KUMAR ANIL AGARWAL, MUMBAI V. ITO 18 (2)(2), MUMBAI

ITA 2421/MUM/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 3801 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2015-2016
• Appeal Filed On: 16-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Capital asset; Opportunity of being heard; Principle of natural justice; Accommodation entries; Set aside; Capital Gains; Bogus
• Section: 68; 69; 69C; 143(3)

Judgement Text

P A G E | 1 ITA NO.2421/MUM/2019 A.Y. 2015 - 16 MR. KUMAR ANIL AGARWAL VS. INCOME - TAX OFFICER - 18(2)(2) IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO.2421/MUM/2019 (ASSESSMENT YEAR: 2015 - 16 ) MR. KUMAR ANIL AGARWAL 3 RD FLOOR, BOTAWALA BUILDING, 27/31, OLD HANUMAN LANE, MUMBAI 400 002 VS. INCOME - TAX OFFICER - 18(2)(2), 308, EARNEST HOUSE, 3 RD FLOOR, MUMBAI MAHARASHTRA 400 021 PAN AABPA2765R (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI NEELKANTH KHANDELWAL, A.R RESPONDENT BY: SHRI V. VINOD KUMAR, D.R DATE OF HEARING: 04.11 .2019 DATE OF PRONOUNCEMENT: 0 6 .11.2019 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 29, MUMBAI, DATED 28.03.2019, WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT ACT), DATED 29.12.201 7 FOR A.Y. 2015 - 16. THE ASSESSEE HAS ASSAILED THE IMPUGNED ORDER BY RAISING BEFORE US THE FOLLOWING GROUNDS OF APPEAL: THE FOLLOWING GROUNDS OF APPEAL ARE INDEPENDENT OF AND WITHOUT PREJUDICE TO, ONE ANOTHER 1. THE COMMISSIONER OF INCOME - TAX (APPEALS) - 29, MUMBAI (HEREINAFTER REFERRED TO AS THE CIT(A)) ERRED IN FRAMING AN EX - PARTE ORDER. THE APPELLANT CONTENDS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) OUGHT NOT TO FRAMED AN EX - PART E ORDER. 2. THE CIT(A) ERRED IN UPHOLDING THE ACT ION OF THE INCOME - TAX OFFICER - 18(2)(2), MUMBAI (HEREINAFTER REFERRED TO AS THE ASSESSING OFFICER) IN MAKING AN ADDITION OF RS . 1,61,80 , 924 / - , HOLDING THE CAPITAL GAINS ON SALE OF LONG - TERM CAPITAL ASSETS BEING, SHARES OF P A G E | 2 ITA NO.2421/MUM/2019 A.Y. 2015 - 16 MR. KUMAR ANIL AGARWAL VS. INCOME - TAX OFFICER - 18(2)(2) SURA B HI CHEMICALS AND INVESTMENTS LTD TO HE NON - GENUINE AND THEREBY NOT ALLOWING EXEMPTION UNDER SECTION 10(38) OF THE ACT. THE APPELLANT CONTENDS THAT ON THE FACTS AND IN TH E CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) OUGHT NOT TO HAVE UPHELD THE ACTION OF THE ASSESSING OFFICER IN CONSIDERING THE CAPITAL GAINS ON SALE OF LONG - TERM CAPITAL ASSET S BEING, SHARES OF SURAB HI CHEMICALS AND INVESTMENTS LTD TO BE NON - GENUINE INASMUCH AS THE SAID SHARES HAVE BEEN PURCHASED DURING AN EARLIER YEAR ARE INVESTMENTS; THE SAME BEING SOLD SHALL NECESSARILY GIVE RISE TO CAPITAL GAINS AND THE IMPUGNED SHARES BEING LONG - TERM CAPITAL ASSET, THE CAPITA L GAINS ARE LONG - TERM CAPITAL GAINS IN RESPECT OF WHICH THE ASSESSING OFFICER OUGHT TO HAVE ALLOWED EXEMPTION OF SECTION 10(38) OF THE ACT; ACCORDINGLY, THE IMPUGNED ADDITION UNDER SECTION 68 OF THE ACT IS NOT JUSTIFIED. THE APPELLANT FURTHER, CONTENDS TH AT THE CIT(A) OUGHT NOT TO HAVE UPHELD THE ACTION OF THE ASSESSING OFFICER IN MAKING THE IMPUGNED ADDITION INASMUCH AS THE ASSESSMENT ORDER HAS BEEN FRAMED IN VIOLATION AND UTTER DISREGARD TO THE PRINCIPLES OF NATURAL JUSTICE INASMUCH AS, AMONGST OTHERS, T HE ASSESSING OFFICER HAS NOT GIVEN THE DOCUMENTS/ STATEMENTS ON OATH TO THE APPELLANT FOR REBUTTAL, WHICH ARE IN HIS POSSESSION AND ON WHICH HE HAS RELIED UPON AND HAS NOT GIVEN AN OPPORTUNITY TO THE APPELLANT TO CROSS EXAMINE THE PERSONS WHOSE STATEMENT T HE ASSESSING OFFICER HAS RELIED UPON. THE APPELLANT FURTHER, CONTENDS THAT THE CIT(A) OUGHT NOT TO HAVE UPHELD THE ACTION OF THE ASSESSING OFFICER IN MAKING THE IMPUGNED ADDITION INASMUCH AS THE ASSESSING OFFICER HAS NOT PROVED THAT THE CASH EMANATED FROM THE COFFERS OF THE APPELLANT. 3. THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN MAKING AN ADDITION OF RS 80,905 UNDER SECTION 69C OF THE ACT, BEING COMMISSION AT 0.5% FOR OBTAINING THE ALLEGED ACCOMMODATION ENTRIES FOR CAPITAL GAINS RS 1,61,80,924 ON SALE OF LONG - TERM CAPITAL ASSET BEING SHARES OF SURABHI CHEMICALS AND INVESTMENTS LTD. THE APPELLANT CONTENDS THAT ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) OUGHT NOT TO HAVE UPHELD THE ACTION OF THE ASSESSING OF FICER IN MAKING THE IMPUGNED ADDITION INASMUCH AS THERE IS NO ACCOMMODATION ENTRY AVAILED BY THE APPELLANT AND THE ASSESSING OFFICER HAS FAILED TO BRING ANY EVIDENCE ON RECORD TO MAKE THE IMPUGNED ADDITION; HENCE, THE IMPUGNED ADDITION OUGHT TO BE DELETED THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER OR AMEND THE AFORESTATED GROUNDS OF APPEAL. 2. BRIEFLY STATED, THE ASSESSEE HAD E - FILED HIS RETURN OF INCOME FOR A.Y. 2015 - 16 ON 25.08.2015, DECLARING HIS TOTAL INCOME AT RS.11,19,140/ - . SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER SEC.143(2) OF THE ACT. THE A.O WHI LE FRAMING THE ASSESSMENT OBSERVED THAT THE ASSESSEE HAD DURING THE YEAR CLAIMED TO HAVE SOLD 1,82,500 SHARES OF M/S SURABHI CHEMICALS AND INVESTMENTS LTD. FOR A CONSIDERATION OF RS.1,61,61,120/ - . AFTER CLAIMING DEDUCTION OF THE PURCHASE PRICE OF RS.2 ,73, 750/ - , THE ASSESSEE HAD CLAIMED THE BALANCE LTCG OF RS.1,58,87,370/ - AS EXEMPT UNDER SEC. 10(38) OF THE ACT. THE A.O WAS OF THE VIEW THAT THE ASSESSEE HAD OBTAINED AN ACCOMMODATION ENTRY FOR BOGUS PROFIT ON SALE OF SHARES AMOUNTING TO RS.1,61,80,924/ - (AS PER THE AIR TRANSACTION REPORT OF ITD SYSTEM). ALTERNATIVELY, THE A.O HELD A CONVICTION THAT THE IMPUGNED SALE PRICE OF THE SHARES REPRESENTED THE INCOME OF THE ASSESSEE FROM OTHER SOURCES, WHICH HOWEVER WAS WRONGLY P A G E | 3 ITA NO.2421/MUM/2019 A.Y. 2015 - 16 MR. KUMAR ANIL AGARWAL VS. INCOME - TAX OFFICER - 18(2)(2) PROJECTED BY HIM AS HIS INCOME IN THE NATURE OF CAPITAL GAIN. APART THEREFROM, THE A.O WAS OF THE VIEW THAT FOR OBTAINING THE AFORESAID ACCOMMODATION ENTRY OF BOGUS PROFIT ON SALE OF SHARES THE ASSESSEE WOULD ALSO HAD PAID COMMISSION @ 0.5% OF THE IMPUGNED SALE CONSIDERATION OF T HE SALE PRICE OF SHARES AMOUNTING TO RS.1,61,80,924/ - (AS PER THE AIR TRANSACTION REPORT OF THE ITD SYSTEM). ON THE BASIS OF HIS AFORESAID OBSERVATIONS, THE A.O CONCLUDED THAT THE IMPUGNED SALE CONSIDERATION OF SHARES OF M/S SURABHI CHEMICALS AND INVESTMENTS WAS IN FAC T THE UNEXPLAINED INVESTMENT MADE BY THE ASSESSEE IN CASH TO OBTAIN THE EQUIVALENT AMOUNT AS BOGUS PROFIT ON SALE OF SHARES. ACCORDINGLY, THE A.O MADE AN ADDITION UNDER SEC. 69 OF RS.1,61,80,924/ - . ALSO, AN ADDITION OF COMMISSION OF RS.80,905/ - THAT WAS AL LEGED TO HAVE BEEN PAID BY THE ASSESSEE FOR FACILITATING OBTAINING OF THE AFORESAID ACCOMMODATION ENTRY WAS MADE IN THE HANDS OF THE ASSESSEE. IN THE BACKDROP OF HIS AFORESAID DELIBERATION S THE A.O ASSESSED THE INCOME OF THE ASSESSEE AT RS.1,73,80,970/ - . 3 . AGGRIEVED, THE ASSESSEE ASSAILED THE ASSESSMENT FRAMED BY THE A.O IN APPEAL BEFORE THE CIT(A). HOWEVER, THE CIT(A) NOT FINDING FAVOUR WITH THE CONTENTIONS ADVANCED BY THE ASSESSEE DISMISSED THE APPEAL. 4. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF T HE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE AT THE VERY OUTSET OF THE HEARING OF THE APPEAL SUBMITTED, THAT THE CIT(A) HAD DISMISSED THE APPEAL ON THE BASIS OF AN EX - PARTE ORDER. IT WAS AVERRED BY THE LD. A.R THAT THE FAILURE ON THE PART OF THE ASSESSEE TO PUT UP AN APPEARANCE BEFORE THE CIT(A) WAS BACKED BY AN INADVERTENT MISTAKE ON THE PART OF HIS CHARTERED ACCOUNTANT . IT WAS SUBMITTED BY THE LD. A.R THAT THE ASS ESSEE AFTER HAVING RECEIVED THE NOTICE FIXING THE HEARING OF THE APPEAL ON 25.03.2019 BEFORE THE CIT(A) - 2 9, MUMBAI, HAD FORWARDED THE SAME TO HIS CHARTERED ACCOUN TANT I.E M/S P.D. SARAF & CO. ON 22.03.2019. HOWEVER, ON ACCOUNT OF AN INADVERTENT M ISTAKE TH E CHARTERED ACCOUNTANT HAD FAILED TO DELIVER THE SAME MR. RAJIV KHANDELWAL, CHARTERED ACCOUNTANT , WHO WAS ENGAGED BY THE ASSESSEE TO REPRESENT HIS CASE BEFORE THE FIRST APPELLATE AUTHORITY. IN SUM AND SUBSTANCE, IT WAS THE CLAIM OF THE LD. A.R THAT THE FAI LURE ON THE PART OF THE ASSESSEE TO COMPLY WITH THE NOTICE INTIMATING THE FIXATION OF THE APPEAL BEFORE THE CIT(A) - 29, MUMBAI ON 25.03.2019 WAS PURELY ON ACCOUNT OF A BONAFIDE MIS TAKE ON THE PART OF THE ASSESSES CHARTERED ACCOUNTANT . IN ORDER TO FORTIFY HIS AFORESAID CONTENTION THE LD. A.R HAD DRAWN O UR ATTENTION TO THE AFFIDAVIT DATED P A G E | 4 ITA NO.2421/MUM/2019 A.Y. 2015 - 16 MR. KUMAR ANIL AGARWAL VS. INCOME - TAX OFFICER - 18(2)(2) 19.06.2019 OF THE ASSESSEE WHEREIN THE AFORESAID FACTS HAD BEEN DEPOSED BY HIM. APART THEREFROM, IT WAS SUBMITTED BY THE LD. A.R THAT ON TWO OTHER OCCASION S I.E ON 20.11. 2018 AND 20.12.2018 THE AS SESSEE HAD SPECIFICALLY FILED APPLICATION S SEEKING ADJOURNMENT OF THE HEARING OF THE APPEAL. IN THE BACKDROP OF THE AFORESAID FACTS, IT WAS SUBMITTED BY THE LD. A.R THAT THE CIT( A) WAS IN ERROR IN STATING IN HIS ORDER THAT ON THE AFORESAID TWO DATES ALSO THE ASSESSEE HAD FAILED TO EFFECT NECESSARY COMPLIANCE AND HAD NOT PUT UP AN APPEARANCE BEFORE HIM. IT WAS AVERRED BY THE LD. A.R THAT IN ALL FAIRNESS THE MATTER MAY BE RESTORED T O THE FILE OF THE CIT(A) WITH A DIRECTION TO DISPOSE OFF THE APPEAL AFTER AFFORDING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 5. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) SUBMITTED THAT AS THE ASSESSEE HAD FAILED TO PUT UP AN A PPEARANCE ON THE RESPECTIVE DATES ON WHICH THE APPEAL WAS FIXED FOR HEARING BEFORE THE CIT(A), THEREFORE, THE LATTER HAD RIGHTLY DISPOSED OFF THE APPEAL AFTER AFFORDING SUFFICIENT OPPORTUNITY TO THE ASSESSEE WHO HAD CHOSEN NOT TO AVAIL THE SA ME. IT WAS AV ERRED BY THE LD. D .R THAT AS THE ASSESSEE WAS ALREADY AFFORDED SUFFICIENT OPPORTUNITY BY THE CIT (A), THEREFORE, ITS CLAIM THAT THE MATTER BE RESTORED FOR FRESH ADJUDICATION DID NOT MERIT ACCEPTANCE. 6. WE HAVE HEARD THE AUTHORIZE D REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. AS IS DISCERNIBLE FROM THE IMPUGNED ORDER, WE FIND THAT THE CIT(A) HAD OBSERVED THAT THE ASSESSEE ON ALL THE SIX OCCASIONS ON WHICH THE APPEAL WAS POSTED FOR HE ARING BEFORE HIM, HAD FAILED TO PUT UP AN APPEARANCE BEFORE HIM. ACCORDINGLY, THE CIT(A) HOLDING A CONVICTION THAT THE ASSESSEE WAS NOT INTERESTED IN PURS UING AND PROSECUTING THE APPEAL HAD THUS PROCEEDED WITH THE SAME AND PASSED AN EX - PARTE ORDER. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION AND ARE PERSUADED TO ACCEPT THE CLAIM OF THE LD. A.R THAT THE FAILURE ON THE PART OF THE ASSESSEE TO PUT UP AN APPEARANCE ON 25.03.2019 WAS BACKED BY AN INADVERTENT MISTAKE ON THE PART OF HIS CHARTERED ACCOUNTANT . AS CAN B E GATHERED FROM THE ASSESSES AFFIDAVIT, DATED 19.06.2019 , THOUGH THE ASSESSEE HAD ON 22.03.2019 DELIVERED THE NOTICE INTIMATING THE HEARING OF THE APPEAL BEFORE THE CIT(A) ON 25.03.2019 TO HIS CHARTERED ACCOUNTANT I.E M/S P.D. SARAF & CO. HOWEVER , THE LA TTER ON ACCOUNT OF A BONAFIDE OMISSION HAD FAILED TO DELIVER THE SAME TO MR. RAJIV KHANDELWAL , CHARTERED ACCOUNTANT I.E THE COUNSEL WHO WAS ENGAGED BY THE ASSESSEE FOR REPRESENTING HIS P A G E | 5 ITA NO.2421/MUM/2019 A.Y. 2015 - 16 MR. KUMAR ANIL AGARWAL VS. INCOME - TAX OFFICER - 18(2)(2) CASE BEFORE THE FIRST APPELLATE AUTHORITY . ALTHOUGH, THE ASSESSEE HAD REMAINED VIGILANT AND HAD DELIVERED THE NOTICE INTIMATING THE FIXATION OF THE APPEAL BEFORE THE CIT(A) TO HIS CHARTERED ACCOUNTANT I.E M/S P.D. SARAF & CO. ON 22.03.2019, HOWEVER, WE FIND THAT THE LATTER HAD INADVERTENTLY OMITTED TO DELIVER THE SAME TO THE COUNSEL WHO WAS ENGAGED BY THE ASSESSEE TO REPRESENT HIS CASE BEFORE THE FIRST APPELLATE AUTHORITY. INSOFAR ON TWO OCCASIONS (OUT OF REMAINING 5 OCCASIONS) ON WHICH THE HEARING OF THE APPEAL WAS FIXED I.E ON 20.11.2018 AND 20.12 .2018, WE FIND THAT THE ASSESSEE VIDE LETTERS DATED 16.11.2018 AND 1 8.12.2018 FILED WITH THE CIT(A) HAD REQUESTED FOR AN ADJOURNMENT ON THE SAID RESPECTIVE DATES. AS SU CH, WE FIND THAT THE CIT(A) IS I N ERROR IN STATING IN HIS ORDER THAT EVEN ON THE AFORESA ID TWO OCCASIONS I.E ON 20.11.2018 AND 20.12.2018 THE ASSESSEE HAD FAILED TO EFFECT NECESSARY COMPLIANCE . IN OUR CONSIDERED VIEW, THE ASSESSEE HAS A BONAFIDE REASON FOR FAILING TO PUT UP AN APPEARANCE BEFORE THE CIT(A) ON 25.03.2019. APART THEREFROM , THE O BSERVATIONS OF THE CIT(A) AS REGARDS NON - COMPLIANCE ON THE PART OF THE ASSESSEE ON TWO OF THE OCCASIONS I.E ON 20.11.2018 AND 20.12.2018 CLEARLY MILITATE AGAINST THE FACTS BORNE FROM THE RECORDS. ON THE BASIS OF OUR AFORESAID DELIBERATIONS, WE ARE OF THE CONSIDERED VIEW THAT THE MATTER REQUIRES TO BE RESTORED TO THE FILE OF THE CIT(A) FOR FRESH ADJUDICATION AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GROUND OF APPEA L NO. 1 IS ALLOWED FOR STATISTICAL PURPOSES. 7. AS THE MATTER HAS BEEN RESTORED TO THE FILE OF THE CIT(A) FOR FRESH ADJUDICATION, THEREFORE, WE REFRAIN FROM ADVERTING TO AND THEREIN DISPOSING OFF THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ASSAILING THE A DDITIONS SUSTAINED BY THE CIT(A) ON MERITS. ACCORDINGLY, THE GROUND OF APPEAL NO. 2 AND 3 ARE LEFT OPEN. WE THUS IN TERMS OF OUR AFORESAID OBSERVATIONS SET ASIDE THE MATTER TO THE FILE OF THE CIT(A) FOR FRESH ADJUDICATION AFTER AFFORDING A SUFFICIENT OPPOR TUNITY OF BEING HEARD TO THE ASSESSEE. 8. THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES IN TERMS OF OUR AFORESAID OBSERVATIONS. ORDER PRON OUNCED IN THE OPEN COURT O N 0 6 . 11.2019 S D / - S D / - ( N.K. PRADHAN ) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 0 6 .11 .2019 P A G E | 6 ITA NO.2421/MUM/2019 A.Y. 2015 - 16 MR. KUMAR ANIL AGARWAL VS. INCOME - TAX OFFICER - 18(2)(2) PS. ROHIT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI