Smt. Sarwariben Mukesh Agarwal, Ahmedabad V. The ACIT.,Circle-7, Ahmedabad

ITA 1551/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94359 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 17-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 02-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VILAS SHINDE
• Assessee Lawyers: S N SOPARKAR
• Keywords: Capital asset; Business income
• Section: 143(3); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: S H RI G. D. AGRAWAL , VICE PRESIDENT AND SHR I S. S. GODARA , JUDICIAL MEMBER SMT. SARWARIBEN MUKESH AGARWAL, 4 TH FLOOR , COMMERCE HOUSE, OPP. RAJVANSH APARTMENT , BODAKDEV AHMEDABAD (APPELLANT) VS ACIT, CIRLCE - 7, AHMEDABAD (RESPONDENT) REVENUE BY : S H RI VILAS SHINDE , SR. D . R. ASSESSEE BY: S H RI S.N. SOPARKAR , A.R. DATE OF HEARING : 17 - 08 - 2 015 DATE OF PRONOUNCEMENT : 26 - 08 - 2 015 / ORDER P ER : S. S. GODARA , JUDICIAL MEMBER : - THIS REVENUE S APPEAL FOR A.Y. 2007 - 08, AR ISES FROM ORDER OF THE CIT(A) - VI, AHMEDABAD DATED 15 - 04 - 2011 IN APPEAL NO. CIT(A) - VI/CIR.7 / 59/ 09 - 10, IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. I T A NO . 1551 / A HD/20 11 A SSESSMENT YEAR 200 7 - 08 I.T.A NO. 1551 /AHD/20 11 A.Y. 2007 - 08 PAGE NO SMT. SARWARIBEN MUKESH AGARWAL VS. ACIT 2 2. THE ASSESSEE S SOLE S UBSTANTIVE GROUND CHALLENGES THE CIT (A) S ACTION IN UPHOLDING ASSESSMENT OF RS . 37,72,996/ - AS SHORT TERM CAPITAL GAINS ON ACCOUNT OF PROFITS DERIVED F R O M SALE OF SHARES DESPITE THE FACT THAT THE SAME STOOD APPROPRIATE D IN SEBI S FAVOUR. THE ASSESSEE - INDI VIDUAL FILED HER RETURN ON 31/07/2007 . SHE HAD SOLD 44,362/ - SHARES OF NISSAN COPPER LIMITED THROUGH A BROKER FOR RS. 57,47,11.4/ - RESULTING IN THE IMPUGNED PROFITS. HER CASE THROUGHOUT HAS BEEN THAT THE ABOVESTATED CONSIDERATION WAS NOT RECEIVED AS PER SEBI S IMPOUNDING INSTRUCTION S . SHE WOULD INCORPORATE A NOTE ALONG WITH RETURN DULY CL ARIFYING ALL OF THE SEBI S PROCEEDINGS PRAYING THAT IF THE SAME GO AGAINST HER , NECESSARY REFUND BE ORDERED. IT IS EVIDENT FORM PA G ES 97 - 98 OF THE PAPER BOOK THAT SE BI S PROCEEDINGS ATTAINED FINALITY ON 26 - 03 - 2009 WH E REIN ASSESSEE SETTLED THE ISSUE FOR PAYMENT FOR RS . 40,36,942/ - EXCEEDING THE IMPUGNED CAPITAL GAINS SUM OF RS. 37,72,996/ - . HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT HER ABOVE SATED NOTE AND STILL T AXED HER CAPITAL GAIN IN ASSESSMENT ORDER DATED 22/12/2009. 3. THE COMMISSIONER OF INCOME TAX(A) HAS UPHELD THE ASSESSING OFFICER S ACTION AS FOLLOWS: - 2.2 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSESSMENT ORDER AND APPELLANT'S SUBMISSION. APPELLANT D ISCLOSED CAPITAL GAIN ON SALE OF SHARES OF NISSAN COPPER LTD. THE SHARES WERE PURCHASED AND SOLD DURING THE YEAR THROUGH SHARE BROKER FROM STOCK EXCHANGE. BROKER HAS ISSUED CONTRACT NOTES AND BILLS FOR SUCH TRANSACTIONS. IN VIEW OF THESE EVIDENCES, IT IS C LEAR THAT CAPITAL ASSET IN THE FORM OF SHARES WERE PURCHASED AND SOLD DURING THE YEAR AND ACCORDINGLY THE DIFFERENCE IS LIABLE FOR CAPITAL GAIN TAX. APPELLANT HAS RIGHTLY DISCLOSED I.T.A NO. 1551 /AHD/20 11 A.Y. 2007 - 08 PAGE NO SMT. SARWARIBEN MUKESH AGARWAL VS. ACIT 3 THE CAPITAL GAIN ON THE BASIS OF PURCHASES AND SALE BILLS ISSUED BY SHARE B ROKER. CONSIDERING THE MANIPULATION IN SHARE PRICES, SEBI INVESTIGATED THE MATTER AND PENDING SUCH INVESTIGATION, WITHHELD THE PAYMENT TO THE APPELLANT. APPELLANT WROTE A NOTE IN THE COMPUTATION OF INCOME AS REFERRED BY THE APPELLANT IN ITS SUBMISSION. AS PER THIS NOTE IF APPELLANT'S MONEY IS FINALLY HELD TO BE NOT PAYABLE BY SEBI THEN CAPITAL GAINS SHOULD NOT BE TAXED. SEBI PASSED ORDER IN 2009 IN WHICH CONSENT APPLICATION OF THE APPELLANT WAS ACCEPTED. IN THE SAID CONSENT APPLICATION, APPELLANT AGREED TO TRANSFER THE AMOUNT WITHHELD TO SEBI TOWARDS SETTLEMENT CHARGES. THEREFORE IT IS CLEAR THAT APPELLANT VOLUNTARILY TRANSFERRED THE WITHHELD MONEY TO SEBI. THE TRANSACTIONS WERE NOT DECLARED NULL AND VOID BY THE SEBI AND AS SUCH PURCHASE AND SALE OF SHARES A RE VALID AND NOT HELD TO BE ILLEGAL BY THE SEBI. IN THE LIGHT OF ABOVE FACTS, IT IS CLEAR THAT APPELLANT EARNED CAPITAL GAIN DURING THIS YEAR AND BY CONSENT TERM TRANSFERRED THE CAPITAL GAIN TO SEBI TOWARDS SETTLEMENT CHARGES. BY AGREEING TO TRANSFER CAPIT AL GAIN, APPELLANT CANNOT CLAIM THAT IT HAD NOT EARNED CAPITAL GAIN. THE MOMENT SALE TRANSACTION IS COMPLETE, CAPITAL GAINS IS LIABLE TO TAX. PAYMENT OR RECEIPT OF SALE CONSIDERATION IS NOT REQUIRED FOR CHARGING CAPITAL GAIN. UNDOUBTEDLY SALE TRANSACTION W AS COMPLETE DURING THE YEAR. PAYMENT WAS NOT RECEIVED BUT THE SAME IS NOT REQUIRED TO TAX CAPITAL GAIN. SEBI HAS NOT PASSED ANY ORDER BY WHICH THE APPELLANT'S TRANSACTIONS WERE HELD TO BE ILLEGAL OR NULL AND VOID. ACCORDINGLY THE CAPITAL GAIN RESULTING OUT OF PURCHASES AND SALE OF SHARES WAS CORRECTLY OFFERED FOR TAX BY THE APPELLANT AND ASSESSING OFFICER HAS CORRECTLY TAXED THE SAME. THERE IS NO NECESSITY FOR ASSESSING OFFICER TO DEAL WITH EACH AND EVERY NOTE WRITTEN BY ASSESSEES IN COMPUTATION OF INCOME. SINCE CAPITAL GAIN ACCRUED TO THE APPELLANT DURING THIS YEAR, THE SAME WAS TAXABLE IN ASSESSMENT YEAR 2007 - 08 ONLY. NON - RECEIPT OF CAPITAL GAIN IN 2009 CANNOT DETERMINE THE TAXABILITY OF CAPITAL GAIN IN 2007 - 08. SINCE APPELLANT HERSELF AGREED FOR TRANSFER OF WITHHELD FUNDS, SHE CANNOT CLAIM THAT THE TRANSACTIONS FOR HELD TO BE NOT GENUINE BY SEBI. THERE IS NO PROVISION UNDER CAPITAL GAINS HEAD TO ALLOW LOSS SUFFERED SUBSEQUENTLY ON ACCOUNT OF NON - RECEIPT OF SALE CONSIDERATION. THERE IS NO QUESTION OF REAL I NCOME IN THE CASE OF APPELLANT SINCE PROVISIONS OF CAPITAL GAIN ARE CLEAR AND UNAMBIGUOUS. IN VIEW OF THIS THE SUBMISSION OF THE APPELLANT IS NOT OF ANY HELP. ACCORDINGLY THIS GROUND OF THE APPELLANT IS REJECTED. IN THE FINAL RESULT APPEAL IS DISMISSED. I.T.A NO. 1551 /AHD/20 11 A.Y. 2007 - 08 PAGE NO SMT. SARWARIBEN MUKESH AGARWAL VS. ACIT 4 4 . WE HAVE HEARD BOTH T HE PARTIES AND GONE THROUGH CASE FILE. THE ASSESSEE S STRONGLY ARGUES AGAINST TAXATION OF HER SHORT TERM CAPITAL GAINS IN VIEW OF THE SEB I S DIS GO R G ING ORDER. THE REVENUE S CASE IN THE LIGHT OF COMMISSIONER OF INCOME TAX(A) S ORDER I S THA T THE SAME AROSE IN S UCCEEDING ASSESSMENT YEARS ONLY WHICH IS NOT RELEVANT FOR THE RELEVANT PREVIOUS YEAR. IT TRANSPIRES THAT A CO - ORDINATE BE N CH OF THE TRIBUNAL IN ITA NO. 573/AHD/2010 MONAL THAPPAR VS. A CIT DECIDED ON 24/07/2015 HAS DELETED AN IDE NTICAL ASSESSMENT OF CAPITAL GAINS IN VIEW OF SEB I S DISGORGING PROCEEDINGS FINALIZED IN SUCCEEDING ASSESSMENT YEAR AS UNDER: - 12. IN VIEW OF THE ABOVE DISCUSSIONS, FOUR ISSUES EMERGE OUT FOR OUR ADJUDICATION, NAMELY, (A) WHETHER THE GAIN ARISEN T O BOTH THE ASSESSEES ON PURCHASE AND SALE OF SHARES IS TO BE ASSESSED UNDER THE HEAD 'CAPITAL GAINS' OR 'BUSINESS INCOME' ? (B) WHETHER AFTER DISGORGEMENT OF RS.30,98,785/ - BY SMT. REETABEN R. THAKKAR AND RS.29,17,331/ - BY SHRI MONAL Y. THAKKAR, NO AMO UNTS LEFT IN THEIR HANDS, THEREFORE, WHETHER THE INCOME TO THIS EXTEND IS TO BE ASSESSED IN THE HANDS OF BOTH THESE ASSESSEES, EITHER UNDER THE HEAD 'BUSINESS INCOME' OR UNDER THE H EAD 'CAPITAL GAINS' ? X X X X X X X X X X X X X X X X X X 13. THE ID. COUNSEL FOR THE ASSESSEE, WHILE IMPUGNING THE ORDERS OF THE CIT(A) CONTENDED THAT THE ACTIVITY OF THE ASSESSEE IN THE PURCHASE AND SALE OF SHARES IS OF INVESTMENT IN THE SHARES, AND IT CANNOT BE ASSESSED UNDER THE HEAD 'BUSINESS INCOME'. ALTERN ATIVELY, ON THE STRENGTH OF SEBI ORDER, HE CONTENDED THAT NO INCOME ULTIMATELY RESULTED TO BOTH THE ASSESSEE, THEREFORE, THE AMOUNT OF RS. RS.30,98,785/ - AND RS.29,17,331/ - IS TO BE EXCLUDED FROM THE ASSESSMENTS, OF BOTH THESE ASSESSEES, RESPECTIVELY IN TH E ASSTT.YEAR 2006 - 07. HE FURTHER CONTENDED THAT CAPITAL GAIN IS I.T.A NO. 1551 /AHD/20 11 A.Y. 2007 - 08 PAGE NO SMT. SARWARIBEN MUKESH AGARWAL VS. ACIT 5 ASSESSED UNDER THE HEAD 'BUSINESS INCOME' BY THE ID. CIT(A). CONSEQUENTLY, LOSS ON ACCOUNT OF REPAYMENT OF THIS INCOME TO THE SEBI IS TO BE ALLOWED TO THE ASSESSEES. THE PAYMENT HAS BEEN MADE IN THE ASSTT.YEAR 2009 - 10, THEREFORE, THIS AMOUNT IS TO BE ALLOWED TO THE ASSESSEES IN THE ASSTT.YEAR 2009 - 10. 14. AS FAR AS THE SETTLEMENT CHARGES ARE CONCERNED, HE CONTENDED THAT PAYMENT WAS NOT .MADE FOR VIOLATION OF ANY LAW. IT WAS PAID FOR SETTLEMENT OF DISPUTE WITH THE SEBI AND IT IS COMPENSATORY IN NATURE. IT DOES NOT COME WITHIN THE AMBIT OF EXPLANATION - 1 APPENDED TO SECTION 37 OF THE INCOME TAX ACT. THEREFORE, THE SETTLEMENT CHARGES PAID BY THESE ASSESSEES DESERVE TO BE ALLOWED TO THE ASSESSEES. I N SUPPORT OF HIS CONTENTIONS, HE RELIED UPON THE ORDER OF THE ITAT, MUMBAI IN THE CASE OF KAIRA CAN COMPANY LTD. VS. DCIT, 127 TTJ 514 (MUM). 15. ON THE OTHER HAND, THE ID. DR RELIED UPON THE ORDERS OF THE HUE AUTHORITIES BELOW. SHE CONTENDED THAT SEBI OR DER WAS PASSED AFTER THE END OF THE ACCOUNTING PERIOD, AND THEREFORE, BEFORE THE SEBI ORDER, THE INCOME HAD RESULTED TO BOTH THE ASSESSEES. ASSESSEES HAVE MADE INVESTMENT OF RS.4 CRORES AND RS.2.8 CRORES BY FINANCING BENAMI INVESTORS. THIS SHOWS THEIR MODU S OPERANDI AND HOW THEY HAVE UNDERTAKEN THE ACTIVITY IN AN ORGANIZED MANNER. IT IS TO BE ASSESSED AS BUSINESS INCOME. SHE FURTHER CONTENDED THAT AS FAR AS SETTLEMENT CHARGES ARE CONCERNED, THESE ARE PAID BY THE ASSESSEE IN VIOLATION OF SEBI RULES. THESE AR E IN VIOLATION OF RULES, AND THEREFORE, NOT COMPENSATORY IN NATURE. ALTERNATIVELY, SHE CONTENDED THAT IF THE ALTERNATIVE CONTENTION OF THE ASSESSEES IS ACCEPTED BY THE REVENUE, THEN THERE IS NO INCOME LEFT WITH THE ASSESSEE, AGAINST WHOM THEY CAN CLAIM SET TLEMENT CHARGES. 16. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS, AND GONE THROUGH THE RECORD CAREFULLY. FROM THE FINDINGS OF THE SEBI, IT IS IMPLICIT CLEAR THAT BOTH THE ASSESSEES HAVE INDULGED IN VIOLATION OF SEBI REGULATIONS, WHILE MAKING INVESTMENTS IN IPOS. WHATEVER AMOUNTS THEY HAVE ILLEGALLY EARNED, WHICH COULD BE ASSESSED AS THEIR INCO ME/, HAS BEEN TAKEN AWAY FROM THEM. THEY HAVE ALREADY DISGORGED THE AMOUNT, THOUGH, THE PAYMENT WAS MADE AFTER THE CLOSE OF ACCOUNTING YEAR, AND EVEN AFTER PASSING OF T HE ASSESSMENT ORDER. BUT THESE PAYMENTS RELATED TO SAME SHARE TRANSACTIONS, WHICH HAVE GIVEN RISE TO THE ALLEGED INCOME IN THE HANDS OF THE ASSESSEE. THE APPEAL BEFORE THE CIT(A) IS A CONTINUATION OF THE ORIGINAL I.T.A NO. 1551 /AHD/20 11 A.Y. 2007 - 08 PAGE NO SMT. SARWARIBEN MUKESH AGARWAL VS. ACIT 6 PROCEEDINGS. BEFORE THE CIT(A), THE ASSESSE E HAVE ALREADY TAKEN ADDITIONAL GROUNDS OF APPEAL ON THE STRENGTH OF THE SEBI ORDER. THEREFORE, WE FIND FORCE IN THE CONTENTIONS OF THE ID. COUNSEL FOR THE ASSESSEE THAT ULTIMATELY NO INCOME HAS RESULTED TO THE ASSESSEES, OUT OF THESE SHARE TRANSACTIONS. T HE INCOME OF RS.30,98,785/ - AND RS.29,17,331/ - IS TO BE EXCLUDED FROM THE HANDS OF SMT.REETABEN R. THAKKAR AND SHRI MONAL Y. THAKKAR RESPECTIVELY IN THE ASSTT.YEAR 2006 - 07. THE R EVENUE FAILS TO POINT OUT ANY DISTINCTION ON FACTS. WE FOLLOW ABOVE EXTRACT ED DECISION OF THE LEARNED CO - ORDINATE BENCH IN THE VERY ISSUE A N D DELETE THE IMPUGNED ADDITION ACCORDINGLY. IT IS MADE CLEAR THAT THE ASSESSE WOULD GET RELIEF OF RS. 37,72,996/ - OUT OF THE TOTAL SETTLEMENT SUM OF RS. 40,36,942/ - . HER SOLE SUBSTANTIVE GRO UND SUCCEEDS. 5 . THIS ASSESSEE S APPEAL IS ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 26 - 08 - 2015 SD/ - SD/ - ( G.D. AGRAWAL ) ( S. S. GODARA ) VICE PRESIDENT JUDICIAL MEMBER AHMEDABAD : DATED 26 /08 /2015 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. I.T.A NO. 1551 /AHD/20 11 A.Y. 2007 - 08 PAGE NO SMT. SARWARIBEN MUKESH AGARWAL VS. ACIT 7 BY ORDER/ , / ,