NARENDRA KUMAR JAIN, CHENNAI V. ITO NCW 5(2), CHENNAI

ITA 3073/CHNY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9862 (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: 2010-2011
• Appeal Filed On: 12-11-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHNY; M SUBASHRI JCIT ITA NOS
• Assessee Lawyers: R PADMANABHAN
• Keywords: Unexplained cash credit; Share purchase agreement; Earning of tax free income; Wrong claim
• Section: 68; 10

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , D B ENCH, CHENNAI , ! . , ' # BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI S.JAYARAMAN, ACCOUNTANT MEMBER ! / I.T.A. NOS.3073/CHNY/2018 % /ASSESSMENT YEAR: 2010-11 SHRI NARENDRA KUMAR JAIN, NO.44/39, EK AGRAHARAM STREET, MAHAVEER MARKET, PARK TOWN, CHENNAI. PAN: AACPN 7186Q VS THE INCOME TAX OFFICER, NON-CORPORATE WARD-5(2), CHENNAI. ! / I.T.A. NOS.3074/CHNY/2018 % /ASSESSMENT YEAR: 2010-11 SHRI MANKANWAR, NO.18, ELEPHANT GATE STREET, SOWCARPET, CHENNAI. PAN: ABRPM 0693F VS THE INCOME TAX OFFICER, NON-CORPORATE WARD-5(3), CHENNAI. ! / I.T.A. NOS.3076/CHNY/2018 % /ASSESSMENT YEAR: 2010-11 SHRI LAL CHAND RAJESH KUMAR BANTIA HUF, 13, CHANDRAPPA MUDALI STREET, SOWCARPET, CHENNAI. PAN: AAAHL 0911R VS THE INCOME TAX OFFICER, NON-CORPORATE WARD-5(2), CHENNAI. ! / I.T.A. NOS.3077/CHNY/2018 % /ASSESSMENT YEAR: 2013-14 SMT . REKHA S.JAIN, 39,KALATHI PILLAI STREET, SOWCARPET, CHENNAI-600 079. PAN: AACPC 5119L VS THE INCOME TAX OFFICER, NON-CORPORATE WARD-6(1), CHENNAI. ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR.R.PADMANABHAN, C.A /RESPONDENT BY : MS. M.SUBASHRI, JCIT 2 ITA NOS.3073, 3074 & 3076, 3077/CHNY/2018 /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 APPEA LS AGAINST THE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS)-5, C HENNAI, IN ITA NOS 282, 148, 258 & 207 /CIT(A)-5/2017-18 DATED 31/30. 8.2018, RESPECTIVELY, FOR THE ASSESSMENT YEARS 2010-11 & 20 13-14, RESPECTIVELY. SINCE, COMMON ISSUES ARE INVOLVED IN THESE APPEALS , THEY ARE HEARD TOGETHER AND BEING DISPOSED TOGETHER, FOR CONVENIE NCE SAKE . 2. ALL THESE ASSESSEES HAVE PURCHASED SHARES OF M /S BAKRA PRATHISTHAN LTD, BY CASH FOR A NOMINAL PRICE, OFF MARKET, FROM CERTAIN BROKERS SUBSEQUENTLY, EACH OF THEM SOLD THOSE S HARES 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 THE REPORT OF INVESTIGATIONS DONE BY THE REVENUE IN KOLKATTA IN WHICH ONE OF THE BROKERS NAMED THE RESPECTIVE ASSESSEE AS A BENEF ICIARY OF BOGUS LTCG OR NAMED THE SHARES HELD BY THE COMPANY AS A PAPER/SHELL/BOGUS COMPANY ETC , REOPENED THE RESPE CTIVE ASSESSMENT . DURING THE RE-ASSESSMENT , THE RESPECTIVE AO ISSUE D A LETTER TO THE SELLER OF SHARES WHICH WAS RETURNED BY THE POSTAL AUTHORITIES MARKING NOT KNOWN OR INSUFFICIENT ADDRESS OR AS UNSERVED, AS THE CASE MAY BE. 3 ITA NOS.3073, 3074 & 3076, 3077/CHNY/2018 THEREAFTER, THE RESPECTIVE A O CONSIDERING THE RE SPECTIVE ASSESSEES EXPLANATION, MATERIAL ETC., ON THE BASIS OF INVESTI GATIONS DONE BY THE REVENUE AND AFTER ANALYZING THESE TRANSACTIONS IN D ETAIL, TREATED, INTER ALIA, THAT THE TRANSACTIONS ARE NOT GENUINE, THE R ESPECTIVE ASSESSEE HAS NOT PROVED THAT THE IMPUGNED TRANSACTIONS WER E GENUINE, THE SALE AND PURCHASE OF THOSE SHARES AS PENNY STOCK, ASSE SSED THE ENTIRE SALE CONSIDERATION AS AN UNEXPLAINED CREDIT UNDER SECTIO N 68 AND REFUSED EACH OF THE ASSESSEES EXEMPTION CLAIM UNDER SECT ION 10(38). AGGRIEVED, EACH OF THE ABOVE ASSESSEE CARRIED THE MATTER ON APPEAL BEFORE THE CIT(A). THE LD. CIT(A) , INTER ALIA, RE LYING ON THE DECISIONS IN THE CASES OF ITO, 19(3) (4) MUMBAI VS SHAMIM M BHA RWANI, REPORTED IN 69 TAXMANN.COM 65 (MUMBAI TRIB) AND SANJAY BIMALCH AND JAIN V PCIT-1, NAGPUR REPORTED IN 89 TAXMANN.COM 196 (BOM B H C ) DISMISSED THE APPEAL OF EACH OF THE ABOVE ASSESSEE . AGGRIEVED AGAINST THAT ORDER, THE ABOVE ASSESSEES HAVE FIL ED THE ABOVE APPEALS BEFORE THE TRIBUNAL. 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 4 ITA NOS.3073, 3074 & 3076, 3077/CHNY/2018 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 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 THE M 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 5 ITA NOS.3073, 3074 & 3076, 3077/CHNY/2018 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 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 DEMATING OF THE SHARES? WHEN WERE THEY DEMATED? W HEN 6 ITA NOS.3073, 3074 & 3076, 3077/CHNY/2018 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 FILE OF THE AO FOR RE-ADJUDICATION AFTER GRANTING T HE ASSESSEE ADEQUATE OPPORTUNITY TO SUBSTANTIATE ITS CASE AND W E DO SO. 7 ITA NOS.3073, 3074 & 3076, 3077/CHNY/2018 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. 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 A O FOR RE-ADJUDICATION ON THE LINES INDICATED ABOVE. T HEREFORE, THE A O CONCERNED SHALL REQUIRE THE ASSESSEE; TO ES TABLISH WHO, WITH WHOM, HOW AND IN WHAT CIRCUMSTANCES THE IMPUGNED TRANSACT IONS WERE CARRIED OUT ETC., TO PROVE THAT THE IMPUGNED TRANSACTIONS ARE ACTUAL , GENUINE ETC. THE ASSESSEE SHALL COMPLY TO THE A O S 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 CONDUCT APPROPRIATE ENQUIRY AS DEEMED FIT, BUT SHALL FURNIS H ADEQUATE OPPORTUNITY TO THE ASSESSEE ON THE MATERIAL ETC. TO BE USE D AGAINST HIM/ IT, AS THE CASE MAY BE, AND DECIDE THE MATTER IN ACCORDANC E WITH LAW. 8 ITA NOS.3073, 3074 & 3076, 3077/CHNY/2018 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. ,/0 1 /GF