PRAVIN B JAIN HUF, MUMBAI V. ITO 19(2)(5), MUMBAI

ITA 4788/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3407 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 08-08-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Keywords: Unexplained expenditure; Share purchase agreement
• Section: 69C; 201; 68

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) & SHRI AMARJIT SINGH (JM) I.T.A. NO. 4788 /MUM/ 201 8 (ASSESSMENT YEAR 20 14 - 15 ) PRAVIN B. JAIN HUF M/S. SANDEEP ART NX 111, GROUND FLOOR BAPU KHOTE, KAZI STREET PYDHONI , MUMBAI - 400 003. PAN : AAMHP5929D V S . ITO 19(2)(5) 2 ND FLOOR MATRU MANDIR TARDEO MUMBAI - 400 007. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY NONE DEPARTMENT BY SHRI CHAITANYA ANJARIA DATE OF HEARING 27 . 08 . 201 9 DATE OF PRONOUNCEMENT 21 . 1 1 . 20 1 9 O R D E R PER SHAMIM YAHYA (AM) : - THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A) DATED 16.5.2018 AND PERTAINS TO A.Y. 2014 - 15. GROUNDS OF APPEAL READ AS UNDER : - 1. THE GROUNDS MENTIONED HEREUNDER ARE WITHOUT PREJUDI CE TO ONE ANOTHER 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION OF RS. 10,32,480 / - OF THE LTCG U/S 68 MADE BY THE LEARNED ASSESSING OFFICER; WITHOUT CONSIDERING THE FACT, 'THAT APPELLANT HAS SOLD THE EQUITY SHARE DULY LISTED IN RECOGNISED STOCK EXCHANGE THROUGH THE SEBI, BSE & NSE RECOGNISED BROKER AND ON WHICH STT HAS BEEN PAID. FURTHER ALL THE CONTRACT NOTES WERE PLACED ON RECORD. ALL TRANSACTIONS OF SALE & PURCHASE OF SAID LIS TED EQUITY SHARES HAS BEEN DONE THROUGH ACCOUNT PAYEE CHEQUES ONLY AND SAME WERE DULY REFLECTED IN APPELLANT'S BANK ACCOUNT AND THE SAID SHARES WERE KEPT MORE THAN A YEAR IN HIS DEMAT ACCOUNT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE LEARNED COMMISSI ONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION OF RS. 20,650/ - OF UNEXPLAINED EXPENDITURE U/S 69C MADE BY THE LEARNED ASSESSING OFFICER; WITHOUT CONSIDERING THE FACT, 'THAT APPELLANT HAS NOT MADE ANY SUCH EXPENSES AND HAD SOLD THE EQUITY SHA RE DULY LISTED IN RECOGNISED STOCK EXCHANGE THROUGH THE SEBI, BSE & NSE RECOGNISED BROKER AND ON WHICH STT HAS BEEN PAID. FURTHER ALL THE CONTRACT NOTES WERE PLACED ON RECORD. PRAVIN B. JAIN HUF 2 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE APPELLANT FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 12.03.2016, DECLARING TOTAL INCOME AT RS NIL. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE HAS CLAIMED LONG TERM CAPITAL GAIN (LTCG) OF RS 10 , 32 , 480/ - ON PURCHASE/SALE OF SHARES O F M/S MATRA KAUSHAL ENTERPRISES LTD. AFTER DUE CONSIDERATION OF FACTS OF THE CASE, THE AO HELD THAT THE LTCG CLAIMED WAS AN ACCOMMODATION ENTRY AND THER EFORE ADDED THE AMOUNT OF RS 10, 32 , 480/ - TO THE INCOME OF THE ASSESSEE U/S 68 FOR THE RELEVANT YEAR. 3 . UPON ASSESSEES APPEAL LEARNED CIT(A) CONFIRMED THE ASSESSING OFFICER ACTION BY ELABORATELY CONSIDERING THE ISSUE AS UNDER : - 5.2 I HAVE CONSIDERED THE FACTS OF THE CASE, SUBMISSIONS AND CONTENTIONS OF THE ASSESSEE AS ALSO THE ORDER OF THE AO. THE ASSES SEE CONTENDS THAT IT HAS PURCHASED THE SHARES IN A GENUINE AND BONAFIDE MANNER BY WAY OF PREFERENTIAL SHARE ALLOTMENT OF SHARES OF M/S KAUSHALYA GLOBAL LTD (WHICH GOT SUBSEQUENTLY MERGED WITH M/S MATRA KAUSHAL ENTERPRISES LTD). THE SHARES OF KAUSHALYA GLOB AL LTD WERE DEMATERIALIZED AND AFTER AMALGAMATION WITH M/S MATRA KAUSHAL ENTERPRISES LTD., IT BECAME THE OWNER OF THE SHARES OF M/S MATRA KAUSHAL ENTERPRISES LTD., WHICH WERE ALSO DEMATERIALIZED AND SUBSEQUENTLY SOLD. IT WAS FURTHER SUBMITTED THAT SINCE TH E PAYMENTS HAVE BEEN MADE/RECEIVED THROUGH BANKING CHANNEL, THEREFORE THE ACTION OF THE AO OF MAKING THE SAID ADDITION U/S 68 AFTER REJECTING ITS CLAIM OF LTCG IS NOT CORRECT. MOREOVER, IN SUPPORT OF ITS TRANSACTIONS OF PURCHASE/SALE OF SHARES OF M/S MATRA KAUSHAL ENTERPRISES LTD, THE ASSESSEE HAD SUBMITTED BEFORE THE AO AS WELL AS THE UNDERSIGNED, THE COPY OF SHARE CERTIFICATE OF M/S KAUSHALYA GLOBAL LTD., BANK STATEMENT, DEMAT ACCOUNT, SALE BILLS OF M/S PRABHUDAS LILADHAR (P) LTD., ETC. IT IS ALSO OBSERVE D THAT THE AO HAS NOT MADE ANY ADDITION ON ACCOUNT OF UNEXPLAINED EXPENDITURE U/S 69C FOR OBTAINING THE ACCOMMODATION ENTRY OF LTCG. HOWEVER, THE ASSESSEE HAS IN ITS WRITTEN SUBMISSIONS STATED THAT ADDITION OF RS 20,650/ - HAS BEEN MADE BY THE AO U/S 69C. 5.3 THE GENUINENESS OF THE ASSESSEE'S CLAIM OF LTCG CAN VALIDLY BE TESTED ON THE GROUND / PRINCIPLE OF PREPONDERANCE OF HUMAN PROBABILITIES AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF SUMATI DAYAL (214 ITR 801). IN THE SAID DECISION, THE HON'BLE SU PREME COURT WHILE DECLARING THE TRANSACTION TO BE NON - GENUINE, DISCARDED A HOST OF DOCUMENTARY EVIDENCES RELIED UPON BY THE ASSESSEE. FURTHER, THE HON'BLE SUPREME COURT IN THE CASE OF DURGA PRASAD MORE (182 ITR 540) HAS HELD THAT EVIDENCES ARE NOT BY THEMS ELVES CONCLUSIVE AND THE TRUTH OF THE MATTER COULD BE DETERMINED ON THE BASIS OF THE SURROUNDING FACTS AND CIRCUMSTANCES OF THE CASE. IT FURTHER HELD THAT WHAT IS RELEVANT WHILE DETERMINING THE GENUINENESS OF THE TRANSACTION IS THE SUBSTANCE OF THE TRANSAC TION AND NOT ITS FORM. PRAVIN B. JAIN HUF 3 5.4 THE TIMING OF THE PURCHASE OF THE SAID SHARES AND ITS DEMATERIALIZATION IS VERY IMPORTANT. IN THE INSTANT CASE, IT IS OBSERVED THAT THE SHARE CERTIFICATES OF 20,000 SHARES ISSUED TO THE ASSESSEE OF M/S KAUSHALYA GLOBAL LTD IS D ATED 03.08.2012 AND IT HAS BEEN DEMATERIALIZED AS LATE AS 31.07.2013. NO REASONS HAVE BEEN PROVIDED BY THE ASSESSEE EITHER IN THE ASSESSMENT PROCEEDINGS OR IN THE APPELLATE PROCEEDINGS AS TO WHY THERE WAS AN UNUSUAL DELAY OF AROUND A YEAR IN GETTING THEIR DEMATERIALIZATION. IT IS ALSO OBSERVED THAT THE DEMATERIALIZATION OF THE SHARES AS WELL AS THE TIME OF SALE COINCIDES WITH THE SPIRALING PRICE OF THE SAID SCRIP. 5.5 MOREOVER, IT IS OBSERVED THAT THE SHARES OF M/S KAUSHALYA GLOBAL LTD (WHICH GOT AMALGAMAT ED WITH M/S MATRA KAUSHAL ENTERPRISES P LTD) WHICH WERE ALLEGEDLY PURCHASED @ RS 10/ - PER SHARE HAVE BEEN SOLD AT AN AVERAGE RATE OF AROUND @ RS 51 7/ - PER SHARE. THE ASSESSEE HAS NOT BEEN IN A POSITION TO JUSTIFY ITS DECISION OF TRADING IN THE SHARES OF TH E SAID SCRIP WHICH HAD WEAK FUNDAMENTALS. THE FANTASTIC SALE PRICE WAS NOT AT ALL POSSIBLE AS THERE WAS NO ECONOMIC OR FINANCIAL BASIS AS TO HOW THE SHARES OF THIS SCRIP WOULD JUMP FROM NOMINAL AMOUNT TO SUCH HIGHER AMOUNT. THESE FACTS ALSO EXPOSE THE DUBI OUS NATURE OF THE TRANSACTIONS OF PURCHASE/SALE OF SHARES OF M/S MATRA KAUSHAL ENTERPRISES P LTD. MOREOVER, IT HAS ALSO BEEN ASCERTAINED FROM THE ASSESSEE THAT NEITHER IN THE PRECEDING 3 YEARS AND SUCCEEDING 2 YEARS, IT HAS BOOKED ANY LTCG AND THEREFORE, T HE SINGLE INSTANCE OF LTCG WITH SUCH HIGH PROFIT SHOWN IN THE RELEVANT YEAR LEAVES LITTLE DOUBT THAT THE ASSESSEE HAS INDULGED IN A DUBIOUS TRANSACTION MEANT TO INTRODUCE THE UNDISCLOSED INCOME IN THE GARB OF LONG TERM CAPITAL GAIN. 5.7 THE HON'BLE JURISD ICTIONAL HIGH COURT IN THE CASE OF SANJAY BIMALCHAND JAIN (89 TAXMANN.COM 196) HAD AN OCCASION TO ADJUDICATE A SIMILAR ISSUE RELATED TO THE CLAIM OF LONG TERM CAPITAL GAIN ON SALE OF SCRIPS OF 2 UNKNOWN COMPANIES. IN THE SAID CASE, THE BROKER OF THE ASSESS EE DID NOT RESPOND TO THE LETTE R OF THE AO SEEKING THE RELEVANT INFORMATION. MOREOVER, THE ASSESSEE WAS NOT ABLE TO FURNISH ANY COGE NT EVIDENCE TO EXPLAIN AS TO HOW THE SHARES OF AN UNKNOWN WORTHLESS COMPANY JUMPED TO SUCH HIGH AMOUNTS. AFTER CONSIDERING T HE FACTUAL POSITION OF THE SAID CASE, THE HON'BLE COURT PROCEEDED TO CONFIRM THE CONCLUSION OF THE LOWER AUTHORITIES THAT THE ASSESSEE HAD INDULGED IN A DUBIOUS SHARE TRANSACTION MEANT TO INTRODUCE THE UNDISCLOSED INCOME IN THE GARB OF LONG TERM CAPITAL GA IN. THE FACTS OF THE CASE OF THE ASSESSEE ARE VERY SIMILAR TO THAT OF THE CASE OF SANJAY BIMALCHAND (SUPRA). 5.8 IN VIEW OF THE AFORESAID DISCUSSION, IT IS APPARENT THAT THE LONG TERM CAPITAL GAIN CLAIMED BY THE ASSESSEE IS BOGUS AND WITH A SOLE PURPOSE O F MISUSING THE EXEMPTION PROVIDED U/S 10(38). IF ONE CONSIDERS THE PECULIAR FACTS OF THIS CASE, THE CLAIM OF THE ASSESSEE OF LONG TERM CAPITAL GAIN DOES NOT ACCORD WITH HUMAN PROBABILITIES AND THE RATIO OF THE DECISIONS OF THE H ON'BLE SUPREME COURT IN THE CASES OF DURGA PRASAD MORE (SUPRA) AND SUMA TI DAYAL(SUPRA) ARE CLEARLY ATTRACTED. THEREFORE, NO INFIRMITY IS FOUND IN THE ACTION OF THE AO OF TREATING THE ASSESSEE'S CLAIM OF LTCG AS NON - GENUINE . 4. AGAINST THE ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE US . PRAVIN B. JAIN HUF 4 5. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE NOTE THAT LEARNED CIT(A) HAS GIVEN A FINDING THAT THERE IS NO ECONOMIC OR FINANCIAL BASIS AS TO HOW THE SHARES OF A LITTLE KNOWN COMPANY JUMPING MANIFOLD IN NO TIME GIVING THE ASSESSEE A WINDF ALL OF CAPITAL GAIN. THE FINDING OF LEARNED CIT(A) AND HIS REASONING ARE FULLY IN CONFORMITY WITH THE DISCUSSION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF SANJAY BIMALCHAND JAIN (SUPRA). HENCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED CIT(A). H E NCE WE UPHOLD THE SAME. 6. IN THE RESULT ASSESSEES APPEAL STANDS DISMISSED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 21 . 1 1 . 201 9 . SD/ - SD/ - ( AMARJIT SINGH ) (SH A MIM YAHYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 21 / 1 1 / 20 1 9 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// ( ASSISTANT R EGISTRAR ) PS ITAT, MUMBAI