Jeetendra Kanunga , Bangalore V. The Deputy Commissioner of Income Tax Circle-4(1)(1), Bangalore

ITA 2531/BANG/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 0839 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2015-2016
• Appeal Filed On: 05-09-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: H.N. KHINCHA
• Keywords: Revision of order; Opportunity of being heard; Assessment record; Set aside; Capital Gains
• Section: 263; 143(3); 142(1); 2(A); 20

Judgement Text

1 ITA NO .2531 (B)/20 18 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH C , BANGALORE BEFORE SHRI N.V.VASUDEVAN, VICE PRESIDENT AND SHRI B.R.BASKARAN, ACCOUNTANT MEMBER ITA NO. 2531 /BANG/20 18 (ASSESSMENT YEAR : 20 15 - 16 ) SHRI JEETENDRA KANUNGA, B - 05,5 TH FLOOR, SOLUS JAIN HEIGHTS, 1 ST CROSS, JC ROAD, BANGALORE - 56 0 0 27 PAN NO.A JYPK6026F APPELLANT VS THE D EPUTY COMMISSIONER OF INCOME TAX OFFICER, CIRCLE - 4(1)(1), B ANGALORE RESPONDENT ASSESSEE BY : SHRI H.N.KHINCHA, CA REVENUE BY : SHRI PRADEEP KUMAR, CIT DATE OF HEARING : 08 - 0 6 - 2020 DATE OF PRONOUNCEMENT : 10 - 06 - 2020 O R D E R PER B.R.BASKARAN, AM: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE REVISION ORDER DATED 31 - 07 - 2018 PASSED BY PR.CIT, BANGALORE FOR THE ASSESSMENT YEAR 2015 - 16. THE ASSESSEE IS CHALLENGING THE VALIDITY OF THE REVISION ORDER PASS ED BY THE PR.CIT U/S 263 OF THE IT ACT, 1961. THE ASSESSMENT IN THE HANDS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WAS COMPLETED BY THE AO ON 31 - 08 - 2017 U/S 143(3) OF THE IT ACT, 1961 . 2. THE ASSESSEE IS A DEALER IN IRON, STEEL, FERROS AND NON - FERROS METAL . ON EXAMINATION OF THE ASSESSMENT RECORD, THE LD.PR.CIT , NOTICED THAT THE RETU R N OF INCOME OF THE ASSESSEE WAS SELECTED FOR SCRUTINY, INTER - ALIA FOR 2 ITA NO .2531 (B)/20 18 THE REASONS THAT THE ASSESSEE HAS ENTERED INTO SUSPICIOUS SALES TRANSACTION IN SHARES AND EX EM PT LONG TERM CAPITAL GAINS SHOWN IN RETURN (PENNY STOCK TAB IN ITS). HOWEVER, IT W AS NOTICED THAT THE AO HAS FAILED TO CONDUCT ENQUIRIES REGARDING THE ABOVE ISSUE AND HAS FAILED TO BRING CORRECT INCOME INTO TAX. HENCE, THE LD.PR.CIT INITIATED 263 PROCE EDINGS BEFORE THE LD.PR.CIT. THE ASSESSEE SUBMITTED THAT HE HAS PURCHASED 25 , 000 SHARES OF M/S LIFELINE DRUGS & PHARMA LTD., FOR A CONSIDERATION OF RS.15.00 LAKHS ON 01 - 10 - 2012. THE SAID SHARES WERE SOLD IN THE FINANCIAL YEAR 2014 - 15 RELEVANT TO ASSESSMEN T YEAR 2015 - 16 FOR A CONSIDERATION OF RS.6.17 CRORES WHICH R E SULTED IN LONG TERM CAPITAL GAINS OF RS.6.01 CRORES. IT WAS SUBMITTED THAT THE ENTIRE TRANSACTION WAS CARRIED OUT THROUGH M/S RELIANCE S E CURITIES LTD., AND THE ENTIRE CONSIDERATION WAS RECEIVED THROUGH BANKING CHANNEL. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAS FURNISHED COPIES OF CONTRACT NOTES, LEDGER STATEMENT, DEMAT STATEMENT AND BANK STATEMENT BEFORE THE AO IN REPLY TO THE NOTICE U/S 142(1) OF THE ACT ON 14 - 08 - 2017 ISSUED BY AO. ACCORDING LY, THE ASSESSEE BY PLACING RELIANCE ON HOST OF CASE LAWS CONTENDED THAT THE ASSESSEE HAS TAKEN A PLAUSIBLE VIEW IN THE MATTER AND HENCE, THE REVISION PROCEEDINGS DO NOT LIE IN THE INSTANT CASE. ACCORDINGLY, THE ASSESSEE PRAYED THE PROCEEDING S MAY KINDLY BE DROPPED. 3. THE LD. PR.CIT W AS NOT CONVINCED WITH THE CONTENTION OF THE ASSESSEE. HE EXPRESSED THE VIEW THAT THE AO SHOULD HAVE SUBJECTED TO THOROUGH VERIFICATION ESPECIALLY WHEN THE CASE IS SELECTED FOR SCRUTINY ON THE ISSUE OF SUSPICIOUS SALES TRANSACTION IN SHARES AND EXEMPT LONG TERM CAPITAL GAINS. THE LD.PR.CIT HAS TAKEN THE VIEW THAT THE AO HAS COMPLETED THE ASSESSMENT WITHOUT MAKING PROPER ENQUIRIES AND VERIFICATION WHICH SHOULD HAVE BEEN MADE ON THE FACTS OF THE CASE . THE LD. PR.CIT ALSO TOOK SUPPORT OF CLAUSE(A) OF EXPLANATION - 2 TO SEC.2363 OF THE ACT. THE PR.CIT ALSO NOTED THE FACT THAT THE PRICES OF SHARE PRICE OF M/S LIFELINE DRUGS & PHARMA LTD., HAS GONE UP FROM RS.60 TO 2,410/ - WITHIN A SPAN OF LES S THAN TWO YEARS WHICH RESULTS IN AN INCREASE OF 3916% WHICH IS ABNORMAL FOR AN UNKNOWN COMPANY HENCE, THE AO HAS 3 ITA NO .2531 (B)/20 18 NOT EXAMINED THE ISSUE IN AN APPROPRIATE MANNER IN THE ABOVE SAID FACTUAL CONTEXT AND ALSO NOT ANALYSED THE REAL NATURE OF TRANSACTION. T HE P R.CIT TOOK THE VIEW THAT THE IMPUGNED ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO T HE INTERESTS OF REV E NUE AND ACC ORDINGLY HE SET ASIDE THE IMPUGNED ORDER AND DIRECTED THE AO TO EXAMINE THE ABOVE SAID ISSUE AND RE - DO THE ASSESSMENT AFRESH AS PER LAW AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 4. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD. PR.CIT. 5. THE LD. AR SUBMITTED THAT THE AO CONDUCTED DUE ENQUIRIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS WITH REGARD TO LONG TERM CAPITAL GAINS DECLARED BY THE ASSESSEE. HE INVITED OUR ATTENTION TO TWO NOTICES ISSUED BY THE AO U/S 142(1) OF TH E IT ACT WHICH ARE PLACED AT PAGE - 37 OF THE PAPER BOOK FILED BY THE ASSESSEE. THE LD. AR SUBMITTED THAT THE AO HAS CALLED FOR COMPLETE DETAILS OF THE LONG TERM CAPITAL GAINS IN THE SECOND NOTICE ISSUED U/S 142(1) OF THE IT ACT AND IN RESPONSE TO THE SAME THE ASSESSEE HAS FURNISHED COPIES OF CONTRACT NOTES, LEDGER ACCOUNT COPES, DEMAT ACCOUNT COPIES AND BANK ACCOUNT COPIES. ACCORDINGLY, THE LD. AR SUBMITTED THAT THE AO HAS APPLIED HIS MIND ON THIS ISSUE AND ACCEPTED THE CLAIM OF THE ASSESSEE AND HENCE, T HE IMPUGNED REVISION ORDER IS LIABLE TO BE QUASHED AS PER DECISION RENDERED BY THE HONBLE SUPREME COURT IN THE C A S E OF CIT V S NIRAV MODI (2017) 77 TAXMANN.COM 78(SC) AND ALSO MALABAR IND.CO.LTD., VS CIT 243 ITR 83. 6. THE LD. AR FURTHER SUBMITTED THAT IT IS IMPERATIVE ON THE PART OF THE PR.CIT(A) TO CONDUCT ENQUIRIES BEFORE ISSUING ANY DIRECTION TO THE LD. CIT(A) . HE SUBMITTED THAT IN THE INSTANT CASE, LD. PR.CIT HAS NOT CONDUCTED ANY ENQUIRIES WITH REGARD TO THE ISSUE RELATING TO LO N G TERM CAPITAL GAINS A ND HENCE, LD. PR.CIT SHOULD NOT HAVE PASSED THE IMPUGNED REVISION ORDER WITHOUT SATISFYING HIMSELF ON THE ALLEGED POINT IN THE REVISION ORDER. IN SUPPORT OF HIS PREPOSITION, THE LD. AR PLACED RELIANCE ON THE FOLLOWING TWO CASE LAWS: 4 ITA NO .2531 (B)/20 18 1. M/S SASKEN TECHNOLOGIES LTD VS JCIT , SPL.RANGE - 6, BANGALORE 2. M/S AMIRA PURE FOODS PVT.LTD., VS THE PR.CIT, CENTRAL, GURGAON 7. ON THE CONTRARY, LD. DR SUBMITTED THAT THE AO HAS TAKEN UP THE RETURN OF INCOME FILED BY THE ASSESSEE FOR SCRUTINY INTER - ALIA FOR THE REASO NS THAT THE ASSESSEE HAS INDULGED IN SUSPICIOUS SALES TRANSACTION IN SHARES AND CLAIMED LONG T ERM CAPITAL GAINS ARISING THERE FROM AS EXEMPT. HOWEVER, THE AO RESTRICTED HIS ENQUIRY WITH REGARD TO LONG TERM CAPITAL GAINS TO THE EVIDENCES FURNISHED BY THE ASSESSEE IN THE FORM OF CONTRAC T NOTICES AND BANK STATEMENTS. THE AO HAS NOT CONDUCTED ENQUIRY WITH REGARD TO SUSPICIOUS NATURE OF TRANSACTION AND GENUINENESS OF LONG TERM CAPITAL GAINS FOR WHICH THE RETURN OF INCOME WAS TAKEN UP FOR SCRUTINY. THE LD. AR SUBMITTED THAT A NEW EXPLANATION - 2 HAS BEEN INSERTED IN SEC.263 OF THE ACT BY THE FINANCE ACT 2015 WITH EFFECT FROM 01 - 06 - 2015 AND AS PER CLAUSE - (A) OF THE SAID EXPLANATION , IF THE ASSESSMENT ORDER IS PASSED WITHOUT MAKING ENQUIRY OR VERIFICATION WHICH SHOULD HAVE BEEN MADE, TH A N THE SAID ASSESSMENT ORDER SHALL BE DEEMED TO BE ERRONEOUS IN SOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. 8. THE LD. DR SUBMITTED THAT THE LD. PR.CIT HAS RIGHTLY INVOKED THE PROVISIONS OF SEC.263 OF THE IT ACT SINCE TH E A O DID NOT MAKE ANY ENQUIRY OR VERIFICATION WHICH SHOULD HAVE BEEN MADE IN RESPECT OF LONG TERM CAPITAL GAINS AS DECLARED BY THE ASSESSEE. 9. THE LD. DR FURTHER SUBMITTED THAT THE LD. PR.CIT ALSO CONDUCTED EN QUIRY WITH REGARD TO LONG TERM CAPITAL GAINS AND THE PR.CIT HAS DISCUSSED THE SAME IN PARA - 4.1 OF HIS ORDER WHEREIN SHE HAS RECORDED THAT THE SHARE PRICES OF M/S LIFELINE DRUGS & PHARMA LTD. HAS WENT UP FROM RS.60 TO 2,410/ - WITHIN A SPAN OF LESS THAN TWO YEARS AND THE SAID INCREASE WORKS OUT TO 3916 % WHICH IS ABNORMAL FOR AN UNKNOWN COMPANY AND SUCH INCREASE SHOULD HAVE COST FURTHER PROBE. ACCORDINGLY, 5 ITA NO .2531 (B)/20 18 LD. DR SUBMITTED THAT LD. AR WAS NOT CORRECT IN STATING THAT THE LD. PR.CIT HAS NOT CONDUCTED ANY ENQUIRY. 10. WE HAVE HEARD THE RIVAL CONTENTIONS A ND PERUSED THE RECORDS. 10.1 IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS DECLARED THE LONG TERM CAPITAL GAINS ON SALE OF 25,000/ - SHARES OF M/S LIFELINE DRUGS & PHARMA LTD., AND EARNED THE LONG TERM CAPITAL GAINS OF RS.6.01 CRORES. THE ASSESSEE HAS CLAIM ED THE SAME AS EXEMPT U/S 10(38) OF THE IT ACT. IT IS ALSO AN ADMITTED FACT THAT THE RETURN OF I N COME FILED BY THE ASSESSEE WAS TAKEN UP FOR S CRUTINY INTER - ALIA FOR THE REASONS THAT THE ASSESSEE HAS INDULGED IN SUSPICIOUS SALES TRANSACTION IN PENNY STOCK AND CLAIMED EXEMPTION OF LONG TERM CAPITAL GAINS ARISING THERE FROM. 11. THOUGH, LD. A R SUBMITTED THAT THE AO HAS CONDUCTED DUE ENQUIRIES WITH REGARD TO LONG TERM CAPITAL GAINS DECLARED BY THE AS SESSEE YET, WE NOTICE THAT THE AO HAS RESTRICTED HIS ENQUIRY OR VERIFICATION WITH REGARD TO QUANTUM OF LONG TERM CAPITAL GAINS DECLARED BY THE ASSESSEE BY CALLING FOR COPIES OF CONTRACT NOTICES, LEDGER ACCOUNTS, DEMAT ACCOUNTS AND BANK STATEMENTS. THE AO H AS NOT CONDUCTED ANY ENQUIRY WITH REGARD TO SUSPICIOUS SALES TRANSACTION PARTICULARLY IN VIEW OF THE FACT THAT M/S LIFELINE DRUGS & PHARMA LTD. SHARES HAVE BEEN DECLARED AS PENNY STOCK EVEN THOUGH, THE RETURN OF INCOME FILED BY THE ASSESSEE WAS TAKEN UP FO R SCRUTINY FOR EXAMINING THE GENUINENESS OF SHARE TRANSACTION. THIS ACTION OF THE AO WOULD SHOW THAT THAT THERE WAS NO APPLICATION OF MIND ON THE PART OF THE AO AND HENCE, IN OUR VIEW THE LD. PR.CIT WAS JUSTIFIED IN HOLDING THAT THE ASSESSMENT ORDER IS ERRONEOUS IN SOFAR IT IS PREJUDICIAL TO THE INTERESTS OF RE V ENUE. 12. THE LD. DR HAS RIGHTLY DEMONSTRATED THAT THE LD. PR.CIT ALSO CONDUCTED NECESSARY ENQUIRY WITH REGARD TO INCREASE IN SHARE PRICES OF M/S LIFELINE DRUGS & PHARMA LTD., WHICH WAS CONSIDERE D BY HER AS ABN ORMAL FOR AN UNKNOWN COMPANY. HENCE, AS STATED IN EXPLANATION - 2(A) TOSEC.263 OF THE IT ACT, THE AO HAS FAILED TO MAKE ENQUIRY OR VERIFICATION 6 ITA NO .2531 (B)/20 18 WHICH SHOULD HAVE BEEN DONE BY HIM. ACCORDINGLY, WE UPHOLD THE REVISION ORDER PASSED BY LD.PR.CIT . 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 10 - 06 - 2020 SD/ - SD/ - (N.V.VASUDEVAN ) (B.R.BASKARAN) VICE PRESIDENT ACCOUNTANT MEMBER BANGALORE DATED : 10 - 06 - 2020 *AM COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF BY ORDER ASST. REGISTRAR 7 ITA NOS.181 - 184(B0/2020