TaxTMI 
TaxTMI 
TaxTMI 
2013 (9) TMI 1325
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.... book given to him and the same has not been considered. 4. That the enquiries made at the back of assessee from brokers, banks, stock exchange, registrar of companies or from the company country credit capital Ltd. were never confronted to the assessee during the assessment proceedings hence violates the principles of natural justice and this point has not been considered by the CIT(A)-II, hence proceedings should be quashed on this ground. 5. The assessment has been completed on the basis of M/s Surya Scripts (P) Ltd. and M/s Sunrise Stock services (P) Ltd. and assessee was never confronted on this issue, hence the assessment based in violation to the principles of natural justice should be quashed and this point has not been considered by the CIT(A)-II, Ldh. 6. The A.O has no powers to ask source of source and this point has not been considered by the CIT(A)-II Ludhiana hence the assessment should be quashed on this ground. 7. The CIT(A)-II has not considered this aspect that A.O has not powers to change the head of Income declared in the Return of Income filed by the assessee and the same may please be accepted. 8. The A. O has considered and assessed the Income ....
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....ssessee had filed return of income declaring income of Rs. 58,47,952/- consisting of business income and other income. Income from shares was also included in the return. It was particularly noticed that a sum of Rs. 51,37,580/- was shown on account of long term capital gains on which tax was levied @ 10%. To verify the genuineness of these transactions of the assessee was asked to furnish the details of purchase and sale of shares. On perusal of the details filed by the assessee in this regard, it was further noticed that the main items of the profit generated was on account of sale of shares of Country Credit Capital Ltd. The details of transaction in respect of share of this company have been extracted by the Assessing Officer at page 2 of the assessment order which is as under: S. No. Script Name D.O.P No. of Shares Amount D.O.S No. of Shares Amount Vaule per share in Rs. Profit 1. Country Credit Capital Ltd. 05.04.0 2 3000 11400 11.11. 03 5000 52785 0 105/- 2. Country Credit Capital Ltd. 08.04.0 2 4000 16000 12.11. 03 5000 53160 0 106/- 3. Country Credit Capital Ltd. 15.04.0 2 1000 0 51000 09.12. 03 4500 47529 0 105/-  ....
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.... per reply dated 20-11-2006 it was intimated that no trading of these shares occurred on the floor of the Exchange during the relevant period. 5 Mumbai Stock Exchange, Dalal Street, Mumbai. As per the reply dated 24-11- 2006 received on fax dated 18- 12-2006 the Stock Exchange has informed that the Company is not listed with it hence no trading has ever occurred. 6. Kolkata Stock Exchange Association Ltd. 7 Lyons Range Kolkata. As on date no reply has been received form the Stock Exchange but the contentions put forth in the above para are also applicable here. The AO in Range V called for similar information for the same company and vide reply dated 03-03-2006 it was intimated that the shares of M/s Country Credit Capital Ltd. are not listed with the Stock Exchange. As the shares were never listed before 03-03-2006 there is no question of trading whatsoever. 7. The Assessing Officer has given the reasons for making inquiries from stock exchanges particularly from Madhya Pradesh Stock Exchange and Ahmedabad Stock Exchange vide following para in the assessment order: "It is worthwhile to mention here that enquiry letters to Madhya Pradesh Stock Exchange and Ahmedabad ....
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....months old. Further it was stated that cheques were issued after receipt of equivalent amount of cash. The Assessing Officer himself stated in the assessment order that though the statement is that of an Accountant but it shows the motive of the assessee. 9. Since the assessee has failed to furnish any supporting evidence regarding market rate of the shares, date of purchase and sale of shares, therefore, the Assessing Officer made inquiries from Registrar of Companies, Jalandhar and sought copy of the balance sheet and profit and loss account. The Registrar vide letter No. 4708 dated 12.12.2006 supplied the copy of balance sheets. Balance sheets have been extracted as under: Particulars Year Ending 31.3.2003 31.3.2004 Share capital (Equity share of 3200500 each of Rs. 10) 32005000 32005000 Fixed assets 5695891 5693269 Net current assets 22565313 22650432 Sale of share & securities 11971950 28831670 Profit/Loss (-) 108311 (-)607 Total loss c/f to Balance sheet (Accumulated losses) (-)2776082 (-)2776689 Earning per share (-)0.03 0 NAV (Net Asset Value) Rs. 7.05 Rs. 7.07 10. The Assessing Officer worked out NAV of the shares as on 31....
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.... share of Country Credit Capital Ltd. . On the basis of above enquiries the Assessing Officer concluded as under: "a) The assessee has done all the share transactions through M/s Modi Share Shoppe whose proprietor is Smt. Bindia Gupta and Shri Rajit Gupta, C.A husband of the above said lady did the transaction on his behalf as told by the assessee in his statement. The assessee knows Shri Rajiv Gupta since many years, still neither he nor his wife who is proprietor of Modi Share Shoppe has complied with the summons issued twice. b) The assessee has failed to produce the share broker. c) Enquiries from various stock exchanges have revealed that the shares were never listed or traded. d) The companies whose shares were traded could not produce books of account. e) Information from the Registrar of Companies Jalandhar that the company is running in losses and NAV per share of this company was ranging between Rs. 7.05 and 7.85 during this period. The value of the share could never be more than Rs. 105/- as can be seen from the sale value of the shares as per table I. f) Enquiries from the Banks revealed that the cash was deposited in the Bank account of broker before t....
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....d. and Registrar of Companies and the same were not confronted to the assessee. It was also stated in the additional grounds that the statements of Surya Scrips Pvt Ltd. and M/s Sunrise Stocks Services Pvt Ltd. were recorded and the assessee was not confronted with the same. Additional grounds were forwarded by the ld. CIT(A) to the Assessing Officer f or hisreport/comments. The Assessing Officer objected to the admission of additional grounds and also pointed out that in Assessment year 2005-06 also the issue of bogus long term capital gains were involved and during the proceedings for that Assessment year the broker was summoned who appeared and gave categorical statement that the assessee gave cash to the broker to give entries of long term capital gains. According to the Assessing Officer full opportunity was given to the assessee to cross-examine the broker and such cross- examination was ultimately made and the assessee could not contradict the statement of the broker. 14. In addition to these additional grounds, detailed submissions were made before the ld. CIT(A). It was mainly submitted that in addition to interest income from the firm the assessee derived income fr....
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....The ld. CIT(A) considered these submissions in detail and after considering the remand report received by him, did not find force in the submissions and decided the issue against the assessee. 17. Before us, the ld. counsel of the assessee submitted that it is wrong on the part of the Assessing Officer to say that the shares were not listed in MP Stock Exchange and Ahmedabad Stock Exchange. The Assessing Officer has not confronted the assessee with the letters written by the Stock exchanges and therefore, could not have relied on this information. He then referred to page 237 and 238 which is copy of letter of Ahmedabad Stock Exchange and clearly shows that there was a trading in the shares of Country Credit Capital Ltd. In fact shares were placed in "permitted category" of shares which is different from "listed shares". He also referred to pg 239 which is a copy of News Paper cutting which shows the quotations of Country Credit Capital Ltd. He also referred to page 236 of the paper book which is a copy of letter written by Delhi Stock Exchange Association Ltd. In this letter stock exchange has clearly stated that the details of the transaction in case of Country Credit Capi....
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....was not allowed on the next day which was requested on behalf of the assessee. He fairly admitted that the Assessing Officer had given time to Shri Suresh Kumar Gupta but he did not turn on the next day. Further the statement of Smt. Bindiya Gupta and Shri Suresh Kumar were recorded for Assessment year 2005-06 and the same could not be relied for Assessment year 2004-05. 18. He referred to the decision in case of Baijnath Aggarwal Vs. ACIT, 43 DTR 149 (copy filed in the paper book) and Mohal Lal Jinder Vs. ITO and others in ITAs No. 303/Chd/2004 (copy filed in the paper book). The facts in both the cases were identical to the facts of the case of the assessee and the Tribunal, after examining the facts had held that the transactions were genuine because the same were supported by sale and purchase bills etc. and therefore, these decisions should be followed. 19. He referred to Section 48 of the Act and submitted that even if the value of the shares was less the assessee was not required to declare the market value of the shares while computing the capital gains but in terms of Section 48, full value of the consideration had to be shown as sale consideration and theref....
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....06 ITR 414 (PH) Sumati Dayal Vs. CIT, 214 ITR 801 (S.C) Balbir Chand Maini Vs. CIT & other, 340 ITR 161 (PH) 21. In the rejoinder the ld. counsel of the assessee submitted that the decisions cited by the Department are distinguishable. 22. We have heard the rival submissions carefully and find that the ld. CIT(A) has decided the issue against the assessee by observing that the evidence discussed by the Assessing Officer as well as categorical statement of the broker that no sale or purchase of shares was done by the assessee but only entries of capital gain was given to the assessee on receipt of cash payment. The ld. CIT(A) relied on the statement of the broker for Assessment year 2005-06. It was observed that it would not make any difference whether statement was recorded for Assessment years 2005-06 & 2004-05. The ld. CIT(A) has also dealt with other arguments in para 7 to 17 of his order. 23. Though the ld. CIT(A) has categorically dealt with all the arguments in detail, we would like to deal with the arguments made before us. First contention of the ld. counsel of the assessee was that the assessee was not confronted with the material gathered from ....
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....he knowledge of the assessee when his statement was recorded on 15.12.2006 and which have been extracted by the Assessing Officer in the assessment order. Relevant question and answer is as under: "Question - As per the information received from many Stock exchanges it is seen that this Company (Country Credit Capital Ltd) is not listed with Bombay Stock Exchange and was last traded on DSE on 26.11.1996 and there was no transaction after that period and even in Ludhiana Stock Exchange there is no transaction during the period when purchase and sale has been done on your behalf. Kindly tell where these shares were traded. In the absence of any trading in the above mentioned recognized stock exchange. Answer - I do not remember at present but I will submit the evidence later on." 25. Thus assessee was clearly informed that various stock exchanges have already informed that no trading has taken place. The assessee has taken trouble by obtaining one loose paper from Ahmedabad Stock Exchange (which is placed at pages 237 and 238 of the paper book.) Careful perusal of this table shows that it is not signed by anybody. The contention of the ld. counsel of the assessee was tha....
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....he assessee and therefore, these quotations in a Gujarati Daily will not help the assessee. We also find that there is no merit in the contention that the Assessing Officer has not considered Annexure A&B given by Delhi Stock Exchange in its letter dated Nov 20,2006 (copy of which has been referred by the ld. counsel of the assessee at page 236 of the paper book). In fact the ld. DR for the revenue has filed the copy of the Annexure A&B clearly states that "no trading reported during this period". Annexure A refers to period 1.4.2003 to 31.3.2004 and Annexure B refers to the period 1.4.2002 to 31.3.2003, therefore, for the period under consideration there was no trading in the shares of Country Credit Capital Ltd. in Delhi stock Exchange. We have also perused page 235 of paper book which is copy of the letter written by MP Stock exchange in response to the query raised by the Assessing Officer u/s 133(6) of the Act. No doubt this letter mentions the address of the company. However, careful reading of the letter shows that the stock exchange has not denied or confirmed the fact whether the shares of Country Credit Capital Ltd. were listed there or not? However, it is categorically m....
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....a and Shri Suresh Kumar Gupta are not reliable because they were even not aware of the basic facts of the case and Smt. Bindya Gupta has clearly admitted that she was not aware of the knitty gritty of the business. In this regard he referred to the questions and answers during cross objection during which Shri Suresh Kumar Gupta has replied that he does not remember the status of the proprietary concern for all the years. It was further contended that proper time to cross examine was not given because the ld. counsel of the assessee had sought further time to cross examine Shri Suresh Kumar Gupta. In this regard first of all we would like to reproduce the relevant portion of the statement recorded by the Assessing Officer. 29. The relevant portion of the statement of the assessee, Shri Chandan Gupta is as under: "Question - Kindly tell the total number of shares of Country Credit Capital Ltd. you have purchased and s old and also the purchase and sale rates. Answer - At present I do not remember. Question - How much amount was received on the sale of the shares? Answer - At present I do not remember. Question -In your return of income major source of income is ....
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....bout the nature of entries has been mentioned before but I am fully aware of the fact that all cheques issued to Shri Chandan Gupta are in lieu of cash accepted on his behalf. I would further submit that if complete details regarding the modus operandi of Shri Chandan Gupta regarding these entries in required that can be clarified from my father-in-law Shri Suresh Kumar Gupta who shall be able to provide complete details regarding the receipt of cash, the bogus nature of entries and other necessary details. I would reemphasize that there is no doubt in this fact that cheques have been issued to Shri Chandan Gupta out of the account of M/s Modi Share Shoppee after receiving equivalent amount of cash. As can be seen from the above statement of Smt. Bindia Gupta it is very clear that though she is not aware of the intricacies of the business of share trading. She is well aware of the fact that the assessee Shri Chandan Gupta has provided cash to the firm/s Modi Share Shoppee for providing bogus entries of long term capital gains. This substantiates the enquiries conducted from the banks and other sources that the assessee Shri Chandan Gupta has taken bogus capital gain entries. But ....
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....Question - So if it is said that Shri Chandan Gupta has taken bogus long term capital gains by giving you cash is equivalent as seems by you statement above will it be true. Answer - Yes, the long term capital gains entries are undoubtedly bogus." 32. Relevant portion of cross examination allowed is as under: "Party No. 1 consisting of Shri Suresh Kumar Gupta Prop M/s Modi Share Shoppee and Shri Rajiv Gupta, C.A son of Shri Suresh Kumar Gupta. And Party No. 2 consisting of Shri Chandan Gupta the assessee and Shri Subhash Jain, C.A. Id. counsel of the assessee. P-2 Question - What is the name of accountant for Financial Year 2004-05? P-1 Answer - I do not remember at present. P-2 Question - Have you ever received cash from Shri Chandan Gupta directly during the Financial Year 2004-05 on behalf of M/s Modi Share Shoppee where you are prop? P-1 Answer - As much as I remember the cash has been received on behalf of Shri Chandan Gupta on different occasion during this Financial Year (Year 2003-04 & 2004-05) to the best of my knowledge. P-2 Question - Complete details of cash book with reference to Shri Chandan Gupta in relation to cash? P-1 Answer - ....
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....esh Kumar Gupta has categorically stated that the cheques were issued by receiving equivalent amount of cash. When the cross examination was given to the assessee, the assessee could not prove otherwise simply by saying that the cross examination should not be relied because the assessee was not given further time. This is particularly not correct because the assessee was given three hours to cross examine Shri Suresh Kumar Gupta. It is also pertinent to know that Shri Rajiv Gupta who the assessee claims to know and on whose advice it was stated that the assessee was carrying on the business in shares, was also present during cross examination which become clear from the statement because it has been mentioned very clearly that Party No. 1 consisting of Shri Suresh Kumar Gupta Prop M/s Modi Share Shoppee and Shri Rajiv Gupta, C.A son of Shri Suresh Kumar Gupta and Party No. 2 consisting of Shri Chandan Gupta, the assessee and Shri Subhash Jain, C.A counsel of the assessee. 35. The above analysis is clearly supported by the test of human probabilities given by the Hon'ble Apex Court in case of Sumati Dayal Vs. CIT (Supra) which was relied on by the ld. DR for the revenue.....
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....ifferent, however, if the claim, of winnings in races was false and what were passed off as such winnings really represented the appellant's taxable income from some undisclosed sources on these facts it was held as under: "Held, dismissing the appeal, that the Settlement Commission after considering the surrounding circumstances and applying the test of human probabilities had rightly concluded that the appellant's claim about the amount being her winnings from races was not genuine." Thus from above it is absolutely clear that surrounding circumstances and human probability was applied and upheld by the Hon'ble Apex Court. When the facts in case before us are examined on this prism it becomes absolutely clear that the assessee had miserably failed to prove the genuineness of the transaction of sale and purchase of the shares. 36. Another contention that the Assessing Officer has not produced the balance sheet of Country Credit Capital Ltd. in the assessment order, is of no assistance to the case of the assessee. When this contention is examined in the overall circumstances of the case as well as test of human probabilities then it can be easily seen that th....
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....ficer did not make any inquiry either from the company whose shares were purchased and sold by the assessee or from the share broker through whom the transaction took place. Therefore, it can be held that the transaction entered into by the assessee relating to long term capital gains was not a sham transaction rather it was a genuine transaction. As such the Assessing Officer was not justified in considering the capital gain earned by the assessee as non genuine and the ld. CI T(A) wrongly confirmed the action of the assessment order." 38. Similarly the decision relied on by the ld. counsel of the assessee in case of Baijnath Aggarwal Vs. ACIT (2010) 133 TTJ (Agra) (TM) is of no assistance to the assessee. Firstly in that case shares were obtained by the assessee through initial public offer. Secondly in that case also detailed enquiries were not made by the revenue authorities whereas in case before us the broker of the assessee himself categorically admitted that the assessee had paid cash in lieu of the entry of capital gain. 39. It was also argued before us that when the assessee had returned an item of income under the head "capital gain" the provisions of sect....
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....d by the assessee about the nature and source of such sums found credited in the books of the assessee is in the opinion of the Assessing Officer not satisfactory. Such opinion formed itself constitutes appellate authority prima facie evidence against the assessee, viz., the receipt of money, and if the assessee fail to rebut the said evidence the same can be used against the assessee by holding that it was a receipt of an income nature." 41. We may reiterate that Chandigarh Bench of the Tribunal in case in case of ACIT V. Avtar Singh, ITA No. 949/Chd/2011 has taken similar view. In that case the assessee has purchased shares of Arcee Ispat Udyog @ Rs. 100 per share and later on sold the same at Rs. 10 per share and claimed capital loss. After detailed discussion it was held that this transaction was bogus and therefore, capital loss could not be allowed. In this decision only difference is that the assessee had claimed bogus capital loss whereas in case before us the assessee has claimed bogus capital gain and therefore, ratio of this decision is applicable. Further Hon'ble Punjab & Haryana High Court has confirmed the addition in case of Som Nath Maini Vs. CIT (supra)....