TOUCAN ENTERTAINMENT P.LTD, MUMBAI V. ITO 8(1)(4), MUMBAI

ITA 465/MUM/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0372 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 21-03-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 20-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K RAVIKIRAN
• Keywords: Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 465/MUM/2015 ASSESSMENT YEAR: 2008 - 09 TOUCAN ENTERTAINMENT P. LTD. (FORMERLY KNOWN AS GHARSE ONLINE SERVICES P. LTD.) A - 21, 1 ST FLOOR, GHANSHYAM INDUSTRIAL ESTATE, OFF VEERA DESAI ROAD, ANDHERI (W), MUMBAI - 400053 VS. ITO - 8(1)(4 ) ROOM NO. 207, 2 ND FLOOR, AAYAKAR BHAVAN, CHURCHGATE, M UMBAI - 400020 . PAN NO. AABCG8546P ASSESSEE BY : MS. PARVATHY GANESH, AR REVENUE BY: MR. K. RAVI KIRAN, DR DATE OF HEARING : 1 6/05/2017 DATE OF PRONOUNCEMENT : 10/08/2017 ORDER PER N.K. PRADHAN, A.M . THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 200 8 - 09 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS) - 16 , MUMBAI AND ARISES OUT OF THE PENALTY ORDER U/S 271(1)(C) OF THE INCOME TAX ACT 1961 ( T HE ACT). ITA NO. 465/MUM/2015 2 2. THE GROUND OF APPEAL FILED BY THE ASSESSEE READ S AS UNDER: - THE ORDER PASSED BY THE LD. CIT(A) LEVYING PENALTY OF RS.1,20,098/ - U/S 271(1)(C) OF THE ACT BE SET ASIDE/DELETED AS THE SAME IS DEFECTIVE, ILLEGAL AND VOID - AB - INITIO FOR WANT OF JURISDICTION. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER (AO) FOUND DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THE ASSESSEE HAD CLAIMED SHORT TERM CAPITAL LOSS (STCL) OF RS.36,78,000/ - . THE DETAILS AS FRAMED BY THE AO ARE AS UNDER: NAME OF COMPANY DATE OF ACQUISITION QUANTITY RATE OF PURCHA SE ACQ COST SALE DATE QUANTITY SOLD RATE OF SALE SALES CONSIDERATION CAPITAL GAINS BROADBAND PACENET 18.07.2007 10,000 10.00 1,00,000 23.07.2007 10,000 10.20 1.02,000 2,000 -- DO -- 18.07.2007 16,00,000 12.50 2,00,00,000 07,08,2007 16,00,000 10.20 1,63,20,000 - 36,80,000 TOTAL 16,10,000 2,01,00,000 16,10,000 1,64,22,000 - 36,78,000 THE AO ON PERUSAL OF THE ABOVE CHART FOUND THAT THE ASSESSEE HAD PURCHASED 10,000 SHARES OF M/S BROADBAND PACENET INDIA PVT. LTD. (BPIPL) ON 18.07.2007 @ RS.10 AND ON THE SAME DATE IT HAD PURCHASED 16,00,000 SHARES @ RS.12.50 PER SHARE. SUBSEQUENTLY, THE A SSESSEE HAD SOLD PART OF THESE SHARES I.E. 10,000 SHARES ON 23.07.2007 @ RS.10.20 PER SHARE AND ON 07.08.2007 IT HAD SOLD 16,00,000 SHARES @ RS.10.20 . THE AO THEN ASKED THE ASSESSEE - COMPANY THE BASIS OF PRICE DIFFERENTIAL ON THE SAME DAY AS WELL AS ON 07.0 8.2007 RESULTING IN LOSS I.E. SELLING THE SHARES @ RS.10.20 WHICH WERE PURCHASED JUST BEFORE 20 DAYS @ RS.12.50 . IN REPLY TO THE QUERY RAISED BY THE AO, THE ASSESSEE SUBMITTED ITA NO. 465/MUM/2015 3 THAT THE VALUE OF SHARE WAS ONLY RS.3.84 AND IT HAD PURCHASED @ RS.12.50 AND SOLD @ RS.10.20 PER SHARE. THE AO NOTED THAT THE ASSESSEE DID NOT FURNISH ANY DOCUMENTARY EVIDENCE WITH REGARD TO THE PURCHASE OF SHARES AT THE ABOVE PRICE. THEREFORE, THE AO TOOK INTO ACCOUNT THE PURCHASE PRICE OF 16,00,000 SHARES BY THE ASSESSEE ON 18.07 .2007 @ RS.10 AND RECOMPUTED THE SHORT TERM CAPITAL GAINS ( STCG ) AS UNDER: NAME OF COMPANY DATE OF ACQUISITION QUANTITY RATE OF PURCHA SE ACQ COST SALE DATE QUANTITY SOLD RATE OF SALE SALES CONSIDERATION CAPITAL GAINS BROADBAND PACENET 18.07.2007 10,000 10.00 1,00,000 23.07.2007 10,000 10.20 1.02,000 2,000 -- DO -- 18.07.2007 16,00,000 10.00 1,60,00,000 07,08,2007 16,00,000 10.20 1,63,20,000 3,20,000 TOTAL 16,10,000 1,61,00,000 16,10,000 1,64,22,000 3,22,000 ACCORDINGLY, THE AO DISALLOWED THE CLAIM OF THE ASSESSEE OF STCL OF RS.36,78,000/ - AND MADE AN ADDITION OF STCG OF RS.3,22,000/ - COMPUTED AS ABOVE. 3.1 FURTHER THE AO FOUND THAT THE ASSESSEE HAD CLAIMED LONG TERM CAPITAL GAINS (LTCG) OF RS.24,96,000/ - (TO BE TAXED @ 10%) AND LTCG OF RS. NIL (TO BE TAXED @ 20%). THE CHART FILED BY THE ASSESSEE BEFORE THE AO IS AS UNDER : - ITA NO. 465/MUM/2015 4 LONG TERM CAPITAL GAINS (TO BE TAXED @ 10%) NAME OF COMPANY DATE OF ACQUISITION QUANTITY RATE OF PURCHASE ACQ COST SALE DATE QUANTITY SOLD RATE OF SALE SALES CONSIDERATION CAPITAL GAIN BROADBAND PACENET 24.03.06 71,01,000 10.00 7,10,10,000 07.08.07 71,01,000 10.20 7,24,30,200 14,20,200 -- DO -- 13.09.04 53,79,000 10.00 5,37,90,000 07.08.07 53,79,000 10.20 5,48,65,800 10,75,800 TOTAL 1,24,80,000 12,48,00,000 16,10,000 12,72,96,000 24,96,000 LONG TERM CAPITAL GAIN (TO BE TAXED @ 20%) NAME OF COMPANY DATE OF ACQUISITION QUANTITY RATE OF PURCHASE ACQ COST SALE DATE QUANTITY SOLD RATE OF SALE SALES CONSIDERATION CAPITAL GAIN BROADBAND PACENET 13.09.04 21,10,000 10.00 2,11,00,000 23.07.07 21,10,000 10.00 2,11,00,000 NIL TOTAL 21,10,000 2,11,00,000 21,10,000 2,11,00,000 NIL THE AO ON PERUSAL OF THE ABOVE CHART FOUND THAT THE ASSESSEE HAD SOLD ITS SHARES ON 23.07.2007 @ RS.10 PER SHARE. ON THE SAME DATE THE ASSESSEE HAD SOLD SHARES OF THE SAME COMPANY @ RS.10.20 PER SHARE AND IN THE ABOVE CHART IT HAD SHOWN THAT THE SHARE S WERE SOLD @ RS.10 PER SHARE. THE AO FOUND THAT WHILE CLAIMING STCG, THE ASSESSEE WA S SELLING THE SHARES @ RS. 10.20 PER SHARE AND IN ANOTHER CHART, WHILE SHOWING LTCG, IT WAS SHOWING THE SHARES SOLD @ RS.10 PER SHARE. THE SHARES TRADED WERE ON THE SAME DAY I.E. 23.07.2007. THE SHARES TRADED WERE OF THE GROUP CONCERN I.E. BPIPL . HENCE, THERE SHOULD BE NO REASON FOR DIFFERENCE IN SELLING PRICE. HOWEVER, THE AO OBSERVED THAT THE ASSESSEE HAD DELIBERATELY MANIPULATED THE COST OF SHARES AS WELL AS THE SALE CONSIDERATION IN SUCH A WAY WHICH LEADS TO EVASION OF TAX PAYMENT. IN ITA NO. 465/MUM/2015 5 VIEW OF THE ABOVE, THE AO TOOK INTO ACCOUNT T HE SALE PRICE OF 21,10,000 SHARES SOLD BY THE ASSESSEE ON 23.07.2007 CONSIDERING @ RS.10.20 PER SHARE AND RECOMPUTED THE LTCG AS UNDER: LONG TERM CAPITAL GAIN (TO BE TAXED @ 20%) NAME OF COMPANY DATE OF ACQUISITION QUANTITY RATE OF PURCHASE ACQ COST SALE DATE QUANTITY SOLD RATE OF SALE SALES CONSIDERATION CAPITAL GAIN BROADBAND PACENET 13.09.04 21,10,000 10.00 2,11,00,000 23.07.07 21,10,000 10.20 2,15,22,000 4,22,000 TOTAL 21,10,000 2,11,00,000 21,10,000 2,15,22,000 4,22,000 ACCORDINGLY, THE AO DISALLOWED THE CLAIM OF THE ASSESSEE THAT LTCG BE TAXED @ 20% AMOUNTING TO RS. NIL. ON THE OTHER HAND, HE BROUGHT TO TAX THE LTCG @ 20% AMOUNTING TO RS.4,22,000/ - COMPUTED ABOVE. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) VIDE ORDER NO. CIT(A) - 16 / ITO 8(1)(4)/IT - 227/2010 - 11 DATED 24.10.2011 CONFIRM ED THE ACTION OF THE AO. 5. THEN THE AO IMPOSED A MINIMUM PENALTY OF RS.1,20,098/ - ON THE INCOME ON WHICH TAX IS SOUGHT TO BE EVADED I.E. RS.7,44,000/ - (RS.3,22,000/ - PLUS RS.4,22,000/ - ). 6. AGGRIEVED BY THE PENALTY ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A) . WE FIND THAT THE LD. CIT(A) HAS AGREED WITH REASONS GIVEN BY THE AO AND DISMISSED THE APPEAL FILED BY THE ASSESSEE. ITA NO. 465/MUM/2015 6 7. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT NO ADVERSE MATERIAL HAS BEEN BROUGHT ON RECORD BY THE AO TO SHOW THAT THE ASSE SSEE - COMPANY HAD FURNISHED INACCURATE PARTICULARS OF INCOME OR HAD IN ANY MANNER COMMITTED FRAUD AND THE DISALLOWANCE AROSE ONLY BECAUSE OF THE REJECTION OF THE EXPLANATION OF THE ASSESSEE - COMPANY. THE LD. COUNSEL FURTHER SUBMITS THAT (I) STCG OF RS.3,22,0 00/ - IS TO BE SET OFF AGAINST THE BUSINESS LOSS OF RS.11,98,961/ - AND (II) IN ANOTHER ORDER THE LD. CIT(A) IN THE CASE OF THE ASSESSEE FOR THE AY 2008 - 09 VIDE ORDER DATED 24.10.2011 HAS DIRECTED THE AO TO PROVIDE THE COST OF INDEXATION WHILE COMPUTING LTCG . 8. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE FIND THAT THE ASSESSEE PURCHASED 10,000 SHARES OF BPIPL ON 18.07.2007 @ RS.10 AND ON THE SAME DAY IT PURCHASED 16,00,000 SHARES @ OF RS.12.50 PER SHARE. THEN THE ASSESSEE SOLD PART OF THESE SHARES I.E. 10,000 SHARES ON 23.07.2007 @ RS.10.20 PER SHARE AND ON 07.08.2007, IT SOLD 16,00,000 SHARES @ RS.10.20. HAVING GONE THROUGH THE FACTS OF THE CASE DELINEATED AT PARA 3 HERE - IN - ABOVE , WE AGREE WITH THE ACTION OF THE AO IN DISALLOWING STCL OF RS.36,78,000/ - AND BRINGING TO TAX STCG OF RS.3,22,000/ - . THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS ON THE ABOVE AMOUNT. THE MINIMUM PENALTY IMPOSED BY THE AO ON THIS PORTION OF RS.3,22,000/ - IS CONFIRMED. ITA NO. 465/MUM/2015 7 9.1 HOWEVER, THERE IS MERIT IN THE ORDER DATED 24.10.2011 OF THE LD. CIT(A) THAT THE AO SHOULD HAVE PROVIDED COST OF INDEXATION WHILE COMPUTING THE LTCG. AS PER THE SCHEME OF THE ACT INDEXED COST OF ACQUISITION IS TO BE REDUCED FROM THE FULL VALUE OF CONSIDERATION WHILE COMPUTING T HE LTCG. THEREFORE, THE PENALTY IMPOSED BY THE AO ON THE LTCG OF RS.4,22,000/ - WITHOUT INDEXED COST OF ACQUISITION IS NOT THE CORRECT O NE AND THE SAME IS DELETED . 10. IN V IEW OF THE ABOVE, THE AO IS DIRECTED TO IMPOSE MINIMUM PENALTY U/S 271(1)(C) ON STCG OF RS.3,22,000/ - ONLY. 11. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10/08/2017. SD/ - SD/ - (MAHAVIR SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 10/08/2017 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI