The DCIT, Circle-1, Surat V. Himson Industrial Ceramics Pvt.Ltd., Surat

ITA 1594/AHD/2011

• Counselvise Citation: 159420514 RSA 2011
• Duration Of Justice: 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2005-2006
• Appeal Filed On: 09-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K PATEL
• Keywords: Share purchase agreement
• Section: 143(3)

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , .'.#$%, '& ' ' BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ./ I.T.A. NO.1594/AHD/2011 ( ) * ) * ) * ) * / / / / ASSESSMENT YEAR : 2005-06) THE DY.CIT CIRCLE-1 SURAT ) ) ) ) / VS. M/S.HIMSON INDUSTRIAL CERAMICS PVT.LTD. HIRALAL COLONY, A.K. ROAD SURAT + '& ./,- ./ PAN/GIR NO. : AAACH 5829 F ( +. / // / APPELLANT ) .. ( /0+. / RESPONDENT ) +. 1 ' / APPELLANT BY : SHRI A.K. PATEL, D.R. /0+. 2 1 ' / RESPONDENT BY : -NONE- (WRITTEN SUBMISSION) )3 2 & / / / / DATE OF HEARING : 30/09/2011 4$* 2 & / DATE OF PRONOUNCEMENT : 21/10/2011 '5 / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WHI CH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-I, SURAT DAT ED 09/03/2011 AND THE SOLITARY SUBSTANTIAL GROUND READS AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN CANCELING THE PENALTY IMPOSED B Y THE A.O. U/S.271(1)(C) OF THE I.T. ACT OF RS.6,98,070/- IN SPITE OF THE FACT THAT THE SHARE TRANSACTIONS WAS NOT DONE BY THE ASS ESSEE THROUGH THE BOMBAY STOCK EXCHANGE IN DEMAT FORM AS PER PROV ISO TO SECTION 112(1)(D) AND THEREBY THE ASSESSEE HAD CONS CIOUSLY & ITA NO.1594/AHD /2011 DY.CIT VS. M/S.HIMSON INDUSTRIAL CERAMICS P.LTD. ASST.YEAR - 2005-06 - 2 - DELIBERATELY FURNISHED INACCURATE PARTICULARS OF IN COME IN RESPECT OF LTCG TO THE EXTENT OF RS.19,07,688/-. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S. 143(3) OF THE I.T. ACT, 1961 DATED 17/ 12/2007 AND PENALTY ORDER PASSED U/S.271(1)(C) OF THE ACT DATED 18/03/2 010 WERE THAT THE ASSESSEE-COMPANY DURING THE YEAR WAS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF CERAMIC GUIDES. DURING T HE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN GROSS PROFIT OF RS.68,22,532/- ON TOTAL TURNOVER OF RS.3,33,92,825/- WHICH WORKS OUT TO 20.43% AS AGAINST G.P. OF 24% ON TOTAL TURNOVER OF RS.3,77,82,041/-. THE ASSESSING OFFICER NOTED THAT DURING THE YEAR UNDER CONSIDERAT ION THE ASSESSEE SHOWN LONG-TERM CAPITAL GAIN OF RS.19,07,688/- ON SALE OF SHARES. THE DETAILS OF THE TRANSACTIONS ARE AS UNDER:- NAME OF THE COMPANY NAME OF THE BROKER THROUGH WHOM SHARE WERE SOLED NAME OF THE EXCHANGE IN WHICH BROKER IS A MEMBER DATE OF TRANSACTION FAST TRACK ENTERTAINMENT LTD. KISAN RATILAL CHOKSEY SHARES & SECURITIES PVT.LTD. BOMBAY, STOCK EXCHANGE 25.06.2004 -DO- -DO- -DO- 30.06.2004 -DO- -DO- -DO- 05.07.2004 2.1. HOWEVER, THE AO HAD WRITTEN A LETTER FOR TH E CONFIRMATION OF THOSE TRANSACTIONS BUT EVEN AFTER THE THOROUGH ENQUIRY HE WAS NOT SATISFIED AND ASSESSED THE SAME AS UNDISCLOSED INCOME. THE MAT TER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY WHO HAS CONFI RMED THE ACTION OF THE ITA NO.1594/AHD /2011 DY.CIT VS. M/S.HIMSON INDUSTRIAL CERAMICS P.LTD. ASST.YEAR - 2005-06 - 3 - AO AND THE MATTER HAD GONE BEFORE THE TRIBUNAL AND VIDE AN ORDER DATED 10/06/2011 VIDE ITA NO.153/AHD/2009, ITAT BENCH D (A.Y. 2005- 06) REVERSED THE FINDINGS AND ALLOWED THE APPEAL OF THE ASSESSEE. 3. AS FAR AS THE PENALTY PROCEEDINGS ARE CONCERNED, ON APPEAL, THE LEARNED CIT(APPEALS) HAS CANCELLED THE PENALTY IMPO SED BY THE ASSESSING OFFICER BY OBSERVING AS UNDER:- DECISION : THE RIVAL SUBMISSIONS HAVE BEEN CONSIDERED AND REL EVANT LEGAL PROVISIONS AND JUDGEMENTS QUOTED HAVE BEEN TA KEN INTO ACCOUNT. THERE IS CONSIDERABLE FORCE IN THE ARGUMENTS OF THE APPELLANT. IT HAS CONCLUSIVELY ESTABLISHED THAT SHARES WERE PURCHASED. FOR THIS A BROKER NOTE WAS FURNISHED. AFTER PURCHASE THE SHARES WERE DEMATTED BY THE APPE LLANTS WITH NSDL. THE SALE OF SHARES ARE ALSO REFLECTED I N DEMAT ACCOUNT. THE A.O. HAS NOT BEEN ABLE TO PROVE THAT DEMATTING OF SHARES IS A SHAM TRANSACTION. IN FACT, THE A.O. DOES NOT EVEN WHISPER ABOUT DEMAT A/C BEING BOGUS. IF THE D EMAT A/C WITH NSDL, A GOVERNMENT AGENCY, IS TRUE AND GEN UINE (NOBODY HAS QUESTIONED ITS GENUINENESS), THE SHARE TRANSACTIONS CANNOT BE HELD TO BE A SHAM TRANSACTIO N. THE APPELLANT HAS PUT FORTH ALL FACTS BEFORE A.O. ON THE BASIS OF APPELLANTS ARGUMENT AND ALL THE ABO VE, IT IS HELD THAT THIS IS NOT A FIT CASE FOR IMPOSITION OF PENALTY U/S.271(1)(C) OF THE I.T. ACT. ACCORDINGLY, PENALT Y IS CANCELLED. 4. WE HAVE HEARD THE LD.DR AND PERUSED THE WRITTEN SUBMISSIONS OF THE ASSESSEE. ONCE A VIEW HAS ALREADY BEEN IN QUA NTUM APPEAL BY THE RESPECTED COORDINATE BENCH AND DELETED THE ADDITION , THEREFORE THERE IS NO OCCASION FOR LEVY OF CONCEALMENT PENALTY. FOR T HE SAKE OF READY ITA NO.1594/AHD /2011 DY.CIT VS. M/S.HIMSON INDUSTRIAL CERAMICS P.LTD. ASST.YEAR - 2005-06 - 4 - REFERENCE, RELEVANT PARAGRAPH OF THE TRIBUNAL, ORDE R CITED SUPRA, IS REPRODUCED BELOW THROUGH WHICH THE IMPUGNED QUANTUM ADDITION WAS DELETED:- 6. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. WE HAVE ALSO PERUSED THE ORDERS OF THE AUTHORITIES BELOW IN THE LIGHT OF THE COMPILATION FILED. THE COMPILATION CONTAINED THE CONTRACT NOTE IN RESPECT OF PURCHASE OF SHARES. THE COMPILATION ALS O CONTAINS THE SHARE CERTIFICATES AS ALSO THE DEMAT ACCOUNT. THER E WAS CONTRACT NOTE OF THE SUB-BROKER M/S.BABUBHAI HIRALAL & CO. THERE IS ALSO A CONFIRMATION LETTER FORM THE BROKER KISHANBHAI R. CHOKSHI. ON THE BASIS OF THOSE EVIDENCES THE VEHEMENT CONTENTIO N BEFORE US ARE THAT ONCE THE TRANSACTION WAS THROUGH PROPER CHANNE L, THEN THE SAME SHOULD HAVE BEEN ACCEPTED AS A GENUINE TRANSAC TION. THE ONLY REASON ON THE BASIS OF WHICH THE AO HAS DOUBTE D THE TRANSACTION WAS A LETTER FROM THE BSE. THE PRELIMI NARY OBJECTION OF THE LD.AR WAS THAT IF THE INFORMATION CALLED FOR FORM THE STOCK EXCHANGE ITSELF WAS WRONG, THEN IN CONSEQUENCE THER EOF THE BSE HAD WRITTEN ABOUT THAT INFORMATION WHICH WAS AVAILA BLE WITH THEM. THE CORRECT FACTUAL POSITION WAS THAT THE BROKER KI SHANBHAI R.CHOKSHI IS A REGISTERED BROKER AND THAT FACT WAS DULY NARRATED IN THE SAID LETTER BY BSE. HOWEVER, THE TRANSACT ION WAS AS PER CONTRACT NOTE THROUGH A SUB-BROKER M/S.BABUBHAI HIR ALAL & CO., WHO IN TURN HAD THE CONTRACT NOTE WITH THE MAIN BRO KER, I.E. KISHANBHAI R.CHOKSHI. IN ADDITION TO THE ABOVE, OUR ATTENTION HAS ALSO BEEN DRAWN ON A CONFIRMATION ISSUED BY THE BROKER, I.E. KISHANBHAI R.CHOKSHI, WHEREIN HE HAS AFFIRMED THAT THE DEAL WAS THROUGH THEM AND THEY HAVE ISSUED THE CONTRACT IN F AVOUR OF THE SUB-BROKER AND THAT SUB-BROKER HAD IN TURN FORWARDE D THE SAME CONTRACT IN FAVOUR OF HIMSON INDUSTRIAL CERAMICS PV T.LTD., I.E. THE ASSESSEE. OUR ATTENTION HAS ALSO BEEN DRAWN ON THE EXTRACT OF DEMAT ACCOUNT AND THE TRANSACTIONS AS RECORDED IN T HE BOOKS OF ACCOUNT. WITH THIS FACTUAL BACKGROUND, WE HAVE EXA MINED THE CASE LAWS CITED BEFORE US. FOR EXAMPLE, IN THE CASE OF SMT. SUNITA OBROI 126 TTJ 745 (AGRA)[THIRD MEMBER] THE ISSUE WA S IDENTICAL THAT WHETHER THE TRANSACTION WAS IN THE NATURE OF C APITAL GAIN VIS- -VIS IN COME FROM OTHER SOURCES. IN SHORT, THE CONCLUSION WAS ITA NO.1594/AHD /2011 DY.CIT VS. M/S.HIMSON INDUSTRIAL CERAMICS P.LTD. ASST.YEAR - 2005-06 - 5 - THAT ASSESSEE HAVING SOLD SHARES WHICH WERE EVIDENC ED BY CONTRACT NOTES AND THE PAYMENTS BEING RECEIVED THROUGH BROKE R FROM BANK ACCOUNT, THEN THE TRANSACTION COULD NOT BE TREATED AS NON-GENUINE. IT WAS HELD THAT THE PROFIT ON SALE OF SHARES WAS A SSESSABLE AS CAPITAL GAINS AND NOT AS INCOME FROM OTHER SOURCES. LIKEWISE, A DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. H.B.STOCK HOLDINGS LTD. REPORTED AT 325 ITR 316(DE L) THE OVERALL CONCLUSION WAS THAT ONCE THE DOCUMENTS WHICH WERE R ELIED UPON BY THE ASSESSEE, SHOWED THAT THE TRANSACTIONS WERE ENT ERED INTO AT THE MARKET VALUE AND THE TRANSACTIONS THROUGH SHARE BRO KER, THEN THE ALLEGATION ABOUT THE GENUINENESS WAS NOT JUSTIFIABL E. KEEPING BREVITY IN MIND, WITHOUT DISCUSSING THE OTHER CITED PRECEDENTS, WE HEREBY GIVE OUR FINDING ON FACTS THAT THE IMPUGNED TRANSACTION APPEARED TO BE A GENUINE TRANSACTION, THEREFORE, TH E SAME DESERVES TO BE ACCEPTED AS DECLARED BY THE ASSESSEE. GROUN D RAISED BY THE ASSESSEE IS ALLOWED. 5. UNDER THE CIRCUMSTANCES, WHEN THE QUANTUM ADDITI ON HAS ALREADY BEEN DELETED BY THE TRIBUNAL, THEREFORE, WE HEREBY AFFIRM THE DELETION OF PENALTY. THEREFORE, GROUND RAISED BY THE REVENUE IS DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. SD/- SD/- ( A.K. GARODIA ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEM BER AHMEDABAD; DATED 21 / 10 /2011 6..), .)../ T.C. NAIR, SR. PS ITA NO.1594/AHD /2011 DY.CIT VS. M/S.HIMSON INDUSTRIAL CERAMICS P.LTD. ASST.YEAR - 2005-06 - 6 - '5 2 /7 8'7* '5 2 /7 8'7* '5 2 /7 8'7* '5 2 /7 8'7*/ COPY OF THE ORDER FORWARDED TO : 1. +. / THE APPELLANT 2. /0+. / THE RESPONDENT. 3. 9 / CONCERNED CIT 4. 9() / THE CIT(A)-I, SURAT 5. 7<# /) , , / DR, ITAT, AHMEDABAD 6. # =3 / GUARD FILE. '5) '5) '5) '5) / BY ORDER, 07 / //TRUE COPY// > >> >/ // / , , , , ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION..10.10.2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 11.10.2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S 21.10.11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 21.10.11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER