TaxTMI 
TaxTMI 
2017 (5) TMI 1777
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....rther addition of unexplained money used for payment of commission for obtaining the said long term capital gain. For this common issue, the assessee has raised identical worded grounds in all the three years, except the quantum, and hence we will take up the grounds raised in AY 2006-07 reads as under:- "1. On the facts and circumstances of the case as well as in law the Learned AO has erred in passing order U/s.153A read with section 143(3) and thereby making the addition of Rs. 57,71,395/- being sale proceeds of long term capital gain on sale of shares declared in regular books of accounts and further addition of Rs. 2,88,570/- being unexplained money used for payment of commission for obtaining the said long term capital gain. Appellants contained that the order so passed is illegal and unjustified and therefore liable to be quashed. 2. On the facts and circumstances of the case as well as in law the Hon'ble CIT (A) has erred in treating the entire sale proceeds of shares amounting to Rs. 57,71,395/- which resulted in to long term capital gain to the appellant, as unexplained cash credit U/s.68 of the IT Act. Reasons assigned by him for doing the same are ....
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....ncome from undisclosed sources for AY 2004-05 at Rs. 16,77,000/- for AY 2005-06 at Rs. 1,22,40,247/- and for AY 2006-07 at Rs. 57,71,395/-. For this, the AO reasoned that the assessee was not able to produce the parties from whom she had made purchases of shares and failed to prove the genuineness of transaction particularly purchase party DPS Shares and Securities Pvt. Ltd. He also noted that even the assessee could not prove from whom it has purchased the shares of Robinson Worldwide and Jaykay Dee Industries Ltd. and also not been able to prove the receipt of physical delivery of shares. He referred to the statement of DPS Shares and Securities Pvt. Ltd. for the same. The AO also noted that even actual date of receipt of physical delivery of shares is not known whereas demat delivery of shares have been received near the date of sale of shares in the case of Robinson Worldwide. As regards to Jaykay Dee Industries shares were not taken in demat account. The AO noted that in the case of Jaykay Dee Industries Ltd. enquiries were conducted u/s 133(6) of the Act with the purchase brokers and one purchase broker Abhijeet Investment conceded before the AO that it has issued only accomm....
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.... were shown on 6/4/2004 through the speculation income. It is further noticed that neither brokerage nor service charges were charged neither on speculation transactions nor on purchase of penny stock shares of M/s. Robinson. The relevant copy of Bill No, Group C/009/0012 dated. 9/4/2004 reveals that Robinson shares were allegedly purchased on 8/4/2004 on credit from DPS Shares & Securities (P) Ltd. The impugned bill dated 9/4/2004 does not bear the appellant. Moreover, the source of purchase of impugned 50000 shares of Robinson have not been satisfactorily explained. The purchase transactions were not routed through BSE nor NSE. This is abnormal Summons u/s.131 of the Act were issued to M/s. DPS Shares & Securities Pvt. Ltd, the reported brokers of the penny stocks in the appellant's case and they were asked to appear and produce their bills, contract notes, bank statements and other relevant details for A.Y.2004-05 2005-06 and 2006-07: The responsible director of M/s.DPS Shares & Securities P. Ltd. Shri Pratik Shah in his sworn statement u/s 131 of the Act revealed that the impugned bills relating to the relevant transactions of shares of Robinson were not genuine. They were ....
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....a CA and lives at Walch and Terrace, B- 34, 2nd floor, Opp. A.C. Market, Tardeo, Mumbai- 34. Shri Shirish C shah lives at Meghdoot Apts, Marine Drive. We used to receive one paise per share for the bogus purchases shown by us, from these persons, for transactions carried out at their behest. For speculation gains we did not receive any remuneration. 5. Your statement leads to an inference that all bills issued - by you relating to purchase of aforesaid three scrips (and speculation gain bills), are bogus. What do you say? Ans: Yes, I hereby state that all bills issued by you relating to supposed purchases made by M/s. DPS shares & Securities Put. Ltd., in the lost about 5 to 6 years, relating to scripts M/s. Fast Track Entertainment Ltd., M/s. G Tech Info Ltd, and M/s. Robinson Worldwide Trade Ltd are bogus. No purchases were ever made by us relating to these 3 steps. If any third party produces the bills of M/s.DPS Shares & securities P. ltd. where in purchases of these 3 scrips is shown to have been made through us, then the purchases shown in these bills are bogus. Similarly, the speculation gains supposedly earned by third parties, by dealing through us are al....
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.... appellant and is group were only for accommodation purpose. For the sake of ready reference Question No. 10 to 17 and answers of cross examination dated 1/12/2008 are reproduced here under: Q. 10 The shares of Robinson delivered by your office to our office have been sent by us for transfer in the name of different family members of Shri Brijesh Shah, Pratikasha Sha, sh Shreevallabh Damani and Smt. Damani, which have been duly transferred by the company for e.g. the copy of letter of Shri Bnjesh Shah issued by the company. Can you tell us how the company can transfer We shores without physical delivery? Please explain. Ans: No. We have not given any physical delivery or Demat delivery to the Shri Brijesh shah and others of the said Scrip Robinson Worldwide Trade bid., we have not given physical delivery or Demat delivery of the above scrip as these transactions were not done through done through Stock Exchange so we did not receive any physical delivery from the stock exchange. If we give any delivery of any shares to any of our clients we give it thorn on our company's letter pad, which is called delivery memo. So do you have the delivery memo of ou....
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....the all over questions asked by Mr. R.B. Golecha, I would like to state that all the bills and contract notes issued by our company were given to the said above group for accommodation purposes." 2.3.5.1 Enquiries were made from BSE and 'Trade file' of appellant's broker was examined vis-à-vis the assertion of the appellant made before the Assessing Officer. As is evident from para 12.2 to 15, pages 24 to 27of the impugned assessment order penny stocks, were not actually purchased, as observed by the Ld. Assessing Officer. The appellant was confronted regarding the discrepancies with regard to discrepancies in in Demat A/c. It is established that there is no correlation, between the purchase of shares and credit of Demat shares. 2.3.6. I have also considered various arguments of the Ld. AR. The assessment u/s.153A has not been challenged by the appellant. It is not disputed that assessment under section 153A is legal and regular. The only grievance of the appellant is regarding the rejection of capital gains and addition of commission @5% of the gross receipt of sale of penny stock shares and levy of interest u/s. 2348 of the Act. I have a so co....
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....hat no confrontation of the purchase broker or no opportunity to cross examine the same was allowed to the assessee. The purchase enquiries in the case of Jaykay Dee Industries Ltd. were conducted by issuing notices u/s 131 and 133(6) of the Act with the purchase broker. In the case of M/s Abhijeet Investment who conceded before the AO that only accommodation bills were issued. In the case of M/s Shailee Securities, the broker denied the transactions and in the case of Drishti Securities, the AO noted that notice u/s 133(6) returned unserved. It was argued that no opportunity has been provided by the AO to the assessee to cross examine the share broker i.e. M/s Abhijeet Investment and Shailee Securities during assessment proceedings. As regards to another purchase broker M/s Drishti Securities, the AO held the purchased in question as bogus even though there was no service of summons u/s 131 of the Act. The learned Counsel for the assessee stated that complete details of purchases i.e. evidence of share purchase of M/s Jaykay Dee Industries in the shape of copy of purchase bill for purchase of 16,000 shares, copy of physical share certificate of 16,000 shares, copy of bill showing ....
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.... in response to notice u/s 133(6) of the Act and the contents of the letter reads as under: - "sub:- Information u/s 133(6 of the I.T. Act. With reference to above we herewith state as under:- 1. The said bills are issued by us to Smt. Pratiksha Shah. 2. Bills are issued only to accommodate the said parties for LTG purpose. 3. None of the said transactions are done on BOLT TWS of BSE or OFF MARKET. 4. We had not delivered them any physical shares of any scrip. 5. We have not done any transaction with their family members also till date. Kindly acknowledge our reply and do needful." In view of the above letter, the learned Counsel for the assessee argued that this letter is not in connection with the assessee and it relates to Smt. Pratiksha Shah which has wrongly been utilized by the AO against assessee for making addition. The AO also referred to statement of Shri Sujal C Shah recorded under section 131 of the Act on 18-01-2007 during the course of survey proceedings and it was never provided with an opportunity to cross examine and hence it cannot be used against the assessee. He also stated that the state....
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....curities has stated that the accommodation entries have been given by them on the instructions of third persons namely Shri Naresh Saboo and Shri Shirish C. Shah. But we find that none of these statements has reference assessee. Only evidence brought by the AO against the assessee is the statement of Shri Prank C. Shah. We also noted from the statement that he has himself stated that he is an accommodation entry provider and therefore he is a tainted party. Accordingly, the credibility and reliability of the statement of such party is questionable and not reliable. He himself stated that the transactions entered by him with the assessee have not been reflected in his regular books of accounts and therefore, it is in the interest of Mr. Shah to say that these transactions are bogus. In case these transactions are held to be genuine, Mr. Shah stands to be fastened with tax liabilities for having not included these transactions in his books and therefore, Mr. Shah being an interested party the creditability of the statement given by him is under serious doubt especially in the absence of any document /material to substantiate his statement. We also find from the facts that the assesse....
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....see's name on 14.06.2003 and 20.04.2004. The said fact can be ascertained from the letter received by the assessee from Robinson Worldwide Trade Limited. The shares of the assessee were consolidated and Jumbo share certificate was issued. Thereafter, the said shares were dematerialized to de-mat account of the assessee held with HDFC Bank. Such demated shares were sold through AKD Securities Pvt. Ltd. as can be seen from the sale bills and the payments for the sale of said shares have been received through account payee cheques. Even for assessment years 2004-05, the assessee has submitted various documentary evidences, which have not been considered by the AO. As regards to the reliance placed by the AO on the cross-examination conducted in the case of the assessee, we find that the assessee and the director of the broker DPS Shares & Securities Pvt. Ltd. have nowhere specifically stated in their respective statements that they have issued accommodation entries to the assessee. There is no link between the statement and the assessee. They have simply stated that they issued accommodation entries on instructions of certain third parties. Further, no statements of such third par....
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....omething more which was required, which would connect the present Assessee to the transactions and which are attributed to the Promoters/Directors of the two companies. The Tribunal referred to the entire material and found that the investigation stopped at a particular point and was not carried forward by the Revenue. There are 1,30,000 shares of Bolton Properties Ltd. purchased by the Assessee during the month of January 2003 and he continued to hold them till 31 March 2003. The present case related to 20,000 shares of Mantra Online Ltd for the total consideration of Rs. 25,93,150/-. These shares were sold and how they were sold, on what dates and for what consideration and the sums received by cheques have been referred extensively by the Tribunal in para 10. A copy of the DMAT account, placed at pages 36 & 37 of the Appeal Paper Book before the Tribunal showed the credit of share transaction. The contract notes in Form-A with two brokers were available and which gave details of the transactions. The contract note is a system generated and prescribed by the Stock Exchange. From this material, in para 11 the Tribunal concluded that this was not mere accommodation of cash and enab....
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....of Jagdish H. Shah (supra) also. Be that as it may, it is quite clear that the stand of the Revenue as well as the assessee in the present case is on similar footing to their respective stands in the case of Jagdish H. Shah (supra). Having regard to the aforesaid similarities, which are not controverted by the Revenue, we deem it fit and proper to rely upon the reasoning taken by the Co-ordinate Bench in the case of Jagdish H. Shah(supra) and hold that the income tax authorities have erred in treating the sale consideration on the sale of shares of Robinson Worldwide Trade Ltd. as an income from undisclosed sources. Identical decision was also rendered in the case of Mr Nikunj J. Shah(supra) by Mumbai Tribunal in ITA No. 6545/Mum/2011 for assessment year 2005-06 vide orders dated 31-07-2015 , relevant extracts are reproduced below: "6. Having perused the orders of the authorities below as well as the submissions put forth before us, it is evident that similar controversy has been considered by our Co-ordinate Bench in the case of Jagdish H. Shah (supra).The Ld. Representative of the assessee has also placed on record copies of the assessment order as well as order of CIT(A....
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....y which the. Director has confianed 'the offmarket transaction in physical mode of shares of the 11,500 shares of M/s.Robinson Impex (India) Ltd (Robinson Worldwide Trade Ltd.,). We have also considered the retraction letter of Shri Rajkumar Masalia addressed to the AO by which he accepted that he. was not aware of the transaction and he has stated wrong facts during the course of his statement recorded by the A.O. 12. We find that during the course of the appellate proceedings, the CIT(A) has called for a Remand Report from the AO relating to the purchase of 11500 shares of M/s. Robinson Worldwide Trade Ltd., (formerly known as robinson Impex (India) Ltd.]. We have perused the Remand Report of ITO 10(3)(2) Mumbai dt. 11.4.2011. In his Remand Report, the AO states that an opportunity of cross examination of Shri Rajkumar Masalia was given to the assessee on 18-02-2009, 29-04-2009 and 09-11-2009. However, despite of giving aforesaid opportunities, Shri Rajkumar Masalia did not attend though assessee's representative attended on all of above dates and whose attendance was duly recorded on the attendance Sheet. In his Remand Report, the AO further states that the said....
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.... of the present case, respectfully following the same, we allow all these three appeals of the assessee. 17. In the result, these three appeals of the assessee are allowed. Order pronounced in the open court on 17-05-2017. ============= Document 1 Sr. Name of No. Scrip 1. Jaykay No. of scrip 5000 (a) Purchased through No. of scrip Sold through (a).Abhijit Investments 16,000 (sold VRP Finance Pvt. Ltd. Dee 6300 (b) Industries 4700 (c) Ltd. 16,000 (pur. in AY 2001- 02) (SEBI Reg. No. INS 011450611/01/09017), (b).Shailee Securities (SEBI Reg. No. INS 010316714/09960) and (c) Drishti Securities Pvt Ltd (SEBI Reg. No. INS 010996539) in AY 2004-05) (SEBI Reg. No. INS 230782935/2310777) 2. Robinson 82,500 Worldwide (pur. in Ltd AY 2004- DPS Shares & Securities Pvt Ltd (SEBI Regn No INB-010986539, 82,500 (sold in AY 2005-06) 05) Clearing No. 151) 50,000 50,000 (Sold in A. (Sold in Y. 2006-07) A. Y. 2005-06) AKD Securities Pvt Ltd (SEBI Regn No INB 010993033) Document 2 Particulars Evidence of share (i) purcha....