MEENA JAIN,NEW DELHI vs. ITO, NEW DELHI

Date of hearing : 08.09.2016 Date of Pronouncement : 21.09.2016 ORDER

PER BEENA A. PILLAI, JM:

2. On the facts and in the circumstances of the case, the Ld' CIT (A) has erred in sustaining the additions of Rs.5,0,000/- because the notice issued u/s 148 of the Act

2 I.T.A.No.5034./Del/2012 was illegal and hence initiation of proceedings u/s. 148 of the Income Tax Act,196l is bad in law and void.

3. On the facts and in the circumstances of the case, the Ld' CIT(A) has erred in, sustaining the addition of Rs.5,00,000/- on account of unexplained credits in the books of accounts u/s. 68 of the Income Tax Act, 1961.

3.1 On the facts and in the circumstances of the case, the Ld' CIT (A) has erred in sustaining the addition of Rs.5,00,000/- because the authorities below were not justified in treating the capital gains on purchase and sale of shares shown by the assessee in the income tax return as non genuine transaction and have thereby erred in treating the same as income from other sources u/s. 68.

3.2_0n the fact and in the circumstances of the case, the Ld' CIT (A) has erred in sustaining the additions of Rs.5,00,000/- because the authorities below have erred in not appreciating the submissions of the appellant nor have they confronted the documents filed before them with regard to the purchase and sale of shares.

3.3 On the facts and in the circumstances of the case, the Ld' CIT (A) has erred in sustaining the additions of Rs.5,00,000 because the "authorities below have erred in wrongly relying on statement of some parties recorded behind back of the assessee without producing them for cross examination inspite of a request being made by the assessee and thus have erred in using that evidence against the assessee for making the assessment,

3.4 The Ld' CIT(A) has erred in sustaining the additions of Rs.5,00,000/- made by the A.O by treating the sale proceeds of Rs. 5,00,000 from the sale of 20,000 equity shares each to Sh. Sachin

3 I.T.A.No.5034./Del/2012

Guupta & Smt. Rani Sharma respectively as being undisclosed income of the appellant u/s. 68 of the Income Tax Act,1961.

3.5 The Ld' CITCA) has erred in sustaining the addition u/s. 68 of the Act on petty technical grounds without appreciating that the appellant purchased equity shares of BT TECH NET L TD for Rs.4,45,000/- in the preceding year relevant to assessment year 2000-01 which had been sold during the assessment year 2002-03.

3.6 Without prejudice to the above grounds, the A.O has erred in not giving credit for Rs. 52,840 which had been shown as capital gain on sale and purchase of 40,000 equity shares of BT TECH NET LTD in the Income Tax Returns.”

4 I.T.A.No.5034./Del/2012 2.2 The assessee submitted before the Assessing Officer that the assessee had included the gain from short term in the total income and there was no escapement of income. Ld. Assessing Officer did not accept the transaction to be genuine and made an addition of Rs.5 lacs, u/s 68 as found credited in the bank account. 2.3 Aggrieved by the order of the Assessing Officer, the assessee preferred an appeal before Ld. CIT(A). 2.4 Before Ld. CIT(A), the assessee submitted that she received two cheques of Rs.2,50,000/- each from Mr. Sachin Gupta through cheque drawn on Karur Vyasa Bank, Karol Bagh, New Delhi and Mrs. Rani Sharma through cheque drawn on Federal Bank, Karol Bagh, New Delhi, against the sale of 20000 equity shares each @12.50 per share, of B. T. Technet Limited. She submitted that sale consideration received by cheques were deposited in the bank account held by the assessee. She submitted that these shares were purchased by her in the previous year from Jaitn Taneja & others. Copies of the Share Certificates along with detail of the distinctive number etc. were filed before the Assessing Officer. The assessee submitted before the Assessing Officer that she has earned profit on the sale of shares of Rs.52,840/- (Rs.5,00,000 - Rs.4,45,000/ - Rs.2,160 (commission)) and the same has been declared in the Statement of Taxable Income filed along with original Income Tax Return filed. 2.5 Ld. CIT(A) has held as under:

5 I.T.A.No.5034./Del/2012

“The appellant has been unable to explain the identity, genuineness and creditworthiness of the persons who have allegedly purchased the shares. As the explanation offered by the assessee about the nature and source of the sums found credited in the books was not satisfactory there was. prima facie. evidence against the assessee. viz., the receipt of money. The burden was on the assessee to rebut the same. and. he failed to rebut it. it can therefore be held against the assessee that it was a receipt of an income nature. The appellant has failed to discharge its onus to produce legally acceptable evidence of creditworthiness of the donor. The expression "the assessee offers no explanation" means the assessee offers no proper reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. In this case the appellant has offered no creditable explanation about the amounts credited in his books, the receipt of Rs.5.00.000/- therefore cannot be treated as explained. Considering the above facts, the addition of Rs. 5.00.000/- made by the AO u/s 68 is confirmed.”

7 I.T.A.No.5034./Del/2012 stated by him that the sale of shares for the year under consideration, was not bona fide. In the absence of specific material, the Assessing Officer could not proceed to assume the sale proceed of Rs.5,00,000/- as being alleged undisclosed income of the assessee. Ld. A.R. placed reliance on two judgments of the Hon’ble Supreme Court in the case of Chhugamal Rajpal Vs. Sp. Chaliha & Others (1971) 79 ITR 603 (SC) and (ii) ITO Vs. Lakhmani Mewal Das (1967) 1031TR 437 (SC). 3.4 Ld. A.R. submitted that he Assessing Officer has not provided an opportunity to the assessee to confront Sh. Sachin Gupta & Smt. Rani Sharma to bring out the true state of affairs. Ld. A.R. submitted that assessee had purchased 20000 equity shares each of Rs.10/- of M/s. B T Technet Ltd. for the sale consideration of Rs.2,00,000/- each from Ms. Manju Gupta D/o Sh. Laxman Dass, Rio. 4439, Katra Rai Ji, Paharganj and Ms. Shanti Devi Gupta, 010. Sh. Shyam Singh Gupta, Rio WZ-48, Basai, Darapur as per the terms of agreement dated 3rd and 4th March, 2000 respectively. Ld. A.R. further submitted that all the details regarding the receipt of cheque and sale of shares and purchase of amount were provided to the Assessing Officer vide letter dated 30.10.2009 and vide letter dated 07.02.2012, assessee had filed an application under Rule 46A for admission of additional evidence before Ld. CIT(A) which are as under:

8 I.T.A.No.5034./Del/2012

(i) The copy of the agreements is enclosed. Further the appellant is filing the following documents in respect of the both sellers Of the said shares. (ii) Copy of Acknowledgment Receipt for filing of Income Tax Returns (iii) Copy of Acknowledgment Receipt for filing of Wealth Tax Returns (iv) Copy of Retion Card. (v) Copy of Balance Sheet. vi) Bank statements of Shri Sachin Gupta and Ms. Rani Sharma.”

4.1 Ld. A.R. submitted that the assessee could not file these documents before Ld. Assessing Officer as the same were not traceable. 4.2 Ld. A.R. referred to the computation of net profit from capital gain placed at page 7 of the Paper Book which amounted to Rs.52,840/-. He further submitted that profit earned on sale has been included while calculating the taxable income which is placed at page 1. He submitted that since the assessee has considered the amount for taxation, the Assessing Officer by adding taxable income again has amounted to double taxation. He thus submitted that the addition ma de by the Assessing Officer deserves to be deleted. 4.3 Ld. A.R. placed his reliance on the decision of Hon'ble Jurisdictional High Court in passed in the case of Pr. CIT Vs. Softline Creations Pvt. Ltd.

5. On the contrary, Ld. D.R. relied upon the order of Ld. CIT(A) and submitted that the genuineness and 9 I.T.A.No.5034./Del/2012 creditworthiness of Shri Sachin Gupta New Delhi Mrs. Rani Sharma has not been established by assessee.

10 I.T.A.No.5034./Del/2012

"6. This Court has considered the submissions of the parties. In this case the discussion by the CIT(Appeals) would reveal that the assessee has filed documents including certified copies issued by the Registrar of Companies in relation to the share application, affidavits of the Directors, Form 2 filed with the ROC by such applicants confirmations by the applicant for company's shares, certificates by auditors etc. Unfortunately, the assessing officer chose to base himself merely on the general inference to be drawn from the reading of the investigation report and the statement of Mr. Mahesh Garg. To elevate the inference which can be drawn on the basis of reading of such material into judicial conclusions would be improper, more so when the assessee produced material. The least that the assessing officer ought to have done was to enquire into the matter by, if necessary, invoking his powers under Section 131 summoning the share applicants or directors. No effort was made in that regard. In the absence oj any such finding that the material disclosed was untrustworthy or lacked credibility the assessing officer merely concluded on the basis of enquiry report, which collected certain facts and the statements of Mr. Mahesh Garg that the income sought to be added Jell within the description of Section 68.

7. Having regard to the entirety of facts and circumstances, the Court is satisfied that the finding of the Tribunal in this case accords with the ratio of the decision of the Supreme Court in Lovely Exports (supra)."

11 I.T.A.No.5034./Del/2012

6. We are of the opinion that no question of law arises, having regard to the concurrent findings of fact. The assessee has, in our opinion, complied with the law spelt out by the Supreme Court in CIT v. Lovely Exports Pvt. Ltd. 216 CTR (SC) 195. The appeal is meritless and is consequently dismissed.”

6.2 Similar is the situation in the facts and circumstances of the case before us. The assessee submitted details / documents relating to Shri Sachin Gupta and Mrs. Rani Sharma before Ld. CIT(A). From the remand report, it appears that the Ld. A.O. has not verified these documents. 6.3 Respectfully following the ratio laid down by Hon'ble Delhi High Court in the case of Pr. CIT Vs Softline Creations Pvt. Ltd. (supra), we delete the addition of Rs.5,00,000/- in the hands of the assessee.

by the assessee stand allowed.

8. In the result, appeal filed by the assessee stands allowed. Order pronounced in the open court on 21st Sep., 2016.

Sd./- d./-