PRABHA SRISRIMAL,CHENNAI vs. ACIT NON CORPORATE WARD 10(1), CHENNAI

आदेश / O R D E R

PER G. MANJUNATHA, ACCOUNTANT MEMBER:

This appeal filed by the assessee is directed against the order of the

Commissioner of Income Tax (Appeals)-12, Chennai, dated 31.10.2018

and pertains to assessment year 2015-16.

1 For that the order of the learned Commissioner of Income tax (Appeals) is contrary to law, facts and circumstances of the case and in any case is opposed to the principles of equity, natural justice and fair play. 2 For that the Learned Commissioner of Income Tax (Appeals) has erred in confirming that the order of the Assessing Officer was not "bad in law" under the facts and circumstances of the case 3 For that the Learned Commissioner of Income Tax (Appeals) has erred in confirming invocation of Section 68 under the facts and circumstances of the case

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4 For that the Learned Commissioner of Income Tax (Appeals) has erred in confirming Disallowance of claim made U/s. 10(38) (Long Term Capital Gain on account of sale of shares) under the facts and circumstances of the case.

5 For that the Learned Commissioner of Income tax (Appeals) has erred in confirming the additions without providing an opportunity of being heard under the facts and circumstances of the case.

6 For that the Learned Commissioner of Income Tax (Appeals) has erred in not considering the cost of the shares paid through banking channels under the facts and circumstances of the case.

7 For that the Learned Commissioner of Income Tax has erred in confirming the addition made by the Assessing Officer based on realm of surmises, conjectures and suspicion.

8 For that the Learned Commissioner of Income Tax (Appeals) has erred in not considering the oral submissions made.

9 For that the Learned Commissioner of Income Tax (Appeals) has erred in not passing a speaking order on all the grounds of appeal before him.

PRAYER

For these grounds and such other grounds that may be urged before or during the hearing of the appeal it is most humbly prayed that the Honourable Income Tax Appellate Tribunal may be pleased to

a. Direct the Assessing Officer to delete the additions made in respect of unexplained cash credit to the tune of Rs.20,85,000/- under the head "Income from Other Sources".

b. Pass such other orders as the Honourable Appeallate Tribunal may deem fit.

derived income from house property, income from business, income from

capital gains and income from other sources, filed her return of income for

the AY 2015-16 on 22.09.2015, declaring total income of Rs.29,31,200/-.

The case has been selected for scrutiny and during the course of

assessment proceedings, the AO noticed that the assessee has declared

long term capital gains on sale of shares exempted u/s.10(38) of the Act,

to the tune of Rs.19,85,000/-. Therefore, called upon the assessee to file

necessary details. In response, the assessee has filed various details

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including contract note, Demat account details, broker details, name of

scrip purchased and mode of payment, etc. The AO after considering

relevant submissions of the assessee and also taken note of information

received from the Directorate of Investigation Income Tax, Kolkata, opined

that M/s.Kailash Auto Finance Ltd., is a penny stock, which has been used

by many people for claiming bogus long term capital gains for the purpose

of exemption u/s.10(38) of the Act. Therefore, after analyzing various

details including report of the Directorate of Income Tax (Investigation)

opined that consideration received for sale of shares of M/s.Kailash Auto

Finance Ltd., is unexplained credit, which needs to be taxed u/s.68 of the

Act, and accordingly, made addition of Rs.20,85,000/-. The assessee

carried the matter in appeal before the First Appellate Authority, but could

not succeeded. The Ld.CIT(A) for the reasons stated in his appellate order,

sustained the additions made by the AO. Aggrieved by the order of the

Ld.CIT(A), the assessee is in appeal before us.

sustaining the additions made by the AO towards consideration received for

transfer of shares of M/s.Kailash Auto Finance Ltd., u/s.68 of the Act,

without appreciating the fact that the assessee has furnished all evidences

to prove that said transaction is genuine, which is carried out through

proper channel. The Ld.AR further submitted that the AO has made

addition towards consideration u/s.68 of the Act, without providing a

reasonable opportunity of hearing to the assessee to justify her case, which

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is evident from the fact that so called Investigation Report relied upon by

the AO was not shared with the assessee to make her rebuttal. Therefore,

the issue may be set aside to the file of the AO to give one more opportunity

of hearing to the assessee.

submitted that the Ld.CIT(A) has brought from clear facts in light of various

reasons given by the AO and also in light of the report of Directorate of

Investigation Income Tax, Kolkata & Delhi, that long term capital gains

derived by the assessee from sale of shares of M/s.Kailash Auto Finance

Ltd., is bogus which is used for converting unaccounted income of the

assessee. Therefore, there is no reason to set aside the issue to the file of

the AO.

record and gone through orders of the authorities below. The AO has made

addition towards sale proceeds of shares of M/s.Kailash Auto Finance Ltd.,

u/s.68 of the Act, as unexplained credit on the ground that M/s.Kailash

Auto Finance Ltd., is a penny stock company, which fact has been

established by the report of the Directorate of Investigation, Kolkata &

Delhi, where the modus operandi of penny stock companies have been

unearthed. The AO has discussed the issue in light of origin of the shares

subsequent conversion and listing to the end point and opined that these

are circular trading within known people to jack up sale price of the share

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to give benefit to certain persons for commission. This fact has been

strengthened by the fact of admission of certain persons in the statement

recorded u/s.132(4) of the Act, during the course of investigation by the

Directorate of Investigation, Kolkata & Delhi. It was the explanation of the

assessee that M/s.Kailash Auto Finance Ltd., may be a penny stock, but the

assessee has carried out purchase and sale transaction through registered

stock exchange and shares were demated in Demat A/c. Further,

consideration for purchases has been paid through proper banking channel.

The assessee has filed all details including progress note, share certificate,

contract note, bank details, etc. The AO ignored all details furnished by the

assessee and has made additions only on the basis of report of the

Directorate of Investigation, Kolkata & Delhi, without providing details of

said report and also opportunity of cross-examination of persons who gave

statement against the assessee. Therefore, requested to set aside the

appeal to the file of the AO to justify her case.

ld.Counsel for the assessee for the simple reason that there is no dispute

with regard to the details filed by the assessee. Further, transaction has

been carried out through registered stock exchange. Therefore, when you

relied upon the documents furnished by the assessee, there cannot be any

doubt of genuineness of transaction. However, the investigation carried

out by the Directorate of Investigation, Kolkata & Delhi, reveals that

M/s.Kailash Auto Finance Ltd., is a penny stock, which has been used to

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provide bogus long term capital gains to various persons. The AO has relied

on the report of the Directorate of Investigation, Kolkata & Delhi, and

statement recorded from certain persons without providing details of report

and statement of some persons. It is a well settled principle of law that if

any third party information relied on by the AO to take an adverse inference

against the assessee, then, it is the duty of the AO to share such

information to assessee for her rebuttal. In this case, the AO does not

shared information to the assessee. Therefore, we are of the considered

view that the issue needs to be go back to the file of the AO to give one

more opportunity of hearing to the assessee to justify her case. Hence, we

set aside the issue to the file of the AO and direct the AO to re-do the

assessment after providing reasonable opportunity of hearing to the

assessee.

purposes.

Order pronounced on the 21st day of September, 2022, in Chennai.

Sd/- Sd/- (महावीर िसंह) (जी. मंजूनाथा) (G. MANJUNATHA) (MAHAVIR SINGH) लेखा सद�य/ACCOUNTANT MEMBER उपा�� /VICE PRESIDENT

चे�ई/Chennai, �दनांक/Dated: 21st September, 2022. TLN आदेश क� �ितिलिप अ�ेिषत/Copy to:

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