SHRI SURENDRA KEDIA ,BANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-5(3)(1), BANGALORE

O R D E R

Per Chandra Poojari, AM :

2. The assessee has raised the following grounds:- “

The grounds stated hereunder are independent of and without prejudice to one another. The Appellant submits as under:

1. Assessment order bad in law and on facts and in violation of principles of natural justice 1.1. At the outset, Mr. Surendra Kedia (hereinafter referred to as 'the Appellant') prays that the order dated 17 September 2018 passed by the learned Commissioner of Income-tax (Appeals) - 5, Bangalore ['CIT(A)'], upholding the order passed under section 143(3) of the Income-tax Act, 1961 (,the Act'), be struck down as invalid, as the order is bad in law and on facts. 1.2. The Ld. CIT(A) has drawn reference to the stock of NCL Research and Financial Services Ltd which was never held by the Appellant. Further, the Ld. CIT(A) has also mentioned that the Appellant had given an oath that he had purchased shares of NCL Research and Financial Services Ltd from Anand Rathi share and stock brokers Ltd. The Appellant has not held such stock nor has given any statement to this effect and thus the order passed by the CIT(A) is erroneous, suffers from non-application of mind and is liable to be quashed. 1.3. The Ld. CIT(A) has drawn reference to MIs Katyani Commodities Private Limited, M/s Dhanraksha Vincom Private Limited, MIs Linus Holdings Limited and MIs Ridhi Vincom Private Limited as companies who have acted as alleged 'accommodation entry providers' The Appellant has not engaged with any of the aforesaid companies and hence the order passed by the CIT(A) is erroneous, suffers from non-application of mind and is liable to be quashed. 1.4. The Ld. CIT(A)/Ld. AD erred in not providing any opportunity to the Appellant to cross examine the evidence relied upon to make additions and thus the order violates the principles of natural justice.

2. Addition made under 68 of the Act as unexplained income 2.1 The Ld. CIT(A)/Ld. AO has proceeded merely on the basis of his own notions, suspicion, surmises and conjectures and disregarded the documents, evidences and submissions without applying independent mind and therefore the addition of INR 1,99,96,398 is arbitrary and deserves to be set aside. 2.2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in confirming the addition' made by the AO under section 68 of the Act at INR 1,99,96,398 without adjudicating the legal pleas raised by the Appellant. 2.3 The Ld. CIT(A)/Ld. AO has failed to appreciate that there is some amount of risk associated with trading in shares and unexpected gains or unexpected losses are possible. 2.4 The Ld. CIT(A)/Ld. AO has erred in not taking into consideration the fact that the Appellant is in no way connected with such 'entry operators' or 'brokers' and has merely made an investment based on market information received from friends and associates.

2.5 The Ld. CIT(A)/Ld. AO has grossly erred in concluding that the Appellant has converted some unaccounted money through accommodation entries. 2.6 The Ld. CIT(A) has erred in concluding that the transactions were not genuine. The Ld. CIT(A) has also erred in upholding the addition made by the Ld. AO under section 68 of the Act on the basis that the transaction is not genuine, even though no cogent evidence has been brought on record which demonstrates that the transaction is not genuine. 2.7 The Ld. CIT(A)/Ld. AO has grossly erred in concluding that trading transactions of purchase and sale of shares are not being carried out for commercial purpose but to create artificial gains with a view to evade taxes. 2.8 The Ld. CIT(A) has grossly erred in concluding that the intent or Mens Rea on part of the Appellant is very evident.

3. Other grounds 3.1 The Ld. AO has erred in not granting a credit of self- assessment tax paid by the Appellant on January 31, 2016, to the extent of INR 56,761. 3.2 The Ld. AO has erred in levying and computing interest of INR 27,03,429 under section 234B of the Act. 3.3. The Ld. AO has erred in levying and computing interest of INR 231,718 under section 234C of the Act. 3.4. The Ld. AO has arithmetically erred in computing the total tax liability for Mr. Surendra Kedia as INR 98,44,060.

4. Initiation of penalty proceedings under section 271 (1 )(c) of the Act On the facts and in the circumstances of the case and in law, the Ld. AO has erred in initiating penalty proceedings under section 271 (1 )(c) of the Act.

5. Relief The Appellant prays that directions be given to grant all such relief arising from the proceeding grounds as also all reliefs consequential thereto. The appellant craves leave to add to or later, by deletion, substitution or otherwise, any or all of the above grounds of appeal, at any time before or during the hearing of the appeal.”

3.1 At the outset, the learned AR pleaded that there is gross violation of the principles of natural justice and fair play, especially in the absence of report / information and cross examination of persons whose statements were relied upon by the Assessing Officer while passing the order, makes the order totally bad in law and liable to be cancelled.

“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.” 4.3.2 From the above Para from the judgment of Hon’ble Karnataka High Court, it is seen that matter was restored back to the file of the AO for fresh decision after providing copy of the statement of Shri Mukesh Choksi and other related 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 orders of learned CIT(A) for Assessment Year 2008-09 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.”

5.1 In view of the above, we are not inclined to comment upon any other grounds of appeal on merits of the issue at this stage.