Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “A”
Before: SHRI S.S.GODARA & SHRI INTURI RAMA RAO
आदेश/ ORDER Per S.S.Godara, JM: These three Revenue appeals for A.Y. 2015-16 arise against the CIT(A)-2, Kolhapur’s separate orders; all dated 11.02.2019, passed in case no’s.Ich/CIT(A)-2/89/2017-18, Ich/CIT(A)- 2/87/2017-18 and Ich/CIT(A)-2/88/2017-18; assessee-wise, involving proceedings u/s 143(3) of the Income Tax Act, 1961 [in short “the Act”].
Cases called twice. None appears at assessees behest. The very factual position appears to have continued as on 22.07.2022 and 30.08.2022 as well. They are accordingly proceeded ex-parte.
It emerges during the course of hearing and with the able assistance coming from the Revenue side that its identical sole substantive grievance raised in all these three appeals seeks to revive the Assessing Officer’s action rejecting the assessees section 10(38) exemption claims of Rs.93,97,455/-, Rs.92,80,122/- and Rs.94,04,496/-, assessee wise; respectively thereby treating the same as unexplained cash credits under section 68 of the Act. The CIT(A)’s detailed discussion in issues reads as follows: “5.1 Ground Nos. 1 to 5
I have carefully considered the reasons given by AO for making additions, the submissions of the AR in this regard and the
ITA No’s.664 to 666/PUN/2019 for A.Y. 2015-16 (R) Nilawati Neminath Shete & ( 02) Others
citations. All the grounds of appeal raised at Sr. Nos. 1 to 5 are against the action of AO in making addition u/s 68 amounting to Rs. 93,97,455/-. Therefore, all the five grounds are clubbed together for the purpose of adjudication. In the light of the facts narrated at the beginning, the reasons given by AO for additions and the submission of AR, the issue for decision is whether the LTCG accrued to the appellant is through bogus accommodation entry or not.
AO is of the view that the transaction resulting in LTCG is not genuine but it is bringing back the appellant’s own money into its account without paying tax through a bogus accommodation entry. According to him it is a sham transaction with a pre-determined plan. The appellant has purchased 5,00,000 shares of Panchshul Marketing Pvt. Ltd for Rs 5,00,000/- through Jatadhari Marketing Pvt Ltd on 21.08.2012. Later on the said company merged into KAFL and thereafter, KAFL allotted its shares to the appellant through Demat Account. After one year, the said shares were sold at substantially high price and consequent LTCG with no Tax u/s 10(38). AO could not accept this possibility of gaining Rs. 90,81,153/- in one year from a meager investment of Rs.5,00,000/-. AO further relied more on the report of Investigation Wing, Kolkata in the form of statement recorded in respect of Sh. Dokania and his confession of the modus operandi adopted by him in making available the LTCG to beneficiaries by rigging the price of KAFL. He also relied upon the interim report of SEBI holding KAFL to be one of the scrip jacking up its price for providing LTCG to beneficiary.
On the other hand, AR of the appellant vehemently argued that her transactions of shares are through stock exchange and banking mode. He has placed on record the contract note for sale of shares, Demat Account, Bank Account etc. He has also
ITA No’s.664 to 666/PUN/2019 for A.Y. 2015-16 (R) Nilawati Neminath Shete & ( 02) Others
placed on record the final report of SEBI which revoked its order against 244 members and continued its investigation in respect of 2 members. In the left out list of 244 members, the appellant’s name figures at Sr no. 228. He also strongly argued that the statement given Sh. Dokania is best known to him. He further argued that Sh. Dokania was not made available for cross verification. He further, emphasized that the said person has nowhere in his statement asserted that the appellant is known to him and to have got benefit out of his action. He has cited many decisions amongst which the citation relates to the matter of LTCG in KAFL which came up before Honble ITAT Kolkata in the case of Manish Baid & another wherein the Honble ITAT held as under-
"6. We have heard both the rival submissions and perused the materials available on record. We find lot of force in the arguments of the id AR that the id AO was not justified in rejecting the claim of the assessee on the basis of theory of surrounding circumstances, human conduct, and preponderance of probability without bringing on record any legal evidence against the assessee. We rely on the judgement of Special Bench of Mumbai Tribunal in the case of GTC Industries Ltd. (supra) for this proposition. The various facets of the arguments of the id AR supra, with regard to impleading the assessee for drawing adverse inferences which remain unproved based on the evidences available on record, are not reiterated for the sake of brevity. The principles laid down in various case laws relied upon by the Id AR are also not reiterated for the sake of brevity. We find that the amalgamation of CPAL with KAFL has been approved by the order of Hon'ble High Court. The ld AO ought not to have questioned the validity of the amalgamation scheme approved by the Hon 'ble High Court in May 2013 merely based on a statement given by a third
ITA No’s.664 to 666/PUN/2019 for A.Y. 2015-16 (R) Nilawati Neminath Shete & ( 02) Others
party which has not been subject to cross-examination. Moroever, it is also pertinent to note that the assessee and / or the stock broker Ashita Stock Broking Ltd name is neither mentioned in the said statement as a person who had allegedly dealt with suspicious transactions nor they had been the beneficiaries of the transactions of shares of KAFL. Hence we hold that there is absolutely no adverse material to implicate the assessee to the entire gamut of unwarranted allegations leveled by the id AO against the assessee, which in our considered opinion, has no legs to stand in the eyes of law.
We find that the id DR could not controvert the arguments of the Id AR with contrary material evidences on record and merely relied on the orders of the lower authorities apart from placing the copy of SEBI's interim order supra. We find that the SEBI's orders relied on by the Id AO and referred to him as direct evidence against the assessee did not contain the name of the assessee and/or the name of Ashika Stock Broking Ltd. through whom the assessee sold the shares of KAFL as a beneficiary to the alleged accommodation entries provided by the related entities/ promoters / brokers/ entry operators. In the instant Case, the shares of CPAL were purchased by the assessee way back on 20.12.2011 and pursuant to merger of CPAL with KAFL, the assessee was allotted equal number of shares in KAFL, which was sold by the assessee by exiting at the most opportune moment by making good profits in order to have a good return on his investment. We find that the assessee and/ or the broker Ashita Stock Broking Ltd was not the primary allottees of shares either in CPAL or in KAFL as could be evident from the SEBI's order. We find that the SEBI order did mention the list of 246 beneficiaries of persons trading in shares of
ITA No’s.664 to 666/PUN/2019 for A.Y. 2015-16 (R) Nilawati Neminath Shete & ( 02) Others
KAFL, wherein, the assessee and / or Ashita Stock Broking Ltd's name is not reflected at all. Hence the allegation that the assessee and / or Ashita Stock Broking Ltd getting involved in price rigging of KAFL shares fails. We also find that even the SEBI's order heavily relied upon by the Id AO clearly states that the company KAFL had performed very well during the year under appeal and the P/E ratio had increased substantially. Thus we hold that the said orders of SEBI is no evidence against the assessee, much less to speak of direct evidence. The enquiry by the Investigation Wing and/or the statements of several persons recorded by the Investigation Wing in connection with the alleged bogus transactions in the shares of KAFL also did not implicate the assessee and/or his broker. It is also a matter of record that the assessee furnished all evidences in the form of bills, contract notes, demat statements and the bank accounts to prove the genuineness of the transactions relating to purchase and sale of shares resulting in L TCG. These evidences were neither found by the Id AO to be false or fabricated. The facts of the case and the evidences in support of the assessee's case clearly support the claim of the assessee that the transactions of the assessee were bona fide and genuine and therefore the id AO was not justified in rejecting the assessee's claim of exemption under section 10(38) of the Act. We also find that the various case laws of Hon'ble Jurisdictional High Court relied upon by the Id AR and Endings given thereon would apply to the facts of the instant case. The Id DR was not able to furnish any contrary cases to this effect. Hence we hold that the Id AO was not justified in assessing the sale proceeds of shares of KAFL as undisclosed income of the assessee u/s 68 of the Act. We accordingly hold that the reframed question no. 1 raised hereinabove is decided in the negative and in favour of the
ITA No’s.664 to 666/PUN/2019 for A.Y. 2015-16 (R) Nilawati Neminath Shete & ( 02) Others
assessee."
I have carefully perused the above referred ITAT order decided in favor of the assessee, upon which the appellant has placed her reliance in the submissions made during the course of appellate proceedings. On going through the same, I find that the facts of the said case are identical to those of the instant case and hence, the same can be aptly applied here. Further, in the instant case, SEBI vide its order No. SEBI/WTM/MPB/EFD-DRA-I/31/2017 dated 21.09.2017 has declared that nothing adverse was found against the appellant during the course of investigation made by it regarding dealings in the scrip of KAFL and hence revoked the interim as well as confirmatory orders enforced upon the appellant earlier. I, therefore, find force in the submission made by the appellant that the transactions entered into by her are genuine and also that Sh. Dokania, whose statement was recorded by the Investigation Wing and subsequently relied upon by the AO, has nowhere asserted that the appellant is known to him or that it was intended to get benefit out of his action.
Considering the above elucidated facts, it cannot be said that the transactions entered into by the appellant were bogus accommodation entries, because stating so would only be on the basis of suspicion raised by the AO and no corroborative evidence in this regard has been found. Also, the investigations of SEBI that were relied upon by the AO while making such addition in the assessment order stands infructuous since SEBI in its final order has itself declared that nothing adverse has been found against the appellant.
Furthermore, I have also gone through the appellate order passed by my predecessor for A.Y. 2014-15 in appellant’s own case and other member cases, brought to my notice by the appellant, wherein an exactly identical issue has been decided in favor of the appellant. On careful perusal of the same, I find that the facts of the preceding
ITA No’s.664 to 666/PUN/2019 for A.Y. 2015-16 (R) Nilawati Neminath Shete & ( 02) Others
assessment year and the reasoning given by AO for the addition made are similar to those of the year under consideration. Since, nothing contrary has been found on record in the case of the appellant for the assessment year under consideration, I do not find any reason to differ my views from the decision taken by my predecessor for A.Y. 2014-15. In view of the above discussion, case laws cited (supra) and issue being identical to the one already decided by my predecessor for the preceding assessment year, the question so framed is decided in the negative and in favor of the appellant. Hence, the addition so made by the AO by treating long term capital gains earned by the appellant on sale of shares of KAFL as bogus accommodation entry is unwarranted and unjustified. The AO is, therefore, directed to delete the addition amounting to Rs. 93,97,455/- and re-compute the demand raised & interest thereupon accordingly. The grounds raised by the appellant at Sr Nos. 1 to 5, thus stand allowed.”
Suffice to say, the very reasoning follows in Revenue’s later twin appeals as well.
Mr.Murkhunde vehemently argued during the course of hearing in light of assessment findings herein dated 29.12.2017 that the Assessing Officer had not only considered all the relevant records but also the DIT(Inv)’s report explaining in detail the fraudulent manner adopted by the respective directors/promoters, share brokers and accommodation entry providers getting engaged in artificial rigging of scrip prices thereby deriving bogus gains as well as losses; as the case may be. Mr.Murkhunde also sought to buttress the point in light of the assessment findings that the companies herein
ITA No’s.664 to 666/PUN/2019 for A.Y. 2015-16 (R) Nilawati Neminath Shete & ( 02) Others
M/s.Kailash Auto’s financials also make it clear that the same was not having any worth so as to give rise to long term capital gains within a very short span of time. He further took us to para 12 in Assessing Officer’s assessment order that the assessees’ transactions itself relating to M/s.Kailash Auto finance are bogus, thereby lacking genuineness.
We find force in revenue’s foregoing arguments wherein these three assessee’s have failed to prove genuineness of the respective long term capital gains / losses which have been found to be unexplained giving rise to addition(s) under section 68 of the Act. This tribunals recent co-ordinate bench in Smt.Beena Shammi Chaudhary vs. ITO in ITA No.1849/PUN/2018 for A.Y.2009-10 decided on 17.02.2022 has accepted Revenue’s identical arguments involving such bogus long term capital gains as under:- “9. Now I turn to contention of the ld. AR on section 47 of the Registration Act. This section with the heading `Time from which registered document operates‟ provides that : `A registered document shall operate from the time from which it would have commenced to operate if no registration thereof had been required or made, and not from the time of its registration‟. A document is first executed and then submitted for registration, if required. Normally, it takes some time between executing a document and its registration because the same has to be submitted for registration; checked by the competent authorities; and then actually registered. Unless a document is revoked before its actual registration, the parties submit themselves to the contents of the document by
ITA No’s.664 to 666/PUN/2019 for A.Y. 2015-16 (R) Nilawati Neminath Shete & ( 02) Others
signing it, which coincides with its execution itself. Unless contrary is agreed between the parties in the document, it is from its execution that the parties intend to act upon it and make it operational. Section 47 of the Registration Act states that a registered document shall operate from the time from which it would have commenced to operate if no registration thereof had been required or made (that is, on its execution). It means that the time lag between the execution of a document and its registration is ignored insofar as its operation is concerned. Thus, all the documents, whether or not requiring registration, operate from the date of their execution and the date of registration, where registration is mandatory, is irrelevant insofar as their operation is concerned. Whereas, section 17 of the Registration Act lists the documents whose registration is compulsory and section 49 of the Registration Act deals with the effects of non-registration of documents required to be registered u/s 17 of that Act, section 47 of the Registration Act deals with an altogether different aspect of time from which a registered document operates. It is only after a document required to be registered is actually registered as per section 17 of the Registration Act that the controversy of timing of operation of registration comes in to play, which is exclusively covered by section 47 of the Registration Act.
Coming to section 45 of the Act, which is a charging section for capital gains, provides that any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections 54 etc., be chargeable to incometax under the head "Capital gains", and shall be deemed to be the income of the previous year in which the transfer took place. Manifestly, income under this head becomes chargeable to tax in the year in which the transfer takes place. `Transfer‟ takes place only when it becomes operational, that is, on executing the sale deed - neither before it, that is, when the parties are in the process
ITA No’s.664 to 666/PUN/2019 for A.Y. 2015-16 (R) Nilawati Neminath Shete & ( 02) Others
of negotiations, nor after it, that is, when the registration of the deed actually takes place.
Adverting to the facts of the extant case, I find that the sale deed, even though registered on 17.04.2008, was admittedly executed on 15.12.2007, which date falls in the previous year relevant to the A.Y. 2008-09 and, as such, the amount of capital gain becomes chargeable to tax in such preceding assessment year. Since the `transfer‟ of the property took place on execution of sale deed in the preceding year, I hold that the amount of capital gain cannot be charged to tax for the A.Y. 2009-10 under consideration. On a specific query, the ld. AR candidly admitted that no capital gain was offered for taxation by the assessee in her return for the A.Y. 2008-09 or any other year. The AO is at liberty to take necessary action for taxing the amount in the correct assessment year as per law.”
We further note that the Revenue had filed identical appeal ITA No.418/PUN/2018 involving the first assessee Smt.Nilawati N. Shete in AY 2014-15 relied upon by the CIT(A) wherein the matter stands settled under the Direct Tax VSVS- 2020. This is further coupled with the fact that hon’ble Calcutta high court’s recent decision [2022] 139 taxmann.com 352 (Kol) PCIT vs. Shanti Bajaj has explained at length the entire gamut of such bogus long term capital gain to conclude the same as unexplained and lacking genuineness.
Faced with the situation, we accept the Revenue’s identical arguments in these three appeals to restore the Assessing Officer’s
ITA No’s.664 to 666/PUN/2019 for A.Y. 2015-16 (R) Nilawati Neminath Shete & ( 02) Others
findings making unexplained cash credits addition involving varying sums(supra). Ordered accordingly.
These three Revenue’s appeals are allowed in above terms. The copy of this common order be placed in the respective case files.
Order pronounced in the open Court on 29th September, 2022.
Sd/- Sd/- (INTURI RAMA RAO) (S.S.GODARA) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; �दनांक / Dated : 29th Sep, 2022/ SGR* आदेशक��ितिलिपअ�ेिषत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5. िवभागीय�ितिनिध, आयकर अपीलीय अिधकरण, “ए” ब�च, पुणे / DR, ITAT, “A” Bench, Pune. गाड�फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे/ITAT, Pune.