VANDANA K METHA, MUMBAI V. ITO 25(3)(3), MUMBAI

ITA 6484/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70964 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 17-07-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 23-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V V SHASTRI
• Assessee Lawyers: VIPUL SHAH
• Keywords: Income from undisclosed sources

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 6484/MUM/2011 ASSESSMENT YEAR: 2006-07 VANDANA K MEHTA S-1, 303, UDYOG NAGAR, KAMLA VIHAR, MAHAVIR NAGAR KANDIVALI (W), MUMBAI 400 067 PAN: AADPM 2504 J VS. ITO 25(3)(3) MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIPUL SHAH RESPONDENT BY : SHRI V.V. SHASTRI DATE OF HEARING : 18.07.2013 DATE OF PRONOUNCEMENT : 28.08.2013 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE COMMON ORDER OF THE LD.CIT (A)-35, MUMBAI DATED 11.07.2011 FOR THE ASSE SSMENT YEAR 2006-07. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS: 1) IN THE FACT AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [HERE IN AFTER REFERRED TO AS CIT(A) ] ERRED IN TREATING A LONG TERM CAPITAL GAIN TRANSACTION AS INCOME FROM OTHER SOU RCES AND THEREBY MAKING IT AMENABLE TO TAX RATE OF 30%. 2) IN THE FACT AND CIRCUMSTANCES OF THE CASE, THE L EARNED CIT(A) ERRED IN TREATING LONG TERM CAPITAL GAIN FROM SALE OF SHARES AS INCO ME FROM OTHER SOURCES AFTER RECOGNIZING AND ACCEPTING THE FACT THAT THE SALE OF IMPUGNED SHARES WERE FROM DEMAT ACCOUNT OF THE APPELLANT. 3) IN THE FACT AND CIRCUMSTANCES OF THE CASE, THE L EARNED CIT(A) ERRED IN CONCLUDING THAT THE IMPUGNED SHARES WERE PURCHASED ON THE SAME DAY WHEN THEY WERE DEMATED AT THE MARKET PRICE WITHOUT THERE BEING ANY EVIDENCE TO THAT EXTENT OR WITHOUT THERE BEING ANY OBSERVATION TO THAT EXTENT BY THE LEARNED A.O. 4) IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN CONCLUDING THAT THE APPELLANT COULD NOT ESTABLISH P OSSESSION OF SHARES, WITHOUT CONSIDERING THE DELIVERY NOTE ISSUED BY THE BROKER TO THE APPELLANT WHICH WAS DULY FILED. ITA NO. 6484/MUM/2011 VANDANA K MEHTA ASSESSMENT YEAR: 2006-07 2 3. BRIEFLY STATED, THE ASSESSEE, A PARTNER IN A PAR TNERSHIP FIRM M/S. D.K. ENTERPRISES FROM WHICH HE DERIVES INCOME BY WAY OF SHARE PROFIT , REMUNERATION AND INTEREST ON CAPITAL WHILE DECLARING A TOTAL INCOME AT RS.1,85,275/- HAD SHOWN A LONG TERM CAPITAL GAINS OF RS.6,23,418/- ON ACCOUNT OF SALE OF SHARES OF MINOL TA FINANCE THEREBY CLAIMED THE SAME AS EXEMPT U/S 10(38) OF THE INCOME TAX ACT. THE DET AILS OF THE PURCHASE AND SALE TRANSACTIONS IN THE SAID SHARES ARE AS FOLLOWS: DATE OF PURCHASE QUANTITY COST NAME OF BROKER (WHERE BASED) DATE OF SALE QUANTITY SALE PRICE RECD. (NET) 01.06.2004 2300 18,791 RAJENDRA PRASAD SHAH - RAJENDRA PRASAD SHAH 16.08.2005 2300 6,42,873/- TOTAL 2300 18,791 2300 6,42,873/- 4. IN THE ASSESSMENT FRAMED U/S 143(3), THE AO TREA TED THE IMPUGNED AMOUNT AS UNDISCLOSED INCOME AND THEREBY ADDED THE SAME TO TH E TOTAL INCOME OF THE ASSESSEE. ACCORDING TO THE AO, (I) THE PURCHASE OF SHARES WAS AN OFF MARKET TRANSACTION, (II) IT WAS NOT IN CONFIRMITY WITH THE SEBI GUIDELINES, (III) P AYMENT FOR PURCHASES WAS MADE IN CASH, (IV) THE ASSESSEE WAS NOT A REGULAR INVESTOR IN SHA RES AND (V) THE DEALS WERE IDENTIFIED AS PENNY SHARES BY THE INVESTIGATION WING OF THE DEPAR TMENT, AMONG OTHER THINGS. 5. ON APPEAL, THE LD.CIT(A) HAD DIRECTED TO ASSESS RS.5,29,000/- UNDER THE HEAD INCOME FORM OTHER SOURCES AS THE MARKET PRICE OF THE SHARE ON THE DATE OF PURCHASE WAS RS. 230 PER SHARE (2300X230= 5,29,000/-) AND THE BA LANCE OF RS.1,13,873/- IN THE SALE VALUE (6,42,873-5,29,000/-) AS SHORT TERM CAPITAL G AINS. ACCORDING TO THE LD.CIT(A), THE GENUINENESS OF PURCHASE TRANSACTION IS NOT PROVED B EYOND DOUBT BY THE ASSESSEE AND IT IS ABNORMAL THAT THE ASSESSEE PURCHASED 2300 SHARES OF M/S MINOLTA FINANCE LTD WITHOUT BUYING ANY OTHER SHARES AND THE SAME IS INCREASED 3 4 TIMES. 6. HAVING HEARD BOTH THE SIDES AND PERUSED THE MATE RIAL ON RECORD, IT IS PERTINENT TO MENTION THAT THE ASSESSEE HAS PURCHASED THE SHARES WHICH ARE LISTED ON A CALCUTTA STOCK EXCHANGE AND THE SCRIPT HAS BEEN ALLOWED TO BE LIST ED BY THE CALCUTTA STOCK EXCHANGE. THE AO HAS TREATED THE PURCHASE OF SHARES AS NON-GE NUINE SINCE THE SHARES HAVE BEEN PURCHASED IN OFF MARKET TRANSACTION FROM THE BROKER BY PAYING CASH AND SINCE THERE IS NO STAMP OF DATE, TRADE NO. ETC. ON THE CONTRACT NOTE. HOWEVER THE AO HAS NOT DOUBTED THE GENUINENESS OF SALE OF SHARES BUT TREATED THE ENTIR E SALE PROCEEDS AS INCOME FROM OTHER ITA NO. 6484/MUM/2011 VANDANA K MEHTA ASSESSMENT YEAR: 2006-07 3 SOURCES BEING INCOME FROM UNDISCLOSED SOURCES. THE LD.CIT(A) RATIFIED THE ACTION OF THE AO BUT TREATED PART OF THE INCOME AS INCOME FROM OT HER SOURCES AND PART AS SHORT TERM CAPITAL GAINS. IT IS RELEVANT TO POINT OUT THAT ONE CANNOT SELL SHARES WITHOUT PURCHASING IT. IT IS AN ADMITTED FACT THAT THE PAYMENT FOR THE PUR CHASES OF THE SHARES HAS BEEN MADE IN CASH, WHICH IS NOT THE NORMAL SHARE TRADING PRACTIC E. ALSO, IT APPEARS THAT NO AUTHENTICATED DOCUMENTS HAVE BEEN BROUGHT ON RECORD BEFORE THE LOWER AUTHORITIES TO ESTABLISH THE DATE OF PURCHASE OF THESE SHARES. IT IS ALSO RELEVANT TO POINT OUT THAT THE LD.CIT(A) IN PARA 3.3 ON PAGE 4 OF HIS ORDER HAS ST ATED IF THE APPELLANT HAD NOT PURCHASED SHARES FROM SHRI RAJENDRA PRASAD SHAH ON 1.06.2004, IN ANY CASE THE SAME SHOULD HAVE BEEN PURCHASED ON 28.06.2005 FROM SOME OTHER PERSON BY PAYING MARKET PRICE OF RS.230/- PER SHARE. TAKING IN TO ACCOUNT OF THE FACTS AND CIRCUMSTANCES IN TOTO, WE ARE OF THE CONSIDERED OPINION THAT THE LD.CIT(A) IS NOT JUSTIFIED IN TREATING PART OF THE INCOME AS INCOME FROM OTHER SOURCES AND PART AS SHO RT TERM CAPITAL GAINS RATHER THE ENTIRE INCOME ON SALE OF THE SHARES OUGHT TO HAVE B EEN TREATED AS SHORT TERM CAPITAL GAIN AS THE DATE OF PURCHASE OF THE SHARES IS NOT DULY P ROVED SO AS TO ESTABLISH THE HOLDING PERIOD, AMONG OTHER THINGS. WE DIRECT AND ORDER ACC ORDINGLY. SINCE ALL THE GROUNDS OF APPEAL ARE RELATED TO THE SAME ISSUE, WE DO NOT FEE L THAT IT IS REQUIRED TO ADJUDICATE EACH GROUND SEPARATELY. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF AUGUST, 2013. SD/- SD/- (B. RAMAKOTAIAH) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 28.08.2013. *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR F BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.