Jayanthilal, CHENNAI V. ITO, CHENNAI

ITA 3487/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4200 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 21-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 29-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V SREENIVASAN JICIT D R
• Assessee Lawyers: A S SRIRAMAN
• Keywords: Reopening of assessment; Principle of natural justice; Accommodation entries; Reason to believe
• Section: 147

Judgement Text

, D/ SMC , IN THE INCOME TAX APPELLATE TRIBUNAL D/SMC BENCH, CHENNAI . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER I.T.A.NO.3487 /MDS./2016 ( ASSESSMENT YEAR : 2009-10) SHRI JAYANTHILAL , 4,THAMBU NAICKEN STREET, SOWCARPET, CHENNAI -79. VS. THE INCOME TAX OFFICER, NON CORPORATE WARD 4(2), CHENNAI-6. PAN AAFPJ 3646 J ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : MR.A.S.SRIRAMAN,ADVOCATE / RESPONDENT BY : MR.V.SREENIVASAN, JICIT, D.R ! ' / DATE OF HEARING : 21.06.2017 #$%& ! ' /DATE OF PRONOUNCEMENT : 21.06.2017 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE, AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)-5, CHENNA I DATED 29.11.2016 PERTAINING TO ASSESSMENT YEAR 2009-10. ITA NO.3487 /MDS/2016 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS F OR ADJUDICATION. 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APP EALS) 5, CHENNAI DATED 29.11.2016 IN I.T.A.NO.12/CIT(A)-5/2014-15 FOR THE ABOVE MENTIONED ASSESSMENT YEAR IS CONTRARY TO LAW, FACTS, AND IN T HE CIRCUMSTANCES OF THE CASE. 2. THE CIT (APPEALS) ERRED IN CONFIRMING THE VALIDI TY OF THE RE-ASSESSMENT ORDER WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION AND OUGHT TO HAVE APPRECIATED THAT THE ORDER OF RE-ASSESSMENT UNDER CONSIDERATION WAS PASSED OUT OF TIME, INVALID, PASSED WITHOUT JURISDICTION AND NOTSUSTAIN ABLE BOTH ON FACTS AND IN LAW. 3. THE CIT (APPEALS) WENT WRONG IN RECORDING THE FI NDINGS IN THIS REGARD IN PARA 6.1 TO 6.3 OF THE IMPUGNED ORDER WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. V 4. THE CIT (APPEALS) ERRED IN SUSTAINING THE DISALL OWANCE OF EXEMPTION CLAIMED ON LONG TERM CAPITAL GAINS AS PER SECTION 10(38) OF THE ACT AND CONSEQUENTLY ERRED IN SUSTAINING THE ASSESSMENT OF THE SAID CAPI TAL GAINS OF RS.8,71,423/- IN TREATING SUCH SUM AS UNEXPLAINED INCOME WITHOUT ASS IGNING PROPER REASONS AND JUSTIFICATION. 5. THE CIT (APPEALS) WENT WRONG IN RECORDING THE FI NDINGS IN THIS REGARD IN, PARA 7.2 TO 7.4 OF THE IMPUGNED ORDER WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 6. THE CIT (APPEALS) FAILED TO APPRECIATE THAT HAVI NG NOT EXAMINED THE DETAILS INDEPENDENTLY, WITH REGARD TO THE PURCHASE AND SALE OF SHARES., THE FINDINGS ON NON PRODUCTION OF EVIDENCE WITH REGARD TO THE TRAN SACTION OF PURCHASE AND SALE WAS WHOLLY UNJUSTIFIED. 7.THE CIT (APPEALS) FAILED TO APPRECIATE THAT IN AN Y EVENT THE INFORMATION RECEIVED WITH REGARD TO MAHA SAGAR GROUP OF CASES I N MUMBAI WHICH INFORMATION WAS THE FOUNDATION OF THE PRESENT RE-ASSESSMENT WAS NOT PUT TO THE APPELLANT THEREBY VITIATING THE RE-ASSESSMENT COMPLETELY. ITA NO.3487 /MDS/2016 3 8. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THER E WAS NO PROPER OPPORTUNITY GIVEN BEFORE PASSING OF THE IMPUGNED ORDER .AND ANY ORDER PASSED IN VIOLATION OF THE PRINCIPLES NATURAL JUSTICE WOULD BE NULLITY IN LAW. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL, FILED RETURN OF INCOME FOR ASSESSMENT YEAR 2009-10 ADMITTING AN INCOME OF ` 2,04,330/-. THE AO FOUND FROM THE DETAILS AVAILABLE ON RECORD THAT THE ASSESSEE HAD PURCHASED SHARES OF M/ S.ESSAR OIL AND M/S.SAT INDUSTRIES FOR A TOTAL VALUE OF ` 3,08,243/- AND SOLD THE SAME DURING THE FINANCIAL YEAR 2008-09 FOR ` 11,79,666/-. THE ASSESSEE HAD EARNED LONG TERM CAPITAL GAINS OF ` 8,71,423/- THROUGH THESE TRANSACTION. IT WAS STATED BY THE ASSESSEE THAT TH E PURCHASE OF SHARES AND THEIR SUBSEQUENT SALE ARE GENUINE TRANSA CTIONS ONLY. 3.1 DURING THE COURSE OF SEARCH IN THE MAHASAGAR G ROUP OF CASES IN MUMBAI, SHRI MUKESH CBHOKSI, DIRECTOR OF M/S.MAHASA GAR SECURITIES PVT. LTD HAD ADMITTED THAT THE GROUP CONCERNS THAT THE GROUP CONCERNS IN THE MAHASAGAR GROUP HAVE ISSUED ACCOM MODATION ENTRIES TO THE VARIOUS PARTIES TO DECLARE SPECULATI ON PROFIT/LOSS, SHORT TERM CAPITAL GAIN, LONG TERM CAPITAL GAINS ETC. SHR I CHOKSI HAS ITA NO.3487 /MDS/2016 4 IDENTIFIED ALL SUCH BENEFICIARIES OF ACCOMMODATION ENTIRES AND THAT THE ASSESSEE IS ONE AMONG THEM. 3.2 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED A LETTER DATED 27.12.2014 STATING THE REASONS FOR ACCEPTING THE GENUINITY OF TRANSACTIONS AND THEREBY ON EARNING ON EXEMPTED LONG TERM CAPITAL GAINS. THE AO REJECTED THE ASSESSEES CLAIM OF GENUINITY OF TRANSACTIONS AND THEREBY ON EARNING ON EXEMPTED LONG TERM CAPITAL GAINS. THE AO COMPLETED THE ASSESSMENT U/S.143(3) R.W.S.147 OF THE ACT ON THE BASIS OF STATEMENTS MADE BY MR.CHOKSI DETERMINING THE INCOME AT ` 10,75,753/- AND RAISING A DEMAND OF ` 4,04,860/- BY TREATING THE ENTIRE LONG TERM CAPITAL GAINS OF ` 8,71,423/- CLAIMED AS EXEMPTED BY THE ASSESSEE IS TREATED AS UNEXPLAINED INCOME. AGGRIEVED BY THE ORDER OF LD. ASSESSING OFFICER, TH E ASSESSEE CARRIED THE APPEAL BEFORE THE LD.CIT(A). ON APPEAL, THE LD .CIT(A) AFTER GIVING SUFFICIENT OPPORTUNITY OF HEARING TO THE ASS ESSEE, CONFIRMED THE REOPENING OF ASSESSMENT AND ALSO THE ADDITION MADE BY THE AO. AGAINST THE ORDER OF LD.CIT(A), NOW THE ASSESSEE I S IN APPEAL BEFORE US. ITA NO.3487 /MDS/2016 5 4. BEFORE US, LD.A.R SUBMITTED THAT THE REOPENING IS BAD IN LAW AND RE-ASSESSMENT SHOULD BE QUASHED. 4.1 ON THE OTHER HAND, LD.D.R RELIED ON THE ORDER OF LOWER AUTHORITIES. 5. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. ADMITTEDLY, THE DEPARTMENT HAS RECEIVED IN FORMATION FORM DIT(I&CI), NEW DELHAI THAT A SEARCH ACTION WAS COND UCTED IN THE MAHASAGAR GROUP OF CASES IN MUMBAI AND SHRI MUKESH CBHOKSI, DIRECTOR OF M/S.MAHASAGAR SECURITIES PVT. LTD AND O THER CONCERNS IN THE MAHASAGAR GROUP, HAD ADMITTED THAT THE GROUP CO NCERNS THAT THE GROUP CONCERNS IN THE MAHASAGAR GROUP HAVE ISSUED ACCOMMODATION ENTRIES TO THE VARIOUS PARTIES TO DEC LARE SPECULATION PROFIT/LOSS, SHORT TERM CAPITAL GAIN, LONG TERM CAP ITAL GAINS ETC. THE MODUS OPERANDI HAD BEEN EXPLAINED B, SHRI MUKESH CH OKSI THAT A COLOUR OF GENUINENESS WAS GIVEN TO THE TRANSACTIONS BY MAKING PART OF THE TRANSACTION IS EVIDENCED THROUGH BANK OR THR OUGH STOCK EXCHANGE. IT HAS BEEN STATED BY HIM THAT SHARES ARE PURCHASED FROM ITA NO.3487 /MDS/2016 6 A BROKER/AGENT, THEN TRANSFERRED TO DEMAT ACCOUNT A ND WITHIN A FEW DAYS THE SHARES ARE SHOWN AS SOLD THROUGH STOCK EXC HANGE. SHRI CHOKSI HAS IDENTIFIED ALL SUCH BENEFICIARIES OF ACC OMMODATION ENTRIES AND THAT THE ASSESSEE IS ONE AMONG THEM. FROM THE DETAILS AVAILABLE ON RECORD, IT WAS SEEN THAT THE ASSESSEE HAD PURCHA SED SHARES OF M/S. ESSAR OIL AND M/S.SAT INDUSTRIES FOR A TOTAL VALUE OF RS.3,08,243/- AND SOLD THE SAME DURING FINANCIAL YE AR 2008-09 FOR ` 11,79,666/-. THE ASSESSEE HAS SHOWN A LONG TERM CAP ITAL GAINS OF ` 8,71,423/- OUT OF THE ABOVE SALES. 5.1 IN VIEW OF THE ADMISSION MADE BY SHRI CHOKSI O F MAHASAGAR GROUP OF CONCERNS, IT WAS VERY CLEAR THAT THE RECEI PT BY WAY OF SALE OF SHARES BY THE ASSESSEE WAS NOT GENUINE, IT WAS ONLY AN ACCOMMODATION MANAGED/FACILITATED BY MAHISAGAR GRUP AND THAT THE ASSESSEE HAD BROUGHT IN TO THE BUSINESS HIS OWN MON EY. IT WAS CLEAR THAT THE ASSESSEE HAD SUPPRESSED THE PRIMARY FACTS REGARDING THE TRUE NATURE OF TH SHARE TRANSACTION. ITA NO.3487 /MDS/2016 7 5.2 THEREFORE, AS THERE WAS REASON TO BELIEVE INCO ME CHARGEABLE TO TAX TO THE TUNE OF ` 3,08,423/- HAD ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE INCOME TAX ACT, 1961, THE ASSESSMENT WAS REOPENED U/S.147 AND NOTICE U/S.148 WAS ISSUED ON 06.03.2014 AND SERVED ON THE ASSESSEE ON 08.03.2014. FURTHER, THERE IS NO DISPUTE THAT THE ASSESSEE HAS NOT FURNISHED ANY PRO OF TO ESTABLISH THE GENUINENESS OF THE PURCHASE AND SALE OF SHARES BEFO RE THE LOWER AUTHORITIES. HENCE, LD.CIT(A) RELYING ON THE JUDGE MENT OF DELHI HIGH COURT IN THE CASE OF PRATIBHA FINVEST (P.) LTD., VS . I.T.O IN [2013] 29 TAXMANN/.COM 429(DELHI) UPHELD THE REOPENING OF ASS ESSMENT. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD.CIT(A) ON THE ISSUE OF REOPENING OF ASSESSMENT AND THE SAME IS C ONFIRMED. 6. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGARD TO NON- PASSING OF INFORMATION RECEIVED FROM DIT(I&CI),NEW DELHI TO THE ASSESSEE THAT A SEARCH ACTION WAS CONDUCTED IN THE MAHASAGAR GROUP OF CASES IN MUMBAI AND STATEMENT GIVEN BY SHR I MUKESH CBHOKSI, DIRECTOR OF M/S.MAHASAGAR SECURITIES PVT. LTD., WHICH IS THE BASE FOR FOUNDATION FOR RE-OPENING OF ASSESSMENT. ITA NO.3487 /MDS/2016 8 6.1 BEFORE US, LD.A.R SUBMITTED THAT FROM THE IN FORMATION RECEIVED BY THE DEPARTMENT, THE AO CAME TO A CONCLUSION THAT THE ASSESSEE PURCHASES AND SALE OF SHARES FROM THE COMPANIES OWN ED BY SHRI MUKESH CHOKSI. THIS INFORMATION WAS NOT MADE AVAIL ABLE TO THE ASSESSEE AND THE AO CANNOT USE THE MATERIAL COLLECT ED AT THE BACK OF THE ASSESSEE TO FRAME THE ASSESSMENT SO AS TO TAKE A DECISION AGAINST THE ASSESSEE. FOR THIS PURPOSE, HE RELIED O N THE JUDGMENT OF DELHI HIGH COURT IN THE CASE OF PR. CIT VS. LAXMAN INDUSTRIAL RESORUCES LTD IN ITA NO.169 OF 2017 DATED 14.03.20 16 WHEREIN HELD THAT PLACING RELIANCE BY THE AO ON THE DOCUMENTS WI THOUT PLACING THE SAME TO THE ASSESSEE BY THE AO IS INAPPROPRIATE. IN MY OPINION, WHATEVER THE MATERIAL GATHERED BY THE AO FOR THE PU RPOSE OF ASSESSMENT TO BE CONFRONTED TO THE ASSESSEE BEFORE USING THE SAME AGAINST THE ASSESSEE. 6.2 IN THE PRESENT CASE, THE DEPARTMENTAL REPRESEN TATIVE IS NOT ABLE TO SHOW THAT DOCUMENTS RELIED BY THE AO FOR TH E PURPOSE OF ASSESSMENT WAS CONFRONTED TO THE ASSESSEE FOR HIS C OMMENTS. HENCE, I AM OF THE OPINION THAT THE DOCUMENTS RELIE D BY THE AO FOR ITA NO.3487 /MDS/2016 9 THE PURPOSE OF ASSESSMENT TO DENY THE EXEMPTION U/S .10(38) OF THE ACT TO BE FURNISHED TO THE ASSESSEE FOR HIS COMMENT S, THEREAFTER THE AO SHALL COME TO CONCLUSION IN ACCORDANCE WITH LAW. ACCORDINGLY, THE ISSUE IN DISPUTE RELATING TO THE MERIT OF THE A DDITION IN THIS CASE IS REMITTED TO THE FILE OF AO FOR HIS FRESH CONSIDERAT ION FOR GIVING AN OPPORTUNITY OF HEARING TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST JUNE, 2017. SD/- ( ) ( CHANDRA POOJARI ) /ACCOUNTANT MEMBER CHENNAI, DATED THE 21 ST JUNE, 2017 . K S SUNDARAM. ' ( )!*+ ,+%! / COPY TO: 1 . / APPELLANT 3. ' ' -! () / CIT(A) 5. +0 1 )!)23 / DR 2. / RESPONDENT 4. ' ' -! / CIT 6. 1 45 6 / GF