SHRI KANTILAL MEHTA, MUMBAI V. THE ACIT CEN CIR-13, MUMBAI

ITA 2735/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2195 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 15-04-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 21-04-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K MAHAJAN
• Assessee Lawyers: AJAY NAGPAL
• Keywords: Income from undisclosed sources; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI R.S. PADVEKAR (JM) AND SHRI RAJENDRA S INGH(AM) ITA NO.2735/M/2008 ASSESSMENT YEAR 2006-07 SHRI KANTILAL MEHTA THE ACIT CENTRAL CIRCLE 13 B-88 KALPATARU HABITAT OLD CGO BUILDING, M.K. ROA D DR. S.S.RAO ROAD, PAREL MUMBAI 400 020. MUMBAI 400 012. PAN : AAGPM 0689 K APPELLANT RESPONDENT ASSESSEE BY : SHRI AJAY NAGPAL REVENUE BY : SHRI K.K. MAHAJAN O R D E R PER RAJENDRA SINGH (AM) THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 13.2.2008 OF CIT(A) FOR THE ASSESSMENT YEAR 2006-07 . THE ONLY DISPUTE RAISED BY THE ASSESSEE IN THIS APPEAL IS REGARDING ADDITIO N OF RS.4,13,590/- MADE BY AO ON ACCOUNT OF ALLEGED BROKERAGE EXPENDITURE INCU RRED BY THE ASSESSEE AND CHARGE OF INTEREST UNDER SECTION 234A, 234B, 234C & 234D. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT A SEARCH HAD BEEN CONDUCTED IN CASE OF MEHTA GROUP DURING THE COURSE OF WHICH T HE ASSESSEE WHO WAS ONE OF THE IMPORTANT FAMILY MEMBERS ADMITTED THAT THE GROU P HAD DONE TRANSACTIONS IN SHARES OF THE COMPANIES SUCH AS PRRANITA INDUSTR IES AND IFS LTD. THROUGH CERTAIN BROKERS WHICH WAS NOT GENUINE AND THE TRANS ACTIONS HAD BEEN ARRANGED BY THE BROKERS TO CREATE ARTIFICIAL CAPITAL GAIN TH ROUGH SHARE MARKET HAWALA OPERATIONS. THE ENTIRE GROUP INCLUDING THE ASSESSEE ADMITTED HAVING EARNED 2 UNDISCLOSED INCOME OF RS. 1,77,28,838/- IN THE FORM OF ARTIFICIAL LONG TERM CAPITAL GAIN WHICH INCLUDED A SUM OF RS.84,64,293/- BY THE ASSESSEE. THE AO NOTED THAT SHRI NARENDRA SHAH WHO WAS A DIRECTOR OF ONE OF THE SHARE BROKING FIRMS THROUGH WHOM THE TRANSACTIONS HAD BEEN ARRANG ED HAD ADMITTED THAT BOGUS TRANSACTIONS WERE SHOWN ONLY TO GAIN COMMISSI ON/ BROKERAGE FROM THE CLIENTS WHO WERE IN NEED OF ARTIFICIAL CAPITAL GAIN . THE CASH COMPONENT INVOLVED IN SUCH TRANSACTIONS WAS UNRECORDED AND ONLY THE CH EQUE/DEBIT WERE STATED IN THE BOOKS AND THE BROKERS BILLS WERE FABRICATED. TH E AO THEREFORE CONCLUDED THAT THE TRANSACTIONS WERE PROVED TO BE SHAM AND TH E ENTIRE EXERCISE COULD HAVE ENTAILED CERTAIN COST. HE ESTIMATED THAT 5% OF THE ARTIFICIAL CAPITAL GAIN MUST HAVE BEEN PAID BY THE ASSESSEE TO THE BROKERS WHICH WAS UNRECORDED. ACCORDINGLY HE ADDED A SUM OF RS.4,13,590/- AS UNAC COUNTED INCOME ON THIS ACCOUNT @ 5% OF RS.82,71,794/-. 2.1 IN APPEAL THE ASSESEE SUBMITTED THAT THE LONG T ERM CAPITAL GAIN WAS GENUINE AND THE ASSESSEE HAD SURRENDERED THE SAME A S INCOME FROM UNDISCLOSED SOURCES ONLY TO AVOID LITIGATION AND TO BUY PEACE OF MIND. CIT(A) HOWEVER DID NOT ACCEPT THE EXPLANATION AS IN HIS OP INION NOBODY WOULD DECLARE THE GENUINE CAPITAL GAIN AS UNDISCLOSED INCOME. THE ASSESSEE HAD DISCLOSED INCOME ONLY WHEN CORNERED BY THE DEPARTMENT. HE ALS O OBSERVED THAT EVEN THOUGH THERE WAS NO EVIDENCE ON RECORD THAT BROKERA GE/ COMMISSION HAD BEEN PAID IT WAS CLEAR THAT SERVICES HAD BEEN RENDERED B Y THE BROKER WHICH WAS SUPPORTED BY THE STATEMENT OF SHRI NARESH SHAH. IT WAS THEREFORE LOGICAL TO CONCLUDE THAT MONEY HAD PASSED HANDS IN LIEU OF SUC H SERVICES RENDERED WHICH WAS NOT RECORDED. THE ESTIMATED SUCH EXPENDITURE AT THE RATE OF 5% OF THE CAPITAL GAIN WAS THEREFORE UPHELD BY THE CIT(A) AGG RIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3 3. AFTER HEARING BOTH THE PARTIES WE FIND THAT THE ISSUE RAISED IN THIS APPEAL IS COVERED BY THE DECISION OF THE TRIBUNAL IN CASE OF ONE OF THE OTHER FAMILY MEMBERS OF THE GROUP IN WHICH THE TRIBUNAL HAD DELE TED THE IDENTICAL ADDITION MADE BY THE AO. THE TRIBUNAL IN CASE OF SHRI RAHUL MEHTA IN ITA NO.2736/M/2008 IN WHICH CASE ALSO THE CAPITAL GAIN HAD BEEN SURRENDERED AS INCOME FROM UNDISCLOSED SOURCES AND THE AO HAD MADE ADDITION ON ACCOUNT OF UNACCOUNTED BROKERAGE PAID, OBSERVED THAT THERE WAS NOTHING ON RECORD TO SHOW THAT THE ASSESSEE HAD PAID 5% BROKERAGE FOR AR RANGING THE TRANSACTIONS. ACCORDINGLY THE TRIBUNAL DELETED THE ADDITION MADE BY AO. IN THIS CASE THE ASSESSEE COMPANY IS ONE OF THE MEMBERS OF THE SAME GROUP WHICH WAS SEARCHED AND THE SITUATION IS IDENTICAL. THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF TRIBUNAL IN CASE OF SHRI RAHUL MEHTA (S UPRA) WE SET ASIDE THE ORDER OF CIT(A) AND DELETE THE ADDITION MADE. 4. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED. 5. THE ORDER WAS PRONOUNCED IN OPEN COURT ON 20.04 .2010. SD/- SD/- ( R.S. PADVEKAR) (RAJEN DRA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE :20.04.2010 AT :MUMBAI