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2015 (3) TMI 801 - ITAT LUCKNOW

2015 (3) TMI 801 - ITAT LUCKNOW - TMI - Validity of reopening of assessment - validity of reasons recorded - Held that:- As per the reason to believe for reopening, it is noted by the Assessing Officer that in the information forwarded by Addl. DIT (Inv.), Meerut to the Investigation Wing, Lucknow, it was stated that M/s H. B. Relan & Co., Karol Bagh, Delhi was providing accommodation entries of short term / long term capital gain in lieu of cash received from intending beneficiaries and Smt. Ma .....

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(Inv.), Meerut to the Investigation Wing, Lucknow but further enquiries were made and it was noted by Assessing Officer that the assessee has made purchases of these shares during 03/09/99 to 04/10/99 at a cost of ₹ 3,37,445/- and these shares were sold during 11/09/2000 to 30/11/2000 at a hefty sale consideration of ₹ 48,41,763/- within a period of 13 months from the date of purchase. Enquiries were made from various stock exchanges and also from the brokers before initiating the as .....

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aim of long term capital gain cannot be rejected by the Revenue without bringing adverse material on record and merely on the basis of some statement of some broker. The theory of human probability is also not attracted in the present case because this is noted that the assessee is engaged in the speculation transactions in share also and therefore, the judgment of Hon'ble Apex Court in the case of CIT v. DURGA PRASADMORE [1971 (8) TMI 17 - SUPREME Court] and SUMATI DAYAL v. CIT [1995 (3) TM .....

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A.M. This is assessee s appeal directed against the order passed by learned CIT(A)-II, Lucknow dated 27/08/2010 for the assessment year 2001-2002. 2. Ground Nos. 1,2 & 3 are inter-connected regarding validity of reopening, which are as under: 1. BECAUSE the proceedings under section 147 as initiated vide notice dated 06.12.2005 under section 148 have neither been validly initiated nor concluded in accordance with the provisions of law and as such the assessment order dated 28.12.2006 passed .....

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entire proceedings based on such "reasons recorded" are bad in law. 3. BECAUSE the enquiry report from investigation wing cannot be said to constitute relevant material or information for the purpose of initiation of proceedings under section 147 and as such the entire proceedings based on such information or enquiry report are bad in law and therefore the Ld. "CIT(A)" could not have sustained the proceedings under section 147 on the basis of such report or information. 3. Le .....

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ficer had rightly initiated the proceedings under section 147 by issuing the notice under section 148 of the Income-tax Act, 1961 and in case the assessee was not satisfied, she had the option of filing a Writ Petition which she did before the Hon'ble Allahabad High Court who did not grant any relief to the assessee. As the Assessing Officer had valid reasons to initiate the reassessment proceedings, and the notice under section 148 of the Income-tax Act, 1961 has not been quashed nor the pr .....

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le High Court. Hence, the orders of the authorities below on the validity of reopening proceedings have merged with the judgment of Hon'ble Allahabad High Court and therefore, we cannot interfere in the orders of the authorities below on this issue. Moreover, as per the reason to believe for reopening, available on pages 38 to 39 of the paper book, it is noted by the Assessing Officer that in the information forwarded by Addl. DIT (Inv.), Meerut to the Investigation Wing, Lucknow, it was sta .....

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ere not corroborated with the information provided by the assessee. From these reasons, it is apparent that the Assessing Officer has not merely acted upon the information provided by Addl. DIT (Inv.), Meerut to the Investigation Wing, Lucknow but further enquiries were made and it was noted by Assessing Officer that the assessee has made purchases of these shares during 03/09/99 to 04/10/99 at a cost of ₹ 3,37,445/- and these shares were sold during 11/09/2000 to 30/11/2000 at a hefty sal .....

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763/- realized on sale of shares. These grounds are as under: 4. BECAUSE the appellant had duly disclosed the full particulars of income, including income under the head "Long Term Capital Gain", by disclosing not only the date and cost of acquisition of shares but also relevant material for sale of shares along with the return filed on 31.07.2001, and therefore, on perusal of such relevant facts given in the return of income, it cannot be said that the Assessing Officer could have com .....

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tion 14,76,000.00 Less:(i)Brokerage 7380.00 (ii)Service Tax 369.00 7,749.00 SUB TOTAL 14,68,251.00 (B) M/s Renu Poddar Registered with Kolkata Stock Exchange Sale consideration 4,65,000.00 Less:Brokerage & service tax 1000.00 1,000.00 SUB TOTAL 4,64,000.00 (C) M/s Renu Poddar Registered with Kolkata Stock Exchange Sale consideration 7,50,000.00 Less:Brokerage & service tax 1500.00 1,500.00 SUB TOTAL 7,48,500.00 (D) M/s H.B. Relan & Co.registered with Delhi stock exchange Sale conside .....

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ncome, and without disputing the date and cost of acquisition of shares, the Ld. CIT(A) as well as Assessing Officer, could not have disputed the sale of such shares during the relevant Assessment Year (2001-02) and as such taxing the entire sale proceeds under the head "income from other sources" in the impugned assessment year 2001-02 is wholly erroneous not only in law but also on facts. 7. BECAUSE the Ld. CIT(A) has erred in law and on facts in not appreciating the appellant's .....

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share certificates and allotment letter giving distinctive numbers of shares as issued by the concerned company; (f) report of listing of shares in respective stock exchanges. and therefore, the contrary view taken by the CIT(A) for sustaining the additions without rebutting the above documents and information is wholly vitiated. 8. BECAUSE the Ld. CIT(A) as well as Assessing Officer have disbelieved the appellant's version of nature and source of credits, which were by way of sale of shares .....

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addition of ₹ 48,47,763/- is based on irrelevant consideration, surmises and presumptions without, rebutting the evidences and documents placed by the appellant on record and without confronting the documents alleged to have been supplied by third parties and therefore, such an addition deserves to be deleted. 10. BECAUSE the appellant had already offered for taxation, the resultant capital gain of ₹ 9,24,319/- and any income over and above the same could not have been subjected to a .....

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urnished on 05/02/2015 and the same are reproduced below for the sake of ready reference:- As per the information made available by the Bench Secretary in terms of the order sheet entry dated 15.12.2014, the above mentioned appeal is re-fixed for hearing on 05.02.2015, as 'part heard', for the following clarifications "Certain clarifications are required, i.e. whether the shares are quoted. If quoted, quotation on date of purchase & sale. If not quoted, book value on date of pur .....

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0,48,817 2 (a)Unometal Ltd. 15,000 23.08.99 1,25,250 17.10.00 7.48,500 10,87,250 (b)Unometal Ltd. 10,000 18.10.00 4,64,000 3 B.T. Technet Ltd. 10,000 04.10.99 1,00,000 30.11.00 14,68,251 13,68,251 3,37,445 48,41,763 45,04,318 Deduct 45,04,319 Relief under section 54EC on account of Investment in NABARD (to the extent of investment made in the Capital Gain bonds. 35,80,000 Total Capital Gain 9,24,319 4. It is stated that all the three companies whose shares were purchased and sold by the assessee .....

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pany on 03.06.1999. The shares were purchased though M/s. S.K. Financial Services, a broker duly registered with SEBI. Various evidences in support of transactions of purchase and sale of shares have been placed at pages 69 to 77 of the paper book filed before the Hon'ble Bench on 30.11.2011. The assessee had sold these shares on 05.09.2000 @ ₹ 114/- per share as per contract note dated 05.09.2000 issued by H.B. Relan & Co., a broker duly registered with SEBI. The copy of contract .....

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wever, copy of contract note dated 02.06.1999 issued by S.K. Financial Services, (appearing at page no.69), copy of sale bill cum delivery letter no. S3-26 dated 03.06.1999 issued by S.K. Financial Services showing distinctive number of shares (copy placed at page no.70), copy of statement of accounts issued by S.K. Financial Services (copy placed at page no.71) all go to fully substantiate the purchase transaction of 19,000 shares @Rs.5.80 per share. 8. Not-with-standing the aforesaid, it is st .....

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ares of Parnami Habitat Developers Ltd. went down which is a very normal feature in this resume of business, and on 02.06.1999, the shares became available at ₹ 5.80 per share. UNOMETALS LTD. 9. As per details given in the table below Para 3 above, the assessee had purchased 25,000 shares of Unometals Ltd. on 23.08.1999 @ ₹ 5.00 per share, through M/s. D.B. & Co., a broker duly registered with SEBI. The copy of contract note issued by D.B. & Co. is placed at page 101 of the p .....

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0 shares were sold on 18.10.2000 @ 46.50 per share. Various documentary evidences in support of purchase and sale transactions are placed at page 99 to 114 of the paper book. 11. Copy of official quotation of Calcutta Stock Exchange of 24.08.1999 (shares were purchased by the assessee on 23.08.1999) is placed at page no. 105 to 106 and copy of official quotation of 18.10.2000 (shares were sold by the assessee on 17.10.2000 and 18.10.2000) is placed at page 110 to 113 of the paper book. B.T.TECHN .....

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the company through demand draft issued by State Bank of India on 06.01.2000 by debiting assessee's bank account no. 4280. Copy of demand draft requisition dated 08.09.1999 for ₹ 25,000/-, copy of demand draft no. 045485 dated 08.09.1999 for ₹ 25,000/-, copy of share application form no. 2503, copy of allotment letter dated 04.10.1999 issued by the company, copy of share certificate delivery letter dated 04.10.1999, issued by the company's Registrar and Transfer Agents and co .....

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were sold by the assessee on 23.11.2000 @ ₹ 147/- per share and remaining 2000 shares were sold by the assessee on 24.11.2000 @ Rs. ISO/- per share, through Dileep Kumar Bhandari, a stock broker duly registered with SEBI and Member of M.P. Stock Exchange, Indore. In support of sale of shares on behalf of the assessee, the broker Dileep Kumar Bhandari had issued contract notes, sale bills and account statement. The payments were received by the assessee through demand drafts, as per partic .....

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rovided to the assessee, a copy of letter dated 03.05.2005 from M.P. Stock Exchange who have confirmed the quotation of ₹ 147/- per share on 23.11.2000 and ₹ 150/- per share on 24.11.2000. Copy of M.P. Stock Exchange's letter dated 03.05.2005 along with enclosure containing the quotation particulars of 23.11.2000 and 24.11.2000 is enclosed as ANNEXURE- VI hereto. 16. It is worthy of mention here that the transactions are supported by the 'contract notes' and at no stage t .....

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of genuineness of the transactions can be relied upon or not. Such an issue came up before the ITAT in DCIT v. SMT. PHOOLWATI DEVI [2009] 314 ITR (AT) 1 [ITAT Delhi Bench] in the context of Section 68 it is observed that section 68 of the Income-tax Act, 1961, refers to amounts credited in the books of account of the assessee but it is not exhaustive of the additions that can be made by the Assessing Officer, Where it is seen that the assessee is in receipt of monies, then notwithstanding that .....

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icially, the evidence could not be accepted in view of the surrounding circumstances and human probabilities. There were certain features of the case, which belie the documentary evidence. Firstly, the loans were used by the assessee for a period of three and half years but did not carry any interest. Secondly, in all the cases, the issue of draft in favour of the assessee from the bank accounts of the creditors was preceded by an equivalent or almost equivalent amount of cash deposit in the ban .....

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did not prove that the monies actually belonged to them. Therefore, considering the circumstances and applying the test of human probabilities it could not be held that the assessee had taken a genuine loan. The decisions in CIT v. DURGA PRASADMORE [1971] 82 ITR 540 (SC) and SUMATI DAYAL v. CIT [1995]214 ITR 801 (SC) were applied. The ratios of 82 ITR 540 (SC) and 214 ITR 801 (SC) are applicable to the facts of the case as the assessee, who had no previous history of either dealing in shares no .....

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income shown under the head long term capital gains as income from other sources and the view of the Assessing Officer is hereby confirmed. The payment of service tax does not make the transactions genuine. Thus, the grounds of appeal no. 7 to 10 and 12 are hereby rejected. 8.1 From the above Para from the order of CIT(A), we find that his decision is merely by following the decision of Hon'ble Apex Court rendered in the case of CIT vs. Durga Prasad More [1971] 82 ITR 540 (SC) and in the cas .....

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and before the CIT(A) and before the Tribunal in the form of contract notes issued by share brokers along with the quotation of stock exchanges and the receipt of cheque and payment by cheque for these sales and purchase of shares etc., it cannot be stated by the CIT(A) that the transactions are bogus. Regarding this allegation that the assessee has no previous history of dealing in share, we would like to observe that the computation of income of the assessee is available on pages 19 to 20 of t .....

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ssions of Learned A.R. of the assessee, as reproduced above, the assessee has furnished the official quotation of various stock exchanges regarding purchase and sale of these shares. Regarding Parnami Habitat Developers Ltd., the assessee has furnished official quotation of M.P. Stock Exchange as on 05/09/2000, which is available on page No. 77 of the paper book and as per the same, official quotation is shown at ₹ 114/- per share. The assessee has shown sale of these shares on 05/09/2000 .....

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000 shares were sold on 18/10/2000 @Rs.40/- per share. The assessee has also furnished the copy of Calcutta Stock Exchange on 24/08/99 and the shares were purchased by the assessee on 23/08/2000 available on pages 105 to 106 of the paper book. Regarding the quotation on the date of sale of these shares, it has been submitted that official quotation of 17 & 18/10/2000 is available on pages 110 to 113 of the paper book and the shares were sold on 17/08/2000. Regarding the third share of B.T. T .....

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s were sold on 23/11/2000 @Rs.147/- per share and the remaining 2000 shares were sold by the assessee on 24/11/2000 @Rs.150/- per share. Regarding official quotation of these shares, it has been submitted by the assessee that the Assessing Officer had himself provided to the assessee, a copy of letter dated 03/05/2005 from M. P. Stock Exchange who have confirmed the quotation of ₹ 147/- per share on 23/11/2000 and ₹ 150/- per share on 24/11/2000. Copy of M.P. Stock Exchange letter da .....

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ayment for purchase of shares has been made by cheques and sale proceeds were realized by cheque and the purchase and sale prices are supported by official quotation of stock exchange or by preferential allotment by company in one case and no positive adverse material has been brought on record by the Assessing Officer except the statement of some broker contending that he is providing accommodation entries, it cannot be said that the claim of the assessee is liable to be rejected. 10. Reliance .....

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ncome. In that case, the decision of the Tribunal is as per Para 11 of the Tribunal order, which is available on page 134 of the paper book and is reproduced below for the sake of ready reference:- 11. There is no doubt in such cases, the brokers become the witnesses of the department. The department has got statements of these brokers which are used against the assessee. Irrespective of the fact that the statements were recorded at the back of the assessee and that the assessee was or was not a .....

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e apparent has to be treated as real unless proved otherwise. Long ago Hon'ble Supreme Court has laid this law while rendering the celebrated decision in the case CIT Vs. Daulat Ram Rawatmal [1964] 53 ITR 574 (SC). The assessee has countered the statements of brokers by way of his duly sworn-in affidavit. We have examined the entire evidences placed in the paper book of the assessee. 10.1 From the above Para of the Tribunal decision, it is seen that it was held by the Tribunal in that case t .....

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