Ritu Mittal, Burhanpur V. ITO Burhanpur, Burhanpur

ITA 435/Ind/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3843 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 18-01-2021
• Assessment Year: 2015-2016
• Appeal Filed On: 05-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Principle of natural justice; Earning of tax free income; Question of law; Cost of acquisition; Fair market value; Accommodation entries; Benefit of exemption; Sham transactions; Penny stocks; Capital Gains; Bogus
• Section: 68; 263; 10; 69C; 143(3); 142(1); 143(2); 13

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE HONBLE MANISH BORAD, ACCOUNTANT MEMBER AND HONBLE MADHUMITA ROY, JUDICIAL MEMBER ITA NO.434/IND/2019 ASSESSMENT YEAR 2015-16 SMT. NEELAM MITTAL, : APPELLANT 35, MANGALDEEP, ADARSH COLONY, BURHANPUR (M.P) PAN : AJIPM9958J V/S ITO, BURHANPUR : RESPONDENT ITA NO.435/IND/2019 ASSESSMENT YEAR 2015-16 SMT. RITU MITTAL, : APPELLANT 35, MANGALDEEP, ADARSH COLONY, BURHANPUR (M.P) PAN : AHVPM9575E V/S ITO, BURHANPUR : RESPONDENT SMT. NEELAM MITTAL & ANR ITA NO.434 & 435/IND/2019 2 REVENUE BY SHRI HARSHIT BARI, SR.DR ASSESSEE BY SHRI PANKAJ SHAH , CA DATE OF HEARING 08 .04 .2021 DATE OF PRONOUNCEMENT 2 5 . 0 5 . 202 1 O R D E R PER BENCH THE ABOVE CAPTIONED APPEALS FILED AT THE INSTANCE OF THE ASSESSEE(S) FOR ASSESSMENT YEAR 2015-16 ARE DIREC TED AGAINST THE ORDERS OF LD. COMMISSIONER OF INCOME TAX(APPEALS)-I I (IN SHORT LD. CIT], INDORE EVENLY DATED 25.01.2019 WHICH ARE ARIS ING OUT OF THE ORDER U/S 143(3) OF THE INCOME TAX ACT 1961(IN SHO RT THE ACT) DATED 24.11.2017 & FRAMED BY ITO-BURHANPUR RESPECT IVELY. 2. ASSESSEE(S) HAS RAISED FOLLOWING GROUNDS OF APPE AL:- (I) SMT. NEELAM MITTAL ITA NO.434/IND/2019 ASSESSME NT YEAR 2015-16 1 . ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-II , INDORE ('CIT(A)') ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN MAKING ADDITION IN THE ASSESSMENT AND NO T ACCEPTING THE INCOME AS RETURNED BY THE APPELLANT. THE APPELLANT PRAYS THAT THE SAID ADDITION AND ADJUSTME NT BE DELETED AND RETURNED INCOME BE ACCEPTED. 2.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION O F ASSESSING OFFICER IN DISALLOWING THE CLAIM OF LONG TERM CAPITAL GAINS ON SALE OF LISTED SHARES AMOUNTING TO RS.1654277. THE APPELLANT PRAYS THAT THE SAID SMT. NEELAM MITTAL & ANR ITA NO.434 & 435/IND/2019 3 DISALLOWANCE BE DIRECTED TO BE DELETED. 3.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN NOT PROVIDING OR CONFRONTING TH E ALLEGED INFORMATION, THIRD PARTY MATERIAL AND STATEMENTS, I F ANY, WHICH HAVE BEEN RELIED FOR DRAWING ADVERSE INFERENC E IN DISALLOWING THE CLAIM OF EXEMPTION UNDER SECTION 10 (38) OF THE ACT. THE APPELLANT PRAYS THAT THE SAID DISALLOW ANCE MADE IN CONTRAVENTION TO PRINCIPLES OF NATURAL JUST ICE BE DIRECTED TO BE DELETED. 4.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT T HE SHARES HAVE BEEN SOLD ON RECOGNIZED STOCK EXCHANGE AND THE SAME CANNOT BE DOUBTED AND ACCORDINGLY THE SALE PROCEEDS CANNOT BE TREATED AS UNEXPLAINED. ACCORDIN GLY THE APPELLANT PRAYS THAT THE SAID TREATMENT BY AO B E DIRECTED TO BE QUASHED AND THE APPLICATION OF SECTI ON 68 OF THE ACT DIRECTED TO BE REJECTED. 5. THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER AND/OR AMEND ALL OR ANY OF THE FOREGOING GROUNDS OF APPEAL . (II) SMT. RITU MITTAL ITA NO.435/IND/2019 ASSESSME NT YEAR 2015-16 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-II, IN DORE ('CIT(A)') ERRED IN CONFIRMING THE ACTION OF ASSESS ING OFFICER IN MAKING ADDITION IN THE ASSESSMENT AND NO T ACCEPTING THE INCOME AS RETURNED BY THE APPELLANT. THE APPELLANT PRAYS THAT THE SAID ADDITION AND ADJUSTME NT BE DELETED AND RETURNED INCOME BE ACCEPTED. 2.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION O F ASSESSING OFFICER IN DISALLOWING THE CLAIM OF LONG TERM CAPITAL GAINS ON SALE OF LISTED SHARES AMOUNTING TO RS.1654277. THE APPELLANT PRAYS THAT THE SAID DISALLOWANCE BE DIRECTED TO BE DELETED. SMT. NEELAM MITTAL & ANR ITA NO.434 & 435/IND/2019 4 3.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN NOT PROVIDING OR CONFRONTING TH E ALLEGED INFORMATION, THIRD PARTY MATERIAL AND STATEMENTS, I F ANY, WHICH HAVE BEEN RELIED FOR DRAWING ADVERSE INFERENC E IN DISALLOWING THE CLAIM OF EXEMPTION UNDER SECTION 10 (38) OF THE ACT. THE APPELLANT PRAYS THAT THE SAID DISALLOW ANCE MADE IN CONTRAVENTION TO PRINCIPLES OF NATURAL JUST ICE BE DIRECTED TO BE DELETED. 4.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT T HE SHARES HAVE BEEN SOLD ON RECOGNIZED STOCK EXCHANGE AND THE SAME CANNOT BE DOUBTED AND ACCORDINGLY THE SALE PROCEEDS CANNOT BE TREATED AS UNEXPLAINED. ACCORDIN GLY THE APPELLANT PRAYS THAT THE SAID TREATMENT BY AO B E DIRECTED TO BE QUASHED AND THE APPLICATION OF SECTI ON 68 OF THE ACT DIRECTED TO BE REJECTED. 5.THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER AND/O R AMEND ALL OR ANY OF THE FOREGOING GROUNDS OF APPEAL . 3. FROM PERUSAL OF THE ABOVE GROUNDS WE FIND THAT T HE COMMON ISSUES HAVE BEEN RAISED FIRSTLY RELATES TO GENUINEN ESS OF LONG TERM CAPITAL GAIN(IN SHORT LTCG), CLAIMED EXEMPT U/S 10( 38) OF THE ACT ARISING FROM SALE OF EQUITY SHARES OF KAPPAC PHARMA LIMITED AND SECONDLY LEGAL ISSUE THAT OPPORTUNITY OF CROSS EXAM INATION NOT PROVIDED TO ASSESSEE(S). 4. AS ISSUES RAISED AND FACTS ARE COMMON, AT THE RE QUEST OF ALL THE PARTIES, THESE APPEALS WERE HEARD TOGETHER AND BEIN G DISPOSED OFF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENI ENCE AND BREVITY. AS AGREED BY ALL THE PARTIES WE WILL TAKE UP THE FACTS OF ASSESSEE NAMELY NEELAM MITTAL TO ADJUDICATE THE COM MON ISSUES. SMT. NEELAM MITTAL & ANR ITA NO.434 & 435/IND/2019 5 5. BRIEF FACTS OF THE CASE AS CULLED OUT FROM THE R ECORDS ARE THAT THE ASSESSEE IS AN INDIVIDUAL. SHE FILED E-RETURN OF IN COME ON 29.10.2015 SHOWING INCOME AT RS.3,22,610/-. CASE SE LECTED UNDER COMPLETE SCRUTINY THROUGH CASS FOLLOWED BY SERVING OF NOTICES U/S 143(2) AND 142(1) OF THE ACT. WHILE EXAMINING RECOR DS IT WAS REVEALED THAT DURING THE YEAR ASSESSEE HAD EARNED L TCG AT RS.16,54,277/- FROM SALE OF 3000 EQUITY SHARES OF K APPAC PHARMA LIMITED (IN SHORT KPL) PURCHASED FOR RS.6,000/-. TH E ASSESSEE CLAIMED IT TO BE EXEMPT INCOME U/S 10(38) OF THE AC T BUT THE SAME WAS NOT DISCLOSED IN THE INCOME TAX RETURN. LD. AO CALLED FOR VARIOUS DETAILS PERTAINING TO THIS TRANSACTION. THE ASSESSEE FILED VARIOUS DOCUMENTS IN SUPPORT OF PURCHASE AND SALE O F SHARES. PURCHASE WAS OFFLINE IN CASH MADE FROM A PRIVATE LI MITED COMPANY AND SALE WAS THROUGH A REGISTERED BROKER ON THE REC OGNIZED STOCK EXCHANGE. LD. AO CALLED FOR INFORMATION FROM THE SE LLER OF THE SHARES LOCATED AT AHMEDABAD. THE NOTICE WAS RETURNED UN-SE RVED. LD. AO DOUBTED THE PURCHASE WHICH WAS MADE AT RS.2 PER SHA RE. LD. AO FURTHER EXAMINED THE SALE TRANSACTION AND WAS ABLE TO LAY HANDS ON A REPORT DATED 13.04.2016 ISSUED BY JOINT DIRECTOR INVESTIGATION, INDORE FOR THE ALLEGED GROUP OF CONCERNS ENGAGED IN PROVIDING BOGUS LTCG BY WAY OF BRINGING THE PRICES OF THE SHARES AT ABNORMALLY HIGH PRICE WHICH ARE MUCH HIGHER THAN THE FAIR MARKET VA LUE OF THE SHARES. THE ASSESSEE SOLD THE SHARES DURING APRIL A ND MAY 2014. SECURITY EXCHANGE BOARD OF INDIA SUSPENDED THE TRAD ING OF KAPPAC SMT. NEELAM MITTAL & ANR ITA NO.434 & 435/IND/2019 6 PHARMA LIMITED ON 1 ST JANUARY, 2015. LD. AO DOUBTED THE COMPLETE TRANSACTION AND HELD IT TO BE BOGUS AND NON GENUINE DENIED THE BENEFIT OF EXEMPTION AND ADDED RS.16,54,227/- AS IN COME FROM OTHER SOURCE. THE INCOME ASSESSED AT RS.19,76,890/- . 6. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE TH E LD. CIT(A) BUT FAILED TO GET ANY RELIEF. LD. CIT(A) PLACING RELIAN CE ON VARIOUS DECISIONS CAME TO THE CONCLUSION THAT COMPLETE TRA NSACTION OF PURCHASE AND SALE OF SHARES ARE SHAM WHICH CANNOT S TAND THE TEST OF HUMAN PROBABILITY AND ALSO HELD THAT ASSESSEE IS INDULGED IN ARRANGING BOGUS LTCG TO CLAIM EXEMPTION U/S 10(38) OF THE ACT. 7. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNA L. LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED REFERRING TO THE WRI TTEN SUBMISSIONS RUNNING FROM PAGES 1 TO 16 FILED DURING THE COURSE OF HEARING, GIVING DETAILS OF FACTS OF THE CASE, ARGUM ENTS MADE AND RELIANCE PLACED ON VARIOUS DECISIONS. 8. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD DULY DISCHARGED ITS ONUS BY FILING ALL THE NECESSAR Y DOCUMENTS IN ORDER TO SUPPORT THE GENUINENESS OF PURCHASE AND SA LE OF EQUITY SHARE OF KAPPAC PHARMA LIMITED. THE IMPUGNED ADDITI ON MADE IN THE HANDS OF ASSESSEE IS BASED ON AN INVESTIGATION REPORT WHICH WAS CARRIED OUT IN CASE OF ANOTHER PERSON TO WHICH THE ASSESSEE IS NOT CONNECTED AND ALSO NO OPPORTUNITY TO CROSS EXAMINE MR. NISHANT NIYATI WAS PROVIDED EVEN AFTER MAKING SPECIFIC REQU EST. HE SMT. NEELAM MITTAL & ANR ITA NO.434 & 435/IND/2019 7 SUBMITTED THAT IN VIEW OF THE JUDGMENT OF THE HON'B LE APEX COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES VS. CCE 281 CTR 241(SC ). THE IMPUGNED ADDITION IS LIABLE TO BE DELETED AND T HE PROCEEDINGS DESERVES TO BE QUASHED AS THE ASSESSEE WAS NOT PROV IDED ANY OPPORTUNITY TO CROSS EXAMINE THE PERSON ON THE BASI S OF WHOSE STATEMENT ADDITION HAS BEEN MADE IN THE HANDS OF AS SESSEE. LD. COUNSEL FOR THE ASSESSEE ALSO REFERRED TO VARIOUS D OCUMENTS FILED IN THE PAPER BOOK DATED 07.04.2021 RUNNING FROM PAGES 1 TO 17. RELIANCE WAS PLACED ON FOLLOWING DECISIONS: 1. ARUN KUMAR V. ACIT (ITANO.457/DEL/2018) 2. USHA SINGHANIA V. ITO (ITANO.1495/KOL/2018 3. SHYAM SUNDAR AGARWAL V. ITO (ITANO.1714/KOL/2018 4. SURESH KUMAR CHUG V. ITO (ITA NO.2789/DEL/2018 5. SIDHARTHA JAIN VS. ITO (ITANO.4459/DEL/2017 6. HIMANSHU CHAUDHARY V. ITO (ITANO.7772/DEL/2017 7. RADHIKA GARG V. ITO (ITANO.2429/DEL/2018 8. YOGENDRA DALMIA ITANO.774/KOL/2018 DATED 09.08.2 019 (I.T.A.T., KOLKATA) 9. KRISHNA DEVI ITANO.125 OF 2020 DATED 15.01.2021( HIGH COURT OF DELHI) 9. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE VEHEM ENTLY ARGUED SUPPORTING THE ORDERS OF BOTH LOWER AUTHORITIES. RE LIANCE WAS PLACED ON VARIOUS DECISIONS REFERRED BY LD. CIT(A) AND IN ADDITION RELIANCE WAS ALSO PLACED ON THE FOLLOWING JUDGMENTS: 1. UDIT KALRA VS. ITO WARD-50(1) ITANO.220/2019 DATED 08.03.2019(DELHI HC) 2. UDIT KALRA, VS. ITO ITANO.6717/DEL/2017 DATED 08 .01.2019 3. SUMAN PODDAR VS. ITO [2019} 112 TAXMANN.COM 330 (SC) SMT. NEELAM MITTAL & ANR ITA NO.434 & 435/IND/2019 8 10. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US AND CAREFULLY GONE THROUGH THE JUDGMENTS REFERRED AND RELIED BY BOTH SIDES. THE COMMON ISSUE ON MERIT REL ATES TO GENUINENESS OF CLAIM OF LTCG FROM SALE OF EQUITY SH ARES OF KAPPAC PHARMA LIMITED TO BE EXEMPT U/S 10(38) OF THE ACT A ND COMMON LEGAL GROUND HAS BEEN RAISED FOR QUASHING THE ASSES SMENT PROCEEDINGS AS NO OPPORTUNITY WAS PROVIDED TO CROSS EXAMINE THE THIRD PERSON WHOSE STATEMENT WAS ADOPTED AS A BASIS TO MAKE ADDITION IN THE HANDS OF ASSESSEE. IN THE CASE OF A SSESSEE NAMELY NEELAM MITTAL AGAINST GROSS SALE CONSIDERATION OF R S.16,54,277/- DEDUCTION OF PURCHASE COST OF RS.6000/- WAS CLAIMED AND THE NET GAIN IS CLAIMED EXEMPT U/S 10(38) OF THE ACT AT RS. 16,48,277/-. THE SIMILAR AMOUNT OF PURCHASE AND SALE AND LTCG IS SHO WN IN THE CASE OF RITU MITTAL. IN BOTH THESE CASES THE PURCHA SES WERE MADE OFFLINE IN CASH AND SALE AFFECTED ON A RECOGNIZED S TOCK EXCHANGE THROUGH REGISTERED BROKER AND SHARE TRANSFERRED FRO M DMAT ACCOUNT. HOWEVER, LD. AO HAS HELD THE COMPLETE TRAN SACTIONS FROM PURCHASE AND SALE AS A SHAM TRANSACTIONS AND HAVE A LLEGED THE ASSESSEE HAS TAKEN AN ACCOMMODATION ENTRY OF BOGUS LTCG IN ORDER TO CONVERT IT UNACCOUNTED MONEY BY CLAIMING E XEMPT U/S 10(38) OF THE ACT ON THE BASIS OF INVESTIGATION REP ORTS IN OTHER CASES AND ALSO DOUBTING THE ABNORMAL INCREASE IN SHARE PR ICE OF KAPPAC PHARMA LIMITED IN A VERY SHORT SPAN. SMT. NEELAM MITTAL & ANR ITA NO.434 & 435/IND/2019 9 11. WE OBSERVE THAT OFFLINE PURCHASES ARE MADE FROM PVT. LTD. COMPANY. THE DETAILS OF WHICH WERE PROVIDED IN THE DEBIT NOTE. IT IS NOT CLAIMED BY ASSESSEE THAT THE PURCHASE ARE MADE THROUGH REGISTERED BROKER. IT WAS A DIRECT PURCHASE FROM A SHAREHOLDER WHO WAS ALLOTTED SHARES IN NOVEMBER 2010. KPL IS A LIMI TED COMPANY HAVING ITS REGISTERED OFFICE AT MUMBAI. IT ALLOTTED SHARES TO VARIOUS SHAREHOLDERS IN 2010. THEREAFTER IN 2012 ON 18.09.2 012 BOTH THE ASSESSEE(S) PURCHASED 3000 EQUITY SHARES EACH AT RS .2 PER SHARE AND PAID CASH. PURCHASING OF EQUITY SHARES ON OFFLI NE MODE IS NOT BARRED IN LAW. AFTER THE PURCHASE THE SHARES WERE L ODGED FOR GETTING TRANSFER IN THE NAME OF ASSESSEE AND THE SAME WAS C OMPLETED ON 09.10.2012 BY TRANSFER NO.26217 AND REGISTERED FOLI O NO.AS0273 IN THE CASE OF NEELAM MITTAL & VIDE TRANSFER NO.26218 BY REGISTERED FOLIO NO.TS0022 IN CASE OF TITU MITTAL. THEREAFTER THESE SHARES WERE SOLD THROUGH MEMBER OF BOMBAY STOCK EXCHANGE NAMELY INDIRA SECURITIES PVT. LTD. HAVING SEBI REGN. NO. INB01128 6631. THE SALE CONSIDERATION SO RECEIVED WAS CREDITED TO THE BANK ACCOUNT OF THE ASSESSEE. WE FURTHER NOTE THAT THE SHARES ARE S OLD THROUGH REGISTERED BROKERS ON THE STOCK EXCHANGE. THE DETAI LS OF BUYERS OF THE SHARES ARE NOT VISIBLE AS ALL SUCH TRANSACTION OF PURCHASE AND SALE ON THE RECOGNIZED STOCK EXCHANGE ARE CARRIED O UT THROUGH REGISTERED BROKERS AND WORK UNDER A SOFTWARE CONTRO LLED BY SEBI. SO THE GENUINENESS OF DOCUMENTS EVIDENCING SALE CO NSIDERATION FROM SALE OF SHARES HAS NOT BEEN DOUBTED BY REVENUE AUTHORITIES. SMT. NEELAM MITTAL & ANR ITA NO.434 & 435/IND/2019 10 12. IT IS ALSO BROUGHT TO OUR NOTICE THAT THE TRADI NG OF EQUITY SHARES OF KPL WAS SUSPENDED FROM 1 ST JANUARY 2015 BUT THE TRANSACTION OF SALE OF SHARES IN THE CASE OF ASSESS EE WAS CARRIED OUT ALMOST 9 MONTHS BEFORE I.E. IN APRIL & MAY 2014 WHE N THERE WAS NO SUCH RESTRICTION ON TRADING OF EQUITY SHARES OF KPL ON THE PORTAL OF STOCK EXCHANGE. THE PURCHASE AND SALE OF EQUITY SHA RES OF KPL WERE ALLOWED FOR ALL THOSE WHO WANTED TO DEAL IN THIS SC RIP. 13. WE FURTHER NOTE THAT LD. AO HAS REFERRED TO INV ESTIGATION REPORT PERTAINING TO SOME PERSONS WHO ARE ALLEGED T O BE INDULGED IN PROVIDING ACCOMMODATION ENTRY TO VARIOUS PERSONS IN THE FORM OF BOGUS CAPITAL GAIN AGAINST CHARGING OF SOME BROKERA GE/COMMISSION. NO SUCH REPORT HAS BEEN FILED BEFORE US. LD. AO HAS ALSO NOT ALLOWED THE REQUEST OF ASSESSEE TO CROSS EXAMINE TH E PERSON BASED ON WHOSE STATEMENT THE ADDITION HAVE BEEN MADE IN T HE HANDS OF ASSESSEE. IT IS CLEARLY A VIOLATION OF PRINCIPLES O F NATUREL JUSTICE WHICH THE ASSESSEE IS ELIGIBLE TO BE ALLOWED AS TH E ASSESSEE WAS SUBJECTED TO TAX ON THE ADDITIONS MADE. THIS RATIO WAS LAID DOWN BY THE HON'BLE APEX COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES VS. CCE 281 CTR 241 (SC) THAT NOT ALLOWING THE ASSESSEE TO CROSS- EXAMINE THE WITNESSES BY THE ADJUDICATING AUTHORITY THOUGH THE STATEMENTS OF THOSE WITNESSES WERE MADE THE BASIS O F THE IMPUGNED ORDER IS A SERIOUS FLAW WHICH MAKES THE ORDER NULL ITY INASMUCH AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BECAUSE OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED . SMT. NEELAM MITTAL & ANR ITA NO.434 & 435/IND/2019 11 14. SIMILAR VIEW WAS ALSO TAKEN BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF PR. CIT VS. PARADISE INLAND SHIPPING PVT. LTD. [201 7] 84 TAXMANN.COM 58 (BOMBAY) HAS HELD THAT ONCE THE ASSESSEE HAS PRODUCED DOCUMENTARY EVIDENCE TO ESTABLISH THE EXIS TENCE OF SUCH COMPANIES, THE BURDEN SHIFTS TO THE REVENUE TO ESTA BLISH THEIR CASE. RELIANCE ON STATEMENTS OF THIRD PARTIES IS NOT PERM ISSIBLE. VOLUMINOUS DOCUMENTS PRODUCED BY THE ASSESSEE CANNOT BE DISCAR DED MERELY ON THE BASIS OF STATEMENTS OF INDIVIDUALS CONTRARY TO SUCH PUBLIC DOCUMENTS. 14A. IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE APEX COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES VS. CCE (SUPRA), WE FIND THAT IN THE INSTANT CASE ALSO THERE IS A VIOLATION OF PRINC IPLE OF NATURAL JUSTICE AS BOTH THE ASSESSEE(S) WERE NOT ALLOWED TO CROSS EXAMINE THE PERSON AND THE STATEMENTS WERE MADE ON THE BASI S OF THE ADDITION. WE THEREFORE ALLOW THE LEGAL GROUND COMM ONLY RAISED THROUGH GROUND NO.3 BY BOTH THE ASSESSEE(S) HOLDING THAT NO ADDITION SHOULD HAVE BEEN MADE WITHOUT PROVIDING OP PORTUNITY OF CROSS EXAMINATION WITH MR. NISHANT NYATI TO BOTH TH E ASSESSEE(S) NAMELY SMT. NEELAM MITTAL AND SMT. RITU MITTAL AS THE STATEMENT OF MR. NISHANT NYATI WAS TAKEN AT THE BACK OF THE A SSESSEE(S). THUS THE COMMON GROUND NO.3 RAISED BY BOTH THE ASSESSEE( S) ARE ALLOWED. 15. AS REGARDS MERITS OF THE CASE, WE FIND THAT THE ISSUE RAISED IN THE INSTANT CASE OF QUESTION OF GENUINENESS OF LONG TERM CAPITAL SMT. NEELAM MITTAL & ANR ITA NO.434 & 435/IND/2019 12 GAIN FROM SALE OF SHARES OF KAPPAC PHARMA LIMITED I S SQUARELY COVERED BY THE DECISION OF CO-ORDINATE BENCH OF KOL KATTA IN THE CASE OF YOUGENDRA DALMIA (SUPRA) AND THE RELEVANT EXTRACT IS REPRODUCED BELOW: PARA 6 NEXT COMES ASSESSEES LATTER APPEAL ITA NO.775/KOL/2018 SEEKING TO REVERSE BOTH THE LOWER A UTHORITIES ACTION TREATING HIS SALE PROCEEDS AMOUNTING TO RS.1 ,81,009/- DERIVED FROM SALE OF SHARES IN M/S GCM SECURITIES P VT. LTD AND KAPPAC PHARMA LTD. HAS TO BE IN THE NATURE OF UNEXP LAINED CASH CREDITS. BOTH THE LOWER AUTHORITIES HAVE FURTHER DI SALLOWED THE ALLEGED COMMISSION EXPENDITURE @ 5% THEREUPON WITH COMING TO 1,81,009/- U/S. 69C OF THE ACT. THE CIT(A)S DETAI LED DISCUSSION UNDER CHALLENGE TO THIS EFFECT READS AS UNDER:-.... ....... PARA 7 WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATIO N TO RIVAL CONTENTIONS. THERE CAN HARDLY BE ANY DISPUTE THAT A SSESSEE HAS PLACED ON RECORD HIS SUPPORTIVE DOCUMENTARY EVIDENC E COMPRISING OF RELEVANT PURCHASE BILLS OF SHARES ALLOTMENT, CER TIFIED COPIES, CONTRACT NOTES, BROKERAGE DETAILS ETC. WE PUT UP A SPECIFIC QUERY AS TO WHETHER ANY OF ENTRY OPERATORS SEARCHED OR SURVE Y HAS QUOTED THESE ASSESSEES NAMES OR NOT BEFORE THE DEPARTMENTA L AUTHORITIES. THERE IS NO SUCH MATERIAL IN THE CASE FILE INDICATI NG SUCH AS STATEMENT. I FIND THAT THIS CO-ORDINATE BENCHS DEC ISION IN ITA NO. 1918/KOL/2018 IN SMT. SANGITA JHUNJHUNWALA VS. ITO DECIDED ON 04.01.2019 HAS DELETED SIMILAR BOGUS LTCG VIDE FOLL OWING DETAILED DISCUSSION IN PARA 3 TO 5 AS UNDER........ .... PARA 8 THIS TRIBUNALS YET ANOTHER DECISION IN ( 2017) 60 ITR (TRIB) 1 (BANG) CANARA BANK VS. JCIT HOLDS THAT THE ESTOPPLE PRINCIPLE DOES NOT APPLY IN INCOME TAX PROCEEDINGS. WE THEREFORE REJECT REVENUES ARGUMENTS IN SUPPORT OF IMPUGNED A DDITION. WE TAKE INTO ACCOUNT ALL THE RELEVANT FACTS AND CIRCUM STANCES TO ADOPT THE LEARNED CO-ORDINATE BENCHS ABOVE EXTRACTED DET AILED REASONING MUTATIS MUTANDIS TO DELETE THE IMPUGNED ADDITION FO RMING SUBJECT- MATTER OF THE INSTANT APPEAL. COMMISSION EXPENDITUR E DISALLOWANCE; IF ANY, SHALL AUTOMATICALLY FOLLOW SU IT AS A NECESSARY COROLLARY. NO OTHER ARGUMENT HAS BEEN RAISED BEFORE US DURING THE COURSE OF HEARING. THIS ASSESSEES LATTER APPEAL IT A NO. 775/KOL/2018 IS ALLOWED. [EMPHASIS SUPPLIED] SMT. NEELAM MITTAL & ANR ITA NO.434 & 435/IND/2019 13 16. FURTHER THIS TRIBUNAL IN THE CASE OF ADITYA MUNDRA VS. PR. CIT (SUPRA) HAS ALSO DEALT WITH THE SIMILAR ISSUE RELATING TO KPL THOUGH WITH REFERENCE TO PROCEEDINGS U/S 263 OF THE ACT OB SERVING AS FOLLOWS: 1. PARA 37 ON THE OTHER HAND ALL THE RELEVANT DOCUMENTS TO PR OVE THE PURCHASE AND SALE WERE BEFORE THE LD. A.O. PURCHASE S WERE AT THE FAIR MARKET VALUE AT RS.12/-. SALES HAVE BEEN EFFEC TED THROUGH REGISTERED BROKER AFTER PAYMENT OF SECURITY TRANSAC TION TAX AND SOLD AT THE PRICES APPEARING AT THE RECOGNIZED STOCK EXC HANGE. MERELY OBSERVING THAT THE PRICES OF THE EQUITY SHARES HAVE BEEN INCREASED DRASTICALLY CANNOT BE A EVIDENCE IN ITSELF TO TREAT THE TRANSACTIONS AS BOGUS. THERE ARE NUMBER OF INCIDENCES WHERE THE SHA RE PRICES OF CERTAIN LISTED COMPANIES INCREASED DRASTICALLY BUT THAT ALL DEPENDS ON DEMAND AND SUPPLY OF THE EQUITY SHARE, PERCEPTIO N OF ITS GROWTH AND THE MARKET SENTIMENTS. UNLESS AND UNTIL THE COM PANY OF WHICH THE EQUITY SHARES ARE BEING TRADED IS FOUND TO BE I NVOLVED IN MALPRACTICES THE FINANCIAL RESULTS ARE NOT COMMENSU RATE WITH THE PRICES AT THE NSE/BSE PORTAL AND SUFFICIENT PROOFS ARE AVAILABLE SHOWING THE ALLEGED COMPANY TO BE A BOGUS/PENNY STO CK OR PAPER COMPANY, ONE CANNOT QUESTION THE GENUINENESS OF TRA NSACTIONS CARRIED OUT ON THE PORTAL OF NSE/BSE WHICH ARE UNDE R THE CONTROL OF SECURITIES AND EXCHANGE BOARD OF INDIA.' [EMPHASIS SUPPLIED] S17. AS REGARDS THE JUDGMENT RELIED BY THE LD. DR W E FIND THAT THE CASE OF THE TRIBUNAL IN THE CASE OF UDIT KALRA (SUPRA) IS A DECISION GIVEN BY A SINGLE MEMBER ON 08.01.2019 AND THE SAME WILL NOT BE APPLICABLE, SINCE THE COORDINATE BENCH KOLKATA BEIN G A DOUBLE BENCH HAS DECIDED THE VERY SAME ISSUE IN FAVOUR OF ASSESSEE VIDE ORDER DATED 09.08.2019. SMT. NEELAM MITTAL & ANR ITA NO.434 & 435/IND/2019 14 18. AS REGARDS THE JUDGMENT OF HON'BLE DELHI HIGH C OURT IN THE CASE OF SUMAN PODDAR VS. ITO [2019] 112 TAXMANN.COM 329 (DE LHI), THE SPECIAL LEAVE PETITION FILED AGAINST THE ORDER OF H ON'BLE HIGH COURT WAS DISMISSED BY HON'BLE SUPREME COURT BUT IN THIS CASE THE ISSUE RELATED TO SALE OF EQUITY SHARES OF CRESSANDA SOLUT IONS LTD. WHERE AS IN THE CASE OF ASSESSEE COMPANY IS KPL. THE FACT S ARE ALSO DIFFERENT AS IN THE CASE OF ASSESSEE IN THE INSTANT APPEAL, THERE WAS NO RESTRICTION BY THE SEBI ON THE TRADING OF SHARES OF KPL ON THE BOMBAY STOCK EXCHANGE ON THE DATES WHEN SALE TRANSA CTION TOOK PLACE. IT WAS ALMOST AFTER 9 MONTHS THAT THE TRADIN G WAS SUSPENDED. THERE ARE ALSO NO DOCUMENTARY EVIDENCE TO PROVE THA T THE ASSESSEE WAS INDULGED IN MANAGING THE AFFAIR OF PROVIDING AC COMMODATION ENTRY. JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF SUMAN PODDAR (SUPRA) WAS SUBSEQUENTLY CONSIDERED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF PR. CIT VS. SMT. KRISHNA DEVI (SUPRA) AND SINCE THERE WAS NO EVIDENCE PRODUCED BY THE LD. AO TO SHOW THAT THERE WAS AN AGREEMENT BETWEEN ASSESSEE AND ANY OTH ER PARTY WHICH ARE ALLEGED TO BE INVOLVED IN PROVIDING ACCOM MODATION ENTRY, THE APPEAL OF THE REVENUE WAS DISMISSED BY THE HON' BLE COURT OBSERVING AS FOLLOWS: 11. ON A PERUSAL OF THE RECORD, IT IS EASILY DISCERN IBLE THAT IN THE INSTANT CASE, THE AO HAD PROCEEDED PREDOMINANTLY ON THE BASIS OF THE ANALYSIS OF THE FINANCIALS OF M/S GOLD LINE INTERNATIONAL FINVEST LIMITED. HIS CONCLUSION AND FIN DINGS AGAINST THE RESPONDENT ARE CHIEFLY ON THE STRENGTH O F THE ASTOUNDING 4849.2% JUMP IN SHARE PRICES OF THE AFOR ESAID COMPANY WITHIN A SPAN OF TWO YEARS, WHICH IS NOT SU PPORTED BY THE FINANCIALS. ON AN ANALYSIS OF THE DATA OBTAI NED FROM THE SMT. NEELAM MITTAL & ANR ITA NO.434 & 435/IND/2019 15 WEBSITES, THE AO OBSERVES THAT THE QUANTUM LEAP IN THE SHARE PRICE IS NOT JUSTIFIED; THE TRADE PATTERN OF THE AF ORESAID COMPANY DID NOT MOVE ALONG WITH THE SENSEX; AND THE FINANCIALS OF THE COMPANY DID NOT SHOW ANY REASON FO R THE EXTRAORDINARY PERFORMANCE OF ITS STOCK. WE HAVE NOT HING ADVERSE TO COMMENT ON THE ABOVE ANALYSIS, BUT ARE C ONCERNED WITH THE AXIOMATIC CONCLUSION DRAWN BY THE AO THAT T HE RESPONDENT HAD ENTERED INTO AN AGREEMENT TO CONVERT UNACCOUNTED MONEY BY CLAIMING FICTITIOUS LTCG, WHIC H IS EXEMPT UNDER SECTION 10(38), IN A PRE-PLANNED MANNER TO EVADE TAXES. THE AO EXTENSIVELY RELIED UPON THE SEA RCH AND SURVEY OPERATIONS CONDUCTED BY THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT IN KOLKATA, DELHI, MUMBAI AND AHMEDABAD ON PENNY STOCKS, WHICH SETS OUT THE MODUS OPERANDI ADOPTED IN THE BUSINESS OF PROVIDING ENTRIE S OF BOGUS LTCG. HOWEVER, THE RELIANCE PLACED ON THE REPORT, W ITHOUT FURTHER CORROBORATION ON THE BASIS OF COGENT MATERI AL, DOES NOT JUSTIFY HIS CONCLUSION THAT THE TRANSACTION IS BOGU S, SHAM AND NOTHING OTHER THAN A RACKET OF ACCOMMODATION ENTRIE S. WE DO NOTICE THAT THE AO MADE AN ATTEMPT TO DELVE INTO THE QUESTION OF INFUSION OF RESPONDENTS UNACCOUNTED MONEY, BUT HE DID NOT DIG DEEPER. NOTICES ISSUED UNDER SECTIONS 133(6)/131 O F THE ACT WERE ISSUED TO M/S GOLD LINE INTERNATIONAL FINVE ST LIMITED, BUT NOTHING EMERGED FROM THIS EFFORT. THE PAYMENT FO R THE SHARES IN QUESTION WAS MADE BY SH. SALASAR TRADING COMPANY. NOTICE WAS ISSUED TO THIS ENTITY AS WELL, B UT WHEN THE NOTICES WERE RETURNED UNSERVED, THE AO DID NOT TAK E THE MATTER ANY FURTHER. HE THEREAFTER SIMPLY PROCEEDED ON THE BASIS OF THE FINANCIALS OF THE COMPANY TO COME TO T HE CONCLUSION THAT THE TRANSACTIONS WERE ACCOMMODATION ENTRIES, A ND THUS, FICTITIOUS. THE CONCLUSION DRAWN BY THE AO, THAT TH ERE WAS AN AGREEMENT TO CONVERT UNACCOUNTED MONEY BY TAKING FI CTITIOUS LTCG IN A PRE-PLANNED MANNER, IS THEREFORE ENTIRELY UNSUPPORTED BY ANY MATERIAL ON RECORD. THIS FINDING IS THUS PURELY AN ASSUMPTION BASED ON CONJECTURE MADE BY THE AO. THIS FLAWED APPROACH FORMS THE REASON FOR THE LEARN ED ITAT TO INTERFERE WITH THE FINDINGS OF THE LOWER TAX AUTHORI TIES. THE LEARNED ITAT AFTER CONSIDERING THE ENTIRE CONSPECTUS OF CASE AND THE EVIDENCE BROUGHT ON RECORD, HELD THAT THE RES PONDENT HAD SUCCESSFULLY DISCHARGED THE INITIAL ONUS CAST UPO N IT UNDER SMT. NEELAM MITTAL & ANR ITA NO.434 & 435/IND/2019 16 THE PROVISIONS OF SECTION 68 OF THE ACT. IT IS RECOR DED THAT THERE IS NO DISPUTE THAT THE SHARES OF THE TWO COMPANIES WERE PURCHASED ONLINE, THE PAYMENTS HAVE BEEN MADE THROUG H BANKING CHANNEL, AND THE SHARES WERE DEMATERIALIZED AND THE SALES HAVE BEEN ROUTED FROM DE-MAT ACCOUNT AND THE CONSIDERATION HAS BEEN RECEIVED THROUGH BANKING CHAN NELS. THE ABOVE NOTED FACTORS, INCLUDING THE DEFICIENT EN QUIRY CONDUCTED BY THE AO AND THE LACK OF ANY INDEPENDENT SO URCE OR EVIDENCE TO SHOW THAT THERE WAS AN AGREEMENT BETW EEN THE RESPONDENT AND ANY OTHER PARTY, PREVAILED UPON THE IT AT TO TAKE A DIFFERENT VIEW. BEFORE US, MR. HOSSAIN HAS N OT BEEN ABLE TO POINT OUT ANY EVIDENCE WHATSOEVER TO ALLEGE THAT MONEY CHANGED HANDS BETWEEN THE RESPONDENT AND THE BROKER OR ANY OTHER PERSON, OR FURTHER THAT SOME PERSON PROVIDED TH E ENTRY TO CONVERT UNACCOUNTED MONEY FOR GETTING BENEFIT OF LT CG, AS ALLEGED. IN THE ABSENCE OF ANY SUCH MATERIAL THAT CO ULD SUPPORT THE CASE PUT FORTH BY THE APPELLANT, THE ADDITIONS CANNOT BE SUSTAINED. 12. MR. HOSSAINS SUBMISSIONS RELATING TO THE START LING SPIKE IN THE SHARE PRICE AND OTHER FACTORS MAY BE ENOUGH TO S HOW CIRCUMSTANCES THAT MIGHT CREATE SUSPICION; HOWEVER THE COURT HAS TO DECIDE AN ISSUE ON THE BASIS OF EVIDENCE AND PROOF, AND NOT ON SUSPICION ALONE. THE THEORY OF HUMAN BEHAVIO R AND PREPONDERANCE OF PROBABILITIES CANNOT BE CITED AS A B ASIS TO TURN A BLIND EYE TO THE EVIDENCE PRODUCED BY THE RESP ONDENT. WITH REGARD TO THE CLAIM THAT OBSERVATIONS MADE BY T HE CIT(A) WERE IN CONFLICT WITH THE IMPUGNED ORDER, WE MAY ONL Y NOTE THAT THE SAID OBSERVATIONS ARE GENERAL IN NATURE AN D LATER IN THE ORDER, THE CIT(A) ITSELF NOTES THAT THE BROKER DID NOT RESPOND TO THE NOTICES. BE THAT AS IT MAY, THE CIT(A) HAS O NLY APPROVED THE ORDER OF THE AO, FOLLOWING THE SAME REASONING, AND RELYING UPON THE REPORT OF THE INVESTIGATION WING. LASTLY, RELIANCE PLACED BY THE REVENUE ON SUMAN PODDAR V. ITO (SUPRA) AND SUMATI DAYAL V. CIT (SUPRA) IS OF NO ASSISTANCE. UPO N EXAMINING THE JUDGMENT OF SUMAN PODDAR (SUPRA) AT LE NGTH, WE FIND THAT THE DECISION THEREIN WAS ARRIVED AT IN LIGH T OF THE PECULIAR FACTS AND CIRCUMSTANCES DEMONSTRATED BEFORE THE ITAT AND THE COURT, SUCH AS, INTER ALIA, LACK OF EVIDENC E PRODUCED BY THE ASSESSEE THEREIN TO SHOW ACTUAL SALE OF SHARES IN THAT CASE. SMT. NEELAM MITTAL & ANR ITA NO.434 & 435/IND/2019 17 ON SUCH BASIS, THE ITAT HAD RETURNED THE FINDING OF F ACT AGAINST THE ASSESSEE, HOLDING THAT THE GENUINENESS OF SHARE TRANSACTION WAS NOT ESTABLISHED BY HIM. HOWEVER, TH IS IS QUITE DIFFERENT FROM THE FACTUAL MATRIX AT HAND. SIMILARLY , THE CASE OF SUMATI DAYAL V. CIT (SUPRA) TOO TURNS ON ITS OWN SPE CIFIC FACTS. THE ABOVE-STATED CASES, THUS, ARE OF NO ASSISTANCE TO THE CASE SOUGHT TO BE CANVASSED BY THE REVENUE. 13. THE LEARNED ITAT, BEING THE LAST FACT-FINDING AUT HORITY, ON THE BASIS OF THE EVIDENCE BROUGHT ON RECORD, HAS RIGH TLY COME TO THE CONCLUSION THAT THE LOWER TAX AUTHORITIES ARE N OT ABLE TO SUSTAIN THE ADDITION WITHOUT ANY COGENT MATERIAL ON RECORD. WE THUS FIND NO PERVERSITY IN THE IMPUGNED ORDER. 14. IN THIS VIEW OF THE MATTER, NO QUESTION OF LAW, MUCH LESS A SUBSTANTIAL QUESTION OF LAW ARISES FOR OUR CONSIDER ATION. 15. ACCORDINGLY, THE PRESENT APPEALS ARE DISMISSED. 19. WE, THEREFORE, IN VIEW OF THE ABOVE DISCUSSIONS AND RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY HON'BLE COURTS IN THE CASE OF PCIT V/S SMT. KRISHNA DEVI (SUPRA) AND THE DECISIONS OF COORDINATE BENCH KOLKATA IN THE CASE OF YOUGENDRA DALMIA (SUPR A) ARE SQUARELY APPLICABLE ON THE FACTS AND ISSUES RAISED BEFORE US ARE INCLINED TO HOLD THAT BOTH THE APPEALS DESERVES TO BE ALLOWED ON MERITS OF THE CASE, CONDITIONS FOR CLAIMING EXEMPT U/S 10(38) OF THE ACT WERE FULFILLED WITH REGARD TO THE SALE TRANSACT ION AND THE EVIDENCE SO PRODUCED IN SUPPORT THEREOF HAS NOT BEE N CONTROVERTED BY THE REVENUE AUTHORITIES. THUS THE COMMON GROUND S RAISED ON MERITS BY BOTH ASSESSEES ARE ALLOWED. SMT. NEELAM MITTAL & ANR ITA NO.434 & 435/IND/2019 18 20. IN THE RESULT, ALL GROUNDS RAISED BY THE ASSESS EE(S) ARE ALLOWED AND APPEALS FILED BY THE ASSESSEE IN ITANO. 434 & 4 35/IND/2019 ARE DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST T HE REVENUE. THE ORDER PRONOUNCED AS PER RULE 34 OF ITAT RULES, 1963 ON 25.05.2021. SD/- SD/- (MADHUMITA ROY) (MANIS H BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : 25.05.2021 PATEL/PS COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T.A.T., INDORE