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CIT Vs. VINOD KUMAR GUPTA
February, 27th 2013
        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




ITA 1303 /2011                                                         Page 4 of 8
`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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