The Tribunal Followed Its Earlier Decision In The Case Ofkanhaiyalal & Sons (Huf v. Ito In Ita

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 23.03.2021 CORAM : The Honourable Mr.Justice T.S.SIVAGNANAMandThe Honourable Ms.Justice R.N.MANJULA Tax Case Appeal No.181 of 2020 The Commissioner of Income Tax,Chennai....AppellantVs Mrs.Pinky Devi...Respondent PRAYER: Appeal under Section 260A of the Income Tax Act, 1961against the order dated 06.12.2019 made in ITA.No.1803/Chny/2018on the file of the Income Tax Appellate Tribunal, Madras 'A'Bench, Chennai for the assessment year 2010-11.Appeal against the order dated 21.03.2018 made inITA.No.83/CIT(A)-5/2017-18 on the file of the Commissioner ofIncome Tax(Appeals)-5, Chennai-34 for the Assessment Year 2010-11 and as Appeal against the order dated 31.10.2017 made inPAN.No.ALXPP7284K on the file of the Income Tax Officer, NonCorporate Ward 5(5), Chennai, for the Assessment Year 2010-11. For Appellant:Mr.T.Ravikumar, SSCFor Respondent:No Appearance JUDGMENT (Delivered by T.S.Sivagnanam,J) This appeal has been filed under Section 260A of the IncomeTax Act, 1961 ('the Act' for brevity) challenging the orderdated 06.12.2019 made in ITA.No.1803/Chny/2018 on the file ofthe Income Tax Appellate Tribunal, Madras 'A' Bench, Chennai('the Tribunal' for brevity) for the assessment year 2010-11. 2. The appeal was admitted on 23.07.2020 on the followingsubstantial questions of law:"(i) Whether on the facts and in thecircumstances of the case, the Tribunal wasright in setting aside the order passed bythe Assessing Officer for re-examination,especially when the Assessing Officer had https://hcservices.ecourts.gov.in/hcservices/ duly examined the matter in great depth whileframing the assessment order? (ii) Whether on the facts and in thecircumstances of the case, the Tribunal wasright in remitting the issue back to the fileof the Assessing Officer by quoting thedecision in the case of Kanhaiyalal and Sons(HUF) in ITA.No. 1849/Chny/2014 wherein theonus has been shifted to the revenue with adirection that the Assessing Officer is tobring on record the role of the Assessee inpromoting the Company and the relation of theAssessee if any with that of the promotersand role of inflating of prices etc whileexercise had already been done by the AO? 3. Is not the finding of the Tribunalperverse especially when the decision of theTribunal is contrary to the time testedPrincipal that the person who asserts a facthas to discharge the initial burden cast uponhim to show that the said facts are true andonly thereafter the burden would shift to thedepartment?" 3. We have heard Mr.T.Ravikumar, learned Senior StandingCounsel appearing for the appellant-Revenue. Though notice wasserved on the respondent and the name printed in the cause, noneappeared on their behalf. 4. 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. 5. 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: 4. 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. 5. 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: "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 andecision 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 an authorized 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 theshares 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 above fact, it is concluded as under : ...... 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 above fact, 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 theassessee'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 Limited https://hcservices.ecourts.gov.in/hcservices/ from 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. .... 7.11. It can be seen from the clientstatement of Shri Ashok Kumar Kayan that notonly the assessee but the following members ofthe HUF family members have also invested in thesaid impugned shares : From the above table, it is established that theentire family involved in this operation toconvert 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 https://hcservices.ecourts.gov.in/hcservices/ '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. ...... https://hcservices.ecourts.gov.in/hcservices/ '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 isundertakinganysubstantialdevelopmentactivity.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 were https://hcservices.ecourts.gov.in/hcservices/ artificially 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." 6. Since the Tribunal had followed the earlier decision,which has been set aside in the above mentioned decision, thesame has to be applied in this case as well. 7. Thus, the Tax Case Appeal is allowed and the impugnedorder is set aside. Consequently, the substantial questions oflaw are answered in favour of the Revenue and against theassessee. No costs. Sd/- Assistant Registrar //True Copy// Sub Assistant Registrar hvkTo1. The Income Tax Appellate Tribunal, Madras 'A' Bench, Chennai. 2. The Commissioner of Income Tax, (Appeals)-5, Chennai-34. 3. The Income Tax Officer, Non Corporate Ward 5(5), Chennai. +1cc to Mr.T.Ravikumar, Advocate, S.R.No.18740 LN(CO)KM(23/04/2021) TCA.No.181 of 2020 https://hcservices.ecourts.gov.in/hcservices/