DCIT CEN CIR 44, MUMBAI V. DEVEN J MEHTA, MUMBAI

ITA 6058/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2549 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 29-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K SRIVASTAVA
• Keywords: Income from undisclosed sources; Loose papers; Document seized; Source of fund; Documents seized
• Section: 143(3); 68

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH , JM AND SHRI RAJESH KUMAR, AM ./ I .T.A. NO. 6058 /MUM/201 4 ( / ASSESSMENT YEAR S : 200 8 - 09 ) DY. COMMISSIONER OF INCOME TAX, CENTRAL CIR - 44, ROOM NO.656, 6 TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400 0 20 / VS. SHRI DEVEN J MEHTA, 1401, RAHEJA CENTRE, FREE PRESS MAR G , NARIMAN POINT, MUMBAI - 400021 ./ PAN : AAPPM2 122C / APPELLANT BY SHRI A K SRIVASTAVA / RE SPONDENT BY SHRI VIJAY MEHTA / DATE OF HEARING : 7 .9.2016 / DATE OF PRONOUNCEMENT : 27 . 10 .2016 / O R D E R PER RAJESH KUMAR , A M T HIS IS AN APPEAL FILED BY THE REVENUE CHALLENGING THE ORDER DATED 9.6. 201 4 PASSED BY THE LD.CIT(A) - 37 , MUMBAI DELETING THE ADDITION ON ACCOUNT OF UNEXPLAINED RECEIPT OF SALE OF SHARES OF ARSS INFRASTRUCTURES PROJEC T LTD AMOUNTING TO RS.1,20,00,000/ - FOR THE ASSESSMENT YEAR 2008 - 09. 2. THE FACTS OF THE CASE ARE THAT A SEARCH WAS CONDUCTED ON 6.10.2010 IN THE CASE OF M/S ARSS INFRASTRUCTURES PROJECT LTD AND GROUP CONCERNS. DURING THE 2 ITA NO. 6058 / MUM/ 201 4 COURSE OF SEARCH ACTION, AT THE PREMISES OF SHRI JITENDRA MEHTA, FATHER OF THE ASSESSEE, CERTAIN INCRIMINATING MATERIAL S IN THE FORM OF VARIOUS LOOSE PAPERS WERE FOUND AND SEIZED, WHICH PERTAIN ED TO THE ASSESSEE . 3. GROUND NO.1 AND 2 ARE AGAINST THE DELETION OF ADDITION ON ACCOUNT O F RECEIPT OF SALE OF SHARES OF M/S ARSS INFRASTRUCTURES PROJECT LTD AMOUNTING TO RS.1,20,00,000/ - BY THE LD. CIT(A) IGNORING THE FACTS THAT AO HAD RELIED UPON THE DOCUMENTARY EVIDENCES WHICH WERE FOUND DURING THE COURSE OF SEARCH ACTION. GROUNDS OF APP EAL NO.3 AND 4 ARE GENERAL IN NATURE, THEREFORE, NEED NO ADJUDICATION, HENCE DISMISSED. 4. AT THE OUTSET, THE LD.AR SUBMITTED BEFORE US THAT AN IDENTICAL ISSUE HAS BEEN DECIDED BY THE CO - ORDINATE BENCH OF MUMBAI TRIBUNAL IN DCIT V/S M/S JYOTI BRIGHT B AR PVT LTD IN ITA NO.2832 AND 2833/MUM//2014 (AYS - 2009 - 10 AND 2010 - 11) DATED 8.6.2016 AND THE FACTS OF THE SAID CASE WERE IDENTICAL TO THAT OF THE ASSESSEES APPEAL AND HENCE THE ISSUE RAISED IN THIS APPEAL WAS SQUARELY COVERED BY THE ABOVE SAID DECIS ION OF THE TRIBUNAL. HE, THEREFORE, PRAYED THAT FOLLOWING THE SAME ANALOGY, THE APPEAL FILED BY THE DEPARTMENT BE DISMISSED. 5 . ON THE OTHER HAND, THE LD. DR VEHEMENTLY SUBMITTED THAT THE CASE OF THE ASSESSEE HAS WRONGLY BEEN ALLOWED BY THE LD.CIT(A) D ESPITE THE FACT THAT THE ADDITION WAS MADE BY THE AO ON THE BASIS OF INCRIMINATING DOCUMENTARY EVIDENCE FOUND DURING THE SOURCE OF SEARCH. 3 ITA NO. 6058 / MUM/ 201 4 6 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND PERUS ED THE RELEVANT MATERIAL AVAILABLE PLACED BEFORE US INCLUDING THE IMPUGNED ORDERS OF AUTHORITIES BELOW AND CASE LAW RELIED UPON BY THE ASSESSEE. A SEARCH WAS CONDUCTED ON 6.10.2010 IN THE CASE OF M/S ARSS INFRASTRUCTURES PROJECT LTD AND GROUP CONCERNS. DURING THE COURSE OF SEARCH ACTION, AT THE PREMISES OF SHRI JITENDRA MEHTA, FATHER OF THE ASSESSEE, CERTAIN INCRIMINATING MATERIAL IN THE FORM OF VARIOUS LOOSE PAPERS WERE FOUND AND SEIZED, WHICH PERTAIN ED TO THE ASSESSEE AND ACCORDINGLY, THE NOTICE WAS ISSUED TO THE ASSESSEE U/S 153C OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT MR.SURESH GAGGAR , THE RELATED ENTITIES , MR.JITENDRA MEHTA AND THE ASSESSEE SHRI DEVEN MEHTA WERE ENGAGED IN THE BUSINESS OF BUYING, TRANSFERRING AND MANIPULATING THE SHARES OF M/S ARSS INFRAST RUCTURES PROJECT LTD BEFORE ITS LISTING ON 3.3.2010. THE AO OBSERVED THAT THE ASSESSEE SOLD 60000 SHARES TO SHRI SURESH GAGGAR @ RS.13.33 PS PER SHARE AND THUS THE AO NOTED THAT THE ASSESSEE WAS INVOLVED IN MANAGING THE IPO TO WHICH PRIVATE LIMITED COMPANIES AND MR . SURESH GAGGAR WERE PRIVY TO SUCH OPERATION S . ACCORDING TO THE AO, TWO GROUPS WERE INDULGED IN MANIPULATION IN THE SHARE TRANSACTIONS OF M/S ARSS INFRASTRUCTURES PROJECT LTD BEFORE IPO AND PURCHASE AND SALES WERE MADE AT DIFFERE NT RATES THEREBY EARNING PROFIT OUTSIDE THE BOOKS OF ACCOUNTS. FINALLY, THE AO CAME TO THE CONCLUSION THAT THE ASSESSEE SOLD 60000 SHARES OF M/S ARSS INFRASTRUCTURES PROJECT LTD TO MR.SURESH GAGGAR AT HIGHER PRICE THAN 4 ITA NO. 6058 / MUM/ 201 4 THE PRICE OF RS.13.33 PER SH ARE AS DISCLOSED BY THE ASSESSEE AND ACCORDINGLY, CONSIDERING THE SALE PRICE OF THESE SHARES AT RS.200 PER SHARE ON THE BASIS OF SALE INSTANCES ON THE SAME DATE HELD THE ASSESSEE HAS CONCEALED INCOME TO THE TUNE OF RS.1,20,00,000/ - AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCES OF INCOME B ESIDES MAKING THE OTHER ADDITIONS BY PASSING ORDER U/S 143(3) DATED 30.3.2011 DETERMIN ING THE TOTAL INCOME AT RS.4,88,38,370/ - . AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE CARRIED TH E MATTER BEFORE THE LD.CIT(A), WHO DECIDED THE ISSUE IN FAVOR OF THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER : DECISION 14.0 THE FACTS OF THE CASE, THE STAND TAKEN BY THE A.O IN THE ASSESSMENT ORDER THE SUBMISSIONS OF THE APPELLANT DURING THE APPEA L PROCEEDINGS HAVE BEEN CARE' CONSIDERED. 14.1 AS IT CAN BE SEEN THAT THE A.O HAD ADOPTED THE SALE CONSIDERATION @ R S.200/ - PER SHARE AT MARKET VALUE ON THE BASIS OF CERTAIN INSTANCES OF SHARE TRANSACTION CITED BY HIM AS AGAINST THE ACTUAL CONSIDERATION RECEIVED OF RS.13.33 PER SHARE ADOPTED BY APPELLANT FOR THE A.Y.2008 - 09. FROM THE SUBMISSIONS OF THE APPELLANT, IT CAN BE SEEN THAT THE DECISIONS CITED BY THE A.O ARE NOT APPLICABLE TO THE FACTS OF THE CASE. ON THE CON TRARY, THE DECISIONS CITED BY THE APP ELLANT IN THE FOLLOWING CASES ARE DIRECTLY RELEV ANT AND APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE: (1) K.P. VARGHESE VS. IT O (1981) 131 ITR 597 (SC) (II) CIT VS. GODAVARI CORPORATION LTD. (1993) 200 ITR 567 (SC) (III) CIT VS. SH IVAKAMI CO. PVT. LTD. (1986) 159 ITR 71 (SC) (IV)CIT V/S SMT.NANDINI NOPANY (1998) 230 IRE 679 (CAL) 5 ITA NO. 6058 / MUM/ 201 4 14.2 IN VIEW OF THE DECISIONS CITED ABOVE, IT IS ESTABLISHED THAT EVEN IF THERE WERE SOME OTHER INSTANCES OF SALE OF SHARES AT A HIGHER PRICE THAT CANNOT LEAD TO A CONCLUSION THAT THE APPELLANT HAD ALSO SOLD ITS SHARES AT HIGHER PRICE UNTIL OTHERWISE THE A.O IS ABLE T O PROVE THAT THE CONSIDERATION RECEIVED BY THE APPELLANT IS MORE THAN WHAT IS SHOWN IN THE RETURN OF INCOME. SINCE THE A.O FAILED TO ESTABLISH THAT THE APPELLANT HAD RECEIVED THE SALE CONSIDERATION MORE THAN WHAT IS SHOWN, THE ADDITION OF RS.1,20,00,000 / - 7 . W E FIND THAT AN IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S JYOTI BRIGHT BAR PVT LTD(SUPRA). THE OPERATIVE PART OF THE SAID DECISION IS REPRODUCED BELOW : 18. WE HAD ALSO CAREFULLY GONE THROUGH THE SEIZED DOCUMENTS TO WHICH OUR ATTENTION WAS INVITED BY LD. DR AND FOUND THAT SEIZED PAPERS ARE DRAFT MOU AND AGR EEMENT IN THE NAME OF DEVAN MEHTA, WHICH SHOWS THAT HE WAS INDULGED IN THE BUSINESS OF PROVIDING SERVICES FOR LISTING OF SHARES ON VARIOUS STOCK EXCHANGES, WHICH IS NOT AN ILLEGAL, NO COGENT MATERIAL WAS THERE TO INDICATE THAT DEVAN MEHTA WAS ENGAGED IN MA NIPULATING IPOS. WE ALSO FOUND THAT DURING THE COURSE OF SEARCH STATEMENT OF MR. DEVAN MEHTA WAS RECORDED, WHEREIN HE HAS CLEARLY STATED THAT ASSESSEES BUSINESS WAS INVESTMENT. SHARES WERE ALSO REFLECTED IN THE BALANCE SHEET AS INVESTMENT. THERE IS NO QUE STION IN NOT TREATING THE INCOME FROM SALE OF SHARES AS CAPITAL GAIN. EVEN IN THE ASSESSMENT ORDER EXCEPT IN THE COMPUTATION PART THE AO HAS MENTIONED THE ADDITION AS MADE U/S.68. THE AO HAS REFERRED TO PARA 5 OF HIS ORDER WHICH PARA ALSO DESCRIBES ACTIVIT Y IN WHICH ASSESSEE IS ENGAGED I.E. INVESTMENT IN SHARES. PROVISION OF SECTION 68 CANNOT BE INVOLVED BECAUSE REQUIREMENT OF SECTION IS NATURE AND SOURCE, BOTH SHOULD BE UNEXPLAINED. IN THE INSTANT CASE BOTH THE NATURE AND SOURCE OF MONEY HAS BEEN EXPLAINE D AND ONLY ADDITION HAS BEEN MADE BY SUBSTITUTING THE ACTUAL SALE PRICE. ACCORDINGLY, ADDITION HAS BEEN WRONGLY MADE BY AO U/S.68. 8 . IN VIEW OF THE ABOVE DISCUSSION AND ON PERUSAL OF THE TRIBUNAL ORDER CITED SUPRA, WE FIND THAT THE CASE OF THE ASSESSEE SQUARELY COVERED IN FAVOUR OF THE 6 ITA NO. 6058 / MUM/ 201 4 ASSESSEE. THEREFORE, RESPECTFULLY FOLLOWING THE RATIO LAID DOWN IN THE ABOVE CASE LAW, WE DISMISS THE APPEAL OF THE REVENUE. 9 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE O PEN COURT ON 27 . 10 .2016 . SD SD ( MAHAVIR SINGH ) ( RAJESH KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 27 . 10. 2016 SR.PS:SRL: / COPY OF THE ORD ER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, TRUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI