Late Sanjay Agarwal, Chennai V. DCIT, Corp Cir -5(1), Chennai

ITA 867/CHNY/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1853 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 01-04-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S BHARAT
• Assessee Lawyers: S SRIDHAR
• Keywords: Opportunity of being heard; Earning of tax free income; Set aside; Capital Gains
• Section: 12

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: CHENNAI , ! . , ! & BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NOS.865 & 866/CHNY/2019 /ASSESSMENT YEARS: 2012-13 & 2013-14 SMT.BABITA AGARWAL, NO.195/93, GOVINDPPA NAICKEN STREET, SOWCARPET, CHENNAI-600 001. [PAN: AAJPB 0278 Q] VS. THE DY. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-5(1), CHENNAI. ( ( /APPELLANT) ( )*( /RESPONDENT) ./ ITA NO.867/CHNY/2019 /ASSESSMENT YEAR: 2012-13 LATE SANJAY AGARWAL, NO.195/93, GOVINDPPA NAICKEN STREET, SOWCARPET, CHENNAI-600 001. [PAN: ABBPS 7936 H] VS. THE DY. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-5(1), CHENNAI. ( ( /APPELLANT) ( )*( /RESPONDENT) ( + / APPELLANT BY : MR.S.SRIDHAR, ADV. )*( + /RESPONDENT BY : MR.S. BHARAT, CIT + /DATE OF HEARING : 13.06.2019 + /DATE OF PRONOUNCEMENT : 17.06.2019 / O R D E R PER BENCH : ITA NOS.865 & 866/CHNY/2019 ARE THE APPEALS FILED BY THE ASSESSEE, SMT. BABITA AGARWAL, AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-3, CHENNAI, IN ITA NO.92/CIT(A )-3/2017-18 DATED ITA NOS.865-867/CHNY/2019 :- 2 -: 19.02.2019 FOR THE AY 2012-13 & IN ITA NO.97/CIT(A )-3/2017-18 DATED 19.02.2019 FOR THE AY 2013-14 RESPECTIVELY. ITA NO. 867/CHNY/2019 IS AN APPEAL FILED BY THE ASSESSEE, LATE SANJAY AGARWAL, AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-3, CHENNAI , IN ITA NO.91/CIT(A)-3/2017-18 DATED 19.02.2019 FOR THE AY 2012-13. 2. SHRI S. BHARAT, CIT, REPRESENTED ON BEHALF OF TH E REVENUE AND SHRI S.SRIDHAR, ADV., REPRESENTED ON BEHALF OF THE ASSES SEE. 3. IT WAS SUBMITTED BY THE LD.AR THAT THE ISSUES WE RE AGAINST THE ACTION OF THE LD.CIT(A) IN CONFIRMING THE DISALLOWA NCE OF THE EXEMPT 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 THE CASE OF SHRI SUNIL KUMAR LALWANI VS. ITO IN ITA NO. 659/CHNY/2018 AND ALSO IN THE CASE OF SHRI AASHESH KUMAR LALWANI VS. ITO FOR THE AY 2014-15 DATED 09.01.2019, WHEREIN, THE CO-ORDINATE BENCH OF THIS TRIBUNAL HAS HELD AS FOLLOWS: 4. IN REPLY, IT WAS SUBMITTED BY LD.D.R THAT THE I SSUE WAS NOW SQUARELY COVERED BY THE DECISION OF CO-ORDINATE BENCH OF THI S TRIBUNAL IN THE CASE OF SHRI HEERACHAND KANUNGA FOR ASSESSMENT YEARS 2010-11 & 2 011-12 IN ITA NOS.2786 & 2787/MDS/2017 VIDE ORDER DATED 03.05.2018 WHEREIN THE TRIBUNAL HAS BEEN 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 TO BE SUPPORTED BY FACTS AND THE FACTS ARE UNFORTUNATELY NOT FORTHCOMING IN THE ASSESSMENT ORD ER, IN THE ORDER OF THE LD.CIT(A) NOR FROM THE SIDE OF THE ASSESSEE. T HE MAIN 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 GAINS TO HIS CLIENTS. THE SAID SHRI ASHOK KUMAR KAYAN ALSO ITA NOS.865-867/CHNY/2019 :- 3 -: ALLEGEDLY SEEMS TO HAVE PROVIDED THE ASSESSEES NAM E AND PAN AS ONE OF THE BENEFICIARIES. HOWEVER, THIS STATEMENT GIVE N BY SHRI ASHOK KUMAR KAYAN CANNOT BE THE FOUNDATION FOR THE PURPOS E OF ASSESSMENT IN SO FAR AS SHRI ASHOK KUMAR KAYAN HAS NOT BEEN PROVI DED TO THE ASSESSEE FOR CROSS-EXAMINATION. IN THE ABSENCE OF OPPORTUNITY OF CROSS- EXAMINATION, THE STATEMENT REMAINS MERE INFORMATION AND SUCH INFORMATION CANNOT BE FOUNDATION FOR ASSESSMENT. 10. ADMITTEDLY, THE ASSESSEE HAS CLAIMED TO HAVE PU RCHASED 15000 SHARES FROM M/S.BPL @ RS.20/- PER SHARE TOTALING IN TO RS.3,00,000/-. THE ASSESSEE CLAIMS TO HAVE PAID CASH FOR THE PURCH ASE OF THESE SHARES. THE PRIMARY QUESTION WOULD BE AS TO WHERE THE PURCH ASE WAS DONE? IF THE PURCHASE HAS BEEN DONE IN KOLKATA, HOW WAS THE CASH TRANSFERRED? WHEN DID THE ASSESSEE RECEIVED THE SHARE CERTIFICAT ES AND THE SHARE TRANSFER FORMS? HOW DID THE ASSESSEE OVERCOME THE PROVISIONS OF SEC.40A(3)? WAS THERE ADEQUATE CASH AVAILABILITY I N THE BOOKS OF THE ASSESSEE ON 24.04.2008? DID THE ASSESSEE TRAVELLED TO KOLKATA? HOW WAS THE TRANSACTION DONE? WHO APPLIED FOR THE DEMA TING OF THE SHARES? WHEN WERE THEY DEMATED? WHEN WERE THE SHARES TRANS FERRED TO THE DEMAT ACCOUNT OF THE ASSESSEE? TO WHOM WERE THE SHA RES SOLD DURING THE ASSESSMENT YEARS 2010-11 & 2011-12? WHEN WERE THE CHEQUES RECEIVED BY THE ASSESSEE? FROM WHOM DID THE ASSESS EE RECEIVED THE CHEQUES? WAS THERE ANY CASH DEPOSIT IMMEDIATELY PRI OR TO THE ISSUING OF THE CHEQUE FROM THE BANK ACCOUNT OF THE PURCHASER O F THE SHARES 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 HA S 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 PU RCHASED THE SHARES OF M/S.BPL FROM A SUB-BROKER IN HIS FRIENDS CIRCLE. WHAT IS THE TRUE NATURE OF THE TRANSACTION? FROM WHOM DID THE ASSESS EE ACTUALLY PURCHASE THE SHARES? DID THE ASSESSEE TAKE POSSESS ION OF THE SHARES IN ITS PHYSICAL FORM? IN PARA NO.8.1 OF THE ASSESSMEN T ORDER, IT IS MENTIONED THAT THE ASSESSEE IS AN INVESTOR AND HAS BEEN REGULARLY TRADING IN SHARES. IF THIS IS SO, DOES THE DEMAT A CCOUNT 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 WHATSOEV ER TO SHOW THAT THE ASSESSEE HAS HELD THE SHARES FOR MORE THAN 12 MONTH S. THIS IS BECAUSE ASSUMING THAT THE DEMAT HAS BEEN DONE AND THE SHARE S OF M/S.BPL HAS COME INTO THE ASSESSEES DEMAT ACCOUNT AND HAS IMME DIATELY 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 DEMA T WAS DONE ON VARIOUS DATES. THEN THE QUESTION RISES AS TO WHY T HERE IS SO MUCH OF DIFFERENCE IN THE DATES OF DEMATING WHEN 15000 SHAR ES HAVE BEEN PURCHASED TOGETHER ON 24.04.2008. NO DETAILS IN RE SPECT OF M/S.BPL COMPANY IS KNOWN, WHAT IS THE PRODUCT OF THE COMPAN Y 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 WHERE THE SHARE VALUE OF THE COMPANY WAS HITTING THE CIRCUIT BREAKE R OF THE STOCK EXCHANGE ON A DAILY BASIS AND OBVIOUSLY IT WOULD HA VE DRAWN ATTENTION. THIS BEING SO, AS THE FACTS ARE NOT COMING OUT OF T HE ASSESSMENT ORDER NOR THE ORDER OF THE LD.CIT(A) NOR FROM THE SIDE OF THE ASSESSEE, WE ARE ITA NOS.865-867/CHNY/2019 :- 4 -: OF THE VIEW THAT THE ISSUES IN THIS APPEAL MUST BE RESTORED TO THE FILE OF THE AO FOR RE-ADJUDICATION AFTER GRANTING THE ASSES SEE 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 ASS ESSEE IN SO FAR AS THE STATEMENT HAS NOT BEEN GIVEN TO THE ASSESSEE NO R HAS SHRI ASHOK KUMAR KAYAN BEEN PROVIDED TO THE ASSESSEE FOR CROSS -EXAMINATION. HOWEVER, THE ASSESSEE SHALL PROVE THE TRANSACTION O F THE LONG TERM CAPITAL GAINS IN RESPECT OF WHICH THE ASSESSEE HAS CLAIMED THE EXEMPTION U/S.10(38) BY PROVIDING ALL SUCH EVIDENCE S AS REQUIRED BY THE AO TO SUBSTANTIATE THE CLAIM AS ALSO BY PRODUCING T HE PERSONS THROUGH WHOM THE ASSESSEE HAS UNDERTAKEN THE TRANSACTION OF THE PURCHASE AND SALE OF THE SHARES WHICH WOULD INCLUDE THE SUB-BROK ER, 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 LD. ASSESSING OFFIC ER. 5. PER CONTRA, LD.A.R SUBMITTED THAT THE HONBLE D ELHI HIGH COURT IN THE CASE OF PR.CIT VS. M/S.LAXMAN INDUSTRIAL RESOURCES LTD., IN ITA NO.169/2017, C.M.APPL.7385/2017 VIDE ORDER DATED 14.03.2017 HAS HELD THE ISSUE IN FAVOUR OF THE ASSESSEE. THE LD.A.R ALSO PLACED BEFORE US T HE 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 FOR AS SESSMENT 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. ADMITTED LY, THE A.O RECEIVED INFORMATION FROM INVESTIGATION WING OF THE DEPARTME NT AT KOLKATA WITH REGARD TO INVESTMENT OF THE ASSESSEE IN PENNY STOCK COMPANY, NAMELY, M/S.CONCRETE CREDIT LIMITED. THE ASSESSEE ALSO ADMI TTEDLY SOLD THE SAID SHARES AND CLAIMED EXEMPTION UNDER SECTION 10(38) O F THE ACT DURING THE YEAR WIDER CONSIDERATION. THEREFORE, THE ASSESS ING OFFICER HAS NOT DISPUTED THE SOURCE FOR INVESTMENT. THE ASSESSING O FFICER DISALLOWED THE CLAIM OF EXEMPTION ON THE GROUND THAT THE INVESTMEN T WAS IN A PENNY STOCK COMPANY. FROM THE MATERIAL AVAILABLE ON RECOR D IT APPEARS THAT A COPY OF INFORMATION SAID TO BE RECEIVED FROM THE IN VESTIGATION WING OF THE DEPARTMENT AT KOLKATA WAS NOT FURNISHED TO THE ASSESSEE. IT IS NOT BROUGHT ON RECORD THE RELATIONSHIP OF THE ASSESSEE WITH THE PROMOTERS OF M/S CONCRETE CREDIT LIMITED. IT IS ALSO NOT BROUGHT ON RECORD THE ROLE OF THE ASSESSEE IN PROMOTING THE COMPANY, NAMELY, M/S CONCRETE CREDIT LIMITED, ISSUE OF PUBLIC SHARES, INFLATION OF PRICE OF SHARES, ETC. IN THOSE CIRCUMSTANCES, THIS TRIBUNAL IS OF THE CONSIDERED O PINION THAT THE MATTER NEEDS TO BE RE-EXAMINED BY THE ASSESSING OFFICER. A CCORDINGLY, THE ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE ENTIRE ISSUE 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 CO MPANY AND RELATIONSHIP OF THE ASSESSEE WITH OTHER PROMOTERS, ROLE OF THE ASSESSEE IN INFLATING THE PRICE OF SHARES, ETC. THE ASSESSI NG 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 A ND THEREAFTER DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW, AFT ER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. ITA NOS.865-867/CHNY/2019 :- 5 -: 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. RESP ECTFULLY FOLLOWING THE ABOVE DECISIONS OF THE CO-ORDINATE BENCH OF THIS TR IBUNAL, THE ISSUE IS RESTORED TO THE FILE OF LD. ASSESSING OFFICER FOR RE-ADJUDIC ATION ON IDENTICAL DIRECTIONS AS GIVEN IN THE CASE OF HEERACHAND KANUNGA REFERRED TO SUPRA. THE LD. ASSESSING OFFICER SHALL ALSO BRING ON RECORD THE ROLE OF THE ASSESSEE IN PROMOTING THE COMPANY AND RELATIONSHIP OF THE ASSESSEE WITH OTHER PROMOTERS, ROLE OF THE ASSESSEE IN INFLATING THE PRICE OF SHARES, ETC. AS HAD BEEN HELD BY THE CO- ORDINATE BENCH 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 THE C ASE OF PR.CIT VS. M/S.LAXMAN INDUSTRIAL RESOURCES LTD., REFERRED TO SUPRA WHEN R E-ADJUDICATING THE ISSUE. THE ISSUES IN BOTH THE APPEALS OF ASSESSEES MENTIONED I N THE TITLE ARE RESTORED TO THE FILE OF LD. ASSESSING OFFICER FOR RE-ADJUDICATI ON AFTER GRANTING THE ASSESSEES ADEQUATE OPPORTUNITY OF BEING HEARD. 4. IN REPLY, THE LD.DR VEHEMENTLY SUPPORTED THE ORD ER OF THE AO 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 LALWANI VS . ITO AND ALSO IN THE CASE OF SHRI AASHESH KUMAR LALWANI VS. ITO, REFERRE D TO SUPRA, THE ISSUES IN THESE APPEALS ARE RESTORED TO THE FILE OF THE AO FOR RE-ADJUDICATION. 6. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE ES ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE 17 TH DAY OF JUNE, 2019, IN CHENNAI. SD/- SD/- ( . ) ( S. JAYARAMAN ) ! /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) ! /JUDICIAL MEMBER ITA NOS.865-867/CHNY/2019 :- 6 -: /CHENNAI, 2 /DATED: 17 TH JUNE, 2019. TLN + )34 54 /COPY TO: 1. ( /APPELLANT 4. 6 /CIT 2. )*( /RESPONDENT 5. 4 ) /DR 3. 6 ( ) /CIT(A) 6. /GF