TMI Blog2017 (5) TMI 1777X X X X Extracts X X X X X X X X Extracts X X X X ..... ere 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 parties have been confronted and in such a case, no question of cross-examination of the broker arises when there is no specific statement with regards to the assessee. Even otherwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied 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 ₹ 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 wrong and insufficient. 3. On the facts and circumstances of the case as well as in law the Hon'ble CIT (A) has erred in upholding the addition of ₹ 2,88,570/- being unexplained money used for payment of commission / fees for obtaining alleged long term capital gain on sale of shares. Reasons assigned by him for doing the same are wrong and insufficient. 3. Briefly stated facts are that the assessee is deriving income from commission, speculation income, long term and short term capital gain, house property income and income from other sources. A search under section 132 of the Act was conducted on the residential premises of the assessee on 18-01-2007 for the reason that the assessee obtained artificial capital gain by manipulating share transactions. It was claimed before us by the learned C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res 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 accommodation bills and another purchase broker Shailee Securities totally denied the transaction. Another purchase broker Drishti Securities notice u/s 133(6) could not be served and no enquiry was made in the case of another sale broker AKD Securities Pvt. Ltd. According to AO, the assessee has not provided any evidence for payment of purchase of these shares. In regard to the AY 2005-06 and 2006-07, the addition was made in respect to purchase of shares of Robinson Worldwide Trade Ltd. for the reason that assessee did not produce DPS Shares and Securities from whom it was claimed that the shares were purchases and also sale transaction was made. AO noted that the statement of Shri Sujal Shah of DPS Shares and Securities Pvt. Ltd. wherein he admitted to have issued accommodation bill and assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey 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 accommodation bills. The relevant part of his sworn statement may be extracted as under: - Q.3. Do you mean to say that you purchased and sale shares etc., only to BSE? Ans: Yes. We, i.e. out company and three of our Directors, deal through BSE only. However, about 4 or 5 years back approximately, we had issued certain bills relating to purchase of shares of M/s. Robinson Worldwide Trade Ltd. (earlier known as Robinson Impex Ltd.), M/s. Fast Tract Entertainment Ltd. and M/s.CL Tech Info Trading Ltd. Bills relating to all these entities were issued without any actual purchases having been made by us from anywhere or from anybody. These were basically accommodation bills. We meaning the company and the three of our Director; or any employee, never received any amount for these supposed purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases 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 also bogus. I am. willing to state, upon being shown or upon being required, whether transactions of purchases shown in our bill are genuine or not. For the bogus purchases made as shown in these bills, we have shown certain brokerage upon which we have shown having charged. Service Tax. No service tax was ever received by us. Therefore, no Service Tax was ever paid to Government. 6. Do you wish to state anything? Ans: We have used term bills/contract notes interchangeably. 'Enquiries, were made from BSE and NSE and they have reportedly informed that the impugned shares were not purchased through BSE or through NSE. 2.3.3 The appellant was properly confronted on the issue of bogus purchase of Robinson Shares, the penny stock and he was asked to explain the status of bogus purchase of Robinson shares from the said M/s DPS S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actions 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 our company? I do not know how the delivery memo of your company? I do not know how the company M/s Robinson Worldwide Trade Ltd. has transferred the shares in your client's favour. Q.11 I am Showing you DRF (Dematerilisation Request Form) of my client Shri Brijesh Shah sent to their DP is possible for DP to give credit in Dental account without physical delivery of shares. Ans: It is not connected with our company. Q.12 Please confirm that in your statement dated 21/11/2008. you have issued these bills by instruction of Mr. Naresh Saboo. Ans: yes. I have issued the said bills on instruction of Mr. Naresh Saboo. 13.1n your statement you have stated that you have issued accommodation bills relating to purchase of Robinson Shares whether as per ESE/SEBI Bylaws, are you allowed to issue non genuine bills to clients. Ans: No. As per BSE/SEBI. Bylaws, we are not allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egarding 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 considered various arguments taken by the Ld.AR. In the present case, the Ld. Assessing Officer has challenged the purchase of the said penny stock which were used for fabricating capital gains which is contested by the Ld. AR as discussed in the preceding paragraphs. -------------------------------------------------------------------- 2.3.12 Having regard to the facts and circumstances of the case, and in law, it is held that the Appellant has not been able to conclusively prove the purchases of penny stock shares of Robinson and the enquiry made by the Investigation Wing as well as by the Ld. Assessing Officer have established that the appellant had arranged purchases of Long Term Capital Gain and purchases of artificial speculation gain or obtaining bogus purchases and sales bills showing share transactions. As beneficiary, the appellant was given physical shares along with back dated bogus purchase bill reflecting purchases of penny stock shares at a very low price almost one year back for facilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 speculation gain and statement of Demat A/c reflecting transfer of shares, copy of ledger account of VRP Finance Pvt. Ltd. for shares for AY 2004-05, copy of sale bill of VRP Finance Ltd. for sale of shares in AY 2004-05 were enclosed. He argued that even the source of purchase consideration in the shape of copy of bank statement of HDFC bank was submitted. He argued that 16,000 scripts of shares were purchased of Jaykay Dee Industries Ltd. in 2001-02 and declared in the return of income, which was eventually sold in AY 2004-05 through VRP Finance Pvt. Ltd. 7. Similarly, the learned Counsel for the assessee argued that the evidences of purchase and sale of shares of Robinson Worldwide Ltd. for the AY 2005-06 was produced in the shape of copy of purchase bill and contract note for purchase of 82,500 number of shares of Robinson Worldwide, ledger copy evidencing purchase of shares, copy of letter dated 14-06-2003 received from Robinson Worldwide issuing jumbo shares certificate for sale of shares for AY 2005-06. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vided with an opportunity to cross examine and hence it cannot be used against the assessee. He also stated that the statement of Shri Pratik C Shah recorded under section 131 of the Act dated 18-11-2008 shows that the director of DPS Shares and Securities have made a general statement and nothing was against the assessee. In term of the above arguments the learned Counsel for the assessee argued that the addition was made without any basis and the evidences produced by the assessee were never considered by the AO nor otherwise proved wrong. 9. On the other hand, the learned CIT DR relied on the orders of the lower authorities. She argued that the AO as well as CIT(A) in their orders have elaborately discussed the modus operandi employed by the operators with regards to penny stock shares which was busted by the Investigation Wing. She also stated that the assessee was part of operators for obtaining fabricated share transactions resulting in artificial/ bogus capital gains. She fully relied on the order of the AO and that of the CIT(A). 10. We have heard the rival contentions and gone through the facts and circumstances of the case. We find from the facts of the case that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate his statement. We also find from the facts that the assessee has filed voluminous document to substantiate its claim and the AO has not found any fault in the same. The case law of coordinate bench of this Mumbai Tribunal in the case of Sri Sri Bhagvandas Gordhandas Vs. DCIT in ITA No. 5021/Mum/96 is in similar circumstances and facts. In the said case, the assessee Sri Bhagwandas Gordhandas of M/s. Bhagwandas Gordhandas was engaged in the business of share broking, share Jobbing and trading in shares. A search was conducted in the case of a broker T.H. Vakil (MTHV) in August 1992. During that search, Sri Rajen C. Vakil of MTHV admitted about transferring of' hawala losses to a number of share brokers, including the assessee-appellant. Relying on the admission/ statement of RCV, the AO treated nine transactions of the assessee with MTHV to be non-genuine and meant simply for transferring fictitious speculation losses aggregating to ₹ 59,41,500/- to the assessee. Given the aforesaid facts, the Hon'ble Tribunal at para 27 of the order ruled as under: - ........the deponent or declarant is himself tainted in as much as he himself is involved in the transactions a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... third parties. Further, no statements of such third parties have been confronted and in such a case, no question of cross-examination of the broker arises when there is no specific statement with regards to the assessee. 13. Even otherwise, the alleged cross-examination as held was not conducted in context of the assessee and during the course of cross-examination proceedings, the purchase documents which have been stated that the accommodation bills pertain to Shri Brijesh D. Shah and which do not belong to the assessee. The relevant extract of said statement is given hereunder: Q. 5 1 am showing you the contract note and bill for purchase of shares of Robinson Impex issued by your company to Shri Beijesh Shah and Smt. Pratiksha Shah, Late Shri Shreevallabh Damani and Suit. Saroj Devi Damani. For e.g. bills as under: Bill date Name of the party Quantity Amount Bought/ Sold 04/04/03 Brijesh D. 79500 120840 Bought Shah This contract note /bill in the name of Shri Brijesh Shah, issued by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... From this material, in para 11 the Tribunal concluded that this was not mere accommodation of cash and enabling it to be converted into accounted or regular payment. The discrepancy pointed out by the Calcutta Stock Exchange regarding client Code has been referred to. But the Tribunal concluded that itself, is not enough to prove that the transactions in the impugned shares were bogus/sham. The details received from Stock Exchange have been relied upon and for the purposes of faulting the Revenue in failing to discharge the basic onus. If the Tribunal proceeds on this line and concluded that inquiry was not carried forward and with a view to discharge the initial or basic onus, then such conclusion of the Tribunal cannot be termed as perverse. The conclusions as recorded in para 12 of the Tribunal's order are not vitiated by any error of law apparent on the face of the record either. 15. Similarly, the co-ordinate Bench of this Tribunal exactly the same script of shares i.e. Robinson Impex (India) Ltd. and same share broker DPS Shares and Securities Pvt. Ltd. were under question, the Tribunal in the case of Late Smt. Kanchanben J. Shah vs. ITO in ITA No. 6544/Mum/2011 date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has also placed on record copies of the assessment order as well as order of CIT(A) in the case of Jagdish H. Shah(supra) which reveal that the discussion contained therein is almost similar to the discussion in the impugned orders before us. The enquiries made by the AO in case of Jadish H. Shah (supra) are on similar lines to those made in the case before us. In the case of the assessee as well as in the case of Jagdish H. Shah(supra) the shares were purchased from the same broker namely DPS Shares and Securities Pvt. Ltd. It is also emerging that the AO carried out a verification exercise which involved recording of statement of one Shri Raj Kumar Masalia, Principal Officer of DPS Shares Securities Ltd.; similar action was taken in the case 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the attendance Sheet. In his Remand Report, the AO further states that the said shares of M/s. Robinson Worldwise Trade Ltd. (formerly known as Robinson Impex (India) Ltd.] were purchased on 05-04-2003 for a consideration of ₹ 15191.99 from M/s. DPS Shares and Securities Pvt. Ltd. As per record of the said company, the shares were endorsed in favour of the assessee on 30-04- 2003 in physical format only. The AO further states that as per investigation made, these shares were sent for dematerialization to HDFC Bank on 03-05-2004 and were converted into De-mat form on 22-05-2004. In his Remand Report, the AO has further confirmed the sale transaction made through broker, M/s. Ajmeera Associates Pvt. Ltd. 13. After considering all the above stated facts in totality, we do not find any reason or logic in treating the purchase of 11,500 shares as bogus. The Lower Authorities could have directly verified the transaction from the company itself, whose shares were questioned to be bogus but both the Lower Authorities did not do this exercise. The Remand Report of the AO itself show that the transactions have been treated as genuine subsequently by the AO himself while sending ..... X X X X Extracts X X X X X X X X Extracts X X X X
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