TaxTMI 
TaxTMI 
2010 (2) TMI 656
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....well as the Assessing Officer was not justified in rejecting the claim of long-term capital gain of Rs. 11,40,826 from sale of shares. (3) That the order and findings of the authorities below are based purely on conjectures, surmises, suspicion and hypothesis and are liable to be set aside." 3. The grounds of appeal raised by the Revenue are as under : "(1) That the learned GIT(A)-II, Agra has erred in law and on facts in directing the Assessing Officer to tax out of the total amount of unexplained income of the assessee of Rs. 12,19,538, the amount of Rs. 5,98,000 received through draft dated 20-1-2001 only in the assessment year 2001-02 and to bring to tax the remaining amount in the assessment year 2002-03 ignoring the fact that the assessee has followed mercantile system of accounting and accordingly she herself has claimed deduction under section 54F of the IT Act on the total amount of alleged capital gain in the year under consideration, (2) That the decision of the learned CIT(A)-II, Agra being erroneous in law and on facts deserves to be quashed and that of the Assessing Officer deserves to be restored, (3) That the appellant craves leave to add or alter any....
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....nd it was found that no such broker existed at the given address. On enquiries from the Jaipur Stock Exchange, it was reported that no trading on the floor of stock exchange, since March, 2000, of M/s. Sudev Industries Ltd. was being done. From these verifications, the learned Assessing Officer inferred that the case of the assessee regarding genuineness of the share transaction was not established. The evidences so collected by him were confronted to the assessee and she was also required to produce the share broker and the representative of the company along with its books of account. The learned Assessing Officer also directed the assessee to be personally present for further investigation. Thereafter, various query letters were sent to the assessee. Assessee furnished the present address of M/s. Sudev Industries Ltd. as 247, Sector 19, Noida (UP). It was also submitted to counter the evidence with regard to enquiries conducted from the Jaipur Stock Exchange that trading of share was done through Madhya Pradesh Stock Exchange, Indore and not through Jaipur Stock Exchange. It was further explained that the number of bank draft issued by the State Bank of Indore, Branch Green Park....
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....med this amount of Rs. 12,19,538 as proceeds of shares and is received from M/s. P.K. Jain & Co., as share broker registered at Jaipur Stock Exchange. (4) The amount of Rs. 12,19,538 is received not from Jaipur but from Delhi. (5) At the given address of company and of M/s. P.K. Jain & Co., it is noticed no P.K. Jain existing at Jaipur. However it is noticed that Shri P.K. Jain was registered share broker in Jaipur Stock Exchange. 6) From Jaipur Stock Exchange it is inquired that there is no trading of shares of M/s. Sudev Industries Ltd. during the period under consideration. (7) The assessee on being informed filed the rate of shares quoted in Madhya Pradesh Stock Exchange which means that the shares alleged to have been sold from Madhya Pradesh Stock Exchange. (8) On enquiries conducted from Madhya Pradesh Stock Exchange it is noticed that during the period trading of 200 shares was made. The shares alleged to have been sold by the assessee are not registered with Madhya Pradesh Stock Exchange and the trading of 200 shares was made under permitted category. As the assessee has claimed the sale of 17,000 shares of the company the trading of 200 shares cannot be tra....
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....ature as in this case, the concerned brokers namely, M/s. J.R.D. Stock Brokers, New Delhi and M/s. Yadav & Co., New Delhi have categorically denied share transactions and had stated that no actual transactions had taken place and statement or accounts showing transactions of sales were given by them for commission so as to provide entries to the assessees. They have categorically stated that they first received cash amounts from persons who used to seek entries from them and against the cash receipts they had given them cheques/drafts. (iii) that the increase of value of shares is highly abnormal and unrealistic. In just 15 to 16 months' time the prices of these shares have allegedly increased by more than 16 times. In the instant case, the information received from M/s. Madhya Pradesh Stock Exchange reveals that the trading only of 200 shares is quoted with the exchange on 14th Nov., 2000 to 17th Nov., 2000, then on 20th Nov., 2000 and again on 28th Nov., 2000 at the rate of Rs. 36.70, Rs. 39.60, Rs. 42.76, Rs. 46, Rs. 49.60 and Rs. 72 respectively which shows the tactics of increasing the rate of shares of a particular company to get such type of persons (as assessee) benefite....
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....12,19,538 was added to the income of the assessee of this year as her unexplained and undisclosed income. 7. Against the above addition the assessee preferred appeal before the learned CIT(A) who, in turn, confirmed the addition but has bifurcated the receipt of drafts as per their dates of receipts by observing that after accepting the sale proceeds of Rs. 12,19,438 as undisclosed income of the assessee, in principle, only a sum of Rs. 5,98,000 has to be added in the year under consideration as this amount was received vide draft dated 20-1-2001 and the balance amount has to be considered in assessment year 2002-03 because an amount of Rs. 5,98,000 was received through draft dated 8-8-2001. 8. Now, the assessee is aggrieved against entire addition and the Revenue is aggrieved against the spreading of this amount in two years and raised the above extracted grounds of appeal. 9. In effect the issue raised by both the parties are common and can be decided simultaneously. 10. We have heard the rival submissions in details and also gone through the entire pieces of evidences which are placed in the paper book of the assessee as well as the entire assessment order as well as....
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....ed from Smt. Bibi Rani Bansal routed through some bogus account and the balance came to their current account No. 6351026 and draft was issued by SBI and on behalf of ABN Amro Bank. In this letter it is also stated that it was only accommodation entry regarding capital gains etc. Learned Authorised Representative has invited attention to p. 24 of paper book which was a letter written by Addl. CIT, Khand-2, Jaipur by Income-tax Inspector Shri Manohar Vijay which was directly obtained by the H.O., Firozabad by G.P. Gargh, ITO while making enquiry in relation to Shri P.K. Jain. It was informed that P.K. Jain & Associates' owner Shri Jain was residing in C-9, Bapunagar which house has 3 portions, one of the portions was in occupation by one Shri Ajay Sharma during the period February, 2004 and that Shri Ajay Sharma purchased that portion of the house four years ago from Shri P.K. Jain. The Inspector has also clarified that Shri P.K. Jain was residing in this house four years back. At pp. 25 to 36 a copy of the third remand report sent by ITO is placed. From the remand report it is evident that the existence of Shri P.K. Jain, proprietor M/s. P.K. Jain & Associates was confirmed but as ....
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.... through bank draft at the prevailing market rate as per the concerned Madhya Pradesh Stock Exchange and when the assessee has handed over the possession of the original share scrips along with the blank transfer deeds to the broker from whom she had received payment, the transaction as far as the assessee is concerned of sale of shares is complete. In common parlance, nothing more is expected from a man in such sale transaction of shares. The main ground for suspecting the sale of these shares by the learned Assessing Officer is the exorbitantly high sale price of shares and that a scam of large scale fictitious share transactions were detected by the Department. The scam which was noticed in some other company's shares cannot be relevant insofar as this case is concerned. Even the transaction with the scammers (or brokers) who were indulging in illegal activities has to be examined according to its merits. Insofar as exorbitant price of the shares at that time is concerned, it is proved on record that the sale price of share on that date was actually very high which is proved from quotation of the Madhya Pradesh Stock Exchange which is on record. The learned Authorised Representa....
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....r case. In such circumstances when explanation insisting on the production of a conclusive evidence, the case must be dealt with on reasonable probabilities and legal inferences arising out of proven or admitted facts. It is nobody's case that burden of proof is not static and keeps on shifting. The learned Assessing Officer has relied on the finding of Hon'ble Supreme Court in the case of Sumati Dayal v. CIT [1995] 214 ITR 801^3 that apparent must be treated till it is shown that the apparent is not real. It is true that the apparent must be treated as real until there are reasons to believe that the apparent is not real. The Department cannot act unreasonably while considering the explanations of the assessee. The facts of the given case have to be examined in their totality in the light of attending circumstances. The letters written by Shri P.K. Jain, copies of which are placed on record, have to be considered in view of the fact that earlier even when the assessee tried the whereabouts of Shri P.K. Jain was not found yet he has written three letters successfully on which the signatures of Shri Jain are found to be microscopically different. There is force in the submission of ....
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....ho brought the cash and when the payment received from the share broker Shri P.K. Jain vide D.D. dated 20-1-2001 amounting to Rs. 5,98,500 and D.D. dated 8-8-2001 amounting to Rs. 6,17,993 out of his bank account No. 6351026 were enquired by the learned Assessing Officer and conducted several enquires regarding the source of cash introduction. But the Assessing Officer could not find out as to by whom cash was deposited. It is not proved from records that the amount of Rs. 14 lakhs belonged to the assessee as stated by the share broker. The assessee received Rs. 12,16,493 through D.D. whereas the amount shown as belonging to her as paid to the broker for payment of DDs. comes to Rs. 14 lakhs. The excess amount of Rs. 1,83,507 comes to nearly 15 per cent of the amount of DD prepared. So what happened to remaining amount because nobody would give such a huge commission. Whereas she had to pay tax on long-term capital gain at 10 per cent only without taking benefit of indexation. It clearly shows that no sane person could get the bogus entry in these circumstances. So the averments of the letter of Shri P.K. Jain seems to be vague and absurd and these cannot be accepted as correct. Sh....
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....8) 7 DTR (Agra)(Trib.) 158-Ed.]; (9) Tribunal, Agra Bench in the case of Ashok Kumar Lavania [IT Appeal No. 112 (Agra) of 2004, dated 30-5-2008]. 12. In the result, appeal of the assessee is allowed and that of the Revenue is dismissed. Sanjay Arora, Accountant Member. - I have carefully perused the order proposed by my learned Brother, and also discussed the same with him. However, being unable to bring myself in agreement therewith, I proceed to write my separate order, as under. 2. The only issue arising in the assessee's appeal in the present case is the non-acceptance of its claim in respect of long-term capital gain on the sale of shares, which stands treated by the Revenue as income from other sources, as in its view the assessee was unable to prove the share transaction(s) yielding the 'capital gain' under reference. 3.1 For the detailed reasons listed in the case of Baijnath Agarwal v. Asstt. CIT [2010] 42 SOT 475 (Agra) (TM), I have, vide my dissenting order dated 10-2-2009, taken a different view from that by my learned Brother, dismissing the assessee's appeal on this ground, in that case. 3.2 On the basis of the hearing, and the examination of the rec....
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.... of shares. (2) That in view of the submissions, evidence and material placed on record, the learned CIT(A) as well as the AO was not justified in rejecting the claim of long-term capital gain of Rs. 11,40,826 from sale of shares. That the orders and findings of the authorities below are based purely on conjectures, surmises, suspicion and hypothesis and are liable to be set aside." Grounds raised in ITA No. 101/Agra/2005 by Revenue : "(1) That the learned CIT(A)-II, Agra has erred in law and on facts in directing the AO to tax out of the total amount of unexplained income of the assessee of Rs. 12,19,538, the amount of Rs. 5,98,000 received through draft dt. 20th Jan., 2001 only in the asst. yr. 2001-02 and to bring to tax the remaining amount in the asst. yr. 2002-03 ignoring the fact that the assessee has followed mercantile system of accounting and accordingly she herself has claimed deduction under section 54F of the IT Act, on the total amount of alleged capital gain in the year under consideration. (2) That the decision of the learned CIT(A)-II,Agrabeing erroneous in law and on facts deserves to be quashed and that of the AO deserves to be restored." 2. The....
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....sment order and held that since the assessee could not prove the sale of shares and genuineness of receipts of money from sale of shares, so the entire amount of cheque/draft will be treated as income from undisclosed and unexplained sources. Accordingly, the AO treated the entire amount of Rs. 12,19,538 received against the sale proceed of shares as income from undisclosed and unexplained sources. 3. When the matter went before the CIT(A), the CIT(A) partly allowed the appeal of the assessee by observing as under : "5.12 Considering the above facts and the legal position it is held that the AO was justified in holding that the share transactions were sham and bogus. The same have been shown just to convert the appellant's unaccounted income into white. The alleged sale proceeds of Rs. 12,19,538 represented the assessee's undisclosed income. Thus, AO's action, in principle, is upheld. However, since in this year the assessee has received only Rs. 5,98,000 vide draft year i.e. asst. yr. 2002-03. In the result, in this year addition to the extent of Rs. 5,98,000 is confirmed. 6. In the result, the appeal is partly allowed." 4. When the matter came before the Tribunal, lea....
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....possession, power and capacity. Even after the assessment, he made all efforts to get information and even went to Delhi along with the AO for adequate enquiries. Purchase of shares stands fully proved. Sale price at the relevant time also stands proved. Moreover, shares were purchased in the earlier year and stand accepted by the Department. Abnormal increase in share prices is not an abnormal phenomena. The issue has been considered by Agra Bench in the case of Smt. Memo Devi v. Asstt. CIT [2008] 7 DTR (Agra)(Trib) 158 assessee was neither a director in the company nor related to them. He also had no control over the stock exchange. As such, he was not in capacity to manipulate or rig the share prices. Reliance on the letters of the broker M/s P.K. Jain & Associates, who admits of his dubious dealings, without testing them is a fatal mistake by the Department. The averments of the letters were disputed and did not inspire credence, yet the Department simply relied on them without examining the broker and his books of accounts and without providing cross-examination to the assessee. In the absence of letters of the broker being tested by the AO it cannot be said that they are comp....
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....roved through the direct confirmation by the company in response to the notice of the AO under section 133(6). Therefore, the assessee's case is not different from the case of Ashok Kumar Lavania (supra) to which the Hon'ble AM was a party. 7. Referring to the information provided by share broker M/s P.K. Jain & Associates, it was pointed out that this information is not credible. In the first letter dt. 27th July, 2004 he denied any transaction being entered into with the assessee and also mentions that bill dt. 15th Dec, 2000 in the name of the assessee seems to be fictitious one and appears to be only an accommodation entry. In the second letter dt. 4th Aug., 2004 he states that he had issued draft to the assessee and he received the cash from the assessee. In this letter he also mentions that cash received by him was routed through some bogus account and the balance came to his current account No. 6351026 from which the draft was issued by State Bank of Indore on behalf of ABN Amro Bank. In this letter, he did not disclose all the accounts through which the cash was routed and even the name of the banker in which the current account No. 351026 exists. Vide letter dt. 28th Se....
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....missions along with the orders of the tax authorities below as well as the order of my learned colleague members. I noted that while passing the dissent order the learned AM has mainly relied on its, separate order passed in the case of Baijnath Agarwal ITA No. 133/Agra/2005. I have gone through the order of Baijnath Agarwal and noted that in his dissent order in that case the learned AM has relied on the decision of Ashok Kumar Lavania 112/Agra/2004. I have gone through the decision of Ashok Kumar Lavania in ITA No. 112/Agra/2004 which was decided by the Bench constituting of same learned JM and learned AM vis-a-vis the facts of the case of the assessee. In that case also the transaction of sales has not been accepted by the AO as he doubted the sale prices and also relied on the statement of Shri Ashok Gupta, director of M/s JRD Stock Brokers (P.) Ltd. who stated that as a matter of fact there was no actual purchase and sale of shares as was reflected in the contract notes issued by M/s JRD Stock Brokers (P) Ltd. to the beneficiaries. In that case the assessee claimed long-term capital gain of Rs. 25,14,770 and claimed exemption under section 54EA of the Act. The long-term capita....
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....re certificates received from the companies; and (v) affidavit. (11) There is no doubt, in such cases, the brokers become the witnesses of the Department. The Department has got statements of these brokers which are used against the assessee. Irrespective of the fact that the statements were recorded at the back of the assessee and that the assessee was or was not afforded opportunity for cross-examination, when overwhelming documentary evidences are produced by the assessee, the burden shifts on the Revenue to explain away them. Every time the statements cannot help the Department. How the above-mentioned evidences could be ignored? The Revenue has to give reasons for rejecting them. These are important documents, some of them arise under the provisions of the Companies Act. The brokers were never confronted with the evidences produced by the assessee. The apparent has to be treated as a real unless proved otherwise. Long ago Hon'ble Supreme Court has laid this law while rendering the celebrated decision in the case of CIT v. Daulatram Rawatmull [1964] 53 ITR 574 (SC). The assessee has countered the statements of brokers by way of his duly sworn-in affidavit. We have examine....
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....es were delivered after its sale and the assessee did not remain in possession of those shares. From the above facts, it is established that the assessee acquired the shares to earn profit. There is no evidence except speculation that this profit is not from the sale of shares. The AO has failed to establish his case and to discharge the requisite burden cast on him. The Authorised Representative has filed the requisite quotation of18th July, 1996along with the requisite proof of transactions of 9,000 shares along with transfer of share certificate. Therefore, in the given facts and circumstances of the case, the CIT(A) has correctly come to the conclusion that the assessee has dealt in these shares and these transactions cannot be held bogus. The deletion of addition of Rs. 4,99,062 is confirmed.' (13) The above decision clearly helps the case of the assessee. (14) Credence cannot be given to the statements of the persons who themselves admit and have dubious dealings as against the documentary evidences produced by the assessee. (15) Moreover, when purchases have not been doubted or disputed by the Revenue in this case, the decision of Hon'ble Punjab & Haryana High Court....
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....fact in assessee's case the purchase of shares is also not in dispute but rather the company has directly confirmed to the AO the purchase of the shares by the assessee in reply to the notice issued under section 133(6). The learned AM was also the party to that decision. I noted that in this case the AO has doubted the sale consideration because the share price has increased tremendously. I noted that in the case of Ashok Kumar Lavania (supra) also the assessee has purchased the shares @ Rs. 4 per share and sold @ Rs. 65 to Rs. 84 per share. In that case also the broker has not accepted the transaction but on the basis of the evidence the Tribunal has accepted the transaction to be genuine one as there was no corroborative evidence to support the statement of the broker. In this case, I noted that the statements of the broker couldn't be given any credence as he has stated differently vide different letters. Earlier he denied the transaction being entered into. Subsequently he has accepted that he has issued the draft after receiving the cash. Again he said that the cash was routed through some bogus account but he accepted that the draft has been made from his account. Subsequent....
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.... "The mere reliance on the statement of third parties who were never examined by the AO himself cannot be held to be sufficient to come to the finding that the transaction was not genuine and more so when there are other material and evidences to support the transaction." 13. Hon'ble Delhi High Court in the case of CIT v. SMC Share Brokers Ltd. (supra) also observed as under : "There is no doubt that the statement of Manoj Agarwal had evidentiary value but weight could not be given to it in proceedings against the assessee without it being tested under cross-examination. In the absence of statement being tested, it cannot be said that it should be believed completely to the prejudice of assessee." 14. Under these facts, I am of the opinion that the case of the assessee is duly covered by the Division Bench of this Tribunal in the case of Ashok Kumar Lavania in ITA No. 112/Agra/2004 which has been decided by the Bench constituting of the same very learned Members. Judicial discipline demands that on the similar facts the Bench is bound to follow its earlier decisions. The principles of judicial discipline require that the order of the Co-ordinate Bench has to be followed.....
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....almost similar circumstances the Hon'ble Punjab & Haryana High Court in the case of CIT v. Anupam Kapoor [2007] 212 CTR (P&H) 491 [2008] 299 ITR 179 (P&H) has also observed as under : "The Tribunal was right in rejecting the appeal of the Revenue by holding that the assessee was simply a shareholder of the company. He had made the investment in a company in which he was neither a director nor was he in control of the company. The assessee had taken shares from the market, the shares were listed and the transaction took place through a registered broker of the stock exchange. There was no material before the AO, which could have lead to a conclusion that the transaction was simpliciter a device to camouflage activities to defraud the Revenue. No such presumption could be drawn by the AO, merely on surmises and conjectures." 18. In the stock exchange when the transaction is entered, into, the assessee is not aware of the buyer of the shares. He enters into transaction only through a share broker. Therefore, the observation of the AO that the assessee could not identify the buyer cannot be the basis of regarding the transaction to be non-genuine one. I also noted that the AO has....
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....that is available on record, there is no averment, much less any evidence, with the Revenue in this regard. While there may be enough grounds with the AO to carry out the impugned verification exercise to test the efficacy of the transactions resulting in long-term material gains in the hand of the assessee but there is no cogent material or evidence to indicate that the impugned sale proceeds reflected unaccounted income of the assessee." 20. It was the duty of the AO to bring on record sufficient evidences and materials to prove that the documents filed by the assessee were bogus false or fabricated and the long-term capital gain shown by him was actually his income from undisclosed sources. The only material to support such conclusion of the lower authorities is either the findings of the DDI in general investigations or the twisting statements of M/s P.K. Jain & Associates which remain untested by the AO himself. None of the judicial precedents supports the case of the Revenue. While making addition as income from undisclosed sources, burden on the Department is very heavy to establish that the alleged receipt was actually income of the assessee from the undisclosed sources.....
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....A No. 881/Del/2004 (Delhi Bench 'SMC'); (ii) Dilip Gargh v. ITO ITA No. 470/Agra/2004; (iii) Gopal Prasad Agarwal v. Asstt. CIT ITA No. 128/Agra/2004 22. I also noted that the case of the assessee is duly covered by the decision of the Third Member in the case of Smt. Sunita Oberoi v. ITO ITA No. 273/Agra/2004; asst. yr. 1995-96, dt. 7th Aug., 2009, [2009] 126 TTJ (Agra) (TM) 745, in which on difference of opinion on the question under the similar circumstances whether the assessee can be said to have discharged her burden to prove the genuineness of the transaction in shares of M/s Prasidh Exports Ltd. and M/s K.L.P. Finance Ltd. or that the burden had shifted on the Revenue that can be held to have not discharged by them, the decision to uphold, accepting of alleged profit on alleged share of M/s Prasidh Exports Ltd. and M/s K.L.P. Finance Ltd. as income from other sources instead of assessee has claimed the capital gain is a correct decision or not. The Hon'ble Third Member has held as under : "The only reason to make the addition is that confirmation from the share brokers could not be filed by the assessee and summons issued to the said persons were not s....