The ACIT, Circle-3, Surat V. Shri Mahesh G.Vakil, Surat

ITA 218/AHD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60475 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 23-05-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 22-01-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: MEHUL SHAH A R
• Keywords: Unexplained cash credit; Income from undisclosed sources
• Section: 68

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD , .. , '# ' $ BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ./ I.T.A. NO.218/AHD/2010 ( & ' & ' & ' & ' / / / / ASSESSMENT YEAR : 2006-07) ACIT CIRCLE-3 SURAT & & & & / VS. SHRI MAHESH G.VAKIL HUF SHANTISADAN, NEAR NEW WADIA WOMENS COLLEGE ATHWALINES, SURAT ( '# ./)* ./ PAN/GIR NO. : AAFHM 0532 A ( (+ / // / APPELLANT ) .. ( ,-(+/ RESPONDENT ) (+ . '/ APPELLANT BY : SHRI SHYAM PRASAD, SR.D.R. ,-(+ / . ' / RESPONDENT BY : SHRI MEHUL SHAH, A.R. &0 / #/ // / DATE OF HEARING : 23/05/2012 12' / # / DATE OF PRONOUNCEMENT : 31/5/12 '3/ O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE ARISING FRO M THE ORDER OF LD.CIT(A)-II SURAT DATED 08/10/2009 AND THE SUBSTAN TIVE GROUND PRESSED BEFORE US IS REPRODUCED BELOW:- 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DIRECTING TO ACCEPT THE CLAI M OF THE A OF RS.9,48,447 AS CAPITAL GAIN AS AGAINST THE SAME TRE ATED BY THE AO AS UNEXPLAINED CREDIT UNDER THE PROVISIONS OF SECTI ON 68 OF THE I.T. ACT. ITA NO .218/AHD/2010 ACIT VS. SHRI MAHESH G.VAKIL HUF ASST.YEAR 2006-07 - 2 - 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T. ACT, 1961 DATED 28/1 1/2008 WERE THAT THE ASSESSEE-HUF HAS CLAIMED LONG-TERM CAPITAL GAIN OF RS.8,68,147/- ON THE GROUP OF GAUTAM RESOURCES. THE DETAILS OF SALE AND PURCHASE WAS INTIMATED AS UNDER:- PURCHASE DATE NO.OF SHARES RATE OF PURCHASE PURCHASE AMOUNT SALE DATE NO.OF SHARES SALES RATE SALE VALUE 16.03.2004 10000 8.03 80300 28.7.2005 10000 94.95 9 ,49,500 2.1. IN THIS REGARD, THE ASSESSING OFFICER HAS MADE CERTAIN ENQUIRIES AND THEREAFTER CONCLUDED THAT THE ASSESSEE HAS BROU GHT HIS UNACCOUNTED INCOME IN THE BOOKS OF ACCOUNT AS SHORT-TERM CAPITA L GAIN. THE ASSESSEE FAILED TO SUBSTANTIATE THE GENUINENESS OF THE SAID SHORT-TERM CAPITAL GAIN, THEREFORE THE SAID SUM CREDITED IN THE BOOKS OF ACC OUNT WAS HELD AS AN UNEXPLAINED CASH CREDIT U/S.68 OF THE I.T.ACT AND, ACCORDINGLY, THE SAID AMOUNT WAS TAXED IN THE HANDS OF THE ASSESSEE. TH E MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY WHO HAS ACCEPT ED THE EXPLANATION OF THE ASSESSEE AND THE RELEVANT PORTION IS AS FOLLOWS :- 5.1. IT HAS ALSO BEEN EXPLAINED THAT THE SELF CO DE WAS USED BY THE BROKER SINCE, PRIOR TO 01-04-2005, IT WAS NOT M ANDATORY UNDER THE SEBI GUIDELINES TO USE SEPARATE CODE FOR EACH C LIENT. THE CSE HAD DULY CONFIRMED THE FACT THAT BOTH THE PURCHASE AND THE SALE TRANSACTIONS WERE DONE THROUGH THE ON-LINE TRADING SYSTEM OF THE EXCHANGE. AS A RULE, THERE WAS NO REQUIREMENT FOR THE EITHER THE PURCHASING OR THE SELLING BROKER TO FURNISH THE NAM E(S) AND ADDRESS(ES) OF THE SELLER AND THE BUYER OF THE SHAR ES. THE TRANSACTIONS WERE NOT DONE OFF-LINE. AS REGARDS TH E ABSENCE OF THE BROKER-CLIENT AGREEMENT, WHERE THERE WERE CONTRACT NOTES PROVIDING COMPLETE DETAILS, THERE WAS NO REQUIREMEN T FOR ANY SUCH WRITTEN AGREEMENT. IN FACT, SEBI GUIDELINES DO NOT MANDATE FOR ANY AGREEMENT TO BE ENTERED INTO. AS IS COMMON KNO WLEDGE MOST ITA NO .218/AHD/2010 ACIT VS. SHRI MAHESH G.VAKIL HUF ASST.YEAR 2006-07 - 3 - SHARE TRANSACTIONS ARE DONE ON TELEPHONE WHERE THE CLIENT ADVISES THE BROKER OR VICE-VERSA, TO EITHER PURCHASE OR SEL L SHARES. 5.2. FINALLY, SIMPLY BECAUSE THE PRICE OF THE PARTI CULAR SCRIP HAD INCREASED SUBSTANTIALLY IN A SHORT PERIOD OF TIME, IT COULD NOT BE USED AS A GROUND TO TREAT THE TRANSACTIONS AS BOGUS , ESPECIALLY WHEN THE GENUINENESS OF THE TRANSACTIONS HAD ALREAD Y BEEN PROVED BEYOND DOUBT BY SEVERAL DOCUMENTARY EVIDENCES PROCU RED BY THE AO, AS ALSO SUBMITTED BY THE ASSESSEE ALONG WITH TH E WRITTEN CONFIRMATIONS FURNISHED BY THE BROKERS AND SUPPORTE D BY THEIR BANK STATEMENTS. 5.3. GIVEN SUCH FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED ABOVE IN CONSIDERABLE DETAIL, I HAVE COME TO THE IN EVITABLE CONCLUSION THAT THERE WAS SIMPLY NO BASIS FOR THE A O TO TREAT THE SUM OF RS.9,48,447 AS UNEXPLAINED CASH CREDIT UNDER THE PROVISIONS OF SECTION 68 OF THE IT ACT, WHICH WILL THEREFORE STAND DELETED. THE AO IS DIRECTED TO ACCEPT THE CAPITAL GAIN OF RS.8,68,147 AS DISCLOSED BY THE ASSESSEE. 3. WITH THIS FACTUAL BACKGROUND, WE HAVE HEARD BOTH THE SIDES. WE HAVE BEEN INFORMED THAT ON IDENTICAL FACTS OF THE C ASE OF THE ASSESSEE IN INDIVIDUAL CAPACITY A FAVOURABLE VIEW HAS BEEN TAKE N BY ITAT A BENCH AHMEDABAD IN ITA NO.3104/AHD/2009 FOR A.Y. 20 06-07 TITLED AS ACIT VS. SHRI MAHESH G.VAKIL, ORDER DATED 31/05/201 1, WHEREIN VIDE PARAGRAPH NO.7, IT WAS HELD AS UNDER:- 7. AFTER HEARING BOTH THE SIDES, WE HAVE CAREFULL Y GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT BEFORE THE AO, ON BEHALF OF THE ASSESSEE, IT WAS EXPLAINED THAT TH E PURCHASE TRANSACTIONS WERE MADE ON THE 'ON LINE TRADING SYSTEM' AND THESE TRANSACTIONS WERE GENUINE. EARLIER IT WAS NOT COMPULSORY FOR A CLIENT TO HAVE HIS OWN TRANSACTIONS RECORD UNDER SEBI GUIDELINES. WITH EFF ECT FROM 01.04.2005, IT HAS BEEN MADE COMPULSORY. THEREFORE, THE PURCHASES EARLIER MADE WERE USUALLY DURING THE BROKER'S CODE. IT WAS, FOR THIS REASON, THE 'SELF CODE WAS USED. SINCE, THE SHARES WERE SOLD AFTER 01.04.2005, THE TRANSACTIONS WERE ITA NO .218/AHD/2010 ACIT VS. SHRI MAHESH G.VAKIL HUF ASST.YEAR 2006-07 - 4 - NOT UNDER THE BROKER'S CODE. THE COPY OF THE SEBI GUIDELINES HAS BEEN PLACED ON RECORD. WITH REGARD TO THE SERVICE-TAX AN D STAMP CHARGES IT HAS BEEN SUBMITTED BY THE ID. COUNSEL THAT THE CONTRACT NOTE OF M/S. M BHIWANIWALA & CO. CLEARLY MENTIONED THAT THE BROKER AGE WAS INCLUSIVE OF SERVICE TAX ETC. IN THE CASE OF THE SELLING BROKER, SHRI ASHOK KUMAR KAYARI, THE SERVICE TAX SECURITIES TRANSACTION TAX AND EDUC ATION CESS WERE SEPARATELY MENTIONED. THIS CLEARLY SHOWED THAT THE AO HAD NOT STUDIED THE CONTRACT NOTES IN DETAIL. 7.1 WITH REGARD TO THE POINT RAISED BY THE AO ABOU T THE ABSENCE OF BROKER- CLIENT AGREEMENT, IT HAS BEEN SUBMITTED THAT THE GE NUINENESS OF THE TRANSACTIONS WAS ALREADY PROVED BY THE CONTRACT NOT ES FOR SALE AND PURCHASE, THE BANK STATEMENT OF THE BROKER, THE DEM AT ACCOUNT SHOWING TRANSFER IN AND OUT OF SHARES, AS ALSO THE ABSTRACT OF TRANSACTIONS FURNISHED BY THE CSE. THE BROKERS HAD SEPARATELY CONFIRMED TH E TRANSACTIONS DIRECTLY TO THE AO. 7.2 FINALLY, WITH REGARD TO THE OBJECTION OF AO REG ARDING SHARP INCREASE IN THE VALUE OF SCRIP, BEFORE THE AUTHORITIES BELOW, I T WAS EXPLAINED THAT INCREASE IN THE PRICE OF THE SCRIP COULD NOT BE A R EASON TO DOUBT THE GENUINENESS OF THE TRANSACTIONS AND CONSIDER IT AS 'SCANDALOUS'. THE AO COULD NOT ASSESS THE INCOME WITHOUT SUPPORTING EVID ENCES AND SIMPLY COULD NOT ASSUME ,:HE TRANSACTION? TO BE BOGUS. IN SUPPOR T OF HIS CONTENTS, THE ID. COUNSEL HAS PLACED RELIANCE ON THE FOLLOWING CASE L AWS: (I) RAJNIDEVI A CHOWDHARY V/S ITO - 1TA NO. 6455/M/ 07 (II) ACIT V/S CLARIDGES INVESTMENTS AND FINANCES P . LTD. 2007 18 SOT 390 (III) MUKESH R MAROLIA V/S ADO I. CIT 200665 SOT 24 7 (IV) CIT V/S DAULATRAM RAWATMUTI 1973 87 ITR 349 (S C) (V) ACCHYALAL SHAW V/S ITO 2009 121 TTJ (CALCUTTA) 695 (VI) PRAKASH CHAND S SANDH V/S ACIT 2009ITA NO.3270 /AHD/2008 (VII) HITESHKUMAR B SANGHVI V/S ITO WD 2(2), SURAT. 7.3 AFTER CONSIDERING THE AFORESAID SUBMISSIONS, IN THE IMPUGNED ORDER, THE ID. CIT(A), FOR THE DETAILED REASON GIVEN IN PARA 5 , HELD THAT SUM OF RS.36,71,882 IS NOTHING BUT CAPITAL GAIN AND HE DI RECTED THE AO TO ACCEPT THE SAME ACCORDINGLY. IT IS PERTINENT TO NOTE THAT BEFORE THE AO, THE ASSESSEE HAS FURNISHED COMPLETE DETAILS. THESE WERE NOT FOUND FALSE OR BOGUS BY THE AO. ONLY ON DOUBTS AND SUSPICION THE A O TREATED THE CAPITAL GAIN DECLARED BY THE ASSESSEE AS UNEXPLAINED CREDIT UNDER SECTION 68 OF THE I.T.ACT, 1961. LOOKING TO THE TOTALITY OF THE FACTS , WE ARE OF THE VIEW THAT THE ID. CIT(A) HAS GIVEN COGENT REASON FOR DIRECTIN G THE AO TO ACCEPT THE CAPITAL GAIN OF RS.34,65,922/- AS DISCLOSED BY THE ASSESSEE. WE, THEREFORE, INCLINE TO UPHOLD THE ORDER OF THE ID. CIT(A). RESU LTANTLY, THE APPEAL OF THE REVENUE IS DISMISSED. ITA NO .218/AHD/2010 ACIT VS. SHRI MAHESH G.VAKIL HUF ASST.YEAR 2006-07 - 5 - 4. AN ANOTHER DECISION OF ITAT A BENCH IN THE CAS E OF SAID GROUP HAS ALSO BEEN CITED PRONOUNCED IN THE CASE OF ACIT VS. HEMANI M.VAKIL BEARING ITA NO.3106/AHD/2009 FOR A.Y. 2006-07, ORDE R DATED 31/05/2011, WHEREIN AS WELL THE QUESTION OF CAPITAL GAIN WAS ACCEPTED. SINCE ON IDENTICAL FACTS A VIEW HAS ALREADY BEEN TA KEN BY THE RESPECTED CO-ORDINATE BENCH, THEREFORE, WE FIND NO REASON TO TAKEN ANY OTHER VIEW BUT TO FOLLOW THE VIEW ALREADY TAKEN. RESULTANTLY, WE HEREBY CONFIRM THE FINDING OF LEARNED CIT(APPEALS) AND THIS GROUND OF THE REVENUE IS HEREBY DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. SD/- S D/- ( .. ) ( ) '# ( T.R. MEENA ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL ME MBER AHMEDABAD; DATED 31/ 05 /2012 ..&, .&../ T.C. NAIR, SR. PS '3 / ,4 5'4' '3 / ,4 5'4' '3 / ,4 5'4' '3 / ,4 5'4'/ COPY OF THE ORDER FORWARDED TO : 1. (+ / THE APPELLANT 2. ,-(+ / THE RESPONDENT. 3. 6 / CONCERNED CIT 4. 6() / THE CIT(A)-II, SURAT 5. 49: ,& , , / DR, ITAT, AHMEDABAD 6. :; <0 / GUARD FILE. '3& '3& '3& '3& / BY ORDER, -4 , //TRUE COPY// = == =/ // / ) ) ) ) ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD ITA NO .218/AHD/2010 ACIT VS. SHRI MAHESH G.VAKIL HUF ASST.YEAR 2006-07 - 6 - 1. DATE OF DICTATION23/5/12 (DICTATION-PAD PGS 1 TO 5 ATTACHED) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 28.5.12 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S31.5.12 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 31.5.12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER