DCIT CIR-3(1), JAMSHEDPUR V. M/S YASH INFRATECH PRIVATE LIMITED , JAMSHEDPUR

ITA 155/RAN/2017

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 8770 (ITAT-RANCHI)
• Duration Of Justice: 5 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 23-08-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 05-07-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital asset
• Section: 131; 143(3); 250; 143(2)

Judgement Text

आयकर अपीलीय अधिकरण र ांची 'डीबी' पीठ, कोलक त म ें IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI ‘DB’ BENCH AT KOLKATA [वच च ु अल कोर् ु ] [Virtual Court] श्री सांजय गग ु , न्य धयक सदस्य एवां डॉ. मनीष बोरड, ल े ख सदस्य क े समक्ष Before SRI SANJAY GARG, JUDICIAL MEMBER & DR. MANISH BORAD, ACCOUNTANT MEMBER I.T.A. No.: 155/Ran/2017 Assessment Year: 2014-15 DCIT, Circle-3(1), Jamshedpur..................................Appellant Vs. M/s. Yash Infratech (P) Ltd....................................Respondent [PAN: AAACY 3093 J] Appearances by: Sh. Pranob Kumar Koley, Sr. D/R, appeared on behalf of the Revenue. Sh. Rahul Saboo, A/R, appeared on behalf of the Assessee. Date of concluding the hearing : August 24 th , 2022 Date of pronouncing the order : November 9 th , 2022 आद े श ORDER Per Manish Borad, Accountant Member: This appeal filed by the Revenue pertaining to the Assessment Year (in short “AY”) 2014-15 is directed against the I.T.A. No.: 155/Ran/2017 Assessment Year: 2014-15 M/s. Yash Infratech (P) Ltd. Page 2 of 11 order passed u/s 250 of the Income Tax Act, 1961 (in short the “Act”) by ld. Commissioner of Income-tax (Appeals), Jamshedpur [in short ld. “CIT(A)”] dated 27.04.2017 which is arising out of the assessment order framed u/s 143(3) of the Act dated 30.12.2016. 2. The Revenue is in appeal before this Tribunal raising the following grounds of appeal: “1. Under the facts and circumstances of the case, whether the Ld. CIT(A) is justified in overlooking the facts and investigation done by the Assessing officer i.e. factual data collected from Bombay Stock Exchange, repetitnransaction with few PAN's and statement given by the company operator and director. 2. Under the facts and circumstances of the case, whether the Ld. CIT(A) is justified in overlooking the statement recorded under section 131 of I.T.Act, 1961 of Shri Raj Kumar Agarwal, Director of the assessee company in which he confirmed and accepted that the short term capital loss was bogus. 3. Under the facts and circumstances of the case, whether the Ld. CIT(A) is justified on focusing at the sentence that "he was successful in bringing back his own accounted cash into his books" and ignoring the fact that the same was a typographical error or irrelevant sentence where the essence of the assessment order to prove or establish that the assessee has planned his transaction in such a way where tax evasion was the prime motto. 4. Under the facts and circumstances of the case, whether the Ld. CIT(A) is justified in making observation that Assessing officer has not given any opportunity for cross examination but fully relied on investigation wing's report and also has not conducted any independent enquiry before making addition. 5. Under the facts and circumstances of the case, whether the Ld. CIT(A) is justified in overlooking the independent enquiry conducted by the Assessing officer which is the part of the assessment order in which various issues regarding enquiries have been mentioned. 6. Any other grounds of appeal during the course of hearing.” I.T.A. No.: 155/Ran/2017 Assessment Year: 2014-15 M/s. Yash Infratech (P) Ltd. Page 3 of 11 3. Brief facts of the case as culled out from the records are that the assessee is a private limited company engaged in real estate business. Income of Rs. 96,52,485/- declared in the return of income for AY 2014-15 on 27.11.2014. Case selected for limited scrutiny through CASS followed by serving of notices u/s 143(2) & 142(1) of the Act. During the course of assessment proceedings ld. AO observed that during the year the assessee has claimed Short Term Capital Loss from sale of equity shares amounting to Rs. 1,86,25,766/- and the same has been set off against the Long Term Capital Gain at Rs. 2,98,39,449/- earned during the year. Ld. AO further, noticed that the assessee was in the real estate business and has never made any investment in the equity shares and the Short Term Capital Loss incurred from purchase/sale of shares was of the companies which were found to be penny stock companies and the alleged Short Term Capital Loss was the one which was arranged in the form of accommodation entry by the assessee through entry providers/company traders so as to reduce tax liability. Though the assessee made various submissions but they were not found to be satisfactory as ld. AO apart from referring to various documents and statements, noticed that Short Term Capital Loss are merely arranged and are in the form of colourable device to evade the tax and also referred to the statement of the assessee wherein it has been accepted that bogus Short Term Capital Loss has been arranged. Accordingly, the claim of set off of Short Term Capital Loss at Rs. 1,86,12,793/- was denied and income assessed at Rs. 2,82,65,279/-. 4. Aggrieved, the assessee preferred appeal before ld. CIT(A) and succeeded in getting relief as ld. CIT(A) held that ld. AO did not I.T.A. No.: 155/Ran/2017 Assessment Year: 2014-15 M/s. Yash Infratech (P) Ltd. Page 4 of 11 find the transactions bogus and even if it is manipulated affair, the genuineness must be proved ingenuine before making any addition. 5. Aggrieved, the Revenue is now in appeal before this Tribunal. Ld. D/R vehemently argued supporting the detailed finding of ld. AO and further took us through various observations made by ld. AO about the companies in regard to which the assessee incurred huge losses in the purchase and sale transactions of equity shares. Ld. D/R also referred to the modus operandi of the entry operators and other accommodation entry providers which dealt in penny stock companies of which the share prices are manipulated firstly rise from very low to very high prices and then the prices drastically decrease and there is no nexus of any business activity of the particular company. It is also submitted that the Director of the company has himself accepted on both u/s 131 of the Act that the alleged Short Term Capital Loss of Rs. 1,86,12,793/- is bogus. 6. Per contra ld. Counsel for the assessee apart from placing heavy reliance on the finding of ld. CIT(A) also referred to the following written submission: “That the instant appeal has been filed by the appellate assailing the order dated 27.04.2017 passed in Appeal No.89/JSR/2016-17 by Commissioner of Income Tax, Appeal. Facts of the case: # That the period in dispute is 2014-15. # Income declared by the assessee (respondent) Rs. 9652490/-. # Return of income computed by the Assessing Officer Rs. 28265280/-. # Date of filing of Income Tax Return is 27.11.2014. I.T.A. No.: 155/Ran/2017 Assessment Year: 2014-15 M/s. Yash Infratech (P) Ltd. Page 5 of 11 # The Assessee Company/Respondent is engaged in Real Estate business. Respondent in its return of income has claimed short-term capital loss on sale of shares of the following companies namely: (a) M/S Shreen Shaleen Textile Ltd. (b) M/S Ruton International Ltd. (c) M/S Grandmark (d) M/S Wagned Infra Venture # Department has done the scrutiny assessment of the assessee/respondent in the light of the fact that Directorate of Investigation, Kolkata carried out country wide investigation to unearth the organised racket of generating bogus entries of long term capital gain which is exempt from tax. # In this context the Directorate of Investigation, Kolkata carried out detailed inquiry throughout the country to unveil the cartel which included share brokers/broking companies, entry operators, promoters of the said company and the beneficiaries thereof. # In the instant case the department has alleged that the assessee has incurred short term capital loss which is not a natural one but an organised one. # The department has also alleged direct and circumstantial evidence against the assessee but has not been able to prove the same beyond all reasonable doubt. # In light of the aforesaid the appellants have done the scrutiny assessment of the respondents/assessee and in the scrutiny assessment it was alleged by the department, the following: (i) The assessee/respondent co. purchased shares despite the fact that the company was not having the substantial profit. (ii) The respondent co. is novice in share market and there is no substantial share transaction made by them in the earlier year. (iii) Since the financial results of the company in which the respondent/assessee has made the investment was not splendid one. And therefore, the entire transaction entered into by the respondent co./assessee was considered as the pre-determined one. # The Appellate Department in the assessment proceedings has added the entire short term capital loss incurred by the I.T.A. No.: 155/Ran/2017 Assessment Year: 2014-15 M/s. Yash Infratech (P) Ltd. Page 6 of 11 respondent/assessee to its income and determined the total taxable income as 2,82,65,280/-. # Being aggrieved by the assessment order passed for the year 2014- 15 the assessee had preferred an appeal before the Commissioner of Income Tax (Appeal). # The CIT Appeal vide its order dt.27.04.2017 passed in Appeal No.89/JSR/2016-17, had allowed the appeal preferred by the respondents. # The Income Tax department against the order passed by CIT Appeal dated 27.04.2017 had preferred an instant appeal on several grounds. Arguments of the Assessee/Respondents in support of the order dated 27.04.2017 passed in Appeal NO.89/JSR/2016-17. (i) The entire additions of short term capital loss has been made by the department on the basis of conjectures surmises, suspicions and also on the basis of third party statement despite the fact that the assessee has furnished all the documents pertaining to the share transaction which has not been denied and disputed by the assessing officer. (ii) The Appellant/ Department/Assessing Officer has not disputed the documents furnished by the assessee/respondents at the time of scrutiny assessment i.e. demat accounts, demat statements, delivery statements, banking transaction records etc. (iii) The Ld. CIT(Appeal) has rightly considered the contention of the assessee in which it was accepted that there was no reason to doubt the genuineness of transaction made in the scripts as they were made through recognised trading platform were one can only see the price and quantity of shares and not the details of purchaser. (iv) The Ld. Assessing Officer in the scrutiny assessment or before the Ld. CIT Appeal has not brought on records any materials to support its findings that there was a connivance of the assessee with share broker for entering into such transaction. Meaning thereby sale and purchase of shares are through valid contract notes and are supported by Demat statements and account paying cheques. Thus such transaction cannot be considered and termed as bogus entries. (v) The assessing officer during the scrutiny assessment has made the additions merely on the basis of presumption and suspicion. I.T.A. No.: 155/Ran/2017 Assessment Year: 2014-15 M/s. Yash Infratech (P) Ltd. Page 7 of 11 (vi) There was no cogent materials and evidence brought on record by the assessing officer which could prove that the documents submitted by the assessee namely contract notes, demat accounts, bank statement, broker notes, share certificate, demat statements, were false and fabricated. (vii) The genesis of scrutiny assessment was on the basis of information received from the investigating wing that there are large of manipulations in the sale and purchase of shares but no such report was ever brought on record by the department. (viii) During the scrutiny assessment it was contended by the department that there was enquiries made against several companies but the department had failed to bring on record the name of brokers. (ix) During the scrutiny assessment proceedings the evidences produced by the assessee was not independently verified by the department and in absence thereof the disallowance of short term capital loss is unlawful and it can be termed as the decision taken by the department on the basis of conjectures and surmises. (x) That the scrutiny assessment the department has taken the statement of various persons i.e. the brokers who have become the witnesses of the department. These statements were recorded behind the back of assessee. No opportunity of cross examination was afforded to the assessee. Further the brokers were also not confronted with the evidences produced by the assessee. In absence of the aforesaid the addition of short term capital loss is illegal and arbitrary. (xi) The Assessee has entered into transaction with one M/S Gautam Kumar Agriharhi who is member of Calcutta Stock Exchange. The assessing officer has not raised any doubt him. Further he was not examined by the investigating team and assessing officer and in absence thereof the entire proceedings by the assessing officer on the pretext of investing in penny stock and coming to a conclusion that the transactions is a pre-determined one is bad in law.” 7. We have heard rival contentions and perused the records placed before us. Though the Revenue has raised various grounds of appeal but the grievance in short is against the finding of ld. CIT(A) deleting the addition made by ld. AO treating the Short Term Capital Loss from sale of shares at Rs. 1,86,12,793/- as ingenuine I.T.A. No.: 155/Ran/2017 Assessment Year: 2014-15 M/s. Yash Infratech (P) Ltd. Page 8 of 11 and bogus and secondly, Revenue has also challenged the finding of ld. CIT(A) holding that ld. AO has not given any opportunity for cross-examination. We observe that the assessee company is in real estate business. During the year, on account of sale of a capital asset, the assessee earned Long Term Capital Gain at Rs. 2,98,39,449/-. In the instant year itself, the assessee has claimed to have incurred Short Term Capital Loss from the sale of equity shares amounting to Rs. 1,86,25,766/-. Now, genuineness of this Short Term Capital Loss is in challenge before us. 8. We find that the assessee was not into the field of purchase and sale of shares in the past. Ironically, the equity shares of the companies in which it traded/made transactions of purchase and sale have all resulted into losses. The observations of ld. AO are worth noting that in one of the companies i.e. M/s. Wagend Infra Ventures Ltd., in which the assessee incurred loss of Rs. 16,31,392/-, from the financials of these companies, it was notice that the price of the equity shares initially sky rocketed without having any reasonable profits, earning per share, bonus, dividend and thereafter there was a sudden fall in the prices. The Investigation Wing of the Income Tax Department, Kolkata carried out investigations about the role of the brokers in this entire process and it was found that when the prices are manipulated to increase, beneficiaries are provided the short term/long term capital gain accommodation entry and when the prices decrease then at that time those people who require bogus Short Term Capital Loss to evade taxes by setting such losses against the actual gains, then such accommodation entry in the form of Short Term Capital Loss are provided by such entry operators/brokers I.T.A. No.: 155/Ran/2017 Assessment Year: 2014-15 M/s. Yash Infratech (P) Ltd. Page 9 of 11 to the beneficiaries who want to reduce their tax liability. The observations of ld. AO are further, note worthy that similar type of trend was found in the case of other companies in which the assessee company has done purchase and sale and has incurred losses. In the assessment order, ld. AO has reproduced the trading pattern of such companies in which the assessee has done sale/purchase transactions and perusal of the same shows that there is no difference in time of placing the order and time of order execution. Normally when a person wants to purchase the share it registers its request on the portal and as and when the seller is available and the price at which the transaction is to be finalised is agreed then the purchase/sale transaction is completed. However, looking to the data of purchase and sale of shares by the assessee shows that trades have been executed with mutual understanding by placing simultaneous synchronized orders. Also the successful hitting of orders placed for large volume of shares indicates that the buyers is in coalition with the assessee and such Short Term Capital Loss is arranged. 8.1. Further, we also find that the Directors of the assessee company Mr. Raj Kumar Agarwal in the statement given u/s 131(1A) of the Act on 10.06.2015 has himself accepted that Short Term Capital Loss of Rs. 1,86,12,793/- is bogus and the statement was recorded before the DDIT (inv.), Jamshedpur. It has been categorically accepted by Mr. Raj Kumar Agarwal, Director of the assessee company that bogus Short Term Capital Loss has been arranged by dealing in the scrips of M/s. Shree Shaleen Textiles Ltd., M/s. Rutron International Ltd. and M/s. Wagend Infra Ventures Ltd. All the above-described facts stand unrebutted. I.T.A. No.: 155/Ran/2017 Assessment Year: 2014-15 M/s. Yash Infratech (P) Ltd. Page 10 of 11 8.2. On the other hand, ld. Counsel for the assessee has made general submissions that the Department has not been able to prove that there are direct and circumstantial evidence against the assessee and the said additions made by ld. AO are merely on the basis of conjectures, surmises, suspicion and on the basis of third party statement. We, however, fail to find any merit in these contentions made by ld. Counsel for the assessee and also find that the judgments referred and relied are not applicable on the facts of the case. The detailed documented finding of ld. AO provides complete details of the racket of the entry operators and accommodation entry providers of providing bogus Long Term Capital Gain/Short Term Capital Loss to various beneficiaries from trading in the scrips of penny stock paper companies which are having no regular business activity and the prices of such companies on the stock exchange are manipulated. The statement of the assessee itself adds to the correctness of the finding of ld. AO wherein it has been accepted that the assessee has arranged bogus Short Term Capital Loss which has been set off against the Long Term Capital Gain for reducing tax liability. 9. We, therefore, under the given facts and circumstances of the case, are of the considered view that this entire Short Term Capital Loss of Rs. 1,86,12,793/- claimed by the assessee is bogus and arranged through accommodation entry providers for reducing the tax liability arising from the Long Term Capital Gain from sale of land. The alleged transactions of arranging Short Term Capital Loss is basically a colourable device which cannot be treated as a part of the tax planning and it will be wrong to encourage or entertain such dubious method of evading the tax. We, therefore, I.T.A. No.: 155/Ran/2017 Assessment Year: 2014-15 M/s. Yash Infratech (P) Ltd. Page 11 of 11 fail to find any merit in the finding of ld. CIT(A) and hold that the claim of the assessee of Short Term Capital Loss is not genuine as assessee had himself accepted on oath to have arranged such bogus Short Term Capital Loss. We, therefore, confirm the finding of ld. AO disallowing the set off of Short Term Capital Loss. Thus, grounds raised by the Revenue are allowed. 10. In the result, the appeal filed by the Revenue is allowed. Kolkata, the 9 th November, 2022. Sd/- Sd/- [Sanjay Garg] [Manish Borad] Judicial Member Accountant Member Dated: 09.11.2022 Bidhan (P.S.) Copy of the order forwarded to: 1. DCIT, Circle-3(1), Jamshedpur 2. M/s. Yash Infratech (P) Ltd., 67-1/3, Birenu Trade Centre, Pennar Road, Sakchi, Jamshedpur-834 007. 3. CIT(A), Jamshedpur. 4. CIT- 5. CIT(DR), Ranchi Bench, Ranchi. True copy By order Assistant Registrar ITAT, Kolkata Benches Kolkata