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Income Tax Appellate Tribunal, CHENNAI BENCHES, CHENNAI
Before: Shri Mahavir Singh, Hon’ble & Shri Girish Agrawal, Hon’ble
1 ITA 1903-1904/CHNY/2019 A.Ys 2011-12 & 2013-14 Smt. Vandana Jain ITA 1905-1906/Chny/2019 A.Ys 2011-12 & 2013-14 Raj Kumar Jain ITA 1907/Chny/2019 A.Y. 2013-14 Raj Kumar Jain HUF & ITA 1970/Chny/2018 A.Y. 2014-15 Smt. Mithu Kumari Ranka IN THE INCOME TAX APPELLATE TRIBUNAL, CHENNAI BENCHES, CHENNAI Before Shri Mahavir Singh, Hon’ble Vice President and Shri Girish Agrawal, Hon’ble Accountant Member “C” BENCH I.T.A. Nos. 1903 & 1904/Chny/2019 Assessment Years: 2011-12 & 2013-14
Smt. Vandana Jain Vs. Income Tax Officer, No. 21 2nd Fl., Ramaswamy Street, Non Corporate Ward 2(2), T. Nagar, Chenna-600 017. Chennai-600 034. PAN: ACPPV5784R Appellant Respondent
I.T.A. Nos. 1905 & 1906/Chny/2019 Assessment Years: 2011-12 & 2012-13
Mr. Raj Kumar Jain Vs. Income Tax Officer, No. 21, 2nd Floor, Ramaswamy Street, Non Corporate Ward 2(3), T. Nagar, Chennai-600017. Chennai-600 034. PAN: AAEPR4826M Appellant Respondent
I.T.A. No. 1907/Chny/2019 Assessment Year: 2013-14 Raj Kumar Jain HUF Vs. Income Tax Officer, No. 21, 2nd Floor, Ramaswamy Street, Non Corporate Ward 2(3), T. Nagar, Chennai-600017. Chennai-600 034. PAN: AAAHR1762E Appellant Respondent
Date of Hearing (virtual) 03-03-2022 Date of Pronouncement 31.03.2022 For the Appellant None For the Respondent Mr. G. Johnson, Addl.CIT
2 ITA 1903-1904/CHNY/2019 A.Ys 2011-12 & 2013-14 Smt. Vandana Jain ITA 1905-1906/Chny/2019 A.Ys 2011-12 & 2013-14 Raj Kumar Jain ITA 1907/Chny/2019 A.Y. 2013-14 Raj Kumar Jain HUF & ITA 1970/Chny/2018 A.Y. 2014-15 Smt. Mithu Kumari Ranka “D” BENCH I.T.A No. 1970/Chny/2018 Assessment Years: 2014-15
Smt. Mithu Kumari Ranka Vs. Income Tax Officer, No.Vaikunta Vathiyar Street Non Corporate Ward 5(3), II Floor, Sowcarpet Chennai-600 006. Chennai-600 079. PAN AAKPM0943J Appellant Respondent
Date of Hearing 03-03-2022 Date of Pronouncement 31.03.2022 For the Appellant Mr. D. Anand, Advocate For the Respondent Mr. G. Johnson, Addl.CIT
ORDER Per Girish Agrawal, Accountant Member:
All the above captioned six appeals preferred by respective assessees against the separate orders of Commissioner of Income-tax (Appeals) – 2, Chennai and Commissioner of Income-tax (Appeals) – 5 (in short, referred to as ‘the Ld. CIT(A)’ dated 30-04-2019 and 05-04-2018 respectively for the assessment years 2011-12, 2013-14 and 2014-15 arising from the assessment orders passed by the ITO, NCW- 2(2) / ITO,NCW-2(3) / ITO,NCW-5(3), Chennai dated 29-12-2017 and 25-10-2016 respectively u/s.143(3)/147 of the Income-tax Act, 1961 ( hereinafter, referred to as the ‘Act’. Since there are common grounds involved in all the captioned six appeals, we dispose of them by this consolidated order for the sake of convenience and brevity.
3 ITA 1903-1904/CHNY/2019 A.Ys 2011-12 & 2013-14 Smt. Vandana Jain ITA 1905-1906/Chny/2019 A.Ys 2011-12 & 2013-14 Raj Kumar Jain ITA 1907/Chny/2019 A.Y. 2013-14 Raj Kumar Jain HUF & ITA 1970/Chny/2018 A.Y. 2014-15 Smt. Mithu Kumari Ranka 3. Following common grounds are raised in ITA Nos. 1903 to 1907/Chny/2019 –
For that the order of the Commissioner of Income-tax (Appeals)2, Chennai is contrary to law, facts and circumstances of the case and is opposed to the principles of natural justice.
For that the Commissioner of Income Tax (Appeals) - 2 failed to appreciate that the order of the Assessing Officer is without jurisdiction.
For that the order passed u/s.143(3) is bad in law. For that the Assessing Officer erred in completing the assessment u/s.143(3).
For that the appellant had diligently declared the Capital Gains in the Statement of Account filed before the Ld. AO and is entitled for the exemption U/s. 10(38) of the Act.
For that the Appellant had submitted the details relevant to the assessment proceedings along with the evidences in support of the Long Term Capital Gains arose on sale of Shares as per the provisions of section 112 of the Income Tax Act, 1961.
For that the assumption of the Ld. AO as well the CIT (Appeals) - 2 relying on the statement of a third party without confronting the evidences for cross verification is contrary to the principles laid down by the Apex Court and the provisions of Income-tax Act, 1961.
For that the CIT (Appeals)-2 had further assumed that the entire Sale of shares as income under section 68 which is part of the original assessment order as well as his presumption on the Appellant's case.
For that the entire dealings in the Equity were transacted through the Banking transactions and are beyond surmise of any kind without bringing any materials against the Appellant.
For that the Appellant objects towards levy of Interest U/s. 234 B of the Income tax Act, 1961.
For these grounds and such other ground that maybe adduced before or during the hearing of the appeal with the leave of this respectful authority, may be pleased to
4 ITA 1903-1904/CHNY/2019 A.Ys 2011-12 & 2013-14 Smt. Vandana Jain ITA 1905-1906/Chny/2019 A.Ys 2011-12 & 2013-14 Raj Kumar Jain ITA 1907/Chny/2019 A.Y. 2013-14 Raj Kumar Jain HUF & ITA 1970/Chny/2018 A.Y. 2014-15 Smt. Mithu Kumari Ranka (a) Allow the exemption U/s. 10(38) of the I.T. Act, 1961 on the Long Term Capital Gains on sale of shares having sales consideration of Rs. 24,82,748/-; OR
(b) Pass such other orders as this respectful authority may deem fit.
Similar grounds are raised in ITA No. 1970/Chny/2018 which are reproduced for ease of reference –
The order of the learned Commissioner of Income (Appeals)-S, is wrong, illegal and opposed to facts of the instant case.
The learned CIT(A)-5 erred in law in passing the impugned order ex- parte without providing adequate opportunity to the appellant which is against the provision of law and principles of natural justice.
The learned Assessing officer and the first appellate authority erred in assessing the income from purchase and sale of shares under the head un-explained credit under section 68 and not as income exempt under section 10(38) of the Income Tax Act as claimed by the appellant.
The learned CIT(A)-5 and AO ought to have seen that in the case of the appellant the transaction of purchase and sale of shares are through recognized stock exchange which is fully supported by uncontroverted Documentary evidences and payment of STT which establish the bonafide of the appellants claim.
Bothe the Assessing officer and the CIT(A) in total non-application of mind to the facts of the appellants case, erred in law in disallowing the claim of appellant claim of relief under section 10(38) of the Income Tax Act.
The learned CIT(A)-5 erred in law in not following the decision of the Jurisdiction Tribunal in the case of Nirav Kumar Mahendra Sapani and Kinner Prafulchand Sapani where in the facts are para material, in doing so the learned CIT(A) failed to uphold the principles of Judicial discipline.
The learned CIT(A)-5 and AO erred in law and facts in treating the transaction of purchase of shares as Off market despite providing salient evidences such as Purchase contract through recognized stock exchange
5 ITA 1903-1904/CHNY/2019 A.Ys 2011-12 & 2013-14 Smt. Vandana Jain ITA 1905-1906/Chny/2019 A.Ys 2011-12 & 2013-14 Raj Kumar Jain ITA 1907/Chny/2019 A.Y. 2013-14 Raj Kumar Jain HUF & ITA 1970/Chny/2018 A.Y. 2014-15 Smt. Mithu Kumari Ranka vide contract note. The said uncontroverted evidences are overlooked by the assessing officer without any rhyme of reason.
The learned CIT(A)-5, erred in law and facts in not sending the notice of hearing to the appellant, thereby violating the principle of natural justice.
The learned assessing officer as well as the CIT(A) erred in relying on a certain pattern of bogus claim which is totally irrelevant to facts of the appellants. The learned lower authorities erred in relying on investigation in the case of third party which has no bearing on the appellants transaction to disallow the claim of the appellant under section 10(38).
The Assessing Officer added a sum of Rs.1,20,000/- towards drawings ignoring the fact that the assessee's family is a small family showing adequate drawings.
11.That the Assessing Officer while giving a finding that the appellants claim of interest to loan creditors to the tune of Rs.1,10,580/- is disallowed on account of earning exempted income grossly erred in ignoring that the exempt income credited to Profit & Loss A/c is only Rs.13,405/- towards dividend. As regards PPF Interest is concerned, it is well known that deduction u/s 80C towards PPF is allowed if and only if the investment is made out of taxable income. Since the appellant had sufficient taxable income in earlier years also, PPF contributions were made out of taxable income only. Hence no interest can be attributed to the investment in PPF.
The AO erred in relying on the reports from Investigating Wing of Income Tax Department, Kolkatta and statement of entry operators and post survey enquiries. The appellant was never afforded any opportunity to counter the same. Infact, in none of the hearing notices, the AO ever had mentioned about receipt of any such reports or statements. All these are grossly violative of principles of natural justice. The appellant was thus prevented from cross-examining the person whose statement has been relied on by the AO. 5. From the perusal of above grounds, we observe that the common grievance of all the assessee is against the decision of Ld. CIT(A) in confirming the addition of sale consideration received on sale of shares of listed companies under section 68 of the Act,
6 ITA 1903-1904/CHNY/2019 A.Ys 2011-12 & 2013-14 Smt. Vandana Jain ITA 1905-1906/Chny/2019 A.Ys 2011-12 & 2013-14 Raj Kumar Jain ITA 1907/Chny/2019 A.Y. 2013-14 Raj Kumar Jain HUF & ITA 1970/Chny/2018 A.Y. 2014-15 Smt. Mithu Kumari Ranka denying the claim of exemption u/s 10(38) and commission paid on the sale transaction without confronting the evidences for cross verification relied upon by the Ld. AO for taking the adverse view.
For ease of reference, we draw brief facts from the case of Smt. Vandana Jain in ITA No. 1903/Chny/2019 with difference in other cases only of quantum, dates and name of scripts sold. The facts in brief are that the assessee being an individual filed her e- return of income for the A.Y 2011-12 declaring total income of Rs. 3,62,240/-. The case of the assessee was reopened u/s. 147 of the Act with the approval of the Ld.Pr.CIT-1, Chennai by issuance of a notice dtd. 09-11-2016. Assessee sold 7500 shares of Bakra Pratisthan Limited and realized long term capital gain (LTCG). In her e-filed return of income, the assessee reported an amount of Rs. 24,82,748/- in the details of Exempt Income [LTCG on which STT is paid u/s 10(38) of the Act)]. Ld. AO disallowed the claim of exemption u/s 10(38) by holding that the assessee entered into an engineered transaction to generate artificial LTCG on sale of shares which fall under the category of penny stocks. Ld. AO based his decision of treating the impugned transaction of sale of shares as bogus transaction by relying on the report of Directorate of Income-tax (Investigation), Kolkata wherein the Investigation Wing of the Department has studied the modus operandi of rigging the prices of penny stocks and generation of capital gain there from. Before the Ld. AO, the assessee furnished the evidences for sale of 7500 shares of said company, M/s. Bakra Pratisthan Ltd sold for a consideration of Rs. 24,82,748/- through Shri Ashok Kumar Kayan, Kolkata. The AO found that the assessee purchased 7500 shares of said company from M/s. Akashgnaga Polyplast P. Ltd. for Rs. 1,50,000/- during FY 2008-09, which were sold during the year under consideration. Ld. AO noted in para 6 of the assessment order that the Investigation Wing recorded a statement of Shri Harshvardhan Kayan S/o of Ashok Kumar Kayan of Kolkata, wherein he admitted that price of impugned scripts was artificially inflated for the purpose of generating long term capital gain to the beneficiaries. The Ld. AO in the assessment order has elaborately discussed the
7 ITA 1903-1904/CHNY/2019 A.Ys 2011-12 & 2013-14 Smt. Vandana Jain ITA 1905-1906/Chny/2019 A.Ys 2011-12 & 2013-14 Raj Kumar Jain ITA 1907/Chny/2019 A.Y. 2013-14 Raj Kumar Jain HUF & ITA 1970/Chny/2018 A.Y. 2014-15 Smt. Mithu Kumari Ranka investigation carried on and study made by the Investigation Wing, Kolkata relating to the modus operandi of the alleged scheme of generation of bogus LTCG.
Considering the report of the Investigation Wing of the Department, statement recorded of certain persons, Ld. AO held that the assessee entered into an engineered transaction to generate artificial LTCG and treated the sale consideration of shares as bogus transaction. Ld. AO concluded the assessment by making the addition as ‘unexplained cash credits’ since explanation furnished by the assessee being unsatisfactory for the credit of Rs. 24,82,748/- u/s. 68 of the Act and assessed the same under the head ‘Income from other sources’. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who sustained the addition made by the Ld. AO. Aggrieved, now the assessee is in appeal before this Tribunal.
Mr. G. Jhonson, Addl.CIT represented the matter on behalf of the revenue and assisted the Bench in perusing the material on record. Mr. D. Anand, Advocate represented the assessee in the case of ITA No. 1970/Chny/2018.
Before adverting on the merits of the case, at the outset, the Bench took note of Ground No. 6 in ITA Nos. 1903 to 1907/Chny/2019 and Ground Nos. 9 and 12 in ITA No. 1970/Chny/2018 reproduced supra relating to non-confronting of evidences to the assessee for cross verification and cross examination, violating the principles of natural justice and raised a specific query before the Ld. Sr. DR to this effect in the light of provisions of section 142(3) of the Act. Ld. Sr. DR read out the provisions of section 142(3) before us which is reproduced as under for ease of reference –
Inquiry before assessment. 142(1)… 142(2)…
8 ITA 1903-1904/CHNY/2019 A.Ys 2011-12 & 2013-14 Smt. Vandana Jain ITA 1905-1906/Chny/2019 A.Ys 2011-12 & 2013-14 Raj Kumar Jain ITA 1907/Chny/2019 A.Y. 2013-14 Raj Kumar Jain HUF & ITA 1970/Chny/2018 A.Y. 2014-15 Smt. Mithu Kumari Ranka 142(3) The assessee shall, except where the assessment is made under section 144, be given an opportunity of being heard in respect of any material gathered on the basis of any inquiry under sub-section (2) or any audit under sub-section (2A) and proposed to be utilized for the purposes of the assessment.
Ld. Sr. DR did not controvert on the factual position vis-à-vis section 142(3) (supra) about non-supply of the relevant material to the assessee in the course of assessment proceedings for its cross verification and cross examination and urged before the Bench for liberty to file a written submission for his contentions along with relevant documentary evidences. In the light of this submission by the Ld. Sr. DR and provisions of section 142(3) of the Act, further specific query was raised by the Bench as to why this issue be not restored to the file of the Ld. AO for which the Ld. Sr. DR placed reliance on the decision of Hon’ble Jurisdictional High Court of Madras in the case of CIT, Chennai v. Mrs. Manish D. Jain (HUF) in TCA No. 223 of 2020, order dated 16.12.2020. Bench heard the matter and granted liberty to the Ld. Sr. DR for filing a written submission as requested along with providing a copy to the Ld. AR.
Ld. AR representing the matter before us in ITA No. 1970/Chny/2018 submitted that the Ld. AO had extensively relied upon the report of the Investigation Wing, Kolkata and certain statements recorded thereby on penny stocks, which sets out the modus operandi adopted in the alleged business of providing entries of bogus LTCG, without these being confronted to the assessee for cross verification and examination. He further submitted that similar issue was considered by the SMC Bench of Bangalore ITAT in the case of Sri Vinod Kothari (HUF) in ITA No. 698/Bang/2019, dated 03.07.2019 and the Tribunal had restored the issue to the file of Assessing Officer for examining it afresh as per directions issued by Hon’ble Karnataka High Court in the case of Chandra Devi Kothari v. ITO in writ petition no. 39370/2014 dtd 02.02.2015. Accordingly, the Ld. AR prayed that the issue under the present appeals may also be restored to the file of Assessing Officer with similar directions. Ld. AR also placed reliance on the decision of Hon’ble
9 ITA 1903-1904/CHNY/2019 A.Ys 2011-12 & 2013-14 Smt. Vandana Jain ITA 1905-1906/Chny/2019 A.Ys 2011-12 & 2013-14 Raj Kumar Jain ITA 1907/Chny/2019 A.Y. 2013-14 Raj Kumar Jain HUF & ITA 1970/Chny/2018 A.Y. 2014-15 Smt. Mithu Kumari Ranka Delhi High Court in the case of PCIT-12 v. Smt. Krishna Devi & Others in ITA 125/2020 order dated 15.01.2021.
We heard the parties and perused the material available on record including the judgments cited before us. It is placed on record that Ld. Sr. DR filed a written submission through email dated 11.03.2022 / 15.03.2022l addressed to the Bench along with soft copies of relevant attachments comprising of –
a. Decision by coordinate SMC Bench of Chennai ITAT in Manish D. Jain (HUF) ITA No. 2982/Chny/2018 dated 04.09.2019
b. Decision by Hon’ble Madras High Court in the case of CIT, Chennai v. Manish D. Jain (HUF) TCA No. 223 of 2020 dated 16.12.2020
c. Investigation Report by Directorate of Income-Tax (Investigation) Kolkata in the case of Project Bogus LTCG/STCL through BSE Listed Penny Stocks comprising of 135 pages from Chapter 1 to 8 (annexure ’A’ & ’B’ not included in this submission though listed in the index of this report)
We find from the submission made by the Ld. Sr. DR that the factual position in the light of provisions of section 142(3) of the Act read out in the course of hearing before us is uncontroverted. Copy of investigation report has been made available by the Ld. Sr. DR for the first time before the Bench through the email as stated above.
On perusal of the judgment of Hon’ble Madras High Court in the case of Mrs. Manish D. Jain (HUF) (supra), relied upon by the Ld. Sr. DR, it is noted from Para 27 of the judgment that the Hon’ble High Court stated, “As pointed out in the decision of this Court in the case of Cholamandalam MS General Insurance Co., we find in the instant case that there was no material, which necessitated the remand of the case to the Assessing Officer and it is a clear case where the Tribunal had failed to exercise its jurisdiction in the
10 ITA 1903-1904/CHNY/2019 A.Ys 2011-12 & 2013-14 Smt. Vandana Jain ITA 1905-1906/Chny/2019 A.Ys 2011-12 & 2013-14 Raj Kumar Jain ITA 1907/Chny/2019 A.Y. 2013-14 Raj Kumar Jain HUF & ITA 1970/Chny/2018 A.Y. 2014-15 Smt. Mithu Kumari Ranka manner known to law. The Tribunal, being a last fact finding Authority, is under the legal obligation to record a correct finding of fact.” [emphasis supplied by us].
In the present case before us, it is an uncontroverted factual position accepted by the Ld. Sr. DR on the material made available to the assessee vis-à-vis requirements of provisions of section 142(3) of the Act. Furthermore, copy of investigation report of the Investigation Wing, Kolkata extensively relied upon by the Ld. AO is furnished before the Bench and made available to the Ld. AR now, for the first time. We note that compliance of provisions of section 142(3) is a mandatory statutory requirement in completing the assessment proceedings failing which may vitiate the entire assessment itself since this sub-section uses the word ‘shall’.
Per contra, the Ld. Counsel referred to another decision of Co-ordinate Bench, ITAT Bangalore in ITA No. 650/Bang/2019 for A.Y. 2015-16 in the case of Shri Suresh J. Kothari (HUF) v. ITO, Ward 2(2)(1), Bengaluru, dated 31.07.2019 which in turn has followed the directions issued in the case of Chandra Devi Kothari (supra) by Hon’ble High Court of Karnataka. Relevant portion of the said order of co-ordiante Bench of ITAT Bangalore is reproduced herein below for the sake of clarity and ease of reference:
“3. The learned Authorised Representative submitted that an identical issue was considered by the SMC bench of Bangalore Tribunal in assessee's brother case named Sri Vinod Kothari (HUF) in ITA No.698/Bang/2019 and the Tribunal, vide its order dt.03.7.2019, has restored the issue to the file of Assessing Officer for examining it afresh as per directions issued by Hon'ble Karnataka High Court, in the case of Chandra Devi Kothari Vs. ITA (Writ Petition No. 39370/2014 Dt. 2.2.2015). Accordingly, the learned Authorised Representative prayed that the issue contested in this appeal may also be restored to the file of Assessing Officer with similar directions. 4. The learned Departmental Representative did not object to the prayer put forth by the learned A.R. 5. We heard the parties and perused the record. We notice that the SMC Bench of Bangalore Tribunal has considered an identical issue in the case of Shri Vinod
11 ITA 1903-1904/CHNY/2019 A.Ys 2011-12 & 2013-14 Smt. Vandana Jain ITA 1905-1906/Chny/2019 A.Ys 2011-12 & 2013-14 Raj Kumar Jain ITA 1907/Chny/2019 A.Y. 2013-14 Raj Kumar Jain HUF & ITA 1970/Chny/2018 A.Y. 2014-15 Smt. Mithu Kumari Ranka Kothari (HUF) (supra) and the matter has been restored to the file of Assessing Officer with the following observation: 4.3.1 I have considered the rival submissions and first of all, I reproduce Para No.8 of the judgment of Hon'ble Karnataka High Court rendered in the case of M/s. Chandra Devi Kothari (Supra) and this is as under: "8. In the light of the facts and circumstances as adverted to above and as the petitioner has been denied an opportunity of fair hearing by providing copy of the statement and related details regarding the alleged share amount, I am of the view that the matter requires to be re-considered by the respondent by providing fair and reasonable opportunity of hearing to the petitioner and by furnishing the details / copy of the statement based on which the impugned assessment order has been passed." [emphasis supplied by us] 4.3.2 From the above Para 8 of the judgment of Hon'ble Kanataka High Court in the case of Chandra Devi Kothari (supra) it is seen that matter was restored back to the file of the AO for fresh decision after providing copy of the statement and other related details relied upon by the AO); in this case copy of the Report of Kolkata Investigation Directorate and other attendant details. As per the facts noted by the High Court in the earlier paras of judgment (supra) and as per the facts of the case on hand, there appears to be no difference in facts and therefore by respectfully following this judgment in the case of Chandra Devi Kothari (Supra), I set aside the impugned order of learned CIT(A) for Assessment Year 2014-15 and restore the matters to the file of the AO for fresh decision with the same directions as were issued by the Hon'ble Karnataka High Court in the case as per Para No.8 of the judgment reproduced above. In view of this decision, no adjudication is called for at this stage regarding the merits of the addition." ITA No.650/Bang/2019 As the facts prevailing In the instant case is identical nature, following the aforesaid decision of the Tribunal, we set aside the order passed by the learned CIT (Appeals) and restore all the issues to the file of Assessing Officer with similar directions mentioned in ITAT Order (supra) for examining them afresh. 6. In the result, appeal of the assessee is treated as allowed for statistical purposes.” 14. Considering the uncontroverted factual position accepted by the Ld. Sr. DR on the material made available to the assessee vis-à-vis provisions of section 142(3) of the Act which casts a mandatory statutory procedural compliance requirement on the Ld. AO in completing the assessment proceedings which otherwise may vitiate the assessment itself,
12 ITA 1903-1904/CHNY/2019 A.Ys 2011-12 & 2013-14 Smt. Vandana Jain ITA 1905-1906/Chny/2019 A.Ys 2011-12 & 2013-14 Raj Kumar Jain ITA 1907/Chny/2019 A.Y. 2013-14 Raj Kumar Jain HUF & ITA 1970/Chny/2018 A.Y. 2014-15 Smt. Mithu Kumari Ranka it necessitates us to remand back the present case to the Assessing Officer for its appropriate adjudication by respectfully considering the observation made by the Hon’ble Madras High Court in Para 27 in the case of Mrs. Manish D. Jain (HUF) (supra) on the availability of material to the assessee. Further, respectfully following the directions given in Para 8 in the judgment of Hon’ble Karnataka High Court in the case of Chandra Devi Kothari (supra) and the order of co-ordinate bench of ITAT, Bangalore in the case of Shri Suresh J. Kothari (HUF) (supra), we set aside the impugned order passed by Ld. CIT(A) and Ld. AO and restore the matter back to the file of the Ld. AO with the direction to comply with the mandatory statutory requirements of section 142(3) of the Act failing which may vitiate the assessment itself. We are of the considered view that the Ld. AO has to reconsider the issue afresh after furnishing to the assessee all the material relied upon by him/her while passing the assessment order. Since the matter is restored to the file of Ld. AO for fresh adjudication in terms of finding and observations made hereinabove, we are not expressing any views on the merits of the case so as to limit the assessment procedure before the Ld. AO. The observations herein made by us in remanding the matter back to the file of Ld. AO will not impair or injure the case of the Revenue nor will it cause any prejudice to the defense/explanation of the assessee. Needless to say that assessee be given reasonable opportunity of being heard, who shall also cooperate by making all the required compliances for the completion of assessment proceedings. Accordingly, in terms of above, the appeal of the assessee is allowed for statistical purpose.
Since the facts and issues raised in respect of transaction of sale of shares in other appeals are common and identical to that of ITA No. 1903/Chny/2019 for A.Y 2011-12 which we have already discussed/disposed of as above and therefore following the same ratio of our aforementioned decision, the other appeals, viz. ITA Nos. 1904 to 1907/Chny/2019 and ITA No. 1970/Chny/2018 in respect of other captioned assessee are allowed for statistical purpose.
13 ITA 1903-1904/CHNY/2019 A.Ys 2011-12 & 2013-14 Smt. Vandana Jain ITA 1905-1906/Chny/2019 A.Ys 2011-12 & 2013-14 Raj Kumar Jain ITA 1907/Chny/2019 A.Y. 2013-14 Raj Kumar Jain HUF & ITA 1970/Chny/2018 A.Y. 2014-15 Smt. Mithu Kumari Ranka 16. In respect of Ground No. 8 in ITA Nos. 1906 & 1907/Chny/2019 relating to addition made by the Ld. AO towards alleged commission paid by the assessee on the sale transaction of shares, we find that it is consequential in nature to the above finding and observations on the issue of sale transaction of shares and is accordingly disposed of as allowed for statistical purpose.
Ground no. 10 in ITA No. 1970/Chny/2018 relates to addition made by Ld. AO of Rs. 1,20,000/- towards inadequacy of drawings and confirmed by the Ld. CIT(A). Total drawing of the family were Rs. 1,26,102/- which comes to approx. Rs. 10,000/- per month for the whole family. Before us, Ld. Counsel for the assessee could not explain how the drawing of Rs. 10,000/- per month would be sufficient for the whole family. We find no reason to interfere with the finding given by Ld. CIT(A) in this respect and accordingly, this ground of appeal is dismissed.
Ground No. 11 in ITA No. 1970/Chny/2018 relates to disallowance made by the Ld. AO u/s 14A of Rs. 1,10,580/- towards interest to loan creditor debited to Profit & Loss account which is confirmed by the Ld. CIT(A). The assessee submitted that she earned an exempt income of Rs. 13,405/- only during the year which is credited in the Profit & Loss account. As regards PPF interest, it is contested by the assessee that deduction u/s 80C towards PPF is allowed if and only if the investment is made out of taxable income. Since the assessee had sufficient taxable income in earlier years also, PPF contributions were made out of taxable income only. Hence, assessee claimed that no interest can be attributed to the investment in PPF. We note the claim of the assessee that disallowance u/s 14A should not exceed the quantum of exempt income earned during the year and find force in the same. We, accordingly, direct the Ld. AO to restrict the disallowance u/s 14A of the Act up to the amount of exempt income earned i.e. Rs. 13,405/- and delete the balance addition of Rs. 97,175/- (Rs. 1,10,580 – Rs. 13,405). Accordingly, this ground of appeal is partly allowed.
14 ITA 1903-1904/CHNY/2019 A.Ys 2011-12 & 2013-14 Smt. Vandana Jain ITA 1905-1906/Chny/2019 A.Ys 2011-12 & 2013-14 Raj Kumar Jain ITA 1907/Chny/2019 A.Y. 2013-14 Raj Kumar Jain HUF & ITA 1970/Chny/2018 A.Y. 2014-15 Smt. Mithu Kumari Ranka 19. In the result, five appeals vide ITA Nos. 1903 to 1907/Chny/2019 in respect of respective assessee are allowed for statistical purpose and appeal vide ITA No. 1970/Chny/2018 is partly allowed.
Order is pronounced in the open court on 31st March, 2022. Sd/- Sd/- (Mahavir Singh) (Girish Agrawal) Vice President Accountant Member Dated: 31.03.2022
**PP. Sr. PS Copy of the order forwarded to:
1.Assessee –
2.Revenue – 3. CIT 4. CIT(A) 5.DR, ITAT, Chennai True Copy By Order
Senior Private Secretary ITAT Chennai