RAMESH KUMAR MANTRI HUF,JAIPUR vs. ITO WD 4(2), JAIPUR, JAIPUR

2 SHRI RAMESH KUMAR MANTRI, HUF VS ITO,WARD 4(2), JAIPUR ‘’1. In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the AO in making additions of Rs.1,08,297/- towards short term capital loss and treating the same to be out of unexplained money. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the entire addition amounting to Rs.1,08,297/-.

In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the AO in assuming payment of commission on the alleged accommodation entry presumed to have taken by the assessee and making addition of Rs.6,498/- by assuming fictitious commission payment @ 6% of the sales consideration. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the entire addition amounting to Rs.6,498/-.

In the facts and circumstances of the case and in law, the ld. CIT(A), NFAC has erred in deciding the appeal ex- parte without providing opportunity of being heard to the assessee. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the order of ld. CIT(A) being against the principles of natural justice.’’ 2.2 Brief facts of the case are that the Assessee HUF filed its return of income on 10.09.2011 for the A.Y. 2011-12 declaring a total income at Rs. 20,25,290/-. The case was reopened u/s 148 of the I.T Act 1961, by the AO on the basis of outcome of an enquiry report received from DCIT Central Circle 3[4], Mumbai vide letter dated 22.03.2018 which was forwarded through Pr.CCIT Rajasthan Jaipur through letter no.7546 dated 28.03.2018. In the said report, it was informed that shares of M/s.Comfort Intech Ltd, is a penny stock and during financial year 3 SHRI RAMESH KUMAR MANTRI, HUF VS ITO,WARD 4(2), JAIPUR 2010-11 total value of shares sold by the assessee was of Rs.1,08,297/-. Such loss was treated as bogus by the AO and assessment was completed u/s 147/143 [3] of the IT act, 1961 after making addition of Rs.1,08,297/- alongwith 6% commission of Rs.6,498/-. 2.3 Aggrieved by the order of the AO, the assessee carried the matter before the ld. CIT(A) who after providing numerous opportunities to the assessee passed the ex-parte order by dismissing the appeal of the assessee with following observations. ‘’5. DECISION: I have carefully considered the facts of the case, the grounds of appeal, and statement of facts filed along with Form No.35. 5.1 As discussed above in para No.1, that the assessee was provided numerous opportunities for making written submissions during the course of appellate proceedings. However, the assessee did not avail opportunity to file written submissions. The appeal cannot be kept pending indefinitely. Therefore, I proceed to decide the appeal exparte on the basis of material available on record. 5.2 In this case notice u/s.148 of the IT Act was issued on 30.03.2018 through ITBA Portal by the AO on the basis of information in his possession and reason to believe, served upon the assessee on 30.03.2018. In response thereto, the assessee filed ITR for AY. 2011- 12 on 05.04.2018, thereby declaring total income of Rs. 20,25,990/- which is same as in the original return of income filed on 10.09.2011.The reasons for reopening the assessment were provided to the assessee by the AO. The assessee had traded in the penny stock script of M/s Comfort Intech Ltd (script code 531216) and claimed Short Term Capital Loss of (-) Rs. 1,08,297/-. The AO had received information from the Investigation Wing as to how the said stock was 4 SHRI RAMESH KUMAR MANTRI, HUF VS ITO,WARD 4(2), JAIPUR a penny stock and the loss booked was artificial loss. During the course of reassessment proceedings, the AO had examined the case of the assessee and considered the reply of the assessee. The reply of the assessee was considered by the AO and found it not tenable for the reasons that the assessee has traded in the penny stock script of M/s Comfort Intech Ltd (script code 531216) and claimed Short Term Capital Loss of (-) Rs. 1,08,297/-. Further, as per information, the M/s Comfort Intech Ltd is a penny stock company listed on Bombay Stock Exchange with script Code-531216 and this company has been used to facilitate introduction of unaccounted income of members of beneficiaries in the form of exempt capital gain or Short Term Capital Loss in their books of accounts. It was noticed that share price of M/s Comfort Intech Ltd rose unnaturally during the period of mid 2009 to 2010 as it had never risen previously. Further, trade data of M/s Comfort Intech Ltd was analyzed by the Investigation Wing and found that both purchase and sale of the shares are concentrated within few persons/entities. It is seen from the financials of the entry providers that they do not have any creditworthiness. They are either non-filers or have filed nominal return of income. In view of the above discussion the AO held that the Short Term Capital Loss of (-) Rs. 1,08,297/-shown by the assessee was found to be not genuine and intended to reduce taxable capital gain in same year or carrying forward. Therefore, the AO made an addition of Rs. 1,08,297/- u/s 68/69 of the IT Act, as undisclosed income/investment, to the total taxable income of the assessee for AY. 2011-12. The AO also held that the assessee had paid 6% of the total trade value for availing this STCL and made an addition of Rs. 6,498/- (being 6% of Rs. 1,08,297/-) u/s 69C of the 1.T Act, as unexplained expenditure, to the total income of the assessee for A.Y. 2011-12. 5.3 On the other hand, it is contention of the assessee that the AO has made both the additions wrongly by treating the loss in trading of shares as artificial. Having considered the facts of the case and the arguments of the appellant, I find that the assessee has not been able to prove the credentials of the company M/s Comfort Intech Ltd., the trading in shares of which the assessee had incurred losses. Further, the assessee has not been able to establish the genuineness of purchase of shares by providing the entries in the bank account, contract notes and the copies of the Demat Statement. Similarly, the 5 SHRI RAMESH KUMAR MANTRI, HUF VS ITO,WARD 4(2), JAIPUR assessee has not been able to establish the genuineness of sale of the said shares as well. The company M/s Comfort Intech Ltd has been established to be a penny stock by investigation carried out by the income tax Department and it has been operated by the close group by manipulating prices to provide entries for artificial gains and losses for commission. The assessee is one of such beneficiaries. 5.4 In view of the foregoing, I do not have any reason to interfere with the order of the AO making addition of Rs.1,08,297/ alongwith 6% commission of Rs.6,498/- Hence, all the grounds of appeal except No.7 are Dismissed.’’ 2.4 During the course of hearing, the ld. AR of the assessee submitted that proper submission before the ld. CIT(A) could not be made because of some communication gap leading to misunderstanding as to who was to upload the submissions and the communication was between the assessee and his counsel and he further submitted that such gap persisted because of the newly introduced system of faceless appeals. Thus, the ld. AR prayed the Bench to restore the appeal to the file of the ld. CIT(A) for providing one more opportunity of making submissions. 2.5 On the other hand, the ld. DR supported the order of the ld. CIT(A). 2.4 After hearing both the parties and perusing the materials available on record, the Bench feels that grounds raised by the assessee (supra) need afresh consideration by the ld. CIT(A) as the order passed by the ld. CIT(A) is ex-parte because of non-submission of any documents/ evidences/ written submission/ paper book by the assessee. Hence, the assessee is deprived off to contest the case