RAMESHKUMAR D. JAIN, MUMBAI V. ITO 14(2)(3), MUMBAI

ITA 1093/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92789 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 11-03-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 07-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Keywords: Unexplained cash credit; Wrong claim; Sham transactions
• Section: 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D , MUMBAI BEFORE SHRI B.R. BASKARAN , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO. 1093 /M/2013 ASSESSMENT YEAR: 200 6 - 0 7 SHRI RAMESHKUMAR D. JAIN, PURSHOTTAM BUILDING, 1 ST FLOOR, R.NO .14, MALHORRAO WADI, DADISETH AGIARY LANE, MUMBAI 400 002 PAN: AAIPJ 9085A VS. INCOME TAX OFFICER - 14(2)(3), MUMBAI (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI VIMAL PUNMIYA, A.R. R EVENUE BY : SHRI LOVE KUMAR, D.R. DATE OF HEARING : 11.03. 201 5 DATE OF PRONOUNCEMENT : 03.06. 2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 11.12.2012 OF THE COMMIS SIONER OF INCOME TAX (APPEALS) [(HEREINAFTER REFERRED TO AS CIT(A)] RELEVANT TO ASSESSMENT YEAR 2006 - 07. THE ASSESSEE HAS AGITATED THE CONFIRMATION OF LEVY OF PENALTY OF RS.308500/ - UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT. 2. THE BRIEF FACTS OF T HE CASE AS COMING OUT OF THE IMPUGNED ORDER ARE THAT D URING THE COURSE OF THE ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) OBSERVED THAT ASSESSEE HAD SHOWN LONG TERM CAPITAL GAIN OF RS.9,44,638/ - ON SALE OF 90000 SHAR ES OF M/S PRRANET INDUSTRIES ITA NO.1093/M/2013 SHRI RAMESHKUMAR D. JAIN 2 AND HA D CLAIMED EXEMPTION U/S 10(38) FOR THE SAID LTCG ON ACCOUNT OF SALE OF SHARES. IN RESPECT OF PURCHASE OF T HE SAID SHARES, THE ASSESSEE HAD SHOWN PURCHASE OF 9000 SHARES OF M/S PRRANET INDUSTRIES ON 27.04.2004 THROUGH THE BROKER M/S VIJAY BHAGWANDAS & CO. HOWEVER, ON ENQUIRY FROM BOMBAY STOCK EXCHANGE ABOUT THE SAID TRANSACTION OF 9000 SHARES OF M/S PRRANET INDUSTRIES ON 2704.2004, BSE INFORMED THAT ON 27.04.2004, NO TRANSACTION HAD BEEN EXECUTED BY ANY TRADING MEMBER OF TH E EXCHANGE IN THE SCRIPT M/S. PRRANET INDUSTRIES LTD. AS THE PURCHASE OF THE SHARES WERE NOT ESTABLISHED , THE AO ISSUED SUMMON TO THE BROKER WHO HAD ISSU ED PURCHASE BILL. THE BROKER M/S VIJAY BLIAGWANDAS & CO. DID NOT RESPOND TO THE SUMMON U/S 131 OF THE I T ACT REQUIRING HIM TO APPEAR AND FURNISH THE DETAILS CALLED FOR. SINCE, ASSESSEE COULD NOT FURNISH ANY SATISFACTORY EXPLANATION TO PROVE THE GENUINENESS OF THE SAID LTCG OF RS.9,44,638/ - , T HEREFORE, THE AO MADE THE ADDITION OF RS.9,44,638/ - AS UNEXPLAINED CASH CREDIT. HE ALSO INITIATED P ENALTY PROCEEDINGS U/S 271(1)(C) OF THE IT ACT . IN THE M EAN TIME, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) AGAINST THE ASSESSMENT ORDER. THE LD. CIT(A) CONFIRMED THE ADDITION AND DISMISSED THE ASSESSEE'S APPEAL . IN THE PENALTY PROCEEDINGS, T HE AO BEING NOT SATISFIED WITH THE EXPLANATION AND SUBMISSIONS GIVEN BY THE ASSESSEE, LEVIED IMPUGNED PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE ASSESSEE PREFERRED APPEAL AGAINST THE SAID LEVY OF PENALTY BEFORE THE LD. CI T(A). 4. THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) THAT THERE WAS NO CONCEALMENT OF ANY PARTICULAR OF INCOME . THE ASSESSEE HAD DISCLOSED ALL THE TRANSACTIONS RELATING TO PURCHASE AND SALE OF SHARES. THERE WAS NO ATTEMPT ON THE PART OF THE ASSESSEE TO FURNISH INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. THE AO WRONGLY DISBELIEVED THE EVIDENCE PRODUCED BY THE ASSESSEE IN RELATION TO THE SHARES TRANSACTIONS. THE LD. CIT(A) , HOWEVER, OBSERVED THAT THE ASSESSEE HAD PREFERRED AN APPEAL BEFO RE THE ITAT AGAINST THE ITA NO.1093/M/2013 SHRI RAMESHKUMAR D. JAIN 3 CONFIRMATION OF THE ADDITIONS BY THE LD. CIT(A) WHICH WERE MADE BY THE AO UN DER SECTION 68 OF THE ACT. HE FURTHER OBSERVED T HAT THE ITAT, AFTER CON SIDERATION OF ALL THE FACTS, HAD CONFIRMED THE ADDITIONS SO MADE BY THE AO. HE, THE REFORE, HELD THAT SINCE THE FINDINGS OF THE ITAT CLEARLY ESTABLISHED THAT THE CLAIM OF TAX EXEMPT LONG TERM CAPITAL GAIN PUT FORWARD BY THE ASSESSEE WAS A FALSE CLAIM , H ENCE, IT WAS A CASE OF CONCEALMENT OF INCOME BY THE ASSESSEE BY WAY OF ADOPTING A COLOU RABLE DEVICE OF SHAM TRANSACTIONS OF PURCHASE AND SALE OF SHARES. HE THEREFORE UPHELD THE PENALTY SO LEVIED BY THE AO. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS COME IN APPEAL BEFORE US. 5 . WE HAVE HEARD THE RIVAL CONTENTIONS OF THE L D. REPRESENTATIVES OF BOTH THE PARTIES AND HAVE ALSO GONE THROUGH THE RECORDS. THE LD. A.R. OF THE ASSESSEE HAS RELIED UPON A CATENA OF JUDICIAL DECISIONS TO STRESS THE POINT THAT THE ASSESSEE HAD DISCLOSED COMPLETE FACTS BEFORE THE AO. HE HAS CONTENDED T HAT M ERELY BECAUSE THE AO WAS NOT SATISFIED WITH THE CLAIM OF LONG TERM CAPITAL GAIN S BY THE ASSESSEE THAT ITSELF WAS NOT SUFFICIENT FOR THE LEVY OF PENALTY. HE HAS FURTHER SUBMITTED THAT THE ASSESSEE HAD NEITHER CONCEALED HIS INCOME NOR HAD FURNISHED ANY INACCURATE PARTICULARS OF INCOME. HE HAS FURTHER SUBMITTED THAT THE AO HAS NOT GIVEN ANY CATEGORICAL FINDING THAT THE TRANSACTION WAS NOT GENUINE. THE ADDITION MADE BY THE AO WAS ON ASSUMPTION BASIS. HENCE, THE LEVY OF PENALTY WAS NOT JUSTIFIED. ON THE OTHER HAND, THE LD. D.R. HAS RELIED UPON THE FINDINGS OF THE LOWER AUTHORITIES. 6 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND FROM THE ASSESSMENT ORDER THAT THE ADDITIONS IN RESPECT OF LTCG CLAIM MADE BY THE ASSESSEE WERE MADE BY THE AO FOR W ANT OF PROPER EVIDENCE TO PROVE THE GENUINENESS OF TRANSACTIONS. IN APPEAL BEFORE THE LD. CIT(A) , THE ASSESSEE SUBMITTED THAT THE ITA NO.1093/M/2013 SHRI RAMESHKUMAR D. JAIN 4 TRANSACTIONS WERE CARRIED OUT THROUGH A BROKER AND THE CONTRACT NOTE WAS ISSUED BY THE BROKER IN THIS RESPECT. THE ASSESSEE HAD ALSO FURNISHED THE BILLS ISSUED TO THE ASSESSEE AGAINST THE TRANSACTIONS EXECUTED BY BROKER ON HIS BEHALF. IT WAS ALSO SUBMITTED THAT THE SHARES IN QUESTION WERE PURCHASED IN THE YEAR ENDED ON 31.03.05. IN THE SAME FINANCIAL YEAR , THE ASSESSEE MADE S PECULATIVE PROFIT OF RS.17,847/ - FROM TRADING IN SHARES. THE SAID SHARE PROFIT WAS INVESTED IN PURCHASE OF THE SHARES IN QUESTION WHICH WAS EVIDENT FROM THE PROFIT & LOSS ACCOUNT. THE INVESTMENT IN SHARES WAS SETTLED AGAINST THE SPECULATIVE PROFIT MADE. THE SAID SHARES WERE SOLD IN A.Y. 2006 - 07 AND THE LONG TERM CAPITAL GAINS EARNED WERE SHOWN IN THE RETURN OF INCOME. IT WAS ALSO STATED THAT THE TRANSACTION WAS DONE BEFORE DT.01.10.04, HENCE THE CONDITION OF EXECUTING THE TRANSACTION THROUGH EXCHANGE WA S NOT APPLICABLE TO THE TRANSACTIONS IN QUESTION. THE TRANSACTION WAS AN OFF MARKET TRANSACTION. THE LD. CIT(A) , HOWEVER, DID NOT AGREE WITH THE CONTENTION OF THE ASSESSEE AND HELD THAT THE ASSESSEE COULD NOT PROVE ABOUT THE GENUINENESS OF TRANSACTION RE LATING TO THE PURCHASE OF SHARES IN THE ABSENCE OF SUFFICIENT EVIDENCE. HE, THEREAFTER, HELD THAT ONCE THE PURCHASE OF SHARES WAS HELD AS NON GENUINE, THERE WAS NO REASON FOR HOLDING THE SALES ALSO AS GENUINE, THOUGH THE SAME WERE FOUND HAVING AFFECTED TH ROUGH BANKING CHANNELS AS WELL AS REFLECTED IN ASSESSEES D - MAT ACCOUNT. T HE TRIBUNAL , IN ITS ORD ER DATED 15.06.11 , WHILE DISMISSING THE APPEAL OF THE ASSESSEE IN RELATION TO QUANTUM ASSESSMENT PROCEEDINGS, HAS NOT HELD THAT THE REVENUE HAS BEEN ABLE TO D ISPROVE THE CONTENTIONS OF THE ASSESSEE. THE TRIBUNAL UPHELD THE ADDITIONS MADE BY THE AO HOLDING THAT THE ASSESSEE COULD NOT SATISFACTORILY PROVE THE GENUINENESS OF THE TRANSACTIONS. THE TRIBUNAL FURTHER OBSERVED THAT WHEN VIEWED WITH THE ANGLE OF HUMAN PROBABILITIES , THE CLAIM PUT FORWARD BY THE ASSESSEE OF THE CAPITAL GAINS COULD NOT BE ACCEPTED. HOWEVER, THE FACT REMAINS THAT THE CLAIM OF THE ASSESSEE OF LONG TERM CAPITAL GAINS WAS NOT ALLOWED BECAUSE THE ASSESSEE COULD NOT PROVE ITA NO.1093/M/2013 SHRI RAMESHKUMAR D. JAIN 5 THE SAME BY WAY OF S UFFICIENT POSITIVE EVIDENCE. THE REVENUE COULD NOT PROVE THAT THE CLAIM PUT BY THE ASSESSEE WAS WRONG OR BOGUS. I T HAS BEEN THE CASE OF THE ASSESSEE THAT THE PURCHASE TRANSACTION WAS OFF MARKET TRANSACTION. THE ASSESSEE HAS PRODUCED THE PURCHASE BILL A ND CONTRACT NOTE OF THE BROKER. THERE WAS NO COMPULSION UNDER ANY LAW THAT THE SHARES SHOULD BE HELD ONLY IN D - MAT ACCOUNT FORM. NO EVIDENCE WAS FOUND BY THE REVENUE AUTHORITIES TO SHOW THAT THE PURCHASE OF SHARES IN PHYSICAL FORM WAS WRONG OR ILLEGAL. EVEN NO DOUBT HAS BEEN RAISED BY ANY OF THE LOWER AUTHORITIES REGARDING THE GENUINENESS OF THE SALE TRANSACTIONS OF THE SHARES WHICH ADMITTEDLY HAVE BEEN DONE THROUGH BANKING CHANNEL. MERELY BECAUSE THE BROKER DID NOT TURN UP IN RESPONSE TO THE SUMMONS IS SUED BY THE AO UNDER SECTION 131 OF THE ACT , THAT ITSELF , DID NOT DISPROVE THE FACTUM OF PURCHASE OF SHARES BY THE ASSESSEE THROUGH BROKER. THE ADDITION HAD BEEN MADE IN THE CASE OF THE ASSESSEE ON THE BASIS OF ASSUMPTION THAT THE TRANSACTION OF PURCHASE DID NOT LOOK GENUINE. HOWEVER PENALTY PROCEEDINGS ARE SEPARATE FROM QUANTUM ASSESSMENT PROCEEDINGS. IN THE CASE OF LEVY OF PENALTY , IT SHOULD BE PROVED ON THE FILE THAT THE PARTICULARS FURNISHED BY THE ASSESSEE WERE INACCURATE PARTICULARS OF INCOME OR THA T THERE WAS CONCEALMENT OF INCOME . EVERY CASE OF CONFIRMATION OF DISALLOWANCE CANNOT BE REGARDED AS A CASE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. EVEN IT CANNOT BE SAID THAT THIS CASE OF THE ASSESSEE WAS A CASE OF NO E VIDENCE AT ALL . THE ASSESSEE HAS SUBMITTED EVIDENCE IN THE SHAPE OF CONTRACT NOTE, PURCHASE BILLS, SALE BILLS, BANK STATEMENT, D - MAT ACCOUNT STATEMENT REFLECTING THE SALE OF SHARES ETC. THE EVIDENCE PRODUCED ON THE FILE BY THE ASSESSEE HAS NOT BEEN PROVE D WRONG OR FALSE. T HE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. UPENDRA V. MITHANI ITA (L) NO.1860 OF 2009 DECIDED ON 05.08.2009, HAS OBSERVED IN THE MATTER OF LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT , THAT IF THE ASSESSEE GIVES AN EXPL ANATION WHICH IS UNPROVED BUT NOT DISPROVED I.E. IT IS NOT ACCEPTED BUT CIRCUMSTANCES DO ITA NO.1093/M/2013 SHRI RAMESHKUMAR D. JAIN 6 NOT LEAD TO THE REASONABLE AND POSITIVE INFERENCE THAT THE ASSESSEES CASE IS FALSE, THEN NO PENALTY CAN BE IMPOSED IN SUCH CASES. WHEN THE FACTS OF THE CASE IN HAND ARE CONSIDERED IN THE LIGHT OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. UPENDRA V. MITHANI (SUPRA) , THE LEVY OF PENALTY CANNOT BE HELD TO BE JUSTIFIED IN THIS CASE. THE SAME IS ACCORDINGLY ORDERED TO BE DELETED. IN THE RESU LT, THE APPEAL OF THE ASSESSEE IS HEREBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 03.06. 201 5 . SD/ - SD/ - ( B.R. BASKARAN ) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIA L MEMBER MUMBAI, DATED: 03.06.2015 . * KISHORE , SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.