ITO 26(2)(2), MUMBAI V. VISHAL VINOD SHAH, MUMBAI

ITA 4209/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3817 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2003-2004
• Appeal Filed On: 11-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C SABOO
• Assessee Lawyers: NEIL PHILIP
• Keywords: Unexplained investment; Income from undisclosed sources; Share purchase agreement; Opportunity of being heard; Opportunity of cross examination; Speculation loss; Accommodation entries
• Section: 54F; 142(1); 147; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI JASON P BOAZ, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER ITA NO.4209(MUM ) 2014 (ASSESSMENT YEAR : 2003-04) THE INCOME-TAX OFFICER, WARD-26(2)(2), MUMBAI APPELLANT VS SHRI VISHAL VINOD SHAH, NO.30, WARDEN COURT, 79/81, AUGUST KRANTI MARG, MUMBAI-400 036 PAN NO.ADUPS8129B RESPONDENT ASSESSEE BY : SHRI NEIL PHILIP REVENUE BY : SHRI D.C.SABOO DATE OF HEARING : 25-05-2016 DATE OF PRONOUNCEMENT : 1 0-08-2016 O R D E R PER SHRI SANDEEP GOSAIN, JUDICIAL MEMBER THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AG AINST THE ORDER OF CIT(A)-28,MUMBAI DATED 27-03-2014 IN APPEAL NO.CIT( A)- 28/ITO.26(2)(2)/417/10-11 FOR THE ASSESSMENT YEAR : 2003-04 ON THE FOLLOWING GROUNDS; 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN LAW IN DELETING THE ADDITION OF RS.43,52,980/- BY HOLDING THAT THE ASSESSEE WAS NOT GRANTED THE OPPORTUNITY OF CROSS ITA NO.4209(MUM)/2014 2 EXAMINATION OF SHRI MUKESH CHOKSI, MANAGING DIRECTO R OF MAHANAGAR SECURITIES PVT.LTD. WITHOUT APPRECIATING THAT THE POWERS OF CIT(A) ARE CO-TERMINUS WITH THE POWER S OF ASSESSING OFFICER AND HE COULD HAVE GIVEN THE OPPORTUNITY OF CROSS EXAMINATION OF SHRI MUKESH CHO KSI TO THE ASSESSEE INSTEAD OF POINTING OUT THE LACUNA IN THE REMAND REPORT OF THE ASSESSING OFFICER AND CONSEQUE NTLY DELETING THE ADDITION. THIS IS SUPPORTED BY THE DEC ISION IN THE CASE OF CIT VS KANPUR COAL SYNDICATE (53 ITR 22 5 (HON'BLE SUPREME COURT) (1964), JUTE CORPN. OF INDI A LTD VS CIT (53 TAXMAN 85 (HON'BLE SUPREME COURT) (1990) & CIT VS K.S. DATTREYA (197 TAXMANN 151 (KAR.) (2011) . 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.43,52,980/- MADE UNDER THE HEAD OF INCOME FROM OTHER SOURCES, INCOME FROM UNDISCLOSED SOURCES. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FINDIN GS OF THE ASSESSING OFFICERS REMAND REPORT AS WELL AS DDIT(I NV.) UNIT-1(4), MUMBAI. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THE DISCREP ANCIES AND SHORTCOMINGS POINTED OUT BY THE ASSESSING OFFIC ER IN REMAND REPORT FOR UNEXPLAINED INVESTMENT IN PURCHAS E OF SHARES OF M/S BUNIYAD CHEMICALS LTD., 5. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT O F THE ASSESSING OFFICER BE RESTORED. 6. THE APPELLANT CRAVES LEAVE TO AMEND OR TO ALTER ANY GROUND OR ADD A NEW GROUND. ITA NO.4209(MUM)/2014 3 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILE D HIS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.1,37,050/-. TH E CASE WAS RE-OPENED U/S 147 OF THE IT ACT, PURSUANT TO INFORMATION RECE IVED FROM THE DDIT(INV.)-1(4), MUMBAI AND AFTER SERVING STATUTORY NOTICES U/S 142(1) OF THE IT ACT, 1961 UPON THE ASSESSEE. IT WAS FOUND BY THE ASSESSING OFFICER THAT IN THIS CASE, THE INFORMATION WAS RECEIVED FRO M DDIT(INV.)-1(4), MUMBAI THAT THE ASSESSEE WAS INVOLVED IN PURCHASE O F ENTRIES OF SHARES PROFIT OF RS.43,52,980/-. THE ASSESSEE WAS ASKED T O EXPLAIN THE SOURCES OF THE SAME AND SINCE THE LD. AR COULD NOT GIVE SATISF ACTORY EXPLANATION TO THE AO, THEREFORE, THE AO WHILE TAKING INTO CONSIDERATI ON THE STATEMENTS RECORDED OF SHRI MUKESH CHOKSI BY THE DDIT(INV.)-1( 4), REACHED TO THE CONCLUSION THAT THE ASSESSEE HAS INVESTED HIS OWN M ONEY FROM HIS UNDISCLOSED SOURCES INTO SHARES AND THEN HE SOLD TH E SAME IN THE OPEN MARKET TO AVAIL THE BENEFIT OF LONG TERM CAPITAL GA INS. THE AO HELD THAT THE AMOUNT OF RS.43,52,980/- TO BE ASSESSEES INCOME FR OM UNDISCLOSED SOURCES AND THEREFORE, ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE VIDE ORDER OF ASSESSMENT DATED 29-12-2010. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE P REFERRED AN APPEAL BEFORE THE CIT(A) AND THE CIT(A) AFTER CONSIDERING THE CASE OF BOTH THE PARTIES, PARTLY ALLOWED THE APPEAL; FILED BY THE AS SESSEE AND DELETED THE ADDITIONS OF RS.43,52,980/- AND TREATED THE PROFIT ON THE SALE OF SHARES TO BE LONG TERM CAPITAL GAINS VIDE ORDER DATED 27-03-2 014. ITA NO.4209(MUM)/2014 4 4. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE REV ENUE PREFERRED THE PRESENT APPEAL BEFORE US ON THE GROUNDS MENTIONED A BOVE. ] 5. GROUND NOS.5 & 6 ARE GENERAL IN NATURE AND IT DO ES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 6. GROUND NOS. 1 TO 4 IN THIS APPEAL ARE INTER-CONN ECTED AND INTER- RELATED THEREFORE, WE DEEM IT PROPER TO ADJUDICATE THESE GROUNDS TOGETHER. THESE GROUNDS OF APPEAL OF THE REVENUE RELATES TO T HE ISSUE OF DELETING THE ADDITION OF RS.43,52,980/- MADE UNDER THE HEAD IN COME FROM OTHER SOURCES. 7. WE HAVE HEARD THE COUNSEL FOR BOTH THE PARTIES A ND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS TH E ORDERS PASSED BY THE REVENUE AUTHORITIES. THE LD.CIT(A) WHILE DEALING W ITH THESE GROUNDS HAS DECIDING THE SAME IN PAR-3.3 OF HIS ORDER AND THE S AME IS REPRODUCED HEREUNDER; 3. 3 I HAVE CONSIDERED THE SUBMISSION OF THE AR AND ORDER OF THE AO AS WELL AS REMAND REPORTS AND REJOI NDER. IT HAS BEEN CLARIFIED BY THE AO, VIDE LETTER DATED 04. 01.2012 THAT THE ASSESSEE'S CASE WAS ORIGINALLY WITH ITO 16 (1)(1), MUMBAI AND THE PAN WAS ALSO LYING WITH HIM ONLY. ACCORDINGLY, HE ISSUED NOTICE U/S.148. NOTICE U/S 1 43(2) DATED 26/05/20 I 0 WAS ALSO ISSUED BY HIM FOR INITI ATING SCRUTINY ASSESSMENT PROCEEDINGS, WHICH WAS DULY SER VED ON THE ASSESSEE. THEREAFTER WHEN THE MATTER' WAS BR OUGHT TO HIS ATTENTION, HE TRANSFERRED THE FILE TO ITO 26 (2)(2), ITA NO.4209(MUM)/2014 5 MUMBAI WHERE THE ASSESSEE WAS CURRENTLY ASSESSED, W HO THEN CONDUCTED THE ASSESSMENT PROCEEDINGS AND PASSE D THE ASSESSMENT ORDER. THEREFORE THE NOTICE ISSUED U /S.148 AND THE ASSESSMENT PROCEEDINGS ARE LEGALLY VALID. REGARDING NOT PROVIDING OPPORTUNITY OF BEING HEARD AND NOTICE U/S.142(1) NOT BEING SERVED, THE EXPLANATION PROVIDED BY THE AO VIDE REPORT DATED 04/01/2012 BRI NGS OUT THAT THE ORIGINAL NOTICE U/S.142( I) WAS ISSUED ON 09.12.20 LO AND WAS .SERVED BY SPEED POST, FIXING T HE HEARING ON 16.12.20 I O. SHRI. DEEPAK SHAH, CA ATTE NDED ON W0.12.2010 TO WHOM ALSO A COPY OF THE SAID NOTIC E WAS HANDED OVER. HE REQUESTED FOR TIME AND THE CASE WAS ADJOURNED TO 24.12.2010 ON WHICH DATE NO ONE ATTEND ED. SHRI DEEPAK SHAH ATTENDED ON 27.12.2010 ON WHICH DA TE NO ONE ATTENDED. SHRI DEEPAK SHAH ATTENDED ON 27.12.2010 ON WHICH DATE NO ONE ATTENDED. SHRI DEE PAK SHAH ATTENDED AND FILED DETAILS. THUS IT CANNOT BE SAID THAT OPPORTUNITY OF BEING HEARD WAS NOT GIVEN TO TH E APPELLANT. THESE AND OTHER TECHNICAL OBJECTIONS RAISED BY THE APPELLANT HAVE BEEN SUFFICIENTLY MET BY THE AO IN H IS 'REPORT DATED 04.01.2012. IT IS THEREFORE HELD THAT THE REOPENING OF THE CASE WAS DONE BY FOLLOWING DUE PROCEDURE AND IS LEGALLY VALID AS ALSO THE ASSESSME NT ORDER PASSED. GROUND OF APPEAL NO.L TO 5 ARE THEREF ORE DISMISSED. SIMILARLY THE OBJECTIONS RAISED BY THE AO IN FINAL REMAND REPORT DATED 26/02/2014 HAVE BEEN SUFFICIENT LY MET BY AR IN THEIR REJOINDER DATED 22/03/2014. THE AO HAS POINTED OUT A NUMBER OF DISCREPANCIES AND SHORTCOMINGS IN THE ASSESSEE'S EXPLANATION REGARDIN G THE ITA NO.4209(MUM)/2014 6 SHARE TRANSACTIONS, ESPECIALLY W.R.T. SCRIPS OF BUN IYAD CHEMICALS.' IT IS ALLEGED THAT SINCE THE SHARES WER E STATED TO BE FINANCED OUT OF SPECULATIVE PROFITS AND THE A SSESSEE DID NOT PAY FOR THESE SHARES SEPARATELY, THE PURCHA SE IS DOUBTFUL. THIS AND THE DISCREPANCY POINTED OUT IN P ARA 2.1 AND PARA 3 REGARDING THE NUMBER OF SCRIPS SOLD LEAD ING 10 SHARE PROFIT OF RS 1,67,3301-, HAS BEEN CLARIFIED SATISFACTORILY BY THE AR IN REJOINDER DATED 22/03/2 014 THAT THERE IS NO REAL DIFFERENCE . AND THE CONFUSIO N IS ONLY DUE TO POOR DRAFTING. WITH RESPECT TO THE DISCREPAN CY POINTED OUT BY THE. AO IN PARA 3. L, PARA 6, 6.1 AN D PARA 6.2 REGARDING THE MARKET RATES OF SCRIPS BOUGHT AND SOLD BEING VERY DIFFERENT FROM WHAT IS SHOWN IN THE BILL S SUBMITTED BY THE APPELLANT, IT IS SEEN THAT THESE B ILLS LEADING TO SHARE PROFITS RELATE TO AY 2002-03 AND N OT TO THE YEAR UNDER CONSIDERATION. ACCORDINGLY, THE EFFECT O F THE DISCREPANCIES HAS TO BE CONSIDERED IN AY 2002-03 ON LY, FOR WHICH THE AO IS 'FREE TO T