Income Tax Appellate Tribunal - Mumbai
Vipul C Shah, Mumbai vs Acit 15(2), Mumbai on 26 July, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL " G" BENCH, MUMBAI
BEFORE SRI MAHAVIR SINGH, JM AND SRI RAJESH KUMAR, AM
ITA No.5704 & 5705/Mum/2014
(A.Y:2009-10)
Shri Vipul C. Shah Asst. Commissioner of
Smt. Vaishali V Shah Income Tax-15(2)
15/7, Navjivan Society Matru Mandir, R No.113
Lamington Road, Vs. Tardeo, Mumbai -007
Mumbai-400 008
P AN No. AJFPS8772H
P AN No. AQPPS2 455Q
Appellant .. Respondent
ITA No.3440 & 3524/Mum/2014
(A.Y:2007-08)
Shri Vipul C. Shah Asst. Commissioner of
Shri. Vimal C Shah Income Tax-15(2)
15/7, Navjivan Society Matru Mandir, R No.113
Lamington Road, Vs. Tardeo, Mumbai -007
Mumbai-400 008
P AN No. AJFPS8772H
P AN No. AMWPS3500P
Appellant .. Respondent
Assessee by .. Dr. P Daniel, AR
Revenue by .. Shri K. Ravi Ramachandran, DR
Date of hearing .. 15-06-2017
Date of pronouncement .. 26-07-2017
ORDER
PER MAHAVIR SINGH, JM:
These Four appeals by the different assessee are arising out of the different orders of CIT(A)-26, Mumbai, in appeal No. CIT(A)-26/IT- 82,76,31&29/ACIT.15(2)(1)/11-12 & 09-10 dated 18-06-2014, 12-02-2014. The Assessment Orders were framed by the ACIT Circle-15(2), Mumbai for the A.Y. 2007-08 & 2009-10 vide orders dated 30-11-2011, 12-02- 2014, 20-11-2009 under section 143(3) of the Income Tax Act, 1961 (hereinafter 'the Act').
2. The only common issue in these four appeals of different assessee is as regards to the order of CIT(A) confirming the action of the AO in ITA Nos. 5704,5705,3440&3524/Mum/2014 AYs: 07 -08 & 09-10 treating the sale proceeds on shares as income from other sources as against disclosed by AO as capital gains. In all these appeal identical worded grounds are raised on the above issue.
The facts and circumstances are exactly identical in all the cases and hence, we will take the facts from ITA No. 3440/Mum/2014 in the case of Shri Vipul C Shah for the AY 2007-08.
3. Briefly stated facts are that the assessee is engaged in the business of assorting of diamonds and brokerage. The assessee has disclosed income from other sources being interest income and also disclosed short term capital gain on sale and purchase of shares and original assessment was completed under section 143(3) of the Act vide order dated 20-11-2009 wherein, the AO treated the profit arising out of sale and purchase of shares as income from speculative transactions being speculative trading income amounting to Rs. 93,19,053/-. The matter was carried to CIT(A), who deleted the additions and directed the AO to treat the profit arising out of sale and purchase of shares and short term capital gain. Aggrieved, Revenue carried the matter before Tribunal and Tribunal vide order dated 15-03-2013 in ITA No. 5645/Mum/2010 order dated 15-03-2013 set aside the matter back to the file of the CIT(A) with the direction to make enquiries from the main broker instead of sub- broker to gather the evidences whether the delivery is taken by main broker or not. The relevant direction in Para 5 of Tribunals order reads as under: -
"5. We have perused the records and considered the rival contentions carefully. The dispute is regarding nature of income from purchase and sale AY .07-08 of shares by the assessee who belonged to the same group. The assessee had purchased shares from the same sub-broker who in turn had purchased the shares from the main broker. The enquiry from the sub-broker revealed that it had not taken delivery on behalf of the Page 2 of 9 ITA Nos. 5704,5705,3440&3524/Mum/2014 AYs: 07 -08 & 09-10 assessee. The sub-broker had only stated that the shares remained with main broker as there were no instructions for the clients to take delivery. It was also submitted by sub- broker that it had not maintained any demat account of the clients. After considering the material on record, the AO observed that the income from share transaction had to be considered either as speculation or normal business income but since there was no evidence of delivery, the AO treated the income as speculation income. In appeal CIT(A) observed that sub-broker had stated that the shares remained with main broker and from this he concluded that delivery had been taken by the main broker which has to be considered as delivery by the assessee. CIT(A) also observed that there was no dispute that delivery had been taken by main broker. However we note that there is no evidence that the delivery had been taken by main broker. Since the issue of delivery was still in dispute we agree with the submission of ld. DR that finding of CIT(A) that there was no dispute of delivery was not correct. No enquiry has been made from the main broker confirming that it had taken delivery on behalf of the assessee. Moreover even if delivery had been taken CIT(A) was required to examine the other aspect as to whether income from share transaction could be considered as business income or not as AO clearly indicated as it could be considered as speculative income or normal business income. Details of share transactions placed in paper book reveal that shares have been sold after holding for a short period and in some cases there are repeated purchases and sale of shares in same Page 3 of 9 ITA Nos. 5704,5705,3440&3524/Mum/2014 AYs: 07 -08 & 09-10 scrips which apparently are not attributes of an investor. Considering the facts and circumstances of the case the matter requires fresh examination at the level of CIT(A). We, therefore set aside the order of CIT(A) and restore the matter to him for passing a fresh order after necessary examination in the light of the observations made above and after allowing opportunity of hearing to the assessee."
Before CIT(A), assessee produced the copy of ledger account of alliance intermediaries and network Pvt. Ltd to show the transactions carried out but even in second round the same was not examine despite specific direction from the Tribunal. And the CIT(A) confirmed the action of the AO by observing in Para 3.2.8 as under: -
"3.2.8 As per ITAT order in the case of appellant and the operative part reproduced in pam 3.1.2 of this order the appellant was to lead evidence in support of his claim that delivery of the was not in dispute and that the delivery was taken and given. Since no verifiable evidence in support of delivery has been produced and even the name and address of the main broker has not been given to facilitate the enquiry and also in view of the aforesaid orders of ITAT in the case of Mukesh Choksi group, it is hereby held that no genuine transaction in shares was ever done by the appellant and therefore the question of any delivery and evidence in support thereof does not arise. Therefore, though the AO in this case has assessed the income shown in bogus shares transaction as speculation income, the same is correctly assessable as 'Income from other sources' since the share transactions are bogus. The AO is directed to assess the same under the head "Income from other source"."Page 4 of 9
ITA Nos. 5704,5705,3440&3524/Mum/2014 AYs: 07 -08 & 09-10 Aggrieved, now assessee is in second appeal before us.
4. Before us, the learned Counsel for the assessee argued that the findings of the lower authorities that the share transaction entered with alliance intermediaries and network Pvt. Ltd. is purchase without payment and deliveries of shares were not taken by assessee is totally false and he drew our attention to the leger account wherein the payment made on various dates by cheques and similarly, depicted on various dates. The learned Counsel for the assessee also stated that the deliveries was taken by the broker but during the course of search on Mahasagar Securities Pvt. Ltd. and its associate concern Gold Star Finvest Pvt. Ltd etc., which are managed by Mukesh Choksi, who was examined under section 131 of the Act by the DDIT investigation unit 1(4) Mumbai on 11-12-2009, the assessee name was never mentioned in the statement and the transactions entered into by assessee with alliance intermediaries and Network Pvt. Ltd. was never under doubt. The learned Counsel for the assessee before us stated that in assessee's sister concern case i.e. Group Entity in the case of DCIT vs. Vipul C. Shah HUF was decided by this Tribunal exactly on identical facts in ITA No. 5223/Mum/2011 for AY 2007-08 order dated 06-10-2015, wherein Tribunal vide Para 2.3 has confirmed the transaction as genuine by observing as under: -
"2.3. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, the undisputed fact, oozing out from record, is that the assessee has dealt in script in Normal segment (N) and not derivative segment as was reflected from the bills and contracts of the assessee place before the Assessing Officer. The transactions are duly confirmed as per bills/ledger account with the sub-broker i.e. M/s Alliance Page 5 of 9 ITA Nos. 5704,5705,3440&3524/Mum/2014 AYs: 07 -08 & 09-10 Intermediates & Network Pvt. Ltd. and all the payments are duly recorded. The sub-broker duly confirmed that the delivery of shares were taken by the assessee in his demat account but remained with the sub-broker. Undisputedly, the delivery is through demat account. So far as, section 43(5) of the Act is concerned, it deals with speculative transaction which specifically says that "speculative transactions" which is settled otherwise than by actually delivery or transfer of the commodity or scripts. It has been further explained through clauses (b) and (c) to the proviso. Even otherwise, nothing is suggested in the provisions of section 43(5) of the Act that the words "actually delivery or transfer of commodity or scripts" is restricted to the delivery or transfer to the assessee himself, it could be through the agent. If the contract of sale and purchase of shares is settled by way of accepting actual delivery or transfer of goods or scripts by the agent, then it could be construed that the contract for sale and purchase of goods or shares has been settled not otherwise than by the actual delivery or transfer of commodity or scripts. Hon'ble Rajasthan High Court in Aditya Mills (supra) held that the word "actual delivery" is not restricted to the delivery to the assessee. The reasons for keeping the shares with the main broker is plausible and transfer of shares in the assessee's main broker account is not in dispute. NSCCL clears and settles trades as per the well defined settlement cycles. All the securities are being traded and settled under T+2 rolling settlement. NSCCL notifies the relevant trade details to the clearing members/custodians on the trade day (T), which are affirmed on T+1 to NSCCL. Based on its, NSCCL nets the provisions of counterparties to determine their obligations. A Page 6 of 9 ITA Nos. 5704,5705,3440&3524/Mum/2014 AYs: 07 -08 & 09-10 clearing member has to pay-in/pay-out funds and/or securities. Because of the settlement cycle, the delivery in respect of transaction cannot be disputed. Due to this electronic settlement, system in demat form, the trades in the exchanges has gone from few hundred crores per day to lacs of crores per day. Even otherwise, nothing adverse has been pointed out in the transactions carried out by the assessee, by the Assessing Officer. In view of these facts, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income Tax (Appeals), because delivery was taken by broker on behalf of the assessee. It is affirmed."
When this was confronted to the learned Sr. DR, he only relied on the orders of the lower authorities.
5. We have heard the rival contentions and gone through the facts and circumstances of the case. We find that neither the source of investment is not in doubt and the assessee has filed a completed ledger account of alliance intermediaries and networks Pvt. Ltd issued in form No. 10DB for payment of services tax i.e. STT certificate. As regards to the copy of demat account the assessee has replied to the AO vide letter dated 15-08-2009 that the assessee has kept these shares in the demat account maintained with Religare Securities Ltd. having demat account No. 10382297 and another demat account maintained with ARJ Stock Brokers Pvt. Ltd having demat Account No. 12034000 and 2357. We find that this details were available before the AO as well as before CIT(A) and none of the authorities below have examined these details despite specific remand by the Tribunal. In second round, the authorities below have summarily rejected the submissions of the assessee. We find that before CIT(A), the assessee has filed complete detail of demat account in the statement of facts which reads as under: -
"2. The Assessee has opened a Demat Account No. 12034000-2420 with ARJ SECURITIES Page 7 of 9 ITA Nos. 5704,5705,3440&3524/Mum/2014 AYs: 07 -08 & 09-10 PRIVATE LIMITED on 22/04/2005. The Assessee has made Investments in Stock Exchange from September 2006 onwards through a Stock Exchange Broker ALLIANCE INTERMEDARIES AND NETWORK P. LTD. The Assessee have given concern to the broker to maintain the aforesaid Investment in Broker's Pool or Beneficiary Account to maintain the liquidity & to carry out higher amount investment activity, as the broker is providing credit against the holding of investment in Pool or Beneficiary Account."
In such circumstances, and factual position is that in sister concern i.e. sister concern Vipul C. Shah HUF (supra), Tribunal has taken a view that the transactions which are genuine, respectfully following the same, we also allow the claim of the assessee and this issue of assessee's appeal is allowed.
6. In regard to ITA Nos. 5704, 5705 & 3524/Mum/2014 for AYs 2007- 08 and 2009-10 in the case of Vipul C Shah, Vimal C Shah and Vaishali V. Shah, the facts and circumstances are exactly identical and Revenue also conceded this position. Respectfully following and taking consistent view, we allow the claim of the assessee in all these appeals.
7. In the result, the appeals of assessee are allowed.
Order pronounced in the open court on 26-07-2017.
Sd/- Sd/-
(RAJESH KUMAR) (MAHAVIR SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 26-07-2017
Sudip Sarkar /Sr.PS
Page 8 of 9
ITA Nos. 5704,5705,3440&3524/Mum/2014 AYs: 07 -08 & 09-10 Copy of the Order forwarded to:
1. The Appellant
2. The Respondent.
3. The CIT (A), Mumbai.
4. CIT
5. DR, ITAT, Mumbai
6. Guard file. //True Copy// BY ORDER, Assistant Registrar ITAT, MUMBAI Page 9 of 9