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Income Tax Appellate Tribunal, MUMBAI BENCH “H”, MUMBAI
Before: SHRI VIKAS AWASTHY & SHRI GAGAN GOYAL
ORDER PER GAGAN GOYAL, A.M: These two appeals by the assessee are directed against the orders of Pr. Commissioner of Income Tax-30, Mumbai [hereinafter referred to as ‘the PCIT’] under section 263 of the Income Tax Act, 1961( for short ‘the Act’) vide order dated 30.03.2020 for the Assessment Years (AY) 2013-14 & 2014-15. The assessee has raised the similar grounds except variation of amounts in both the AYs.
(A.Y. 2013-14) (A.Y. 2014-15) 2. Facts and grounds being identical, we take appeal no. 1854/Mum/2020 for AY 2013-14 as lead case and ratio will be applied for both the AYs. The assessee has raised the following grounds of appeal: 1. “Pr. Commissioner of Income Tax (“Pr. CIT) erred in passing an order u/s 263 on the basis of notice issued in the name of Deceased assessee, inspite of having details of legal representative on records with him and therefore the order of the Learned "Pr. CIT" passed in the name of legal heir (without mentioning the name) is bad in law which deserves to set aside.
2. Without prejudice to ground No.1, the Learned Pr. Commissioner of Income Tax has grossly erred in fact and in law in concluding that the assessee has not declared entire sale proceeds under Income: Disclosure Scheme, 2016 and directing addition of Rs. 1,66,982/- (Rs. 5,732/- being brokerage on sale of shares charged by the broker and Rs. 1,61,250/- being cost of purchase of shares) without considering the fact that the assessee has already disclosed Rs. 1,61,250/- as the cost of shares in earlier year and the authorised broker has charged Rs. 5,732/-as brokerage on sale of shares as well as ignoring Form No. 4 issued by his own office, under Income Declaration Scheme, 2016, dated 06/10/2017 received on 13/11/2017, wherein all the details.
3. The Learned Pr. Commissioner of Income Tax ("Pr. CIT) erred invoking the provision of Section 263(1) of the Act without appreciating the fact that the Learned Assessing Officer ("LAO")) passed order u/s 143(3) r.ws 147 of the Act after making detailed and. adequate inquiries/ verification/examination with respect to declaration by assessee under the IDS, 2016 in respect of Long Term Capital Gain of Rs. 26,99,448/- and acquisition cost of shares of Rs. 1,61,250/- shown pursuant to declaration filed under the Income Declaration Scheme, 2016 and ignoring Explanation 2 to Section 263(1) of the ‘Act”.
4. The Ld. Pr. Commissioner of Income Tax erred in fact and in law by not giving sufficient opportunity to the assessee before passing order u/s 263.
5. The order of the learned Pr. Commissioner of Income Tax may be set aside.
6. The appellant craves leave, to add, to amend, to alter or delete any of the foregoing grounds of appeal and further reserves its right to file a detailed submission during the hearing of the appeal.”
3. Brief facts of the case are that the assessee filed his return of income on 30.08.2013 & 24.03.2015 for AY 2013-14 & for the AY 2014-15 declaring total income of Rs. 25,16,848/- and Rs. 27,08,807/- respectively.
(A.Y. 2013-14) (A.Y. 2014-15) 4. Information has been received in the ITD system under AIMS about the suspicions transaction undertaken by the assessee in penny stocks. Accordingly the case was reopened u/s 147 of the Act by issuing notice u/s 148 of the I.T. Act to the assessee. In response A.R. of the assessee filed a letter dated 15.11.2016 stating that his return of income filed on 30.08.2013 may be treated as return filed in compliance with the notice u/s 148 of the Act. Subsequently, a notice u/s. 143(2) & notice u/s 142(1) were issued on 10.07.2017 which was duly served upon the assessee.
In response to the notices, ld. Authorized Representative (AR) of the assessee attained the office and submitted all the relevant documents which were verified by the Assessing Officer (AO) and placed on record. Return filed by the assessee under section 148 of the Act was accepted as it is by the AO after verification of the information submitted by the assessee.
Ld. Pr.CIT-30, Mumbai exercised his revisionary powers under section 263 of the Act. The reason for invoking section 263 of the Act by the ld. Pr.CIT was non-declaration of Rs. 1,66,982/- i.e. the cost of purchasing penny stock shares.
The assessee had claimed exemption under section 10(38) of the Act on Long Term Capital Gains (LTCG) of Rs. 26,99,448/- (Rs. 28,66,430/- – Rs. 1,66,982/-). Here Rs. 28,66,430/- is the amount of sales consideration of penny stock shares and Rs. 1.66.982/- is the purchase price. The assessee had made a declaration under IDS 2016 of Rs. 26,99,448/- which corresponds to deduction of claim under section 10(38) of the Act.
The ld. Pr.CIT held that assessee had not made disclosure in respect of Rs. 1,66,982/- being purchase price of penny stock shares. In his view the correct disclosure would have been the sum of Rs. 28,66,430/- being the amount
(A.Y. 2013-14) (A.Y. 2014-15) corresponding to Capital Gain + Purchase price of penny stock shares. This way IDS 2016 declaration made by the assessee was incorrect to the extent of Rs. 1,66,982/-.
No arguments were advanced on ground No.1, hence not adjudicated.
Ground No.2, 3 & 5 are interrelated, hence disposed of by a common finding. We have gone through the relevant documents furnished with us in the form of Paper Book, assessment order under section 143(3) r.w.s. 147 and order of Ld. Pr.CIT under section 263 of the Act.
It is apparently clear from the documents on record that assessee has furnished all the relevant information with supporting documents to be examined during the re-assessment proceedings and the issue of fake LTCG and their declared figures were duly considered at the time of re-assessment. AO examined the issue of fake LTCG claim and was satisfied with the declaration made by the assessee under IDS 2016. Assessee clearly explained his source of investment amounting to Rs. 1,66,982/- upto the satisfaction of AO. AO has taken a conscious call while framing re-assessment order. This order of AO did not seem to be erroneous and prejudicial to the interest of Revenue from any angle.
Findings of the Ld. Pr.CIT that purchase price of penny stock shares were not included in the declaration made under IDS 2016 are not correct as the source of same is not disclosed and the same has not been verified by the AO during re- assessment proceedings. Which is not correct, as the same is not liable to be declared under the scheme of IDS 2016. The re-assessment order passed by the AO in the case of the assessee is not erroneous.
(A.Y. 2013-14) (A.Y. 2014-15) 13. Order passed by AO duly considered the amount of fake LTCG claimed and declared under IDS 2016 and related amount of investment made out of earlier years capital of the assessee, which is not under doubt, hence, the order passed by AO is not erroneous, hence action of Ld. PCIT is not sustainable.
In addition to above a similar issue has been considered by the Tribunal in the case of Filpa Associates Vs. ITO-31(1)(4) (Appeal No. 4761/Mum/2019 and held as under: “Upon careful consideration of documents on record, we find that the assessee has subscribed to public issue of HPC Biosciences Ltd by paying a sum of Rs 1.40 Lacs which was debited to assessee's capital account held with M/s King Enterprises The said payment has been cleared from bank account on 07/03/2013 The shares were held since 15/03/2013 which is evident from Long- Term Capital Gain statement of assessee's broker In the opinion of Ld. Pr. CIT, the cost of acquisition was also to be added to the income of the assessee. However, unless the said payment has certain element of undisclosed income, the same could not be said to be the undisclosed income of the assessee. The said cost of acquisition has been paid by the assessee in a public issue. The payment is well supported by documents on record. Therefore, there could be no occasion to form the order of Ld. AO as erroneous and prejudicial to the interest of the revenue within the meaning of Sec 263 We find the impugned order unsustainable and therefore, quash the same We find that the facts are similar here. The assessee has paid the purchase cost of Rs 50,105/- by cheque as margin money which has been adjusted against the sale proceeds of shares. Therefore, the undisclosed income would be the gains earned by the assessee and not the sale proceeds unless it was shown that the cheque paid by the assessee had element of income. In the absence of such a fact forthcoming in the assessment order, the addition would be unsustainable. Therefore, by deleting the impugned addition, we allow the appeal.”
Keeping in view the findings of para-13 & 14 (supra) and decision of ITAT, Mumbai, we are of the opinion that order passed by Ld. Pr.CIT-30, Mumbai is not sustainable in facts and in law, hence, set-aside.
In the result, appeal of the assessee for AYs 2013-14 is allowed.
ITA No. 1853/Mum/2020 (A.Y. 2014-15)
(A.Y. 2013-14) (A.Y. 2014-15)
The facts of this appeal are similar to the facts in Appeal No. 1854/Mum/2020 for AY 2013-14. The grounds raised by the assessee in this year are also similar to the appeal of the assessee mentioned (supra). There is no dispute on this and agreed by the assessee and Ld. DR. As the facts and law applicable are similar, the ratio of decision in appeal decided (supra) is mutatis mutandis applicable to this year also.
In the result, appeal of the assessee for A.Y. 2014-15 is allowed.
Order pronounced in the open court on 15th day of June, 2022.