Ashish Jain, CHENNAI V. ACIT Non Corporate Circle 4(1), CHENNAI

ITA 2852/CHNY/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2068 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 08-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ABIJIT RAKSHIT
• Keywords: Unexplained cash credit; Share purchase agreement; Opportunity of being heard; Principle of natural justice; Wrong claim; Capital Gains; Bogus
• Section: 10

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B BENCH, CHENNAI [ , , BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ I.T.A.NO.2852/CHNY/2018 ( [ [ / ASSESSMENT YEAR: 2015-16) SHRI ASHISH JAIN, NO.85, 1 ST FLOOR, KHATOD PLAZA, N.S.C. BOSE ROAD, SOWCARPET, CHENNAI 600 079. VS THE ACIT, NON CORPORATE CIRCLE 4(1), CHENNAI. PAN: AGDPJ0377N ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE / RESPONDENT BY : SHRI ABIJIT RAKSHIT, JCIT /DATE OF HEARING : 19.06.2019 /DATE OF PRONOUNCEMENT : 19.06.2019 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE ASSESSEE FILED THIS APPEAL AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-5, CHENNAI IN ITA NO.230/CIT(A)-5/2017-18 DATED 09.08.2018 FOR THE ASSESSMENT YEAR 2015-16. 2. SHRI ASHISH JAIN, THE ASSESSEE IS AN INDIVIDUAL. THE LD.AO CAME TO KNOW THAT THE ASSESSEE HAS MANIPULATED THE MARKET PRICE OF 2 ITA NOS.2852/CHNY/2018 SHARES OF M/S.KAILASH AUTO THROUGH A GROUP OF PERSONS (BROKER SHRI KRISHNA BHATTER, KOLKATA) ACTING AS A SYNDICATE IN ORDER TO PROVIDE ENTRIES OF TAX EXEMPT LONG TERM CAPITAL GAINS / PROFIT TO THE ASSESSEE (BENEFICIARY). ACCORDINGLY, THE ASSESSEE HAD TRADED IN THE ABOVE SCRIP TO THE TUNE OF RS.13,350/- DURING THE FINANCIAL YEAR 2014-15 AND BOGUS LTCG AMOUNTING TO RS.4,98,429/- HAD BEEN FACILITATED TO THE ASSESSEE DURING THE FY 2014-15. THEREFORE THE LD.AO CALLED THE ASSESSEE TO FURNISH VARIOUS DETAILS. AFTER CONSIDERING ALL OF THEM, HE HELD THAT THE SHARES WERE PURCHASED PHYSICALLY BY CASH AND TRANSFERRED TO DEMAT ACCOUNT CONSIDERABLY. THE ASSESSEE HAS NEITHER PRODUCED THE BROKER FOR TAKING SWORN STATEMENT NOR FILED ANY CONFIRMATION IN THIS REGARD AND THE LETTER ADDRESSED TO SHRI KRISHNA BHATTER, KOLKATA IS RETURNED UN-SERVED BY THE POSTAL AUTHORITIES. THEREFORE, HE HELD THAT THE ASSESSEE HAD ENTERED INTO AN ENGINEERED TRANSACTION TO OBTAIN LTCG AND HENCE ASSESSED THE SALE CONSIDERATION AS AN UNEXPLAINED CREDIT U/S.68 OF THE ACT. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). THE LD.CIT(A) DISMISSED THE APPEAL. AGGRIEVED AGAINST THE ORDER THE ASSESSEE FILED THIS APPEAL. 3. IT WAS SUBMITTED BY LD. A.R THAT THE ISSUE IN THIS APPEAL WAS AGAINST THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE ADDITION MADE 3 ITA NOS.2852/CHNY/2018 BY LD. ASSESSING OFFICER IN TREATING THE PURCHASE AND SALE OF SHARES BY THE ASSESSEE, AS PENNY STOCK TRANSACTIONS. ON THE ISSUE U/S 10(38), THE LD. AR SUBMITTED THAT THE ASSESSEE HAS NOT BEEN GIVEN A FAIR OPPORTUNITY BY THE LOWER AUTHORITIES AND THEY CONCLUDED THE ASSESSMENT BASED ON THE DEPARTMENTS ACTION CARRIED OUT ELSEWHERE. PER CONTRA, THE LD DR SUBMITTED THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S 10 (38) BUT HE HAS NOT PROVED THE GENUINENESS, THEREFORE, REITERATING THE FACTS AND CIRCUMSTANCES OF THIS CASE FROM THE ORDERS OF THE LOWER AUTHORITIES AND RELYING ON THIS TRIBUNAL DECISION IN THE CASE OF SHRI HEERACHAND KANUNGA, FOR ASSESSMENT YEARS 2010-11 & 2011-12 IN ITA NOS. 2786 & 2787/MDS/2017 DATED 03.05.2018, THE LD. DR PLEADED THAT THESE APPEALS BE DECIDED ACCORDINGLY. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. ON THE ISSUE OF EXEMPTION CLAIM U/S 10(38), IT IS NOTICED THAT THE ASSESSEE HAS NOT BEEN GIVEN A FAIR OPPORTUNITY TO PROVE THE GENUINENESS BUT THE ASSESSMENT HAS BEEN MADE BASED ON THE EVIDENCES COLLECTED BY THE REVENUE IN THE COURSE OF THE INVESTIGATION CONDUCTED BY THEM ON BROKERS / SHARE BROKING ENTITIES ETC. THIS IS NOT PERMISSIBLE. THIS BEING SO, IN THE INTERESTS OF NATURAL JUSTICE, THE ISSUE OF THE 4 ITA NOS.2852/CHNY/2018 GENUINENESS OF THE TRANSACTIONS REQUIRE RE-ADJUDICATION. SINCE, THE RIGHT TO EXEMPTION MUST BE ESTABLISHED BY THOSE WHO SEEK IT, THE ONUS THEREFORE LIES ON THE ASSESSEE. IN ORDER TO CLAIM THE EXEMPTION FROM PAYMENT OF INCOME TAX, THE ASSESSEE HAD TO PUT BEFORE THE INCOME TAX AUTHORITIES PROPER MATERIALS WHICH WOULD ENABLE THEM TO COME TO A CONCLUSION. (35 ITR 312 (SC)). THUS, THE AO MUST KEEP IN MIND THAT THE ONUS OF PROVING THE EXEMPTION RESTS ON THE ASSESSEE. IF THE AO DOES HAVE ANY EVIDENCE TO THE CONTRARY, IT IS TO BE PUT TO THE ASSESSEE FOR HIS REBUTTAL. THE INTERNAL COMMUNICATIONS OF THE REVENUE ARE EVIDENCES FOR DRAWING AN OPINION ON POSSIBLE WRONG CLAIMS BUT THEY ARE NOT THE FINAL EVIDENCE. 5. FURTHER, PERUSAL OF ASSESSEES CASE SHOWS THAT IT IS SIMILAR TO THE FACTS IN THE CASE OF SHRI HEERACHAND KANUNGA, A DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL MADE FOR ASSESSMENT YEARS 2010-11 & 2011-12 IN ITA NOS. 2786 & 2787/MDS/2017 DATED 03.05.2018 . THE RELEVANT PORTIONS FROM THAT ORDER IS EXTRACTED AS UNDER :- 9. A PERUSAL OF THE FACTS IN THE PRESENT CASE ADMITTEDLY GIVEN ROOM FOR SUSPICION. HOWEVER, ASSESSMENTS ARE NOT TO BE DONE ON THE BASIS 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 5 ITA NOS.2852/CHNY/2018 HAVE PROVIDED BOGUS LONG TERM CAPITAL GAINS TO HIS CLIENTS. THE SAID SHRI ASHOK KUMAR KAYAN ALSO ALLEGEDLY SEEMS TO HAVE PROVIDED THE ASSESSEES NAME AND PAN AS ONE OF THE BENEFICIARIES. HOWEVER, THIS STATEMENT GIVEN BY 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 PURCHASED 15000 SHARES FROM M/S.BPL @ RS.20/- PER SHARE TOTALING INTO RS.3,00,000/-. THE 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 SHARE TRANSFER FORMS? HOW DID THE ASSESSEE OVERCOME THE PROVISIONS OF SEC.40A(3)? WAS THERE ADEQUATE CASH AVAILABILITY IN THE BOOKS OF THE ASSESSEE ON 24.04.2008? DID THE ASSESSEE TRAVELLED 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 ACCOUNT OF THE ASSESSEE? TO WHOM WERE THE SHARES SOLD DURING THE ASSESSMENT YEARS 2010-11 & 2011-12? WHEN WERE THE CHEQUES RECEIVED BY THE ASSESSEE? FROM WHOM DID THE ASSESSEE RECEIVED THE CHEQUES? WAS THERE ANY CASH DEPOSIT IMMEDIATELY PRIOR TO THE ISSUING OF 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 PURCHASED 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-BROKER IN HIS FRIENDS CIRCLE. WHAT IS THE TRUE NATURE OF THE TRANSACTION? FROM WHOM DID THE ASSESSEE ACTUALLY PURCHASE THE SHARES? DID THE ASSESSEE TAKE POSSESSION OF THE SHARES IN ITS PHYSICAL 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 ACCOUNT SHOW SUCH TRANSACTIONS BEING DONE BY THE ASSESSEE OR IS THIS THE ONLY ONE OF TRANSACTION. THUS, CLEARLY THE FACTS REQUIRED FOR ADJUDICATING THE APPEALS ARE NOT FORTHCOMING. THERE IS NO EVIDENCE WHATSOEVER TO SHOW THAT THE ASSESSEE HAS HELD THE SHARES FOR MORE THAN 12 MONTHS. THIS IS BECAUSE ASSUMING THAT THE DEMAT HAS BEEN DONE AND THE SHARES OF M/S.BPL HAS COME INTO THE ASSESSEES DEMAT ACCOUNT AND HAS IMMEDIATELY FLOWN OUT. THEN THE FACTUM OF THE POSSESSION OF THE SHARES FOR MORE THAN 12 MONTHS HAVE TO BE PROVED BY THE ASSESSEE. 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 15000 SHARES HAVE BEEN PURCHASED TOGETHER ON 24.04.2008. NO DETAILS IN RESPECT OF M/S.BPL COMPANY IS KNOWN, 6 ITA NOS.2852/CHNY/2018 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 BREAKER 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 OPPORTUNITY 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 PROVIDED 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 SUBSTANTIATE THE CLAIM AS ALSO BY PRODUCING THE PERSONS THROUGH WHOM THE ASSESSEE HAS UNDERTAKEN THE TRANSACTION OF THE PURCHASE AND SALE OF THE SHARES WHICH WOULD INCLUDE THE SUB-BROKER, FRIEND AND THE BROKER THROUGH WHOM THE TRANSACTION HAS BEEN DONE, BEFORE THE AO FOR EXAMINATION. 13. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE IN ITA NOS.2786 & 2787/CHNY/2017 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 6. RESPECTFULLY FOLLOWING THE ABOVE ORDER, ON THE FACTS AND CIRCUMSTANCES OF THIS CASE, WE DEEM IT FIT TO REMIT THE ISSUES OF EXEMPTION CLAIM IN THIS APPEAL BACK TO THE FILE OF THE A.O. FOR RE- ADJUDICATION ON THE LINES INDICATED ABOVE. THEREFORE, THE AO SHALL REQUIRE THE ASSESSEE; TO ESTABLISH WHO, WITH WHOM, HOW AND IN WHAT CIRCUMSTANCES THE IMPUGNED TRANSACTIONS WERE CARRIED OUT ETC., TO PROVE THAT THE IMPUGNED TRANSACTIONS ARE ACTUAL, GENUINE ETC. THE ASSESSEE SHALL COMPLY WITH THE A.OS REQUIREMENTS AS PER LAW. THE AO IS ALSO FREE TO CONDUCT APPROPRIATE ENQUIRY AS DEEMED FIT, BUT 7 ITA NOS.2852/CHNY/2018 SHALL FURNISH ADEQUATE OPPORTUNITY TO THE ASSESSEE ON THE MATERIAL ETC. TO BE USED AGAINST IT AND DECIDE THE MATTER IN ACCORDANCE WITH LAW. THUS, THE ISSUES OF EXEMPTION CLAIM U/S 10(38) ARE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR RE-ADJUDICATION AFTER GRANTING THE ASSESSEE ADEQUATE OPPORTUNITY OF BEING HEARD. 7. IN THE RESULT, THE ASSESSEES APPEAL IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE 19TH JUNE, 2019 AT CHENNAI. SD/- SD/- /CHENNAI, /DATED 19 TH JUNE, 2019 RSR /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( ) /CIT(A) 4. /CIT 5. /DR 6. [ /GF ( ) (GEORGE MATHAN) /JUDICIAL MEMBER ( ) (S. JAYARAMAN) /ACCOUNTANT MEMBER