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2025 (2) TMI 1769
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....e circumstances of the case and in law, ld. CIT(A) grossly erred in confirming the action ld.AO in reopening the assessment u/s 147 of the Income Tax Act, arbitrarily. 2.1 That, ld.CIT(A) has further erred in confirming the action ld.AO in reopening the assessment on the ground that assessee entered into transaction in the shares of Midland Polymers PMC Fincorp Ltd., though assessee himself had offered short term capital gain on such shares under Income Tax Declaration Scheme, and paid tax @45%, which stood accepted. However the case is re-opened by holding the investment made in acquisition of shares as unexplained arbitrarily. Since the said investment was made out of regular books of account thus there was no escapement of income at all and therefore reopening of assessment is not in accordance with law. 3. On the facts and in the circumstances of the case, the Ld.CIT(A) has grossly erred in confirming the addition of Rs. 70,59,315/- (being cost of purchase of shares) u/s 68 of the I. T. Act, 1961 by alleging that assessee had paid taxes only on short term capital gain of Rs. 15,72,409/- and not on entire value of transactions i.e. 86,31,724/-. Appellant prays ....
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....D-MIDPOLY and security code-531597, was a penny stock company which had allowed itself to be used as such by the operators, entry/exit providers to facilitate the beneficiaries for claiming business loss/LTCG/STCL for the purpose of the introducing their unaccounted income in the books of account or to create fictious losses in the return of income to avoid paying due taxes. As per the evidences collected and impounded during survey proceedings, the trade data of M/s Midland Polymers Ltd was retrieved from BSE Limited. The same was analyzed and analysis of the data has proved that scrip of M/s Midland Polymers Ltd. was used to provide Bogus Long Term Capital Gain/Loss to the beneficiaries; by receiving cash and the purchase and sale of share was done to route the unaccounted income into legal money. The financials of the company for the relevant period do not show any substantial change to support by financial fundamentals of the company. Both purchase and sale of the shares are concentrated with few persons / entities. The entry providers do not have creditworthiness. Subsequently, it is noticed that the assessee is one of the beneficiaries and traded in the scrip of M/s Midland P....
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.... It is thus seen that no circumstances have been explained nor any evidence for existence of any circumstances which prevented the assessee from filing the appeal in time has been filed. 5.4 The aforesaid application, therefore does not explain reasons much less showing and demonstrating sufficient cause. It is a settled position of law that the assessee is duty bound to explain each day's delay after the last date of limitation. It is a clear case of sheer negligence for non-pursuing available remedy in time. It is for the appellant concerned to explain the delay and it is not the function of the appellate authorities to find the cause of delay. The appellate authority has to examine whether sufficient cause has been shown by the party for condoning delay and whether such cause is acceptable or not. In that view of the matter, the Tribunal cannot condone the delay without asking the party concerned to explain the delay, by giving its own reason for the delay [DCM Ltd. vs. State of Tamil Nadu, (1995) 96 STC 263, 264 (Madras)]. 5.5 In this regard, it will be relevant to examine how the Courts have dealt with similar cases. A reference may be made to decision of....
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.... Supreme Court was satisfied that sufficient cause exists for the delay. Therefore, the delay was condoned only after the Court came to the conclusion that the sufficient cause was shown and proved and which has been accepted by the said Court. 12. As far as the present case is concerned, the assessee has never made proper plea for sufficient cause giving evidence and proof beyond reasonable doubt for the delay, that too, for inordinate delay of 558 days in filing the appeal (emphasis supplied) 5.5.2 In the subsequent paragraph 14, Hon'ble Court, observed as under "14. At this juncture, we have to be guided by the judgment in the case of T.N.M. Bank Ltd. v. App. Auty [1990] 1 LLN 457. In that particular case, the Division Bench of this court has held that, "......We are of the view that the question of limitation is not merely a technical consideration. Rules of limitation are based on principles of sound policy and principles of equity. Is a litigant liable to have a Damocles' sword hanging over his head indefinitely for a period to be determined at the whims and fancies of the opponent?" In that decision, this Court has held th....
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....lay. Reliance is placed on the decision of Hon'ble Calcutta High Court in the case of CIT v. Metal Distributors Ltd. [1988] 172 ITR 356. This case was referred to and considered by Hon'ble ITAT Chandigarh in para 6.2 in the case of ACIT vs. Ranbir Chemicals 114 ITD 121. Para 6.2 is reproduced below: "6.2 Hon'ble Calcutta High Court in the case of CIT v. Metal Distributors Ltd. [1988] 172 ITR 3561 held - "that in the absence of proper explanation for the delay in presenting for leave to appeal to the Hon'ble Supreme Court, the delay could not be condoned." On the similar matter and facts, the Hon'ble Rajasthan High Court in the case of State of Rajasthan v. Chaudhury Construction AIR 1988 Raj. 123 held- "that in the absence of material particulars as to why delay had been caused, the delay could not be condoned by merely accepting the explanation that the delay occurred in the Government Office." (emphasis supplied) 5.8 In view of the foregoing discussion, factual matrix and the judicial precedents, I find that no case has been made out by the assessee for existence of sufficient cause in the application for condonatio....
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....ore the ld. CIT(A). 6. Now coming to the merits of the dispute and the ld. AR of the assessee submitted a detailed written submission and paper book. The main contention raised by the assessee that once the income which the alleged to have been arise out of the penny stock has been settled down by filling a declaration under Income declaration scheme. The source of investment so made by the assessee cannot be taxed u/s. 68 of the Act and thereby the ld. AO is taxing the whole receipt without giving the benefit of the money which the assessee invested. Ld. AR of the assessee submitted that the similar issue was raised in the case of his wife and the revenue has dropped that proceeding. Based on that fact ld. AR of the assessee submitted to consider the appeal filed by the assessee challenging that amount added which was already paid by declared sources. The written submission so filed and relied upon by the assessee reads as under : "Ground of Appeal No. 1: In this grounds of appeal, assessee has challenged the action of Ld. CIT(A) in dismissing the appeal of assessee without condoning the delay in filing of appeal and not deciding the matter on merits. ....
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....ce u/s 271(1)(c) of the Act. Assessee in support of his claim along with condonation delay application also provided the affidavit as per the law, It is further submitted that even if ld. CIT(A) was not satisfied with the reasons provided by the assessee, ld. CIT(A) could have asked assessee to furnish other evidences in support of his claim. However, ld. CIT(A) without providing opportunity to assessee to justify the delay in filing the appeal, arbitrarily held that there is no sufficient cause involved. Thus depriving assessee from right to be heard and same is against the principle of natural justice. It is also submitted that ld. CIT(A) has relied upon various case laws, however all the case laws favors the assessee as all the case laws states that delay should be condone and matter should be decided on merits when there is a sufficient cause which resulted in delay in filing of the appeal. Further reliance is placed on the following judicial pronouncements - Meenachil Taluk Cooperative Employees Cooperative Society Ltd. vs. Commissioner of Income-tax. (Appeals) [2024] 165 taxmann.com 366 (Kerala High Court)[25-06-2024] Section 249, read with....
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....t of which appeal could not be filed on time. Even if ld. CIT(A) was not satisfied with the explanation provided an opportunity should have been given to assessee to furnish the necessary evidence before it and the case should be decided on merits. It is further also submitted that it is evident that all the facts are on record and tt is therefore requested before your honours that since all the facts relevant to the appeal under consideration were already filed before ld.AO, appeal may please be decided on merits of the case instead of restoring the same to the file of Ld. CIT(A) as it will cause genuine hardship and only postpone the proceedings. Reliance is placed on the following case laws: Hon'ble Gujrat High Court in the case of 'Saurashtra Packaging (P.) Ltd v. Commissioner of Income-tax [1993] 204 ITR 443 (GUJ.)' Section 254, read with section 41(1) of the Income-tax Act, 1961 - Appellate Tribunal - Order of - Assessment year 1984-85 - Assessee-company took over running business of a firm in which it was a partner - During relevant accounting period assessee received refund of sales-tax - ITO held that said refund was assessable as income....
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....save time." Ground of Appeal No. 2 & 2.1: In these grounds of appeal, assessee has challenged the action of Ld. CIT(A) is dismissing the appeal of assessee, without considering the fact that ld. AO has grossly erred in reopening of assessment u/s 147 of the Income tax Act, even though there assessee has already offered the gain earned on sale of Shares of M/s Midland Polymers Ltd. under the Income Disclosure Scheme 2016 which is also accepted by the ld. AO in the order u/s 148A(d) of the Act. Brief facts pertaining to these ground of appeal, as stated above, is that assessee has not entered into any transaction related to penny stock shares and transactions entered into are genuine and no record of whatsoever nature was provided by the Ld. AO to the assessee for cross examination and further there is no escapement of Income in the hands of assessee, as assessee has already disclosed the Short Term Capital Gain earned on sale of shares of M/s Midland Polymers Ltd while filing the return of income u/s 139(1) of the Act. Thereafter IDS-4 form (APB 61-62) was issued by the Income Tax Department for the year under consideration, wherein the short term capital ....
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....r issuance of notice u/s 148 of the Act for A.Y. 2013-14." In the instant case, it is submitted that ld. AO acted in whims and fancy manner by taking two separate views on exactly identical facts i.e. same assessment year, same share, same nature of income i.e. "Capital Gains" taking a divergent view in case of two assessee's of one family, is beyond judicial prudence. The Hon'ble Supreme Court has held in the case of Parashuram Pottery Works Co. Ltd. Vs. ITO (1977) (106 ITR 1) that there must be a point of finality in all legal proceedings and the stale issues should not be reactivated beyond a particular stage and the lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity and in the case under consideration this act of the department in again reopening the case on the issue which is not only examined in the assessment completed u/s 143(3) but also stood accepted by the department by issue of certificate in IDS, 2016 is an attempt to unsettle the already accepted and settled issue. It also submitted that ld. AO ITO, Ward 5(2), Jaipur in the case of M/s N.K. Agarwal & Sons, PAN: A....
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....Remarks Sales made in the month of March 2013 33,740 86,23,055/- 76-80 (Less) Purchases made in the month of March 2013 33,740 70,39,711/- 81-86 Capital Gain 15,72,409/- 58-62 Offered in IDS At this juncture, reliance is placed on decision of Hon'ble Apex court in the case of Killick Nixon Ltd., Mumbai vs Deputy Commissioner Of Income Tax, wherein it has been held as under: "As far as the provisions of KVSS are concerned, we agree with the contention of the learned Senior Counsel for the assessee that the order to be made by the Designated Authority under Section 90 is a considered order which is intended to be conclusive in respect of tax arrears and sums payable after such determination towards full and final settlement of tax arrears. Once the declarant makes payment of the amount so determined under Section 90, the immunity under Section 91 springs into effect. We are also of the view that upon such declaration being made, tax arrears being determined, paid and certificate issued under the KVSS, there is no jurisdiction for the Assessing Officer to reopen the assessment by a notice under Section....
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....er Section 143(3), upon the declaration being accepted has worked itself out and as on 13th October, 2017, the tax, sur-charge and penalty having been fully paid in terms of the declaration issued in Form 4, there is nothing more to be revised by the PCIT by invoking his power under the Income tax Act. If such revision of assessment is permitted, it would work against the object and purpose of IDS. Section 189 of the Finance Act, places an embargo on the assessee to the effect that an assessee who is a declarant under the IDS shall not be entitled, in respect of undisclosed income, declared or any amount of tax and sur- charge paid thereon, to reopen any assessment or re-assessment made under the Income tax Act." Hon'ble Income Tax Appellate Tribunal, Amritsar bench, Amritsar in the case of Smt. Lata Narang Vs Principal Commissioner Of Income Tax wherein it has been held as under: "5. That having regard to the facts and circumstances of the case, Hon'ble Principal Commissioner of Income Tax has erred in law and on facts, ignoring the fact that assessee has opted for Vivad Se Vishwas scheme for dispute resolution and proceedings under the scheme are completed a....
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....n of Rs. 70,59,315/-. And thereafter same has been sold in March 2013 itself (APB 76-86) for total consideration of Rs. 86,31,724/- and realized a short term capital gain of Rs. 15,72,402/- which was offered for taxation in return of Income u/s 139(1) of the Act. Thereafter when the Income Disclosure Scheme 2016 was introduced by the Government of India, assessee in order to obtain peace of mind, suo-moto offered the gain on such transaction for taxation the rate of 45% and necessary form under IDS, 2016 i.e Form 2,3 & 4 were issued by the department and the assessment had attained the finality. However, ld.AO, on the basis of certain information obtained as a result of Survey conducted by the Investigations wing of the department in the case of third parties held that M/s Midland Polymers Ltd was a penny stock company and accordingly held the Entire Sale consideration after providing credit of Short Term Capital Gain which offered for Taxation under IDS, 2016 as bogus and made addition u/s 68 on that account. With this background, it is submitted that during the course of assessment proceedings. On the basis of general modus operandi, and statements recorded by i....
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....n of Rs. 15,72,409/- earned on equity shares of MIDPOLY in the Income Declaration Scheme in the year 2016 and relevant taxes @ 45% has also been paid thereon and same fact has also been acknowledged in the order passed u/s 148A(d) of the Income Tax Act, 1961 dated 21.07.2022. * That reopening assessment again solely on the basis of the so-called statements of third parties who are completely unknown and unrelated to the assessee. It must be noted that the statements of the said third parties were not recorded by the Assessing Officer of assessee during the course of assessment proceedings, but were recorded in some other proceedings carried out by the Investigation Wing of Indore/Hyderabad. In the present case, the Ld. AO has based his entire assessment order upon the statements of third parties which were recorded by some other authorities and that too behind the back of the assessee. * That it can be seen from the assessment order itself, no corroborative material mentioning name of assessee being beneficiary of accommodation entry, was brought on record by the Ld. AO during the course of assessment proceedings. * That in support of the transaction unde....
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....t amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted f....
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....bills, payment of consideration through bank, DEMAT account, allotment of amalgamated shares, sale of shares through stock exchange at prevailing price, payment of STT etc. Hon'ble Ahmedabad bench of ITAT also in the case of Smt. Sunita Jain vs ITO in ITA No 501/AHD/2016 quashed the assessment order by placing reliance on Apex Court judgement in the case of Andaman Timber (cited supra) as entire assessment was based upon the statements of Sh. Mukesh Choksi, which were neither supplied to assessee nor was opportunity of cross examination was provided. Moreover recently Hon'ble Supreme Court of India in the case of PCIT vs Kuntala Mohapatra in SLP No. 5269/2024 dated 04.03.2024 has dismissed the SLP of Revenue and affirmed the order of the Hon'ble High Court of Orissa wherein Revenue appeal was dismissed and matter was decided in the favour of assessee, in respect of same issue i.e. LTCG claim. Relevant operating para of High Court Order is reproduced as under for ready reference- "3. The impugned order of the ITAT has sufficiently dealt with the factual details concerning the Respondent-Assessee. The question was regarding the claim of long-term capital ga....
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....pugned order of the ITAT that calls for interference by this Court. The appeal is accordingly dismissed." On perusal of aforesaid order, it is submitted that the case of the assessee is on better footings, wherein assessee has duly disclosed the Short Term Capital Gain earned from the sale of shares in her original return of Income and offered for taxation. Further also assessee suo-moto offered the short term capital gain earned on sale of shares under IDS 2016 and paid tax thereon at the rate of 45%.. It is also submitted that similarly assessee was also never provided the opportunity to cross examine the persons on whose statements reliance is placed and based on which additions were made, despite of specific request made to ld. AO. Thus assessee's case is squarely covered by the recent judgement of Hon'ble Apex Court and looking into principle of natural justice addition made deserves to be deleted. Thus, in light of above, it is submitted that the impugned assessment order is clearly bad in law and deserves to be set aside. At this juncture, attention of the Hon'ble Bench is invited to the recent judgement of Hon'ble jurisdictional High Court in the ....
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....levant documentary evidence to establish genuineness of the transaction and there is no contrary evidence to doubt the correctness of the evidences produced by the assessee and therefore treating the transaction of purchase and sale as sham is not justified. Further, learned ITAT has also relied upon the decision of the jurisdictional High Court reported in 2018 (99) taxmann.com 451 (Raj.) titled as Commissioner of Income Tax, Jaipur Vs. Smt. Pooja Agarwal, wherein learned ITAT has relied upon the judgment of Division Bench involving the same facts wherein the Division Bench has dismissed the appeal filed by the Revenue. In the light of above facts, this Court is of the view that the order of learned ITAT requires no interference and therefore, the appeal is dismissed." Hon'ble Rajasthan High Court in the case of CIT vs Pooja Agrawal reported in 160 DTR 198 has categorically held by Hon'ble Court that so far as assessee has furnished all the supporting documents in the shape of copy of contract notes regarding purchase and sale of shares, copy of D-mat account etc. the fact of transaction entered into cannot be denied simply on the ground that in his statements ap....
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....t and considering that no contrary material produced by the department. No case is made out for interference. Moreso, when there is no case pleaded of perversity. No questions of law much less the substantial questions of law arises. 8. The appeal is dismissed." Hon'ble Jaipur bench of ITAT in the case of ACIT vs Saroj Parwal in ITA No. 753/JP/19 has also decide the issue in favour of the assessee. Recently Hon'ble Jaipur bench of ITAT vide order dated 31.08.2022 in the case of Manohar Lal Chug vs. ITO in ITA No. 312/JP/2021 has held that: "6.3. The issue of penny stock and consequent additions made has elaborately dealt with by ITAT Jaipur Bench in the case of Pramod Jain & Others (supra) and relying on the decision of Hon'ble Rajasthan High Court in the case of CIT vs. Pooja Agarwal, 160 DTR 0198 (Raj.) deleted the addition by observing as under :- "In view of the above facts and circumstances of the case, we are of the considered opinion that the addition made by the AO is based on mere suspicion and surmises without any cogent material to show that the assessee has brought back his unaccounted income in the shape of long term capital....
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....ransactions cannot be held as sham. It is pertinent to note here that in the case before Hon'ble Punjab and Haryana High Court, shares were purchased for cash, then too, transaction was held as genuine as all the documents were in favour of assessee,. Thus instant case of assessee is far better as payment for purchase of such shares were made through banking channels. It is further submitted that the other reason of addition is the enquiry made by SEBI and thereafter suspension of the trading of shares of "Midpoly" by SEBI cannot be considered as conclusive evidence to hold the assessee as liable for making addition in the income tax proceedings. In this regard reliance is placed on the decision of Hon'ble Jharkhand High Court in the case of CIT v. Arun Kumar Agarwal (HUF) (2013) 085 DTR 0219 wherein it has been held as under: 10. We have considered the submissions of the learned counsel for the parties and we are of the considered opinion that the learned Assessing Officer was much influenced by the enquiry report which may has been brought on record by the efforts of the Assessing Officer and that enquiry report was prepared by the SEBI and fro....
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.... decisions: Pr. CIT vs Jatin Investment Pvt. Ltd. (Delhi High Court) S 68 Bogus Capital Gains: A transaction cannot be treated as fraudulent if the assessee has furnished documentary proof and proved the identity of the purchasers and no discrepancy is found. The AO has to exercise his powers u/s 131 & 133(6) to verify the genuineness of the claim and cannot proceed on surmises." CIT vs Mukesh Ratilal Marolia (Bombay High Court) S.10(38)/69: Fact that a small amount invested in "penny" stocks gave rise to huge capital gains in a short period does not mean that the transaction is "bogus" if the documentation and evidences cannot be faulted. Surya Prakash Toshniwal HUF vs ITO (ITAT Kolkata) Bogus capital gains from penny stocks: Long Term capital gains claimed exempt u/s 10(38) cannot be treated as bogus unexplained income if the paper work is in order. The fact that the company whose shares were sold has violated SEBI norms is not traceable does not mean that the assessee is at fault. Farrah Marker vs ITO (ITAT Mumbai) S. 10(38)/68: Long Term capital gains on sale of "penny" stocks cannot be treated as bogus & u....
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....stly, the transaction entered into by the assessee and the STCG arising therefrom is completely genuine as has been submitted above in detail in grounds of appeal above. Further it is relevant to state that assessee only went for IDS, 2016 only to obtain peace of mind and to avoid litigation on account of speculation going on with regard to script "M/s Midland Polymers Ltd". Thus, in view of the same there arises no question of any commission payment. Secondly, this addition also is solely based upon the statements of third party absolutely uncorroborated in much as there is no material available on record to show any such payment. No such material has been referred by the Ld. AO and merely on the basis of assumptions and presumptions; the impugned addition has been made. Therefore, when the capital gain has already been established as genuine which was treated as bogus by Ld. AO solely on the basis of uncorroborated statements of a third party, no further addition could have been made solely on the basis of such statements on assumptions and presumptions. Hence, it is prayed that the addition of Rs. 2,11,779/- respectively deserves to be deleted. " 7. To suppo....
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....sidered the reasons advanced by the assessee and thereby condone the delay. Vide ground no. 3 the only issue in this case that whether the action of the ld. AO taxing the purchase price which was paid from the declared sources can also be subjected to tax gain out of the penny stock as the assessee has already settled the amount of income by filling an income declaration as announced by the revenue and thereby that dispute was settled by the assessee. Now the revenue in the re-opened proceeding intended to tax the profit plus purchase price so as to tax the entire receipt as from the undisclosed sources. The issue is narrated by way of chart herein below : Details Quantity Amount (Rs. ) APB Remarks Sales made in the month of March 2013 33,740 86,23,055/- 76-80 (Less) Purchases made in the month of March 2013 33,740 70,39,711/- 81-86 Capital Gain 15,72,409/- 58-62 Offered in IDS As the assessee has paid the purchase price from his disclosed source the same cannot be taxed and the income for Rs. 15,72,409/- has already settled in the IDS the action of the revenue in taxing the purchase price again ....