DIPEN VINOD SHAH, MUMBAI V. ITO 19 (1)(4), MUMBAI

ITA 373/MUM/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5572 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2003-2004
• Appeal Filed On: 14-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Unexplained investment; Income from undisclosed sources; Search and seizure; Opportunity of being heard; Principle of natural justice; Corroborative evidences; Set aside
• Section: 271(1)(c); 143(3); 143(1); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT AND SHRI S. RIFA UR RAHMAN, ACCOUNTANT MEMBER IT A NO. 373/MUM./2020 ( ASSESSMENT YEAR : 20 03 04 ) DIPEN VINOD SHAH 30, WARDEN COURT 79 81, AUGUST KRANTI MARG NANA CHOWK, MUMBAI 400 036 PAN : AQLPSS8747B . APPELLANT V/S INCOME TAX OFFICER WARD 19(1)(4), MUMBAI . RESPONDENT ASSESSEE BY : NONE REVENUE BY : SHRI BHARAT ANDHALE DATE OF HEARING 28 . 0 7 .202 1 DATE OF ORDER 17.9.21 O R D E R PER S. RIFAUR RAHMAN, A.M. TH E CAPTIONED APPEAL PREFERRED BY THE ASSESSEE CHALLENGING THE IMPUGNED ORDER DATED 30 TH SEPTEMBER 2019 , PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 30 , MUMBAI, PERTAINING TO THE ASSESSMENT YEAR 20 03 04 . 2. WHEN THE CASE WAS CALLED FOR HEARING, NEITHER THE APPELLANT ASSESSEE NOR ANY OF HIS AUTHORIZED REPRESENTATIVES APPEARED BEFORE US TO REPRESENT THE CASE. THERE IS NO APPLICATION FOR ADJOURNMENT EITHER. 2 DIPEN VINOD SHAH CONSEQUENTLY, THIS BENCH WAS OF THE OPINION THAT TO PRO CEED TO DISPOSE OFF THE APPEAL EX PARTE QUA THE APPELLANT ASSESSEE AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE AND ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. 3. THE ASSESSEE HAS FILED THIS APPEAL ON THE FOLLOWING GROUNDS: 1. THE NOTICE ISSUED ON 29.06.2015, 06.02.2018, 12.03.2018, 04.04.2018 AND 13.09.2019, HAS NOT BEEN RECEIVED BY THE APPELLANT HENCE PRINCIPLE OF NATURAL JUSTICE IS VIOLATED. 2. THE QUANTUM APPEAL HAS BEEN SET ASIDE / ALLOWED BY THE HONBLE TRIBUNAL VIDE THE ORDER DATED 13.05.2016 FOR THE A.Y. 2003 04 AND A.Y. 2004 05. HENCE PENALTY ORDER IS VITIATED. 3. A.O. HAS RAISED THE PENALTY OF ` 15,30,573 UNDER SECTION 271(1)(C) OF THE ACT WHEREAS THE DEMAND RAISED IN THE QUANTUM ORDER IS ` 10,81,919 WHICH IS NOT FEA SIBLE. 4. FACTS IN BRIEF : - IN THIS CASE, THE ASSESSEE IS AN INDIVIDUAL. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE FILED ITS RETURN OF INCOME ON 31 ST MARCH 2004, DECLARING TOTAL INCOME AT ` 1,66,225. THE RETURN OF INCOME WAS DULY PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) AND WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 27 TH DECEMBER 2010, DETERMINING THE TOTAL INCOME AT ` 48,04,325. 5. THE SUBJECT MAT TER OF THIS APPEAL BEFORE US IS, THE ASSESSING OFFICER WHILE CONCLUDING ASSESSMENT INTER ALIA MADE ADDITION OF ` 44,17,238, ON ACCOUNT OF LONG TERM CAPITAL GAIN. THE ASSESSING OFFICER 3 DIPEN VINOD SHAH MADE HIS OBSERVATIONS AS TO HOW THIS LONG TERM CAPITAL GAIN IS GENERATED WHICH RESULTED IN SUCH ADDITION. THE RELEVANT PORTION FROM THE ASSESSING OFFICERS ORDER IS REPRODUCED BELOW FOR READY REFERENCE : LONG TERM CAPITAL GAIN (LTCG) : IN SUCH CASES A BLACK DATED PURCHASE BILL IS ISSUED TO THE CLIENTS. AGAINST SUCH PURCHASE BILLS, IF THE CLIENT HAS CASH INHAND, ON THE ALLEGED DATE OF PURCHASE, IT IS SHOWN TO HAVE BEEN RECEIVED ON THAT BUT IF NOT , A BACK DATED SPECULATION PROFIT BILL IS GIVEN OF A SIMILAR AMOUNT SO THAT THE PURCHASE CAN BE SHOWN TO HAVE BEEN MADE OUT OF SUCH PROFIT. BUT OBVIOUSLY NO ACTUAL DELIVERY OF SHARES TAKES PLACE ON THE DATE OF PURCHASE BECAUSE THE ENTIRE PURCHASES ARE LYING IN THE LEDGER ACCOUNT IS TRANSFER TO TH E DISCOUNT ACCOUNT. THE SHARES ARE TRANSFERRED TO THE DEMAT ACCOUNT OF THE CLIENT( OFF MARKET) WHEN THE CLIENT W ISHES TO AVAIL THE LONG TERM CAPITAL GAIN ) . MANY CLIENTS ASK FOR WHAT ARE KNOWN AS HOLDING LETTERS WHICH ARE BASICALLY LETTERS ISSUED FROM T HE VARIOUS BROKING COMPANIES OF THE MAHASAGAR/ALAG GROUP THAT THEY HAVE PURCHASED 'X' AMOUNT OF SHARES ON BEHALF OF THESE CLIENTS ON A PARTICULAR DATE AND THESE COMPANIES ARE HOLDING THEM IN THEIR POOL ACCOUNT ON BEHALF OF THESE CLIENTS . THIS LETTER IS US UALLY PRODUCED BEFORE VARIOUS AUTHORITIES TO PROVE THAT THE ALLEGED PURCHASE OF SHARES HAS TAKEN PLACE OVE A YEAR AGO. THE CLIENT THEN DOES ONE OF TWO THINGS - EITHER HE SELLS THE SHARES IN THE OPEN MARKET(THROUGH BOLT I.E. THROUGH HIS STOCK BROKER) AND AVAI LS LTCG OR STCG. IN SUCH CASES ALSO, IF THE SHARES INVOLVED ARE PROMINENT SHARES LIKE MMTC, THE SALE ACTUALLY TAKES PLACE IN THE OPEN MARKET . BUT IF THESE ARE SHARES SOME PENNY - STOCK COMPANIES OF MUKESH CHOKSI OR BY HIS ASSOCIATES THROUGH BOLT AVAILABLE IN THEIR OFFICES. IN THE OTHER TYPE OF CASES, THE CLIENT /BENEFICIARY TRANSFERS THESE SHARES TO THE MUKESH CHOKSI GROUP OF COMPANIES (THROUGH OFF - MARKET TRANSACTIONS). SUCH OFF - MARKET RECEIVING BACK OF SHARES IS RECORDED AS 'TOUCH AND GO' TRANSACTIONS. THE ALLEGED BROKING COMPANIES ISSUE SALE BILLS TO THE CLIENT. HOWEVER THE BILLS PROVIDED BY THE 'BROKING' COMPANIES REFLECT THE TRANSACTION AS HAVING BEEN DONE ON MARKET. THUS IN TOUCH AND GO CASES BOTH SIDED OF THE TRANSACTION ARE BOGUS. FROM THE ABOVE IT C AN BE SEEN THAT THERE WERE NO REAL PURCHASE AND SALES OF SHARES AND GAINS GENERATED THROUGH FACTIOUS BILLS ARE ON ACCOUNT OF PAYMENT OF CONSIDERATION TO SHRI MUKESH CHOKSI AND JAYESH SAMPAT AND THEIR GROUP COMPANY IN CASH AND RETURNED THROUGH CHEQUES AFTER DEPOSITING AND ROUTING THROUGH THEIR VARIOUS ENTITIES/AGENTS AND AS NOTICED AND CONFESSED BY THE 4 DIPEN VINOD SHAH SAID DIRECTORS. IN VIEW OF THE ABOVE FACT UNEARTHED DURING THE COURSE OF SEARCH AND SEIZURE OPERATION IN THE ABOVE SAID GROUP OF CASES AND THE ASSESSEE HAS B EEN FOUND TO BE BENEFICIARY OF THE SO CALLED LONG TERM CAPITAL GAIN AND OTHER GAINS WHICH HAS BEEN DISCLOSED IN THE RETURN AS ELIGIBLE FOR GENUINE EXEMPTION, THE ASSESSEE'S CLAIM CANNOT BE ACCEPTED. IN THE CIRCUMSTANCES, I HOLD THAT ASSESSEE HAS BROUGHT IN HIS UNACCOUNTED INCOME EARNED IN CASH THROUGH THE BOGUS PURCHASE & SALE OF SHARES OF BUNIYAAD CHEMICALS IN HIS ACCOUNT. AND THE SAME IS INVESTED IN PURCHASE OF FLAT JALDARSHAN. ACCORDINGLY SAID AMOUNT OF RS 44,17,238/ - IS TREATED AS UNEXPLAINED INVESTMENT AND ADDED TO THE TOTAL INCOME. FURTHER, 5 % OF THE ABOVE AMOUNT I.E. RS 2,2,862/ - IS TREATED AS COMMISSION PAID TO GET ENTRY FROM GOLDSTAR FINVEST PVT. LTD. PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT IS INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. 6. APART FROM MAKING SUCH ADDITION OF ` 44,17,238, ON ACCOUNT OF LONG TERM CAPITAL GAIN, THE ASSESSING OFFICER ALSO INITIATED PENALTY PROCEEDINGS UNDER THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT SEPARATELY. THE ASSESSEE BEING AGGRIEVED BY THE ORDERS SO PASSED BY THE ASSESSING OFFICER CARRIED THE MATTER BEFORE THE FIRST APPELLATE AUTHORITY. THE LEARNED CIT(A) CONFIRMED THE ADDITION OF ` 44,17,238, ON ACCOUNT OF LONG TERM CAPITAL GAIN MADE BY THE ASSESSING OFFICER. CONSEQUENTLY, THE ASSESSEE AGA IN FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY CHALLENGING THE PENALTY ORDER PASSED UNDER SECTION 271(1)(C) OF THE ACT BY THE ASSESSING OFFICER. 7. THE LEARNED CIT(A) OBSERVED THAT THE GROUNDS OF APPEAL BEFORE HI M RELATE TO LEVY OF PENALTY UNDER SECTIO N 271(1)(C). HE ALSO OBSERVED THAT THE QUANTUM APPEAL HAS BEEN CONFIRMED BY THE LEARNED 5 DIPEN VINOD SHAH CIT(A) AND THE APPEAL IS SAID TO BE PENDING FINAL DISPOSAL BEFORE THE ITAT AS ON 23 RD JULY 2015. HE ALSO OBSERVED THAT THE ASSESSEE HAS NOT BROUGHT ANYTHING ON RECORD T O REBUT THE FINDINGS OF THE ASSESSING OFFICER WITH RESPECT TO LEVY OF PENALTY UNDER SECTION 271(1)(C) . HENCE, THE LEARNED CIT(A) DISMISSED THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE. THE ASSESSEE ONCE AGAIN BEING UNSUCCESSFUL FILED APPEAL BEFORE THE TRIBUNAL. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER OF THE LEARNED CIT(A). 9. CONSIDERED THE SUBMISSIONS OF THE LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE MATERIAL ON RECORD. ON THE ISSUE OF LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT, WE FIND THAT THE TRIBUNAL, FOR THE YEAR UNDER CONSIDERATION, IN QUANTUM PROCEEDINGS, HAS RESTORED THE ISSUE OF ADDITION MADE BY THE ASSESSING OFFICER AT ` 44,17,238, ON ACCOUNT OF LONG TE RM CAPITAL GAIN CLAIMED TO HAVE BEEN RECEIVED FROM SHARE TRANSACTIONS TO THE FILE OF THE LEARNED CIT(A) FOR DECIDING THE ISSUE DENOVO. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL, VIDE ORDER DATED 13 TH MAY 2016, PASSED IN SHRI DIPEN VINOD SHAH V/S ITO, ITA NO.1259/MUM./2013, AT PARA 6 , ARE REPRODUCED BELOW FOR BETTER APPRECIATION OF FACTS: 6 DIPEN VINOD SHAH 6. AS FAR AS ASSESSMENT YEAR 2004 05 IS CONCERNED, ON A PERUSAL OF THE FIRST APPELLATE ORDER IT IS NOTICED THAT THE LEARNED COMMISSIONER (APPEALS) HAS SIMPLY RELIED UPON HIS ORDER FOR THE ASSESSMENT YEAR 2003 04 AND UPHELD THE ASSESSMENT ORDER. THEREFORE, AFTER OVER ALL CONSIDERATION OF FACTS AND MATERIAL ON RECORD, WE ARE OF THE OPINION, THE LEARNED COMMISSIONER (APPEALS) HAVING NOT CONSIDERED THE SUBMISSIONS AND DE ALT WITH THE ISSUES RAISED BY HIM PROPERLY, ORDERS PASSED BY THE LEARNED COMMISSIONER (APPEALS) DESERVES TO BE SET ASIDE. WE DIRECT ACCORDINGLY AND RESTORE THE MATTER BACK TO THE FILE OF THE LEARNED COMMISSIONER (APPEALS) FOR BOTH THE YEARS UNDER CONSIDERA TION FOR HEARING AFRESH. THE ASSESSEE IS AT LIBERTY TO PUT FORWARD HIS ARGUMENT ON ALL THE ISSUES RAISED BY HIM BEFORE THE FIRST APPELLATE AUTHORITY WITH SUPPORTING EVIDENCES. THE LEARNED COMMISSIONER (APPEALS) MUST DEAL WITH THE SUBMISSIONS OF THE ASSESSE E AND DECIDE ALL THE ISSUES RAISED BY THE ASSESSEE BY PASSING A WELL REASONED ORDER. NEEDLESS TO MENTION, THE LEARNED COMMISSIONER (APPEALS) MUST AFFORD REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE DECIDING THE ISSUES. 10. AS IT APPEARS FROM THE ABOVE, THE TRIBUNAL DURING QUANTUM PROCEEDINGS HAS RESTORED THE ISSUE OF ADDITION MADE BY THE ASSESSING OFFICER AT ` 44,17,238, ON ACCOUNT OF LONG TERM CAPITAL GAIN TO THE FILE OF THE LEARNED CIT(A) FOR DECIDING THE ISSUE DENOVO, WHI CH HAS NOT ATTAINED FINALITY AS ON THE DATE OF PASSING OF THIS ORDER . IN THIS VIEW OF THE MATTER, SINCE THE QUANTUM ADDITION HAS NOT ATTAINED FINALITY, THE PENALTY PROCEEDINGS BEFORE US ARE PRE MATURE IN NATURE A ND HENCE THE ISSUE OF PENALTY NEEDS TO BE RE STORED TO THE FILE OF THE ASSESSING OFFICER . CONSEQUENTLY, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT(A) AND RESTORE THE ISSUE OF PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT TO THE FILE OF THE ASS ESSING OFFICER AND DIRECT HIM TO RE - CONSIDER THE ISSUE OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT, BASED UPON THE DECISION OF THE 7 DIPEN VINOD SHAH LEARNED CIT(A) ON QUANTUM ADDITION. THUS, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 17.9.21 SD/ - MAHAVIR SINGH VICE PRESIDENT SD/ - S. RIFAUR RAHMAN ACCOUNTANT MEMBER MUMBAI, DATED: 17.9.21 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI