Vidhi Malhotra, Faridabad V. ITO, Ward- 2(5), Faridabad

ITA 93/DEL/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8952 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 04-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Keywords: Accommodation entries; Penny stocks
• Section: 143(3); 131; 68

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC: NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO. 93/DEL/2018 ASSTT. YEAR: 2014-15 ITA NO. 94/DEL/2018 ASSTT. YEAR : 2014-15 SANTOSH MENDIRATTA, C/O. SANDEEP SAPRA, ADVOCATE, C-763, NEW FRIENDS COLONY, NEW DELHI DELHI 110 025 VS. ITO, WARD -2(3) FARIDABAD PAN ALMPM3696H (APPELLANT) (RESPONDENT) VIDHI MALHOTRA, C/O. SANDEEP SAPRA, ADVOCATE, C-763, NEW FRIENDS COLONY, NEW DELHI DELHI 110 025 VS. ITO WARD-2(5), FARIDABAD PAN AKYPM8161D (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI SANDEEP SAPRA, ADVOCATE DEPARTMENT BY : SHRI S.L. ANURAGI, SR. DR DATE OF HEARING 14/11 /201 8 DATE OF PRONOUNCEMENT 20 /12/2018 2 O R D E R PER AMIT SHUKLA, J.M. THE AFORESAID APPEALS HAVE BEEN FILED BY THE ABOVE NAMED ASSESSEES AGAINST SEPARATE IMPUGNED ORDER DATED 16.10.2017 AND 17.10.2017, PASSED BY LD. CIT (APPEALS) FARIDABAD FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) FOR THE ASSESSMENT YEAR 2014-15. SINCE ISSUES INVOLVED IN BOTH THE APPEALS ARE COMMON ARISING OUT OF IDENTICAL SET OF FACTS, THEREFORE THE SAME WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER. 2. WE ARE TAKING UP THE APPEALS IN THE CASE OF VIDHI MALHOTRA WHEREIN THE ASSESSEE HAS RAISED FOLLOWING GROUNDS:- 1. THAT THE LD. CIT(A) HAS ERRED ON FACTS AND UNDER THE LAW IN CONFIRMING THE ADDITION OF RS.36,38,067/- UNDER SECTION 68 OF IT. ACT AS AGAINST LONG TERM CAPITAL GAIN OF RS.36,38,067/- CLAIMED AS EXEMPT UNDER SECTION 10(38) OF IT. ACT INTER ALIA BECAUSE: (I) STATEMENT OF SHRI SUNIL DOKANIA AND 16 OTHER PERSONS RECORDED BY DDIT (INV), KOLKATA DID NOT HAVE ANY EVIDENTIARY VALUE AS THE SAME WERE RECORDED IN THE ABSENCE OF THE APPELLANT. (II) COPIES OF STATEMENTS OF 16 OTHER PERSONS BESIDES SHRI SUNIL DOKANIA MENTIONED AT PAGES 8-9 OF THE ASSESSMENT ORDER WERE NOT PROVIDED TO THE APPELLANT. (III) STATEMENT OF SHRI SUNIL DOKANIA AND 16 OTHER PERSONS COULD NOT BE RELIED UPON AS THE AO DID NOT ALLOW THE APPELLANT TO CROSS EXAMINE SHRI SUNIL DOKANIA AND 16 OTHER PERSONS DESPITE A SPECIFIC REQUEST HAVING BEEN MADE BY THE APPELLANT. 3 (IV) DOCUMENTARY EVIDENCE FILED TO PROVE LONG TERM CAPITAL GAIN OF RS.36,38,067/- ON SALE OF SHARES HAVE NEITHER BEEN CONTROVERTED NOR DISPROVED BY THE LD.CIT(A)/AO. (V) THE LD. CIT(A)/AO HAD NOT BROUGHT ANYTHING ON RECORD TO PROVE THAT THE APPELLANT HAD ROUTED HER OWN UNACCOUNTED MONEY IN THE GARB OF LONG TERM CAPITAL GAIN. (VI) PROVISIONS OF SECTIONS 68 OF IT. ACT IN TERMS HAD NO APPLICATION TO THE FACTS OF APPELLANT'S CASE. 2. THAT THE LEVY OF INTEREST UNDER SECTION 234 ARE ILLEGAL AND AT ANY RATE, WITHOUT PREJUDICE, THE INTEREST AS LEVIED IS VERY EXCESSIVE. 2. THE BRIEF FACTS ARE THAT ASSESSEE IS AN INDIVIDUAL WHO HAD DECLARED LONG TERM CAPITAL GAIN OF RS. 36,38,067/- WHICH WAS CLAIMED AS EXEMPT U/S 10(38). THE LD. AO IN THE ASSESSMENT ORDER HAS, FIRST OF ALL DISCUSSED HOW SOME OF THE PEOPLE INDULGE IN GETTING BOGUS LONG TERM CAPITAL GAIN FROM PENNY STOCKS AND AFTER DETAILED DISCUSSION HE CONCLUDED THAT ASSESSEE WAS ALSO ONE BENEFICIARIES WHO HAS TAKEN ACCOMMODATION ENTRY OF RS.36,38,067/-. ASSESSEE HAD PURCHASED AND SOLD THE SHARES OF M/S. CAREFUL PROJECT ADVISORT LTD. WHICH AMALGAMATED INTO M/S. KAILASH AUTO FINANCE LTD. ON 9.5.2013 BY HONBLE HIGH COURT OF ALLAHABAD, THE DETAILS OF WHICH WERE AS UNDER:- SCRIP PURCHASED M/S. CAREFUL PROJECT ADVISORT LTD. WHICH AMALGAMATED INTO M/S. KAILASH AUTO FINANCE LTD. ON 9.5.2013 BY HONBLE HIGH COURT OF ALLAHABAD. NO. OF SHARES PURCHASED 100000 4 DATE OF PURCHASE 13.12.2011 AMOUNT PAID RS. 1,00,000/- BROKE THROUGH WHOM PURCHASED DIRECT PURCHASED OFFLINE. NO STT PAID NO. OF SHARES SOLD 100000 DATE OF SALE (NSE) 06-08-2013, 07-08-2013, 08-08-2013 AND 01-10-2013 AND STT PAID BROKER SHAREKHAN LTD. AMOUNT RECEIVED GROSS AMOUNT RS. 37,40,701/- NET AMOUNT RS. 37,35,000/- 3. THEREAFTER, LD. AO HELD THAT SCRIPS OF M/S. KAILASH AUTO FINANCE LTD. WERE USED BY ENTRY PROVIDERS FOR PROVIDING BOGUS ACCOMMODATION ENTRIES AND ALSO NOTED THAT IN SOME OTHER MATTER IN THE COURSE OF PROCEEDINGS U/S 131 BEFORE INVESTIGATION WING KOLKATA, ONE CHARTERED ACCOUNTANT HAD CONFIRMED THAT HE HAS PROVIDED ACCOMMODATION ENTRY IN THE SCRIP OF M/S. KAILASH AUTO FINANCE LTD. AND BASED ON SUCH STATEMENT OF CHARTERED ACCOUNTANT, HE DREW ADVERSE INFERENCE THAT THIS IS ALSO SAME KIND OF ACCOMMODATION ENTRY. AFTER DETAILED DISCUSSION, HE TREATED THE LONG TERM CAPITAL GAIN OF RS. 36,38,067/- AS HE TAXED THE SAME U/S 69. 4. LD. CIT (A) TOO HAS CONFIRMED THE SAID ADDITION MOSTLY BASED ON GENERAL OBSERVATION. HE ALSO HAS TAKEN NOTE OF THE FACT THAT THE INVESTIGATION WING HAS RECORDED THE STATEMENT OF SHRI SUNIL DOKANIA 5 CA, WHO HAS CLEARLY ADMITTED THAT THE SCRIP OF M/S. KAILASH AUTO FINANCE LTD. WAS USED FOR PROVIDING BOGUS LONG TERM CAPITAL GAINS AND SHORT TERM CAPITAL LOSS TO VARIOUS CLIENTS. HE ALSO TOOK NOTE OF THE FACT THAT AO HAS ALSO BROUGHT ON RECORD THAT SEBI HAS SUSPENDED SOME OF THE SCRIPS INCLUDING THAT OF KAILASH AUTO FINANCE LTD. THEREAFTER, HE TOO HAS DISCUSSED HOW THE MODUS OPERANDI ARE ADOPTED FOR TAKING ACCOMMODATION ENTRIES OF PENNY STOCK BECAUSE SHARES PURCHASED OF RS. 1 LACS HAS BEEN SOLD AT A PRICE OF 37 TIMES OF THE PURCHASE PRICE IN A SHORT PERIOD OF 1.5 YEARS. 5. I HAVE CAREFULLY CONSIDERED THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDER AND ALSO PERUSED THE RELEVANT MATERIAL REFERRED TO BEFORE US. LD. COUNSEL POINTED OUT THAT ASSESSEE HAS PURCHASED ONE LAC SHARES OF M/S. CAREFUL PROJECT ADVISOR LTD. ON 13.12.2011 FROM JATADHARI MARKETING PVT. LTD. WHICH IS EVIDENT FROM SALE BILL PLACED AT THE PAPER BOOK PAGE 13. THE AFORESAID SHARES WERE TRANSFERRED TO ASSESSEE IN HER DMAT ACCOUNT ON 18.2.2012 WITH SHAREKHAN LTD. THE HONBLE ALLAHABAD HIGH COURT VIDE JUDGMENT ORDER DATED 9.5.2013, HAD ORDERED THAT TWO COMPANIES NAMELY, M/S. CAREFUL PROJECTS ADVISORY LTD. AND PANCHASHUL MARKETING PVT. LTD. WILL BE AMALGAMATED WITH M/S. KAILASH AUTO FINANCE LTD. ACCORDINGLY, IN LIEU OF ONE LAC SHARES OF CAREFUL PROJECTS ADVISORY LIMITED, SHARES OF KAILASH AUTO FINANCE LTD. WAS ACQUIRED BY THE ASSESSEE. THIS HAS 6 BEEN CONFIRMED BY THE COMPANY VIDEE ALLOTMENT VIDE LETTER DATED 6.8.2013. THE ASSESSEE HAS SOLD THESE ONE LAC SHARES OF KAILASH AUTO FINANCE LTD. THROUGH BOMBAY STOCK EXCHANGE ON THE FOLLOWING DATES :- DATED 2.8.2013 FOR 10,000 SHARES DATED 5.8.2013 FOR 30,000 SHARES DATED 6.8.2013 FOR 40,100 SHARES DATED 27.9.2013 FOR 19,900 SHARES ASSESSEE HAS ALSO PAID STT AND HAS RECEIVED SALE CONSIDERATION THROUGH ACCOUNT PAYEE CHEQUES AMOUNTING TO RS. 37,38,067/- DULY CREDITED TO THE ASSESSEES BANK ACCOUNT OF THE ASSESSEE, COPY OF WHICH HAS BEEN PLACED AT PAGES 59-6- OF THE PAPER BOOK. HE FURTHER SUBMITTED THAT, HERE IN THIS CASE, ASSESSEE HAS PURCHASED THE SHARES THROUGH REGISTERED BROKER AND WAS SOLD THE SAME THROUGH REGISTERED BROKER IN BOMBAY STOCK EXCHANGE AND THERE IS NO INQUIRY OR MATERIAL ON RECORD WHATSOEVER TO SHOW THAT ASSESSEE HAS EITHER ROOTED HER OWN UNACCOUNTED MONEY FOR TAKING ACCOMMODATION ENTRY OR WAS FOUND TO BE BENEFICIARY OF ANY ACCOMMODATION ENTRY UNDER ANY INVESTIGATION. THE DOCUMENTS RELATING TO PURCHASE AND SALE OF SHARES HAVE NEITHER BEEN CONTROVERTED NOR DISPROVED BY THE AUTHORITIES BELOW. THEREFORE, NO ADVERSE INFERENCE COULD BE DRAWN AGAINST THE ASSESSEE. IN SO FAR AS THE OBSERVATION OF THE AO THAT STATEMENT OF SHRI SUNIL DOKANIA RELIED UPON BY THE AUTHORITIES BELOW, WILL HAVE NO RELEVANCE HERE AND SAME CANNOT BE RELIED UPON FOR THE REASON THAT ALL THE RELEVANT MATERIAL 7 REFERRED IN THE SAID STATEMENT WAS NEITHER MADE AVAILABLE TO THE ASSESSEE NOR ANY CROSS EXAMINATION WAS ALLOWED AND WHENCE THE STATEMENT HAS BEEN RECORDED BEHIND THE BACK OF THE ASSESSEE THEN IT DOES NOT HAVE ANY EVIDENTIARY VALUE. THUS, WITHOUT THEIR BEING ANY SPECIFIC MATERIAL RELATING TO ASSESSEE NO ADVERSE INFERENCE CAN BE DRAWN. 7. ON THE OTHER HAND LD. DR SUBMITTED THAT ONCE IT HAS BEEN UNEARTHED BY THE INVESTIGATION WING THAT SCRIP OF KAILASH AUTO FINANCE LTD. WAS USED FOR PROVIDING BOGUS LONG TERM CAPITAL GAIN TO VARIOUS PEOPLE, THEN THERE IS A STRONG PRESUMPTION THAT ASSESSEE TOO HAS TAKEN SUCH ACCOMMODATION ENTRY. THIS IS MORE SO WHEN ASSESSEE HAS PURCHASED THE SHARES OF RS. ONE LAC AND IN ONE AND A HALF YEAR HAS SOLD IT AT MORE THAN 37 TIMES. THIS SHOWS THAT HOW SCRIPS HAVE BEEN MANIPULATED FOR PROVIDING SUCH LONG TERM CAPITAL GAIN. 8. ON PERUSAL OF THE MATERIAL PLACED ON RECORD, WE FIND THAT IN SO FAR AS PURCHASE OF SHARES IS CONCERNED THE SAME HAS NOT BEEN DOUBTED, BECAUSE AO WHILE ADDING THE LONG TERM CAPITAL GAIN HAS GIVEN THE BENEFIT OF PRICE PAID FOR ACQUISITION OF SHARES. SHARES WERE ALSO PURCHASED THROUGH ACCOUNT PAYEE CHEQUE DULY REFLECTED IN THE BOOKS AND SHOWN BY THE ASSESSEE IN THE EARLIER YEAR. IN FACT ASSESSEE HAS PURCHASED SHARES OF CAPITAL PROJECTS ADVISORY LIMITED IN THE FINANCIAL YEAR 2011-12 AND THE SAID COMPANY WAS MERGED WITH M/S. 8 KAILALSH AUTO FINANCE LTD. VIDE AMALGAMATION ORDER DATED 9.5.2013 PASSED BY HONBLE ALLAHABAD HIGH COURT. RELIANCE HAS BEEN PLACED BY THE AUTHORITIES BELOW ON THE STATEMENT OF SHRI SUNIL DOKANIA. HOWEVER, IN HIS STATEMENT HE HAS GIVEN LIST OF CERTAIN SCRIPS ON WHICH HE HAS SATED THAT THESE WERE PAPER COMPANIES USED FOR PROVIDING ACCOMMODATION ENTRIES. THE SAID STATEMENT NO DOUBT IS QUITE INCRIMINATING TO HOLD THAT SCRIPS OF M/S. KAILASH AUTO FINANCE LIMITED WERE USED FOR PURPOSE OF ACCOMMODATION ENTRIES, HOWEVER SUCH A STATEMENT CANNOT BE THE SOLE GROUND TO IMPLICATE ASSESSEE AND JUSTIFY THE ADDITIONS ESPECIALLY WHEN, NOWHERE ASSESSEE HAS BEEN FOUND TO BE BENEFICIARY OF ANY KIND OF ACCOMMODATION ENTRY IN ANY INQUIRY BY THE INVESTIGATION WING OR ANY SUCH MATERIAL HAS BEEN UNEARTHED BY THE DEPARTMENT. THE ASSESSEE HAD DULY SHOWN THE TRANSACTION IN CHEQUES RIGHT FROM PURCHASE TO SALE OF SHARES AND ALL THE TRANSACTION HAS BEEN HAVE BEEN ROUTED THROUGH DMAT ACCOUNT SOLD IN THE BOMBAY STOCK EXCHANGE AS PER QUOTED PRICE AS ON THAT DATE. BEFORE US IT HAS ALSO BEEN BROUGHT ON RECORD THAT SEBI VIDE ITS ORDER DATED 21 ST SEPTEMBER 2017 HAS REVOKED THE BAN ON KAILASH AUTO FINANCE LTD. PARA 5 OF THE SAID ORDER READS AS UNDER :- PURSUANT TO THE INTERIM ORDER, SEBI CONDUCTED A DETAILED INVESTIGATION INTO THE ROLE OF VARIOUS ENTITIES IN PRICE MANIPULATION IN THE SCRIP OF KAILASH AUTO SO AS TO ASCERTAIN THE VIOLATION OF SECURITIES LAWS. UPON COMPLETION OF INVESTIGATION BY SEBI, 9 INVESTIGATION DID NOT FIND ANY ADVERSE EVIDENCE/ADVERSE FINDINGS IN RESPECT OF VIOLATION OF PROVISIONS OF THE PFUTP REGULATIONS IN RESPECT OF THE FOLLOWING 244 ENTITIES (AGAINST WHOM DIRECTIONS WERE ISSUED VIDE THE INTERIM ORDER AND / OR CONFIRMATORY ORDERS) WARRANTING CONTINUATION OF ACTION UNDER SECTION 11B/R/W11 (4) OF THE ACT. THE DETAILS OF THE 244 ENTITIES ARE AS FOLLOWS. AND VIDE PARA 8 THERE IS DIRECTION OF REVOCATION. THUS, SEBI ALSO DID NOT FIND ANY PRIMA FACIE MATERIAL FOR MANIPULATION OF PRICE OF SCRIP OF KAILASH AUTO FINANCE LIMITED. IF AO HAD FOUND OUT THAT SCRIPS OF KAILASH AUTO FINANCE LIMITED WAS USED BY CERTAIN PERSONS FOR PROVIDING ACCOMMODATION ENTRY, THEN HE SHOULD HAVE CARRIED OUT SOME PRIMA FACIE INQUIRY TO FIND OUT WHETHER ASSESSEE TOO WAS INVOLVED IN ROUTING HER OWN UNACCOUNTED MONEY FOR GETTING BOGUS LONG TERM CAPITAL ON THE SCRIPTS OF SUCH COMPANY. GENERAL OBSERVATION ABOUT THE MODUS OPERANDI OF LONG TERM CAPITAL GAIN WOULD BE OF NO USE UNLESS AND UNTIL THERE IS SOME SPECIFIC INFORMATION AND MATERIAL QUA THE ASSESSEE. ONCE PURCHASE OF THE SHARES ARE NOT DOUBTED AND SALE HAS BEEN MADE THROUGH BOMBAY STOCK EXCHANGE ROUTED THROUGH DMAT ACCOUNT THEN CONSIDERATION RECEIVED HAS TO BE TREATED FROM AMOUNT OF SALE OF SHARES WHETHER THE PRICE HAS BEEN RIGGED OR NOT. ONE FACTOR WHICH HAS WEIGHED HEAVILY ON THE AUTHORITIES BELOW IN THE PRESENT CASE IS THAT SHARE PRICE HAS A RISEN TO MORE THAN 37 TIMES. ONCE THE 10 SEBI HAS HELD THAT THERE IS NO ADVERSE EVIDENCE OR MATERIAL THAT THERE WAS ANY VIOLATION OF PROVISION OF PFUT REGULATION IN RESPECT OF KAILASH AUTO FINANCE LIMITED AND RESTRAIN ORDER ON THE TRADING HAS BEEN REVOKED, THEN IT FOLLOWS THAT THE SHARE PRICE OF WHICH HAS BEEN SOLD FOR GENUINE QUOTED PRICE AND THEREFORE, THE SALE PROCEEDS HAS TO BE RECKONED FROM SALE OF SUCH SHARES AND WOULD BE TREATED AS EXPLAINED CREDIT OR INVESTMENT. ACCORDINGLY, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT THE LONG TERM CAPITAL GAIN SHOWN BY THE ASSESSEE IS GENUINE AND CONSEQUENTLY LIABLE FOR EXEMPTION U/S 10(38). THUS, APPEAL OF THE ASSESSEE IS ALLOWED. 9. EXACTLY SIMILAR FACTS ARE PERMEATING IN THE CASE OF SMT. SATOSH MENDIRATTA, WHEREIN THE ASSESSEE HAS SHOWN LONG TERM CAPITAL GAIN OF RS. 36,59,773/- ON SIMILAR SCRIP. EVEN THE FINDING OF THE AO AND LD. CIT(A) ARE EXACTLY THE SAME, THEREFORE, OUR FINDING GIVEN ABOVE WILL APPLY MUTATIS MUTANDIS FOR THIS APPEAL ALSO. ACCORDINGLY THE APPEAL OF THE ASSESSEE IS ALLOWED. 10. IN THE RESULT BOTH THE APPEALS OF THE ASSESSEES ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH DECEMBER, 2018. SD/- (AMIT SHUKLA) JUDICIAL MEMBER DATED: 20 /12/2018 11 VEENA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI