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2025 (2) TMI 1938
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.... of the parties, both the appeals were clubbed, heard together and are decided by common order to avoid conflicting decision. For appreciation of facts, appeal in ITA No. 552/SRT/2024 is treated as lead case. The assessee has raised following grounds of appeal: "1. On the facts and circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax Appeal ADDL/JCIT(A)-7, Kolkata was not justified in dismissing the order without considering the facts of the case defying natural justice to the appellant. 2. On the facts and circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax Appeal ADDL/JCIT(A)-7, Kolkata has erred in confirming the action of Income Tax Officer in re-opening the assessment u/s 147 of the Act and issuing notice u/s 148 of the I.T. Act, 1961. 3. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax Appeal ADDL/JCIT(A)-7, Kolkata has erred in upholding the addition of Rs. 6,81,214/- on account of long term capital gain treating such exempt LTCG as unexplained cash credit u/s 68 of the....
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....ssee sold shares of three instalments on 10.07.2010, 10.08.2010 and 13.08.2010. The holding period is more than seven years and the assessee claimed only Rs. 6,81,214/- as LTCG. The complete details with acquisition of sales of purchase through banking channel and was sold through recognized Stock Exchange after payment of STT. The assessee sold shares much prior to splitting the shares of Global Capital Market Ltd. in ratio of 1:10 in the month of November, 2010 and is not beneficiary of any same transactions. The price of shares was raised upto Rs. 224/- per share i.e., even after splitting, the same fact remains the same assessee being a bona fide holder of shares sold such shares at an average price of Rs. 77.91/- Rs. 74.44/- and Rs. 75.93/- per share. The assessee furnished complete details to prove the genuineness of the transactions. The transactions of Global Capital Market Ltd., is still being conducted in Bombay Stock Exchange. The Ld. AR of the assessee submits though assessee has already furnished complete details in the form of contract note of purchase, bank statement, holding statement from the year ending on 31.03.2004 and 31.03.2010. The Ld. AR of the assessee furt....
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....sessment proceedings, which goes to the root of the matter needs to be admitted. Hence, we hereby allow the assessee to raise additional ground of appeal. Since this ground raises question about the assumption of jurisdiction and validity of reassessment order itself, therefore we thought it appropriate to take up and decide this additional ground first. 17. We have gone through the facts of the case, the reasons recorded for reopening u/s 147 of the Act, the submission and the various decisions of the Courts including those relied upon by the ld Counsel for the assessee. Before we proceed to adjudicate the issue relating to validity of reassessment proceedings, we would like to examine the reasons recorded by 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 C....
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....sity comes to notice to turn around and say 'you accepted my lie, now your hands are tied and you can do nothing'. It would, be travesty of justice to allow the assessee that latitude." 21. The Hon'ble Gujarat High Court in the case of Dishman Pharmaceuticals and Chemicals Ltd. vs. DCIT (OSD), Ahmedabad (2012) 346 ITR 228 (Guj) has summed up the requirements of the law, in such circumstances and has held as following: "There is no set format in which such reasons must be recorded. It is not the language but the contents of such recorded reasons which assumes importance. In other words, a mere statement that the Assessing Officer had reason to believe that certain income has escaped assessment and such escapement 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 Cour....
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....ith the provisions of law. Therefore, based on these facts and applicable precedents to these facts, we dismiss the additional grounds raised by the assessee. 26 In the result, additional ground nos.1 and 2 raised by the assessee are dismissed. 27. Now coming on merits of the case. Though facts have been discussed in detail in the foregoing paragraphs, however in the succinct manner, the relevant facts and background are reiterated in order to appreciate the controversy and the issue for adjudication. The assessee has submitted before us, chart showing purchases and sale of shares and the period of holding and numbers of shares, appeal- wise, which are reproduced below: (i) In respect of ITA No. 183/SRT/2021 for AY.2011-12, the assessee has submitted the following chart: CHART DEPICTING PURCHASE AND SALE DETAILS Purchase Date 31.03.2003 Holding Statement as Proof of Purchase at Page No. 5 of Paper Book Index Number of shares purchased 12000 Purchased from I.C. Baid & Co. off market. SEBI registration No. IBN030669417 Purchase Consideration 82,975/- Bank Statement showing Purchase payment on 02.04.2003 at Page No. 8 of Paper B....
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....ket. SEBI registration No. IBN030669417 Purchase Consideration 31,221/- Bank Statement showing Purchase payment on 02.04.2003 at Page No. 7 of Paper Book Index (Two script purchased of Rs. 31,221 and Rs. 8,099, Total-Rs. 39,320/-) Average Purchase Price 5.58 Holding Period 7 years 31.03.2003 to 15.07.2010, Transaction Statement at Page 8-10 of Paper Book Index Sale Date 07.07.2010 and 15.07.2010 Sales Contract Note at Page No. 1-2 of Paper Book Index Number of shares Sold 3000 and 2600 Sold through SHCIL Services Limited on recognised Stock Exchange- SEBI registration No. IBN011253839. Sale Consideration (Net of STT) 2,28,682.98/- and 2,01,804.94/- Bank Statement showing Sale proceeds received on 18.07.2010 and 21.07.2010- vide cheque no. 95551 and 794024 at Page No. 3 of Paper Book Index Average Sale Price (Net of STT) 76.20 and 77.62 - Average Sale Price (Total Sales Consideration) 76.8 and 78.2 - 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 introduc....
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....o of 1:10 in the month of November 2010 and the price rose up after such split of shares and the assessee had sold its shares before such split in August 2010 itself. Hence this clearly implies that assessee was not involved into any bogus transactions. Had the assessee been involved, he would have known the activity of split to be carried out and why would he sell shares before such split of shares after which the price increased to Rs. 225 almost. This further implies that assessee had done a bona fide transaction and had sold 5,000 shares at a price of Rs. 77 per share and even when the price rose upto Rs. 224 per share after split (i.e almost Rs. 2,240/- per share before split). In such a scenario any person involved in sham transactions and wanting to earn huge profits would never miss such an opportunity, however the assessee being a bona fide 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,....
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....s comprising contract notes, brokers, banking details in support of the genuineness of the transactions. The shares are sold by assessee's broker on BSE platform hence source is BSE's clearing system. The transactions on the BSE platform and settlement system who are responsible for the transactions of the demat account and prevailing price on public domain prove the genuineness of the transactions. 34. We are aware of the recent Judgment of Penny Stock of Hon'ble Calcutta High Court in the case of Swati Bajaj and others in IA No. GA/2/2022, dated 14.06.2022. The important findings of the Hon'ble Court are reproduced below: "94. At this juncture, it would be relevant to note the powers executable by this Court under Section 260A 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 w....
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....ew that it was necessary for the AO, before making the addition under Section 68, to prove that the share application monies actually emanated from the assessee and represented undisclosed income of the assessee. He, however, did not cite any of those decisions. In any case the law having been laid down by the Supreme Court in the judgments cited above, we do not think that there is any merit in his submission. A perusal of the order of the Tribunal shows that it has gone on the basis of the documents submitted by the assessee before the AO and has held that in the light of those documents, it can be said that the assessee has established the identity of the parties. It has further been observed that the report of the investigation wing cannot conclusively 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 creditworthines....
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....l has been passed in appeals filed by the assessees against the orders passed by the Commissioner invoking the power under Section 263 of the Act. The Learned Senior Counsel for the assessee submitted that the assumption of jurisdiction by the Commissioner under Section 263 is thoroughly flawed that there has been violation of principles of natural justice in as much as the Commissioner has pre-decided the issue even at the stage of issuance of show cause notice. 99. While proposing to invoke the power under Section 263 of the Act, the question as to whether the Commissioner was justified in invoking the power under Section 263 has to be decided based on facts of each case. The assessee cannot be allowed to contend that the language employed in the orders 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 or....
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....e manner in which the enquiry should have been conducted. The entire case before the department was the genuinity of the claim for LTCG/STCL and the basis was unhealthy and steep rise of the price of the shares of mostly the paper companies though listed before the stock exchanges their shares were very rarely traded and in the background of these facts the enquiry should have been conducted by the assessing officer. Therefore we are of the clear view that the assumption of jurisdiction under Section 263 of the Act by the respective Commissioners was fully justified and are shown to be proper exercise of power. The tribunal while interfering with the orders of the Commissioner once again posed a wrong question to itself and failed to approach the matter in the proper 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 issu....
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....y the revenue, rightly the mind of the assessee as an investor was taken note to deny the claim for exemption. It 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. This is evident from the income details of the assessee which has been culled out by the respective assessing officers. Assuming that the assessee 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 transaction....
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....riod of limitation, their vested right to avail the benefit of the Vivad Se Viswas Scheme was taken away. We have rejected such an argument firstly by holding that there is no vested right for an assessee to come under the Scheme and this finding was rendered by us after examining the provisions of the V.S.V. Act, secondly we have held that cases cannot be decided based on hypothesis nor can the Court read the mind of the assessee that in the event, the revenue had filed appeal on time, the assessee may have availed the benefit under the V.S.V. Scheme. In fact, we find that the Comptroller and Auditor General has also severely commented upon the action taken by the Income Tax Department on such issues and that no uniform procedure had been followed by the various 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 w....
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....cheme of merger is being misused. Though the scheme of merger is approved by the Company Court, in the event it is found that such merger was done/ obtained by playing fraud, the Company Court is empowered to revoke the order and it appears that the Income Tax Department has not taken any steps in this regard to approach the Company Court or the Tribunal with such a prayer. Thus, we have no hesitation to hold that the orders passed by the CIT(A) affirming the orders passed by the Assessing Officers as well as the orders passed by CIT under Section 263 of the Act were proper and legal and the Tribunal committed a serious error in reversing such decisions. Mr. Arif Ali, learned Advocate appearing for the appellant in ITAT No. 44 of 2020 (Assessee-Gupta Agarwal) submitted 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 th....
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....on'ble Calcutta High Court: " ... The assessees cannot be heard to say that they had blindly followed advice of a third party and made the investment. Selection of shares to be purchased is a very complex issue, it requires personal knowledge and expertise as the investment is not in a mutual fund. None of the assessees before us have shown to have to made any risk analysis before making their investment in a "penny stock". If according to them they have blindly taken a decision to invest in insignificant companies they having done so at their own peril have to face the consequences. Thus, the conduct of the assessees before us probabilities the stand taken by the revenue, rightly the mind of the assessee as an investor was taken note to deny the claim for exemption. It 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 as....
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....he time between the buy and sale operations and also the sudden and steep rise of the price of the shares of the companies when the general market trend was admittedly recessive and thereafter arrived at a conclusion which in our opinion is a proper conclusion and in the absence of any satisfactory explanation by the assessee, the Assessing Officers were bound to make addition under Section 68 of the Act .... " Our analysis in respect of assessee's facts: In the assessee's case under consideration, the assessee's proximity of the time between the buy and sale of shares are as follows: (i) In case of assessee's appeal in ITA No. 183/SRT/2021: Assessee sold the shares after seven years. (ii) In case of assessee's appeal in ITA No. 184/SRT/2021: Assessee sold the shares after eight years. (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 perio....
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....to the submission requires examination. "Whether on the facts and circumstances of the case and in law, the decision of Appellate Tribunal is ex facie perverse because the Appellate tribunal deleted the addition of Rs. 2,10,474/- made on account of bogus long term capital gain, without appreciating the entire gamut of fact that the assessee transacted in penny stock namely M/s. Devika Proteins Ltd. thus earning bogus Long term Capital Gain and claiming it to be exempt under section 10(38) of the Income- tax Act?" 3. The assessee filed the return of income for the assessment year 2011-12 on 29-3-2012 declaring his total income Rs. 3,11,490/-. Subsequently the assessment was reopened as information was received that assessee has indulged into script of shell company and had claimed long term capital gain on sale of shares of Devika Proteins Limited to the tune of Rs. 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 R....
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....and sold in 2010-11. The shares were retained for more than seven years and were sold after such long time. These circumstances suggest that the investment was not bogus. The shares were purchased in order to invest and not for the purpose of earning exempted income by frequent trading in short time. 38. We note that above judgment of Hon'ble Gujarat High Court in the case of Jagat Pravinbhai Sarabhai (supra) is binding judgment, on the Tribunal situated in Gujarat, as it is the judgment of Hon'ble jurisdictional High Court. At this juncture, it is useful to refer to the judgment of Hon'ble High Court of Bombay in the case of CIT v. Thana Electricity Supply Ltd. (1994) 206 ITR 727 (Bom.) wherein after considering various judgments of Supreme Court laid down the following propositions with regard to binding precedent. The findings of the Hon'ble Court are reproduced below: "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 ....
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.... "The law declared by the Supreme Court shall be binding on all Courts within the territory of India." In that view of the matter, all Courts in India are bound to follow the decisions of the Supreme Court. 9. Though there is no provision like Art. 141 which specifically lays down the binding nature of the decision of the High Courts, it is well accepted legal position that a Single Judge of a High Court is ordinarily bound to accept as correct, judgments of Courts of co-ordinate jurisdiction and of Division Benches and of the Full Benches of his Court and of the Supreme Court. Equally well settled is the position that when a Division Bench of the High Court gives a decision on a question of law, it should generally be followed by a co-ordinate Bench of the same High Court. If the co-ordinate Bench in the subsequent case wants the earlier decision to be reconsidered it should 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 w....
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....iew instead of referring the matter to a larger Bench." 13. The above decision was followed by the Supreme Court in Baradakanta Mishra vs. B. Dixit AIR 1972 SC 2466 wherein the legal position was reiterated in the following words (at 2469) : "It would be anomalous to suggest that a Tribunal over which the High Court has superintendence can ignore the law declared by that Court and start proceedings in direct violation of it. If a Tribunal can do so, all the subordinate Courts can equally do so, for there is no specific provisions, just like in the case of Supreme Court, making the law declared by the High Court binding on subordinate Courts. It is implicit in the power of supervision conferred on a superior Tribunal that all the Tribunals subject to its supervision should conform to the law laid down by it. Such obedience would also be conducive to their smooth working; otherwise there would be confusion in the administration of law and respect for law would irretrievably 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....
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....purpose of disposing of the particular case. This position has been made further clear by the Supreme Court in a recent decision in CIT vs. Sun Engineering Works Pvt Ltd. (1992) 107 CTR (SC) 209 : (1992) 198 ITR 297 (SC) at 320 where it was observed : "It is neither desirable nor permissible to pick out a word or a sentence from the judgment of this Court, divorced from the context of the question under consideration and treat it to be the complete "law" declared by this Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this Court. A decision of this Court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, the Courts must carefully try to ascertain the true principle laid down by the decision of this Court and not 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 earl....
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....of co-ordinate jurisdiction, the later decision is to be preferred if reached after full consideration of the earlier decisions. (d) The decision of one High Court is neither binding precedent for another High Court nor for Courts or Tribunals outside its own territorial jurisdiction. It is well settled that the decision of a High Court will have the force of binding precedent only in the State or territories in which the Court has jurisdiction. In other States or outside the territorial jurisdiction of that High Court it may, at best, have only a persuasive effect. By no amount of stretching of the doctrine of stare dicisis judgments of one High Court can be given the status of a binding precedent so far as other High Courts or Courts or Tribunals within their territorial jurisdiction are concerned. Any such attempt will go counter to the very doctrine of stare decisis and also the various decisions 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 pur....
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.....12.2023. We find that Tribunal allowed the appeals of family members of assessee by following the decision of Hon'ble jurisdictional High Court in the case of PCIT vs. Jagat Pravinbhai Sarabhai (2022) 142 taxmann.com 247 (Guj). We have again independently considered the fact of the case and find that holding period of shares by assessee was more than seven years, as has been in earlier case of assessee's family members. Thus, we do not find any justification and treating the LTCG as unexplained credit. Therefore, we find that grounds of appeal raised by assessee in this appeal is covered in favour of assessee. The grounds of appeal raised by the assessee are allowed. 7. In the result, the appeal of the assessee is allowed. 8. Now coming to assessee's appeal in ITA No. 882/SRT/2024 for assessment year 2011-12, wherein assessee has raised following grounds of appeal: "1. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner Income Tax (Appeal), NFAC has erred in confirming the action of Income Tax Officer in re-opening the assessment/s 147 of the Act and issuing notice u/s 148 of the I.T. Act, 1961. 2. ....
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....er considering the submission of assessee's family members. The Ld. AR of the assessee submits that delay is neither intentional nor deliberate and may be condoned. The Ld. AR of the assessee submits that delay may be condoned and appeal may be considered on merit and as the case is squarely covered in favour of assessee to substantiate the fact that no notice of hearing of appeal was received. On merit of the case, Ld. AR of the assessee submits that grounds of appeal raised in this appeal is also covered by the decision of assessee's family members case (supra) as submitted in ITA No. 552/Srt/2021. 10. On the other hand, the ld Sr DR for the revenue submits that the assessee has not explained the delay. It is the duty of assessee to keep the track of appeal pending before fist appellate authority. On merit of the additions, the ld Sr DR for the revenue supported the order of Assessing Officer. We have considered the rival submissions of the parties and perused the orders of order of authorities carefully. first we are considering the plea of condonation of delay. We find that while filing fist appeal, in Form-35 the assessee has furnished e-mail address as 'rahulcoa108@y....