LATA BHAWARLAL JAIN, CHENNAI V. ITO NON CORPORATE WARD 5(2), CHENNAI

ITA 2942/CHNY/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 2992 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 22-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SURESH KUMAR
• Keywords: Unexplained cash credit; Share purchase agreement; Principle of natural justice; Wrong claim; Benefit of exemption; Capital Gains
• Section: 234B; 143(1); 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI , . , % BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI S.JAYARAMAN, ACCOUNTANT MEMBER / I.T.A. NO.2942/CHNY/2018 /ASSESSMENT YEAR: 2013-14 SMT. LATA BHAWARLAL JAIN, 26, ARUNACHALAM STREET, SOWCARPET, CHENNAI-600 079. VS THE INCOME TAX OFFICER, NON CORPORATE WARD-5(2), CHENNAI. PAN:ABCP0530B ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR.SURESH KUMAR, CA /RESPONDENT BY : MR. SRIDHAR DORA, JCIT /DATE OF HEARING : 05.03.2019 /DATE OF PRONOUNCEMENT : 05.03.2019 / O R D E R PER S.JAYARAMAN, AM: THE ASSESSEE FILED THIS APPEAL AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-5, CHENNAI, IN ITA NO. 222/ CIT(A)-5/2017-18 DATED 10.07.2018 FOR THE ASSESSMENT YEAR 2013-14. 2. MRS. LATA B.JAIN, THE ASSESSEE, DERIVED INCOME FROM HOUSE PROPERTY, INTEREST INCOME AND INVESTMENT IN SHARES . BASED ON THE INVESTIGATION REPORT FURNISHED BY THE INVESTIGATION WING, KOLKATA, THE ASSESSING OFFICER REOPENED THE ASSESSMENT WHICH WA S ORIGINALLY PROCESSED UNDER SECTION 143(1) . AFTER CONSIDERING THE ASSESSEES 2 ITANO.2942/CHNY/2018 EXPLANATION ETC , ON THE BASIS OF INVESTIGATIONS DO NE BY THE REVENUE AND AFTER ANALYZING THESE TRANSACTIONS IN DETAIL , THE ASSESSING OFFICER , INTER ALIA, TREATED THE SALE AND PURCHASE OF ABNORMAL QUANTITY OF SHARES OF M/S.BAKRA PRATHISTHAN LTD. AS PENNY STOCK, ASSESSED THE ENTIRE SALE CONSIDERATION AS AN UNEXPLAINED CREDIT UNDER SECTIO N 68 AND REFUSED THE ASSESSEES EXEMPTION CLAIM UNDER SECTION 10(38) . AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). THE LD. CIT(A) AFTER CONSIDERING THE ASSESSEES EXPLANATION ETC HELD , INTER-ALIA, THAT THE ASSESSEE CLAIMED TO HAVE PURCHASED SHARES OF M/S.B AKRA PRATHISTHAN LTD OFF MARKET, DID NOT BRING ANY MATERIAL ON REC ORD TO ESTABLISH THE GENUINENESS OF PURCHASE AND SALE OF SHARES OF M/S. BAKRA PRATHISTHAN LTD , WHICH DID NOT PAY ANY DIVIDEND NOR DID ISSUE ANY BONUS SHARES DURING THE PERIOD OF HOLDING THE SHA RES BY THE ASSESSEE, THE SHARE PRICES OF M/S.BAKRA PRATHISTHAN LTD. WER E ARTIFICIALLY HIKED ETC AND THEREFORE, THE LD.CIT(A) CONCURRED WITH THE FIN DINGS RECORDED BY THE ASSESSING OFFICER AND UPHELD THE ACTION OF THE ASSE SSING OFFICER. AGGRIEVED, THE ASSESSEE FILED THIS APPEAL WITH THE FOLLOWING GROUNDS:- 1. FOR THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CAS E TO THE EXTENT PREJUDICIAL TO THE INTERESTS OF THE APPELLANT AND I S OPPOSED TO THE PRINCIPLES OF NATURAL JUSTICE, EQUITY AND FAIR PLAY . 2. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS ) FAILED TO APPRECIATE THAT THE ORDER OF THE ASSESSING OFFICER IS WITHOUT JURISDICTION. 3 ITANO.2942/CHNY/2018 3. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS ) FAILED TO APPRECIATE THAT THE REASSESSMENT IS BAD IN LAW. 4. FOR THAT THE ASSESSMENT OFFICER FAILED TO COMPLY WITH THE STATUTORY REQUIREMENTS OF REASSESSMENT. 5. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN UPHOLDING THE REJECTION OF THE CLAIM OF EXEMPTION U /S 10(38) ON THE LONG TERM CAPITAL GAINS ON SALE OF SHARES. 6. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS ) FAILED TO APPRECIATE THAT ALL THE CONDITIONS REQUIRED FOR CLA IMING EXEMPTION ULS.L0(38) HAD BEEN MET BY THE APPELLANT. 7. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN UPHOLDING THE ENTIRE SALE PROCEEDS AS UNEXPLAINED C REDIT IN THE HANDS OF THE APPELLANT U/S.68 OF THE INCOME TAX ACT. 8. FOR THAT THE COMMISSIONER OF INCOME TAX(APPEALS) FAILED TO APPRECIATE THAT THE PROVISIONS OF SECTION 68 ARE NO T INVOCABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 9. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN UPHOLDING THE INTEREST LEVIED U/S.234A 234B 234C. 3. THE LD. AR SUBMITTED THAT THE ASSESSEE WAS DERIV ING INCOME FROM HOUSE PROPERTY AND NON-SPECULATIVE BUSINESS. THE AS SESSEE HAD CLAIMED THE BENEFIT OF EXEMPTION U/S.10(38) IN RES PECT OF SALE OF SHARES OF M/S.BAKRA PRATHISTHAN LTD. THE ASSESSING OFFICE R DENIED THE CLAIM OF DEDUCTION BASED UPON THE REPORT CLAIMED TO HAVE BEE N RECEIVED FROM INVESTIGATION WING, KOLKATA, WHEREIN MR.ASHOK KUMA R KAYAN, HAS MENTIONED THE ASSESSEES NAME IN HIS ALLEGED STA TEMENT WHEREIN THE LIST OF CLIENTS TO WHOM HE HAS PROVIDED THE BOGUS LONG TERM CAPITAL GAINS FACILITY. THE ASSESSEE WAS NOT FURNISHED WITH THO SE DETAILS. THE LD. CIT(A) FAILED TO APPRECIATE THAT ALL THE CONDITIONS REQUIRED FOR CLAIMING 4 ITANO.2942/CHNY/2018 EXEMPTION UNDER SECTION 10(38) HAD BEEN MET BY THE ASSESSEE AND THEREFORE HE HAS ERRED IN UPHOLDING THE REJECTION OF CLAIM OF EXEMPTION UNDER SECTION 10(38) ON THE LONG TERM CAPITAL GAINS ON SALE OF SHARES ETC. PER CONTRA, THE LD. DR VEHEMENTLY SUPPORTED THE O RDERS OF THE ASSESSING OFFICER AND LD.CIT(A). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND GONE T HROUGH RELEVANT MATERIAL. SINCE THE LD. AR DID NOT ARGUE O N THE GROUNDS RELATED TO THE ISSUES OF THE RE-ASSESSMENT, THE CORRESPONDI NG GROUNDS ARE DISMISSED. WITH REGARD TO THE ISSUE OF CLAIM OF EXEMPTION U/S.10(38) IN RESPECT OF LONG TERM CAPITAL GAINS, IT IS NOTICED THAT THE ASSESSEE HAS NOT BEEN GIVEN ANY OPPORTUNITY TO PROVE THE GENUINE NESS BUT THE ASSESSMENT HAS BEEN MADE BASED ON THE EVIDENCES COL LECTED BY THE REVENUE IN THE COURSE OF THE INVESTIGATION CONDUCTE D BY THEM ON BROKERS / SHARE BROKING ENTITIES ETC. THIS IS NOT P ERMISSIBLE. THIS BEING SO, IN THE INTEREST OF NATURAL JUSTICE, THE ISSUE O F THE GENUINENESS OF THE TRANSACTIONS REQUIRE RE-ADJUDICATION. SINCE, THE RIGHT TO EXEMPTION MUST BE ESTABLISHED BY THOSE WHO SEEK IT , THE ONUS TH EREFORE LIES ON THE ASSESSEE. IN ORDER TO CLAIM THE EXEMPTION FROM PAY MENT OF INCOME TAX, THE ASSESSEE HAD TO PUT BEFORE THE INCOME TAX AUTHO RITIES PROPER MATERIALS WHICH WOULD ENABLE TO COME TO A CONCLUSIO N. (35 ITR 312 (SC). THUS, THE A O MUST KEEP IN MIND THAT THE ONU S OF PROVING THE 5 ITANO.2942/CHNY/2018 EXEMPTION RESTS ON THE ASSESSEE. IF THE A O DOES H AVE 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 DRA WING AN OPINION ON POSSIBLE WRONG CLAIMS BUT THEY ARE NOT THE FINAL EVIDENCE. FURTHER, PERUSAL OF ASSESSEES CASE SHOWS THAT IT IS SIMILAR TO THE FACTS IN THE CASE OF SHRI HEERACHAND KANUNGA REFERRED TO SUP RA. THE RELEVANT PORTIONS FROM THAT ORDER IS EXTRACTED AS UNDER :- 9. A PERUSAL OF THE FACTS IN THE PRESENT CASE ADM ITTEDLY GIVEN ROOM FOR SUSPICION. HOWEVER, ASSESSMENTS ARE NOT T O BE DONE ON THE BASIS OF MERE SUSPICION. IT HAS TO BE SUPPOR TED 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 A SSESSMENT IN THE PRESENT CASE IS THE STATEMENT OF ONE SHRI AS HOK KUMAR KAYAN WHO HAS ADMITTED TO HAVE PROVIDED BOGUS LONG TERM CAPITAL GAINS TO HIS CLIENTS. THE SAID SHRI ASHOK K UMAR KAYAN ALSO ALLEGEDLY SEEMS TO HAVE PROVIDED THE ASSESSEE S NAME AND PAN AS ONE OF THE BENEFICIARIES. HOWEVER, THIS STA TEMENT 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-EXA MINATION. IN THE ABSENCE OF OPPORTUNITY OF CROSS-EXAMINATION, THE STATEMENT REMAINS MERE INFORMATION AND SUCH INFORMA TION 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 TOTAL ING INTO RS.3,00,000/-. THE ASSESSEE CLAIMS TO HAVE PAID CAS H FOR THE PURCHASE OF THESE SHARES. THE PRIMARY QUESTION WOU LD BE AS TO WHERE THE PURCHASE WAS DONE? IF THE PURCHASE HAS BE EN 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 PROVISION S OF SEC.40A(3)? WAS THERE ADEQUATE CASH AVAILABILITY IN THE BOOKS OF THE ASSESSEE ON 24.04.2008? DID THE ASSESSEE TR AVELLED TO KOLKATA? HOW WAS THE TRANSACTION DONE? WHO APPLIE D FOR THE 6 ITANO.2942/CHNY/2018 DEMATING OF THE SHARES? WHEN WERE THEY DEMATED? W HEN 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 TH E ASSESSEE RECEIVED THE CHEQUES? WAS THERE ANY CASH D EPOSIT IMMEDIATELY PRIOR TO THE ISSUING OF THE CHEQUE FROM THE BANK ACCOUNT OF THE PURCHASER OF THE SHARES OF THE ASSES SEE? 11. A PERUSAL OF THE ASSESSMENT ORDER AT PARA NO.7. 1 SHOWS THAT IN THE WRITTEN SUBMISSIONS, THE ASSESSEE STATE S 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 T HE TRUE NATURE OF THE TRANSACTION? FROM WHOM DID THE ASSESSEE ACTU ALLY PURCHASE THE SHARES? DID THE ASSESSEE TAKE POSSESS ION OF THE SHARES IN ITS PHYSICAL FORM? IN PARA NO.8.1 OF THE ASSESSMENT ORDER, IT IS MENTIONED THAT THE ASSESSEE IS AN INVE STOR AND HAS BEEN REGULARLY TRADING IN SHARES. IF THIS IS SO, D OES THE DEMAT ACCOUNT SHOW SUCH TRANSACTIONS BEING DONE BY THE AS SESSEE OR IS THIS THE ONLY ONE OF TRANSACTION. THUS, CLEARLY THE FACTS REQUIRED FOR ADJUDICATING THE APPEALS ARE NOT FORTH COMING. THERE IS NO EVIDENCE WHATSOEVER TO SHOW THAT THE AS SESSEE HAS HELD THE SHARES FOR MORE THAN 12 MONTHS. THIS IS B ECAUSE ASSUMING THAT THE DEMAT HAS BEEN DONE AND THE SHARE S OF M/S.BPL HAS COME INTO THE ASSESSEES DEMAT ACCOUNT AND HAS IMMEDIATELY FLOWN OUT. THEN THE FACTUM OF THE POSS ESSION OF THE SHARES FOR MORE THAN 12 MONTHS HAVE TO BE PROVE D BY THE ASSESSEE. THIS IS ALSO NOT FORTHCOMING. IN REPLY TO A SPECIFIC QUERY, AS THE DATE OF THE DEMAT OF SHARES, IT WAS S UBMITTED BY THE LD.AR THAT THE DEMAT WAS DONE ON VARIOUS DATES. THEN THE QUESTION RISES AS TO WHY THERE IS SO MUCH OF DIFFER ENCE IN THE DATES OF DEMATING WHEN 15000 SHARES HAVE BEEN PURCH ASED TOGETHER ON 24.04.2008. NO DETAILS IN RESPECT OF M /S.BPL COMPANY IS KNOWN, WHAT IS THE PRODUCT OF THE COMPAN Y 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 DAIL Y BASIS AND OBVIOUSLY IT WOULD HAVE DRAWN ATTENTION. THIS BEIN G SO, AS THE FACTS ARE NOT COMING OUT OF THE ASSESSMENT ORDER NO R 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 RES TORED TO THE 7 ITANO.2942/CHNY/2018 FILE OF THE AO FOR RE-ADJUDICATION AFTER GRANTING T HE ASSESSEE ADEQUATE OPPORTUNITY TO SUBSTANTIATE ITS CASE AND W E DO SO. 12. THE STATEMENT RECORDED BY THE REVENUE FROM SHRI ASHOK KUMAR KAYAN CANNOT BE USED AS AN EVIDENCE AGAINST T HE ASSESSEE IN SO FAR AS THE STATEMENT HAS NOT BEEN GI VEN TO THE ASSESSEE NOR HAS SHRI ASHOK KUMAR KAYAN BEEN PROVID ED TO THE ASSESSEE FOR CROSS-EXAMINATION. HOWEVER, THE A SSESSEE SHALL PROVE THE TRANSACTION OF THE LONG TERM CAPITA L GAINS IN RESPECT OF WHICH THE ASSESSEE HAS CLAIMED THE EXEMP TION U/S.10(38) BY PROVIDING ALL SUCH EVIDENCES AS REQUI RED BY THE AO TO SUBSTANTIATE THE CLAIM AS ALSO BY PRODUCING T HE PERSONS THROUGH WHOM THE ASSESSEE HAS UNDERTAKEN THE TRANSA CTION OF THE PURCHASE AND SALE OF THE SHARES WHICH WOULD INC LUDE THE SUB-BROKER, FRIEND AND THE BROKER THROUGH WHOM THE TRANSACTION HAS BEEN DONE, BEFORE THE AO FOR EXAMIN ATION. 13. IN THE RESULT, THE APPEALS FILED BY THE ASSESS EE IN ITA NOS.2786 & 2787/CHNY/2017 ARE PARTLY ALLOWED FOR ST ATISTICAL PURPOSES. 6. RESPECTFULLY FOLLOWING THE ABOVE ORDER, THE ISSU E OF EXEMPTION IN THIS APPEAL IS RESTORED 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 CARRIE D OUT ETC., TO PROVE THAT THE IMPUGNED TRANSACTIONS ARE ACTUAL , GENUI NE ETC. THE ASSESSEE SHALL COMPLY TO THE A OS REQUIREMENTS AS PER LAW. ON APPRECIATION OF ALL THE ABOVE ASPECTS, THE AO WOULD DECIDE THE MATTER IN ACCORDANCE WITH LAW. THE AO IS ALSO FREE TO CONDUC T APPROPRIATE ENQUIRY AS DEEMED FIT, BUT SHALL FURNISH ADEQUATE OPPORTUNI TY TO THE ASSESSEE 8 ITANO.2942/CHNY/2018 ON THE MATERIAL ETC TO BE USED AGAINST IT AND DECID E THE MATTER IN ACCORDANCE WITH LAW. 7. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH MARCH, 2019 AT CHENNAI SD/- SD/- ( ) ( . ) (GEORGE MATHAN) (S.JAYARAMAN) ( ! / JUDICIAL MEMBER) ( ! / ACCOUNTANT MEMBER) /CHENNAI, $ /DATED 05 TH MARCH, 2019 SOMU () *) /COPY TO: 1. APPELLANT 2. RESPONDENT 3. + () /CIT(A) 4. + /CIT 5. ) / /DR 6. 2 /GF