MANISH KUMAR S. MEHTA, MUMBAI V. ITO 24(2)(4), MUMBAI

ITA 1850/MUM/2009

• Counselvise Citation: 185019914 RSA 2009
• Duration Of Justice: 3 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 26-03-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 23-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P C MAURYA
• Keywords: Share purchase agreement; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B BENCH BEFORE SHRI D.MANMOHAN (VICE PRESIDENT) AND SHRI REJENDRA (ACCOUNTANT MEMBER) ITA NO.1850 /MUM/2009 ASSESSMENT YEAR: 2005-06 MANISH KUMAR S.MEHTA, B-11, SIDDHARTH APPT., 3 RD FLOOR, MANCHHUBHAI ROAD, MALAD (EAST), MUMBAI-400 097 PA NO.AAEPM 2096 G ITO 24(2)(4), MUMBAI. (APPELLANT) VS. (RESPONDENT) ITA NO.1851 /MUM/2009 ASSESSMENT YEAR: 2005-06 MANISH KUMAR S.MEHTA,HUF B-11, SIDDHARTH APPT., 3 RD FLOOR, MANCHHUBHAI ROAD, MALAD (EAST), MUMBAI-400 097 PA NO.AABHM 5594 E ITO 24(2)(4), MUMBAI. (APPELLANT) VS. (RESPONDENT) APPELLANT BY : MR BHUPENDRA SHAH RESPONDENT BY: P.C.MAURYA DATE OF HEARING: 26.3.2012 DATE OF PRONOUNCEMENT: 4 . 4.2012 ORDER PER RAJENDRA, AM: BOTH THE APPEALS ARE FILED BY THE ASSESSEE AGAINST COMMON ORDER DATED 30.1.2009 OF THE CIT(A)-XXIV, MUMBAI FOR THE ASSESS MENT YEAR 2005-06. SINCE COMMON GROUNDS ARE RAISED IN BOTH THE APPEALS, THEY WERE HEARD TOGETHER AND ARE BEING DECIDED BY A COMMON ORDER FOR THE SAKE OF CON VENIENCE. 2. COMMON GROUNDS RAISED BY THE ASSESSEE ARE AS UND ER: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO ERRED IN TREATING LTCG OF RS.12,43,540 AS STCG IN THE CASE O F INDIVIDUAL AND LTCG ITA NO.1850 /MUM/2009 ITA NO.1851 /MUM/2009 2 RS.12,45,629 AS STCG IN THE CASE OF HUF BY DISREGAR DING SEVERAL PROOF AND RESORTING TO ASSUMPTIONS. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE O ERRED IN REJECTING THE CLAIM OF EXEMPTION U/S.54EC OF RS.1250000/- IN THE CASE OF INDIVIDUAL AS WELL AS HUF EVEN THOUGH THE PROOF OF REINVESTMENT IS SUB MITTED TO THE AO. 3. THE LD CIT(A) ALSO ERRED IN CONFIRMING ALL ADDIT IONS WITHOUT ANY COGENT REASONS. 4. THE AO WRONGLY INITIATED PENALTY U/S.271(1)(C) A ND CHARGED INTEREST U/S.234. 3. FACTS IN BRIEF ARE THAT DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD CLA IMED LONG TERM CAPITAL GAIN ON SALE OF SHARES OF FAST TRACK ENTERTAINMENT LTD (FTEL). THE SALE PROCEEDS WERE CLAIMED TO HAVE BEEN INVESTED IN NABARD CAPITAL GAIN BOND. THE ASS ESSING OFFICER REJECTED THE CLAIM OF EXEMPTION MADE U/S. 54EC OF THE I.T.ACT, 1961 BY TH E ASSESSEE. THE AO GAVE FIVE REASONS ON PAGE NOS. 2-3 OF THE ASSESSMENT ORDER TO JUSTIFY THE DISALLOWANCE. FINALLY, HE ARRIVED AT FOLLOWING CONCLUSIONS IN BOTH THE CAS ES: IN VIEW OF THE FACT THAT THE ASSESSEE HAS NOT BEEN ABLE TO PROVE THE PURCHASE OR THE DATE OF PURCHASE BEYOND DOUBT AND ALSO THE FACT THAT THE SAID TRANSACTION IS NOT DOCUMENTED BY ANY AUTHORITY. IN THIS CASE BOMB AY STOCK EXCHANGE, THE ASSESSEES CLAIM OF LONG TERM CAPITAL GAIN IS REJEC TED. BUT AS THERE HAS BEEN A SALE OF THE SAID SHARES GAIN ARISING OUT OF THE SAI D TRANSACTION, RS.12,43,540 (INDIVIDUAL) AND RS.12,45,629 (HUF) IS TREATED AS S HORT TERM CAPITAL GAIN AND TAXED ACCORDINGLY. 4. AGGRIEVED, THE ASSESSEE PREFERRED APPEALS BEFORE THE CIT(A) AGAINST THE STAND TAKEN BY THE ASSESSING OFFICER. THE CIT(A) HELD TH AT THE ASSESSEE HAD COMPLETELY FAILED TO PROVE THAT THEY HAD PURCHASED THE SAID SHARES ON 3.4.2003. THE CIT(A) FURTHER OBSERVED THAT HE FAILED TO PROVE THAT HE HELD THE SHARES FOR MORE THAN A YEAR. THE APPELLANT ALSO FAILED TO PROVE THE GENUINENESS OF T HE TRANSACTION CLAIMED TO HAVE BEEN MADE BY HIM IN THE SHARES OF M/S. CMC LTD WITH ANY DOCUMENT. SO THE FACTS OF THE CASE CLEARLY DEMONSTRATE THAT THE APPELLANT MADE THE UNT RUE CLAIM OF PURCHASE AND SALE OF SHARES OF M/S. CMC LTD AS ON 1.4.2003 AND OF PURCHA SE OF SHARES OF M/S. FAST TRACK ENTERTAINMENT LTD AS ON 3.4.2003 WITH AN INTENTION TO AVOID THE PAYMENT OF TAX ON THE SALE OF THE SHARES OF M/S. FAST TRACK ENTERTAINMENT LTD. THE AO WAS FULLY JUSTIFIED IN ASSESSING THE GAIN ON THE SALE OF THE AFORESAID SHA RES AS SHORT TERM CAPITAL GAIN. I, ITA NO.1850 /MUM/2009 ITA NO.1851 /MUM/2009 3 THEREFORE, CONFIRM THE ASSESSMENT OF GAIN OF RS.12, 43,540 (INDIVIDUAL) RS. RS.12,45,629(HUF) AS SHORT TERM CAPITAL GAIN. CONS EQUENTLY, THE APPELLANT CANNOT BE ENTITLED TO DEDUCTION U/S. 54EC. AGGRIEVED, THE A SSESSEE IS IN FURTHER APPEAL BEFORE US. 5. THE LEARNED A.R. APPEARING ON BEHALF OF THE ASSE SSEE SUBMITTED THAT THE ASSESSEE HAD PRODUCED NECESSARY EVIDENCE BEFORE THE AO TO SUPPORT THE CLAIM, THAT BROKER HAD ADMITTED THAT THE ASSESSEE HAD PURCHASED THE SHARES OF FTEL, THAT SHARES WERE REFLECTED IN DEMAT ACCOUNT OF THE ASSESSEE. 6. THE ASSESSEE HAD CLAIMED THAT THEY HAD PURCHASED 28000 SHARES OF FTEL ON 7.4.2003 AND THE SAME WERE SOLD ON 12.4.2004, 13.4. 2004 AND 15.4.2004. THE AO HELD THAT SHARES WERE NOT PURCHASED ON 7.4.2003 THAT THE SALE OF SHARES RESULTED IN SHORT TERM CAPITAL GAIN AND NOT IN LTCG AS CLAIMED BY THE ASSESSEE. THE ASSESSEE HAD CLAIMED THAT PROFIT ARISING FROM SPECULATIVE SALE O F SHARES OF CMC LTD WAS UTILIZED IN PURCHASING THE SHARES OF FTEL. 7. ARGUING THE MATTER, LEARNED DEPARTMENTAL REPRESE NTATIVE SUBMITTED THAT NO ADVANCE WAS MADE TO THE BROKER FOR SPECULATIVE TRAN SACTIONS NOR WAS ANY CONTRACT ENTERED INTO. HE FURTHER SUBMITTED THAT THE AO AND THE CIT(A) HAD RIGHTLY HELD THAT TRANSACTION IN QUESTION HAD RESULTED IN SHORT TERM CAPITAL GAIN. 8. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE DOC UMENTS SUBMITTED BY THE ASSESSEE. THE CERTIFICATE FORWARDING THE PAPER BOO K WAS FOUND TO BE IN CONTRAVENTION OF RULE 18 OF THE I.T.RULES, 1962. INSTEAD OF CERTIFY ING BEFORE WHICH AUTHORITY WHICH PAPERS WERE FILED THE ASSESSEE HAD CERTIFIED THE PA PER BOOK AS UNDER: NO NEW EVIDENCE IS PRODUCED EXCEPT P-32. THE AR DID NOT REQUEST TO THE BENCH TO ADMIT THE SA ID ADDITIONAL EVIDENCE. LD D.R. ALSO DID NOT RAISE ANY OBJECTION REGARDING THE NEW EVIDE NCE FURNISHED BY THE ASSESSEE. WE FIND THAT IT IS A VERY CRUCIAL EVIDENCE TO DECIDE T HE ISSUE REGARDING PURCHASE OF SHARES ON A PARTICULAR DATE. ONLY THE ASSESSEE KNOWS THE REA SONS AS TO WHY THE LETTER (PAGE 32 OF THE PB) OF FAST TRACK DATED 23.4.2003 INTIMATING TH E ASSESSEE ABOUT TRANSFER OF SHARES ITA NO.1850 /MUM/2009 ITA NO.1851 /MUM/2009 4 WAS NOT SUBMITTED BEFORE THE LOWER AUTHORITIES. AS PER THE LETTER WE ARE ENCLOSING BELOW MENTIONED SHARE CERTIFICATES DULY TRANSFERRED IN YOUR NAME. WE ARE OF THE OPINION THAT IF THE ASSESSEE CAN PROVE THE GENUINEN ESS OF THE ABOVE LETTER, THE MATTER ARGUED BEFORE US CAN EASILY BE DECIDED. AS THE AO AND THE CIT(A) HAD NO OCCASION TO VERIFY THE VERACITY OF THE LETTER, SO WE REMIT THE MATTER BACK TO THE FILE OF THE AO TO DECIDE THE ISSUE OF LTCG/STCG TAKING INTO CONSIDERA TION THE LETTER OF FAST TRACK AND THE JUMBO CERTIFICATES ISSUED BY FTEL. 9. IN THE RESULT, APPEALS FILED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 4 TH APRIL , 2012 SD/- SD/- (D.MANMOHAN) (RAJEN DRA) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED 4 TH APRIL, 2012 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),XXIV, MUMB AI 4. COMMISSIONER OF INCOME TAX, 24 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH B MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI