Smt.A Sonal , Bangalore V. The Income Tax Officer Ward-2(2), Bangalore

ITA 359/BANG/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4499 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 27-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Accommodation entries; Set aside
• Section: 143(3); 234B; 143(1); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC - B BENCH : BANGALORE BEFORE SHRI JASON P BOAZ , ACCOUNTANT MEMBER ITA NO. 3 5 9 /BANG/201 9 ASSESSMENT YEAR : 20 0 6 - 0 7 SMT. A. SONAL, NO.4, BYRAPPA LANE, RANESINGPET, BANGALORE-560 053. PAN : ABHPS 4389 N VS. THE INCOME TAX OFFICER, WARD 2(2), BANGALORE. APPELLANT RESPONDENT ASSESSEE BY : SMT. SUMAN LUNKAR, CA REVENUE BY : SHRI. S. T. SESHADRI, JCIT DATE OF HEARING : 1 6 . 0 4 .201 9 DATE OF PRONOUNCEMENT : 24 . 0 5 .201 9 O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-2, BANGALORE, DATED 13.12.2018 FOR ASSESSMENT YEAR 2006-07. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE AS UNDER: 2.1 THE ASSESSEE FILED HER RETURN OF INCOME FOR ASSESSMENT YEAR 2006-07 ON 31.03.2007 DECLARING INCOME OF RS.1,39,609/-. THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). SUBSEQUENTLY, BASED ON INFORMATION RECEIVED CONSEQUENT TO SEARCH IN THE MAHASAGAR GROUPA AND ITS DIRECTOR, SHRI MUKESH CHOKSI ON 25.11.2009, WHEREIN THE ASSESSEE WAS SAID TO ITA NO. 359/BANG/2019 PAGE 2 OF 6 HAVE BEEN A BENEFICIARY OF THEIR FRAUDULENT / BOGUS SHARE DEALINGS, THE ASSESSMENT IN THE ASSESSEES CASE FOR THE ASSESSMENT YEAR 2006-07 WAS RE-OPENED BY PROCEEDINGS INITIATED BY THE ASSESSING OFFICER (AO) UNDER SECTION 147 OF THE ACT. THE RE- ASSESSMENT WAS CONCLUDED VIDE ORDERS PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT DATED 18.12.2013 WHEREIN CONSIDERATION RECEIVED ON SALE OF SHARES OF M/S. BUNIYAD CHEMICALS LTD., AMOUNTING TO RS.8,24,325/- WAS BROUGHT TO TAX AS UNEXPLAINED INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. THE ASSESSEES APPEAL WAS DISMISSED BY CIT(A)-2, BANGALORE. 3. AGGRIEVED BY THE ORDERS OF CIT(A)-2, BANGALORE, DATED 13.12.2018 FOR ASSESSMENT YEAR 2006-07, THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL WHEREIN IT HAS RAISED THE FOLLOWING GROUNDS: 1. THE LEARNED ASSESSING OFFICER HAD ERRED IN PASSING THE ORDER IN THE MANNER PASSED BY HIM AND THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE SAME. THE ORDERS PASSED ARE BAD IN LAW AND ARE LIABLE TO BE QUASHED. 2.1 IN ANY CASE, THE CONDITIONS PRECEDENT FOR THE ISSUE OF NOTICE U/S. 148 OF THE ACT BEING ABSENT, THE RE-OPENING OF ASSESSMENT BECOMES BAD IN LAW AND CONSEQUENTLY THE ORDER AS PASSED/CONFIRMED BEING ALSO BAD IN LAW IS REQUIRED TO BE QUASHED. 2.2 IN ANY CASE THE ASSESSING OFFICER HAVING NOT COMPLIED WITH LEGAL PROVISIONS / PROCEDURE FOR REOPENING / REASSESSMENT, THE CONSEQUENTIAL ORDER BECOMES BAD IN LAW AND LIABLE TO BE QUASHED. 3.1 IN ANY CASE THE ORDER PASSED IS IN GROSS VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE AND FAIR PLAY, ESPECIALLY IN THE ABSENCE OF THE CROSS EXAMINATIONS OF THE PERSONS WHOSE AVERMENTS ARE SOUGHT TO BE RELIED UPON BY THE ASSESSING OFFICER WHILE PASSING THE ORDER, MAKES THE ORDER TOTALLY BAD IN LAW AND LIABLE TO BE CANCELLED. 3.2 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS INSTEAD OF QUASHING THE IMPUGNED ORDER, HAS JUST CONFIRMED THE ORDER OF ASSESSING OFFICER WITHOUT PROPERLY CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, ARGUMENTS OF THE APPELLANT AND THE LAW APPLICABLE. ITA NO. 359/BANG/2019 PAGE 3 OF 6 4.1 THE ASSESSING OFFICER HAD IN ANY CASE, ERRED IN TREATING A SUM OF RS.8,24,325/- BEING SALE PROCEEDS OF SHARES AS 'INCOME FROM OTHER SOURCES'. 4.2 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN HOLDING THAT I) THE APPELLANT HAS EARNED SHORT TERM CAPITAL GAIN ON SALE OF SHARES AND SUCH SHORT TERM CAPITAL GAIN IS OFFERED TO TAX BY THE APPELLANT. II) AS THE ASSESSING OFFICER HAS ADDED THE SALE CONSIDERATION OVER AND ABOVE THE SHORT TERM CAPITAL GAIN OFFERED, THE ADDITION TO THE EXTENT OF SHORT TERM CAPITAL GAIN OFFERED AMOUNTS TO DOUBLE ADDITION AND SAME IS TO BE DELETED. THE FINDINGS OF CIT(A) IS WHOLLY ERRONEOUS AS THE APPELLANT HAD EARNED LONG TERM CAPITAL GAIN ON SALE OF SHARES AND SUCH LONG TERM CAPITAL GAIN WAS CLAIMED AS EXEMPT BY THE APPELLANT IS TO BE REJECTED. 5. IN ANY CASE AND WITHOUT FURTHER PREJUDICE, THE AUTHORITIES BELOW HAVE ERRED IN: A) TAXING CONFIRMING THE ENTIRE CONSIDERATION RECEIVED ON SALE OF SHARES UNDER THE HEAD OTHER SOURCES. B) HOLDING WITHOUT BASIS THAT THE TRANSACTIONS IN SHARES ARE FRAUDULENT. C) ALLEGING WITHOUT ANY BASIS THAT THE APPELLANT HAS OBTAINED ACCOMMODATION ENTRIES AND APPELLANT'S OWN MONEY COME BECK IN THE GUISE OF CAPITAL GAINS THE CONCLUSIONS / OBSERVATIONS OF AUTHORITIES BELOW BEING TOTALLY ERRONEOUS AND WITHOUT BASIS BOTH ON FACTS AND LAW IS TO BE DISREGARDED. 6. IN ANY CASE, THE ADDITION AS MADE/CONFIRMED IS ERRONEOUS AND EXCESSIVE. 7. THE APPELLANT HAD ACTUALLY SOLD SHARES THROUGH DEMAT ACCOUNT AND HAD EARNED CAPITAL GAIN THEREON AND SAME NEEDS TO BE ACCEPTED AS SUCH. 8. THE APPELLANT DENIES THE LIABILITY TO PAY INTEREST U/S. 234A, 234B AND 234C. THE INTEREST HAVING BEEN LEVIED ERRONEOUSLY IS TO BE DELETED. 9. IN VIEW OF THE ABOVE AND OTHER GROUNDS TO BE ADDUCED AT THE TIME OF HEARING, IT IS REQUESTED THAT THE IMPUGNED ORDER BE QUASHED OR ATLEAST THE ASSESSMENT OF SALE PROCEEDS OF SHARES UNDER THE HEAD INCOME FROM OTHER SOURCES BE DELETED, THE EXEMPTION ON LONG TERM CAPITAL GAIN AS CLAIMED BL% THE APPELLANT BE ACCEPTED AND THE INTEREST LEVIED BE ALSO DELETED. ITA NO. 359/BANG/2019 PAGE 4 OF 6 4. GROUND NO.3.1 4.1 IT WAS SUBMITTED BY THE LEARNED AR OF THE ASSESSEE THAT IN GROUND NO.3.1 (SUPRA), THE ASSESSEE HAS DISPUTED THE VALIDITY OF REASSESSMENT ORDER PASSED BY THE AO WHICH WAS UPHELD BY THE LEARNED CIT(A). IN THIS REGARD, IT WAS POINTED OUT THAT THE MAIN BASIS FOR RE-OPENING THE ASSESSMENT FOR ASSESSMENT YEAR 2006-07 IS ON ACCOUNT OF THE SEARCH IN THE CASE OF MAHASAGAR GROUP ON 25.11.2009, WHEREIN, AS PER THE STATEMENT OF MR. MUKESH CHOKSHI, DIRECTOR OF M/S. MAHASAGAR SECURITIES LTD., IN WHICH IT IS ALLEGED THAT HE HAS STATED THAT HIS BUSINESS ACTIVITIES IS TO PROVIDE ACCOMMODATIVE ENTRIES FOR LONG TERM AND SHORT TERM CAPITAL GAINS, PURCHASE AND SALES OF SHARES ETC., AND HE HAS ALSO PROVIDED LIST OF BENEFICIARIES WHICH INCLUDE THE NAME OF THE ASSESSEE ALSO. IT WAS SUBMITTED THAT NEITHER THE COPY OF THE STATEMENT OF MR. MUKESH CHOKSHI NOR THE LIST OF BENEFICIARIES HAVE BEEN MADE AVAILABLE TO THE ASSESSEE NOR HAS SHE BEEN ALLOWED CROSS-EXAMINATION OF THE PERSONS ON THE BASIS OF WHOSE STATEMENTS, THE AO HAS DRAWN ADVERSE INFERENCE IN THE ASSESSEES CASE. THE LEARNED AR SUBMITTED THAT UNDER THESE FACTS, JUDGMENTS OF HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CHANDRA DEVI KOTHARI IN WRIT PETITION NO.39370/2014 DATED 2ND OF FEB, 2015 (COPY OF WHICH HAS BEEN PLACED ON RECORD), IS SQUARELY APPLICABLE. SHE HAS PARTICULARLY DRAWN MY ATTENTION TO PARA NO.8 OF THIS JUDGMENT OF HONBLE KARNATAKA HIGH COURT, AS PER WHICH, IT WAS HELD THAT SINCE THE PETITIONER HAS BEEN DENIED AN OPPORTUNITY OF FAIR HEARING BY PROVIDING COPY OF THE STATEMENT AND RELATED DETAILS, THE MATTER IS REQUIRED TO BE RECONSIDERED BY THE AO BY PROVIDING FAIR AND REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE AFTER FURNISHING DETAILS / COPY OF THE STATEMENT BASED ON WHICH THE IMPUGNED ASSESSMENT ORDER HAS BEEN PASSED. THE LEARNED AR SUBMITTED THAT IN THE LIGHT OF THE FACTS OF THE PRESENT CASE AND AS PER THIS JUDGMENT OF HONBLE KARNATAKA HIGH COURT, IN THE CASE ON HAND ALSO, THE ENTIRE MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE AO FOR FRESH DECISION WITH SAME DIRECTIONS. ITA NO. 359/BANG/2019 PAGE 5 OF 6 4.2 PER CONTRA, THE LEARNED DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 4.3.1 I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND FIRST OF ALL, I REPRODUCE PARA NO.8 OF THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF M/S. CHANDRA DEVI KOTHARI (SUPRA) AND THIS IS AS UNDER: 8. IN THE LIGHT OF THE FACTS AND CIRCUMSTANCE SA S ADVERTED TO ABOVE AND AS THE PETITIONER HAS BEEN DENIED AN OPPORTUNITY OF FAIR HEARING BY PROVIDING COPY OF THE STATEMENT AND RELATED DETAILS REGARDING THE ALLEGED SHARE AMOUNT, I AM OF THE VIEW THAT THE MATTER REQUIRES TO BE RE-CONSIDERED BY THE RESPONDENT BY PROVIDING FAIR AND REASONABLE OPPORTUNITY OF HEARING TO THE PETITIONER AND BY FURNISHING THE DETAILS / COPY OF THE STATEMENT BASED ON WHICH THE IMPUGNED ASSESSMENT ORDER HAS BEEN PASSED. 4.3.2 FROM THE ABOVE PARA FROM THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT, IT IS SEEN THAT MATTER WAS RESTORED BACK TO THE FILE OF THE AO FOR FRESH DECISION AFTER PROVIDING COPY OF THE STATEMENT OF SHRI MUKESH CHOKSI AND OTHER RELATED DETAILS. AS PER THE FACTS NOTED BY THE HIGH COURT IN THE EARLIER PARAS OF JUDGMENT (SUPRA) AND AS PER THE FACTS OF THE CASE ON HAND, THERE APPEARS TO BE NO DIFFERENCE IN FACTS AND THEREFORE BY RESPECTFULLY FOLLOWING THIS JUDGMENT IN THE CASE OF CHANDRA DEVI KOTHARI (SUPRA), I SET ASIDE THE IMPUGNED ORDERS OF LEARNED CIT(A) FOR ASSESSMENT YEAR 2006-07 AND RESTORE THE MATTERS TO THE FILE OF THE AO FOR FRESH DECISION WITH THE SAME DIRECTIONS AS WERE ISSUED BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE AS PER PARA NO.8 OF THE JUDGMENT REPRODUCED ABOVE. IN VIEW OF THIS DECISION, NO ADJUDICATION IS CALLED FOR AT THIS STAGE REGARDING THE MERITS OF THE ADDITION. ITA NO. 359/BANG/2019 PAGE 6 OF 6 5. IN THE RESULT, THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2006-07 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 TH DAY OF MAY, 2019. SD/- SD / - SD/ - (N. V. VASUDEVAN) VICE PRESIDENT (JASON P BOAZ) ACCOUNTANT MEMBER BANGALORE. DATED: 24 TH MAY, 2019. /NS/* COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.