CHETNA SURESH GADA, MUMBAI V. ITO 18 (1)(3), MUMBAI

ITA 3948/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 3787 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 03-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY J SETHI
• Keywords: Principle of natural justice; Accommodation entries; Onus to prove; Penny stocks; Set aside; Capital Gains
• Section: 69C; 22; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI , ! BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER . 3948 / / 2019 (%. .2014-15 ) ITA NO. 3948/MUM/2019 (A.Y.2014-15) CHETNA SURESH GADA, 1103/1104, GAGANGIRI TOWER, DR.DESHMUKH LANE, OPP. VP ROAD, MUMBAI 400 004 PAN: AABPG8894P / VS. : / APPELLANT INCOME TAX OFFICER 18(1)(3), EARNEST HOUSE, NARIMAN POINT, MUMBAI 400 021. : / RESPONDENT ASSESSEE BY : SHRI BHADRESH DOSHI REVENUE BY : SHRI SANJAY J. SETHI / DATE OF HEARING : 02/12/2020 / DATE OF PRONOUNCEMENT : 22 /02/2021 / ORDER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-53, MUMBAI ( I N SHORT THE CIT(A)) DATED 05/04/2019 FOR THE ASSESSMENT YEAR 2014-15. 2. THE ASSESSEE IN APPEAL HAS ASSAILED THE FINDING S OF CIT(A) IN CONFIRMING THE OF RS.7,72,167/- UNDER SECTION 69C OF THE IN COME TAX ACT, 1961 ( IN SHORT 2 ITA NO. 3948/MUM/2019 (A.Y.2014-15) THE ACT) ON ACCOUNT OF COMMISSION ALLEGEDLY PAI D ON PROCURING ACCOMMODATION ENTRIES. 3. SHRI BHADRESH DOSHI, APPEARING ON BEHALF OF THE ASSESSEE NARRATING THE FACTS OF THE CASE SUBMITTED THAT THE ASSESSEE OFFER ED LONG TERM CAPITAL GAIN OF RS.1,54,43,335/- ON SALE OF SHARES OF M/S. PARAG S HILP INVESTMENT LTD. UNDER INCOME DECLARATION SCHEME 2016 ( IN SHORT IDS 2016 ). THE ASSESSING OFFICER IN SCRUTINY ASSESSMENT PROCEEDINGS FOR ASSESSMENT Y EAR 2014-15 ACCEPTED THAT THE LONG TERM CAPITAL GAIN ON SALE OF SHARES O F PS IT INFRASTRUCTURE AND SERVICES LTD.( FORMERLY KNOWN AS M/S. PARAG SHILP INVESTMENT LTD.) IN FINANCIAL YEAR 2013-14 RELEVANT TO ASSESSMENT YEAR 2014-15 W AS DECLARED BY THE ASSESSEE UNDER IDS-2016, HOWEVER, THE ASSESSING OF FICER HELD THAT THE ASSESSEE HAS DECLARED BOGUS LTCG ON PENNY STOCK SC RIP OF M/S. PARAG SHILP INVESTMENT LTD. THE ASSESSING OFFICER MADE ADDITION UNDER SECTION 69C OF THE ACT ON ACCOUNT OF ALLEGED COMMISSION PAID BY THE ASSESSEE TO THE BOGUS ENTRY PROVIDER. THE ASSESSING OFFICER ESTIMATED THE COMMISSION @5% ON THE LONG TERM CAPITAL GAINS AND MADE ADDITION OF RS.7,7 2,167/-. THE LD.AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT FOR M AKING THE AFORESAID ADDITION THE CIT(A) PLACED RELIANCE ON THE STATEMEN T OF DIVESH UPADHYAY AND VIPUL BHATT, THE ALLEGED ACCOMMODATION ENTRY PROVID ERS. THE LD.AUTHORIZED REPRESENTATIVE OF THE ASSESSEE VEHEMENTLY ARGUED TH AT NO RELIANCE CAN BE PLACED ON THE STATEMENTS OF AFORESAID PERSONS AS TH EY WERE NEITHER RELATED TO THE TRANSACTIONS CARRIED OUT BY THE ASSESSEE NOR TH E ASSESSEE WAS AFFORDED OPPORTUNITY TO CROSS EXAMINE THE SAID PERSONS WHOS E STATEMENTS WERE USED FOR MAKING ADDITION IN THE HANDS OF ASSESSEE. THE L D.AUTHORIZED REPRESENTATIVE OF THE ASSESSEE CONTENDED THAT THE ASSESSEE AGAIN MADE REQUEST FOR CROSS EXAMINATION OF THE ALLEGED ENTRY PROVIDERS BEFORE T HE CIT(A). THE REQUEST OF 3 ITA NO. 3948/MUM/2019 (A.Y.2014-15) THE ASSESSEE WAS REJECTED BY THE CIT(A). THE LD.AU THORIZED REPRESENTATIVE OF THE ASSESSEE FURTHER CONTENDED THAT DIVESH UPADHYA Y IN HIS STATEMENT RECORDED UNDER SECTION 131 OF THE ACT ADMITTED TO H AVE CHARGED COMMISSION @ 7% AND VIPUL BHATT IN HIS STATEMENT RECORDED UN DER SECTION 132(4) OF THE ACT ADMITTED TO CHARGING THE COMMISSION @ 4% FOR PROVIDING ACCOMMODATION ENTRY PENNY STOCKS. HOWEVER, IT I S NOT EMANATING FROM THE ASSESSMENT ORDER THAT THE RATE OF COMMISSION STATED BY THE AFORESAID PERSONS IN THEIR RESPECTIVE STATEMENT IS IN RESPECT OF ANY SPECIFIC SCRIP. THE STATEMENT IS GENERAL AND HENCE, THE RATES ADMITTED BY THE AFO RESAID PERSONS CANNOT BE APPLIED ON PENNY STOCK SCRIP TRADED BY THE ASSESSEE . 3.1 THE LD.AUTHORIZED REPRESENTATIVE OF THE ASSESSE E SUBMITTED THAT WITHOUT PREJUDICE TO HIS PRIMARY ARGUMENTS, IF AT A LL ADDITION UNDER SECTION 69C IS TO BE UPHELD THEN THE RATE OF COMMISSION IS ON T HE HIGHER SIDE. THE COMMISSION RATE BE REDUCED TO 0.15%. TO SUPPORT H IS CONTENTIONS THE LD.AUTHORIZED REPRESENTATIVE OF THE ASSESSEE PLACED RELIANCE ON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF PCIT VS. A LAG SECURITIES PVT. LTD. REPORTED AS 117 TAXAMANN.COM 292. 3.2 THE LD.AUTHORIZED REPRESENTATIVE OF THE ASSESSE E IN SUPPORT OF HIS SUBMISSIONS FOR NOT GRANTING OPPORTUNITY TO CROSS E XAMINE THE PERSONS ON WHOSE STATEMENT ADDITION WAS MADE RELIED ON THE DEC ISION OF HON'BLE SUPREME COURT OF INDIA IN THE CASE OF ANDAMAN TIMB ER VS. COMMISSIONER OF CENTRAL EXCISE, 62 TAXMANN.COM 03. 4. PER CONTRACT, SHRI SANJAY J. SETHI, REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE IMPUGNED ORDER AND PRAYED F OR DISMISSING APPEAL OF THE ASSESSEE. THE LD.DEPARTMENTAL REPRESENTATIV E SUBMITTED THAT THE 4 ITA NO. 3948/MUM/2019 (A.Y.2014-15) ASSESSEE UNDER IDS-2016 HAD DECLARED ONLY BOGUS LON G TERM CAPITAL GAIN. THE COMMISSION PAID TO ENTRY PROVIDERS FOR PROCURING AC COMMODATION ENTRIES IN RESPECT OF SAID LTCG ON SALE OF SHARES WAS NOT DECL ARED BY THE ASSESSEE. THEREFORE, DURING THE ASSESSMENT PROCEEDINGS ONLY A DDITION IN RESPECT OF UNDECLARED EXPENDITURE WAS MADE. THE LD.DEPARTMEN TAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS NOT DENIED PAYMENT OF COMMISSION AND HAS ONLY DISPUTED THE RATE OF COMMISSION. 5. I HAVE HEARD THE SUBMISSIONS MADE BY RIVAL SIDE S AND HAVE EXAMINED THE ORDERS OF AUTHORITIES BELOW. THE ASSESSEE HAS CHALLENGED THE ADDITION IN RESPECT OF ALLEGED PAYMENT OF COMMISSION BY RAISING THREE CONTENTIONS: (I) STATEMENT OF ENTRY PROVIDERS WAS NOT PUT TO T HE ASSESSEE FOR CROSS EXAMINATION. (II) ENTRY PROVIDERS WHOSE STATEMENTS WERE RECORD ED ARE UNRELATED TO THE TRANSACTIONS CARRIED BY T HE ASSESSEE. (III) THE RATE OF COMMISSION ESTIMATED IS ON THE H IGHER SIDE. 6. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE STATEMENT OF DIVESH UPADHYAY AND VIPUL BHATT, ALLEGED BOGUS ENTRY PR OVIDERS WERE RECORDED UNDER SECTION 131 AND 132(4) OF THE ACT, RESPECTIVE LY. THE ASSESSING OFFICER HAS ESTIMATED RATE OF COMMISSION AT 5% ON THE BASIS OF STATEMENT OF AFORESAID PERSONS. THOUGH IT IS NOT EMANATING FROM THE ASSES SMENT ORDER THAT THE ASSESSEE ASKED FOR CROSS EXAMINATION OF THE AFO RESAID PERSONS, HOWEVER, IN THE IMPUGNED ORDER THE CIT(A) IN PARA 4.3 HAS RE CORDED THE FACT OF ASSESSEES REQUEST FOR CROSS EXAMINATION OF THE AFORESAID PERS ONS. THE REQUEST OF THE ASSESSEE TO CROSS EXAMINE THE AFORESAID PERSONS WAS REJECTED BY THE CIT(A). IT IS FURTHER OBSERVED THAT THE ASSESSING OFFICER WHIL E PLACING RELIANCE ON THE STATEMENT OF AFORESAID ENTRY PROVIDERS HAS NOWHER E MENTIONED THAT THESE 5 ITA NO. 3948/MUM/2019 (A.Y.2014-15) ENTRY PROVIDERS WERE INSTRUMENTAL IN PROVIDING ACC OMMODATION ENTRIES IN RESPECT OF PENNY STOCK OF PS IT INFRASTRUCTURE AN D SERVICES LTD. TO THE ASSESSEE OR ANY OTHER PERSONS. THUS, ADDITION BY P LACING RELIANCE ON THE STATEMENT OF AFORESAID PERSONS IS FLAWED. THE ASS ESSING OFFICER IS NOT BOUND BY ANY TECHNICAL RULES OF THE LAW OF EVIDENCE. H E CAN COLLECT THE MATERIAL TO FRAME ASSESSMENT BY WAY OF PRIVATE ENQUIRIES. HOW EVER, THE PRINCIPLE OF NATURAL JUSTICE DEMANDS THAT IF HE DESIRES TO USE T HE MATERIAL SO COLLECTED, THE ASSESSING OFFICER MUST CONFRONT THE COLLECTED EVIDE NCE TO ASSESSEE AND SEEK HIS COMMENTS. IF ANY STATEMENT IS RECORDED, WHICH ASSESSING OFFICER INTENDS TO USE AGAINST THE ASSESSEE, AN OPPORTUNITY SHOULD BE GRANTED TO THE ASSESSEE TO CROSS-EXAMINE THE PERSON MAKING THE STATEMENT. TH E HON'BLE SUPREME COURT OF INDIA IN THE CASE OF ANDAMAN TIMBER (SUPRA) HAS HELD THAT IF OPPORTUNITY FOR CROSS EXAMINATION IS NOT PROVIDED TO THE ASSESSEE ANY ADDITION MADE ON SUCH STATEMENT IS UNSUSTAINABLE IN LAW. 7. IN THE PRESENT CASE, THE ASSESSING OFFICER HAS A LLEGED THAT THE ASSESSEE HAS PAID COMMISSION ON BOGUS PENNY STOCK TRANSACTIO NS. ONUS IS ON THE ASSESSING OFFICER TO PROVE THAT THE ASSESSEE HAS PA ID COMMISSION TO BOGUS ENTRY PROVIDERS. IT IS TRAIT LAW THAT NO ADDITION CAN BE MADE ON MERE SUSPICION HOWSOEVER STRONG IT MAY BE UNLESS IT IS SUPPORTED B Y CORROBORATIVE EVIDENCE. ADDITION ON MERE SURMISES, SUSPICION AND CONJECTURE S WOULD FAIL THE TEST OF JUDICIAL SCRUTINY. THE HONBLE APEX COURT IN THE C ASE OF UMACHARAN SHAH & BROS. VS. CIT REPORTED AS 371 ITR 271 HELD THAT SU SPICION HOWSOEVER STRONG, CANNOT TAKE THE PLACE OF EVIDENCE. THE HONBLE SUP REME COURT OF INDIA IN THE CASE OF CIT VS. DAULAT RAM RAWAT MULL REPORTED AS 8 7 ITR 349 HELD THAT THE ONUS TO PROVE THAT THE MISTAKE APPARENT IS NOT REA D IS ON THE PARTY WHO CLAIMS IT TO BE SO. HERE IT IS THE ASSESSING OFFICER WHO IS ALLEGING THAT THE ASSESSEE HAS 6 ITA NO. 3948/MUM/2019 (A.Y.2014-15) PAID COMMISSION TO BOGUS ENTRY PROVIDER. THE BURDE N IS ON THE ASSESSING OFFICER TO ADDUCE EVIDENCE TO PROVE PAYMENT OF ALLE GED COMMISSION TO BOGUS ENTRY PROVIDER. THE ASSESSING OFFICER HAS FAILED T O DISCHARGE ONUS CAST UPON HIM. THE ADDITION UNDER SECTION 69C OF THE ACT HAS BEEN MADE ON SUSPICION AND CONJECTURES WITHOUT THERE BEING ANY COGENT EV IDENCE. THUS, IN THE LIGHT OF THE FACTS OF THE CASE AND THE LAW LAID DOWN BY THE HONBLE APEX COURT, THE IMPUGNED ORDER IS SET ASIDE AND THE APPEAL BY THE A SSESSEE IS ALLOWED. 8. IN THE RESULT, APPEAL BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON MONDAY T HE 22 ND DAY OF FEBRUARY, 2021. SD/- (VIKAS AWASTHY) / JUDICIAL MEMBER / MUMBAI, (%/ DATED: 22/02/2021 VM , SR. PS(O/S) COPY OF THE ORDER FORWARDED TO : 1. ) / THE APPELLANT , 2. *+ / THE RESPONDENT. 3. ,+ ( )/ THE CIT(A)- 4. ,+ CIT 5. -.*+% , . . . , / DR, ITAT, MUMBAI 6. ./012 / GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI