DCIT, Circle - 43, Kolkata, Kolkata V. Jagdish Prasad Goel, Kolkata

ITA 541/KOL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48058 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 31-03-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 16-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V A RAJU
• Keywords: Unexplained cash credit; Depreciation; Business expenditure; Salary income; Opportunity of cross examination; Cost of acquisition
• Section: 142(1)

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA () BEFORE , , /AND . !., '# [BEFORE HONBLE SRI MAHAVIR SINGH, JM & HONBLE SRI C. D. RAO , AM] $ $ $ $ / ITA NO. 541 /KOL/2010 %& '( %& '( %& '( %& '(/ // / ASSESSMENT YEARS : 2005-06 DEPUTY COMMISSIONER OF INCOME-TAX, -VS- JAGDISH PR ASAD GOEL CIRCLE-43, KOLKATA. (PA NO.AFFPG 1693 B) (*+ / APPELLANT ) (,-*+/ RESPONDENT ) & $ $ $ $ / ITA NO. 542 /KOL/2010 %& '( %& '( %& '( %& '(/ // / ASSESSMENT YEAR : 2005-06 DEPUTY COMMISSIONER OF INCOME-TAX, -VS- JAGDISH PR ASAD GOEL (HUF) CIRCLE-43, KOLKATA. (PA NO.AAGHJ 7577 A) (*+ / APPELLANT ) (,-*+/ RESPONDENT ) FOR THE APPELLANT: . SHRI V. A. RAJU FOR THE RESPONDENT : ./ SHRI RAVI TULSIYAN '/ / ORDER PER SHRI C. D. RAO, AM/ . .. . ! ! ! !. .. . , , , , '# '# '# '# BOTH THESE APPEALS PREFERRED BY THE REVENUE ARE DIR ECTED AGAINST THE SEPARATE ORDERS OF THE LD. CIT(A), KOLKATA FOR ASSESSMENT YE AR 2005-06 DATED 22.1.2010. SINCE GROUNDS ARE COMMON AND FACTS ARE IDENTICAL, WE DISP OSE OF BOTH THE APPEALS BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. GROUND NOS. 1 AND 2 OF BOTH THE APPEALS ARE IN R EGARD TO DELETION OF ADDITION AS UNEXPLAINED CASH CREDIT ON ACCOUNT OF SALE OF SHARE S. FOR THIS, THE REVENUE HAS RAISED THE FOLLOWING COMMON TWO GROUNDS I.E. GROUND NOS. 1 AND 2 EXCEPT DIFFERENCE IN AMOUNT. 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.39,80,980/- (FOR SELF) AND RS.68,89,850/- (FOR HUF) MADE AS UNEXPLAINED CASH CREDIT ON ACCOUNT OF SALE OF SHARE S. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) FAILED TO APPRECIATE THAT THE TRANSACTIONS REGARDING PURCHAS E AND SALE OF SHARES WAS NOT ESTABLISHED AS GENUINE IN VIEW OF INFORMATION RECEI VED FROM KOLKATA STOCK EXCHANGE. 2 3. BRIEF FACTS OF THE ASSESSEE, INDIVIDUALS CASE A RE THAT THE ASSESSEE IS A PROP. OF JAYPEE UDYOG, CARRYING ON BUSINESS OF JOB WORKS. H E FILED HIS RETURN FOR ASSESSMENT YEAR UNDER APPEAL ON 28.10.2005 ALONG WITH P&L ACCO UNT, BALANCE SHEET, TAX AUDIT REPORT AND COMPUTATION OF TOTAL INCOME SHOWING TOTA L INCOME OF RS.23,15,789/-, SALARY INCOME OF RS.3,467/-, HP INCOME OF RS.42,000/-, BUS INESS INCOME OF RS.61,956/-, STCG OF 21,373/-, LTCG OF RS.37,49,390/- ON SALE OF SHARES, INCOME FROM OTHER SOURCES OF RS.1,25,141/- HAVE BEEN DISCLOSED IN THE RETURN. HE HAS ALSO CLAIMED DEDUCTIONS U/S. 80L AND 80CCC OF RS.3,041/- AND 10, 000/- RESPECTIVELY. THE CASE WAS TAKEN UP UNDER SCRUTINY AND NOTICE U/S. 143(2) AND 142(1) WERE SERVED. FROM THE ASSESSMENT ORDER IT IS OBSERVED THAT THE ASSESSING OFFICER FOUND THAT THE ASSESSEE CLAIMED LTCG ON SALE OF SHARES OF RS.39,80,980/-. ON ENQUIRY U/S. 133(6), THE ASSESSING OFFICER FOUND THAT CALCUTTA STOCK EXCHANG E SUBMITTED A CD CONTAINING DETAILS OF TRANSACTIONS. AS PER THE DETAILS TRADE NO.1549 FOR PURCHASE OF THE SHARES OF BOLTON PROPERTIES DID NOT APPEAR ON 07.03.03. TRAD E NO.2102 REGARDING PURCHASE OF BLUE CHIP SHARES DID NOT APPEAR ON 5.3.2003. THE T RADE NO.2103 IS SHOWN IN THE CD AS EXECUTED AT 15.03.34 AND NOT AS 12.15.33 AS NOTED I N THE CONTRACT NOTE. AS PER CD TRADE NO.2103 ORDER NUMBERS WERE DIFFERENT COMPARED TO TH E ORDER NUMBER MENTIONED IN THE CONTRACT NOTE. THE CD DISCLOSED TRANSACTIONS IN 25 00 SHARES WHEREAS THE CONTRACT NOTE DISCLOSED TRANSACTIONS OF 7000 SHARES. HENCE, THE A SSESSING OFFICER TREATED THE TRANSACTION AS INGENUINE AND BOGUS AND STATED THAT THE ASSESSEE USED COLOURABLE DEVICE IN CONNIVANCE WITH STOCK BROKERS TO INTRODUCE THE A SSESSEES UNDISCLOSED INCOME IN THE GUISE OF TRANSACTIONS IN PENNY STOCK OF BOLTON PROP ERTIES AND BLUE CHIP. HE, THEREFORE, REJECTED THE CONTENTION OF THE ASSESSEE AND TREATED THE SALE CONSIDERATION OF SHARES OF RS.39,80,980/- AS UNEXPLAINED CASH CREDIT AND MADE THE ADDITION. LIKEWISE, IN HUFS CASE ALSO THE ASSESSING OFFICER REJECTED THE ASSESS EES CLAIM AND TREATED THE LTCG OF RS.68,89,850/- AS UNEXPLAINED CASH CREDIT ON THE SE LF SAME REASONING. IN APPEAL, THE LD. CIT(A) DELETED THE ADDITIONS IN BOTH THE CASES BY S TATING THAT SINCE THE APPELLANT HAS FURNISHED SATISFACTORY EVIDENCE IN SUPPORT OF THE P URCHASE AND SALE OF SHARES, THE ASSESSING OFFICER IS NOT CORRECT IN ASSESSING CAPIT AL GAIN AS UNEXPLAINED CREDIT U/S. 68. AGGRIEVED, THE REVENUE IS IN APPEALS BEFORE US. 3 4. AT THE TIME OF HEARING BEFORE US, THE LD. DR REL IED ON THE ORDER OF THE ASSESSING OFFICER AND URGED BEFORE THE BENCH TO SET ASIDE THE ORDERS OF THE LD. CIT(A) AND RESTORE THAT OF THE ASSESSING OFFICER. HE ALSO SUBMITTED TH AT THE TRANSACTIONS ARE INGENUINE AND BOGUS AND IT IS CLEAR THAT THE ASSESSEE HAS USED CO LOURABLE DEVICE IN CONNIVANCE WITH THE STOCK BROKERS TO INTRODUCE ASSESSEES INCOME FROM U NDISCLOSED SOURCE IN THE GUISE OF TRANSACTIONS IN PENNY STOCK OF BOLTON AND BLUE CHIP . HE ALSO CONTENDED THAT THE TRANSACTION IN RESPECT OF SHARES HAVE BEEN CLAIMED TO HAVE BEEN MADE THROUGH BROKER M/S. BUBNA STOCK BROKING SERVICES (P) LTD., ON RECE IPT OF ADVERSE INFORMATION FROM KOLKATA STOCK EXCHANGE IN RESPONSE TO NOTICE U/S. 1 33(6) OF THE I. T. ACT, 1961 IT IS FOUND THAT THE TRANSACTIONS WAS NOT ESTABLISHED TO BE GENUINE. ACCORDINGLY, THE ASSESSING OFFICER HAS RIGHTLY TREATED THE ENTIRE SA LE PRICE OF SHARES AS UNEXPLAINED CASH CREDIT. HE, THEREFORE, PRAYED BEFORE THE BENCH TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THAT OF THE ASSESSING OFFICER. 5. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE WHILE RELYING ON THE ORDER OF THE LD. CIT(A) REITERATED HIS SAME SUBMISSIONS AS S UBMITTED BEFORE THE LOWER AUTHORITIES AND FURTHER SUBMITTED THAT THE ASSESSEE SHOWED LTCG ON SALE OF SHARES OF BLUECHIP AND BOLTON PROPERTIES. THE SAID SHARES WE RE PURCHASED FROM BUBNA STOCK BROKING SERVICES PVT. LTD., WHICH IS A MEMBER OF CA LCUTTA STOCK EXCHANGE ASSOCIATION LTD. PURCHASE BILLS AND CONTRACT NOTES EVIDENCING THE SAID PURCHASE OF SHARES HAD BEEN DULY SUBMITTED TO THE ASSESSING OFFICER WHICH PROVE THE EXISTENCE OF THE TRANSACTIONS. HE ALSO CONTENDED THAT THE AO HAS BASED HIS ORDER ON THE INFORMATION AND DETAILS IN A CD COLLECTED FROM CALCUTTA STOCK EXCHANGE ASSOCIATI ON LTD.. HOWEVER, NO SUCH INFORMATION HAS BEEN PROVIDED TO THE ASSESSEE AND N O OPPORTUNITY WAS GIVEN TO THE ASSESEE OF BEING HEARD. HE ALSO CONTENDED THAT TH E SHARES HAVE BEEN DULY CREDITED INTO THE DEMANT ACCOUNT OF THE ASSESSEE. THE BOOKS OF AC COUNTS CLEARLY REFLECT THE SAID PURCHASE OF SHARES. THE SAID SHARES ARE DULY REFLE CTED IN THE BALANCE SHEET OF THE ASSESSEE FILED ALONG WITH THE RETURN. HE ALSO PLAC ED RELIANCE ON THE DECISION OF ITAT MUMBAI BENCH IN THE CASE OF MUKESH R. MAROLIA VS. A DDL. CIT, ITAT NO.1201/MUM/2005. HE ALSO PLACED RELIANCE ON THE D ECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. DHAWAN INVESTMENT & TRADING CO. LTD. 236 ITR 486 4 AND CIT VS. CURRENCY INVESTMENT CO. LTD. 241 ITR 49 4. HE LASTLY CONCLUDED THAT THE ACTION OF THE ASSESSING OFFICER IS NOT JUSTIFIED AN D THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION. HE, THEREFORE, CONCLUDED THAT THE AC TION OF THE LD. CIT(A) IN THIS REGARD MAY BE UPHELD. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED HE M ATERIAL AVAILABLE BEFORE US. WE FIND THAT THE ASSESSING OFFICER RELIED ON THE IN FORMATION COLLECTED FROM CALCUTTA STOCK EXCHANGE ASSOCIATION LTD., WHICH ACCORDING TO HIM PROVE THAT THE SAID TRANSACTIONS OF PURCHASE AND SALES OF SHARES ARE BO GUS AND INGENUINE. THE ASSESSING OFFICER TREATED THE TRANSACTION AS INGENUINE AND BO GUS BY OBSERVING THAT THE ASSESSEE USED COLOURABLE DEVICE IN CONNIVANCE WITH STOCK BRO KERS TO INTRODUCE THE ASSESSEES UNDISCLOSED INCOME IN THE GUISE OF TRANSACTIONS IN PENNY STOCK OF BOLTON PROPERTIES AND BLUE CHIP. HE, THEREFORE, REJECTED THE CONTENTION OF THE ASSESSEE AND TREATED THE SALE CONSIDERATION OF SHARES OF RS.39,80,980/- AS UNEXPL AINED CASH CREDIT AND MADE THE ADDITION. LIKEWISE, IN HUFS CASE ALSO THE ASSESSI NG OFFICER REJECTED THE ASSESSEES CLAIM AND TREATED THE LTCG OF RS.68,89,850/- AS UNE XPLAINED CASH CREDIT ON THE SELF SAME REASONING. IN APPEAL, THE LD. CIT(A) DELETED BOTH THE ADDITIONS BY STATING THAT SINCE THE APPELLANT HAS FURNISHED SATISFACTORY EVID ENCE IN SUPPORT OF THE PURCHASE AND SALE OF SHARES, THE ASSESSING OFFICER IS NOT CORREC T IN ASSESSING CAPITAL GAIN AS UNEXPLAINED CREDIT U/S. 68. WHILE DELETING THE ADD ITIONS, THE LD. CIT(A) IN ASSESSEE/INDIVIDUALS CASE HAS HELD AS UNDER: THE APPELLANT CLAIMED TO HAVE EARNED LONG TERM CAP ITAL GAIN OF RS.37,49,390/- ON SALE OF SHARES. THE APPELLANT SUBMITTED THE FOLLOWING DETA ILS REGARDING THE PURCHASE AND SALE OF SHARES. NAME OF CO. QUANTITY DATE OF ACQUISITION COST DATE OF SALE SALE PRICE ACTUAL GAIN BLUE CHIP 6,000 5/3/03 44,220/- 24/5/04 10,06,980/- 9,62,760/- -DO- 5,000 5/3/03 36,850/- 3/6/04 9,89,000/- 9,52,150/- -DO- 6,000 5/3/03 44,220/- 3/6/04 11,86,800/- 11,42,580/- BOLTON PROPERTIES 2,000 7/3/03 1,06,300/- 31/8/04 7,98,200/- 6,91,900/- TOTAL 39,80,980/- 37,49,390/- THE APPELLANT SUBMITTED THAT THE SHARES OF BLUE CHI P AND BOLTON PROPERTIES WERE PURCHASED FROM M/S. BUBNA STOCK BROKING SERVICES LT D. THE APPELLANT FURNISHED THE CONTRACT NOTES ISSUED BY THE BROKER M/S. BUBNA STOC K BROKING SERVICES LTD. REGARDING THE 5 PURCHASE OF SHARES. THE APPELLANT FURNISHED THE DEM AT ACCOUNT WHEREIN 17000 SHARES OF BLUE CHIP ARE TRANSFERRED ON 08-03-03 FROM M/S. SHI V MANGAL SECURITIES (P) LTD. FURTHER 2000 SHARES OF BOLTON PROPERTIES ARE CREDITED IN TH E DEMAT ACCOUNT OF THE APPELLANT ON 11- 03-03 BEING TRANSFERRED FROM M/S. SHIV MANGAL SECUR ITIES (P) LTD. THE APPELLANT FURNISHED COPIES OF THE DEMAT ACCOUNT AND THE CONTRACT NOTES ISSUED BY THE BROKER THE A 0 NOTICED THAT THERE IS A VARIATION IN THE TRANSACTIONS GIVEN , BY THE BROKER IN HIS STATEMENT FURNISHED. THE TRADE NOS. MENTIONED IN THE CONTRACT NOTE DID N OT APPEAR IN THE CD GIVEN BY CALCUTTA STOCK EXCHANGE. THERE IS VARIATION IN THE TRADING T IME MENTIONED. FURTHER, THE ORDER NOS. MENTIONED WERE ALSO DIFFERENT. THE QUANTITY OF SHAR ES TRADED ALSO HAS NOT TALLIED. THE A.O. CONCLUDED THAT THE PURCHASE TRANSACTIONS ARE NOT GE NUINE BASED UPON THE INFORMATION GIVEN BY THE CALCUTTA STOCK EXCHANGE. ON EXAMINATIO N OF THE EVIDENCE PRESENTED BY THE APPELLANT AND ALSO THE FINDINGS OF THE A.O. THE FOL LOWING ISSUES EMERGE REGARDING THE PURCHASE OF SHARES. (I) THE APPELLANT CLAIMED OFF-MARKET PURCHASE OF 17 000 SHARES OF BLUE CHIP AND 2000 SHARES OF BOLTON PROPERTIES. (II) THE CONTRACT NOTE IS ISSUED BY THE BROKER M/S. BUBNA STOCK BROKING SERVICES LTD. FOR THE PURCHASE. (III) THE SHARES OF BLUE CHIP AND BOLTON ARE CREDIT ED IN THE DEMAT ACCOUNT OF THE APPELLANT ON 08-03-03 AND 11-03-03. THESE SHARES W ERE TRANSFERRED BY M/S. SHIV MANGAL SECURITIES (P) LTD. (IV) THE BALANCE SHEET OF THE APPELLANT AS ON 31-03 -04 CLEARLY INDICATES THE SHARES OF 17000 OF BLUE CHIP HELD BY THE APPELLANT AND 2000 SHARES OF BOLTON PROPERTIES. (V) IN THE CASE CITED BY THE APPELLANT MUKESH R. MA ROLIA -VS. ADDI. CIT RANGE- 15(2), THE HONBLE ITAT, MUMBAI HELD AS UNDER: 10.1. THE ASSESSEE HAS PURCHASED THE SHARES OF FOU R COMPANIES VIZ. ALLAN INDUSTRIAL GASES LTD., MOBILE TELECOM, RASHI AGROTE CH AND CENTILL AGROTECH, DURING THE PREVIOUS YEARS RELEVANT TO THE ASSESSMEN T YEARS 1999-2000 AND 2000- 2001. THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSES SEE FOR BOTH THE YEARS CLEARLY REFLECTED THE PURCHASE OF THOSE SHARES. THE SHARES ARE REFLECTED IN THE BALANCE SHEETS FILED BY THE ASSESSEE ALONG WITH THE RETURNS OF INCOME FOR THE ASSESSMENT YEARS 1999-2000 AND 2000-2001. THEREFORE IT IS SEEN THAT AS A PRIMA FACIE EVIDENCE, THE PURCHASES OF SHARES HAVE BEEN CONTEMP ORANEOUSLY ENTERED INTO THE BOOKS OF ACCOUNTS OF THE ASSESSEE. 10.4 WHEN THE TRANSACTIONS WERE OFF-MARKET TRANSACT IONS, THERE IS NO RELEVANCE IN SEEKING DETAILS OF SHARE TRANSACTION FROM STOCK EXC HANGES.... STOCK EXCHANGES CANNOT GIVE DETAILS OF TRANSACTIONS ENTERED INTO BE TWEEN THE PARTIES OUTSIDE THEIR FLOOR. THEREFORE, THE RELIANCE PLACE BY THE ASSESSI NG AUTHORITY ON THE COMMUNICATIONS RECEIVED FROM THE STOCK EXCHANGES TH AT THE PARTICULARS OF SHARE TRANSACTIONS ENTERED INTO THE ASSESSEE WERE NOT AVA ILABLE IN THEIR RECORD, IS OUT OF PLACE. THERE IS NO EVIDENTIAL VALUE FOR SUCH RELIAN CE PLACED BY THE ASSESSING AUTHORITY... WE ARE OF THE CONSIDERED VIEW THAT THE MATERIALS COLLECTED BY THE ASSESSING AUTHORITY FROM THE STOCK EXCHANGES ARE NO T VALID TO DISPEL OR DISBELIEVE THE CONTENTIONS OF THE ASSESSEE. 6 10.6.... THE ABOVE CIRCUMSTANCES HAVE MADE OUT A CL EAR CASE IN SUPPORT OF THE BOOK ENTRIES REFLECTING THE PURCHASE AND SALE OF SH ARES AND ULTIMATELY SUPPORTING THE MONEY RECEIVED ON SALE OF SHARES AND FINALLY IN VESTING THE MONEY RECEIVED IN THE PURCHASE OF FLAT. THE CHAIN OF TRANSACTIONS ENT ERED INTO BY THE ASSESSEE HAVE BEEN PROPERLY ACCOUNTED, DOCUMENTED AND SUPPORTED B Y EVIDENCES. 10.7. THEREFORE WE FIND THAT EXPLANATIONS OF THE AS SESSEE SEEMS TO HAVE BEEN REJECTED BY THE ASSESSING AUTHORITY MORE ON THE GRO UND OF PRESUMPTION THAN ON FACTUAL GROUND.... IN THE PRESENT CASE, HOWEVER UNB ELIEVABLE IT MIGHT BE, EVERY TRANSACTION OF THE ASSESSEE HAS BEEN ACCOUNTED, DOC UMENTED AND SUPPORTED. 10.9. THEREFORE, IN SHORT ON THE BASIS OF THE INTER NAL EVIDENCES AVAILABLE WITH THE ASSESSEE AND THE FACT THAT THE SALE PROCEEDS WERE C OLLECTED THROUGH BANK ACCOUNTS AND COUPLED WITH EXTERNAL EVIDENCE OF SURVEY AND ST ATEMENT OF PARTIES, WE HAVE TO HOLD THAT THE SALE PROCEEDS OF RS.1,41,08,484/- HAS BEEN EXPLAINED. THEREFORE THE SAID ADDITION IS DELETED. IN THE CASE OF THE APPELLANT THE PURCHASES OF THE S HARES ARE SUPPORTED BY THE BROKERS CONTRACT NOTE AND THE PURCHASE OF SHARES IS SUPPORT ED BY CONTEMPORANEOUS ENTRIES IN THE BOOKS OF ACCOUNT OF THE APPELLANT. (VI) THE A.O. OBTAINED THE CD FROM THE CALCUTTA ST OCK EXCHANGE CONTAINING THE DETAILS OF THE TRANSACTIONS IN THE SHARES. HOWEVER , PRIOR TO THE ASSESSMENT, THIS EVIDENCE WAS NOT PRESENTED TO THE APPELLANT FOR HI S EXPLANATION. FURTHER, NO OPPORTUNITY OF CROSS EXAMINATION HAS BEEN FURNISHE D. THE APPELLANT RELIED UPON THE CASE OF MADRAS HIGH COURT IN THE CASE OF THANJ AI MARASU VS ITO (247 ITR 465) WHEREIN IT IS HELD AS UNDER: - IT IS PROPER FOR THE A.O. TO ALLOW THE APPELLANT T HE OPPORTUNITY TO EXAMINE THE WITNESS AND THEN CROSS-EXAMINE THEM TO ASCERTAIN THE VERACITY OF THEIR DIFFERENT AVERMENTS AT DIFFERENT STAGES. IT IS SEEN FROM RECORD THAT THE EVIDENCE GATHERED B Y THE A.O. IN THE FORM OF THE CD FROM CALCUTTA STOCK EXCHANGE IS NOT GIVEN TO THE APPELLA NT FOR EXPLANATION. AS PER SECTION 138 OF THE INDIAN EVIDENCE ACT, NO EVIDENCE AFFECTING T HE PARTY IS ADMISSIBLE AGAINST THE PARTY UNLESS THE LATER HAS HAD AN OPPORTUNITY OF TE STING ITS TRUTHFULNESS BY CROSS EXAMINATION. THERE IS A MERIT IN THE APPELLANTS CO NTENTIONS THAT THE EVIDENCE GATHERED BY THE A.O. IS NOT PUT TO HIM AND A FAIR OPPORTUNIT Y OF CROSS EXAMINATION IS NOT GIVEN. THE APPELLANT CLAIMED THAT THE SHARES PURCHASED WER E SOLD AS UNDER (I) BLUE CHIP SHARES WERE SOLD THROUGH M/S. ESHA IN VESTMENT & TRADING PVT. LTD. (II)SHARES OF BOLTON PROPERTIES WERE SOLD THROUGH M /S. M. BHIWANIWALA & CO. THE APPELLANT FURNISHED THE CONTRACT NOTES ISSUED B Y M/S. ESHA INVESTMENT & TRADING PVT. LTD. AND M/S. M. BHIWANIWALA & CO. IN SUPPORT OF THE SALE TRANSACTIONS, THE APPELLANT HAS FURNISHED THE FOLLOWING DETAILS: 7 (I) CONTRACT NOTES ISSUED BY MIS. ESHA INVESTMENT & TRADING PVT. LTD. AND M/S. M. BHIWANIWALA & CO. (II) COPIES OF THE DEMAT ACCOUNT STATEMENT WHEREIN THE SHARES ARE SOLD OFF-MARKET AND THE ACCOUNT IS DEBITED. 17000 SHARES OF BLUE CH IP ARE TRANSFERRED ON 14-06- 04 TO PEERLESS SECURITIES LTD. 2000 SHARES OF BOLTO N PROPERTIES ARE TRANSFERRED ON 01-09-2004 TO M/S. M. BHIWANIWALA & CO. (III) COPIES OF THE BANK ACCOUNT EVIDENCING THE REC EIPT OF SALE CONSIDERATION OF THE SHARES ARE FURNISHED. (IV) IT IS SUBMITTED THAT M/S. ESHA INVESTMENT & TR ADING PVT. LTD. IS A REGISTERED BROKER AT MAGADH STOCK EXCHANGE HAVING SEBI REGISTR ATION NUMBER. THE EVIDENCE PRESENTED BY THE APPELLANT CLEARLY IND ICATES THAT THE SHARES WERE AVAILABLE IN THE DEMAT ACCOUNT OF THE APPELLANT. CONTRACT NOT ES ISSUED BY THE BROKERS CLEARLY INDICATES THE SALE OF THESE SHARES. THE SHARES ARE TRANSFERRED OUT OF THE DEMAT ACCOUNT OF THE APPELLANT. THE SALE CONSIDERATION OF THE SHA RES IS RECEIVED BY THE APPELLANT THROUGH ACCOUNT PAYEE CHEQUES CREDITED IN THE BANK ACCOUNT. COPIES OF THE BANK ACCOUNT FURNISHED BY THE APPELLANT CLEARLY PROVES S ALE TRANSACTIONS OF THE SHARES. THE EVIDENCE PRESENTED BY THE APPELLANT REGARDING PURCH ASE OF SHARES AND THE SALE OF SHARES CLEARLY PROVES THE TRANSACTIONS ENTERED INTO BY THE APPELLANT. THE TRANSACTIONS ARE SUPPORTED BY THE CONTEMPORARY ENTRIES IN THE BOOKS OF ACCOUNT, IN THE DEMAT ACCOUNT AND ALSO THE BANK ACCOUNTS. IN VIEW OF THE MUMBAI I TAT DECISION RELIED UPON BY THE APPELLANT, THE APPELLANTS TRANSACTIONS ARE PROVED BY THE CONTEMPORARY RECORDS. THE EVIDENCE PRESENTED BY THE APPELLANT AND THE CONTENT IONS RAISED CANNOT BE DENIED MERELY DUE TO THE VARIATION IN THE DETAILS FURNISHED BY TH E CALCUTTA STOCK EXCHANGE. FURTHER, OFF-MARKET TRANSACTIONS ENTERED INTO BETWEEN THE IN DIVIDUALS DO NOT REFLECT IN THE SYSTEMS OF THE EXCHANGE. THE VARIATION NOTICED BY T HE A.O. IS ONLY A POINTER TO FURTHER INVESTIGATE THE TRANSACTIONS CLAIMED BY THE APPELLA NT. THIS EVIDENCE IN ITSELF CANNOT NEGATE THE CONTEMPORARY EVIDENCE PRESENTED BY THE A PPELLANT. SINCE THE APPELLANT HAS FURNISHED SATISFACTORY EVIDENCE IN SUPPORT OF THE P URCHASE AND SALE OF SHARES, THE A.O. IS NOT CORRECT IN ASSESSING SALE CONSIDERATION OF S HARES AS UNEXPLAINED CREDIT U/S.68. THE AO. IS DIRECTED TO DELETE THE ADDITION OF RS.39 ,80,980/-. IN THIS VIEW OF THE MATTER AND IN THE ABSENCE OF AN Y CONTRARY MATERIAL BROUGHT ON RECORD BY THE REVENUE AT THE TIME OF HEARING BEFORE US, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND THE SAME IS HEREBY UPHELD. T HEREFORE, BOTH THE GROUND NOS. 1 AND 2 TAKEN BY THE REVENUE IN BOTH THE APPEALS ARE DISM ISSED. 7. GROUND NO. 3 OF THE APPEAL OF THE REVENUE IN RES PECT OF INDIVIDUAL ASSESSEE IS CONCERNED, THE REVENUE HAS AGITATED AGAINST THE DEL ETION OF DISALLOWANCE FOR RS.6,94,727/- MADE ON ACCOUNT OF DEPRECIATION. BRI EFLY STATED FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER NOTICED THAT THE 8 ASSESSEE DISCLOSED ADDITION TO PLANT AND MACHINERY OF RS.27,74,908/-. THE ASSESSING OFFICER ASKED FOR DETAILS REGARDING ACQUISITION, TR ANSPORTATION, INSTALLATION AND USE OF THE PLANT AND MACHINERY. THE ASSESSEE FAILED TO FURNIS H THE DETAILS AS ASKED FOR. HENCE, THE ASSESSING OFFICER DISALLOWED THE DEPRECIATION CLAIM ED OF RS.6,93,727/-. IN APPEAL, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW DEPRECIATION AS CLAIMED BY THE ASSESSEE. AGGRIEVED, THE REVENUE IS NOW IN APPEAL BEFORE US. 8. AT THE TIME OF HEARING BEFORE US, THE LD. DR REL IED ON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE LD. CIT(A) DELETED T HE DISALLOWANCE ON ACCOUNT OF DEPRECIATION INSPITE OF NO EVIDENCE COULD BE PRODUC ED REGARDING PUT TO USE OF THE ASSETS. HE ALSO CONTENDED THAT SINCE THE ASSESSEE FAILED TO FURNISH NECESSARY DETAILS RETARDING ACQUISITION, TRANSPORTATION, INSTALLATION AND USE O F PLANT AND MACHINERY, THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE DEPRECIATION AS CLAIMED BY THE ASSESSEE. HE, THEREFORE, URGED BEFORE THE BENCH TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THAT OF THE ASSESSING OFFICER. 9. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE WHILE RELYING ON THE ORDER OF THE LD. CIT(A) REITERATED HIS SAME SUBMISSION AS SU BMITTED BEFORE THE LOWER AUTHORITIES AND FURTHER SUBMITTED THAT THE ASSESEE PURCHASED PL ANT AND MACHINERY WORTH RS.27,74,908/- DURING THE ASSESSMENT YEAR 2004-05 A ND THE SAME WAS NOT PUT INTO USE DURING THE SAID ASSESSMENT YEAR. HE ALSO DRAWN OUR ATTENTION TO THE NOTES ON ACCOUNT- SCHEDULE 10 TO THE BALANCE SHEET FOR ASSESSMENT YEA R 2004-05 SUBMITTED ALONG WITH THE RETURN FOR ASSESSMENT YEAR 2004-05, WHEREIN IT WAS MENTIONED THAT DEPRECIATION ON PLANT AND MACHINERY AMOUNTING TO RS.27,74,908/- CAP ITALIZE DURING 2003-04 HAS NOT BEEN PROVIDED AS IT HAS NOT BEEN PUT TO USE IN BUSI NESS. THE SAID MACHINERY WAS PUT TO USE IN ASSESSMENT YEAR 2005-06 AND DEPRECIATION AMO UNTING TO RS.6,93,727/- WAS ACCORDINGLY, CLAIMED. HE ALSO CONTENDED THAT P&L AC COUNT OF ASSESSMENT YEAR 2005- 06 SHOWS THAT THERE HAS BEEN SUBSTANTIAL INCREASE I N JOB WORK CHARGES RECEIPTS IN ASSESSMENT YEAR 2005-06 IN COMPARISON TO RECEIPTS I N PREVIOUS ASSESSMENT YEAR. THE JOB WORK CHARGES RECEIPTS HAVE INCREASED BY MORE TH AN 90% FROM RS.13,08,221/- TO RS.25,35,338/-. SUCH A CONSIDERABLE IMPROVEMENT CO ULD BE ACHIEVED ONLY ON ACCOUNT OF USE OF PLANT AND MACHINERY IN THE SAID ASSESSMENT Y EAR 2005-06. HE ALSO CONTENDED 9 THAT IN THIS CASE, THE ASSESSEE WAS DISALLOWED DEPR ECIATION BY THE ASSESSING OFFICER ON THE ALLEGED GROUND THAT THE MACHINERY WAS NOT PUT T O USE. HOWEVER, IN THE PRESENT CASE, THE MACHINERY WAS PUT TO USE BY THE ASSESSEE, WHICH RESULTED IN THE SIGNIFICANT INCREASE IN THE INCOME OF THE ASSESEE. HE LASTLY PRAYED THA T THE ORDER OF THE LD. CIT(A) IN THIS REGARD MAY BE UPHELD. 10. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE BEFORE US. WE FIND THAT SINCE THE ASSESSEE FAILED TO FURNISH N ECESSARY DETAILS REGARDING ACQUISITION, TRANSPORTATION, INSTALLATION AND USE OF PLANT AND M ACHINERY, THE ASSESSING OFFICER HAS DISALLOWED THE DEPRECIATION AS CLAIMED BY THE ASSES SEE. IN APPEAL, THE LD. CIT(A) WHILE ALLOWING THE ASSESSEES GROUND OF APPEAL HAS HELD A S UNDER : THE APPELLANT FURNISHED COPIES OF THE BILLS FOR AC QUISITION OF THE PLANT & MACHINERY. THESE BILLS WERE PRESENTED BEFORE THE A.O. DURING T HE ASSESSMENT PROCEEDINGS. THE BALANCE SHEET OF THE EARLIER YEAR INDICATES THE ADD ITION OF PLANT & MACHINERY IN THE FIXED ASSET SCHEDULE. NO DEPRECIATION IS CLAIMED DU RING THE EARLIER YEAR SINCE PLANT & MACHINERY WAS NOT PUT TO USE. FOR THIS ASSESSMENT Y EAR, THE APPELLANT CONTENDS THAT THE ASSETS ARE USED FOR THE PURPOSE OF BUSINESS AND HEN CE DEPRECIATION IS CLAIMED. IT IS SEEN THAT THE JOB CHARGES RECEIVED BY THE APPELLANT HAVE SHOWN A SUBSTANTIAL INCREASE COMPARED TO THE EARLIER YEAR. THE JOB CHARGES RECEI PTS INCREASED FROM 13.08 LACS OF THE EARLIER YEAR TO RS.25.35 LACS FOR THIS YEAR. THE EV IDENCE PRESENTED BY THE APPELLANT IN THE FORM OF THE BILLS FOR PURCHASE OF PLANT & MACHI NERY, COPIES OF THE BALANCE SHEET OF THE EARLIER YEAR WHEREIN ADDITION TO PLANT & MACHIN ERY IS DISCLOSED IN THE BALANCE SHEET ALONG WITH THE INCREASE IN THE JOB CHARGES RE CEIPTS PROVES THAT THE PLANT & MACHINERY IS USED BY THE ASSESSEE FOR THE PURPOSE O F BUSINESS DURING THIS YEAR. IN VIEW OF THE RATIO LAID DOWN IN THE DECISION OF THE YELLA MMA DASAPPA HOSPITAL (290 ITR 353), DEPRECIATION IS ALLOWABLE ON AN ASSET ONLY WHEN IT IS USED FOR THE PURPOSE OF BUSINESS. SINCE THE APPELLANT HAS USED THE ASSETS FOR THIS YE AR, DEPRECIATION ON THE PLANT & MACHINERY CLAIMED BY THE APPELLANT IS ALLOWABLE FOR THIS YEAR. THE A.O. IS DIRECTED TO ALLOW DEPRECIATION CLAIMED BY THE APPELLANT. 11. IN VIEW OF THE ABOVE AND IN THE ABSENCE OF ANY CONTROVERTING MATERIAL BROUGHT ON RECORD BY THE REVENUE AUTHORITIES TO REBUT THE FIND ING OF THE LD. CIT(A), WE DO NOT FIND ANY INFIRMITY IN HIS ORDER AND THE SAME IS HEREBY U PHELD. THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 12. GROUND NO. 4 OF THE REVENUES APPEAL IN RESPECT OF ASSESSEE INDIVIDUALS CASE IS CONCERNED, THE REVENUE HAS AGITATED AGAINST THE DEL ETION OF DISALLOWANCE OF RS.1,68,592/- MADE ON ACCOUNT OF INTEREST ON LOAN. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESEE CLAIMED INTEREST EXPENDITURE OF RS .1,68,592/- ON THE LOAN. AT THE TIME 10 OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER AS KED FOR DETAILS REGARDING THE NEXUS BETWEEN THE LOAN TAKEN AND THE INVESTMENTS MADE. S INCE THE ASSESSEE FILED NO EXPLANATION BEFORE THE ASSESSING OFFICER, HE DISALL OWED THE INTEREST CLAIMED OF RS.1,68,592/-. IN APPEAL, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION. AGGRIEVED, THE REVENUE IS NOW IN APPEAL BEFORE US. 13. AT THE TIME OF HEARING BEFORE US, THE LD. DR HE AVILY RELIED ON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT INTEREST ON LO AN WAS DISALLOWED BY THE ASSESSING OFFICER AS THE ASSESEE FAILED TO EXPLAIN THE NEXUS BETWEEN LOAN TAKEN AND UTILIZATION THEREOF. THE LD. CIT(A) WAS NOT RIGHT IN DELETING THE ADDITION WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE COULD NOT EXPLAIN THE NEXUS OF LOAN TAKEN AND ITS UTILIZATION. HE, THEREFORE, URGED BEFORE THE BENCH TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THAT OF THE ASSESSING OFFICER. 14. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE WHILE REITERATING HIS SAME SUBMISSION AS SUBMITTED BEFORE THE LOWER AUTHORITIE S VEHEMENTLY RELIED ON THE ORDER OF THE LD. CIT(A) AND PRAYED BEFORE US THAT THE ACTIO N OF THE LD. CIT(A) MAY BE UPHELD. 15. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE BEFORE US. WE FIND THAT THE ASSESSING OFFICER DISALLOWED THE INTEREST CLAIMED OF RS.1,68,592/- SINCE THE ASSESSEE FAILED TO FILE ANY EXPLANATION AND DETAILS REGARDING THE NEXUS BETWEEN THE LOAN TAKEN AND THE INVESTMENTS MADE. IN APPEAL , WHILE ALLOWING THE ASSESSEES CLAIM, THE LD. CIT(A) HAS HELD AS UNDER : THE APPELLANT CLAIMED INTEREST EXPENDITURE OF RS.1 ,68,592/- PM THE BORROWED FUNDS. THE A.O. CALLED FOR THE DETAILS REGARDING THE NEXU S BETWEEN THE BORROWAL AND INVESTMENT. IN THE ABSENCE OF DETAILS, THE A.O. DIS ALLOWED THE ENTIRE INTEREST EXPENDITURE. THE APPELLANT HAS FURNISHED THE COPIE S OF THE BALANCE SHEET WHICH INDICATES THAT THE APPELLANT HAS OWN FUNDS TO THE E XTENT OF RS.1.35 CRORES FOR INVESTMENT IN THE VARIOUS BUSINESS. AS PER THE BAL ANCE SHEET, THE BORROWAL IS RS.20.04 LACS ONLY. THERE IS NO DIRECT NEXUS BETWEEN THE AMO UNT BORROWED AND THE INVESTMENTS MADE BY THE APPELLANT. THE INTEREST EXPENDITURE CLA IMED DURING THE EARLIER YEARS IS ALSO ALLOWED AS BUSINESS EXPENDITURE. IN THE ABSENC E OF A DIRECT NEXUS BETWEEN THE BORROWED FUNDS, THE A.O. IS NOT CORRECT IN DISALLOW ING INTEREST CLAIMED BY THE APPELLANT. THE APPELLANT RELIED UPON THE CALCUTTA H IGH COURT DECISION IN THE CASE OF BRITISH PAINTS INDIA LTD. VS. CIT (190 ITR 196) WHE REIN IT IS HELD THAT THE I. T. ACT DID NOT AUTHORIZE AN APPORTIONMENT OF THE EXPENDITURE B ETWEEN THE DIFFERENT HEADS OF RECEIPTS. IN VIEW OF THIS DECISION AND IN THE ABSEN CE OF A DIRECT NEXUS BETWEEN THE 11 BORROWAL AND THE INVESTMENT IN SHARES, THE A.O. IS NOT CORRECT IN DISALLOWING THE INTEREST. THE APPELLANTS BALANCE SHEET DISCLOSED S UBSTANTIAL OWN FUNDS FOR MAKING THE NECESSARY INVESTMENT. THE BORROWAL OF FUNDS IS LOW COMPARED TO THE OWN FUNDS OF THE APPELLANT. THE INTEREST EXPENDITURE CLAIMED BY THE APPELLANT IS HENCE NOT IDENTIFIABLE WITH THE INVESTMENT IN SHARES. ACCORDINGLY, THE INT EREST EXPENDITURE IS ALLOWABLE AS A BUSINESS EXPENDITURE U/S. 36(1)(III). THE A.O. IS N OT CORRECT IN DISALLOWING THE INTEREST EXPENDITURE. THE A.O. IS DIRECTED TO DELETE THE ADD ITION OF RS. 1,68,592/-. IN VIEW OF THE ABOVE AND IN THE ABSENCE OF ANY CONT ROVERTING MATERIAL BROUGHT ON RECORD BY THE REVENUE AUTHORITIES TO REBUT THE FINDING OF THE LD. CIT(A), WE DO NOT FIND ANY INFIRMITY IN HIS ORDER AND THE SAME IS HEREBY UPHEL D. THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 16. IN THE RESULT, THE APPEALS OF THE REVENUE ARE D ISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 13.04.2011 SD/- SD/- , , , , . !., , , , '# (MAHAVIR SINGH) (C. D. RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER ( (( (!# !# !# !#) )) ) DATED : 13 TH APRIL, 2011 01 %23 4 JD.(SR.P.S.) '/ 5 ,6 7'6'8- COPY OF THE ORDER FORWARDED TO: 1 . *+ /APPELLANT - DCIT, CIRCLE-43, KOLKATA. 2 ,-*+ /RESPONDENT SHRI JAGDISH PRASAD GOEL/ SHRI JAGDIS H PRASAD GOEL (HUF), 89, BURTOLLA STREET, KOL-7. 3 . /% / THE CIT, KOLKATA 4 . /% ( )/ THE CIT(A), KOLKATA. 5 . ?@ ,% / DR, KOLKATA BENCHES, KOLKATA -6 ,/ TRUE COPY, '/%A/ BY ORDER, 3 /ASSTT. REGISTRAR .