Pankaj Agarwal, CHENNAI V. ACIT Central Circle 3(2), CHENNAI

ITA 768/CHNY/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2813 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 22-03-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Share purchase agreement; Opportunity of being heard; Set aside; Capital Gains; Bogus
• Section: 201; 20

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI , , BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER & S HRI S.JAYARAMAN , ACCOUNTANT MEMBER ./ I.T.A.NO.767/CHNY/2019 / ASSESSMENT YEAR : 2015-16 SHRI MUKESH AGARWAL , 14,MOORTHY STREET,3 RD FLOOR, ROSS STREET,AGASTHAYAR NAGAR, KILPAUK,CHENNAI 600 010. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 3(2), CHENNAI.600 034. [PAN AAFPK 6968 E ] ( / APPELLANT) ( /RESPONDENT) ./ I.T.A.NO.768/CHNY/2019 /ASSESSMENT YEAR : 2015-16 SHRI PANKAJ AGARWAL , 14,MOORTHY STREET,3 RD FLOOR, ROSS STREET,AGASTHAYAR NAGAR, KILPAUK,CHENNAI 600 010. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 3(2), CHENNAI.600 034. [PAN AFLPA 1767 N ] ( / APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR.N.ARJUN RAJ,ADVOCATE FOR MR.S.SRIDHAR,ADVOCATE !' /RESPONDENT BY : MR.AR.V.SREENIVASAN,JCIT,D.R & / DATE OF HEARING : 03 - 09 - 20 1 9 & / DATE OF PRONOUNCEMENT : 03 - 09 - 201 9 ITA NO. 767,768/CHNY2019 :- 2 -: / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER ITA NO.767/CHNY/2019 IS AN APPEAL FILED BY THE ASSESSEE, SHRI MUKESH AGARWAL, AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-19 ,CHENNAI IN ITA NO.386/17-18 DATED 28.02.2019 FOR THE ASSESSMENT YE AR 2015-16. ITA NO.768/CHNY/2019 IS AN APPEAL FILED BY THE ASSE SSEE, SHRI MUKESH AGARWAL, AGAINST THE ORDER OF THE COMMISSION ER OF INCOME TAX(APPEALS)-19 ,CHENNAI IN ITA NO.385/17-18 DATED 28.02.2019 FOR THE ASSESSMENT YEAR 2015-16. 2. AS THE ISSUES RAISED IN BOTH THE APPEALS FILED B Y THE DIFFERENT ASSESSEE ARE IDENTICAL, BOTH THE APPEALS ARE DISPOSED OFF BY THIS COMMON ORDER. 3. MR.N.ARJUN RAJ REPRESENTED ON BEHALF OF THE ASS ESSEE AND MR.AR.V.SREENIVASAN REPRESENTED ON BEHALF OF THE REVENUE. 4. IT WAS SUBMITTED BY THE LD.AR THAT THE ISSUES RAISE D IN BOTH THE APPEALS OF THE ASSESSEE WERE AGAINST THE ACTION OF THE LD.CIT(A) IN CONFIRMING THE DISALLOWANCE OF THE EXE MPT INCOME U/S.10(38) OF THE ACT. THE ISSUES IN THESE APPEALS ARE SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ITA NO. 767,768/CHNY2019 :- 3 -: THE CASE OF SHRI SUNIL KUMAR LALWANI VS. ITO IN ITA NO.659/CHNY/2018 AND ALSO IN THE CASE OF SHRI AASHE SH KUMAR LALWANI VS. ITO FOR THE AY 2014-15 DATED 09.01.2019 , WHEREIN, THE CO-ORDINATE BENCH OF THIS TRIBUNAL HAS HELD AS FOLL OWS: 4. IN REPLY, IT WAS SUBMITTED BY LD.D.R THAT THE I SSUE WAS NOW SQUARELY COVERED BY THE DECISION OF CO-ORDINATE BEN CH OF THIS TRIBUNAL IN THE CASE OF SHRI HEERACHAND KANUNGA FO R ASSESSMENT YEARS 2010-11 & 2011-12 IN ITA NOS.2786 & 2787/MDS/ 2017 VIDE ORDER DATED 03.05.2018 WHEREIN THE TRIBUNAL HAS BEE N HELD AS FOLLOWS:- 9. A PERUSAL OF THE FACTS IN THE PRESENT CASE ADM ITTEDLY GIVEN ROOM FOR SUSPICION. HOWEVER, ASSESSMENTS ARE NOT TO BE DONE ON THE BASIS OF MERE SUSPICION. IT HAS T O BE SUPPORTED BY FACTS AND THE FACTS ARE UNFORTUNATELY NOT FORTHCOMING IN THE ASSESSMENT ORDER, IN THE ORDER O F THE LD.CIT(A) NOR FROM THE SIDE OF THE ASSESSEE. THE M AIN FOUNDATION OF THE ASSESSMENT IN THE PRESENT CASE IS THE STATEMENT OF ONE SHRI ASHOK KUMAR KAYAN WHO HAS ADMITTED TO HAVE PROVIDED BOGUS LONG TERM CAPITAL G AINS TO HIS CLIENTS. THE SAID SHRI ASHOK KUMAR KAYAN AL SO ALLEGEDLY SEEMS TO HAVE PROVIDED THE ASSESSEES NAM E AND PAN AS ONE OF THE BENEFICIARIES. HOWEVER, THIS STATEMENT GIVEN BY SHRI ASHOK KUMAR KAYAN CANNOT BE THE FOUNDATION FOR THE PURPOSE OF ASSESSMENT IN SO FAR AS SHRI ASHOK KUMAR KAYAN HAS NOT BEEN PROVIDED TO THE ASSESSEE FOR CROSS-EXAMINATION. IN THE ABSENCE OF OPPORTUNITY OF CROSS-EXAMINATION, THE STATEMENT REM AINS MERE INFORMATION AND SUCH INFORMATION CANNOT BE FOUNDATION FOR ASSESSMENT. 10. ADMITTEDLY, THE ASSESSEE HAS CLAIMED TO HAVE PURCHASED 15000 SHARES FROM M/S.BPL @ RS.20/- PER SHARE TOTALING INTO RS.3,00,000/-. THE ASSESSEE CLA IMS TO HAVE PAID CASH FOR THE PURCHASE OF THESE SHARES. T HE PRIMARY QUESTION WOULD BE AS TO WHERE THE PURCHASE WAS DONE? IF THE PURCHASE HAS BEEN DONE IN KOLKATA, HOW WAS THE CASH TRANSFERRED? WHEN DID THE ASSESSEE RECEIVE D THE SHARE CERTIFICATES AND THE SHARE TRANSFER FORMS? H OW DID THE ASSESSEE OVERCOME THE PROVISIONS OF SEC.40A(3)? WAS THERE ADEQUATE CASH AVAILABILITY IN THE BOOKS O F THE ASSESSEE ON 24.04.2008? DID THE ASSESSEE TRAVELLED TO KOLKATA? HOW WAS THE TRANSACTION DONE? WHO APPLIE D FOR THE DEMATING OF THE SHARES? WHEN WERE THEY DEMATED ? WHEN WERE THE SHARES TRANSFERRED TO THE DEMAT ACCOU NT ITA NO. 767,768/CHNY2019 :- 4 -: OF THE ASSESSEE? TO WHOM WERE THE SHARES SOLD DURIN G THE ASSESSMENT YEARS 2010-11 & 2011-12? WHEN WERE THE CHEQUES RECEIVED BY THE ASSESSEE? FROM WHOM DI D THE ASSESSEE RECEIVED THE CHEQUES? WAS THERE ANY CA SH DEPOSIT IMMEDIATELY PRIOR TO THE ISSUING OF THE CHE QUE FROM THE BANK ACCOUNT OF THE PURCHASER OF THE SHARE S OF THE ASSESSEE? 11. A PERUSAL OF THE ASSESSMENT ORDER AT PARA NO.7. 1 SHOWS THAT IN THE WRITTEN SUBMISSIONS, THE ASSESSEE STATES THAT HE HAS PURCHASED 15000 SHARES OF M/S.BP L FROM M/S.ABPL, KOLKATA. HOWEVER, IN PARA NO.8.3, I T IS MENTIONED THAT THE ASSESSEE IN GOOD FAITH HAS PURCH ASED THE SHARES OF M/S.BPL FROM A SUB-BROKER IN HIS FRIE NDS CIRCLE. WHAT IS THE TRUE NATURE OF THE TRANSACTION ? FROM WHOM DID THE ASSESSEE ACTUALLY PURCHASE THE SHARES? DID THE ASSESSEE TAKE POSSESSION OF THE SHARES IN ITS P HYSICAL FORM? IN PARA NO.8.1 OF THE ASSESSMENT ORDER, IT I S MENTIONED THAT THE ASSESSEE IS AN INVESTOR AND HAS BEEN REGULARLY TRADING IN SHARES. IF THIS IS SO, DOES T HE DEMAT ACCOUNT SHOW SUCH TRANSACTIONS BEING DONE BY THE ASSESSEE OR IS THIS THE ONLY ONE OF TRANSACTION. T HUS, CLEARLY THE FACTS REQUIRED FOR ADJUDICATING THE APP EALS ARE NOT FORTHCOMING. THERE IS NO EVIDENCE WHATSOEVER T O SHOW THAT THE ASSESSEE HAS HELD THE SHARES FOR MORE THAN 12 MONTHS. THIS IS BECAUSE ASSUMING THAT THE DEMAT HAS BEEN DONE AND THE SHARES OF M/S.BPL HAS COME INTO T HE ASSESSEES DEMAT ACCOUNT AND HAS IMMEDIATELY FLOWN OUT. THEN THE FACTUM OF THE POSSESSION OF THE SHARES FOR MORE THAN 12 MONTHS HAVE TO BE PROVED BY THE ASSESSEE. THIS IS ALSO NOT FORTHCOMING. IN REPLY TO A SPECIFIC QU ERY, AS THE DATE OF THE DEMAT OF SHARES, IT WAS SUBMITTED B Y THE LD.AR THAT THE DEMAT WAS DONE ON VARIOUS DATES. TH EN THE QUESTION RISES AS TO WHY THERE IS SO MUCH OF DIFFERENCE IN THE DATES OF DEMATING WHEN 15000 SHAR ES HAVE BEEN PURCHASED TOGETHER ON 24.04.2008. NO DET AILS IN RESPECT OF M/S.BPL COMPANY IS KNOWN, WHAT IS THE PRODUCT OF THE COMPANY WHICH HAD LEAD TO THE SHARE VALUE OF THE COMPANY TO GO UP FROM RS.20/- TO RS.352/- IN A PERIOD OF TWO YEARS. THIS WOULD CLEARLY BE A CASE W HERE THE SHARE VALUE OF THE COMPANY WAS HITTING THE CIRC UIT BREAKER OF THE STOCK EXCHANGE ON A DAILY BASIS AND OBVIOUSLY IT WOULD HAVE DRAWN ATTENTION. THIS BEIN G SO, AS THE FACTS ARE NOT COMING OUT OF THE ASSESSMENT O RDER NOR THE ORDER OF THE LD.CIT(A) NOR FROM THE SIDE OF THE ASSESSEE, WE ARE OF THE VIEW THAT THE ISSUES IN THI S APPEAL MUST BE RESTORED TO THE FILE OF THE AO FOR RE-ADJUD ICATION AFTER GRANTING THE ASSESSEE ADEQUATE OPPORTUNITY TO SUBSTANTIATE ITS CASE AND WE DO SO. ITA NO. 767,768/CHNY2019 :- 5 -: 12. THE STATEMENT RECORDED BY THE REVENUE FROM SHRI ASHOK KUMAR KAYAN CANNOT BE USED AS AN EVIDENCE AGAINST THE ASSESSEE IN SO FAR AS THE STATEMENT HAS NOT BEEN GIVEN TO THE ASSESSEE NOR HAS SHRI ASHOK KUMAR KAYAN BEEN PROVIDED TO THE ASSESSEE FOR CROSS- EXAMINATION. HOWEVER, THE ASSESSEE SHALL PROVE THE TRANSACTION OF THE LONG TERM CAPITAL GAINS IN RESPE CT OF WHICH THE ASSESSEE HAS CLAIMED THE EXEMPTION U/S.10 (38) BY PROVIDING ALL SUCH EVIDENCES AS REQUIRED BY THE AO TO SUBSTANTIATE THE CLAIM AS ALSO BY PRODUCING THE PER SONS THROUGH WHOM THE ASSESSEE HAS UNDERTAKEN THE TRANSACTION OF THE PURCHASE AND SALE OF THE SHARES WHICH WOULD INCLUDE THE SUB-BROKER, FRIEND AND THE BROKER THROUGH WHOM THE TRANSACTION HAS BEEN DONE, BEFORE THE AO FOR EXAMINATION. IT WAS A SUBMISSION THAT ON IDENTICAL DIRECTIONS, T HE ISSUE IN THESE APPEALS CAN ALSO BE RESTORED TO THE FILE OF L D. ASSESSING OFFICER. 5. PER CONTRA, LD.A.R SUBMITTED THAT THE HONBLE D ELHI HIGH COURT IN THE CASE OF PR.CIT VS. M/S.LAXMAN INDUSTRI AL RESOURCES LTD., IN ITA NO.169/2017, C.M.APPL.7385/2017 VIDE O RDER DATED 14.03.2017 HAS HELD THE ISSUE IN FAVOUR OF THE ASSE SSEE. THE LD.A.R ALSO PLACED BEFORE US THE DECISION OF THE CO -ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SHRI ARAVIND NANDLAL KHATRI VS. INCOME TAX OFFICER, IN ITA NO.2035/CHNY/2038 FO R ASSESSMENT YEAR 2011-12 VIDE ORDER DATED 03.12.2018 WHEREIN THE CO-ORDINATE BENCH OF THIS TRIBUNAL HAS HELD AS FOLLOWS:- 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE A.O RECEIVED INFORMATION FR OM INVESTIGATION WING OF THE DEPARTMENT AT KOLKATA WIT H REGARD TO INVESTMENT OF THE ASSESSEE IN PENNY STOCK COMPANY, NAMELY, M/S.CONCRETE CREDIT LIMITED. THE ASSESSEE ALSO ADMITTEDLY SOLD THE SAID SHARES AND C LAIMED EXEMPTION UNDER SECTION 10(38) OF THE ACT DURING TH E YEAR WIDER CONSIDERATION. THEREFORE, THE ASSESSING OFFICER HAS NOT DISPUTED THE SOURCE FOR INVESTMENT. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF EXEMPTION ON THE GROUND THAT THE INVESTMENT WAS IN A PENNY STOCK COMPANY. FROM THE MATERIAL AVAILABLE ON RECORD IT APPEARS THAT A COPY OF INFORMATION SAID TO BE RECEI VED FROM THE INVESTIGATION WING OF THE DEPARTMENT AT KO LKATA WAS NOT FURNISHED TO THE ASSESSEE. IT IS NOT BROUGH T ON RECORD THE RELATIONSHIP OF THE ASSESSEE WITH THE PROMOTERS OF M/S CONCRETE CREDIT LIMITED. IT IS ALS O NOT BROUGHT ON RECORD THE ROLE OF THE ASSESSEE IN PROMO TING THE COMPANY, NAMELY, M/S CONCRETE CREDIT LIMITED, I SSUE OF PUBLIC SHARES, INFLATION OF PRICE OF SHARES, ETC . IN THOSE ITA NO. 767,768/CHNY2019 :- 6 -: CIRCUMSTANCES, THIS TRIBUNAL IS OF THE CONSIDERED O PINION THAT THE MATTER NEEDS TO BE RE-EXAMINED BY THE ASSESSING OFFICER. ACCORDINGLY, THE ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE ENTIRE ISSU E IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE A.O SHALL BRING ON RECORD THE ROLE OF THE ASSESSEE IN PROMOTING THE COMPANY AND RELATIONSHIP OF THE ASSES SEE WITH OTHER PROMOTERS, ROLE OF THE ASSESSEE IN INFLA TING THE PRICE OF SHARES, ETC. THE ASSESSING OFFICER SHALL ALSO FURNISH A COPY OF THE REPORT SAID TO BE RECEIVED FR OM THE INVESTIGATION WING OF THE DEPARTMENT AT KOLKATA TO THE ASSESSEE AND THEREAFTER DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW, AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. RESP ECTFULLY FOLLOWING THE ABOVE DECISIONS OF THE CO-ORDINATE BE NCH OF THIS TRIBUNAL, THE ISSUE IS RESTORED TO THE FILE OF LD. ASSESSING OFFICER FOR RE-ADJUDICATION ON IDENTICAL DIRECTIONS AS GIVE N IN THE CASE OF HEERACHAND KANUNGA REFERRED TO SUPRA. THE LD. ASSE SSING OFFICER SHALL ALSO BRING ON RECORD THE ROLE OF THE ASSESSEE IN PROMOTING THE COMPANY AND RELATIONSHIP OF THE ASSES SEE WITH OTHER PROMOTERS, ROLE OF THE ASSESSEE IN INFLATING THE PRICE OF SHARES, ETC. AS HAD BEEN HELD BY THE CO-ORDINATE B ENCH OF THIS TRIBUNAL IN THE CASE OF SHRI ARAVIND NANDLAL KHATRI VS. I.T.O REFERRED TO SUPRA. THE LD. ASSESSING OFFICER SHALL KEEP IN MIND THE DIRECTIONS OF THE HONBLE DELHI HIGH COURT IN T HE CASE OF PR.CIT VS. M/S.LAXMAN INDUSTRIAL RESOURCES LTD., RE FERRED TO SUPRA WHEN RE-ADJUDICATING THE ISSUE. THE ISSUES IN BOTH THE APPEALS OF ASSESSEES MENTIONED IN THE TITLE ARE RES TORED TO THE FILE OF LD. ASSESSING OFFICER FOR RE-ADJUDICATION A FTER GRANTING THE ASSESSEES ADEQUATE OPPORTUNITY OF BEING HEARD. 4. IN REPLY, THE LD.DR VEHEMENTLY SUPPORTED THE ORD ER OF THE ASSESSING OFFICER AND THE LD.CIT(A) 5. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-OR DINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SHRI SUNIL KUMAR LA LWANI VS. ITO AND ALSO IN THE CASE OF SHRI AASHESH KUMAR LALWANI VS. ITO, REFERRED TO SUPRA, THE ISSUES IN THESE APPEALS ARE RESTORED TO THE FILE OF THE AO FOR RE-ADJUDICATION. ITA NO. 767,768/CHNY2019 :- 7 -: 6. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE IN THE CASE OF SHRI MUKESH AGARWAL AND SHRI PANKAJ AGARWAL AR E PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT AFTER CONCLUSIO N OF HEARING ON 03 RD SEPTEMBER, 2019, AT CHENNAI. SD/- SD/- ( ) (S. JAYARAMAN) # /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) $ # / JUDICIAL MEMBER / CHENNAI * / DATED: 03 RD SEPTEMBER, 2019. K S SUNDARAM !,- .- / COPY TO: 1 . / APPELLANT 4. / / CIT 2. !' / RESPONDENT 5. - !2 / DR 3. / () / CIT(A) 6. / GF