Kailashben Chimanbhai Pokal, Ahmedabad V. The ITO, Ward-3(3)(10), Ahmedabad

ITA 1681/AHD/2019

AI Insights

The case involves Kailashben Chimanbhai Pokal, the appellant, who contested the reopening of her income assessment for the Assessment Year 2010-11 by the Income Tax Officer, Ahmedabad. The reopening was based on information from the PDIT (Investigation), Kolkata, which indicated that the appellant was involved in transactions that resulted in bogus long-term capital gains. The Tribunal examined the procedures followed by the lower authorities in adding the long-term capital gains as unexplained investments under Section 69 of the Act. The appellant argued that the shares were purchased legitimately and the transactions were genuine, supported by bank transactions and dematerialization of shares. However, the Tribunal found discrepancies in the documentation and the process of share acquisition, leading to the dismissal of the appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 129278 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 09-05-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 10-11-2019
• Other Referred Cases: Swati Bajaj case
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained investment; Share purchase agreement; Reason to believe; Capital Gains
• Section: 147; 131; 69; 148; 133A

Judgement Text

ITA No.1681/Ahd/2019 Assessment Year: 2010-11 Page 1 of 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH, AHMEDABAD BEFORE Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA No.1681/Ahd/2019 Assessment Year: 2010-11 Kailashben Chimanbhai Pokal, vs. Income Tax Officer, P4-504, Capital Greens, Ward 3(3)(10), Ahmedabad. Near GD Goenka International School, Canal Road, Vesu, Surat – 395 007. [PAN – ACYPP 7107 P] (Appellant) (Respondent) Assessee by : Shri Vipul Khandhar, AR Revenue by : Shri V.K. Mangla, Sr. DR Date of hearing : 10.05.2023 Date of pronouncement : 26.05.2023 O R D E R This appeal is filed by the Assessee against order dated 09.09.2019 passed by the CIT(A)-3, Ahmedabad for the Assessment Year 2010-11. 2. The Assessee has raised the following grounds of appeal :- “1. The learned CIT(A) has erred both in law and on the facts of the case in confirming the action of AO of reopening the assessment u/s. 147 of the Act. On the facts and circumstances of the case, learned CIT(A) ought to have held that the action of reopening is without jurisdiction and not permissible either in law or on facts. 2. The learned CIT(A) has erred both in law and on the facts of the case in confirming the action of AO of adding long-term capital gain of Rs.21,10,776/- as unexplained investment u/s. 69 of the Act. 3. Both the lower authorities have erred in not appreciating that Section 69 of the Act is not at all applicable to the appellant. 4. Both the lower authorities have erred in violating the Principles of Natural Justice: a. The learned CIT(A) has erred both in law and on the facts of the case in confirming the addition despite the fact that the AO did not confront the appellant with the department investigations relied upon to make the addition. b. The learned CIT(A) has erred both in law and on the facts of the case in confirming the addition despite the fact that the AO did not ITA No.1681/Ahd/2019 Assessment Year: 2010-11 Page 2 of 5 give the appellant an opportunity to cross-examine the persons whose statements were used against it. c. The learned CIT(A) has erred both in law and on the facts of the case in confirming the addition made by the AO despite the fact that the AO has not placed on record any evidence directly pertaining to the appellant and has made the addition merely on the basis of a prima facie view, conjectures, surmises and suspicion. d. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 5. Alternatively and without prejudice, capital gain ought to have been taxed u/s. 111A of the Act. 6. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 7. The learned CIT(A) has erred in law and on facts of the case in confirming action of the Id. AO in levying interest u/s.234A/B/C of the Act. 8. The learned CIT(A) has erred in law and on facts of the case in confirming action of the Id. AO in initiating penalty u/s.271(1)(c) of the Act. 9. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.” 3. The assessee is an individual and filed her return of income on 14.12.2010 declaring total income of Rs.8,18,570/-. The case was processed under Section 143(1) of the Income Tax Act, 1961 by accepting return of income. The information was received from the PDIT (Investigation) Kolkata wherein it was stated that survey were carried out by the Office of PDIT (Investigation), Kolkata in the premises of Ashok Kumar Kyan, a share Broker at CSE and BSE and it was found that he was involved in providing accommodation entry in the form of bogus long term capital ITA No.1681/Ahd/2019 Assessment Year: 2010-11 Page 3 of 5 gains in connivance with entry operators and promoters of scrips at Calcutta Stock Exchange as well. The said share broker named penny stock at BSE and CSE which were used for the purpose of providing accommodation entry in the form of Long Term Capital Gains. The Investigation Wing, Kolkata has also covered other share brokers under Section 131 or 133A of the Income Tax Act, 1961. It was observed that the brokers were active at the CSE for the same purpose. On analysis of trade data taken from the Calcutta Stock Exchange it was found that the above mentioned brokers traded in the 9 penny stocks at the platform of CSE for providing bogus LTCG to clients. The trading made in all penny stocks have yielded huge long term capital gains to the various beneficiaries. The assessee is also a beneficiary of Rs.7,31,250/- of bogus long term capital gain by selling scrips of Concrete Credit Limited through broker Ashok Kumar Kyan during the F.Y. 2009-10 relevant to A.Y. 2010-11. The assessee claimed exemption under Section 10(38) amounting to Rs.7,31,250/- in her return of income for the A.Y. 2010-11 in respect of bogus long term capital gain. The assessee’s case was reopened after recording the reasons. After issuance of statutory notices, the assessee filed its details along with return filed in response to notice under Section 148 of the Act on 14.12.2010. After taking cognisance of the assessee’s reply, the Assessing Officer made addition of Rs.21,10,776/- under Section 69 of the Act being undisclosed investment. 4. The Ld. AR submitted that all the relevant details and documents clarified that M/s. Maheshwari Datamics & Stock Holding Company was broker and Demat authorities respectively. The Assessing Officer has rejected the claim of genuineness of LTCG on the reason being that details of such LTCG has been come from the Director of Investigation, Kolkata, so it has been bogus one. The Ld. AR submitted that only on the basis of the investigation report without any inquiry reopening is considered to be against the provision of law as the reason to believe that income has escaped from the tax does not have nexus with the fact of the assessee’s case. Ld. AR submitted that the assessee explained the source and the same reflected in bank accounts as well as the transaction in share was genuine. The Ld. AR stated that the assessee purchased this scrip in Vindus Holding Limited on 29.12.2007 of 5000 equity shares of Rs.10/- each and in Concrete Credit Limited (earlier known as Shubhalaxmi Projects Limited) in November 2005 of 3000 equity shares of Rs.10/- each. The amount for purchase was Rs.50,000/- and Rs.30,000/- respectively. The Ld. AR submitted that the same was not purchased through broker but were purchased from ITA No.1681/Ahd/2019 Assessment Year: 2010-11 Page 4 of 5 original owner in cash in physical form. The assessee dematerialised the said shares on 04.02.2010 & 21.11.2005 and therefore date of entry in Demat account was accordingly on 04.02.2010 & 21.11.2005. The assessee sold shares on 15.02.2010 and 29.09.2009 for amount of Rs.14,61,348.53 in Vindus Holding Limited and Rs.7,29,427.06 in Concrete Credit Limited. The broker at the time of sale was Ashok Kumar Kyan and the amount received after the sale was through banking channel. Ld. AR further submitted that the decisions in case of Swati Bajaj will not be applicable in assessee’s case as the assessee explained the source while purchase as well as given the details after selling those separately. 5. Ld. DR relied upon the Assessment Order and the order of the CIT(A). Ld. DR further submitted that this scrip was purchased through cash and the same was not justified as to how the purchase of shares was made from the original holder. The Ld. DR further submitted that the CIT(A) has categorically mentioned that the total value received by the assessee on sale of these shares was shown at Rs.21,10,776/-. Even though the Company had no credentials, in fact, the investigation report has identification of Vindus Holding Limited and Concrete Credit Limited as scrip in which they have provided bogus entries. 6. Heard both the parties and perused all the relevant material available on record. The Assessing Officer has reopened the assessee’s case after the survey was carried out in the premises of Ashok Kumar Kyan, Share Broker in assessee’s case while selling the scrip of Concrete Credit Limited and Vindus Holding Limited Both these shares were purchased by the assessee in cash though the assessee stated that the purchase was made from the original holder Shri Amit Chaurasia as mentioned in each physical share certificate. The said company is provider of services relating to transfer and registration of shares and providing service as Registrars and Share Transfer Agents authorised from SEBI which is Maheshwari Datamatics Pvt. Ltd. and subsequently the Demat holding was also obtained by the assessee. The Ld. AR while dealing with the shares has submitted that the same was sold through Ashok Kumar Kyan who is the very person whose premises were surveyed by the Investigation Wing. Though the assessee was not confronted the same, but was not explained by the assessee as to how the original shares were purchased and the details of Amit Chaurasia was also not given by the assessee while purchasing the shares of these two scrips. This share certificate does not explain as ITA No.1681/Ahd/2019 Assessment Year: 2010-11 Page 5 of 5 to how Amit Chaurasia, as individual, transported the shares to the assessee in both these scrips. The element of genuineness is in doubt and the Assessing Officer’s observation that the sale of shares purchased from Maheshwari Datamatics Pvt. Ltd. and Stock Holding Corporation of India Limited were fabricated appears to be justifiable with the conduct of the assessee. It is clear that 5000 plus 3000 i.e. 8000 shares of Vindus Holding Limited and Concrete Credit Limited respectively was not purchased from Maheshwari Datamatics Pvt. Ltd. and Stock Holding Corporation of India Limited. However, the same was purchased in earlier years from the original share holders of which the payment was made in cash but not other records were available before the Assessing Officer as well as before the CIT(A) as well as before the Tribunal. When the purchase of shares which was in doubt, as the assessee has not explained the genuineness of the original holder, the same was rightly added under Section 69 as undisclosed investment. Appeal of the assessee is thus dismissed. 7. In the result, appeal filed by the assessee is dismissed. Order pronounced in the open Court on this 26 th day of May, 2023. Sd/- (SUCHITRA KAMBLE) Judicial Member Ahmedabad, the 26 th day of May, 2023 PBN/* Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad