The ACIT, Ujjain V. Shri Ashish Rathi, Ujjain

ITA 321/IND/2009

• Counselvise Citation: 32122714 RSA 2009
• Duration Of Justice: 2 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 08-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 23-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Share purchase agreement; Earning of tax free income
• Section: 154

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JM AND SHRI R.C. SHARMA, AM ITA NO. 321/IND/2009 AY: 2006 - 07 ACIT - 1(1), UJJAIN APPELLANT VS. ASHISH RATHI, UJJAIN PAN AHJPR 8714 P RESPONDENT APPELLANT B Y SHRI ARUN DEWAN, SR. DR RESPO NDENT BY S/ SHRI M. MANI & A.L. JAIN DATE OF HEARING : 22.07.2011 DATE OF PRONOUNCEMENT : 16.09.2011 ORDER PER R.C. SHARMA, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) - UJJAIN , DATED 24.4.2009 FOR THE AY 2006 - 07 IN THE MATTER OF ORDER PASSED U/S 1 43 ( 3 ) OF THE I.T. ACT, 1961, ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, WHETHER LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.50,97,640/ - DISALLOWING CLAIM OF LONG TERM CAPITAL GAIN. 2 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN ACCEPTING THE SHARE TRANSACTION TOOK PLACE ON 4.6.03. AS PER SEBI GUIDELINES, ORDER NUMBER, TRADE N UMBER, DETAILS OF SERVICE TAX, TURNOVER TAX AND CLIENT CODE IS MUST WHILE NO SUCH DETAILS MENTIONED ON CONTRACT NOTES FURNISHED FOUND. 2. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FACTS OF THE CAS E ARE THAT ASSESSEE FILED RETURN SHOWING TOTAL INCOME AT RS.5,80,315/ - CLAIMING EXEMPT INCOME , U/S 10(38) OF THE I.T. ACT , TO THE TUNE OF RS.50,97,640/ - ON ACCOUNT OF LONG TERM CAPITAL GAIN. THE AO ASSESSED THE TOTAL INCOME AT RS. 56,77,955 / - DISALLOWING T HE CLAIM OF LONG TERM CAPITAL GAIN AND TREATING IT AS SHORT TERM CAPITAL GAIN. A DEMAND OF RS.22,90,635/ - WAS RAISED. HOWEVER, IT WAS RECTIFIED VIDE ORDER U/S 154 DATED 6.2.2009, REVISING THE DEMAND AT RS.7,74,714/ - . THE AO MADE ENQUIRIES TO ASCERTAIN THE GENUINENESS OF PURCHASE OF 24000 SHARES OF M/S. G.K. CONSULTANTS @ RS.3.75 PER SHARE ON 4.6.03 THROUGH SHRI RAJENDRA KUMAR SHAH, SHARE BROKER, AND A REGISTERED MEMBER OF CALCUTTA STOCK EXCHANGE. THE AO SENT A LETTER DATED 8.12.08 TO SHRI REJENDRA SHAH, BUT NO REPLY WAS 3 RECEIVED FROM HIM TILL THE PASSING OF ASSESSMENT ORDER ON 24.12.2008. SIMILARLY, THE AO WROTE LETTERS TO CALCUTTA STOCK EXCHANGE, M/S. G.K. CONSULTANTS, NEW DELHI AND ROC, NEW DELHI, BUT REPLIES WERE NOT RECEIVED FROM THEM TILL THE PASSING OF THE ORDER. IN ABSENCE OF PROPER VERIFICATION AND CONFIRMATIONS FROM CONCERNED ORGANIZATIONS/PERSONS, THE AO DOUBTED THE PURCHASE OF SHARES IN THE YEAR 2003. HE WAS OF THE VIEW THAT SHARES WERE PURCHASED IN THE YEAR 2005, THEREFORE, THE ASSESSEE WAS NOT EN TITLED FOR THE CLAIM OF LONG TERM CAPITAL GAIN U/S 10(38) OF THE I. T. ACT. 3. AGGRIEVED WITH THE ACTION OF THE AO, T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) . THE LD. CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, FACTS & CIRCUMST ANCES OF THE CASE , REMAND REPORT AND DOCUMENTARY EVIDENCES, DELETED THE ADDITION MADE BY THE AO. FINDINGS OF THE LD. CIT(A) ARE REPRODUCED AS UNDER: 2.6 I HAVE GONE THROUGH THE FACTS OF THE CASE. AS REGARDS THE PURCHASE OF SHARES IN THE YEAR 2003, THE AP PELLANT FURNISHED FOLLOWING DOCUMENTARY EVIDENCE: 1. CONTRACT NOTE WITH DELIVERY OUTWARD BILL DTD. 4.6.2003. 4 2. COPY OF LEDGER ACCOUNT FOR PROOF OF PAYMENT FOR THE YEAR 1.4.2003 TO 31.3.2004. 3. COPY OF SHARE TRANSFER FORM DTD. 14.7.2003. 4. CORRESPONDENCE FOR REGISTR ATION OF TRANSFER DTD. 11.10.2003. 5. LETTER FOR REGISTRATION OF TRANSFER DTD. 3.11.2003. 6. COPY OF CONSOLIDATED SHARE CERTIFICATE DTD. 3.11.2003. THE CALCUTTA STOCK EXCHANGE HAS INTIMATED THAT THE SHARES OF M/S. G.K. CONSULTANTS LTD. CAN BE TREATED IN PHYSICA L SEGMENT ALSO. IT IS ALSO CLARIFIED THAT TRADING IN THE ONLINE TRADING SYSTEM OF EXCHANGE IS 500 SHARES AND NO SUCH LIMIT WAS FOR PHYSICAL SALE. THE APPELLANT HAS PURCHASED THE SHARES IN PHYSICAL FORM FROM STOCK BROKER AND THE SAME HAS NO CHARACTERISTIC O F ONLINE TRADING SYSTEM OF THE EXCHANGE. THEREFORE, OBSERVATION OF AO THAT THE TRADING OF MORE THAN 500 SHARES AT A TIME IS NOT PERMISSIBLE, IS NOT CORRECT. SECONDLY, THE PREVIOUS OWNER OF THE SHARES WAS PRIVATE LIMITED COMPANY 5 AND NOT AN INDIVIDUAL. THERE FORE, THE SCOPE OF ANY MANIPULATION WAS RARE. THE AO HAS BASED HIS CONCLUSION ON SEARCH ON OFFICIAL WEBSITE OF CALCUTTA STOCK EXCHANGE. HE FOUND THAT ON 4.6.03 NO TRADING HAS TAKEN PLACE. THERE ARE REASONS FOR NON - APPEARANCE OF TRANSACTION ON THE WEBSITE O F CALCUTTA STOCK EXCHANGE BECAUSE THE TRANSACTION HAS TAKEN PLACE IN PHYSICAL FORM. IN VIEW OF THE ABOVE FACTS, THERE ARE SUFFICIENT DOCUMENTARY EVIDENCES IN SUPPORT OF PURCHASE OF SHARES ON 4.6.03 WHICH ARE DETAILED ABOVE. AFTER CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, I FOUND THAT THE CLAIM OF THE APPELLANT OF EXEMPTION U/S 10(38) OF THE I.T. ACT IS BASED ON SUFFICIENT FACTS AND THERE IS NO CONTRARY EVIDENCE ON RECORD. ACCORDINGLY, THE ADDITION MADE BY THE AO AMOUNTING 6 TO RS.50,97,640/ - IS NOT SUSTAINABLE, HENCE DELETED. 4. AGGRIEVED WITH THE ABOVE ORDER OF THE LD. CIT(A), THE REVENUE IS IN FURTHER APPEAL BEFORE US. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FOUND THAT AFTER CONSIDERING VARIOUS D OCUMENTS PLACED ON RECORD AND AFTER CALLING REMAND REPORT FROM THE AO, THE LD. CIT(A) REACHED TO THE CONCLUSION THAT THE ASSESSEE HAS ACQUIRED THE SHARES ON 4.6.2003, AS PER THE CONTRACT NOTE WITH DELIVERY OUTWARD BILL. COPY OF THE LEDGER ACCOUNT FOR THE P ROOF OF PAYMENT WAS ALSO PLACED BEFORE THE LOWER AUTHORITIES. WE ALSO FOUND THAT SHARES WERE DULY TRANSFERRED IN THE NAME OF THE ASSESSEE AFTER ITS PURCHASE AND FRESH SHARE CERTIFICATE WAS ISSUED BY THE COMPANY M/S. G. K. CONSULTANTS LIMITED ON 3 RD NOVEMBE R, 2003. THUS, AS PER DOCUMENTARY EVIDENCE, THE ASSESSEE WAS HOLDING SHARE FOR MORE THAN 12 MONTHS BEFORE ITS SALE. THEREFORE, THE CIT(A) HAS CORRECTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER BY HOLDING THE SAME AS SHORT TERM CAPITAL GAIN. THE D ETAILED FINDING RECORDED BY THE LD. CIT(A) AS REPRODUCED HEREINABOVE HAS NOT BEEN CONTROVERTED BY THE 7 DEPARTMENT BY BRINING ANY POSITIVE MATERIAL ON RECORD. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). 5. IN THE RESULT, THE AP PEAL OF THE REVENUE IS DISMISSED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 16 TH SEPTEMBER, 2011. SD/ - SD/ - (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 16 TH SEPTEMBER, 2011. CPU* 1316