ITO 20(2)(1), MUMBAI V. SHRI JIMEET VIPUL MODI, MUMBAI

ITA 4297/MUM/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8769 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2014-2015
• Appeal Filed On: 25-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR SHANTESHWAR SWAMI LD
• Assessee Lawyers: PARESH SHAPARIA LD
• Keywords: Unexplained cash credit; Source of fund; Accommodation entries; Onus to prove; Capital Gains
• Section: 143(3); 68

Judgement Text

ITA NO.4297/MUM/2018 SHRI JIMEET VIPUL MODI ASSESSMENT YEAR: 2014 - 15 1 IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI . . , , BEFORE JUSTICE SHRI P . P . BHATT, PRESIDENT AND SHRI MANOJ KUMAR AGGA RWAL, AM (HEARING THROUGH VIDEO CONFERENCING MODE) ./ I.T.A. NO .4297/MUM/201 8 ( / ASSESSMENT YEAR: 20 14 - 15 ) INCOME T AX OFFICER - 20(2)(1) ROOM NO.216, 2 ND FLOOR PIRAMAL CHAMBERS, LALBAUG PAREL , MUMBAI - 400 012 / VS. SHRI JIMEET V IPUL MODI 66/1, HANSA VILLA BHAUDAJI CROSS ROAD MATUNGA (E ), MUMBAI - 400 019 ./ ./ PAN/GIR NO. AQXMP - 9261 - G ( / APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : SHRI PARESH SHAPARIA - LD. AR REVENUE BY : DR. SHANTESHWAR SWA MI - LD.DR / DATE OF HEARING : 28/06/2021 / DATE OF PRONOUNCEMENT : 29/07/2019 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR (AY) 20 14 - 15 CONTEST THE ORDER OF LD. COM MISSIONER OF INCOME - TAX (APPEALS) - 32 , MUMBAI, [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO.CIT(A) - 32/IT - 584/ITO - 20(2)(1)/16 - 17 DATED 2 0 /0 3/2018 ON FOLLOWING GROUNDS : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) DELETE D THE ADDITION OF RS.3,21,31,930 / - BEING PURCHASE OF SHARES OF PENNY STOC K ITA NO.4297/MUM/2018 SHRI JIMEET VIPUL MODI ASSESSMENT YEAR: 2014 - 15 2 GOMTI FINLEASE (LNDIA ) LTD, WITHOUT CONSIDERING THE FACT THAT AN INFORMATION WAS RECEIVED FROM KOLKATA INVESTIGATION DIRECTORATE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT THE ASSESSING OFFICER DISALLOWED RS.6,39,240/ - ON ACCOUNT OF COMMISSION PAID U/S.69C BEING 2% OF ADDITION OF RS.3,21,31,930/ - WITHOUT CONSIDERING THE FACT THAT SINCE THE STCG WAS TREATED AS B OGUS, THE COMMISSION PAID ALSO STANDS TO BE DISALLOWED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE ONUS IS ON THE ASSESSEE TO EXPLAIN AND SUBSTANTIATE THE GENUINENESS AND TRUE NATURE OF THE SHARE TRANSACTION. 4. THE APPELLANT PRAYS THAT THE ORDER FOR THE CIT(A) ON THE ABOVE GROUNDS BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. AS EVIDENT , THE REVENUE IS AGGRIEVED BY DELETION OF ADDITION OF RS.321.31 L ACS AS WELL AS ESTIMATE COMMISSION OF 2% AS MADE BY LD. AO WHILE FRAMING THE ASSESSMENT FOR THE YEAR U/S 143(3) ON 30/12/2016. THE ASSESSEE BEING RESIDENT INDIVIDUAL IS STATED TO BE ENGAGED IN THE BUSINESS OF SHARE - BROKING. 2. WE HAVE CAREFULLY HEARD THE RIVAL SUBM ISSIONS AND PERUSED RELEVANT MATERIAL ON RECORD INCLUDING THE ORDERS OF LOWER AUTHORITIES. THE LD. D R , DRAWING ATTENTION TO THE FACTUAL MATRIX OF THE CASE , PLEADED FOR RESTORATION OF THE ASSESSMENT AS FRAMED BY L D. AO. THE COUNSEL FOR ASSESSEE (AR), ON THE OTHER HAND , DRAWING ATTENTION TO THE FINDINGS OF LEARNED CIT (A) IN THE IMPUGNED ORDER, SUBMITTED THAT THE PROVISIONS OF S EC.68 AS INVOKED BY L D. AO WERE NOT APPLICABLE TO THE FACTS OF THE CASE AND THEREFORE, THE ADDITIONS HAVE RIGHTLY BEEN DELETED . OUR AD JUDICATION WOULD BE AS GIVEN IN SUCCEEDING PARAGRAPHS. ASSESSMENT PROCEEDINGS 3.1 DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED THAT THE ASSESSEE SUFFERED SHORT - TERM CAPITAL LOSS (STCL) OF RS . 213.08 LACS ON SALE OF SHARES OF AN ENTITY NAMELY GOMTI FINLEA SE . THIS ENTITY GOT MERGED WITH ANOTHER ENTITY NAMELY KDJ HOLIDAYSCAPES RESORTS . THE SET - OFF OF LOSSES ITA NO.4297/MUM/2018 SHRI JIMEET VIPUL MODI ASSESSMENT YEAR: 2014 - 15 3 THUS SUFFERED DURING THE YEAR WAS CLAIMED AGAINST SHORT - TERM CAPITAL GAINS EARNED DURING THE YEAR. THE WORKING OF LOSS HAS BEEN TABULATED IN PARA - 4.2 OF TH E ASSESSMENT ORDER. UPON PERUSAL OF THE SAME, IT COULD BE SEEN THAT THE ASSESSEE PURCHASED THE SHARES OF GOMTI FINLEASE BETWEEN THE PERIOD 19/12/2013 TO 07/01/2014 AT AVERAGE PRICE OF RS.182/ - APPROX. PER SHARE WHEREAS THE SHARES WERE SOLD ON 19/02/2014 AT AVERAGE PRICE OF RS.33/ - APPROX. PER SHARE. 3.2 THE QUANTUM OF LOSS ES WAS FOUND SUSPICIOUS IN VIEW OF THE FINDING OF KOLKATA INVESTIGATION WING WHILE CARRYING OUT INVESTIGATI ON I NTO 84 PENNY STOCK SCRIPS. DURING INVESTIGATION, STATEMENT OF VARIOUS OPERAT ORS, ENTRY - PROVIDERS AND STOCK - BROKERS WERE RECORDED WHEREIN THEY ADMITTED TO HAVE PROVIDED ACCOMMODATION ENTRIES IN THE FORM OF LONG - TERM CAPITAL GAINS AND SHORT - TERM CAPITAL LOSSES. IN THE STATEMENT RECORDED FROM SHRI NIKHIL JAIN AND SHRI BIDYOOT SARKAR, IT WAS ADMITTED THAT M/S GOMTI FINLEASE I.E. KDJRL WAS A PENNY STOCK SCRIP WHICH WAS USED TO PROVIDE ARTIFICIAL LOSSES TO VARIOUS BENEFICIARIES. ON THE BASIS OF THE SAME, THE SCRIP DEALT WITH BY THE ASSESSEE WAS HELD TO BE A PENNY STOCK SCRIP. 3.3 THE PR ICE MOVEMENT OF THIS SCRIP WAS TABULATED BY LD. AO IN PARA - 6.5 OF THE ORDER. IT WAS OBSERVED THAT LOSSES WERE BOOKED WHEN THE SHARE PRICES WERE GOING DOWN WHEREAS THE GAINS WERE EARNED WHEN THE PRICES WERE INCREASING. IT WAS ALSO NOTED THAT PRICE OF THE SH ARE WAS NOT COMMENSURATE WITH THE FINANCIAL PERFORMANCE OF THE COMPANY AND ACCORDINGLY, IT WAS CONCLUDED BY LD.AO THAT THE SHARE PRICES OF THE SCRIP WERE MANIPULATED IN ORDER TO PROVIDE ARTIFICIAL GAINS / LOSSES. THESE SHARES WERE PURCHASED BY THE ASSESSEE FROM A FAMILY CONCERN NAMELY ITA NO.4297/MUM/2018 SHRI JIMEET VIPUL MODI ASSESSMENT YEAR: 2014 - 15 4 SMRUDDHI STOCKBROKERS LTD. THE STATEMENT OF THE ASSESSEE WAS ALSO RECORDED ON 21/12/2016. 3.4 HOWEVER, I N REPLY TO SHOW - CAUSE NOTICE DATED 26/12/2016 , THE ASSESSEE REFUTED THE ALLEGATIONS OF LD. AO AND SUBMITTED THAT THE DIRE CT EVIDENCE IN THE FORM OF PURCHASE BILL OF SHARES, BANK STATEMENTS, DEMAT STATEMENTS WERE FILED IN SUPPORT OF THE TRANSACTIONS. THEREFORE, THE LOSSES WERE GENUINE AND FULLY ALLOWABLE. THE SALE / PURCHASE OF SHARES WAS DONE ON RECOGNIZED STOCK EXCHANGE WHI CH WAS SUPPORTED BY THE CONTRACT - CUM - BILL OF TRANSACTIONS ISSUED BY REGISTERED STOCK - BROKER, LEDGER ACCOUNT AS WELL AS DEMAT ACCOUNT STATEMENT SHOWING MOVEMENT OF SHARES. THE PURCHASE AS WELL AS SALE TRANSACTIONS TOOK PLACE THROUGH BANKING CHANNELS. THE AS SESSEE DENIED HAVING KNOWN SHRI NIKHIL JAIN OR SHRI BIDYOOT SARKAR. THE ASSESSEE ALSO DEMANDED CROSS - EXAMINATION OF THESE PERSONS IN CASE THEIR STATEMENT WAS USED AGAINST THE ASSESSEE AS EVIDENCE. 3.5 HOWEVER, REJECTING ALL THESE SUBMISSIONS AND GOING BY T HE INVESTIGATION FINDINGS, LD. AO CONCLUDED THAT SET - OFF OF SHORT - TERM CAPITAL LOSSES COULD NOT BE ALLOWED AND THE AMOUNT OF RS.321.31 LACS AS PAID BY THE ASSESSEE TOWARDS PURCHASE OF SHARES WAS TO BE ADDED BACK TO ASSESSEES TAXABLE INCOME AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. THE LD. AO ALSO ESTIMATED COMMISSION OF 3% AGAINST THESE TRANSACTIONS AND MADE ANOTHER ADDITION OF RS.6.39 LACS IN THE HANDS OF THE ASSESSEE U/S 69. APPELLATE PROCEEDINGS 4. 1 DURING APPELLATE PROCEEDINGS, THE ASSESSEE AGAIN REFUTED THE ALLEGATIONS OF LD. AO BY WAY OF ELABORATE WRITTEN SUBMISSIONS WHICH ITA NO.4297/MUM/2018 SHRI JIMEET VIPUL MODI ASSESSMENT YEAR: 2014 - 15 5 HAVE ALREADY BEEN EXTRACTED IN THE IMPUGNED ORDER. THE LD. CIT(A), AT THE OUTSET, NOTED THAT PROVISIONS OF SEC.68 WERE INVOKED BY LD. AO TO ADD BACK THE PURCHASE PRICE OF SHARE S. HOWEVER, THE PAYMENT FOR PURCHASE OF SHARES WAS MADE THROUGH BANKING CHANNELS WHICH STOOD CORROBORATED BY VARIOUS DOCUMENTS SUBMITTED BY THE ASSESSEE. ALL THE PAYMENT FOR PURCHASES WAS MADE THROUGH ACCOUNT PAYEE CHEQUES WHICH WERE DEBITED IN ASSESSEES BOOKS OF ACCOUNTS. THUS, THE TRANSACTION WAS A D EBIT ENTRY IN THE BOOKS OF ACCOUNTS AND THEREFORE, THE PURCHASE PRICE PAID BY THE ASSESSEE COULD NOT BE HELD TO BE UNEXPLAINED CASH CREDIT IN THE BOOKS OF ACCOUNT. THIS BEING SO, THE PROVISIONS OF SEC.68 WOUL D HAVE NO APPLICABILITY TO THE FACT OF THE CASE AND THE ADDITION WAS TOTALLY ON A WRONG FOOTING. THEREFORE, THE IMPUGNED ADDITIONS WERE NOT SUSTAINABLE UNDER LAW. 4.2 AT THE SAME TIME, IN PARA - 5.3, IT WAS OBSERVED BY LD. CIT(A) THAT LD. AO HAD NOT CONSIDE RED THE DOCUMENTS PERTAINING TO PURCHASE AND SALE OF SHARES OF GOMTI FINLEASE (INDIA) LIMITED . THESE DOCUMENTS WERE IN THE SHAPE OF CONTRACT NOTE , BANK STATEMENTS, BROKERS LEDGER AND DEMAT ACCOUNT STATEMENT OF THE ASSESSEE WHICH WERE DULY SUBMITTED AT THE TIME OF ASSESSMENT PROCEEDINGS . THE ASSESSEE HA D FULLY DISCHARGED THE ONUS TO PROVE THE TRANSACTIONS . THE ASSESSEE HAD PURCHASED THE SHARES O F A LISTED COMPANY THROUGH RECOGNIZED STOCK BROKER ON BS E AND SIMILARLY SOLD THE SHARES THROUGH RECOGNIZED STOCK BR OKE R ON BSE AT THE PREVALENT PRICE. AS REGARDS ADJUSTMENT / FLUCTUATION IN RATE ( RS 494/ - TO RS. 99/ - ), THE SAME WAS DUE TO SPLIT TING OF SHARES SINCE THE SCRIP HAD FACE VALUE OF RS.10/ - WHICH WAS SPLIT ON 26/12/2013 TO RS.2/ - PER SHARE. ACCORDINGLY, THE MA RKET VALUE WAS REDUCED IN THAT PROPORTION. THE ITA NO.4297/MUM/2018 SHRI JIMEET VIPUL MODI ASSESSMENT YEAR: 2014 - 15 6 A SSESSEE HAD FULLY DISCHARGED HIS ONUS TO PROVE THE TRANSACTION OF PURCHASE OF SHARES INCLUDING SOURCE OF FUNDS FOR THE PURCHASE. THE A SSESSEE FURNISHED J USTIFICATION FOR PURCHASE OF SHARES BASED ON THE MARKET INFORMATION THAT THE SAID COMPANY , AS PER SPECIAL RESOLUTION PASSED ON 29 / 11 / 2012 AND THE BOARD OF DIRECTORS MEETING HELD ON 09/03/2013 , HAD DECIDED TO INVEST RS . 15 CRORES IN THE EQUITY OF KDJ HOSPITAL L IMITED WHEREIN THE COMPANY HAD EXISTING EQUITY OF 40 .76%. BY MAKING ADDITIONAL INVESTMENT, THE HOLDING WOULD BE MORE THAN 75% AND ACCORDINGLY, THE SCRIP EXHIBITED A CONSISTENT HIGHER - TOP HIGHER - BOTTOM PATTERN O N ITS CHARTS . IT HAS ALSO EXHIBITED PATTERN OF CORRECTING AND BOUNCING B ACK FROM ITS 14 DAYS MOVIN G AVERAGE WH ICH ALSO COINCIDED WITH A LOWER - BOTTOM IN THE CHARTS. THE STOCK W A S TRADING WELL ABO VE THE LONG - TERM AVERAGE I . E . 200 DAYS MOVING AVERAGE OF THE STOCK, WHICH IN DICATED THAT THE LONG TERM TREND OF THE STOCK WAS FIRMLY UP. THE SAID SHARES WERE SO LD AS THE PRICE OF ANY SCRIPT WOULD BE MARKET DRIVEN. SINCE THE ASSESSEE WAS AN INVESTOR, WHEN THE PRICES WERE CONTINUOUSLY FALLING , THE ASSESSEE EXITED FROM THE SAID SCRIPT AND BOOKED LOSSES TO SAFEGUARD HIMSELF AGAINST FUTURE LOSSES. THE STATEMENT OF SHR I NIKHIL JAIN AND SHRI BID YOOT SARKAR AS REFERRED TO B Y LD. AO DID NOT CONTAIN ANY REFERENCE TO THE ASSESSEE. THE RELIANCE ON THE SAID STATEMENT WITHOUT ANY CO - RELATION DOES NOT PROVE TH AT THE TRANSACTIONS WERE NON - GENUINE. THERE WAS NO EVIDENCE OF ANY CAS H TRANSACTION AND LD. AO FAILED TO BRING ON RECORD ANY EVIDENCE TO SUPPORT THE CONCLUSIONS THAT THE LOSSES WERE NOT GENUINE. RATHER THE CONCLUSIONS WERE BASED MERELY ON S URMISES AND CONJECTURES . ON THE OTHER HAND , THE ASSESSEE HAD FURNISHED ALL THE DOCUMEN TARY EVIDENCES IN SUPPORT OF THE CLAIM. ITA NO.4297/MUM/2018 SHRI JIMEET VIPUL MODI ASSESSMENT YEAR: 2014 - 15 7 4.3 FINALLY, RELYING UPON THE DECISION OF HONBLE BOBAY HIGH COURT IN THE CASE OF CIT VS. MUKESH RATILAL M AROLIA ( ITA 456 OF 2007 DATED 07/09/2011) , THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN CASE OF PR. CIT VS. PREM LAL GANDHI ( ITA N O .95 OF 2017 DATED 18/01/2018) AND THE DECISION OF DELHI TRIBUNAL IN CHANDER PRAKASH VS. ITO IN ( ITA NO. 6880/DEL/2017 DATED 12 /03/2018) , THE IMPUGNED ADDITIONS AS WELL AS CONSEQUENTIAL ADDITION OF ESTIMATE D COMMISSION , AS MAD E BY LD.AO, WAS DELETED. AGGRIEVED, THE REVENUE IS IN FURTHER APPEAL BEFORE US. OUR FINDINGS & ADJUDICATION 5. AFTER HAVING GONE THROUGH THE FINDINGS OF LD. CIT(A) IN THE IMPUGNED ORDER, THE UNDISPUTED FACT THAT EMERGES ARE THAT THE PURCHASE AS WELL AS SA LE TRANSACTIONS HAVE TAKEN PLACE ON STOCK EXCHANGE THROUGH STOCK - BROKER. THERE IS MOVEMENT OF SHARES IN ASSESSEES DEMAT STATEMENT. THE TRANSACTIONS HAVE TAKEN PLACE THROUGH BANKING CHANN E LS AND DULY SUPPORTED BY BROKERS CONTRACT NOTES, DEMAT STATEMENTS, LEDGER STATEMENTS AS WELL AS BANK STATEMENTS. THE ASSESSEE IS REGULAR INVESTOR IN SHARES. THE ASSESSEE HAS ALWAYS MAINTAINED THAT THE TRANSACTIONS WERE GENUINE. AS AGAINST THIS, THE ONLY ADVERSE MATERIAL IN THE ARMORY OF LD. AO IS THE INVESTIGATION FINDING S. HOWEVER, THE ASSESSEE HAS NOT BEEN NAMED IN ANY OF THE STATEMENT. THE ASSESSEE HAS DENIED HAVING KNOWN SHRI NIKHIL JAIN & SHRI BIDYOOT SARKAR WHOSE STATEMENTS FORM THE VERY BASIS OF DOUBTING THE ASSESSEES TRANSACTIONS. THE ASSESSEE, AS RIGHTLY POINTED OUT BY LD. CIT(A), HAD DULY DISCHARGED THE ONUS TO ESTABLISH THE GENUINENESS OF THE TRANSACTIONS AND THE ONUS WAS ON LD. AO TO DISLODGE THEM. HOWEVER, EXCEPT FOR MERE ALLEGATIONS, THERE IS NO ITA NO.4297/MUM/2018 SHRI JIMEET VIPUL MODI ASSESSMENT YEAR: 2014 - 15 8 ADVERSE MATERIAL AGAINST THE ASSESSEE AND THE ADDITIONS ARE BASE D MERELY ON CONJECTURES AND SURMISES. ANOTHER ASPECT IS THAT THE PROVISIONS OF SEC.68, AS INVOKED BY LD. AO, HAD NO APPLICABILITY TO THE FACT OF THE CASE. THE INVOKING OF WRONG PROVISIONS WOULD MAKE THE ADDITIONS UNSUSTAINABLE IN THE EYES OF LAW. THEREFORE , WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE HAS BEEN CLINCHED IN THE RIGHT PERSPECTIVE BY LD.CIT(A) IN THE IMPUGNED ORDER. FINDING NO REASON TO INTERFERE IN THE SAME, WE DISMISS THE APPEAL. 6. IN THE RESULT, THE APPEAL STANDS DISMISSED. ORDER PR ONOUN CED ON 29 TH JULY 20 21. SD/ - SD/ - (JUSTICE P.P. BHATT) (MANOJ KUMAR AGGARWAL) PRESIDENT ACCOUNTANT MEMBER MUMBAI; DATED : 29.07.2 021 SR.PS , JAISY VARGHESE / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI .