Shri.ratanchand Manoharmal v. Income Tax Officer,Non-Corporate Ward - 17(2),Chennai - 600 006

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 15.03.2021 CORAM : The Honourable Mr.Justice T.S.SIVAGNANAMandThe Honourable Ms.Justice R.N.MANJULA Tax Case Appeal Nos.183 of 2021 & 409 of 2020 Shri.Ratanchand Manoharmal...Appellant in TCA.No.183/2021 &Respondent in TCA.No.409/2020 Vs Income Tax Officer,Non-Corporate Ward - 17(2),Chennai - 600 006....Respondent in TCA.No.183/2021 & Appellant in TCA.No.409/2020 COMMON PRAYER: Appeals under Section 260A of the Income Tax Act,1961 against the order dated 22.07.2019 made inITA.No.3115/Chny/2018 on the file of the Income Tax AppellateTribunal, Chennai Bench 'B' for the assessment year 2014-15,appeal against the order dated 10/08/18 made in ITA.No.296/CIT(A)-5/2017-18 on the file of the Commissioner of Income Tax(Appeals)-5, Chennai and against the order dated 27/12/17 madein PAN: on the file of the Income Tax Office, NonCorporate Ward-17(2) Chennai for the assessment year 2014-15. For Assessee:Mr.R.Sivaraman For Revenue:Mrs.R.Hemalatha, SSC These appeals have been filed under Section 260A of theIncome Tax Act, 1961 ('the Act' for brevity) challenging theorder dated 22.07.2019 made in ITA.No.3115/Chny/2018 on the fileof the Income Tax Appellate Tribunal, Chennai Bench 'B' ('theTribunal' for brevity) for the assessment year 2014-15. 2. TCA.No.183 of 2021 has been filed by the assessee andTCA.No.409 of 2020 has been filed by the Revenue. https://hcservices.ecourts.gov.in/hcservices/ 3. The assessee in TCA.No.183 of 2021 has raised thefollowing substantial questions of law for consideration: "1. Whether, on the facts and in thecircumstances of the case, the Tribunal wasright in law in summarily remanding the files tothe Respondent without adjudicating on thepreliminaryissuespertainingtothejurisdiction of the Assessing Officer raised bythe Appellant? 2. Whether, on the facts and in thecircumstances of the case, the Tribunal wasright in law in summarily remanding the files ofthe Appellant to the Respondent instead of theCommissioner of Income Tax (Appeals)-5, Chennaiwithout considering the fact that the Appellantwas denied a reasonable opportunity of beingheard before the Commissioner of Income Tax(Appeals)?3. Whether, on the facts and in thecircumstances of the case, the Tribunal wasright in law in failing to consider that theimpugned order u/s. 143(3) r.w.s. 147 of theIncome Tax Act, 1961 passed by the Respondentwas ex-facie unlawful as the same was passedwithout disposing the objections of theAppellant by means of a 'speaking order'?4. Whether, on the facts and in thecircumstances of the case, the Tribunal wasright in law in failing to consider that theimpugned re-assessment proceedings initiated bythe Respondent is bad in law as the notice u/s.148 of the Income Tax Act, 1961 was issued whensufficient time was available to the Respondentto initiate proceedings by issuing notice u/s.143(2) of the Income Tax Act, 1961? 5. Whether, on the facts and in thecircumstances of the case, the Tribunal wasright in law in failing to consider whether anAssessing Officer other than a PrincipalCommissioner of Income Tax or Commissioner ofIncome Tax has the jurisdiction to transfer anyrecords, files, proceedings prior to theinitiation of proceedings under Section 127 ofthe Income Tax Act, 1961?6. Whether, on the facts and in thecircumstances of the case, the Tribunal wasright in law in remanding the files to theRespondent on the aspect of disallowance ofclaim made u/s. 10(38) of the Income Tax Act, 1961 without considering the nature & veracityof the transactions?" 5. Whether, on the facts and in thecircumstances of the case, the Tribunal wasright in law in failing to consider whether anAssessing Officer other than a PrincipalCommissioner of Income Tax or Commissioner ofIncome Tax has the jurisdiction to transfer anyrecords, files, proceedings prior to theinitiation of proceedings under Section 127 ofthe Income Tax Act, 1961?6. Whether, on the facts and in thecircumstances of the case, the Tribunal wasright in law in remanding the files to theRespondent on the aspect of disallowance ofclaim made u/s. 10(38) of the Income Tax Act, 1961 without considering the nature & veracityof the transactions?" 4. The Revenue in TCA.No.409 of 2020 has raised thefollowing substantial questions of law for consideration:"1. Whether, on the facts and in thecircumstances of the case, the Tribunal wasright in setting aside the well reasoned orderpassed by the Assessing Officer for re-examination, especially when all the materialplaced were considered by the assessing officerwhile passing the assessment order? 2. Whether, on the facts and in thecircumstances of the case, the Tribunal wasright in remitting the issue back to the file ofthe Assessing Officer by quoting the decision inthe case of Kanhaiyal and Sons (HFU) inITA.No.849/Chny/2014 Sunil Kumar Lalwani andthat Aashesh Kumar Lalwani wherein the onus hasbeen shifted to the revenue with a directionthat the Assessing Officer is to bring onrecords the role of the Assessee in promotingthe Company and the relation of the Assessee ifany with that of the promoters and role ofinflating of prices, etc which exercise hadalready been done by the AO and the SEBI? 3. Is not the finding of the Tribunal perverseespecially when the decision of the Tribunal iscontrary to the time tested Principal that theperson who asserts a fact has to discharge theinitial burden cast upon him to show that thesaid facts are true and only thereafter theburden would shift to the department?" 5. We have elaborately heard Mr.R.Sivaraman, learned counselfor the assessee and Mrs.R.Hemalatha, learned Senior StandingCounsel appearing for the Revenue. 6. The Tribunal followed its earlier decision in the case ofKanhaiyalal & Sons (HUF) Vs. ITO in ITA.No.1849/Chny/2018 andremanded the matter back to the file of the Assessing Officerfor reconsideration. 7. In several other matters, identical orders were passed bythe Tribunal remanding the matter back to the Assessing Officer.This Court has dealt with an identical issue in the case ofCommissioner of Income Tax vs Manish D.Jain (HUF) [(2020) 122taxmann.com 180 (Madras)]. In the said decision, this Courtfaulted the Tribunal for remanding the matter back by assigningthe following reasons: https://hcservices.ecourts.gov.in/hcservices/ "24. Bearing the principles laid down in thedecision of the Hon'ble Supreme Court in thecase of NRA Iron & Steel Private Ltd., in mind,if we examine the order passed by the AssessingOfficer, we find that a detailed enquiry hadbeen conducted by the Assessing Officer afteraffording an opportunity to the assessee. Theassessee availed the opportunity through writtensubmissions. The assessee was represented by anauthorized representative and thereafter afinding had been rendered. The said finding wastested for its correctness by the CIT(A), whoapproved the same by order dated 07.8.2018. 25. We refer to the following factual findingsrendered by the CIT(A) while dismissing theappeal filed by the assessee : https://hcservices.ecourts.gov.in/hcservices/ "24. Bearing the principles laid down in thedecision of the Hon'ble Supreme Court in thecase of NRA Iron & Steel Private Ltd., in mind,if we examine the order passed by the AssessingOfficer, we find that a detailed enquiry hadbeen conducted by the Assessing Officer afteraffording an opportunity to the assessee. Theassessee availed the opportunity through writtensubmissions. The assessee was represented by anauthorized representative and thereafter afinding had been rendered. The said finding wastested for its correctness by the CIT(A), whoapproved the same by order dated 07.8.2018. 25. We refer to the following factual findingsrendered by the CIT(A) while dismissing theappeal filed by the assessee : “2.1. .......In response to notices, the ARof the assessee Shri Omprakash Jain, B.Com, FCAof Om Jain & Associates, Chartered Accountantsappeared and filed the details of purchase of450 shares of M/s.Dhanlabh Merchandise Limited,later it was merged with M/s.Bakra PratisthanLimited and 450 shares converted into 4500shares. In this connection, the AR furnished thecopy of sale bill dated 15.1.2010 ofM/s.Excellent Barter Private Limited of ShaymNagar WB 743127 wherein it is noticed that theassessee has purchased 450 shares of DhanlabhMerchandise Limited @ Rs.200 each per share fora consideration of Rs.90,000/-. But the billdoes not contain any distinctive numbers and itwas stated 'as per Demat form'. The AR of theassessee also furnished the copy of transactionreport from Motilal Oswal Securities asdocumentary evidence for purchase of theseshares and later converted into M/s.BakraPratisthan Limited on 28.12.2011. ..... 2.2........On the perusal of the same, itis noticed that the closing balance as on02.3.2010 was Rs.5,607/-. On 03.3.2010, therewas a credit entry of Rs.90,000/- and a debitentry with narration 'manual chg' Rs.90,000/-.As per the narration of the bankers, it ismanual cheque only and the same was passed inclearing on the same day by Calcutta basecompany. It is not at all possible..... 2.3. As it was held by the assessee the shares of M/s.Dhanlabh Merchandise Limited waspurchased from M/s.Excellent Barter Pvt. Ltd. OfShaym Nagar WB 743127, a communication dated28.9.2017 was sent to M/s.Excellent BatterPrivate Limited calling for the followingdetails under Section 133(6) of the I.T. Act1961. By the examination of the details and thesame was returned unserved by the postalauthorities with remarks 'not known'. ...... Besides the above, the AR of the assesseehas not furnished any documentary evidences withrespect to the sale of shares of M/s.BakraPratisthan Limited. Instead, he furnished thebank account copy wherein on 03.1.2012, anamount of Rs.9,50,714/- was credited in the bankwith description 'RTGS-INWFIX- FIT SECURITIES'.Considering the abovefact, it is concluded as under : 2.4. The purchase of 450 shares ofM/s.Dhanlabh Merchandise Limited is itself asham transaction for the following reasons:1. Based on the details filed by the AR ofthe assessee and the address was provided theassessee the communication sent by this officeto M/s.Excellent Batters Private Limited.2. The postal remarks is 'not known' only.The postal authorities did not mention that theperson left or something else. The word 'notknown' means that the address itself bogus orincorrect one.3. Accordingly, it is established thatthere is no such person in that address havingname M/s.Excellent Batters Private Limited.4. It is onus on the part of the assesseeto prove the genuineness of the transaction.5. It is also noticed that the documentaryevidence filed by the assessee towards paymentmade for purchase of shares also not related tothis transaction. 6. In the absence of the distinctive nos.,in the sale bill dated 25.1.2010 ofM/s.Excellent Batters Pvt. Ltd., and hence, itis not known that to whom the shares wereoriginally allotted and how the same wassubsequently transferred to the assessee forthat there is no documentary evidence produced.The assessee HUF not furnished the copy of nametransfer application also. 7. It is also noticed from the AR of the assessee's submission dated 15.11.2017 thatM/s.Excellent Batters P. Ltd., is a shareholderof M/s.Dhanlabh Merchandise Ltd., but there isno documentary evidence was filed by him. 8. As the assessee HUF itself has statedthat the HUF is doing commodities trading, whyoff market transaction for purchase of sharesnot reported to BSE. Considering the above factfindings, it is established that the purchase of450 shares of M/s.Dhanlabh Merchandise Limitedfrom M/s. Excellent Barter Private Limited bythe assessee is itself a sham transaction.Accordingly, the documentary evidence furnishedby the assessee towards purchase of shares of4500 M/s.Bakra Pratisthan Limited is not agenuine one and hence, the claim of exemptionunder Section 10(38) towards selling of the sameis not entertained. .... convert their black money into white. It is asham transaction only. .... 9. Considering the above factual positionas also the legal position, it is held that theassessee has entered into an engineeredtransaction to generate artificial long termcapital gains. As the explanation furnished bythe assessee regarding the credits ofRs.15,86,250/- in its books is found to beunsatisfactory, the same are hereby held as'unexplained cash credits' in the books of theassessee and accordingly added to the totalincome of the assessee in accordance with theprovisions of Section 68 of the IT Act, 1961 andassessed under the head 'income from othersources' Penalty proceedings under Section 271(1)(c) read with Explanation 1 thereto areseparately initiated for furnishing theinaccurate particulars of income with respect tothe claim of capital gain made in the light ofthe findings made in the preceding paragraphs....... 7.3.......However, in the present appeal,the appellant purchased the shares of M/s.BakraPratisthan Limited in off market. During thecourse of the hearing on 24.7.2018, the ARadmitted that the assessee purchased the sharesof M/s.Dhanlab Merchandise Limited in offmarket...... 7.4. These shares were purchased throughoff market and not through Stock Exchange.The notice under Section 133(6) dated28.9.2017 sent by the Assessing Officer toM/s.Excellent Barter Private Limited from whichthe assessee had purchased the shares ofM/s.Dhanlab Merchandise Limited was returnedunserved with remark 'not known'. Moreover, the assessee did not bring anyother material on record to establish thegenuineness of the purchase of shares.M/s.Bakra Pratisthan Limited did not paydividend or did not issue bonus shares duringthe period of holding of these shares by theassessee corresponding to the increase in theprice of the share of M/s.Bakra PratisthanLimited. During this period, there has been nocorporate announcement by M/s.Bakra PratisthanLimited which suggests that the company is undertakinganysubstantialdevelopmentactivity.The above facts were not disputed by theappellant.These facts clearly establish that theshare prices of M/s.Bakra Pratisthan Limitedwere artificially hiked...... 7.6. In the present case also, the shareswere purchased through off market and notthrough Stock Exchange and selling rates wereartificially hiked later on.” undertakinganysubstantialdevelopmentactivity.The above facts were not disputed by theappellant.These facts clearly establish that theshare prices of M/s.Bakra Pratisthan Limitedwere artificially hiked...... 7.6. In the present case also, the shareswere purchased through off market and notthrough Stock Exchange and selling rates wereartificially hiked later on.” 26. The above findings will clearly show thatnot only the Assessing Officer, but also the CIT(A) examined the modus operandi of the assesseeand held that the shares were purchased throughoff market and not through Stock Exchange andthat the selling rates were artificially hikedlater on. The above findings have not been setaside by the Tribunal and there is no reason forthe Tribunal to remand the matter to theAssessing Officer for a fresh consideration. 27. As pointed out in the decision of this Courtin the case of Cholamandalam MS GeneralInsurance Co., we find in the instant case thatthere was no material, which necessitated theremand of the case to the Assessing Officer andit is a clear case where the Tribunal had failedto exercise its jurisdiction in the manner knownto law. The Tribunal, being a last fact findingAuthority, is under the legal obligation torecord a correct finding of fact. It has beenheld in thecases of (i) M.R.M.Periyannan Chettiar Vs. CIT [reportedin (1960) 39 ITR 159 (Madras)] (ii) V.Ramaswamy Iyengar Vs. CIT [reported in(1960) 40 ITR 377 (Madras)] (iii) Hindustan Sanitary Ware and IndustriesLtd. Vs. CIT [reported in (1978) 114 ITR 85(Calcutta)](iv) CIT Vs. Ishwardass [reported in (1986) 158ITR 168 (Delhi)] and (v) CIT Vs. Harikishan Jethalal Patel [reportedin (1987) 168 ITR 472 (Gujarat)]that the power to remand the case should beexercised 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 beenproduced and the CIT(A), after fullinvestigation of the evidence and examination ofthe accounts, had given a definite finding onthe question in issue, the Tribunal's order ofremand was held to be invalid. 29. Further, in the recent decision of theHon'ble Division Bench of this Court in the caseof Tharakumari Vs. ITO [TCA.No.128 of 2019 dated11.2.2019], the appeal filed by the assessee ina case relating to penny stock was dismissedafter noting the factual findings rendered bythe Assessing Officer, the CIT(A) and theTribunal. Thus, for all the above reasons, wehold that the order passed by the Tribunal callsfor interference.30. In the result, the above tax case appeal isallowed, the impugned order passed by theTribunal is set aside and the substantialquestions of law framed are answered in favourof the Revenue and against the assessee.Consequently, the order passed by the CIT(A)stands restored." 8. The above decision will apply with full force to theimpugned order and consequently, the impugned order has to beinterfered with. 9. The assessee is also aggrieved by the impugned order asthe assessee would contend that the Tribunal ought not to haveremanded back the matter to the Assessing Officer as additionalgrounds have been raised by them before the Tribunal, which werenever considered or adverted to. The learned counsel appearingon instructions of the Chartered Accountant would submit thatthe grounds were canvassed before the Tribunal, but the Tribunalwas of the view that since in the case of Kanhaiyalal & Sons(supra), the matter was remanded, they would follow the saiddecision. The following are the grounds raised by the assesseebefore the Tribunal: "1. For that the order of the learnedCommissioner of Income Tax (Appeals) iscontrary to law, facts and circumstances of 9. The assessee is also aggrieved by the impugned order asthe assessee would contend that the Tribunal ought not to haveremanded back the matter to the Assessing Officer as additionalgrounds have been raised by them before the Tribunal, which werenever considered or adverted to. The learned counsel appearingon instructions of the Chartered Accountant would submit thatthe grounds were canvassed before the Tribunal, but the Tribunalwas of the view that since in the case of Kanhaiyalal & Sons(supra), the matter was remanded, they would follow the saiddecision. The following are the grounds raised by the assesseebefore the Tribunal: "1. For that the order of the learnedCommissioner of Income Tax (Appeals) iscontrary to law, facts and circumstances of https://hcservices.ecourts.gov.in/hcservices/ the case and in law case is opposed to theprinciples of equity, natural justice andfair play. 2. For that the Learned Commissioner ofIncome Tax (Appeals) has erred in confirmingthat the order of the Assessing Officer wasnot "bad in law" under the facts andcircumstances of the case. 3. For that the Learned Commissioner ofIncome Tax (Appeals) has erred in notdeciding whether the Assessing Officer canassume Jurisdiction under Section 147 whentime limit was available for invoking Section143(2) under the facts and circumstances ofthe case. 4. For that the Learned Commissioner ofIncome Tax (Appeals) has erred in notdeciding whether the Assessing Officer, NonCorporate Ward, 10(3), Chennai, can assumepower to transfer the case to AssessingOfficer, Non Corporate Ward, 5(4), under thefacts and circumstances of the case. 5. For that the Learned Commissioner ofIncome Tax (Appeals) has erred in confirminginvocation of Section 68 under the facts andcircumstances of the case. 6. For that the Learned Commissioner ofIncome Tax (Appeals) has erred in confirmingDisallowance of claim u/s. 10(38) (Long TermCapital Gain on account of sale of shares)under the facts and circumstances of thecase. 7. For that the Learned Commissioner ofIncome Tax (Appeals) has erred in confirmingtheadditionswithoutprovidinganopportunity of being heard under the factsand circumstances of the case and disposingof appeal for want of prosecution. 8. For that the Learned Commissioner ofIncome Tax (Appeals) has erred in notconsidering the cost of the shares paidthrough banking channels under the facts andcircumstances of the case. 9. For that the Learned Commissioner ofIncome Tax (Appeals) has erred in confirmingaddition u/s. 69C under the facts andcircumstances of the case.10. For that the Learned Commissioner ofIncome Tax (Appeals) has erred in disposingof appeal for want of prosecution. 11. For that the Learned Commissioner ofIncome Tax (Appeals) has erred in passingspeaking order on all the grounds of appealraised." 10. As the above grounds have been raised before theTribunal, it would be necessary to deal with these grounds andthen record a finding that despite the contention advanced bythe assessee, the matter requires to be reconsidered de novo bythe Assessing Officer. 11. We see no such finding in the impugned order passed bythe Tribunal. 12. One of the grounds canvassed before the Tribunal wasthat the Commissioner of Income Tax (Appeals) has disposed ofthe appeal for want of prosecution and therefore, it issubmitted that there has been violation of principles of naturaljustice. 13. These issues are required to be considered by theTribunal and having not been considered, we are inclined tointerfere with order passed by the Tribunal. 10. As the above grounds have been raised before theTribunal, it would be necessary to deal with these grounds andthen record a finding that despite the contention advanced bythe assessee, the matter requires to be reconsidered de novo bythe Assessing Officer. 11. We see no such finding in the impugned order passed bythe Tribunal. 12. One of the grounds canvassed before the Tribunal wasthat the Commissioner of Income Tax (Appeals) has disposed ofthe appeal for want of prosecution and therefore, it issubmitted that there has been violation of principles of naturaljustice. 13. These issues are required to be considered by theTribunal and having not been considered, we are inclined tointerfere with order passed by the Tribunal. 14. For the above reasons, the tax case appeals are allowedand the impugned order is set aside and the matter standsremanded to the Tribunal to consider the appeal afresh on meritsand in accordance with law qua the grounds raised by theassessee before the Tribunal as mentioned above and other issuesthat may be canvassed by the assessee during the hearing beforethe Tribunal. Consequently, the substantial questions of law areleft open. No costs. Sd/- Assistant Registrar(CS-IV)//True Copy// Sub Assistant Registrar hvk https://hcservices.ecourts.gov.in/hcservices/ To 1. The Income Tax Appellate Tribunal, 'B' Bench, Chennai. 'B' Bench, Chennai. 2. Income Tax Officer, Non-Corporate Ward - 17(2), Chennai - 600 006. Non-Corporate Ward - 17(2), Chennai - 600 006. 3.The Commissioner of Income Tax(Appeals)-5, Chennai. Chennai. TCA.Nos.183 of 2021 &409 of 2020 RS II(CO)CB(14/06/2021)