9911796707
TMI Blog2021 (9) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... ad brought on record the role of the assessee in promoting a company, the relation of the assessee with that of the promoter and the role of inflating of prices, etc. The Tribunal, by the impugned order, allowed the appeal and remanded the matter by following its earlier decision in the case of Kanhaiyalal & Sons (HUF) Vs. ITO [ITA. No.1849/Chny/2014 dated 06.12.2019]. 4. The Revenue is on appeal before us challenging the correctness of the order and raising the following substantial question of law : "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 & Sons (HUF) in ITA. No.1849/Chny/2014 Sunil Kumar Lalwani and Aashesh Kumar Lalwani wherein the onus has been shifted to the Revenue with a direction that the Assessing Officer is to bring on record 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 Assessing Officer and the SEBI?" 5. An identical issue was considered by this Court in sever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd is not a power to be exercised in a routine manner and should be used sparingly as an exception only when the facts warranted such course of action. We feel that the Tribunal should have arrived at its own conclusion on facts after due consideration of the materials before it which were no different from which was placed before the authorities below. Hence, we have no hesitation in setting aside the order passed by the Tribunal in remanding the matter back to the Income Tax Appellate Tribunal on the admitted fact that no fresh materials were placed before the Tribunal necessitating remand." 15. Thus, we are required to consider the issue as to whether the Tribunal was justified in remanding the matter to the Assessing Officer to reconsider the issue regarding the claim made by the assessee under Section 10(38) of the Act. On a reading of the order passed by the Tribunal, we find that the Tribunal did not interfere with the factual findings recorded by the Assessing Officer and the CIT(A) with regard to the transaction done by the assessee. Thus, unless and until the Tribunal found an error in the approach of the Assessing Officer or the CIT(A) and only after interfering with s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Company were also not known to the assessee. The share certificate issued to the seller from whom the assessee had purchased and the certificates issued to the seller would be a month or so before the alleged sales to the assessee. The evidence was typed date of transfer on the back side of the share certificates and the bill for purchasing this scrip was shown as a proof and the date of bill would be the prior to the date of share certificate itself allotting the shares to the seller. In many cases, implying that the shares were sold to the assessee, even before the receipt of share certificate by the seller. The shares were demated just before the sale of shares to the assessee , who was having no experience in share trading. The Security Exchange Bureau of India (SEBI) had blacklisted nearly 14 brokers for their alleged involvement in manipulating the market prices and rigging the markets for jacking up the share prices. The Income Tax Department Investigation Wing which had conducted detailed investigation had unearthed shell companies which specialized in manipulating the market prices of the shares of certain listed company on the stock exchange by a group of persons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the present assessee's case, the assessee has originally purchased 450 shares of face value of Rs. 10/- each at Rs. 200/- per share amounting to Rs. 90,000/- of Dhanlabh Mercantile Ltd, Offline on 15.1.2010 from M/s.Excellent Barter Ltd, Calcutta. The said company was subsequently merged with M/s.Bakra Prathisthan Ltd and 4500 shares of M/s.Bakra Prathisthan Ltd., were allotted to assessee at Rs. 10/- per share. The assessee sold 4500 shares of M/s.Baktra Prathisthan Limited on 03.01.2012 for Rs. 15,83,623/-, which had acquired for Rs. 90,000/-. The assessee had not furnished any documentary evidence to prove the genuineness of the transaction in respect of purchase and sale of shares. The assessee had not discharged the onus cast upon him to prove the genuineness of the transactions. The assessee had entered into engineered transaction to generate artificial long term capital gains and the Explanation offered by the assessee regarding the credit of Rs. 15,86,250/- in its book was found to be unsatisfactory and therefore, 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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly disallowed. 21. A similar view was taken in the decision of the High Court of Bombay in the case of Sanjay Bimalchand Jain Vs. PCIT-1, Nagpur [reported in (2018) 89 Taxmann.com 196]. In that case, the assessee purchased shares of two penny stock companies for a lower amount and within a year, sold such shares at a higher amount. The assessee had not tendered cogent evidence to explain as to why shares in an unknown company had jumped to such a higher amount in no time and also failed to provide details of persons, who purchased the said shares and the transaction was held to be an attempt to hedge the undisclosed income as long term capital gain. 22. In the decision in the case of Suman Poddar Vs. ITO [reported in (2019) 112 Taxmann.com 329], the Delhi High Court upheld the order of the Tribunal, which held that the share transactions were bogus because the company, whose shares were allegedly purchased, was a penny stock. This decision was affirmed by the Hon'ble Supreme 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... worthiness/ investments; and (iii) genuineness of the transaction. Only when these three ingredients are established prima facie, the department is required to undertake further exercise." It has been held that merely proving the identity of the investors does not discharge the onus of the assessee, if the capacity or creditworthiness has not been established. In Shankar Ghosh v. ITO [(1985) 23 TTJ (Cal.) 20], the assessee failed to prove the financial capacity of the person from whom he had allegedly taken the loan. The loan amount was rightly held to be the assessee's own undisclosed income. 8.4. Reliance was also placed on the decision of CIT v. Kamdhenu Steel & Alloys Limited and Others [(2012) 206 Taxman 254 (Delhi)] wherein the Court that : "38. Even in that instant case, it is projected by the Revenue that the Directorate of Income Tax (Investigation) had purportedly found such a racket of floating bogus companies 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors, but also the capacity of the creditors to advance money and establish the genuineness of the transactions. The initial onus of proof lies on the assessee. This Court in Roshan Di Hatti v. CIT [(1992) 2 SCC 378], held that if the assessee fails to discharge the onus by producing cogent evidence and explanation, the AO would be justified in making the additions back into the income of the assessee. v. The Guwahati High Court in Nemi Chand Kothari v. CIT [(2003) 264 ITR 254 (Gau.)] held that merely because a transaction takes place by cheque is not sufficient to discharge the burden. The assessee has to prove the identity of the creditors and genuineness of the transaction. : "It cannot be said that a transaction, which takes place by way of cheque, is invariably sacrosanct. Once the assessee has proved the identity of his creditors, the genuineness of the transactions which he had 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies failed to appreciate that the investor companies which had filed income tax returns with a meagre or nil income had to explain how they had invested such huge sums of money in the assessee Company - Respondent. Clearly the onus to establish the credit worthiness of the investor companies was not discharged. The entire transaction seemed bogus, and lacked credibility. The Court/Authorities below did not even advert to the field enquiry conducted by the AO which revealed that in several cases the investor companies were found to be nonexistent, and the onus to establish the identity of the investor companies, was not discharged by the assessee. 14. The practice of conversion of unaccounted money through the cloak of Share Capital/Premium must be subjected to careful scrutiny. This would be particularly so in the case of private placement of shares, 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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'. ...... 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 L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
