GEETA KASHYAP SHAH, MUMBAI V. ITO 25(3)(1), MUMBAI

ITA 742/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3246 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 23-02-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 29-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHAMMED RIZWAN
• Keywords: Unexplained investment; Share purchase agreement; Source of fund; Reason to believe
• Section: 143(3); 68; 69; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL,MUMBAI BENCH G, MUMBAI BEFORE SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.742/MUM/2013 ASSESSMENT YEAR: 2005-06 MISS. GEETA KASHYAP SHAH, C-801, KRISHNA VASANT SAGAR, KANDIVALI (EAST), MUMBAI-400101. PAN: AMCPS0403M VS. ITO- 25(3)(1), MUMBAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI HIRO RAI (AR ) REVENUE BY : SHRI MOHAMMED RIZWA N (DR) DATE OF HEARING : 23.02.2016 DATE OF PRONOUNCEMENT : 08.06.2016 O R D E R PER PAWAN SINGH, JM: 1. THE PRESENT APPEAL IS FILED BY ASSESSEE AGAINST THE ORDER OF CIT(A)-11, MUMBAI DATED 27 TH OF NOVEMBER 2012 CONFIRMING THE ORDER OF PENALTY U NDER SECTION 271(1)(C) OF THE ACT, IN RESPECT OF AY 2005 06. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FILED RETURN OF INCOME FOR RELEVANT ASSESSMENT YEAR, DECLARING TOTAL INCOME AT RS. 2,01 ,190/-. THE RETURN WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLE TED UNDER SECTION 143(3) OF THE ACT, DETERMINING THE TOTAL INCOME OF ASSESSEE A T RS.15,90,534/-. WHILE MAKING ASSESSMENT AO MADE CERTAIN ADDITION U/S 68 IN RESPECT OF CAPITAL GAIN OF RS.1501240/ - AND OF RS.31,344/- SALES OF SHARES THROUGH M/S VIJAY BHAGWANDASS &CO.THE ASSESSEE FILED APPEAL AGAINST T HE QUANTUM ASSESSMENT BEFORE CIT APPEALS. THE ASSESSEE WITHDREW THE APPEA L IN RESPECT OF GROUND OF ADDITION MADE UNDER SECTION 68 IN RESPECT OF CAPITA L GAIN OF RS.15,01,240/-. 2 ITA NO. 742/M/2013- MISS. GEETA KASHYAP SHAH HOWEVER THE OTHER ADDITION OF RS.31,344/- MADE U/S 68 OF ACT, WAS DELETED BY THE CIT APPEALS. 3. AFTER DISPOSAL OF THE APPEAL AO SERVED NOTICE OF P ENALTY UNDER SECTION 274, READ WITH SECTION 271(1) (C) OF THE ACT. THE ASSESS EE SUBMITTED HIS REPLY DATED 16 APRIL 2009. IN REPLY ASSESSEE CONTENDED THAT THE ASSESSEE NEITHER CONCEALED THE INCOME NOR FURNISHED INACCURATE PARTICULAR OF I NCOME. ALL THE RELEVANT PARTICULAR E.G. BANK ACCOUNT, CONTRACT NOTES, SHARE CERTIFICATES, DEMAT STATEMENTS, COPY OF ACCOUNT WITH BROKER THROUGH WHOM THE SHARE WERE PURCHASED AND SOLD WERE SUBMITTED. HOWEVER, THE REPLY OF ASSESSEE WAS NOT CONSIDERED SUFFICIENT AND SATISFACTORY. AND AO CONCLUDED THAT DURING TH E ASSESSMENT PROCEEDING, THE ENQUIRIES MADE WITH THE BROKER, M/S VIJAY BHAGWANDA S & COMPANY AND THE BOMBAY STOCK EXCHANGE HAS REVEALED THAT ASSESSEE HA S NOT MADE ANY TRANSACTION WITH THEM. AND AO CONSIDERED IT A FIT CASE FOR LEVY OF PENALTY IN RESPECT OF ADDITION OF RS.15,01,240/-, AND THUS IMPOSED THE PENALTY OF HUNDRED PERCENT OF THE TAX SOUGHT TO BE ALLEGEDLY EVADED. 4. AGGRIEVED BY THE ORDER OF PENALTY ASSESSEE FILED AP PEAL BEFORE COMMISSIONER OF APPEAL BUT WITHOUT ANY SUCCESS, HENCE THE PRESENT A PPEAL IS FILED BEFORE THIS TRIBUNAL. 5. WE HAVE HEARD AR OF THE PARTIES AND PERUSED THE MAT ERIAL AVAILABLE ON RECORD. AR OF ASSESSEE ARGUED THAT ASSESSEE PURCHASED 26,40 0 SHARES OF FAST TRACK ENTERTAINMENT LTD IN PHYSICAL FORM FROM THE REGIST ERED BROKER, VIJAY BHAGWANDAS & COMPANY VIDE BILL NO 2, DATED 17 APRIL 2003 AND 23 APRIL 2003, AND ALSO PLACED ON RECORD THE COPY OF CONTRAC T NOTES, TRANSFER CERTIFICATES AND COPY OF JUMBO CERTIFICATES. THE APPEAL FILED BE FORE CIT(A) WAS NOT PURSUED IN VIEW OF THE REASONS STATED IN LETTER DATED 31 ST OF OCTOBER 2008, WHICH WAS ADDRESSED TO CIT APPEALS. IN THE SAID LETTER IT WAS CONTENDED THAT RATE OF TAX IS SAME IN RESPECT OF STCG AND INCOME CONSIDERED IN SE C 68 OF THE ACT, MR. VIJAY BHAGWANDAS THROUGH WHOM HE HAS DEALINGS EXPIRED ON 6 TH JUNE 2006, THE ASSESSEE HAS ALREADY PAID TAX OF RS.6,59,010/-. IF THE INCOME IS CONSIDERED AS INCOME UNDER SECTION 68 INSTEAD OF CAPITAL GAIN, PE NALTY IS NOT LEVIABLE. AR OF ASSESSEE FURTHER ARGUED THAT COORDINATE BENCH OF IT AT, MUMBAI IN ITA NO.1123/M/2009 IN MILAN GANDHI VERSUS ITO, FURTHER IN ITA NO.2008/PUNE/2012 IN PUSHPALATA BHANDARI VERSUS DC IT, CONSIDERED THE SIMILAR TRANSACTION, TRANSACTED THROUGH VIJAY BHAG WANDAS & CO. AND THE 3 ITA NO. 742/M/2013- MISS. GEETA KASHYAP SHAH TRANSACTIONS WERE HELD TO BE GENUINE AND THE CLAIM OF LTGS WAS ALLOWED IN THE HANDS OF ASSESSEE THEREIN. ON THE OTHER HAND CIT(DR ) RELIED UPON THE ASSESSMENT ORDER U/S 143(3) AND SUPPORTED PENALTY ORDER BY AO AND THE IMPUGNED ORDER PASSED BY CIT(A). 6. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND FURTHER PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS AN ADMITTED FAC T THAT CAPITAL GAIN OF RS.15,01,240/- CLAIMED BY ASSESSEE WAS DISALLOWED A ND ADDED TO THE TOTAL INCOME OF ASSESSEE UNDER SECTION 68 OF THE ACT. THE ASSESSEE ONLY CLAIMED THE CAPITAL GAIN OF RS. 31,344/-ON SALE OF SHARES THROU GH VIJAY BHAGWANDAS & CO, WHICH WAS ALSO ADDED UNDER SECTION 68 OF THE ACT, I N THE QUANTUM ASSESSMENT. WE HAVE SEEN THE BILLS, DATED 17 APRIL 2003 AND 23 APRIL 2003, CERTIFICATE OF TRANSFER DATED 23 RD APRIL 2003, COPY OF CONTRACT NOTES, TRANSFER CERTIF ICATES AND COPY OF JUMBO CERTIFICATES OF FAST TRACK ENTERTAINM ENT LIMITED (FILED IN THE FORM OF PAPER BOOK) TO SHOW THE TRANSACTION, TRANSA CTED THROUGH VIJAY BHAGWANDAS & CO. THE COORDINATE BENCH OF ITAT MUMBA I, WHILE DEALING WITH THE SALE OF SHARES OF FAST TRACK ENTERTAINMENT LTD (FTEL) TRANSACTED THROUGH VIJAY BHAGWANDAS & CO. IN ITA NO. 1123/M/2009 IN NI PA MILAN GANDHI VERSUS ITO HELD AS UNDER:- 13. SEQUENCES OF EVENTS MAY RAISED SUSPI CION ABOUT FTEL SHARES TRANSACTIONS, BUT SUSPICION OR DOUBT OF HIGHEST DEG REE CANNOT TAKE PLACE OF PRIME FACIE EVIDENCE. FACTS OF THE CASE UNDER CONSI DERATION DO NOT INDICATE THAT THERE ARE EVIDENCE TO UPHOLD THE VIEW OF THE C IT (A). WE ARE OF THE OPINION THAT ASSESSEE IS ENTITLED TO CLAIM EXEMPTIO N UNDER SECTION 54 EC ARISING OUT OF LTGC. CASE RELIED UPON BY THE AR OF ASSESSEE. IN CASE OF ITO VERSUS SH. JITENDER J GANDHI, MUKESH R MEROLIA VERSUS ACIT AND ITO VERSUS BIBI RANI BANSAL ALSO ENDORSE OUR VIEWS. IN VIEW OF THESE DISCUSSIONS, WE UPHOLD THE GRIEVANCE OF THE ASSESSE E AND REVERSED THE ORDER OF CIT APPEALS. 7. FURTHER, COORDINATE BENCH OF ITAT PUNE IN ITA NO.20 08/PUNE/2012, WHILE DEALING WITH TRANSACTIONS OF SHARE OF FAST TRACK EN TERTAINMENT LTD HELD AS UNDER: 20. THE QUESTION WHICH ARISES BEFORE US IS THE TRE ATMENT OF GAIN ARISING ON THE SAID TRANSACTION OF SALE, PURCHASE OF SHARES IS TO BE ASSESSED UNDER THE HEAD INCOME FROM LONG TERM CAPITAL GAINS AS CLAIMED BY THE ASSESSEE OR UNDER THE HEAD INCOME FROM OTHER SOURCES AS DETERMI NED BY THE AUTHORITIES BELOW. THE FIRST ASPECT TO BE CONSIDERED IN THE CAS E OF ASSESSEE IS THAT 4 ITA NO. 742/M/2013- MISS. GEETA KASHYAP SHAH THOUGH ENQUIRIES WERE MADE IN RESPECT OF SEVERAL CO MPANIES AND BROKERS, BUT THE NAME OF BROKER THROUGH WHOM THE ASSESSEE HA D TRANSACTED IN THE SHARES OF M/S. FAST TRACK ENTERTAINMENT LTD. DOES N OT APPEAR IN THAT SAID LIST. FURTHER, THE ASSESSEE HAS PRODUCED COMPLETE E VIDENCE VIS--VIS THE PURCHASE OF SHARES AND THE DELIVERY OF SHARES CERTI FICATES TO THE ASSESSEE AND ITS ITA NO.2008/PN/2012 ITA NO.372/PN/2014 MRS PUSHPALATA OMPRAKASH BHANDARI CONSEQUENT CONVERSION INTO JUMBO CERTIFICATES AND FURTHER SALE TRANSACTION THROUGH DIFFERENT BROKERS. IN THE TOTALITY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, WHERE THE ASSES SEE HAS PLACED ON RECORD THE COMPLETE EVIDENCE OF PURCHASE AND SALE O F SHARES, MERELY BECAUSE THE SHARES WERE D- MATTED IN JULY, 2004 AND THEREAFTER, WERE SOLD IN THE MONTH OF AUGUST, 2004, DOES NOT ESTABLISH TH E CASE OF AUTHORITIES BELOW, IN VIEW OF THE CIRCUMSTANTIAL EVIDENCE PRODU CED BY THE ASSESSEE. IN THE TOTALITY OF SAID EVIDENCES, WE HOLD THAT ONCE T HE ASSESSEE HAD TAKEN THE DELIVERY OF SHARES BY WAY OF SHARE CERTIFICATES, WH ICH IN TURN, WERE FORWARDED TO THE COMPANY ALONG WITH TRANSFER DEEDS ON 04.07.2003 ITSELF ESTABLISHES THE CASE OF THE ASSESSEE OF HAVING PURC HASED THE SAID SHARES DURING THAT PERIOD. FURTHER, THE SAID SHARES WERE C ONVERTED INTO JUMBO CERTIFICATES VIDE COMMUNICATION DATED 16.02.2004 AN D THEREAFTER, THERE WAS DE-MATERIALIZATION OF THE SHARES ON 26.07.2004. IN THE ENTIRETY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, WE HOLD THAT TH E GAIN ARISING ON TRANSFER OF SHARES IS TO BE ASSESSED AS INCOME FROM LONG TERM CAPITAL GAIN IN THE HANDS OF THE ASSESSEE. 21. WE FURTHER FIND SUPPORT FROM THE RATIO LAID DOW N BY THE HON'BLE BOMBAY HIGH COURT IN CIT VS. SHRI MUKESH RATILAL MA ROLIA IN INCOME TAX APPEAL NO.456 OF 2007, VIDE ORDER DATED 07.09.2011, WHEREIN IT WAS HELD AS UNDER:- '5. ON FURTHER APPEAL, THE ITAT BY THE IMPUGNED ORD ER ALLOWED THE CLAIM OF THE ASSESSEE BY RECORDING THAT THE PURCHAS E OF SHARES DURING THE YEAR 1999-2000 AND 2000-2001 WERE DULY RECORDED IN THE BOOKS MAINTAINED BY THE ASSESSEE. THE ITAT HAS RECORDED A FINDING THAT THE SOURCE OF FUNDS FOR ACQUISITION OF THE SHARES WAS T HE AGRICULTURAL INCOME WHICH WAS DULY OFFERED AND ASSESSED TO TAX I N THOSE ASSESSMENT YEARS. THE ASSESSEE HAS PRODUCED CERTIFICATES FROM THE AFORESAID FOUR COMPANIES TO THE EFFECT THAT THE SHARES WERE IN-FAC T TRANSFERRED TO THE NAME OF THE ASSESSES. IN THESE CIRCUMSTANCES, THE D ECISION OF THE ITAT IN HOLDING THAT THE ASSESSEE HAD PURCHASED SHARES O UT OF THE FUNDS DULY DISCLOSED BY THE ASSESSEE CANNOT LIE FAULTED. 6 SIMILARLY, THE SALE OF THE SAID SHARES FOR RS.1,4 1,08,484/- THROUGH TWO BROKERS NAMELY, M/S RICHMOND SECURITIES PVT. LTD. A ND M/S.SCORPIO 5 ITA NO. 742/M/2013- MISS. GEETA KASHYAP SHAH MANAGEMENT CONSULTANTS PVT. LTD. CANNOT BE DISPUTED , BECAUSE THE FACT THAT THE ASSESSEE HAS RECEIVED THE SAID AMOUNT IS N OT IN DISPUTE. IT IS NEITHER THE CASE OF THE REVENUE THAT THE SHARES IN ITA NO.2008/PN/2012 ITA NO.372/PN/2014 MRS PUSHPALATA OMPRAKASH BHANDAR I QUESTION ARE STILL LYING WITH THE ASSESSEE NOR IT IS THE CAS E OF THE REVENUE THAT THE AMOUNTS RECEIVED BY THE ASSESSEE ON SALE OF THE SHA RES IS MORE THAN WHAT IS DECLARED BY THE ASSESSEE. THOUGH THERE IS S OME DISCREPANCY IN THE STATEMENT OF THE DIRECTOR OF M/S. RICHMAND SECU RITIES PVT. LTD. REGARDING THE SALE TRANSACTION, THE TRIBUNAL RELYIN G ON THE STATEMENT OF THE EMPLOYEE OF M/S. RICHMAND SECURITIES PVT. LTD. HELD THAT THE SALE TRANSACTION WAS GENUINE. 7 IN THESE CIRCUMSTANCES, THE DECISION OF THE ITAT IN HOLDING THAT THE PURCHASE AND SALE OF SHARES ARE GENUINE AND THEREFO RE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN HOLDING THAT THE AMOUN T OF RS.1,41,08,484/- REPRESENTED UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE INCOME TAX ACT, 1961 CANNOT BE FAULTED. 8. IN THE RESULT, WE SEE NO MERIT IN THIS APPEAL AN D THE SAME IS DISMISSED WITH NO ORDER AS TO COSTS.' 22. FURTHER, PUNE BENCH OF THE TRIBUNAL IN SUSHILA SURESH CHAVAN VS. ITO IN ITA NO.1436/PN/2011, RELATING TO ASSESSMENT YEAR 2003-04, VIDE ORDER DATED 15.01.2014, IN SIMILAR CIRCUMSTANCES HAD HELD THAT THE TRANSACTION OF PURCHASE AND SALE OF SHARES OF DATABASE FINANCE LTD . WAS A GENUINE TRANSACTION AND THE CLAIM OF LONG TERM CAPITAL GAIN WAS ALLOWED IN THE HANDS OF THE ASSESSEE THEREIN. IN THE TOTALITY OF T HE ABOVE SAID FACTS AND CIRCUMSTANCES AND THE CASE LAWS, WE FIND NO MERIT I N THE ORDER OF CIT(A) AND REVERSING THE SAME, WE DIRECT THE ASSESSING OFF ICER TO COMPUTE THE INCOME IN THE HANDS OF THE ASSESSEE UNDER THE HEAD 'INCOME FROM LONG TERM CAPITAL GAINS'. THUS, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWED. 8. NOW COMING TO THE FACT OF THE PRESENT CASE, THE ASS ESSEE SUBMITTED HER REPLY IN RESPONSE TO THE NOTICE FOR PENALTY VIDE HER REPLY D ATED 17 NOVEMBER 2007, WHEREIN IT WAS CONTENDED THAT SALE CONSIDERATION WA S PAID THROUGH BANKING CHANNEL AND SHE HAS NO REASON TO BELIEVE THAT THAT THE DOCUMENTS WERE NOT GENUINE OR BOGUS AS INDICATED TO HER BY AO. THE SAL E PRICE OF SHARES WAS RECEIVED BY ASSESSEE THROUGH HER DMAT ACCOUNT OUT O F WHICH, 10,000 SHARES OF WERE SOLD ON 2 ND JUNE 2004 AND REMAINING 16400 SHARES WERE SOLD ON 15 JUNE 2004 THROUGH DMAT ACCOUNT. MOREOVER, THE CLAIM LT C G WAS CONSIDERED AS INCOME UNDER SECTION 68 OF THE ACT, THUS IT WAS A S UFFICIENT REPLY AS PER EXPLANATION 1 OF SECTION 271(1) (C) OF THE ACT. MOR EOVER THE COORDINATE BENCH OF ITAT PUNE, AND MUMBAI, WHILE DEALING WITH THE SA LE OF SHARES OF FAST TRACK ENTERTAINMENT LTD (FTEL) TRANSACTED THROUGH VIJAY B HAGWANDAS & CO. IN ITA 6 ITA NO. 742/M/2013- MISS. GEETA KASHYAP SHAH NO. 1123/M/2009 IN NIPA MILAN GANDHI VS. ITO AND IT A NO.2008/PUNE/2012, TITLED AS PUSHPALATA OMPRAKASH VS DCIT, WHILE DEALI NG WITH TRANSACTIONS OF SHARE OF FAST TRACK ENTERTAINMENT LTD. HELD THAT TH E ASSESSEE IN THOSE CASE WERE HELD ENTITLED FOR LTCG ON THE SALES OF SHARES OF FT EL, THUS THE CONTENTION OF THE REVENUE WAS NOT ACCEPTED. 9. IN VIEW OF THE ABOVE DISCUSSION, WET FIND THAT THE ASSESSEE SUFFICIENTLY EXPLAINED IN THE REPLY TO THE NOTICE U/S 274 R.W.S. 271(1)(C) OF THE ACT. AND AS SUCH NO INACCURATE PARTICULAR WAS FILED BY THE ASSESSEE AND THE LEVY OF THE PENALTY WAS WRONGLY INFLICTED UPON THE ASSESSEE, HENCE THERE IS NO MERIT IN THE ORDER OF PENALTY AND THE SAME IS DELETED. THE GROUND RAISED IN THE PRESENT APPEAL IS ALLOWED. 10. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH JUNE 2016. SD/- SD/- (D.KARUNAKARA RAO) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 08/06/2016 S.K.PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / (ASSTT.REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. !'# / GUARD FILE. $ //TRUE COPY/