Pavillion Commercial Pvt. Ltd., Kolkata V. ITO,Ward-5(2), Kolkata, Kolkata

ITA 935/KOL/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4728 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 27-06-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 14-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V N DATTA
• Keywords: Business income
• Section: 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.935/KOL/2012 ASSESSMENT YEARS:2005-06 PAVILLION COMMERCIAL PVT. LTD., 9, LAL BAZAR STREET, KOLKATA-700 001 [ PAN NO. AABCP 5608 F ] / V/S . ITO WARD-5(2) AAYAKAR BHAWAN, KOLKATA-700 069 /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI V. N. DATTA, ADVOCATE /BY RESPONDENT SHRI SALLONG YADEN, ADDL. CIT-DR /DATE OF HEARING 27-06-2016 /DATE OF PRONOUNCEMENT 12-08-2016 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-VI, KOLKATA DATED 23.03.2012. ASSESSM ENT WAS FRAMED BY ITO WARD- 5(2), KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 196 1 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 26.12.2007 FOR ASSESSMEN T YEAR 2005-06. SOLITARY INTER- CONNECTED GROUNDS RAISED BY THE ASSESSEE PER ITS AP PEAL ARE AS UNDER:- 1. THAT THE ORDER PASSED BY THE LD ASSESSING OFFIC ER AS WELL AS LD. C.I.T.(A) IS ARBITRARY, IMAGINARY WITHOUT ANY BASIS AND ILLEG AL. 2. THAT THE LD. C.I.T.(A) HAS ERRED IN CONFIRMING T HE DISALLOWANCE OF SHORT TERM CAPITAL LOSS OF RS.5681304/- WHICH WAS DISALLOWED B Y THE LD ASSESSING OFFICER ONLY ON THE BASIS OF THAT THE STOCK BROKER HAS BEEN SUSPENDED BY THE SEBI, WHICH IS TOTALLY AGAINST THE FACT AND LAW ALSO. ITA NO.935/KOL/2012 A.Y.2005- 06 PAVILLION COMMERCIAL PVT. LTD. VS. ITO WD-5(2) KOL. PAGE 2 3. THAT THE LD. C.I.T.(A) HAS ERRED IN CONFIRMING T HE DISALLOWANCE OF SHORT TERM CAPITAL LOSS OF RS.5681304/- WHICH WAS DISALLOWED B Y THE LD ASSESSING OFFICER OBSERVING THAT THE SHORT TERM CAPITAL LOSS ARISE BY TRADING IN SHARES OF COMPANIES WHOSE STOCK WERE BANNED BY SEBI. THIS IS TOTALLY AGAINST THE FACT AND LAW. 4. THAT THE LD. C.I.T.(A) HAS ERRED IN CONFIRMING T HE ORDER PASSED BY LD. ASSESSING OFFICER IGNORING THE FACT THAT KOLKATA ST OCK EXCHANGE ASSOCIATION LTD HAS CONFIRM THE TRADE DETAIL EXECUTED BY BROKER IN THE SCRIPT BY WHICH SHORT TERM CAPITAL LOSS ARISE WHICH IS TOTALLY UNJUSTIFIE D AND IT SHOULD NOT BE SUSTAINED. 5. THAT LEAVE MAY BE GRANTED TO ADD, TO ALTER MODIF Y OR AMEND GROUND OR GROUNDS OF APPEAL DURING THE HEARING OF APPEAL. SHRI V.N. DATTA, LD. AUTHORIZED REPRESENTATIVE APPE ARED ON BEHALF OF ASSESSEE AND SHRI SALLONG YADEN, LD. DEPARTMENTAL REPRESENTATIVE APPEARED ON BEHALF OF REVENUE. 2. ONLY INTER-CONNECTED ISSUE IN THIS APPEAL IS THA T LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER BY TREATING THE SHO RT TERM CAPITAL LOSS OF 56,81,304/- AS BOGUS LOSS. 3. FACTS IN BRIEF ARE THAT ASSESSEE IN THE PRESENT CASE IS A PRIVATE LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF LOAN AND ADVANCE. FO R THE YEAR UNDER CONSIDERATION, ASSESSEE HAS FILED ITS RETURN DECLARING A BUSINESS LOSS OF 69,92,140/-. THEREAFTER, THE CASE WAS SELECTED FOR SCRUTINY AND ACCORDINGLY NOTI CE U/S 143(2) R.W.S. 142(1) OF THE ACT WAS ISSUED. 4. ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAS MA DE PURCHASE AND SALE OF SHARE OF VARIOUS COMPANIES AND BOOKED A LOSS OF 56,81,304/-, DETAILS OF SUCH COMPANIES ARE AS UNDER:- INWARDS OUTWARDS LOSS GLOBE STOCK 43,32,152/- 12,47,803/- 30,84,354/- PSLFINANCE 4,97,725/- 49,300/- 4,48,425/- LIMTXINV 9,89,900/- 1,24,700/- 8,65,200/- ITA NO.935/KOL/2012 A.Y.2005- 06 PAVILLION COMMERCIAL PVT. LTD. VS. ITO WD-5(2) KOL. PAGE 3 SANGOCON 15,75,340/- 2,92,080/- 12,83,260/- DURING THE ASSESSMENT PROCEEDINGS, AO OBSERVED THAT SALE/PURCHASE OF SHARES OF M/S GLOBE STOCK AND SECURITIES LTD. HAS BEEN BANNED BY SEBI AND INVESTIGATION IS CARRIED OUT AGAINST THE OTHER COMPANIES AS STATED ABOVE BY SEBI. IT WAS ALSO OBSERVED THAT THE BROKER M/S RAJENDRA PRASAD SHAH THROUGH WHOM THE TR ANSACTIONS IN THE SHARE OF ABOVE COMPANIES WERE CARRIED OUT BY THE ASSESSEE WAS ALSO SUSPENDED BY SEBI. THE RELEVANT CONTRACT NOTES WERE SENT TO KOLKATA STOCK EXCHANGE (KSE FOR SHORT) BY THE AO FOR VERIFICATION BUT KSE WAS NOT ABLE TO PROVIDE THE NA ME AND ADDRESS OF THE SELLER/ PURCHASER OF SUCH SHARES. FROM THE DETAILED, IT WAS OBSERVED THAT THE BROKER M/S RAJENDRA PRASAD SHAH, CREATED THE LOSS FOR THE ASSE SSEE BY FURNISHING PURCHASE AND SALES BILLS WITH A VIEW TO PROVIDE THE LOSS TO ASSE SSEE. ACCORDINGLY, AO OBSERVED THAT THE LOSS CLAIMED BY ASSESSEE FOR 56,81,304/- IN THE SALE-PURCHASE OF SHARE OF THE AFORESAID COMPANIES ARE NOTHING BUT A BOGUS SHORT T ERM CAPITAL LOSS WHICH CANNOT BE ALLOWED TO THE CARRIED FORWARD. THUS, THE LOSS CLAI MED BY ASSESSEE WAS DISALLOWED. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHEREAS ASSESSEE SUBMITTED THAT : (I) THE KOLKATA STOCK EXCHANGE HAD CONFIRMED THE TR ANSACTIONS EXECUTED BY THE BROKER M/S RAJENDRA PRASAD SHAH; (II) ALL THE TRANSACTIONS WERE EXECUTED IN THE RELE VANT PREVIOUS YEAR 2004-05 AND TILL 31.03.2005, THE SALE OF COMPANY SHARE OF M /S GLOB STOCKS & SECURITIES LTD. WERE NOT BANNED AND ALSO THE BROKER M/S RAJEND RA PRASAD SHAH WAS NOT SUSPENDED BY THE SEBI; (III) THE ORDER OF SEBI WAS PASSED ON 29.09.2005 AN D 30.11.2005 RESPECTIVELY WHICH IS LONG AFTER THE TRANSACTIONS DATE AND CLOSE OF THE FINANCIAL YEAR; (IV) THE SHARES PURCHASED AT MARKET RATE THROUGH BR OKER M/S RAJENDRA PRASAD SHAH AGAINST ACCOUNT PAYEE CHEQUE, THE SHARES WERE DULY CREDITED IN THE DEMAT ACCOUNT OF ASSESSEE. SIMILARLY, SHARES WERE SOLD AT THE MARKET RATE AGAINST THE PAYMENT THROUGH ACCOUNT PAYEE CHEQUE THEREFORE NO D ISALLOWANCE BY HOLDING THE AFORESAID TRANSACTIONS AS BOGUS IS WARRANTED ITA NO.935/KOL/2012 A.Y.2005- 06 PAVILLION COMMERCIAL PVT. LTD. VS. ITO WD-5(2) KOL. PAGE 4 HOWEVER, LD. CIT(A) HAS DISREGARDED THE CLAIM OF AS SESSEE AND UPHELD THE ACTION OF AO BY OBSERVING THE FOLLOWING FACTS:- (A) SHARE BROKER, M/S RAJENDRA PRASAD SHAH DID NOT PROV IDE THE DETAILS OF THE BUYERS AND SELLERS OF THE SHARE OF AFORESAID COMPAN Y, THEREFORE THE ACTIVITIES WERE SUSPENDED AS THE BROKER, M/S RAJENDRA PRASAD S HAH DELIBERATELY WAS NOT PROVIDING THE DETAILS OF BUYERS AND SELLERS WHI CH ARE MANDATORY IN NATURE. THE SAID BROKER WAS SUSPENDED FOR THE ACTIV ITY OF SHARE DONE IN THE EARLIER YEAR PERIOD ALSO; (B) IT WAS NOTED FROM THE DATE-WISE CHART OF THE PRICE OF THE UNQUOTED SHARE- SCRIP OF THE AFORESAID FOUR COMPANIES THAT THERE WA S A SHARP DECLINE IN THE PRICE OF THE COMPANIES. ALTHOUGH, THE SENSEX WAS GA INING RATIO GROWTH. ACCORDINGLY, LD. CIT(A) FOUND THAT MODUS OPERANDI ADOPTED BY ASSESSEE IS TO AVOID TAXES BEING NON-GENUINE CIRCUMSTANCES AND IT WAS NO THING BUT A COLORABLE DEVICE TO AVOID TAX AND HE UPHELD THE ACTION OF AO. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US. 6. BEFORE US LD. AR SUBMITTED PAPER BOOK WHICH IS R UNNING PAGES FROM 1 TO 63 AND STATED THAT SEBI HAS SUSPENDED THE BROKER, M/S RAJENDRA PRASAD SHAH ON ACCOUNT OF SOME OTHER REASONS AND THE TRANSACTIONS MADE BY ASSESSEE WAS BEFORE THE DATE OF SUSPENSION OF SAID M/S RAJENDRA PRASAD SHAH BY THE KSE. THE LD. AR DREW OUR ATTENTION ON PAGES 1 TO 13 WHERE THE CONTRACT NOTES IN SUPPORT OF SALE & PURCHASE OF SHARES WAS PLACED. SIMILARLY THE SUMMERY OF DMAT AC COUNT WAS PLACED ON PAGES 14- 17 OF THE PAPER BOOK AND THE BANK STATEMENT WAS REF LECTING ALL THE TRANSACTIONS WHICH IS PLACED ON PAGES 18 TO 34 OF THE PAPER BOOK. ON T HE HAND THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE LOWER AUTHORITIES. 6.1 WE HAVE HEARD RIVAL PARTIES AND PERUSED THE MAT ERIALS AVAILABLE ON RECORD. FROM THE FOREGOING DISCUSSION WE FIND THAT THE AUTH ORITIES BELOW HAVE TREATED THE LOSS OF THE ASSESSEE AS BOGUS BECAUSE THE BROKER OF KSE WAS SUSPENDED. HOWEVER, WE FIND ITA NO.935/KOL/2012 A.Y.2005- 06 PAVILLION COMMERCIAL PVT. LTD. VS. ITO WD-5(2) KOL. PAGE 5 THAT THE TRANSACTIONS WERE COMPLETE IN TERMS OF DOC UMENTATION AND THERE WAS NO DEFECT IN THE PAPERS SUBMITTED BY THE ASSESSEE IN SUPPORT OF THE TRANSACTIONS. WE ALSO FIND THAT THERE WERE ENTRIES FOR THE SALE PURCHASE OF TH E SHARES IN THE BANK STATEMENTS, CONTRACT NOTES, DMAT ACCOUNT OF THE ASSESSEE. IN OU R CONSIDERED VIEW WE FIND THAT THE ASSESSEE HAS PROVED THE TRANSACTION ON THE BASIS OF DOCUMENTS AND THEREFORE THE SUSPENSION OF THE BROKER BY SEBI WILL NOT HOLD THE TRANSACTION IN VALID. IN THIS CONNECTION WE ARE PUTTING OUR RELIANCE IN THE JUDGM ENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. KORLAY TRADING CO. LTD. (1999) 152 CTR 0017 : (1998) 232 ITR 0820, THE HEAD NOTE O F THE CASE READS AS UNDER : BUSINESS INCOMELOSS ON SALE OF SHARESGENUINENESS OF TRANSACTION DOUBTEDASSESSEE BY FURNISHING NAME OF COMPANY, NUM BER OF SHARES PURCHASED, DATE OF SALE, AMOUNT OF PURCHASE AND SAL E MONEY, ETC. DISCHARGED ITS INITIAL BURDENMERELY BECAUSE BROKER THROUGH WH OM TRANSACTION WAS MADE FAILED TO PRODUCE HIS BOOKS DOES NOT MEAN THAT TRAN SACTION WAS NOT GENUINE NO INVESTIGATION MADE BY ITO TO BRING ON RECORD ANY MATERIAL TO DISBELIEVE THE CLAIM OF ASSESSEETRANSACTION IS PROVEDFINDING OF TRIBUNAL IS BASED ON MATERIAL AND CANNOT BE SAID TO BE PERVERSECLAIM FO R LOSS WAS ALLOWABLE IN THE INSTANT CASE, LD. DR HAS NOT BROUGHT ANY DEF ECT WITH RESPECT TO THE TRANSACTIONS OF THE SALE & PURCHASE OF THE SHARES BUT JUST MENTI ONED THAT THE BROKER THROUGH WHOM THE TRANSACTIONS WERE MADE WAS SUSPENDED. WE ALSO F IND THAT THE BROKER WAS NOT SUSPENDED DURING THE PERIOD, WHEN THE TRANSACTIONS FOR SALE & PURCHASE OF THE SHARES TAKEN PLACE. THE LD. DR HAS ALSO NOT BROUGHT ON REC ORD THE REASONS FOR WHICH THE BROKER WAS SUSPENDED. IN VIEW OF ABOVE, WE ARE INCL INED TO REVERSE THE ORDER OF AUTHORITIES BELOW AND THIS GROUND OF ASSESSEE IS AL LOWED. 7. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 12/08/2016 SD/- SD/- (S.S.VISWANETHRA RAVI) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP ! - 12/08/2016 / KOLKATA ITA NO.935/KOL/2012 A.Y.2005- 06 PAVILLION COMMERCIAL PVT. LTD. VS. ITO WD-5(2) KOL. PAGE 6 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-PAVILLION COMMERCIAL PVT. LTD. 9, LAL BA ZAR STREET, KOLKATA-01 2. /RESPONDENT-ITO, WARD-5(2), AAYAKAR BHAWAN, KOLKATA -700 069 3. '# % / CONCERNED CIT 4. % - / CIT (A) 5. &'( ))'# , '# / DR, ITAT, KOLKATA 6. (*+ / GUARD FILE. BY ORDER/ , /TRUE COPY/ / '#,