Naresh Saboo, Mumbai vs Assessee

ITA Nos.6769, 6770 & 6771/M/2010 Assessment Years: 2005-06, 2006-07 & 2007-08

Shri Naresh Saboo, ACIT, Central Circle-12, B-34, Walchand Terrace - Opp 8th Floor, Old CGO Bldg., AC Market, Vs. M.K. Road, Tardeo, Mumbai - 400020 Mumbai - 400 034 PAN: ACAPS 9713L (Appellant) (Respondent)

Present for: Assessee by : Shri Jayant Bhatt, A.R. Revenue by : Shri S.J. Singh, D.R.

Date of Hearing : 03.06.2015 Date of Pronouncement : 30.06.2015

ORDER

Per Sanjay Garg, Judicial Member:

The above titled three appeals relating to A. Y. 2005-06, 2006-07 & 2007-08 have been preferred by the assessee against the orders all dated 7.7.2010 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as CIT(A)] and for the sake of convenience, the same are taken together for disposal by this common order. First we take assessee's appeal for AY - 2005-

06.

ITA NO.6769/M/2010 for A.Y. 2005-06

2. The assessee in this case is aggrieved by the decision of Ld. CIT(A) in confirming the assessment of long term capital gain as unexplained cash credits u/s 68 of the Act.

2 ITA Nos.6769, 6770 & 6771/M/2010 Shri Naresh Saboo

3. The brief facts of the case relevant to the issue under consideration are that are that the assessee is a Chartered Accountant and director in M/s. Soboo Capitals & Securities Pvt. Ltd. The assessee declared Long term Capital gain (LTCG) on sale of shares of M/s Robinson Worldwide Trade Ltd and claimed the same as exempt. There was a search and seizure action u/s. 132 of the Act undertaken on 18/1/2007 in the premises of the appellant including his residences. Consequent to the said search operations, it came to light that the transaction of purchase of the above said shares was carried through M/s DPS Shares & Securities P Ltd. However the Director of above said share broker company namely Shri Sujal C. Shah, in his statement u/s 131 of the act recorded on 18-01-2007 confessed that it did not actually purchase the shares of M/s Robinson Worldwide Trade Ltd, but provided only accommodation bills. During the course of assessment proceedings, the assessing officer again summoned another the director of M/s DPS shares & securities P Ltd namely shri Pratik C. Shah on 18.11.2008 and recorded his statement, wherein the said director also confirmed the fact of providing only accommodation bills in the shares of M/s Robinson Worldwide Trade Ltd. Accordingly, the Assessing Officer (hereinafter referred to as the AO) proposed to assess the Long term Capital gain as income of the assessee. The assessee sought for cross examination of the director of M/s DPS Shares & Securities P Ltd and the same was provided by the assessing officer. In the cross examination, the director admitted that he had not accounted for the transactions relating to accommodation bills in its books of account, but maintained its stand that there was no actual delivery of shares, but only accommodation bills were given. Though the shares were found to have been sold through the D-mat account, yet the AO doubted the same since the purchases were not made through banking channels, i.e., the purchases were made either by adjusting the speculation profits claimed to have been earned by the assessee or by paying 3 ITA Nos.6769, 6770 & 6771/M/2010 Shri Naresh Saboo

cash. Accordingly, the AO came to the conclusion that the purchases had been back dated in order to declare Long term capital gain. Accordingly, the AO came to the conclusion that the whole of transactions of purchase and sale were sham transactions. He, accordingly, assessed the long term capital gain as income of the assessee under income from other sources. The AO also assessed 5% of the LTCG as the charges incurred by the assessee in obtaining bogus LTCG.

4. The Ld. CIT(A) also confirmed the additions by holding that the assessee had failed to discharge its burden of proof regarding the genuineness of the transactions. He however treated the amount of addition as unexplained cash credits u/s 68 of the Act. Aggrieved, the assessee has filed this appeal before us.

5. The ld. AR of the assessee, before us, has submitted that the assessee had sold 1500 shares of Robinson in F.Y. 2004-05 relevant to A.Y. 2005-06, which resulted into Long Term Capital Gain of Rs.1,86,375/-. The said equity shares of Robinson were purchased on 22/5/2003@ Rs.5.05 per share through M/s.DPS Shares and Securities Pvt. Ltd, who was a member of Stock Exchange. He has further submitted that copies of the sales bills were furnished before the Assessing officer. The sale proceeds were received by the assessee through account payee cheque and the delivery of the shares was given to the pool account of the said broker and from this pool account the shares were delivered to the Bombay Stock Exchange. The BSE had confirmed the sale transactions of the said Robinson scripts. He has further submitted that these evidences were not considered by the Assessing Officer and he solely relied on the statements given by the Director of the said M/s.DPS Shares & Securities Pvt. Ltd. The contention of the Ld A.R has been that the above said share broking firm has not accounted the share transactions carried on by the 4 ITA Nos.6769, 6770 & 6771/M/2010 Shri Naresh Saboo

assessee and hence, in order to suit its convenience, the director of the above said company has stated the transactions of purchase to be bogus transactions. The Ld A.R has further placed reliance on the decision rendered by the co- ordinate bench of this Tribunal in I.T.A. No.6747/Mum/2010 for AY 2007-08 in the case of "Smt.Rooplata Jain vs. ACIT" decided on 8.4.2015.

On the contrary, the Ld D.R placed strong reliance on the orders of tax authorities.

6. We have considered the rival contentions. We have also perused the decision relied upon by the assessee in the case of "Smt.Rooplata Jain vs. ACIT" (Supra), wherein, the Tribunal has considered the identical issues of purchase and sale of shares of M/s Robinson Worldwide Trade Ltd and has observed that the evidences furnished by the assessee with regard to the purchase and sale of shares should have been discreetly examined and then a holistic view of the matter should have been taken by the tax authorities. The Tribunal in the said case has restored the matter for fresh examination to the assessing officer. The Tribunal has also directed the AO to take into account the decision rendered by the co-ordinate bench in the case of "Shri Arvind M Kariya" ITA NO.787/M/2010 decided on 30.12.2011.

The relevant part of the order of the Tribunal in the case of "Smt.Rooplata Jain vs. ACIT"(Supra), for the sake of convenience, is reproduced as under:

"6. Before us, the assessee filed copies of income tax returns filed for AY 2005-06 and 2006-07; copies of broker notes for purchase of shares, dematerialisation details, copies of broker notes for sale of shares, bank statements, Ledger account copies issued by M/s DPS Shares and Securities P Ltd etc. We notice that both the tax authorities have failed to examine them in order to find out about the veracity of the claim put forth by the assessee. Instead both the tax authorities have been swayed away by the statement given by the directors of M/s DPS Shares & Securities Ltd. There may be merit in the contentions of the assessee that the statement given by the directors of the above said company should not be relied 5 ITA Nos.6769, 6770 & 6771/M/2010 Shri Naresh Saboo

upon, since they have given the statement to suit their own conveniences, since these transactions were not accounted for by them. Under these circumstances, in our view, it may not be proper to draw adverse inferences against the assessee based upon the statement given by the directors of M/s DPS Shares & Securities P Ltd alone. In our view, the evidences furnished by the assessee with regard to the purchase and sale of shares should have been discreetly examined and then a holistic view of the matter should have been taken by the tax authorities. Since the tax authorities have failed to examine the basic evidences, we are of the view that this issue requires fresh examination at the end of the assessing officer. While examining the same, the AO should also take into account the decision rendered by the co-ordinate bench in the case of Shri Arvind M Kariya (referred supra). Accordingly, we set aside the order of Ld CIT(A) and restore all the issues to the file of the assessing officer for fresh examination in the light of discussions made supra."

7. Since the facts of the case in hand are also identical, the contentions raised by the assessee are also on the same line, we therefore following the above decision of the Co- Ordinate Bench of the Tribunal, we set aside the order of Ld CIT(A) and restore all the issues to the file of the AO to decide the same a fresh in the light of the directions given by the Tribunal in the case of "Smt.Rooplata Jain vs. ACIT" (Supra).

The appeal of the assessee is therefore allowed for statistical purposes.

ITA No.6770/M/2010 for A.Y. 2006-07. 8. Since the facts and issues under consideration are identical for this year also, hence, in view of our discussion of the matter as above, the order of the Ld. CIT(A) for the year under consideration is also set aside and the matter is restored to the file of the AO for decision a fresh as per the directions given above for A.Y. 2005-06.

ITA No.6771/M/2011 for 2007-08 9. The assessee in this appeal has challenged the action of the Ld. CIT(A) in confirming the additions made by the AO as unexplained investments in relation to jewellery found during the search action.

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10. During the course of the search operation u/s 132 of the Act, total jewellery weighing 1798 gms was found from the premises of the assessee. The gold content in diamond set was reported by the assessee at 181 gms and the remaining gold ornaments and jewellery weighed 1617 gms. During the course of the assessment proceedings, the Assessing Officer asked the assessee to show cause why jewellery to the extent reflected in the return of income should not be considered as explained and the rest of jewellery should not be treated as unexplained and added to the income of the assessee.

11. The assessee explained that the gold jewellery belonged to him and his family members i.e. his wife, his unmarried daughter, his son and parents who have been living with him. That the jewellery weighing 307.01 gms and diamond set were shown in the balance sheet of Kum. Madhu Malpani (now Smt. Madhu Saboo) since 1980. The balance jewellery of Madhu Saboo was received during marriage dated 2.12.88. The details were filed with the return filed for AY 89-90. That jewelleiy weighing 649.400 gms was shown in the balance sheet of his mother Smt. Saraswati Devi in A. Y. 89-90 and also in AY 92-93.His mother has been assessed for the last 30 years and his father has also been assessed to tax from last 40 years .Further that the assessee, himself, a chartered Accountant has been assessed to tax from last 20 years. During scrutiny assessment for A.Y. 98-99 in his the submissions he had mentioned that along with the assets shown in the balance sheet, he also owned some household furniture and jewellery weighing 160 gms in addition to jewellery of his wife which was given by her parents at the time of marriage. The jewellery found was the personal effect his wife & mother. The major portion of jewellery was shown in the balance sheet and disclosed during the scrutiny assessment proceedings. He further submitted that looking to the status of family and the customs and the practice of the community to which the family 7 ITA Nos.6769, 6770 & 6771/M/2010 Shri Naresh Saboo

belonged, the jewellery found should be treated as duly explained. The AO however did not agree with the explanation offered by the assessee. He however observed that the following items had been duly explained -

1. Smt.Madhu Saboo as per her return of wealth gold jewellery of 307.010 gms @ Rs.774 per gm Rs. 237620/-

2. Smt. Sarswati S. Saboo (mother of assessee) as per her return of earlier years gold jewellery of 649.40 gms. @ Rs.774 per gm Rs. 502330/-

3. Diamond set as per value declared Rs. 20000/-

Total explained jewellery Rs. 759950/-.

12. The AO, therefore, observed that out of the total value of jewellery found valuing to Rs. 24,75,237/-, jewellery valuing to Rs.7,59,950/- only could be treated as explained. Jewellery valuing to Rs.17,15,287/- remained unexplained. He accordingly added the said amount into the income of the assessee. Aggrieved by the addition made by the AO, the assessee preferred appeal before the Ld. CIT(A).

13. The Ld. CIT(A) observed that apart from the jewellery treated by the AO as explained ,the assessee was entitled to further relief of 160gms. of jewellery as declared by the assessee during the course of scrutiny assessment proceedings for A.Y. 1998-99. He accordingly granted relief to the assessee pertaining to 160 gms of jewellery @ Rs.774/- per gram as adopted by the Assessing Officer calculated at Rs.1,23,840/-. He accordingly reduced the addition made by the Assessing Officer to Rs.15,91,447/- . Aggreived by the order of the CIT(A), the assessee has come in appeal before us.

14. We have heard the rival contentions. As per the CBDT circular No.1916 dated 11.5.1994, the gold jewellery and ornaments to the extent of 500 gms per married lady, 250 gms per unmarried lady and 100 gms per male 8 ITA Nos.6769, 6770 & 6771/M/2010 Shri Naresh Saboo

member of the family need not be seized. The family of the assessee consists of 3 male members i.e. Assessee himself, his father and son, two married ladies i.e. his wife and mother, one unmarried lady i.e. his daughter. The Hon'ble Gujarat High Court in the case of "CIT vs. Ratanlal Vyaparilal Jain" 235 CTR (Guj) 568 has held that though the said circular had been issued for the purpose of non- seizure of the jewellery, but the basis for the same recognizes customs of gifts of jewellery by the relatives and friends on certain occasions such as marriages, birthdays, marriage anniversary and other festivals. In such circumstances, unless the Revenue shows anything to the contrary, it can be safely presumed that source to the extent of the jewellery stated in the circular stands explained. Even as per clause (iii) of the CBDT Circular (Supra), it has been mentioned that the authorized officer may, having regard to the status of the family, and the custom and practices of the community to which the family belongs and other circumstances of the case, decide to exclude a larger quantity of jewellery and ornaments from seizure. We further find that the AO the addition made by the AO also includes Rs. 61500/- on account of silver items. As observed above, out of the seized jewellery worth about Rs.24.75 lakhs, the assessee explained the source of acquisition of the jewellery worth about Rs. 8.85 lakhs which has been duly disclosed in the returns of his family members. It is also evident that the assessee is a Charted accountant and his family is having good financial status. The possession of a jewellery worth value of about Rs.24.75 lakhs by the assessee and his family members cannot be said to be improbable or beyond the source of income of the assessee and his family members. Some of the jewellery had been duly shown by the wife of the assessee in her return even prior to her marriage. His mother has been assessed to income tax for the last 30 years. Assessee himself is assessed to tax for the last 20 years. Assessee and his mother have also disclosed a part of the jewellery purchased in earlier years in their returns. It is also very common that 9 ITA Nos.6769, 6770 & 6771/M/2010 Shri Naresh Saboo

as per the customs and practices prevalent in our country, the jewellery/gold etc. is gifted by the relatives and friends of a person at the time of certain occasions like marriages, birth of a child, birthdays, marriage anniversaries etc. The quantum and the worth of the gifts also depend upon the social as well as financial status not only of the donor but of the donee also. Considering the status of the assessee and his family members, CBDT Circular Guidelines(supra) and further in the light of the decision of the Hon'ble Gujarat High Court in the case of "CIT vs. Ratanlal Vyaparilal Jain"(supra) as well as the explanation submitted by the assessee, it cannot be said to be a case of unexplained jewellery. The addition made by the AO and further confirmed by the CIT(A) on this account are, therefore, held to be not sustainable and the same are accordingly set aside. This appeal of the assessee is therefore allowed.

15. In the result, the appeals of the assessee for AY 2005-06 and AY 2006- 07 are allowed for statistical purposes and appeal for AY 2007-08 is hereby allowed.

Order pronounced in the open court on 30.06.2015.

Sd/- Sd/- (G.S. Pannu) (Sanjay Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai, Dated: 30.06.2015. * Kishore, Sr. P.S.

Copy to: The Appellant The Respondent 10 ITA Nos.6769, 6770 & 6771/M/2010 Shri Naresh Saboo

The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR Concerned Bench //True Copy// [

By Order

Dy/Asstt. Registrar, ITAT, Mumbai.