M/S. KATARIA KETAN ISHWARLAL, MUMBAI v. THE ITO 11(2)(4),

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH MUMBAI BEFORE SHRI R.S. PADVEKAR JM & BEFORE SHRI R.K. PA NDA AM I.T.A. NO. 4304/MUM/2007 (ASSESSMENT YEAR 2002-03) MR. KATARIA KETAN ISHWARLAL H-62 MAHINDRA PARK NARAYAN NAGAR LBS MARG GHATKOPAR (W) MUMBAI-86 PAN: ADOPK3265C VS. I.T.O.-11(2)(4) MUMBAI APPELLANT RESPONDENT APPELLANT BY: MR. K. GOPAL RESPONDENT BY: MR. SOMAGYAN PAL O R D E R DATE OF HEARING: 22.04.2010 DATE OF ORDER: 30.04.2010 PER R.K. PANDA AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 28 TH FEBRUARY 2007 OF THE CIT(A)-XI MUMBAI RELATING T O ASSESSMENT YEAR 2002-03. 2. GROUNDS OF APPEAL NO. 1 AND 5 BY THE ASSESSEE BE ING GENERAL IN NATURE ARE DISMISSED. GROUNDS OF APPEAL NO. 4 WAS N OT PRESSED BY THE LEARNED COUNSEL FOR THE ASSESSEE FOR WHICH THE LEAR NED DR HAS NO OBJECTION. ACCORDINGLY THE SAME IS ALSO DISMISSED. 3. IN GROUNDS OF APPEAL NO. 2 THE ASSESSEE HAS CHAL LENGED THE ORDER OF THE CIT(A) IN SUSTAINING THE ADDITION OF RS. 4 LAKH S OUT OF RS.5 LAKHS ADDED BY THE ASSESSING OFFICER AS UNEXPLAINED/UNACCOUNTED EXPENDITURE ON MARRIAGE. 4. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE HAD CLAIMED RECEIPT OF GIFTS FROM RELATIVES AND FRIENDS ON THE OCCASION OF HIS MARRIAGE. THE I.T.A. NO. 4304/MUM/2007 MR. KATARIYA KETAN ISHWARLAL ==================== 2 ASSESSING OFFICER ASKED THE ASSESSEE TO PROVIDE THE DETAILS OF THE EXPENSES INCURRED ON HIS MARRIAGE CEREMONY. IT WAS SUBMITTE D BY THE ASSESSEE THAT HE HAS NO IDEA OF THE EXPENDITURE INCURRED ON ACCOU NT OF MARRIAGE MARRIAGE FUNCTION AND ENTERTAINMENT OF THE GUESTS S INCE THESE WERE BORNE BY HIS RELATIVES AND HIS FRIENDS ONLY. ON BEING QU ESTIONED BY THE ASSESSING OFFICER TO PROVIDE THE NAMES OF THE RELAT IONS AND FRIENDS WHO HAD INCURRED SUCH EXPENDITURE ON HIS MARRIAGE AND T HE DETAILS OF THEIR SOURCES ETC. THE ASSESSEE FAILED TO PROVIDE ANY S UCH DETAILS AS DESIRED BY THE ASSESSING OFFICER. ACCORDINGLY THE ASSESSING OFFICER ESTIMATED THE EXPENDITURE INCURRED BY THE ASSESSEE ON ACCOUNT OF MARRIAGE CEREMONY AT RS. 5 LAKHS AND ADDED THE SAME TO HIS TOTAL INCOME. 4.1 IN APPEAL THE LEARNED CIT(A) RESTRICTED SUCH ESTIM ATED EXPENDITURE TO RS. 4 LAKHS FOR WHICH THE ASSESSEE I S IN APPEAL BEFORE US. 4.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BO TH THE SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE WHO IS A CHARTERED ACCOUNTANT BY PROF ESSION GOT MARRIED DURING THE YEAR AND HAS SHOWN TO HAVE RECEIVED VARI OUS GIFTS ON THE OCCASION OF HIS MARRIAGE. WE FIND THE ASSESSEE HAS NOT SHOWN ANY EXPENDITURE ON ACCOUNT OF THE MARRIAGE CEREMONY ON THE GROUND THAT SUCH EXPENDITURE WAS BORNE BY HIS RELATIVES AND FRI ENDS. WE FIND IN RESPONSE TO NOTICE ISSUED BY THE ASSESSING OFFICER THE ASSESSEE DID NOT PRODUCE DETAILS OF THE PERSONS WITH THEIR SOURCE OF INCOME WHO ACCORDING TO THE ASSESSEE HAD INCURRED THE MARRIAGE EXPENSES . WE FIND THE ASSESSING OFFICER MADE AN ADDITION OF RS. 5 LAKHS O N ACCOUNT OF SUCH EXPENDITURE WHICH WAS RESTRICTED TO RS. 4 LAKHS BY THE LEARNED CIT(A). IT IS THE SUBMISSION OF THE LEARNED COUNSEL FOR THE AS SESSEE THAT THE ADDITION IS UNWARRANTED SINCE THE ASSESSEE LOST HIS FATHER A T THE AGE OF 14 AND WAS LEADING A SIMPLE LIFE STYLE AND THE EXPENDITURE WAS INCURRED BY HIS UNCLE. HOWEVER THE LEARNED COUNSEL FOR THE ASSESSEE WAS U NABLE TO PROVIDE THE DETAILS OF THE UNCLE ALONG WITH HIS SOURCE OF INCOM E AND AMOUNT OF I.T.A. NO. 4304/MUM/2007 MR. KATARIYA KETAN ISHWARLAL ==================== 3 EXPENDITURE INCURRED BY HIM FOR THE MARRIAGE CEREMO NY OF THE ASSESSEE. UNDER THESE CIRCUMSTANCES IT CANNOT BE SAID THAT T HE ASSESSEE HAD NOT INCURRED ANY EXPENDITURE. HOWEVER CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE WE ARE OF THE CONSIDERED OPINION THAT THE ADDITION OF RS. 4 LAKHS APPEARS TO BE ON THE HIGHER SIDE ESPECIALLY W HEN THE DEPARTMENT HAS NO INFORMATION AS TO THE NUMBER OF PERSONS WHO ATTENDED THE FUNCTION THE PLACE OF FUNCTION LAVISHNESS OF THE EXPENDITURE ETC. WE THEREFORE DEEM IT PROPER TO RESTRICT THE DISALLOWA NCE TO RS. 2 LAKHS WHICH IN OUR OPINION WILL BE REASONABLE. GROUNDS OF APP EAL NO. 2 BY THE ASSESSEE IS PARTLY ALLOWED. 5. IN GROUNDS OF APPEAL NO. 3 THE ASSESSEE HAS CHALLE NGED THE ORDER OF THE CIT(A) IN CONFIRMING THE ACTION OF THE ASSES SING OFFICER IN DENYING THE BENEFIT OF DEDUCTION U/S. 54F OF THE ACT. 5.1 FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE HAS CLAIMED TO HAVE PURCHASED A RESIDENTIAL FLAT FOR AN AMOUNT OF RS.17 31 340 WITHIN A PERIOD OF ONE YEAR BEFORE THE CAPITAL GAIN ON SAL E OF SHARES AND HAS CLAIMED EXEMPTION OF LONG TERM CAPITAL GAIN U/S. 54 OF THE ACT. ON BEING QUESTIONED BY THE ASSESSING OFFICER IT WAS SUBMITTE D THAT 9500 SHARES OF KUSHAL SOFTWARE WHICH WERE PURCHASED ON 6 TH APRIL 2000 FOR A CONSIDERATION OF RS.47 500 WERE SOLD ON 8 TH MAY 2001. THE ASSESSEE FURNISHED THE COPY OF THE BILLING CUM TRANSACTION A ND HOLDING STATEMENT BY STOCK HOLDING CORPORATION OF INDIA LTD. FROM TH E VARIOUS DETAILS FURNISHED BY THE ASSESSEE THE ASSESSING OFFICER NO TED THAT THE SALE CONSIDERATION OF RS.5 95 248 WAS RECEIVED FROM M/S. GOLD STAR FINVEST PVT. LTD. IT WAS NOTED BY THE ASSESSING OFFICER TH AT A DETAILED ENQUIRY WAS CONDUCTED IN THE CASE OF SHRI MUKESH CHOKSI M/S. G OLD STAR FINVEST PVT. LTD. AND M/S. RICHMOND SECURITIES PVT. LTD. BROKER COMPANIES. IT IS FURTHER NOTED THAT THE BROKERS AND MR. CHOKSI FACIL ITATED A NUMBER OF PARTIES BY WAY OF ISSUING BOGUS CAPITAL GAIN BILLS. THIS FACT HAS BEEN ADMITTED BY MR. CHOKSI VIDE HIS STATEMENT DATED 26 TH APRIL 2002 WHEREIN I.T.A. NO. 4304/MUM/2007 MR. KATARIYA KETAN ISHWARLAL ==================== 4 HE STATED THAT HE HAS ISSUED BOGUS BILLS OF SHARE T RANSACTIONS AND CHARGED THE COMMISSION ACCORDINGLY. HE HAD STATED THAT THE PARTIES USED TO PAY HIM CASH EQUIVALENT TO THE BILL AMOUNT AND RECEIVED CHEQUE FROM THE BROKER COMPANIES. THE CHEQUE/DEMAND DRAFT WERE ISS UED BY THE BANK ACCOUNT MAINTAINED IN THE NAME OF THE ABOVE MENTION ED BROKER COMPANIES. THE ASSESSING OFFICER CONFRONTED THE AB OVE TO THE ASSESSEE AND ALSO PROVIDED A COPY OF THE STATEMENT OF MR. MU KESH CHOKSI OF M/S. GOLD STAR FINVEST PVT. LTD. HOWEVER NOT BEING SAT ISFIED WITH THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE THE ASSESSING O FFICER HELD THE AMOUNT RECEIVED ON SALE OF SHARES AMOUNTING TO RS.5 95 248 FROM M/S. GOLD STAR FINVEST PVT. LTD. AS UNEXPLAINED CASH CREDIT AND AC CORDINGLY DENIED THE RELIEF U/S. 54F OF THE ACT. 5.2 IN APPEAL THE CIT(A) CONFIRMED THE ACTION OF THE A SSESSING OFFICER. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESS EE IS IN APPEAL BEFORE US. 5.3 THE LEARNED COUNSEL FOR THE ASSESSEE REFERRING TO P AGE 141 OF THE PAPER BOOK REFERRED TO THE SHARE CERTIFICATE OF KUS HAL SOFTWARE LTD. REFERRING TO PAGE 142 OF THE PAPER BOOK WHICH IS T HE REVERSE SIDE OF THE SHARE CERTIFICATE HE SUBMITTED THAT THE SHARES HAV E BEEN TRANSFERRED IN THE NAME OF THE ASSESSEE ON 10 TH APRIL 2000. REFERRING TO PAGE 183 OF THE PAPER BOOK HE SUBMITTED THAT THE SHARE TRANSFER FO RM WAS DULY SUBMITTED BEFORE THE COMPANY FOR TRANSFER OF THE SH ARES FROM THE NAME OF HANDFUL INVESTMENT PVT. LTD. TO THE NAME OF THE ASS ESSEE. REFERRING TO PAGES 49AND 50 OF THE PAPER BOOK HE SUBMITTED THA T THERE IS NO DISPUTE TO THE PURCHASE OF SHARES SINCE THESE WERE SUBSEQUE NTLY DEMATERIALISED. THUS THERE IS NO DISPUTE ABOUT THE PURCHASE OF THE SHARES. REFERRING TO THE STATEMENT OF MR. MUKESH CHOKSI A COPY OF WHICH IS PLACED AT PAGE 150 OF THE PAPER BOOK HE SUBMITTED THAT MR. CHOKSI HAD GIVEN A GENERAL STATEMENT BUT THERE IS NO SPECIFIC ALLEGATION AGAIN ST THE ASSESSEE SINCE HE HAS NOT TAKEN THE NAME OF THE ASSESSEE. HE ACCORDI NGLY SUBMITTED THAT THE SHARES WERE DULY PURCHASED AND SOLD BY THE ASSESSEE FULFILLING THE I.T.A. NO. 4304/MUM/2007 MR. KATARIYA KETAN ISHWARLAL ==================== 5 CONDITIONS FOR ELIGIBILITY OF DEDUCTION U/S. 54F. THEREFORE THE SAME SHOULD BE ALLOWED. 6. THE LEARNED DR ON THE OTHER HAND STRONGLY RELIED ON THE ORDER OF THE CIT(A) AND THE ASSESSING OFFICER. HE SUBMITTED THAT THE STATEMENT OF MR. CHOKSI CLEARLY SHOWS THAT HE WAS ENGAGED IN GIV ING FAKE BILLS OF SHARE TRANSACTIONS ON COMMISSION BASIS. SINCE THE ASSESS EE HAS SOLD HIS SHARES THROUGH THE COMPANY OWNED BY MR. CHOKSI THEREFORE THE TRANSACTION HAS TO BE TREATED AS BOGUS AND THE CIT(A) WAS JUSTIFIED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER. 6.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BO TH THE SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. FROM THE COP Y OF THE SHARE CERTIFICATE DEMAT ACCOUNT SHARE TRANSFER FORM FIL ED IN THE PAPER BOOK WE FIND THE ASSESSEE HAS PURCHASED 9500 SHARES OF KUSH AL SOFTWARE LTD. FROM M/S. HANDFUL INVESTORS PVT. LTD. WE FIND THE ASSES SING OFFICER TREATED THE SALE OF SUCH SHARES BY THE ASSESSEE THROUGH M/S. GO LD STAR FINVEST PVT. LTD. AS BOGUS ON THE GROUND THAT MR. CHOKSI AND HIS BROKING COMPANY WERE ENGAGED IN GIVING FALSE SHARE TRANSACTION BILL S. HOWEVER FROM THE COPY OF THE STATEMENT OF MR. CHOKSI A COPY OF WHIC H IS FILED IN THE PAPER BOOK WE FIND MR. CHOKSI HAS NOT SPECIFICALLY MENTI ONED THE NAME OF THE ASSESSEE FOR OBTAINING BENEFIT ON SALE OF SUCH BOGU S SHARES. THE LEARNED DR ALSO COULD NOT POINT OUT FROM THE STATEMENT OF S HRI CHOKSI THAT HE HAS TAKEN THE NAME OF THE ASSESSEE FOR OBTAINING ANY BE NEFIT ON ISSUE OF SUCH BOGUS BILLS. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND CONSIDERING THE FACT THAT THE ASSESSEE HAD PURCHAS ED THE SHARES WHICH WERE DULY TRANSFERRED TO THE DEMAT ACCOUNT AND IN ABSENCE OF ANY ALLEGATION AGAINST THE ASSESSEE BY MR. CHOKSI IT CA NNOT BE SAID THAT THE SALE OF THE SHARES IS BOGUS. IN THIS VIEW OF THE M ATTER WE HOLD THAT THE SALE TRANSACTION ENTERED INTO BY THE ASSESSEE IS GE NUINE TRANSACTION. SINCE THE ASSESSING OFFICER HAS NOT DISPUTED REGARDING TH E PURCHASE OF HOUSE PROPERTY AND SINCE THE ASSESSEE FULFILS THE CONDITI ONS FOR TREATING THE I.T.A. NO. 4304/MUM/2007 MR. KATARIYA KETAN ISHWARLAL ==================== 6 PROFIT ON SALE OF SUCH SHARES AS LONG TERM CAPITAL GAIN AND FULFILLED THE CONDITIONS FOR ALLOWABILITY OF DEDUCTION U/S. 54F THEREFORE WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OF FICER TO ALLOW THE CLAIM OF THE ASSESSEE. THIS GROUND BY THE ASSESSEE IS AC CORDINGLY ALLOWED. 7. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 30 TH APRIL 2010. SD/- (R.S. PADVEKAR) JUDICIAL MEMBER SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI DATED 30 TH APRIL 2010 COPY TO: (1) THE APPELLANT (2) THE RESPONDENT (3) THE CIT(A) -XI MUMBAI (4) THE CIT MC-XI MUMBAI (5) THE DR H BENCH ITAT MUMBAI. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI TPRAO