Ginny Garg, New Delhi vs Department Of Income Tax

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH 'E', NEW DELHI Before Smt. Diva Singh, JM And Sh. N. K. Saini, AM ITA No. 3682/Del/2012 : Asstt. Year : 2006-07 ITA No. 3683/Del/2012 : Asstt. Year : 2008-09 ACIT, Central Circle-12, Vs Smt. Manju Garg, New Delhi 292, Katra Peran, Tilak Bazar, Delhi-110006 (APPELLANT) (RESPONDENT) PAN No. AJCPG4645C ITA No. 4153/Del/2012 : Asstt. Year : 2008-09 ITA No. 4154/Del/2012 : Asstt. Year : 2009-10 ITA No. 4155/Del/2012 : Asstt. Year : 2010-11 ACIT, Central Circle-12, Vs Smt. Ginny Garg, New Delhi 292, Katra Peran, Tilak Bazar, Delhi-110006 (APPELLANT) (RESPONDENT) PAN No. AHXPG1191Q ITA No. 4156/Del/2012 : Asstt. Year : 2008-09 ITA No. 4157/Del/2012 : Asstt. Year : 2009-10 ITA No. 4158/Del/2012 : Asstt. Year : 2010-11 ACIT, Central Circle-12, Vs Smt. Prerna Garg, New Delhi 292, Katra Peran, Tilak Bazar, Delhi-110006 (APPELLANT) (RESPONDENT) PAN No. AIRPG4850H ITA No. 4159/Del/2012 : Asstt. Year : 2008-09 ITA No. 4160/Del/2012 : Asstt. Year : 2009-10 ITA No. 4161/Del/2012 : Asstt. Year : 2010-11 ACIT, Central Circle-12, Vs Smt. Suman Garg, New Delhi 292, Katra Peran, Tilak Bazar, Delhi-110006 (APPELLANT) (RESPONDENT) PAN No. AHYPG8925D 2 ITA Nos.3682, 3683, 4153 to 4164 & 4413/Del/2012 Manju, Ginny, Suman & Prerna Garg ITA No. 4162/Del/2012 : Asstt. Year : 2008-09 ITA No. 4163/Del/2012 : Asstt. Year : 2009-10 ITA No. 4164/Del/2012 : Asstt. Year : 2010-11 ACIT, Central Circle-12, Vs Smt. Madhu Garg, New Delhi 292, Katra Peran, Tilak Bazar, Delhi-110006 (APPELLANT) (RESPONDENT) PAN No. AHYPG8924C

ITA No. 4413/Del/2012 : Asstt. Year : 2008-09 ACIT, Central Circle-12, Vs Smt. Gunjan Garg, New Delhi 292, Katra Peran, Tilak Bazar, Delhi-110006 (APPELLANT) (RESPONDENT) PAN No. AAGPG5718B Assessee by : Sh. K.P. Ganguli, Adv. Revenue by : Sh. Gunjan Prashad, CIT DR

Date of Hearing : 26.05.2015 Date of Pronouncement : 29.05.2015

ORDER

PER BENCH:

These appeals relating to the different assessees belonging to the same group are directed against the separate orders of the ld. CIT(A)-XXXI, New Delhi, each dated 11.05.2012 for the assessment years 2006-07 & 2008-09 in the case of Smt. Manju Garg, dated 25.05.2012 for the assessment years 2008-09 to 2010-11 in the cases of Smt. Ginny Garg, Smt. Prerna Garg & Smt. Madhu Garg, dated 23.05.2012 for the assessment years 2008-09 to 2010-11 in the case 3 ITA Nos.3682, 3683, 4153 to 4164 & 4413/Del/2012 Manju, Ginny, Suman & Prerna Garg of Smt. Suman Garg and dated 14.06.2012 in the case of Smt. Gunjan Garg, New Delhi.

2. First we will deal with the appeal in ITA No. 3682/Del/2012. Following grounds have been raised in this appeal:

"1. The order of the Ld. CIT(A) is not correct in law and facts.

2. On the facts and in the circumstances of the case, the ld. CIT(A) has erred in deleting the addition of Rs.1,04,600/- made by the Assessing Officer on account of treating the agricultural income declared by the assessee as income received from undisclosed sources by applying the provisions of section 68 of the I.T. Act, 1961 without appreciating the fact that the assessee did not furnish the details/evidences in respect of genuineness of the claim of agricultural income.

3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding that assessee's claim of short term capital gain of Rs.13,49,105/- on the transactions shares cannot be treated as income from other sources.

4. The appellant craves leave to add, amend any/all of the grounds of appeal before or during the course of the hearing of the appeal."

3. First issue vide Ground No. 2 relates to the deletion of addition made by the AO on account of agricultural income. Facts of the case related to this issue in brief are that a search and seizure operation u/s 132 of the Income Tax Act, 1961 (hereinafter referred to as the Act) was carried out in 4 ITA Nos.3682, 3683, 4153 to 4164 & 4413/Del/2012 Manju, Ginny, Suman & Prerna Garg Sh. Mukesh Garg Group of cases on 20.01.2010 and in case of assessee on 03.03.2010 at Locker No. 1390, Punjab National Bank, G.T. Road, Ghaziabad, U.P. Thereafter a notice u/s 153A of the Act dated 11.07.2011 was issued to the assessee requiring him to file the return of income for the assessment year 2006-07. In response to the said notice, the assessee filed the return of income on 19.08.2011 declaring total income of Rs.22,22,160/- and had also shown agricultural income of Rs.1,04,600/-.

4. During the course of assessment proceedings, the AO asked the assessee to furnish the details as per the following proforma:

1. Name of Assessee

2. Asstt. Year

3. Land of Area (Hector & acre)

4. Location of Land Holding

5. Nature of Land (Irrigated or not)

6. Name of Crops

7. Quantitative of Crop produced

8. Sale Price of Crops Rs

9. Total Expenses Claimed Rs.

Bifurcation of Expenses with Preparation of Justification Land for Ag Cost of Seeds (all expenses must be including Ploughing labour expenses) Sowing of Crops/Seeds (Labour expenses means no. of Pesticide 5 ITA Nos.3682, 3683, 4153 to 4164 & 4413/Del/2012 Manju, Ginny, Suman & Prerna Garg days and per day per labour Security charge) Charge Water expenses Electric Expenses Harvesting Charges Transportation Charges Sale expenses/Mandi expenses

10. Net Ag Income (Disclosed in Return of Income)

11. % of net income to gross income

12. Other Owners of the land with their share in that land

13. What are the consideration paid for using their land (If not paid explain the reason)

14. Remarks on reasonableness of the AG income disclosed by the assessee

5. In response the assessee furnished the copy of sale deed/documents in respect of holding of land at various places and copy of an agreement on stamp paper dated 24.03.2005 with Sh. Jai Prakash in respect of giving land to him for cultivation. As per the said agreement all the expenses related to cultivation such as seeds, khad, water will be borne by Sh. Jai Prakash but the same will be deducted at the time of sale of crops. It was also mentioned 6 ITA Nos.3682, 3683, 4153 to 4164 & 4413/Del/2012 Manju, Ginny, Suman & Prerna Garg that Sh. Jai Prakash will grow only vegetables and all the labour expenses will be borne by him. As regards to the division of agricultural produce between the two parties, it had been mentioned that the contractor will pay to the first party i.e. assessee, 60% of the actual sale of the crops after deducting expenses as per the agreement. The AO after considering the submissions of the assessee observed that mere filing of copy of agreement dated 24.03.2005 did not prove that the agreement was effective in actual and cultivation activities or agricultural operation was made effective as per agreement.

He also pointed out that nothing was mentioned in the agreement to the period for which the same will remain effective. The AO also pointed out that the assessee did not furnish any details of expenses incurred and the crops grown on the land and also did not produce party alongwith the details/evidences so that the genuineness of the claim could be verified. The AO observed that agricultural operation on the agricultural land was a must ingredient to grow any agricultural produce, to sale of such produce in the market, resulting in income received from such agricultural activities which may qualify the definition of agricultural income as per clause (1) of section 2 of the Act. The AO pointed out that the assessee 7 ITA Nos.3682, 3683, 4153 to 4164 & 4413/Del/2012 Manju, Ginny, Suman & Prerna Garg failed to produce details of expenses incurred to grow the crops, expenses on purchases of seeds, fertilizers, watering, cartage, wages and other necessary expenditure which were necessary to be incurred to cultivate the land and that the assessee also failed to furnish the evidence in respect of sale of crops in the market.

He, therefore, treated the agricultural income of Rs. 1,04,600/- as income from undisclosed sources and made the addition by applying the provisions of section 68 of the Act.

6. Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted that the genuineness of the documents and the agreement dated 24.05.2003 entered between the assessee and cultivator was not doubted and the certificate of the tehsilpatwari was also not held as ingenuine. The agricultural land was owned by the assessee and the agricultural activities were carrying on, therefore, the income derived was agricultural income. The reliance was placed on the judgment of the Hon'ble Supreme Court in the case of Raja Benoy Kumar Sahas Roy's reported at (1957) 32 ITR 466.

7. The ld. CIT(A) after considering the submissions of the assessee observed that the assessee entered into an 8 ITA Nos.3682, 3683, 4153 to 4164 & 4413/Del/2012 Manju, Ginny, Suman & Prerna Garg agreement for the cultivation of agricultural lands at Biharipur, Alipur, Khera Kherakera and Siraspur with Sh. Jai Prakash on 24.03.2005 and that the assessee furnished a certificate dated 20.08.2010 from the tehsilpatwari that vegetables are grown on the assessee's agricultural lands for the past many years. The ld. CIT(A) further observed that the AO jumped into the conclusion that no agricultural operation was carried on the agricultural land without examining Shri Jai Prakash with whom the assessee entered into agreement. He also observed that the AO had not made any enquiry from tehsilpatwari Sh. Jagdish Prasad Sharma, therefore, the rejection of claim of the assessee without making any enquiry from the cultivator and tehsilpatwari was not tenable. The ld. CIT(A) also pointed out that this was a search assessment and there was no finding to this effect by the AO that incriminating materials suggestive of agricultural income being not genuine had been found. She, therefore, held that the AO was not justified in holding that the amount of Rs. 1,04,600 was not agricultural income of the assessee.

8. Being aggrieved the Department is in appeal. The ld. CIT DR strongly supported the order of the AO and reiterated the observations made in the assessment order. He 9 ITA Nos.3682, 3683, 4153 to 4164 & 4413/Del/2012 Manju, Ginny, Suman & Prerna Garg further submitted that the ld. CIT(A) had given a negative finding that the AO could have examined Shri Jai Prakash, the contractor or Shri Jagdish Prasad Sharma, tehsilpatwari. He further submitted that the assessee had also not produced any document/evidence in support of her claim. He also submitted that the ld. CIT(A) would have done all those things which the AO ought to have done but such an exercise was not done. Therefore, the ld. CIT(A) was not justified in negating the view taken by the AO. The reliance was placed on the following case laws:

Ø JCIT Vs Swarup Vegetable Products Industries Ltd. (2005) 96 ITD 468 (Del.) Ø CIT Vs M.P. Portfolio (P) Ltd. (2014) 264 CTR 258 (Del)

9. In his rival submissions the ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the AO had not provided due and reasonable opportunity of being heard to the assessee. He also stated that the approval of the additional CIT was sought on 26.12.2011 by the AO and on the same date the assessment order was passed by him which clearly shows that the order was passed in haste without applying the mind and the ld. CIT(A) after appreciating the facts in right prospective rightly held that 10 ITA Nos.3682, 3683, 4153 to 4164 & 4413/Del/2012 Manju, Ginny, Suman & Prerna Garg the income of Rs. 1,04,600/- shown by the assessee was the agricultural income not the income from undisclosed sources as considered by the AO. He further submitted that the assessee entered into an agreement with Shri Jai Prakash on 24.03.2005. The said agreement between the assessee and the cultivator was not doubted and there was no doubt that the assessee was carrying on agricultural activity. He drew our attention towards page no. 15 of the assessee's paper book which is the copy of the said agreement. He further submitted that the assessee furnished a certificate from tehsilpatwari wherein it was certified that the vegetables were grown on the agricultural land of the assessee for the last many years (copy of the same is placed at page no. 16 of the assessee's paper book). It was submitted that the assessee discharge the onus cast upon her, therefore the ld. CIT(A) rightly directed the AO to treat the impugned income as an agricultural income.

10. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is alleged that the assessee could not produce before the AO any details and evidences to substantiate that the expenses such as seeds, khad and water etc. were incurred for cultivation. The assessee also 11 ITA Nos.3682, 3683, 4153 to 4164 & 4413/Del/2012 Manju, Ginny, Suman & Prerna Garg did not furnish the details of the crops grown and the details of sales. She simply stated that an agreement was entered with Shri Jai Prakash wherein it was mentioned that he will grow vegetables and will incur all the expenses. In the present case, no doubt the assessee furnished a certificate dated 20.08.2010 from the tehsilpatwari wherein it is stated that on the agricultural land vegetables were grown for the last few years. However, neither the details of crops were given nor it is mentioned that who is the owner of the land and in which year which type of vegetables/crops were grown by whom. The assessee also did not furnish copy of the Jamabandi. However, the ld. CIT(A) accepted the claim of the assessee. It is well settled that the powers of the ld. CIT(A) and the AO are co-terminus but in the present case, it appears that the ld. CIT(A) failed to discharge the duty to perform those function which ought to have been but not done by the AO, and simply on this basis that the AO did not examine the cultivator or the tehsilpatwari, he directed the AO to treat the impugned income as agricultural income. We, therefore, considering the totality of the facts deem it appropriate to set aside this issue back to the file of the AO to be decided afresh in accordance with law after providing due and reasonable opportunity of being heard to the 12 ITA Nos.3682, 3683, 4153 to 4164 & 4413/Del/2012 Manju, Ginny, Suman & Prerna Garg assessee. The assessee is also free to adduce any evidence in support of her claim.

11. The next issue vide Ground No. 3 relates to Short Term Capital Gains of Rs. 13,49,105/- which was considered by the AO as "income from other sources". The facts related to this issue in brief are that the assessee had shown an income of Rs. 13,49,105/- under the head Short Term Capital Gains from share trading. The AO asked the assessee to furnish copy of D-mat account, details of share holding and Short Term Capital Gains with confirmed ledger account from brokers in respect of share trading. The assessee furnished the ledger account/bills of the broker. The AO observed that the ledger account revealed that at most of the occasions payments had been made after a long gap of purchase of shares and in some cases the period of payments were even more than six months after the date of purchase of shares. She also pointed out that in all cases of family members (individuals), the income from share trading had been shown but details/ledger account of broker revealed that all the share trading were made for gains only and that too year to year, whereas factual position was absolutely different as the share trading was the most uncertain trade. The AO pointed out that generally broker is used to settle every 13 ITA Nos.3682, 3683, 4153 to 4164 & 4413/Del/2012 Manju, Ginny, Suman & Prerna Garg transaction within a day or two and payments are demanded immediately after every purchase transaction but in the all group of cases payments had been made for share transactions after long gap. The AO also pointed out that the assessee failed to furnish contract note, delivery/transfer of shares in D-mat account or any supporting evidence which could prove that the share were transferred in D-mat account of the assessee. She further observed that the assessee failed to produce the broker for further verification of genuineness of transaction and simply filing of ledger account/bills of broker did not prove that delivery of shares were made. According to her the assessee had taken entries only for capital gain to evade tax or paid tax at lower rate. The AO held that the share transaction as claimed to have been undertaken were not genuine and the income earned from undisclosed sources had been routed through Short Term Capital Gains for the purpose of giving tax at lower rate. She, therefore, treated the "Short Term Capital Gains"

claimed by the assessee, as income from undisclosed sources and assessed the same as "income from other sources".

12. Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted that the share transactions were in 14 ITA Nos.3682, 3683, 4153 to 4164 & 4413/Del/2012 Manju, Ginny, Suman & Prerna Garg the nature of investment and the profit received there from was assessable as "Short Term Capital Gains" as shown by the assessee and the department had placed no material to show that the assessee's case did not fall within the tests laid down by the CBDT Circular No. 4 of 2007. It was further stated that whether a particular holding of shares was by way of investment or formed part of the stock in trade was a matter which was within the knowledge of the assessee who held the shares. The reliance was placed on the following case laws:

Ø CIT Vs Holck Larsen (1986) 160 ITR 67 (SC) Ø CIT Vs Associated Industrial Development Co. P. Ltd. (1971) 82 ITR 586 (SC)

13. The ld. CIT(A) after considering the submissions of the assessee observed that the assessee furnished documents relating to transactions of shares, broker's ledger account & bills. He further observed that the AO had asked the assessee to bring the broker before her but there was no allegation of taking accommodation entries. He also observed that nothing had been found during the course of search which could indicate the possibility of indulging in accommodation entries and nothing was brought on record from the seized records or subsequent investigations to 15 ITA Nos.3682, 3683, 4153 to 4164 & 4413/Del/2012 Manju, Ginny, Suman & Prerna Garg prove that the assessee was indulged in accommodation entries. According to the ld. CIT(A) the AO has to prove her allegation of accommodation entries as per Rule of Evidence and that all the shares need not be routed through D-mat account but those were provisions for the transactions in pool account of brokers. The ld. CIT(A) observed that the AO had not conducted any enquiry from the brokers and as regards to the payment interval, he was of the view that it could not be a sufficient evidence to hold that the transactions in shares were bogus and that the conduct of the assessee did not point to the trading character of the transaction. The ld. CIT(A) held that the transactions in shares of the assessee had given rise to "Short Term Capital Gains" and it could not be treated as "income from other sources".

14. Being aggrieved the department is in appeal. The ld. CIT DR reiterated the observations made by the AO and further submitted that the assessee did not produce the requisite details asked by the AO and that the ld. CIT(A) without considering the facts in right prospective accepted the claim of the assessee.

16 ITA Nos.3682, 3683, 4153 to 4164 & 4413/Del/2012 Manju, Ginny, Suman & Prerna Garg

15. In his rival submissions the ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that D-mat account was not required to be maintained. He further submitted that it was not the case of the Department that the assessee had not shown investment in share in her balance sheet nor that the investments in shares and mutual fund were false and untrue. It was further submitted that the share transactions were in the nature of investment and the profit received there from was assessable as "Short Term Capital Gains" as shown by the assessee. The reliance was placed on the following case laws:

Ø Raja Bahadur Visheshwara Singh Vs CIT (1961) 41 ITR 685 (SC) Ø Nidhi Dyeing and Printing Mills P. Ltd. Vs ITO (2011) 9 ITR (Trib) 65 (Ahd.) Ø CIT Vs Gopal Purohit (2010) 228 CTR (Bom) 582 Ø ITO Vs Rohit Anand (2010) 127 TTJ (Del) 122 Ø CIT Vs Rewashanker A. Kothari (2006) 283 ITR 338 (Guj) Ø CIT Vs Supriya Investments P. Ltd. dated September 4, 2007 Ø CIT Vs Gulmohar Finance Ltd. (2008) 170 Taxman 483 (Del) Ø CIT Vs R.K. Dhawan (2009) 208 Taxman 393 (Del) Ø Vinod M. Shah Vs ACIT (2010) 38 SOT 503 (Mum) Ø CIT Vs H.B. Stock Holdings Ltd. (No.2) (2010) 325 ITR 320 17 ITA Nos.3682, 3683, 4153 to 4164 & 4413/Del/2012 Manju, Ginny, Suman & Prerna Garg Ø Bombay Gymkhana Ltd. Vs ITO (2008) 115 TTJ (Mum) 639 Ø Coloma Commercial Co. Ltd. Vs ACIT, ITA No. 585/Kol/2009 dated May 14, 2010 Ø JCIT Vs Shri Deo Kumar Saraf, ITA No. 411/Kol/2009 dated June 18, 2009 Ø ITO Vs Lookad Finance and Leasing Ltd., ITA No. 659/Kol/2008 dated July 24, 2009 Ø Citadell Agencies P. Ltd. Vs ACIT (2007) 11 SOT 273 (Bom) Ø Sar Investment P. Ltd. Vs DCIT (2010) 40 SOT 566 (Ahd), ITA No. 2116/Ahd/2007 dated July 23, 2010

16. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it appears that the ld. CIT(A) had not given cogent reason while accepting the claim of the assessee. He simply stated that the AO did not ask the assessee to bring the broker and that the assessee had furnished documents relating to transaction of shares. On the contrary, the AO categorically stated that the assessee was asked to furnish copy of D-mat account, details of share holding, details of Short Term Capital Gains with confirmed ledger account from brokers in respect of share trading. The AO clearly mentioned at page no. 6 of the assessment order that the assessee failed to furnish contract note, delivery/transfer of shares in D-mat account or any supporting evidence which could prove that shares were 18 ITA Nos.3682, 3683, 4153 to 4164 & 4413/Del/2012 Manju, Ginny, Suman & Prerna Garg transferred in D-mat account of the assessee and that simply filing of ledger account/bills of broker did not prove that delivery of shares was made. On the said observations of the AO, the ld. CIT(A) is silent and had not discussed how the assessee overcome those shortcoming which were specifically pointed out by the AO. In the present case, the contention of the ld. Counsel for the assessee was that the assessment order was passed in haste and without providing due and reasonable opportunity of being heard. It was specifically pointed out that the prior approval of the Additional CIT, Central Circle -3, New Delhi was obtained by the AO on 26.12.2011 and the assessment order was also passed on the same date. We, therefore, considering the totality of the facts deem it appropriate to remand this issue back to the file of the AO to be adjudicated afresh in accordance with law after providing due and reasonable opportunity of being heard to the assessee.

17. In all other cases the issues are identical having similar facts. The only difference is in the amount involved, therefore our findings given in ITA No. 3682/Del/2012 for the assessment year 2006-07 shall apply mutatis mutandis for the assessment year 2008-09 in the assessee's case and 19 ITA Nos.3682, 3683, 4153 to 4164 & 4413/Del/2012 Manju, Ginny, Suman & Prerna Garg also shall apply with same force in all other cases under consideration pertaining to different assessees.

18. In the result, all the appeals of the Department are allowed for statistical purposes.

(Order Pronounced in the Court on 29/05/2015).

Sd/- Sd/- (Diva Singh) (N. K. Saini) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 29/05/2015 *Subodh* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5.DR: ITAT ASSISTANT REGISTRAR