S. Bharat Raj, Bangalore V. ACIT, Bangalore

CO 76/BANG/2012

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7933 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 05-10-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-01-2013
• Assessment Year: 1994-1995
• Appeal Filed On: 05-09-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V CHANDRASHEKAR
• Assessee Lawyers: B SARAVANAN
• Keywords: Cost of acquisition; Validity of assessment
• Section: 143(3); 142(1); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER I.T.A. NO.76/BANG/2012 (ASSESSMENT YEAR : 2005-06) ASST. COMMISSIONER OF INCOME TAX, CIRCLE 4(1), BANGALORE. . APPELLANT. VS. SMT. KALPANA MEHTA, NO.97, KUSHIL, 13 TH MAIN, 30THCROSS, BSK 2 ND STAGE, BANGALORE-70. .. RESPONDENT. APPELLANT BY : SHRI B. SARAVANAN. RESPONDENT BY : SHRI V. CHANDRASHEKAR. DATE OF HEARING : 24.09.2012. DATE OF PRONOUNCEMENT : 05.10.2012. O R D E R PER SHRI JASON P. BOAZ, A.M . : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, BANGALORE DT.30.11.2011 FOR ASSESSMENT YEAR 2005-06. 2. THE FACTS OF THE CASE, IN BRIEF, ARE AS UND ER: 2.1 THE ASSESSEE FILED HER RETURN OF INCOME FOR ASS ESSMENT YEAR 2005-06 ON 30.7.2005 DECLARING INCOME OF RS.32,34,823. THE RE TURN WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 (HEREIN AFTER RE FERRED TO AS 'THE ACT'). IN THE COURSE OF INVESTIGATIONS DURING THE SEARCH ASSESSMENT PROC EEDINGS IN THE CASES OF SRI MANGILAL CHHAJJER, S. VIMAL CHAND AND S.T. SHANKAR AND SONS ALLEGEDLY DUBIOUS SHARE TRANSACTIONS 2 ITA NO. 76/BANG/12 WERE UNEARTHED WHEREIN ARTIFICIAL CAPITAL GAINS WER E GENERATED THROUGH M/S. FAST TRACK ENTERTAINMENT LTD WHICH WAS SAID TO BE INVOLVED IN CONVERSION OF BLACK MONEY BY PAYING TAX @ 10% OR NIL INSTEAD OF 30%. IN THIS VIEW OF THE MA TTER, PROCEEDINGS WERE INITIATED UNDER SECTION 147 OF THE ACT FOR BRINGING TO TAX IN COME THAT HAD ESCAPED ASSESSMENT AND AFTER RECORDING REASONS FOR REACHING SUCH BELIEF, N OTICE UNDER SECTION 148 OF THE ACT WAS ISSUED TO THE ASSESSEE ON 27.10.2009. THE ASSESSEE REQUESTED THE ASSESSING OFFICER TO TREAT THE RETURN OF INCOME FILED ON 30.7.2005 AS HA VING BEEN FILED IN RESPONSE TO NOTICE UNDER SECTION 148. SUBSEQUENTLY, NOTICES UNDER SEC TION 143(2) AND 142(1) OF THE ACT WERE ISSUED AND THE ASSESSMENT WAS TAKEN UP. THE ASSESS ING OFFICER COMPLETED THE ASSESSMENT BY AN ORDER UNDER SECTION 143(3) R.W.S. 147 OF THE ACT ON 27.12.2010 DETERMINING THE INCOME OF THE ASSESSEE AT RS.32,68, 670. IN DOING SO THE ASSESSING OFFICER TREATED THE SALE CONSIDERATION OF SHARES AM OUNTING TO RS.29,65,640, ARISING OUT OF DUBIOUS CAPITAL GAINS DECLARED, TO BE INCOME FROM OTHER SOURCES. 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT DT.27.12.2 010, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). THE LEARNED CIT(A) DISPOSED OFF THE ASSESSEES APPEAL BY ORDER DT.10.11.2011 ALLOWING PARTIAL RELIEF IN THE FOLLOW ING MANNER : A) THE ASSESSEES TECHNICAL GROUNDS RAISED CHALLENG ING THE VALIDITY OF REOPENING THE ASSESSMENT UNDER SECTION 147, ISSUE OF NOTICE UNDER SECTION 148, VALIDITY OF ASSESSMENT ORDER PASSED THEREAFTER ETC WERE DISMISSED BY THE L EARNED CIT(APPEALS). B) ON MERITS, HOWEVER, THE LEARNED CIT(APPEALS) FOL LOWING THE DECISIONS OF THE CO-ORDINATE B BENCH OF THE TRIBUNAL IN THE CASES OF SRI MANG ILAL CHAJJER IN ITA NO.526/BANG/2010 DT.23.3.2011 FOR ASSESSMENT YEAR 2005-06 AND OF SRI S. VIMAL CHAND IN ITA 3 ITA NO. 76/BANG/12 NO.947/BANG/2010 DT.24.6.2011 FOR ASSESSMENT YEAR 2 005-06, ON SIMILARITY OF FACTS, ALLOWED THE ASSESSEES APPEAL. 3) AGGRIEVED BY THE ORDER OF THE CIT(APPEALS), TH E ASSESSEE HAS FILED THIS APPEAL. IN THE GROUNDS RAISED IT IS CONTENDED AS UNDER : 1. THE ORDER OF THE CIT (APPEALS) IS OPPOSED TO THE FACTS OF THE CASE. 2. THE LEARNED CIT (APPEALS) HAS ERRED IN DIRECT ING THE ASSESSING OFFICER TO TREAT THE INCOME FROM SALE OF SHARES AS LONG TERM CAPITAL GAINS AND NOT AS INCOME FROM OTHER SOURCES. 3. THE LEARNED CIT (APPEALS) HAS FAILED TO APPRE CIATE THE FACT THAT SEVERAL PERSONS PURCHASED THE SHARES OF M/S. FAST TRACK ENT ERTAINMENT LTD., FOR RE.1 AND SUBSEQUENTLY SOLD THEM FOR RS.55 TO RS.90 ELECT RONICALLY THROUGH BOMBAY STOCK EXCHANGE WITHIN A FEW DAYS OF PURCHASE, THUS SHOWING A COLLUSION BETWEEN PURCHASERS AND SELLERS TO TURN BLACK MONEY INTO WHITE. 4. THE LEARNED CIT (APPEALS) FAILED TO APPRECIAT E THE FACT THAT THE ASSESSEE ALSO WAS ONE SUCH PERSON WHO PURCHASED THE SHARE S OF M/S. FAST TRACK ENTERTAINMENT LTD., ON 10.4.2003 FOR RS.43,209 AND LATER SOLD THESE SHARES BETWEEN 7.6.2004 AND 2.7.2004 FOR RS.29,65,640 THUS USING THIS CHANNEL TO COVERT BLACK MONEY INTO WHITE. 5. FOR THESE AND SUCH OTHER GROUNDS THAT MAYBE URG ED AT THE TIME OF HEARING THE APPEAL, THE ORDER OF THE LEARNED CIT (APPEALS) MAY BE SET ASIDE AND THAT THE ORDER OF THE ASSESSING OFFICER MAY BE RESTORED. 4. THE GROUNDS RAISED AT S.NOS.1 AND 5 ARE GENERAL IN NATURE AND NO ADJUDICATION IS CALLE D FOR THEREON. 5.1 THE MAIN ISSUE OF DISPUTE IS IN RESPECT OF THE GROUNDS RAISED AT S.NOS.2 TO 4 ; IT WAS CONTENDED BY THE LEARNED DEPARTMENTAL REPRESENT ATIVE THAT THE LEARNED CIT(APPEALS) ERRED IN HOLDING THAT THE INCOME FROM SALE OF SHARE S WERE LONG TERM CAPITAL GAINS RATHER THAN FROM OTHER SOURCES. IT WAS SUBMITTED THAT T HE LEARNED CIT(APPEALS) HAD FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE AMONG MANY O THERS HAD PURCHASED THE SHARES OF M/S. FAST TRACK ENTERTAINMENT LTD FOR RE.1 PER SHAR E AND SUBSEQUENTLY SOLD THEM FOR RS.55 TO RS.90 PER SHARE ELECTRONICALLY THROUGH BSE WITHIN A FEW DAYS OF PURCHASE, THUS 4 ITA NO. 76/BANG/12 EVIDENCING COLLUSION BETWEEN PURCHASERS AND SELLERS TO TURN BLACK MONEY INTO WHITE. IN THE ASSESSEES CASE IT WAS POINTED OUT THAT USING THIS CHANNEL, SHE BOUGHT 43,209 SHARES ON 10.4.2003 @ RE.1 PER SHARE AND THEN SOLD THEM FOR R S.29,65,640 IN THE PERIOD 7.6.2004 TO 2.7.2004. 5.2 THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITT ED THAT THE ISSUES OF DISPUTE IN THIS APPEAL WERE COVERED IN FAVOUR OF THE ASSESSEE BY TH E ORDERS OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASES OF MANGILAL CHHAJJER (S UPRA) AND S. VIMAL CHAND (SUPRA) IN WHICH ON THE VERY SAME ISSUE THE CO-ORDINATE BENCH OF THE TRIBUNAL HAD ADJUDICATED IN FAVOUR OF THE ASSESSEE. IT WAS SUBMITTED THAT SINCE THE LEAR NED CIT(APPEALS) HAD FOLLOWED THESE ORDERS OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN GIVING THE ASSESSEE RELIEF ON THIS ISSUE THE ORDER OF THE LEARNED CIT(APPEALS) BE UPHELD AND THE APPEAL OF REVENUE BE DISMISSED. 5.3 WE HAVE HEARD BOTH PARTIES AND CAREFULLY PERUS ED THE MATERIAL ON RECORD AND CONSIDERED THE JUDICIAL DECISIONS CITED. WE FIND T HAT IDENTICAL ISSUES AS THOSE OF DISPUTE IN THIS APPEAL, AS RAISED AT GROUNDS AT S.NOS.2 TO 4, WERE CONSIDERED BY A CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASES OF MANGILAL CHH AJJER (SUPRA) AND IN THE CASE OF S .VIMAL CHAND (SUPRA). IT IS ALSO SEEN THAT THE FACTS OF T HE CITED CASES (SUPRA) ARE SIMILAR TO THOSE OF THE PRESENT CASE UNDER CONSIDERATION IN AS MUCH AS THE SHARES WERE PURCHASED IN APRIL, 2003 AND SOLD IN JUNE, 2004. THE OPERATIVE PORTION OF THE DECISION OF THE CO- ORDINATE BENCH OF THIS TRIBUNAL (SUPRA) IS AT PARA 27 THEREOF WHICH IS EXTRACTED HEREUNDER: 27. THE PURCHASE OF SHARES HAVE BEEN PROVED BY TH E PROCESS OF DEMATING OF SHARES. SHARES HAVE BEEN REFLECTED IN THE BALANCE SHEETS OF THE ASSESSEE. SHARES WERE SUBSEQUENTLY SOLD ON THE FLOOR OF STOCK EXCHAN GE. THE SALES WERE ARRANGED THROUGH ACCREDITED BROKERS. THE SALES PROCEEDS WER E RECEIVED FROM THE STOCK 5 ITA NO. 76/BANG/12 EXCHANGES THROUGH BANK INSTRUMENTS. WHEN ALL THESE THINGS PUT TOGETHER, THE ASSESSEES HAVE MADE OUT A CLEAR CASE OF PURCHASE AN D SALE OF SHARES RESULTING IN SURPLUS IN THEIR RESPECTIVE HANDS. IN THE ABSENCE OF ANY EVIDENCES TO CONTRARY, THE SURPLUS HAVE TO BE TREATED AS LONG TERM CAPITAL GAI NS, AS THE SHARES WERE HELD FOR A PERIOD OF MORE THAN ONE YEAR. THE REVENUE CANNOT D ISBELIEVE THE DOCUMENTARY EVIDENCES AVAILABLE WITH THE ASSESSEES AND TREAT TH E SURPLUS AS INCOME FROM OTHER SOURCES ONLY FOR THE REASON THAT THE SALE VALUE OF THE SHARES WERE HIGH WHEN COMPARED TO THE LOWER PURCHASE COST. WHY SUCH A HUG E MARGIN WAS THERE, IS A MATTER TO BE PROBED INTO AND MADE OUT AGAINST THE ASSESSEE BY UNIMPEACHABLE EVIDENCES. AS FAR AS THESE CASES ARE CONCERNED, THE REVENUE HA S MADE AN ATTEMPT TO EXPLAIN THE PROPOSITIONS AGAINST THE ASSESSEE ONLY ON THE B ASIS OF PRESUMPTIONS AND HYPOTHESIS. SUCH PRESUMPTIONS AND HYPOTHESIS CANNO T BE TREATED AS SUBSTITUTE TO REASONABLE EVIDENCES, HOW SO EVER INTELLIGENT AND PERSUASIVE, THEY MIGHT BE. WE ARE OF THE CONSIDERED VIEW THAT THE ISSUES OF DI SPUTE IN THIS APPEAL ARE COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE CO-OR DINATE BENCH OF THE TRIBUNAL IN THE CASES OF MANGILAL CHHAJJER (SUPRA) AND S. VIMAL CHA ND (SUPRA) FOR ASSESSMENT YEAR 2005- 06. WE, THEREFORE, RESPECTFULLY FOLLOWING THESE DE CISIONS OF THE CO-ORDINATE BENCH OF THE TRIBUNAL (SUPRA) DIRECT THAT THE INCOME FROM ARISIN G FROM THE PURCHASE AND SALE OF SHARES OF M/S. FAST TRACK ENTERTAINMENTS LTD BY THE ASSESS EE DURING THE RELEVANT PERIOD BE ASSESSED UNDER THE HEAD LONG TERM CAPITAL GAINS A S THE SHARES IN THIS CASE HAD BEEN HELD FOR MORE THAN 12 MONTHS AND NOT AS INCOME FROM OTH ER SOURCES. 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH OCT., 2012. SD/- SD/- (P. MADHAVI DEVI) (JASON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER