JAFFERLI K. RATTONSEY, MUMBAI v. DCIT CEN CIR 5, MUMBAI

ITA 3589/MUM/2009 | 2005-2006
Pronouncement Date: 31-05-2010 | Result: Allowed

Appeal Details

RSA Number 358919914 RSA 2009
Assessee PAN AABPR3348D
Bench Mumbai
Appeal Number ITA 3589/MUM/2009
Duration Of Justice 11 month(s) 28 day(s)
Appellant JAFFERLI K. RATTONSEY, MUMBAI
Respondent DCIT CEN CIR 5, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-05-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted J
Tribunal Order Date 31-05-2010
Date Of Final Hearing 05-05-2010
Next Hearing Date 05-05-2010
Assessment Year 2005-2006
Appeal Filed On 02-06-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI J BENCH MUMBAI BEFORE SHRI N.V. VASUDEVAN (JUDICIAL MEMBER) AND SHRI PRAMOD KUMAR (ACCOUNTANT MEMBER) ITA NO.3589/MUM./2009 ASSESSMENT YEAR : 2005-06 DATE OF HEARING 5.5.2010 JAFFERALI K. RATTONSEY C/O DIMEXON DIAMONDS LTD. 804 RAHEJA CHAMBERS 213 NARIMAN POINT MUMBAI 400 021 PAN AABPR3348D .. APPELLANT VS. DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 5 AAYAKAR BHAVAN M.K. ROAD MUMBAI 400 020 RESPONDENT ITA NO.3643/MUM./2009 ASSESSMENT YEAR : 2005-06 DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 5 AAYAKAR BHAVAN M.K. ROAD MUMBAI 400 020 .. APPELLANT VS JAFFERALI K. RATTONSEY C/O DIMEXON DIAMONDS LTD. 804 RAHEJA CHAMBERS 213 NARIMAN POINT MUMBAI 400 021 PAN AABPR3348D RESPONDENT ASSESSEE BY : SHRI AJAY R. SINGH REVENUE BY : SHRI N.K. BALODIA JAFFERALI K. RATTONSEY [2] O R D E R PER BENCH 1. THESE CROSS APPEALS ARE DIRECTED AGAINST CIT(A) S ORDER DATED 30 TH MARCH 2009 FOR THE ASSESSMENT YEAR 2005-06. AS BOTH OF T HESE APPEALS PERTAIN TO A COMMON ISSUE ARISING OUT OF THE SAME SET OF FACTS AND AS THESE APPEALS WERE HEARD TOGETHER BOTH THE APPEALS ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. THE ASSESSEE BEFORE US IS AN INDIVIDUAL WHO WAS SUB JECTED TO SEARCH AND SEIZURE OPERATIONS ON 11 TH JULY 2006. IN THE COURSE OF ASSESSMENT PROCEEDINGS WHICH FOLLOWED THIS SEARCH AND SEIZURE THE ASSESSI NG OFFICER NOTICED THAT THE ASSESSEE HAD DURING THE RELEVANT PREVIOUS YEAR SO LD 3 95 200 SHARES OF DIMEXON DIAMONDS LTD. @ RS.76.25 PER SHARE AND THUS CLAIMED A LONG TERM CAPITAL LOSS OF RS.19 22 003. THE ASSESSING OFFICER FURTHER NOTED T HAT NAV (NET ASSETS VALUE) OF THESE SHARES WAS RS.422 PER SHARE. IT WAS IN THIS B ACKDROP THAT THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO SHOW CAUSE AS TO W HY SALE PRICE OF RS.422 PER SHARE NOT BE ADOPTED FOR COMPUTATION OF LONG TERM CAPITAL GAIN. IN RESPONSE TO THE SAID NOTICE THE ASSESSEE FILED VALUATION REPORT OF THES E SHARES AS OBTAINED FROM C. DALAL & CO. AND V.R. PANDEY & CO. WHICH SHOWED THE FAIR VALUE AS PER CCI GUIDELINES AT RS.202.40 AND AGREED PRICES AT RS.148/-. IT WAS ALS O CONTENDED BY THE ASSESSEE THAT FOR THE PURPOSE OF COMPUTING CHARGEABLE CAPITAL GAI NS UNDER THE ACT THE ASSESSING OFFICER DID NOT HAVE THE POWERS TO REJECT THE ACTUA L SALE CONSIDERATION. THE ASSESSING OFFICER DID NOT AGREE WITH ANY OF THESE S UBMISSIONS. HE RECOMPUTED THE FAIR VALUE AS PER CCI GUIDELINES AT RS.290. HE ALSO RELIED UPON AMONGST OTHER THINGS HON'BLE SUPREME COURTS JUDGMENTS IN THE CA SES OF MC DOWELL & CO. LTD. VS CTO 154 ITR 148 AND CIT VS DURGA PRASAD MORE 82 I TR 540 TO JUSTIFY HIS DISREGARDING THE SALE PRICE DISCLOSED BY THE ASSESS EE AND ADOPTING FULL VALUE OF CONSIDERATION. DRAWING INSPIRATION FROM SECTION 50C THE ASSESSING OFFICER ADOPTED SALE CONSIDERATION AT RS.300 AT WHICH ONE SHRI KAMA RUDDIN DHANJI SOLD THE SAME JAFFERALI K. RATTONSEY [3] SHARES. ACCORDINGLY AN ADDITION OF RS.8 85 24 056 WAS MADE TO THE ASSESSEES INCOME. AGGRIEVED BY THE ADDITION SO MADE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A) WHO APPROVED THE ACTION O F THE ASSESSING OFFICER IN PRINCIPLE BUT RESTRICTED THE QUANTUM OF ADDITION TO SUCH AMOUNT AS MAY BE COMPUTED BY ADOPTING PROFIT EARNING CAPACITY METHOD . 3. NONE OF THE PARTIES IS SATISFIED BY THE VERDICT OF THE LEARNED CIT(A). WHILE ASSESSEE IS AGGRIEVED THAT THE CIT(A) OUGHT TO HAVE ACCEPTED THE ACTUAL SALE CONSIDERATION I.E. @ RS.76.25 PER SHARE THE ASSE SSING OFFICER IS AGGRIEVED THAT THE CIT(A) OUGHT TO HAVE UPHELD ADDITION MADE BY HIM BY TAKING FULL SALE CONSIDERATION @ RS.300. THE SPECIFIC GRIEVANCES RAISED BY THE PAR TIES ARE AS FOLLOWS:- REVISED GROUNDS OF APPEAL BY THE ASSESSEE 1. THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSES SING OFFICER TO COMPUTE CAPITAL GAINS ON SALE OF SHARES OF MESSRS D IMEXON DIAMONDS LTD. ON THE BASIS OF PROFIT EARNING CAPACITY VALUA TION METHOD AS AGAINST THE ACTUAL SALE CONSIDERATION OF RS.76.25 PER SHARE SHOWN BY THE APPELLANT THEREBY CONFIRMING THE ADDITION OF RS.72 716 800 ON NOTIONAL BASIS. 2. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE VAL UE IN RESPECT OF THE UNLISTED EQUITY SHARES OF A COMPANY IN WHICH PU BLIC ARE NOT SUBSTANTIALLY INTERESTED SHOULD BE WORKED OUT ON TH E BASIS OF THE YIELD METHOD OR THE NET ASSET VALUE METHOD AS LAID DOWN I N THE WEALTH TAX ACT 1957 R/W THE WEALTH TAX RULES 1C AND 1D AND T HEREBY CONFIRMING THE ADDITION OF RS.72 716 800 AS INCOME OF THE APPE LLANT. 3. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE RE IS NO PROVISION UNDER THE INCOME TAX ACT 1961 TO TAX THE CAPITAL G AIN ON SALE OF SHARES ON NOTIONAL BASIS AND THE TRANSACTION BEING GENUINE THE ADDITION CONFIRMED BY THE CIT(A) MAY BE DIRECTED TO BE DELET ED. GROUNDS RAISE BY THE ASSESSING OFFICER 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESSING OFF ICER TO ADOPT FULL VALUE OF CONSIDERATION OF DIMEXON DIAMONDS LTD. SHA RES FOR COMPUTING JAFFERALI K. RATTONSEY [4] LONG TERM CAPITAL GAIN BY THE PROFIT EARNING CAPACI TY METHOD AT RS.260/- PER SHARE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT(A) ERRED IN HOLDING THAT THE PROFIT EAR NING CAPACITY METHOD IS THE ONLY METHOD FOR VALUING THE SHARES OF DIMEXO N DIAMONDS LTD. ON THE FACTS AND CIRCUMSTANCES OF THE CASE WHEREAS THE ASSESSING OFFICER VALUED THE SHARES AT RS.290/- PER SHARE BY THE FARE VALUE METHOD AS PER THE GUIDELINES FOR VALUATION OF SHARES ISSUED BY MI NISTRY OF FINANCE DEPARTMENT OF ECONOMIC AFFAIRS. 4. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED THE MA TERIAL ON RECORD AND DULY CONSIDERED THE APPLICABLE LEGAL POSITION AS AL SO THE FACTUAL MATRIX OF THE CASE. 5. WE HAVE NOTED THAT ON MATERIALLY IDENTICAL FACTS ( EXCEPT THE AGREED SALES PRICE OF RS.148 PER SHARE AS AGAINST AGREED SALES P RICE OF RS.76.25 ON THE FACTS OF THIS CASE) A CO-ORDINATE BENCH OF THE TRIBUNAL HAS INTER-ALIA HELD THAT IT IS A SETTLED LEGAL POSITION THAT IN THE ABSENCE OF ANY EVIDENCE OF UNDERSTATEM ENT OR SUPPRESSION OF SALE CONSIDERATION THE SALE PRICE D ECLARED BY THE ASSESSEE HAS TO BE ACCEPTED FOR THE PURPOSES OF SECTION 48 (PAGE 8; VISHAL P. MEHTA VS DCIT AND VICE VERSA; ITA NOS.3586 AND 3646/MUM./2009; ORDER DATED 26 TH FEBRUARY 2010. IN THE CASE BEFORE US THERE IS NO EVIDENCE FOR UNDER STAT EMENT OR SUPPRESSION OF SALES PRICE. IN VIEW OF THESE DISCUSSIONS AND RESPECTFUL LY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH WE UPHOLD THE GRIEVANCES OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO COMPUTE CAPITAL GAINS ON THE B ASIS OF STATED SALES CONSIDERATION THE ASSESSEE GETS THE RELIEF ACCORDI NGLY. 6. AS REGARDS THE GRIEVANCES RAISED BY THE ASSESSING O FFICER THESE GRIEVANCES ONLY RELATE TO QUANTUM OF ADDITION TO BE MADE ON AC COUNT OF CAPITAL GAINS ON SALE OF SHARES. HOWEVER NOW THAT WE HAVE HELD THAT THE CAP ITAL GAINS ARE TO BE COMPUTED ON THE BASIS OF CONSIDERATION STATED BY THE ASSESSE E THESE GRIEVANCES ARE RENDERED INFRUCTUOUS. WE NEED NOT ADJUDICATE ON THE SAME. JAFFERALI K. RATTONSEY [5] 7. IN THE RESULT WHILE THE APPEAL OF THE ASSESSEE IS ALLOWED THE APPEAL FILED BY THE ASSESSING OFFICER IS DISMISSED AS INFRUCTUOUS. PRONOUNCED IN THE OPEN COURT TODAY ON 31 ST DAY OF MAY 2010. S D/XX (N.V. VASUDEVAN) JUDICIAL MEMBER S D/XX (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI; 31 ST DAY OF MAY 2010 COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) MUMBAI 4. COMMISSIONER (APPEALS) MUMBAI 5. DEPARTMENTAL REPRESENTATIVE J BENCH ITAT MUMB AI 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES MUMBAI PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY JAFFERALI K. RATTONSEY [6] DATE INITIAL 1. DRAFT DICTATED ON 24.5.2010 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 25.5.2010 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 25.5.2010 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 25.5.2010 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 25.5.2010 SR.PS/PS 6. DATE OF PRONOUNCEMENT 31.5.2010 SR.PS 7. FILE SENT TO THE BENCH CLERK 31.5.2010 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER