GAUTAM THADANI,NEW DELHI vs INCOME TAX OFFICER, NEW DELHI

Income Tax Appellate Tribunal, DELHI ‘SMC’ BENCH, NEW DELHI

Before: SHRI H.S. SIDHU

This appeal filed by the assessee is directed against the order of the Ld. Commissioner of Income Tax [Appeals]-4, New Delhi dated 30.01.2015 pertaining to assessment year 2004-05 on the following grounds:-

1. On the facts and circumstances of the case the CIT(A) is wrong in confirming the addition of Rs. 963,950/- mae by the AO u/s. 68 of the Act.

2. That on the facts of the case section 68 are not applicable in the case of the assessee as the appellant does not maintain any books of accounts an therefore, the provisions of section 68 are not applicable.

3. That without prejudice to the above the CIT(A) is wrong in confirming the addition of Rs. 9,63,950/- made by the AO on account of sale of shares.

4. That the CITA(A) has confirmed the addition of Rs. 9,63,950/- on account of sale of shares on conjectures and surmises without looking into the records and evidences filed by the appellant.

5. That in law and facts of the case the CIT(A) is wrong in confirming the addition of Rs. 9,63,950/- as income from unexplained source.

6. That the addition made is against the law and facts of the case. 2. The AO completed the assessment u/s. 143(3)/254 of the Income Tax Act, 1961 (in short “Act”) in compliance of the order dated 06.12.2010 passed by the ITAT, Delhi Bench ‘C’, New Delhi in in the case of the assessee. 2.1 The assessee is an individual and shown salary income and income from M/s Global Health Care Pvt. Ltd. He has shown capital gain and income from other sources also. The return of income was filed on 28.1.2014 declaring income of Rs. 23,85,514/-. The AO examined the same and found that assessee has shown long term capital gain of Rs. 9,85,820/-. The long term capital gain has been shown on the sale of 10000 shares of M/s Supreme Agro Products Ltd. through DN Kansal Securities Pvt. Ltd., who is a broker with Delhi Stock Exchange. The AO called the detail from the assessee in respect of the shares of M/s Supreme Agro Products Ltd. The assessee has filed a Contract Note from the broker. He has filed the photocopies of 03 cheques of a sum of Rs. 3 lacs, Rs. 2 lacs and Rs. 4,63,950/-. To verify the same, AO sent the notice u/s. 133(6) of the Act to M/s DN Kansal Securities Pvt. Ltd. and called certain information. This letter was received back with the remarks of the postal authorities “Left”. After perusing the Contract Note and details of payments, the AO found that the payment has been received in March, 2004 whereas contract note is of May, 2003. There is a gap of nine months in the contract note as well as the ultimate receipt of payment. AO doubted the genuineness of the transaction and has also information from the Delhi Stock Exchange who informed that on 05.05.2003 no such transaction in respect of shares of M/s Super Agro Products Pvt. Ltd. has been carried out by broker DN Kansal Securities Pvt. Ltd. at Delhi Stock Exchange. The AO confronted these development to the assessee and in reply, the assessee submitted that he is not aware where the broker has sold the shares i.e. in which Stock Exchange, he traded this transaction. As regards to the rate on which shares were sold, assessee has submitted copy of newspaper cutting from HT business Patna. After hearing the assessee and perusing the documentary evidences filed by the assessee, the AO is not satisfied with the explanation given by the assessee and finally the AO added Rs. 9,63,950/- as undisclosed income of the assessee u/s. 68 of the Act. Aggrieved with the assessment order, assessee appealed before the Ld. CIT(A), who vide his impugned order dated 04.09.2009 has dismissed the appeal of the assessee and against the impugned order dated 4.9.2009, assessee filed an appeal before the Tribunal and Tribunal vide its order dated 6.12.2010 remitted the issue to the file of the AO for re-adjudication. In compliance of the Tribunal’s order dated 6.12.2010, the AO completed the assessment on 23.12.2011 u/s. 143(3)/254 of the Act and again added Rs. 9,63,950/- to the income of the assessee being undisclosed income u/s. 68 of the I.T. Act. Aggrieved by the assessment order dated 23.12.2011 assessee filed the appeal before the Ld. CIT(A) who vide his impugned order dated 30.1.2015 has dismissed the appeal of the assessee. Aggrieved with the impugned order, assessee has filed the present appeal before the Tribunal.

3. At the time of hearing, Ld. Counsel for the assessee filed Written Submissions containing pages 1-6 and also enclosed some orders of the ITAT and the judgement of the Hon’ble Supreme Court and the Hon’ble High Courts. Ld. Counsel for the assessee has also filed a very voluminous paper book containing pages 1-113 in which he has attached the written submissions, before the Tribunal from pages 1-14 and other necessary documents including assessment order, appellate order, allotment letter of the shares and contract note and copy of account payee cheque and copy of orders of the Tribunal and judgment of Hon’ble Supreme Court of India and the Hon’ble High Courts. Ld. Counsel for the assessee finally requested that in view of the written submissions filed by him and the paper book in which he has attached the various documentary evidences supporting the claim of the assessee, the appeal of the assessee may be allowed by deleting the addition in dispute.

On the contrary, Ld. DR relied upon the orders of the authorities below and stated that assessee has filed his return of income on 28.10.2004 in which long term capital gain on the sale of 10000 shares from M/s Supreme Agro Products Pvt. Ltd. was declared. The AO asked the assessee about the genuineness of the sale and purchase of the shares in dispute, but the assessee did not prove the genuineness of the sale and purchase of shares. Therefore, the sale and purchase of shares of M/s Supreme Agro Products Ltd. is only a paper transaction and not an actual one and only to evade the legitimate tax. He further stated that AO has also issued notices to the broker as well as to the company to prove the genuineness and sale and purchase of the shares in dispute, but all notices were received back unserved with the remarks “Left”. Even otherwise, the assessee has also unable to file the relevant documentary evidences for substantiating his claim before the revenue authorities as well as before this Tribunal. He requested that since the revenue authorities have passed the well reasoned orders which may be upheld by dismissing the appeal filed by the assessee.

I have heard both the parties and perused the orders of the revenue authorities alongwith the written submissions filed by the assessee and the documentary evidences filed by the assessee in the shape of paper book in which the assessee has attached various documentary evidences for substantiating his claim before the AO. 5.1 After going through the impugned order dated 30.1.2015 passed by the Ld. CIT(A), I am of the view that no doubt that the AO while passing the original assessment order as well as present assessment order in compliance of the ITAT order has conducted the enquiry by issuing various notices u/s. 131 of the Act and u/s. 133(6) of the Act for proving the genuineness of the transaction. But before the Ld. First Appellate Authority the main plea of the assessee was that the AO has not carried out any enquiry in compliance with the directions of the ITAT, Delhi issued vide order dated 6.12.2010 to clear the doubt and to follow the prescribed procedure under the law and in the interest of justice, Ld. CIT(A) himself utilised the statutory powers vested with him which are co-terminus with that of the AO and carried out enquiries to give effect to the directions of the ITAT, Delhi in their order dated 6.12.2010. 5.2 During the course of appellate proceedings, the Ld. CIT(A) issued notice to M/s Supreme Agro Products Ltd. dated 10.12.2013 in which various details were called for, which the Ld. CIT(A) has mentioned in para no. 6.2 at page no. 7 of his impugned order. For the sake of convenience, the para no. 6.2 is reproduced as under:- “6.2 During the course of appellate proceedings, this office issued notice to M/s Superme Agro Products Pvt. Ltd. dated 1.12.2013, in which the following details were called for:-

Mr. Gautam Thadani, C-31, Mayfair Garden, New Delhi has claimed to have been allotted 10,000 shares of your company, as an original allottee on 04.03.2002.

You are requested to kindly confirm whether shares were allotted to Mr. Gautam Thadani by your company on the above mentioned dates. In case such transactions are confirmed, kindly furnish the following documents to the undersigned:

(i) Copy of share application by Mr. Gautam Thadani.

(ii) Copy of transfer deeds in respect of shares claimed to have been sold by Mr. Gautam Thadani.

(iii) Details of payment made by Mr. Gautam Thadani for the purpose of applying for shares.

You are also requested to furnish the details of prevailing market value of the shares as on the first date and as on the last date of may 2003, as mentioned in your annual accounts.

4. You are requested to furnish the above details by 26 December 2013.”

5.3 In compliance of the notice dated 10.12.2013 issued by the Ld. CIT(A), M/s Supreme Agro Products Ltd. vide letter 16.12.2013 informed that the assessee has applied for preferential allotment of 20,000 shares on 4.2.2002 to the company, for which an amount of Rs. 2 lacs by cheque drawn on HDFC Bank was paid on 4.2.2002. A copy of Application Form S.NO. 1014 for preferential allotment of 20,000 equity shares filed by the assessee on 4.2.2002 was filed before the Ld. CIT(A). But M/s Supreme Agro Products Ltd. do not confirm whether any shares were actually allotted to the assessee and did not furnish the evidence in the form of copy of shares certificate, folio no. / distinctive number or copy of transfer deed in respect of shares claimed to have been allotted to the assessee. Ld. CIT(A) has also asked M/s Supreme Agro Products Pvt. Ltd. to furnish the prevailing market value of shares in the month of May, 2003, which too was not furnished by this company to the Ld. CIT(A). Ld. CIT(A) has also issued various notices to passing the same to the company as well as to its Directors Mr. Pawan Kumar, Arvind Kumar while issuing the notice u/s. 131 of the I.T. Act on 17.2.2014. But no response was given by them. But on 22.4.2014 they informed that there is no procedure to maintain the market value of shares and whether any share were actually allotted or not. The Ld. CIT(A) has also issued various notices to the company and its Director, but they did not respond to the same and in the absence of any reply, penalty u/s. 272(2)(A) of an amount of Rs. 10,000/- was also levied on Mr. Praveen Kumar, Director of M/s Supreme Agro Products Pvt. Ltd. vide order dated 16.9.2014. 5.4 Keeping in view of the facts and circumstances as explained above, I am of the view that assessee did not substantiate his claim as required under section 68 of the I.T. Act, 1961 for the amount of Rs. 9,63,950/- by way of filing the valid documentary evidences as required by the revenue authorities. As per the impugned order passed by the Ld. CIT(A) in spite of the various notices given by the Ld. CIT(A) to the assessee and his Company M/s Supreme Agro Products Pvt. Ltd. from where he has purchased and later sold the shares in dispute as well as its Directors Mr. Praveen Kumar and Mr. Arvind Kumar Kabra. They did not respond to the query raised by the Ld. CIT(A). After verification from the Delhi Stock Exchange about the confirmations of the sale of shares in dispute reply was negative against the assessee that no such shares purchased and sold by this company which is held by the assessee. The assessee himself informed vide letter dated 23.1.2014 that he has not dealing with the broker, hence, did not have the latest address of that broker. The concerned Income Tax Officer was also asked by the Ld. CIT(A) to conduct the enquiry through the Income Tax Inspector (ITI), the ITI found that the address given by the Delhi Stock Exchange did not exist. The revenue authority has also made the enquiry on google map about the broker and found the office of the broker and visited the same and found that premises was locked. The AO has also sent summons to the Directors of M/s DN Kansal Securities Pvt. Ltd. namely Mahinder Kumar Gupta and Mukesh Pal and got served through the SHO, Kavi Nagar, Ghaziabad UP on 29.8.2014 calling for their presence on 03.09.2014. The SHO get the summons served on Sh. Lekh Raj Father of Sh. Mukesh Pal in the presence of one neighbour Ms. Manju and Ms. Meenu sister of Mukesh Pal on 29.8.2014 calling for his compliance on 03.9.2014. On 21.10.2014 summons u/s. 131 of the Act was also issued to Mahinder Kumar Gupta and Sh. Mukesh Pal, Director of M/s DN Kansal Securities calling for compliance on 31.10.2014. In response to the same, no one appeared. Assessee was also asked by the AO to produce the Director of the Company to prove the genuineness of the transaction in dispute, but on given date i.e. 10.11.2014 assessee could not produce these 02 Directors of the broker company and AR of the assessee expressed inability to produce the brokers. Keeping in view of the facts and circumstances of the case as explained above, I am of the view that in spite of the various opportunities given by the AO and Ld. CIT(A) by using co-terminus powers, neither the assessee nor his Authorised Representative filed any satisfactory documentary evidences for substantiating the claim before the revenue authorities especially before the Ld. CIT(A) and after careful consideration of the facts and circumstances of the case, the Ld. CIT(A) has held that the transactions in dispute is under doubt. Since the actual sale price of the shares of M/s Supreme Agro Products Pvt. Ltd. claimed to be sold by the assessee at a face value of Rs. 96.50 per share in May, 2003 was itself doubtful as the payment for sale consideration from M/s DN Kansal Securities Pvt. Ltd., an unrelated party, was received after 10 months by the assessee in March, 2010 and it was not clear as to whom these shares were eventually sold by the broker and what was the basis for taking sale price at Rs. 96.50 per share when the company was running in losses. As per the documentary evidences filed by the assessee and the finding of the Ld. CIT(A) that M/s Supreme Agro Products Pvt. Ltd. was carrying on huge losses in the AY 2004-05 and had not declared any dividend to its share holders, further adds to the suspicion for trading of its shares 9.6 times its face value as claimed by the assessee. 5.4 Keeping in view of the facts and circumstances of the case as explained above and after considering the written submissions filed by the assessee alongwith the documentary evidences in the shape of Paper Book filed by the assessee, I am of the view that M/s Supreme Agro Products Pvt. Ltd. had claimed to have received application for preferential allotment of 20,000 shares to the assessee on 4.2.2002 on the receipt of cheque and on the same date at the face value of Rs. 10 per share, but the assessee could not file any documentary evidences to establish that any shares were actual allotted to the assessee despite repeated opportunity given by the revenue authorities to the assessee and to M/s Supreme Agro Products Pvt. Ltd. and its Directors mentioned above. M/s Supreme Agro Products Pvt. Ltd. failed to provide the copy of transfer deed and details of specific shares shows that the purchase as well as sale of the shares do not stand proved. The revenue authorities has also issued summons u/s. 131(1) of the Act which was duly served upon two directors of M/s DN Kansal Securities Ld claimed to be the buyer of such 10000 shares through service Income Tax Inspector and through concerned SHO of the PS Kavi Nagar, Ghaziabad. Both Directors do not comply the notices. Despite several reminder from M/s Supreme Agro Products Pvt. Ltd. failed to provide the crucial information, the penalty u/s. 272A of the Act and penalty of Rs. 10000/- was levied on Mr. Praveen Kumar, Director of that company. I am of the view that no real transaction of purchase and sale of shares of M/s Supreme Agro Products Pvt. Ltd. did take place in the case of the assessee. M/s Supreme Agro Products Pvt. Ltd. was running in huge losses and had not declared any dividend for several years which shows that the aforesaid transaction in dispute is to make the money unaccounted money as a long term capital gain which is taxable at a concessional rate, was a bogus transaction in the nature of colourable device of the nature covered in the scope of decision of Hon’ble Supreme Court of India in the case of CIT vs. Mc. Dowell Ltd. 154 ITR (SC). In my considered view the Ld. CIT(A) has passed a well reasoned order on the basis of documentary evidences filed by the assessee which did not prove the genuineness of the transaction in dispute. The assessee remained non-cooperative before the AO as well as before the Ld. CIT(A) by not producing the Director before the revenue authorities as well as not substantiated the claim before the AO as well as Ld. CIT(A) in spite of the repeated opportunities given to the assessee. 5.5 Keeping in view of the facts and circumstances as explained above, I am of the view that no interference is called in the well reasoned impugned order passed by the Ld. CIT(A), hence, I uphold the impugned order passed by the Ld. CIT(A) and rejected the ground raised by the assesee by dismissing the appeal filed by the assessee.

GAUTAM THADANI,NEW DELHI vs. INCOME TAX OFFICER, NEW DELHI