SRI DINESH KUMAR R PATEL (HUF),BANGALORE vs. INCOME TAX OFFICER, WARD-4(3)(4), BANGALORE

Appellants by : Sri.Sreehari Kutsa, Advocate Respondent by : Dr.Ganesh R.Ghale, Standing Council for DR Date of Date of Hearing : 27.02.2020 Pronouncement : 28.02.2020 O R D E R These appeals filed by different assessees are directed against different orders of the CIT(A). The relevant assessment year in all these appeals is 2014-2015.

“1. The order of the learned Commissioner of Income-tax Appeals, passed under section 250 of the Act in so far as it is against the Appellant is opposed to law, equity, weight of evidence, probabilities and the facts and circumstances in the Appellant’s case.

2. The Appellant denies itself liable to be assessed to tax on a total income of Rs.22,98,850/ as determined by the learned AO and confirmed by the CIT(A), as against the total income of Rs.11,66,550/- as declared by the Appellant on the facts and circumstances of the case.

3. The learned CIT(A) is not justified in upholding the denial of the benefit of exemption of the long term capital gain on sale of equity shares of Rs.11,32,300/- on the facts and circumstances of the case.

4. The learned CIT(A) failed to appreciate that the AO is not justified in questioning the genuineness of the share transaction without any corroborating evidence on the facts and circumstances of the case.

5. The learned CIT(A) failed to appreciate that the AO is not justified in denying the statute given exemption benefit on mere suspicions on the facts and circumstances of the case. 6. The learned CIT(A) ought to have held that the AO failed to appreciate that the Appellant had bought and sold the shares from the open market i.e., Stock Exchange and the transaction was supported by contract notes and therefore the allegation that the capital gains is bogus, is not justified in law and on the facts and circumstances of the case. 7. The CIT(A) ought to have held that the learned AO has failed to apply his mind on the facts of the case and has simply relied on the findings of the Investigation Department and therefore the order of assessment is not sustainable on the facts and circumstances of the case. 8. The learned CIT(A) erred in law in not appreciating the various documents placed by the Appellant and he merely repeated the views of the Assessing Officer and without even adverting to the contentions of the Appellant and consequently the order suffers from non-application of mind and also the violation of principles of natural justice on the facts and circumstances of the case. 9. The learned CIT(A) failed to appreciate that not granting the right to cross examine is fatal to the assessment proceedings and consequently he ought to have cancelled the entire assessment order on the facts and circumstances of the case. 10. The CIT(A) ought to have held that the learned AO erred in initiating penalty proceedings under section 271(1)(c) of the Act as there was no furnishing of inaccurate particulars at all and the conclusion of the learned AO that penalty is to be initiated is not in accordance with law on the facts and circumstances of the case. 11. Without prejudice to the right to seek waiver with the Hon’ble Chief Commissioner of Income Tax / Director General of Income Tax the Appellant Company denies itself liable to be charged to interest under section 234B and section 234C of the Act which under the facts and circumstances of the case deserves to be cancelled. The calculation of interest under section 234B and section 234C is not in accordance with law as the rate, amount and method for calculating interest is not discernible from the order of assessment.

12. The Appellant craves leave to add, alter, delete or substitute any of the grounds urged above.

8. I have considered the rival submissions. I find that the Assessee specifically asked for copies of investigation report of the Directorate of Investigation, Kolkata and statement of Mr.Poddar, on the basis of which the AO drew adverse inference regarding the genuineness of the transaction of purchase of sale of shares of NCL Research & Financial Services Ltd. The Assessee also asked for a cross examination of Mr.Poddar. Both the investigation report and the statement of Mr.Poddar was not provided till the fag end of the assessment proceedings. I also find that the entire basis of the conclusions of the revenue authorities is based on the investigation report of the Directorate of Investigation, Kolkata. It is also seen that the said investigation report does not name the Assessee as a person who has indulged in any fraudulent transaction of purchase or sale of shares. Elaborate submissions were made before CIT(A) on the above infirmities in the approach of the AO which results in violation of principles of natural justice, but the CIT(A) failed to address those issues and proceeded to confirm the order of the AO. I therefore find force in the submission of the learned counsel for the Assessee that the issue of violation of principles of nature justice goes to the root of the matter and the issue needs fresh examination by the AO, after due opportunity to the Assessee of being heard and affording opportunity of cross examination of persons on whose basis the report of the Directorate of Investigation, Kolkata.

9. This Tribunal in its order dated 05.12.2018 in the case of Shri Ramesh Kumar Shah Vs. ACIT on an identical issue of treating sale of shares as bogus on identical facts of violation of principles of natural justice, remanded the matter for fresh consideration to the AO with the following observations:- “3.3 Per contra, the learned DR for Revenue submitted that on similar facts and circumstances as in the case on hand, issue for consideration is covered by the decisions of the Bengaluru ITAT in the cases of Arvind Kumar Moochand and Pukhraj Hasmukhlal in ITA No.1927/Bang/2017 wherein the Tribunal has restored the issue to the file of the AO having observed that the additions were made based on reports of the Investigation Directorate at Kolkata and statements of various persons without confronting OR making them available to the assessee for rebuttal. In those cases, the Tribunal restored the matter to the file of the AO with the direction to confront the matter to the file of the AO with the direction to confront the assessee with the reports / documents / statements proposed to be used against the assessee, allow rebuttal thereof and cross examination of parties on whose testimony is proposed to be relied upon and the matter be adjudicated afresh after affording the assessee adequate opportunity of being heard and to also file details / submissions in this regard. 3.4 In Rejoinder, the ld.AR for the assessee did not dispute the proposition put forth by the ld. DR for restoring this issue to the file of the AO for de novo adjudication. 3.5 We have heard both parties and perused and carefully considered the material on record; including the judicial decisions cited and the orders of the authorities below. Taking into consideration the facts and circumstances of the case that the assessee specifically requested for cross-examination of the deponents whose statements were the basis of addition by the AO and also the report of the Investigation Directorate, Kolkata for rebuttal; from the judicial decisions cited, we find that the issue for consideration is squarely covered by the orders of the Bengaluru ITAT in the cases of Arvind Kumar Moolchand (supra) and Pukhraj Hasmukhlal (supra). Following the aforesaid orders (supra), we set aside the orders of the AO and restore the matter of treatment of profit declared on sale of shares, claimed as exempt u/s 10(38) of the Act, to the file of the AO to re-adjudicate the issue afresh; after making available to the assessee for rebuttal all documents; including Statements, Investigation Reports, etc., relied upon by Revenue for making the additions/disallowances and providing adequate opportunity to the assessee for cross-examination of persons whose statements are being relied upon. It is accordingly ordered. Consequently, ground No. 2 is disposed off as above. "