SMT. ANJU PRAVEEN KUMAR, CHENNAI V. ITO, NCW - 9 91), CHENNAI

ITA 1763/CHNY/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 2243 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: misc
• Appeal Filed On: 06-06-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Share purchase agreement; Tangible material; Penny stocks; Capital Gains
• Section: 10

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C BENCH, CHENNAI [ , , BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ I.T.A.NO.1763/CHNY/2019 ( [ [ / ASSESSMENT YEAR: 2012-13) SMT. ANJU PRAVEEN KUMAR, NO.25 B, EVK SAMPATH ROAD, VEPERY, CHENNAI 600 007. VS THE INCOME TAX OFFICER, NON-CORPORATE WARD 9(1), CHENNAI. PA N: AA EPJ2827N ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : NONE / RESPONDENT BY : SHRI ARUNRAJ, JCIT /DATE OF HEARING : 25.09.2019 /DATE OF PRONOUNCEMENT : 03.12.2019 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE ASSESSEE FILED THIS APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-10, CHENNAI IN ITA NO.151/17-18/CIT(A)-10 DATED 28.02.2019 FOR THE ASSESSMENT YEAR 2012-13. 2 ITA NO.1763/CHNY/2019 2. SMT. ANJU PRAVEEN KUMAR, THE ASSESSEE, PURCHASED 3500 SHARES OF M/S. BLUE PRINTS SECURITIES LTD, OFF MARKET, AT THE RATE OF RS.10/- PER SHARE. SUBSEQUENTLY, THEY WERE SOLD. THE ASSESSEE CLAIMED LONG TERM CAPITAL GAIN AT RS.10,74,325/- AND CLAIMED THE SAME AS EXEMPT U/S.10(38). BASED ON THE INFORMATION RECEIVED FROM THE DIRECTORATE OF INVESTIGATION OF KOLKATA, THE ASSESSING OFFICER REOPENED THE ASSESSMENT, EXAMINED AND HELD THAT THE SHARES TRADED BY THE ASSESSEE AS PENNY STOCK AND THE ASSESSEE IS ONE OF THE BENEFICIARY OF TRADING IN PENNY STOCKS AND WAS CLAIMING BOGUS CAPITAL GAINS. UPON EXAMINATION OF FACTS AND ANALYSIS, THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAD MANIPULATED THE SALE OF SHARES WITHIN A SHORT SPAN OF TIME IN COLLUSION WITH THE BORKERS IN ORDER TO EARN TAX FREE EXEMPT LTCG AND THE ASSESSEE HAS NOT PROVED THE GENUINESS OF TRANSACTIONS. THEREFORE, HE ASSESSED THE ENTIRE SALE VALUE OF SHARES AT RS.10,74,325/- U/S.68 AND REFUSED THE EXEMPTION CLAIMED U/S.10(38). AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). THE LD.CIT(A) DISMISSED THE APPEAL. AGGRIEVED AGAINST THAT ORDER, THE ASSESSEE FILED THIS APPEAL. 3 ITA NO.1763/CHNY/2019 3. NONE WAS PRESENT FOR THE ASSESSEE. IT IS SEEN FROM THE GROUNDS THAT THE ASSESSEE HAS CHALLENGED THE JURISDICTION OF THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT U/S.147 WITHOUT TANGIBLE MATERIAL AND THE ACTION OF THE LD.CIT(A) IN CONFIRMING THE ADDITION MADE BY THE LD. ASSESSING OFFICER IN TREATING THE PURCHASE AND SALE OF SHARES BY THE ASSESSEE, AS PENNY STOCK TRANSACTIONS. PER CONTRA, THE LD DR SUBMITTED THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S 10 (38) BUT SHE HAS NOT PROVED THE GENUINENESS, THEREFORE, REITERATING THE FACTS AND CIRCUMSTANCES OF THIS CASE FROM THE ORDERS OF THE LOWER AUTHORITIES, THE LD. DR SUPPORTED THOSE ORDERS AND PLEADED THAT THIS APPEAL BE UPHELD. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. SINCE, THE ASSESSEE HAS TAKEN A PLEA THAT THE REASONS RECORDED FOR REOPENING IS NOT GIVEN TO THE ASSESSEE, WE RESTORE THE MATTER TO THE ASSESSING OFFICER TO INTIMATE THE REASONS FOR REOPENING THE ASSESSMENT AND THEREAFTER COMPLY IN ACCORDANCE WITH THE HONBLE SUPREME COURTS DECISION IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD., VS. ITO, APPEAL (CIVIL) NO.7731 OF 2002 DATED 25.11.2002. FURTHER, IF AFTER PROPER COMPLIANCE WITH THE ABOVE DIRECTIONS, THE ASSESSING OFFICER 4 ITA NO.1763/CHNY/2019 PROPOSES TO PROCEED WITH THE REASSESSMENT, THEN, WE HOLD THAT THE ASSESSING OFFICER SHALL FOLLOW THE DIRECTIONS ISSUED BY THIS TRIBUNAL IN THE CASE OF SHRI HEERACHAND KANUNGA, A DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL MADE FOR ASSESSMENT YEARS 2010-11 & 2011- 12 IN ITA NOS. 2786 & 2787/MDS/2017 DATED 03.05.2018. FOR THIS PURPOSE, THE RELEVANT PORTION OF THE ORDER, SUPRA, IS EXTRACTED AS UNDER :- 9. A PERUSAL OF THE FACTS IN THE PRESENT CASE ADMITTEDLY GIVEN ROOM FOR SUSPICION. HOWEVER, ASSESSMENTS ARE NOT TO BE DONE ON THE BASIS OF MERE SUSPICION. IT HAS TO BE SUPPORTED BY FACTS AND THE FACTS ARE UNFORTUNATELY NOT FORTHCOMING IN THE ASSESSMENT ORDER, IN THE ORDER OF THE LD.CIT(A) NOR FROM THE SIDE OF THE ASSESSEE. THE MAIN FOUNDATION OF THE ASSESSMENT IN THE PRESENT CASE IS THE STATEMENT OF ONE SHRI ASHOK KUMAR KAYAN WHO HAS ADMITTED TO HAVE PROVIDED BOGUS LONG TERM CAPITAL GAINS TO HIS CLIENTS. THE SAID SHRI ASHOK KUMAR KAYAN ALSO ALLEGEDLY SEEMS TO HAVE PROVIDED THE ASSESSEES NAME AND PAN AS ONE OF THE BENEFICIARIES. HOWEVER, THIS STATEMENT GIVEN BY SHRI ASHOK KUMAR KAYAN CANNOT BE THE FOUNDATION FOR THE PURPOSE OF ASSESSMENT IN SO FAR AS SHRI ASHOK KUMAR KAYAN HAS NOT BEEN PROVIDED TO THE ASSESSEE FOR CROSS-EXAMINATION. IN THE ABSENCE OF OPPORTUNITY OF CROSS- EXAMINATION, THE STATEMENT REMAINS MERE INFORMATION AND SUCH INFORMATION CANNOT BE FOUNDATION FOR ASSESSMENT. 10. ADMITTEDLY, THE ASSESSEE HAS CLAIMED TO HAVE PURCHASED 15000 SHARES FROM M/S.BPL @ RS.20/- PER SHARE TOTALING INTO RS.3,00,000/-. THE ASSESSEE CLAIMS TO HAVE PAID CASH FOR THE PURCHASE OF THESE SHARES. THE PRIMARY QUESTION WOULD BE AS TO WHERE THE PURCHASE WAS DONE? IF THE PURCHASE HAS BEEN DONE IN 5 ITA NO.1763/CHNY/2019 KOLKATA, HOW WAS THE CASH TRANSFERRED? WHEN DID THE ASSESSEE RECEIVED THE SHARE CERTIFICATES AND THE SHARE TRANSFER FORMS? HOW DID THE ASSESSEE OVERCOME THE PROVISIONS OF SEC.40A(3)? WAS THERE ADEQUATE CASH AVAILABILITY IN THE BOOKS OF THE ASSESSEE ON 24.04.2008? DID THE ASSESSEE TRAVELLED TO KOLKATA? HOW WAS THE TRANSACTION DONE? WHO APPLIED FOR THE DEMATING OF THE SHARES? WHEN WERE THEY DEMATED? WHEN WERE THE SHARES TRANSFERRED TO THE DEMAT ACCOUNT OF THE ASSESSEE? TO WHOM WERE THE SHARES SOLD DURING THE ASSESSMENT YEARS 2010-11 & 2011-12? WHEN WERE THE CHEQUES RECEIVED BY THE ASSESSEE? FROM WHOM DID THE ASSESSEE RECEIVED THE CHEQUES? WAS THERE ANY CASH DEPOSIT IMMEDIATELY PRIOR TO THE ISSUING OF THE CHEQUE FROM THE BANK ACCOUNT OF THE PURCHASER OF THE SHARES OF THE ASSESSEE? 11. A PERUSAL OF THE ASSESSMENT ORDER AT PARA NO.7.1 SHOWS THAT IN THE WRITTEN SUBMISSIONS, THE ASSESSEE STATES THAT HE HAS PURCHASED 15000 SHARES OF M/S.BPL FROM M/S.ABPL, KOLKATA. HOWEVER, IN PARA NO.8.3, IT IS MENTIONED THAT THE ASSESSEE IN GOOD FAITH HAS PURCHASED THE SHARES OF M/S.BPL FROM A SUB-BROKER IN HIS FRIENDS CIRCLE. WHAT IS THE TRUE NATURE OF THE TRANSACTION? FROM WHOM DID THE ASSESSEE ACTUALLY PURCHASE THE SHARES? DID THE ASSESSEE TAKE POSSESSION OF THE SHARES IN ITS PHYSICAL FORM? IN PARA NO.8.1 OF THE ASSESSMENT ORDER, IT IS MENTIONED THAT THE ASSESSEE IS AN INVESTOR AND HAS BEEN REGULARLY TRADING IN SHARES. IF THIS IS SO, DOES THE DEMAT ACCOUNT SHOW SUCH TRANSACTIONS BEING DONE BY THE ASSESSEE OR IS THIS THE ONLY ONE OF TRANSACTION. THUS, CLEARLY THE FACTS REQUIRED FOR ADJUDICATING THE APPEALS ARE NOT FORTHCOMING. THERE IS NO EVIDENCE WHATSOEVER TO SHOW THAT THE ASSESSEE HAS HELD THE SHARES FOR MORE THAN 12 MONTHS. THIS IS BECAUSE ASSUMING THAT THE DEMAT HAS BEEN DONE AND THE SHARES OF M/S.BPL HAS COME INTO THE ASSESSEES DEMAT ACCOUNT AND HAS IMMEDIATELY FLOWN OUT. THEN THE FACTUM OF THE POSSESSION OF THE SHARES FOR MORE THAN 12 MONTHS HAVE TO BE PROVED BY THE ASSESSEE. THIS IS ALSO NOT FORTHCOMING. IN REPLY TO A SPECIFIC QUERY, AS THE DATE OF THE DEMAT OF SHARES, IT WAS SUBMITTED BY THE LD.AR THAT THE DEMAT WAS DONE ON VARIOUS DATES. 6 ITA NO.1763/CHNY/2019 THEN THE QUESTION RISES AS TO WHY THERE IS SO MUCH OF DIFFERENCE IN THE DATES OF DEMATING WHEN 15000 SHARES HAVE BEEN PURCHASED TOGETHER ON 24.04.2008. NO DETAILS IN RESPECT OF M/S.BPL COMPANY IS KNOWN, WHAT IS THE PRODUCT OF THE COMPANY WHICH HAD LEAD TO THE SHARE VALUE OF THE COMPANY TO GO UP FROM RS.20/- TO RS.352/- IN A PERIOD OF TWO YEARS. THIS WOULD CLEARLY BE A CASE WHERE THE SHARE VALUE OF THE COMPANY WAS HITTING THE CIRCUIT BREAKER OF THE STOCK EXCHANGE ON A DAILY BASIS AND OBVIOUSLY IT WOULD HAVE DRAWN ATTENTION. THIS BEING SO, AS THE FACTS ARE NOT COMING OUT OF THE ASSESSMENT ORDER NOR THE ORDER OF THE LD.CIT(A) NOR FROM THE SIDE OF THE ASSESSEE, WE ARE OF THE VIEW THAT THE ISSUES IN THIS APPEAL MUST BE RESTORED TO THE FILE OF THE AO FOR RE-ADJUDICATION AFTER GRANTING THE ASSESSEE ADEQUATE OPPORTUNITY TO SUBSTANTIATE ITS CASE AND WE DO SO. 12. THE STATEMENT RECORDED BY THE REVENUE FROM SHRI ASHOK KUMAR KAYAN CANNOT BE USED AS AN EVIDENCE AGAINST THE ASSESSEE IN SO FAR AS THE STATEMENT HAS NOT BEEN GIVEN TO THE ASSESSEE NOR HAS SHRI ASHOK KUMAR KAYAN BEEN PROVIDED TO THE ASSESSEE FOR CROSS- EXAMINATION. HOWEVER, THE ASSESSEE SHALL PROVE THE TRANSACTION OF THE LONG TERM CAPITAL GAINS IN RESPECT OF WHICH THE ASSESSEE HAS CLAIMED THE EXEMPTION U/S.10(38) BY PROVIDING ALL SUCH EVIDENCES AS REQUIRED BY THE AO TO SUBSTANTIATE THE CLAIM AS ALSO BY PRODUCING THE PERSONS THROUGH WHOM THE ASSESSEE HAS UNDERTAKEN THE TRANSACTION OF THE PURCHASE AND SALE OF THE SHARES WHICH WOULD INCLUDE THE SUB-BROKER, FRIEND AND THE BROKER THROUGH WHOM THE TRANSACTION HAS BEEN DONE, BEFORE THE AO FOR EXAMINATION. 13. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE IN ITA NOS.2786 & 2787/CHNY/2017 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 5. FOLLOWING THE ABOVE ORDER, THE ASSESSING OFFICER SHALL REQUIRE THE ASSESSEE TO ESTABLISH WHO, WITH WHOM, HOW AND IN WHAT 7 ITA NO.1763/CHNY/2019 CIRCUMSTANCES THE IMPUGNED TRANSACTIONS WERE CARRIED OUT ETC., TO PROVE THAT THE IMPUGNED TRANSACTIONS ARE ACTUAL, GENUINE ETC. THE ASSESSEE SHALL COMPLY WITH THE ASSESSING OFFICERS REQUIREMENTS AS PER LAW. ON APPRECIATION OF ALL THE ABOVE ASPECTS, THE ASSESSING OFFICER WOULD DECIDE THE MATTER IN ACCORDANCE WITH LAW. THE ASSESSING OFFICER IS ALSO FREE TO CONDUCT APPROPRIATE ENQUIRY AS DEEMED FIT, BUT SHALL FURNISH ADEQUATE OPPORTUNITY TO THE ASSESSEE ON THE MATERIAL ETC., TO BE USED AGAINST HER AND DECIDE THE MATTER IN ACCORDANCE WITH LAW. 6. IN THE RESULT, THE ASSESSEES APPEAL IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 3 RD DECEMBER, 2019 AT CHENNAI. SD/- SD/- /CHENNAI, /DATED 3 RD DECEMBER, 2019 RSR /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( ) /CIT(A) 4. /CIT 5. /DR 6. [ /GF ( ) (GEORGE MATHAN) /JUDICIAL MEMBER ( ) (S. JAYARAMAN) /ACCOUNTANT MEMBER