MANDAKINI HOSPITALITY P.LTD, MUMBAI V. ASST CIT CIR 4(2), MUMBAI

ITA 2538/MUM/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8753 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 15-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Assessee Lawyers: PRADEEP SHARMA
• Keywords: Onus to prove

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'B' BENCH, MUMBAI BEFORE SHRI P K BANSAL, VICE PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.2538 /MUM/2014 (ASSESSMENT YEAR: 2009-10) M/S. MANDAKINI HOSPITALITY P. LTD. VS. A C I T - 4(2) RAAJ CHAMBER, S.K.M. FABRICS PLOT NO. 115, 115/IT-03 R.K. PHARMAHANSE MRG ANDHERI (E), MUMAI 400069 AAYAKAR BHAVAN M.K. ROAD MUMBAI 400020 PAN AAECM3343D APPELLANT RESPONDENT APPELLANT BY: SHRI PRADEEP SHARMA RESPONDENT BY: SHRI SUMAN KUMAR DATE OF HEARING: 14.09.2017 DATE OF PRONOUNCEMENT: 31.10.2017 O R D E R PER P.K. BANSAL, VICE PRESIDENT THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-8, MUMBAI DATED 03.01.2014 FOR A.Y. 2009-10. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS WHETHER T HE LOSS INCURRED BY THE ASSESSEE IS A LONG TERM CAPITAL LOSS OR NOT? 3. THE BRIEF FACTS OF THE CASE ARE THAT THE AO NOTED DURING THE COURSE ASSESSMENT PROCEEDINGS THAT THE ASSESSEE HAS SHOWN LONG TERM CAPITAL LOSS ON SALE OF 26570000 SHARES OF LANDMARK LEISURE CORPORATION LTD. THROUGH OFF MARKET TRANSACTION AMOUNTING TO ` 1,55,97,441/-. THESE SHARES ARE LISTED ON THE STOCK EXCHANGE. THE SHARES HAS NO T BEEN SOLD BY THE ASSESSEE THROUGH STOCK EXCHANGE BUT HAS BEEN SOLD O FF MARKET. THE AO ISSUED NOTICES TO THE BUYERS OF SHARES I.E. M/S. IN VITAQTION EQUIFFIN PVT. LTD. AND M/S. CORONATION INFOTECH P. LTD. THE AO, O N GOING THROUGH THE BANK ACCOUNT STATEMENT OF M/S. INVITATION EQUIFIN P . LTD. IN IDBI NOTED THAT THE COMPANY HAS MADE THE PAYMENT TO THE ASSESS EE ON 25.02.2009 ITA NO. 2538/MUM/2014 M/S. MANDAKINI HOSPITALITY P. LTD. 2 AMOUNTING TO ` 90,91,565/-. JUST ONE DAY BEFORE, I.E. ON 24.02.200 9 A SUM OF ` 91,00,000/- HAS BEEN RECEIVED BY M/S INVITATION EQU IFIN P. LTD. IN THIS ACCOUNT. WHEN THE NOTICE WAS ISSUED TO THE BRANCH M ANAGER OF IDBI IT WAS NOTED THAT THE SAID FUND HAS COME INTO THE BANK ACC OUNT OF M/S. INVITATION EQUIFIN P. LTD. FROM THE ACCOUNT OF ANOTHER PERSON IN STANDARD & CHARTERED BANK. THE AO NOTED THAT SIMILAR WAS THE C ASE IN THE CASE OF M/S CORONATION INFOTECH P. LTD. WHICH HAS AN ACCOUNT WI TH IDBI IN WHICH ALSO AN AMOUNT HAS BEEN RECEIVED FROM AN ACCOUNT FROM ST ANDARD & CHARTERED BANK. THE AO WAS, THEREFORE, OF THE OPINION THAT TH E ASSESSEE HAS CIRCUMVENT THE PROVISIONS OF SECTION 10(38) BY ENTE RING INTO OFF MARKET TRANSACTION AND THEREFORE HE RELYING ON THE DECISIO N OF THE HON'BLE SUPREME COURT IN THE CASE OF MC DOWELL & CO. LTD. 1 54 ITR 148 HELD THAT THE ENTIRE TRANSACTION IS COLOURABLE DEVICE TO CIRC UMVENT THE PROVISIONS OF SECTION 10(38) AND THEREFORE HE DISALLOWED THE CARR Y FORWARD OF LONG TERM CAPITAL LOSS AMOUNTING TO ` 1,55,97,911/-. WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT(A) CONFIRMED THE ORDER OF THE C IT(A). 4. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE ORDERS OF THE TAX AUTHORITIES BELOW. WE NOTED THAT THE ASSESSEE H AS PURCHASED SHARES OF M/S. LANDMARK LEISURE CORPORATION LTD. @ ` 1/- AND THESE SHARES WERE SOLD BY THE ASSESSEE @67 PAISE DURING THE IMPUGNED ASSESSMENT YEAR FOR A SUM OF ` 1,78,01, 565/-. THE SHARES WERE LISTED IN THE STOCK EXCHANGE BUT THE ASSESSEE HAS SOLD THE SHARES OFF MARKET TO M/S. INVITATION EQUIFIN P. LTD. AND M/S. CORONATION INFOTECH P. LTD. 1,30,00,0 00 EQUITY SHARES WERE SOLD TO CORONATION INFOTECH P. LTD. WHILE 1,35,690, 500/- EQUITY SHARES WERE SOLD TO M/S INVITATION EQUIFIN P. LTD. THE ASS ESSEE HAS SUBMITTED COPIES OF THE BILLS DATED 24.02.2009. THE SHARES WE RE PURCHASED BY THE ASSESSEE IN THE FINANCIAL YEAR 2003-04 AND HAVE DUL Y BEEN REFLECTED IN THE BALANCE SHEET OF THE ASSESSEE. THIS IS NOT A CASE T HAT THE SHARES WERE PURCHASED BY THE ASSESSEE DURING THE IMPUGNED ASSES SMENT YEAR. WE NOTED THAT THE AO DID NOT ACCEPT THE SALE TO BE NON GENUINE ONLY ON THE BASIS THAT THE PURCHASER BEFORE ISSUING THE CHEQUE TO ASSESSEE GOT, THE PAYMENT IN ITS BANK ACCOUNT FROM SOME PARTY. IN OUR VIEW RECEIVING OF ITA NO. 2538/MUM/2014 M/S. MANDAKINI HOSPITALITY P. LTD. 3 PAYMENT BY THE PURCHASER FROM ANY PARTY BUT NOT FRO M THE ASSESSEE DOES NOT MEAN THAT THE TRANSACTION ENTERED INTO BY THE A SSESSEE IS NON GENUINE. IT IS NOT THE CASE OF THE REVENUE THAT ASSESSEE OR ANY OF ITS ASSOCIATE CONCERN HAVE MADE PAYMENT TO THE PURCHASER BEFORE T HE ASSESSEE RECEIVED THE SALE CONSIDERATION FROM THE PURCHASER. THIS IS SETTLED LAW IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F CIT VERSUS DAULAT RAM RAWAT MULL 87 ITR 349 THAT APPARENT IS REAL THE ONUS IS ON TH E PART WHO ALLEGES APPARENT IS NOT REAL. WE FIND THAT THE REVENUE HAS NOT BROUGHT OUT ANY COGENT MATERIAL OR EVIDENCE ON RECORD WHICH MAY PROVE THAT THE TRANSACTION ENTERED INTO BY THE ASSESSEE FOR THE SA LE OF SHARES IS NON GENUINE. IT IS A CASE WHERE THE ASSESSEE HELD THE S HARES FOR MORE THAN FIVE YEARS AND SUBSEQUENTLY HE SOLD THE SHARES. THE ASSE SSEE HAS EXPLAINED THE REASONS FOR THE SALE TRANSACTION. MERELY THE TRANSA CTION IS OFF MARKET TRANSACTION DOES NOT MEAN THAT THE TRANSACTION IS N OT A GENUINE TRANSACTION. IT IS A CASE WHERE THE ASSESSEE HAD D ULY SUBMITTED THE STATEMENT GIVEN BY THE STOCK HOLDING CORPORATION AN D THE DELIVERY REPORT TO THE STOCK HOLDING CORPORATION FOR ACTUAL SALE AN D DELIVERY OF SHARES EXECUTED BY THE ASSESSEE. IN OUR OPINION THE REVENU E HAS SIMPLY ALLEGES AND APPLIED THE DECISION OF THE MC DOWELL & CO. LTD . 154 ITR 148 WITHOUT LOOKING INTO THE FACT OF THE CASE AND WITHOUT DISCH ARGING ITS ONUS TO PROVE THAT THE TRANSACTION ENTERED INTO BY THE ASSESSEE I S A SHAM AND COLOURABLE TRANSACTION. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO ACCEPT THE TRANSACTION ENTERED INTO BY THE AS SESSEE AS GENUINE TRANSACTION AND ALLOW THE LOSS INCURRED BY THE ASSE SSEE ON SALE OF SHARES AS LONG TERM CAPITAL LOSS. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2017. SD/ - SD/ - (PAWAN SINGH) (P.K. BANSAL) JUDICIAL MEMBER VICE PRESIDENT MUMBAI, DATED: 31 ST OCTOBER, 2017 ITA NO. 2538/MUM/2014 M/S. MANDAKINI HOSPITALITY P. LTD. 4 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -8, MUMBAI 4. THE CIT - 4, MUMBAI 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.