ITO, CHENNAI V. Deepak Kumar Babulal, CHENNAI

ITA 1370/CHNY/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73672 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 18-12-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 19-06-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T N BETGERI JCITD R
• Assessee Lawyers: M KARUNAKARAN
• Keywords: Unexplained investment; Peak credit
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI. ( BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER ) .. I.T.A. NO.1358/MDS/13 ASSESSMENT YEAR : 2009-10 SHRI DEEPAK KUMAR BABULAL, NO.98,VENKATACHALAM MUDALI STREET, PARK TOWN, CHENNAI 600 003. PAN: ADKPD 7916 M (APPELLANT) V. THE INCOME TAX OFFICER, BUSINESS WARD-X(3), CHENNAI-06. (RESPONDENT) I.T.A. NO.1370/MDS/13 ASSESSMENT YEAR : 2009-10 THE INCOME TAX OFFICER, BUSINESS WARD-X(3), CHENNAI-06. (APPELLANT) V. SHRI DEEPAK KUMAR BABULAL, NO.98,VENKATACHALAM MUDALI STREET, PARK TOWN, CHENNAI 600 003. PAN: ADKPD 7916 M (RESPONDENT) ASSESSEE BY : SHRI M.KARUNAKARAN, ADVOCATE REVENUE BY : SHRI T .N.BETGERI, JCIT,D.R. DATE OF HEARING : 18.12.13 DATE OF PRONOUNCEMENT : 04.02.14 ITA NO. 1358 & 1370/MDS/13 MR.DEEPAK KUMAR BABULAL 2 O R D E R PER A.MOHAN ALANKAMONY , ACCOUNTANT MEMBER: THESE TWO APPEALS ARE FILED BY THE ASSESSEE AND THE REVENUE, AGGRIEVED BY THE ORDER OF THE LD. CIT(A)-I V, CHENNAI IN ITA NO.596/2011-12 DATED 12.03.2013 FOR ASSESSMENT YEA R 2009-10 PASSED UNDER SECTION 143(3 ) READ WITH SECTION 147 & SEC.250 OF THE ACT. 2. THE ASSESSEE HAS RAISED SEVERAL ARGUMENTATIVE A ND ELABORATE GROUNDS IN HIS APPEAL, AND THEY ARE BRIEFLY STATED HEREIN-BELOW FOR ADJUDICATION. 1. LD. LD. CIT (A) HAD ERRED BY CONFIRMING THE ADDITION TO THE EXTENT OF ` 36,74,800/- AS UNEXPLAINED INVESTMENT IN SHARES. 2. LD. CIT(A) HAD ERRED BY REMITTING BACK THE IS SUE WITH THE DIRECTION IN REGARD TO THE ADDITION OF ` 2,05,468 TOWARDS PROFIT ON SALE OF SHARES UNDER THE HEAD SHORT TERM CAPITAL GAIN WITHOUT CONSIDERING THE FACT THAT THE GAIN ARR IVED FROM ITA NO. 1358 & 1370/MDS/13 MR.DEEPAK KUMAR BABULAL 3 THE SALE OF SHARES WERE LONG TERM CAPITAL GAIN AND FURTHER EXEMPT U/S. 10(38) OF THE ACT. 3. SIMILARLY THE REVENUE HAS RAISED SEVERAL ARGUME NTATIVE GROUNDS AND THEY ARE CONCISED HEREIN-BELOW FOR OUR CONSIDERATION. 1. LD. CIT (A) HAD ERRED IN DELETING THE ADDITION O N UNEXPLAINED INVESTMENT IN SHARES TO THE TUNE OF ` 9,78,600/-. 2. LD. LD. CIT (A) HAD ERRED IN DIRECTING THE LD. ASSESSING OFFICER TO VERIFY THE FINANCIAL YEAR FOR THE SALE O F SHARES BASED ON FRESH EVIDENCE. 4. THE ASSESSEE IS AN INDIVIDUAL, FILED HIS RETUR N OF INCOME FOR THE A.Y. 2009-10 SUBSEQUENT TO ISSUANCE OF NOTICE U/S. 148 BASED ON THE INFORMATION RECEIVED FROM DY. DIRECTOR OF INVES TIGATION, CHENNAI. ITA NO. 1358 & 1370/MDS/13 MR.DEEPAK KUMAR BABULAL 4 SUBSEQUENTLY THE ASSESSMENT WAS COMPLETED ON 30.12. 2011 WHEREIN LD. ASSESSING OFFICER MADE ADDITION ON ACCOUNT OF:- A) UNEXPLAINED INVESTMENT ON PURCHASE OF SHARES ` 46,53,460/- B) PROFIT ON SALE OF SHARES (SHORT TERM CAPITAL GAI N) ` 2,05,468/- 5. GROUND NO.1 : UNEXPLAINED INVESTMENT IN SHARES ` 46,53,460/- :- DURING THE COURSE OF ASSESSMENT, LD. ASSESSING OF FICER OBSERVED THAT THE ASSESSEE HAD INVESTED IN SHARES F OR ` 46,53,460/-. SINCE THE ASSESSEE COULD NOT EXPLAIN THE SOURCE OF HIS INVESTMENT, LD. ASSESSING OFFICER MADE ADDITION FOR THE AFORE-S TATED SUMS UNDER THE HEAD UNEXPLAINED INVESTMENTS. ON APPEAL, THE LD.CIT (A) WORKED OUT THE PEAK INVESTMENT AT ` 36,74,800/- AND CONFIRMED THE ADDITION FOR RS. 36,74,800/- AND THUS AN AMOUNT OF ` 9,78,660/- WAS DELETED. THE WORKING OF THE PEAK CREDIT ARRIVED AT BY THE LD.CIT(A) IS EXTRACTED HEREIN BELOW FOR REFERENCE:- ITA NO. 1358 & 1370/MDS/13 MR.DEEPAK KUMAR BABULAL 5 DATE AMOUNT INVESTED IN PURCHASE OF SHARES AMOUNT REALIZED ON SALE OF SHARES PEAK INVESTMENT 29.08.08 5,10,000 - 5,10,000 02.09.08 - 5,39,650 (29,650) 04.09.08 17,01,200 - 16,71,550 24.10.08 20,03,250 (I.E.5,84,000 +14,19,250) - 36,74,800 29.10.08 - 14,87,500 21,87,300 06.11.08 2,51,000 3,00,618 21,37,682 21.11.08 1,35,350 - 22,73,032 13.12.08 52,550 - 23,25,582 15.12.08 -- 61,000 22,64,582 TOTAL 46,53,350 23,88,768 6. BEFORE US, LD. A.R. HAS SUBMITTED WRITTEN SUBMI SSIONS, AND THE RELEVANT PORTION OF THE SAME ON THE ISSUE IS REPROD UCED HEREIN BELOW FOR REFERENCE:- THE APPELLANT SUBMITS THAT HE DID NOT PURCHASE ANY SHARES IN THE F.Y.2008-09 AT ALL AND THE SHARES WERE PURCHASE D IN THE F.Y.2007-08 FOR A SUM OF RS.16,25,000/- FROM SRI S.K.KHEMKA. T HIS IS EVIDENCED FROM THETRIAL BALANCE FILED BY THE APPELLANT FOR TH E ASSESSMENT YEAR 2008-09 (AS ON 31/3/2008) WHEREIN THE PURCHASES OF SHARES FROM M/S.ESSAR OIL LTD FOR RS.9,84,450/- AND OF M/S.RELI ANCE NATURAL RESORUCES LTD. FOR RS.6,40,500/- WERE SHOWN AND SRI S.K.KHEMKA WAS SHOWN AS CREDITORS FOR THE SAME AMOUNT. (PAGE 1 -3 OF THE PAPER BOOK). THIS PURCHASE WAS ALSO SUPPORTED BY THE CONTRACT NO TES ISSUED BY THE SAID SRI S K KHEMKA. SHRI S.K. ITA NO. 1358 & 1370/MDS/13 MR.DEEPAK KUMAR BABULAL 6 KHEMKA WAS ALSO PAID THE AMOUNT DUE THROUGH CHEQU ES IN THE SUBSEQUENT YEAR AND THE BANK STATEMENT EVIDENCING T HE SAME WAS ALSO FURNISHED IN THE PAPER BOOK AT PAGE NO.7-8. AS PER THE DOCUMENTARY EVIDENCE FURNISHES, THE SHARES WERE PURCHASED ON 9/ 4/2007. THIS IS ALSO SUPPORTED BY THE LETTER ISSUED BY THE ASST. DIRECTO R OF INCOME- TAX(INVESTIGATION) DATED 16.4.2010 WHEREIN IT WAS C ONFIRMED THAT AS PER THE BROKERS CONTRACT THE SHARES WERE PURCHASES ONL Y ON 9.4.2007. THE APPELLANT SUBMITS THAT THE LOWER AUTHORITIES WERE W RONG IN PRESUMING THAT THE SHARES WERE PURCHASED IN THE F.Y.2008-09 WHEREA S THE SHARES WERE PURCHASED IN THE F.Y.2007-08 FOR RS.16,25,000/- AND DULY BROUGHT INTO THE BOOKS. THE LOWER AUTHORITIES WERE THEREFORE WR ONG IN OBSERVING THAT THE APPELLANT HAD INVESTED RS.46,53,460/- AND THAT TOO IN THE ASSESSMENT YEAR 2008-09 AND IN BRINGING TO TAX THE ALLEGED SUM AS UNEXPLAINED INVESTMENT IN THE ASSESSMENT. THE APPELLANT FURTHER SUBMITS THAT IN THE F.Y.20 08-09 THE SHARES HELD PHYSICALLY WERE PUT INTO DE-MAT ACCOUNT . THE TRANSFER OF SHARES FROM PHYSICAL FORM INTO DE-MAT ACCOUNT CANNO T BE CONSIDERED AS A FRESH PURCHASE OF SHARES AND IT CANNOT BE PRESUME D THAT THE APPELLANT HAD PURCHASED THE SHARES ON THEDATE OF SUCH TRANSFE R AND THAT TOO AT THE PREVAILING MARKET RATE ON THE SAID DATE AMOUNTING T O RS.46,53,460/-. IT MAY BE SEEN FROM THE LETTER OF THE ASST. DIRECTOR O F INCOME TAX(INVG) THAT THE DEPARTMENT PRESUMED THAT THE SHARES WERE PURCHA SED ON THE DATE OF TRANSFER TO DE-MAT ACCOUNT AT THE PREVAILING MARKET RATE AT RS.42,14,450/- . IT IS WELL SETTLED LAW THAT NO ADDITION COULD BE MADE BASED ON PRESUMPTION OF FACTS ESPECIALLY WHEN THE APPELLANT WAS ABLE TO PROVE THAT THE SHARES WERE ACTUALLY PURCHASED FOR A LESSER CON SIDERATION AND THAT TOO IN THE EARLIER PREVIOUS YEAR. THE APPELLANT SUBMITS THAT THE DIFFERENCE BETWEE N THE PURCHASE AMOUNT AS ADOPTED BY THE AO OF RS.46,53,460/- AND R S.42,14,450/- ITA NO. 1358 & 1370/MDS/13 MR.DEEPAK KUMAR BABULAL 7 ADOPTED BY THE INVESTIGATION WING AMOUNTED TO RS.4, 39,010/-. THIS IS DUE TO THE FACT THAT THE SHARES OF M/S.RELIANCE NAT URAL RESOURCES LTD. PURCHASED WAS ONLY 35000 SHARES FOR RS.14,19,250/- AS NOTED BY THE INVESTIGATION WING WHEREAS THE ASSESSING OFFICER TO OK THE NUMBER OF SHARES AT 45000 (35000+5400+3600+1000) THUS A SUM O F RS.4,39,010/- WAS WRONGLY TAKEN AS UNEXPLAINED INVESTMENT BY THE AO IN ANY VIEW OF THE MATTER. THE APPELLANT SUBMITS IN THE APPEAL PREFERRED AG AINST THE UNEXPLAINED INVESTMENT IN SHARES OF RS.46,53,460/- THE COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT ONLY PEAK INVESTMENT S SHOULD BE ASSESSED AND NOT THE ENTIRE COST OF THE SHARES. HE HAS ALLOWED SET OFF OF THE SALE CONSIDERATION RECEIVED ON SALE OF SUCH SHA RES WHILE WORKING OUT THE PEAK INVESTMENTS AND ARRIVED AT THE PEAK AT RS. 36,74,800/-. HOWEVER, IN A NOTE IN THE SAID ORDER HE HAS OBSERVE D AS UNDER:- HOWEVER, IF DATES OF SALE ARE MISTAKENLY MENTIONED AS 05-09-2009 AND 25.11.2009 INSTEAD OF THE ACTUAL SALE DATES OF 05.09.2008 AND 25.11.2008 IT WILL AMOUNT TO SHORT TERM CAPITAL G AINS. THE AO IS REQUIRED TO LOOK INTO THIS ASPECT AND IF FOUND SO, THE AO MAY TREAT THE ABOVE GAINS AS SHORT TERM CAPITAL GAIN ONLY. IN TH AT CASE, THE AO IS ALSO REQUIRED TO RECOMPUTED THE PEAK INVESTMENTS BY CONSIDERING THE ABOVE SALES AS THE SALE OF THE FY 2008-09 FOR THE P URPOSE OF PARA(A) ABOVE. HOWEVER, THE PEAK INVESTMENTS WILL REMAIN AT RS.36,74,800 AS ON 24.10.2008. THE AO WHILE GIVING EFFECT TO THE APPELLANT ORDER F O THE LD. CIT (A) FOUND THAT THE ACTUAL DATES OF SALES WERE 05.09.2008 AND 25.11.2008 AND ACCORDINGLY BROUGHT THE PROFIT AS SHORT TERM CAPITA L GAINS. THE APPELLANT SUBMITS THAT THE PEAK OF RS.36,74,800/- WAS ARRIVED AT BY THE LD. CIT (A) AS ON 24.10.2008. IF THE SALES AS ON 5.9.2008 OF R S.17,13,680/- IS ALSO CONSIDERED, THE PEAK INVESTMENT IN SHARES WOULD BE GET REDUCED BY THE ITA NO. 1358 & 1370/MDS/13 MR.DEEPAK KUMAR BABULAL 8 SAID AMOUNT AND THE PEAK PURCHASE WOULD ONLY BE RS. 19,61,120/- THE LD. CIT (A) WAS THEREFORE, NOT CORRECT IN DETERMINI NG THE PEAK INVESTMENT AT RS.36,74,800/- AGAINST THE CORRECT AMOUNT OF RS .19,61,120/- THIS IS WITHOUT PREJUDICE TO THE SUBMISSION MADE AS ABOVE T HAT THERE ARE NO UNEXPLAINED INVESTMENTS IN SHARES AND THE ENTIRE AM OUNT WAS DULY REFLECTED IN THE BOOKS OF ACCOUNTS IN FULL. AGAINST THE RELIEF GRANTED BY THE LD. CIT (A) ON THIS GROUND, THE DEPARTMENT CAME IN APPEAL BEFORE THIS HONBE ITAT O N THE GROUND THAT THE PEAK CREDIT METHOD WOULD NOT BE AVAILABLE TO TH E APPELLANT AS REGULAR BOOKS OF ACCOUNTS WERE MAINTAINED BY THE APPELLANT. THE ASSESSEE SUBMITS THAT THE AMOUNT WAS ADDED AS UNEXPLAINED IN VESTMENT IN SHARES AND THEREFORE THE ALLEGED UNEXPLAINED AMOUNT ACTUAL LY INVESTED SHOULD BE DETERMINED AND WHILE DOING SO, THERE IS NOTHING WRONG IN TELESCOPING THE AMOUNTS AVAILABLE BY WAY OF SALE OF SHARES FOR FUTURE INVESTMENT IN SUCH SHARES. THE THEORY OF ASSESSING PEAK CREDIT W AS WELL ACCEPTED BY THE DEPARTMENT AND THEREFORE THIS GROUND OF THE DEP ARTMENT MAY BE DISMISSED. THIS GROUND MAY NOT EVEN SUSTAIN ONCE I T IS HELD THAT THE INVESTMENT IN SHARES WERE MADE ONLY IN THE ASSESSME NT YEAR 2008-09 AND NOT IN THE A.Y.2009-10 AS THERE WOULD BE NO UNE XPLAINED INVESTMENT AT ALL FOR CONSIDERATION IN THE ASSESSMENT YEAR 200 9-10. 7. CONSIDERING THE WRITTEN SUBMISSIONS, AND THE FA CTS OF THE CASE WE ARE OF THE OPINION THAT IN THE INTEREST OF JUSTI CE, THE MATTER HAS TO BE REMITTED BACK TO THE FILE OF THE LD. ASSESSING O FFICER SINCE ALL THE ARGUMENTS RAISED BY THE ASSESSEE IN HIS WRITTEN SUB MISSIONS WERE NOT CONSIDERED BY THE REVENUE. ACCORDINGLY WE HER EBY REMIT BACK ITA NO. 1358 & 1370/MDS/13 MR.DEEPAK KUMAR BABULAL 9 THE MATTER TO THE FILE OF THE LD. ASSESSING OFFICER FOR DE NOVO CONSIDERATION. 8. GROUND NO.2 : PROFIT ON SALE OF SHARES ` 2,05,468/- :- LD. ASSESSING OFFICER ARRIVED AT A FIGURE OF ` 2,05,468/- AS SHORT TERM CAPITAL GAINS EARNED BY THE ASSESSEE DURING TH E RELEVANT PREVIOUS YEAR. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED HEREIN BELOW:- DATE OF PURCHASE SHA RES PURCHASE VALUE IN RS. DATE OF SALE **SALE VALUE IN RS. SHORT TERM CAPITAL GAIN 29.08.2008 255 @ RS.2.04 PER SHARE 5,10,000 02.09.08 5,39,650(2,500 @ RS. 21,586) 29,650 04.09.2008 8000 @ RS.212.65 . PER SHARE 17,01,200 05.09.09 17,13,680 (RS.8000 @ RS.214.21) 12,480 24.10.2008 10000 @ RS.58.40 PER SHARE 5,84,000 27.10.09 6,09,600 (1,000 @ RS.60.96 PER SHARE) TOTAL 27,95,200 28,62,930 RELIANCE NATURAL RESOURCES LTD. ITA NO. 1358 & 1370/MDS/13 MR.DEEPAK KUMAR BABULAL 10 DATE OF PURCHASE SHARES PURCHASE VALUE IN RS. DATE OF SALE **SALE VALUE IN RS. SHORT TERM CAPITAL GAIN 24.10.2008 35,000 @ RS.40.55 PER SHARE 14,19,250 29.10.08 10,62,500 (25,000 @ RS.42.50 PER SHARE 68,250 - -- - -- 4,25,000 ( 10,000 @ RS.42.50 PER SHARE) -- 06.11.2008 5400@ RS.46.50 PER SHARE 2,51,000 06.11.08 3,00,618 ( 5400 @ RS.55.67) 49,518 21.11.2008 3600 @ RS.37.50 PER SHARE 1,35,350 25.11.09 1,46,880 (3,600 @ RS.30.80) 11,520 13.12.2008 1000 @ RS.52.55 PER SHARE 52,550 15.12.08 61,000 (1000 @ RS.61) 8,450 TOTAL 18,58,260 19,95,998 1,37,738 GRAND TOTAL OF ESSAR OIL & RNRL 46,53,460 48,58,928 2,05,468 ITA NO. 1358 & 1370/MDS/13 MR.DEEPAK KUMAR BABULAL 11 9. LD. CIT(A) AFTER EXAMINING THE COMPUTATION OF LD. ASSESSING OFFICER OBSERVED AS UNDER:- NOTE: HOWEVER, IF DATES OF SALE ARE MISTAKENLY MENTIONED AS 05.09.2009 AND 25.11.2009 INSTEAD OF THE ACTUAL SALE DATES OF 05.09.2008 AND 25.11.2008, IT WILL AMO UNT TO SHORT TERM CAPITAL GAINS. THE A.O IS REQUIRED TO L OOK INTO THIS ASPECT, AND IF FOUND SO, THE AO MAY TREAT THE ABOVE GAINS AS SHORT TERM CAPITAL GAINS ONLY. IN THAT CASE, THE A O IS ALSO REQUIRED TO RECOMPUTED THE PEAK INVESTMENTS BY CONS IDERING THE ABOVE SALES AS THE SALES OF THE FINANCIAL YEAR 2008-09, FOR THE PURPOSE OF PARA (A) ABOVE. HOWEVER, THE PEA K INVESTMENTS WILL REMAIN AT RS.36,74,800/- AS ON 24. 10.2008. FROM THE ORDER OF THE LD.CIT (A), IT IS EVIDENT THA T HE HAS ONLY DIRECTED THE LD. ASSESSING OFFICER TO VERIFY THE RE LEVANT DATES AND RE- COMPUTE THE INCOME AS PER MERITS AND FACTS OF THE C ASE. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD .CIT (A). HOWEVER AS PRAYED BY THE ASSESSEE, THE LD. ASSESSING OFFICER I S DIRECTED TO LOOK INTO THE ISSUE CONSIDERING THE PROVISIONS OF THE SE C.10 (38) OF THE ACT. ACCORDINGLY, THIS GROUND RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 10. REVENUES APPEAL :- SINCE THE FIRST GROUND OF THE REVENUES APPEAL IS INTER RELATED TO THE GROUND RAISED BY THE ASSESSEE AND THE SAME IS R EMITTED BACK TO ITA NO. 1358 & 1370/MDS/13 MR.DEEPAK KUMAR BABULAL 12 THE FILE OF THE LD. ASSESSING OFFICER FOR DE NOVO C ONSIDERATION IN THE ASSESSEES APPEAL SUPRA, AND FURTHER THE SECOND GRO UND OF THE REVENUE RELATES TO, GRANTING OPPORTUNITY TO THE LD. ASSESSING OFFICER FOR THE FRESH CLAIMS MADE BEFORE THE LD. CIT(A), WE FIND IT APPROPRIATE TO REMIT BACK THE REVENUES APPEAL ALSO BACK TO THE FILE OF THE LD. ASSESSING OFFICER FOR DE NOVO CONSIDERATION. IT IS ORDERED ACCORDINGLY. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL OF REVENUE IS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 4 TH FEBRUARY, 2014 AT CHENNAI. SD/- SD/- (V. DURGA RAO) (A.MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 4 TH FEBRUARY, 2014. K S SUNDARAM. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE