THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 07.02.2013
+ ITA 1303/2011
CIT ..... Appellant
versus
VINOD KUMAR GUPTA ..... Respondent
Advocates who appeared in this case:
For the Appellant : Mr N P Sahni, sr. standing counsel
For the Respondent : Mr V K Sabharwal, Adv.
CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE R.V.EASWAR
JUDGMENT
BADAR DURREZ AHMED, J (ORAL)
The question framed for our consideration in this appeal by an order
dated 03.09.2012 was as under :-
Whether the Tribunal fell into an error in upholding the deletion
of a sum of `1,51,27,450/-, directed by the CIT(A) on account of
long term capital gain, assessed by the AO on sale of shares in
respect of AY 2006-07 in the facts of the case?
However, on hearing counsel for the parties we feel that the actual question
pertains to the Tribunal rendering a decision contrary to the record.
Consequently, we reframe the question as under :-
Whether the impugned order passed by the Income Tax Appellate
Tribunal affirming the deletion of a sum of `1,51,27,450/- by the
ITA 1303 /2011 Page 1 of 8
CIT(Appeals) on account of long term capital gains, is not
contrary to the record and/or perverse?"
2. The facts of the case are that in respect of the assessment year 2006-07,
48,100 shares of R.S.Builtwell Pvt. Ltd. were sold by the assessee to M/s
Samiah International Builders Pvt. Ltd., Mr Jamil A. Khan and Ms Tabassum
Jamil. The apparent consideration for the transfer of these shares was shown as
`125/- per share. There is no dispute that this amount of `125/- per share was
received through cheques from the aforesaid persons by the
respondent/assessee.
3. A survey operation was carried out under Section 133A of the Income
Tax Act, 1961 insofar as M/s Samiah International Builders Pvt. Ltd. was
concerned on 15.1.2008. In the course of the survey operations certain
documents were found to which the Managing Director of M/s Samiah
International Builders Pvt. Ltd., namely, Mr Jamil A Khan had no explanation.
In a statement given by the said Mr Jamil A Khan on 16.1.2008, in response to
a question as to whether he was associated with R.S. Builtwell Pvt. Ltd., he
answered that he and his wife were directors in it and the main activity of the
project of Singapore Residency, Sector-36 at Greater Noida was looked after
by M/s Samiah International Builders Pvt. Ltd. and only the land title of the
project was in the name of R.S. Builtwell Pvt. Ltd. When he was questioned as
per question 30 with regard to the documents which were found and
ITA 1303 /2011 Page 2 of 8
impounded at the premises at A-35, Sector 63 Noida during the survey
operation, he answered and he was unable to explain the transactions recorded
in the said transactions. However, he stated that to avoid litigation and to buy
peace of mind he would voluntariliy offer for taxation an amount of `10 crores
as additional income of M/s Samiah International Builders Pvt. Ltd. He also
handed over post dated cheques totaling `3,39,90,000/- representing the tax
amount on the surrender of `10 crores made by him. This was followed by a
letter, the contents of which read as under :-
"We have surrendered an additional income of `10 crores subject
to the non-initiation of any penal action on dated 15.1.2008
during the course of survey proceedings but due to mental
pressure on the date, we have written current financial year
instead of relevant financial year regarding the period to which
the surrender related. Moreover, on the day of survey we have
not gone through the seized documents and now after going
through the seized documents, we affirm that we have
surrendered an additional income of `10 crores subject to the
non-initiation of any penal action on dated 15.1.2008 during the
course of survey proceedings in the relevant financial year of the
documents seized. We, however, now give details of the
surrender and the same includes additional income of `6.29
crores being amount paid by Ms/ Samiah International Builders
Pvt. Ltd. for the purchase of shares during the financial year
2005-06 and the balance amount of `3.71 crores related to the
relevant year of remaining documents seized during the survey."
This is for your information and record please.
Thanking you,
Yours faithfully,
Sd/-
For Samiah International Builders P. Ltd.
(Er. Jamil A. Khan)
Director." (underlining added)
ITA 1303 /2011 Page 3 of 8
From the above, the assessing officer computed the value of each share at
`439.5. This was based on the fact that the said Mr Jamil A. Khan had
admitted that the additional income of `10 cores surrendered by him included
an income of `6.29 crores being the amount paid by M/s Samiah International
Builders Pvt. Ltd. for the purchase of the shares during the financial year 2005-
06. It is an admitted position that in that year two lakh shares were purchased
by M/s Samiah International Builders Pvt. Ltd. and/or by Mr Jamil A. Khan
and Ms Tabassum Jamil. The breakup was that 48,100 shares were purchased
from the respondent-assessee whereas the remaining shares were purchased
from other members of the assessee's family. What the assessing officer did
was to divide the consideration of `6.29 crores by the total number of shares
(two lakh shares) to arrive at the value per share. According to this calculation
the value per share was computed at `439.50. Since the apparent consideration
was only `125 per share, it was deduced that the remaining consideration of
`314.50 per share was paid in cash. On the basis of this, the capital gains in the
hands of the respondent-assessee for sale of 48,100 shares was assessed at
`2,11,39,950/- which led to an addition of `1,51,27,450/-.
4. The assessment was completed on the above basis.
5. The respondent-assessee being aggrieved by the said assessment,
preferred an appeal before CIT (Appeals) who deleted the said addition of
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`1,51,27,450/-. The CIT(Appeals) was impressed by the fact that during the
course of assessment proceedings the respondent-assessee had filed
documentary evidence before the assessing officer which included the
confirmations/affidavits of the buyers, income tax returns of the buyers, the
valuation report of the independent valuer in support of price of shares and that
the assessing officer had not pointed out any defects or deficiency in them.
The CIT(Appeals) was of the opinion that the assessing officer had erred in
making the addition on the basis of the statement made by Jamil A. Khan
particularly when Jamil A. Khan had confirmed to the assessing officer, by
filing an affidavit, that no cash payment was made to the appellant for
purchase of shares. It was also observed that the assessing officer had not
brought on record the author of the documents impounded during the course of
survey and that despite the request of the respondent-assessee, the assessing
officer had not provided an opportunity of cross-examining Jamil A. Khan or
the author of the impounded documents. Consequently, the CIT(Appeals)
concluded that the addition could not be made at the hands of the respondent-
assessee on the basis of documents/papers found from the premises of third
parties and on the basis of the statement recorded by the third parties behind the
back of the assessee.
ITA 1303 /2011 Page 5 of 8
6. The revenue went up in appeal before the Tribunal which, we feel, has
merely parroted the conclusions of the CIT(Appeals). This would be apparent
from the paragraph 6 of the impugned order which is as under :-
"6. We have heard the rival contentions in light of the material
produced and precedent relied upon. We find that during the
assessment proceedings in this case assessee has filed before the
affidavit of the buyers and the income tax return of the buyers
and Valuation Report of independent valuer in support of the
price of shares. The Assessing Officer has not pointed out any
defect or deficiency in any of them. Assessing officer made the
addition on the basis of statement of Shri Jamil A. Khan, but it is
noted that Sh. Jamil A. Khan himself confirmed to the Assessing
Officer by filing an affidavit that no cash payment was made to
the assessee for the purchase of shares. The Assessing Officer
has not brought on record the author of documents impounded
during the course of survey. Despite the request of the appellant,
the Assessing Officer has not provided the opportunity of cross
examination of Jamil A Khan or the author of impounded
documents. In these circumstances, Ld. Commissioner of Income
Tax (Appeals) held that additions cannot be made in the hands of
the assessee on the basis of documents found from the premises
of third parties and on the basis of statement recorded of third
parties behind the back of the assessee. Furthermore, the
company shares were sold, was a unquoted company, the sale
price were arrived at on the basis of valuation report of
independent valuer and the Assessing Officer has erred in
ignoring such report without pointing out any defects in this
regard. Case laws referred by the Ld. Commissioner of Income
Tax (Appeal)'s are also germane and support the case of the
assessee."
7. We may point out that the assessment of the respondent-assessee was
getting time barred on 31.12.2008. The last hearing in the matter was
conducted by assessing officer on 29.12.2008, on which date, the respondent-
assessee submitted a reply and along with the reply he annexed affidavits of
ITA 1303 /2011 Page 6 of 8
Jamil A. Khan and Tabassum Jamil in their individual capacities and also an
affidavit of Jamil A. Khan as a director of M/s Samiah International Builders
Pvt. Ltd. It is in these affidavits that it has been stated that no cash was paid for
the purchase of the shares of R.S. Builtwell Pvt. Ltd. from the respondent-
assessee.
8. We find that both the Commissioner of Income Tax (Appeals) as also
the Tribunal have founded their conclusion essentially on the premise that the
respondent-assessee had requested for an opportunity of cross-examining Jamil
A. Khan and that such an opportunity had not been provided by the assessing
officer. However, from the record we do not find that there was any such
request made by the respondent-assessee for cross-examining Jamil A. Khan.
In fact, we find it rather intriguing as to why would the respondent-assessee
request for cross-examining Jamil A. Khan when the respondent-assessee
himself had furnished affidavits to Jamil A. Khan in support of his case. The
observations of the Commissioner of Income Tax (Appeals) as also of the
Tribunal that despite the request of the respondent-assessee, the assessing
officer had not provided opportunity of cross-examining Jamil A. Khan, are
contrary to the record. We are therefore, of the opinion that the answer to the
question framed has to be in favour of the revenue and against the respondent-
assessee.
ITA 1303 /2011 Page 7 of 8
9. It must also be mentioned that in the conclusions arrived at by the
Tribunal, there is reference to the return filed by Jamil A. Khan. But, that
reference is to the original return filed by Jamil A. Khan and not to the revised
return filed by Jamil A. Khan. The Tribunal had completely overlooked the
fact that Jamil A.Khan had filed a revised return after he had made a surrender
of `10 crore during the survey operation. In that return an amount of `6.29
crores has been shown as the cash component of the purchase of shares of R.S.
Builtwell Pvt. Ltd. from the assessee and his relatives. That aspect of the
matter has been ignored by the Tribunal. Consequently, having answered the
question in favour of the revenue, we set aside the impugned order and remit
the matter to the Tribunal for considering the same afresh on all grounds.
The appeal is allowed as above. There shall be no order as to costs.
BADAR DURREZ AHMED, J
R.V.EASWAR, J
FEBRUARY 07, 2013
vld
ITA 1303 /2011 Page 8 of 8
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