Sonal Dipakbhai Subhash Corporation v. Commissioner of Income-tax-III, Ahmedabad
[Citation -2016-LL-0926-90]

Citation 2016-LL-0926-90
Appellant Name Sonal Dipakbhai Subhash Corporation
Respondent Name Commissioner of Income-tax-III, Ahmedabad
Court ITAT-Ahmedabad
Relevant Act Income-tax
Date of Order 26/09/2016
Assessment Year 2006-07
Judgment View Judgment
Keyword Tags prejudicial to the interests of revenue • commercial expediency • revisional proceeding • interest of revenue • regular assessment • vacancy allowance • stock exchange • capital gain
Bot Summary: The shares of M s. Vishal Exports Overseas Ltd have been kept at a high value artificially through brokers in order to generate capital gain, since the value of these shares dropped immediately after the impugned sale of the shares. In the return of income filed, you have shown Long Term Capital Gain on account of sale of shares of M s. Vishal Exports Overseas Ltd, an Ahmedabad based company, but due to lack of time, the ITO Ward-7(2), Ahmedabad could not arrive at a logical conclusion on these share transactions he had finalized the order determining total income at Rs.3,28,080 - accepting the returned income. The shares of M s. Vishal Exports Overseas Ltd were artificially kept at a high value through brokers in order to generate capital gain, since the value of these shares dropped immediately after the impugned sale of the shares. The details of share holding in VEOL pre IPO and post IPO is as under: Total shares held by the Promoter group prior to Post IPO IPO Sr. Name Face Number Percent Number of age of No value shares shares 1 Shri DipakS. 5 58,52,000 24.38 58,52,000 24. Thereafter shares were split and for each share of Rs. 5, five shares of Rs. 1 were issued. From the bills of share transactions submitted by the assessees, it is seen that all the above assessees have sold shares through their broker M s Harikishan Hiralal and Fortis Securities Limited. CIT. Range-7 has utilized the internet and the website of NSE and BSE to collect further evidence which confirms the suspicion that the long term capital gains earned by the four ladies was the result of artificial propping up of the shares of Vishal Exports Overseas Ltd. specially since the value of these shares dropped immediately after the sale of the impugned shares.


IN INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH Before: Shri Pramod Kumar, Accountant Member and Shri S. S. Godara, Judicial Member ITA No. 1165 Ahd 2011 Assessment Year 2006-07 Smt. Sonal Dipakbhai, Commissioner of Mehta Subhash Income Tax-III, 1 s t Corporation, Ja y Vs Floor, C.U. Shah Bungalow, 132 ft. Ring Chamber, Ashram Road, Satellite, Road, Ahmedabad Ahmedabad (Respondent) PAN: ABOPM4404B (Appellant) ITA No. 1426 Ahd 2011 Assessment Year 2006-07 Smt. Raxa S. Mehta Commissioner of Subhash Corporation, Income Tax-III, 1 s t Jay Bungalow, 132 ft. Vs Floor, C.U. Shah Ring Road, Satellite, Chamber, Ashram Ahmedabad Road, Ahmedabad PAN: ABOPM4405A (Respondent) (Appellant) ITA No. 1427 Ahd 2011 Assessment Year 2006-07 I.T.A Nos.1165, 1426 to 1428 Ahd 2011 A.Y. 2006-07 Page No 2 Four different assessees vs. CIT Smt. Rachna Y. Parikh Commissioner of Subhash Corporation, Income Tax-III, 1 s t Jay Bungalow, 132 ft. Vs Floor, C.U. Shah Ring Road, Satellite, Chamber, Ashram Ahmedabad Road, Ahmedabad PAN: ABRPP6212B (Respondent) (Appellant) ITA No. 1428 Ahd 2011 Assessment Year 2006-07 Smt. Usha Pradipbhai Commissioner of Mehta Subhash Income Tax-III, 1 s t Corporation, Ja y Vs Floor, C.U. Shah Bungalow, 132 ft. Ring Chamber, Ashram Road, Satellite, Road, Ahmedabad Ahmedabad (Respondent) PAN: ABOPM4406D (Appellant) Revenue by: Smt. Vibha Bhalla, CIT-D.R. Assessee by: Shri S.N. Soparkar with Parin Shah, A.R. Date of hearing : 30-08-2016 Date of pronouncement : 26-09-2016 ORDER PER : S. S. GODARA, JUDICIAL MEMBER:- These four different assessees have instituted instant as many appeals for assessment year 2006-07 against separate orders of CIT, Ahmedabad; all dated 22-03-2011, in case No. HQ. I.T.A Nos.1165, 1426 to 1428 Ahd 2011 A.Y. 2006-07 Page No 3 Four different assessees vs. CIT Tech. III 263-3 2009-10, HQ. Tech. III 263- 6 2009-10, HQ. Tech. III 263-5 2009-10, & HQ. Tech. III 263-4 2009-10, respectively; in proceedings u s 263 of Income Tax Act, 1961; in short Act . 2. Both parties inform us at outset that this batch of four appeals raises identical grounds issues. We accordingly take up ITA No 1165 Ahd 2011 in case of Smt. Sonal Dipakbhai Mehta as lead case involving following substantive grounds:- 1. Ld. CIT has erred in law and on facts in passing order u s 263 of act holding assessment order passed in scrutiny proceedings u s 143 (3) of act as erroneous and prejudicial to interest of revenue to extent of acceptance of claim of long term capital gain on sale of shares being exempt u s 10 (38) of Act. learned CIT failed to appreciate fact that assessment order sought to be revised was passed after proper inquiry and verification by AO of claim made by appellant and hence this order of CIT, which is totally erroneous, prejudicial and against principles of Natural Justice deserves to be quashed. 2. Ld. CIT has erred in facts and on law in issuing directions to AO to frame fresh assessment simply because it appeared to him that assessment order in scrutiny proceedings was passed without considering vital facts and without making necessary inquiries. Ld. CIT grievously failed in forming opinion that assessment order was erroneous and prejudicial to interest of revenue without dealing with inquiries conducted and facts verified by AO after taking into consideration various submissions, evidences and factual information gathered during assessment proceedings. 3. Ld. CIT has erroneously directed AO to re adjudicate of long term capital gain arising out of sale of shares and claim of exemption u s 10(38) of Act afresh without taking into consideration submissions, documentary evidence and factual matrix placed on record by appellant in revisional proceeding, that was considered by AO while passing scrutiny order. This action of Ld. CIT is harsh, uncalled for and completely against principles of I.T.A Nos.1165, 1426 to 1428 Ahd 2011 A.Y. 2006-07 Page No 4 Four different assessees vs. CIT Natural Justice. order passed by Ld. CIT in revisional proceedings deserves to be quashed. 3. assessee-an individual derives income from business and other sources as per assessment order dated 31-12-2008. She filed return on 31-01-2007 stating total income of Rs. 3,28,080 -. same stood processed. Assessing Officer then completed regular assessment hereinabove accepting returned income. 4. We proceed further to notice that CIT thereafter formed opinion that above regular assessment was erroneous causing prejudice to interest of Revenue. He accordingly issued section 263 show cause notice dated 23-12-2009 reading as follows:- 1. On verification of your case for Asstt.Year 2006-07, it is seen that assessment order passed under section 143(3) of I.T. Act, 1961 by ITO Wd.-7(2), Ahmedabad on 31-12-2008 is erroneous in so far as it is prejudicial to interests of revenue for reasons mentioned in subsequent paragraphs. 2. (I) ITO Ward-7(2), Ahmedabad has finalized order determining total income at Rs.3,28,080 - accepting return income. It is seen that assessee has shown long term capital gain in return of income for A.Y. 2006-07. This capital gain was on account of sale of their share holding in M s. Vishal Exports Overseas Ltd, Ahmedabad based company but due to lack of time, logical conclusion could not be arrived at. However, initial impression was that share transactions have been maneuvered and prices of script have been largely influenced by few persons. shares of M s. Vishal Exports Overseas Ltd have been kept at high value artificially through brokers in order to generate capital gain, since value of these shares dropped immediately after impugned sale of shares. Also it is observed that 2839 trades have been taken place with Religare Securities Ltd. number of trades with Harikihan Harilal was not ascertainable. Thus minimum of I.T.A Nos.1165, 1426 to 1428 Ahd 2011 A.Y. 2006-07 Page No 5 Four different assessees vs. CIT 2839 sale transactions have been conducted within short period of 05 07 2005 to 09 08 2005 i.e. just over one month. This required much thought and planning especially since it was inter-woven with transaction of at least three other assessees. In these 2839 trade's over 73,01,335 shares have been sold at value of Rs. 15,33,24,628 -. These facts would imply that case would be covered by Board's Circular No. 4 of 2007. 2.(II) Another angle to this issue is to discover that certain bank accounts were opened in name of certain individuals introduced by either M s. Vishal Exports Overseas Ltd or by people close to assessee and money was circulated through these bank accounts. 2.(Ill) Also information is available on file that certain individuals who have purchased shares of M s. Vishal Exports Overseas Ltd have shown business losses in their-returns which have been adjusted against their business profits. Thus, assessee has claimed LTCG from sale of shares which is exempt from tax and on other hand losses on sale of same shares which have been shown as business losses in hands of purchasers who have thus reduced their tax liability. 2.(IV) Apart from this, in balance sheet, there are residential properties shops owned assessee and aspect of income from such properties have not been verified by Assessing Officer keeping in view of-section 23 of Act as it is observed that assessee has not claimed vacancy allowance in respect of following property known as Vishal House. 3. In view of above facts of case, assessment finalized u s. 143(3) of Act in case of assessee is erroneous and prejudicial to interest of Revenue in so far as issue of Long Term Capital Gains has not been verified investigated into. 5. This case file reveals that CIT issued another show cause notice dated 03-01-2011 containing following reasonings:- On verification of your case record for Asstt.Year 2006-07, it is seen that assessment order dated 31-12-2008 passed by ITO Ward-7(2), Ahmedabad under section 143(3) of I.T. Act, I.T.A Nos.1165, 1426 to 1428 Ahd 2011 A.Y. 2006-07 Page No 6 Four different assessees vs. CIT 1961 is erroneous in so far as it is prejudicial to interest of revenue for reasons mentioned in subsequent paragraphs 2. (I) In return of income filed, you have shown Long Term Capital Gain on account of sale of shares of M s. Vishal Exports Overseas Ltd, Ahmedabad based company, but due to lack of time, ITO Ward-7(2), Ahmedabad could not arrive at logical conclusion on these share transactions, therefore, he had finalized order determining total income at Rs.3,28,080 - accepting returned income. Initial impression was that share transactions were maneuvered and prices of script were largely influenced by few persons. shares of M s. Vishal Exports Overseas Ltd were artificially kept at high value through brokers in order to generate capital gain, since value of these shares dropped immediately after impugned sale of shares. Also it was noticed that 2839 trades were taken place with Religare Securities Ltd. number of trades with another entity, viz. Harikihan Harilal was not ascertainable. Thus, minimum of 2839 sale transactions were effected within short period of 05 07 2005 to 09408 2005 i.e. just over one month, which required much thought arid planning especially since it was inter-woven with transactions of at least three other persons. In these 2839 trades, over 73,01,335 shares were sold at value of Rs.15,33,24,628 -. These facts would imply that case would be covered by Board's Circular No. 4 of 2007. 2.(II) Certain bank accounts were opened in name of some Individuals introduced by either M s.Vishal Exports Overseas Ltd or by people close to assessee and money was circulated through these bank accounts. 2.(Ill) . Also information is available on record that certain individuals who have purchased shares of M s. Vishal Exports Overseas Ltd had declared business losses in their returns which were adjusted against their business profits. Thus, you have claimed LTCG from sale of shares which is exempt from tax and on other hand losses on sale of same shares which were declared as business losses in hands of purchasers who in turn reduced their tax liability. 2.(IV) Apart from this, in balance sheet, there are residential properties shops owned by you and aspect of income from such properties were verified by Assessing Officer, keeping I.T.A Nos.1165, 1426 to 1428 Ahd 2011 A.Y. 2006-07 Page No 7 Four different assessees vs. CIT in view of section 23 of Act as it is observed that you have not claimed vacancy allowance in respect of property known as Vishal House. 3. In view of above facts of case, assessment finalized u s. 143(3) of Act in your case is erroneous and prejudicial to interest of Revenue in so far as issue of Long Term Capital Gains was not verified investigated into by Assessing Officer. 6. assessee filed her reply strongly contesting above show cause notice inter alia pleading therein that impugned regular assessment had been completed after making all inquiries and seeking detailed information & clarifications which were duly verified. Her further case was that various hearings had taken place during scrutiny as evidenced from assessment demonstrating confirmations thereof. assessee claimed to have filed all relevant documents including her balance sheet from assessment year 2004-05 to 2006-07 qua impugned sale of shares, copies of demat accounts, payment received and long term capital gains in question. She further stated that Assessing Officer had framed impugned regular assessment under CIT-III s directions after getting various direct information from bankers maintaining her accounts, he obtained statement copies of concerned brokers as well. assessee requested CIT to call for relevant proceedings sheet as well. 7. This case file indicates that assessee further stated before CIT that it was wrong to say that Assessing Officer did not have sufficient time to arrive at logical conclusion qua impugned I.T.A Nos.1165, 1426 to 1428 Ahd 2011 A.Y. 2006-07 Page No 8 Four different assessees vs. CIT share transactions, allegation of artificial maneuvering thereof was not based on any evidence but on mere assumptions and presumptions, M s Vishal Exports Shares had been heavily traded in NSE for commercial expediency reasons etc. assessee also explained that she was original allottee of shares in question since 1995 followed by bonus shares issued upto 2003 treated as investments only. Her case was that share purchase business losses were thus not material. assessee replied qua latter issue of vacancy allowance that same was never claimed during assessment. She accordingly sought to drop impugned section 263 show cause notice. 8. case file demonstrates that assessee s explanations stood rejected in CIT s order under extracted below:- 8. M s Vishal Export Overseas Ltd. was once renowned Export Company, set up in 1995. Company was family owned. Details of share holding on 31-3-2003 were as under: Subhash Chhagan Mehta 9.71% Kanta Subhash Mehta (Wife) 4.93% Pradeep Deepak Subhash Raksha Rachna Y. Subhash Subhash Parikh Mehta Mehta 24.38% Mehta 7.29% 7.29% 24.41%(son) (son) (daughter) (daughter) Usha (W)-Sonal Deepak Subhash Mehta 2.77% Mehta 15.21% I.T.A Nos.1165, 1426 to 1428 Ahd 2011 A.Y. 2006-07 Page No 9 Four different assessees vs. CIT (daughter in (daughter in law) law) 9. In April, 2004 ladies of Vishal Export Overseas Ltd. Group made public offer for sale of, 60 lakh shares at price of Rs.45 - per share. details of share holding in VEOL pre IPO and post IPO is as under: Total shares held by Promoter group prior to Post IPO IPO Sr. Name Face Number Percent Number % of age of No value shares shares 1 Shri DipakS. 5 58,52,000 24.38 58,52,000 24. Mehta 38 2. Shri Pradeep 5 51,39,557 21.42 51,39,557 21.42 S. Mehta 3. Smt. 5 36,50,667 15.21 14,60,267 6.0 Sonalben D. Mehta 4. Smt. Ushaben 5 23,45,333 9.77 9,38,133 3.9 P. Mehta 5. Shri 5 23,31,557 9.71 23,31,557 9.71 Subhashchan dra C. Mehta 6. Smt. 5 17,48,667 7.29 6,99,467 2.91 Rachnaben Y. I.T.A Nos.1165, 1426 to 1428 Ahd 2011 A.Y. 2006-07 Page No 10 Four different assessees vs. CIT Parikh 7. Smt. Raxaben 5 17,48,667 7.29 6,99,467 2.91 M.Doshi 8. Smt. 5 11,83,552 4.93 8,79,552 3.67 Kantaben S. Mehta 9 General 5 Nil Nil 60,00,000 25 Public Total 2,40,00,00 100% 2,40,00,00 100% 0 0 10. Thereafter shares were split and for each share of Rs. 5, five shares of Rs. 1 were issued. share holding of ladies of VEOL group after split was as under: Name No. No. of shares held a) Rachna Y. Parikh 34,97,335 b) Ushaben P. Mehta 50,40,665 c) Raksha S. Mehta 34,97,335 d) Sonal D. Mehta 73.01,335 TOTAL 1,93,36,670 11. During Financial Year 2005-06 ladies of VEOL group sold all their shares and earned capital gain. sale transactions are summarized as under: Name No. of shares Capital Gain a) Rachna Y. Parikh 34,97,335 Rs.7,56,80,237.45 b) Ushaben P. Mehta 50,40,665 Rs. 10,07,26,357.08 c) Raksha S. Mehta 34,97,335 Rs.7,58,55,692.78 d) Sonal D. Mehta 73,01,335 Rs.15,33,24,626.87 TOTAL 1,93,36.670 Rs. 40,55,86,914.18 I.T.A Nos.1165, 1426 to 1428 Ahd 2011 A.Y. 2006-07 Page No 11 Four different assessees vs. CIT 12. These shares were sold through stock exchange between 29 June, 2005 to 9th August, 2005. movement of these shares was very restricted before and after that period. Also price of scrip escalated during this period and it fell there after. From bills of share transactions submitted by assessees, it is seen that all above assessees have sold shares through their broker M s Harikishan Hiralal (SEBI Regn. No. INV010797912 - Clearing No.267) and Fortis Securities Limited (Now Religare) (SEBI Regn. No. INB230653732 - Clearing No. 06537). 13. Scrutiny of bank account of these assessees reveals that large number of transactions of high value were made through their bank accounts during relevant period. It was gathered that funds had been rotated through numerous accounts in single day. It was ascertained from information provided by bank authorities that some of bank accounts had been opened in this particular period for specific purpose of rotating funds. head offices of number of concerns through which money was rotated were located outside Ahmedabad and in some cases even outside Gujarat. other noticeable fact or was that all accounts were introduced by Vishal Export Overseas Limited. For example M s Shah & Sanghvi Agro Pvt. Ltd. C-302, Rajkishore Co.Op. Hsg. Soc. M.G. Road, Kandivali (W), Mumbai had opened bank account in Kalupur Commercial Co-operative Bank, Ashram Road Branch on 01-07-2005. Vishal Export Overseas Limited had introduced this account. From statement of account it was quite evident that all transactions entailed rotation of funds. Funds were either transferred in or transferred out on very same day. 14. few instances of rotation of funds and opening of bank accounts in Kalupur Commercial Co-operative Banks are given below: FEW INSTANCES OF FUND ROTATION Date : 8 7 2005 Amount of Cheque : Rs.1,00,90,000 Vishal Sonal D. Dipak Mehta Khazana Vishal Export Mehta (A c (A c No. Consultancy Export (A c No. 2295) 2298) Pvt. Ltd. (A c No. No. (A c No. 2134)\ 2134) 7383) I.T.A Nos.1165, 1426 to 1428 Ahd 2011 A.Y. 2006-07 Page No 12 Four different assessees vs. CIT Date : 8 7 2005 Amount of Cheque: Rs. 1,01,95,000 Vishal Usha P. Pradip Mehta Khazana Vishal Export Mehta (A c (A c No. Consultancy Export (A c No. 2299) 2294) Pvt. Ltd. (A c (A c No. No. No. 7383) 2134) 2134) Date : 8 7 2005 Amount of Cheque : Rs.1,00,90,000 Vishal Raxa S. Dipak Mehta Khazana Vishal Export Mehta (A c (A c No. Consultancy Export 2298) (A c No. 2300) Pvt. Ltd. (A c No. No. 2134) (A c No. 2134) 7383) Date : 8 7 2005 Amount of Cheque : Rs.1,69,50,000 Yishal Kanta Subhash Khazana -> Vishal Export S. chandra Mehta Consultancy Export (A c (A c Mehta (A c No. 2296) Pvt. Ltd. No. 2134) No. (A c No. (A c No. 2134) 2297) 7383) Date : 8 7 2005 Amount of Cheque : Rs.2,73,40,000 Vish Dipak Khazana Vishal Export (A c No. al Mehta (A c Consultanc 2134) Exp No. 2298) y Pvt. Ltd. ort (A c No. (A c 7383) No. 213 4) I.T.A Nos.1165, 1426 to 1428 Ahd 2011 A.Y. 2006-07 Page No 13 Four different assessees vs. CIT Date : 4 1 2006 Amount of Cheque : Rs.1,39,41,000 Vish Shah & Vishal Vishal Export (A c No. al Sanghvi Plastomer 2134) Exp (A c No. (A c No. ort 7384) 2420) (A c No. 213 4) Date : 2 3 2006 Amount of Cheque : Rs.40,00,000 (5 instances) Vishal Jayraj Agro Vishal Vishal Export (A c No. Export (A c No. Plastomer 2134) (A c 7405) (A c No. No. 2 2420) 134) Date: 29 3 2006 Amount of Cheque : Rs.50,00,000 (4 instances) Vishal ALGI Vishal Vishal Export (A c No. Export (A c No. Plastomer 2134) (A c 7424) (A c No. No. 2420) 2134) NEW ACCOUNTS INTRODUCED BY VISHAL EXPORTS Name Address Date of openin g Shah & Sanghvi C-302, Raj Kishore Co. Op. Housd. Socy., 1 7 20 M.G.Road, Kandiwali, Mumbai . 05 Jayraj Agro Pvt. B-3204, Khazaria Tilak TASK.Road, Kantiwali, 4 8 20 Ltd. Mumbai 05 ALGI Impex Pvt. 301, Shanta Sadan, Anandnagar, Vasai, Thane 24 8 2 Ltd. 005 I.T.A Nos.1165, 1426 to 1428 Ahd 2011 A.Y. 2006-07 Page No 14 Four different assessees vs. CIT Well Worth 408, Saman Complex, Vastrapur, Ahmedabad 20 6 2 Overseas Ltd. 005 GCCL Sakar-I, Ashram Road, Ahmedabad 19 8 2 Infrastructure & 005 projects Ltd. 15. name of purchasing parties was obtained. It was noticed from list that some of persons had purchased large number of shares of VEOL on certain dates and had booked losses on these shares. A) Dipak J. (-)Rs.44,15,842 - Panchal HUF B) Tejas K. Patel (-)Rs.l,05,84,401 - amount of Rs.90 lakhs was paid to this person by Smt. Sonal D. Mehta on 18-7-2005 and another amount of Rs.90 lakhs was paid by Usha P. Mehta on same day. C) Uday H. Vora (-)Rs.36,62,936 - 16. above facts could not be confronted to assessees because none attended in 263 proceedings after 16-3-2011. 17. It would, therefore, appear that case is not as simple as learned A.R. would have us believe. There also appears to be element of criminality involved because Sri Subhashchandra C. Mehta, Sri Dipak S. Mehta and Sri Pradeep S. Mehta were arrested by CBI in February, 2010 for committing financial fraud of around Rs.500 crores. Trading in shares of VEOL has been suspended and when last heard shares of VEOL were quoted at Rs.0.45. I.T.A Nos.1165, 1426 to 1428 Ahd 2011 A.Y. 2006-07 Page No 15 Four different assessees vs. CIT 18. Lastly, there is no evidence to show that assessment order was finalized under guidance of Commissioner of Income- tax. 19. In light of above discussion it appears that assessment order was passed by A.O. without considering vital facts and without making necessary enquiries. Therefore, order passed by A.O. is erroneous and prejudicial to revenue which is being set aside on issues enumerated in notice u s. 263. A.O. is directed to pass fresh assessment order after giving due opportunity to assessee. 9. Learned Authorized Representative raises multi-folded arguments in course of hearing. His first plea is that Assessing Officer had issued detailed questionnaire in section 142(1) notice dated 14-07-2008 (query no. 8) asking for details of share purchases, names of scrips, no. of units, date of sale qua exempt income and long term capital gains. He takes us to page 51 of paper book comprising of yet another show cause dated 18- 09-2008 raising specific questions on long term capital gains issue. Learned counsel then refers page 53 to 180 to state that assessee had filed all necessary details of her family members, demat account, bank account statements, balance sheet, P & L account, capital accounts for assessment years 2004-05 to 2006-07 with long term capital gains charts, ledger account of M s. Vishal Exports along with those of two brokers M s. Harikishan Hiralal and Fortis Securities coupled with brief history of above export firm. assessee accordingly contends that this is certainly not case of no inquiry at all as per hon ble jurisdictional high court s decisions i.e. CIT vs. Nirma Chemical Works (2009) 309 ITR 67 I.T.A Nos.1165, 1426 to 1428 Ahd 2011 A.Y. 2006-07 Page No 16 Four different assessees vs. CIT (Gujarat), and in tax appeal no. 177 of 2016 decided on 29-06-2016 DCIT vs. Shri Prakash B. Khatri. 10. Shri Soparkar s next argument refers to CBDT circular no. 4 2007 and states that same is no longer good law since superseded by yet another circular no. 6 of 2016 dated 29-02-2016 itself clarifying that where listed shares and securities are held for period of more than 12 months immediately preceding transfer investor concerned desires to treat same as capital gains, it shall not be put to dispute. 11. assessee s third argument is that CIT has traversed beyond his section 263 show cause reason whilst exercising revisional jurisdiction wherein original show cause was very much vague one not indicating all necessary details of account holder. We invited Shri Soparkar s attention to page 16 of CIT s order at this stage that all this material could not be confronted to assessee because of her absence in section 263 proceedings on 16- 03-2011. And also that hon ble apex in latest decision CIT vs. Amitabhvachan (2016) 384 ITR 200 (SC) has decided every issue of CIT s action in traversing beyond section 263 show cause notice reasons in Revenue s favour. Learned counsel produces hon ble Bombay high court s decision in CIT vs. Nirav Modi Income Tax Appeal No. 117 2014 decided on 16-06-2016 as well as co-ordinate bench decision in (2016) 72 taxmann.com 127 (Kol) Damodar Valley Corporation vs. DCIT to have already distinguished same. I.T.A Nos.1165, 1426 to 1428 Ahd 2011 A.Y. 2006-07 Page No 17 Four different assessees vs. CIT 12. assessee further clarifies that issue of vacancy allowance is not being contested. She accordingly prays for acceptance of her appeal. 13. Revenue strongly objects to assessee s arguments. It takes us to impugned assessment order. It inter alia states that there is no discussion at all qua assessee s long term capital gains rather Assessing Officer has ignored this clinching aspect by observing that assessee derives business income and from other sources without even verifying her explanation sought to be obtained by various show cause notices. Ms. Bhalla invites our attention to note sheet dated 20-10-2015 in instant case file directing Revenue to produce all assessment records. She states that same is very much available now. She produces on record CIT-III s Ahmedabad letter dated 11-08-2009 addressed to CIT-II reading as follows:- Sub:- Report in cases of claim of LTCG in shares of Vishal Exports Overseas Limited. Kindly find enclosed herewith report of I.T.O. Ward 7(2), Ahmedabad and of Additional C.I.T. Range-7, Ahmedabad. 2. It may be stated that I.T.O. Ward 7(2) had brought to my notice last year that in cases of four ladies i.e. Rachna Y. Parikh, Ushaben P. Mehta, Raksha S. Mehta and Sonal D. Mehta were shown long term capital gains of Rs.40,55,86,914.98 in returns of income for asstt. Year 2006-07. This capital gain was on account of sale of their share holding in M s Vishal Exports Overseas Ltd. Ahmedabad based company. In short time available with I.T.O. and despite his pendency of more than 600 scrutiny cases, I.T.A Nos.1165, 1426 to 1428 Ahd 2011 A.Y. 2006-07 Page No 18 Four different assessees vs. CIT inquiries were got conducted in Delhi and Bombay and in A.hmedabad. However, no evidence was forth coming to support initial impression that these capital gains were because of introduction of unaccounted cash in some hands. But inquiries did reveal that shares of M s Vishal Exports Overseas Ltd. have been kept at high value artificially through brokers in order to generate capital gains. 3. similar pattern was also seen in earlier assessment year 2005-06. Due to shortage of time, tremendous pressure of scrutiny assessments and lack 6f evidence, assessments had to be completed on returned income in case of all four ladies. 4. But evidence collected so far was again reviewed by me some time last month and new Addl. C.I.T. was asked to submit report in matter after going through evidence collected so far and any-other evidence that could be collected from formal and informal sources. present report of Addl. CIT. Range-7 is result of these directions. 5. Addl. CIT. Range-7 has utilized internet and website of NSE and BSE to collect further evidence which confirms suspicion that long term capital gains earned by four ladies was result of artificial propping up of shares of Vishal Exports Overseas Ltd. specially since value of these shares dropped immediately after sale of impugned shares. 6. Another angle to this issue is discovery that certain bank accounts were opened name or certain individuals introduced by either M s Vishal Exports Overseas Ltd. or by people close to four ladies and money was circulated through cheques in these bank accounts. impression that one gets on examining these bank accounts is that these accounts have been utilized to show circulation of money but we are unable to ascertain at this stage, bigger purpose behind same. 7. Information is also available on file that certain individuals who have purchased shares of M s Vishal Exports Overseas Ltd. have shown business losses in their returns which have been adjusted against their business profits. Thus we have on one hand gains from sale of shares which are exempt from tax and on other hand losses on sale of same shares which have been shown as I.T.A Nos.1165, 1426 to 1428 Ahd 2011 A.Y. 2006-07 Page No 19 Four different assessees vs. CIT business losses in hands of purchasers who have thus reduced their tax liability. 8. It is evident that huge amounts of exempt income has been earned by manipulating value of shares of M s Vishal Exports Overseas Ltd. by certain individuals including four lady assessees in which brokers may also have been involved. Full inquiry into all ramifications of this issue would require inquiries in hands of individuals being assessed in different charges of Ahmedabad and also out side Ahmedabad. This is beyond wherewithal of ITO. Ward. 7(2), Ahmedabad. only organization which is equipped to make it full-fledged inquiry is Investigation Wing. Since amount involved is very substantial and extensive inquiries have to be made to confirm initial impression, it is requested that, if approved, matter may be referred to Investigation Wing at Ahmedabad for full-fledged inquiries. 9. As far as four ladies are concerned, I am directing Addl. CIT. Range-7 and ITO. Wd. 7(2), Ahmedabad to examine feasibility of moving proposal u s. 263 for taxing these Long Term Capital Gains as business profits in A.Y. 2006-07, and, if possible, A.Y. 2005-06 also. 14. Revenue s stand accordingly is that there is no evidence in case file indicating CIT-III to have supervised impugned regular assessment. It thereafter files on record complete compilation of assessment note sheets as follows:- 1. Return of income was filed with ITO, Wd. 7(2) vide receipt No. 0721016306 on 31 1 2007 declaring total income at Rs. 328080 -. 2. case was selected under CASS. 28 12 07 Notice u s. 143(2) was issued on 28 12 07 for hearing on 4 1 2008 14 07 08 Notice u s. I42(1) was issued on 14 07 2008 for hearing on 26 8 08 I.T.A Nos.1165, 1426 to 1428 Ahd 2011 A.Y. 2006-07 Page No 20 Four different assessees vs. CIT 16 10 08 In response to said notice Shri G.N. Patel, ITP attended on behalf of assessee and filed details called for. 15. Revenue then highlights fact that Assessing Officer did not apply his mind at all on relevant details filed on record as evidenced from his extracted note-sheet. Its case is that Assessing Officer has rather kept documents on record. Ms. Bhalla raises very objection of assessee s certification that all relevant details contained in paper book confirm to case records. She accordingly prays for upholding CIT s order under challenge. 16. We afforded rebuttal opportunity to assessee. Shri Soparkar reiterates submissions already made. He is however unable to prove fact that assessee had placed on record all relevant details of her long term capital gains in question. 17. We have heard both parties. There is no dispute that CIT has exercised his revisional jurisdiction u s. 263 of act by terming impugned regular assessment as erroneous causing prejudice to interest of Revenue mainly on ground that Assessing Officer did not inquire and verify into assessee s long term capital gains arising from sale of shares in M s Vishal Exports. It has come on record that Assessing Officer merely issued questionnaire of long term capital gains vide scrutiny notice dated 14- 07-2008 and 18-09-2008 (supra). assessee claims to have filed I.T.A Nos.1165, 1426 to 1428 Ahd 2011 A.Y. 2006-07 Page No 21 Four different assessees vs. CIT all these details. We do not find any such particulars to be emanating from case records produced at Revenue s behest who raises strongly pitch challenging correctness of certification of contents in paper book. We infer in these facts that assessee has not placed on record her long term capital gains so as to enable Assessing Officer to conduct further necessary inquiry verification. Our inference is further strengthened from fact that assessment note-sheets extracted hereinabove nowhere discuss same at all. We take note of fact that Assessing Officer merely states that assessee derives business income and from other sources i.e. without even making mention of her long term capital gains. assessee has also failed in proving fact that CIT-III, Ahmedabad had ever supervised impugned regular assessment. All this leads us to conclusion that impugned assessment is case of no inquiry so as to render this regular assessment exigible to invoking CIT s section 263 jurisdiction. 18. We now come to assessee s reliance of catena of case law i.e. Nirma Chemical Works and Shri Prakash B. Khatri (supra). We do not find these judicial precedents to be applicable in facts of case wherein it has been already held to be case of no inquiry. Assessee s reliance on board circular on merits of issue is accordingly rendered academic. 19. We proceed to deal with assessee s crucial argument that CIT has not acted as per law in exercising section 263 jurisdiction I.T.A Nos.1165, 1426 to 1428 Ahd 2011 A.Y. 2006-07 Page No 22 Four different assessees vs. CIT whilst traversing beyond show cause notice reasons. We observe first of all that there is no argument on assessee s behest qua violation of principles of natural justice as not having been met since she did not come present in course of section 263 proceedings. Hon ble apex court (supra) has already upheld similar instance of CIT s jurisdictional beyond reasons contained in section 263 notice. Learned Co-ordinate bench decision in Damodar Valley case (supra) is found to be involving different set of facts wherein section 263 show cause notice dealt with Assessing Officer s action in assessment wrongly applying section 32(1)(iia) to that of no inquiry without affording opportunity of hearing. This bench holds in para 6.3 that CIT concerned can deal with other reasons only after putting assessee to notice and not otherwise. We reiterate that this assessee had already been put to notice in section 263 proceedings (supra). 20. This leaves us with hon ble Bombay high court decision in Nirav Modi s case (supra). We find that this case involved regular assessment wherein Assessing Officer had made necessary inquiry and examined evidence to adopt one of possible view as against facts of instant case already held to be instance of no inquiry. assessee s arguments are accordingly devoid of merit. same stand rejected accordingly. We find no reason to interfere with CIT s order under challenge. ITA 1165 Ahd 2011 fails. I.T.A Nos.1165, 1426 to 1428 Ahd 2011 A.Y. 2006-07 Page No 23 Four different assessees vs. CIT 21. We come to remaining three appeals ITA 1426 to 1428 Ahd 2011 involving as many different assesseees. Both parties indicate that issues involved therein are same as decided in Revenue s favour hereinabove. We notice that these assessees also challenge CIT s order invoking section 263 jurisdiction on very background of facts. We uphold these CIT s orders as well. Same orders to follow in ITA Nos. 1426 to 1428 Ahd 2011. 22. All these four assessees appeals are dismissed. Order pronounced in open court on 26-09-2016 Sd - Sd - (PRAMOD KUMAR) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 26 09 2016 ak Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order , , Sonal Dipakbhai Subhash Corporation v. Commissioner of Income-tax-III, Ahmedabad
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