Madras High Court
Shri.Ratanchand Manoharmal vs Income Tax Officer on 15 March, 2021
Bench: T.S.Sivagnanam, R.N.Manjula
TCA.Nos.183 of 2021 & 409 of 2020
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 15.03.2021
CORAM :
The Honourable Mr.Justice T.S.SIVAGNANAM
and
The Honourable Ms.Justice R.N.MANJULA
Tax Case Appeal Nos.183 of 2021 & 409 of 2020
Shri.Ratanchand Manoharmal ...Appellant in TCA.No.183/2021 &
Respondent in TCA.No.409/2020
Vs
Income Tax Officer,
Non-Corporate Ward - 17(2),
Chennai - 600 006. ...Respondent in TCA.No.183/2021
& Appellant in TCA.No.409/2020
COMMON PRAYER: Appeals under Section 260A of the Income Tax Act,
1961 against the order dated 22.07.2019 made in ITA.No.3115/Chny/2018
on the file of the Income Tax Appellate Tribunal, Chennai Bench 'B' for the
assessment year 2014-15.
For Assessee: Mr.R.Sivaraman
For Revenue: Mrs.R.Hemalatha, SSC
1/20
https://www.mhc.tn.gov.in/judis/
TCA.Nos.183 of 2021 & 409 of 2020
COMMON JUDGMENT
(Delivered by T.S.Sivagnanam,J) These appeals have been filed under Section 260A of the Income Tax Act, 1961 ('the Act' for brevity) challenging the order dated 22.07.2019 made in ITA.No.3115/Chny/2018 on the file of the Income Tax Appellate Tribunal, Chennai Bench 'B' ('the Tribunal' for brevity) for the assessment year 2014-15.
2. TCA.No.183 of 2021 has been filed by the assessee and TCA.No.409 of 2020 has been filed by the Revenue.
3. The assessee in TCA.No.183 of 2021 has raised the following substantial questions of law for consideration:
"1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in summarily remanding the files to the Respondent without adjudicating on the preliminary issues pertaining to the jurisdiction of the Assessing Officer raised by the Appellant?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in summarily 2/20 https://www.mhc.tn.gov.in/judis/ TCA.Nos.183 of 2021 & 409 of 2020 remanding the files of the Appellant to the Respondent instead of the Commissioner of Income Tax (Appeals)- 5, Chennai without considering the fact that the Appellant was denied a reasonable opportunity of being heard before the Commissioner of Income Tax (Appeals)?
3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in failing to consider that the impugned order u/s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 passed by the Respondent was ex-facie unlawful as the same was passed without disposing the objections of the Appellant by means of a 'speaking order'?
4. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in failing to consider that the impugned re-assessment proceedings initiated by the Respondent is bad in law as the notice u/s. 148 of the Income Tax Act, 1961 was issued when sufficient time was available to the Respondent to initiate proceedings by issuing notice u/s. 143(2) of the Income Tax Act, 1961?
5. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in failing to consider whether an Assessing Officer other than a Principal Commissioner of Income Tax or 3/20 https://www.mhc.tn.gov.in/judis/ TCA.Nos.183 of 2021 & 409 of 2020 Commissioner of Income Tax has the jurisdiction to transfer any records, files, proceedings prior to the initiation of proceedings under Section 127 of the Income Tax Act, 1961?
6. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in remanding the files to the Respondent on the aspect of disallowance of claim made u/s. 10(38) of the Income Tax Act, 1961 without considering the nature & veracity of the transactions?"
4. The Revenue in TCA.No.409 of 2020 has raised the following substantial questions of law for consideration:
"1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in setting aside the well reasoned order passed by the Assessing Officer for re-examination, especially when all the material placed were considered by the assessing officer while passing the assessment order?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in remitting the issue back to the file of the Assessing Officer by quoting the decision in the case of Kanhaiyal and Sons (HFU) in ITA.No.849/Chny/2014 Sunil Kumar Lalwani and that 4/20 https://www.mhc.tn.gov.in/judis/ TCA.Nos.183 of 2021 & 409 of 2020 Aashesh Kumar Lalwani wherein the onus has been shifted to the revenue with a direction that the Assessing Officer is to bring on records the role of the Assessee in promoting the Company and the relation of the Assessee if any with that of the promoters and role of inflating of prices, etc which exercise had already been done by the AO and the SEBI?
3. Is not the finding of the Tribunal perverse especially when the decision of the Tribunal is contrary to the time tested Principal that the person who asserts a fact has to discharge the initial burden cast upon him to show that the said facts are true and only thereafter the burden would shift to the department?"
5. We have elaborately heard Mr.R.Sivaraman, learned counsel for the assessee and Mrs.R.Hemalatha, learned Senior Standing Counsel appearing for the Revenue.
6. The Tribunal followed its earlier decision in the case of Kanhaiyalal & Sons (HUF) Vs. ITO in ITA.No.1849/Chny/2018 and remanded the matter back to the file of the Assessing Officer for reconsideration.
5/20https://www.mhc.tn.gov.in/judis/ TCA.Nos.183 of 2021 & 409 of 2020
7. In several other matters, identical orders were passed by the Tribunal remanding the matter back to the Assessing Officer. This Court has dealt with an identical issue in the case of Commissioner of Income Tax vs Manish D.Jain (HUF) [(2020) 122 taxmann.com 180 (Madras)]. In the said decision, this Court faulted the Tribunal for remanding the matter back by assigning the following reasons:
"24. Bearing the principles laid down in the decision of the Hon'ble Supreme Court in the case of NRA Iron & Steel Private Ltd., in mind, if we examine the order passed by the Assessing Officer, we find that a detailed enquiry had been conducted by the Assessing Officer after affording an opportunity to the assessee. The assessee availed the opportunity through written submissions. The assessee was represented by an authorized representative and thereafter a finding had been rendered. The said finding was tested for its correctness by the CIT(A), who approved the same by order dated 07.8.2018.
25. We refer to the following factual findings rendered by the CIT(A) while dismissing the appeal filed by the assessee :
“2.1. .......In response to notices, the AR of 6/20 https://www.mhc.tn.gov.in/judis/ TCA.Nos.183 of 2021 & 409 of 2020 the assessee Shri Omprakash Jain, B.Com, FCA of Om Jain & Associates, Chartered Accountants appeared and filed the details of purchase of 450 shares of M/s.Dhanlabh Merchandise Limited, later it was merged with M/s.Bakra Pratisthan Limited and 450 shares converted into 4500 shares. In this connection, the AR furnished the copy of sale bill dated 15.1.2010 of M/s.Excellent Barter Private Limited of Shaym Nagar WB 743127 wherein it is noticed that the assessee has purchased 450 shares of Dhanlabh Merchandise Limited @ Rs.200 each per share for a consideration of Rs.90,000/-. But the bill does not contain any distinctive numbers and it was stated 'as per Demat form'. The AR of the assessee also furnished the copy of transaction report from Motilal Oswal Securities as documentary evidence for purchase of these shares and later converted into M/s.Bakra Pratisthan Limited on 28.12.2011.
.....
2.2........On the perusal of the same, it is noticed that the closing balance as on 02.3.2010 was Rs.5,607/-. On 03.3.2010, there was a credit entry of Rs.90,000/- and a debit entry with narration 'manual chg' Rs.90,000/-. As per the narration of the bankers, it is manual cheque only and the same was passed in clearing on the same day by Calcutta base company.
It is not at all possible.
....
2.3. As it was held by the assessee the shares of M/s.Dhanlabh Merchandise Limited was purchased from M/s.Excellent Barter Pvt. Ltd. Of Shaym Nagar WB 743127, a communication dated 28.9.2017 was sent to M/s.Excellent Batter Private Limited calling for the following details under Section 133(6) of the I.T. Act 1961. By the examination of the details and the same was returned unserved by the postal authorities with remarks 'not known'.
7/20https://www.mhc.tn.gov.in/judis/ TCA.Nos.183 of 2021 & 409 of 2020 ......
Besides the above, the AR of the assessee has not furnished any documentary evidences with respect to the sale of shares of M/s.Bakra Pratisthan Limited. Instead, he furnished the bank account copy wherein on 03.1.2012, an amount of Rs.9,50,714/- was credited in the bank with description 'RTGS- INWFIX- FIT SECURITIES'. Considering the above fact, it is concluded as under :
2.4. The purchase of 450 shares of M/s.Dhanlabh Merchandise Limited is itself a sham transaction for the following reasons:
1. Based on the details filed by the AR of the assessee and the address was provided the assessee the communication sent by this office to M/s.Excellent Batters Private Limited.
2. The postal remarks is 'not known' only.
The postal authorities did not mention that the person left or something else. The word 'not known' means that the address itself bogus or incorrect one.
3. Accordingly, it is established that there is no such person in that address having name M/s.Excellent Batters Private Limited.
4. It is onus on the part of the assessee to prove the genuineness of the transaction.
5. It is also noticed that the documentary evidence filed by the assessee towards payment made for purchase of shares also not related to this transaction.
6. In the absence of the distinctive nos., in the sale bill dated 25.1.2010 of M/s.Excellent Batters Pvt. Ltd., and hence, it is not known that to whom the shares were originally allotted and how the same was subsequently transferred to the assessee for that there is no documentary evidence produced. The assessee HUF not furnished the copy of name transfer application also.
8/20https://www.mhc.tn.gov.in/judis/ TCA.Nos.183 of 2021 & 409 of 2020
7. It is also noticed from the AR of the assessee's submission dated 15.11.2017 that M/s.Excellent Batters P. Ltd., is a shareholder of M/s.Dhanlabh Merchandise Ltd., but there is no documentary evidence was filed by him.
8. As the assessee HUF itself has stated that the HUF is doing commodities trading, why off market transaction for purchase of shares not reported to BSE. Considering the above fact findings, it is established that the purchase of 450 shares of M/s.Dhanlabh Merchandise Limited from M/s. Excellent Barter Private Limited by the assessee is itself a sham transaction. Accordingly, the documentary evidence furnished by the assessee towards purchase of shares of 4500 M/s.Bakra Pratisthan Limited is not a genuine one and hence, the claim of exemption under Section 10(38) towards selling of the same is not entertained.
....
7.11. It can be seen from the client statement of Shri Ashok Kumar Kayan that not only the assessee but the following members of the HUF family members have also invested in the said impugned shares :
SNo Name PAN Amount
01 Karuna A Jain AGTPJ5140K 25,46,855
02 Abhishek Jain AEUPJ3242F 15,93,300
03 Abhishek M Jain HUF AAJHA1645J 15,86,250
04 Amit Kumar AEEPA9942F 15,86,250
05 Amit Kumar I Jain HUF AAJHA1641N 15,86,250
06 Hitesh M Jain HUF AADHH3539N 10,57,500
07 Mamta M Jain AFJPM4958B 9,52,290
08 Manish D Jain HUF AAJHM6100N 15,86,250
(assessee)
09 Nitin I Jain AEPPN8578R 15,86,250
9/20
https://www.mhc.tn.gov.in/judis/ TCA.Nos.183 of 2021 & 409 of 2020 SNo Name PAN Amount 10 Nitu Amit Jain AEZPJ1421K 22,21,695 11 Rajesh D Jain AEOPR8702G 15,93,300 12 Shilpa M Jain AGZPJ9692C 15,93,300 Total 1,94,89,490 From the above table, it is established that the entire family involved in this operation to convert their black money into white. It is a sham transaction only.
....
9. Considering the above factual position as also the legal position, it is held that the assessee has entered into an engineered transaction to generate artificial long term capital gains. As the explanation furnished by the assessee regarding the credits of Rs.15,86,250/- in its books is found to be unsatisfactory, the same are hereby held as 'unexplained cash credits' in the books of the assessee and accordingly added to the total income of the assessee in accordance with the provisions of Section 68 of the IT Act, 1961 and assessed under the head 'income from other sources' Penalty proceedings under Section 271(1)(c) read with Explanation 1 thereto are separately initiated for furnishing the inaccurate particulars of income with respect to the claim of capital gain made in the light of the findings made in the preceding paragraphs.
......
7.3.......However, in the present appeal, the appellant purchased the shares of M/s.Bakra Pratisthan Limited in off market. During the course of the hearing on 24.7.2018, the AR admitted that the assessee purchased the shares of M/s.Dhanlab Merchandise Limited in off market.
.....
7.4. These shares were purchased through off market and not through Stock Exchange.
10/20https://www.mhc.tn.gov.in/judis/ TCA.Nos.183 of 2021 & 409 of 2020 The notice under Section 133(6) dated 28.9.2017 sent by the Assessing Officer to M/s.Excellent Barter Private Limited from which the assessee had purchased the shares of M/s.Dhanlab Merchandise Limited was returned unserved with remark 'not known'.
Moreover, the assessee did not bring any other material on record to establish the genuineness of the purchase of shares.
M/s.Bakra Pratisthan Limited did not pay dividend or did not issue bonus shares during the period of holding of these shares by the assessee corresponding to the increase in the price of the share of M/s.Bakra Pratisthan Limited. During this period, there has been no corporate announcement by M/s.Bakra Pratisthan Limited which suggests that the company is undertaking any substantial development activity.
The above facts were not disputed by the appellant.
These facts clearly establish that the share prices of M/s.Bakra Pratisthan Limited were artificially hiked.
.....
7.6. In the present case also, the shares were purchased through off market and not through Stock Exchange and selling rates were artificially hiked later on.”
26. The above findings will clearly show that not only the Assessing Officer, but also the CIT(A) examined the modus operandi of the assessee and held that the shares were purchased through off market and not through Stock Exchange and that the selling rates 11/20 https://www.mhc.tn.gov.in/judis/ TCA.Nos.183 of 2021 & 409 of 2020 were artificially hiked later on. The above findings have not been set aside by the Tribunal and there is no reason for the Tribunal to remand the matter to the Assessing Officer for a fresh consideration.
27. As pointed out in the decision of this Court in the case of Cholamandalam MS General Insurance Co., we find in the instant case that there was no material, which necessitated the remand of the case to the Assessing Officer and it is a clear case where the Tribunal had failed to exercise its jurisdiction in the manner known to law. The Tribunal, being a last fact finding Authority, is under the legal obligation to record a correct finding of fact. It has been held in the cases of
(i) M.R.M.Periyannan Chettiar Vs. CIT [reported in (1960) 39 ITR 159 (Madras)]
(ii) V.Ramaswamy Iyengar Vs. CIT [reported in (1960) 40 ITR 377 (Madras)]
(iii) Hindustan Sanitary Ware and Industries Ltd. Vs. CIT [reported in (1978) 114 ITR 85 (Calcutta)]
(iv) CIT Vs. Ishwardass [reported in (1986) 158 ITR 168 (Delhi)] and
(v) CIT Vs. Harikishan Jethalal Patel [reported in (1987) 168 ITR 472 (Gujarat)] 12/20 https://www.mhc.tn.gov.in/judis/ TCA.Nos.183 of 2021 & 409 of 2020 that the power to remand the case should be exercised on judicial principles.
28. Further, in the decisions in the cases of
(i) United Commercial Bank Vs. CIT [reported in (1982) 137 ITR 434 (Calcutta)]
(ii) Darjeeling Dooars Plantations Vs. CIT [reported in (1988) 174 ITR 37 (Calcutta)] and
(iii) Siemens India Ltd. Vs. CIT [reported in (1997) 226 ITR 801 (Bombay)], it was held that where all the evidence had been produced and the CIT(A), after full investigation of the evidence and examination of the accounts, had given a definite finding on the question in issue, the Tribunal's order of remand was held to be invalid.
29. Further, in the recent decision of the Hon'ble Division Bench of this Court in the case of Tharakumari Vs. ITO [TCA.No.128 of 2019 dated 11.2.2019], the appeal filed by the assessee in a case relating to penny stock was dismissed after noting the factual findings rendered by the Assessing Officer, the CIT(A) and the Tribunal. Thus, for all the above reasons, we hold that the order passed by the Tribunal calls for interference.
13/20https://www.mhc.tn.gov.in/judis/ TCA.Nos.183 of 2021 & 409 of 2020
30. In the result, the above tax case appeal is allowed, the impugned order passed by the Tribunal is set aside and the substantial questions of law framed are answered in favour of the Revenue and against the assessee. Consequently, the order passed by the CIT(A) stands restored."
8. The above decision will apply with full force to the impugned order and consequently, the impugned order has to be interfered with.
9. The assessee is also aggrieved by the impugned order as the assessee would contend that the Tribunal ought not to have remanded back the matter to the Assessing Officer as additional grounds have been raised by them before the Tribunal, which were never considered or adverted to.
The learned counsel appearing on instructions of the Chartered Accountant would submit that the grounds were canvassed before the Tribunal, but the Tribunal was of the view that since in the case of Kanhaiyalal & Sons (supra), the matter was remanded, they would follow the said decision. The following are the grounds raised by the assessee before the Tribunal:
"1. For that the order of the learned Commissioner of Income Tax (Appeals) is contrary 14/20 https://www.mhc.tn.gov.in/judis/ TCA.Nos.183 of 2021 & 409 of 2020 to law, facts and circumstances of the case and in law case is opposed to the principles of equity, natural justice and fair play.
2. For that the Learned Commissioner of Income Tax (Appeals) has erred in confirming that the order of the Assessing Officer was not "bad in law" under the facts and circumstances of the case.
3. For that the Learned Commissioner of Income Tax (Appeals) has erred in not deciding whether the Assessing Officer can assume Jurisdiction under Section 147 when time limit was available for invoking Section 143(2) under the facts and circumstances of the case.
4. For that the Learned Commissioner of Income Tax (Appeals) has erred in not deciding whether the Assessing Officer, Non Corporate Ward, 10(3), Chennai, can assume power to transfer the case to Assessing Officer, Non Corporate Ward, 5(4), under the facts and circumstances of the case.
5. For that the Learned Commissioner of Income Tax (Appeals) has erred in confirming invocation 15/20 https://www.mhc.tn.gov.in/judis/ TCA.Nos.183 of 2021 & 409 of 2020 of Section 68 under the facts and circumstances of the case.
6. For that the Learned Commissioner of Income Tax (Appeals) has erred in confirming Disallowance of claim u/s. 10(38) (Long Term Capital Gain on account of sale of shares) under the facts and circumstances of the case.
7. For that the Learned Commissioner of Income Tax (Appeals) has erred in confirming the additions without providing an opportunity of being heard under the facts and circumstances of the case and disposing of appeal for want of prosecution.
8. For that the Learned Commissioner of Income Tax (Appeals) has erred in not considering the cost of the shares paid through banking channels under the facts and circumstances of the case.
9. For that the Learned Commissioner of Income Tax (Appeals) has erred in confirming addition u/s. 69C under the facts and circumstances of the case.16/20
https://www.mhc.tn.gov.in/judis/ TCA.Nos.183 of 2021 & 409 of 2020
10. For that the Learned Commissioner of Income Tax (Appeals) has erred in disposing of appeal for want of prosecution.
11. For that the Learned Commissioner of Income Tax (Appeals) has erred in passing speaking order on all the grounds of appeal raised."
10. As the above grounds have been raised before the Tribunal, it would be necessary to deal with these grounds and then record a finding that despite the contention advanced by the assessee, the matter requires to be reconsidered de novo by the Assessing Officer.
11. We see no such finding in the impugned order passed by the Tribunal.
12. One of the grounds canvassed before the Tribunal was that the Commissioner of Income Tax (Appeals) has disposed of the appeal for want of prosecution and therefore, it is submitted that there has been violation of principles of natural justice.
17/20https://www.mhc.tn.gov.in/judis/ TCA.Nos.183 of 2021 & 409 of 2020
13. These issues are required to be considered by the Tribunal and having not been considered, we are inclined to interfere with order passed by the Tribunal.
14. For the above reasons, the tax case appeals are allowed and the impugned order is set aside and the matter stands remanded to the Tribunal to consider the appeal afresh on merits and in accordance with law qua the grounds raised by the assessee before the Tribunal as mentioned above and other issues that may be canvassed by the assessee during the hearing before the Tribunal. Consequently, the substantial questions of law are left open. No costs.
(T.S.S.,J.) (R.N.M.,J.)
15.03.2021
Index:Yes/No
Internet:Yes/No
hvk
18/20
https://www.mhc.tn.gov.in/judis/ TCA.Nos.183 of 2021 & 409 of 2020 To
1. The Income Tax Appellate Tribunal, 'B' Bench, Chennai.
2. Income Tax Officer, Non-Corporate Ward - 17(2), Chennai - 600 006.
19/20https://www.mhc.tn.gov.in/judis/ TCA.Nos.183 of 2021 & 409 of 2020 T.S.SIVAGNANAM,J AND R.N.MANJULA,J hvk TCA.Nos.183 of 2021 & 409 of 2020 15.03.2021 20/20 https://www.mhc.tn.gov.in/judis/