TaxTMI 
TaxTMI 
2021 (10) TMI 746
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....1,97,50,500/- made by the Assessing Officer as unexplained investment under section 69 of the Income Tax Act 1961 whereas the property was purchased by M/s. Seven Star Township Pvt. Ltd. 3. That the Learned Commissioner of Income Tax (Appeals)-2, Udaipur, Rajasthan erred in confirming the addition of Rs. 1,65,53,295/- out of Rs. 1,97,50,500/- made by the Assessing Officer under section 69 of the Income Tax Act, 1961 on the basis of incorrect facts and arbitrarily grounds. 4. That, on the facts and circumstances of the case, the Ld Commissioner of Income Tax (Appeal)-2, Udaipur, Rajasthan erred in confirming the disallowance of claim of Long Term Capital Gain Rs. 93,34,545/- made by the Assessing Officer under section 68 of the Act on the alleged ground that the transactions relating to Long Term Capital Gains on sale of shares of "Unisys Software & Holdings Industries Ltd" were dubious, suspicious and meant to book Long Term Capital Gain. 5. That the learned Commissioner of Income Tax (Appeal)-2, Udaipur, Rajasthan erred in confirming the aforesaid disallowance of Rs. 93,34,545/- made by the Assessing Officer as unexplained cash credit after disallowing t....
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.... 4. That, as per the CBDT notification No. 35/2020 dated 24th June, 2020, it was mentioned that all the compliance dates falling during the lockdown period shall be extended up to 31st March, 2021. 5. That, the legal heir of the deceased assessee is a super senior citizen and owning to the current circumstances we were not able to get the necessary documents signed." 4. On the other hand, the ld DR could not rebut the facts submitted by the assessee before us for seeking condonation of delay. 5. We have considered the rival submissions as well as relevant material on record. As regards the sufficiency of cause for filing the appeals belatedly, it is settled principles of law that the Courts have to take liberal approach while interpreting the expression 'sufficient cause' for condonation of delay. In case of Collector, Land Acquisition Vs. Mst. Katiji (1987) 167 ITR 471, the Hon'ble Supreme Court has laid down the principle that the power to condone the delay provided under the statute is to enable the Courts to do substantial justice to the parties by disposing of the matter on merits, therefore, while considering the matters for condonation of delay, the law must ....
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.... mentioned hereinabove. 10. Grounds No. 1 to 3 of the assessee raised by the assessee are interrelated and interconnected and relate to challenging the order of ld. CIT(A) in upholding the additions of Rs. 1,65,53,295/- u/s 69 of the Act, therefore, we thought it fit to decide all these grounds through the present consolidated order. In this regard, the ld. AR appearing on behalf of the assessee has reiterated the same arguments as were raised before the ld. CIT(A) and also relied upon written submissions filed before the Bench and contents of the same are reproduced as under. "1. The assessee filed Income Tax Return for the Assessment Year 2013-14 on 23.09.2013 and during the regular assessment proceedings the previous authorized representative did not made any submission and the Assessee was never informed for the above negligence on the part of the Authorized Representative. That may be due to some unavoidable reason on part of the previous authorized representative (best known to him) of the Assessee, the representative was not able to give the reply of the notice issued by the assessing officer on time while the Assessee had provided all the information required by....
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....ue of the investments may be deemed to be the income of the assessee of such financial year." 8. On a plain reading of the section it is clearly evident that section 69 is applicable if the assessee has made any investment and failed to show the same in the books of accounts maintained by him or fails to provide satisfactory explanation w.r.t any investment or income in his name. 9. It is submitted that assessee was holding directorship in M/s Seven Star Township Private Limited, company engaged in real-estate & construction activities. During the relevant assessment year assessee in the capacity of director performed registries/ legal formalities for registry of the property situated at Village Dabla Khurd, Tehsil Faghi, which was purchased by the company in its own name. The assessee was only a POA holder for the registry/documentation purpose on behalf of company, moreover on the registry document (purchase deed) it is specifically mentioned that the assessee has signed under the capacity of being a director in the company. Moreover, in our case the property is not purchased by the Assessee and also not in the name of the Assessee. Assessee is only playing role....
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....ried to look into the details to make a fair opinion rather their negligence can be seen from the fact that the bank accounts of the company provide that out of the total cheques issued amounting to Rs. 1,97,05,500/-, cheques amounting to Rs. 49,07,450/- were debited from the company bank accounts and rest other got dishonored. The Ld. AO in his remand report dated 03.10.2020 claimed that a total of Rs. 34,50,000/- could only be verified, contradicting which the Ld. CIT(A)-II, Udaipur in the order dated 27.02.2020 claimed that only Rs. 31,15,705/- could be verified, on the facts supra, it is clearly evident that the Ld. AO has erred both in facts and law thus it seems there was no intention to provide relief rather the motive was to increase litigation. I would to place on record the judgment made in the case of Ashok Kumar Rastogi V CIT (1991) 100 CTR 204 wherein it was laid down that "Assessing Officer is expected to appreciate the reasonable explanation offered to him, the evidences produced before him about the nature and source of investment and he cannot make the addition merely on surmises, conjectures as well as without any supporting evidences." 14. It is clearly ....
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....and have perused the material placed on record. We have also deliberated upon the decisions cited in the orders passed by the authorities below as well as cited before us and we have also gone through the orders passed by the revenue authorities. As per the facts of the present case, we noticed that, since according to the AO, the assessee had purchased immovable property of Rs. 1,97,50,500/-, therefore, the sources of the said investment was sought from the assessee. Since, the assessee could not produce evidences; therefore, the addition u/s 69 of the Act was made. The ld. AR further submitted that no property was ever purchased by the assessee in his own name. Rather, the facts are that the assessee was one of the Director of Company M/s Seven Star Developers Township Pvt. Ltd and the immovable property of Rs. 1,97,50,500/- was purchased by the company in his own name. It was further submitted that the company is a legal person different from its members/shareholders and possesses the right to enter into valid contracts for sale, to purchase, to hold, to lease out or take on lease and to mortgage immovable properties in its own name. Being the Director of the Company, the assess....
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.... 138-153 9 Dipesh Ramesh Vardhan vs. DCIT (ITAT Mumbai) dated 11.08.2020 154-174 10 Gateway Leasing Pvt. Ltd vs. ACIT (Bombay High Court) dated 11.03.2020 175-214 11 Suresh Kumar Agarwal vs. ACIT (ITAT Delhi) dated 29.06.2020 215-251 12 Vijayrattan Balkrishan Mittal vs. DCIT (ITAT Mumbai) dated 01.10.2019 252-343 14. We noticed from perusal of the record that the ld. CIT(A) had sought remand report from the AO. The AO had made addition on account of disallowance out of purchase immovable property u/s 69 of the Act to the effect that creditworthiness of the company namely M/s Seven Star Developers Township Pvt. Ltd could not be established. Hence, the source of investment of Rs. 1,97,50,500/- remained to be explained and hence, the addition was made u/s 69A of the Act. In this regard, the assessee through its AR had controverted the comments made in the remand report and filed a detailed submission which is available at para No. 6.2 and 6.3 of the order of ld. CIT(A) and the same are reproduced below. " 6.2 The AO's remand report dated 09-05-2018 was provided to the appellant on 21-05-2018. The appellant's AR furnished counter....
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....ort with complete annexure for the Assessment Year 2013-14 with this letter. We would like to draw your attention towards certain vital cases and rulings being made by various courts in India. In the case of Salomon v Salomon & Co Ltd. One of the case was regarding Salomon v Salomon & Co Ltd it was held that Separate personality means that the artificial legal person, the company, can do almost everything a human person can do; it can make contracts, employ people, borrow and pay money, sue and be sued, among other things. It was held in State Trading Corporation of India Ltd. AIR (1963) SC 1811, Once a company or corporation is formed, the business which is carried on by the such company or corporation is the business of that company or corporation and is not the business of the citizens who get the company or corporation incorporated and the rights of the incorporated body must be judges on that footing and cannot be judged on the assumption that they are the rights attributed to the business of individual citizens. Since the land is in the name of the company and assessee is only entered into the agreement for purchase of the land on ....
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....nship Developers Private Limited and also reflected in the books of the company. Assessee has no concern with this property neither he has purchased nor the property is in his name. We are enclosing copies of Income Tax Return with computation and Copy of Audit Report with complete annexure for the Assessment Year 2013-14 of M/s Seven Star Township Private Limited. 'Annexure-A'" Besides the above submissions, the appellant furnished an affidavit of Sh. Narendra Singh, director of the company and sale deed dated 24-09-2012 in support of his claim that investment in the land purchased at Village Dabala, Tehsil Fagi, Jaipur was in fact made by the company M/s. Seven Star Township Pvt. Ltd. Considering the details and evidences produced by the appellant, my ld. predecessor vide letter No. CIT(A)-2/UDR/2019-20/737 dated 31-07-2019 required the AO to submit remand report on the specific issues after taking into consideration the evidences produced by the assessee. As regards the addition of Rs. 1,97,05,550/- made on account of unexplained investment in the land purchased at Village Dabala and in order to ascertain the veracity of the appellant's claim that all p....
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....ajendra Singh on 26.04.2013 by clearing and as such the payment of examining 04 cheques of Rs. 36,11,770/- has not been found to be made from the bank account of the assessee company as no such payment / cheques are debited in the bank account of the assessee company with Punjab National Bank, Vasihali Nagar, Jaipur. It is suspected that the payment of the amount of Rs. 36,11,770/- is paid to the land owners either by the assessee or the company in cash. 2.2. As per the sale deed of the land the company of which has been forwarded to this office, payment of Rs. 1,36,84,0765/- has been made to the land owner Sh. Bheru Singh by cheque as per the detail given at page no. 13 of the sale deed. On the examination of the bank statement of the company M/s Seven Star Township Developers Private Limited it has been revealed that the payment of Rs. 25,00,000/- only has been made to Sh. Bheru Singh on 18.04.2013 by clearing. It means the company has not made the payment of the remaining amount of Rs. 1,11,84,075/- to Sh. Bheru Singh which is apparent from the bank statement of the company obtained from the bank. It is suspected that this amount of Rs. 1,11,84,075/- has been paid to th....
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.... Seven Star Township Developers Private Limited vide cheque no. 620494,620495 and 620496 for the payment of Rs. 3,32,000/- , Rs. 9,95,750/- & Rs. 1,29,700,1- were found to be correct. 3. In the reply of point No. 2.1, 2.2 & 2.3 of remand report, the assessing officer duly verified another bank account i. e Punjab National Bank Account No. 4144002100009766 held in the name of Ws Seven Star Township Developers Private Limited and payments made from the same account for the purchase of said land to the various land owners. The ld. assessing officer has duly confirmed that the payment of Rs. 9,50,000/- and. Rs. 25,00,000/- was made through the PNR bank account held in the name of company Ws Seven Star Township Developers Private Limited hence its is prima facie proved that the both the bank accounts were operated in the name of said company and payments were made by the company to the land owners through these bank account hence assessee Shri Late Satpal Singh has no monetary transaction in relation to the purchase of land said land. Further, the Ld assessing officer has erred in his reply of remand report stating "that the remaining amount of Rs. 36,11,770/- and Rs. ....
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....l year 2013-14 for your reference we are also enclosing the bifurcation of closing inventories of the company M/s Seven Star Township Private Limited as on 31.03.2013, which includes land, cost of Rs. 19705000/-: 4. In the reply of point No. 3 of remand report the assessing officer has mentioned that the company M/s Seven Star Township Developers Private Limited has deposited cash of Rs. 89,41,000/- in F.Y 2012-2013 and Rs. 33,62,000/- in F.Y. 2013-14, as the above cash was deposited in the account of the company there we would request your good self to kindly question the company for the same. In the appellant's case, the last hearing was conducted on 21-01-2020. Sh. Rounak Khandelwal, FCA attended and relied on various written submissions /details / evidences made earlier. The appellant's written submissions, details and evidences brought on record by the appellant and AO's remand reports and appellant's counter comments thereon have been duly considered while deciding the issue at hand. 15. After having meticulously gone through the facts of the present case as well as orders passed by the Revenue authorities and material placed on record we ....
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....oreover, registered documents are got registered before the registering authority and the Registrar carries out or executes the registration of a document during discharge of his official duties, therefore, more presumption of correctness is attached with the registration of a document. It is also an admitted fact that the assessee only being the Director of the company and power of attorney holder was entitled to perform legal formalities for the purpose of registration of sale deed. The Revenue has not placed on record even a single document to demonstrate that the assessee had any financial interest in the land purchased by the company. Even no document has been placed on record to show that at any stage, the sale consideration was ever paid by the assessee from his bank accounts. On the contrary, the assessee had also furnished an affidavit to this effect which is sworn by Shri Narendra Singh, another Director of the company who also reiterated the same stand taken by the assessee. It is also a fact that the company is a separate legal entity as distinct from its Members, therefore, it is separate at law from its share holders, Directors, promoters etc. and as such is conferred....
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.... on behalf of the company which is specifically mentioned in the sale deed itself and thus in this way, the capacity of the assessee was only that of a power of attorney holder. Since the property belongs to assessee i.e. M/s Seven Star Township Pvt. Ltd. and the company had already shown the said property in their financial statements for the year under consideration and the said documents have not been rebutted or controverted by the Revenue at any stage of proceeding. Since the assessee had acted only as a power of attorney holder, therefore, no liability could have been fastened upon the assessee on behalf of the company. In this respect, we draw strength from the decision in the case of Salomon v Salomon & Co. Ltd wherein it was held that Separate means that the artificial legal person, the company, can do almost everything a human person can do; it can make contracts, employ people, borrow and pay money, sue and be sued, among other things. We also draw strength from the decision in the case of State Trading Corporation of India Ltd. AIR (1963) SC 1811 wherein it was held that "once a company or corporation is formed, the business which is carried on by the such company or co....
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....we direct the A.O. to delete the said addition. Thus, these grounds of appeal raised by the assessee are allowed. 19. Ground Nos. 4 to 8 of the appeal raised by the assessee are interrelated and interconnected and relates to challenging the order of the ld. CIT(A) in confirming the disallowance of Rs. 93,34,545/- made by the Assessing Officer as unexplained cash credit after disallowing claim of the assessee of exemption u/s 10(38) of the Act and therefore, we thought it fit to decide these grounds through the present consolidated order. 20. The ld. AR appearing on behalf of the assessee has reiterated the same arguments as were raised before the ld. CIT(A) and also relied upon the written submissions submitted before the Bench and same are reproduced as below. "1. The assessee filed Income Tax Return for the Assessment Year 2013-14 on 23.09.2013 and during the regular assessment proceedings the previous authorized representative did not made any submission and the Assessee was never informed for the above negligence on the part of the Authorized Representative. That may be due to some unavoidable reason on part of the previous authorized representative (best known t....
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....ceipts against sale of shares by account payee cheques. 8. During the assessment year 2010-11 assessee had purchased shares of Unisys Softwares & Holdings Ind. Ltd. on 16/03/2010 vid cheque no. 0004936 amounting to Rs. 11,50,000/-. Assessee had 50,000 shares of Unisys Softwares & Holdings Ind. Ltd. which were duly credited to his demat account on 30/06/2010. Details of purchase and sale with contract notes are annexed to the paper book submitted, details synopsis of the same is provided below for your kind perusal; S. No. Particulars Date Details 1. Purchase of Shares 16/03/2010 50,000 shares of Unisys Softwares & Holdings Ind. Ltd. 2. Credit to Demat Account 30/06/2010 Transfer of 50,000 shares of Unisys Softwares & Holdings Ind. Ltd. to Demat 3. Sale of Shares 09/04/2012 35,000 shares sold 4. Sale of Shares 11/04/2012 11,000 shares sold 5. Sale of Shares 12/04/2012 4,000 shares sold 9.During the relevant assessment year assessee sold such shares and made a long term capital gain of Rs. 93,34,545/-, per se it is very evident that assessee held such shares for a period of more than 12 months b....
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....n of Rs. 93,34,545/- made by the Ld. CIT (A)- II, Udaipur is wrong and bad in law may very kindly be deleted." 21. On the contrary, ld. DR appearing on behalf of the Revenue has relied upon the order passed by the ld. CIT(A). 22. We have heard the ld. Counsels of both the parties and have perused the material placed on record. We have also deliberated upon the decisions cited in the orders passed by the authorities below as well as cited before us and we have also gone through the orders passed by the revenue authorities. As per facts of the present case, we noticed that assessee had shown capital gain of Rs. 93,34,545/- and claimed exemption u/s 10(38) of the Act. In this regard, the AO had sought information from the assessee to provide the proof of claiming said exemption. But since the assessee could not submit any proof of claim, therefore, the exemption claimed by the assessee was disallowed by the AO. On appeal before ld. CIT(A), the assessee filed written submission and additional evidences under Rule 46(A) of the IT Rules. Therefore, ld. CIT(A) called for AO's remand report in which it was stated before the AO that the assessee had purchased shares of M/s Unisys Soft....
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....d shares ones and with a view to reduce litigation and uncertainty in that matter, in partial modification to the earlier circulars no. 04 of 2007 dated June 15, 2007. In this circular it further instructs that assessing officers in holding whether the surplus generated from sale of listed or other securities would be treated as Capital Gain or Business Income, shall take into the account the following: a. Where assessee itself irrespective of the period of holding the listed shares and securities, opts to treat as stock-in trade, the income arising from transfer of such shares /securities would be treated as its business income. b. In Respect of listed shares and securities held for more than 12 months immediately from the date of transfer, if assessee desires to treat the income arising from the transfer thereof as a capital gain, the same shall not be put to dispute by assessing officer. However, this stand, once taken by the assessee in a particular assessment year, shall remain applicable in subsequent Assessment years also and the taxpayers shall not be allowed to adopt a different/contrary stand in this regard in subsequent years. c. In al....
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....f shares by account payee cheques. 'Annexure-B' However assessee has sold 50000 shares of Unisys Software & holdings Industries limited which is listed on the stock exchange. After considering the above circular the same was treated as per desire of assessee i.e. Long Term capital gain from shares and this will not be put to dispute by Assessing Officer. Therefore, we request you not to add back the same to the total income of the assessee." 24. However, the ld. DR submitted that assessee had purchased shares of M/s Unisys Software @ Rs. 23 per share on 16.03.2010 which were surprisingly sold @ Rs. 209 to 211 per share on 12.04.2012 within a period of two years, however, the financial position of the company was not increased during this period that clearly indicated that the shares of the penny stock company were managed by the Syndicate of Directors, promoters and entry providers to introduce unaccounted money in the books of accounts of the beneficiaries in lieu of commission. Whereas ld. AR specifically submitted that transaction of the shares and entered by him were genuine and well proved from the various documentary evidences. In support of his ....
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....tice that as per Income Tax Act following conditions are to be satisfied for claiming the exemption U/s 10(38) of the Act as under: * Tax payer is an individual, HUF, firm or a company * The asset which is transferred is a long term capital asset. * Such asset is equity share in a company or units of equity oriented mutual funds. * At the time of transfer, the transaction is chargeable to securities transaction tax. 27. It was submitted that in case, the above conditions are satisfied, long term capital gain needs to be examined from the tax point of view. On the plain reading of section it is clearly evident that section 10(38) of the Act is applicable if the assessee has satisfied all the conditions in respect of claiming exemption u/s 10(38) of the Act as mentioned above. During the appellate proceedings before ld. CIT(A), the assessee has furnished all the evidences for purchase of shares as well as sale of shares, which inter alia included copies of bills for purchase of shares and contract notes for sale of shares, Demat account and bank statements evidencing payments for purchase of shares and receipts against sale of share by account p....
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....es of bills for purchase of share and contract notes for sale of share, Demat account and bank statement evidencing payments for purchase of shares and receipts against sale of shares by account payee cheques. The assessee has also relied upon the circular issued by CBDT dated 29.02.2016, bearing Circular No. 6/2016 which is read below:- "Further, we would like to draw your attention on the circular issued by CBDT dated: 29.02.2016, Circular no. 6/2016, which says: CBDT realizing that major part of shares /securities transactions takes place in respect of the listed shares ones and with a view to reduce litigation and uncertainty in that matter, in partial modification to the earlier circulars no. 04 of 2007 dated June 15, 2007. In this circular it further instructs that assessing officers in holding whether the surplus generated from sale of listed or other securities would be treated as Capital Gain or Business Income, shall take into the account the following: a. Where assessee itself irrespective of the period of holding the listed shares and securities, opts to treat as stock-in trade, the income arising from transfer of such shares /securit....
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....s Ltd. amounting to Rs. 9,38,600/- at a premium of Rs. 20.85 per share in physical form. The Coordinate Bench has deleted the addition by holding as under: "6. I have heard both the parties and perused the relevant records available with me, especially the orders of the revenue authorities and the case law cited by both the parties. I note that assessee has earned Long Term Capital Gain amounting to Rs. 18,46,600/- during the financial year 2013-14 and the same has been claimed exempt under Section 10(38) of Income Tax Act, 1961. The assessee had purchased of 45,000/- shares of Unisys Software Holding Industries Ltd amounting Rs. 9,38,600/- at a premium of Rs. 20.85 per share in physical form. Out of the aforesaid 45000/- Shares assessee sold of 8000 Shares only i.e. 17.77%. Thus, the major part of the Shares i.e. 82.33% are still in the hand of the assessee. In my view the the assessee just wanted to enter into the transaction to earn exempted capital gain, but the assessee did not sell all the share 45000 shares instead of sale of a part i.e. 8000 shares only when that time was the best price ever. All the transaction were made through account payee cheque / banking chan....
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....ble High Court of Punjab & Haryana in the case of PCIT (Central), Ludhiana vs. Prem Pal Gandhi passed in ITA No. 95 of 2017. Decision dated 18.1.2018 of the Hon'ble High Court of Punjab & Haryana in the case of PCIT (Central), Ludhiana vs. Prem Pal Gandhi passed in ITA No. 95 of 2017 wherein it has been held as under:- "2. The following questions of law have been raised:- (i) Whether on the facts and in the circumstances of the case, the Hon'ble Income Tax Appellate Tribunal has erred in upholding the order of the CIT(A) deleting the addition of Rs. 4,11,77,474/- made by the AO on account of sham share transactions ignoring an important aspect that the transaction of shares showing their purchase price at Rs. 11,00,000/- and sale consideration at Rs. 4,23,45,295/- within a period of less than two years / purchases of shares made in cash not cheque that too before shares got dematerialized / worth of the company at the time of purchase / sale of shares not proved- All suggest non-genuineness of the said transaction? (ii) Whether on the facts and in the circumstances of the case, the Hon'ble Income Tax Appellate Tribunal has erred in law in upholdi....