MEHUL KRISHNKANT MEHTA, MUMBAI V. ACIT 29(2) , MUMBAI

ITA 1654/MUM/2022

AI Insights

The case involves Mehul Krishnakant Mehta, who appealed against the order of the National Faceless Appeal Centre (NFAC), which confirmed the action of the Assessing Officer (AO) in treating the proceeds from the sale of shares as unexplained cash credit under section 68 of the Income Tax Act, and consequently denying exemption of long-term capital gain under section 10(38). The AO had based his decision on suspicions of the transactions being make-believe and lacking genuineness, influenced by investigations into similar transactions involving various operators and intermediaries. The CIT(A) upheld the AO's decision, leading to Mehta's appeal to the Tribunal. The Tribunal noted that the CIT(A) had not adequately considered the documentary evidence provided by Mehta, which supported the genuineness of the transactions.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 299181 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 12-10-2022
• Assessment Year: 2015-2016
• Appeal Filed On: 22-06-2022
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Capital Gains; Bogus
• Section: 68; 69C; 143(3); 142(1); 234B; 250; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA No. 1654/Mum/2022 (A.Y: 2015-16) Mehul Krishnakant Mehta Shop No. 24, Sharmila Apartments, Model Town, Mulund (W), Mumbai – 400080. Vs. ACIT, Circle – 29(2) Room No. 202, C-10, 2 nd Floor BKC, Bandra (E), Mumbai – 400051. ./ज आइआर ./PAN/GIR No. : AACPM6130D Appellant .. Respondent Appellant by : Shri. Ravi Swarna.AR Respondent by : Shri. Suresh Periasamy.DR Date of Hearing 13.10.2022 Date of Pronouncement 30.12.2022 आद श / O R D E R PER PAVAN KUMAR GADALE JM: The assessee has filed the appeal against the order passed by the National Faceless Appeal Centre (NFAC), Delhi / CIT(A) passed u/s 250 of the Act. The assessee has raised the fallowing grounds of appeal: 1. That on the facts and circumstances of the case as well as law, the NFAC erred in confirming the action of the Learned Assessing Officer ("Ld. AO") in treating the proceeds amounting to Rs. 99,72,951/- on sale of shares of M/s. Parag Shilpa Investment Ltd. as ITA No. 1654/Mum/2022 Mehul Krishnkant Mehta, Mumbai. - 2 - unexplained cash credit u/s. 68 of the Act and consequently denying exemption of long-term capital gain of Rs. 97,38,148/- u/s. 10(38) of the Act on the alleged ground that transaction entered into by the Appellant are make-believe transactions, lack genuineness and character of commercial nature. The Appellant therefore prays that the action of the Ld. AO in treating the sale consideration on sale of shares of M/s. Parag Shilpa Investment Ltd. be held as bad in law and consequently, the addition made by the Ld. AO is liable to be deleted. 2. That on the facts and circumstances of the case as well as law, the NFAC erred in confirming the action of the Ld. AO in treating the proceeds amounting to Rs. 99,72,951/- on sale of shares of M/s. Parag Shilpa Investment Ltd. as unexplained cash credit u/s. 68 of the Act and consequently denying exemption of long- term capital gain of Rs. 97,38,148/- claimed under section 10(38) of the Act on the alleged ground that purchase of shares of M/s. Swift IT Infrastructure & Services Ltd. (which later merged with and into M/s. Parag Shilpa Investment Ltd.) was a predetermined move to bring back unaccounted money and pre- arranged method to evade taxes and launder money. The Appellant therefore prays that the observations made by the Ld. AO be held as merely based on the basis of suspicion, conjectures and surmises, without the support of any concrete evidence against the Appellant for reaching to this conclusion. as he has failed to find any ITA No. 1654/Mum/2022 Mehul Krishnkant Mehta, Mumbai. - 3 - fault with the ample documentary evidence produced in support of purchase and sale of shares. Consequently, the addition made by the Ld. AO is liable to be deleted. 3. That on the facts and circumstances of the case as well as law, the NFAC erred in confirming the action of the Ld. AO in treating the proceeds amounting to Rs. 99,72,951/- on sale of shares of M/s. Parag Shilpa Investment Ltd. as unexplained cash credit u/s. 68 of the Act and consequently denying exemption of long- term capital gain of Rs. 97,38,148/- claimed under section 10(38) of the Act by relying on the findings of the search survey, inquiries conducted on brokers, operators and the entry providers. The Appellant therefore prays that the action of the Ld. AO in relying on the findings of the search survey as well as inquiries conducted on brokers, operators and entry providers, without bringing on record any document relating to the Appellant or any material to show any specific infirmity or falsity in relation to explanations furnished by the Appellant, be held as bad in law and consequently, the addition made by the Ld. AO is liable to be deleted. 4. That on the facts and circumstances of the case as well as law, the lower authorities erred in not appreciating the documents, explanation and evidence produced in support of purchase and sale of shares by the Assessee and thereby treating the LTCG on sale of shares as bogus transaction. ITA No. 1654/Mum/2022 Mehul Krishnkant Mehta, Mumbai. - 4 - The Appellant therefore prays that the action of the NFAC in confirming the order of the Ld. AO, be held as bad in law. 5. That on the facts and circumstances of the case as well as law, the NFAC erred in confirming the action of the Ld. AO in treating the sale consideration amounting to Rs. 99,72,951/- as unexplained cash credit u/s. 68 of the Act and consequently, denying exemption u/s. 10(38) of the Act on the alleged ground that transactions carried out by the Appellant are not genuine. 6. The Appellant therefore prays that the lower authorities have failed to prove the role of the Appellant in the artificial price rigging of the shares of the investee company held by it and therefore, the findings drawn thereon are bad in law and liable to be quashed The Appellant therefore prays that the lower authorities erred in relying on the general, vague and unauthenticated statement of Shri Sajjan Kedia who did not make any specific statement against the Appellant to say that the transaction entered into by the Appellant were sham/ bogus transaction and the hence, the impugned addition is unjustified. 7. That on the facts and circumstances of the case as well as law, the NFAC erred in confirming the action of the Ld. AO in treating the sale consideration amounting to Rs. 99,72,951/- as unexplained cash credit u/s. 68 of the Act and consequently, denying exemption u/s. 10(38) of the Act on the alleged ground that transactions carried out by the Appellant are not genuine. The Appellant therefore prays that the broker/operator involved in the transaction are un- related parties, and ITA No. 1654/Mum/2022 Mehul Krishnkant Mehta, Mumbai. - 5 - therefore the genuineness of the transaction cannot be questioned. 8. That on the facts and circumstances of the case as well as law, the lower authorities has erred in relying upon the decisions to support the contention that the long-term capital gains arising to the Appellant is a bogus, sham and colourable device. The Appellant therefore prays that the decisions relied upon by the lower authorities are distinguishable on facts and hence cannot be applied in the case of the Appellant. 9. That on the facts and circumstances of the case as well as law, the NFAC erred in confirming the action of the Ld. AO in making addition on account of unexplained expenditure of Rs. 2,49,323/- under section 69C of the Act for alleged commission payment for procuring the alleged unexplained income. The Appellant therefore prays that the addition made u/s. 69C of the Act is liable to be deleted as it did not incur any expenditure in the nature of commission. 10. That on the facts and circumstances of the case as well as law, the NFAC erred in confirming the action of the Ld. AO in levying interest u/s. 234B and 234C of the Act. The Appellant therefore prays that the levy of interest u/s. 234B and 234C of the Act, be deleted. 11. The Appellant craves leave to, add to, alter, amplify, modify or delete all or any of the aforesaid grounds at or before the hearing. ITA No. 1654/Mum/2022 Mehul Krishnkant Mehta, Mumbai. - 6 - 2. The brief facts of the case are that the assessee is an individual and is engaged in business and derives income from business and profession, capital gain and income from other sources. The assessee has filed the return of for the A.Y 2015-16 on 23.09.2015 disclosing a total income of Rs.35,63,400/-. Subsequently, the A.O. has issued notice u/s 143(2) and 142(1) of the Act along with questionnaire. In compliance to the notice, the Ld. AR of the assessee appeared from time to time and filed the details and the case was discussed. On perusal of the information, the AO found that the assessee has claimed exemption of long term capital gains of Rs. 97,38,148/- in the return of income. The assessee was called for the details of long term capital gains in respect of the shares of M/s Parag Shilpa Investment Ltd. In response, the assessee vide letter dated 22.11.2017 filed the details of long term capital gains in on sale of shares of M/s. Parag Shilpa Investments Ltd and was claimed exempted u/s 10(38) of the Act. Whereas the AO has received information from Kolkata Investigation Directorate that 84 penny stocks including M/s Parag Shilpa Investments Ltd as ITA No. 1654/Mum/2022 Mehul Krishnkant Mehta, Mumbai. - 7 - one of the beneficiary has been treated as bogus transactions involving various operators, intermediaries and the beneficiaries and investigation. The AO is suspicious on the facts of earning long term capital gains and dealt on the information in respect of purchase of shares, amalgamation and the analysis of scrip, sale, purchases and trading of scrip and the investigation report of the operators. The AO is of the opinion that it is not a regular transaction and there are number of operators involved and the AO has recorded the statement of the assessee. Finally the AO having dealt on the statement, factual information and investigation report has denied the claim of long term capital gains exemption and made an addition u/s 68 of Rs.99,72,951/-and also commission u/s 69C of the Act of Rs. 2,49,323/- and assessed the total income of Rs.1,37,85,670/- and passed the order u/s 143(3) of the Act dated 28.12.2016. 3. Aggrieved by the order the assessee has filed an appeal before the CIT(A). Whereas the CIT(A) has considered the grounds of appeal, submissions of the assessee and findings of the A.O and has confirmed the addition and dismissed the assessee appeal. ITA No. 1654/Mum/2022 Mehul Krishnkant Mehta, Mumbai. - 8 - Aggrieved by the CIT(A)order, the assessee has filed an appeal before the Hon’ble Tribunal. 4. At the time of hearing, the Ld. AR submitted that the CIT(A) has erred in confirming the action of the AO in denying the exemption of long term capital gains u/s 10(38) of the Act and making addition u/s 68 of the Act and also making the addition u/s 69C of the Act in respect of the commission. The Ld. AR further submitted that the lower authorities has relied on the only circumstantial evidence and no direct evidence found and Ld. AR emphasized that the addition cannot be made on the circumstantial evidence and there is no investigation made by the AO. Further no proper opportunity was granted to the assessee before the CIT(A) and relied on the paper book and judicial decisions and prayed for allowing the assessee appeal. Contra the Ld.DR supported the order of the CIT(A). 5. We heard the rival submissions and perused the material on record. The sole crux of the disputed issues as envisaged by the Ld. AR that the CIT(A) erred in sustaining the addition u/s 68 & U/sec69C ITA No. 1654/Mum/2022 Mehul Krishnkant Mehta, Mumbai. - 9 - of the Act without providing proper opportunity and overlooking the facts. The contentions of the Ld. AR that the AO and the CIT(A) has not considered the material evidences. The assessee has filed the all the details before the lower authorities and the CIT(A) has not considered the fact that the assessee has purchased the shares and after purchasing the shares ,the company was amalgamated and bonus issue took place and all the transactions of purchases and sales were supported with the documentary evidences. The Ld.AR also emphasized that the documentary evidences establishing the genuineness of the transactions were filed before the lower authorities. We found that the CIT(A) has relied on the facts which are emanated from form No. 35 and prima-facie the CIT(A) has dealt on the findings of the AO and has not considered the submissions of the assessee in respect of the documentary evidences. We considering the overall facts and circumstances find the order passed by the the CIT(A) order is cryptic and non speaking order. Accordingly in the interest of justice, we restore the disputed issues to the file of the CIT(A) for afresh adjudication on merits and shall provide ITA No. 1654/Mum/2022 Mehul Krishnkant Mehta, Mumbai. - 10 - adequate opportunity of being heard to the assessee and the assessee should also cooperate in submitting the information for early disposal of the appeal and the grounds of appeal of the assessee are allowed for statistical purposes. 6. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on 30.12.2022. Sd/- Sd/- (PRASHANT MAHARISHI) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 30.12.2022 KRK, PS /Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. 3. आ र आ / The CIT(A) 4. आ र आ ( ) / Concerned CIT 5. "#$ % & &' , आ र ) र*, हमद द / DR, ITAT, Mumbai 6. % -. / 0 / Guard file. ान ु सार/ BY ORDER, " & //True Copy// 1. ( Asst. Registrar) ITAT, Mumbai