MANJUNATH HIREGANGE ,BANGALORE vs. INCOME TAX OFFICER WARD-1(3)(2), BANGALORE

O R D E R Per Shri Jason P Boaz, A.M. :

This appeal by the assessee is directed against the order of CIT(A)-2, Bangalore, dated 30.11.2018 for Assessment Year 2014-15.

2.1 The assessee, an individual, filed his return of income for Assessment Year 2014-15 on 28.07.2014 declaring income of Rs.3,44,690/- under the head salaries. The case was taken up for scrutiny for the stated reason that a large volume of transactions (sale of equity other than delivery) are reported in security transaction tax return but no capital gains has been offered for taxation in the return of income filed. The assessment was concluded under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) vide order dated 16.12.2016 wherein the assessee’s income was determined at Rs.25,25,720/-; in view of an adhoc addition of Rs.21,42,625/- @2% of the turnover of security transactions undertaken by the assessee in the financial year relevant to Assessment Year 2014-15.

2.2 Aggrieved by the order of assessment dated 16.12.2016 for Assessment year 2014-15, the assessee filed an appeal before CIT(A) who dismissed the assessee’s appeal vide the impugned order dated 30.11.2018; holding as under at para 5 of his order:-

5. I have considered the above grounds of appeal, statement of facts and written submissions filed by the appellant and also perused the assessment order. The Assessing Officer during the scrutiny proceedings on receipt of information from security transaction tax return (STT Return) has proposed to estimate the appellant's income @ 2% of security transaction of Rs. 10,77,31,255/- which worked out to Rs. 21,42,625/- and brought to tax as appellant could not furnish any details along with the sources and proof and demat account thereon assuming that the appellant had no explanation. Aggrieved by the order the appellant filed this appeal raising grounds on a solitary issue objecting to the addition of 2% of value of securities transactions. The appellant further claimed that he had sent second e-mail attaching the details of demat account statement. During the appellate proceedings the appellant submitted the statement of the share transactions received from share broker including intraday transactions which resulted in speculation profits/ loss along with STT paid. The AR of the appellant asked to explain as to why the statement of capital gains without signatures should not be disregarded for want of authenticity of the statement. The AR sought adjournment for furnishing the documentary evidences with brokers notes, the bank statement reflecting the share transactions, copy of the demat account etc. Accordingly the case was adjourned to 29/11/2018 on which date neither the appellant nor the AR of the appellant appeared. Therefore it is presumed that, since in spite of ample opportunity, the appellant

had no case to present with the documentary evidences in the appellate proceedings. The grounds are therefore not allowed.”

3.1 Aggrieved by the order of CIT(A)-2, Bangalore, dated 30.11.2018 for Assessment Year 2014-15, the assessee has filed this appeal before the Tribunal, raising the following grounds:

1. The CIT (A) was not correct in confirming the addition made by A.O. to the extent of Rs.21,42,625/- being estimated Income @ 2% on security transaction of Rs.10,71,31,255/-.

2. The A.O. and CIT (A) were not correct in coming to conclusion that the securities Transaction amount huge thus estimated the income @ 2% on STT without any basis, though share transaction details/documents were available with them. 3. The A.O. and CIT (A) have erred in not verifying the documents/details submitted by Appellant by mail as well as hard copies during the course of hearing. 4. The CIT (A) was not correct in not giving sufficient opportunity to Appellant to submit the details called for during the course of hearing. 5. The CIT (A) was not correct in stating that the AR of Appellant has not appeared on 29/11/2018, as the AR of the Appellant has appeared to CIT (A) office on 29.11.2018, however the CIT (A) was not available in the office on 29.11.2018 and also CIT (A) office have refuse to accept the documents brought by AR of the Appellant. 6. The Appellant craves leave to add, to alter, to amend or to delete any of the grounds that may be urged at the time of hearing of the Appeal.

3.2 In support of these grounds, the learned AR of the assessee contends that the impugned order of the CIT(A) dismissing the assessee’s appeal was passed in haste and without considering the assessee’s appeal on merits. According to the learned AR, in the first place there was no basis for the Assessing Officer (AO) to make an adhoc addition of 2% of the turnover of the assessee’s security transactions in the period under consideration. It is submitted that on appeal, the CIT(A) afforded the assessee one opportunity of being heard and on the second day of hearing i.e., on 29.11.2018, the CIT(A) not being present in office at the appointed time, the office refused to accept the following details filed vide the assessee’s letter of the same date i.e., 29.11.2018: (i) Soft copy of statement of capital gains in Excel format, (ii) Equity transaction statement for period from 01.04.2013 to 31.03.2014 and (iii) consolidated Investment Portfolio for the period 01.04.2013 to 31.03.2014. It is contended that non consideration of aforesaid material filed by the CIT(A) has led to the confirmation of an unsustainable, baseless, adhoc addition made by the AO i.e., of 2% of the assessee’s turnover in security transactions and consequently fastened the assesssee with uncalled for tax liability. The learned AR pleaded that in view of the above facts and as the ultimate object of assessment being that the correct income of the assessee is brought to tax, the impugned orders of the learned CIT(A) be set aside and the matter be remanded to the file of the AO for denovo adjudication / assessment.

3.3 Per contra, the learned DR for Revenue supported the orders of the authorities below.

3.3.1 I have heard and carefully considered the rival contentions / submissions put forth and perused the material on record. On a careful appraisal of the order of assessment, it is seen that the AO, after having noted that the assessee failed to provide the details of security transactions amounting to Rs.10,71,31,255/- called for i.e., of speculative business, short term capital gains and long term capital gains, proceeded to estimate the assessee’s income at Rs.21,42,625/- on adhoc basis @ 2% of the total turnover of security transactions. The assessee has however alleged in the grounds raised before CIT(A) that all details of Security Transactions had been emailed to the AO, which was ignored. On appeal, it is seen that there was only one hearing, after which the case was adjourned to 29.11.2018. At this stage, the rival averments are (i) by the CIT(A) that on 29.11.2018 none appeared and (ii) by the assessee in ground No.5 (supra) that when they went to office of the CIT(A) on 29.11.2018, the CIT(A) was not available in his office and his office refused to accept the assessee’s written submissions vide letter dated 29.11.2018 enclosing (a) soft copy of statement of Capital Gains in Excel format (b) Equity Transactions Statement for period 01.04.2013 to 31.03.2014 and (c) Consolidated Investment Portfolio for the period 01.04.2013 to 31.03.2014. It is seen that the CIT(A) passed the impugned order not on the merits of any submission / details furnished by the assessee; but virtually ex-parte referring only to the grounds of appeal and statement of facts. Admittedly, the assessee’s appeal has not been disposed off by adjudication of the merits of the issues raised before the CIT(A). Since the ultimate aim of assessment is that only the correct taxes due by the assessee be collected by Revenue, in my considered view, it is imperative, in the interest of substantial justice, that the assessee’s appeal be heard and disposed off on merits.

3.3.2 In view of the above, I am of the considered opinion that the interest of substantial justice will be well served if the impugned order of CIT(A) dated 30.11.2018 be set aside. I, therefore, set aside the impugned order of the CIT(A) dated 30.11.2013 for Assessment Year 2014-15 and restore the matter to the file of the CIT(A) for fresh hearings, examination and adjudication on merits of the issues raised by the assessee in the appeal before him; including the assessee’s submissions to AO via email and to the CIT(A) as enclosed with assessee’s letter dated 29.11.2018 and email. Needless to add, the CIT(A) shall afford both the assessee as well as the AO adequate opportunity of being heard and to file details / submissions / rebuttals / rejoinders required, which shall be duly considered before deciding the issues. The assessee is also directed to attend the hearings fixed by the CIT(A) in this regard. It is accordingly ordered. Consequently, ground No.4 of assessee’s appeal is allowed.

Order pronounced in the open court on this 10th day of April, 2019.