VINOD J. SHARMA, THANE V. ACIT (CC)-11, MUMBAI

ITA 3213/MUM/2010

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2810 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2015
• Appeal Filed By: Assessee
• Bench Allotted: F
• Next Hearing Date: 31-08-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 23-04-2010
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Business income; Principle of natural justice; Opportunity of cross examination; Penny stocks
• Section: 143(3)

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI , , , BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.3213/MUM/2010 ASSESSMENT YEAR: 2005-06 VINOD J. SHARMA, 201/1, RAJSHRI TOWER, NR. PRATAP CINEMA, KIKAD ROAD, THANE-400601. / VS. ASST. CIT ( CC ) - 11 MUMBAI- ( ASSESSEE ) ( REVENUE ) P.A. NO. AWPPS8950C / ASSESSEE BY SHRI K. GOPAL ( AR ) / REVENUE BY SHRI ARVIND KUMAR ( D R) ! ' # $ / DATE OF HEARING : 31/08/2015 # $ / DATE OF ORDER: 28/10/2015 / O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-3 7, MUMBAI {(IN SHORT LD. CIT(A)} DATED 29.01.2010 FOR THE VINOD J. SHARMA 2 ASSESSMENT YEAR 2005-06, DECIDED AGAINST THE ASSESS MENT ORDER PASSED BY THE ASSESSING OFFICER (IN SHORT AO ) U/S 143(3) OF THE ACT. THE ASSESSEE HAS RAISED FOLLOWING GROUN DS OF APPEAL: THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) [HEREI NAFTER REFERRED AS 'CIT(A)'] ERRED IN CONFIRMING THE ACTIO N OF THE ASSESSING OFFICER ON DETERMINING THE TOTAL INCOME A T RS.60,97,647/- AS AGAINST THE RETURNED INCOME OF RS.40,15,410/- BY MAKING FALLOWING ADDITIONS AND DISALLOWANCES WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. A. ADDITION ON ACCOUNT OF ALLEGED ARTIFICIAL CAPITAL GAIN RS.54,44,645/- B. ADDITION ON ACCOUNT OF ALLEGED PAYMENT OF COMMISSION RS.2,72,232/- A. ADDITION ON ACCOUNT OF ALLEGED ARTIFICIAL CAPITA L GAIN RS.54,44,645/- 2. THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.54,44,645/- MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THE TRANSACTION OF PURCHASE AND SALE OF SHARES OF FAST TRACK ENTERTAINMENT LTD. IS NOT GENUINE WI THOUT APPRECIATING THE EVIDENCE BROUGHT ON RECORD BY THE APPELLANT. HENCE, THE ADDITION OF RS.54,44,645/- BY TREATING THE SAME AS BUSINESS INCOME RATHER THAN CA PITAL GAINS IS NOT AT ALL JUSTIFIED AND THE SAME MAY BE D ELETED. 3. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE WIT NESSES OF THE DEPARTMENT WERE NOT ABLE TO SUBSTANTIATE THEIR VINOD J. SHARMA 3 STATEMENTS MADE WITH RESPECT TO THE TRANSACTION IN QUESTION AND GAVE VAGUE REPLIES. HENCE, THE ADDITIO N OF RS.54,44,645/- MADE RELYING ON THE STATEMENTS OF TH E WITNESSES IS NOT AT ALL JUSTIFIED AND THE SAME MAY BE DELETED. B. ADDITION ON ACCOUNT OF ALLEGED PAYMENT OF COMMISSION RS.2,72,232/- 4. THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.2,72,232/- MADE BY THE ASSESSING OFFICER ON THE BASIS OF CONJECTURE AND SURMISES THAT THE APPELLANT HAS P AID ALLEGED COMMISSION AT THE RATE OF 5% TO EARN THE CA PITAL GAINS. THE ADDITION OF RS.2,72,232/- HAS BEEN MADE WITHOUT ANY BASIS HENCE THE SAME MAY BE DELETED. 5. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE ADD ITION OF RS.2,72,232/- HAS BEEN MADE IN BREACH OF PRINCIPLES OF NATURAL JUSTICE AS THE WITNESSES OF THE DEPARTMENT HAVE NOT MENTIONED ANYWHERE THAT THEY HAVE RECEIVED ANY COMMISSION FOR CARRYING OUT ALLEGED TRANSACTION. HE NCE, THE ADDITION OF RS.2,72,232/- IS NOT AT ALL JUSTIFI ED AND THE SAME MAY BE DELETED. C. LEVY OF INTEREST UNDER SECTION 234A, 234B,234C I S NOT AT ALL JUSTIFIED 6. THE LD. CIT(A) ERRED IN CONFIRMING THE LEVY OF I NTERST UNDER SECTION 234A, 234B, 234C IS NOT JUSTIFIED AS THE ASSESSEE DENIES THE SAME. 7. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER OR A MEND ANY OF THE GROUND BEFORE OR AT THE TIME OF HEARING. VINOD J. SHARMA 4 2 . BOTH THE PARTIES HAVE MADE SUBMISSIONS ON THE AFO RESAID GROUNDS. THE PRIMARY ISSUE THAT ARISES FOR OUR CONS IDERATION IN THIS APPEAL IS THAT WHETHER THE ACTION OF THE LO WER AUTHORITIES IN TREATING THE LONG TERM CAPITAL GAIN ARISING OUT OF SHARES DONE BY THE ASSESSEE DURING THE YEAR IS GENU INE OR NOT. 2.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTED BY THE AO THAT DURING THE YEAR THE ASSESSEE H AS DISCLOSED LONG TERM CAPITAL GAIN OF RS.36,34,635/- FROM SALE OF SHARE OF SCRIPT FAST TRACK, AS PER FOLLOWING D ETAILS: BROKER DATE OF BILL QUANTITY RATE AMOUNT M/S. T.H. VAKIL SECURITIES P. LTD. (PURCHASE) 05.04.2004 112500 3.65 RS.4,10,625/- VIJAY BHAGWANDAS & CO (SALE) 05.04.2004 112500 AVERAGE RATE RS.48 RS.54,44,645/- IT IS NOTED FROM THE PERUSAL OF THE ASSESSMENT ORDE R THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, SUMMON S WERE ISSUE TO M/S. T.H. VAKIL SHARES & SECURITIES P. LTD . & M/S. VISHAL BHAGWANDAS & CO. STATEMENTS ON OATH WERE REC ORDED IN THIS CONNECTION. THE PARTIES DENIED HAVING ISSUE D THE BILLS PRODUCED BY THE ASSESSEE. IT IS MENTIONED IN THE AS SESSMENT ORDER THAT THE ASSESSEE WAS GIVEN A COPY OF THE ABO VE STATEMENTS VIDE ORDER SHEET ENTRY DATED 25.09.2007 AND WAS VINOD J. SHARMA 5 ASKED TO JUSTIFY HIS CLAIM OF LONG TERM CAPITAL GAI N IN LIGHT OF THE INVESTIGATIONS CARRIED OUT BY THE AO AND FACTS BROUGHT ON RECORDS. IN REPLY, THE ASSESSEE IS SUBMITTED THAT ALLEGATION S MADE IN THE STATEMENTS RECORDED BY THE AO ARE FALSE AND NEEDS TO BE IGNORED. IT WAS FURTHER SUBMITTED BY TH E ASSESSEE TO THE AO THAT THE IMPUGNED SHARES WERE PURCHASED W AY BACK IN THE F.Y. 2002-03 AND THESE WERE DISCLOSED BY THE ASSESSEE IN BALANCE SHEET FOR A.Y.2002-03. IT WAS FURTHER SU BMITTED BY THE ASSESSEE THAT SALES BILLS OF THE BROKER M/S. VI JAY BHAGWANDAS AND CO. WERE SUBMITTED WHEREIN COMMISSIO N, SERVICE TAX AND STT HAVE BEEN CHARGED. IT WAS FURTH ER OBSERVED BY THE AO IN THE ASSESSMENT ORDER THAT THE IMPUGNED SHARES CLAIMED TO HAVE BEEN SOLD BY THE AS SESSEE BELONGED TO THE COMPANY NAMELY M/S. FAST TRACK LTD. , AND THAT SH. NARENDRA SHAH APPEARED ON BEHALF OF ONE OF THE BROKERS THROUGH WHOM SHARES WERE PURCHASED AND STAT ED THAT IMPUGNED TRANSACTIONS WERE BOGUS. SIMILARLY, SH. VI SHAL SHAH ALSO ATTENDED BEFORE THE AO ON BEHALF OF THE OTHER BROKERS NAMELY M/S. VIJAY BHAGWANDAS & CO. THROUGH WHOM SHA RES WERE SOLD, AND STATEMENT OF SHRI VISHAL SHAH WAS RE CORDED, WHEREIN HE ALSO STATED THAT NO GENUINE BUSINESS TRA NSACTIONS HAVE BEEN MADE BY THE SAID BROKER WITH THE ASSESSEE . KEEPING IN VIEW, ALL THESE FACTS AND CIRCUMSTANCES OF THE C ASE, THE AO FINALLY HELD THAT IN FACT PURCHASE AS WELL AS SALE TRANSACTIONS OF THE SCRIPT FAST TRACK ENTERTAINMENT WAS BOGUS. T HUS, THE AO TREATED THE AMOUNT OF LONG TERM CAPITAL GAIN, AS SHOWN BY THE ASSESSEE IN THE RETURN OF INCOME ON ACCOUNT OF SALE OF SHARES OF FAST TRACT ENTERTAINMENT LTD., AS UNDISCL OSED VINOD J. SHARMA 6 INCOME OF THE ASSESSEE , AMOUNTING TO RS.54,44,645/ - THE AO ALSO MADE ADDITION ON ACCOUNT OF COMMISSION PAID OU T OF THE BOOKS OF ACCOUNT ON THESE TRANSACTIONS AMOUNTING TO RS.2,72,232/-. 2.2. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A), WHEREIN IT WAS CONTENDED THA T AO HAS NOT PROPERLY EXAMINED THE DETAILS AND EVIDENCES AND HAS NOT GIVEN OPPORTUNITY OF CROSS EXAMINATION OF THE PERSO NS WHOSE STATEMENTS WERE RECORDED BY THE AO AT THE BACK OF T HE ASSESSEE. THE LD. CIT(A) DIRECTED THE AO TO GRANT O PPORTUNITY OF CROSS EXAMINATION OF THE AFORESAID PERSONS IN TH E REMAND PROCEEDINGS. AS PER REMAND REPORT OF THE AO, HE HAD GRANTED OPPORTUNITY OF CROSS EXAMINATION TO THE ASSESSEE IN THE REMAND PROCEEDINGS. THE LD. CIT(A) AFTER CONSIDERIN G THE ASSESSMENT ORDER, REMAND REPORT OF AO, REPLY OF THE ASSESSEE TO REMAND REPORT AND FURTHER SUBMISSIONS OF THE ASS ESSEE, DECIDED THE APPEAL. IN THE APPEAL ORDER, IT WAS HEL D BY THE LD. CIT(A) THAT THE CASE OF THE ASSESSEE IS ONE OF THE CASES OF PENNY STOCK SHARES WHICH WERE USED FOR BOGUS CAPITA L GAIN. IT WAS FURTHER HELD BY HIM THAT FAST TRACK ENTERTAINME NT IS ONE OF THE COMPANIES WHO ARE USING PENNY STOCKS. THEREA FTER THE LD. CIT(A) WENT ON DESCRIBING MODUS OPERANDI USED B Y THE COMPANIES WHO ARE GENERATING BOGUS CAPITAL GAIN USI NG PENNY STOCKS, AND THEN FINALLY, TAKING INTO ACCOUNT ALL T HE FACTS AND CIRCUMSTANCES OF THE CASE, HE CONCLUDED THAT PURCHA SE AND SALE OF IMPUGNED SHARES WAS BOGUS. RESULTANTLY, LON G TERM CAPITAL GAIN DISCLOSED BY THE ASSESSEE WAS ALSO BOG US, AND VINOD J. SHARMA 7 THEREFORE ADDITIONS MADE BY THE AO ON ACCOUNT OF BO GUS CAPITAL GAIN AND COMMISSION THEREON WERE CONFIRMED. 2.3 WE HAVE GONE THROUGH THE ARGUMENTS MADE BY BOTH TH E SIDES AND THE ORDERS OF THE LOWER AUTHORITIES. DURI NG THE COURSE OF HEARING, OUR ATTENTION WAS DRAWN ON VARIO US EVIDENCES FILED BY THE ASSESSEE, BEFORE THE AO AND BEFORE THE LD. CIT(A), ESTABLISHING THAT PURCHASE OF SHARES OF FAST TRACK ENTERTAINMENT LTD. WAS DONE BY THE ASSESSEE IN F.Y. 2002-03 AND SALE OF THE SHARES HAVE BEEN DONE IN IMPUGNED F .Y. I.E. F.Y. 2004-05. OUR ATTENTION HAS ALSO BEEN DRAWN ON THE COPIES OF SHARES CERTIFICATES OF FAST TRACK ENTERTA INMENT LTD. DULY TRANSFERRED IN THE NAME OF THE ASSESSEE. FURTH ER, OUR ATTENTION WAS DRAWN ON THE COPIES OF TRANSFER LETTE R ISSUED BY THIS COMPANY NAMELY FAST TRACK ENTERTAINMENT LTD. O UR ATTENTION WAS ALSO DRAWN UPON THE CONTRACT NOTES IS SUED AT THE TIME OF PURCHASES OF SALES AND SHARES. IT WAS V EHEMENTLY ARGUED THAT THE PURCHASES OF IMPUGNED SHARES WERE D ONE IN THE EARLIER YEARS, AND THE SAME WAS REFLECTED IN TH E BALANCE SHEET FILED ALONG WITH RETURN OF INCOME FILED BY TH E ASSESSEE AND SAME HAS BEEN ACCEPTED BY THE REVENUE. IT HAS B EEN FURTHER ARGUED THAT ENTIRE SALES CONSIDERATION OF T HESE SHARE HAS BEEN RECEIVED BY WAY OF CHEQUES AND THIS FACT C AN BE VERY WELL VERIFIED THROUGH RESPECTIVE BANKS, EVEN AS ON DATE. THE LD. COUNSEL APPEARING ON BEHALF OF THE ASSESSEE SUB MITTED THAT THE AO HAS DISREGARDED ALL THE DOCUMENTARY EVI DENCES, RELYING UPON ORAL STATEMENTS OF THE TWO PERSONS. IT HAS BEEN CONTENDED BY THE LD. COUNSEL THAT THE MR. NARENDRA SHAH WAS VINOD J. SHARMA 8 NOT AUTHORIZED FOR MAKING STATEMENTS ON BEHALF OF M /S. T.H. VAKIL SHARES & SECURITIES PVT. LTD. AND THEREFORE, HIS STATEMENT COULD NOT BE TAKEN INTO CONSIDERATION. TH E AO SHOULD BE DIRECTED TO VERIFY THE FACTS WITH DULY AU THORIZED PERSON OF M/S. T.H. VAKIL SHARES & SECURITIES PVT. LTD. SIMILARLY, WITH REGARD TO THE STATEMENT OF OTHER PE RSON NAMELY MR. VISHAL SHAH, IT HAS BEEN CONTENDED BY THE LD. C OUNSEL THAT STATEMENT OF MR. VISHAL SHAH IS VAGUE AND SELF - CONTRADICTORY AND CANNOT BE RELIED UPON. ON THE OTH ER HAND, LD. DR FAIRLY ACCEPTED THAT THOUGH THE ASSESSEE HAD SUBMITTED REQUISITE DOCUMENTARY EVIDENCES IN SUPPOR T OF ITS CLAIM AND AO COULD NOT BRING ON RECORD CONTRARY EVI DENCES TO CONTRADICT THE EVIDENCES FILED BY THE ASSESSEE, BUT THERE STATEMENTS OF FEW PERSONS AGAINST THE ASSESSEE. HOW EVER, WHEN BENCH PUT ACROSS FACTUAL QUERIES TO THE PARTIE S, BOTH THE PARTIES I.E., LD. COUNSEL AS WELL AS LD. DR FAIRLY AGREED THAT THERE WERE SOME GAPS AND CONTRADICTIONS. IT HAS BEE N STATED BY THE AO IN THE ASSESSMENT ORDER, THAT THERE IS NO DEMAT ACCOUNT. ON THE OTHER HAND, LD COUNSEL HAS CONTENDE D THAT SHARES WERE CONVERTED IN THE DEMAT ACCOUNT ON THE S ALE OF SHARES. LD. AO HAS FIELD TO VERIFY THE DEMAT ACCOUN T. FURTHER THE COMPANY NAMELY FAST TRACK ENTERTAINMENT LTD., I S EXISTING ON THE RECORDS OF ROC AS WELL AS ON THE RE CORDS OF INCOME TAX DEPARTMENT. THE AO FAILED TO MAKE INQUIR IES OF THE SAID COMPANY WITH THESE AGENCIES, AND FURTHER, AO S HOULD MAKE INQUIRIES WITH THE AUTHORIZED PERSONS OF THE B ROKERS ONLY. THEREFORE, ON THE BASIS OF REQUEST MADE FROM BOTH THE SIDES, AND IN VIEW OF FACTS AND CIRCUMSTANCES OF TH IS CASE, WE VINOD J. SHARMA 9 FIND IT APPROPRIATE TO SEND THIS MATTER BACK TO THE FILE OF THE AO WITH THE DIRECTION TO MAKE PROPER INQUIRIES AND TO EXAMINE ALL THE DOCUMENTARY EVIDENCES AS HAVE BEEN SUBMITTE D BY THE ASSESSEE IN SUPPORT OF ITS CLAIM AND FOR THIS PURPO SE THE AO SHALL AFFORD OPPORTUNITY OF HEARING TO THE ASSESSEE . THE AO SHALL EXERCISE ITS POWERS, AS HAS BEEN CONFERRED UP ON HIM UNDER THE LAW, TO MAKE INQUIRIES FROM THE PERSONS/A GENCIES CONCERNED. THE ASSESSEE SHALL EXTEND ALL REQUISITE COOPERATION AS MAY BE DIRECTED BY THE AO BY FILING COMPLETE ADD RESS AND ANY PARTICULARS OF THE PERSONS CONCERNED. THE AO SH ALL GRANT OPPORTUNITY OF CROSS EXAMINATION TO THE ASSESSEE, I N CASE HE WOULD BE RELYING UPON STATEMENT OF ANY OF THE PERSO NS AGAINST THE ASSESSEE. WE, THEREFORE, SEND THIS MATTER BACK TO THE FILE OF THE AO WITH OUR DIRECTIONS AS STATED ABOVE. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH OCTOBER 2015. SD/- (SANJAY GARG ) SD/- (ASHWANI TANEJA) '# / JUDICIAL MEMBER $# / ACCOUNTANT MEMBER ! ' MUMBAI; & DATED : 28/10/2015 CTX? P.S/. .. VINOD J. SHARMA 10 %'&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. ()* / THE APPELLANT 2. +,)* / THE RESPONDENT. 3. - - ! . ( ( ) / THE CIT, MUMBAI. 4. - - ! . / CIT(A)- , MUMBAI 5. 12 +3 , - ($ 3 4 , ! ' / DR, ITAT, MUMBAI 6. 5 ' / GUARD FILE. / BY ORDER, ,1( + //TRUE COPY// / (DY./ASSTT. REGISTRAR) , ! ' / ITAT, MUMBAI