M/s. Talkatora Investent & Trading Co. Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 4414/DEL/2014

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5947 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2010-2011
• Appeal Filed On: 12-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Additional evidence; Avoidance of tax; Capital Gains
• Section: 48; 54

Judgement Text

IN TH E INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : D : NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 4414 /DEL/201 4 ASSESSMENT YEAR : 20 1 0 - 11 TALKATORA INVESTMENT & TRADING CO. PVT. LTD., 54, RIN G ROAD, LAJPAT NAGAR - III, NEW DELHI. PAN: A AA CT3012G VS ACIT, CIRCLE - 16 (1), NEW DELHI. (APP ELL A NT ) (RESPONDENT) A SSESSEE BY : SHRI R OHIT JAIN, ADVOCATE, SHRI DEEPASHREE RAO, CA & SHRI VIBHU GUPTA, CA RE VENUE BY : SHRI R .K. GUPTA, SR. DR DATE OF HEARING : 2 4 .09. 20 20 DATE OF PRONOUNCEMENT : 30 . 0 9 . 20 20 ORDER PER R. K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 31 .0 3 . 2014 OF THE CIT(A) - 19 , NEW DELHI , RELATING TO ASSESSMENT YEAR 2010 - 11 . 2. T HE GROUND OF APPEAL NUMBER 1 BY THE ASSESSEE READS AS UNDER : - ITA NO. 4414 /DEL/201 4 2 1. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN HOLDING THAT THE LEGAL AND TRAVELLING EXPENSES INCURRED BY THE APPELLANT WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER OF SHARES HELD AND TRANSFERRED BY IT AND CLAIMED AGAINST INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAINS AS NOT ACCEPTABLE AND HENCE NOT ALLOWABLE. 3. F ACTS OF THE CASE , IN BRIEF , ARE THAT THE ASSESSEE IS A C OMPANY AND DERIVES INCOME FROM SALE AND PURCHASE OF SHARES . I T FILED ITS RETURN OF INCOME ON 30 TH MARCH , 2011 DECLARING THE TOTAL INCOME AT RS. 6 , 37 , 34 , 020 / - . T HE AO , DURING THE COURSE OF ASSESSMENT PROCEEDINGS , NOTED THAT THE ASSESSEE HAS SHOWN INCOME FROM LONG TERM CAPITAL GAIN AMOUNTING TO RS. 12 , 92 , 42 , 065 / - AND HAS CLAIMED DEDUCTION UNDER SECTION 54 EC OF RS. 50 LACS . A CCORDING TO THE AO , THE DURATION OF HOLDING OF SUCH SHARES WAS LESS THAN 12 MONTHS AND , THEREFORE , IT WAS SHORT - TERM CAPITAL GAIN AND , CONSE QUENTLY , THE ASSESSEE IS NOT ENTITLED TO CLAIM THIS AS LONG - TERM CAPITAL GAIN AND , THEREFORE, NO BENEFIT UNDER SECTION 54 EC CAN BE ALLOWED TO THE ASSESSEE . I N VIEW OF THE ABOVE , THE AO TREATED THE LONG - TERM CAPITAL GAIN DECLARED BY THE ASSESSEE AS SHORT - TE RM CAPITAL GAIN AND DENIED BENEFIT OF DEDUCTION UNDER SECTION 54 EC. 4. I N APPEAL , THE LD. CIT (A) ACCEPTED THE PLEA OF THE ASSESSEE THAT SUCH GAIN ON SALES OF SHARES IS LONG - TERM CAPITAL GAIN AND THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 54 EC. H O WEVER , T HE EXPENSES CLAIMED ON SALE OF SUCH S HARES TO THE EXTEN T OF RS. 1 , 69 , 18 , 1 4 2 / - ON ACCOUNT OF LITIGATION AND TRAVELLING EXPENSES WAS REJECTED BY HIM ON THE GROUND THAT THE ASSESSEE COULD NOT SUBSTANTIATE THE IN CURR ING ITA NO. 4414 /DEL/201 4 3 OF SUCH EXPENSES . HE ACCORDINGLY REJECTED THE CLAIM OF THE EXPENSES TO THE TUNE OF 1 , 69 , 18 , 142 / - . 5. A GGRIEVED WITH SUCH ORDER OF THE CIT (A), THE ASSESSEE IS AN APPEAL BEFORE T HE TRIBUNAL . 6. T HE L D. COUNSEL FOR THE ASSESSEE STRONGLY CHALLENGED THE ORDER OF THE CIT (A) IN REJECTING THE C LAIM OF SUCH EXPENDITURE WHICH WAS SPECIFICALLY IN CURRED FOR SALE OF SUCH SHARES . HE SUBMITTED THAT THE LD.CIT(A) FOR THE FIRST TIME PROCEEDED TO DENY THE CLAIM OF TRANSFER RELATED EXPENDITURE AMOUNTING TO RS. 1 , 69 , 18 , 142 / - ON THE PREMISE THAT THE ASSESSEE WAS UNABLE TO SUBSTANTIATE ITS CLAIM WITHOUT A FFOR DING ANY OPPORTUNITY TO LEAD EVIDENCE IN SUPPORT THE REOF. HE SUBMITTED THAT THE CIT(A) HAS NOWHERE DISPUTED THE A LLOWA BILITY OF CLAIM OF D EDUCTION IN TERMS OF SECTION 48 (1) OF THE A CT , BUT , DENIED THE CLAI M OF THE ASSESSEE MERE LY ON THE GROUND THAT SUCH CLAIM REM A IN E D UNSUBSTANTIATED . H E SUBMITTED THAT THE CIT(A) DURING THE COURSE OF APPEAL PROCEEDINGS ONLY DIRECTED T HE ASSESSEE TO SUBMIT DOCUMENTARY EVIDENCES IN SUPPORT OF TRANSFER RELATED EXPENSES . T HE VARIOUS DOCUMENTS FURNISHED BY THE ASSESSEE WERE NOT AT ALL CONSIDERED OR EVEN ACKNOWLEDGED BY THE C IT(A). THE LD. COUNSEL FOR THE ASSESSEE FILED CERTAIN EVIDENCES IN SHAPE OF ADDITIONAL EVIDENCE AND SUBMITTED THAT TH ESE EVIDENCES GO TO THE ROOT OF THE MATTER AND SHOULD BE ADMITTED FOR A DJUDICATING THE ISSUE . H E SUBMITTED THAT HE HAS NO OBJECTION IF THE SAME IS RE STOR ED TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMIN E THE VARIOUS EVIDENCES SUBSEQUENTLY FILED IN SUPPORT OF EXPENSES INCURRED ON SALE OF THE SHARES AND ITA NO. 4414 /DEL/201 4 4 CLAIMED AS EXPENSES UNDER SECTION 48 ( 1 ) FROM SUCH LONG TERM CAPITAL GAIN . T HE L D. COUNSEL H AS ALSO RELIED ON VARIOUS DECISIONS PLACED IN THE COMPILATION OF PAPER BOOK . 7. THE L D. D R, ON THE OTHER HAND , HEAVILY RELIED ON THE ORDER OF TH E AO AND THE C IT(A). H E SUBMITTED THAT THE ASSESSEE HAS NOT SUBSTANTIATED INCU R RING OF E XPENDITURE FOR EAR NING SUCH LONG TERM CAPITAL GA IN SHOWN AS DEDU CTION UNDER SECTION 48 ( 1 ) OF THE A CT . HE, ACCORDINGLY , SUBMITTED THAT THE ORDER OF THE CIT(A) SHOULD BE UPHELD AND THE GROUND RAISED BY THE ASS ESSEE SHOULD BE DISMISSED . 8. W E HAVE CONSIDERED THE R IVAL ARGUMENTS MADE BY BOTH THE S IDES, PERUSED THE ORDERS OF THE A O AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. W E HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US . W E FIND THE AO IN THE INSTANT CASE TREATED THE LONG - TERM CAPITAL GAIN CLAIMED BY THE ASSESSEE ON ACCOUNT OF SALE OF SHARES AS SHORT - TERM CAPITAL GAIN ON THE GROUND THAT THE DURATION OF THE HOLDING OF SUCH SHARES WAS LESS THAN 12 MONTHS AND , THEREFORE , IT WAS SHORT - TERM CAPITAL GAIN . S UBSEQUENTLY THE AO DID NOT ALLOW THE BENEFIT OF DEDUCTION UNDER SECTION 54 EC OF THE A CT AMOUNT ING TO RS. 50 LACS . THE LD. CIT (A) HELD THAT THE PROFIT ON SALE OF SHARES IS LONG - TERM CAPITAL GAIN AND ALLOWED DEDUCTION CLAIMED UNDER SECTION 54 EC AMOUNTING TO RS.50 LAKHS. THE R EVENUE IS NOT IN APPEAL AGAINST THE ORDER OF THE CIT (A) HOLDING SUCH PROFIT ON SALE OF SHARES AS L ONG TERM CAPITAL GAIN . T HEREFORE , NOW THE ONLY QUESTION THAT REMAINS TO BE A DJU DICATED IS AS TO WHETHER THE VARIOUS EXPENSES CLAIMED BY THE ASSESSEE ON ITA NO. 4414 /DEL/201 4 5 ACCOUNT OF TRAVEL AND LITIGATION EXPENSES TO THE TUNE OF RS. 1 , 69 , 18 , 142 / - INCURRED DURING THE FINANCIAL YEAR 2009 - 10 IS AN ALLOWABLE EXPENSES UNDER SECTION 48 (1) TO BE CLAIMED AS D EDUCTION FROM SUCH LONG TERM CAPITAL GAIN . A S STATED EARLIER , THE AO HAD NOT ADJUDICAT ED THIS ISSUE SINCE HE T REATED THE CAPITAL GAIN AS SHORT TERM CAPITAL GAIN . W E FIND THE CIT (A) REJECTED THE CLAIM OF THE ASSESSEE O N THE GROUND THAT THE ASSESSEE COULD NOT SUBST ANTIATE ITS CL AIM THAT THE TRAVEL AND LITIGATION EXPENSES SHOULD BE DEDUCTED FOR COMPUTING LONG TERM CAPITAL GAIN . IT IS THE SUBMISSION OF THE L D. COUNSEL THAT VARIOUS DETAILS FURNISHED BEFORE THE CIT (A) WERE NOT PROPERLY GONE THROUGH BY HIM AND HE HAS N OT PASSED ANY COMMENTS ON THAT . T HE L D. COUNSEL FOR THE ASSESSEE ALSO FILED CERTAIN ADDITIONAL EVIDENCE S AND SUBMITTED THAT THESE EVIDENCES GO TO THE ROOT OF THE MATTER OF THE ISSUE IN HAND . C ONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN THE INTEREST OF JUSTICE WE ADMIT TH E ADDITIONAL EVIDENCE S AND RESTORE THE ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO ADJUDICATE TH E ISSUE RELATING TO ALLOW A BILITY OF DEDUCTION OF SUCH TRAVELING AND LITIGATION EXPENSES FROM THE LONG TERM CAPI TAL GAIN EARNED BY THE ASSESSEE . N EEDLESS TO SAY , THE AO SHALL DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH THE L A W AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . W E HOLD AND DIRECT ACCORDINGLY . T HE GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES . ITA NO. 4414 /DEL/201 4 6 9. GROUND NO. 2 RAISED BY THE ASSESSEE READS AS UNDER : - 2. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN UPHOLDING THE ORDER OF THE ASSISTANT COMMISSIONER OF INCOME TAX DISALLOWING THE LONG TERM CAPITAL LOSS INCURRED BY THE APPELLANT ON SALE OF PREFERENCE SHARES HELD BY IT FOR MORE THAN 12 MONTHS. 10. THE F ACTS OF THE CASE , IN BRIEF , ARE THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOT ED THAT THE ASSESSEE COMPANY HAS CLAIMED LON G - TERM CAPITAL LOSS OF RS.4, 12 , 59 , 906 / - ON ACCOUNT OF SALE OF PREFERENCE SHARES OF FIZA ROZIL EXPORTS PRIVATE LIMITED AT THE PRICE OF RS. 10 / - PER SHARE WHICH ARE PURCHASED BY THE COMPANY @ RS.100/ - PER SHARE IN THE FINANCIAL YEAR 2001 - 02. A CCORDING TO AO, THE ASSESS EE COMPANY WAS CONSCIOUS OF THE CAPITAL GAIN BEING EARNE D ON SALE OF SHARES , THEREFORE, THE PREFERENCE SHARES OF FIZA ROZIL EXPORTS PRIVATE LIMITED WERE SOLD AT A NOMINAL PRICE OF RS. 10 / - EACH . H E , THEREFORE , HELD THAT SALE OF SHARES WAS A S HAM TRANSACTION AND THERE WAS NO REAL TRANSAC TION . A CCORDING TO THE AO, THE INVESTMENT IN SHARE S OF FIZA ROZIL EXPORTS PRIVATE LIMITED AND ITS SUBSEQUENT SALE WERE ONLY SEEN AS A VEHICLE FOR BOOKING LOSSES ADOPTED BY THE ASSESSEE . R ELYING ON THE DECISION OF HON BLE BOMBAY HIGH COURT IN THE CASE OF KILLICK NIXON LIMITED VS. DCIT, ITA 5518 / 2010 , WHEREIN IT WAS HELD THAT AS THE TRANSACTION UNDERTAKEN BY THE ASSESSEE WAS NOT GENUINE , BUT , A COLOURABLE DEVICE AND THERE COULD BE NO QUESTION OF TAX PLANNING OR LEGITIMATE AVOIDANCE OF TAX LIABILITY , THE AO HELD THAT THE LONG - TERM CAPITAL L OSS CLAIMED IN THE TAX RETURN BY THE ASSESSEE IS NOT ALLOWABLE . ITA NO. 4414 /DEL/201 4 7 10.1 I N APPEAL , THE LD. CIT(A) UPHELD THE ACTION OF THE AO . W HILE DOING SO , HE OBSERVED THAT THE ASSESSEE WAS NOT ABLE TO CONTRO VERT THE FINDINGS OF THE AO AND ESTABLISH THE GENUINENESS OF THE LOSS CLAIME D . H E ALSO RELIED ON THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF SUMAT I DAYAL VS. CIT , 214 IT R 8 0 1 , WHERE IN IT WAS HELD THAT TAX ING AUTHORITIES ARE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY AND THE MATTER HAS TO BE CONSIDERED BY APPLYING THE TEST OF HUMAN PROBABILITIES . A CCORDINGLY , HE UPHELD THE ACTION OF THE AO . 11. AGGRIEVED WITH SUCH ORDER OF THE CIT (A), THE ASSESSEE IS IN APPEAL BEFORE T HE TRIBUNAL . 12. THE LD. COUNSEL FOR THE ASSESSEE FILED CERTAIN ADDITIONAL EVIDENCES IN THE SHAPE OF AUDITED FINANCIAL STATEMENTS OF M/S FIZA ROZIL EXPORTS PRIVATE LIMITED FOR THE FINANCIAL YEAR ENDING 31 .0 3 . 2007 AND 31.03.2008, COPY OF LETTER DATED 8 TH M AY , 2008 ADDRESS ED TO THE SHAREHOLDERS OF FIZA ROZIL EXPORTS PRIVATE LIMITED AND ALSO COPY OF FINANCIAL DOCUMENTS OF THE COMPANY AND SUBMITTED THAT A PERUSAL OF THE ABOVE ALONG WITH THE FINANCIALS OF THE COMPANY FOR 200 1 - 02 WOULD SHOW THAT THERE IS NO SHAM TRANSACTION AT ALL . H E SUBMITTED THAT THE ASSESSEE COMPANY WAS EXPECTING RELIEF FROM TH E RBI . F URTHER , THE VARIOUS EVIDENCES W ERE NOT AT ALL CONSIDERED BY THE LOWER AUTHORITIES . HE ACCORDINGLY SUBMITTED THAT THE MATTER MAY BE RESTORED TO THE FILE OF THE AO WITH THE DIRECTION TO ADJUDICATE TH E ISSUE AFRESH IN THE LIGHT OF THE ADDITIONAL EVIDENCE S FURNISHED BY THE ASSESSEE . ITA NO. 4414 /DEL/201 4 8 13. THE LD. DR, ON THE OTHE R HAND , HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE ASSESSEE WAS FULLY AWARE OF THE LONG - TERM CAPITAL GAIN AND TO SET OF F T HE SAME , HE ENTERED INTO A SHAM TRANSACTION BY SELLING THE SHA RES AT VERY LOW PRICE AND CLAIMED HUGE LOSS . H E SUBMITTED THAT THE ORDER OF THE CIT(A) UNDER THE FACTS AND CIRCUMSTANCES IS FULLY JUSTIFIED AND THE SAME SHOULD BE UPHELD . 14. WE HAVE CONSIDERED THE R IVAL ARGUMENTS MADE BY BOTH THE SIDES , PERUSED THE ORDER ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE . W E HAVE ALSO CONSIDERED THE VARIOUS DECISION S PLACED IN THE PAPER BOOK . W E FIND , THE AO , IN THE INSTANT CASE , REJECTED THE CLAIM OF LONG - TERM CAPITAL LOSS OF RS. 4,12,59,906/ - ON ACCOUNT OF SALE OF 2 8000 0 PREFERENCE SHARES OF M/S FIZA ROZIL EXPORTS PRIVATE LIMITED WHICH WERE PURCHASED AT A PRICE OF RS.100/ - IN THE FINANCIAL YEAR 200 1 - 02 AND SOLD AT A PRICE OF RS. 10 / - DURING THE IMP UGNED FINANCIAL YEAR HOLDING THE SAME TO BE A S HAM TRANSACTION . W E FIND , THE L D. CIT(A), RELYING ON THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF SUMA TI DAYAL (SUPRA), UPHELD THE ACTION OF THE AO . IT IS THE SUBMISSION OF THE L D. COUNSEL THAT IF THE FINANCIALS OF TH E SAID COMPANY IS GONE THROUGH FROM FINANCIAL YEAR 2001 - 02, TILL THE DATE OF SALE , IT WILL BE SEEN AS TO WHY THE SHARES WERE SOLD AT A LOWER PRICE . I T IS ALSO HIS SUBMISSION THAT THE AO, WITH OUT AFFORDING ANY OPPORTUNITY WHATSO EVER CAME TO THE CONCLUSION TH AT THE TRANSACTION IS A S H AM TRANSACTION WHICH HAS BEEN UPHELD BY THE CIT(A). WE FIND SOME FORCE IN THE ARGUMENT OF THE L D. COUNSEL THAT A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE AO NOWHERE HAS CON FRONTED THE ITA NO. 4414 /DEL/201 4 9 ASSESSEE REGARDING TH E SALE OF SUCH SHARES AT RS. 10 / - PER SHARE WHICH WERE PURCHASED AT A PRICE OF RS.100/ - . T HE ORDER OF THE CIT(A) IS ALSO SILENT ON THIS ISSUE . C ONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND IN THE INTEREST OF JUSTICE , WE DEEM IT PROPER TO RES TORE THE ISSUE TO THE FILE OF THE AO WITH THE DIRECTION TO GO THROUGH THE VARIOUS EVIDENCES INCLUDING THE ADDITIONAL EVIDENCE FILED BEFORE THE TRIBUNAL WHICH ARE ADMITTED BY US AND DECIDE THE ISSUE A FRESH AND IN ACCORDANCE WITH THE LAW. N EEDLESS TO SAY , THE AO SHALL GIVE DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. W E HOLD AND DIRECT ACCORDINGLY . GROUND NO. 2 BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES . 15. I N THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STAT ISTICAL PURPOSES THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 30 .0 9 .20 20 . SD/ - SD/ - ( SU DHANSHU SRIVASTAVA ) ( R. K. PANDA ) J UDICIAL MEMBER ACCOUNTANT MEMBER DATED: 30 TH SEPTEMBER, 2020. DK COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR, ITAT, NEW DELHI