2015 (3) TMI 921 - ITAT PUNE

Genuity of transaction - contract notes, and broker's bills etc., found and seized in the course of search action and proved to be bogus by the statement of the brokers who issued these broker notes do not amount to be incriminating material as held by CIT(A) - CIT (A)holding that the income claimed as long term capital gains cannot be held as business income as adventure in nature of trade - Held that:- On the basis of the above factual discussion, not much reliance should be placed on statements made by the assessee during the course of search because no corresponding seized material was found in the course of search to justify the additions in question. The verbal statement of the assessee without any connection with the other materials found during the search cannot be considered to be materials found during the search. Relevant income tax returns for the past years were filed prior to the search in the normal course suo moto disclosing the particulars of subject additions which stood accepted u/s 143(l) of the Act. Assessment as contemplated u/s 153A is not a de novo assessment and additions made therein, has to be necessarily restricted to undisclosed income unearthed during search. There is nothing on record to suggest that any corroborative evidence was found to justify the addition in question.

The first appellate authority held that the issue of genuineness of the claim of LTCG and STCG of assessee group should be judged independently on the strength and merit of documentary and other third party contemporary evidences, irrespective of the admission/retraction of the assessee. This exercise was carried out by the first appellate authority in the subsequent part of the order.

In the light of the above the appellant submitted that in view of the voluminous documentary evidence and material on record and there being no material in the possession of the Assessing Officer to rebut the said evidence, the transactions of purchase and sale of shares were conclusively proved by the appellant. The same should not have been washed away by the revenue by indulging in assumptions and arbitrary conclusions, and by selectively referring to some stray pieces of so-called evidence. Drawing inferences which on the face of it is not tenable. The Assessing Officer failed to provide adequate opportunity to the appellant for cross-examination of brokers whose statements were recorded behind the back of the appellant and were used to the detriment of the appellant. The Assessing Officer did not refer to the various replies filed by the assessees to Assessing Officer's queries. All these have rendered the assessment order to be bad in law and absolutely unjustified.he objectives are kept in view of the context of framing assessments under new provisions - 153A, it would indicate that the basic structure of search assessments are retained and the new provisions aim at trust based, hassle free assessment. If these are the avowed objectives, the search related assessment should base on evidence found on search. In course of search, no such evidence was found indicating that the share transactions are bogus. Hence the assessment made by the Assessing Officer on surmises and presumptions is not sustainable.

The assessee is not concerned with the modus operandi of the broker's trading with its other clients. As long as he had purchased and sold the shares of the assessee through known and accepted procedure, the broker's misdealing with others should not be a criteria to suspect the appellant's genuine share transactions and capital gain thereupon. If these brokers were suspended by SEBI subsequent to the assessee's company's dealing with them, it is the matter between SEBI and the broker and the assessee company is not concerned in any way unless action is based on transactions including assessee's transactions. There is nothing on record to suggest that transactions with assessee are also basis for SEBI's action against alleged brokers. The Hon'ble Kolkata High Court in the case of CIT vs. Korlay Trading Co. Ltd. (1998 (2) TMI 104 - CALCUTTA High Court) held that once the assessee has furnished the name of the company, number of shares purchased, date of sale, amount of purchase money, amount of sale money, etc., the assessee had discharged its initial burden and if the broker did not maintain any accounts, the transaction could not be doubted for no fault of the assessee.

Considering the totality of the facts of the case and relying on various decisions cited supra and considering the elaborate discussion by the Ld. CIT(A) we find no infirmity in his order accepting the Long Term Capital Gains and Short Term Capital Gains declared by the assessee. Accordingly, the order of the CIT(A) is upheld and the grounds raised by the Revenue are dismissed. - Decided in favour of assessee.