×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
The captioned appeal filed by the Revenue, pertaining to assessment year 2007-08, is directed against an order passed by the learned Commissioner of Income Tax (Appeals)-IV, Kolkata (in short the ld. ‘CIT(A)’], which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 ( in short the ‘Act’) dated 31/12/2009.
2. The appeal filed by the Revenue for Assessment Year 2007-08, is barred by limitation by 15 days. The Revenue has moved a petition requesting the Bench to condone the delay.We heard both the parties on this preliminary issue. Having regard to the reasons given in the petition, we condone the delay and admit the appeal for hearing.
3. Grounds of appeal raised by the Revenue are as follows:
(i) That on the facts and circumstances of the case, the ld. CIT(A) has erred in deleting the addition made u/s 68 of the IT Act ignoring the fact that the alleged sale of shares of “Dehra Dun Tea Co. Ltd.” took place at a price of Rs. 15,611/- per share and the trading was not through the Stock Market and that the market price of the scrip as confirmed by the SEBI stood at Rs. 4.20/- per share as quoted 18 months before the date of transaction.
(ii) And that there was no intention on the part of both buyer and seller to determine the market condition of demand and supply in spite of availability of proper mechanism.
(iii) And that the prices of each shares were sold at 3717% of the last quoted price of it in the open market and the buyer or seller did not go through the mechanism of classifying those shares as is normally done before trading in inactive shares.
(iv) That the assessee craves for leave to add, delete or modify any of the grounds of appeal before or at the time of hearing.
4. Brief facts qua the issue are that he assessee company filed its return of income for the assessment year 2007-08, on 08/11/2007 declaring a total income of Rs. 13,27,30,800/-. The return was duly processed u/s 143(1) of the Income Tax Act. The case was later selected for scrutiny as per CASS. Consequently, notice u/s 143(2) and notice u/s 142(1) of the I.T. Act were issued and served on the assessee. In the course of assessment proceedings, books of accounts along with requisite details and supporting documents were produced and examined. During the assessment year under consideration, the assessee by way of sale of shares in “Dehra Dun Tea Co. Ltd.” a company listed in the Calcutta Stock Exchange, reported long term capital gain of Rs. 12,89,60,745/- by entering into off market transaction through plain agreement. The assessee was holding 8240 shares of “Dehra Dun Tea Co. Ltd.” which was required for a total sum of Rs. 47,077/-, and which makes the cost price of share at Rs.5.71 per share. The said shares was claimed to be sold to one “Logical Buildwell Pvt. Ltd.” for a total sum of Rs. 12,86,34,640/- through a plain agreement. That makes the sale price of shares at Rs. 15,611/- per share.
5. The assessing officer, in order to examine the genuineness of the transaction and capital gain declared, sent notices u/s 133(6) of the Act to Calcutta Stock Exchange, where the said shares was claimed to be listed. In response to the same the Calcutta Stock Exchange refused to accept the said transaction as there was no record in support of the same. Further as per said Exchange, the last traded price of the said scrip was Rs.4.20 per share purportedly around 18 months before the date of the alleged transaction. The AO noticed that the shareswere therefore not traded in the Stock Exchange where it was listed and the fact that the said shares were sold in an offline transaction, not following the guidelines of reporting to the Calcutta Stock Exchange, clearly demonstrates that here was no intention of determination of proper price between the buye and the seller through open market conditions of demand and supply. The said shares were sold at a price which was 3,717% of the last traded price as per information supplied by the Calcutta Stock Exchange. Even in share not traded in the StockExchange there is a mechanism of classifying those shares as inactive shares and a ceiling is capped on the price movement which again by any stretch of calculation cannot arrive at the sale price of Rs. 15,611/ per share, as reported by the assessee and to cover it, all the said transaction was not, as mandatorily required reported to the Calcutta Stock Exchange to hide the bogusness of the said transaction. The entire facts goes to show that the said transaction was through organized connivance between the buyers and the sellers to convert their undisclosed income into white, in total disregard to free pricing objective with which shares are listed in the Stock Exchange.
6. Considering the above facts and circumstances of the case, the assessing officer computed the long term capital gain by applying the last traded price in the Stock Exchange i.e. Rs.4.20 per share and that remaining amount was treated as “undisclosed income” as per Section 68 of the I.T. Act, as under
Before making the addition of Rs.12,86,00,032/-,the assessee was given sufficient opportunities by serving show cause letters by AO, but no plausible explanation could be put forward by assessee to disprove the above. Therefore, assessing officer made addition under section 68 of the Act to the tune of Rs. 12,86,00,032/-.
7. Aggrieved by the stand so taken by the Assessing Officer, the Assessee carried the matter in appeal before the Ld. CIT(A) who has deleted the addition. Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before us.
8. The ld. DR for the Revenue submitted before us that assessee has sold shares one to one basis and not through the Calcutta Stock Exchange, where the said shares was claimed to be listed. The last published price in the Stock exchange was at Rs.4.20 per hare whereas assessee sold the shares at Rs.15,611/- per share. In response to notice U/s 133(6) of the Act, the Calcutta Stock Exchange replied to assessing officer stating that for the said transaction there was no record. Further as per said Exchange, the last traded price of the said scrip was Rs.4.20 per share purportedly around 18 months before the date of the alleged transaction. The AO noticed that the shares were therefore not traded in the Stock Exchange where it was listed and the fact that the said shares were sold in an offline transaction, not following the guidelines of reporting to the Calcutta Stock Exchange, which clearly demonstrates that there was no intention of determination of proper price between the buyer and the seller through open market conditions of demand and supply. The said shares were sold at a price which was 3,717% of the last traded price. Even in shares not traded in the Stock Exchange there is a mechanism of classifying those shares as inactive shares and a ceiling is capped on the price