RUCHIT BHARAT PATEL, MUMBAI V. ACIT 12(1), MUMBAI

ITA 2806/MUM/2010

• Counselvise Citation: 280619914 RSA 2010
• Duration Of Justice: 1 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 11-11-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 09-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VANDANA SAGAR
• Assessee Lawyers: V G GINDE
• Keywords: Unexplained investment
• Section: 68; 69; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI P.M. JAGTAP P.M. JAGTAP P.M. JAGTAP P.M. JAGTAP (AM) AND (AM) AND (AM) AND (AM) AND SMT. ASHA VIJAYARAGHAVAN (JM) SMT. ASHA VIJAYARAGHAVAN (JM) SMT. ASHA VIJAYARAGHAVAN (JM) SMT. ASHA VIJAYARAGHAVAN (JM) ITA NO. 2806/MUM/2010 ASSESSMENT YEAR- 2006-07 RUCHIT BHARAT PATEL, 3-3A, 1 ST FLOOR, 32-34, CHURCHGATE HOUSE, VEER NARIMAN ROAD, FORT, MUMBAI-400 001 PAN-ANDPP 9202F VS. THE ACIT 12(1) MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI V.G. GINDE RESPONDENT BY: MS. VANDANA SAGAR O R D E R O R D E R O R D E R O R D E R PER ASHA VIJAYARAGHAVAN (JM) PER ASHA VIJAYARAGHAVAN (JM) PER ASHA VIJAYARAGHAVAN (JM) PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 18.1.2010 PASSED BY THE LD. CIT(A)-23 FOR THE ASSESSMENT YEAR 2006-07. 2. FACTS OF THE CASE IN BRIEF ARE THAT THE RETURN OF INCOME DECLARING TOTAL INCOME AT `. 1,62,99,460/- WAS FILED ON 31.7.2 006. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS COMPLE TED U/S. 143(3) OF THE I.T. ACT DETERMINING THE TOTAL INCOME AT `. 1,71,05,090/-. 3. THE ASSESSING OFFICER HELD THAT THE VERIFICATION OF SHORT TERM CAPITAL GAINS, BROKERS NOTES AND ALL THE TRANSACTIONS WE RE OBTAINED AND THE SAME WERE SUBMITTED TO THE BOMBAY STOCK EXCHANGE FOR VERIFICATION, THROUGH WHICH EXCHANGE THESE TRANSACTIO NS WERE CLAIMED ITA NO. 2806/M/2010 2 TO HAVE BEEN MADE. THE BSE HAS VERIFIED THESE TRANSAC TIONS AND FOUND THAT THE PURCHASES OF FOLLOWING SCRIP AS SHOWN BY THE ASS ESSEE IS NOT CORRECT. DATE NAME OF THE SCRIP QTY OF PURCHASES SHOWN BY THE ASSESSEE TOTAL TRADE DONE BY THE BSE ON THE SPECIFIED DATE DIFFERENCE IN QTY. 7.12.2005 SHRI HONDA 11943 11903 40 30.1.2006 RAYBAN SUN 34930 24930 10000 4. FURTHER THE AO HELD AS FOLLOWS: FROM THE ABOVE CHRONOLOGICAL SEQUENCE OF EVENTS AND THE BRIEF DISCUSSION MADE AGAINST EACH EVENT, IT IS EVIDENT LY CLEAR THAT THE ASSESSEE HAS TOTALLY FAILED TO EXPLAIN THE PURC HASE OF THE SHARES OF RAYBAN SUN-10000 & SHRI HONDA-40 AND THESE INVESTMENTS ARE FOUND UNEXPLAINED. THEREFORE, THE VA LUE OF SUCH INVESTMENTS IS BROUGHT TO TAX AS UNEXPLAINED INVESTMENT IN THE HANDS OF THE ASSESSEE BY INVOKING PROVISIONS OF S. 69 OF T HE I.T. ACT, 1961. THE UNEXPLAINED INVESTMENT IS CALCULATED AS UNDER: DATE NAME OF THE SCRIP QTY OF PURCHASES SHOWN BY THE ASSESSEE TOTAL TRADE DONE BY THE BSE ON THE SPECIFIED DATE DIFFERENCE IN QTY. 7.12.2005 SHRI HONDA 40 153.25 6130 30.1.2006 RAYBAN SUN 10000 79.95 799500 TOTAL 8,05,630 THE AMOUNT OF `. 8,05,630/- IS ACCORDINGLY BROUGHT T O TAX AS UNEXPLAINED INVESTMENT. ITA NO. 2806/M/2010 3 AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A). BEFORE THE LD. CIT(A) THE LD. AR SUBMITTED THE SEQUEN CE IN TRANSACTION IN THE SHARE MARKET WHICH IS AS FOLLOWS: A CLIENT FIRST PLACES AN ORDER. WHEN AN ORDER IS EX ECUTED, A CONTRACT CUM BILL IS ISSUED. IF THE TRANSACTION IS FOR PURCHASE OF SHARES BY CLIENT AND FOR DELIVERY, A BROKE R GETS DELIVERY OF CONTRACTED SHARES IN HIS DEMAT ACCOUNT WHI CH IS ALSO CALLED POOL ACCOUNT. BROKER THEREAFTER TRANSFE RS THESE SHARES FROM HIS POOL ACCOUNT TO RESPECTIVE PURCHASERS DEMAT ACCOUNT. IN THE APPELLANTS CASE, SAME SEQUENCE OF TRANSACTION HA S TAKEN PLACE AND SHARES RECEIVED FROM BSE IN BROKERS ACCOUNT ARE TRANSFERRED TO CLIENTS DEMAT ACCOUNT. T HE APPELLANT HAS NOT ONLY DUTIFULLY PAID FOR THE SHARES PURCHASED, BUT ALSO ACCOUNTED FOR THE SHARES IN HIS BOOK S OF ACCOUNTS AND REFLECTED IN HIS RETURN OF INCOME. T HUS, BALANCE SHEET WHICH DISCLOSED LIST OF INVESTMENT IN SHAR E WHICH INCLUDES 34930 SHARES OF RAYBAN SUN AND 11943 SHARES OF SHRI HONDA. IT IS NOT THE FAULT OF THE APP ELLANT IF THE BSE RECORDS DO NOT MATCH WITH THE BROKERS RECORD . SINCE THE APPELLANT HAS RECORDED ALL THE INVESTMENTS I N THE BOOKS OF ACCOUNT AND COPY OF BALANCE SHEET WAS ON RECO RD, PROVISIONS OF SEC. 69 OF I.T. ACT ARE NOT APPLICABLE. 5. THE LD. CIT(A) HELD AS FOLLOWS: I HAVE CONSIDERED THE SUBMISSIONS MADE FOR THE APPELLA NT. THE AO HAS ONLY BROUGHT TO TAX THAT UNEXPLAINED QTY. OF SHARES AT THE RATES PER SHARE GIVEN BY THE BSE. AFTER VERIFICA TION FROM BSE IT HAS BEEN MADE CLEAR THAT ONLY 11903 SHARES OF SHRI HONDA AND 24930 SHARES OF RAYBAN SUN WERE TRADED ON BSE, THUS TH E INVESTMENT SHOWN IN THE BOOKS HAS BEEN TREATED BY TH E AO AS REFLECTING THESE NUMBER OF SHARES ONLY. THE DIFFERENC E IN QTY. HAS NOW BEEN RIGHTLY BROUGHT TO TAX BY THE AO. THE ADDITION HAS BEEN MADE AFTER CROSS CHECKING TRANSACTIONS WITH BSE. THE APPELLANT HAS NOT BEEN ABLE TO EXPLAIN AS TO HOW THE BSE RECORDS ARE WRONG. THE ADDITION IS THUS CONFIRMED. 6. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. THE LD. C OUNSEL FOR THE ASSESSEE SHRI V.G. GINDE SUBMITTED THAT THE ORDER OF THE LD. CIT(A) ITA NO. 2806/M/2010 4 IN CONFIRMING THE ORDER OF THE AO IS INCORRECT IN A S MUCH AS THERE CANNOT BE UNEXPLAINED INVESTMENT IN THE PRESENT CASE A S THE ASSESSEE HAS REPORTED MORE SHARES THAN SHOWN BY THE BOMBAY STOC K EXCHANGE. THE LD. COUNSEL POINTED OUT THAT THERE IS A DISCREPANC Y IN THE QTY. OF THE TWO SCRIPS NAMELY SHRI HONDA AND RAYBAN SUN, WITH RESPECT TO THE QTY. OF SHARES SHOWN IN THE BSE WHICH APPEARS TO BE LESS THAN THAT SHOWN IN THE BOOKS OF THE ASSESSEE. HE FURTHER SUBMITTED THAT THE ENTIRE TRANSACTIONS HAVE BEEN FULLY ACCOUNTED FOR AND REFLECTED IN THE BOOKS OF ACCOUNT. 7. THE LD. COUNSEL TOOK US THROUGH THE RELEVANT PAGE OF THE PAPER BOOK SHOWING THE LIST OF SHARE INVESTMENT FOR THE A.Y. 2006-07. PAGE 3 OF THE PAPER BOOK CONTAINS THE CONTRACT-CUM- BILL OF SHARES OF SHRI HONDA, PAGE-5 LEDGER ACCOUNTS HAVE BEEN PROVIDED FROM 1.4. 2005 TO 31.3.2006, PAGE-7 & 8 CONTAINS THE D-MAT COPIES AND PAGE-9 SHOWS THAT THE AMOUNTS HAVE BEEN CREDITED. 8. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT IS NOT THE ASSESSEE WHO IS TO BE FAULTED IN CASE THE BSE RECORDS DOES NOT MATCH THE BROKERS RECORD. THE LD. COUNSEL SUBMITTED THAT TH E ASSESSEE HAS RECORDED ALL THE INVESTMENTS IN THE BOOKS OF ACCOUNT A ND THE COPY OF THE BALANCE SHEET HAVE BEEN PROVIDED AND THEREFORE T HE PROVISIONS OF SEC. 69 ARE NOT APPLICABLE. ITA NO. 2806/M/2010 5 9. THE LD. DEPARTMENTAL REPRESENTATIVE MS. VANDANA SA GAR ON THE OTHER HAND RELIED ON THE DECISION OF MANOJ AGARWAL W HEREIN IT HAS BEEN HELD AS FOLLOWS: EVEN IF SEC. 68 IS NOT APPLICABLE IN SUCH CASES, THE C ASH DEPOSIT IN THE BANK CAN BE ASKED TO BE EXPLAINED BY T HE ASSESSEE UNDER SECTION 69 OR SEC. 69B. 10. FOLLOWING THE PROPOSITION IN THE CASE OF MANOJ A GARWAL, THE LD. DR EMPHASIZED THAT EVEN THOUGH SEC. 69 HAS BEEN WRONG LY INVOKED, THE RIGHT SECTION IS SEC. 69(C) WHICH READS AS FOLLOWS: WHERE IN ANY FINANCIAL YEAR AN ASSESSEE HAS INCURRED A NY EXPENDITURE AND HE OFFERS NO EXPLANATION ABOUT THE SOURCES OF SUCH EXPENDITURE OR PART THEREOF, OR THE EXPLANATION, IF ANY OFFERED BY HIM IS NOT, IN THE OP INION OF THE AO, SATISFACTORY, THE AMOUNT COVERED BY SUCH EXPENDITURE OR PART THEREOF, AS THE CASE MAY BE, MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FINANCI AL YEAR. 11. THE LD. DR SUBMITTED THAT THE SOURCES HAVE NOT BE EN EXPLAINED. IN THE REJOINDER, THE LD. COUNSEL FOR THE ASSESSEE POINT ED OUT AT PAGE-5 OF THE PAPER BOOK WHICH CONTAINS THE RUNNING ACCOUNT FROM THE BROKERS ACCOUNT AND REPLIED THAT THE SOURCE HAS BEEN EXPLAIN ED SATISFACTORILY. 12. WE HEARD BOTH THE PARTIES. THE LD. COUNSEL FOR TH E ASSESSEE SUBMITTED BROKERS NOTE PROVING PURCHASE OF SHARES, AMOUN T DUE RS. 17,46,860/- FOR PURCHASE OF SHARES OF SHRI HONDA WAS DE BITED IN THE BOOKS OF BROKER ON 7.12.2005. THUS PURCHASE OF 11,943 SHARES OF SHRI HONDA IS EXPLAINED. 13. THE LD. COUNSEL SIMILARLY SUBMITTED BROKERS NOTE R EGARDING PURCHASE OF 34,930 SHARES ON 30.1.2006 AMOUNTING TO RS. ITA NO. 2806/M/2010 6 27,79,916.79. AMOUNT DUE IS DEBITED IN BOOKS OF BROK ER. THUS PURCHASE OF 34,930 SHARES OF RAYBAN SUN IS EXPLAINED. 14. THEREFORE WE FIND THE ASSESSEE HAS SUBMITTED HIS ACCO UNT IN BOOKS OF BROKER TO SHOW THAT THESE TRANSACTIONS ARE RECO RDED IN BROKERS BOOK. SIMILARLY THE ASSESSEE HAS ACCOUNTED FOR P URCHASE OF SHARES IN THE BOOKS OF ACCOUNT MAINTAINED BY HI. ALL THE SHARES ARE REFLECTED IN THE DEMAT STATEMENT OF THE ASSESSEE. MOREO VER SAID SHARES ARE REFLECTED AS INVESTMENTS IN THE BALANCE SHEET OF THE ASSESSEE AS ON 31.3.2006. 15. FOR INVOKING THE PROVISIONS OF SEC. 69 THE ASSESSEE SH OULD NOT HAVE RECORDED THE INVESTMENT IN THE BOOKS OF ACCOUNT. BUT IN THIS CASE THE ASSESSEE HAS RECORDED ALL THE INVESTMENTS IN THE BOOK S OF ACCOUNTS AND COPY OF BALANCE SHEET HAS BEEN PRODUCED B EFORE THE AO. MOREOVER THESE INVESTMENTS HAVE BEEN PAID BY THE ASSESSEE AND ARE REFLECTED IN HIS DEMAT STATEMENTS ALSO. IN VIEW OF THE ABOVE FACTS PROVISIONS OF SEC. 69 OF THE I.T. ACT IS NOT APPLICAB LE AND THE ADDITION MADE BY THE AO. IS DELETED. 16. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED ON THIS 25 TH DAY OF MAY, 2011 SD/- SD/- (P.M. JAGTAP) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEM BER MUMBAI, DATED 25 TH MAY , 2011 RJ ITA NO. 2806/M/2010 7 COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR B BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NO. 2806/M/2010 8 DATE INITIALS 1 DRAFT DICTATED ON: 20 .0 5 .2011 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 20 .0 5 .2011 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK: DATE ON WHICH FILE GOES TO AR _________ ______ 10. DATE OF DISPATCH OF ORDER: _________ ______