Prakash Baid HUF, Kolkata V. I.T.O.,Ward-35(1), Kolkata

ITA 1833/KOL/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 2482 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 01-09-2021
• Assessment Year: 2015-2016
• Appeal Filed On: 05-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Capital Gains; Bogus
• Section: 68; 143(3); 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA A (SMC) BENCH, KOLKATA (BEFORE SRI SANJAY GARG, JUDICIAL MEMBER) I.T.A. NO. 1833/KOL/2019 ASSESSMENT YEAR: 2015-16 PRAKASH BAID HUF.......................................................................................APPELLANT [PAN: AAFHP 7168 F] VS. ITO, WARD-35(1), KOLKATA.....................................................................RESPONDENT APPEARANCES BY: SH. YASH BAID, A/R, APPEARED ON BEHALF OF THE ASSESSEE. SH. JAYANTA KHANRA, JCIT, SR. D/R, APPEARED ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : SEPTEMBER 1 ST , 2021 DATE OF PRONOUNCING THE ORDER : OCTOBER 28 TH , 2021 ORDER PER SANJAY GARG, JUDICIAL MEMBER : THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 27.05.2019 OF THE COMMISSIONER OF INCOME TAX (APPEALS)-10, KOLKATA [HEREINAFTER REFERRED TO AS CIT(A)]. 2. THE ASSESSEE IN THIS APPEAL HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER U/S 143(3) & U/S.250 OF THE INCOME TAX ACT, 1961 IS BAD IN LAW AS THE LD A.O. & LD. CIT(A) MADE ADDITIONS OF RS. 36,90,000/- BASED ON SURMISES AND IGNORING THE EVIDENCES/DOCUMENTS FILED BEFORE HIM. RS.15,23,120/ 2. THAT THE LD. ASSESSING OFFICER ERRED IN LAW AS WELL AS ON FACTS IN PASSING THE FINAL ORDER OF ASSESSMENT WITHOUT PROVIDING THE OPPORTUNITY OF CROSS VERIFICATION OR CROSS EXAMINATION OF DOCUMENTS & STATEMENTS RELIED UPON BY HIM WHICH AS PER HIM POINTED OUT THE A AS A BENEFICIARY OF SUCH ALLEGED BOGUS LTCG. RS.15,23,120/ 3. THE 'A' CRAVES LEAVE TO ADD, ALTER, AMEND, DELETE, SUBSTITUTE ANY OF THE GROUNDS AND/OR TAKE ADDITIONAL GROUND/S BEFORE OR AT ANY TIME OF HEARING OF THIS APPEAL. 2 I.T.A. NO. 1833/KOL/2019 ASSESSMENT YEAR: 2015-16 PRAKASH BAID HUF. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A HUF AND HAS FILED ITS RETURN OF INCOME SHOWING INCOME FROM OTHER SOURCE OF 6,39,455/- AND 21,125/- AS NET AGRICULTURAL INCOME. THE ASSESSEE CLAIMED TAX EXEMPT LONG TERM CAPITAL GAINS OF 35,65,842/- FROM THE SALE OF SHARES OF M/S. GCM SECURITIES LTD. THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) OBSERVED THAT THERE WAS A SHARP INCREASE IN THE SALE PRICE OF THE SHARES OF M/S. GCM SECURITIES LTD. AS COMPARED TO THE OTHER SHARES. THE AO OBSERVED THAT A HUGE AMOUNT WAS EARNED IN THE AFORESAID TRANSACTION IN RELATION TO THE SHARE OF M/S. GCM SECURITIES LTD. WITHIN A SHORT SPAN OF 16 MONTHS. THE AO TOOK NOTE OF ALL THE INVESTIGATION WING REPORT WHEREIN MODUS OPERANDI WAS EXPLAINED AS HOW SOME COMPANIES WERE MISUSING THE EXEMPTION ON LONG TERM CAPITAL GAINS. THE AO TAKING NOTE OF SUCH A PRACTICE MADE BY SOME COMPANIES DESPITE HAVING LOW FINANCIAL CREDENTIALS, OF SHOWING LONG TERM CAPITAL GAINS BY WAY OF BOGUS TRANSACTIONS AND HELD THAT THE TRANSACTION OF LONG TERM CAPITAL GAINS BY THE ASSESSEE IN RESPECT OF M/S. GCM SECURITIES LTD. WAS BOGUS TRANSACTION AND MADE ADDITION OF 36,90,000/- AS UNEXPLAINED INCOME OF THE ASSESSEE U/S 68 OF THE ACT. BEING AGGRIEVED BY THE ACTION OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) BUT REMAINED UNSUCCESSFUL. 3. BEING AGGRIEVED, THE ASSESSEE HAS COME IN APPEAL BEFORE THIS TRIBUNAL. 4. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE PAPERS ON RECORD. THE LD. COUNSEL FOR THE ASSESSEE HAS MADE THE FOLLOWING WRITTEN SUBMISSIONS: THE APPELLANT ASSESSEE, HEREIN AFTER REFERRED TO AS ASSESSEE, IS A HINDU UNDIVIDED FAMILY (HUF). THE A PRE-DOMINANTLY EARNS DIVIDEND FROM INVESTMENTS MADE, INTEREST INCOME FROM DEPOSITS/LOANS, GAINS ARISING FROM SALE OF INVESTMENTS AND MINOR AGRICULTURAL INCOME EARNED FROM AGRICULTURAL LAND. 3 I.T.A. NO. 1833/KOL/2019 ASSESSMENT YEAR: 2015-16 PRAKASH BAID HUF. THE RETURN OF INCOME FOR F.Y. 2014-15 RELATING TO A.Y. 2015-16 WAS FILED ON 27/08/2015 SHOWING A TOTAL INCOME OF RS. 4,79,600/-. THE ASSESSEES CASE WAS SELECTED FOR COMPLETE SCRUTINY THROUGH CASS AND ACCORDINGLY THE ASSESSMENT ORDER U/S 143(3) OF THE INCOME TAX ACT, 1961 WAS PASSED ON 27/12/2017 AFTER MAKING AN ADDITION OF RS.36,90,000/- (ASSESSED INCOME: RS 41,69,400/-). THE ASSESSEE APPLIED FOR/ PURCHASED SHARES OF GCM SECURITIES LTD. ON 04/04/13 AND WAS ALLOTTED THE SAME AND THE SHARES WERE DULY RECEIVED IN THE ASSESSEES DEMAT ACCOUNT, (EVIDENCING THE PURCHASE AND ACTUAL DELIVERY OF THE SAME). AFTER HOLDING THE SHARES FOR A PERIOD OF ALMOST 16 MONTHS, THE ASSESSEE FINALLY SOLD THE SHARES THROUGH A SEBI REGISTERED BROKER, M/S. EAST INDIA SECURITIES LTD., ON 6 TH , 7 TH AND 8 TH AUGUST, 2014. THE SALES WERE MADE THROUGH A RECOGNIZED STOCK EXCHANGE THROUGH THE ONLINE MECHANISM AND THE SALE PROCEEDS WERE DIRECTLY RECEIVED IN THE ASSESSEES BANK ACCOUNT. THE ASSESSEE WAS SUBJECTED TO STT ON SUCH SALE. THE SYSTEM GENERATED, TIME-STAMPED CONTRACT NOTES AS WELL AS THE DEMAT ACCOUNT OF THE ASSESSEE EVIDENCING THE SALE AND THE ACTUAL DELIVERY OF THE SHARES FROM THE ACCOUNT OF THE ASSESSEE, WAS SUBMITTED DURING THE ASSESSMENT PROCEEDING AND IN ON RECORD. THE LD. A.O. IN HIS ORDER U/S 143(3), RELIED UPON A GENERALIZED MODUS OPERANDI BASED UPON GENERALIZED OBSERVATIONS AND ONLY RECOMMENDATIONS OF THE SPECIAL INVESTIGATION TEAM ON BLACK MONEY. > NO SPECIFIC FINDING OR EVIDENCES OR REPORT AGAINST THE ASSESSEE. > NO MENTION OR WHISPER OF THE ASSESSEE AS A BENEFICIARY OF SUCH ALLEGED MANIPULATION. > NO DOCUMENTS/ REPORTS/ STATEMENTS WERE PROVED TO THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. THAT THE STATEMENT OF MR. ANUJ AGARWAL, DIRECTOR OF M/S. KORP SECURITES P. LTD., IS IRRELEVANT AS IT IS A GENERALIZED STATEMENT AND DOES NOT MENTION/ SPECIFY THE ASSESSEE AS A BENEFICIARY AT ALL. IN FACT IT DOES NOT EVEN WHISPER ABOUT THE ASSESSEE, NOWHERE IN THE STATEMENT, DOES THE NAME OF THE A AS A BENEFICIARY OF SUCH ALLEGED BOGUS CAPITAL GAIN, IS MENTIONED. MOREOVER, MR. ANUJ AGARWAL IS NEITHER A MEMBER NOR A RELATIVE OF THE ASSESSEES MEMBERS. HOW HIS GENERAL STATEMENT HAS BEEN TAKEN TO BE THE GOSPEL TRUTH IN THE ASSESSMENT OF THE ASSESSEE IS BEYOND OUR UNDERSTANDING. THE LD. A.O. HAD NO BASIS OR EVIDENCE TO FORM AN OPINION THAT ASSESSEE WAS A PART OF SUCH SCAM AND YET PROCEEDED TO DISALLOW THE BONA FIDE LTCG EARNED BY THE ASSESSEE. IT IS PERTINENT TO NOTE HERE THAT THE STATEMENT OF MR. ANUJ AGARWAL AS RELIED UPON BY THE LD. A.O. WAS NEVER FURNISHED/PRODUCED TO THE ASSESSEE DURING ASSESSMENT PROCEEDINGS EVEN THOUGH SPECIALLY ASKED FOR BY THE ASSESSEE AGAIN 4 I.T.A. NO. 1833/KOL/2019 ASSESSMENT YEAR: 2015-16 PRAKASH BAID HUF. AND AGAIN DURING THE ASSESSMENT PROCEEDING. THE LD. A.O. MADE IT A PART OF HIS ASSESSMENT ORDER WITHOUT EVEN PRESENTING IT TO THE ASSESSEE. SUCH AN ACTION IS UNJUSTIFIED AND AGAINST NATURAL JUSTICE. FURTHERMORE, IT IS PERTINENT TO NOTE THAT AS AGAINST THE CLAIM OF THE LD. A.O., THE SALES TURNOVER OF M/S GCM SECURITIES LTD. INCREASED FROM RS. 54 LACS IN THE F.Y. 2012-13 TO RS. 12.08 CRORES IN THE F.Y. 2013-14 (AN INCREASE OF ALMOST 22 TIMES OR A 2200% INCREASE FROM THE PREVIOUS YEAR) THAT DURING THE YEAR, THE ASSESSEE HAD EARNED LTCG FROM SALE OF EQUITY SHARES OF TWELVE DIFFERENT COMPANIES TOTALLING TO RS. 97,37,980/-. SINGLING OUT THE LTCG EARNED FROM INVESTMENT IN M/S GCM SECURITIES LTD. AND TREATING IT AS BOGUS IS WRONG AND DOES NOT STAND MERIT ON FACTS AND IN THE EYES OF LAW. THE LD. A.O. HAS GENERALIZED THE ENTIRE ASSESSMENT AND PROCEEDED WITH A PREDETERMINED MOTIVE OF CALLING THE TRANSACTION AS A SHAM, WITHOUT ANY SPECIFIC EVIDENCE AGAINST THE ASSESSEE. THE ASSESSEE HAD ASKED THE LD. A.O. TO PROVIDE SUCH STATEMENTS OF OUR BROKERS OR STOCK EXCHANGE WHEREIN THE ASSESSEE IS SPECIFIED AS A BENEFICIARY OF SUCH BOGUS TRANSACTION BUT NO SUCH STATEMENTS OR EVIDENCES WERE EVER PROVIDED OR PRODUCED BY THE LD. A.O. NO SUCH EVIDENCES WERE BROUGHT FORWARD THAT WOULD RENDER THE DOCUMENTS AND EVIDENCES SUBMITTED BY THE ASSESSEE, AS FALSE OR SHAM. THE LD. A.O. HAS SIMPLY PROCEEDED TO MAKE THE DISALLOWANCES ON PRESUMPTIONS AND SURMISES AND HAS SHOWN A COMPLETE DISREGARD FOR THE DIRECT EVIDENCES RELATING TO THE SALE/ALLOTMENT TRANSACTIONS SUPPORTED BY BROKERS CONTRACT NOTES, ALLOTMENT LETTER, DEMAT ACCOUNT STATEMENTS AND BANK STATEMENTS AS WERE DULY PROVIDED BY THE ASSESSEE. NO OPPORTUNITY OF CROSS-EXAMINATION WAS MADE AVAILABLE TO THE ASSESSEE. NOT ONLY SHOULD THE OPPORTUNITY OF CROSS-EXAMINATION BE MADE AVAILABLE, BUT IT SHOULD BE ONE OF EFFECTIVE CROSS-EXAMINATION SO AS TO MEET THE REQUIREMENT OF THE PRINCIPLES OF NATURAL JUSTICE. IN THE ABSENCE OF SUCH AN OPPORTUNITY, IT CANNOT BE HELD THAT THE MATTER HAS BEEN DECIDED IN ACCORDANCE WITH LAW, AS CROSS-EXAMINATION IS AN INTEGRAL PART AND PARCEL OF THE PRINCIPLES OF NATURAL JUSTICE. THE DISALLOWANCE MADE BY LD A.O. HAS BEEN ABSOLUTELY GENERALIZED IN NATURE WHICH IS AGAINST NATURAL JUSTICE & ERRONEOUS IN THE EYES OF LAW AS WELL AS FACTS. THE DISALLOWANCE NEEDS TO BE QUASHED & JUSTICE RESTORED. HENCE, THE ORDER PASSED U/S 143(3) FOR THE A.Y.2015-16 BY THE LD A.O. IS BAD IN LAW AS WELL AS INVALID. 5. THE LD. D/R ON THE OTHER HAND, HAS RELIED UPON THE OBSERVATIONS MADE BY THE AO AND THE IMPUGNED ORDER OF THE LD. CIT(A). 5 I.T.A. NO. 1833/KOL/2019 ASSESSMENT YEAR: 2015-16 PRAKASH BAID HUF. 6. IN VIEW OF THE AFORESAID SUBMISSIONS MADE BY THE LD. COUNSEL FOR THE ASSESSEE AND AFTER GOING THROUGH THE IMPUGNED ORDERS OF THE LOWER AUTHORITIES, I FIND THAT IN THIS CASE THE AO HAS MADE THE ADDITION WITHOUT HAVING IN HIS POSSESSION ANY INCRIMINATING DOCUMENT/EVIDENCE AGAINST THE ASSESSEE TO SHOW THAT THE TRANSACTION MADE BY THE ASSESSEE IN CASE OF M/S. GCM SECURITIES LTD. WAS BOGUS. THE LD. AO HAS SIMPLY RELIED ON THE GENERAL MODUS OPERANDI OF THE COMPANIES OF EXAGGERATING THE SHARE PRICE FOR THE PURPOSE OF CREATING LONG TERM CAPITAL GAINS ETC. HOWEVER, NO SPECIFIC LINK OF THE ASSESSEE WITH ANY SUCH BOGUS TRANSACTION HAS BEEN ESTABLISHED. MOREOVER, DURING THE YEAR THE ASSESSEE HAS EARNED LONG TERM CAPITAL GAINS FROM SALE OF EQUITY SHARES OF TWELVE COMPANIES TOTALLING TO 97,37,980/-. HOWEVER, THE AO HAS SINGLED OUT THE LONG TERM CAPITAL GAINS FROM INVESTMENT IN M/S. GCM SECURITIES LTD. ONLY AND TREATED THE SAME BOGUS THAT TOO WITHOUT BRINGING ANY RELIABLE INCRIMINATING EVIDENCE AGAINST THE ASSESSEE. ADDITION CANNOT BE MADE ON THE BASIS OF GENERALIZED OPINION WITHOUT ANY EVIDENCE OF ANY MALPRACTICE ON THE PART OF THE ASSESSEE. IN VIEW OF THIS, I DO NOT FIND ANY JUSTIFICATION ON THE PART OF THE LOWER AUTHORITIES IN MAKING/SUSTAINING THE IMPUGNED ADDITIONS AND THE SAME ARE ACCORDINGLY ORDERED TO BE DELETED. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 28.10.2021. SD/- [ SANJAY GARG ] JUDICIAL MEMBER DATED: 28.10.2021 BIDHAN (P.S.) 6 I.T.A. NO. 1833/KOL/2019 ASSESSMENT YEAR: 2015-16 PRAKASH BAID HUF. COPY OF THE ORDER FORWARDED TO: 1. PRAKASH BAID HUF, 313, TODI CHAMBERS, 2, LAL BAZAR STREET, KOLKATA-700 001. 2. ITO, WARD-35(1), KOLKATA. 3. CIT(A)-10, KOLKATA. (SENT THROUGH MAIL) 4. CIT- 5. CIT(DR), KOLKATA BENCHES, KOLKATA. (SENT THROUGH MAIL) TRUE COPY BY ORDER ASSISTANT REGISTRAR/DDO ITAT, KOLKATA BENCHES