G.R. PANDYA SHARE BROKING LTD, MUMBAI V. ACIT CC 13, MUMBAI

ITA 539/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3472 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 19-07-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 22-01-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P O MEENADR
• Assessee Lawyers: ASHWIN KASHINATHAR
• Keywords: Share purchase agreement; Additional evidence; Onus to prove

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -GBENCH MUMBAI , , , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND RAM LAL NEGI,JUDICIAL MEMBER ./ITA/539/MUM/2014, /ASSESSMENT YEARS: 2009-10 M/S. G.R. PANDYA SHARE BROKING LTD.C/O., SHAH AND COMPANY TAX CONSULTANTS 201, PRINCESS STREET, KESAR BLDG., 1 ST FLOOR, ROOM NO.11MUMBAI-2. PAN:AAACG 3748 A VS. ACIT,CC-13 11 TH FLOOR, ROOM NO.1103, OLD CGO BLDG., MK ROAD MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT) REVENUE BY: SHRI P.O. MEENA-DR ASSESSEE BY: SHRI ASHWIN KASHINATH-AR / DATE OF HEARING: 17.08.2016 / DATE OF PRONOUNCEMENT:26.08.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 22.11.2013 OF CIT(A)-3 7, MUMBAI THE ASSESSEE HAS FILED THE PRESENT APPEAL. 2. THE ASSESSEE,VIDE ITS LETTER DATED 16/06/2016,HAS R EQUESTED TO ADMIT ADDITIONAL EVIDENCES UNDER RULE 29 OF THE INCOME TAX APPELLATE TRIBUNAL RULES, 1963(RULES). IN ITS APPLICATION,THE ASSESSEE HAS MENTIONED THAT IT COULD NOT SUBSTANTIA TE THE TRANSACTION OF LTCL BEFORE THE AO, IS THE SUFFICIENT EVIDENCES COULD NOT BE PRODUCED,T HAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO HAD ASKED FOR THE DETAILS, THAT UPON RECEIPT OF THE LETTER OF THE AO IT MADE AN EFFORT TO OBTAIN THE REQUISITE DETAILS BUT WAS N OT ABLE TO FURNISH THE SAME IN THE SHORT PERIOD OF TIME RANTED BY THE AO, THAT IT HAD CLOSED ITS BU SINESS IN THE MONTH OF NUMBER 2002, THAT THE SHARES IN QUESTIONS WERE PURCHASED IN THE AY.2002-0 3,THAT DUE TO CLOSURE OF THE BUSINESS AND LOSS OF RECORDS IT WAS NOT ABLE TO FURNISH THE DOCU MENTS TO PROVE THE GENUINENESS OF THE TRANSACTION,THAT DURING THE APPELLATE PROCEEDINGS I T HAD FILED AN SUBMISSION, THAT IT HAD MADE SEVERAL EFFORTS TO OBTAIN OLD RECORDS OF THE BUSINE SS TO LOCATE EVIDENCE OF PURCHASE OF SHARES BUT WAS UNABLE TO GET THE SAME,THAT THE AFFAIRS OF THE COMPANY WERE MANAGED WHOLLY BY BHARAT PANDYA,THAT HE WAS SUFFERING FROM OLD DAYS A ND WAS UNABLE TO COMPILE THE RELEVANT INFORMATION, THAT THE ASSESSEE WAS IN RECEIPT OF CO PY OF PAN OF NPS,THAT THE SAID EVIDENCE WAS NOT FURNISHED BEFORE THE AO/FAA, THAT THE BALAN CE SHEETS NOT FILED BEFORE THE FAA WERE TRACED BY IT,THAT THERE WAS NO MALAFIED INTENTION O N PART OF THE ASSESSEE NOT TO FURNISH THE EVIDENCES EARLIER.THE ASSESSEE RELIED UPON THE DECI SION OF PRABHAVATI S SHAH(231ITR 1). 539/M/14 GR PANDYA 2 2.1. DURING THE COURSE OF HEARING BEFORE US,THE AR REITE RATED THE ARGUMENTS THAT WERE PART OF THE APPLICATION MADE BY THE ASSESSEE FOR ADMITTING THE ADDITIONAL EVIDENCES.HE FURTHER ARGUED THAT ASSESSEE HAD TRANSFERRED THE SHARES IN PHYSICA L FORM, THAT IT COULD NOT FURNISH A COPY OF THE DMAT ACCOUNT,, THAT THE SHARES WERE HANDED OVER TO NPS, THAT THE ASSESSEE COULD NOT PROVIDE THE DETAILS OF PAN TO THE AO/FAA.THE DEPART MENTAL REPRESENTATIVE(DR) CONTENDED THAT THE ASSESSEE HAD NOT SHOWN ANY REASONABLE CAUS E FOR NOT SUBMITTING THE EVIDENCES BEFORE THE LAW AUTHORITIES,THAT IT COULD HAVE FILED THE EV IDENCES DURING THE APPELLATE PROCEEDINGS. AFTER CONSIDERING THE RIVAL SUBMISSIONS,WE ARE ADMI TTING THE ADDITIONAL EVIDENCES PRODUCED BY THE ASSESSEE. 3. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF SHARE-B ROKING, FILED ITS RETURN OF INCOME ON 26.03.2011 DECLARING TOTAL AT NIL.THE AO COMPLETED ASSESSMENT, ON 27.12.2011,U/.S143(3) OF THE ACT,DETERMINING INCOME OF THE ASSESSEE AT RS 15 .34 LAKHS.EFFECTIVE GROUND OF APPEAL IS ABOUT DISALLOWANCE OF LONG TERM CAPITAL LOSS(LTCL) OF RS.21.26 LAKHS.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESS EE CLAIMED LOSS OF RS.1.82 LAKHS ON ACCOUNT OF SETTING OFF OF LTCL OF RS.21,26,931/- WI TH LTCG OF RS.19.44LAKHS.HE DIRECTED THE ASSESSEE TO FILE EXPLANATION IN THAT REGARD.VI DE ITS LETTER,DATED 12.12.2011,THE ASSESSEE STATED THAT IT HAD SOLD 65000 SHARES OF TSL LTD.(TS LL) AT RS.1.75 PER SHARE TO NPS FOR RS. 1. 13 LAKHS ON 30.6.2008, THAT COST OF THE SHARES WAS RS.22.40 LAKHS(BEING RS.34.47 PER SHARE IN THE YEAR OF INVESTMENT PRIOR TO 7.11. 2002),THAT TH E LOSS INCURRED WAS OF RS.21.26 LAKHS,THAT SAME WAS TO BE TREATED AS LTCL,THAT NPS WAS PAID RS .1.13CRORES, THAT THE ASSESSEE HAD SUFFERED LOSS OF RS.21.26 LAKHS , THAT THE SAID SHARES WERE SOLD IN ORDER TO SATISFY THE OUT - STANDING DUES OF NPS, THAT IT HAD RECEIVED SHARES F ROM BSE AT RS. 1 PER SHARE, THAT IT HAD SOLD 400 SHARES FOR RS. 19.45 LAKHS RESULTING IN LTC G O F RS. 99.44 LAKHS, THAT THE LTC AND OF RS. 1.82 LAKHS WAS ON ACCOUNT OF LTC YEAR OF RS. 2 1.26 LAKHS AND LTC G OF RS. 19.44 LAKHS. THE AO DIRECTED THE ASSESSEE TO PRODUCE THE DEMERIT ACCOUNT SHOWING THE HOLDINGS OF TS LL, ADDRESS AND PAN OF NPS ALONG WITH CONTRACT NOTES SH ARE TRANSFER CERTIFICATE. AS PER THE AO THE ASSESSEE DID NOT SUBMIT ANY OF THE DOCUMENTS. C ONSIDERING THE ABOVE FACTS, THE AO HELD THAT THE ASSESSEE HAD NOT PRODUCED EVIDENCES WHICH WERE CRITICAL TO ESTABLISH THE DREAMINESS OF THE TRANSACTION, THAT IN THE ABSENCE DOCUMENTARY EVIDENCES LOSS OF RS. 21.26 LAKHS COULD NOT BE TREATED A GENUINE, THAT SAME COULD NOT BE SE T OFF AGAINST THE LTC G. HE ADDED RS. 19.44 LAKHS TO THE TOTAL INCOME OF THE ASSESSEE. 539/M/14 GR PANDYA 3 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA). BEFORE HIM, THE ASSESSEE STATED THAT THE BUSINESS CARRIED OUT BY IT WAS DISCONTINUED IN NOVEMBER 2002, THAT IT HAD OBTA INED THE SHARES OF TS LL IN PHYSICAL FORM AND SAME WERE REFLECTED IN THE BALANCE SHEET A S ON 31/03/02 TO 31/03/200 IT, THAT THE RELEVANT BALANCE SHEETS SHOWED THE INVESTMENT IN 2. 5 LAKHS TSLL SHARES AT THE RATE OF RS. 44 PER SHARE, THAT THE STATION QUESTIONS WERE RECEIVED IN PHYSICAL FORM AND HAD NOT BEEN DEMATERIALIZED. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AN D THE ASSESSMENT ORDER, THE F AA OBSERVED THAT BEFORE THE AO THE ASSESSEE HAD CLAIME D THAT SHARES WERE PURCHASED AT THE RATE OF RS.34.47 PER SHARE, THAT IN THE, AS ON 31/03/ 20 02, THE PRICE WAS SHOWN AT RS. 44 PER SHARE, THAT THE ASSESSEE DID NOT EXPLAIN THE DISCREPANCY D URING THE APPELLATE PROCEEDINGS, THAT IN THE BALANCE SHEET, AS ON 31 ST /03/2006, DESCRIPTION OF SHARES WAS NOT GIVEN, THAT THE BALANCE SHEETS SUBSEQUENT TO 31/03/2006 HAD NOT BEEN PRODUCED, THA T NO CONTRACT NOTE FOR SALE OF 65,000 SHARES OF TCLL TO NPS AT THE RATE OF RS. 1.75 PER S HARE WAS PRODUCE, THAT THE COPY OF SHARE TRANSFER FORM WAS ALSO NOT FURNISHED, THAT ASSESSEE HAD CLAIMED THAT SALE RECEIPTS WERE ADJUSTED AGAINST THE OUTSTANDING DUE OF NPS, THAT N O EVIDENCE WAS AVAILABLE TO SHOW THAT NPS DID EXIST, THAT NO CONFIRMATION FROM NPS WITH REGAR D TO THE TRANSACTION QUESTION WAS FILED, THAT SHARES WERE NOT SOLD THROUGH ANY RECOGNISED ST OCK EXCHANGE.THE FAA CALLED FOR ABOVE DETAILS, DURING THE APPELLATE PROCEEDINGS HELD ON 3 1.10.2013. HE OBSERVED THAT THE ASSESSEE HAD FAILED TO ESTABLI SH THE GENUINENESS OF THE LOSS CLAIMED IN RESPECT OF THE SHARES OF TCLL,THAT IT WAS NOT ONLY THE QUESTION OF COST OF SHARES,THAT THE GENUINENESS OF THE LOSS CLAIMED WAS ALSO IN QUESTIO N, THAT INCOME OF THE ASSESSEE HAD BEEN UNDER-ASSESSED TO THE EXTENT OF RS. 1.82 LAKHS,.HE BROUGHT IT TO THE NOTICE OF THE AUTHORISED REPRESENTATIVE(AR) OF THE ASSESSEE,AS IT WOULD RESU LT IN ENHANCING THE INCOME.FINALLY,HE DISMISSED ALL THE GROUNDS OF APPEAL RAISED BY THE A SSESSEE AND ENHANCED ITS INCOME BY RS. 1.82 LAKHS. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE ASSESSEE HAD CLAIMED LTCL ON ACCOUNT OF SALE OF SHA RES TO NPS, THAT IT WAS CLAIMED THAT SHARES WERE HANDED OVER TO NPS IN-PERSON, THAT THE SAID TRANSACTION RESULTED IN LTCL, THAT THE AO AND THE FAA HAD CALLED FOR DETAILS ABOUT THE TRANSACTIONS TO EXAMINE THE GENUINENESS OF THE CLAIM,THAT THE ASSESSEE DID NOT FURNISH THE BASIC DOCUMENTS IN ITS SUPPORT,THAT IT HAD NOT EXPLAINED AS TO AT WHAT RATE THE SHARES WERE SOLD I .E. WERE AT RS. 34 OR AT RS. 44 PER SHARE.THE FAA HAS GIVEN A CATEGORICAL FINDING OF FACT THAT TH E ASSESSEE HAD NOT EXPLAINED THE 539/M/14 GR PANDYA 4 DISCREPANCY.EVEN BEFORE US, THE ASSESSEE DID NOT TH ROW ANY LIGHT IN THAT REGARD. IT HAD NOT PRODUCED NPS BEFORE THE AO OR THE FAA. NOW IT IS CL AIMED THAT NPS IS NO MORE. IN OUR OPINION,NOTHING PREVENTED THE ASSESSEE TO FILE AN A FFIDAVIT OR A CONFIRMATION LETTER FROM THE ALLEGED PURCHASER OF THE SHARES OF TSLL.ONCE IT HAD RECEIVED THE ORDER OF THE AO, IT VERY WELL KNEW THAT THE TRANSACTION ENTERED INTO BY IT W ITH NPS WAS REJECTED BY THE AO AND HE HAD HELD THAT IT WAS NOT A GENUINE TRANSACTION.IN THESE CIRCUMSTANCES,HE SHOULD HAVE PRODUCED SOME RELIABLE EVIDENCES BEFORE THE FAA TO SUBSTANTI ATE THE GENUINENESS OF THE TRANSACTION. EVEN IF THE SHARES WERE IN PHYSICAL FORM THE TRANSF ER FORMS,TRANSFERRING THE SHARES IN FAVOUR OF NPS,SHOULD HAVE BEEN FILED. AFTER THE ALLEGED DEMIS E OF NPS THE ASSESSEE HAS FILED PAN CARD OF NPS.THERE IS NO EVIDENCE TO HOLD THAT THE PAN CA RD PRODUCED BY THE ASSESSEE BELONGED TO THE SAME PERSON WHOM IT HAD SOLD THE SHARES.IN OUR OPINION,THE TRANSACTION ITSELF IS PROVED.AS THE ASSESSEE HAD CLAIMED THE LOSS,SO FOLL OWING THE PRINCIPLES OF BURDEN OF PROOF,IT SHOULD HAVE DISCHARGE THE ONUS.IN OUR OPINION, THE ASSESSEE HAD MISERABLY FAILED TO PROVE THE GENUINENESS OF THE TRANSACTION.THE SO-CALLED ADDITI ONAL EVIDENCES, PRODUCED BY THE ASSESSEE BEFORE US,DO NOT PROVE IN ANY MANNER THE GENUINENES S OF THE SALE OF THE SHARES TO NPS DURING THE YEAR UNDER CONSIDERATION.AS THE EXISTENCE OF NP S AND SALE OF THE SHARES HAVE NOT BEEN PROVED BY THE ASSESSEE, SO, WE ARE OF THE OPINION T HAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY.THE ASSESSEE IT SELF IS TO BE BLAMED FOR THE POSITION IN WHICH IT FINDS ITSELF TODAY.THE FAA HAD, AFTER CONS IDERING THE AVAILABLE MATERIAL, HAD TAKEN AN INFORMED DECISION.SO,WE DO NOT WANT TO INTERFERE WITH IT.HERE,WE WOULD LIKE TO REFER TO THE CASE OF DURGA PRASAD MORE (82 ITR 540),WHEREIN THE HONBLE APEX COURT HAS OBSERVED AS UNDER: 'NOW, COMING TO THE QUESTION OF ONUS, THE LAW DOES NOT PRESCRIBE ANY QUANTITATIVE TEST TO FIND OUT WHETHER THE ONUS ON A PARTICULAR CASE HAS BEEN DISCHARGED OR NOT. IT ALL DEPENDS ON THE FACTS AND CIRCUMSTANCES OF EACH CASE. IN SOME CASES , THE ONUS MAY BE HEAVY WHEREAS, IN OTHERS, IT MAY BE NOMINAL. THERE IS NOTHING RIGID A BOUT IT....SCIENCE HAS NOT YET INVENTED ANY INSTRUMENT TO TEST THE RELIABILITY OF THE EVIDENCE PLACED BEFORE A COURT OR TRIBUNAL. THEREFORE, THE COURTS AND TRIBUNALS HAVE TO JUDGE THE EVIDENCE BEFORE THEM BY APPLYING THE TEST OF HUMAN PROBABILITIES. HUMAN MINDS MAY DIFFER AS TO THE REL IABILITY OF A PIECE OR EVIDENCE.' IF THE SURROUNDING CIRCUMSTANCES OF THE CASE ARE CO NSIDERED IT BECOMES VERY CLEAR THAT THE ASSESSEE HAD FAILED TO PROVE THAT THE STAND TAKEN B Y THE DEPARTMENTAL AUTHORITIES WAS ARBITRARY. IT HAD NOT PRODUCED THE PERSON TO WHOM THE SHARES W ERE CLAIMED TO HAVE BEEN SOLD.IT IS ALSO A FACT THAT NO CONFIRMATION ABOUT THE ALLEGED TRANSAC TION WAS PRODUCED DURING THE ASSESSMENT/APPELLATE PROCEEDINGS.THOUGH IT WAS CLAI MED THAT SHARES WERE HANDED PHYSICALLY 539/M/14 GR PANDYA 5 TO SETTLE THE OUTSTANDING BALANCE WITH NPS,YET THE COPIES OF THE SHARE CERTIFICATES WERE NEVER PRODUCED BEFORE THE AO TO MAKE FURTHER VERIFICATION WITH THE COMPANY THAT HAD ISSUED THE SHARES.THUS, THE ASSESSEE HAD PREVENTED THE AO TO M AKE ANY FURTHER INVESTIGATION.AS PER THE ESTABLISHED PRINCIPLES OF THE TAXATION JURISPRU -DE NCE CLAIM MADE BY AN ASSESSEE HAS TO BE PROVED BY IT.CONSIDERING THE ABOVE,FIRST GROUND OF APPEAL IS DECIDED AGAINST THE ASSESSEE. 5. SECOND GROUND DEALS WITH THE ENHANCEMENT MADE BY TH E FAA.WE FIND THAT THE FAA HAD ENHANCED THE INCOME AFTER INTIMATING THE AR OF THE ASSESSEE ABOUT THE PROPOSED ACTION. THUS,HE HAD FOLLOWED THE MANDATE OF SECTION 251(2)O F THE ACT, THOUGH A FORMAL NOTICE UNDER THE SAID SECTION WAS NOT ISSUED.IN OUR OPINION, THE FAA HAD RIGHTLY ENHANCE THE INCOME, BECAUSE THE AO HAD ERRONEOUSLY ALLOWED THE DEDUCTIO N TO THE TUNE OF RS.1.82 LAKHS.AS AN APPELLATE AUTHORITY,THE FAA HAS POWER TO ENHANCE TH E INCOME OF THE ASSESSEE. SO,WE DO NOT FIND ANY LEGAL INFIRMITY IN HIS ORDER.SECOND GROUND IS ALSO DECIDED AGAINST THE ASSESSEE. 6. LAST GROUND,DEALING WITH INTEREST TO BE LEVIED U/S. 234,BEING CONSEQUENTIAL IN NATURE IS NOT BEING ADJUDICATED. AS A RESULT,APPEAL OF THE ASSESSEE STANDS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH AUGUST,2016. 26 , 2016 SD/- SD/- ( / R.L.NEGI ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 26 .08.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR G BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.