MR.ANRAJ HIRALAL SHAH (HUF), MUMBAI V. INCOME TAX OFFICER 19(1)(1), MUMBAI

ITA 4514/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8089 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 17-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAITNYA ANJARIA LD
• Assessee Lawyers: NEELKANTH KHANDELWAL LD
• Keywords: Set aside
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO. 4514/MUM/2018 ASSESSMENT YEAR: 2014-15 MR. ANRAJ HIRALAL SHAH (HUF) 3/A, 114-D, R.K WADI BUILDING, 1 ST PARSIWADA LANE, V.P ROAD, MUMBAI-400 004. PAN: AALH49218F VS. I.T.O., 19 ( 1 )( 1 ) , MUMBAI MATRU MANDIR, TARDEO ROAD, MUMBAI-400 007. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI NEELKANTH KHANDELWAL, LD.AR RESPONDENT BY : SHRI CHAITNYA ANJARIA, LD.DR DATE OF HEARING : 1 6 .07 .2019 DATE OF PRONOUNCEMENT : 1 6 - 07 - 2019 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 04-05- 2018 PASSED BY LD CIT(A)-51, MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 2014-15. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN PARTIALLY CONFIRMING ADDITION RELATING SALE OF SHARES MADE BY THE AO REJECTING THE CLAIM OF CAPITAL GAINS. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME DECLARING CAPITAL GAINS AND INCOME FROM OTHER SOURC ES. THE ASSESSEE HAD DECLARED LONG TERM CAPITAL GAIN OF RS.8,40,497/ AND CLAIMED THE SAME AS EXEMPT U/S 10(38) OF THE ACT. THE ASSESSEE HAD SOL D 2200 SHARES OF M/S SUNRISE ASIAN LTD (FORMERLY SANTOSHI MAA TRADELINKS LTD BEFORE AMALGAMATION) FOR A VALUE OF RS.9,73,927/- IN MAY, 2013. THE ASSESSEE HAD [2] ITA NO.4514/MUM/2018 ANRAJ HIRALAL SHAH(HUF) PURCHASED THE ABOVE SAID SHARES IN APRIL 2012 FOR A CONSIDERATION OF RS.1,33,430/-. THE AO RECEIVED INFORMATION FROM IN VESTIGATION WING THAT THE TRADING IN SHARES OF SUNRISE ASIAN LTD FALLS UN DER THE CATEGORY OF SUSPICIOUS LONG TERM CAPITAL GAINS ON SHARES. ACCO RDINGLY HE REOPENED THE ASSESSMENT OF THE YEAR UNDER CONSIDERATION. ONE OF THE DIRECTORS OF M/S SUNRISE ASIAN LTD HAD ADMITTED BEFORE THE REVENUE T HAT THE PRICES OF SHARES HAVE BEEN RIGGED. THE AO, AFTER DISCUSSING THE MOD US OPERANDI ADOPTED FOR BOOKING LONG TERM CAPITAL GAIN BY RIGGING THE PRICE S, CAME TO THE CONCLUSION THAT THE TRANSACTIONS OF PURCHASE AND SALE MADE BY THE ASSESSEE ARE NOT GENUINE. THE ASSESSEE SUBMITTED THAT HE HAD EARNED SPECULATION PROFIT IN THE FINANCIAL YEAR RELEVANT TO THE AY 2013-14 AND U SED THE SAME FOR PURCHASE OF SHARES. THE AO DISBELIEVED THE CONTRAC T NOTES RELATING TO SPECULATION PROFIT. SINCE THERE WAS UNUSUAL RISE I N THE PRICES OF SHARES OF M/S SUNRISE ASIAN LTD, THE AO TOOK THE VIEW THAT T HE GENUINENESS OF TRANSACTIONS OF SALE IS ALSO IN DOUBT. ACCORDINGLY HE REJECTED THE CLAIM OF CAPITAL GAINS AND ASSESSED THE NET SALE CONSIDERATI ON OF RS.9,73,927/- AS INCOME OF THE ASSESSEE U/S 68 OF THE ACT. THE AO A LSO ADDED 2% OF THE SALE CONSIDERATION AS EXPENSES INCURRED BY THE ASSESSEE IN PROCURING LONG TERM CAPITAL GAIN ENTRIES. 3. THE LD CIT(A) GAVE PARTIAL RELIEF BY SUSTAININ G ADDITION TO THE EXTENT OF NET GAINS MADE BY THE ASSESSEE. IN ADDITION TO THE REASONING GIVEN BY THE AO, THE LD CIT(A) ALSO OBSERVED THAT THE SPECULATIO N PROFIT WAS EARNED BY THE ASSESSEE FROM SOME OTHER BROKER, WHILE THE SHAR ES WERE CLAIMED TO HAVE BEEN PURCHASED FROM M/S EDEN FINANCIAL SERVICES LTD . 4. THE LD A.R SUBMITTED FOLLOWING POINTS:- (A) THE LD CIT(A) WAS NOT RIGHT IN OBSERVING THAT THE ASSESSEE HAD EARNED SPECULATION PROFIT FROM SOME OTHER BROKER. INVITING OUR ATTENTION TO THE COPIES OF FINANCIAL STATEMENTS FUR NISHED FOR AY 2013- [3] ITA NO.4514/MUM/2018 ANRAJ HIRALAL SHAH(HUF) 14, THE LD A.R SUBMITTED THAT THE ASSESSEE HAS EARN ED SPECULATION PROFITS FROM TWO BROKERS IN THAT YEAR, ONE OF WHICH IS M/S EDEN FINANCIAL SERVICES LTD, FROM WHOM THE SHARES WERE P URCHASED AGAINST THE SPECULATION PROFIT. (B) THE BROKERS FROM WHOM THE ASSESSEE HAD PURCHAS ED SHARES AND THROUGH WHOM THE ASSESSEE SOLD SHARES HAVE NOT BEEN IDENTIFIED AS TAINTED BROKERS. (C) THE PURCHASE OF SHARES AND THE SOURCE OF PUR CHASES HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER IN THE PRECEDING YEAR. (D) THE SHARES HAVE BEEN RECEIVED IN D-MAT ACCOUNT OF THE ASSESSEE AND THEY HAVE BEEN SOLD THROUGH THE D-MAT ACCOUNT O NLY. ACCORDINGLY THE LD A.R SUBMITTED THAT THE ASSESSING OFFICER HAS DISBELIEVED THE TRANSACTIONS FOR THE REASON THAT THE THERE IS H UGE JUMP IN THE PRICES OF SHARES IN VIEW OF ALLEGED RIGGING OF PRICES BY THE DIRECTORS OF THE ABOVE SAID COMPANY. HE SUBMITTED THAT THE AO HAS NOT ESTABLIS HED ANY LINK BETWEEN THE ASSESSEE AND THE DIRECTORS OF THE COMPANY. ACC ORDINGLY HE SUBMITTED THAT THE ASSESSEE HAS PURCHASED AND SOLD THE SHARES IN THE NORMAL COURSE. ACCORDINGLY HE SUBMITTED THAT THERE IS NO REASON TO SUSPECT THE TRANSACTIONS OF THE ASSESSEE. 5. ON THE CONTRARY, THE LD D.R SUBMITTED THAT TH E INVESTIGATION WING OF THE DEPARTMENT HAS UNEARTHED HUGE RACKET OF RIGGING OF PRICES OF THE SHARES WITH THE FRAUDULENT MOTIVE OF GENERATING TAX EXEMPT CAPI TAL GAINS. THE REVENUE HAS IDENTIFIED SUSPICIOUS SHARE TRANSACTIONS AND TH E SHARES OF M/S SUNRISE ASIAN LTD WERE ONE OF SUCH SHARES. HE SUBMITTED TH AT THE DIRECTORS OF THE [4] ITA NO.4514/MUM/2018 ANRAJ HIRALAL SHAH(HUF) ABOVE SAID COMPANY HAS ADMITTED THE PRICE RIGGING. ACCORDINGLY HE SUBMITTED THAT THE LD CIT(A) WAS JUSTIFIED IN CONFI RMING THE ADDITION. 6. THE LD A.R, IN THE REJOINDER, SUBMITTED THAT THE ASSESSING OFFICER HAS MADE THE ADDITION U/S 68 OF THE ACT, WHILE THE ASSE SSEE HAS OFFERED THE GAIN AS LONG TERM CAPITAL GAIN. HOWEVER, THE AO HAS ASS ESSED ENTIRE SALE CONSIDERATION AS INCOME. HE SUBMITTED THAT THE HON BLE RAJASTHAN HIGH COURT HAS UPHELD THE ORDER OF TRIBUNAL IN DELETING AN IDENTICAL ADDITION IN THE CASE OF CIT VS. SMT. POOJA AGARWAL (D.B. INCOME TAX APPEAL NO.385/2011 DATED 11.09.2017), SINCE THE SHARES WER E TRANSACTED THROUGH STOCK EXCHANGE. HE SUBMITTED THAT THE ASSESSEE, IN THE INSTANT CASE ALSO, HAS TRANSACTED THE PURCHASE AND SALE TRANSACTIONS T HROUGH STOCK EXCHANGE ONLY. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS P URCHASED AND SOLD SHARES OF OTHER COMPANIES ALSO, WHICH IS EVIDENT FR OM THE D-MAT STATEMENT. 7. I HAVE HEARD RIVAL CONTENTIONS AND PERUSED TH E RECORD. I NOTICE THAT THE AO HAS RECEIVED INFORMATION ABOUT SUSPICIOUS SHARE TRANSACTIONS AND ON THE BASIS OF THE SAME; HE HAS DISBELIEVED THE CLAIM OF LONG TERM CAPITAL GAINS. I NOTICE THAT THE ASSESSEE HAS PURCHASED SHARES THROU GH A BROKER NAMED M/S EDEN FINANCIAL SERVICES AND SOLD SHARES THROUGH INT IME EQUITIES LTD. THUS, I NOTICE THAT THE PURCHASE AND SALE OF SHARES HAVE BEEN CARRIED OUT THROUGH TWO DIFFERENT BROKERS. IT IS NOT THE CASE OF THE A O THAT BOTH THE SHARE BROKERS REFERRED ABOVE HAVE BEEN IDENTIFIED AS TAIN TED BROKERS INVOLVED IN FRAUDULENT TRANSACTIONS. 8. THE ASSESSEE HAS EARNED SPECULATION PROFIT IN THE IMMEDIATELY PRECEDING YEAR THROUGH M/S EDEN FINANCIAL SERVICES ALSO AND THE SAID PROFIT HAS BEEN USED TO PURCHASE THE SHARES OF M/S SUNRISE ASIAN LTD. THE ASSESSEE HAS OFFERED THE SPECULATION PROFIT FOR INC OME TAX PURPOSES IN THE IMMEDIATELY PRECEDING YEAR AND IT HAS BEEN ACCEPTED . FURTHER THE ASSESSEE [5] ITA NO.4514/MUM/2018 ANRAJ HIRALAL SHAH(HUF) HAS SHOWN THE PURCHASE OF IMPUGNED SHARES AS INVEST MENT IN THE BALANCE SHEET. HENCE THE PURCHASE OF SHARES HAS BEEN ACCEP TED. FURTHER THE SHARES HAVE BEEN RECEIVED IN THE D-MAT ACCOUNT OF THE ASSE SSEE AND THEY HAVE BEEN SOLD THROUGH THE D-MAT ACCOUNT ONLY. HENCE THE DEL IVERY OF SHARES ALSO STAND PROVED. THE AO HAS NOT BROUGHT ANY MATERIAL O N RECORD TO SHOW THAT THE ASSESSEE WAS PART OF FRAUDULENT PRICE RIGGING. ACCORDINGLY, IN THE ABSENCE OF ANY EVIDENCE TO IMPLICATE THE ASSESSEE O R TO PROVE THAT THE TRANSACTIONS ARE BOGUS, I AM OF THE VIEW THAT THE C APITAL GAINS DECLARED BY THE ASSESSEE CANNOT BE DOUBTED WITH. IN THAT VIEW OF THE MATTER, THE ADDITION MADE TOWARDS EXPENSES IS NOT ALSO SUSTAINA BLE. 9. ACCORDINGLY, I SET ASIDE THE ORDER PASSED BY LD CIT(A) ON BOTH THE ISSUES AND DIRECT THE AO TO DELETE BOTH THE ADDITIO NS. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED ON 16-07-2019 SD/- ( B.R. BASKARAN) ACCOUNTANT MEMBER MUMBAI, DATED : 16 TH JULY,2019 *PP/SPS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. THE CIT 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER (ASSISTANTREGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI [6] ITA NO.4514/MUM/2018 ANRAJ HIRALAL SHAH(HUF) DATE INITIAL WHETHER DICTATION PAD ENCLOSED WITH THE FILE :NO. 1. DRAFT DICTATED ON/PENDRIVE 18.07.2019 YES SR.PS 2. DRAFT PLACED BEFORE AUTHOR 18.07.2019 MATTER TYPED P.P SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 18.07.2019 P.P JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 19/7 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PP SR.PS 6. DATE OF PRONOUNCEMENT 16/7 SR.PS 7. FILE SENT TO THE BENCH CLERK 19/7 PP SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER