AMIT GOYAL HUF,JAIPUR vs. ITO WARD 2(3), JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Mk0 ,l- lhrky{eh]U;kf;d lnL; ,oa Jh jkBkSM+ deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ fu/kZkj.k o"kZ@Assessment Years : 2015-16 Amit Goyal HUF cuke ITO, Vs. A-141, Vidyut Nagar, Ward-2(3), Jaipur. Ajmer Road, Jaipur. LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABHA 9214 K vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksjls@Assessee by : Shri Harshit Agrawal (C.A.) jktLo dh vksjls@Revenue by: Smt. Monisha Choudhary ( Addl. CIT) lquokbZ dh rkjh[k@Date of Hearing : 05/10/2023 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 18/12/2023 vkns'k@ORDER PER: DR. S. SEETHALAKSHMI, J.M. This appeal is filed by the assessee is directed against the order of the Ld. CIT(A) dated 26.06.2023, National Faceless Appeal Centre, Delhi [herein after referred to as (NFAC)] for the assessment year 2015-16. 2. The assessee has raised the following grounds of appeal:-

1. On the facts and in the circumstances of the case and in law, Id.CIT(A) has grossly erred in passing order without affording adequate opportunity of being heard. Appellant prays that out of four notices issued for hearing, three were issued in the year 2020, when offices of counsels were not fully functional due to intermittent countrywide lockdowndue

Amit Goyal HUF vs. ITO to COVID 19 pandemic, and the last notice issued on 01.06.2023, was not received by the assessee and could not be complied with. It is therefore prayed that order so passed by Id.CIT(A) is against the principle of natural justice and deserves to be set aside.

2.1 That Ld. CIT(A) has further erred in ignoring the fact that payment for purchase of shares was made through banking channel as well as impugned shares were duly received by the appellant which were later credited in his DMAT account, thus purchase and ownership of shares with assessee is established and cannot be doubted, therefore the profit from sale of such shares cannot be held as bogus.

2.2 That the Ld. AO and also CIT(A) failed to appreciate that shares of M/s Kappac Pharma Ltd. are quoted in recognized stock exchange and its shares were sold by the assessee through authorised share broker on the online portal of the recognized stock exchange after paying STT and payment was received through banking channels as well as shares were duly debited in D-Mat account and thereby sale of shares is established and not at all doubtful and therefore consequent LTCG is not at all non- genuine and thus the addition made u/s 68 deserves to be deleted.

2.3 That the above mentioned addition made by the A.O. after interalia observing that the financial transaction effected by the assessee were sham ones, without rebutting the documentary evidences of purchase, banking channel payment, D-Mat account and subsequent sale on on-line portal at market price and payment received through banking channels after due payment of STT and merely on presumptions and assumptions and Amit Goyal HUF vs. ITO relying on uncorroborated and general statement of some broker not related with assessee, which was confirmed by ld.CIT(A), is most arbitrary. unjust and untenable in fact and in law and liable to be deleted.

2.4 That the addition of Rs. 29,81,183/- made by the AO and confirmed by Ld. CIT(A) by holding the Long Term Capital Gain on sale of shares as unexplained credit, after placing reliance onsome information and statements of third parties recorded by some other officials, in some other case and behind the back of assessee that too without having any specific mention therein of either the name of assessee or his broker and moreover without allowing the cross-examination those persons to the assessee, is totally against the principles of natural justice and thereby unlawful and therefore the addition so made deserves to be deleted.

2.5 That Ld. CIT(A) has erred in ignoring the fact that all the allegations are without independent application of mind by the AO and based merely on the borrowed information supplied by other authorities, which are not even factually co-relatedand thereby addition made based on such allegations deserves to be deleted.

3. On the facts and in the circumstances of the case Id. CIT(A) has further erred in confirming addition by heavily relying upon decision of Hon'ble Kolkata High Court in the case of PCIT vs Swati Bajaj. Appellant prays that the facts of the case under consideration are distinguishable with that of Swati Bajaj and therefore findings of the said case are not applicable to the case of assessee.

5. On the facts and in the circumstances of the case, the Ld. CIT(A) has grossly erred in confirming the addition of Rs. 59,624/- made by Ld. AO u/s 69C of the I. T. Act 1961 on Amit Goyal HUF vs. ITO whims and fancies and baselessly alleging that the assessee has paid commission at the rate of 2% of the long term capital gain to the entry provider without appreciating the facts and circumstances of the case and the submissions made and further bringing no evidence on record for saying so. Thus, the addition of Rs. 59,624/- deserves to be deleted.

Amit Goyal HUF vs. ITO of the assessee, since all the above requirements have been duly complied with, therefore the claim of the assessee to consider the income of Rs. 29,81,183/- exempt U/s 10(38) is correct and is within the four corners of the law and cannot be denied. Further the addition of Rs. 59,624/- (being the assumed commission @ 2 percent on Long Term Capital Gain) as undisclosed expenditure for acquiring alleged accommodation entry is also not valid and lawful.

4. Being aggrieved by the order of the AO, the assessee filed an appeal before the ld. CIT(A). The Ld. CIT(A) observed that notices were issued on 17.01.2020, 09.03.2020, 28.12.2020 & 01.06.2023 except asking for adjournment on 29.12.2020 & 11.01.2021 requiring the assessee to file the details in support of grounds taken by the assessee. Since the assessee has not complied with the notices issued by the Id. CIT(A) but he has dismissed the appeal of the assessee ex-parte order. The extract of the order of the ld. CIT(A) is reproduced as under:-

“4.3. DECISION: 4.3.1. The AO has made out a clear out case by discussing all the aspects involved in this case. The stated scrip did not have business operations or income to justify the high share price. The sudden peak and drop in share prices is a clear indication of share trading done with intention to fix prices in order to create accommodation entries. The appellant's timing of buying the share and selling clearly points out to its involvement in the share rigging The appellant's objects as seen in the grounds of appeal, are based on the following points: (a) appellant did not maintain books of accounts and hence, no addition u/s 68 can

Amit Goyal HUF vs. ITO be made (b) no amount of Rs. 59,624/- was paid and no books maintained for the addition to be made u/s 63 (c) the appellant was not allowed opportunity to cross examine the third party brokers involved (d)the appellant had complied with basic requirements of claiming LTCG from reflection of shares in dMAT account, trading in stock exchanges etc. 4.3.2. These are dealt with as under:-  The appellant is not contending the analysis of the AO on the scrip being a penny stock and that it defines human probabilities in its share price movement.  The appellant is also not contending that the share price is not rigged or that there was a reason for such abnormal rise in prices. The analysis of the AO was not countered. The appellant has not been able to counter the AO's arguments on share price rigging with any evidence relating to (a) the financials of the company, its profits/assets/cash flows and the link to the share prices (b) growth of the company in relation to the rise in share prices (c) the actual receipt of money into the bank account without corresponding outflows (d) the sustained level of share pricing across years and such other aspects to prove his stand of it not being a penny stock.  The High Court of Kolkata in the case of PCIT vs Swati Bajaj [2022] on the issue of cross examination by the appellant held that.

"55. The first argument on behalf of the assessee is that the copy of the investigation report was not furnished to them despite specific written request made on behalf of the assesses to furnish the copy of the report, the statements recorded and provide those persons from whom statements were recorded to be cross examined on behalf of the assessee. There is no dispute to the fact that the copy of the statement said to have been recorded during the course of investigation has not been furnished to the assessees and the request made by some of them for cross examining of those persons was not considered. The Amit Goyal HUF vs. ITO question would be as to whether the noncompliance of the above would render the assessments bad in law. The argument of the revenue is that the assessments cannot be held to be illegal merely on the grounds that the copy of the report was not furnished as the respective assessing officers have clearly mentioned as to the nature of investigation done by the department and as the report itself states that the investigation commenced not from the assessees end but the Individuals who dealt with these penny stocks who were targeted. It is equally true invariably in all cases, the statement of the stock brokers, the entry operators or the Directors of the various penny stock companies does not directly implicate the assessee. If such being the situation, the assessee cannot be heard to say that the copy of the entire report should have been furnished to him, the person from whom the statements were recorded should have been produced for cross examination as admittedly there is nothing to implicate the assesseu Smt. Swati Bajaj of insider trading or rigging of share prices. But the allegation against the assessee is that the claim for LTCG/LTCL is bogus. As pointed out by Mr. Rai, learned senior standing counsel, the investigation report is general in nature not assessee specific Therefore, we are required to see as to whether non-furnishing of the report which according to the revenue is available in the public domain would vitiate the proceedings on the ground that the assessee was put to prejudice.

Amit Goyal HUF vs. ITO or the test of fair hearing as. Further the Hon'ble Supreme Court pointed out a distinction between a case of no opportunity and a case of no adequate opportunity and while examining the latter case, it was held that the violation has to be examined from the stand point of prejudice, in other words the Court or the tribunal has to see whether in the totality of the circumstances, the delinquent officer/employee did or did not have a fair hearing and the orders to be made shall depend upon the answers to the said query. Further it was held that there may be a situation where interest of the state or public interest may call for curtailing of rule of audi alteram partem and in such a situation the Court may have to balance public/state interest with the requirements of natural justice and arrive at an appropriate decision.

Therefore, considering the factual scenario no prejudice has been established to the assessee by not furnishing the investigation report in its entirety nor making the persons available for cross examination as admitted by the department in substantial number of cases the assessees have not been specifically indicted by those persons from whom statements have been recorded.

There is nothing in the assessment order that is based solely on statement of anyone. The price manipulation and lack of authenticity for purchase date is proved by other facts. Therefore, there is no cause of grievance to the appellant and the issue has no relevance.

 In respect of the expenditure towards commission, unlike as contended by the appellant, the AO had not added the same as unexplained cash credit in books of accounts u/s 68 but has stated the same to be unexplained expenditure which is covered by provisions of section 69C and therefore, this argument has no meaning.  In respect of the unexplained cash credit u/s 68, which the LTCG on being found bogus came to be treated so, the appellant's contention is the technicality that it did not have books and therefore section 68 cannot be invoked. In this respect, the fact remains that the appellant has shown the same as LTCG in its return of income. Return of income for the assessee where books of accounts is Amit Goyal HUF vs. ITO not required to be maintained is the books of account to understand the income arising and taxable for the assessee. It is what gives the true picture of assessee's financials. Therefore, the addition u/s 68 of the IT Act is correct as the amount was credited in the Return of Income. In this context, the Ahmedabad Tribunal in case of Atmiben Alipitkumar Dosni v. Income-tax officer [2023] 149 taxmann.com 104, has held on similar facts for the trading in the same scrip of Kappa Pharma, that the LTCG claimed was bogus and upheld the AO's addition as unexplained cash credit u/s 68.

4.3.3. Further, as the appellant claimed an exempt income, the onus is on the appellant to prove the same. The Honourable HC of Kolkata in case of PCIT vs Swati Bajaj (quoted supra), clearly made out this point that it is appellent who has to prove the genuineness of the LTCG.

"73. Unfortunately, the test of genuinely needs to be established otherwise, the appellant are lawfully bound to prove the huge LTCG claims to be genuine. In other words if there is information and data available of unreasonable rise in the price of the shares of these penny stock companies over a short period of time of little more than one year, the genuinely of such steep rise in the prices of shares needs to be established and the onus is on the assessee to do so as mandated in Section 68 of the Act. Thus, the appellant cannot be permitted to contend that the assessments were based on surmises and conjectures or presumptions or assumptions. It is the appellant's duty to establish that the rise of the price of shares within a short period of time was a genuine move that those penny stocks companies had credit worthiness and coupled with genuinity and identity. The assesses cannot be heard to say that their claim has to be examined only based upon the documents produced by them namely bank details, the purchase/sell documents, the details of the D-Mat. Account etc. The assesses have lost sight of an important fact that when a claim is made for LTCG or STCL, the onus is on the assessee to prove that credit worthiness of Amit Goyal HUF vs. ITO the companies whose shares the assessee has dealt with, the genuineness of the price rise which is undoubtedly alarming that to within a short span of time.

4.3.4. The AO in his discussion in the assessment order has also brought out how the test of human probability as laid out by the Honourable Apex Court was not fulfilled in such case of penny stock trading resulting in abnormal profits. Thus, based on the facts discussed by the AO, the legal position discussed herein, the addition of the AO is upheld.

5. During the course of hearing, the ld. AR for the assessee prayed that the Id. CIT(A) has passed the ex-parte order and the assessee was not provided adequate opportunity of being heard. Thus, the assessee may be provided one more

Amit Goyal HUF vs. ITO opportunity to advance his arguments/submissions before the ld. AO in the interest of equity and justice.

6. Per contra, the ld. DR supported the orders of the lower authorities praying that the assessee was provided various opportunities by the lower authorities to argue the case but the assessee was lethargic and unserious to pursue her case and thus the order passed by the ld. CIT(A) should be sustained.

8. Before parting, we may make it clear that our decision to restore the matter back to the file of the ld. CIT(A) shall in no way be construed as having any reflection or expression on the merits of the dispute, which shall be adjudicated by the ld. CIT(A) independently in accordance with law.

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

Order pronounced in the open court on 18/12/2023.