SHRI NARENDRA S SHAH,MUMBAI vs. DCIT, CC-2(2), MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRYAssessment Year: 2014-15
Per : Narender Kumar Choudhry, Judicial Member:
This appeal has been preferred by the Assessee against the order dated 24.01.2017, impugned herein, passed by the Ld.
Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2014-15. Shri Naredra S Shah
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2. In the instant case, two issues are involved and for the sake of brevity, this Court is inclined to decide the issues independently.
In this case, the Assessee has sold certain shops and villas on a sale consideration lower than the value assessed by the stamp valuation authority, detailed below:
Sr.
Mo.
Name of the costumer
Shop /
Gala No.
Date of agreement
Sale
Consideration
Market value as per Stamp
Duty valuation
I.
Sh. Jitesh K. Shah
C-l
02.2013
13,50,000/-
36,27,000/-
Sh. Rajesh K. Shah
C-7
02.2013
13,50,000/-
36,27,000/-
Ms. Mohini K. Choudhari
B-7
10.2013
16,000/-
21,44,000/-
Shri Gaurang G. Gupta
C-8
12.2013
26,76,280/-
46,20,000/-
Shri Sunil A. Patil
JB-3
12.2013
35,00,000/-
36,47,000/-
Sh. Dilip S. Thakar
B-4
12.2013
35,00,000/-
36,47,000/-
Sh. Dilip S. Thakar
B-5
12.2013
35,00,000/-
36,47,000/-
Ms. Anita D. Sawant
C-15
10.2013
60.000/-
27,96,000/-
Consequently, the AO show caused the Assessee “as to why the difference of sale consideration vis-à-vis market value totaling to Rs.70,02,720/- as per stamp duty valuation authority should not be brought to tax in view of the provision of section 43CA of the Act”.
On examination of the records of the Assessee, the Assessing Officer (AO) also seen that the Assessee has sold shop no. C-16 measuring 1058 sq. ft. (built up area) to Ms. Mohini Chaudhari on dated 24.10.2013 for a sale consideration of Rs.21,16,000/-, however, the market value of the same as per stamp duty valuation was Rs.21,44,000/-. Thus, there is a difference of Rs.28,000/- Shri Naredra S Shah
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which is taxable u/s 43CA of the Act and therefore the AO on this aspect as well, show caused the Assessee .
The Assessee, in response to the aforesaid show cause notices, vide letter dated 20.12.2016 filed his reply and claimed as under:
“5.4 In response to the same, the Assessee has filed letter dated
20.12.2016 and inter-alia stated that provisions of section 43CA are not applicable in the case of the Assessee as:
a. For Sr.No.1 & 2, Shop/Gala No.C-1 & C-7, as the agreement is executed on 08.02.2013, the provision of Sec 43CA with respect to difference of Sales Consideration & Stamp Duty Valuation is not covered and hence such difference cannot be taxed within the provisions of Sec 43CA of the Act.
b. For Sr.No.4, Gala No.C-8, the Assessee has stated that the actual area of gala concerned is 1580 sq.ft. (Built up) and that mentioned in the agreement is 2280 sq.ft. which is saleable area.
For the purpose of Stamp Duty Valuation the area to be considered is the Built up Area. The copies of sanctioned plans are already filed to your good self. Therefore the Stamp Duty
Valuation shall come down considerably.
C. In connection with the Gala No.B-3, B-4, B-5 & C-15, the area in each gala mentioned in the agreement & the area given in the sanction plans is different. From the above submission and explanation, it is submitted that value adopted or assessed for the purpose of the payment of Stamp Duty should not be accepted as deemed consideration and actual consideration should only be taken as Sales Consideration.”
The AO, though considered the aforesaid submissions of the Assessee, but found the same as not tenable, in view of the specific provisions of section 43CA of the Act introduced w.e.f. 01.04.2014 and accordingly held that the provisions of section 43CA are deeming provisions and thereby the value adopted or assessed or assessable by the Stamp Duty Valuation Authority, shall be deemed to be full value of the consideration received or occurring, as a result of such transfer. Shri Naredra S Shah
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8. The AO at last, brought the amount of Rs.24,48,720/- to tax , on account of difference between the market value adopted by the Stamp Duty Valuation Authority and the agreement value shown by the Assessee in the sale deeds u/s 43CA of the Act, as detailed below:
Sr.
No.
Name of the Customer
Sho p/
Gala
No.
Date of agreement
Sale
Consideratio n
Market value as per Stamp
Duty
Valuation
Difference
Shri Gaurang G.
Gupta
C-8
12.2013
26,76,280/-
46,20,000/-
19,43,720/-
Shri Sunil A. Patil
B-3
12.2013
35,00,000/-
36,47,000/-
1,47,000/-
Shri Dilip S.
Thakar
B-4
12.2013
00.000/-
36,47,000/-
1,47,000/-
Shri Dilip S.
Thakar
B-5
12.2013
35,00,000/-
36,47,000/-
1,47,000/-
Ms.Anita D.
Sawant
C-15
10.2013
27,60,000/-
27,96,000/-
36,000/-
Ms.Mohini K.
Chaudhari
C-16
10.2013
21,16,000/-
21,44,000/-
28,000/-
TOTAL
24,48,720/-
The Assessee, being aggrieved, challenged the said addition before the Ld. Commissioner (along with other addition which we will deal later on) and has claimed that provisions of section 43CA of the Act are not applicable to the case of the Assessee. The Assessee further claimed that in some of the cases/sale, the salable area is mentioned, instead of built up area and the Stamp Duty Valuer has assessed stamp duty on the basis of calculation, as per salable area instead of built up area. Further, the AO did not refer the matter to valuation officer for valuation of the property as requested by the Assessee vide his submission dated 20.12.2016 but made the addition of Rs.24,48,720/- being difference between Shri Naredra S Shah
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sale consideration vis-à-vis market value, as per stamp duty value under the head “income from business and profession” u/s 43CA of the Act. And therefore the addition is liable to be deleted.
The Ld. Commissioner though considered the claim of the Assessee; however, by sidelining the said request of the Assessee qua referring of the matter to valuation officer for valuation of the property, affirmed the aforesaid addition by holding that the AO has rightly made the addition u/s 43CA of the Act as the Assessee has shown the sale consideration less than the stamp duty valuation.
This Court has given thoughtful considerations to the peculiar facts and circumstances of the case and observe that admittedly both the authorities below even on specific request dated 20.12.2016 as made by the Assessee, have failed to refer the matter for valuation to the District Valuation Authority. It is the mandate of the law that whenever the Assessee disputes the valuation and requests for valuation of the property by the District Valuation Authority as specified under the provisions of the Act, it has become bounden duty of the Revenue Authorities to refer the matter/valuation of the property to the Appropriate Authority for valuation of the property and/or for deciding the issue qua valuation of the property. Hence, considering the peculiar facts and circumstances in totality, as the Assessee has specifically requested both the Authorities below for reference of the valuation of the property involved to the District Valuation Officer, this Court is inclined to remand the instant issue to the file of the AO for decision afresh, suffice to say by referring the valuation of the property involved to the District Valuation Officer and on receiving the valuation report, to decide the issue afresh, accordingly. Shri Naredra S Shah
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10. Coming to the 2nd issue involved, this Court has observed that the Assessee had made offline purchase of 4,000 shares of M/s. Conart Traders Ltd., on a consideration of Rs.1,00,000/- on dated 28.09.2011. M/s. Conart Traders Ltd. subsequently merged into M/s. Sunrise Asian Ltd. through order dated 22.03.2013 of Hon’ble High Court. Later on dated 23.01.2013, said 4,000 shares of M/s. Sunrise Asian Ltd. were converted into Demat form and sold through Bombay Stock Exchange, at prevailing market prices on the following dates and rates:
Number of Shares
Date of Sale
Rate per share
Total amount
1000
12.08.2013
Rs.500
Rs.4,97,759.70
1450
14.08.2013
Rs.500
Rs.7,26,374.88
1400
06.09.2013
Rs.506
Rs.7,04,858
150
17.09.2013
Rs.507
Rs.75,714.52
The sale proceeds of the above transactions, were credited to the Assessee’s bank account, which has duly been disclosed by the Assessee in its return of income, claiming exemption of the said amount u/s 10(38) of the Act. Further, the said amount was also subjected to Securities Transaction Tax (STT).
The AO though considered the said claim lodged by the Assessee u/s 10(38) of the Act, however found the same not acceptable mainly on following reasons:
“ That during the survey action at the registered office of scrip
M/s. Sunrise Asian Ltd., it was seen that no work was going on in that office and the statement of Shri Vipul Vidhur Bhat was recorded who admitted to have dealt with various entities including M/s. Sunrise Asian Ltd. Further, the Directorate Of Investigation, Kolkata has carried out various investigations and SEBI in its report has given the findings with regard to the accommodation entries qua share transactions of various scrips”.
Shri Naredra S Shah
The AO, therefore, based on the “investigation carried out into 84 penny stock shares quoted on BSE, by the Directorate Of Investigation, Kolkata and the mode of acquisition of 4000 shares in physical form by the Assessee and unusual rise in the price os scrip within a shorter period and analysis of transaction, failure of the Assessee discharge his onus, ignorance of the Assessee about shares and penny stock companies, financial analysis of penny stock companies, order of the SEBI, cash trail in the accounts of the entry providers, arranged transactions etc.”, ultimately disallowed the deduction claimed as exempt to the tune of Rs.19,01,173/- u/s 10(38) of the Act and added the same to the income of the Assessee.
The Assessee, being aggrieved, challenged the said addition before the Ld. Commissioner, however, of no avail, as the Ld. Commissioner affirmed the said addition, on the similar footing/reasoning as of the AO.
This Court has given thoughtful considerations to the peculiar facts and circumstances of the case. Admittedly, the Assessee in order to discharge his liability and/or onus cast u/s 68 of the Act has submitted the following documents:
“1) Copy of application form dt. 28/09/2011 for applying shares of P.Saji Textiles Limited.
2) Copy of cheque issued to P.Saji Textiles Limited for Rs.
1,00,000/- dated 28/09/2011. 3) Copy of debit note dt. 16/01/2012 of Rs. 1,00,000/- by P.Saji
Textiles Limited for allotting 4000 equity shares of M/s Conart
Trader's Ltd.
4) Copy of share Transfer Form Dated 13/01/2012 along with the letter to Conart Trader's Ltd. for transferring the shares on Assessee's Name.
Shri Naredra S Shah
5) Copy of share certificate No. 967 for 4000 shares issued by Conart Trader's Limited issued in lieu of certificate no. 841 dated
16/01/2012. 6) Copy of Demat Statement issued by Comfort Securities Limited from 14/10/2011 to 09/12/2016. 7) Copy of contract notes cum Bill & Contract notes issued to Assessee by Comfort Securities limited.
8) Copy of certificate issued by Conart Traders Limited dated
10/04/2012 for holding of shares by the Assessee as on 31/03/2012. 9) Copy of extract of Annual report of Conart Traders Limited for F.Y. 2011-12 downloaded from official website of ROC, where
Assessee name is reflecting as a shareholder as on 30/09/2012. 10) Copy of Bank statement reflecting amount paid to P.Saji Ltd.
for Purchase of shares of Conart Traders Ltd. & amount received on sale of shares directly in Assessee's account.
11) Copy of scheme for Amalgamation”
Admittedly, the authorities below have failed to establish the involvement of the Assessee in manipulation of price rigging and/or controlling the scrip under consideration and/or any involvement with Shri Vipul Vidhur Bhat and/or fraudulent or unfair trade practices. It is also admitted fact that no action has been taken against the Assessee in any of the proceedings for manipulation/malpractice or any violation by the Assessee by the SEBI. Admittedly, the Assessee held the shares for more than one and a half year and sold through banking channel and online platform. The Assessee by filling relevant documents as mentioned in para no. 15 above, has also discharged prima-facie onus cast u/s 68 of the Act. And therefore on the aforesaid facts, addition in hand is un-sustainable.
The Ld. A.R. relied on various judgments including passed by the Hon’ble Gujarat High Court in the case of Pr. CIT vs. Divyaben Shri Naredra S Shah
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Prafulchandra Parmar (2022) 169 taxmann.com 473 (Guj) wherein the Hon’ble High Court has also dealt with the identical scrip i.e.
M/s. Sunrise Asian Ltd. and ultimately affirmed the decision of the Tribunal, in deleting the identical addition, by observing and holding as under:
“16. Considering the contentions raised on behalf of the Revenue, the Tribunal has arrived at a finding of fact that shares of Sunrise Asian Ltd. sold by the Assessee cannot be doubted as bogus and exemption under Section 10(38) of the Act was rightly availed by the Assessee. The Tribunal has also concluded that the presumption drawn by the Assessing Officer was not corroborated by any evidence to establish the alleged non- genuine transaction by the Assessee. It was, therefore, rightly held by the Tribunal that the claim of the Assessee for exemption of Long Term Capital Gains under Section 10(38) of the Act cannot be held to be bogus on the basis of presumption in absence of any evidence brought on record by the Assessee with regard to shares of Sunrise Asian Ltd, which is not even found to be rigged by the SEBI also. The Tribunal has also considered that the Assessee held the shares for two and half years and after holding the shares for a long period, the same were sold by the Assessee and therefore, reliance was placed on the decision of this Court in the case of Jagat Pravinbhai Sarabhai (supra), wherein this Court has held as under:
"5. The genuineness of investment in the shares by the Assessee was substantiated by him by producing copy of transaction statement for the period from 1.6.2001 to 1.10.2010. The investment was made in the year 2000-01. The shares were retained for more than ten years and were sold after such long time. These circumstances suggested that the investment was not bogus or investment
Shri Naredra S Shah
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made in penny stock. The shares were purchased in order to invest and not for the purpose of earning exempted income by frequent trading in short span.
The finding recorded by the appellate authority and confirmed by the appellate tribunal is based on material before them. They are in the realm of findings of fact. No error could be noticed in the findings and conclusion that the investment was longstanding and genuine and was not penny stock on the basis of which the capital gain was wrongly claimed.
1 On the facts of case, no question of law much less substantial question of law arises.
Resultantly, appeal is dismissed."
The Assessee further relied on the judgment passed by the Hon’ble Co-ordinate Bench of the Tribunal in the case of Lalitaben Pravin Shah vs. CIT, New Delhi in ITA no.2008/M/2023 decided on 05.04.2024, wherein the Hon’ble Tribunal has also dealt with the same scrip i.e. M/s. Sunrise Asian Ltd. and ultimately deleted the addition by analyzing the factual aspects of the case and respectfully following judgments passed by various Courts.
On the contrary the Ld. D.R. relied on the decision of the Hon’ble Tribunal in the case of Aakruti Ketan Mehta vs. ITO, Ward- 35, Mumbai, decided on 31.01.2024, wherein also the identical scrip has been dealt with and addition has been sustained
As observed above, the Hon’ble Gujarat High Court has also dealt with the identical scrip as observe above and therefore judgment of the Hon’ble High Court would get precedence over the Shri Naredra S Shah
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tribunal judgment. Even otherwise, every case having its own peculiar facts and circumstances and depends on factual aspects and establishing the relevant claim and documents and discharging the onus cast under the relevant provisions of law.
As the Assessee in the instant case by producing relevant documents as mentioned in para no. 15 of this order, has been able to establish the genuineness of his claim u/s 10(38) of the Act and the Department has also not brought any corroborative evidence against the Assessee’s claim or documents and has also not specifically attributed or established any role to the Assessee for rigging of the price of shares involved and/or connivance with the owner of the scrip and it is also a fact that the Assessee has purchased negligible shares of the scrip and sold the shares through online platform and banking channel, as clearly reflects from the documents produced by the Assessee and as reproduced herein above and thus the addition in any case is unsustainable and therefore this Court by respectfully following the judgment of Hon’ble Gujarat High Court in the case of Pr. CIT vs. Divyaben Prafulchandra Parmar (supra), is inclined to accept the claim of the Assessee lodged u/s 10(38) of the Act. Consequently the addition in hand is deleted.
In the result, the appeal filed by the Assessee, is partly allowed for statistical purposes.
Order pronounced in the open court on 28.04.2025. (NARENDER KUMAR CHOUDHRY)
JUDICIAL MEMBER
Shri Naredra S Shah
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* Kishore, Sr. P.S.
Copy to: The Appellant
The Respondent
The CIT, Concerned, Mumbai
The DR Concerned Bench
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By Order
Dy/Asstt.