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Income Tax Appellate Tribunal, MUMBAI BENCH “A” MUMBAI
Before: SHRI KULDIP SINGH & SHRI OM PRAKASH KANT
PER OM PRAKASH KANT, AM
This appeal by the Revenue is directed against the order dated 23.01.2020 passed by the Ld. Commissioner of Income-tax (Appeals)-46, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2015-16, raising following grounds :
Amit Burakia 2 ITA No. 1590/M/2020
1. "Whether in the facts and circumstances of the case, the "Whether in the facts and circumstances of the case, the "Whether in the facts and circumstances of the case, the Ld.CIT(A) is justified in not upholding the action of the AO in Ld.CIT(A) is justified in not upholding the action of the AO in Ld.CIT(A) is justified in not upholding the action of the AO in rejecting the Claim exemption rejecting the Claim exemption u/s 10(38) of Rs 40716372/ u/s 10(38) of Rs 40716372/- on transactions in penny Stock shares of PSIT Infrastructure & transactions in penny Stock shares of PSIT Infrastructure & transactions in penny Stock shares of PSIT Infrastructure & Services Ltd and assessing the same as assessee's Business Services Ltd and assessing the same as assessee's Business Services Ltd and assessing the same as assessee's Business income. income.
2. Whether in the facts and circumstances of the case, the Ld. Whether in the facts and circumstances of the case, the Ld. Whether in the facts and circumstances of the case, the Ld. CIT(A) had failed appreciate that th CIT(A) had failed appreciate that the action of the AO in e action of the AO in rejecting the claim exemption u/s 10(38) of Rs. 40716372/- rejecting the claim exemption u/s 10(38) of Rs. 40716372/ rejecting the claim exemption u/s 10(38) of Rs. 40716372/ was based on attending circumstances and human probabilities was based on attending circumstances and human probabilities was based on attending circumstances and human probabilities which does not get vitiated if there are compelling reasons to which does not get vitiated if there are compelling reasons to which does not get vitiated if there are compelling reasons to reject the frontage of a transaction based on the so called reject the frontage of a transaction based on the s reject the frontage of a transaction based on the s evidence which is nothing more than a mere paper work? evidence which is nothing more than a mere paper work? evidence which is nothing more than a mere paper work? 3. Whether in the facts and circumstances of the case, the Ld. Whether in the facts and circumstances of the case, the Ld. Whether in the facts and circumstances of the case, the Ld. CIT(A) ought to have upheld the action of the AO in denying CIT(A) ought to have upheld the action of the AO in denying CIT(A) ought to have upheld the action of the AO in denying exemption u/s 10(38) of Rs.407163724 and exemption u/s 10(38) of Rs.407163724 and assessing same as ssessing same as business business profits by relying on the ratio laid down by the Hon'ble profits by relying on the ratio laid down by the Hon'ble Supreme Court in the case of CIT v. Durga Prasad More (1971) Supreme Court in the case of CIT v. Durga Prasad More (1971) Supreme Court in the case of CIT v. Durga Prasad More (1971) 82 ITR 540 (SC) & Sumati Dayal v. CIT (1995) 214 ITR 801(SC)? 82 ITR 540 (SC) & Sumati Dayal v. CIT (1995) 214 ITR 801(SC)? 82 ITR 540 (SC) & Sumati Dayal v. CIT (1995) 214 ITR 801(SC)? 4. Whether in the facts and circumstances of the case, the Whether in the facts and circumstances of the case, the Whether in the facts and circumstances of the case, the Ld.CIT(A) was Ld.CIT(A) was justified deleting the addition made by the AO justified deleting the addition made by the AO rather than taking the investigation / enquiries further either rather than taking the investigation / enquiries further either rather than taking the investigation / enquiries further either by himself or cause to get it done as per section 250(4) of the I by himself or cause to get it done as per section 250(4) of the I by himself or cause to get it done as per section 250(4) of the I T Act, especially ignoring the circumstantial evidences T Act, especially ignoring the circumstantial evidences T Act, especially ignoring the circumstantial evidences conclusions brought out conclusions brought out by the Assessing officer in his order by the Assessing officer in his order that the claim of LTCG are part of major scheme of that the claim of LTCG are part of major scheme of that the claim of LTCG are part of major scheme of accommodation entries to generate bogus long term capital accommodation entries to generate bogus long term capital accommodation entries to generate bogus long term capital gains?" gains?"
Amit Burakia 3 ITA No. 1590/M/2020
5. "Whether in the facts and circumstances of the case and in law, "Whether in the facts and circumstances of the case and in law, "Whether in the facts and circumstances of the case and in law, the Ld.CIT(A) is correct in deleting the Ld.CIT(A) is correct in deleting the addition of Rs. the addition of Rs. 80,00,000/ 80,00,000/- without fulfilling the obligation of the first without fulfilling the obligation of the first appellate authority to have ensured that effective enquiry was appellate authority to have ensured that effective enquiry was appellate authority to have ensured that effective enquiry was carried out as held by the Hon'ble Delhi High Court in the case carried out as held by the Hon'ble Delhi High Court in the case carried out as held by the Hon'ble Delhi High Court in the case of M/s. Jansampark Advertising & Marketing (P) Ltd. in ITA of M/s. Jansampark Advertising & Marketing (P) Lt of M/s. Jansampark Advertising & Marketing (P) Lt 525/2014 delivered on 11.03. 2015 525/2014 delivered on 11.03. 2015 6. "The appellant prays that the order of the Ld. CIT(A) on the "The appellant prays that the order of the Ld. CIT(A) on the "The appellant prays that the order of the Ld. CIT(A) on the above ground be set aside and that of the Assessing Officer be above ground be set aside and that of the Assessing Officer be above ground be set aside and that of the Assessing Officer be restored." restored." 7. "The appellant craves leave to add, amend or alter all or any of "The appellant craves leave to add, amend or alter all or any of "The appellant craves leave to add, amend or alter all or any of the grounds the grounds of appeal" 2. Briefly stated, facts of the case are that the assessee filed Briefly stated, facts of the case are that the assessee Briefly stated, facts of the case are that the assessee return of income for the year under consideration on 31.08.2015 return of income for the year under consideration on 31.08.2015 return of income for the year under consideration on 31.08.2015 declaring total income of declaring total income of ₹43,70,070/- including long term capital including long term capital gain on sale of the shares gain on sale of the shares M/s PSIT Infra Ltd. M/s PSIT Infra Ltd. amounting to ₹4,07,16,372/- which was claimed as exempt u/s 10(38) of the which was claimed as exempt u/s 10(38) of the which was claimed as exempt u/s 10(38) of the Income-tax Act, 1961 (in short ‘the Act’). In the assessment tax Act, 1961 (in short ‘the Act’). In the assessment tax Act, 1961 (in short ‘the Act’). In the assessment completed u/s 143(3) of the Act dated 30.12.2017, the Assessing completed u/s 143(3) of the Act dated 30.12.2017, the Assessing completed u/s 143(3) of the Act dated 30.12.2017, the Assessing Officer rejected the claim of the assessee of Officer rejected the claim of the assessee of “long term c long term capital gain”
Amit Burakia 4 ITA No. 1590/M/2020 and assessed the income the income under the head “profit and grain profit and grain of business or profession” business or profession”.
3. On further appeal, the Ld. CIT(A) reverse finding of the Ld. On further appeal, the Ld. CIT(A) reverse finding of the Ld. On further appeal, the Ld. CIT(A) reverse finding of the Ld. Assessing Officer and directed Assessing Officer and directed to assess the said amount under the the said amount under the head ‘capital gain’, subje head ‘capital gain’, subject to exemption u/s 10(38) of the Act. ct to exemption u/s 10(38) of the Act.
4. Aggrieved, the Revenue is in appeal raising the grounds as Aggrieved, the Revenue is in appeal raising the grounds as Aggrieved, the Revenue is in appeal raising the grounds as reproduced above.
5. Before us, the Ld. Departmental Representative (DR) filed an Before us, the Ld. Departmental Representative (DR) fi Before us, the Ld. Departmental Representative (DR) fi application under Rule 29 application under Rule 29 (sic) for admitting statement of Shri (sic) for admitting statement of Shri Rajkumar Kedia i.e. one of the employee working Shri Soumen Sen r Kedia i.e. one of the employee working Shri Soumen Sen r Kedia i.e. one of the employee working Shri Soumen Sen who was the Director with M/s PSIT Infra Ltd. For ready reference who was the Director with M/s PSIT Infra Ltd. For ready reference who was the Director with M/s PSIT Infra Ltd. For ready reference same is reproduced as under: reproduced as under:
“Kindly refer to the hearing in the above case fixed for today. Kindly refer to the hearing in the above case fixed for today. Kindly refer to the hearing in the above case fixed for today.
The issue involved in this case is The issue involved in this case is assessee's claim of long term capital gain to assessee's claim of long term capital gain to the tune of Rs. 4,07,16,372/ of Rs. 4,07,16,372/- being exempt u/s 10(38) of the IT Act. The scrip in which being exempt u/s 10(38) of the IT Act. The scrip in which the assessee claimed the LTCG is M/s PSIT Infra Ltd. The assessment was made after the assessee claimed the LTCG is M/s PSIT Infra Ltd. The assessment was made after the assessee claimed the LTCG is M/s PSIT Infra Ltd. The assessment was made after
Amit Burakia 5 ITA No. 1590/M/2020 discussing in detail the price movement discussing in detail the price movement and the inherent strength of the scrip, the and the inherent strength of the scrip, the circumspect way of the transaction carried out by the assessee and reliance was placed circumspect way of the transaction carried out by the assessee and reliance was placed circumspect way of the transaction carried out by the assessee and reliance was placed on certain legal decisions. on certain legal decisions.
During the course of assessment proceedings in another case, it was found that During the course of assessment proceedings in another case, it was found that During the course of assessment proceedings in another case, it was found that M/s PSIT Infra Ltd. was admitted to be a penny stock used for providing Ltd. was admitted to be a penny stock used for providing Ltd. was admitted to be a penny stock used for providing accommodation entry by the operators. It was specifically admitted by the main accommodation entry by the operators. It was specifically admitted by the main accommodation entry by the operators. It was specifically admitted by the main operator Shri Rajkumar Kedia and one of the employees working under him Shri operator Shri Rajkumar Kedia and one of the employees working under him Shri operator Shri Rajkumar Kedia and one of the employees working under him Shri Soumen Sen who was Director with M/S PSIT Soumen Sen who was Director with M/S PSIT Infra Ltd. in the statement recorded us Infra Ltd. in the statement recorded us 131 of the IT Act during the course of survey action u/s 133A of the I T Act. 131 of the IT Act during the course of survey action u/s 133A of the I T Act. 131 of the IT Act during the course of survey action u/s 133A of the I T Act.
The above admission juxtaposed with the matching circumstances in the The above admission juxtaposed with the matching circumstances in the The above admission juxtaposed with the matching circumstances in the assessee's case and the scrip having been specifically identified case and the scrip having been specifically identified as an instrument for providing accommodation entry, there is no two opinion about the fact that the providing accommodation entry, there is no two opinion about the fact that the providing accommodation entry, there is no two opinion about the fact that the assessee's claim is nothing but laundering of his unaccounted income masquerading assessee's claim is nothing but laundering of his unaccounted income masquerading assessee's claim is nothing but laundering of his unaccounted income masquerading an accommodation entry as a genuine LTCG transaction. Copies of the relevant an accommodation entry as a genuine LTCG transaction. Copies of the relev an accommodation entry as a genuine LTCG transaction. Copies of the relev statements and other relevant facts specifically of the scrip are bring enclosed statements and other relevant facts specifically of the scrip are bring enclosed statements and other relevant facts specifically of the scrip are bring enclosed herewith for ready reference. herewith for ready reference.
In this background, the additional evidence may kindly be admitted and the In this background, the additional evidence may kindly be admitted and the In this background, the additional evidence may kindly be admitted and the same may please be considered. same may please be considered.” 5.1 It is the shares of this co It is the shares of this company which has been held by the mpany which has been held by the Assessing Officer as penny stock and accordingly he has denied long Assessing Officer as penny stock and accordingly he has denied long Assessing Officer as penny stock and accordingly he has denied long term capital gain u/s 10(38) of the Act to the assessee. term capital gain u/s 10(38) of the Act to the assessee. term capital gain u/s 10(38) of the Act to the assessee. The Ld. DR submitted that the statement of Shri Rajkumar Kedia is having submitted that the statement of Shri Rajkumar Kedia is having submitted that the statement of Shri Rajkumar Kedia is having bearing on the issue bearing on the issue-in-dispute and therefore, same might be ispute and therefore, same might be Amit Burakia 6 ITA No. 1590/M/2020 admitted as additional evidence and matter may be restored back to admitted as additional evidence and matter may be restored back to admitted as additional evidence and matter may be restored back to the Ld. Assessing Officer for deciding afresh. The Ld. Counsel of the the Ld. Assessing Officer for deciding afresh. The Ld. Counsel of the the Ld. Assessing Officer for deciding afresh. The Ld. Counsel of the assessee also did not object seriously for restoring the matter to the assessee also did not object seriously for restoring the matter to the assessee also did not object seriously for restoring the matter to the AO but requested that sted that cross-examination of Shri Rajkumar Kedia examination of Shri Rajkumar Kedia might be provided if same same is relied upon by the Assessing Officer. the Assessing Officer.
We have heard rival submission of the parties on the issue-in- We have heard rival submission of the parties on the issue We have heard rival submission of the parties on the issue dispute of admissibility of additional evidence. The statement by dispute of admissibility of additional evidence. The statement by dispute of admissibility of additional evidence. The statement by Shri Rajkumar Kedia is in relation to the shares of PSIT Infra Ltd. ajkumar Kedia is in relation to the shares of PSIT Infra Ltd. ajkumar Kedia is in relation to the shares of PSIT Infra Ltd. which the assessee has claimed to have which the assessee has claimed to have sold during the year under during the year under consideration and shown long term capital gain consideration and shown long term capital gain consideration and shown long term capital gain on the same. Therefore, in the facts n the facts of the case, the additional evidence is havi , the additional evidence is having bearing on the issue the issue-in-dispute before us. Accordingly, we Accordingly, we feel it appropriate to restore the issue to the file of the Ld. Assessing restore the issue to the file of the Ld. Assessing restore the issue to the file of the Ld. Assessing Officer for deciding afresh. for deciding afresh. If the Assessing Officer rely solely rely solely on the said statement then following the principles of said statement then following the principles of natural justice, the natural justice, the assessee should be provided opportunity of cross assessee should be provided opportunity of cross- -examination of Amit Burakia 7 ITA No. 1590/M/2020 the said witness of the Revenue. of the Revenue. It is needless to mention that needless to mention that assessee shall be afforded afforded adequate opportunity of being of being heard.
In the result, the appeal filed by the In the result, the appeal filed by the Revenue is allowed for Revenue is allowed for statistical purposes.