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TMI Blog2022 (12) TMI 1506X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment Year 2011-12, have been taken into consideration for deciding the above appeals en masse. 3. Grounds of appeal raised by the assessee in lead case (in ITA No. 183/SRT/2021 for AY. 2011-12) are as follows: "Additional Grounds of Appeal 1. On the facts and circumstances of the case as well as law on subject, the learned assessing officer has erred in reopening the assessment u/s 147 by issuing notice u/s 148 of the Act. 2. It is therefore prayed that assessment framed u/s 143(3) r.w.s. 147 of the Act may kindly be quashed and /or addition made by learned assessing officer may please be deleted. Grounds of Appeal 3. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the long Term Capital Gains of Rs. 3,47,564/- as unexplained cash Credit. 4. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming Rs. 10,426/- as unexplained u/s 69 of the Act. 5. It is therefore prayed that addition made by the assessing officer and confirmed by CIT(A) of Rs. 3,57,990/- may please be deleted. 6. Assessee craves leave to add, alter or delete any gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer noted that in assessee`s case, information has been received from the Kolkata Investigation Directorate that assessee has transacted in the scrip, M/s Global Capital Markets Ltd, which was already established as a penny stock listed on BSE and the same was used to facilitate introduction of unaccounted income of members of beneficiaries. The assessee was identified as one of the beneficiaries. The assessing officer observed that share price of the scrip, M/s GLOBAL CAPITAL MARKETS LTD, rose from Rs. 100 in December, 2008 top Rs. 1000/- in November, 2010 and dipped to Rs. 50/- in May, 2012. Further, it was noticed, by the assessing officer, from the financials of the company that for the relevant period, the financials of the company, do not show any substantial change so as to support such a huge deviation of the price. The assessing officer also noted that the company does not have any business activities which justify the huge market price of shares and the purchase and sale of the scrip, Global Capital Markets Ltd, were concentrated within few persons. The exit providers do not have creditworthiness. During the year under consideration, the assessee has made transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On account of the detailed above reasons, observations and judicial pronouncements, the appeal of the Assessee is, hereby, dismissed and the impugned addition is, hereby, confirmed." 9. Aggrieved by the order of the ld. CIT(A), the assessee is in further appeal before us. 10. Ms. Richa Tosniwal, Learned Counsel for the assessee, at the outset, states that assessee has raised additional grounds of appeal challenging the validity of reassessment proceedings. She submitted before the Bench that although the assessee has not raised such ground during the appellate proceedings, however facts are emanating from the assessment order. Since it is a legal issue, and facts are there in the assessment order therefore same may be admitted for adjudication. 11. About validity of reopening the assessment under section 147 of the Act, Ms. Richa Tosniwal, Learned Counsel for the assessee, begins by pointing out that there is no whisper in the reasons recorded, of any tangible material which came to the possession of the assessing officer subsequent to the filing of the return of income. It reflects an arbitrary exercise of the power conferred under section 147 of the Act. In the reasons supplie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. 13. Learned DR for the Revenue, pleaded that assessee has not argued the issue of validity of reassessment proceedings before the ld CIT(A), therefore, at this stage the assessee should not be allowed to argue on such legal issue. 14. On the validity of reassessment proceedings, the ld DR submitted that after recording reasons for reopening of the case and after obtaining necessary approval from the Pr. C1T-2, Surat, the assessee`s case was reopened u/s 147 of the Act. The notice u/s 148 of the Act was issued on 29.03.2018 and served upon the assessee. In response to the same, the assessee has filed return of income on 05.04.2018. The copy of reasons recorded for reopening the case was given to the assessee. The objection of the assessee has also been disposed of by assessing officer, vide speaking order of assessing officer dated 02.08.2018. The ld DR took us through paper book page No. 45, where reasons recorded by the assessing officer are stated, and argued that assessing officer received the information from the DDIT (Investigation) unit-3(2) Kolkata is respect of the BSE listed Penny stock companies. After getting such information, assessing officer has applied his mind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as received by the AO from the DDIT Investigation Wing, Kolkata, regarding BSE listed Penny stock. (b) The AO has noted that the information received from the DDIT Investigation Wing, Kolkata, has revealed that assessee has sold 5000 shares of Rs. 3,85,006/- in the scrip Global Capital Market Limited. (c) The Assessing Officer specified the code number. (d) The AO noted that assessee has claimed exemption wrongly. (e) The AO finally recorded the reasons stating that he has reason to believe that an amount of Rs. 3,85,006/- has escaped assessment within the meaning of section 147 of the Act. (f) This information was not available at the time of passing the original assessment; order, if any. (g) The assessing officer had verified the information with the record available in his office and duly noted the same. (h) He has thus recorded his prima facie reason to believe that amount of Rs. 3,85,006/- has escaped assessment. 19. Having gone through the entire gamut of facts and circumstances, we are of the view that not only there existed new information with the AO from the credible sources, but also that he has applied his mind and recorded the conclusion that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of reasons recorded, it can be culled out that there were sufficient grounds for the Assessing Officer to hold such beliefs." 22. A three Judges Bench of Hon'ble Gujarat High Court in the case of A.L.A. Firm v. CIT, 189 (1991) ITR 285, after an elaborate discussion of the subject opined that the jurisdiction of the Income Tax Officer to reassess income arises if he has in consequence of specific and relevant information coming into his possession subsequent to the previous concluded assessment, reason to believe, that income chargeable to tax and had escaped assessment. It was held that even if the information be such that it could have been obtained by the I.T.O. during the previous assessment proceedings by conducting an investigation or an enquiry but was not in fact so obtained, it would not affect the jurisdiction of the Income Tax Officer to initiate reassessment proceedings, if the twin conditions prescribed under Section 147 of the Act are satisfied. 23. In fact, in three recent judgments; the Hon'ble Gujarat High Court has upheld the reopening on similar facts. The case is squarely covered against the assessee by these judgments which are: * Yogen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchased 12,000 shares of M/s Global Capital Markets Limited on 31.03.2003 from I C Baid & Co. at a price of Rs. 6.91 approximately when the concept of STT was not even introduced and DEMAT was not even popular. As at March 2006, there were only a total of 538 depository participants registered with the Securities and Exchange Board of India. The notification about the new regulation made by SEBI for Mandatory Dematerialization of physical shares held by an investor stated that from April 1, 2019, from this date an investor was not be able to transfer the shares held in physical form using a transfer deed. Hence it is clear that there was no requirement of DEMAT during the period when the assessee purchased the shares i.e back in the year 2003. However, the assessee has submitted the holding Statement as on 31.03.2004 which reflects that the assessee had the shares of Global Capital Market in possession and was held in its demat account with SHCIL Limited. Copy of the same is filed by assessee in the Paper Book at Page No 5 and 6. Further the entire payment for purchase of shares was made through banking channels which can be duly verified from the bank statement for the period of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d shares of M/s Global Capital Markets Limited during FY 2010-11 on 29.07.2010 after holding the shares for more than 7 years and claimed just Rs. 3,47,564/- as Long Term Capital Gain (LTCG). This fact clearly shows that assessee is genuine investor as he was holding shares for more than seven years, and does not involve in taking penny stock accommodation entry. 32. It is well settled position of law that, an assessee receiving a credit has to testify its case through the 'triple marker test' of Identity, Creditworthiness and Genuineness of Transactions. It is imperative, therefore, that the case be analysed in light of these three well-settled canons of adjudication, as embedded in the statute as also promulgated by various judicial pronouncements. The onus of proof requires the assessee to furnish the proof of identity, creditworthiness and genuineness of the transaction. We note that in assessee`s case under consideration, the assessee has submitted the copy of Contract note. The contract notes shows the quantity, rate, time stamp, value, taxes and charges viz. STT, brokerage, SEBI and exchange turnover charges, service tax and stamp duty incurred on all the transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court of Delhi in CIT Nippun Builders and Development Private Limited in ITA No. 120 of 2012 dated 07.01.2013 wherein it was held as follows:- This principle was reiterated by the Supreme Court in Commissioner of Income Tax v. Devi Prasad Vishwanath Prasad, (1969) 72 ITR 194 wherein Shah, J (as His Lordship then was) held as follows: "The question again assumes that it was for the Income-Tax Officer to indicate the source of the income before the income could be held taxable and unless he did so, the assessee was entitled to succeed. That is not, in our judgment, the correct legal position. Where there is an explained cash credit, it is open to the Income Tax Officer to hold that it is income of the assessee and no further burden lies on the Income-Tax Officer to show that income is from any particular source. It is for the assessee to prove that even if the cash credit represents income it is income from a source which has already been taxed." The law as stated above has not undergone any change because of the introduction of Section 68 in the Income Tax Act, 1961. As observed by S. Ranganathan J in Yadu Hari Dalmia Vs. Commissioner of Income Tax, Delhi (Central), (1980) 126 ITR 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charged its onus to prove not only the identity of the share applicants, but also their creditworthiness and the genuineness of the transactions. No attempt was made by the tribunal to scratch the surface and probe the documentary evidence in some depth, in the light of the conduct of the assessee and other surrounding circumstances in order to see whether the assessee has discharged its onus under Section 68. With respect, it appears to us that there has only been a mechanical reference to the case-law on the subject without any serious appraisal of the facts and circumstances of the case. 96. Mr. Roy Chowdhury had pointed out to the findings recorded by the assessing officer in the case of Dinesh Kumar Bansal which is the subject matter of ITAT No. 31 of 2020 wherein the assessee had invested in Kailash Auto Finance. In his submission, the order of the assessing officer is a well written order and he had elaborately referred to the findings recorded by the assessing officer. On going through the said order, we find the assessing officer has cogently brought out the factual scenario to establish machinations of fraudulent, manipulative and deceptive dealings and how the stock ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of jurisdiction. What is required to be seen is the content of the order and the discussion and findings rendered by the Commissioner. This is because the cardinal principle is that substance over form has to be preferred. The Commissioner while issuing the show cause notice had come to the prima facie conclusion that the assessing officer did not conduct an enquiry as required to justify such prima facie opinion. The Commissioner was required to set out as to why in his opinion the enquiry by the assessing officer was not proper or insufficient. On reading of the orders passed by the Commissioner under Section 263 which are the subject matter in ITAT No. 156 of 2021 and other similar matters, it is seen that the Commissioner has disclosed to the assessee as to why in his case the power under Section 263 has to be invoked. On reading of the orders passed by the Commissioner, we find that the order to be a reasoned order and there is nothing to conclude. The issue was pre-decided. The assessments orders which are subject matter of Section 263 action shows that an enquiry has not been conducted by the assessing officer in the manner it ought to have been conducted. We say so because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery superficial manner without dwelling deep into the core of the issue. The tribunal being the last fact finding authority was required to go deeper into the issue as the matter have manifested large scale scam. Thus, the orders of the tribunal are not only perfunctory but perverse as well. The exercise that was required to be done by the tribunal is to consider the totality of the circumstances because the transactions are shown to be very complex, the meeting of minds of the "players" can never be established by direct evidence and therefore the surrounding circumstances was required to be taken note of by the tribunal which exercise has not been done. We have considered as to whether in such an event, should the matter be remanded to the tribunal for fresh consideration. We have held that there is no such requirement and that is the Court is empowered to examine the findings recorded by the assessing officer, or the CIT (A) to arrive at a conclusion. The assessees have been harping upon the opinion rendered by the financial experts, professionals in the said field the information which were available in the media etc. All these opinions are at best suggestions to an investor. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned profit or incurred loss cannot validate the tainted transactions. It has been established by the department that the rise of the prices of the shares was artificially done by the adopting manipulative practices. Consequently whatever resultant benefits which accrue from out of such manipulative practices are also to be treated as tainted. However, the assessee had opportunity to prove that there was no manipulation at the other end and whatever gains the assessee has reaped was not tainted. This has not been proved or established by any of the assessee before us. Therefore, the assessing officers were well justified in coming to a conclusion that the so called explanation offered by the assessee was not to their satisfaction. Thus, the assessee having not proved the genuineness of the claim, the creditworthiness of the companies in which they had invested and the identity of the persons to whom the transactions were done, have to necessarily fail. In such factual scenario, the Assessing Officers as well as the CIT(A) have adopted an inferential process which we find to be a process which would be followed by a reasonable and prudent person. The Assessing Officers and the CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tanding Counsels, in the chain of events, there are three main person who are involved, the first of which is the entry operator who is said to have managed the overall scam as the entry operator controls several paper companies which have been utilized for routing the cash. The operator is also in control of some penny stock companies whose shares are listed on recognized stock exchanges. It is true that "penny stock" is not an offensive word or comes with a stigma. Penny stock is a stock which trades at a relatively low prices and market capitals. These stocks are highly speculative and they are categorized as high risk stocks largely due to lack of liquidity. Furthermore, the shares of the penny stock are closely held as the general public is not interested in these stocks due to the poor financials of the listed companies. It is for such reasons the entry operators are said to have chosen these penny stocks. In certain cases before us it has been established that the promoters/ Directors of the penny stock companies are also involved and they allowed the entry operators to manage the affairs of the company in return of a commission paid to them. The third set of persons involve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of mind both by the Income Tax Department as well as the Officers of the Ministry of Law and Justice. More often we have stated that due care and caution has to be taken when appeals are drafted and filed before this Court and this is not the first case which has come up before us where the pleadings were irrelevant to the facts of the case. However, the substantial questions of law suggested by the revenue is with regard to the correctness of the order of the Tribunal in interfering with the order of the CIT(A) who affirmed the order of the Assessing Officer making the addition under Section 68 of the Act. Furthermore, we have to note that more than 90 appeals were allowed by the Tribunal in a single order and the facts of the 89 assessees were not noted by the Tribunal. In any event, the assessee, Mr.Gupta was quite happy with the result and he made no attempt to request the Tribunal to note his facts which according to him may have been unique as was submitted before us. If the assessees could take shelter under an order passed by the Tribunal which has not discussed even the basic facts of the assessees' case, we are not inclined to non-suit the revenue on the ground that some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n done in the name of the individual assessee or by the Karta of the HUF. None of the assessee before us have been shown to big time investor...." Our analysis in respect of assessee`s facts: In the assessee`s case under, the assessee has done risk analysis before making investments. The assessee has not taken blind decision to invest in the shares. After purchasing the shares, the assessee holds these shares for the period of seven years. Hence, assessee under consideration is an Investor. Thus, for such assessee it can not be said that he has engaged in taking accommodation entry to evade the taxes. Thus, assessee before us is a big time Investor, as he was holding the shares for a period of seven years. (ii) Observation of Hon`ble Calcutta High Court: "......It has been established by the department that the rise of the prices of the shares was artificially done by the adopting manipulative practices. Consequently whatever resultant benefits which accrue from out of such manipulative practices are also to be treated as tainted. However, the assessee had opportunity to prove that there was no manipulation at the other end and whatever gains the assessee has reaped was not t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , held the share for long time. Hence the assessee is an Investor and therefore should not be treated to engage in fraudulent activities/manipulation activities. We note that assessee had sold shares of M/s Global Capital Markets Limited during FY 2010-11 on 29.07.2010 after holding the shares for more than 7 years and claimed just Rs. 3,47,564/- as Long Term Capital Gain( LTCG). We also note that the amount of Rs. 3,47,564/- is not a significant amount. Therefore considering these facts, we are of the view that assessee under consideration, has not taken accommodation entry. Therefore, we note that findings of Hon`ble Calcutta High Court in the case of Swati Bajaj and others(supra) is not entirely applicable to the assessee`s facts under consideration. By way of this above analysis, we are not stating that entire findings of Hon`ble Calcutta High Court in the case of Swati Bajaj and others(supra) are distinguishable on facts, of Course some of the findings are applicable to the assessee`s facts. In our above analysis, we have pointed out that some of the major facts of the assessee under consideration is different, hence findings of Hon`ble Calcutta High Court in the case of Swat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeals), the issue was re-examined. According to the appellate authority the appellant assessee had furnished evidence to show that the shares were brought as genuine investment which was long back in the year 2000-01. As the shares were in the nature of old investment, they could not be treated as penny stock by any stretch of imagination. 4. The Income-tax Appellate Tribunal further examined the question in appeal preferred by the revenue and confirmed the view of the appellate authority noticing that the shares were purchased in the year 2001 and they were sold after long time in the year 2010-11. 5. The genuineness of investment in the shares by the assessee was substantiated by him by producing copy of transaction statement for the period from 1-6-2001 to 110-2010. The investment was made in the year 2000-01. The shares were retained for more than ten years and were sold after such long time. These circumstances suggested that the investment was not bogus or investment made in penny stock. The shares were purchased in order to invest and not for the purpose of earning exempted income by frequent trading in short span. 6. The finding recorded by the appellate authority a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Court in such matters. Because, if we are to accept this submission, it will be an exercise in futility to examine the real controversy before us with a view to decide the issue, as in that case, in view of the Calcutta decision, whatever may be our decision on the question of law referred to us, we would be bound to follow the decision of the Calcutta High Court and answer the question accordingly. This submission, in our opinion, is not tenable as it goes counter not only to the powers of this Court to hear the reference and decide the questions of law raised therein and to deliver its judgment thereon but also to the doctrine binding precedent known as stare decisis. We shall deal with the reasons for the same at some length a little later. 7. We have also carefully gone through the decisions of this Court referred to by the counsel for the assessee in support of his above contention. In our opinion, the observations in those decisions have not been properly appreciated. They have been too widely interpreted. There appears to be a misconception about the nature thereof and their binding effect. We shall also refer to those decisions and the relevant observations therein an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court. Referring to the States Reorganisation Act, it was observed that there was nothing in the said Act or any other law which exhalts the ratio of those decisions to the status of a binding law nor could the ratio decidendi of those decisions be perpetuated by invoking the doctrine of stare decisis. The doctrine of stare decisis cannot be stretched that far to make the decision of one High Court a binding precedent for the other. This doctrine is applicable only to the different Benches of the same High Court. 11. It is also well settled that though there is no specific provision, making the law declared by the High Court binding on subordinate Courts, it is implicit in the power of supervision conferred on a superior Tribunal that the Tribunals subject to its supervision would confirm to the law laid down by it. It is in that view of the matter that the Supreme Court in East India Commercial Co. vs. Collector of Customs AIR 1962 (SC) 1893 (at 1905) declared : "We, therefore, hold that the law declared by the Highest Court in the State is binding on authorities or Tribunals under its superintendence, and they cannot ignore it....." 12. This position has been very aptly s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on". A case is only an authority for what it actually decides and not what may come to follow logically from it. Judgments of Courts are not to be construed as statutes [see Amarnath Omprakash vs. State of Punjab (1985) 1 SCC 345]. While following precedents, the Court should keep in mind the following observations in Mumbai Kamgar Sabha vs. Abdulbhai AIR 1976 SC 1455 (at 1467-68) : "It is trite, going by Anglophonic principles, that a ruling of a superior Court is binding law. It is not of scriptural sanctity but is of ratio wise luminosity within the edifice of facts where the judicial lamp plays the legal flame. Beyond those walls and de hors the milieu we cannot impart eternal vernal value to the decision, exalting the doctrine of precedents into a prison house of bigotry, regardless of varying circumstances and myriad developments. Realism dictates that a judgment has to be read, subject to the facts directly presented for consideration and not affecting those matters which may lurk in the record. Whatever be the position of subordinate Courts casual observations, generalisations and sub-silentio determinations must be judiciously read by Courts of co-ordinate jurisdiction." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is thus clear that it is only the ratio decidendi of a case which can be binding-not obiter dictum. Obiter, at best, may have some persuasive efficacy. 17. From the foregoing discussion, the following propositions emerge : (a) The law declared by the Supreme Court being binding on all Courts in India, the decisions of the Supreme Court are binding on all Courts, except, however, the Supreme Court itself which is free to review the same and depart from its earlier opinion if the situation so warrants. What is binding is, of course, the ratio of the decision and not every expression found therein. (b) The decisions of the High Court are binding on the subordinate Courts and authorities or Tribunals under its superintendence throughout the territories in relation to which it exercises jurisdiction. It does not extent beyond its territorial jurisdiction. (c) The position in regard to binding nature of the decisions of a High Court on different Benches of the same Court, may be summed up as follows : (i) A Single Judge of a High Court is bound by the decision of another Single Judge or a Division Bench of the same High Court. It would be judicial impropriety to ignore that de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Thana Electricity Supply Ltd (supra) it is abundantly clear that decision of a High Court will have the force of binding precedent only in the State or territories in which the Court has jurisdiction. Hence we note that Judgment of Hon`ble Calcutta High Court in the case of Swati Bajaj and others(supra) should not be applicable to the assessee as it is outside the territorial jurisdiction of Gujarat. However, the Judgment of Hon`ble Jurisdictional High Court of Gujarat in the case of Jagat Pravinbhai Sarabhai(supra) should be applicable to the assessee`s case, as it is the judgment of Jurisdictional High Court. Therefore, respectfully following the binding judgment of the Hon`ble Jurisdictional High Court of Gujarat in the case of Jagat Pravinbhai Sarabhai (supra), we allow the appeal of the assessee. 40. In ground No. 4, assessee stated that Assessing Officer made addition under section 69C on account of commission paid @ 2% or 3% of bogus long term capital gain. In the assessee`s case AO added Rs. 10426 ( 3% of Rs. 3,47,564). Since, we have deleted the alleged addition of Rs. 3,47,564/-, hence addition made by AO does not have leg to stand, therefore it is hereby deleted. 41. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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