Guddi Magrajji, CHENNAI V. ITO Non Corporate Ward 4(4), CHENNAI

ITA 2628/CHNY/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5113 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 02-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SAGADEVAN
• Assessee Lawyers: MRS A SUSHMA HARINI
• Keywords: Share purchase agreement; Penny stocks

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI . . . , . , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P.GEORGE, ACCOUNTANT MEMBER ./ ITA NO.2628/CHNY/2017 ! ! /ASSESSMENT YEAR: 2010-11 SMT. GUDDI MAGRAJJI, NO.153/154, GROUND FLOOR, MINT STREET, SOWCARPET, CHENNAI-600 079. VS. THE INCOME TAX OFFICER, NON-CORPORATE WARD-4(4), CHENNAI-600 006. [PAN: AEKPG 8199 N ] ( $ /APPELLANT) ( %&$ /RESPONDENT) $ ' / APPELLANT BY : MRS.A. SUSHMA HARINI, ADV. %&$ ' /RESPONDENT BY : MR.B.SAGADEVAN, JCIT ' /DATE OF HEARING : 20.06.2018 ' /DATE OF PRONOUNCEMENT : 25.06.2018 / O R D E R PER ABRAHAM P.GEORGE , ACCOUNTANT MEMBER : ASSESSEE IN THIS APPEAL WHICH IS DIRECTED AGAINST THE ORDER DATED 20.09.2017 OF THE COMMISSIONER OF INCOME TAX(A) IS AGGRIEVED O N THE DENIAL OF EXEMPTION CLAIMED BY HER U/S.10(38) OF THE ACT. 2. LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT A SWO RN STATEMENT TAKEN/RECORDED FROM STOCK BROKER SHRI ASHOK KUMAR KAYAN AND USED B Y THE REVENUE FOR DENYING THE EXEMPTION CLAIMED BY THE ASSESSEE U/S.10(38) OF THE ACT. HOWEVER, THIS STATEMENT AS PER THE LD.AR WAS NEVER PUT TO THE ASSESSEE, NOR THE ASSESSEE GIVEN AN ITA NO.2628/CHNY/2017 :- 2 -: OPPORTUNITY TO CROSS-EXAMINE THE SAID PERSON. AS P ER THE LD.AR, THE AUTHORITIES LOWER HAD DISBELIEVED THE SALE OF SHARES MADE BY TH E ASSESSEE THROUGH SHRI ASHOK KUMAR KAYAN BASED ON HIS STATEMENT. AS PER THE LD. AR, THE LOWER AUTHORITIES ERRONEOUSLY CONSIDERED THE SALE TO BE OF PENNY STOC KS AND ROUND TRIPPING THEREBY GENERATING BOGUS CAPITAL GAINS WHICH WAS CLAIMED AS EXEMPT. FURTHER, AS PER THE LD.AR, IN A SIMILAR CASE IN SMT.ANJANA JAIN V. ITO IN ITA NO.2606/CHNY/2017, WHERE ALSO THE VERY SAME BROKER WAS INVOLVED, THIS TRIBUN AL HAD REMITTED THE ISSUE BACK TO THE FILE OF THE AO FOR GIVING A COPY OF THE STATEME NT OF SHRI ASHOK KUMAR KAYAN TO THE ASSESSEE. 3. PER CONTRA, THE LD.DR SUBMITTED THAT ANOTHER CO- ORDINATE BENCH IN THE CASE OF HEERACHAND KANUNGA V. ITO IN ITA NOS.2786 & 2787/CH NY/2017 THROUGH ITS ORDER DATED 03.05.2018 HAD REMITTED A SIMILAR ISSUE BACK TO THE AO WITH SPECIFIC DIRECTIONS. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED ON RECORD. IT IS NOT DISPUTED THAT EXEMPTION CLAIMED BY THE ASSESSEE U/S.10(38) OF THE ACT WAS DENIED DISBELIEVING THE CLAIM OF LONG TERM CAPITAL GAINS. THE MAIN REASON WHY THE CLAIM WAS DISBELIEVED WAS THE STATEMENT GIV EN BY A SHARE BROKER SHRI ASHOK KUMAR KAYAN. IT SEEMS SHRI ASHOK KUMAR KAYAN STATE D THAT HE WAS PROVIDING ACCOMMODATION ENTRY IN THE FORM OF BOGUS LONG TERM CAPITAL GAINS, IN CONNIVANCE WITH ENTRY OPERATORS AND PROMOTERS OF PENNY STOCK S CRIPTS. WHAT WAS HELD BY THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SMT. ANJANA, SUPRA, WHERE ALSO SIMILAR PENNY STOCKS WERE DISBELIEVED BASED ON THE STATEMEN T VERY SAME SHRI ASHOK KUMAR KAYAN IS REPRODUCED HEREUNDER: ITA NO.2628/CHNY/2017 :- 3 -: 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ENTIRE ASSESSMENT APPEARS TO BE MADE ONLY ON THE BASIS OF THE STATEMENT OF SHRI ASHOK KUMAR KAYAN, WHO IS CONSIDE RED TO BE A PENNY STOCK BROKER. ADMITTEDLY, THE STATEMENT SAID TO BE RECORDED FROM SHRI ASHOK KUMAR KAYAN WAS NOT FURNISHED TO THE ASSESSEE. IT IS ALSO NOT KNOWN WHE THER THE PURCHASE PRICE OF THE SHARES WAS PAID BY CHEQUE OR BY CASH. THE ASSESSING OFFICER OB SERVED THAT THE ASSESSEE DID NOT DISCLOSE THE MODE OF PAYMENT OF PURCHASE PRICE. IN THOSE CIR CUMSTANCES, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RECO NSIDERED BY THE ASSESSING OFFICER. ACCORDINGLY, THE ORDERS OF BOTH THE AUTHORITIES BEL OW ARE SET ASIDE AND THE ENTIRE ISSUE RAISED BY THE ASSESSEE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL FURNISH A COPY OF THE STATEMENT SAID TO BE RE CORDED FROM SHRI ASHOK KUMAR KAYAN TO THE ASSESSEE. THE ASSESSEE SHALL ALSO DISCLOSE THE MODE OF PAYMENT OF PURCHASE PRICE FOR PURCHASING THE SHARES OF BAKRA PRATISTHAN LIMITED. THEREAFTER, THE ASSESSING OFFICER SHALL EXAMINE THE MATTER AND DECIDE THE ISSUE AFRESH IN A CCORDANCE WITH LAW, AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. 5. IN THE CASE OF SHRI HEERACHAND KANUNGA (SUPRA) W HERE ALSO THE VERY SAME SHRI ASHOK KUMAR KAYAN WAS INVOLVED, WHAT WAS HELD BY THE TRIBUNAL IS REPRODUCED HEREUNDER: 9. A PERUSAL OF THE FACTS IN THE PRESENT CASE ADMIT TEDLY GIVEN ROOM FOR SUSPICION. HOWEVER, ASSESSMENTS ARE NOT TO BE DONE ON THE BASI S OF MERE SUSPICION. IT HAS TO BE SUPPORTED BY FACTS AND THE FACTS ARE UNFORTUNATELY NOT FORTHCOMING IN THE ASSESSMENT ORDER, IN THE ORDER OF THE LD.CIT(A) NOR FROM THE SIDE OF THE ASSESSEE. THE MAIN FOUNDATION OF THE ASSESSMENT IN THE PRESENT CASE IS THE STATEMENT OF ONE SHRI ASHOK KUMAR KAYAN WHO HAS ADMITTED TO HAVE PROVIDED BOGUS LONG TERM CAPITAL G AINS TO HIS CLIENTS. THE SAID SHRI ASHOK KUMAR KAYAN ALSO ALLEGEDLY SEEMS TO HAVE PROVIDED T HE ASSESSEES NAME AND PAN AS ONE OF THE BENEFICIARIES. HOWEVER, THIS STATEMENT GIVEN B Y SHRI ASHOK KUMAR KAYAN CANNOT BE THE FOUNDATION FOR THE PURPOSE OF ASSESSMENT IN SO FAR AS SHRI ASHOK KUMAR KAYAN HAS NOT BEEN PROVIDED TO THE ASSESSEE FOR CROSS-EXAMINATION. IN THE ABSENCE OF OPPORTUNITY OF CROSS- EXAMINATION, THE STATEMENT REMAINS MERE INFORMATION AND SUCH INFORMATION CANNOT BE FOUNDATION FOR ASSESSMENT. 10. ADMITTEDLY, THE ASSESSEE HAS CLAIMED TO HAVE PU RCHASED 15000 SHARES FROM M/S.BPL @ RS.20/- PER SHARE TOTALING INTO RS.3,00,000/-. TH E ASSESSEE CLAIMS TO HAVE PAID CASH FOR THE PURCHASE OF THESE SHARES. THE PRIMARY QUESTION WOULD BE AS TO WHERE THE PURCHASE WAS DONE? IF THE PURCHASE HAS BEEN DONE IN KOLKATA, HOW WAS THE CASH TRANSFERRED? WHEN DID THE ASSESSEE RECEIVED THE SHARE CERTIFICATES AND THE SH ARE TRANSFER FORMS? HOW DID THE ASSESSEE OVERCOME THE PROVISIONS OF SEC.40A(3)? WAS THERE A DEQUATE CASH AVAILABILITY IN THE BOOKS OF THE ASSESSEE ON 24.04.2008? DID THE ASSESSEE TRAVE LLED TO KOLKATA? HOW WAS THE TRANSACTION DONE? WHO APPLIED FOR THE DEMATING OF THE SHARES? WHEN WERE THEY DEMATED? WHEN WERE THE SHARES TRANSFERRED TO THE DEMAT ACCOU NT OF THE ASSESSEE? TO WHOM WERE THE SHARES SOLD DURING THE ASSESSMENT YEARS 2010-11 & 2 011-12? WHEN WERE THE CHEQUES RECEIVED BY THE ASSESSEE? FROM WHOM DID THE ASSESS EE RECEIVED THE CHEQUES? WAS THERE ANY CASH DEPOSIT IMMEDIATELY PRIOR TO THE ISSUING O F THE CHEQUE FROM THE BANK ACCOUNT OF THE PURCHASER OF THE SHARES OF THE ASSESSEE? 11. A PERUSAL OF THE ASSESSMENT ORDER AT PARA NO.7. 1 SHOWS THAT IN THE WRITTEN SUBMISSIONS, THE ASSESSEE STATES THAT HE HAS PURCHA SED 15000 SHARES OF M/S.BPL FROM M/S.ABPL, KOLKATA. HOWEVER, IN PARA NO.8.3, IT IS MENTIONED THAT THE ASSESSEE IN GOOD FAITH HAS PURCHASED THE SHARES OF M/S.BPL FROM A SUB-BROK ER IN HIS FRIENDS CIRCLE. WHAT IS THE TRUE NATURE OF THE TRANSACTION? FROM WHOM DID THE ASSESS EE ACTUALLY PURCHASE THE SHARES? DID THE ASSESSEE TAKE POSSESSION OF THE SHARES IN ITS P HYSICAL FORM? IN PARA NO.8.1 OF THE ASSESSMENT ORDER, IT IS MENTIONED THAT THE ASSESSEE IS AN INVESTOR AND HAS BEEN REGULARLY TRADING IN SHARES. IF THIS IS SO, DOES THE DEMAT A CCOUNT SHOW SUCH TRANSACTIONS BEING DONE BY ITA NO.2628/CHNY/2017 :- 4 -: THE ASSESSEE OR IS THIS THE ONLY ONE OF TRANSACTION . THUS, CLEARLY THE FACTS REQUIRED FOR ADJUDICATING THE APPEALS ARE NOT FORTHCOMING. THER E IS NO EVIDENCE WHATSOEVER TO SHOW THAT THE ASSESSEE HAS HELD THE SHARES FOR MORE THAN 12 M ONTHS. THIS IS BECAUSE ASSUMING THAT THE DEMAT HAS BEEN DONE AND THE SHARES OF M/S.BPL H AS COME INTO THE ASSESSEES DEMAT ACCOUNT AND HAS IMMEDIATELY FLOWN OUT. THEN THE FA CTUM OF THE POSSESSION OF THE SHARES FOR MORE THAN 12 MONTHS HAVE TO BE PROVED BY THE ASSESS EE. THIS IS ALSO NOT FORTHCOMING. IN REPLY TO A SPECIFIC QUERY, AS THE DATE OF THE DEMAT OF SHARES, IT WAS SUBMITTED BY THE LD.AR THAT THE DEMAT WAS DONE ON VARIOUS DATES. THEN THE QUESTION RISES AS TO WHY THERE IS SO MUCH OF DIFFERENCE IN THE DATES OF DEMATING WHEN 15 000 SHARES HAVE BEEN PURCHASED TOGETHER ON 24.04.2008. NO DETAILS IN RESPECT OF M /S.BPL COMPANY IS KNOWN, WHAT IS THE PRODUCT OF THE COMPANY WHICH HAD LEAD TO THE SHARE VALUE OF THE COMPANY TO GO UP FROM RS.20/- TO RS.352/- IN A PERIOD OF TWO YEARS. THIS WOULD CLEARLY BE A CASE WHERE THE SHARE VALUE OF THE COMPANY WAS HITTING THE CIRCUIT BREAKE R OF THE STOCK EXCHANGE ON A DAILY BASIS AND OBVIOUSLY IT WOULD HAVE DRAWN ATTENTION. THIS BEING SO, AS THE FACTS ARE NOT COMING OUT OF THE ASSESSMENT ORDER NOR THE ORDER OF THE LD.CIT(A) NOR FROM THE SIDE OF THE ASSESSEE, WE ARE OF THE VIEW THAT THE ISSUES IN THIS APPEAL MUST BE RESTORED TO THE FILE OF THE AO FOR RE- ADJUDICATION AFTER GRANTING THE ASSESSEE ADEQUATE O PPORTUNITY TO SUBSTANTIATE ITS CASE AND WE DO SO. 12. THE STATEMENT RECORDED BY THE REVENUE FROM SHRI ASHOK KUMAR KAYAN CANNOT BE USED AS AN EVIDENCE AGAINST THE ASSESSEE IN SO FAR AS THE STATEMENT HAS NOT BEEN GIVEN TO THE ASSESSEE NOR HAS SHRI ASHOK KUMAR KAYAN BEEN PR OVIDED TO THE ASSESSEE FOR CROSS- EXAMINATION. HOWEVER, THE ASSESSEE SHALL PROVE THE TRANSACTION OF THE LONG TERM CAPITAL GAINS IN RESPECT OF WHICH THE ASSESSEE HAS CLAIMED THE EXEMPTION U/S.10(38) BY PROVIDING ALL SUCH EVIDENCES AS REQUIRED BY THE AO TO SUBSTANTIAT E THE CLAIM AS ALSO BY PRODUCING THE PERSONS THROUGH WHOM THE ASSESSEE HAS UNDERTAKEN TH E TRANSACTION OF THE PURCHASE AND SALE OF THE SHARES WHICH WOULD INCLUDE THE SUB-BROKER, F RIEND AND THE BROKER THROUGH WHOM THE TRANSACTION HAS BEEN DONE, BEFORE THE AO FOR EXAMIN ATION. 6. IN BOTH THE ABOVE CASES, THE MATTER HAS BEEN REM ITTED BACK TO THE AO. THE DIRECTIONS GIVEN REQUIRED THE ASSESSEE TO PROVE THE TRANSACTIONS OF THE LONG TERM CAPITAL GAINS BY PROVIDING ALL EVIDENCE REQUIRED BY THE AO AND THE REVENUE HAS BEEN DIRECTED TO GIVE THE STATEMENT OF SHRI ASHOK K UMAR KAYAN TO THE ASSESSEE FOR REBUTTAL. SIMILAR DIRECTIONS ARE GIVEN HERE ALSO A ND THE MATTER IS REMITTED BACK TO THE AO FOR FRESH CONSIDERATION, IN ACCORDANCE WITH LAW. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT IN JUNE 25, 201 8, IN CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( . ) ( ABRAHAM P.GEORGE ) /ACCOUNTANT MEMBER ITA NO.2628/CHNY/2017 :- 5 -: /CHENNAI, . /DATED: JUNE 25, 2018. TLN ' %/0 10 /COPY TO: 1. $ /APPELLANT 4. 2 /CIT 2. %&$ /RESPONDENT 5. 0 % /DR 3. 2 ( )/CIT(A) 6. ! /GF