TaxTMI 
TaxTMI 
TaxTMI 
2021 (10) TMI 746
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....d investment under section 69 of the Income Tax Act 1961 whereas the property was purchased by M/s. Seven Star Township Pvt. Ltd. 3. That the Learned Commissioner of Income Tax (Appeals)-2, Udaipur, Rajasthan erred in confirming the addition of Rs. 1,65,53,295/- out of Rs. 1,97,50,500/- made by the Assessing Officer under section 69 of the Income Tax Act, 1961 on the basis of incorrect facts and arbitrarily grounds. 4. That, on the facts and circumstances of the case, the Ld Commissioner of Income Tax (Appeal)-2, Udaipur, Rajasthan erred in confirming the disallowance of claim of Long Term Capital Gain Rs. 93,34,545/- made by the Assessing Officer under section 68 of the Act on the alleged ground that the transactions relating to Long Term Capital Gains on sale of shares of "Unisys Software & Holdings Industries Ltd" were dubious, suspicious and meant to book Long Term Capital Gain. 5. That the learned Commissioner of Income Tax (Appeal)-2, Udaipur, Rajasthan erred in confirming the aforesaid disallowance of Rs. 93,34,545/- made by the Assessing Officer as unexplained cash credit after disallowing the claim of the assessee of exemption of Rs. 93,34,545/- under section 10(38) ....
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....uring the lockdown period shall be extended up to 31st March, 2021. 5. That, the legal heir of the deceased assessee is a super senior citizen and owning to the current circumstances we were not able to get the necessary documents signed." 4. On the other hand, the ld DR could not rebut the facts submitted by the assessee before us for seeking condonation of delay. 5. We have considered the rival submissions as well as relevant material on record. As regards the sufficiency of cause for filing the appeals belatedly, it is settled principles of law that the Courts have to take liberal approach while interpreting the expression 'sufficient cause' for condonation of delay. In case of Collector, Land Acquisition Vs. Mst. Katiji (1987) 167 ITR 471, the Hon'ble Supreme Court has laid down the principle that the power to condone the delay provided under the statute is to enable the Courts to do substantial justice to the parties by disposing of the matter on merits, therefore, while considering the matters for condonation of delay, the law must be applied in a meaningful manner which subserves ends of justice and technical considerations should not come in the way of cause of substant....
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....he order of ld. CIT(A) in upholding the additions of Rs. 1,65,53,295/- u/s 69 of the Act, therefore, we thought it fit to decide all these grounds through the present consolidated order. In this regard, the ld. AR appearing on behalf of the assessee has reiterated the same arguments as were raised before the ld. CIT(A) and also relied upon written submissions filed before the Bench and contents of the same are reproduced as under. "1. The assessee filed Income Tax Return for the Assessment Year 2013-14 on 23.09.2013 and during the regular assessment proceedings the previous authorized representative did not made any submission and the Assessee was never informed for the above negligence on the part of the Authorized Representative. That may be due to some unavoidable reason on part of the previous authorized representative (best known to him) of the Assessee, the representative was not able to give the reply of the notice issued by the assessing officer on time while the Assessee had provided all the information required by the A/R. 2. The A.O had completed the assessment proceedings as per Best Judgment and passed assessment order u/s 144 dated: 27.03.2016 received by us (Pres....
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....e any investment and failed to show the same in the books of accounts maintained by him or fails to provide satisfactory explanation w.r.t any investment or income in his name. 9. It is submitted that assessee was holding directorship in M/s Seven Star Township Private Limited, company engaged in real-estate & construction activities. During the relevant assessment year assessee in the capacity of director performed registries/ legal formalities for registry of the property situated at Village Dabla Khurd, Tehsil Faghi, which was purchased by the company in its own name. The assessee was only a POA holder for the registry/documentation purpose on behalf of company, moreover on the registry document (purchase deed) it is specifically mentioned that the assessee has signed under the capacity of being a director in the company. Moreover, in our case the property is not purchased by the Assessee and also not in the name of the Assessee. Assessee is only playing role on behalf of the company as he is director in the company. The Assessee is being authorized by the company for purchase of the property situated at Village Dabla Khurd, Tehsil Faghi and for the necessary formalities in re....
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....mpany bank accounts and rest other got dishonored. The Ld. AO in his remand report dated 03.10.2020 claimed that a total of Rs. 34,50,000/- could only be verified, contradicting which the Ld. CIT(A)-II, Udaipur in the order dated 27.02.2020 claimed that only Rs. 31,15,705/- could be verified, on the facts supra, it is clearly evident that the Ld. AO has erred both in facts and law thus it seems there was no intention to provide relief rather the motive was to increase litigation. I would to place on record the judgment made in the case of Ashok Kumar Rastogi V CIT (1991) 100 CTR 204 wherein it was laid down that "Assessing Officer is expected to appreciate the reasonable explanation offered to him, the evidences produced before him about the nature and source of investment and he cannot make the addition merely on surmises, conjectures as well as without any supporting evidences." 14. It is clearly evident from the facts supra, the Ld. CIT(A)-II Udaipur has erred in accepting the claim made the Ld. AO and thus without considering the facts provided during the appeal proceedings wrongfully applied the provisions of section 69 and made an addition to the assesee for an amount of Rs....
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....0,500/-, therefore, the sources of the said investment was sought from the assessee. Since, the assessee could not produce evidences; therefore, the addition u/s 69 of the Act was made. The ld. AR further submitted that no property was ever purchased by the assessee in his own name. Rather, the facts are that the assessee was one of the Director of Company M/s Seven Star Developers Township Pvt. Ltd and the immovable property of Rs. 1,97,50,500/- was purchased by the company in his own name. It was further submitted that the company is a legal person different from its members/shareholders and possesses the right to enter into valid contracts for sale, to purchase, to hold, to lease out or take on lease and to mortgage immovable properties in its own name. Being the Director of the Company, the assessee was only authorized to represent the company through Board resolution passed in Board Meetings of the Board of Directors of a Company. Being the authorized person, the assessee was only required to complete relevant administrative, revenue and legal formalities in relation to purchase of the property. It was further submitted that the immovable property in question was never purchas....
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....om the AO. The AO had made addition on account of disallowance out of purchase immovable property u/s 69 of the Act to the effect that creditworthiness of the company namely M/s Seven Star Developers Township Pvt. Ltd could not be established. Hence, the source of investment of Rs. 1,97,50,500/- remained to be explained and hence, the addition was made u/s 69A of the Act. In this regard, the assessee through its AR had controverted the comments made in the remand report and filed a detailed submission which is available at para No. 6.2 and 6.3 of the order of ld. CIT(A) and the same are reproduced below. " 6.2 The AO's remand report dated 09-05-2018 was provided to the appellant on 21-05-2018. The appellant's AR furnished counter comments on the said report on 05-06-2018, which are reproduced as under:- "As per the remand report AO's comment, regarding the purchase of immovable property of Rs. 1,97,05,000/, As the following transaction performed by the assessee on behalf of the company in which he was holding directorship. The investment was done by the company in property and the source for such investment also belongs to such company itself as the assessee was onl....
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.... pay money, sue and be sued, among other things. It was held in State Trading Corporation of India Ltd. AIR (1963) SC 1811, Once a company or corporation is formed, the business which is carried on by the such company or corporation is the business of that company or corporation and is not the business of the citizens who get the company or corporation incorporated and the rights of the incorporated body must be judges on that footing and cannot be judged on the assumption that they are the rights attributed to the business of individual citizens. Since the land is in the name of the company and assessee is only entered into the agreement for purchase of the land on behalf of the company. Therefore, we request you not to add back the same to the total income of the assessee after considering the above case laws. Subsequently, the appellant's AR filed written submissions dated 20-052019, which are reproduced as under:- "As per the remand report AO's comment, regarding the purchase of immovable property of Rs. 1,97,05,000/- that the company having negative reserves and low figures of loans & advances. The assessing officer has consider the negative reserves and low fi....
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....m that investment in the land purchased at Village Dabala, Tehsil Fagi, Jaipur was in fact made by the company M/s. Seven Star Township Pvt. Ltd. Considering the details and evidences produced by the appellant, my ld. predecessor vide letter No. CIT(A)-2/UDR/2019-20/737 dated 31-07-2019 required the AO to submit remand report on the specific issues after taking into consideration the evidences produced by the assessee. As regards the addition of Rs. 1,97,05,550/- made on account of unexplained investment in the land purchased at Village Dabala and in order to ascertain the veracity of the appellant's claim that all payments were made by Seven Star Township Pvt. Ltd. by cheques from Axis Bank and Punjab National Bank (PNB), the CIT(A) directed the AO to obtain a copy of the bank account from PNB u/s. 133(6) of the Act. In response, the AO, vide letter No. F.NO. DCIT/Circle-5/JPR/2019-20/528 dated 03-10-2019, submitted remand report stating as under:- "Addition of Rs. 1,97,05,500/-, As directed, a copy of the bank statement of M/s Seven Star Township Developers Private Limited, B-15, Ganga Sagar-B, Vaishali Nagar, Jaipur for the period from 01.04.2012 to 31.03.2014 was requ....
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.... land owner Sh. Bheru Singh by cheque as per the detail given at page no. 13 of the sale deed. On the examination of the bank statement of the company M/s Seven Star Township Developers Private Limited it has been revealed that the payment of Rs. 25,00,000/- only has been made to Sh. Bheru Singh on 18.04.2013 by clearing. It means the company has not made the payment of the remaining amount of Rs. 1,11,84,075/- to Sh. Bheru Singh which is apparent from the bank statement of the company obtained from the bank. It is suspected that this amount of Rs. 1,11,84,075/- has been paid to the land owners either by the assessee or the company in cash which may kindly enquired during, the appellate proceedings. 2.3. After careful examination of the aforesaid bank statements of the company M/s. Seven Star Township Developers Private Limited it is concluded and submitted that out of the total payment claimed to be paid to the land owners namely Sh. Rajendra Singh, Dakh Kanwar and Bheru Singh of Rs. 1,97,03,295/-, the payment to the extent of Rs. 34,50,000/- only has been verified from the bank accounts and the balance of Rs. 1,62,53,295/- remained unverified. 3. Further, after examination of....
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....he PNR bank account held in the name of company Ws Seven Star Township Developers Private Limited hence its is prima facie proved that the both the bank accounts were operated in the name of said company and payments were made by the company to the land owners through these bank account hence assessee Shri Late Satpal Singh has no monetary transaction in relation to the purchase of land said land. Further, the Ld assessing officer has erred in his reply of remand report stating "that the remaining amount of Rs. 36,11,770/- and Rs. 1,11,84,075/- were made in cash by assessee or said company". We would like your kind attention to the fact that all of the cheques mentioned in the registry deed were duly presented in the bank. It is duly mentioned in law that company has a separate legal identity and "the existence of a company is distinct and separate from that of its members. It can own property, bank accounts, raise loans, incur liabilities and enter into contracts. According to Law, it is altogether differentfi.om the subscribers to the Memorandum of Association". Hence the contention made by the Ld. Assessing Officer is baseless and not as per law. As the aggrieved assessee was ....
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....h. Rounak Khandelwal, FCA attended and relied on various written submissions /details / evidences made earlier. The appellant's written submissions, details and evidences brought on record by the appellant and AO's remand reports and appellant's counter comments thereon have been duly considered while deciding the issue at hand. 15. After having meticulously gone through the facts of the present case as well as orders passed by the Revenue authorities and material placed on record we noticed that the ld. CIT(A) upheld the liability upon the assessee only by holding that in the remand report proceedings, the A.O. could only verify that out of the total investment of Rs. 1,97,05,000/- made by the company i.e M/s Seven Star Township Pvt. Ltd. only an amount of Rs. 31,15,705/- was made by the company to the respective land owners. However, with regard to balance amount of Rs. 1,65,53,295/- is concerned, the same remains unexplained investment, therefore, the ld. CIT(A) fastened the liability of the said amount on the assessee. It is important to mention here that the assessee is not recorded as registered owner of the property in question. The registered sale deed has alre....
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.... that at any stage, the sale consideration was ever paid by the assessee from his bank accounts. On the contrary, the assessee had also furnished an affidavit to this effect which is sworn by Shri Narendra Singh, another Director of the company who also reiterated the same stand taken by the assessee. It is also a fact that the company is a separate legal entity as distinct from its Members, therefore, it is separate at law from its share holders, Directors, promoters etc. and as such is conferred with rights and is subject to certain duties and obligations. 15.1 In the instant case, at the outset, the assessee being a Director and power of attorney holder, executed the said transaction of purchase of immovable property on behalf of the company. There is absolutely no doubt that after passing a Board Resolution, the assessee was authorized to execute such transaction of purchase of immovable property by giving a power of attorney in his favour. 15.2 A power of attorney is a legal document whereby it give one person i.e. agent, the power to act for another person i.e. the principal. However, the agent can have broad legal authority or limited authority to make legal decisions abou....
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....on v Salomon & Co. Ltd wherein it was held that Separate means that the artificial legal person, the company, can do almost everything a human person can do; it can make contracts, employ people, borrow and pay money, sue and be sued, among other things. We also draw strength from the decision in the case of State Trading Corporation of India Ltd. AIR (1963) SC 1811 wherein it was held that "once a company or corporation is formed, the business which is carried on by the such company or corporation is the business of that company or corporation and is not the business of the citizens who get the company or corporation incorporated and the rights of the incorporated body must be judges on that footing and cannot be judged on the assumption that they arc the rights attributed to the business of individual citizens. 17.1 The Revenue authorities were expected to appreciate the reasonable explanation put forth by the assessee and the evidences produced about the nature and source of investment, however, in this case, the revenue authorities made additions merely on the basis of surmises and conjectures as well as without any supporting evidence which they were not entitled to do so. In....
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....ns submitted before the Bench and same are reproduced as below. "1. The assessee filed Income Tax Return for the Assessment Year 2013-14 on 23.09.2013 and during the regular assessment proceedings the previous authorized representative did not made any submission and the Assessee was never informed for the above negligence on the part of the Authorized Representative. That may be due to some unavoidable reason on part of the previous authorized representative (best known to him) of the Assessee, the representative was not able to give the reply of the notice issued by the assessing officer on time while the Assessee had provided all the information required by the A/R. 2. The A.O had completed the assessment proceedings as per Best Judgment and passed assessment order u/s 144 dated: 27.03.2016 received by us (Present A/R) on 18.07.2016 in respect of assessment year referred above, wherein a sum of Rs. 6,17,66,128/- has been added in the income of the assessee for such assessment year. 3. Further, in continuation to the reply submitted by us on 13.10.2020 wherein we had placed on record the detailed submission regarding the addition made against the assessee for an amount of R....
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.... 09/04/2012 35,000 shares sold 4. Sale of Shares 11/04/2012 11,000 shares sold 5. Sale of Shares 12/04/2012 4,000 shares sold 9.During the relevant assessment year assessee sold such shares and made a long term capital gain of Rs. 93,34,545/-, per se it is very evident that assessee held such shares for a period of more than 12 months before selling them and such long term capital gain is exempt as per the section 10(38) of the Income Tax Act, 1961. 10. During the appeal proceedings the Ld. CIT(A)-II, Udaipur without due consideration of the facts mentioned advertently added the same to the income of assessee by taking support and under shelter of various judgments which had different facts. In the matter of Vijayrattan Balkrishan Mittal vs. DCIT (ITAT Mumbai) it was concluded that "the fact that a scam has taken place in some penny stocks does not mean that all transactions in penny stocks can be regarded as bogus. In deciding whether the claim is genuine or not, the authorities have to be guided by the legal evidence and not on general observations based on statements, probabilities, human behavior, modus operandi etc. 11. It must be mentioned that various p....
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....ission and additional evidences under Rule 46(A) of the IT Rules. Therefore, ld. CIT(A) called for AO's remand report in which it was stated before the AO that the assessee had purchased shares of M/s Unisys Software who was one of the 84 penny stock companies investigated by the DG(Inv.), Kolkata was managed by the Syndicate of Directors, Promoters and Entry providers to introduce unaccounted money in the books of accounts of various persons in lieu of commission, therefore, long term capital gains (LTCG) by the assessee was treated as bogus. The ld. AR had submitted that the counter comments as well as written submissions to the remand report submitted by the AO which is reproduced as under:- "1. "Disallowance of Exemption of Capital Gain u/s 10(38): As per the remand report, AO's comment, regarding disallowance of the capital gain earned from sale of shares, as assessee did not provide proof of claiming said exemption like copies of contract notes, Demat account and bank statements hence the same exemption remained unverifiable. As the assessee was not aware about non-compliance done by the A/R on behalf of him, he was himself unable to prove the reliability of the genuine....
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....ers shall not be allowed to adopt a different/contrary stand in this regard in subsequent years. c. In all other cases, the nature of transaction (i.e. whether the same is in the nature of capital gain or business income) shall continue to be decided keeping in view the aforesaid Circulars issued by the CBDT. However assessee has sold 50000 shares of Unisys Software & holdings Industries limited which is listed on the stock exchange. After considering the above circular the same was treated as per desire of assessee i.e. Long Term capital gain from shares and this will not be put to dispute by Assessing Officer. Therefore, we request you not to add back the same to the total income of the assessee. 23. Subsequently, the ld AR of the assessee filed written submissions dated 20-05-2019 and the same are reproduced as under:- 1. Disallowance of Exemption of Capital Gain u/s 10(38): As per the remand report, AO's comment, regarding disallowance of the capital gain earned from sale of shares, as assessee did not provide proof of claiming said exemption like copies of contract notes, Demat account and bank statements hence the same exemption remained unverifiable. As the asse....
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.... his submission, the ld. AR has drawn our attention to the paper book which contents of copy of Demate Account and holding statement which are at page No. 1 to 5 of the paper book, copy of bank statement which are at paper book page No. 6, copy of purchase bill dated 16.03.2010 which is at paper book page No. 7 and copy of sale bills which are at paper book page No. 8-10. 25. Per contra, the ld. DR relied upon the following case laws and details of the same are as under:- S. No. Case Law Page No. 1 Soman Sun City vs. JCIT ITA No. 2960/Mumbai/2016 order dated 23.10.2017 1-15 2 Sumati Dayal Vs. CIT dt. 28.03.1995 (SC) 16-21 3 CIT vs. Durga Prasad More dt. 26-08.1971 (SC) 22-26 4 Sh. Satish Kishor, Delhi vs. ITO (ITA No. 1704/Del/2019 dt. 06.09.2019 27-47 5 Sanjay Bimalchand Jain vs. CIT, Nagpur (HC, Bombay) appeal NO. 18/2017 dt. 10.04.2017 48-51 6 Udit Kalra vs. ITO ITA No. 6717/Del/2017 dt. 08.01.2019 52-60 7 Suman Poddar ITA No. 841/2019 HC of Delhi 61-79 8 Nipul Builder Delhi HC ITA No. 120/2012 dt. 07.01.2013 80-87 9 NR Portfolio Delhi HC Appeal No. 1018/2011 dt. 22.11.2013 88-100 10 Pratham Telecom India Pvt. Ltd. vs. DCIT .....
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....sys Software & Holdings Ind. Ltd. on 16/03/2010 vide cheque No. 0004936 amounting to Rs. 11,50,000/-. Assessee had 50,000 shares of Unisys Software & Holdings Ind. Ltd. which were duly credited in his demat account on 30/06/2010. Details of purchase and sale with contract notes are annexed to the paper book submitted, details synopsis of the same is as under: S.No. Particulars Date Details 1. Purchase of Shares 16/03/2010 50,000 shares of Unisys Softwares & Holdings Ind. Ltd. 2. Credit to Demat Account 30/06/2010 Transfer of 50,000 shares of Unisys Softwares & Holdings Ind. Ltd. to Demat 3. Sale of Shares 09/04/2012 35,000 shares sold 4. Sale of Shares 11/04/2012 11,000 shares sold 5. Sale of Shares 12/04/2012 4,000 shares sold 29. During the relevant assessment year, assessee sold such shares and made a long term capital gain of Rs. 93,34,545/-, per se it is very evident that assessee held such shares for a period of more than 12 months before selling them and such long term capital gain is exempt as per the section 10(38) of the Act. However, the ld. CIT(A) considering while relying upon various judgments on different facts denied the cl....
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....sfer, if assessee desires to treat the income arising from the transfer thereof as a capital gain, the same shall not be put to dispute by assessing officer. However, this stand, once taken by the assessee in a particular assessment year, shall remain applicable in subsequent Assessment years also and the taxpayers shall not be allowed to adopt a different/contrary stand in this regard in subsequent years. c. In all other cases, the nature of transaction (i.e. whether the same is in the nature of capital gain or business income) shall continue to be decided keeping in view the aforesaid Circulars issued by the CBDT." 31. Since the assessee had sold 50,000/- share of Unisys Software and Holding Industries Ltd. which is listed on the stock exchange. Therefore, while taking into consideration, circular issued by CBDT dated 29.02.2016, bearing Circular No. 6/2016 and also decisions in the following cases i.e. * Deepak Kumar Agarwal HUF vs ITO Ward 2(3) ITA 223& 222/JP/2020 (ITAT Jaipur) dated 09.02.2021 * CIT vs. Smt. Pooja Agarwal (DB Appeal No. 385/2011 dated 11.09.2017) * PCIT vs Pramod Jain & others (DB Appeal No. 209/2018 dated 24.07.2018)  Manish Kumar Baid vs. A....
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.... of purchase bill dated 22.02.2010; a copy of share transfer form in the favour of the assessee; Copy of bank statement highlighting the payment made against the share purchased; Transaction statement of the stock broker i.e. Pace Stock Broking Services (P) Ltd., account; copy of bank statement in which sale proceed from the sale of shares received; copy of calculation of long term capital gain, which was not faulted by the AO. However, the lower authorities have not considered the aforesaid documents and rejected all the claims made by the assessee by relying on the report of the Investigation Wing and thereby made the addition, which is not sustainable in the eyes of law. I further find that the AO has given detailed explanation in the order regarding the modus operandi of bogus LTCG scheme but failed to substantiate how the assessee fell in the purview of the same without bringing any material on record and proving that the assesssee was directly involved in the so called bogus transaction. I further note that the addition in dispute made by the AO and upheld by the Ld. CIT(A) u/s 68 as unexplained credit instead of long term capital gain as claimed by the assessee, however, the....
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.... was directed to reopen the case of the assessee for the assessment year 2006-07 on this issue? (iii) Whether the Hon'ble ITAT has erred in ignoring an important aspect that in such cases of sham transactions of shares showing abnormal hike in their value, where the facts themselves speak loud and clear, the AO is justified to even draw an inference from the attendant circumstances? (iv) Whether on the facts and in the circumstances of the case, the Hon'ble Income Tax Appellate Tribunal has erred in law in upholding the order of the CIT(A) deleting the addition of Rs. 12,59,000/- made by the AO on the basis of seized document on the grounds that the AO has not pointed out as to how the figures of Rs. 12.59 lacs has been worked out ignoring the fact that the assessee himself in his reply to the AO had tried to explain the source of the receipts of Rs. 12,59,000/- instead of challenging the working out of the said figure by the AO? 3. The first three questions of law raised in this appeal are covered against the appellant by an order and judgment of a Division Bench of this Court dated 16.02.2017 in ITA-18-2017 titled as The Pr. Commissioner of Income Tax (Central), Ludhiana vs....