Bhim Sain Jain, New Delhi V. ITO, Ward-1(2), Faridabad

ITA 5576/DEL/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7312 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 28-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P S THUING ALENG
• Keywords: Income from undisclosed sources; Opportunity of being heard
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : SMC : NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.5576/DEL/2018 ASSESSMENT YEAR: 2014-15 BHIM SAIN JAIN, C/O KAPIL GOEL, ADVOCATE, F-26/124, SECTOR-7, ROHINI. PAN: ABUPJ6954B VS. ITO, WARD-1(2), FARIDABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI KAPIL GOEL, ADVOCATE REVENUE BY : SHRI P.S. THUINGALENG, SR. DR DATE OF HEARING : 11.12.2018 DATE OF PRONOUNCEMENT : 11.01.2019 ORDER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 29 TH JUNE, 2018 OF THE CIT(A), FARIDABAD, RELATING TO ASSESSMENT YEAR 2014-15. 2. ALTHOUGH A NUMBER OF GROUNDS HAVE BEEN RAISED BY THE ASSESSEE, THESE ALL RELATE TO THE ORDER OF THE CIT(A) IN SUSTAINING THE ADDITI ON OF RS.23,70,761/- MADE BY THE ASSESSING OFFICER TREATING THE LONG-TERM CAPITAL GA IN ARISING FROM SALE OF SHARES AS INCOME FROM UNDISCLOSED SOURCES U/S 68 OF THE IT AC T, 1961. 3. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE AS SESSEE IS AN INDIVIDUAL AND FILED HIS RETURN OF INCOME ON 29 TH SEPTEMBER, 2014 DECLARING TOTAL INCOME OF RS.17,85 ,350/-. ITA NO.5576/DEL/2018 2 THE ASSESSEE DERIVES INCOME FROM A PROPRIETARY CONC ERN M/S GOMTI FOOD PRODUCTS. THE ASSESSING OFFICER, DURING THE COURSE OF ASSESSM ENT PROCEEDINGS OBSERVED THAT THE ASSESSEE HAS CLAIMED EXEMPTION OF RS.23,25,961/- U/ S 10(38) OF THE IT ACT ON ACCOUNT OF SALE OF SHARES OF M/S PAWANSUT HOLDINGS LTD. ON BEING ASKED BY THE ASSESSING OFFICER, THE ASSESSEE FURNISHED WRITTEN SUBMISSIONS ENCLOSING THE COPIES OF COMPUTATION, BANK STATEMENTS AND FURNISHED THE DETA ILS OF LONG-TERM CAPITAL GAIN. FROM THE DETAILS FURNISHED BY THE ASSESSEE, THE ASS ESSING OFFICER OBSERVED THE FOLLOWING:- SCRIP PURCHASED M/S PAWANSUT HOLDINGS LTD. NO. OF SHARES PURCHASED 12,800 DATE OF PURCHASE 02.04.2012 AMOUNT PAID RS.44,800/- BROKER THROUGH WHOM PURCHASED OFFLINE FROM M/S ROXT ECH SECURITIES LTD. NO. OF SHARES SOLD 12700 DATE OF SALE (NSE) 10.03.2014 BROKER M/S EMKAY GLOBAL FINANCIAL SERVICES LTD. AMOUNT RECEIVED RS.23,74,138/- WITHOUT STT. AFTER STT AND BROKERAGE RS.23,70,761/-. 4. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURN ISH THE FOLLOWING DETAILS:- A) AMOUNT OF INVESTMENTS MADE; B) SOURCE OF INVESTMENT MADE; C) MODE OF PAYMENTS MADE TO SHARE BROKER WITH EVIDENCE ; D) BUSINESS ACTIVITY OF THE INVESTOR; E) CONTRACT NOTE FOR PURCHASE OF SHARES/INVESTMENT MAD E AND SALE OF INVESTMENT/SHARES; F) BANK STATEMENT OF REFLECTING PAYMENT AND RECEIPT OF SALE OF INVESTMENTS; ITA NO.5576/DEL/2018 3 G) DEMAT STATEMENT TO PROVE INWARD & DELIVERY OF SHARE S; H) LEDGER COPY OF SHARE BROKER ACCOUNT; I) COPY OF LEDGER ACCOUNT OF SOURCE OF INVESTMENT; J) DETAIL OF INVESTMENTS MADE IN SHARES FOR 3 YEARS AN D REGULARITY OF INVESTING IN SHARES; K) DATE OF OPENING OF DEMAT ACCOUNT AND TRADING ACCOUN T; L) IF THE SHARE BROKER IS NOT FROM DELHI, THE REASON F OR INVESTING THROUGH A SHARE BROKER NOT PLACED AT DELHI; M) COMPLETE NAME AND ADDRESS WITH PAN OF COMPANY WHOSE SHARES SOLD FOR CLAIMING LTCG EXEMPTION; N) COMPLETE NAME AND ADDRESS WITH PAN OF BROKER THROUG H WHOM SHARES PURCHASED AND SOLD FOR CLAIMING LTCG EXEMPTION. 5. THE ASSESSEE FURNISHED THE REQUISITE DETAILS AS CALLED FOR BY THE ASSESSING OFFICER. HOWEVER, THE ASSESSING OFFICER WAS NOT SAT ISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND OBSERVED THE FOLLOWING IRREGULA RITIES:- I) THE SHARES WERE NOT DELIVERED TO THE ASSE SSE IN ANY FORM TILL THE SALE OF THESE SHARES. II) THEY WERE DELIVERED DIRECTLY IN D-MAT ACCOUNT, WHI CH WAS OPENED ON 26.02.2014 AND SALE WAS SHOWN ON 10.03.2014. III) THERE IS NO CONTRACT NOTE OF EITHER PURCHASE OR SAL E OF SHARES. THE RELEVANT COLUMNS IN THE SALE BILL I.E. ORDER NO., T RADE NO., AND TRADE TIME ARE LEFT BLANK. THESE ARE VITAL INGREDIENTS FOR ANY GENUINE SALE AND PURCHASE OF SHARES THROUGH ANY RECOGNIZED STOCK EXCHANGE. IV) NO PROOF/SOURCE OF PAYMENT FOR PURCHASE OF THESE S HARES IS BROUGHT ON RECORD EXCEPT FOR A CASH BOOK SHEET OF BROKER FROM WHOM SHARES CLAIMED TO HAVE BEEN PURCHASED. ITA NO.5576/DEL/2018 4 V) THE PURCHASE OF THE SHARES CANNOT BE VERIFIABLE FRO M THE BOMBAY STOCK EXCHANGE SINCE THE VITAL COLUMNS IN THE SAID BROKER BILL SUCH AS ORDER NO., TRADE NO. & TRADE TIME WERE LEFT BLANK. VI) CLIENT ID, CLIENT CODE, BROKER CODE ARE MISSING FRO M THE PURCHASE BILL RAISED BY M/S ROXTECH SECURITIES SERVICES. 6. SINCE THE SHARES WERE PURCHASED FROM OFF MARKET AND THE SHARES WERE PURCHASED IN PHYSICAL FORM AND, THEREFORE, NOT IN CONFORMITY WITH SEBI GUIDELINES AND THE PAYMENTS FOR PURCHASE WAS MADE IN CASH AND THE ASSE SSEE WAS NOT A REGULAR INVESTOR IN SHARES, THE ASSESSING OFFICER, FOLLOWING THE DECISI ON OF THE HON'BLE SUPREME COURT IN THE CASE OF MCDOWELL & CO. LTD. VS. CTO (1985) 154 ITR 148 (SC) AND VARIOUS OTHER DECISIONS HELD THAT THE TRANSACTIONS ARE SHAM TRANS ACTIONS AND MADE ONLY TO BRING UNACCOUNTED MONEY IN THE GUISE OF EXEMPTED LONG-TER M CAPITAL GAIN AND PAPER WORK HAS BEEN DONE MERELY TO GIVE A COLOUR OF AUTHENTICI TY TO THE TRANSACTIONS AND BY CREATING A FAADE OF LEGITIMATE TRANSACTIONS. THE A SSESSING OFFICER, THEREFORE, REJECTED THE CLAIM OF EXEMPT LONG-TERM CAPITAL GAIN U/S 10(3 8) OF THE IT ACT AND MADE ADDITION OF RS.23,70,761/- TO THE TOTAL INCOME OF THE ASSESS EE U/S 68 OF THE IT ACT. 7. IN APPEAL, THE LD.CIT(A) UPHELD THE ACTION OF TH E ASSESSING OFFICER. WHILE DOING SO, HE OBSERVED THE FOLLOWING:- A) THE SCRIP OF M/S PAWANSUT HOLDINGS LIMITED IN WHICH THE ASSESSEE TRADED WAS PURCHASED THROUGH BROKER MAKING PAYMENT IN CASH . THE A.O. SENT A LETTER TO M/S PAWANSUT HOLDINGS LIMITED BY EMAIL AS WELL AS P OST IN RESPECT TO WHICH NO RESPONSE WAS RECEIVED. ITA NO.5576/DEL/2018 5 B) THE APPELLANT WAS CONFRONTED WITH ALL THE MATERIAL AVAILABLE WITH THE A.O. HOWEVER, HE FAILED TO REBUT THE FINDINGS OF A.O. AG AINST THE TRANSACTION OF THE APPELLANT. C) THE APPELLANT HAS FAILED TO GIVE ANY REASONABLE REA SON FOR INVESTING IN SHARES OF NON-DESCRIPT COMPANY. D) THE APPELLANT HAS FAILED TO GIVE ANY CONCRETE EVIDE NCE OF HIS BONA FIDE CLAIM DURING THE ASSESSMENT AS WELL AS THE APPELLAT E PROCEEDINGS. THE APPELLANT HAS FAILED TO COUNTER THE OBSERVATIONS AND FACTS CI TED BY THE A.O. IN THE ASSESSMENT ORDER. 8. RELYING ON VARIOUS DECISIONS, THE LD.CIT(A) HELD THAT THE ASSESSING OFFICER HAS RIGHTLY ADDED THE AMOUNT OF RS. 23,70,761/- TO THE TOTAL INCOME OF THE ASSESSEE U/S 68 OF THE IT ACT TREATING THE SAME AS INCOME FROM UNDI SCLOSED SOURCES. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 9. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALLE NGED THE ORDER OF THE CIT(A). RELYING ON VARIOUS DECISIONS, HE SUBMITTED THAT THE RE WAS NO MATERIAL FROM THE INVESTIGATION WING OF THE DEPARTMENT THAT THE ASSES SEE IS A BENEFICIARY OF SOME ENTRIES. IT IS ALSO NOT THE ALLEGATION OF THE DEPA RTMENT THAT IT IS A PENNY STOCK COMPANY. HE SUBMITTED THAT THE SALE OF SHARES IS N OT IN DISPUTE SINCE THE SHARES WERE TRANSFERRED FROM THE DEMAT ACCOUNT AND THE AMOUNT W AS RECEIVED IN CHEQUE. THE ASSESSEE HAD ALSO SUBSTANTIATED THE EVIDENCE OF PUR CHASE OF SHARES ON 2 ND APRIL, 2012 BY FURNISHING THE REQUISITE DOCUMENTS. THEREFORE, THE ADDITION CANNOT BE MADE U/S 68 ITA NO.5576/DEL/2018 6 OF THE IT ACT. RELYING ON VARIOUS DECISIONS, HE SU BMITTED THAT BANK STATEMENT OR BANK PASSBOOK IS NOT BOOKS OF ACCOUNT AND, THEREFORE, TH E AMOUNTS FOUND CREDITED IN THE BANK ACCOUNT OF THE ASSESSEE CANNOT BE ADDED U/S 68 OF THE IT ACT. IN ANY CASE, SINCE THE SHARES WERE HELD FOR MORE THAN 12 MONTHS AND WE RE SOLD THROUGH REGISTERED STOCK BROKER THROUGH THE DEMAT ACCOUNT AND THE AMOUNT HAS BEEN RECEIVED BY CHEQUE AND STT HAS BEEN PAID, THEREFORE, THERE IS NO QUESTION OF MAKING ANY ADDITION U/S 68 OF THE IT ACT. HE ACCORDINGLY SUBMITTED THAT THE CLAIM OF EXEMPTION U/S 10(38) MADE BY THE ASSESSEE HAS TO BE ACCEPTED AND THE ORDER OF THE CI T(A) HAS TO BE SET ASIDE. HE ALSO RELIED ON THE FOLLOWING DECISIONS:- I) ARUN KUMAR, SMC BENCH, ITA NO.457/DEL/2018, ORD ER DATED 05.11.2018; II) SHOUBIT GOEL HUF, SMC BENCH, ITA NO.2021/DEL/2 018, ORDER DATED 25.09.2018. III) JYOTI GUPTA, SMC BENCH, ITA NO.3510/DEL/2018, ORDER DATED 06.11.2018; IV) AMIT RASTOGI HUF, SMC BENCH, ITA NO.2128/DEL/2 018, ORDER DATED 24.10.2018. V) SHIKHA DHAWAN, SMC BENCH, ITA NO.3035/DEL/2018, ORDER DATED 27.06.2018; VI) VEENA GUPTA, F BENCH, ITA NO.5662/DEL/2018, OR DER DATED 27.11.2018; VII) MUKTA GUPTA, SMC BENCH, ITA NO.2766/DEL/2018, ORDER DATED 26.11.2018; & VIII) INDER SINGH VS. ITO, DELHI BENCH B, ITA NO.1931/D EL/2016, ORDER DATED 05.12.2018. 10. THE LD. DR, ON THE OTHER HAND, HEAVILY RELIED O N THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE ASSESSING OFFICER HAS CLEARLY BR OUGHT ON RECORD THE MODUS OPERANDI ITA NO.5576/DEL/2018 7 ADOPTED BY THE ASSESSEE FOR CONVERTING ITS UNACCOUN TED MONEY AS TAX FREE INCOME. RELYING ON THE DECISION OF THE HON'BLE SUPREME COUR T IN THE CASE OF SUMATI DAYAL REPORTED IN 214 ITR 801 (SC) AND DURGA PRASAD MORE, REPORTED IN 82 ITR 540 (SC), HE SUBMITTED THAT THE ADDITION MADE BY THE ASSESSIN G OFFICER AND SUSTAINED BY THE CIT(A) SHOULD BE UPHELD. 11. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. I HAVE ALSO CONSI DERED THE VARIOUS DECISIONS CITED BEFORE ME. I FIND THE ASSESSEE, IN THE INSTANT CAS E, HAD PURCHASED 12800 SHARES OF M/S PAWANSUT HOLDINGS LTD. OFFLINE FOR RS.44,800/- ON 2 ND APRIL, 2012 THROUGH BROKER M/S ROXTECH SECURITIES LTD. THE ASSESSEE SOLD 12700 SH ARES OF THE ABOVE COMPANY FOR A TOTAL CONSIDERATION OF RS.23,74,138/- ON 10 TH MARCH, 2014 THROUGH STOCK EXCHANGE WITH PAYMENT OF STT AFTER GETTING THE SHARES DEMATE RIALIZED. I FIND THE ASSESSING OFFICER, REJECTING THE CLAIM OF EXEMPTION U/S 10(38 ) OF THE IT ACT, MADE ADDITION OF RS.23,70,761/- U/S 68 OF THE IT ACT WHICH HAS BEEN UPHELD BY THE CIT(A). IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE HAS FURNISHED THE RELEVANT DETAILS FOR PURCHASE OF THE SHARES AND THE SHARES WERE SOLD THROUGH RECOGNIZED STOCK EXCHANGE AND THE PAYMENT HAS BEEN MADE BY CHE QUE AND STT HAS BEEN PAID AND, THEREFORE, ADDITION CANNOT BE MADE U/S 68 OF THE IT ACT ON THE BASIS OF PURE SURMISES AND PRESUMPTIONS. IT IS THE SUBMISSION OF THE LD. D R THAT WHEN THE SHARES ARE PURCHASED FROM OFF MARKET BY PAYMENT OF CASH AND TH E PRICE OF THE SHARE HAS SUDDENLY JUMPED AND THE ASSESSEE IS NOT A REGULAR INVESTOR I N SHARES, THEREFORE, IT IS BEYOND ITA NO.5576/DEL/2018 8 HUMAN PROBABILITIES THAT THE ASSESSEE WILL HAVE SUC H KNOWLEDGE TO INVEST IN SHARES OF A NON-DESCRIPT COMPANY TO HAVE WINDFALL GAIN. 11.1 IT IS AN ADMITTED FACT THAT THE 12700 SHARES O F M/S PAWANSUT HOLDINGS LTD. WERE SOLD ON 10 TH MARCH, 2014 FOR A TOTAL CONSIDERATION OF RS.23,74, 138/-. THE SHARES WERE SOLD THROUGH RECOGNIZED STOCK EXCHANGE AND STT HAS BEEN PAID. THE AMOUNT HAS BEEN RECEIVED BY CHEQUE. IT IS ALSO AN ADMITTED FA CT THAT THE SHARES WERE DEMATERIALIZED PRIOR TO ITS SALE. THUS, THE SALE OF SHARES IS NOT IN DISPUTE AND, THEREFORE, THE AMOUNT CANNOT BE ADDED U/S 68 OF THE IT ACT. H OWEVER, THE QUESTION THAT ARISES IN THE INSTANT CASE IS REGARDING THE DATE OF PURCHASE OF THE SHARES. IT IS THE ALLEGATION OF THE ASSESSING OFFICER THAT THE SHARES WERE PURCHASE D OFF MARKET AND THE PAYMENT HAS BEEN MADE IN CASH. ALTHOUGH THE ASSESSEE HAS FILED A VOLUMINOUS PAPER BOOK, HOWEVER, THE BALANCE SHEET OR STATEMENT OF AFFAIRS FOR THE YEAR ENDING 31 ST MARCH, 2013 HAS NOT BEEN FILED. THEREFORE, IT IS NOT DISCERNIBL E FROM THE RECORDS AS TO WHETHER THE ASSESSEE HAS SHOWN SUCH PURCHASE OF SHARES IN THE B ALANCE SHEET OR STATEMENT OF AFFAIRS AS ON 31.03.2012. IF THE ASSESSEE HAS SHOWN THE SH ARES IN THE BALANCE SHEET OR STATEMENT OF AFFAIRS AS ON 31 ST MARCH, 2013, THEN, IT CAN BE SAFELY PRESUMED THAT THE SHARES WERE PURCHASED IN FINANCIAL YEAR 2012-13. S INCE THE SHARES WERE SOLD ON 10 TH MARCH, 2014, THEREFORE, THE SHARES CAN BE HELD TO B E FOR A PERIOD OF MORE THAN 12 MONTHS AND ACCORDINGLY EXEMPTION U/S 10(38) OF THE IT ACT CAN BE ALLOWED TO THE ASSESSEE. SINCE THE BALANCE SHEET OR STATEMENT OF A FFAIRS FOR THE YEAR ENDING 31 ST MARCH, 2013 IS NOT AVAILABLE IN THE PAPER BOOK, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS ITA NO.5576/DEL/2018 9 OF THE CASE AND IN THE INTEREST OF JUSTICE, I DEEM IT PROPER TO RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR THE LIMITED PURPO SE OF VERIFYING THE BALANCE SHEET OR STATEMENT OF AFFAIRS OF THE ASSESSEE AS ON 31 ST MARCH, 2013 TO FIND OUT IF THE SHARES ARE APPEARING IN THE BALANCE SHEET OR STATEMENT OF AFFA IRS OF THE ASSESSEE AS ON 31 ST MARCH, 2013 TO ALLOW THE CLAIM OF THE LONG-TERM CAPITAL GA IN U/S 10(38) OF THE IT ACT. IN ABSENCE OF THE SAME HE CAN ALSO ASK THE ASSESSEE TO PROVE TO HIS SATISFACTION BY ANY OTHER EVIDENCE THAT THE SHARES WERE IN FACT PURCHAS ED DURING F.Y. 2012-13. THE ASSESSING OFFICER SHALL DECIDE THE ISSUE AS PER FAC T AND LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. I HOLD AND DIRECT ACCORDINGLY. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 12. IN THE RESULT, THE APPEAL FILED BY THE AS SESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 1 1.01.2019. (R.K. PANDA) ACCOUNTANT MEMFBER DATED: 11 TH JANUARY, 2019 DK COPY FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR, ITAT, NEW DELHI.