Mohanlal Chimnaji Jain, CHENNAI V. ITO Non Corporate Ward 5(3), CHENNAI

ITA 2780/CHNY/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7315 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 20-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SAGADEVAN IRS
• Assessee Lawyers: S SRIDHAR
• Keywords: Principle of natural justice; Wrong claim

Judgement Text

, (SMC) , IN THE INCOME TAX APPELLATE TRIBUNAL, C (SMC) BENCH : CHENNAI . , [BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT M EMBER ] ./I.T.A. NO. 2780/CHNY/2017 / ASSESSMENT YEAR : 2014-2015 MOHANLAL CHIMNAJI JAIN, NO.90/97, NSC BOSE ROAD, SOWCARPET, CHENNAI 600 079. [PAN AJYPJ 9818L] VS. THE INCOME TAX OFFICER, NON CORPORATE WARD 5(3) CHENNAI 600 006. ( !' / APPELLANT) ( #$!' /RESPONDENT) / APPELLANT BY : SHRI. S. SRIDHAR, ADVOCATE /RESPONDENT BY : SHRI. B. SAGADEVAN, IRS, JCIT. /DATE OF HEARING : 24-07-2018 ! /DATE OF PRONOUNCEMENT : 25-07-2018 % / O R D E R THIS IS AN APPEAL FILED BY THE ASSESSEE, WHICH I S DIRECTED AGAINST AN ORDER DATED 04.10.2017 OF COMMISSION ER OF INCOME-TAX (APPEALS)-5, CHENNAI. 2. GROUNDS TAKEN BY THE ASSESSEE ARE REPRODUCED HEREUN DER:- ITA NO. 2780 /CHNY/2017 :- 2 -: 1.THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 5, CHENNAI DATED 4.10.2017 IN I.T.A. NO.153 /CIT(A)-5/2016-17 FOR THE ABOVE MENTIONED ASSESSMENT YEAR IS CONTRARY TO LAW, FACTS, AND IN THE CIRCUMSTANCES OF THE CASE. 2. THE CIT (APPEALS) ERRED IN SUSTAINING THE REJECTION OF THE CLAIM FOR EXEMPTION U/S 10(38) OF THE ACT IN RESPECT OF THE COMPUTATION OF LONG TERM CAPITAL GAINS WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 3. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE GENUINENESS OF THE TRANSACTION ROUTED THROUGH THE RECOGNIZED STOCK EXCHANGE AND THE PAYMENT OF STT WOULD VITIATE THE PERVERSE FINDINGS OF FACTS IN PARA 6.3 & PARA 6.5 OF THE IMPUGNED ORDER WHILE CONSEQUENTLY VITIATE THE DECISION TO DENY THE EXEMPTION SOUGHT FOR U/S 10(38) OF THE ACT. 4. THE CIT (APPEALS) ERRED IN ENHANCING THE ASSESSMENT IN TREATING THE ENTIRE SALE PROCEEDS OF M/S ASHIKA CREDIT CAPITAL LTD. IN VIEW OF WRONG PRESUMPTION OF FACTS IN PARA 6.7 OF THE IMPUGNED ORDER WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 5. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE ENHANCEMENT OF THE ASSESSMENT IN THIS REGARD WAS WRONG, ERRONEOUS, UNJUSTIFIED, INCORRECT AND NOT SUSTAINABLE IN LAW. 6. THE COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT THERE WAS NO PROPER OPPORTUNITY GIVEN BEFORE PASSING OF THE IMPUGNED ORDER AND ANY ORDER PASSED IN VIOLATION OF THE PRINCIPLES NATURAL JUSTICE WOULD BE NULLITY IN LAW. 7. THE APPELLANT CRAVES LEAVE TO FILE ADDITIONAL GROUNDS/ARGUMENTS AT THE TIME OF HEARING. ITA NO. 2780 /CHNY/2017 :- 3 -: 3. GROUNDS INDICATE THAT ASSESSEE IS AGGRIEVED ON TREA TMENT OF GAINS ARISING FROM SALE OF 3500 SHARES OF ONE M/S. ASHIKA CREDIT CAPITAL LTD. ASSESSEE HAD TREATED GAINS FROM THE SALE OF SHARES AS LONG TERM CAPITAL GAINS, WHEREAS LD. ASSESSING OFFICER HAD CO NSIDERED M/S.ASHIKA CREDIT CAPITAL LTD TO BE A PENNY STOCK AND TOOK T HE CLAIM AS BOGUS. LD. ASSESSING OFFICER HELD THAT THE GAINS CLAIMED H AD TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. LD. COMMISSIONER OF INCOME TAX (APPEALS) ON THE OTHER HAND, ENHANCED T HE INCOME ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. ACCORDING TO HIM, LD. ASSESSING OFFICER ONLY CONSIDERED THE GAIN ARISING FROM BOGUS SALE OF THE SHARES, WHEREAS THE WHOLE CONSIDERATION SHOWN AS RECEIVED ON SALE OF THE SHARES WAS ASSESSABLE UNDER THE HEA D INCOME FROM OTHER SOURCES. 4. NOW BEFORE US, LD. AUTHORISED REPRESENTATIVE STRO NGLY ASSAILING THE ORDERS OF THE LOWER AUTHORITIES SUBMI TTED THAT ASSESSEE HAD ACQUIRED SHARES OF M/S.ASHIKA CREDIT CAPITAL L TD THROUGH A RECOGNIZED STOCK EXCHANGE AND NOT THROUGH ANY OFF M ARKET DEAL. AS PER THE LD. AUTHORISED REPRESENTATIVE, LD. COMMISSI ONER OF INCOME TAX (APPEALS) COMMITTED AN ERROR WHEN HE MENTIONED AT P ARA 6.3 OF ITS ORDER THAT SHARES WERE PURCHASED THROUGH OFF MARKET DEALS AND NOT THROUGH A RECOGNIZED STOCK EXCHANGE. FURTHER, AS P ER THE LD. ITA NO. 2780 /CHNY/2017 :- 4 -: AUTHORISED REPRESENTATIVE, LD. ASSESSING OFFICER HA D RELIED ON REPORTS OF THE INVESTIGATION WING, OF INCOME TAX DEPARTMEN T, KOLKATTA TO HOLD THAT SHARES OF M/S.ASHIKA CREDIT CAPITAL LTD WAS A PENNY STOCK AND USED FOR GENERATING BOGUS CLAIM OF LONG TERM C APITAL GAINS. AS PER THE LD. AUTHORISED REPRESENTATIVE THIS REPORT W AS NEVER PUT TO THE ASSESSEE AND ASSESSEE WAS DEPRIVED OF AN OPPORTUNI TY FOR REBUTTING THE FINDINGS OF INVESTIGATION WING. 5. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE SUBMIT TED THAT ASSESSEE COULD NOT SHOW ANY EVIDENCE WHY THE VALUE OF THE EQUITY SHARES OF M/S.ASHIKA CREDIT CAPITAL LTD HAD EXPONE NTIALLY INCREASED IN A VERY SHORT PERIOD OF TIME. AS PER THE LD. DEP ARTMENTAL REPRESENTATIVE, ASSESSEE CLAIMED SHARES TO HAVE BE EN PURCHASED IN MAY, 2012 AND SOLD IN OCTOBER 2013, AND THE PRICE M ORE THAN DOUBLED. AS PER THE LD. DEPARTMENTAL REPRESENTATIVE, THIS CL AIM WAS RIGHTLY CONSIDERED AS BOGUS BY THE LOWER AUTHORITIES. 6. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. CONTENTION OF TH E LD. AUTHORISED REPRESENTATIVE IS THAT SHARES OF M/S.ASHIKA CREDIT CAPITAL LTD WAS ACQUIRED THROUGH RECOGNIZED STOCK EXCHANGE AND WAS NOT THROUGH ANY OFF MARKET DEAL. FURTHER, ACCORDING TO THE LD. AUT HORISED REPRESENTATIVE REPORT OF INVESTIGATION WING, INCOME TAX DEPARTMENT, ITA NO. 2780 /CHNY/2017 :- 5 -: KOLKATTA ON WHICH RELIANCE WAS PLACED BY THE LOWER AUTHORITIES WAS NEVER PUT TO THE ASSESSEE. I FIND THAT SHARES OF M /S.ASHIKA CREDIT CAPITAL LTD WAS CONSIDERED BY LD. ASSESSING OFFIC ER TO BE A PENNY STOCK BASED ON A REPORT RECEIVED FROM THE INVESTIGA TION WING OF INCOME TAX DEPARTMENT, KOLKATTA. THIS IS CLEAR FRO M THE PARA 3.1 OF THE ASSESSMENT ORDER WHICH IS REPRODUCED HEREUNDER: - IN THIS CONNECTION THERE WAS A FACT FINDING REPO RTS FROM THE INVESTIGATION WING, INCOME TAX DEPARTMENT, KOLKATTA , WHEREIN IT THAT THE SHARES OF M/S. ASHIKA CREDIT CA PITAL LTD (SCRIP CODE NO.590122) WAS IDENTIFIED ONE OF THE BS E LISTED PENNY STOCK WHICH HAVE BEEN USED FOR GENERATING BOG US LTGG AND AS PER THE REPORT THE FOLLOWING FINDING WE RE MADE. THERE WAS NO OTHER EVIDENCE WITH THE REVENUE TO SHO W THAT PURCHASE AND SALE OF THE SHARES WERE BOGUS AND ONLY DONE WIT H THE INTENTION OF GENERATING LONG TERM CAPITAL GAINS FOR CLAIMING EXE MPTION U/S.10(38) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). I AM OF THE OPINION THAT ASSESSEE OUGHT HAVE BEEN GIVEN A FAIR CHANCE FOR REBUTTING THE FINDINGS OF THE INVESTIGATION WING, INCOME TAX DEPA RTMENT, KOLKATTA ON WHICH RELIANCE WAS PLACED BY THE LD. ASSESSING OFFICER FOR DISBELIEVING THE TRANSACTIONS CLAIMED IN THE SHARES OF M/S.ASHIKA CREDIT CAPITAL LTD. I THEREFORE SET ASIDE THE ORD ERS OF THE LOWER AUTHORITIES AND REMIT THE CASE BACK TO THE FILE OF THE LD. ASSESSING ITA NO. 2780 /CHNY/2017 :- 6 -: OFFICER FOR CONSIDERATION AFRESH IN ACCORDANCE WITH LAW, GIVING FAIR OPPORTUNITY TO THE ASSESSEE TO REBUT ANY FINDING OR ANY MATERIAL WHICH IS SOUGHT TO BE USED AGAINST HIM. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSE. ORDER PRONOUNCED ON WEDNESDAY, THE 25TH DAY OF JU LY, 2018, AT CHENNAI. SD/- ( . ) (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER '# / CHENNAI $% / DATED: 25 TH JULY, 2018. KV %& '()( / COPY TO: 1 . / APPELLANT 3. *+, / CIT(A) 5. (-. / / DR 2. / RESPONDENT 4. * / CIT 6. .01 / GF