TMI Blog2014 (5) TMI 881X X X X Extracts X X X X X X X X Extracts X X X X ..... nel and that any sale of the shares was not possible through demat account, if the shares were not listed in some stock exchange. The assessee was having proper demat account and sold the shares which were listed in the Madhya Pradesh Stock Exchange, the sale proceed received by the assessee through bank channel was not doubted by the AO - The purchase of the shares was through a broker and nothing is brought on record to substantiate that the said broker was not in existence at the relevant time when the purchases were made - the transactions entered into by the assessee was a genuine transaction and as the shares were purchased on 04/04/2003, which were sold on 10/06/2004, the holding period of the shares was more than 12 months as such the profit earned by the assessee on account of sale of shares, which were held for more than 12 months was long term capital gain – there was no infirmity in the order of the CIT(A) on the issue. CIT(A) has stated that the brokerage was deducted from the share consideration by the broker and only balance amount was paid to the assessee through demand draft - The observation of the CIT(A) was not rebutted - the CIT(A) has rightly deleted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by the Assessing Officer on account of non-genuineness of long term capital gain while ground No.3 is co-related to grounds No. 1 2 and relates to the alleged commission paid for arranging the capital gain. 5. Facts of the case, in brief, are that the assessee filed return of income on 30/07/2005 and revised the same on 03/10/2005 showing income of Rs. 17,28,388/- including long term capital gain of Rs. 15,69,618/-, which was processed. Later on, a survey under section 133A of the I.T. Act, 1961 (hereinafter referred to "Act", in short) was conducted in Bapu group of cases and certain loose papers were found, which were impounded. According to Assessing Officer, those loose papers revealed that assessee was indulged in arranging bogus capital gains during the assessment year under consideration. The Assessing Officer noticed that the assessee had declared sale consideration of Rs. 16,44,055/- and from this sale, a sum of Rs. 70,919/- was reduced as cost of acquisition and Rs. 3,318/- as bank commission and other charges. The Assessing Officer also observed that page 43 of the Annexure B-21 shows that the figures recorded on the paper were different and the due proportion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase of sale were not genuine at all. As regards to the position of M/s. M.V. Associates, through which the payment in cash was made, the Assessing Officer observed that as per spot verification by the Inspector, no such company was in existence on the given address. The Assessing Officer also observed that the notice under section 133(6) of the Act issued to M/s. Suma Finance Investment returned by the postal authorities with the remark "left", he, therefore was of the view that the transactions were bogus and were nothing but an accommodation entry in the form of long term capital gain. The Assessing Officer asked the assessee to show-cause as to why the sale consideration of Rs. 15,69,818/- may not be taxed under section 68 of the Act as unexplained cash credits. In response to it, the assessee submitted that he had correctly purchased shares of aforesaid company through the said broker in the year 2003-04 and the relevant documents had already been provided. It was further stated that the assessee was not having the contact with the said company, which might have changed or may not exist at present. The Assessing Officer did not accept the submissions of the assessee by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n para 3.2 of the impugned order, which are reproduced verbatim as under:- "4.1. During the year under appeal, the appellant has declared the long term capital gain of Rs. 15,69,818/- on sale of 17,500 equity shares of Suma Finance and Investment Ltd in her return of income filed on dated 03-10- 2005 The copy of return of income is enclosed herewith. 4.2. The assessing officer has disallowed the long term capital gain claimed by the appellant and made the disallowance of long term capital gain on sale of equity shares of Rs,15,69,818/- as unexplained cash credit under section 68 of the Act doubting the genuineness of equity share transactions carried out by the appellant resulting the long term capital gain during the year under appeal. 4.3. The appellant very respectfully submits that she has purchased 17,500 equity shares on dated 04-04-2003 of M/s Suma Finance and Investment Ltd. ("the company") for Rs. 70,919/- through M/s Krishna Stock Broking Company Limited, 34, Rashid Market, Delhi -110051 ("the broker"). 4.4. The appellant states the other relevant details of the above equity shares as under: S.No. Contract Date of Quantity Rate per Amount note/purchase purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 4.14. Thereafter the appellant has dematerialized the above equity shares with J K Bank depository Services of Jammu Kashmir Bank Ltd. G-40, Connaught place, New Delhi 110001 (DP ID No lN 302349 under Client lD N0.10221172) under dematerialization process, The copy of the statement of share holding with share depository is enclosed herewith. 4.15. The appellant has sold 17,500 equity shares on dated 10-06-2004 at the rate of Rs. 94 per share through her broker vide sale contract and sale bill number P-00-0146 dated 12-06-2004. The copy of contract note and sale bill is enclosed herewith. 4.16. The appellant states the other relevant details of the sales of above equity shares as under: S.No. Contract note/ Date of sale Quantity Rate Amount sale Bill No. of shares of shares per (Rs.) sold share 1 P-06-0146 10/06/2004 17500 Rs. 94/- 16,45,000 2 Less: Brokerage 875 3 Less: Service Tax 70 4 Total realization 16,44,055 of shares sold 4.17. Thus, the appellant has sold his total equity shares through her broker for Rs. 16,44,055/-after deduction of brokerage and service tax. The copies of contract note and sale bill No. P-06-0140 dated 12-06-2004 is enclosed herewith. 4.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2009) 121 TTJ 695 (Kol) ITO Vs Smt. Bibi Rani Bansal (2010) 133 TTJ 394 (Agra) (TM) Smt. Sunita Oberoi Vs Income Tax Officer (2009) 126 TTJ 745 (Agra)(TM) 4.22. In the present case, the appellant had furnished all the cogent and concrete evidences of definite legal character to establish the genuineness of the shares transaction carried out by the appellant. 4.23. The appellant very respectfully states that he has correctly claimed the long term capital gain of Rs. 15,69,818/- on sale of shares in her return and made the payment of due taxes thereon, therefore the disallowances of capital gain of Rs. 15,69,818/- is unwarranted and unsustainable on the facts and circumstances of the case and liable to be deleted. 4.24. The appellant very respectfully further submits that the assessing officer has treated the amount of long term capital gain of Rs. 15,69,818/- as unexplained cash credit under section 68 of the Act. 4.25. Section 68 of the Act provides that where any sum is found in the books of accounts of the assessee maintained for any previous year, and the assessee offers no explanation about the nature and source of thereof or the explanation offered by him is not, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant had satisfactorily explained the nature and source of the amount of sale consideration received by her from sale of shares furnishing all the cogent and concrete evidences of definite legal character and, therefore, the addition of capital gain of shares of Rs. 15,69,818/- made by the Assessing officer treating the same as unexplained cash credit is unwarranted and liable to be deleted. 4.33. Thus, the appellant has discharged her primary onus cast upon her by furnishing all information and the above documents to the assessing officer. CIT Vs. Orissa Corporation (P) Ltd., (1986) 159 ITR 78 (SC) Nemi Chand Kothari Vs. CIT (2003)264 ITR 254 (Gau) 4.34. The assessing officer miserably failed to discharge the onus cast upon him to prove that the documents and other evidences submitted by tne appellant relating to the share transactions are totally false and bogus and therefore the long term capital gain claimed by the appellant is genuine and the addition of sale consideration under section 68 of the Act as unexplained cash credit is totally incorrect and patently erroneous and the same is liable to be deleted. 4.35. The assessing officer has observed that he has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er has to see, whether the sale has been affected or not as per the documents and as per the acceptance and admission of the respective brokers. Our reliance has been placed on the following judicial decision: Acchyalal Shaw Vs lTO (2009) 121 TTJ 695 (Kol) 4.44. The appellant having shown the -capital gain from sale of shares in off market transaction which transactions were confirmed by the share broker, and therefore, the assessing officer is not justified in making addition of the amount of capital gain under section 68 of the Act mere on suspicion and enquiry from stock exchange. 4.45. The assessing officer further observed that the information under section 133(6) were called from M/s Suma Finance and Investment Ltd. and his authorized signatories of the company, but the same was returned back 'Left' by the postal authorities. 4.46. The appellant very humbly submits that the mere fact that the notice under section 133(6) were returned back with the remark 'Left' could not lead to the conclusion that above parties are not in existence. 4.47. The appellant has placed the various documents sent to the appellant relating to the share transactions, which clearly proves th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... traveled from the appellant to the other agencies. 4.58. In the absence of any concrete and tangible evidence of definite legal character to substantiate his above allegations the share transactions of the appellant cannot be treated as sham transactions carried out by the appellant with unaccounted money. Therefore, the. 4.59. disallowance of capital gain and addition of long term capital gain of Rs. 15,69,818/- as unexplained cash credit under section 68 of the Act is unwarranted and unsustainable in law as well as on the facts of the case and the same is liable to be deleted. 4.60. The appellant very humbly request that she has made the genuine transactions and correctly claimed the long term capital gain on shares and, therefore, the disallowance of capital gain and addition of cash credit of Rs. 15,69,818/- made by the assessing officer is unwarranted and unsustainable in law as well as on the facts and circumstances of the case. 4.61. All other observations, findings and/or allegations made by the assessing officer and inferences and conclusions drawn by him on the basis of such findings are totally incorrect, arbitrary, and fictitious and based on mere assumptions a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 69,818/- made by the assessing officer is unwarranted and unsustainable in law as well as on the facts and circumstances of the case. 4.67. In view of the foregoing grounds of defence, the appellant very humbly prays that the disallowance of capital gain and addition of cash credit by Rs. 15,69,818/- made by the assessing officer may kindly be deleted. 8. Apart from the above submissions, the assessee filed an application under Rule 46A of the I.T. Rules 1962 (hereinafter referred to as "Rules", in short) enclosing therewith statement of demat of shares of J K Bank Depository Services, list of share trading quotations, Madhya Pradesh Stock Exchange, certificate of Registrar of Companies, Haryana for change of company's name in the above and had claimed that those additional evidences could not be submitted before the Assessing Officer because the same were not available with the assessee. The learned CIT(A) sent the documents furnished by the assessee under section 46A of the Rules to the Assessing Officer for his comments on the admissibility and merit of the evidences and the Assessing Officer vide letter No. 1846 dated 31/12/2012 submitted his report as under:- "In the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions generating the actual long term capital gain in the hands of the appellant. 4. For the sake of brevity, all these detailed submissions are not being reiterated here but they should be treated as part and parcel of these submissions in response to the remand report. 5. In the preset case the appellant has filed the statement of demat of shares of J K Bank Depository Services, list of share trading quotations Madhy Pradesh stock Exchange, certificate of Registrar of Company's Hariyana for change of company's name as an additional evidences in the above appeal. 6. The appellant could not produced the additional evidences before the assessing officer as the same could not be available with the appellant during the course of assessment proceedings despite of her all efforts. 7. Thus, the appellant was prevented by sufficient cause from producing the above additional evidences before the assessing officer, which are very much relevant to grounds of appeal. 8. It is prima facie clear that the appellant has bona fide reasons for non filing of these evidences and documents filed are related to the root of the matter and necessary to examine the claim of the appellant. 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Learned CIT(A) after considering the submissions of the assessee and the remand report of the Assessing Officer observed that the assessee sold 17500 equity shares of M/s. Suma Finance Investment Ltd. and declared capital gain at Rs. 15,69,818/- against the sale proceeds of Rs. 16,44,055/-. He further observed that in the details furnished during the appeal proceedings as additional evidences, which were forwarded to the Assessing Officer, the assessee had filed complete details of the transactions of the shares like statement of demat account, list of shares trading, quotations of Madhya Pradesh Stock Exchange, certificate of Registrar of Companies etc., which revealed that the share transactions were not bogus. He further observed that the substantive part of the issue of dispute had been proved beyond doubt by the assessee and it was not the case of the Assessing Officer that the assessee had not made any purchase of shares because papers relating to the purchase of shares were found and impounded during the course of survey operations at the business premises of assessee's group, therefore, it cannot be said that the sale proceeds declared by the assessee on account of share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es were issued on dated 25/07/2003 which clearly proves that shares were held by the appellant less than 12 months, hence the same does not fall under the purview of the long term capital gain and required to be taxed as short term capital gain. 4.36. The appellant very respectfully submits that she has purchased 17,500 equity shares on dated 04-04-2003 of M/s Suma Finance and Investment Ltd, for Rs. 70,919/- vide bill number S-04-0129 from the broker. 4.37. M/S Suma Finance and Investment Ltd. has also sent the original share certificates to the appellant duly transferred in her name along with its letter dated 30-04-2003. 4.38. Thereafter M/s Suma Finance and Investment Limited have consolidated equity share certificates bearing numbers 12483 to 12577 into one share certificate of 17500 shares and issued the same on dated25-07- 2003. 4.39. Factually, the appellant had purchased the shares on dated 04-04- 2003 and sold them on dated 10-06-2004, which covers the period of holding of shares for more than 12 months. 4.40. lt is very humbly further submitted that the period of 12 months is recognized from the date of purchase of shares in the name of the buyer and not from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s purpose, the assessing officer has relied on the loose papers page 43 of annexure B-21 impounded during the course of survey. 5.3. The assessing officer has presumed that the appellant might have paid the estimated commission/brokerage of Rs.60,651/- (around at the rate of 4%) to the broker for getting the accommodation entry of long term capital gain. 5.4. The assessing officer has also observed that the appellant has not disclosed the payment of estimated commission/brokerage in his books of accounts and, therefore, he added the same to the returned income of the appellant assuming that the payment of alleged commission/brokerage has been made out of undisclosed income of the appellant. 5.5. The appellant very respectfully submits that loose paper is neither books of accounts nor document under section 34 of the Evidence Act, 1988 having no evidentiary value without corroborating the contents of such loose paper by any tangible and positive evidence of definite legal character. 5.6. Mere noting on, the loose papers without any corroborative and positive evidence, no inference and conclusion can be drawn by the assessing officer that the appellant had made the payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om his broker on payment of commission/brokerage of Rs Rs.60,651/- in cash out of undisclosed income are totally incorrect, arbitrary, fictitious and based on mere assumptions and presumptions, surmises and conjectures, pure guess, doubts, suspicion, irrelevant and extraneous considerations and hypothetical as well as imaginary grounds. 5.16. It is well settled position of law that the assessing officer can not made the addition/disallowance of income/expenses on mere assumption and presumption, pure guess, doubts and suspicion and estimates. Reliance has been placed on the following judicial decisions for this purpose: Dhakeswari Cotton Mills Ltd., Vs. CIT (1954) 26 ITR 775 (SC) Dhiraj Lal Girdhari Lal Vs. CIT (1954) 26 ITR 726 (SC) Lal Chand Bhagat Ambika Ram Vs. CIT (1959) 37 ITR 288 (SC) Omar Salay Mohammed said Vs. CIT (1959) 37 ITR 151 (SC) 5.17. lt is further very respectfully submitted that the addition and/or disallowances of income made on the basis of mere presumption or estimate, however, strong and well founded it may be, can not sustained in the eye of law and by itself would not take the place of evidence and constitute material for holding the validity of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, learned CIT(A) forwarded those additional evidences to the Assessing Officer for his comment. Additional evidences furnished by the assessee were examined by the learned CIT(A), who also considered the remand report of the Assessing Officer and categorically stated that the assessee furnished complete details of the transactions of the shares i.e statement of demat account, list of share trading, quotations of Madhya Pradesh Stock Exchange, certificate of Registrar of Companies, which clearly proved that the assessee entered into the transaction, having demat account No. 10221172 with J K Bank Depository of J K Bank Ltd., Gurgeon (Haryana) and the sale of the shares of M/s Suma Finance Investment Ltd., which were listed with Madhya Pradesh Stock Exchange was affected to demat account. Learned CIT(A) also verified that the sales proceeds had been received through banking channel and that any sale of the shares was not possible through demat account, if the shares were not listed in some stock exchange. In the present case, the assessee was having proper demat account and sold the shares which were listed in the Madhya Pradesh Stock Exchange, the sale proceed received b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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