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Income Tax Appellate Tribunal, MUMBAI BENCHES “B”, MUMBAI
Before: SHRI R.C.SHARMA (AM) & SHRI RAM LAL NEGI (JM)
PER RAM LAL NEGI, JM
This is an appeal preferred by the assessee against order dated 25/01/2012 passed by the CIT(Appeals)-35, Mumbai, for the Asst. year 2003- 04, whereby the Ld. CIT(A) dismissed the appeal filed by the assessee against assessment order dated 24/12/2010 passed u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 (in short ‘the Act’).
Brief facts of the case are that the assessee filed its return of income u/s 139(1) declaring total income of Rs. 91,994/-. The assessee had shown Long Term Capital gain on sale of 12500 shares of Buniyad Chemicals Ltd. of Rs. 9,89,387/- and had claimed exemption u/s 54F of the Act. Later on assessment was reopened and order u/s 143(3) read with section 147 of the Act was passed on 24.12.2010, determining the total income of the assessee at Rs. 11,39,130/- after making an addition of Rs. 9,97,275/- as income from undisclosed sources and Rs. 49,864/- as unexplained expenditure u/s 69C of the Act. The AO reopened the case after the search and seizure action undertaken in the case of M/s Mahasagar Securities Pvt. Ltd. and its group companies, during which it came to the notice of the department that Sh. Mukesh Choksi, a Chartered Accountant by profession had floated bogus companies including M/s Buniyad Chemicals Limited and some of these companies were engaged in issuing bogus sale bills to various entities.
3. Aggrieved by the said order, the assessee preferred first appeal before the Ld. CIT(A). The Ld. CIT(A) after hearing the assessee confirmed the A.O’s action of treating the said capital gain of Rs. 9,97,275/- as income from other sources and Rs. 49,864/- as unexplained expenditure and dismissed the assessee’s appeal. Against the impugned order passed by the Ld. CIT(A), the assessee is in appeal before the Tribunal on the following effective grounds:-
“1. On the facts and circumstances of the case, the Commissioner (Appeals) has erred in upholding validity of reopening of the case u/s 148 of the Act.
2. On the facts and circumstances of the case, the Commissioner (Appeals) has erred in upholding the treatment of long term capital gain on sale of shares as income from other sources by the Assessing Officer.
On the facts and circumstances of the case, the Commissioner (Appeals) has failed to appreciate that the transaction of purchase and sale of shares is supported by proper documents.
On the facts and circumstances of the case, the Commissioner (Appeals) has failed to appreciate that the appellant has received
delivery of physical share certificates and thereafter these shares were duly transferred in the name of appellant.
On the facts and circumstances of the case, the Commissioner (Appeals) has failed to appreciate that appellant has dematerialized the physical shares through Depository Participant authorized by SEBI as well as NSDL.
On the facts and circumstances of the case, the Commissioner (Appeals) has failed to consider the written submissions filed before him on 16/01/2012 and upheld the Assessment Order with presumptions and surmises.
7. The Commissioner (Appeals) has erred in dismissing the Appeal without dealing with the Ground No.s 4 and 5 of the Grounds of Appeal filed before him.”
4. Before us, the Ld. Counsel for the assessee submitted that he does not want to press ground No 1 of the appeal being general in nature. Accordingly, ground No 1 of the appeal is dismissed as not pressed.
5. As regards ground Nos. 2 to 6, the Ld. Counsel submitted that the Ld. CIT(A) has wrongly confirmed the findings of A.O. as the same is not based on any evidence. The A.O. had wrongly treated the sale proceeds of shares amounting to Rs. 9,97,275/- as income from undisclosed sources on the basis of reply of NSE. The assessee purchased 12500 shares of M/s Buniyad Chemicals Limited for a sum of Rs. 7,888/- on 11.4.2001 which were transferred in the name of assessee. The shares were thereafter converted to demat form and credited to the assessee’s account with Kapol Co-operative Bank Ltd. The assessee sold the said shares on 18th Nov., 2002 and received the consideration by cheque. Similarly, addition of Rs.49,864/- as unexplained expenditure u/s 69C, estimating the same as commission @ 5% of the sale proceeds of shares is based on surmises and conjunctures. The Ld. Counsel further submitted that the Ld. CIT(A) has wrongly passed the impugned order ignoring the documentary evidence adduced by the assessee in support of its contention. Hence the addition of Rs. 9,97,275/- as well as Rs.49,864/- needs to be deleted. To substantiate his contention the Ld. Counsel placed reliance on various decisions rendered by the ITAT Benches in which the identical issues were decided in favour of the assessee including the following decisions of Mumbai Benches: i) Sh. Kamlesh Mundra vs. ITO, AY 2003-04 dated 4.3.16. ii) Status Credit and Capital Pvt. Ltd. vs. ITO, ITA No4646/Mum/2012, AY 2004-05 dated 13.1.2016. iii) Smt. Jyoti D. Shah vs. ITO, ITA No.1843/Mum/2012 AY 2003-04 dated 18.12.2014. iv) Jatin P.A Jmera vs. ITO, ITA No. 7859/Mum/2011 AY 2003-04 dated 9.11.2014. v) Shri Mangesh V. Tiwari vs. ITO, ITA No. 2587/Mum/2013 AY 2003-04 dated 26.2. 2016. vi) ITO vs Smt. Amina Rangari, ITA No. 1867/Mum/2011 AY 2003-04 dated 4.9.2015. vi) M/s R C Enterprise vs. ITO, ITA No.3861/Mum/2012 AY 2003-04.
6. On the other hand, the Ld. Departmental Representative relying on the order passed by the Ld. CIT(A) submitted that there is no infirmity in the impugned order to interfere with the same. The Ld. CIT(A) has rightly upheld the findings of the AO as the same has been passed in accordance with law after taking into consideration the entire evidence adduced by the assessee to substantiate its claim.
We have heard the rival submissions and also perused the material placed before us including the decisions relied on by the parties. We notice that the sale and purchase of shares by the assessee are duly supported by the documentary evidence and the same has not been rebutted by the authorities below. The conclusions of the authorities below are rather based on information which is not proved by any evidence. There is no material on record to establish that the transactions were bogus. On the other hand copy of letter dated 30th June 2001 vide which Buniyad Chemicals Limited transferred the shares certificate No 063276 to 063400, Folio No M120 in favour of the assessee, negates the findings of the authorities below that the transactions were bogus. Further, the copies of share certificates, copy of letter dated 20th Nov., 2001 issued by Buniyad Chemicals Limited, informing the assessee that the shares of Buniyad Chemicals Ltd. have been permitted to transform into demat form and further its request to send the share certificates for dematerialize, copy of statement of transaction cum charges from 1.12.2002 to 31.12.2002 issued by the Kapol Co-operative Bank, Mumbai and other documents placed on record in the form of Paper Book substantiate the contention of the assessee that the transaction of purchase of shares and sale thereof was genuine.
We notice that the coordinate Benches of Mumbai Tribunal have already decided the identical issue in favour of the assessee in the cases relied upon by the appellant/ assessee. In the case of Sh. Kamlesh Mundra vs. ITO (supra) and Status Credit and Capital Pvt. Ltd. vs. ITO (supra), the coordinate Benches have decided the identical issue in favour of the assessee following the decision of the coordinate Bench in Smt. Durga Devi Mudra vs. ITO (ITA No. 1176/Mum/2012). In the said cases similar additions were made by the AO and the Ld. CIT(A) confirmed the same. In appeal against the order of the Ld. CIT(A), the coordinate Benches following its earlier decision rendered in the case of Smt. Durga Devi Mudra vs. ITO (supra) decided the identical issues in favour of the assessee. In the said cases the assessee had entered into purchase and sale of shares of M/s Buniyad Chemicals Ltd. and M/s Jay Kay Dee Industries Ltd. and the resultant profits were brought to tax by the department. The assessees challenged the impugned orders before the ITAT and the coordinate Benches decided the issues in favour of the assessee and allowed the appeals.
Hence, the identical issue has already been decided in favour of the assessee by the coordinate Benches in the cases referred and discussed above. The issue involved in the present case is identical to the issues involved in the aforesaid cases. We, therefore, respectfully following the decisions of the coordinate Benches, decide ground No 2 to 6 in favour of the assessee and against the revenue and hold that the assessee has proved the genuineness of the share transaction and there is no ground to disallow the claim of the assessee in respect of the long term capital gain. Accordingly, we direct the AO to allow the deduction.
So far as Ground No 7 is concerned since we have decided the main issue in favour of the assessee, we do not consider it necessary to adjudicate this ground separately.
In the result the appeal filed by the assessee for Asst. Year 2003-04 is partly allowed.
Order pronounced in the open court 14th December, 2016.