RAKESH KUMAR SINGHAL, NOIDA V. ITO, WARD- 3(1), NOIDA

ITA 5402/DEL/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8831 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 23-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C P SINGH
• Assessee Lawyers: RAKESH GUPTA
• Section: 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER I.T.A. NO.5402/DEL/2017 ASSESSMENT YEAR: 2014-15 RAKESH KUMAR SINGHAL, G-523/5, SECTOR-GAMMA- II, GREATER NOIDA. V. INCOME TAX OFFICER, WARD- 3(1), NOIDA. TAN/PAN: APYPS 1142N (APPELLANT) (RESPONDENT) APPELLANT BY: S/SHRI RAKESH GUPTA, ADV. & SOMIL AGGARWAL, ADV. RESPONDENT BY: SHRI C.P. SINGH, SR.D.R. DATE OF HEARING: 11 09 2018 DATE OF PRONOUNCEMENT: 10 12 2018 O R D E R PER AMIT SHUKLA, J.M.: THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE IMPUGNED ORDER 30.06.2017 PASSED BY COMMISSIONER OF INCOME TAX (APPEALS)-I, NEW DELHI F OR THE QUANTUM OF ASSESSMENT PASSED U/S.143(3) FOR THE ASSESSMENT YEAR 2014-15. IN THE VARIOUS GROUNDS OF APPEAL, ASSESSEE HAS CHALLENGED THE ADDITION OF RS.34,43,09 3/- U/S.68 ON THE TRANSACTION OF SALE OF SHARES SHOWN A S LONG TERM CAPITAL GAIN AND DENYING THE BENEFIT OF EXEMPT ION U/S.10(38). 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD SHOWN LONG TERM CAPITAL GAI N ON SALE OF SHARES OF M/S. KAPPAC PHARMA LTD. WHICH WAS SOLD FOR RS.34,43,093/- AND HAD CLAIMED EXEMPTION U/S.10(38) . THE I.T.A. NO.5402/DEL/2017 2 COMPUTATION OF LONG TERM CAPITAL GAIN WAS SHOWN IN THE FOLLOWING MANNER: NAME OF THE COMPANY WHOSE SHARES SOLD NUMBER OF SHARES SOLD SALE PRICE PURCHASE PRICE (IN RS.) PROFIT/LOSS LONG TERM CAPITAL GAIN EXEMPT U/S.10(38) (IN RS.) KAPPAC PHARMA LTD. 5000 34,43,093 65,000 33,78,093 33,12,544 PENTA SOFT 4800 3446 38994 (65549) 3. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESS EE SUBMITTED THAT THE SHARES WERE PURCHASED DIRECTLY F ROM M/S. VISHAL REALTY MANAGEMENT LTD., BASED AT AHMADABAD G UJARAT FOR AN AMOUNT OF RS.65,000/- PAID IN CASH. IT WAS O FF MARKET TRANSACTION AND THE PURCHASE PRICE GIVEN FOR THE SH ARE WAS RS.13 PER SHARE AS PER THE PREVAILING MARKET PRICE. THE SAID SHARES WERE TRANSFERRED BY THE COMPANY TO THE ASSES SEE ON 09.10.2012. THE PHYSICAL SHARES WERE DEMATERIALIZED AND TRANSFERRED TO DEMAT ACCOUNT MAINTAINED WITH INDIA BULLS SECURITY LTD. ON 05.12.2011. THE SAID SHARES WERE S OLD FOR SHARE PRICE OF RS.34,43,093/- DURING THE FINANCIAL YEAR 2013- 14. THE LEARNED ASSESSING OFFICER HAD INCORPORATED THE BRIEF HISTORY OF SCRIP OF M/S. KAPPAC PHARMA LTD. AND NOT ED THAT REVENUE FROM OPERATION WAS ZERO AND IT IS MERELY A SHAM COMPANY WHEREIN NO ACTIVITY WHATSOEVER WAS CARRIED OUT. THE COMPANY HAS CONVERTED/SUB DIVIDED THE SHARE OF FACE VALUE OF RS.10 AND CONVERTED THE SHARE HOLDING OF THE SHAREH OLDER TO 70 TIMES OF THE SHARE VALUE OF THE SHARE THEY WERE HOLDING. DURING THE PERIOD THERE WAS AN ASTRONOMICAL RISE OF SHARES I.T.A. NO.5402/DEL/2017 3 PRICE OF THE SCRIP. AFTER NOTING THIS FACT, HE ALSO DISCUSSED THE BACKGROUND OF THE CASE WHEREIN ROUTING OF UNACCOUNT ED MONEY IN THE GARB OF BOGUS LONG TERM CAPITAL GAIN C LAIMED EXEMPTION U/S. 10(38) AND THE MODUS OPERANDI HAS ALSO BEEN NOTED BY HIM. HE ALSO RECORDED THE STATEMENT OF THE ASSESSEE WHICH HAS BEEN INCORPORATED FROM PAGES 6 TO 14 OF T HE ASSESSMENT ORDER AND THE INFERENCE DRAWN FROM THE S AID STATEMENT IS SUMMARIZED BY HIM IN THE FOLLOWING MAN NER: 1. IN REPLY TO QUESTION NO. 10 WHEREIN IT HAS BEEN ASK ED THAT HE IS WELL AWARE OF SELLER OF SHARES M/S VISHAL REALITY M ANAGEMENT LIMITED, FURNISH THE DETAILS, THE ASSESSEE REPLIED THAT HE WAS IN CONNECTION WITH M/S VISHAL REALITY MANAGEMENT LIMIT ED THROUGH ONE OF HIS FRIENDS. 2. IN REPLY TO QUESTION NO. 05 WHEREIN IT HAS BEEN AS KED WHY YOU PURCHASED SHARES OF M/S KAPPAC PHARMA LIMITED, THE ASSESSEE REPLIED THAT HE GOT THE TIP FROM HIS FRIENDS TO PUR CHASE THE SHARES OF SAID COMPANY AS THEY ARE LIKELY TO GET APPRECIAT ED. 3. THE ASSESSEE COULD NOT FURNISH ANY DETAIL ABOUT HI S SO CALLED FRIEND UNDER WHOSE GUIDANCE THE SHARES WERE PURCHAS ED. 4. THE COUNSEL OF THE ASSESSEE VIDE ORDER SHEET DATED 05.12.2016 ASKED TO PRODUCE THE PRINCIPAL OFFICER OF BROKER CO MPANY M/S INDIA BULL SECURITIES LTD. AND ALSO THE FRIEND FROM WHERE THE ASSESSEE CONNECTED WITH M/S VISHAL REALITY MANAGEMENT. THE C OUNSEL VIDE HIS REPLY DATED 20.12.2016 STATED HIS INABILITY TO PRODUCE THE BROKER FOR EXAMINATION/CROSS-EXAMINATION AND THE FRIEND OF THE ASSESSEE AND STATED AS UNDER: 'PRODUCE FRIEND FROM WHOM, ASSESSEE GOT CONNECTED W ITH M/S VISHAL REALTY MANAGEMENT LIMITED : IT IS SUBMITTED THAT THE SHARES WAS PURCHASED IN THE YEAR 2012, FOUR YEARS BACK AND IT IS INFORMED BY THE ASSESSEE THAT PRESENTLY HE IS NOT REMEMBERING THE NAME AND ADDRESS OF THE FRIEND WHO HAVE SUGGESTED FOR PURCHASE OF SHARES FROM VISHAL REALTY MANAGEMENT LIMITED ....' AS FAR AS PRINCIPAL OFFICER OF M/S INDIA BULL SECUR ITIES LTD. IS CONCERNED, THE ASSESSEE STATED THAT THE ASSESSEE IS COMPLETELY OUT OF TOUCH WITH THE COMPANY M/S INDIA BULL SECURITIES LTD. SINCE 2014 I.T.A. NO.5402/DEL/2017 4 AND REQUESTED TO CALL THE INFORMATION FROM .M/S IND IA BULL SECURITIES LTD. THE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS TO PRODUCE THE BROKER. THEREFORE, SUMMON U/S 131 DATED 21.12.2016 WAS ISSUED TO M/S INDIA BULL SECURITIES LTD. AT THE ADDRESS GI VEN BY THE ASSESSEE WHICH HAS BEEN RECEIVED BACK UNSERVED. IT CLEARLY DEPICTS THAT THE ASSESSEE HAS VOLUNTARILY GIVEN WRONG ADDRE SS AND ALSO PROVES THAT THE ASSESSEE HAS NOT BEEN ABLE TO DISCH ARGE HIS ONUS. 4. HE ALSO NOTED ONE VERY IMPORTANT FACT THAT, D UE TO DUBIOUS BUSINESS ACTIVITIES AND THE SHARE TRADING D ONE BY M/S. KAPPAC PHARMA LTD., NOTICE HAS BEEN ISSUED BY THE SEBI AND WAS ALSO UNDER THE SCANNER OF THE SEBI. HE ALSO CONFRONTED TO THE ASSESSEE THAT THE DDIT KOLKATA HA D IDENTIFIED M/S. KAPPAC PHARMA LTD. AS ONE OF THE EN TITY INVOLVED IN BOGUS LONG TERM CAPITAL GAIN AND ALSO N OTED THAT THE DETAIL INVESTIGATION WAS CARRIED OUT WHEREIN IT WAS FOUND THAT IT IS PURELY A SHAM COMPANY AND SEBI HAS SUSPE NDED TRADING OF THE EQUITY SHARES. THIS FACT HAS ALSO BE EN ACCEPTED BY THE ASSESSEE VIDE SUBMISSION DATED 05.12.2016. A FTER DETAILED DISCUSSION AND ON THE BASIS OF DETAIL INVE STIGATION CARRIED OUT BY THE DDIT KOLKATA, HE CAME TO THE CON CLUSION THAT THE ENTIRE TRANSACTION OF SALE AND PURCHASE OF SHARE IS BOGUS. ACCORDINGLY, THE ENTIRE SALE RECEIPTS AS UNE XPLAINED CASH CREDIT TAXABLE U/S.68. 5. LD. CIT(A) IN A VERY BRIEF AND CRYPTIC ORDER HAS DISMISSED THE ASSESSEES APPEAL AFTER OBSERVING AND HOLDING A S UNDER: 5. THE ID. COUNSEL FOR THE APPELLANT ON 13/04/2017 SOUGHT ADJOURNMENT TO FILE NECESSARY DETAILS AND EVIDENCE TO CORROBORATE ITS CLAIM THAT THE IMPUGNED ASSESSMENT ORDER WAS BAD IN LAW. THE SAME WAS ALLOWED AND ON 02/05/2017 THE I.T.A. NO.5402/DEL/2017 5 ID. COUNSEL FOR THE APPELLANT SUBMITTED A WRITTEN B RIEF PLACING RELIANCE ON VARIOUS AUTHORITIES BY VARIOUS HIGH COU RTS AND THE BENCHES OF THE ID. ITAT BUT NONE OF WHICH ARE OF AN Y HELP AS THE FACTS OF THOSE CASES ARE DIFFERENT FROM THE CAS E OF THE APPELLANT. IT IS NOT IN DISPUTE THAT THE APPELLANT HAS RECEIVED CREDIT IN ITS ACCOUNTS AND HAS NOT BEEN ABLE TO DIS CHARGE ITS PRIMARY ONUS IN TERMS OF THE LAW AS APPLICABLE UNDE R SECTION 68 OF I.T. ACT, 1961. SINCE THE ONLY LEGAL GROUND R AISED BY THE APPELLANT IS THAT PROCEEDS OF SHARE TRANSACTIONS CA NNOT BE TREATED AS INCOME OF THE APPELLANT, IT IS INCUMBENT UPON THE APPELLANT TO PROVE THAT THE AMOUNT UNDER CONSIDERAT ION WAS INDEED THE PROCEEDS OF SHARE TRANSACTION. THE APPEL LANT FAILED TO DISCHARGE THIS ONUS BEFORE THE ID. A.O. AND HAS ALSO NOT BEEN ABLE TO PROVE ITS CLAIM IN THE PRESENT PROCEED INGS. THE APPELLANT HAS NOT BEEN ABLE TO DISPROVE THE DETAILE D LEGAL GROUNDS RAISED BY THE ID. A.O. THAT BEING THE CASE THE IMPUGNED ASSESSMENT ORDER CALLS FOR NO INTERFERENCE AND THEREFORE THE SAME IS CONFIRMED. THE APPEAL OF THE APPELLANT FAILS AND IS DISMISSED. 6. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT ENTIRE DOCUMENTS PROVING THE GENUINENESS OF TH E TRANSACTION AS WELL AS THE PRICE QUOTATION OF THE S AID COMPANY BEFORE THE BOMBAY STOCK EXCHANGE WAS ALSO FILED TO SHOW THAT THE SHARES WERE PURCHASED AND SOLD AT THE QUOT ED PRICE. NO DISCREPANCY WHATSOEVER HAS BEEN FOUND IN THE DOC UMENTS AND EVIDENCES FILED BY THE ASSESSEE AND WITHOUT ANY SPECIFIC EVIDENCE IN THE CASE OF THE ASSESSEE ADDITION HAS B EEN MADE PURELY ON SURMISES. MOREOVER, THE LD. CIT (A) TOO W ITHOUT CONSIDERING THE MATERIAL FACTS ON RECORD HAS DISMIS SED THE I.T.A. NO.5402/DEL/2017 6 APPEAL WITHOUT ANY DISCUSSION. 7. ON THE OTHER HAND, LEARNED DR STRONGLY RELIED UP ON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT A SSESSING OFFICER HAS CATEGORICALLY BROUGHT OUT ON RECORD AS TO HOW M/S. KAPPAC PHARMA LTD. WAS INVOLVED IN PROVIDING BOGUS ACCOMMODATION ENTRY AND HAS BEEN FOUND TO BE A BOGU S AND SHAM COMPANY. NOT ONLY THAT, EVEN THE ASSESSEE IN H IS STATEMENT COULD NOT GIVE JUSTIFICATION REGARDING BOT H THE LIMBS OF THE TRANSACTION TO THE SATISFACTION OF THE ASSES SING OFFICER AND ALSO THE REVENUE FROM OPERATION OF THIS COMPANY WAS ZERO AS ON MARCH, 2012 AND MARCH, 2013. THIS CLEARLY SHO WS THAT THIS COMPANY WAS RIGGING THE PRICE IN THE STOCK EXC HANGE AND ALSO IT HAS CAME IN THE SCANNER OF SEBI, THEREF ORE, IT IS A CLEAR CUT SHAM TRANSACTION FOR CONVERTING UNACCOUNT ED MONEY INTO A LONG TERM CAPITAL GAIN FOR CLAIM EXEMPTION U/S.10(38). 8. AFTER CONSIDERING RIVAL SUBMISSIONS AND ON PERUS AL OF THE IMPUGNED ORDERS, WE FIND THAT ASSESSEE HAS FILE D ALL THE NECESSARY DOCUMENTS IN THE FORM OF SHARE CERTIFICAT E ALLOTTED TO IT, DEBIT NOTE BY THE BROKER FOR THE PURCHASE OF 5,000 EQUITY SHARES OF M/S. KAPPAC PHARMA LTD. OF RS.65,000/- @1 3 PER SHARE, WHICH HAVE BEEN SOLD BY THE ASSESSEE DURING THE FINANCIAL YEAR 2013-14 FOR SUM OF RS.34,54,750/- TH ROUGH REGISTERED STOCK BROKER. EVEN THOUGH CONTRACT NOTIC E, BANK STATEMENT, DEMAT ACCOUNT, ETC HAS BEEN FILED, BUT T HE ASSESSING OFFICER IN HIS IMPUGNED ASSESSMENT ORDER HAS DISCUSSED AND BROUGHT ON RECORD THE FACT THAT HOW T HIS COMPANY, M/S. KAPPAC PHARMA LTD. WITHOUT HAVING ANY I.T.A. NO.5402/DEL/2017 7 REVENUE FROM OPERATIONS HAS RIGGED THE PRICE FROM R S.13/- TO RS.695/- PER SHARE. APART FROM THAT, HE HAS ALSO DI SCUSSED AS HOW THE INVESTIGATION WING KOLKATA UNIT HAS FOUND T HAT THIS COMPANY WAS FOUND TO BE BOGUS AND A SHAM COMPANY INVOLVED IN PROVIDING AND ASSISTING BOGUS LONG TERM CAPITAL GAIN. THE ASSESSEE THEREAFTER HAS NOT DISCHARGE HIS ONUS TO REFUTE THE FINDING OF THE ASSESSING OFFICER; AND HE WAS NOT EVEN AWARE OF THE BROKER AND MERELY STATED THAT HE GOT A TIP FROM HIS FRIEND TO PURCHASE THE SHARE OF THIS COMPA NY WITHOUT GIVING ANY FURTHER CORROBORATIVE OR ANY CREDIBLE RE BUTTAL AND ALSO SHOWED HIS INABILITY TO PRODUCE THE BROKER FOR EXAMINATION/CROSS-EXAMINATION. APART FROM THAT, THE TRADING OF THE SAID COMPANY WAS ALSO SUSPENDED BY THE SEBI. THE LD. CIT(A) HAS NEITHER DISCUSSED THE FINDING AND MATERI AL BROUGHT ON RECORD BY THE ASSESSING OFFICER NOR HAS TAKEN IN TO COGNIZANCE ASSESSEES DOCUMENTS. HE HAS NOT GIVEN A NY FINDING AS TO WHY THE DOCUMENTS FILED BY THE ASSESS EE ARE NOT TENABLE IN VIEW OF THE INFORMATION OR MATERIAL AVAI LABLE ON RECORD BROUGHT BY THE ASSESSING OFFICER AND WHY THE ASSESSMENT ORDER HAS BEEN SUSTAINED. ACCORDINGLY, I N THE INTEREST OF JUSTICE, WE FEEL THAT MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE LD. CIT (A) TO CONSIDER ALL THE MATERIALS ON RECORD AND GIVE A SPEAKING ORDER WITH A SPECIFIC FI NDING ON THE ISSUE INVOLVED AFTER GIVING DUE AND EFFECTIVE OPPOR TUNITY TO THE ASSESSEE. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. I.T.A. NO.5402/DEL/2017 8 ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH DECEMBER, 2018. SD/- [AMIT SHUKLA] JUDICIAL MEMBER DATED: 10 TH DECEMBER, 2018 PKK: