M/S ANUSMRITI SARKAR , MUMBAI V. ITO 16(1)(1), MUMBAI

ITA 390/MUM/2020

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3538 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 15-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATYA PINISETTY
• Keywords: Accommodation entries; TDS; Set aside
• Section: 69C; 143(3); 13; 22; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO.390/M/2020 ASSESSMENT YEAR: 2014-15 M/S. ANUSMRITI SARKAR, FLAT NO.2506, A WING ADANI WESTERN HEIGHTS, OPP GURUDWARA, JP ROAD, FOUR BUNGLOW, ANDHERI (WEST), MUMBAI 400 058 PAN: BDTPS2583M VS. ITO 16(1)(1), 436A ROOM NO., AAYAKAR BHAVAN, CHURCHGATE, MUMBAI - 400020 (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI VISHNU AGARWAL, A.R. REVENUE BY : SHRI SATYA PINISETTY, D.R. DATE OF HEARING : 24.03.2021 DATE OF PRONOUNCEMENT : 07.06. 2021 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 19.11.2019 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2014-15. 2. THE ISSUE RAISED IN GROUND NO.1 IS AGAINST THE C ONFIRMATION OF ADDITION OF RS.1,01,71,119/- BY LD. CIT(A) AS MA DE BY THE AO UNDER SECTION 68 OF THE ACT TOWARDS LONG TERM CAPIT AL GAIN ACCRUING ON SALE OF LISTED SHARES. ITA NO.390/M/2020 M/S. ANUSMRITI SARKAR 2 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED T HE RETURN OF INCOME ON 09.10.2014 DECLARING INCOME OF RS.13,96,5 30/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICES WERE DULY ISSUED AND SERVED UPON THE ASSESS EE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO OBSERVE D THAT ASSESSEE HAS EARNED A LONG TERM CAPITAL GAIN OF RS.1,01,71,119/- FROM THE SALE OF SHARES OF M/S. SU RABHI CHEMICAL AND INVESTMENT LTD. AND M/S. KAILASH AUTO FINANCE LTD. THE APPELLANT HAD PURCHASED 500 SHARES OF M/S . SURABHI CHEMICAL AND INVESTMENT LTD. ON 11.07.2012 (PURCHAS E BILL ATTACHED). THEN THE COMPANY HAS ISSUED BONUS IN TH E RATIO OF 1:9 ON 11.08.2012. SO THE NUMBER OF SHARES WITH TH E APPELLANT HAS BECOME 5,000/- EQUITY SHARES. THEN ON 12.04.20 13 THE COMPANY HAS SPLIT THE SHARE FROM EVERY ONE EQUITY S HARE OF RS. 10/EACH TO RS. 1 EACH WHICH HAS RESULTED TO 50.000 EQUITY SHARES WITH ASSESSEE. THE APPELLANT HAD PURCHASED T HE 2,00,000/- SHARES OF M/S PANCHSHUL MARKETING LTD. O N 12.06.2012 (PURCHASE BILL ATTACHED). THEN THE COMPA NY HAS MERGED WITH LISTED COMPANY M/S KAILASH AUTO FINANCE LTD. VIDE HON'BLE HIGH COURT (COPY ENCLOSED). THERE AFTER THE APPELLANT HAD RECEIVED THE 2,00,000/- SHARES OF M/S KAILASH AUTO FINANCE LTD (AMALGAMATED COMPANY). THE AO TREATED THE CAPITAL G AIN AS BOGUS AND FICTITIOUS ON THE BASIS OF REPORT OF THE INVESTIGATION WING AND FINDINGS OF THE SEBI WHICH IS ALSO DISCUSS ED IN DETAIL IN THE ASSESSMENT ORDER. THE ASSESSEE FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE COPIES OF D-MAT ACCOUNT, SUPPORTING CONTRACT NOTES EVIDENCING PURCHASE AND S ALE OF SHARES AND PAYMENTS AND RECEIPTS BY ACCOUNT PAYEE C HEQUES. UNDISPUTEDLY, THESE SHARES WERE HELD FOR A PERIOD O F MORE THAN ITA NO.390/M/2020 M/S. ANUSMRITI SARKAR 3 12 MONTHS. FINALLY, THE AO ISSUED SHOW CAUSE NOTIC E TO THE ASSESSEE AS TO WHY THE CLAIM U/S 10(38) OF THE ACT SHOULD NOT BE REJECTED ON ACCOUNT OF BEING BOGUS AND FINALLY ADDE D THE SAME ALONG WITH THE COMMISSION @ 3% TO THE INCOME OF THE ASSESSEE IN THE ASSESSMENT FRAMED UNDER SECTION 143(3) OF TH E ACT DATED 30.12.2016 AFTER TAKING INTO ACCOUNT THE SUBMISSION S OF THE ASSESSEE. 4. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) ALS O DISMISSED THE APPEAL OF THE ASSESSEE BY UPHOLDING THE ORDER O F AO. 5. THE LD. COUNSEL, AT THE OUTSET, POINTED OUT THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL OF LONG TERM CAPITAL GAIN ON SALE OF SHARES OF M/S. KAILASH AUTO FINANCE LTD. IS SQUA RELY COVERED BY THE VARIOUS DECISION OF THE CO-ORDINATE BENCHES OF THE TRIBUNAL IN THE FOLLOWING CASES. 1. MANISH KUMAR BAID VS. ACIT, CIR-35 ; KOLKATA I. T.A. NO. 1236/KOL/2017 2. MAHENDRA KUMAR BAID VS. ACIT, CIR-35, KOLKATA I. T.A. NO. 1236/KOL/2017 3. SMT. SONAL BAJAJ VS. I.T.O., WARD-36(2J, KOLKATA I. T.A. NO. 239/KOL/2018 4. MR. SANJIV SHROFF VS. ACIT, CIR-36, KOLKATA I. T .A. NO. 1197/KOL/2018 5. MR. SHANKARLAL SHROFF VS. 1TO, WARD-36(2), KOLKA TA I. T.A. NO. 1197/KOL/2018 6. SMT. DIPIKA SHROFF VS. ITO, WARD-34(3J, KOLKATA I.T.A. NO. 1197/KOL/2018 7. SHRI. UDIT GOYAL VS. ITO, WARD-36(4), KOLKATA I. T.A. NO. 1637/KOL/2018 8. SHASHI BALA BAJAJ VS. ITO, WARD-36(2), KOLKATA I . T.A. NO. 1547/KOL/2018 6. THE LD. A.R. THEREFORE SUBMITTED THAT THE ADDITI ON IN THIS CASE MAY KINDLY BE DELETED FOLLOWING THE SAID DECIS IONS OF THE CO- ORDINATE BENCHES OF THE TRIBUNAL. THE LD. A.R. FUR THER SUBMITTED THAT IN BOTH THE SHARES, THE ASSESSEE HA S FILED THE FOLLOWING DOCUMENTS EVIDENCING THE PURCHASE AND SAL E OF SHARES. A) DETAILED SUMMARY CHART OF PURCHASE AND SALE (PAG E NO 6 OF PAPER BOOK) B) CONTRACT NOTES/BROKER NOTES FOR THE SALE OF SHAR ES THROUGH STOCK EXCHANGE, IN WHICH NO OF SHARES SOLD, RATE, DATE ETC. HAS BEEN D ULY MENTIONED (REFER PAGE NO. 7 TO 16 OF PAPER BOOK). ITA NO.390/M/2020 M/S. ANUSMRITI SARKAR 4 \ C) COPY OF DEMAT/ TRANSACTION STATEMENT FOR THE P ERIOD 01.04.2013 TO 31.03.2014. (PAGE NO. 17 OF PAPER BOOK) D) COPY OF PURCHASE BILLS OF SHARES (PAGE NO. 19 & 26 OF PAPER BOOK). E) LEDGER COPY OF SHARE BROKER. F) LEDGER COPY OF PARTIES FROM WHOM SHARES WERE PUR CHASED. G) BANK STATEMENT DULY HIGHLIGHTING THE PAYMENT FOR PURCHASE (PAGE NO. 22 & 29 OF PAPER BOOK). H) BANK STATEMENT DULY HIGHLIGHTING THE RECEIPT OF SALE CONSIDERATION FROM SHARES (PAGE NO. 18 OF PAPER BOOK). I) COMPUTATION OF INCOME J) COPY OF HIGH COURT ORDER OF MERGER OF THE COMPA NY (PAGE NO. 33 TO 63 OF PAPER BOOK). IT IS VITAL TO NOTE THAT THE CONTRACT-CUM-BILL (COP Y ENCLOSED) CONTAINS THE DETAILS OF THE ORDER NO, TRADE NO., NAME OF SHARES, QUANTITY, RATE, ETC.. 7. THE LD. A.R. SUBMITTED THAT ALL THE NECESSARY EV IDENCES WERE FILED BEFORE THE AUTHORITIES BELOW, HOWEVER, T HE AO AS WELL AS LD. CIT(A) HAVE PROCEEDED ON THE SURMISES AND PR ESUMPTION THAT THE INVESTIGATION AND SEBI REPORT SUGGEST THA T THESE ARE ACCOMMODATION ENTRIES AND PRICES OF SHARES WERE MAN IPULATED WITHOUT DOING ANY VERIFICATION ON THE EVIDENCES PR ODUCED BY THE ASSESSEE. THE LD. A.R., THEREFORE, PRAYED THAT THE ADDITION AS MADE BY THE AO MAY KINDLY BE DELETED. 8. THE LD. D.R., ON THE OTHER HAND, RELIED HEAVILY ON THE ORDER OF AUTHORITIES BELOW. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE HAS EARNED A CAPITAL GAIN OF RS.1 ,01,71,119/- ON THE SALE OF SCRIPTS NAMELY M/S. SURABHI CHEMICAL AND INVESTMENT LTD. AND M/S. KAILASH AUTO FINANCE LTD. THE FACTS QUA THE PURCHASE AND SALE OF SHARES AND NECESSARY E VIDENCES WERE ALREADY DISCUSSED HEREINABOVE AND ARE NOT BEIN G REPEATED FOR THE SAKE OF GRAVITY. WE NOTE THAT ASSESSEE HAS FILED ALL THE EVIDENCES COMPRISING SUMMARY OF SALE AND PURCHASE O F SHARES, ITA NO.390/M/2020 M/S. ANUSMRITI SARKAR 5 CONTRACT NOTES/BROKER NOTES, DETAILS OF DMAT ACCOUNT/TRANSACTION STATEMENT, COPIES OF PURCHASE B ILLS, EVIDENCES OF PAYMENT THROUGH BANKING CHANNELS ALONG WITH BANK STATEMENTS ETC. WE NOTE THAT THE AUTHORITIES BELOW HAVE RELIED MERELY ON THE REPORT OF INVESTIGATION WING A ND SEBI BY IGNORING THE FACTS ON RECORD. WE FURTHER NOTE THAT IN THE CASE OF M/S. KAILASH AUTO FINANCE LTD. THE VARIOUS CO-ORDIN ATE BENCHES OF THE TRIBUNAL AT KOLKATA HAVE DECIDED THE ISSUE I N FAVOUR OF THE ASSESSEE. THE OPERATIVE PART OF THE DECISION IN IT A NO.1236 & 1237/KOL/2017 IS REPRODUCED AS UNDER: 6. WE HAVE HEARD BOTH THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND LOT OF FORCE IN THE ARGUMENTS OF THE LD AR THAT THE LD AO WAS NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE ON THE BASIS OF THEORY OF SURROUNDING CIRCUMSTANCES, HUMAN CONDUCT, AND PREPONDERANCE OF PROBABILITY WITHOUT BRINGING ON RECORD ANY LEGAL EVIDENCE AGAINST THE ASSESSEE. WE RELY ON THE JUDGEMENT OF SPECIAL BENCH OF MUMBAI TRIBUNAL IN THE CASE OF GTC INDUSTRIES LTD. (SUPRA) FOR THIS PROPOSITION. THE VARIOUS FACETS OF THE ARGUMENTS OF THE LD AR SUPRA, WITH REGARD TO IMPLEADING THE ASSESSEE FOR DRAWING ADVERSE INFEREN CES WHICH REMAIN UNPROVED BASED ON THE EVIDENCES AVAILABLE ON RECORD, ARE NOT REITERATED FOR THE SAKE OF BREVITY. THE PRINCIPLES LAID DOWN IN VARIOUS CASE L AWS RELIED UPON BY THE LD AR ARE ALSO NOT REITERATED FOR THE SAKE OF BREVITY. WE FIN D THAT THE AMALGAMATION OF CPAL WITH KAFL HAS BEEN APPROVED BY THE ORDER OF HONBLE HIGH COURT. THE LD AO OUGHT NOT TO HAVE QUESTIONED THE VALIDITY OF THE AMALGAMA TION SCHEME APPROVED BY THE HONBLE HIGH COURT IN MAY 2013 MERELY BASED ON A ST ATEMENT GIVEN BY A THIRD PARTY WHICH HAS NOT BEEN SUBJECT TO CROSS EXAMINATION. M OROEVER, IT IS ALSO PERTINENT TO NOTE THAT THE ASSESSEE AND / OR THE STOCK BROKER AS HITA STOCK BROKING LTD NAME IS NEITHER MENTIONED IN THE SAID STATEMENT AS A PERSON WHO HAD ALLEGEDLY DEALT WITH SUSPICIOUS TRANSACTIONS NOR THEY HAD BEEN THE BENEF ICIARIES OF THE TRANSACTIONS OF SHARES OF KAFL. HENCE WE HOLD THAT THERE IS ABSOLUT ELY NO ADVERSE MATERIAL TO IMPLICATE THE ASSESSEE TO THE ENTIRE GAMUT OF UNWAR RANTED ALLEGATIONS LEVELED BY THE LD AO AGAINST THE ASSESSEE, WHICH IN OUR CONSID ERED OPINION, HAS NO LEGS TO STAND IN THE EYES OF LAW. WE FIND THAT THE LD DR CO ULD NOT CONTROVERT THE ARGUMENTS OF THE LD AR WITH CONTRARY MATERIAL EVIDENCES ON RE CORD AND MERELY RELIED ON THE ORDERS OF THE LOWER AUTHORITIES APART FROM PLACING THE COPY OF SEBIS INTERIM ORDER SUPRA. WE FIND THAT THE SEBIS ORDERS RELIED ON BY THE LD AO AND REFERRED TO HIM AS DIRECT EVIDENCE AGAINST THE ASSESSEE DID NOT CONTAI N THE NAME OF THE ASSESSEE AND/OR THE NAME OF ASHIKA STOCK BROKING LTD. THROUG H WHOM THE ASSESSEE SOLD THE SHARES OF KAFL AS A BENEFICIARY TO THE ALLEGED ACCO MMODATION ENTRIES PROVIDED BY THE RELATED ENTITIES / PROMOTERS / BROKERS / ENTRY OPERATORS. IN THE INSTANT CASE, THE SHARES OF CPAL WERE PURCHASED BY THE ASSESSEE WAY B ACK ON 20.12.2011 AND PURSUANT TO MERGER OF CPAL WITH KAFL, THE ASSESSEE WAS ALLOTTED EQUAL NUMBER OF SHARES IN KAFL, WHICH WAS SOLD BY THE ASSESSEE BY E XITING AT THE MOST OPPORTUNE ITA NO.390/M/2020 M/S. ANUSMRITI SARKAR 6 MOMENT BY MAKING GOOD PROFITS IN RODER TO HAVE A GO OD RETURN ON HIS INVESTMENT. WE FIND THAT THE ASSESSEE AND / OR THE BROKER ASHIT A STOCK BROKING LTD WAS NOT THE PRIMARY ALLOTTEES OF SHARES EITHER IN CPAL OR IN KA FL AS COULD BE EVIDENT FROM THE SEBIS ORDER. WE FIND THAT THE SEBI ORDER DID MENTI ON THE LIST OF 246 BENEFICIARIES OF PERSONS TRADING IN SHARES OF KAFL, WHEREIN, THE ASS ESSEE AND / OR ASHITA STOCK BROKING LTDS NAME IS NOT REFLECTED AT ALL. HENCE T HE ALLEGATION THAT THE ASSESSEE AND / OR ASHITA STOCK BROKING LTD GETTING INVOLVED IN PRICE RIGGING OF KAFL SHARES FAILS. WE ALSO FIND THAT EVEN THE SEBIS ORDER HEAV ILY RELIED UPON BY THE LD AO CLEARLY STATES THAT THE COMPANY KAFL HAD PERFORMED VERY WEL L DURING THE YEAR UNDER APPEAL AND THE P/E RATIO HAD INCREASED SUBSTANTIALL Y. THUS WE HOLD THAT THE SAID ORDERS OF SEBI IS NO EVIDENCE AGAINST THE ASSESSEE, MUCH LESS TO SPEAK OF DIRECT EVIDENCE. THE ENQUIRY BY THE INVESTIGATION WING AND /OR THE STATEMENTS OF SEVERAL PERSONS RECORDED BY THE INVESTIGATION WING IN CONNE CTION WITH THE ALLEGED BOGUS TRANSACTIONS IN THE SHARES OF KAFL ALSO DID NOT IMP LICATE THE ASSESSEE AND/OR HIS BROKER. IT IS ALSO A MATTER OF RECORD THAT THE ASSE SSEE FURNISHED ALL EVIDENCES IN THE FORM OF BILLS, CONTRACT NOTES, DEMAT STATEMENTS AND THE BANK ACCOUNTS TO PROVE THE GENUINENESS OF THE TRANSACTIONS RELATING TO PURCHAS E AND SALE OF SHARES RESULTING IN LTCG. THESE EVIDENCES WERE NEITHER FOUND BY THE LD AO TO BE FALSE OR FABRICATED. THE FACTS OF THE CASE AND THE EVIDENCES IN SUPPORT OF THE ASSESSEES CASE CLEARLY SUPPORT THE CLAIM OF THE ASSESSEE THAT THE TRANSACT IONS OF THE ASSESSEE WERE BONAFIDE AND GENUINE AND THEREFORE THE LD AO WAS NO T JUSTIFIED IN REJECTING THE ASSESSEES CLAIM OF EXEMPTION UNDER SECTION 10(38) OF THE ACT. WE ALSO FIND THAT THE VARIOUS CASE LAWS OF HONBLE JURISDICTIONAL HIGH CO URT RELIED UPON BY THE LD AR AND FINDINGS GIVEN THEREON WOULD APPLY TO THE FACTS OF THE INSTANT CASE. THE LD DR WAS NOT ABLE TO FURNISH ANY CONTRARY CASES TO THIS EFFE CT. HENCE WE HOLD THAT THE LD AO WAS NOT JUSTIFIED IN ASSESSING THE SALE PROCEEDS OF SHARES OF KAFL AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE ACT. WE ACCORD INGLY HOLD THAT THE REFRAMED QUESTION NO. 1 RAISED HEREINABOVE IS DECIDED IN THE NEGATIVE AND IN FAVOUR OF THE ASSESSEE. 10. WE NOTE THAT THE ASSESSEE HAS FILED ALL THE EVI DENCES AND THE AUTHORITIES BELOW COULD NOT BRING OUT ANY MATER IAL TO PROVE THAT THE CAPITAL GAIN EARNED BY THE ASSESSEE IS BOG US EXCEPT THE ATTRIBUTION BY THE INVESTIGATION WING AND SEBI. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, THE ORDER OF LD. CIT(A) CA N NOT BE SUSTAINED . ACCORDINGLY, WE SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION. 11. THE ISSUE RAISED IN GROUND NO.2 IS CONNECTED WI TH GROUND NO.1 AND HAS ALREADY BEEN ADJUDICATED AS ABOVE. ITA NO.390/M/2020 M/S. ANUSMRITI SARKAR 7 12. THE ISSUE RAISED IN GROUND NO.3 IS AGAINST THE ORDER OF LD. CIT(A) CONFIRMING THE ADDITION OF RS.3,05,134/- BY LD. CIT(A) AS MADE BY THE AO UNDER SECTION 69C OF THE ACT TOWARDS COMMISSION OF ACCOMMODATION ENTRIES ON LONG TERM CA PITAL GAIN. SINCE WE HAVE ALREADY DECIDED THE ISSUE ON MERIT IN FAVOUR OF THE ASSESSEE, THEREFORE THIS ADDITION IS AUTOMATICALLY DELETED AS BEING CONSEQUENTIAL. THE AO IS DIRECTED TO DELETE THE ADDITION ACCORDINGLY. GROUND IS ALLOWED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07.06.2021. SD/- SD/- ( AMARJIT SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 07.06.2021. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASS TT. REGISTRAR, ITAT, MUMBAI.