M/s. Mahendra Kumar Jhawar and Sons, HUF, Kolkata V. ITO, Ward - 35(4), Kolkata , Kolkata

ITA 1834/KOL/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0786 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 27-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Unexplained expenditure; Wrong claim; Accommodation entries; Scheme of amalgamation; Capital Gains; Bogus
• Section: 68; 69C; 143(3); 20

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 1834 / KOL / 20 18 ASSESSMENT YEAR :2015-16 M/S MAHENDRA KUMAR JHAWAR AND SONS HUF, 14/2 3 RD FLOOR, R.NO. 223, BHIKAM CHAND MARKET, OLD CHINA BAZAR ST. BRABOUARNE ROAD,KOLKATA-001 [ PAN NO.AAGHM 5078 N ] V/S . INCOME TAX OFFICER, WARD-NO.35(4), 110 SHANTIPALLY, NR. RUBY HOSPITL, E.M. BYE PASS,KOLKAKTA-17 /APPELLANT .. / RESPONDENT ITA NO.2019/KOL/2018 ASSESSMENT YEAR :2014-15 SHRI MANOJ KUMAR DUGAR 18B SUKEAS LANE, KOLKATA-700001 [ PAN NO.ADPPD 7177 D ] V/S . INCOME TAX OFFICER, WARD-NO.35(4), 110 SHANTIPALLY, NR. RUBY HOSPITL, E.M. BYE PASS,KOLKAKTA-17 /APPELLANT .. / RESPONDENT /BY ASSESSEE SHRI S.M. SURANA, ADVOCATE /BY RESPONDENT SHRI ROBIN CHOUDHURY, ADDL CIT-SR-DR /DATE OF HEARING 19-11-2018 /DATE OF PRONOUNCEMENT 30-11-2018 / O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THESE TWO ASSESSEES HAVE FILED THEIR INSTANT RESPEC TIVE APPEAL(S) FOR ASSESSMENT YEARS 2015-15 & 2014-15 AGAINST THE COMM ISSIONER OF INCOME TAX (APPEALS)-10 KOLKATAS SEPARATE ORDER(S) DATED 19.07.2018 AND ITA NO.1834 & 2019/KOL/2018 A.YS 15-16 & 1 4-15 M/S MAHENDRA KR. JHAWAR SH. MANOJ KR. DUGAR VS. ITO WD-35(4), KOL. PAGE 2 24.08.2018 PASSED IN CASE NO.1018/CIT(A)-10/W-35(4) /2015-16/2017-18/KOL & 357/CIT(A)-10/W-35(4)/2014-15/2016-17/KOL, INVOLV ING PROCEEDINGS U/S. 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE A CT. 2. WE HAVE HEARD THESE TWO APPEAL(S) TOGETHER SINCE INVOLVING IDENTICAL QUESTION OF CORRECTNESS OF THIS ASSESSEES CLAIM HA VING DERIVED LONG / SHORT TERM CAPITAL GAINS TREATED AS UNEXPLAINED CASH CRED ITS IN ASSESSMENT AND LOWER APPELLATE PROCEEDINGS. WE THUS TREAT FORMER A PPEAL ITA NO.1834/KOL/2018 TO BE THE LEAD CASE. 3. THE ASSESSEES SOLE SUBSTANTIVE GROUND PLEADED I N THE INSTANT APPEAL IS THAT BOTH THE LOWER AUTHORITIES ERRED IN LAW AS WEL L AS ON FACTS IN TREATING ITS LTCG OF 5,52,796/- ON SALE OF SHARES HELD IN M/S KAILASH AU TO FINANCE LTD. TO BE UNEXPLAINED CASH CREDITS U/S 68 OF THE ACT. 4. MR. CHOUDHURY VEHEMENTLY CONTENDS DURING THE COU RSE OF HEARING THAT BOTH THE LOWER AUTHORITIES HAVE RIGHTLY TREATED ASS ESSEES CAPITAL GAINS DERIVED FROM SUSPICIOUS TRANSACTIONS IN COLLUSION WITH VARI OUS ENTRIES AND OPERATORS AS UNEXPLAINED CASH CREDITS U/S 68 OF THE ACT. WE FIND THAT THIS TRIBUNALS CO- ORDINATE BENCHS DECISION IN ITA NO.1335-1340/KOL/2 018 BANWARI LAL SARAF (HUF) & OTHERS VS. ITO DECIDED ON 17.10.2018 HAS RE JECTED REVENUES SIMILAR CONTENTION REGARDING ALLEGING ARTIFICIAL RI GGING OF SHARES IN M/S KAILASH AUTO FINANCE LTD. AS FOLLOWS:- 2. THE COMMON ISSUES INVOLVED IN THESE APPEALS RELA TE TO THE CONFIRMATION BY THE LD. CIT(A) OF THE ACTION OF THE AO IN DISALLOWING T HE CLAIM OF THE ASSESSEE FOR EXEMPTION ON ACCOUNT OF LONG TERM CAPITAL GAIN ARI SING FROM THE SALE OF SHARES OF M/S. KAILASH AUTO FINANCE LTD. BY TREATING THE SAME AS BOGUS AND ADDING THE ENTIRE PROCEEDS OF SUCH SALE U/S 68 BY TREATING THE SAME A S UNEXPLAINED CASH CREDIT AND ALSO MAKING A FURTHER ADDITION ON ACCOUNT OF THE CO MMISSION ALLEGEDLY PAID BY THE ASSESSEE FOR OBTAINING THE ENTRIES FOR MAKING SUCH BOGUS CLAIM OF LONG TERM CAPITAL GAIN BY TREATING THE SAME AS UNEXPLAINED EXPENDITUR E. THE AMOUNTS SO ADDED BY THE AO AND CONFIRMED BY THE LD. CIT(A), WHICH ARE IN DI SPUTE IN THE PRESENT APPEALS, ARE AS UNDER: ITA NO. NAME OF THE ASSESSEE ADDITION U/S 68 ADDITION U/S 69C 1335/K/2018 BANWARILAL SARAF (HUF) RS.34,75,674/- RS.6,741/- 1336/K/2018 SWETA SARAF RS.34,48,756/- RS.17,244/- 1337/K/2018 SONAL SARAF RS.33,39,382/- RS.16,697/- 1338/K/2018 VIVK SARAF (HUF) RS.33,89,500/- - 1339/K/2018 SUSHILA DEVI SARAF RS.34,67,372/- RS.17 ,337/- 1340/K/2018 VINAY SARAF (HUF) RS.34,28,175/- - ITA NO.1834 & 2019/KOL/2018 A.YS 15-16 & 1 4-15 M/S MAHENDRA KR. JHAWAR SH. MANOJ KR. DUGAR VS. ITO WD-35(4), KOL. PAGE 3 3. THE RELEVANT FACTS, WHICH ARE ALMOST IDENTICAL I N ALL THESE CASES, ARE THAT THE ASSESSEES IN THE PRESENT CASES HAD INITIALLY PURCHA SED SHARES OF CERTAIN UNLISTED COMPANIES SUCH AS M/S. PANCHSHUL MARKETING LTD. ETC . FROM M/S. BRIJDHARA MERCANTILE PVT. LTD. IN THE F.Y. 2012-13 THROUGH CH EQUES. LATER ON, THE SAID COMPANIES WERE AMALGAMATED WITH M/S. KAILASH AUTO F INANCE LTD. AND AS PER THE SCHEME OF AMALGAMATION DULY APPROVED BY THE HON'BLE ALLHABAD HIGH COURT, THE ASSESSEES WERE ALLOTTED SHARES OF KAILASH AUTO FINA NCE LTD. THE SHARES SO ALLOTTED IN DEMATERIALISED FORM WERE DULY CREDITED IN THE AC COUNTS OF THE ASSESSEES. EACH OF THE SIX ASSESSEES IN THE PRESENT CASES SOLD 90,000 EQUITY SHARES SO ALLOTTED ON DIFFERENT DATES DURING THE PREVIOUS YEAR RELEVANT T O THE ASSESSMENT YEAR UNDER CONSIDERATION AND CLAIMED THE LONG TERM CAPITAL GAI N ARISING FROM SUCH SALE AS EXEMPT FROM TAX U/S 10(38) OF THE ACT. DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, THE CLAIM OF THE ASSESSEES FOR SUCH EXEMPTION WAS E XAMINED BY THE AD AND ON SUCH EXAMINATION, HE HELD FOR THE DETAILED REASON GIVEN IN THE ASSESSMENT ORDERS THAT THE CLAIM OF THE ASSES SEES FOR LONG TERM CAPITAL GAIN WAS BOGUS IN AS MUCH AS THE ENTIRE TRANSACTIONS GIVING RISE TO SUCH LONG TERM CAPITAL GAINS WERE ACCOMMODATION ENTRIES. ACCORDINGLY, THE ENTIRE PROCEEDS OF SALE OF SHARES CREDITED IN THE BOOKS OF THE ASSESSEES WERE TREATED BY THE AD AS UNEXPLAINED CAS H CREDITS AND ADDITIONS TO THAT EXTENT WERE MADE BY HIM TO THE TOTAL INCOME OF THE ASSESSEES U/S 68. HE ALSO TREATED THE COMMISSION ALLEGEDLY PAID BY THE ASSESSEE FOR O BTAINING SUCH ACCOMMODATION ENTRIES AS UNEXPLAINED EXPENDITURE AND ADDITIONS ON THIS COUNT WERE MADE BY HIM TO THE TOTAL INCOME OF THE ASSESSEES U/S 69C OF THE AC T. ON APPEAL, THE LD. CIT(A) CONFIRMED THESE ADDITIONS MADE BY THE A.D. IN CASE OF ALL THE SIX ASSESSEES. AGGRIEVED BY THE ORDERS OF THE LD. CIT(A), THE ASSE SSEES HAVE PREFERRED THESE APPEALS BEFORE THE TRIBUNAL. 4. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS SUBMITTED BY THE L EARNED COUNSEL FOR THE ASSESSEE, SIMILAR ISSUES INVOLVING IDENTICAL FACTS HAD COME U P FOR CONSIDERATION BEFORE THE DIVISION BENCH OF THIS TRIBUNAL IN THE CASE OF MANI SH KUMAR BAID AND MAHENDRA KUMAR BAID AND VIDE ITS ORDER DATED 18.08.2017 PASS ED IN ITA NOS. 1236 & 1237/K/2017, THE TRIBUNAL DELETED THE SIMILAR ADDIT IONS MADE BY THE A.O. U/S 68 FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO. 6 OF I TS ORDER: 6. WE HAVE HEARD BOTH THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND LOT OF FORCE IN THE AR GUMENTS OF THE ID AR THAT THE ID AO WAS NOT JUSTIFIED IN REJECTING THE CLAIM OF T HE ASSESSEE ON THE BASIS OF THEORY OF SURROUNDING CIRCUMSTANCES, HUMAN CONDUCT, AND PREPONDERANCE OF PROBABILITY WITHOUT BRINGING ON RECORD ANY LEGAL EV IDENCE AGAINST THE ASSESSEE. WE RELY ON THE JUDGEMENT OF SPECIAL BENCH OF MUMBAI TRIBUNAL IN THE CASE OF GTC INDUSTRIES LTD. (SUPRA) FOR THIS PR OPOSITION. THE VARIOUS FACETS OF THE ARGUMENTS OF THE ID AR SUPRA, WITH REGARD TO IMPLEADING THE ASSESSEE FOR DRAWING ADVERSE INFERENCES WHICH REMAIN UNPROVE D BASED ON THE EVIDENCES AVAILABLE ON RECORD, ARE NOT REITERATED F OR THE SAKE OF BREVITY. THE PRINCIPLES LAID DOWN IN VARIOUS CASE LAWS RELIED UP ON BY THE ID AR ARE ALSO NOT REITERATED FOR THE SAKE OF BREVITY. WE FIND THAT TH E AMALGAMATION OF CPAL WITH KAFL HAS BEEN APPROVED BY THE ORDER OF HON 'BLE HIG H COURT. THE ID AO OUGHT NOT TO HAVE QUESTIONED THE VALIDITY OF THE AM ALGAMATION SCHEME APPROVED BY THE HON'BLE HIGH COURT IN MAY 2013 MERE LY BASED ON A STATEMENT GIVEN BY A THIRD PARTY WHICH HAS NOT BEEN SUBJECT TO CROSS - EXAMINATION. MOREOVER, IT IS ALSO PERTINENT TO NOTE THAT THE ASSESSEE AND / OR THE STOCK BROKER ASHITA STOCK BROKING LTD NAME IS N EITHER MENTIONED IN THE SAID STATEMENT AS A PERSON WHO HAD ALLEGEDLY DEALT WITH SUSPICIOUS TRANSACTIONS NOR THEY HAD BEEN THE BENEFICIARIES OF THE TRANSACTIONS OF SHARES OF KAFL. HENCE WE HOLD THAT THERE IS ABSOLUTELY NO ADVERSE MATERIAL TO ITA NO.1834 & 2019/KOL/2018 A.YS 15-16 & 1 4-15 M/S MAHENDRA KR. JHAWAR SH. MANOJ KR. DUGAR VS. ITO WD-35(4), KOL. PAGE 4 IMPLICATE THE ASSESSEE TO THE ENTIRE GAMUT OF UNWAR RANTED ALLEGATIONS LEVELLED BY THE ID AO AGAINST THE ASSESSEE, WHICH IN OUR CON SIDERED OPINION, HAS NO LEGS TO STAND IN THE EYES OF LAW. WE FIND THAT THE ID DR COULD NOT CONTROVERT THE ARG UMENTS OF THE ID AR WITH CONTRARY MATERIAL EVIDENCES ON RECORD AND MERELY RE LIED ON THE ORDERS OF THE LOWER AUTHORITIES APART FROM PLACING THE COPY OF SE BI'S INTERIM ORDER SUPRA. WE FIND THAT THE SEBI'S ORDERS RELIED ON BY THE ID AO AND REFERRED TO HIM AS DIRECT EVIDENCE AGAINST THE ASSESSEE DID NOT CONTAI N THE NAME OF THE ASSESSEE AND/OR THE NAME OF ASHIKA STOCK BRAKING LT D. THROUGH WHOM THE ASSESSEE SOLD THE SHARES OF KAFL AS A BENEFICIARY T O THE ALLEGED ACCOMMODATION ENTRIES PROVIDED BY THE RELATED ENTIT IES / PROMOTERS / BROKERS / ENTRY OPERATORS. IN THE INSTANT CASE, THE SHARES OF CPAL WERE PURCHASED BY THE ASSESSEE WAY BACK ON 20.12.2011 AND PURSUANT TO MERGER OF CPAL WITH KAFL, THE ASSESSEE WAS ALLOTTED EQUAL NUMBER OF SHA RES IN KAFL, WHICH WAS SOLD BY THE ASSESSEE BY EXITING AT THE MOST OPPORTU NE MOMENT BY MAKING GOOD PROFITS IN RUDER TO HAVE A GOOD RETURN ON HIS INVESTMENT. WE FIND THAT THE ASSESSEE AND / OR THE BROKER ASHITA STOCK BROKING L TD. WAS NOT THE PRIMARY ALLOTTEES OF SHARES EITHER IN CPAL OR IN KAFL AS CO ULD BE EVIDENT FROM THE SEBL'S ORDER. WE FIND THAT THE SEBI ORDER DID MENTI ON THE LIST OF 246 BENEFICIARIES OF PERSONS TRADING IN SHARES OF KAFL, WHEREIN, THE ASSESSEE AND / OR ASHITA STOCK BROKING LTD'S NAME IS NOT REF LECTED AT ALL. HENCE THE ALLEGATION THAT THE ASSESSEE AND / OR ASH ITA STOCK BROKING LTD GETTING INVOLVED IN PRICE RIGGING OF KAFL SHARES FA ILS. WE ALSO FIND THAT EVEN THE SEBI'S ORDER HEAVILY RELIED UPON BY THE ID AO C LEARLY STATES THAT THE COMPANY KAFL HAD PERFORMED VERY WELL DURING THE YEA R UNDER APPEAL AND THE P/E RATIO HAD INCREASED SUBSTANTIALLY. THUS WE HOLD THAT THE SAID ORDERS OF SEBI IS NO EVIDENCE AGAINST THE ASSESSEE, MUCH LESS TO SPEAK OF DIRECT EVIDENCE. THE ENQUIRY BY THE INVESTIGATION WING AND /OR THE STATEMENTS OF SEVERAL PERSONS RECORDED BY THE INVESTIGATION WING IN CONNECTION WITH THE ALLEGED BOGUS TRANSACTIONS IN THE SHARES OF KAFL AL SO DID NOT IMPLICATE THE ASSESSEE AND/OR HIS BROKER. IT IS ALSO A MATTER OF RECORD THAT THE ASSESSEE FURNISHED ALL EVIDENCES IN THE FORM OF BILLS, CONTR ACT NOTES, DEMAT STATEMENTS AND THE BANK ACCOUNTS TO PROVE THE GENUINENESS OF T HE TRANSACTIONS RELATING TO PURCHASE AND SALE OF SHARES RESULTING IN LTCG. T HESE EVIDENCES WERE NEITHER FOUND BY THE ID AO TO BE FALSE OR FABRICATE D. THE FACTS OF THE CASE AND THE EVIDENCES IN SUPPORT OF THE ASSESSEE'S CASE CLE ARLY SUPPORT THE CLAIM OF THE ASSESSEE THAT THE TRANSACTIONS OF THE ASSESSEE WERE BONA FIDE AND GENUINE AND THEREFORE THE ID AO WAS NOT JUSTIFIED I N REJECTING THE ASSESSEE'S CLAIM OF EXEMPTION UNDER SECTION 10(38) OF THE ACT. WE ALSO FIND THAT THE VARIOUS CASES LAWS OF HON'BLE JURISDICTIONAL HIGH C OURT RELIED UPON BY THE ID. AR AND FINDINGS GIVEN THEREON WOULD APPLY TO THE FA CTS OF THE INSTANT CASE. THE ID. DR WAS NOT ABLE TO FURNISH ANY CONTRARY CAS ES TO THIS EFFECT. HENCE WE HOLD THAT THE ID. AO WAS NOT JUSTIFIED IN ASSESSING THE SALE PROCEEDS OF SHARES OF KAFL AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 6 8 OF THE ACT. WE ACCORDINGLY HOLD THAT THE REFRAMED QUESTION NO. 1 R AISED HEREINABOVE IS DELETED IN THE NEGATIVE IS DECIDED IN THE NEGATIVE AND IN FAVOUR OF THE ASSESSEE.' 5. THE TRIBUNAL ALSO ALLOWED THE CONSEQUENTIAL RELI EF TO THE ASSESSEE BY DELETING THE ADDITIONS MADE BY THE A.D. U/S 69C HOLDING THAT THE TRANSACTIONS GIVING RISE TO LONG TERM CAPITAL GAIN BEING GENUINE, THERE WAS NO QUEST ION OF PAYING ANY COMMISSION FOR OBTAINING THE ALLEGED ACCOMMODATION ENTRIES. SINCE THE ISSUES INVOLVED IN THE PRESENT CASES AS WELL AS THE MATERIAL FACTS RELEVAN T THERETO ARE SIMILAR TO THE CASES OF ITA NO.1834 & 2019/KOL/2018 A.YS 15-16 & 1 4-15 M/S MAHENDRA KR. JHAWAR SH. MANOJ KR. DUGAR VS. ITO WD-35(4), KOL. PAGE 5 SHRI MANISH KUMAR BAID AND MAHENDRA KUMAR BAID (SUP RA), I RESPECTFULLY FOLLOW THE ORDER PASSED BY DIVISION BENCH OF THIS TRIBUNAL AND DELETE THE ADDITIONS MADE U/S 68 AND 69C TO THE TOTAL INCOME OF THE SIX ASSESSEES IN THE PRESENT CASES. WE SOUGHT FOR REVENUES RESPONSE AS TO WHETHER THE ASSESSEES NAME HAS CROPPED UP IN ANY SEARCH STATEMENT IN CASE OF ANY E NTRY OPERATOR OR NOT. MR. CHOUDHURY HAS TAKEN LOT OF PAINS TO SUBMIT THAT ALT HOUGH ALL FACTS AND CIRCUMSTANCES INVOLVED IN THE INSTANT CASE POINT OU T SUSPICIOUS SHARE INVESTMENTS MADE AT ASSESSEES BEHEST, THERE IS NO DIRECT EVIDENCE AVAILABLE IN THE CASE FILE PIN-POINTING THIS TAXPAYERS NAME SPECIFICALLY. WE THEREFORE ADOPT THE ABOVE DETAILED REASONING MUTATIS MUTANDIS TO DELETE THE IMPUGNED ADDITION OF 5,52,796/-. 5. SAME REASONING TO FOLLOW IN LATTER ASSESSEES AP PEAL ITA NO.2019/KOL/2018 SEEKING TO TREAT THE LTCG OF 1,26,6,67,408/- DERIVED FROM SHARES IN M/S UNNO INDUSTRIES LTD. AS THERE IS NO D IRECT EVIDENCE IMPLICATING THIS TAXPAYER AS WELL. 6. BOTH THESE ASSESSEES APPEALS ARE ALLOWED ACCORD INGLY. ORDER PRONOUNCED IN THE OPEN COURT 30/11/2018 SD/- SD/- ( ) (( ) (DR. A.L. SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP, SR.P.S )- 30 / 11 /201 8 / COPY OF ORDER FORWARDED TO:- 1. /ASSESSEE-M/S MAHENDRA KR. JHAWAR & SONS HUF 14/2,3 RD FL. R.NO.223, BHAKAM CHAND MARKE T, OLD CHINA BAZAR STREET BRABOURNE ROAD. KOL-001 SH MANOJ KR. DUGA R 18B, SUKEAS LANE, KOLKATA-001 2. /REVENUE-ITO WARD-35(4), 110, SHANTIPALLY, NR. RUBY HOSPITAL, KOLKATA-107 3. 4 5 / CONCERNED CIT KOLKATA 4. 5- / CIT (A) KOLKATA 5. 8 ((4, 4, / DR, ITAT, KOLKATA 6. = / GUARD FILE. BY ORDER/ , /TRUE COPY/ / 4,