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TMI Blog2010 (10) TMI 762X X X X Extracts X X X X X X X X Extracts X X X X ..... shares, nor had it maintained the database of this alleged seller of shares, though required to do so as per stipulation; iii) The CIT(A) has erred in law by holding that the additions were wrongly made as per provisions of section 68 of the IT Act, 1961. More application of wrong section cannot make the addition bad particularly when in the facts and circumstances the assessee had actually introduced his undisclosed income by means of entering into fictitious share transactions iv) The ld. CIT(A) has erred in law and in facts in holding that the issue relating to supposed double addition account of long term capital gains is a consequential ground emanating out of the ground no.3 which relates to assessee's claim that the AO has wrongly added Rs.45,55,979/- under section 68 of the IT Act, As noted by the AO in his order, the addition amounting to Rs.45,55,979/- relates exclusively to the share transactions of M/s Shalimar Agro Ltd, whereas the additions amounting to Rs.15,19,471/- relates to shares other than M/s Shalimar Agro Ltd." 3. We have heard the learned DR as well as learned AR and considered the relevant record for admitting the revised grounds. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Stock and Broking that their main broker was Vidyut Devndra Kumar, Gr. Floor, Rajabahadur Mansion, 32, Ambala Doshi Marg, Fort, Mumbai-400001. The AO issued summons under section 131 of the Act to the main broker Vidyut Devndrakumar asking them to submit a copy of the contract note duly certified, details of payment received, descriptive numbers of shares sold by them to M/s Shreenidhi Stock and Broking. In response to the said summon, the main broker Vidyut Devendrakumar vide their letter dated 16.11.2006, had submitted that they have not executed any trade of Shalimar Agro Ltd on 24.4.2002 on their BSE terminals. A copy of the said letter was forwarded to the aseseee by the AO and asked to show cause as to why the transactions should not be treated as sham transaction. In reply, the assessee vide letter dated 4.12.2006 submitted that the shares were purchased from M/s M/s Shreenidhi Stock and Broking on 24.04.2002 and not from M/s Vidyut Devendrakumar. It was also submitted that M/s Shreenidhi Stock and Broking purchased the said shares from one Mr. Bhagwan Solanki residing at New Shivaji Nagar, Kapaswadi, Versova Link Road, Andheri (W), Mumbai-400058. In view of the said reply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intain the database of their clients. The AO observed non-maintenance of data base of the client and sub-broker in the form in which the assessee is a partner reveals fictitious nature of the transaction. The AO also issued summons to M/s Shalimar Agro Ltd for producing the certified true copy of Annual Return file for the Financial Year from in the office of the Registrar of Companies, Certified true copy of share transfer deed, transferring shares in the name of Mr. Arvind Karia and extract of member register duly certified by the company. No reply received from the company and therefore, the AO doubted the genuineness of the documents. The AO has also held that the assessee failed to prove that he has purchased the shares from Mr. Bhagvan Solanki. Accordingly, the sale proceeds received in the assessee's books of account in respect of shares were treated as unexplained cash credit u/s 68 of the Income Tax Act, 1961. Consequently, the exemption u/s 54F was also disallowed. 8. On appeal, the CIT(A) allowed the claim of the assessee vide paragraph 5.7 as under: "5.7 After considering the various facts and circumstances of the case as well as judicial pronouncements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany dated 30.4.2002 and submitted that when the shares in question were transferred in the name of the assessee on 30.4.2002 then the transactions of purchase cannot be disputed. The learned AR has further submitted that the assessee disclosed the shares in the balance sheet for the period ending on 31.3.2003 which also shows that the transaction of purchases of shares by the assessee is genuine and cannot be doubted. The aseseee produced before the AO the purchase note regarding the purchase of shares, copy of certificate, letter of the company dated 30.4.2002 confirming the transfer of shares in the name of the aseseee, DMAT account statement for purchase as well as sale of the shares, copy of ledger account of the aseseee in the books of broking firm for the purchase of shares. Thus, it is contended by the learned AR that the aseseee has proved without any doubt that the purchase and sale transactions was genuine and duly supported by the necessary evidence. As regard the objection of the AO regarding not providing copy of Annual Return of the Company despite the summons issued. The leaned AR has submitted that the assessee vide letter dated 22.2.2002 informed the AO that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the alleged transaction is off-market and in the absence of other evidence, it is necessary to establish the genuineness of the transactions and thus the concerned company should furnish the necessary record for verification. As evident from the letter dated 30.4.2002 issued by the Company that the shares were transferred in the name of the aseseee but the veracity of the said letter has not been examined by the AO because the AO wanted some more information and record from the company which was not produced. Prima facie it appears that the shares were transferred in the name of the assessee on 30.4.2002 and the transaction of purchase took place during the year 2002-03 relevant to the assessment year 2003-04. However the relevant record was not made available before the AO to verify the veracity of the said letter dated 30.04.2002 of confirmation. Therefore, even if it is presumed that the shares were purchased during the year 2002-03 the actual date of transaction has to be established specifically when the assessee has purchased the shares through the firm in which he is a partner and did not make any payment. The person from whom the shares were purchased was also not pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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