Suman Poddar v. Income Tax Officer

$~69 *IN THE HIGH COURT OF DELHI AT NEW DELHI+ITA 841/2019 SUMAN PODDAR ..... Appellant Through:Mr. Arvind Kumar and Ms. DevinaSharma, Advocates. versus INCOME TAX OFFICER Through:None. ..... Respondent CORAM:HON'BLE MR. JUSTICE VIPIN SANGHIHON'BLE MR. JUSTICE SANJEEV NARULAO R D E R%17.09.2019 C.M. No. 41505/2019 (exemption) 1. Exemption allowed, subject to all just exceptions. 2. The application stands disposed of. ITA 841/2019 3. The present appeal is directed against the order dated 25.07.2019 passedby the Income Tax Appellate Tribunal (ITAT) Delhi Bench 'G', New Delhi,in ITA No. 1006/Del/2019 for the assessment year 2014-15 whereby thetribunal had rejected the appeal preferred by the Appellant/Assessee. TheAppellant had filed return of income for the assessment year 2014-15declaring income of Rs. 4,96,650/-.The return of the Appellant wasselected for scrutiny. The Appellant had booked Long Term Capital Gain(LTCG) of Rs. 73,77,806/- and sought exemption under Section 10 (38) of the Income Tax Act, 1961. The Assessing Officer on consideration of thereplies and responses of the assessee in pursuance of the notices issued tothe assessee, computed the net taxable income at Rs. 78,74,456/-. The AOadded the amount of Rs. 73,77,806/- by denying the exemption claimedunder Section 10 (38) of the Act on account of LTCG.The AssessmentOfficer (AO) found the transaction pertaining to purchase of shares by theAppellant/Assessee of M/s Smartchamps IT and Infra Ltd., which wasmerged with M/s Cressanda Solutions Ltd., to be a bogus transaction byholding that M/s Cressanda Solutions Ltd. was a penny stock. The appealpreferred by the Appellant before the learned CIT (Appeals) met the samefate and the findings of fact in relation to the transaction being bogus wereupheld by the CIT (Appeals). The further appeal preferred before the ITAThas been dismissed and the ITAT has once again found the said transactionto be bogus. 4. We have, therefore, at the outset put it to learned counsel for theAppellant that since there are consistent findings of fact and the entiredispute raised by the Appellant is factual, there is no reason for the Court toentertain the present appeal and no question of law arises for ourdetermination. 5. Counsel for the Appellant has submitted that the findings returned by theAssessing Officer; the CIT (Appeals), and; the ITAT are perverse since,according to the Appellant, there was no basis for concluding that thetransaction entered into by the Appellant for purchase of shares of M/sSmartchamps IT and Infra Ltd. (which was later merged with M/s Cressanda Solutions Ltd.) was bogus.Counsel for the Appellant submits that theAppellant had made cheque payment for the purchase of 1500 shares of M/sSmartchamps IT and Infra Ltd. in the assessment year 2012-13, and thatinvestment was accepted by the department.He further submits that theAppellant had produced all the relevant materials before the AssessingOfficer, namely, the documentation relating to opening of the DMATaccount; the purchase of shares of M/s Smartchamps IT and Infra Ltd., thecontract notes, and other relevant documents. 6. Learned counsel for the Appellant has taken us through the impugnedorder. Having heard the learned counsel and perused the records includingthe impugned order, we are of the view that there is absolutely no merit inthe present appeal. The ITAT has extensively discussed the evidence andmaterials on the basis of which the Assessing Officer recorded his findingswith regard to the genuineness of the transaction in question. The findingsreturned by the Assessing Officer, the CIT (Appeals) and the Tribunal arebased on appreciation of evidence and there is ample justification for them.Thus, it cannot be said that the findings of fact are perverse. The relevantdiscussion found in the impugned order reads as follows: 6. Learned counsel for the Appellant has taken us through the impugnedorder. Having heard the learned counsel and perused the records includingthe impugned order, we are of the view that there is absolutely no merit inthe present appeal. The ITAT has extensively discussed the evidence andmaterials on the basis of which the Assessing Officer recorded his findingswith regard to the genuineness of the transaction in question. The findingsreturned by the Assessing Officer, the CIT (Appeals) and the Tribunal arebased on appreciation of evidence and there is ample justification for them.Thus, it cannot be said that the findings of fact are perverse. The relevantdiscussion found in the impugned order reads as follows: “9. We have gone through the rationale given by both the partiespertainingtotheirarguments.Inthiscase,itisanuncontroverted fact that the assessee has failed to prove thegenuineness of the transaction. The AO has worked out theglaring facts, which cannot be ignored and which are clearindicative of the non-genuine nature of the transactions. Theassessee could not satisfactorily explain how the investments inthe absence of any evidence as to the financials, growth andoperations of the company could earn profit of 4910% over ashort period of 5 months from the date of allotment of shares --(21.02.2013date of allotment and 18.07.2013 to 12.09.2013 date of sale) of Cressanda Solutions Ltd. against the purchase of15,000 shares of Smartchamps IT and Infra Ltd. on 22.09.2011.Most importantly, in spite of earning so much of profit, theassesseehasneverembarkeduponanytransactionsforinvestments with the broker or in any other dealing of shares.The revenue from operations of Cressanda Solutions Ltd. for theyear March 2012 was Rs.00 and, for the year March 2013 is Rs.0.99 Cr. The financials of the company proving that the entity isa penny stock company are as under: Balance Sheet of Cressanda Solution ----------in Rs. Cr.---------- Profit & Loss account of Cressanda Solution -----------in Rs. Cr.------ (emphasis supplied) 7. Thus, the Tribunal has in depth analyzed the balance sheets and the profitand loss accounts of Cressanda Solutions Ltd. which shows that theastronomical increase in the share price of the said company which led toreturns of 491% for the Appellant, was completely unjustified. Pertinently,the EPS of the said company was Rs. 0.01/- as in March 2016, it was Rs. -0.01/- as in March 2015 and -0.48/- as in March 2014. Similarly, the otherfinancials parameters of the said company cannot justify the price in excessof Rs. 500/- at which the Appellant claims to have sold the said shares toobtain the Long Terms Capital Gains. It is not explained as to why anyonewould purchase the said shares at such high price. The Tribunal goes on toobserve in the impugned order as follows: “10. With such financials and affairs of business, the purchase ofshare of face value Rs. 10/- at the rate of Rs.491/- by any personand the assessee's contention that such transaction is genuineand credible and arguing to accept such contention would onlymake the decision of the judicial authorities a fallacy. 11. The evidences put forth by the Revenue regarding the entryoperation fairly leads to a conclusion that the assessee is one ofthe beneficiaries of the accommodation entry receipts in the formof long-term capital gains. The assessee has failed to prove thatthe share transactions are genuine and could not furnishevidences regarding the sale of shares except the copies of the “10. With such financials and affairs of business, the purchase ofshare of face value Rs. 10/- at the rate of Rs.491/- by any personand the assessee's contention that such transaction is genuineand credible and arguing to accept such contention would onlymake the decision of the judicial authorities a fallacy. 11. The evidences put forth by the Revenue regarding the entryoperation fairly leads to a conclusion that the assessee is one ofthe beneficiaries of the accommodation entry receipts in the formof long-term capital gains. The assessee has failed to prove thatthe share transactions are genuine and could not furnishevidences regarding the sale of shares except the copies of the contract notes, cheques received against the overwhelmingevidences collected by the Revenue regarding the operation ofthe entire affairs of the assessee. This cannot be a case ofintelligent investment or a simple and straight case of taxplanning to gain benefit of long-term capital gains. The earnings@ 491% over a period of 5 months is beyond human probabilityand defies business logic of any business enterprise dealing withshare transactions. The net worth of the company is not known tothe assessee. Even the brokers who coordinated the transactionswere also unknown to the assessee. All these facts give credenceto the unreliability of the entire transaction of shares giving riseto such capital gains. The ratio laid down by the Hon'bleSupreme Court in the case of Sumati Dayal vs. CIT, 214 ITR 801is squarely applicable to the case. Though the assessee hasreceived the amounts by way of account payee cheques, thetransactions cannot be treated as genume in the presence of theoverwhelming evidences put forward by the Revenue. The factthat in spite of earning such steep profits, the assessee neverventured to involve himself in any other transaction with thebroker cannot be a mere coincidence of lack of interest. Relianceis placed on the judgment in the case of Nipun Builders andDevelopers Pvt. Ltd. (supra), where it was held that it is the dutyof the Tribunal to scratch the surface and probe the documentaryevidence in depth, in the light of the conduct of assessee andother surrounding circumstances in order to see whether theassessee is liable to the provisions of section 68 or not. In thecase of NR Portfolio, it was held that the genuineness andcredibility are deeper and obtrusive. Similarly, the bankstatements provided by the assessee to prove the genuineness ofthe transactions cannot be considered in view of the judgment ofHon'ble court in the case of Pratham Telecom India Pvt. Ltd.,wherein, it was stated that bank statement is not sufficientenough to discharge the burden. Regarding the failure to accordthe opportunity of cross examination, we rely on the judgment ofPrem Castings Pvt. Ltd. Similarly, the Tribunal in the case ofUdit Kalra, ITA No. 6717/Del/2017 for the assessment year2014-15 has categorically held that when there was specificconfirmation with the Revenue that the assessee has indulged in non-genuineandboguscapitalgainsobtainedfromthetransactions of purchase and sale of shares, it can be a goodreason to treat the transactions as bogus. The differences of thecase of Udit kalra attempted by the Ld. AR does not add anycredence to justify the transactions. The Investigation Wing hasalso conducted enquiries which proved that the assessee is alsoone of the beneficiaries of the transactions entered by theCompanies through multiple layering of transactions and entriesprovided. Even the BSE listed this company as being used forgenerating bogus LTCG. On the facts of the case and judicialpronouncements will give rise to only conclusion that the entireactivities of the assessee is a colourable device to obtain boguscapital gains. The Hon'ble High Court of Delhi in the case ofUdit Kalra, ITA No. 220/2009 held that the company had meagerresources and astronomical growth of the value of the company'sshares only excited the suspicion of the Revenue and hence,treated the receipts of the sale of shares to be bogus. Hon 'bleHigh Court has also dealt with the arguments of the assessee thathe was denied the right of cross examination of the individualswhose statements led to the enquiry. The ld. AR argument that noquestion of law has been framed in the case of Udit Kalra alsodoes not make any tangible difference to the decision of this case.Since the additions have been confirmed based on the enquiriesby the Revenue, taking into consideration ratio laid down by thevarious High Courts and Hon'ble Supreme Court, our decision isequally applicable to the receipts obtained from all the threeentities. Further, reliance is also placed on the orders of variousCourts and Tribunals listed below. MK. Rajeshwari vs. ITO in ITA No.17231Bangl2018, order dated12.10.2018.12.10.2018. Abhimanyu Soin vs. ACIT in ITA No. 9511Chdl2016, order dated18.04.2018.18.04.2018. Sanjay Bimalchand Jain vs. ITO 89 taxmann.com 196. Dinesh Kumar Khandelwal, HUF vs. ITO in ITA No. 58 &591Nagl2015, order dated 24.08.2016.591Nagl2015, order dated 24.08.2016. Ratnakar M Pujari vs. ITO in IT A No. 9951Muml2012, orderdated 03.08.2016.dated 03.08.2016. Disha N. Lalwani vs. ITO in ITA No. 6398 I Mum I 2012, orderdated 22.03.2017.dated 22.03.2017. ITO vs. Shamim. M Bharwoni [20 16] 69 taxmann.com 65. Usha Chandresh Shah Vs ITO in ITA No. 6858 I Mum I 2011,order dated 26.09.2014.order dated 26.09.2014. CIT vs. Smt. Jasvinder Kaur 357 ITR 638. 12. The facts as well as rationale given by the Hon 'ble HighCourt are squarely applicable to the case before us. Hence,keeping in view the overall facts and circumstances of the casethat the profits earned by the assessee are a part of majorscheme of the accommodation entries and keeping in view theratio of the judgments quoted above, we, hereby decline tointerfere in the order of the Ld. CIT(A).” (emphasis supplied) 8. From the above extract, it would be seen that the Cressanda Solutions Ltd.was in fact identified by the Bombay Stock Exchange as a penny stock beingused for obtaining bogus Long Term Capital Gain. NO evidence of actualsale except the contract notes issued by the share broker were produced bythe assessee. No question of law, therefore arises in the present case and theconsistent finding of fact returned against the Appellant are based onevidence on record. 9. In the aforesaid facts and circumstances, we do not find any merit in thepresent appeal and the same is dismissed. VIPIN SANGHI, J SEPTEMBER 17, 2019/nk SANJEEV NARULA, J