Income Tax Officer Ward-1(3), RAIPUR V. Smt. Rachna Devi Sadhwani L/H of late Shri Kalyan Das Sadhwani, RAIPUR

ITA 15/BIL/2012

• Counselvise Citation: [NaN] 107 COUNSELVISE.COM (IT) 2047 (ITAT-RAIPUR)
• Duration Of Justice: 10 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2003-2004
• Appeal Filed On: 31-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 271(1)(c); 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 54F; 143(1); 250; 139(1)

Judgement Text

Page 1 of 8 आयकर अपीलीय Ɋायािधकरण, Ɋायपीठ रायपुर मŐ। IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR (Through Virtual Court at Pune) BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI JAMLAPPA D. BATTULL, ACCOUNTANT MEMBER आयकरअपीलसं. / ITA No. 15/BLPR/2012 िनधाŊरणवषŊ / Assessment Year : 2003-2004 Income Tax Officer, Ward 1(3), Raipur (C.G.) .......अपीलाथŎ / Appellant बनाम / V/s. Smt. Rachna Devi Sadhwani, L/H of Late Shri Kalyan Das Sadhwani A-3, Mahaveer Goushalla Complex, K.K. Road, Dist Raipur (C.G) PAN : AJGPS 9795 L ......ŮȑथŎ / Respondent Appearances Assessee by : None for the assessee Revenue by : Shri G.N Singh, CIT-DR सुनवाईकीतारीख / Date of conclusive Hearing : 01/02/2022 घोषणाकीतारीख / Date of Pronouncement : 03/02/2022 आदेश/ ORDER PER JAMLAPPA D. BATTULL, AM ; The present appeal is filed by the Revenue against the first appellate order of Commissioner of Income Tax - Appeals, Raipur[for short “CIT(A)”] passed u/s 250 vide order dt 14/11/2011, which in turn sprung from the assessment order [for short “AO”] dt 28/12/2010 passed for AY 2003-2004 by the Ld Assessing Officer [for short “Ld AO”] u/s 147 of the Income-tax Act, 1961 [for short “the Act”]. ITA No. 15/BLPR/2012 AY2003-2004 ITAT-Raipur Page 2 of 8 2. The solitary issue involved in the present appeal is the rejection of claim of long term capital gain [for short “LTCG”] arisen to the respondent assessee from a transfer stock/shares of listed company, on the cradle of departmental information gathered in relation to search operation u/s 132 carried out on the third party. 3. Before advancing the matter on facts for adjudication, it is essential to reproduce grounds assailed by the Revenue upon the approval u/s 253(2) vide order dt 27/01/2012 as under; “1. Whether in law and on facts & circumstance of the case, the CIT(A) has erred in deleting the addition of ₹ 10,45,804/- made by the A.O. u/s 68 of the I.T. Act, 19661 by rejecting the Long Term Capital Gain claim of the assessee” “2. The order of the Ld. CIT(A) is erroneous both in law and on facts” “3. Any other ground that may be adduced at the time of hearing” 4. Now its turn to state the facts of the case succinctly as; 4.1 The respondent assessee (deceased) was an individual and for AY 2003-2004 filed his personal Income Tax Return [for short “ITR/ROI”) u/s 139(1) on 31/03/2004 with a returned income of ₹64,556/- comprising of income from house property and income from other sources in the form of interest etc., and the long term capital gain [for short “LTCG”] arisen to him on transfer of listed shares/security with a with a claim of exemption u/s 54F. The said return was accepted u/s 143(1) of the Act. Subsequently the Ld AO reopened the case on the basis of the certain information received from ITO Ward 1(2), Kota that, during the course of search action u/s 132 carried on the directors of the company M/s S. J. Capital Ltd. through which the shares were bought & sold and drafts consideration were received by the respondent assessee and he had admitted that, such drafts issued to the respondent were accommodation entries, holding to which the Ld AO ITA No. 15/BLPR/2012 AY2003-2004 ITAT-Raipur Page 3 of 8 has passed an assessment order u/s 147 rejecting the claim of LTCG and assessed the gain u/s 68 of the Act. 4.2 Aggrieved by the aforesaid order of assessment, the respondent assessee filed an appeal before the Ld CIT(A) challenging the action of Ld AO, wherein the Ld CIT(A) considering the facts and evidential material laid during the course of assessment proceedings, overturned the assessment order in its entirety. 4.3 Against this first appellate order, the Revenue is before us. Albeit the tax effect in the present case falls below the monetary limit prescribed by the CBDT vide Circular 17/2019, the department persuading the appeal on revenue audit objection, holding the same as falling under exception. 5. In this backdrop, we now first proceed with an assessment order; 5.1 On 30/03/2001 the assessee had purchased 10,000 shares of M/s Tech DNA Solutions Ltd., a listed company on Recognized Stock Exchanges, at the rate ₹6.10 inclusive of brokerage @ ₹0.10 per share through registered share broker namely M/s S. J. Capital Limited wherein the account of the broker was settled by payment in cash and the delivery of the shares was taken in physical form and same were sold on 23/01/2003 at the net rate of ₹104.80 per share, after deduction of brokerage @ ₹0.20 per share, net under a written contract notes issued by the broker for the transaction so executed and the net sales consideration of ₹10,45,804/- (after bank/draft charges) were credited to the bank account of the respondent. This transaction resulted into LTCG of ₹9,81,744/- against which the exemption u/s 54F was claimed in the ITR. 5.2 The Ld AO doubted the share transaction on the information from the ITO Ward 1(2), Kota to the effect that, certain investigation was carried out by the Deputy Director of Income Tax, Investigation [for short “DDIT(Inv)”], New Delhi ITA No. 15/BLPR/2012 AY2003-2004 ITAT-Raipur Page 4 of 8 on the directors of the share broker company M/s S. J. Capital Ltd. and the concerned director had admitted that, they had provided accommodation entry to the extent of ₹10,45,804/- (being the net consideration) in the garb of LTCG and founding thereupon the Ld AO directed the respondent to produce the director of broker company to ascertain the veracity of the facts and also caused the production of bank statement, computation of income, capital account and balance-sheet for the relevant AY. 5.3 In compliance thereof, the respondent through the authorised representative [for short “AR”] made submission before the Ld AO and concurrently sought an opportunity to cross examine the material forming basis of reopening for rebuttal. Considering the submission, the Ld AO drawn following inference at Para 5 on page 5 of the AO; “5. In view of the reply submitted as above, following facts and interference can be drawn:-Entries are broadly taken for two purposes: i) To plough back unaccounted money for the purpose of business or for personal needs such as purchase of assets, etc. in the form of gifts, share application money, Loans etc. ii) To inflate expenses in the trading & P & L A/c. so as to reduce the real profits and thereby pay less taxes” 5.4 Underlying the observation as regards to fact of purchase of shares in cash, statements and affidavits obtained of search party and failure on the part of the respondent assessee to produce the confirmation letter from the broker company, the Ld AO rejected the claim of LTCG and carried out the assessment by an addition of the same u/s 68 and assessed the total income at ₹11,10,360/- u/s 147. Also initiated the penalty proceedings u/s 271(1)(c) of the Act for furnishing inaccurate particulars of income. ITA No. 15/BLPR/2012 AY2003-2004 ITAT-Raipur Page 5 of 8 6. On an appeal by the assessee, the Ld CIT(A) while adjudicating the matter in favour of the respondent has made categorical findings/observation with respect to brushing aside the evidential material produce, failure on the part of the Ld AO to establish any nexus between the statement of search party and the LTCG transaction which is clearly discernible from the relevant Para 4 of the said appellate order; “4. The A.O. proceeded to complete the assessment u/s 147 by rejecting the documentary evidence in support of the shares purchases and sales and the explanations of the appellant. The LTCG claim was rejected and the income was assessed under section 68. The Assessing Officer has referred to Annexure ‘S’ in his order which are copies of statement and affidavit of one Mr Mahesh Garg recorded at New Delhi by investigation Wing during the year 2004. In his statement and affidavit, Mr. Mahesh Garg has admitted that he is an entry operator and had explained his modus operandi and also named certain parties to whom he has provided accommodation entries. However, he has not mentioned the names of either the appellant or M/s S. J. Capital Ltd. the share broker. The Assessing Officer has not established any nexus between the aforesaid statement and the LTCG transaction of the appellant which is the subject matter of the assessment.” 7. The Ld CIT(A), in the absence of any adverse finding as regards to receipt of sales proceeds of listed shares through bank drafts, any fault with the legal evidences produced during the course of assessment proceedings, failure to conduct independent enquiries and solely relying on search material etc., disapproved the action of Ld AO in holding the transaction as bogus/sham and consequent addition u/s 68, ergo granted the relief to the respondent. 8. Against the grant of relief to the assessee by Ld CIT(A), the Revenue is in appeal before Tribunal with the grounds of appeal set at Para 3 hereinbefore. 9. We have heard the rival contention of both the parties; perused material placed on record and duly considered the facts of the case in the light of legal ITA No. 15/BLPR/2012 AY2003-2004 ITAT-Raipur Page 6 of 8 position. The facts of the case remained undisputed before the lower authorities that, the assessee indeed carried out purchase and sales of shares of listed company namely “M/s Tech DNA Solution Ltd” through the broker company M/s S. J. Capital Ltd., New Delhi under the valid contract notes issued to him and admittedly the sales proceeds were credited to the bank account. A perusal of the assessment order it clearly shows that, the Ld AO was carried away by the departmental information gathered of search action undertaken on one of the director of the broker company by the DDIT (Inv). It can further be seen from the records that the entire assessment has been framed without conducting any independent and separate enquiry from the relevant parties or sources, but has merely relied upon the third party affidavit and statements recorded by the DDIT(Inv) without confronting them to the assessee for cross examination or rebuttal. 10. On a careful perusal of copy of statement and affidavit of search party namely Mr Mahesh Garg in which certain parties have been named to whom he had provided accommodation entries, we concur with the observation of Ld CIT (A) that, neither the name of respondent assessee nor of the share broker company was referred in such statement/affidavit. Thus except for some vague information, the Ld AO did not had any findings or material on record to conclude that the funds available with the share broker for issue of bank drafts were attributable to the respondent assessee. 11. The appellant had produced legal evidences in support of his claim of LTCG earned or derived, which were not denied by the Ld AO, however was suspicious about the LTCG transaction on the basis of information received from the ITO Ward 1(2), Kota. It transpired from the assessment order that, he did not bring on record any legal proof in support of his action. There may be staggering spike in the stock/share price and other anecdotal factors may be enough to showcase the circumstances that might create a suspicion during the course of assessment ITA No. 15/BLPR/2012 AY2003-2004 ITAT-Raipur Page 7 of 8 proceedings; however the tax authorities are to decide an issue on the basis of cogent evidence and tangible proof but not on unaided suspicions and is settled law that, suspicion howsoever strong cannot replace the legal proof as laid by the Hon’ble Supreme Court in the case of Umarchand Shaw & Brothers Vs CIT 37 ITR 271. 12. There is no dispute that the statements which were relied by the Ld AO were not at all recorded in the course of assessment proceedings before him, but they were pre-existing statements recorded by the Investigation Wing, however the same solely cannot form the basis for making an addition in the absence of proper enquiry and examination. In our considered opinion, Ld AO neither brought on record any deprecative proofs against the evidences produced by the assessee nor confronted to the respondent the every basis relied upon for cross examination, nor conducted any independent enquiries, therefore following the ratio laid down by the Hon’ble Delhi High Court in the case of PCIT Vs Smt Krishan Devi (ITA No 130/2020) and conjunctly upon the judgement of Hon’ble Supreme Court in the case of Andaman Timber Industries 281 CTR 214 (SC), we do not find any merits in the assessment order. 13. Considering the entire conspectus of case, we find no virtues in the assessment order; consequently there remained no iota of doubt in upholding the order of Ld CIT(A) with no infirmity. 14. Resultantly, the appeal of the revenue is dismissed, with no order as to cost. Order pronounced on this Thursday 3 rd day of February, 2022. Sd/- Sd/- (RAVISH SOOD) (JAMLAPPA D. BATTULL) JUDICIAL MEMBER ACCOUNTANT MEMBER रायपुर/ RAIPUR ; िदनांक / Dated :3 rd February, 2022 ITA No. 15/BLPR/2012 AY2003-2004 ITAT-Raipur Page 8 of 8 आदेश की Ůितिलिप अŤेिषत / Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant. 2. ŮȑथŎ / The Respondent. 3. The CIT (Appeals), Raipur (C.G) 4. The Pr. CIT, Raipur (C.G) 5.िवभागीयŮितिनिध,आयकरअपीलीयɊायािधकरण,रायपुरबŐच, रायपुर / DR, ITAT, Raipur Bench, Raipur. 6. गाडŊफ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // िनजीसिचव / Private Secretary आयकरअपीलीयअिधकरण, रायपुर / ITAT, Raipur. Sr Event Occurrence Date Attributes 1 Draft dictated on 01/02/2022 Sr.PS/PS 2 Draft placed before author 02/02/2022 Sr.PS/PS 3 Draft proposed and placed before the second Member JM/AM 4 Draft discussed/approved by second Member AM/JM 5 Approved draft comes to the Sr. PS/PS Sr.PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the Asstt Registrar 11 Date of dispatch of order