Akshay Jain, Ghaziabad V. DCIT, Circle-1, Ghaziabad

ITA 4199/DEL/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6473 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 01-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Keywords: Principle of natural justice; Condonation of delay; Penny stocks
• Section: 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER I.T.A. NO.4199/DEL/2018 ASSESSMENT YEAR: 2014-15 AKSHAY JAIN, C/O AKHILESH KUMAR, ADV., CHAMBER NO.206-07, ANSAL SATYAM, RDC RAJ NAGAR, GHAZIABAD. V. DCIT, CIRCLE-1, GHAZIABAD. TAN/PAN: AEXPJ 2344D (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI AKHILESH KUMAR AND PUSHKAR PANDEY, ADV. RESPONDENT BY: SHRI S.L. ANURAGI, SR.D.R. DATE OF HEARING: 14 11 2018 DATE OF PRONOUNCEMENT: 17 01 2019 O R D E R THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE IMPUGNED ORDER DATED 28.02.2018 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS), GHAZIABAD FOR THE QUANTUM OF ASSESSMENT PASSED U/S.143(3) OF THE IT A CT, FOR THE ASSESSMENT YEAR 2014-15. 2. AT THE OUTSET, THE APPEAL OF THE ASSESSEE IS B ARRED BY LIMITATION BY 12 DAYS FOR WHICH THE ASSESSEE HAS FI LED AN APPLICATION FOR CONDONATION OF DELAY STATING THAT A FTER RECEIVING OF THE ORDER OF THE LD. CIT (A) ON 22.03. 2018, ASSESSEE HAS DULY HANDED OVER THE SAME TO HIS CHART ERED ACCOUNTANT, SHRI ANIL MITTAL ON 30.03.2015 TO PREPA RE AND FILE THE APPEAL BEFORE TRIBUNAL AND ALSO PAID THE FEES F OR FILING. FROM TIME TO TIME ASSESSEE WAS IN TOUCH WITH HIS CA , I.T.A. NO.4199/DEL/2018 2 HOWEVER, ON 27.05.2018 WHEN THE ASSESSEE VISITED TH E OFFICE OF THE CA, HE WAS INFORMED THAT CA HAS EXPRESSED HI S INABILITY TO FILE THE SECOND APPEAL AS HE WAS NOT M UCH CONVERSANT WITH THE TRIBUNAL MATTERS. THEREAFTER, T HE ASSESSEE TOOK STEPS AND ENGAGED DIFFERENT PROFESSIO NALS AND GOT THE APPEAL PREPARED AND SAME WAS FILED ON 01.06 .2018 IN SUPPORT ASSESSEE HAS ALSO FILED HIS AFFIDAVIT. 3. AFTER CONSIDERING THE REASONS STATED IN THE APPL ICATION FOR CONDONATION OF DELAY, I FIND THAT THERE WAS NO FAULT ON THE PART OF THE ASSESSEE FOR NOT PURSUING THE APPEAL, A ND THEREFORE, IN THE INTEREST OF NATURAL JUSTICE, WE AR E CONDONING THE DELAY AND ADMITTING THE APPEAL FOR ADJUDICATION. 4. IN VARIOUS GROUNDS OF APPEAL, THE ASSESSEE HAS CHALLENGED THE ADDITION OF RS.30,19,500/- MADE U/S. 68 R.W.S. 115BBE ON ACCOUNT OF SALE OF EQUITY SHARES. 5. THE FACTS IN BRIEF ARE THAT ASSESSEE HAD DECLA RED LONG TERM CAPITAL GAIN ON SALE OF SHARES OF M/S. JOLLY P LASTICS INDUSTRIES LTD. WHICH WAS CLAIMED AS EXEMPT U/S. 10 (38). IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE VID E LETTER 27.06.2016 SUBMITTED THE DETAILS OF PURCHASE AND SA LE OF SCRIP. HOWEVER, THE LEARNED ASSESSING OFFICER ISSUE D NOTICES U/S .133(6) TO M/S. GLOBE CAPITAL MARKETING LTD.; M /S. JOLLY PLASTIC INDUSTRIES LTD.; AND NATIONAL SECURITIES DE POSITORY LTD. AND NOTED THAT NOTICE ISSUED TO M/S. JOLLY PLA STIC RETURNED BACK UNSERVED. THEREAFTER, HE NOTED THE BR IEF HISTORY OF M/S. JOLLY PLASTIC INDUSTRIES PVT. LTD. AND FOUN D THAT THIS COMPANY THOUGH WAS TRADING IN PLASTICS SINCE 8 TH APRIL, 1981, I.T.A. NO.4199/DEL/2018 3 HOWEVER, FROM LAST FIVE YEARS IT WAS PAYING NIL TAX ES. APART FROM THAT, THERE WERE NO SALES MADE BY THIS COMPANY IN THE YEAR IN WHICH THE SHARES WERE PURCHASED. HE ALSO NO TED THE MODUS OPERANDI ADOPTED BY VARIOUS ENTRY OPERATORS FOR GETTING ACCOMMODATION ENTRY IN FORM OF PENNY STOCKS. HE FUR THER NOTED THAT THE SHARE TRADING OF THE SAID COMPANY WA S SUSPENDED BY THE SEBI VIDE NOTICE DATED 1 ST JANUARY, 2015. THEREAFTER, HE MADE A DETAILED DISCUSSION BY RELYIN G UPON VARIOUS JUDGMENTS AND GENERAL TREND ADOPTED BY VARIO US PERSONS, AND HELD THAT ASSESSEE HAS INTRODUCED AMOU NT OF RS.30,90,500/-, THE SOURCE OF WHICH REMAINS UNEXPLA INED AND ARE NOT SATISFACTORY. ACCORDINGLY, HE TAXED THE LONG TERM CAPITAL GAIN SHOWN BY THE ASSESSEE @30% AS PROVIDED U/S.115BBE AND MADE ADDITION OF RS.20,19,500/-. 6. IN THE FIRST APPEAL, THE LD. CIT( A) NOTED THAT ASSESSEE HAS CLAIMED BENEFIT AND DECLARATION MADE IN IDS 201 6 SCHEME FOR SUM OF RS.10 LAC TOWARDS CAPITAL GAIN U/ S.10(38) WHICH HAS BEEN ALLOWED BY THE ASSESSING OFFICER. HE FURTHER OBSERVED THAT ASSESSEE HAS FAILED TO SUBSTANTIATE H IS CLAIM WHICH HAS BEEN ALLOWED BY THE ASSESSING OFFICER AND ACCORDINGLY HE ENHANCED THE QUANTUM OF ADDITION U/S .68 TO RS.30,19,500/- WHICH WAS MADE BY THE ASSESSING OFFI CER OF RS.20,19,500/- HE ALSO TOOK NOTE OF THE ANALYSIS AN D THE FINDING GIVEN BY THE ASSESSING OFFICER AS TO HOW TH E PRICES OF THE SAID SHARES HAD HAS INCREASED MANIFOLD WHICH IS NOT BACKED BY ANY FINANCIAL FUNDAMENTALS. APART FROM TH AT, M/S. JOLLY PLASTIC INDUSTRIES PVT. LTD. WAS FOUND TO BE ONE OF THE PENNY STOCK INVOLVED IN MANIPULATION OF SHARE MARKE T WHICH I.T.A. NO.4199/DEL/2018 4 IS EVEN NOTED BY THE SEBI AND ALSO THE PURCHASES OF THE SAID SHARES HAVE NOT BEEN MADE THROUGH RECOGNIZED STOCK EXCHANGE. THUS, PURCHASE OF THE SHARES ITSELF WAS QUESTIONABLE AND ACCORDINGLY, HE HELD THAT ACTION O F THE ASSESSING OFFICER IN TAXING THE SAID SUM U/S.68 IS JUSTIFIED. 7. BEFORE ME, LEARNED COUNSEL SUBMITTED THAT THESE SHARES WERE PURCHASED THROUGH BROKER LIMESTONE PROPERTIES LTD. ON 1 ST JUNE, 2012 AT RS.1,34,000/- FOR 10,000 EQUITY SHAR ES @ 13.37 PER SHARE. THE SAID SHARES WERE ENTERED INTO DEMAT ACCOUNT ON 24.10.2013 AND THE SALE WAS MADE ON 29.10.2013. DEMAT ACCOUNT WAS WITH GLOBE CAPITAL MA RKET LTD. WHICH HAS BEEN PLACED AT PAGE 10 OF THE PAPER BOOK AND FROM THERE HE POINTED OUT THAT BOTH PURCHASE AND SA LE OF THE SAID SCRIP HAS BEEN ROUTED THROUGH DEMAT ACCOUNT. THEREAFTER, HE DREW OUR ATTENTION TO PAGES 11 TO 13 OF THE PAPER BOOK WHICH CONTAINS COPY OF BANK STATEMENT WH EREIN THE AMOUNT FROM SALE OF SHARES HAVE BEEN CREDITED O N 01.11.2013 AND 05.11.2013 AFTER THE SHARES WERE SOL D THROUGH BOMBAY STOCK EXCHANGE THROUGH BROKER, SOUTH ASIAN STOCK LTD. FOR WHICH THE CONTRACT NOTE HAS BE EN PLACED IN THE PAPER BOOK AT PAGES 14 AND 15 ALONG WITH TRA NSACTIONS STATEMENT OF NATIONAL SECURITIES DEPOSIT LTD. WHICH IS GIVEN FROM PAGES 21 TO 28 OF THE PAPER BOOK. HE FURTHER P OINTED OUT TO THE HISTORY OF MOVEMENT OF SHARE PRICE OF M/S. J OLLY PLASTIC INDUSTRIES PVT. LTD. TO SHOW HOW THE SHARES HAD GRA DUALLY INCREASED AND HAD REACHED AT A PEAK OF RS.317. AT T HE TIME OF SALE, THE LISTED PRICE IN THE STOCK EXCHANGE WAS AR OUND RS.301 TO RS.305 PER SHARE. HE HAS GIVEN THE HISTOR Y OF DAILY QUOTED PRICE OF THE SAID COMPANY IN THE BOMBAY STOC K I.T.A. NO.4199/DEL/2018 5 EXCHANGE RIGHT FROM 06.12.2012 TO 27.11.2014. THERE AFTER, HE DREW OUR ATTENTION TO THE LIST OF SHELL COMPANIE S PUBLISHED ON 06.08.2017 AND POINTED OUT THAT M/S. JOLLY PLAST IC INDUSTRIES LTD. IS NOT APPEARING IN SUCH LIST. FURT HER, THE SUSPENSION OF TRADING BY THE SEBI WAS DONE IN JANUA RY, 2015, I.E., MUCH AFTER THE EXPIRY OF SIXTEEN MONTHS FROM THE DATE OF THE SALE BY THE ASSESSEE. IT IS ALSO NOT TH E CASE HERE THIS WAS THE SOLE INVESTMENT IN SHARES MADE BY THE ASSESSEE. IN FACT ASSESSEE WAS A REGULAR INVESTOR WHO HAS BEE N INVESTING IN SHARES REGULARLY. THE ASSESSING OFFICE R HAS NOT GATHERED ANY MATERIAL OR INFORMATION FROM ANYWHERE THAT ASSESSEE WAS ANY BENEFICIARY OF ACCOMMODATION ENTRY OR THERE ANY STATEMENT BY THE BROKER OR THE BROKER WERE INVO LVED IN RIGGING OF PRICES IN STOCK EXCHANGE SO AS TO REACH TO A CONCLUSION THAT ANY UNACCOUNTED MONEY HAS BEEN GIVE N BY THE ASSESSEE TO GIVE A COLOUR OF LONG TERM CAPITAL GAIN OR ANY KIND OF BOGUS ACCOMMODATION ENTRY HAS BEEN GIVEN BY THE BROKER OR TRANSACTION HAS BEEN MANAGED THROUGH ANY ENTRY PROVIDER. THE ENTIRE OBSERVATION MADE IN THE ASSESS ING OFFICER AND LD. CIT (A) ORDER IS BASED ON GENERAL PERCEPTIO N SANS ANY INFORMATION OR INQUIRY IN THE CASE OF THE ASSESSEE. THUS, SUCH AN ADDITION CANNOT BE MADE U/S.68, BECAUSE THE NATU RE AND SOURCE OF CREDIT HAS BEEN EXPLAINED. 8. LASTLY, IN SO FAR AS THE OBSERVATION OF THE LE ARNED ASSESSING OFFICER THAT M/S. JOLLY PLASTIC INDUSTRIE S LTD. DOES NOT HAVE MUCH FINANCIAL WORTH, HE SUBMITTED THAT IT IS ABSOLUTELY INCORRECT, AS THE SALES/OPERATING INCOME FOR 31 ST MARCH, 2013 WAS RS.6750.88 LACS AND AS 31 ST MARCH, 2014 I.T.A. NO.4199/DEL/2018 6 WAS RS.573.94 LACS AND THERE WAS A PURCHASE OF STOC K-IN- TRADE OF MORE THAN RS. 568 LACS. THUS, THE CONTENTI ON OF THE LEARNED AO THAT COMPANY HAS NO FINANCIAL WORTH IS N OT CORRECT. 9. ON THE OTHER HAND, LEARNED DEPARTMENT REPRESENTA TIVE STRONGLY RELIED UPON THE ORDER OF THE AO AND LD. CI T (A) AND SUBMITTED THAT ONCE THE TRADING OF THE SAID COMPANY HAS BEEN BANNED BY SEBI, IT GOES TO SHOW THAT THESE ARE PENN Y STOCK COMPANIES FOUND TO BE RIGGING THE PRICE IN THE STOC K EXCHANGE FOR PROVIDING SUCH KIND OF AN ENTRIES TO THE SO CAL LED INVESTORS. SUCH KIND OF COMPANIES HAVE ALSO BEEN RE PORTED BY KOLKATA INVESTIGATION WING THAT THE SCRIP OF THESE COMPANIES HAVE FREQUENTLY USED FOR PROVIDING ACCOMMODATION EN TRY. THUS, ADDITION AS SUSTAINED BY THE LD. CIT (A) NEED S TO BE CONFIRMED. 10. AFTER HEARING THE RIVAL SUBMISSIONS AND ON PE RUSAL OF THE MATERIAL REFERRED TO BEFORE US, I FIND THAT THE ASSESSEE HAD PURCHASED 10,000 EQUITY SHARES OF M/S. JOLLY PLASTI C INDUSTRIES LTD. FROM A BROKER ON 1 ST JUNE, 2012 FOR RS.1,34,000/-. THEREAFTER, THE SHARES WERE DEMATERI ALSED ON 24.10.2013 SHOWING THE PURCHASE OF 10,000 SHARE OF M/S. JOLLY PLASTIC INDUSTRIES LTD. THE SAID SHARES HAVE BEEN SOLD FOR RS.30,19,500/- IN THE BOMBAY STOCK EXCHANGE THR OUGH A RECOGNIZED BROKER, SOUTH ASIAN STOCK LTD. WHO HAS TRADED THE SHARES BETWEEN 15:03 TO 15:06 @ 309.10 PER SHAR ES. THE CONTRACT NOTE FOR SALE SHOWS THE TRANSACTIONS TIMIN G, TRADE NUMBER AND THE AMOUNT OF STT PAID ON SUCH SHARES. A FTER I.T.A. NO.4199/DEL/2018 7 THE SALE OF SHARES ON 29.10.2013, THE AMOUNT OF SAL E PROCEEDS HAVE BEEN CREDITED IN THE BANK ACCOUNT OF THE ASSES SEE ON 01.11.2013 AND 05.112013. THE BANK STATEMENT CLEARL Y SHOWS RTGS CREDIT FROM SOUTH ASIAN STOCK LTD. THESE DOCUMENTS OSTENSIBLY GO TO SHOW THAT THE CREDITS AP PEARING IN THE BANK ACCOUNT IS FROM SALES OF SHARES ONLY AND T HE SOURCE OF CREDIT IN THE BANK ACCOUNT STANDS WELL ESTABLISH ED AS REQUIRED UNDER SECTION 68. THE ISSUE RAISED BY THE LEARNED ASSESSING OFFICER AND LD. CIT(A) ARE THAT IT IS AN UNACCOUNTED MONEY WHICH HAS BEEN ROUTED SHAM TRANSACTION OF LON G TERM CAPITAL GAIN BECAUSE FOR THE REASONS THAT; FIRSTLY , THE TRADING OF THE SHARES OF M/S. JOLLY PLASTIC LTD. WAS SUSPENDED BY SEBI; AND SECONDLY , PRICES OF THE SHARES OF THE SAID COMPANY WERE BEING MANIPULATED WITHOUT ANY FINANCIAL FUNDAMENTAL S. BOTH THE AUTHORITIES HAVE QUOTED THE GENERAL MODUS OPERANDI AND CATENA OF JUDGMENT INCLUDING THAT OF HON'BLE SUP REME COURT IN THE CASE OF SUMATI DAYAL VS. CIT (1995) 21 4 ITR 801 AND MC. DOWELL & CO. LTD., 154 ITR 148. 11. FROM THE PERUSAL OF THE ENTIRE ASSESSMENT AND APPELLATE ORDER NOWHERE THERE IS ANY DISCUSSION OR WHISPER TH AT THERE IS ANY MATERIAL OR INFORMATION WITH THE DEPARTMENT THA T ASSESSEES NAME HAS APPEARED AS A BENEFICIARY OF ACCOMMODATION ENTRY IN ANY KIND OF INQUIRY OR INVES TIGATION CONDUCTED BY THE DEPARTMENT OR ASSESSEE HAS ROUTED HIS UNACCOUNTED MONEY IN THE GARB OF LONG TERM CAPITAL GAIN. THE ENTIRE EMPHASIS IS ON THE FACT THAT THERE IS AN ASTRONOMICAL RISE IN THE PRICE OF THE SHARES IN BSE . FROM THE I.T.A. NO.4199/DEL/2018 8 PERUSAL OF THE HISTORIC PRICE OF SHARES OF M/S. JOL LY PLASTIC INDUSTRIES LTD., IT IS SEEN THAT THE PRICE OF THE S AID SHARES HAD BEEN STEADILY GROWING SINCE DECEMBER, 2012 AND HAD REACHED TO ITS ZENITH AROUND OCTOBER, 2013 AND TRADING IN S UCH SHARES WAS CONTINUING UPTILL JANUARY, 2015. IT WAS ONLY IN JANUARY 2015, THE SEBI HAS SUSPENDED ITS TRADING WHICH WAS MUCH AFTER THE ASSESSEE HAD SOLD THE SHARES. APART FROM THAT, THE COPY OF BALANCE SHEET OF M/S. JOLLY PLASTIC INDUSTR IES LTD. AS FILED BY THE LEARNED COUNSEL AVAILABLE IN THE PUBLI C DOMAIN, IT CANNOT BE HELD THAT THE SAID COMPANY DID NOT HAD AN Y OPERATIONS OR SALES AS THE FIGURES OF SALE AS ON 31 ST MARCH, 2013 AND AS ON 31 ST MARCH, 2014 HAS ALREADY BEEN INCORPORATED ABOVE. IF WHAT IS APPARENT IS NOT REAL , THEN DEPARTMENT HAS TO BRING SOME COGENT MATERIAL ON REC ORD TO PROVE THAT ASSESSEES CONTENTION/EXPLANATION ARE IN CORRECT OR ARE NOT SUBSTANTIATED. HERE, IN THIS CASE, ADDITION HAS BEEN SOUGHT TO BE MADE U/S.68 WHICH POSTULATES THAT ASSE SSEE HAS TO PROVE THE NATURE AND SOURCE OF CREDIT APPEARING IN HIS BOOKS OF ACCOUNT. HERE, FROM THE PERUSAL OF THE NAT URE OF CREDIT, IT IS SEEN THAT THE SAME HAS COME THROUGH S ALES OF SHARES WHICH FACT HAS ALSO NOT BEEN DOUBTED BY THE DEPARTMENT. THE SOURCE OF MONEY IS THROUGH BROKER W HO HAS UNDERTAKEN THE TRANSACTION OF THE SHARES LYING WITH THE ASSESSEE PURCHASED IN THE EARLIER YEARS AND SAME HA S BEEN SOLD AFTER PAYING DUE TAXES IN THE FORM OF STT. THU S, NATURE OF THE CREDIT STANDS FULLY EXPLAINED. IF IT IS TO B E HELD THAT ASSESSEE HAS ROUTED HIS OWN UNACCOUNTED MONEY, THEN THERE HAS TO BE SOME MATERIAL TO PROVIDE LIVE LINK NEXUS TO SHOW THAT THE UNACCOUNTED MONEY HAS BEEN ROUTED UNDER TH E GARB I.T.A. NO.4199/DEL/2018 9 OF TRANSACTION OF PURCHASE AND SALE OF SHARES. IF T HE AVAILABILITY OF SHARES IS NOT IN DOUBT THEN THE SAL E OF THE SAME ALSO CANNOT BE DOUBTED IN WAKE OF THE EVIDENCES AS DISCUSSED ABOVE. EVEN FOR THE SAKE OF REPETITION, IT IS REITE RATED THAT IT IS NOT A CASE HERE THAT ANY SUCH INFORMATION OR MATERI AL WAS FOUND OR DISCOVERED THAT THE ASSESSEE BENEFICIARY O F ANY ACCOMMODATION ENTRY NOR THERE IS ANY SUCH STATEMENT OR MATERIAL EITHER FROM THE BROKER OR FROM THE STOCK E XCHANGE OR FROM ELSEWHERE. THUS, IN THE FACTS AND CIRCUMSTANCE S OF THE CASE, WE DO NOT FIND ANY REASON TO SUSTAIN THE ADDI TION MADE U/S.68 BY THE ASSESSING OFFICER AND LD. CIT (A) AND ACCORDINGLY SAME IS DIRECTED TO BE DELETED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH JANUARY, 2019. SD/- [AMIT SHUKLA] JUDICIAL MEMBER DATED: 17 TH JANUARY, 2019 PKK