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Anil Kumar Singhal, D-55, Mahendru Enclave, Opp. Model Town-III, Delhi-110033 Vs ITO, Ward-37(1), New Delhi.
July, 24th 2014
               IN THE INCOME TAX APPELLATE TRIBUNAL
                     DELHI BENCH: `A' NEW DELHI

              BEFORE SMT DIVA SINGH, JUDICIAL MEMBER
                                AND
               SHRI T.S.KAPOOR, ACCOUNTANT MEMBER

                            I.T.A .No.-3840/Del/2013
                        (ASSESSMENT YEAR-2007-08)

            Anil Kumar Singhal,                         vs    ITO,
            D-55, Mahendru Enclave,                           Ward-37(1),
            Opp. Model Town-III, Delhi-110033                 New Delhi.
            PAN-AENPS0008R
            (APPELLANT)                                       (RESPONDENT)

                  Appellant by:         Sh. Raj Kumar Gupta, CA
                                        & Sumit Goel, CA
                  Respondent by:        Y.Kakkar, DR

                                        ORDER
PER DIVA SINGH, JM

      This is an appeal filed by the assessee against the order dated 28.03.2013
of CIT(A)-XXVIII, New Delhi pertaining to 2007-08 assessment year wherein
penalty imposed u/s 271(1)(c) has been upheld by the CIT(A).
2.    Right at the outset, Ld. AR, Mr. Raj Kumar Gupta appearing on behalf of
the assessee submitted that the point at issue is fully covered in favour of the
assessee by the order of the Co-ordinate Bench in the case of the assessee passed
in the Quantum proceedings wherein the addition made by the AO which was
enhanced by the CIT(A) was deleted by the ITAT. Inviting attention to the
assessment order dated 10.12.2009 it was pointed out that the AO had made the
following additions:-
      i)      "Loss from house property disallowed as discussed above        Rs.20,818
      ii)     Income from undisclosed sources as discussed above            Rs.8,00,000
                                             2                      I.T.A .No.-3840/Del/2013





      iii)   Loss on sale of shares disallowed as discussed above               Rs.8,99,090"

3.    Referring to the penalty proceedings it was submitted that on account of
the addition of Rs.8,00,000/- and the disallowance of Rs.8,99,090/- penalty
proceedings were initiated.           However since in appeal the addition of
Rs.8,00,000/- was enhanced and instead substituted by Rs.13,11,010/- penalty
was imposed. It was submitted referring to the order dated 22.02.2013 in ITA
No-802/Del/2011 that the addition including enhancement was                           deleted
accordingly it was contended that the penalty order does not survive. On going
through the orders, Ld. SR. DR placed reliance upon the penalty order and did
not dispute that pursuant to the deletion of the additions in the quantum
proceedings the penalty proceedings became infructuos.
4.    We have heard the rival submissions and perused the material available on
record and have taken into consideration the order of the Tribunal in quantum
proceedings relied upon by the assessee. For ready-reference we extract para 8
from the afore-mentioned order of the Tribunal in quantum proceedings so as to
address the facts as available before the Co-ordinate Bench:-
      8.      "At the time of hearing before us, it was stated by the learned
      counsel that during the accounting year relevant to assessment year under
      consideration, the assessee earned short term capital gain of Rs.8 lakhs
      from sale of shares of Agro Fincap Ltd. The assessee suffered short term
      capital loss of Rs.8 lakhs from sale of shares of Sebros Auto (P.) Ltd. He
      also suffered short term capital loss of rs.99,090/- from sale of shares of
      Agro Savings Ltd. Thus, net loss from sale of shares was Rs.99,090/- that
      the assessee did not claim any deduction in respect of net loss suffered from
      the sale of shares. The Assessing Officer asked the assessee to produce the
      balance sheet of the companies on the date of purchase of shares as well as
      on the date of sale so as to work out NAV of the shares at the relevant time.
      Since the assessee failed to produce the balance sheet of the companies, the
      Assessing Officer held that the share transactions claimed to have been
      entered into by the assessee are nothing but accommodation entries given
      to various parties. He, therefore, made the addition of Rs.8 lakhs in
      respect of short term capital gain from sale of shares treating the same as
      income from undisclosed sources.          He further added the sum of
      Rs.8,99,090/- being the loss from sale of shares. However, in response to
                                               3                      I.T.A .No.-3840/Del/2013


       assessee's application under section 154, the addition for loss suffered by
       the assessee on sale of shares of Rs.8,99,090/- was deleted."

4.1.   The finding arrived at in the quantum proceedings by the ITAT read as
under :-
       12. "We have carefully considered the arguments of both the sides and
       perused the material placed before us. The Assessing Officer made the
       addition of Rs.8 lakhs as income from undisclosed sources and also
       disallowed the loss on sale of shares with the following finding:-
                "As the assessee did not file copy of balance sheet of the concerned
                companies, nor filed net worth/NAV of the shares traded, and
                genuineness of the transactions are not proved. Such transactions
                are nothing but accommodation entries given to various parties.
                Hence profit of Rs.8,00,000/- on alleged sale of 20,000 unquoted
                shares of M/s Agroha Fincap Ltd. is treated as the assessee's
                income from undisclosed sources and penalty proceedings u/s
                271(1)(c) have been initiated separately.
                Similarly loss of Rs.99,090/- claimed on sale of 11010 unquoted
                shares of M/s Agroha Savings Ltd., and loss of Rs.8,00,000/- on
                sale of 20000 unquoted shares of M/s Sebros Auto Pvt. Ltd. As the
                assessee did not file copy of balance sheet of the concerned
                companies, nor filed net worth/NAV of the shares traded, and
                genuineness of the transactions are not proved. Such transactions
                are nothing but accommodation entries given to various parties.
                Hence the loss of Rs.8,99,090/- is disallowed and penalty
                proceedings u/s 271(1)(c) have been initiated separately."
        13. Thus, he treated the transactions of purchase and sale of shares to be
       accommodation entries mainly on the ground that the assessee did not file
       the copy of the balance sheet of the concerned companies nor filed the net
       worth/NAV of those companies. The learned CIT(A) discussed this issue at
       great length. He also considered the details with regard to persons from
       whom the assessee has purchased the shares and to whom the assessee has
       sold the shares and after considering those details, he agreed with the
       conclusion of the Assessing Officer that the transactions of purchase and
       sale of shares are bogus. He, therefore, came to the conclusion that receipt
       from alleged sale of shares is to be added under Section 68 and the claim
       of loss from sale of shares, being bogus, is to be disallowed. The assessee
       has argued at length and has also filed the written submission alongwith
       the evidences in support of his contention that the purchase and sale of
       shares by the assessee was genuine. However, without going into the
       question of genuineness of the purchase and sale of shares, we are
       impressed by the argument of the assessee's counsel that whether the
       purchase and sale of shares is genuine or bogus, no addition can be made.
       So far as the first aspect of the question is concerned, there is no dispute
       that if the purchase and sale of shares is genuine, no addition is required to
       be made because the profit from sale of shares of Rs.8 lakhs got set off
                                               4                       I.T.A .No.-3840/Del/2013


       against the loss from sale of shares of Rs.8 lakhs and there is further loss of
       Rs.99,090/-. However, the second question is whether any addition under
       Section 68 is required to be made if the purchase and sale of shares is
       treated as bogus. In our opinion, addition under Section 68 can be made
       only if there is net credit to the capital account. If we consider the entire
       transaction of purchase and sale of shares as bogus, then net result is that
       the debit in the assessee's account against the purchase of shares was more
       by Rs.99,090/- than the credit against the sale of shares. Therefore, during
       the year under consideration, there is no net credit to the capital account.
       On the other hand, there is a debit to the capital account by Rs.99,090/-.
       Since there is no net credit during the year under consideration, no
       addition under Section 68 can be made. Moreover, the debit to the capital
       account for purchase of shares is prior to the credit from sale of shares.
       Therefore, if purchase and sale of shares is to be treated as bogus, the
       money debited by the assessee as purchase of shares is available with him
       to explain the credit from the sale of shares. We may clarify that we have
       not expressed any opinion whether the transactions of purchase and sale of
       shares are bogus or genuine. However, we are of the opinion that even if it
       is presumed that the purchase and sale of shares are bogus, no addition
       under Section 68 can be made because there is no net credit in the capital
       account, on the other hand, there is net debit to the capital account of
       `99,090/-In view of the above, the addition made by the Assessing Officer
       in this regard and the enhancement made thereto by the learned CIT(A)
       are deleted. Accordingly, ground Nos.2, 3 & 4 of the assessee's appeal
       are allowed."
4.2. Thus in the afore-mentioned peculiar facts and circumstances where the additions made in the quantum proceedings do no admittedly survive which position of fact is not disputed by the department the penalty order has to be quashed as it became infructuos. It is a settled position that in the absence of any addition in the quantum proceedings the penalty order has no legs to stand on. 5. The penalty order as such is quashed and the impugned order is set aside as per the pronouncement made in the open Court at the time of hearing itself in the presence of the parties. 6. In the result the appeal of the assessee is allowed. The order is pronounced in the open court on 11th of July 2014. Sd/- Sd/- (T.S.KAPOOR) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated:- 11/07/2014 *Amit Kumar* 5 I.T.A .No.-3840/Del/2013 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI
 
 
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