Income Tax Appellate Tribunal - Indore
Anil Kumar Lila (Huf), Bhopal vs Acit-1(2), Bhopal on 25 May, 2021
अपील य अ धकरण, इ दौर यायपीठ, इ दौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI MANISH BORAD,ACCOUNTANT MEMBER AND MIS MADHUMITA ROY, JUDICIAL MEMBER IT(SS)A No.222/Ind/2019 Assessment Year:2005-06 Smt. Babita Lila ACIT-1(2), 83-A, Lila Niwas, Malviya बनाम/ Bhopal Nagar Bhopal Vs. (Appellant) (Revenue ) P.A. No.AALPL2708D IT(SS)A No.223/Ind/2019 Assessment Year:2007-08 Smt. Sona Lila ACIT-1(2), 83-A, Lila Niwas, Malviya बनाम/ Bhopal Nagar Bhopal Vs. (Appellant) (Revenue ) P.A. No.AALPL2699D IT(SS)A No.224/Ind/2019 Assessment Year:2006-07 Shri Shankar Kumar Lila ACIT-1(2), (HUF) बनाम/ Bhopal 83-A, Lila Niwas, Malviya Vs. Nagar Bhopal (Appellant) (Revenue ) P.A. No.AAFHS9681C Smt. Babita Lila & others IT(SS)A Nos.225 & 227/Ind/2019 Assessment Years:2006-07 & 2007-08 Shri Anil Kumar Lila HUF ACIT-1(2), 83-A, Lila Niwas, Malviya बनाम/ Bhopal Nagar Bhopal Vs. (Appellant) (Revenue ) P.A. No.AACHA9047H IT(SS)A No.226/Ind/2019 Assessment Year:2007-08 Shri Anil Kumar Lila 83-A, ACIT-1(2), Lila Niwas, Malviya Nagar बनाम/ Bhopal Bhopal Vs. (Appellant) (Revenue ) P.A. No.AALPL2700M Appellant by S/Shri Ashish Goyal & N.D. Patwa, ARs Revenue by Shri S.B. Prasad, CIT-DR Date of Hearing: 13.04.2021 Date of Pronouncement: 25.05.2021 आदे श / O R D E R PER BENCH:
The above captioned appeals at the instance of different assessees are directed against the respective orders of Ld. Commissioner of Income Tax(Appeals)-3, (in short 'CIT(A)'), Indore dated 30.07.2019.
Grounds of appeal in IT(SS)ANo.222/Ind/2019, Smt. Babita Lila
1. The Learned Assessing officer has erred in law and on facts in treating the income from "Short Term Capital Gain" of Rs.4,24,313/- as "income from other sources".2
Smt. Babita Lila & others
2. That the Ld. AO has treating the income of Short Term Capital Gain as income from other sources without having any material or evidence on record to do so.
3.That the appellant reserves the right to add, alter or amend the grounds of appeal before the appeal is decided.
Ground of appeal in IT(SS)A No.223/Ind/2019, Smt. Sona Lila
1.The Learned Assessing officer has erred in law and on facts in making addition of Rs.3,59,495/-.
2. The Learned AO has erred in making the addition of Rs.3,59,495/- ignoring the evidence filed by the appellant in support of income from Capital Gain.
3. That the Ld. AO has erred in treating the income of Long Term Capital Gain as income from other sources without having any material or evidence on record to do so.
4.That the appellant reserves the right to add, alter or amend the grounds of appeal before the appeal is decided.
Ground of appeal in IT(SS)A No.224/Ind/2019, Shri Shankar Kumar Lila
1.The Learned Assessing officer has erred in law and on facts in making addition of Rs.81,322/-.
2. The Learned AO has erred in making the addition of Rs.81,322/- ignoring the evidence filed by the appellant in support of income from Capital Gain.
3. That the Ld. AO has erred in treating the income of Long Term Capital Gain as income from other sources without having any material or evidence on record to do so.
4.That the appellant reserves the right to add, alter or amend the grounds of appeal before the appeal is decided.
Ground of appeal in IT(SS)A No.225/Ind/2019, Shri Anil Kumar Lila HUF
1.The Learned Assessing officer has erred in law and on facts in making addition of Rs.18,978/-.
2. The Learned AO has erred in making the addition of Rs.18,978/- ignoring the evidence filed by the appellant in support of income from Capital Gain.
3. That the Ld. AO has erred in treating the income of Long Term Capital Gain as income from other sources without having any material or 3 Smt. Babita Lila & others evidence on record to do so.
4.That the appellant reserves the right to add, alter or amend the grounds of appeal before the appeal is decided.
Grounds of appeal in IT(SS)ANo.226/Ind/2019 Shri Anil Kumar Lila
1. The Learned Assessing officer has erred in law and on facts in making addition of Rs.3,47,061/-.
2. The Learned AO has erred in making the addition of Rs.3,47,061/- ignoring the evidence filed by the appellant in support of income from Capital Gain.
3. That the Ld. AO has erred in treating the income of Long Term Capital Gain as income from other sources without having any material or evidence on record to do so.
4. That the appellant reserves the right to add, alter or amend the grounds of appeal before the appeal is decided.
Grounds of appeal in IT(SS)ANo.227/Ind/2019 Shri Anil Kumar Lila HUF
1.The Learned Assessing officer has erred in law and on facts in making addition of Rs.3,39,656/-.
2. The Learned AO has erred in making the addition of Rs.3,39,656/- ignoring the evidence filed by the appellant in support of income from Capital Gain.
3. That the Ld. AO has erred in treating the income of Long Term Capital Gain as income from other sources without having any material or evidence on record to do so.
4.That the appellant reserves the right to add, alter or amend the grounds of appeal before the appeal is decided.
2. As the issue raised in all these appeals are similar, these were heard together at the request of all the parties and are being disposed off by this common order for the sake of convenience and brevity. As agreed facts of the case of Smt. Babita Lila are considered to adjudicate the common issues raised before us.
4Smt. Babita Lila & others
3. Brief facts of the case are that the assessee is an individual and is a member of Lilasons Group of Bhopal. Search u/s 132 of the Act was conducted on 28.10.2010 at various business premises of Lilasons Group and individuals connected to this group. The assessee was also subject to search. Subsequently, notice u/s 153A of the Act was issued followed by serving of notices u/s 143(2) & 142(1) of the Act. The assessee has been consistently filing the returns and original return of income for A.Y. 2005-06 was filed on 31.07.2005 declaring income of Rs. 10,54,407/-. Similar income was again disclosed in the return filed in compliance to notice u/s 153A of the Act submitted on 21.02.2012. Though a common assessment order has been framed for A.Ys. 2005-06 to 2010-11 but our adjudication is confined to A.Y. 2005-06 only.
4. During the assessment proceedings while examining the computation of income Ld. AO observed that the assessee has shown Long Term Capital Gain at Rs.4,24,313/-. Details were called and the same were duly filed including the contract note for purchase and sale, DEMAT account for transfer of shares and bank statement in support of the remittance received. But Ld. AO was not convinced as he observed that the transaction of purchase and sale have taken place in physical form. Ld. AO treated the capital gain as bogus liable to be taxed under the head "Income from other sources". Though the assessed income of the assessee remained the same as was disclosed in the return of income, except the change of 5 Smt. Babita Lila & others head of taxing the "capital gain" income as "Income from other sources".
5. Appeal by the assessee before the ld. CIT(A) did not bring any relief. As the Ld. CIT(A) also concluded that the transactions were sham and unaccounted income was converted into bogus capital gain and relying on various judicial pronouncements confirmed the action of the Ld. AO.
6. Now the assessee is in appeal before the Tribunal. Ld. counsel for the assessee vehemently argued referring to the following written submissions which are as follows:
1. The only addition which is impugned is the addition u/s. 68, in respect of the Short term Capital gains of Rs.
4,24,313 offered in the return u/s. 139 as liable to tax @ 10%.
2. The capital gains arose as under:
Security Date of Purchase Date of Sale STCG purchase cost sale proceeds Shaw Wallace 19.01.2005 3,77,547 11.02.2005 4,82,286 1,04,739 Interlink FN 04.01.2005 2,17,051 20.01.2005 2,71,625 54,574 Robinsons Imp. 29.01.2005 6,21,303 24.02.2005 8,86,303 2,65,000 TOTAL 4,24,313
3. This capital gains was already offered in the regular return filed prior to the date of search. The return was filed on 31.07.2005, no regular assessment for same was undertaken; but the time limit for regular assessment had expired on the date of initiation of search on 28.10.2010. The assessment u/s. 153A was therefore a non-abated assessment. It is submitted that the scope of the proceedings u/s. 153A shall be limited to the incriminating material found during the course of search.
4. In the present case, during the course of search, no incriminating material was found to show that the capital gains offered was false. No such material was referred in the assessment order. As held in various cases, addition in 6 Smt. Babita Lila & others search cases, can be made only on basis of material found during the course of search, moreso, in the case of non-abated assessments. Thus, the present addition itself is without any basis and liable to be deleted.
CIT vs Kabul Chawla 380 ITR 573 (Del.) CIT vs Continental Warehousing Corporation 58 taxmann.com 78 (Bom.) Om Shakthy Agencies (Madras) P Ltd. 157 ITD 1062 (Trib. Chennai) Parag M. Sanghvi 63 taxmann.com 118 (Trib. Mumbai)
5. Without prejudice, it is submitted that the in respect of the transaction of capital gains, the following details are furnished: -
i. The Demat statement for purchase and sale of shares is at PB 4-5. The transaction is duly reflected in the Demat statement of the assessee.
ii. Through this Demat only, the sale proceeds of various other listed companies like Axis Bank, Bank of India, Colgate etc were reflected, which has not been doubted by the department.
iii. The share broker was DPS shares and Securities, who was duly registered with SEBI. He gave contract notes and broker statement which are placed at PB 6-19. iv. The shares were sold through banking channels and the amount was received in the bank of the assessee. PB 20. v. It is pertinent to note that the purchase and sale both were STT paid. In the contract note at PB 7, details for purchase of shares of Interlink FN is mentioned. STT has been charged in the contract note.
6. No evidence was brought on record to show that the capital gains was bogus.
7. Ld. AO referred to certain inquiries conducted by the Investigation Wing at Mumbai. What inquiries were conducted; whose statement was recorded; what evidence was found; what were the findings of such inquries is totally unknown. The same were not brought on record. The same were not confronted to the assessee for cross-examination and rebuttal. It is unknown whether such evidence was even in the possession of the Ld. AO . It is unknown as to why he did not provide the same to the assessee for rebuttal.
7Smt. Babita Lila & others It is a settled proposition of law that any evidence cannot be used against the assessee , unless the evidence is provided to the assessee and an opportunity of rebuttal has been provided to him.
Kishinchand Chellaram 125 ITR 713 (SC) P.S. Abdul Majeed v. Agrl. ITandSTO [1994] 209 ITR 821 (Ker.) CIT v. Biju Patnaik [1991] 190 ITR 396 (Ori.).
8. Further, the statement of third-person would be relevant in his own case. It would not have relevance in the case of assessee.
In Chiranji Lal Steel Rolling Mills Vs. CIT (1972) 84 ITR 222 (P&H), considering section 27 of the Evidence Act, it was held that statement of co-accused cannot be read in evidence against another co-accused unless and until it is corroborated with independent material.
Further reliance is placed on M.K. Brothers 163 ITR 249 (Raj.), where it was held that Statement recorded u/s. 132(4) or 131 of the third parties are binding upon them in their own case only and same cannot be foisted upon the other parties in the absence of sufficient corroboratory material.
9. No separate and independent inquiry was conducted by the ld AO. He merely relied on some inquiries by Investigation department, that too in Mumbai. Such reports, probably, were not with the Ld. AO.
10. Findings of the Ld. AO are contradictory. At the one end he stated that the demat account was not provided by the assessee, but referred to the said demat account in the earlier part of his findings.
11. The contention regarding bogus capital gains u/s. 10(38) has been dispelled with by various judgments, unless there are evidences to prove that the transaction was camouflaged; and unless the material was provided to the assessee. Merely use of the words "penny stock" cannot act as a magical words to deem any transaction as bogus. The respondents have to bring evidence to establish the transaction as bogus. In the present case, the assessee has given evidences to establish that the transaction is genuine. Reliance is placed on following cases:
i. Pr. CIT vs Smt. Krishna Devi (Del. HC) - PB 21-30 ii. Arzoo Anand (Trib. Indore) - PB 31-43 iii. Smt. Smita P Patil (Trib. Pune) - PB 44-60 8 Smt. Babita Lila & others iv. ITO vs Smt. Arti Mittal (Hyd. Trib) - PB 61-78 v. Consistent Vyapaar Pvt Ltd. (Trib. Kol.) - PB 79-99 vi. Smt. Kalpana Mukesh Ruia (Trib. Mum.)- PB 100-161 vii. Saroj Damani (Trib. Mum.) - PB 162-179 viii. Smt. Karuna Garg (Trib. Del.) - PB 180-186 It is therefore prayed that the addition made may kindly be set-aside both on legal ground as well as on the merits.
7. Per contra Ld. Departmental Representative (DR) supported the finding of both the lower authorities and also submitted that there is mismatch of names in the name of company appearing in contract note with those appearing in the DEMAT account.
However, Ld. CIT-DR failed to controvert the fact that the alleged additions are made only on the basis of information collected during the assessment proceeding and the genuineness of the brokers through which purchase and sale were effected and the agency managing DEMAT account is not in doubt.
8. We have heard rival contentions and perused the records placed before us and carefully gone through the written submissions filed by the Ld. counsel for the assessee and the various decisions referred and relied by both the parties. In instant appeal relates to five (5) assessees which are part of a group namely, "Lilasons" which was subjected to search u/s 132 of the Act on 28.10.2010. Various individuals (including the assessee) connected this group were also subject to search and the cases were reopened from A.Y.2005-06 onwards.
9Smt. Babita Lila & others
9. On perusal of the grounds raised by various assessee(s) we find that the respective orders of Ld. CIT(A) are challenged on account of following two issues.
a) Treating the capital income as income from other sources.
b) Treating the capital gain as income from other sources without having any material or evidence on record.
10. As far as the facts are concerned they are common in nature. In all these cases incomes from capital gain from purchase and sale of shares have been consistently shown in various years as and when such transactions took place. DEMAT account are maintained having holding of various listed companies. All the purchase and sales are supported by contract note issued by registered brokers. Considerations for purchase/sale have flown in and out through banking channels. Genuineness of the existence of the brokers firms indulged in the business of purchase and sale of equity shares on behalf of the other person has not been doubted at any stage. Complete details of purchase and sale of shares have been disclosed by the assessee(s) in their respective return of income filed much before the date of search. The capital gains are both short term and long term as per the period of holding of the shares. Security transactions tax has been paid both at the time of purchase and sale. Sales are made on the portal of recognized stock exchange. The impugned amounts of addition before us are as follows:
Name of assessee Assessment Capital Gain Remark year 10 Smt. Babita Lila & others Babita Lila 2005-06 4,24,313/- STCG Sona Lila 2007-08 3,59,495/- LTCG Shankar Kumar Lila 2006-07 81,322/- LTCG Anil Kumar Lila HUF 2006-07 18,978/- LTCG Anil Kumar Lila 2007-08 3,47,061/- LTCG Anil Kumar Lila HUF 2007-08 3,39,656/- LTCG
11. Ld. counsel for the assesse has filed separate paper books for each of the assessee(s) in appeal before us, providing the details of computation of income originally filed, DEMAT statement, statement from brokers, ledger account in the books of brokers, contract note, form no.10DB regarding payments of Security transaction tax and the bank statement. Though the Ld. DR in some of cases has referred to some mismatch in the names but the same were clarified by the Ld. counsel for the assessee to our satisfaction.
12. We, therefore, after carefully examining the documents placed before us are satisfied that the assessee had made genuine claim of capital gain (Long Term Capital Gain/Short Term Capital Gain) in their respective returns of income and both the purchase and sales of shares are proved to be correct and the credit of the consideration in the bank account for the years under appeal are having direct nexus with the sale of equity shares made during the year, are of the considered view that both lower authorities were not justified in treating the alleged income as income from other sources without disputing the genuineness of the evidences placed on record finding anything contrary to the claim of the assessee, and merely denying the claim of the assessee by giving general 11 Smt. Babita Lila & others remarks. Thus, this common issue is decided in favour of the assessee(s) and the finding of the Ld. CIT(A) of confirming the action of the Ld. AO of treating STCG/LTCG as income from other sources is set aside.
13. As regards second common issue that action of the Ld. AO of treating the capital gain from sale of equity shares as income from other sources is without having any material or evidence on record. We need to examine this issue on the basis of the facts of the case. We note that all the assessees are filing the returns of income regularly and showing income from capital gain (LTCG/STCG) in their regular returns of income. The details of original return filed by the assessee are as follows:
Name of assessee Assessment Filing on original year return of income Babita Lila 2005-06 31.07.2005 Sona Lila 2007-08 31.07.2007 Shankar Kumar Lila 2006-07 29.07.2006 Anil Kumar Lila HUF 2006-07 29.07.2006 Anil Kumar Lila 2007-08 25.10.2007 Anil Kumar Lila HUF 2007-08 28.09.2007
14. The above details of date of filing the original return of income shows that the claim of capital gain was put forth before the revenue authorities years before the date of search. Respective details of scrip wise purchase and sale were already filed before revenue authorities. The time limit for selecting the case for scrutiny by serving of notice u/s 143(2) of the Act expired much before the date of search i.e. 28.10.2010. Thus, all the assessment years in dispute before us are non-abated assessments. Income 12 Smt. Babita Lila & others with same details were again filed in compliance to notice u/s 153A of the Act. During course of search, copies of DEMAT accounts were seized by the search team which were having same details as were filed by the assessees in their respective income tax returns before the search took place. No other incriminating material has been referred by the Ld. AO which has been found during the course of search indicating that the assessee(s) have entered into sham transaction and the alleged transaction of purchase and sale of shares are in the nature of accommodation entries or there is any direct nexus of the assessee to have involved in managing/ arranging the accommodation entries. The facts remains undisputed that the alleged additions are neither based on an incriminating material found during the course of search nor any material gathered during the assessment proceedings and the finding of both the lower authorities are just based on the theory developed by the revenue authorities, on the basis of the result of some investigation carried out by teams of revenue department in some other cases and the reports of such so called theory have not been controverted to the assessee, thus, denying them the principles of natural justice of cross examination the information of the 3rd party on the basis of which additions were going to be made.
15. We, therefore, are of the considered view the second common issue also deserves to be decided in favour of the assessee as we find that the Ld. AO had no material evidence on record to treat the 13 Smt. Babita Lila & others income shown as LTCG/STCG from sale of equity shares as income from other sources
16. In the result, all grounds raised by the assessee(s) are allowed and appeals filed by the assessees in IT(SS)ANos. 222 to 227/Ind/2019 are allowed.
Order was pronounced as per Rule 34 of I.T.A.T., Rules 1963 on 25.05.2021.
Sd/- Sd/-
(MADHUMITA ROY) (MANISH BORAD)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Indore; दनांक Dated :25/05/2021
Patel/PS
Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file.
By order Assistant Registrar, Indore 14