Udit Kalra, New Delhi V. ITO, Ward- 50(1), New Delhi

ITA 6717/DEL/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7925 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 07-11-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Keywords: Accommodation entries; Benefit of exemption
• Section: 143(3); 142(1); 68

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI SMC BENCH, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 6717/DEL/2017 [ASSESSMENT YEAR: 2014-15] UDIT KALRA, VS. ITO, WARD-50(1), C/O DEV RAJ SHARMA, CIVIC CENTRE, ADVOCATE, NEW DELHI 2 TA-327, 2 ND FLOOR, TUGHLAKABAD EXTN., MAIN OKHLA ROAD, NEW DELHI 110 019 (PAN: CDHPK9311E) [APPELLANT] [RESPONDENT] ASSESSEE BY: SH. DEV RAJ SHARMA, ADV. REVENUE BY : SHRI SL ANURAGI, SR. DR. ORDER THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX [APPEALS]-17, NE W DELHI DATED 25.8.2017 PERTAINING TO ASSESSMENT YEAR 2014-15 ON THE FOLLOWING GROUNDS:- I) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LD. CIT(A) IS BAD, BOTH IN THE EYE OF LAW AND ON THE FACTS. II) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ORDER PASSED BY THE 2 ASSESSING AUTHORITY AND CONFIRMING THE ADDITIONS. III) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACT THAT ADDITIONS TO THE INCOME OF THE ASSESSEE WERE MADE PURELY ON PRESUMPTIONS ON CONJECTURE AND SURMISES AND THEREFORE DESERVE TO BE DELETED. IV) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DISALLOWING DEDUCTION CLAIMED BY THE ASSESSEE U/S. 10(38) OF THE INCOME TAX ACT FOR RS. 27,20,457/-. THE LD. CIT(A) AS WELL AS AO HAS FAILED TO APPRECIATE THAT FOR CLAIMING THE BENEFIT OF EXEMPTION U/S. 10(38) OF THE ACT THREE REQUIREMENT NEEDS TO BE FULFILLED. (A) FIRST THE SHARE SHOULD BE HELD FOR MORE THAN 1 YEAR. (B) SECONDLY IT SHOULD BE LISTED AND SOLD ON RECOGNISED STOCK EXCHANGE AND (C) THIRDLY ON THE SAID SALE NECESSARY SECURITY TRANSACTION TAX (STT) HAS BEEN PAID. 3 A PERUSAL OF THE BILLS OF PURCHASE AND SALE SHOWS THAT THE SHARES HAVE BEEN HELD FOR MORE THAN 1 YEAR, THE SAME HAS BEEN SOLD ON RECOGNISED STOCK EXCHANGE AND NECESSARY STT HAS BEEN PAID TO GOVT. TREASURY AND THEREFORE THE EXEMPTION U/S. 10(38) OF THE ACT CANNOT BE DENIED IN THE CIRCUMSTANCES OF THE CASE. 5. THE LD. CIT(A) AND THE AO HAS ERRED IN LAW AND ON FACTS IN NOT CONFRONTING THE ASSESSEE WITH THE MATERIAL AND STATEMENT USED AGAINST HIM IN THE ASSESSMENT ORDER. ON THIS GROUND ALSO THE ADDITIONS MADE BY THE AO DESERVE TO BE DELETED. IT IS SUBMITTED THAT THE ASSESSEE WAS SUPPLIED WITH THE COPY OF THE STATEMENT OF MR. ALOK HARLALKA BUT WAS EVER GIVEN OPPORTUNITY TO CROSS EXAMINE SAID MR. ALOK HARLALKA INSPITE OF HIS SPECIFIC REQUEST . SURPRISINGLY THE AO HAS CONCLUDED THE ASSESSMENT RELYING ON THE STATEMENT OF SOME SRI JAI KISHAN PODDAR INSTEAD OF MR. ALOK HARLALKA. 6. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY OR MORE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF THE HEARING OF THE APPEAL. 4 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FILED HIS RETURN OF INCOME ON 25.7.2014 DECLARING A TOTAL INCOME OF RS. 7,71,040/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY THROUGH CASS IN ORDER TO EXAMINE SUSPICION LONG TERM CAPITAL GAIN ON SHARES (INPUTS FROM INVESTIGATION WING). NOTICE U/S. 143(2) OF TH E INCOME TAX ACT, 1961 (IN SHORT ACT) WAS ISSUED ON 18.9.2015. CONS EQUENT ON TRANSFER OF JURISDICTION, THE FURTHER NOTICE U/S. 1 43(2) OF THE ACT WAS ISSUED TO THE ASSESSEE ON VARIOUS DATES AND AGAIN N OTICE U/S. 142(1) ISSUED FOR HEARING ON 27.5.2016. IN COMPLIAN CE TO THE SAME THE A.R. FOR THE ASSESSEE APPEARED FROM TIME TO TIM E AND FURNISHED THE INFORMATION CALLED FOR. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS DECLARED INCOME EARNED FROM LONG TERM CAPITAL GAIN OF RS. 27,20,457/- ON SALE OF SHARES DURING THE YE AR WHICH HAS BEEN CLAIMED EXEMPT U/S. 10(38) OF THE ACT. AO HEL D THAT THE TRANSACTIONS WAS BOGUS OR SHAM AND NOTHING BUT A R ACKET OF ACCOMMODATION ENTRIES, BY WAY OF LONG TERM CAPITAL GAIN EXEMPT FROM TAX, THE AMOUNT OF CAPITAL GAINS OF RS. 27,20, 457/- CLAIMED AS LTCG EXEMPT FROM TAX WAS HELD TO BE NOT GENUINE AND ADDITION AS MADE OF THE TOTAL CASH CREDIT OF RS. 27,20,457/- TO THE RETURNED INCOME OF THE ASSESSEE AS PER THE PROVISIONS OF SEC TION 68 OF THE ACT AND PROVISION OF SECTION 115BBE OF THE ACT ARE ALSO APPLIED AND THIS AMOUNT IS TAXED @ 30% AND ACCORDINGLY, ASSESSED THE INCOME OF 5 THE ASSESSEE AT RS. 35,39,500/- VIDE ORDER DATED 28 .12.2016 PASSED U/S. 143(3) OF THE ACT. AGAINST THE ASSESSME NT ORDER, THE ASSESSEE APPEALED BEFORE THE LD. CIT(A) WHO VIDE HI S IMPUGNED ORDER DATED 25.8.20187 HAS DISMISSED THE APPEAL O F THE ASSESSEE. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), ASSESSE E APPEALED BEFORE THE TRIBUNAL. 3. DURING THE HEARING, LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ADDITION IN DISPUTE WAS MADE AND CONFIRME D PURELY ON PRESUMPTIONS, CONJECTURE AND SURMISES AND THEREFORE , DESERVE TO BE DELETED. HE FURTHER SUBMITTED THAT THE AUTHORITIE S BELOW HAVE FAILED IN DISALLOWING DEDUCTION CLAIMED BY THE ASS ESSEE U/S. 10(38) OF THE ACT FOR RS. 27,20,457/-. HE FURTHER SUBMIT TED THAT THE LOWER AUTHORITIES ALSO FAILED TO APPRECIATE THAT FOR CLA IMING THE BENEFIT OF EXEMPTION U/S. 10(38) OF THE ACT THREE REQUIREMENT NEEDS TO BE FULFILLED I.E. FIRST THE SHARE SHOULD BE HELD FOR M ORE THAN 1 YEAR, SECONDLY IT SHOULD BE LISTED AND SOLD ON RECOGNISED STOCK EXCHANGE AND THIRDLY ON THE SAID SALE NECESSARY SECURITY TRA NSACTION TAX (STT) HAS BEEN PAID. HE FURTHER STATED THAT IN THIS CASE A PERUSAL OF THE BILLS OF PURCHASE AND SALE SHOWS THAT THE SHARES HA VE BEEN HELD FOR MORE THAN 1 YEAR, THE SAME HAS BEEN SOLD ON RECOGNI SED STOCK EXCHANGE AND NECESSARY STT HAS BEEN PAID TO GOVT. T REASURY AND THEREFORE THE EXEMPTION U/S. 10(38) OF THE ACT CANN OT BE DENIED IN 6 THE CIRCUMSTANCES OF THE CASE. HENCE, HE REQUESTED TO CANCEL THE ORDERS OF THE AUTHORITIES BELOW AND ALLOW THE APPEA L OF THE ASSESSEE. IN SUPPORT OF HIS CONTENTION, HE FILED A PAPER BOOK C ONTAINING PAGES 1 TO 91 IN WHICH HE HAS ATTACHED THE COPY OF WRITTEN SUBMIS SIONS/ARGUMENTS; SHOW CAUSE NOTICE DATED 19.12.2016 ISSUED BY THE AO ; REPLY DATED 26.12.2016 OF THE ASSESSEE TO THE SHOWS CAUSE NOTIC E DATED 19.12.2016; COPY OF THE BANK STATEMENT OF AXIS BANK, EAST PATE L NAGAR, NEW DELHI; COPY OF JUDGMENT OF HIGH COURT OF GUJARAT IN CASE O F CIT VS. HIMANI M. VALIK (2013) 10 TAXMANN.COM 326 (GUJARAT); COPY OF JUDGMENT OF RAJASTHAN HIGH COURT IN CASE OF CIT VS. SMT. SUMITR A DEVI IN ITA NO. 54/2012; COPY OF JUDGMENT OF ITAT, MUMBAI IN CASE O F ACIT VS. SHRI INDRAVADAN JAIN ITA NO. 4861/MUM/2014; COPY OF THE JUDGEMENT OF MUMBAI HIGH COURT IN CASE OF CIT VS. SHRI MUKESH RA TILAL MAROLIA, ITA NO. 456/MUM/2007; DECISION OF ITAT, AGRA IN CASE OF KM. SAUMYA AGARWAL VS. ITO (2008) 174 TAXMAN 60 (AGRA); COPY OF ITAT D ECISION IN CASE OF MEENU GOEL VS. ITO IN ITA NO. 6235/DEL/2017 AND JUD GEMENT OF HONBLE HIGH COURT OF PUNJAB AND HARYANA IN THE CASE OF PR. CIT VS. PREM PAL GANDHI AND PR. CIT VS. HITESH GANDHI IN ITA 18 OF 2017 DATED 16.2.2017. 4. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. HE FURTHER STATED THAT ASSESSEE HAS NOT SUBS TANTIATED HIS CLAIM BEFORE THE REVENUE AUTHORITIES. HE SUBMITTED THAT THE PURCHASE TRANSACTION HAS BEEN DONE OFF MARKET IN PHYSICAL FO RM BY PAYING CASH AND ASSESSEE HAS PURCHASED THE SHARES M/S KAPPAC PHARMA LTD. IN PHYSICAL 7 FORM AND THEREAFTER, THE SAME HAVE BEEN CONVERTED I NTO ELECTRONIC MODE AND SEBI GUIDELINES HAVE BEEN NOT ADOPTED. IT WAS F URTHER SUBMITTED THAT THE PURCHASE PAYMENTS WERE MADE IN CASH AND NOT THR OUGH THE NORMAL BANKING CHANNEL THEREFORE THE SAME WERE NON VERIFIA BLE FROM THE AUTHENTIC SUPPORTING DETAILS SUCH AS BANK ACCOUNTS/ DOCUMENTS. THE ASSESSEE IS NOT A REGULAR INVESTOR IN SHARES. ASSES SEE HAS FAILED TO FURNISH THE PROOF OF SOURCE FOR THE PURCHASE TRANSACTIONS. THUS, THE ENTIRE TRANSACTIONS ARE AGAINST HUMAN PROBABILITY. HE FURT HER STATED THAT THE CASE LAWS RELIED UPON BY THE AO AS WELL AS LD. CIT( A) MAY BE READ AS HIS ARGUMENTS INCLUDING THE DECISION OF THE HONBLE SUP REME COURT OF INDIA IN THE CASE OF MC DOWELL AND COMPANY LIMITED, 154 ITR 148. 5. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RE CORDS ESPECIALLY THE IMPUGNED ORDER. I FIND THAT THE ASSESSEE IS AN INDIVIDUAL AND THE AMOUNT OF CASH CREDIT RS. 27,68,457/-. HOWEVER, ON PERUSING THE ASSESSMENT ORDER, I FIND THAT THERE WAS A SPECIFIC INFORMATION THAT ASSESSEE HAS INDULGED IN NON-GENUINE AND BOGUS CAPI TAL GAIN OBTAINED FROM THE TRANSACTIONS OF PURCHASE AND SALE OF SHARE S OF M/S KAPPAC PHARMA LTD., A MUMBAI BASED COMPANY. IT IS NOTICED THAT THE PURCHASE TRANSACTION HAS BEEN DONE OFF MARKET IN PHYSICAL FO RM BY PAYING CASH. THE ASSESSEE HAS PURCHASED THE SHARE M/S KAPPAC PHA RMA LTD. IN PHYSICAL FORM AND THEREAFTER, THE SAME HAVE BEEN CO NVERTED INTO ELECTRONIC MODE. THE PURCHASE PAYMENTS WERE MADE IN CASH AND NOT THROUGH THE NORMAL BANKING CHANNEL THEREFORE THE SA ME WERE NON- VERIFIABLE FROM THE AUTHENTIC SUPPORTING DETAILS SU CH AS BANK ACCOUNT/ 8 DOCUMENTS. ASSESSEE IS NOT A REGULAR INVESTOR IN SHARES. THE ASSESSEE HAS FAILED TO FURNISH THE PROOF OF SOURCE FOR THE P URCHASE TRANSACTIONS. THUS, THE ENTIRE TRANSACTIONS ARE AGAINST HUMAN PRO BABILITY. ALSO CONSIDERING THE FINDINGS OF THE INVESTIGATION WING, INQUIRIES CONDUCTED IN THE CASE OF ASSESSEE, BROKERS, OPERATORS AND THE E NTRY PROVIDERS AND THE NATURE OF TRANSACTION ENTERED INTO BY THE ASSESSEE THE LTCG OF RS. 27,20,457/- CLAIMED EXEMPT U/S. 10(38) OF THE ACT B Y THE ASSESSEE CANNOT BE ALLOWED AND THE AMOUNT OF RS. 27,68,457/- RECEIVED BACK AS SALES PROCEEDS ON SALE OF SHARES WAS REQUIRED TO BE ADDED BACK TOWARDS HIS TAXABLE INCOME UNDER SECTION 68 OF THE ACT. THE ABOVE AMOUNT OF RS. 27,68,457/- WAS DEEMED AS INCOME OF THE ASSESSEE U/ S. 68 OF THE ACT, OVER AND ABOVE, THE INCOME ALREADY DECLARED IN ITR DURING AY 2014-15. IN VIEW OF ABOVE DISCUSSIONS, THE LANDMARK DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MCDOWELL AND COMPANY L IMITED, 154 ITR 148 IS SQUARELY APPLICABLE IN THIS CASE WHEREIN IT HAS BEEN HELD THAT TAX PLANNING MAY BE LEGITIMATE PROVIDED IT IS WITHIN TH E FRAMEWORK OF THE LAW AND ANY COLOURABLE DEVICES CANNOT BE PART OF TAX PL ANNING AND IT IS WRONG TO ENCOURAGE OR ENTERTAIN THE BELIEF THAT IT IS HON OURABLE TO AVOID THE PAYMENT OF TAX BY DUBIOUS METHODS. HOWEVER, THE CA SE LAWS CITED BY THE LD. COUNSEL FOR THE ASSESSEE ARE ON DISTINGUISHED F ACTS, HENCE, NOT APPLICABLE IN THE INSTANT CASE. THE ASSESSEE HAS NOT RAISED ANY LEGAL GROUND AND ARGUED ONLY ON MERIT FOR WHICH ASSESSEE HAS FAILED TO SUBSTANTIATE HIS CLAIM BEFORE THE LOWER REVENUE AU THORITIES AS WELL AS BEFORE THIS BENCH. IN VIEW OF ABOVE DISCUSSIONS, I AM OF THE CONSIDERED 9 OPINION THAT LD. CIT(A) HAS RIGHTLY CONFIRMED THE A DDITION IN DISPUTE, WHICH DOES NOT NEED ANY INTERFERENCE ON MY PART, TH EREFORE, I UPHOLD THE ACTION OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AN D REJECT THE GROUNDS RAISED BY THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. THE ORDER PRONOUNCED ON 08.01.2019. SD/- [H.S. SIDHU] JUDICIAL MEMBER DATED: 08-01-2019 SR BHATNAGAR COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) ASST. REGISTRAR, 5. DR ITAT, NEW DELHI