ACIT 15(2), MUMBAI v. POORANMAL D. CHOUDHARI, MUMBAI

ITA 4389/MUM/2012 | 2008-2009
Pronouncement Date: 31-10-2013 | Result: Allowed

Appeal Details

RSA Number 438919914 RSA 2012
Assessee PAN AAGPP0357F
Bench Mumbai
Appeal Number ITA 4389/MUM/2012
Duration Of Justice 1 year(s) 4 month(s) 2 day(s)
Appellant ACIT 15(2), MUMBAI
Respondent POORANMAL D. CHOUDHARI, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-10-2013
Appeal Filed By Department
Order Result Allowed
Bench Allotted C
Tribunal Order Date 31-10-2013
Assessment Year 2008-2009
Appeal Filed On 28-06-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH MUMBAI BEFORE SHRI H.L.KARWA PRESIDENT & SHRI N.K.BILLAIYA AM ITA N O. 4389 / MUM/ 20 1 2 ( ASSESSMENT YEAR : 20 0 8 - 0 9 ) ACIT 15(2) MUMBAI - 400 007 VS. SHRI POORANMAL D. CHOUDHARY 201 ARIHANT APARTMENT DR. BHAADKAMKAR MARG MUMBAI CENTRAL MUMBAI - 400 008 PAN/GIR NO. : A A GPP 0357 F ( APPELLANT ) .. ( RESPONDENT ) /REVENUE BY : SHRI SANJEEV JAIN /ASSESSEE BY : SHRI N.M.PORWAL DATE OF HEARING : 31 ST DATE OF P RONOUNCEMENT : 31 ST OCTOBER 2013 O R D E R PER N.K.BILLAIYA A.M : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT (A) - 26 MUMBAI DATED 4 - 4 - 2012 PERTAINING TO A.Y.200 8 - 0 9 . 2 . THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE CIT(A) ERRED IN HOLDING THAT THE RECEIPT OF RS. 80 LAKHS BY THE ASSESSEE FROM ALLEGED SALE OF SHARES OF M/S KORA CONSTRUCTIONS PVT. LTD. CAN NEITHER BE TREATED AS UNEXPLAINED CASH CREDIT NOR INCOME FROM OTHER SOURCES . 3 . THE FACTS EMANATING FROM THE ASS ESSMENT RECORD SHOW THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS CLAIMED TO HAVE EARNED LONG TERM CAPITAL GAIN AFTER INDEXATION TO THE TUNE OF ITA NO . 4389 /1 3 2 RS. 78 58 355/ - . THE SAID LONG TERM CAPITAL GAIN WAS THE RESULT OF SALE OF 10 000 SHARES OF M/S KORA CONSTRUCTIONS PVT. LTD. THE ASSESSEE CLAIMED TO HAVE PURCHASED THE SHARES OF M/S KORA CONSTRUCTIONS PVT. LTD. ON 1 - 4 - 1999 AT THE RATE OF RS. 10/ - PER SHARE TOTAL COST BEING RS. 1 LAKH. THE ASSESSEE HAS SOLD THESE SHARES ON 1 - 4 - 2007 FOR A CONSIDERATION OF R S. 80 LAKHS RESULTING INTO LONG TERM CAPITAL GAIN. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO FURNISH CERTIFIED VALUATION REPORT OF THE AUDITOR REGARDING THE SHARES OF THE COMPANY FROM F.Y. 1999 - 2000 TO F.Y.2007 - 08 ALONG WITH PROFIT AND LOSS ACCOUNT BALANCE SHEET WITH ALL THE SCHEDULES AND DIRECTORS REPORT FOR F.YS. 1999 - 2000 2007 - 08 & 2009 - 10. THE ASSESSEE WAS ALSO ASKED TO FILE THE BASIS OF THE VALUATION FOR THE PRICE OF THE SHARES OF THE COMPANY NAMELY M/S KO RA CONSTRUCTIONS PVT. LTD. ALONG WITH MEMORANDUM OF ASSOCIATION RETURN S FILED WITH THE REGISTRAR OF THE COMPANIES FOR THE F.YS.1999 - 2000 2007 - 08 & 2009 - 10. THE DETAILS SOUGHT BY THE AO WERE NEVER FILED BY THE ASSESSEE. S O FAR AS THE VALUATION OF SHARES PRICE IS CONCERNED THE ASSESSEE SIMPLY STATED THAT IT IS ACTUAL PRICE RECEIVED FROM M/S HI - C LASS BUILDCON PVT. LTD. I NSTEAD OF REPEATED REQUEST FROM THE AO THE ASSESSEE NEVER COMPLIED WITH THE REQUIREMENTS/DETAILS SOUGHT BY THE AO. THE AO WAS LEFT WITH N O CHOICE BUT TO ASSESS THE AMOUNT UNDER SECTION 68 OF THE ACT. 4 . THE ASSESSEE STRONGLY AGITATED THE MATTER BEFORE THE CIT(A) AND REITERATED ITS CLAIM OF LONG TERM CAPITAL GAIN RESULTING FROM THE SALE OF ITA NO . 4389 /1 3 3 10 000 SHARES OF M/S KORA CONSTRUCTION PVT. LTD. BE FORE THE CIT(A) THE ASSESSEE STRONGLY CONTENDED THAT HE CANNOT BE HELD LIABLE FOR THE DETAILS OF THIRD PARTY I.E. M/S KORA CONSTRUCTION PVT. LTD. IT WAS CONTENDED THAT THE AO SHOULD HAVE MADE ENQUIRY DIRECTLY FROM M/S KORA CONSTRUCTION PVT. LTD. AND THE R EGISTRAR OF THE COMPANIES. THE CIT(A) CALLED FOR A REMAND REPORT WHICH WAS SUBMITTED BY THE AO STATING THAT THE ASSESSEE DID NOT GIVE ANY DETAIL AT THE TIME OF ASSESSMENT. IT WAS FURTHER POINTED OUT THAT AT THE GIVEN ADDRESS OF THE COMPANY M/S KORA CONSTR UCTION PVT. LTD. NOBODY WAS FOUND AT THE PREMISES THEREFORE SUMMON WAS SERVED BY AFFIXTURE ON 13 - 3 - 2011 IN RESPONSE TO WHICH ONE OF THE MAJOR SHAREHOLDER OF THE COMPANY ATTENDED THE REMAND PROCEEDINGS WHO STATED THAT THERE IS NO ACTIVITIES IN THE COMP ANY SINCE LAST 10 TO 15 YEARS. THE AO ASKED THE CIT(A) TO DECIDE THE CASE ON MERIT. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS AS WELL AS THE REMAND REPORT OF THE AO THE CIT(A) WAS CONVINCED THAT THE ASSESSEE HAS DISCLOSED THE SOURCE OF THE RECEIPTS FROM M/S HI - CLASS BUILDCON PVT. LTD. WHO HAS PURCHASED 10 000 SHARES OF M/S KORA CONSTRUCTION PVT. LTD. FROM THE ASSESSEE. THE CIT(A) WAS OF THE BELIEF THAT THE ASSESSEE HAS SUCCESSFULLY DISCHARGED THE ONUS CAST UPON HIM BY SECTION 68 OF THE ACT AND ACCOR DINGLY DIRECTED THE AO TO DELETE THE ADDITION. AGGRIEVED BY THIS THE REVENUE IS BEFORE US. 5 . LEARNED DR STRONGLY SUBMITTED THAT THE ASSESSEE NEVER FILED ANY DETAIL ASKED FOR BY THE AO DURING THE COURSE OF ASSESSMENT ITA NO . 4389 /1 3 4 PROCEEDINGS. EVEN BEFORE THE CIT(A) THE ASSESSEE HAS NOT FILED THE REQUIRED DETAILS. IT IS THE SAY OF THE DR THAT THE CIT(A) HAS SIMPLY DELETED THE ADDITIONS BY CONSIDERING THAT THE PAYMENTS HAVE BEEN MADE BY M/S HI - CLASS BUILDCON PVT. LTD. WHO HAS ACQUIRED SHARES OF M/S KORA CONSTRUCTIONS PVT. LTD. FROM THE ASSESSEE. LEARNED DR STRONGLY CONTENDED THAT THE CIT(A) DID NOT BASE HIS FINDINGS ON THE MATERIAL EVIDENCE WHICH OUGHT TO HAVE BEEN BROUGHT ON RECORD BY THE ASSESSEE. 6. PER CONTRA LEARNED COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. IT IS THE SAY OF THE COUNSEL FOR THE ASSESSEE THAT THE AO HAS NOT DOUBTED THE PURCHASE OF SHARES BY THE ASSESSEE NOR THE AO HAS DOUBTED THE SALE OF SHARES BY THE ASSESSEE OF M/S KORA CONSTRUCTION PVT. LTD. THE ASSESSEE HAS FURNISHED ALL THE DETAILS RELATING TO PURCHASE AND SALE OF SHARES THEREFORE THE CIT(A) HAS RIGHTLY DELETED THE ADDITION. 7 . WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. THE ASSESSEE HAS PURCHASED THE SHARES OF M/S KORA CONSTRUCTIONS PVT. LTD. ON 1 - 4 - 1999. THE ASSESSEE HAS FILED COPY OF SHARE CERTIFICATE OF THE SAID COMPANY. ON PERUSAL OF THE SAID CERTIFICATE SHOWS THAT THE ASSESSEE WAS HOLDING 5000 SHARES ON 12 - 8 - 1999 WHEREAS IT IS THE CLAIM OF THE ASSESSEE THAT IT HAS SOLD 10 000 SHARES. THE ASSESSEE HAS TO FILE FURTHER DETAILS IN RESPECT OF THE PURCHASE OF SHARES. FURTHER WE FIND THAT THE AO AND ALSO THE CIT(A) ITA NO . 4389 /1 3 5 SHOULD HAVE GONE THROUGH THE ARTICLES OF THE ASSOCIATION OF M/S KORA CONST RUCTION PVT. LTD. SINCE THE SAID COMPANY IS A PRIVATE LIMITED COMPANY IT IS INCUMBENT UPON THE REVENUE AUTHORITIES TO VERIFY AS TO WHETHER THE ARTICLES OF THE COMPANY PERMITS FREE TRANSFERABILITY OF SHARES WITHIN THE PROVISIONS OF THE COMPANIES ACT. THE ASSESSEE NEEDS TO BRING ARTICLES OF ASSOCIATION ON RECORD. FURTHER WE FIND THAT THE CIT(A) HAS SIMPLY ACCEPTED THE SALE VALUE OF SHARES AS SHOWN BY THE ASSESSEE THOUGH THE AO HAS SPECIFICALLY ASKED FOR A VALUATION REPORT. IN OUR CONSIDERATE VIEW SINCE T HE SHARES ARE OF A PRIVATE LIMITED COMPANY THE COMPANY HAS TO JUSTIFY ITS VALUE ON THE DATE OF SALE UNLIKE LISTED COMPANIES WHERE THE FAIR MARKET VALUE OF SHARES CAN EASILY BE VERIFIED FROM THE STOCK EXCHANGE. THE CIT(A) HAS NEITHER CALLED FOR ANY VALUAT ION REPORT NOR HIS FINDING IS BASED ON ANY VALUATION REPORT. CONSIDERING ALL THESE ERRORS IN THE FINDINGS OF THE ORDER OF THE CIT(A) IN THE INTEREST OF JUSTICE AND FAIR - PLAY WE RESTORE THE ENTIRE ISSUE BACK TO THE FILES OF THE AO FOR DE NOVO ASSESSMENT. THE ASSESSEE IS DIRECTED TO FILE THE ARTICLES OF ASSOCIATION OF M/S KORA CONSTRUCTION PVT. LTD. THE BASIS FOR THE VALUE OF SHARES AS ON THE DATE OF SALE ANNUAL RETURN FILED BY THE COMPANY BEFORE THE REGISTRAR OF COMPANIES ALONG WITH ITS STATEMENT OF ACCO UNT FROM F.YS.1999 - 2000 TO 2008 - 09. NEEDLESS TO MENTION THAT THE ONUS TO PROVE THE CORRECTNESS OF THE RETURN OF INCOME LIES UPON THE ASSESSEE AND THE ASSESSEE HAS TO FIRST DISCHARGE THIS ONUS BY BRINING COGENT MATERIAL EVIDENCES ON RECORD. THE AO IS DIRECT ED TO VERIFY THE ARTICLES OF ASSOCIATION WHETHER ITA NO . 4389 /1 3 6 THE ARTICLES OF THE COMPANY M/S KORA CONSTRUCTION PVT. LTD. ALLOW FREE TRANSFERABILITY ON SHARES. THE AO IS ALSO DIRECTED TO VERIFY THE BASIS OF VALUATION OF SHARES ON THE DATE OF SALE AS PROVIDED BY THE ASS ESSEE AFTER GIVING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 8 . RESULTANTLY APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31/10/ 2013 . SD/ - ( ) ( H.L.KARWA ) SD/ - ( ) ( N.K.BILLAIYA ) / PRESIDENT / ACCOUNTANT MEMBER MUMBAI ; DATED : 31/10 / 2013 /PKM PS COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) MUMBAI. 4. / CIT 5. / DR ITAT MUMBAI 6. GUARD FILE. //TRUE COPY// / BY ORDER ( ASSTT. REGISTRAR) / ITAT MUMBAI