M/s. Anurag Khaitan (HUF), Gurgaon V. ITO, Gurgaon

ITA 4575/DEL/2009

• Counselvise Citation: 457520114 RSA 2009
• Duration Of Justice: 2 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-12-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 04-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS ANUSHA KHURANA
• Assessee Lawyers: DR RAKESH GUPTA
• Keywords: Income from undisclosed sources; Onus to prove

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH A AA A : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI R.P.TOLANI, JM AND SHRI R.P.TOLANI, JM AND SHRI R.P.TOLANI, JM AND SHRI R.P.TOLANI, JM AND SHRI SHAMIM, YAHYA SHAMIM, YAHYA SHAMIM, YAHYA SHAMIM, YAHYA, AM , AM , AM , AM ITA NO. ITA NO. ITA NO. ITA NO.4 44 4575/DEL/2009 575/DEL/2009 575/DEL/2009 575/DEL/2009 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 200 200 200 2005 55 5- -- -06 0606 06 M/S ANURAG KHAITAN (HUF), M/S ANURAG KHAITAN (HUF), M/S ANURAG KHAITAN (HUF), M/S ANURAG KHAITAN (HUF), HOUSE NO.31, SECTOR HOUSE NO.31, SECTOR HOUSE NO.31, SECTOR HOUSE NO.31, SECTOR- -- -45, 45, 45, 45, NEAR DELHI PUBLIC SCHOOL, NEAR DELHI PUBLIC SCHOOL, NEAR DELHI PUBLIC SCHOOL, NEAR DELHI PUBLIC SCHOOL, GURGAON GURGAON GURGAON GURGAON. .. . PAN : PAN : PAN : PAN : AAFHA6222H. AAFHA6222H. AAFHA6222H. AAFHA6222H. VS. VS. VS. VS. INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, WARD WARD WARD WARD- -- -1, 1,1, 1, GURGAON. GURGAON. GURGAON. GURGAON. (APPELLANT) (RESPONDENT) APPELLANT BY : DR.RAKESH GUPTA. RESPONDENT BY : MRS.ANUSHA KHURANA, SR.DR. ORDER ORDER ORDER ORDER PER PER PER PER R.P.TOLANI, JM R.P.TOLANI, JM R.P.TOLANI, JM R.P.TOLANI, JM : : : : THIS IS ASSESSEES APPEAL. FOLLOWING GROUNDS ARE RAISED:- 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD.CIT(A) HAS ERRED IN LAW AND ON FACTS I N CONFIRMING THE ACTION OF LD.A.O. IN MAKING ADDITION OF RS.9,98,850/- AS UNDISCLOSED INCOME AND HAS FURTHER ERRED IN NOT GRANTING THE EXEMPTION CLAIMED U/S 10(38) OF THE INCOME TAX ACT, 1961. 2. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, THE ORDER UNDER APPEAL IS BAD IN LAW AND AGAINST THE FA CTS AND CIRCUMSTANCES OF THE CASE. 3. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD.CIT(A) HAS ERRED IN LAW AND ON FACTS I N CONFIRMING THE ACTION OF LD.A.O. IN NOT ALLOWING TH E REBATE U/S 88 OF THE INCOME TAX ACT, 1961 AS CLAIMED BY TH E ASSESSEE. 2. BRIEF FACTS ARE THAT THE ASSESSEE IN ITS RETURN SHOWED A PROFIT OF `10,70,729/- ON ACCOUNT OF SALE OF 5,000 SHARES OF M/S G.K.CONSULTANTS LIMITED, THE SAME WAS CLAIMED EXEMPT UNDER SECTION 10(38). THESE SHARES WERE PURCHASED BY THE ASSESSEE ON 10.6.2003 THROUGH ONE ITA-4575/DEL/2009 2 BROKER S.B. BHUTRA & CO., CALCUTTA. THE SALE OF SH ARES WAS EFFECTED THROUGH THE SHARE BROKER BADRI PRASAD & SONS, CALCU TTA. THE FACT THAT THE ASSESSEE PURCHASED SHARES AT `21,850/- AND SOLD THEM FOR `10,92,579/- RAISED THE ASSESSING OFFICERS SUSPICI ON AND ASKED THE ASSESSEE TO PRODUCE THE PROOF IN SUPPORT OF ITS CLA IM. THE ASSESSEE FILED ITS JUSTIFICATION IN THE FORM OF CONTRACT NOT E, PURCHASE OF SHARES THROUGH BANK ACCOUNT AND SALE OF SHARES THROUGH BAN K ACCOUNT, THE SHARES BEING LISTED ON CALCUTTA STOCK EXCHANGE AND CONTENDED THAT BY PRODUCING ALL THESE DOCUMENTS, IT HAD DISCHARGED IT S BURDEN. ASSESSING OFFICER FOUND THAT THE SHARES WERE LISTED ON CALCUTTA EXCHANGE AT `192/- PER SHARE WHEREAS THE SAME SHARE S OF G.K. CONSULTANTS LTD. WERE TRADED IN BOMBAY EXCHANGE AT `8.40/-. THE ASSESSEES SHARE BROKER BADRI PRASAD & SONS WAS SUS PENDED BY THE SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI) VIDE ORDER DATED 14.1.2006. ASSESSING OFFICER THUS HELD THAT THE SA LE PRICE AS SHOWN BY THE ASSESSEE ON CALCUTTA STOCK EXCHANGE WAS NOT GEN UINE AND ADOPTED THE SALE VALUE OF `19.13 AS THE HIGHEST SAL E PRICE TILL APRIL, 2005 ON BOMBAY STOCK EXCHANGE. THE DIFFERENCE OF ` 9,98,850/- IN THIS BEHALF PERTAINED TO A LISTED PUBLIC COMPANY ON CALC UTTA STOCK EXCHANGE, IT WAS HELD TO BE INCOME FROM UNDISCLOSED SOURCES AND ASSESSEES CLAIM U/S 10(38) WAS DENIED. 3. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN AP PEAL. THE LEARNED CIT(A), HOWEVER, CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 4. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDS TH AT THESE SHARES WERE PURCHASED ORIGINALLY IN PHYSICAL FORM AND SINC E AT THE TIME OF SALE THERE WAS NO OPTION TO SELL IN PHYSICAL FORM, THE S HARES WERE DEMATTED AND THEREAFTER SOLD THROUGH BROKER. THIS CLEARLY I NDICATES THAT SHARES WERE ACTUALLY TRADED AND THE DELIVERY WAS GIVEN. A SSESSEE FURNISHED THE DETAILS ABOUT THE LISTING OF THE SHARES ON CALC UTTA EXCHANGE ON FOUR DIFFERENT DATES AND CONTENDED THAT THE LISTING OF T HE PRICE ON STOCK ITA-4575/DEL/2009 3 EXCHANGE DEPENDED ON THE ACTIVITY OF TRADING IN PAR TICULAR STOCK EXCHANGE. MERELY BECAUSE SHARES WERE TREATED AT A LOWER VALUE AT MUMBAI CANNOT BE A REASON TO HOLD THAT THE RATES LI STED AT CALCUTTA EXCHANGE WERE NOT GENUINE. WHEN THE ASSESSEE HAS T RADED THE SHARES ON CALCUTTA EXCHANGE, THERE IS NO JUSTIFICATION TO SUBSTITUTE THE SALE PRICE AT MUMBAI STOCK EXCHANGE RATES MORE SO WHEN T HE TRANSACTION OF SALES HAS BEEN HELD TO BE GENUINE. ASSESSING OFFIC ER ON PRESUMPTIONS CANNOT SUBSTITUTE OWN VALUE OF SALE OF SHARES WHEN THE ASSESSEE HAS BEEN ABLE TO DEMONSTRATE THE ACTUAL VALUE TRANSACTE D THROUGH BANK ACCOUNT AND THE TRANSFER OF SHARES ON THE BASIS OF DEMAT ACCOUNT. THE LICENSE OF BROKER BADRI PRASAD & SONS WAS SUSPENDED W.E.F. 29.9.2005 WHEREAS THE TRANSACTIONS IN QUESTION ARE PRIOR TO 1 ST APRIL, 2005 I.E. AY 1995-96. THEREFORE, THE SUBSEQUENT SUSPENSION OF T HE BROKER BY SEBI HAS NO ADVERSE INFERENCE ON THE ASSESSEES CASE. A O NEITHER TRIED TO FIND OUT THE SAID BROKER WHO WAS THE ONLY LINK BETW EEN THE ASSESSEE TO SELL THE SHARES AND REALIZE THE PROCEEDS. IT WAS P LEADED THAT THE ADDITION CANNOT BE MADE ON THE BASIS OF SUSPICION A ND SURMISES. RELIANCE WAS PLACED ON THE FOLLOWING JUDGMENTS:- (I) SHREE LEKHA BANERJEE & ORS. VS. CIT 49 ITR 112 (SC) . (II) CIT VS. SHRI RAM NARAIN GOEL 224 ITR 180 (P&H). (III) SUMER CHAND JAIN VS. CIT 292 ITR 24 (MP). (IV) SONA ELECTRONICS CO. VS. CIT 152 ITR 507 (DEL). (V) CIT VS. ORISSA CORP.PVT.LTD. 159 ITR 78 (SC). (VI) GG FILMS VS. ITO 45 TTJ 644 (COCHIN) AND ANIL MIDHA (HUF) VS. ITO 100 TTJ 644 (JODHPUR). 5. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDS TH AT THE ASSESSEES SHARE TRANSACTION HAS NOT BEEN HELD TO B E BOGUS. ONLY THE SALE PRICE IS BEING QUESTIONED NOT ALLEGING THAT TH E CALCUTTA EXCHANGE PRICE IS BOGUS BUT ON THE EXCUSE THAT AT BOMBAY STO CK EXCHANGE, THE SHARES WERE TRADED AT A VERY LOWER RATE. IT IS PLE ADED THAT BOTH THE ITA-4575/DEL/2009 4 ENTITIES I.E. CALCUTTA STOCK EXCHANGE AND BOMBAY ST OCK EXCHANGE LISTINGS HAVE LEGAL VALUE. THE ASSESSEES CLAIM U/ S 10(38) IS DENIED ON ASSUMPTION AND INCOME HAS BEEN WRONGLY TREATED AS I NCOME FROM OTHER SOURCES. 6. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDS TH AT EVEN IF ON ASSUMPTION IT IS HELD THAT THE INCOME ADDED BY THE ASSESSING OFFICER IS ASSESSEES OWN UNDISCLOSED INCOME, THE SAME IS ACTU ALLY RECEIVED IN THE NEXT FINANCIAL YEAR AS THE SALE PROCEEDS WERE R ECEIVED BY THE ASSESSEE ON 2.4.2005 IN UNITED BANK OF INDIA. COPY OF ACCOUNT IS FURNISHED. IT IS PLEADED THAT ON THIS ASSUMPTION A LSO, THE ASSESSEE IS LIABLE TO BE ASSESSED IN RESPECT OF THIS UNDISCLOSE D INCOME IN THE YEAR OF RECEIPT IN AY 2006-07 AND ON ASSUMPTION, IT CANN OT BE HELD TO BE ACCRUED TO THE ASSESSEE IN AY 2005-06 WHICH IS UNDE R APPEAL. 7. LEARNED DR SUPPORTED THE ORDERS OF THE AUTHORITI ES BELOW AND VEHEMENTLY ARGUED THAT THE PLEA ABOUT TAXABILITY OF INCOME IN AY 2006-07 FROM THE UNEXPLAINED SOURCES HAS NOT BEEN T AKEN BY THE ASSESSEE BEFORE ANY OF THE LOWER AUTHORITIES. THER EFORE, THE SAME CANNOT BE RAISED BY THE ASSESSEE. ON MERITS, HE CO NTENDED THAT IN THE ECONOMIC REALITIES, IT CANNOT BE SO THAT A STOCK IS TRADED AT `190 ON CALCUTTA EXCHANGE AND `8.40 PER SHARE ON BOMBAY EXC HANGE. THIS CLEARLY INDICATES THAT THE PRICE WAS RIGGED IN CALC UTTA EXCHANGE, WHICH IS FURTHER REFLECTED FROM THE FACT THAT THE ASSESSE ES SHARE BROKER BADRI PRASAD & SONS WAS SUSPENDED BY THE SEBI. IT IS CON TENDED THAT BOTH THE AUTHORITIES HAVE PROPERLY VERIFIED THE FACTS AN D LOOKING AT THE HIGHEST DIFFERENCE BETWEEN THE SHARE PRICE AT TWO D IFFERENT STOCK EXCHANGES, THE ASSESSING OFFICER HAS TAKEN A PROPER VIEW BY ESTIMATING THE SALE OF SHARE PRICE OF `19.13 AND HE LD THE REST TO BE ASSESSEES UNDISCLOSED INCOME. ITA-4575/DEL/2009 5 8. THE LEARNED COUNSEL FOR THE ASSESSEE IN REJOINDE R ON THE PRELIMINARY ISSUE CONTENDS THAT IT IS A LEGAL ISSUE FOR WHICH NO FURTHER VERIFICATION IS REQUIRED. ALL THE DETAILS ARE CONT AINED IN THE LOWER AUTHORITIES ORDERS. THE ASSESSEE HAS CHALLENGED T HE ADDITION ON THE FACTS AND LAW. A NEW PLEA CAN BE TAKEN BY THE ASSE SSEE. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS FILED ON RECO RD EVIDENCE IN THE FORM OF PURCHASE AND DEMAT OF SHARES OF M/S G.K.CON SULTANTS LTD.; THE CONTRACT NOTE OF THE SHARE BROKER SUBSTANTIATES THE ASSESSEES VERSION THAT THE SHARES WERE SOLD AT THE PRICE RECORDED THE REIN; THE PROOF OF LISTING OF SHARES ON THE STOCK EXCHANGE IS SUBMITTE D WHICH TALLIES WITH THE SHARE BROKERS CONTRACT NOTE; AND THE AMOUNT HA S BEEN RECEIVED BY THE ASSESSEE BY WAY OF BANKING CHANNEL. IN OUR VIE W, THE ASSESSEE HAS THUS DISCHARGED ITS BURDEN TO SUBSTANTIATE ITS CLAI M. 10. APROPOS THE ASSESSING OFFICER HAS PROPOSED ONLY THE RATES AT BOMBAY STOCK EXCHANGE COUPLED WITH THE SUSPICION TH AT IN ECONOMIC REALITIES, SUCH DIFFERENCE OF LISTING OF SHARES AT THE PRICE OF ` 8.40 ON BOMBAY STOCK EXCHANGE AND ` 192 ON CALCUTTA STOCK EXCHANGE IS NOT POSSIBLE. NO FURTHER EVIDENCE HAS BEEN BROUGHT ON RECORD ASKING THE CALCUTTA STOCK EXCHANGE TO SUBSTANTIATE THE LISTING . BESIDES, AN ADVERSE INFERENCE HAS BEEN DRAWN ON THE SEBIS DEBA R ON THE BROKER WHICH IS FOUND TO BE EFFECTIVE FROM 29.9.2005 WHERE AS THE ASSESSEES TRANSACTIONS ARE PRIOR TO 31.3.2005. CONSEQUENTLY, THIS ADVERSE INFERENCE IS OF NO AVAIL AS IT RATHER PROVES THE CL AIM OF THE ASSESSEE THAT AT THE RELEVANT TIME, WHEN THE STOCKS ARE TRAD ED, THE SHARE BROKER HAD A VALID LICENSE TO OPERATE. IN OUR VIEW, WHAT IS SUBSTANTIATED BY THE ASSESSEE IS TO BE HELD TO BE CORRECT UNLESS THE CONTRARY IS PROVED BY THE DEPARTMENT AND THE BURDEN OF PROOF IN THIS C ASE LIES ON THE ASSESSING OFFICER. ASSESSING OFFICER HAS BROUGHT O N RECORD THE DOCUMENTS AS MENTIONED ABOVE I.E. BOMBAY STOCK EXCH ANGE LISTING ITA-4575/DEL/2009 6 AND THE FACT OF ASSESSEES BROKER BEING DEBARRED PO ST-FACTO AS A BROKER WHICH RATHER IMPLIES THAT AT THE RELEVANT TIME, HE HAD A VALID LICENSE. IN OUR VIEW, THE MATERIAL BROUGHT ON RECORD BY THE ASSESSING OFFICER DOES NOT DISCHARGE THE BURDEN TO DISLODGE THE ASSES SEES EVIDENCE. THE ASSESSEES EVIDENCE CANNOT BE BRUSHED ASIDE ONL Y ON THE BASIS OF BOMBAY STOCK EXCHANGE LISTING. ASSESSEES TRANSACT IONS WERE ON CALCUTTA STOCK EXCHANGE AND IN THAT CASE, THE EVIDE NCE SHOULD HAVE EMANATED FROM THE CALCUTTA STOCK EXCHANGE. THE ASS ESSEES TRANSACTION BEING ON A LISTED SHARE THROUGH LICENSE D STOCK BROKER BY TRANSFER OF SHARES IN DEMAT FORM, THE PAYMENTS SHOU LD HAVE BEEN RECEIVED THROUGH BANK ACCOUNT. IN OUR VIEW, THE AS SESSEE HAS DISCHARGED ITS ONUS AND THE BURDEN HAS NOT BEEN SAT ISFACTORILY DISCHARGED BY THE ASSESSING OFFICER. IN VIEW THERE OF, WE DELETE THE ADDITION AND HOLD THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 10(38). SINCE WE HAVE DECIDED THE ISSUE ON MERITS, WE SEE NO REASON TO GO INTO THE YEAR OF TAXABILITY. 11. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED . DECISION PRONOUNCED IN THE OPEN COURT ON 23 RD DECEMBER, 2011. SD/- SD/- ( (( (SHAMIM YAHYA SHAMIM YAHYA SHAMIM YAHYA SHAMIM YAHYA) )) ) (R.P.TOLANI (R.P.TOLANI (R.P.TOLANI (R.P.TOLANI) )) ) ACCOUNTANT ACCOUNTANT ACCOUNTANT ACCOUNTANT MEMBER MEMBER MEMBER MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER DATED : 23.12.2011 VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR