Sunita Kedia v. The Commissioner Of Income Tax, Jaipur

// 1 // IN THE HIGH COURT OF JUDICATURE FOR RAJASTHANBENCH AT JAIPUR ORDERIN D.B. Income Tax Appeal No.24/2010 SunitaKediaVs.TheCommissioner of Income Tax,Jaipur Date of Order ::: 18.10.2010 PresentHon'ble Mr. Justice Arun MishraHon'ble Mr. Justice Mohammad Rafiq Shri N.L. Agrawal, Counsel for appellant#### (Per Hon'ble Mohammad Rafiq, J.):- This appeal has been filed by assesseeSunita Kedia (hereinafter shall be referred toas 'the assessee') assailing assessment orderdated 28.09.2006 passed by Income Tax Officer,Ward-2, Jhunjhunu, order dated 22.02.2008 passedby Commissioner of Income Tax (Appeals)-III,Jaipur (for short, 'the CIT') and order dated31.07.2009 passed by Income Tax AppellateTribunal, Jaipur Bench 'B' Jaipur (for short,'the ITAT'), dismissing thereby her appeal andupholding assessment order. Factual matrix of case is that assessingofficer passed assessment order on 28.09.2006for assessment year 2004-05 under Section 143(3) of the Income Tax Act, 1961, whereby heassessed a sum of Rs.13,66,775/- as income of assessee as against returned income ofRs.11,30,275/-. In doing so, he made additionsof - Rs.1,02,500/- originally declared byassessee as income other than long term capitalgain; Rs.1,40,275/- of long term capital gainwas treated as income from undisclosed sourcesand income of Rs.1,24,000/- was treated asincome from unexplained creditors under Section68 of the Act. Thus a total sum ofRs.13,66,775/- was assessed. While the CIT(Appeals), Jaipur, confirmed addition of incomeof Rs.1,40,275/- from long term capital gaintreated as income from undisclosed sources, buthe deleted a sum of Rs.75000/- out of additionof Rs.1,24,000/- made by assessing officer ofunexplained creditors under Section 68 of theAct; thus, partly allowed the appeal. Furtherappeal preferred by assessee was also partlyallowed by learned ITAT, Jaipur vide its orderdated 10.04.2008, thereby deleting only additionof Rs.1,24,000/-. The assessee has come to thisCourt in appeal against all the aforesaid threeorders. Shri N.L. Agrawal, learned counsel forassessee, has argued that assessee computedtotal income in return, declaring long termcapital gain of Rs.11,40,225 from sale of share;she claimed investment of Rs.11,12,500/- out of the aforesaid capital gain under Section 54F ofthe Act, in immovable property and showedbalance taxable capital gain of Rs.27,775/-chargeable under Section 45 of the Act. Incomeof Rs.1,02,500/- was also shown from othersources. Assessing officer selected appellant'scase for scrutiny and issued notice underSection 143(2) on 17.10.2005 fixing 26.10.2005as date of hearing. Another letter dated31.10.2005 enclosing therewith notice underSection 142 (1) of the Act was issued fixing11.11.2005 as date of hearing, and on which dateShri S.K. Modi, Advocate, attended proceedings,filed power of attorney and informed theassessing officer about non-receipt of noticeunder Section 143 (2) of the Act for hearing on26.10.2005, and argued that for that reason hecould not file reply. A request was made fortransferring the case to any Income Tax Officerin Hyderabad, for the reasons that the assesseewas unable to travel conveniently because shewas presently residing in Hyderabad, she ishaving children of tender age and also notfeeling well from health point of view and ifthe case was transferred, she could give herevidence and simultaneously it was also prayedthat time may be extended for submission of her reply. It was further argued that matter wasthen adjourned to 07.12.2005 and thereafter to19.12.2005, on which date Shri Suman Kumar Modi,Advocate, appeared and filed computerized copyof accounts along with balance sheet as on31.03.2003 and 31.03.2004 and also filed replyaccompanied with documents regarding purchase often thousand shares of M/s Boltan PropertiesLimited on 16.04.2002 from Calcutta StockExchange through M/s Prakash Nahta & Company,member of said Stock Exchange in the physicalform and taken delivery thereof. The said sharecertificates were sent to company for transferin favour of assessee and consolidation thereof,vide letter dated 21.04.2002. These shares weretransferred by the company in favour of assesseeand a consolidated share certificate in lieu ofthe former share certificate, was sent videletter dated 30.04.2002 by the company toassessee. The said share certificate wasdematerialized in due course with HDFCdepository services and then were sold on27.10.2003. Documentary evidence in support ofall of above transactions were submitted alongwith reply dated 19.12.2005 to assessingofficer. It was further argued that statement ofone Pawan Purohit was illegally relied on by assessing officer that M/s Prakash Nahta andCompany was engaged in providing accommodationentries of long term capital gain and BoltenProperty Limited is also a share script in whichthese accommodation entries were provided bybrokers to beneficiary. This statement wasrecorded behind back of assessee withoutproviding her opportunity of cross-examination.Said statement could not be therefore actedupon. Assessing officer supplied Photostatcopies of Page Nos.1, 12 and 13 of statement ofsaid witness and did not provide complete set ofcopy of statement. Even from that statement, itis not evident that any transaction was made byassessee through so-called Pawan Purohit of M/sB.C. Purohit & Company. It was contended that assessee repliedshow cause notice vide letter dated 27.03.2006to same effect and denied having any concernwith M/s B.C. Purohit & Company or even ShriPawan Purohit. Shares in question were purchasedby assessee from Kolkata and statement of athird person, namely, Shri Pawan Purohit, inthis case would not be relevant. Statement ofPrakash Chand Nahta of M/s Prakash Nahta &Company, Kolkata was not recorded beforeassessing officer. M/s. Boltan Property Limitedwas a company enlisted in Calcutta Stock Exchange and there was no reason for declaringthe company as forged or bogus company withoutany material in support of presumption ofassessing officer. Assessee did not make paymentin cash so that same could have been depositedin any bank account in HDFC or ICICI Bank inJaipur. Assessing officer was wholly unjustifiedin treating long term capital gain ofRs.1,40,275/- as income from undisclosedsources, and instead the income from long termcapital gain by selling of shares held for morethan a year. The CIT (Appeals) and ITAT erred inupholding the suspicion entertained by assessingofficer which was entirely based on statement ofShri Pawan Purohit. They also erred in notconsidering documentary evidence filed withreply dated 19.12.2005 by Shri S.L. Poddar,learned counsel appeared for assessee. Entireorder of assessment was based on surmises andconjectures and on mere doubt and suspicion.There was absolutely no basis or foundation forpassing such an order. Said shares were actuallysold on 27.10.2003 in dematerialized form inconsideration of total sum of Rs.11,81,475/- andpayment thereof was received by assessee throughaccount payee cheque and this material wasillegally ignored by assessing officer as alsoby CIT (Appeals) and ITAT. Learned counsel, in support of hisarguments, relied on judgment of Supreme Courtin Ishwar Dass Jain (Dead) through LRS Vs. SohanLal (Dead) by LRS, AIR 2000 SC 426andunreported judgment of Supreme Court inDilbagrai Punjabi Vs. Sharad Chandra, CivilAppeal No.3387 of 1981, decided on 08.08.1988,to argue that there are two situations in whichinterference with findings of fact by this Courtis permissible; first one is when material orrelevant evidence is not considered which, ifconsidered, would have led to an oppositeconclusion and the appellate authority under aduty to examine entire relevant evidence onrecord, has refused to consider importantevidence having direct bearing on the disputedissue. Resultant error arising therefrom is of amagnitude that it gives birth to a substantialquestion of law. The court in such circumstancesis fully authorized to set aside such finding.Second situation in which interference withfinding of fact is permissible is where afinding has been arrived at by appellate courtby placing reliance on inadmissible evidence,which if it was omitted, an opposite conclusionwas possible. The learned counsel therefore argued thatsubstantial question of law as to admissibility or relevance of statement of Shri Pawan Purohitarises in present case and question also arisesas to fact that learned assessing officer asalso appellate authorities have committed anerror in not considering relevant evidenceproduced by assessee regarding transaction ofpurchase or sales. We have given our anxious considerationto submissions made by learned counsel and alsocarefully perused assessment order as also orderof CIT (Appeals) and that of ITAT. We find from assessment order that asregards to income shown from long term capitalgain, assessing officer noted that a searchproceeding was carried out under Section 132 ofthe Act in premises of M/s B.C. Purohit &Company, Jaipur, on 12.04.2005 and it wasgathered therefrom that M/s. Prakash Nahta &Company, Kolkata, was conduit in providingaccommodation entries of such long term capitalgain on transaction of share script of M/sBolten Property Limited. Most of beneficiariesof such accommodation entries had surrenderedsuch gains as their income from other sources.Fact of accommodation entries was taken asproved and believed by assessing officer thatgains shown by assessing officer to be throughsimilar channel is not exception of common modus // 9 // operandibeingadoptedbyallotherbeneficiaries. Two other family members ofassessee had also shown long term capital gainfrom similar transactions of shares of sameCompany through M/s Prakash Nahta & Companythrough same broker. In this respect, statementof Shri Prakash Purohit, grandson of Shri B.C.Purohit, was also relied on, who clearly statedthat M/s Prakash Nahta and Company, Kolkata wasengaged in providing accommodation entries oflong term capital gains and that they werehelping Shri Nahta in that work. He also statedthat common modus operandi for such long termcapital gains was adopted by such beneficiaries.Though the assessee had filed certain detailsrelating to those transactions vide earlierletter dated 19.12.2005, but he failed to appearbefore assessing officer and also failed torespond to his letter dated 11.08.2006. Inresponse to that letter, assessee ratherrequested for time which was granted byassessing officer fixing 19.09.2006 as date ofhearing, but on that date again neither assesseeherself attended the proceeding nor herrepresentative appeared nor any communication ofany sort was sent. Faced with that situation,assessing officer had no alternative but to holdthat long term capital gain declared by assessee was her income from other sources. CIT (Appeal)and ITAT upheld those findings of assessingofficer by further noticing that there wasnothing on record to prove actual delivery ofshares claimed to have been purchased byassessee in spite of opportunity given to her.Even if documents produced by assessee are takento be genuine, she was required to provephysical delivery of shares taken at the time ofpurchase, and according to circumstances, namelythat assessee got shares dematerialized inOctober, 2003, which were sold on 27.10.2003 andthat shares were dematerialized immediatelybefore sale was effected. In absence of physicaldelivery of shares on 16.04.2002, sale of sharesdeclared by assessee did not take to be genuine.Conclusion that was drawn by all authorities wasthat such long term capital gain was managedwith a view to channelizing undisclosed incomeof the beneficiaries. In view of detailed discussion made byassessing officer as also CIT (Appeals) andITAT, the argument that relevant and materialevidence was not considered or that anyirrelevant or inadmissible evidence has beenacted upon, cannot be accepted and for thatreason, judgments of Supreme Court in IshwarDass (supra) and Dilbagrai Punjabi(supra), // 11 // cannot be held to have any application to factsof present case. We therefore do not find any merit inthis appeal and it is dismissed summarily. (Mohammad Rafiq) J. (Arun Mishra) J. //Jaiman//