The ACIT, Central Circle-1(3), Ahmedabad V. Shri Gautam N. Jhaveri, Ahmedabad

ITA 3017/AHD/2009

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0460 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-10-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 04-10-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 09-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M K PATEL
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 3017/AHD/2009 (ASSESSMENT YEAR: 2005-06) ACIT, CENTRAL CIRCLE 1(3), AHMEDABAD V/S SHRI GAUTAM N. JHAVERI PROP. OF M/S. RAJESH N. JHAVERI 410, WALL STREET-11, ELLISBRIDGE, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: ADAPJ5993J APPELLANT BY : SHRI PRASOON KABRA, SR. D. R. RESPONDENT BY : SHRI M.K. PATEL, A.R. ( )/ ORDER DATE OF HEARING : 04 -10-201 6 DATE OF PRONOUNCEMENT : 06 -10-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. WITH THIS APPEAL, THE REVENUE HAS CHALLENGED THE CO RRECTNESS OF THE ORDER OF THE LD. CIT(A)-I, AHMEDABAD DATED 03.09.2009 PER TAINING TO A.Y. 2005- 06. ITA NO. 3017 /AHD/2009 . A.Y. 2005-0 6 2 2. THE SOLE GRIEVANCE OF THE REVENUE RELATES TO THE DE LETION OF THE ADDITION OF RS. 4,99,44,800/- ON ACCOUNT OF DISALLOWANCE OF LOS S IN TRADING OF SHARES OF FAST TRACK LTD., INDOCARE PHARMA LTD., SEA GUL LE L TD. AND WELLWORTH OVERSEAS LTD. 3. RIVAL SUBMISSIONS WERE HEARD AT LENGTH. HAVING HEAR D THE RIVAL SUBMISSIONS, WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORI TIES BELOW. 4. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE A SSESSEE IS A SHARE BROKER WHOSE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERA TION WAS SELECTED FOR SCRUTINY ASSESSMENT. DURING THE COURSE OF THE SCRUT INY ASSESSMENT PROCEEDINGS, THE A.O. FOUND THAT THE ASSESSEE HAS M ADE AVAILABLE FUNDS TO THE PERSONS INVOLVED IN SOME IPO SCAM. THE A.O. FUR THER OBSERVED THAT THE ASSESSEE HAS RECEIVED SHARES FROM SAID PERSONS AND SOLD THE SAID SHARES IN THE MARKET AND THE SURPLUS HAS BEEN OFFERED FOR TAX UNDER THE HEAD BUSINESS INCOME. DETAILS WERE CALLED FROM THE ASS ESSEE WHICH WERE DULY PLACED ON RECORD. ON GOING THROUGH THE DETAILS, THE A.O. NOTICED THAT THE ASSESSEE HAS INCURRED LOSS IN THE SHARE TRADING OF SHARES OF ADITYA INTERNATIONAL, FAST TRACK INDOCARE, SEAGUL LE AND W ELL WORTH OVERSEAS. 5. ON FURTHER VERIFICATION OF THE DEMAT ACCOUNTS OF TH E AFOREMENTIONED COMPANIES, THE A.O. CAME TO THE CONCLUSION THAT THE LOSSES SHOWN BY THE ASSESSEE IN TRADING IN SHARES OF THE AFOREMENTIONED COMPANIES ARE BOGUS AND ACCORDINGLY THE LOSS OF RS. 4,99,44,800/-. ITA NO. 3017 /AHD/2009 . A.Y. 2005-0 6 3 6. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND STRONGLY CLAIMED THAT THE LOSSES ARE GENUINE AND WHEREVER THERE WAS A PRO FIT, THE A.O. HAS ACCEPTED THE SAME. THEREFORE, THERE IS NO REASON WH Y THE LOSSES SHOULD BE DISALLOWED. IT WAS STRONGLY CONTENDED THAT ALL THE TRANSACTIONS IN THE CASE OF AFORE-STATED 4 COMPANIES SHARES ARE ROUTED THROUGH DEMAT ACCOUNTS AND THE PAYMENT RECEIVED FROM PURCHASE AND SALE WERE DO NE THROUGH BANKING CHANNELS. IT WAS BROUGHT TO THE NOTICE OF THE LD. C IT(A) THAT ALL THE TRANSACTIONS HAVE BEEN MADE AT MARKET RATES. THEREF ORE, THE LOSS INCURRED IS GENUINE BUSINESS LOSS INCURRED IN THE NORMAL COU RSE OF BUSINESS. 7. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS AND ALSO CONSIDERING THE REMAND REPORT, THE LD. CIT(A) HELD AS UNDER:- 9.4 IN THE LIGHT OF THE ABOVE DISCUSSION, I FIND TH AT THE TRANSACTIONS IN QUESTION APPEAR TO BE REAL TRANSACTIONS AND NOT MERELY BOOK/ PAPER ENTRIES AS OBSERVED BY THE A.O. THE DELIVERIES OF SHARES HAVE BEEN ROUTED THROUGH THE DEMAT ACCOUNTS. THE PAYMENTS HAVE BEEN MADE AND RECEIVED THROUGH BA NKING CHANNELS. CONFIRMATIONS OF THE PARTIES WITH WHOM THE TRANSACT IONS HAVE BEEN ENTERED INTO HAVE BEEN FURNISHED AND HAVE NOT BEEN DISPUTED. MAR KET QUOTATIONS IN SUPPORT OF PRICE OF SHARES ON THE DATE OF PURCHASE AND SALE ARE FURNISHED WHICH ESTABLISHES THAT THE TRANSACTIONS ARE AT MARKET RAT ES. THUS, I AGREE WITH THE ARGUMENT OF THE A.R. THAT SIMPLY BECAUSE SOME OF TH E TRANSACTIONS ARE OFF MARKET ONES; THEY DO NOT LEAD TO THE CONCLUSION THA T THE TRANSACTIONS ARE SHAM OR FAKE. IT IS SUBMITTED THAT OFF MARKET TRANSACTIONS ARE VALID TRANSACTIONS THOUGH NOT THROUGH STOCK EXCHANGE BUT THEY ARE DULY ROUTED THROUGH DEMAT ACCOUNTS AND BANKING CHANNELS. IT IS SEEN THAT THE A.O. IN T HE ASSESSMENT ORDER HAS OBSERVED THAT 'THE ONUS LIES ON THE ASSESSEE TO EST ABLISH THE CORRECTNESS OF THOSE ITA NO. 3017 /AHD/2009 . A.Y. 2005-0 6 4 BILLS AND THAT THIS CAN BE PROVED EITHER BY FURNISH ING THE EVIDENCE INDICATING THAT THE TRANSACTIONS HAVE BEEN ROUTED THROUGH THE STOCK EXCHANGE AND/OR THE EXCHANGE OF SHARES/MONIES HAS TAKEN PLACE ON THE DA TES OF TRANSACTIONS'. FROM THE FOREGOING DISCUSSION, IT IS CLEAR THAT THE APPE LLANT HAS ALREADY PROVED THAT THE TRANSACTIONS IN CASE OF ALL 4 SCRIPS ARE ROUTED THR OUGH STOCK EXCHANGE AND THE EXCHANGE OF MONIES/SHARES HAS ALSO TAKEN PLACE THRO UGH BANKING CHANNELS AND DEMAT ACCOUNTS. ON THE GIVEN FACTS OF THE CASE AND CONSIDERING THE DECISIONS RELIED UPON BY THE APPELLANT, I AM CONVINCED THAT T HE TRANSACTIONS IN QUESTION AND THE LOSS INCURRED BY THE APPELLANT IN TRADING O F SHARES IS GENUINE AND INCURRED IN THE NORMAL COURSE OF HIS BUSINESS. ACCORDINGLY, THE ADDITION OF RS.4,99,44,800/- ON ACCOUNT OF DISALLOWANCE OF LOSS IN SHARE TRADING OF 4 COMPANIES IS HEREBY DELETED. 8. BEFORE US, THE LD. D.R. STRONGLY SUPPORTED THE FIND INGS OF THE A.O. 9. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. THE UNDISPUTED FACT IS THAT ALL THE IMPUGNED TRANSACTIONS WERE ROUTED THROUGH DEMAT ACCOUNTS. IT IS ALSO AN UNDISP UTED FACT THAT THE TRANSACTIONS HAVE BEEN DONE AT MARKET RATES. SIMPLY BECAUSE SOME OF THE TRANSACTIONS ARE OFF MARKET TRANSACTIONS, IT CANNOT BE SAID THAT SUCH TRANSACTIONS ARE SHAM OR FAKE EVEN THE OFF MARKET T RANSACTIONS HAVE BEEN DONE AT MARKET RATES. THE ASSESSING OFFICER HAS FAI LED TO BRING ANY COGENT MATERIAL EVIDENCE ON RECORD WHICH COULD SUGGEST THA T THE TRANSACTIONS ARE SHAM OR BOGUS. IT IS PERTINENT TO MENTION HERE THAT WHEREVER THERE WAS A PROFIT IN SIMILAR OFF MARKET TRANSACTIONS, THE A.O. HAS ACCEPTED THE SAME. THEREFORE, WE DO NOT FIND ANY MERIT IN DISBELIEVING THE LOSSES INCURRED BY THE ASSESSEE IN THE ORDINARY COURSE OF HIS BUSINESS . CONSIDERING THE TOTALITY ITA NO. 3017 /AHD/2009 . A.Y. 2005-0 6 5 OF THE FACTS, WE DO NOT FIND ANY REASON TO INTERFER E WITH THE FINDINGS OF THE LD. CIT(A). APPEAL FILED BY THE REVENUE IS ACCORDIN GLY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 06 - 10- 2 016. SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD