ITO, Muzaffarnagar V. Sh. Om Singh Malik, Muzaffarnagar

ITA 2345/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58996 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 29-03-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 10-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Assessee Lawyers: B R WADHWA
• Keywords: Income from undisclosed sources; Opportunity of being heard; Accommodation entries
• Section: 143(3); 54F; 68; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E DELHI BEFORE SHRI I.P. BANSAL AND SHRI K.G. BANSAL ITA NO. 2345(DEL)/2011 ASSESSMENT YEAR: 2004-05 INCOME-TAX OFFICER, SHRI OM SINGH MALIK, WARD 1(2), MUZAFFARNAGAR. VS. 5-D, NEW MANDI, MUZAFFARNAGAR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.S. NEGI, SR. D.R. RESPONDENT BY: SHRI B.R. WADHWA, ADVOCATE DATE OF HEARIN G : 29.03.2012 DATE OF PRONOUN CEMENT: 29 .03.2012 ORDER PER K.G. BANSAL : AM THE ONLY GROUND TAKEN BY THE REVENUE IN THIS APPEA L IS THAT THE LD. CIT(APPEALS) ERRED ON FACTS AND IN LAW IN DELET ING THE ADDITION OF RS. 10,51,700/-, MADE BY THE AO U/S 68 OF THE INCOM E-TAX ACT, 1961, AS INCOME FROM UNDISCLOSED SOURCES SHOWN BY THE ASS ESSEE AS LONG-TERM CAPITAL GAIN ON SALE OF SHARES, WHICH HAS BEEN C LAIMED AS EXEMPT U/S 54 OF THE ACT, IGNORING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SUMATI DAYAL VS. CIT, (1995) 214 ITR 801 AN D HONBLE CHATTISGARH HIGH COURT IN THE CASE OF KUSHAL PRASAD MANHAR VS. CIT, (2010) 236 CTR 192, WITHOUT APPRECIATING THE FULL FACTS O F THE CASE AND IN ITA NO.2345(DEL)/2011 2 PARTICULAR THAT THE ASSESSEE HAD HIMSELF SURREN DERED THE AMOUNT OF RS. 9,21,700/- BEFORE THE AO. 2. THE FACTS OF THE CASE ARE THAT THE ORIGINA L ASSESSMENT WAS COMPLETED U/S 143(3) ON 24.11.2006, IN WHICH A DDITION OF RS. 9,21,700/- WAS MADE U/S 68 OF THE ACT, REPRESENTING UNEXPLAI NED INCOME SHOWN AS INCOME EARNED FROM SALE OF SHARES. THE ASSES SMENT WAS ENHANCED IN APPEAL BY THE LD. CIT(APPEALS), IN WHICH THE A DDITION OF RS. 9,21,700/- WAS ENHANCED TO RS. 10,51,700/-. THIS ASSESSMEN T WAS SET ASIDE BY G BENCH OF DELHI TRIBUNAL ON 06.08.2008 IN ITA NO. 4007(DEL)/2007 BY MAKING FOLLOWING OBSERVATIONS:- 7. WE HAVE CAREFULLY CONSIDERED THE ENTIRE MATE RIAL ON RECORD AND THE RIVAL SUBMISSIONS. AS THE FACTS E MERGE, IT IS EVIDENT THAT COPY OF STATEMENT WAS NOT SUPPLIED TO ASSESSEE DESPITE REPEATED REQUESTS. IN OUR VIEW, BEFORE MAKING ANY ADDITION ON THE BASIS OF STATEMENT, IT IS IMPERAT IVE ON THE PART OF REVENUE TO SUPPLY A COPY, IF A REQUEST IS MADE, IN THIS BEHALF. THE SAME HAS NOT BEEN DISPUTED BY LEARN ED DR. IN OUR VIEW, THE ASSESSEE DESERVES TO BE GIVEN A COPY OF STATEMENT AND TO BE HEARD THEREON IN ACCORDANCE WITH LAW. WE FIND MERIT IN THE PRAYER OF LD. COUNSEL AND A CCORDINGLY WE SET ASIDE THE ISSUE IN QUESTION TO THE FILE OF AO WITH A DIRECTION TO SUPPLY A COPY OF THE STATEMENT OF A.K. LATTA AND THEN TO DECIDE THE ISSUE AFRESH IN ACCORDANC E WITH LAW, OF COURSE, AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE ORDER ACCORDINGLY. ITA NO.2345(DEL)/2011 3 2.1 IN PURSUANCE OF THE DIRECTIONS OF THE TRIBUNAL , THE AO FURNISHED A COPY OF THE STATEMENT OF SHRI ASHOK KUMAR LATTA, DIRECTOR OF ELBEE PORTFOLIO (P) LTD., TO THE ASSESSEE. THE ASSESSEE WAS ALSO REQUIRED TO PRODUCE THIS PERSON FOR EXAMINATION ON THE GROU ND THAT HE WAS A WITNESS OF THE ASSESSEE AS THE ALLEGED TRANSACT ION OF SALE OF SHARES WAS CARRIED ON THROUGH AFORESAID COMPANY, WHICH ACTE D AS A BROKER. HOWEVER, THE STAND OF THE ASSESSEE WAS THAT HE HAS FURNISHED ALL THE EVIDENCE IN HIS POSSESSION IN RESPECT OF SALE. PRODUCTION OF SUCH EVIDENCE DISCHARGED THE BURDEN CAST ON HIM. THEREAFTER, THE AO SOUGHT TO DISPROVE THE EVIDENCE BY USING THE STATEMEN T OF SHRI ASHOK KUMAR LATTA. THEREFORE, HE WAS THE WITNESS OF THE AO AN D IT WAS FOR HIM TO PRODUCE HIM FOR CROSS-EXAMINATION. THIS PLEA WA S NOT ACCEPTED BY THE AO. IN VIEW OF THE STATEMENT OF SHRI ASHOK KUMAR LATTA, THE TRANSACTION OF SALE OF SHARES OF SUMA FINANCE & INVESTMENT L TD., WAS HELD TO BE A BOGUS TRANSACTION THROUGH WHICH UNACCOUNTED MONEY OF THE ASSESSEE HAD BEEN CREDITED TO THE BANK ACCOUNT. THEREFORE, T HE CREDITS WERE HELD TO REPRESENT INCOME FROM UNDISCLOSED SOURCES. ACCOR DINGLY, DEDUCTION U/S 54F WAS DENIED. ITA NO.2345(DEL)/2011 4 2.2 THE MATTER WAS AGITATED BEFORE CIT(APPEALS), MUZAFFARNAGAR. HE ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING THAT THE ASSESSEE HAS PRODUCED SUFFICIENT EVIDENCE TO SHOW THAT HE S OLD THE SHARES AND THE AMOUNT REPRESENTED SALE PROCEEDS. IN SUCH CIRCUM STANCES, SHRI ASHOK KUMAR LATTA COULD ONLY BE THE WITNESS OF THE A O AND THE ASSESSEE COULD NOT BE FORCED TO PRODUCE HIM. ON THE OTHER HAND, THE ASSESSEE WAS RIGHT IN ASKING FOR CROSS EXAMINATION, FOR WHICH REQUIS ITE ARRANGEMENT WAS MADE BY HIM FOR PAYMENT OF DAILY ALLOWANCE. DWELLIN G SPECIFICALLY ON THE STATEMENT OF SHRI ASHOK KUMAR LATTA, FURNISHED BEFORE THE INVESTIGATION WING, IT IS MENTIONED THAT THE NAME OF THE ASSESS EE HAS NOT BEEN SPECIFICALLY MENTIONED. HIS STATEMENT CANNOT BE RELIED UPON IN ABSENCE OF CROSS- EXAMINATION. HIS FINDINGS, CONTAINED ON PAGE NOS. 1 0, 11 AND 12, ARE REPRODUCED BELOW:- IT IS OBSERVED THAT DURING ASSESSMENT PROCEEDIN GS AS WELL AS APPELLATE PROCEEDINGS, THE ASSESSEE HAD FURNISHED ADEQUATE DETAILS AND EVIDENCES TO SUBSTANTIATE SALE OF SHARES OF THE COMPANY M/S SUMA FINANCE & INVESTMENT LTD. AS UND ER:- (I) PHOTOCOPY OF TRANSACTION STATEMENT ISSUED BY STOCK HOLDING CORPORATION OF INDIA LTD. REGARDING SALE O F SHARES. IN THIS STATEMENT THE NAME OF THE PURCHASER OF SHAR ES HAS ALSO BEEN GIVEN. THUS, THE SALES STAND CONFIRMED. ITA NO.2345(DEL)/2011 5 (II) PHOTOCOPY OF CONTRACT NOTE AND SETTLEMENT N O. 2003067 DATED 17.04.2003 REGARDING SHARES SOLD IN DE-MAT ACCOUNT THROUGH M/S ELBEE PORTFOLIO PVT. LTD., DELHI. (III) PHOTOCOPY OF DELIVERY INSTRUCTION NO. 00020 01 EXECUTED ON 19.04.2003 ISSUED BY STOCK HOLDING CO RPORATION OF INDIA LTD. (IV) PHOTOCOPIES OF BANK DRAFTS DRAWN ON STATE B ANK OF INDIA: A) DD NO. 216267 DATED 22.04.2003 FOR RS. 9,00,000 /- B) DD NO. 216268 DATED 22.04.2003 FOR RS. 1,49, 531/- (V) PHOTOCOPIES OF DEMAND DRAFTS NO. 21 6267 AND 216268 DATED 22.04.2003. (VI) PHOTOCOPY OF ALLAHABAD BANK ACCOUNT NO. 4066 I N WHICH BANK DRAFTS HAVE BEEN CREDITED. FROM THE ABOVE, IT IS EVIDENT THAT THE APPE LLANT WAS ABLE TO DISCHARGE ITS PRIMARY ONUS OF TABLING ALL THE R ELEVANT DETAILS. ON THE OTHER HAND, THE AO HAS NOT BEEN ABLE TO PIN -POINT ANY DEFECTS IN THE EVIDENCES FILED BY THE APPELLANT A ND HARPED UPON STATEMENT OF SHRI ASHOK KUMAR LATTA RECORDED BY ADDITIONAL DIT (INV.), DELHI AND PHYSICAL PRODUCTI ON OF THE AFORESAID PERSON. ONCE THE MATTER WAS SET ASIDE TO THE FILE OF THE AO, HE WAS DUTY BOUND TO GIVE OPPORTUNITY TO THE APPELLANT TO CROSS-EXAMINE THE DIRECTOR OF THE B ROKER COMPANY. THE APPELLANT HAS AMPLY PROVED AND DIS CHARGED ITS BURDEN BY FILING THE NECESSARY RELEVANT DOCUMENT ARY EVIDENCES IN SUPPORT OF SALE OF SHARES. THIS I S ALSO IMPORTANT TO NOTE THAT IN THE STATEMENT RECORDED ON OATH S HRI ASHOK KUMAR LATTA HAS NOT SPECIFICALLY MENTIONED THE AP PELLANTS NAME AND HIS STATEMENT IS GENERAL IN NATURE. A S PER THE DIRECTION OF THE HONBLE ITAT, IT WAS OBLIGATORY ON THE PART OF THE AO TO EXAMINE SHRI ASHOK KUMAR LATTA SPECIF ICALLY IN RESPECT OF APPELLANTS TRANSACTIONS AND PROVIDE O PPORTUNITY TO THE APPELLANT TO CROSS-EXAMINE HIM. SINCE THE DIR ECTIONS OF THE HONBLE ITAT HAVE NOT BEEN COMPLIED, THE STATEME NT OF SHRI ITA NO.2345(DEL)/2011 6 ASHOK KUMAR LATTA CANNOT BE RELIED UPON FOR MAKING THE IMPUGNED ADDITION. ON THE MERITS OF THE CASE, THE APPELLANT HAS GIVEN ALL POSSIBLE DETAILS OF THE TRANSACTIO NS IN QUESTION WHICH COULD NOT BE DISPROVED BY THE AO. THEREFORE , TRANSACTION IS TREATED AS GENUINE AND NO ADDI TION U/S 68 OF THE I.T. ACT IS CALLED FOR IN APPELLANTS CASE. T HERE ARE PLETHORA OF COURT JUDGMENTS SUPPORTING THE CASE OF THE APPELLANT. I WOULD CITE JUST FEW OF THEM, VIZ., G ANGOUR INVESTMENT LTD. 179 TAXMAN 1 (DELHI), BAV SHAKTI S TEEL MINES P. LTD. 179 TAXMAN 25 (DELHI), LOVELY EXPORTS PV T. LTD. & OTHERS 216 CTR 195 (SC) AND 299 ITR 268 (DEL), CIT VS. VALUE CAPITAL SERVICES (P) LTD. 307 ITR 334, CI T VS. FIRST FINANCE LTD 286 ITR 477, JAYA SECURITIES LTD. VS. CIT, KANPUR 166 TAXMAN 7 (ALL), UMA POLYMERS 100 IT D 1 (JD.) TM. IN VIEW OF THE FOREGOING DISCUSSION AND RESPECTFULLY FOLLOWING THE ABOVE QUOTED DECISIONS OF HONBLE C OURTS, ADDITION U/S 68 MADE BY THE AO AT RS. 10,51,700/- IS NOT JUSTIFIED. THUS, ADDITION MADE U/S 68 AT RS. 10,51,700/- IS DIRECTED TO BE DELETED. GROUND NO. 4 IS ALLOWED. 2.3 AGGRIEVED BY THIS ORDER, THE REVENUE IS IN APP EAL BEFORE US. 2.4 BEFORE US, THE LD. SENIOR DR SUBMITS THAT TH E TRIBUNAL HAD DIRECTED THE AO TO FURNISH THE STATEMENT OF SHRI ASHOK KUMA R LATTA TO THE ASSESSEE. THE AO HAD ACTED ON THIS DIRECTION AND FURNI SHED THE STATEMENT TO THE ASSESSEE. ON PERUSAL OF THE STATEMENT, IT WILL BE SEEN THAT HE IS DIRECTOR OF ELBEE POFTFOLIO (P) LTD. THIS COMPANY IS DEALING IN SHARES; CASH AMOUNTS ARE DEPOSITED IN ITS BANK ACCOUNT AGAINST WHICH CHEQUES OR DEMAND DRAFTS ARE ISSUED. IT DEALS IN SHARES OF LISTED AND U NLISTED COMPANIES AND THE ITA NO.2345(DEL)/2011 7 TRANSACTIONS ARE ENTERED IN ACCORDANCE WITH THE DESIRE OF THE CUSTOMERS. HOWEVER, THE COMPANY DOES NOT ACTUALLY DEAL IN SHARES. IN THESE CIRCUMSTANCES, THE AO HAS COME TO THE CONCLUSION THAT ELBEE PORTFOLIO (P) LTD. IS MERELY A NAME LENDER AND THAT IT IS T HE WITNESS OF THE ASSESSEE. THE LD. CIT(APPEALS) OBTAINED THE REMAND REPORT OF THE AO BUT IT WAS INFORMED THAT SHRI ASHOK KUMAR LATTA IS UNTRACEA BLE. HOWEVER, THE CIT(APPEALS) CAME TO THE CONCLUSION THAT THE ASSES SEE HAS DISCHARGED HIS BURDEN IN THE MATTER AND IF ASHOK KUMAR LATTA HAS GIVEN A GENERAL BUT SOME KIND OF ADVERSE STATEMENT, IT IS FOR THE A O TO ALLOW CROSS- EXAMINATION TO THE ASSESSEE. THIS FINDING IS INCO RRECT AS THE ASSESSEE HAD UNDERTAKEN TRANSACTIONS THROUGH THE AFORESAID COMPANY AND IT WAS FOR HIM TO PRODUCE SHRI ASHOK KUMAR LATTA TO SUBSTANTI ATE THE TRANSACTIONS OF SALE. 2.5 IN REPLY, THE LD. COUNSEL RELIED ON THE IMPUG NED ORDER AND FILED WRITTEN SUBMISSIONS. IT IS SUBMITTED THAT THE AS SESSEE HAD FILED DOCUMENTS BEFORE THE LOWER AUTHORITIES, WHICH HAVE BEEN SP ECIFICALLY NARRATED BY THE LD. CIT(A) ON PAGE NOS. 10 AND 11 OF THE IMPUGN ED ORDER. THE AO HAS NOT BEEN ABLE TO POINT OUT ANY DEFECT IN THESE D OCUMENTS. THE ASSESSEE HAD ALSO MADE APPLICATION TO THE AO FOR SUMMONING SHRI ASHOK KUMAR ITA NO.2345(DEL)/2011 8 LATTA FOR CROSS-EXAMINATION. HOWEVER, THE AO D ID NOT GIVE AN OPPORTUNITY OF CROSS-EXAMINATION. IN SUCH CIRCU MSTANCES, HIS STATEMENT COULD NOT BE RELIED UPON. THE ASSESSEE HAD SUBM ITTED ADEQUATE DETAILS AND DISCHARGED HIS BURDEN. THEREFORE, THE LD. CIT(APPEALS) WAS RIGHT IN DELETING THE ADDITION. 2.6 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. THE ASSESSEE HAD SHOWN SALE OF SH ARES OF SUMA FINANCE & INVESTMENTS LTD. THE TRANSACTION HAS BEEN EVIDENC ED BY COPY OF A NUMBER OF DOCUMENTS, BEING TRANSACTION STATEMEN T ISSUED BY STOCK HOLDING CORPORATION OF INDIA REGARDING SALE, CO NTRACT NOTE IN SETTLEMENT NO. 2003067 DATED 17.04.2003, DELIVERY INSTRUCT ION VIDE SLIP NO. 0002001 DATED 19.04.2003, AND ACCOUNT WITH ALLAHABAD BENC H IN WHICH BANK DRAFT HAD BEEN CREDITED. IT IS SEEN THAT THE SHARES W ERE PURCHASED ON 31.3.2002. AS AGAINST THE AFORESAID, THE AO HAS RELIED ON THE STATEMENT OF SHRI ASHOK KUMAR LATTA DATED 21.06.2009, WHICH REMAINS UNT ESTED FOR LACK OF CROSS- EXAMINATION. THIS STATEMENT IS GENERAL IN NATURE ABOUT THE TRANSACTIONS OF ELBEE PORTFOLIO (P) LTD., BEING IN THE NATURE OF ACCOMMODATION ENTRIES FURNISHED TO VARIOUS PERSONS ACCORDING TO THEIR REQUIREMENTS. THE STATEMENT DOES NOT CONTAIN THE NAME OF THE ASSESS EE. ACCORDING TO US, THIS ITA NO.2345(DEL)/2011 9 UNTESTED STATEMENT CANNOT BE RELIED UPON AGAINST THE DOCUMENTARY EVIDENCE FILED BY THE ASSESSEE IN VIEW OF THE D ECISION IN THE CASE OF CIT VS. SMC SHARE BROKERS LTD. (2007) 288 ITR 345. THE STATEMENT IS AN EVIDENCE ON RECORD BUT BEING AN UNTESTED EVIDENC E MUCH WEIGHT CANNOT BE ATTACHED TO IT. 2.7 THE REVENUE HAS RELIED ON THE DECISION IN THE CASE OF SUMATI DAYAL VS. CIT, (1995) 214 ITR 801 (SC). THE DECISIO N IS THAT IT IS HIGHLY IMPROBABLE FOR AN UNINITIATED PERSON TO WIN JAC KPOTS IN A NUMBER OF RACES IN TWO CONSECUTIVE YEARS, WHEN NO EVIDENCE REGARDING PURCHASE OF TICKETS HAD BEEN FILED. IN SUCH A CASE, THE PROBABILITY OF ACTUAL HAPPENING OF HIGHLY IMPROBABLE EVENT SHOULD BE TAKEN INTO ACCOUNT, WHICH IN ANY CASE WOULD BE INFINITESIMALLY MINIM AL. THE FACTS ARE CLEARLY DISTINGUISHABLE. PURCHASE OF SHARES AND SALE OF SHARES IS NOT AN HIGHLY IMPROBABLE EVENT. IT IS NOT THAT THE AS SESSEE HAS NOT BEEN ABLE TO BRING ANY EVIDENCE ON RECORD REGARDING SALE. THE REFORE, THE RATIO OF THIS CASE IS NOT APPLICABLE. IN THE CASE OF KUSHAL PR ASAD MANHAR (SUPRA), THE ALLEGED CREDITORS HAD FILED RETURNS FOR THE FIRST TIME PERTAINING TO ASSESSMENT YEAR 2005-06, WHICH WERE NOT SUPPORT ED BY BALANCE-SHEETS SHOWING LOANS ADVANCED TO THE ASSESSEE. THE LOAN S WERE ADVANCED ON A ITA NO.2345(DEL)/2011 10 NUMBER OF OCCASIONS AND ON SUCCESSIVE DATES. T HE CAPACITY OF THE LENDERS WAS NOT PROVED. THE COURT HELD THAT TRIBUNAL PRO PERLY APPRECIATED THE FACTS OF THE CASE AND NO SUBSTANTIAL QUESTION ARO SE FOR ITS CONSIDERATION. THE FACTS OF THIS CASE ARE ALSO DISTINGUISHABLE . THE DEMAND DRAFTS DEPOSITED IN THE BANK ACCOUNT ARE NOT LOANS BUT R EPRESENT SALE PROCEEDS. THE TRANSACTION OF PURCHASE HAD NOT BEEN INITIALL Y DOUBTED BY THE AO ALTHOUGH SUBSEQUENTLY THE CIT(APPEALS) ENHANCED ASSESSMENT ON THIS GROUND IN THE APPEAL AGAINST ORIGINAL ASSESSMENT O RDER. THE TRANSACTIONS ARE UNDERTAKEN THROUGH DMAT ACCOUNT AND, THUS, EVIDENCED BY TRANSACTION SLIP ISSUED TO STOCK HOLDING CORPOR ATION OF INDIA LTD., THE DEPOSITORY. THEREFORE, THE RATIO OF THIS CASE I S ALSO NOT APPLICABLE. 2.8 WE MAY ALSO ADD THAT THE ASSESSEE HAD OFFE RED THE AMOUNT FOR TAXATION IN THE COURSE OF ORIGINAL ASSESSMENT PRO CEEDINGS WITH THE CONDITION THAT PENALTY SHALL NOT BE INITIATED. A S THIS CONDITION WAS NOT ADHERED TO, THE APPEAL WAS FILED AND FINALLY THE TRIBUNAL SET ASIDE THE PROCEEDINGS TO THE FILE OF THE AO. IN VIEW OF THE APPEAL PROCEEDINGS UPON THE ORIGINAL ORDER, THE SURRENDER OF AMOUNT CEASES TO HAVE ANY EFFECT. ITA NO.2345(DEL)/2011 11 2.9 THUS, WE CONCUR WITH THE LD. CIT(APPEALS) TH AT ON THE FACTS AND IN THE CIRCUMSTANCES, THE REVENUE HAS NOT BEEN ABLE TO PROVE THAT THE SALE PROCEEDS WERE IN THE NATURE OF ACCOMMODATION ENT RIES. 3. IN THE RESULT, THE APPEAL IS DISMISSED. SD/- SD/- ( I.P. BANSAL) (K.G. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER SP SATIA COPY OF THE ORDER FORWARDED TO:- OM SINGH MALIK, MUZAFFARNAGAR. ITO, WARD 1(2), MUZAFFARNAGAR. CIT(A) CIT, THE D.R., ITAT, NEW DELHI. ASSISTANT REGISTRAR.