Smt. Sadhana, Bangalore V. Income Tax Officer, Bangalore

ITA 508/BANG/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5345 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 02-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWAPNA DAS JT BENGALURU
• Keywords: Principle of natural justice; Accommodation entries; Penny stocks
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC - B BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER ITA NO.508/BANG/2017 ASSESSMENT YEAR : 2008-09 SMT. SADHANA, NO.13/1, 2 ND FLOOR, K. V. TEMPLE STREET, BENGALURU-560 053. PAN: ACRPS 2408 P VS. THE INCOME TAX OFFICER, EARLIER: WARD-1(3), NOW: WARD-2(2)(5), BENGALURU. APPELLANT RESPONDENT APPELLANT BY : SHRI SUDHEENDRA, FCA RESPONDENT BY : SMT. SWAPNA DAS, JT.CIT(DR)(ITAT)-2, BENGALURU DATE OF HEARING : 16.05.2017 DATE OF PRONOUNCEMENT : 26.05.2017 O R D E R THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER OF CIT(APPEALS) INTER ALIA ON THE FOLLOWING GROUNDS:- 1. THE LEARNED ASSESSING OFFICER HAD ERRED IN PASS ING THE ORDER IN THE MANNER PASSED BY HIM AND THE LEARNED COMMISSIONER O F INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE SAME. THE IMPUGNED ORDERS BEING BAD IN LAW, VOID AB-INITIO ARE REQUIRED TO BE QUASHED. 2.1 IN ANY CASE, THE CONDITIONS PRECEDENT FOR THE ISSUE OF NOTICE U/S. 148 OF THE ACT BEING ABSENT, THE RE-OPENING OF ASSESSMENT BECOMES BAD IN LAW AND CONSEQUENTLY THE ORDER AS PASSED/CONFIRMED BEIN G ALSO BAD IN LAW IS 2.. ITA NO. 508/BANG/2017 PAGE 2 OF 5 REQUIRED TO BE QUASHED. 2.2 IN ANY CASE, THE IMPUGNED ORDER PASSED WITHOUT COMPLYING THE LEGAL FORMALITIES REQUIRED U/S 147 OF THE ACT, BECOME BAD IN LAW AND IS REQUIRED T O BE QUASHED. 3.1 IN ANY CASE THE ORDER PASSED IN GROSS VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE AND FAIR PLAY, ESPECIALLY IN THE AB SENCE OF THE CROSS EXAMINATIONS OF THE PERSONS WHOSE AVERMENTS ARE SOU GHT TO BE RELIED UPON BY THE ASSESSING OFFICER WHILE PASSING THE ORDER, M AKES THE ORDER TOTALLY BAD IN LAW AND LIABLE TO BE CANCELLED. 3.2 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS INSTEAD OF QUASHING THE IMPUGNED ORDER, HAS JUST CONFIRMED THE ORDER OF ASSESSING OFFICER WITHOUT PROPERLY CONSIDERING THE FACT AND C IRCUMSTANCES OF THE CASE, ARGUMENTS OF THE APPELLANT AND THE LAW APPLICABLE. 3.3. IN ANY CASE AND WITHOUT PREJUDICE, THE ORDERS PASSED BY THE AUTHORITIES BELOW BEING CONTRARY TO BINDING DICTUM OF THE JURISDICTIONAL HIGH COURT ARE BAD IN LAW AND ARE LIABLE TO BE QUAS HED. 4. THE ASSESSING OFFICER HAD IN ANY CASE, ERRED IN TREATING A SUM OF RS. 5,42,863/- BEING SALE CONSIDERATION RECEIVED ON SALE OF SHARES AS 'INCOME FROM OTHER SOURCES' AND THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE SAME. THE ACTION OF AUT HORITIES BELOW HAS NO SUPPORT IN LAW; IS CONTRARY TO FACTS AND EVIDENCE A VAILABLE AND THEREFORE DESERVES TO BE REJECTED. 5.1 IN ANY CASE AND WITHOUT FURTHER PREJUDICE, THE AUTHORITIES BELOW HAVE ERRED IN: A) TAXING/ CONFIRMING THE ENTIRE SALE CONSIDERATION RE CEIVED ON SALE OF SHARES AS INCOME UNDER THE HEAD OTHER SOURCES. B) NOT CONSIDERING THE FACT THAT THE APPELLANT HAD EA RNED LONG TERM CAPITAL GAIN ON SALE OF SHARES AND SUCH GAIN WAS EX EMPT U/S 10(38) OF THE ACT. C) HOLDING WITHOUT BASIS THAT THE TRANSACTIONS IN SHAR ES ARE FRAUDULENT D) ALLEGING WITHOUT ANY BASIS THAT THE APPELLANT HAS O BTAINED ACCOMMODATION ENTRIES AND APPELLANT'S OWN MONEY COM E BACK IN THE GUISE OF CAPITAL GAINS. E) HOLDING THAT THE APPELLANT CANNOT CLAIM TO BE AN IN NOCENT INVESTOR AS SHE HAS DEALT IN PENNY STOCKS AND EARNED EXTRA-ORDINARY PROFITS WHICH ARE NOT BACKED BY TRANSACTIONS ON THE FLOOR OF THE STOC K EXCHANGE. THE CONCLUSIONS / OBSERVATIONS OF AUTHORITIES BELOW BEING TOTALLY ERRONEOUS AND WITHOUT BASIS BOTH ON FACTS AND LAW IS TO BE DISREGARDED. - 2 - ITA NO. 508/BANG/2017 PAGE 3 OF 5 5.2 THE SEVERAL OBSERVATIONS MADE AND VARIOUS CONCL USIONS DRAWN BY THE LOWER AUTHORITIES IN THE COURSE OF ORDER ARE WITHOU T BASIS AND EVIDENCE AND ARE MADE/DRAWN ON SURMISES, PROBABILITIES AND CONJECTUR ES. SUCH OBSERVATIONS AND CONCLUSIONS BY QUASI-JUDICIAL AUTHORITIES HAVE NO S UPPORT IN LAW AND DESERVE TO BE REJECTED IN TOTO. 6. THE APPELLANT HAD ACTUALLY SOLD SHARES THROUGH D EMAT ACCOUNT AND HAD EARNED CAPITAL GAIN THEREON AND SAME NEEDS TO B E ACCEPTED AS SUCH. 7. THE APPELLANT DENIES THE LIABILITY TO PAY INTERE ST. THE INTEREST HAVING BEEN LEVIED ERRONEOUSLY IS TO BE DELETED. 8. IN VIEW OF THE ABOVE AND OTHER GROUNDS TO BE AD DUCED AT THE TIME OF HEARING IT IS REQUESTED THAT THE IMPUGNED O RDER BE QUASHED OR AT LEAST THE INCOME FROM LONG TERM CAPITAL GAIN EARNED ON SALE OF SHARES AS CLAIMED EXEMPT U/S 10(38) OF THE ACT BY THE APPELLA NT BE ACCEPTED, THE ASSESSMENT OF SALE CONSIDERATION RECEIVED ON SALE O F SHARES AS INCOME FROM OTHER SOURCES BE DELETED AND THE INTEREST LEVIED BE ALSO DELETED. 2. DURING THE COURSE OF HEARING, THE LD. COUNSEL F OR THE ASSESSEE HAS INVITED MY ATTENTION TO THE ASSESSMENT ORDER WITH T HE SUBMISSION THAT SEARCH WAS CONDUCTED IN A GROUP OF SHRI MUKESH CHOK SI AND ON THE BASIS OF THE STATEMENT OF SHRI MUKESH CHOKSI, THE AO HAS TREATED THE SHARE TRANSACTIONS ENTERED UPON BY THE ASSESSEE AS BOGUS AND MADE THE ADDITION OF THE SAME IN THE HANDS OF THE ASSESSEE. 3. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTEND ED DURING THE COURSE OF ASSESSMENT PROCEEDINGS ASSESSEE HAS ASK ED FOR OPPORTUNITY TO CROSS-EXAMINE SHRI MUKESH CHOKSI, WHOSE STATEMEN T IS BEING RELIED UPON FOR MAKING THE ADDITION IN THE HANDS OF ASSESS EE; BUT THE ASSESSEE HAS NOT BEEN AFFORDED OPPORTUNITY TO CROSS-EXAMINE HIM. RATHER, STATEMENT OF SHRI MUKESH CHOKSI RECORDED DURING THE COURSE OF HIS OWN ASSESSMENT WAS ALSO NOT CONFRONTED TO THE ASSESSEE. THEREFORE, THE ITA NO. 508/BANG/2017 PAGE 4 OF 5 ADDITIONS MADE IN THE HANDS OF ASSESSEE ARE NOT SUS TAINABLE IN THE EYES OF LAW. 4. THE LD. DR, ON THE OTHER HAND, HAS PLACED RELIAN CE UPON THE ORDER OF CIT(APPEALS). 5. HAVING CAREFULLY EXAMINED THE ORDERS OF LOWER AU THORITIES IN THE LIGHT OF RIVAL SUBMISSIONS, I FIND THAT DURING THE COURSE OF SEARCH CONDUCTED UPON THE SHRI MUKESH CHOKSI GROUP, STATEMENT OF SHRI MUK ESH CHOKSI WAS RECORDED AND IN HIS STATEMENT HE HAS ADMITTED THAT HE WAS PROVIDING ACCOMMODATION ENTRIES TO THOSE WHO WERE INTERESTED TO EARN CAPITAL GAIN. ON A CAREFUL PERUSAL OF THE ASSESSMENT ORDER, I FIN D THAT THERE IS NO FINDING WITH REGARD TO THE SUPPLY OF STATEMENT OF SHRI MUKE SH CHOKSI TO THE ASSESSEE. MOREOVER, NOTHING IS AVAILABLE ON RECORD , WHEREFROM IT COULD BE INFERRED THAT ASSESSEE WAS EVER ALLOWED TO CROSS-EX AMINE MR. MUKESH CHOKSI. IT IS SETTLED POSITION OF LAW THAT STATEME NT OR THE EVIDENCE WHICH IS BEING RELIED UPON BY THE AO FOR MAKING THE ADDITION IN THE HANDS OF ASSESSEE, THE SAME SHOULD BE CONFRONTED TO THE ASSE SSEE AND THE ASSESSEE SHOULD BE ALLOWED TO CROSS-EXAMINE THE WIT NESS IN THIS REGARD. 6. FROM A CAREFUL PERUSAL OF THE ORDERS OF LOWER AU THORITIES, IT IS QUITE EVIDENT THAT STATEMENT OF MR. MUKESH CHOKSI WAS REL IED ON FOR MAKING THE ADDITION, BUT ASSESSEE WAS NEVER ALLOWED TO CROSS-E XAMINE HIM. IN THESE CIRCUMSTANCES, I AM OF THE VIEW THAT THE AO WAS NOT JUSTIFIED IN MAKING ADDITION IN THE HANDS OF ASSESSEE, WITHOUT ALLOWING THE ASSESSEE TO CROSS- ITA NO. 508/BANG/2017 PAGE 5 OF 5 EXAMINE MR. MUKESH CHOKSI, WHOSE STATEMENT WAS RELI ED UPON FOR MAKING THE ABOVE ADDITIONS. I ACCORDINGLY SET ASIDE THE O RDER OF CIT(APPEALS) AND RESTORE THE MATTER TO THE FILE OF AO WITH A DIRECTI ON TO FIRST CONFRONT THE STATEMENT OF MR. MUKESH CHOKSI TO THE ASSESSEE AND ALLOW HIM TO CROSS- EXAMINE MR. MUKESH CHOKSI TO DIG OUT THE TRUTH IN T HIS REGARD. ACCORDINGLY, THE APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF MAY, 2017. SD/- (SUNIL KUMAR YADAV ) JUDICIAL MEMBER BANGALORE, DATED, THE 26 TH MAY, 2017. / NSHYLU /* COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.