THE ACIT 25(3), MUMBAI V. SHRI RAJESH NUWAL (HUF), MUMBAI

ITA 4922/MUM/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8328 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 01-11-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 05-08-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P N DEVADASAN
• Assessee Lawyers: SANJEEV LALAN
• Keywords: Unexplained cash credit; Share purchase agreement
• Section: 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D MUMBAI BEFORE SHRI R.S. SYAL (A.M.) AND SHRI D.K. AGARWAL (J.M.) ITA NO. 4922/MUM/2008 ASSESSMENT YEAR : 2005-06 A.C.I.T. 25(3), C-11, R. NO. 308, PRATYAKSHAKAR BHAVAN, BANDRA-KURLA COMPLEX, BANDRA (E), MUMBAI 400 051. VS. SHRI RAJESH NUWAL (HUF), 701, SUNVILE, PLOT NO. 80, NUTAN LAXMI CO-OPERATIVE HOUSING SOCIETY LTD., 8 TH ROAD, J.V.P.O., VILE PARLE (WEST), MUMBAI- 400 156. PAN : AAIHR5976G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.N. DEVADASAN RESPONDENT BY : SHRI SANJEEV LALAN O R D E R PER D.K. AGARWAL, J.M. THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED A GAINST THE ORDER DATED 28.05.2008 PASSED BY THE LD. CIT (A) FOR THE A.Y. 2005-06. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE IS AN HUF, DERIVES INCOME FROM CAPITAL GAINS, INTEREST AND DIV IDEND. THE RETURN OF INCOME WAS FILED DECLARING TOTAL INCOME AT ` 15,76,571/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS INTER ALIA OBSERVED BY THE A.O. THAT THE ASSESSEE CLAIMED LONG TERM CAPITAL GAINS O F ` 14,20,560/- ON SALE OF SHARES OF ASHIKA CREDIT CAPITAL LTD. THE SH ARES ARE CLAIMED TO HAVE BEEN BOUGHT ON 16.5.02 FOR ` 1,97,000/- AND SOLD ON 16.4. 04 FOR ` ITA NO.4922/MUM/208 SH RI RAJESH NUWAL 2 16,17,560/-. THE ASSESSEE HAS FURNISHED COPY OF BR OKERS NOTE OF BROKER LADHA & CO. CALCUTTA IN SUPPORT OF THE PURCHASE AND CONFIRMATION OF BROKER SNEH CAPITAL IN SUPPORT OF THE SALE OF THE S AME BEFORE THE A.O. THESE SHARES WERE SOLD TO SPIDER IMPEX PVT. LTD., M UMBAI. THE A.O. CALLED THE DEMAT ACCOUNT OF THE ASSESSEE AND FOUND THAT THESE SHARES DID NOT FIGURE IN THE DEMAT ACCOUNT. THE A.O. ALSO NOTI CED THAT MOST OF THE SHARES PURCHASED AND SOLD BY THE ASSESSEE AS ON 31. 3.04 DID NOT FIGURE IN THE DEMAT STATEMENT. THE A.O. ISSUED SUMMONS DA TED 5.10.07 TO SPIDER IMPEX PVT. LTD. AT THE ADDRESS GIVEN BY THE ASSESSEE WHICH COULD NOT BE SERVED AS THE PREMISES WAS FOUND TO BE OCCUP IED BY SOME OTHER PERSONS. THE A.O. ASKED THE ASSESSEE TO FURNISH CO RRECT ADDRESS OF SPIDER IMPEX PVT. LTD. THE ASSESSEE FILED LETTER DA TED 5.11.07 OF SNEH CAPITAL WHEREIN IT WAS SUBMITTED THAT THE ASSESSEE SOLD 25,000 SHARES OF ASHIKA CREDIT CAPITAL LTD. TO SPIDER IMPEX PVT. LTD . THE BROKER ALSO INFORMED THAT THE SHARES HAD BEEN SOLD IN OFF MARKE T TRANSACTION. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FURNISHED COPY OF BROKERS NOTE IN SUPPORT OF ITS CLAIM OF HAVING ACQ UIRED SHARES OF ASHIKA CREDIT CAPITAL LTD. ON 16.5.02. THE ASSESSEE ALSO FURNISHED COPY OF BANK ACCOUNT FROM WHERE ASSESSEE ISSUED TWO CHEQUES OF ` 1 LAC DATED 8.10.02 AND ` 97,000/- DATED 10.10.02 IN THE NAME OF LADHA & CO. THE A.O. NOTICED THAT THE PAYMENT IS MADE TO LADHA & CO. NEA RLY 5 MONTHS AFTER THE DATE OF PURCHASE OF SHARES. THE ASSESSEE VIDE L ETTER DATED 23.11.07 FURNISHED CONFIRMATION LETTER DATED 15.11.07 FROM S PIDER IMPEX PVT. LTD. ITA NO.4922/MUM/208 SH RI RAJESH NUWAL 3 CONFIRMING THAT THE COMPANY HAD BOUGHT THE SHARES O F ASHIKA CREDIT CAPITAL LTD. FROM THE ASSESSEE THROUGH THE BROKER S NEH CAPITAL AND THAT THE TRANSACTION WAS AN OFF MARKET TRANSACTION. THE A.O. ISSUED SUMMON DATED 14.12.07 TO SPIDER IMPEX PVT. LTD. ON THE ADD RESS GIVEN IN CONFIRMATION WHICH WAS SERVED ON THEM. HOWEVER, TH ERE WAS NO COMPLIANCE OF THE SUMMON BY SPIDER IMPEX PVT. LTD., THE A.O. TREATED THE TRANSACTION AS NON-GENUINE FOR THE FOLLOWING RE ASONS:- (I) APPELLANT HAS NOT PRODUCED THE SHARE CERTIFICAT ES EVIDENCING THE OWNERSHIP OF THE SHARES OF ASHIKA (THOUGH SPIDE R IMPEX PVT. LTD. SENT COPIES OF SHARES VIDE LETTER DATED 15.11. 07). (II) APPELLANT INITIALLY DID NOT FILE THE CORRECT A DDRESS OF SPIDER IMPEX PVT. LTD. BUT LATER ON FILED CONFIRMATION AND THE CORRECT ADDRESS. (III) THE SUMMON ISSUED TO M/S SPIDER IMPEX PVT. LT D. REMAINED UNCOMPLIANCED THOUGH THEY HAVE GIVEN CONFIRMATION. (IV) SHARES WERE PURCHASED IN PHYSICAL FORM AND THE SHARES WERE SOLD OFF MARKET TO SPIDER IMPEX PVT. LTD. (V) APPELLANT HAS NOT RECEIVED PAYMENT FOR SELLING THESE SHARES AND HAS CLAIMED TO HAVE BOUGHT SHARES OF SOME OTHER COMPANY IN LIEU OTHER OF. ON THE BASIS OF THE ABOVE, THE A.O. TREATED SALE CO NSIDERATION OF ` 16,17,560/- AS UNEXPLAINED CREDIT U/S 68 OF THE INC OME TAX ACT, 1961 (THE ACT) AND ADDED TO THE INCOME OF THE ASSESSEE. 3. ON APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE WH ILE OBJECTING TO THE A.O.S OBSERVATION THAT THE SALE TRANSACTION OF THE SHARES IS NOT GENUINE ALSO FILED COPY OF ACCOUNT OF APPELLANT IN THE BOOK S OF BROKER M/S LADHA ITA NO.4922/MUM/208 SH RI RAJESH NUWAL 4 & CO. (PURCHASING BROKER) FOR THE PERIOD 1.4.02 TO 31.3.03, COPY OF ACCOUNT IN THE BOOKS OF M/S SNEH CAPITAL (SELLING B ROKER) AND COPY OF SHARE CERTIFICATE AS SENT BY PURCHASER SPIDER IMPEX PVT. LTD. ALONG WITH CONFIRMATION OF AFORESAID PARTY TO THE A.O. HE ALS O FILED COPY OF BANK ACCOUNT TO SHOW THAT THE PURCHASE PRICE OF SHARES W AS PAID IN 2002 ITSELF AND SUBMITTED THAT ALL THE ABOVE DOCUMENTS WERE ALS O FILED BEFORE THE A.O. 4. THE LD. CIT(A) AFTER CONSIDERING THE DOCUMENTARY EVIDENCES FILED BY THE ASSESSEE HELD THAT TRANSACTIONS DONE BY THE APP ELLANT IS GENUINE AND NO ADVERSE VIEW IS REQUIRED TO BE TAKEN, DIRECTED T HE A.O. TO TAX LONG TERM CAPITAL ON SALE OF SHARES OF ASHIKA CREDIT CAP ITAL LTD. AND ACCORDINGLY DELETED THE ADDITION OF ` 16,75,000/- MADE BY THE A.O. U/S 68 OF THE ACT. 5. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US TAKING FOLLOWING GROUNDS OF APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER U/S 68 OF THE INCOME TAX ACT, 196 1 OF ` 16,71,500/- AND DIRECTING THE ASSESSING OFFICER TO TAX THE SAME AS LONG TERM CAPITAL GAIN ON SALE OF SHARES OF M/S ASH IKA CREDIT CAPITAL LTD. 2. THE APPELLATE PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS TO BE SET ASIDE AND THAT OF THE AO BE RESTO RED. ITA NO.4922/MUM/208 SH RI RAJESH NUWAL 5 6. AT THE TIME OF HEARING, THE LD. D.R. SUBMITS THA T FOR THE REASONS AS MENTIONED IN THE ASSESSMENT ORDER, THE LD. CIT(A) H AS ERRED IN DELETING THE ADDITION OF ` 16,71,500/- MADE BY THE A.O. U/S 68 OF THE ACT. H E, THEREFORE, SUBMITS THAT THE ADDITION MADE BY THE A. O. BE RESTORED. 7. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFOR E THE A.O. AND LD. CIT(A) FURTHER SUBMITS THAT IN VIEW OF THE DOCUMENT ARY EVIDENCE SUBMITTED BEFORE THE A.O. AND LD. CIT(A), THE LD. C IT(A) WAS FULLY JUSTIFIED IN DELETING THE ADDITION MADE BY THE A.O. AND HIS O RDER BE UPHELD. 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE F IND THAT THE A.O. HAS TREATED THE SALE OF SHARES OF ASHIKA CREDIT CAPITAL LTD. AS NOT GENUINE AND ADDED THE SAME U/S 68 OF THE ACT AS THE ASSESSE E HAS NOT EXPLAINED THE TRANSACTION SATISFACTORILY. HOWEVER, THE LD. CI T(A) IN VIEW OF THE DOCUMENTARY EVIDENCE FILED BY THE ASSESSEE HELD THA T THE TRANSACTION DONE BY THE APPELLANT IS GENUINE AND NO ADVERSE VIE W IS REQUIRED TO BE TAKEN IN THIS REGARD AND HENCE HE DELETED THE ADDIT ION MADE BY THE A.O. WE FURTHER FIND THAT THERE IS NO DISPUTE THAT THE A SSESSEE BEFORE THE A.O. HAS FILED COPY OF ACCOUNT OF APPELLANT IN THE BOOKS OF BROKER M/S LADHA & CO. (PURCHASING BROKER) FOR THE PERIOD 1.4.02 TO 31.3.03, COPY OF ACCOUNT IN THE BOOKS OF M/S SNEH CAPITAL (SELLING B ROKER) AND COPY OF ITA NO.4922/MUM/208 SH RI RAJESH NUWAL 6 SHARE CERTIFICATE AS SENT BY PURCHASER SPIDER IMPEX PVT. LTD. ALONG WITH CONFIRMATION OF AFORESAID PARTY AND BANK ACCOUNT TO SHOW THAT THE PURCHASE PRICE OF SHARES WAS PAID IN 2002 ITSELF. T HUS THERE IS NO DISPUTE THAT THE PURCHASE OF THE SAID SHARES ARE GENUINE. WE FURTHER FIND THAT THE ASSESSEE HAS ALSO FILED SHARE BILL OF THE AFORE SAID SHARES ISSUED BY SNEH CAPITAL BILL DATED 16.4.2004 WHERE 25000 SHARE S OF ASHIKA CREDIT CAPITAL LTD. WERE SOLD @ ` 64.80 FOR A TOTAL CONSIDERATION OF ` 16,20,000 AGAINST WHICH BROKER BOUGHT 30,000 SHARES OF RUCHI INVESTMENT FOR THE ASSESSEE FOR TOTAL CONSIDERATION OF ` 16,20,000/-. WE FURTHER FIND THAT THE ASSESSEE HAS ALSO FILED RUNNING ACCOUNT OF ASSESSEE WITH M/S SNEHA CAPITAL, MUMBAI IN THE BOOKS OF ABOVE BROKER. WE FU RTHER FIND THAT THE ASSESSEE ALSO FILED OFFICIAL REPORT AND QUOTATION O F RATE OF CALCUTTA STOCK EXCHANGE SHOWING RATE OF ` 64.80 PER SHARE ON 16.4.04. WE FURTHER FIND THAT THE ASSESSEE HAS ALSO FILED OFFICIAL REPORT AN D QUOTATION OF RATE OF CALCUTTA STOCK EXCHANGE SHOWING RATE OF ` 7.85 PER SHARE ON THE DATE OF PURCHASE I.E 16.5.02. WE FURTHER FIND THAT THE ASS ESSEE HAS FILED COPY OF SHARE CERTIFICATE SENT BY SPIDER IMPEX PVT. LTD. AL ONG WITH CONFIRMATION TO THE A.O. WHICH SHOWS THAT THE ORIGINAL HOLDER OF SHARES WAS SHRI SUSHIL GARG. THESE SHARES WERE TRANSFERRED TO THE NAME OF SHRI RAJESH NUWAL HUF, APPELLANT ON 30.11.02 BY REGISTERED FOLI O OF COMPANY 4778 DATED 30.11.02 AND THESE SHARES WERE AGAIN TRANSFER RED TO SPIDER IMPEX PVT. LTD. BY REGISTERED FOLIO NO. 5211 DATED 31.5.0 4. THUS THE ASSESSEE HAS DISCHARGED ITS BURDEN. MERELY BECAUSE THE BUYER OF SHARES OF M/S ITA NO.4922/MUM/208 SH RI RAJESH NUWAL 7 SPIDER IMPEX PVT. LTD. DID NOT ATTEND THE PROCEEDI NGS U/S 131 DOES NOT MEAN THAT THE SHARE TRANSACTION ENTERED INTO BY THE ASSESSEE IS NOT GENUINE. THE CONFIRMATION ALONG WITH COPY OF SHARE CERTIFICATE SENT BY SPIDER IMPEX PVT. LTD. TO THE A.O. GIVES COMPLETE P ROOF OF SALE. THE SHARES OF ASHIKA CREDIT CAPITAL LTD. ARE NOT REGIST ERED IN BOMBAY STOCK EXCHANGE HENCE THEY CANNOT ROUTE THROUGH BOMBAY STO CK EXCHANGE. ON THE OTHER HAND, THEY ARE QUOTED IN CALCUTTA STOC K EXCHANGE. IN THIS VIEW OF THE MATTER AND KEEPING IN VIEW THAT THE ASS ESSEE HAS TAKEN PHYSICAL DELIVERY OF SHARES AND THE RESPECTIVE SHAR ES ARE TRANSFERRED IN HIS NAME ON 30.11.02 WHICH WERE SOLD TO SPIDER IMPE X PVT. LTD. AS PER CONFIRMATION FILED BY THEM, WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS FULLY JUSTIFIED IN TREATING THE SHARE TRANSACTION AS GENU INE TRANSACTION AND IN DIRECTING THE A.O. TO TAX LONG TERM CAPITAL GAIN ON SALE OF SAID SHARES AND THEREBY DELETING THE ADDITION OF ` 16,17,500/- MADE BY THE A.O. U/S 68. THE GROUNDS TAKEN BY THE REVENUE ARE THEREFORE REJE CTED. 9. IN THE RESULT, APPEAL OF THE REVENUE STANDS DISM ISSED. ORDER PRONOUNCED ON THIS 9 TH DAY OF MARCH , 2011. SD/- (R.S. SYAL) ACCOUNTANT MEMBER SD/- (D.K. AGARWAL) JUDICIAL MEMBER MUMBAI, DATED 9 TH MARCH , 2011. RK ITA NO.4922/MUM/208 SH RI RAJESH NUWAL 8 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- 16 MUMBAI 4. COMMISSIONER OF INCOME TAX VIII, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH D, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI ITA NO.4922/MUM/208 SH RI RAJESH NUWAL 9 DRAFT DICTATED ON 21.2.11 , 24.2.11 SR PS 2 DRAFT PLACED BEFORE AUTHOR ON 2 4 . 2 .11 ,25.2.11 SR PS 3 DRAFT PROPOSED & PLACE BEFORE THE 2 ND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY 2 ND MEMBER JM/AM 5 APPROVE D DRAFT COMES TO THE SR PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR PS 7 FILE SENT TO THE BENCH CLERK SR PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE ON WHICH FILE GOES TO THE AR 10 DATE OF D ESPATCH SR PS