Smt. Kirti Sudhir Rane, Nashik V. Income-tax Officer, Ward - 2 (5), Nashik

ITA 387/PUN/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1679 (ITAT-PUNE)
• Duration Of Justice: 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 14-05-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 07-03-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: ARISES OUT OF PASSED
• Keywords: Accommodation entries

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT . / ITA NO.387/PUN/2019 / ASSESSMENT YEAR : 2014-15 SMT. KIRTI SUDHIR RANE, KIRTI KIRAN, BEHIND NAKSHATRA LAWNS, GANGAPUR ROAD, ANANDWALLI, NASHIK 422 005 PAN : AQBPR0938F VS. ITO, WARD-2(5), NASHIK (APPELLANT) (RESPONDENT) / ORDER PER R.S.SYAL, VP : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSE D BY THE CIT(A)-1, NASHIK ON 10-12-2018 IN RELATION TO THE ASSES SMENT YEAR 2014-15. 2. THE FIRST GROUND IS AGAINST THE CONFIRMATION OF ADDITION OF RS.9,78,436/-. BRIEFLY STATED, THE FACTS OF THE CASE AR E THAT THE ASSESSEE IS AN INDIVIDUAL WHO FILED HER RETURN DECLARING TOTAL INCOME AT RS.77,130/- THE CASE WAS SELECTED FOR SCRUTINY ON THE BASIS OF APPELLANT BY SHRI NIKHIL PATHAK RESPONDENT BY SHRI RAJESH GAWALI DATE OF HEARING 14-05-2019 DATE OF PRONOUNCEMENT 15-05-2019 ITA NO.387/PUN/2019 SMT. KIRTI SUDHIR RANE 2 INPUTS FROM INVESTIGATION WING ABOUT THE ASSESSEES SUSPICIOU S TRANSACTIONS RELATING TO LONG TERM CAPITAL GAIN OF RS.9,67,878 /- U/S.10(38) OF THE ACT ON ACCOUNT OF SALE OF LISTED SHARES O F M/S. TURBOTECH ENGINEERS LTD. (TEL). 2600 SHARES OF TEL WER E BOUGHT IN CASH FROM M/S. EKTA SHARES AND SECURITIES ON 24-01-2012 FOR RS.10,558/- @ RS.4/- PER SHARE. THESE SHARES WERE ALLEGEDLY PURCHASED OFFLINE THROUGH THE SAID BROKER. THEREAFTER, A DEMAT ACCOUNT WAS OPENED IN THE NEXT YEAR IN WHICH THESE 2600 SH ARES WERE TRANSFERRED. SUBSEQUENTLY, ON 10-07-2013 AND 25- 07-2013, THE ASSESSEE CLAIMED TO HAVE SOLD SUCH 2600 SHARES AT THE RA TE OF RS.376.83 PER SHARE DECLARING EXEMPT LONG TERM CAPITAL GAIN OF RS.9,67,878/-. THE ASSESSING OFFICER (AO) CARRIED OUT INVESTIGATION OF THE COMPANY WHOSE SHARES WERE PURCHASED AND SOLD. HE FOUND THAT FROM THE YEAR ENDING MARCH 2010 TO MARCH 2013, REVE NUE FROM OPERATIONS OF THIS COMPANY WAS NIL AT GROSS AS WELL AS NET LEVEL AND IN FACT THIS COMPANY HAD SHOWN LOSS IN EARLIER YEAR. IT W AS FURTHER OBSERVED THAT THE SHARES OF THIS COMPANY WERE SUSPENDED ON BOMBAY STOCK EXCHANGE FROM 21-12-2007 TO 17-10-2012. D ESPITE THAT, IT WAS DECLARED AS IF THE COMPANY HAD CONSOLIDATED ITS P OSITION AND THE PRICE PER SHARE SHOT UP FROM RS.4/- TO RS.376.8 6. THE AO RECORDED THE STATEMENT OF THE ASSESSEE U/S.131 OF THE ACT IN WHICH ITA NO.387/PUN/2019 SMT. KIRTI SUDHIR RANE 3 SHE ADMITTED TO BE TOTALLY UNAWARE OF THE PRICE OF THE TRANSAC TION AS SHE WAS HOUSEWIFE AND THE TRANSACTION WAS HANDLED BY HER CHARTERED ACCOUNTANT. IN THE BACKDROP OF THESE FACTS, THE AO REFUSED TO ACCEPT THE GENUINENESS OF THE SALE CONSIDERATION AT RS.9,78,489/- SHOWN BY THE ASSESSEE FROM TRANSFER OF SUCH SHARES. THIS LED TO THE ADDITION OF RS.9,78,436/-. THE AO FURTHE R HELD THAT SUCH TYPE OF BOGUS TRANSACTIONS WERE ARRANGED AT A COMMIS SION RANGING FROM 5 TO 6%. TREATING 6% OF THE DECLARED SALE CONSIDERATION OF RS.9,78,436/-, THE AO MADE FURTHER ADDITIO N OF RS.58,706/- TOWARDS THE AMOUNT OF COMMISSION PAID BY THE A SSESSEE FOR SUCH ALLEGED TRANSACTION OF CAPITAL GAIN, WHICH IS SUBJECT M ATTER OF GROUND NO. 2 OF THE APPEAL. THE LD. CIT(A) AFFIRME D THE ADDITIONS MADE BY THE AO. AGGRIEVED BY THE CONFIRMATION OF ADDITIONS, THE ASSESSEE HAS COME UP IN APPEAL BEFORE THE TRIBUNAL. 3. I HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE RELEV ANT MATERIAL ON RECORD. IT IS APPARENT FROM FACTUAL POSITION N ARRATED ABOVE THAT THE SHARES OF THE TEL WERE ALLEGEDLY PURCHASE D BY THE ASSESSEE IN 2012 @ RS.4/- PER SHARE. SUCH PURCHASE W AS MADE IN CASH AND OFFLINE. IN THE IMMEDIATELY SUCCEEDING YEAR, THE ASSESSEE SOLD THE SHARES OF THIS COMPANY AT A PHENOMENAL PRICE OF RS.376.83 ITA NO.387/PUN/2019 SMT. KIRTI SUDHIR RANE 4 PER SHARE. THE AO HAS REPRODUCED THE PROFIT AND LOSS A CCOUNT AND BALANCE SHEET OF THIS COMPANY FOR THE LAST 5 YEARS. IT CA N BE SEEN THAT FOR THE YEAR ENDINGS MARCH 2010 TO MARCH 2013, THIS COMPANY HAD REVENUE FROM OPERATIONS AT NIL. SIMILAR IS THE POSITION REGARDING ITS BALANCE SHEET. THE SHARE CAPITAL HAS BEEN SH OWN AS INVESTED IN CURRENT INVESTMENTS. WHAT IS FURTHER INTERESTING TO NOTE IS THAT THE TRADING OF SHARES OF THIS COMPANY WAS SUSPENDE D BY THE BOMBAY STOCK EXCHANGE FROM 2007 TILL 17-10-2012. THE ASS ESSEE ALLEGEDLY PURCHASED SHARES DURING THE PERIOD OF SUSPENSION ON 24- 01-2012. IT IS NOT UNDERSTANDABLE AS TO HOW THE ASSESSEE COULD MANAGE TO PURCHASE OF SHARES WHEN THEIR TRADING WAS SUSP ENDED. EVEN SEBI PUT THIS SCRIP UNDER `SURVEILLANCE, WHICH IS EVIDE NT FROM THE SCREENSHOT OF BOMBAY STOCK EXCHANGE AS REPRODU CED ON PAGE 7 OF THE ASSESSMENT ORDER. THE ABOVE FACTUAL MATRIX AMPLY PROVES THAT THE SHARE PRICES OF THIS COMPANY WERE RIGGED A ND RAISED THROUGH CIRCULAR TRADING. THERE IS HIGHLY ANY FUNDAMENTAL FO R HEROIC RISE IN PRICE OF THE SHARES OF THIS COMPANY FROM MERE RS. 4/- TO RS.378.83 PER SHARE WITHIN A SPAN OF ONE YEAR, AND THA T TOO, WHEN THE COMPANYS GROSS AND NET REVENUE FROM OPERATIONS WAS NIL. ITA NO.387/PUN/2019 SMT. KIRTI SUDHIR RANE 5 4. AT THIS JUNCTURE, IT WILL NOT BE OUT OF PLACE TO REFER TO THE JUDGMENT OF THE HON'BLE SUPREME COURT IN CIT VS. DURGA PRASAD MORE (1971) 82 ITR 540 (SC), IN WHICH THE ASSESSEE CLAIMED BEFORE THE ITO THAT INCOME OF CERTAIN PROPERTY SHOULD NOT BE TAXED IN HIS HANDS AS IT WAS A TRUST PROPERTY. THE ITO REJECTED THE CLA IM AND INCLUDED THE INCOME IN THE HANDS OF THE ASSESSEE. THE TRIB UNAL AFFIRMED THE DECISION OF THE ITO, WHICH WAS REVERSED BY TH E HON'BLE HIGH COURT. REVERSING THE VERDICT OF THE HONBLE HIGH COURT, THEIR LORDSHIPS NOTICED THAT THOUGH THE ASSESSEE MADE A CLAIM THAT INCOME OF THE PROPERTY WAS NOT HIS AND PRODUCED CONVEYAN CE EXECUTED IN HIS FAVOUR AND THE DEED OF SETTLEMENT EXECUTED B Y HIS WIFE, NEARLY ABOUT A YEAR AFTER THE CONVEYANCE, HOWEVER, WHEN THE ITO ASKED THE ASSESSEE ABOUT THE SOURCE FROM WHICH HIS W IFE GOT THE AMOUNT, APART FROM SAYING THAT IT WAS STHRIDHAN PROPERTY, HE FAILED TO DISCLOSE ANY SOURCE FROM WHICH HIS WIFE COULD HAVE GOT TH E AMOUNT FOR PURCHASING THE PREMISES. IN THIS BACKDROP OF FACTS, THE HON'BLE SUPREME COURT HELD THAT ALTHOUGH THE APPARENT MUST BE CONSIDERED AS REAL, BUT, IF THERE ARE REASONS TO BELIEVE TH AT THE APPARENT IS NOT REAL, AS IS THE CASE UNDER CONSIDERATION AS WELL, THEN THE APPARENT SHOULD BE IGNORED TO UNEARTH THE HARSH REALITY. ITA NO.387/PUN/2019 SMT. KIRTI SUDHIR RANE 6 5. SIMILAR VIEW HAS BEEN CANVASSED IN SUMATI DAYAL VS. CIT (1995) 214 ITR 801 (SC). THE QUESTION FOR CONSIDERATION IN THAT CASE WAS WHETHER THE ASSESSEE PURCHASED WINNING TICKETS AF TER THE EVENT. IT WAS OBSERVED THAT IN ALL CASES IN WHICH A RECEIPT IS SOUGHT TO BE TAXED AS INCOME, THE BURDEN LIES ON THE DEPARTMENT TO PROVE THAT IT IS WITHIN THE TAXING PROVISION AND IF A RECEIPT IS IN THE NATUR E OF INCOME, THE BURDEN OF PROVING THAT IT IS NOT TAXABLE BECAUS E IT FALLS WITHIN EXEMPTION PROVIDED BY THE ACT, LIES UPON THE ASSESS EE. BUT, IN VIEW OF SECTION 68, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF THE ASSESSEE FOR ANY PREVIOUS YEAR THE SAME M AY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF T HAT PREVIOUS YEAR IF THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE N ATURE AND SOURCE THEREOF IS, IN THE OPINION OF THE ASSESSING OFFICER, NOT SATISFACTORY. IN DECIDING THE ISSUE AGAINST THE ISSUE, THEIR LO RDSHIPS HELD THAT : `APPARENT MUST BE CONSIDERED REAL UNTIL IT IS SHOWN T HAT THERE ARE REASONS TO BELIEVE THAT THE APPARENT IS NOT THE REAL AND THAT THE TAXING AUTHORITIES ARE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY AND THE MATTER HAS TO BE CONSIDERED BY APPLYING THE TEST OF HUMAN PROBABILITIES. THIS SHOWS THAT A DECISION BASED ON THE ATTENDING CIRCUMSTANCES AND HUMA N PROBABILITIES DOES NOT GET VITIATED IF THERE ARE COMPELLING REASONS TO ITA NO.387/PUN/2019 SMT. KIRTI SUDHIR RANE 7 REJECT THE FRONTAGE OF A TRANSACTION BASED ON THE SO-CALLED EVIDENCE, WHICH IS NOTHING MORE THAN A MERE PAPER WORK. 6. IN VIEW OF THE FACTUAL AND LEGAL POSITION DISCUSSED ABOVE , IT IS CRYSTAL CLEAR THAT TEL IS A PENNY STOCK COMPANY AND THE AS SESSEE OBTAINED ONLY ACCOMMODATION ENTRIES IN THE GARB OF LONG TERM CAPITAL GAIN FROM TRANSFER OF ITS SHARES, FOR WHICH AN APPR OPRIATE ADDITION HAS RIGHTLY BEEN MADE AND UPHELD BY THE AUTHORITIES BELOW. I, THEREFORE, COUNTENANCE THE IMPUGNED ORDER ON THIS SCO RE. 7. SINCE IT HAS BEEN HELD ABOVE THAT THE ASSESSEE OBTAINED ACCOMMODATION ENTRIES IN RESPECT OF THE LONG TERM CAPITAL GAIN, AS THE SEQUITUR, THE CONCLUSION DRAWN BY THE AUTHORITIES BELOW FO R MAKING AND CONFIRMING THE ADDITION OF RS.58,706/- TOWARDS COMMISSION FOR OBTAINING SUCH ACCOMMODATION ENTRIES, ALSO DESERVES TO BE AND IS HEREBY UPHELD. 8. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH MAY, 2019. SD/- (R.S.SYAL) / VICE PRESIDENT PUNE; DATED : 15 TH MAY, 2019 ITA NO.387/PUN/2019 SMT. KIRTI SUDHIR RANE 8 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT (APPEALS)-1. NASHIK 4. THE PR. CIT-1, NASHIK 5. , , SMC / DR SMC, ITAT, PUNE; 6. / GUARD FILE. // TRUE COPY // / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE DATE 1. DRAFT DICTATED ON 14-05-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 14-05-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *