Smt.Sunanda Jayprakash Surana, v. ITO, Wd 11(4), Pune, Satara

ITA 1310/PUN/2008 | 2005-2006
Pronouncement Date: 20-08-2010 | Result: Allowed

Appeal Details

RSA Number 131024514 RSA 2008
Assessee PAN AHDPS4650A
Bench Pune
Appeal Number ITA 1310/PUN/2008
Duration Of Justice 1 year(s) 10 month(s)
Appellant Smt.Sunanda Jayprakash Surana,
Respondent ITO, Wd 11(4), Pune, Satara
Appeal Type Income Tax Appeal
Pronouncement Date 20-08-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 20-08-2010
Assessment Year 2005-2006
Appeal Filed On 20-10-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE SHRI I.C. SUDHIR (JM) AND SHRI D. KARUNAKARA RAO (AM) ITA NO. 1310/PN/2008 (ASSTT. YEAR : 2005-06) SMT. SUNANDA JAYPRAKASH SURANA C/O SHAH KHANDELWAL JAIN & ASSOCIATES CHARTERED ACCOUNTANTS 1 ST FLOOR ALANKAR CINEMA BUILDING PUNE 411001 PAN : AHDPS 4650 A .. APPELLANT V. INCOME TAX OFFICER WARD 11(4) PMT BUILDING SWARGATE PUNE . RESPONDENT APPELLANT BY : SHRI NILESH KHANDELWAL RESPONDENT BY : SHRI. ABHAY DAMLE ORDER PER D. KARUNAKARA RAO AM THIS IS THE APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF CIT(A)- I PUNE DATED 11.09.2008 FOR THE A.Y. 2005-06. F OLLOWING GROUNDS WERE RAISED BY THE ASSESSEE : 1. ON FACTS & CIRCUMSTANCES PREVAILING IN THE CASE & AS PER PROVISIONS OF LAW IT BE HELD THAT THE LEARNED TAXING AUTHORITY B ELOW HAVE ERRED IN TAXING THE AMOUNT OF RS.14 06 248/- ASSESSABLE UNDE R THE HEAD INCOME FROM OTHER SOURCES IN PLACE OF THAT ASSESS ABLE UNDER THE HEAD CAPITAL GAIN AS CLAIMED BY THE APPELLANT. T HE ACTION OF LEARNED TAXING AUTHORITY BELOW BE HELD AS ERRONEOUS UNJUST IFIED & CONTRARY TO FACTS PREVAILING IN THE CASE & SCHEME & PROVISIONS OF LAW. THE SAID INCOME OF RS.14 06 248/- BE HELD AS ASSESSABLE UNDE R THE HEAD CAPITAL GAINS ARISING ON TRANSFER OF SHARES & BE DIRECTED TO BE TAXED ACCORDINGLY. 2. ON FACTS & CIRCUMSTANCES PREVAILING IN THE CASE & AS PER PROVISIONS OF LAW IT BE HELD THAT THE LEARNED TAXING AUTHORITY B ELOW HAS ERRED IN TAXING A SUM OF RS.28 528/- U/S 69C OF THE ACT ON S URMISES & GUESS WORK. THE ACTION OF THE LEARNED TAXING AUTHORITY BELOW BE HELD ERRONEOUS ARBITRARY UNFOUNDED & UNJUSTIFIED. THE ADDITION OF RS. 28 528/- BE DIRECTED TO BE DELETED. 2. AT THE VERY OUTSET DURING THE TIME MEANT FOR TH E COVERED CASES THE LD COUNSEL FOR THE ASSESSEE STATED THAT THERE ARE TWO GROUNDS IN THE APPEAL AND GROUND NO. 1 RELATES TO TAXABILITY OF THE INCOME EA RNED OUT OF SALE OF PENNY STOCK ITA NO 1310/PN/2008 SMT. SUNANDA JAYPRAKASH SURANA.. A.Y.2005-06 PAGE OF 4 2 UNDER THE HEAD INCOME FROM CAPITAL GAINS AS CLAIM ED BY THE ASSESSEE OR INCOME FROM THE OTHER SOURCES AS DECIDED BY THE A.O AND T HE CIT(A). IN THIS REGARD THE LD COUNSEL BROUGHT TO OUR NOTICE AN ORDER OF THIS T RIBUNAL PASSED BY THE UNDERSIGNED MEMBERS OF THE BENCH VIDE ITA NO. 1332/ PN/2008 FOR THE A.Y. 2005-06 IN THE CASE OF SMT. SUREKHA BHAGVATIPRASAD MUNDADA AND OTHERS. LD COUNSEL BROUGHT TO OUR NOTICE THE FACT THE TRIBUNAL HAS HE LD THAT THE INCOME EARNED OUT OF SUCH PENNY STOCK HAS TO BE TAXED UNDER THE HEAD CA PITAL GAINS IN VIEW OF THE FACT THAT IMPUGNED PENNY STOCKS/SHARES ARE FINALLY FOUND CREDITED IN THE D-MAT ACCOUNT OF THE ASSESSEE. IN THIS REGARD LD COUNSEL READ O UT PARA 20 TO 22 OF THE SAID ORDER. WE HAVE PERUSED THE SAME AND FOR THE SAKE OF COMPLE TENESS OF THE ORDER THE SAID PARAGRAPHS ARE REPRODUCED : 20. TO SUM UP THE ASSESSEE CLAIMS THAT SHE EARNED LONG TERM CAP ITAL GAIN WHIH ARE EXEMPT U/S 10(38) OF THE ACT. AS PER THE ASSESSEE THE AO ERRONEOUSLY HELD THE SAME AS INCOME FROM OTHER SOU RCES AND THE CIT(A) GRANTED PART RELIEF HOLDING THAT THE SAID GAINS CON STITUTES SHORT TERM CAPITAL GAINS AND IN THE PROCESS HE CONSIDERED THE DATE O F TRANSFER OF IMPUGNED SHARE TO THE DMAT ACCOUNT OF THE ASSESSEE AS THE DATE FOR COUNTING THE PERIOD OF HOLDING OF THE SHARES. OTHERWISE THE ASSESSEE ARGU ES FOR REVERSAL OF THE ORDERS OF THE REVENUE AND PRAY FOR GRANT OF EXEMPTION U/S 10(38) IN RESPECT OF THE IMPUGNED CAPITAL GAINS. REVENUE CONTENDS FOR TAXATI ON OF THE SAID GAINS UNDER THE HEAD INCOME FROM OTHER SOURCES. 21. THE PARTIES HAVE ADVANCED THEIR COMMON ARGUMEN TS IN RESPECT OF THE ABOVE REFERRED TWELVE APPEALS OF SIX EACH BELONGING TO ASSESSEE AND THE REVENUE. ON CONSIDERATION OF THE ARGUMENTS AND OUR DISCUSSION WE UPHELD THE INVALIDITY OF THE CONTRACT NOTES AND THE UNSUPPORTED ENTRIES IN THE BOOKS OF ACCOUNTS IN THIS REGARD. THE PROCEEDINGS U/S 11B AN D 11(4) OF SEBI ACT 1992 IN RESPECT OF THE BROKER CONTRIBUTES TO THE LACK OF CR EDIBILITY TO THE ASSERTIONS MADE BY SRI R P SHAH THE BROKER AND THE CONFIRMATION GIV EN BY HIM. FURTHER ON THE ISSUE IF THE PURCHASE TRANSACTIONS IN QUESTION ARE EITHER THE CALCUTTA EXCHANGE OR OFF MARKET TRANSACTIONS IT IS NOW THE CHANGED POSI TION THAT THE ASSESSEES COUNSEL ATTEMPTED TO MAKE IT A CASE OF OFF MARKET T RANSACTIONS AND IN OUR OPINION THE SAME CONSTITUTES AN AFTERTHOUGHT WHICH IS NOT ENTERTAINED AT THIS STAGE WITH OUT SUPPORTING EVIDENCES. IT IS A SETTLE D POSITION THAT WHEN DEDUCTION IS CLAIMED U/S 10(38) OF THE ACT BY THE ASSESSEE AN D THEREFORE THE ONUS IS ON THE ASSESSEE AND THE SAME IS NOT DISCHARGED. INSOFA R AS THE CIRCULAR NO 704 DT 8/4/95- IS CONCERNED THAT IT HAS NOT APPLICATION T O THE CASE OF THE ASSESSEE WHERE THERE IS NO CLARITY ON IF THE TRANSACTIONS AR E OFF MARKET OR OTHERWISE. THE LACK OF CREDIBILITY TO THE BROKERS DEALS THE DATE APPEARING IN THE ALLEGED CONTRACT NOTE HAVE TO BE IGNORED. FURTHER WE FIND THAT THE IN THE CASES LIKE THIS THE ONUS IS ON THE ASSESSEE AS HELD IN THE CASE OF SHANTHILA L MUNNALAL (SUPRA). THIS DECISION ALSO PROPOSES THAT THE IMPUGNED PURCHASE T RANSACTIONS MUST BE TREATED AS NON GENUINE TRANSACTIONS UNDER THE FACTUAL MATRI X OF TAINTED BROKER SOLITARY TRANSACTION AND ALSO THE PENNY STOCK. 22. EVEN WE ARE NOT PRIVY TO SUCH ORIGINALS OF THE CONTRACT NOTES AS THEY ARE NOT PART OF THE PAPER BOOK FILED BEFORE US. IN ANY CASE WE HAVE GIVEN OUR FINDING ON THE CREDIBILITY OF THESE CONTRACTS NOTES AND THE SA ME IS AGAINST THE ASSESSEE HAVE ALSO EXAMINED THE FOLLOW UP ACTION CONSEQUENT TO THE SAID CONTRACT NOTE ITA NO 1310/PN/2008 SMT. SUNANDA JAYPRAKASH SURANA.. A.Y.2005-06 PAGE OF 4 3 AND FOUND THE SHARES WERE NEITHER TRANSFERRED TO TH E ASSESSEE NOR THE PAYMENTS OF CONSIDERATION WAS MADE BY THE ASSESSEE TO THE BR OKER IN A REASONABLE TIME PERIOD. THERE IS NO EVIDENCE TO SUBSTANTIATE THAT THERE IS SOME UNDERSTANDING BETWEEN THE BROKER AND THE ASSESSEE FOR SUCH INAC TION TO GIVE EFFECT TO THE SAID CONTRACT NOTES. THAT MEANS THESE CONTRACT NOTES AR E AS GOOD AS DEAD ONES. IN ANY CASE NOW THE ASSESSEE HAS DECIDED TO RESORT TO THE NEW LINE OF ARGUMENT I.E. OFF MARKET TRANSACTION. IN EFFECT IN OUR O PINION IT IS AS GOOD AS THE ASSESSEE STOPPED RELYING ON THE CONTRACT NOTES. FURTHER WE CONSIDERING THE FACT THAT THE ASSESSEES FAMILY IS FAIRLY ACQUAINTE D WITH THE BROKER WHO ENTERTAINED THE TELEPHONIC ORDERS OF THE ASSESSEE THE ALLEGATION OF PROXIMITY OF SRI RAJENDRA P SHAH THE BROKER TO THE ASSESSEES F AMILY SHOULD BE ENTERTAINED AND THEREFORE THERE MUST SOMETHING MORE THAN WHAT MEETS THE EYES AND MORE THAN WHAT APPEARS IN THE BOOKS OF ACCOUNTS OF THE B ROKER AND THE ASSESSEE. THEREFORE THE RATIO DECIDENDI OF THE APEX COURT IN THE CASE OF SUMATI DAYAL (SUPRA) HAS SOME RELEVANCE TO THIS CASE. DURING THE HEARING LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE IMPUGNED PURCHASE TRANS ACTIONS ARE ENTERED IN HER BOOKS AS INVESTMENTS AND IN OUR OPINION THE SAME C ANNOT BE CONCLUSIVE PROOF CONSIDERING VARIOUS ABNORMALITIES AND ALLEGATIONS I NVOLVING THE SCRIP BROKER THE ASSESSEE AND THE ACT OF OTHER ASSESSEES WITH COMPAR ABLE PURCHASE TRANSACTIONS THROUGH THE SAME BROKER AND REVISING OF THEIR INCOM E OFFERING THEIR PROFITS ALLEGEDLY EARNED ON SALE OF SHARES. IT IS OBVIOUS T HAT THE SAID BOOKS ARE WRITTEN UNDER THE GUIDANCE OF THE ASSESSEE AND THE ENTRIES ARE NOT ADEQUATELY SUBSTANTIATED BY WAY OF PROPER CONTRACT NOTES AND T HE CONTRACT NOTES THEMSELVES SUFFER FORM CREDIBILITY IN VIEW OF THE ABOVE DISCRE DITS TOO. FURTHER WE HAVE OBSERVED THAT ORIGINALLY THE CLAIM OF THE ASSESSEE /BROKER IS THAT THE IMPUGNED TRANSACTIONS ARE EFFECTED THROUGH THE EXCHANGE WHI CH WAS FOUND TO BE FALSE BY THE AO THROUGH HIS DIRECT ENQUIRIES WITH THE CALCUT TA EXCHANGE. A.O GATHERED RELEVANT DETAILS FROM THE EXCHANGE TO DEMONSTRATE T HAT THE PURCHASE TRANSACTION WAS NOT A RECORDED TRANSACTION IN THE CALCUTTA STOC K EXCHANGE. THIS IS SUPPORTED BY THE FACT THAT THE SHARES ARE NEITHER TRANSFERRED TO THE ASSESSEE NOR THE RELEVANT PAYMENTS ARE MADE BY THE ASSESSEE TO THE B ROKER IMMEDIATELY AFTER PLACING THE ORDER FOR PURCHASE OF SHARES AND TILL T HE EXPIRY OF 18 MONTHS. THUS IT IS AN UNDISPUTED FACT THAT THE ASSESSEE RECEIVED S ALE CONSIDERATION AND THE SAME IS ENTERED THE BANK ACCOUNTS OF THE ASSESSEES AND THE SAME IS RECEIVED INCIDENTAL TO THE INVESTMENT IN THE SHARES CAPITA L ASSETS. THEREFORE INCOME IF ANY GENERATED OUT THE SAME HAS TO BE CAPITAL GAINS MAY BE LONG TERM OR SHORT TERM AND IT CERTAINLY IS NOT INCOME FROM OTHER SOU RCES. CONSIDERING THE ABOVE WE ARE OF THE CONSIDERED OPINION THAT THE IMPUGNED GAINS ARE RIGHTLY TREATED AS SHORT TERM CAPITAL GAINS AND THEREFORE THE ASSESSEE IS NOT ENTITLED TO EXEMPTION U/S 10(38) OF THE ACT AS THE EXEMPTION IS AVAILABLE ONLY TO THE LONG TERM CAPITAL GAINS. THEREFORE THE ORDER OF THE CIT (A) DOES NOT CALL FOR INTERFERENCE. ACCORDINGLY THE GROUNDS RAISED BY TH E ASSESSEE ARE DISMISSED . CONSIDERING THE ABOVE NATURE OF THE ISSUE WE ARE O F THE OPINION IN PRINCIPLE THE ISSUE IS COVERED AND THEREFORE THE IMPUGNED INCOME IS TAXABLE UNDER THE HEAD INCOME FROM CAPITAL GAINS AND NOT UNDER THE HEAD I NCOME FROM OTHER SOURCES AND HENCE THE ASSESSEE IS ENTITLED TO RELIEF IN THIS RE GARD. ACCORDINGLY GROUND NO. 1 IS ALLOWED IN FAVOUR OF THE ASSESSE. 3. GROUND NO. 2 RELATES TO THE ADDITION OF RS. 28 5 28/- TOWARDS THE COMMISSION PAID BY THE ASSESSEE FOR HELPING THE ASSESSEE FOR S ERVICES CONNECTED TO THE IMPUGNED TRANSACTIONS RELATING TO THE PENNY STOCK . AT THE OUTSET THE COUNSEL ITA NO 1310/PN/2008 SMT. SUNANDA JAYPRAKASH SURANA.. A.Y.2005-06 PAGE OF 4 4 DEMONSTRATED THAT THERE IS NO EVIDENCE FOR SUCH INC URRING OF THE EXPENDITURE BY THE ASSESSEE. IT IS MERELY A GUESS WORK THAT THE A.O A SSUMED THE PAYMENT OF THE SAID COMMISSION. CIT(A) HAS NOT PASSED A DETAILED ORDER IN THIS REGARD WHILE CONFIRMING THE ADDITION. 4. WE HAVE PERUSED THE RELEVANT ORDERS OF THE REVEN UE AND PERUSED THE MATERIAL AVAILABLE BEFORE US. IT IS AN ADMITTED PO SITION THAT THE SAID AMOUNT WAS ARRIVED AT ON AD-HOC BASIS I.E. AT 2% OF THE TRANSA CTIONAL VALUE. IN OUR OPINION SUCH GUESS WORKS ARE NOT ENTERTAINABLE. THEREFORE WE A RE OF THE OPINION THAT THE ORDER OF THE CIT(A) IN THIS REGARD SHOULD BE DELETED. AC CORDINGLY GROUND NO. 2 OF THE APPEAL IS ALLOWED . 5. IN THE RESULT ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20TH AUGUS T 2010 SD/- SD/- (I.C. SUDHIR) JUDICIAL MEMBER (D. KARUNAKARA RAO ) ACCOUNTANT MEMBER PUNE DATED THE 20TH AUGUST 2010 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT -I PUNE 4. THE CIT(A)-I PUNE 4. THE D.R. A BENCH PUNE 5. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE