TMI Blog2011 (11) TMI 472X X X X Extracts X X X X X X X X Extracts X X X X ..... the said transactions as false or fictitious simply based on the information submitted by Stock Exchange the Revenue authorities is not justified to doubt the genuineness of the transactions. Thus confirming the order of CIT(A) deleting the addition and treating the same as long term Capital Gains - Decided in favor of assessee. - ITA No. 1593/Kol/2009, - - - Dated:- 11-11-2011 - Mahavir Singh, C.D. Rao, JJ. A.K. Singh for the Appellant S.L. Kochar for the Respondent ORDER C.D. Rao, Accountant Member 1. This appeal is filed by the Revenue against the order dated 24.06.2009 of the ld. CIT(A)-XIX, Kolkata pertaining to A.yr.2006-07. 2. The first issue raised by the Revenue is relating to deletion of addition amounting to Rs.68,66,377/- in respect of unexplained credit. 3. The brief facts of this issue are that while doing the scrutiny assessment Assessing Officer on examination of the books of accounts of assessee noticed that the credit of Rs.68,66,377/- is in the capital account of assessee and when asked to explain the nature and sources of the same assessee explained that the said amount was received by him by cheque from State Bank of Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re gifted by Shri K. C. Chhajer to the appellant without any consideration. On the basis of various observations as mentioned in the assessment order, it was concluded by the A.O. that the appellant has brought his own unaccounted cash in the books of accounts in the garb of alleged gift. It was also observed by the AO that even if it is considered that the appellant has received gift from Shri Chajjer, the amount of Rs.68,66,377/- is taxable u/s. 56(2)(v) because the donor was not a relative of the appellant. On the other hand, the appellant has contended that he had received gift of two IMD Bonds of 50,000 USD each from Shri K. C. Chhajer on 24.2.2003 which is evidenced by the copies of IMD Bonds Certificate filed before the A.O. It was argued by the appellant that there was no requirement of a gift deed because on the reverse side of the Bonds Certificate the space was provided for executing a gift by the owner of the Bond in favour of any other person. In the case of appellant, the donor has signed on the back side of the certificate on 24.2.2003 to evidenced the gift made in favour of the appellant. The appellant has also put his signature on the, said. Bonds Certificates on r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant has introduced his own unaccounted cash in the books of accounts in the garb of gift, while there is no evidence to prove that any consideration was passed on by the appellant to Shri Chhajer as a consideration for gift. The A.O. has also doubted the transfer of the gift for the reason that if the gift was received on 24.2.2003, the same should have been reflected in the balance sheet for AY 2003-04. I am of the opinion that the A.O. was not correct in his observations, because, as on 24.2.2003, the appellant has received the IMD Certificates and there was no way to reflect the Bonds in the balance sheet on the assets side because there was no amount to credit the same on the liability side of the balance sheet. The receipt of the gift could only be reflected in the accounts when the IMD certificates were matured and the appellant has received the amount in terms of money from the State Bank of India, Mumbai. Thus, I am of the opinion that the AO was not justified in concluding that the gift transaction was not genuine as the same was not reflected in the balance sheet as on 31.3.2003 and the gift was received by the appellant during Financial Year 2005-06. The A.O. has not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at he has close relationship with the appellant's family since past more than 40 years or so. In view of above, I am of the opinion that AO was not justified in making the addition u/s. 68 of the I.T. Act without controverting the evidences produced by the appellant and also without bringing anything on record to prove that the appellant has introduced his own unexplained cash in the books of accounts in the garb of gift as held by the A.O. 3.2. Aggrieved by this Revenue is in appeal before us. 4. At the time of hearing the ld.DR appearing on behalf of the revenue reiterated the observations made by AO. 5. On the other hand, the ld. Counsel appearing on behalf of assessee relied on the orders of the ld. CIT(A) and further contended that the facts of the present case are similar to that of the case which was decided by Hon'ble Allahabad High Court in the case of Kanchan Singh vs CIT reported in 174 Taxman 383 (All). The ld. CIT(A) also has analysed the facts of the said decision of Hon'ble Allahabad High Court and compared the present facts of assessee while deleting the addition made by Assessing Officer. Therefore, he requested to upheld the action of ld. CIT(A). 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns is colourable. In any case, the purchase transaction of shares from the broker is not genuine for the reason that the transaction has not been routed through the Stock Exchange and has not been informed to the Stock Exchange by the close of the day by the concerned broker. 9.2. In the circumstances, no exemption u/s 10(38) would be available to the assessee on the alleged Long Term Capital Gain of Rs.20,82,170/-. The Long Term Capital Gain shown by the assessee is held to be fictitious. It is held that the assessee has actually not earned the Capital gains as claimed by him whereas the assessee has introduced his own unaccounted money into the books and credited the same in the form of Long Term Capital Gains. The amount of Rs.20,82,170/- is treated as unexplained credit in the books of the assessee and is added to the income of the assessee. 9.3. On appeal ld. CIT(A) after taking into consideration the various submissions made by assesee which were incorporated in the impugned order treated the Long Term Capital Gain as shown by assessee as Long Term Capital Gain instead of unexplained credit u/s 68 of the IT Act by observing as under:- "(19) I have considered the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO had also made observations regarding price rigging and suspension of broker from the Exchange etc. However, I am of the opinion that merely for the reason that either the broker has not reported the off-market transaction to the Exchange or there was any discrepancy on account of Trade numbers recorded on contract notes vis- vis in the record of the Exchange, the purchase transactions made by the appellant cannot be treated as fictitious or not genuine. The evidences produced by the appellant cannot be brushed aside merely on the basis of information received from the Stock Exchange without bringing anything positive on record to controvert or to prove that the evidences produced by the appellant were false and fictitious. If the brokers had not complied any rule and regulation of the Stock Exchange, for that the appellant cannot be held responsible and he cannot be punished for the same. Had the purchase transaction been fictitious, the shares would have not been credited to the de-mat account of the appellant. It is not the case of the A.O. that the shares which were credited to the Demat account of the appellant, did not exist at all. Once the shares has been credited to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase and treat the capital gains as Long term Capital Gains and thus confirm the order of ld. CIT(A) on this issue. 12. After hearing the rival submissions and on careful material available on record, recently the Hon'ble Jurisdictional High Court in the case of CIT vs Kedarnath Agarwal (supra) has observed as under:- "The Appellate Authority further came to the conclusion that the Assessing Authority had disallowed the capital loss of Rs.15,29,049/-only on the basis of information submitted by the Stock Exchange and the Assessing Officer himself had not brought anything on record to prove that the transactions of purchase and sale of the shares in which the assessee had suffered the loss were not genuine transactions. It is further recorded by the Appellate Authority that the assessee had submitted the complete documentary evidences to prove his transactions of purchase and sale of those shares and the Assessing Officer could not prove that the evidence submitted by the assessee was either false or fictitious. It was further pointed out that the assessee had purchased and sold the shares through the registered share brokers of the CSE, the delivery of shares was recei ..... X X X X Extracts X X X X X X X X Extracts X X X X
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