ITO, WARD - 12(3), KOLKATA, KOLKATA vs. M/S. KHAITAN POLYFAB PVT. LTD., KOLKATA

Both appeals by Revenue are arising out of order of Commissioner of Income Tax (Appeals)-XXIV, Kolkata by different date i.e. 16.01.2012 & 19.01.2009. Assessments were framed by ITO Ward-12(3), Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide their orders dated 28.03.2006 and 29.12.2006 for assessment years 2003-04 & 1999-00 respectively.

The sole issue raised by Revenue in this appeal is that ld. CIT(A) erred in deleting the addition made by the AO for Rs. 1.26 crores on account of loss on the undisclosed sale of shares. The effective ground of appeal raised by Revenue is reproduced below:- “1) That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in directing the AO to allow loss of Rs.1,26,00,000/- on account of sale of 14,00,000 shares of Tribhuvan Properties Ltd., when such shares were not disclosed in the return.”

Aggrieved assessee preferred an appeal to Ld. CIT(A) who deleted the addition made by the AO on account of loss on sale of shares by observing as under :- & 608/Kol/09 A.Ys 03-04 & 99-00 ITO Wd-12(3) Kol. v. M/s Khaitan Polyfab Pvt.Ltd. Page 3 “3.4 I have considered the above report and also the submission of the Ld. A/R. the Ld. CIT has held in appeal order No. 41/CIT(A)-XXXII/Wd- 12(3)/08-09/Kol dated 19.01.09 that the shares were duly reflected in the balance sheet of the appellant company as on 31.03.1999. He has also held that the payment for the purchase of shares was made out of its bank account. The remand report dated 05.10.2009 has been submitted by the Assessing Officer in a routine manner without verifying the details. Considering the facts of the case, I hold that the Assessing Officer has wrongly disallowed the loss of Rs.1,26,00,000/- on account of sale of 14,00,000 shares of Tribhuvan properties Ltd. Accordingly, he is directed to allow the said loss of Rs.1,26,00,000/- on account of sale of 14,00,000 shares of Tribhuvan properties Ltd. this ground of appeal is allowed.”

The learned DR before us submitted that that the share certificates and documents filed for the transfer of shares were not furnished before the AO at the time of assessment. The Ld CIT(A) has given relief to the assessee on the basis of fresh evidence without recording the reason for admitting the same as per Rule 46A of IT Rules 1962. The DR further submitted that whether the paper book was filed before the Ld CIT(A) is also not clear and vehemently supported the order of AO. On the other hand, Ld AR submitted that no new evidence was filed before the Ld CIT(A) and all these papers were already submitted before the AO while framing the assessment order. All the aforesaid shares were duly reflected in the balance sheet for the year 1999-00 and relied on the order of ld. CIT(A).

We have heard rival contentions and perused the materials available on record. From the aforesaid discussion we find that the assessee has claimed loss on the sale of 14 lacs shares of M/s Tribhuvan Properties Ltd but the AO disallowed the same on the ground that the shares were not reflected in the financial statements of the assessee in the earlier years though the assessee claimed to purchase these shares from Rampur International Ltd. in the financial year 1998-99. The ld. DR drew our attention on the paper book filed & 608/Kol/09 A.Ys 03-04 & 99-00 ITO Wd-12(3) Kol. v. M/s Khaitan Polyfab Pvt.Ltd. Page 4 for the assessment year 1999-2000 where the necessary details for the purchase of the shares from Rampur International Limited, bank statement for the payment of the shares, balance sheet of the assessee, share certificates and confirmation from Tribhuban Properties Ltd were placed. From the submission, we find that all the transactions were duly accounted for in the books of accounts and reflected in the financial statements. However for the year financial years 1999-00 and 2000-01 the aforesaid 14 lacs shares were shown in the name of Ansuman infra Private Ltd by mistake and therefore such difference in the shares held by the assessee in Tribhuban Properties Ltd was arising. We find that this as clerical error and has no bearing in the income of the assessee. Accordingly in our considered view, the shares were genuinely purchased but wrongly recorded in the name of Ansuman infra Private Ltd in the books. Accordingly we have no hesitation in upholding the order of learned CIT(A). Hence this ground of appeal of the Revenue is dismissed.

The solitary issue raised by Revenue in this appeal is that ld. CIT(A) erred in deleting the addition made by AO for Rs.1.47 crores on account of undisclosed purchase of shares.

At the outset it was observed that the case was reopened u/s 148 of the Act on the information gathered during the assessment proceedings for the AY 2002-03 u/s 143(3) of the Act that 14 lacs shares of Tribhuvan Properties Pvt. Ltd. were sold by the assessee in the AY 2002-03 but their corresponding purchase were not disclosed for Rs. 1.47 crores in the earlier years. However the Ld. CIT(A) granted the relief to the assessee.

Before us the ld. AR filed a paper book having pages 1 to 23 and drew our attention on page 19 of the paper book where aforesaid shares were duly & 608/Kol/09 A.Ys 03-04 & 99-00 ITO Wd-12(3) Kol. v. M/s Khaitan Polyfab Pvt.Ltd. Page 5 disclosed in the schedule ‘C’ of the balance sheet. The bank statement is also placed on pages 8 to 12 of the paper book reflecting the payment from the disclosed bank account for the purchase of the shares. Accordingly we are inclined not to interfere in the order of ld. CIT(A). Hence this ground of appeal of Revenue is dismissed.