Zikrullah Abbasali Choudhary v. Dy. Commissioner Of Income Tax… Respondentscircle 2(3), Pune

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 233 OF 2015 Zikrullah Abbasali Choudhary … Appellant vs. Dy. Commissioner of Income Tax… RespondentsCircle 2(3), Pune. …....... Mr. Ruturaj H. Gurjar i/b. Mr. M. C. Naniwadekar for the Appellant. Mr. Sham Walve for the Respondent. …....... P. C. CORAM : A.S. OKA & A.K. MENON, JJ.DATE : 31[st] OCTOBER, 2017 1.Heard learned Counsel appearing for the appellant. He has pressed into service the following questions of law which are formulated in paragraph 5 ofthe Memorandum of Appeal “1.Whether on the facts and in the circumstances of the case,the ITAT was justified in confirming the treatment of gainsreceived by the assesseee from sale of shares as “Income from othersources”, instead of “long term capital gains” as duly declared bythe assessee? 2.Whether on the facts and in the circumstances of the case,the ITAT was justified in law in relying on irrelevant materialsuch as the alleged “admission” by the assessee through assessee's letter dated 24.12.2009, when on a proper analysis of the saidletter, there is no such admission ? 3.Whether on the facts and in the circumstances of the case,the ITAT was justified in law in taking into account irrelevantmaterials, and not taking into consideration relevant materialsduly produced before it ? 2.On the basis of search conducted under Section 132 of the Income TaxAct, 1961 a notice under Section 153A was issued pursuant to which theappellant assessee filed a return declaring total income of Rs. 97,58,950/-. Inthe return, Long Term Capital gain of Rs.65,97,975/- was claimed on the basisof sale of shares of M/s. Tanu Health Care Ltd. and M/s. Comfort Intech Ltd.The Assessing Officer found that appellant-assesssee had purchased the saidshares at a very nominal price and had sold the same at a very high price. Itwas observed by the Assessing Officer that the appellant- assessee acquired theshares in March 2004 and the payment towards the same has been made inApril, 2005. The explanation offered by the appellant-assessee was that hehad asked his broker to buy the said stock for him and the payment was madeby him later on. The Assessing Officer called upon the appellant to Showcause as to why the capital gain should not be considered as income fromother sources. A letter dated 24[th] December, 2009 was submitted by theappellant to the Assessing officer. The material part of the said letter readsthus : “This is to bring to your kind notice that my shares dealings of M/s.Tanu Health Ltd. Purchased the shares of M/s. Tanu Healthcare Ltd.Through the brokers by paying Account payee Cheques. The purchase &sale of shares are made through my demat Account. Sale are also madethrough the brokers for which I have received the cheques. All these detailsI have submitted to your office. But there is constant pressure from your office to surrender theincome earned from the dealings in share of M/s. Tanu Healthcare Ltd. Assuch to buy the metal peace and to concentrate on my business affairsuninterruptedly I submit to your suggestions. Further, I assure you that I will pay the Income Tax on aboveincome, provided the Tax Liability is arrived at without Interest & Penaltyas promised by you.” 3.The Assessing Officer proceeded to consider the sum of Rs. 93,48,858/-declared by the appellant-assessee as “income from other sources”. Beingaggrieved by the Order of the Assessing Officer, an appeal was preferred bythe appellant before the Commissioner of Income Tax (Appeals). By thejudgment and order dated 20[th] February, 2012 the appeal was dismissed bythe Commissioner of Income Tax (Appeals). Being aggrieved by the saidorder, an appeal was preferred by the appellant-assessee before the AppellateTribunal which has been dismissed by the impugned judgment and order. Further, I assure you that I will pay the Income Tax on aboveincome, provided the Tax Liability is arrived at without Interest & Penaltyas promised by you.” 3.The Assessing Officer proceeded to consider the sum of Rs. 93,48,858/-declared by the appellant-assessee as “income from other sources”. Beingaggrieved by the Order of the Assessing Officer, an appeal was preferred bythe appellant before the Commissioner of Income Tax (Appeals). By thejudgment and order dated 20[th] February, 2012 the appeal was dismissed bythe Commissioner of Income Tax (Appeals). Being aggrieved by the saidorder, an appeal was preferred by the appellant-assessee before the AppellateTribunal which has been dismissed by the impugned judgment and order. 4. The submission of the learned Counsel appearing for the appellant isthat the Assessment Order as well as the appellate order of the first AppellateAuthority are passed only on the basis of the statement made by the appellant- assessee in the letter dated 24[th] December, 2009 without examining anyother material. He submitted that even the Appellate Tribunal was impressedby the contents of the said letter as is clear from paragraph 9 of the impugnedjudgment and order of the Appellate Tribunal. He pointed out that in fact, thesaid letter specifically records that the transactions were genuine as thepurchase and the sale of shares were through the demat account of theappellant and cheque payment was received from the brokers after the sale ofshares. His submission is that the letter read as whole does not constitute anyadmission of surrender of income. The submission is that the statement athighest will be an admission on point of law. 5.Lastly, he submitted that the Appellate Tribunal did not considermaterial proofs such as contract notes and the fact that the transactions weremade by account payee cheques. He would, therefore, submit that an order ofremand be made to the Appellate Tribunal with the direction to the AppellateTribunal to consider the material produced by the Appellant and thereafter todecide the issue whether Capital Gain of Rs.93,48,858/- claimed by theappellant can be treated as income from other sources. 6.We have given careful consideration to the submissions. After havingcarefully perused the impugned judgment and order, we do not agree withthe submission that the Appellate Tribunal was impressed only by contents ofthe said letter. In paragraph 6.3 and 6.4, the Appellate Tribunal after considering the various details and material produced by the appellant hasrecorded the following findings : 6.3From the various details furnished by the assessee we find the cost ofpurchase of shares of M/s. Tanu Health Care Ltd. Were made after alapse ofmore than one year from the date on which shares were purchased by thebroker. The assesssee was not known to the broker. During the course ofsearch the statement of the assessee was recorded wherein he has stated thatthe sale transactions were done as per advice of his friend Shri Anand Jaju,Pune who has expertise in share market. The relevant question and answerof the assessee are as under : Q.No.11 In your statement recorded on oath on 24-10-2007, you were asked aboutyour investment in shares of “Tanu Healthcare P. Ltd.” as it appears the transactionappears to be a colourable transaction wherein the payment for acquiring shares wasmade after a lapse of more than one year from the date on which the shares wereactually acquired by you. Do you have to offer your comment about this ? Ans :As stated earlier, I have entered into this transaction with a genuine belief toearn some profit. Accordingly, I have made cheque payment for this investment andhave recd. back some handsome returns through cheques only. As stated earlier, thiswas done as per advice of my friend Shri Anan Jaju from Pune who hold expertise inshare market investment. To the best of my knowledge, the entire transaction isgenuine and accounted for.” Ans :As stated earlier, I have entered into this transaction with a genuine belief toearn some profit. Accordingly, I have made cheque payment for this investment andhave recd. back some handsome returns through cheques only. As stated earlier, thiswas done as per advice of my friend Shri Anan Jaju from Pune who hold expertise inshare market investment. To the best of my knowledge, the entire transaction isgenuine and accounted for.” 6.4From the submission of the Ld. Counsel for the assessee we find theassessee is not known to the broker and made the transaction of purchase ofshares on the advice of his friend and the cost of purchase of shares was notgiven to the broker. Only a few days before the sale of shares the paymenthas been made and the assessee after selling the shares got huge amount ofprofit. It is strange to believe that a person not known to the assessee willinvest in the purchase of shares on behalf of his unknown client withoutreceiving any money and after a period of one year will given away anamount of above Rs. 90 lakhs profit without retaining the same for himself.Even the middleman, i.e. in the instant case, friend of the assessee who had expertise in purchase and sale of shares has not made any profit for himselfand has given away the money to the assessee which is very substantial. Allthese things in our opinion are against human probabilities.” 7.The learned Counsel appearing for the appellant relied upon what isobserved in paragraph 6.9. It is true that in first part of paragraph 6.9, thereis a reference to the said letter . However, the said paragraph reiterates thatsurrounding circumstances of the case prove that the transactions in purchaseand sale of shares is a colourable device especially when the assessee had notdone any such transaction in the preceding or subsequent year and theassessee did not know the broker. Findings of fact arrived at by the Tribunalin paragraph 6.3 and 6.4 are on the basis of material on record and therefore,it cannot be said that the Appellate Tribunal has relied upon only the allegedadmission of the appellant on the point of law. 8.No substantial question of law arises. There is no merit in the appealand accordingly, the same is dismissed. - (A.K. MENON, J) (A.S. OKA, J)