I.T.O., Ward - 8(3), Kolkata, Kolkata V. M/s. Tarajyot Enterprises Pvt. Ltd., Kolkata

ITA 2045/KOL/2009

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6805 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 13-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 03-12-2009
• Court: TRIBUNAL
• Department Lawyers: GOUTAM MONDAL
• Assessee Lawyers: S M SURANA
• Keywords: Income from undisclosed sources
• Section: 131

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH-B: KO LKATA ( ) , , . . , ,) [BEFORE HONBLE SHRI MAHAVIR SINGH, J.M. & HONBLE SHRI C.D. RAO, A.M] /I.T.A. NO. 2045/KOL./2009 ASSESSMENT YEAR : 2005-2006 INCOME TAX OFFICER, WARD-8(3), KOLKATA -VS.- M /S. TARAJYOT ENTERPRISES PVT. LTD., KOLKATA (PAN : AABCT 8934 E) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI GOUTAM MONDAL, SR. D.R . RESPONDENT BY : SHRI S.M. SURANA, A.R. ! ! ! ! /O R D E R PER SHRI MAHAVIR SINGH, JUDICIAL MEMBER / , : THIS APPEAL BY REVENUE IS ARISING OUT OF THE ORDER OF CIT-VIII, KOLKATA IN APPEAL NO. 550/CIT(A)-VIII/KOL/08-09 VIDE DATED 18.09.2009. TH E ASSESSMENT WAS FRAMED BY ITO, WARD- 8(3), KOLKATA U/S.143(3) OF THE INCOME TAX ACT, 196 1 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2006-07 VIDE HIS ORDER DATED 26.12. 2007. 2. FIRST TWO COMMON ISSUES IN THIS APPEAL OF THE RE VENUE IS AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-VIII, KOLKATA DELETING THE DISALLOWANCE OF GODOWN RENT AND TELEPHONE EXPENSES MADE BY THE ASSESSING OFFICE R. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NOS. 1 & 2 :- (1) THAT THE LD. CIT(A.) HAS ERRED IN DELETING THE ADDITION OF RS.85,368/- ON ACCOUNT OF GODOWN RENT DISALLOWED BY THE AO AS EXPE NDITURE NOT RELATED TO BUSINESS. (2) THAT THE LD. CIT(A.) ERRED IN ACCEPTING THAT TE LEPHONE EXPENSES OF RS.37,923/- INCURRED WERE FOR LEGITIMATE BUSINESS P URPOSES WHEN IT IS NOTED IN THE ASSESSMENT ORDER BY THE ASSESSING OFFICER TH AT THE ASSESSEE HAS STATED THAT THE LABORERS MISUSED THE TELEPHONE INSTALLED T HERE TO MAKE PERSONAL CALLS. 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT AS REGARD TO DISALLOWANCE OF GOD OWN RENT, THE ASSESSING OFFICER HIMSELF HAS ADMITTED THAT ONLY DURING THE RELEVANT PERIOD, THE ASSESSEE DID NOT CARRY OUT ANY BUSINESS AT THE ITA NO. 2045/KOL.2009 TARAJYOT ENTERPRISES PVT. LTD. ASSESSMENT YEAR 05-06 2 SAID PREMISES. IT PREFERRED NOT TO SURRENDER THE TE NANCY AS A MATTER OF BUSINESS PRUDENCE, BUT ADMITTED THAT THE COMPANY WAS EARLIER AN AGENT OF I NDIAN PETROCHEMICALS LTD. AND IT HAD ACQUIRED A GODOWN AT 1/4C, KHAGENDRA CHATTERJEE STR EET, KOLKATA-700 002 AND ANOTHER GODOWN AT 95, KASHIPORE ROAD, KOLKATA-700 002. WE FIND THA T THE ASSESSING OFFICER HAS NOWHERE NOTED THAT THERE HAS BEEN DISCONTINUED OF BUSINESS OR THA T ASSESSEE NEVER ENGAGED IN THE BUSINESS IN WHICH ASSETS HAVE BEEN USED PREVIOUSLY BUT THE FIND ING IS REVERSED THAT IN EARLIER YEAR THE ASSESSEE WAS ENGAGED IN A BUSINESS AND EVEN NOW THE ASSESSEE HAS NOT DISCONTINUED THE BUSINESS. IN VIEW OF THE FACT, WE FIND THAT CIT(APPEALS) HAS RIGHTLY DELETED THE ADDITION AND WE CONFIRM THE SAME. IN RESPECT OF DISALLOWANCE OF TELEPHONE EXPENSES, T HE ASSESSING OFFICER HAS NOTED THE FOLLOWING EXPENSES :- SL. NO. TELEPHONE NO. TOTAL EXPENSES FOR THE YEAR 1. 2476-4123 RS. 4,545/- 2. 2556-9436 RS.12,670/- 3. 2556-9678 RS.21,116/- 4. 2557-4331 RS. 638/- TOTAL RS.38,969 WE FIND THAT THE ASSESSING OFFICER REACHED TO THE F INDING THAT THESE TELEPHONES WERE NOT RELATED TO ASSESSEES BUSINESS ONLY ON THE PREMISES THAT TH E ASSESSEE COULD NOT PRODUCE THE RELEVANT BILLS. WE ARE IN AGREEMENT WITH THE ASSESSING OFFICER THAT THERE MAY BE ELEMENT OF PERSONAL USER OF THESE TELEPHONES. HENCE, THE DISALLOWANCE OUT OF TH E EXPENDITURE OF RS.38,969/- SHOULD BE RESTRICTED AT 10% AND THAT COMES TO RS.3,896/- ONLY . ACCORDINGLY, THIS ISSUE OF REVENUES APPEAL IS PARTLY ALLOWED. 4. THE NEXT ISSUE IN THIS APPEAL OF THE REVENUE IS AGAINST THE ORDER OF CIT(APPEALS) DELETING THE ADDITION MADE BY THE ASSESSING OFFICER TREATING THE LONG-TERM CAPITAL GAIN DISCLOSED BY THE ASSESSEE AS INCOME FROM UNDISCLOSED SOURCES . FOR THIS , REVENUE HAS RAISED THE FOLLOWING GROUNDS NO. 3 & 4 :- (3) THAT THE LD. CIT(A.) ERRED IN DELETING THE ADDI TION OF RS.21,68,210/- MADE BY THE ASSESSING OFFICER ON ACC OUNT OF TREATING THE SAME AS INCOME FROM UNDISCLOSED SOURCES WITHOUT APPRECIATING THE FACTS OF THE CASE THAT THE LTCG WERE NOT GENUINE. ITA NO. 2045/KOL.2009 TARAJYOT ENTERPRISES PVT. LTD. ASSESSMENT YEAR 05-06 3 (4) THAT THE LD. CIT(A.) FAILED TO APPRECIATE THE F ACT THAT THE LTCG CLAIMED BY THE ASSESSEE HAD BEEN ARRANGED BY BROKER S WHO MANIPULATED THE SHARE PRICES OF THE SAID SCRIPTS AN D WERE LATER SUSPENDED BY THE STOCK EXCHANGE FOR INDULGING IN SU CH ACTIVITIES ILLEGAL IN THE RULES OF THE STOCK EXCHANGE. 5. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE E CLAIMED LONG-TERM CAPITAL GAIN OF RS.21,68,210/- AND CLAIMED IT AS EXEMPT UNDER SECTI ON 10(38) APART FROM SHORT-TERM CAPITAL GAIN OF RS.5,50,653/-. THE ASSESSING OFFICER REQUIRED TH E ASSESSEE TO EXPLAIN THE LONG-TERM CAPITAL GAIN. THE ASSESSEE SUBMITTED COPIES OF CONTRACT NOT ES DATED 04.08.2003 SHOWING PURCHASES OF 25,000 SHARES OF M/S. ANKIT PRACHI TRADING & INVES TMENT LIMITED AT A PRICE OF RS.2,29,250/- FROM ONE M/S. BALLAV DASS DAGA, A MEMBER OF CALCUTT A STOCK EXCHANGE. ACCORDING TO THE ASSESSEE, THESE SHARES WERE SOLD ON 05.10.2005 AT A PRICE OF RS.23,95,700/- (NET) THROUGH M/S. AHILYA COMMERCIAL PVT. LTD., A MEMBER OF CALCUTTA S TOCK EXCHANGE (ASSESSEE HAS TAKEN THE SALE VALUE AS RS.23,97,500/-). THE ASSESSING OFFICER AFT ER GOING THROUGH THESE DOCUMENTS NOTED THAT PURCHASES MADE THROUGH M/S. BALLAV DASS DAGA WERE A SELF TRADING AND M/S. BALLAV DASS DAGA WAS LATER SUSPENDED BY THE CALCUTTA STOCK EXCHANGE FOR ALLEGED ILLEGAL TRANSACTIONS. SIMILARLY, M/S. AHILYA COMMERCIAL PVT. LTD. THROUGH WHOM THE A SSESSEE HAS MADE SALE WAS ALSO A CROSS DEAL AND THIS STOCK BROKER WAS SUSPENDED LATER ON. THE ASSESSING OFFICER AFTER DISCUSSING HYPOTHETICAL SITUATION TREATED THE TRANSACTIONS AS BOGUS AND ASSESSED THE INCOME OF LONG-TERM CAPITAL GAIN AS INCOME FROM UNDISCLOSED SOURCES. AG GRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(APPEALS). 6. IN THE IMPUGNED ORDER, THE COMMISSIONER OF INCOM E-TAX (APPEALS) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER :- IT APPEARS FROM THE RECORD THAT THE TRANSACTIONS, I.E. BOTH PURCHASE AND SALE OF SHARES ARE EVIDENCED BY CONTRACT NOTES AND PAYMENTS HAVE BEEN RECEIVED THROUGH ACCOUNT PAYEE CHEQUES. THE TRANSAC TIONS HAVE BEEN REPORTED TO THE CALCUTTA STOCK EXCHANGE(CSE) AND AR E EVIDENCED BY THE DEMAT ACCOUNT OF THE APPELLANT. THE A.O. HAS RELIED ON A STATEMENT UNDER SEC. 131 OF THE INCOME TAX ACT GIVEN BY THE DIRECTO R OF THE APPELLANT WHEREIN, IT APPEARS, THE DEPONENT COULD NOT SHED MU CH LIGHT ON EITHER THE ACTIVITY OF THE COMPANY WHOSE SHARE HAS BEEN TRANSA CTED OR HOW THE SHARE PRICE HAD INCREASED VERY RAPIDLY. FURTHERMORE, THE A.O. HAS NOTED IN HIS/ ASSESSMENT ORDER, THAT THE BROKER CONCERNED IN BOTH THE PURCHASE AND SALE TRANSACTIONS W SUBSEQUENTLY SUSPENDED BY CSE. THE A.O. DOES NOT DISPUTE THE MODALITY OF THE TRANS ACTIONS, VIZ, THESE TRANSACTIONS ARE EVIDENCED BY CONTRACT NOTE, PAYMEN T HAS BEEN RECEIVED THROUGH BANKING CHANNELS AND THAT THE DEMAT ACCOUNT OF THE APPELLANT ITA NO. 2045/KOL.2009 TARAJYOT ENTERPRISES PVT. LTD. ASSESSMENT YEAR 05-06 4 EVIDENCES THESE TRANSACTIONS. THERE IS NO ALLEGATIO N THAT THE TRANSACTIONS NOTES WERE FABRICATED. AT THE POINT OF TIME THE TRA NSACTIONS WERE DONE, THE BROKERS CONCERNED WERE REGISTERED WITH CSE. IF THEY WERE SUSPENDED LATER ON, I SEE NO REASON, HOW THAT CAN BE LED AT THE DOO R OF THE APPELLANT. HOW A PARTICULAR BROKER CONDUCTS HIMSELF AND WHAT CONSEQU ENCE HE FACES FOR HIS ACTIONS CANNOT BE AN APPELLANTS RESPONSIBILITY. FU RTHERMORE, IN Y OPINION, TOO MUCH SHOULD NOT BE READ INTO A DEPONENTS LACK OF COMPLETE KNOWLEDGE ABOUT A PARTICULAR SCRIP WHICH HE HAD TRANSACTED IN . NEITHER CAN HE BE EXPECTED TO KNOW EXACTLY HOW THE PRICE OF A SCRIP C AN INCREASE OR FOR THAT MATTER DECREASE. FROM THE TENOR OF THE A.OS ORDER IT APPEARS THAT THE PRICE OF THE PARTICULAR SCRIP HAD BEEN MANIPULATED. HOWEVER, PRICE MANIPULATION IN THE STOCK EXCHANGE AND EVEN INSIDER -TRADING MAY BE ILLEGAL BUT THAT DOES NOT NEGATE THE PHYSICAL REALITY OF TH E TRANSACTION. IF PURCHASE AND SALE ARE EVIDENCED BY DOCUMENTS AS CLAIMED BY T HE APPELLANT THEN, IN MY OPINION, THE SAME CANNOT BE DOUBTED ON EXTRANEOU S GROUNDS. PARADOXICALLY, THE STATEMENT OF THE DEPONENT ACTUAL LY STRENGTHENS THE APPELLANTS CASE AS THE A.O. HAS NOT BEEN ABLE TO D ISPROVE THE DOCUMENTS RELIED ON BY THE APPELLANT AS EVIDENCE. IT IS ALSO SEEN FROM THE ASSESSMENT ORDER THAT THE A.O. HAD PERUSED FILE OF M/S. SHETH IMPEX PVT. LTD. THE SAID FILE HAS BEEN PERUSED AND IT IS SEEN THAT TRANSACTI ON HAS BEEN ACCEPTED THERE. UNDER THE CIRCUMSTANCES I AM OF THE OPINION THAT THE A.OS ACTION IN ASSESSING LTCG AS INCOME FROM UNDISCLOSED SOURCE CA NNOT BE SUSTAINED. THE APPELLANT HAS SUBMITTED A NUMBER OF JUDICIAL DE CISIONS IN ITS FAVOUR, THESE HAVE BEEN MENTIONED IN ITS SUBMISSION. IT IS ALSO NOTED THAT THE HONBLE ITAT, KOLKATAS DECISION ON SIMILAR ISSUE I S IN FAVOUR OF THE APPELLANT. THESE INCLUDE THE CASES OF SMT. VARSHA D AGA (ITA NO. 1387/KOL/2008), SHRI JAYWANT HEMANI (ITA NO.340/KOL /2007) AND SHRI RAJ KUMAR AGARWAL (ITA NO. 1330/KO112007). RESPECTFULLY , FOLLOWING THE SAME, I DELETE THE ADDITION MADE. THIS GROUND OF AP PEAL IS ACCORDINGLY ALLOWED. 7. WE HAVE HEARD BOTH THE SIDES AND HAVE GONE THROU GH FACTS AND CIRCUMSTANCES OF THE CASE. BY CONSIDERING THE TOTALITY OF THE FACTS, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF CIT(APPEALS). HENCE, WE UPHOLD HIS ORDER AND DISMIS S GROUNDS NO. 3 & 4 OF THE APPEAL TAKEN BY THE REVENUE. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S ALLOWED IN PART AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 24.6.2011 SD/- SD/- [C. D. RAO ( . . )] [ MAH AVIR SINGH / ] ACCOUNTANT MEMBER/ JUDICIAL MEMBER/ ] DATED : 24 / 06/ 2011 ITA NO. 2045/KOL.2009 TARAJYOT ENTERPRISES PVT. LTD. ASSESSMENT YEAR 05-06 5 COPY OF THE ORDER FORWARDED TO: 1 . M/S. TARAJYOT ENTERPRISES PVT. LTD., 16A, CHOWRINGH EE MANSION, 30, J.L. NEHRU ROAD, KOLKATA-16. 2. ITO, WARD-8(3), KOLKATA, P-7, CHOWRINGHEE SQUARE, K OLKATA- 69 3. CIT(APPEALS)- , KOLKATA 4 . CIT- , KOLKATA 5 . DR, KOLKATA BENCHES, KOLKATA (TRUE COPY) BY ORDER ASSISTANT REGISTRAR I.T.A.T., KOLKATA. LAHA, SR. P.S.