KANTILAL JITENDRA KUMAR, CHENNAI V. ACIT NON CORPORATE CIRCLE 4(1), CHENNAI

ITA 3113/CHNY/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4134 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 14-11-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: PRAMODKUMAR CHOPDA
• Keywords: Unexplained cash credit; Share purchase agreement; Principle of natural justice; Reasonable cause; Wrong claim; Capital Gains; Bogus
• Section: 68; 10; 13

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.3113/CHNY/2018 /ASSESSMENT YEAR: 2015-16 SHRI KANTILAL JITENDRA KUMAR, 249, SYDENHAMS ROAD, PERIAMET, CHENNAI-600 003. VS THE ASSISTANT COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE-4(1), CHENNAI. PAN:AAOPJ1810B ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. PRAMODKUMAR CHOPDA, ADVOCATE /RESPONDENT BY : MR. SRIDHAR DORA, JCIT /DATE OF HEARING : 13.03.2019 /DATE OF PRONOUNCEMENT : 13.03.2019 / 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.395/CIT(A)-5/2017-18 DATED 30.08.2018 FOR THE ASSESSMENT YEAR 2015-16. 2. SHRI KANTILAL JITENDRA KUMAR, THE ASSESSEE, PURCHAS ED SHARES PHYSICALLY AT RS. 32,450/ ON 9.4.2013 AND SOLD THE SHARES OF M/S KAILASH AUTO FINANCE LTD ON 25.7.2014 FOR A TOTAL C ONSIDERATION OF RS. 11,14,158/- AND CLAIMED THE LONG TERM CAPITAL GAIN OF RS.10,81,708/- U/S 2 ITANO.3113/CHNY/2018 10(38) FOR THE ASSESSMENT YEAR 2015-16. WHILE MAKIN G THE ASSESSMENT, AFTER CONSIDERING THE ASSESSEES EXPLANATION , MATERIAL ETC. AND ON THE BASIS OF INVESTIGATIONS DONE BY THE REVENUE AND AFTER ANALYZING THESE TRANSACTIONS IN DETAIL, THE ASSESSING OFFICER TREATED, INTER ALIA, THAT THE TRANSACTIONS ARE NOT GENUINE, THE ASSESSEE HAS NOT PROVED THAT THE IMPUGNED TRANSACTIONS WERE GENUINE, THE SALE AND PURCHASE OF THOSE SHARES AS PENNY STOCK, ASSESSED THE ENTIRE SALE CO NSIDERATION AS AN UNEXPLAINED CREDIT UNDER SECTION 68 AND REFUSED TH E ASSESSEES EXEMPTION CLAIM UNDER SECTION 10(38). AGGRIEVED, T HE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). THE LD. CIT(A) HELD THAT THERE WAS 8 DAYS DELAY IN FILING THE APPEAL AND SINCE THE ASSESSEE DID NOT FURNISH ANY PROOF TOWARDS THE REASON FOR THE DELAY IN FILING TH E APPEAL , HE DISMISSED THE APPEAL AS BARRED BY LIMITATION. AGGRIEVED, THE ASSESSEE FILED THIS APPEAL WITH THE FOLLOWING GROUNDS:- THE APPELLATE ORDER IN ITA NO. 395/CIT(A)-5/2017-1 8 DATED 30-08- 2018 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPE ALS)-5, CHENNAI, IS ERRONEOUS, OPPOSED TO LAW AND FACTS OF THE APPEL LANTS CASE. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN DISMISSING THE APPEAL SUBMITTED BY THE APPELLANT ON THE SOLE GROUND THAT THE APPEAL WAS NOT PRESENTED WITHIN THE STIPUL ATED TIME LIMIT AND WAS DELAYED BY 8 (EIGHT) DAYS. 2.1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) FAILED IN HIS DUTY BY NOT CONSIDERING THE FACT THAT THE APPELLANT WAS PREVENTED BY SUFFICIENT AND REASONABLE CAUSE FROM SUBMITTING THE APPEAL IN TIME. 2.2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) OUGHT TO HAVE GIVEN SUFFICIENT OPPORTUNITIES TO THE APPELLANT TO SUBSTANTIATE WITH EVIDENCE THE REASON FOR THE SMALL DELAY IN SUBMISSI ON OF THE APPEAL. 3 ITANO.3113/CHNY/2018 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN NOT CONSIDERING THE MERITS OF THE GROUNDS OF APPEAL AND THE WRITTEN SUBMISSIONS OF THE APPELLANT, LEADING TO INDIRECT C ONFIRMATION OF THE ADDITION OF RS.11,14,158, BEING SALE CONSIDERATION OF SHARES HELD BY THE APPELLANT IN THE COMPANY BY NAME KAILASH AUTO FINAN CE LIMITED AND THEREBY CONFIRMING THE ADDITION. 3.1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) FAILED TO NOTE THAT PURCHASE OF SHARES OF COMPANIES FROM THE OFF M ARKET IS NOT PROHIBITED AS PER ANY LAW. 3.2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) FAILED TO NOTE THAT THE SHARES IN QUESTION WERE BOUGHT THROUGH SHA RE BROKERS REGISTERED WITH RECOGNIZED STOCK EXCHANGE. 3.3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) FAILED TO NOTE THAT THE SHARES IN QUESTION WERE SOLD THROUGH BROKE RS REGISTERED WITH RECOGNIZED STOCK EXCHANGE AND THE SALE CONSIDERATIO N OF THE SHARES HAD BEEN RECEIVED THROUGH BANKING CHANNELS. 3.4. THE LEARNED ASSESSING OFFICERS FINDING THAT T HE SELLING RATES OF SHARES WERE ARTIFICIALLY HIKED HAS NO SUPPORT, AND AT ANY RATE IF AT ALL HAD IT BEEN DONE, THE APPELLANT WAS NOT AWARE OF IT AND HAD NO ROLE IN SUCH ALLEGED EXERCISE OF ARTIFICIALLY HIKING THE SALE PR ICE OF SHARES. 3.5. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) FAILED TO ANALYZE AND AGREE OR DISAGREE WITH THE FACTS DISCUS SED IN THE WRITTEN SUBMISSIONS, INCLUDING THE FACT THAT THE SEBI HAD R ESCINDED ITS EARLIER ORDER OF SUSPENDING TRADING OF SHARES OF KAILASH AU TO FINANCE LIMITED. 4. FOR THESE AND THE OTHER GROUNDS WHICH THE APPELL ANT MAY BE PERMITTED TO SUBMIT AT THE TIME OF HEARING, IT IS P RAYED, THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) MAY BE SET ASI DE, WITH DIRECTIONS TO THE ASSESSING OFFICER TO DELETE THE A DDITION MADE IN THE ASSESSMENT ORDER AND TO ALLOW THE DEDUCTION CLAIMED BY THE APPELLANT UNDER SECTION 10 (38) OF THE INCOME-TAX ACT, 1961. 3. THE LD AR SUBMITTED THAT THERE WAS AN ERROR IN T HE E-FILING WEBSITE, WHICH WAS NOT ENABLING THE ASSESSEE TO FILE THE APP EAL ONLINE WHICH WAS RESOLVED SUBSEQUENTLY. THEREFORE, THERE WAS 8 DAYS DELAY IN FILING THE APPEAL WHICH MAY BE CONDONED. 4 ITANO.3113/CHNY/2018 3.1 AFTER HEARING BOTH THE PARTIES, IN THE INTERESTS OF JUSTICE, WE CONDONE THE DELAY IN FILING THE APPEAL AND ADMIT THE SAME FOR HEARING. 4. ON MERITS, THE LD AR SUBMITTED ON THE LINES OF GROUNDS OF APPEAL NO 2.2 TO 3.5, SUPRA, AND RELIED ON THE ORDER OF T HIS TRIBUNAL IN THE CASE OF KANTILAL BHARAT DOSHI VS ACIT, NON CORPORATE CI RCLE 4(1), CHENNAI IN ITA NO 2611/ CHNY/2018 DT. 14.01.2019. PER CONTRA, THE LD DR SUBMITTED THAT THE ASSESSEE HAS CLAIMED DEDUCT ION U/S 10(38) BUT HE HAS NOT PROVED THE GENUINENESS, THEREFORE, THE LD DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND GONE T HROUGH RELEVANT MATERIAL. ON THE CLAIM OF EXEMPTION U/S.10 (38) IN RESPECT OF LONG TERM CAPITAL GAINS, IT APPEARS THAT THE A SSESSEE HAS NOT BEEN GIVEN ADEQUATE OPPORTUNITY TO PROVE THE GENUINENESS 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 BEING SO , IN THE INTERESTS OF NATURAL JUSTICE, THE ISSUE OF THE GENUINENESS OF THE TRANSACTIONS REQUIRE RE-ADJUDICATION. SINCE, THE RIGHT TO EXEMP TION MUST BE ESTABLISHED BY THOSE WHO SEEK IT, THE ONUS THEREFOR E LIES ON THE ASSESSEE. IN ORDER TO CLAIM THE EXEMPTION FROM PAY MENT OF INCOME TAX, 5 ITANO.3113/CHNY/2018 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 ON US OF PROVING THE EXEMPTION RESTS ON THE ASSESSEE. IF THE AO DOES HA VE 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. THE DECISION RELIED ON BY THE ASSESSEE HAS CONSIDERED THE DECISION OF THIS TRIBUNAL IN THE CASE OF SHRI HEERACHAND KANUNGA, IT A NOS 2786 & 2787/CHNY/ 2017 DT 03.5.2018, THE RELEVANT PORTION S 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 6 ITANO.3113/CHNY/2018 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 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 ITANO.3113/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. 6. RESPECTFULLY FOLLOWING THE ABOVE ORDER, IN THE F ACTS AND CIRCUMSTANCES OF THIS CASE, WE DEEM IT FIT TO REMI T THE ISSUE OF EXEMPTION IN THIS APPEAL BACK TO THE FILE OF THE A O FOR RE-ADJUDICATION ON THE LINES INDICATED ABOVE. THEREFORE, THE A O SH ALL 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 TO THE A OS REQUIREMENTS AS PER LAW. ON A PPRECIATION OF ALL THE ABOVE ASPECTS, THE AO WOULD DECIDE THE MATTER IN AC CORDANCE WITH LAW. THE A O IS ALSO FREE TO CONDUCT APPROPRIATE ENQU IRY AS DEEMED FIT, BUT SHALL FURNISH ADEQUATE OPPORTUNITY TO THE ASSESSE E ON THE MATERIAL ETC. TO BE USED AGAINST IT AND DECIDE THE MATTER IN ACCO RDANCE WITH LAW. 8 ITANO.3113/CHNY/2018 7. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH MARCH, 2019. SD/- SD/- ( ) ( . ) (GEORGE MATHAN) (S.JAYARAMAN) ( ! / JUDICIAL MEMBER) ( ! / ACCOUNTANT MEMBER) /CHENNAI, # /DATED 13 TH MARCH, 2019 SOMU '( )( /COPY TO: 1. APPELLANT 2. RESPONDENT 3. * ( ) /CIT(A) 4. * /CIT 5. ( . /DR 6. 1 /GF