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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI KUL BHARAT & SHRI MANISH BORAD
आदेश / O R D E R
PER KUL BHARAT, J.M: This appeal by the Revenue is directed against the order of Ld. Commissioner of Income Tax(Appeals)-I, Bhopal, (in short ‘CIT(A)’), dated 26.03.2013 pertaining to the A.Y. 2008-09. The revenue has raised following grounds of appeal: “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.5,80,51,000/- made by the AO on account of share sale consideration treated as income from other sources.
Ramesh Chand Agarwal
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.6,93,51,178/- made by the AO on account of Long Term Capital Gain treated as income from other sources.”
Briefly stated facts are that the case of the assessee was selected for scrutiny assessment through CASS while framing the assessment. The assessing officer made two additions of Rs.5,80,51,000/- and Rs.6,93,51,178/- on account of treating the sale consideration as income from other sources and the long term capital gain treated as income from other sources. 3. Aggrieved by this the assessee preferred an appeal before the Ld. CIT(A) who after considering the submissions deleted the additions. Now the revenue is in appeal before this Tribunal challenging the order of the Ld. CIT(A). 4. Ground No.1 is against deleting the addition of Rs.5,80,51,000/- made by the AO on account of share sale consideration treated as income from other sources. Ld. CIT-DR, Shri Lal Chand vehemently argued that the Ld. CIT(A) was not justified in deleting the additions. He submitted that AO has observed in the assessment order that no share certificate in the name of the assessee in these companies were produced. No share certificate forms towards sale of shares in Bharskar Exxoils Ltd. were produced. No share purchase agreement between the assessee and buyer were produced. The assessee also observed that on perusal of audited balance sheet of the company submitted during assessment proceedings of Bhaskar Infrastructure Ltd. for F.Y. ended on 31.03.2007, there was a brought forward loss of 2
Ramesh Chand Agarwal
Rs.2,88,153/- whereas the assessee has sold share at Rs.710/- per share. In case of Bhaskar Exxoils Ltd. the assessee could not submit to whom shares were sold and from whom sale consideration was received. Ld. CIT-DR submitted that these were the sufficient reason for treating transactions as bogus and taxing the income from other sources. On the contrary Ld. Authorized Representative (AR), Shri S.S. Deshpande supported the order of the Ld. CIT(A) and submitted that the assessee has produced the relevant documents and which was forwarded the AO for examination and verification. 5. We have heard rival contentions and perused material on record. We find that after considering the submissions the Ld. CIT(A) has given the findings on fact as under: “4.6 I have carefully considered the submission of the appellant, remand report and rejoinder of the appellant. Regarding the issue of sale of share of Divya Moti Hotel and Resorts Pvt. Ltd. it is noticed that the appellant had shown sale of 70000 shares of M/s. Divy Moti Hotel & Resorts pvt. Ltd. to M/s. Reeva Buildcon Pvt. Ltd. for a consideration of Rs.4,97,00,000/- @ Rs.710/- per share. The appellant has furnished details in the form of balance sheet of M/s. Divya Moti Hotel & Resorts Pvt. Ltd., Jipur. Copy of Form No.20B furnished by M/s Divya Moti Hotel & Resorts Pvt. Ltd. before the Registrar of Companies including Annual Returns showing the details of shareholders as on the date of Annual General Meeting (AGM) and also the Balance sheet and other docuemnts furnished by M/s. Reeva Buildcon Pvt. Ltd. to the Registrar of companies. From the documents, it can be clearly seen that the appellant was shown as shareholder of M/s. Divya Moti Hotel & Resorts Pvtl ltd. holding 70000 shares as per the list of shareholders as on AGM on 29.09.2007. It is also mentioned in the annual returns furnished before the registrar that these shares were
Ramesh Chand Agarwal
transferred on 04.01.2008 in the name of M/s Reeva Buildcon Pvt. Ltd. It is also noticed that the appellant had received the sale consideration of Rs.4,97,00,000/- by cheque no.927605 dated 04.01.2008 drawn on IDBI Bank Branch D-24, Durlabh Niwas, Prithviraj Road, C Scheme, Jaipur from M/s. Reeva Buildcom Pvt. Ltd. The investment made by M/s Reeva Buildcon Pvt. Ltd. had also been reflected by it in its balance sheet as on 31.03.2008. All these facts and documents submitted by the appellant proved the genuineness of transaction of sale. As far as sale price of share of M/s. Divya Moti Hotel & Resorts Pvt. Ltd. is concerned, it may be noticed that M/s. Divya Moti Hotel & Resorts Pvt. Ltd. had allotted 150000 equity shares on 28.12.2007 at price of Rs.700/- per shares which included Rs.690/- as share premium on each share of Rs.10/-, which indicate the prevailing market rate of the share. The appellant has sold these share on 04.01.2008 at a rate of Rs.710/- per share. In the absence of any material on records to the contrary, it cannot be said that the shares were not worth Rs.710/- per share on the date of sale. The appellant had furnished documents to prove the genuineness of the transaction. It may be noted that the appellant has shown a long term capital gains as chargeable to tax and not exempt. Similarly, in regard to sale of share of the other company, M/s Bhaskar Exxoils Pvt. Ltd. to M/s. Vindhya Solvent Pvt. Ltd., the appellant has furnished documents showing the sale of shares such as the appellant has furnished the copy of share transfer deed of shares of Bhaskar Exxoils Pvt. Ltd. showing the name of transfer and transferee along with their signatures and also a copy of balance sheet as on 31.03.2008 of M/s. Vindhya Solvent Pvt. Ltd. the transferee company showing the investment in the shares of Bhaskar Exxoils Pvt. Ltd. The AO id not point out any defects or deficiency or inconsistency in the documents furnished by the appellant and also had not brought any material on record which can suggest that the transactions of sale of shares shown by the appellant were not genuine. The suspicion or doubt howsoever strong it may be, cannot take the shape of evidence. Therefore, considering the totality of facts and circumstances of the case, the AO was not justified, in the absence of any material in his possession, to hold that the 4
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transactions of sale of shares shown by the appellant were sham transactions. Therefore, the addition of Rs.5,80,51,000/- made by the AO cannot be sustained and is, thus, deleted. The AO is directed to assess the profits earned by the appellant on sale of these shares as income under the head capital gains as long term capital gains. Thus, this ground of appeal is allowed.”
This finding on fact is not controverted by the Revenue by placing any contrary material on record. We, therefore, do not see any reason to interfere in the finding of the Ld. CIT(A), same is hereby affirmed. 6. Ground No.2 is against deleting the addition of Rs.6,93,51,178/- made by the AO on account of Long Term Capital Gain treated as income from other sources. Ld. CIT-DR supported the order of the AO and submitted that ld. CIT(A) was not justified in making the addition. On the contrary Ld. counsel for the assessee supported the order of the Ld. CIT(A) and submitted that the AO failed to appreciate the fact in right prospective. 7. We have heard the rival contentions and perused material on record. The AO has made addition by observing as under: “ From the long capital gain of Rs.4,93,47,305/-, long term capital loss of Rs.4,86,44,204/- of A.Y. 2007-08 has been deducted. The entire transactions of long term capital gain on sale of shares of these companies are bogus transactions and total share consideration is treated as income from other sources for the following reasons: 1) No share certificate in the name of the assessee in these companies were produced. 2) No share certificate forms towards sale of shares in Bharskar Exxoils Ltd. were produced.
Ramesh Chand Agarwal
3)No share purchase agreement between the assessee and buyer are produced, as these shares are not sold to stock exchange or share brokers. Due to this the assessee has not been able to prove the purchase of shares in his name in these companies and the purpose of investment in equity share of these unlisted/unquoted companies is not made clear. 4) The assessee was specifically asked to justify the sale of equity shares of M/s Divya Moti Hotel and Resorts Pvt. Ltd. at premium. On perusal of audited balance sheet of the company submitted during assessment proceedings of Bhaskar Infrastructure Ltd. for F.Y. ended on 31.03.2007, there was a brought forward loss of Rs.2,88,153/- whereas the assessee has sold share at Rs.710/- per share. Thereby earning is Rs.0.52/- per share as on 31.03.2007. 5) In case of Bhaskar Exxoils Ltd. the assessee could not submit to whom shares were sold and from whom sale consideration was received. In view of the above observations and finding entire sale consideration of Rs.5,80,51,000/- declared on account of sale of equity share of above companies by the assessee and offered as long term capital gains remains unexplained and therefore the same is treated as income from other sources. Further the assessee has also claimed long term capital gain of Rs.6,93,51,178/- as exempt u/s 10(38) of IT Act, 1961. The details of the same were submitted along with the written submission dated 25.8.2010. The assessee has not submitted any brokers note to justify the claim of exemption u/s 10938). The details whether the shares were sold through stock exchange and security transaction charge were paid or not have not been submitted. It is also seen that 1235269 shares of Mercator lines sold at Rs.6,44,69,753/-. The shares have no purchase cost as the entire amount of Rs.6,44,69,753/- shown as exempt from long term capital gain u/s 10(38). As per the details of long term gain, profit/loss in case of assessee relating to the shares of Mercator lines it is stated that the assessee sold 1652318 shares during F.Y.2007-08 whereas the total no. of share in the name of the assessee as per the Demat account with IDBI Bank Ltd. relating to Mercator lines was 1259329 share only. Therefore when the assessee is holding 1259329 6
Ramesh Chand Agarwal
shares in his Demat account, how can he sell 1652318 shares and can earn long term capital gain of Rs.6,85,86,066/- which has been claimed as exempt u/s 10(38) of the IT Act. However no evidence/proof or explanation has been furnished in this respect. Therefore in view of the above entire long term capital gain of Rs.6,93,51,178/- claimed as exempt is disallowed and charge to tax as income from other sources.
However, the Ld. CIT(A) after considering the submissions and examining the assessment order has given finding on fact as under: “5.5 I have carefully considered the submission of the appellant and facts of the case. The appellant had shown long term capital gains of Rs.6,93,51,178/- on the sale of 1652318 shares of M/s Mercator Lines Ltd. 28671 shares of M/s Reliance National Resources Ltd. and 23178 shares of Visa Steel Limited during F.Y. 2007-08 and claimed the same as exempt u/s 10(38) of the IT Act. The appellant had also furnished copy of his demat accounts as well as copy of broker’s notes for sale of shares on the National Stock Exchange of India ltd. and Bombay stock exchange Ltd. it is also noticed that security transaction tax (STT) was paid by the appellant on the transactions of sale of these shares, as is mentioned in the broker’s notes. As per computation of long term capital gains furnished by the appellant, it is noticed that the appellant had shown sale of these shares after holding the same for more than one year. Thus, the appellant had earned long term capital gains on the transfer of share on the recognized stock exchanges and paid security transaction tax on the sale of these shares. Therefore, the appellant had fulfilled the conditions u/s 10(38) and was eligible for exemption u/s 10(38) on the long term capital gains earned on sale of 1652318 shares of M/s. Mercator Lines Ltd. 28671 share of M/s. Reliance Natural Resources Ltd. and 23178 shares of Visa Steel Limited during the previous year relevant to A.Y. 2008-09 under consideration. On perusal of Demat Account maintained by the appellant with IDBI Ltd. it is noticed that appellant was allotted 1317850
Ramesh Chand Agarwal
bonus shares of M/s. Mercator Lines Ltd. on 08.03.2006. Since, the appellant had sold these bonus shares, the cost of acquisition of these bonus shares had been correctly shown to Rs.NIL, as there was no cost incurred by the appellant in acquisition of bonus shares. As regards observation of the AO that ‘when the appellant was holding 1259329 shares only in his demat account, how can be sell 1652318 shares of M/s Mercator Lines Ltd., it is noticed that 450000 shares of M/s Mercator Lines Ltd. belonging to the appellant were transferred from appellant’s demat account no.11145756 with IDBI Bank Ltd. to appellant’s own another ledger account CMP 90 for clients margin by the broker. The appellant had also furnished a certificate from M/s. Kassa Finevest Ltd. as well as copy of his account of demat ledger CPM 90 of Ramesh Chandra Agrawal, the appellant, wherein 450000 shares of M/s. Mercator Lines Ltd. were credited and these shares were shown sold during F.Y. 2007-08. It may be noted that the demat account fo the appellant with IDBI Bank Ltd. was showing opening balance of 1259329 shares of M/s Mercator Lines Ltd. s on 01.04.2007 and another 450000 shares of M/s Mercator Lines Ltd. were there in another account of the appellant client ledger CMP 90 kept for client margin by Kassa Finevest Pvt. Ltd. Thus, the appellant was having sufficient number of shares for making sale of 1652318 shares on which the long term capital gains earned was claimed as exempt u/s 10(38) of the Act.
There is no dispute with regard to the fact that the AO made addition on the basis that as per the details of long term gain, profit/loss in case of assessee relating to the shares of Mercator lines it is stated that the assessee sold 1652318 shares during F.Y.2007-08 whereas the total no. of share in the name of the assessee as per the Demat account with IDBI Bank Ltd. relating to Mercator lines was 1259329 share only. However, this objection of the AO is rebutted by the assessee by furnishing the evidence that
Ramesh Chand Agarwal
the assessee was having sufficient number of shares for making sale of 1652318 shares. No contrary material is placed before this Tribunal by the Revenue, therefore, we do not see any reason to interfere in the finding of the Ld. CIT(A), same is hereby upheld. Thus, the ground of revenue is dismissed.
In the result, the appeal of the Revenue in ITA No.394/Ind/2013 is rejected.
Order was pronounced in the open court on 31 .01.2018.
Sd/- Sd/- (MANISH BORAD) (KUL BHARAT) CCOUNTANT MEMBER JUDICIALMEMBER Indore; �दनांक Dated : 31 / 01/2018 ctàxÄ? P.S/.�न.स.
Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file. By order Private Secretary/DDO, Indore