Vijay Kumar Baid, HUF, CHENNAI V. ITO Non Corporate Ward 5(2), CHENNAI

ITA 2300/CHNY/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6145 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 03-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SAGADEVAN IRS
• Assessee Lawyers: D ANAND
• Keywords: Wrong claim
• Section: 5(2)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A (SMC) BENCH : CHENNAI [BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT M EMBER ] ./I.T.A. NO.2300/CHNY/2018 / ASSESSMENT YEAR : 2011-2012. VIJAY KUMAR BAID (HUF) , NO.1, KALATHI PILLAI STREET, CHENNAI 600 079. [PAN AAAHV 1998J] VS. THE INCOME TAX OFFICER, NON CORPORATE WARD 5(2) CHENNAI 600 006. ( / APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI. D ANAND, ADVOCATE /RESPONDENT BY : SHRI. B.SAGADEVAN, IRS, JCIT. /DATE OF HEARING : 17 - 01 - 201 9 /DATE OF PRONOUNCEMENT : 24 - 01 - 201 9 / O R D E R IN THIS APPEAL FILED BY THE ASSESSEE, WHICH IS D IRECTED AGAINST AN ORDER DATED 14.06.2018 OF LD. COMMISSION ER OF INCOME TAX (APPEALS)-5, CHENNAI, IT IS AGGRIEVED ON DISALLOWA NCE OF EXEMPTION CLAIMED U/S.10(38) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) ON CAPITAL GAINS EARNED BY HIM FROM SALE OF 30,000 S HARES IN ONE M/S. SPLASH MEDIA & INFRO LTD (IN SHORT SMIL). 2. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESS EE HAD ACQUIRED 750 EQUITY SHARES FROM ONE M/S. SMIL ON 1 0.11.2009 ITA NO.2300/CHNY/2018 :- 2 -: THROUGH STOCK EXCHANGE. ACCORDING TO THE LD. AUTHO RISED REPRESENTATIVE, PURCHASES WERE NOT OFF-MARKET BUT WAS DONE THROUGH A RECOGNIZED STOCK EXCHANGE BY A STOCK BROKER NAME D M/S.MSE FINANCIAL SERVICES LTD. AS PER THE LD. AUTHORISED REPRESENTATIVE THE SAID BROKER WAS REGISTERED IN SEBI. CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE WAS THAT THE PAYMENTS FOR PURCHASE W ERE MADE THROUGH BANK ON 12.11.2009. SUBMISSION OF THE LD. AUTHORISED REPRESENTATIVE WAS THAT ON THE ABOVE 750 SHARES, A SSESSEE HAS RECEIVED 2250 BONUS SHARES, IN THE RATIO OF 1:3 ON 01.12.2009 INCREASING ITS HOLDING TO 3000 EQUITY SHARES. THER EAFTER AS PER THE LD. AUTHORISED REPRESENTATIVE, THE SAID M/S. SMIL HAD O N 20.07.2010 SPLIT ITS RS.10/- EQUITY TO 10 EQUITY SHARES OF RS.1/- EA CH, SHARE THEREBY INCREASING ASSESSEES HOLDING TO 30000 SHARES. CON TENTION OF THE LD. AUTHORISED REPRESENTATIVE WAS THAT LOWER AUTHORITIE S HAD WENT BY A PRESUMPTION THAT THE PURCHASES OF THE SHARES WERE DONE OFF MARKET. AS PER THE LD. AUTHORISED REPRESENTATIVE, LOWER AUT HORITIES SIMPLY WENT BY INVESTIGATION REPORT GIVEN BY THE INVESTIGATION WING OF THE DEPARTMENT IN KOLKATA, AND PROCEEDED TO DISBELIEVE THE CLAIM OF CAPITAL GAINS ON SALE OF THE SHARES. CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE, WAS THAT REPORT OF THE INVESTIGATI ON WING OF KOLKATA HAD NO ROLE, IN SO FAR AS ASSESSEE WAS CONCERNED, SINCE PURCHASES AS WELL AS SALES WERE ON MARKET TRANSACTIONS THROUGH RECOGNIZED STOCK ITA NO.2300/CHNY/2018 :- 3 -: EXCHANGES. RELIANCE WAS PLACED ON A DECISION OF CO- ORDINATE BENCH IN THE CASE OF NIRAV KUMAR MAHENDRA KUMAR SAPANI VS. DCIT (ITA NO.2032/MDS/2017, DATED 08.02.2018 ). 3. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE SUBMIT TED THAT IN SIMILAR CASES, THIS TRIBUNAL WAS SENDING THE Q UESTION OF TAXING THE CAPITAL GAINS ARISING OUT OF SALE OF SHARES, BACK TO THE LD. ASSESSING OFFICER FOR RECONSIDERATION. AS PER THE LD. DEPART MENTAL REPRESENTATIVE, THERE WAS NOTHING ON RECORD WHICH C OULD SUGGEST A DIFFERENT METHODOLOGY IN THIS CASE. RELIANCE WAS PLACED ON A DECISION OF CO-ORDINATE BENCH IN THE CASE OF HEERACHAND KANUNGA VS. ITO (ITA NO.2786 & 2787/CHNY/2017, DATED 03.05.2018 ). 4. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. WHAT I FIND IS THA T LD. ASSESSING OFFICER HAD RELIED ON AN INVESTIGATION REPORT OF INVESTIGAT ION WING OF THE DEPARTMENT, FROM KOLKATA, FOR DISBELIEVING THE PURC HASE AND SALE TRANSACTION OF THE SHARES OF M/S. SMIL CLAIMED BY THE ASSESSEE. AS PER THE LD. ASSESSING OFFICER, SHARE PRICE MOVEMENT S OF THE SHARES OF SMIL, CLEARLY INDICATED ARTIFICIAL HIKING OF THE PRICES AND CONSEQUENT BOGUS CLAIM OF CAPITAL GAINS. LD. COMMISSIONER OF INCOME TAX (APPEALS) ON THE OTHER HAND HAD TAKEN A VIEW THAT S HARES ACQUIRED BY THE ASSESSEE WERE THROUGH OFF MARKET. HE ALSO HELD THAT THERE WERE ITA NO.2300/CHNY/2018 :- 4 -: NO BONUS SHARES ISSUED BY SMIL FOR JUSTIFYING THE INCREASE IN THE PRICE OF ITS SHARES. HOWEVER, RECORDS PRODUCED BY THE ASSESSEE BEFORE ME IN THE NATURE OF CONTRACT NOTE ISSUED BY M/S. M SE FINANCIAL SERVICES LTD AND CERTIFICATE OF M/S. STOCK HOLDING CORPORATION OF INDIA LIMITED CLEARLY INDICATE THAT THE SHARES WERE PURCH ASED BY THE ASSESSEE THROUGH ON-MARKET TRANSACTIONS, AND THAT TOO IN DEMAT FORM. PAYMENTS WERE MADE BY THE ASSESSEE WERE ALSO THROUGH BANK. LD. COUNSEL FOR THE ASSESSEE HAS CERTIFIED THAT THE SE RECORDS WERE WITH THE LOWER AUTHORITIES. IT IS A MATTER OF RECORD TH AT SMIL HAD ISSUED BONUS SHARES IN THE RATIO OF 3:1 AND THEREAFTER SPL IT THEIR SHARES. SALE MADE BY THE ASSESSEE WAS ALSO THROUGH STOCK EXCHANG E AND CONSIDERATION RECEIVED THROUGH BANK ONLY. IN SIMI LAR CIRCUMSTANCES IN THE CASE OF NIRAV KUMAR MAHENDRA KUMAR SAPANI (SUPRA) THIS TRIBUNAL HAD HELD AS UNDER:- 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EI THER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECO RD. THE PURCHASE OF SHARES OF SWACA BUSINESS MACHINES LTD. BY BOTH THE ASSESSEES WAS EVIDENCED BY WAY OF CONTRACT NOTE ISSUED BY THE RECOGNISED STOCK BROKER ASE CAPITAL M ARKETS LTD. IT IS NOT IN DISPUTE THAT ASE CAPITAL MARKETS LTD. IS ONE OF THE RECOGNISED STOCK BROKERS BY SECURITY EXCHANG E BOARD OF INDIA. THE SHARES WERE ALSO SOLD THROUGH ASE CAP ITAL MARKETS LTD. THE CONTRACT NOTES FOR PURCHASE AND SA LE OF SHARES WERE FILED BY BOTH THE ASSESSEES BEFORE THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT PROCEED ING. THE ASSESSMENT PROCEEDINGS WERE COMPLETED ON THE GROUND THAT ONE SHRI CHANDRAKANT SHAH PROVIDED ACCOMMODATION EN TRY ITA NO.2300/CHNY/2018 :- 5 -: TO VARIOUS PERSONS. THE QUESTION ARISES FOR CONSIDE RATION IS WHETHER THE ASSESSEES TRANSACTION IN RESPECT OF PU RCHASE OF SHARES AND SALE OF SHARES THROUGH ASE CAPITAL MARKE TS LTD. IS A BOGUS TRANSACTION? THIS TRIBUNAL IS OF THE CON SIDERED OPINION THAT WHEN THE FACT THAT ASE CAPITAL MARKETS LTD. IS A RECOGNISED STOCK BROKER IS NOT IN DISPUTE AND THE A SSESSEES HAVE ALSO PURCHASED THE SHARES AT THE MARKET RATE A ND SOLD THE SAME AT MARKET RATE THROUGH RECOGNISED STOCK BR OKER OF SECURITY EXCHANGE BOARD OF INDIA, IT CANNOT BE SAID THAT THE TRANSACTION WAS A BOGUS ONE. AS TO THE DECISION OF HEERACHAND KANUNGA (SUPRA ) RELIED ON BY THE LD. DEPARTMENTAL REPRESENTATIVE, THE ORIGINAL ACQUISITI ON OF SHARES IN THE SAID CASE WERE NOT IN A DEMAT FORM, AND IT SEEMS SUCH SHARES WERE PURCHASED OFF MARKET. IN THE CIRCUMSTANCES, I AM IN CLINED TO FOLLOW THE DECISION OF CO-ORDINATE BENCH IN THE CASE OF NIRAV KUMAR MAHENDRA KUMAR SAPANI (SUPRA). TRANSACTIONS DONE THROUGH RECOGNIZED STOCK EXCHANGES WHERE PAYMENTS WERE MADE THROUGH BANK CAN NOT BE DOUBTED OR DISBELIEVED BASED ON AN INVESTIGATION RE PORT OF THE DEPARTMENT, WHICH AT THE BEST CAN BE STRONG REASON TO SUSPECT THE VERACITY OF THE CLAIM BUT NOT GOOD ENOUGH TO DISBEL IEVE IT. I AM THEREFORE OF THE OPINION THAT THERE IS NOTHING CONC RETE BROUGHT ON RECORD BY THE DEPARTMENT TO SHOW THAT TRANSACTIONS ENTERED BY THE ASSESSEE IN THE SHARES OF SMIL WERE BOGUS OR SHAM. I THEREFORE DO NOT FIND ANY REASON TO UPHOLD THE ORDERS OF THE LOWER AUTHORITIES. SUCH ORDERS ARE SET AIDE AND THE ADDITION IS DELETED. ITA NO.2300/CHNY/2018 :- 6 -: 5. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS ALLOWE D. ORDER PRONOUNCED ON THURSDAY, THE 24TH DAY OF JAN UARY, 2019, AT CHENNAI. SD/ - (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER / CHENNAI / DATED:24TH JANUARY, 2019. KV / COPY TO: 1 . / APPELLANT 3. ( ) / CIT(A) 5. / DR 2. / RESPONDENT 4. / CIT 6. / GF