ACIT-12(2)(1), MUMBAI , MUMBAI V. SHRI SURENDRA DEVIPRASAD TIBREWALA, MUMBAI

ITA 6347/MUM/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 6911 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 03-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Tax effect; Set aside
• Section: 68; 148; 268A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “E”, MUMBAI BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER ITA No. 6347/Mum/2019 (A.Y. 2011-12) ACIT-12(2)(1), Room No. 128E, 1st Floor, Aayakar Bhavan, Churchgate, Mumbai-400020 ...... Appellant Vs. Shri Surendra Deviprasad Tibrewala, 2, Violet Villa, West Avenue Road, Santacruz (W), Mumbai-400054. PAN: AAAPT7373B ..... Respondent Appellant by : Sh. B.K. Bagchi Respondent by : Sh. Abhay Nerurkar Date of hearing : 02/03/2022 Date of pronouncement : 15/03/2022 ORDER PER GAGAN GOYAL, A.M: This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-20, Mumbai [hereinafter referred to as ‘the CIT (A)’] dated 25.06.2019 for the Assessment Year (AY) 2011-12. The Revenue has filed the following grounds of appeal: 1. Whether on the facts and circumstances of the case, Ld. CIT (A) is justified in deleting the addition made u/s 68 on account of sales proceeds from penny stock without appreciating that the same was in the nature of organized tax-evasion scam. 2. Whether on the facts and circumstances of the case, Ld. CIT(A) is justified in allowing the claim of STCS of Rs. 10,530/- claimed by the assessee without appreciating the fact that the AO has rightly computed the STCG of Rs. 10,776/- after detailed analysis of the price movement of the stock in KCLIPL. 2 I.T.A NO.6347/MUM/2019 (A.Y.2011-12) 3. On the facts and circumstances of the case, Hon'ble ITAT is requested to entertain this appeal though the tax effect is below the monetary limit prescribed in the CBDT's Circular No. 17/2019 dated 08.08.2019 but is in the nature of organized tax evasion activity in Circular No. 23/2019 dated: 06.09.2019. 4. The appellant prays that the order of the CIT (A) on the grounds be set aside and that of the Assessing Officer be restored. 5. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary. 2. Brief facts of the case are that the assessee e-filed his return of income for AY 2011-12 on 01.08.2011 declaring total income of Rs. 69,62,152/-. Thereafter, information was received from the Investigation Unit about the assessee. As per this information, the assessee was indulged in the penny stock transactions to the tune of Rs. 3,11,880/-, thereafter notice under section 148 of the Income Tax Act, 1961 (for short ‘the Act’) dated 27.03.2018 was issued and served upon the assessee. The Investigation Wing alleged that the shares of M/s. KCL Infra Projects Ltd. were being used as penny stock to provide bogus Long Term Capital Gain (LTCG)/Short Term Capital Loss (LTCL). The Assessing Officer (AO) further sought information from the Bombay Stock Exchange (BSE) to identify the beneficiaries who have traded in the share of KCLIPL. This information was reconciled with the return of income filed by the assessee and it was noticed that this transaction of shares was not appearing in ITS. Details of the assessee extracted from I.T.D. System. During 148 proceedings, assessee responded the contract notes, Bank Account showing the payment received from the broker, Demat A/c statement. The AO considering the replies of the assessee vis-a-vis finding of the search/survey conducted in the case of assessee, brokers, operators and the entry providers and the nature of transaction entered into by the assessee, the total sale value of Rs. 2, 31,000/- received back as sales proceeds on sale of shares of KCIPL is added back towards his taxable income under section 68 of the Act and the STCL of Rs. 10,530/- as claimed by the assessee is not allowed. Further, the 3 I.T.A NO.6347/MUM/2019 (A.Y.2011-12) STCG of Rs. 10,776/- is reduced from the total STCG u/s 111A in the computation of income. Penalty proceedings u/s. 271(1) (c) of the Income-tax Act, 1961 are initiated for concealment of taxable income as well as furnishing of inaccurate particulars of income. 3. Against this order of AO, assessee preferred an appeal before the CIT (A). CIT(A) in his order observed as under: The AO’s action in treating the total sale value of Rs. 2, 31,581/- as unexplained cash is also grossly wrong. The AO has himself mentioned in the show cause notice that the appellant had sold shares in KCLIPL for Rs. 2,31,581/-. Therefore, the source of the sum of Rs. 2, 31,581/- stands explained. It may be possible that some people have rigged the shares in KCLIPL but the AO has not been able to bring any material to support his contention that the appellant was involved in the said rigging. I, therefore, hold that the addition made u/s. 68 is not sustainable. Accordingly, I direct the AO to delete the addition of Rs. 2, 31,581/-. For the same reasons, I hold that AO was not justified in disallowing the STCL of Rs. 10,530/-. In the result, ground of appeal No. 1 & 2 are allowed.” 4. We have gone through the assessment order with replies of assessee filed before the AO and the order of CIT (A) along with submission of the assessee before the CIT (A). Before deciding the matter with respect to ground no.1, 2 & 4, it is pertinent to refer ground no.3 with reference to Circular No. 23/2019 dated 06.09.2019. “Subject: -Exception to monetary limits for filing appeals specified in any Circular issued under Section 268A of the Income-tax Act, 1961-reg Reference is invited to the Circulars issued from time to time by Central Board of Direct Taxes (the Board) under section 268A of the Income-tax Act,1961 (the Act), for laying down monetary limits and other conditions for filing of departmental appeals before Income Tax Appellate Tribunal (ITAT), High Courts and SLPs/appeals before Supreme Court. 2. Several references have been received by the Board that in large number of cases where organised tax-evasion scam is noticed through bogus Long-Term 4 I.T.A NO.6347/MUM/2019 (A.Y.2011-12) Capital Gain (LTCG) Short Term Capital Loss (STCL) on penny stocks and department is unable to pursue the cases in higher judicial fora on account of enhanced monetary limits. It has been reported that in large number of cases, ITATs and High Court have recognized the unique modus operandi involved in such scam and have passed judgements in favour of the revenue. However, in cases where some appellate fora have not given due consideration to position of law or facts investigated by the department, there is no remedy available with the department for filing further appeal in view of the prescribed monetary limits. 3. In this context, Board has decided that notwithstanding anything contained in any circular issued u/s 268A specifying monetary limits for filing of departmental appeals before Income Tax Appellate Tribunal (ITAT), High Courts and SLPs/appeals before Supreme Court, appeals may be filed on merits as an exception to said circular, where Board, by way of special order direct filing of appeal on merit in cases involved in organised tax evasion activity.” 5. As per para-3 of this Circular in the case of bogus LTCG/STCL of penny stocks, appeals may be filed on merits as an exception to said Circular where Board by way of special order direct filing of appeal on merit in cases involved in organized tax evasion activity. 6. Considering the directions in the Circular as we found that there is no special order obtained by the Department from Board in this case, hence, same is not qualified to be entertained. 7. In the result, appeal of the Revenue is dismissed relying on Board Circular (Supra) without discussing the merits. Order pronounced in the open court on 15th day of March, 2022. Sd/- Sd/- (KULDIP SINGH) (GAGAN GOYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, िदनांक/Dated: 15/03/2022 SK, Sr.PS 5 I.T.A NO.6347/MUM/2019 (A.Y.2011-12) Copy of the Order forwarded to : 1. अपीलाथŎ/The Appellant , 2. Ůितवादी/ The Respondent. 3. आयकर आयुƅ(अ)/ The CIT(A)- 4. आयकर आयुƅ CIT 5. िवभागीय Ůितिनिध, आय.अपी.अिध., मुबंई/DR, ITAT, Mumbai 6. गाडŊ फाइल/Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, Mumbai