M/s. Premium Linkers Ltd., New Delhi V. ITO, New Delhi

ITA 2252/DEL/2010

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4163 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2006-2007
• Appeal Filed On: 13-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Share purchase agreement; Transactions in derivatives
• Section: 142(1); 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DELHI BEFORE SHRI G.D.AGRAWAL, HONBLE PRESIDENT AND SHRI SUDHANSHU SRIVASATAVA, JUDICIAL MEMBER ITA NO. 2252/DEL/2010 ASSESSMENT YEAR: 2006- 07 ITA NO 1826/DE L/2014 ASSESSMENT YEAR: 2006 -07 APPELLANT BY SH. K. SAMPATH, ADV. RESPONDENT BY SH. ATIQ AHMAD, SR.DR DATE OF HEARING 0 6 .0 9 .2017 DATE OF PRONOUNCEMENT 0 4 . 1 0 .2017 ORDER PER BENCH ITA 2252/DEL/2010 IS AN APPEAL FILED BY THE ASSESSE E AGAINST THE ORDER OF LD. CIT (A) DATED 31.3.2010 FOR AY 200 6-07 WHEREAS ITA 1826/DEL/2014 IS PREFERRED BY THE ASSESSEE AGAI NST CONFIRMATION OF PENALTY IMPOSED U/S 271(1)(C) OF TH E INCOME TAX ACT, 1961 FOR THE SAME YEAR. THE GROUNDS OF APPEALS TAKEN BY THE ASSESSEE IN ITA 2252/DEL/2010 ARE AS UNDER:- PREMIUM LINKERS LTD. 102, PALCO HOUSE, 2162/T-10, MAIN PATEL ROAD, NEW DELHI-110008. PAN-AAACP1111G VS ITO, WARD-14(3), NEW DELHI. (APPELLANT) (RESPONDENT) 2 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD CIT (A) ERRED IN CONFIRMING THE FOLLOWING ACTION OF THE ASSESSING OFFICER. 1. IN COMPLETING ASSESSMENT U/S 144 OF THE INCOME T AX ACT, 1961 WITHOUT ALLOWING REASONABLE, ADEQUATE AND PROP ER OPPORTUNITY OF HEARING. 2. IN DISALLOWING LOSS ON SALE OF SNARES IN A SUM O F RS.1,62,40,000/- INCURRED IN THE NORMAL COURSE OF B USINESS . THE ABOVE ACTIONS OF THE LD. CIT(A) ARE MOST ARBITR ARY, ERRONEOUS AND UNTENABLE AND IT IS PRAYED THAT SUCH ACTIONS MUST BE QUASHED. 2. THE APPEAL WAS EARLIER DISMISSED ON 25.10.2011 AS NOBODY WAS PRESENT AND TRIBUNAL HAD DISMISSED THE APPEAL IN LIMINE. HOWEVER, VIDE ORDER DATED 23.8.2013 THE SAME WAS RE CALLED AND WAS FINALLY HEARD ON MERITS ON 10.12.2013 AND WAS D ISPOSED OFF VIDE ORDER DATED 7 TH FEBRUARY, 2014. HOWEVER, THE ASSESSEE MOVED A MISCELLANEOUS APPLICATION BEFORE THE ITAT AND THIS ORDER TOO WAS RECALLED VIDE ORDER DATED 08/04/2016 IN MA NO. 295/ DEL/2014. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSM ENT IN THIS CASE WAS COMPLETED U/S 144 OF THE INCOME TAX ACT, 1961 V IDE ASSESSMENT ORDER DATED 15.12.2008. THE ASSESSING OF FICER DISALLOWED AN AMOUNT OF RS.L,62,40,000/- AS LOSS CL AIMED BY THE ASSESSEE ON SALE OF SHARES. THE ASSESSING OFFICER H AD ISSUED VARIOUS 3 NOTICES FOR COMPLIANCE BUT NOBODY APPEARED. THEREFO RE, ON 24.10.2008 A FINAL QUESTIONNAIRE WAS ISSUED AND THE ASSESSEE FILED REPLY ON DATED 7.11.2008 AND THE HEARING WAS THEN A DJOURNED FOR 27.11.2008 ON WHICH DATE NO COMPLIANCE WAS MADE. TH EREFORE, THE ASSESSING OFFICER ISSUED A FINAL SHOW CAUSE NOTICE DATED 4TH DECEMBER, 2008 WHEREIN VARIOUS OBSERVATIONS MADE BY THE ASSESSING OFFICER WERE NOTED AND IT WAS SPECIFICALL Y MENTIONED THAT IF ON THE FIXED DATE COMPLIANCE WAS NOT MADE, THE A SSESSMENT WOULD BE COMPLETED U/S 144 OF THE ACT. THE ASSESSIN G OFFICER, THEREAFTER, COMPLETED THE ASSESSMENT BY HOLDING AS UNDER:- 'THIS LETTER WAS RECEIVED BACK UN-SERVED WITH THE R EMARKS OF THE POSTAL AUTHORITIES' 'LEFT'. THIS IS THE SAME AD DRESS AT WHICH THE EARLIER NOTICES WERE DULY SERVED UPON THE ASSES SEE. INSPECTOR WAS ALSO DEPUTED BUT AS PER HIS REPORT HE HAS AFFIXED THE SHOW CAUSE NOTICE ALONG WITH NOTICE U/S 142(1) AT THE ADDRESS OF THE ASSESSEE I.E. 102, PALCO HOUSE, 2162 /T-10, MAIN PATEL ROAD, NEW DELHI - 110008. SINCE THE PROCEEDIN GS ARE BARRED BY LIMITATION AND THE ASSESSEE IS NOT ATTEND ING THE OFFICE IN SPITE OF MORE THAN SUFFICIENT OPPORTUNITY ALLOWE D TO HIM, I AM LEFT WITH NO OTHER ALTERNATIVE BUT TO DECIDE THE CA SE ON MERITS ON THE BASIS OF MATERIAL AVAILABLE ON RECORD AND AS PR OPOSED IN THE SHOW CAUSE NOTICE DATED 4.12.2008. IN THE ABSENCE OF ANY DETAILS AND INFORMATION THE L OSS CLAIMED BY THE ASSESSEE ON TRADING OF SHARES OF 4 RS.1,62,40,000/- AS DISCUSSED ABOVE IS DISALLOWED. IT IS ALSO GATHERED THAT THE ASSESSEE HAS MADE THE TRANSACTION S OF RS.1,40,00,000/- IN RESPECT OF SHARES OF M/S TECH D NA SOLUTIONS LTD. THROUGH VINAYAK LOCAL AREA BANK, SIK AR, RAJASTHAN. ENQUIRIES CONDUCTED REVEALED THAT THE VI NAYAK LOCAL AREA BANK IS NOT ALLOWED TO MAKE ANY TRANSACTIONS B Y THE GOVT. THERE ARE ONLY TWO EMPLOYEES OF THE BANK SITTING TH ERE AND THEY CANNOT MAKE ANY TRANSACTION OF RECEIPT AND CLEARING . THE TRANSACTION MADE THROUGH THE BANK HAS NO EVIDENCE O F GENUINENESS. THE ASSESSEE COULD NOT GIVE ANY SUPPOR TING DOCUMENTARY EVIDENCE IN RESPECT OF THESE TRANSACTIO NS IN SPITE OF MORE THAN SUFFICIENT OPPORTUNITY ALLOWED TO HIM. ACCORDINGLY, AN AMOUNT OF RS.1,62,40,000/- IS ADDED TO THE INCOM E DECLARED BY THE ASSESSEE AS PROPOSED IN THE SHOW CAUSE NOTIC E DATED 4.12.2008 AND PENALTY PROCEEDINGS U/S 271(1)( C) AR E BEING INITIATED SEPARATELY FOR FURNISHING INACCURATE PART ICULARS OF ITS INCOME.' 4. BEFORE THE LD CIT (A), THE ASSESSEE OBJECTED TO THE ASSESSMENT ORDER MADE U/S 144 AND ALSO ARGUED ON MERITS. THE L D CIT (A), AFTER OBTAINING REMAND REPORT FROM ASSESSING OFFICE R AND AFTER GOING THROUGH VARIOUS DOCUMENTS FILED BY THE ASSESSEE, DI D NOT ACCEPT THE CONTENTIONS OF ASSESSEE AND UPHELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. THE RELEVANT OBSERVATIONS OF LD CIT (A) ARE CONTAINED IN PARA 5.3 WHICH ARE REPRODUCED BELOW:- 5 'I HAVE CAREFULLY CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND PERUSED THE ASSESSMENT ORDER PASSED B Y THE ASSESSING OFFICER. IT IS SEEN THAT THE APPELLANT HA D EARNED PROFIT OF RS.1,63,35,766/- ON THE SALE OF SHARES OF M/S IK F TECHNOLOGIES LTD. THE APPELLANT HAS SUBMITTED THE E VIDENCE IN RESPECT OF THE TRANSACTION IN THE SHARES OF M/S IKF TECHNOLOGIES LTD. THAT TRANSACTION WAS CARRIED OUT THROUGH A REC OGNIZED BROKER AND ON THE RECOGNIZED STOCK EXCHANGE. THE AR HAS SUBMITTED COMPLETE DETAILS ABOUT THE SALE AND PURCH ASE OF SHARES OF IKF TECHNOLOGIES LTD. HOWEVER, IN RESPECT OF LOSS OF RS.1,30,00,000/- ON SALE OF SHARES OF TECH DNA SOLU TIONS, THE APPLICANT HAS FAILED TO SUBMIT ANY CONVINCING EVIDE NCE. NO BILLS AND CONTACT NOTES FROM ANY RECOGNIZED BROKER WERE P RODUCED IN RESPECT OF TRANSACTION OF TECH DNA SOLUTIONS. NO SH ARE CERTIFICATE NO. AND DISTINCTIVE NOS. OF SHARES OF T ECH DNA SOLUTIONS WERE SUBMITTED. ADMITTEDLY THE SHARES OF TECH DNA SOLUTIONS ARE NOT TRADED IN THE FUTURES AND OPTIONS (F&O) SEGMENT. THEREFORE, THE ONLY POSSIBILITY IS THROUGH TAKING THE DELIVERY. IT IS AN ADMITTED FACT THAT VINAYAK LOCAL AREA BANK IS A TAINTED ENTITY WHICH HAS BEEN BANNED BY THE GOVT. FROM UNDERTAKING ANY TRANSACTION. IT IS ALSO AN ADMITTED FACT THAT THE DIRECTOR OF THE APPELLANT COMPANY MR. PRAKASH CHAND GOYAL IS PROMOTER OF THIS TAINTED ENTITY/BANK. THUS THE APPE LLANT WAS IN A POSITION TO OBTAIN WHATEVER CONFIRMATION THEY WAN TED FROM THE ABOVE TAINTED ENTITY, BUT THEY COULD NOT PRODUCE AN Y CORROBORATIVE EVIDENCE THAT ANY REAL TRANSACTION WA S CARRIED OUT IN THE SHARES OF TECH DNA SOLUTIONS. SIMILAR IS THE CASE IN 6 RESPECT OF CLAIM OF LOSS OF RS.32,40,000/- ON SALE OF SHARES OF OTHER COMPANIES. THE APPELLANT COULD NOT SUBMIT ANY EVIDENCE LIKE BILLS AND CONTRACT NOTES FROM A RECOGNIZED BRO KER FOR THE TRANSACTIONS CARRIED OUT ON A RECOGNIZED STOCK EXCH ANGE. NO SHARE CERTIFICATE NUMBER AND DISTINCTIVE NO OF SHAR ES WERE SUBMITTED IN RESPECT OF THE SO CALLED SHARES OF THE OTHER COMPANIES. EVEN BASIC INFORMATION IN RESPECT OF ABO VE TRANSACTION WAS NOT SUBMITTED BY THE APPELLANT. THE APPELLANT COULD NOT PROVIDE ANY EVIDENCE FOR PAYMENT OF BROKE RAGE ON THE ABOVE TRANSACTION AND PAYMENT OF SECURITIES TRANSAC TION TAX AND SERVICE TAX IN RESPECT OF ABOVE TRANSACTION. NO EVIDENCE WHATSOEVER WAS PRODUCED WHICH COULD PROVE THE GENUI NENESS OF THE TRANSACTION IN RESPECT OF WHICH LOSS OF RS.1 ,62,40,000/- HAS BEEN CLAIMED. THUS IT IS EVIDENT THAT THE TRANS ACTION WAS AN AFTER THOUGHT AND DESIGNED TO SET OFF THE PROFIT ON THE SHARES OF IKF TECHNOLOGIES LTD. IN VIEW OF THE ABOVE DISCUSSI ON, I HOLD THAT THE ASSESSING OFFICER WAS FULLY JUSTIFIED IN T REATING THE LOSS ON SALE OF SHARES OF TECH DNA SOLUTIONS LTD. AND OT HER COMPANIES AS NOT GENUINE AND DISALLOWING THE SAME. I, THEREFORE, CONFIRM THE ADDITION OF RS.1,62,40,000/- MADE BY THE ASSESSING OFFICER. THIS GROUND IS REJECTED.' 5. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 6. AT THE OUTSET, THE LD AR SUBMITTED THAT 'LEFT' R EMARKS AS CONTAINED IN THE ORDER OF ASSESSMENT ARE WRONG AND ASSESSEE WAS NOT PROVIDED SUFFICIENT AND REASONABLE OPPORTUNITY AND IT WILL BE IN 7 THE INTEREST OF JUSTICE IF THE APPEAL IS REMITTED B ACK TO THE OFFICE OF ASSESSING OFFICER FOR RE-ADJUDICATION. HE FURTHER S UBMITTED THAT EVEN LD CIT (A) DID NOT PROVIDE ADEQUATE AND PROPER OPPORTUNITY. 7. THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT SUFFI CIENT NOTICES WERE ISSUED EVEN THEN THE ASSESSEE DID NOT CARE TO APPEAR BEFORE ASSESSING OFFICER. IN THIS RESPECT OU R ATTENTION WAS INVITED TO THE RELEVANT PORTION OF ASSESSMENT O RDER AND FURTHER SUBMITTED THAT LD CIT (A) AFTER CONSIDERING THE CONTENTIONS OF ASSESSEE AND AFTER OBTAINING REMAND REPORT FROM ASSESSING OFFICER HAD DECIDED THE MATTER ON MERITS. THEREFORE, NO OBJECTIVE WILL BE ACHIEVED BY SENDING THE CASE B ACK TO THE OFFICE OF ASSESSING OFFICER AS THE LD CIT (A) HAS C ONSIDERED ALL THE RELEVANT MATERIAL. THEREFORE, IT WAS PLEADED TH AT PRAYER OF THE LD AR TO SEND BACK THE CASE TO THE ASSESSING OF FICER WAS ONLY TO BUY TIME AND SHOULD NOT BE ACCEPTED. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PER USED THE RELEVANT MATERIAL ON RECORD. THE FACT THAT THE ASSE SSMENT WAS COMPLETED U/S 144 OF THE ACT IS UNDISPUTED. THE ONL Y PLEA OF THE ASSESSEE IS THAT IT MAY BE PROVIDED ADEQUATE OP PORTUNITY TO PRESENT ITS CASE. IT IS EVIDENT FROM THE ASSESSMENT ORDER THAT THE ADDITION OF RS. 1,62,400/- ON ACCOUNT OF LOSS IN TR ADING OF 8 SHARES WAS MADE IN ABSENCE OF ANY DETAILS. BEFORE T HE LD. CIT (A) ALSO, THE ASSESSEE COULD NOT FURNISH RELEVANT D ETAILS LIKE THE BASIS OF VALUATION OF SHARES, THE DATE OF PURCHASE OF SHARES AND THE WORKING OF THE LOSS SAID TO HAVE BEEN INCURRED ON ACCOUNT OF TRADING IN SHARES. THUS, THE ASSESSEE WAS NOT ABLE TO SUBSTANTIATE ITS CLAIM BEFORE THE LD. CIT (A) ALSO. HOWEVER, BEFORE US, THE LD. AR HAS GIVEN AN ASSURANCE THAT T HE ASSESSEE SHALL FULLY CO-OPERATE WITH THE AO IF IT IS GIVEN A NOTHER OPPORTUNITY TO FURNISH THE REQUIRED DETAILS/EVIDENC ES/ DOCUMENTS. THEREFORE, LOOKING INTO THE OVERALL FACT S AND CIRCUMSTANCES OF THE CASE AND KEEPING IN MIND THAT A HIGH PITCHED ASSESSMENT AT RS. 1,62,44,980/- HAS BEEN MA DE AS AGAINST THE RETURNED INCOME OF RS. 4,984/-, WE DEEM IT FIT TO RESTORE THE ISSUE TO THE FILE OF THE AO FOR FRESH A DJUDICATION AFTER GIVING THE ASSESSEE A PROPER OPPORTUNITY. WE ALSO D IRECT THE ASSESSEE TO FULLY CO-OPERATE WITH THE AO IN THE ASS ESSMENT PROCEEDINGS. ACCORDINGLY, ITA NO. 2252/DEL/2010 STA NDS ALLOWED FOR STATISTICAL PURPOSES. 9. ITA NO. 1826/DEL/2014 PERTAINS TO THE PENALTY IM POSED U/S 271(1)(C) WITH RESPECT TO THE QUANTUM PROCEEDIN GS WHICH WE HAVE ALREADY RESTORED TO THE FILE OF THE AO AS A BOVE. IN VIEW 9 OF OUR REMANDING THE QUANTUM PROCEEDINGS TO THE FIL E OF THE AO, WE RESTORE THE PENALTY PROCEEDINGS ALSO TO THE FILE OF THE AO TO BE ADJUDICATED AFRESH AFTER THE COMPLETION OF THE A SSESSMENT PROCEEDINGS. ACCORDINGLY, THIS APPEAL ALSO STANDS A LLOWED FOR STATISTICAL PURPOSES. 10. IN THE FINAL RESULT, BOTH THE APPEALS STAND ALL OWED FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 4 TH OCTOBER, 2017. SD/- SD/- (G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA) PRESIDENT JUDICIAL MEMBER DATED: 4 TH OCTOBER, 2017 GS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER ASSISTANT REGI STRAR 10