TaxTMI 
TaxTMI 
2017 (1) TMI 818
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....hange and transactions were proved bogus 4. Brief facts are - in the return of income, the assessee qua the sale of shares of Prranet Indu declared income from Short Term Capital Gain of Rs. 32,94,684/- and Long Term Capital Gain of Rs. 94,49,383/- on sales of shares of Telent Infoways Limited. In respect thereof, assessee furnished the relevant details and bills issued by M/s. Goldstar Finvest Pvt. Ltd. [GFPL for short] (for purchase) and by M/s. Mahasagar Securities Pvt. Ltd. [MSPL for short] (for sales). The bills reflected that:- (i) The broker Goldstar Finvest Pvt. Ltd. was was mentioned as "dealer of Inter-connected Stock Exchange of India Limited (ISE)/ Sub-broker of National Stock Exchange India Limited member - ISE Securities and Services Limited, SEBI Reg. no.INB- 230932431/23-10777. (ii) While M/s. Mahasagar Securities Pvt. Ltd. was mentioned as "dealer of Inter-connected Stock Exchange of India Limited / Sub-broker of National Stock Exchange India Limited member - ISE Securities and Services Limited, SEBI Reg. no.INB- 230683331/23-10777. 4.1 Ld. AO sent letters u/s 133(6) in response thereto the NSE furnished a reply dated 22.11.2011 revealing that: (i) M....
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....ide bills dated 20/8/2004, 24/08/2004, 01/09/2004, 08/09/2004 and 09/09/2004. The copies of invoices, contract note, etc. has already been submitted and these copies and contract note includes complete details showing order number, trade number, trade time, quantity, sale rate, brokerage, net rate and amount. The entire amount has been received by Account Payee cheque and from Mahasagar Securities Pvt. Ltd. The transaction has taken place in the normal course of the business and I have nothing to do with the search carried out in the case of Mahasagar Securities Pvt. Ltd. as the reasons mentioned for reopening of the assessment that the group was found to be engaged in fraudulent billing activities. Please note that the said invoice as well as contract note includes the complete details such as quantity, rate, order number, trade number, trade time, sale rate, brokerage, net rate and amount with respect of each sale, etc. 5) Accordingly, the entire purchase as well as sale relating to 2,00,000 shares of Talent Infoway Limited is genuine. The sale transaction has taken place through Mahasagar Securities Pvt. Ltd. the copy of memo, etc. has already been submitted by me, the paymen....
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....on profit for that he has submitted the bills issued by the M/s. Goldstar Finvest Pvt. Ltd. and from M/s. Mahasagar Securities Pvt. Ltd. * Since, M/s. Mahasagar Securities Pvt. Ltd. is no more in existence so how it is possible give credit of any claim based upon the bills issued by the M/s. Mahasagar Securities Pvt. Ltd. similarly, M/s. Goldstar Finvest Pvt. Ltd. is no more member / sub-broker in ISE. * Further, the key person of the M/s. Mahasagar Securities Pvt. Ltd., Shri Mukesh Choksi has also admitted in his statement during the search operation u/s.132 of the I. T. Act, 1961 that the group were engaged in fraudulent billing activities in the business of providing bogus speculation profit / loss, short term / long term capital gain / loss, commodities profit / loss on commodity trading (through MCX). However, on request of the assessee, the information received from the respective stock exchanges has been supplied to the assessee." 5. Aggrieved, the assessee preferred first appeal where all the facts were reiterated and following explanations and written submissions dated 10.12.2011 were made :- "1) Regarding copies of purchase invoice relating to 2,00,000 shar....
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....ery, trade number, trade order, trade time, quantity, etc. are clearly mentioned. Further, bill states that he is dealer of Inter-connected Stock Exchange of India Ltd. as well as sub-broker of NSE Member along with SEBI registration number. The contract note also mention that he is the sub-broker of NSE Member, therefore, I do not know in which exchange the trade has been executed as normally it is not being looked into by any investor; as I was interested to sell and the rate was intimated to me which has been confirmed by me and accordingly, shares were delivered, same were sold and payment has been received through Account Payee cheque. 7) Further, BSE has clearly reported the transaction pertaining to Prraneta Industries." The copy of letter dated 10/12/2011 along with enclosures is attached herewith vide Annexure-8. 8. In view of above facts and comprehensive evidences, the LTCG and STCG on sale of shares of various companies being genuine and duly supported by independent evidences, the same requires to be accepted. It is thus contended that the AO's allegation that the appellant has entered into accommodation entries with Mahasagar Securities Pvt. Ltd. (Now Ala....
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....ocuments have not been found by the Revenue. Statements recorded at the back of the assessee would not ipso facto include the case against the assessee particularly when the makers of the statements have not been allowed be interrogated by the assessee company. On factual merits also statements of R and S recorded at the back of the assessee cannot be relied upon for fastening tax liability against the assessee particularly when the assessee has not been allowed opportunity of cross examination and no supporting evidence has been brought on record by the A.O. Amariit Sinsh Bakslti (HUF) Vs. Asst. CIT (2003) 263 ITR 75 (A.T) (Delhi) "wherein it is held that the provisions of the Indian Evidence Act are not strictly applicable to the proceedings under the Income-tax Act, but the broad principles of the law of evidence apply to such proceedings. Further an entry in the books of account maintained in the regular course of business is relevant for purposes of considering the nature and impact of a transaction, but noting on slips of paper or loose sheets of paper cannot fall in this category. Noting on loose sheets of paper are required to be supported/corroborated by other eviden....
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....nt. Allowing the appellant to take photocopies of the seized materials was not the same thing as supplying the copies of the depositions and giving an opportunity of cross-examining those patients to the appellant. Simply because the depositions were taken before A, it could not be said that an opportunity, much less sufficient opportunity of cross-examining, was offered. Any material collected by the Assessing Officer has to be put to the assessee before an adverse inference on the basis of that material is drawn to the prejudice of the assessee. In respect of the four depositions relied upon by the Assessing Officer no such opportunity was given and accordingly, they could not be a basis for drawing any adverse inference to the prejudice of the appellant." CIT vs. SMC Share Brokers Ltd, (2007) 288 ITR 345 (Delhi) "Where block assessment proceedings were initiated against the assessee under section 158BD and though during the assessment proceedings, the assessee requested the A. O. time and again to permit him to cross-examine the person on the basis of whose statement proceedings had been launched and from whose possession the documents were recovered, so that the assessee ....
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.... sold the same on Aug/Sep 2004. The appellant -has submitted Xerox copies of purchase as well as sale invoices. The appellant has also submitted Xerox copies of Demat Statements. The appellant has also submitted Xerox copies of bank statement through which transactions were routed. Considering the above documentary evidences of third party, as well as the fact that the said shares were purchased/sold through stock broker appearing in demat statement supported by invoices, the genuineness of the said transactions cannot be doubted. The appellant has purchased and sold 50000 shares of Prraneta Industries Limited. The BSE has submitted evidences of sale of 30000 shares in response to notice issued by A.O. u/s 133(6) of the Act. The sale of shares as reported by BSE are matching with Demat Statement. It also proves that the said broker was registered with BSE. However for 20000 shares the same is not appearing in annexure of BSE, Nevertheless since entries for 20000 is also appearing in demat statement and the appellant was holding 20000 shares on the date of sale, the appellant has also received cheques against the sale. Stock Brokers are under control of SEBI, therefore it cann....
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....e copies of the 3 letters of BSE, ISE and NSE and clarified that BSE has clearly stated that PAN based transaction have become mandatory with effect from 1/1/2007 and these transactions being relevant to financial year 2004- 05 have not been reported by BSE. Further, Inter connected Stock Exchange of India has stated that the transactions were not with ISE and with respect to NSE, information was supplied to the A.O. therefore, even from the inquiry conducted by the A.O. it has not been proved that impugned transactions relating to the sale of the shares of Prraneta Industries are not genuine when BSE has clearly informed about the transaction relating to appellant in Annexure 'A'. This submission of the appellant though considered by the AO in para No. 3.8, but AO simply stated that in the said reply of appellant nothing was new and everything was already stated in the earlier submission dated 5/12/2011. Therefore, A.O. has not brought on record any evidences indicating that the said gain of Rs. 94,49,384/- is not genuine. Any transaction cannot become suomoto non-genuine simply because there has been search & seizure in some cases wherein contrary documentary evidences were found....
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...., it seems that 30,000 shares sold through Neptune Securities Pvt. Ltd. who is the member of Ahmedabad Stock Exchange as well as BSE sub-broker have been confirmed and remaining 20,000 shares sold through Vimla Exim Pvt. Ltd. who is a sub-broker of ASE Capital Market Ltd. have not been properly inquired. Moreover, the invoices by Vimla Exim Pvt. Ltd. contain the order number, trade number, trade time, quantity sold, settlement number, settlement period as well as contract number, etc. Information provided in the invoice of Vimla Exim Pvt. Ltd. is similar to information provided by Neptune Securities Pvt. Ltd. and the period and rate is also almost same in both the cases. Therefore, having accepted the purchases as genuine, further sale of 30,000 shares having been accepted as genuine, no evidences have been brought on record by the A.O. about the remaining 20,000 shares to treat the same as non-genuine. No further inquiry has been conducted with any of the brokers and nonavailability of exact information about the 20,000 shares has been considered for the purpose of addition u/s. 68 of the I.T. Act, 1961. The fact remains that total shares were held in demat form, copies of the dem....
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....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 the co-ordinate bench of the Tribunal in the case of Mrs. Uttara S. Shorewala (supra) (in which one of us - the Accountant Member is a party) following the decision of Hon 'ble Calcutta High Court upheld the order of the Id. CIT(A) in holding that the A.O. cannot make any addition in the assessee's hands despite the assessee not having made any payment to the entities mentioned by Shri Choksi, whose statement is being relied upon by him. The CIT (A) also noted that Mr. Mukesh Choksi has been vacillating right through and has given different versions at different stages of the proceedings and therefore his evidence was unreliable. 9.6 In view of the above judicial decisions the statement of Mr. Mukesh Choksi cannot be a deciding factor for rejecting the genuineness of the purchase of shares by the assessee especially when all other supporting evidences filed by the assessee were neither proved to be false or untrue. We further find merit in the submission of the Id. counsel for the assessee that the dematerializa....
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....es to enter into transactions even without the help of brokers. Therefore, it is not possible to hold that the transactions reported by the assessee were quite sham on the legal proposition arrived at by the CIT(A) that off-market transactions are not permissible. The assessee has stated that the transactions were made with the help of professional mediators who are experts in off-market transactions. 70.4 When the transactions were off-market transactions, there is no relevance in seeking details of share transactions from Stock Exchanges. Such attempts would be futile. Stock Exchanges cannot give details of transactions entered into between the parties outside their floor. Therefore, the reliance placed by the assessing authority on the communications received from the Stock Exchanges that the particulars of share transactions entered into by the assessee were not available in their records, is out of place. There is no evidential value for such reliance placed by the assessing authority. The assessee had made it very clear that the transactions were not concluded on the floor of the Stock Exchange. The matter being so, there is no probative value for the negative replie....
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.... also in D-mat account. (ii) Ld. AO did not conduct any enquiry from Gold Star Finvest P. Ltd. which is found to be registered as a sub Broker of NSE Details of Sales (i) The shares are sold On 26/8/2004, 28/8/2004, 06/9/2004, 11/9/2004, 13/9/2004 through Maha Sagar Securities P. Ltd. which is a dealer of Inter Continental Stock Exchange and Sub Broker of NSE which has duly supplied the information received in pursuance to inquiries u/s. 133(6). Vide reply to show cause notice dated 10/12/2011 - Para No. 5 placed on Page No. 84 to 85 the details have been provided by NSE to the ld. AO in Annexure A confirming the transactions. Contents of Annexure A have neither been discussed by the AO in the Assessment Order nor given to the assessee for any further clarifications. (ii) Therefore, NSE having confirmed the transaction to ld. AO in reply to statutory inquiries u/s 133(6), ld. CIT(A) has rightly deleted the additions. B) Amount Gain Share Rs. 13,17,873/- Short Term Capital Gain - Parranet Indus. Ld. Counsel contends that: (i) Total 50,000 shares sold on 16/3/2005 which were purchased by cheque payments on 3/9/2004 and duly e....
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....however has filed confirming letters from the broker dated 6/11/2003 and 2/12/2003 wherein it is stated that 99,400 shares were received by them in physical form. The copies of contract note, sale deed confirming the sales of shares, distinctive nos. of shares and the amount realized with sale rate etc. have also been made available. Madhya Pradesh Stock Exchange Ltd. however, had replied that no data was available with them and therefore, the same cannot fee provided. But, as all the other required details including the information from the bank confirming the deposits of the cheques with amount and the dates of deposit as shown by the assessee in his bank account indicate that the assessee earned income from LTCG. The assessee has sold the shares in open market through a registered broker who confirm the sale rate in the contract note and in the bills." 7.3 Similarly, in the assessment u/s 143(3) of Shri Sureshchandra Agrawal also, these transactions and capital gains on sales have been accepted. Copies of their assessment orders are placed on record. 7.4 In view of all these facts, circumstances, contentions and proposition of law, the order of ld. CIT(A) is perfectly just....
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....g details of share transactions from Stock Exchanges. Such attempts would be futile. Stock Exchanges cannot give details of transactions entered into between the parties outside their floor. Therefore, the reliance placed by the assessing authority on the communications received from the Stock Exchanges that the particulars of share transactions entered into by the assessee were not available in their records, is out of place. There is no evidential value for such reliance placed by the assessing authority. The assessee had made it very clear that the transactions were not concluded on the floor of the Stock Exchange. The matter being so, there is no probative value for the negative replies solicited by the assessing authority from the respective Stock Exchanges. We are of the considered view that the materials collected by the assessing authority from the Stock Exchanges are not valid to dispel or disbelieve the contentions of the assessee." 9.3 The Mumbai Tribunal order in the case of Shri Mukesh Moralia has been upheld and confirmed by the Bombay High Court in Tax Appeal No.456 of 2007. Therefore, in view of foregoing, the shares purchased through off-market trade the same canno....