BAUCHAND L VANDRA, MUMBAI V. ITO WD 25(3)91), MUMBAI

ITA 886/MUM/2013

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2882 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 30-04-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 01-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASGHAR ZAIN VP LD
• Assessee Lawyers: SANJAY PARIKHLD
• Keywords: Share purchase agreement; Sham transactions
• Section: 143(3); 54F; 133(6); 68

Judgement Text

ITA NO.886/MUM/2013 BAUCHAND L.VANDRA ASSESSMENT YEAR-2005-06 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE HONBLE SHRI SAKTIJIT DEY, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.886/MUM/2013 ( / ASSESSMENT YEAR: 2005-06) BAUCHAND L. VANDRA B/603, ASHIANA CHS LIMITED SHANTILAL MODI MARG OPP. S.B.I, KANDIVALI(W) MUMBAI-400 067 / VS. INCOME TAX OFFICER, WARD - 25(3)(1) ROOM NO.307, 3 RD FLOOR C-11, PRATYAKSHKAR BHAVAN BANDRA KURLA COMPLEX BANDRA(E), MUMBAI-400 051 '#! ./ ! ./PAN/GIR NO. AACPV-7150-J ( #% /APPELLANT ) : ( &'#% / RESPONDENT ) A SSESSEE BY : SANJAY PARIKH, LD.AR RE VENUE BY : ASGHAR ZAIN VP, LD. DR / DATE OF HEARING : 27/09/2018 / DATE OF PRONOUNCEMENT : 02/11/2018 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2005-06 CONTEST THE ORDER OF THE LD. COMMISSIONER OF INCOME -TAX (APPEALS)-35 [CIT(A)], MUMBAI, APPEAL NO.CIT(A)-35/ITO.25(3)(1)/ITA.355/07-08 DATED 21/11/2012 QUA CONFIRMATION OF ADDITION U/S 68 FOR RS.11.98 LACS AND DENIAL OF CONSEQUENTIAL DEDUCTION U/S 54F. THE ASSESSMENT FOR ITA NO.886/MUM/2013 BAUCHAND L. VANDRA ASSESSMENT YEAR-2005-06 2 IMPUGNED AY WAS FRAMED BY LD. INCOME TAX OFFICER, WARD-25(3)(1), MUMBAI [AO] U/S 143(3) OF THE INCOME TAX ACT, 1961 ON 28/12/2007 WHEREIN THE INCOME OF THE ASSESSEE HAS BEEN ASSESSE D AT RS.13.55 LACS AS AGAINST RETURNED INCOME OF RS.0.93 LACS FIL ED BY THE ASSESSEE ON 23/09/2005. THE ASSESSEE BEING RESIDENT INDIVIDUAL WAS ENGAGED IN GARMENTS BUSINESS UNDER PROPRIETORSHIP CONCERN NAMELY M/S PRAMUKH CREATION. 2.1 DURING ASSESSMENT PROCEEDINGS, IT WAS NOTED THA T THE ASSESSEE SOLD 8000 SHARES OF AN ENTITY NAMELY M/S OFFSHORE FINVEST LIMITED ON VARIOUS DATES [BETWEEN 01/07/2004 TO 08/12/2004] FO R NET SALE CONSIDERATION OF RS.12.40 LACS. THE DETAILS OF THE SALE HAVE ALREADY BEEN EXTRACTED IN PARA 3.1 OF THE QUANTUM ASSESSMENT ORDER. ALL THE SHARES UNDER QUESTION WERE STATED TO BE PURCHASED B Y THE ASSESSEE ON 21/04/2003 FOR RS.42,560/- I.E. @RS.5.32 PER SHARE FROM A BROKER NAMELY RAJENDRA PRASAD SHAH, REGISTERED WITH CALCUTTA STOCK EXCHANGE. THE DIFFERENCE OF SALE PRICE AND PURCHASE PRICE I.E. RS.11.98 LACS WAS CLAIMED AS LONG TERM CAPITAL GAINS , AGAINST WHICH DEDUCTION U/S 54F WAS CLAIMED IN VIEW OF THE FACT THAT THE AS SESSEE PURCHASED A NEW FLAT FOR RS.12.41 LACS. 2.2 THE STEEP DIFFERENCE IN THE SALE PRICE AND PURC HASE PRICE CREATED DOUBT IN THE MIND OF LD. AO AS TO GENUINENESS OF TH E TRANSACTIONS AND ACCORDINGLY, THE ASSESSEE WAS DIRECTED TO SUBSTANTI ATE THE SAME. THE ASSESSEE DEFENDED THE SAME VIDE REPLY DATED 17/12/2 007, INTER-ALIA, BY SUBMITTING THAT THE SHARES WERE ACQUIRED ON 21/04/2 003 THROUGH BROKERS CONTRACT NOTE NO. 710 AND THE PHYSICAL DELIVERY OF THE SHARES WAS TAKEN ITA NO.886/MUM/2013 BAUCHAND L. VANDRA ASSESSMENT YEAR-2005-06 3 AND ACCORDINGLY, THE SHARES WERE SENT FOR TRANSFER IN ASSESSEES NAME TO THE CONCERNED COMPANY ON 06/02/2004. 2.3 HOWEVER, THE FAILURE TO SUBMIT REQUISITE DOCUME NTS VIZ. PROOF OF CONVERSION OF PHYSICAL FORM OF SHARES IN TO DEMAT FORM, COPY OF TRANSFER DEED, PAYMENT DETAILS, COPY OF ALLOTMENT LETTER FOR UNIQUE CLIENT CODE BY BROKER AND ALSO THE DISTINCTIVE NUMBER AND FOLIO NU MBER OF THE SHARES CERTIFICATES ETC. LED TO LD. AO TO DISBELIEVE THE S UBMISSIONS OF THE ASSESSEE. FINDING VARIOUS OTHER DISCREPANCIES & SHO RTCOMINGS AS ENUMERATED IN PARA 3.5 OF THE QUANTUM ASSESSMENT ORDER, LD. AO TREATED THE STATE TRANSACTIONS AS SHAM TRANSACTIONS AND ADDED THE RESULTANT GAINS OF RS.11.98 LACS IN THE HANDS OF TH E ASSESSEE AS CASH CREDIT U/S 68. CONSEQUENTLY, DEDUCTION U/S 54F AS CLAIMED BY THE ASSESSEE AGAINST THOSE GAINS ALSO GOT DISALLOWED. I N THE ALTERNATIVE, LD. AO OPINED THAT DEDUCTION U/S 54F COULD ALSO NOT BE ALLOWED TO THE ASSESSEE IN VIEW OF THE FACT THAT THE POSSESSION OF THE NEW PROPERTY WAS NOT OBTAINED BY THE ASSESSEE WITHIN STIPULATE PERIO D. 2.4 THE ASSESSEE WAS SADDLED WITH ANOTHER ADDITION OF RS.61,000/- DUE TO LOW FAMILY HOUSEHOLD WITHDRAWALS OF RS.89,00 0/- REFLECTED BY THE ASSESSEE. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITHO UT ANY SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 21/11/2 012 WHEREIN VARIOUS REMAND REPORTS WAS SOUGHT FROM LD. AO. DURING REMAND PROCEEDINGS, NOTICE U/S 133(6) WAS SENT TO KOLKATA STOCK EXCHANGE WHEREIN IT TRANSPIRED THAT THE BROKER RAJENDRA PARSHAD SHAH HAD NOT CARRIED OUT ANY SUCH PURCHASE TRANSACTION FOR THE A SSESSEE ON 21/04/2003 AND THEREFORE, THE CONTRACT NOTE ISSUED BY THE BROKER TO THE ITA NO.886/MUM/2013 BAUCHAND L. VANDRA ASSESSMENT YEAR-2005-06 4 ASSESSEE WAS NOT IN CONFORMITY WITH THE TRADES EXEC UTED IN THE EXCHANGE. THE NOTICE SENT U/S 133(6) TO THE PRINCIP AL OFFICER OF M/S OFFSHORE FINVEST LIMITED AT OLD ADDRESS AS WELL AS NEW ADDRESS WAS RETURNED BACK UNDELIVERED. THE ASSESSEE VIDE DETAIL ED SUBMISSIONS AS EXTRACTED ON PARA 18 OF THE IMPUGNED ORDER, DEFENDED THE TRANSACTIONS. HOWEVER, THE SAME COULD NOT FIND FAVOR WITH LD. CIT (A) WHO CONFIRMED THE STAND OF LD. AO. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. AUHTORIZED REPRESENTATIVE FOR ASSESSEE [ AR], SHRI SANJAY PARIKH, DRAWING OUR ATTENTION TO THE DOCUMENTS PLACED IN TH E PAPER-BOOK DEFENDED THE TRANSACTIONS WHICH HAVE BEEN CONTROVER TED BY LD. DEPARTMENTAL REPRESENTATIVE [DR], SHRI ASGHAR ZAIN VP WHO JUSTIFIED THE STAND OF LOWER AUTHORITIES. 5.1 WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE SUBMISSIONS AND RELEVANT MATERIAL ON RECORD. UPON PERUSAL, IT IS NO TED THAT THE IMPUGNED SHARES OF M/S OFFSHORE FINVEST LIMITED WERE PURCHASED BY THE ASSESSEE FOR PURCHASE CONSIDERATION OF RS.42,560/- FROM A BR OKER RAJENDRA PRASAD SHAH . IN SUPPORT OF PURCHASE TRANSACTIONS, THE LEDGER E XTRACT OF THE ASSESSEE IN THE BOOKS OF SHARE BROKER RAJENDRA PRASAD SHAH HAS BEEN PLACED ON PAGE NUMBER 16 OF THE PAPER BOOK, THE PERUSAL OF WHICH REVEAL THAT THE STATED INVESTMENT HAS BEEN SOURCED BY THE ASSESSEE OUT OF SALE PROCEEDS OF EARLIER INVESTMENT I.E. GEOMATSOFT ON 04/04/2003. THE GAIN ON SALE OF EARLIER INVESTMENT HAS BEEN REF LECTED BY THE ASSESSEE IN HIS RETURN OF INCOME FOR AY 2004-05 AND THE SAME HAS BEEN ACCEPTED BY THE REVENUE. IN SUPPORT OF GENUINENESS OF PURCHASE OF IMPUGNED SHARES, THE ASSESSEE HAS PLACED ON RECORD CONTRACT NOTE, ITA NO.886/MUM/2013 BAUCHAND L. VANDRA ASSESSMENT YEAR-2005-06 5 RELEVANT SHARE CERTIFICATE, STATEMENT OF DEMAT HOLD ING ON VARIOUS DATES . THE PERUSAL OF THE SHARE CERTIFICATE REVEAL THAT TH E SAID SHARES WERE TRANSFERRED IN ASSESSEES NAME ON 06/02/2004 VIDE TRANSFER NUMBER 561 , REGISTERED FOLIO NO. V-41 AND THE SAID SHARES WERE SUBSEQUENTLY CONVERTED INTO DEMAT FORM WHICH IS EVIDENCED BY THE STATEMENT OF DEMAT HOLDING AS ON 31/05/2004. THE COST OF THESE SHARES HAS BEEN REFLECTED IN ASSESSEES BALANCE SHEET FOR THE FINANCIAL YEAR 200 3-04. ALL THE AFORESAID FACTS LEAD US TO CONCLUDE THAT THE ASSESS EE, IN FACT, ACQUIRED THE SHARE AT SOME POINT OF TIME AND THE SAID TRANSA CTIONS WERE NOT MERE PAPER TRANSACTIONS. NOTHING ON RECORD SUGGEST THAT ANY CASH TRANSACTIONS GOT EXCHANGED BETWEEN THE ASSESSEE AND THE SHARE BROKER. THIS IS FURTHER SUPPORTED BY THE FACT THAT THE ASSE SSEE INVESTED THE ENTIRE GAINS IN PURCHASE OF NEW HOUSE PROPERTY. AFTER WEIG HING ALL THESE EVIDENCES ON RECORD AS AGAINST THE FINDINGS OF REVE NUE, WE FIND OURSELVES IN CONCURRENCE WITH THE SUBMISSIONS OF LD . AR THAT THE TRANSACTIONS WERE GENUINE IN NATURE. SO FAR AS THE HUGE RISE IN THE SALE PRICE OF THE SHARES IS CONCERNED, IT IS TRITE LAW T HAT THE ADDITIONS COULD NOT BE MADE MERELY ON THE BASIS OF SUSPICION, CONJECTUR ES OR SURMISES. NOTHING ON RECORD SUGGEST THAT THE ASSESSEE, IN ANY MANNER, COLLIDED WITH HIS SHARE BROKER TO MANIPULATE THE PRICE OF THE STATED SHARES. THEREFORE, THE ADDITION OF RS.11.98 LACS AS MADE BY LD. AO U/S 68 STANDS DELETED. 5.2 SO FAR ASSESSEES CLAIM U/S 54F IS CONCERNED, W E FIND THAT THE ASSESSEE HAS INVESTED THE GAINS IN NEW HOUSE PROPER TY VIZ. FLAT AT ASHIANA [KANDIVALI] ON VARIOUS DATES, THE DETAILS OF WHICH HAVE BEEN EXTRACTED ON PAGE NUMBER 45 OF THE PAPER-BOOK. THE ASSESSEES CLAIM ITA NO.886/MUM/2013 BAUCHAND L. VANDRA ASSESSMENT YEAR-2005-06 6 HAS BEEN DENIED ONLY ON THE PREMISE THAT THE POSSES SION OF THE FLAT COULD NOT BE OBTAINED BY THE ASSESSEE WITHIN STIPUL ATED PERIOD OF TIME. HOWEVER, THE SAME PER SE, IN OUR OPINION, COULD NOT BE A GROUND TO DENY THE DEDUCTION PARTICULARLY WHEN THE ASSESSEE HAS AC QUIRED CERTAIN RIGHTS IN THE PROPERTY AND HAS APPROPRIATED THE CAPITAL GA INS TOWARDS THE SAME AND FULFILLED ALL THE OTHER CONDITIONS AS ENVISAGED BY SECTION 54F. THE ASSESSEE COULD NOT BE PENALIZED FOR DELAYS IN THE C ONSTRUCTION WHICH IS A COMMON FEATURE OF THE INDUSTRY. THEREFORE, WE HOLD THAT THE ASSESSEE WAS ENTITLED FOR DEDUCTION U/S 54F. THE LD. AO IS D IRECTED TO ALLOW THE SAME. 5.3 SO FAR AS THE ADDITION ON ACCOUNT OF LOW HOUSEH OLD EXPENSES ARE CONCERNED, WE CONCUR WITH THE STAND OF LOWER AUTHOR ITIES, IN THIS REGARD AND THEREFORE, DISMISS THIS GROUND OF ASSESSEES AP PEAL. 5.4 THIS IS MADE CLEAR THAT OUR OBSERVATION, ADJUDI CATION AND CONCLUSION AS ABOVE SHALL REMAIN RESTRICTED TO THE FACTUAL MATRIX OF THE INSTANT CASE ONLY. 6. THE APPEAL STAND PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND NOVEMBER, 2018. SD/- SD/- (SAKTIJIT DEY) (MA NOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED :02/11/2018 SR.PS:-THIRUMALESH/JV, SR.PS ! / COPY OF THE ORDER FORWARDED TO : 1. #% / THE APPELLANT ITA NO.886/MUM/2013 BAUCHAND L. VANDRA ASSESSMENT YEAR-2005-06 7 2. &'#% / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. ,-& . , . , / DR, ITAT, MUMBAI 6. -/01 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI