Shri Rajesh Panalal Parikh, Baroda V. The Income tax Officer, Ward-5(3), Baroda

ITA 3440/AHD/2007

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0362 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-10-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 08-08-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH
• Keywords: Set aside; Capital Gains

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HONBLE SH RI N.S. SAINI, A.M.) I.T.A. NO. 3440/AHD./2007 ASSESSMENT YEAR : 2004-2005 RAJESH PANALAL PARIKH, BARODA -VS.- INCOME T AX OFFICER, WARD-5(3), BARODA (P.A. NO. ADHPP 6024 F) (APPELLANT) (R ESPONDENT) APPELLANT BY : SHRI MANISH J. SHAH RESPONDENT BY : SMT. NEETA SHAH O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER :- THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) -V, BORADA DATED 23-05-2007 FOR THE ASSESSMENT YEAR 2004-2005 ON THE FOLLOWING GROUND : - THE LEARNED I.T.O. ERRED AT LAW AND CONSIDERING TH E FACTS OF THE CASE IN MAKING ADDITION OF RS.1,15,350/- UNDER THE HEAD SHORT TER M CAPITAL GAINS AND LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN CONFIR MING THE SAME. 2. 2. BRIEF FACTS RELATING TO CONTROVERSY INVOLVED IN THIS APPEAL ARE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF MANUFACTURE A ND SELLING OF CEMENT ARTICLES. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE F ILED THE RETURN OF INCOME DECLARING TOTAL INCOME AT RS.2,76,637/-. DURING THE COURSE OF ASSES SMENT PROCEEDINGS, THE A.O. GATHERED THAT THE ASSESSEE HAD SOLD CERTAIN SHARES, BUT NO CAPITAL GA IN/LOSS RELEVANT TO SALE OF THESE SHARES WAS OFFERED BY THE ASSESSEE FOR TAXATION. IT WAS ALSO N OTICED THAT THE SHARES WERE ORIGINALLY IN THE NAME OF DIFFERENT PERSONS. THE SAME WERE GOT TRANSF ERRED IN THE NAME OF ASSESSEE IN THE YEAR UNDER CONSIDERATION AND LATER ON SOLD DURING THE YE AR. NO CONSIDERATION WAS PAID, ACCORDING TO A.O., BEFORE GETTING THESE SHARES BY THE ASSESSEE I N HIS NAME. IN ORDER TO VERIFY THE GENUINENESS OF THESE TRANSACTION, THE A.O. ASKED THE ASSESSEE T O EXPLAIN THE REASONS FOR NOT SHOWING THE 2 CAPITAL GAIN. BEFORE THE A.O., IT WAS EXPLAINED THA T THESE SHARES WERE ORIGINALLY IN THE NAME OF DIFFERENT PERSONS, WHO ARE HIS RELATIVES, FRIENDS A ND NEIGHBORS. THE ASSESSEE SUBMITTED THAT SINCE THESE PERSONS DO NOT HAVE ANY DEMAT ACCOUNT, THEREF ORE, IN ORDER TO HELP THEM THESE SHARES WERE FIRST TRANSFERRED IN HIS NAME, DEMATED AND LATER ON AS PER INSTRUCTIONS OF THE SO-CALLED OWNERS SOLD THE SAME. THE COMPLETE LIST OF SHARES, ALONGWITH NA MES AND ADDRESS OF THE PERSONS TO WHOM THE SHARES BELONGED AND SALE CONSIDERATION WERE FURNISHED. IT WAS ALSO SUBMITTED THAT SALE CONSIDERATIONS AFTER DEDUCTING THE EXPENSES INCURRE D WERE GIVEN TO THE RELATIVES, FRIENDS AND NEIGHBORS, WHO HAD GIVEN THE SHARES TO THE ASSESSEE FOR THE PURPOSE OF SALES. 3. THE A.O. FOUND THE AFORESAID EXPLANATION OF THE ASSESSEE UNSATISFACTORY. ACCORDING TO A.O, NO PROOF REGARDING INVESTMENT MADE BY SO-CALLE D SHAREHOLDERS HAS BEEN FURNISHED. APART FROM THIS, THE A.O. REJECTED THE EXPLANATION OF THE ASSESSEE. THESE SHARES WERE GIVEN BY THE ORIGINAL SHAREHOLDERS TO THE ASSESSEE WITHOUT SALE CONSIDERATION. ACCORDING TO A.O. FROM FACTS ON RECORD AND DISCUSSION, THE FOLLOWING FACTS EMERGE : _ (A) THE INVESTMENT IN THE SHARES IN QUESTION MAY B E UNCOUNTED INVESTMENT OF THE ASSESSEE. AS THE SO-CALLED SHAREHOLDERS ARE DIF FERENT PERSONS AND BELONGING TO DIFFERENT SECTORS OF THE SOCIETY. THER EFORE, ASSESSEES CLAIM DOES NOT APPEAR TO BE GENUINE. (B) LATER ON THE SAID SHARES WERE GOT TRANSFERRED I N THE NAME OF THE ASSESSEE WITHOUT GIVING ANY SALE CONSIDERATION FOR PURCHASE OF THE SAME. (C) THE ASSESSEE SOLD THE SAID SHARES AND SALE CONS IDERATION HAS ALSO BEEN DEPOSITED IN THE SB ACCOUNT OF THE ASSESSEE, WHICH CLEARLY SHOWS THAT THE SHARES ACTUALLY BELONG TO THE ASSESSEE HIMSELF. (D) NO DETAILS OR ANY DOCUMENTARY PROOF ABOUT HOLDI NG OF THESE SHARES BY THE OTHER PERSONS HAS BEEN FURNISHED. THE ASSESSEE SIMP LY FILED NAME AND ADDRESS OF CERTAIN PERSONS WITHOUT IDENTIFICATION. THEREFORE, CROSS VERIFICATION/ ENQUIRY COULD NOT BE MADE. (E) THE SO-CALLED SHAREHOLDERS HAD NOT BEEN FILED A NY RETURN OF INCOME AND OFFERED THE CAPITAL GAIN IN THEIR RESPECTIVE RETURN S, THEREFORE, ASSESSEES CLAIM IS NOT VERIFIABLE WITH INDEPENDENT DOCUMENTAR Y EVIDENCES, HENCE, REJECTED. 4. ON THE BASIS OF AFORESAID FACTS, THE A.O. TOOK T HE VIEW THAT THESE SHARES ACTUALLY BELONGED TO THE ASSESSEE. SINCE THE ASSESSEE HAS NOT FURNISH ED PROOF REGARDING SOURCE OF INVESTMENT IN THESE SHARES, THE A.O. BROUGHT TO TAX ENTIRE SALE C ONSIDERATION OF THE SHARES AMOUNTING TO 3 RS.1,15,350/- AS INCOME OF THE ASSESSEE HOLDING SHO RT-TERM CAPITAL GAIN ON THE SALE OF BENAMI SHARES. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), THE ASSESSEE REITERATED THE SUBMISSIONS BEFORE THE A.O. IT WAS C LAIMED THAT SALE CONSIDERATION AFTER DEDUCTING THE EXPENSES WERE HANDED OVER TO THE ORIGINAL OWNER S OF THE SHARES. THE DETAILS OF BANK ACCOUNT FROM WHICH PAYMENTS WERE MADE TO THE ORIGINAL SHARE HOLDERS WERE ALSO FURNISHED. APART FROM THIS, BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THE ASSESSEE HAS FURNISHED AFFIDAVIT FROM THE ORIGINAL OWNER OF SHARES CONFIRM ING THE SALE CONSIDERATION WAS RECEIVED BY THEM AFTER THE SHARES WERE SOLD BY THE ASSESSEE. TH E LEARNED COMMISSIONER OF INCOME TAX(APPEALS) REJECTED THE EXPLANATION OF THE ASSESS EE AND UPHELD THE ACTION OF A.O. AGGRIEVED BY THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX( APPEALS), THE ASSESSEE IS IN APPEAL BEFORE US. 5. AT THE TIME OF HEARING, ON BEHALF OF THE ASSESSE E SHRI MANISH J.SHAH APPEARED AND CONTENDED THAT BOTH THE DEPARTMENTAL AUTHORITIES BE LOW REJECTED THE EXPLANATION OF THE ASSESSEE ON DOUBT AND SUSPICION. THE LD. COUNSEL OF THE ASS ESSEE SUBMITTED THAT COMPLETE DETAILS OF SHARES OF VARIOUS PERSONS ALONGWITH THEIR ADDRESSES WERE F URNISHED BEFORE THE A.O. THE LD. COUNSEL OF THE ASSESSEE FURTHER EXPLAINED THAT HIS FRIENDS, RE LATIVES AND NEIGHBORS WERE SMALL INVESTORS, WHO WERE NOT HAVING DEMAT ACCOUNT. THE ASSESSEE WAS HAV ING A DEMAT ACCOUNT AND IN ORDER TO HELP THEM THE ASSESSEE TRANSFERRED THE SHARES IN HIS NA ME, SOLD THE SAME AFTER DEMATED AND PAID SALE CONSIDERATION TO THE ACTUAL OWNERS AFTER DEDUCTING THE EXPENSES. THE LD. COUNSEL OF THE ASSESSEE FURTHER EXPLAINED THAT OPENING OF DEMAT ACCOUNT FOR SMALL INVESTORS, WHO WERE HOLDING SHARES IN SMALL QUANTITY, IS COSTLY AFFAIR. ONCE DEMAT ACCOUN T IS OPEN, ONE HAS TO PAY ANNUAL CHARGES WHETHER THE TRANSACTION IS DONE OR NOT. BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), THE ASSESSEE HAS FURNISHED AFFIDAVIT. IN THESE CIRCUMSTANCES, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OUGHT TO HAVE C ALLED THE REMAND REPORT FROM THE A.O. TO RE-ADJUDICATE THE ADDITION IN ACCORDANCE WITH LAW. 6. ON THE OTHER HAND, SMT. NEETA SHAH, LD. DEPARTME NTAL REPRESENTATIVE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. SHE POINTED OUT THAT O NUS WAS ON THE ASSESSEE. THE ASSESSEE WAS REQUIRED TO FURNISH THE NECESSARY EVIDENCE REGARDIN G CAPITAL GAIN PAID BY THE ORIGINAL OWNERS. NO SUCH EVIDENCE WAS FURNISHED. IT APPEARS THAT NEITHE R ORIGINAL OWNER NOR THE ASSESSEE WAS PAYING 4 THE CAPITAL GAIN ON THESE SHARES. THEREFORE, THE AD DITION WAS RIGHTLY MADE AND SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN THE IMPUGNED ORDER. 7. WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE R IVAL SUBMISSIONS MADE BEFORE US AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. BEFOR E BOTH THE AUTHORITIES BELOW, THE ASSESSEE HAS SUBMITTED THAT NO SALE CONSIDERATION WAS PAID IN RE SPECT OF THESE SHARES BEFORE THE SALE CONSIDERATION IS RECEIVED BY THE ASSESSEE. THE ENTI RE SALE CONSIDERATION AFTER DEDUCTING THE EXPENSES WAS PAID TO THE RESPECTIVE OWNERS OF THE S HARES THROUGH ACCOUNT PAYEE CHEQUES. THIS FACT IS VERIFIABLE FROM THE BANK STATEMENT OF THE A SSESSEE WITH ICICI BANK SUBMITTED BEFORE THE A.O. THE COMPLETE ADDRESSES OF ORIGINAL SHAREHOLDER S WERE ALSO FURNISHED. THE A.O. COULD HAVE EASILY MADE VERIFICATION FROM THE CONCERNED ORIGINA L SHAREHOLDERS. ADMITTEDLY, THIS WAS NOT DONE. WHEN THE ADDITION WAS MADE, THE ASSESSEE HAS FURNISHED FURTHER EVIDENCE IN THE FORM OF AFFIDAVIT FROM THE ORIGINAL SHAREHOLDERS BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). LOOKING TO THESE FACTS, IN OUR OPINIO N, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OUGHT TO HAVE CALLED A REMAND REPORT. SINCE THIS WAS NOT DONE, WE SET ASIDE THE IMPUGNED ORDER OF LEARNED COMMISSIONER OF INCOME TA X(APPEALS) AND RESTORE THE MATTER TO A.O. WITH THE DIRECTION THAT THE ASSESSEE SHOULD FU RNISH THE AFFIDAVIT OF THE ORIGINAL SHAREHOLDERS BEFORE THE A.O. THE A.O., IF REQUIRES MAY CALL THE ORIGINAL SHAREHOLDERS FOR EXAMINATION. HE IS ALSO AT LIBERTY TO EXAMINE WHETHER THE ORIGINAL SHA REHOLDERS HAD PAID THE CAPITAL GAIN ON THOSE SHARES. IN CASE, THE ASSESSEE HAS PAID ENTIRE SALE CONSIDERATION AFTER SELLING THE SHARES, IN OUR OPINION, NO ADDITION IS CALLED FOR. THE A.O. IS ACC ORDINGLY DIRECTED TO RE-ADJUDICATE THIS ADDITION AFRESH IN ACCORDANCE WITH LAW AFTER PROVIDING ADEQU ATE OPPORTUNITY OF HEARING TO THE ASSESSEE CARRYING OUT FURTHER INVESTIGATION AS INDICATED ABO VE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE COURT ON 09.10.2 009 SD/- SD/- (N.S. SAINI) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 09 / 10 / 2009 5 COPY OF THE ORDER IS FORWARDED TO : 1) SHRI RAJESH PANALAL PARIKH, SULTANPURA, LALBHAIS L ANE, NEAR MAHADEV TEMPLE, BARODA-390001, (2) ITO, WARD-5(3), BORADA 3) CIT(A)- ,BORADA (4) CIT- ,BORADA.(5 ) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD LAHA/SR.P.S.