OM KISHAN GUPTA, NEW DELHI V. PR. CIT- 19, NEW DELHI

ITA 3139/DEL/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7377 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2014-2015
• Appeal Filed On: 03-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR GUPTA
• Keywords: Bogus purchase; Cost of acquisition
• Section: 271(1)(c); 143(3); 263

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH E, NEW DELHI BEFORE : SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 3139/DEL/2018 ASSESSMENT YEAR: 2014-15 OM KISHAN GUPTA, C - 39, ANAND VIHAR, NEW DELHI PAN- AESPG 6326B (APPELLANT) VS. PR. C.I.T. 19, NEW DELHI (RESPONDENT) APPELLANT BY SH. SALIL KAPOOR, ADVOCATE RESPONDENT BY SH. RAJESH KUMAR GUPTA, CIT/DR ORDER PER L.P. SAHU, A.M.: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. PCIT-19, NEW DELHI DATED 26.03.2018 PASSED U/S. 263 OF THE I T ACT, 1961 FOR THE ASSESSMENT YEAR 2014-15 ON THE FOLLOWING GROUNDS : 1. THAT THE NOTICE ISSUED U/S 263 OF THE INCOME TAX A CT, 1961 ('THE ACT') AND THE ORDER PASSED BY THE PRINCIPAL COMMISS IONER OF INCOME TAX ('PR. CIT') U/S 263 OF THE ACT ON THE BASIS OF SUSPI CION, CONJECTURE AND SURMISES IS ILLEGAL, BAD IN LAW AND WITHOUT JURISDI CTION. 2. THE ORDER U/S 263 PASSED BY THE PR. CIT IS ILLEGA L, BAD IN LAW AND WITHOUT JURISDICTION AS DETAILED REPLIES FILED BEFO RE THE PR. CIT, IN RESPONSE DATE OF HEARING 27.11.2018 DATE OF PRONOUNCEMENT 17.01.2019 ITA NO. 3139/DEL/2018 2 TO THE NOTICE U/S 263, HAVE NOT BEEN CONSIDERED WHI LE PASSING THE FINAL ORDER. HENCE THE ORDER U/S 263 IS LIABLE TO BE QUAS HED. 3. THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER ('AO') U/S 143(3) IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE TO THE EXTENT THAT NO ADDITION ON ACCOUNT OF ALLEGE D COMMISSION HAS BEEN ADDED. 4. THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF TH E CASE, THE PR. CIT HAS ERRED ON FACTS AND IN LAW IN ASSUMING JURISDICT ION U/S 263 WHEN THE ASSESSMENT ORDER U/S 143(3) WAS PASSED BY THE AO AF TER MAKING DETAILED ENQUIRIES REGARDING THE LONG TERM CAPITAL GAIN ON SH ARES. THE ASSESSMENT ORDER U/S 143(3) CANNOT BE SET ASIDE MER ELY BECAUSE THE CIT FEELS THAT FURTHER ENQUIRY SHOULD HAVE BEEN MADE. 5. THE PR. CIT HAS FAILED IN NOT APPRECIATING THAT TH E ISSUE OF SALE/PURCHASE OF SHARES WAS CATEGORICALLY EXAMINED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THAT THE ASSES SEE HAD FURNISHED COMPLETE DETAILS REGARDING THE SAME. THE ASSESSMENT ORDER U/S 143(3) CANNOT BE SET REVISED MERELY BECAUSE THE CIT FEELS T HAT THE ISSUE SHOULD HAVE BEEN EXAMINED FROM A DIFFERENT ANGLE. 6. THAT THE PR. CIT HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT THE AO HAS NOT PROPERLY EXAMINED THE ISSUE. THE AO IS NOT S UPPOSED TO WRITE EACH AND EVERY ISSUE, WHICH IS ALLOWED/ACCEPTED IN THE A SSESSMENT ORDER. 7. WITHOUT PREJUDICE, THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE PR. CIT HAS ERRED IN INVOKING THE JURISDIC TION U/S SECTION 263 OF THE ACT ON ISSUES OTHER THAN THOSE DECIDED IN LIMIT ED SCRUTINY, DURING THE COURSE OF REGULAR ASSESSMENT PROCEEDING U/S 143(3) OF THE ACT. 8. WITHOUT PREJUDICE, THAT THE EXERCISE OF JURISDIC TION BY PR. CIT U/S 263 IS BAD IN LAW AND WITHOUT ANY BASIS AS THE SAME HAS BEEN DONE ON MERE ASSUMPTION OF WRONG FACTS. THAT PR. CIT HAS ERRE D IN ASSUMING THE WRONG FACTS AND OBSERVING THAT 'IT WAS AN ACCOMMODA TION ENTRY TAKEN BY THE ASSESSEE BY PAYING COMMISSION IN CASH TO THE EN TRY OPERATION FOR ARRANGING THE SAID ACCOMMODATION ENTRY'. HOWEVER NO SUCH OBSERVATION IS RECORDED BY AO. ITA NO. 3139/DEL/2018 3 9. WITHOUT PREJUDICE, THAT THE DIRECTION GIVEN BY T HE PR. CIT ARE ILLEGAL, BAD IN LAW AND ALSO CONTRARY. 10. THAT WITHOUT PREJUDICE, THE PR. CIT HAS WRONGLY A ND ILLEGALLY HELD THAT THE ORDER PASSED BY AO IS ERRONEOUS AND PREJUD ICIAL TO THE INTEREST OF THE REVENUE, WHEN NO INDEPENDENT ENQUIRY HAS BEEN M ADE BY PR. CIT. HENCE THE NOTICE ISSUED U/S 263 AND THE ORDER PASSE D U/S 263 IS ILLEGAL AND BAD IN LAW 11. THAT THE PR. CIT HAS PASSED THE ORDER U/S 263 IGN ORING THE EVIDENCE, DOCUMENTS FILED BY THE ASSESSEE AND MATERIAL AVAILA BLE ON RECORD. 12. THAT THE EXPLANATIONS GIVEN, EVIDENCE PRODUCED, MATERIAL PLACE AND AVAILABLE ON RECORD HAS NOT BEEN PROPERLY CONSIDERE D AND JUDICIALLY INTERPRETED AND THE SAME DO NOT JUSTIFY THE ORDER P ASSED U/S 263. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED RETURN OF INCOME ON 30.09.2014. SUBSEQUENTLY, THE RETURN WAS REVISED. D URING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSER VED THAT THE ASSESSEE HAS DECLARED LONG-TERM CAPITAL GAINS ON SALE OF SHARES OF RS.2,40,38,889/- WHICH WAS CLAIMED AS EXEMPT U/S. 10(38) OF THE IT ACT, TH E DETAILS OF WHICH ARE AS UNDER : NAME OF THE SCRIP SALE PRICE PURCHASE PRICE (INDEXED) GAIN (EXEMPT) RANDER CORP 4433146 443110 3990036 EFFINGO TEXTILES 202 82203 23350 20048853 TOTAL 24038889 THE CASE WAS TAKEN UP FOR COMPLETE SCRUTINY WITH MA IN REASON FOR SELECTION BEING TO EXAMINE SUSPICIOUS LONG TERM CAPITAL GAINS ON THE SALE OF SHARES. THE ITA NO. 3139/DEL/2018 4 DETAILS OF PURCHASE AND SHARES WERE EXAMINED BY THE ASSESSING OFFICER OF BOTH THE COMPANIES AND THEIR PROFIT AND LOSS ACCOUNT FOR LAST FIVE YEARS. AFTER RELYING UPON SOME CASE LAWS, THE AO NOTED THAT IT W AS A BOGUS CAPITAL GAIN IN THE GARB OF PURCHASE AND SALE OF SHARES. ACCORDINGL Y, THE ASSESSING OFFICER ADDED RS.2,53,51,809/- AS MENTIONED IN PARA 26 OF T HE ASSESSMENT ORDER AS UNDER : 26. FROM THE ABOVE FACTS AND CIRCUMSTANCES, THE TR ADING PATTERN OF ASSESSEE, AND THE WAY THE SHARE PRICES HAVE BEEN MA NIPULATED, IT IS HELD THAT THE ASSESSEE IN CONNIVANCE WITH CERTAIN ENTRY OPERATOR S HAVE MISUSED THE STOCK EXCHANGE SYSTEM TO GENERATE FICTITIOUS LTCG AND THER EBY HAVE AVOIDED PAYMENT OF LEGITIMATE TAXES. HENCE, AN AMOUNT OF RS.2,53,91 ,809 (SALE COST OF RANDER CORP. OF RS.44,33,146/- AND EFFINGO TEXTILES OF RS.2 ,02,82,203 + PURCHASE COST OF RANDER CORP. OF RS.4,43,110/- AND EFINGO TEXTILES O F RS.2,33,350/-) IS HELD TO BE BOGUS AND ACCORDINGLY DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCES. ON THE REASONS MENTIONED ABOVE, I AM SATISFIED THAT THE ASSESSEE HAS CONCEALED HIS IN COME AND FURNISHED INACCURATE PARTICULARS, HENCE, PENALTY PROCEEDING U /S. 271(1)(C) IS BEING INITIATED SEPARATELY. (ADDITION OF RS.2,53,91,809/-) 3. THE LD. AR SUBMITTED THAT THE ORDER U/S. 263 IS NOT JUSTIFIED AT ALL. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ALL THE DETAI LS WERE SUBMITTED BEFORE THE ASSESSING OFFICER IN RESPONSE TO NOTICE U/S. 14 2(1) WHO EXAMINED THE PURCHASE AND SALES OF SHARES. THE PURCHASE AND SALE S OF SHARES WERE MADE THROUGH RECOGNIZED STOCK EXCHANGE AND STT & BROKERA GE CHARGES HAVE BEEN PAID. ALL THE TRANSACTIONS HAVE BEEN DONE THROUGH B ANKING CHANNELS. THERE IS NO ANY WHISPER REGARDING PAYMENT OF COMMISSION TO T HE BROKERS. RELEVANT DOCUMENTS WERE PRODUCED BEFORE THE ASSESSING OFFICE R AND THERE IS NO ITA NO. 3139/DEL/2018 5 CONNECTION BETWEEN THE BUYER AND SELLER OF THE SHAR ES. NO CASH TRANSACTIONS ARE INVOLVED. THE IMPUGNED ORDER REVISING THE ASSES SMENT ORDER IS BASED ON SURMISES AND CONJECTURES WHICH IS NOT SUSTAINABLE I N THE EYE OF LAW. THE ASSESSING OFFICER HAS PASSED ASSESSMENT ORDER AS PE R INCOME-TAX ACT. THE ASSESSMENT ORDER UNDER CONSIDERATION IS NEITHER ERR ONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. HE RELIED ON MANY CASE LAW S PLACED ON THE PAPER BOOK CONTAINING 298 PAGES. HE ALSO REITERATED THE SUBMIS SIONS MADE BEFORE THE LD. PCIT. 4. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE R PASSED BY THE LOWER AUTHORITIES AND SUBMITTED THAT THOUGH THE ASSESSING OFFICER HAS MADE A DEEP ENQUIRY ON THE BOGUS PURCHASE AND SALES OF SHARES, LAST TRACK RECORDS OF THE COMPANIES, WHO SHARES WERE TRANSACTED, THEIR EPS WH ICH IMPARTS IMPORTANT ROLE IN THE HIKE OF SHARE PRICE OF A COMPANY, SUDDE N DOWN FALL IN THE RATES OF SHARES OF THOSE COMPANIES, AFTER COMPLETION OF ASSE SSEES TRANSACTIONS AND OTHER ATTENDING CIRCUMSTANCES BEHIND THE ALLEGED TR ANSACTIONS, BUT THE ASSESSING OFFICER HAS FAILED TO CONSIDER AND EXAMIN E THAT IN THE CASE OF BOGUS PURCHASE AND SALE OF SHARES, THE ELEMENT OF COMMISS ION PAYMENT IS ALWAYS INVOLVED AND THEREFORE, THE ASSESSING OFFICER WAS I N ERROR IN NOT MAKING ANY ADDITION TOWARDS UNEXPLAINED COMMISSION FOR THE ABO VE ARRANGEMENT OF CAPITAL GAINS. THEREFORE, THE LD. PCIT WAS JUSTIFIE D IN SETTING ASIDE THE ASSESSMENT ORDER BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. ITA NO. 3139/DEL/2018 6 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GON E THROUGH THE ENTIRE MATERIAL AVAILABLE ON RECORD AND ALSO THE CASE LAWS CITED BY BOTH THE PARTIES. FROM THE FACTS NARRATED ABOVE, THE ONLY QUESTION TO BE DECIDED BY US IS WHETHER THE LD. PCIT WAS JUSTIFIED IN REVISING THE ASSESSMENT ORDER U/S. 263 OF THE ACT ON THE PREMISE THAT THE ASSESSING OFFICER D ID NOT EXAMINE AND ADD THE AMOUNT OF COMMISSION TO THE INCOME OF THE ASSESSEE FOR ARRANGING BOGUS CAPITAL GAINS ? IT IS NOTABLE THAT FOR INVOKING THE PROVISIONS OF SECTION 263, IT IS SINE QUA NONE TO ESTABLISH THAT THE ASSESSMENT ORDE R SOUGHT TO BE REVISED IS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. A PERUSAL OF THE IMPUGNED ORDER REVEALS THAT THE LD. PCIT ITSELF HAS OBSERVED THAT THE LD. ASSESSING OFFICER HAS MADE DEEP EXAMINATION ON THE BOGUS PURCHASE AND SALES OF SHARES. THE ONLY GROUND FOR REVISION IS THAT THE ASSESSING OFFICER DID NOT MAKE ANY ADDITION TOWARDS COMMISSION PAID FOR ARRAN GING BOGUS CAPITAL GAINS. IT IS WORTHWHILE TO NOTE HERE THAT FIRSTLY N O RECORD OR DOCUMENT IS REFERRED TO BY THE LD. PCIT TO ESTABLISH THAT THE A SSESSEE HAD MADE ANY CASH PAYMENT TOWARDS COMMISSION AND SECONDLY, A PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT THE AO HAS MADE ADDITION OF THE ENTIRE PURCHASE VALUE PLUS SALE VALUE TOTALING TO RS.2,53,91,809/- TO THE TOTA L INCOME OF THE ASSESSEE. IN PRESENCE OF THESE FACTS, IT CANNOT BE SAID THAT THE AO HAS PAID DEAF EAR TO THE ASPECT OF COMMISSION WHICH ACCORDING TO THE LD. PCI T, MIGHT HAVE BEEN PAID BY THE ASSESSEE FOR ARRANGING BOGUS CAPITAL GAINS. IN SUCH CIRCUMSTANCES, FOR WANT OF ANY WHISPER OF COMMISSION PAYMENT IN THE AS SESSMENT ORDER, THE SAID ORDER MAY AT THE MOST BE TERMED AS ERRONEOUS, BUT I T CANNOT BE PREJUDICIAL TO THE INTEREST OF REVENUE PARTICULARLY WHEN THE ASSES SING OFFICER HAS ADDED ENTIRE PURCHASE VALUE AND SALE VALUE OF SHARES DECL ARED TO THE INCOME OF THE ITA NO. 3139/DEL/2018 7 ASSESSEE AS MENTIONED IN PARA 26 OF THE ASSESSMENT ORDER REPRODUCED ABOVE. UNLESS BOTH THE CONDITIONS OF ASSESSMENT ORDER BEIN G ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE ARE SATISFIE D, THE LD. PCIT WAS NOT JUSTIFIED TO REVISE THE SAID ORDER U/S. 263 OF THE ACT AS HELD IN SEVERAL DECISIONS CITED BY THE ASSESSEE. WE ACCORDINGLY, DO NOT FIND ANY JUSTIFICATION TO SUSTAIN THE IMPUGNED ORDER. IT IS HOWEVER, MADE CLE AR THAT THIS ORDER WILL NOT BE AN EXEMPLAR FOR OTHER CASES HAVING DIFFERENT SET OF FACTS AND WILL NOT BE PREJUDICIAL TO ANY OTHER PROCEEDINGS IN THE CASE OF THIS ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17.01.2019. SD/- SD/- (AMIT SHUKLA) (L.P. S AHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 17.01.2019 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI