The ACIT, Circle-3, Surat V. Shri Jitendra Dalpatbhai Shah, Surat

ITA 3105/AHD/2009

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6444 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 20-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI RAJ KUMAR
• Keywords: Unexplained cash credit
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : AH MEDABAD ( BEFORE HONBLE SHRI T.K.SHARMA, J.M. & HONBLE SHRI A.N.PAHUJA, A.M.) I.T.A.NO. 3105/AHD./2009 : ASSESSMENT YEAR 200 6-07 ACIT, CIRCLE-3, SURAT VS- SHRI JITENDRA DALPATBHAI SHAH, SURAT (PAN : ADRPS 1134M) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI JAI RAJ KUMAR, SR. D.R. RESPONDENT BY: NONE O R D E R PER SHRI T.K.SHARMA, JUDICIAL MEMBER : THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF LD. CIT(A)-II, SURAT DATED 25.08.2009 DIRECTING TO ACCEPT THE CLAIM OF T HE ASSESSEE OF RS.1,38,21,924/- AS CAPITAL GAIN AS AGAINST THE SAME TREATED BY THE AO AS UNEXPLAINED CREDIT UNDER THE PROVISIONS OF SECTION 68 OF THE I.T. ACT FOR THE AS SESSMENT YEAR 2006-2007. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S AN INDIVIDUAL. FOR THE ASSESSMENT YEAR UNDER APPEAL, HE FILED THE RETURN OF INCOME ON 31.01.2007, DECLARING TOTAL INCOME AT RS.1,39,05,748/-. THE AO FRAMED THE ASSESSMENT U NDER SECTION 143(3) ON 08.12.2008 AND ASSESSED THE TOTAL INCOME AT RS.1,42 ,45,197/-. IN THE ASSESSMENT ORDER HE HAS TREATED THE SHORT TERM CAPITAL GAIN OF RS.1, 38,21,924/- DECLARED BY THE ASSESSEE AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE I.T. ACT, 1961. 2.1 FOR TREATING THE AFORESAID CAPITAL GAIN OF RS.1 ,38,21,924/- AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE I.T. ACT, IN THE ASS ESSMENT ORDER, THE AO OBSERVED THAT THE ASSESSEE HAS BROUGHT HIS INCOME FROM UNACCOUNTE D SOURCES IN HIS BOOKS OF ACCOUNT AS LEGITIMATE INCOME BY PAYING LESSER TAX CLAIMING THAT INCOME IS FROM SHORT TERM 2 ITA NO.3105/AHD./2009 CAPITAL GAIN. THE AO ALSO OBSERVED THAT AS THE ASSE SSEE COULD NOT FURNISH THE DETAILS AS REQUIRED AS WELL AS KEEPING IN VIEW THE FACTS AND C IRCUMSTANCES OF THE CASES, THE SUM CREDITED IN THE BOOK OF ACCOUNT OF RS.1,38,21,924/- AS SALE CONSIDERATION OF SHARES IS TREATED AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE I.T. ACT AND BROUGHT TO TAX. 3. ON APPEAL, AFTER CONSIDERING THE SUBMISSIONS OF THE A.R. AND THE OBSERVATIONS OF THE AO IN THE ASSESSMENT ORDER, THE LD. CIT(A), IN THE IMPUGNED ORDER, DIRECTED THE AO TO ACCEPT THE CAPITAL GAIN OF RS.1,34,82,475/- A S DISCLOSED BY THE ASSESSEE FOR THE DETAILED REASONS GIVEN IN PARA 5 TO 5.3, WHICH ARE REPRODUCED HEREUNDER: 5. I HAVE CAREFULLY CONSIDERED THE VIEW TAKEN BY THE AO ON ONE HAND AND THE DETAILED SUBMISSIONS OF THE AR ON THE OTHER, ALONG WITH THE ENCLOSED DOCUMENTARY EVIDENCES. TO BEGIN WITH, I AM OF THE V IEW THAT NO ADDITION COULD BE MADE UNDER THE PROVISIONS OF SEC.68 OF THE IT AC T. THIS IS BECAUSE, THE IDENTITY OF THE PERSON FROM WHOM THE SAID SUM OF RS .1,38,21,924 WAS RECEIVED, WAS FULLY ESTABLISHED. THIS SUM REPRESENTED THE SAL E PROCEEDS OF SHARES OF M/S. RAJ SYNTHETICS AND RAJ CYLINDERS, THE SALE S HAVING BEEN AFFECTED THROUGH THE BROKERS, M/S. SANJU KABRA AND ASHOK KUMAR KAYAN . THE GENUINENESS OF THE TRANSACTIONS WAS PROVED BY THE FACT THAT THE SA ID SUM WAS RECEIVED BY ACCOUNT-PAYEE CHEQUES AND A COPY OF THE ASSESSEES BANK STATEMENT WAS FURNISHED AS EVIDENCE. SINCE THEY WERE REGISTER ED BROKER'S WITH THE SEBI, THEIR CREDITWORTHINESS IN RELATION TO THE SAID SUM COULD NOT BE BROUGHT INTO DOUBT. THE FACT THAT THE SAID SUM REPRESENTED THE S ALE PROCEEDS OF THE SHARES SOLD BY THE ASSESSEE THROUGH THE SAID BROKERS, WAS EVIDENCED BY THE CONTRACT NOTES ISSUED BY THE BROKERS WHICH SHOWED THE TRADE TIME, ORDER NUMBERS, TRADE NUMBERS, SETTLEMENT NUMBERS, THE DETAILS OF STT PAI D, THEIR SEBI REGISTRATION NUMBERS AND THEIR COMPLETE ADDRESSES. 5.1 THE AO ISSUED THE NOTICE U/S.133(6) ONLY TO THE BROKER FROM WHOM THE ASSESSEE HAD PURCHASED THE SHARES, I.E M/S. PRAKASH NAHATA & CO. HE ALSO ISSUED A LETTER TO THE CSE. THEIR FAILURE TO REPLY TO SUCH NOTICES HAS BEEN TAKEN AS A GROUND BY THE AO TO REJECT THE ASSESSEE'S CLAI M OF STCG. I AM OF THE VIEW THAT WHEN THE SAID NOTICES WERE NOT COMPLIED WITH, THE AO COULD HAVE ISSUED SUMMONS U/S.131 OF THE IT ACT, OR COULD HAVE EVEN I SSUED A COMMISSION TO AN OFFICER IN CALCUTTA. WITHOUT PROGRESSING IN THAT DI RECTION AND WITHOUT BRINGING HIS ENQUIRIES TO A LOGICAL CONCLUSION, THE AO COULD NOT SIMPLY TREAT THE TRANSACTIONS TO BE BOGUS. THE AO HAS RECORDED HIS R EASONS FOR REJECTING THE ASSESSEE'S CLAIM IN PARA- 4.5, PAGE- 8 OF THE ASST. ORDER. IN SR. NOS.(V) AND (VI), IT HAS BEEN RECORDED BY THE AO THAT THE ASSESSEE FA ILED TO FURNISH RELEVANT EVIDENCES IN SUPPORT OF THE PURCHASE PRICE OF BOTH THE SCRIPS AND ALSO TO SHOW WHETHER THE PURCHASES WERE MADE OFF MARKET OR ON-LINE. THE AO COULD HAVE 3 ITA NO.3105/AHD./2009 EASILY LOOKED UP THE QUOTATION INFORMATION OF THE CSE ON THE SAID DATES EITHER ON THE INTERNET OR FROM ISSUES OF THE ECONOMIC TIMES OR ANY OTHER ECONOMIC NEWSPAPER. THE PRICE OF ANY SHARE ON ANY PARTICULAR DATE IS DULY FURNISHED BY THE CONCERNED EXCHANGE AND IS ALWAYS IN THE PUBLIC DOMAIN. SECOND LY, WHETHER THE PURCHASES WERE MADE OR-LINE OR OFF-MARKET WAS CLEAR LY EVIDENCED BY THE CONTRACT NOTES ISSUED BY M/S. PRAKASH NAHATA & CO., WHICH SHOWED THE TRADE TIME, THE ORDER NUMBERS, THE TRADE NUMBERS, ETC. ETC. THIS WAS DULY POINTED OUT BY THE ASSESSEE IN RESPONSE TO THE SHOW-CAUSE NOTICE ISSUED BY THE AO, THE CONTENT'S OF WHICH HAVE BEEN REPRODUCED IN PARA -4.4 OF THE ASST. ORDER. 5.2 FINALLY, SIMPLY BECAUSE THE PRICE OF THE PARTICULAR SCRIP HAD INCREASED SUBSTANTIALLY IN A SHORT PERIOD OF TIME, IT COULD NOT BE USED AS A GROUND TO TREAT THE TRANSACTIONS AS BOGUS, ESPECIALLY WHEN THE GENUINENESS OF THE TRANSACTIONS HAD ALREADY BEEN PROVED BEYOND DOUBT BY SEVERAL DOC UMENTARY EVIDENCES PROCURED BY THE AO, AS ALSO SUBMITTED BY THE ASSESSEE ALONG WITH THE WRITTEN CONFIRMATIONS FURNISHED BY THE BROKERS AND SUPPORTED BY THEIR BANK STATEMENTS. 5.3 GIVEN SUCH FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED ABOVE IN CONSIDERABLE DETAIL, I HAVE COME TO THE INEVITABLE CONCLUSION THAT THERE WAS SIMPLY NO BASIS FOR THE AO TO TREAT THE SUM OF RS 1,38,21,924 AS UNEXPLAINED CASH CREDIT UNDER THE PROVISIONS OF SECTION 68 OF THE IT ACT WHICH WILL STAND DELETED. THE AO IS DIRECTED TO ACCEPT THE CAPITAL GAIN OF RS 1,34,82,475 AS DISCLOSED BY THE ASSESSEE. 4. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE T RIBUNAL. 5. ON THE DATE FIXED FOR HEARING, NONE WAS PRESENT FROM THE SIDE OF THE ASSESSEE. ON EARLIER DATE, A PAPER BOOK CONTAINING 99 PAGES, WHICH, INTER ALIA , INCLUDE SUBMISSION FILED BEFORE THE LD. CIT(A) AND OTHER DO CUMENTARY EVIDENCES OF SALE AND PURCHASE AND COPY OF ACCOUNT OF THE ASSESSEE IN THE BOOKS OF THE BROKERS, BROKERS NOTES, COPY OF DEMAT ACCOUNT OF THE ASSESSEE IN WHI CH TWO SCRIPS ON WHICH SHORT-TERM CAPITAL GAIN IS DECLARED HAS BEEN DULY ENTERED. IN THE CIRCUMSTANCES, WE PROCEED TO DECIDE THIS APPEAL ON THE BASIS OF SUBMISSIONS MADE BY THE LD. D.R. AND THE MATERIALS AVAILABLE ON RECORD. 6. AT THE TIME OF HEARING BEFORE US, SHRI RAI RAJ K UMAR, SR.D.R. APPEARED ON BEHALF OF THE REVENUE AND POINTED OUT THAT THE DECI SION OF THE LD. CIT(A) IS NOT ACCEPTABLE FOR THE FOLLOWING REASONS: 4 ITA NO.3105/AHD./2009 I) THE LD.CIT(A) HAS NOT APPRECIATED THAT IN PU RSUANCE OF NOTICE U/S.133(6) OF THE ACT, THE BROKER AND THE CALCUTTA STOCK EXCHA NGE, HAVE NOT MADE ANY COMPLIANCE DURING THE COURSE OF ASSESSMENT PROCEEDI NGS. II) THE LD.CIT(A) HAS NOT APPRECIATED THAT NO CLIEN T CODE WITH THE NAME OF THE ASSESSEE HAS BEEN SHOWN IN THE 'CONTRACT NOTE' AND IT WAS NOT SUBJECT TO 'SERVICE TAX' OR 'STAMP CHARGES' AND THEREBY THE SO CALLED P URCHASE/SALE TRANSACTION OF SHARE IS VERY MUCH DOUBTFUL AND PURELY 'ACCOMMODATI VE'. III) THE LD.CIT(A) HAS NOT APPRECIATED THAT THE VA LUE OF SHARES PURCHASED AND SOLD BY THE ASSESSEE HAD INCREASED MANIFOLD IN A VE RY SHORT PERIOD OF ONE YEAR AND SUCH TYPE OF INCREASE ARE NOT MADE DURING THE S AID PERIOD EVEN IN THE COMPANIES OF INTERNATIONAL STANDARD CORPORATE COMP ANIES. IV) IN VIEW OF THE RATIOS LAID DOWN BY THE SUPREM E COURT IN THE CASE OF SUMATI DAYAL V. CIT(1995) 80 TAXMAN 89/214 ITR 801 (SC) IN VIEW OF SECTION 68 WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF THE ASSESSEE FOR ANY PREVIOUS YEAR, THE SAME MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR IF THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE NATURE AND SOURCE THEREOF IS IN THE OPINION OF THE AO NOT SATISFACTORY, IN SUCH CASE THERE IS PRIMA-FACIE EVIDENCE AGAINST THE ASSESSEE I.E. THE RECEIPT OF MONEY AND IF HE FAILS TO REBUT THE SAME THE SAID EVIDENCE BEI NG UNREBUTTED CAN BE USED AGAINST HIM BY HOLDING THAT IT IS A RECEIPT OF AN I NCOME NATURE 7. AFTER HEARING THE LD. D.R., WE HAVE CAREFULLY GO NE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT IN THE RETURN OF INCOME, THE ASSESSEE HAS DECLARED THE SHORT-TERM CAPITAL GAIN OF RS.1,34,82, 475/- AS UNDER: NAME OF SCRIP SALES DATE SALES VALUE PURCHASE DATE PURCHASE VALUE STCG RAJ SYNTHETICS 25.07.05 86,36,059 04.10.04 184,954 84,51,105 RAJ CYLINDERS 09.07.05 51,85,865 04.10.04 154,495 5 0,31,370 1,38,21,924 339,449 1,34,82,475 7.1 IN THE ASSESSMENT ORDER, THE AO TREATED THE AFO RESAID SHORT TERM CAPITAL GAIN AS UNEXPLAINED CREDIT UNDER SECTION 68 OF THE I.T. ACT , 1961. THE SOURCE OF CREDIT HAS BEEN EXPLAINED BY THE ASSESSEE WITH DOCUMENTARY EVI DENCE AND THESE DOCUMENTS WERE NOT FOUND FALSE. ON PERUSAL OF THE IMPUGNED ORDER O F THE LD. CIT(A), WE ARE CONVINCED THAT ON DOUBTS AND SUSPICION, THE AO HAS TREATED SH ORT-TERM CAPITAL GAIN OF RS.1,38,21,924/- DECLARED BY THE ASSESSEE AS UNEXPL AINED CREDIT UNDER SECTION 1961 OF 5 ITA NO.3105/AHD./2009 THE I.T. ACT AND IN OUR CONSIDERED OPINION, THE LD. CIT(A) HAS GIVEN COGENT REASON FOR DIRECTING THE AO TO ACCEPT THE SHORT-TERM CAPITAL G AIN OF RS. 1,34,82,475/- DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME. WE, THEREFORE , DECLINE TO INTERFERE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 31.05.2011 SD/- SD/- (A.N.PAHUJA) (T.K.SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 31/05/2011 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE 2) THE DEPARTMENT 3) CIT(A) CONCERNED 4) CIT CONCERNED 5) D.R., ITAT, AHMEDABAD TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD TALUKDAR/SR.P.S.