Ashishbhai Ranjitbhai Dalal, Surat V. Income Tax Appellate Tribunal Ward 3(2)(6), Surat

ITA 22/SRT/2022

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0402 (ITAT-SURAT)
• Duration Of Justice: 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 17-10-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 30-01-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Period of limitation; Cost of acquisition; Reason to believe; Borrowed satisfaction; Capital Gains
• Section: 148; 143(3); 142(1)

Judgement Text

आयकर अपीलȣय अͬधकरण, स ु रत Ûयायपीठ, स ु रत IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT ‘SMC BENCH’ BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER आ.अ.सं./ITA Nos.22/SRT/2022 (AY 2012-13) (Hearing in Virtual Court) Ashishbhai Ranjitbhai Dalal Plot No. 10, Mathuresh Nagar Society, B/h Sargam Shopping Centre Somnath Mahadev Road, Parle Point, Surat-395 007 PAN : AAPPD 6916 R Vs Income Tax Officer, Ward-3(2)(6), Income Tax Office, Anavil Business Centre Adajan Hazira Road, Surat-395 009 अपीलाथȸ/Appellant Ĥ×यथȸ /Respondent Ǔनधा[ǐरती कȧ ओर से /Assessee by Shri Rushin Patel, AR राजèव कȧ ओर से /Revenue by Shri J.K.Chandnani, Sr-DR सुनवाई की तारीख/Date of hearing 18.10.2022 उɮघोषणा कȧ तारȣख/Date of pronouncement 18.10.2022 Order under section 254(1) of Income Tax Act 1. This appeal by assessee is directed against the order of National Faceless Appeal Centre [for short to as “NFAC”]/Ld. CIT(A) dated 24.11.2021 for the assessment year 2012-13, which in turn arises out of assessment order passed under section 143(3) r.w.s. 147 of Income-Tax Act,1961 (hereinafter referred to as ‘the Act’) dated 20.11.2019. The assessee has raised the following grounds of appeal: ITA Nos.22/SRT/2022 (A.Y 12-13) Sh. Ashishbhai R Dalal 2 “1. The Learned CIT(A) has erred in law and on facts of the case in issuing notice u/s 148 of the Act without a valid reason to believe that income chargeable to tad has escaped assessment for reassessment u/s 147 of the Act. 2. The Learned CIT(A) has erred in law and on facts of the case in sustaining addition of Rs.2,57,370/- as unexplained income without properly appreciating the true facts of the case and without considering the submissions made by the Appellant andsup0porting documents submitted by the Appellant.” 2. Brief facts of the case are that assessee has not filed his return of income for assessment year 2012-13. The Assessing Officer received information from Joint Director of Income-tax (Inv.), Unit-7 Mumbai that during the year under consideration, the assessee has sold penny stock scrip of Scan Steels Ltd. for a consideration of Rs.2,57,370/-. The Assessing Officer recorded the reasons that income of assessee escape assessment to the extent of transaction amount of Rs.2,57,370/-. The Assessing Officer in reasons recorded noted that income of Rs.2,57,370/- represents as undisclosed and unexplained income which has escaped assessment within the meaning of sec 147 of the Act. The Assessing Officer after recording the reasons, issued notice under section 148 of the Act to assessee on 30.03.2019. In ITA Nos.22/SRT/2022 (A.Y 12-13) Sh. Ashishbhai R Dalal 3 response to notice under section 148, the assessee filed his return of income on 29.04.2019 showing total income of Rs.67,640/-. The reasons recorded by Assessing Officer was provided to the assessee. The assessee was issued notice under section 142(1) of the Act. The assessing officer recorded that but no response was made by assessee. The Assessing Officer in absence of any details or explanation treated the transaction of Rs.2,57,370/- as undisclosed income of assessee in the assessment order dated 20.11.2019. 3. Aggrieved by the addition made by Assessing Officer the assessee has filed appeal before the NFAC/CIT(A). Before NFAC/ ld.CIT(A) the assessee has challenged the validity of re- opening as well as addition on merit. The assessee filed his written submission. The written submission of assessee was duly recorded by Ld.NFAC/CIT(A). In the written submission, the assessee stated that he has purchased 1350 shares of Scan Steel Ltd. for a consideration of Rs.2,55,368/- and all the scrip code was sold without actual delivery in a intr-day transaction. The assessee derived profit of Rs.1,655/-only on such ITA Nos.22/SRT/2022 (A.Y 12-13) Sh. Ashishbhai R Dalal 4 transaction. The assessee furnished bifurcation of share, cost of acquisition and date of sale in the following manner: Jaina m Page No. Date of purchase Shar e Cost of acquisitio n Date of sale Shar e Copy of sale Gain or loss 4 12.7.201 1 40 78982 12.7.201 1 400 82648 3666 5 13.7.201 1 450 85444 13.7.201 1 450 85914 470 6 19.7.201 1 100 18604 19.7.201 1 100 19090 486 6 21.7.201 1 400 72338 21.7.201 1 200 38960 2791 7 22.7.201 1 200 29517 - 6652 Total 1350 255368 1350 25702 3 165 5 4. The assessee submitted that the transaction was made through Bombay Stock Exchange (for short to as “BSE”) assessees broker Jainam Share Consultants Pvt Ltd. No payment for purchase of share was made to the broker and all the transactions were intra-day transaction and assessee earned profit of Rs.1,655/- on such overall transaction. The assessee further stated that he has not directly or indirectly involved with the business activities of Scan Steel Ltd. Thus, the Assessing Officer committed error in making the addition of Rs.2,57,370/- without assigning any section under which the addition was made. ITA Nos.22/SRT/2022 (A.Y 12-13) Sh. Ashishbhai R Dalal 5 5. The Assessing Officer made addition without providing any opportunity or considering the details and facts of the case. The Assessing Officer issued show cause notice dated 03.11.2019 fixing the date of compliance on 08.11.2019. The assessee was unable to make such compliance owing to short span of time and sought adjournment on 08.11.2019. Thereafter the assessee filed detailed on 21.11.2019 however, the Assessing Officer passed the assessment order on 20.11.2019 prior to such assessee’s details on 21.11.2019 without giving any opportunity to the assessee. The Assessing Officer has not intimated whether the adjournment application of assessee was considered or rejected by him. The Assessing Officer wrongly mentioned the considering of penny stock of Rs.2,57,370/- which is not correct, the correct figure is Rs.2,57,923/- the Assessing Officer knowingly ignored the fact that assessee has purchased the shares for consideration of Rs.2,55,368/- and derived profit of Rs.1,655/- only. The Ld.NFAC/CIT(A) after considering the contents of the assessment order and the submission of assessee upheld the order passed by the ITA Nos.22/SRT/2022 (A.Y 12-13) Sh. Ashishbhai R Dalal 6 Assessing Officer by taking view that assessee purchased 1350 shares of Scan Steel Ltd. (subsequently known as “Clarus” BSE scrip Code 511672) with a consideration of Rs.2,55,368/-. On the validity of re-opening, the assessee stated that Assessing Officer received information from the office of Joint Director of Income Tax (Investigation), Unit-7, Mumbai that assessee sold penny stock scrip for a consideration of Rs.2,57,370/-. The assessing officer reopened case on borrowed satisfaction. He has not made any independent investigation before recording reasons. The reopening on borrowed satisfaction is not valid. 6. The NFAC/CIT(A) after considering the submissions of the assessee held that investigation was conducted by Department of Mumbai, wherein the department reveals that trading in the said penny stock was a manipulated affair to generate bogus long term entities facilitating tax evasion. The assessee was one of beneficiary who has taken accommodation entry of long term gain through trading in penny stock company. In this case, the assessee claimed to have made a deal was identified as penny share by the Investigation Wing. The rate of shares was not ITA Nos.22/SRT/2022 (A.Y 12-13) Sh. Ashishbhai R Dalal 7 based on business results but was fluctuated from insider’s trading from negligible value to very high price and vice versa without any reason or basis solely to accommodate or generate bogus capital gain or loss and upheld the addition made by the Assessing Officer. 7. Further aggrieved the assessee has filed present appeal before the Tribunal. 8. On perusal of record, it shows that present appeal is barred by eight days of the prescribed period of limitation for filing this appeal before the Tribunal. The assessee has filed an application for condonation of delay. In the application, the assessee has stated that he was undergone “corona positive” and was home quarantine as advised by doctor. Hence, this appeal was not filed in due course of time. The Ld. Authorized Representative (AR) for the assessee prayed that delay of appeal was filed before the Tribunal was due to Covid-19 suffers by assessee and was isolated in home quarantine advised by doctor. The Ld. AR for the assessee has shown sufficient and bona fide cause for condonation of delay. ITA Nos.22/SRT/2022 (A.Y 12-13) Sh. Ashishbhai R Dalal 8 9. On the other hand, Ld. Senior Departmental Representative (Sr- DR) for the Revenue has not opposed the delay in filing appeal before the Tribunal. 10. Considering the submission of both the parties and finding taking note of the fact that assessee was suffering by infection of Covid-19 and was home quarantine as advised by doctor and was unable to file the present appeal before the Tribunal in due time. Thus, I find sufficient cause for condonation of delay, considering the fact that plea of assessee was circumstances situation. The delay in filing appeal is condoned and admitted for decision on merits. Now I will advert to discuss the merits to the appeal. 11. I have heard the submissions of parties on the merits of case. The Ld. AR for the assessee submits that assessee’s case was re-opened on the basis of third party information. The Assessing Officer before making any reasons have not investigated the fact and reopened without verification of fact that assessee has obtained accommodation entry or bogus capital gains. The Ld. AR for the assessee submits that assessee transacted in share script of M/s Scan Steels Ltd. on intra-date transaction based. ITA Nos.22/SRT/2022 (A.Y 12-13) Sh. Ashishbhai R Dalal 9 The assessee has not made any investment, the transaction was not delivery base. The assessee was given only profit on inter- date and assessee earned profit of Rs.1,655/-. During the assessment proceedings, the assessee sought adjournment on 08.11.2019. Neither the assessee was informed about such adjournment nor about the rejection of his adjournment application. The assessee furnished complete details of inter- date transaction, however to the surprise of assessee the Assessing Officer passed assessment order one day prior to filing his adjournment order. Before Assessing Officer as well as NFAC/CIT(A) the assessee furnished his bank account and current account of The Surat Peoples Co-Op. Bank Ltd. and submitted that he had purchased 1350 share of Scan Steel Ltd. and sold on the same days without accepting the delivery and earned profit of Rs.1,655/-only and such transaction was entered with the BSE. The assessee has clearly stated that he has not made any payment for the purchase of share to his broker or any one else nor received any payment or sale of above shares and received only Rs. 1,655/- as profit. The profit of Rs.1,655/- cannot be treated as bogus entry. The lower ITA Nos.22/SRT/2022 (A.Y 12-13) Sh. Ashishbhai R Dalal 10 authorities have not verified the details in the bank account of assessee and made addition or aggregate of sale amount. In fact, no such amount was received by assessee. The Ld. AR for the assessee submits that assessee has placed on record his ledger account of assessee with his broker Jainam Share Consultants Pvt. Ltd, and the copies of his pass book, wherein only the profit of Rs.1,655/- was recorded in the account of assessee. 12. In alternative and in without prejudice submissions, the Ld. AR for the assessee submits that once the NFAC/CIT(A) accepted the investment, the entire sale consideration cannot be added and only profit and loss earned by assessee can be considered for the purpose of assessment. 13. On the other hand, Ld. Sr-DR for the Revenue submits that Assessing Officer made the re-opening assessment on the basis of information received from Investigation Wing Mumbai. At the time of re-opening mere information to make believe that income of assessee has escaped assessment is sufficient for making re-opening. The Ld. Sr-DR for the Revenue submits that assessee is claiming that he is not claiming in the taxable income in the statement of total income and assessee has ITA Nos.22/SRT/2022 (A.Y 12-13) Sh. Ashishbhai R Dalal 11 shown cash deposits in his bank account of Rs.67,50/- in his bank account. The Ld. Sr-DR for the Revenue submits that lower authorities have given clear findings that assessee has made transaction in the penny stock script company. 14. On the specific submission, Ld. AR for the assessee that assessee has made intra-date transaction and neither the cost of purchase of penny stock script share was paid nor the entire sale consideration of share was received by assessee that only a profit of Rs.1,655/- was received, the Ld. Sr-DR for the Revenue submits that the matter may be restored back to the file of NFAC/CIT(A) for proper verification of fact and pass the order in accordance with law. 15. I have considered the rival submissions of both the parties and perused the order of lower authorities carefully. I find that the Assessing Officer made the addition of Rs.2,57,370/- by taking view that assessee has not furnished any details despite service of notice and that assessee made penny stock transaction for a consideration of penny stock share script of M/s Scan Steels Ltd. of Rs.2,57,370/-. I find that before NFAC/CIT(A) the assessee filed written submission wherein clearly stated that he ITA Nos.22/SRT/2022 (A.Y 12-13) Sh. Ashishbhai R Dalal 12 has made intra -date transactions of four days i.e., on 12 th July, 13 th July, 19 th July and 21 st July of 2011. The assessee furnished details of share and the cost of acquisition and gain or loss earned during those days. The assessee in his details submitted that he has earned only Rs.1,655/- as gains on intra –day transaction. The assessee also furnished his account with share broker Jainam Share Consultants Pvt. Ltd. wherein only Rs.1,655/- was received. I further find that NFAC/CIT(A) instead of considering the contention of assessee discussed several other things and the case law which has no relevance or parity in facts of this case and upheld the addition made by Assessing Officer without verified the facts. 16. In my view, when the Assessing Officer passed his assessment order for want of reply or evidence and it is the case of assessee that he has furnished complete details regarding such transaction before CIT(A). In my opinion, the NFAC/CIT(A) was duty bound to verify the fact and such evidence, either of his own or by seeking remand report from the assessing officer. On careful analysis of such evidence, I find that the assessee has successfully prove that he has entered into intra-day ITA Nos.22/SRT/2022 (A.Y 12-13) Sh. Ashishbhai R Dalal 13 transaction share of Scan Steel Ltd. The assessee has not paid the purchase cost nor received the entire sale consideration rather received the gain of Rs.1,655/- which cannot be considered as accommodation entry of gain of penny stock transaction. Therefore, I direct the Assessing Officer to delete the entire addition. 17. So far as objection raised by Ld. Sr-DR for the Revenue that assessee has made cash deposit of Rs. 67,500/- in his bank account, I find that assessee has shown such deposit as “income from other sources”. Therefore, the submission raised by Ld. Sr-DR for the Revenue is mis-placed. 18. Considering the fact that I have already granted relive to the assessee on merit. Therefore, adjudication on the submission of ld AR for assessee on validity on re-opening has become academic. 19. In the result, assessee’s appeal is allowed. Order pronounced in the open court on 18/10/2022 at the time of hearing. Sd/- (PAWAN SINGH) [᭠याियक सद᭭य JUDICIAL MEMBER] ITA Nos.22/SRT/2022 (A.Y 12-13) Sh. Ashishbhai R Dalal 14 स ू रत /Surat, Dated: 18 /10/2022 Dkp. Out Sourcing Sr.P.S Copy to: 1. Appellant- 2. Respondent- 3. CIT(A)- 4. CIT 5. DR 6. Guard File True copy/ By order // True Copy // Sr.P.S./Assistant Registrar, ITAT, Surat