Rajeshbhai D. Dungarani (HUF), Surat V. Income Tax Officer, Ward -3(2)(3), Surat

ITA 561/SRT/2023

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 5004 (ITAT-SURAT)
• Duration Of Justice: 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 27-11-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 13-08-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Corroborative evidences; Third party statement; Condonation of delay
• Section: 147; 68; 148; 143(2); 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH (SMC), SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER ITA No. 561/Srt/2023 (Assessment Year 2011-12) (Virtual hearing) Rajeshbhai D Dungarani (HUF), 15-A, Sundaram Park Society, Dabholi Road, Surat-395004 (Gujarat) PAN No. AAKHR 4970 E Vs. I.T.O., Ward-3(2)(3), Surat. Appellant/ assessee Respondent/ revenue Assessee represented by Shri Keyur Sheth, Advocate Department represented by Shri Vinod Kumar, Sr. DR Appeal instituted on 14/08/2023 Date of hearing 28/11/2023 Date of pronouncement 29/11/2023 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of National Faceless Appeal Centre, Delhi (NFAC)/learned Commissioner of Income Tax (Appeals) [in short, the ld. CIT(A)] dated 09/05/2023 for the Assessment Year (AY) 2011-12. 2. Perusal of record shows that the impugned order was passed on 09/05/2023, however the present appeal is filed on 14/08/2013, thus, there is a delay of 37 days in filing appeal before the Tribunal. The assessee has filed application for condonation of delay in filing appeal. The learned Authorised Representative (ld. AR) of the assessee submits that the ld. CIT(A) passed the order on 09/05/2023, however, the assessee could not came to know about passing of order as the matter ITA No. 561/Srt/2023 Rajeshbhai D Dungarani Vs ITO 2 was assigned to their Chartered Accountant for pursuing the appeal. Their Chartered Accountant not informed them about outcome of appeal. The assessee on coming to know that their appeal has been rejected, in the month of August, 2023, immediately, filed the present appeal by engaging him. The ld. AR of the assessee submits that the delay in filing appeal is neither intentional nor deliberate but for the reasons beyond the control of assessee. The assessee is not going to be benefitted in filing appeal belatedly. The ld. AR of the assessee further submits that when there is mistake on the part of Chartered Accountant in filing appeal before the Tribunal, the delay may be condoned as has been held by the Hon'ble Karnataka High Court in Mrs. Premalatha Pagaria Vs ITO (2021) 130 taxmann.com 403. The ld. AR of the assessee further submits that while considering the application of condonation of delay, if the delay is not very long, the Bench may adopt a pragmatic approach. To support such view, the ld. AR of the assessee relied upon the decision of Hon'ble Jurisdictional High Court in the case of Shreeji Prints Pvt. Ltd. Vs Commissioner of Customs (Appeals) 2017 (357) E.LT. 92 (Guj). 3. On the other hand, the learned Senior Departmental Representative (ld. Sr. DR) for the revenue submits that the assessee has not explained the delay properly. They have not disclosed the name of Chartered Accountant who has allegedly not informed the assessee. The ld. Sr. DR ITA No. 561/Srt/2023 Rajeshbhai D Dungarani Vs ITO 3 for the revenue submits that in absence of proper explanation, delay may not be condoned. 4. I have considered the contention of both the parties and perused the record carefully. As recorded above, there is delay of 37 days in filing the present appeal. The ld. AR of the assessee vehemently argued that the delay in filing appeal is neither intentional nor deliberate and that the assessee is not going to be benefitted by filing appeal belatedly. I find that the Hon'ble Jurisdictional High Court in Shreeji Prints Pvt. Ltd. Vs CC(A) (supra) held that while exercising discretion under Section 5 of Limitation Act, the Court ought to adopt pragmatic approach. It was further held that distinction must be made between a case where the delay is inordinate and the cases where delay is of few days only. Considering the fact that the assessee is diligent in pursuing the appeal and the delay is only of 37 days, and adopting a liberal approach and further keeping in view the principle that when technical consideration in cause of substantial justice are pitted against each other, the cause of justice must be prevailed. Therefore, the delay of 37 days in filing appeal before the Tribunal is condoned. Now adverting to the merit of the case. 5. Brief facts of the case are that the case of assessee was reopened on the basis of information from the office of Pr.DIT (Inv.), Surat regarding the bogus claim of long term capital gain of Rs. 3,43,200/- by the assessee. The Assessing Officer after obtaining necessary approval, ITA No. 561/Srt/2023 Rajeshbhai D Dungarani Vs ITO 4 issued notice under Section 148 of the Income Tax Act, 1961 (in short, the Act) on 29/03/2018. In response to notice under Section 148 of the Act, the assessee filed return of income on 11/07/2018 declaring total income at Rs. 5,24,220/-. The assessee on filing return of income, requested for reasons recorded. The reasons recoded were provided to the assessee on 24/07/2018. The Assessing Officer after serving notice under Section 143(2) of the Act proceeded for assessment. During the assessment, the Assessing Officer issued show cause notice to the assessee that the assessee has shown to have earned short term capital gain of Rs. 3,43,200/- from scrip of M/s Splash Media & Infra Ltd. which is engaged in providing accommodation entry as per the information that investigation wing of Calcutta carried out investigation that certain bogus companies are indulging in providing entries of penny stock and that the assessee is beneficiary of such penny stock. The assessee has purchased 7800 shares of M/s Splash Media & Infra Ltd. on 06/01/2011 at a price of Rs. 5,53,800/- and sold all the scrips on 18/01/2011 for a consideration of Rs. 8,97,000/-, thus earned short term capital gain of Rs. 3,43,200/-. The Investigation Wing identified M/s Splash Media & Infra Ltd. as one of the penny stock entity for providing bogus entry. The assessee filed its reply dated 17/12/2018. In the reply, the assessee stated that they have purchased 7800 shares on 06/01/2011 at the rate of Rs. 71/- per share and sold on 18/01/2011 at the rate of Rs. 115/- per ITA No. 561/Srt/2023 Rajeshbhai D Dungarani Vs ITO 5 share through Reliance Securities Limited on Bombay Stock Exchange. The assessee provided contract note of purchases and details of sale transaction. The assessee stated that they have paid Share Transaction Tax (STT) on such transaction. The assessee also furnished trading account from their broker showing the sale and purchase of transactions of the said scrips. The assessee submitted that they have shown short term capital gain in their computation of income, in the return of income filed originally as well as in response to notice under Section 148 of the Act. There is no evidence that scrip of M/s Splash Media & Infra Ltd. are bogus. There is no evidence in support of such allegation. The assessee asked for supply of complete information about such allegation. The assessee further stated that the transactions were entered on electronic exchange platform and they were not aware who has sold the share and from whom they have made purchases of such shares. Payment of purchases of shares is recorded in their books of account. Source of investment is not doubted. Sale proceeds are received in their bank account by electronic means. 6. The reply of assessee was not accepted by the Assessing Officer. The Assessing Officer by referring the modus operandi of penny stock company and held that the assessee has sold share within 12 days and earned short term capital gain. Financial result of transaction indicate that rise in price was a result of rigging. The Assessing Officer thereby ITA No. 561/Srt/2023 Rajeshbhai D Dungarani Vs ITO 6 brought the short term capital gain under taxation under Section 68 of the Act. 7. Aggrieved by the additions in the assessment order, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee challenged the additions under Section 68 of the Act. No grounds of appeal against reopening under section 147 or validity on notice under section 148 was raised, thus the issue of reopening attains finality. Against the addition under Section 68 of the Act of Rs. 3,43,200/-, the assessee filed detailed written submission which has been dealt with by the ld. CIT(A) in detail on para 6.1 at page No. 4 to 24 of the order of ld. CIT(A). The ld. CIT(A) after considering the submission of assessee held that on the basis of ratio laid down by Hon'ble Calcutta High Court in PCIT Vs Swati Bajaj (2022) 139 taxmann.com 352 (Cal) clearly held that long term capital gain/short term capital gain related to penny stock identified by investigation report can be accepted to be genuine only if the tax payer who claims that the said capital gains proved with supporting evidence as genuine. The assessee has not made as to how such capital gain has accrued to the assessee which has no sound business activity and confirmed the order of Assessing Officer. Further aggrieved, the assessee has filed present appeal before the Tribunal. 8. I find that the assessee has raised as many as 22 grounds of appeal running into 17 pages. The grounds of appeal raised by assessee are not ITA No. 561/Srt/2023 Rajeshbhai D Dungarani Vs ITO 7 in consonance with the Income Tax (Appellate Tribunal) Rules, 1963. All the grounds of appeal are narration of facts. However, in my considered view, the only substantial ground of appeal for adjudication is “whether on facts and law, the Assessing Officer erred in treating the short term capital gain of Rs. 3,43,200/- as unexplained cash credit on sale of shares of M/s Splash Media & Infra Ltd.” No other grounds of appeal arise as neither the assessee has challenged the validity of reopening before the ld. CIT(A) nor raised any iota of grounds in all 22 grounds of appeal running into 17 pages. No application for raising additional ground of appeal is filed nor any liberty is sought to raised legal plea by assessee. 9. I have heard the submissions of ld. AR of the assessee and the ld. Sr. DR for the revenue. The ld. AR of the assessee submits that the case of assessee was reopened on the basis of information received from Pr. DIT (Inv.), Surat that the assessee is beneficiary of long term capital gain on sale of scrip of penny stock. The report of investigation was not provided to the assessee. The assessee requested for complete investigation. The Assessing Officer insisted that such investigation report is available in public domain. No such complete report of investigation allegedly conducted by the Investigation Wing, Kolkata is available on public domain. The assessee also requested for cross examination of the person who was allegedly behind providing such accommodation entry. No cross examination of such person was allowed. The assessee made purchases ITA No. 561/Srt/2023 Rajeshbhai D Dungarani Vs ITO 8 of 7800 shares of M/s Splash Media & Infra Ltd. which is now known as Luharuka Media & Infra Ltd.. The assessee purchased shares @ Rs 71/- per share and sold at Rs. 115/- per share. The assessee made transaction through stock broker namely Reliance Securities Limited on Bombay Stock Exchange. The payment was made through online platform. On increase of rate of shares, the assessee sold all the shares through stock exchange. The assessee paid STT on such transaction. The assessee furnished details of entire Demat account showing the sale and purchase. The assessee also furnished trading account with their broker Reliance Securities Limited. Reliance Securities Limited is a well-known broker. There is no allegation of Assessing Officer that Reliance Securities Limited was indulged in providing accommodation entry or manipulating the share price of specific scrips. Entire transaction was conducted through Bombay Stock Exchange. Besides that the assessee has also made trading in various scrips and earned short term capital gain or short term capital loss. All such short term capital gain or short term capital loss was shown in the computation of income filed with return of income. The Assessing Officer made addition solely on the basis of third party information without providing such details to the assessee. The Assessing Officer or the ld. CIT(A) has not considered the documentary evidences furnished by the assessee nor given their adverse finding on such evidences. The Assessing Officer and the ld. CIT(A) relied on third ITA No. 561/Srt/2023 Rajeshbhai D Dungarani Vs ITO 9 party information. The ratio of case law in PCIT Vs Swati Bajaj (supra) is not applicable on the facts of the present case. The assessee has clearly proved the transaction by furnishing complete evidence of whole of the transaction. The assessee filed contra confirmation from their broker, contract note reflecting purchases through Reliance Securities Limited, payment of STT, contract note of sale of share through Reliance Securities Limited and payment of STT, transaction of Demat account of assessee with broker alongwith bank statement. The transaction of assessee is genuine and cannot be treated non-genuine on the basis of third party information. The ld. AR of the assessee has also filed legal paper book containing more than 20 decisions on various issues. 10. On the other hand, the ld. Sr. DR for the revenue supported the orders of lower authorities. The ld. Sr. DR for the revenue submits that within 12 days of purchase, the rate of impugned scrips was increased from Rs. 71 to Rs. 115/- per share. Such increase is not ordinary being unordinary as a result of price manipulation. The assessee is beneficiary of penny stock and the Assessing Officer rightly brought such surplus shown in the form of capital gain as unexplained credit. The ld. Sr. DR for the revenue submits that all the submissions and argument of assessee was considered by the Assessing Officer as well as the ld. CIT(A). The assessee is not eligible for any relief. ITA No. 561/Srt/2023 Rajeshbhai D Dungarani Vs ITO 10 11. I have considered the submissions of both the parties and have gone through the orders of the lower authorities carefully. I have also deliberated upon the various case laws relied by the ld. AR of the assessee. I find that during the assessment, the assessee in response to show cause notice, furnished the details of shares purchased by assessee through Reliance Securities Limited on Bombay Exchange Limited. The assessee provided contract note of purchase, details of payment of STT, contract note of sale alongwith STT paid, contra confirmation from their share broker. The assessee also furnished his bank statement showing the entire transaction through banking channel. I find that the Assessing Officer made addition solely on the basis of report of Investigation Wing without referring even a single evidence furnished by assessee. The assessee demanded copy of investigation report carried out by the Investigation Wing, Kolkata. The same was not provided to the assessee. Before the ld. CIT(A), the assessee reiterated its submission about genuineness of their transaction. I find that the ld. CIT(A) instead of considering the evidence furnished by assessee, directly came to the conclusion by referring the decision in PCIT Vs Swati Bajaj (supra). In my view, the facts of the present case is at variance with the decision of PCIT Vs Swati Bajaj (supra). In the present case, the assessee has shown sufficient evidence about the purchase and sale of scrip of M/s Splash Media & Infra Ltd.. ITA No. 561/Srt/2023 Rajeshbhai D Dungarani Vs ITO 11 No adverse material against such evidence was brought on record. No investigation was carried out by the Assessing officer. I find that the assessee by furnishing complete details of their share transaction, has discharged primary onus upon them. The Hon'ble Jurisdictional High Court in CIT Vs Ranchhod Jivabhai Nakhava 21 taxmann.com 159 (Guj) held that once the assessee has discharged its primary onus, the onus shift upon the revenue to carry out further investigation to disprove the evidence of assessee. I find that in the present case, the Assessing Officer failed to carry out any investigation or brought any adverse material against the assessee. There is no dispute that the assessee made purchases of impugned shares through well-known stock broker Reliance Securities Limited. The transaction was carried out through Bombay Stock Exchange, therefore, I do not find any justification to tax such short term capital gain as unexplained cash credit without bringing any adverse evidence on record. Accordingly, I direct to delete the addition made by the Assessing Officer and confirmed by the ld. CIT(A). In the result, the substantial ground of appeal as framed by me is allowed. 12. In the result, this appeal of assessee is allowed. Order announced in open court on 29 th November, 2023. Sd/- (PAWAN SINGH) JUDICIAL MEMBER ITA No. 561/Srt/2023 Rajeshbhai D Dungarani Vs ITO 12 Surat, Dated: 29/11/2023 *Ranjan Copy to: 1. Assessee 2. Revenue 3. CIT 4. DR By order 5. Guard File Sr. Private Secretary, ITAT, Surat