VIREN JAYANTILAL SHETH, MUMBAI V. ITO WD 22(2)(4), MUMBAI

ITA 682/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4172 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 05-01-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 24-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK BATRA
• Keywords: Share purchase agreement; Earning of tax free income; Cost of acquisition
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUM BAI BEFORE SHRI JASON P. BOAZ, AM AND SHRI SANDEEP GOSA IN, JM ./ I.T.A. NO. 682/MUM/2013 ( / ASSESSMENT YEAR: 2006-07) VIREN JAYANTILAL SHETH 703,RIDDHI APARTMENT, RIDDHI SIDDHI COMPLEX, TILAK ROAD, GHATKOPER (E) MUMBAI-400 077. / VS. INCOME TAX OFFICER WARD 22(2)(4), MUMBAI. ./ ./PAN/GIR NO. ABAPS 5349H ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI HIRO RAI / RESPONDENT BY : SHRI VIVEK BATRA / DATE OF HEARING : 15/03/2016 !'# / DATE OF PRONOUNCEMENT : 06/04/2016 $% / O R D E R PER SANDEEP GOSAIN, J. M.: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)- 19, DATED 03. 12.2012 FOR A.Y. 2006-07 ON THE FOLLOWING GROUNDS OF APPEAL. 2 ITA NO. 682/MUM/2013 (A.Y. 2006-07) VIREN JYANTILAL SHETH VS. ITO 1. THE LEARNED ASSESSING OFFICER HAS ERRED IN DISALLO WING THE CLAIM OF LONG TERM GAIN OF RS.348842 ON SALE OF SHARES. 2. THE LEARNED ASSESSING OFFICER HAS ERRED IN ESTIMATI NG SHORT TERM GAIN OF RS.852500. 3. THE LEARNED ASSESSING OFFICER HAS ERRED IN MAKING H IS OWN ESTIMATES AND PRESUMPTIONS RELATING TO THE DATE OF SALE AND PURCH ASE OF SHARES. 4. THE LEARNED ASSESSING OFFICER HAS ERRED IN MAKING H IS OWN ASSUMPTIONS REGARDING THE VALUE FOR PURCHASE AND SALE OF SHARES . 5. THE LEARNED ASSESSING OFFICER HAS ERRED IN RELYING ON OUTSIDE DOCUMENTS WITHOUT GIVING OPPORTUNITY TO THE APPELLANT TO EXAM INE THE SAME. 6. THE LEARNED ASSESSING OFFICER HAS ERRED IN NOT PROV IDING PROPER OPPORTUNITY TO THE APPELLANT. 7. THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER. 8. THE APPELLANT CRAVE LEAVE, TO ADD, AMEND OR ALTER A NY OF THE GROUND OR GROUNDS OF APPEAL ON OR BEFORE THE HEARING OF THE A PPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS FOUND BY THE AO THAT THE ASSESS EE HAS SHOWN LONG TERM CAPITAL GAIN OF RS.3,48,842/- FROM SALE OF SHARES O F TUBE AND MALLEABLE LTD. AFTER SEEKING REPLY FROM THE ASSESSEE, THE AO PASSED THE ORDER OF ASSESSMENT THEREBY TREATING THE TRANSACTION AS SHORT TERM CAPITAL GAIN AND ACCORDINGLY MADE ADDITIONS IN THE TOTAL INCOME OF THE ASSESSEE. 3 ITA NO. 682/MUM/2013 (A.Y. 2006-07) VIREN JYANTILAL SHETH VS. ITO 3. AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE FILED THE APPEAL BEFORE CIT(A) AND THE CIT(A) AFTER CONSIDERING THE CASE OF THE AS SESSEE DISMISS THE APPEAL VIDE ITS ORDER DATED 03.12.2012. 3.1 AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE F ILED THE PRESENT APPEAL BEFORE US ON THE GROUNDS MENTIONED HEREIN ABOVE. GROUND NO. 1-8: SINCE ALL THE GROUNDS RAISED BY THE ASSESSEE ARE I NTER-CONNECTED AND INTER- RELATED AND MOOT ISSUE RELATES TO ONLY ONE ISSUE I. E. TREATING LONG TERM CAPITAL GAIN AS SHORT TERM CAPITAL GAIN THEREFORE, WE THOUG HT IT FIT TO DISPOSE OFF THE SAME THROUGH THE PRESENT COMMON ORDER. 4. AT THE VERY OUTSET, LD. AR REPRESENTING THE ASSE SSEE RELIED UPON THE WRITTEN SUBMISSIONS DATED 21.11.2008 WHICH FOUND MENTIONED AT PARA NO.2.2 OF AOS ORDER AND READS AS UNDER: DURING THE RELEVANT YEAR, OUR CLINET HAVE SOLD 500 0 SHARES OF TUBES AND MALLEABLE LTD. FOR WHICH OUR CLIENT HAS CLAIMED LONG TERM CAPITAL GAIN OF RS.348842.10. THESE SHARES WERE PUR CHASED BY OUR CLIENT IN HIS WIFES NAME IN THE YEAR 1995. A COPY OF PHYSICAL HOLDING 4 ITA NO. 682/MUM/2013 (A.Y. 2006-07) VIREN JYANTILAL SHETH VS. ITO OF SHARES IS ENCLOSED HEREWITH AS ANNEXURE II. OUR CLIENT IS REGULARLY FILLING HIS PERSONAL BALANCE SHEET WITH RETURN OF I NCOME. A COPY OF STATEMENT OF INCOME, ACKNOWLEDGEMENT OF RETURN FILE D FOR A.Y. 2000- 01 ALONG WITH COPY OF BALANCE SHEET AND PARTICULARS OF SHAREHOLDING IS ENCLOSED THEREWITH AS ANNEXURE III. THE STATEMEN T OF SHARES SHOWS THE SHARE HELD BY OUR CLIENT OF TUBES AND MALLEABLE LTD. THE NAME OF THE COMPANY WAS CHANGED TO SICAL LOGISTICS LTD. THE PHYSICAL SHARES WERE TRANSFERRED TO DEMAT A/C WITH SHAREKHAND LTD. ON 08.04.2005. THE COPY OF DEMAT A/C IS ENCLOSED AS ANNEXURE IV. T HESE SHARES WERE SOLD BY OUR CLIENT ON 6 TH AND 9 TH MAY 2005 ON BOMBAY STOCK EXCHANGE THROUGH THE BROKER BHARAT S PUROHIT. THE COPY OF SA LE BILL SHOWING THE DETAILS OF SALES ARE ENCLOSED HEREWITH AS ANNEX URE V. THESE SHARES ARE SOLD THROUGH THE BROKER AT JAMNAGAR SINCE THE S HARES WERE ORIGINALLY PURCHASED AND WERE SOLD BY OUR CLIENTS FATHER IN LAW WHO IS AT JAMNAGAR. IT WAS SUBMITTED THAT THE ASSESSEE SUBSCRIBED TO 50 00 EQUITY SHARES OF TUBES AND MALLEABLE LTD. IN THE YEAR 1994 AT A PREMIUM OF RS. 50/-. THE TOTAL COST OF ACQUISITION OF 5000 SHARES WAS THEREFORE RS.3,00,00 0/-. THESE SHARES WERE PURCHASED BY THE ASSESSEE IN HIS WIFES NAME. THE 5 000 SHARES OF TUBES AND MALLEABLE LTD. WERE DEMATERIALIZED ON 8.4.2005 AND WERE TRANSFERRED TO THE 5 ITA NO. 682/MUM/2013 (A.Y. 2006-07) VIREN JYANTILAL SHETH VS. ITO ACCOUNT OF SUB-BROKER NAMELY SHRI BHARAT S. PUROHI T ON 27.4.2005. THESE SHARES WERE SOLD BY THE ASSESSEE THROUGH SUB BROKER SHRI B HARAT S. PUROHIT. THE COST OF THESE SHARES BEING RS.3,00,000/- IN THE YEAR 1994-9 5, THE LONG TERM GAIN OF RS.3,48,842/- WAS RIGHTLY CLAIMED AS EXEMPT INCOME U/S 10(38). IT WAS FURTHER SUBMITTED THAT, THE AO WHILE IGNORING THE FACTS AND DOCUMENTARY EVIDENCE HAD ASSUMED THE COST OF ACQUISITION OF SHARES AT RS.50, 000/- AND THE SALE VALUE AT RS.8,82,500/- WITHOUT INFORMING THE ASSESSEE AND WI THOUT PROVIDING ANY OPPORTUNITY TO EXPLAIN THE FACTS. 5. ON THE OTHER HAND LD. DR APPEARING ON BEHALF OF REVENUE RELIED UPON THE ORDERS PASSED BY LOWER AUTHORITIES. 6. WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY THE LOWER AUTHORITIES AFTER CONSIDERING THE SAME, WE HAVE NOTICED THAT TH E AO HAS TREATED THE LONG TERM CAPITAL GAIN AS SHORT TERM CAPITAL GAIN ON THE BASIS OF REASONS MENTIONED IN PARA NO. 2.3 OF THE ORDER OF ASSESSMENT. THE PIT H AND SUBSTANCE OF THE ORDERS PASSED BY THE AO IS THAT THERE ARE CERTAIN CONTRADI CTION IN THE SUBMISSIONS MADE BY ASSESSEE AND THE SAME HAVE BEEN HIGHLIGHTED BY THE AO AT PARA NO. 2.3. 6 ITA NO. 682/MUM/2013 (A.Y. 2006-07) VIREN JYANTILAL SHETH VS. ITO 7. LD. AR DREW OUR ATTENTION TO PAGE NO.1 OF THE PA PER BOOK WHICH CONTAIN DETAIL REPLY SUBMITTED BY THE ASSESSEE TO THE INCOM E TAX OFFICER. OUR ATTENTION WAS ALSO DRAWN TO PAGE NO. 3 OF THE PAPER BOOK WHICH CO NTAINS SAMPLE SHARE CERTIFICATE ISSUE IN THE NAME OF HEENABEN VIREN SHE TH AND PAGE NO. 4&5 OF PAPER BOOK CONTAINS ACKNOWLEDGEMENT OF RETURN FOR YEAR 20 00-01 WHEREIN THE INVESTMENT HAS BEEN SHOWN BY THE ASSESSEE. PAGE NO. 8 &9 OF PA PER BOOK REFLECTS CAPITAL GAIN AND DETAILS OF INVESTMENTS IN SHARES BY ASSESSEE IN PUBLIC LIMITED COMPANY TITLED M/S. TUBES AND MALLEABLES LTD, PAGE NO. 10 OF PA PER BOOK RELATES TO DEMAT A/C OF SMT. HEENABEN VIREN SHETH AND PAGE NO.11 TO 15 C ONTAINS SHARE BILLS THROUGH WHICH SHARES HAVE BEEN SOLD BY ASSESSEE THROUGH BRO KER. 7. FROM THE CO-JOINT READING OF ALL THE ABOVE MENTI ONED DOCUMENTS AND AFTER HEARING THE PARTIES WE FOUND THAT THE AO HAD TREATE D THE TRANSACTION AS SHORT TERM CAPITAL GAIN ON THE GROUND THAT THERE WERE CERTAIN CONTRADICTIONS IN THE STATEMENT OF ASSESSEE AND DATE OF ACQUISITION OF SHARES. IT I S AN UNDISPUTED FACT THAT SHARES WERE IN A POSSESSION OF ASSESSEE FOR APPROXIMATELY EIGHT YEARS. THEREFORE IN SUCH CIRCUMSTANCES THE ACQUISITION OF DATE IS NOT RELEVA NT ONCE IT IS PROVED THAT THE SHARES SOLD WERE IN POSSESSION OF THE ASSESSEE FOR MORE THAN THREE YEARS. ALTHOUGH THE AO HAS CALLED INFORMATION U/S 133(6) OF THE I. T. ACT FROM THE BOMBAY STOCK EXCHANGE BUT THE AO HAS NOT INFORMED THE ASSESSEE A ND HAS NOT CALLED FOR ANY 7 ITA NO. 682/MUM/2013 (A.Y. 2006-07) VIREN JYANTILAL SHETH VS. ITO EXPLANATION OR INFORMATION FROM THE ASSESSEE. IN CA SE OF ANY DOUBT, THE AO COULD HAVE CALLED FOR MORE DETAILS FROM THE ASSESSEE, BUT IN THIS CASES THE AO HAS NOT DONE THIS EXERCISE. FROM THE DETAILS OF ALL THE DOC UMENTS PLACED ON RECORD BY WAY OF PAPER BOOK, WE HAVE NOTICED THAT THE SHARES WERE PURCHASED AND SOLD BY THE ASSESSEE AFTER RETAINING THEM FOR APPROXIMATELY EIG HT YEARS. HENCE, THE EXACT DATE OF ACQUISITION OR MINOR VARIATIONS IN THE RATE OR D ATE OF SALE DOES NOT MAKE ANY DIFFERENCE FOR DECIDING THE ISSUE OF TREATING THE T RANSACTION AS LONG TERM CAPITAL GAIN OR SHORT TERM CAPITAL GAIN. 8. THEREFORE, TAKING INTO CONSIDERATION THE DOCUMEN TARY EVIDENCE WHICH ESTABLISHES THAT THE ASSESSEE WAS IN POSSESSION OF SHARES SINCE 1994-95 AND THE SAME WERE BEING SOLD IN 2005-06 THEREFORE THE INCOM E FROM THE SALE OF SHARES IS CLEARLY A LONG TERM CAPITAL GAIN WHICH IS EXEMPT FR OM TAX U/S10(38). ACCORDINGLY WE ARE OF THE VIEW THAT THE AO HAS FAIL ED BOTH IN LAW AND ON FACTS IN DISALLOWING THE CLAIM OF LONG TERM CAPITAL GAIN OF RS.3,48,842/- IN RESPECT OF SALE OF SHARES OF TUBES AND MALLEABLES LTD. THEREFO RE, WE DIRECT THE AO TO DELETE THE ADDITIONS. HENCE, THESE GROUNDS OF APPEAL ARE A CCEPTED. 7. IN THE RESULT, THE ASSESSEES APPEAL IS ACCEPTED . 8 ITA NO. 682/MUM/2013 (A.Y. 2006-07) VIREN JYANTILAL SHETH VS. ITO ORDER PRONOUNCED IN THE OPEN COURT ON 6TH APRIL, 2016 SD/- SD/- (JASON P. BOAZ) (SANDEEP GOSAIN) $ / ACCOUNTANT MEMBER &' $ / JUDICIAL MEMBER ( ) MUMBAI; *$ DATED : 06.04.2016 PS. ASHWINI / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT - CONCERNED 5. ./0 ''12 , 12# , ( ) / DR, ITAT, MUMBAI 6. 045 6 / GUARD FILE / BY ORDER, / !'# (DY./ASSTT. REGISTRAR) #$ %, ( ) / ITAT, MUMBAI