VEENA GUPTA, NEW DELHI V. ACIT, CIRCLE- 33(1), NEW DELHI

ITA 5662/DEL/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1494 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2014-2015
• Appeal Filed On: 31-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Keywords: Unexplained cash credit; Salary income; Principle of natural justice; Opportunity of cross examination; Third party statement; Scheme of amalgamation; Sham transactions
• Section: 142(1); 68

Judgement Text

ITA NO. 5662/DEL/2018 A.Y. 2014-15 VEENA GUPTA 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: F, NEW DELHI BEFORE SMT. BEENA A PILLAI, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 5662/DEL/2018 AY: 2014-15 VEENA GUPTA 88, POORVI MARG, VASANT VIHAR, NEW DELHI. AAGPG8753L VS . ACIT CIRCLE 33(1) NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. H.P. AGARWAL, FCA MS. PRASHUKA JAIN, FCA DEPARTMENT BY : SH. SURENDER PAL, SR. DR DATE OF HEARING : 05/11/2018 DATE OF PRONOUNCEMENT : 27/11/2018 ORDER PER BEENA A PILLAI, JUDICIAL MEMBER PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST ORDER DATED 23/01/17 PASSED BY LD. CIT (A)-11, NEW DELHI FOR ASSESSMENT YEAR 2014-15 ON FOLLOWING GROUNDS OF APP EAL: 1. THE LD.CIT(A) HAS ERRED ON FACTS AND IN LAW IN CON FIRMING ADDITION OF RS. 1,39,32,231/- U/S 68 OF THE INCOME TAX ACT ON ACCOUNT OF LONG TERM CAPITAL GAIN ON SALE OF SHA RES BY TREATING THE SAME AS UNEXPLAINED CREDIT ENTRIES. 2. THE ORDER PASSED BY THE LD.CIT(A) IS BAD IN LAW, SI NCE THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDITION MADE BY THE AO A) BY TREATING THE PURCHASE & SALE OF SHARES AS SHAM AND BOGUS, TOTALLY IGNORING THE RELIABLE AND CREDIB LE ITA NO. 5662/DEL/2018 A.Y. 2014-15 VEENA GUPTA 2 EVIDENCE SUBMITTED BY THE APPELLANT (INCLUDING MERGER ORDER ISSUED BY BOMBAY HIGH COURT); B) BY IGNORING ALL FAVOURABLE JUDICIAL PRECEDENTS CITE D BY THE APPELLANT IS IRRELEVANT MERELY BY REMARKING THAT THE HONBLE COURTS/TRIBUNALS HAVE PASSED THOSE JUDGMENTS WITHOUT BEING AWARE OF THE ENTIRETY OF CIRCUMSTANCES; C) ON THE BASIS OF UNRELATED THIRD PARTY STATEMENTS WITHOUT PROVIDING THE APPELLANT A COPY OF THE STATEMENTS AND THE OPPORTUNITY OF CROSS EXAMINATION DESPITE THE SPECIFIC REQUEST MADE BY THE APPELLANT BEFORE THE AO FOR THE SAME; AND D) MERELY ON PRINCIPLES OF HUMAN PROBABILITY AND PREPONDERANCE OF PROBABILITY. 3. THE APPELLANT CRAVES LEAVE TO ADD, OR MODIFY THE AB OVE GROUNDS OF APPEAL AT OR BEFORE THE HEARING OF THE A PPEAL. 2. BRIEF FACTS OF THE CASE ARE AS UNDER: ASSESSEE FILED HER RETURN OF INCOME ON 28/07/14, DE CLARING TOTAL INCOME OF RS.37,48,600/-. CASE WAS SELECTED FOR SCR UTINY DUE TO SUSPICION OF LONG TERM CAPITAL GAIN ON SHARES AS IN FORMED BY INVESTIGATION WING. NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED TO ASSESSEE, ALONG WITH QUESTIONNAIRE AND NO TICE UNDER SECTION 142(1) OF THE ACT. IN RESPONSE TO STATUTORY NOTICES, REPRESENTATIVE OF ASSESSEE APPEARED BEFORE LD.AO AN D SUBMITTED NECESSARY DETAILS AND DOCUMENTS WHICH WERE EXAMINED ON TEST CHECK BASIS. ITA NO. 5662/DEL/2018 A.Y. 2014-15 VEENA GUPTA 3 3. LD.AO OBSERVED THAT ASSESSEE DERIVED INCOME FROM SALARY AND HOUSE PROPERTY, BUSINESS OR PROFESSION, CAPITAL GAINS AND OTHER SOURCES. 4. MAIN ISSUE THAT WAS TAKEN UP FOR CONSIDERATION B Y LD.AO WAS EXAMINING SUSPICIOUS LONG TERM CAPITAL GAIN ON SHARES DECLARED BY ASSESSEE IN COMPUTATION OF INCOME. IT W AS FOUND THAT ASSESSEE HAD LONG TERM CAPITAL GAIN, WHICH WAS CLAI MED TO BE EXEMPT AMOUNTING TO RS.1,39,32,356/-. IT WAS ALLEGE D THAT IT WAS RECEIVED FROM SALE OF SHARES. ASSESSEE DECLARED FOL LOWING CALCULATIONS REGARDING INCOME FROM LONG TERM CAPITA L GAIN OF SHARES CLAIMED AS EXEMPT UNDER SECTION 10(38) OF TH E ACT: NAME OF SCRIPT SALE PRICE (RS.) PURCHASE PRICE (INDEXED) (RS.) GAIN (EXEMPT) (RS.) UNNO INDUSTRIES 1,48,83, 544/- 9,51, 188/- 1,39,32, 356/- 5. LD.AO ON EXAMINATION OF SHARES SALE TRANSACTION, FOUND THAT ENTIRE SALE PROCEEDS WAS RECEIVED FROM SALE OF TWO SCRIPTS M/S UNNO INDUSTRIES (EARLIER NAMED BASUKINATH REAL ESTA TE LTD, WHEN SHARES WERE PURCHASED) AND MARUTI UDYOG. 5.1 ASSESSEE WAS CALLED UPON TO GIVE DETAILS REGARD ING MANNER IN WHICH SHARES WERE PURCHASED AND DOCUMENTS IN SUP PORT. ASSESSEE SUBMITTED THAT ASSESSEE PURCHASED 2500 SHA RES OF M/S BASUKINATH REAL ESTATE LTD., IN FINANCIAL YEAR 2011 -12, THROUGH M/S SHAREWOOD FURNITURE PVT. LTD., FOR AN AMOUNT OF RS. 5 LACS. IT WAS SUBMITTED THAT BASUKINATH REAL ESTATE LTD., DECLARED BONUS IN RATIO OF 18:1 ON 16/03/12 AND ACCORDINGLY, 45,000 SHARES WERE ALLOTTED TO ASSESSEE. ASSESSEE FURTHER SUBMITTED THAT ITA NO. 5662/DEL/2018 A.Y. 2014-15 VEENA GUPTA 4 THE SAID 47,500 SHARES (2500 ORIGINALLY PURCHASED + 45,000 BONUS SHARES) GOT DEMATERIALISED AND WERE CREDITED INTO ASSESSEES DEMAT ACCOUNT ON 29/09/12. 5.2 ASSESSEE SUBMITTED THAT SUBSEQUENTLY M/S BASUKI NATH REAL ESTATE LTD., MERGED WITH M/S UNNO INDUSTRIES, PURSU ANT TO ORDER PASSED HONBLE BOMBAY HIGH COURT, APPROVING SCHEME OF AMALGAMATION. ACCORDINGLY, 47,500 SHARES OF M/S UNN O INDUSTRIES WERE ISSUED TO ASSESSEE AND WAS CREDITED IN DEMAT ACCOUNT ON 28/03/2013. 6. FROM THE ABOVE, LD.AO OBSERVED THAT ASSESSEE BOU GHT 2500 SHARES OF M/S BASUKINATH REAL ESTATE LTD., ON 30/09 /11 AT A COST OF RS. 5 LACS FROM M/S SHAREWOOD FURNITURE PVT . LTD. SUBSEQUENTLY, BONUS SHARES AT THE RATIO OF 18:1 WAS ISSUED TO ASSESSEE, TOTALLING TO 45,000 ON 16/03/12, WITHIN A PERIOD OF 5 MONTHS FROM DATE OF PURCHASE OF SHARES. IT WAS OBSE RVED THAT SUBSEQUENT TO AMALGAMATION APPROVED BY BOMBAY HIGH COURT ASSESSEE WAS ALLOTTED 47,000 SHARES OF AMALGAMATED COMPANY, BEING M/S UNNO INDUSTRIES. THESE SHARES WERE SOLD B Y ASSESSEE AFTER LOCK IN PERIOD OF ONE YEAR, THEREBY EARNING L ONG TERM CAPITAL GAIN OF APPROXIMATELY 1.39 CRORES. 6.1 AND IT WAS OBSERVED THAT DURING ASSESSMENT PROC EEDINGS LD. AO RECORDED STATEMENT OF ONE SH. AMIT DALMIA AN D SH. NARENDRA KUMAR JAIN WHO HAS ACCEPTED TO HAVE MANAGE D AND CONTROLLED VARIOUS COMPANIES ACTING AS ACCOMMODATIO N ENTRY AND EXIT PROVIDERS FOR M/S UNNO INDUSTRIES. 6.2 HE, THUS, MADE AN ADDITION ON BASIS OF TEST OF HUMAN PROBABILITIES TO AN EXTENT OF RS. 1,39,32,231/-. ITA NO. 5662/DEL/2018 A.Y. 2014-15 VEENA GUPTA 5 7. AGGRIEVED BY ORDER OF LD. AO ASSESSEE PREFERRED APPEAL BEFORE LD. CIT (A), WHO UPHELD ACTION OF LD. AO. AGGRIEVED BY ORDER OF LD. CIT (A) ASSESSEE IS IN AP PEAL BEFORE US NOW. 8. MAIN ISSUE ALLEGED BY LD. AR BEFORE US IS IN RES PECT OF DENIAL OF OPPORTUNITY TO CROSS EXAMINE PERSONS WHOSE STATE MENTS HAVE BEEN BASIS FOR ADDITION IN HANDS OF ASSESSEE. 9. LD. AR SUBMITTED THAT ASSESSING OFFICER PASSED I N VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. HE SUBMITTED THAT COPIES OF STATEMENT BY SH. AMIT DALMIA AND SH. NARENDRA KUMAR JAIN RECORDED BY INVESTIGATING WING WAS NOT PROVIDED TO ASSESSEE. HE SUBMITTED THAT ON MERITS, SECTION 68 OF THE ACT IS NOT APPLICABLE, AS ASSESSEE HAD PROVIDED EXPLANATION FOR CREDIT ENT RIES IN ITS BOOKS OF ACCOUNTS. FURTHER, REASON FOR NON-SATISFAC TION BY LD.AO REGARDING EXPLANATION OFFERED BY ASSESSEE HAS NOT B EEN SUBJECT TO TESTS OF LAW, SINCE OPPORTUNITY TO CROSS EXAMINE PE RSONS, HAS NOT BEEN GRANTED TO ASSESSEE, OF WHOSE STATEMENT HAS BE EN RELIED UPON BY LD.AO FOR MAKING ADDITION. 10. ON CONTRARY, LD.SR. DR SUBMITTED THAT, INFORMAT ION OBTAINED BY ASSESSEE RELATED TO SHARE TRADING PATTE RN OF ASSESSEE. HE SUBMITTED THAT LD. AO APPLIED TEST OF HUMAN PROB ABILITIES TO EVALUATE GENUINENESS OF TRANSACTION TO CONCLUDE SAL E AND PURCHASE OF SHARES TO BE SHAM TRANSACTIONS UNDERTAK EN WITH PURPOSE OF OBTAINING BOGUS LONG TERM CAPITAL GAINS, LD. SR. DR PLACED RELIANCE UPON DETAILED OBSERVATIONS BY LD. A O AND LD. CIT (A). ITA NO. 5662/DEL/2018 A.Y. 2014-15 VEENA GUPTA 6 11. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SI DES IN LIGHT OF RECORDS PLACED BEFORE. WE ALSO REFER TO AL L JUDICIAL PRECEDENTS RELIED UPON BY BOTH SIDES. 12. IT IS OBSERVED THAT BOTH ASSESSING OFFICER AS W ELL AS LD.CIT(A) IS RELYING UPON STATEMENT RECORDED BY INV ESTIGATION DEPARTMENT OF SH. AMIT DALMIA AND SH. NARENDRA KUMA R JAIN. IT IS BASED UPON THEIR STATEMENTS, THAT TEST OF HUMAN PROBABILITIES HAS BEEN APPLIED TO FACTS OF PRESENT CASE BY AUTHOR ITIES BELOW. FURTHER, IT CANNOT BE IGNORED THAT ASSESSEE WAS NOT GRANTED OPPORTUNITY TO CROSS EXAMINE SH. AMIT DALMIA AND SH . NARENDRA KUMAR JAIN. EVEN AFTER ASSESSEE ASKING FOR OPPORTUN ITY TO CROSSEXAMINE THESE PERSONS, BEFORE FIRST APPELLATE AUTHORITY, SAME WAS NOT GRANTED. ASSESSEE HAS CONTESTED TRUTHF ULNESS OF STATEMENTS GIVEN BY SH. AMIT DALMIA AND SH. NARENDR A KUMAR JAIN BEFORE US. 12.1 IT IS PERTINENT TO NOTE THAT ASSESSEE, VIDE LE TTER DATED 21/12/16 HAD ASKED LD. AO TO PROVIDE MATERIAL BASED UPON WHICH VARIOUS ALLEGATIONS HAVE BEEN LEVIED BY LD. A O. THESE FACTORS FROM PARA 20 OF ASSESSMENT ORDER, WHEREIN A SSESSEE RAISED OBJECTIONS, ONE OF WHICH IS OPPORTUNITY TO C ROSS EXAMINE, IN CASE OF ANY EVIDENCE USED AGAINST ASSESSEE. 12.3 TO OUR SURPRISE, LD. AO WITHOUT PROVIDING ANY MATERIAL EVIDENCE, REPORT ON WHICH HE WAS RELYING AND NOT GR ANTING AN OPPORTUNITY TO CROSS EXAMINE THE PERSONS ON WHOSE S TATEMENT HE ARRIVED AT CERTAIN PRESUPPOSITIONS, MADE ADDITION I N THE HANDS OF ASSESSEE. THIS IS EVIDENT FROM PARA 22 OF ASSESSMEN T ORDER. 13. BEFORE LD. CIT (A) ASSESSEE ONCE AGAIN RAISED P LEA OF CROSS- EXAMINATION GRANTED TO ASSESSEE AND MATERIALS NOT B ASED UPON ITA NO. 5662/DEL/2018 A.Y. 2014-15 VEENA GUPTA 7 WHICH THE SUBMISSIONS HAVE BEEN MADE HAS NOT BEEN P ROVIDED FOR EXAMINATION. EVEN THEN OPPORTUNITY WAS NOT GRAN TED TO ASSESSEE, THOUGH LD. CIT (A) HAD COTERMINOUS POWERS AS THAT OF LD. AO. 14. IN OUR VIEW THIS AMOUNTS TO GROSS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. WE DRAW OUR SUPPORT FROM THE DECIS ION OF HONBLE SUPREME COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES VERSUS CCE REPORTED IN (2015) 62 TAXMANN.COM 3, WHEREIN HONBLE COURT OBSERVED AS UNDER: ACCORDING TO US, NOT ALLOWING THE ASSESSEE TO CROS S- EXAMINE THE WITNESSES BY THE ADJUDICATING AUTHORITY THOUGH THE STATEMENTS OF THOSE WITNESSES WERE MADE THE BASIS OF THE IMPUGNED ORDER IS A SERIOUS FLAW WHICH MAKES THE ORDER NULLITY INASMUCH AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BECAUSE OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED. IT IS TO BE BO RNE IN MIND THAT THE ORDER OF THE COMMISSIONER WAS BASED U PON THE STATEMENTS GIVEN BY THE AFORESAID TWO WITNESSES . EVEN WHEN THE ASSESSEE DISPUTED THE CORRECTNESS OF THE STATEMENTS AND WANTED TO CROSS-EXAMINE, THE ADJUDIC ATING AUTHORITY DID NOT GRANT THIS OPPORTUNITY TO THE ASS ESSEE. IT WOULD BE PERTINENT TO NOTE THAT IN THE IMPUGNED ORD ER PASSED BY THE ADJUDICATING AUTHORITY HE HAS SPECIFI CALLY MENTIONED THAT SUCH AN OPPORTUNITY WAS SOUGHT BY TH E ASSESSEE. HOWEVER, NO SUCH OPPORTUNITY WAS GRANTED AND THE AFORESAID PLEA IS NOT EVEN DEALT WITH BY THE ADJUDICATING AUTHORITY. ITA NO. 5662/DEL/2018 A.Y. 2014-15 VEENA GUPTA 8 15. WE, ACCORDINGLY, RESPECTFULLY FOLLOWING DECISIO N OF HONBLE SUPREME COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES VERSUS CCE (SUPRA) ALLOW APPEAL OF ASSESSEE ON LEGAL GROUND RAISED IN GROUND 2(C), AND QUASH AND SET-ASIDE THE ASSESSMENT ORDER SO PASSED. 15.1 AS WE HAVE ALLOWED ASSESSEES APPEAL ON GROUND 2(C), OTHER GROUNDS RAISED BY ASSESSEE BECOMES ACADEMIC IN NATU RE WHICH DO NOT REQUIRE ANY ADJUDICATION AT THIS STAGE. ACCORDINGLY WE ALLOW THE APPEAL OF ASSESSEE ON THE LEGAL ISSUE RAISED IN ON GROUND 2(C). IN THE RESULT APPEAL FILED BY ASSESSEE STANDS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 27/11/2018 SD/- SD/- (PRASHANT MAHARISHI) (B EENA A PILLAI) ACCOUNTANT MEMBER JUD ICIAL MEMBER DT. 27 TH NOVEMBER, 2018 *KAVITA ARORA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT - TRUE COPY - BY ORDER, ASSISTANT REGISTRAR ITAT DELHI BENCHES ITA NO. 5662/DEL/2018 A.Y. 2014-15 VEENA GUPTA 9