SUNILKUMAR GOYAL, MUMBAI V. ITO 19(1)(2), MUMBAI

ITA 4125/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88621 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2006-2007
• Appeal Filed On: 22-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Keywords: Unexplained cash credit
• Section: 68

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ./ I.T.A. NO.4125 /MUM/2013 ( / ASSESSMENT YEAR 2006-07 SHRI SUNIL KUMAR GOYAL, C/O SHANKARLAL JAIN & ASSOCIATES, 12, ENGINEER BUILDING, 265, PRINCESS STREET, MUMBAI 400 002. / VS. INCOME TAX OFFICER - 19(1)-2, PIRAMAL CHAMBERS, BOMBAY. ./ PAN : AEJPG9364E ( / APPELLANT ) .. ( / RESPONDENT ) ./ I.T.A. NO.4126 /MUM/2013 ( / ASSESSMENT YEAR 2006-07 SHRI SUNIL KUMAR GOYAL (HUF), C/O SHANKARLAL JAIN & ASSOCIATES, 12, ENGINEER BUILDING, 265, PRINCESS STREET, MUMBAI 400 002. / VS. INCOME TAX OFFICER - 19(1)-2, PIRAMAL CHAMBERS, BOMBAY. ./ PAN : AABHG8756N ( / APPELLANT ) .. ( / RESPONDENT ) A PPELLANT BY SHRI S.L. JAIN R E SPONDENT BY : SH RI NEIL PHILIP / DATE OF HEARING : 18-03-2015 / DATE OF PRONOUNCEMENT : 18-03-2015 [ ITA 4125 & 4126/M/13 2 !' / O R D E R PER R.C. SHARMA, AM : THESE ARE THE APPEALS FILED BY THE ASSESSEE ARE DIR ECTED AGAINST THE ORDERS PASSED BY THE LD. CIT(A) -22, MUMBAI DATED 5 -4-2013 FOR THE ASSESSMENT YEAR 2006-07. 2. IN BOTH THESE APPEALS, THE ASSESSEE IS AGGRIEVED FOR ADDITION MADE BY THE A.O. U/S 68 OF THE INCOME TAX ACT, 1961 IN RESP ECT OF SALES REALIZATION OF SHARES. 3. THE GROUNDS TAKEN IN BOTH THESE APPEALS ARE, SAM E, IN ONE APPEAL THE ASSESSEE IS IN THE CAPACITY OF INDIVIDUAL WHEREAS I N THE OTHER APPEAL HE IS DOING IN THE CAPACITY OF HUF. 4. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL CARRYIN G ON THE BUSINESS OF JEWELLERY IN THE PARTNERSHIP NAMED AND STYLED AS 'B ALAJI JEWELS' AND ALSO DERIVES INCOME FROM CAPITAL GAIN AND OTHER SOURCES. DURING THE YEAR, THE ASSESSEE HAS DECLARED RS.5,25,934/- BY WAY OF SHORT TERM CAPITAL GAIN BUT THE A.O. HAS CONSIDERED THE ENTIRE TRANSACTION AS SHAM AND ADDED BACK THE ENTIRE SALE CONSIDERATION OF RS.15,74,087/- TO THE INCOME OF THE ASSESSEE AS UNEXPLAINED CASH CREDIT. THE AO HAS DISCUSSED IN DE TAIL IN THE ASSESSMENT ORDER AS TO WHY THE ENTIRE AMOUNT OF RS. 15,74,087/ - WAS CONSIDERED AS UNEXPLAINED CASH CREDIT. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE ADDITION AFTER HAVING THE FOLLOWING OBSERVATION:- 5. I HAVE GONE THROUGH THE SUBMISSION OF THE APPEL LANT AND ALSO THE OBSERVATIONS MADE BY THE AO IN THE ASSESSMENT ORDER . FROM THE PERUSAL OF THE ASSESSMENT ORDER IT IS SEEN THAT IT IS NOT A CASE WHERE AS PER THE APPELLANT, THE AO HAS MADE INFERENCE ABOUT GENUINENESS OF THE TRANSACTION SOLELY BASED ON DISBELIEF THAT NO BROKE R COULD HAVE WAITED FOR THE PAYMENT OR THE TRANSACTION COULD NOT HAVE T AKEN PLACE WITHOUT ITA 4125 & 4126/M/13 3 THE COMPLIANCE WITH THE PROCEDURE. DURING THE ENTIR E ASSESSMENT PROCEEDING, THE AO HAS MADE VARIOUS INQUIRIES FROM THE BROKER M/S VISHWAS SECURITIES LTD., FROM NATIONAL STOCK EXCHAN GE (NSE) AND FROM DEPOSITORY M/S CHURIWALA SECURITIES PVT. LTD. THE A O HAS ALSO CONFRONTED ASSESSEE TIME AND AGAIN ABOUT WHATEVER I NFORMATION HAS BEEN RECEIVED FROM VARIOUS INQUIRIES. FROM THE ENTI RE INQUIRIES AND THE VERIFICATION CARRIED OUT BY THE AO DURING THE COURS E OF ASSESSMENT PROCEEDING, FOLLOWING FACTS HAVE EMERGED: (I) SHARES WORTH RS.10,44,5601- HAVE BEEN PURCHASED IN THE MONTH OF OCTOBER, 2005. (II) THE PURCHASE CONSIDERATION HAS NOT BEEN PAID BY THE ASSESSEE TILL 13.12.2005. (III) ON 13.12.2005 AN AMOUNT OF RS.50,0001- HAS BEEN PAI D. (IV) THE PATTERN OF PAYMENT OF PURCHASE CONSIDERATION SH OWS THAT THE AMOUNTS HAVE BEEN PAID AFTER CONSIDERABLE GAP AND J UST A FEW DAYS BEFORE THE DATE OF SALE. (V) THE SHARES HAVE BEEN TRANSFERRED TO THE DEMAT A /C OF THE ASSESSEE ON 27.02.2006 ONWARDS. (V) ALL THE SCRIPS HAVE BEEN HELD FOR A PERIOD RANGING 0 DAY TO MAXIMUM 1 DAY. IT IS SEEN THAT THE NATIONAL STOCK EXCHANGE (NSE) H AS CONFIRMED THAT NO TRANSACTION HAS BEEN DONE IN THE CLIENT CODE OF APP ELLANT BY THE BROKER M/S VISHWAS SECURITIES LTD. DURING THE COURSE OF ASSESS MENT PROCEEDING, THE APPELLANT DID NOT BRING ANY EVIDENCE ON RECORD TO P ROVE THE GENUINENESS OF THE PURCHASE TRANSACTION OF THE SHARES NOR HAS PRODUCED ANY MATERIAL EVIDENCE TO REBUT THE FINDINGS OF THE AO. THE AO'S CONTENTION T HAT THE ASSESSEE HAS FAILED TO PRODUCE ORIGINAL PURCHASE BILLS THROUGH WHICH TH E OWNERSHIP IN THE SHARES HAS BEEN TRANSFERRED IN ITS NAME AND THE BROKER ALS O FAILED TO PROVIDE THE ORIGINAL PURCHASE BILLS/BROKERS NOTES WHICH WOULD H AVE HELPED IN ASCERTAINING THE ORIGINAL CLIENT CODE IN WHICH THE SHARES HAVE B EEN PURCHASED. NOW, THE QUESTION ARISES IF THE APPELLANT COULD NOT PRODUCE THE PROPER INFORMATION DURING THE COURSE OF ASSESSMENT PROCEEDING THEN CAN THE TRANSACTION BE HELD AS VALID. THE ANSWER IS ONCE THE AUTHENTICITY OF TH E TRANSACTION HAS BEEN RAISED BY THE AO DURING .THE COURSE OF ASSESSMENT P ROCEEDING, IT IS THE BOUNDEN DUTY OF THE ASSESSEE TO SATISFY AND EXPLAIN PROPERLY HIS CONTENTION. IN THE INSTANT CASE, IT IS SEEN THAT THE APPELLANT HAS FAILED TO DO SO AND SO, I AGREE WITH THE FINDINGS OF THE AO THAT THE SAID TRA NSACTIONS ARE NOT GENUINE AND THEY ARE BASICALLY BOOK ENTRIES FOR INTRODUCING CAPITAL IN ITS PARTNERSHIP FIRM - BALAJI ENTERPRISES. IN THE LIGHT OF THE ABOV E DISCUSSION, I HEREBY CONFIRMED THE ACTION OF THE AO IN TREATING THE CRED IT OF RS.15,74,087/ IN THE ITA 4125 & 4126/M/13 4 BOOKS OF THE ASSESSEE AS UNEXPLAINED CASH CREDIT AN D ADDING THEM UNDER TOTAL INCOME U/S.68 OF THE I.T. ACT, 1961. 5. IT WAS CONTENDED BY THE LD. A.R. THAT THE ASSESS EE HAS FURNISHED FULL DETAILS OF AMOUNT PAID FOR PURCHASE OF SHARES AS PE R THE BANK STATEMENT OF PUNJAB & SIND BANK AND ALSO FILED NSE CONFIRMATION OF SALE OF SHARES, CONFIRMATION OF M/S VISHWAS SECURITIES LTD., BILLS OF PURCHASE OF SHARES, BILLS OF SALES OF SHARES ETC. 6. ON THE OTHER HAND, THE LD. D.R. RELIED ON THE OR DERS OF LOWER AUTHORITIES. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFU LLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND FOUND FROM THE RECO RD THAT ASSESSEE HAD ENTERED INTO BROKER-CLIENT AGREEMENT WITH M/S. VISH WAS SECURITIES LTD. (A MEMBER OF NSE) SOMEWHERE IN ABOUT OCTOBER, 2005 AND PAID THE INITIAL MARGIN OF RS.50,000/-. THE BROKER HAD PURCHASED THE SHARES REFERRED IN STATEMENT OF CAPITAL GAIN AND ISSUED THE CONTRACT N OTES FOR THE' SAME. THE BROKER HAD KEPT THE TRANSACTION AND DELIVERY OF THE SHARES IN HIS POOL ACCOUNT. ASSESSEE DID NOT PAY THE AMOUNT AS THE BRO KER HAD NOT DELIVERED IT TO ASSESSEE'S DEMAT ACCOUNT. THE SHARES, PURCHASED IN OCTOBER, 2005 WERE TRANSFERRED TO DEMAT ACCOUNT UPON PAYMENT. THE SHAR ES HAVE BEEN SUBSEQUENTLY SOLD THROUGH THE SAME BROKER IN THE OP EN MARKET. UPON THE SALE OF SHARES THE DELIVERY IS TO BE MADE TO THE BR OKER'S ACCOUNT AND FROM WHERE THE BROKER SUBSEQUENTLY MAKES DELIVERY TO THE STOCK EXCHANGE. THE LETTER OF THE BROKER CONFIRMS THE ABOVE FACT OF PUR CHASE AS WELL AS HOLDING OF THE SHARES IN POOL ACCOUNT. THE BROKER ALSO EXPLAIN ED THE REASONS FOR TIME GAP IN COMPLETING THE PURCHASE AND ITS PAYMENTS. FU RTHER, THE BROKER HAS CONFIRMED OF NOT CHARGING ANY INTEREST ON FUNDING I T HAD DONE BETWEEN THE DATE OF PURCHASE AND DATE OF RECEIPT OF PAYMENTS. T HE LETTER OF NSE NOWHERE SAYS THAT THE BROKER NEVER PURCHASED THE SAID SHARE S. ITA 4125 & 4126/M/13 5 8. WITH REGARD TO THE A.O.S COMMENTS OF DELIVERY O F SHARES TO THE SAME BROKER'S ACCOUNT, IT HAS TO BE SO AS THE INVESTOR C ANNOT MAKE DIRECT DELIVER TO THE EXCHANGE. ASSESSEE HAS TO ROUTE THE DELIVERY OF SHARES THROUGH THE BROKER'S DEMAT ACCOUNT. IN ANY CASE, THE BROKER HAD CONFIRMED THAT THE TRANSACTION WAS IN POOL ACCOUNT AND, OBVIOUSLY, THE REFORE, FIRSTLY, THE DELIVERY WAS IN THE ACCOUNT OF THE BROKER AND SUBSEQUENTLY I T WAS TRANSFERRED. 9. WE FIND THAT A.O. OVERLOOKED THE FACT THAT THE C REDIT TO THE BANK ACCOUNT OF THE ASSESSEE WAS IN RESPECT OF SHARES SO LD AND DELIVERED OUT OF DEMAT ACCOUNT. THUS, THERE IS NO QUESTION OF SAME B EING UNEXPLAINED. SIMILARLY, THE PAYMENT FOR PURCHASE WERE MADE FROM THE ASSESSEE'S BANK ACCOUNT AND THE SAID PAYMENT WAS FOR SHARES PURCHAS ED AND CREDITED TO THE DEMAT ACCOUNT OF THE ASSESSEE. 10. FROM THE RECORD WE FOUND THAT AS PER THE UNDERS TANDING OF ASSESSEE, PAYMENT FOR THE SHARES WAS TO BE MADE UPON DELIVERY THEREOF. ASSESSEE EFFECTED THE PAYMENTS ONLY AT THE TIME OF DELIVERY OF SHARES IN HIS DEMAT ACCOUNT. THE BROKER DID PURCHASE THE SHARES BUT TO SAFEGUARD HIS POSITION, DID NOT ENTER INTO TRANSACTION IN THE NAME OF APPEL LANT BUT ENTERED INTO THE TRANSACTION IN POOL ACCOUNT. THE PRECAUTION TAKEN B Y THE BROKER ACCORDS WITH THE COMMERCIAL PRACTICE OF ENTERING INTO BUSINESS I N A MANNER, WHICH DOES NOT AFFECT HIS INTERESTS AND, IN FACT, SECURES HIS INTERESTS. A.O. HAS RECORDED THE FACT OF PURCHASES, DELIVERY, PAYMENT, SALE, DEL IVERY THEREOF AND REALIZATION OF CONSIDERATION. HE HAS NOT RAISED ANY DOUBTS OR P ASSED ANY ADVERSE COMMENTS IN RELATION TO THE FACT OF PURCHASES, DELI VERY, PAYMENT, SALE, DELIVERY THEREOF AND REALIZATION OF CONSIDERATION. AO HAS NOT DISPUTED THE FACT THAT DELIVERY DID TAKE PLACE INTO AND FROM HIS DEMA T ACCOUNT. AO HAS NOT DISPUTED THE FACT ABOUT PAYMENT MADE FOR PURCHASES AS WELL AS REALIZATION OF SALES. HE HAS NOT DOUBTED THE GENUINENESS THEREOF. EVEN HE HAS NOT RECORDED ANY FINDING TO THE EFFECT THAT THE PAYMENTS AND/OR REALIZATION WERE ONLY ITA 4125 & 4126/M/13 6 MAKE-BELIEVE. THE BROKER DID ENTER INTO TRANSACTION S, WHICH WERE VERIFIED BY AO WITH CONCERNED AUTHORITIES. THE BROKER HAS CONFI RMED THE TRANSACTION. IN THAT, A DOUBT HAS BEEN RAISED BY OBSERVING 'CONTRAC T NOTES ISSUED APPEAR TO BE FAKE.' HOWEVER, HE HAS NOT GIVEN A CATEGORICAL F INDING TO THE EFFECT THAT THE CONTRACT NOTES ISSUED WERE FAKE EITHER ON THE BASIS OF INDEPENDENT EVIDENCE OR ON THE BASIS OF THE RECORDS OF THE BROKER. RELIANCE IN THIS CONNECTION IS PLACED ON THE DECISION OF SUPREME COURT IN THE CASE OF SRE ELEKHA BANERJEE & ORS. V. COMMISSIONER OF INCOME TAX, BIHAR AND ORISSA (1963) (49 ITR 112) WHEREIN IT HAS BEEN HELD THAT THE DEPARTMENT CANNOT BY MERELY REJECTING UNREASONABLY A GOOD EXPLANATION, CONVERT GOOD PROOF INTO NO PROOF. THE INFERENCE ABOUT GENUINENESS OF THE TRANSACTION IS SOLELY BASED ON D ISBELIEF, NAMELY, NO BROKER COULD HAVE WAITED FOR THE PAYMENT OR THE TRANSACTIO N COULD NOT HAVE TAKEN PLACE WITHOUT THE COMPLIANCE WITH THE PROCEDURE. IN THAT, THE COMMERCIAL PRACTICE OF ENTERING INTO TRANSACTION ON HIS OWN AC COUNT IN TERMS OF COMMERCIAL UNDERSTANDING WITH THE CUSTOMER IN CERTA IN CIRCUMSTANCES HAS NOT BEEN CONSIDERED. WHILE DRAWING THE INFERENCE, A .O. TOTALLY IGNORED THE FACT ABOUT VERIFIABLE PAYMENT THOUGH BANK ACCOUNT; VERIF IABLE RECEIPT OF DELIVERY IN DEMAT ACCOUNT; VERIFIABLE DELIVERY FROM DEMAT ACCOU NT; AND PAYMENT THROUGH THE BANK ACCOUNT. HOWEVER, WHEN THE VERIFIABLE AND/ OR VERIFIED DELIVERIES AND PAYMENTS ARE VISIBLE ON RECORD THERE IS NO MERIT IN THE ACTION OF LOWER AUTHORITY FOR TREATING THE SALE PROCEEDS OF SHARES CREDITED IN BANK ACCOUNT AS UNEXPLAINED CASH CREDIT U/S 68 OF THE INCOME TAX AC T. 11. FACTS IN ITA NO. 4126/MUM/2013 WHEREIN ASSESSEE WAS TRANSACTING IN THE CAPACITY OF HUF ARE SAME, FOLLOWING THE REASONI NG DISCUSSED ABOVE, WE DO NOT FIND ANY MERIT IN THE ORDERS PASSED BY THE LOWE R AUTHORITIES. ITA 4125 & 4126/M/13 7 12. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH MARCH, 2015. !' # $% &! ' 18-03-2015 ( ) SD/- SD/- (SANJAY GARG) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER $ 5 MUMBAI ; &! DATED 24-03-2015 [ .=../ RK , SR. PS ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. > () / THE CIT(A) CONCERNED,, MUMBAI 4. > / CIT -CONCERNED, MUMBAI 5. AB( ==CD , CD , $ 5 / DR, ITAT, MUMBAI E BENCH 6. (FG H / GUARD FILE. ' / BY ORDER, A = //TRUE COPY// (/') * ( DY./ASSTT. REGISTRAR) , $ 5 / ITAT, MUMBAI