ITO, Jalgaon V. Smt. Veenaben Shantilal Suratwala, Jalgaon

ITA 1315/PUN/2009

• Counselvise Citation: 131524514 RSA 2009
• Duration Of Justice: 1 year(s) 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 30-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 17-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY SINGH
• Keywords: Bogus purchase; Capital asset; Share purchase agreement; Cost of acquisition; Wrong claim; Benefit of exemption
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER SL. NO . ITA NO./CO NO ASSTT. YEAR APPELLANT/CROSS OBJECTOR RESPONDENT 1. 1315/PN/09 06-07 INCOME-TAX OFFICER, WD. 1(1) JALGAON SMT VEENABEN SHANTILAL SURATWALA, 10, HOUSING SOCIETY, SHAHUNAGAR, JALGAON 2. CO 02/PN/11 06-07 SMT VEENABEN S SURATWALA, JALGAON ITO, WD. 1(1) JALGAON 3. 1316/PN/09 06-07 INCOME-TAX OFFICER, WD. 1(1) JALGAON SMT BHANUBEN M SURATWALA, 29,30,31/1 YASHWANT COLONY, RING ROAD, JALGAON 4. CO 03/PN/11 06-07 SMT BHANUBEN M SURATWALA, JALGAON ITO, WD. 1(1) JALGAON 5. 1317/PN/09 06-07 INCOME-TAX OFFICER, WD. 1(3) JALGAON SHRI PARAG S SURATWLALA, PROP. BALAJI PHARMA CORPORATION, 32 MIDC AREA, JALGAON 6. CO 29/PN/11 06-07 SHRI PARAG S SURATWALA, JALGAON ITO, WD. 1(1) JALGAON ASSESSEES BY : SMT DEEPA KHARE DEPARTMENT BY : SHRI SANJAY SI NGH ORDER PER G. S. PANNU, A.M : THE CAPTIONED PROCEEDINGS RELATE TO THREE ASSESSEES BELONG ING TO ONE FAMILY AND THE ISSUE INVOLVED IS COMMON. THEREFORE, THE Y WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY A CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 2 2. IT WAS ALSO A COMMON POINT BETWEEN THE PARTIES THAT THE FACTS AND CIRCUMSTANCES LEADING TO THE PRESENT DISPUTE ARE IDENTICAL IN ALL THE THREE CASES AND, THEREFORE, FOR THE SAKE OF CONVENIENCE, ITA NO 131 5/PN/09 IN THE CASE OF SMT VEENABEN SHANTILAL SURATWALA AND THE CORRESPONDI NG CROSS OBJECTION (CO ) NO 02/PN/11 IS TAKEN UP AS A LEAD CASE. ITA NO 1315/PN/09 CO NO 02/PN/11 : SMT VEENABEN S SURATWALA: 3. IN ORDER TO APPRECIATE THE ISSUES AGITATED BY THE RE VENUE IN ITS APPEAL AND BY THE ASSESSEE IN THE CORRESPONDING CROSS OBJECTION, THE FO LLOWING DISCUSSION IS RELEVANT. THE ASSESSEE IS AN INDIVIDUAL WHO HAD FILED HER RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 DECLARING TOTAL INCOME AS NIL WHICH , INTER ALIA , INCLUDED A CLAIM OF EXEMPTION UNDER SECTION 10(38) OF THE ACT AMOUNTING TO RS 13,39,339/- BEING A LONG TERM CAPITAL GAIN ON THE SA LE OF 110000 EQUITY SHARES OF ONE M/S PRRANETA INDUSTRIES LTD. THE RETURN SO FILED BY THE ASSESSEE WAS SUBJECTED TO A SCRUTINY ASSESSMENT UNDER SECTION 143(3) OF TH E ACT BY THE ASSESSING OFFICER CULMINATING IN AN ORDER DATED 19.12.20 08 WHEREIN THE TOTAL INCOME HAS BEEN ASSESSED AT RS 13,39,339/-. IN THE DETER MINATION OF SUCH INCOME, THE ASSESSING OFFICER REJECTED THE ASSESSEES CLAIM OF EXEMPTION UNDER SECTION 10(38) OF THE ACT AND THE ENTIRE AMOUNT OF RS 1 3,39,339/- CLAIMED AS A LONG TERM CAPITAL GAIN ON SALE OF SHARES, WAS ASSESSED AS INCOME FROM OTHER SOURCES. THE ASSESSEE ASSAILED THE ORDER OF THE ASSESSING O FFICER IN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) ON FACTS AND IN LAW. THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS PARTLY ACCEPTED THE PLEA OF THE ASSESSEE, INASMUCH AS THE INCOME OF RS 13,39,339/- HAS BEEN ACCEPTED TO BE ASSESSABLE AS CAPITAL GAINS, ALBEIT AS A SHORT TERM CAPITAL GAIN AS AGAINST LONG TERM CAPITAL GAIN CANVASSED BY THE ASSESSEE. ACCORDINGLY, T HE ASSESSEES CLAIM OF EXEMPTION UNDER SECTION 10(38) OF THE ACT WAS REJECT ED. ON THE OTHER HAND, THE COMMISSIONER OF INCOME-TAX (APPEALS) DID NOT CONCUR WITH THE ASSESSING OFFICER THAT THE IMPUGNED SUM WAS ASSESSABLE AS INCOME FR OM OTHER SOURCES, 3 WHICH IS SOUGHT TO BE ASSAILED BY THE REVENUE IN ITS APPE AL. ON THE CONTRARY, IN ITS CROSS OBJECTION, THE ASSESSEE HAS CONTENDED THAT THE COMM ISSIONER OF INCOME-TAX (APPEALS) WRONGLY TREATED THE GAIN ON SALE OF SHARES AS A SHORT TERM CAPITAL GAIN INSTEAD OF A LONG TERM CAPITAL GAIN, THUS, ACCORDING TO THE ASSESSEE THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN SUSTAI NING THE DENIAL OF EXEMPTION UNDER SECTION 10(38) OF THE ACT. EVIDENTLY, THE CROSS GROUNDS RAISED BY THE REVENUE AND THE ASSESSEE EMANATE FROM A SIMILAR CO NTROVERSY AND THEREFORE, THE SAME HAVE BEEN HEARD TOGETHER. 4. IN ORDER TO APPRECIATE THE REASONS WEIGHING WITH T HE ASSESSING OFFICER TO TREAT THE GAIN ON THE SALE OF SHARES AS INCOME FROM OT HER SOURCES, THE REASONS ARE AS FOLLOWS. THE ASSESSING OFFICER FOUND THAT ASSESSEE CLA IMED TO HAVE PURCHASED 18000 SHARES OF PRRANETA INDUSTRIES LTD. ON 1 5.10.2003 AT THE RATE OF RS 1.25 PER SHARE. ASSESSEE CLAIMED THAT THE INVESTEE COMPA NY SPLIT UP ITS SHARES AND THE ERSTWHILE FACE VALUE OF RS 10 PER SHARE W AS CONVERTED INTO 10 SHARES OF RS 1 ONE EACH AND HENCE THE SHAREHOLDING OF TH E ASSESSEE INCREASED FROM 18000 TO 180000 SHARES OUT OF WHICH ASSESSEE CLAIMED TO HAVE SOLD 110000 SHARES DURING THE YEAR FOR A TOTAL CONSIDERATIO N OF RS 13,53,450/- AT VARYING RATES, THE RELEVANT DETAIL ARE CONTAINED IN PARA 3 OF THE ASSESSMENT ORDER. THE ASSESSEE HAD ALSO CLAIMED THAT PURCHASES WERE MADE THRO UGH A BROKER M/S VIJAYKUMAR BHAGWANDAS & CO., MUMBAI AND THAT THE SALES WERE MADE THROUGH ANOTHER BROKER M/S M M UPADHAYA, AGAIN BASED AT MUMBAI . THE ASSESSEE CLAIMED THAT THE CONSIDERATION FOR PURCHASE OF SHARES WAS P AID IN CASH. SIMILARLY, WITH REGARD TO THE SALE OF SHARES, ASSESSEE EXPLAINED TH AT SHE OPENED A DEMAT ACCOUNT WITH AXIS BANK ON 12.2.2005 AND THE SAME WAS CREDI TED WITH THE SHARES IN QUESTION ON 18.3.2005. AFTER THE SHARES WERE DEMATE D, THE SAME WERE SOLD ON VARIOUS DATES AS DETAILED IN THE ASSESSMENT ORDER. THE ASSE SSING OFFICER CONDUCTED ENQUIRIES WITH THE BOMBAY STOCK EXCHANGE SINCE I T WAS CLAIMED THAT THE SHARES WERE LISTED ON SUCH EXCHANGE. APART THEREFROM, THE ASSESSING OFFICER ALSO MADE ENQUIRIES WITH THE BROKER M/S VIJAYKUMAR BHAGW ANDAS & CO. AT THE 4 ADDRESS PROVIDED BY THE ASSESSEE AS ALSO WITH INVESTEE COMP ANY M/S PRRANETA INDUSTRIES LTD. IN THE COURSE OF ASSESSMENT PROCEEDINGS, ASSE SSEE WAS ALSO EXAMINED ON THE BASIS OF THE ENQUIRIES CONDUCTED BY THE ASSESSING OFFICER AND WAS PARTICULARLY INFORMED THAT THE BROKER M/S VIJAYKUMA R BHAGWANDAS & CO COULD NOT BE CONTACTED AT THE GIVEN ADDRESS AND THAT T HE ASSESSEE SHOULD PRODUCE HIM IN ORDER TO VERIFY THE CLAIM OF THE ASSESSE E. THE ASSESSING OFFICER NOTICED THAT THE DEMAT ACCOUNT REFLECTED THAT ASSESSEE HAD RECEIVED DELIVERY OF THE SHARES ON 7.4.2005, I.E. AFTER A TIME GAP OF 17 M ONTHS FROM THE DATE OF PURCHASE CONTRACT NOTE I.E. 15.10.2003. THE ASSESSING OFFI CER ALSO NOTICED THAT THE PURCHASE COST INDICATED IN THE CONTRACT NOTE WAS RS 1.5 0 PER SHARE WHILE IT WAS INFORMED BY THE INVESTEE COMPANY THAT THE MARKET R ATE WAS AROUND RS 3/- PER SHARE AT THE TIME OF THE STATED PURCHASE. THE ASSESSI NG OFFICER ALSO NOTICED THAT AS PER THE COMMUNICATION RECEIVED FROM THE INVESTE E COMPANY M/S PRRANETA INDUSTRIES LTD., THE SHARES IN QUESTION WERE RECEIVED BY THEM FOR TRANSFER IN THE FINANCIAL YEAR 2004-05 AND THAT THE ASSESSEE HAD NO EVI DENCE OF PURCHASE OF SHARES NOR WAS HAVING ANY PROOF REGARDING FORWARDING O F THE PHYSICAL SHARES TO THE INVESTEE COMPANY FOR ISSUING OF JUMBO CERTIFICATES. TH E ASSESSING OFFICER ALSO NOTICED THAT THE CONTRACT NOTE ISSUED BY THE BROKER WAS DATED 16.10.2003 WHILE THE SAID CONTRACT NOTE CONTAINED A DATE OF PRINTI NG AS OF MARCH, 2005 AND AS PER THE ASSESSING OFFICER THE CONTRACT NOTE APPEARED T O HAVE BEEN ANTE-DATED BY THE BROKER M/S VIJAYKUMAR BHAGWANDAS & CO. THE BR OKER ALSO WAS NOT PRODUCED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AS CA LLED FOR. CONSIDERING ALL THE AFORESAID FACTORS, THE ASSESSING OFFICER CONCLUDED THAT THE CONTRACT NOTE DATED 16.10.2003 ISSUED BY THE BROKER M/S VIJAYKUMAR BHAGWANDAS & CO WAS BOGUS. ACCORDINGLY, THE ASSESSING OFFI CER HELD THAT THE ASSESSEE HAD MADE A WRONG CLAIM OF EXEMPTION UNDER SECTION 10(38) OF THE ACT BY FURNISHING ANTE-DATED, BOGUS PURCHASE NOTE. AS PER THE ASSESSING OFFICER, THIS WAS DONE WITH THE SOLE INTENT OF SHOWING A LONG TERM CA PITAL GAIN AND CLAIMING THE BENEFIT OF EXEMPTION UNDER SECTION 10(38) OF THE ACT. IN CONCLUSION, THE 5 ASSESSING OFFICER REJECTED THE CLAIM OF EXEMPTION UNDER SECT ION 10(38) AND ASSESSED THE ENTIRE AMOUNT OF GAIN OF RS 13,39,339/- AS I NCOME FROM OTHER SOURCES. 5. IN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (A PPEALS), ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING THE CLAIM OF EXEMPTION UNDER SECTION 10(38) OF THE ACT BY DOUBTING THE GENUINENESS OF THE PURCHASE OF SHARES OF M/S PRRANETA INDUSTRIES LTD THE SAL IENT FEATURES OF THE TRANSACTIONS OF PURCHASE AND SUBSEQUENT SALE WERE ELUCIDATE D TO PROVE ITS GENUINETY. THAT THE ASSESSEE HAD PURCHASED 18000 EQUITY SHARES OF FACE VALUE OF RS 10/- EACH OF M/S PRRANETA INDUSTRIES LTD FOR A T OTAL CONSIDERATION OF RS 23,087/-. THAT THE SHARES WERE RECEIVED IN PHYSICAL FORM AND THE SAID SHARES BEING 180 SHARE CERTIFICATES WERE SENT TO THE INVESTEE CO MPANY FOR TRANSFER ALONGWITH THE TRANSFER DEEDS. THE SHARES WERE SPLIT UP INTO FACE VALUE OF RS 1/- PER SHARE. THE ASSESSEE HAVING NO INTENTION TO SELL IMMED IATELY WANTED TO CONSOLIDATE THESE 180 CERTIFICATES INTO JUMBO CERTIFICATES AND THEREFORE THESE CERTIFICATES WERE SENT IN ORIGINAL TO THE COMPANY FOR ISSU ANCE OF JUMBO CERTIFICATES. THE INVESTEE COMPANY ISSUED 3 JUMBO CERTIFICAT ES DATED 8.3.2004 AND COPIES OF THESE 3 JUMBO CERTIFICATES BEING AVAILABLE W ITH THE ASSESSEE WERE FURNISHED TO THE ASSESSING OFFICER. THE ASSESSEE SUBSEQUENTLY BEING DESIROUS OF SELLING THE SHARES, OPENED A DEMAT ACCOUNT WITH UTI BAN K (AXIS BANK) IN JANUARY, 2005 AND ON 18.3.2005 THE ORIGINAL JUMBO CE RTIFICATES WERE SENT FOR DEMATING TO UTI BANK. THE CERTIFICATES NUMBER, FOLIO NUMBER, ETC. AS APPEARING IN THE DEMAT REQUEST FORM WERE THE SAME AS ON THE CO PIES OF JUMBO CERTIFICATES FURNISHED TO THE ASSESSING OFFICER. THE SHARES WERE DEMATED W.E.F. 23.3.2005 AND WERE CREDITED TO ASSESSEES DEMAT ACCOUNT. THE COMPANY SUB-DIVIDED ITS SHARES OF RS 10/- (FACE VALUE) EACH INTO RS 1/- EACH IN ITS EGM DATED 28.3.2005 AND ACCORDINGLY CREDITED 1,80,000 SHARES OF RS 1/- EACH IN LIEU OF 18,000 SHARES OF RS 10/- EACH TO THE DEMAT ACCOUNT ON 20.4.2005. DETA ILS OF SALE OF SHARES WERE ALSO GIVEN. THE RELEVANT SALE CONTRACT NOTES WERE SU BMITTED TO THE 6 ASSESSING OFFICER ALONGWITH RETURN OF INCOME AND THAT THE REQUIRED SECURITIES TRANSACTION TAX (STT) WHICH WAS INTRODUCED SINCE 1.10.2004 WAS LEVIED ON THE SALE. THE TRANSACTION OF SALE HAS TAKEN PLACE ON A RECO GNIZED STOCK EXCHANGE, I.E. THE STOCK EXCHANGE OF MUMBAI THROUGH A REGISTERED BROKER, I.E. M M UPADHYA. IT WAS CONTENDED THAT IN THE FACE OF THE AFO RESAID, THE ASSESSING OFFICER DID NOT POINT OUT ANY DEFICIENCY IN THE TRANSA CTION OF SALE AND ACCORDINGLY, THE AMOUNT OF CAPITAL GAIN ON SALE OF SHARES HAS BEEN W RONGLY ASSESSED AS INCOME FROM OTHER SOURCES. 6. THE COMMISSIONER OF INCOME-TAX (APPEALS), AFTER CONSI DERING THE SUBMISSIONS OF THE ASSESSEE, WAS OF THE OPINION THAT THE ASSESSI NG OFFICER SUCCEEDED IN PROVING THAT THE PURCHASE OF SHARES WAS NOT P ROVED ON THE BASIS OF THE CONTRACT NOTES FURNISHED AND, THEREFORE, THE BURDEN WAS ON THE ASSESSEE TO PRODUCE NECESSARY EVIDENCE/WITNESS TO REBUT THE SAME. ACCO RDING TO THE COMMISSIONER OF INCOME-TAX (APPEALS), THE ASSESSING OFFICER WAS ABLE TO PROVE THAT THE CONTRACT NOTES ISSUED BY THE SHARE BROKER WERE UN RELIABLE. FURTHER THE ASSESSING OFFICER COULD ESTABLISH THAT THE STATED TRANSACTIONS HAD NOT TAKEN PLACE ON THE BOMBAY STOCK EXCHANGE ON THE DATES MENTIONED IN THE CONTRACT NOTES. THERE WERE NEITHER ANY VALID CONTRACT NOTES NOR ANY ACCE PTABLE EVIDENCE REGARDING THE PURCHASE OF SHARES ON THE DATES ADMITTED BY THE ASSESSEE. THE ASSESSEE ALSO FAILED TO GIVE SUFFICIENT PROOF REGARDING TH E PAYMENT OF PURCHASE CONSIDERATION. IN VIEW OF ALL THESE, THE COMMISSIONER O F INCOME-TAX (APPEALS) CONCURRED WITH THE ASSESSING OFFICER THAT THERE WAS NO SUFFI CIENT AND VALID EVIDENCE AVAILABLE WITH THE ASSESSEE TO PROVE THAT THE SHARES WERE ACTUALLY ACQUIRED ON THE DATES CLAIMED BY THE ASSESSEE DURING THE FINANCIAL YEAR 2003-04. HOWEVER, AS REGARDS THE ACTION OF THE ASSESSING OFFICER I N TREATING THE SURPLUS ON ACCOUNT OF THE TRANSACTIONS AS UNACCOUNTED/UNEXPLAINED IN COME, AS PER THE COMMISSIONER OF INCOME-TAX (APPEALS), THE SAME CANNOT BE JUSTIFIED AS IT WAS BASED ON PRESUMPTIONS. THE COMMISSIONER OF INCOME-TAX (AP PEALS) FURTHER HELD THAT THE ASSESSEE HAS SUFFICIENTLY PROVED THE TRANSFER OF THE SHARES INTO THE 7 DEMAT ACCOUNT. THE SHARES WERE ACTUALLY SOLD THROUGH A BR OKER AND SUCH TRANSACTIONS WERE REFLECTED IN THE STOCK EXCHANGE AND THE SALE PROCEEDS HAVE BEEN ACCOUNTED FOR IN THE ACCOUNTS OF THE ASSESSEE AND ACCEPT ED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER COULD NOT BRING OUT ANY CONVINCING MATERIAL ON RECORD TO SUBSTANTIATE HIS FINDING THAT TH E ASSESSEE BROUGHT UNACCOUNTED MONEY IN THE GUISE OF LONG TERM CAPITAL GA IN. RELIANCE WAS PLACED ON THE JUDGMENT OF THE HONBLE PUNJAB & HARYANA HIG H COURT IN THE CASE OF ANUPAM KAPOOR 299 ITR 179 (P&H) AND THAT OF THE HON BLE SUPREME COURT IN THE CASE OF UMA CHARAN SHAH & BROTHERS 37 ITR 271 (SC ). THE COMMISSIONER OF INCOME-TAX (APPEALS) ACCORDINGLY HELD THAT THE ASSESSE E WAS ABLE TO PROVE THE RECEIPT OF SALE CONSIDERATION AND SURPLUS ARISING OUT OF IT AND, THUS, THE SURPLUS CANNOT BE ASSESSED AS UNEXPLAINED UNDER THE HEAD INCOME FROM OTHER SOURCES AS WAS DONE BY THE ASSESSING OFFICER. AS REGARDS THE TAXABILITY, THE COMMISSIONER OF INCOME-TAX (APPEALS) HELD THAT SINCE TH E SHARES WERE TRANSFERRED TO THE ASSESSEES DEMAT ACCOUNT ONLY DURING T HE FINANCIAL YEAR 2004- 05, THAT DATE ABOVE COULD BE TAKEN AS THE DATE OF ACQUI SITION OF SHARES, AND AS A CONSEQUENCE, IT WAS HELD THAT THE SHARES WERE HELD FOR A PERIOD OF LESS THAN ONE YEAR BEFORE ITS SALE AND, THEREFORE, THE INCOME WAS A SSESSABLE AS SHORT TERM CAPITAL GAIN. AS TO THE COST OF ACQUISITION, THE COMMISSI ONER OF INCOME-TAX (APPEALS) HELD THAT THE COST OF ACQUISITION SHOWN BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS BE ACCEPTED. THE COMMISSIONER OF INCOME-TAX (APPE ALS) ACCORDINGLY DIRECTED THE ASSESSING OFFICER TO WORK OUT THE CAPITAL GAIN S OR LOSS ADOPTING THE DATE OF ACQUISITION AS THE DATE OF TRANSFER INTO THE D EMAND ACCOUNT AND THE COST OF ACQUISITION AS PER THE BOOKS OF ACCOUNT AND TO ASSESS THE SAME ACCORDINGLY. THE EXEMPTION CLAIMED UNDER SECTION 10(38) OF THE ACT W AS DENIED SINCE THE SURPLUS WAS TREATED AS A SHORT TERM CAPITAL GAIN AND NOT AS LONG TERM CAPITAL GAIN. 7. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE VEHE MENTLY POINTED OUT THAT THOUGH THE COMMISSIONER OF INCOME-TAX (APPEALS) WA S JUSTIFIED IN NEGATING THE STAND OF THE ASSESSING OFFICER THAT THE IMPUGNED INCOM E WAS LIABLE TO BE 8 ASSESSED AS INCOME FROM OTHER SOURCES, YET THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS WRONGLY ASSESSED IT AS SHORT TERM CAPITAL GAIN. ACCORDING TO THE LEARNED COUNSEL, THE ASSESSEE HAS SOLD THE SHARES ON DIFFERE NT DATES BETWEEN 5.6.2005 AND 22.5.2005 AND PRIOR TO SUCH SALE, THE SHA RES HAVE BEEN UNDISPUTABLY HELD BY THE ASSESSEE FOR A PERIOD EXCEEDING 12 MONTHS. IN THIS CONNECTION, THE LEARNED COUNSEL REFERRED TO A LETTER DATED 5.1.2004 OF M/S PRRANETA INDUSTRIES LTD., ADDRESSED TO THE ASSESSEE CERTIFY ING THE TRANSFER OF SHARE CERTIFICATES IN THE NAME OF THE ASSESSEE. FURTHER A LETTER OF PRRANETA INDUSTRIES LTD DATED 8.3.2004 ADDRESSED TO THE ASSESSEE WA S ALSO REFERRED TO POINT OUT THAT THE INVESTEE COMPANY HAD ISSUED JUMBO CER TIFICATES AFTER CONSOLIDATION IN EXCHANGE OF THE SHARES SENT BY THE ASSESSEE . ON THE BASIS OF THE AFORESAID MATER, COPIES OF WHICH HAVE BEEN PLACED I N PAPER BOOK AT PAGES 8 AND 9, IT WAS POINTED OUT THAT THE SHARES WERE INDEE D HELD BY THE ASSESSEE FOR A PERIOD EXCEEDING 12 MONTHS PRIOR TO THE SALE AND, THER EFORE, THE CAPITAL GAINS QUALIFIES TO BE A LONG TERM CAPITAL GAINS. FURTHER-MOR E, REFERENCE HAS BEEN MADE TO PAGES 8 TO 14 OF THE PAPER BOOK WHEREIN ARE PLACED COPIES OF JUMBO SHARE CERTIFICATES ISSUED BY M/S PRRANETA INDUSTRIES LTD IN THE NAME OF THE ASSESSEE WHICH CLEARLY SHOW THE DATE OF ISSUANCE AS 8.3.2004. THE L EARNED COUNSEL SUBMITTED THAT THOUGH THE ASSESSEE CONTENDS THAT THE PUR CHASE DATE AS SHOWN IN THE CONTRACT NOTE DATED 16.10.2003 SHOULD BE RECKONED F OR THE PURPOSE OF CALCULATING THE PERIOD OF HOLDING, YET EVEN IF THE SA ME IS NOT ACCEPTED, THEN CERTAINLY THE PERIOD BE COUNTED FROM 8.1.2004 WHICH WO ULD PROVE THAT THE SHARES HAVE BEEN HELD FOR A PERIOD EXCEEDING 12 MONTHS PRIOR TO SALE. EVEN IN THIS MANNER, THE GAIN WOULD BE A LONG TERM CAPITAL ELIGI BLE FOR EXEMPTION UNDER SECTION 10(38) OF THE ACT. IN THIS CONNECTION, RELIANCE HA S ALSO BEEN MADE TO CBDT CIRCULARS NO. 704 DATED 28.4.95 AND 768 DATED 24 .6.1998 TOSUBMIT THAT THE PERIOD OF HOLDING SHOULD BE RECKONED. 8. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE, APPEARING FOR THE REVENUE, AT THE OUTSET POINTED OUT THAT SIMI LAR TRANSACTIONS INVOLVING 9 PURCHASE AND SALE OF SHARES OF PENNY STOCK WAS SUBJECT MATTER OF CONSIDERATION BY THE TRIBUNAL IN A GROUP OF CASES VIDE ITA NO. 1332P N/08 & ORS DATED 16.06.2010 IN THE CASE OF SMT SUREKHA BHAGVATIPRASAD MUNDADA GROUP. IT WAS POINTED OUT THAT THE ORDER OF THE COMMISSIONER OF INCO ME-TAX IN THE SAID GROUP WAS ALSO ON SIMILAR LINES AS IN THE INSTANT CASE. IN THOSE CASES ALSO, THE ASSESSEE HAD CLAIMED EXEMPTION UNDER SECTION 10(38) OF TH E ACT ON THE LONG TERM CAPITAL GAINS EARNED ON SALE OF SHARES. THE ASSESSIN G OFFICER HAD FOUND A SUBSTANTIAL TIME GAP BETWEEN THE CONTRACT NOTES PURPORT EDLY SHOWING PURCHASE OF SHARES AND THE CREDIT OF THE SHARES TO THE DEMAT ACCOUNT OF THE ASSESSEE. IN THOSE CASES ALSO, THE PURCHASE CONTRACT NOTES WERE HELD TO BE BOGUS BY THE ASSESSING OFFICER AND THE INCOME WAS ASSESSED AS INCOME FROM O THER SOURCES. THE COMMISSIONER OF INCOME-TAX HAD HELD THE SHARES CONTRA CT NOTES AS BOGUS BUT BY RELYING ON THE DEMAT ACCOUNT IT WAS HELD THAT THE ACQUISITION OF SHARES COULD NOT BE DENIED, BUT THE DATE OF CREDIT OF SHARES I NTO THE DEMAT ACCOUNT WAS HELD TO BE THE DATE OF ACQUISITION AND ON THAT BASIS TH E GAIN ON SALE OF SHARES WAS TREATED AS SHORT TERM CAPITAL GAINS. IT WAS POINTED O UT THAT THE DECISION OF THE COMMISSIONER OF INCOME-TAX ON SIMILAR LINES WAS UPHELD BY THE TRIBUNAL IN THE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE RESPECTIVEL Y. IN THESE CIRCUMSTANCES, THE LEARNED DEPARTMENTAL REPRESENTATIVE PO INTED OUT THAT THE ASSESSEE IN THE PRESENT CASE HAS ALSO NOT BEEN ABLE TO SUBSTAN TIATE THE EVIDENTIARY VALUE OF THE CONTRACT NOTES DATED 16.10.20 03 AND, THEREFORE, THE COMMISSIONER OF INCOME-TAX MADE NO MISTAKE IN TREATING T HE SAID PURCHASES AS UNPROVED. ALTHOUGH, THE LEARNED DEPARTMENTAL REPRESE NTATIVE DEFENDED THE ADDITION MADE BY THE ASSESSING OFFICER AS INCOME FROM OTH ER SOURCES, HOWEVER, IT WAS FAIRLY CONTENDED THAT IN VIEW OF THE PRECEDENT, THE CONCLUSION OF THE COMMISSIONER OF INCOME-TAX (APPEALS) FOR TREATING THE SURPLUS AS CAPITAL GAIN WOULD PREVAIL. HOWEVER, HE HAS ASSAILED THE PLEA OF TH E ASSESSEE THAT THE CAPITAL GAIN BE TREATED AS LONG TERM CAPITAL GAIN AS AGAINST SH ORT TERM CAPITAL GAIN TREATED BY THE COMMISSIONER OF INCOME-TAX (APPEALS). 10 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS, PE RUSED THE ORDERS OF THE AUTHORITIES BELOW AND ALSO THE RELEVANT MATERIAL TO WHICH OUR ATTENTION HAS BEEN DRAWN DURING THE COURSE OF HEARING. WE HAVE ALSO CAREFULLY PERUSED THE PRECEDENT OF OUR CO-ORDINATE BENCH IN THE CASE OF ITA NO 1332/PN/08 & ORS. IN THE CASE OF SMT SUREKHA BHAGVATIPRASAD MUNDADA & ORS (SU PRA). FACTUALLY SPEAKING, THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE ARE MORE OR LESS SIMILAR TO THOSE CONSIDERED BY OUR CO-ORDINATE BENCH IN THE CASE OF MUNDADA GROUP (SUPRA). IN THE PRESENT CASE, THE CLAIM OF THE ASSE SSEE IS THAT SHE HAS PURCHASED THE SHARES OF PRRANETA INDUSTRIES LTD ON 16.1 0.2003 THROUGH M/S VIJAYKUMAR BHAGWANDAS & CO, A BROKER OF BOMBAY STOCK E XCHANGE. IN SO FAR AS THIS ASPECT IS CONCERNED, WE FIND THAT THE ASSESSING OFFI CER HAS CORRECTLY INFERRED THAT THE PURCHASE TRANSACTIONS AS DEPICTED BY THE CONTRACT NOTES WAS NOT PROVED. THE ASSESSING OFFICER MADE RELEVANT ENQUIRIES WHI CH HAVE BEEN DETAILED IN THE ASSESSMENT ORDER AND ON THAT BASIS THE CONTRACT N OTES IN QUESTION WERE HELD TO BE UNRELIABLE. IN THIS REGARD, THE ASSESSEE WAS A LSO EXAMINED IN THE COURSE OF ASSESSMENT PROCEEDINGS AND IN OUR OPINION, THER E IS NO MATERIAL CORROBORATING THE PLEA OF THE ASSESSEE THAT THE SHARES I N QUESTION WERE ACQUIRED ON 16.10.2003 IN TERMS OF THE IMPUGNED CONTRACT NOTES ISSUED BY BROKER. THE ASSESSING OFFICER ALSO POINTED OUT THAT THOUGH THE CONTRACT NOTE ISSUED BY THE BROKER WAS STATED ON 16.10.2003, THE PRINTING OF SUCH N OTES WAS BEARING DATES OF MARCH 2005. THE BROKER SHRI VIJAYKUMAR BHAGWANDAS WAS AL SO SOUGHT TO BE CONTACTED BY THE ASSESSING OFFICER WITHOUT SUCCESS AND THE A SSESSEE ALSO DID NOT PRODUCE THE BROKER, WHEN CALLED UPON TO DO SO. ON THE BASIS OF THE MATERIAL AND EVIDENCE ON RECORD, WHICH IS ON SIMILAR FOOTING AS WAS IN THE CASE OF SUREKHA MUNDADA & OTHERS (SUPRA), WE FIND NO INFIRMITY IN THE CONCURRENT FINDINGS OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AN D THE ASSESSING OFFICER TO THE EFFECT THAT THE CONTRACT NOTES DATED 16.10.2003 ARE UNRELIABLE AND THE ASSESSEE HAS FAILED TO PROVE PURCHASE OF SHARES ON THE BASIS OF SUCH 11 BROKER/CONTRACT NOTES. QUITE CLEARLY, THE FINDINGS OF THE TRIBUNAL IN THE CASE OF SUREKHA MUNDADA & ORS (SUPRA) ALSO SUPPORT THE AFORESAID . 10. NOW, WE MAY DEAL WITH THE CONCLUSION OF THE COMMISSI ONER OF INCOME-TAX (APPEALS) TO THE EFFECT THAT THE SURPLUS ON SALE OF SHAR ES IS LIABLE TO BE ASSESSED AS CAPITAL GAIN AND NOT AS INCOME FROM OTHER SOURCES. IN FACT, UNDISPUTABLY THE ASSESSING OFFICER HAS NOT POINTED OUT ANY INFIRMITY IN THE TRANSACTION OF SALE WHICH HAS BEEN EFFECTED THROUGH THE DEMAT ACCOUNT OF THE ASSESSEE. PROCEEDING ON THAT BASIS, IN OUR VIEW, THE COMMISSIONER OF INCOME-TAX MADE NO MISTAKE IN HOLDING THAT THE ASSESSING OFFICERS CONTENTION THAT ASSESSEE NEVER PURCHASED THE SHARES, COULD NOT BE ACCEPTED. QUITE CLEARL Y, THE SHARES IN QUESTION COULD NOT HAVE BEEN CREDITED TO THE DEMAT ACCO UNT OF THE ASSESSEE MAINTAINED WITH AXIS BANK WITHOUT ASSESSEE HAVING ACTUALL Y ACQUIRED THE SAME. THEREFORE, CONSIDERING THE TOTALITY OF CIRCUMSTANCES, THE ONLY PLEA AGAINST THE ASSESSEE COULD BE THAT THE ASSESSEE HAS FAILED TO PROVE THE D ATE OF ACQUISITION OF SHARES AS CANVASSED I.E. 16.10.2003 11. IN SO FAR AS THE DATE OF ACQUISITION OF SHARES IS CONCE RNED, THE COMMISSIONER OF INCOME-TAX HELD THAT THE DATE ON WHICH THE SHARES WERE ACTUALLY CREDITED TO THE DEMAT ACCOUNT SHOULD BE CONSIDER ED AS THE DATE OF ACQUISITION, I.E. 18.3.2005. ON THIS ASPECT, THE CLAIM O F THE ASSESSEE IS THAT EVEN IF THE DATE OF CONTRACT NOTES DATED 16.10.2003 IS NOT ACCEPTED, YET THE EVIDENCE IN THE FORM OF LETTER FROM THE INVESTEE COMPANY DATE D 5.1.2004 BE TAKEN INTO CONSIDERATION WHICH SHOWS THAT ON THAT DATE THE ASSESSEE W AS A REGISTERED SHAREHOLDER OF THE INVESTEE COMPANY. IT WAS POINTED OUT THAT EVEN THE JUMBO SHARE CERTIFICATES WERE ISSUED BY THE INVESTEE COMPANY I N THE NAME OF THE ASSESSEE ON 8.3.2004. IT WAS THEREFORE CONTENDED THAT CON SIDERING SUCH DATE OF ACQUISITION THE PERIOD OF HOLDING PRIOR TO SALE WOULD EXCEED 12 MONTHS THEREBY SHOWING THAT THE CAPITAL GAIN WAS LONG TERM IN NATURE . IT HAS BEEN EMPHASIZED THAT ALL THIS MATERIAL WAS BEFORE THE LOWER AUTHORITI ES AND THE SAME IS 12 UNCONTROVERTED AND, THEREFORE, THE NATURE OF THE CAPI TAL GAIN BE TREATED AS LONG TERM CAPITAL GAIN. THE LEARNED DEPARTMENTAL REPRESEN TATIVE ON THE OTHER HAND HAS REFERRED TO A LETTER DATED 4.12.2008 ADDRESSED BY THE INVESTEE COMPANY TO THE ASSESSING OFFICER WHEREIN IT HAS BEEN STATED THAT THE SHARES WERE SENT TO THE INVESTEE COMPANY FOR TRANSFER IN THE FINANCIAL YEAR 20 04-05, WHICH WOULD SHOW THAT THE SHARES WERE NOT HELD FOR A PERIOD OF 12 MONT HS PRIOR TO THE SALE. IT WAS, THEREFORE, CONTENDED THAT THE PLEA OF THE ASSESSEE THA T THE PERIOD OF HOLDING BE RECKONED FROM JANUARY/MARCH 2004, CANNOT BE ACCEPTED. 12. ON THIS ASPECT, WE HAVE GIVEN OUR ANXIOUS CONSIDERATI ON TO THE RIVAL POSITIONS. QUITE CLEARLY, THERE IS NO DISPUTE THAT THE SALE OF THE SHARES GIVING RISE TO THE IMPUGNED SURPLUS HAVE BEEN MADE ON VARYING DAT ES, VIZ. 5.2.2005, 8.4.2005, 8.8.2005 AND 22.8.2005 AS DETAILED IN PARA 3 OF THE ASSESSMENT ORDER. THE PERIOD OF HOLDING OF SHARES PRIOR TO ITS SALE IS REL EVANT BECAUSE OF ASSESSEES CLAIM OF EXEMPTION UNDER SECTION 10(38) OF THE ACT. SUB -SECTION (38) OF SECTION 10 EXEMPTS INCOME ARISING FROM THE TRANSFER OF A LONG TERM CAPITAL ASSET BEING AN EQUITY SHARE. IT IS ALSO RELEVANT TO OBSERVE THAT EQUIT Y SHARES CAN BE CONSIDERED AS A LONG TERM ASSET IF THE SAME IS HELD BY THE ASSESSEE FOR A PERIOD EXCEEDING 12 MONTHS PRIOR TO ITS SALE. THE COMMISSIONER OF INCOME- TAX (APPEALS) HAS CONSIDERED THE DATE OF CREDIT TO THE DEMAT ACCOUNT AS THE DATE OF ACQUISITION OF SHARES BY THE ASSESSEE, I.E. 18.3.2005. BEFORE US, THE ASSESS EE HAS ATTEMPTED TO RELY ON COPIES OF JUMBO SHARE CERTIFICATES DATED 18.3. 2004 AS ALSO THE CORRESPONDENCE FROM THE INVESTEE COMPANY DATED 5.1.200 4 TO SUBSTANTIATE THAT THE ASSESSEE HAD ACQUIRED THE SHARES EVEN PRIOR TO THE D ATE OF CREDIT TO THE DEMAT ACCOUNT, EVEN THOUGH THE ASSESSEE MAY FAIL TO PROV E THE PURCHASE ON THE BASIS OF CONTRACT NOTES DATED 16.10.2003. IN THIS CONNECTI ON, WE FIND THAT THERE IS AN APPARENT INCONSISTENCY IN THE INFORMATION FURNISHED B Y THE INVESTEE COMPANY, I.E. PRRANETA INDUSTRIES LTD. ON ONE HAND, THE INVESTE E COMPANY HAS ISSUED JUMBO SHARE CERTIFICATES IN THE NAME OF THE ASSESSEE WHICH ARE DATED 8.3.2004, COPIES OF WHICH ARE PLACED IN THE PAPER BOOK. IT HAS AL SO ISSUED A LETTER DATED 13 5.1.2004 EVIDENCING TRANSFER OF SHARES IN THE NAME OF THE ASSESSEE YET IN A COMMUNICATION DATED 4.12.2008 TO THE ASSESSING OFFICER, IT IS STATED BY THE INVESTEE COMPANY THAT THE SHARES WERE SENT FOR TRANSFER IN THE FINANCIAL YEAR 2004-05. THIS APPARENT INCONSISTENCY HAS NOT BEEN APPROPR IATELY PUT TO VERIFICATION EITHER BY THE ASSESSING OFFICER OR BY THE CO MMISSIONER OF INCOME-TAX (APPEALS). THE SAME, IN OUR VIEW, IS QUITE CRUCIAL TO DE CIDE THE PERIOD OF HOLDING BY THE ASSESSEE INASMUCH AS IF THE EVIDENCE RELIED BY TH E ASSESSEE, IN THE FORM OF LETTER OF THE INVESTEE COMPANY DATED 5.1.2004 AND THE DATE OF JUMBO SHARE CERTIFICATES DATED 8.2.2004, IS TAKEN TO BE CORRECT, THE N THE SALES IN QUESTION ARE INDEED AFTER A PERIOD OF 12 MONTHS IMPLYING THEREBY THAT THE SURPLUS QUALIFIES TO BE A LONG TERM CAPITAL GAIN ELIGIBLE FOR EXEMPTION U NDER SECTION 10(38) OF THE ACT. ON THE CONTRARY, THE SURPLUS WOULD BE LIABLE TO BE T REATED AS SHORT TERM CAPITAL GAIN, AS HELD BY THE COMMISSIONER OF INCOME-TAX (APPEAL S). THEREFORE, IN THE ABSENCE OF ANY CLEAR CUT EVIDENCE TO APPRECIATE THE RIVAL CLAIMS ON THIS ASPECT, IN OUR VIEW, APPROPRIATE VERIFICATION IS REQUIRED TO BE CARRIED OUT. THEREFORE, FOR THE LIMITED PURPOSE OF ESTABLISHING THE DATE OF TRANSFER OF SHARES IN THE RECORDS OF THE INVESTEE COMPANY SO AS TO DETERMINE THE PERIOD OF HOLDI NG BY THE ASSESSEE PRIOR TO THE IMPUGNED SALES, THE MATTER IS REMANDED BACK TO T HE FILE OF THE ASSESSING OFFICER. NEEDLESS TO MENTION THE ASSESSING OFFICER SHALL CARRY OUT THIS LIMITED EXERCISE AFTER ALLOWING THE ASSESSEE A REASONABLE OPPORTU NITY OF BEING HEARD IN SUPPORT OF HER STAND. THE ASSESSING OFFICER SHALL ADJUDICA TE THE ASSESSEES CLAIM FOR EXEMPTION UNDER SECTION 10(38) OF THE ACT IN ACCORD ANCE WITH LAW, BASED ON THE RESULT OF HIS AFORESAID EXERCISE. THUS IN SO FAR AS ASSE SSEES CROSS OBJECTION IS CONCERNED, IT IS PARTLY ALLOWED AND THE APPEAL OF TH E REVENUE IS DISMISSED. 13. THE FACTS AND CIRCUMSTANCES, AS WELL AS CONTENTIONS O F RIVAL SIDES ARE IDENTICAL IN RESPECT OF THE REVENUES APPEAL VIDE ITA NO. 1316/PN/09 & 1317/PN/09 ASSESSEES C.O NO. 03/PN/11 & 29/PN/11 IN TH E CASES OF SMT BHANUBEN M SURATWALA AND SHRI PARAG S SURATWALA, RE SPECTIVELY AND, THEREFORE, OUR ABOVE DECISION GIVEN IN ITA NO. 1315/PN/09 & CO NO 02/PN/11 IN THE CASE 14 OF SMT VEENABEN S SURATWALA WILL APPLY MUTATIS MUTA NDIS TO THE OTHER CASES ALSO. THUS, ITA NOS 1315, 1316 & 1317/PN/09 BY THE RE VENUE ARE DISMISSED, WHILE CORRESPONDING C.O NOS 02, 03 & 29/PN/11 ARE PART LY ALLOWED. 14. IN THE RESULT, ALL THE APPEALS OF THE REVENUE AR E DISMISSED, WHILE ALL THE CROSS OBJECTIONS OF THE ASSESSEES ARE PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF OCTOBER, 2011. SD/- SD/- (I.C. SUDHIR) (G.S. PAN NU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 21 ST OCTOBER, 2011 B COPY TO:- 1) THE ASSESSEES 2) ITO, WD 1(1) JALGAON 3) THE CIT-(A)-II, NASHIK 4) THE CIT-II, NASHIK 5) THE D R, A BENCH, ITAT, PUNE 6) GUARD FILE BY ORDER TRUE COPY ASST. REGISTRAR, I.T.A.T., PUNE