RITIKA GOEL, New Delhi V. ITO, WARD- 36(4), NEW DELHI

ITA 3868/DEL/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5981 (ITAT-DELHI)
• Duration Of Justice: 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 23-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Assessee Lawyers: SURESH K GUPTA
• Keywords: Opportunity of being heard; Principle of natural justice; Accommodation entries
• Section: 143(3); 133A; 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : A+SMC , NEW DELHI BEFORE SHRI AMIT SHUKLA , JUDICIAL M EMBER AND SH RI O.P. KANT , ACCOUNTANT MEMBER ITA NO . 3868 /DE L/ 2018 ASSESSMENT YEAR : 2014 - 15 SMT. RITIKA GOEL, A - 2/1, PRINCESS ROAD, MODEL TOWN - 1, NEW DELHI VS. ITO, WARD - 36(4), NEW DELHI PAN : AJIPA1921F (APPELLANT) (RESPONDENT) APPELLANT BY SHRI SURESH K. GUPTA, CA RESPONDENT BY SHRI S. L. ANURAGI, SR.DR ORDER PER O.P. KANT, A .M. : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER DATED 15/03/2018 PASSED BY THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) - 12, NEW DELHI[IN SHORT THE LD. CIT(A)] FOR ASSESSMENT YEAR 2014 - 15 RAISING FOLLOWING GROUNDS: 1 . THE LD. CIT(A) HAS ERRED BOTH IN LAW AND IN FACTS IN CIRCUMSTANCES OF THE CASE IN UPHOLDING ADDITION OF RS.29,14, 442/ - MADE U/S 68 OF THE IT ACT BY DISALLOWING THE CLAIM OF EXEMPTION U/S 10(38) OF THE LTCG EARNED ON THE SHARES OF PUBLIC LIMITED COMPANY COMPLYING WITH ALL THE REQUIREMENTS LAID DOWN IN THE ABOVE SECTION TO CLAIM THE EXEMPTION AND ACTION OF THE ASSESSIN G OFFICER IS BASED ON CONJECTURES AND SURMISES. 2 . THE LD. CIT( A) HAS ERRED BOTH IN LAW AND IN FACTS IN CIRCUMSTANCES OF THE CASE IN UPHOLDING ADDITION OF RS.29,14,442/ - BY RELYING ON THE PERCEPTION BASED ON THE GENERALIZED MATERIAL WITHOUT APPLYING THE SAME ON THE APPELLANT WITH THE CORROBORATIVE FACTS AND IN THE AB SENCE OF WHICH THE ORDER UNDER APPEAL IS NOT IN CONFORMITY WITH PRINCIPLES OF NATURAL JUSTICE. DATE OF HEARING 09.01.2019 DATE OF PRONOUNCEMENT 23.01.2019 2 ITA NO. 3868/DEL/2018 3 . THE LD. CIT(A) HAS ERRED IN UPHOLDING ADDITION OF RS.29,14,442/ - WHICH IS BAD IN LAW AS THE SAME HAS BEEN MADE WITHOUT THE APPELLANT BEING PROVIDED WITH THE IN CRIMINATING MATERIAL AND CROSS EXAMINATION OF THE MATERIAL AND STATEMENTS ON THE BASIS OF WHICH THE INVESTMENT OF THE APPELLANT IS CHARACTERIZED AS PENNY STOCK AND LD. ASSESSING OFFICER HAS SIMPLY RELIED ON THE REPORTS/INFORMATION WHICH ARE CONTRARY TO TH E EVIDENCE SUBMITTED BY THE APPELLANT IN SUPPORT OF THE TRANSACTION OF THE PURCHASE/SALE OF SHARES. 4 . THE LD. CIT(A) HAS ERRED IN LAW AND IN FACTS OF THE CASE IN GIVING A FINDING THAT THE LD. ASSESSING OFFICER HAS ESTABLISHED THAT ASSESSEE HAS INTRODUCED HE R ACCOUNTED MONEY IN GARB OF LONG TERM CAPITAL GAINS AND RESORTED TO SHAM DEVICES BASED ON DEEP ANALYSIS DONE BY THE ASSESSING OFFICER. 5 . THE APPELLANT CRAVES LEAVE TO ADD, DELETE, MODIFY/AMEND IN THE ABOVE GROUNDS OF APPEAL WITH THE PERMISSION OF THE HON BL E APPELLANT AUTHORITY. 2. B RIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 31/07/2014 DECLARING TOTAL INCOME OF RS. 1,46,350/ - . THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE INCOME TAX - A CT, 1961 (IN SHORT THE A CT ) WAS ISSUED AND COMPLIED WITH. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF THE A CT ON 28/12/2016 AFTER REJECTING THE CONTENTION OF THE ASSESSEE OF HAVING MADE LONG - TERM CAPITAL GAIN ON SALE OF SHARES OF M/S E STEEM O RGANIC F OOD P ROCESSING LIMITED (EBOFPL) AND MADE ADDITION OF RS.29,14,442/ - UNDER SECTION 68 OF THE A CT. THE ASSESSING OFFICER CHAR ACTERIZ ED THE SCRIP AS PENNY STOCK AND OBSERVED THAT THE PRICE OF SCRIP HAS BEEN RIGGED BY A GROUP OF BROKER S/PERSONS TO RAISE IT FROM R S. 10 PER SHARE AT THE TIME OF PURCHASE TO ASTRONOMICAL PRICE OF RS. 485.31 AT THE TIME OF SALE BY THE ASSESSEE. THE ASSESSING OFFICER HAS MENTIONED IN THE ORDER THAT THIS VIEW HAS BEEN FORMED ON THE BASIS OF THE ENQUIRY REPOR T O F THE INVESTIGATION WING OF INCOME - TAX DEPARTMENT, KOLKATA CARRIED OUT IN THE CASE OF ACCOMMODATION ENTRY PROVIDERS. THE LD. CIT(A) HAS REJECTED THE SUBMISSION OF THE ASSESSEE AND UPHELD 3 ITA NO. 3868/DEL/2018 THE ORDER OF THE LD. ASSESSING OFFICER. AGGRIEVED WITH THE ORDER OF T HE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TR IBUNAL RAISING THE GROUNDS A S REPRODUCED ABOVE. 3. AT THE OUTSET, THE LD. COUNSEL OF THE ASSESSEE REFERRED TO GROUND NO. 3 OF THE APPEAL AND SUBMITTED THAT THE A DITION HAS BEEN UPHELD WITHOUT PROVIDING ANY INCRIMINATING MATERIAL AND CROSS - EXAMINATION OF THE MATERIAL AND STATEMENTS ON THE BASIS OF WHICH THE INVESTMENT OF THE ASSESSEE HAS BEEN CHARACTERIZED AS PENNY STOCK. THE LD. COUNSEL FURTHER SUBMITTED THAT THE ADDITION HAS BEEN MADE AND THE ASSESSMENT ORDER HAS BEEN SUSTAINED ON THE BASIS OF THE ASSUMPTION OF THE WRONG FACTS. HE CITED FEW INSTANCES OF SUCH WRONG ASSUMPTION OF THE FACT AS UNDER : ( I ) ACCORDING TO THE ASSESSING OFFICER, THE SHARES OF M/S EBOFPL HAVE BEEN ALLOTTED TO THE ASSESSEE IN OFF - LINE M ODE, WHEREAS ACCORDING TO THE ASSESSEE, SHARES WERE SUBSCRIBED AND ALLOTTED UNDER THE IPO , MAKING PAYMENT THROUGH BANK A ND AFTER ALLOTMENT SHARES WERE DIRECTLY TRANSFERRED TO DEMAT ACCOUNT. ( II ) ACCORDING TO THE ASSESSING OFFICER THE SHARES OF M/S EBOFPL WERE DEMATERIALIZED JUST BEFORE THE DATE OF THE SALE, WHEREAS ACCORDING TO THE ASSESSEE , AS A RESULT OF IPO ALLOTMENT THE SHARES WERE CREDITED TO THE DEMAT ACCOUNT OF THE ASSESSEE ON 04/02/20 13 M AINTAINED WITH M/S NARAYAN S ECURITIES LTD. SUBSEQUENTLY , THESE SHARES WERE TRANSFERRED TO ANOTHER DEMAT ACCOUNT OF THE ASSESSEE WITH THE HDFC S ECURITIES ON 10/03/2014 BY DEBITING M/S NARAYAN S ECURITY DEMAT ACCOUNT. ( III ) ACCORDING TO TH E ASSESSING OFFICER, THE BROKER, I.E., M/S. NARAYAN SECURITIES, WHO SOLD THE SHARES OF THE 4 ITA NO. 3868/DEL/2018 ASSESSEE HAS BEEN PENALIZED BY THE SEBI FOR ADMINISTRATIVE WRONGDOING, WHEREAS ACCORDING TO THE ASSESSEE SHARES IN QUESTION HAVE BEEN SOLD THROUGH ANOTHER BROKER NAMELY M/S INT OUCH S ECURITIE S LTD. ( IV ) ACCORDING TO THE ASSESSING OFFICER SOME BROKERS IN CALCUTTA EXCHANGE DEALING IN THE SCRIP OF EBOFPL ADMITTED OF RIGGING IN SHARES PRICE AND PROVIDED ACCOMMODATION ENTRIES, WHEREAS ACCORDING TO THE ASSESSEE NEITHER SUCH STATEMENT WAS PROVIDED NOR CR OSSS - EXAMINATION REQUEST WAS EXCEEDED TO. ( V ) ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE IS NOT A REGULAR INVESTOR IN SHARES AND MAKING HUGE MONEY IN ONE SUCH TRANSACTION IS AGAINST THE HUMAN PROBABILITY, WHEREAS ACCORDING TO THE ASSESSEE , THE ASSESSEE HAS SHOWN SHORT - TERM CAPITAL GAIN ON LISTED SECURITIES OF RS. 14, 533/ - IN THE RETURN OF INCOME, BESIDES THERE HAD BEEN CLAIM OFF CAPITAL GAIN ON SHARES IN EARLIER YEARS I.E. IN AY2012 - 13 AND 2013 - 14. ( VI ) ACCORDING TO THE ASSESSING OFFICER, IN THE I NTERIM ORDER PASSED BY THE SEBI, TRADE IN THE SCRIP OF EBOFPL WAS SUSPENDED ON THE GROUND THAT THERE WAS MANIPULATION OF THE SHARE MARKET FOR PROVIDING ACCOMMODATION ENTRY BY WAY OF LONG - TERM CAPITAL GAIN, WHEREAS ACCORDING TO THE ASSESSEE, THE INTERIM ORDER OF SEBI DATED 29/06/2015, COVERS THE INVESTOR S WHO HAVE BEEN ALLOTTED SHARES IN THE PRE - IPO STAGE OR HAVE BEEN OFFERED PREFERENTIAL ALLOTMENT AND THERE IS NO ADVERSE OBSERVATION ON THE SUBSCRIPTION OF SHARES BY THE SHARE APPLICANTS IN THE IPO AND IN THE FINAL ORDE R THE SEBI 5 ITA NO. 3868/DEL/2018 HAS ABSOLVED 216 ENTITIES FROM THE CHARGE OF PRICE MANIPULATION OUT OF 238 ENTITIES COVERED BY THE INTERIM ORDER. 4. ACCORDINGLY, HE SUBMITTED THAT ADDITION HAS BEEN SUSTAINED WITHOUT PROVIDING COPY OF THE STATEMENTS OF THE BROKERS RELI ED UPON BY THE ASSESSING OFFICER AND ASSUMING WRONG FACTS, THUS , THE ADDITION MIGHT BE DELETED. ALTERNATIVELY, HE SUBMITTED THAT MATTER MAY BE RESTORED BACK TO THE FILE O F THE LD. CIT(A) FOR DECIDING A FRESH. 5. ON THE CONTRARY, THE LD. DR RELIED ON THE OR DER OF THE LOWER AUTHORITIES AND SUBMITTED THAT ASSESSEE IS ONE OF THE BENEFICIARIES OF ACCOMMODATION ENTRY AND , THUS , THE AUTHORITIES HAVE RIGHTLY TAX ED THE INCOME AS UN EXPLAINED CASH CREDIT UNDER SECTION 68 OF THE A CT. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. ON PERUSAL OF THE ASSESSMENT ORDER, WE FIND THAT THE ASSESSING OFFICER HAS REFERRED TO THE REPORT OF DIRECTOR OF I NVESTIGATION, I NCOME TAX DEPARTMENT , K OLKATA OF CONDUCTING EN QUIRIES ON SHARE BROKERS AND COMPANIES INVOLVED IN ACCOMMODATION ENTRY OF PENNY STOCK SCAMS INCLUDING THE SHARES OF M/S EBOFPL, UNDER SECTION 131 AN D UNDER SECTION 133A OF THE A CT. WE ALSO FIND THAT A COPY OF STATEMENTS OF THOSE BROKERS OR COMPANIES INVOL VED HAS NOT BEEN PROVIDED TO THE ASSESSEE. IN OUR OPINION , NOT PROVIDING OF THE MATERIAL, WHICH IS USED AGAINST THE ASSESSEE, AMOUNTS TO VIOLATION OF THE PRINCIPLE OF THE NATURAL JUSTICE. FURTHER, THE LD. COUNSEL HAS BROUGHT TO OUR KNOWLEDGE ASSUMPTION OF WRONG FACTS BY THE ASSESSING OFFICER. WE NOTE 6 ITA NO. 3868/DEL/2018 THAT THERE IS A DIFFERENCE BETWEEN THE PARTIES ON THE FACTS ON BASIS OF WHICH THE ASSESSING OFFICER HAS ARRIVED AT THE CONCLUSION THAT THE AMOUNT CREDITED BY WAY OF THE ALLEGED SALE OF THE SHARES WAS IN THE NAT URE OF ACCOMMODATION ENTRY. FEW SUCH DIFFERENC ES HAVE BEEN LISTED ABOVE IN THE SUBMISSION OF THE LD. COUNSEL OF THE ASSESSEE. IN OUR OPINION, FIRST OF ALL ASCERTAINMENT OF THE CORRECT FACTS IN THE CASE IS REQUIRED, THEN ONLY, IT CAN BE APPRECIATED WHETHER THE ASSESSEE HAS OBTAINED ACCOMMODATION ENTRY BY WAY OF SALE OF PENNY STOCK OR NOT. THE LD. CIT(A) HAS NOT GIVEN HIS OPINION ON THE FINDING OF FACTS OF THE ASSESSING OFFICER , WHICH HAVE BEEN CHALLENGED BY THE ASSESSEE. FOR EXAMPLE, THE ASSESSEE HAS CLAIMED THAT IT HAS SUBSCRIBED SHARES UNDER THE INITIAL PUBLIC OFFER (IPO), WHEREAS THE ASSESSING OFFICER HAS HELD THAT ASSESSEE HAS PURCHASE D SHARES THROUGH OFF - LINE MODE. IF THE SHARES HAD BEEN OBTAINED BY WAY OF OFF - LINE MODE, THEN PROBABILITY OF COLLUSION OF THE ASSESSEE WITH THE PROMOTERS OF THE COMPANY OR THE BROKERS MAY BECOME PROBABLE BUT IF THE SHARES HAVE BEEN PURCHASED BY WAY OF SUBSCRIPTION OF IPO, THERE ARE NO CHANCES OF COLLUSION OF THE ASSESSEE WITH THE PROMOTERS OF THE COMPANY OR BROKERS FOR MAKING INVESTMENT IN THE SHARES OF THE COMPANY. THUS , CORRECTNESS OF THE FACT OF PURCHASE OF THE SHARES IS ESSENTIAL FOR HOLDING WHETHER THE ASSESSEE OBTAINED ACCOMMODATION ENTRY. SIMILARLY, CORRECTNESS OF THE OTHER FACTS OF INVOLVEMENT OF BROKERS, REPORT OF SEBI ETC. FOR ADMITTING THE SAME AS CIRCUMSTANTIAL EVIDENCE , IS ESSENTIAL IN DETERMINING THE ISSUE IN DISPUTE IN THE INSTANT CASE. THE LD. CIT(A) HAS NOT GIVEN ANY SPECIFIC FINDING IN THE IMPUGNED ORDER ON THE CORRECTNESS OF THE 7 ITA NO. 3868/DEL/2018 FACTS IN THE ASSESSMENT ORDER , WHICH HAVE BEEN CHALLENGED BY THE ASSESSEE. 7. IN VIEW OF THE AFORESAID FACTS AND CIRCUMSTANCES, WE ARE OF THE OPINION TO RESTORE THIS MATTER TO THE FILE OF THE LD. CIT(A) FOR DECI DING A FRESH AFTER ASCERTAINING CORRECT FACTS OF THE CASE AND AFTER PROVIDING OPPORTUNITY OF BEING HEARD TO BOTH THE PARTIES. THE LD. CIT(A) IS ALSO DIRECTED TO PROVIDE THE MATERIAL TO THE ASSESSEE, WHICH HAS BEEN GATHERED BY THE ASSESSING OFFICER AND USED AGAINST THE ASSESSEE INCLUDING STATEMENT OF BROKERS/COMPANIES AT KOLKATA , WHO HAVE BEEN ALLEGED TO BE ENGAGED IN PROVIDING ACCOMMODATION ENTRY. ACCORDINGLY, THE GROUND S OF THE APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, THE APPEAL OF TH E ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER IS PRONOUN CED IN THE OPEN COURT ON 23 RD JANUARY , 201 9 . SD/ - SD/ - [ AMIT SHUKLA ] [O.P. KANT] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 23 RD JANUARY, 2019 . RK / - [D.T.D.S] COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI