PRADEEP KAINYA, MUMBAI v. ASST CIT CEN CIR 3(3), MUMBAI

CO 143/MUM/2015 | 2006-2007
Pronouncement Date: 29-09-2016 | Result: Dismissed

Appeal Details

RSA Number 14319923 RSA 2015
Assessee PAN AACPK1625P
Bench Mumbai
Appeal Number CO 143/MUM/2015
Duration Of Justice 1 year(s) 15 day(s)
Appellant PRADEEP KAINYA, MUMBAI
Respondent ASST CIT CEN CIR 3(3), MUMBAI
Appeal Type Cross Objection
Pronouncement Date 29-09-2016
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted Not Allotted
Tribunal Order Date 29-09-2016
Assessment Year 2006-2007
Appeal Filed On 14-09-2015
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C MUMBAI BEFORE SHRI AMIT SHUKLA JUDICIAL MEMBER AND SHRI MANOJ KUM AR AGGARWAL ACCOUNTANT MEMBER ITA NO. : 7430 /MUM/20 1 4 (ASSESSMENT YEAR: 2006 - 07 ) ACIT CC 3(3) CEN RG. 3 R. NO. 401 4 TH FLOOR AAYAKAR BHAVAN MUMBAI - 400 020 VS SHRI PRADEEP KANIYA 60/62 KIKA STREET GULALWADI MUMBAI - 400 004 PAN: AACPK 1625 P (APPELLANT) (RESPONDENT) C.O. NO. 143/MUM/2015 ARISING OUT OF ITA NO. : 7430/MUM/2014 AY 2006 - 07 SHRI PRADEEP KANIYA MUMBAI - 400 004 PAN: AACPK 1625 P VS ACIT CC 3(3) CEN RG. 3 R. NO. 401 4 T H FLOOR AAYAKAR BHAVAN MUMBAI - 400 020 CROSS OBJECTOR (RESPONDENT) IT A NO.: 7431 /MUM/201 4 (ASSESSMENT YEAR : 2006 - 07 ) ACIT CC 3(3) CEN RG. 3 (3) R. NO. 401 4 TH FLOOR AAYAKAR BHAVAN MUMBAI - 400 020 VS SMT PAD MA KANIYA 60/62 KIKA STREET GULALWADI MUMBAI - 400 004 PAN: AACPK 162 6 Q (APPELLANT) (RESPONDENT) C.O. NO. 144/MUM/2015 ARISING OUT OF ITA NO. : 743 1 /MUM/2014 AY 2006 - 07 SMT PAD MA KANIYA MUMBAI - 400 00 4 PAN: AACPK 1626 Q VS ACIT CC 3(3) CEN RG. 3 R. NO. 401 4 TH FLOOR AAYAKAR BHAVAN MUMBAI - 400 020 (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI C S SALDANHA REV ENUE BY SHRI C S SHARMA 2 SHRI PRADEEP KANIYA ITA 7430 /MUM/ 2014 CO 143/MUM/2015 SMT PADMA KANIYA ITA 7431/MUM/2014 CO 144/MUM/2015 /DATE OF HEARING : 29 - 09 - 201 6 / DATE OF PRONOUNCEMENT : 29 - 09 - 2016 ORDER PER AMIT SHUKLA J.M. : THE AFORESAID APPEALS H AVE BEEN FILED BY THE R EVENUE AS WELL AS C ROSS OBJECTIONS BY THE ABOVE NAMED ASSESSEES AGAINST IMPUGNED ORDER OF EVEN DATE 23.09.2014 PASSED BY LD. CIT (A PPEALS ) - 39 MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143(3) R.W.S. 147 FOR THE ASSE SSMENT YEARS 2006 - 07. SINCE ISSUE S INVOLVED IN BOTH THE APPEALS ARE COMMON ARISING OUT OF IDENTICAL SET OF FACTS THEREFORE SAME WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY WAY OF THIS CONSOLIDATED ORDER. 2. WE WILL FIRST TAKE - UP ITA NO.743 0 / MUM/ 2014 AND CO NO.143 /MUM/ 2015 IN CASE OF SHRI PRADEEP KANIYA. IN THE GROUNDS OF APPEAL THE REVENUE HAS RAISED FOLLOWING EFFECTIVE GROUND: - 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF A SUM OF RS.56 95 435/ - MADE BY THE AO RELATING TO UNEXPLAINED CASH CREDIT OF RS.54 24 224/ - (LTCG FROM SALE OF SHARES) AND UNEXPLAINED EXPENDITURE OF RS.2 71 211/ - (EXPENDITURE OF 5% COMMISSION TOWARDS THE LTCG). 3 SHRI PRADEEP KANIYA ITA 7430 /MUM/ 2014 CO 143/MUM/2015 SMT PADMA KANIYA ITA 7431/MUM/2014 CO 144/MUM/2015 3 . IN THE CROSS OBJECTION THE ASS ESSEE HAS CHALLENGED THE VALIDITY OF REOPENING UNDER SECTION 147 ON THE FOLLOWING GROUNDS: 1. THE NOTICE UNDER SECTION 148 OF THE ACT DATED 24.09.2010 FOR REOPENING OF COMPLETED ASSESSMENT U/S 143(3) R.W.S. 153A DATED 31.12.2007 IS BAD IN LAW AS THE ASSE SSEE HAD DECLARED FULL AND TRUE PARTICULARS OF HIS INCOME THEREFORE NOTICE OF REOPENING IS LIABLE TO BE QUASHED. 2. THE REOPENING OF ASSESSMENT IS BAD - IN - LAW AS THE COMPLETED ASSESSMENT WAS REOPENED WITHOUT ANY NEW TANGIBLE MATERIAL AND SUCH REOPENING I S NOTHING BUT CHANGE OF OPINION. 4 . AT THE OUTSET THE LD. COUNSEL SUBMITTED THAT EXACTLY SIMILAR ISSUE WAS INVOLVED IN THE CASE OF ANIL KANIYA WHO IS ONE OF THE FAMILY MEMBER OF THE ASSESSEE BEFORE THIS TRIBUNAL FOR THE SAME ASSESSMENT YEAR VIZ. 200 6 - 07 ( IN ITA NO. 4077/MUM/2013 VIDE ORDER DATED 22.03.2016 ) WHEREIN THE TRIBUNAL HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AFTER DETAILED DISCUSSION. NOT ONLY THAT I N ANOTHER SEPARATE ORDER OF THE TRIBUNAL IN THE CASE OF SMT. NEELAM KANIYA ( IN ITA NO.4081/MUM/2013 VIDE ORDER DATED 09.12.2015 ) AGAIN FOR THE SAME ASSESSMENT YEAR VIZ. 2006 - 07 THE TRIBUNAL HAD DECIDED THE SAME ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. THE MAIN ISSUE INVOLVED IN THESE APPEALS IS TAXABILITY OF LONG - TER M - CAPITAL - GAIN ON SALE OF SHARES WHICH HAS BEEN CLAIMED AS EXEMPT BY THE ASSESSEE BUT TREATED TO BE TAXABLE AS INCOME FROM OTHER SOURCES UNDER SECTION 68 BY THE ASSESSING OFFICER . 4 SHRI PRADEEP KANIYA ITA 7430 /MUM/ 2014 CO 143/MUM/2015 SMT PADMA KANIYA ITA 7431/MUM/2014 CO 144/MUM/2015 5. BRIEF FACTS ARE THAT THE ASSESSEE HAS SHOWN PURCHASE OF 23 000 SHAR ES OF G K CONSULTANTS LTD ON 10.06.2003 THROUGH A BROKER RAJENDRA PRASAD SHAH FOR SUM OF RS.96 140/ - AND SAME WERE SOLD IN MONTH OF MAY 20 0 5 FOR RS.55 20 364/ - . THE SHARES WERE PURCHASED IN PHYSICAL FORM ON 10.06.2003 AND WERE DEMATED ON 15.03.2005. T HE ASSESSEE HAD THUS DISCLOSED THE GAIN AS LONG - TERM - CAPITAL - GAIN AT RS.54 24 224/ - IN HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006 - 07 FILED ON 16.03.2007. THE ASSESSMENT OF SAID RETURN OF INCOME WAS COMPLETED UNDER SECTION 153A R.W.S. 143(3) ON 31. 12.2007 AT RS.25 25 560/ - WHER E BY THE RETURN OF INCOME WAS ACCEPTED ALONG WITH THE COMPUTATION OF LTCG . SUBSEQUENTLY THE ASSESSEES CASE WAS REOPENED UNDER SECTION 148 ON THE FOLLOWING REASONS RECORDED AS INCORPORATED BY THE ASSESSING OFFICER AT PAGE 1 OF THE ASSESSMENT ORDER: - DURING THE COURSE OF ASSESSMENT FOR A. Y. 2007 - 08 IT WAS NOTICED THAT THE ASSESSEE HAD INDULGED IN ALLEGED PURCHASE AND SALE OF PENNY - STOCK SHARES (M/S. OASIS CINE COMMUNICATION). THE BROKER CONCERNED HAD DENIED ANY TRANSA CTION WITH THE ASSESSEE. ALSO SEBI HAD INITIATED ENQUIRIES AGAINST THE VARIOUS BROKERS INVOLVED IN TRANSACTION OF MIS. OASIS CINE COMMUNICATION. CONSIDERING THESE FACTS THERE IS REASON TO BELIEVE THAT INCO ME TO THE TUNE OF RS.35 86 500 / - HAS ESCAPED A SSESSMENT IN A. Y. 2006 - 07. SINCE THE ORIGINAL ASSESSMENT HAD BEEN MADE U/S. 143(3) R.W.S. 153A ON 31.12.2007 AND 4 YEARS HAVE NOT 5 SHRI PRADEEP KANIYA ITA 7430 /MUM/ 2014 CO 143/MUM/2015 SMT PADMA KANIYA ITA 7431/MUM/2014 CO 144/MUM/2015 ELAPSED FROM THE END OF THE RELEVANT ASSESSMENT YEAR ASSESSMENT IS BEING RE - OPENED.' 6 . THE LD. ASSESSING OFFICER HELD TH AT THE TRANSACTION OF SALE OF SHARES IS BOGUS AS IT IS A SALE OF PENNY STOCK AND NOT ONLY THAT HE ALSO ADDED 5% COMMISSION ON ALLEGED ACCOMMODATION OF TRANSACTION OF SHARES OF RS.2 71 211/ - . T HE ASSESSING OFFICERS RELEVANT OBSERVATIONS ON ALLEGED TRANSA CTION OF SHARES BEING NON - GENUINE WERE AS UNDER: I . SHARES WERE PURCHASED IN PHYSICAL FORM AND DEMATERIALIZED 2 MONTHS BEFORE SALE. II . T HE MODUS - OPERANDI IS ABSOLUTELY SAME FOR ALL THE MEMBERS OF THE KAINYA GROUP . III . O NCE THE PURCHASE ITSELF IS QUESTIONED THE INCIDENCE OF CAPITAL GAIN CANNOT BE ATTRACTED. IV . T HESE ADJUSTMENTS WERE MADE LEADING TO BELATED FILING TO RETURN . V. THE BALANCE SHEET AND PROFIT AND LOSS OF ACCOUNT OF THE COMPANY G.K. CONSULTANT LTD. IS INSIGNIFICANT AND IT DOES NOT WARRANT SUCH HUGE MAGNITUDE OF PURCHASE AND SALE. VI. DURING THE COURSE OF SEARCH ACTION SEVERAL BENEFICIARIES HAVE ADMITTED THAT CASH EQUIVALENT OF SALE RECEIPT WAS GIVEN INTERMEDIARIES WHO ARRANGED BACK DATED PURCHASE INVOICES FOR WHICH COMMISSION WAS PAID . AFTER REFERRING TO VARIOUS DECISIONS HE TAXED THE ENTIRE AMOUNT OF LTCG AS INCOME FROM OTHER SOURCES AND ALSO 6 SHRI PRADEEP KANIYA ITA 7430 /MUM/ 2014 CO 143/MUM/2015 SMT PADMA KANIYA ITA 7431/MUM/2014 CO 144/MUM/2015 ADDED RS.2 71 211/ - ON ACCOUNT OF UNACCOUNTED COMMISSION PAID . 7 . BEFORE THE LD. CIT(A) THE ASSESSEE MADE VERY ELABORATE SUBMISSION THE SUM AND SU BSTANCE OF WHICH ARE AS UNDER: (I) DURING THE COURSE OF SEARCH CARRIED OUT IN THE CASE OF ASSESSEE AS ON 18.01.2006 THE ENTIRE TRANSACTION OF THE ASSESSEE WAS EXAMINED BY THE INVESTIGATION TEAM OF THE DEPARTMENT AND NO ADVERSE INFERENCE WAS DRAWN AND SHAR ES WHICH WERE HELD BY THE ASSESSEE IN THE EARLIER YEARS WERE DULY DISPOSED OFF PRIOR TO THE DATE OF SEARCH AND IT ALSO REVEALED THAT 33000 SHARES OF G.K. CONSULTANT LTD. WERE SOLD ON VARIOUS DATES ON WHICH LTCG WAS CLAIMED AND THE SAME WAS ALLOWED BY THE ASSESSING OFFICER IN THE SCRUTINY ASSESSMENT FOR THE ASSESSMENT 2005 - 06 AND 2006 - 07 ; II) ONCE THE PURCHASE OF SAME SHARES HAS BEEN SHOWN AS AN INVESTMENT IN THE BALANCE SHEETS AND ACCEPTED BY THE DEPARTMENT IN THE SCRUTINY PROCEEDINGS AND ALSO THE SALE OF CERTAIN LOT OF THE SAME SHARES HAS BEEN ACCEPTED AS LTCG IN THE EARLIER YEAR THEN NO DIFFERENT VIEW CAN BE TAKEN. III) THE CONTRACT NOTE ISSUED BY THE BROKER FOR THE PURCHASE ALONG WITH THE COPY OF LEDGER ACCOUNT BANK STATEMENT CONFIRMATION LETTERS R ECEIVED FROM THE G.K. CONSULTANT 7 SHRI PRADEEP KANIYA ITA 7430 /MUM/ 2014 CO 143/MUM/2015 SMT PADMA KANIYA ITA 7431/MUM/2014 CO 144/MUM/2015 LTD. HOST OF OTHER EVIDENCES WERE ALSO FILED TO PROVE THE GENUINENESS OF THE TRANSACTION . 8. THE LD. CIT ( A) AFTER TAKING NOTE OF THE VARIOUS GAMUT OF FACT OBSERVE THAT THE ASSESSEE HAD PLACED FOLLOWING MATERIAL DOCUM ENTS TO PROVE THE GENUINENESS OF THE TRANSACTION: I ) THE SHARES HELD IN M/S G K CONSULTANTS LTD WERE DISCLOSED AS INVESTMENT FOR AY 2004 - 05 ; II ) THE SALE OF SHARES OF O.K. CONSULTANTS LTD. IN A.Y. 2005 - 06 AND DISCLOSURE OF LONG TERM CAPITAL GAIN THEREON WAS AC CEPTED BY THE AO ; III ) COPY OF CONTRACT NOTE ISSUED BY RAJENDRA PRASAD DATED 10.06.2003 EVIDENCES PURCHASE OF SHARES WHICH HAS NOT BEEN REJECTED OR DISOWNED BY THE A. 0. HENCE THERE IS DOCUMENTARY EVIDENCE AVAILABLE FOR PURCHASE OF SHARES ; IV ) PAYMENT WAS MADE THROUGH BANKING CHANNELS AND THE SHARES WERE HELD IN THE DEMAT ACCOUNT OF THE ASSESSEE ; V ) CONTRACT NOTE HAS BEEN FILED EVIDENCING SALES THROUGH BROKER OF STOCK CHANGE AND PAYMENT RECEIVED THROUGH ACCOUNT PAYEE CHEQUE . BASED ON THESE DOCUMENTS HE ALLOWED T HE ASSESSEES APPEAL AFTER OBSERVING AND HOLDING AS UNDER : - FROM THE ABOVE IT CAN BE OBSERVED THAT REQUISITE MATERIAL TO EVIDENCE THE TRANSACTION WAS PLACED ON RECORD BY THE APPELLANT. THE SAID EVIDENCE HAS NOT BEEN DISCOUNTED. WHEN THE APPELLANT HAS S UBMITTED COPIES OF CONTRACT NOTE SHOWN 8 SHRI PRADEEP KANIYA ITA 7430 /MUM/ 2014 CO 143/MUM/2015 SMT PADMA KANIYA ITA 7431/MUM/2014 CO 144/MUM/2015 THAT MONEY HAS BEEN RECEIVED IN THE BANK ACCOUNT FROM SALE OF SHARES THE PURCHASES OF WHICH HAD NOT BEEN DOUBTED IN THE EARLIER YEAR IT IS NOT POSSIBLE TO ACCEPT THE FINDING OF THE AO THAT THE INCOME IS FROM UND ISCLOSED SOURCE. FROM THE RECORDS IT CAN BE SEEN THAT APPELLANT HAD SUBMITTED CONTRACT NOTE SALES BILL DEMAT STATEMENT AND STATEMENT OF ACCOUNT TO SUBSTANTIATE THAT SALES HAD BEEN EFFECTED. I ALSO FIND THAT THE SHARES HAVE BEEN SHOWN IN THE BALANCE SHEET OF THE APPELLANT SINCE LAST TWO YEARS ASSESSMENT OF WHICH WAS COMPLETED UNDER SECTION 143(3) OF THE ACT AND NO ADVERSE FINDING ABOUT THE INVESTMENTS HAVE BEEN BROUGHT ON RECORD. FURTHER IN A.Y. 2005 - 06 LONG TERM CAPITAL GAIN EARNED ON SALE OF SHARES OF G. K. CONSULTANTS LTD. CLAIMED BY THE APPELLANT AS EXEMPT U/S 10(38) WAS ACCEPTED BY THE AO. THAT BEING SO THE ADDITION ON ACCOUNT OF LONG TERM CAPITAL GAIN HAS BEEN MADE BY THE AO PURELY ON THE BASIS OF SURMISES WHICH CANNOT BE SUSTAINED. CONSEQUENT LY HE ALSO DELETED THE ADDITION ON ACCOUNT OF 5% COMMISSION. 9 . THE LD. DR HAS STRONGLY RELIED UPON THE ORDER OF THE ASSESSING OFFICER WHEREAS THE LD. COUNSEL FOR THE ASSESSEE PLACED HIS RELIANCE ON THE ORDER OF THE AO AS WELL AS ORDER OF THE CIT(A) AS REFERRED TO ABOVE. 10 . WE FIND THAT FIRST OF ALL THE AO HAD ADMITTED THAT SIMILAR TRANSACTION IN SAME SCRIPT WAS INVOLVED IN THE CASE ON OTHER FAMILY MEMBERS OF THE ASSESSEE LIKE IN THE CASE OF SHRI ANIL KANIYA ( SUPRA ) AND SMT. NEELAM KANIYA. IN THESE CASES 9 SHRI PRADEEP KANIYA ITA 7430 /MUM/ 2014 CO 143/MUM/2015 SMT PADMA KANIYA ITA 7431/MUM/2014 CO 144/MUM/2015 THE MATTER HAD REACHED UPTO THE STAGE OF THE TRIBUNAL WHEREIN DETAILED FINDING ON SIMILAR GAMUT OF FACTS HAVE BEEN CONSIDERED AND THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE AND REVENUES APPEAL HAS BEEN DISMISSED. THE RELEVANT FINDING OF THE TRIBUNAL IN THE CASE OF SHRI ANIL KANIYA ( SUPRA ) IS REPRODUCED HERE UNDER: - 3.6. IF THE OBSERVATION MADE IN THE ASSESSMENT ORDER LEADING TO ADDITION MADE TO THE TOTAL INCOME CONCLUSION DRAWN IN THE IMPUGNED ORDER MATERIAL AVAILABLE ON RECORD ASSER TIONS MADE BY THE LD. RESPECTIVE COUNSEL IF KEPT IN JUXTAPOSITION AND ANALYZED THE MAJOR GRIEVANCE OF THE REVENUE IS THAT THOUGH THE SHARES WERE CLAIMED TO BE PURCHASED IN JUNE 2003 BUT THE PAYMENTS WERE MADE ON OR AFTER 22/12/2004 AND THE SHARES WERE SE NT FOR DEMATIZATION IN APRIL 2005. ANOTHER GRIEVANCE OF THE REVENUE IS THAT THE PURCHASE PRICE OF THE CLAIM SHARES WAS VERY LOW WHEREAS THE SAME WERE SOLD AT THE RATE OF 250 PER SHARES CAUSING HUGE ARTIFICIAL GAIN TO THE ASSESSEE. ON THE OTHER HAND TH E LD. COUNSEL FOR THE ASSESSEE EXPLAINED THAT THE TRANSACTION WAS GENUINE AND IDENTICALLY FOR A.Y. 2007 - 08 THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) (FOR A.Y. 2007 - 08) NO FURTHER APPEAL WAS FILED BY THE DEPARTMENT. IT IS NOTED THAT VIDE ORDER DATED 01/11/2013 ON IDENTICAL ISSUE THE LD. COMMISSIONER (APPEALS) WHEREIN THE ASSESSEE CLAIMED TO HAVE PURCHASED 9000 SHARES ON 29/09/2004 OF OASIS SINE COMMUNICATION LTD. THROUGH ONE BR OKER SHRI PREM LAL ROY FOR RS.58 680/ - AND THE SAME WERE CLAIMED TO BE SOLD DURING THE YEAR THROUGH STOCK EXCHANGE FOR RS.25 99 731/ - CAUSING GAIN OF RS.25 41 051/ - . THOSE SHARES WERE ALSO PURCHASED IN PHYSICAL FORM AND SOLD IN DE - MAT FORM. THE LD. ASSES SING OFFICER HELD THE SAME TO BE NON - GENUINE. ULTIMATELY THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. THE ASSESSEE IS RELYING UPON THIS DECISION OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). IN THE CASE OF THE ASSESSEE THE SHARES OF M/S G.K. CONS ULTANTS LTD. WERE PURCHASED THROUGH BROKER SHRI RAJENDRA PRASAD SHAH. ADMITTEDLY THE COMPANY OF WHICH THE SHARES WERE PURCHASED AND THE BROKER ARE DIFFERENT. HOWEVER THERE IS NO DISPUTE THAT THE SHARES WERE PURCHASED IN PHYSICAL FORM IN JUNE 2003 AND W ERE DEMATTED ON 15/04/2005. THE STAND OF THE REVENUE IS THAT THERE WERE VARIOUS PERSONS WHO WERE 10 SHRI PRADEEP KANIYA ITA 7430 /MUM/ 2014 CO 143/MUM/2015 SMT PADMA KANIYA ITA 7431/MUM/2014 CO 144/MUM/2015 BENEFICIARIES OF BOGUS CAPITAL GAIN ON SALE OF SHARES OF PENNY STOCK COMPANIES. HOWEVER THE LD. ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY EVIDENCE (I) THAT M/S G.K. CONSULTANTS LTD. IS A PENNY STOCK COMPANY (II) THE ASSESSING OFFICER DID NOT MADE ANY INVESTIGATION FROM CALCUTTA WITH RESPECT TO THE CREDENTIALS OF M/S G.K. CONSULTANTS LTD. (III) THE ASSESSING OFFICER HAS NOT DISPUTED THAT THE SHARES WERE DEMATERIALIZED AND THE IMPUGNED AMOUNT WAS RECEIVED ON SALE OF SUCH SHARES. A BROAD AND BALLED OBSERVATION HAS BEEN MADE THAT VARIOUS PERSONS ARE BENEFICIARIES OF BOGUS CAPITAL GAINS ON SALE OF CERTAIN SCRIPS OF PENNY STOCK COMPANIES. THE ASSESSEE HAS NEI THER PROVED THAT EITHER M/S G.K. CONSULTANTS LTD. IS A PENNY STOCK COMPANY OR IS INVOLVED IN PROVIDING BOGUS SHARES. IT SEEMS THAT THE ADDITION WAS MADE MERELY ON PRESUMPTION. IN SUCH A SITUATION WE ARE OF THE VIEW THAT PRESUMPTION CANNOT TAKE THE SHAPE OF EVIDENCE HOWEVER STRONG IT MAY BE. EVEN OTHERWISE THE LD. ASSESSING OFFICER HAS NOT SUBSTANTIATED HIS PRESUMPTION WITH THE HELP OF ANY DOCUMENTARY EVIDENCES. THE ASSESSEE HAS PRODUCED THE COPIES OF CONTRACT NOTE MONEY WAS RECEIVED THROUGH BANKING CHA NNEL FROM SALE OF SHARES PURCHASES OF EARLIER YEARS WERE NOT DOUBTED. DEMATTING WAS DONE BY THE ASSESSEE SALE WAS AFFECTED THUS THERE IS NO REASON TO INTERFERE WITH THE FINDING OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) THUS IT WAS RIGHTLY HELD THAT THE ADDITION MADE U/S 68 OF THE ACT CANNOT BE SUSTAINED AND ALSO THE RESULTANT DISALLOWANCE OF COMMISSION AT THE RATE OF 5% MADE BY THE ASSESSING OFFICER. EVEN OTHERWISE FOR MAKING ADDITION U/S 68 OF THE ACT THERE HAS TO BE CREDIT OF AMOUNTS IN THE BOOKS OF THE ASSESSEE AND IF THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH CREDITS THEN THE SOME SO CREDITED MAY BE CHARGED TO TAX AS INCOME OF THE ASSESSEE. HOWEVER IN THE PRESENT CASE THE ASSESSEE HAS OFFERED ITS EXPLANATION AND IF THE LD. ASSESSING OFFICER IS STILL NOT SATISFIED WITH SUCH EXPLANATION ONUS SHIFTS UPON HIM TO PROVE OTHERWISE. THE ASSESSEES BURDEN IS CONFINED TO PROVE CREDITWORTHINESS OF THE CREDITOR WITH REFERENCE TO THE TRANSACTION FOUND IN THE BOOKS OF THE ASSESSEE. IN THE PRESENT APPEAL THE IDENTITY OF THE CREDITOR IS NOT IN DOUBT THE SALE PROCEEDS WERE RECEIVED THROUGH BANKING CHANNEL NO ADVERSE MATERIAL WAS BROUGHT ON RECORD BY THE ASSESSING OFFICER TO SUBSTANTIATE HIS PRESUMPTION THE SHARES REMAINED IN THE DEMAT ACCOUNT OF THE ASSESSEE FOR MORE THAN TWELVE MONTHS SOLD THROUGH RECOGNIZED STOCK EXCHANGE ON WHICH STT WAS PAID THE QUOTATION OF THE AID SCRIPS WERE AVAILABLE ON THE 11 SHRI PRADEEP KANIYA ITA 7430 /MUM/ 2014 CO 143/MUM/2015 SMT PADMA KANIYA ITA 7431/MUM/2014 CO 144/MUM/2015 EXCHANGE THUS THE APPEAL OF THE REVENUE IS HAVING NO MERIT CONSEQUENTLY DISMISSED. 4. NOW WE SHALL TAKE UP THE CROSS OBJECTION OF THE ASSESSEE FOR ASSESSMENT YEAR 2006 - 07 WHEREIN NOTICE ISSUED U/S 148 DATED 24/09/2010 FOR REOPENING OF THE COMPLETED ASSESSMENT U/S 143(3) R.W.S 153A DATED 31/12/2007 WAS CLAIMED TO BE BAD I N LAW AS THE ASSESSEE HAD DECLARED FULL AND TRUE PARTICULARS OF HIS INCOME THEREFORE NOTICE IS LIABLE TO BE QUASHED. THE LD. COUNSEL ADVANCED ARGUMENTS WHICH IS IDENTICAL TO THE GROUND RAISED BY PLACING RELIANCE UPON THE DECISION ITA NO.4081/MUM/2013. WI THOUT GOING INTO MUCH DELIBERATION WE HAVE DECIDED THE APPEAL OF THE REVENUE ON MERIT IN FAVOUR OF THE ASSESSEE THEREFORE WE ARE REFRAINING OURSELVES TO DECIDE THE ISSUE OF REOPENING AND THUS DISMISS THE CROSS OBJECTION OF THE ASSESSEE AS IN - FRUCTUOUS . WE FIND THAT SIMILAR VIEW HAS BEEN TAKEN INDEPENDENTLY BY THE TRIBUNAL IN THE CASE OF SMT. NEELAM KANIYA ( SUPRA ). THUS RESPECTFULLY FOLLOWING THE ABOVE PRECEDENTS WE DO NOT FIND MERITS IN THE GROUNDS RAISE BY THE REVENUE. 11. APART FROM THAT IT IS NOTED THAT THERE ARE NO MATERIAL ON RECORD TO REBUT THE AFORESAID FINDING OF THE LD. CIT(A) BY THE DEPARTMENT AND ONCE THE PURCHASES WHICH IS REFLECTED IN THE BALANCE SHEET OF THE EARLIER YEARS HAS BEEN ACCEPTED IN THE SCRUTINY PROCEEDINGS ALONG WITH T HE PART OF THE SALE OF THE SAME SCRIPTS IN THE AY 2005 - 06 THEN THE SALE OF THE BALANCE SCRIPTS IN THIS YEAR CANNOT BE DOUBTED . A CCORDINGLY THE FINDING OF THE CIT(A) IS AFFIRMED AND GROUNDS TAKEN BY THE REVENUE IS DISMISSED. 1 2 . AS REGARDS THE VALIDITY O F REOPENING AS CHALLENGED BY THE ASSESSEE IN CROSS OBJECTION THE SAME WILL BECOME PURELY ACADEMIC IN VIEW OF THE OUR FINDINGS GIVEN ABOVE ON MERITS AS 12 SHRI PRADEEP KANIYA ITA 7430 /MUM/ 2014 CO 143/MUM/2015 SMT PADMA KANIYA ITA 7431/MUM/2014 CO 144/MUM/2015 THE MATTER HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. ACCORDINGLY CROSS OBJECTION FILED BY THE ASSESS EE IS TREATED AS IN - FRUCTUOUS. 1 3 . IN THE CASE OF SMT. PADMA KANIYA ALSO AS ADMITTED BY BOTH THE PARTIES IDENTICAL FACTS ARE PERMEATING THROUGH AND SIMILAR GROUND HAS BEEN RAISED BY THE REVENUE AND ALSO SIMILAR CROSS OBJECTION RAISED BY THE ASSESSEE. FOR THE SAKE OF READY REFERENCE THE SAME ARE REPRODUCED HERE IN UNDER: - 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF A SUM OF RS.57 13 172/ - MADE BY THE AO RELATING TO UNEXPLAINED CAS H CREDIT OF RS.54 41 116/ - (LTCG FROM SALE OF SHARES) AND UNEXPLAINED EXPENDITURE OF RS.2 72 056/ - (EXPENDITURE OF 5% COMMISSION TOWARDS THE LTCG). IN CROSS OBJECTION FOLLOWING GROUNDS HAVE BEEN RAISED: - 1. THE NOTICE UNDER SECTION 148 OF THE ACT DAT ED 24.09.2010 FOR REOPENING OF COMPLETED ASSESSMENT U/S 143(3) R.W.S. 153A DATED 31.12.2007 IS BAD IN LAW AS THE ASSESSEE HAD DECLARED FULL AND TRUE PARTICULARS OF HIS INCOME THEREFORE NOTICE OF REOPENING IS LIABLE TO BE QUASHED. 2. THE REOPENING OF ASS ESSMENT IS BAD - IN - LAW AS THE COMPLETED ASSESSMENT WAS REOPENED WITHOUT ANY NEW TANGIBLE MATERIAL AND SUCH REOPENING IS NOTHING BUT CHANGE OF OPINION. 1 4 . ADMITTEDLY THE FACTS HERE IN THIS CASE ARE ALSO IDENTICAL THEREFORE OUR FINDINGS GIVEN ABOVE WI LL APPLY MUTATIS MUTANDIS AND ACCORDINGLY THE REVENUES APPEAL IS TREATED AS DISMISSED WHEREAS CROSS OBJECTION IS FILED BY THE ASSESSEE IS TREATED AS IN - FRUCTUOUS. 13 SHRI PRADEEP KANIYA ITA 7430 /MUM/ 2014 CO 143/MUM/2015 SMT PADMA KANIYA ITA 7431/MUM/2014 CO 144/MUM/2015 1 5 . IN THE RESULT BOTH THE APPEALS RAISED BY THE REVENUE AND CROSS OBJECTIONS OF THE A SSESSEES ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29TH SEPTEMBER 2016 . SD/ - SD/ - ( ) ( ) ( MANOJ KUMAR AGGARWAL ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUM BAI DATE: 29TH SEPTEMBER 2016. / COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3 ) THE CI T ( APPEAL ) 39 MUMBAI. 4 ) THE CIT - CENT.II MUMBAI 5 ) / THE D.R. C BENCH MUMBAI. 6 ) \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / DY. / ASSTT. REGISTRAR I.T.A.T. MUMBAI * . . *CHAVAN SR.PS