Shri Rajendra Mangilal Oradia, Surat V. The Income tax Officer, Ward-2(2), Surat

ITA 3971/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6040 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-06-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 29-10-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH
• Assessee Lawyers: RASESH SHAH
• Keywords: Unexplained cash credit; Share purchase agreement; Source of fund
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BEFORE SHRI MUKUL SHRAWAT, JUDICIAL MEMBER AND SHRI D.C. AGRAWAL, ACCOUNTANT MEMBER DATE OF HEARING : 08/06/2010 DRAFTED ON: 0 8/06/2010 ITA NO.3971/AHD/2007 ASSESSMENT YEAR : 2004-05 SHRI RAJENDRA MANGILAL ORADIA V-1130, SURAT TEXTILE MARKET RING ROAD,SURAT VS. THE INCOME TAX OFFICER WARD-2(2) SURAT PAN/GIR NO. : AAAPO 7472 Q (APPELLANT) .. (RESPONDENT) APPELLANT BY : S/SHRI RASESH SHAH & HARDIK VORA RESPONDENT BY: SMT. NEETA SHAH, SR. D.R. O R D E R PER SHRI MUKUL SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WH ICH HAS EMANATED FROM THE ORDER OF THE LEARNED CIT(APPEALS) -II, SURAT DATED 09/08/2007. THE ONLY GROUND READS AS UNDER:- 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED CIT(APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN MAKING ADDIT ION OF RS.11,84,436/- FOR CASH CREDIT U/S.68 OF THE I.T.AC T BY TREATING THE INCOME FROM CAPITAL GAIN SHOWN BY ASSESSEE AS INCOM E FROM UNDISCLOSED SOURCES. ITA NO.3971/AHD /2007 SHRI RAJENDRA MANGILAL ORADIA VS. ITO ASST.YEAR - 2004-05 - 2 - 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S. 143(3) OF THE I.T. ACT, 1961 DAT ED 14/11/2006 WERE THAT THE ASSESSEE IN INDIVIDUAL CAPACITY DERIVES INCOME FROM INTEREST AND PROFIT FROM A PARTNERSHIP-FIRM. BESIDES THE ABOVE TWO SOURCES OF INCOME, DURING THE YEAR UNDER CONSIDERATION ASSESSM ENT YEAR 2004-05, THE APPELLANT HAS ALSO DISCLOSED 'LONG-TERM CAPITAL GAIN' ON SALE OF SHARES. IN SUPPORT OF THE CLAIM OF 'LONG-TERM CAPITAL GAIN' OF RS.11,84,436/-, THE APPELLANT HAS FURNISHED A COPY OF THE CONTRACT NOTE AND BILLS OF SHARE TRANSACTIONS. THE ASSESSEE HAS FURNISHED A CONTRA CT NOTE OF M/S.GOLDSTAR FINVEST PVT.LTD. IN RESPECT OF SALE OF SHARES OF M/S.TALENT INFOWAYS LTD. THE ASSESSING OFFICER HAS ALSO NOTED VIDE PARAGRAPH NO.3 THAT THE ASSESSEE HAS FURNISHED - QUOTE ON PERUSAL OF THE RELEVANT CONTRACT NOTE OF GOLDSTAR FINVEST PVT.LTD. IN REGAR D TO SALE OF SHARES OF TALENT INFOWAYS LTD., IT IS NOTICED THAT COMPLETE D ETAILS SUCH AS CONTRACT NOTE NO., DATE, SETTLEMENT NO., SETTLEMENT DATE, ORDER NO., TRADE NO. AND TRADE TIME ARE MENTIONED THERE IN WHICH PRIMA F ACIE GAVE IMPRESSION THAT THE SAME WAS DONE THROUGH ONLINE. UNQUOTE. AN ENQUIRY WAS CONDUCTED BY THE ASSESSING OFFICER FROM NATIONAL STOCK EXCHANGE (NSE), HOWEVER, IT WAS INFORMED THAT THE S AID COMPANY VIZ. M/S.TALENT INFOWAYS LTD. WAS NOT LISTED ON THE SAID EXCHANGE. BECAUSE OF THE SAID INFORMATION FROM NSE, THE ASSESSING OFF ICER WAS OF THE VIEW THAT THE IMPUGNED TRANSACTION OF SHARES WAS NOT A G ENUINE TRANSACTION. HE HAS OPINED THAT THE CREDIT ENTRY OF RS.11,84,436 /- SHOWN AS CAPITAL GAIN REMAINED UNEXPLAINED. FROM THE SIDE OF ASSES SEE, IT WAS STRONGLY OBJECTED AND MENTIONED THAT THE SAID COMPANY WAS LI STED WITH AHMEDABAD STOCK EXCHANGE (ASE) AND IN SUPPORT OF TH IS, FURNISHED A ITA NO.3971/AHD /2007 SHRI RAJENDRA MANGILAL ORADIA VS. ITO ASST.YEAR - 2004-05 - 3 - COPY OF LETTER FROM THE SAID STOCK EXCHANGE. THE A SSESSING OFFICER WAS NOT CONVINCED WITH ALL THAT INFORMATION AND SUPPORT ING EVIDENCES AND ARRIVED AT A CONCLUSION THAT THE ASSESSEE HAS PRODU CED A FAKE NOTE OF THE BROKER TO CREATE AN ILLUSION THAT THE TRANSACTION W AS DONE THROUGH A STOCK EXCHANGE, HOWEVER, IT WAS NOT LISTED THEREIN, THERE FORE, THE AMOUNT IN QUESTION BEING CREDITED IN THE BOOKS OF ACCOUNT WAS AN UNEXPLAINED CREDIT, THEREFORE, TAXABLE U/S.68 OF THE I.T. ACT, 1961. ACCORDINGLY, THE ADDITION WAS MADE WHICH WAS CHALLENGED BEFORE THE F IRST APPELLATE AUTHORITY. 3. BEFORE LEARNED CIT(APPEALS), THE ASSESSEE HAS RE ITERATED ALL THOSE FACTS AND VEHEMENTLY ARGUED THAT THE SAID COMPANY W AS DULY LISTED ON ASE AND THOSE SUBMISSIONS OF THE ASSESSEE WERE INC ORPORATED BY THE LEARNED CIT(APPEALS) AS FOLLOWS:- SUBMISSIONS OF THE ASSESSEE: 6. IN THE WRITTEN SUBMISSIONS FILED IN COURSE OF T HE APPELLATE PROCEEDINGS, IT HAS ONLY BEEN VERY BRIEFLY SUBMITTE D THAT THE SHARES OF THE M/S.TALENT INFOWAYS WERE LISTED WITH THE ASE AND THAT, THE TRANSACTIONS WERE CONDUCTED THROUGH THE BROKERS M/S .GOLDSTAR FINVEST P.LTD. THE ASSESSEE HAD SUBMITTED EVIDENCE OF THE PREVAILING PRICES OF THE SHARES AT THE AHMEDABAD ST OCK EXCHANGE ON DIFFERENT DATES. XEROX COPIES OF THE SHARE CERT IFICATES DULY TRANSFERRED IN THE NAME OF THE ASSESSEE, WAS ALSO A PPARENTLY FILED WITH THE AO. IT HAS BEEN CONTENDED THAT THE AO HA D ERRED IN MAKING ENQUIRIES FROM THE NSE WHERE THE SHARES WAS NOT LISTED. HE OUGHT TO HAVE MADE ENQUIRIES FORM THE ASE. THE AO WAS ALSO NOT JUSTIFIED IN OBSERVING THAT THE SAID BROKER WAS ONLY A MEMBER OF BSE AND WAS NOT AUTHORIZED TO TRANSACT ON THE NS E. THE AR HAS ENCLOSED A LETTER FROM THE SAID BROKER STATING THEREIN THAT THEY ARE ELIGIBLE TO TRADE ON THE NSE, BSE AND ALSO THE ASE. IN SUPPORT ITA NO.3971/AHD /2007 SHRI RAJENDRA MANGILAL ORADIA VS. ITO ASST.YEAR - 2004-05 - 4 - OF HIS CONTENTIONS THE AR HAS PLACED RELIANCE ON TH E DECISION OF THE MUMBAI BENCH OF ITAT IN THE CASE OF MUKESH R.MAROLI A VS. ADDL. CIT (2006) 6 SOT 247. 3.1. A CONCLUSION WAS DRAWN THAT APART FROM THE CON TRACT NOTES AND OTHER DOCUMENTS, THE ASSESSEE HAS ONLY FURNISHED AN INTRODUCTORY LETTER FORM BOMBAY STOCK EXCHANGE (BSE) AND MERELY FURNISH ED AN UNDERTAKING FROM ASE. IN VIEW OF LEARNED CIT(APPEA LS), THOSE LETTERS WERE IRRELEVANT. ACCORDING TO HIM, EVEN THE SHARE CERTIFICATES WERE ALSO NOT RELEVANT PRIMARILY BECAUSE OF THE REASON THAT S UCH TRANSACTIONS OUGHT TO HAVE BEEN DONE THROUGH DEMAT FORM. SINCE THE AS SESSEE HAS NOT FURNISHED THE DETAILS OF THE DEMAT ACCOUNT TO DEMON STRATE THAT THOSE SHARES WERE KEPT THEREIN, HENCE, IN THE ABSENCE OF SAID EVIDENCE, IT WAS HELD THAT SINCE THE SAID TRANSACTION WAS NOT CONDUC TED THROUGH ASE AND NOT EVEN THROUGH NSE, THEREFORE, THE ASSESSING OFFI CER HAS RIGHTLY INVOKED THE PROVISIONS OF SECTION 68 OF THE I.T. AC T, 1961. WITH THE RESULT, THE ACTION OF THE ASSESSING OFFICER WAS AFF IRMED. 4. NOW THE ASSESSEE IS IN FURTHER APPEAL. 5. FROM THE SIDE OF THE APPELLANT S/SHRI RASESH SHA H & HARDIK VORA, LEARNED AUTHORISED REPRESENTATIVE(S) OF THE ASSESSE E APPEARED AND FROM THE SIDE OF THE REVENUE SMT.NEETA SHAH LEARNED DEPA RTMENTAL REPRESENTATIVE APPEARED. WE HAVE HEARD BOTH THE SI DES AT SOME LENGTH. LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE H AS FURNISHED A COMPILATION CONTAINING 89 PAGES AND PLACED RELIANCE ON THE EVIDENCES AS WELL AS CASE LAWS ANNEXED THEREIN. ON THE OTHER HA ND, LEARNED ITA NO.3971/AHD /2007 SHRI RAJENDRA MANGILAL ORADIA VS. ITO ASST.YEAR - 2004-05 - 5 - DEPARTMENTAL REPRESENTATIVE SMT.NEETA SHAH HAS OBJE CTED AN INFORMATION PLACED ON PAGE NO.27 AT SL.NO.8 OF THE COMPILATION WHICH WAS A PRINT-OUT OF THE LISTED COMPANIES TAKEN OUT F ROM THE SIDE OF ASE. SHE HAS OBJECTED THE SAID EVIDENCE NOW PLACED AT TH E SECOND STAGE OF APPEAL AND DRAWN OUR ATTENTION THAT WITHOUT FOLLOWI NG THE CORRECT PROCEDURE OF FURNISHING OF A NEW EVIDENCE, THE APPE LLANT HAS TRIED TO PLACE THIS EVIDENCE IN THE COMPILATION WHICH IS AGA INST THE PRESCRIBED PROCEDURE AS WELL AS CONTRARY TO THE LAID DOWN RULE S. WHEN THIS OBJECTION WAS CONFRONTED TO LEARNED AUTHORISED REPR ESENTATIVE OF THE ASSESSEE THAT WHETHER HE IS WILLING TO FILE THE SAI D EVIDENCE AS PRESCRIBED UNDER THE RULES AND WHETHER BECAUSE OF THIS REASON WANTED AN ADJOURNMENT. HOWEVER, LEARNED AUTHORISED REPRESENT ATIVE OF THE ASSESSEE HAS CATEGORICALLY STATED THAT THERE IS NO NEED TO ADJOURN THIS APPEAL BECAUSE THERE ARE SO MANY OTHER EVIDENCES IN SUPPORT OF THE CLAIM, HENCE, WITHOUT TAKING INTO CONSIDERATION THE SAID E VIDENCE, MATTER CAN BE ARGUED. CONSIDERING THE STATEMENT OF LEARNED AUTHOR ISED REPRESENTATIVE OF THE ASSESSEE, WE HAVE DECIDED TO PROCEED WITH TH E MATTER, BUT WITHOUT ACKNOWLEDGING OR PAYING ANY CREDENCE TO THE SAID E VIDENCE AS LISTED AT SL.NO.8 AND PLACED ON PAGE NO.27 OF THE COMPILATION . 5.1. THE COMPILATION CONSISTS A CERTIFICATE FROM TH E SHARE BROKER M/S.GOLDSTAR FINVEST P.LTD. THROUGH WHICH HE HAS I NFORMED THAT HE WAS ELIGIBLE TO TRADE THROUGH NSE, BSE AND ASE. IN TH IS COMPILATION, A LETTER OF THE SAID COMPANY, NAMELY, M/S.TALENT INFO WAYS LTD. ADDRESSED TO THE STOCK EXCHANGE AHMEDABAD (LISTING DEPARTME NT) HAS ALSO BEEN FURNISHED. THIS COMPILATION ALSO CONSISTED CONTRAC T NOTE, BROKERS BILL ITA NO.3971/AHD /2007 SHRI RAJENDRA MANGILAL ORADIA VS. ITO ASST.YEAR - 2004-05 - 6 - FOR SALE OF SCRIPTS ON EVERY TRANSACTIONS. MOREO VER, AT SL.NO.6 AND ON PAGE NOS.11 TO 14, THE APPELLANT HAS FURNISHED EVID ENCES TO ESTABLISH THAT M/S.TALENT INFOWAYS LTD. WAS DULY LISTED WITH THE S TOCK EXCHANGE AHMEDABAD AND THOSE EVIDENCES WERE CLAIMED TO BE VE RY MUCH BEFORE THE REVENUE AUTHORITIES. WE FIND SOME FORCE IN THE VEHEMENT ARGUMENTS AND ASSERTIONS OF LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE. IN ADDITION TO THE EVIDENCES AND DOCUMENTS, PHOTOCOPIE S OF THE IMPUGNED SHARE-CERTIFICATES CLAIMED TO BE TRANSFERRED IN THE NAME OF THE ASSESSEE AT THE TIME OF PURCHASE AND THEN FINALLY GOT TRANSFERR ED IN THE NAME OF THE PURCHASER HAVE ALSO BEEN FURNISHED. THIS WAS QUITE A STRANGE SITUATION THAT, ON ONE HAND, THE ASSESSING OFFICER HAS ACKNOW LEDGED THE FURNISHING OF CONTRACT NOTE, SETTLEMENT DATE, SETTLEMENT NUMBE R AND CERTIFICATE OF THE BROKER. IT WAS ALSO NOT IN DISPUTE THAT THE AP PELLANT HAS INFORMED THE ASSESSING OFFICER THAT M/S.TALENT INFOWAYS LTD. WAS DULY LISTED WITH ASE. EVEN THEN, THE ASSESSING OFFICER HAS NOT MAD E ANY ENQUIRY FROM ASE BUT CONFINED HIS ENQUIRY TO BSE AND NSC. ONCE THE ASSESSEE WAS INFORMING ABOUT THE STOCK EXCHANGE IN WHICH THE SAI D COMPANY WAS LISTED, THEN THE ASSESSING OFFICER OUGHT TO HAVE MA DE THE ENQUIRY FROM THE CONCERNED STOCK EXCHANGE, I.E. AHMEDABAD STOCK EXCHANGE. HOWEVER, HE HAS PROCEEDED MERELY ON THE ENQUIRY MAD E FORM NSE WHICH WAS NATURALLY AN UNCONNECTED OR IRRELEVANT EN QUIRY. NEVERTHELESS, WE ARE ALSO OF THE VIEW THAT CERTAIN COGENT EVIDENC ES HAVE ALSO NOT BEEN FURNISHED FROM THE SIDE OF THE ASSESSEE TO CORROBOR ATE THE GENUINENESS OF THE TRANSACTIONS. WE ARE OF THE VIEW THAT THE ASS ESSEE SHOULD HAVE PLACED ON RECORD THE DEMAT ACCOUNT TO REMOVE ANY DO UBT. THE ASSESSEE COULD HAVE PLACED THE PHOTOCOPIES OF THE S HARE CERTIFICATES, ITA NO.3971/AHD /2007 SHRI RAJENDRA MANGILAL ORADIA VS. ITO ASST.YEAR - 2004-05 - 7 - WHERE THE NAME OF THE ASSESSEE IS REGISTERED AT THE TIME OF PURCHASE. THE ASSESSEE ALSO COULD HAVE FURNISHED THE SHARES CERTI FICATES DEPICTING THE NAME OF THE SUBSEQUENT PURCHASER IN THE PROCESS OF SALE OF SHARES. ONCE THE SHARES HAVE BEEN SOLD BY THE ASSESSEE, THEN NAT URALLY SHARE CERTIFICATES MUST HAVE BEEN WITNESSED THE REGISTRATION OF THE SA ID PARTY AS PER THE FINAL SALE TRANSACTED. WE ARE ALSO OF THE VIEW THA T IF THE ASSESSING OFFICER HAS MADE CERTAIN ENQUIRIES WHICH ACCORDING TO THE ASSESSEE WERE INCORRECT, THEN IT WAS HIS DUTY TO PLACE ON RECORD THE CORRECT INFORMATION ABOUT THE LISTING OF THE SAID COMPANY WITH ASE. IT APPEARS, AS ALSO IT IS EVIDENT, THAT THE ASSESSEE HAS NOT FURNISHED ALL TH OSE PARTICULARS, THEREFORE, WE DEEM IT PROPER TO RESTORE THIS GROUND BACK TO THE STAGE OF ASSESSING OFFICER TO BE DECIDED DE NOVO IN THE LIGHT OF OUR OBSERVATIONS MADE SUPRA. WE ALSO DIRECT THIS ASSESSEE TO FURNIS H REQUISITE EVIDENCES AND DETAILS TO ASSESSING OFFICER, SO THAT ON MERITS THE MATTER CAN NOW BE RE-ADJUDICATED AFRESH IN THE TERMS OF THE DIRECTION MADE BY US. THIS GROUND, THEREFORE, ALLOWED ONLY FOR STATISTICAL PUR POSES. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED BUT FOR STATISTICAL PURPOSES. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 11/ 06 /2010. SD/- SD/- ( D.C. AGRAWAL) ( MUKUL SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 11/ 06 /2010 T.C. NAIR, SR. PS ITA NO.3971/AHD /2007 SHRI RAJENDRA MANGILAL ORADIA VS. ITO ASST.YEAR - 2004-05 - 8 - COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-II, SURAT 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD