Case Law Details
Kirti Bipin Thorat Vs ITO (ITAT Pune)
Introduction: The case of Kirti Bipin Thorat vs. ITO, as heard by the Income Tax Appellate Tribunal (ITAT) Pune, revolves around the assessment for the assessment year 2014-15. The appeal was preferred by the assessee against the order of the Commissioner of Income Tax (Appeals) [CIT(A)] dated 23.01.2018. In this case, there are two primary issues: the reopening of the assessment under section 147/148 and the disallowance of an addition of Rs. 26,68,060. The latter pertains to unaccounted income received in cash concerning the sale of shares.
Detailed Analysis:
1. Reassessment Proceedings: The CIT(A) examined the issue of reassessment proceedings and found that the assessee was given ample opportunities to present their case before the Assessing Officer (AO). Both the CIT(A) and the AO conducted the reassessment proceedings within the legal framework, and the AO recorded proper reasons for the reassessment. It was also noted that the assessee’s authorized representative agreed during the appellate proceedings that the AO provided adequate opportunities during the assessment proceedings. Consequently, the ITAT upheld the CIT(A)’s findings regarding the reassessment proceedings.
2. Addition of Unaccounted Income from Share Sale: The crux of this issue lies in a search and seizure action conducted under section 132 of the Income Tax Act on the Sinhgad group of cases, including Jay Shriram Sugar and Agro Products Ltd. (JSAPL). The assessee and her family members were major shareholders in JSAPL. The seized documents contained transactions related to the assessee, specifically pertaining to the sale of 43,934 shares in JSAPL. The shares were sold to Shri Maruti N. Navale and group at Rs. 60 per share, amounting to Rs. 26,36,040. Additionally, an extra amount of Rs. 17,76,960 was paid to the assessee in cash in the financial year 2013-14, which was not disclosed.
3. AO’s Actions and Assessee’s Opportunity: The AO added the unaccounted cash receipt of Rs. 17,76,960 to the assessee’s income during the year. Summons were issued to the assessee and Maruti N. Navale under section 131 of the Act, but the assessee did not attend the AO’s office. Maruti N. Navale’s Chartered Accountant appeared and provided ledger entries relating to the assessee. The CA admitted that the Department had taken action against various other recipients of cash payments, and there was a common practice of cash transactions. The opportunity was also provided to the assessee to cross-examine Maruti N. Navale but was missed due to the assessee’s absence. There were no documents to suggest that the cash payments were not made to the assessee, and there was a self-admission by Maruti N. Navale’s CA.
4. Capital Gain or Loss Issue: The assessment order mentioned that the shares were purchased and sold at Rs. 100 per share, and the AO did not dispute this fact. Therefore, there should be no capital gain or loss for the assessee. However, the CIT(A) noticed that the assessee claimed a loss of Rs. 26,48,463 under “capital gains,” which was disallowed since the shares were purchased and sold at the same price. The ITAT upheld the CIT(A)’s findings.
Conclusion: In the case of Kirti Bipin Thorat vs. ITO, the ITAT Pune upheld the addition of unaccounted income received in cash from the sale of shares. The evidence presented, including self-admissions and common practices of cash transactions, supported the AO’s decision. Additionally, the ITAT confirmed the CIT(A)’s findings related to the reassessment proceedings. This case emphasizes the importance of proper documentation and compliance in income tax matters to avoid disputes and penalties.
FULL TEXT OF THE ORDER OF ITAT PUNE
This appeal preferred by the assessee emanates from the order of Commissioner of Income Tax [Appeals]-3, Pune (for short, „CIT(A)‟), dated 23.01.2018 for A.Y.2014-15 as per the grounds of appeal on record.
2. That, on perusal of the grounds of appeal, though descriptive and elaborate, there are broadly two issues for which assessee is aggrieved i.e. (i) reopening of assessment u/sec. 147/148; and (ii) the disallowance of addition of Rs. 26,68,060/- made by the AO and as upheld by the ld. CIT(A).
3. That, with regard to the re-assessment proceedings, there is a precise and clear finding by the ld. CIT(A) that as per record, assessee was given full opportunity to defend his case before the AO and that the re-assessment proceedings have been conducted u/sec. 147/148 by the AO after proper recording of the reasons. It is further noted that even ld.AR during the appellate proceedings before the ld. CIT(A) has agreed that AO did provide adequate opportunities in the assessment proceedings. Even before us also, at the time of hearing, even though this has been raised in the grounds of appeal, but the ld.AR did not submit any submission regarding this ground. We do not find any infirmity with the findings of the ld. CIT(A) on this issue and the order of the ld. CIT(A) is upheld.
4. With regard to the other issue of addition of Rs. 26,68,060/- received as unaccounted income in cash towards the sale of shares.
5. The relevant facts of this issue are that there was a search and seizure action u/sec. 132 of the Act conducted upon Sinhgad group of cases on 06/08/2013, wherein one of the groups was Jay Shriram Sugar and Agro Products Ltd. (JSAPL), which was also searched. Certain loose papers were found and seized in the said premises, which contained some transactions related to the assessee and her family members, who were in fact the major shareholders of the company-JSAPL and the company was primarily run by Shri G.S. Thorat, a relative of the assessee. That, as per the submissions of the assessee, the said company i.e. JSAPL had incurred huge loss and, therefore 43,934/- shares held by the assessee in JSAPL were sold by the assessee and transferred to Shri Maruti N. Navale and group at a price of Rs. 60/- per share for a total amount of Rs. 26,36,040/-. The seized document in bundle No.4 and page No.20 revealed that for such transaction of shares, Navale & Group has paid the assessee an additional amount of Rs. 17,76,960/- by cash in F.Y. 2013-14 relevant to the present A.Y. 2014-15 and this payment receipt was not disclosed by the assessee. The AO had added the same as assessee’s unaccounted income during the year. The AO had also extracted the findings of the Investigation Wing in the assessment order. In order to verify the issue of cash receipt of Rs. 17,76,960/- in share transactions, summons were issued u/sec. 131 of the Act to the assessee and also to Maruti N. Navale, who had purchased the shares of JSAPL. The hearing was fixed on 02/12/2016, however, the assessee did not attend the office of AO. In response to the summons, the CA of Maruti N. Navale had appeared and submitted ledger of the assessee in the books of Maruti N. Navale (individual) and M/s. JSAPL. The issue was discussed with the CA of Maruti N. Navale, who had admitted that the issue of cash payment to shareholders has been decided by DCIT, Central Circle-2, Pune wherein various additions have been made on account of cash payments to 28 persons mentioned in the papers. Therefore, all that transpires from the entire proceedings is that as per the self-admission of CA of Maruti N. Navale, there had been similar transaction whereas shares were purchased by Navale group and payments were also made in cash forming unaccounted income in the hands of the recipients for which even adequate action has been taken by the Department in respect of various other such recipients. The essential fact is, an opportunity was provided to the assessee to cross-examine Maruti N. Navale by the AO. But as observed, the assessee has not attended the proceedings and, therefore she lost the opportunity of such cross-examination for her own absence. There are no materials/documents on record to show that such unaccounted cash payments were not paid to the assessee. On the contrary, there is a self-admission of payment of cash (unaccounted) by the CA of Maruti N. Navale, who had purchased the shares from the assessee in the said company of JSAPL. As per the admission, there has been natural practice of payment in cash for which additions have been made by the Department in case of several shareholders who have entered into transaction with Navale group. Even at the time of hearing also, the ld.AR for the assessee could not justify this cash receipt in lieu of sale transactions of shares. The ld.AR could not deny nor place on record any evidence in support of the assessee to counter the stand of the Revenue. Considering these facts and circumstances of the case, we do not find any infirmity with the findings of the ld. CIT(A) and the said addition sustained by the ld. CIT(A) is upheld.
6 Further, the ld. CIT(A) has observed that as per para 6.1 of the assessment order, the AO has referred to the submission of the assessee wherein it was stated that the purchase and selling price of share was Rs. 100 per share and this was not disputed by the AO. Therefore, it is a position that the shares were purchased at Rs.100 and were also sold for Rs.100. Therefore, there cannot be any capital gain or loss in the hands of the assessee. However, from the copy of return furnished by the assessee during the appellate proceedings, it was noticed by the ld. CIT(A) that assessee has claimed loss of (-) Rs.26,48,463/- under the head „capital gains‟, which was disallowed by the ld. CIT(A), since as observed, the position was such as per the self-declaration by the assessee that question itself does not arise for any loss occurrence in such sale transactions where the shares were purchased and sold at the same price. This finding of the ld. CIT(A) is also upheld. The grounds of appeal of the assessee stands dismissed.
6. In the result, appeal of the assessee is dismissed.
Order pronounced in open Court on 20th September, 2023.
