AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2009 (5) TMI 928
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....145(3) of the Act and confirming the trading addition of Rs. 1,66,708. Ground Nos. 1 and 2 of the Revenue : The learned CIT(A) has erred in deleting the addition made under s. 69C of Rs. 43,93,872 and has erred in deleting the addition made under proviso to s. 69C of Rs. 43,93,872. 3. We have heard the parties. The brief facts of the case are that the assessee firm is engaged in the business of export of gems and jewellery. During the course of assessment proceedings the assessee firm was required to produce the five different parties from whom purchases of Rs. 43,93,872 were shown. None of the parties could be produced. The AO has also issued summons but in 4 cases these were returned unserved by postal authorities and in case of the 5th party namely M/s Manviya Exports summons was served but nobody appeared. Again it was confronted to the assessee but he has expressed his inability to produce these parties with their books of accounts. Thereafter, the AO has discussed the various cases from which purchases from these parties were not considered genuine and has given a finding that the assessee was not in a position to prove such purchases and therefore, on account of such unpro....
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.... of the case are that on perusal of relevant portion of the assessment order it is seen that as per demat account of the assessee there was a credit of shares on 20th April, 2002 and 22nd April, 2002. When the explanation for the investment in said purchases was called for it was clarified that the payment for the same has been made on 19th March, 2001 while delivery of the shares was taken on 20th April and 22nd April, 2002. The AO has given a finding that genuinely these shares were purchased in April, 2002 and it is not reflected in the books of accounts, therefore, under s. 69 he made an addition of Rs. 3,51,400. 7. The learned CIT(A) confirmed the action of the AO. 8. The learned counsel for the assessee Shri Mahendra Gargieya, advocate argued that the correct figure of the addition made by the AO is Rs. 4,01,600 instead of Rs. 3,51,400 for which there was no objection by the learned Departmental Representative. He further argued that the payment through account payee cheque was made on 1st March to the broker and this fact is not disputed. The assessee has purchased 80,000 equity shares of M/s Shardaraj Trade Fin. Ltd. on 19th March, 2001 from M/s S.S. Bhutra & Co., Calcutt....
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....ion made on account of unexplained investments of Rs. 3,51,400 is liable to be deleted. Secondly, even otherwise the fact of purchases cannot be doubted inasmuch as the appellant did make payment of Rs. 4,01,600 through cheque to the broker namely M/s S. Bhutra & Co. on the basis of contract note No. 2, dt. 19th March, 2001 (paper book 86), as per his bill No. 35 (paper book 87). The note shows the fact of purchases on 19th March, 2001. The fact of payment is evident from a copy of bank statement of the account of assessee with ICICI Bank (paper book 127), as also the statement of account of M/s S. Bhutra & Co. with Canara Bank (paper book 125). Notably, the broker Shri S. Bhutra has also made the payment of service-tax of Rs. 80 and stamp charges of Rs. 41 on the day of the transaction as evident from the bottom of the contract note issued by the broker (paper book 86). Thus, it could not have been a managed affair at all in view of these unrebutted facts. Thus, the genuineness of the fact of making payment towards the purchases of the share, could not have been doubted and therefore, the appellant must be considered to have purchased these shares in March, 2001 itself. For the re....
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....exchange. Further, it was confirmed by Kolkata Stock Exchange that Shri Basant Kumar Chirimar has not done any transaction in the aforesaid scrip. Under these circumstances by sending a copy of Addl. Director of IT (Inv.), Kolkata report a show cause was given to which it was replied that copy of broker note was already filed and all the payments made and received by account payee cheque. However, the said explanation was not considered satisfactory by AO on the ground that the stock broker has sold the shares of the said scrip on his own account and these have been sold to one of the clients in self-code which is possible only when purchaser and seller quare of the transaction through same broker and these transactions are actually managed transactions where broker himself has decided the sale and purchase price. According to AO in genuine transactions the shares are required to be delivered within 3 days but the delivery on 25th Sept., 2002 proves that it was managed transaction of Bubna Stock Broking Services Ltd., Kolkata and it is not genuine transaction. Further, the Kolkata Stock Exchange Ltd. has confirmed that Shri Basant Kumar Chirimar has not done any transaction in the ....
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.... vide and co-terminus with those of the AO and what AO can do, he can do and what AO fails to do, that also he can do. Kindly refer CIT vs. Kanpur Coal Syndicate (1964) 53 ITR 225 (SC). Secs. 251 and 252 of the Act have also been worded keeping the same spirit, as also r. 46A. Sec. 250(4) empowers the CIT(A) to make further inquiries on its own or to direct the AO to make further inquiry and to report him. The embargo put on his power under r. 46A(1) and (2) has also been loosened by sub-r. (4), which also empowers the CIT(A) to direct the production of any document/the examination of witness, to enable him to dispose of the appeal. Thus, the legislative intent is quite clear that the CIT(A) should not straightaway reject evidence/s filed before him under r. 46A(1). The powers of CIT(A), are also to be interpreted in the context of the amended law, wherein he is no more empowered to restore back any matter which was available earlier under s. 251(1)(a), necessitating a compulsory admission of the evidence before him in the interest of justice. This matter has recently been dealt with elaborately in CIT vs. K. Ravindranathan Nair (2003) 184 CTR (Ker) 46, which has held that the CIT(....
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....ng to the same. Thus, firstly, this was a new concept and therefore it was quite natural for all the concerned to take sometime and follow the procedure newly laid. The appellant did not keep a silence but acted diligently and thus, there was a reasonable cause behind this delay. Secondly, even otherwise the fact of purchases cannot be doubted inasmuch as the appellant did make payment of Rs. 4,01,600 through cheque to the broker namely M/s S. Bhutra & Co. on the basis of contract note No. 2, dt. 19th March, 2001 (paper book 86), as per his bill No. 35 (paper book 87). The note shows the fact of purchases on dt. 19th March, 2001. The fact of payment is evident from a copy of bank statement of the account of assessee with ICICI Bank (paper book 127), as also the statement of account of M/s S. Bhutra & Co. with Canara Bank (paper book 125). Notably, the broker Shri S. Bhutra has also made the payment of service-tax of Rs. 80 and stamp charges of Rs. 41 on the day of the transaction as evident from the bottom of the contract note issued by the broker (paper book 86). Thus, it could not have been a managed affair at all in view of these unrebutted facts. Thus, the genuineness of the fa....
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.... as open market prices in absence of any contrary evidences brought on record. The next allegation of the AO is that though the shares were shown to have been sold on 6th May, 2002, yet from a perusal of the demat account, the delivery was given on 20th Aug., 2002 (50,000 shares)/on 25th Aug., 2002 (30,000 shares) (wrongly typed in the order of the authorities below as "25th Sept., 2002") and therefore, this was a managed transaction. However, the authorities below had totally lost sight of an important fact that the ICICI Bank had suspended the debit transaction in relation to the present assessee and this fact is evident from the ICICI demat account (paper book 121), wherein the status has been shown as "suspended for debit". It is mainly for this reason only that there was a delay in the delivery through the demat account. Otherwise also, this fact was stressed by the authorities below more than warranted inasmuch as the very fact of purchases in March, 2001 is established from the record and the existence of the shares thereafter further stood proved through the ICICI demat account (though in April, 2002, which is not relevant). The sale of these shares is claimed to be in May,....
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.... carried out of market as against online trading. Although the authorities below have not alleged nor denied yet we may clarify that online trading i.e., purchase and sale of shares, is fully permissible under the SEBI Rules and Guidelines i.e. Securities and Exchange Board of India Act (SEBI), 1992 read with Securities Contracts Regulation Act, 1956. The Kolkata Stock Exchange Ltd. has nowhere stated in its letter dt. 13th March, 2006 that off market transactions were not permissible at the relevant point of time or that the self-code parties, transactions, could not be done. The learned CIT(A) has suggested that to prove genuineness of the sale of 60,000 shares, the genuineness of the sale price of the scrip and the party to whom such shares were sold, could have been given. As regards the sale price, we have already submitted above. With regard to the buyer, suffice to say that once the transaction is made through an independent broker, whose identity and independence is not doubted (or even assuming doubted, is not established by the authorities below), it is immaterial to whom the shares were sold. It was for the Revenue to have brought contrary evidence on record that such a ....
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....7 made under proviso to s. 69C. Ground Nos. 2.1 and 2.2 and 3 of the assessee : The learned CIT(A) has erred in invoking the provisions of s. 145(3) of the Act, and confirming the addition of Rs. 5,23,465 and not allowing the benefit of deduction under s. 80HHC on Rs. 5,23,465. 19. The brief facts of the case are that the assessee firm is engaged in the trading of precious and semi-precious stones and filed return of income on 22nd Sept., 2004, declaring total income of Rs. 18,71,700. The case was selected for scrutiny. During the assessment proceedings the AO made verification regarding the genuineness of the following purchases claimed by the assessee : Name of the party Amount of purchases M/s Veni Gems Rs. 10,51,218 M/s Abhay International Rs. 3,32,839 Rs. 13,84,057 For that purpose, the AO required the assessee to produce the above-mentioned two parties along with their books of account and bank statements before him on 22nd Nov., 2006. However, on 22nd Nov., 2006 the assessee produced none of the parties and instead the assessee filed copies of acknowledgement of return of income filed for the said year along with confirmation of both the parties. Further, i....
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....e purchases were not genuine parties and to cover their malpractices, FIR had been lodged stating to have lost the books of account in the flood so that no authority could enquire the matter of issue of bills. Further, the AO also pointed out that as per the details of goods shown to have been sold to the assessee, the same were made from an address of Jaipur, but on enquiries by the Ward Inspector, it was noticed that no business was ever done from that address, because that address was also found to be in a residential locality. The AO was of the further view that even if it was assumed that the books of account were destroyed still both the parties could have attended the office and explained the case by giving details of the parties from whom they made purchases and the manner in which they transacted with the assessee and other details of the payments etc. In accordance with the said observations, the AO held that the purchases amounting to Rs. 13,84,057 from M/s Veni Gems and M/s Abhay International were not genuine. After holding the purchases amounting to Rs. 13,84,057 as non-genuine, the AO made an addition of that amount of Rs. 13,84,057 treating the same as unexplained e....
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....essee's income from business will be much higher, it will not be entitled for any further deduction under s. 80HHC in respect of such increased business income." 20. The learned CIT(A) deleted the addition under s. 69C and proviso to s. 69C of the Act but invoked the provisions of s. 145(3) of the Act and estimated the income by directing the AO to apply the GP rate of 30 per cent on declared sales and sustained the addition of Rs. 5,23,465. The learned CIT(A) confirmed the action of the AO in not allowing the deduction under s. 80HHC of the Act on such addition. 21. We have heard the rival contentions and perused the facts of the case. We concur with the views of the learned CIT(A) as regards the deletion of addition under s. 69C and proviso to s. 69C of the Act since there is no doubt on the sales made by the assessee and definitely purchases have been made and therefore, the purchases cannot be said to be unexplained but at the same time, the assessee has made the purchases may be from some other parties. Therefore, the quantum of purchases declared remained unverified as discussed in the order of the authorities below. Therefore, we find no infirmity in the order of the l....