TaxTMI 
TaxTMI 
2012 (7) TMI 577
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....pital gains of Rs. 80,03,027/- (5,29,22,774 - 4,41,10,775) be taxed as short term capital gains. 3. The learned CIT(A) further erred in holding that the purchase value of the shares sold be taken at the average of high and low price of the shares traded on the NSE and BSE on the date of dematerialization viz. Rs. 4,41,10,775/- and treating the same as unexplained investment in the shares. 4. Without prejudice to above, the appellant has made investment in shares in earlier year which were duly reflected in the books of account of the appellant, hence the addition of Rs. 44110775/-unexplained investment for the year under consideration may be deleted. 5. Without prejudice to above, the transaction in shares being genuine and sufficient evidences were produced, the long term capital gains shown by the appellant as exempt under section 10(38) of the Income-tax Act, 1961 may be accepted and additions confirmed by the CIT(A) may be deleted." 3. Facts of the case, in brief, are that the in response to notice u/s.153A dated 27.11.2006, the assessee furnished return of income on 29.12.2006 declaring total income of Rs. 68,01,840/-. The income of the assessee c....
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.... of his transactions of purchase of shares. 4.3 The AO subsequently issued notice u/s.133(6) to National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) calling for certain information. The Stock Exchanges were specifically asked to furnish the details whether the shares mentioned above were traded through the Stock Exchanges as per the Contract notes furnished by the assessee. The details of broker notes, Trade Nos., Settlement No. and date of purchase of these shares were provided to the Stock Exchanges. 4.4 In response to the notice issued u/s.133(6), the NSE vide letter dated 15.07.2008 informed that M/s. Mahasagar Securities Pvt Ltd is neither a registered trading member nor a sub broker affiliated to any registered trading member of stock exchange. Further, the securities of the company Parraneta Industries are not listed on the exchange. The BSE vide letter dated 16.7.2008 informed that M/s. Mahasagar Securities Pvt. Ltd. is not registered with the BSE. 4.5 The AO scrutinized the Demat A/c. held with Techno Shares and Stock Ltd. and found that the above mentioned shares are dematerialized immediately before the date of sale i.e. either on the same date of sale ....
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....as recorded u/s.131 of the I.T. Act. In the said statement Shri Mukesh Chokshi in his reply to question No.7 to 10 specifically denied to have purchased any shares for the assessee by his company Mahasagar Securities Pvt. Ltd. He also stated that, the broker's notes furnished by the assessee, have not been issued by Mahasagar Securities Pvt. Ltd. Since Shri Mukesh Chokshi has categorically denied to have issued any contract notes and denied to have any transaction with the assessee and denied to have known the assessee, the AO allowed an opportunity to the assessee to cross examination. Shri Mukesh Chokshi, Director of Mahasagar Securities Pvt. Ltd., which the assessee availed. 4.8 In response to the questions put by the representative of the assessee to Shri Mukesh Chokshi in presence of the AO Shri Mukesh Chokshi reiterated that he has not purchased any shares for the assessee and has not issued any brokers note. Therefore, the AO came to the conclusion that the brokers note furnished by the assessee regarding the alleged purchase of shares are not genuine. 4.9 Simultaneously, summons were also issued to the BSE and NSE on 24.12.2008 to furnish the details of trading ca....
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....rough the Stock Exchanges. These shares were not traded through the stock exchanges. (V) The shares were not dematerialized after the purchase. (VI) The shares got dematerialized only on the day of sale or 2 to 3 days before the date of sale. The shares have been transferred from the another D.P in which the assessee has no Demat account. (VII) The assessee has not furnished any evidence to establish that, the shares were actually purchased by him. All these facts according to the AO established that, the purchase of shares as claimed by the assessee are not genuine. 4.11 The AO noted that the assessee only furnished the contract notes of a brokers and ledger account of Mahasagar Securities Pvt. Ltd. to support the claim of purchase of shares. No other documentary evidence was furnished to prove the genuineness of the purchases. Since the person who was supposed to sign or issued these contract notes has denied to have signed and issued the contract notes, therefore, the AO came to the conclusion that these documents are not genuine but fabricated. He also rejected the contention of the assessee that he was in habit of relying on portfolio managemen....
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....nvestment in shares. The AO analysed the total purchase price on the date of dematerialization of shares which comes to Rs. 4,41,10,775/-. According to him this amount becomes the unexplained investment in shares, as it is not accounted for in the books of accounts. Since, the total sale receipts from the shares has been shown at Rs. 5,09,25,802/-, therefore, the Short Term Capital Gain on account of sale of the shares comes to Rs. 80,03,027/-. However, as the entire receipts on the sale of shares have been treated as unaccounted income and added back to the total income, the AO did not make any separate addition under unexplained investment and short term capital gain. Thus, the AO made an addition of Rs. 5,09,25,802/- as unexplained cash credit u/s. 68 of the I.T. Act. 5. Before the Ld. CIT(A) it was submitted that the purchase of the said shares was genuine, the sale of the said shares are out of the balance held in the demat account of the assessee, the said shares were transferred on the floor of the exchange, there are bills and contract notes for effecting such transfers and the amount has been received by account payee cheque substantially establishing the source of the ....
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....said shares were received as Bonus Shares on the original shares purchased by the assessee earlier and some of the said shares included shares which were split after the purchase of the original shares. Therefore, the same remaining in the form of "shares and securities" cannot be doubted and there cannot be levy as cash credit in respect thereof. 5.3 It was further submitted that some of the said shares were received as bonus shares are out of the balance held in the Demat account of the assessee, the said shares were transferred on the floor of the exchange, there are bills and contract notes for effecting such transfers and the amount has been received by account payee cheque. The assessee also filed certain additional evidences. 5.4 The Ld. CIT(A) sent the additional evidences filed before him to the AO and called for a remand report from him. After obtaining the remand report from the AO and after considering the submissions of the assessee to the remand report, the Ld. CIT(A) held that no addition can be made u/s.68 of the I.T. Act in the instant case. He, however, upheld the alternate proposition of the AO in treating the Short Term Capital Gain on the sale of the shar....
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.... & Stocks Ltd. The sale consideration was received by account payee cheques through banking channels and from a reputed BSE/NSE broker who is regularly assessed to tax by ACIT Circle-4(2) Mumbai. These relevant shares trading have been routed through prescribed and mandatory channels which are monitored by SEBI, BSE, NSE etc. No abnormalities reported by any agency. There is no seized material found nor seized by any authority U/s. 132(1) of the Act or otherwise on this issue. Neither any statement on oath U/s. 132(4) of the Act was recorded on this issue nor any disclosure made. These overwhelming evidences have not been discounted by the AO and he has not assailed the reliability, validity or genuineness of sale of the impugned listed shares. The jurisdictional AO of the said Techno Shares & Stocks Ltd. has also not found anything wrong or anything suspicious about the capacity or creditworthiness of the said M/s. Techno Shares & Stocks Ltd. in the Assessment Year 2006-07 with reference to the sale transactions of the impugned shares with the assessee concerned. The corresponding brokerage income earned on the sale of these listed shares have been accepted by the Department and c....
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....of the Bench to the copy of the bank statement of HDFC Bank evidencing the payment for purchase of shares. Referring to paper book page 45 of the paper book the ld. Counsel for the assessee drew the attention of the Bench to the copy of the accountant payee cheque issued to MSPL by the assessee. Referring to paper book pages 46 to 58 of the paper book the ld. Counsel for the assessee drew the attention of the Bench to the copy of the ledger account of MSPL in the books of the assessee. Referring to paper book page 59 of the paper book the ld. Counsel for the assessee drew the attention of the Bench to the copy of the ledger account of the assessee in the books of MSPL. Referring to paper book pages 62 to 88 of the paper book the ld. Counsel for the assessee drew the attention of the Bench to the copies of the contract notes and sale bills of all the shares sold from Techno Shares & Stocks Ltd. Referring to paper book pages 89 to 94 of the paper book the ld. Counsel for the assessee drew the attention of the Bench to the copy of the D-mat account. Referring to paper book page 95 of the paper book the ld. Counsel for the assessee drew the attention of the Bench to the copy of the con....
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....he entire transaction cannot be treated as bogus. He submitted that since the shares were dematerialised before the date of sale it confirms the fact that the said shares were in fact purchased by the assessee prior to the de-materialisation. Referring to the confirmation letter dtd. 28.10.2005 from Sunchan Securities which was filed before the A.O. he submitted that the same clearly states that the shares purchased by the assessee were transferred on behalf of MSPL to the DP account. Therefore, the above evidences clearly and conclusively prove that the assessee has duly discharged the onus cast upon him. The Revenue has not brought on record anything to show that these are false or untrue. 7.2 He submitted that Mr. Mukesh Choksi at one time denies to have made the transactions with the assessee or even knowing the assessee. However, during cross examination he has accepted to have received the cheque from the assessee. Therefore there is no evidentiary value of Mr. Mukesh Choksi on account of double speaking. Referring to the decision of Hon'ble Calcutta High Court in the case of CIT v. Eastern Commercial Enterprises [1994] 210 ITR 103, he submitted that the Hon'ble Co....
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..... 122 to 124/Kol/2011) 04 Dhakeswari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775 (SC) Asstt. CIT v. J.R. Solvent Industries (P) Ltd. 24 DTR 387 (Chd.) 05 Atma Ram Tulsyan ITA 495/ALL/2007 06 ITO v. Smt. Kusumlata [2007] 13 SOT 61 (Jodh.) 07 CIT v. Anupam Kapoor [2008] 299 ITR 179/166 Taxman 178 (Punj. & Har.) 08 Mansi Modi (Poddar) v. ITO [ITA No 1465/Kol/2010] 8. The ld. D.R., on the other hand, heavily relied on the order of the ld. CIT(A). He submitted that in view of denial of Mr. Mukesh Choksi the transactions cannot be accepted as genuine. The various decisions relied on by the ld. Counsel for the assessee are distinguishable and are not applicable to the facts of the present case. He accordingly submitted that the order of the ld. CIT(A) should be upheld. 9. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. In the instant case the A.O. made addition of Rs. 5,09,25,802/- as unexplained cash credit holding the sale of shares by the asse....
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....ledger account of the assessee in books of MSPL were also filed before the A.O. Similarly the copies of contract notes and sale bills of all the shares transferred to Techno Shares & Stocks Ltd. with copy of D-Mat account and copy of confirmation letter dtd. 28.10.2005 from Sunchem Securities P. Ltd. were also filed before the A.O. Nothing was brought by the A.O. to prove that any of these evidences filed by the assessee is false or untrue. The Revenue has basically gone on the statement of Mr. Mukesh Choksi who denied to have known the assessee and denied to have made any transaction with the assessee on account of purchase of shares. The relevant questions and answers of Mr. Mukesh Choksi recorded by the A.O. on 24.12.2008, copy of which is placed at paper book page No. 19 to 23 are as under. Q No. 7:- Do you know Shri Jafferali K. Rattonsey and Smt. Hamida Rattonsey? Ans. No. I do not know them. Q No. 8:- I am showing you the ledger account of Mahasagar Securities Pvt. Ltd. in the books of Shri J.K. Rattonsey and Smt. Hamida J. Rattonsey. From this account it is seen that the assessee have carried out regular transaction with Mahasagar Securities Pvt. ....
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.... Ans. I am preparing accounts on receipt basis and the cheques received by me are accounted as a general receipts and on which the commission earned by me has been accounted fully. Here the shares have been delivered by Sunchan Securities, I have not given any instructions to Sunchan Securities. Q.No.5 Question put up by Dr. Mahesh Akhade - Kindly furnish the statement of bank accounts of Mahasagar Securities Pvt. Ltd. in which the above mentioned two cheques amounting to Rs. 12,40,565/- and Rs. 11,91,378/- have been deposited. Ans. At present they are not available with me, I will furnish the same after receipt of the same. 9.5 From the above, it is clear that Mr. Mukesh Choksi is double speaking in his statements i.e. one given before the A.O. and the one during cross examination before the A.O. Under these circumstances one has to see the evidentiary value of a person making double speaking. We find the Hon'ble Calcutta High Court in the case of Eastern Commercial Enterprises (supra) has held that a man indulging in double speaking cannot be said by any means a truthful man at any stage and no Court can decide on which occasion he was truthful. We find t....