GOLDEN ENTERPRISES, CHENNAI V. ITO NON CORPORATE WARD-4(4), CHENNAI

ITA 225/CHNY/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7014 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 04-08-2021
• Assessment Year: 2012-2013
• Appeal Filed On: 29-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G SURESH PERIASAMY
• Assessee Lawyers: S SRIDHAR
• Keywords: Principle of natural justice; Reasonable cause; Condonation of delay; Penny stocks; Borrowed satisfaction; Set aside
• Section: 22; 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI [ , . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./ ITA NOS.: 224 & 225/CHNY/2020 / ASSESSMENT YEARS: 2011-12 & 2012-13 M/S . GOLDEN ENTERPRISES, 23, GENERAL MUTHIA MUDALI STREET, SOWCARPET, CHENNAI 600 079. PAN: AAFFG 1597F V. THE ITO, NON-CORPORATE WARD 4(4) CHENNAI. ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE /RESPONDENT BY : SHRI G. SURESH PERIASAMY, JCIT /DATE OF HEARING : 04.08.2021 /DATE OF PRONOUNCEMENT : 23.08.2021 / O R D E R PER G. MANJUNATHA, AM: THESE TWO APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST ORDERS OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-5, COIMBATORE, BOTH DATED 31.10.2019 AND PERTAINS TO ASSESSMENT YEARS 2011-12 & 2012-13. SINCE, FACTS ARE IDENTICAL AND ISSUES ARE COMMON, FOR THE SAKE OF CONVENIENCE 2 I.TA. NOS. 224 & 225/CHNY/2020 THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF, BY THIS CONSOLIDATED ORDER. 2. THE LD.AR FOR THE ASSESSEE AT THE TIME OF HEARING SUBMITTED THAT THERE IS A DELAY OF 22 DAYS IN FILING BOTH THE APPEALS BEFORE THE TRIBUNAL FOR WHICH NECESSARY PETITION FOR CONDONATION OF APPEAL ALONG WITH AFFIDAVIT HAS BEEN FILED EXPLAINING THE REASONS FOR DELAY IN FILING THE APPEAL. THE LD.AR FURTHER SUBMITTED THAT THE DELAY IN FILING THE SAID APPEALS WERE NEITHER WILLFUL NOR DELIBERATE BUT DUE TO CIRCUMSTANCES BEYOND THE CONTROL OF THE ASSESSEE BECAUSE THE CHARTERED ACCOUNTANT OF THE ASSESSEE DID NOT FILE THE APPEALS EVEN AFTER ITS REPEATED REMINDERS AND HENCE, THE ASSESSEE ENGAGED THE PRESENT COUNSEL FOR FILING APPEALS, WHO FILED IMMEDIATELY AFTER ENGAGING THEM. BECAUSE OF THE INABILITY OF THE CHARTERED ACCOUNTANT OF THE ASSESSEE, THE APPEALS COULD NOT BE FILED WITHIN THE STATUTORY TIME ALLOWED UNDER THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT). HAVING HEARD BOTH SIDES, WE ARE OF THE CONSIDERED VIEW THAT REASONS GIVEN BY THE ASSESSEE FOR NOT FILING THE APPEALS WITHIN THE TIME ALLOWED UNDER THE ACT COMES UNDER REASONABLE CAUSE AS PROVIDED UNDER THE ACT FOR CONDONATION OF DELAY AND HENCE, DELAY IN FILING OF ABOVE APPEALS ARE CONDONED AND APPEALS FILED BY THE ASSESSEE ARE ADMITTED FOR ADJUDICATION. 3 I.TA. NOS. 224 & 225/CHNY/2020 3. THE ASSESSEE HAS MORE OR LESS RAISED COMMON GROUNDS OF APPEAL FOR BOTH ASSESSMENT YEARS AND THEREFORE, FOR THE SAKE OF BREVITY, GROUNDS OF APPEAL FILED FOR ASSESSMENT YEAR 2011-12 ARE REPRODUCED AS UNDER:- 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-5, CHENNAI DATED 31 .1 0.2019 IN I.T.A.NO.240/CIT(A)-5/2018-19, FOR THE ABOVE MENTIONED ASSESSMENT YEAR IS CONTRARY TO LAW, FACTS, AND IN THE CIRCUMSTANCES OF THE CASE. 2. THE CIT (APPEALS) ERRED IN SUSTAINING THE RECOMPUTATION OF INCOME FROM BUSINESS WHICH IS MAINLY COMPRISED OF BUYING AND SELLING OF STOCKS, SHARES AND COMMODITIES TRADING IN THE COMPUTATION OF TAXABLE TOTAL INCOME WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 3. THE CIT(APPEALS) FAILED TO APPRECIATE THAT THE REJECTION OF THE LOSS SUFFERED FROM TWO TRANSACTIONS AGGREGATING TO RS.47,94,131/- BY THE ASSESSING OFFICER LEASED ON THE PRESUMPTION OF THE SHARES TRADED AS PENNY STOCK WAS WRONG, ERRONEOUS, UN JUSTIFIED, INCORRECT, INVALID AND NOT SUSTAINABLE BOTH ON FACTS AND IN LAW. 4. THE CIT (APPEALS) FAILED TO APPRECIATE THAT HAVING NOT SHARED THE MATERIALS USED FOR REACHING HIS CONCLUSION (AO) TO TREAT THE STOCKS TRADED BY THE APPELLANT AS PENNY STOCKS, THE CONSEQUENTIAL DECISION OF REJECTING THE CLAIM OF LOSS SHOULD BE CONSIDERED AS WHOLLY UNJUSTIFIED. 5. THE CIT (APPEALS) FAILED TO APPRECIATE THAT HAVING NOTICED THE FACT OF THE PURCHASE OF THE SHARES UNDER CONSIDERATION THROUGH ONLINE/REGISTERED BROKER OF NATIONAL STOCK EXCHANGE/BOMBAY STOCK EXCHANGE END FURTHER HAVING NOTICED THE SALE OF SHARES THROUGH ONLINE, THE PRESUMPTION OF THE MOTIVE ON THE PART OF THE APPELLANT FOR TAX EVASION SHOULD BE CONSIDERED AS BAD IN LAW. 6. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE TRANSACTION DETAILS OF THE DISPUTC1 TRADING IN SHARES/STOCKS EVEN THOUGH PLACED ON RECORD, THE REASONABLE LEGAL CONCLUSION 4 I.TA. NOS. 224 & 225/CHNY/2020 BASED ON THE SAID TRANSACTION DETAILS WAS NOT TAKEN/REACHED, THEREBY VITIATING THE RELATED FINDINGS. 7. THE CIT (APPEALS) FAILED TO APPRECIATE THAT HAVING OBTAINED THE INFORMATION FROM THE REGISTERED SHARE BROKER OF THE NATIONAL STOCK EXCHANGE/BOMBAY STOCK EXCHANGE, SUCH INFORMATION WAS NOT TAKEN TO ITS LOGICAL CONCLUSION, THEREBY VITIATING THE RELATED FINDINGS. 8. THE CIT(APPEALS) FAILED TO APPRECIATE THAT HAVING NOTICED THE BUSINESS PATTERN OF THE APPELLANT IN SHARE TRADING, THE CONCLUSIONS REACHED ON TAX EVASION PERTAINING TO THE DISPUTED TWO TRANSACTIONS WERE WRONG, ERRONEOUS, UNJUSTIFIED, INCORRECT, INVALID AND NOT SUSTAINABLE BOTH ON FACTS AND IN LAW. 9. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE ORDER OF RE-ASSESSMENT UNDER CONSIDERATION WAS PASSED OUT OF TIME, INVALID, PASSED WITHOUT JURISDICTION AND NOT SUSTAINABLE BOTH ON FACTS AND IN LAW AND OUGHT TO HAVE APPRECIATED THAT THE BORROWED SATISFACTION WOULD VITIATE THE ASSUMPTION OF JURISDICTION U/S 147 OF THE ACT. 10. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THERE WAS NO PROPER OPPORTUNITY GIVEN BEFORE PASSING THE IMPUGNED ORDER AND ANY ORDER PASSED IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE IS NULLITY IN LAW. 11. THE APPELLANT CRAVES LEAVE TO FILE ADDITIONAL GROUNDS /ARGUMENTS AT THE TIME OF HEARING. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF TRADING IN SHARES AND SECURITIES, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEARS 2011-12 & 2012-13 ON 30.09.2011 & 24.09.2012, ADMITTING NIL TOTAL INCOME RESPECTIVELY. THE ASSESSMENTS HAVE BEEN SUBSEQUENTLY REOPENED U/S.147 OF THE INCOME TAX ACT, 5 I.TA. NOS. 224 & 225/CHNY/2020 1961 (HEREINAFTER THE ACT) FOR THE REASONS RECORDED, AS PER WHICH INCOME CHARGEABLE TO TAX HAD BEEN ESCAPED ASSESSMENT AND HENCE, NOTICE U/S.148 OF THE ACT DATED 27.04.2018 WAS ISSUED. THEREAFTER THE ASSESSMENT FOR BOTH ASSESSMENT YEARS HAVE BEEN COMPLETED U/S.143(3) R.W.S. 147 OF THE ACT ON 31.120.2018 AND DETERMINED TOTAL INCOME AT RS.NIL AFTER ALLOWING SET-OFF OF BROUGHT FORWARD BUSINESS LOSS, BY MAKING ADDITION TOWARDS DISALLOWANCE OF LOSS INCURRED ON PURCHASE AND SALE OF SHARES OF CERTAIN COMPANIES, ON THE GROUND THAT THE ASSESSEE IS ONE OF THE BENEFICIARY OF BOGUS LONG TERM CAPITAL GAIN / LOSS DERIVED FROM TRANSACTIONS OF PENNY STOCK COMPANIES. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE APPELLATE AUTHORITY. THE LD.CIT(A) FOR THE DETAILED REASONS RECORDED IN HIS APPELLATE ORDER DATED 31.10.2019 DISMISSED APPEAL FILED BY THE ASSESSEE FOR BOTH ASSESSMENT YEARS. AGGRIEVED BY THE CIT(A) ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LD.AR FOR THE ASSESSEE SUBMITTED THAT THE LD.CIT(A) HAS ERRED IN SUSTAINING ADDITION MADE BY THE AO TOWARDS LOSS SUFFERED FROM PURCHASE AND SALE OF SHARES WITHOUT APPRECIATING 6 I.TA. NOS. 224 & 225/CHNY/2020 THE FACT THAT THE ASSESSEE HAS TRADED IN SHARES THROUGH ONLINE AND FURTHER THROUGH REGISTERED BROKER OF NATIONAL STOCK EXCHANGE / BOMBAY STOCK EXCHANGE. 6. THE LD.DR ON THE OTHER HAND SUBMITTED THAT THE ASSESSEE DID NOT FILED ANY DETAILS EITHER BEFORE THE AO OR CIT(A) TO JUSTIFY ITS CASE. THEREFORE, IT IS AMPLY CLEAR THAT THE ASSESSEE DOES NOT HAVE ANYTHING TO SAY ON THE ISSUE OF BOGUS LONG TERM CAPITAL LOSS DERIVED FROM PURCHASE AND SALE OF CERTAIN PENNY STOCK COMPANIES. THEREFORE, THE AO AS WELL AS THE LD.CIT(A) ON THE BASIS OF MATERIALS AVAILABLE ON RECORD, HAS HELD THAT TRANSACTION OF PURCHASE AND SALE OF SHARES OF TWO COMPANIES IS BOGUS AND THUS DISALLOWED LOSS CLAIMED BY THE ASSESSEE. 7. PER CONTRA, THE LD.AR FOR THE ASSESSEE FAIRLY AGREED THAT THE ASSESSEE COULD NOT FILE RELEVANT DETAILS BEFORE THE AO AS WELL AS CIT(A), HOWEVER FACT REMAINS THAT ASSESSEE HAS FILED PAPER-BOOK AND FURNISHED ALL EVIDENCES TO PROVE ITS CASE. THEREFORE, THE ISSUE MAY BE REMANDED BACK TO THE FILE OF THE AO TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE. 7 I.TA. NOS. 224 & 225/CHNY/2020 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED MATERIALS AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. ADMITTEDLY, THE ASSESSEE DID NOT FILE ANY DETAILS WHEN THE AO HAS ISSUED SHOW-CAUSE NOTICE DATED 24.12.2018 CALLING FOR VARIOUS DETAILS TO JUSTIFY LOSS DECLARED FROM SALE OF SHARES OF M/S.SVC RESOURCES LTD AND M/S. KADAMB CONSTRUCTION. THEREFORE, THE AO ON THE BASIS OF MATERIALS AVAILABLE ON RECORD HAS HELD THAT TRANSACTIONS OF PURCHASE AND SALE OF SHARES OF TWO SCRIPS IS BOGUS IN NATURE AND THUS, DISALLOWED LOSS CLAIMED BY THE ASSESSEE FOR BOTH ASSESSMENT YEARS. WE, FURTHER NOTED THAT EVEN BEFORE LD.CIT(A), THE ASSESSEE DID NOT FILE ANY EVIDENCES NOR JUSTIFIED ITS CASE, WHICH IS EVIDENT FROM THE FACT THAT THE LD.CIT(A) HAS RECORDED CATEGORICAL FINDING IN HIS APPELLATE ORDER AT PARA 4 THAT ALTHOUGH THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED BUT NOT MADE ANY ARGUMENTS IN SUPPORT OF GROUNDS TAKEN AND NO WRITTEN SUBMISSIONS ARE FILED. THEREFORE, THE LD.CIT(A) HAS AFFIRMED THE FINDINGS OF THE AO ON THE BASIS OF FACTS BROUGHT ON RECORD BY THE AO IN HIS ASSESSMENT ORDER. BEFORE US, THE ASSESSEE HAS FILED A PAPER-BOOK WHICH RUNS INTO 873 PAGES AND CLAIMS THAT IT HAS FILED ALL DETAILS TO JUSTIFY CLAIM ON LOSS SUFFERED FROM 8 I.TA. NOS. 224 & 225/CHNY/2020 TRADING OF TWO SCRIPS. ADMITTEDLY, THESE EVIDENCES ARE NOT PLACED BEFORE THE AO AS WELL AS THE LD.CIT(A). THE VOLUMINOUS PAPER-BOOK FILED BY THE ASSESSEE CANNOT BE VERIFIED BY US, THAT TOO WITHOUT PROVIDING OPPORTUNITY OF HEARING TO THE AO. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE ISSUE NEEDS TO GO BACK TO THE FILE OF THE AO TO GIVE ANOTHER OPPORTUNITY TO THE ASSESSEE TO EXPLAIN ITS CASE WITH NECESSARY EVIDENCES. HENCE, WE SET ASIDE BOTH THE APPEALS TO THE FILE OF THE AO AND DIRECT THE AO TO REDO THE ASSESSMENTS DE-NOVA IN ACCORDANCE WITH LAW, AFTER GIVING ANOTHER OPPORTUNITY OF HEARING TO THE ASSESSEE. 8. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT ON 23 RD AUGUST, 2021 AT CHENNAI. SD/- SD/- ( ) (V. DURGA RAO) / JUDICIAL MEMBER ( . ) (G. MANJUNATHA) /ACCOUNTANT MEMBER /CHENNAI, /DATED, THE 23 RD AUGUST, 2021 RSR /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( ) /CIT(A) 4. /CIT 5. /DR 6. /GF.