BHANMAL UTTAM CHAND, CHENNAI V. ITO NCW 6(3), CHENNAI

ITA 3072/CHNY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9861 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2015-2016
• Appeal Filed On: 12-11-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M. SUBASHRI
• Assessee Lawyers: R. PADMANABHAN
• Keywords: Unexplained cash credit; Share purchase agreement; Earning of tax free income; Wrong claim; Bogus
• Section: 68; 12; 10

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, D BE NCH, CHENNAI , ! . , ' # BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI S.JAYARAMAN, ACCOUNTANT MEMBER ! / I.T.A. NO.3072/CHNY/2018 % /ASSESSMENT YEAR: 2015-16 SRI BHANMAL UTTAM CHAND , 41, WALL TAX ROAD, CHENNAI. VS THE INCOME TAX OFFICER, NON-CORPORATE WARD-6(3), CHENNAI. PAN: AINPC 4931B ! / I.T.A. NO.3075/CHNY/2018 % /ASSESSMENT YEAR: 2015-16 SHRI SUNIL KUMAR JAIN, NO.39, KALATHI PILLAI STREET, SOWCARPET, CHENNAI. VS THE INCOME TAX OFFICER, NON-CORPORATE WARD-6(3), CHENNAI. PAN: AAWPS 8664E ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR.R.PADMANABHAN, C.A /RESPONDENT BY : MS. M.SUBASHRI, JCIT /DATE OF HEARING : 10.04.2019 /DATE OF PRONOUNCEMENT : 08.05.2019 &/ O R D E R PER S.JAYARAMAN, AM: THE ABOVE ASSESSEES HAVE FILED THE ABOVE APPEALS AGAINST THE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS)-5, C HENNAI, IN ITA NOS 227 & 103 /CIT(A)-5/2017-18 DATED 31.8.2018 & 07.9 .2018 ,RESPECTIVELY, FOR THE ASSESSMENT YEAR 2015-16. SINCE, COMMON ISSUES ARE INVOLVED IN THESE APPEALS, THEY ARE HEAR D TOGETHER AND BEING DISPOSED TOGETHER, FOR CONVENIENCE SAKE . 2 ITAN OS.3072 & 3075/CHNY/2018 2. ALL THESE ASSESSEES HAVE PURCHASED SHARES OF M/S JACKSON INVESTMENTS LTD & M/S ESAAR(INDIA) LTD , RESPECTIV ELY, BY CASH FOR A NOMINAL PRICE, OFF MARKET, FROM CERTAIN BROKERS. SUBSEQUENTLY, EACH OF THEM SOLD THOSE SHARES ON HUGE PRICE , EARNED A HUGE PROFIT OF LTCG AND CLAIMED IT AS AN EXEMPT INCOME U/S. 10(38). THE RESPECTIVE ASSESSING OFFICER, ON THE BASIS OF SUSPICIOUS SALE TRANSACTION IN SHARES AND EXEMPT LTCG SHOWN IN RETURN (PENNY STOCK) REPOR T, SELECTED THE CASE FOR SCRUTINY. DURING THE ASSESSMENT, THE RE SPECTIVE AO ISSUED A LETTER TO THE SELLER OF SHARES WHICH WAS RETURNED BY THE POSTAL AUTHORITIES MARKING NOT KNOWN OR INSUFFICIENT ADDRESS OR AS U NSERVED, AS THE CASE MAY BE. THEREAFTER, THE RESPECTIVE A O CONSIDERING THE RESPECTIVE ASSESSEES EXPLANATION, MATERIAL ETC., ON THE BA SIS OF INVESTIGATIONS DONE BY THE REVENUE IN WHICH ONE OF THE BROKERS NA MED THE RESPECTIVE ASSESSEE AS A BENEFICIARY OF BOGUS LTCG OR NAME D THE SHARES HELD BY THE COMPANY AS A PAPER/SHELL/BOGUS COMPANY ETC, AND AFTER ANALYZING THESE TRANSACTIONS IN DETAIL, TREATED, IN TER ALIA, THAT THE TRANSACTIONS ARE NOT GENUINE, THE RESPECTIVE ASSE SSEE HAS NOT PROVED THAT THE IMPUGNED TRANSACTIONS WERE GENUINE, THE SALE AND PURCHASE OF THOSE SHARES AS PENNY STOCK, ASSESSED THE ENTIR E SALE CONSIDERATION AS AN UNEXPLAINED CREDIT UNDER SECTION 68 AND REFU SED EACH OF THE ASSESSEES EXEMPTION CLAIM UNDER SECTION 10(38). A GGRIEVED, EACH OF THE ABOVE ASSESSEE CARRIED THE MATTER ON APPEAL B EFORE THE CIT(A). 3 ITAN OS.3072 & 3075/CHNY/2018 THE LD. CIT(A) , INTER ALIA, RELYING ON THE DECISI ONS IN THE CASES OF ITO, 19(3) (4) MUMBAI VS SHAMIM M BHARWANI, REPORTED IN 69 TAXMANN.COM 65 (MUMBAI TRIB) AND SANJAY BIMALCHAND JAIN V PCIT -1, NAGPUR REPORTED IN 89 TAXMANN.COM 196 (BOMB H C ) DISMISS ED THE APPEAL OF EACH OF THE ABOVE ASSESSEE. AGGRIEVED AGAINST THAT ORDER, THE ABOVE ASSESSEES HAVE FILED THE ABOVE APPEALS BEFORE THE T RIBUNAL. 3. IT WAS SUBMITTED BY LD. A.R THAT THE ISSUE IN THIS APPEAL IN EACH OF THE ABOVE ASSESSEES CASE WAS AGAINST THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE ADDITION MADE BY THE RESPECTIVE LD. ASSESSING OFFICER IN TREATING THE PURCHASE AND SALE OF SHARES BY THE RES PECTIVE ASSESSEE , AS PENNY STOCK TRANSACTIONS. THE LD AR SUBMITTED ON THE LINES OF GROUNDS OF APPEAL AND RELIED ON THE ORDER OF THIS TRIBUNA L IN THE CASE OF SHRI HEERACHAND KANUNGA FOR ASSESSMENT YEARS 2010-11 & 2 011-12 IN ITA NOS. 2786 & 2787/MDS/2017 DATED 03.05.2018. PER CO NTRA, THE LD DR SUBMITTED THAT THE RESPECTIVE ASSESSEE HAS CLAIMED DEDUC TION U/S 10 (38) BUT HE/ IT HAS NOT PROVED THE GENUINENESS, T HEREFORE, REITERATING THE FACTS AND CIRCUMSTANCES OF THESE CASES FROM THE ORDERS OF THE LOWER AUTHORITIES THE LD. DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT IS NOTICED THAT EACH OF THE ABOVE THE ASSESSEE HAS NOT BEEN GIVEN A FAIR OPPORTUNITY TO PROVE THE GENUINENESS BUT THE ASSESSMENT HAS BEEN MADE BA SED ON THE EVIDENCES COLLECTED BY THE REVENUE IN THE COURSE OF THE INVESTIGATION 4 ITAN OS.3072 & 3075/CHNY/2018 CONDUCTED BY THEM ON BROKERS / SHARE BROKING ENTITI ES ETC. THIS IS NOT PERMISSIBLE. THIS BEING SO, IN THE INTERESTS OF NAT URAL JUSTICE, THE ISSUE OF THE GENUINENESS OF THE TRANSACTIONS REQUIRE RE-A DJUDICATION. SINCE, THE RIGHT TO EXEMPTION MUST BE ESTABLISHED BY THOSE WHO SEEK IT , THE ONUS THEREFORE LIES ON THE ASSESSEE. IN ORDER TO CLAI M THE EXEMPTION FROM PAYMENT OF INCOME TAX, THE ASSESSEE HAD TO PUT BEFO RE THE INCOME TAX AUTHORITIES PROPER MATERIALS WHICH WOULD ENABLE T HEM TO COME TO A CONCLUSION. (35 ITR 312 (SC)).THUS, THE A O MUST KE EP 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 REVENU E ARE EVIDENCES FOR DRAWING AN OPINION ON POSSIBLE WRONG CLAIMS BUT THE Y ARE NOT THE FINAL EVIDENCE. FURTHER, PERUSAL OF THE ABOVE ASSESSEE S CASES SHOW THAT THEY ARE 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 PORT IONS FROM THAT ORDER IS EXTRACTED AS UNDER :- 9. A PERUSAL OF THE FACTS IN THE PRESENT CASE ADMI TTEDLY GIVEN ROOM FOR SUSPICION. HOWEVER, ASSESSMENTS ARE NOT T O 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 S IDE 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 5 ITAN OS.3072 & 3075/CHNY/2018 CLIENTS. THE SAID SHRI ASHOK KUMAR KAYAN ALSO ALLE GEDLY SEEMS TO HAVE PROVIDED THE ASSESSEES NAME AND PAN AS ONE OF THE BENEFICIARIES. HOWEVER, THIS STATEMENT GIVEN BY SH RI ASHOK KUMAR KAYAN CANNOT BE THE FOUNDATION FOR THE PURPOSE OF A SSESSMENT IN SO FAR AS SHRI ASHOK KUMAR KAYAN HAS NOT BEEN PROVI DED TO THE ASSESSEE FOR CROSS-EXAMINATION. IN THE ABSENCE OF OPPORTUNITY OF CROSS-EXAMINATION, THE STATEMENT REMAINS MERE INFOR MATION AND SUCH INFORMATION CANNOT BE FOUNDATION FOR ASSESSMEN T. 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 SHARE TRANS FER FORMS? HOW DID THE ASSESSEE OVERCOME THE PROVISIONS OF SEC.40A (3)? WAS THERE ADEQUATE CASH AVAILABILITY IN THE BOOKS OF TH E 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 TRANS FERRED 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 WH OM DID THE 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, KO LKATA. HOWEVER, IN PARA NO.8.3, IT IS MENTIONED THAT THE A SSESSEE 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 SH ARES? DID THE ASSESSEE TAKE POSSESSION OF THE SHARES IN ITS P HYSICAL FORM? IN PARA NO.8.1 OF THE ASSESSMENT ORDER, IT IS MENTI ONED THAT THE ASSESSEE IS AN INVESTOR AND HAS BEEN REGULARLY TRAD ING IN SHARES. IF THIS IS SO, DOES THE DEMAT ACCOUNT SHOW SUCH TRA NSACTIONS BEING DONE BY THE ASSESSEE OR IS THIS THE ONLY ONE OF TRA NSACTION. THUS, CLEARLY THE FACTS REQUIRED FOR ADJUDICATING THE APP EALS ARE NOT FORTHCOMING. THERE IS NO EVIDENCE WHATSOEVER TO SH OW THAT THE ASSESSEE HAS HELD THE SHARES FOR MORE THAN 12 MONTH S. THIS IS BECAUSE ASSUMING THAT THE DEMAT HAS BEEN DONE AND T HE SHARES 6 ITAN OS.3072 & 3075/CHNY/2018 OF M/S.BPL HAS COME INTO THE ASSESSEES DEMAT ACCOU NT AND HAS IMMEDIATELY FLOWN OUT. THEN THE FACTUM OF THE POSS ESSION 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 S UBMITTED BY THE LD.AR THAT THE DEMAT WAS DONE ON VARIOUS DATES. TH EN THE QUESTION RISES AS TO WHY THERE IS SO MUCH OF DIFFER ENCE IN THE DATES OF DEMATING WHEN 15000 SHARES HAVE BEEN PURCHASED T OGETHER ON 24.04.2008. NO DETAILS IN RESPECT OF M/S.BPL COMPA NY IS KNOWN, WHAT IS THE PRODUCT OF THE COMPANY WHICH HAD LEAD T O THE SHARE VALUE OF THE COMPANY TO GO UP FROM RS.20/- TO RS.35 2/- IN A PERIOD OF TWO YEARS. THIS WOULD CLEARLY BE A CASE WHERE TH E SHARE VALUE OF THE COMPANY WAS HITTING THE CIRCUIT BREAKER OF T HE STOCK EXCHANGE ON A DAILY BASIS AND OBVIOUSLY IT WOULD HA VE DRAWN ATTENTION. THIS BEING SO, AS THE FACTS ARE NOT COM ING 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-ADJUD ICATION AFTER GRANTING THE ASSESSEE ADEQUATE OPPORTUNITY TO SUBST ANTIATE 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 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 ASSES SEE SHALL PROVE THE TRANSACTION OF THE LONG TERM CAPITAL GAIN S 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 PURC HASE 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 EXAMINATION. 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. 5. RESPECTFULLY FOLLOWING THE ABOVE ORDER, ON THE F ACTS AND CIRCUMSTANCES OF THESE CASES, WE DEEM IT FIT TO R EMIT THE ISSUE OF EXEMPTION IN THESE APPEALS BACK TO THE FILE OF THE RESPECTIVE AO 7 ITAN OS.3072 & 3075/CHNY/2018 FOR RE-ADJUDICATION ON THE LINES INDICATED ABOVE. T HEREFORE, THE AO CONCERNED SHALL REQUIRE THE ASSESSEE ; TO ESTABLISH WHO, WITH WHOM, HOW AND IN WHAT CIRCUMSTANCES THE IMPUGNED TR ANSACTIONS WERE CARRIED OUT ETC., TO PROVE THAT THE IMPUGNED TRANS ACTIONS ARE ACTUAL , GENUINE ETC. THE ASSESSEE SHALL COMPLY TO THE A OS REQUIREMENTS AS PER LAW. ON APPRECIATION OF ALL THE ABOVE ASPEC TS, THE AO WOULD DECIDE THE MATTER IN ACCORDANCE WITH LAW. THE A O IS ALSO FREE TO CONDUCT APPROPRIATE ENQUIRY AS DEEMED FIT, BUT SHA LL FURNISH ADEQUATE OPPORTUNITY TO THE ASSESSEE ON THE MATERIAL ET C. TO BE USED AGAINST HIM/ IT, AS THE CASE MAY BE, AND DECIDE THE MATTER IN ACCORDANCE WITH LAW. 6. IN THE RESULT, EACH OF THE ABOVE ASSESSEES APPE AL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH MAY, 2019. SD/- SD/- ( ) ( . ) (GEORGE MATHAN) (S.JAYARAMAN) ( /JUDICIAL MEMBER) ( / ACCOUNTANT MEMBER) /CHENNAI, !' /DATED 8 TH MAY, 2019 EDN, SR. P.S $ %& '& /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( ( )/CIT(A) 4. ( /CIT 5. &)* +, /DR 6. *-. / /GF