KANTHILAL PRAVEEN KUMAR, CHENNAI V. ACIT NON CORPORATE CIRCLE 5 , CHENNAI

ITA 3114/CHNY/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4126 (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; 2; 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.3114/CHNY/2018 /ASSESSMENT YEAR: 2015-16 SHRI KANTILAL PRAVIN KUMAR, 249, SYDENHAMS ROAD, PERIAMET, \CHENNAI-600 003. VS THE ASSISTANT COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE-5, CHENNAI. PAN:AARPP4152F ( /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.274/CIT(A)-5/2017-18 DATED 14.08.2018 FOR THE ASSESSMENT YEAR 2015-16. 2. SHRI KANTILAL PRAVIN KUMAR, THE ASSESSEE, PURCHASED SHARES PHYSICALLY AT RS. 25,850/ ON 9.4.2013 AND SOLD THE SHARES OF M/S KAILASH AUTO FINANCE LTD ON 03.6.2014 FOR A TOTAL C ONSIDERATION OF RS. 9,40,000/- AND CLAIMED THE LONG TERM CAPITAL GAIN O F RS.9,09,798/ U/S 2 ITANO.3114/CHNY/2018 10(38) FOR THE ASSESSMENT YEAR 2015-16. WHILE MAKIN G THE ASSESSMENT, AFTER CONSIDERING THE ASSESSEES EXPLANATION, M ATERIAL ETC., ON THE BASIS OF INVESTIGATIONS DONE BY THE REVENUE AND AFT ER ANALYZING THESE TRANSACTIONS IN DETAIL, THE ASSESSING OFFICER TREAT ED, 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, INT ER ALIA, THAT THOUGH HE HAS GIVEN MORE THAN 3 OPPORTUNITIES TO THE ASSESSEE , THE ASSESSEE DID APPEAR FOR HEARING, THEREFORE AFTER CONSIDERING THE MATERIAL BEFORE HIM HE DISMISSED THE APPEAL ON MERIT. AGGRIEVED, THE ASSESSEE FILED THIS APPEAL WITH THE FOLLOWING GROUNDS:- THE APPELLATE ORDER IN ITA NO. 274/CIT (A) 5/2017- 18 DATED 14-08- 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 WI THOUT AFFORDING SUFFICIENT OPPORTUNITIES. 2.1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) FAILED TO NOTE THAT WHEN THE CASE WAS POSTED FOR HEARING ON 25-07- 2018, AUTHORIZED REPRESENTATIVES OF THE APPELLANT HAD SUBMITTED A LE TTER REQUESTING FOR ADJOURNMENT ON THE GROUND THAT THE CHARTERED ACCOUN TANT WHO WAS TO APPEAR FOR THE HEARING WAS SERIOUSLY SICK AND HAD B EEN MEDICALLY ADVISED BED REST FOR A MONTH. 3 ITANO.3114/CHNY/2018 2.2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) FAILED TO NOTE THAT THERE WAS SUFFICIENT AND REASONABLE CAUSE WHER EBY THE APPELLANTS AUTHORIZED REPRESENTATIVE COULD NOT ATTEND THE HEAR ING OF THE APPEAL ON 25-07-2018, AND THEREFORE HE OUGHT TO HAVE GRANTED AN ADJOURNMENT INSTEAD OF PROCEEDING WITH PASSING OF THE APPELLATE ORDER. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE NOTED THAT DENIAL OF AN OPPORTUNITY TO THE APPELLAN T TO SUBMIT WRITTEN SUBMISSIONS IN SUPPORT OF THE GROUNDS OF APPEAL HAD LED TO NON- CONSIDERATION OF THE MERITS OF THE APPELLANTS PLEA S, WHICH IN TURN LED TO UPHOLDING OF THE UNJUSTIFIED ADDITION OF RS. 940,00 0 MADE IN THE ASSESSMENT ORDER. 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 VIZ., SHARES IN THE COM PANY BY NAME KAILASH AUTO FINANCE LIMITED, WERE BOUGHT THROUGH SHARE BRO KERS 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 OF THE CASE, INCLUDING THE FACT THAT THE SEBI HAD RESCINDED ITS EARLIER ORDER OF SUSPENDING TRADING OF SHARES OF KAILASH AUTO FINANCE LIMITED. 3.6. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) FAILED TO NOTE THAT THE CASE LAWS RELIED ON BY HIM ARE CLEARLY DI STINGUISHABLE ON FACTS AND IN LAW. 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. 4 ITANO.3114/CHNY/2018 3. THE LD AR SUBMITTED ON THE LINES OF GROUNDS OF APPEAL, SUPRA, AND RELIED ON THE ORDER OF THIS TRIBUNAL IN THE CAS E OF KANTILAL BHARAT DOSHI VS ACIT, NON CORPORATE CIRCLE 4(1), CHENNAI I N ITA NO 2611/ CHNY/2018 DT 14.01.2019. PER CONTRA, THE LD DR SUBM ITTED THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S 10(38) BUT HE HAS NOT PROVED THE GENUINENESS, THEREFORE, THE LD DR SUPPORTED THE OR DERS OF THE LOWER AUTHORITIES. 4. 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 ASSESSEE 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 IS NOT P ERMISSIBLE. THIS BEING SO, IN THE INTERESTS OF NATURAL JUSTICE, THE ISSUE OF THE GENUINENESS OF THE TRANSACTIONS REQUIRE RE-ADJUDICATION. SINC E, 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 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 ON US OF PROVING THE 5 ITANO.3114/CHNY/2018 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 CONSIDERE D 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 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 6 ITANO.3114/CHNY/2018 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 7 ITANO.3114/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. 5. RESPECTFULLY FOLLOWING THE ABOVE ORDER, WE DEEM IT FIT TO REMIT THE ISSUE OF EXEMPTION IN THIS APPEAL BACK TO TH E FILE OF THE A O FOR RE- ADJUDICATION ON THE LINES INDICATED ABOVE. THEREFOR E, THE A O SHALL REQUIRE THE ASSESSEE; TO ESTABLISH WHO, WITH WH OM, HOW AND IN WHAT CIRCUMSTANCES THE IMPUGNED TRANSACTIONS WERE CARRIE D OUT ETC., TO PROVE THAT THE IMPUGNED TRANSACTIONS ARE ACTUAL, GENUIN E ETC. THE ASSESSEE SHALL COMPLY TO THE A OS REQUIREMENTS AS PER LAW. ON APPRECIATION OF ALL THE ABOVE ASPECTS, THE AO WOU LD DECIDE THE MATTER IN ACCORDANCE WITH LAW. THE A O IS ALSO FREE TO CONDUCT APPROPRIATE ENQUIRY AS DEEMED FIT, BUT SHALL FURNISH ADEQUATE O PPORTUNITY TO THE 8 ITANO.3114/CHNY/2018 ASSESSEE ON THE MATERIAL ETC. TO BE USED AGAINST IT AND DECIDE THE MATTER IN ACCORDANCE WITH LAW. 7. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED 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