Commissioner Of Income Tax-Iii v. Roselabs Finance Limited ==========================================================

C/TAXAP/1115/2008 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/TAX APPEAL NO. 1115 of 2008 ==========================================================COMMISSIONER OF INCOME TAX-IIIVersusROSELABS FINANCE LIMITED========================================================== Appearance:MS MAUNA BHATT for the PETITIONER(s) No. 1MRS SWATI SOPARKAR(870) for the RESPONDENT(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHIand HONOURABLE MR.JUSTICE B.N. KARIA Date : 13/06/2018 ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) Revenue is in appeal against the judgment of ITAT. Following question was framed at the time of admission of appeal : “Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by CIT(A) deletion of addition made u/s. 69 of the Income Tax Act, 1961 of Rs.82,11,558/-?” Respondent assessee is a company. While assessing the return for the assessment year 2004-2005, the Assessing Officer noticed a mismatch in the assessee's Demat account and the assessee's books of accounts concerning certain shares of Gujarat Arth Ltd. He noticed that Demat account showed a total of 7,26,695 shares to the credit of assessee which figure did not match with the assessee's accounts. Since opening balance in the account showed only 2,57,665 shares of the company, he confronted the assessee with such discrepancy. The assessee gave a detailed reply, principally, contending that the assessee had opening balance of 25,66,695 shares of the said company. During the year the assessee had received further 4,70,000 shares by way of a loan. Out of the total holding, the assessee had given 2,56,695 to one M/s. Cavalier Securities Ltd. on 22.10.2003. The assessee produced supporting material and confirmation from the said M/s. Cavalier Securities Ltd. The assessee further contended that despite repeated requests, M/s. Cavalier Securities Ltd. had not returned the shares. Later on, value of shares in cash as per the face value was received by the assessee from M/s. Cavalier Securities Ltd. only on 1.10.2006. Regarding 4,70,000 shares borrowed by the assessee from Tripex Overseas Ltd, it was contended that these shares still continued in the balance sheet of Tripex Overseas. The assessee had not purchased these shares. The assessee had therefore, not shown such shares in the balance sheet. The Assessing Officer had not accepted the explanations and added entire face value of total of 7,26,695 shares as assessee's undisclosed investment in terms of section 69 of the Income Tax Act. Assessee carried the matter in appeal. CIT (Appeals) allowed the appeal accepting the assessee's explanations. In a detailed order, he principally held as under. One, that the shares lent to M/s. Cavalier Securities Ltd. on 22.10.2003 were not returned despite repeated requests. The money was returned only on 1.10.2006 meaning such event fell outside the year under consideration and secondly, that the assessee had received 4,70,000 shares by way of borrowing and such shares continued to be shown in the balance sheet of lender company i.e Tripex Overseas. He also noticed that the Assessing Officer had ignored the closing balance of 2,57,665 shares of Gujarat Arth Ltd. Relevant portion of order of CIT (Appeals) reads as under : One, that the shares lent to M/s. Cavalier Securities Ltd. on 22.10.2003 were not returned despite repeated requests. The money was returned only on 1.10.2006 meaning such event fell outside the year under consideration and secondly, that the assessee had received 4,70,000 shares by way of borrowing and such shares continued to be shown in the balance sheet of lender company i.e Tripex Overseas. He also noticed that the Assessing Officer had ignored the closing balance of 2,57,665 shares of Gujarat Arth Ltd. Relevant portion of order of CIT (Appeals) reads as under : “4.1.2. It is seen that the appellant is stated to have lent shares of Gujarat Arth Ltd. numbering 2,56,695 to M/s. Cavalier Securities Ltd on 22-10-2003 which were not returned to appellant even after repeated requests and insisting. However, the appellant, had argued to receive the value of the shares in cash as per the face value and the same is stated to have been received by the appellant on 1-10-2006, therefore, there is no investment aspect involved for the assessment year under consideration since the assesses owned these shares even during previous year. Therefore, I am of the view that no addition is called for on this count. Since the appellant received the value of the shares only on 1-10-2006, obviously this transaction will not be reflected for this year. 4.1.3. With regard to borrowed shares of 4,70,000/also, it is seen from the balance sheets of the Tripex Overseas Ltd who are stated to have lent shares have been showing the said shares in its balance sheet. Therefore, it cannot be said that, the appellant had purchased these shares and made investment. The appellant is seen to have borrowed shares which are not yet purchased and, therefore the Tripex Overseas Ltd is still claiming they said shares possession in its balance sheet. 4.1.4. Hence, having verified the fade and circumstances of the case and also after perusing the submissions of the A. R. and also in. view of above discussions, I am of view that the addition made at Rs. 82, 11,588/- is uncalled for. Hence, the same is deleted.” Tribunal by a brief order confirmed these findings making the following observations : “7. Being aggrieved, the Revenue is in appeal before us. We have heard the parties and considered the rival submissions. The fact that the assessee has lent shares of Guajrat Arth Ltd. to M/s. Cavaliar Securities Ltd. on 20.10.2003, is not in dispute. it is also not in dispute that they were to return to the assessee even after request and insisting. The equivalent amount in cash was received by the assessee only on 1.10.2006 and, therefore, the CIT (A) was right in holding that there was no investment involved for the year under consideration and addition on this account can not be made in this year. As regards assessee borrowing shares of Rs.4,70,000/-, the fact is evident from the balance sheet of Tripex Overseas Ltd., who have lent these shares to the assessee. Here also, the assessee cannot be said to have purchased shares and made investments. M/s. Tripex Overseas Ltd., is showing these shares as an asset in their Balance sheet. In these circumstances, in our opinion, the ClT(A) was justified in holding the addition. No interference in his order is called for.” From the above it can be seen that CIT(Appeals) and Tribunal concurrently held that the assessee had duly explained the so-called discrepancy in its books of accounts vis-a-vis the Demat account concerning the assessee's holding of shares of Gujarat Arth Ltd. Assessing Officer had in fact, ignored even the closing balance of such shares in the books of accounts of assessee. We do not find that the Tribunal committed any error. Question is answered against the Revenue. Tax Appeal is dismissed. (AKIL KURESHI, J) raghu (B.N. KARIA, J)