The Dy. C.I.T.,Central Circle, Agra V. Smt. Smt. Neena Mittal, Agra

ITA 110/AGR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7041 (ITAT-AGRA)
• Duration Of Justice: 1 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 03-05-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 21-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K SHARMA
• Keywords: Share purchase agreement; Set aside
• Section: 143(3); 142(1); 133(6); 147; 131; 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI P.K. BANSAL, ACCOUNTANT MEMBER AND SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO.110/AGR/2010 ASST. YEAR: 2002-03 DY. COMMISSIONER OF INCOME TAX, VS. SMT. NEENA MIT TAL, CENTRAL CIRCLE, AGRA. W/O. SHRI NIRVIKAR NATH MITTAL, 14, LAJPAT KUNJ, AGRA. (PAN : AEHPM 1035 N). (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.K. SHARMA, JR. D.R. RESPONDENT BY : NONE (APPLICATION REJECTED) ORDER PER H.S. SIDHU, J.M. : THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST TH E ORDER DATED 13.01.2010 PASSED BY THE LD. CIT(A)-II, AGRA ON THE FOLLOWING GROUNDS :- 1. THE ORDER OF THE CIT(A) IS PERVERSE IN AS MUCH AS IT IS BASED ON INCORRECT FACT THAT THE TRANSACTION WAS THROUGH A R ECOGNISED BROKER, WHEN THE A.O. HAD CLEARLY MENTIONED IN THE ORDER TH AT THE SAID BROKER WAS DEBARRED BY THE DELHI STOCK EXCHANGE WAY BACK I N 1996. 2. THAT THE CIT(A) ERRED IN LAW IN HOLDING THAT THE ASSESSEE HAD DISCHARGED THE ONUS OF PROVING THE GENUINENESS OF T RANSACTION ONLY BY GIVING THE DETAILS OF THE BANK AND THE CONTRACT NOT E ISSUED BY A DEBARRED BROKER. 3. THAT THE ORDER OF THE LD. CIT(A), AGRA BEING ERR ONEOUS IN LAW AND ON FACTS BE VACATED AND THE ORDER OF THE A.O. B E RESTORED. 2 4. THAT THE APPELLANT CRAVES LEAVE TO AMEND THE GRO UNDS OF THE APPEAL STATED ABOVE, AS AND WHEN NEED FOR DOING SO ARISE. 2. THE ASSESSEE FILED HER RETURN OF INCOME ON 22.07 .2002 DECLARING INCOME OF ` 8,23,947/-, THE SAME WAS PROCESSED ON 20.12.2002. THE ASSESSING OFFICER REOPENED THE CASE OF THE ASSESSEE BY ISSUING A NOTI CE UNDER SECTION 148 OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) DATED 30.03.2005 ON THE BASIS OF SOME INFORMATION. IN RESPONSE TO THE SAME, THE ASS ESSEE FILED RETURN ON 24.05.2005 DECLARING THE SAME INCOME. IN THE RETURN, THE ASSE SSEE HAS SHOWN INCOME FROM LONG TERM CAPITAL GAINS (LTCG) AMOUNTING TO ` 6,50,842/- ON SALE OF 7300 SHARES OF M/S. K.R.S. FINANCIAL LIMITED THROUGH THE BROKER M/S. S.K. GARG & CO. WHICH WAS PURCHASED ON 12.07.1998 FOR ` 55,630/- AND SOLD ON 09.06.20011 FOR ` 7,07,888/-. A NOTICE UNDER SECTION 142(1) OF THE A CT DATED 02.09.2005 ALONG WITH QUESTIONNAIRE WAS ISSUED TO THE ASSESSEE. IN RESPO NSE TO THE SAME, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED AND FILED CERTAIN OBJECTIONS REGARDING ISSUANCE OF NOTICE UNDER SECTION 148 OF T HE ACT WHICH WAS DECIDED BY THE ASSESSING OFFICER BY OBSERVING THAT THE ACTION UNDER SECTION 148 HAS BEEN TAKEN IN VIEW OF NON-GENUINENESS OF THE BROKER AND SALE OF SHARES, AND NOT ON THE BASIS OF REFERENCE OF CASES OF BAIJ NATH AND OTHERS . THE ASSESSEE ALSO FILED REPLY TO THE QUESTIONNAIRES, BUT SHE HAS NOT FILED THE COMPL ETE DETAILS AS REQUIRED BY THE ASSESSING OFFICER REGARDING PURCHASE AND SALE OF SH ARES IN DISPUTE. THE ASSESSING 3 OFFICER ISSUED NOTICES AND SUMMONS TO THE BROKER WH ICH HAVE BEEN RECEIVED BACK UNSERVED WITH THE REMARK OF POSTAL AUTHORITIES LEF T WITHOUT ADDRESS. NO CONFIRMATION OF THE DRAFTS RECEIVED FROM THE BANK H AS BEEN FILED BY THE ASSESSEE. THE ASSESSING OFFICER RECEIVED INFORMATION FROM STO CK EXCHANGE OF DELHI VIDE THEIR LETTER NO.DSE/L&S/GEN/6/2738 DATED 29.09.2005 WHICH REVEALED THAT THE BROKER M/S. S.K. GARG & CO. WAS DECLARED DEFAULTER W.E.F. 23.10.1996 AND DEBARRED FROM MAKING SHARE TRANSACTIONS. THE ASSES SING OFFICER ISSUED NOTICE UNDER SECTION 142(1) OF THE ACT ALONG WITH INFORMAT ION RECEIVED ON ENQUIRIES, FIXING THE DATE ON 18.10.2005. IN RESPONSE TO THE SAME, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED, BUT HAS NO T COMPLIED WITH THE NOTICE ISSUED UNDER SECTION 142(1) OF THE ACT. THE ASSESS ING OFFICER DIRECTED HIM TO FILE COMPLETE REPLY OF THE QUESTIONNAIRE AND TO PRODUCE THE BROKER M/S. S.K. GARG & CO., DELHI WITH BOOKS OF ACCOUNTS, BANK PASS BOOK A ND OTHER EVIDENCES IN SUPPORT OF SHARE TRANSACTIONS. BESIDES, THE ASSESSEE WAS A LSO REQUIRED TO FURNISH COMPLETE ADDRESS OF THE PURCHASER OF SHARES AND TO PRODUCE H IM WITH HIS BANK PASS BOOKS AND A CERTIFICATE FROM HIM PROVING THE PURCHASE OF SHARES OF THE ASSESSEE AND ALSO TO FURNISH A CERTIFICATE FROM THE COMPANY PROVING T HE SALE OF SHARES. FOR THE COMPLIANCE OF THE SAME, THE ASSESSING OFFICER FIXED THE CASE FOR HEARING ON 23.09.2005, BUT NONE ATTENDED ON BEHALF OF THE ASSE SSEE ON THAT DATE. THE ASSESSING OFFICER PROPOSED TO INITIATE THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(B) OF THE ACT FOR THE DEFAULT. THE ASSESSIN G OFFICER ALSO MADE ENQUIRY 4 FROM THE DELHI STOCK EXCHANGE ABOUT M/S. S.K. GARG & CO, DELHI AND M/S. K.R.S. FINANCIAL SERVICES LIMITED BY ISSUING NOTICE UNDER SECTION 133(6) OF THE ACT AND SUMMON UNDER SECTION 131 OF THE ACT WHICH RECEIVED BACK UNSERVED WITH THE REMARK LEFT. THE ASSESSING OFFICER ALSO RECEIVED INFORMATION DECLARING M/S. S.K. GARG & CO. AS DEFAULTER AND DEBARRED FROM MAKI NG SHARE TRANSACTIONS W.E.F. 23.10.1996 AND THE SAME WAS FURNISHED TO THE ASSESS EE ALSO. THE ASSESSEE HAS ALSO FILED A REPLY BY MERELY STATING THAT SHE HAD NO CON CERN AGAINST THE BROKER TO GO DEEPLY WHEN TRANSACTION WAS MADE AND ON JUNE 2001 H ER SHARE WAS PURCHASED/SOLD IN MARKET AND HENCE SHE DID NOT GO DEEPLY. LASTLY, NEITHER EVIDENCE IN SUPPORT OF SHARE TRANSACTION WAS FILED NOR BROKER HAS BEEN PRO DUCED. AFTER CONSIDERING THE REPLY FILED BY THE ASSESSEE AS WELL AS SOME DOCUMEN TARY EVIDENCES, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT IN DISPUTE BY HOLD ING THAT THE AMOUNT IN DISPUTE RECEIVED BY THE ASSESSEE BY CHEQUE, THE ASSESSEE CO ULD NOT PROVE THE GENUINENESS OF THE TRANSACTION NOR THE ASSESSEE HAS PRODUCED TH E BROKER INSPITE OF VARIOUS OPPORTUNITIES GIVEN AND LASTLY, ON THE BASIS OF INF ORMATION COLLECTED BY THE DEPARTMENT, THE ASSESSING OFFICER MADE THE ENTIRE D RAFT AMOUNT OF ` 7,06,472/- RECEIVED FROM SALE OF SHARES AND TREATED THE SAME A S INCOME FROM UNDISCLOSED AND UNEXPLAINED SOURCES AND ADDED TO THE INCOME OF THE ASSESSEE UNDER SECTION 68 OF THE ACT VIDE ORDER DATED 21.10.2005 PASSED UNDER SE CTION 143(3) READ WITH SECTION 147 OF THE ACT. AGGRIEVED BY THE SAME, THE ASSESSE E FILED APPEAL BEFORE THE LD. FIRST APPELLATE AUTHORITY WHO, VIDE THE IMPUGNED OR DER DATED 13.01.2010, PARTLY 5 ALLOWED THE APPEAL OF THE ASSESSEE BY DELETING THE ADDITION IN DISPUTE. NOW, THE REVENUE HAS FILED THE PRESENT APPEAL, AGGRIEVED BY THE IMPUGNED ORDER. 3. AT THE TIME OF HEARING, THE LD. DEPARTMENTAL REP RESENTATIVE REITERATED THE AVERMENTS MADE IN THE GROUNDS OF APPEAL AND THE ORD ER PASSED BY THE ASSESSING OFFICER. ON A PERUSAL OF THE RECORDS, WE HAVE SEEN THAT THIS OFFICE HAS ISSUED NOTICE BY REGISTERED POST ACKNOWLEDGEMENT DUE TO THE ASSES SEE ON THE ADDRESS GIVEN IN COLUMN 11 OF FORM NO.36. IN RESPONSE TO THE SAME, SHRI TARUN KANT, ADVOCATE, FILED APPLICATION REQUESTING FOR ADJOURNMENT ON THE GROUND THAT HE IS ALREADY BUSY FROM 01.05.2011 TO 20.05.2011 AT BOMBAY. THEREFORE , HE IS NOT AVAILABLE IN AGRA ON 03.05.2011 I.E. TODAY AND REQUESTED FOR ADJOURNM ENT. ON A PERUSAL OF THE APPEAL RECORD, WE FOUND THAT THE ASSESSEE HAS NOT AUTHORIZ ED SHRI TARUN KANT, ADVOCATE TO PROSECUTE THE MATTER IN DISPUTE BECAUSE NO AUTHORIZ ATION IS AVAILABLE ON RECORD. IN ABSENCE OF THE SAME, WE ARE UNABLE TO CONSIDER THE REQUEST OF SHRI TARU KANT, ADVOCATE. THEREFORE, THE APPLICATION IS REJECTED, BEING NOT AUTHORIZED AS REQUIRED UNDER LAW. 4. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES O F THE PRESENT CASE AND THE ARGUMENTS ADVANCED BY THE LD. DEPARTMENTAL REPRESEN TATIVE, AS STATED IN THE GROUNDS OF APPEAL REPRODUCED ABOVE, WE ARE OF THE C ONSIDERED OPINION THAT THE LD. FIRST APPELLATE AUTHORITY HAS WRONGLY DELETED THE A DDITION IN DISPUTE WITHOUT ANY 6 BASIS, ESPECIALLY WHEN THE ASSESSEE COULD NOT PRODU CE THE BROKER M/S. S.K. GARG & CO., DELHI WITH THE OTHER RELEVANT RECORDS AS DIREC TED BY THE ASSESSING OFFICER. WE HAVE SEEN THAT THE ASSESSING OFFICER HAD GIVEN VARI OUS OPPORTUNITIES TO THE ASSESSEE TO PRODUCE THE BROKER M/S. S.K. GARG & CO. WITH BOOKS OF ACCOUNTS, BANK PASS BOOK AND OTHER EVIDENCES IN SUPPORT OF THE SHA RE TRANSACTION. IT WAS ALSO REQUIRED FROM THE ASSESSEE TO FURNISH COMPLETE ADDR ESS OF THE PURCHASER OF SHARES AND TO PRODUCE HIM WITH HIS BANK PASS BOOKS AND A C ERTIFICATE FROM HIM PROVING PURCHASE OF SHARES OF THE ASSESSEE AND ALSO TO FURN ISH A CERTIFICATE FROM THE COMPANY PROVING SALE OF SHARES. BUT THE ASSESSEE H AS NOT FURNISHED ANY EVIDENCE AS REQUIRED BY THE ASSESSING OFFICER. WE HAVE ALSO SEEN THAT THE ASSESSING OFFICER ISSUED NOTICE TO THE BROKER M/S. S.K. GARG & CO. WH ICH HAS BEEN RECEIVED BACK UNSERVED WITH THE REMARK LEFT. ON THE OTHER HAND , THE ASSESSING OFFICER WAS IN POSSESSION OF A VERY IMPORTANT INFORMATION OF DECLA RING M/S. S.K. GARG & CO. AS DEFAULTER AND DEBARRED FROM MAKING SHARE TRANSACTIO NS W.E.F. 23.10.1996. IT IS ALSO A MATTER ON RECORD THAT THE ASSESSEE HAS PURCHASED THE SHARES IN DISPUTE FROM M/S. S.K. GARG & CO. ON 12.07.1998 FOR ` 55,630/- AND SOLD ON 09.06.2001 FOR ` 7,07,888/-. THE ASSESSING OFFICER, HAVING DOUBT IN MIND ON THE BASIS OF THIS INFORMATION, MADE THE ADDITION IN DISPUTE, BUT, THE LD. FIRST APPELLATE AUTHORITY HAS DELETED THE SAME, WITHOUT CONSIDERING THESE RELEVAN T INFORMATION, BY FOLLOWING SOME DECISION OF I.T.A.T. BENCHES. FOR THE SAKE OF CONVENIENCE, THE RELEVANT PORTION OF THE ORDER OF THE LD. FIRST APPELLATE AUT HORITY IS REPRODUCED AS UNDER :- 7 I HAVE PERUSED THE ASSESSMENT ORDER, WRITTEN ARGUM ENTS, REPORT OF THE AO U/S 250(4), REJOINDER OF THE APPEL LANT, THE LEGAL PRECEDENTS CITED, THE ORDERS PASSED BY THE HON'BLE ITAT, AGRA IN CASES CITED BY THE AR, AND ALSO CONSIDERED THE ORAL PLEADING OF THE AR FOR THE APPELLANT, IN MY OPINION, THE APPELLANT DES ERVES TO SUCCEED. THE SHORT QUESTION FOR CONSIDERATION WAS WHETHER TH E EVIDENCE PRODUCED BY THE ASSESSEE WAS SUFFICIENT TO DISCHARG E THE INITIAL ONUS OF PROVING THE GENUINENESS OF THE SHARE TRANSACTION . THE ASSESSING OFFICER HAS PLACED NO MATERIAL ON RECORD AGAINST TH E ASSESSEE FROM WHICH IT CAN BE INFERRED THAT THE TRANSACTION OF PU RCHASE AND SALES OF SHARES ENTERED INTO BY THE ASSESSEE WERE EITHER BOG US OR ACCOMMODATION ENTRY. AS REGARDS THE OBSERVATIONS OF THE ASSESSING OFFICER THAT THE APPELLANT COULD NOT PRODUCE THE BR OKER AND THE PURCHASER OF THE SHARES WHICH MADE HIM TREAT THE CA PITAL GAIN AS THE UNEXPLAINED MONEY IS MERELY HIS OWN BELIEF AND HAS NO BASIS. APPELLANT ALONG WITH THE RETURN OF HIS INCOME HAD M ADE COMPLETE DISCLOSURE OF THE CAPITAL GAIN ON THE SALES OF THES E SHARES. ALL THE CIRCUMSTANCES AND HUMAN PROBABILITIES ARE IN FAVOUR OF THE APPELLANT, THE AO HAS NOT POINTED OUT A SINGLE DEFECT IN THE D OCUMENTS/EVIDENCE SUBMITTED BY THE APPELLANT IN RELATION TO THE SALES /PURCHASE TRANSACTIONS. IN THESE CIRCUMSTANCES OF THE CASE WH EN THE ASSESSEE IS IN POSSESSION OF 7300 EQUITY SHARES OF THE COMPANY THEN THESE SHARES HAVE TO BE SOLD TO SOME PERSON AND THE ASSESSEE HAD DONE THE SAME BY SELLING THE SHARE THROUGH A BROKER OF A RECOGNIZED STOCK EXCHANGE. THE APPELLANT HAD DISCHARGED HIS ONUS BY PROVIDING THE DOCUMENTS/EVIDENCE IN RELATION TO THE IDENTITY OF T HE BROKER AND THE GENUINENESS OF THE TRANSACTION. THE AO HAS NOT BROU GHT EVIDENCE TO SHOW THAT SUCH CAPITAL GAIN WAS A SHAM TRANSACTION AND HAS NOT PROVED ANY LINKAGE WITH THE TRANSACTION OF THE ASSE SSEE, WHICH COULD FURTHER PROVE THAT THE ASSESSEE'S TRANSACTIONS WERE BOGUS OR MERELY AN ENTRY. NO EFFORTS WERE MADE TO SHOW THAT THE MONEY FROM THE APPELLANT TO THE BROKER HAS NOT CHANGED HANDS. IT WAS ALSO NO T ESTABLISHED BY THE AO HOW THE ALLEGED CAPITAL GAIN WAS THE UNEXPLA INED MONEY OF THE APPELLANT IRRESPECTIVE OF THE FACT THAT THE COMPLET E DISCLOSURE WAS MADE IN THE RETURN OF INCOME. ON THE OTHER HAND APP ELLANT HAS SUBMITTED THE CONTRACT NOTE OF BROKERS, SALE AND PU RCHASE BILLS OF THE BROKERS, COPIES OF THE SHARE CERTIFICATES ETC. WHIC H THE ASSESSING OFFICER NEVER REBUTTED IN ORDER TO PROVE THEY ARE F ALSE OR UNTRUE. THE AGRA BENCH OF HON'BLE ITAT IN THE CASE OF ASHOK KUM AR AGARWAL IN ITA NO.129/AG/2004 DATED 3.4.2006 IN THE SIMILAR CI RCUMSTANCES HAVE CANCELLED THE ADDITION OF LONG TERM CAPITAL GAINS O N THE SIMILAR FACTS. 8 ALSO, HON'BLE ITAT AGRA BENCH AGRA ON THE IDENTICAL FACTS IN THE CASE OF VINEET KHERA AND MEMO DEVI ON 14.3.2008 AND OTHE R CASES HAVE ACCEPTED SUCH LONG TERM CAPITAL GAINS. FURTHER, HON 'BLE P&H HIGH COURT IN THE CASE OF CIT VS ANUPAM GUPTA REPORTED I N 166 TAXMANN 178 ON THE SIMILAR FACTS AND CIRCUMSTANCES TREATED THE LONG TERM CAPITAL GAIN ON THE SALES OF SHARES AS GENUINE. APP ELLANT VIDE HIS REJOINDER WHICH IS ON RECORD PROVIDED THE COPY OF T HE ORDER OF THE HON'BLE ITAT AGRA BENCH AGRA IN THE CASE OF SHRI. A SHOK KUMAR LAVANIA ITA 112/AGRA/2004 WHEREIN HON'BLE AGRA BENC H VIDE ITS ORDER DATED 30/05/2008 HAS UPHELD THE MODUS OPERAND I AND ALSO CONFIRMED THE LONG TERM CAPITAL GAIN ON THE SALE OF SHARES AS GENUINE. NO ADVERSE INFERENCE HAS BEEN DRAWN BY THE HON'BLE BENCH. SIMILARLY IN THE PRESENT CASE I FIND NO DEFECT IN SHARE TRANS ACTIONS BEING MADE BY THE APPELLANT AND AS SUCH NO ADVERSE INFERENCE I S DRAWN. APPELLANT HAD DONE THE SAME AS WOULD BE DONE BY ANY PERSON WITH A PRUDENT MIND IN ORDER TO SELL HIS COMMODITY. IT IS EVIDENT FROM THE RECORD THAT THE AO FAILED TO ESTABLISH THE NEXUS BE TWEEN THE SALE PROCEEDS OF THE SHARES AND SO CALLED UN-ACCOUNTED M ONEY OF THE APPELLANT WHICH ACCORDING TO HIM IS MERE A BOGUS EN TRY TAKEN FROM THE BROKER. NEITHER THE STATEMENT OF THE BROKER OR ANY OTHER DOCUMENTARY EVIDENCE IS ON RECORD FROM WHICH IT COU LD BE ESTABLISHED THAT THE APPELLANT HAD TAKEN ENTRY. THUS IN VIEW OF THE ABOVE POSITION OF FACTS AND THE LAW, I HOLD THAT ON MERIT, THE ADD ITION OF ` 7,06,472/- IS WHOLLY UNJUSTIFIED AND IS HEREBY DELETED. AO IS ALSO DIRECTED TO SET OFF PURCHASE PRICE OF SHARES AMOUNTING TO ` 55,630/- AGAINST THE GROSS RECEIPTS OF ` 7,07,888/- RECEIVED. THUS, GROUND NO.1 & 4 ARE ALLOWED. 5. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES O F THE PRESENT CASE, AND THE ORDER PASSED BY THE ASSESSING OFFICER AS WELL AS T HE IMPUGNED ORDER PASSED BY THE LD. FIRST APPELLATE AUTHORITY, WE ARE OF THE CONSID ERED OPINION THAT IN THE INTEREST OF JUSTICE, WE SHOULD GIVE MORE OPPORTUNITY TO THE ASSESSEE FOR SUBSTANTIATING THE CLAIM IN DISPUTE BEFORE THE ASSESSING OFFICER. THE REFORE, WE SET ASIDE THE ISSUE IN DISPUTE TO THE ASSESSING OFFICER TO DECIDE THE SAME AFRESH UNDER LAW, AFTER GIVING 9 OPPORTUNITY TO THE ASSESSEE FOR SUBSTANTIATING HER CLAIM BEFORE THE ASSESSING OFFICER. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S ALLOWED FOR STATISTICAL PURPOSE. (ORDER PRONOUNCED IN THE OPEN COURT ON 03.05.2011 ). SD/- SD/- (P.K. BANSAL) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE: AGRA DATE: 3 RD MAY, 2011 PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR, ITAT, AGRA BENCH, AGRA 6. GUARD FILE ASSISTANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL, AGRA TRUE COPY