JCIT, (OSD), CIR-8(1), KOLKATA, Kolkata V. M/s Carbon Finance Ltd., Kolkata

ITA 841/KOL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9587 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2017
• Appeal Filed By: Department
• Bench Allotted: SMC
• Next Hearing Date: 15-11-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 27-04-2016
• Court: TRIBUNAL
• Keywords: Share purchase agreement

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : KOLKATA [BEFORE HONBLE SRI ABY T.VARKEY, JM & DR.A.L.SAI NI, AM] I.T.A NO. 841/KOL/201 6 ASSESSMENT YEAR : 2005-0 6 J.C.I.T. (OSD), CIRCLE-8(1) -VS.- M/S. CA RBON FINANCE LTD. KOLKATA KOLKATA [PAN : AABCB 9071 C] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : NONE FOR THE RESPONDENT : MISS RUCHIRA KHERIA, ACA DATE OF HEARING : 28.12.2016. DATE OF PRONOUNCEMENT : 06 .01.2017. ORDER PER ABY T.VARKEY, JM THIS IS AN APPEAL PREFERRED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-15, KOLKATA DATED 02.02.2016 FOR A.Y 2005-06. 2. THE SOLE GROUND RAISED BY THE REVENUE IS A S FOLLOWS :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN TO ASSESS THE LTCG AT A LOSS OF RS.60,31,202/- THOUGH THE ASSESSEE WAS NOT ABLE TO PRODUCE THE EVIDENCE OF PURCHASE & SALE OF SHARES. 3. THE BRIEF FACTS OF THE CASE IS THAT THE APP ELLANT IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF FINANCING AND INVESTMENT ACTIVITIES. THE ASSESSEE FILED ITS RETURN OF INCOME SHOWING A LOSS OF RS.1,38,270/- UN DER THE NORMAL PROVISION OF THE ACT AND BOOK PROFIT UNDER THE PROVISION OF SECTION 115J B OF THE ACT AT RS.18,89,510/-. THEREAFTER THE CASE WAS SELECTED FOR SCRUTINY AND O N 14.12.2007 AND ASSESSMENT WAS PASSED DETERMINING THE TOTAL INCOME AT RS.27,09,516 /-. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO VIDE ORDER DAT ED 28.03.2012 DISPOSED OFF THE APPEAL BY GIVING CERTAIN SPECIFIC DIRECTION TO THE AO FOR COMPUTATION OF THE TOTAL 2 ITA NO.841/KOL/2016 M/S. CARBON FINANCE LIMITED A.YR.2005-06 2 INCOME. THE ASSESSEE FILED AN APPLICATION BEFORE TH E AO TO GIVE EFFECT TO THE ORDER OF THE LD. CIT(A) AND PURSUANT TO THE SAID APPLICATION OF THE ASSESSEE THE IMPUGNED ORDER WAS PASSED BY THE AO U/S 251/154/143(3) OF THE ACT DATED 13.08.2012 WHEREBY THE AO RE-COMPUTED THE TOTAL INCOME UNDER THE REGULAR PROV ISION OF THE ACT WITHOUT GRANTING CERTAIN CLAIMS AS PER THE PROVISION OF THE ACT. WHI LE GIVING EFFECT TO THE LD. CIT(A)S DIRECTION, THE AO NOTES THAT THE ASSESSEE FAILED TO PRODUCE EVIDENCE OF PURCHASE OF SHARES I.E. CONTRACT NOTES, BILLS/VOUCHERS WITH REG ARD TO THE TRANSACTIONS RELATING TO THE SHARES PURCHASED IN A.Y.1993-94, 1994-95, 1995-96 A ND 1996-97 AND SO THE CLAIM OF LONG TERM CAPITAL GAIN ON THE SAID SHARES WAS NOT A CCEPTED BY THE AO. THEREAFTER THE AO COMPUTED LONG TERM CAPITAL GAIN AND GRANTED ONLY LO SS OF RS.15,391/- IN PLACE OF THE ASSESSEES CLAIM OF LONG TERM CAPITAL GAIN AT A LOS S OF RS.60,31,202/-. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE BY HOLDING AS UNDER :- I HAVE GONE THROUGH THE APPEAL EFFECT ORDER, THE S UBMISSION OF THE AR DURING THE APPELLATE PROCEEDINGS AND THE VARIOUS DOCUMENTS FIL ED DURING THE APPELLATE PROCEEDINGS. IT IS MENTIONED BY THE AO IN THE ORDER THAT THE 'ASSES SEE FAILED TO PRODUCE ANY EVIDENCE OF PURCHASE I.E. CONTRACT NOTES, BILLS 1 VOUCHERS WITH REGARD TO TRANSACTION RELATING TO SHARES WHICH ARE PURPORTED TO BE PURCHASED IN 1993-94, 199 4-95, 1995-96 AND 1996-1997, THE APPEAL EFFECT IS GIVEN AS ABOVE'. HOWEVER, THE AO H AS CLEARLY MISSED THE FACT THAT THE SHARES WERE NOT PURCHASED FROM THE OPEN MARKET. HEN CE, THE ASSESSEE COULD NOT HAVE PRODUCED THE CONTRACT NOTES ETC. INSTEAD, THOSE SHA RES HAD COME TO THE ASSESSEE ON AMALGAMATION OF DIFFERENT COMPANIES WHICH WERE RESU LT OF THE HIGH COURT ORDERS. THESE FACTS WERE AVAILABLE ORE THE A.O. AND HAVE BEEN DEM ONSTRATED AND PROVED BY THE ASSESSEE BEYOND DOUBT BY RELEVANT DOCUMENTS. HENCE, THE AO I S DIRECTED TO ASSESS THE LTCG AT LOSS OF RS. 60,31,202/- INSTEAD OF RS. 15,391/-. AGGRIEVED BY THE AFORESAID ORDER OF THE LD. CIT(A) THE REVENUE IS BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS. WHILE GIVING EFFECT TO THE ORDER OF THE LD. CIT(A) THE AO HAS NOT GRANTED THE LONG TERM CAPITAL GAIN FOR SHARES ACQUIRED BY THE ASSESSEE IN YEAR 1993-94 TO 1996-97 BECAUSE THE ASSESSEE FAILED TO PRODUCE THE EVIDENCE OF PURCHASE OF SHARES I.E. CON TRACT NOTES WITH REGARD TO TRANSACTION RELATING TO THE SHARES WHICH ARE PURPORTED TO BE PU RCHASED DURING THIS PERIOD. THE CASE 3 ITA NO.841/KOL/2016 M/S. CARBON FINANCE LIMITED A.YR.2005-06 3 OF THE ASSESSEE IS THAT IN THE YEAR 1993-94 TO 1996 -97 THE SHARES OF M/S. H.L.INVESTMENT CO. LTD WHERE INITIAL PURCHASED BY THE TWO COMPANIE S I.E M/S GRAPHITE HOLDINGS LIMITED AND M/S GRAPHITE INVESTMENTS LTD.. THE LD. CIT(A) HAS REPRODUCED THE CHART SHOWING THE DETAILS OF PURCHASE OF SHARES OF BOTH T HESE COMPANIES I.E. GRAPHITE HOLDINGS LIMITED AND GRAPHITE INVESTMENTS LTD. FROM 1993-94 TO 1996-97 AT PAGE-5 OF THE IMPUGNED ORDER OF LD. CIT(A). IT HAS BEEN BROUG HT TO OUR KNOWLEDGE THAT IN THE YEAR 2001-02, M/S. GRAPHITE HOLDINGS LTD AND M/S. GRAPHI TE INVESTMENTS LTD WAS MERGED WITH M/S. BANGUR ENTERPRISES LTD VIDE ORDER OF HON BLE CALCUTTA HIGH COURT DATED 22.03.2002. THEREAFTER POST-AMALGAMATION, THE NAME OF THE COMPANY WAS CHANGED TO M/S. CARBON ENTERPRISES LTD W.E.F. 01.04.2002 AND S UBSEQUENTLY TO M/S. CARBON FINANCE LTD WITH EFFECT FROM 12.12.20003, (COPY OF THE CERTIFICATE OF INCORPORATION AND HIGH COURT ORDERS WERE ALSO ANNEXED.) THE LD. CIT(A ) HAS ALSO TAKEN NOTE OF THESE FACTS BEING DULY INCORPORATED IN THE BALANCE SHEET OF M/S CARBON FINANCE LTD FOR A.Y.2005- 06. THE LD. CIT(A) TOOK NOTE OF THE FACT THAT SINC E THE ASSESSEE HAS NOT ACQUIRED THE SHARES THROUGH DIRECT PURCHASE OF SHARES, SO THE AO S DIRECTION TO PRODUCE SHARE CERTIFICATE OF M/S H.L.INVESTMENT CO.LTD WAS NOT PO SSIBLE AND SINCE THE ASSESSEE HAS GENUINELY ACQUIRED THE SHARES AND RECORDED THE SHAR ES IN ITS BOOKS OF ACCOUNT, THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY GRANTIN G LONG TERM CAPITAL GAIN OF RS.60,31,202/-. WE TAKE NOTE THAT IN THE LIGHT OF T HE FACTS AS ENUMERATED ABOVE, THE AO ERRED IN NOT APPRECIATING THE FACT THAT SHARES HAS COME TO THE ASSESSEE DUE TO THE OPERATION OF AMALGAMATION OF THE DIFFERENT COMPANIE S AS PER THE HONBLE HIGH COURTSORDER WHICH HAS BEEN RIGHTLY APPRECIATED BY THE LD. CIT(A) AND SO WE CONFIRM THE ORDER OF LD. CIT(A), SINCE WE DO NOT FIND ANY I NFIRMITY IN THE ORDER OF THE LD. CIT(A) AND THEREFORE WE DISMISS THE APPEAL OF THE REVENUE. 4 ITA NO.841/KOL/2016 M/S. CARBON FINANCE LIMITED A.YR.2005-06 4 5. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 06.01.2017. SD/- SD/- [DR.A.L.SAINI] [ ABY T.VARK EY ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 06 . 01.2017. [RG PS] COPY OF THE ORDER FORWARDED TO: 1. M/S. CARBON FINANCE LTD., 31, CHOWRINGHEE ROAD, KOLKATA-700016. 2. J.C.I.T. (OSD), CIRCLE-8(1), KOLKATA. 3. CIT(A)-15, KOLKATA. 4. CIT-3, KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSTT.REGISTRAR, ITAT, KOLKATA BENCHES