The ITO, Ward-2(3), RAJKOT-GUJARAT V. Shri Paresh Valjibhai Pipalia, RAJKOT-GUJARAT

ITA 1345/RJT/2010

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0392 (ITAT-RAJKOT)
• Duration Of Justice: 7 year(s) 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 23-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Corroborative evidences
• Section: 143(3)

Judgement Text

ITO, WARD-2(3), RAJKOT VS. SHRI PARESH VALJIBHAI PIPALIA/ITA NO.1345/RJT/2010/AY: 2007-08 PAGE 1 OF 8 , , IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT . . , . . , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . . ./I.T.A. NO.1345/RJT/2010 /ASSESSMENT YEAR : 2007-08 THE INCOME TAX OFFICER, WARD-2(3), RAJKOT. VS. SHRI PARESH VALJIBHAI PIPALIA, MATRUCHHYA, STREET NO.., SANT KABIR ROAD 3, GADHA NAGAR, RAJKOT. [PAN: ALVPP 8488 K] APPELLANT /RESPONDENT /ASSESSEE BY SHRI VIMAL DESAI A.R. /REVENUE BY SHRI JITENDER KUMAR CIT - DR / DATE OF HEARING: 2 6 .11. 2018 /PRONOUNCEMENT ON 0 7 . 1 2 .2018 /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER: 1. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-III, RAJKOT(IN SHORT THE CIT (A)) DATED 15.09.2010 PERTAINING TO ASSESSMENT YEAR 2007-08 WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE INCOME TAX OFFICER, WARD-2(3), RAJKOT(IN SHORT THE AO) DATED 22.12.2009 UNDER SECTION 143(3) OF INCOME TAX ACT,1961 (IN SHORT THE ACT). ITO, WARD-2(3), RAJKOT VS. SHRI PARESH VALJIBHAI PIPALIA/ITA NO.1345/RJT/2010/AY: 2007-08 PAGE 2 OF 8 2. GROUND NO.1 AND 2 RELATES TO RESTRICTING THE ADDITION TO RS.1,05,000/- AND DELETING THE ADDITION OF RS.81,37,500/- IN SPITE OF THE FACT THAT THE ASSESSEE COULD NOT EXPLAIN THE CASH DEPOSITS IN HIS BANK ACCOUNTS BY FILING OF ANY COGENT EVIDENCES. 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AO NOTICED THAT THE ASSESSEE HAS TOTAL DEPOSIT OF RS.1,56,86,861/- IN HIS BANK ACCOUNT WHICH ALSO INCLUDED CASH TRANSACTION OF RS.82,99,250/-. THE ASSESSEE WAS THEREFORE ASKED TO EXPLAIN THE SAME. THE ASSESSEE VIDE LETTER DATED 17.12.2009 SUBMITTED HIS EXPLANATION BY STATING THAT THE TOTAL DEBIT SIDE OF THIS ACCOUNT OF RS.1,56,78,763/- AND DEPOSITS IN THIS ACCOUNT REPRESENT SALE OF INVESTMENT OF SHARES FOR WHICH LEDGER COPY OF ACCOUNT WAS ALREADY FILED VIDE LETTER DATED 03.12.2009. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AS ACCORDING TO HIM THE ASSESSEE COULD NOT EXPLAIN THE TRANSACTION SHOWN IN THE D-MAT ACCOUNT AND SAME WERE NOT RECONCILED WITH CASH BOOK. ACCORDINGLY, THE AO MADE AN ADDITION OF RS.82,42,500/-. 4. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHEREIN SAME SUBMISSIONS WERE REPEATED AND DETAILS WERE ITO, WARD-2(3), RAJKOT VS. SHRI PARESH VALJIBHAI PIPALIA/ITA NO.1345/RJT/2010/AY: 2007-08 PAGE 3 OF 8 FILED AFTER CONSIDERING THE SAME. THE CIT(A) OBSERVED THAT THE APPELLANT HAS RECEIVED RS.84,24,174/- FROM THE BUYERS OF THE SHARES / SALE OF SHARES AND THE TRANSACTION HAS BEEN COMPLETED BY THE END OF THE ACCOUNTING YEAR AS PER BOOKS OF ACCOUNTS DULY CONFIRMED BY THE RESPECTIVE BUYERS. NOT ONLY THAT, THE SHARES HAVE BEEN PURCHASED FROM THE PARTIES, TO WHOM CHEQUES WERE ISSUED AND SOLD THE SAME IN CASH. THE AO HAS NOT DOUBTED THE PURCHASES NEITHER HE HAS DOUBTED THE GENUINENESS OF THE TRANSACTION AS TO PURCHASE OF SHARES. HOWEVER, IT IS NOTICED THAT THE SOME OF THE CASES OF SHARES WERE MADE BUYER TO PURCHASE, BUT IT DOES NOT AT ALL MEAN THAT THE TRANSACTIONS IS BOGUS AND THE CASH RECEIVED ON ADVANCE SALE IS BOGUS. THE APPELLANT HAS SUBSEQUENTLY PURCHASED THE SHARES AND OFFERED THE DUE PROFIT /LOSS ON SUCH TRANSACTIONS. NEVERTHELESS, AS THE APPELLANT HAVING THE D-MAT ACCOUNT THE APPELLANT HAS MADE SOME OF THE TRANSACTION IN OFF MARKET AND IN CASH, OFF MARKET TRANSACTION IS NOT PROHIBITED BY LAW. WHEN THE APPELLANT HAD SUBMITTED PROOF OF SALE OF SHARES BY FURNISHING COPIES OF BILLS AND D-MAT ACCOUNT, THE AO INSTEAD OF VERIFYING THE GENUINENESS OF THE EVIDENCE SUBMIT BEFORE HIM, DECLINES TO ACCEPT THE APPELLANTS CONTENTION WITHOUT BRINGING ON RECORD AS TO HOW THE APPELLANTS CONTENTION IS ITO, WARD-2(3), RAJKOT VS. SHRI PARESH VALJIBHAI PIPALIA/ITA NO.1345/RJT/2010/AY: 2007-08 PAGE 4 OF 8 WRONG. UNDER THESE CIRCUMSTANCES, WHEN THE SOURCE OF CREDIT/INVESTMENT IN BANK ACCOUNT BEING CASH DEPOSITED IS FOUND FULLY EXPLAINED. THEREFORE, THE ADDITION MADE BY THE AO DOES NOT SURVIVE ON MERIT, HENCE, DESERVES TO BE DELETED. HOWEVER, CONSIDERING THE FACT THAT THE APPELLANT HAS NOT PRODUCED SUPPORTING EVIDENCES OF TRANSACTION BEING CARRIED OUT EITHER IN MARKET OR OTHERWISE, AND THEREFORE OFFERED THE PROFIT ON CASH SALES, HENCE, THE CIT(A) FOLLOWING THE DECISION OF ITAT RAJKOT BENCH IN THE CASE OF M/S.D. LAKHANI INVESTMENTS DATED 08.03.2007 CONSIDERED THE GROSS BROKERAGE @2.5% OF TOTAL TURNOVER AS REASONABLE FOR ADDITION IN PROFIT. THE CIT(A) FURTHER FOLLOWED THE DECISION OF CIT(A) FOR A.Y. 2006-07 IN THE ASSESSEES OWN CASE. IN VIEW OF THESE FACTS, THE SUPPRESSION OF PROFIT AT RS.1,05,000/- WAS CONFIRMED AND ACCORDINGLY, BALANCE ADDITION OF RS.81,37,500/- WAS DELETED. 5. BEING AGGRIEVED, THE REVENUE HAS FILED THIS APPEAL BEFORE US. THE LD.SR.DR RELYING ON THE AO SUBMITTED THAT THE ASSESSEE HAS NOT FURNISHED COMPLETE DETAILS OF SHARE TRANSACTIONS AND SAME WERE NOT RECONCILED WITH THE D-MAT ACCOUNT AND NECESSARY ITO, WARD-2(3), RAJKOT VS. SHRI PARESH VALJIBHAI PIPALIA/ITA NO.1345/RJT/2010/AY: 2007-08 PAGE 5 OF 8 EVIDENCES, THEREFORE, THE CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION BY RESTRICTING THE ADDITION TO 2.5% OF PROFIT. 6. PER CONTRA, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS FURNISHED COMPLETE LEDGER ACCOUNT OF SHARE PURCHASE WHICH HAS NOT BEEN DOUBTED BY THE AO AND THE SAME HAS BEEN SOLD DURING THE YEAR OF HIS SALE PROCEEDS ARE DEPOSITED IN THE BANK ACCOUNT OF ASSESSEE. THEREFORE, THE CIT(A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE AO. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS SEEN THAT THE ASSESSEE HAS FURNISHED THE COMPLETE DETAILS OF LEDGER ACCOUNT OF PURCHASE AND SALES OF SHARES AND SAME WERE ALSO REFLECTED IN THE BANK ACCOUNTS MAINTAINED BY THE ASSESSEE. THE CIT(A) AFTER VERIFYING THE FACTS, HAS HELD THAT THE FINDINGS OF THE AO ARE NOT CORRECT, MOREOVER, THE CIT(A) PLACING RELIANCE ON THE DECISION RAJKOT ITAT BENCH IN THE CASE OF LAKHANI INVESTMENT (SUPRA) HAS RESTRICTED THE ADDITION TO NET PROFIT @2.5% OF THIS TRANSACTION. WE ALSO FIND THAT THE AO HAS NOT DOUBTED THE PURCHASE OR NEITHER HAS DOUBTED THE GENUINENESS OF TRANSACTION AS TO PURCHASE OF SHARES FURTHER THE OFF MARKET SALE ITO, WARD-2(3), RAJKOT VS. SHRI PARESH VALJIBHAI PIPALIA/ITA NO.1345/RJT/2010/AY: 2007-08 PAGE 6 OF 8 SHARE TRANSACTION IS NOT PROHIBITED BY LAW. THEREFORE, WE HAVE NO REASON TO INTERFERE WITH THE FINDINGS OF THE CIT(A) WHEREIN HE HAS UPHELD THE GROSS BROKERAGE @ 2.5% OF TOTAL TURNOVER. IN VIEW OF THESE FACTS, THIS GROUND OF APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED. 8. GROUND NO.3 RELATES TO DELETION OF THE ADDITION OF RS.3,59,255/- MADE ON ACCOUNT OF UNEXPLAINED UNSECURED LOAN. THE AO HAS MADE AN ADDITION OF RS.2,91,732/- AND RS.67,493/- BEING UNSECURED LOANS RECEIVED FROM M/S.LABDHI FIANCE (NSC) AND M/S.LABDHI FINANCIERS (MCX) RESPECTIVELY, ON ACCOUNT ALLEGED UNEXPLAINED CREDIT. IN APPEAL, THE CIT(A) OBSERVED THAT THE ASSESSEE IS ENGAGED IN THE SHARE DEALING IN BOTH THE SEGMENT OF NSC SHARES AND MCX COMMODITY AND HAS MADE VARIOUS BUSINESS TRANSACTIONS WITH LABDHI FIANCIAL CORPORATION. IT IS NOTICED THAT THE BALANCE OUTSTANDING IS CREDIT BALANCE IN RESPECT OF SUNDRY CREDITORS AND NOT THE UNSECURED LOAN. FURTHER, THE BALANCE OUTSTANDING IN THE BOTH THE ACCOUNTS I.E. NSC AND MCX ACCOUNTS TALLIES. IT IS A FACT ON RECORD THAT THE AO HAS ALSO ACCEPTED THE CREDIT AND DEBIT ENTRIES IN BOTH ACCOUNTS AS GENUINE, THEREFORE THERE IS NO NEED TO TREAT THE CLOSING BALANCE IN THE ACCOUNT AS ITO, WARD-2(3), RAJKOT VS. SHRI PARESH VALJIBHAI PIPALIA/ITA NO.1345/RJT/2010/AY: 2007-08 PAGE 7 OF 8 UNEXPLAINED C ASH CREDIT U/S.68 OF THE ACT. PARTICULARLY, WHEN THE TRANSACTIONS ARE IN THE NATURE OF SALE AND PURCHASE AND NOT THE UNSECURED LOAN, ACCORDINGLY THE ADDITION OF RS.3,59,255/- WAS DELETED. 9. BEING AGGRIEVED, THE REVENUE HAS FILED THIS APPEAL BEFORE THIS TRIBUNAL. THE LD.SR.DR HAS RELIED ON THE ORDER OF THE AO WHEREAS THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE TRANSACTION IS QUESTION IS NOT UNSECURED LOAN, BUT CREDIT BALANCE IN RESPECT OF SUNDRY CREDITORS WITH THE TRANSACTIONS DONE WITH LABDHI FINANCIAL CORPORATION IN RESPECT OF NSC AND MCX. THEREFORE, THE CIT(A) HAS CORRECTLY DELETED THE SAID ADDITION. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND FIND THAT THE TRANSACTIONS UNDER CONSIDERATION ARE NOT UNSECURED LOAN BUT CREDIT BALANCES APPEARING IN THE BALANCE SHEET WHICH ARE TALLIED WITH THE ACCOUNTS OF LABDHI FINANCIAL CORPORATION. THESE BALANCES ARE OUTSTANDING. THEREFORE, THE CIT(A) HAS CORRECTLY FIND THE FACT AND DELETED THE ADDITION, HENCE WE DO NOT FIND ANY FAULT IN THE ORDER OF LD.CIT(A), ACCORDINGLY THIS GROUND OF REVENUE IS DISMISSED. ITO, WARD-2(3), RAJKOT VS. SHRI PARESH VALJIBHAI PIPALIA/ITA NO.1345/RJT/2010/AY: 2007-08 PAGE 8 OF 8 11. GROUND NO.4 AND 5 ARE GENERAL IN NATURE, DOES NOT REQUIRE ANY ADJUDICATION. IN VIEW OF ABOVE, APPEAL OF THE REVENUE IS THEREFORE DISMISSED. 12. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. 13. THE ORDER PRONOUNCED IN THE OPEN COURT ON 07.12.2018. SD/- SD/- ( .. /C.M. GARG) ( .. / O.P.MEENA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER / RAJKOT, DATED : 7 TH DECEMBER , 2018/ S.GANGADHARA RAO, SR.PS COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, RAJKOT