IT: Where purchase of shares as well as sales thereof by assessee is established, surplus therefrom would be capital gain, investment of which would be entitled to section 54F exemption
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[2013] 33 taxmann.com 365 (Guwahati - Trib.)
IN THE ITAT GUWAHATI BENCH
Ramesh Kumar Goel
v.
Income-tax Officer, Ward - 2(2), Guwahati*
K. K. GUPTA, ACCOUNTANT MEMBER
AND K.S.S. PRASAD RAO, JUDICIAL MEMBER
AND K.S.S. PRASAD RAO, JUDICIAL MEMBER
IT APPEAL NO. 72 (GAU.) OF 2008
[ASSESSMENT YEAR 2004-05]
[ASSESSMENT YEAR 2004-05]
FEBRUARY 2, 2012
Section 54F, read with section 45, of the Income-tax Act, 1961 - Capital gains - Exemption of, in case of investment in residential house [Conditions precedent] - Assessment year 2004-05 - Assessee acquired shares and purchase of said shares was declared by him in earlier year and that was accepted by department - Shares were sold through stock brokers at price quoted at Stock Exchange at relevant time and sale consideration was received by account payee demand draft - Whether purchase of shares as well as sales thereof by assessee was established and, hence, sale proceeds of shares could not be treated as income from undisclosed sources; it would be capital gain - Held, yes - Whether assessee could not be denied exemption under section 54F for investment of sale proceeds of shares in acquiring residential unit - Held, yes [Para 6] [In favour of assessee]
FACTS
| ■ | The assessee claimed to have purchased 4000 equity shares of SCCL for a sum of Rs. 9,280 during the previous year and sold these shares for Rs. 6,33,718 and disclosed long-term capital gain of Rs. 6,24,106. Further, the assessee invested this amount in acquiring the residential unit and had claimed exemption under section 54F. | |
| ■ | The Assessing Officer found that the assessee was not able to produce the sale details of shares and particular of broker to whom the shares were sold, the Assessing Officer presumed that the sale is bogus and he added the surplus as income from undisclosed sources. | |
| ■ | On appeal | |
| ■ | The Commissioner affirmed the order of the Assessing Officer. | |
| ■ | On second appeal : |
HELD
| ■ | The assessee has also made available with the departmental authorities filing the copies of annual return, memorandum of association, Form No. 23AC and market quotation of shares of SCCL, having been downloaded from Taxman Website as on 31-3-2003 and 31-3-2004. The Assessing Officer has not accepted the sale proceeds claimed by the assessee for the reason that he has attempted to verify the address of SCCL, which was not fruitful. Except this aspect, there is no other contrary material made out by the Assessing Officer to show that the information furnished by the assessee, basing on that the assessee has made the claim, is incorrect simply because he has not been able to trace the said SCCL at the address given by the assessee. The Assessing Officer presumed that the sale proceeds are bogus and he did not accept the claim of the assessee. | |
| ■ | On perusal of the copies of the documents that were produced by the assessee before the Assessing Officer and also before the Tribunal through his paper book, it is found that the shares of SCCL have collected during the years 2003, 2004, 2005 and 2006 as can be seen from the document being downloaded from Taxman Website by the assessee clearly and categorically establishes that the existence of the said SCCL and the assessee purchased shares of the said company not at all disputed by the Assessing Officer and the sale proceeds of Rs. 6,33,718 were received by the assessee by way of demand draft on ABN Amro Bank and it was duly credited to his account. The Assessing Officer has not been able to make out any iota of evidence to contradict all these factual aspect. | |
| ■ | It is established principles of law that no assumption can be made basing on conjecture, suspicion and surmises. The findings of the Assessing Officer that the assessee could not identify the broker of the shares cannot be a basis of recording the transaction as bogus. From the overall consideration of the evidences produced by the assessee it is clear that the assessee has acquired the shares and purchase of the said shares declared by him in the earlier year and that was accepted by the department and the shares were sold through Stock brokers at the price quoted at the Stock Exchange at the relevant time and the sale consideration was received by assessee by account payee demand draft, will go to show that the purchase of shares as well as sales thereof by the assessee is established; more so, when the Assessing Officer has not been able to make out any positive material contradicting these factual aspects. Hence, the action of the Assessing Officer in treating the sale proceeds of the shares of Rs. 6,33,718 as income from undisclosed sources by denying the exemption claimed by assessee under section 54F of the Act in spite of the assessee making the capital gains and showing the investment of sale proceeds of the shares in acquiring residential unit inasmuch as the Assessing Officer has not denied the acquisition of the residential unit by the assessee. Hence, the actions of the departmental authorities are hereby set aside by allowing the issue raised by the assessee in his appeal. [Para 6] |
CASE REVIEW
Dhakeshwari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775 (SC) and CIT v. Carbo Industrial Holdings Ltd. [2000] 244 ITR 422/[2001] 116 Taxman 199 (Cal.) (para 6) followed.
CASES REFERRED TO
Dhakeshwari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775 (SC) (para 6) and CIT v. Carbo Industrial Holding Ltd. [2000] 244 ITR 422/[2001] 116 Taxman 154 (Cal.) (para 6).
Somnath Ghosh for the Appellant. S. Bhattacharjee for the Respondent.
ORDER
K.S.S. Prasad Rao, Judicial Member - This appeal filed by the assessee having been aggrieved by the order of CIT(A) dated 28.01.2008 for AY 2004-05 in the case of the assessee. The assessee has raised the sole issue Regarding disallowance of the claim of assessee in respect of capital gains of Rs. 6,33,718/- and consequently disallowing the exemption claimed u/s. 54F of the Income-tax Act, 1961 (hereinafter referred to as 'the Act').
2. Both the parties were heard regarding the issue raised by the assessee and its legal implications.
3. On careful perusal of the material made available before the Tribunal and analyzing the same in the light of the rival submissions of both the parties, the undisputed facts relating to the issues are that the assessee is an individual engaged in trading in coal. During the year (under consideration the assessee has sold away 4000 equity shares of M/s. Stanley Credit Capital Ltd. (in short SCCL) which were purchased by him in the immediate preceding year at the sum of Rs. 6,33,718/- and the assessee has disclosed capital gain of Rs. 6,24,106/- on the sale of these equity shares. At the same time, the assessee has claimed exemption u/s. 54F of the Act, as he invested the said amount in purchasing the site and building thereon for self use. During the course of assessment proceedings, the assessee has categorically stated before the AO that he has made an investment of Rs. 9280/- towards purchase 4000 equity share of SCCL at Rs. 2.30 p. per share on 15.07.2002. The shares were purchased in physical mode on delivery basis through Stock broker M/s. N.M. Lohia & Co., Kolkata. This investment was disclosed in the financial statement submitted along with the return for the assessment year 2003-04. Later on, in the assessment year under consideration, the assessee has sold these equity shares of a sum of Rs. 6,33,7018/- being at Rs. 158.43 per share in the month of October, 2003 to a broker at Kolkata and received the proceeds by way of demand draft No. 161741 payable at ABN Amro Bank and it was credited on 31.10.2003. Accordingly, the assessee has earned a long term capital gain of Rs. 6,24,106/- (6,33,718 - 9,280/-. The assessee claimed exemption of the investment of such amount in acquiring the residential unit u/s. 54F of the Act. Since the assessee was not able to produce the sale details of shares and particulars broker to whom the shares were sold, the AO presumed that the sale is bogus and he added the sale proceeds after deducting cost of the shares as income from undisclosed sources while passing the assessment order. Aggrieved with this order, the assessee went in appeal before Ld. CIT(A) but was unsuccessful. Hence, the present appeal is filed by the assessee before the Tribunal.
4. During the course of hearing, the Ld. Representative of assessee has vehemently argued assailing the orders of the departmental authorities contending,inter alia, that the assessee has tiled the particulars of purchase of shares and disclosed the said purchases during the relevant assessment year. The assessee has also found that the said company M/s. SCCL is actually in existence by producing the address of the said company as Cabin No. 674, Padam tower, 14/113, Civil Lines, Kanpur (UP). The assessee has also procured copy of annual returns, Memorandum of Association, Form No. 23AC and market quotation of shares of SCCL downloaded from Taxmann Website as on 31st March, 2003, 2004, 2005 and 2006. Apart from these details, the assessee also requested the AO to verify the purchase and sale of shares from SCCL but the verification carried out by the AO was not fruitful. Thus, the assessee has categorically established the purchase of the said shares and both the departmental authorities have not disputed the purchases. But at the same time, they have not accepted the sale of the said shares in spite of the amount of Rs. 6,33,718/- was established by the assessee are received by demand draft and credit in his bank account. Both the departmental authorities have rejected the claim of the assessee basing on assumption and presumption but without making out any positive evidence to establish that the claim of the assessee is bogus. Hence, he sought for setting aside the orders of the departmental authorities by allowing the appeal of the assessee.
5. Contrary to this, the Ld. Departmental Representative vehemently argued supporting the orders passed by the departmental authorities and sought for upholding the same by dismissing the appeal of the assessee.
6. On careful analysis of the orders passed by the departmental authorities, the undisputed facts relating to the issue are that the assessee has purchased 4000 equity shares of M/s. SCCL. The investment of Rs. 9280/- on 15.07.2002 and this was disclosed during the relevant assessment year, the financial statement submitted along with the return for the AY 2003-04, the assessee has sold these shares, during the period under consideration for a sum of Rs. 6,33,718/- in the month of October, 2003 and received the proceeds by way of demand draft No. 161741 payable at ABN Amro Bank and this amount was credited the account of the assessee on 31.10.2003 and the assessee has categorically stated that he invested this amount in acquiring residential unit and claimed exemption from capital gains u/s. 54F of the Act. The assessee has substantiated the claim of purchase and sale of the said shares by producing the purchase details and the disclosure in the relevant assessment year in the financial statement filed along with the return for the relevant assessment year and he sold the said shares and established the same by the receipt of DD No. 161741 for Rs. 6,33,718/- and crediting the same in his bank account. The assessee has also made available with the departmental authorities filing the copies of annual return, memorandum of association form no. 23AC and market quotation of shares of M/s. SCCL having been downloaded from Taxman Website as on 31.03.2003, 2004, 2005 and 2006. In spite of all these particulars, the AO has not accepted the sale proceeds claimed by the assessee for the reason that he has attempted to verify the address of M/s. SCCL, which was not fruitful. Except this aspect, there is no other contrary material made out by the AO to show that the information furnished by the assessee, basing on that the assessee has made the claim, is incorrect simply because he has not been able to trace the said SCCL at the address given by the assessee. The AO presumed that the sale proceeds are bogus and he did not accept the claim of the assessee. On perusal of the copies of the documents that were produced by the assessee before the AO and also before the Tribunal through his paper book, it is found that the share of SCCL have collected during the year 2003, 2004, 2005 and 2006 as can be seen from the document being downloaded from Taxman Website by the assessee clearly and categorically establishes that the existence of the said SCCL and the assessee purchased shares of the said company not at all disputed by the AO and the sale proceeds of Rs. 6,33,718/- were received by the assessee by way of demand draft on ABN Amro Bank and it was duly credited to his account. The AO has not been able to make out any iota of evidence to contradict all these factual aspect but at the same time, he came to the conclusion by way of presumption and assumption that the sale proceeds of the assessee is bogus and added the same as income from undisclosed sources. It is an established principles of law that no assumption can be made basing on conjecture, suspicion and surmises that as hold by the Hon'ble Apex Court in the case of Dhakeswari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775 (SC). In the case of CIT v. Carbo Industrial Holdings Ltd. [2000] 244 ITR 422/[2001] 116 Taxman 159 (Cal.), it was held by the Hon'ble Calcutta High Court that where the details furnished revealed that the purchases and sale of shares were not accepted as having been transacted on the same date, whereas payment by account payee cheques have not been disputed and merely because some brokers failed to appear, the assessee should not be punished for the default of a broker, and also on mere suspicion the assessee's claim should not be denied. By applying the ratios cited supra to the instant case, the finding of the AO that the assessee could not identify the broker of the shares cannot be a basis of recording the transaction as bogus. From an over all consideration of the evidences produced by the assessee it is clear that the assessee has acquired the shares and purchase of the said shares declared by him in the earlier year and that was accepted by the department and the shares were sold through Stock brokers at the price quoted at the Stock Exchange at the relevant time and the sale consideration was received by assessee by account payee demand draft, will go to show that the purchase of shares as well as sales thereof by the assessee is established more so, when the AO has not been able to make out any positive ' material contradicting these factual aspects. Hence, we are of the considered view that the action of the AO in treating the sale proceeds of the shares of Rs. 6,33,718/- as income from undisclosed sources by denying the exemption claimed by assessee u/s. 54 of the Act, in spite of the assessee making the capital gains and showing the investment of sale proceeds of the shares in acquiring residential unit inasmuch as the AO has not denied the acquisition of the residential unit by the assessee. Hence, the actions of the departmental authorities are hereby set aside by allowing the issue raised by the assessee in his appeal.
7. In the result, appeal of the assessee is allowed.
SB*In favour of assessee.
Regards
Prarthana Jalan
__._,_.___
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