S. RAMASWAMY, MUMBAI V. DCIT (OSD-II) RG 7,

ITA 3378/MUM/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9381 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2004-2005
• Appeal Filed On: 09-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Keywords: Cost of acquisition
• Section: 143(3); 234B; 10; 2; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E , MUMBAI BEFORE S HRI G.S. PANNU (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 3378 /MUM/20 1 4 ASSESSMENT YEAR: 2004 - 05 SHRI S. RAMASWAMY, ROOM NO. 35 - A, READYMONEY MANSION, 43, VEER NARIMAN ROAD, MUMBAI - 4 00093 PAN: ACYPS8259D VS. THE DCIT (OSD - II), CENTRAL RANGE - 7, MUMBAI (APPELLANT) (RESPONDENT) & ITA NO. 3380 /MUM/201 4 ASSESSMENT YEAR: 2009 - 10 SHRI S. RAMASWAMY, ROOM NO. 35 - A, READYMONEY MANSION, 43, VEER NARIMAN ROAD, MUMBAI - 400093 PAN: AC YPS8259D VS. THE DCIT (OSD - II), CENTRAL RANGE - 7, MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VIMAL PUNAMIYA (A R) REVENUE BY : SHRI V. JUSTIN (D R) DATE OF HEARING: 21 /09 /201 7 DATE OF PRO NOUNCEMENT: 27 / 0 9 /201 7 O R D E R PER RAM LAL NEGI, JM THESE APPEAL S HAVE BEE N PREFERRED BY THE ASSESSEE AGAINST THE TWO ORDER S DATED 27/02/2014 PASSED BY THE LD. C OMMISSIONER OF INCOME TAX (APPEALS) - 40 , MUMBAI , FOR THE ASSESSMENT YEAR S 2004 - 2005 AND 2009 - 2010 RESPECTIVELY , WHEREIN THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL FILED BY THE 2 ITA NO S . 3378 & 3380/MUM/2014 ASSESSMENT YEAR S : 2004 - 05 & 2009 - 10 ASSESSEE AGAINST ASSESSMENT ORDERS PASSED THE AO UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). SINCE, BOTH THE APPEALS PERTAIN TO THE APPELLANT FOR TWO ASSESSMENT YEARS AND THE ISSUES RAISED IN BOTH THE APPEALS ARE IDENTICAL, THE SAME WERE CLUBBED AND HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 3378/MUM/2014 (ASSESSMENT Y EAR: 2004 - 2005 ) 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A SHARE BROKER OF THE CHENNAI STOCK EXCHANGE AND PROPRIETOR OF M/S EXCEL & CO . IN THE YEAR 1997 , THE ASSESSEE WAS NOTIFIED UNDER THE SPECIAL COURT ( TRIAL OF OFFENCES RELATING TO TRANSACT ION IN SECURITIES) ACT, 1992 AND ALL THE ASSETS WERE ATTACHED UNDER THE SAID ACT AND THE CUSTODIAN WAS APPOINTED. SINCE, T HE ASSESSEE HAD NOT FILE D RETURN OF INCOME U/S 139 OF THE ACT FOR THE YEAR UNDER CONSIDERATION , AO ISSUED NOTICE U/S 142 (1) OF THE AC T. IN RESPONSE THEREOF, T HE ASSESSEE FILED THE RETURN DECLARING THE TOTAL INCOME OF RS. 3,32,874/ - . THE CASE WAS SELECTED FOR SCRUTINY. DURING THE ASSESSMENT PROCEEDINGS IT WAS NOTICED THAT AN AMOUNT OF RS. 7,12,679/ - HAD BEEN CREDITED TO THE BANK ACCOUNT OF THE ASSESSEE AS CONSIDERATION FOR SALE OF SHARES. IN THE ABSENCE OF ANY DETAILS THEREOF FILED BY THE ASSESSEE OR THE CUSTODIAN, THE AO ESTIMATED THE CAPITAL GAIN AT RS. 5.00.000/ - AND ADDED THE SAID AMOUNT TO THE INCOME OF THE ASSESSEE AS LONG TERM CAPI TAL GAIN AND AFTER MAKING OTHER ADDITIONS, WHICH ARE NOT THE SUBJECT MATTER OF THIS APPEAL, DETERMINED THE TO T AL INCOME OF THE ASSESSEE AT RS. 3,23,20,880/ - . 3. THE ASSESSEE CHALLENGED THE ASSESSMENT O R DER BEFORE THE LD. CIT (A). THE LD. CIT (A) AF T ER HEA RING THE ASSESSEE PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. HOWEVER, SUSTAINED THE ADDITION OF RS. 5,00,000/ - MADE BY THE AO AS LONG TERM CAPITAL GAIN, HOLDING THAT THE ASSESSEE HAS FAILED TO FURNISH ANY DETAIL IN 3 ITA NO S . 3378 & 3380/MUM/2014 ASSESSMENT YEAR S : 2004 - 05 & 2009 - 10 TO DETERMINE THE COST OF ACQUISITION OF T HE SHARES IN QUESTION . STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. 4. THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL AGAINST THE IMPUGNED ORDER PASSED BY THE LD. CIT (A): - GROUND NO.: 1 THE LD. CIT (A) ERRED IN M AKING ADDITION OF RS. 5,00,000/ - AS LONG TERM CAPITAL GAIN FROM THE SALE OF SHARES ON ESTIMATION BASIS. GROUND NO. 2 THE LD. CIT (A) ERRED IN CHARGING INTEREST U/S 234B AND 234C OF THE IT ACT. GROUND NO. 3 THE LD. CIT (A) ERRED IN CHARGING INTEREST U/S 2 71(1)(C) OF THE INCOME TAX ACT. 5 . BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ADDITION IS NOT SUSTAINABLE AS THE BANK ACCOUNT OF THE ASSESSEE HAD BEEN ATTACHED BY THE CUSTODIAN SINCE LONG. THE CUSTODIAN SOLD SOME SEIZED SHARES AND CRE DITED THE SALE PROCEEDS IN THE ATTACHED BANK ACCOUNT OF THE ASSESSEE. SINCE, THE BANK ACCOUNT IS ATTACHED THE ASSESSEE DID NOT RECEIVE ANY MONEY TILL DATE . RELYING ON THE JUDGMENT OF HONBLE SUPREME COURT PASSED IN HARSHAD SHANTILAL MEHTA VS. CUSTODIAN (19 98) 99 TAXMAN 216 (SC) AND DECISION S OF THE MUMBAI BENCH OF THE ITAT RENDERED IN DCIT VS. PALLAVI HOLDI NGS PVT. LTD. (2006) 5 SOT 190 (MUM) AND THE DECISION OF ITAT BENCH, DELHI RENDERED IN ACIT VS. GLAD INVESTMENTS PVT. LTD. (2006) 8 SOT 612 , SUBMITTED TH AT THE LD. CIT (A) HAS WRONGLY AFFIRMED THE ACTION OF THE AO. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE MUM B AI BENCH OF THE TRIBUNAL HAS SET ASIDE THE ORDER OF THE LD. CIT (A) PERTAINING TO THE ASSESSMENT YEAR 1995 - 96, 1996 - 97, 1997 - 98, 1 998 - 99, 2000 - 01 AND 2003 - 04 AND RESTORED ALL GROUNDS OF APPEAL RAISED BEFORE THE TRIBUNAL 4 ITA NO S . 3378 & 3380/MUM/2014 ASSESSMENT YEAR S : 2004 - 05 & 2009 - 10 TO THE FILE OF AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH THE LAW KEEPING IN VIEW THE FACTS THAT THE BEING NOTIFIED PERSON UNDER THE SPECIAL COURT (TRIAL OF OFFENCE S RELATING TO TRANSACTION IN SECURITIES) ACT, 1992, WAS NOT A POSITION TO PRESENT THE CASE AND ADDUCE EVIDENCE IN SUPPORT OF ITS CONTENTIONS . 6 . ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) RELYING ON THE FINDINGS OF LD. CIT (A) SUBMITTED TH AT SINCE THE SHARES WERE SOLD BY THE CUSTODIAN FOR RS. 7,12,679/ - AND THE ASSESSEE HAS FAILED TO FURNISH ANY DETAIL TO ENABLE THE AO TO DETERMINE THE COST OF ACQUISITION OF THE SHARES IN QUESTION, T HE AO HAS RIGHTLY ESTIMATED THE CAPITAL GAIN AT RS. 5,00,0 00/ - , WHICH COMES TO APPROXIMATELY 70% OF THE CONSIDERATION. HENCE, THE IMPUGNED ORDER DOES NOT SUFFER FROM ANY INFIRMITY. 7 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO GONE THROUGH THE MATERIAL ON RECORD INCLUDING THE CASE S RELIED UPON BY THE LD. COUNS EL FOR THE ASSESSEE. WE NOTICE THAT T HE LD. CIT (A) HAS SUSTAINED THE ADDITION OF RS. 5,00,000/ - HOLDING THAT ESTIMATION OF CAPITAL GAIN OF RS. 5,00,000/ - IS NEITHER UNREASONABLE NOR EXCESSIVE. AS HAS BEEN POINTED OUT BY THE LD. CIT (A), THE ASSESSEE FAILE D TO PROVIDE COST OF ACQUISITION OF THE SHARES IN QUESTION DURING THE ASSESSMENT PROCEEDINGS. 8 . ADMITTEDLY, THE ASSESSEE WAS ARRESTED IN CONNECTION WITH HIS ALLEGED INVOLVEMENT IN MULTI - CRORE SECURITIES SCAM AND REMAINED IN JAIL FOR A LONG TIME . DURING THE SEARCH OPERATION, THE RELATED DOCUMENTS WERE SEIZED EITHER BY THE CBI OR BY THE INCOME TAX DEPARTMENT. THE CUSTODIAN APPOINTED UNDER THE SPECIAL COURT TRIAL OF OFFENCES RELATING TO TRANSACTION IN SECURITIES, TOOK POSSESSION OF THE RECORDS INCLUDING THE ACCOUNTS OF THE ASSESSEE MAINTAINED IN THE BANK S . AS ALLEGED BY THE ASSESSEE SOME OF THE DOCUMENTS WERE DESTROYED IN FIRE IN JANUARY 2010 . DUE TO THE SAID 5 ITA NO S . 3378 & 3380/MUM/2014 ASSESSMENT YEAR S : 2004 - 05 & 2009 - 10 REASONS, THE ASSESSEE COULD NOT PROPERLY PRESENT HIS CASE BEFORE THE AUTHORITIES BELOW. IN THESE CIR CUMSTANCES, IT CAN SAFELY BE CONCLUDED THAT THE ESTIMATED CAPITAL GAIN OF RS. 5,00,000/ - DETERMINED BY THE AO IS NOT BASED ON THE EVIDENCE ON RECORD. SINCE, THE AO COULD NOT ASCERTAIN THE COST OF ACQUISITION OF THE SHARES IN QUESTION , ADDITION OF 70% OF TH E TOTAL SALE CONSIDERATION , IS NOT JUSTIFIABLE . THE COORDINATE BENCH OF THE TRIBUNAL HAS SET ASIDE THE ORDER S OF THE LD. CIT (A) PASSED IN ASSESSEES OWN CASE PERTAINING TO THE ASSESSMENT YEAR 1995 - 96, 1996 - 97, 1997 - 98, 1998 - 99, 2000 - 01 AND 2003 - 04 AND RES TORED ALL GROUNDS OF APPEAL RAISED BEFORE THE TRIBUNAL TO THE FILE OF AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH THE LAW KEEPING IN VIEW THE FACTS THAT THE BEING NOTIFIED PERSON UNDER THE SPECIAL COURT (TRIAL OF OFFENCES RELATING TO TRANSACTION IN SECURI TIES) ACT, 1992, THE ASSESSEE WAS NOT A POSITION TO PRESENT THE CASE AND ADDUCE EVIDENCE IN SUPPORT OF ITS CONTENTIONS . 9 . WE ARE THEREFORE OF THE CONSIDERED VIEW THAT THE ASSESSEE SHOULD GET AN OPPORTUNITY TO PRESENT HIS CASE AFRESH AFTER MAKING AVAILAB LE ALL THE RELATED DOCUMENTS. WE, THEREFORE, RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE COORDINATE BENCH SET ASIDE THE ORDER OF THE LD. CIT (A) AND RESTORED THE ISSUE TO THE FILE OF AO TO DECIDE THE ISSUE AFRESH AFTER AFFORDING A REASONABLE OPPORTUNITY O F THE ASSESSEE AND MAKING AVAILABLE ALL THE RELATED DOCUMENTS PERTAINING TO THE CLAIM OF THE ASSESSEE. HENCE, THIS GROUND OF THE APPEAL IS PARTLY ALLOWED. 10. GROUND NO 2 AND 3 PERTAIN TO CHARGING INTEREST UNDER SECTION 234B AND 234C AND PENALTY U/S 271(1 )(C) OF THE ACT (WRONGLY MENTIONED INTEREST) . SINCE GROUND NO 2 IS CONSEQUENTIAL AND GROUND NO 3 IS PREMATURE, THESE GROUNDS CANNOT BE DECIDED AT THIS STAGE HENCE NOT ADJUDICATED. 6 ITA NO S . 3378 & 3380/MUM/2014 ASSESSMENT YEAR S : 2004 - 05 & 2009 - 10 ITA NO. 3380/MUM/2014 (ASSE SSMENT Y EAR: 2009 - 2010 ) THE FACTS OF THIS CASE AND THE ISSUE INVOLVED ARE IDENTICAL TO THE FACTS AND ISSUE INVOLVED IN THE ASSESSEE S OWN CASE PERTAINING TO THE ASSESSMENT YEAR 2004 - 05 DISCUSSED ABOVE EXCEPT THE AMOUNT OF ADDITION MADE BY THE AO. IN THIS CASE IT WAS NOTICED THAT THE ASSESSEE HAD RECE IVED AN AMOUNT OF RS. 1,04,00,000/ - AS A SALE CONSIDERATION FOR APPELLANTS FLAT SOLD BY THE CUSTODIAN DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. AO AFTER DEDUCTING THE COST OF ACQUISITION DETERMINED THE CAPITAL GAIN AT RS. 89,76, 859/ - AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. THE LD. CIT(A) CONFIRMED THE ADDITION MADE BY THE AO IN THE FIRST APPEAL. THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST THE SAID ORDER. 2. THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GRO UNDS OF APPEAL AGAINST THE IMPUGNED ORDER PASSED BY THE LD. CIT (A): - GROUND NO.: 1 THE LD. CIT (A) ERRED IN MAKING ADDITION OF RS. 89,76,859/ - AS LONG TERM CAPITAL GAIN ON THE SALE OF FLAT AT ANDHERI (W). GROUND NO. 2 THE LD. CIT (A) ERRED IN CHARGING INTEREST U/S 234B AND 234C OF THE IT ACT. GROUND NO. 3 THE LD. CIT (A) ERRED IN CHARGING INTEREST U/S 271(1)(C) OF THE INCOME TAX ACT. 3. SINCE WE HAVE SET ASIDE THE IMPUGNED ORDER AND RESTORED ALL THE ISSUES TO THE FILE OF AO FOR FRESH ADJUDICATION IN VIEW OF THE PECULIAR FACTS OF THE CASE AND TAKING INTO CONSIDERATION THE VIEW TAKEN BY THE COORDINATE BENCH OF THE 7 ITA NO S . 3378 & 3380/MUM/2014 ASSESSMENT YEAR S : 2004 - 05 & 2009 - 10 TRIBUNAL IN ASSESSEES OWN CASES FOR THE ASSESSMENT YEAR 1995 - 96, 1996 - 97, 1997 - 98, 1998 - 99, 2000 - 01 AND 2003 - 04, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) IN THIS CASE AND RESTORE ALL THE ISSUES TO THE FILE OF THE AO FOR FRESH ADJUDICATION FOR THE SAME REASONS. WE ACCORDINGLY DIRECT AO TO DECIDE THE ISSUES INVOLVED IN THIS CASE IN TERMS OF ORDER PASSED IN ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2004 - 05. IN THE RESULT, APPEALS FILED BY THE ASSESSEE FOR ASSESSMENT YEAR S 2004 - 2005 AND 2009 - 2010 ARE TREATED AS PARTLY ALLOWED FOR THE STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH . SEPTEMBER , 2017 . SD/ - SD/ - ( G.S. PANNU ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 27 / 0 9 / 2017 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMB A I