Neeta Jain, CHENNAI V. ITO Non Corporate Ward 9(3), CHENNAI

ITA 862/CHNY/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7476 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 29-03-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J PAVITHRAN KUMAR
• Assessee Lawyers: S SANKARALINGAM; T C NARAYANAN
• Keywords: Share purchase agreement; Set aside; Capital Gains
• Section: 201

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI , , BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NO. 862 /CHNY/ 201 9 / ASSESSMENT YEAR: 2013 - 14 SMT. NEETA JAIN, NO.3 - D, JAIN VILLA APARTMENT, 9/10, CLEMENS ROAD, VEP ERY, CHENN AI 600 00 7 . [PAN: A ACPN 7536J ] VS. INCOME TAX OFFICER, NON - CORPORATE WARD - 9(3) ROOM NO.212, 2 ND FLOOR, WANAPARTHY PALACE 121, NUNGAMBAKKAM HIGH ROAD, CHENNAI 600 034 ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. S. SANKARALINGAM, C.A & MR. T. C. NARAYANAN, C.A. /RESPONDENT BY : MR. J. PAVITHRAN KUMAR, JCIT / DATE OF HEARING : 29 . 01.2020 / DATE OF PRONOUNCEMENT : 29 . 01 .20 20 / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER : TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMIS SIONER OF INCOME TAX (APPEALS) - 1 0 , CHENNAI I N ITA NO. 184/17 - 18/CIT(A) - 10 DATED 31.01.2019 FOR THE ASSESSMENT YEAR S 201 3 - 1 4 . ITA NO. 862 /CHNY/201 9 : - 2 - : 2. MR. S . SANKARALINGAM AND MR. T.C. NARAYANAN, CHARTERED ACCOUNTANTS REPRESENTED ON BEHALF OF THE ASSESSEE AND MR. J. PAVITHRAN KUMAR, JCIT REPRE SENTED ON BEHALF OF THE R EVENUE . 3. IT WAS SUBMITTED BY THE LEARNED AUTHORIZED REPRESENTATIVE THAT THE ASSESSEE IS AN INDIVIDUAL WHO IS EARNING INTEREST INCOME. THE ASSESSEE HAD FILED HER RETURN OF INCOME OF THE RELEVANT ASSESSMENT YEAR ON 28.03.2014. SUBSE QUENTLY, AS IT WAS NOTICED THAT THE ASSESSEE HAD SOLD PENNY STOCK SCRIPT NAMELY GFLFIN. THE LEARNED ASSESSING OFF ICER HAD ISSUED NOTICE U/S.148 ON 04.08.2016 AND THE SAME WAS SERVED ON 13.08.2016 . IT WAS A SUBMISSION THAT IN RESPONSE TO THE NOTICE U/S.148, THE ASSESSEE HAD SOUGHT FOR THE REASONS RECORDED FOR REOPENING VIDE LETTER DATED 07.11.2017. IT WAS A SUBMISSI ON THAT THE ASSESSEE HAD ALSO E - FILED HER RETURN OF INCOME ON 09.09.2016. IT WAS A SUBMISSION THAT THE LEARNED ASSESSING OFFICER HAD RESPONDED VIDE LETTER DATED 24.10.2017 EXPLAINING THE REASONS RECORDED FOR THE PURPOSE OF REOPENING. IT WAS A SUBMISSION THAT THE ASSESSEE HAD SUBSEQUENTLY SOUGHT FOR THE REASONS RECORDED THROUGH AN RTI DATED 19.11.2019. IT WAS A SUBMISSION THAT INFORMATION WAS RECEIVED ON 28.11.2019. IT WAS A SUBMISSION THAT THE ASSESSEE HAD ALSO OBJECTED TO THE REASONS VIDE LETTER DATED 11.12.2017 AND THE SAME HAS NOT BEEN DISPOSED OF BEFORE PROCEEDING WITH THE ASSESSMENT. IT WAS A SUBMISSION THAT THE NON - DISPOSAL OF THE REASONS RECORDED WAS IN VIOLATION TO THE PRINCIPLES LAID ITA NO. 862 /CHNY/201 9 : - 3 - : DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF GKN DRIVESHA FTS (INDIA) L IMITED VS. INCOME TAX OFFICER REPORTED IN [ 2003 ] 259 ITR 19(SC). IT WAS ALSO A SUBMISSION THAT EVEN IN RESPECT OF THE MERITS, THE LEARNED ASSESSING OFFICER HAS NOT GIVEN THE EVIDENCES COLLECTED BY HIM FOR THE PURPOSE OF TREATING THE SHARE TRA NSACTION DONE BY THE ASSESSEE AS BOGUS. IT WAS A SUBMISSION THAT HE HAD NO OBJEC TION IF THE ISSUES WERE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR RE - ADJUDICATION AFTER DISPOSING OF THE OBJECTION OF THE ASSESSEE IN RESPECT OF THE REOPENING OF THE A SSESSMENT. 4 . IN REPLY, T HE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ISSUES MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR RE - ADJUDICATION. 5 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECO RD. 6. A PERUSAL OF THE LAW AS LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA) L IMITED VS. INCOME TAX OFFICER, (SUPRA) SHOWS THAT THE ASSESSING OFFICER IS TO PROCEED WITH THE ASSESSMENT WHEN THE REOPENING HAS BEEN DONE ONLY A FTER DISPOSING OF THE OBJECTIONS RAISED BY THE ASSESSEE IN RESPECT OF THE REOPENING. ADMITTEDLY, IN THE PRESENT CASE, THE NOTICE ISSUED U/S.148 HAS BEEN SERVED TO THE ASSESSEE ON 13.08.2016 AND THE REASONS HAVE BEEN SOUGHT FOR ONLY ON 07.11.2017 AFTER WHI CH THE NOTICE U/S.142(1) HAS BEEN ISSUED ON THE ASSESSEE. IT IS FURTHER ITA NO. 862 /CHNY/201 9 : - 4 - : NOTICE THAT THE OBJECTION TO THE REOPENING HAS BEEN FILED ONLY ON 11.12.2017 WHICH IS AFTER THE LAPSE OF THE SUBSTANTIAL TIME. AS THE INTEREST OF JUSTICE IS PRIMARY AND PREDOMINANT A ND THAT THE ASSESSEE MUST BE GIVEN AN OPPORTUNITY TO SUBSTANTIATE H ER CASE, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER SHOULD HAVE DISPOSE D OF F THE OBJECTION OF THE ASSESSEE BEFORE PROCEEDING WITH THE ASSESSMENT. THE NON - DISPOSAL OF THE OBJECTION IS CL EARLY AN IRREGULARITY BUT IT IS NOT AN ILLEGALITY. 7. IN THE CIRCUMSTANCES, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ISSUES OF THE APPEAL ARE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR RE - ADJUDICATION AFTER GRANTING THE ASSESSEE ADEQUATE OPPORTUNITY TO SUBSTANTIATE HER CASE. THE ASSESSING OFFICER SHALL FIRST DISPOSE OF THE OBJECTIONS FILED BY THE ASSESSEE IN RESPECT OF THE REOPENING OF THE ASSESSMENT. IF , AFTER CONSIDERING THE OBJECTIONS RAISED BY THE ASSESSEE IN RESPECT OF THE REOPENING OF THE ASSESSMENT, THE ASSESSING OFFICER PROPOSES TO PROCEED WITH THE ASSESSMENT, THEN THE ASSESSING OFFICER SHALL COMPLY WITH THE PRINCIPLES LAID DOWN BY THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SHRI HEERACHAND KANUNGA VS. THE INCOM E TAX OFFICER REPORTED IN I.T.A. NOS.2786 & 2787/CHNY/2017 DATED 03.05.2018, WHEREIN IN PARA - 9 TO 12, IT HAS BEEN HELD AS FOLLOWS: 9. A PERUSAL OF THE FACTS IN THE PRESENT CASE ADMITTEDLY GIVEN ROOM FOR SUSPICION. HOWEVER, ASSESSMENTS ARE NOT TO BE DONE ON THE BASIS OF MERE SUSPICION. IT HAS TO BE SUPPORTED BY FACTS AND THE FACTS ARE UNFORTUNATELY NOT FORTHCOMING IN THE ASSESSMENT ORDER, IN THE ORDER OF THE LD.CIT(A) NOR FROM THE SIDE OF THE ASSESSEE. THE MAIN FOUNDATION OF THE ASSESSMENT IN THE PRESENT CAS E IS THE STATEMENT OF ONE SHRI ASHOK KUMAR KAYAN WHO HAS ADMITTED TO HAVE PROVIDED BOGUS LONG TERM CAPITAL GAINS TO HIS CLIENTS. THE SAID SHRI ASHOK KUMAR KAYAN ALSO ALLEGEDLY SEEMS TO HAVE PROVIDED THE ASSESSEES NAME AND PAN AS ITA NO. 862 /CHNY/201 9 : - 5 - : 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 - EXAMINATI ON, THE STATEMENT REMAINS 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 CLAIMS TO HAVE PAID CASH FOR THE PURCHASE OF THESE SHARES. THE 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 RECEIVED THE SHARE CERTIFICATES AND THE SHAR E TRANSFER FORMS? HOW DID THE ASSESSEE OVERCOME THE PROVISIONS OF SEC.40A(3)? WAS THERE ADEQUATE CASH AVAILABILITY IN THE BOOKS OF THE ASSESSEE ON 24.04.2008? DID THE ASSESSEE TRAVELLED TO KOLKATA? HOW WAS THE TRANSACTION DONE? WHO APPLIED FOR THE DEMATING OF THE SHARES? WHEN WERE THEY DEMATED? WHEN WERE THE SHARES TRANSFERRED TO THE DEMAT ACCOUNT OF THE ASSESSEE? TO WHOM WERE THE SHARES SOLD DURING THE ASSESSMENT YEARS 2010 - 11 & 2011 - 12? WHEN WERE THE CHEQUES RECEIVED BY THE ASSESSEE? FROM WHOM DID THE ASS ESSEE RECEIVED THE CHEQUES? WAS THERE ANY CASH DEPOSIT IMMEDIATELY PRIOR TO THE ISSUING OF THE CHEQUE FROM THE BANK ACCOUNT OF THE PURCHASER OF THE SHARES OF THE ASSESSEE? 11. A PERUSAL OF THE ASSESSMENT ORDER AT PARA NO.7.1 SHOWS THAT IN THE WRITTEN SUB MISSIONS, THE ASSESSEE STATES THAT HE HAS PURCHASED 15000 SHARES OF M/S.BPL FROM M/S.ABPL, KOLKATA. HOWEVER, IN PARA NO.8.3, IT IS MENTIONED THAT THE ASSESSEE IN GOOD FAITH HAS PURCHASED THE SHARES OF M/S.BPL FROM A SUB - BROKER IN HIS FRIENDS CIRCLE. WHAT I S 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 PHYSICAL FORM? IN PARA NO.8.1 OF THE ASSESSMENT ORDER, IT IS MENTIONED THAT THE ASSESSEE IS AN INVESTOR AND HAS BEEN REGULARLY TRADING IN SHARES. IF THIS IS SO, DOES THE DEMAT ACCOUNT SHOW SUCH TRANSACTIONS BEING DONE BY THE ASSESSEE OR IS THIS THE ONLY ONE OF TRANSACTION. THUS, CLEARLY THE FACTS REQUIRED FOR ADJUDICATING THE APPEALS ARE NOT FORTHCOMING. THERE IS NO EVIDENCE WHATSOEVER TO 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 THE 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 QUERY, AS THE DATE OF THE DEMAT OF SHARES, IT WAS SUBMITTED BY THE LD.AR THAT THE DEMAT WAS DONE ON V ARIOUS DATES. THEN THE QUESTION RISES AS TO WHY THERE IS SO MUCH OF DIFFERENCE IN THE DATES OF DEMATING WHEN 15000 SHARES HAVE BEEN PURCHASED TOGETHER ON 24.04.2008. NO DETAILS IN RESPECT OF M/S.BPL COMPANY IS KNOWN, WHAT IS THE PRODUCT OF THE COMPANY WHIC H 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 WHERE THE SHARE VALUE OF THE COMPANY WAS HITTING THE CIRCUIT BREAKER OF THE STOCK EXCHANGE ON A DAILY BASIS AND OBVIOUSLY IT WOULD HAVE DRAWN ATTENTION. THIS BEING SO, AS THE FACTS ARE NOT COMING OUT OF THE ASSESSMENT ORDER NOR THE ORDER OF THE LD.CIT(A) NOR FROM THE SIDE OF THE ASSESSEE, WE ARE OF THE VIEW THAT THE ISSUES IN THIS APPEAL MUST BE RESTORED TO THE FILE OF THE AO FOR RE - ADJUDICATION AFTER GRANTING THE ASSESSEE ADEQUATE OPPORTUNITY TO SUBSTANTIATE ITS CASE AND WE DO SO. 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 STATEME NT 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 RESPECT OF WHICH THE ASSESSEE HAS CLAIMED THE EXEM PTION U/S.10(38) BY PROVIDING ALL SUCH EVIDENCES ITA NO. 862 /CHNY/201 9 : - 6 - : AS REQUIRED BY THE AO TO SUBSTANTIATE THE CLAIM AS ALSO BY PRODUCING THE PERSONS THROUGH WHOM THE ASSESSEE HAS UNDERTAKEN THE TRANSACTION OF THE PURCHASE AND SALE OF THE SHARES WHICH WOULD INCLUDE THE SUB - BR OKER, FRIEND AND THE BROKER THROUGH WHOM THE TRANSACTION HAS BEEN DONE, BEFORE THE AO FOR EXAMINATION. 8. THE ASSESSING OFFICER SHALL ALSO GRANT THE ASSESSEE ADEQUATE OPPORTUNITY TO SUBSTANTIATE ALL HER CLAIMS. 9 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO. 862 /CHNY/2019 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JANUARY , 20 20 IN CHENNAI. SD/ - ( ) (INTURI RAMA RAO) / ACCOUNTANT MEMB ER / CHENNAI, / DATED: 29 TH JANUARY , 2 020 IA, SR. PS SD/ - ( ) (GEORGE MATHAN) /JUDICIAL MEMBER / COPY TO: 1. / APPELLANT 2. / RESPONDENT 3. ( ) / CIT(A) 4. / CIT 5. / DR 6. / GF