ACIT CENT. CIR. - 42, MUMBAI V. M/s. SPENTA AGRO INDUSTRIES P. LTD., MUMBAI

ITA 942/MUM/2007

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100996 (ITAT-MUMBAI)
• Duration Of Justice: 8 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 17-06-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 01-02-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K JANGRE
• Assessee Lawyers: VIJAY KOTHARI
• Keywords: Income from undisclosed sources; Onus to prove

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ./ I.T.A. NO. 942 /MUM/2007 ( / / / / ASSESSMENT YEAR : 2003-04 ASSTT. C.I.T., CENT. CIR.42, ROOM NO. 655, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. / VS. M/S SPENTA AGRO INDUSTRIES PVT. LTD., NEELKANTH APARTMENT, ACHARYA ATRE MARG 62, HILL ROAD, BEHIND WORLI DAIRY, MUMBAI 18. ! '# ./ PAN : AAACS 6364G ( !$ / // / APPELLANT ) .. ( %&!$ / RESPONDENT ) A PPELLANT BY SHRI S.K. JANGRE (DR) R E SPONDENT BY : SHRI VIJAY KOTHARI ' (# / // / DATE OF HEARING : 02-07-2015 )* ' (# / DATE OF PRONOUNCEMENT : 09-09-2015 [ +', / O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENU E AGAINST THE ORDER OF LD. CIT(A) , CENTRAL -1, MUMBAI DATED 23-10-2006 . 2. IN THIS APPEAL, THE REVENUE IS AGGRIEVED BY THE ACTION OF THE LD. CIT(A) IN HOLDING THAT THE TRANSACTIONS OF PURCHASE AND SA LE OF SHARES DONE BY THE ASSESSEE IN RELATION TO THE SHARES OF DATABASE FINA NCE LTD. AS GENUINE AND THEREBY ALLOWING THE CLAIM OF LONG TERM CAPITAL GAI NS TO THE ASSESSEE IN RELATION TO THE SAID TRANSACTION. ITA 942/M/07 2 3. BRIEF FACTS OF THE CASE ARE THAT DURING THE ASSE SSMENT PROCEEDINGS, THE A.O. NOTED THAT THE ASSESSEE HAD EARNED LONG TERM C APITAL GAIN OF RS. 1,27,34,279/-. HE ASKED THE ASSESEE TO FURNISH THE DETAILS IN THIS RESPECT. THE ASSESSEE EXPLAINED THAT IT HAS SOLD 160000 SHAR ES OF M/S DATABASE FINANCE LTD. FOR A CONSIDERATION OF RS. 1,29,28,679 /-. THE A.O. NOTED THAT THE ASSESSEE HAD FURNISHED THE COPIES OF PURCHASE AND S ALE BILLS IN THE FORM OF BROKERS NOTE THROUGH WHOM THE SHARES OF M/S DATABA SE FINANCE LTD. WERE PURCHASED AND SOLD, HOWEVER, THE ASSESSEE COULD NOT FURNISH THE DETAILS OF PROOF OF PAYMENT MADE FOR THE PURCHASE OF SHARES IN QUESTION. THOUGH THE ASSESSEE EXPLAINED THAT THE VALUE OF THE SAID SHARE S WAS ADJUSTED AGAINST THE PAYMENT DUE FROM THE BROKER, HOWEVER, THE A.O. WAS NOT SATISFIED WITH THE SAID EXPLANATION OF THE ASSESSEE. HE ALSO REPORTED THE STATEMENT OF SMT. RUPI V. CHINOY, DIRECTOR OF THE ASSESSEE COMPANY AND ASK ED HER TO FURNISH THE PROOF OF PAYMENT FOR THE PURCHASE OF SHARES OF M/S DATABASE FINANCE LTD. THE SAID DIRECTOR REITERATED THE EARLIER SUBMISSION S. HOWEVER, THE A.O. HELD THAT SINCE THE ASSESSEE COULD NOT FURNISH THE PROOF OF PAYMENT OF CONSIDERATION FOR THE PURCHASE OF SHARES, HENCE, TH E ENTIRE TRANSACTION WAS BOGUS. HE, THEREFORE, ASSESSED THE INCOME OF RS. 1, 27,34,279/- AS INCOME FROM UNDISCLOSED SOURCES AS AGAINST CLAIM OF LONG T ERM CAPITAL GAIN MADE BY THE ASSESSEE. 4. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A). IT WAS EXPLAINED BEFO RE THE LD. CIT(A) THAT THE ENTIRE DETAILS WITH RESPECT TO THE PURCHASE AND SAL E OF SHARES WERE FURNISHED BEFORE THE A.O; HOWEVER, THE A.O. FAILED TO APPREC IATE THE EVIDENCE PRODUCED BEFORE HIM. THE LD. CIT(A) AFTER CONSIDERING THE SU BMISSION AND GOING THROUGH THE EVIDENCES, WHICH WERE ALSO FURNISHED BEFORE THE A.O., OBSERVED THAT THE ASSESSEE HAD FILED COPY OF THE BROKERS BILL SHOWIN G THE TRANSACTION ABOUT THE PURCHASE OF SHARES OF M/S DATABASE FINANCE LTD. THE CERTIFICATE FROM THE BROKER REGARDING THE TRANSACTION OF THE SAID SHARES IN FAVOUR OF THE ASSESSE ITA 942/M/07 3 WAS ALSO FILED. THE DISTINCTIVE NUMBER OF SHARES WE RE ALSO MENTIONED. THE LD. CIT(A) OBSERVED THAT THE BROKERS NOTE SHOWED THE P URCHASE OF 16,000 SHARES OF M/S DATABASE FINANCE LTD. BY THE ASSESSEE FOR A CONSIDERATION OF RS. 1,94,780/- AND THE AMOUNT HAD BEEN SHOWN AS DUE FRO M THE ASSESSEE. THE LD. CIT(A) FURTHER OBSERVED FROM ANOTHER BROKERS N OTE THAT THE ASSESASEE HAD ALSO SOLD SHARES OF SOME OTHER COMPANY THROUGH THE SAME BROKER AND AN AMOUNT OF RS. 5,25,992/- WAS SHOWN AS DUE TO THE AS SESSEE BY THE SAID BROKER. THE BROKERS NOTE OF PURCHASE OF SHARES WAS DT. 18.4.2001 WHEREAS THE BROKERS SALE NOTE WAS DATED 4.4.2001, HENCE, T HE LD. CIT(A) OBSERVED THAT IT WAS CLEAR FROM THE SAID EVIDENCES THAT THE AMOUN T WAS DUE TO BE RECEIVED FROM THE BROKER AND HENCE THE PURCHASE VALUE OF SHA RES OF M/S DATABASE FINANCE LTD. WAS ADJUSTED AGAINST THE SALE PROCEEDS OF SHARES AS DUE FROM THE BROKER AND THE NECESSARY ENTRIES TO THIS EFFECT HAD ALSO BEEN MADE IN THE BOOKS OF ACCOUNT. THE LD. CIT(A) FURTHER OBSERVED T HAT THE SHARES PURCHASED BY THE ASSESSEE OF M/S DATABASE FINANCE LTD. WERE T RANSFERRED IN THE NAME OF THE ASSESSEE. THE ASSESSEE HAD ALSO FURNISHED BEFOR E THE LD. CIT(A) THE COPY OF QUOTED PRICE OF SHARES OF M/S DATABASE FINANCE LTD. OF THE BOMBAY STOCK EXCHANGE (BSE). THE LD. CIT(A), THEREFORE, OBSERVED THAT THE ASSESSEE HAD FULLY DISCHARGED ITS BURDEN TO PROVE THE GENUINENES S OF THE TRANSACTION OF PURCHASE AND SALE OF SHARES OF M/S DATABASE FINANCE LTD. THE A.O. HAD NOT BROUGHT ON RECORD ANY EVIDENCE WHICH WOULD SHOW THA T THE TRANSACTIONS RELATING TO THE PURCHASE AND SALE OF SHARES IN QUES TION WERE NOT GENUINE, ESPECIALLY WHEN THE OTHER TRANSACTIONS OF PURCHASE AND SALE OF SHARES RELATING TO OTHER COMPANIES ON THE BASIS OF BROKERS NOTE HA S BEEN CONSIDERED AS GENUINE BY THE A.O. HE, THEREFORE, HELD THAT THE A. O. WAS NOT JUSTIFIED IN HIS ACTION TO TREAT THE AFORESAID TRANSACTION AS NON-GE NUINE BY THE A.O. HE, ACCORDINGLY, DELETED THE ADDITION MADE BY THE A.O. BY HOLDING THAT THE INCOME EARNED BY THE ASSESSEE FROM THE SALE OF SHARES OF M /S DATABASE FINANCE LTD. WAS TO BE TREATED AS LONG TERM CAPITAL GAIN. AGGRI EVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE HAS COME IN APPEAL BEFORE US. ITA 942/M/07 4 4. WE HAVE HEARD THE RIVAL CONTENTIONS. THE LD. D.R . COULD NOT BRING BEFORE US ANY FACTUAL DISCREPANCY OR ERROR OF LAW IN THE W ELL REASONED ORDER OF THE LD. CIT(A). THE ASSESSEE HAD FURNISHED THE ENTIRE DETA ILS RELATING TO THE PURCHASE AND SALE OF SHARES IN QUESTION. THE A.O. TREATED TH E TRANSACTION AS NON- GENUINE SOLEY ON THE GROUND THAT THE QASSESSEE HAD NOT FURNISHED PROOF OF PAYMENT OF CONSIDERATION FOR THE PURCHASE OF SHARES . HOWEVER, THE LD. CIT(A) AFTER APPRECIATING THE EVIDENCE FILED BY THE ASSESS EE HAS GIVEN A CATEGORICAL FINDING THAT PRIOR TO THE PURCHASE OF SHARES IN QUE STION, THE ASSESSEE HAD SOLD SHARES OF SOME OTHER COMPANY THROUGH THE SAME BROKE R AND THE SALE PROCEEDS OF THE SAID SHARES WERE DUE TO BE PAID BY THE SAID BROKER TO THE ASSESSEE COMPANY. THE ASSESSEE HAD ADJUSTED THE SAI D AMOUNT WITH THE PURCHASE PRICE OF THE SAHRES OF M/S DATABASE FINANC E LTD. ALL THE EVIDENCES HAVE BEEN DULY FURNISHED BY THE ASSESSEE IN THIS RE SPECT. 5. AT THIS STAGE, THE LD. D.R. HAS TRIED TO BRING O UT A NEW ARGUMENT THAT THE BROKER M/S G.R. PANDYA SHARE BROKING COMPANY, T HROUGH WHOM THE ASSESSEE HAD PURCHASED SHARES OF M/S DATABASE FINAN CE LTD. WAS PROCEEDED AGAINST BY THE SEBI FOR VIOLATION OF SEBI RULES. I T HAS BEEN CONTENDED THAT CERTAIN ENQUIRY WAS CONDUCTED BY THE SEBI AGAINST T HE BROKER M/S G.R. PANDYA SHARE BROKING COMPANY FOR DEALINGS WITH PRAB HU STEEL, IN CONSEQUENCE OF WHICH ITS CERTIFICATE OF REGISTRATIO N WAS SUSPENDED FOR A PERIOD OF TWO MONTHS. WE ARE SURPRISED, HOW THE SAID ENQUI RY CAN IN ANY WAY RELATED TO THE CASE OF THE ASSESSEE. IF THE SEBI HAS PROCEE DED AGAINST THE SHARE BROKER IN RELATION TO SOME OTHER COMPANY WITH WHOM THE ASSESSEE HAD NO RELATION AT ALL, HOW CAN THE SHARES PURCHASED BY TH E ASSESSEE FROM M/S DATABASE FINANCE LTD. CAN BE HELD TO BE NON-GENUINE . THE SAID ENQUIRY, IF ANY, CONDUCTED BY THE SEBI HAD NO RELATION, WHATSOE VER, WITH THE SHARE TRANSACTION DONE BY THE ASSESSEE. THE ASSESSEE HAD DULY FURNISHED THE EVIDENCE OF PURCHASE AND SALE OF SHARES AND THE LON G TERM CAPITAL GAIN EARNED ITA 942/M/07 5 THEREFROM. NO DISCREPANCY HAS BEEN BROUGHT OUT BY THE LD. D.R. IN RELATION TO THE SHARE TRANSACTIONS DONE BY THE ASSESSEE WITH M/ S DATABASE FINANCE LTD. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORD ER OF THE LD. CIT(A) WHILE ALLOWING THE CLAIM OF THE ASSESSEE. THERE IS NO MER IT IN THE APPEASL FILED BY THE REVENUE AND THE SAME IS ACCORDINGLY DISMISSED. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH SEPTEMBER, 2015. +', ' )* # ' -+. 09-09-2015 * ' / SD/- SD/- (R.C. SHARMA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMB ER MUMBAI ; -+ DATED 09-09-2015 [ .../ R.K. R.K. R.K. R.K. , SR. PS +', ' %(01 2'1( +', ' %(01 2'1( +', ' %(01 2'1( +', ' %(01 2'1(/ COPY OF THE ORDER FORWARDED TO : 1. !$ / THE APPELLANT 2. %&!$ / THE RESPONDENT. 3. 3( () / THE CIT(A)-1, MUMBAI 4. 3( / CIT- (CENTRAL) 1 MUMBAI 5. 16/ %( , , / DR, ITAT, MUMBAI A BENCH 6. /8 9 / GUARD FILE. +', +', +', +', / BY ORDER, &1( %( //TRUE COPY// : :: :/ // /; < ; < ; < ; < ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI