Kamala Devi Baid, Bengaluru V. The Income Tax Officer, Ward- 2(2)(4), Bengaluru

ITA 1873/BANG/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6475 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 30-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Opportunity of being heard; Principle of natural justice; Accommodation entries; Set aside
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC - B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT ITA NO. 1873/BANG/2019 ASSESSMENT YEAR : 2011 - 12 SMT. KAMALA DEVI BAID, NO.1, 3 RD FLOOR, V.K.V.M. COMPLEX, 189/191, A.S. CHAR STREET, BENGALURU 560 053. P AN: ACQPB 3866R VS. THE INCOME TAX OFFICER, WARD 2(2)(4), BANGALORE. APP ELLANT RESPONDENT APP ELLANT BY : S MT. SUMAN LUNKAR, CA RESPONDENT BY : SHRI GANESH R. GHALE, STANDING COU NSEL FOR DEPT. DATE O F HEARING : 0 9 . 1 0 .2019 DATE OF PRONOUNCEMENT : 16 . 1 0 .2019 O R D E R THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORD ER DATED 17.07.2019 OF THE CIT(APPEALS)-II, BENGALURU, RELATING TO ASSE SSMENT YEAR 2011-12. 2. THE ISSUE THAT NEEDS TO BE ADJUDICATED IN THIS APPEAL IS AS TO WHETHER THE REVENUE AUTHORITIES WERE JUSTIFIED IN T REATING A SUM OF RS.15,35,759 WHICH WAS CLAIMED BY THE ASSESSEE TO B E LONG TERM CAPITAL GAIN ON SALE OF SHARES AS UNEXPLAINED CASH CREDIT U /S. 68 OF THE INCOME- TAX ACT, 1961 [THE ACT] AND ADDING THE SAME AS IN COME UNDER THE HEAD INCOME FROM OTHER SOURCES. ITA NO. 1873/BANG/2019 PAGE 2 OF 6 3. THE ASSESSEE IS AN INDIVIDUAL HAVING INCOME UNDE R THE HEAD INCOME FROM HOUSE PROPERTY, CAPITAL GAIN AND OTHER SOURCES . THE ASSESSEE CLAIMED TO HAVE PURCHASED SHARES OF A COMPANY BY NA ME 21 ST CENTURY LTD. FOR CONSIDERATION OF RS.60,000 IN THE FY 2007-08 AN D SOLD THE SAME DURING THE FY 2010-11 FOR A TOTAL SALE VALUE OF RS.15,55,7 57, THEREBY DERIVING A LONG TERM CAPITAL GAIN OF RS.15,35,758. THIS LONG- TERM CAPITAL GAIN WAS CLAIMED AS EXEMPT U/S. 10(38) OF THE ACT. 4. THE AO NOTICED THAT THERE WAS AN INVESTIGATION C ARRIED OUT BY THE DIRECTORATE OF INVESTIGATION THROUGHOUT THE COUNTRY IN WHICH IT CAME TO LIGHT THAT THERE WAS AN ORGANIZED RACKET OF GENERATING BO GUS ENTRIES OF LONG-TERM CAPITAL GAIN WHICH IS EXEMPT. THE MODUS OPERANDI WAS TO BUY SHARES OF COMPANIES CONTROLLED BY THE OPERATORS AT A LESS PRI CE AND THEREAFTER RIG THE PRICE OF THE STOCK TO A HIGH LEVEL AND SELL THE SHA RES AND DECLARE LONG-TERM CAPITAL GAIN. ACCORDING TO THE INVESTIGATION CARRI ED OUT BY THE DEPARTMENT, THE OPERATORS WERE DUMMY PAPER COMPANIES AND THE LO NG-TERM CAPITAL GAIN DECLARED AND CLAIMED AS EXEMPT WAS NOTHING BUT ASSE SSEES OWN MONEY WHICH HAS TO BE ADDED U/S. 68 OF THE ACT. 5. BASED ON THE ABOVE SAID INVESTIGATION CARRIED OU T BY THE DIRECTORATE OF INVESTIGATION, KOLKATA, AND THE STATEMENTS OF VA RIOUS OPERATORS, ENTRY PROVIDERS AND STOCK BROKERS ADMITTING ACCOMMODATION ENTRIES OF LONG TERM CAPITAL GAIN, THE AO WAS OF THE VIEW THAT THE LONG- TERM CAPITAL GAIN DECLARED BY THE ASSESSEE HAS TO BE TREATED AS UNEXPLAINED CA SH CREDIT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ACCORDINGLY, THE AO TREATED THE LONG TERM CAPITAL GAIN AS UNEXPLAINED CASH CREDIT U/S. 6 8 OF THE ACT AND ADDED THE SAME TO THE TOTAL INCOME OF ASSESSEE. THE CIT( APPEALS) CONFIRMED THE ORDER OF AO. 6. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE BROUGHT TO MY NOTICE THAT IN GROUND NO.4 RAISED BY THE ASSESSE E BEFORE THE ITA NO. 1873/BANG/2019 PAGE 3 OF 6 CIT(APPEALS), THE ASSESSEE HAS SPECIFICALLY CHALLEN GED THE ORDER OF AO AS AN ORDER PASSED IN GROSS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE INASMUCH AS THE MATERIAL AND REPORT BASED ON WHICH THE AO DR EW HIS CONCLUSION WERE NOT MADE AVAILABLE TO THE ASSESSEE. HE BROUGH T TO MY NOTICE THAT THE CIT(A) DID NOT DEAL WITH THE AFORESAID ASPECT AT AL L. 7. EVEN BEFORE THE TRIBUNAL IN GROUND NOS. 3.1 TO 3.3, THE ASSESSEE HAS PROJECTED ITS GRIEVANCE OF VIOLATION OF PRINCIP LES OF NATURAL JUSTICE IN THE FOLLOWING MANNER:- 3.1 IN ANY CASE THE ORDER PASSED IN GROSS VIOLATIO N OF THE PRINCIPLES OF NATURAL JUSTICE AND FAIR PLAY, ESPECI ALLY IN THE ABSENCE OF THE CROSS EXAMINATIONS OF THE PERSONS WH OSE AVERMENTS ARE SOUGHT TO BE RELIED UPON BY THE ASSES SING OFFICER WHILE PASSING THE ORDER, MAKES THE ORDER TOTALLY BA D IN LAW AND LIABLE TO BE CANCELLED. 3.2 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS INSTEAD OF QUASHING THE IMPUGNED ORDER, HAS JUST CO NFIRMED THE ORDER OF ASSESSING OFFICER WITHOUT PROPERLY CONSIDE RING THE FACTS AND CIRCUMSTANCES OF THE CASE. 3.3. IN ANY CASE AND WITHOUT PREJUDICE, THE ORDERS PASSED BY THE AUTHORITIES BELOW BEING CONTRARY TO BINDING DICTUM OF THE JURISDICTIONAL HIGH COURT ARE BAD IN LAW AND ARE LI ABLE TO BE QUASHED. 8. THE LD. COUNSEL FOR THE ASSESSEE FILED BEFORE ME A COPY OF THE ORDER DATED 05.12.2018 IN THE CASE OF SHRI RAMESH KUMAR SHAH VS. ACIT ITA NO.595/BANG/2018 WHEREIN THIS TRIBUNAL ON IDENTICAL FACTS OF VIOLATI ON OF PRINCIPLES OF NATURAL JUSTICE, REMANDED THE MAT TER FOR FRESH CONSIDERATION TO THE AO WITH THE FOLLOWING OBSERVATIONS:- 3.3 PER CONTRA, THE LEARNED DR FOR REVENUE SUBMI TTED THAT ON SIMILAR FACTS AND CIRCUMSTANCES AS IN THE CASE ON H AND, ISSUE FOR CONSIDERATION IS COVERED BY THE DECISIONS OF THE BE NGALURU ITAT IN THE CASES OF ARVIND KUMAR MOOCHAND IN ITA ITA NO. 1873/BANG/2019 PAGE 4 OF 6 NO.509/BANG/2017 AND PUKHRAJ HASMUKHLAL IN ITA NO.1927/BANG/2017 WHEREIN THE TRIBUNAL HAS RESTORED THE ISSUE TO THE FILE OF THE AO HAVING OBSERVED THAT THE ADDI TIONS WERE MADE BASED ON REPORTS OF THE INVESTIGATION DIRECTOR ATE AT KOLKATA AND STATEMENTS OF VARIOUS PERSONS WITHOUT CONFRONTI NG OR MAKING THEM AVAILABLE TO THE ASSESSEE FOR REBUTTAL. IN THOSE CASES, THE TRIBUNAL RESTORED THE MATTER TO THE FILE OF THE AO WITH THE DIRECTION TO CONFRONT THE MATTER TO THE FILE OF THE AO WITH THE DIRECTION TO CONFRONT THE ASSESSEE WITH THE REPORTS / DOCUMENTS / STATEMENTS PROPOSED TO BE USED AGAINST THE ASSESSEE , ALLOW REBUTTAL THEREOF AND CROSS EXAMINATION OF PARTIES O N WHOSE TESTIMONY IS PROPOSED TO BE RELIED UPON AND THE MAT TER BE ADJUDICATED AFRESH AFTER AFFORDING THE ASSESSEE ADE QUATE OPPORTUNITY OF BEING HEARD AND TO ALSO FILE DETAILS / SUBMISSIONS IN THIS REGARD. 3.4 IN REJOINDER, THE LD.AR FOR THE ASSESSEE DID NO T DISPUTE THE PROPOSITION PUT FORTH BY THE LD. DR FOR RESTORING T HIS ISSUE TO THE FILE OF THE AO FOR DE NOVO ADJUDICATION. 3.5 WE HAV E HEARD BOTH PARTIES AND PERUSED AND CAREFULLY CONSIDERED THE MA TERIAL ON RECORD; INCLUDING THE JUDICIAL DECISIONS CITED AND THE ORDERS OF THE AUTHORITIES BELOW. TAKING INTO CONSIDERATION THE FA CTS AND CIRCUMSTANCES OF THE CASE THAT THE ASSESSEE SPECIFI CALLY REQUESTED FOR CROSS-EXAMINATION OF THE DEPONENTS WHOSE STATEM ENTS WERE THE BASIS OF ADDITION BY THE AO AND ALSO THE REPORT OF THE INVESTIGATION DIRECTORATE, KOLKATA FOR REBUTTAL; FR OM THE JUDICIAL DECISIONS CITED, WE FIND THAT THE ISSUE FOR CONSIDE RATION IS SQUARELY COVERED BY THE ORDERS OF THE BENGALURU ITA T IN THE CASES OF ARVIND KUMAR MOOLCHAND (SUPRA) AND PUKHRAJ HASMUKHLAL (SUPRA). FOLLOWING THE AFORESAID ORDERS (SUPRA), WE SET ASIDE THE ORDERS OF THE AO AND RESTORE THE MATT ER OF TREATMENT OF PROFIT DECLARED ON SALE OF SHARES, CLAIMED AS EX EMPT U/S 10(38) OF THE ACT, TO THE FILE OF THE AO TO RE-ADJUDICATE THE ISSUE AFRESH; AFTER MAKING AVAILABLE TO THE ASSESSEE FOR REBUTTAL ALL DOCUMENTS; INCLUDING STATEMENTS, INVESTIGATION REPORTS, ETC., RELIED UPON BY REVENUE FOR MAKING THE ADDITIONS/DISALLOWANCES AND PROVIDING ADEQUATE OPPORTUNITY TO THE ASSESSEE FOR CROSSEXAMI NATION OF PERSONS WHOSE STATEMENTS ARE BEING RELIED UPON. IT IS ACCORDINGLY ORDERED. CONSEQUENTLY, GROUND NO. 2 IS DISPOSED OFF AS ABOVE. ' ITA NO. 1873/BANG/2019 PAGE 5 OF 6 9. A COPY OF THE JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF MRS. CHANDRA DEVI KOTHARI VS. ITO W.P.39370/2014 (T -IT) WAS ALSO FILED BEFORE ME WHEREIN ON IDENTICAL ISSUE OF ACCOMMODATION/BOGUS ENTRIES BASED ON STATEMENT OF T HIRD PARTIES, THE HONBLE KARNATAKA HIGH COURT TOOK THE VIEW THAT THE MATTER REQUIRES TO BE RE-CONSIDERED BY PROVIDING FAIR AND REASONABLE OPPO RTUNITY OF HEARING TO THE ASSESSEE AFTER PROVIDING COPIES OF STATEMENT RELIED UPON BY THE REVENUE. 10. THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT T HE ASSESSEE DID NOT ASK FOR AN OPPORTUNITY BEFORE THE AO AND IT WAS ONL Y BEFORE THE CIT(APPEALS) THAT SUCH A PLEA WAS MADE. 11. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. I FIND THAT IDENTICAL ISSUE WAS CONSIDERED BY THIS TRIBUNAL IN THE CASE O F SHRI RAMESH KUMAR SHAH (SUPRA) AND THE TRIBUNAL REMANDED THE ISSUE TO THE AO FOR F RESH CONSIDERATION WITH A DIRECTION THAT THE ASSESSEE SH OULD BE PROVIDED WITH ALL THE RELEVANT EVIDENCE RELIED UPON BY THE AO FOR MAK ING THE ADDITION AND ALSO ALLOW OPPORTUNITY OF CROSS-EXAMINATION OF STAT EMENTS OF PERSONS WHICH HAS BEEN RELIED UPON BY THE INVESTIGATION AGENCY. I ALSO FIND THAT THE HONBLE HIGH COURT OF KARNATAKA HAS GIVEN SIMILAR D IRECTIONS IN THE CASE OF MRS. CHANDRA DEVI KOTHARI (SUPRA) WHEREIN ALSO THE ISSUE WAS WITH REGARD TO LONG TERM CAPITAL GAIN ON SALE OF SHARES BEING TREATED AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT BY THE R EVENUE. IN THE LIGHT OF THE AFORESAID DIRECTIONS, I SET ASIDE THE ORDER OF THE CIT(APPEALS) AND REMAND THE QUESTION OF TREATING THE LONG TERM CAPITAL GAIN AS UNEXPLAINED CASH CREDIT TO THE AO FOR FRESH CONSIDERATION AS DIRECTE D BY THE TRIBUNAL IN THE CASE OF SHRI RAMESH KUMAR SHAH (SUPRA) . I MAKE IT CLEAR THAT ALL ISSUES RAISED BY THE ASSESSEE IN THIS APPEAL ARE ALSO LEFT OPEN FOR CONSIDERATION. 12. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS TR EATED AS ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 1873/BANG/2019 PAGE 6 OF 6 PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF OCTOBER, 2019. SD/- ( N.V. VASUDEVAN ) VICE PR E SIDENT BANGALORE, DATED, THE 16 TH OCTOBER, 2019. / D ESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. C IT(A) 5. DR, I TAT, BANGALORE. 6. GUARD FIL E BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.