MANSUKHLAL VELJI KENIA, MUMBAI V. ITO WD 25(3)(1), MUMBAI

ITA 1713/MUM/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1412 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 06-05-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 12-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Assessee Lawyers: B V JHAVERI
• Keywords: Unexplained expenditure; Income from undisclosed sources; Search and seizure; Share purchase agreement
• Section: 69C; 143(3); 54F; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI R.C.SHARMA (AM) AND SHRI RAM LAL NEGI (JM ) ITA NO. 1713/MUM/2012 ASSESSMENT YEAR: 2003-04 MANSUKHLAL VELJI KENIA 302, EVERSHINE MILLENNIUM PARK- 41, THAKUR VILLAGE, KANDIVALI-EAST, MUMBAI- 400 101. PAN: ACEPK2957J VS. THE ITO WARD 25(3)(1) C-11,III FLOOR, ROOM NO. 307, PRATYAKSH KAR BHAVAN, BANDRA KURLA COMPLEX, MUMBAI- 400 051. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI. B.V.JHAVERI RESPONDENT BY : SHRI. SUMAN KUMAR DATE OF HEARING: 0 5/12/2016 DATE OF PRONOUNCEMENT: 14/12/20 16 O R D E R PER RAM LAL NEGI, JM THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST ORDER DATED 25/01/2012 PASSED BY THE CIT(APPEALS)-35, MUMBAI, F OR THE ASST. YEAR 2003- 04, WHEREBY THE LD. CIT(A) DISMISSED THE APPEAL FIL ED BY THE ASSESSEE AGAINST ASSESSMENT ORDER DATED 24/12/2010 PASSED U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI LED ITS RETURN OF INCOME U/S 139(1) DECLARING TOTAL INCOME OF RS. 91,994/-. THE ASSESSEE HAD SHOWN LONG TERM CAPITAL GAIN ON SALE OF 12500 SHARES OF BUNIYA D CHEMICALS LTD. OF RS. 9,89,387/- AND HAD CLAIMED EXEMPTION U/S 54F OF THE ACT. LATER ON ASSESSMENT WAS REOPENED AND ORDER U/S 143(3) READ W ITH SECTION 147 OF THE 2 ITA NO. 1713/MUM/2012 ASSESSMENT YEAR: 2003-04 ACT WAS PASSED ON 24.12.2010, DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 11,39,130/- AFTER MAKING AN ADDITION OF RS. 9,9 7,275/- AS INCOME FROM UNDISCLOSED SOURCES AND RS. 49,864/- AS UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT. THE AO REOPENED THE CASE AFTER THE SEARCH AND SEIZURE ACTION UNDERTAKEN IN THE CASE OF M/S MAHASAGAR SECURITIES PVT. LTD. AND ITS GROUP COMPANIES, DURING WHICH IT CAME TO THE NOTICE OF TH E DEPARTMENT THAT SH. MUKESH CHOKSI, A CHARTERED ACCOUNTANT BY PROFESSION HAD FLOATED BOGUS COMPANIES INCLUDING M/S BUNIYAD CHEMICALS LIMITED A ND SOME OF THESE COMPANIES WERE ENGAGED IN ISSUING BOGUS SALE BILLS TO VARIOUS ENTITIES. 3. AGGRIEVED BY THE SAID ORDER, THE ASSESSEE PREFE RRED FIRST APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) AFTER HEARING THE ASSESS EE CONFIRMED THE A.OS ACTION OF TREATING THE SAID CAPITAL GAIN OF RS. 9,97,275/- AS INCOME FROM OTHER SOURCES AND RS. 49,864/- AS UNEXPLAINED EXPENDITURE AND DIS MISSED THE ASSESSEES APPEAL. AGAINST THE IMPUGNED ORDER PASSED BY THE LD . CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING EFFECTI VE GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE COMMISSIONER (APPEALS) HAS ERRED IN UPHOLDING VALIDITY OF REOPEN ING OF THE CASE U/S 148 OF THE ACT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE COMMISSIONER (APPEALS) HAS ERRED IN UPHOLDING THE TREATMENT OF L ONG TERM CAPITAL GAIN ON SALE OF SHARES AS INCOME FROM OTHER SOURCES BY THE ASSESSING OFFICER. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE COMMISSIONER (APPEALS) HAS FAILED TO APPRECIATE THAT THE TRANSAC TION OF PURCHASE AND SALE OF SHARES IS SUPPORTED BY PROPER DOCUMENTS . 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE COMMISSIONER (APPEALS) HAS FAILED TO APPRECIATE THAT THE APPELLA NT HAS RECEIVED 3 ITA NO. 1713/MUM/2012 ASSESSMENT YEAR: 2003-04 DELIVERY OF PHYSICAL SHARE CERTIFICATES AND THEREAF TER THESE SHARES WERE DULY TRANSFERRED IN THE NAME OF APPELLANT. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE COMMISSIONER (APPEALS) HAS FAILED TO APPRECIATE THAT APPELLANT H AS DEMATERIALIZED THE PHYSICAL SHARES THROUGH DEPOSITO RY PARTICIPANT AUTHORIZED BY SEBI AS WELL AS NSDL. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE COMMISSIONER (APPEALS) HAS FAILED TO CONSIDER THE WRITTEN SUBMIS SIONS FILED BEFORE HIM ON 16/01/2012 AND UPHELD THE ASSESSMENT ORDER WITH PRESUMPTIONS AND SURMISES. 7. THE COMMISSIONER (APPEALS) HAS ERRED IN DISMISSI NG THE APPEAL WITHOUT DEALING WITH THE GROUND NO.S 4 AND 5 OF THE GROUNDS OF APPEAL FILED BEFORE HIM. 4. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT HE DOES NOT WANT TO PRESS GROUND NO 1 OF THE APPEAL BEING GENER AL IN NATURE. ACCORDINGLY, GROUND NO 1 OF THE APPEAL IS DISMISSED AS NOT PRESS ED. 5. AS REGARDS GROUND NOS. 2 TO 6, THE LD. COUNSEL S UBMITTED THAT THE LD. CIT(A) HAS WRONGLY CONFIRMED THE FINDINGS OF A.O. AS THE SAME IS NOT BASED ON ANY EVIDENCE. THE A.O. HAD WRONGLY TREATED THE SALE PROCEEDS OF SHARES AMOUNTING TO RS. 9,97,275/- AS INCOME FROM UNDISCL OSED SOURCES ON THE BASIS OF REPLY OF NSE. THE ASSESSEE PURCHASED 12500 SHARE S OF M/S BUNIYAD CHEMICALS LIMITED FOR A SUM OF RS. 7,888/- ON 11.4. 2001 WHICH WERE TRANSFERRED IN THE NAME OF ASSESSEE. THE SHARES WER E THEREAFTER CONVERTED TO DEMAT FORM AND CREDITED TO THE ASSESSEES ACCOUNT W ITH KAPOL CO-OPERATIVE BANK LTD. THE ASSESSEE SOLD THE SAID SHARES ON 18 TH NOV., 2002 AND RECEIVED THE CONSIDERATION BY CHEQUE. SIMILARLY, ADDITION OF RS.49,864/- AS UNEXPLAINED EXPENDITURE U/S 69C, ESTIMATING THE SAME AS COMMIS SION @ 5% OF THE SALE PROCEEDS OF SHARES IS BASED ON SURMISES AND CONJUNC TURES. THE LD. COUNSEL 4 ITA NO. 1713/MUM/2012 ASSESSMENT YEAR: 2003-04 FURTHER SUBMITTED THAT THE LD. CIT(A) HAS WRONGLY P ASSED THE IMPUGNED ORDER IGNORING THE DOCUMENTARY EVIDENCE ADDUCED BY THE AS SESSEE IN SUPPORT OF ITS CONTENTION. HENCE THE ADDITION OF RS. 9,97,275/- AS WELL AS RS.49,864/- NEEDS TO BE DELETED. TO SUBSTANTIATE HIS CONTENTION THE L D. COUNSEL PLACED RELIANCE ON VARIOUS DECISIONS RENDERED BY THE ITAT BENCHES IN W HICH THE IDENTICAL ISSUES WERE DECIDED IN FAVOUR OF THE ASSESSEE INCLUDING TH E FOLLOWING DECISIONS OF MUMBAI BENCHES: I) SH. KAMLESH MUNDRA VS. ITO, ITA NO.6248/MUM/2012 AY 2003-04 DATED 4.3.16. II) STATUS CREDIT AND CAPITAL PVT. LTD. VS. ITO, IT A NO4646/MUM/2012, AY 2004-05 DATED 13.1.2016. III) SMT. JYOTI D. SHAH VS. ITO, ITA NO.1843/MUM/20 12 AY 2003-04 DATED 18.12.2014. IV) JATIN P.A JMERA VS. ITO, ITA NO. 7859/MUM/2011 AY 2003-04 DATED 9.11.2014. V) SHRI MANGESH V. TIWARI VS. ITO, ITA NO. 2587/MU M/2013 AY 2003-04 DATED 26.2. 2016. VI) ITO VS SMT. AMINA RANGARI, ITA NO. 1867/MUM/201 1 AY 2003-04 DATED 4.9.2015. VI) M/S R C ENTERPRISE VS. ITO, ITA NO.3861/MUM/ 2012 AY 2003-04. 6. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE RELYING ON THE ORDER PASSED BY THE LD. CIT(A) SUBMITTED THAT THERE IS NO INFIRMITY IN THE IMPUGNED ORDER TO INTERFERE WITH THE SAME. THE LD. CIT(A) HAS RIGHTLY UPHELD THE FINDINGS OF THE AO AS THE SAME HAS BEEN PASSED IN ACCORDANCE WITH LAW AFTER TAKING INTO CONSIDERATION THE ENTIRE EVIDENCE ADDUCED BY THE ASSESSEE TO SUBSTANTIATE ITS CLAIM. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PER USED THE MATERIAL PLACED BEFORE US INCLUDING THE DECISIONS RELIED ON BY THE PARTIES. WE NOTICE THAT THE SALE AND PURCHASE OF SHARES BY THE ASSESSE E ARE DULY SUPPORTED BY THE 5 ITA NO. 1713/MUM/2012 ASSESSMENT YEAR: 2003-04 DOCUMENTARY EVIDENCE AND THE SAME HAS NOT BEEN REBU TTED BY THE AUTHORITIES BELOW. THE CONCLUSIONS OF THE AUTHORITIES BELOW ARE RATHER BASED ON INFORMATION WHICH IS NOT PROVED BY ANY EVIDENCE. TH ERE IS NO MATERIAL ON RECORD TO ESTABLISH THAT THE TRANSACTIONS WERE BOGU S. ON THE OTHER HAND COPY OF LETTER DATED 30 TH JUNE 2001 VIDE WHICH BUNIYAD CHEMICALS LIMITED TRA NSFERRED THE SHARES CERTIFICATE NO 063276 TO 063400, FOLIO N O M120 IN FAVOUR OF THE ASSESSEE, NEGATES THE FINDINGS OF THE AUTHORITIES B ELOW THAT THE TRANSACTIONS WERE BOGUS. FURTHER, THE COPIES OF SHARE CERTIFICAT ES, COPY OF LETTER DATED 20 TH NOV., 2001 ISSUED BY BUNIYAD CHEMICALS LIMITED, INF ORMING THE ASSESSEE THAT THE SHARES OF BUNIYAD CHEMICALS LTD. HAVE BEEN PERM ITTED TO TRANSFORM INTO DEMAT FORM AND FURTHER ITS REQUEST TO SEND THE SHAR E CERTIFICATES FOR DEMATERIALIZE, COPY OF STATEMENT OF TRANSACTION CUM CHARGES FROM 1.12.2002 TO 31.12.2002 ISSUED BY THE KAPOL CO-OPERATIVE BANK, M UMBAI AND OTHER DOCUMENTS PLACED ON RECORD IN THE FORM OF PAPER BOO K SUBSTANTIATE THE CONTENTION OF THE ASSESSEE THAT THE TRANSACTION OF PURCHASE OF SHARES AND SALE THEREOF WAS GENUINE. 8. WE NOTICE THAT THE COORDINATE BENCHES OF MUMBAI TRIBUNAL HAVE ALREADY DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESS EE IN THE CASES RELIED UPON BY THE APPELLANT/ ASSESSEE. IN THE CASE OF SH. KAMLESH MUNDRA VS. ITO (SUPRA) AND STATUS CREDIT AND CAPITAL PVT. LTD. VS. ITO (SU PRA), THE COORDINATE BENCHES HAVE DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE A SSESSEE FOLLOWING THE DECISION OF THE COORDINATE BENCH IN SMT. DURGA DEVI MUDRA VS . ITO (ITA NO. 1176/MUM/2012). IN THE SAID CASES SIMILAR ADDITIONS WERE MADE BY THE AO AND THE LD. CIT(A) CONFIRMED THE SAME. IN APPEAL AG AINST THE ORDER OF THE LD. CIT(A), THE COORDINATE BENCHES FOLLOWING ITS EARLIE R DECISION RENDERED IN THE CASE OF SMT. DURGA DEVI MUDRA VS. ITO (SUPRA) DECI DED THE IDENTICAL ISSUES IN FAVOUR OF THE ASSESSEE. IN THE SAID CASES THE ASSES SEE HAD ENTERED INTO PURCHASE AND SALE OF SHARES OF M/S BUNIYAD CHEMICAL S LTD. AND M/S JAY KAY 6 ITA NO. 1713/MUM/2012 ASSESSMENT YEAR: 2003-04 DEE INDUSTRIES LTD. AND THE RESULTANT PROFITS WERE BROUGHT TO TAX BY THE DEPARTMENT. THE ASSESSEES CHALLENGED THE IMPUGNED O RDERS BEFORE THE ITAT AND THE COORDINATE BENCHES DECIDED THE ISSUES IN FA VOUR OF THE ASSESSEE AND ALLOWED THE APPEALS. 9. HENCE, THE IDENTICAL ISSUE HAS ALREADY BEEN DECI DED IN FAVOUR OF THE ASSESSEE BY THE COORDINATE BENCHES IN THE CASES REF ERRED AND DISCUSSED ABOVE. THE ISSUE INVOLVED IN THE PRESENT CASE IS IDENTICAL TO THE ISSUES INVOLVED IN THE AFORESAID CASES. WE, THEREFORE, RESPECTFULLY FOLLOW ING THE DECISIONS OF THE COORDINATE BENCHES, DECIDE GROUND NO 2 TO 6 IN FAVO UR OF THE ASSESSEE AND AGAINST THE REVENUE AND HOLD THAT THE ASSESSEE HAS PROVED THE GENUINENESS OF THE SHARE TRANSACTION AND THERE IS NO GROUND TO DIS ALLOW THE CLAIM OF THE ASSESSEE IN RESPECT OF THE LONG TERM CAPITAL GAIN. ACCORDINGLY, WE DIRECT THE AO TO ALLOW THE DEDUCTION. 10. SO FAR AS GROUND NO 7 IS CONCERNED SINCE WE HAV E DECIDED THE MAIN ISSUE IN FAVOUR OF THE ASSESSEE, WE DO NOT CONSIDER IT NECESSARY TO ADJUDICATE THIS GROUND SEPARATELY. 11. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE FOR ASST. YEAR 2003-04 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COUR T 14 TH DECEMBER, 2016. SD/- SD/- ( R.C.SHARMA ) (RAM LAL NEGI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED:14/12/2016 7 ITA NO. 1713/MUM/2012 ASSESSMENT YEAR: 2003-04 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. !' , $ !'% , / DR, ITAT, MUMBAI 6. &' ( / GUARD FILE. / BY ORDER, ) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI PRAMILA