G.Narendar Chordia , CHENNAI V. ITO NCW 5(2) , CHENNAI

ITA 1819/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5626 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 24-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B SAGADEVAN IRS
• Assessee Lawyers: DEEPAK; H C KHINCHA
• Keywords: Reopening of assessment; Share purchase agreement; Accommodation entries; Reason to believe
• Section: 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B (SMC) BENCH : CHENNAI . , [BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT M EMBER ] ./I.T.A. NO. 1819/MDS/2017 / ASSESSMENT YEAR : 2012-2013 G. NARENDAR CHORDIA, FLAT NO.3-J, DOOR NO.76, OSIAN HEIGHTS, BASIN BRIDGE ROAD, OLD WASHERMANPET, CHENNAI 600 021 [PAN AAJPG 2700P ] VS. THE INCOME TAX OFFICER, NCW-5(2) CHENNAI 600 006. ./I.T.A. NO.1820/MDS/2017 / ASSESSMENT YEAR : 2012-2013 HATIMAL CHORDIA, FLAT NO.3-I, DOOR NO.76, OSIAN HEIGHTS, BASIN BRIDGE ROAD, OLD WASHERMANPET, CHENNAI 600 021. [ PAN AAHPH 2267H ] VS. THE INCOME TAX OFFICER, NCW-4(4) CHENNAI 600 006. ( !' / APPELLANT) ( #$!' /RESPONDENT) / APPELLANT BY : SHRI. H.C. KHINCHA & DEEPA K. C.A. /RESPONDENT BY : SHRI. B. SAGADEVAN, IRS, JCIT. /DATE OF HEARING : 14-12-2017 !' /DATE OF PRONOUNCEMENT : 21-12-2017 ITA NOS.1819 & 1820 /MDS/2017 :- 2 -: % / O R D E R THESE ARE APPEALS FILED BY THE ASSESSEES WHO ARE B ROTHERS, DIRECTED AGAINST ORDERS DATED 30.06.2017 OF LD. COM MISSIONER OF INCOME TAX (APPEALS)-5, CHENNAI. 2. GROUNDS TAKEN BY BOTH THE ASSESSEES ARE SIMILAR AND ASSAILS THE REOPENING DONE FOR THE IMPUGNED ASSESSMENT YEAR AS WELL AS MERITS OF THE ADDITIONS DONE UNDER THE HEAD INCOM E FROM OTHER SOURCES. 3. FACTS APROPOS ARE THAT ASSESSEE SHRI. G. NARENDAR C HORDIA WORKING AS PLANT HEAD MANAGER OPERATION IN MEDOPHA RM AND ASSESSEE SHRI. HASTIMAL CHORDIA HAVING INCOME FRO M SALARY AND CAR LEASE HAD FILED RETURNS FOR THE IMPUGNED ASSESSMENT YEAR DECLARING INCOME OF E4,67,380/- AND E9,35,700/- RESPECTIVELY. SUCH RETURNS WERE PROCESSED U/S.143(1) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT). LD. ASSESSING OFFICER RECEIVED INFORMATION FROM DDIT (INVESTIGATION), UNIT-1, CRU, CHENNAI THAT ASSESSEE S WERE BENEFICIARIES OF CERTAIN TRANSACTIONS DONE THROUGH ONE MR. PRAKA SH KUMAR JOJODIA, PROMOTER OF M/S. QUEST FINANCIAL SERVICES LIMITED A ND M/S. KWALITY CREDIT AND LEASING LIMITED, KOLKATA, WHICH RESULTED IN BOGUS LONG TERM CAPITAL GAINS TO VARIOUS PERSONS, INCLUDING T HE ASSESSEES. ITA NOS.1819 & 1820 /MDS/2017 :- 3 -: ASSESSEE SHRI. G. NARENDAR CHORDIA HAD CLAIMED LON G TERM CAPITAL GAINS OF E23,97,500/- AND ASSESSEE SHRI. HASTIMAL CHORDIA HAD CLAIMED LONG TERM CAPITAL GAINS OF E23,97,000/- BOT H ARISING SALE OF EQUITY SHARES, AS EXEMPT U/S.10(38) OF THE ACT. I NFORMATION REGARDING THESE TRANSACTIONS OF WHICH SHRI. PRAKAS H KUMAR JOJODIA WAS ONE OF THE PRINCIPAL PLAYERS, CAME TO THE KNOW LEDGE OF REVENUE WHEN HE WAS SUBJECTED TO A SEARCH OPERATION BY THE REVENUE. SHRI. PRAKASH KUMAR JOJODIA WAS THE MANAGING DIRECTOR OF M/S. QUEST FINANCIAL SERVICES LTD. REVENUE IT SEEMS WAS HAVIN G WITH THEM A STATEMENT RECORDED FROM SHRI. PRAKASH KUMAR JOJODIA , WHICH ADMITTED OF TRANSACTIONS UNDERTAKEN FOR PROVIDING BOGUS LO NG TERM CAPITAL GAINS, ON COMMISSION BASIS, THROUGH PRIVATE LIMI TED SHELL COMPANIES OWNED OR CONTROLLED BY HIM. OR IN OTHER WORDS, WH AT ARE KNOWN AS TRANSACTIONS OF PENNY STOCK COMPANIES. 4. NOTICE U/S.148 OF THE ACT WAS ISSUED TO THE ASSESSE ES ON 23.02.2015 AND 13.02.2015 RESPECTIVELY. ASSESSEES SOUGHT REASONS FOR THE REOPENING AND SUCH REASONS WERE FURNISHED TO THE ASSESSEES. REASONS INTERALIA MENTIONED ABOUT THE STATEMENT GI VEN BY SHRI. PRAKASH KUMAR JOJODIA. DURING THE COURSE OF RE-ASS ESSMENT PROCEEDINGS, LD. ASSESSING OFFICER PUT THE ASSESSEE S ON NOTICE ON WHY THE CLAIM OF LONG TERM CAPITAL GAINS SHOULD NOT BE DISALLOWED AND WHY ITA NOS.1819 & 1820 /MDS/2017 :- 4 -: SUCH AMOUNTS SHOULD NOT BE ASSESSED AS INCOME FROM OTHER SOURCES. AS PER THE LD. ASSESSING OFFICER MODUS OPERANDI WA S TO BUY UNLISTED SHARES OF PRIVATE LIMITED COMPANY AT A VERY LOW BOO K VALUE IN CASH, WHICH COMPANY AT A LATER STAGE GOT AMALGAMATED WIT H A LISTED PENNY STOCK COMPANY WITH A HIGH COURT APPROVAL FOR SUCH SCHEME FOR AMALGAMATION. AS PER THE LD. ASSESSING OFFICER PRI CES OF THE SHARES OF THE PENNY STOCK COMPANIES WERE MANIPULATED TO 20 TO 25 TIMES SO THAT INVESTORS MADE BOGUS LONG TERM CAPITAL GAINS ON SA LE OF ITS SHARES. LD. ASSESSING OFFICER NOTED THAT SHRI. PRAKASH KUMAR JO JODIA HAD ADMITTED FLOATING A NUMBER OF COMPANIES THROUGH WHICH TRAN SACTIONS IN CASH, CHEQUES AND RTGS CREDITS WERE CARRIED OUT AND HE HA D ALSO OFFERED A SUM OF E1,00,00,000/- AS INCOME EARNED FOR GIVING A CCOMMODATION ENTRIES TO VARIOUS PARTIES LIKE ASSESSEES. 5. WHEN QUERIED ON THE ABOVE, REPLY OF THE ASSESSEES WERE THAT THEY HAD PURCHASED THREE HUNDRED EQUITY SHARES EACH OF ONE M/S. REWARD AGENCIES PRIVATE LIMITED THROUGH OFF MARKET DEAL, BY PAYING E500/- PER SHARE TO ONE M/S. SANKLAP VINCOME (P) L TD. AS PER THE ASSESSEES SUCH EQUITY SHARES WERE TRANSFERRED IN TH EIR NAMES BY. M/S. REWARD AGENCIES PRIVATE LIMITED AS EARLY AS 25TH JA NUARY, 2011. CONTENTION OF THE ASSESSEES WERE THAT M/S. REWARD A GENCIES PRIVATE LIMITED WAS LATER CONVERTED AS A PUBLIC LIMITED C OMPANY AND ITA NOS.1819 & 1820 /MDS/2017 :- 5 -: THEREAFTER AMALGAMATED WITH ONE M/S. QUEST FINANCIA L SERVICES LIMITED WHICH HAD THE APPROVAL OF HONBLE CALCUTTA HIGH CO URT THROUGH ITS ORDER DATED 25 TH AUGUST, 2011. AS PER THE ASSESSEE THROUGH THIS AMALGAMATION SCHEME SANCTIONED BY HONBLE CALCUTTA HIGH COURT, FOR ONE EQUITY SHARE IN M/S. REWARD AGENCIES PRIVATE LI MITED, HUNDRED EQUITY SHARES OF M/S. QUEST FINANCIAL SERVICES LIMI TED WERE ALLOTTED. CONTENTION OF THE ASSESSEES WAS THAT THIRTY THOUSAN D EQUITY SHARES EACH WERE ALLOTTED TO THEM IN M/S. QUEST FINANCIA L SERVICES LIMITED AND THESE WERE DEMATTED AND SOLD IN KOLKATA STOCK E XCHANGE THROUGH ONE M/S. K. PRASAD & CO. AS PER THE ASSESSEES, M/ S. QUEST FINANCIAL SERVICES LIMITED BEING A LISTED COMPANY LONG TERM CAPITAL GAINS ARISING TO THEM, ON SALE OF SHARES OF THE SAID COMPANY, THR OUGH KOLKATA STOCK EXCHANGE WAS EXEMPT U/S.10(38) OF THE ACT. ASSESSE E ALSO POINTED OUT THAT THE SALE TRANSACTION WERE CARRIED OUT THR OUGH BANKING CHANNELS. 6. HOWEVER, LD. ASSESSING OFFICER DID NOT ACCEPT THE R EPLY GIVEN BY THE ASSESSEE. ACCORDING TO HIM, JOINT COMMISSIO NER OF INCOME TAX IN A PROCEEDING U/S.144A OF THE ACT HAD REJECTED SI MILAR CONTENTIONS OF THE ASSESSEE. ACCORDING TO HIM, THE STATEMENT RECO RDED FROM SHRI. PRAKASH KUMAR JOJODIA, WHO WAS A PROMOTER AND DIRE CTOR OF M/S QUEST FINANCIAL SERVICES LIMITED, CLEARLY PROVED TH AT HE HAD ITA NOS.1819 & 1820 /MDS/2017 :- 6 -: PROVIDED ACCOMMODATION ENTRIES TO MANY PERSONS INCL UDING ASSESSEES. LD. ASSESSING OFFICER ALSO NOTED THAT ASSESSEES COU LD NOT FURNISH ANY EVIDENCE AS TO HOW THEY CAME TO KNOW ABOUT M/S. REW ARD AGENCIES P. LTD FOR PURCHASING THEIR SHARES. AS PER THE LD. ASS ESSING OFFICER THESE WERE ISOLATED TRANSACTIONS DONE BY THE ASSESSEE WIT H THE M/S. SANKLAP VIBCOM (P) LTD, KOLKATA, WHO WERE SELLER OF THE SHA RES AND ASSESSEE HAD NO MEANS OF KNOWING SUCH COMPANY OR BUYING THEI R SHARES. LD. ASSESSING OFFICER REFUSED TO TAKE INTO CONSIDERATIO N AN AFFIDAVIT DATED 22.02.2015 OF SHRI. PRAKASH KUMAR JOJODIA PRODUCE D BY THE ASSESSEE WHEREIN HE RETRACTED FROM HIS EARLIER STATEMENT GIV EN TO THE REVENUE AND AFFIRMED THAT PURCHASE AND SALE OF SHARES WERE GENUINE. LD. ASSESSING OFFICER OBSERVED AS UNDER AT PARAS 9.2 T O 9.8 OF HIS ORDER. 9.2 THE ASSESSEEE HAS STATED THAT HE DOES NOT KNO W ANY OF THE OFFICE BEARERS EITHER THE OLD OR THE NEW COMPANY AND THAT HE IS NOT RELATED TO ANY OFFICE BEARERS OF ANY OF THE COMPANY. HENCE, ENEMITY CANNO T BE SAID TO BE A CAUSE FOR MENTIONING THE NAME OF TH E ASSESSEE IN THE LIST OF THE BENEFICIARY. 9.2 THE ASSESSEE HAS STATED THAT HE DOES NOT KNOW MR. PRAKASH JAJODIA. LETTER WERE SENT BY THIS OFFIC E TO M/S.SANKLAP VINCOM (P) LTD AND K PRASAD AND CO. BUT NO REPLY WAS RECEIVED TILL THE DATE OF PASSING ASSESSMENT ORDER AND IT IS NOT KNOWN HOW HE OBTAINE D THE AFFIDAVIT OF MR. PRAKASH JAJODIA. 9.3 ON VERIFICATION OF THE AFFIDAVIT, IT IS FOUND THAT THE DETAILS MENTIONED IN THE SERIAL NUMBER (6), (7) , (8), (9) (10) & (11) OF THE AFFIDAVIT ARE FALSE. 9.4 IN THE SWORN STATEMENT RECORDED FROM MR. PRAKASH JAJODIA ON 07.08.2014 IT IS MENTIONED AS UNDER: ITA NOS.1819 & 1820 /MDS/2017 :- 7 -: 9.5 IN THE SWORN STATEMENT RECORDED FROM MR. PRAKASH JAJODIA ON 26..08.2014 IT IS MENTIONED AS UNDER: 'I HAVE GONE THROUGH THE ABOVE STATEMENT AND CONFIRM THAT THE SAME HAS SEEN AND EXACTLY .. 9.6 A BRIEF OF THE CLIENT SCRIP OF SHRI PRAKASH JAJ ODIA IS REPRODUCED WHEREIN THOUGH THE MEMBER BROKER IS K PRASAD & CO. THROUGH WHOM THE ASSESSEE HAS SOLD THE SHARES OF QUEST FINANCIAL SERVICES LTD., IT ALSO HA S VARIOUS COUNTER PARTY MEMBER AGAINST EACH TRANSACTIONS. FURTHER IT IS SEEN FROM THE INTERNET IN THE WEBSITES OF HTTP://WWW.GUICKCOMPANY.INLCOMPANY AND CORPORATEDLR.COM/CORNPANV THAT ONE OF THE DIRECTORS OF THE CONVERTED COMPANY NAMELY, REWARD AGENCIES LTD . IS SHRI RAJESH KURMI WHO HAPPENS TO BE ONE OF THE DUMMY DIRECTORS OF JAMAKARCHI COMPANNIES OF SHRI PRAKASH JAJODIA AND A S PER HIS SWORN STATEMENT RECORDED BY THE INVESTIGATI ON WING, SHRI RAJESH KURMI IS 10 TH PASS AND IS AN EMPLOYEE OF SHRI PRAKASH JAJODIA. HE ALSO SAID 'I D O ALL KINDS OF OFFICIAL WORK IN THE OFFICE OF SHRI PRAKAS H JAJODIA AS ASSIGNED BY HIM FOR WHICH 1 AM GETTING SALARY OF RS.20000 PM. VARIOUS KINDS OF WORKS LIKE COLLECTING AND DELIVERING CASH FROM VARIOUS PARTIES , DEPOSITING AND WITHDRAWING CASH FROM VARIOUS ACCOUN TS. THESE COMPANIES ARE NOT DOING ANY REAL WORK AS THESE COMPANIES ARE PAPER COMPANIES AND DOING WORK OF JAMAKARCHI/ACCOMMODATION ENTRIES.' HENCE IT IS CLEAR THAT THE ASSESSEE HAS BEEN PROVIDED BOGUS LON G TERM CAPITAL GAIN THROUGH ACCOMMODATION ENTRIES . 9.6.1 ANOTHER POINT TO BE NOTED IS THAT THOUGH THE ASSESSEE IN HIS SWORN STATEMENT FIRST SAID NO WHEN ASKED IF ANY OTHER MEMBER OF HIS FAMILY HAVE ALSO INVESTED IN THE SAME COMPANY AND MADE PROFIT OUT OF IT . AT THE SAME TIME AFTER THE ASSESSEE WAS SHOWN THE LIST OF THE CLIENT IN CHENNA I TO WHOM BOGUS LONG TERM CAPITAL WAS PROVIDED WHICH ALSO HAD MANY OF HIS FAMILY MEMBERS, THE ASSESSEE SAID THAT ONLY HE HAD PURCHASED THE SHARES AND HE DIDN'T KNOW IF ANY OF H IS FAMILY MEMBERS HAD PURCHASED. 9.7 IT CAN BE SEEN FROM THE CLIENT STATEMENT OF SHR I PRAKASH JAJODIA THAT NOT ONLY THE ASSESSEE BUT THE FOLLOWING MEMBERS OF H I S FAM I LY HAVE ALSO INVESTED IN SHARES WHICH WAS EVENTUALLY AMALAGAMATED TO QUEST F I NANCIAL SERVICES LTD. ITA NOS.1819 & 1820 /MDS/2017 :- 8 -: SL. NO NAME AMOUNT RELATION TO THE ASSESSEE 1 HASTIMAL CHORDIA 2397000 ASSESSEE 2 G. NARENDRA CHORDIA 2399000 BROTHER 3 NIRMALA KUMARI CHORDIA 2394000 MOTHER 4 SHILPA JAIN 2397000 WIFE OF HIS BROTHER G. NARENDRA CHORDIA 5 SEEMA JAIN 2397000 WIFE OF THE ASSESSEE 9 .8 IT IS CONCLUDED THAT IT IS NOT A SINGLE, GENUINE TRANSACTION BUT THE ASSESSEE APART FROM HIS FAMILY MEMBERS HAS BEEN ONE OF THE BENEFICIARIES WHO WAS PROVIDED BOGUS LONG TERM CAPITAL GAINS THROUGH PRIVATE LIMITED SHELL COMPANIES/LISTED PENNY STOCK COMPANIES . HE DISBELIEVED THE CLAIM OF LONG TERM CAPITAL GAIN S AND MADE AN ADDITION OF THE EQUIVALENT AMOUNT UNDER THE HEAD IN COME FROM OTHER SOURCES FOR BOTH THE ASSESSEES. 7. AGGRIEVED, THE ASSESSEES MOVED IN APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). APART FROM AS SAILING THE VALIDITY OF THE REOPENING DONE FOR THE IMPUGNED ASS ESSMENT YEAR, ASSESSEES ALSO CHALLENGED THE MERITS OF THE ADDITIO N. LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD THE REOPE NING TO BE VALID. ACCORDING TO HIM INFORMATION RECEIVED FROM INVEST IGATION WING OF THE DEPARTMENT, KOLKATA WAS GOOD ENOUGH REASON FOR REOP ENING THE ASSESSMENT. IN SO FAR AS, MERITS WERE CONCERNED, L D. COMMISSIONER OF ITA NOS.1819 & 1820 /MDS/2017 :- 9 -: INCOME TAX (APPEALS) HELD THAT PURCHASE OF THE SHAR ES WERE INITIALLY DONE THROUGH OFF-MARKET DEALS IN CASH AND THE SELL ING RATES WERE ARTIFICIALLY HIKED. ACCORDING TO HIM, FINANCIALS OF M/S. QUEST FINANCIAL SERVICES LTD DID NOT JUSTIFY THE PRICES AT WHICH ITS SHARES WERE SOLD. FURTHER, ACCORDING TO THE LD. COMMISSIONER OF INCOM E TAX (APPEALS) ADDITIONS MADE BY THE LD. ASSESSING OFFICER WERE N OT SOLELY BASED ON THE STATEMENTS RECORDED FROM SHRI. PRAKASH KUMAR JO JODIA BUT FOR OTHER REASONS AS WELL. LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT LD. ASSESSING OFFICER WAS JUSTIFIED IN CO NSIDERING THE LONG TERM CAPITAL GAINS AS BOGUS AND IN MAKING THE ADDI TIONS U/S.68 OF THE ACT. 8. NOW BEFORE ME, LD. AUTHORISED REPRESENTATIVE STRONG LY ASSAILING THE REOPENING DONE FOR THE IMPUGNED ASSES SMENT YEAR SUBMITTED THAT REASONS GIVEN BY LD. ASSESSING OFFIC ER, FOR SUCH REOPENING STATED THAT KEY PERSON SHRI. PRAKASH KU MAR JOJODIA, WHO WAS THE PROMOTER OF M/S. QUEST FINANCIAL SERVICES L IMITED AND M/S. KWALITY CREDIT AND LEASING LIMITED, KOLKATA, ADMITT ED HIS INVOLVEMENT IN PROVIDING BOGUS LONG TERM CAPITAL GAINS TO VARI OUS PERSONS ON COMMISSION BASIS. AS PER THE LD. AUTHORISED REPRES ENTATIVE THIS COULD NOT BE STATED AS A REASON. ACCORDING TO HIM, THOUG H SUFFICIENCY OF THE REASON COULD NOT BE QUESTIONED, ITS RELEVANCY COUL D BE LOOKED INTO. ITA NOS.1819 & 1820 /MDS/2017 :- 10 -: AS PER THE LD. AUTHORISED REPRESENTATIVE, ONE OF TH E ESSENTIAL CONDITIONS REQUIRED FOR REOPENING OF AN ASSESSMENT , AS SET-OUT IN SECTION 147 OF THE ACT, WAS NOT SATISFIED. 9. ARGUING ON THE MERITS OF THE CASE, LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT PURCHASE OF SHARES OF M/S. REWARD AGENCIES P. LTD WERE PROVED THROUGH SHARE CERTIFICA TES WHICH REFLECTED TRANSFER OF THESE SHARES FROM M/S. SANKLAP VINCOM ( P) LTD TO THE ASSESSEES. ACCORDING TO HIM, AMALGAMATION OF M/S. R EWARD AGENCIES P. LTD WITH M/S. QUEST FINANCIAL SERVICE LTD COUL D NOT BE QUESTIONED SINCE IT HAD THE APPROVAL OF THE HONBLE CALCUTTA HIGH COURT. AS FOR THE SALE OF THE SHARES IN M/S. QUEST FINANCIAL SERV ICE LTD, CAPITAL GAINS ARISING FROM WHICH WAS CLAIMED AS EXEMPT, CONTENTIO N OF THE LD. AUTHORISED REPRESENTATIVE WAS THAT SUCH SALE WAS DO NE THROUGH KOLKATTA STOCK EXCHANGE BY A RECOGNIZED STOCK BROKE R AND PAYMENTS RECEIVED THROUGH BANKING CHANNELS. ACCORDING TO HI M, UNDUE RELIANCE WAS PLACED BY THE REVENUE ON A STATEMENT RECORDED F ROM SHRI. PRAKASH KUMAR JOJODIA WHO WAS NEVER KNOWN TO THE AS SESSEE. ACCORDING TO HIM, ASSESSEE HAD NEVER PURCHASED SHAR ES FROM SHRI. PRAKASH KUMAR JOJODIA. AS PER THE LD. AUTHORISED RE PRESENTATIVE THE SO CALLED STATEMENT RECORDED FROM SHRI. PRAKASH KUM AR JOJODIA WAS NEVER PUT TO THE ASSESSEE. FURTHER, AS PER THE LD. AUTHORISED ITA NOS.1819 & 1820 /MDS/2017 :- 11 -: REPRESENTATIVE, ASSESSEE WAS NEVER GIVEN AN OPPORTU NITY TO CROSS- EXAMINE THE SAID PERSON. LD. AUTHORISED REPRESENTA TIVE SUBMITTED THAT ASSESSEE HAD FILED AN AFFIDAVIT OF SHRI. PRA KASH KUMAR JOJODIA RETRACTING HIS EARLIER STATEMENTS. CONTENTION OF L D. AUTHORISED REPRESENTATIVE WAS THAT SHRI. PRAKASH KUMAR JOJODIA HAD AFFIRMED THE TRANSACTIONS OF SHARES OF M/S. QUEST FINANCIAL SERV ICES LTD AS GENUINE. ACCORDING TO HIM, SIMILAR TRANSACTIONS WHERE CAPITA L GAINS WERE CONSIDERED AS BOGUS HAD COME UP BEFORE BANGALORE B ENCH OF THE TRIBUNAL IN THE CASE OF VIMALA DEVI CHHAJER AND OTHERS VS. DCIT (ITA NOS.513 TO 518/BANG/2010, 519 TO 526/BANG/2010, 946 TO 949, 955, 956, 970/BANG/2010, 1000 TO 1005/BANG/2010 AND 1071 /BANG/2010, VIDE ORDER DATED 23.03.2011 ), AND THE TRIBUNAL HAD HELD THE CAPITAL GAINS CLAIMED TO BE NOT BOGUS. RELIANCE WAS ALSO PLACED ON THE DECISION OF KOLKATA BENCH OF THE TRIBUNAL IN THE CA SE OF MANISH KUMAR BAID AND MAHENDRA KUMAR BAID VS. AICT,( ITA NOS.123 6 & 1237/KOL/2017, DATED 18.08.2017 ) AND THAT OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. ARVIND KUMAR JAIN, ITA NO.4862/MUM/2014, DATED 18.09.2017 . AS PER THE LD. AUTHORISED REPRESENTATIVE IN THE CASE DECIDED BY KOLKATA BENCH ALSO THE COMPANY IN WHICH CONCERNED ASSESSEE HAD INVESTED WAS MERGE D WITH ANOTHER LISTED COMPANY AND THE CLAIM OF LONG TERM CAPITAL GAINS WAS ON SALE OF EQUITY SHARES OF SUCH LISTED COMPANY. AS PER TH E LD. AUTHORISED ITA NOS.1819 & 1820 /MDS/2017 :- 12 -: REPRESENTATIVE, KOLKATA BENCH HAD HELD THAT TRANSA CTIONS RELATING TO THE LONG TERM CAPITAL GAINS COULD NOT BE DISBELIEVE D SINCE THE SALE OF THE SHARES WERE EFFECTED THROUGH REGISTERED STOCK BROKERS. FURTHER, AS PER THE LD. AUTHORISED REPRESENTATIVE, EQUITY SH ARES OF M/S. QUEST FINANCIAL SERVICE LTD HELD BY THE ASSESSEE WERE DEM ATERIALIZED OR DEMATTED AND SUCH DEMATTING CLEARLY PROVED THE HOL DING OF SHARES BY THE ASSESSEE IN THE SAID COMPANY. THUS, ACCORDING T O HIM, LOWER AUTHORITIES FELL IN ERROR IN DISBELIEVING THE LONG TERM CAPITAL GAINS AND MAKING AN ADDITION U/S.68 OF THE ACT FOR THE AMOUNT S WHICH WERE RECEIVED THROUGH A RECOGNIZED STOCK EXCHANGE AND S OURCE OF WHICH WAS CLEARLY EXPLAINED. 10. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE STRONG LY SUPPORTING THE ORDERS OF THE LOWER AUTHORITIES SUB MITTED THAT SHRI. PRAKASH KUMAR JOJODIA WAS THE PROMOTER OF M/S. QU EST FINANCIAL SERVICES LTD. ACCORDING TO HIM, ASSESSEES WERE MEN TIONED IN THE STATEMENT RECORDED FROM THE SAID PERSON, AS ONE AMO NG MANY TO WHOM HE HAD PROVIDED ACCOMMODATION ENTRIES. AS PE R THE LD. DEPARTMENTAL REPRESENTATIVE, SHARE PRICE OF M/S. QU EST FINANCIAL SERVICE LTD WERE ARTIFICIALLY JACKED UP WITHOUT ANY CREDIBLE FINANCIALS FOR THE SAID COMPANY. ACCORDING TO HIM, ASSESSEE COULD NOT SAY HE WAS NOT AWARE OF THE STATEMENT GIVEN BY SHRI. PRAK ASH KUMAR JOJODIA ITA NOS.1819 & 1820 /MDS/2017 :- 13 -: SINCE ASSESSEE HAD FILED AN AFFIDAVIT FROM THE VER Y SAME PERSON RETRACTING WHAT HE EARLIER SAID. ACCORDING TO HIM, ADDITIONS WERE RIGHTLY MADE DISBELIEVING THE SERIES OF TRANSACTIO NS, WHICH WERE MANUFACTURED ONLY FOR ILLEGAL EVASION OF TAX. 11. ON THE ASPECT OF REOPENING, THE CONTENTION OF THE L D. DEPARTMENTAL REPRESENTATIVE WAS THAT REASONS CLEA RLY INDICATED ESCAPEMENT OF INCOME FROM ASSESSMENT. 12. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. FIRST TAKING UP TH E QUESTION WHETHER THE REOPENING WAS VALID OR NOT, ADMITTEDLY, THE ORI GINAL RETURNS WERE ONLY SUBJECTED TO A PROCESSING U/S.143(1) OF THE AC T. WHEN THE ORIGINAL RETURNS WERE ONLY PROCESSED U/S.143(1) OF THE ACT, I CANNOT SAY THAT AN ASSESSMENT WAS BEEN DONE AFTER APPLICATION OF MIND BY THE LD. ASSESSING OFFICER. SUCH PROCESSING IN MY OPINION I S A MINISTERIAL ACT. IN TAKING THIS VIEW, I AM FORTIFIED BY THE JUDGME NT OF APEX COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS P. LTD 291 IT R 500. REASONS RECORDED BY THE LD. ASSESSING OFFICER FOR R EOPENING THE ASSESSMENT HAS BEEN PLACED BEFORE ME AT PAPER BOOK PAGE NO.81 AND THIS READS AS UNDER:- THIS OFFICE IS IN RECEIPT OF INFORMATION, THAT THER E WAS A SEARCH OPERATION IN THE CASE OF MLS QUEST FINANCIAL SERVICES AND KWALITY CREDIT AND LEASING LIMITED ,KE Y ITA NOS.1819 & 1820 /MDS/2017 :- 14 -: PERSON MR. PRAKASH JAJODIA REVEALED THE FACT THAT H E AND HIS GROUP INVOLVED IN PROVIDING BOGUS LONG TERM CAP ITAL GAINS TO VARIOUS PERSONS ON COMMISSION BASIS THROUG H A NUMBER OF PRIVATE LIMITED SHELL COMPANIES OWNED OR CONTROLLED BY HIM AS WELL AS SOME LISTED PENNY STOC K COMPANIES. SRI HASTIMAL CHORDIA IS ONE OF THE BENEFICIARIES. THE TRANSACTION AMOUNT DURING THE PE RIOD IS RS.23,97,000/-, THE WHOLE OF WHICH IS BOGUS. THEREFORE. I HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX RELEVANT FOR' THE A Y 2012-13 HAS ESCAPED ASSESSMENT DUE TO FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS RELEVANT FOR THE PURPOSE OF ASSESSMENT. REASONS ARE SIMILAR FOR BOTH THE ASSESSEE. CONSIDE RING THE FACT THAT ORIGINAL RETURN WAS SUBJECT ONLY TO A PROCESSING U /S.143(1) OF THE ACT, I AM OF THE OPINION THAT REASON ABOVE GIVEN WAS RE LEVANT ENOUGH FOR RESORTING TO A REOPENING. PRESENCE OF A RELEVANT REASON IS ENOUGH IN SUCH CASES, AND IT IS NOT NECESSARY THAT ESCAPEMENT OF INCOME HAS TO BE ESTABLISHED. RULES FOR REOPENING ARE MUCH MORE L IBERAL WHERE ORIGINAL RETURNS ARE ONLY SUBJECT TO PROCESSING U/S.143(1) OF THE ACT. I THEREFORE UPHOLD THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) IN SO FAR AS THE REOPENING OF ASSESSMENT IS CONCERNED. 13. COMING TO THE MERITS OF THE ADDITIONS WHAT I FIND IS THAT LOWER AUTHORITIES HAD RELIED ON A STATEMENT FROM ON E SHRI. PRAKASH KUMAR JOJODIA WHO WAS THE PROMOTER AND DIRECTOR OF M/S. REWARD AGENCIES PVT. LTD WHICH WAS AMALGAMATED WITH M/S. Q UEST FINANCIAL SERVICE LTD, PURSUANT TO A SCHEME SANCTIONED BY HO NBLE CALCUTTA ITA NOS.1819 & 1820 /MDS/2017 :- 15 -: HIGH COURT. ONCE THE SCHEME IS SANCTIONED BY HONB LE CALCUTTA HIGH COURT, I CANNOT CONSIDER THE AMALGAMATION AS A SHA M ONE. RATIO OF ALLOTMENT OF SHARES IN M/S. QUEST FINANCIAL SERVICE LTD WHICH WAS 1: 100, VIZ; HUNDRED SHARES OF M/S. QUEST FINANCIAL S ERVICE LTD FOR ONE SHARE OF M/S. REWARD AGENCIES PVT. LTD. THIS RATIO WAS AS PER THE APPROVED SCHEME. THIS IS CLEARLY MENTIONED AT PARA 3 TO SCHEDULE A OF THE SAID SCHEME, WHICH READ AS UNDER:- (A) THE TRANSFEREE COMPANY SHALL, WITHOUT FURTHER ACT, DEED, SHALL ALLOT TO EVERY SHARE-HOLDERS OF M/S DRISTI BUPPLIERS LIMITED, 90 :NINETY) EQUITY SHARE; OF RS. 10/ - EACH CREDITED IS FULLY PAID UP FOR 1 (ONE) EQUITY S HARES OF RS. 10/- EACH FULLY PAID UP AND HELD BY SUCH SHARE- HOLDERS IN M/S DRISU SUPPLIERS LIMITED, AND SHALL ALLOT TO EVERY SHARE HOLDER OF M/S PRAN [EEVAN DISTRIBUTORS LIMITE D, 90 (NINETY: EQUITY SHARES OF RS 10/- EACH CREDITED AS FULLY PAD UP FOR :. (ONE) EQUITY SHARES OF 10/- EACH FULLY PAID UP AND HELD BY SUCH SHARE-HOLDERS IN M/S. PRUN ]EEVAN DIST RIBUTORS LIMITED .AND SHALL ALLOT TO EVERY SHARE-HOLDERS OF M/5 REWARD AGENCIES LIMITED 100 (HUNDRED) EQUITY SHARE; OF RS. 10L- EACH CREDITED AS FULLY PAID UP FOR 1 (ONE) EQUITY SHARES OF RS. 10/ - EACH FULLY PAID UP AND HELD BY SUCH SHARE-HOLDERS IN MS REWARD AGENCIES LIMITED. THOUGH LD. ASSESSING OFFICE CONSIDERED THE PRICES OF SHARES OF M/S. QUEST FINANCIAL SERVICE LTD, TO HAVE BEEN JACKED U P ARTIFICIALLY, NOTHING IS AVAILABLE ON RECORD WHICH COULD SHOW W HAT WERE THE FINANCIALS OF M/S. QUEST FINANCIAL SERVICE LTD. LD. ASSESSING OFFICER OUGHT TO HAVE ANALYSISED THE FINANCIALS OF THE SAID COMPANY BEFORE COMING TO A CONCLUSION THAT SUCH FINANCIALS WERE NO T AT ALL IN RHYME WITH THE SHARE PRICES. IT MAY BE TRUE THAT ASSESSE E HAD ACQUIRED ITA NOS.1819 & 1820 /MDS/2017 :- 16 -: ORIGINAL SHARES IN M/S. REWARD AGENCIES P. LTD IN OFF-MARKET TRANSACTIONS BY PAYING CASH. HOWEVER, BACKSIDE OF THE SHARE CERTIFICATES OF M/S. REWARD AGENCIES P. LTD PLACED AT PAPER BOOK PAGES 110, 111, 112, 113, 114 & 115 CLEARLY SHOW THAT TH E EQUITY SHARES WERE TRANSFERRED TO THE ASSESSEE ON 25.01.2011. OR IGINAL OWNER OF THESE SHARES WERE ONE M/S. DRISTI SUPPLIERS PRIVAT E LIMITED AND THEY HAD TRANSFERRED SUCH SHARES TO M/S. SANKLAP VINCOM PRIVATE LIMITED ON 25.10.2010. THE SELLER OF THE SHARES TO THE ASSE SSEE WAS M/S. SANKLAP VINCOM PRIVATE LIMITED. WHAT RELATION SHRI . PRAKASH KUMAR JOJODIA HAD WITH M/S. SANKLAP VINCOM PRIVATE LIMITE D IS NOT AVAILABLE ON RECORD. ASSESSEES HAVE MAINLY RELIED ON THE ORD ERS OF THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF VIMALA DEVI CHHAJER AND OTHERS (SUPRA) THAT OF KOLKATA BENCH OF THE TR IBUNAL IN THE CASE OF MANISH KUMAR BAID (SUPRA) AND THAT OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ARVIND KUMAR JAIN (SUPRA). HOWEVER IN ALL THESE CASES RELIED ON BY THE ASSESSEE WHAT I FIND IS THAT STAT EMENT RELIED ON BY THE REVENUE FOR DISBELIEVING LONG TERM CAPITAL GAIN S, DID NOT MENTION THE NAMES OF THE CONCERNED ASSESSEES CLEARLY. AS AG AINST THIS, THE CASE OF THE REVENUE HERE IS THAT ASSESSEES NAME WERE ME NTIONED BY SHRI PRAKASH KUMAR JOJODIA IN THE STATEMENT RECORDED FRO M HIM. THUS THE STATEMENT OF SHRI. PRAKSH KUMAR JOJODIA WAS THE CR UCIAL LINK FOR DISBELIEVING THE LONG TERM CAPITAL GAINS CLAIMED BY THE ASSESSEE. RULES ITA NOS.1819 & 1820 /MDS/2017 :- 17 -: OF NATURE JUSTICE, IN MY OPINION REQUIRED SUCH STAT EMENT TO BE GIVEN TO THE ASSESSEE. NEITHER WAS IT GIVEN NOR ASSESSEE G IVEN AN OPPORTUNITY TO CROSS EXAMINE SHRI. PRAKASH KUMAR J OJODIA. NO DOUBT ASSESSEE HAD FILED AN AFFIDAVIT FROM SHRI. PRAKASH KUMAR JOJODIA RETRACTING HIS EARLIER STATEMENT. THIS WILL NOT I N MY OPINION ABSOLVE THE REVENUE FROM ITS DUTY TO PLACE BEFORE THE ASSES SEE THE STATEMENT OF SHRI. PRAKASH KUMAR JOJODIA RELIED ON BY THEM FO R DISBELIEVING THE LONG TERM CAPITAL GAINS CLAIMED BY THE ASSESSEE. TH E ENTIRE ADDITION EMANATED FROM THE STATEMENT GIVEN SHRI. PRAKASH KUM AR JOJODIA AND A FINDING THAT PRICES OF THE SHARES OF M/S. QUEST FIN ANCIAL SERVICE LTD WERE ARTIFICIALLY JACKED UP. IN MY OPINION SALE OF THE SHARES, HAVING BEEN DONE RECOGNIZED STOCK EXCHANGE AND SALE CONSI DERATION HAVING BEEN RECEIVED THROUGH BANKING CHANNELS, THE SALE AS SUCH OUGHT NOT HAVE BEEN DISBELIEVED UNLESS THERE WERE STRONG REA SONS FOR DISBELIEVING THE CLAIM. IN THE CIRCUMSTANCES, I AM OF THE OPINION THAT THE ISSUE REQUIRES A FRESH LOOK BY THE LD. ASSESSIN G OFFICER. LD. ASSESSING OFFICER HAS TO GIVE A COPY OF THE STATEME NT OF SHRI. PRAKASH KUMAR JOJODIA TO THE ASSESSEE SO THAT THEY CAN PLAC E THEIR OBJECTIONS. LD. ASSESSING OFFICER HAS TO CONSIDER THE MERITS OF THE OBJECTIONS IF ANY FILED BY THE ASSESSEE, AND IF REQUIRED THE ASSESSE ES SHALL BE GIVEN AN OPPORTUNITY TO CROSS EXAMINE SHRI. PRAKASH KUMAR JO JODIA. LD. ASSESSING OFFICER ALSO NEEDS TO VERIFY THE FINANCIA LS OF M/S. QUEST ITA NOS.1819 & 1820 /MDS/2017 :- 18 -: FINANCIAL SERVICES LTD BEFORE COMING TO A CONCLUSIO N THAT ITS SHARE PRICES WERE JACKED UP. NEEDLESS TO MENTION IF THE NAME OF THE ASSESSEES ARE NOT APPEARING IN THE STATEMENT OF SHR I. PRAKASH KUMAR JOJODIA, TRANSACTIONS GIVING RISE TO THE LONG TERM CAPITAL GAINS CANNOT BE DISBELIEVED, UNLESS THERE ARE OTHER VERY STRON G REASONS FOR DOING SO. WITH THESE DIRECTIONS, I SET ASIDE THE ORDER S OF THE LOWER AUTHORITIES AND REMIT THE ISSUE BACK TO THE FILE O F THE LD. ASSESSING OFFICER FOR CONSIDERATION AFRESH IN ACCORDANCE WITH LAW. 14. IN THE RESULT, APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THURSDAY, THE 21ST DAY OF DECEMBER, 2017, AT CHENNAI. SD/- ( . ) (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED:21ST DECEMBER, 2017 KV &' ()*) / COPY TO: 1 . / APPELLANT 3. +,- / CIT(A) 5. )./ 0 / DR 2. / RESPONDENT 4. + / CIT 6. /12 / GF