Income Tax Appellate Tribunal - Mumbai
Nitesh Shahra, Mumbai vs Dcit 12(2), Mumbai on 16 March, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL " B ", BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI RAM LAL NEGI, JM SA No.192/Mum/2018 (Arising out of ITA No.624/Mum/2017) (Assessment Year 2010-11) Shri Nitesh Shahra Vs. DCIT - 12(2), Now 17(2) Flat No.102, 1st Floor Mumbai 10A Sharda Building Churchgate, Mumbai - 400 020 PAN/GIR No. ABJPS2642E Appellant) .. Respondent) Assessee by Shri Madhur Agarwal Revenue by Shri Saurabh Kumar Rai Date of Hearing 16/03/2018 Date of Pronouncement 16/03/2018 आदे श / O R D E R PER R.C.SHARMA (A.M):
This stay application arose out of ITA No.624/Mum/2017.
2. Through this stay application, assessee has requested for stay of outstanding demand.
3. It was contended by learned AR that the assessee had purchased 10,000 shares of RIL, a public company on 18th May 1992 at a face value of Rs. 10 each. After a series of right issues, stock splits and bonus shares awarded, the assessee held 48 lakh shares of face value of Re. 1 each during the year under consideration. The assessee sold it's entire 2 SA No.192/Mum/2018 Shri Nitesh Shahra stake in RIL in July and August 2009 and purchased share warrants of RSIL.
4. The AO declined assessee's claim of long term capital gain by observing that there was voluminous growth in volume and price of the shares of RIL which carried out by the assessee's group concerns from June 2009 onwards due to which the assessee made huge profits. A share of RIL costing the assessee Rs.0.14 had been sold within the range of Rs.30.88 to Rs. 39.76 and the proceeds immediately invested in RSIL, a company in which the assessee was a promoter. The AO further alleged that heavy trading in the shares of RIL by the assessee's group concerns had jacked up the price of the shares of RIL on sale of which the assessee had earned a profit of Rs. 17.47 crore on a meagre investment of Rs. 6.50 lac. Hence, the huge profit earned by the assessee was as a result of price manipulation in the stock exchange carried out by the assessee's group concerns. Thus, the AO held that the gain received on sale of RIL shares could not be termed as gain on sale of investment but was a profit earned out of an activity which was an adventure in the nature of trade.
5. In reply to the above the learned AR submitted that the assessee had sold 48 lac shares of RIL through broker's in the stock exchange with no knowledge of who the buyer of the shares was. The transaction of sale of shares was on a recognized stock exchange where the assessee could sell his investment at the best price he could fetch and the AO could not sit in the armchair of a businessman to determine the price at which the 3 SA No.192/Mum/2018 Shri Nitesh Shahra assessee should have sold these shares. The assessee had purchased shares of RIL in 1992 with duly supported documentary evidences including photocopy of bill and, hence, the purchase could not be doubted since the payments were made by demand draft with regular receipt of dividend income and subsequent rights and bonus allotment by the company. As per learned AR the AO, in holding that income received from sale of shares of RIL is Business Income, has lost sight of the fact that RIL is a public company whose shares are freely traded on the stock exchange.
6. In view of the above, it was argued that assessee has good primafacie case and that assessee has already paid a sum of Rs. 54,34,126/-, therefore, stay should be granted for the balance amount.
7. On the other hand, learned DR strongly opposed the stay application and contended that merit can be seen only at the time of regular hearing of the case and requested that stay should be granted only after asking the assessee to pay part of the demand.
8. We have considered rival contentions and carefully gone through the stay application as well as orders of the lower authorities. We found that the assessee, being an individual shareholder has no control whatsoever over the prices of shares. It is not the case of the AO or CIT(A) that RIL or RSIL are bogus companies. They are fully functioning public companies and the assessee is the promoter of RSIL, heading the refinery operations in the country. However, without going much on the merit of the issue and considering the balance of convenience, we direct 4 SA No.192/Mum/2018 Shri Nitesh Shahra the assessee to pay a sum of Rs.50 lakhs before 31/03/2018. Appeal is fixed for hearing on 09/04/2018. Subject to payment of Rs.50 lakhs, stay is granted for a period of six months or till the disposal of appeal whichever is earlier.
9. In the result, stay is disposed of in terms indicated hereinabove.
Order pronounced in the open court on this 16/03/2018
Sd/- Sd/-
(RAM LAL NEGI) (R.C.SHARMA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai; Dated 16/03/2018
Karuna Sr.PS
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. The CIT(A), Mumbai.
4. CIT
DR, ITAT, Mumbai
5. BY ORDER,
6. Guard file.
सत्यापित प्रतत //True Copy//
(Asstt. Registrar)
ITAT, Mumbai