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2010 (10) TMI 1190
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....a Finance Limited for Rs. 11,37,480/- which were purchased on 10.05.2001 for Rs. 83,436/- inclusive of transfer charges and bank charges. During the course of assessment proceedings the assessee submitted that 12000 shares of Suma Finance Limited were purchased for Rs. 80,460/- on 10.05.2001 through broker M/s Aggarwala & Co., New Delhi vide their Bill No.SB-1705 dated 17.05.2001 and these shares were sold on 28.12.2001 vide Bill No.P2-1201 dated 12.01.2001 through M/s Sridhar Financial Services Limited, New Delhi for a net consideration of Rs. 11,37,480/-. Photocopies of bills for purchase and sale along with contract notes were filed. The purchase consideration was paid vide Demand Draft No.195551 (Rs.80,000/-) and cash of Rs. 460/-. The sale proceeds were shown as received from M/s. Sridhar Financial Services Limited through Demand Drafts on Nainital Bank Limited, detailed as under :- 28.01.2002 Rs. 6,00,000/- 29.01.2002 &nb....
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....in doubt insomuch that its shares were being traded on the Delhi Stock Exchange. The shareholding of the appellant has not been controverted by the Assessing Officer. The selling rate is endorsed by the quotation on record which is un-refuted. In view of the foregoing I find that the impugned share transactions have not been proved as non-genuine and therefore, finding of the Assessing Officer that the short term capital gains disclosed by the appellant is her undisclosed income, is not tenable. Accordingly, the Assessing Officer is directed to adopt the short term capital gains as per return and allow set off of brought forward losses under the head 'capital gains' after verification." 4. We have carefully considered the rival submissions and perused the material on record. The issue is duly covered by the decision of Third Member in the case of ITO vs. Smt. Bibi Rani Bansal in ITA No.101/Agr/2005 for the A.Y. 2001-02, in which, vide order dated 09.02.2010 this Tribunal has confirmed the order of the CIT(A). We noted, in that case, the assessee has purchased the shares and sold those shares through M/s. P.K. Jain & Associates i.e. the broker. The purchase of shares has....
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....rchase and sale of the shares on commission basis. When the matter traveled to the Tribunal, the Tribunal deleted the addition by observing as under :- "(10) So in the given case also the department cannot treat the long term capital gains as assessee's income from other sources. There is no direct evidence. The statements of the brokers were recorded at the back of the assessee. An opportunity of cross-examination means and implies a clear opportunity after providing copies of such adverse statements to crossexamine. Otherwise also the statement of Shri Ashok Gupta is too vague to be of any evidentiary value. He has nowhere stated that the transaction of the assessee was bogus or not genuine. He has no corroborative evidence to show that the cash for drafts was received from the assessee. In the absence of any corroborative evidence his statement cannot be accepted as true on his mere ipse dixit. Shri Manoj Agarwal was not produced for cross-examination. From his statement no adverse inference can be drawn against the assessee. Shri Manoj Agarwal handed over a letter to D.D.I. (Inv) in which he stated that out of the total transactions, the transactions amounting to Rs. 1....
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....e. The payment was made by cheque. These shares were transferred in the name of the assessee. The assessee held these shares for more than one year. She sold these shares to J, a member of stock exchange. J in his letter has confirmed that transaction and the payment was made through cheque. The assessee has provided all the requisite evidences in support of all transactions. Simply because J could not produce his books of account or the quoted rate of shares in stock exchange being less or the transactions being not reported by J to the stock exchange, would not make a transaction bogus. The stock exchange has intimated the A.O. that they are only having information of the transactions between two members of the stock exchange and not otherwise. In the present case, the transaction was between a member and a non-member and therefore, such transactions were not reported in the stock exchange. Further, the credit in the bank account of J is by clearance. Therefore, the allegation of the A.O. that the amount was deposited in cash has no basis. The assessee has accepted having invested her funds on the advice of her father-in-law. The burden of proving a transaction is always on the p....
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....essing Officer concluded that the assessee had paid cash and purchased the cheque. In the absence of any cogent material in this regard, having been placed on record, the Assessing Officer could not have reopened the assessment. The assessee had made an investment in a company, evidence whereof was with the Assessing Officer. Therefore, the Assessing Officer could not have added the income, which was rightly deleted by the Commissioner (Appeals) as well as the Tribunal" (16) Thus, the sum total of the foregoing discussions go to, cumulatively, establish that the assessee has been successful in proving the long term capital gain earned by him in this case. He has also established that he is exempt from tax qua long term capital gains as has been claimed." 11. In my opinion, this case is equally applicable in the case of the assessee. In the case of the assessee, purchase of the shares has duly been proved and there is no dispute on the purchase of the shares being made by the assessee. The shares were purchased in earlier year. The shares were transferred in the name of the assessee as has been confirmed by the company when enquired by the A.O. The assessee has sub....
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....portunity to the assessee to cross examine the person who has given the statement at the back of the assessee. I have also gone through the decision of Delhi High Court in the case of SMC Share Brokers Limited, 288 ITR 345 (Delhi) and that of Kishan Chand Chellaram, 125 ITR 713 (SC) and that of Umacharan Shaw & Bros., 37 ITR 271 (SC). All those decisions lay down the proposition of the law that statement recorded at the back of the assessee cannot be used against the assessee until and unless the assessee has been given the opportunity to cross examine the person. Ld. D.R. was asked in the open Court whether any opportunity for cross examination was provided to the assessee in respect of the broker. The ld. D.R. expressed his inability as the record does not show that any such opportunity was provided. In almost similar circumstances, Hon'ble Calcutta High Court in the case of Eastern Commercial Enterprises (210 ITR 103) observed as under :- "At the earlier occasion he claimed all his sales to be genuine but before the Assessing Officer in the case of the assessee, he disowned the sales specifically made to the assessee. This statement can at the worst show that S is not a....
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.... order, their minds were influenced with the other consideration that the value of the shares has tremendously increased which was abnormal and indicates that the entire transaction is managed one. The prices have increased in 15 to 16 months by 16 times. Although the rate of Rs. 72/- was quoted on 28.11.2000 in M.P. Stock Exchange is apparent from page 11, para (iii) of the Assessment Order. It was further observed that in such a short period, share of no other reputed company has increased so much and the share market has also not shown such a rise. In my opinion, the share market is quite volatile and prices do fluctuate abnormally. It is seen that the shares dealt by the assessee were quoted at M.P. Stock Exchange at almost similar rates at which they were sold. The assessee is only a small shareholder of the company. He is not the director of the company or of the stock exchange. Under these circumstances how he can manipulate the prices is beyond one's comprehension. It is pertinent that the issue of abnormal increase in prices of the shares has come up for consideration before the ITAT, Agra Bench in the cases of Smt. Memo Devi (ITA No.396/Ag/2004 - reported as 7 DTR 158) wh....
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....arlier years which stand accepted by the Revenue. The shares were sold through stock brokers who were registered with the Stock Exchange. Shares were sold at the prices quoted at the Stock Exchange at the relevant time. The payment of sale consideration also flown from the bank account of the broker where the fund came through clearing, not in cash. The decision of the lower authorities are influenced by the general observation of the Investigation Wing that arose a suspicion turned into conclusive proof in the minds of the authorities that everybody who has sold the shares at a high price has converted his unaccounted money through accommodation entries. This approach does not have any leg to stand. Hon'ble Supreme Court in the case of Umacharan Shaw & Bros vs. CIT, 37 ITR 271 (SC) has clearly laid down that suspicion howsoever strong cannot take place of proof. From the entire appreciation of evidence, I noted that Assessing Officer has failed to establish that the assessee has introduced his own unaccounted money in the shape of alleged sale proceeds of shares. Hon'ble Supreme Court in the case of Kishan Chand Chellaram vs. CIT reported in 125 ITR 713 (SC) has observed that "the....
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....ese purchases are evidenced from the contract note. The payment was made by cheque. These shares were transferred in the name of the assessee. The assessee held these shares for more than one year. She sold these shares to the member of stock exchange Shri J.K. Jain. Shri J.K. Jain in his letter dt. 22nd Dec., 1999 has confirmed the transaction and the payment was made through cheque. The assessee has provided all the requisite evidences in support of all transactions. Simply because Shri J.K. Jain could not produce his books of account or the quoted rate of shares in Delhi Stock Exchange being less or the transactions being not reported by Shri J.K. Jain to the stock exchange would not make a transaction bogus. The Jaipur Stock Exchange has intimated the AO that they are only having information of the transactions between two members of the stock exchange and not otherwise. In the present case, the transaction was between a member and a non-member and therefore, such transactions were not reported in the stock exchange. Further, the credit in the bank account of Shri J.K. Jain is by clearance. Therefore, the allegation of the AO that the amount was deposited in cash has no basis. ....
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....and she acted on his advice and had no contact thereafter. The reasoning that summons issued to the parties came back unserved cannot by itself be held against the assessee as whether the share broker continues the business or discontinues the same or changed the addresses or for that matter the companies whose shares were purchased and sold changed their premises or names as changed by virtue of being acquired by some other company the assessee cannot be held liable to stay in touch for all times to come. Similarly, no reasons are there to show that Shri Praveen Mittal was ever in a position to declare the transactions of an acquaintance broker as bogus transactions neither any evidence has been led nor reasons advanced to support how he could be considered to be a reliable person so as to ignore the evidences available on record i.e. contract notes of sale and of the specific shares of specific rates on specific dates. Shri Praveen Mittal was the witness of the Department, the onus was therefore on the Department to produce him and make him available for cross-examination by the assessee. Similarly, the evidence that the companies were not in existence at the address available wi....