Rekha Sharma, V. ITO Ward 34 (3),

ITA 1725/DEL/2007

• Counselvise Citation: 172520114 RSA 2007
• Duration Of Justice: 4 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 10-10-2011
• Assessment Year: 1996-1997
• Appeal Filed On: 10-04-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY JINDAL
• Assessee Lawyers: ROHIT GARG
• Keywords: Gift; Share purchase agreement
• Section: 147; 131; 148; 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH H DELHI ] BEFORE MS. DIVA SINGH, JM & SHRI K. D. RANJ AN, AM I. T. APPEAL NO. 1725 (DEL) OF 2007. ASSESSMENT YEAR : 199697. MS. REKHA SHARMA, THE INCO ME-TAX OFFICER, J 672, KARTAR NAGAR, SHAHDARA, VS. W A R D : 34 (3), N E W D E L H I 110 032. N E W D E L H I. PAN / GIR NO. AAP PS 2445 J. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI ROHIT GARG, C. A.; DEPARTMENT BY : SHRI VIJAY JINDAL, SR. D. R.; O R D E R. PER K. D. RANJAN, AM : THIS APPEAL BY THE ASSESSEE FOR ASSESSMENT YEAR 199 6-97 ARISES OUT OF ORDER OF THE LD. CIT (APPEALS)XXVII, NEW DELHI. 2.1 THE FIRST GROUND OF APPEAL FOR CONSIDERATION RE LATES TO CONFIRMING THE ADDITION OF RS.3,38,563/- ON ACCOUNT OF INVESTMENTS IN SHARES. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 1 47 ON 10/09/2000 ON THE GROUND THAT INCOME TO THE EXTENT OF RS.3,80,520/- REMAINED UNEXPLAINED. NEITHER IN RESPONSE TO NOTICE ISSUED UNDER SECTION 148 ANY REPLY NOR WAS RETURN OF INCOME FI LED BY THE ASSESSEE. SUMMONS UNDER SECTION 131 OF THE ACT DATED 6/11/2000 WERE ISSUED AND SERV ED ON THE ASSESSEE ON 7/11/2001, FIXING THE CASE FOR 19/11/2001. THE SUMMON ISSUED REMAINED UN -COMPLIED WITH. ANOTHER SUMMON UNDER 2 I. T. APPEAL NO. 1725 (DEL) OF 2007. SECTION 131 WAS ISSUED AND SERVED ON THE ASSESSEE. ON THIS DATE ALSO, NONE ATTENDED THE PROCEEDINGS. ON 18/01/2002, SHRI GANESH DUTT ATTEN DED AND FILED ACKNOWLEDGEMENT OF PHOTO- COPIES OF INCOME TAX RETURN, STATEMENT OF TAXABLE I NCOME AND BALANCE SHEET FOR ASSESSMENT YEAR 1996-97. IN RESPONSE TO NOTICE UNDER SECTION 143(2 ) AND 142(1) DATED 24/01/2002, SHRI SANJAY AGGARWAL, CHARTERED ACCOUNTANT ATTENDED AND FILED T HE DETAILS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AUTHORIZED REPRESENTATIVE OF THE AS SESSEE WAS ASKED TO FURNISH THE DOCUMENTS REGARDING PURPORTED OPENING CAPITAL OF RS.3,80,520/ -, PHOTO COPIES OF SHARE CERTIFICATES, CONFIRMATIONS OF GIFT RECEIVED ALONG WITH THEIR SOU RCE AND EVIDENCE OF ALLOTMENT OF SHARES IN THE NAME OF THE ASSESSEE. THE ASSESSEE DID NOT FILE TH ESE DOCUMENTS. THE ASSESSING OFFICER ON THE BASIS OF DETAILS FILED BY THE ASSESSEE NOTICED THAT THE ASSESSEE PURCHASED AND SOLD SHARES THROUGH VARDHMAN CONSULTANTS AND VARDHMAN PORTFOLIO PVT. LT D. DURING FINANCIAL YEARS 1991-92 TO 1994-95. DURING THIS PERIOD, THE ASSESSEE WAS AN E MPLOYEE OF THESE TWO COMPANIES AND WORKED AS COMPUTER OPERATOR. ALL THE PAYMENTS FOR PURCHAS E OF SHARES WERE MADE THROUGH PAY ORDERS AND BY ADJUSTING SALARY FROM THOSE FUNDS. IN ORDER TO VERIFY THE AUTHENTICITY OF THESE TRANSACTIONS THE ASSESSING OFFICER ISSUED SUMMONS UNDER SECTION 131 OF THE ACT TO BOTH THE COMPANIES REQUIRING THEM TO PRODUCE THE FOLLOWING INFORMATION FOR THE RELEVANT PERIODS :- (1) COPY OF ACCOUNTS OF MRS. REKHA SHARMA IN THE BO OKS OF ACCOUNTS IN THE YEAR THE TRANSACTION TOOK PLACE; (2) SHARE REGISTER; (3) COPIES OF ALL BANK ACCOUNTS; (4) SALARY REGISTER MAINTAINED, IF ANY; & (5) PROOF OF FILING OF INCOME TAX RETURNS. 2.2 ON THE DATE FIXED FOR HEARING REPLIES FROM THE COMPANIES WERE RECEIVED BY SPEED POST, BUT INFORMATION ASKED FOR WAS NOT PRODUCED. FURTHER TH E LETTER SUBMITTED BY M/S. VARDHMAN CONSULTANTS WAS NOT SIGNED AS IT OUGHT TO HAVE BEEN SIGNED BY THE PROPRIETOR. HOWEVER, IT WAS SIGNED BY A RELATIVE OF THE ASSESSEE. INTERESTINGL Y, SIGNATORIES BEING THE SAME THE CONTENTS OF BOTH THE LETTERS LOOKED SIMILAR. IT WAS INFORMED THAT D UE TO HEAVY LOSSES, COMPANY HAD TO ABANDON ITS 3 I. T. APPEAL NO. 1725 (DEL) OF 2007. BUSINESS IN 1997. THE ASSESSEE COULD NOT GET ACCES S TO THE COMPANIES RECORDS AND DOCUMENTS AS THOSE WERE DESTROYED. BESIDES ABOVE, THE AUTHOR IZED REPRESENTATIVE OF THE ASSESSEE ALSO FAILED TO PRODUCE PHOTOCOPIES OF SHARES ALLOTTED IN THE NA ME OF MRS. REKHA SHARMA. KEEPING IN MIND THESE FACTS, THERE WAS NO EVIDENCE TO PROVE WHETHER SHARES WERE REALLY BOUGHT IN THE NAME OF MRS. RAKHA SHARMA OR HER NAME WAS JUST BEING USED B Y THE COMPANIES FOR THEIR PERSONAL GAINS. THE ASSESSING OFFICER FURTHER NOTED THAT THE ASSESS EE HAD TRIED TO TAKE VAGUE STAND BEFORE THE DEPARTMENT THAT THE ASSESSEE HAD BEEN RECEIVING HUG E AMOUNT OF GIFTS FROM THE PARENTS AND HAD INVESTED IN PUBLIC LIMITED COMPANIES LIKE M/S. RAJA STHAN BREWERIES LTD., RAJASTHAN POLYSTERS AND ITC LTD. ACCORDING TO THE EXPLANATION THE ASSESSEE INVESTED RS.25,000/- OUT OF GIFTS RECEIVED FROM PARENTS AND GRAND-PARENTS AS EARLY AS IN 1991- 92. SHE INVESTED RS.42,000/- OUT OF GIFTS RECEIVED IN 1992-93; INVESTED RS.23,500/- OUT OF GI FTS IN 1993-94 AND RS.23,500/- OUT OF GIFTS RECEIVED IN 1994-95. HOWEVER, NO EVIDENCE WAS FILE D REGARDING RECEIPT OF GIFTS. THE ASSESSEE TRIED TO EXPLAIN THE INVESTMENTS MADE IN VARIOUS AS SESSMENT YEARS FROM GIFTS. HOWEVER, NO EVIDENCE WAS FILED BY THE ASSESSEE. THE ASSESSING OFFICER IN VIEW OF THESE FACTS CAME TO THE CONCLUSION THAT FOR MAKING INVESTMENT IN SHARES OF PUBLIC LIMITED COMPANIES, THE ASSESSEE HAD NO FUNDS. THE SHARE BROKER HAD MERELY ACCOMMODATED HE R TO BUILD UP HER CAPITAL OF RS.3,80,520/-. THE ASSESSING OFFICER, THEREFORE, ADDED THE AMOUNT OF RS.3,80,520/-. 3.1 BEFORE THE LD. CIT (APPEALS) THE COUNSEL FOR TH E ASSESSEE FILED YEAR-WISE DETAILS OF INVESTMENT IN SHARES AS UNDER :- FINANCIAL YEAR AMOUNT . 1991-92 RS. 71,148/- 1992-93 RS. 1,14,955/- 1993-94 RS. 98,600/- 1994-95 RS. 58,860/- TOTAL : RS. 3,38,563/- 4 I. T. APPEAL NO. 1725 (DEL) OF 2007. 3.2 SINCE INVESTMENTS WERE MADE IN EARLIER YEARS OU T OF GIFTS FROM PARENTS AND GRAND-PARENTS, IT WAS PLEADED THAT THE ADDITION COULD NOT BE MADE IN THE YEAR UNDER CONSIDERATION AS THE ASSESSEE HAS NEITHER INVESTED NOR SOLD ANY SHARES DURING THE YEAR UNDER CONSIDERATION. THE LD. CIT (APPEALS), HOWEVER, OBSERVED THAT THE ASSESSING OFF ICER HAD DISCUSSED THE ISSUE OF RS.3,80,563/- AS OPENING CAPITAL AT LENGTH AND THAT THERE WAS NO DOCUMENTARY EVIDENCE REGARDING RECEIPT OF GIFTS BY THE ASSESSEE DURING THE PRECEDING YEARS IN WHICH SHARES WERE CLAIMED TO HAVE BEEN PURCHASED. THE ASSESSEE SHOULD HAVE FILED CONFIRMA TIONS FROM THE PARENTS AND GRAND-PARENTS. SINCE THE ASSESSEE COULD NOT PRODUCE DOCUMENTARY EV IDENCE IN RESPECT OF INVESTMENT IN SHARES INCLUDING COPIES OF SHARE CERTIFICATES BEFORE THE AO, THE LD. CIT (A) HELD THAT THE AMOUNT OF RS.3,80,520/- CLAIMED AS OPENING CAPITAL WAS LIABLE TO BE TAXED. THE LD. CIT (A), THEREFORE, UPHELD THE DISALLOWANCE MADE BY THE AO. 4. BEFORE US THE LD. AR OF THE ASSESSEE REITERATED SIMILAR ARGUMENTS. IT WAS SUBMITTED THAT THE ASSESSEE HAD PURCHASED SHARES OF RAJASTHAN POLY STERS IN FINANCIAL YEAR 1991-92 AND 1992-93. 6,800 SHARES OF RAJASTHAN BREWERIES WERE PURCHASED IN 1993-94. IN FINANCIAL YEAR 1994-95 THE ASSESSEE PURCHASED 100 SHARES OF ITC LTD. THE LD. AR OF THE ASSESSEE DREW OUR ATTENTION TOWARDS THE RECEIPT ISSUED BY VARDHMAN CONSULTANTS FOR PURCHASE OF SHARES ON DIFFERENT DATES. THE ASSESSEE ALSO FILED THE STATEMENT OF ACCOUNTS F ROM 1/4/1992 TO 31 ST MARCH, 1993 IN RESPECT OF MS. REKHA SHARMA. THE ASSESSEE ALSO FILED CONFIRMA TION FROM VARDHMAN CONSULTANTS DATED 6 TH MARCH, 2002 CONFIRMING THE DELIVERY BASED SHARE TRA NSACTIONS OF RAJASTHAN POLYSTERS LTD., RAJASTHAN BREWERIES AND ITC LTD. THE ASSESSEE ALSO FILED PHOTO-COPY OF SHARE CERTIFICATES OF RAJASTHAN BREWERIES LTD PURCHASED BY HER. AS REGARD S OTHER SHARE CERTIFICATES IT WAS SUBMITTED THAT ASSESSEE COULD NOT TRACE THEM OUT BEING OLD MA TTER. THE LD. AR OF THE ASSESSEE ON THE BASIS OF ABOVE SUBMITTED THAT NO PURCHASE OR SALE OF SHAR E WAS MADE DURING ASSESSMENT YEAR 1996-97 AND HENCE NO ADDITION CAN BE MADE IN THE HANDS OF T HE ASSESSEE. ON THE OTHER HAND, THE LD. SR. DR SUPPORTED THE ORDER OF THE LD. CIT (APPEALS). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER HAS DISALLOWED THE OPENING CAPITA L OF RS.3,80,520/- ON THE GROUND THAT THERE 5 I. T. APPEAL NO. 1725 (DEL) OF 2007. WAS NO EVIDENCE OF GIFTS RECEIVED IN EARLIER YEARS FOR THE PURCHASE OF SHARES. THE ASSESSEE HAD FILED COPY OF BILLS FOR PURCHASE OF SHARES DURING T HE FINANCIAL YEAR 1991-92 TO 1994-95. THE ASSESSEE HAD FILED THE COPY OF ACCOUNT OF THE ASSES SEE IN THE BOOKS OF VARDHMAN CONSULTANTS INDICATING THE PURCHASE OF SHARES AND ALSO THE DETA ILS OF AMOUNT RECEIVED THROUGH PAY ORDER AND TRANSFER FROM SALARY ACCOUNT FROM THE STATEMENT O F ACCOUNTS IN THE BOOKS OF VARDHMAN PORTFOLIO PVT. LTD. IT IS SEEN THAT THE ASSESSEE HA D BEEN PURCHASING SHARES OF DIFFERENT COMPANIES IN FINANCIAL YEARS 1991-92, 1992-93, 1993-94 AND 19 94-95. THE ASSESSEE HAD FILED PHOTOCOPY OF SHARES OF RAJASTHAN BREWERIES LTD., WHICH WERE PURC HASED BY THE ASSESSEE DURING THE FINANCIAL YEAR 1993-94. WE HAVE GONE THROUGH THE PHOTO-COPIE S OF SHARE CERTIFICATES. WE FIND THAT SHARES OF RAJASTHAN BREWERIES WERE TRANSFERRED IN THE NAME OF THE ASSESSEE ON 30 TH AUGUST, 1994 WHICH PROVES THE CONTENTION OF THE ASSESSEE THAT THE SHAR ES OF RAJASTHAN BREWERIES LTD. WERE PURCHASED BY HER IN FINANCIAL YEAR 1993-94. THESE SHARES WER E PURCHASED IN APRIL, 1993 AND WERE TRANSFERRED IN THE NAME OF THE ASSESSEE IN AUGUST, 1994. THE AO HAD REJECTED THE CONTENTION OF THE ASSESSEE IN RESPECT OF OPENING BALANCE ON THE G ROUND THAT NO EVIDENCE WAS FILED BY THE ASSESSEE IN RESPECT OF LOANS AND ADVANCES AND GIFTS RECEIVED BY THE ASSESSEE. HOWEVER, THE AO HAS NOT COMMENTED ABOUT THE BILLS ISSUED BY VARDHMA N CONSULTANTS PVT. LTD., WITH WHOM THE ASSESSEE WAS HAVING ACCOUNT AND WAS ALSO EMPLOYED W ITH THEM. SINCE NO INVESTMENT OR SALES WERE MADE DURING THE YEAR UNDER CONSIDERATION AND P URCHASES AS PER THE STATEMENT OF ACCOUNT IN THE BOOKS OF VARDHMAN INVESTMENTS WERE MADE IN EARL IER YEARS, NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE MERELY BECAUSE THE ASSESSEE H AD NOT FILED ANY EVIDENCE FOR GIFTS IN THE FINANCIAL YEAR 1991-92 TO 1993-94. SINCE THE AMOUN T OF RS.3,80,563/- WAS INVESTED IN SHARES FROM FINANCIAL YEAR 1991-92 TO 1994-95, IN OUR CONS IDERED OPINION, NO ADDITION CAN BE MADE IN THE YEAR UNDER CONSIDERATION. THE OTHER ADDITION M ADE IS IN RESPECT OF CASH OF RS.400/-. IT IS UNBELIEVABLE THAT A PERSON, WHO IS WORKING WITH A C OMPANY WILL NOT HAVE CASH IN HAND OF RS.400/-. THEREFORE, ADDITION ON ACCOUNT OF RS.400 /- CANNOT BE SAID TO BE OUT OF HER UNDISCLOSED INCOME. THE OPENING BALANCE ALSO INCLUDES A SUM OF RS 41,557 ON ACCOUNT OF LOANS AND ADVANCES FOR WHICH THE ASSESSEE HAD NOT GIVEN ANY EVIDENCE. THE SAID LOANS AND ADVANCES OF RS.41,557/- WERE ALSO RECEIVED IN EARLIER YEARS. SINCE NO AMOU NT WAS RECEIVED DURING THE RELEVANT ASSESSMENT YEAR, IN OUR CONSIDERED OPINION, NO ADDI TION CAN BE MADE IN THE YEAR UNDER CONSIDERATION IN RESPECT OF OPENING CAPITAL BALANCE . IN VIEW OF THE ABOVE, IT IS HELD THAT THE LD. 6 I. T. APPEAL NO. 1725 (DEL) OF 2007. CIT (A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITIO N OF RS.3,80,520/- ON ACCOUNT OF OPENING CAPITAL BALANCE. THE ASSESSING OFFICER IS DIRECTED TO DELETE ADDITION.`` WE ORDER ACCORDINGLY. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT TODAY ON : 18 TH NOVEMBER, 2011. SD/- S D/- [ DIVA SINGH ] [ K. D. RA NJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 18 TH NOVEMBER, 2011. * MEHTA * COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT.