Smt. Ushadevi Mansingahka, Bhilwada V. Ayakar Bhawan, Indore

ITA 397/Ind/2018

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 8896 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-12-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 01-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PUNEET KUMAR
• Assessee Lawyers: C P RAWKA
• Keywords: Wrong claim; Penny stocks; Set aside; Capital Gains
• Section: 143(3); 142(1); 153A; 201; 143(2)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.397/IND/2018 ASSESSMENT YEAR: 2014-15 SMT. USHADEVI MANSINGHKA MANSINGHKA HOUSE, GANGAPUR CHOURAHA BHILWADA (RAJASTHAN) / VS. ITO-1 KHANDWA ( APPELLANT ) ( RE VENUE ) PAN: AEEPM1258G APPELLANT BY SHRI C.P. RAWKA , C A RE VENUE BY SHRI PUNEET KUMAR, SR. DR DATE OF HEARING: 12.12.2019 DATE OF PRONOUNCEMENT: 26.12.2019 / O R D E R PER MANISH BORAD, A.M: THIS APPEAL AT THE INSTANCE OF ASSESSEE PERTAINING TO A.Y. 2014-15 IS DIRECTED AGAINST THE ORDER OF COMMISSION ER OF INCOME TAX(APPEALS)-II, INDORE, (IN SHORT CIT), DATED 20 .03.2018 WHICH IS ARISING OUT OF THE ORDER U/S 143(3) OF THE INCOME T AX ACT 1961(HEREINAFTER CALLED AS THE ACT) FRAMED ON 23. 12.2016 BY ITO- KHANDWA. SMT. USHADEVI MANSINGHKA ITANO.397/IND/2018 2 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL: 1.THAT THE LD. CIT(A) ERRED IN LAW AND FACTS OF TH E CASE AND CONFIRMED THE ADDITION MADE BY THE LD. AO OF INCOME OF LTCG RS.94,93,723/- TO THE TOTAL INCOME OF THE ASSESSEE WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE HAS OFFERED THE SAME INCOME FOR TAX UNDER IDS 2016. THUS, MAKING THE SAM E INCOME UNDER DOUBLE TAXATION. THE ACTION OF LD. CIT(A) IS TOTALLY WRONG ON THE FACTS OF THE CASE. 3. BRIEF FACTS AS CULLED OUT FROM THE RECORDS ARE T HAT THE ASSESSEE IS AN INDIVIDUAL. SHE FILED HER RETURN OF INCOME ON 31 .07.2014 SHOWING TOTAL INCOME OF RS. 2,56,610/-, AFTER CLAIM ING EXEMPTION U/S 10(38) OF THE ACT FOR LONG TERM CAPITAL GAIN FR OM SALE OF SHARE OF M/S KAILASH AUTO FINANCE LTD. AT RS.94,93,723/-. CASE SELECTED FOR SCRUTINY UNDER CASS FOLLOWED BY SERVING OF NOTI CES U/S 143(3) & 142(1) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS LD. AO EXAMINED THE TRANSACTION OF LONG TERM CAPITAL GA IN AND ONGOING THROUGH VARIOUS DOCUMENTS RELATING TO CAPIT AL GAIN OBSERVED THAT NO SECURED TRANSACTION TAX (STT) WAS PAID IN THE BILL OF THE BROKER M/S OVERFLOW MERCHANDISE PVT. LTD. KO LKATA. FURTHER THE LETTER SERVED TO THE BROKER WAS RETURNED UNSERV ED. AFTER MAKING FURTHER INQUIRIES WHEN THE LD. AO CAME TO CONCLUSIO N THAT THE ASSESSEE HAS SHOWN BOGUS CLAIM OF LONG TERM CAPITAL GAIN TO EVADE TAX, IN THE MEANT TIME DURING THE COURSE OF A SSESSMENT PROCEEDINGS ITSELF ASSESSEE FILED A COPY OF DECLARA TION MADE UNDER THE INCOME DECLARATION SCHEME 2016. AS PER THE DECL ARATION CASH INCOME OF RS.95,00,000/- WAS OFFERED TO TAX FOR A.Y . 2013-14 AND DUE TAXES WERE PAID AS PER THE SCHEME. ASSESSEE CON TENDED THAT AS PER THE SCHEME ASSESSEE IS ELIGIBLE TO CLAIM THE BE NEFIT OF CASH SMT. USHADEVI MANSINGHKA ITANO.397/IND/2018 3 INCOME DISCLOSED FOR A.Y. 2013-14 AS A SOURCE FOR T HE BOGUS LOGN TERM CAPITAL GAIN CLAIM MADE FOR A.Y. 2014-15. LD. AO WAS NOT SATISFIED AND DID NOT ALLOW THE ASSESSEES CLAIM AN D MADE ADDITION OF BOGUS LONG TERM CAPITAL U/S 10(38) OF THE ACT O F RS. 94,93,723/- AND ASSESSED INCOME AT RS.97,50,330/-. 4. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE TH E LD. CIT(A) AND FILED DETAILS OF THE SCHEME AND FREQUENTLY ASKED TO QUESTION IN SUPPORT OF ITS CLAIM OF SETTING OF THE BOGUS INCOME SHOWN FOR A.Y. 2014-15 AGAINST THE INCOME DISCLOSED IN IDS(INCOME DECLARATION SCHEME) 2016 FOR A.Y. 2013-14 BUT COULD NOT SUCCEED , AS LD. CIT(A) CONFIRMED THE ADDITION MADE BY THE LD. AO OBSERVING AS FOLLOW: 3. AS PER THE PROVISION OF SECTION 196 OF IDS 2016 SCHEME DID NOT APPLY IN RELATION TO ANY UNDISCLOSED INCOME CHA RGEABLE TO TAX UNDER THE IT ACT FOR ANY PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR BEGINNING ON THE FIRST DAY OF APRIL 2017, WHERE A NOTICE U/S 142 OR 143(2) OR 148 153A OR 153 C OF THE ACT WERE ISSUED IN RESPECT OF SUCH ASSESSMENT YEAR AND THE ASSESSMENT WAS PENDING. HENCE IN THIS CASE THE ASSE SSMENT WAS PENDING AND IT WAS CATEGORICALLY CONCLUDED THAT THE ASSESSEE HAD CLAIMED BOGUS LONG TERM CAPITAL GAIN. THE ASSESSEE WANTS THE BENEFIT OF IDS 2016 IN RESPECT O F ASSESSMENT YEAR UNDER CONSIDERATION AS A CONSEQUENT IAL EFFECT TO THE DISCLOSURE OF INCOME MADE IN EARLIER YEAR WH ICH CANNOT BE ALLOWED IN VIEW OF THE PROVISIONS OF THE IDS 2016. THUS, IN LIGHT OF THE ABOVE FACTS, THE ADDITION SO MADE BY THE AO IS HEREBY CONFIRMED AND THIS GROUND OF APPEAL IS DISMISSED. 5. AGGRIEVED ASSESSEE IS NOW IN APPEAL BEFORE THE T RIBUNAL. SMT. USHADEVI MANSINGHKA ITANO.397/IND/2018 4 6. LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED R EFERRING TO THE FOLLOWING SYNOPSIS PLACED ON RECORD: THE ASSESSEE HAS EARNED INCOME AMOUNTING TO RS. 95,00,000/- FROM VARIOUS SOURCES IN ASH DURING THE ASSESSMENT Y EAR 2013- 14 WHICH WAS NOT DISCLOSED IN THE INCOME TAX RETURN OF THE YEAR. HOWEVER, THE SAID AMOUNT WAS DECLARED BY THE ASSESSEE UNDER INCOME DECLARATION SCHEME, 2016 IN F ORM NO. 1 AS ON 30109/2016. THE SAID AMOUNT WAS USED IN THE ASSESSMENT YEAR 201 4-15 TO EARN INCOME FROM CAPITAL GAIN WHICH WAS EXEMPT UNDE R SECTION 10(38) OF INCOME TAX ACT. FURTHER IT IS SUBMITTED THAT THE COMMISSIONER OF IN COME TAX (APPEALS)-II, INDORE CONTENDED ON THIS FACT STATING THAT SECTION 196 OF IDS 2016 IS APPLICABLE IN THIS CASE AS MENTI ONED ON PAGE NO.2 OF THE APPELLATE ORDER, HOWEVER AS PER TH E F AQS IN CIRCULAR NO.17 OF 2016 ISSUED ON 20105/2016 IT WAS CLARIFIED THAT THE PERSON SHALL ONLY BE INELIGIBLE FROM DECLA RATION FOR THOSE ASSESSMENT YEARS FOR WHICH A NOTICE U/S 142(1) OR 143(2) OR 148 OR 153A OR 153C IS ISSUED AND PROCEED ING IS PENDING BEFORE THE ASSESSING OFFICER AND HE SHALL B E FREE TO DECLARE UNDISCLOSED INCOME FOR OTHER YEARS FOR WHIC H NO NOTICE UNDER ABOVE REFERRED SECTIONS HAS BEEN ISSUED. SIMI LARLY IN THE CASE OF ASSESSEE, THE UNDISCLOSED INCOME DECLAR ED UNDER IDS 2016 WAS RELATED TO ASSESSMENT YEAR 2013- 14 HO WEVER THE NOTICE ISSUED PERTAINS TO ASSESSMENT YEAR 2014- 15, THEREFORE SECTION 196 OF IDS 2016 IS NOT APPLICABLE ON THE ASSESSEE. IN ADDITION TO ABOVE, WE FURTHER SUBMIT THAT THE AS SESSEE DISCLOSED IN FORM 1 OF DESCRIPTION COLUMN THAT THE UNDISCLOSED MONEY WAS APPLIED FOR EARNING INCOME FROM LONG TERM CAPITAL GAIN AND THE SAID DECLARATION BY THE ASSESSEE WAS A CCEPTED BY PRINCIPAL COMMISSIONER/COMMISSIONER IN FORM 4 UN DER IDS 2016 AS ON 15/02/2018. PLEASE FIND ENCLOSED FORM 1 AND FORM 4. THAT THE RELEVANT ABSTRACT OF FAQS OF CIRCULAR 25 A ND 29 OF 2016 ARE ENCLOSED; SMT. USHADEVI MANSINGHKA ITANO.397/IND/2018 5 IT IS SUBMITTED THAT THE ASSESSEE HAS APPLIED HIS U NDISCLOSED INCOME AMOUNTING TO RS.95 LACS TO EARN INCOME FROM CAPITAL GAINS AND SINCE THE ASSESSEE HAS ALREADY PAID TAXES @ 45% ON SUCH UNDISCLOSED INCOME UNDER IDS 2016. IN VIEW OF THE ABOVE, IT IS CLEAR THAT THE ASSESSEE WAS ELIGIBLE TO APPLY THE CASH IN HAND BEING UNDISCLOSED INCOME TO INCOME WHICH WAS LONG TERM CAPITAL GAIN OF PENNY STOCKS. THE ADDITION THEREFORE MADE BY THE ASSESSING OFFICE R AND CONFIRMED BY THE LD. COMMISSIONER OF INCOME TAX (AP PEALS) LIABLE TO DELETED IN FULL. 7. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE (DR) VEHEMENTLY ARGUED SUPPORTING THE ORDER OF BOTH LOWER AUTHORITI ES. 8. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US. THE SOLE GRIEVANCE OF THE ASSESSEE IS WI TH REGARD TO THE FINDING OF LD. CIT(A) DENYING THE BENEFIT OF INCOME OFFERED IN IDS 2016 FOR A.Y. 2013-14 AGAINST THE BOGUS LONG TERM C APITAL GAIN SHOWN BY THE ASSESSEE IN A.Y. 2014-15. THERE IS NO DISPUTE TO THE FACT THAT ASSESSEE HAS SHOWN BOGUS LONG TERM CAPITA L GAIN OF RS.94,93,723/- IN A.Y. 2014-15. 9. THE ASSESSEE IN ORDER TO TAKE THE BENEFIT OF THE INCOME DECLARATION SCHEME 2016 FILED A DECLARATION U/S 183 OF THE FINANCE ACT 2016 ON FORM NO.1 AND OFFERED UNDISCLOSED INCOM E OF RS.95,00,000/- FOR A.Y. 2013-14 AND ACCORDINGLY PAI D THE TAX SURCHARGE AND PENALTY AS PROVIDED IN THE IDS, 2016 TOTALING TO SMT. USHADEVI MANSINGHKA ITANO.397/IND/2018 6 RS.42,75,000/-. ASSESSEE WAS ISSUED AN ACKNOWLEDGEM ENT OF DECLARATION BY THE INCOME TAX DEPARTMENT ON FORM NO .2 FOR THE SAID DECLARATION AND TAXES PAID THEREON RELEVANT TO A.Y. 2013-14. FURTHER THE ASSESSEE ON FORM NO.3 PROVIDED INTIMATI ON OF PAYMENT OF TAXES TO THE INCOME TAX DEPARTMENT WITH THE BANK DETAILS AND SERIAL OF CHALLAN ALONG WITH AMOUNT PLACED AT PAGE NO.12 OF THE PAPER BOOK. THEREAFTER THE INCOME TAX DEPARTMENT IS SUED A CERTIFICATE ON FORM NO.4 TO THE ASSESSEE ON 14.02.2 018 AT SO. NO.5 OF THIS CERTIFICATE FOUR COLUMN ARE MADE. FIRST COL UMN IS SERIAL NUMBER, SECOND COLUMN IS ASSESSMENT YEAR I.E. A.Y. 2013-14, 3 RD COLUMN OF THE AMOUNT OF UNDISCLOSED INCOME DECLARED AND ACCEPTED AT RS.95,00,000/- AND THE 4 TH COLUMN IS FOR THE DESCRIPTION OF ASSETS WHERE UNDISCLOSED INCOME DEC LARED IN THE FORM OF INVESTMENT IN ASSET . UNDER THIS 4 TH COLUMN INCOME TAX DEPARTMENT HAS MENTIONED I EARNED INCOME RECEIVED IN CASH WHICH WAS SHOWN AS LONG TERM CAPITAL GAIN IN NEXT YEAR . 10. FORM NO.4 IS PLACED ON PAGE 14 OF THE PAPER BOO K WHICH MAKE IT CLEAR THAT THE ASSESSEE OFFERED THE INCOME UNDER IDS 2016 AT RS.95,00,000/- IN ORDER TO GET THE BENEFIT FOR THE SOURCE OF INCOME USED TO OBTAIN BOGUS ENTRY OF LONG TERM CAPITAL GAI N IN A.Y. 2014- 15. SO IN FORM NO.4 ISSUED BY THE DEPARTMENT IN THE CERTIFICATE OF DECLARATION ITSELF THE ASSESSEES CLAIM HAS BEEN ME NTIONED AND HAS BEEN ACCEPTED. 11. NOW THIS CLAIM OF THE ASSESSEE IS TO BE TESTED WITH THE CONTENTS SMT. USHADEVI MANSINGHKA ITANO.397/IND/2018 7 OF INCOME DECLARATION SCHEME. WE FIND THAT ALONG WI TH CHAPTER 9 OF THE FINANCE ACT 2016 UNDER WHICH THE INCOME DECLARA TION SCHEME 2016 IS PROVIDED AND SECTION 181 TO SECTION 199 OF THE FINANCE ACT 2016 TAKES CARE OF IDS SCHEME 2016, CENTRAL BOARD D IRECT TAXES ISSUED VARIOUS CIRCULARS AND CLARIFICATION RELATING TO THE INCOME DECLARATION SCHEME, 2016. 12. IN ONE OF SUCH CIRCULAR NO.25 OF 2016 DATED 30 TH JUNE 2016 FOLLOWING QUESTION NO.6 & ITS ANSWER GIVEN BY THE D BDT READS AS FOLLOWS: QUESTION NO.6: WHAT IS THE PURPOSE OF OBTAINING THE INFORMATION ABOUT THE NATURE OF UNDISCLOSED INCOME IN THE LAST COLUMN OF TABLE AT POINT (I) RELATING TO N ATURE OF UNDISCLOSED INCOME IN ANNEXURE TO FORM-1? ANSWER: THE PURPOSE OF OBTAINING INFORMATION ABOUT THE NATU RE OF UNDISCLOSED INCOME IS TO KNOW WHETHER THE UNDISC LOSED INCOME IS IN THE FORM OF MOVEABLE ASSET, IMMOVABLE ASSET, GOLD, JEWELLERY OR CASH. HERE, THE NATURE OF INCOME NEED NOT BE CONFUSED WITH THE SOURCE OF INCOME. THERE IS NO NEE D TO INDICATE THE SOURCE OF INCOME AT ALL. IN THE COLUMN MEANT FO R NATURE OF UNDISCLOSED INCOME ONE HAS TO WRITE THE NOMENCLATUR E SUCH AS IMMOVABLE PROPERTY, MOVEABLE PROPERTY, GOLD, JEWELLERY OR CASH ETC. THIS WILL ENABLE THE TAXPAYER TO ESTABL ISH THE LINK BETWEEN THE INCOME DECLARED UNDER THE SCHEME AND T HE CLAIM, IF ANY, MADE IN RESPECT OF SUCH UNDISCLOSED INCOME IN THE RETURN OF INCOME FILED SUBSEQUENTLY OR DURING ANY ASSESSME NT PROCEEDINGS. 13. IN CIRCULAR NO.29 OF 2016 DATED 18 DAY OF AGUST 2016 FOLLOWING QUESTION NO.2 AND IT S ANSWER READS AS FOLLOWS: SMT. USHADEVI MANSINGHKA ITANO.397/IND/2018 8 QUESTION NO.2: WHETHER THE AMOUNT DECLARED UNDER TH E SCHEME FOR AN EARLIER ASSESSMENT YEAR CAN BE TAKEN INTO ACCOUNT TO EXPLAIN THE TRANSACTION(S) IN THE ASSESS MENT PROCEEDINGS FOR SUBSEQUENT ASSESSMENT YEAR(S)? ANSWER: AS PER SECTION 189 OF THE FINANCE ACT, 2016, ANY DECLARATION MADE UNDER THE SCHEME SHALL NOT AFFECT FINALITY OF COMPLETED ASSESSMENTS. HOWEVER, IN AN ASSESSMENT PR OCEEDING BEFORE THE ASSESSING OFFICER FOR AN ASSESSMENT YEAR SUBSEQUENT TO THE YEAR FOR WHICH THE INCOME IS DECLARED UNDER THE SCHEME, THE INCOME DECLARED FOR AN EARLIER ASSESSMENT YEAR CAN BE TAKEN INTO ACCOUNT TO EXPLAIN THE TRANSACTIONS PROV IDED THERE IS A NEXUS BETWEEN THE INCOME DECLARED AND THE TRANSAC TIONS OF THE SUBSEQUENT ASSESSMENT YEAR. 14. FROM PERUSAL OF THE ABOVE QUESTION AND THE ANSW ER GIVEN BY THE CBDT THERE REMAINS NO CONFUSION TO THE EXTENT T HAT THE INCOME DECLARED IN EARLIER ASSESSMENT YEAR CAN BE TAKEN IN TO ACCOUNT TO EXPLAIN THE TRANSACTIONS OF SUBSEQUENT YEAR PROVIDE D THERE IS A NEXUS BETWEEN THE INCOME DECLARED AND THE TRANSACTI ON OF THE SUBSEQUENT ASSESSMENT YEAR. 15. IN THE CASE OF ASSESSEE FOR A.Y. 2013-14 CASH I NCOME OF RS.95,00,000/- IS OFFERED AS UNDISCLOSED INCOME. TH E REVENUE AUTHORITIES WERE UNABLE TO FIND ANY OTHER SOURCE OF UNDISCLOSED INCOME FOR A.Y. 2013-14. THEREFORE, THE ASSESSEE HA D UNDISCLOSED CASH INCOME AT THE END OF A.Y. 2013-14 I.E. AT THE OPENING OF A.Y. 2014-15. FOR A.Y. 2014-15 THERE IS NO OTHER UNDISCL OSED INCOME FOUND EXCEPT THE BOGUS CLAIM OF LONG TERM CAPITAL G AIN. 16. WE, THEREFORE, IN THE GIVEN FACTS AND CIRCUMSTA NCES OF THE CASE, ARE OF THE CONSIDERED VIEW THAT THE INCOME OFFERED BY THE ASSESSEE SMT. USHADEVI MANSINGHKA ITANO.397/IND/2018 9 UNDER IDS 2016 FOR A.Y. 2013-14 AT RS.95,00,000/- H AS BEEN RIGHTLY CLAIMED AS THE SOURCE OF THE BOGUS LONG TER M CAPITAL GAIN MANAGED BY THE ASSESSEE IN A.Y. 2014-15 AND THUS, T HE BOGUS CLAIM OF LONG TERM CAPITAL GAIN FOR A.Y. 2014-15 HA S BEEN RIGHTLY EXPLAINED BY THE ASSESSEE BYWAY OF OFFERING UNDISCL OSED INCOME IN A.Y. 2013-14 UNDER THE INCOME DECLARATION SCHEME 20 16. WE, THUS, SET ASIDE THE ORDERS OF THE BOTH LOWER AUTHOR ITIES DELETE THE ADDITION FOR RS.94,93,723/- AND ALLOW THE SOLE GROU ND RAISED BY THE ASSESSEE. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 26.12.20 19. SD/- (KUL BHARAT) SD/- (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER INDORE; DATED : 26/12/2019 CTX? P.S/. . . COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUAR D FILE. BY ORDER ASSISTANT REGISTRAR