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TMI Blog2021 (9) TMI 1004X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Substantial questions of law framed are answered in favour of the Revenue - Tax Case Appeal No.451 of 2021 - - - Dated:- 15-9-2021 - Honourable Mr.Justice T.S.Sivagnanam And Honourable Mr.Justice Sathi Kumar Sukumara Kurup For the Appellant : Mrs.R.Hemalatha, SSC JUDGMENT T.S.SIVAGNANAM, J. We have elaborately heard Mrs.R.Hemalatha, learned Senior Standing Counsel appearing for the appellant Revenue. 2. This appeal filed by the Revenue under Section 260A of the Income Tax Act, 1961 (for short, the Act) is directed against the order dated 03.09.2019 passed in ITA.No.2397/Chny/2018 on the file of the Income Tax Appellate Tribunal, Chennai 'D' SMC Bench for the assessment year 2015-16. 3. An appeal was filed by the respondent assessee before the Tribunal challenging the order passed by the Commissioner of Income Tax (Appeals)-5, Chennai [for brevity, the CIT(A)] dated 29.06.2018, by which, the CIT(A) affirmed the order of assessment dated 21.12.2017 passed under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is more or less identical to that of the case of the respondent assessee, considered the issue as to whether the Tribunal was justified in remanding the matter to the Assessing Officer by placing reliance upon its decision in the the case of Kanhaiyalal Sons (HUF). The argument of the Revenue was that the order of the Tribunal was perverse. After testing the correctness of the said argument, the Court held in favour of the Revenue. 6. The relevant portions in the decision of this Court in the case of Manish D.Jain (HUF) are as follows : 12. The first and foremost aspect to be considered is as to whether the Tribunal was justified in remanding the matter to the Assessing Officer for a fresh consideration of the claim made by the assessee under Section 10(38) of the Act. 13. There is no dispute with regard to the power of the Tribunal to remand while exercising its jurisdiction under Section 254 of the Act. The Hon'ble Supreme Court, in the case of Hukumchand Mills Ltd. Vs. CIT [reported in (1967) 63 ITR 232] held that the Tribunal had power to remand the matter back to the Income Tax Officer. This decision was followed by the Hon'ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer 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 Tribunal was wholly unjustified, devoid of reasons and unsustainable in law. 17. Moving to the findings rendered by the Assessing Officer and the CIT(A) with regard to the nature of transaction done by the assessee, we find that there was absolutely no justification on the part of the Tribunal to interfere with the facts recorded by both the Lower Authorities. The gist of the modus operandi done by the assessee as could be culled from the order of assessment as well as the order of the CIT(A) is as follows : The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ager 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 buyers would have made losses on account of trading in scrip. Statements recorded from brokers/ operators had admitted using shell companies who were the buyers trading in shares just to jack up the prices and to keep the volume of trade going so as not to come under the scanner of the SEBI. The buyers of the shares from the beneficiaries were found to have common directors and common address and the shares were sold by the members of same family and same surname and same address or from the same town. Once the operators ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 sum is found credited in the books of the assessee for any previous year the same may be charged to income tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. In such a case there is, prima facie, evidence against the assessee, viz., the receipt of money, and if he fails to rebut, the said evidence being un-rebutted, can be used against him by holding that it was a receipt of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Identity of the creditors Capacity of creditors to advance money; and Genuineness of transaction. This Court in the land mark case of Kale Khan Mohammad Hanif v. CIT [(1963) 50 ITR 1 (SC)] and Roshan Di Hatti v. CIT [(1977) 107 ITR (SC) 938] laid down that the onus of proving the source of a sum of money found to have been received by an assessee, is on the assessee. Once the assessee has submitted the documents relating to identity, genuineness of the transaction and creditworthiness, then the AO must c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies/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: A bare reading of Section 68 of the Income- tax Act, 1961, suggests that (i) there has to be credit of amounts in the books maintained by the assessee; (ii) such credit has to be a sum of money during the previous year ; and (iii) either (a) the assessee offers no explanation about the nature and source of such credits found in the books or (b) the explanation offered by the assessee, in the opinion of the Assessing Officer, is not satisfactory. It is only then that the sum so credited may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 examined in the context of Section 68 are CIT v. Divine Leasing Financing Ltd. [(2007) 158 Taxman 440] and CIT v. Value Capital Service (P.) Ltd. [(2008) 307 ITR 334]. 11. The principles which emerge where sums of money are credited as Share Capital/Premium are : i. The assessee is under a legal obligation to prove the genuineness of the transaction, the identity of the creditors, and credit-worthiness of the investors who should have the financial capacity to make the inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Associates, Chartered Accountants appeared and filed the details of purchase of 450 shares of M/s.Dhanlabh Merchandise Limited, later it was merged with M/s.Bakra Pratisthan Limited and 450 shares converted into 4500 shares. In this connection, the AR furnished the copy of sale bill dated 15.1.2010 of M/s.Excellent Barter Private Limited of Shaym Nagar WB 743127 wherein it is noticed that the assessee has purchased 450 shares of Dhanlabh Merchandise Limited @ ₹ 200 eac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee 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 Merchandise Ltd., but there is no documentary evidence was filed by him. 8. As the assessee HUF itself has stated that the HUF is doing commodities trading, why off market transaction for purchase of shares not reported to BSE. Considering the above fact findings, it is established that the purchase of 450 shares of M/s.Dhanlabh Merchandise Limited from M/s. Excellent Barter Private Limited by the assessee is itself a sham tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .... 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 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 shares of M/s.Dhanlab Merchandise Limited in off market. ..... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anitary 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 fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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