Smt. Chandadevi Patodia, Surat V. The Income tax Officer,Ward-3(3), Surat

ITA 4040/AHD/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6654 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 10-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 15-12-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P TALATI
• Keywords: Unexplained cash credit; Additional evidence; Cost of acquisition
• Section: 133(6); 143(1); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'D' BEFORE SHRI T K SHARMA,JM &SHRI A N PAHUJA, AM ITA NO.4040/AHD/2008 (ASSESSMENT YEAR:-2005-06) SMT. CHANDADEVI PATODIA, 5/A, SAGAR APARTMENT, UMARA JAKATNAKA, SURAT V/S INCOME-TAX OFFICER, WARD- 3(3),AAYKAR BHAVAN, MAJURA GATE, SURAT PAN: AANPP 3644 C [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI HARDIK VORA, AR REVENUE BY:- SHRI S P TALATI, DR O R D E R A N PAHUJA: THIS APPEAL BY THE ASSESSEE AGAINST AN ORDER DATED 31- 10-2008 OF THE LD. CIT(APPEALS)-II, SURAT FOR THE ASSESSMENT YEAR 2005-06, RAISES THE FOLLOWING GROUNDS:- [1] ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WE LL AS ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN MAKING ADDITION OF RS.10,20,50 1/- AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT, INSTEAD OF LONG TERM CAPITAL GAIN ON SALE OF SHARES. [2] IT IS THEREFORE PRAYED THAT ABOVE ACTION OF THE ASSESSING OFFICER AND CONFIRMED BY CIT(A) MAY PLEASE BE DELETED. [3] APPELLANT CRAVES LEAVE TO ADD, ALTER OR DELETE ANY GROUND(S) EITHER BEFORE OR IN THE COURSE OF HEARING OF THE APPEAL . 2. FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOME OF RS.1,67,740/- FILED ON 30-03-2006 BY THE ASSESSEE, AFTER BEING PROCESSED U/S 143(1) OF THE INCOME-TAX ACT, 1 961 [HEREINAFTER REFERRED TO AS THE ACT], WAS SELECTED FOR SCRUTIN Y WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE ACT ON 31-03-2007.DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER[AO IN SHORT] NOTICED THAT ASSESSEE CLAIMED LONG TERM CAPITAL GAIN OF R S.10,02,288/- ON SALE OF SHARES OF M/S. FAST TRACK ENTERTAINMENT LTD. THE COST OF ACQUISITION OF 14400 SHARES OF THE SAID COMPANY WAS SHOWN AT ITA N O.4040/AHD/2008 2 2 RS.18,213/- AND THE SALE CONSIDERATION OF RS.10,20, 501/-.TO A QUERY BY THE AO, THE ASSESSEE CLAIMED PURCHASE OF SHARES ON 17-04-2003 @ RS.1.22 PER SHARE WHEREAS SALE PRICE ON 30-09-20 04 @ RS.70.86 PER SHARE. IN ORDER TO ASCERTAIN THE GENUINENESS OF THE TRANSACTIONS, A NOTICE U/S. 133(6) OF THE ACT WAS ISSUED BY THE A O ON 09-10-2007 TO M/S. VIJAY BHAGWANDAS &. CO., THE SHARE BROKER, THROUGH WHOM THE ASSESSEE CLAIMED TO HAVE . PURCHASED AND SOLD S HARES. THERE BEING NO RESPONSE, A REMINDER NOTICE U/S.133(6) OF THE ACT WAS ISSUED ON 02-11-2007, SEEKING THE FOLLOWING INFOR MATION WITHIN FIVE DAYS OF THE RECEIPT OF THE SAID NOTICE:- '(A) COPY OF LEDGER A/C. OF THE SAID PARTY AS APPEA RED FROM YOUR BOOKS OF A/C. FOR THE F.Y.2003-04 & 2004-05. (B) PLEASE SPECIFY THE MODE OF PAYMENT / RECEIPT IN RESPECT TO THE ABOVE TRANSACTIONS I.E. THROUGH CROSSED CHEQUES/D.D ./CASH /OR THROUGH BEARER CHEQUES. (C) PLEASE FURNISH COPIES OF BILLS IN SUPPORT OF TH E ABOVE. (D) IF YOU HAVE ANY SHARE/SECURITY TRANSACTIONS WIT H MY ASSESSEE, PLEASE STATE POINT WISE - (I) WHETHER THE TRANSACTIONS ARE MADE THROUGH ANY AUTHORIZED STOCK EXCHANGE OR NOT? (II) IF THE SAID TRANSACTION WAS 'OFF MARKET' PLEASE MENTION THE SELLER OF THE SCRIPS. (III) PLEASE FURNISH COPY OF CLIENT BROKER AGREEMEN T MADE WITH THE ABOVE CAPTIONED ASSESSEE. (IV) FOR EVERY SHARE TRANSACTION, PLEASE MENTION O RDER NO., TRADE NO. AND CLIENT CODE.' 2.1 IN THE ABSENCE OF ANY RESPONSE, THE AO SHOW-C AUSED THE ASSESSEE VIDE LETTERS DATED 02-11-2007 & 23.11.2007 . SINCE THE ASSESSEE FAILED TO FURNISH ORDER NO. AND TRADE NO. FOR PURCHASE OF SHARES OF FAST TRACK ENTERTAINMENT THROUGH VIJAY BH AGWANDAS & CO. ON 17-04-2003 NOR ANY CLIENT CODE HAD BEEN MENTIONE D ON THE BROKER NOTE WHILE THE SAID BROKER DID NOT CONFIRM THE TRANSACTIONS ITA N O.4040/AHD/2008 3 3 NOR THE ASSESSEE FURNISHED A COPY OF THE DEMAT ACC OUNT OR MODE OF PAYMENT FOR PURCHASE OF THESE SHARES , THE AO ADDED THE AMO UNT OF RS.10,20,501/- U/S 68 OF THE ACT 3. ON APPEAL, THE LEARNED CIT(A) UPHELD THE ADDITIO N IN THE FOLLOWING TERMS:- 5. IN THE WRITTEN SUBMISSION, THE AR HAS CONTENDED THAT THE SHARES WERE PURCHASED IN PHYSICAL FORM AND THEREFORE, NO T RADE TIME WAS MENTIONED ON THE CONTRACT NOTE. THE CONTRACT WAS RO UTED THROUGH THE BOMBAY STOCK EXCHANGE AND THE SETTLEMENT NO. WAS DU LY MENTIONED ON THE NOTE. THE SHARES WERE DEMATERIALISED AND A COPY OF THE DEMAT ACCOUNT HAD BEEN FURNISHED. THE SALE PROCEEDS WERE RECEIVED THROUGH ACCOUNT-PAYEE CHEQUES(S). THEREFORE, ACCORDING TO T HE AR, THE IDENTITY OF THE PAYER, HIS CAPACITY TO PAY AS ALSO THE GENUINEN ESS OF THE TRANSACTION HAD BEEN DULY ESTABLISHED. DECISION 6. I HAVE CAREFULLY CONSIDERED BOTH THE POSITIONS. THE SUBMISSION OF THE AR IS VERY SKETCHY TO SAY THE LEAST. EVEN IN A PPELLATE PROCEEDINGS, NO CONFIRMATION HAS BEEN FURNISHED FROM M/S VIJAY BHGW ANDAS & CO, FROM WHOM THE SUM OF RS.10,20,501 HAD ALLEGEDLY BEEN REC EIVED. THEREFORE, THE IDENTITY OF THE PAYER IS NOT ESTABLISHED, AND C ONSEQUENTLY, THE CREDITWORTHINESS AS ALSO THE GENUINENESS OF THE TRA NSACTION IS NOT PROVED. THE CONTRACT NOTE SUBMITTED BY THE ASSESSEE WAS INC OMPLETE AND DID NOT CONTAIN VITAL INFORMATION, WHICH HAS BEEN REPEATEDL Y POINTED OUT BY THE AO IN THE ASSESSMENT ORDER. NO EXPLANATION HAS YET BEE N FURNISHED BY THE ASSESSEE REGARDING THE LACK OF SUCH INFORMATION. TH ERE IS NO EVIDENCE TO SHOW THAT THE TRANSACTION HAD TAKEN PLACE THROUGH T HE BOMBAY STOCK EXCHANGE. THE DEMAT ACCOUNT NOW FURNISHED IS AN ADD ITIONAL EVIDENCE. NO REQUEST HAS BEEN MADE TO ADMIT SUCH EVIDENCE IN TER MS OF RULE 46A OF THE IT RULES. AS IS SEEN FROM THE ASSESSMENT ORDER, MOR E THAN SUFFICIENT OPPORTUNITY HAD BEEN PROVIDED TO THE ASSESSEE TO FU RNISH THE DEMAT ACCOUNT, IF THERE WAS ANY. THEREFORE, THE ASSESSEE' S CASE DOES NOT APPEAR TO HAVE BEEN COVERED BY ANY OF THE EXCEPTIONS PROVI DED UNDER RULE 46A OF THE IT RULES AND THEREFORE, THE COPY OF THE DEMAT A CCOUNT NOW FURNISHED CANNOT BE ADMITTED. FURTHER, THE DEMAT ACCOUNT WHIC H PURPORTEDLY WAS WITH THE HDFC BANK, IS NEITHER SIGNED NOR STAMPED. 6.1 TAKING INTO ACCOUNT THE AFORESAID FACTS AND THE CIRCUMSTANCES OF THE CASE, I HAVE COME TO THE INEVITABLE CONCLUSION THAT THE CREDIT OF RS.10,20,501 HAS NOT SATISFACTORILY BEEN EXPLAINED. THE ASSESSEE'S CLAIM OF LTCG IS NOT BACKED UP BY ANY CREDIBLE EVIDENCE. THEREFORE, THE AO WAS FULLY JUSTIFIED IN TREATING THE SAID SUM AS UNE XPLAINED CASH CREDITS ITA N O.4040/AHD/2008 4 4 UNDER THE PROVISIONS OF THE 8 OF THE IT ACT. THE A DDITION OF THE SUM OF RS.10,20,501 IS CONFIRMED. 4. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED AR ON B EHALF OF THE ASSESSEE CONTENDED THAT SINCE THE LD. CIT(A) DID NO T ADMIT ADDITIONAL EVIDENCE IN THE FORM OF STATEMENT OF DE MAT ACCOUNT PLACED IN PAGE 6 TO 10 OF THE PAPER BOOK , THE MATT ER REQUIRES RECONSIDERATION BY THE LD. CIT(A). THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE IMPUGNED ORDER. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY, THE ASSESSEE PURCHASED SHARES OF THE AFORESAID COMPANY NAMELY M/S. FAST TRACK ENTERTAINMENT LTD. ON 17-04-2003 @ RS.L.22 PER SHARE AND SOLD ON 30-09-2004 @ RS.70.86 PER SHARE. SINCE THE ASSESSEE DID NOT SUBMIT DETAILS AND DOCUMENTS DESIR ED BY THE AO , AMOUNT OF SALE CONSIDERATION OF RS.10,20,501/- WAS ADDED U/S 68 OF THE ACT . THE LD. CIT(A) UPHELD THE ADDITION WHILE DISCARDING COPIES OF DEMA T ACCOUNT PLACED BEFORE HIM ON THE GROUND THAT THESE WERE UNSIGNED AND NO REQ UEST WAS MADE TO ADMIT THE ADDITIONAL EVIDENCE IN TERMS OF RULE 46A OF THE IT RULES,1962..EVEN OTHERWISE, SUFFICIENT OPPORTUNITY HAD BEEN PROVIDED BY THE AO, THE LD. CIT(A) OBSERVED. BEFORE, PROCEEDING FURTHER , WE MAY HAVE A LOOK AT THE RELEVANT RULE 46A OF THE IT RULES 1962, WHICH READS AS UNDER: (1) THE APPELLANT SHALL NOT BE ENTITLED TO PRODUCE BEFORE THE DEPUTY COMMISSIONER (APPEALS) OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS), ANY EVIDENCE, WHETHER ORAL OR DOCUMENTARY, OTHER TH AN THE EVIDENCE PRODUCED BY HIM DURING THE COURSE OF PROCEEDINGS BEFORE THE ASS ESSING OFFICER, EXCEPT IN THE FOLLOWING CIRCUMSTANCES, NAMELY:-- (A) WHERE THE ASSESSING OFFICER HAS REFUSED TO ADMI T EVIDENCE WHICH OUGHT TO HAVE BEEN ADMITTED;OR (B) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE EVIDENCE WHICH HE WAS CALLED UPON TO PRODUCE BY THE ASSESSING OFFICER; OR (C) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING BEFORE THE ASSESSING OFFICER ANY EVIDENCE WHICH IS RELEVAN T TO ANY GROUND OF APPEAL; OR ITA N O.4040/AHD/2008 5 5 (D) WHERE THE ASSESSING OFFICER HAS MADE THE ORDER APPEALED AGAINST WITHOUT GIVING SUFFICIENT OPPORTUNITY TO THE APPELLANT TO A DDUCE EVIDENCE RELEVANT TO ANY GROUND OF APPEAL. (2) NO EVIDENCE SHALL BE ADMITTED UNDER SUB-RULE (1 ) UNLESS THE DEPUTY COMMISSIONER (APPEALS) OR AS THE CASE MAY BE, THE C OMMISSIONER (APPEALS) RECORDS IN WRITING THE REASONS FOR ITS ADMISSION. (3)THE DEPUTY COMMISSIONER(APPEALS) OR, AS THE CA SE MAY BE, THE COMMISSIONER (APPEALS) SHALL NOT TAKE INTO ACCOUNT ANY EVIDENCE PRODUCED UNDER SUB-RULE (1) UNLESS THE INCOME-TAX OFFICER HA S BEEN ALLOWED A REASONABLE OPPORTUNITY- (A) TO EXAMINE THE EVIDENCE OR DOCUMENT OR TO CROS S-EXAMINE THE WITNESS PRODUCED BY THE APPELLANT, OR (B) TO PRODUCE ANY EVIDENCE OR DOCUMENT OR ANY WITN ESS IN REBUTTAL OF THE ADDITIONAL EVIDENCE PRODUCED BY THE APPELLANT. (4) NOTHING CONTAINED IN THIS RULE SHALL AFFECT THE POWER OF THE DEPUTY COMMISSIONER (APPEALS) OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS) TO DIRECT THE PRODUCTION OF ANY DOCUMENT, OR THE EXAMI NATION OF ANY WITNESS, TO ENABLE HIM TO DISPOSE OF THE APPEAL, OR FOR ANY OTH ER SUBSTANTIAL CAUSE INCLUDING THE ENHANCEMENT OF THE ASSESSMENT OR PENALTY (WHETH ER ON HIS OWN MOTION OR ON THE REQUEST OF THE ASSESSING OFFICER) UNDER CLAUSE (A) OF SUB SECTION (1) OF SECTION 251 OR THE IMPOSITION OF PENALTY UNDER SECT ION 271. ' 5.1 IT IS EVIDENT FROM THE AFORESAID PROVISIONS THAT TH E LD. CIT(A) CAN TAKE INTO ACCOUNT ANY EVIDENCE PRODUCED UNDER SUB-R. (1) OF R ULE 46A OF THE IT RULES, 1962 FOR ANY OTHER SUBSTANTIAL CAUSE IN TERMS OF SU B-RULE (4) OF THE SAID RULE .IN THE CASE UNDER CONSIDERATION, THE DOCUMENTS PLACED AT SR. NO.5 TO 9 & 11 OF THE PAPER BOOK WERE ADMITTEDLY FILED BEFORE THE LEARNED CIT(A) FOR THE FIRST TIME. UNDISPUTEDLY, THOUGH THE AO HAD PROVIDED SEVERAL OP PORTUNITIES TO THE ASSESSEE TO ESTABLISH THE PURCHASE AND SALE OF THE SHARES O F THE AFORESAID COMPANY, THE ASSESSEE COULD NOT FURNISH COPY OF DEMAT ACCOUNT OR OTHER RELEVANT DOCUMENTS NOR THE CONCERNED BROKER RESPONDED. WE ARE OF THE O PINION THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN IGNORING THESE DOCUMENTS, ESP ECIALLY WHEN PURCHASE OF SHARES DOES NOT APPEAR TO HAVE BEEN DISPUTED IN THE PRECEDING YEAR AND SUB- RULE(4) OF RULE 46A EMPOWERS HIM TO ADMIT THE ADDI TIONAL EVIDENCE IN THE INTEREST OF SUBSTANTIAL JUSTICE. THE POWERS OF THE CIT(A) IN TERMS OF RULE 46A TO ADMIT FRESH EVIDENCE, ENTAILS AN ELEMENT OF DISCRETION WH ICH IS REQUIRED TO BE EXERCISED IN A JUDICIOUS MANNER. THE POWERS OF THE CIT(A) TO ADMIT ADDITIONAL EVIDENCE ARE ITA N O.4040/AHD/2008 6 6 NOT ONLY IN SITUATIONS WHERE THE EVIDENCE COULD NOT BE PRODUCED BEFORE LOWER AUTHORITIES OWING TO LACK OF ADEQUATE OPPORTUNITY B UT ALSO IN SITUATIONS WHERE THE FRESH EVIDENCE WOULD ENABLE THE CIT(A) TO DISPOSE O F THE APPEAL OR FOR ANY OTHER SUBSTANTIAL CAUSE. OF COURSE, THE POWER IS TO BE E XERCISED JUDICIOUSLY AND FOR REASONS TO BE RECORDED. IN THE INSTANT CASE, WE FIN D FROM THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) THAT THE SAID FRESH EVIDENCE BEING PRODUCED SEEKS TO CLEAR THE OBSCURITY, THEREBY LEADING TO CORRECT APPRECIAT ION OF FACTS AND, IN OUR VIEW, THE ADMISSION OF THE SAME IS VERY MUCH WITHIN THE REALM OF THE EXPRESSION 'FOR ANY OTHER SUBSTANTIAL CAUSE' MENTIONED IN RULE 46A OF T HE I.T.RULES,1962. THEREFORE, THE SAID EVIDENCE DESERVES TO BE ADMITTED IN THE IN TEREST OF SUBSTANTIAL JUSTICE SO AS TO REMOVE THE OBSCURITY IN THE ORDER OF THE LOWE R AUTHORITIES ON THIS ISSUE. ACCORDINGLY, IN THE INTEREST OF JUSTICE AND FAIR P LAY, WE VACATE THE FINDINGS OF THE LD. CIT(A) AND RESTORE THE MATTER TO HIS FILE WITH THE DIRECTIONS TO ADMIT THE ADDITIONAL EVIDENCE AND FOLLOW THE MANDATE IN TERMS OF RULE 46A(1) TO (4) OF THE IT RULES, 1962 AND THEREAFTER, DISPOSE OF THE MAT TER IN ACCORDANCE WITH LAW AFTER ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES . IT MAY BE CLARIFIED THAT THE LD. CIT(A) IS FREE TO UNDERTAKE ANY INDEPENDENT ENQUIRE S, IF FOUND NECESSARY AND THEREAFTER, MAY PASS SUCH ORDERS AS HE DEEMS PROPER , IN ACCORDANCE WITH LAW. WITH THESE DIRECTIONS, GROUND NO. 1 RAISED IN THE APPEAL IS DISPOSED OF AS INDICATED HEREINBEFORE. 6. GROUND NO. 2 BEING GENERAL IN NATURE NOR ANY SUBMISSIONS HAVINGBEEN MADE BY THE LD. AR, DOES NOT REQUIRE ANY SEPARATE ADJUDICAT ION WHILE NO ADDITIONAL GROUND HAVING BEEN RAISED IN TERMS OF THE RESIDUARY GROUND NO. 3 IN THE APPEAL, BOTH THESE GROUNDS ARE DISMISSED. 7. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICA L PURPOSES. ORDER PRONOUNCED IN THE COURT TODAY ON 10-05-2011 SD/- SD/- (T K SHARMA) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 10-05-2011 ITA N O.4040/AHD/2008 7 7 COPY OF THE ORDER FORWARDED TO: 1. SMT. CHANDADEVI PATODIA, 5/A, SAGAR APARTMENT, U MARA JAKATNAKA, SURAT 2. THE ITO, WARD-3(3), SURAT 3. CIT CONCERNED 4. CIT(A)-II, SURAT 5. DR, ITAT, AHMEDABAD BENCH-D, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD