VIKRAM JAMNADDAS KOTHARI, MUMBAI V. ACIT CIR 12(3), MUMBAI

ITA 2374/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56195 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 08-12-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 15-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANTAM BOSE
• Keywords: Business income
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH -MUMBAI BEFORE HONBLE SHRI R.S. PADVEKAR,(J.M.) AND SHRI RAJENDRA SINGH,(A.M.) I.T.A. NO.2374/MUM/2009 ASSESSMENT YEAR : 2005-06 SHRI VIKRAM JAMNADAS KOTHARI 66, ZAVER MAHAL, 5 TH FLOOR FLAT NO.12-A NETAJI SUBHASH ROAD MARINE DRIVE MUMBAI-400 020 P.A. NO.(AAUPK 4223 D) VS. ASSTT. COMMISSIONER OF INCOME TAX , CIRCLE-12(3) MUMBAI. ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : : SHRI JITENDRA JAIN RESPONDENT BY SHRI SANTAM BOSE DATE OF HEARING : 12/12/ 2011 DATE OF PRONOUNCEMENT : 23/12/2011 O R D E R PER RAJENDRA SINGH (AM) THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 3/2/2009 FOR THE ASSESSMENT YEAR 2005-06. THE ON LY DISPUTE RAISED IN THIS APPEAL IS REGARDING ADDITION ON ACCOUNT OF SHARE TRANSACTIONS SHOWN BY THE ASSESSEE AS CAPITAL GAIN BUT TREATED BY THE AO AS SHAM AND BOGUS. 2. THE FACTS IN BRIEF ARE THAT THE AO DURING THE ASSESSME NT PROCEEDINGS NOTED THAT THE ASSESSEE HAD DECLARED SHORT TER M ITA NO.2374/M/09 A.Y. : 05-06 2 CAPITAL GAIN OF RS.58,43,335/- ON TOTAL SALE OF SHARES O F RS.91,61,463/-. THE CAPITAL GAIN HAD ARISEN ON ACCOUNT OF SALE OF SHARES IN 17 SCRIPS THROUGH THREE DIFFERENT BROKERS, D ETAILS OF WHICH HAVE BEEN GIVEN AT PAGE-3 OF THE ASSESSMENT ORDER. THE THREE BROKERS WERE: GANDHI SECURITIES PVT. LTD., VIJAY BHAGWANDAS & CO. AND ADVANI SHARE BROKERS PVT. LTD. THE AO MADE ENQUIRY FROM BSE WHO REPLIED THAT THE ASSESSEE WAS REGISTERED AS TRADER WITH CENTRUM BROKING PRIVATE LIM ITED. THE ACCOUNTS OF TRADE DONE BY THE ASSESSEE THROUGH CENTRUM BROKING PRIVATE LIMITED FROM 1/4/2005 TO 31/3/2005 WERE GIVEN BY THE ASSESSEE. BSE ALSO REPORTED THAT THE TRANSACTIONS M ADE BY THE ASSESSEE WERE ONLY DURING THE PERIOD 1/2/2005 TO 1/3/2005 IN 5 SCRIPS. 2.1 THE AO HOWEVER NOTED THAT THE ASSESSEE HAD MADE MOST OF THE PURCHASES PRIOR TO JANUARY, 2005. THE AO, THER EFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY TRANSACTIONS SHOULD N OT BE TREATED AS NON GENUINE AND SALE PROCEEDS DECLARED BY THE ASSESSEE SHOULD NOT BE TREATED AS INCOME UNDER SECTION 68. THE ASSESSEE SUBMITTED THAT ALL TRANSACTIONS WERE DONE THROUGH REGISTERED BROKERS AND SUB-BROKERS AS PER PREVAILING PRA CTICE AND PURCHASES DONE BY BROKERS FOR THEIR CLIENTS UNDER THE IR ID ITA NO.2374/M/09 A.Y. : 05-06 3 WHICH WAS ALLOWED BY BSE TILL 31/3/2005. THE BROKERS /SUB- BROKERS HAD ISSUED PURCHASE AND SALE BILLS AND SAME WERE REFLECTED IN THE HDFC BANK ACCOUNT. SHARES WERE ALSO TRANSFERRED TO DEMAT ACCOUNT OF THE ASSESSEE ON PAYMENT OF PURCHASE PRICE AND SUBSEQUENTLY SOLD THROUGH DEMAT ACCOUNT . THE AO, HOWEVER MADE ENQUIRIES FROM THE 3-BROKERS AND AFTER NECESSARY ENQUIRIES THE FOLLOWING CONCLUSIONS WERE DRAWN :- (I) AS PER BSE THE ASSESSEE HAD TRANSACTED ONLY IN SHA RES OF FIVE COMPANIES DURING THE PERIOD 1.2.2005 TO 1.3.2005. (II) THE DATES OF PURCHASES AND SALES WILL NOT MATCH WIT H THE DETAILS PROVIDED BY BM GANDHI SECURITIES AND MORE OVER NO D ETAILS WERE RECEIVED FROM M/S. VIJAY BHAGWANDAS & CO. (III) IF THE SHARES HAD BEEN HELD BY SUB-BROKERS IN THEIR POOL A/C., HE COULD NOT UNDERSTAND AS TO HOW ONE BROKER COULD SELL SHARES FROM THE POOL A/C. OF ANOTHER BROKER. (IV) FOR THE SHARES LIKE G.TECH. TRAINING THE CLOSING BA LANCE SHOULD HAVE BEEN 60,000 SHARES WHEREAS NO SHARES ARE REFLE CTED IN THE TRANSACTION STATEMENT OF THE BROKERS. 2.2 THE AO, THEREFORE, HELD THAT THE TRANSACTIONS RELA TING TO PURCHASE AND SALE OF SHARES WERE SHAM AND BOGUS AND ADDED RS.91,61,463/- AS INCOME OF THE ASSESSEE FROM OTHER SOURCES UNDER SECTION 68 OF THE INCOME TAX ACT. 3. IN APPEAL, THE ASSESSEE SUBMITTED THAT SOME OF THE TRANSACTIONS WERE DONE THROUGH POOL A/C. OF BROKERS AS PE R BSE REGULATIONS. THE ASSESSEE HAD FILED NECESSARY PARTICULARS ITA NO.2374/M/09 A.Y. : 05-06 4 PERTAINING TO THE TRANSACTIONS DONE THROUGH POOL A/C. THE ASSESSEE HAD ALSO FILED CONFIRMATIONS OF THE BROKERS EXCEPT M/S. VIJAY BHAGWANDAS & CO. THE ASSESSEE ALSO SUBMITTED THAT AO WAS NOT CORRECT IN STATING THAT THE TRANSACTIONS DID NOT MATCH WITH THE DETAILS PROVIDED BY BM GANDHI SECURITIES PVT. LTD. THE STATEMENT GIVEN BY M/S. GANDHI SECURITIES PVT. LTD. TAL LIED WITH THE STATEMENT OF SHORT TERM CAPITAL GAIN FILED BY THE ASSESSEE. AS REGARDS THE FINDING OF THE AO THAT IN CASE OF G.TECH TRAINING NO CLOSING BALANCE OF RS.60,000/- SHARES WERE REFLECTED, THE ASSESSEE SUBMITTED THAT NUMBER OF SHARES PURCHASED OF G.TECH TRAINING WERE 1,00,000 AND NOT 1,60,000 AS TAKEN BY THE AO. IN RELATION TO THE POOL A/C., IT WAS SUBMITTED THAT PURCH ASES REMAINED IN THE POOL A/C. OF BROKERS WHICH WERE SUBSEQUE NTLY TRANSFERRED TO INDIVIDUAL DEMAT A/C. OF THE BUYER. C IT(A) ACCEPTED THE EXPLANATION GIVEN BY THE ASSESSEE AS TRANSACTIO NS WERE SUPPORTED BY PURCHASES AND SALE BILLS AS WELL AS CONFIRMATION GIVEN BY BROKERS EXCEPT IN CASE OF THE BROK ER M/S. VIJAY BHAGWANDAS & CO. CIT(A), THEREFORE, TREATED ALL TRANSACTIONS AS GENUINE EXCEPT SALES AND PURCHASES MADE THROUGH M/S. VIJAY BHAGWANDAS & CO. WHICH WAS TREATED AS BOGUS AS PER DETAILS GIVEN BELOW:- ITA NO.2374/M/09 A.Y. : 05-06 5 NAME OF THE CO. NO. OF SHARES SALES VALUE PRRALET INDS. 12,500 5,48,925 HIMACHAL FUTURISTIC 5,000 WRONGLY SHOWN AS 15000 BY CIT(A) 78,850 IKF SOFTWARE 50,000 8,70,500 TOTAL 14,97,775/- CIT(A), THEREFORE, CONFIRMED ADDITION TO THE TUNE OF RS.14,97,775/- AGGRIEVED, BY WHICH ASSESSEE IS IN APPEAL. 4. BEFORE US, THE LD. AR FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE LOWER AUTHORITIES THAT SALES AND PURCHASES WERE SUPPORTED BY BILLS. IT WAS SUBMITTED THAT THE AO HAD MADE ADDITION ONLY IN CASES WHERE PURCHASES AND SALES B OTH HAD BEEN MADE THROUGH THE BROKER, VIJAY BHAGWANDAS & CO. FOR WANT OF CONFIRMATION FROM THE BROKER. IN RESPECT OF T HE THREE CASES IN WHICH CIT(A) HAD CONFIRMED ADDITIONS, PURCHASES AND SALE BILLS WERE AVAILABLE AT PAGE 21/22; 29/30 AND PA GE 26-28 OF THE PAPER BOOK. IT WAS POINTED OUT THAT IN ALL THESE CASES SERVICE TAX AND SHARE TRANSACTION TAX, (STT) HAD BEEN PA ID WHICH WAS DULY SHOWN IN THE BILL. IT WAS ALSO SUBMITTED THAT SALE VALUES WERE REFLECTED IN THE BANK ACCOUNT. THE LD. A R ALSO REFERRED TO COPY OF DEMAT ACCOUNT OF THE ASSESSEE PLACED A T PAGE-56 OF THE PAPER BOOK IN WHICH SALE AND PURCHASE OF SHARES OF IKF SOFTWARE WERE DULY REFLECTED. IT WAS ACCORDINGL Y URGED ITA NO.2374/M/09 A.Y. : 05-06 6 THAT THE TRANSACTIONS SHOULD BE ACCEPTED AS GENUINE EVEN IN THESE CASES ALSO. THE LD. DR ON THE OTHER HAND PLACED RE LIANCE ON THE FINDINGS GIVEN BY THE AUTHORITIES BELOW. 5. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING GENUINE NESS OF SHORT TERM CAPITAL GAIN SHOWN BY THE ASSESSEE FROM SALE AND PURCHASE OF SHARES. THE ASSESSEE HAD SHOWN THE TOTAL SHORT TERM CAPITAL GAIN OF RS.58,43,335/- ON ACCOUNT OF SALE O F SHARES OF 17 SCRIPS WITH THE TOTAL SALES OF RS.91,61,467/-. THE AO MADE ENQUIRIES FROM BSE AS WELL AS THROUGH BROKERS THROUGH WHOM PURCHASES AND SALES HAD BEEN MADE AND AFTER POINTING OU T VARIOUS DISCREPANCIES AS MENTIONED EARLIER TREATED THE TRANSACTIONS AS NON GENUINE AND ENTIRE SALES OF RS.91,61,4 63/- WAS TREATED AS INCOME FROM OTHER SOURCES UNDER SECTION 68 O F THE ACT. CIT(A) ON FURTHER EXAMINATION FOUND ALL THE TRANSACTIONS GENUINE EXCEPT THE TRANSACTIONS WHERE BOTH SALES AND PURC HASES WERE MADE THROUGH BROKER M/S. VIJAY BHAGWANDAS & CO. WHO HAD NOT FILED ANY CONFIRMATION. THE CASE OF THE ASSESSEE IS THAT EVEN IN THESE CASES SALES AS WELL AS PURCHASES ARE SUPPORTED BY BILLS ISSUED BY THE BROKER WHICH SHOW PAYMENT OF SERVICE TAX AND STT. THE AMOUNT OF SALE CONSIDERATION HAS BEEN RECEIVED BY CHEQUE AND REFLECTED IN THE BANK ACCOUNT. THE SHARE ITA NO.2374/M/09 A.Y. : 05-06 7 TRANSACTIONS WERE ALSO ROUTED THROUGH DEMAT ACCOUNT. IN OUR VIEW SALES AND PURCHASES CAN NOT BE TAKEN AS BOGUS ONLY ON THE GROUND OF NO CONFIRMATION FROM THE BROKER PARTICULARL Y WHEN THE BROKER HAS NOT DENIED THE TRANSACTIONS. THE CLAIM OF TH E ASSESSEE IS THAT SHARES PURCHASED THROUGH THE POOL A/C. OF TH E BROKER WERE TRANSFERRED TO DEMAT ACCOUNT OF THE ASSESSEE A FTER PAYMENT OF PURCHASE PRICE AND THEREAFTER THESE WERE SOLD AND SALE OF SHARES IS REFLECTED IN THE DEMAT ACCOUNT AND PURCHA SES AND SALE CONSIDERATIONS ARE ROUTED THROUGH THE BANK ACCOU NT OF THE ASSESSEE. THE ASSESSEE HAS FILED THE COPY OF THE DEMAT A /C. OF THE ASSESSEE IN WHICH PURCHASE AND SALE OF SHARE IN CASE O F IKF SOFTWARE ARE REFLECTED. IN CASE, AFTER THE PAYME NT OF PURCHASE PRICE, SHARES ARE CREDITED INTO THE DEMAT A/C. AN D AFTER SALES, THE QUANTITY OF SHARES IS DEBITED IN THE DEMAT A/ C., PURCHASE AND SALES PRICES SHOWN IN THE BILLS ARE COMPARABLE TO THE STOCK EXCHANGE RATES ON THE DATES OF PURCHASES AND SALES AND PURCHASE AND SALE CONSIDERATIONS ARE REFLECTED IN THE BOOK ACCOUNT OF THE ASSESSEE, THE TRANSACTIONS SHOULD BE TREATED AS GENUINE. IN OUR VIEW MATTER REQUIRES FRESH EXAMINATI ON AS MENTIONED ABOVE BEFORE DRAWING ANY CONCLUSION AS TO T HE GENUINENESS OF THE TRANSACTIONS. WE, THEREFORE, SET ASID E THE ORDER OF CIT(A) AND RESTORE THE MATTER TO THE FILE O F AO FOR ITA NO.2374/M/09 A.Y. : 05-06 8 PASSING A FRESH ORDER AFTER NECESSARY EXAMINATION IN THE LIGHT OF OUR OBSERVATIONS MADE ABOVE AND AFTER ALLOWING OPPORT UNITY OF HEARING TO THE ASSESSEE. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23/12/2011. SD/- SD/- (R.S. PADVEKAR) (RAJ ENDRA SINGH) JUDICIAL MEMBER ACCO UNTANT MEMBER MUMBAI, DATED: 23/12/2011. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.