The ACIT, Circle-2,, Bhavnagar v. Shri Dhirajlal Madhavji Patel,

ITA 3263/AHD/2008 | 2005-2006
Pronouncement Date: 02-07-2010 | Result: Dismissed

Appeal Details

RSA Number 326320514 RSA 2008
Assessee PAN ENTIN5300E
Bench Ahmedabad
Appeal Number ITA 3263/AHD/2008
Duration Of Justice 1 year(s) 9 month(s) 7 day(s)
Appellant The ACIT, Circle-2,, Bhavnagar
Respondent Shri Dhirajlal Madhavji Patel,
Appeal Type Income Tax Appeal
Pronouncement Date 02-07-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 02-07-2010
Date Of Final Hearing 29-06-2010
Next Hearing Date 29-06-2010
Assessment Year 2005-2006
Appeal Filed On 25-09-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD A BENCH (BEFORE S/SHRI G.D. AGARWAL VICE-PRESIDENT AND BHAVNESH SAINI JUDICIAL MEMBER) ITA.NO.3263/AHD/2008 ASSTT.YEAR : 2005-2006 ACIT CIR.1 BHAVNAGAR. VS. SHRI DHIRAJLAL MADHAVJI PATEL C/O. PATEL SALT & MARINE CHEM. P. LTD. NR.RAILWAY CROSSING KUMBHARWADA BHAVNAGAR. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI A.K. KHANDELWAL ASSESSEE BY : SHRI B.R.POPAT O R D E R PER G.D. AGARWAL VICE-PRESIDENT: THIS IS REVENUES APPEAL AGAINST THE ORDER OF THE CIT(A)-XX AHMEDABAD DATED 27-6-2008 FOR A.Y.2005-2006 ARISING OUT OF THE ORDER OF THE ASSES SING OFFICER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961. THE F OLLOWING GROUNDS ARE RAISED IN THE APPEAL: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.8 66 521/- MADE BY HE AO ON ACCOUNT OF UNDISCLOSED INCOME. 2. THE LD.CIT(A) ERRED IN LAW AND ON FACTS OF THE C ASE IN DIRECTING THE AO TO RET THE AMOUNT OF RS.8 66 521/- AS LONG T ERM CAPITAL GAIN AND ALLOW EXEMPTION U/S.10(38) OF THE I.T.ACT. 2. AT THE TIME OF HEARING BEFORE US IT IS SUBMITTE D BY THE LEARNED COUNSEL THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS T HE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS CLAIMED TO HAVE EARNED CAPITA L GAIN OF RS.8 66 521/- WHICH IS EXEMPT FROM TAX. WHEN THE ASSESSING OFFIC ER MADE INQUIRY FROM THE SHARE BROKER THROUGH WHOM THE ASSESSEE HAS CLAIMED TO HAVE PURCHASED THE SHARES THE LETTER RETURNED UNSERVED WITH THE REMAR KS NOT CLAIMED. SIMILARLY THE LETTER WRITTEN TO THE COMPANY WHOSE SHARES THE ASSESSEE CLAIMED TO HAVE ITA.NO.3263/AHD/2008 -2- PURCHASED WAS ALSO RECEIVED BACK WITH THE REMARKS O F THE POSTAL AUTHORITIES LEFT. THE ASSESSEE COULD NOT PROVE EITHER THE GE NUINENESS OF THE PURCHASES OF THE SHARES OR SALE OF SHARES AND ALSO THE APPRECIAT ION IN THE VALUE OF THESE SHARES. HE FURTHER STATED THAT IN RESPECT OF NOTIC E UNDER SECTION 131 THE ASSESSEE DID NOT APPEAR. THE CIT(A) WITHOUT PROPER LY APPRECIATING THE FACTS OF THE CASE HAS ACCEPTED THE CONTENTION OF THE ASSESSE E THAT THE CLAIM OF CAPITAL GAIN BY THE ASSESSEE WAS GENUINE. HE THEREFORE SUB MITTED THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) SHOULD BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTH ER HAND STATED THAT THE PURCHASE OF THE SHARES WAS NOT IN THE YEAR UNDER CO NSIDERATION BUT WAS IN THE PRECEDING YEAR. THE PURCHASE OF SHARES WAS DULY DI SCLOSED IN THE ASSESSEES BOOKS OF ACCOUNTS AND WAS ALSO ACCEPTED BY THE REVE NUE. DURING THE YEAR UNDER CONSIDERATION THERE WAS SALE OF SHARES. THE GENUINENESS OF WHICH WAS NOT DOUBTED. THE SALE OF SHARES WAS THROUGH M/S.MI TESH SECURITIES PVT. LTD. OF BHAVNAGAR AND THE PAYMENTS FOR THE SALE OF SHARES W ERE RECEIVED BY CHEQUE. THAT AFTER PURCHASING THE SHARES IN PHYSICAL FORM T HE SAME WAS CONVERTED INTO DEMAT FORM AND THE DEMAT ACCOUNT STATEMENT WITH THE IDBI BANK WAS DULY FURNISHED. HE FURTHER STATED THAT MERELY BECAUSE THE BROKER OF THE ASSESSEE AT MUMBAI HAS CHANGED HIS OFFICE NO ADVERSE INFERENCE CAN BE DRAWN AGAINST THE ASSESSEE. SIMILARLY THE ASSESSEE BEING A SHAREHOL DER WAS NOT AWARE OF THE CHANGE OF THE ADDRESS BY THE COMPANY WHOSE SHARES THE ASSESSEE HAD PURCHASED AND SOLD. WITH REGARD TO THE NOTICE UNDE R SECTION 131 IT WAS SUBMITTED BY THE LEARNED COUNSEL THAT WHATEVER INFO RMATION WAS SOUGHT FOR BY THE AO AS PER THE SUMMONS UNDER SECTION 131 WERE DULY FURNISHED BY WAY OF WRITTEN SUBMISSIONS. THEREAFTER THE ASSESSING OFF ICER DID NOT ISSUE ANY OTHER NOTICE UNDER SECTION 131. HE ALSO STATED THAT TH E INQUIRIES WERE CONDUCTED BY THE AO BEHIND BACK OF THE ASSESSEE AND THE ASSESSEE WAS NEVER CONFRONTED WITH THE RESULT OF THE INQUIRY. HE THEREFORE SUBMITTED THAT THE CIT(A) HAS RIGHTLY ACCEPTED THE CAPITAL GAIN AS GENUINE. ITA.NO.3263/AHD/2008 -3- 4. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED MATERIALS PLACED BEFORE US. WE FIND THAT THE CIT(A) HAS DISCUSSED THE ISSUE AT LENGTH FROM PAGE NOS.2 TO 6 OF HIS ORDER. HE HAS DISCUSSED THE GROUNDS ON WHICH THE AO TREATED THE CAPITAL GAIN AS NON-GEN UINE AND THE ASSESSEES EXPLANATION THEREFOR. THEREAFTER AT PAGE NO.7 8 AND 9 OF HIS ORDER HE HAS GIVEN HIS OWN FINDING WHICH READS AS UNDER: 3.1 I HAVE CAREFULLY GONE THROUGH THE FACTS OF THE CASE AND WRITTEN SUBMISSION MADE BY THE ID. COUNSEL. IT IS SEEN FROM THE FACTS ON RECORD AND SUBMISSION OF THE APPELLANT THAT THE APPELLANT HAD MADE INVESTMENT IN 5300 EQUITY SHARES OF M/S. ROBINSON IMPEX (INDIA) LTD. T HROUGH REGISTERED BROKER M/S. DP5 SHARES & SECURITIES PVT.LTD. THESE SHARE C ERTIFICATES WERE THEREAFTER GOT CONSOLIDATED INTO ONE SINGLE PHYSICAL SHARE CER TIFICATE. THEREAFTER THE PHYSICAL HOLDING OF THE SHARES WAS CONVERTED INTO D EMAT FORM BY SURRENDERING THE SHARE PHYSICAL CERTIFICATE TO IDBI BANK HAVING DP ID NO.IM300450. THE INVESTMENT HAS BEEN DULY REFLECTED IN THE REGULAR B OOKS FOR THE F Y RELEVANT TO A Y 2004-05. THE INVESTMENT IS ALSO REFLECTED IN TH E BALANCE SHEET PREPARED ON 31 MARCH 2004. THE AFORESAID HOLDING OF SHARES WAS TRANSFERRED BY THE APPELLANT ELECTRONICALLY THROUGH THE RECOGNIZED STO CK EXCHANGE IN THE MONTH OF OCTOBER 2004. THIS TRANSFER WAS AFFECTED THROUGH M /S. MITESH SECURITIES PVT. LTD. AND THE SOME WERE ROUTED 'THROUGH THE DMAT AC COUNT HELD BY THE APPELLANT WITH IDBI BANK. THE SALE PROCEEDINGS IN T HIS CONNECTION WERE REALIZED BY CROSSED ACCOUNT PAYEE CHEQUES AND THE S AME WERE DEPOSITED IN THE BANKING ACCOUNT MAINTAINED BY THE APPELLANT. 3.2 IT IS VERY CLEAR IN THIS CASE THAT WITH REGARD TO PURCHASE HOLDING AND TRANSFER OF AFORESAID SHARES THE APPELLANT HAS FIL ED DOCUMENTARY EVIDENCES SUCH AS THE INVOICES RAISED BY GPS SHARES AND SECUR ITIES PVT.LTD. IN RESPECT OF PURCHASE OF SHARES COPY OF THE CONSOLIDATED SHARE CERTIFICATE COPY OF THE APPLICATION MADE FOR GETTING THE PHYSICAL SHARES CO NVERTED INTO DMAT FORM DMAT ACCOUNT STATEMENT OF THE APPELLANT THE BILLS RAISED BY M/S. MITESH SECURITIES PERT. LTD. COPY OF THE RELEVANT BANK ST ATEMENT INDICATING THE REALIZATION OF THE NET TRANSFER PRICE COPY OF THE RELEVANT LEDGER ACCOUNT CERTIFICATE ISSUED BY THE STOCK EXCHANGE AHMEDABAD INDICATING THE TRADING PRICE OF THE SHARES IN THE MONTH OF APRIL 2033. AL L THESE DOCUMENTS CONFIRM THAT THE CLAIM OF THE APPELLANT WITH REGARD TO INVE STMENT IN HOLDING OF SHARES AND THE TRANSFER THERE OF IS GENUINE. THE ASSESSING OFFICER HAS WHILE RIOT ACCEPTING THE CLAIM OF THE APPELLANT RAISED SO MANY POINTS AS DETAILED IN THE ASSESSMENT ORDER TO WHICH THE LEARNED AUTHORISED RE PRESENTATIVE OF THE APPELLANT REPLIED IN DETAIL WITH DOCUMENTARY EVIDEN CES AND CLARIFICATION OF FACTS. 3.3 I HAVE CONSIDERED CAREFULLY ALL THE ISSUES RAI SED AGAINST THE CLAIM OF THE APPELLANT BY THE ASSESSING OFFICER AND THE CLARIFIC ATION PUT FORTH BY THE LEARNED AUTHORISED REPRESENTATIVE OF THE APPELLANT BEFORE ME AND FIND THAT THE ITA.NO.3263/AHD/2008 -4- APPELLANT HAS EXPLAINED WITH SUPPORTING DOCUMENTS T HAT THE SHARES WERE HELD AS INVESTMENTS OR CAPITAL ASSET WHICH WERE TRANSFE RRED ELECTRONICALLY THROUGH RECOGNIZED STOCK EXCHANGE. SINCE THE TRANSACTIONS W ERE SUBJECTED TO PAYMENT OF STT IT BECOMES CLEAR THAT IT GENERATED CAPITOL GAINS LIABLE TO BE TAXED ACCORDING TO THE PROVISIONS OF THE ACT. IN THE CASE OF THE APPELLANT THE SHARES WERE HELD OVER A PERIOD OF 12 MONTHS THE TRANSACTI ON OF THE SAME GENERATED THE LONG TERM CAPITAL GAIN. THEREFORE ASSESSING OF FICER`S FINDINGS TREATING SUCH LONG TERM CAPITAL GAIN AS INCOME FROM UNDISCLO SED SOURCES ARE NOT JUSTIFIED. 3.4 IN THE LIGHT OF THE ABOVE DISCUSSION THE ASSES SING OFFICER IS DIRECTED TO TREAT THE AMOUNT AS LONG TERM CAPITAL GAIN AND A LLOW EXEMPTION U/S. 10(38) OF THE IT ACT FROM TAXATION ACCORDINGLY. AFTER CONSIDERING THE ABOVE AND THE FACTS OF THE CA SE WE DO NOT FIND ANY INFIRMITY IN THE ABOVE FINDINGS OF THE CIT(A). HE HAS CONSIDERED EACH AND EVERY FACT WITH REGARD TO THE PURCHASE OF SHARES C ONSOLIDATION OF THE SHARE CERTIFICATE ITS CONVERSION FROM PHYSICAL SHARE CER TIFICATE TO DEMAT FORM. THE PURCHASES HAVE BEEN DISCLOSED IN THE BALANCE SHEET FOR THE YEAR ENDING 31 ST MARCH 2004 AND THE SALE OF SHARES HAVE BEEN EFFECT ED IN DEMAT FORM AND THE RECEIPT OF THE SALE PROCEEDINGS BY ACCOUNT PAYEE CH EQUES. CONSIDERING ALL THESE FACTS AND THE SUPPORTING EVIDENCES THEREFOR THE CIT(A) HELD THAT THE ASSESSEES CLAIM OF CAPITAL GAIN WAS GENUINE AND TH E ASSESSING OFFICER WAS NOT JUSTIFIED IN TREATING THE LONG TERM CAPITAL GAIN AS INCOME FROM UNDISCLOSED SOURCES. IN THIS VIEW OF THE MATTER WE FIND NO J USTIFICATION TO INTERFERE WITH THE FINDINGS OF THE CIT(A). THE ORDER OF THE CIT(A ) ON THIS ISSUE IS SUSTAINED. 5. IN THE RESULT THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN OPEN COURT ON 2 ND JULY 2010. SD/- SD/- (BHAVNESH SAINI) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 02-07-2010 ITA.NO.3263/AHD/2008 -5- VK* COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR ITAT. BY ORDER AR ITAT AHMEDABAD