MANISHA AJAY SHAH, MUMBAI V. PR. CIT 30, MUMBAI

ITA 3001/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5015 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2015-2016
• Appeal Filed On: 08-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Cost of acquisition; Capital Gains; Bogus
• Section: 263; 63; 142(1); 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D, MUMBAI , ,$% BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI RAJESH KUMAR, ACCOUNTANT MEMBER . 3001 / /201 9 (,. . 2015-16 ) ITA NO. 3001/MUM/2019 (A.Y.2015-16) MRS. MANISHA AJAY SHAH, 601/602 ADARSH HARMONY, ADARSH VIHAR COMPLEX, OFF MARVE ROAD, MUMBAI 400 064 PAN: ANGPS 4878K ...... . / APPELLANT , VS. PRINCIPAL CIT-30, ROOM NO.401, 4 TH FLOOR, BLDG. NO.C-13, PRATYAKSHA KAR BHAVAN, BANDR KURLA COMPLEX, BANDRA(E) MUMBAI- 400 051 ..... /0/ RESPONDENT .1/ APPELLANT BY : NONE /01/ RESPONDENT BY : SHRI PURUSHOTTAM TRIPURI ,20 / DATE OF HEARING : 01/10/2020 345 20 / DATE OF PRONOUNCEMENT : 14 /10/2020 / ORDER PER VIKAS AWASTHY, JM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF PRINCIPAL COMMISSIONER OF INCOME TAX -30, MUMBAI ( IN SHORT THE PCIT) DATED 07/03/2019 PASSED UNDER SECTION 263 OF THE INCOME T AX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT). 2 ITA NO. 3001/MUM/2019 (A.Y.2015-16) 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RE CORDS ARE: THE ASSESSEE FILED RETURN OF INCOME FOR ASSESSMENT YEAR 2015-1 6 ON 20/07/2015 DECLARING HER TOTAL INCOME OF RS.16,46,420/-. THE CASE OF ASS ESSEE WAS SELECTED FOR SCRUTINY UNDER CASS. DURING THE PENDENCY OF SCRUTIN Y ASSESSMENT, THE ASSESSEE MADE DECLARATION OF RS.32,86,815/- UNDER INCOME DEC LARATION SCHEME 2016 (IN SHORT IDS) IN RESPECT OF LONG TERM CAPITAL GAINS (LTCG) FROM SALE OF SHARES CLAIMED AS EXEMPT IN RETURN OF INCOME. THEREAFTER, THE ASSESSING OFFICER VIDE ORDER DATED 21/12/2017 COMPLETED THE ASSESSMENT ACC EPTING THE INCOME DECLARED BY THE ASSESSEE WITHOUT MAKING ANY ADDITIO N/DISALLOWANCES. 2.1. AT THE TIME OF FILING RETURN OF INCOME, THE AS SESSEE CLAIMED LONG TERM CAPITAL GAIN OF RS.32,86,815/- ON SALE OF SHARES OF GCM SECURITIES LTD. AS EXEMPT UNDER SECTION 10(38) OF THE ACT. THE ASSESSI NG OFFICER ISSUED NOTICE U/S 142(1) OF THE ACT ALONG WITH A QUESTIONNAIRE RAISIN G A SPECIFIC QUERY ON LTCG/STCG ARISING FROM SALE OF EQUITY SHARES. THE A SSESSEE IN REPLY DATED 28/6/2017 TO THE SAID SPECIFIC QUESTION ON LTCG/STC G ON SALE OF SHARES INFORMED THAT DECLARATION HAS BEEN MADE UNDER 2016 SCHEME OFFERING LTCG TO TAX. 2.2. THEREAFTER, THE PCIT INVOKED THE PROVISIONS OF SECTION 263 OF THE ACT ON THE GROUND THAT THE ASSESSEE HAS MADE DECLARATION O F CAPITAL GAIN ONLY IN IDS 2016. THE ASSESSEE OUGHT TO HAVE DECLARED GROSS S ALE PRICE OF THE SHARES I.E. RS.34,30,000/-. BEFORE THE PCIT, THE ASSESSEE CONTE NDED THAT IT IS ONLY PROFIT ELEMENT ON SALE OF SHARES THAT IS TAXABLE AND NOT T HE GROSS SALE PRICE. THE PURCHASE PRICE I.E. RS.1,43,185/- HAS TO BE DEDUCTE D FROM THE SALE PRICE. THE ASSESSEE IN ORDER TO SUBSTANTIATE THAT ASSESSEE IN FACT PAID FOR PURCHASE OF SHARES, FURNISHED COPY OF SHARE APPLICATION FORM AN D COPY OF DENA BANK 3 ITA NO. 3001/MUM/2019 (A.Y.2015-16) STATEMENT (AT PAGE 22 AND 28 OF THE PAPER BOOK, RES PECTIVELY). THE CONTENTION OF THE ASSESSEE BEFORE THE PCIT WAS THAT THE PURCHA SE AND SALE OF GCM SECURITIES SHARES IS GENUINE AND THROUGH AUTHORIZED BROKER. TO SUBSTANTIATE HER CONTENTIONS THE ASSESSEE FILED CONTRACT NOTES A ND LEDGER ACCOUNT. THE ONLY REASON FOR MAKING DECLARATION UNDER IDS 2016 WAS TO BUY PEACE OF MIND. THE ASSESSEE HAS FILED PAPER BOOK WHEREIN THE NOTICE IS SUED UNDER SECTION 142(1) DATED 19/06/2017 AND THE QUESTIONNAIRE ISSUED ALONG WITH THAT NOTICE IS AT PAGES 15 AND 16 OF THE PAPER BOOK. THE REPLY TO TH E SAID NOTICE DATED 28/06/2017 IS AT PAGES 17 TO 27 OF THE PAPER BOOK. 3. SHRI PURUSHOTTAM TRIPURI, REPRESENTING THE DEPAR TMENT VEHEMENTLY DEFENDED THE IMPUGNED ORDER AND PRAYED FOR DISMISSI NG THE APPEAL OF THE ASSESSEE. THE LD. DEPARTMENTAL REPRESENTATIVE SUBM ITTED THAT IN THE RETURN OF INCOME THE ASSESSEE HAS WRONGLY CLAIMED EXEMPTION U NDER SECTION 10(38) OF THE ACT ON LONG TERM CAPITAL GAINS FROM SALE OF SHA RES OF GCM SECURITIES LTD. THE PURCHASE AND SALE OF AFORESAID SCRIP FALLS UNDE R THE CATEGORY OF PENNY STOCK. THUS, IN THE CASE OF BOGUS LONG TERM CAPITA L GAINS, ENTIRE SALE PROCEEDS ARE TO BE ADDED TO THE TOTAL INCOME. 4. WE HAVE HEARD THE SUBMISSIONS MADE BY LD. DEPART MENTAL REPRESENTATIVE AND HAVE EXAMINED THE MATERIAL AVAIL ABLE ON RECORD. THE PCIT HAS INVOKED REVISIONAL JURISDICTION UNDER SECTION 2 63 OF THE ACT ON THE GROUND THAT THE ASSESSING OFFICER HAS FAILED TO EXAMINE TH E TRANSACTION OF PURCHASE AND SALE OF SHARES. ANOTHER REASON FOR INVOKING RE VISIONAL JURISDICTION BY THE PCIT IS, THAT THE ASSESSEE IN IDS 2016 HAS ONLY DEC LARED LONG TERM CAPITAL GAIN ON PENNY STOCK, WHEREAS, THE ASSESSEE SHOULD HAVE D ECLARED GROSS SALE RECEIPT OF THE SHARES. THE IMMUNITY IS GRANTED TO THE ASSES SEE TO THE EXTENT 4 ITA NO. 3001/MUM/2019 (A.Y.2015-16) DECLARATION IS MADE UNDER IDS 2016 AND NOT AGAINST THE ENTIRE TRANSACTION. THE PCIT INVOKED REVISIONAL JURISDICTION TO TAX THE DIF FERENCE BETWEEN GROSS SALE PRICE OF THE SHARES RS.34,30,000/- AND LONG TERM CA PITAL GAINS DECLARED BY THE ASSESSEE RS.32,86,815/-. IN OTHER WORDS, THE PC IT SEEKS TO TAX EVEN THE PURCHASE COST OF THE SHARES I.E. RS.1,43,185/- STAT ING IT TO BE A BOGUS PURCHASE TRANSACTION. 5. AFTER EXAMINING THE DOCUMENTS ON RECORD WE DO NO T CONCUR WITH THE VIEW OF THE PCIT. THE ASSESSEE HAS DEMONSTRATED FRO M THE BANK STATEMENT THAT THE AMOUNT HAS BEEN PAID FOR PURCHASE OF SHARE S OF GCM SECURITIES LTD. THROUGH CHEQUE. THIS IS FURTHER CORROBORATED BY SHA RE APPLICATION FORM OF GCM SECURITIES AT PAGE 22 OF THE PAPER BOOK AND TRANSAC TION-CUM-HOLDING STATEMENT IN THE CASE OF ASSESSEE ISSUED BY STOCK H OLDING CORPORATION OF INDIA LTD. AT PAGE 19 OF THE PAPER BOOK. THE DOCUMENTS F URNISHED BY THE ASSESSEE CLEARLY INDICATES THAT THE SHARES WERE INDEED PURCH ASED BY THE ASSESSEE THROUGH BANKING TRANSACTIONS. IT IS NOT THE CASE O F THE REVENUE THAT THE AMOUNT PAID BY THE ASSESSEE FOR PURCHASE OF SHARES HAS TRAVELLED BACK TO THE ASSESSEE IN THE FORM OF CASH OR ANY OTHER MANNER. 6. THE PROVISIONS OF SECTION 263 OF THE ACT CAN BE INVOKED IF, THE TWIN CONDITIONS MANDATED UNDER THE SECTION ARE SATISFIED , I.E: (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVE NUE. IF ANY ONE OF THESE TWO CONDITIONS IS ABSENT, THE C OMMISSIONER OF INCOME TAX CANNOT TAKE RECOURSE TO SECTION 263 OF THE ACT. 5 ITA NO. 3001/MUM/2019 (A.Y.2015-16) 7. IN THE PRESENT CASE, WE FIND THAT THE ASSESSING OFFICER HAS ISSUED A QUESTIONNAIRE WHEREIN SPECIFIC INFORMATION WAS SOUG HT ON TRANSACTION OF EQUITY SHARES AND WORKING OF SHORT TERM CAPITAL GAI N/LONG TERM CAPITAL GAIN. THE ASSESSEE FURNISHED A DETAILED REPLY TO THE NOTI CE ISSUED UNDER SECTION 142(1) OF THE ACT, WHEREIN THE ASSESSEE WHILE REPLY ING TO THE QUERY ON TRANSACTION OF SHARES, INFORMED THAT A DECLARATION UNDER IDS 2016 HAS BEEN MADE IN RESPECT OF LONG TERM CAPITAL GAIN ARISING O N SALE OF SHARES TO GCM SECURITIES LTD. OSTENSIBLY, THE ASSESSING OFFICER A FTER EXAMINING THE DOCUMENTS ACCEPTED THE SAME AND MADE NO ADDITION. MERELY FOR THE REASON THAT THE ASSESSING OFFICER HAS TAKEN A PLAUSIBLE VIEW AFTER EXAMINING THE RECORDS THAT IS NOT ACCEPTABLE TO THE PCIT, WOULD NOT MAKE THE ASSE SSMENT ORDER ERRONEOUS. IN THE PRESENT CASE TWIN CONDITIONS SET OUT IN SECT ION 263 ARE NOT SATISFIED AND HENCE, THE PCIT WRONGLY ASSUMED REVISIONAL JURISDIC TION. 8. IN VIEW OF OUR ABOVE FINDING, WE FIND MERIT IN T HE APPEAL OF THE ASSESSEE. THE IMPUGNED ORDER IS QUASHED AND THE APPEAL OF ASS ESSEE IS ALLOWED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN OPEN COURT ON WEDNESDAY THE 14TH DAY OF OCTOBER, 2020. SD/- SD/- (RAJESH KUMAR) (VIKAS AW ASTHY) $ / ACCOUNTANT MEMBER / JUDICIAL MEMBER / MUMBAI, 6,/ DATED: 14/10/2020 VM , SR. PS(O/S) 6 ITA NO. 3001/MUM/2019 (A.Y.2015-16) COPY OF THE ORDER FORWARDED TO : 1. . / THE APPELLANT , 2. /0 / THE RESPONDENT. 3. 70 ( )/ THE CIT(A)- 4. 70 CIT 5. 89/0, , . . . , / DR, ITAT, MUMBAI 6. 9:;< / GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI