Income Tax Appellate Tribunal - Delhi
Subhash Chander Gupta, New Delhi vs Department Of Income Tax on 20 February, 2015
1
ITA 4091/Del/2011
ACIT Vs. Subhash Chander Gupta
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "F" NEW DELHI
BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER
AND
SHRI H.S. SIDHU: JUDICIAL MEMBER
ITA no. 4091/Del/2011
A.Y. 2008-09
ACIT, Circle 25(1), Vs. Subhash Chander Gupta,
New Delhi. 145, Bhera Enclave,
Paschim Vihar, New Delhi.
PAN: AEIPG 1546 B
( Appellant ) ( Respondent )
Appellant by : Shri Vikram Sahay Sr. DR
Respondent by : Shri Sandeep Sapra Adv.
Date of hearing : 06-01-2015
Date of order : 20-02-2015.
ORDER
PER S.V. MEHROTRA, A.M:-
This appeal, preferred by the department, is directed against the order dated 29-06-2011, passed by the CIT(Appeals), XXIV, New Delhi, in appeal no. 326/10-11, relating to A.Y. 2008-09.
2. Brief facts are that the assessee- individual, filed his return of income, declaring total income at Rs. 1,57,06,840/-, which comprised of income from salary, house property, capital gains and income from other sources. The AO has observed that there was AIR information pertaining to the share transactions aggregating to Rs. 3,08,78,420/- and expenditure 2 ITA 4091/Del/2011 ACIT Vs. Subhash Chander Gupta incurred at hotel amounting to Rs. 4,06,018/- by the assessee during the year under consideration. The AO show caused the assessee to explain as to why keeping in view the large volumes of sale & purchases of shares the short term capital gains, claimed by the assessee, be not treated as business income. The assessee's reply has been reproduced in the assessment order, wherein he, inter alia, submitted that the assessee's intention was to hold the shares but the condition of the stock market was such that he liquidated his investment. The main contention of assessee was that the shares were held as investment in Demat account. In support of his claim, the assessee had furnished details of shares transacted along with contract note, broker account, Demat Account to demonstrate that he had traded in shares on actual delivery basis on which security transaction tax had been paid. It was clarified that the income received on intraday transaction had been shown as income from other sources by treating the same as speculative transaction, because the delivery had not been taken. The AO, however, pointed out that the capital gains disclosed by the assessee included gain of Rs. 1,24,44,090/- on sale of 25000 shares of Lanco Infratech Ltd. and gain of Rs. 24,09,217/- on shares of six other companies. He further pointed out that on perusal of Demat account of the assessee with M/s Crimson Financial Ltd., there was a transaction dated 26-12-2007, referred as OF-CR TO 133524 TX 545538 1203590000000020, whereby 25000 shares of Lanco Infratech Ltd. were credited to the account of the assessee, whereas in the computation of income, the assessee had shown that these shares were purchased by him on 30-8-2007. He, therefore, required M/s Crimson Financial Ltd. to furnish information u/s 133(6). The reply received from M/s Crimson Financial Ltd. has also been reproduced in the assessment order.
3ITA 4091/Del/2011 ACIT Vs. Subhash Chander Gupta 2.1. The AO, after considering the said reply, sought information U/s 133(6) regarding transfer of shares of M/s Lanco Infratech Ltd. from TCG Stock Broking Ltd. The AO also issued summons u/s 131 to the principal officer of the said company and the reply filed by them has also been reproduced.
2.2. The reply received from TCG Stock Broking Ltd. has been reproduced at pages 6 & 7 of the assessment order.
2.3. From the aforementioned reply the AO observed that the shares had been bought by TCG Stock Broking Ltd. through the main broker to M/s Crimson Financial Services Ltd. on 30-8-2007. The contract notes had been issued by the broker in the name of TCG Stock Broking Ltd.. These shares were lying in the D-mat account of TCG Stock Broking Ltd. till 26-12-2007, on which date they were transferred to assessee's D-mat account and sold by him on the same day. The AO, therefore, was not convinced with the assessee's submissions that the shares were purchased by him on 30-8-2007. He, therefore, required the Principal Officer of TCG Stock Broking Ltd. to furnish further information, as has been mentioned in para 12 of AO's order. The reply received from TCG Stock Broking Ltd. has been reproduced in para 13 and after considering the same and after recording the statement of Principal Officer of TCG Stock Broking Ltd. Mr. A.K. Garg, Director of the company, the relevant portion of which has been reproduced in the assessment order, the AO concluded that the assessee failed to substantiate that 25000 shares of M/s Lanco Infratech Ltd. were bought by him at any 4 ITA 4091/Del/2011 ACIT Vs. Subhash Chander Gupta time before 26-10-2007, inter alia, for the reason that there was no customer agreement between TCG Stock Broking Ltd. and the assessee during financial year 2007-08. There was no tripartite agreement between M/s TCG Stock Broking Ltd., Mr. Subhash Chander Gupta and the main broker M/s Crimsons Financial Services Ltd., specifying the scope of rights and obligation of the sub broker, broker and such clients of such broker as mandatorily required under the stock broker and sub broker and sub brokers regulations 1992 of SEBI.
2.4. The AO did not accept the assessee's contention that the shares were held as investment and held that this transaction was an adventure in the nature of trade. He, accordingly, treated the short term capital gain as income from business.
2.5. Ld. CIT(A) allowed the assessee's appeal in view of the decision of Hon'ble Jurisdictional high Court in the case of CIT Vs. Rohit Anand 327 ITR 445, after taking into consideration the statement of Principal Officer of TCG Stock Broking Ltd. Mr. A.K. Garg, who categorically stated on oath that the assessee had purchased the said shares of M/s Lanco Infratech Ltd. on 30-08-2007 and the said shares remained in the D-mat account of M/s TCG Stock Broking Ltd. till 26-12-2007. He further observed as under:
"Having recorded the statement of Shri A.K. Garg under oath and having collected all the material from M/s TCG Stock Broking Ltd. and M/s Crimson Financial services Ltd. u/s 133(6) of the Act, which went on to prove the contention of the appellant that he had purchased the said shares on 30-08-2007 and got it transferred to his d-mat account on 26-12-2007, and 5 ITA 4091/Del/2011 ACIT Vs. Subhash Chander Gupta sold them on the same date, the onus was now on the Assessing Officer to prove otherwise. It was, incumbent upon the AO to prove conclusively that the whole transaction was a sham. However, the AO has failed to do so and has merely pointed out that the shares were transferred to the d-mat account of the appellant on 26-12-2007 and, therefore, she has presumed that they were purchased on the same date and were sold on the same date also. This, thus, became the only basis of her conclusion that the transaction should be treated as a business transaction."
3. Ld. DR relied on the order of AO and submitted that shares were not purchased on 30-8-2007 but on 26-12-2007 and sold on the same date. Therefore, this was definitely an adventure in the nature of trade. He submitted that assessee was in footwear business and out of twenty, nineteen transactions were accepted by AO and only this very transaction of sale of 25000 shares of M/s Lanco Infratech Ltd. was considered as an adventure in the nature of trade.
3.1. Ld. DR referred to page 9 of the assessment order, wherein portions of statement of A.K. Garg, Principal Officer of M/s Lanco Infratech Ltd. is contained and referred to question no. 10 and answer thereon, which is reproduced hereunder:
Q. 10. What was the mode of payment received by you? Was any advance or margin money paid to you by Subhash Chand Gupta?
Ans. 10. No advance or margin money was received however my company & Subhash Chand Gupta both have declaring with Crimsons Financial Services Ltd., which is the main broker of NSE? The payment for the shares purchased by Subhash Chand Gupta was received by us 4-09-2007 through transfer of the amount by journal entry from Crimsons Financial Services Ltd.6
ITA 4091/Del/2011 ACIT Vs. Subhash Chander Gupta 3.2. He further referred to question no. 14 and answer thereto, which is reproduced hereunder:
Q. 14. Why weren't these 25000 shares of Lanco (ITL) bought in the name of Subhash Chand Gupta as was communicated and directed to you by him? Kindly give a detail explanation.
Ans. 14. The shares were purchased by us in our code on behalf of and S.C.Gupta & delivered to Subhash Chand Gupta as per his instructions."
3.3. Ld. DR submitted that both these questions and answers thereto have to be read together from which it will be clear that the purchase of shares was not effected on 30-08-2007. He submitted that purchase of shares in hand of assessee can be taken on the date when it comes to his account.
3.4. As regards the reliance placed by ld. CIT(A) on the decision of Rohit Anand (supra). Ld. DR submitted that facts are entirely different in the said case.
3.5. Ld. DR submitted that department has also filed PB containing all the details relating to summons, information u/s 133(6) and other details.
4. Ld. counsel for the assessee submitted that purchase/ sales bill have not been denied by AO. There was no question of cross-examining Mr. A.K. Garg as all the answers were in assessee's favour. Ld. counsel referred to pages 21 to 23, wherein the computation of income is contained and pointed out that AO accepted the long term capital gain returned by assessee. In regard to short term capital gain he accepted the assessee's claim with respect to six transactions but denied only in respect of M/s Lanco Infratech Ltd.
7ITA 4091/Del/2011 ACIT Vs. Subhash Chander Gupta 4.1. Ld. counsel pointed out that all transactions except M/s Lanco Infratech Ltd. was through M/s Crimson Financial services Ltd. and the transaction in regard to M/s Lanco Infratech Ltd. was through M/s TCG Stock Broking Ltd., who was sub- broker of M/s Crimson Financial services Ltd. He further submitted that these shares were acquired on assessee's behalf by M/s TCG Stock Broking Ltd., on 30- 08-2007 and these were held by assessee for maximum number of days out of all the other transactions. In case of rest of shares, the sale took place from one day to one month 11 days.
4.2. Ld. counsel for the assessee referred to pages 37 and 38 of PB wherein statement of account from 1-4-2007 to 31-3-2008 of assessee in the books of M/s TCG Stock Broking Ltd., is contained, to demonstrate that on 30-08-2007 in assessee's account, M/s TCG Stock Broking Ltd., had purchased 25000 shares. Ld. counsel further referred to pages 47 to 71, wherein the assessee's account in the books of M/s Crimson Financial services Ltd. is contained to demonstrate that a sum of Rs. 74,83,706.44 was debited to assessee's account on the basis of Journal entry in the books of M/s TCG Stock Broking Ltd.
4.3. Ld. counsel refeferred to page 56 of department's PB, wherein also the statement of assessee's account in the books of M/s Crimson Financial services Ltd. is contained, which also shows the same entry. He further referred to pages 70 to 76 of the PB to demonstrate that M/s Lanco Infratech Ltd. shares were transferred to assessee's D-mat account on 26-12-2007 from M/s TCG Stock Broking Ltd. He submitted that assessee had running account with M/s Crimson Financial services Ltd.
8ITA 4091/Del/2011 ACIT Vs. Subhash Chander Gupta 4.4. Ld. counsel further referred to pages 39 to 44 of assessee's PB to demonstrate that M/s TCG Stock Broking Ltd. had issued purchase bills to assessee on 30-8-2007. Ld. counsel submitted that all these documents clearly establish that the shares were purchased by assessee on 30-08-2007. He further pointed out that sale bills issued by M/s Crimson Financial services Ltd. dated 26- 12-2007 are contained from pages 72 to 95 of the PB. He further referred to page 94 of the PB to demonstrate that assessee had paid STT charges of Rs. 24856/-. Ld. counsel submitted that these documents have not been controverted by the department. He further referred to pages 101 to 105 of the PB, wherein the statement of Shri A.K. Garg is contained, who categorically confirmed the purchase of shares on assessee's behalf on 30-08-2007.
4.5. Ld. counsel further referred to pages 107 to 108 of the PB, wherein the reply to notice u/s 133(6) of M/s Crimson Financial services Ltd. dated 26-8-2010, is contained, in which, inter alia, it is confirmed that 25000 shares of M/s Lanco Infratech Ltd. had been transferred to the D-mat A/c of Subhash Chand Gupta from M/s TCG Stock Broking Ltd. He, therefore, submitted that assessee had discharged the primary onus that lay upon him and, therefore, ld. CIT(A) rightly concluded that impugned shares were held by assessee as its investment and were taxable as short term capital gain on its transfer.
5. We have considered the rival contentions and have perused the entire material available on record. The evidence on record have been relied upon by assessee for establishing that the shares were purchased on 30-08-2007 by M/s TCG Stock Broking Ltd. on assessee's behalf, has not at all been controverted by the department. It is a simple case of purchase of shares by an individual through 9 ITA 4091/Del/2011 ACIT Vs. Subhash Chander Gupta broker, who held the shares in its D-mat A/c till the transfer of the shares in D-mat account on the date when the assessee intended to sell the same. The broker was holding shares on behalf of assessee because consideration was paid by assessee through journal entry in the running a/c of assessee with broker. It is a normal share trading transaction in support of which all the ingredients regarding purchase and sales were fully established by the assessee. Merely because the shares were kept in the brokers code from 30-8-2007 till 26-12-2007, on which date the shares were transferred to assessee's d-mat account with main broker, cannot be the basis for coming to the conclusion that the actual purchase took place on 26-12-2007 by assessee. In the books of account of sub-broker, the purchase was recorded in assessee's account on 30-8-2007 and the shares were D-mated in assessee's account by principal broker on 26-12-2007 from the sub-broker's account clearly demonstrate that the assessee had purchased shares on 30-8-2007, which were held on assessee's behalf by M/s TCG Stock Broking Ltd. The sole reason assigned by AO for coming to the conclusion that the shares were held as stock in trade was that the shares were transferred on the same date on which it was purchased. This finding is completely erroneous on the face of it in the back drop of evidence brought on record. We accordingly, confirm the order of CIT(A).
6. In the result, revenue's appeal is dismissed.
Order pronounced in open court on 20-02-2015.
Sd/- Sd/-
(H.S. SIDHU ) ( S.V. MEHROTRA )
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 20-02-2015.
MP: Copy to :
1. Assessee
2. AO
3. CIT
4. CIT(A)
5. DR