NIKUNJK J SHAH, MUMBAI V. ITO 10(3)(2), MUMBAI

ITA 6545/MUM/2011

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0808 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-05-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 28-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR YOGESH KAMAT
• Assessee Lawyers: DR K SHIVRAM MS NEELM C JADHAV
• Keywords: Income from undisclosed sources; Retraction
• Section: 143(3); 54

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B MUMBAI . . , , BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER . / ITA NO.6545/MUM/2011 / ASSESSMENT YEAR 2005-06 NIKUNJ J. SHAH, 1683/16-A, KINJALK APARTMENT, DR. AMBEDKAR ROAD, MULUND (W), MUMBAI 80 / VS. THE ITO 10(3) (2), ROOM NO.259, 4 TH FLOOR, AAYKAR BHAVAN, MUMBAI 400 020 ./ ./ PAN/GIR NO. : AAVPS 0118E ( / APPELLANT ) .. ( / RESPONDENT ) APPELLANT BY DR. K.SHIVRAM / MS.NEELM C. JADHAV RESPONDENT BY DR. YOGESH KAMAT ' #$ / DATE OF HEARING : 2/06/2015 ' #$ / DATE OF PRONOUNCEMENT : 31/07/2015 / O R D E R PER G.S.PANNU, A.M: THE PRESENT APPEAL IS PREFERRED BY THE ASSESSEE AND IS DIRECTED AGAINST THE IMPUGNED APPELLATE ORDER DATED 16/08/2011 PAS SED BY LD. CIT(A)-22, MUMBAI PERTAINING TO THE ASSESSMENT YEAR 2005-06, W ITH REFERENCE TO THE ASSESSMENT ORDER DATED 28/12/2007 PASSED IN TERMS O F SECTION 143(3) OF THE INCOME TAX ACT, 1961(THE ACT). 2. IN THIS APPEAL ALTHOUGH ASSESSEE HAS RAISED MUL TIPLE GROUNDS OF APPEAL BUT THE SOLITARY GRIEVANCE IS WITH RESPECT TO THE ACTION OF THE INCOME TAX AUTHORITIES IN TREATING THE INCOME DECLARED BY THE ASSESSEE ON SALE AND . / ITA NO.6545/MUM/2011 / ASSESSMENT YEAR 2005-06 2 PURCHASE OF SHARES OF ROBINSON WORLDWIDE TRADE LTD. [FORMERLY KNOWN AS ROBINSON IMPEX (INDIA) LTD.] AS AN INCOME ASSESSABL E UNDER THE HEAD INCOME FROM OTHER SOURCES AS AGAINST ASSESSEES STAND OF THE SAME BEING ASSESSABLE AS LONG TERM CAPITAL GAIN. 3. IN BRIEF, THE RELEVANT FACTS ARE THAT THE APPELL ANT IS AN INDIVIDUAL, WHO FILED HIS RETURN OF INCOME FOR A.Y 2005-06 ON 24/ 3/2006 DECLARING TOTAL INCOME OF RS.4,68,678/- WHICH, INTER-ALIA, INCLUDE D INCOMES BY WAY OF SALARIES, CAPITAL GAIN AND INCOME FROM OTHER SOURCE S. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT ASSESSE E HAD MADE INVESTMENT IN NABARD BONDS TO THE TUNE OF RS.12.00 LACS AND CLAIM ED EXEMPTION UNDER SECTION 54EC OF THE ACT IN RESPECT OF LONG TERM CAP ITAL GAIN EARNED IN RESPECT OF THE SALE OF SHARES OF ROBINSON WORLDWIDE TRADE LTD. THE AO NOTICED THAT ASSESSEE HAD PURCHASED 11,500 SHARES OF ROBINSON WO RLDWIDE TRADE LTD. @ 1.30 PER SHARE FOR A TOTAL CONSIDERATION OF RS.15 ,191.99 AND HAD SOLD THE SAME FOR A CONSIDERATION OF RS..11,29,475/-. THE AO CARRIED OUT A VERIFICATION EXERCISE AND CONCLUDED THAT THE PURPORTED PURCHASE OF 11500 SHARES OF ROBINSON WORLDWIDE TRADE LTD. WAS NOTHING BUT A SHA M TRANSACTION. ACCORDINGLY, THE AO TREATED THE CONSIDERATION RECEI VED ON THE SALE OF 11500 SHARES OF ROBINSON IMPEX LTD. OF RS.11,29,475/- AS INCOME FROM UNDISCLOSED SOURCES. THIS RESULTED IN ASSESSMENT OF RS.11,29, 475/- AS AN INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES AND CONSEQUENTLY THE EXEMPTION CLAIMED UNDER SECTION 54 EC OF THE ACT WITH RESPECT TO THE INVESTMENTS IN NABARD BONDS WAS DISALLOWED AS THE ASSESSEE DID NOT HAVE A NY INCOME UNDER THE HEAD CAPITAL GAINS. THE AFORESAID STAND OF THE AO HAS S INCE BEEN AFFIRMED BY LD. CIT(A). IN THIS BACKGROUND, THE ASSESSEE IS IN FUR THER APPEAL BEFORE US. 4. AT THE TIME OF HEARING, THE LD. REPRESENTATIVE O F THE ASSESSEE POINTED OUT THAT AN IDENTICAL CONTROVERSY IN THE CASE OF JAGDI SH H. SHAH HAS BEEN CONSIDERED BY THE TRIBUNAL VIDE ORDER IN ITA NO.6 557/MUM/2011 DATED . / ITA NO.6545/MUM/2011 / ASSESSMENT YEAR 2005-06 3 5/9/2012 FOR ASSESSMENT YEAR 2005-06, WHEREBY THE I NCOME EARNED ON SALE OF THE SHARES OF ROBINSON IMPEX LTD. HAS BEEN ACCEPTED AS AN INCOME ASSESSABLE UNDER THE HEAD LONG TERM CAPITAL GAIN. LD. AR ALSO FILED A TABULATION SHOWING SIMILARITY OF FACTS BETWEEN THE CASE OF THE ASSESSE E AND THAT OF JAGDISH H. SHAH(SUPRA). THE TABULATION FURNISHED BY THE ASSES SEE DEPICTS THE SIMILARITY IN SCRIP INVOLVED, ASSESSMENT YEAR INVOLVED, THE BR OKER INVOLVED, ENQUIRIES BY AO FROM BSE, ETC. APART THEREFROM, IT HAS ALSO B EEN POINTED OUT THAT THE SAME AO AS WELL AS THE SAME CIT(A) HAVE RENDERED TH E DECISIONS ON THE SAME DATES IN THE CASE OF JAGDISH H. SHAH (SUPRA) AS W ELL AS THE ASSESSEE. UNDER THESE CIRCUMSTANCES, IT HAS BEEN POINTED OUT THAT THE IMPUGNED ORDERS OF THE LOWER AUTHORITIES ARE UNSUSTAINABLE AND THAT INCOME FROM SALE OF THE SHARES OF ROBINSON IMPEX LTD. BE ACCEPTED AS LONG TERM CAPITA L GAIN AS RETURNED BY THE ASSESSEE. 5. THE LD. DR APPEARING FOR THE REVENUE HAS NOT CON TROVERTED THE FACTUAL MATRIX BROUGHT OUT BY LD. REPRESENTATIVE OF THE ASS ESSEE. 6. HAVING PERUSED THE ORDERS OF THE AUTHORITIES BEL OW AS WELL AS THE SUBMISSIONS PUT FORTH BEFORE US, IT IS EVIDENT THAT SIMILAR CONTROVERSY HAS BEEN CONSIDERED BY OUR CO-ORDINATE BENCH IN THE CASE OF JAGDISH H. SHAH (SUPRA). THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ALSO PLA CED ON RECORD COPIES OF THE ASSESSMENT ORDER AS WELL AS ORDER OF CIT(A) IN THE CASE OF JAGDISH H. SHAH(SUPRA) WHICH REVEAL THAT THE DISCUSSION CONT AINED THEREIN IS ALMOST SIMILAR TO THE DISCUSSION IN THE IMPUGNED ORDERS B EFORE US. THE ENQUIRIES MADE BY THE AO IN CASE OF JADISH H. SHAH (SUPRA) ARE ON SIMILAR LINES TO THOSE MADE IN THE CASE BEFORE US. IN THE CASE OF T HE ASSESSEE AS WELL AS IN THE CASE OF JAGDISH H. SHAH(SUPRA) THE SHARES WERE PURC HASED FROM THE SAME BROKER NAMELY DPS SHARES AND SECURITIES PVT. LTD. IT IS ALSO EMERGING THAT THE AO CARRIED OUT A VERIFICATION EXERCISE WHICH INVOLV ED RECORDING OF STATEMENT OF ONE SHRI RAJ KUMAR MASALIA, PRINCIPAL OFFICER OF DP S SHARES & SECURITIES LTD.; . / ITA NO.6545/MUM/2011 / ASSESSMENT YEAR 2005-06 4 SIMILAR ACTION WAS TAKEN IN THE CASE OF JAGDISH H. SHAH (SUPRA) ALSO. BE THAT AS IT MAY, IT IS QUITE CLEAR THAT THE STAND OF THE REVENUE AS WELL AS THE ASSESSEE IN THE PRESENT CASE IS ON SIMILAR FOOTING TO THEIR RESPECTIVE STANDS IN THE CASE OF JAGDISH H. SHAH (SUPRA). HAVING REGAR D TO THE AFORESAID SIMILARITIES, WHICH ARE NOT CONTROVERTED BY THE RE VENUE, WE DEEM IT FIT AND PROPER TO RELY UPON THE REASONING TAKEN BY THE CO-O RDINATE BENCH IN THE CASE OF JAGDISH H. SHAH(SUPRA) AND HOLD THAT THE INCOME TAX AUTHORITIES HAVE ERRED IN TREATING THE SALE CONSIDERATION ON THE SALE OF SHARES OF ROBINSON WORLDWIDE TRADE LTD. AS AN INCOME FROM UNDISCLOSED SOURCES. NEVERTHELESS IN ORDER TO IMPART COMPLETENESS TO THIS ORDER, WE DEEM IT FIT A ND PROPER TO REPRODUCE HEREAFTER THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL IN THE CASE OF JAGDISH H. SHAH(SUPRA), WHICH IS AS UNDER: 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES AND ALSO THE PAPER BOOK SUBMITTED BY TH E ASSESSEE. IT IS NOT IN DISPUTE THAT THE SHARES WERE PURCHASED IN PHYSICAL FORM IN OFF MARKET TRANSACTION. IT IS ALSO NOT IN DISPUTE THAT THE SHA RES WERE SUBSEQUENTLY DE- MATTED AND THE SALES HAVE TAKEN PLACE OUT OF THE DMAT A/C. THE ONLY DISPUTE RELATES TO THE GENUINENESS OF THE PURCHASES' AS DOU BTED BY THE LOWER AUTHORITIES. WE FIND THAT THE PURCHASES. ARE SUPPORTED BY PURCHA SE BILLS ISSUED BY M/ S. DPS SHARES ~ SECURITIES PVT. LTD., EXHIBITED AT PAGES 2 8 TO 32 OF THE PAPER BOOK. WE ALSO FIND THAT THE SHARES SO PURCHASED WERE TRANSFE RRED TO DMAT A/C WITH HDFC BANK. COP,!! OF WHICH IS EXHIBITED AT PAGE NO. 34 O F THE PAPER BOOK. WE HAVE ALSO CONSIDERED THE LETTER OF THE DIRECTOR OF M/S. DPS S HARES & SECURITIES PVT. LTD., ADDRESSED TO THE AO BY WHICH THE. DIRECTOR HAS CONF IANED 'THE OFF-MARKET TRANSACTION IN PHYSICAL MODE OF SHARES OF THE 11, 500 SHARES OF M/S.ROBINSON IMPEX (INDIA) LTD (ROBINSON WORLDWIDE TRADE LTD.,). WE HAVE ALSO CONSIDERED THE RETRACTION LETTER OF SHRI RAJKUMAR MASALIA ADDRESSE D TO THE AO BY WHICH HE ACCEPTED THAT HE. WAS NOT AWARE OF THE TRANSACTION AND HE HAS STATED WRONG FACTS DURING THE COURSE OF HIS STATEMENT RECORDED B Y THE A.O. 12. WE FIND THAT DURING THE COURSE OF THE APPELLAT E PROCEEDINGS, THE CIT(A) HAS CALLED FOR A REMAND REPORT FROM THE AO RELATING TO THE PURCHASE OF 11500 SHARES OF M/S. ROBINSON WORLDWIDE TRADE LTD., (FORMERLY KN OWN AS ROBINSON IMPEX (INDIA) LTD.]. WE HAVE PERUSED THE REMAND REPORT O F ITO 10(3)(2) MUMBAI DT. 11.4.2011. IN HIS REMAND REPORT, THE AO STATES THA T AN OPPORTUNITY OF CROSS- EXAMINATION OF SHRI RAJKUMAR MASALIA WAS GIVEN TO T HE ASSESSEE ON 18-02-2009, 29-04-2009 AND 09-11-2009. HOWEVER, DESPITE OF GIV ING AFORESAID OPPORTUNITIES, SHRI RAJKUMAR MASALIA DID NOT ATTEND THOUGH ASSESSE ES REPRESENTATIVE ATTENDED ON ALL OF ABOVE DATES AND WHOSE ATTENDANCE WAS DULY RECORDED ON THE ATTENDANCE SHEET. IN HIS REMAND REPORT, THE AO FUR THER STATES THAT THE SAID SHARES OF M/S. ROBINSON WORLDWISE TRADE LTD. (FORME RLY KNOWN AS ROBINSON IMPEX (INDIA) LTD.] WERE PURCHASED ON 05-04-2003 FO R A CONSIDERATION OF . / ITA NO.6545/MUM/2011 / ASSESSMENT YEAR 2005-06 5 RS.15191.99 FROM M/S. DPS SHARES AND SECURITIES PVT . LTD. AS PER RECORD OF THE SAID COMPANY, THE SHARES WERE ENDORSED IN FAVOUR OF THE ASSESSEE ON 30-04- 2003 IN PHYSICAL FORMAT ONLY. THE AO FURTHER STATE S THAT AS PER INVESTIGATION MADE, THESE SHARES WERE SENT FOR DEMATERIALIZATION TO HDFC BANK ON 03-05-2004 AND WERE CONVERTED INTO DE-MAT FORM ON 22-05-2004. IN HIS REMAND REPORT, THE AO HAS FURTHER CONFIRMED THE SALE TRANSACTION MADE THROUGH BROKER, M/S. AJMEERA ASSOCIATES PVT. LTD. 13. AFTER CONSIDERING ALL THE ABOVE STATED FACTS IN TOTALITY, WE DO NOT FIND ANY REASON OR LOGIC IN TREATING THE PURCHASE OF 11,500 SHARES AS BOGUS. THE LOWER AUTHORITIES COULD HAVE DIRECTLY VERIFIED THE TRANS ACTION FROM THE COMPANY ITSELF, WHOSE SHARES WERE QUESTIONED TO BE BOGUS BUT BOTH THE LOWER AUTHORITIES DID NOT DO THIS EXERCISE. THE REMAND REPORT OF THE AO ITSELF SHOW THAT THE TRANSACTIONS HAVE BEEN TREATED AS GENUINE SUBSEQUEN TLY BY THE AO HIMSELF WHILE SENDING THE REMAND REPORT TO THE CIT(A). WE FIND THAT THE SALE TRANSACTION OF 11,500 SHARES OF M/S.ROBINSON IMPEX (INDIA) LTD. (R OBINSON WORLDWIDE TRADE LTD.) HAS BEEN DOUBTED OR QUESTION BY THE LOWER AU THORITIES. A SIMPLE LOGICAL QUESTION ARISES IF THE SHARES WERE NEVER PURCHASED, HOW CAN THEY BE SOLD SUBSEQUENTLY? 14. AFTER CONSIDERING ALL THE FACTS AND SUBMISSIONS , WE FIND THAT BOTH THE LOWER AUTHORITIES HAVE GROSSLY ERRED IN TREATING TH E SALE CONSIDERATION AS INCOME FROM UNDISCLOSED SOURCES. 15. WE, THEREFORE, REVERSE HT FINDING OF LOWER AUTH ORITIES AND DIRECT THE AO TO ACCEPT THE LONG TERM CAPITAL GAINS AS RETURNED BY T HE ASSESSEE. 6.1 FOLLOWING THE AFORESAID PRECEDENT WE HEREBY ALL OW THE APPEAL OF THE ASSESSEE, AND DIRECT THE AO TO ACCEPT THE LONG TERM CAPITAL GAIN AS RETURNED BY THE ASSESSEE. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/7/2015 ' *+ ,- 31/07/2015 ' SD/- SD/- ( / SANJAY GARG ) ( . . / G.S.PANNU ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER * MUMBAI; , DATED 31/07/2015 . / ITA NO.6545/MUM/2011 / ASSESSMENT YEAR 2005-06 6 ! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 0# ( ) / THE CIT(A)- 4. 0# / CIT 5. 12 #34 , $ 34 , * / DR, ITAT, MUMBAI 6. 5 / GUARD FILE. / BY ORDER, 1# # //TRUE COPY// / (DY./ASSTT. REGISTRAR) , * / ITAT, MUMBAI . . ./ VM , SR. PS