TEJAS NAGINDAS AMBAVI, MUMBAI V. ASST CIT CR 21(2), MUMBAI

ITA 6410/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1259 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 17-10-2014
• Court: TRIBUNAL
• Department Lawyers: VISHWAS MUNDHE
• Assessee Lawyers: VISHWAS MEHANDALE

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO. 6410/M/2014 ( 2010 - 2011 ) TEJAS NAGINDAS AMBAVI, 401, KELAWALA TOWER, 28, SWASTIK SOCIETY, N.S. ROAD NO.2, JUHU SCHEME, MUMBAI - 56. / VS. ACIT, CIRCLE - 21(2), MUMBAI. ./ PAN : ADZPA0369G ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI VISHWAS MEHANDALE / RESPONDENT BY : SHRI VISHWAS MUNDHE, DR / DATE OF HEARING : 20 .04.2017 / DATE OF PRONOUNCEMENT : 21 .04.2017 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 17.10.2014 IS AGAINST THE ORDER OF THE CIT (A) - 32, MUMBAI DATED 14.08.2014 FOR THE ASSESSMENT YEAR 2010 - 2011. 2. IN THIS APPEAL, ASSESSEE RAISED FOUR GROUNDS IN TOTO. GROUND NO.1 RELATES TO THE GRANTING OF ADEQUATE O PPORTUNITY TO THE ASSESSEE AND THE SAME IS NOT PRESSED. AFTER HEARING THE LD DR, THE SAID GROUND NO.1 IS DISMISSED AS NOT PRESSED. 3. REFERRING TO GROUNDS NO.2 AND 3, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE EARNED LONG TERM CAPITAL GAINS AMOUNTING TO RS. 7,31,572/ - ON SALE OF SHARES. ASSESSEE CLAIMED EXEMPTION IN RESPECT OF THE SAME U/S 10(3 8) OF THE ACT. HOWEVER, AO TREATED ENTIRE AMOUNT AS BOGUS CAPITAL GAINS. NO ADDITION WAS MADE IN RESPECT OF ORIGINAL INVESTMENT OF THE SAID SHARES. IN THE PROCESS, AO IGNORED THE DOCUMENTS SUCH AS CONTRACT NOTES, CORRESPONDENCE OF THE BROKER, CONFIRMATIONS BY THE BROKER, PAYMENT TRANSACTIONS ETC. MATTER TRAVELLED TO THE FAA. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT (A) CONFIRMED THE SAID DECISION OF THE AO. CIT (A) ACTUALLY ENHANCED THE ASSESSMENT TO THE TUNE OF RS. 20,683/ - , THE ORIGINAL 2 INVESTMENT IN ACQUIRING 2500 SHARES OF WELL PACK COMPANY. AGGRIEVED, ASSESSEE RAISED THE INSTANT GROUNDS BEFORE THE TRIBUNAL. 4. BEFORE US, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER FAILED TO EVIDENCE HOW THE CONTRACT NOTES DATED 18.11.2008 IS BOGUS (PAGE 16 OF THE PAPER BOOK). BRINGING OUR ATTENTION TO THE SAID DOCUMENTS, LD COUNSEL FOR THE ASSESSEE SUBMI TTED THAT THE ASS ESSEE PURCHASED 2500 SHARES OF WELL PACK COMPANY AT THE GROSS RATE OF RS. 8.15 PER SHARE TOTALLING TO GROSS INVESTMENT OF RS. 20,683/ - . THE FACT OF PAYMENT STAMP CHARGES, TRANSACTIONS CHARGES AND SECURITY TRANSACTION TAX (STT) ETC WAS ALSO MENTIONED. FURT HER, BRINGING OUR ATTENTION TO PAGE 17 OF THE PAPER BOOK IT WAS ARGUED THAT THE BROKER CONFIRMED THE RECEIPT OF THE RELEVANT CASH VIDE SETTLEMENT POSTING DATED 18.11.2008. REFERRING TO PAGE 18 OF THE PAPER BOOK, LD COUNSEL FOR THE ASSESSEE DEMONSTRATED TH AT THE SAME CONSTITUTES A HOLDING CERTIFICATE WITH A PROMISE TO TRANSFER THE SAID SHARES TO THE DMAT ACCOUNT OF THE ASSESSEE. OTHERWISE, THE BROKER IS HOLDING THE SAID ASSESSEES SHARES IN HIS POOL ACCOUNTS. PAGE 19 REFERS TO CREDITING THE SAID SHARES TO THE DMAT ACCOUNT OF THE ASSESSEE. REFERRING TO THE SAID DOCUMENTS, LD COUNSEL FOR THE ASSESSEE DEMONSTRATED THAT THE TRANSACTIONS ARE GENUINE, INVESTMENT IS GENUINE AND THE AO HAS NOT DISCHARGED HIS ONUS IN DISBELIEVING THE SAID TRANSACTIONS WITHOUT BR INGING ANY INCRIMINATING MATERIAL AGAINST THE ASSESSEE. HE MERELY CARRIED AWAY BY THE CASH PURCHASE TRANSACTION WITH A BIASED MIND / SUSPICION. 5. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELE VANT MATERIAL PLACED BEFORE THE TRIBUNAL, WE FIND MERIT IN THE ARGUMENT OF THE ASSESSEE. ON PERUSAL OF THE DOCUMENTS FURNISHED BEFORE US (SUPRA), WE FIND THAT THE DOCUMENTATION IS FULL PROOF. THERE IS NO REASON FOR THE AO TO SUSPECT ANY PART OF THE TRANS ACTION. AO DOES NOT HAVE ANY INCRIMINATING EVIDENCE EITHER DIRECT OR INDIRECT THAT THROWS LIGHT ON THE GENUINENESS OF THE PURCHASE TRANSACTION. CBDT CIRCULAR 6/16 ALSO DOES NOT PERMIT THE AO TO TREAT THE TRANSACTION AS NON - GENUINE WHEN THE DOCUMENTATION I S FULLY MAINTAINED BY THE ASSESSEE. THEREFORE, I N OUR CONSIDERED VIEW, THE ORDERS OF THE CIT (A) AND THE AO ON THIS ISSUE ARE REQUIRED TO BE REVERSED. WE ORDER ACCORDINGLY. THUS, GROUND NO.2 IS ALLOWED. 3 6. REFERRING TO GROUND NO.3, LD COUNSEL FOR THE AS SESSEE MENTIONED THAT CIT (A) DIRECTED THE ENHANCEMENT OF THE ASSESSMENT WITH REGARD TO INVESTMENT OF RS. 20,683/ - AND WITHOUT ISSUING SHOW CAUSE NOTICE FOR SUCH ENHANCEMENT. RELYING ON VARIOUS DECISIONS, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT SUCH DI RECTIONS OF THE CIT (A) FOR ENHANCEMENT OF THE ASSESSMENT ARE ILLEGAL. ON HEARING BOTH THE PARTIES ON THIS ISSUE, IT IS NOTICED THAT CIT (A) FAILED TO ISSUE SHOW CAUSE NOTICE BEFORE MAKING ENHANCEMENT AND THEREFORE, WE APPROVE THE LD ARS ARGUMENT. WE OR DER ACCORDINGLY. THUS, GROUND NO. 2 AND 3 ARE ALLOWED. 7. REFERRING TO GROUND NO.4, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE SAID GROUND WAS RAISED IN CONNECTION WITH THE REJECTION OF THE ASSESSEES CLAIM OF DEDUCTION OF INTEREST OF RS. 6,06,165/ - AGAINST THE INCOME FROM CAPITAL GAINS. IN THIS REGARD, REFERRING TO PARA 7 OF THE ASSESSMENT ORDER, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE FILED A REVISED COMPUTATION OF INCOME DURING THE ASSESSMENT PROCEEDINGS CLAIMING INTEREST EXPENDITURE AGAINST THE CAPITAL GAINS EARNED ON SALE OF FLAT. ACTUALLY, ASSESSEE WITHDREW THE SAID CLAIM MADE ORIGINALLY AGAINST THE HEAD OF BUSINESS IN COME. IT IS FURTHER MENTIONED THAT THE RELEVANT FUNDS WERE UTILISED FOR BUYING AA N GAN FLAT. ASSESSEE CLAIMS THE INTEREST EXPENDITURE TO THE EXTENT OF RS. 6,06,165/ - AS ALLOWABLE AGAINST THE CAPITAL GAINS EARNED ON THE SALE OF THE SAID FLAT. IN OTHER WOR DS, IT IS THE CLAIM OF THE ASSESSEE THAT THE SAID EXPENDITURE IS INCURRED IN WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER OF THE SAID FLAT. PROBABLY, ASSESSEE RELIED ON THE PROVISIONS OF SECTION 48(II) OF THE ACT . AO DID NOT ALLOW THE SAME ON F INDING NO NEXUS WITH THE SAID SALE TRANSACTIONS. ON APPEAL, CIT (A) CONFIRMED THE SAME. 8. ON HEARING BOTH THE PARTIES ON THIS ISSUE, WE FIND, THE ASSESSEES EXPLANATION IE BORROWAL OF RS. 50 LAKHS IN THE YEAR UNDER CONSIDERATION AND RS. 20 LAKHS BORROWED IN THE PRECEDING YEAR WAS UTILISED FOR THE PURCHASE OF FLAT (AA N GAN FLAT) WAS NOT APPROVED BY THE CIT (A). ASSESSEE ALSO FURNISHED LETTER TO THE CIT (A) CONFIRMING THAT THE BARROWED FUNDS WERE UTILISED FOR PURCHASE OF FLAT AND THE SAME WAS ALSO REJECTED. AO / CIT (A) FURTHER REJECTED THE ORDER OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF S. BALAN ALIAS SHANMUGAM VS. DCIT (2009) (120 ITD 469) (PUNE) AND DELHI HIGH COURT JUDGMENT IN THE CASE OF PRA TIBHA PALIWAL VS. ACIT (19 TAXMAN.COM 355). IN OUR VIE W, T HESE DECISIONS ARE RELEVANT FOR THE PROPOSITION THAT 4 INTEREST BURDEN OF THE BORROWED FUND STANDS CAPITALIZED AND THEREFORE, IT SERVE THE PART OF THE INVESTMENT. THE WRITTEN SUBMISSION OF THE LD AR (PARA 3) ARE RELEVANT AND ARE APPLICABLE TO THE FACTS OF THIS CASE. T HE ASSESSEE CLAIMS THE APPROPRIATION OF THE BORROWED CAPI TAL FOR THE PURCHASE OF FLAT AND T HEREFORE, CLAIM OF TH E INTEREST EXPENDITURE IS RELATABLE TO THE SAID FLAT ONLY . AO HAS NO EVIDENCE TO SHOW THAT THE INTEREST BEARING BORROWED FUND WAS NOT APPLIED FOR ACQUIRING THE SAID FLAT, WHICH YIELDED CAPITAL GAINS EVENTUALLY. FROM THE FACTS AVAILABLE BEFORE US, THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL AND THE JUDGMENT OF THE HONBLE DELHI HIGH COURT (SUPRA) HELPS THE ASSESSEE. THEREFORE , WE ARE OF THE VIEW THAT THE AO SHOULD BE DIRECTED TO GRANT DEDUCTION OF INTEREST FROM THE CAPITAL GAINS COMPLYING WITH THE SAID ORDERS OF THE TRIBUNAL AND THE JUDGMENT OF THE DELHI HIGH COURT (SUPRA). WE ORDER ACCORDINGLY. THUS, THIS GROUND IS ALLOWED. 9. IN THE RESULT, A PPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNC ED IN THE OPEN COURT ON 21 ST APRIL, 2017. SD/ - SD/ - ( RAM LAL NEGI) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 21.04.2017 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI 5