ITO, New Delhi V. M/s. Navyug Investment Ltd., New Delhi

ITA 5103/DEL/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6769 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC 3
• Next Hearing Date: 02-11-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 11-08-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: ASHISH GOEL
• Keywords: Business income; Income from undisclosed sources; Question of law; Speculative transactions; Capital Gains
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 143(1); 43; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC - 3 , NEW DELHI BEFORE SH. N. K. SAINI, A CCOUNTANT M EMBER ITA NO. 5103/DEL/2015 : ASSTT. YEAR : 2003 - 04 ITA NO. 5104/DEL/2015 : ASSTT. YEAR : 2004 - 05 INCOME TAX OFFICER, WARD - 7(1) (OLD WARD - 10(1), NEW DELHI - 110001 VS M/S NAVYUG INVESTMENT LTD. (MERGED WITH DEEPRAJ INVESTMENT PVT. LTD.), 3 - B, VANDANA, 11, TOLSTOY MARG, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. A AACN0767E ASSESS EE BY : SH. VED JAIN & ASHISH GOEL, CAS REVENUE BY : ANIL SHARMA, SR. DR DATE OF HEARING : 0 2.1 1 .201 6 DATE OF PRONOUNCEMENT : 01 .02 .201 7 ORDER THESE TWO APPEALS BY THE DEPARTMENT ARE DIRECTED AGAINST THE SEPAR ATE O R DER S EACH DATED 09.04.2015 OF LD. CIT(A) - X I V , NEW DELHI . 2. SINCE THE ISSUES INVOLVED IN THESE APPEALS ARE SIMILAR AND THE APPEALS WERE HEARD TOGETHER SO THESE ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY . 3. FIRST WE WILL DEAL WITH THE APPEAL IN ITA NO. 5103/DEL/2015 FOR THE ASSESSMENT YEAR 2003 - 04. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: ITA NO S. 5103 & 5104 /D EL /201 5 NAVYUG INVESTMENT LTD. 2 1. WHETHER THE CIT(A) UNDER THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW WAS JUSTIFIED IN DELETING T HE ADDITION OF RS, 47 ,91,398/ - U/S 68 OF THE I .T. ACT ON THE GROUND THAT THE A.O. HAS NOT PROVIDED CROSS EXAMINATION TO THE ASSESSEE, WHEREAS THE FACT REMAINS THAT THE SAME WAS NOT SOUGHT BY THE ASSESSEE, DESPITE DIRECTION OF HON'BLE IT AT. 2. WHETHER THE CIT(A) UNDER THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 47,91,398/ - U/S 68 OF I .T. ACT ON THE GROUND OF NON VERIFICATION OF CERTAIN MATERIALS, WITHOUT REMANDING THE MATTER TO THE ASSESSING OFFICER. 3. T HE APPELLANT CRAVES LEAVE, TO ADD, ALTER OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF THE HEARING. 4 . FROM THE ABOVE GROUNDS, IT WOULD BE CLEAR THAT ONLY GRIEVANCE OF THE DEPARTMENT IN THIS APPEAL RELATES TO THE DELETION OF ADDITION OF RS.47 ,91,398/ - MADE BY THE AO U/S 68 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) . 5 . FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 13.09.2003 DECLARING NIL INCOME (AFTER ADJUSTMENT OF BROUGHT FORWARD LOSSE S) WHICH WAS PROCESSED U/S 143(1) OF THE ACT ON 06.11.2003. SUBSEQUENTLY, THE AO ON THE BASIS OF INFORMATION RECEIVED FROM DI(INV.) WING OF THE DEPARTMENT ISSUED NOTICE U/S 148 OF THE ACT TO THE ASSESSEE ON 09.11.2006. THE AO FRAMED THE ASSESSMENT AT AN IN COME ITA NO S. 5103 & 5104 /D EL /201 5 NAVYUG INVESTMENT LTD. 3 OF RS.47,66,877/ - . THE AO WHILE MAKING THE IMPUGNED ADDITION HELD THAT M/S S J CAPITAL LTD. AND M/S MKM FINSEC PVT. LTD. WHO BOUGHT SHARES FROM THE ASSESSEE WERE NOT GENUINE AS THE ASSESSEE FAILED TO PRODUCE THE DIRECTOR OF THE SAID COMPANY. THEREFORE , THE TRANSACTIONS OF THE SAID COMPANIES WERE NOT REAL BUT WERE ONLY DESIGNED TO INTRODUCE THE UNDISCLOSED INCOME INTO THE BUSINESS OF THE ASSESSEE . ACCORDINGLY, THE AMOUNT OF RS.47,91,398/ - RECEIVED FROM THE SAID COMPANIES WAS TREATED AS UNEXPLAINED AND A DDED TO THE INCOME OF THE ASSESSEE AS INCOME FROM UNDISCLOSED SOURCES. 6 . BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) WHO DELETED THE ADDITION VIDE ORDER DATED 30.06.2009. THEREAFTER, THE DEPARTMENT PREFERRED AN APPEAL TO THE ITA T WHEREIN VIDE ORDER DATED 09.07.2012, THE MATTER WAS RESTORED TO THE AO WHO AGAIN MADE THE IMPUGNED ADDITION . IN THE SECOND INNING BEFORE THE LD. CIT(A), TH E ASS ESSEE SUBMITTED THAT THE REASON RECORDED BY THE AO WAS THAT A SUM OF RS.16,27,688/ - HAD ESCAPE D ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. THE ASSESSEE EXPLAINED THAT OUT OF THE AFORESAID AMOUNT A SUM OF RS.14,89,788/ - WAS DECLARED BY THE ASSESSEE AS PROFIT IN SHARE DEALING IN ITS PROFIT AND LOSS ACCOUNT AND A SUM OF RS.1,37,900/ - WAS REQUIRED TO BE ADJUSTED AGAINST SALE OF INVESTMENTS IN SHARES ACQUIRED BY THE ASSESSEE IN EARLIER YEARS. IT WAS FURTHER SUBMITTED THAT AGAINST THE AFORESAID AMOUNT OF RS.16,27,688/ - , THE AO MADE AN ADDITION OF RS.47,91,398/ - AS ALLEGED INCOME U/S 68 OF TH E ACT WITHOUT ANY COGENT ITA NO S. 5103 & 5104 /D EL /201 5 NAVYUG INVESTMENT LTD. 4 MATERIAL OR EVIDENCE IN SUPPORT THEREOF. IT WAS CONTENDED THAT EVEN THE SUM OF RS.47,91,398/ - HAS ALREADY BEEN DECLARED AS INCOME IN PROFIT AND LOSS ACCOUNT. THE ASSESSEE FURTHER SUBMITTED THAT THE SAID AMOUNT OF RS.47,91,398/ - HAD BEEN DOUBLE TAXED AS ONCE UNDER THE HEAD PROFIT IN SHARE DEALING/SALE OF SHARES AND AGAIN U/S 68 OF THE ACT. THE ASSESSEE SUBMITTED THAT THE AO HAD COMPUTED INCOME OF THE ASSESSEE IN THE FOLLOWING MANNER: (IN RS.) INCOME FROM BUSINESS & PROFESSION ( - ) 3,12,85,668/ - DEDUCT: LOSS ON SALE OF INVESTMENTS 3,37,53,873/ - (CONSIDERED SEPARATELY) COMMISSION PAID 4200/ - 3,37,58,073/ - LESS: AMOUNT INCLUDED IN THE P&L A/C AS 24,72,405/ - BUSINESS RECEIPTS BY WAY OF SHARE DEALING PROFIT ON TRANSACTIONS WHICH HAVE BEEN HELD AS BOGUS TRANSACTIONS (AS DISCUSSED) SEPARATELY CONSIDERED 25,04,065/ - NET PROFIT AS PER P ROFIT & LOSS A/C ( - ) 24,521/ - ADD: INCOME FROM OTHER SOURCES (1) SHARE DEALING PROFIT (HELD AS UNEXPLAINED)(U/S68) 25,04,065/ - (2) AMOUNT RECEIVED ON 'SALE OF INVESTMENT' (HELD AS UNEXPLAINED) ADDED U/S 68 OF THE ACT. 12,98,572/ - (3) AMOUNT RECEIVED ON 'SALE OF INVESTMENT 9,95,800/ - 47,91,398/ - (ADDED U/ S68OF THEACT) (HELD AS UNEXPLAINED) 47,66,877/ - INCOME/L OSS UNDER THE HEAD CAPITAL GAINS (LOSS OF RS.3,37,58,073/ - CLAIMED ON SALE OF INVESTMENT BUT DISALLOWED AS DISCUSSED ABOVE) NIL TOTAL TAXABLE INCOME 47,66,877/ - ITA NO S. 5103 & 5104 /D EL /201 5 NAVYUG INVESTMENT LTD. 5 7 . THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE IMPUGNED ADDITION BY OBSERVING IN PARAS 5.3.1 & 5.3.2 OF THE IMPUGNED ORDER BY OBSERVING AS UNDER: 5.3.1 FROM THE AFORESAID COMPUTATION, IT IS EVIDENT THAT THE ASSESSING OFFICER FIRSTLY REDUCED THE BUSINESS PROFITS DECLARED BY THE ASSESSEE OF RS. 25,04,065/ - FROM BUSINESS RECEIPTS AND THEREAFTER, SEPARATELY TAXED THE SAME UNDER SECTION 68 OF THE ACT. THUS, OUT OF THE ADDITIONS MADE OF RS. 47,91,398/ - , SUM OF RS. 25.04.065/ - HAS BEEN SEPARATELY REDUCED FROM THE DECLARED INCOME AND THUS, BROUGHT TO TAX UNDER SECTION 68 OF THE ACT AS UNEXPLAINED INCOME FROM OTHER SOURCES . AS SUCH, THERE IS NO DOUBLE TAXATION TO THIS EXTENT. SO FAR AS THE OTHER S - M OF RS. 12,98,572/ - AND RS. 9,95,800/ - ARE CONCERNED, THE CONCLUSION OF THE A SSESSING OFFICER IS THAT THESE ARE NOT CONSIDERATION RECEIVED ON - SALE OF SHARES AND THEREFORE, SUCH SUMS RECEIVED ARE TAXABLE UNDER SECTION 68 OF THE ACT. THESE SUMS HAVE NOT BEEN SEPARATELY OFFERED FOR TAX BY THE ASSESSEE AS ACCORDING TO THE ASSESSEE, THE SE WERE SUMS REDUCED FRO M THE INVESTMENT MADE BY THE ASSESSEE IN THE SHAR ES AND ACCORDINGLY, ONLY PROFIT/ LOSS WAS DECLARED IN THE RETURN OF INCOME. HOWEVER THIS DOES NOT ALTER THE FACTUAL POSITION THAT THIS AMOUNT RECEI VED HAS BEEN OFFERED FOR TAX. IN SUCH CIRCUMSTANCES, ADDITION MADE OF RS. 47,91,387/ - TANTAMOUNTS TO DOUBLE TAXATION SINCE THE SAID SUM HAS ALREADY BEEN OFFERED FOR TAX AND HAS ALSO BEEN ASSESSED TO TAX IN THE INSTANT ORDER OF ASSESSMENT. IN ARRIVING AT THE ABOVE CONCLUSION, I AM SUPPORTED BY THE DECISION OF DELHI BENCH OF THE TRIBUNAL IN THE CASE OF INTERCITY F INVEST PVT. LTD. IN ITA NO. 313/DEL/ 12 WHEREBY IT WAS HELD AS UNDER: '7. THE FACTS OF THIS CASE ARE SIMILAR TO THE FACTS FOR ASSESSMENT YEAR 2001 - 02. THE ONLY DIFFERENCE IS THAT THE ENTRIES ARE IN RESPECT OF CHEQUES RECEIVED FROM MKM FINSEC (P) LTD. THERE WERE CERTAIN TRANSACTIONS UNDERTAKEN ITA NO S. 5103 & 5104 /D EL /201 5 NAVYUG INVESTMENT LTD. 6 BY THE ASSESSEE THROUGH THE AFORESAID COMPANY IN RESPECT OF WHICH THE DELIVERY WAS NEITHER TAKEN NOR GIVEN. THE TRANSACTIONS WERE SETTLED BY RECE IVING THE DIFFERENCE BY WAY OF T HREE CHEQUES DATED 21.3.2003, 25.2.2003 AND 28.2.2003 OF RS. 4,59,989/ - , RS. 4, 99,929/ - AND RS. 4,99,750/ - . THESE TRANSACTIONS WERE IN THE NATURE OF SPECULATIVE TRANSACTIONS, THE PROFITS FROM WHICH WERE CREDITED TO PROFIT AND LOSS ACCOUNT. THE LD. CIT(APPEALS) HAS RETURNED A FINDING THAT THESE TRANSACTIONS FORM PART OF PROFIT AND LOSS ACCOUNT AND THE AMOUNT RECEIVED FROM MKM FINSEC (P) LTD. IS INCLUDED IN THE OVERALL PROFIT OF RS. 24,99,715/ - ON PURCHASE AND SALE OF SHARES. TH EREFORE, THERE IS NO QUESTION OF APPLICABILITY OF SECTION 68. SINCE THE AMOUNT WAS ALREADY DECLARED AS PROFIT BY THE ASSESSEE, THE ADDITION OF RS. 14,59,668/ - MADE BY THE AO WAS DELETED BY HIM. 8. BEFORE US, THE CASE OF THE ID. COUNSEL IS THAT NO ADDITION WAS REQUIRED TO BE MADE AS THE AMOUNT HAS ALREADY BEEN INCLUDED IN THE PROFIT AND LOSS ACCOUNT. THE ID. DR COULD NOT DISPLACE THE FINDING OF THE ID. CIT(APPEALS) BEFORE US. IN THESE CIRCUMS TANCES, WE AGREE WITH THE ID. CI T(APPEALS) THAT THE SAME AMOUNT COU LD NOT HAVE BEEN INCLUDED TWICE IN THE TOTAL INCOME OF THE ASSESSEE. THEREFORE, WE HAVE NO REASON WHATSOEVER FOR INTERFERING WITH THE ORDER OF THE CIT(APPEALS).' 5.3.2 FOLLOWING THE ABOVE, DECISION, ADDITION MADE IS DELETED. 8 . THE LD. CIT(A) ALSO REF ERRED TO VARIOUS DECISIONS OF THE ITAT IN PARAS 5.3.5 TO 5.3.9, FOR THE COST OF REPETITION, THE SAME ARE NOT REPRODUCED HEREIN. ITA NO S. 5103 & 5104 /D EL /201 5 NAVYUG INVESTMENT LTD. 7 9 . NOW THE DEPARTMENT IS IN APPEAL. THE LD. DR SUPPORTED THE ORDER OF THE AO AND REITERATED THE OBSERVATIONS MADE IN THE ASSESSM ENT ORDER. 10 . IN HIS RIVAL SUBMISSIONS THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE ASSESSEE FURNISHED ALL THE DETAILS WHICH WERE ASKED BY THE AO WHO ACCEPTED THE INCOME FROM THE SALE PROCEEDS OF THE SHARES. IT WAS FURTHER SUBMITTED THAT AN IDENTICAL ISSUE WAS INVOLVED IN THE CASE OF ITO VS JATIN INVESTMENT PVT. LTD. IN ITA NOS. 4325 & 4326/DEL/2009 , IN THE SAID CASE SIMILAR ADDITIONS WERE MADE WHICH WERE DELETED BY THE LD. CI T(A) AND THE ITAT VIDE ORDER DATED 27.05.2015 UPHELD THE ORDER OF THE AO IN DELETING THE IDENTICAL ADDITIONS (COPY OF THE SAID ORDER WAS FURNISHED WHICH IS PLACED ON RECORD). 11 . I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THR OUGH THE MATERIAL AVAILABLE ON THE RECORD. IT IS NOTICED THAT A SIMILAR ISSUE WAS INVOLVED IN THE CASE OF M/S JATIN INVESTMENT PVT. LTD. (SUPRA) WHEREIN THE VIEW TAKEN BY THE LD. CIT(A) WAS UPHELD BY THE ITAT IN ITA NO. 4325 & 4326/DEL/2009 BY OBSERVING IN PARA 12 OF THE ORDER DATED 27.05.2015 WHICH READ AS UNDER: 12. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, IT IS NOTICED THAT THE ASSESSEE PURCHASED THE SHARES IN EARL IER YEARS WHICH WERE SHOWN AS INVESTMENT IN THE BOOKS OF ACCOUNTS AND REFLECTED IN THE 'ASSET SIDE' OF THE 'BALANCE SHEET', OUT OF THOSE INVESTMENTS (COPY WHICH IS ITA NO S. 5103 & 5104 /D EL /201 5 NAVYUG INVESTMENT LTD. 8 PLACED AT PAGE NO. 23 AND 24 OF THE ASSESSEE'S PAPER BOOK), THE ASSESSEE SOLD CERTAIN INVEST MENTS AND ACCOUNTED FOR THE PROFIT / LOSS AND OFFERED THE SAME FOR TAXATION. IN THE PRESENT CASE, THE AMOUNT IN QUESTION WAS NEITHER A LOAN OR THE DEPOSIT, IT WAS ALSO NOT ON ACCOUNT OF SHARE APPLICATION MONEY, THE SAID AMOUNT WAS ON ACCOUNT OF SALE OF INV ESTMENT THEREFORE THE PROVISIONS OF SECTION 68 OF THE ACT WERE NOT APPLICABLE AND THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION. IN OUR OPINION, THE LD. CIT(A) RIGHTLY DELETED THE ADDITION MADE BY THE AO. 12 . THE SAID DECISION OF THE ITAT AUTHORED BY ME HAS BEEN UPHELD BY THE HON BLE DELHI HIGH COURT IN ITA NOS. 43 & 44/2016 IN THE CASE OF PR. CIT - 5 VS JATIN INVESTMENT PVT. LTD. VIDE ORDER DATED 18.01.20 17 WHEREIN RELEVANT FINDINGS HAVE BEEN GIVEN IN PARAS 4 TO 6 WHICH READ AS UNDER: 4. THE ITAT AGREE D WITH THE CONCLUSIONS OF THE CIT (A) UPON ITS INDEPENDENT EXAMINATION OF THE RECORD. IT ALSO DISCOUNTED THE REVENUE'S SUBMISSIONS THAT THE INVESTMENT SHOWN IN THE BOOK OF ACCOUNTS AND REFLECTED AS ASSETS IN THE SIDE OF THE BALANCE SHEET, SHOULD HAVE BEEN PROPERLY TREATED AND THAT IN THE ABSENCE OF SUCH TREATMENT SECTION 68 APPLIES. THE ITAT REJECTED THIS CONTENTION AND HELD - BASED UPON THE PRINCIPLES ENUNCIATED IN CIT V. VISHAL HOLDING & CAPITAL PVT. LTD. (ORD ER OF THIS COURT DATED 9.8.2010) THAT THE INVO CATION OF SECTION 68 IN THE CIRCUMSTANCES IS UNWARRANTED. 5. LEARNED COUNSEL FOR THE REVENUE REITERATED THE GROUNDS CITED IN SOME OF THE CONTENTIONS MADE BEFORE THE ITAT. LEARNED COUNSEL ESPECIALLY EMPHASIZED ON THE SUBMISSION THAT THE INCORRECT REFLECTI ON OF THE RECEIPTS IN THE BALANCE SHEET BELIED THE TRUE NATURE OF THE RECEIPTS AS A JUSTIFICATION FOR THE APPLICATION OF SECTION 68. ITA NO S. 5103 & 5104 /D EL /201 5 NAVYUG INVESTMENT LTD. 9 6. THE ITAT IN OUR OPINION QUITE CORRECTLY APPRECIATED THE LAW AND ITS APPLICATION BY THE FIRST APPELLATE AUTHORITY, I.E., CIT (A). HAVING REGARD TO THE FACTS AND THE NATURE OF THE ANALYSIS BASED UPON THE DECISIONS OF THIS COURT, AS WELL AS THE RELIANCE ON VARIOUS DECISIONS WITH RESPECT TO THE TRUE NATURE OF SECTION 68, WE ARE OF THE OPINION THAT NO QUESTION OF LAW ARISES; TH E APPEALS ARE ACCORDINGLY DISMISSED. 13 . I, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS AS DISCUSSED HEREINABOVE, DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. 14 . IN ITA NO. 5104/DEL/2015, THE FACTS ARE IDENTICAL AS WERE INVOLVED IN ITA N O. 5103/DEL/2015 FOR THE ASSESSMENT YEAR 2003 - 04 WHICH HAS BEEN ADJUDICATED IN FORMER PART OF THIS ORDER , T HEREFORE, THE FINDINGS GIVEN THEREIN SHALL APPLY MUTATIS MUTANDIS FOR THIS ASSESSMENT YEAR 2004 - 05 ALSO. 15 . IN THE RESULT, THE APPEAL S OF THE DEPA RTMENT ARE DISMISSED. (O RDER PRONOUNCED IN THE COURT ON 01 /02 /2017 ) SD/ - (N. K. SAINI) ACCOUNTANT MEMB ER DAT ED: 01 /02 /2017 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR