ACIT 20(1), MUMBAI V. L. JAIPAL REDDY, MUMBAI

ITA 3607/MUM/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59794 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 15-11-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 02-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K B MENON
• Assessee Lawyers: SUBODH L RATNAPARKHI
• Keywords: Income from undisclosed sources
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A MUMBAI BEFORE SHRI B.R. MITTAL (JUDICIAL MEMBER) AND SHRI PRAMOD KUMAR (ACCOUNTANT MEMBER) ITA NO.3607 & 3608/MUM/2009 ASSESSMENT YEAR-2003-04 & 2004-05 THE ACIT 20(1), PIRAMAL CHAMBERS, PAREL, MUMBAI-400 012 VS. SHRI L. JAIPAL REDDY, SAKET, G-2, MIDC, MAROL INDL. AREA, MAHAKALI CAVES ROAD, MUMBAI-400 093 PAN-AAAFS 4555G (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI P.K.B. MENON RESPONDENT BY: SHRI SUBODH L. RATNAPARKHI DATE OF HEARING : 11. 01.2012 DATE OF PRONOUNCEMENT: 20.1.2012 O R D E R PER B.R. MITTAL, JM : THE DEPARTMENT HAS FILED THESE TWO APPEALS FOR ASSE SSMENT YEARS 2003-04 AND 2004-05 AGAINST COMMON ORDER OF LD. CIT (A) DT.5.3.2009 DISPUTING DELETION OF RS. 10,55,575/- AND RS. 6,99, 796/- FOR ASSESSMENT YEARS 2003-04 AND 2004-05 RESPECTIVELY MADE BY ASSESSING OFFICER CONSEQUENT TO HIS TREATMENT GIVEN TO THE SAID SUM AS INCOME FROM OTHER SOURCES AS AGAINST CLAIM OF ASSESSEE OF LONG TERM CAPITAL GAIN ON SALE OF SHARES OF M/S. JAY KAY DEE INDUSTRIES LTD. 2. THE RELEVANT FACTS ARE THAT ASSESSEE IS AN INDIV IDUAL AND CLAIMED CAPITAL GAIN OF RS. 10,12,449/- IN ASSESSMENT YEAR 2003-04 AND OF RS. 6,99,796/- IN ASSESSMENT YEAR 2004-05 ON ACCOUNT OF SALE OF 10,0 00 SHARES AND 7000 ITA NO.3607 & 08/M/09 2 SHARES RESPECTIVELY OF M/S. JAY KAY DEE INDUSTRIES L TD. THE ASSESSING OFFICER STATED THAT ASSESSEE CLAIMED TO HAVE PURCHASED 2500 0 SHARES OF M/S. JAY KAY DEE INDUSTRIES LTD. @ 4.31 PER SHARE ON 3.11.2001 TH ROUGH M/S. VRP FINANCIAL SERVICES PVT. LTD. OUT OF WHICH ASSESSEE SOLD 10000 SHARES IN ASSESSMENT YEAR 2003-04 I.E. AFTER ONE YEAR AT AN A VERAGE REALIZATION OF RS. 101.25 PER SHARE AND SOLD 7000 SHARES IN ASSESSMENT YEAR 2004-05 WHEN REALIZATION PRICE WAS 104.78 PER SHARE. THE AO STA TED THAT TO ASCERTAIN GENUINENESS OF TRANSACTION, ENQUIRIES WERE CONDUCTE D BY ISSUING LETTERS U/S. 133(6) OF THE ACT TO INTER CONNECTED STOCK EXCHANGE OF INDIA LTD. THROUGH WHICH SHARE TRADING HAD TAKEN PLACE, RECORDED THE STATEMENT OF SHRI PRADEEP DHANUKA, DIRECTOR OF VRP FINANCIAL SERVICES (P) LTD ., THE BROKER THROUGH WHOM THE SHARES WERE PURCHASED AND SOLD AND ALSO MA DE ENQUIRIES FROM M/S. JAY KAY DEE INDUSTRIES LTD., THE COMPANY WHOSE SHARE S WERE PURCHASED AND SOLD BY ASSESSEE. THE AO HAS STATED THAT AS PER IN FORMATION RECEIVED FROM INTER CONNECTED STOCK EXCHANGE OF INDIA LTD., NO SA LE OF SHARES OF SAID COMPANY HAD TAKEN PLACE IN THE EXCHANGE ON THE DATE S AS GIVEN BY ASSESSEE. HE HAS FURTHER STATED THAT NUMBER OF SHARES SOLD BY ASSESSEE ARE FAR HIGHER THAN WHAT HAS ACTUALLY TAKEN PLACE ON THE FLOOR OF THE EXCHANGE. THE PRICES OF SHARES SOLD BY ASSESSEE IS OUTSIDE TRADING BAND. THE AO FURTHER STATED THAT ENTIRE PURCHASE OF SHARES IS THROUGH OFF MARKE T TRANSACTION, WHICH IS DULY CONFIRMED BY SHRI PRADEEP DHANUKA, DIRECTOR OF THE BROKER OF ASSESSEE M/S. VRP FINANCIAL SERVICES (P) LTD. HE HAS FURTHER STA TED THAT NO SUCH TRANSACTION HAS TAKEN PLACE IN THE EXCHANGE ON THE GIVEN DATE O F PURCHASE AS CLAIMED BY ASSESSEE. AO FURTHER STATED THAT ON THE ENQUIRIES MADE, IT WAS FOUND THAT SHARES SOLD TO M/S. SANCHIT PORTFOLIO IS PROPRIETOR SHIP CONCERN OF MRS. NIDHI DHANUKA WIFE OF SHRI PRADEEP DHANUKA, DIRECTOR OF H IS BROKER VRP FINANCIAL SERVICES (P) LTD. HE HAS FURTHER STATED THAT SHRI PRADEEP DHANUKA, HAS CLOSE ASSOCIATION OR NEXUS WITH M/S. JAY KAY DEE INDUSTRI ES LTD. AO HAS STATED THAT HE MADE ENQUIRIES FROM STANDARD CHARTERED BANK , MUMBAI WHO WAS THE DEPOSITORY PARTICIPANT (DP) OF THE ASSESSEE AND IT WAS FOUND THAT DURING THE RELEVANT ASSESSMENT YEAR, ASSESSEE HAS ISSUED ONLY SIX D-MAT INSTRUCTIONS. ITA NO.3607 & 08/M/09 3 AO OBSERVED THAT SAID COMPANY IS AN UNKNOWN COMPANY AND NOTICE SENT TO SAID COMPANY WAS RETURNED UNSERVED. 3. CONSIDERING ABOVE FACTS, AO STATED THAT ABOVE TR ANSACTIONS WERE NOT GENUINE TRANSACTION AND ACCORDINGLY CONSIDERED THE ENTIRE SALE PROCEEDS OF RS. 10,55,575/- ON SALE OF 10000 SHARES IN ASSESSME NT YEAR 2003-04 AS SHAM /BOGUS TRANSACTION AND ADDED THE AMOUNT TO THE INCO ME OF ASSESSEE. SIMILARLY, AO CONSIDERED TRANSACTION OF SALE OF 700 0 SHARES OF M/S. JAY DAY DEE INDUSTRIES LTD. IN ASSESSMENT YEAR 2004-05 AS S HAM TRANSACTION AND ADDED AMOUNT OF RS. 6,99,796/ AS INCOME FROM OTHER SOURCES BY CONSIDERING ENTIRE TRANSACTION NOT GENUINE. 4. BEING AGGRIEVED ASSESSEE FILED APPEALS BEFORE FI RST APPELLATE AUTHORITIES. 5. ON BEHALF OF ASSESSEE, IT WAS CONTENDED THAT ASS ESSEE PURCHASED 25000 EQUITY SHARES ON 2.11.2001 THROUGH BROKER M/S VRP FINANCIAL SECURITIES PVT. LTD AND FURNISHED COPY OF BILL DT. 3.11.2001 AND ALSO COPY OF CONTRACT NOTE DT. 2.11.2001 ISSUED BY BROKER. IT IS RELEVANT TO STATE THAT COPY OF SAID CONTRACT NOTE BILL IS PLACED AT PAGES 17 TO 18 OF PAPER BOOK. IT WAS ALSO CONTENDED THAT ASSESSEE PAID PURCHASE CONSIDER ATION OF RS. 1,07,816/- BY ACCOUNT PAYEE CHEQUE NO. 049697 DT. 2.11.2001 DR AWN ON HDFC BANK, ANDHERI(E) BRANCH, MUMBAI AND ALSO FURNISHED BANK A CCOUNT STATEMENT BEFORE AO DURING ASSESSMENT PROCEEDINGS. IT IS REL EVANT TO STATE THAT COPY OF SAID BANK STATEMENT REFLECTING ABOVE TRANSACTION IS PLACED AT PAGE 19 OF PAPER BOOK. THE ASSESSEE SUBMITTED BEFORE LD. CIT( A) THAT ALL THE SHARES PURCHASED WERE DEMATERIALIZED AND ALSO FILED STATEM ENT OF D-MAT ACCOUNT MAINTAINED WITH HIS DP HOLDER M/S. STANDARD CHARTER ED BANK FOR THE PERIOD 1.10.2001 TO 31.12.2001. IT IS RELEVANT TO STATE T HAT COPY OF SAID D-MAT STATEMENT IS PLACED AT PAGES 19A AND 20 TO 22 OF PA PER BOOK AND REFLECTING THE CREDIT OF SAID SHARES IN D-MAT STATEMENT OF ASS ESSEE. ASSESSEE SUBMITTED THAT HE SOLD 10000 SHARES DURING ASSESSMENT YEAR 20 03-04 THROUGH HIS BROKER M/S. VRP FINANCIAL SERVICES PVT. LTD. I.E. 4 000 SHARES ON 29.11.2002, ITA NO.3607 & 08/M/09 4 1,000 SHARES EACH ON 6.12.2002, 17,12,2002, 18,12,2 002 AND 19,12,2002 AND REMAINING 2000 SHARES ON 30.12.2002. IT WAS ALSO CO NTENDED THAT ASSESSEE SOLD IN THE SAME MANNER 7000 SHARES IN ASSESSMENT Y EAR 2004-05. THE ASSESSEE FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDINGS COPIES OF CONTRACT NOTES AND BILLS ISSUED BY BROKER ON ACCOUN T OF SALES OF SHARES. IT IS RELEVANT TO STATE THAT COPIES OF SAID BILLS AND CON TRACT NOTES FOR SALE OF SHARES ISSUED BY BROKER ARE PLACED AT PAGES 23 TO 40 OF PA PER BOOK. THE ASSESSEE SUBMITTED THAT HE RECEIVED SALE CONSIDERATION FROM HIS BROKER BY ACCOUNT PAYEE CHEQUES WHICH WERE CREDITED IN HIS BANK ACCOU NT WITH HDFC BANK, ANDHERI(E) BRANCH, MUMBAI. THE ASSESSEE HAS ALSO P LACED BANK STATEMENT EVIDENCING RECEIPT OF SALE CONSIDERATION ON SALE OF SHARES AT PAGE 47 FOR ASSESSMENT YEAR 2003-04 AND AT PAGES 48 TO 49 FOR A SSESSMENT YEAR 2004- 05. THE ASSESSEE ALSO STATED THAT DELIVERY INSTRUC TION SLIPS GIVEN BY ASSESSEE TO HIS DP HOLDER FOR TRANSFER OF SHARES FROM HIS D- MAT ACCOUNT WERE ALSO PROVIDED TO AO. IT IS RELEVANT TO STATE THAT SAID DELIVERY INSTRUCTION SLIPS ARE PLACED AT PAGES 41 TO 46 OF PAPER BOOK. THE ASSESS EE ALSO CONTENDED THAT AO RECORDED STATEMENT OF HIS BROKER, AND HE CONFIRM ED THE TRANSACTION OF PURCHASE AND SALE OF SHARES OF M/S. JAY KAY DEE IND USTRIES LTD., ON BEHALF OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEARS. TH E ASSESSEE HAS ALSO PLACED AT PAGES 50 TO 54 OF PAPER BOOK, STATEMENT O F PRADEEP DHANUKA, DIRECTOR OF HIS BROKER VRP FINANCIAL SERVICES (P) L TD. RECORDED BY AO ON 5.1.2006. THE ASSESSEE CONTENDED THAT ENTIRE PURCH ASE AND SALE TRANSACTIONS ARE GENUINE AND ADVERSE INFERENCE SHOULD NOT BE WIT HDRAWN IN RESPECT OF ABOVE TRANSACTIONS. 6. LD. CIT(A) AFTER CONSIDERING ABOVE FACTS AND SUB MISSIONS OF ASSESSEE HAS HELD THAT AO HAS BASED HIS DECISION NOT ON FACT S BUT ON THEORETICAL GROUNDS OF CONVERSION OF UNACCOUNTED INCOME INTO AN ACCOUNTED ONE WITHOUT BRINGING SUFFICIENT EVIDENCES ON RECORD TO PROVE TH E SAME. LD. CIT(A) HAS STATED THAT ASSESSEE HAS PRODUCED CLINCHING EVIDENC ES IN THE SHAPE OF PURCHASE AND SALES BILLS, CONTRACT NOTES, RECORDS O F PAYMENTS MADE AND RECEIVED THROUGH NORMAL BANKING CHANNELS, THE CONFI RMATION OF BROKER, ITA NO.3607 & 08/M/09 5 RECORDS OF TRANSACTIONS OF PURCHASE OF SHARES IN HI S BALANCE SHEET, THE RECORD OF DEBIT AND CREDIT OF SHARES IN HIS D-MAT ACCOUNT MAINTAINED WITH D.P HOLDER ETC. WHICH ARE NOT DISPROVED OR FOUND INCORRECT OR FALSE BY AO. LD. CIT(A) HAS ALSO STATED THAT THE ENTIRE LOT OF 25000 SHARES OF M/S. JAY KAY DEE INDUSTRIES LTD. WERE PURCHASED IN THE PRECEDING ASSE SSMENT YEAR, THE BALANCE SHEET AND RETURN OF INCOME FOR THE SAID ASSESSMENT YEAR FILED IS DULY ACCEPTED AND NO FAULT THEREIN FOUND BY THE AO. HE HAS FURTHE R OBSERVED THAT EVEN, A PART OF SHARES WERE NOT SOLD DURING RELEVANT ASSESS MENT YEARS AND ARE HELD BY ASSESSEE IN D-MAT FORM WHICH IS DULY REFLECTED I N HIS FINAL ACCOUNTS AND THE RETURN OF INCOME FILED. THEREFORE, AO ACCEPTED THE PURCHASE OF SHARES IN EARLIER YEAR AND ACCORDINGLY THE CONTENTION OF AO T HAT SALES THEREOF ARE SHAM OR BOGUS IS NOT ACCEPTABLE. LD. CIT(A) ALSO STATED THAT WHEN AO EXAMINED THE BROKER THROUGH WHOM THE SHARES WERE PURCHASED A ND SOLD BY ASSESSEE, BROKER HAD CATEGORICALLY CONFIRMED HAVING ARRANGED FOR SAID TRANSACTION ON BEHALF OF ASSESSEE. EVEN PAYMENTS FOR PURCHASE AND RECEIPTS AGAINST SALE OF SHARES ARE MADE THROUGH NORMAL BANKING CHANNELS, WH ICH ARE NOT DISPUTED BY AO. LD. CIT(A) HAS ALSO STATED THAT CONTENTION OF AO THAT SHARE TRANSACTIONS BEING OFF MARKET TRANSACTIONS, ARE ARRANGED TRANSAC TIONS, SAME ARE ALSO LEGAL AND CONSIDERED THE DECISION OF ITAT MUMBAI BENCH IN THE CASE OF MUKESH R. MAROLIA VS ADDL. CIT, 6 SOT 247 (MUM) WHEREIN IT W AS HELD THAT OFF MARKET SHARE TRANSACTIONS ARE GENUINE. LD. CIT(A) HAS STA TED THAT ASSESSEE HAS PRODUCED RELEVANT DOCUMENTS AND THEREFORE SALE OF S HARES UNDERTAKEN BY ASSESSEE DURING RELEVANT ASSESSMENT YEARS ARE GENUI NE TRANSACTIONS. HENCE, LD. CIT(A) DELETED THE ADDITIONS MADE BY AO AND ALL OWED CLAIM OF ASSESSEE OF CAPITAL GAINS FOR BOTH ASSESSMENT YEARS UNDER CO NSIDERATION. THUS DEPARTMENT IS IN APPEALS BEFORE TRIBUNAL. 7. DURING THE COURSE OF HEARING, LD. DEPARTMENTAL R EPRESENTATIVE RELIED ON THE ORDER OF AO. HE SUBMITTED THAT SALE PRICE S HOWN BY ASSESSEE ARE ON HIGHER SIDE AND THEREFORE AO CONSIDERED THAT TRANSA CTIONS ARE NOT GENUINE. ON THE OTHER HAND, LD. AR MADE HIS SUBMISSIONS ON T HE LINES OF SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND ALSO REFERRED REL EVANT DOCUMENTS PLACED ITA NO.3607 & 08/M/09 6 ON PAPER BOOK, THE REFERENCES OF WHICH HAVE ALREADY BEEN MENTIONED HEREIN ABOVE. HE FURTHER SUBMITTED THAT ALL THE RATES ARE COMPARABLE AND TRANSACTIONS ARE GENUINE. HE FURTHER SUBMITTED THA T ASSESSEE SOLD THE BALANCE 8000 SHARES OUT OF 25000 SHARES IN ASSESSME NT YEAR 2009-10 @ RS. 8/- ONLY. HE SUBMITTED THAT ORDER OF LD. CIT(A) IS IN ORDER. 8. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF AUTHO RITIES BELOW AND THE SUBMISSIONS OF LD. REPRESENTATIVES OF THE PARTIES. WE HAVE ALSO CAREFULLY CONSIDERED RELEVANT PAGES OF PAPER BOOK, THE REFERE NCE OF WHICH, WE HAVE ALREADY MENTIONED HEREIN ABOVE. WE OBSERVE THAT AS SESSEE HAS PLACED ON RECORD BEFORE AO AND CIT(A) AS WELL AS IN THE PAPER BOOK FILED BEFORE US ALL THE RELEVANT DOCUMENTS FOR PURCHASE AND SALE OF SHA RES UNDER CONSIDERATION. WE ALSO OBSERVE THAT ON PURCHASE OF SAID 25000 SHAR ES OF M/S. JAY KAY DEE INDUSTRIES LTD., SAID SHARES WERE DULY CREDITED IN D -MAT ACCOUNT STATEMENT OF ASSESSEE. THE ASSESSEE MADE PAYMENT OF PURCHASE CO NSIDERATION BY ACCOUNT PAYEE CHEQUE WHICH IS REFLECTED IN HIS BANK STATEME NT. WE ALSO OBSERVE THAT WHEN ASSESSEE SOLD 10000 SHARES IN ASSESSMENT YEAR 2003-04 AND 7000 SHARES IN ASSESSMENT YEAR 2004-05, SALE PROCEEDS WE RE ALSO RECEIVED THROUGH ACCOUNT PAYEE CHEQUES AND SAME ARE ALSO REFLECTED I N THE BANK ACCOUNT OF ASSESSEE, COPY OF WHICH ARE PLACED AT PAGE 47 FOR A SSESSMENT YEAR 2003-04 AND AT PAGES 48 TO 49 FOR ASSESSMENT YEAR 2004-05. WE ALSO OBSERVE THAT ON SALE OF SHARES, SAME WERE DULY DEBITED IN HIS D- MAT STATEMENT. NOT ONLY THIS, AO WHEN EXAMINED DIRECTOR OF BROKER THROUGH W HOM ASSESSEE ENTERED INTO PURCHASE AND SALE OF SHARES, HE CONFIRMED THE TRANSACTIONS MADE ON BEHALF OF ASSESSEE FOR PURCHASE AND SALE OF SHARES IN BOTH ASSESSMENT YEARS UNDER CONSIDERATION. WE AGREE WITH LD. CIT(A) THAT AO HAS GONE ON HIS OWN PRESUMPTION AND HAS IGNORED RELEVANT DOCUMENTS PLAC ED ON RECORD TO HOLD THAT SAID TRANSACTIONS ARE NOT GENUINE AND IT WAS O NLY A CONVERSION OF UNACCOUNTED INCOME OF ASSESSEE INTO AN ACCOUNTED ON E, BUT SAID FINDING OF AO IS NOT BASED ON ANY COGENT MATERIAL ON RECORD. CONSIDERING THE FACTS BEFORE US, WE DO NOT FIND ANY REASON TO INTERFERE W ITH THE ORDER OF LD. CIT(A). HENCE WE UPHOLD THE ORDER OF LD. CIT(A) FOR BOTH AS SESSMENT YEARS UNDER ITA NO.3607 & 08/M/09 7 CONSIDERATION VIZ. ASSESSMENT YEARS 2003-04 & 2004- 05 BY REJECTING GROUND OF APPEAL TAKEN BY DEPARTMENT. 9. IN THE RESULT, BOTH APPEALS OF DEPARTMENT ARE DIS MISSED. ORDER PRONOUNCED ON THIS 20 TH DAY OF JANUARY, 2012 SD/- SD/- ( PRAMOD KUMAR) (B.R. MITTAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 20 TH JANUARY, 2012 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR A BENCH TRUE COPY BY ORDER ASSTT. 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