TMI Blog2014 (5) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that the sale transactions were done as per advice of his friend Shri Anand Jaju, Pune who has expertise in share market. Relying upon Sumati Dayal Vs. CIT [1995 (3) TMI 3 - SUPREME Court] - the assessee during the course of assessment proceedings has surrendered the income after the modus operandi as discussed by the Assessing Officer in the body of the assessment order was confronted - It is a fact that the assessee never appeared before the Assessing Officer and was always represented by his Advocate - the contention of the assessee has surrendered the income due to coercion cannot be substantiated –The assessee has surrendered the income before the AO for which the Assessing Officer did not proceed for any further enquiry and completed the assessment by treating the long term capital gain as income from other sources and since the surrounding circumstances of the case also prove that the transactions in purchase and sale of shares is just a colourable device especially when the assessee had not done any such transaction in the preceding or subsequent year and the assessee even does not know the broker personally – thus, there is no infirmity in the order of the CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Sr.No.150, Plot No.6, Sukhneni Imperial Pase-III, Moruwadi, Pimpri, Pune-18. To The Asst. Commissioner of Income Tax, Central Circle-2(3), 4th Floor, PMT Building, Shankar Seth Road, Swargate, Pune -411037. Sub : Our Shares dealings of M/s. Tanu Health Care Ltd. Mumbai. Respected Sir, Please refer to our discussions held and the explanations demanded by you, I have to state as under. This is to bring to your kind notice that my shares dealings of M/s. Tanu Health Ltd. purchased the shares of M/s. Tanu Healthcare Ltd. through the brokers by paying Account payee Cheques. The purchase sale of shares are made through my demat Account. Sale are also made through the brokers for which I have received the cheques. All these details I have submitted to your office. But there is constant pressure from your office to surrender the income earned from the dealings in share of M/s Tanu Healthcare Ltd. As such to buy the metal peace and to concentrate on my business affairs uninterruptedly I submit to your suggestions. Further, I assure you that I will pay the Income Tax on above income, provided the Tax Liability is arrived at without Interest Pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l year. It is observed that the prices of these stocks start picking up from May- June of a particular F. Y. and are at peak in the month of October and start falling as the month of March approaches. The financial results of these companies also suggest that these companies have nominal turnover and the annual results show loss which does not explain such volatility in prices of these companies whenever trading is taking place for shares of these companies. In the recent past enquiries with stock brokers in Mumbai and enquiries in cases of beneficiaries at Pune have established the practice of claiming bogus LT capital gains by converting unaccounted money through purchase and sale penny stock company shares and in a large number of cases the brokers as well as the beneficiaries have admitted to have manipulated the prices of penny stock companies. 6.3 Discrete enquiries have revealed that the address of Tanu Healthcare Ltd as per PAN data is I that of a small cyber cafe in Mumbai and the discrete enquiries have revealed that there is no office at that address and it is only a mailing address from where the dak is collected at frequent intervals by the persons connected with Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... months. However, no profit on sale of shares which were used to buy the penny, stock shares have been disclosed in the returns of Zikrullah suggesting that the purchases shown by broker in respect of penny stocks was merely an accommodation entry and no pm-chases were made at that time and the entries are passed only afterwards just before getting the shares Demoted. Without prejudice to the fact that these are mere accommodation entries, even then the profits can be only STCG as there is no authentic proof of holding those shares before the date of Demat and accordingly taxable @ 30% instead of 10%. Zikrullah had not shown any income from sale of shares before or after AY 05-06 and he has traded mainly in these two shares only. Shri Zikrullah during search could not give satisfactory explanation to various questions posed to him such as why he preferred to do transaction in these shares only when he had never done any transaction in shares before. He did not know anything about these companies such as line of business, their products or turnover, profitability etc. He stated that he transacted in these shares as per advice of his friend. 6.5 When seen in this background, all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reful perusal of a letter of the appellant dt.24/12/2009 does not leave any doubt on its interpretation. The letter, in unambiguous terms, surrendered the income earned by the appellant from the dealing in the share of M/s. Tanu Health Care Ltd. By surrendering this income, the appellant prevented the AO from making further investigation. It is a settled law that retraction, if any, has to be immediately after the statement. The person who gives the original statement has to explain delay in giving retraction. Retraction has to be supported by suitable evidences. It is a settled law that admission / statement is a good piece of evidence and the same can be used against the person who makes it. The reason behind this is that a person making a statement stops the opposite party from making further investigation. This view has been held by Hon'ble ITAT Pune Bench in the case of Hotel Kiran Vs. ACIT reported in (2002) 82 ITD 453. Although this decision has been given with reference to statement recorded u/s. 132(4), it is equally applicable to the statement given during the course of assessment proceedings. The Hon'ble ITAT has held that great evidentiary value has been attache ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch sale under s. 132(4), in our opinion, he can always retract from such statement. Similarly, if the assessee can show that the statement has been made on mistaken belief on facts, he can retract from the statement if he can show that facts on the basis of admission so made were incorrect. This is what has been held by the Hon'ble Supreme Court in the case of Pullangode Rubber Produce Co. Ltd. (supra). 9. In view of the above discussions, we are of the view that admission made in statement under s. 132(4) has great evidentiary value and is binding on a person who makes it. Therefore, the addition can be made on the basis of such admission by using the same in evidence. The legislature was well aware that under the general law mere admission may not be conclusive one. The IT Act is a specific Act and assessment has to be made on the basis of material gathered by the AO. For this purpose, vast powers have been conferred on the IT authorities for making investigation including the powers of search. If in the course of such search, the assessee makes some admission, he debars the authorized officer from making further investigation. In view of this, legislature in its wisdom h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessee strongly challenged the order of the CIT(A). He submitted that the assessee in his statement recorded during the search u/s.132(4) had clearly stated that the transactions are genuine. Referring to the copies of the contract notes, he submitted that the purchase and sales are through broker and they have been routed through the Demat account of the assessee. The payments have been made and received by cheques and therefore the transaction should not be disbelieved merely because the payment has been made to the broker towards the cost of purchase after a lapse of one year. He submitted that the Assessing Officer only suspects and has not found any defect in the said transactions for which he forced the assessee to surrender. 4.1 Referring to the decision of the Pune Bench of the Tribunal in the case of Avinash Kantilal Jain he submitted that under identical facts and circumstances the Tribunal has treated the capital gain received on transfer of shares as Long Term Capital Gain and thereby allowed the deduction u/s.10(38). Referring to the decision of the Mumbai Bench of the Tribunal in the case of Mukesh R. Marolia Vs. Addl.CIT he submitted that in the said dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purchased the shares at a very nominal price without receiving any payment and sells the same after a period of one year and gives back the huge amount of money to the assessee. It is not possible by any prudent or sensible person to part with such huge amount to a stranger. Therefore, when these facts were detected by the Assessing Officer, the assessee surrendered the income. 5.3 Referring to the decision of Hon ble Bombay High Court in the case of Rameshchandra Co. Vs. CIT reported in 168 ITR 375 he submitted that the Hon ble High Court in the said decision has held that where an assessee has made the statement of facts he could have no grievance if the taxing authority taxes him in accordance with that statement. If he can have no grievance he could file no appeal. Therefore, it is imperative if the assessee s case is that his statement has been wrongly recorded or that he made it in a mistaken belief of fact or law, then he could make an application for rectification to the party which passed the order based upon that statement. Until rectification is made the appeal is not competent. 5.4 Referring to the decision of Hon ble Kerala High Court in the case of Mahesh B. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omfort Intech Ltd. and claimed Rs.27,58,883/- as exempt. We find the Assessing Officer disallowed the claim of such long term capital gain of shares of M/s. Tanu Health Care Ltd. and Comfort Intech Ltd.on the ground that the assessee has purchased the shares for a very nominal price which was sold at a very high price to claim long term capital gain and when confronted the assessee surrendered the same income. Accordingly, the Assessing Officer treated the claim of long term capital gain of Rs.93,48,858/- as income from other sources. 6.1 We find the Ld.CIT(A) upheld the action of the Assessing Officer on the ground that the assessee in his letter in unambiguous terms surrendered the income earned by him from the dealing in shares of M/s. Tanu Health Care Ltd. and M/s. Comfort Intech Ltd. By surrendering this income the assessee prevented the Assessing Officer from making any further investigation and there was no retraction immediately after the statement. 6.2 It is the submission of the Ld. Counsel for the assessee that he has surrendered the income due to coercion by the Department since there was constant pressure to surrender the said income. It is also the submission of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invest in the purchase of shares on behalf of his unknown client without receiving any money and after a period of one year will give away an amount of above Rs.90 lakhs profit without retaining the same for himself. Even the middleman, i.e. in the instant case, friend of the assessee who had expertise in purchase and sale of shares has not made any profit for himself and has given away the money to the assessee which is very substantial. All these things in our opinion are against human probabilities. 6.5 We find the Hon ble Supreme Court in the case of Sumati Dayal Vs. CIT reported in 214 ITR 801 has held as under : It is no doubt true that in all cases in which a receipt is sought to be taxed as income, the burden lies upon the Department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within an exemption provided by the Act lies upon the assessee. (See Parimisetti Seetharamamma [1965] 57 ITR 532 at page 536). But, in view of section 68 of the Act, where any sum is found credited in the books of the assessee for any previous year, the same may be charged to income ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out the reality of such recitals. 6.7 We further find that the assessee during the course of assessment proceedings has surrendered the income after the modus operandi as discussed by the Assessing Officer in the body of the assessment order was confronted. It is a fact that the assessee never appeared before the Assessing Officer and was always represented by his Advocate. Therefore, the submission of the Ld. Counsel for the assessee that the assessee has surrendered the income due to coercion in our opinion is not substantiated. It is only after the Department confronted the modus operandi adopted by the assessee that the assessee surrendered the income before the Assessing Officer. 6.8 We find the Hon ble Bombay High Court in the case of Rameshchandra and CO. (Supra) has held as under : The judgment of this court in Jivatlal Purtapshi's case [1967] 65 ITR 261 was, as the Tribunal held, squarely applicable. It was stated by this court (at p. 266) that what is voluntarily accepted cannot give rise to a grievance which can be taken further in appeal. In the appeal memo, which was filed by the Department, the only ground taken was that the deletion of the item by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it could not be held as matter of law that no appeal was competent. It was no doubt true that in a case where the admission of the assessee had been wrongly recorded in the assessment order, it was open to the assessee to file a petition for rectification; but if the order was appealable, it was equally open to the assessee to avail of the remedy of appeal and the appellate authority would have to decide the appeal on merits. Nor was it necessary for the assessee to file an affidavit in support of his submissions in all cases. The assessee might choose to file an affidavit in support of his submissions and, if he chose not to file it, the circumstances appearing on the file had to be judged in the light of the material available and if there were sufficient circumstances on the file to come to the conclusion that the admission made by the assessee was not binding on him, he would be entitled to the relief in appeal. With great respect to the learned judges of the Punjab and Haryana High Court who decided Chhat Mull Aggarwal's case [1979] 116 ITR 694, we are unable to agree. Where an assessee has made a statement of facts, he can have no grievance if the taxing authority tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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