Shri Rajendra Prasad Bubna, Kolkata V. I.T.O.,Ward-36(1), Kolkata

ITA 2223/KOL/2019

AI Insights

The case involves Shri Rajendra Prasad Bubna, who appealed against the order of the Ld. CIT(A)-10, Kolkata, which confirmed the assessment order by the Income Tax Officer, Ward-36(1), Kolkata. The assessment order treated the LTCG earned from the sale of 6000 shares of GCM Securities Ltd. as unexplained, categorizing them as penny stocks involved in a scam of bogus LTCG/STCL. The Tribunal, referencing a decision by the Hon'ble jurisdictional High Court of Calcutta in a similar case (Swati Bajaj & Others), dismissed the appeal, affirming the lower authorities' findings.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 125323 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 11-12-2022
• Assessment Year: misc
• Appeal Filed On: 29-12-2022
• Other Referred Cases: Swati Bajaj & Others (2022) 139 taxmann.com 352(Cal.)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RANU BISWAS
• Keywords: Unexplained cash credit; Penny stocks
• Section: 68; 263; 69C; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH KOLKATA आयकरअपीलीयअधीकरण, Ɋायपीठ “C”कोलकाता, BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No.2223/Kol/2019 Assessment Year: 2015-16 Shri Rajendra Prasad Bubna, 7, Lyons Range, 3 rd Floor, Room No. 7, Dalhousie, Kolkata-700 001. (PAN: AECPB9460K) Vs. Income Tax Officer, Ward- 36(1), Kolkata. (Appellant) (Respondent) Present for: Appellant by : N o n e Respondent by : Smt. Ranu Biswas, Addl. CIT, DR Date of Hearing : 12.12.2022 Date of Pronouncement : 13.12.2022 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of Ld. CIT(A)-10, Kolkata vide Appeal No. 965/CIT(A)-10/Wd-36(1)/2015- 16/2017-18/Kol dated 26.07.2019 passed against the assessment order by the ITO, Ward-36(1), Kolkata u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) dated 27.12.2017. 2. None appeared on behalf of the assessee. In the light of decision of the Hon’ble jurisdictional High Court at Calcutta in Swati Bajaj & Others (2022) 139 taxmann.com 352(Cal.), we deem it proper to adjudicate the matter ex parte qua the assessee with the assistance of Ld. Sr. DR. Rajendra Prasad Bubna ITA No.2223/Kol/2019 AY 2015-16 2 3. Assessee has raised as many as nine grounds, all of which are in respect of treatment by the Ld. AO of the Long Term Capital Gain (LTCG) of Rs.40,36,900/- on the sale of 6000 shares of GCM Securities Ltd. (in short “GCM”) by holding it as penny stock and also in respect of addition of Rs.20,184/- being 0.5% as alleged cost of arrangement of accommodation entry by treating it as unexplained expenditure u/s. 69C of the Act on the LTCG referred above. The said grounds are not reproduced for the sake of brevity. 4. Brief facts of the case are that assessee filed his return of income on 21.08.2015 reporting total income at ₹14,59,860/- and also claimed exemption on the LTCG earned on selling of shares of GCM u/s. 10(38) of the Act. In the course of assessment, Ld. AO noted that major part of income of the assessee has been generated from exempt income in the form of LTCG by selling 6000 shares of penny stock of a company named GCM listed at Bombay Stock Exchange (BSE) amounting to Rs.40,36,700/-. In this respect, it is noted that assessee had purchased 6000 shares of GCM on 03.04.2013 for Rs.1,20,000/- including Security Transaction Tax (STT) through North Pole Finance Ltd. These shares were sold on various dates during AY 2015-16 with total sale amount of Rs.41,56,920/-. Thus, Ld. AO noted that assessee made a gain of almost 3359% in a span of just 17 months. Ld. AO observed that GCM is one of the 84 scrips which were identified by the Investigation Directorate, involved in the scam of bogus LTCG/STCL and assessee is also a part of list of beneficiaries identified by the Investigation Directorate. Ld. AO concluded the assessment by treating the LTCG as unexplained cash credit u/s. 68 of the Act and added it to the total income of the assessee. Ld. AO further made an addition of Rs.20,184/- by taking 0.5% as the commission charged on the alleged accommodation entry taken by the assessee in the form of LTCG. Aggrieved, assessee went in appeal Rajendra Prasad Bubna ITA No.2223/Kol/2019 AY 2015-16 3 before the Ld. CIT(A) who confirmed the addition. Aggrieved, assessee is now in appeal before this Tribunal. 5. We have heard Ld. Sr. DR and have carefully gone through the facts and records and the decision cited above. We find that recently on 14.06.2022, the Hon’ble jurisdictional High Court of Calcutta passed a judgment in the case of Swati Bajaj and others [2022] 139 taxmann.com 352 (Cal) dealing with set of cases with similar fact patterns as narrated above for the present appeals under consideration before us. Hon’ble jurisdictional High Court by taking the report of the Directorate of Investigation of the Department as the basis, gave its observations and findings, which are summarized hereunder. 6. There are two category of cases dealt with by the Hon’ble High Court, viz. first category being those arising out of the order of Tribunal dated 26.06.2019 in which 90 appeals filed by the assessees were allowed and second category is of those cases where assessee has challenged the assumption of jurisdiction by CIT under section 263 of the Act. In the present appeal before us, we are concerned with the first category whose relevant observations and findings by the Hon’ble High Court are noted below: a) From the assessment order passed in the case of the assessee Smt. Swati Bajaj, we find that the genesis of the issue commenced from an investigation report submitted by the Directorate of Income Tax, Investigation, Kolkata (DIT). The investigation report has been prepared by the Deputy Director of Income Tax, Investigation Unit -II and III, Kolkata. [para 43] b) The assessee were conscious of the fact that they have not been named in the report, therefore made a vague and bold statement that the non- furnishing of report would vitiate the proceedings. Therefore, merely by mentioning that statements have not been furnished can in no manner advance the case of the assessee. If the report was available in the public Rajendra Prasad Bubna ITA No.2223/Kol/2019 AY 2015-16 4 domain as has been downloaded and produced by the revenue, nothing prevented the assessees who are ably defended by the Chartered Accountants and Advocates to download such reports and examine the same and thereafter put up their defence. Therefore, the based on such general statements of violation of principles of natural justice the assessees have not made out any case. [para 65] c) The test to be applied is the test of preponderance of probabilities to ascertain as to whether there has been violation of the provisions of the Income-tax Act. In such a circumstance, the conclusion has to be gathered from various circumstances like the volume from trade, period of persistence in trading in the particular scrips, particulars of buy and sell orders and the volume thereof and proximity of time between the two which are relevant factors. Therefore, the methodology adopted by the revenue cannot be faulted. [para 69] d) Test of preponderance of probabilities have to be applied and while doing so, the court cannot loose sight of the fact that the shares of very little known companies with in-significant business had a steep rise in the share prices within the period of little over a year. [para 73] e) The assessee was not named in the report and when the assessee makes the claim for exemption, the onus of proof is on the assessee to prove the genuinity. [para 73] f) It is incorrect to argue that the assessees have been called upon to prove the negative in fact, it is the assessees duty to establish that the rise of the price of shares within a short period of time was a genuine move that those penny stocks companies had credit worthiness and coupled with genuinity and identity. [para 73] g) The assessee cannot escape from the burden cast upon him and unfortunately in these cases the burden is heavy as the facts establish that the shares which were traded by the assessees had phenomenal and fanciful rise in price in a short span of time. [para 75] h) The exercise that was required to be done by the Tribunal is to consider the totality of the circumstances because the transactions are shown to be very complex, the meeting of minds of the 'players' can never be established by direct evidence and therefore the surrounding circumstances was required to be taken note of by the Tribunal which exercise has not been done. [para 99] i) The assessee had opportunity to prove that there was no manipulation at the other end and whatever gains the assessee has reaped was not tainted. This has not been proved or established by any of the assessee. [para 99] Rajendra Prasad Bubna ITA No.2223/Kol/2019 AY 2015-16 5 j) The tribunal being the last fact finding authority was required to go deeper into the issue as the matter have manifested large scale scam. Thus, the orders of the tribunal are not only perfunctory but perverse as well. The exercise that was required to be done by the tribunal is to consider the totality of the circumstances because the transactions are shown to be very complex, the meeting of minds of the "players" can never be established by direct evidence and therefore the surrounding circumstances was required to be taken note of by the tribunal which exercise has not been done. [para 99] k) In such factual scenario, the Assessing Officers as well as the Commissioner (Appeals) have adopted an inferential process which is found to be a process which would be followed by a reasonable and prudent person. The Assessing Officers and the Commissioner (Appeals) have culled out proximate facts in each of the cases, took into consideration the surrounding circumstances which came to light after the investigation, assessed the conduct of the assessee, took note of the proximity of the time between the buy and sale operations and also the sudden and steep rise of the price of the shares of the companies when the general market trend was admittedly recessive and thereafter arrived at a conclusion which is a proper conclusion. [para 99] l) For all the above reasons, we hold that the Tribunal committed a serious error in setting aside the orders of the CIT(A) who had affirmed the orders of the Assessing Officer. [para 101] m) In the result, these appeals are allowed and the substantial questions of law framed/suggested are answered in favour of the revenue and against the assessee restoring the orders passed by the respective Assessing Orders as affirmed by the CIT(A). [para 102]. 7. In the context of factual matrix of the present appeal before us narrated above, the position of law as enunciated by the Hon’ble jurisdictional High Court of Calcutta in Swati Bajaj (supra) carrying force of binding nature on the issue under consideration for us, we note that issue involved in this appeal is covered against the assessee by the said decision as the fact pattern is similar to that which were before the Hon’ble High Court. Since none appeared before us on behalf of the assessee, the relevant factual matrix was captured with the assistance of Ld. Sr. DR. Rajendra Prasad Bubna ITA No.2223/Kol/2019 AY 2015-16 6 8. After taking into consideration the factual matrix of the case before us vis-à-vis the decision of Hon’ble jurisdictional High Court of Calcutta in Swati Bajaj & others (supra), we respectfully following the said decision carrying the force of binding nature, being the jurisdictional High Court, dismiss the appeal of the assessee and confirm the action of the Ld. CIT(A). 9. In the result, the appeal of the assessee is dismissed. Order pronounced in the open Court on 13thDecember,2022 Sd/- Sd/- (Rajpal Yadav) (Girish Agrawal) Vice President Accountant Member Dated: 13th December, 2022 JD, Sr. P.S. Copy to: 1. The Appellant: 2. The Respondent:. 3. CIT(A)-10 Kolkata 4. The Pr. CIT, Kolkata. 5. DR, ITAT, Kolkata Bench, Kolkata //True Copy// By Order Assistant Registrar ITAT, Kolkata Benches, Kolkata