THE DCIT 8(2), MUMBAI V. M/S. HALDIRAM HOTELS PVT. LTD, MUMBAI

ITA 5447/MUM/2007

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7996 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 17-03-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 14-08-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: REENA JHA TRIPATHI PER R K
• Assessee Lawyers: HITESH P SHAH
• Keywords: Income from undisclosed sources; Question of law; Sham transactions; Capital Gains
• Section: 143(3); 153A; 68

Judgement Text

1 ITA NO. 5445 TO 5447/MUM/2007 (ASST YEAR 2001-02 TO 2003-04) IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI H MUMBAI H MUMBAI H MUMBAI H BENCH BENCH BENCH BENCH MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI BEFORE SHRI R K PANDA, AM BEFORE SHRI R K PANDA, AM BEFORE SHRI R K PANDA, AM BEFORE SHRI R K PANDA, AM & SHRI VIJAY PAL RAO, JM & SHRI VIJAY PAL RAO, JM & SHRI VIJAY PAL RAO, JM & SHRI VIJAY PAL RAO, JM ITA NO. ITA NO. ITA NO. ITA NO. 5445 TO 5447/MUM/2007 5445 TO 5447/MUM/2007 5445 TO 5447/MUM/2007 5445 TO 5447/MUM/2007 (ASST YEAR (ASST YEAR (ASST YEAR (ASST YEAR 2001 2001 2001 2001- -- -02 TO 2003 02 TO 2003 02 TO 2003 02 TO 2003- -- -04 0404 04) )) ) THE DY COMMR OF INCOME TAX 8(2), MUMBAI VS HALDIRAM HOTELS P LTD 601 INDRA APARTMENT 484 TEJPAL ROAD VILE PARELE(E) MUMBAI ( (( (APPELLANT APPELLANT APPELLANT APPELLANT) )) ) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO. PAN NO. PAN NO. PAN NO.AAACH9230L AAACH9230L AAACH9230L AAACH9230L A SSESSEE BY SHRI HITESH P SHAH REVENUE BY SMT REENA JHA TRIPATHI PER R K PANDA, AM PER R K PANDA, AM PER R K PANDA, AM PER R K PANDA, AM THE ABOVE THREE APPEALS FILED BY THE REVENUE ARE D IRECTED AGAINST THE COMMON ORDER DATED 18.4.2007 OF THE CIT(A)-I, NAGPU R FOR THE ASSESSMENT YEARS 2001-02 TO 2003-04 RESPECTIVELY. SINCE IDENTICAL G ROUNDS HAVE BEEN TAKEN BY THE REVENUE IN ALL THE THREE APPEALS; THEREFORE, TH ESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2 ALL THESE CASES WERE GETTING ADJOURNED FROM TIME TO TIME SINCE 10.2.2009 DUE TO SOME REASONS OR OTHER. FROM THE ORDER SHEET ENTRIES, IT WAS NOTED THAT ON 20.4.2010, THE LD DR WAS DIRECTED TO FIND OUT AS TO WHAT HAPPENED IN OTHER 22 CASES OF THE SAME GROUP. THEREAFTER, IT WAS SEEN TH AT ON SUBSEQUENT DATES, THE LD DR HAS NOT FILED ANY DETAILS REGARDING THE OUTCO ME OF THE APPEALS IN THE 22 CASES OF THE GROUP CONCERNS. 2 ITA NO. 5445 TO 5447/MUM/2007 (ASST YEAR 2001-02 TO 2003-04) 3 AT THE TIME OF HEARING, WHEN THE NAME OF THE ASSE SSEE WAS CALLED, THE LD DR FILED A LETTER FROM THE CIT(A)-8 MUMBAI, ACCORDI NG TO WHICH, THE ASSESSING OFFICER IS ALREADY ON THE JOB FOR THE DESIRED PAPE R BOOK AND IS LIKELY TO BE NEARING COMPLETION AND THE PRESENT STATUS OF THE RE PORT COULD NOT BE ASCERTAINED SINCE THE ASSESSING OFFICER IS ON SEARCH DUTY. THE LD DR, ACCORDINGLY REQUESTED FOR ADJOURNMENT. 3.1 THE LD COUNSEL FOR THE ASSESSEE ON THE OTHER HA ND SUBMITTED THAT THE ORDER OF THE TRIBUNAL IN THE OTHER RELATED MATTERS I.E. GROUP CONCERNS HAS ALREADY ATTAINED FINALITY IN VIEW OF THE DECISION OF THE JURISDICTIONAL HIGH COURT WHEREIN THE APPEAL OF THE REVENUE HAS BEEN DISMISSED. THE LD DR, THEREAFTER STATED THAT SHE IS PREPARED WITH THE MATTER AND ALSO CONCEDED T HAT THE MATTER HAS BEEN DECIDED BY THE JURISDICTIONAL HIGH COURT IN THE CAS E OF OTHER GROUP CONCERNS. UNDER THESE CIRCUMSTANCES, WE PROCEED TO DISPOSE OF THESE APPEALS. 4 IDENTICAL GROUNDS HAVE BEEN TAKEN BY THE REVENUE IN ALL THE THREE APPEALS WHICH ARE AS UNDER: ITA NO. 5445 TO 5447/MUM/2007(ASSESSMENT YEAR 2001 ITA NO. 5445 TO 5447/MUM/2007(ASSESSMENT YEAR 2001 ITA NO. 5445 TO 5447/MUM/2007(ASSESSMENT YEAR 2001 ITA NO. 5445 TO 5447/MUM/2007(ASSESSMENT YEAR 2001- -- -02) 02) 02) 02) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED DELETING THE ADDITION OF RS. 27,35,000 /- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SALE PROCEEDS OF SH ARES AS UNEXPLAINED INCOME U/S 68 OF THE I T ACT WITHOUT APPRECIATING T HE FINDINGS OF THE ASSESSING OFFICER N THE CASE OF THE ASSESSEE. 3 ITA NO. 5445 TO 5447/MUM/2007 (ASST YEAR 2001-02 TO 2003-04) ITA NO. 5446/MUM/2007 ITA NO. 5446/MUM/2007 ITA NO. 5446/MUM/2007 ITA NO. 5446/MUM/2007(ASSESSMENT YEAR 2002 (ASSESSMENT YEAR 2002 (ASSESSMENT YEAR 2002 (ASSESSMENT YEAR 2002- -- -03) 03) 03) 03) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED DELETING THE ADDITION OF RS. 1,46,02,3 88/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SALE PROCEEDS OF SH ARES AS UNEXPLAINED INCOME U/S 68 OF THE I T ACT WITHOUT APPRECIATING T HE FINDINGS OF THE ASSESSING OFFICER N THE CASE OF THE ASSESSEE. ITA NO. 5447/MUM/2007 ITA NO. 5447/MUM/2007 ITA NO. 5447/MUM/2007 ITA NO. 5447/MUM/2007(ASSESSMENT YEAR 2003 (ASSESSMENT YEAR 2003 (ASSESSMENT YEAR 2003 (ASSESSMENT YEAR 2003- -- -04) 04) 04) 04) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED DELETING THE ADDITION OF RS. 1,33,36,0 00/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SALE PROCEEDS OF SH ARES AS UNEXPLAINED INCOME U/S 68 OF THE I T ACT WITHOUT APPRECIATING T HE FINDINGS OF THE ASSESSING OFFICER N THE CASE OF THE ASSESSEE. 5 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSE E BELONGS TO HALDIRAM GROUP OF NAGAPUR. SEARCH & SEIZURE OPTION U/S 132(1 ) OF THE I T ACT WAS CONDUCTED IN THE ENTIRE GROUP FROM 20.1.2005 ONWARD S. THE ASSESSING OFFICER THEREAFTER, COMPLETED THE ASSESSMENT U/S 153A R.W.S 143(3) OF THE I T ACT. THE ASSESSING OFFICER, IN THE ASSESSMENT ORDER REJECTED THE CLAIM OF PROFIT ON SALE OF SHARES OFFERED BY THE ASSESSEE TREATING THE SAME AS LONG TERM CAPITAL GAINS AND INSTEAD DETERMINED THE SALE PROCEEDS FROM SHARE S AS INCOME FROM UNDISCLOSED SOURCES AND ACCORDINGLY, TAXED U/S 68 O F THE ACT. THUS, HE MADE AN ADDITION OF RS. 27,35,000/- FOR ASSESSMENT YEAR 200 1-02; RS. 1,46,02,388/- FOR ASSESSMENT YEAR 2002-03 AND RS. 1,33,36,000/- FOR A SSESSMENT YEAR 2003-04. 4 ITA NO. 5445 TO 5447/MUM/2007 (ASST YEAR 2001-02 TO 2003-04) 6 IN APPEAL, THE CIT(A) DELETED THE ABOVE ADDITIONS BY HOLDING AS UNDER: I HAVE ALREADY CLARIFIED THAT ALL SUCH TRANSACTION S DONE THROUGH PRADEEP KUMAR DAGA ARE ACCEPTED AS GENUINE IN MY AF ORESAID ORDER IN THE CASE OF SHRI KAMALKUMAR AGRAWAL. THE APPELLANT-GROUP HAS SUBMITTED IDENTICAL STATEME NT OF FACTS AND GROUNDS OF APPEAL IN RESPECT OF ALL THE ASSESEE S WHERE SHARE TRANSACTIONS HAVE BEEN SHOWN AND LTCG IS DECLARED B Y THEM. THE ASSESSING OFFICER HAS FRAMED ONE COMMON ORDER DEALI NG WITH THIS ISSUE ENCOMPASSING ALL THE ASPECTS RELATED TO THIS ISSUE. ONLY SCRIPS INVOLVED IN RESPECT OF ALL THE ASSESSEES ARE SOME TIME COMMON AND SOME TIME DIFFERENT. DETAILS OF SCRIPS T RADED BY EACH ASSESSEE IN DIFFERENT YEARS HAVE BEEN DISCUSSED IN THEIR RESPECTIVE CASES. HOWEVER, LEGAL ISSUES RELATED TO SAME AND TH E GENERAL APPROACH OF THE ASSESSING OFFICER ARE COMMON IN AL L THE ASSESSMENTS. THE ISSUES WERE DISCUSSED IN DETAIL AN D ADJUDICATED UPON IN RESPECT OF SHRI KAMALKUMAR AGRAWALS CASE F OR ASSESSMENT YEAR 2002-03 VIDE MY ORDER NO.CIT(A)-I/1 022/2006-07 DATED 17.4.2007. FOLLOWING MY AFORESAID ORDER I DEL ETE ADDITION OF RS. 27,35,000/ IN ASSESSMENT YEAR 2001-02, RS. 1,46 ,02,388/- IN ASSESSMENT YEAR 2002-03 AND RS. 1,33,36,000/ IN ASS ESSMENT YEAR 2003-04 ON ACCOUNT OF SALE PROCEEDS OF SHARES TAXED U/S 68. IN MY AFORESAID ORDER I HAVE ALSO DISCUSSED IN DETA IL THAT SECTION 68 IS NOT APPLICABLE IN THE FACTS AND CIRCU MSTANCES OF THE CASE. THE ASSESSING OFFICER DURING THE APPELLATE STAGE MO VED A FRESH PROPOSAL TO TAX THE ENTIRE SALE RECEIPTS AS B USINESS INCOME ALLEGEDLY ARISING FROM ADVENTURE IN THE NATURE OF T RADE. AGAIN REFERENCE MAY BE MADE TO MY AFORE-CITED ORDER WHERE IN I HAVE DISCUSSED AND DECIDED IN DETAIL THAT; I) IN THE FACTS AND CIRCUMSTANCES OF THE CASE SUCH PROPOSAL CANNOT BE ENTERTAINED AT THE APPELLATE STA GE FOR THE VERY FIRST TIME BECAUSE THIS WAS NEVER A SUBJEC T MATTER OF THE IMPUGNED ASSIGNMENTS, AND APPELLATE AUTHORI TYS POWERS DO NOT EXTEND TO SUCH EXTRANEOUS MATTERS. II) EVEN ON THE ANALYSIS OF MERIT OF SUCH PROPOSING IT IS NOT FOUND TENABLE. THE SAID PROPOSITION OF THE ASSESSING OFFICER WAS, THEREFORE, REJECTED BY ME. 7 AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE REVE NUE IS IN APPAL HERE BEFORE THE TRIBUNAL: 5 ITA NO. 5445 TO 5447/MUM/2007 (ASST YEAR 2001-02 TO 2003-04) 8 AFTER HEARING BOTH THE PARTIES, WE FIND THE CIT(A ) FOLLOWING HIS ORDER IN THE CASE OF SHRI KAMALKUMAR AGRAWAL FOR ASSESSMENT YE AR 2002-03 DELETED THE ADDITION. WE FIND, WHEN THE REVENUE CHALLENGED THE ORDER OF THE TRIBUNAL IN THE CASE OF RELATED PARTIES THE JURISDICTIONAL HIGH CO URT NAGPUR BENCH VIDE CONSOLIDATED ORDER DATED 23.9.2010( COPY OF WHICH WAS FILED BY THE LD COUNSEL FOR THE ASSESSEE) AT PAGES 11 TO 16 OF THE ORDER H AS HELD AS UNDER: 11. .. . WE SEE NO MERIT IN THE ABOVE CONTENTIONS. THE FAC T THAT THE ASSESSEES IN THE GROUP HAVE PURCHASED AND SOLD SHAR ES OF SIMILAR COMPANIES THROUGH THE SAME BROKER CANNOT B A GROUND TO HOLD THAT THE TRANSACTIONS ARE SHAM AND BOGUS, E SPECIALLY WHEN DOCUMENTARY EVIDENCE WAS PRODUCED TO ESTABLISH THE GENUINENESS OF THE CLAIM. 12 FROM THE DOCUMENTS PRODUCED BEFORE US, WHICH WER E ALSO IN POSSESSION OF THE ASSESSING OFFICER, IT IS SEEN THA T THE SHARES IN QUESTION WERE IN FACT PURCHASED BY THE ASSESSEES ON THE RESPECTIVE DATES AND THE COMPANY HAS CONFIRMED TO H AVE HAND OVER THE SHARES PURCHASED BY THE ASSESSEES. SIMILAR LY, THE SALE OF THE SHARES TO THE RESPECTIVE BUYERS IS ALSO ESTA BLISHED BY PRODUCING DOCUMENTARY EVIDENCE. IT IS TRUE THAT SOM E OF THE TRANSACTIONS WERE OFF-MARKET TRANSACTIONS. HOWEVER, THE PURCHASE AND SALE PRICE OF THE SHARES DECALED BY TH E ASSESSEE WERE IN CONFORMITY WITH THE MARKET RATES PREVAILING ON THE RESPECTIVE DATES AS IS SEEN FROM THE DOCUMENTS FURN ISHED BY THE ASSESSEES. THEREFORE, THE FACT THAT SOME OF THE TRANSACTIONS WERE OFF MARKET TRANSACTIONS CANNOT BE A GROUND TO TREAT THE TRANSACTIONS AS SHAM TRANSACTIONS. 13. THE STATEMENT OF PRADEEP KUMAR DAGA THAT THE TR ANSACTIONS WITH THE HALDIRAM GROUP WERE BOGUS HAS BEEN DEMONST RATED TO BE WRONG BY PRODUCING DOCUMENTARY EVIDENCE TO THE E FFECT THAT THE SHARES SOLD BY THE ASSESSEES WERE IN CONSONANCE WITH THE MARKET PRICE. ON PERUSAL OF THOSE DOCUMENTARY EVIDE NCE, THE TRIBUNAL HAS ARRIVED AT A FINDING OF FACT THAT THE TRANSACTIONS WERE GENUINE. NOTHING IS BROUGHT TO OUR NOTICE THAT THE FINDINGS RECORDED BY THE TRIBUNAL ARE CONTRARY TO THE DOCUME NTARY EVIDENCE ON RECORD. 14 THE TRIBUNAL HAS FURTHER RECORDED A FINDING OF F ACT THAT THE CASH CREDITS IN THE BANK ACCOUNTS OF SOME OF THE BU YERS OF 6 ITA NO. 5445 TO 5447/MUM/2007 (ASST YEAR 2001-02 TO 2003-04) SHARES CANNOT BE LINKED TO THE ASSESSES. MOREOVER, IN THE LIGHT OF THE DOCUMENTARY EVIDENCE ADDUCED TO SHOW THAT TH E SHARES PURCHASED AND SOLD BY THE ASSESSEES WERE IN CONFORM ITY WITH THE MARKET PRICE, THE TRIBUNAL RECORDED A FINDING O F FACT THAT THE CASH CREDIT IN THE BUYERS BANK ACCOUNTS CANNOT BE ATTRIBUTED TO THE ASSESSEES. NO FAULT CAN BE FOUND WITH THE ABOV E FINDING RECORDED BY THE TRIBUNAL. 15 RELIANCE PLACED BY THE COUNSEL FOR THE REVENUE O N THE DECISION OF THE APEX COURT IN THE CASE OF SUMATI DA YAL (SUPRA) IS WHOLLY MISPLACED. IN THAT CASE, THE ASSESSEE THEREI N HAD CLAIMED INCOME FROM HORSE RACES AND THE FINDING OF THE FACT RECORDED WAS THAT THE ASSESSEE THEREIN HAD NOT PART ICIPATED IN RACES BUT PURCHASED WINNING TICKETS AFTER THE RACE WITH THE UNACCOUNTED MONEY. IN THE PRESENT CASE, THE DOCUMEN TARY EVIDENCE CLEARLY SHOWS THAT THE TRANSACTIONS WERE A T THE RATE PREVAILING IN THE STOCK MARKET AND THERE WAS NO QUE STION OF INTRODUCING UNACCOUNTED MONEY BY THE ASSESSEES. THU S, HE DECISION RELIED UPON BY THE COUNSEL FOR THE REVENUE IS WHOLLY DISTINGUISHABLE ON FACTS. 16 FOR ALL THE AFORESAID REASONS, WE HOLD THAT THE DECISION OF THE TRIBUNAL IS BASED ON FINDING OF FACTS. NO SUBST ANTIAL QUESTION OF LAW ARISES FROM THE ORDER OF THE TRIBUNAL. ACCOR DINGLY, ALL THESE APPEALS ARE DISMISSED. NO ORDER AS TO COSTS. 9 SINCE THE CIT(A) HAS FOLLOWED HIS OWN ORDER IN TH E CASE OF SHRI KAMALKUMAR AGRAWAL AND SINCE THE JURISDICTIONAL HI GH COURT , NAGPUR BENCH IN THE CASE OF RELATED PARTIES OF THE SAME GROUP HAS U PHELD THE ORDER OF THE TRIBUNAL; THEREFORE, WE DO NOT FIND ANY INFIRMITY I N THE ORDER OF THE CIT(A) IN DELETING THE ADDITION. ACCORDINGLY, THE GROUNDS R AISED BY THE REVENUE IN ALL THESE APPEALS ARE DISMISSED. 10 IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON THE 23 RD DAY OF MAR 2011. SD/- SD/- ( (( ( VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO ) )) ) JUDICIAL MEMBER ( (( ( R K PANDA R K PANDA R K PANDA R K PANDA ) )) ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED: 23 RD , MAR 2011 RAJ* 7 ITA NO. 5445 TO 5447/MUM/2007 (ASST YEAR 2001-02 TO 2003-04) COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI