DCIT, Hyderabad v. Smt P.V.Subbamma, Hyderabad

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B HYDERABAD BEFORE SHRI G.C. GUPTA VICE-PRESIDENT AND SHRI AKBER BASHA ACCOUNTANT MEMBER ITA NO. ASSESSMENT YEAR APPELLANT RESPONDENT 407/H/06 1996-97 P.V. SUBBAMMA HYD. ACIT CIR- 2(3) HYDERABAD. 408/H/06 -DO M.V.B SUDHIR KUMAR HYDERABAD. ACIT CIR- 2(3) HYD. 487/H/06 -DO- DCIT CIR- 16(3) HYD. P.V. SUBBAMMA HYD. 488/HYD/06 -DO- DCIT CIR- 16(3) HYD M.V.B SUDHIR KUMAR HYDERABAD. ASSESSEEST BY : SHRI S. RAMA RAO DEPARTMENT BY : SHRIE.S. NAGENDRA PRASAD & SMT. NIVEDITA BISWAS O R D E R PER AKBER BASHA ACCOUNTANT MEMBER THESE CROSS APPEALS TWO BY DIFFERENT ASSESSEES AND TWO BY THE DEPARTMENT ARE DIRECTED AGAINST SEPARATE ORD ERS OF CIT 2 A)-V HYDERABAD PERTAINING TO THE ASSESSMENT YEARS 1996-97. SINCE COMMON AND IDENTICAL ISSUES ARE INVOLVED IN T HESE APPEALS THESE ARE TAKEN UP TOGETHER AND DISPOSED O FF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA 407/HYD/06 - (ASSESSEE'S APPEAL) : 2. FIRST AND FIFTH GROUNDS OF APPEAL ARE GENERAL I N NATURE AND THEY REQUIRE NO ADJUDICATION. 3. SECOND GROUND OF APPEAL IS WITH REGARD TO DISALL OWANCE OF CAPITAL GAIN ARISING ON SALE OF 1 LAKH SHARES. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE CLAIMED TRANSFE R OF 1 LAKH SHARES ON 25-3-1996 TO MS. K. SUNITA AT THE RATE OF RS.4 PER SHARE WAS AGAINST THE ADJUSTMENT OF HER LOAN ACCOUN T. NO EVIDENCE REGARDING THIS TRANSACTION HAS BEEN PLACED EITHER DURING THE ASSESSMENT PROCEEDINGS OR IN THE APPEAL PROCEEDINGS. THE CIT [A] NOTICED IN HIS ORDER THAT ON 25-10- 1995 THE ASSESSEE HAS SOLD 1 50 000 SHARES TO M/S DSJ FINANCE AT THE RATE OF RS.18 PER SHARE. IN A GAP OF FIVE MONTHS THE VARIATION IN THE SALE PRICE IS FROM RS. 18 TO RS.4 PER SHARE AND THE ASSESSING OFFICER ADOPTED THE SAL E PRICE AT RS.18/- PER SHARE IN THE ABSENCE OF ANY SUPPORTING EVIDENCE FURNISHED BY THE ASSESSEE. ENQUIRIES MADE WITH THE HYDERABAD STOCK EXCHANGE REVEALED THAT DURING THE P ERIOD 3 21-3-1996 TO 26-3-1996 THE SHARE PRICE OF M/S FINE PLAST POLYMERS LIMITED WAS IN THE RANGE OF RS.14 TO RS.17 AND THEREFORE THE MAXIMUM TRANSACTIONS TOOK PLACE ON 21 -3-1996 ON WHICH THE AVERAGE PRICE PER SHARE WAS RS.15.99 A ND IN THE ABSENCE OF ANY SPECIFIC EVIDENCE FROM THE ASSESSEE' S SIDE THE CIT(A) WAS OF THE VIEW THAT IT WOULD BE FAIR TO ADO PT AN AVERAGE SALE PRICE OF RS.16/- PER SHARE FOR THE ABO VE TRANSACTION AS AGAINST THE SHARE PRICE ADOPTED BY T HE ASSESSING OFFICER AT RS.18 PER SHARE IN THE ASSESSM ENT ORDER. IN THE CIRCUMSTANCES THE CIT(A) DIRECTED THE ASSE SSING OFFICER TO ADOPT RS.16 PER SHARE AS THE SALE PRICE FOR THE SALE OF 1 00 000 SHARE BY THE ASSESSEE TO MS.K. SUNITA A ND TO RE- COMPUTE THE CAPITAL GAINS AND FURTHER THE ASSESSING OFFICER WOULD ALSO CONSIDER WHETHER ANY INDEXATION OF COST IS ALLOWABLE TO THE ASSESSEE IN THIS TRANSACTION AND I F SO APPROPRIATE RELIEF MAY BE GIVEN WHILE RE-COMPUTING THE CAPITAL GAINS. WE FIND FORCE IN THE ARGUMENT OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THERE IS NO PROVISION UNDER T HE INCOME- TAX ACT TO ESTIMATE THE SALE CONSIDERATION WHEN THE SALE PRICE IS AGREED TO BY BOTH THE PARTIES. BUT AT THE SAME TIME IT IS ILLOGICAL TO ACCEPT THE CONTENTIONS OF THE LEARNED COUNSEL THAT THE ASSESSEE SOLD THE SHARES TO MS. K. SUNITA AT RS .4 PER SHARE WHEN THE MARKET PRICE OF SHARES OF M/S FINEP LAST POLYMERS LIMITED WAS AT RS.15.99 ON 21-3-1996 WHICH IS CLOSURE TO THE TRANSACTION DATE. HOWEVER WE FIND T HAT THE 4 ENQUIRIES MADE BY THE DEPARTMENT WITH HYDERABAD STO CK EXCHANGE HAS REVEALED THAT DURING THE PERIOD FROM 2 1-3-1996 TO 26-3-1996 THE SHARE PRICE OF M/S FINEPLAST POL YMERS LIMITED WAS IN THE RANGE OF RS.14 TO RS.17 PER SHARE . IN VIEW OF THE ABOVE ENDS OF JUSTICE WILL BE MET IF WE ADO PT THE SHARE PRICE AT RS.14/- PER SHARE BEING THE LOWEST RANGE D URING THE AFORESAID PERIOD AS THE SALE CONSIDERATION ON TRANS FER OF THE SHARES M/S FINEPLAST POLYMERS LIMITED. HENCE WE DIR ECT THE ASSESSING OFFICER TO ADOPT RS.14 PER SHARE AS INDIC ATED ABOVE AND HENCE THIS GROUND OF THE ASSESSEE IS PARTLY ALL OWED. 4. THIRD & FOURTH GROUNDS OF APPEAL ARE WITH REGAR D TO THE DISALLOWANCE OF INTEREST OF RS.7 41 066 ON THE BORR OWED FUNDS USED FOR THE PURCHASE OF SHARES. ACCORDING TO THE FACTS OF THE CASE THAT DURING THE ASSESSMENT PROCEEDINGS THE AS SESSEE COULD NOT FURNISH ANY DETAILS TO ESTABLISH THE GENU INENESS OF THE LOANS AND FURTHER THAT THE AMOUNTS WERE ACTUALL Y USED FOR THE PURCHASE OF SHARES AND IN THE ABSENCE OF NEXUS BETWEEN THE UTILIZATION OF FUNDS FOR THE PURCHASE OF SHARES THE ASSESSING OFFICER RESORTED TO THE ABOVE DISALLOWANC E AND IN THE APPEAL PROCEEDINGS IT HAS BEEN CONTENDED THAT THE ASSESSEE FILED CONFIRMATION LETTERS IN SUPPORT OF T HE BORROWING OF RS.54 94 726 BEFORE THE ASSESSING OFFICER AND C OPIES OF THE CONFIRMATORY LETTERS WERE ALSO FILED BEFORE THE CIT (A). IT WAS SUBMITTED BY THE ASSESSEE'S COUNSEL THAT THE ASSESS EE WAS 5 READY TO PRODUCE ALL THE DETAILS REQUIRED IN THIS R EGARD AND FURTHER CONTENDED THAT THE CIT(A) HAS SIMPLY DISALL OWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESS EE COULD NOT FURNISH ANY DETAILS TO ESTABLISH THE GENUINE OF THE LOAN. IT WAS CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESS EE THAT THE ASSESSEE GOT ALL THE REQUIRED DETAILS TO SUPPOR T THE ASSESSEE'S CLAIM AND REQUESTED THE TRIBUNAL TO REST ORE THIS MATTER TO THE FILE OF THE ASSESSING OFFICER FOR REC ONSIDERATION. IN VIEW OF THE ABOVE AND IN THE INTEREST OF JUSTICE WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR CONSIDERING THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER AFFOR DING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. HENCE THESE GROUNDS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 5. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS TEATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.487/HYD/06 (DEPARTMENTAL APPEAL) 6. THE ONLY EFFECTIVE GROUND OF APPEAL IS WITH REGA RD TO DISALLOWANCE OF UNEXPLAINED INVESTMENT OF RS.15 05 000 IN M/S. FINE PLAST POLYMERS LIMITED. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE DETAILS OF INVESTMENT IN M/S FINEPLAS T POLYMERS LIMITED SHARES WERE REQUIRED TO BE PRODUCED BY THE A SSESSEE DURING THE ASSESSMENT PROCEEDINGS ALONG WITH SOURCE S FOR 6 SUCH INVESTMENT AND THE ASSESSEE FILED ONLY STATEME NT FURNISHING THE DETAILS OF THE AMOUNT INVESTED IN TH E EQUITY SHARES IN M/S FINEPLAST POLYMERS LIMITED AND HENCE THE ASSESSING OFFICER CONCLUDED THAT ON ACCOUNT OF FAIL URE TO EXPLAIN THE SOURCES OF INVESTMENT THE ENTIRE AMOUN T WAS LIABLE TO BE TAXED AS UNEXPLAINED INVESTMENT IN THE HANDS OF THE ASSESSEE. ON THE OTHER HAND THE CIT(A) ON VE RIFICATION OF THE DOCUMENTS SUBMITTED BY THE ASSESSEE HELD TH AT THE SAID INVESTMENT WAS PROPERLY EXPLAINED AND HENCE HE DELETED THE ADDITION. THE LEARNED DEPARTMENTAL REPRESENT ATIVE CONTENDED THAT THE CIT (A) OUGHT NOT TO HAVE ADMITT ED FRESH EVIDENCE UNDER RULE 46A OF IT RULES AND HENCE THE C IT(A) ERRED IN ALLOWING THE UNEXPLAINED INVESTMENT OF RS. 15 05 000 IN M/S FINEPLAST POLYMERS LIMITED DESPITE THE ASSE SSEE'S FAILURE IN PRODUCING ANY EVIDENCE BEFORE THE ASSESS ING OFFICER. AFTER CONSIDERING THE TOTALITY OF FACTS AND THE CIR CUMSTANCES OF THE CASE ON THIS ISSUE WE FIND THAT THERE IS A VIO LATION ON THE PART OF THE CIT (A) TO ADMIT FRESH EVIDENCE UNDER R ULE 46A OF INCOME-TAX RULES. IN VIEW OF THE ABOVE WE RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR CON SIDERING THIS ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND WE ALSO DIRECT T HE ASSESSEE TO FURNISH ALL THE REQUIRED LETTERS AND CO NFIRMATION LETTERS BEFORE THE ASSESSING OFFICER IN SUPPORT OF HER CLAIM. 7 HENCE APPEAL OF THE REVENUE IS ALLOWED FOR STATIST ICAL PURPOSES. ITA NO.488/HYD/06- (DEPARTMENTAL APPEAL) :- 9. AT THE OUTSET IT IS THE CONTENTION OF THE LEARN ED DEPARTMENTAL REPRESENTATIVE THAT THE CIT(A) ALLOWED THE UNEXPLAINED INVESTMENTS OF RS.48 41 550/- IN M/S PE SALA FINANCIAL SERVICES LIMITED AND ALLOWING AN AMOUNT O F RS.10 25 000/- AS CONFIRMED ADVANCES OUT OF LOANS A ND ADVANCES RECEIVED BY THE ASSESSEE FOR WHICH NO EVID ENCE WAS PRODUCED DURING THE SCRUTINY ASSESSMENT BEFORE THE ASSESSING OFFICER AND HENCE VIOLATION OF RULE 46A OF INCOME-T AX RULES FOR WHICH NO SERIOUS OBJECTION RAISED BEFORE US BY THE LEARNED COUNSEL FOR THE ASSESSEE. IN VIEW OF THE ABOVE WE RESTORE THE ENTIRE MATTER RELATING TO LOANS AND ADVANCES ON INVESTMENTS TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE MATTER FRESH AFTER GIVING PROPER OPPORTUNITY OF BEI NG HEARD TO THE ASSESSEE IN THIS REGARD. 10. IN THE RESULT THE APPEAL OF THE REVENUE IS AL LOWED FOR STATISTICAL PURPOSE. ITA NO.408/HYD/2006 (ASSESSEE'S APPEAL) 8 11. FIRST AND FOURTH GROUNDS ARE GENERAL IN NATURE AND THEY DO NOT REQUIRE ANY ADJUDICATION. 12. SINCE WE RESTORED THE ENTIRE MATTER RELATING T O INVESTMENTS LOANS AND ADVANCES TO THE FILE OF THE ASSESSING OFFICER FOR RECONSIDERATION IN REVENUE'S APPEAL IN ITA NO.488/HYD/2006 GROUND NOS. 2 AND 3 RAISED IN THE ASSESSEE'S APPEAL ARE ALSO RESTORED TO THE FILE OF THE ASSESSING OFFICER. 13. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. THE ORDER WAS PRONOUNCED IN THE COURT ON 30 -4 -2010. SD/- (G.C.GUPTA) SD/- ( AKBER BASHA) VICE PRESIDENT ACCOUNTANT MEMBER. DT/- 30 -4-2010. COPY FORWARDED TO: 1. ASSESSEES C/O SRI S. RAMA RAO FLAT NO.103 H.NO.3-6-542/4 INDIRADEVI NILAYAM STREET NO.7 HIMAYATNAGAR HYDERABAD. 2. 3. THE ACIT CIR-2(3) HYDERABAD. CIT A)-V HYDERABAD. 4. CIT AP HYDERABAD. 5. THE D.R. ITAT HYDERABAD 9 JMR