THE ITO 9(2)(4), MUMBAI v. M/S. SHRADDHA S. PAI, MUMBAI

ITA 4242/MUM/2008 | 2005-2006
Pronouncement Date: 31-05-2010

Appeal Details

RSA Number 424219914 RSA 2008
Assessee PAN AJXPP3847L
Bench Mumbai
Appeal Number ITA 4242/MUM/2008
Duration Of Justice 1 year(s) 11 month(s) 14 day(s)
Appellant THE ITO 9(2)(4), MUMBAI
Respondent M/S. SHRADDHA S. PAI, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-05-2010
Appeal Filed By Department
Bench Allotted J
Date Of Final Hearing 06-05-2010
Next Hearing Date 06-05-2010
Assessment Year 2005-2006
Appeal Filed On 16-06-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J BEFORE SHRI N.V. VASUDEVAN (JM) & PRAMOD KUMAR (AM) I.T.A.NO. 4242/MUM/2008 (ASSESSMENT YEAR : 2005-06 ) ITO 9(2)(4) ROOM NO. 255 2 ND FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. VS. SMT. SHRADDHA S. PAI 52 BHASKAR PARSHURAM NIKETAN SAKHARAM KEER MARG MAHIM MUMBAI-400 016. PAN/GIR NO. : AJXPP3847L APPELLANT RESPONDENT I.T.A.NO. 4243/MUM/2008 (ASSESSMENT YEAR : 2005-06 ) ITO 9(2)(4) ROOM NO. 255 2 ND FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. VS. SHRI SHRIDHAR R. PAI 52/53 BHASKAR PARSHURAM NIKETAN SAKHARAM KEER MARG MAHIM MUMBAI-400 016. PAN/GIR NO. : AACPP1945K APPELLANT RESPONDENT ASSESSEE BY : SHRI S.G. DESAI DEPARTMENT BY : SHRI PRADEEP HEDAOO ORDER PER N.V. VASUDEVAN JM :- ITA NO. 4242/MUM/2008 IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 28.3.2008 OF LEARNED CIT(A)-IX MUMBAI RELATING TO A.Y. 2005-06. THIS APPEAL IS IN RESPECT OF THE ASSESSEE BY NAME MRS. SHRADDHA S. PAI. 2. ITA NO. 4243/MUM/2008 IS ALSO AN APPEAL BY THE R EVENUE AGAINST THE ORDER DATED 28.3.2008 OF LEARNED CIT(A) -IX MUMBAI RELATING SHRI SHRIDHAR R. PAI SMT. SHRADDHA S. PAI 2 TO A.Y. 2005-06. THIS APPEAL RELATES TO AN ASSESSEE BY NAME SHRI SHRIDHAR R. PAI. 3. IN BOTH THESE APPEALS THE ISSUE THAT HAS BEEN R AISED BY THE REVENUE IS AS TO WHETHER LEARNED CIT(A) WAS JUSTIFI ED IN DELETING THE ADDITION OF RS. 28 58 389/- MADE BY THE ASSESSING O FFICER IN THE CASE OF EACH OF THE ASSESSEE BEING THE SALE CONSIDERATION RECEIVED BY THE ASSESSEES ON SALE OF SHARES RECEIVED BY BOTH THE AS SESSEES ON THE GROUND THAT THEY WERE UNEXPLAINED INVESTMENT AND BY INVOKI NG THE PROVISIONS OF SECTION 69 OF THE ACT BY REJECTING THE CLAIM OF THE ASSESSEES THAT THEY HAD EACH EARNED LONG TERM CAPITAL GAIN ON SALE OF S HARES OF RS. 27 49 347/-. 4. THE CAPITAL GAIN IN QUESTION AROSE OUT OF PURCH ASE OF 31700 SHARES BY EACH OF THE ASSESSEES OF A COMPANY BY NAME FAST TRA CK ENTERTAINMENT LTD. ON 9.7.2003 FOR A SUM OF RS. 2.27 PER SHARE. THE AFORESAID SHARES WERE SOLD BY BOTH THE ASSESSEES DURING THE PREVIOUS YEAR RELEVANT TO A.Y. 2005-06 FOR SALE CONSIDERATION OF RS.28 58 389 RESU LTING IN CAPITAL GAIN OF RS. 27 49 347/- EACH. THE CAPITAL GAIN WAS CLAIM ED AS EXEMPT. THE ASSESSING OFFICER FOR THE REASONS GIVEN IN THE ORDE R OF ASSESSMENT IN THE CASE OF BOTH THE ASSESSEES HELD THAT LONG TERM CAPI TAL GAIN CLAIMED TO HAVE BEEN EARNED BY THE ASSESSEE CANNOT BE ACCEPTED AS THE TRANSACTION OF PURCHASE OF SHARES WAS ONLY A PAPER TRANSACTION DESIGNED TO EVADE PAYMENT OF TAX LEGITIMATELY DUE. THE ASSESSING OFFI CER TREATED ENTIRE SALE VALUE OF SHARES SHOWN BY THE ASSESSEE NAMELY RS. 28 58 389/- AS UNEXPLAINED INVESTMENT U/S. 69 OF THE ACT. ON APPE AL BY THE ASSESSEES LEARNED CIT(A) HELD THAT THE ADDITIONS U/S. 69 WERE MADE BY THE ASSESSING OFFICER PURELY ON CONJECTURE AND SURMISES . THE ADDITION MADE BY THE ASSESSING OFFICER WAS DELETED BY LEARNED CIT (A) GIVING RISE TO THE PRESENT APPEALS BY THE REVENUE BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING OF THESE APPEALS IT WAS BROUGHT TO OUR NOTICE THAT SIMILAR TRANSACTIONS OF PURCHASE AND SA LE OF SHARES BY BOTH SHRI SHRIDHAR R. PAI SMT. SHRADDHA S. PAI 3 THE ASSESSEES IN RESPECT OF SIMILAR TRANSACTION OF THE SHARES OF THE COMPANY HAD COME UP FOR CONSIDERATION IN A.Y. 2004- 05 AND THIS TRIBUNAL IN ITA NO. 4116 & 4117/MUM/07 WAS PLEASED TO HOLD THAT THE TRANSACTION OF PURCHASE AND SALE OF SHARES WERE GEN UINE AND THE ADDITION MADE U/S. 69 CANNOT BE SUSTAINED. THE TRIBUNAL ALSO HELD THAT EXEMPTION OF LONG TERM CAPITAL GAIN U/S. 54F CLAIME D BY THE ASSESSEE SHOULD BE ALLOWED. FOLLOWING WERE RELEVANT OBSERVAT IONS OF THE TRIBUNAL:- THE COMMON FACTS OF THE CASE IN BRIEF ARE THAT DUR ING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD SHOWN LONG TERM CAPI TAL GAIN AND SALE OF SHARES AND CLAIMED EXEMPTION UNDER SECTION 54F OF T HE ACT IN RESPECT OF INVESTMENT IN RESIDENTIAL FLAT. THE SHARES OF THE B ELOW MENTIONED COMPANIES WERE DEALT IN BY THE ASSESSEE I) SURYADEEP SALT REFINERY & CHEMICALS WORKS LTD. II) BETALA GLOBAL SECURITIES LTD. III) FAST TRACK FINANCE. THE SHARES WERE CLAIMED TO BE PURCHASED THROUGH REG ISTERED STOCK BROKERS OR THROUGH SUB-BROKERS IN THE FINANCIAL YEAR 2002-0 3. THE SAID SHARES WERE PURCHASED IN CASH BY THE ASSESSEE AND THE CASH WAS PAID BY M/S. PAI BROTHERS ENGG. PVT.LTD. WHERE THE ASSESSEE WAS A D IRECTOR. THE SAID SHARES WERE PURCHASED BY THE ASSESSEE IN PHYSICAL F ORM. HOWEVER DURING THE YEAR UNDER APPEAL BEFORE US THE ASSESSEE SOLD THE ABOVE SHARES AND BEFORE SELLING THE SHARES WERE DEMATED. THE SALE OF SHARES WAS CLAIMED TO BE THROUGH RECOGNIZED STOCK BROKERS. ONLY ONE SHAR E OF SURYADEEP SALT REFINERY & CHEMICALS WORKS LTD. WAS SOLD IN PHYSIC AL FORM. THE TRANSACTION OF PURCHASE AND SALE OF SHARES WAS TREA TED AS BOGUS BY THE ASSESSING OFFICER IN ORDER TO COVER THE INVESTMENT OF UNACCOUNTED FUNDS IN THE FLAT AND CLAIMING EXEMPTION UNDER SECTION 54 F OF THE ACT. THE SAID TRANSACTIONS WERE TREATED AS SHAM TRANSACTIONS AND THE SALE PROCEEDS WERE INCLUDED AS INCOME FROM UNDISCLOSED SOURCES IN THE HANDS OF THE ASSESSEE AND THE BENEFIT OF DEDUCTION UNDER SECTION 54F OF T HE INCOME TAX ACT WAS DENIED. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E RECORD. THE CIT(A) ON ELABORATE CONSIDERATION OF THE FACTUAL AND LEGA L ASPECTS OF THE MATTER IN THE CASE OF BOTH THE ASSESSEES BEFORE US AND IN VIE W OF THE FACT THAT THE ASSESSEE WAS HOLDING SHARES IN HIS/HER NAME WHICH I N TURN WERE DULY REGISTERED WITH RELEVANT COMPANY ALLOWED THE CLAIM OF THE ASSESSEE. THE CIT(A) HELD THAT THE PROFITS ARISING ON SALE OF SHA RES WAS TO BE ASSESSED AS LONG TERM CAPITAL GAIN WHICH IN TURN WOULD BE ELIG IBLE FOR DEDUCTION UNDER SECTION 54F OF THE ACT. SHRI SHRIDHAR R. PAI SMT. SHRADDHA S. PAI 4 SIMILAR ISSUE AROSE BEFORE THE TRIBUNAL IN ITA N O.4114/MUM/2007 IN SHRI LAXMINARAYAN R.PAI AND VIDE ORDER DATED 8 TH MAY 2009 THE TRIBUNAL ALLOWED THE CLAIM OF THE ASSESSEE AFTER HO LDING THAT THE TRANSACTION OF PURCHASE AND SALE ENTERED INTO BY TH E ASSESSEE WAS A GENUINE TRANSACTION. IN THE FACTS OF THE CASE BEFORE THE TR IBUNAL THE ASSESSEE HAD TRADED IN SHARES OF SURYADEEP SALT REFINERY & CHEMI CALS WORKS LTD. BETALA GLOBAL SECURITIES LTD. & FAST TRACK FINANCE. IN LINE WITH THE RATIO LAID DOWN BY THE CO-ORDINATE BENCH OF THE TRIBUNAL. AND IN ITA NO.4115/MUM/2007 IN THE CASE OF SMT. BHARATI L.PAI WHICH IN TURN FOLLOWED THE EARLIER ORDER OF THE TRIBUNAL IN THE C ASE OF SHRI LAXMINARAYAN R.PAI ON IDENTICAL FACTS WE CONFIRM THE FINDINGS OF THE CIT(A) AND DISMISS THE APPEALS FILED BY REVENUE. 5. IT IS NOT IN DISPUTE BEFORE US FACTS AND CIRCUMS TANCES IN THE PRESENT ASSESSMENT YEAR ARE IDENTICAL TO THE FACTS AND CIRCUMSTANCES THAT PREVAILED IN A.Y. 2004-05. IN VIEW OF THE ABOV E RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL REFERRED TO ABOVE WE UPHOLD THE ORDER OF LEARNED CIT(A) AND DISMISS BOTH THESE APPEALS BY TH E REVENUE. 6. IN THE RESULT BOTH APPEALS BY THE REVENUE ARE D ISMISSED. ORDER HAS BEEN PRONOUNCED ON 31 ST DAY OF MAY 2010. SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER SD/- (N.V. VASUDEVAN) JUDICIAL MEMBER DATED : 31 ST MAY 2010 COPY TO : 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A)-CONCERNED. 4. THE CIT CONCERNED. 5. THE DR CONCERNED MUMBAI 6. GUARD FILE BY ORDER TRUE COPY ASSTT. REGISTRAR ITAT MUMBAI PS