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Income Tax Appellate Tribunal, MUMBAI BENCHES “E”, MUMBAI
Before: SHRI G.S. PANNU (AM) & SHRI RAM LAL NEGI (JM)
O R D E R PER RAM LAL NEGI, JM These appeals have been preferred by the assessee against the two orders dated 27/02/2014 passed by the Ld. Commissioner of Income Tax (Appeals)-40, Mumbai, for the assessment years 2004-2005 and 2009-2010 respectively, wherein the Ld. CIT (A) has partly allowed the appeal filed by the Assessment Years: 2004-05 & 2009-10 assessee against assessment orders passed the AO under section 143(3) of the Income Tax Act, 1961 (for short ‘the Act’). Since, both the appeals pertain to the appellant for two assessment years and the issues raised in both the appeals are identical, the same were clubbed and heard together and are being disposed of by this consolidated order for the sake of convenience.
Brief facts of the case are that the assessee is a share broker of the Chennai Stock Exchange and proprietor of M/s Excel & Co. In the year 1997, the assessee was notified under the Special Court (Trial of offences relating to transaction in securities) Act, 1992 and all the assets were attached under the said Act and the custodian was appointed. Since, the assessee had not filed return of income u/s 139 of the Act for the year under consideration, AO issued notice u/s 142 (1) of the Act. In response thereof, the assessee filed the return declaring the total income of Rs. 3,32,874/-. The case was selected for scrutiny. During the assessment proceedings it was noticed that an amount of Rs. 7,12,679/- had been credited to the bank account of the assessee as consideration for sale of shares. In the absence of any details thereof filed by the assessee or the custodian, the AO estimated the capital gain at Rs. 5.00.000/- and added the said amount to the income of the assessee as long term capital gain and after making other additions, which are not the subject matter of this appeal, determined the total income of the assessee at Rs. 3,23,20,880/-.
The assessee challenged the assessment order before the Ld. CIT (A). The Ld. CIT (A) after hearing the assessee partly allowed the appeal of the assessee. However, sustained the addition of Rs. 5,00,000/- made by the AO as long term capital gain, holding that the assessee has failed to furnish any detail in Assessment Years: 2004-05 & 2009-10 to determine the cost of acquisition of the shares in question. Still aggrieved, the assessee is in appeal before this Tribunal.
The assessee has raised the following effective grounds of appeal
against the impugned order passed by the Ld. CIT (A):- “Ground No.:
1. The Ld. CIT (A) erred in making addition of Rs. 5,00,000/- as Long Term Capital Gain from the sale of shares on estimation basis. Ground No.
2. The Ld. CIT (A) erred in charging interest u/s 234B and 234C of the IT Act. Ground No.
3. The Ld. CIT (A) erred in charging interest u/s 271(1)(c) of the income tax act.”
Before us, the Ld. counsel for the assessee submitted that the addition is not sustainable as the bank account of the assessee had been attached by the custodian since long. The custodian sold some seized shares and credited the sale proceeds in the attached bank account of the assessee. Since, the bank account is attached the assessee did not receive any money till date. Relying on the judgment of Hon’ble Supreme Court passed in Harshad Shantilal Mehta Vs. Custodian (1998) 99 Taxman 216 (SC) and decisions of the Mumbai Bench of the ITAT rendered in DCIT Vs. Pallavi Holdings Pvt. Ltd. (2006) 5 SOT 190 (Mum) and the decision of ITAT Bench, Delhi rendered in ACIT vs. Glad Investments Pvt. Ltd. (2006) 8 SOT 612, submitted that the Ld. CIT (A) has wrongly affirmed the action of the AO. The Ld. counsel for the assessee further submitted that the Mumbai Bench of the Tribunal has set aside the order of the Ld. CIT (A) pertaining to the assessment year 1995-96, 1996-97, 1997-98, 1998-99, 2000-01 and 2003-04 and restored all grounds of appeal
raised before the Tribunal Assessment Years: 2004-05 & 2009-10 to the file of AO for fresh adjudication in accordance with the law keeping in view the facts that the being notified person under the Special Court (Trial of offences relating to transaction in securities) Act, 1992, was not a position to present the case and adduce evidence in support of its contentions.
6. On the other hand, the Ld. Departmental Representative (DR) relying on the findings of Ld. CIT (A) submitted that since the shares were sold by the custodian for Rs. 7,12,679/- and the assessee has failed to furnish any detail to enable the AO to determine the cost of acquisition of the shares in question, the AO has rightly estimated the capital gain at Rs. 5,00,000/-, which comes to approximately 70% of the consideration. Hence, the impugned order does not suffer from any infirmity.
We have heard the rival submissions and also gone through the material on record including the cases relied upon by the Ld. counsel for the assessee. We notice that the Ld. CIT (A) has sustained the addition of Rs. 5,00,000/- holding that estimation of capital gain of Rs. 5,00,000/- is neither unreasonable nor excessive. As has been pointed out by the Ld. CIT (A), the assessee failed to provide cost of acquisition of the shares in question during the assessment proceedings.
Admittedly, the assessee was arrested in connection with his alleged involvement in multi-crore securities scam and remained in jail for a long time. During the search operation, the related documents were seized either by the CBI or by the Income Tax Department. The custodian appointed under the Special Court trial of offences relating to transaction in securities, took possession of the records including the accounts of the assessee maintained in the banks. As alleged by the assessee some of the documents were destroyed in fire in January 2010. Due to the said Assessment Years: 2004-05 & 2009-10 reasons, the assessee could not properly present his case before the authorities below. In these circumstances, it can safely be concluded that the estimated capital gain of Rs. 5,00,000/- determined by the AO is not based on the evidence on record. Since, the AO could not ascertain the cost of acquisition of the shares in question, addition of 70% of the total sale consideration, is not justifiable. The coordinate Bench of the Tribunal has set aside the orders of the Ld. CIT (A) passed in assessee’s own case pertaining to the assessment year 1995-96, 1996-97, 1997-98, 1998-99, 2000-01 and 2003-04 and restored all grounds of appeal raised before the Tribunal to the file of AO for fresh adjudication in accordance with the law keeping in view the facts that the being notified person under the Special Court (Trial of offences relating to transaction in securities) Act, 1992, the assessee was not a position to present the case and adduce evidence in support of its contentions.
9. We are therefore of the considered view that the assessee should get an opportunity to present his case afresh after making available all the related documents. We, therefore, respectfully following the view taken by the coordinate Bench set aside the order of the Ld. CIT (A) and restored the issue to the file of AO to decide the issue afresh after affording a reasonable opportunity of the assessee and making available all the related documents pertaining to the claim of the assessee. Hence, this ground of the appeal is partly allowed.
10. Ground No 2 and 3 pertain to charging interest under section 234B and 234C and penalty u/s 271(1)(c) of the Act (wrongly mentioned interest). Since ground No 2 is consequential and Ground No 3 is premature, these grounds cannot be decided at this stage hence not adjudicated. Assessment Years: 2004-05 & 2009-10 The facts of this case and the issue involved are identical to the facts and issue involved in the assessee’s own case pertaining to the assessment year 2004-05 discussed above except the amount of addition made by the AO. In this case it was noticed that the assessee had received an amount of Rs. 1,04,00,000/- as a sale consideration for appellant’s flat sold by the custodian during the year relevant to the assessment year under consideration. AO after deducting the cost of acquisition determined the capital gain at Rs. 89,76,859/- and added the same to the income of the assessee. The Ld. CIT(A) confirmed the addition made by the AO in the first appeal. The assessee is in appeal before the Tribunal against the said order.
2. The assessee has raised the following effective grounds of appeal
against the impugned order passed by the Ld. CIT (A):- “Ground No.: 1 The Ld. CIT (A) erred in making addition of Rs. 89,76,859/- as long term Capital Gain on the sale of Flat at Andheri (W). Ground No. 2 The Ld. CIT (A) erred in charging interest u/s 234B and 234C of the IT Act. Ground No. 3 The Ld. CIT (A) erred in charging interest u/s 271(1)(c) of the income tax act.”
3. Since we have set aside the impugned order and restored all the issues to the file of AO for fresh adjudication in view of the peculiar facts of the case and taking into consideration the view taken by the coordinate Bench of the Assessment Years: 2004-05 & 2009-10 Tribunal in assessee’s own cases for the assessment year 1995-96, 1996-97, 1997-98, 1998-99, 2000-01 and 2003-04, we set aside the impugned order passed by the Ld. CIT(A) in this case and restore all the issues to the file of the AO for fresh adjudication for the same reasons. We accordingly direct AO to decide the issues involved in this case in terms of order passed in assessee’s appeal for the assessment year 2004-05. In the result, appeals filed by the assessee for assessment years 2004- 2005 and 2009-2010 are treated as partly allowed for the statistical purposes.