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Facts
Multiple assessees invested in shares of Routron International Ltd., a penny stock company, during AY 2012-13. Subsequent reassessment proceedings under Section 148 led to additions under Section 68 and 69C for unaccounted money and notional commission, which were upheld by the CIT(A). The assessees had also declared certain income related to these transactions under the IDS 2016 scheme.
Held
The Tribunal condoned the delay in filing the appeals due to the authorized representative's ill-health. On merits, it held that the lower authorities failed to adequately verify the source of investments and the nature of transactions. Consequently, the matter was remitted back to the Ld. CIT(A) for fresh adjudication after proper verification and providing the assessee with an opportunity to substantiate the source of funds.
Key Issues
1. Condonation of delay in filing appeals before the Tribunal. 2. Validity of additions under Section 68 and 69C for investments in alleged penny stock shares without proper verification of the source of funds by the lower authorities.
Sections Cited
51, 143(1), 148, 142(1), 10(38), 68, 69C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SMT. BEENA PILLAI
Assessee Particulars Date of order Anant Vijay Damani CIT(A) 1 Jaipur 17/01/2025 Radhika AnantDamani CIT(A) Gwaloor 25/06/2024 NarottamDualalDamani(HUF) NFAC Delhi 16/05/2023 GirirajDualalDamani (HUF) CIT(A) 2 Bangaluru 29/10/2024
The Ld.AR submitted that there is a delay of 3 months to 2 years in filing above appeals before this Tribunal. Affidavit 4514, 4515, 4516/Mum/2025; A.Y. 2012-13 seeking condonation of delay in respect of above appeals are placed in the respective paper books. The Ld.AR submitted that, the authorised representative was common for above assessee’s. It is submitted that the authorized representative was not keeping well due to severe health issues and could not take necessary steps in filing present appeals before this Tribunal.
He submitted that the delay was unintentional and the authorised representative was also not in a position to inform the assessee regarding the passing of the impugned orders. He thus prayed for the delay to be condoned and to consider the issue raised by the assessee on merits.
3.1 On the contrary, the Ld.DR placed reliance on orders passed by authorities below. I have perused the submissions advanced by both sides in the light of records placed before me.
It is noted that there is no malafide intention on behalf of assessee in not filing the present appeal before this Tribunal, within the period of limitation. In my view there is sufficient cause made out to condone the delay as observed by Hon’ble Supreme Court in case of Collector Land Acquisition Vs. Mst. Katiji&Ors., reported in (1987) 167 ITR 471 in support of his contentions. 4.1 Reliance is placed on following observations by Hon’ble Supreme Court in case of Collector Land Acquisition Vs. Mst. Katiji&Ors., reported in (1987) 167 ITR 471 wherein, Hon’ble Court observed as under:-
“The Legislature has conferred the power to condone delay by enacting section 51 of the Limitation Act of 1963 in 4514, 4515, 4516/Mum/2025; A.Y. 2012-13 order to enable the courts to do substantial justice to parties by disposing of matters on de merits". The expression “sufficient cause” employed by the Legislature is adequately elastic to enable the courts to apply the law in a meaningful manner which subserves the ends of justice that being the life-purpose of the existence of the institution of courts. It is common knowledge that this court has been making a justifiably liberal approach in matters instituted in this court. But the message does not appear to have percolated down to all the other courts in the hierarchy. And such a liberal approach is adopted on principle as it is realized that :
1. 1. Ordinarily, a litigant does not stand to benefit by lodging an appeal late.
2. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. ......................................................1.Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908, may be admitted after the prescribed period if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period.” 4.2 Considering the submissions by both sides and respectfully following the observation by Hon’ble Supreme Court, I find it fit to condone the delay caused in filing the present appeal as it is not attributable to the assessee. 4.3 In any event, though the procedural law pertaining to the limitation has been drafted to construe it strictly, the fact remains that, considering such technicalities will not advance the cause of justice. Accordingly, the delay in filing present appeals filed by the assessees before for A.Y. 2012-13 before this Tribunal’s stand condoned.
Brief Facts of the case are as under:
The assessee’s submitted that they derived income under the head income from business, income from long-term capital gains and income from other sources. It is submitted that the assessee had filed its usual return of income and was processed under section 143 (1) the details of which are as under:
Assessee Original ROI 143(1) Intimation filed Anant Vijay Damani 17/07/2012 Accepted returned income Radhika AnantDamani 18/07/2012 Accepted returned income NarottamDualalDamani 21/07/2012 Accepted returned income (HUF) GirirajDualalDamani (HUF) 20/07/2012 Accepted returned income 5.1 Subsequently, an information was received from the directorate of investigation regarding organised racket of generating bogus entries of long-term capital gain/short-term capital loss in penny stock, M/s. Routron International Ltd. the assessing officers of the above referred assesse’s received information regarding the transaction carried out by them in the said Penny stock during the year under consideration wherein shares were allotted to them the details of which are as under:
Assessee Date of Amount No.of allotment invested Shares Anant Vijay Damani 05/11/1011 Rs.10,00,000/- 1,00,000 Radhika AnantDamani 05/12/2011 Rs.4,00,000/- 40,000 NarottamDualalDamani(HUF) 05/12/2011 Rs.5,00,000/- 50,000 GirirajDualalDamani (HUF) 05/11/2011 Re.8,50,000/- 85,000 4514, 4515, 4516/Mum/2025; A.Y. 2012-13 5.2 Accordingly, the assessments in case of all the above assessee’s were reopened by issuing notices under section 148 of the act on 30/03/2019. The assessees accordingly filed their returns of income in lieu of the notice issued. The assessee’s were called upon to explain the source of the investments. In response to the notice issued under section 142 (1) of the act the assessee filed bank statement for financially relevant to assessment year under consideration and it was submitted that the payment towards the purchase of shares was to banking channel in favour of the company. 5.3 The assessee placed on record application made towards shares purchased, allotment letter issued by M/s. Routron International Ltd., demat account as on the date of purchase. The assessee vide its letter dated 14/12/2019 submitted that, the preference shares were purchased for face value of Rs.10 per share, without any premium thereon. It was also submitted that the shares were directly credited to the demat account of the assessee by way of corporate action and said shares were locked in for one year. 5.4 It was also clarified that in the case of Anant Vijay Damani, actual amount invested was of Rs.6 lakh only towards allotment of 60,000 shares. It was clarified that Anant Vijay Damani was a joint applicant with his wife Radhika Damani. It was a submitted that the information to that extent in case of Anant Vijay Damani was incorrect. 5.5 It was submitted that, subsequently during financial year 2013-14 relevant to assessment year 2014-15, the shares were 4514, 4515, 4516/Mum/2025; A.Y. 2012-13 sold and long-term capital gains was earned by the assessee’s that was claimed as exempt under section 10(38) of the act. 5.6 During the year 2016 assessee declared income under IDS 2016 scheme. The assessee declared following amount as income from other sources being cash generated and utilised during financial year 2012-13 for unsubstantiated LTCG in respect of Rutron International Ltd.
Assessee Amount declared in IDS 2016 Anant Vijay Damani Rs.46,65,500 Radhika AnantDamani Rs.60,70,500 NarottamDualalDamani(HUF) Rs.38,64,500 GirirajDualalDamani (HUF) Rs.87,22,000 5.7 The Ld.AO after verifying the submissions filed by the assessee was of the opinion that assessee has not declared this again made to bogus preferential share allotment in IDS. The Ld.AO was of the opinion that the assessee invested unaccounted cash generated and utilised the same during the relevant assessment year under consideration towards purchase of preferential shares in the penny stock company. The Ld.AO thus made addition of the amount invested by the assessee’s in the penny stock as unaccounted money under section 68 of the act, and also computed notional commission charged by an entry operator under such circumstances and made disallowance under section 69C the of the act.
Aggrieved by the orders passed by the Ld.AO, the assessee’s preferred appeal before the Ld.CIT(A).
4514, 4515, 4516/Mum/2025; A.Y. 2012-13 6. The Ld.CIT(A) after considering the submissions of the assessee, upheld the observations of the Ld.AO. It is further noted that the assessee could not represent its case before the Ld.CIT(A) and the impugned orders were passed based on the documents available on record in case of Giriraj Daulal Damani (HUF) and Radhika Anant Damani. In case of Anant Vijay Damani and Narottam Daulal Damani (HUF) the appeals filed by the assessee was dismissed for non-prosecution.
Aggrieved by the orders passed by the Ld.CIT(A)/NFAC, the assessee’s preferred appeals before this Tribunal.
The Ld.AR submitted that all assessee’s have filed declaration under IDS 2016 in Form 1 and the same was accepted by the Department by issuing Form 4. He submitted that both these documents are placed in the paper book of the relevant assessee’s. The Ld.AR emphasised that, undisclosed income as per the declaration made in IDS is out of the cash generated during financial year 2012-13 (relevant to assessment year 2013-14) for unsubstantiated LTCG in respect of shares of Rutron International Ltd. 7.1 The Ld.AR further emphasise that during the year under consideration to investment made by the assessee in the shares of alleged penny stock was through banking channels and the shares were directly credited to the demand account of all assesse’s. It was submitted that, there is no documentary evidence for any live link with the Department to come to the conclusion that the assessee was involved in the price rigging of Rutron International Ltd. 4514, 4515, 4516/Mum/2025; A.Y. 2012-13 7.2 On the contrary, the Ld.DR vehemently supported the orders passed by the authorities below and submitted that in the present facts, of the case the investment made by the assessee in the alleged penny stock has been questioned during the assessment proceedings. Whereas in IDS-2016 declaration filed by the assessee in the year 2016, is regarding unaccounted cash with all assessee’s out of the sale of shares of the alleged penny stock.
I have perused the submissions advanced by both sides in the light of the records placed before me.
It is noted that, impugned orders are passed without considering the evidence/submissions of the assessee, due to non re presentation as the authorised representative of the assessee was not keeping good health. 8.1 Upon perusal of the documents furnished in the paper book it is noted that, the authorities below have not verified the cash flow statement of the assessee for the year under consideration. From the banks statements placed in the paper book apparently the investment in the shares of the alleged penny stock company was made through proper channel. However it is noted that before the date of payment to the alleged company, there was deposits in the bank account of the assessee of similar amounts, which has not been substantiated by the assessee’s. The assessing officer invoked section 68 of the act questioning the source of the investments made in the alleged shares of the penny stock company.
4514, 4515, 4516/Mum/2025; A.Y. 2012-13 8.2 It is also noted that the assessee has all throughout consistently submitted that, the shares were allotted directly into the demat accounts of all the assessee’s. It is also admitted by the assessee that there was a lock in period of one year from the date of purchase of these shares. Thus the assessee could have sold the shares after December 2012. 8.3 The Ld.AO merely proceeded on the report from the investigation wing and did not analyse the penny stock nature of the alleged script. The Ld.AO did not verify the details furnished by all assessee’s in accordance with law. Even Ld. CIT(A) did not carry out necessary verification of the documents that were available on the assessment records. In the interest of justice I therefore remit the issue to the Ld.CIT(A) with a direction to verify the source of investment. Assessee is directed to substantiate the source of the investments made in the alleged script in order to come out of the garb of section 68 of the act. Needless to say that proper opportunity of being heard must be granted to the assessee. Accordingly grounds raised by the all assessees for the year under consideration stands partly allowed for statistical purposes. In the result all appeals filed by the assessees for all assessment years stands partly allowed for statistical purposes. Order pronounced in the open court on 29/08/2025