Govindram Bung & Sons HUF, Hyderabad V. Income Tax Officer, Ward-8(2), Hyderabad

ITA 1494/Hyd/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0604 (ITAT-HYDERABAD)
• Duration Of Justice: 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 17-09-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 06-07-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NILANJAN DEY
• Assessee Lawyers: MANOJ KUMAR DAGA
• Section: 147; 131; 148

Judgement Text

ITA NOS 1492 1494 1495 AND 1496 OF 2018 PK BUNG AND OTHERS HYDERABAD. PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.1492/HYD/2018 (ASSESSMENT YEAR: 2011-12) PRAMOD KUMAR BUNG HYDERABAD PAN:AHAPB58 97M VS INCOME TAX OFFICER WARD 8(2), HYDERABAD (APPELLANT) (RESPONDENT) ITA NO.1494/HYD/2018 (ASSESSMENT YEAR: 2011-12) GOVINDRAM BUNG & SONS (HUF) HYDERABAD PAN: AACHG3125J VS INCOME TAX OFFICER WARD 8(2), HYDERABAD (APPELLANT) (RESPONDENT) ITA NO.1495/HYD/2018 (ASSESSMENT YEAR: 2011-12) URMILA BUNG, HYDERABAD PAN:AAGPN0266M VS INCOME TAX OFFICER WARD 8(2), HYDERABAD (APPELLANT) (RESPONDENT) ITA NO.1496/HYD/2018 (ASSESSMENT YEAR: 2011-12) KAUSHALYA DEVI BUNG HYDERABAD PAN:ADHPB1866B VS INCOME TAX OFFICER WARD 8(2), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI MANOJ KUMAR DAGA FOR REVENUE : SHRI NILANJAN DEY, DR DATE OF HEARING: 17.09.2018 DATE OF PRONOUNCEMENT: 1 9 . 0 9 .2018 ITA NOS 1492 1494 1495 AND 1496 OF 2018 PK BUNG AND OTHERS HYDERABAD. PAGE 2 OF 6 O R D E R PER SMT. P. MADHAVI DEVI, J.M. ALL ARE APPEALS OF THE RESPECTIVE ASSESSEES FOR TH E A.Y 2011-12 AGAINST THE ORDER OF THE CIT (A)-2, HYDERAB AD DATED 30.05.2018 RESPECTIVELY. ALL THE ASSESSEES ARE RELA TED PARTIES AND THE ISSUES ARE COMMON AND THEREFORE, THE APPEALS WE RE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON AND CON SOLIDATED ORDER. FOR THE SAKE OF CONVENIENCE, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE SHRI PRAMOD KUMAR BUNG ARE REPRODUC ED HEREUNDER: 1. THAT THE LEARNED CIT (A) ERRED IN LAW AND ON FA CT IN CONFIRMING THE ASSESSMENT ORDER AND DISMISSING THE APPEAL FILED AGAINST THE ASSESSMENT ORDER. 2. THAT THE LEARNED CIT (A) WITHOUT APPRECIATING TH E FACTS AND WITHOUT PROPER APPLICATION OF LAW ERRED IN CONF IRMING THE ADDITION OF RS.34,99,520 AND UPHOLDING THE DENI AL OF EXEMPTION CLAIMED U/S 10(38) OF THE I.T. ACT, 1961. 3. THAT THE LEARNED CIT (A) ERRED IN DISMISSING THE GROUND THAT NON SUPPLY OF REASONS FOR RE-OPENING ASSESSMEN T WHICH IS MANDATORY AS PER PROCEDURE LAID DOWN BY HON'BLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFT INDIA LTD VS. ITO (259 ITR 19) WILL VITIATE THE RE-ASSESS MENT PROCEEDINGS AND RENDER THE RE-ASSESSMENT ORDER BAD IN LAW AS DECIDED BY COURTS IN A NUMBER OF DECISIONS R ELIED UPON BY THE APPELLANT. 4. THAT THE LEARNED CIT (A) ERRED IN LAW IN APPLYIN G THE PROVISIONS OF SECTION 292B AND SECTION 292BB TO THE APPELLANTS CASE EVEN THOUGH AS PER JUDGMENT OF THE APEX COURT SUPPLYING OF REASONS FOR RE-OPENING IS MANDAT ORY. 5. THAT THE LEARNED CIT (A) ERRONEOUSLY UPHELD THE RE- OPENING OF ASSESSMENT BY THE AO ONLY ON THE GROUND THAT CERTAIN INFORMATION HAS BEEN RECEIVED FROM INVESTIG ATION WING AGAINST PERSONS OTHER THAN THE APPELLANT WITHO UT APPLICATION OF MIND AND WITHOUT ESTABLISHING A LIVE LINK BETWEEN THE INFORMATION RECEIVED AND BELIEF THAT IN COME HAS ESCAPED ASSESSMENT. HE OUGHT TO HAVE HELD THE REOPENING AND SUBSEQUENT RE-ASSESSMENT ONLY BAD IN LAW. 6. THAT THE LEARNED CIT (A) ERRED IN NOT APPRECIATI NG THE FACT THAT THE APPELLANT HAS DISCHARGED THE INITIAL ONUS OF ITA NOS 1492 1494 1495 AND 1496 OF 2018 PK BUNG AND OTHERS HYDERABAD. PAGE 3 OF 6 FILING EVIDENCES IN SUPPORT OF ITS CLAIM OF LTCG WH ICH HAVE NOT BEEN FOUND TO BE DEFECTIVE OR WRONG OR FABRICAT ED BY THE AO OR BY LEARNED CIT (A). 7. THAT THE LEARNED CIT (A) ERRED IN HOLDING THAT T HE STATEMENT RECORDED ON OATH U/S 131 FROM THE BROKERS / PROMOTERS/OPERATORS WITHOUT ANY REFERENCE TO THE APPELLANT IS A CIRCUMSTANTIAL EVIDENCE AGAINST THE APPELLANT. 8. THAT THE LEARNED CIT (A) ERRED IN UPHOLDING ORDE R OF THE AO WHERE THE CLAIM OF THE APPELLANT HAS BEEN REJECT ED ON THE BASIS OF CERTAIN FINDING BY THE INVESTIGATING O FFICERS IN RESPECT OF OTHER PERSONS AND NOT IN RESPECT OF THE APPELLANT, IN PARTICULAR EVEN THOUGH THERE IS ABSOL UTELY NO REFERENCE TO THE APPELLANT IN THE REPORT RELATING T O SUCH INVESTIGATION. 9. THAT THE LEARNED CIT (A) ERRED IN UPHOLDING ORDE R OF THE AO WHICH IS BASED ON SUSPICION AND DOUBT. HIS SUSPI CION HOWEVER STRONG CANNOT TAKE THE PLACE OF PROOF AS WA S HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF UMACHAR AN SHAW AND BROTHERS VS. CIT WEST BENGAL (37 ITR 271 S .C) AND DHAKESHWARI COTTON MILLS LTD VS. CIT (26 ITR 77 5 S.C) 10. THAT THE LEARNED CIT (A) ERRED IN APPLYING THE THEORY OF HUMAN PROBABILITY TO APPELLANTS CASE OVERLOOKING T HE FACT THAT ALL THE TRANSACTIONS WERE MADE THROUGH RECOGNI ZED STOCK EXCHANGE, DEMAT ACCOUNT AND BANKING CHANNELS WHICH ARE SUBJECT TO REGULATIONS OF STATUTORY REGUL ATORY AUTHORITY LIKE SEBI AND ALL TRANSACTIONS LEAVE AUDI T TRAIL FOR VERIFICATION. 11. THAT THE LEARNED CIT (A) ERRED IN NOT FOLLOWING THE RULE OF STATUTORY INTERPRETATION ACCORDING TO WHICH WHER E TWO VIEWS ARE POSSIBLE, THE VIEW FAVORING THE ASSESSEE SHOULD BE ACCEPTED AS HELD IN CASE OF CIT VS. VEGETABLE PR ODUCTS LTD (88 ITR 192 S.C) AND CIT VS. JK HOSIERY FACTORY (159 ITR 85 S.C). 12. THAT THE LEARNED CIT (A) ERRED IN RELYING ON TH E DECISIONS IN CASE OF SUMATI DAYAL VS. CIT (214 ITR 801) AND MC DOWELL & COMPANY LTD VS. CTO (1986 AIR 649), WITHOUT APPRECIATING THE FACT THAT THE FACTS IN APP ELLANTS CASE ARE DIFFERENT FROM FACTS OF THESE CASES. 13. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR MO DIFY OR SUBSTITUTE ANY OTHER GROUNDS TO GROUNDS OF APPEAL A T ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL . 13. FOR THESE AND OTHER REASONS THAT MAY BE URGED A T THE TIME OF HEARING ADDITIONS MADE MAY BE DELETED AND APPEAL MAY BE ALLOWED. ITA NOS 1492 1494 1495 AND 1496 OF 2018 PK BUNG AND OTHERS HYDERABAD. PAGE 4 OF 6 2. AS REGARDS GROUNDS 2 TO 4 ARE CONCERNED, THE LEA RNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE RESPECT IVE ASSESSEES FILED THEIR RETURNS OF INCOME BY REPORTING THE LONG TERM CAPITAL GAINS ON SALE OF SHARES BUT CLAIMED IT AS EXEMPT FR OM INCOME TAX. MEANWHILE, THE DIRECTORATE OF INVESTIGATIONS, KOLKA TA CARRIED OUT A COUNTRY WIDE INVESTIGATION TO UNEARTH THE ORGANIZED RACKET OF GENERATING BOGUS ENTRIES OF LTCG WHICH IS EXEMPT FR OM THE INCOME TAX. AS PER THE SAID INFORMATION AVAILABLE, THE ASSESSEES ARE ALSO THE BENEFICIARIES OF THE ABOVE SCHEME. THE AO THEREFORE, WENT THROUGH THE RECORD AND FOUND THAT DURING THE F INANCIAL YEAR 2010-11 RELEVANT TO THE A.Y 2011-12, THE ASSESSEES BEFORE US, HAVE SOLD THE SHARES OF M/S. NCL RESEARCH & FINANCI AL SERVICES LTD (WHICH WAS IDENTIFIED AS A PENNY STOCK COMPANY) AND CLAIMED THE LTCG GAIN DERIVED FROM THE SAID TRANSACTIONS AS EXEMPT U/S 10(38) OF THE ACT. THE AO, THEREFORE, REOPENED THE ASSESSMENT U/S 147 BY ISSUANCE OF A NOTICE U/S 148 OF THE ACT. IN RESPONSE TO THE SAME, THE ASSESSEES FILED THEIR RETURNS OF INCOME A ND ALSO FILED A LETTER SEEKING REASONS FOR REOPENING OF THE ASSESSM ENT. THE AO DID NOT SUPPLY THE REASONS, BUT PROCEEDED TO COMPLE TE THE ASSESSMENTS BY DISALLOWING THE CLAIM OF EXEMPTION A ND BRINGING TO TAX THE LTCG. AGGRIEVED, THE ASSESSEES PREFERRED APPEALS BEFORE THE CIT (A), BY RAISING ADDITIONAL GROUND OF APPEAL THAT THE REASONS RECORDED FOR REOPENING OF THEIR ASSESSMENTS WERE NOT SUPPLIED TO THEM, INSPITE OF SPECIFIC REQUESTS MADE BY THEM. THE CIT (A), HOWEVER, CONSIDERED THE PROVISIONS OF SECT ION 292(B) OF THE ACT AND OBSERVING THAT SINCE THE ASSESSEES PART ICIPATED IN THE ASSESSMENT PROCEEDINGS AND HAVE NEVER RAISED ANY OB JECTION DURING THE ASSESSMENT PROCEEDINGS AND HAVE ALSO GIV EN THEIR SUBMISSIONS TO THE AO, THE ASSESSEES AWARE OF THE R EASONS FOR THE REOPENING AND THERE WAS NO VIOLATION OF ANY OF THE PROVISIONS. HE ITA NOS 1492 1494 1495 AND 1496 OF 2018 PK BUNG AND OTHERS HYDERABAD. PAGE 5 OF 6 ACCORDINGLY REJECTED THE ASSESSEES ADDITIONAL GROUN DS OF APPEAL AND PROCEEDED TO CONFIRM THE DISALLOWANCES MADE BY THE AO. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US BY R AISING THE ABOVE GROUNDS OF APPEALS. 3. THE LEARNED COUNSEL FOR THE ASSESSEES REITERATED THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE AUTHORI TIES BELOW WHILE THE LEARNED DR SUPPORTED THE ORDERS OF THE AU THORITIES BELOW. 4. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE RESPECTIVE ASSESSEES HA D ASKED FOR THE REASONS FOR REOPENING OF THE ASSESSMENT IN A LETTER DATED 13.10.2016 AND IT IS ALSO NOT IN DISPUTE THAT THE R EASONS FOR REOPENING WERE NOT SUPPLIED TO THE ASSESSEES. THE H ON'BLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFT INDIA L TD VS. ITO (259 ITR 19), HAS CLEARLY HELD THAT THE AO HAS TO S UPPLY THE REASONS FOR REOPENING OF THE ASSESSMENT TO THE ASSE SSEE, IF IT IS ASKED FOR, AND IF THE ASSESSEE FILED ITS OBJECTIONS TO THE SAID REASONS FOR THE REOPENING, THE AO HAS TO DISPOSE OF THE SAID OBJECTIONS BEFORE PROCEEDING TO COMPLETE THE ASSESS MENT. IN THE CASE BEFORE US, CLEARLY SUCH A PROCEDURE HAD NOT BE EN FOLLOWED BY THE AO AND EVEN BEFORE THE CIT (A), THE ASSESSEES H AVE NOT BEEN GIVEN THE COPY OF THE REASONS FOR REOPENING. DURING THE COURSE OF HEARING BEFORE US, THE LEARNED COUNSEL FOR THE ASSE SSEE SUBMITTED THAT BY VIRTUE OF THE RTI ACT, THE ASSESSEE HAS OBT AINED THE REASONS FOR REOPENING. SINCE THE ASSESSEES ARE ALR EADY IN POSSESSION OF THE REASONS FOR REOPENING, WE ARE OF THE OPINION THAT THE ASSESSEE SHOULD BE GIVEN AN OPPORTUNITY TO RAIS E THEIR ITA NOS 1492 1494 1495 AND 1496 OF 2018 PK BUNG AND OTHERS HYDERABAD. PAGE 6 OF 6 OBJECTIONS AGAINST SUCH REOPENING, IF THEY SO DESIR E. IN VIEW OF THE SAME, WE DEEM IT FIT AND PROPER TO SET ASIDE THE AS SESSMENT ORDER OF ALL THE ASSESSEES TO THE FILE OF THE AO WITH A D IRECTION TO ALLOW THE ASSESSEES TO FILE THEIR OBJECTIONS TO THE REASO NS FOR REOPENING AND UPON SUCH RECEIPT, SHALL DISPOSE OF THE OBJECTI ONS BY A SPEAKING ORDER AND THEREAFTER IF IT IS CONSIDERED N ECESSARY, TO COMPLETE THE ASSESSMENT PROCEEDINGS AFRESH, AFTER G IVING THE ASSESSEE A FAIR OPPORTUNITY OF HEARING BEFORE TAKIN G A DECISION. THE ASSESSEES SHALL BE GIVEN AN OPPORTUNITY TO PRES ENT ANY DOCUMENTS WHICH WERE RELEVANT TO THE CASE AND ARE N OT FILED EARLIER. 5. IN THE RESULT, THE ASSESSMENTS OF ALL THE FOUR A SSESSEES ARE SET ASIDE WITH THE ABOVE DIRECTIONS AND ALL THE APPEALS ARE TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH SEPTEMBER, 2018. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 19 TH SEPTEMBER, 2018. VINODAN/SPS COPY TO: 1 M/S.PK BUNG, GOVINDRAM BUNG & SONS (HUF), URMILA BUNG & KAUSHALYA DEVI BUNG, HOUSE NO.21-3-558/1/A, MOOSA B OWLI, CHELAPURA, HYDERABAD 500002 (TS) 2 ITO WARD 8(2) HYDERABAD 3 CIT (A) - 2, HYDERABAD 4 PR. CIT 2 HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER