Income Tax Appellate Tribunal - Amritsar
Rama Mittal, Amritsar vs Ito Nfac, Ito Nfac on 3 June, 2024
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH, AMRITSAR
BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER
AND SH. UDAYAN DASGUPTA, JUDICIAL MEMBER
I.T.A. No. 26/Asr/2024
Assessment Year: 2013-14
Rama Mittal, Vs. ITO NFAC,
44-Katra Sher Singh ITO NFAC, Delhi
Amritsar 143001, Punjab
[PAN: AEYPM 1541C]
(Appellant) (Respondent)
Appellant by : Sh. Rohit Kapoor, C. A. &
Sh. V. S. Aggarwal, ITP
Respondent by : Sh. Rajiv Wadhera, Sr. DR
Date of Hearing : 02.05.2024
Date of Pronouncement : 03.06.2024
ORDER
Per Dr. M. L. Meena, AM:
The captioned appeal has been filed by the assessee against the order of the ld. CIT(A) National Faceless Appeal Centre (NFAC), Delhi dated 08.12.2023 in respect of Assessment Year: 2013-14 which is arising 2 ITA No. 26/Asr/2024 Rama Mittal v. ITO out of the Assessment Order dated 30.03.2022 u/s 147 r.w.s. 144 of the Income Tax Act, 1961 passed by the AO NFAC, Delhi.
2. The appellant- assessee has raised the following grounds of appeal:
"1. That the CIT(A) has erred in confirming the addition of Rs. 6652602/- on account of long term capital gain claimed as exempt u/s 10(38) both on law and on facts.
2. That the CIT(A) has erred in confirming the addition of Rs. 6652602/-
without appreciating the fact that the reasons were recorded by the AO without independent application of mind which tantamounts to borrowed satisfaction. That the Ld. CIT(A) has erred in confirming the addition without appreciating the fact that the Ld AO while recording the reasons was not sure whether the transactions were in respect of equity or derivative.
3. That the Ld. CIT(A) has erred in not appreciating that the reasons were recorded on wrong assumption of facts in as much as it has been incorrectly stated that the assessee had not disclosed the long term capital gain and treated the amount of Rs. 6656020/- as unexplained, which is factually incorrect as the same were duly disclosed in the return of income which, itself, vitiates the belied formed by the AO.
4. That the CIT(A) has erred in confirming the addition of Rs. 6652602/-
without appreciating that the Ld AO had failed to dispose off the objections by speaking order.
5. That the assessment framed u/s 147 is bad in law as the AO has failed to provide information in the form of investigation report, statement of Raj Kumar Modi, list of 19 scrips and the document where the name of the assessee is appearing in the list of beneficiaries
6. That the CIT(A) has erred in confirming the addition on the presumption that no prejudice was caused to the assessee by not providing the material and cross examination of Raj Kumar Modi.3 ITA No. 26/Asr/2024
Rama Mittal v. ITO
7. That the CIT(A) has grossly erred on law in holding that cross examination is not required under facts and circumstances of the case ignoring the fact that statement of Sh. Raj Kumar Modi is the basis for initiating re- assessment proceedings.
8. The CIT(A) has erred in not appreciating the fact that there was nothing on record to implicate the fact that the assessee was involved in getting entry after making payment in cash.
9. That the Ld. CIT(A) has erred in not appreciating that the assessment framed u/s 147 is without jurisdiction as the same has been made by relying upon the material seized from the residence of director Mr. Raj Kumar Modi of PMC Fin Corp and has failed to appreciate that in case of seized material, the proceedings should have been initiated u/s 153C of the Income Tax Act 1961.
10. That the CIT(A) has erred in confirming the addition made by the AO merely on the basis of price rigging in the script PMC Fin Corp without pointing out any defect in the documents or explanations submitted by the Assessee. That the CIT(A) has erred in confirming the addition without considering the hard core fact that the security appellate tribunal, Mumbai has held that the companies were not involved in price inflation of PMC Fin Corp Script in the absence of any material on record and allegation is based upon surmises and conjectures.
11. That the CIT(A) has erred in confirming the addition made by the AOO u/s 68 ignoring the fact that no addition u/s 68 can be made in the absence of books of accounts. That the bank passbook can't be considered as books of accounts of the assessee and as such the addition made on the basis of credits in bank statement is not tenable in the eyes of law.
12. That the Assessee craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off."
3. At the time of hearing the Ld. Counsel for the appellant submitted that the Ld. CIT(A) was not justified in confirming validity of the assessment and the addition of Rs.66,52,602/- as unexplained u/s 68 of the Act on account 4 ITA No. 26/Asr/2024 Rama Mittal v. ITO of non disclosure of long term capital gains claim as exempt u/s 10(38) of the Act on the basis of presumption and that the Ld. CIT(A) failed to appreciate the fact that the assessee was neither provided the material nor cross examination of Raj Kumar Modi whose statement was heavily relied by the department. The Ld. AR contended that the assessment framed u/s 147 is bad in law as the AO has failed to provide information in the form of investigation report, statement of Raj Kumar Modi, list of 19 scrips and the document where the name of the assessee is appearing in the list of beneficiaries of the accommodation entries. The AR argued that the CIT(A) has grossly erred on law in holding that cross examination was not required under facts and circumstances of the case, ignoring the fact that statement of Sh. Raj Kumar Modi was the sole basis for initiating re-assessment proceedings and that he failed to appreciate the fact that there was nothing on record to implicate the assessee that he was involved in getting entry after making payment in cash. He pleaded that the addition made may be deleted with the support of a synopsis, paper book and citations would be referred in the adjudication.
4. The Ld. DR relies on the impugned order.
5ITA No. 26/Asr/2024
5. We have heard rival contentions, perused the material on record, impugned order, written submissions and case laws cited before us. It is seen that the AO has discussed that he has considered the submissions of the assessee however, being not satisfied based on the analysis made, held that the company, M/s PMC Fincorp Ltd. was just a colourable device to cover up the ill intention of the assessee to make her unaccounted or black money to white without paying tax, wrapping it u/s 10(38) of the Act without providing information received from wing such as investigation report, statement of Raj Kumar Modi, list of 19 scrips and the document where the name of the assessee is alleged to be appearing in the list of beneficiaries of the accommodation entries. The Ld. AR objected to the addition of Rs. 66,52,6021- u/s 68 as unexplained cash credit made by the AO based on presumption without corroborative evidence and rebuttal of material facts forming the basis to the appellant assesse.
6. It is noted that the Ld. CIT(A) rather addressing the issue on facts of the case by rebutting the contention of the appellant assessee and controverting or disproving the evidences filed before him, made general observation that it is very rare and difficult to get direct information or evidence with regard to the prior meeting of minds of the persons involved in the manipulative activities of price rigging and insider trading. Therefore, 6 ITA No. 26/Asr/2024 Rama Mittal v. ITO a holistic approach is required to be made and the test of preponderance of probabilities have to be applied.
7. It is admitted and undisputed fact on record that no investigation or enquiry was conducted against the assessee either by the AO or by the CIT(A) but it was conducted against the companies and the persons who were involved in the trading of the shares of the companies which were all classified as dummy stocks companies. Further, when the assessee was not directly named in the report, and the assessee makes the genuine claim of exemption u/s 10(38) in its returns as per provisions of law, then how the assesse's claim could be rejected without disproving the source of investment and genuineness of transactions done by him based upon the valid documentary evidence.
8. It is seen that the appellant had held the shares for a period of more than one year and sold them through recognized stock exchange and paid STT, accordingly, complied all the conditions of section 10(38) of Income Tax Act, 1961, of exempt long term capital gain. The details of the shares sold are as under:
Dates Scrip No of Shares Sold Amount (In
Rs.)
14.05.2012 PMC Fincorp Ltd 4000 15,64,521.00
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Rama Mittal v. ITO
21.05.2012 PMC Fincorp Ltd 3000 11,56,981.00
11.06.2012 PMC Fincorp Ltd 3000 12,09,240.00
13.12.2012 PMC Fincorp Ltd 5000 26,94,330.00
Total 15000 66,25,602.00
9. The Counsel contended that the following documents were also submitted during the Assessment and appellate proceedings, which estblish that there was no such direct or indirect transaction was ever made with Raj Kumar Modi. Therefore, reliance upon investigation report where there is no mention of the name of the assessee is against the facts and circumstances of the case. The details of documents submitted is tabulated as under: -
Sr. No Particulars Remarks
1 Copy of purchase bill of shares Please refer page no. 5 of PB
2 Demat a/c Statement Please refer page no. 6 of PB
3 Client Ledger maintained by Religare Please refer page no. 7-17 of
Securities PB
4 Saving bank account statement for the Please refer page no.18 of
FY 2012-13 with Union Bank of India PB
10. It is noted that the assesses has established its claim before the lower authorities, based upon the documents namely bank details, the purchase/sell documents, the details of the D-Mat Account etc. and that the appellant held the shares for a period of more than one year and sold them 8 ITA No. 26/Asr/2024 Rama Mittal v. ITO through recognized stock exchange and paid STT. Meaning thereby that the assesse has complied all the conditions of section 10(38) of Income Tax Act, 1961 to claim, long term capital gain of Rs. 65,01,278/- earned by the appellant was exempt as per provisions of section 10(38) of the Income Tax Act, 1961 and same has been duly declared in the income tax return of the assessee.
11. From the record, it is found that the addition made by the AO and upheld by the CIT(A) was solely based on the premise of alleged price rigging in the PMC Fin Corp script. However, this allegation is negated by the Securities Appellate Tribunal Mumbai, in its order dated August 28, 2023, by explicitly dismissed these allegations. The tribunal's ruling stated that there is no supporting material on record to substantiate the accusation of the company's involvement in price inflation. Moreover, the order emphasized that purchasing shares from the stock exchange platform is not unlawful, and continuous buying of shares at increased prices does not contravene any provisions of SEBI laws, particularly the PFUTP Regulations. (APB, Pgs. 76-88).
12. The Hon'ble SUPREME COURT OF INDIA in the case of Principal Commissioner of Income-tax vs. Renu Aggarwal [2023] 153 Taxmann.com 579 (SC) dismissed the SLP filed by revenue filed against the Hon'ble high 9 ITA No. 26/Asr/2024 Rama Mittal v. ITO court where adjudicating the matter on Section 69A, read with section 10(38), of the Income-tax Act, 1961 - Unexplained moneys (Share dealings) - High Court by impugned order held that where Assessing Officer disallowed exemption claimed by assessee under section 10(38) and made additions, alleging involvement in pennystock which were being misused for providing bogus accomodation of LTCG, however, there was lack of adverse comments from stock exchange and officials of company involved in these transactions and no material relating to assessee was found in investigation wing report, additions made by Assessing Officer had rightly been deleted - Whether SLP filed by revenue against said impugned order was to be dismissed - Held, yes [Para 2] [In favour of assessee].
13. In the case of Principal Commissioner of Income-tax vs. Mamta Rajiv Kumar Agarwal [2023] 155 taxmann.com 549 (Gujarat), the Hon'ble HIGH COURT OF GUJARAT has observed on exemption of capital gains under Section 10(38) of the Income-tax Act, 1961 as under-
"Section 10(38) of the Income-tax Act, 1961 - Capital gains - Income arising from transfer of long term securities (Share dealings) - Assessment year 2013-14 - Assessee had sold shares of SNCFL and earned long-term capital gains - Assessing Officer issued a show cause notice alleging that transaction was a pennystock deal aimed at illegitimately claiming long-term capital gain exemption under section 10(38) - Assessing Officer treated purchase as bogus and added it to total income - Commissioner (Appeals) examined all relevant documents provided by assessee, including bills of purchases, broker account copies, bills for sales, and bank statements and held that 10 ITA No. 26/Asr/2024 Rama Mittal v. ITO purchases were made through a recognized broker via cheque, establishing their genuineness and, thus, he directed Assessing Officer to delete addition of LTCG claimed as exempt under section 10(38) - Tribunal upheld Commissioner (Appeals) decision stating that there was no evidence implicating assessee or broker in any wrongdoing related to SNCFL script - Whether in view of concurrent findings of fact that there was no evidence available on record suggesting that assessee or his broker was involved in rigging up of price of script of SNCFL, addition on account of LTCG claimed as exempt under section 10(38) had rightly been deleted - Held, yes [Paras 4 and 5] [In favour of assessee]"
14. In another case of Principal Commissioner of Income-tax vs. Indravan Jain, HUF [2023] 156 taxmann.com 605 (Bombay) the Hon'ble HIGH COURT OF BOMBAY held as under-
"section 68, read with section 10(38), of the Income-tax Act, 1961 - Cash credit (Share transactions) - Assessment year 2005-06 - Assessee had claimed sale proceeds of shares as long-term capital gain (LTCG) exemption - However, Assessing Officer held that scrip was a pennystSock and thus, he made an addition of same under section 68 - Commissioner (Appeals) observed that shares were purchased on floor of stock exchange and not from broker, payment was made through banking channel, deliveries were taken in DEMAT account where shares remained for more than one year, contract notes were issued and shares were also sold on stock exchange and, accordingly, held that there was no reason to add capital gains as unexplained cash credit under section 68 - Whether Tribunal had rightly concluded that there was no merit in appeal against Commissioner (Appeals) order - Held, yes [Para 4] [In favour of assessee]"
15. Recently, the Hon'ble Apex Court in the case of PCIT v. Dipansu Mohapatra [2024] 160 taxmann.com 289 (SC) dismissed against order of High Court that where assessee provided all details of purchase and sales of shares to AO along with contract notes for purchase and sale, demat account and bank statement and, furthermore no incriminating materials 11 ITA No. 26/Asr/2024 Rama Mittal v. ITO were found during survey conducted in premises of assessee, AO could not deny claim under section 10(38) merely by relying on statements of accommodation entry providers which were recorded much before date of survey.
16. The Judgement of Hon'ble Kolcutta High Court in the case Swat Bajaj relied by the department is not applicable to the facts of the present case and same is distinguished as under:
a) In the case of Swati Bajaj, the Script was of that Surabhi Chemicals and Investment Limited for a duration of 17 months whereas in the present case the script was of PMC Fin Corp. Ltd.
being for duration of 4 Years. (APB, Pg. 176, Para 7)
b) In the case of Swati Bajaj, Investigation report was Available in public domain and substantiate portion has been reproduced in the order whereas in this case it was neither available nor provided to the appellant.
c) In the case of Swati Bajaj, Survey was conducted on broking entities and the brokers admitted that accommodation entries were provided but in the present case, the assessee has purchased the shares from RELIGARE SECURITIES Ltd. and there was no such survey or admission by the broker.
d) Number of beneficiaries Identified but No such identification provided to assessee (APB, Pg.83 para 9.6) 12 ITA No. 26/Asr/2024 Rama Mittal v. ITO
e) Price Rigging was established that Surabhi Chemical scrip were involved in artificial rigging of price to provide bogus LTCG whereas in the instant case, the order of adjudicating authority of SEBI was challenged before Security Appellate Tribunal Mumbai and it has been held by the Tribunal that buying shares from stock exchange is not a crime and does not violate any provisions of SEBI (APB, Pg 85, para 14)
17. Considering the the factual matrix of the case and judicial precedents, we hold that the decision of the Ld. CIT(A) is infirm and perverse to the fact on record. We hold that there was no reason to add capital gains as unexplained cash credit under section 68 of the Act. Accordingly, the addition of Rs. 66,56,020/- is deleted.
18. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 03.06.2024
Sd/- Sd/-
(Udayan Dasgupta) (Dr. M. L. Meena)
Judicial Member Accountant Member
*GP/Sr.PS*
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ITA No. 26/Asr/2024
Rama Mittal v. ITO
Copy of the order forwarded to:
(1)The Appellant:
(2) The Respondent:
(3) The CIT concerned
(4) The Sr. DR, I.T.A.T.
True Copy
By Order