Income Tax Appellate Tribunal - MumbaiPranlal P Damani , Mumbai vs Department Of Income Tax on 26 April, 2011IN THE INCOME TAX APPELLATE TRIBUNAL
                           "C" BENCH, MUMBAI

     BEFORE SHRI, J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND

            SMT. ASHA VIJAYRAGHAVAN, JUDICIAL MEMBER

                          ITA no.3747/Mum./2010
                        (Assessment Year : 2004-05)
                            Date of Hearing: 26.4.2011

Income Tax Officer, Ward-16(1)(2)
Matru Mandir, Mumbai - 400 007                           ....................... Appellant

                                      v/s


Mr. Pranlal P. Damani
44, Vijay Chambers
Tribhuvandas Road
Mumbai 400 004
PAN - AABPD7637F                                         ................... Respondent


                  Revenue by      :   Mr. Surendra Kumar
                  Assessee by     :   Mr. M. Subramanian


                                  ORDER


PER J. SUDHAKAR REDDY, A.M.This appeal filed by the Revenue, is directed against the impugned
order dated 19th February 2010, passed by the Commissioner (Appeals)-
XXVII, Mumbai, for assessment year 2004-05.2.     The assessee filed an application under Rule-27 of Income Tax
(Appellate Tribunal) Rules, 1963, and consequently, the validity of re-
assessment proceedings.3.     Learned Departmental Representative objected the same.4.     On careful consideration of rival contentions, we find that the
Commissioner (Appeals) has decided this issue against the assessee and the
                                         2                    Mr. Pranlal P. Damani
                                                          ITA no.3747/Mum./2010



assessee seeks to support the order of the first appellate authority on the
ground which has been decided against him. This is permissible and,
consequently, we allow the assessee to raise this issue by invoking Rule 27
of Income Tax (Appellate Tribunal) Rules, 1963. Now, we proceed to decide
this appeal on merit.5.    Brief facts of the case are like this. The assessee is an individual and
has filed his return of income declaring incomes under the heads "long term
capital gains", "short term capital gains" and under the head "income from
other sources". He also claimed exemption undersection 54Fof the Income
Tax Act, 1961 (for short "the Act") for long term capital gains arose due to
purchase of 16,000 equity shares of Betala Global Securities Ltd., a Madras
based company, details which are given in the assessment order. The
Assessing Officer, for the various reasons given in his order, has doubted the
date of purchase of these shares. It should be noted that the factum that the
assessee has sold the shares and the date of sale and the amount received
towards sale proceeds is not disputed. The Assessing Officer recorded
various reasons for disbelieving the claim of the assessee that it has
purchased the shares on 8th 9th and 10th July 2002. Main reason are that, the
assessee has failed to produce the requisite evidence and that the assessee's
investments were multiplied by 22 times within a span of 1½ years and the
test of human probability has to be applied. He disbelieve the claim for long
term capital gains and assessed this income under the head "income from
other sources" and refused the claim for deduction undersection 54F.6.    On appeal, the first appellate authority relied upon the decision of
Mumbai Bench of this Tribunal in Mukesh R. Marolia v/s ACIT, decided in ITA
no.1201/ Mum/2005, vide order dated 15th December 2005, and granted
relief. Aggrieved, the Revenue is in appeal raising following grounds of
appeal:-"1.   The Commissioner (Appeals) erred in treating the income arising
      from long term capital gain on purchase / sale of shares amounting to
      ` 16,63,200 as genuine and directing the Assessing Officer to give the
      deduction undersection 54of the Act.3                     Mr. Pranlal P. Damani
                                                           ITA no.3747/Mum./20102.     The Commissioner (Appeals) erred in following the decision of
      Mumbai Tribunal in the case of Mukesh R. Marolia v/s ACIT, wherein it
      is held that all documentary evidences are available of purchase / sale
      of shares transaction is treated as genuine whereas in this case the
      assessee has manipulated the transactions of shares to purchase a
      flat."7.    Learned Departmental Representative, Mr. Surendra Kumar, took this
Bench to the order of the Assessing Officer and contends that the assessee
has claimed that physically share certificates have been delivered by M/s.
Betala Global Securities Ltd., in the name of assessee, vide their letter dated
4th October 2002, and that these certificates were not printed certificates but
were only hand written. The original certificates were in the name of one Ms.
Minakshi Jain, and were issued on 17th February 1996. He pointed out that
Betala Global Securities Ltd., is not listed on the Exchange and, hence, no
details are available with both the Exchanges. He relied on the test of human
probabilities and submitted that the entire transactions pointed out to
manipulation made by the assessee to the share brokers. He relied on the
order of the Assessing Officer and submitted that the Commissioner
(Appeals) committed a mistake by relying on the decision of Mumbai Bench
of this Tribunal in Mukesh R. Marolia (supra).8.    Learned Counsel for the assessee, Mr. M. Subramanian, on the other
hand, on merits, relied on the order of passed by the Commissioner
(Appeals). On the issue of re-opening, the learned Counsel preferred to the
reasons recorded for re-opening and submitted that there is no observations
that the Assessing Officer has reason to belief that income escaped
assessment. He pointed out that a perusal of the reasons for re-opening
show that it was done to scrutinize the long term capital gain transactions in
the hands of the assessee. For the proposition that only the reasons as
recorded by the Assessing Officer has to be looked into and that there should
be a positive recording that the Assessing Officer has reason to believe that
any income chargeable to tax has escaped assessment. In support of his
arguments, he relied on the following judicial pronouncements:-4                     Mr. Pranlal P. Damani
                                                             ITA no.3747/Mum./2010



      ♦Prashant S. Doshi v/s ITO & Anr., (2010) 324 ITR 154 (Bom.); and
      ♦    German Remedies Ltd. v/s DCIT & Ors., (2006) 285 ITR 026 (Bom.)9.    Learned Departmental Representative opposed the contentions of the
learned Counsel and submitted the entire exercise of re-opening was done
because the Assessing Officer was of the opinion that income chargeable to
tax has escaped assessment because of manipulation.10.   Rival contentions were heard. On careful consideration of the facts and
circumstances of the case and on perusal of the papers on record, orders of
the authorities below as well as the case laws cited before us, we hold as
follows.On the issue of reopening, reasons recorded are extracted below:-"During the course of survey action, it was revealed that the assessee
      has declared long term capital gain on sale of shares and claimed
      exemption undersection 34Fof the Act, for acquisition of flat in lieu of
      5long term capital gain. It is also seen that the assessee's investments
      were multiplied by 22 times within a span of 1½ years. Hence, the
      transactions of long term capital gain required to be scrutinized in the
      hands of the assessee."Though the intention of the Assessing Officer might have been that he
had a reason to belief that income chargeable to tax has escaped
assessment, the same has not manifested itself in the reasons of re-
opening. The first part of the reasons are only factual recording that there
was a survey and it was found that the assessee had declared long term
capital gain and claimed exemption undersection 54F. The second factual
recording is that the assessee's investments have multiplied by 22 times
within a span of 1½ years. Thereafter, only recording is that the long term
capital gains are required to be scrutinised in the hands of the assessee. For
scrutiny, notice undersection 143(2)of the Act would suffice. The
assessment cannot be re-opened for scrutining the same. There should be
positive indication in the reasons recorded that the Assessing Officer had
reason to believe that income chargeable to tax has escaped assessment. In
                                       5                    Mr. Pranlal P. Damani
                                                        ITA no.3747/Mum./2010



this case, no such recording is there. This ground is, thus, decided in favour
of the assessee and the order of the Commissioner (Appeals) is hereby
upheld on this ground.11.   Since we have decided the issue of re-opening in favour of the
assessee, the other issues raised by the Revenue become academic in
nature, which need no separate adjudication by us.12.   In the result, Revenue's appeal is dismissed.Order pronounced in the open Court on 28.4.2011


                   Sd/-                                        Sd/-
         ASHA VIJAYRAGHAVAN                            J. SUDHAKAR REDDY
           JUDICIAL MEMBER                            ACCOUNTANT MEMBER

MUMBAI,     DATED:        28.4.2011

Copy to:

(1)   The Assessee
(2)   The Respondent
(3)   The CIT(A), Mumbai, concerned
(4)   The CIT, Mumbai City concerned
(5)   The DR, "C" Bench, ITAT, Mumbai
                                                      TRUE COPY
                                                      BY ORDER



Pradeep J . Chowdhu ry                      ASSISTANT REGISTRAR
Sr. Private Secretary                  ITAT, MUMBAI BENCHES, MUMBAI