ACIT 13(3), MUMBAI V. KANCHAN GAURAV, MUMBAI

ITA 1797/MUM/2010

• Counselvise Citation: 179719914 RSA 2010
• Duration Of Justice: 1 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 20-12-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 08-03-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P K B MENON
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER & SHRI R.S.PADVEKAR, JUDICIAL MEMBER. I.T.A. NO. 179 7/MUM/2010. ASSES SMENT YEAR : 2005-06. THE INCOME-TAX OFFICER, MRS. KANCHAN GAURAV RAIMALANI, 25(2)(1), MUMBAI. VS. FLAT NO. 201-A, ANJANA APT., S.V. ROAD, BORIVALI (W) , MUMBAI. PAN AHAPR 0883M APPELLANT. RESPONDENT. APPELLANT BY : SHRI P.K.B.MENON. RESPONDENT BY : SHRI BHUPENDRA SHAH. DATE OF HEARING : 20-12-2011. DATE OF PRONOUNCEMENT :13-01-2012 O R D E R. PER P.M. JAGTAP, A.M. : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF LEARNED CIT(APPEALS)-24 DATED 31-12-2009 WHEREBY HE DELETED THE ADDITION OF RS.29,05,896/- MADE BY THE AO U/S 68. 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L WHO IS ENGAGED IN THE BUSINESS OF SHARE TRADING. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY HER ON 25-08-2006 DECLARING TOTAL INCO ME OF RS.26,17,024/-. THE TOTAL INCOME DECLARED BY THE ASSESSEE WAS INCLUSIVE OF SH ORT TERM CAPITAL GAIN OF RS.24,88,853/- SHOWN BY THE ASSESSEE IN THE TRANSAC TIONS OF SHARES. DURING THE 2 ITA NO.1797/MUM/2010 ASSESSMENT YEAR : 2005-06 COURSE OF ASSESSMENT PROCEEDINGS, THE CLAIM OF THE ASSESSEE FOR SHORT TERM CAPITAL GAIN WAS EXAMINED BY THE AO AND ON SUCH EXAMINATION , HE RECORDED THE FOLLOWING FINDINGS/OBSERVATIONS : I) THE CONTRACT NOTES FOR PURCHASE OF 200000 SHARE S OF KARUNA CABLES, 20000 SHARES OF SEAGUL LEAFI, 29000 SHARES SOF PRRA NTAL INDUS. AND 10000 SHARES OF SHARYAN RESOUR ISSUED BY THE BROKER VIJAY BHAGWANDAS & CO. ARE BOGUS. II) NO SUCH PURCHASE TRANSACTION HAS BEEN EXECUTED ON THE EXCHANGE AT ALL. III) THE SAID SHARES HAVE ACTUALLY BEEN CREDITED TO THE ASSESSEES DEMAT ACCOUNT JUST ONE OR TWO DAYS BEFORE THEIR SALE TOOK LACE AND FROM VARIOUS DEPOSITARY PARTICIPANTS. IV) THE ENTIRE SALE PROCEEDS OF RS.29,05,896/- ON T HE SALE OF THE SAID SHARES IS ACTUALLY CASH CREDIT INTRODUCED IN HER BO OKS BY THE ASSESSEE. ON THE BASIS OF THE ABOVE FINDINGS/OBSERVATIONS REC ORDED BY HIM, THE SALE PROCEEDS OF RS.29,05,896/- WERE TREATED BY THE AO AS UNEXPLA INED CASH CREDIT AND THE SAID AMOUNT WAS ADDED BY HIM TO THE TOTAL INCOME OF THE ASSESSEE U/S 68 IN THE ASSESSMENT COMPLETED U/S 143(3) VIDE AN ORDER DATED 28-12-2007. 3. AGAINST THE ORDER PASSED BY THE AO U/S 143(3), A N APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LEARNED CIT(APPEALS) AND AF TER CONSIDERING THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE AS WELL AS MATERIAL AVAILABLE ON RECORD BEFORE HIM, THE LEARNED CIT(APPEALS) TREATED THE RELEVANT TRANS ACTIONS OF PURCHASE AND SALE OF SHARES GIVING RISE TO SHORT TERM CAPITAL GAINS AS G ENUINE TRANSACTIONS AND DELETED THE ADDITION MADE BY THE AO U/S 68 FOR THE FOLLOWIN G REASONS GIVEN IN PARAGRAPH NO. 5 OF HIS IMPUGNED ORDER : 3 ITA NO.1797/MUM/2010 ASSESSMENT YEAR : 2005-06 I HAVE CONSIDERED THE SUBMISSIONS OF THE AR. THE ONLY ISSUE UNDER CONSIDERATION IS THE ADDITION OF RS.29,05,896/- U/S . 68. I AM INCLINED TO ACCEPT THE CONTENTION OF THE A.R. THAT THIS MATTER IS SQUARELY COVERED BY THE RATIO OF THE ORDER OF THE HONBLE MUMBAI ITAT IN TH E CASE OF MUKESH MAROLIA VS. ADDL. COMMISSIONER OF INCOME TAX [(2006 ) 6 SOT 247 (MUMBAI)]. THE WHOLE ISSUE IS AROUND THE FACT THAT THE APPELLANT HAD ENTERED INTO OFF-MARKET TRANSACTIONS WHICH CAN NOT BE REFLE CTED IN THE RECORDS OF THE BSE. RESPECTFULLY FOLLOWING THE RATIO OF THE JUDGEM ENT IN THE CASE OF MUKESH MAROLIA (SUPRA) I AM INCLINED TO ACCEPT THE FACT THE WHOLE PRESUMPTION IS FOUNDED ON WRONG FOOTING IN THE ASSE SSMENT ORDER. THE APPELLANT PRODUCED ALL THE BILLS, DEMAT STATEMENTS AND CONTRACT NOTES IN SUPPORT OF THE TRANSACTIONS. JUST BECAUSE THE TRANS ACTIONS WERE CARRIED OUT OFF-MARKET THAT DOES NOT CHANGE THE CHARACTER OF TH E HEAD OF THE INCOME. IN FACT THE APPELLANT HAS DONE WHAT A MAXIMUM ANY INVE STOR CAN DO TO SUPPORT HIS GENUINE OF THE TRANSACTIONS AND HENCE THE BLAME CAN NOT BE FASTENED AT THE DOOR OF THE APPELLANT FOR ANY OTHER PRESUMPTION RAISED BY THE ASSESSING OFFICER. I AM, THEREFORE, RESTORING THE STCG OF RS. 29,05,896/- AND DELETE THE ADDITION OF THE SAME WRONGLY MADE U/S 68. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(APPEALS), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE RELIEF ON THE ISSUE UNDER CONSIDERATION HAS BEEN ALLOWED BY THE LEARNED CIT(APPEALS) TO THE ASSESSEE MAINLY RELYING ON THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL I N THE CASE OF MUKESH R MAROLIA VS. ADDL. CIT REPORTED IN 6 SOT 257 AND THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED BEFORE US THAT THIS ISSUE IS SQUARELY COV ERED IN FAVOUR OF THE ASSESSEE BY THE SAID DECISION OF THE TRIBUNAL. HE HAS ALSO PLAC ED ON RECORD A COPY OF THE ORDER PASSED BY THE TRIBUNAL IN THE CASE OF MUKESH R. MAR OLIA (SUPRA) AND THE RELEVANT OBSERVATIONS OF THE TRIBUNAL RECORDED IN THIS CONTE XT AS CONTAINED IN THE HELD PORTION ARE EXTRACTED BELOW: 4 ITA NO.1797/MUM/2010 ASSESSMENT YEAR : 2005-06 PURCHASE AND SALE OF SHARES OUTSIDE THE FLOOR OF S TOCK EXCHANGE IS NOT AN UNLAWFUL ACTIVITY. OFF-MARKET TRANSACTIONS ARE NOT ILLELGAL. IT IS ALWAYS POSSIBLE FOR THE PARTIES TO ENTER INTO TRANSACTIONS EVEN WITHOUT THE HELP OF BROKERS. THEREFORE, IT IS NOT POSSIBLE TO HOLD THAT THE TRANSACTIONS REPORTED BY THE ASSESSEE WERE QUITE SHAM ON THE LEGAL PROPOSITI ON ARRIVED AT BY THE CIT(A) THAT OFF-MARKET TRANSACTIONS ARE NOT PERMISS IBLE. THE ASSESSEE HAS STATED THAT THE TRANSACTIONS WERE MADE WITH THE HEL P OF PROFESSIONAL MEDIATORS WHO ARE EXPERTS IN OFF-MARKET TRANSACTION S. WHEN THE TRANSACTIONS WERE OFF-MARKET TRANSACTIONS, THERE IS NO RELEVANCE IN SEEKING DETAILS OF SHARE TRANSACTIONS FROM STOCK EXCHANGES. SUCH ATTEM PTS WOULD BE FUTILE, STOCK EXCHANGES CANNOT GIVE DETAILS OF TRANSACTIONS ENTERED INTO BETWEEN THE PARTIES OUTSIDE THEIR FLOOR. THEREFORE, THE RELIANC E PLACED BY THE ASSESSING AUTHORITY ON THE COMMUNICATIONS RECEIVED FROM THE S TOCK EXCHANGES THAT THE PARTICULARS OF SHARE TRANSACTIONS ENTERED INTO BY T HE ASSESSEE WERE NOT AVAILABLE IN THEIR RECORDS, IS OUT OF PLACE. THERE IS NO EVIDENTIAL VALUE FOR SUCH RELIANCE PLACED BY THE ASSESSING AUTHORITY. TH E ASSESSEE HAD MADE IT VERY CLEAR THAT THE TRANSACTIONS WERE NOT CONCLUDED ON THE FLOOR OF THE STOCK EXCHANGE. THE MATTER BEING SO, THERE IS NO PROBATIV E VALUE FOR THE NEGATIVE REPLIES SOLICITED BY THE ASSESSING AUTHORITY FROM T HE RESPECTIVE STOCK EXCHANGES. THE MATERIALS COLLECTED BY THE ASSESSING AUTHORITY FROM THE STOCK EXCHANGES ARE NOT VALID TO DISPEL OR DISBELIEVE THE CONTENTIONS OF THE ASSESSEE. THE TRIBUNAL THUS HAS HELD THAT OFF-MARKET TRANSACT IONS IN SHARES ARE NOT ILLEGAL AND IT IS NOT POSSIBLE TO HOLD THAT THE TRANSACTIONS RE ITERATED BY THE ASSESSEE WERE SHAM MERELY BECAUSE THE OFF-MARKET TRANSACTIONS ARE NOT PERMISSIBLE. BEFORE US, THE LEARNED DR HAS ALSO NOT RAISED ANY MATERIAL CONTENT ION TO DISPUTE THIS POSITION. HE, HOWEVER, HAS SUBMITTED THAT IN THE CASE OF MUKESH R. MAROLIA, SUFFICIENT DOCUMENTARY EVIDENCE WAS PRODUCED BY THE ASSESSEE T O ESTABLISH THAT THE RELEVANT OFF-MARKET TRANSACTIONS IN SHARES WERE GENUINE AND RELYING ON THE SAID EVIDENCE, THE GENUINENESS OF THE OFF-MARKET TRANSACTIONS WAS ACCEPTED BY THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED IN T HIS REGARD THAT EVEN THE ASSESSEE 5 ITA NO.1797/MUM/2010 ASSESSMENT YEAR : 2005-06 IN THE PRESENT CASE HAS SUFFICIENT DOCUMENTARY EVI DENCE AVAILABLE WITH HER TO ESTABLISH THAT THE RELEVANT OFF-MARKET TRANSACTIONS IN SHARES ARE GENUINE AND THE SAME CAN BE VERIFIED BY THE AO IF IT IS SO REQUIRE D. WE, THEREFORE, RESTORE THIS ISSUE TO THE FILE OF THE AO FOR THE LIMITED PURPOSE OF VE RIFYING THE RELEVANT DOCUMENTARY EVIDENCE TO BE PRODUCED BY THE ASSESSEE TO ESTABLIS H THE GENUINENESS OF THE RELEVANT OFF-MARKET TRANSACTIONS IN SHARES AND TO D ECIDE THE ISSUE IN THE LIGHT OF THE DECISION OF THE TRIBUNAL IN THE CASE OF MUKESH R. M AROLIA (SUPRA). 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS TREA TED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 13 TH DAY OF JANUARY, 2012. SD/- SD /- (R.S.PADVEKAR) (P.M. JAGTAP) JUDICIAL MEMBER A CCOUNTANT MEMBER MUMBAI, DATED: 13 TH JANUARY, 2012. COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, A-BENCH. (TRUE COPY ) BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI BENCHES , MUMBAI. WAKODE