Shri. Arvind Kumar Moolchand, Bangalore V. Deputy Commissioner of Income-Tax, Bangalore

ITA 509/BANG/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5366 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 02-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWAPNA DAS JT BENGALURU
• Assessee Lawyers: H N KHINCHA
• Keywords: Principle of natural justice; Accommodation entries; Penny stocks
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC - C BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER ITA NO.509/BANG/2017 ASSESSMENT YEAR : 2008-09 SHRI ARVIND KUMAR MOOLCHAND, NO.13, 2 ND FLOOR, K.V. TEMPLE STREET, SAURASHTRAPET, BENGALURU 560 0 63. PAN: AABPM 2746F VS. THE INCOME TAX OFFICER, WARD 2(2)(1), BENGALURU. APPELLANT RESPONDENT APPELLANT BY : SHRI H.N. KHINCHA, CA RESPONDENT BY : SMT. SWAPNA DAS, JT.CIT(DR)(ITAT)-2, BENGALURU DATE OF HEARING : 17.05.2017 DATE OF PRONOUNCEMENT : 19.05.2017 O R D E R THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF CIT(APPEALS) INTER ALIA ON THE FOLLOWING GROUNDS:- 1. THE LEARNED ASSESSING OFFICER HAD ERRED IN PAS SING THE ORDER IN THE MANNER PASSED BY HIM AND THE LEARNED C OMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE SAME. THE IMPUGNED ORDERS BEING BAD IN LAW, VOID AB-INITI O 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-OPE NING OF ASSESSMENT BECOMES BAD IN LAW AND CONSEQUENTLY THE ORDER AS PASSED/CONFIRMED BEING ALSO BAD IN LAW IS REQUIRED TO BE QUASHED. ITA NO.509/BANG/2017 PAGE 2 OF 6 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 TO BE QUASHED. 3.1 IN ANY CASE THE ORDER PASSED IN GROSS VIOLATIO N OF THE PRINCIPLES OF NATURAL JUSTICE AND FAIR PLAY, ESPECI ALLY IN THE ABSENCE OF THE CROSS EXAMINATIONS OF THE PERSONS WH OSE AVERMENTS ARE SOUGHT TO BE RELIED UPON BY THE ASSES SING OFFICER WHILE PASSING THE ORDER, MAKES THE ORDER TOTALLY BA D IN LAW AND LIABLE TO BE CANCELLED. 3.2 THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS INSTEAD OF QUASHING THE IMPUGNED ORDER, HAS JUST CO NFIRMED THE ORDER OF ASSESSING OFFICER WITHOUT PROPERLY CONSIDE RING THE FACT AND CIRCUMSTANCES OF THE CASE, ARGUMENTS OF THE APP ELLANT 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 LI ABLE TO BE QUASHED. 4. THE ASSESSING OFFICER HAD IN ANY CASE, ERRED IN TREATING A SUM OF RS. 5,42,863/- BEING SALE CONSIDERATION RECE IVED ON SALE OF SHARES AS 'INCOME FROM OTHER SOURCES' AND THE LEARN ED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN C ONFIRMING THE SAME. THE ACTION OF AUTHORITIES BELOW HAS NO SU PPORT IN LAW; IS CONTRARY TO FACTS AND EVIDENCE AVAILABLE AND THE REFORE 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 SOURC ES. B) NOT CONSIDERING THE FACT THAT THE APPELLANT HAD EAR NED LONG TERM CAPITAL GAIN ON SALE OF SHARES AND SUCH GAIN W AS EXEMPT U/S 10(38) OF THE ACT. C) HOLDING WITHOUT BASIS THAT THE TRANSACTIONS IN SHAR ES ARE FRAUDULENT ITA NO.509/BANG/2017 PAGE 3 OF 6 D) ALLEGING WITHOUT ANY BASIS THAT THE APPELLANT HAS OBTAINED 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 EARNE D EXTRA- ORDINARY PROFITS WHICH ARE NOT BACKED BY TRANSACTIO NS ON THE FLOOR OF THE STOCK EXCHANGE. THE CONCLUSIONS / OBSERVATIONS OF AUTHORITIES BELOW BEING TOTALLY ERRONEOUS AND WITHOUT BASIS BOTH ON FACTS A ND LAW IS TO BE DISREGARDED. 5.2 THE SEVERAL OBSERVATIONS MADE AND VARIOUS CONC LUSIONS DRAWN BY THE LOWER AUTHORITIES IN THE COURSE OF ORD ER ARE WITHOUT BASIS AND EVIDENCE AND ARE MADE/DRAWN ON SURMISES, PROBABILITIES AND CONJECTURES. SUCH OBSERVATIONS AND CONCLUSIONS BY QUASI- JUDICIAL AUTHORITIES HAVE NO SUPPORT IN LAW AND DES ERVE TO BE REJECTED IN TOTO. 6. THE APPELLANT HAD ACTUALLY SOLD SHARES THROUGH DEMAT ACCOUNT AND HAD EARNED CAPITAL GAIN THEREON AND SAM E NEEDS TO BE ACCEPTED AS SUCH. 7. THE APPELLANT DENIES THE LIABILITY TO PAY INTER EST. THE INTEREST HAVING BEEN LEVIED ERRONEOUSLY IS TO BE DE LETED. 8. IN VIEW OF THE ABOVE AND OTHER GROUNDS TO BE AD DUCED AT THE TIME OF HEARING IT IS REQUESTED THAT THE IMPUGN ED ORDER BE QUASHED OR ATLEAST THE INCOME FROM LONG TERM CAPITA L GAIN EARNED ON SALE OF SHARES AS CLAIMED EXEMPT U/S 10(3 8) OF THE ACT BY THE APPELLANT BE ACCEPTED, THE ASSESSMENT OF SAL E CONSIDERATION RECEIVED ON SALE OF SHARES AS INCOME FROM OTHER SOU RCES BE DELETED AND THE INTEREST LEVIED BE ALSO DELETED. 2. DURING THE COURSE OF HEARING, THE LD. COUNSEL F OR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE ASSESSMENT ORDER WITH THE SUBMISSION THAT SEARCH WAS CONDUCTED IN A GROUP OF SHRI MUKESH CHOK SI AND ON THE BASIS OF THE STATEMENT OF MUKESH CHOKSI, THE AO HAS TREAT ED THE SHARE ITA NO.509/BANG/2017 PAGE 4 OF 6 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 MUKESH CHOKSI RECORDED DURING THE COUR SE OF HIS OWN ASSESSMENT WAS ALSO NOT CONFRONTED TO THE ASSESSEE. THEREFORE, THE 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 MUKESH CHOKSI GROUP, STATEMENT OF MUKESH CHOKSI WAS RECORDED AND IN HIS STATEMENT HE HAS ADMITTED THAT HE WAS PROVID ING ACCOMMODATION ENTRIES TO THOSE WHO WERE INTERESTED TO EARN CAPITA L GAIN. ON A CAREFUL PERUSAL OF THE ASSESSMENT ORDER, I FIND THAT THERE IS NO FINDING WITH REGARD TO THE SUPPLY OF STATEMENT OF MUKESH CHOKSI TO THE ASSESSEE. MOREOVER, NOTHING IS AVAILABLE ON RECORD, WHEREFROM IT COULD BE INFERRED THAT ASSESSEE WAS EVER ALLOWED TO CROSS-EXAMINE MR. MUKESH CHOKSI . IT IS SETTLED ITA NO.509/BANG/2017 PAGE 5 OF 6 POSITION OF LAW THAT STATEMENT OR THE EVIDENCE WHIC H IS BEING RELIED UPON BY THE AO FOR MAKING THE ADDITION IN THE HANDS OF ASSE SSEE, THE SAME SHOULD BE CONFRONTED TO THE ASSESSEE AND THE ASSESSEE SHOU LD BE ALLOWED TO CROSS-EXAMINE THE WITNESS 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- 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 19 TH DAY OF MAY, 2017. SD/- (SUNIL KUMAR YADAV ) JUDICIAL MEMBER BANGALORE, DATED, THE 19 TH MAY, 2017. / D ESAI S MURTHY / ITA NO.509/BANG/2017 PAGE 6 OF 6 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.