DEEPALI BHALLA NAYAR, MUMBAI V. ACIT 29(1) (ERSTWHILE ITO 20(2)(1), MUMBAI

ITA 3530/MUM/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2664 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 09-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K MOHANDA S
• Keywords: Unexplained cash credit; Gift; Cost of acquisition
• Section: 143(3); 133(6); 147; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SM C BENCH , MUMBAI BEFORE SRI MAHAVIR SINGH, J UDICIAL MEMBER ITA NO .3 5 30 /MUM/2015 (A.Y.:2005 - 06 ) MRS. DEEPALI BHALLA NAYAR, F.181/182, TOWER - 3, GODREJ GARDEN ENCLAVE, OPP. GODREJ MEMORIAL HOSPITAL, VIKHROLI EAST, M UMBAI 400 079 VS. THE ASST. COMMISSIONER OF INCOME TAX - 29(1) [ERSTWHILE ITO 10(2)], MUMBAI ADIPN 2606E APPELLANT .. RESPONDENT APPELLANT BY .. SHRI NIRAJ SETH, AR RESPONDENT BY .. SHRI K. MOHANDAS, DR DATE OF HEARING .. 25 - 07 - 2016 DATE OF PRONOU NCEMENT .. 25 - 07 - 2016 O R D E R PER MAHAVIR SINGH , JM : THIS APPEAL BY THE ASSESSEE IS ARISING OU T OF THE ORDER OF THE CIT (A) - 36, MUMBAI PASSED IN APPEA L NO. CIT (A) - 31 / IT - 329 / ITO - 20(2) (1)/ 1 1 - 12 DATED 06 - 0 2 - 2015 . ASSESSMENT WAS FRAMED BY THE IT O , WARD - 20 ( 2 )( 1 ) , MUMBAI FOR ASSESSMENT YEAR 20 05 - 06 VIDE HIS ORDER DATED 29 - 11 - 2011 PASSED U/S 143(3) READ WITH SECTION 147 OF THE OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT). 2. THE ONLY ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF THE CIT (A) CONFIRMING THE ACTION OF THE AO IN MAKING ADDITION OF SALE PROCE E DS OF SHARES, CLAIMED BY THE ASSESSEE AS LONG TERM CAPITAL GAIN, AS INCOME FROM OTHER SOURCES AS UNEXPLAINED CASH CREDIT AMOUNTING TO RS .22,08,802/ - AND CONSEQUENTIALLY DISALLOWANCE OF COMMISSION AMOUNTING TO RS.3,250/ - . 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE HAS PURCHASED 12,500 SHARES OF TALENT INFO WAYS PVT. LTD. ON 02 - 05 - 2003 FROM MAHASAGAR SECURITIES PVT. LTD. THE COST OF ACQUISITION WAS RS.45,104/ - INCLUDING SERVICE TAX AND STT. THE PAYMENT OF THE ABOVE RS.45,104/ - WAS MADE BY THE ASSESSEES HUSBAND MR. VINAY NAYAR AND THE CONSIDERATION ITA NO. 3530 /MUM/20 1 5 2 WAS NOT ROUTED THROUGH ASSESSEES BOOKS OF ACCOUNT AND ACCORDINGLY, THE A CCOUNTANT MISSED TO INCORPORATE THESE 12500 NOS. OF SHARES IN TH E SHARE HOLDING OF THE ASSESSEE. BUT, CONSEQUENTLY THE SAME WAS ENTERED IN TH E SHARE HOLDING OF THE ASSESSEES CAPITAL ACCOUNT AS GIFTED FROM HER HUSBAND. THE BALANCE 15000 NOS. OF SHARES WERE PURCHASED ON 11 - 04 - 2003 FOR A TOTAL CONSIDERATION OF RS.20,147/ - FROM GOLDSTAR FINVEST PVT. LTD. THEREBY, THE ASSESSEE HAS PURCHASED TOTAL 27,500 NOS. OF SHARES FOR A SUM OF RS.65,251/ - IN APRIL AND MAY, 2003. THE 12,500 NOS. OF SHARES PURCHASED OF MAHASAGAR SECURITIES PVT. LTD. WERE HELD BY THE ASSESSEE IN PHYSICAL FORM WHICH WERE SOLD BY THE ASSESSEE THROUGH MAHASAGAR SECURITIES PVT. LTD. AND PAYMENT WAS RECEIVED BY CHEQUE REFLECTED IN ASSESSEES HDFC BANK ACCOUNT NO.05431000011113, ANDHERI (EAST) BRANCH, MUMBAI. THE DETAILS ARE AS UNDER: DATE CHEQUE NO. AMOUNT (RS .) 01/12/2004 0323674 2,50,000/ - 02/12/2004 0104578 7,00,000/ - 07/12/2004 0957843 1,84,399/ - TOTAL 11,34,399/ - SIMILARLY, THE ASSESSEE ALSO SOLD 15000 SH ARES THROUGH MAHASAGAR SECURITI ES PVT. LTD. IN TWO LOTS O F 7000 AND 800 SHARES VIDE CONTRACT NO TE DATED 27 - 05 - 2004 AND 18 - 06 - 2004. THE SALE PROCEEDS WERE ALSO DEPOSITED BY THE ASSESSEE ON THE SAME HDFC BANK ACCOUNT AND THE DETAILS ARE AS UNDER: - DATE CHEQUE NO. AMOUNT (RS.) 01/06/2004 0179697 5,04,187/ - 24/06/2004 0179820 5,70,214/ - TOTAL 10,7 4,402/ - 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE FILED COMPLETE DETAILS IN RESPECT OF LONG TERM CAPITAL GAIN I.E. BROKERS NOTES FOR SALES AND PURCHASES, STATEMENT OF CAPITAL GAIN, DETAILS OF D E MAT ACCOUNT AND PARTIES ACCOUNTS. THE AO ISSUED NOTICE U/S 133(6) OF THE ACT TO GOLSTAR FINVEST PVT. LTD. AND BOMBAY STOCK EXCHANGE TO FIND OUT THE GENUINENESS OF PURCHASES AND SALES OF SHARES OF TALENT INFOWAYS PVT. LTD. DURING THE FINANCIAL YEAR 2004 - 05 RELEVANT TO ASSESSMENT YE AR 2005 - 06. MA HASAGAR SECURITIES PVT. ITA NO. 3530 /MUM/20 1 5 3 LTD. VIDE LETTER DATED 19 - 10 - 2011 INFORMED THE AO THAT THE BOOKS OF ACCOUNTS FOR THE RELEVANT PERIOD WAS IMPOUNDED BY THE DEPARTMENT DURING THE SEARCH AND THE SAME ARE LYING WITH DDIT, UNIT 4, MUMBAI. BOMBAY STOCK EXCHANGE INFORMED VIDE LETTER DATED 28 - 10 - 2011 THAT GOLDSTAR FINVEST PVT. LTD. IS NEITHER REGISTERED AS STOCK BROKER NOR AS SUB - BROKER AND NOR THE SHARES OF TALENT INFOWAYS PVT. LTD. WERE LISTED ON THE STOCK EXCHANGE. THE ASSESSEE REPLIED TO THE AO THAT THE BROKER, MAHASAGA R SECURITIES PVT. LTD. ISSUED CONTRACT NOTES AND IS A REGISTERED BROKER OF THE STOCK EXCHANGE AND THE TRANSACTIONS WERE MADE BY ACCOUNT PAYEE CHEQUES AND THE ASSESSEE SOLD THE SHARES AND EARNED LONG TERM CAPITAL OF RS.21,43,551/ - . ACCORDING TO THE ASSESSEE , ALL THE DETAILS WERE REFLECTED IN THE ACCOUNTS AND THE DETAILS LIKE CONTRACT NOTES, DEMAT ACCOUNT AND THE PARTIES ACCOUNTS WERE FILED DURING ASSESSMENT PROCEEDINGS . THE AO WAS NOT CONVINCED WITH THE REPLY OF THE ASSESSEE FOR THE REASON THAT THE BOMBAY S TOCK EXCHANG E DENIED GOLDSTAR FINVEST PVT. LTD. HAVING REGISTERED AS BROKER OR SUB - BROKER AND THAT THE BOOKS OF ACC OUNTS WERE NOT PRODUCED BY MAHA SA GAR SECURITIES PVT. LTD. ACCORDINGLY, THE AO TREATED THE SALE PROCEEDS AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT (A). THE CIT (A) ALSO CONFIRMED THE ACTION OF THE AO ON THE SAME REASONING. THE CIT (A) ALSO ENHANCED THE ADDITION BY THE AMOUNT OF R S.65,251/ - BEING PURCHASE PRICE OF SHARES , WHICH FALLS IN FINANCIAL YEAR 2003 - 04 RELEVANT TO ASSESSMENT YEAR 2004 - 05 I.E. IMMEDIATELY PRE VIOUS YEAR. THE CIT (A) ALSO DISALLOWED THE COMMISSION PAYMENT OF RS.3,250/ - INCURRED IN RELATION TO PURCHASE OF THE SHARES . AGGRIEVED AGAINST THE ACTION OF THE CIT (A), THE ASS ESSEE FILED SECOND APPEAL BEFORE THE TRIBUNAL. 5. I HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. I FIND FROM THE FACTS OF THE CASE T HAT THE ASSESSEE PURCHASED 12,500 NOS. OF SHARES OF TALENT INFOWAYS LTD. ON 02 - 05 - 2003 THROUGH MAHASAGAR SECURITIES PVT. LTD. AT RS.45,104/ - INCLU DING SERVICE TAX AND STT. THE AMOUNT WAS PAID BY THE ASSESSEES ITA NO. 3530 /MUM/20 1 5 4 HUSBAND AND DUE TO THIS THE A CCOUNTANT MISSED TO INCORPORATE THESE SHARES IN THE SHARE HOLDING OF T HE ASSESSEE. SUBSEQUENT LY, THE A CCOUNTANT ON REALIZING THIS FA CT, HE ENTERED THE SHAREHOLDING IN THE NAME OF THE ASSESSEE AS GIFT FROM HER HUSBAND. THE ASSESSEE HELD 12,500 NOS. OF SHARE IN PHYSICAL FORM AND SOLD THE SAME VIDE CONTRAC T NOTE DATED 29 - 11 - 2004 OF MAHAS AGAR SECURITI ES PVT. LTD. FOR A CONSIDERATION OF RS.11,35,370/ - WHICH IS PLACED AT PAGES 5 TO 8 OF THE ASSESSEES PAPER BOOK. THE SALE CONSIDERATION OF THESE SHARES ALSO REFLECTED IN THE ASSESSEES HDFC ACCOUNT NO.05431000011113 WITH ANDHERI (EAST) BRANCH. COPY OF THE ASSESSEES BANK STATEMENT IS ALSO PLACED ON PAGES 11 TO 12 OF THE ASSESSEES PAPER BOOK. FURTHER, I FIND THAT THE ASSESSEE PURCHASED 15,000 NOS. OF SHARES ON 11 - 04 - 2003 AT A TOTAL CONSIDE RATION OF RS.20,147/ - FROM GOLDSTAR FINVEST PVT. LTD. THE THESE WERE DE - MATED WITH THE ASSESSEES BANK ACCOUNT WITH HDFC BANK. OUT OF THESE DE - MATED SHARES, THE ASSESSEE VIDE CONTRACT NOTE S DATED 27 - 05 - 2004 AND 18 - 06 - 2004 SOLD 7000 SHARES AND 8000 SHARES AT RS.5,04,350/ - AND RS.5,04,350/ - RESPECTIVELY. THE RECEIPT OF THE S ALE CONSIDERATION IS ALSO REFLECTED IN ASSESSEES ABOVE HDFC BANK ACCOUNT. FROM THIS, IT REVEALS THAT THE ASSESSEE SUBMITTED ALL THE RELEVANT DETAILS REGARDING THE ABOVE TRANSACTIONS BEFORE THE AO WHICH HAS ALSO BEEN ADMITTED BY HIM IN PARA 6 PAGE 3 OF THE ASSESSMENT ORDER. FURTHER, IN PARA 7 OF THE ASSESSMENT ORDER THE AO HAS ADMITTEDLY STATED THAT THE ASSESSEE EARNED LONG TERM CAPITAL . IN VIEW OF THE ABOVE FACT THAT THE ASSESSEE HAS PRODUCED COMPLETE DETAILS DURING THE ASSESSMENT PROCEEDINGS AND EVEN BEF ORE THE CIT (A) I.E. THE TRANSACTIONS OF SALE AND PURCHASE OF SHARES, ADDRESS OF THE BROKERS, CONTRACT NOTES IN CONCERNED FORM WITH BROKERS, COPY OF DEMAT ACCOUNT AND THE AO HAS NOT EXAMINED THE PAYMENT DETAILS IN RESPECT TO SALE OF SHARES WHICH WERE THROU GH BANK ACCOUNTS, IN SUCH CIRCUMSTANCES, THE LONG TERM CAPITAL GAIN DECLARED BY THE ASSESSEE CANNOT BE TREATED AS INCOME FROM OTHER SOURCES OR CASH CREDIT BEING PROFIT ARISING OUT OF SALE OF SHARES. THE DETAILS PRODUCED BY THE ASSESSEE BEFORE THE LOWER AU THORITY CLEARLY SHOWS THAT THE ASSESSEE HAS CLEARLY DISCHARGED ITS BASIC ITA NO. 3530 /MUM/20 1 5 5 ONUS AND ONCE THE ASSESSEE DISCHARGED THE INITIAL OR BASIC ONUS, IT IS FOR THE REVENUE TO CLEARLY ESTABLISH THE TRANSACTIONS AS BOGUS. ACCORDINGLY, WE ARE OF THE VIEW THAT THE REVENUE HAS ERRED IN TREATING THE SALE TRANSACTION OF SHARES AS BOGUS RELYING ON NON - VERIFICATION OF BOOKS OF ACCOUNTS OF THE BROKER, WHICH WERE SEIZED BY THE DEPARTMENT ITSELF DURING SEARCH. IN VIEW OF THESE FACTS, I AM OF THE VIEW THAT ONCE THE ASSESSEE HAS DIS CHARGED ITS ONUS AND REVENUE FAILING IN ITS DUTY TO PROCE ED FURTHER, THE TRANSACTIONS OF SALE OF SHARES CANNOT BE HELD AS BOGUS. I DIRECT THE AO TO TREAT THE PROFIT ARISING OUT OF SALE OF SHARES AS LONG TERM CAPITAL GAIN AS DECLARED BY THE ASSESSEE. 6 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. O RDER PRONOUNCED IN THE OPEN COURT ON 25 /07 / 201 6 . SD/ - ( MAHAVIR SINGH ) JUDICIAL MEMBER MUMBAI , DATED 25 /7 / 201 6 LAKSHMIKANTA DEKA/SR.PS ITA NO. 3530 /MUM/20 1 5 6 COPY OF THE ORDER FORWARDED TO : BY ORDER, ASSISTANT REGISTRAR ITAT, MUMBAI DATE INITIAL DICTATION PAD ATTACHED WITH THE DRAFT ORDER YES 1. DRAFT DICTATED ON 2 5 - 07 - 16 SR.PS 2. DRAFT PLACED BEFORE AUTHOR - 07 - 16 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FI LE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT ( A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//