Shri Hasmukhbhai Giradharbhai Kankhara, Jamnagar V. The Income Tax Officer, Ward-1(3), Jamnagar

ITA 440/RJT/2018

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 5630 (ITAT-RAJKOT)
• Duration Of Justice: 5 year(s) 7 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 30-06-2024
• Assessment Year: 2014-2015
• Appeal Filed On: 10-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BRIJESH PAREKH
• Keywords: Unexplained cash credit; Business income; Bogus
• Section: 68; 10; 143(3); 143(1); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER AND SHRI DINESH MOHAN SINHA, JUDICIAL MEMBER आयकर अपील सं./ITA No.440/RJT/2018 (Assessment Year: 2014-15) (Hybrid Hearing) Hasmukhbhai G. Kankhara, Shop No.12, Shrushti Apartment, Opp . Sun Shine School, Walkeshwari Nagari, Jamnagar, Gujarat-361001 Vs. I.T.O., Ward-1(3), Jamnagar थायीलेखासं./जीआइआरसं./PAN/GIR No.: ADNPK3320R (अपीलाथ /Assessee) ( यथ /Respondent) नधा रतीक ओरसे / Assessee by : Shri Chetan Agarwal and Shri Brijesh Parekh, AR राज वक ओरसे/Revenue by : Shri V.J. Boricha, Sr. DR स ु नवाईक तार ख/ Date of Hearing : 01/07/2024 घोषणाक तार ख/Date of Pronouncement : 25/07/2024 आदेश/ORDER PER ARJUN LAL SAINI, AM: The captioned appeal filed by the assessee, pertaining to Assessment Year 2014-15, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals), Jamnagar vide order dated 26.09.2018, which, in turn, arises out of an assessment order passed by the assessing officer (AO) under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to “as the Act”) vide order dated 28.12.2016. I.T.A No.440/Rjt/2018 A.Y. 2014-15 Hasmukhbhai G. Kankhara vs. ITO 2 2. The grounds of appeal raised by the assessee are as follows: “1. Ld. CIT(A) erred in law as well as on fact in confirming addition of Rs.43,899/- being made by AO on account of withdrawal of exemption claimed u/s. 10(38) on account of sale of shares of listed securities. 2. Ld. CIT(A) erred in law as well as on fact in confirming addition of Rs.43,899/- being made by AO on conjecture, surmise and presumptions. 3. Ld. CIT(A) erred in law as well as on fact in confirming addition of Rs.43,899/- being made by AO without providing opportunity of cross examination of deponents statement recorded in cases of third person without ascertaining applicability of same on our facts of the case.” 3. Succinctly, the factual panorama of the case is that assessee before us is an Individual and has filed his return of income for Assessment Year 2014-15, on 31.03.2015, declaring total income of Rs. 13,04,462/-. The return of income was processed u/s 143(1) of the Income Tax Act, 1961 accepting the income declared by the assessee. Later on, the assessee`s case was selected for complete scrutiny through CASS and accordingly, notice u/s 143(2) of the I. T. Act, 1961 was issued to the assessee. The assessing officer noticed that assessee had declared long term capital gain on sale of shares, exempt from taxation under section 10 (38), of Rs. 41,478/-. Therefore, the assessing officer, issued a notice to the assessee, to explain the transaction. In response, the assessee submitted before the assessing officer, the return of income along with profit and loss account, balance sheets, statement of total income etc. These documents were examined by the assessing officer and it was found that assessee has claimed long term profit of Rs. 41,478/-, as exempt income. The capital gain was received from sale of shares on BSE and payment was received from the broker Ventura Securities Limited. The assessee had made following calculation regarding income from long term capital gain on sale of shares exempt from taxation under section 10(38) of the Income tax Act, 1961: I.T.A No.440/Rjt/2018 A.Y. 2014-15 Hasmukhbhai G. Kankhara vs. ITO 3 Name of company Sale price Purchase price Transfer expenses Exempt u/s 10 (38) Sunrise Asian Limited Rs. 43,899/- Rs. 2,421/- 0 Rs. 41,478/- On further examination of the sale of share transactions made by the assessee during the year it was found by the assessing officer that the entire sale proceeds were received from sale of one scrip i.e. M/s Sunrise Asian Limited (Earlier named as M/s Akai Asian Limited) only. The assessee was asked to give details regarding when and how the shares were purchased and evidence in this respect. The assessee submitted that he (assessee) has sold 100 shares during the year under consideration. The same was purchased by him from on 07.01.2011 and it was demat on 23.02.2011 and transactions were through banking channels and assessee also submitted the debit note and other evidence before the assessing officer. 4. However, assessing officer rejected the contention of the assessee and noted that entire edifice was basically a colourable device to give the colour of genuineness of these transactions through which assessee was successful in bringing back his own unaccounted cash into his books without the payment of taxes. Thereafter, the AO has relied on the judgment of CIT vs. P. Mohanakala, 161 taxman 169 and also relied on the judgment of the Supreme Court in the case of Sumati Dayal vs. CIT 214 ITR 801 and held that the amount of Rs.43,899/- credited by the assessee out of these share, sale receipts during the F.Y. 2013-14, relevant to A.Y.2014-15 in his capital account as his income being unexplained cash credit under Section 68 of the Act which is taxable @ 30%, as I.T.A No.440/Rjt/2018 A.Y. 2014-15 Hasmukhbhai G. Kankhara vs. ITO 4 provided under Section 115BBE of the Act. Therefore, the AO made the addition to the tune of Rs.43,899/-. 5. Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal before the Ld. CIT(A), who has confirmed the action of the assessing officer. The ld CIT(A) noticed that the transactions of purchase of shares of ‘Sunrise Asian Ltd.’ for an aggregate consideration of Rs.2,421/- and subsequent sale of such shares of ‘Sunrise Asian Ltd’ for Rs.43,899/- i.e. during the financial year under consideration falls within the ambit of adventure in the nature of trade. The ld CIT(A) also noticed that claim of long term capital gain of Rs.41,478/- in the case of assessee u/s 10(38) of the Act, is an accommodative entry. Alternatively, ld CIT(A) also held that the profit of Rs.41,478/- (i.e. Rs.43,899 - 2,421) is also taxable under the head business income. This way, the ld. CIT( A) confirmed the addition made by the assessing officer. 6. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us. 7. Shri Chetan Agarwal, Learned Counsel for the assessee, pleaded that first of all, nobody can enter into penny stock transaction for small amount of Rs.41,478/- (Rs.43,899- Rs.2,421). The transaction was made by the assessee through banking channel, assessee submitted debit note and other evidences during the assessment proceedings and shares were sold from the demat account, therefore genuineness of the transaction should not be doubted. The Ld. Counsel stated that assessing officer made addition purely on assumption and conjecture without bringing any material on record that assessee’s unaccounted money was used in this transaction. The Ld. Counsel also stated that no instances of cash I.T.A No.440/Rjt/2018 A.Y. 2014-15 Hasmukhbhai G. Kankhara vs. ITO 5 transactions were noticed by the assessing officer. The assessing officer, did not bring any cogent evidence on the record to show that assessee’s unaccounted money was introduced in the guise of such small amount of Rs. 41,478/-. The ld. Counsel, therefore, stated that transaction done by the assessee, is genuine and no additions should be made in the hands of the assessee. 8. On the other hand, the Ld. D.R. for the Revenue submitted that although the amount is small, that is, it is to the tune of Rs. 41,478/- only, however, the scrip involved in the transaction is the ‘Sunrise Asian Ltd’ which is penny stock scrip. Transaction, through banking channel, does not make the transaction genuine, hence, the addition made by the assessing officer, may be upheld. 9. We have heard the Learned Counsel appearing on behalf of the respective parties at length. The assessee, before us, submitted copy of bank statement which is placed at Paper Book Page No. 5, wherein the proceeds of sale of shares to the tune of Rs. 43,899/- is credited in the bank account, hence the transactions were done by the assessee through proper banking channel. The Ld. Counsel also submitted the Contract Note wherein the entire details are mentioned, which is placed at Paper Book Page No. 6. The Ld. Counsel also submitted the statement of transaction cum holding statement from 1 st April, 2013 to 31 st March, 2014, which is placed at Paper Book Page No. 7, and debit note of Lunkad Textiles Pvt. Ltd, which is placed at Paper Book Page No. 8. The Ld. Counsel also submitted the receipt from Lunkad Textiles Pvt. Ltd, which is placed at Paper Book Page No. 9, and the bank statement of the Navanagar Cooperative Bank Ltd., Jamnagar, which is placed at Paper Book Page No. 10- 11 of the assessee’s paper book. The Ld. Counsel further submitted that as per I.T.A No.440/Rjt/2018 A.Y. 2014-15 Hasmukhbhai G. Kankhara vs. ITO 6 the rules of the Stock Exchange, the assessee has paid the Security Transaction Tax (STT). We also find that impugned addition made by the assessing officer is very small, that is, it is Rs. 43,899/- only, which is below the maximum amount, which is not chargeable to tax. 10. We find that Assessee had purchased shares (Sunrise Asain Ltd) on 07/01/2011 and demat on 23/11/2011, through, "Puna E-stock Broking". After holding of shares for more than 2 years, assessee sold on 14/05/2013, through "Ventura Securities Ltd" through, "Bombay Stock Exchange" and STT was paid by assessee accordingly. The sale consideration received through banking channel in the Union Bank of India of Rs.43,899/-. The difference between sale and purchase of Rs.41,478/-, was Long term capital gain and claimed as an exempted, income in income Tax Return, filed by the assessee. All the share transactions incorporated in books of accounts of the assessee. All the shares were ‘in and out’ through demat account, so possibility of bogus share transactions does not arise. All the conditions mentioned u/s 10(38) of the Act, were fulfilled by the assessee for claiming exempted income. Assessee provided all the documents to the assessing officer, during the course of assessment proceedings, for verification of genuineness of share transactions. 11. We find that as per assessment order from page No. 2 to 25, the Assessing officer made detailed analysis of share transactions but after that analysis assessing officer does not concluded that share transaction made by assessee was not genuine. We note that during the assessment proceedings, the assessee requested for cross examination of above party in his presence. Assessee also requested during assessment proceeding for verification of transactions to stock I.T.A No.440/Rjt/2018 A.Y. 2014-15 Hasmukhbhai G. Kankhara vs. ITO 7 exchange as well as broker through whom share transactions were made but assessing officer was not able to do so. The Assessing officer believed that Assessee made only one share transaction and gained abnormal profit but it is not a base to prove that this is accommodation entry or bogus shares, as there is no cash deposit in any bank account relating to the said transaction. We note that all the transactions of shares, sales and purchases, were incorporated in the books of accounts of the assessee, so there is no question of unexpected income or investment. We note that assessee has submitted, before us, the following judgments, which favour the assessee`s case, under consideration: (i) Navneet Agarwal L/h. of Late Kiran Agarwal vs. ITO, Ward-35(3), Kolkata, ITA No. 2281/Kol/2017. (ii) Shri Pramod Kumar Lodha vs. ITO, Ward-6(2), Jaipur, ITA No. 826/JP/2014. (iii) ITO vs. M/s. Arvind Kumar Jain-HUF, ITA No. 4862/Mum/2014. (iv) Sanjay Bhimalchand Jian L/h Shantidevi Bimalchand Jian vs. PCIT-I, Nagpur, in ITA No. 18/2017. (v) CIT-I vs. Maheshchandra G. Vakil, 220 taxman 166, (Gujarat - HC) (vi) CIT-I vs. Himani M. Vakil, 221 taxman 140, (Gujarat - HC) 12. We note that the alleged circumstances, colourable devices, mentioned by the assessing officer, in the assessment order, and circumstantial evidences and material has led the assessing officer (A.O.) to believe that the real is not the apparent. In the absence of any link between the assessee and the alleged circumstances, human probability is being used by the assessing officer, as a vague, and convenient medium, for the department’s conjectures. We find that reliance by the assessing officer, on vague observations and drawing an adverse I.T.A No.440/Rjt/2018 A.Y. 2014-15 Hasmukhbhai G. Kankhara vs. ITO 8 inference without any admissible evidence on record, is bad in law, and void-ab- initio. Hence, we delete the addition made by the assessing officer. 13. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 25-07-2024 Sd/- Sd/- (DINESH MOHAN SINHA) (A. L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Rajkot Dated: 25/07/2024 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Rajkot 6. Guard file. By order/आदेश से, // TRUE COPY // Assistant Registrar/Sr. P.S./P.S. ITAT, Rajkot