DCIT, Circle - 4, Kolkata, Kolkata v. M/s. Engo Trading & Tea Co. Pvt. Ltd., Kolkata

ITA 1010/KOL/2010 | 2004-2005
Pronouncement Date: 25-02-2011 | Result: Allowed

Appeal Details

RSA Number 101023514 RSA 2010
Assessee PAN AAACE9736G
Bench Kolkata
Appeal Number ITA 1010/KOL/2010
Duration Of Justice 9 month(s) 11 day(s)
Appellant DCIT, Circle - 4, Kolkata, Kolkata
Respondent M/s. Engo Trading & Tea Co. Pvt. Ltd., Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 25-02-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted A
Tribunal Order Date 25-02-2011
Date Of Final Hearing 14-02-2011
Next Hearing Date 14-02-2011
Assessment Year 2004-2005
Appeal Filed On 14-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BENCH-A: KO LKATA [BEFORE HONBLE SHRI B.R. MITTAL J.M. & HONBLE SH RI C.D. RAO A.M] I.T.A. NOS. 1009 & 1010/KOL./2010 ASSESSMENT YEARS : 2003-2004 & 2004-2005 DEPUTY COMMISSIONER OF INCOME TAX -VS.- ENGO T RADING & TEA CO. PVT. LTD. CIRCLE-4 KOLKATA. KOLKATA (PAN : AA ACE 9736 G) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S. BHADRA D.R. RESPONDENT BY : SHRI P.K. SARAF A.R. O R D E R PER SHRI B. R. MITTAL JUDICIAL MEMBER : THE DEPARTMENT HAS FILED THESE APPEALS FOR THE ASS ESSMENT YEARS 2003-04 AND 2004-05 AGAINST THE SEPARATE ORDERS OF LD. COMMISSI ONER OF INCOME-TAX (APPEALS)-XVI KOLKATA DATED 01.01.2010 AND 04.01.2010 RESPECTIVEL Y. SINCE THE ISSUE INVOLVED IN BOTH THE APPEALS IS COMMON AND FACTS ARE IDENTICAL WE D ISPOSE OF BOTH THE APPEALS BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE COMMON GROUND RAISED BY THE REVENUE IN ITS A PPEALS IS AS UNDER :- THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE T HE LD. CIT(A.)- XVI HAS RELIED ON SEVERAL DECISIONS OF ITAT AND OP INED THAT WHETHER THE ASSESSEES NAME APPEARED IN THE LIST OF CALCUTTA STOCK EXCHANGE IS IMMATERIAL. THE TRANSACTION OF SHARE IS EVIDENT FROM THE CONTRACT NOTE OF THE BROKER. THEREFORE HE DIRECTED THE AO TO DELETE THE ADDITION. IN THIS REGARD IT MAY BE MENTIONED HE RE THAT SIMILAR ADDITION WAS MADE ON THE SAME ISSUE IN THE CASE OF PRADIP KR. AGARWAL AND LD. CIT(A.) DELETED THE ADDITION AGAINS T WHICH APPEAL WAS PREFERRED BEFORE ITAT AND HONBLE ITAT (ITA NO. 924 & 925/KOL. OF 2009 DATED 31.12.2009) IN THEIR ORDER H AS SET ASIDE THE DIRECTION OF LD. CIT(A.) AND DIRECTED THE AO TO ALL OW OPPORTUNITY TO THE ASSESSEE IN RESPECT OF THE FACTS GATHERED FROM CALCUTTA STOCK EXCHANGE. THEREFORE IT MAY BE SEEN THAT HONBLE IT AT WAS NOT IN AGREEMENT WITH THE FINDING OF LD. CIT(A.) FOR DELET ION OF ADDITION. ITA NOS.1009 & 1010/KOL./2010 2 3. BRIEF FACTS RELATING TO CONTROVERSY INVOLVED IN BOTH THE APPEALS ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF IN VESTMENT AND TRADING IN SHARES AND SECURITIES. DURING THE COURSE OF ASSESSMENT PROCEED INGS THE ASSESSEE FILED THE RETURN OF INCOME SHOWING A LOSS OF RS.41 17 391/-. DURING THE COURSE OF APPELLATE PROCEEDINGS THE ASSESSEE STATED THAT IT HAD PURCHASED 50 000 SH ARES OF ROHAN FINANCE & SECURITY LIMITED (IN SHORT RFSL) ON 04.12.2001 THROUGH THE BROKER M/S. DIPAK JHUNJHUNWALA & CO. ANOTHER LOT OF 10000 SHARES WERE PURCHASED TH ROUGH THE SAME BROKER ON 04.01.2002. THUS TOTAL 60 000 SHARES WERE PURCHASED FOR A CONSIDERATION OF RS.1 68 200/- AND THE PAYMENT WAS MADE TO THE BROKE R THROUGH CHEQUES ON 14.01.2002. THE ASSESSEE ALSO STATED THAT IT HAD SOLD 40000 SHA RES THROUGH THE BROKER M/S. S. JHUNJHUNWALA & CO. ON 10.03.2003 AND 11.03.2003 FOR AN AMOUNT AGGREGATING TO RS.25 50 400/-. THE SALE PROCEEDINGS WERE RECEIVED FROM THE BROKER BY ACCOUNT PAYEE CHEQUE AND DULY RECORDED IN THE BOOKS OF ACCOUNTS. THE COST OF ACQUISITION OF 40000 SHARES SOLD DURING ASSESSMENT YEAR 2003-04 WAS RS.1 09 800/-. THUS IT HAD EARNED LONG TERM CAPITAL GAIN OF RS.24 40 600/- (RS.25 50 400/- MINUS RS.1 09 800/-) IN ASSESSMENT YEAR 2003-04. THE BALANCE 20 000 SHARES WERE SOLD I N THE NEXT FINANCIAL YEAR ON 12.11.2003 RELEVANT TO ASSESSMENT YEAR 2004-05 AND DISCLOSED CAPITAL GAIN OF RS.9 36 000/-. 4. THE ASSESSING OFFICER WHILE COMPLETING THE ASSES SMENTS FOR BOTH THE ASSESSMENT YEARS UNDER CONSIDERATION STATED THAT LONG-TERM CAP ITAL GAIN DISCLOSED BY THE ASSESSEE OF RS.24 40 600/- IN ASSESSMENT YEAR 2003-04 AND OF RS .9 36 000/- FOR ASSESSMENT YEAR 2004-05 IN RESPECT OF SALE OF SHARES OF RFSL IS INC OME FROM OTHER SOURCES. THE ASSESSING OFFICER HAS STATED THAT WITH A VIEW TO VE RIFY THE CAPITAL GAIN AS SHOWN BY THE ASSESSEE A LETTER DATED 17.12.2007 WAS ISSUED TO T HE PRINCIPAL OFFICER CALCUTTA STOCK EXCHANGE LIMITED ENCLOSING COPIES OF THE CONTRACT N OTES ISSUED BY THE BROKERS TO CONFIRM TRANSACTIONS ALLEGEDLY ENTERED INTO BY THE ASSESSEE AGAINST THE TRADE NOS. AND OTHER DETAILS AS MENTIONED IN SUCH CONTRACT AND THE CALCUTTA STOCK EXCHANGE VIDE ITS LETTER DATED 24.12.2007 STATED THAT AGAINST THE RES PECTIVE ORDER NO. TRADE NO. AND TRADE TIME THE NAME OF THE ASSESSEE DID NOT APPEAR. HENC E THE GENUINITY OF THE TRANSACTIONS ITA NOS.1009 & 1010/KOL./2010 3 ALLEGEDLY ENTERED INTO BY THE ASSESSEE WAS NOT ESTA BLISHED. BEING AGGRIEVED THE ASSESSEE FILED APPEALS FOR BOTH THE ASSESSMENT YEARS UNDER C ONSIDERATION BEFORE THE FIRST APPELLATE AUTHORITY. 5. THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) AFT ER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HAS STATED THAT THE ASSESSING OFFIC ER WAS NOT JUSTIFIED IN TREATING THE AMOUNT OF LONG-TERM CAPITAL GAINS AS INCOME FROM OT HER SOURCES MERELY BECAUSE THE CALCUTTA STOCK EXCHANGE STATED THAT AGAINST THE RES PECTIVE ORDER NO. TRADE NO. AND TRADE TIME THE NAME OF THE ASSESSEE DID NOT APPEAR. THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) HAS HELD THAT THE ASSESSEE DISCHARGED ITS PRIMARY ONUS BY PRODUCING THE COPY OF CONTRACT NOTES DEMAT A/C. AND THE COPIES OF THE RELEVANT BANK STATEMENT. THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) HAS FURTHER ST ATED THAT THE ASSESSEE PURCHASED 60 000 SHARES OF ROHAN FINANCE & SECURITY LIMITED D URING FINANCIAL YEAR 2001-02 AND SAME WERE DULY REFLECTED IN THE BALANCE-SHEET OF TH E ASSESSEE AS ITS INVESTMENT AS ON 31.03.2002. THE LD. COMMISSIONER OF INCOME-TAX (APP EALS) HAS STATED THAT OUT OF THE SAID 60 000 SHARES THE ASSESSEE SOLD 40 000 SHARES IN ASSESSMENT YEAR 2003-04 AND BALANCE 20 000 SHARES DURING ASSESSMENT YEAR 2004-0 5. THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) HAS FURTHER STATED THAT THE SA LE PROCEEDS WERE RECEIVED BY CHEQUE AND THE DEMAT A/C. OF THE ASSESSEE WAS DEBITED. THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) HAS HELD THAT THERE WAS NO REASON TO DISB ELIEVE THE TRANSACTIONS CARRIED OUT BY THE ASSESSEE AS THE ASSESSING OFFICER HAS NOT BROUG HT ANYTHING ON RECORD TO PROVE THAT THE ASSESSEE HAS NOT CARRIED OUT ANY PURCHASE OR SA LE TRANSACTION IN THE AFORESAID SCRIPTS AND THAT THE TRANSACTIONS CLAIMED BY THE ASSESSEE W ERE FICTITIOUS. IT IS RELEVANT TO STATE THAT THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) A LSO PLACED RELIANCE ON THE FOLLOWING DECISIONS OF ITAT CALCUTTA BENCHES :- (I) ACIT CIRCLE-38 KOLKATA VS.- SWAPAN KUMAR BIS WAS KOLKATA ITA NO. 121/KOL./2008; (II) DCIT CIRCLE-4 KOLKATA VS.- SHRI BHAGWATI PR ASAD AGARWAL KOLKATA ITA NO. 1230/KOL./2008; ITA NOS.1009 & 1010/KOL./2010 4 (III) SHRI JAYANT HIMANI VS.- ITO WARD-35(2) KOL KATA ITA NO. 340/KOL./2007; (IV) SHRI ACCHYALAL SHAW VS.- ITO WARD-1(1) SILI GURI ITA NO. 1977/KOL./2008 DATED 16.01.2009; (V) ACIT CIRCLE-30 KOLKATA VS.- RITU KAKRANIA I TA NO. 939/KOL./2008 DATED 14.08.2008; (VI) ITO WARD-39(2) KOLKATA VS.- KANTA KANCHAN R ANI KOLKATA ITA NO. 238/KOL./2007; (VII) ITO WARD-10(2) KOLKATA VS.- NIDHI TREXIM L TD. ITA NO. 1414/KOL./2006. THUS THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) H AS DIRECTED THE ASSESSING OFFICER TO TREAT THE AMOUNT OF RS.24 40 600/- IN ASSESSMENT YEAR 2003-04 AND RS.9 36 000/- IN ASSESSMENT YEAR 2004-05 AS LONG-TERM CAPITAL GAIN O N SALE OF SHARES IN PLACE OF INCOME FROM OTHER SOURCES AS HELD BY THE ASSESSING OFFICER . HENCE THE DEPARTMENT IS IN APPEALS BEFORE THE TRIBUNAL. 6. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH TH E PARTIES AND HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO CONSIDERED THE CASES CITED BY THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) IN THE IMPUGNED ORDER AS ALSO THE RELEVANT PAGES OF THE PAPER BOOK PLACED ON RECORD. WE OBSERVE THAT THE ASSESSEE STATED TO HAVE PURCHASED 60 000 SHARES OF RFSL AND HAS DIS CLOSED LONG-TERM CAPITAL GAINS OF RS.24 40 600/- IN ASSESSMENT YEAR 2003-04 AND OF RS .9 36 000/- IN ASSESSMENT YEAR 2004-05. THE ASSESSEE STATED THAT THE SAID SHARES W ERE PURCHASED THROUGH THE BROKER DEEPAK JHUNJHUNWALA & CO. WE OBSERVE THAT CONTRACT NOTE IN RESPECT OF PURCHASE OF SHARES ON 04.12.2001 OF 50 000 IS PLACED AT PAGES 1 3 TO 15 OF THE PAPER BOOK AND FOR PURCHASE OF 10 000 SHARES ON 04.01.2002 IS PLACED A T PAGE 17 OF THE PAPER BOOK. IN THE SAID CONTRACT NOTE THE NAME OF THE SECURITIES IS M ENTIONED ROHANFIN. WE OBSERVE FROM PAGES 56 TO 58 OF THE PAPER BOOK THAT THE SAID BROKER DEEPAK JHUNJHUNWALA & CO. PURCHASED SHARES OF RFSL AGGREGATING ABOUT 3.40 LAK HS ON 12.04.2001 01.04.2002 @ ITA NOS.1009 & 1010/KOL./2010 5 RS.2.90 RS.2.20 AND IN RESPECT OF ALL THE TRANSACT IONS THE CLIENT CODE IS STATED SELF. THE COUNTER PARTY NAME IS ALSO STATED DEEPAK JHUNJHUNWA LA & CO. 7. WE ALSO OBSERVE THAT THE ASSESSEE STATED TO HAVE SOLD THE SAID SHARES THROUGH S. JHUNJHUNWALA & CO. AS PER COPIES OF THE CONTRACT NO TE PLACED AT PAGE 44 FOR SALE OF 20 000 SHARES @ RS.66.20 PAGES 47 AND 49 FOR SALE OF AGGREGATING 20 000 SHARES @ RS.61.50 FOR 10 000 SHARES AND RS.61.30 FOR 10 000 SHARES IN RESPECT OF PAPER BOOK FOR ASSESSMENT YEAR 2003-04 AND SIMILARLY THE CONTRACT NOTE FOR SALE OF 20 000 SHARES AS PER CONTRACT NOTE AT PAGES 12 & 13 OF THE PAPER BOOK FO R ASSESSMENT YEAR 2004-05 @ RS.49.75. WE OBSERVE ON PERUSAL OF PAGES 59 TO 61 O F THE PAPER BOOK FOR ASSESSMENT YEAR 2003-04 THAT SHRI S. JHUNJHUNWALA HAS ENTERED INTO MORE THAN 3 LAKH SHARES OF RFSL ON 03.10.2003 03.11.2003 AND 11.12.2003 AND I N RESPECT OF ALL THE TRANSACTIONS ENTERED INTO BY SHRI S. JHUNJHUNWALA AS BROKER CLI ENT CODE IS MENTIONED AS SELF AND COUNTER PARTY NAME IS ALSO GIVEN S. JHUNJHUNWALA & CO. 8. ON CAREFUL PERUSAL OF THE DETAILS OF THE TRANSAC TIONS PLACED AT PAGES 56 TO 61 OF THE PAPER BOOK IN RESPECT OF THE BROKERS DEEPAK JHU NJHUNWALA & CO. AND S. JHUNJHUNWALA & CO. AND COMPARING THE ORDER NO. AND TRADE NO. VIS--VIS THE ORDER NO. AND TRADE NO. MENTIONED IN THE CONTRACT NOTE OF THE AFORESAID BROKERS WE AGREE WITH THE ASSESSING OFFICER THAT THE SAID TRADE NO. AND ORDER NO. DO NOT TALLY. 9. A CONTRACT NOTE ISSUED BY BROKERS IS AN IMPORTAN T DOCUMENT FOR THE TRANSACTION IN SHARES. IT IS A LEGAL RECORD OF THE SHARE TRANSACTI ONS CARRIED BY A PERSON THROUGH A BROKER. A CONTRACT NOTE NOT ONLY IT RECORDS TRANSACTIONS BUT IT ALSO PROVIDES DETAILS OF TRANSACTIONS. IT STARTS WITH THE DETAILS OF THE ISS UING BROKER AND SPECIFICALLY MENTIONS THE FULL NAME OF THE CLIENT UNIQUE CLIENT I.D. IN RESP ECT OF TRADE DETAILS THE CONTRACT NOTES PROVIDE THE TRADE DATE SETTLEMENT NO. AND CONTRACT NO. BESIDES STATING THE TIME AND DATE ON WHICH THE TRADE WAS EXECUTED. NOT ONLY THIS THE CONTRACT NOTE SHOULD ALSO CLEARLY MENTION THE NAME OF THE SECURITY AND QUANTITY BOUG HT/ SOLD ON BEHALF OF A CLIENT. THEREFORE THE CONTRACT NOTES TELL AS TO WHAT HAS B EEN TRANSACTED INTO. ACCORDINGLY THE ITA NOS.1009 & 1010/KOL./2010 6 CONTRACT NOTE IS USED TO CHECK THE EXACT NATURE OF TRANSACTIONS ENTERED INTO BY A BROKER ON BEHALF OF A CLIENT. 10. IN THE INSTANT CASE BEFORE US WE OBSERVE THAT THE DETAILS IN THE CONTRACT NOTES AS PLACED ON RECORD (AT PAGES 13 14 15 17 FOR ASSES SMENT YEAR 2003-04) IN RESPECT OF PURCHASE OF SHARES AND AT PAGES 44 47 49 OF PAPER BOOK FOR ASSESSMENT YEAR 2003-04 AND AT PAGE 12 OF PAPER BOOK FOR ASSESSMENT YEAR 20 04-05 IN RESPECT OF SALE OF SHARES VIS--VIS THE DETAILS OF TRANSACTIONS ENTERED INTO BY THE BROKERS DEEPAK JHUNJHUNWALA & CO. AS PER PAGES 56 TO 58 AND S. JHUNJHUNWALA & CO. AS PER PAGES 59 TO 61 OF THE PAPER BOOK FOR ASSESSMENT YEAR 2003-04 ARE NOT MATCHABLE CONSIDERING THE ORDER NO. AND TRADE NO. MENTIONED IN THE CONTRACT NOTES AND IN THE SAID STATEMENT. WE OBSERVE THAT THE ASSESSING OFFICER ALSO HAS MENTIONED IN THE ASSESSM ENT ORDER THAT ON THE INFORMATION RECEIVED FROM THE STOCK EXCHANGE VIDE LETTER DATED 24.12.2007 THE RESPECTIVE ORDER NO. TRADE NO. AND TRADE TIME AND THE NAME OF THE ASSESS EE DID NOT MATCH. AT THE TIME OF HEARING ALSO THE LD. A.R. COULD NOT CONTROVERT THE ABOVE FACTS. 11. WE OBSERVE THAT THE ASSESSING OFFICER HAS DOUBT ED THE GENUINENESS OF THE TRANSACTIONS STATING THE ABOVE FACTS AND THE SAME IT APPEARS HAVE NOT BEEN CONSIDERED BY THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) WHI LE RELYING ON THE DECISIONS AS MENTIONED HEREIN AT PAGE 3 OF THE ABOVE ORDER AND D ISCUSSED BY THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) AT PAGES 7 TO 16 OF THE IMPUGN ED ORDER. CONSIDERING THE ABOVE FACTS WE ARE OF THE CONSIDERED VIEW THAT THE MATTE R SHOULD BE RESTORED TO ASSESSING OFFICER TO DECIDE AFRESH TO FIND OUT WHO WERE THE A CTUAL SELLERS WHEN THE SHARES WERE PURCHASED BY THE ASSESSEE THROUGH DEEPAK JHUNJHUNWA LA & CO. AND ALSO WHEN THOSE SHARES WERE SOLD THROUGH S. JHUNJHUNWALA & CO. AS T O WHO WERE THE ACTUAL BUYERS. IN OTHER WORDS THE ASSESSING OFFICER WILL ASCERTAIN A S TO WHO WERE THE ACTUAL BUYERS OF THE SHARES TO ASCERTAIN THE GENUINENESS OF THE TRANSACT IONS AND DECIDE THE ISSUE AFRESH AFTER CONSIDERING SUCH EVIDENCES AS MAY BE FILED BY THE A SSESSEE AND AFTER GIVING DUE OPPORTUNITY OF HEARING. RESULTANTLY THE ORDERS OF T HE AUTHORITIES BELOW ARE SET ASIDE BY ITA NOS.1009 & 1010/KOL./2010 7 ALLOWING THE GROUNDS OF APPEALS TAKEN BY THE DEPART MENT FOR STATISTICAL PURPOSES AND RESTORING THE ISSUE TO THE ASSESSING OFFICER. 12. IN THE RESULT FOR STATISTICAL PURPOSES THE AP PEALS FILED BY THE REVENUE ARE TREATED AS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25.02. 2011. SD/- SD/- [ C. D. RAO ] [ B.R. MITTAL ] ACCOUNTANT MEMBER JUDIC IAL MEMBER DATED : 25/ 02/ 2011 COPY OF THE ORDER FORWARDED TO: 1. M/S. ENGO TRADING & TEA CO. PVT. LTD. 133 B.R. BA SU ROAD KOLKATA-1. 2 DCIT CIRCLE-4 P-7 CHOWRINGHEE SQUARE KOLKATA-70 0 069 3. CIT(A)- KOLKATA 4. CIT- KOLKATA 5. DR KOLKATA BENCHES KOLKATA (TRUE COPY) BY ORDER ASSISTANT REGISTRAR I.T.A.T. KOLKATA. LAHA SR. P.S.