VINAY KUMAR MAHESWARI, vs. THE INCOME TAX OFFICER

T.C.A.Nos.128, 129 & 130 of 2020 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 27.11.2020 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM and THE HONOURABLE MR.JUSTICE R.PONGIAPPAN T.C.A.Nos.128, 129 & 130 of 2020 Mr.Vinay Kumar Maheswari .. Appellant in T.C.A.No.128/2020 M/s.Damodaran & Sons (HUF) .. Appellant in T.C.A.No.129/2020 Mr.Vijay Kumar Maheswari .. Appellant in T.C.A.No.130/2020 Versus Income Tax Officer, Non-Corporate Ward-9(4) Chennai – 600 034 .. Respondent in all T.C.As Common Prayer:- Tax Case Appeals filed under Section 260-A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal, Madras 'C' Bench, Chennai made in I.T.A.No.2176/Mds/2018, I.T.A.No.2179/Mds/2018 and I.T.A.No.2177/Mds/2018 dated 07.12.2018 relating to the Assessment Year 2014-15. 1/16 http://www.judis.nic.in T.C.A.Nos.128, 129 & 130 of 2020 For Appellants : Mr.Ashok Pathy For M/s.Pass Associates [in all T.C.As]

For Respondent : Mr.Karthik Ranganathan Senior Standing counsel [in all T.C.As] COMMON JUDGMENT [Order of the Court was made by

T.S.SIVAGNANAM

, J.]

These appeals have been filed by the assessees under Section 260A of the Income Tax Act, 1961 ('the Act' for brevity), is directed against the order dated 07.12.2018 passed by the Income Tax Appellate Tribunal, Madras 'C' Bench, Chennai ('the Tribunal' for brevity) in I.T.A.No.2176/Mds/2018, I.T.A.No.2179/Mds/2018 and I.T.A.No.2177/Mds/2018 for the Assessment Year 2014-15. The assessees have raised the following Substantial Questions of Law for consideration: “T.C.A.No.128 of 2020: 1. Whether the Income Tax Appellate Tribunal is right in law in disallowing the claim of the appellant under Section 10(38) of the Income Tax Act when neither the AO or the CIT(A) anywhere in its order has pointed out or discussed non fulfilment or Non-compliance of any conditions under 10(38) of the Income Tax Act to disallow the appellant claim? 2/16 http://www.judis.nic.in T.C.A.Nos.128, 129 & 130 of 2020 2. Whether the Income Tax Appellate Tribunal is right in law in treating the transaction of purchase and sale of shares are bogus in nature when the shares were allotted by the company after obtaining merger order from the Hon'ble High in May 2013 and after obtaining prior approval of BSE as per SEBI Issue of capital and disclosure Requirements Regulation, 2009? 3. Whether the Income Tax Appellate Tribunal being the final fact finding authority is right in law in confirming the order of the lower authorities which was primarily based on modus operandi, generalisation, preponderance of human possibilities without bringing in specific evidences to controvert the validity and correctness of the documentary evidences produced by the appellant to substantiate the transaction? 4. Whether the Income Tax Appellate Tribunal is right in law in sustaining the disallowance of claim made by the revenue authorities under Section 10(38) on the basis of suspicion, surmise and conjectures when it is a settled law that suspicion however strong cannot take the place of evidence? 5. Whether the Income Tax Appellate Tribunal being the final fact finding authority is right in law in confirming the order of the lower authorities even when the revenue 3/16 http://www.judis.nic.in T.C.A.Nos.128, 129 & 130 of 2020 authorities failed to discharge its onus by proving that the transaction is bogus by adducing legal evidences which would directly prove the fact of bogusness of a transaction? 6. Whether the Income Tax Appellate is right in law in treating the transaction of purchase and sale of shares are bogus in nature when the appellant has provided documentary evidences to prove that the appellant received sale proceeds of shares directly from their broker M/s.Motilal Oswal Securities Pvt Ltd by credit to his HDFC Bank a/c. as on date of settlement and that the sale transaction of shares are covered by contract note evidencing that the transactions have suffered expenses like brokerage, service tax, STT, stamp duty, exchange and SEBI turnover charges, etc., which are specifically shown in the contract note issued by the Broker? 7. Whether the Income Tax Appellate Tribunal is right in law in disallowing the claim of the appellant under Section 10(38) on the basis of the report of the investigation wing prepared with respect to bogus capital gains and where there is no finding that the appellant by the revenue authorities that the appellant has been investigated or that the appellant has been a part of any arrangement for purpose of generating bogus long term capital gain to disallow the claim of appellant the appellant under Section 10(38) of IT Act? 4/16 http://www.judis.nic.in T.C.A.Nos.128, 129 & 130 of 2020 8. Whether the Income Tax Appellate Tribunal is right in law in disallowing the claim of the appellant under Section 10(38) of the Income Tax Act when there is no specific finding against the appellant in the investigation wing report? 9. Whether the Income Tax Appellate Tribunal is right in law in sustaining the addition made by the assessing officer under Section 68 despite the fact that the appellant had satisfied all the ingredients of section 68 such as identity of the party, genuiness of the transaction and creditworthiness of the transaction?” T.C.A.No.129 of 2020: 1. Whether the Income Tax Appellate Tribunal is right in law in disallowing the claim of the appellant under Section 10(38) of the Income Tax Act when neither the AO or the CIT(A) anywhere in its order has pointed out or discussed non fulfilment or Non-compliance of any conditions under 10(38) of the Income Tax Act to disallow the appellant claim? 2. Whether the Income Tax Appellate Tribunal is right in law in treating the transaction of purchase and sale of shares are bogus in nature when the shares were allotted by the company after obtaining merger order from the Hon'ble High in May 2013 and after obtaining prior approval of BSE as per SEBI Issue of capital and disclosure Requirements 5/16 http://www.judis.nic.in T.C.A.Nos.128, 129 & 130 of 2020 Regulation, 2009? 3. Whether the Income Tax Appellate Tribunal being the final fact finding authority is right in law in confirming the order of the lower authorities which was primarily based on modus operandi, generalisation, preponderance of human possibilities without bringing in specific evidences to controvert the validity and correctness of the documentary evidences produced by the appellant to substantiate the transaction? 4. Whether the Income Tax Appellate Tribunal is right in law in sustaining the disallowance of claim made by the revenue authorities under Section 10(38) on the basis of suspicion, surmise and conjectures when it is a settled law that suspicion however strong cannot take the place of evidence? 5. Whether the Income Tax Appellate Tribunal being the final fact finding authority is right in law in confirming the order of the lower authorities even when the revenue authorities failed to discharge its onus by proving that the transaction is bogus by adducing legal evidences which would directly prove the fact of bogusness of a transaction? 6. Whether the Income Tax Appellate is right in law in treating the transaction of purchase and sale of shares are bogus in nature when the appellant has provided documentary 6/16 http://www.judis.nic.in T.C.A.Nos.128, 129 & 130 of 2020 evidences to prove that the appellant received sale proceeds of shares directly from his broker M/s.Anush Shares and Securities Pvt Ltd by credit to his Indian Overseas Bank a/c. as on date of settlement and that the sale transaction of shares are covered by contract note evidencing that the transactions have suffered expenses like brokerage, service tax, STT, stamp duty, exchange and SEBI turnover charges, etc., which are specifically shown in the contract note issued by the Broker? 7. Whether the Income Tax Appellate Tribunal is right in law in disallowing the claim of the appellant under Section 10(38) on the basis of the report of the investigation wing prepared with respect to bogus capital gains and where there is no finding that the appellant by the revenue authorities that the appellant has been investigated or that the appellant has been a part of any arrangement for purpose of generating bogus long term capital gain to disallow the claim of appellant the appellant under Section 10(38) of IT Act? 8. Whether the Income Tax Appellate Tribunal is right in law in disallowing the claim of the appellant under Section 10(38) of the Income Tax Act when there is no specific finding against the appellant in the investigation wing report? 9. Whether the Income Tax Appellate Tribunal is right in law in sustaining the addition made by the assessing 7/16 http://www.judis.nic.in T.C.A.Nos.128, 129 & 130 of 2020 officer under Section 68 despite the fact that the appellant had satisfied all the ingredients of section 68 such as identity of the party, genuiness of the transaction and creditworthiness of the transaction?” T.C.A.No.130 of 2020: 1. Whether the Income Tax Appellate Tribunal is right in law in disallowing the claim of the appellant under Section 10(38) of the Income Tax Act when neither the AO or the CIT(A) anywhere in its order has pointed out or discussed non fulfilment or Non-compliance of any conditions under 10(38) of the Income Tax Act to disallow the appellant claim? 2. Whether the Income Tax Appellate Tribunal is right in law in treating the transaction of purchase and sale of shares are bogus in nature when the shares were allotted by the company after obtaining merger order from the Hon'ble High in May 2013 and after obtaining prior approval of BSE as per SEBI Issue of capital and disclosure Requirements Regulation, 2009? 3. Whether the Income Tax Appellate Tribunal being the final fact finding authority is right in law in confirming the order of the lower authorities which was primarily based on modus operandi, generalisation, preponderance of human possibilities without bringing in specific evidences to 8/16 http://www.judis.nic.in T.C.A.Nos.128, 129 & 130 of 2020 controvert the validity and correctness of the documentary evidences produced by the appellant to substantiate the transaction? 4. Whether the Income Tax Appellate Tribunal is right in law in sustaining the disallowance of claim made by the revenue authorities under Section 10(38) on the basis of suspicion, surmise and conjectures when it is a settled law that suspicion however strong cannot take the place of evidence? 5. Whether the Income Tax Appellate Tribunal being the final fact finding authority is right in law in confirming the order of the lower authorities even when the revenue authorities failed to discharge its onus by proving that the transaction is bogus by adducing legal evidences which would directly prove the fact of bogusness of a transaction? 6. Whether the Income Tax Appellate is right in law in treating the transaction of purchase and sale of shares are bogus in nature when the appellant has provided documentary evidences to prove that the appellant received sale proceeds of shares directly from his broker M/s.Motilal Oswal Securities Pvt.Ltd by credit to his HDFC Bank a/c. as on date of settlement and that the sale transaction of shares are covered by contract note evidencing that the transactions have suffered expenses like brokerage, service tax, STT, stamp duty, 9/16 http://www.judis.nic.in T.C.A.Nos.128, 129 & 130 of 2020 exchange and SEBI turnover charges, etc., which are specifically shown in the contract note issued by the Broker? 7. Whether the Income Tax Appellate Tribunal is right in law in disallowing the claim of the appellant under Section 10(38) on the basis of the report of the investigation wing prepared with respect to bogus capital gains and where there is no finding that the appellant by the revenue authorities that the appellant has been investigated or that the appellant has been a part of any arrangement for purpose of generating bogus long term capital gain to disallow the claim of appellant the appellant under Section 10(38) of IT Act? 8. Whether the Income Tax Appellate Tribunal is right in law in disallowing the claim of the appellant under Section 10(38) of the Income Tax Act when there is no specific finding against the appellant in the investigation wing report? 9. Whether the Income Tax Appellate Tribunal is right in law in sustaining the addition made by the assessing officer under Section 68 despite the fact that the appellant had satisfied all the ingredients of section 68 such as identity of the party, genuiness of the transaction and creditworthiness of the transaction?” 2. We have heard Mr.Ashok Pathy for M/s.Pass Associates, 10/16 http://www.judis.nic.in T.C.A.Nos.128, 129 & 130 of 2020 learned counsel for the appellants/assessees and Mr.Karthik Ranganathan, learned Senior Standing counsel for the respondent/Revenue. 3. It may not be necessary for this Court to decide the Substantial Questions of Law framed for consideration on account of certain subsequent developments. The Government of India enacted the Direct Tax Vivad Se Vishwas Act, 2020 (Act 3 of 2020) to provide for resolution of disputed tax and for matters connected therewith or incidental thereto. The Act of the Parliament received the assent of the President on 17th March 2020 and published in the Gazette of India on 17th March 2020.