Daria Hasmukhlal Shah, Ahmedabad V. The Dy.CIT.,Circle-11, Ahmedabad

ITA 422/AHD/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6966 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 14-11-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 15-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROOP CHAND SR DR
• Assessee Lawyers: D K PARIKH
• Keywords: Business income; Principle of natural justice; Difference of opinion

Judgement Text

, , , , D, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, D BENCH . .. . . .. . , !' !' !' !', , , , #$ %&'( #$ %&'( #$ %&'( #$ %&'(, , , , )* + ) ' )* + ) ' )* + ) ' )* + ) ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND ANIL CHATURVEDI, ACCOUNTANT MEMBER) ITA NO.422/AHD/2011 [ASSTT.YEAR : 2007-2008] DARIA HASMUKHLAL SHAH 8, NEW CLOTH MARKET, OS. RAIPUR GATE AHMEDABAD. PAN : BDXSP 1749 D /VS. DCIT, CIR.11 AHMEDABAD. ( (( ( -. -. -. -. / APPELLANT) ( (( ( /0-. /0-. /0-. /0-. / RESPONDENT) 1& 2 3 ) / ASSESSEE BY : SHRI D.K. PARIKH + 2 3 ) / REVENUE BY : SHRI ROOPCHAND, SR.DR 5 2 &(* / DATE OF HEARING : 14 TH NOVEMBER, 2014 678 2 &(* / DATE OF PRONOUNCEMENT : 12/12/2014 )9 / O R D E R PER G.C. GUPTA, VICE-PRESIDENT: THIS APPEAL BY THE ASSESSEE FOR THE ASSTT.YEAR 2007-2008 IS DIRECTED AGAINST THE OR DER OF THE CIT(A). 2. THE GROUNDS OF THE APPEAL OF THE ASSESSEE ARE AS UNDER: 1. THE LD.CIT(A) HAS ERRED BOTH IN LAW AND ON FACT S IN CONFIRMING THE ORDER OF THE AO WHEREBY THE PROFIT ON SALE OF G ENUINE SHARE TRANSACTIONS AMOUNTING TO RS.28,61,792 WHICH WAS CO RRECTLY SHOWN BY THE APPELLANT AS SHORT TERM CAPITAL GAIN, WAS TR EATED BY THE LD.AO AS BUSINESS INCOME AT RS.4,84,392 AND AS INCOME FRO M UNDISCLOSED ITA NO.422/AHD/2011 -2- SOURCES AT RS.23,77,400. THE LD.CIT ERRED BOTH IN LAW AND ON IN NOT APPRECIATING THE SUBMISSIONS MADE AND THE FACTS STA TED IN STATEMENTS OF FACTS BEFORE HIM WHEREBY THE ERRORS COMMITTED BY THE AO WERE POINTED OUT. ON THE FACTS OF THE CASE AND CONSIDER ING TRUE LEGAL POSITION, THE LD.CIT(A) OUGHT TO HAVE CONSIDERED GE NUINE TRANSACTION IN SHARES AND DIRECTED THE AO TO ACCEPT THE SHORT T ERM CAPITAL GAIN AS DECLARED AND TAXABLE AT RATE PRESCRIBED U/S.111- A OF IT ACT. IT BE SO HELD NOW AND THE ORDER OF LD.CIT(A) BE CANCELLED . 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN H OLDING THAT TRANSACTION IN SHARES OF ATLANATA LTD. WAS BOGUS FR OM 9/10/200 TILL 10/01/2007 AND THAT THE ACTION OF THE AO TO TREAT P ROFIT UP TO THAT DATE AS UNDISCLOSED INCOME OF THE APPELLANT AND FUR THER TREATING THE BALANCE AMOUNT AS BUSINESS INCOME WAS CORRECT. THE LD.CIT(A) FAILED TO APPRECIATE THAT ALL THE EVIDENCES, MATERI ALS AND EXPLANATIONS REGARDING BONA FIDE TRANSACTIONS WERE DULY FURNISHED WHICH WERE NOT PROPERLY CONSIDERED BUT WERE REJECTE D ON IRRELEVANT AND UNTENABLE GROUNDS AND PURELY ON CONJECTURES, SU RMISES AND PRESUMPTION. IT BE SO HELD NOW AND THE ORDERS OF B OTH THE LOWER AUTHORITIES BE CANCELLED, BY ACCEPTING THE RETURNED INCOME AND NATURE OF SHORT TERM CAPITAL GAIN AS DECLARED BY AP PELLANT. 3. THE LD.CIT(A) FURTHER ERRED BOTH IN LAW AND ON F ACTS IN NOT CANCELLING THE ORDER OF THE LD.AO WHICH WAS PASSED BY VIOLATING THE PRINCIPLES OF NATURAL JUSTICE AND WITHOUT ANY ADEQU ATE OPPORTUNITY BEING AFFORDED BEFORE TAKING PRESUMPTUOUS ADVERSE I NFERENCE. IT BE SO HELD NOW AND THE ORDER OF THE LD.CIT(A) BE QUASH ED. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ASSESSEE HAS SHOWN PROFIT ON SALE OF GENUINE SHARE TRANSACTION A MOUNTING TO RS.28.61 LAKHS AS SHORT TERM CAPITAL GAIN, WHICH WAS TREATED BY THE AO AS BUSINESS INCOME AT RS.4,84,392/- AND AS INCOME FROM UNDISCLO SED SOURCES AT RS.23,77,400/-. HE SUBMITTED THAT THE REVENUE AUTH ORITIES HAVE NO VALID REASON TO HOLD THAT THE TRANSACTION IN SHARES OF AT LANTA LTD. WERE BOGUS FROM 9.10.2006 TILL 10.1.2007 AND TO TREAT THE PROF IT UPTO THAT DATE AS UNDISCLOSED INCOME OF THE ASSESSEE, AND THE BALANCE INCOME AMOUNT AS BUSINESS INCOME OF THE ASSESSEE. HE SUBMITTED THAT THE ADDITION HAS BEEN MADE PURELY ON PRESUMPTION BASIS. HE SUBMITTED THA T THE ASSESSEE HAS ITA NO.422/AHD/2011 -3- MADE PART PAYMENT OF RS.6 LAKHS FOR PURCHASE OF SHA RES WORTH RS.29,77,400/- AND THE ASSESSEE BEING MINOR AND HAV ING BECOME MAJOR ON 8.11.2005 WAS NOT HAVING DEMAT ACCOUNT OF HER OWN A ND THE SHARES WERE CREDITED TO HER DEMAT ACCOUNT ON 13.1.2007 AND SOLD ON 16.1.2007 AND THE DIFFERENCE AMOUNT WAS SHOWN AS SHORT TERM CAPITAL G AIN OF THE ASSESSEE. 4. THE LEARNED DR HAS OPPOSED THE SUBMISSIONS OF TH E LEARNED COUNSEL OF THE ASSESSEE. HE SUBMITTED THAT WHOLE TRANSACTI ON WAS FICTITIOUS AS THERE WAS NIL BALANCE OF THE SHARES OF ATLANTA LTD., TO T HE CREDIT OF M/S.VOLGA INTERNATIONAL LTD. AS ON 9.10.2006, AND THEREFORE, WHOLE STORY OF THE ASSESSEE THAT IT HAS PURCHASED SHARES OF ATLANTA LT D. FROM THE BROKER, M/S.VOLGA INTERNATIONAL LTD. FALLS TO THE GROUND. HE SUBMITTED THAT DURING THE RELEVANT PERIOD, THE SHORT TERM CAPITAL GAIN WA S ASSESSED AT LESSER RATE OF PROFIT AT 15%, AND THEREFORE, THE ASSESSEE HAS C OOKED UP THE TRANSACTION OF PURCHASE AND SALE OF SHARES. HE SUBMITTED THAT M/S.VOLGA INTERNATIONAL LTD., IS NOT EVEN A REGISTERED SHARE BROKER, AND AS PER THE SEBI GUIDELINES, IT CANNOT DO THE SHARE MARKET OPERATIONS. HE RELIE D ON THE ORDERS OF THE AO AND THE CIT(A). 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT THE ASSESSEE COULD NOT LEAD ANY EVIDENCE TO PROVE THE GENUINENESS OF THE SHARE TRANSACTION O F PURCHASE AND SALE OF SHARES OF M/S.ATLANTA LTD., THROUGH SHARE BROKER, M /S.VOLGA INTERNATIONAL LTD. THE AO HAS SPECIFICALLY RECORDED IN PARA 7 OF HIS ASSESSMENT ORDER THAT M/S.VOLGA INTERNATIONAL LTD. WAS NOT A REGISTE RED SHARE BROKER DURING THE PERIOD. IN PARA 8 OF THE ASSESSMENT THE AO HAS RECORDED THAT THE INFORMATION REGARDING HOLDING OF SHARES OF ATLANTA LTD. WAS FURNISHED BY THE AHMEDABAD STOCK EXCHANGE VIDE THEIR LETTER DATE D 21.12.2009 THAT THERE WAS NIL BALANCE OF SHARES TO THE CREDIT OF M/ S.VOLGA INTERNATIONAL ITA NO.422/AHD/2011 -4- LTD. AS ON 9.10.2006. IN REPLY TO A SPECIFIC QUEST ION FROM THE BENCH, THE LEARNED COUNSEL FOR THE ASSESSEE COULD NOT PLACE ON RECORD ANY EVIDENCE IN SUPPORT OF ITS CLAIM THAT M/S.VOLGA INTERNATIONAL L TD. WAS HAVING REQUISITE NUMBER OF SHARES OF M/S.ATLANTA LTD. DURING THE REL EVANT PERIOD. NO SUCH EVIDENCE WAS FILED BY THE ASSESSEE BEFORE THE AO OR THE CIT(A) OR EVEN BEFORE THE TRIBUNAL IN SPITE OF OPPORTUNITY ALLOWED TO THE ASSESSEE TO DO SO. WE FIND THAT THE UNDISPUTED FACT IS THAT THE TRANSA CTION OF PURCHASES OF SHARES HAS NOT TAKEN PLACE THROUGH ANY STOCK EXCHAN GE OR THROUGH ANY REGISTERED SHARE BROKER. THE SELLER COMPANY M/S.VO LGA INTERNATIONAL LTD. DID NOT HAVE THE SHARES IN ITS DEMATE ACCOUNT ON TH E DATE OF PURCHASE OF SHARES BY THE ASSESSEE. WE FIND THAT THE CIT(A) HA S RIGHTLY RECORDED A FINDING THAT THE REAL TRANSACTION TOOK PLACE ONLY F ROM 10.1.2007, WHEN THE ASSESSEE MADE PART PAYMENT OF RS.6 LAKHS FOR PURCHA SE OF SHARES OF WORTH RS.29,77,400/- AND SHARES WERE TRANSFERRED TO THE A SSESSEE ONLY ON 13.1.2007 AND THE ASSESSEE SOLD THE SHARES ON 16.1. 2007, AND THEREFORE, THE ENTIRE TRANSACTION IS BOGUS FROM 9.10.2006 TILL 10. 1.2007. WE FIND THAT IN THIS CASE, THE ASSESSEE COULD NOT PROVE THE GENUINE NESS OF THE TRANSACTION OF PURCHASE OF SHARES OF ATLANTA LTD. THROUGH M/S.V OLGA INTERNATIONAL LTD., AND THEREFORE, INCOME ARISING THERE FROM COULD NOT BE ASSESSED AS SHORT TERM CAPITAL GAIN, AS CLAIMED BY THE ASSESSEE. IN THE FACTS OF THE CASE, WE FIND THAT THE ASSESSEE IS NOT ENTITLED TO HAVE ITS INCOME ASSESSED UNDER THE HEAD SHORT TERM CAPITAL GAIN AND TO HAVE CONCESSI ONAL TAX THEREON. HOWEVER, WE FIND THAT THE ACTION OF THE REVENUE AUT HORITIES IN BIFURCATING THE PROFIT OF RS.23,77,400/- AS INCOME FROM UNDISCL OSED SOURCES AND THE BALANCE AMOUNT OF RS.4,84,392/- AS BUSINESS INCOME, IS NOT SUSTAINABLE IN LAW. THE AO HIMSELF HAS OBSERVED IN PARA 9 OF THE ASSESSMENT ORDER THAT THE TRANSACTION OF PURCHASE AND SALES ARE TREATED A S ADVENTURE IN THE NATURE OF TRADE OR BUSINESS, AND HAS RELIED ON THE DECISIO NS OF THE HONBLE HIGH ITA NO.422/AHD/2011 -5- COURTS IN SUPPORT OF THIS PROPOSITION. WE FIND THA T PURCHASE PRICE HAS BEEN PAID BY THE ASSESSEE OUT OF ITS DISCLOSED SOURCE AN D THE SALE AMOUNT HAS ALSO BEEN DISCLOSED BY THE ASSESSEE, AND THEREFORE, IT COULD NOT BE SAID THAT THE ASSESSEE HAS EARNED INCOME FROM UNDISCLOSED SOU RCES FOR PART OF THE GAINS ON SALE OF SHARES. IN THE FACTS OF THE CASE, WE ARE OF THE VIEW THAT ENTIRE PROFIT ON SALE OF SHARES OF M/S.ATLANTA LTD. SHOWN BY THE ASSESSEE AT RS.28,61,792/- SHOULD BE ASSESSED UNDER THE HEAD I NCOME FROM BUSINESS IN THE HANDS OF THE ASSESSEE FOR THE REASON THAT TH ERE IS NO INVOLVEMENT OF UNDISCLOSED INCOME IN THE PURCHASE OF SHARES IN QUE STION, AND THE TRANSACTION IS DISCLOSED BY THE ASSESSEE, AND THERE CAN POSSIBLY BE BONA FIDE DIFFERENCE OF OPINION WITH REGARD TO THE CORRECT H EAD OF INCOME UNDER WHICH THE INCOME IN QUESTION SHOULD BE BROUGHT TO T AX. THE AO HAS NOT DISPUTED THE FIGURE OF PROFIT ON PURCHASE AND SALES OF SHARES IN QUESTION AND THE ONLY DIFFERENCE IS WITH REGARD TO THE HEAD OF INCOME UNDER WHICH THE SAME IS ASSESSABLE. IN THESE FACTS OF THE CASE , WHILE WE UPHOLD THE TAXABILITY OF AMOUNT OF RS.28,61,792/- IN THE HANDS OF THE ASSESSEE, WE DIRECT THAT THE SAME BE ASSESSED UNDER THE HEAD IN COME FROM BUSINESS AND THE GROUNDS OF THE APPEAL OF THE ASSESSEE ARE A CCORDINGLY DISPOSED OF. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( %&'( %&'( %&'( %&'( / ANIL CHATURVEDI) )* + )* + )* + )* + /ACCOUNTANT MEMBER ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD