SUPERSTAR EXPORTS PRIVATE LIMITED, Mumbai V. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-2(3)(2), Mumbai

ITA 2290/MUM/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3645 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2014-2015
• Appeal Filed On: 12-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B B RAJENDRA PRASAD LD
• Assessee Lawyers: RAJIV KHANDELWALLD
• Keywords: Capital asset; Application of stay; Cost of acquisition; Corroborative evidences; Valuation report
• Section: 143(3)

Judgement Text

ITA NO. 2290/MUM/2018 SUPERSTAR EXPORTS PRIVATE LIMITED ASSESSMENT YEAR: 2014-15 1 IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI . . , , BEFORE HONBLE SHRI C.N. PRASAD, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.2290/MUM/2018 ( / ASSESSMENT YEAR: 2014-15) & STAY APPLICATION NO. 534/MUM/2018 [ ARISING OUT OF I.T.A. NO.2290/MUM/2008 ] ( / ASSESSMENT YEAR: 2014-15) SUPERSTAR EXPORTS PVT. LTD. J.K SOMANI BUILDING, 2 ND FLOOR BRITISH HOTEL LANE, FORT, MUMBAI 400 001 / VS. ASSISTANT COMMISSIONER OF INCOME TAX- CIRCLE 2(3)(2) AAYKAR BHAWAN, M.K.ROAD MUMBAI 400 020 ./ ./PAN/GIR NO. AAICS-4642-M ( /APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : MR. RAJIV KHANDELWAL- LD. AR REVENUE BY : MR. B.B. RAJENDRA PRASAD- LD.CIT-DR !' / DATE OF HEARING : 10/12/2018 !' / DATE OF PRONOUNCEMENT : 26/02/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2014-15 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-6, ITA NO. 2290/MUM/2018 SUPERSTAR EXPORTS PRIVATE LIMITED ASSESSMENT YEAR: 2014-15 2 APPEAL NO. CIT(A)-6/IT-200/47/2016-17 MUMBAI , [CIT(A)], DATED 26/03/2018 ON FOLLOWING SOLE GROUND OF APPEAL: - THE COMMISSIONER OF INCOME TAX (APPEALS) -6, MUMBAI (HEREINAFTER REFERRED TO AS THE CIT(A)) ERRED IN UPHOLDING THE ACTION OF THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 2(3)(2), MUMBAI (HEREINAFTE R REFERRED TO AS THE ASSESSING OFFICER) IN DISALLOWING THE LOSS OF RS.11 ,87,26,561/- BEING LOSS UNDER THE HEAD CAPITAL GAINS ARISING ON ACCOUNT O F SALE OF SHARES OF SQL STAR INTERNATIONAL LIMITED, BEING LONG-TERM CAPITAL ASSET ON THE GROUND THAT THE TRANSACTION OF SALE OF SUCH SHARES IS NOT GENUI NE. THE APPELLANT CONTEND THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) OUGHT NOT TO HAVE UPHELD THE ACTION OF THE ASSESSING OFFICER IN NOT ALLOWING THE CLAIM OF LOSS UNDER THE HEAD CAPITAL GAINS ON THE SALE OF AFORESAID SHARES INASMUCH THE LOSS IN GENUI NE AND FURTHER, ALL THE DETAILS AS REGARDS THE SALE OF THE AFORESAID WHEREA S HAVE BEEN FURNISHED. THE APPELLANTS FURTHER, CONTEND THAT THE CIT(A) OUG HT NOT TO HAVE UPHELD NOT TO HAVE UPHELD THE ACTION OF THE ASSESSING OFFICER INASMUCH AS THE CIT(A) HAS NOT CORRECTLY APPRECIATED THE FACTS OF THE CASE IN ITS ENTIRETY AND HENCE, THE IMPUGNED DISALLOWANCE REQUIRES TO BE DELETED. 2.1 FACTS IN BRIEF THAT THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE ENGAGED IN TRADING OF SHARES, DERIVATIVES AND COMMODITIES DURING THE IMPUGNED AY WAS ASSESSED IN SCRUTINY ASSESSMENT U/S 143(3) ON 29/12/2016 BY LD. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 2( 3)(2), MUMBAI [AO] WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.529.73 LACS AS AGAINST NIL RETURN E-FILED BY THE ASSESSEE ON 24/03/2015. THE ASSESSEE HAS BEEN DENIED THE BENEF IT OF CERTAIN LONG- TERM CAPITAL LOSS [LTCL] OF RS.1187.26 LACS STATED TO BE INCURRED BY THE ASSESSEE DURING IMPUGNED AY, WHICH IS THE SOLE SUBJECT MATTER OF PRESENT APPEAL BEFORE US. 2.2 DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED TH AT THE ASSESSEE, BEING PROMOTER OF A BOMBAY STOCK EXCHANGE [BSE] LISTED PUBLIC COMPANY NAMELY SQL STAR INTERNATIONAL LTD. [SQL], HELD 12.21% OF THE TOTAL SHAREHOLDING IN THAT ENTITY. THE COMPANY WAS SUSPENDED FROM BSE ITA NO. 2290/MUM/2018 SUPERSTAR EXPORTS PRIVATE LIMITED ASSESSMENT YEAR: 2014-15 3 FOR VIOLATION OF LISTING AGREEMENT. AFTER SUSPENSIO N OF THE SHARES FROM BSE , THE ASSESSEE CLAIMED TO HAVE SOLD 16.50 LACS SHAR ES ON 31/03/2014 IN AN OFF-MARKET TRANSACTION TO AN INDIVIDUAL NAMELY SHRI PARAG DHARAMSHI SHETH FOR A TOTAL SALE CONSIDERATION OF RS.24.75 LAKHS, COMPUTED @ RS.1/50 PER SHARE. THE NET LONG-TERM CAP ITAL LOSS [LTCL] AFTER ALLOWING INDEXED COST OF ACQUISITION WORKED OUT TO RS.1187.26 LACS, THE SET-OFF OF WHICH WAS CLAIMED AGAINST LONG-TERM CAPITAL GAIN OF RS.529.73 LACS EARNED BY THE ASSESSEE DURING IMPUGN ED AY. ACCORDINGLY, THE ASSESSEE WAS ASKED TO FURNISH THE SUPPORTING DOCUMENTARY EVIDENCES IN ORDER TO PROVE THE GENUINE NESS OF THE TRANSACTIONS. 2.3 THE ASSESSEE SUBMITTED THAT SQL WAS DELISTED FROM BSE AND IT WAS LOSS-MAKING COMPANY AND THEREFORE, THE SHARES W ERE SOLD AT DISCOUNTED PRICE IN AN OFF-MARKET TRANSACTION SINCE THERE WAS NO PURCHASER OF THESE SHARES IN THE MARKET. HOWEVER, I N THE ABSENCE OF REQUISITE DOCUMENTARY EVIDENCES AND NOTICING THAT T HE PAYMENT OF THE SHARES WAS NOT RECEIVED BY THE ASSESSEE DURING IMPU GNED AY, LD. AO TREATED THE SAME AS FABRICATED AND SHAM TRANSACTION & DISALLOWED THE LTCL AS CLAIMED BY THE ASSESSEE. 3.1 AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH OUT ANY SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 26/03/2 018 AND SUBMITTED ADDITIONAL DOCUMENTARY EVIDENCES IN TERMS OF RULE-4 6A TO SUBSTANTIATE THE STATED TRANSACTION. THESE EVIDENCES WERE IN THE SHAPE OF SALE NOTE DATED 15/03/2014, COPY OF DELIVERY INSTRUCTION SLIP FOR TRANSFER OF STATED SHARES, COPY OF LEDGER CONFIRMATION FROM PURCHASER OF THE SHARES I.E. SH.PARAG DHARAMSHI SHETH AND COPY OF DEMAT ACCOUNT OF THE PURCHASER ITA NO. 2290/MUM/2018 SUPERSTAR EXPORTS PRIVATE LIMITED ASSESSMENT YEAR: 2014-15 4 TO EVIDENCE TRANSFER OF SHARES. ACCORDINGLY, A REMAND REPORT WAS CALLED AGAINST THE SAME FROM LD. AO, THE RELEVANT FINDINGS OF WHICH HAS BEEN EXTRACTED ON PAGE NUMBERS 4 & 5 OF THE IMPUGNED ORDER. THE LD. AO DOUBTED THE DELIVERY INSTRUCTION SLIP SUBMITTED BY THE ASSESSEE AND OPINED THAT SALE NOTE WAS NOT CONCLUSIVE TO DETERMINE THE GENUINENESS OF THE TRANSACTION AND FURTHER, THE ASSESSEE COULD NOT EXPLAIN NON-FILLING OF LEDGER CONFIRMATION DATED 04/04/2014 DURING ASSE SSMENT PROCEEDINGS, ALTHOUGH THE SAME WAS FILED DURING APP ELLATE PROCEEDINGS. THE DOUBTS WERE RAISED AS TO COMPLETENESS OF THE TR ANSACTIONS. THE FACT THAT THE ASSESSEE FAILED TO PRODUCE THE PURCHASER SHRI SHAH ALONG WITH RELEVANT DOCUMENTS TO CONFIRM THE TRANSACTION WAS A LSO NOTED. 3.2 THE ASSESSEE AGITATED THE REMAND REPORT, INTER-ALIA, ON THE GROUND THAT TRANSACTION WAS AN OFF-MARKET TRANSACTION WITHOUT INVOLVEMENT OF ANY BROKER / STOCK EXCHANGE AND THE SAME WAS DULY SUPPORTED BY TWO DELIVERY INSTRUCTION SLIPS AND SALE NOTE DATED 15/03/2014 WHICH HAS BEEN ACCEPTED BY THE PURCHASER. THE ATTENTION WAS DRAWN TO THE DEMAT STATEMENT TO SUBSTANTIATE THE DELIVERY OF SHARES. IT WAS ALSO CONTENDED THAT ANOTHER SIMILAR OFF-MARKET TRANSACTION WHICH G ENERATED GAINS FOR THE ASSESSEE DURING IMPUGNED AY WAS ACCEPTED BY LD. AO AND THEREFORE, THE CONTRASTING STAND ON THE PART OF LD. AO WAS NOT JUSTIFIED. 3.3 AFTER DUE CONSIDERATION OF REMAND REPORT, ASSESSEES REBUTTAL AND FACTUAL MATRIX, LD. CIT(A) NOTED THAT SALE CONSIDERATION WAS NOT RE CEIVED BY THE ASSESSEE DESPITE LAPSE OF CONSIDERABLE PERIO D OF TIME AND FURTHER THE ASSESSEE HAS NOT SUPPORTED THE SALE CONSIDERATI ON WITH ANY VALUATION REPORT AND THEREFORE, UPHELD THE STAND OF LD. AO, AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. ITA NO. 2290/MUM/2018 SUPERSTAR EXPORTS PRIVATE LIMITED ASSESSMENT YEAR: 2014-15 5 4. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [ AR], SH. RAJIV KHANDELWAL, DRAWING OUR ATTENTION TO THE DOCUMENTS PLACED IN TH E PAPER- BOOK SUBMITTED THAT TRANSACTION WAS SUPPORTED BY REQUISI TE DOCUMENTARY EVIDENCES VIZ. DELIVERY INSTRUCTION SLIPS, SALE NOTE, LEDGER CONFI RMATION, DEMAT ACCOUNT STATEMENT OF THE ASSESSEE AS WELL AS TRANSFEREE ETC. WHICH PROVES THAT THE SHARES IN QUESTION WERE ACTUA LLY TRANSACTED AS WELL AS DELIVERED PURSUANT TO SALE NOTE . IT WAS SUBMITTED THAT SALE HAD TAKEN PLACE DURING IMPUGNED AY AND SALE CONSTITUTE TRANSFER IN TERMS OF SECTION 2(47) OF THE INCOME TAX ACT REGARDLESS OF F ACT THAT THERE WAS NO IMMEDIATE EXCHANGE OF SALE CONSIDERATION BETWEEN RE SPECTIVE PARTIES. IT HAS FURTHER BEEN SUBMITTED THAT ONCE TRANSFER OF CA PITAL ASSET TOOK PLACE IN THE IMPUGNED AY, CAPITAL GAINS / LOSS AROSE TO T HE ASSESSEE WHICH WERE CHARGEABLE TO TAX IN THAT AY IN TERMS OF SECTI ON 48 OF THE ACT. IN OTHER WORDS, IT WAS THE SUBMISSIONS OF LD. AR THAT CAPITAL GAINS WERE TO BE COMPUTED IRRESPECTIVE OF THE FACT WHETHER THE SA LE CONSIDERATION WAS RECEIVED OR MERELY ACCRUED TO THE ASSESSEE IN THE I MPUGNED AY. THE ATTENTION IS ALSO DRAWN TO THE FACT THAT SALE CONSI DERATION HAS FINALLY BEEN RECEIVED BY THE ASSESSEE ON 28/06/2018 FROM AN ENTI TY NAMELY EXCEL CORPORATE SERVICES PVT. LTD. ACTING ON BEHALF OF THE PURCHASER WHICH WOULD DISPEL THE DOUBTS RAISED BY THE REVENUE AS TO GENUINENESS OF THE TRANSACTIONS. PER CONTRA, LD. CIT-DR SUBMITTED THAT CORROBORATIVE EVIDENCES FURNISHED BY THE ASSESSEE WERE INADEQUATE WHICH DO NOT INSPIRE CONFIDENCE TO TREAT THE TRANSACTIONS AS GEN UINE TRANSACTION AND THEREFORE, THE STAND OF FIRST APPELLATE AUTHORITY W AS JUSTIFIED. 5.1 WE HAVE CAREFULLY HEARD THE RIVAL CONTENTIONS A ND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD INCLUDING DOC UMENTS PLACED IN THE ITA NO. 2290/MUM/2018 SUPERSTAR EXPORTS PRIVATE LIMITED ASSESSMENT YEAR: 2014-15 6 PAPER-BOOK. THE UNDISPUTED POSITION THAT EMERGES IS THAT THE AS SESSEE, HOLDING SUBSTANTIAL SHAREHOLDINGS IN SQL, IS STATED TO HAVE SOLD CERTAIN NUMBER OF SHARES OF THAT ENTITY IN OFF-MARKET TRANSACTIONS TO A PURCHASER DURING IMPUGNED AY WHICH HAS GIVEN RISE TO LONG TERM CAPITAL LOSS IN THE HANDS OF THE ASSESSEE. IN SUPPORT OF THE TRANSA CTION, THE ASSESSEE HAS PLACED ON RECORD SALE NOTE DATED 15/03/2014, TWO DELIVERY INSTRUCTION SLIPS IN SUPPORT OF TRANSFER OF SHARES TOTALING TO 16.50 LACS NUMBER OF SHARES, DEMAT STATEMENT OF THE ASSESSEE AS WELL AS PURCHASER EVIDENCING PURCHASE OF SHARES AND LEDGER CONFIRMATION FROM THE PURCHASER. UPON CAREFUL PERUSAL OF THE SAME, WE FIND THAT THE ASSESSEE IS STATED TO HAVE SOLD THESE SHARES TO SHRI PARAG DHARAMSHI SHAH FOR A SALE CONSIDERATION OF RS.24.75 LACS VIDE SALE NOTE DATED 15/03/2014. CONSEQUENTLY, THE ASSESSEE HAS ISSUED T WO DELIVERY INSTRUCTION SLIP NUMBERS 356586 & 356587 BOTH DATED 31/03/2014 FOR 12.50 LACS & 4 LACS NUMBER OF SHARES RESPECTIVELY, DIRECTING ITS DEPOSITORY PARTICIPANTS NAMELY SYSTEMATIX SHARES & STOCKS (I) LTD. TO TRANSFER THE SHARES TO THE PURCHASER. THE ASSESSEE S DEMAT STATEMENT WITH RESPECT TO ITS SHAREHOLDING, AS PLACED ON PAGE NUMBER-24 IN THE PAPER-BOOK REVEAL THAT THESE SHARES HAVE ACTUALLY BEEN DEBITE D / TRANSFERRED FROM ASSESSEES ACCOUNT ON 31/03/2014 A ND THE SAME HAS DULY BEEN CREDITED ON THE SAME DATE TO THE ACCOUNT OF THE PURCHASER CLIENT ID 21316474 HELD WITH STOCK HOLDING CORPORATION OF INDIA LTD. THE LEDGER CONFIRMATION EVIDENCING THE TRANSACTION HAS BEEN PLACED ON PAGE NUMBER-30 OF THE PAPER-BOOK WHICH HAS BEEN CONFIRMED BY THE PURCHASER ON 04/04/2014. THE AMOUNT OF RS.24.75 LAC S RECEIVABLE FROM PURCHASER IS REFLECTED BY THE ASSESSEE IN ITS BALANCE SHEET FOR IMPUGNED ITA NO. 2290/MUM/2018 SUPERSTAR EXPORTS PRIVATE LIMITED ASSESSMENT YEAR: 2014-15 7 AY UNDER THE HEAD OTHER RECEIVABLE AND THE BOOKS OF ACCOUNTS HAVE DULY BEEN AUDITED UNDER LAW . THE AFORESAID SEQUENTIAL EVENTS LEAD US TO FORM AN OPINION THAT THE OWNERSHIP OF THE SHARE WAS, IN FACT, TRANSFERRED BY THE ASSESSEE DURING IMPUGNED AY ITSELF AND THE SALE TRA NSACTION WAS DULY RECOGNIZED BY THE ASSESSEE AS WELL AS THE PURCHASER . THE REVENUE HAS DOUBTED THE TRANSACTION PRIMARILY ON THE GROUND THA T THE SALE CONSIDERATION WAS NOT RECEIVED BY THE ASSESSEE DURI NG IMPUGNED AY AND THEREFORE, THE TRANSACTION WAS MERELY A SHAM TRANSACTION . HOWEVER, NOTHING ON RECORD SUGGEST THE SAME. IT IS TRITE LAW THAT ADDITION COULD NOT BE MADE MERELY ON THE BASIS OF SUSPICION, CONJECTUR ES OR SURMISES WITHOUT BRINGING ON RECORD ANY ADVERSE MATERIAL AGA INST THE ASSESSEE TO REBUT THE ASSESSEES DOCUMENTARY EVIDENCES. 5.2 AS PER CHARGING SECTION 48, THE INCOME CHARGEAB LE UNDER THE HEAD CAPITAL GAINS IS TO BE COMPUTED BY DEDUCTING FROM T HE FULL VALUE OF CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF T RANSFER OF THE CAPITAL ASSET. THE TERM TRANSFER AS DEFINED IN SECTION 2(47) WOULD INCLUDE THE SALE, EXCHANGE OR RELINQUISHMENT OF THE ASSET. SINC E, IN THE PRESENT CASE, WE HAVE ALREADY CONCLUDED THAT THE SALE TOOK PLACE IN THE IMPUGNED AY ITSELF, THE IMPUGNED TRANSACTION, IN TE RMS OF CHARGING SECTION 48, WERE CHARGEABLE TO TAX IN IMPUGNED AY O NLY IRRESPECTIVE OF THE FACT THAT SALE CONSIDERATION WAS ACTUALLY RECEI VED BY THE ASSESSEE OR MERELY ACCRUED TO THE ASSESSEE IN IMPUGNED AY. THE CHARGEABILITY OF THE CAPITAL GAINS, IN OUR OPINION, WAS NOT DEPENDEN T UPON FACTUM OF ACTUAL RECEIPT OF SALE CONSIDERATION BY THE ASSESSE E AND THEREFORE, THE STAND OF LOWER AUTHORITIES, IN THIS REGARD, COULD N OT BE SUSTAINED. ITA NO. 2290/MUM/2018 SUPERSTAR EXPORTS PRIVATE LIMITED ASSESSMENT YEAR: 2014-15 8 5.3 SO FAR AS THE VALUATION OF SHARES IS CONCERNED , IT IS NOTABLE THAT THE SQL WAS A LISTED ENTITY WHOSE TRADING WAS SUSPENDED FR OM BSE DURING THE MONTH OF DECEMBER, 2013 WHEN THE LAST TRADED PR ICE OF THE SHARE WAS RS.1.08 PER SHARE. IT IS ALSO UNDISPUTED FACT T HAT THE SAID ENTITY WAS LOSS MAKING ENTITY AND THERE WAS NO READY BUYER OF ITS SHARE UPON ITS SUSPENSION FROM TRADING ON STOCK EXCHANGE. THE PRIC E OF LISTED SHARES, IN OUR OPINION, ARE GOVERNED MORE BY DEMAND-SUPPLY FACTORS AND THEREFORE, THE SALE CONSIDERATION COULD NOT BE REJE CTED BY REVENUE MERELY BY SUSPECTING THE SAME WITHOUT BRINGING ON R ECORD ANY MATERIAL TO CORROBORATE THE FACT THAT THE PRICE OF THE SHARE S AT RELEVANT TIME WAS ON THE HIGHER SIDE. 5.4 KEEPING IN VIEW THE ABOVE FACTS AND CIRCUMSTANC ES, WE ARE OF THE CONSIDERED OPINION THAT THE STAND OF FIRST APPELLAT E AUTHORITY IN REJECTING THE ASSESSEES LONG TERM CAPITAL LOSS COULD NOT BE SUSTAINED. WE ORDER SO. THE APPEAL STANDS ALLOWED. SA NO. 534/MUM/2018: 6. SINCE WE HAVE DECIDED THE ASSESSEES QUANTUM APP EAL AGAINST WHICH THIS STAY APPLICATION HAS BEEN FILED, THE APP LICATION BECOMES INFRUCTUOUS AND THEREFORE, STAND DISMISSED IN LIMINE. CONCLUSION 7. THE QUANTUM APPEAL STANDS ALLOWED WHEREAS STAY A PPLICATION STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH FEBRUARY, 2019. SD/- SD/- (C.N. PRASAD) (MA NOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ITA NO. 2290/MUM/2018 SUPERSTAR EXPORTS PRIVATE LIMITED ASSESSMENT YEAR: 2014-15 9 MUMBAI; DATED : 26/02/2019 SR. PS - THIRUMALESH / SR.PS :- JAISY VARGHESE / COPY OF THE ORDER FORWARDED TO : 1. !' / THE APPELLANT 2. #!' / THE RESPONDENT 3. $ $ % ( ) / THE CIT(A) 4. $ $ % / CIT CONCERNED 5. &' ( , $ , / DR, ITAT, MUMBAI 6. '+,- / GUARD FILE / BY ORDER, / % (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.