (III) IN THE LANDMARK MCDOWELL VS. CTO CASE, THE HO NBLE APEX COURT HAD HELD COLOURABLE DEVICES CANNOT BE PART OF TAX PLANNING AND IT IS WRONG TO ENCOURAGE OR ENTERTAIN THE BELIE F THAT IT IS HONOURABLE TO AVOID THE PAYMENT OF TAX BY RESORTING TO DUBIOUS METHODS. IT IS THE OBLIGATION OF EVERY CITIZEN TO P AY THE TAXES HONESTLY WITHOUT RESORTING TO SUBTERFUGES. 9 ITA NOS. 1413 TO 1420/CHNY/2018 6. ON APPEAL THE LD.CIT(A) CONFIRMED THE ORDER OF THE LD.AO AFTER DETAILED DELIBERATIONS. 7. BEFORE US THE LD.AR SUBMITTED THAT THE ASSESSEE S WERE NOT PROVIDED WITH AN OPPORTUNITY TO CROSS-EXAMINE THE WITNESS WH O WERE RELIED BY THE REVENUE AND FURTHER FAILED TO FURNISH THE INVESTIGA TION REPORT OF THE INTELLIGENCE WING OF THE REVENUE BEFORE CONCLUDING THE ASSESSMENT. THE LD.AR FURTHER ARGUED THAT THE ASSESSEES WERE NO T PROVIDED WITH PROPER OPPORTUNITY OF BEING HEARD. IT WAS THEREFOR E PLEADED THAT THE MATTER MAY BE REMITTED BACK TO THE FILE OF LD.AO FO R FRESH CONSIDERATION. THE LD.DR STRONGLY OPPOSED TO THE SUBMISSION OF THE LD.AR AND REQUESTED FOR CONFIRMING THE ORDERS OF THE LD.REVEN UE AUTHORITIES. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE MATERIALS ON RECORD. AT THE OUTSET WE MUST SAY THAT THE LD.AR COULD NOT JUSTIFY BEFORE US ANY OF THEIR CLAIMS MADE BEFO RE THE LD.REVENUE AUTHORITIES THAT THE TRANSACTION WAS GENUINE. FURTH ER THE LD.AR COULD NOT SUCCESSFULLY CONTROVERT TO ANY OF THE FINDINGS OF THE LD.REVENUE AUTHORITIES BEFORE US WHICH ARE AGAINST THE ASSESSE ES. INSTEAD THE LD.AR HAS ONLY COME OUT WITH THE PLEA THAT THE ASSE SSEES WERE NOT PROVIDED WITH OPPORTUNITY OF CROSS-EXAMINING THE WI TNESS, THE 10 ITA NOS. 1413 TO 1420/CHNY/2018 INVESTIGATION REPORT WAS NOT FURNISHED AND PROPER O PPORTUNITY WAS NOT PROVIDED OF BEING HEARD. HOWEVER WE FIND THAT ALL T HESE ARGUMENTS RAISED BY THE LD.AR BEFORE US WAS NEVER ALLEGED BEF ORE THE LD.REVENUE AUTHORITIES WHEN THE MATTER WAS BEFORE T HEM. IN THIS SITUATION WE DO NOT HAVE ANY OTHER OPTION BUT TO CO NFIRM THE ORDERS OF THE LD.REVENUE AUTHORITIES IN THE CASE OF ALL THE A SSESSEES BECAUSE THE LD.AO AS WELL AS THE LD.CIT(A) HAVE ARRIVED AT THEIR RESPECTIVE DECISIONS AFTER CONSIDERING THE ISSUES IN THE APPEA L IN DETAIL AND THERE IS NOTHING BEFORE US TO DISTURB THEIR FINDINGS. ACCORD INGLY WE HEREBY CONFIRM THE ORDER OF THE LD.REVENUE AUTHORITIES ON THIS ISSUE. THUS THE FIRST GROUND RAISED BY THE ASSESSEES HEREIN ABOVE I N ALL THE APPEALS ARE HELD AGAINST THE ASSESSEES. 9. WITH RESPECT TO THE GROUND NO. 2(II) & 2(III) R AISED BY THE ASSESSEES IN THE RESPECTIVE APPEALS, WE FIND THAT T HE ISSUE IS WITH RESPECT TO COMPUTATION OF TOTAL INCOME FROM THE BAS IC FACTS OF THOSE CASES AND THEREFORE WE HEREBY REMIT BACK THE MATTER TO THE FILE OF LD.AO TO VERIFY THE CLAIM OF THE ASSESSEES AND THER EAFTER DECIDE THE MATTER IN ACCORDANCE WITH LAW AND MERIT. 11 ITA NOS. 1413 TO 1420/CHNY/2018 10. IN THE GROUND NO. 2(IV), THE ASSESSEE HAS RAISE D THE ISSUE THAT THE LD.AO HAS DENIED THE BENEFIT OF SET-OFF LOSSES. SINCE WE DO NOT FIND ANY DETAILED DISCUSSION ON THE ISSUE BY THE LD.AO A S WELL AS THE LD.CIT(A), WE REMIT BACK THE MATTER TO THE FILE OF LD.AO FOR FRESH CONSIDERATION. 11. LEVY OF INTEREST U/S.243B AND 243C OF THE ACT I S CONSEQUENTIAL IN NATURE AND THEREFORE THIS GROUND RAISED BY THE A SSESSEES IS DEVOID OF MERITS. 12. IN THE RESULT THE APPEALS OF THE ASSESSEES IN I TA NOS.1416, 1418,1419 & 1420/CHNY/2018 ARE PARTLY ALLOWED AND T HE APPEALS OF THE ASSESSEES ITA NOS.1413, 1414, 1415 & 1417/CHNY/2018 ARE DISMISSED. ORDER PRONOUNCED ON THE 6 TH DECEMBER, 2018 AT CHENNAI. SD/- SD/- '# /CHENNAI, $% /DATED 6 TH DECEMBER, 2018 ( ) (JOGINDER SINGH) / VICE PRESIDENT ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER 12 ITA NOS. 1413 TO 1420/CHNY/2018 RSR % '( )( /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. , ( ) /CIT(A) 4. , /CIT 5. (-. / /DR 6. .0 /GF