Balbir Chand Maini v. Commissioner Of Income Tax-Iiiludhiana And Another

Income Tax Appeal No.173 of 2007 [1] IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 173 of 2007Date of decision: 5.4.2011 Balbir Chand Maini --- Appellant Versus Commissioner of Income Tax-IIILudhiana and another --- Respondents --- CORAM:HON’BLE MR. JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present:Mr. Akshay Bhan and Mr. Animesh Sharma, Advocatesfor the appellants. Mr. Denesh Goyal, Standing Counsel for the respondent-Revenue. --- AJAY KUMAR MITTAL, J. The paper-book of this case has not been received from theconcerned Branch as the same is said to have been burnt in the fireincident that took place in the premises of this Court on the night of 30thJanuary, 2011. Learned counsel for the appellant has made available twocopies of paper-book to the Court for reconstruction of the file. The saidcopies are taken on record and the file of the appeal is treated as havingbeen reconstructed. 2. This appeal under Section 260A of the Income-Tax Act, 1961(for short “the Act”) has been filed by the assessee against the orderdated 28.11.2006, passed by the Income Tax Appellate TribunalChandigarh Bench ‘A’, Chandigarh (in short “the Tribunal”) in ITA No.731/CHANDI/2004, relating to the assessment year 1998-99. 3.The appeal was admitted for determination of the followingsubstantial questions of law by this Court: “(i)Whether in the facts and circumstances of the case, thereassessment proceedings could be carried when the noticeissued under Section 148 of the Act is found to be incorrect?reassessment proceedings could be carried when the noticeissued under Section 148 of the Act is found to be incorrect? (ii)Whether in the facts and circumstances of the case, thelearned ITAT was justified in arriving at the conclusion that thesale and purchase of the shares by the assessee was abogus transaction when there was no material on record onwhich such apprehensions could be based?learned ITAT was justified in arriving at the conclusion that thesale and purchase of the shares by the assessee was abogus transaction when there was no material on record onwhich such apprehensions could be based? 4.The facts, in brief, necessary for adjudication as narrated inthe appeal, are that the return for the assessment year 1998-99, filed bythe assessee on 31.10.1998 at the income of Rs. 7,93,140/- wasprocessed under Section 143(1) of the Act and accordingly a notice underSection 148 was issued to him on 29.5.2001. In response to the notice, the assessee again filed return on 16.10.2001 declaring the same incomeas shown in the return filed earlier. The Assessing Officer, however, videorder dated 21.3.2003 completed re-assessment at the income of Rs.20,24,602/-. It was found by the assessing officer that the assessee hadpurchased 30000 shares of M/s.Ankur International at the rate betweenRs. 2.50 and Rs. 3.40 per share, in the month of April, 1997 and out ofthose shares, he sold 24000 shares through a broker, namely, M/s. S.K.Sharma & Co. During reassessment proceedings, the assessing officercame to the opinion that the value of the said shares could not be as highas Rs.55/- per share and accordingly made an addition of Rs. 12,47,500/-to the income of the assessee as income from undisclosed sources.However, he determined a sum of Rs. 2,85,620/- as long term capitalloss, while computing the income. 5.The Commissioner of Income-tax (Appeals) {in short “the CIT(A)”}, by order dated 23.3.2004 deleted the additions made by theassessing officer whereas in the appeal taken by the Revenue, theTribunal vide order under challenge herein reversed the order of the CIT(A) and upheld the additions so made by the assessing officer. 6.We have heard learned counsel for the parties and haveperused the record. 5.The Commissioner of Income-tax (Appeals) {in short “the CIT(A)”}, by order dated 23.3.2004 deleted the additions made by theassessing officer whereas in the appeal taken by the Revenue, theTribunal vide order under challenge herein reversed the order of the CIT(A) and upheld the additions so made by the assessing officer. 6.We have heard learned counsel for the parties and haveperused the record. 7.Learned counsel for the assessee submitted that there was nojustification for the Tribunal not to accept the explanation of the assessee.The transaction entered into by the assessee was a genuine transactionand sale and purchase of shares was actually carried out and theassessee had earned capital gains thereon. The Tribunal had disbelievedthe same on conjectures and surmises. Learned counsel for theassessee further submitted that this was not a ground on which the re- opening was initiated under Section 148 of the Act by the assessingofficer and there was no justification in making addition on that countunder Section 148 of the Act. The said proceedings were, thus, againstlaw and are vitiated. 8. Learned counsel for the Revenue, on the other hand,supported the order passed by the Tribunal. He placed reliance on adecision of this Court in Income Tax Appeal No. 499 of 2005 (Som Nath Maini v. The Commissioner of Income Tax-II, Ludhiana), dated7.11.2006 wherein, in the case of family member of the assessee, ShriSom Nath Maini, this Court had held identical transactions to be non-genuine and upheld the order of the Tribunal on the similar ground. 9. We have gone through the record and do not find any forcein the argument of the learned counsel for the assessee. 10.The Tribunal while adjudicating the issue against theassessee had recorded a finding of fact that the transaction of sale andpurchase of shares of M/s. Ankur International Ltd. was not a genuinetransaction, a part where of relevant to the present issue, mentioned inpara Nos. 27 and 28 of the order, reads as under: “We would also like to refer to certain material on the basis ofwhich the finding of fact has been arrived at by the AssessingOfficer and confirmed by the Tribunal. The assessee hadfurnished evidence in regard to sale of shares through M/s.S.K. Sharma & Co. and the formal confirmation from thebroker. The Assessing Officer had recorded the statement ofShri S.K. Sharma of M/s. S.K. Sharma & Co. and demandeddetails about the sale of shares. Though M/s. S.K. Sharmaadmitted to have purchased the shares of M/s. Ankur “We would also like to refer to certain material on the basis ofwhich the finding of fact has been arrived at by the AssessingOfficer and confirmed by the Tribunal. The assessee hadfurnished evidence in regard to sale of shares through M/s.S.K. Sharma & Co. and the formal confirmation from thebroker. The Assessing Officer had recorded the statement ofShri S.K. Sharma of M/s. S.K. Sharma & Co. and demandeddetails about the sale of shares. Though M/s. S.K. Sharmaadmitted to have purchased the shares of M/s. Ankur International Limited from the assessee, yet it was found bythe Assessing Officer that he failed to produce the books ofaccount and other relevant documents. It was also found bythe Assessing Officer that the alleged sale of shares had nottaken place through any stock exchange. On scrutiny of thebooks of account of M/s. S.K. Sharma & Co., it was found bythe Assessing Officer that there were cash deposits in theirbank account preceding the issue of cheques in the name ofthe assessee for purchase of shares claimed to be the saleproceeds of the same shares received in advance. M/s. S.K.Sharma & Co. could not give the details of the purchaser ofthe shares. As pointed out earlier, the books of accounts ofM/s. S.K. Sharma & Co. were not produced. Other relevantdata which could show the genuineness of the transactionsbetween the assessee and M/s. S.K. Sharma & Co. were notproduced before the Assessing Officer. The contentionadvanced on behalf of the assessee that M/s. S.K. Sharma &Co. having confirmed to have issued the cheques in the nameof the assessee and the sale of shares having taken placethrough them, no addition could be made in the hands of theassessee for non-production of records by M/s. S.K. Sharma& Co. The contention advanced on behalf of the assesseeappears to be attractive at first sight. So, however, when allthe facts and circumstances of this case are viewed in totality,the assessee cannot be said to have discharged the onus inregard to the genuineness of the transaction of sale of sharesthrough M/s. S.K. Sharma & Co. The information appearing from the bank account of M/s. S.K. Sharma & Co. and thenon-production of the records relating to transaction by M/s.S.K. Sharma & Co. have got to be viewed in the light of theattendant facts and material collected by the AssessingOfficer. On enquiry by the Assessing Officer, it was found thatthe shares of M/s. Ankur International Limited had not beenquoted in Ludhiana Stock Exchange beyond 17.7.1997. As on17.7.1997, the said shares were quoted at Rs. 17/- per share.Thereafter the shares were not quoted at all. As per LudhianaStock Exchange records, there was no trading of shares ofM/s. Ankur International Limited after 17.7.1997. This is oneaspect of the matter. The other aspect of the matter is thatthe assessee had furnished evidence to establish that theshares of M/s. Ankur International Limited had been sold byone Shri Rajinder Bansal to Shri Anurag Rastogi and lattersold the same to Shri Sunil Bakiwal on the same date who inturn again sold back the same shares to the original allotteeShri Rajinder Bansal on the same date i.e. 9.2.1998. TheAssessing Officer accordingly held that it was a close circuittransaction and clearly a structured one. Other twotransactions of 100 shares each were also held to bestructured transactions. It was also found by the AssessingOfficer that the shares claimed to have been sold through M/s.S.K. Sharma & Co. had not been transferred even at the timeof making the enquiry by the Assessing Officer. The saidshares continued to be registered in the name of theassessee. 28. The Assessing Officer had also determined the value of shares of M/s. Ankur International Limited on the basis of thefinancial data collected by him and worked out the value ofshares not to be more than Rs. 9.37 per share by adoptingtwo methods for calculation of N.A.V. (net asset value).” 28. The Assessing Officer had also determined the value of shares of M/s. Ankur International Limited on the basis of thefinancial data collected by him and worked out the value ofshares not to be more than Rs. 9.37 per share by adoptingtwo methods for calculation of N.A.V. (net asset value).” 11. No perversity or error of law could be pointed out by thelearned counsel for the appellant so as to persuade this Court to interferewith the said findings which are accordingly affirmed. Further, in SomNath Maini’s case (supra), under identical circumstances this Court hadupheld the findings of the Tribunal against the assessee and held that nosubstantial question of law arises. Still further, Explanation-3 to Section147 of the Act has been inserted by Finance (No.2) Act, 2009,retrospectively from 1.4.1989 wherein it has been provided that theassessing officer is justified in making addition even in respect of thoseissues which come to his notice subsequently in the course of re-assessment proceedings though such issue was not included in thereasons recorded while initiating proceedings under Section 147 of theAct. In view of this, the argument raised by the learned counsel for theassessee does not carry any weight. 12.Accordingly, we find no merit in the appeal and the same isdismissed. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) JUDGE