Income Tax Appellate Tribunal - Mumbai
Shri Ramachandran Ananthan Pothi, ... vs Acit 24(3), Mumbai on 19 March, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL "D" BENCH, MUMBAI
BEFORE SHRI SHAMIM YAHYA, AM AND SHRI PAWAN SINGH, JM
SA No. 95/Mum/2019
(Arising out of ITA No. 1088/Mum/2019)
(Assessment Year: 2014-15)
Shri Ramchandran Ananthan Asst.CIT-24(3)
Pothi Room No.413, 6th floor
513, Building No.9 Piramal Chambers, Lalbaug
Vs.
Laxmi Plaza, Laxmi Industrial Parel, Mumbai- 400 012
Estate, New link, Andheri (West)
Mumbai-400 053
PAN/GIR No. AACPP8620K
(Applicant) : (Respondent)
Applicant by : Arati Debnath
Respondent by : Abi Rama Kartikeyan
Date of Hearing : 15/03/2019
Date of Pronouncement : 19/03/2019
ORDER
Per Shamim Yahya, A. M.:
By way of this stay application, the assessee seeks order u/s. 254(2) of the Income Tax Act, 1961 ('the Act' for short). The submissions of the assessee reads as under:
The Appellant is a resident individual engaged in the business of export of aluminum caps having Permanent Account Number AACPP8620K, During the previous year relevant to assessment year 2014-15, the appellant had earned long term capital gains on sale of shares of M/s. Kailash Auto Finance Ltd, (KAFL) which was claimed as exempt u/s. 10(38). The Ld. AO, in the assessment order that the long term capital gains earned was bogus, and accordingly, disallowed the exemption and added a sum of Rs, 66,18,442/- to the total income: of the appellant. The order of the Ld. AO was upheld by the Ld, CIT(A), against which the appellant has filed an appeal before this Hon'ble Tribunal.
Brief facts of the proceedings for the assessment year under appeal:
1. For the assessment year under consideration, your appellant had e-filed its return of income on 13.11.2014 declaring a total income of Rs.2 SA No. 95/Mum/2019
Ramachandran Ananthan Pothi 1,82,92,510/-, Subsequently, the case of your appellant was selected for scrutiny through CASS and accordingly notices u/s 143(2) and 142(1) of the Income Tax Act "hereinafter referred to an Act" was issued by the Ld. AO and served on the appellant.
2. In response to the above notices, your appellant had duly filed all the documents as and when called for. A show-cause notice was issued wherein the appellant was called upon to file evidences in support of the exemption claimed u/s 10(38) on sale of Shares of M/s. Kailash Auto Finance Ltd (hereinafter referred to as 'KAFL') of the Act. Further, the Ld, AO had relied on the report of the investigation wing to allege that the transactions were managed and bogus. Thereafter, in order to prove the genuineness of the capital gain transaction, the appellant submitted all the required documents such as Purchase Bill & Contract Note of Sales, Bank Statements showing the relevant payments and receipts from the aforesaid transaction. Balance Sheet of the appellant thawing the shares of KAFL as an investment, Demat Statement, Ledger account of the broker - M/s. Mehta Equities Ltd, Order of the SEB1 revoking its earlier ad-interim order against the appellant on account of lack of evidence. Order of the Hon'ble Securities Appellate Tribunal wherein all the charges and allegations made by SEBI against the appellant were dropped, etc.
3. The ld. Assessing Officer disregarded all the above evidences and disallowed the claim on assumptions and surmises. The Ld. Assessing Officer alleged that KAFL was engaged in price rigging and the appellant was one of the beneficiaries of the modus operandi. It was stated that the appellant had no regular trading activity and that the scrip's financial position did not justify the enormous gains. Further, the Ld AO, inter alia, relied on the report of the investigation wing, interim order of SEBI and statement of third parties to contend that the transactions were managed and bogus. Thereafter, the Ld. Assessing Officer, without controverting any of the evidences filed in support of the transaction, based on suspicion, surmises & presumptions and. in gross violation ot the principles of natural justice concluded that the gains accrue to the appellant were bogus and added Rs.66,18,442/- as income u/s. 68 of the Act.
4. Further, based on the statement of a third party, i.e., Shri Sunil Dokania wherein he stated that he generally charged 3% for arranging long term Capital gains., the Ld. AO further added the 3% of the alleged bogus "LTCG as unexplained commission expense u/s 69C of the Act, Accordingly, an order u/s 143(3) dated 27.12 2016 was passed with the above additions and demand of Rs. 31,26,600/- was raided.
5. Aggrieved by the assessment order, the appellant preferred an appeal before the Ld. C1T(A). Simultaneously, during the pendency of the appeal before the first appellate authority, the Ld, AO obtained sanction u/s 279 for launching prosecution against the appellant.
3 SA No. 95/Mum/2019Ramachandran Ananthan Pothi
6. The above sanction u/s 279 was challenged by the appellant ilia Writ Petition before the Hon'ble Bombay High Court on various grounds and made & prayer, inter alia, that prosecution ought to be stayed during the pendency of the appellate proceedings. Thereafter, the Hon'ble Court disposed the writ Petition vide order dated 04.09.2019 by granting interim stay and diverting that the Petitioner may approach the Ld. CIT(A) and seek a stay on the assessment order and the proceedings pursuant to the assessment order. The relevant extract of the decision is reproduced herein below:
"We find that interest of justice would be served if we dispose of this writ petition by keeping larger and wider question open. In the event, the petitioner seeks a stay of the order passed by the Assessment Officer by making a stay application, then, during the pendency of such application, the criminal prosecution should not be launched and, if it has been already launched, the same shall not proceed. Thus, the ad interim stay granted by this Court would continue till the disposal of the application for stay by the First Appellate Authority."
7. Thereafter, immediately the appellant filed an application for stay of proceedings before the Ld, CIT(A). However, without considering the Application, the Ld. CIT(A) dismissed the appeal of the appellant and confirmed the addition made by the Ld. AO on presumptions, suspicion and surmises.
8. Aggrieved by the said decision, the appellant has filed before this Hon'ble Tribunal in Appeal No...
9. Now, vide this application, the appellant is seeking a stay from your Honours on the assessment order dated 27.12.2016 passed by the Assessing Officer and also the consequent prosecution proceedings till the disposal of the appeal. The appellant states that he has a strong prima facie case on merits and expects relief from this Tribunal. The appellant states stay on the following grounds:
1. That the imputed order passed by the Ld. CIT(A) wherein the order passed by the Ld. AO is confirmed is perverse, bad in law and in gross violation of the principles of natural justice, and as such deserves to be quashed,
2. That the impugned order passed by the Ld. CIT(A) is contrary to the law laid down by the Hon'ble Bombay High Court in the case of CIT vs Shyam R. Pawar [(2015) 4 taxmann.com 108].
3. That the additions in the Assessment order have been made in gross violation of the principles of natural justice, in so far as, inter alia, the statements of third parties relied upon for the purpose of making the addition were received by your appellant only after the assessment order was passed 4 SA No. 95/Mum/2019 Ramachandran Ananthan Pothi
4. Thai the additions have been made in the Assessment order solely based on suspicion, surmises and conjectures without controverting any of the documentary evidences submitted by the appellant.
5. That the Ld. ClT(A) Failed to appreciate the fact that the name of the appellant is neither appearing in the report of the investigation wing nor in the statements of third parties relied upon by the Ld.AO.
As such, the addition as confirmed by the Ld. CIT(A) is purely based on suspicion and surmises.
6. That the Ld. CIT(A) failed to appreciate the fact that the case c-f the appellant was squarely covered by the decision of the Hon'ble Income Tax Appellate Tribunal in the case of Sourabh Mittal [ITA NO.16/JP/2018] as well as Sanjeev Goel HUF [ITA No. 354/Kol/2018] wherein on similar facts, the trade carried out by the assesses in script of KAFL had been granted relief by considering the fact that the assessee therein had also been discharged by SEBI or not implicated by SEBI and based on the documentary evidences.
7. That the Ld. C1T(A) failed to appreciate the fact the interim order of SEBE, as relied upon by the AO, wherein the name of the appellant appeared as one of the beneficiaries, has been reversed by the Hon'ble Securities Appellate Tribunal vide order dated 21.10.2017 and the appellant has been discharged,
8. That the order of this Hon'ble Tribunal u/s 254(1) of the Act has a direct bearing On the pending prosecution proceedings before the Judicial Magistrate and that slay ought to be granted in view of the decision of the Hon'ble Apex Court in the case of Mohd Kunhi[l969 AIR 430 SC] & also the Hon'ble Delhi Tribunal in the case of Jindal Steel & Power Ltd [SA No. 198/Del/2016]. Reliance may also be placed on the decision of the Hon'ble Jurisdictional High Court in the appellant's own case wherein the power to stay the prosecution proceedings had been given to the first appellate authority.
9. That the appellant also prays your honor to grant a stay on the effect of the assessment order passed by the Ld. A.O at this would relieve the appellant from undue harassment.
Hence, in view of the above, your appellant prays that till the final disposal of the appeal, an appropriate Stay be granted on the assessment order as well the consequential prosecution proceedings, so as to avoid unnecessary harassment and futile multiple proceeding.
The Appellant therefore prays:
a) That the assessment order u/s 143(3) be stayed till the disposal of the appeal by this Hon'ble Tribunal;
b) That the prosecution proceedings initiated pursuant to the assessment order u/s 279 be stayed till the disposal of the appeal by this Hon'ble Tribunal;5 SA No. 95/Mum/2019
Ramachandran Ananthan Pothi
c) That an early hearing may be granted for an early disposal of the appeal, i.e., prior to next date of hearing before the Judicial Magistrate on 16th May, 2019,
2. We have heard both the counsel and perused the records. The issue in the income tax appeal in this case relates to disallowance of long term capital gain by the assessee by holding that assessee was a beneficiary of bogus long term capital gain (penny stock transactions). These were held to be not genuine and the gain shown was unrealistic.
3. The assessee's claim was that assessee has given all the documentary evidence for the transaction. Apart from raising the demand the AO was obtained sanction u/s. 279 for launching prosecution against the assessee. When the matter was pending before the Ld. CIT(A), the assessee has obtained relief from the Hon'ble High Court which granted interim stay and directed the petitioner to approach CIT(A) and seek a stay on the assessment order and the proceedings there under.
4. The Hon'ble High Court directions in this regard are as under:
6. We find that interest of justice would be served if we dispose of this writ petition by keeping larger and wider question open.In the event, the p etitioner seeks a stay of the order passed by theAssessment Officer by making a stay application,then,duringthependency of such application, the criminal prosecution should not belaunched and, if it has been already launched, the same shall not proceed. Thus, the adinterim stay granted by this Court would continue till the disposal of the application for stay by the First Appellate Authority.
7.It is stated that the petitioner will file this stay applicationwithin one week from the dat e of receipt of copy of this order.
If that is filed and the Commissioner is seized of it, then, until the stay application is disposed of and the order on same is communicated tothe petitioner, the prosecution launched pursuant to the order of sanction shall not proceed.
6 SA No. 95/Mum/2019Ramachandran Ananthan Pothi 8We clarify that we have not expressed any opinion on themerits of the rival contentions.
5. The Ld. CIT(A) has confirmed the additions made by the AO and the dismissed the appeal filed by the assessee. Now assessee has filed appeal before the Tribunal. The demand has been paid fully. There is no prayer for stay demand in this case before us. The assessee plea is that assessment order u/s. 143(3) be stayed till the disposal of the appeal by the tribunal and that the prosecution proceedings initiated pursuant to the assessment order u/s 279 be stayed till the disposal of the appeal by the ITAT. It has also been requested that an early hearing be granted for an early disposal of the appeal, prior to the next date of hearing before the judicial magistrate on 16/05/2019.
6. Revenue's representative has contended that firstly ITAT has no power to grant stay on prosecution proceedings. Secondly, it has been urged that assessee does not has a prima-facie case as this is a case of bogus penny stock transactions.
7. Upon careful consideration we find that as regards the prima facie case claimed by the assessee the same is based upon contention that all the documentary evidence pertaining to the share purchases and sales transactions has been produced. On the other hand, revenue authorities' plea is that the price gain which is almost 40 times in one and half year for a little known company is improbable and unrealistic without any economic and financial basis. In this regard Ld. DR has referred to case 7 SA No. 95/Mum/2019 Ramachandran Ananthan Pothi law from Hon'ble Bombay High Court. In our consider opinion there is no prima-facie case to accede to the prayer that assessment order u/s 143(3) be stayed till the disposal of the appeal by this tribunal.
8. As regards the second prayer of the assessee that the prosecution proceedings initiated pursuant to the assessment order u/s 279 be stayed till the disposal the appeal by the ITAT, we find that the same is beyond the jurisdiction of the ITAT u/s 254 of the I.T.Act and inherent power therein. As regards 3rd prayer for an early hearing for early disposal prior to the next date of hearing before judicial magistrate on 16/05/2019, we are inclined to grant an early hearing. The registry is directed to fix the case for hearing on an out of term basis on 15/04/2019. Notices of hearing has been taken note by the contending parties.
9. In the result, stay application is disposed of as above.
Order pronounced in the open court on 19th March, 2019.
Sd/- Sd/-
(Pawan Singh) (Shamim Yahya)
Judicial Member Accountant Member
Mumbai; Dated :19.03.2019
Thirumalesh, Sr. PS
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent
3. The CIT(A)
4. CIT - concerned
5. DR, ITAT, Mumbai
6. Guard File
8
SA No. 95/Mum/2019
Ramachandran Ananthan Pothi
BY ORDER,
(Dy./Asstt. Registrar)
ITAT, Mumbai