M/s. Rungta Properties Pvt. Ltd., Kolkata v. DCIT, Circle - 7, Kolkata, Kolkata

CO 71/KOL/2011 | 2003-2004
Pronouncement Date: 29-04-2015

Appeal Details

RSA Number 7123523 RSA 2011
Assessee PAN AABCR1610F
Bench Kolkata
Appeal Number CO 71/KOL/2011
Duration Of Justice 3 year(s) 4 month(s) 8 day(s)
Appellant M/s. Rungta Properties Pvt. Ltd., Kolkata
Respondent DCIT, Circle - 7, Kolkata, Kolkata
Appeal Type Cross Objection
Pronouncement Date 29-04-2015
Appeal Filed By Assessee
Bench Allotted C
Tribunal Order Date 29-04-2015
Assessment Year 2003-2004
Appeal Filed On 21-12-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOLKATA [BEFORE HON BLE SHRI MAHAVIR SINGH JM & HON BLE SHRI B.P.JAIN AM ] I.T.A NO S.626 627 & 1536/KOL/2011 ASSESSMENT YEAR S : 2004 - 05 2006 - 07 & 2003 - 04 D.C.I.T. CIRCLE - 7 VS. M/S.RUNGTA PROPERTIES PVT.LTD. KOLKATA KOLKATA (PAN: AABCR 1610 F) (APPELLANT) ( RESPONDENT) C.O.NO.71/KOL/2011 (A/O I.T.A NO.1536/KOL/2011 ASSESSMENT YEAR: 2003 - 04 M/S.RUNGTA PROPERTIES PVT.LTD. VS. D.C.I.T. CIRCLE - 7 KOLKA TA KOLKATA ( CROSS OBJECTOR) ( RESPONDENT) (PAN: AABCR 1610 F) FOR THE DEPARTMENT : SHRI N.B.SOM JCIT FOR THE ASSESSEE : SHRI S.JHAJHARIA FCA & SHRI S.SEN AR DATE OF HEARING : 21 .04. 2015. DATE OF PRONOUNCEMENT: 29.04.2015. ORDER PER SH RI B.P.JAIN AM : THESE THREE APPEALS OF THE REVENUE ARISE FROM THREE DIFFERENT ORDER S OF LD. CIT(A) - VIII KOLKATA DATED 23.12.2010 FOR ASSESSMENT YEAR S 2004 - 05 AND 2006 - 07 AND DATED 04.08.2011 FOR A.Y R.2003 - 04 . THE ASSESSEE HAS ALSO RAISED CROSS OBJEC TION AGAINST THE APPEAL OF THE REVENUE FOR A.YR.2003 - 04. SINCE THE ISSUES IN ALL THE APPEALS ARE IDENTICAL AND THEREFORE ALL THE APPEALS ARE BEING TAKEN TOGETHER BY THIS CONSOLIDATED ORDER. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL FOR A. YR.2004 - 05 AS UNDER : - (I). THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD.CIT(A) HAS ERRED IN LAW AS WELL AS IN FACTS IN HOLDING THAT THE PROFIT FROM SALE OF FLAT IS TO BE TREATED AS INCOME FROM CAPITAL GAIN INSTEAD OF BUSINESS INCOME. (II) TH AT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD.CIT(A) HAS ERRED IN LAW AS WELL AS IN FACTS IN DELETING THE ADDITION MADE U/S 2(22)(E) OF THE INCOME TAX ACT 1961 IN CONTRAVENTION TO THE BASIC PROVISIONS OF THE ACT. ITA NOS.626 627 1536&C.O.71 OF 2011 M/S.RUNGTA PROPERTIES PVT.LTD. A.YRS.2003 - 04 2004 - 05 2006 - 07 2 (III) THAT THE DEPARTMENT CRAV ES LEAVE TO AMEND ALTER OR DELETE ANY OF THE GROUNDS MENTIONED ABOVE OR TO ADD A NEW GROUND IF REQUIRED. 2.1. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL FOR A.YR.2006 - 07 AS UNDER : - (I). THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE T HE LD.CIT(A) HAS ERRED IN LAW AS WELL AS IN FACTS IN DELETING THE DISALLOWANCE MADE BY THE AO OF THE ALLEGED CLAIM OF LOSS OF THE ASSESSEE COMPANY IN TRADING OF PENNY STOCK. (II) THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD.CIT(A) HAS ERRED I N LAW AS WELL AS IN FACTS IN HOLDING THAT THE PROFIT FROM SALE OF FLAT IS TO BE TREATED AS INCOME FROM CAPITAL GAIN INSTEAD OF BUSINESS INCOME. (II I ) THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD.CIT(A) HAS ERRED IN LAW AS WELL AS IN FACTS IN DELETING THE ADDITION MADE U/S 2(22)(E) OF THE INCOME TAX ACT 1961 IN CONTRAVENTION TO THE BASIC PROVISIONS OF THE ACT. (III) THAT THE DEPARTMENT CRAVES LEAVE TO AMEND ALTER OR DELETE ANY OF THE GROUNDS MENTIONED ABOVE OR TO ADD A NEW GROUND IF REQUIRED . 2.2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL FOR A.YR.2003 - 04 AS UNDER : - ( I) THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD.CIT(A) HAS ERRED IN LAW AS WELL AS IN FACTS IN HOLDING THAT THE PROFIT FROM SALE OF FLAT IS TO BE T REATED AS INCOME FROM CAPITAL GAIN INSTEAD OF BUSINESS INCOME. (II ) THAT THE DEPARTMENT CRAVES LEAVE TO AMEND ALTER OR DELETE ANY OF THE GROUNDS MENTIONED ABOVE OR TO ADD A NEW GROUND IF REQUIRED. 2.3. THE LD. COUNSEL FOR THE ASSESSEE HAS WITHDRAWN TH E CROSS OBJECTION AND DID NOT PRESS THE SAME. ACCORDINGLY THE SAME IS DISMISSED AS NOT PRESSED/WITHDRAWN. 3. FIRST OF ALL WE TAKE UP THE REVENUE S APPEAL IN ITA NO.626/KOL/2011 FOR A.YR.2004 - 05. 3.1. AS REGARDS GROUND NO.1 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE OWNED A LAND AND BUILDING AT 206 A.J.C.BOSE ROAD KOLKATA ABOUT 1 BIGHA AND 2 CHITTACKS SINCE 1965. SUCH PROPERTY WAS PURCHASED AT RS.3 17 000/ - (EXCLUDING STAMP DUTY AND OTHER EXPENSES) AND WAS SHOWN IN THE ACCOUNTS OF THE COMPANY SINC E THE DATE OF PURCHASE AS FIXED ASSET IN ITS BALANCE SHEET. THE ASSESSEE HAD ENTERED INTO A JOINT VENTURE AGREEMENT WITH ONE M/S.THE RIGHT ADDRESS LTD. (TRAL FOR BRIEF) ON 28.1.1994 FOR DEVELOPMENT OF A BUILDING ON THE SAID PLOT OF LAND. AS PER SUCH DEVELO PMENT AGREEMENT THE ASSESSEE WAS ENTITLED TO 49.29% OF THE TOTAL FAR (FLOOR AREA RATIO) TOGETHER WITH 49.29% UNDIVIDED SHARE IN THE LAND COMPRISED IN THE BUILDING TO BE CONSTRUCTED AND ALSO IN THE COMMON AREA AND INSTALLATION ATTRIBUTABLE TO ITA NOS.626 627 1536&C.O.71 OF 2011 M/S.RUNGTA PROPERTIES PVT.LTD. A.YRS.2003 - 04 2004 - 05 2006 - 07 3 49.29% IN THE SAID BUILDING. THE POSSESSION OF THE LAND WAS HANDED OVER TO THE SAID DEVELOPER ON 28.9.1996 AS PER THE TERMS OF REFERENCE OF SUCH DEVELOPMENT AGREEMENT DT. 28.1.1994. THE ASSSESSEE HAD SHOWN CAPITAL GAIN OF RS.5 06 280/ - ON SALE OF FIXED ASSETS HOWEVER THE A.O. TREATED THE TRANSACTION AS BEING LIABLE TO BE ASSESSED AS BUSINESS INCOME AND CONSEQUENTLY A.O. TREATED THE GAIN ON SUCH TRANSACTION OF RS.6 30 74 240/ - AS BUSINESS INCOME OF THE ASSESSEE. 3.2. THE AO IN THE ASSESSMENT ORDER HAS MADE DETAILED AND COMPREHENSIVE OBSERVATIONS IN RESPECT OF HIS FINDINGS. FOR THE SAKE OF CONVENIENCE THE SAME ARE DISCUSSED BRIEFLY ( A ) THE AO HAS OBSERVED THE TREATMENT OF RENTAL INCOME PRIOR TO COMPLETION OF THE MULTI STORIED BUILDING AND AFTER THAT ( B ) THE AO HAS DRAWN REFER ENCE TO TREATMENT OF RENT FOR ASSESSMENT YEARS 2003 - 04 04 - 05 AND 06 - 07; ( C ) THE AO HAS FURTHER COMPARED THE AREA OF THE UNSOLD FLAT GIVEN ON RENT THAN THAT APPEARING IN THE BOOKS FOR AY 2006 - 07; ( D ) OTHER OBSERVATIONS OF THE AO INCLUDED (I) THE CAR PARKING SPAC E NOT CONSIDERED FOR DERIVED THE RATE OF PER SQUARE FOOT (II) VALUE OF LAND NOT BEEN CONSIDERED FOR COMPUTING LTCG (III) NATURE OF EXPENSES INCURRED WHICH AS PER THE AO CONSTRUED TO BE BUILDING USED FOR COMMERCIAL PURPOSES AND ALSO (IV) NON - FILING OF WEAL TH TAX RETURN. ( E ) THE AO HAS ALSO MADE CERTAIN OBSERVATIONS IN RESPECT OF THE DEVELOPMENT AGREEMENT DEED WHICH ARE ALSO NARRATED BRIEFLY ( I ) CONSTRUCTION OF PROPERTY STARTED ON 7.6.96 AND WAS COMPLETED ON 20.7.2001. THE MAJORITY OF THE PROPERTY WAS SOLD ON COMP LETION IN THAT SAME YEAR AND THE BALANCE IN THE SUBSEQUENT YEAR AND HENCE THE INTENTION OF THE ASSESSEE WAS TO EARN PROFIT AND NOT CAPITAL GAINS; ( II ) IF THE CAPITAL GAINS WOULD HAVE BEEN COMPUTED THEN IT WOULD HAVE BEEN MADE AS PER THE VALUATION OF REGIS T ERING AUTHORITY AS PER SECTION 50C; ( III ) THE AO HAD MADE CERTAIN OTHER OBSERVATIONS LIKE THAT OF (A) LIQUIDATED DAMAGES (B) CAR PARKING SPACE BEING NOT CONSIDERED (C) COST OF BUILDING IN THE ACCOUNTS INCLUDED THE COST OF LAND AT SANKRAIL (D) FLAT ITA NOS.626 627 1536&C.O.71 OF 2011 M/S.RUNGTA PROPERTIES PVT.LTD. A.YRS.2003 - 04 2004 - 05 2006 - 07 4 AND OTHER AREA S HAVE BEEN DEMARCATED BETWEEN THE DEVELOPER AND THE ASSESSEE (E) PURCHASE OF ADDITIONAL 6073 SQ FT BY DEVELOPER; (F) NON - DISCLOSURE OF 777 SQ FT AREA (G) PAYMENT OF INTEREST IN AY 1994 - 95 (H) LIQUIDATED DAMAGES FOR AY 1997 - 98 (I) REVENUE EXPENSES FOR A Y 2002 - 03 M (J) BROKERAGE COMMISSION FOR AY 04 - 05 (K) NON FILING OF WT RETURN ETC. BASED ON THE AFORESAID OBSERVATIONS THE AO HAS HELD THAT ..XIII) FROM THE FACTS IT BECOMES CLEAR THAT THE INTENTION OF THE ASSESSEE TO CONSTRUCT THE BUILDING WAS TO EAR N PROFIT ON SALE OF FLATS. THIS IS CLEAR FROM THE FACT THAT MAJORITY OF THE AREA OF FLAT HAD BEEN SOLD AS SOON AS THE CONSTRUCTION WAS COMPLETED . THE AR HAS MADE A DETAILED SUBMISSION AND HAS REBUTTED THE ALLEGATIONS/OBSERVATIONS OF THE AO. THE LEARNED A R HAS ALSO RELIED UPON A NUMBER OF JUDICIAL PRONOUNCEMENTS. THE NECESSARY AGREEMENT WAS ALSO PLA CED ON RECORD AND WAS DULY EXPLAINED. 3.3. BEFORE THE LD .CIT(A)THE ASSESSEE MADE THE SUBMISSIONS AND EXPLANATIONS WHICH WERE ACCEPTED VIDE PARA - 7 OF HIS ORDER. THE LD. CIT(A) ALLOWED THE CLAIM OF ASSESSEE AND DIRECTED THE AO TO COMPUTE THE INCOME FROM SALE OF PART OF ASSESSEE S SHARE OF CONSTRUCTED AREA IN THE DEVELOPED PROPERTY AS LONG TERM CAPITAL GAIN AS AGAINST BUSINESS INCOME AS COMPUTED BY THE AO. 4. THE LD. DR RELIED UPON THE ORDER OF AO WHILE THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE SUBMISSIONS MADE BEFORE LD. CIT(A) AND ORDER OF LD. CIT(A). 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. IT WAS SUBMITTED THAT THE ASSE SSEE HAD NO REQUISITE EXPERTISE AND KNOW HOW TO UNDERTAKE THE DEVELOPMENT. THE ASSESSEE PARTED WITH THE LAND AND IN LIEU THEREOF WAS ENTITLED TO 59% OF THE CONSTRUCTED AREA WITHOUT CARRYING OUT ANY TASK ITSELF TOWARDS THE DEVELOPMENT. THE ASSESSEE WAS NEIT HER UNDER ANY OBLIGATION TO INCUR ANY EXPENDITURE TOWARDS CONSTRUCTION OF THE LAND NOR HE CARRIED OUT ANY WORK FOR CONSTRUCTION OF THE BUILDING AT ANY POINT OF TIME. IN TERMS OF THE AGREEMENT BETWEEN THE ASSESSEE AND M/S. TRAL THE ASSESSEE VACATED THE PO SSESSION IN FAVOUR OF M/S.TRAL AND THE SAID DEVELOPER OF THE PROPERTY WAS IN FULL POSSESSION OF THE VACATED LAND SINCE SUCH DATE. THE SAID BUILDING WAS DEMOLISHED FOR MAKING NEW CONSTRUCTION WHICH WAS APPROVED ITA NOS.626 627 1536&C.O.71 OF 2011 M/S.RUNGTA PROPERTIES PVT.LTD. A.YRS.2003 - 04 2004 - 05 2006 - 07 5 BY KOLKATA MUNICIPAL CORPORATION ON 7.6.1996. IT IS ALSO UNDISPUTED FACT THAT THE LAND WAS HELD BY THE ASSESSEE SINCE 1965 AND WAS DECLARED AS FIXED ASSET OF THE ASSESSEE SINCE THAT DATE. THE LAND WAS VALUED AT THE COST . THE SAID LAND WAS NEVER CONVERTED IN STOCK - IN - TRADE. THE ASSESSEEE ENTERED INTO A JO INT VENTURE AGREEMENT WITH M/S THE RIGHT ADDRESS LTD ON 28.1.1994 FOR DEVELOPMENT OF A BUILDING ON THE SAID PROPERTY. AS PER THE DEVELOPMENT AGREEMENT THE ASSESSEE WAS ENTITLED 59% OF THE TOTAL FAR TOGETHER WITH 59% UNDIVIDED SHARE IN THE LAND COMPR ISED IN THE BUILDING TO BE CONSTRUCTED AND ALSO IN THE COMMON AREA AND INSTALLATION ATTRIBUTABLE TO 59% (WHICH RATIO WAS MODIFIED TO 49.29% THROUGH LATER AMENDMENT TO THE AGREEMENT) IN THE SAID BUILDING. THE CONSTRUCTED AREA RECEIVED BY THE ASSESSEE WAS I N LIEU OF THE LAND WHICH WAS ALL ALONG BEEN HELD BY THE ASSESSEE AS A CAPITAL ASSET. THERE WAS NO INTENTION TO TREAT THE SAME AS STOCK IN TRADE. NOTHING HAS BEEN BROUGHT ON RECORD WITH REGARD TO THE INTENTION OF THE ASESSEE TO TREAT THE SAID CAPITAL ASSE T AS STOCK IN TRADE. THE ASSESSEE HAS RELIED UPON THE DECISION OF MUMBAI BENCH OF ITAT IN THE CASE OF ACIT VS M/S.SHREE DHOOTAPAPHESWAR LTD. IN ITA NO.721/M/05 DATED 30.03.2009. A COPY OF THE SAME IS PLACED ON RECORD. IN THIS CASE THE FACTS AND THE DECISIO N ARE REPRODUCED AS UNDER : - A ) THE ASSESSEE WAS HOLDING THIS LAND IN THE YEAR 1936 AND HAD CONSTRUCTED THEREON A FACTORY FOR AYURVEDIC PRODUCTS. B ) THE COMPANY HAS HELD THIS ASSET AS A FIXED ASSET AND HAS BEEN CONSISTENTLY DISCLOSING THE SAME AS SUCH IN ITS BAL ANCE SHEET. C ) THERE IS NO CONVERSION OF THE CAPITAL ASSET BY ITS OWNER INTO STOCK - IN - TRADE AND SEC.45(2) OF THE ACT IS NOT ATTRACTED. D ) IN THE AGREEMENT FOR DEVELOPING THE PROPERTY THE ASSESSEE IS SHOWN AS THE OWNER AND IT IS ALSO RECORDED THAT THE ASSESEE DO ES NOT HAVE THE REQUISITE EXPERTISE AND KNOW - HOW TO UNDERTAKE THE DEVELOPMENT OF THE SAID LAND. E ) AS PER THE AGREEMENT THE ASSESSEE IS PARTING WITH PART OF THE LAND AND IN LIEU THEREOF HE IS RECEIVING 50% OF THE CONSTRUCTED AREA WITHOUT CARRYING OUT ANY TA SK ITSELF TOWARDS THE DEVELOPMENT. F ) THE ASSESSEE COMPANY HAS NOT INCURRED ANY EXPENSES TOWARDS CONSTRUCTION OF THE BUILDING NOR IT HAS CARRIED OUT ANY ACTIVITY FOR CONSTRUCTION OF THE BUILDINGS. 5.1. THE PRESENT FACTS OF THE CASE ARE SIMILAR TO THE FACTS AND CIRCUMSTANCES IN THE CASE OF ACIT VS M/S.SHREE DHOOTAPAPHESWAR LTD. (SUPRA). IN THE PRESENT CASE ALSO THE ASSESSEE HELD THE PLOT OF LAND AS CAPITAL ASSET AND ALL ALONG HAD BEEN DECLARING AS CAPITAL ASSET AND HAD NO INTENTION TO CONVERT INTO STOCK IN TRADE. IN THE AGREEMENT FOR ITA NOS.626 627 1536&C.O.71 OF 2011 M/S.RUNGTA PROPERTIES PVT.LTD. A.YRS.2003 - 04 2004 - 05 2006 - 07 6 DEVELOPING THE PROPERTY THE ASSESSEE IS SHOWN AS THE OWNER . AS PER THE AGREEMENT THE ASSESSEE IS PARTING WITH PART OF THE LAND AND IN LIEU THEREOF HE HAS RECEIVED 4 9.29% OF THE CONSTRUCTED AREA WITHOUT CARRYING OUT ANY TASK TOWA RDS DEVELOPMENT. THE ASSESSEE HAS NOT INCURRED ANY EXPENSES TOWARDS CONSTRUCTION OF BUILDING NOR IT HAD CARRIED OUT ANY ACTIVITY FOR THE CONSTRUCTION OF THE BUILDING. IN THE CIRCUMSTANCES AND FACTS OF THE CASE AND THE DECISION OF MUMBAI BENCH IN THE CASE O F ACIT VS M/S.SHREE DHOOTAPAPHESWAR LTD. (SUPRA) WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A) WHO HAS RIGHTLY HELD THAT THE SAID INCOME HAS TO BE ASSESSED AS CAPITAL GAIN AND NOT AS BUSINESS INCOME. THUS GROUND NO.1 OF THE REVENUE IS DISMISSED 6. AS REGARDS GROUND NO.2 OF THE REVENUE THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAD TAKEN LOAN FROM M/S.RUNGTA ENGINEERING PVT. LTD. AND THE AO FURTHER OBSERVED THAT ONE OF THE SHAREHOLDER OF THE ASSESSEE COMPANY WAS HOLDING MORE THAN 10% SHARES IN T HE LENDER COMPANY HAD RESERVES AND SURPLUS IN ITS BALANCE SHEET. ACCORDINGLY AO TREATED THE AMOUNT OF LOAN TO THE EXTENT OF RESERVES OF THE LENDER COMPANY AS DEEMED DIVIDEND U/S 2(22)(E) OF THE IT ACT. 6.1. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION SO MADE IN VIEW OF THE DECISION OF THE SPECIAL BENCH MUMBAI TRIBUNAL IN THE CASE OF ACIT VS BHAUMIK COLOUR PVT. LTD. 313 ITR 146 WHEREIN IT HAS BEEN HELD THAT DEEMED DIVIDEND CAN BE ASSESSED ONLY IN THE HANDS OF A PERS ON WHO IS A SHAREHOLDER OF THE LENDER AND NOT IN THE HANDS OF THE PERSON OTHER THAN THE SHAREHOLDERS. 7 . THE LD. DR RELIED UPON THE ORDER OF AO WHILE THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE SUBMISSIONS MADE BEFORE LD. CIT(A) AND ORDER OF LD. CIT( A). 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. AS PER SECTION 2(22)(E) OF THE I.T.ACT THE PAYMENT MUST BE TO A PERSON WHO IS A REGISTERED SHARE HOLDER. THE WORD SHARE - HOLDER EXISTED IN SECTION 2(22)(E) AND HAS BEEN INTERPR ETED TO MEAN A REGISTERED SHAREHOLDER. IN THE PRESENT CASE IT IS TRUE THAT MR.S.N.RUNGTA A SHAREHOLDER IS HAVING MORE THAN 20% SHARE IN THE ASSESSEE COMPANY AND ALSO 10% SHARE IN M/ S.RUNGTA ENGINEERING PVT. LTD WHEREFROM THE ASSESSEE HAS TAKEN LOANS. THE RECIPIENT COMPANY DOES NOT HOLD ANY SHARE IN THE LENDER COMPANY IN VIEW OF THE DECISION OF SPECIAL BENCH OF MUMBAI TRIBUNAL IN THE CASE OF ACIT VS.BHAUMIK COLOUR PVT. LTD. (SUPRA) WHERE IT HAS BEEN HELD THAT DEEMED DIVIDEND CAN ITA NOS.626 627 1536&C.O.71 OF 2011 M/S.RUNGTA PROPERTIES PVT.LTD. A.YRS.2003 - 04 2004 - 05 2006 - 07 7 BE ASSESSED ONLY IN THE H ANDS OF A PERSON WHO IS A SHAREHOLDER OF THE LENDER AND NOT IN THE HANDS OF THE PERSON OTHER THAN THE SHAREHOLDERS. THEREFORE THE AO IS NOT JUSTIFIED IN TREATING THE SAME AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE. WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHO HAS RIGHTLY ALLOWED THE CLAIM OF ASSESSEE. THUS GROUND NO.2 OF THE REVENUE IS DISMISSED. 9. GROUND NO.3 BEING GENERAL IN NATURE DOES NOT REQUIRE ANY ADJUDICATION. 10. NOW WE TAKE UP APPEAL OF THE REVENUE IN ITA NO.627/KOL/2011 FOR A .YR.2006 - 07. 10.1. AS REGARDS GROUND NO.2 THE BRIEF FACTS OF THE CASE ARE IDENTICAL TO THE FACTS AS IN GROUND NO.1 FOR A.YR.2004 - 05 DECIDED BY US HEREIN ABOVE. THEREFORE OUR ORDER HEREIN ABOVE FOR A.YR.2004 - 05 IN ITA NO .626/KOL/2011 IN GROUND NO.1 IS IDENT ICALLY APPLICABLE IN THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE. ACCORDINGLY GROUND NO.2 OF THE REVENUE IS DISMISSED. 11. AS REGARDS GROUND NO.3 THE BRIEF FACTS OF THE CASE ARE IDENTICAL TO THE FACTS AS IN GROUND NO.2 FOR A.YR.2004 - 05 DECIDED BY US HEREIN ABOVE. THEREFORE OUR ORDER HEREIN ABOVE FOR A.YR.2004 - 05 IN IT A NO.626/KOL/2011 IN GROUND NO.2 IS IDENTICALLY APPLICABLE IN THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE. ACCORDINGLY GROUND NO.3 OF THE REVENUE IS DISMISSED. 12. WE TAK E UP GROUND NO.1 OF THE REVENUE. THE BRIEF FACTS OF THE CASE ARE THAT THE AO TREATED THE LOSS OF RS.25 30 396/ - A S BOGUS WHICH IN FACT DELETED AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE BY THE LD. CIT(A) VIDE PARA 5.1. TO 5.5. 13 . THE LD. DR RELIED UPON THE O RDER OF AO WHILE THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE SUBMISSIONS MADE BEFORE LD. CIT(A) AND ORDER OF LD. CIT(A). 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSE E HAD SUFFERED A LOSS OF RS.25 30 396/ - FROM TRADING IN SHARES OF M/S.SHARANG VINYOG LTD.. AO CONDUCTED ENQUIRIES FROM ITA NOS.626 627 1536&C.O.71 OF 2011 M/S.RUNGTA PROPERTIES PVT.LTD. A.YRS.2003 - 04 2004 - 05 2006 - 07 8 CALCUTTA STOCK EXCHANGE AND ALSO FROM THE COMPANIES IN WHICH THE ASSESSEE HAD TRADED. WITH RESPECT TO M/S.SHARANG VINYOG LTD. THE AO OBS ERVED THAT ( A ) NO DIVIDEND WAS DECLARED BY M/S.SHARANG VINYOG LTD. SINCE ITS INCORPORATION ( B ) THE EPS (EARNING PER SHARE) OF THAT COMPANY WAS 0.002 AND 0.001 FOR THE FINANCIAL YEAR ENDED 31.3.05 AND 31.3.06 RESPECTIVELY ( C ) THE COMPANY WAS SUSPENDED FROM TRADING FRO M 5.12.05 TO 3.10.2006 AND ( D ) THE COMPANY HAD BEEN INCURRING LOSS OF THE YEARS ENDED 31.3.2004 31.3.2005 AND 31.3.2006 RESPECTIVELY. THE AO HAD GATHERED CERTAIN INFORMATION FROM CALCUTTA STOCK EXCHANGE ASSOCIATION LIMITED BY ISSUE OF NOTICE U/S 133(6) AND A S RESULT OF SUCH VERIFICATION MADE OBSERVATIONS WHICH ARE DISCUSSED BRIEFLY AS BELOW : ( I ) THE NAME OF THE BROKER WAS AHILYA COMMERCIAL PVT. LTD. AND THE SHARES WERE TRADED THROUGH CSE; ( II ) THE SCRIPTS OF M/S. SHARANG VINYOG LTD. EXECUTED BY AHILYA COMMERCIAL PVT . LTD. ON 21.7.2005 TO THE ASSESSEE WERE THROUGH CROSS DEALS; ( III ) THE SAID BROKER VIZ. AHILYA COMMERCIAL PVT. LTD WAS SUSPENDED IN SEPTEMBER 2005 FROM TRADING BY SEBI AND THE SUSPENSION WAS SUBSEQUENTLY REVOKED BY SEBI IN AUGUST 2008 AND THAT THE SUSPENSION W AS FOR VIOLATION OF SEBI RULES. ( IV ) AHILYA COMMERCIAL PVT. LTD. WAS ALSO SUSPENDED FOR SOME TIME BY SEBI WHICH WAS SUBSEQUENTLY REVOKED; ( V ) THE AO HAD FURTHER MENTIONED THE PRICE OF THE SHARES OF M/S. SHARANG VINYOG LTD FROM APRIL 2005 TILL DECEMBER 2005 AND HAD OBSERVED THAT SUCH PRICE VARIED BETWEEN RS.258 [28.4.2005] TO AS LESS AS RS.45/ - [2.12.2005]. IN REPLY TO SUMMON ISSUED BY THE AO U/S 131 ONE OF THE DIRECTORS OF M/S.AHILYA COMMERCIAL PVT. LTD. APPEARED BEFORE THE AO AND HIS STATEMENT WAS RECORDED. FROM T HE EXAMINATION OF THE DIRECTOR THE AO DREW FOLLOWING CONCLUSIONS : ( A ) SIGNIFICANT NUMBER OF TRADES IN SHARES OF M/S.SHARANG VINYOG LTD MADE BY THE SHARE BROKER WERE APPARENTLY CLIENT TO CLIENT TRADES WHICH WERE EXECUTED ON A SINGLE TERMINAL OF THE BROKER AC TING AS COUNTER PARTS AND THROUGH SUCH ACTIVITY THE PRICES OF THAT SCRIP WERE SIGNIFICANTLY JACKED UP; ITA NOS.626 627 1536&C.O.71 OF 2011 M/S.RUNGTA PROPERTIES PVT.LTD. A.YRS.2003 - 04 2004 - 05 2006 - 07 9 ( B ) THE BROKER HAD ALLOWED ITS CLIENTS WHO IN SOME CASES WERE THEY THEMSELVES TO PLACE SIMULTANEOUSLY BOTH BUY AND SELL ORDERS OF SAME QUANTITY AT THE SAME PRICE IN SHARES OF M/S. SHARANG VINYOG LTD TO FACILITATE MATCHING OF TRANSACTIONS AND CREATION OF VOLUME; ( C ) THROUGH MATCHED AND CROSS DEAL THERE HAS BEEN SIGNIFICANT RISE IN THE SHARE PRICES; ( D ) FROM THE RECORDED STATEMENT IT IS CLEAR THAT BOTH THE BROKER AND THE COMPANY WHOSE SHARES WERE TRADED BY THE ASSESSEE WERE FOR SOME TIME SUSPENDED BY THE SEBI; ACCORDINGLY THE AO HAS HELD THAT BY THIS MEANS THE BROKER HAD PURCHASED AND SOLD THE SCRIPTS OF M/S. SHARANG VINYOG LTD AND JACKED UP THE PRICES OF SUCH SHARES RANGING FROM RS.43/ - TO RS.259/ - . 14.1. AS A MATTER OF FACT THE AO DOUBTED THE INTEGRITY OF THE BROKER OR THE MANNER IN WHICH THE BROKER OPERATION AS PER THE STATEMENT OF ONE OF THE DIRECTORS OF THE BROKER FIRM AND ALSO AO OBSERVED THAT ASSESSEE HAD NOT FURNISHED ANY EXPLANATION IN RESPECT OF THE INTENTION OF SHOWING TRADING OF SHARES ONLY IN THREE PENNY STOCKS. AO RELIED UPON THE DECISIONS OF VARIOUS COURTS OF LAW. AS OBSERVED HEREIN ABOVE AO DISALLOWED THE LOSS OF RS.25 30 396/ - ONLY ON THE BASIS OF INF ORMATION SUBMITTED BY THE STOCK EXCHANGE. AO HAS HIMSELF HAS NOT BROUGHT ON RECORD THAT THE TRANSACTION AS FALSE OR FICTITIOUS. AO HAS ALSO NOT DOUBTED THE GENUINENESS OF THE DOCUMENTS PLACED ON RECORD BY THE ASSESSEE. AO S OBSERVATION AND CONCLUSION ARE M ERELY BASED ON THE INFORMATION GIVEN BY THE CALCUTTA STOCK EXCHANGE AND SUBMISSIONS MADE BY THE COMPANY REPRESENTATIVE. THEREFORE ON SUCH BASIS NO DISALLOWANCE CAN BE MADE AND ACCORDINGLY WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A) WHO HAS RIGHTLY ALL OWED THE CLAIM OF ASSESSEE. THUS GROUND NO.1 OF THE REVENUE IS DISMISSED. 15. NOW WE TAKE UP THE APPEAL OF REVENUE IN ITA NO.1536/KOL/2011 FOR A.YR. 2003 - 04. ITA NOS.626 627 1536&C.O.71 OF 2011 M/S.RUNGTA PROPERTIES PVT.LTD. A.YRS.2003 - 04 2004 - 05 2006 - 07 10 15.1. AS REGARDS GROUND NO.1 THE BRIEF FACTS OF THE CASE ARE IDENTICAL TO THE FACTS AS IN GROUND NO.1 FOR A.YR.2004 - 05 DECIDED BY US HEREIN ABOVE. THEREFORE OUR ORDER HEREIN ABOVE FOR A.YR.2004 - 05 IN ITA NO. 626/KOL/2011 IN GROUND NO.1 IS IDENTICALLY APPLICABLE IN THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE. ACCORDINGLY GROUND NO.1 OF THE REVENUE IS DISMISSED. 16. GROUND NO.2 BEING GENERAL IN NATURE DOES NOT REQUIRE ANY ADJUDICATION. 17. IN THE RESULT THE APPEALS OF THE REVENUE IN ITA NOS.626 627 AND 1536/KOL/2011 ARE DISMISSED AND THE CROSS OBJECTION OF THE ASSESSEE BEARING NO.71/KOL/2011 IS ALSO DISMISSED. ORDE R PRONOUNCED IN THE COURT ON 2 9.04.2015. SD/ - SD/ - [ MAHAVIR SINGH ] [ B.P.JAIN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 29.04.2015. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . M/S.RUNGTA PROPERTIES PVT. LTD. 206 A.J.C .BOSE ROAD KOLKATA - 700017. 2 D.C.I.T. CIRCLE - 7 KOLKATA 3 . CIT(A) - VIII KOLKATA 4. CIT - KOLKATA. 5. CIT - DR KOLKATA BENCHES KOLKATA TRUE COPY BY ORDER DEPUTY /ASST. REGISTRAR ITAT KOLKATA BENCHES