TaxTMI 
TaxTMI 
2022 (12) TMI 1506
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....cts narrated in ITA No. 183/SRT/2021, for assessment Year 2011-12, have been taken into consideration for deciding the above appeals en masse. 3. Grounds of appeal raised by the assessee in lead case (in ITA No. 183/SRT/2021 for AY. 2011-12) are as follows: "Additional Grounds of Appeal 1. On the facts and circumstances of the case as well as law on subject, the learned assessing officer has erred in reopening the assessment u/s 147 by issuing notice u/s 148 of the Act. 2. It is therefore prayed that assessment framed u/s 143(3) r.w.s. 147 of the Act may kindly be quashed and /or addition made by learned assessing officer may please be deleted. Grounds of Appeal 3. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the long Term Capital Gains of Rs. 3,47,564/- as unexplained cash Credit. 4. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming Rs. 10,426/- as unexplained u/s 69 of the Act. 5. It is therefore prayed that addition made by the assessing officer and confirmed by CIT(A) of Rs. 3....
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....s. The assessing officer had gone through the written submissions filed by the assessee. The assessing officer noted that in assessee`s case, information has been received from the Kolkata Investigation Directorate that assessee has transacted in the scrip, M/s Global Capital Markets Ltd, which was already established as a penny stock listed on BSE and the same was used to facilitate introduction of unaccounted income of members of beneficiaries. The assessee was identified as one of the beneficiaries. The assessing officer observed that share price of the scrip, M/s GLOBAL CAPITAL MARKETS LTD, rose from Rs. 100 in December, 2008 top Rs. 1000/- in November, 2010 and dipped to Rs. 50/- in May, 2012. Further, it was noticed, by the assessing officer, from the financials of the company that for the relevant period, the financials of the company, do not show any substantial change so as to support such a huge deviation of the price. The assessing officer also noted that the company does not have any business activities which justify the huge market price of shares and the purchase and sale of the scrip, Global Capital Markets Ltd, were concentrated within few persons. The exit provider....
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....m capere potest de injuria sua propria", which is applicable to the issue at hand, means "no one can obtain an advantage by his own wrong." On account of the detailed above reasons, observations and judicial pronouncements, the appeal of the Assessee is, hereby, dismissed and the impugned addition is, hereby, confirmed." 9. Aggrieved by the order of the ld. CIT(A), the assessee is in further appeal before us. 10. Ms. Richa Tosniwal, Learned Counsel for the assessee, at the outset, states that assessee has raised additional grounds of appeal challenging the validity of reassessment proceedings. She submitted before the Bench that although the assessee has not raised such ground during the appellate proceedings, however facts are emanating from the assessment order. Since it is a legal issue, and facts are there in the assessment order therefore same may be admitted for adjudication. 11. About validity of reopening the assessment under section 147 of the Act, Ms. Richa Tosniwal, Learned Counsel for the assessee, begins by pointing out that there is no whisper in the reasons recorded, of any tangible material which came to the possession of the assessing officer subs....
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....are investment on which the STT was duly paid. Based on these factual position, ld Counsel contended that addition made by the assessing officer may be deleted. 13. Learned DR for the Revenue, pleaded that assessee has not argued the issue of validity of reassessment proceedings before the ld CIT(A), therefore, at this stage the assessee should not be allowed to argue on such legal issue. 14. On the validity of reassessment proceedings, the ld DR submitted that after recording reasons for reopening of the case and after obtaining necessary approval from the Pr. C1T-2, Surat, the assessee`s case was reopened u/s 147 of the Act. The notice u/s 148 of the Act was issued on 29.03.2018 and served upon the assessee. In response to the same, the assessee has filed return of income on 05.04.2018. The copy of reasons recorded for reopening the case was given to the assessee. The objection of the assessee has also been disposed of by assessing officer, vide speaking order of assessing officer dated 02.08.2018. The ld DR took us through paper book page No. 45, where reasons recorded by the assessing officer are stated, and argued that assessing officer received the information from the ....
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....the assessing officer, which is reproduced below: 18. From the reasons recorded, the following facts and sequence of events are observed: (a) Credible information was received by the AO from the DDIT Investigation Wing, Kolkata, regarding BSE listed Penny stock. (b) The AO has noted that the information received from the DDIT Investigation Wing, Kolkata, has revealed that assessee has sold 5000 shares of Rs. 3,85,006/- in the scrip Global Capital Market Limited. (c) The Assessing Officer specified the code number. (d) The AO noted that assessee has claimed exemption wrongly. (e) The AO finally recorded the reasons stating that he has reason to believe that an amount of Rs. 3,85,006/- has escaped assessment within the meaning of section 147 of the Act. (f) This information was not available at the time of passing the original assessment; order, if any. (g) The assessing officer had verified the information with the record available in his office and duly noted the same. (h) He has thus recorded his prima facie reason to believe that amount of Rs. 3,85,006/- has escaped assessment. 19. Having gone through t....
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....nt of income was on account of non-filing of the return by the assessee or failure on his part to disclose fully and truly all material facts necessary for assessment would not be conclusive. Nor, absence of any such statement would be fatal, if on the basis of reasons recorded, it can be culled out that there were sufficient grounds for the Assessing Officer to hold such beliefs." 22. A three Judges Bench of Hon'ble Gujarat High Court in the case of A.L.A. Firm v. CIT, 189 (1991) ITR 285, after an elaborate discussion of the subject opined that the jurisdiction of the Income Tax Officer to reassess income arises if he has in consequence of specific and relevant information coming into his possession subsequent to the previous concluded assessment, reason to believe, that income chargeable to tax and had escaped assessment. It was held that even if the information be such that it could have been obtained by the I.T.O. during the previous assessment proceedings by conducting an investigation or an enquiry but was not in fact so obtained, it would not affect the jurisdiction of the Income Tax Officer to initiate reassessment proceedings, if the twin conditions prescribed under....
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....ed the following chart: (ii) In respect of assessee's appeal in ITA No. 184/SRT/2021 for AY.2011-12, assessee submitted the following chart: (iii) In respect of assessee's appeal in ITA No. 185/SRT/2021 for AY.2012-13, assessee submitted the following chart: 28. The assessee had purchased 12,000 shares of M/s Global Capital Markets Limited on 31.03.2003 from I C Baid & Co. at a price of Rs. 6.91 approximately when the concept of STT was not even introduced and DEMAT was not even popular. As at March 2006, there were only a total of 538 depository participants registered with the Securities and Exchange Board of India. The notification about the new regulation made by SEBI for Mandatory Dematerialization of physical shares held by an investor stated that from April 1, 2019, from this date an investor was not be able to transfer the shares held in physical form using a transfer deed. Hence it is clear that there was no requirement of DEMAT during the period when the assessee purchased the shares i.e back in the year 2003. However, the assessee has submitted the holding Statement as on 31.03.2004 which reflects that the assessee had the shares of Global Capital Ma....
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....sham transactions and wanting to earn huge profits would never miss such an opportunity, however the assessee being a bonafide taxpayer was in no knowledge of such series of activities and sold shares in normal course and earns a miniscule profit of Rs. 3,47,564/- only. 31. We note that assessee had sold shares of M/s Global Capital Markets Limited during FY 2010-11 on 29.07.2010 after holding the shares for more than 7 years and claimed just Rs. 3,47,564/- as Long Term Capital Gain (LTCG). This fact clearly shows that assessee is genuine investor as he was holding shares for more than seven years, and does not involve in taking penny stock accommodation entry. 32. It is well settled position of law that, an assessee receiving a credit has to testify its case through the 'triple marker test' of Identity, Creditworthiness and Genuineness of Transactions. It is imperative, therefore, that the case be analysed in light of these three well-settled canons of adjudication, as embedded in the statute as also promulgated by various judicial pronouncements. The onus of proof requires the assessee to furnish the proof of identity, creditworthiness and genuineness of the transac....
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....A of the Act. Sections 103, 107, Order 41 rule 33 read with Section 260A (7) of the Act confers ample powers on this Court to interfere with the orders of the learned Tribunal. 95. Regarding the burden of proof in a case arising under Section 68 of the Act, it would be beneficial to refer to the decision of the High Court of Delhi in CIT Nippun Builders and Development Private Limited in ITA No. 120 of 2012 dated 07.01.2013 wherein it was held as follows:- This principle was reiterated by the Supreme Court in Commissioner of Income Tax v. Devi Prasad Vishwanath Prasad, (1969) 72 ITR 194 wherein Shah, J (as His Lordship then was) held as follows: "The question again assumes that it was for the Income-Tax Officer to indicate the source of the income before the income could be held taxable and unless he did so, the assessee was entitled to succeed. That is not, in our judgment, the correct legal position. Where there is an explained cash credit, it is open to the Income Tax Officer to hold that it is income of the assessee and no further burden lies on the Income-Tax Officer to show that income is from any particular source. It is for the assessee to prove that even if the ca....
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.... prove that the assessee's own monies were brought back in the form of share application money. As noted in the earlier paragraph, it is not the burden of the AO to prove that connection. There has been no examination by the tribunal of the assessment proceedings in any detail in order to demonstrate that the assessee has discharged its onus to prove not only the identity of the share applicants, but also their creditworthiness and the genuineness of the transactions. No attempt was made by the tribunal to scratch the surface and probe the documentary evidence in some depth, in the light of the conduct of the assessee and other surrounding circumstances in order to see whether the assessee has discharged its onus under Section 68. With respect, it appears to us that there has only been a mechanical reference to the case-law on the subject without any serious appraisal of the facts and circumstances of the case. 96. Mr. Roy Chowdhury had pointed out to the findings recorded by the assessing officer in the case of Dinesh Kumar Bansal which is the subject matter of ITAT No. 31 of 2020 wherein the assessee had invested in Kailash Auto Finance. In his submission, the order of t....
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....passed by the Commissioner under Section 263 does not mention about how the assessments order was erroneous in so far as it is prejudicial to the interest of revenue. These words or phrases are contained in Section 263 of the Act. Merely because the Commissioner has not used these words or phrases occurring in Section 263 will not vitiate the assumption of jurisdiction. What is required to be seen is the content of the order and the discussion and findings rendered by the Commissioner. This is because the cardinal principle is that substance over form has to be preferred. The Commissioner while issuing the show cause notice had come to the prima facie conclusion that the assessing officer did not conduct an enquiry as required to justify such prima facie opinion. The Commissioner was required to set out as to why in his opinion the enquiry by the assessing officer was not proper or insufficient. On reading of the orders passed by the Commissioner under Section 263 which are the subject matter in ITAT No. 156 of 2021 and other similar matters, it is seen that the Commissioner has disclosed to the assessee as to why in his case the power under Section 263 has to be invoked. On readin....
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....er perspective considering the backgrounds in which the power was invoked. The tribunal brushed aside the surrounding circumstances which have led to such assessments or orders under Section 263. The manipulative practice adopted by the stock brokers and entry operators was not even adverted to by the tribunal and the entire matter was dealt with in a very superficial manner without dwelling deep into the core of the issue. The tribunal being the last fact finding authority was required to go deeper into the issue as the matter have manifested large scale scam. Thus, the orders of the tribunal are not only perfunctory but perverse as well. The exercise that was required to be done by the tribunal is to consider the totality of the circumstances because the transactions are shown to be very complex, the meeting of minds of the "players" can never be established by direct evidence and therefore the surrounding circumstances was required to be taken note of by the tribunal which exercise has not been done. We have considered as to whether in such an event, should the matter be remanded to the tribunal for fresh consideration. We have held that there is no such requirement and that is ....
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.... is a regular investor as was submitted to us by the learned advocates for the assessees that in any manner cannot improve the situation as the claim for LTCG has been only restricted to the shares which were purchased and sold by the assessees in penny stocks companies. Therefore merely because the assessee had invested in other blue chit companies had earned profit or incurred loss cannot validate the tainted transactions. It has been established by the department that the rise of the prices of the shares was artificially done by the adopting manipulative practices. Consequently whatever resultant benefits which accrue from out of such manipulative practices are also to be treated as tainted. However, the assessee had opportunity to prove that there was no manipulation at the other end and whatever gains the assessee has reaped was not tainted. This has not been proved or established by any of the assessee before us. Therefore, the assessing officers were well justified in coming to a conclusion that the so called explanation offered by the assessee was not to their satisfaction. Thus, the assessee having not proved the genuineness of the claim, the creditworthiness of the compan....
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....Income Tax Officers and in certain cases the assessments were not even reopened. Therefore, merely because in certain cases, appeals were preferred within the relevant time enabling, those assessees to avail the benefit of the V.S.V. Scheme can in no manner advance the case of the assessees before us. As has been argued before us by the learned Senior Standing Counsels, in the chain of events, there are three main person who are involved, the first of which is the entry operator who is said to have managed the overall scam as the entry operator controls several paper companies which have been utilized for routing the cash. The operator is also in control of some penny stock companies whose shares are listed on recognized stock exchanges. It is true that "penny stock" is not an offensive word or comes with a stigma. Penny stock is a stock which trades at a relatively low prices and market capitals. These stocks are highly speculative and they are categorized as high risk stocks largely due to lack of liquidity. Furthermore, the shares of the penny stock are closely held as the general public is not interested in these stocks due to the poor financials of the listed companies. It is ....
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....itted that the facts which have been set out in the memorandum of appeal, is wholly incorrect and does not pertain to the assessee- Gupta Agarwal. We have gone through the memorandum of appeal as well as the substantial questions of law suggested by the revenue and find the same to be not relatable to the assessee. This is on account of non-application of mind both by the Income Tax Department as well as the Officers of the Ministry of Law and Justice. More often we have stated that due care and caution has to be taken when appeals are drafted and filed before this Court and this is not the first case which has come up before us where the pleadings were irrelevant to the facts of the case. However, the substantial questions of law suggested by the revenue is with regard to the correctness of the order of the Tribunal in interfering with the order of the CIT(A) who affirmed the order of the Assessing Officer making the addition under Section 68 of the Act. Furthermore, we have to note that more than 90 appeals were allowed by the Tribunal in a single order and the facts of the 89 assessees were not noted by the Tribunal. In any event, the assessee, Mr.Gupta was quite happy with the ....
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....t is in this background that the human probabilities would assume significance. As observed earlier the doctrine of preponderance of probabilities could very well be applied in cases like the present one. We say human probabilities to be the relevant factor as on account of the fact that the assessees are of individuals or Hindu Undivided Families and the trading has been done in the name of the individual assessee or by the Karta of the HUF. None of the assessee before us have been shown to big time investor...." Our analysis in respect of assessee`s facts: In the assessee`s case under, the assessee has done risk analysis before making investments. The assessee has not taken blind decision to invest in the shares. After purchasing the shares, the assessee holds these shares for the period of seven years. Hence, assessee under consideration is an Investor. Thus, for such assessee it can not be said that he has engaged in taking accommodation entry to evade the taxes. Thus, assessee before us is a big time Investor, as he was holding the shares for a period of seven years. (ii) Observation of Hon`ble Calcutta High Court: "......It has been established by the ....
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.... (iii) In case of assessee`s appeal in ITA No. 185/SRT/2021: Assessee sold the shares after seven years. Hence the proximity of the time between the buy and sale of shares in case of these assessees ranges between 7 Years to 8 Years. It is not the case that assessee took the accommodation entry in penny stock, within a period of two or three months to book bogus LTCG or loss, to defraud the Revenue. The assessee, as on Investor, held the share for long time. Hence the assessee is an Investor and therefore should not be treated to engage in fraudulent activities/manipulation activities. We note that assessee had sold shares of M/s Global Capital Markets Limited during FY 2010-11 on 29.07.2010 after holding the shares for more than 7 years and claimed just Rs. 3,47,564/- as Long Term Capital Gain( LTCG). We also note that the amount of Rs. 3,47,564/- is not a significant amount. Therefore considering these facts, we are of the view that assessee under consideration, has not taken accommodation entry. Therefore, we note that findings of Hon`ble Calcutta High Court in the case of Swati Bajaj and others(supra) is not entirely applicable to the assessee`s facts under consideratio....
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.... 2,10,474/- and that the amount was claimed as exemption under section 10(38) of the Income-tax Act, 1961 (hereafter referred to as 'the Act') 3.1 The Assessing Officer made addition of the said amount. The entire transaction was treated as bogus and in the nature of penny stock. By adding Rs. 2,10,474/- under section 68 of the Act, total income was assessed at Rs. 5,21,964/-. 3.2 In appeal by the assessee before the Commissioner of Income-tax (Appeals), the issue was re-examined. According to the appellate authority the appellant assessee had furnished evidence to show that the shares were brought as genuine investment which was long back in the year 2000-01. As the shares were in the nature of old investment, they could not be treated as penny stock by any stretch of imagination. 4. The Income-tax Appellate Tribunal further examined the question in appeal preferred by the revenue and confirmed the view of the appellate authority noticing that the shares were purchased in the year 2001 and they were sold after long time in the year 2010-11. 5. The genuineness of investment in the shares by the assessee was substantiated by him by produci....
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.... "6. On a careful consideration of the submissions of the learned counsel for the assessee, we find that before taking up the issue involved in the question of law referred to us in this case for consideration, it is necessary to first decide the last submission of the learned counsel that this Court, while interpreting an All India Statute like IT Act, is bound to follow the decision of any other High Court and to decide accordingly even if its own view is contrary thereto, in view of the practice followed by this Court in such matters. Because, if we are to accept this submission, it will be an exercise in futility to examine the real controversy before us with a view to decide the issue, as in that case, in view of the Calcutta decision, whatever may be our decision on the question of law referred to us, we would be bound to follow the decision of the Calcutta High Court and answer the question accordingly. This submission, in our opinion, is not tenable as it goes counter not only to the powers of this Court to hear the reference and decide the questions of law raised therein and to deliver its judgment thereon but also to the doctrine binding precedent known as stare decis....
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....ld refer the question at issue to a larger Bench. 10. It is equally well settled that decision of one High Court is not a binding precedent on another High Court. The Supreme Court, in Valliamma Champaka Pillai vs. Sivathanu Pillai AIR 1979 SC 1937 dealing with the controversy whether a decision of erstwhile Travancore High Court can be made a binding precedent on the Madras High Court on the basis of principle of stare decisis, clearly held that such decision at best have a persuasive effect and not the force of binding precedent on the Madras High Court. Referring to the States Reorganisation Act, it was observed that there was nothing in the said Act or any other law which exhalts the ratio of those decisions to the status of a binding law nor could the ratio decidendi of those decisions be perpetuated by invoking the doctrine of stare decisis. The doctrine of stare decisis cannot be stretched that far to make the decision of one High Court a binding precedent for the other. This doctrine is applicable only to the different Benches of the same High Court. 11. It is also well settled that though there is no specific provision, making the law declared by the High....
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....re would be confusion in the administration of law and respect for law would irretrivably suffer." 14. Having decided whose decision binds whom, we may next examine what is binding. It is well settled that it is only the ratio decidendi that has a precedent value. As observed by the Supreme Court in S.P. Gupta & Ors. vs. President of India & Ors. AIR 1982 SC 149 (at 231), "It is elementary that what is binding on the Court in a subsequent case is not the conclusion arrived at in a previous decision but the ratio of that decision, for it is the ratio which binds as a precedent and not the conclusion". A case is only an authority for what it actually decides and not what may come to follow logically from it. Judgments of Courts are not to be construed as statutes [see Amarnath Omprakash vs. State of Punjab (1985) 1 SCC 345]. While following precedents, the Court should keep in mind the following observations in Mumbai Kamgar Sabha vs. Abdulbhai AIR 1976 SC 1455 (at 1467-68) : "It is trite, going by Anglophonic principles, that a ruling of a superior Court is binding law. It is not of scriptural sanctity but is of ratio wise luminosity within the edifice of facts whe....
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....to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by this Court, to support their reasonings. 16. In the above decision, the Supreme Court, also quoted with approval the following note of caution given by it earlier in Madhav Rao Jiwaji Rao Scindia Bahadur vs. Union of India AIR 1971 SC 530 (at 578) : "It is not proper to regard a word, a clause or a sentence occurring in a judgment of the Supreme Court, divorced from its context, as containing a full exposition of the law on a question when the question did not even fall to be answered in that judgment." It is thus clear that it is only the ratio decidendi of a case which can be binding-not obiter dictum. Obiter, at best, may have some persuasive efficacy. 17. From the foregoing discussion, the following propositions emerge : (a) The law declared by the Supreme Court being binding on all Courts in India, the decisions of the Supreme Court are binding on all Courts, except, however, the Supreme Court itself which is free to review the same and depart from its earlier opinion if the situation so warrants. What is binding is, o....
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....cisions of the Supreme Court which have interpreted the scope and ambit thereof. The fact that there is only one decision of any one High Court on a particular point or that a number of different High Courts have taken identical views in that regard is not at all relevant for that purpose. Whatever may be conclusion, the decisions cannot have the force of binding precedent on other High Courts or on any subordinate Courts or Tribunals within their jurisdiction. That status is reserved only for the decisions of the Supreme Court which are binding on all Courts in the country by virtue of Art. 141 of the Constitution." 39. Therefore, from the above judgment of Hon'ble High Court of Bombay in the case of Thana Electricity Supply Ltd (supra) it is abundantly clear that decision of a High Court will have the force of binding precedent only in the State or territories in which the Court has jurisdiction. Hence we note that Judgment of Hon`ble Calcutta High Court in the case of Swati Bajaj and others(supra) should not be applicable to the assessee as it is outside the territorial jurisdiction of Gujarat. However, the Judgment of Hon`ble Jurisdictional High Court of Gujarat in the case ....
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....ital Markets Limited 511585 530263 Regency Inv. Global Cap M 2. Total Trade Value (Rs.) 44,57,85,325 2,04,27,43,038 5,02,78,35,316.99 The information revealed that during the year he had sold 5000 share of Rs.3,85,006/- in script name Global Cap M and code No. 530263 during the F.Y. 2010-11 relevant to A.Y.2011-12. On receipt of information, notice u/s 133(6) was issued to the assessee asking him to furnish the details of capital gain for the share transaction. However, no reply has been furnished by the assessee. On verification of the computation of income, it is seen that the assessee has not declared any capital gain and also noticed that claimed exemption of Rs. 3,47,564/- In Schedule E1 as exempt income. 3. In view of the decision of the Hon'ble Gujarat High Court in the case of Aradhan Estate (P) Ltd. vs. Dy. Commissioner of Income-tax wherein it was held that report received from investigation wing has a live link for formation of belief in respect of income escaped assessment. 4. In view of the above, I have reason to believe that an amount of Rs.3,85,006/- had escaped of the assessment within the mean....