Income Tax Appellate Tribunal - Mumbai
Superstar Exports Private Limited, ... vs Assistant Commissioner Of Income Tax ... on 26 February, 2019
1 ITA No. 2290/Mum/2018 Superstar Exports Private Limited Assessment Year: 2014-15 आयकर अपीलीय अिधकरण "जी" ायपीठ मुंबई म ।
IN THE INCOME TAX APPELLATE TRIBUNAL "G" BENCH, MUMBAI माननीय ी सी. एन. साद, ाियक सद एवं माननीय ी मनोज कुमार अ वाल ,ले खा सद के सम ।
BEFORE HON'BLE SHRI C.N. PRASAD, JM AND HON'BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपील सं./ I.T.A. No.2290/Mum/2018 ( िनधा रण वष / Assessment Year: 2014-15) & Stay Application No. 534/Mum/2018 [Arising Out of I.T . A . No . 22 9 0/ M um /20 0 8 ] ( िनधा रण वष / Assessment Year: 2014-15) Superstar Exports Pvt. Ltd. Assistant Commissioner of J.K Somani Building, 2 n d Floor बनाम/ बनाम Income Tax- Circle - 2(3)(2) British Hotel Lane, Vs. Aaykar Bhawan, M.K.Road Fort, Mumbai - 400 001 Mumbai 400 020 ःथायीले खासं . /जीआइआरसं . /PAN/GIR No. AAICS-4642-M (अपीलाथ /Appellant) : (ू यथ / Respondent) Assessee by : Mr. Rajiv Khandelwal- Ld. AR Revenue by : Mr. B.B. Rajendra Prasad- Ld.CIT-DR सुनवाई क तार"ख/ : 10/12/2018 Date of Hearing घोषणा क तार"ख / : 26/02/2019 Date of Pronouncement आदे श / O R D E R Per Manoj Kumar Aggarwal (Accountant Member)
1. Aforesaid appeal by assessee for Assessment Year [AY] 2014-15 contest the order of Ld. Commissioner of Income-Tax (Appeals)-6, 2 ITA No. 2290/Mum/2018 Superstar Exports Private Limited Assessment Year: 2014-15 Appeal No. CIT(A)-6/IT-200/47/2016-17 Mumbai, [CIT(A)], dated 26/03/2018 on following sole ground of appeal: -
The Commissioner of Income Tax (Appeals) -6, Mumbai (hereinafter referred to as the CIT(A)) erred in upholding the action of the Assistant Commissioner of Income Tax, Circle - 2(3)(2), Mumbai (hereinafter referred to as the Assessing Officer) in disallowing the loss of Rs.11,87,26,561/- being loss under the head "capital gains" arising on account of sale of shares of SQL Star International Limited, being long-term capital asset on the ground that the transaction of sale of such shares is not genuine. The appellant contend that on the facts and in the circumstances of the case and in law, the CIT(A) ought not to have upheld the action of the Assessing Officer in not allowing the claim of loss under the head "Capital gains" on the sale of aforesaid shares inasmuch the loss in genuine and further, all the details as regards the sale of the aforesaid whereas have been furnished. The appellants further, contend that the CIT(A) ought not to have upheld not to have upheld the action of the Assessing Officer inasmuch as the CIT(A) has not correctly appreciated the facts of the case in its entirety and hence, the impugned disallowance requires to be deleted".
2.1 Facts in brief that the assessee being resident corporate assessee engaged in trading of shares, derivatives and commodities during the impugned AY was assessed in scrutiny assessment u/s 143(3) on 29/12/2016 by Ld. Assistant Commissioner of Income Tax, Circle 2(3)(2), Mumbai [AO] wherein the income of the assessee was determined at Rs.529.73 Lacs as against 'Nil' return e-filed by the assessee on 24/03/2015. The assessee has been denied the benefit of certain Long- Term Capital Loss [LTCL] of Rs.1187.26 Lacs stated to be incurred by the assessee during impugned AY, which is the sole subject matter of present appeal before us.
2.2 During assessment proceedings, it transpired that the assessee, being promoter of a Bombay Stock Exchange [BSE] Listed Public Company namely SQL Star International Ltd. [SQL], held 12.21% of the total shareholding in that entity. The company was suspended from BSE 3 ITA No. 2290/Mum/2018 Superstar Exports Private Limited Assessment Year: 2014-15 for violation of listing agreement. After suspension of the shares from BSE, the assessee claimed to have sold 16.50 Lacs shares on 31/03/2014 in an off-market transaction to an individual namely Shri Parag Dharamshi Sheth for a total sale consideration of Rs.24.75 lakhs, computed @ Rs.1/50 per share. The net Long-Term Capital Loss [LTCL] after allowing indexed cost of acquisition worked out to Rs.1187.26 Lacs, the set-off of which was claimed against Long-Term Capital Gain of Rs.529.73 Lacs earned by the assessee during impugned AY. Accordingly, the assessee was asked to furnish the supporting documentary evidences in order to prove the genuineness of the transactions.
2.3 The assessee submitted that SQL was delisted from BSE and it was loss-making company and therefore, the shares were sold at discounted price in an off-market transaction since there was no purchaser of these shares in the market. However, in the absence of requisite documentary evidences and noticing that the payment of the shares was not received by the assessee during impugned AY, Ld. AO treated the same as fabricated and sham transaction & disallowed the LTCL as claimed by the assessee.
3.1 Aggrieved, the assessee contested the same without any success before Ld. CIT(A) vide impugned order dated 26/03/2018 and submitted additional documentary evidences in terms of Rule-46A to substantiate the stated transaction. These evidences were in the shape of sale note dated 15/03/2014, copy of delivery instruction slip for transfer of stated shares, copy of ledger confirmation from purchaser of the shares i.e. Sh.Parag Dharamshi Sheth and Copy of demat account of the purchaser 4 ITA No. 2290/Mum/2018 Superstar Exports Private Limited Assessment Year: 2014-15 to evidence transfer of shares. Accordingly, a remand report was called against the same from Ld. AO, the relevant findings of which has been extracted on page numbers 4 & 5 of the impugned order. The Ld. AO doubted the delivery instruction slip submitted by the assessee and opined that Sale Note was not conclusive to determine the genuineness of the transaction and further, the assessee could not explain non-filling of ledger confirmation dated 04/04/2014 during assessment proceedings, although the same was filed during appellate proceedings. The doubts were raised as to completeness of the transactions. The fact that the assessee failed to produce the purchaser Shri Shah along with relevant documents to confirm the transaction was also noted. 3.2 The assessee agitated the remand report, inter-alia, on the ground that transaction was an off-market transaction without involvement of any broker / stock exchange and the same was duly supported by two delivery instruction slips and sale note dated 15/03/2014 which has been accepted by the purchaser. The attention was drawn to the demat statement to substantiate the delivery of shares. It was also contended that another similar off-market transaction which generated gains for the assessee during impugned AY was accepted by Ld. AO and therefore, the contrasting stand on the part of Ld. AO was not justified. 3.3 After due consideration of remand report, assessee's rebuttal and factual matrix, Ld. CIT(A) noted that sale consideration was not received by the assessee despite lapse of considerable period of time and further the assessee has not supported the sale consideration with any valuation report and therefore, upheld the stand of Ld. AO, against which the assessee is in further appeal before us.
5 ITA No. 2290/Mum/2018Superstar Exports Private Limited Assessment Year: 2014-15
4. The Ld. Authorized Representative for Assessee [AR], Sh. Rajiv Khandelwal, drawing our attention to the documents placed in the paper- book submitted that transaction was supported by requisite documentary evidences viz. delivery instruction slips, sale note, ledger confirmation, demat account statement of the assessee as well as transferee etc. which proves that the shares in question were actually transacted as well as delivered pursuant to sale note. It was submitted that sale had taken place during impugned AY and sale constitute transfer in terms of Section 2(47) of the Income Tax Act regardless of fact that there was no immediate exchange of sale consideration between respective parties. It has further been submitted that once transfer of capital asset took place in the impugned AY, capital gains / loss arose to the assessee which were chargeable to tax in that AY in terms of Section 48 of the Act. In other words, it was the submissions of Ld. AR that capital gains were to be computed irrespective of the fact whether the sale consideration was received or merely accrued to the assessee in the impugned AY. The attention is also drawn to the fact that sale consideration has finally been received by the assessee on 28/06/2018 from an entity namely Excel Corporate Services Pvt. Ltd. acting on behalf of the purchaser which would dispel the doubts raised by the revenue as to genuineness of the transactions. Per Contra, Ld. CIT-DR submitted that corroborative evidences furnished by the assessee were inadequate which do not inspire confidence to treat the transactions as genuine transaction and therefore, the stand of first appellate authority was justified. 5.1 We have carefully heard the rival contentions and perused the relevant material available on record including documents placed in the 6 ITA No. 2290/Mum/2018 Superstar Exports Private Limited Assessment Year: 2014-15 paper-book. The undisputed position that emerges is that the assessee, holding substantial shareholdings in SQL, is stated to have sold certain number of shares of that entity in off-market transactions to a purchaser during impugned AY which has given rise to Long Term Capital Loss in the hands of the assessee. In support of the transaction, the assessee has placed on record sale note dated 15/03/2014, two delivery instruction slips in support of transfer of shares totaling to 16.50 Lacs number of shares, demat statement of the assessee as well as purchaser evidencing purchase of shares and ledger confirmation from the purchaser. Upon careful perusal of the same, we find that the assessee is stated to have sold these shares to Shri Parag Dharamshi Shah for a sale consideration of Rs.24.75 Lacs vide sale note dated 15/03/2014. Consequently, the assessee has issued two delivery instruction slip numbers 356586 & 356587 both dated 31/03/2014 for 12.50 Lacs & 4 Lacs number of shares respectively, directing its depository participants namely Systematix Shares & Stocks (I) Ltd. to transfer the shares to the purchaser. The assessee's demat statement with respect to its shareholding, as placed on page number-24 in the paper-book reveal that these shares have actually been debited / transferred from assessee's account on 31/03/2014 and the same has duly been credited on the same date to the account of the purchaser Client Id 21316474 held with Stock Holding Corporation of India Ltd. The ledger confirmation evidencing the transaction has been placed on page number-30 of the paper-book which has been confirmed by the purchaser on 04/04/2014. The amount of Rs.24.75 Lacs receivable from purchaser is reflected by the assessee in its Balance Sheet for impugned 7 ITA No. 2290/Mum/2018 Superstar Exports Private Limited Assessment Year: 2014-15 AY under the head other receivable and the books of accounts have duly been audited under law. The aforesaid sequential events lead us to form an opinion that the ownership of the share was, in fact, transferred by the assessee during impugned AY itself and the sale transaction was duly recognized by the assessee as well as the purchaser. The revenue has doubted the transaction primarily on the ground that the sale consideration was not received by the assessee during impugned AY and therefore, the transaction was merely a sham transaction. However, nothing on record suggest the same. It is trite law that addition could not be made merely on the basis of suspicion, conjectures or surmises without bringing on record any adverse material against the assessee to rebut the assessee's documentary evidences.
5.2 As per charging Section 48, the income chargeable under the head Capital Gains is to be computed by deducting from the full value of consideration received or accruing as a result of transfer of the capital asset. The term transfer as defined in Section 2(47) would include the sale, exchange or relinquishment of the asset. Since, in the present case, we have already concluded that the sale took place in the impugned AY itself, the impugned transaction, in terms of charging Section 48, were chargeable to tax in impugned AY only irrespective of the fact that sale consideration was actually received by the assessee or merely accrued to the assessee in impugned AY. The chargeability of the capital gains, in our opinion, was not dependent upon factum of actual receipt of sale consideration by the assessee and therefore, the stand of lower authorities, in this regard, could not be sustained.
8 ITA No. 2290/Mum/2018Superstar Exports Private Limited Assessment Year: 2014-15 5.3 So far as the valuation of shares is concerned, it is notable that the SQL was a listed entity whose trading was suspended from BSE during the month of December, 2013 when the last traded price of the Share was Rs.1.08 per share. It is also undisputed fact that the said entity was loss making entity and there was no ready buyer of its share upon its suspension from trading on stock exchange. The price of listed shares, in our opinion, are governed more by demand-supply factors and therefore, the sale consideration could not be rejected by revenue merely by suspecting the same without bringing on record any material to corroborate the fact that the price of the shares at relevant time was on the higher side.
5.4 Keeping in view the above facts and circumstances, we are of the considered opinion that the stand of first appellate authority in rejecting the assessee's Long Term Capital Loss could not be sustained. We order so. The appeal stands allowed.
SA No. 534/Mum/2018:
6. Since we have decided the assessee's quantum appeal against which this stay application has been filed, the application becomes infructuous and therefore, stand dismissed in limine. Conclusion
7. The quantum appeal stands allowed whereas stay application stand dismissed.
Order pronounced in the open court on 26th February, 2019.
Sd/- Sd/-
(C.N. Prasad) (Manoj Kumar Aggarwal)
ाियक सद / Judicial Member लेखा सद / Accountant Member 9 ITA No. 2290/Mum/2018 Superstar Exports Private Limited Assessment Year: 2014-15 मुंबई Mumbai; िदनां क Dated : 26/02/2019 Sr. PS - Thirumalesh / Sr.PS :- Jaisy Varghese आदे शकी ितिलिपअ ेिषत/Copy of the Order forwarded to :
1. अपीलाथ"/ The Appellant
2. #थ"/ The Respondent
3. आयकरआयु%(अपील) / The CIT(A)
4. आयकरआयु%/ CIT- concerned
5. िवभागीय ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai
6. गाड, फाईल / Guard File आदे शानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकरअपीलीयअिधकरण, मुंबई / ITAT, Mumbai.