ITO 4(1)(4), MUMBAI V. CLIFTON SECURITIES P.LTD, MUMBAI

ITA 1738/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7836 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 10-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL
• Keywords: Additional evidence
• Section: 133(6); 147; 69; 148

Judgement Text

1 ITA 1738/MUM/2017 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NO.1738/MUM/2017) (ASSESSMENT YEARS: 2010-11) ITO-4(1)(4), MUMBAI VS M/S CLIFTON SECURITIES PVT LTD (NOW KNOWN AS MOHANI TEA LEAVES PVT LTD) FLAT NO.501, 5 TH FLOOR, SANNA CHS LTD, SARASWATI ROAD, OFF. LINK ROAD, SANTACRUZ (W), MUMBAI-400 054 PAN : AAACC5995P APPELLANT RESPONDEDNT APPELLANT BY SHRI RAJAT MITTAL RESPONDENT BY SHRI NEEL KHANDELWAL DATE OF HEARING 15-11-2017 DATE OF PRONOUNCEMENT 29-12-2017 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF THE CIT(A)-9, MUMBAI DATED 29-12-2016 AND IT PERTAINS T O AY 2010-11. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY ENGAGED IN THE BUSINESS OF TRADING IN SHARES AND SECURITIES FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-11 ON 29-10-2010 DECLARING TOT AL INCOME OF RS.15,440. IN THIS CASE, A LETTER DATED 19-01-2012 WAS RECEIVE D FROM THE ADDL.CIT, RANGE- 6, KANPUR COMMUNICATING THAT M/S CLIFTON SECURITIES PVT LTD HAS MADE INVESTMENT OF RS.6.84 CRORES IN SHARE IF M/S MOHANI TEA LEAVES PVT LTD, 2 ITA 1738/MUM/2017 KANPUR. FURTHER, ONE MORE LETTER DATED 28-01-2013 WAS RECEIVED FROM THE ITO, WD.1(4), GAZIABAD INTIMATING THAT M/S CLIFTON SECUR ITIES P LTD HAS INVESTED RS.1 CRORE IN PURCHASE OF SHARES OF M/S MNR SHARE & INVESTMENTS PVT LTD. ON THE BASIS OF ABOVE INFORMATION, THE CASE HAS BEEN R EOPENED U/S 147 OF THE I.T. ACT, 1961 AFTER DULY RECORDING THE REASONS FOR REOP ENING OF ASSESSMENT. ACCORDINGLY, NOTICE U/S 148 DATED 18-03-2013 WAS IS SUED. IN RESPONSE TO NOTICE, THE ASSESSEE THROUGH ITS AUTHORISED REPRESE NTATIVE SUBMITTED A LETTER AND STATED THAT THE ORIGINAL RETURN FILED ON 28-09-2010 MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE U/S 148 OF THE ACT. THEREAFT ER, THE AO HAS ISSUED NOTICE U/S 143(2) CALLING FOR VARIOUS DETAILS FOR WHICH TH E ASSESSEE HAS FILED NECESSARY DOCUMENTS WITH REGARD TO THE INVESTMENTS OF RS.6.84 CRORES IN M/S MOHANI TEA LEAVES PVT LTD INCLUDING BALANCE-SHEETS AS ON 31-03 -2010. AS REGARDS INVESTMENT OF R.1 CRORE IN PURCHASE OF SHARE OF M/ S MNR SHARE & INVESTMENTS PVT LTD, ONLY COPY OF BANK STATEMENT HAS BEEN FILED SHOWING THAT THE ASSESSEE COMPANY HAS GOT RS.1 CRORE THROUGH 4 CHEQUES OF RS. 25 LAKHS EACH. IN THE MEANWHILE TO VERIFY THE GENUINENESS OF THE TRANSACT IONS, A NOTICE U/S 133(6) OF THE ACT WAS ISSUED TO M/S MNR SHARE & INVESTMENTS P VT LTD CALLING FOR VARIOUS DETAILS. HOWEVER, THE SAID LETTER WAS RECE IVED BACK UNSERVED WITH POSTAL REMARK LEFT. THEREAFTER, M/S MNR SHARE & INVESTM ENTS PVT LTD VIDE LETTER DATED 21-01-2014 SUBMITTED VARIOUS DETAILS AND CONF IRMED INVESTMENTS IN SHARES OF COMPANY. THE AO, AFTER CONSIDERING RELEVANT INF ORMATIONS AND ALSO TAKING INTO ACCOUNT THE LETTER ADDRESSED BY GAUHATI STOCK EXCHANGE LTD OBSERVED THAT 3 ITA 1738/MUM/2017 THE INVESTMENTS IN SHARES OF M/S MNR SHARE & INVEST MENTS PVT LTD WAS NOT DISCLOSED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. ACCORDINGLY MADE ADDITION OF RS. 1 CRORE U/S 69 OF THE INCOME-TAX ACT, 1961 AS U NEXPLAINED INVESTMENT. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PRE FERRED APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), ASSESSEE HAS FILED ELAB ORATE WRITTEN SUBMISSIONS TO ARGUE THAT THE AO WAS ERRED IN MAKING ADDITION TOWA RDS INVESTMENT IN M/S MNR SHARE & INVESTMENTS PVT LTD FOR RS.1 CRORE MERE LY ON THE BASIS OF NON SERVICE OF NOTICE TO THE COMPANY IGNORING SUBSEQUEN T LETTER ADDRESSED BY M/S MNR SHARE & INVESTMENTS PVT LTD CONFIRMING SHARE TR ANSACTION. THE ASSESSEE FURTHER SUBMITTED THAT IT HAS FILED VARIOUS DETAILS TO PROVE INVESTMENT IN SHARES AND ALSO FILED ENOUGH EVIDENCES TO PROVE THAT THE S AID SHARES HAS BEEN SOLD WITHIN THE SAME FINANCIAL YEAR THROUGH S.S. SECURIT IES. THE AO, BASED ON THE SUBSEQUENT LETTER ISSUED BY GAUHATI STOCK EXCHANGE LTD WHEREIN IT WAS STATED THAT THE MEMBERSHIP OF S.S. SECURITIES WAS CANCELLE D BY SEBI WEF 05-06-2012 WHICH IS NOT AT ALL RELEVANT TO THE ISSUE AS THE AS SESSEE HAS PURCHASED SHARES OF M/S MNR SHARE & INVESTMENTS PVT LTD IN THE ASSESSME NT YEAR 2010-11. THE CIT(A), AFTER CONSIDERING RELEVANT SUBMISSIONS OF T HE ASSESSEE OBSERVED THAT THE ASSESSEE HAS FILED COMPLETE DETAILS IN RESPECT OF I NVESTMENT IN SHARES OF M/S MNR SHARE & INVESTMENTS PVT LTD AND ALSO SOLD THE S AID SHARES IN THE SAME FINANCIAL YEAR THROUGH S.S. SECURITIES. AS A RESUL T, THE INVESTMENT DID NOT APPEAR IN THE BALANCE-SHEET OF THE ASSESSEE FOR THE YEAR ENDING 31-03-2010. THE AO HAS MADE THE ADDITION PURELY ON MISTAKEN FACTS W ITHOUT APPRECIATING THE 4 ITA 1738/MUM/2017 ISSUE THAT THE ASSESSEE HAS SOLD THE SHARES WITHIN THE SAME FINANCIAL YEAR. THE CIT(A) FURTHER OBSERVED THAT IN VIEW OF THE FACT AN D ALL THE DETAILS AND DOCUMENTS, IT IS PROVED THAT INVESTMENT IN THE SHAR ES OF M/S MNR SHARE & INVESTMENTS PVT LTD HAS BEEN MADE THROUGH KNOWN SOU RCE AND THAT THEY HAVE ALSO BEEN SOLD DURING THE YEAR WHICH ARE DULY REFLE CTED IN THE REGULAR BOOKS OF ACCOUNT. THUS, THE ADDITION MADE BY THE AO OF RS.1 CRORE REQUIRES TO BE DELETED. AGGRIEVED BY THE ORDER OF CIT(A), THE REV ENUE IS IN APPEAL BEFORE US. 3. THE LD.DR SUBMITTED THAT THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.1 CRORE MADE ON ACCOUNT OF UNEXPLAINED INVEST MENT IN SHARES OF M/S MNR SHARE & INVESTMENTS PVT LTD WITHOUT APPRECIATIN G THE FACT THAT THE SAID INVESTMENT WAS NOT RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE LD.CIT(A) DELETED ADDITION MADE BY THE AO BY ADMITT ING ADDITIONAL EVIDENCE WITHOUT CONFRONTING THE SAME TO THE AO FOR HIS COMM ENTS. THEREFORE, THE ADDITION MADE BY THE AO SHOULD BE UPHELD. 4. ON THE OTHER HAND, THE LD.AR FOR THE ASSESSEE SUBMI TTED THAT THE ASSESSEE HAS FILED VARIOUS DETAILS TO PROVE INVESTMENT IN SH ARES OF M/S MNR SHARE & INVESTMENTS PVT LTD WHICH IS EVIDENT FROM THE FACT THAT THE CIT(A) HAS RECORDED A CATEGORICAL FINDING IN HIS ORDER THAT THE ASSESSE E HAS PURCHASED AND SOLD SHARES IN THE SAME FINANCIAL YEAR AS A RESULT INVESTMENT I N M/S MNR SHARE & INVESTMENTS PVT LTD DID NOT APPEAR IN THE BALANCE-S HEET OF THE ASSESSEE FOR THE YEAR ENDING. THE AO HAS MISCONSTRUED THE FACTS TO MAKE THE ADDITION ONLY ON THE BASIS OF NON APPEARANCE OF INVESTMENT IN THE BA LANCE-SHEET WITHOUT 5 ITA 1738/MUM/2017 APPRECIATING THE FACTS IN RIGHT PERSPECTIVE THAT ON CE THE SHARES ARE SOLD IN THE SAME FINANCIAL YEAR, THE QUESTION OF DISCLOSURE OF INVESTMENT IN THE BALANCE- SHEET AT THE END OF THE YEAR DOES NOT ARISE. THE CIT(A) HAS RIGHTLY DELETED ADDITION MADE BY THE AO AND HIS ORDER SHOULD BE UPH ELD. 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIA L AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE AO MADE ADDITION TOWARDS INVESTMENT IN M/S MNR SHARE & INVESTMENTS P VT LTD FOR RS.1 CRORE ON THE GROUND THAT THE SAID INVESTMENT IS NOT RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. ACCORDING TO THE AO, THE ASSESSEE HA S FAILED TO PROVE THAT THE SAID AMOUNT IS RECORDED IN HIS BOOKS OF ACCOUNT WITH ANY EVIDENCE. THE AO FURTHER OBSERVED THAT EVEN M/S MNR SHARE & INVESTMENTS PVT LTD DID NOT CONFIRM INVESTMENTS MADE IN SHARES OF COMPANY WHICH IS EVID ENT FROM THE FACT THAT LETTER ADDRESSED TO THE COMPANY WAS RETURNED BACK. TTHOUGH M/S MNR SHARE & INVESTMENTS PVT LTD HAS FILED LETTER SUBSEQUENTLY W ITH ALL DETAILS, FAILED TO ADDUCE ANY REASONS FOR NON SERVICE OF LETTERS ADDRE SSED AT THE EARLIER OCCASION. THE AO FURTHER OBSERVED THAT THE ASSESSEE CLAIMS TO HAVE SOLD SHARES IN THE SAME FINANCIAL YEAR THROUGH M/S S.S. SECURITIES. H OWEVER, THE FACT REMAINS THAT GAUHATI STOCK EXCHANGE CONFIRMED THAT MEMBERSHIP OF S.S. SECURITIES HAS BEEN SUSPENDED. THEREFORE, THE TOTAL SEQUENCE AND EVENT S GAVE RISE TO A SUSPICION THAT INVESTMENT IN M/S MNR SHARE & INVESTMENTS PVT LTD WAS NOT DISCLOSED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. IT IS THE CO NTENTION OF THE ASSESSEE THAT IT HAS FILED ENOUGH EVIDENCES TO JUSTIFY INVESTMENTS I N SHARES OF M/S MNR SHARE 6 ITA 1738/MUM/2017 & INVESTMENTS PVT LTD AND ALSO FILED ENOUGH MATERIA LS TO PROVE THAT THE SAID SHARES HAVE BEEN SOLD IN THE SAME FINANCIAL YEAR. THE AO HAS MISCONSTRUED THE FACTS TOTALLY TO COME TO THE CONCLUSION THAT THE SA ID INVESTMENT IS NOT RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE ONLY ON THE BA SIS OF NON DISCLOSURE OF INVESTMENT IN THE FINANCIAL STATEMENTS AT THE END O F THE FINANCIAL YEAR. THE FACTS REMAINS THAT ONCE SHARES ARE PURCHASED AND SOLD IN THE SAME FINANCIAL YEAR, HOW INVESTMENT IN SHARES WOULD REFLECT IN THE BALANCE-S HEET, AT THE END OF THE YEAR. THEREFORE, THE AO WAS INCORRECT IN MAKING THE ADDIT ION. THE ASSESSEE HAS FILED VARIOUS DETAILS INCLUDING LEDGER EXTRACT TO PROVE T HAT THE PAYMENT FOR INVESTMENT HAS BEEN ROUTED THROUGH PUNJAB NATIONAL BANK AND AL SO THE SAME HAS BEEN SOLD O 22-09-2009. IN THIS REGARD, FILED COPY OF BORKER NOTE ISSUED BY S.S. SECURITIES. THE ASSESSEE ALSO FILED RETURN FILED W ITH ROC TO PROVE THE DETAILS OF SHAREHOLDERS IN THE ASSESSEE COMPANY, AS PER WHICH THE NAME OF ASSESSEE WAS APPEARING IN THE DETAILS OF LIST OF SHAREHOLDERS. 6. HAVING HEARD BOTH THE SIDES AND CONSIDERED MATERIAL ON RECORD, WE FIND FORCE IN THE ARGUMENT OF THE ASSESSEE FOR THE REASO N THAT IT HAS FILED ENOUGH DETAILS TO PROVE INVESTMENT IN SHARES OF M/S MNR SH ARE & INVESTMENTS PVT LTD INCLUDING BANK STATEMENTS, BROKER NOTE, CONFIRMATIO N FROM M/S MNR SHARE & INVESTMENTS PVT LTD, COPY OF THEIR ANNUAL RETURN FI LED WITH ROC AND LEDGER EXTRACT. ALL THESE EVIDENCES GO TO PROVE AN UNDOUB TED FACT THAT THE ASSESSEE HAS PURCHASED SHARES ON 25-06-2009 AND SOLD THE SAME SH ARES ON 22-09-2009. SINCE PURCHASE AS WELL AS SALE OF SHARES HAPPENED I N THE SAME FINANCIAL YEAR, THE 7 ITA 1738/MUM/2017 QUESTION OF DISCLOSURE OF INVESTMENT IN THE BALANCE -SHEET OF THE ASSESSEE AT THE END OF THE FINANCIAL YEAR DOES NOT ARISE. THE AO, WITHOUT APPRECIATING THE FACT SIMPLY MADE ADDITION ON THE BASIS OF NON DISCLOSURE OF INVESTMENT IN THE BALANCE-SHEET OF THE ASSESSEE COMPANY AND ALSO ON T HE BASIS OF SUSPICION THAT THE LETTER ADDRESSED TO M/S MNR SHARE & INVESTMENTS PVT LTD HAS BEEN RETURNED UNSERVED. AS REGARDS LETTER ADDRESSED BY GAUHATI STOCK EXCHANGE LTD, THE FACTS THAT THE SAID LETTER STATES THAT THE MEMB ERSHIP OF M/S S.S. SECURITIES WAS SUSPENDED FROM 05-06-2012, WHICH IS IRRELEVANT, AS THE PURCHASE AND SALE OF SHARES HAPPENED IN THE FINANCIAL YEAR RELEVANT TO A Y 2010-11 AND SAID LETTER DOES NOT SPEAK ANYTHING ABOUT THE MEMBERSHIP OF S.S . SECURITIES DURING THE RELEVANT PERIOD. THEREFORE, WE ARE OF THE CONSIDER ED VIEW THAT THE AO WAS INCORRECT IN MAKING ADDITION TOWARDS INVESTMENT IN SHARES U/S 69 OF THE ACT. THE CIT(A), AFTER CONSIDERING RELEVANT FACTS HAS RI GHTLY DELETED ADDITIONS MADE BY THE AO. WE DO NOT FIND ANY ERROR IN THE ORDER O F THE CIT(A); HENCE, WE ARE INCLINED TO UPHOLD THE FINDINGS OF THE CIT(A) AND D ISMISS THE APPEAL FILED BY THE REVENUE. 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMI SSED. 8 ITA 1738/MUM/2017 ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH DECEMBER, 2017. SD/- SD/- (MAHAVIR SINGH ) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 29 TH DECEMBER, 2017 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI