DCIT CEN CIR 22, MUMBAI V. ANIL KAINYA, MUMBAI

ITA 4077/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3480 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 22-03-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 21-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURESH KUMARDR
• Assessee Lawyers: K SHIVARAM
• Keywords: Unexplained cash credit; Income from undisclosed sources; Retrospective amendment; Tax effect; Reason to believe
• Section: 143(3); 153A; 68; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NOS.4077 & 4078/MUM/2013 ASSESSMENT YEARS-2006-07 & 2009-10 DCIT, CENTRAL CIRCLE-22, ROOM NO.403, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 / VS. SHRI ANIL KAINYA, 701, GAURAV APARTMENT, GOKULDHAM, GOREGAON(E), MUMBAI-400063 PAN NO.AAEPK1673K ( / REVENUE) ( / ASSESSEE) CROSS OBJECTION NO.167/MUM/2014 (ARISING OUT OF ITA NO.4077 /MUM/2013) ASSESSMENT YEARS-2006-07 SHRI ANIL KAINYA, 701, GAURAV APARTMENT, GOKULDHAM, GOREGAON(E), MUMBAI-400063 / VS. DCIT, CENTRAL CIRCLE-22, ROOM NO.403, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 PAN NO. AAEPK1673K ( / ASSESSEE) ( / REVENUE) ITA NO.4077 & 4078/MUM/2013 & C.O. NO.167/MUM/2014 ANIL KAINYA 2 / REVENUE BY SHRI SURESH KUMAR-DR / ASSESSEE BY SHRI K. SHIVARAM / DATE OF HEARING : 22/03/2016 / DATE OF ORDER: 22/03/2016 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDERS BOTH DATED 06/03/2013 OF THE LD. FIRST APPELLATE AU THORITY, MUMBAI, WHEREAS, THE ASSESSEE HAS PREFERRED CROSS OBJECTION FOR THE ASSESSMENT YEAR 2006-07. FIRST, W E SHALL TAKE UP APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2 009-10 (ITA NO.4078/MUM/2013). 2. DURING HEARING, THE LD. COUNSEL FOR THE ASSESSE E, SHRI K. SHIVARAM, AT THE OUTSET, CLAIMED THAT THE T AX EFFECT IN THE PRESENT APPEAL OF THE REVENUE IS RS.8,08,753 /-. THE ASSESSEE ALSO FILED CALCULATION OF THE TAX EFFECT. THE LD. DR, SHRI SURESH KUMAR, FAIRLY AGREED TO THE FACT THAT T HE TAX EFFECT IN THE PRESENT APPEAL IS BELOW PRESCRIBED MO NETARY LIMIT. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT ED THAT ITA NO.4077 & 4078/MUM/2013 & C.O. NO.167/MUM/2014 ANIL KAINYA 3 THE TAX EFFECT IN THE PRESENT APPEAL IS BELOW PRESC RIBED MONETARY LIMIT OF RS.10 LAKH FOR FILING THE APPEAL BEFORE THE TRIBUNAL. THE CBDT ISSUED INSTRUCTION NO.21 OF 2015, DATED 10/12/2015 (F NO.279/MISC./142/2007-IT(PT), APPLICABLE WITH RETROSPECTIVE EFFECT, WHEREIN, THE DEPARTMENT WAS ADVISED/DIRECTED BY THE BOARD NOT T O FILE APPEAL IN THE CASES WHERE THE TAX EFFECT DOES NOT E XCEED THE FOLLOWING MONETARY LIMIT.:- SINCE, THE TAX EFFECT IN THE PRESENT APPEAL IS BELO W PRESCRIBED MONETARY LIMIT, THEREFORE, THE APPEAL OF THE REVENUE IS NOT MAINTAINABLE, CONSEQUENTLY, DISMISSE D. 3. NOW, WE SHALL TAKE UP THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2006-07 (ITA NO.4077/MUM/2013), WHEREIN, THE ONLY GROUND PERTAINS TO DELETING THE A DDITION OF RS.35,32,370/-, MADE U/S 68 OF THE INCOME TAX AC T, 1961 (HEREINAFTER THE ACT), AS UNEXPLAINED CASH CRE DIT AND RS.1,76,619/- AS UNACCOUNTED COMMISSION EXPENDITURE AT THE RATE OF 5% FOR EARNING THE SAME, WITHOUT APPREC IATING THE FACT AND THE EVIDENCE ON RECORD TO PROVE THAT P URCHASE SL. NO. APPEALS IN INCOME TAX MATTERS MONETARY LIMIT (IN RS.) 1. BEFORE ITAT 10,00,000/ - 2. U/S 260 A BEFORE HONBLE HIGH COURT 20,00,000/ - 3. BEFORE HONB LE SUPREME COURT 25,00,000/ - ITA NO.4077 & 4078/MUM/2013 & C.O. NO.167/MUM/2014 ANIL KAINYA 4 AND SALE OF SHARES WERE ARRANGED TRANSACTIONS I.E. NOT GENUINE TRANSACTIONS. 3.1. DURING HEARING, THE LD. DR, INVITED OUR ATTEN TION TO FINDING OF THE ASSESSING OFFICER AT PAGE-3 OF TH E ASSESSMENT ORDER BY EXPLAINING THAT THE SHARES WERE PURCHASED IN JUNE 2003 FROM A BROKER IN CALCUTTA, S HARES WERE TAKEN IN PHYSICAL FORM AND NO IMMEDIATE PAYMEN T WAS MADE. IT WAS EXPLAINED THAT THE FIRST PAYMENT WAS MADE ON 22/12/2004 AND SECOND PAYMENT WAS IN MARCH 2005, WHEREAS, THE RETURN OF INCOME FOR A.Y. 2004-0 5 WAS FILED ON 22/03/2005. IT WAS CLAIMED THAT SHARES WER E SENT FOR DEMATISATION IN APRIL 2005. IT WAS CONTENDED THAT THE PURCHASE RATE WAS FROM 3.25 TO 4.27 AND SOLD IN JUN E 2005 AT A HUGE PROFIT AT THE RATE OF 250 PER SHARE. THE CRUX OF THE ARGUMENT IS THAT IT WAS ONLY A ARRANGED AFFAIR AND NO ACTUAL PURCHASE/SALE WAS EFFECTED. RELIANCE WAS PLACED UP ON THE DECISION IN ITO VS SHAMIM M. BHARWANI (2015) 170 T TJ 238 AND ARVIND M. KARIYA VS ACIT (2013) 153 TTJ 42 2 (MUMBAI TRIB.). 3.2. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESS EE, ASSERTED THAT ON IDENTICAL FACT, THE DEPARTMENT FOR A.Y. 2007-08 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND NO APPEAL WAS FILED BY THE DEPARTMENT AGAINST THE ORDE R OF THE LD. FIRST APPELLATE AUTHORITY. OUR ATTENTION WAS IN VITED TO PAGES 113 TO 124 OF THE PAPER BOOK. OUR ATTENTION WAS ITA NO.4077 & 4078/MUM/2013 & C.O. NO.167/MUM/2014 ANIL KAINYA 5 INVITED TO VARIOUS PAGES OF THE PAPER BOOK TO SUBST ANTIATE THE CLAIM OF THE ASSESSEE. 3.3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE FILED RETURN OF INCOME DECLAR ING TOTAL INCOME OF RS.27,97,112/- ON 28/03/2007, WHICH WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, NOTI CE U/S 148 OF THE ACT WAS ISSUED ON 24/09/2010 TO REOPEN T HE CASE ON THE FOLLOWING REASONS:- DURING THE COURSE OF ASSESSMENT FOR A.Y. 2007-08, IT WAS NOTICED THAT THE ASSESSEE HAD INDULGED IN ALLEGED P URCHASE AND SALE OF PENNY-STOCK SHARE (M/S. OASIS CINE COMMUNICATION). THE BROKER CONCERNED HAD DENIED ANY TRANSACTION WITH THE ASSESSEE. ALSO, SEBI HAD INITI ATED ENQUIRIES AGAINST THE VARIOUS BROKERS INVOLVED IN T RANSACTION OF M/S OASIS CINE COMMUNICATION. IT WAS NOTICED THA T IN THE RETURN FOR A.Y. 2006-07 FILED BELATEDLY ON 28/03/20 07, THE ASSESSEE HAS NOT DECLARED SHARES OF OASIS CINE COMMUNICATION WHICH HE HAD ALLEGEDLY SOLD IN THE PR EVIOUS YEAR RELEVANT TO A.Y. 2007-08. IT IS UNDER THE CIR CUMSTANCES THAT THE ALLEGED LONG TERM CAPITAL GAIN OF RS.25,99 ,731/- WAS TREATED AS INCOME FROM UNDISCLOSED SOURCES IN THE A .Y. 2007- 08. CONSIDERING THESE FACTS, THERE IS REASON TO BELIEVE THAT INCOME TO THE TUNE OF RS.35,86,500/- HAS ESCAPED ASSESSMEN T IN A.Y. 2006-07. SINCE, THE ORIGINAL ASSESSMENT HAD BEEN M ADE U/S 143(2) R.W.S. 153A ON 31/12/2007 AND 4 YEARS HAVE N OT ELAPSED FROM THE END OF THE RELEVANT ASSESSMENT YEA R, ASSESSMENT IS BEING RE-OPENED. 3.4. THE ASSESSING OFFICER ON EXAMINATION OF SUBMISSIONS AND RETURN FILED BY THE ASSESSEE, NOTIC ED THAT THE ASSESSEE HAS CLAIMED THE CAPITAL GAINS AMOUNTIN G TO ITA NO.4077 & 4078/MUM/2013 & C.O. NO.167/MUM/2014 ANIL KAINYA 6 RS.35,32,730/- AS EXEMPT, ON THE SALE OF SHARES OF G.K. CONSULTANTS LTD. THE SHARES WERE CLAIMED TO BE PURC HASED FROM ONE SHRI RAJENDRA PRAKASH SHAH IN JUNE 2003. THE ASSESSEE WAS ASKED TO SUBSTANTIATE THE PURCHASES AN D PAYMENT MADE FOR SUCH PURCHASES. THE CLAIM OF THE ASSESSEE WAS THAT THE SHARES WERE PURCHASED IN PHYS ICAL FORM AND SOLD IN DE-MAT FORM. HOWEVER, THE LD. ASS ESSING OFFICER WAS OF THE VIEW THAT THE GENUINENESS OF THE PURCHASES/TRANSACTIONS IS DOUBTFUL, THEREFORE, IT W AS HELD THAT THE ASSESSEE ENGINEERED THE TRANSACTION TO GEN ERATE ARTIFICIAL LONG TERM CAPITAL GAIN, THUS, THE IMPUGN ED AMOUNT WAS ADDED AS UNEXPLAINED CASH CREDITS U/S 68 OF THE ACT. 3.5. ON APPEAL, BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS), THE SUBMISSIONS OF THE ASSESS EE WERE CONSIDERED AND FINALLY THE ADDITION MADE U/S 68 OF THE ACT WAS DELETED. THE REVENUE IS AGGRIEVED AND IS IN APP EAL BEFORE THIS TRIBUNAL. 3.6. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF K EPT IN JUXTAPOSITION AND ANALYZED, THE MAJOR GRIEVANCE OF THE REVENUE IS THAT THOUGH THE SHARES WERE CLAIMED TO B E PURCHASED IN JUNE 2003 BUT THE PAYMENTS WERE MADE O N OR AFTER 22/12/2004 AND THE SHARES WERE SENT FOR ITA NO.4077 & 4078/MUM/2013 & C.O. NO.167/MUM/2014 ANIL KAINYA 7 DEMATIZATION IN APRIL 2005. ANOTHER GRIEVANCE OF TH E REVENUE IS THAT THE PURCHASE PRICE OF THE CLAIM SHA RES WAS VERY LOW, WHEREAS, THE SAME WERE SOLD AT THE RATE O F 250 PER SHARES, CAUSING HUGE ARTIFICIAL GAIN TO THE ASSESSE E. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE EXPLAI NED THAT THE TRANSACTION WAS GENUINE AND IDENTICALLY FOR A.Y . 2007- 08, THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) (FOR A.Y. 2007-08), NO FURTHER APPEAL WAS FILED BY THE DEPARTMENT. IT IS NOTED THAT VIDE ORDER DATED 01/11/2013 ON IDENTICAL ISSUE, THE LD. COMMISSIONER (APPEALS), WHEREIN, THE ASSESSEE CLAIMED TO HAVE PU RCHASED 9000 SHARES ON 29/09/2004 OF OASIS SINE COMMUNICATI ON LTD. THROUGH ONE BROKER SHRI PREM LAL ROY FOR RS.58 ,680/- AND THE SAME WERE CLAIMED TO BE SOLD DURING THE YEA R THROUGH STOCK EXCHANGE FOR RS.25,99,731/-, CAUSING GAIN OF RS.25,41,051/-. THOSE SHARES WERE ALSO PURCHASED IN PHYSICAL FORM AND SOLD IN DE-MAT FORM. THE LD. ASS ESSING OFFICER HELD THE SAME TO BE NON-GENUINE. ULTIMATEL Y, THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. THE AS SESSEE IS RELYING UPON THIS DECISION OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). IN THE CASE OF THE ASSESSEE, THE SHARES OF M/S G.K. CONSULTANTS LTD. WERE PURCHASED THROUGH BROKER SHRI RAJENDRA PRASAD SHAH. ADMITTEDL Y, THE COMPANY OF WHICH, THE SHARES WERE PURCHASED AND THE BROKER ARE DIFFERENT. HOWEVER, THERE IS NO DISPUTE THAT THE ITA NO.4077 & 4078/MUM/2013 & C.O. NO.167/MUM/2014 ANIL KAINYA 8 SHARES WERE PURCHASED IN PHYSICAL FORM IN JUNE 2003 AND WERE DEMATTED ON 15/04/2005. THE STAND OF THE REVEN UE IS THAT THERE WERE VARIOUS PERSONS, WHO WERE BENEFICIA RIES OF BOGUS CAPITAL GAIN ON SALE OF SHARES OF PENNY STOCK COMPANIES. HOWEVER, THE LD. ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY EVIDENCE (I) THAT M/S G.K. CONSULTANTS LTD. IS A PENNY STOCK COMPANY (II) THE ASSESSING OFFICER DID NOT MADE ANY INVESTIGATION FR OM CALCUTTA WITH RESPECT TO THE CREDENTIALS OF M/S G.K . CONSULTANTS LTD. (III) THE ASSESSING OFFICER HAS NO T DISPUTED THAT THE SHARES WERE DEMATERIALIZED AND THE IMPUGNE D AMOUNT WAS RECEIVED ON SALE OF SUCH SHARES. A BROA D AND BALLED OBSERVATION HAS BEEN MADE THAT VARIOUS PERSO NS ARE BENEFICIARIES OF BOGUS CAPITAL GAINS ON SALE OF CER TAIN SCRIPS OF PENNY STOCK COMPANIES. THE ASSESSEE HAS NEITHER PROVED THAT EITHER M/S G.K. CONSULTANTS LTD. IS A P ENNY STOCK COMPANY OR IS INVOLVED IN PROVIDING BOGUS SHA RES. IT SEEMS THAT THE ADDITION WAS MADE MERELY ON PRESUMPT ION. IN SUCH A SITUATION, WE ARE OF THE VIEW THAT PRESUM PTION CANNOT TAKE THE SHAPE OF EVIDENCE HOWEVER STRONG IT MAY BE. EVEN OTHERWISE, THE LD. ASSESSING OFFICER HAS NOT SUBSTANTIATED HIS PRESUMPTION WITH THE HELP OF ANY DOCUMENTARY EVIDENCES. THE ASSESSEE HAS PRODUCED TH E COPIES OF CONTRACT NOTE, MONEY WAS RECEIVED THROUGH BANKING CHANNEL FROM SALE OF SHARES, PURCHASES OF E ARLIER YEARS WERE NOT DOUBTED. DEMATTING WAS DONE BY THE ITA NO.4077 & 4078/MUM/2013 & C.O. NO.167/MUM/2014 ANIL KAINYA 9 ASSESSEE, SALE WAS AFFECTED, THUS, THERE IS NO REAS ON TO INTERFERE WITH THE FINDING OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS), THUS, IT WAS RIGHTLY HELD THAT THE A DDITION MADE U/S 68 OF THE ACT CANNOT BE SUSTAINED AND ALSO THE RESULTANT DISALLOWANCE OF COMMISSION AT THE RATE OF 5% MADE BY THE ASSESSING OFFICER. EVEN OTHERWISE, FOR MAKING ADDITION U/S 68 OF THE ACT, THERE HAS TO BE CREDIT OF AMOUNTS IN THE BOOKS OF THE ASSESSEE AND IF THE ASS ESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE O F SUCH CREDITS, THEN, THE SOME SO CREDITED MAY BE CHARGED TO TAX AS INCOME OF THE ASSESSEE. HOWEVER, IN THE PRESENT CASE, THE ASSESSEE HAS OFFERED ITS EXPLANATION AND IF THE LD. ASSESSING OFFICER IS STILL NOT SATISFIED WITH SUCH EXPLANATION, ONUS SHIFTS UPON HIM TO PROVE OTHERWIS E. THE ASSESSEES BURDEN IS CONFINED TO PROVE CREDITWORTHI NESS OF THE CREDITOR WITH REFERENCE TO THE TRANSACTION FOUN D IN THE BOOKS OF THE ASSESSEE. IN THE PRESENT APPEAL, THE I DENTITY OF THE CREDITOR IS NOT IN DOUBT, THE SALE PROCEEDS WER E RECEIVED THROUGH BANKING CHANNEL, NO ADVERSE MATERIAL WAS BR OUGHT ON RECORD BY THE ASSESSING OFFICER TO SUBSTANTIATE HIS PRESUMPTION, THE SHARES REMAINED IN THE DEMAT ACCOU NT OF THE ASSESSEE FOR MORE THAN TWELVE MONTHS, SOLD THRO UGH RECOGNIZED STOCK EXCHANGE ON WHICH STT WAS PAID, TH E QUOTATION OF THE AID SCRIPS WERE AVAILABLE ON THE E XCHANGE, THUS, THE APPEAL OF THE REVENUE IS HAVING NO MERIT, CONSEQUENTLY, DISMISSED. ITA NO.4077 & 4078/MUM/2013 & C.O. NO.167/MUM/2014 ANIL KAINYA 10 4. NOW, WE SHALL TAKE UP THE CROSS OBJECTION OF TH E ASSESSEE FOR ASSESSMENT YEAR 2006-07, WHEREIN, NOTI CE ISSUED U/S 148 DATED 24/09/2010 FOR REOPENING OF TH E COMPLETED ASSESSMENT U/S 143(3) R.W.S 153A DATED 31/12/2007 WAS CLAIMED TO BE BAD IN LAW AS THE ASSE SSEE HAD DECLARED FULL AND TRUE PARTICULARS OF HIS INCOM E, THEREFORE, NOTICE IS LIABLE TO BE QUASHED. THE LD. COUNSEL ADVANCED ARGUMENTS WHICH IS IDENTICAL TO THE GROUND RAISED BY PLACING RELIANCE UPON THE DECISION ITA NO.4081/MUM/2013. WITHOUT GOING INTO MUCH DELIBERATION, WE HAVE DECIDED THE APPEAL OF THE REV ENUE, ON MERIT, IN FAVOUR OF THE ASSESSEE, THEREFORE, WE ARE REFRAINING OURSELVES TO DECIDE THE ISSUE OF REOPENING AND THUS DISMISS THE CROSS OBJECTION OF THE ASSESSEE AS IN-FRUCTUOUS . FINALLY, THE APPEALS OF THE REVENUE ARE DISMISSED, WHEREAS, THE CROSS OBJECTION OF THE ASSESSEE IS DIS MISSED AS IN-FRUCTUOUS. THIS ORDER WAS PRONOUNCED IN THE OPEN IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 22/03/2016. SD/- SD/- (RAJENDRA) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER MUMBAI; # DATED : 22/03/2016 ITA NO.4077 & 4078/MUM/2013 & C.O. NO.167/MUM/2014 ANIL KAINYA 11 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. %& '( / THE APPELLANT (RESPECTIVE ASSESSEE) 2. )*'( / THE RESPONDENT. 3. + + , ( %& ) / THE CIT, MUMBAI. 4. + + , / CIT(A)- , MUMBAI, 5. /01 )2 , + %& %23 , / DR, ITAT, MUMBAI 6. 14 5 / GUARD FILE. / BY ORDER, */& ) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI