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Income Tax Appellate Tribunal, DIVISION BENCH ‘B’, CHANDIGARH
Before: SHRI SANJAY GARG & DR. B.R.R. KUMAR
IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH ‘B’, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA No1138/Chd/2016 Assessment Year: 2010-11
The ITO Vs. Sh. Pardeep Aggarwal Ward-2(2) Vill No. 7, Country House Ludhiana Ludhiana
PAN No. ADGPA3453N (Appellant) (Respondent) Assessee By : Sh. Sudhir Sehgal Revenue By : Sh. Manjit Singh
Date of hearing : 02/05/2018 Date of Pronouncement : 09/05/2018
ORDER PER DR. B.R.R. KUMAR, A.M:
The present appeal has been filed by the Revenue against the order of the Ld. CIT(A)-1, Ludhiana dt. 24/08/2016. 2. In the present appeal Revenue has raised the following grounds: 1. Whether upon facts and circumstances of the case, the Ld. CIT(A) justified in reversing the action of Assessing Officer for treated the investment in 36000 shares of Rs.100/- each of BND Neopolymers Pvt. Ltd., amounting to Rs. 36,00,000/- made during the F.Y. 2009-10 as Unexplained Investment as the same has not been reflected in closing stock? 2. Whether upon facts and circumstances of the case, the Ld. CIT(A) justified in reversing the action of Assessing Officer for treated the purchase of shares of BND Neopolymers Pvt. Ltd. in the F.Y. 2009-10 as the same has not been reflected in the Capital Account and Balance Sheet of the assessee?
That the order of the Ld. CIT(A) be set aside and that of the Assessing Officer be restored.
The A.O found that the assessee has claimed LTCG on sale of shares during the A.Y. 2011-12. Those shares have been purchased in the A.Y. 2010- 11(current A.Y.). The Assessing Officer made addition of the amount equivalent to the purchase of shares under section 68 as the amount has not been reflected in the balance sheet of the assessee.
The Ld. CIT(A) has deleted the addition on the grounds that the assessee is an individual and not required to maintain a balance sheet. The Ld. CIT(A) further agreed to the contention that the purchase of shares have been made out of withdrawals from the capital account, and the capital has been decreased to the extent of withdrawals. Further, it was brought before the Ld. CIT(A) that the issue of sale of such shares and consequent earning of capital gains has travelled up to the Tribunal level wherein it was held that shares were actually purchased by the assessee and the addition made on account of LTCG was deleted. 5. The coordinate Bench of ITAT Chandigarh decided the issue in favour of the appellant and dismissed the appeal of the Department vide its order in ITA no. 407/CHD/2015 for AY 2011-12, in the appellant’s case, Vide order dated 11.09.2016 by holding as under regarding the disallowance of exemption claimed u/s 10(38) of the Act-
"We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. On perusal of the order of the learned CIT (Appeals), we do not find any infirmity in the same. This kind of transaction involve two aspects i.e. purchase of shares and sale of shares. The contention of the assessee was that the shares were purchased in the preceding assessment year through cash. For this, the cash flow statement was filed by the assessee and enquiries were conducted by the Assessing Officer from Kolkatta Stock Exchange, wherein the shares of the amalgamating 15 company were listed. The confirmation from Kolkatta Stock Exchange as well as the confirmation made by the brokers through whom the shares were purchased by the assessee are on record, which are in fact culmination of the enquiries initiated by the Assessing Officer himself. No material has been brought on record by the Assessing Officer to arrive at the fact that these confirmations received from Stock Exchange or made by the brokers in their statements were not proved. In such circumstances, we cannot just by indulging in surmises brush aside these evidences on record. As regards the cash flow statement, from the perusal of the assessment order, we could not find any finding or fact recorded by the Assessing Officer, which proves that such cash flow statement is not correct. Regarding maintainability of two Balance Sheets, the same was explained by the assessee during the assessment proceedings. We are in agreement with the submission of the assessee that the assessee being an individual, he may not be maintaining personal books of account and investments were routed through his capital account. Therefore, the same were subtracted from his capital account from the Balance Sheet belonging to his property business. The assessee has duly filed his return for earlier assessment year together with Balance Sheet. In view of all these evidences, we cannot deny that the shares were actually purchased by the assessee in the earlier assessment year. Another contention raised by the Assessing Officer in his Remand Report was with respect 16 to the date of bill and date of share transfer being 4.8.2009 and 19.10.2009 respectively. We do not find this fact having any relevance to the issue in question. Since it may be the case that the transfer of shares may require some time to execute due to some procedural difficulties. The Assessing Officer has also cast aspersions on the assessee as to how the amount of Rs.2,89,43,382/- was transferred to the persons from whom the shares were purchased from Ludhiana to Kolkatta. We do not find this fact to be of any importance. The fact that all other evidences point to the fact that actually purchases were made. It is none of Assessing Officer's concern as to how the cash was transferred. 16. The Assessing Officer has also doubted the genuineness of the company. The shares
purchased were of the company BND Limited, which later got amalgamated with M/s Vindus Holding Limited. The amalgamation has been executed by the order of the High Court. The copy of the High Court's order is on record. In these circumstances how the genuineness of the company can be doubted. We do not understand. The company M/s Vindus Holding Limited is a company listed in the Kolkatta Stock Exchange and the statements of the directors of this company were recorded by the Assessing Officer in Kolkatta, whereby they had confirmed the transactions of sale of share made by the assessee. The 17 company which is listed in a recognized Stock Exchange, the identity of such a company cannot be doubted. 17. With respect to the sale aspect of this transaction, as stated hereinabove in the statements of the brokers of the company, they have confirmed the transaction of sale. The company whose shares were sold is a company listed in Kolkatta Stock Exchange being a recognized Stock Exchange. The evidences in the form of contract note, bank account, Demat account, etc. were filed before the Assessing Officer, which have nowhere been doubted by the Assessing Officer, neither in his assessment order, nor any of the Remand Reports furnished by him. The brokers through whom sale was made had also confirmed the sale of shares. The Assessing Officer has made the detailed exercise by analyzing the persons who have purchased the shares from the assessee and in view of the fact that these persons have not shown the investments in their Balance Sheets, the adverse view has been taken by him. As we understand that any transaction relating to sale or purchase of shares through a Stock Exchange is done through a broker registered in Stock Exchange. The transaction is between the seller and the broker. The seller never knows on whose behalf the broker is purchasing the shares. A broker purchases number of shares of a particular company from the Stock Exchange as per the demand made by his clients on their behalf, 18 similarly he sells the shares of that very company to various persons through Stock Exchange as per their requirements. There is no one to one contact between the seller and purchaser of the shares. In such circumstances, we do not find any relevance of any adverse fact with regard to the purchaser of shares in the present scenario. Therefore, no adverse inference can be drawn in view of the fact that the buyers of the shares were not genuine. 18. The fact that the market price of the shares of this company were statistic for a longer period, cannot be of any substance since market price of any share of any company is a result of number of factors which cannot be generalized as done by the Assessing Officer. There may be a number of companies whose price remains stable for a longer period. This fact cannot put the genuineness of the company in question. In our view, this is also not a relevant fact with regard to present controversy. The company is a one listed in the recognized Stock Exchange. In this case the prices of shares of the company are being taken care of by the SEBI only. There is no finding of fact on record that the shares were sold at a price other than the one quoted in the Stock Exchange on the said date. 19. There is another aspect of this case that the assessee has sold shares at Rs.2,89,43,383/-, the cost of 19 acquisition of which was Rs.21,87,675/-. The Long Term Capital Gain arising on the said transaction was Rs.2,67,55,708/-, which was shown by the assessee in his computation of income and was claimed as exempt under section 10(38) of the Act. The Assessing Officer has made the addition of Rs.2,67,55,708/- stating the same to be added under section 68 of the Act. We do not find this action of the Assessing Officer to be as per law. Section 68 of the Act provides for addition of any amount appearing to be credited to the assessee in his books of account during the year in case the Assessing Officer is not satisfied as to the genuineness of the same. The credit appearing in assessee's account is an amount of Rs.2,89,43,383/- by disallowing the exemption under section 10(38) of the Act at Rs.2,67,55,708/- claimed by the assessee. The Assessing Officer is not justified in invoking the provisions of section 68 of the Act. This also amounts to double taxation or double addition of the income in view of the fact that the same amount has actually been shown by the assessee as his income in his computation of income though the same has also been claimed as exempt under section 10(38) of the Act. In view of the above, the action of the learned CIT (Appeals) in deleting the addition is justified and is hereby upheld. 20. Before concluding the issue, we would like to deal with two more contentions of the Department in the grounds of appeal raised in the present appeal. Fi rstly, 20 there is a mention of applying the test of human probabilities as propounded in the judgments of the Hon'ble Supreme Court in the case of Durga Prasad More
(1971) 82 ITR 540 and Sumati Dayal Vs. CIT (1985) 214 ITR 801. We are aware of the proposition laid down by the Hon'ble Supreme Court and we humbly bow down before the same. However, in the facts and circumstances of the present case in the face of numerous documentary evidences crying for bonafide of the assessee as against only suspicion and surmises in favour of the Department, we do not hesitate to hold that the proposition laid down by the Hon'ble Supreme Court is not applicable in the present case. Even the Assessing Officer has not been able to bring on record any adverse material, on his own investigations, the results have been in favour of the assessee. Suspicion, howsoever strong, cannot take part of the documentary evidences. Second contention of the Department with respect to the prices being manipulated and later on the company delisted from the Stock Exchange, we want to add that the company was very much in existence at the time of transaction and whatever happen later on is of no relevance. The grounds of appeal raised by the Revenue are dismissed. "
Ld. CIT(A) quoting the above order held as under :
“In view of the above order of the Hon'ble ITAT in the appellant’s own case for A.Y 2011-12 wherein it has been held that the Assessing Officer has not doubted the cash flow statement produced by the appellant and that the shares have been actually purchased during the A.Y under consideration, it cannot be helped that the investment in the shares is not from regular sources of the appellant. The case of the appellant is covered by the findings of the Hon'ble ITAT for A.Y 2011-12. The said addition made u/s 69 of the act is therefore not justified and is hereby ordered to be deleted. These grounds of appeal are allowed.”
The Ld. DR relied on the order of the Assessing Officer whereas the Ld. AR relied on the earlier orders of the ITAT Chandigarh as quoted above and also on the order of the Ld. CIT(A).
Based on the facts, we find that since the sale and purchase of shares stands examined and adjudicated while dealing with the case for the A.Y. 2011- 12, having accepted the proceeds of sale of shares as genuine, the purchase of shares cannot be held to be unexplained investment. Hence we decline to interfere in the order of the Ld. CIT(A) on this issue.
In the result, the appeal of the Revenue is dismissed. Order pronounced in the open Court.
Sd/- Sd/- (SANJAY GARG) (DR. B.R.R. KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 09/05/2018 AG
Copy to: 1. The Appellant, 2. The Respondent, 3. The CIT, 4. The CIT(A), 5.The DR