The Asstt. Commissioner of Income-tax, Jalandhar V. Sh. Hitesh Gandhi, Nawanshahr

ITA 129/ASR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0504 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 29-06-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 05-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHAWANI SHANKAR
• Assessee Lawyers: BHAGAT; RAJINDER CHOPRA
• Keywords: Search and seizure; Cost of acquisition
• Section: 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER (CAMP AT JALANDHAR) I.T.A NO. 129(ASR)/2014 ASSESSMENT YEAR: 2008-09 ASST. CIT, CENTRAL CIRCLE-II, JALANDHAR. VS. SH. HITESH GANDHI, BHATTI COLONY, CHANDIGARH ROAD, NAWANSHAHR. PAN:ADVPG2336H (APPELLANT) (RESPONDENT) APPELLANT BY: SH. BHAWANI SHANKAR (DR ) RESPONDENT BY: SH. M. R. BHAGAT & SH. RAJINDER CHOPRA (CA) DATE OF HEARING: 29.06.2016 DATE OF PRONO UNCEMENT: 20.07.2016 ORDER PER T. S. KAPOOR (AM): THIS IS AN APPEAL FILED BY REVENUE AGAINST THE OR DER OF LEARNED CIT(A), LUDHIANA, DATED 30.12.2013, FOR ASST. YEAR: 2008-09. 2. THE REVENUE HAS TAKEN FOUR GROUNDS OF APPEAL, HO WEVER, THE CRUX OF GROUNDS OF APPEAL IS ACTION OF LEARNED CIT(A), B Y WHICH HE HAD DELETED THE ADDITION OF RS.2,78,26,685/- WHICH THE ASSESSIN G OFFICER HAD MADE ON ACCOUNT OF DENIAL OF LONG TERM CAPITAL GAIN. 3. THE BRIEF FACTS OF THE CASE AS NOTED IN THE ASSE SSMENT ORDER ARE THAT THE CASE OF THE ASSESSEE WAS REOPENED U/S 153A AFTER SEARCH TOOK PLACE IN THE PREMISES OF ASSESSEE. DURING ASSESSMEN T PROCEEDINGS U/S 153A, THE ASSESSING OFFICER OBSERVED THAT ASSESSEE HAD DECLARED A CAPITAL ITA NO. 129 (ASR)/2014 ASST. YEAR: 2008-09 2 GAIN TO THE TUNE OF RS.2,78,26,685/- ON ACCOUNT OF LONG TERM CAPITAL GAIN ON ACCOUNT SALE OF 1 LAKH SHARES OF GEEFCEE FINANC E LTD. THE ASSESSING OFFICER DOUBTED THE CLAIM OF ASSESSEE REGARDING LON G TERM CAPITAL GAIN AND RECORDED THE REPLY OF ASSESSEE WITH REGARD TO V ARIOUS QUESTIONS IN THE ASSESSMENT ORDER. FROM THE REPLY OF ASSESSEE RE CORDED IN ASSESSMENT ORDER THE ASSESSING OFFICER OBSERVED THAT ASSESSEE WAS NOT ABLE TO GIVE REPLY AS TO WHY THE SHARES WERE PURCHASED AND HOW T HE SHARES HAD RISEN SO MANY TIMES AND THEREFORE, HE HELD THE CAPITAL GA IN CLAIMED BY ASSESSEE WAS BOGUS AND MADE ADDITION ACCORDINGLY BY RECORDING THE FOLLOWING FINDINGS. IT CAN BE NOTED FROM THE ABOVE REPLIES THAT THE AS SESSEE HAS NOT BEEN ABLE TO FILE SATISFACTORY REPLIES TO THE QUESTIONS LIKE WH Y THE SHARES WERE PURCHASED OR THE FUTURE RISE IN THE VALUE OF THE SHARES. THE OTHER QUESTIONS WERE ALSO NOT REPLIED SATISFACTORILY, AND ARE INCONCLUSIVE. THIS, THE DES PITE THE FACT THAT THE ASSESSEE HAS BEEN INTO THE SALE & PURCHASE BUSINESS OF SHARES FO R THE LAST 30 YEAR AS CLAIMED, NO JUSTIFICATION PUT FORTH, IN SUPPORT OF BONAFIDE TRA NSACTION AND THE ANSWER TO THE 24 QUESTIONS ASKED. THE MOOT POINT TO BE NOTED IN THIS CASE IS THAT THO UGH THE ASSESSEE HAS STATED THAT THE AMOUNT PAID OF RS. 11 LAKHS WAS IN CASH OU T OF CASLI IN HAND AVAILABLE, HE HAS NOT FILED ANY EVIDENCE OF THIS CASH BEING HELD AS C ASH IN HAND. FURTHER, NO STATEMENT OF ACCOUNT OR CASH BOOK HAS BEEN PRODUCED, IN SUPPO RT OF THE SOURCE OF THE CASH OF RS.L 1,00,000/-. FROM THIS IT CAN ONLY BE DEDUCED T HAT, THERE WAS ACTUALLY NO CASH IN HAND BUT THE INVESTMENT IN SHARES IS ACTUALLY A SH AM TRANSACTION WHERE THE PURCHASE IS NOT GENUINE LEADING TO CREATION OF ACCO MMODATION ENTRY CAUSING UNDUE CAPITALIZATION. IN VIEW OF THE ABOVE, THEREFORE, THE TRANSACTION IS BEING TREATED AS NON- GENUINE AND THE CAPITAL GAIN IS BEING ADDED BACK TO THE INCOME OF THE ASSESSEE. THE AMOUNT BEING ADDED BACK WHICH IS RS. 2,78,26,685A IS WORKED OUT AS UNDER:- COST OF 1 LAKH SHARES @ RS. 11 PER SHARE = 110000 0 INDEXED COST OF THE SHARES FOR THE YEAR UNDER CONSI DERATION = 1167821 SALES CONSIDERATION = 28994516 BALANCE CAPITAL GAINS BEING ADDED BACK TO THE INCOM E = 27826685 AS PER ABOVE DISCUSSION AND THE MATERIAL AVAILABLE ON RECORD, THE INCOME OF THE ASSESSEE IS DETERMINED AS UNDER: ITA NO. 129 (ASR)/2014 ASST. YEAR: 2008-09 3 RETURNED INCOME = 4642140 ADD:- ADDITION AS DISCUSSED IN PARA 3(A) =27468825 ASSESSED INCOME =32468825 (ROUNDED OFF) =32468830 4. AGGRIEVED WITH THE ADDITION THE ASSESSEE FILED A PPEAL BEFORE LEARNED CIT(A) AND SUBMITTED VARIOUS SUBMISSIONS. THE LEARN ED CIT(A) AFTER NOTING VARIOUS SUBMISSIONS OF ASSESSEE DELETED THE ADDITION BY HOLDING AS UNDER: 7. I HAVE CONSIDERED THE FACTS OF THE CASE, THE BA SIS OF ADDITION MADE BY THE ASSESSING OFFICER, THE ARGUMENTS OF THE AR DURI NG THE ASSESSMENT AS WELL AS APPELLATE PROCEEDINGS AND THE COMMENTS OF T HE ASSESSING OFFICER IN THE REMAND REPORT. IT IS SEEN THAT THE IMPUGNED PURCHASE OF SHARES ALLEGEDLY EFFECTED IN THE F.Y.2006-07 FOR AN AMOUNT OF RS.11 LAKHS AND THE SAID SHARES HAD BEEN PHYSICALLY TRANSFERRED IN FAVO UR OF THE APPELLANT IN THE BOOKS OF THE LISTED COMPANY NAMELY GEEFCEE FINA NCE LTD. FURTHER THE SAID SHARES GOT DEMATERIALIZED AND WERE CREDITED IN THE ASSESSEES ACCOUNT MAINTAINED WITH DEPOSITORY PARTICIPANT I.E. HDFC ON 16.10.2006. FURTHER, DIVIDEND AMOUNTING TO RS. 1,50,000/- HAS B EEN DECLARED AND RECEIVED WITH RESPECT TO AFOREMENTIONED HOLDING OF SHARES ON 23.10.2007 AND THE SAID DIVIDEND HAD BEEN DISCLOSED BY THE ASS ESSEE IN THE RETURN OF INCOME AND CLAIMED EXEMPT ACCORDINGLY. IT IS ALSO T O BE NOTED THAT THE SAID DIVIDEND HAD BEEN ACCEPTED AS EXEMPT BY THE ASSESSI NG OFFICER FOR THE YEAR UNDER CONSIDERATION. THE ONLY LOGICAL CONCLUSI ON THAT CAN BE MADE FROM THE SEQUENTIAL PERUSAL OF THE ABOVE DETAILED F ACTS IS THAT THE IMPUGNED SHARES WERE ACTUALLY PURCHASED BY THE ASSE SSEE ON GIVEN DATES AS THESE STAND REFLECTED IN THE D'MAT ACCOUNT MAINT AINED WITH FIDFC BANK. THE DIVIDEND DECLARED ON THE SAME HAS BEEN RE CEIVED AND CREDITED IN ASSESSEE'S BANK ACCOUNT WHICH IS FURTHER FOUND R ECORDED IN THE INCOME TAX RETURN AND ALLOWED AS EXEMPT BY THE ASSESSING O FFICER. AS AGAINST THIS CLEAR DOCUMENTARY EVIDENCE IN FAVOUR OF THE AP PELLANT, THE ASSESSING OFFICER HAS MERELY REJECTED THE CONTENTION OF PURCH ASE ON THE BASIS OF SUSPICION ARISING OUT OF RECKLESS/CASUAL REPLIES GI VEN TO VARIOUS QUESTIONS RAISED BY THE ASSESSING OFFICER IN THE ASSESSMENT P ROCEEDINGS. IT IS IMPORTANT TO APPRECIATE HERE THAT THE ASSESSEE HAD BEEN SUBJECTED TO SEARCH AND SEIZURE PROCEEDINGS UNDER SECTION 132 OF THE INCOME TAX ACT, 1961 AND THE SEARCH PROCEEDINGS DID NOT LEAD TO REC OVERY OF ANY INCRIMINATING EVIDENCE TO SHOW THAT THE TRANSACTION OF PURCHASE OF SHARES WAS ARRANGED AS SUSPECTED BY THE ASSESSING OFFICER. IT IS ALSO SEEN THAT NO POST SEARCH ENQUIRIES ON THE ISSUE HAD BEEN COND UCTED IN THE FORM OF RECORDING THE STATEMENT OF BROKER SO AS TO BRING ON RECORD ANY EVIDENCE OF THE SAID TRANSACTION BEING AN ACCOMMODATION ENTRY. THIS IS TO MEAN THAT JUST BECAUSE ASSESSEE HAS BEEN FOUND TO BE EARNING HUGE AMOUNTS OF LONG TERM CAPITAL GAIN ON SALE OF SHARES, THE SAME HAS B EEN HELD TO BE SHAME ITA NO. 129 (ASR)/2014 ASST. YEAR: 2008-09 4 TRANSACTION MERELY ON THE GROUND OF SAME BEING UNLI KELY IN THE GIVEN CIRCUMSTANCES. THE ASSESSING OFFICER, IN THE REMAND REPORT HAS NOT BEEN ABLE TO CONTRADICT ANY OF THE FACTS REGARDING PURCH ASE OF SHARES HIGHLIGHTED ABOVE OR REGARDING THE SALE OF SHARES A ND HAS NOT PROGRESSED BEYOND THE STAGE OF SUSPICION. IT IS FURTHER SEEN T HAT THE SHARES HAD BEEN SOLD FOR AN AMOUNT OF RS.2,91,32,850/- AND HAS BEEN DEBITED TO ASSESSEE'S D'MAT ACCOUNT MAINTAINED WITH D/P, HDFC. IT IS ALSO SEEN THAT STT HAS BEEN PAID ON THE SALE OF SHARES AND SAID SH ARES HAD BEEN SOLD THROUGH NATIONAL STOCK EXCHANGE. IT IS ALSO SEEN TH AT THE ASSESSING OFFICER WHILE WORKING OUT THE ADDITION HAS ALLOWED INDEXATI ON ON THE COST OF PURCHASE OF SHARES TILL THE DATE OF SALE AND HAS IN DEXATION ON THE COST OF PURCHASE OF SHARES TILL THE DATE OF SALE AND HAS IN FACT WORKED OUT THE CAPITAL GAIN ONLY TO MAKE THE IMPUGNED ADDITION. I AM OF THE VIEW THAT THERE IS NO EVIDENCE ON RECORD, GATHERED DURING THE COURSE OF SEARCH PROCEEDINGS OR DURING THE COURSE OF POST SEARCH INV ESTIGATION OR ASSESSMENT PROCEEDINGS TO HOLD THE VIEW THAT THE EN TIRE TRANSACTION OF PURCHASE/SALE OF SHARES EFFECTED OVER A PERIOD OF T WO YEARS WAS A SHAM TRANSACTION. THE ADDITION BEING WITHOUT ANY LOGICAL BASIS IS DIRECTED TO BE DELETED. 5. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US. 6. AT THE OUTSET, THE LEARNED DR SUBMITTED THAT THE PURCHASE OF SHARES DECLARED BY ASSESSEE WAS BOGUS AND ALSO THE SALES DECLARED BY ASSESSEE WERE BOGUS AS THE SHARES WERE RARELY TRADE D AT THE STOCK EXCHANGE AND IN A SHORT PERIOD OF TIME THE VALUE OF SHARES HAD RISES UNREASONABLY FROM RS10/- TO RS.200/- AND THEREFORE, ASSESSING OFFICER HAD RIGHTLY MADE THE ADDITION. 7. THE LEARNED AR, ON THE OTHER HAND, SUBMITTED THA T ASSESSEE HAD PURCHASED SHARES IN THE PHYSICAL FORM AND THE SHARE S WERE GOT DEMATERIALIZED AND WERE CREDITED TO THE DEEMAT ACCO UNT OF ASSESSEE WITH HDFC BANK, THEREFORE, THE ARGUMENTS OF LEARNED DR T HAT THE SHARES WERE BOGUS DO NOT HOLD ANY GROUND. THE LEARNED AR S UBMITTED THAT ASSESSEE HAD RECEIVED DIVIDEND ALSO ON THESE SHARES WHICH IS APPARENT ITA NO. 129 (ASR)/2014 ASST. YEAR: 2008-09 5 FROM THE FINDINGS OF LEARNED CIT(A) AND HE HEAVILY PLACED HIS RELIANCE ON THE ORDER OF LEARNED CIT(A). 8. WE HEAVE HEARD THE RIVAL PARTIES AND HAVE GONE T HROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE ASSESSE E HAD PURCHASED SHARES IN THE MONTH OF APRIL/ MAY, 2006 AS NOTED BY THE LEARNED CIT(A) IN HIS ORDER AT PAGE-4. THE SHARES WERE PURCHASED I N ASST. YEAR 2006-07. FURTHER THE SHARES WERE GOT DEMATERIALIZED AND THE SAME WERE CREATED IN THE ACCOUNT OF ASSESSEE MAINTAINED WITH HDFC BANK. THE ASSESSEE ALSO RECEIVED DIVIDEND ON SUCH SHARES ON 23.10.2007 AND SUCH DIVIDEND WAS CLAIMED AS EXEMPT AND ASSESSING OFFICER DID NOT RAI SE ANY OBJECTION AGAINST THE CLAIM OF SUCH DIVIDEND. THE LEARNED CIT (A) HAS NOTED IN HIS ORDER THAT IN THE REMAND REPORT ASSESSING OFFICER W AS NOT ABLE TO CONTRADICT ANY OF THE FACTS REGARDING PURCHASE OF S HARES AND REGARDING SALE OF SHARES. IT IS FURTHER OBSERVED THAT ASSESSE E HAD PAID STT ON THE SALE OF SUCH SHARES AND THIS FACT HAS BEEN NOTED BY LEARNED CIT(A) IN HIS ORDER. FURTHER, WE FIND THAT WHILE MAKING OUT THE A DDITION ON ACCOUNT OF CAPITAL GAIN THE ASSESSING OFFICER HIMSELF GAVE CRE DIT TO ASSESSEE FOR INDEXED COST OF ACQUISITION TO THE EXTENT OF RS.11, 67,821/- TAKING THE PURCHASE PRICE AT RS.11,00,000/-. FURTHER, WE FIND THAT ASSESSEE HAD SOLD SHARES THROUGH MTL SHARES AND STOCK BORKERS LT D. AS IS NOTED BY ASSESSING OFFICER IN REPLY TO QUESTION NO.24 WHICH IS A SEBI REGISTERED STOCK BROKER. FURTHERMORE THE PAYMENT FOR SALE OF S HARES WAS RECEIVED THROUGH BANKING CHANNELS. ALL THESE DOCUMENTARY EVI DENCES IN FAVOUR OF ITA NO. 129 (ASR)/2014 ASST. YEAR: 2008-09 6 THE ASSESSEE WERE REJECTED BY ASSESSING OFFICER MER ELY ON THE BASIS OF SOME CASUAL REPLIES GIVEN BY ASSESSEE TO THE ASSESS ING OFFICER. HOWEVER, THE FACT REMAINS THAT ALL THE DOCUMENTARY EVIDENCES ARE IN FAVOUR OF ASSESSEE AND LEARNED CIT(A) HAS PASSED A VERY REASO NED AND SPEAKING ORDER AND WE DO NOT FIND ANY INFIRMITY IN THE SAME. 9. IN VIEW OF THE ABOVE, THE APPEAL FILED BY REVENU ES IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 .07.2016. SD/- SD/- (A.D. JAIN) (T. S. KAPOOR) JUDICIAL MEMBER AC COUNTANT MEMBER DATED:20.07.2016. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY