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TMI Blog2020 (12) TMI 740X X X X Extracts X X X X X X X X Extracts X X X X ..... ce 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. In the recent decision of the Hon'ble Division Bench of this Court in the case of Tharakumari Vs. ITO [ 2019 (3) TMI 647 - MADRAS HIGH COURT] 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. Substantial questions of law framed are answered in favour of the Revenue - Tax Case Appeal No.223 of 2020 - - - Dated:- 16-12-2020 - Honourable Mr. Justice T.S. Sivagnanam And Honourable Mrs. Justice V. Bhavani Subbaroyan For the Appellant : Mr.T.Ravikumar, SSC For the Respondent : served and no appearance JUDGMENT T.S.SIVAGNANAM, J. This appeal, filed by the appellant Revenue under Section 260A of the Income Tax Act, 1961 (for short, the Act) is directed against the order dated 04.9.2019 passed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant to the assessment year 2012-13, sold the scrips amounting to ₹ 15,86,250/- and claimed exemption under Section 10(38) of the Act. 5. The assessee did not respond to the notice issued under Section 148 of the Act. Therefore, the assessee was informed by communication dated 04.8.2017 that the entire sale proceeds of shares of M/s.Bakra Pratisthan Limited to the tune of ₹ 15,86,250/- were treated as the income of the assessee and would be assessed under the head 'income from other sources'. The assessee was given one more opportunity to file their written submissions by 16.8.2017. 6. The assessee responded to this notice and filed the written submissions on 04.9.2017 along with a copy of ITR-V. The total income admitted was ₹ 4,79,590/- and the assessee sought reasons for reopening. The reasons were furnished to the assessee by a communication dated 05.9.2017 and thereafter, the notice under Section 143(2) of the Act and the notice under Section 142(1) of the Act, both dated 08.9.2017, were issued. 7. The assessee appeared before the Assessing Officer, furnished details and stated that they had purchased 450 shares of M/s.Dhanlabh Merchandise L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proceeds could not be entertained. Further, the Assessing Officer took note of the investigation conducted by the Department at Calcutta as to how the stock prices raised more than 500-1000 times. The Assessing Officer considered the modus operandi followed by the assessee and found the entire claim made by the assessee to be bogus after rejecting the explanation offered by the assessee. 11. As against the assessment order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals)-5, Chennai-34 [for short, the CIT(A)] and it was dismissed by order dated 07.8.2018. Aggrieved by that, the assessee preferred further appeal before the Tribunal, which allowed the same by the impugned order by remanding the matter to the Assessing Officer to re-examine the issue regarding deduction under Section 10(38) of the Act. This order of remand was passed based upon an order of the Tribunal in the case of Kanhaiyalal Sons (HUF) Vs. ITO [ITA.No.1849/Chny/2018 dated 06.2.2019]. The Revenue is before us challenging the said order passed by the Tribunal as being perverse. 12. The first and foremost aspect to be considered is as to whether the Tribunal was justified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found an error in the approach of the Assessing Officer or the CIT(A) and only after interfering with such a finding, the Tribunal could have exercised its power of remand. Even in such circumstances, the Tribunal was required to record reasons as to why the matter should be remanded and as to why the Tribunal could not decide the factual issue on the available material. 16. We find from the order passed by the CIT(A) that the assessee raised a vague contention that a thirty party statement was relied upon by the Assessing Officer without affording an opportunity to the assessee to confront the same and the decision was taken against the assessee. Unfortunately, the Tribunal did not examine as to whether such a contention raised before the CIT(A) was rightly decided or not. Further, from the grounds raised by the assessee before the CIT(A), we find that they had not disputed the factual position, which had been brought out by the Assessing Officer in his order. Before the Tribunal also, we find that the assessee did not dispute the factual finding recorded by the CIT(A) in his order dated 07.8.2018. Thus, we have no hesitation to hold that the order of remand passed by the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nipulating the market prices of the shares of certain listed company on the stock exchange by a group of persons working as a syndicate for the purpose of providing entries of tax exempt, bogus long term capital gains to large number of beneficiaries in lieu of unaccounted cash converting black money into white without payment of tax. The profit made from the sale of scrip was multiple time the cost of the shares and sale price was not supported by the financial status of the company. The companies had shown very meager profits and were mostly loss making companies with negative earning per shares. These unknown companies never declared dividends and the Director s report did not show any projects or major events done in the operation of the company that would attract investors to trade in the scrip. Same set of brokerages would be seen selling and buying the shares and the sale prices were increased with every trade and trading was done by the same of brokers and also the buyers who were not assessed to tax and had not filed return of income but have purchased large amount of shares. Even those persons who had filed the return of income had declared low income and all bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer held the same as unexplained cash credit which was added to the total income of the assessee as per the provisions of Section 68 of the Act and assessed under the head Income from other sources. 18. The above facts have been culled out by the Assessing Officer as well as the CIT(A). If such is the case, it is not known as to whether there was any justification on the part of the Tribunal to interfere with the order and that too, by remanding the matter for a fresh consideration. 19. In the decision in the case of Sumati Dayal Vs. CIT [reported in (1995) 214 ITR 0801], the Hon'ble Supreme Court, while considering the aspect regarding burden of proof relating to cash credits, pointed out as follows : 4. It is no doubt true that in all cases in which a receipt is sought to be taxed as income, the burden lies on the Department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within exemption provided by the Act lies upon the assessee. [See : Parimisetti Seetharamamma (supra) at P. 536. But, in view of Section 68 of the Act, where any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the decision reported in (2019) 112 Taxmann.com 330. 23. In the decision of the Hon'ble Supreme Court in the case of PCIT, Central Vs. NRA Iron Steel Private Limited [reported in (2019) 412 ITR 0161], the issue, which fell for consideration was as to whether in a case where share capital/premium was credited in the books of accounts of the assessee company, the onus of proof was on the assessee to establish by cogent and reliable evidence after identity of the investor companies, the credit worthiness of the investors and genuineness of transactions to the satisfaction of the Assessing Officer. While answering the issue, the Hon'ble Supreme Court, after referring to its decisions in the case of Sumati Dayal and CIT Vs. P.Mohankala [reported in (2007) 291 ITR 0278], held as follows: 8.2. As per settled law, the initial onus is on the assessee to establish by cogent evidence the genuineness of the transaction, and credit-worthiness of the investors under Section 68 of the Act. The assessee is expected to establish to the satisfaction of the Assessing Officer [CIT Vs. Precision Finance Pvt. Ltd. (1994) 208 ITR 465 (Cal.) : Proof of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with sole purpose of lending entries. But, it is unfortunate that all this exercise if going in vain as few more steps which should have been taken by the Revenue in order to find out causal connection between the case deposited in the bank accounts of the applicant banks and the assessee were not taken. It is necessary to link the assessee with the source when that link is missing, it is difficult to fasten the assessee with such a liability. ....... 10. On the issue of unexplained credit entries/share capital, we have examined the following judgments : i. In Sumati Dayal v. CIT [(1995) 214 ITR 801 (SC), this Court held that : if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory, there is prima facie evidence against the assessee, vis., the receipt of money, and if he fails to rebut the same, the said evidence being unrebutted can be used against him by holding that it is a receipt of an income nature. While considering the explanation of the assessee, the department cannot, however, act unreasonably . ii. In CIT v. P. Mohankala [291 ITR 278], this Court held that: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with his creditors, and the creditworthiness of his creditors vis-a-vis the transactions which he had with the creditors, his burden stands discharged and the burden then shifts to the revenue to show that though covered by cheques, the amounts in question, actually belonged to, or was owned by the assessee himself. (emphasis supplied) vi. In a recent judgment the Delhi High Court in CIT Vs. N.R.Portfolio (P) Ltd. [(2014) 42 Taxmann.com 339/222 Taxman 157 (Mag.) (Delhi) 21] held that the credit-worthiness or genuineness of a transaction regarding share application money depends on whether the two parties are related or known to each other, or mode by which parties approached each other, whether the transaction is entered into through written documentation to protect investment, whether the investor was an angel investor, the quantum of money invested, credit-worthiness of the recipient, object and purpose for which payment/investment was made, etc. The incorporation of a company, and payment by banking channel, etc. cannot in all cases tantamount to satisfactory discharge of onus. vii. Other cases where the issue of share application money received by an assessee was exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, where a higher onus is required to be placed on the assessee since the information is within the personal knowledge of the assessee. The assessee is under a legal obligation to prove the receipt of share capital/premium to the satisfaction of the AO, failure of which, would justify addition of the said amount to the income of the assessee. 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 the assessee Shri Omprakash Jain, B.Com, FCA of Om Jain Associat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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)] 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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