ANUJ SHYAM DUSEJA,CHENNAI vs. ITO INTERNATIONAL TAXATION WARD 1(1), CHENNAI

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) -16, Chennai, dated 31.01.2018 and pertains to assessment year 2014-15.

No one appeared for the assessee inspite of service of notice of hearing by RPAD. The Registry has placed on record the postal acknowledgement as proof of service of notice on the assessee. Therefore, we heard the Ld. Departmental Representative and proceeded to dispose the appeal on merit.

Ms. C. Yamuna, the Ld. Departmental Representative submitted that the assessee is a non-resident Indian and disclosed the long term capital gain of ₹36,99,500/- on sale of one lakh shares of M/s Kailash Auto Finance Limited. The assessee claimed exemption under Section 10(38) of the Income-tax Act, 1961 (in short 'the Act'). According to the Ld. D.R., the Investigation Wing of the Department at Kolkata unearthed bogus entries of long term capital gain. The Calcutta Stock Exchange Limited as a broker, has traded in penny stocks. The Investigation Wing of the Department has found that M/s Kailash Auto Finance Limited also involved in bogus transactions of shares. According to the Ld. D.R., the investigation made by the Department shows that a scheme was hatched by various players to obtain / provide accommodation entries of bogus long term capital gains. On the basis of investigation report, according to the Ld. D.R., the Assessing Officer found that the assessee has actually purchased the shares on 10.02.2012 when the company was in formative stage. The assessee purchased one lakh shares offline from M/s Trump Traders (P.) Ltd., Kolkata. According to the Ld. D.R., the Assessing Officer found that one lakh shares of M/s Careful Projects Advisory Ltd. have been sold to the assessee for ₹1 per share. Since the Assessing Officer found that the entire transactions were bogus and it is a penny stock transaction on the basis of the investigation report of the Department, according to the Ld. D.R., he disallowed the claim of the assessee under Section 10(38) of the Act.

The Ld. Departmental Representative further submitted that the Assessing Officer made addition of ₹1,10,985/- being the commission under Section 69 of the Act. Therefore, according to the Ld. D.R., the CIT(Appeals) has rightly confirmed the order of the Assessing Officer.

We heard the Ld. Departmental Representative and perused the relevant material available on record. From the order of the Assessing Officer it appears that the assessee is a non-resident Indian. Therefore, it has to be examined how the assessee was able to invest black money in share transactions. The Assessing Officer has simply placed reliance on the so-called report of Investigation Wing of the Department at Kolkata. There was no reference about the assessee’s transactions in the investigation report of the Department. Moreover, the copy of report was not filed before this Tribunal and also not furnished to the assessee. Therefore, this Tribunal has no occasion to go through the investigation report of the Department. The Assessing Officer at para 2.9 of his order observed that considering the circumstantial and direct evidences, the long term capital gain of ₹36,99,500/- disclosed by the assessee was not genuine one. Therefore, it was treated as cash credit under Section 69 of the Act.

It is not known what is the evidence involving the assessee is available before the Assessing Officer. In the absence of any evidence before this Tribunal and no evidence of furnishing copies of the material to the assessee, this Tribunal is of the considered opinion that the matter needs to be re-examined by the Assessing Officer. Accordingly, orders of both the authorities below are set aside and the Assessing Officer is directed to furnish copies of entire material, including the report of the Investigation Wing of the Department at Kolkata, and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee.

In the result, the appeal filed by the assessee is allowed for statistical purposes.