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Shri Paresh M. Kariya Versus The ACIT, Cen.

2015 (6) TMI 289 - ITAT MUMBAI

Sale consideration claimed as giving rise to long term capital gains treated as unexplained cash credit u/s.68 by CIT(A)- Held that:- Shares of both the companies, i.e. Shalimar Agro Products Ltd. and G-Tech Info Trading were shown to be held by the assessee in the balance sheet filed with the Department in respect of A.Y 2003-04. There is no material on record to show that the return filed by the assessee showing purchases of these shares in A.Y 2003-04 has ever been disturbed by the Revenue. T .....

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t materially different. Therefore, the impugned transactions in the facts and circumstances of the case are covered by the aforementioned decision of the Tribunal in assessee’s own case in respect of assessment year 2005-06. Respectfully following the said decision of Tribunal given in respect of present assessee with regard to assessment year 2005-06, we are of the opinion that Ld. CIT(A) has committed an error in upholding the addition. - Decided in favour of assessee. - ITA NO.7023/MUM/2010 - .....

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55,98,486/-, claimed as giving rise to long term capital gains, as unexplained cash credit u/s.68. 2. On facts and in circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in confirming the addition of ₹ 2,79,924/- being 5% of the sale consideration of ₹ 55,98,486/- as unexplained expenditure u/s. 69C on account of commission/service charges payable to the broker. 2. The assessee in the present case is part of Kariya Group. A search was conduct .....

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ing artificial/bogus capital gain and, thus, are gaining the entailing benefit of taxation either at lower rate or exemption. In such process, the capital gain shown by the present assessee from the sale of shares of three companies has been treated as unexplained money in possession of the assessee attributable to bogus long time capital gain and an amount of ₹ 81,02,761/- was added to the income of the assessee. 2.1 Further, the AO added a sum of ₹ 4,05,138/- to the aforementioned .....

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sideration Purchase date Purchase cost Mode of paying purchase cost Actual gain Date of credit in Demat A/c. 1. M/s.Robinson WorldwiseTrade Ltd.(also known by the name M/s.Robinson Impex India Ltd. 15000 23.11.04 25.11.04 30.11.04 25,04,275 22.04.03 22,074/- 2482201 2 M/s.Shalimar Agro Product 111750 02.07.03 To 19.03.04 4197361 18.04.02 112500 4084862 3. M/s. G. Tech Info Trading Ltd. 36000 13.10.03 15.10.03 23.10.03 03.11.03 14,01,125/- 13.05.02 45,360 1355765/- 2.2 So far as it relates to obs .....

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carried out any purchase transaction in the said scrip but had merely issued accommodation bills. The AO also during the course of assessment proceedings examined another director namely, Shri Pratik C. Shah on 18/11/2008 and relevant portion of his statement is also reproduced in the assessment order in which he stated that about 4 or 5 years back the said concern had issued certain bills relating to purchase of shares of M/s. Robinson Worldwide Trade Ltd., M/s. Fast Track Entertainment Ltd., a .....

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s issued to the third parties were bogus without any basis or without any transaction. 2.3 In respect of shares of G Tech Info Training Ltd., the AO also summoned Shri Sanjay R. Shah and he was asked to produce the details of transactions relating to sale of shares of G Tech Info Trading Ltd. to the assessee. The said Shri Sanjay R. Shah vide his letter dated 27/11/2008 and 2/12/2008 had denied to have made any transaction with assessee or Kariya Group. It is in these facts, AO considered the sa .....

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and copies of the computerized purchase bills were submitted. It was mentioned that 1,06,500 shares of M/s. Shalimar Agro Products Ltd. were purchased for a consideration of ₹ 85,775/- on 24/04/2002 and such purchase price was adjusted against the total credit balance lying to the assessee s credit on 31/3/2002. It was further mentioned that since the transaction pertained prior to 31/3/2002, the physical records were destroyed. It is in this manner, AO has treated the said transaction als .....

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xtent the addition was duplicate and to that extent Ld. CIT(A) has reduced the addition for the year under consideration. Consequential to that, 5% commission is also reduced which is calculated at ₹ 1,25,214/-. The sustenance of addition by Ld. CIT(A) has been challenged by the assessee in these grounds of appeal. 5. Ld.AR has submitted the synopsis of his arguments, copy of which was also given to Ld.DR. So far as it relates to shares of M/s. Shalimar Agro Products Ltd., the sequence of .....

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ee was adjusted. (iii) M/s. Shalimar Agro Products Ltd. transferred 15,000 shares in the name of the assessee and delivered the share certificates to the assessee on 30-4- 2002 (Pages 49 to 51). (iv) M/s. Shalimar Agro Products Ltd. forwarded an extract of Share Transfer Register and Member Register of the company on 20-06-2007 (pages 52 to 68). Further, the share certificates for 15,000 shares were duly transferred in the name of the assessee. (v) The assessee filed his return of income for the .....

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at Account on 28th May, 2003 (Page 71). (viii) Out of 15,000 shares of ₹ 10/- each, the assessee sold 4,250 shares. Thereafter these shares were split into shares of Re.1/- each on 12th July, 2003. The said shares were sold by the assessee at the Stock Exchange through M/s. Shreenidhi Stock and Broking, the Sub- broker and M/s. Vidyut Devendrakumar which is the main broker registered with the BSE. The details of the sale of these shares are as under: 5.1 It was submitted by Ld. AR that the .....

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ear 2003-04. Those shares were also dematerialized and credited to the Demat account of the assessee and were sold at stock exchange through M/s. Shreenidhi Stock Brokers from time to time and in piecemeal, in the months June 2003 to March 2004 and, therefore, the sale of these shares cannot be disputed or doubted. It was submitted that all these evidences were filed before AO as well as Ld. CIT(A) and no adverse comment has been made against these evidences, therefore, sustenance of disallowanc .....

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G- Tech Info Training Ltd. through Mr. Sanjay R. Shah on 13th May, 2002 for the aggregate consideration of ₹ 45,360/- which was off market transaction (Pages 26 & 27). (b) The aforesaid purchase consideration of ₹ 45,360/- was adjusted against the speculation profit of ₹ 1,49,600/- earned by the assessee and taxed in the hands of the assessee for A.Y. 2003-04. (Pages 28 and 21 & 23) (c) The said shares were delivered to the assessee in physical form with the duly execu .....

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rchase of the said shares for ₹ 45,3601- are reflected. (Pages 24 & 25). (g) The assessee had lodged the aforesaid shares for de- materialisation with M/s. Action Financial Services (India) Ltd. which is registered with NSDL, on 16th July, 2003. The said shares were de- materialised and credited into the Demat account of the assessee on 28th July, 2003 (Page 35). (h) The said shares were sold by the assessee at the Stock Exchange through M/s. Shreenidhi Stock and Broking, the Sub-broke .....

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d the letter before the Assessing Officer disowning the transactions entered into for the assessee for purchase and sale of shares whereby the assessee had earned speculation profits in A.Y. 2003-04 and purchased the shares of M/s. G- Tech Info Training Ltd. The aforesaid request of the assessee has not been acceded to. (Pages 144 & 145) 5.3 It was further submitted that aforementioned sequence of events would prove that the assessee had purchased 36000 shares of M/s .G-Tech Info Training th .....

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assessee on 28/07/2003 and shares were sold by the assessee at stock exchange through M/s. Shreenidhi Stock Broking in the month of October and November, 2003. Therefore, it was submitted that addition in this regard is also required to be deleted. 5.4 It was further submitted that for shares of M/s. Robinson Worldwide Ltd. were treated by the AO in the same manner, as were shares of the aforementioned two companies were treated. However, Ld. CIT(A) found that sale of shares of the company perta .....

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5,04,275/- and brokerage of 5% of ₹ 1,25,215/-. Such addition upheld by Ld. CIT(A) in respect of assessment year 2005-06 was challenged in the appeal filed before Tribunal and Tribunal vide its order dated 30/12/2011 passed in ITA No.790/Mum/2010 has deleted the addition with the following observations: 8. We have considered the rival submissions carefully and find force in the submissions of the Ld. Counsel of the assessee. The ld. CIT(A) has dismissed the appeal of the assessee mainly on .....

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dealer in art pieces, antiques and curios at Bangalore. During the assessment year 1971-72, she claimed that received a total amount of ₹ 3,11,831 by way of race winnings in jackpots and treble events in races at Turf Clubs in Bangalore, Madras and Hyderabad. The said amount was shown by the appellant in the capital account in the books. For the assessment year 1972-73, she claimed receipts of ₹ 93500/- as race winnings in two jackpots at Bangalore and Madras and the said amount was .....

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ring a jackpot occasionally but the claim of the appellant to have won a number of jackpots in three or four seasons not merely at one place but at three different centres, namely, Madras, Bangalore and Hyderabad appears, prima facie, to be wild and contrary to the statistical theories and experience of the frequencies and probabilities. (iii) The appellant's books do not show any drawings on race days or on the immediately preceding days for the purchase of jackpot combination tickets, whic .....

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erest in races from 1972 assumes significance. Winnings in racing became liable to income-tax from April 1, 1972, but one would not give up an activity yielding or likely to yield a large income merely because the income would suffer tax. The position would be different, however, if the claim of winnings in races was false and what were passed off as such winnings really represented the appellant's taxable income from some undisclosed sources. On the above facts it was held as under: Held, d .....

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by the Hon'ble apex court. But in the case of the assessee before us it shows that circumstantial evidence is not so over whelming and rather the documentary evidence clearly proves the transactions. 9. First let us deal with the contentions of the Ld. DR that some papers in the paper book at page nos.42 to 45 were not traceable in the file of the AO. The second allegation vide letter dated 11-11-11 is that the company M/s Robinson Worldwide Trade Ltd is not in existence. Pages 42 and 43 of .....

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s which is placed on records. In the column dealing with annexure K it is stated that various documents are being furnished to prove the genuineness of purchases which includes the transfer form placed at pages 42 and 43 and copy of the share certificate at page 45. This makes it clear that documents were filed before the AO because it has not been denied that letter dated 5-11-08 was filed before the AO. In any case, during the hearing photo copies of 150 certificates issued in the name of the .....

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dwide Trade Ltd were merged and the new name of the company is Sun And Shine Worldwide Ltd. The above extract has been taken on 12-12-2011 which shows that the company is very much in existence even as on today. This is further supported by another extract from M/s. DPS Shares & Securities Pvt. Ltd taken from www.bseindia.com. This extract shows the following information: Outcome of EGM 02-05-2011 18:36 M/s Robinson Worldwide Trade Ltd has informed that the shareholders at the Extra Ordinary .....

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es were traded on 6-9-2011 at ₹ 36.75. This clearly shows that shares of the company are still being traded but under the new name. In the light of these documents, we find no merit in the objection raised in the letter of the DCIT -12, addressed to the CIT DR, which was placed before us. 10. The second important issue on the basis of which the claim of the assessee for capital gain was held to be bogus was the statement of director of M/s. DPS Shares & Securities Pvt. Ltd. The AO has .....

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ruction of Mr.Naresh Saboo and Mr. Shirish C.Shah. Do you agree with the same? Ans. Yes I agree. The bogus bills were issued by .ny company at the instructions of Mr.Naresh Saboo. As these hills were bogus and off market transaction. the physical shares which were given by us to the said Ms..Jigna A.Kariya were received by us from Naresh Sahoo and were forwarded by us to Ms.Jigna .A. Kariya, because these transactions were not on the floor, the said physical shares had not conic from BSE. Hence .....

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led bogus shares were issued on the instructions of Shri Naresh Saboo. Before us it was denied that assessee has anything to do with Shri Naresh Saboo. Neither the AO nor the ld. CIT(A) has brought any material on record to show that Shri Naresh Saboo has some connection with the assessee. Even ld. CIT DR has not placed any evidence to show that Shri Naresh Saboo was acting on behalf of the assessee. Secondly, Shri Pratik Shah in answer to both question Nos.22 & 34 has clearly admitted that .....

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mputation is on pages 22 & 23 of the paper book and this has been accepted by the department. The assessee has also filed the balance sheet in which investment in shares has been shown at ₹ 1,45,06,054/- and in the annexure showing the details of investment in M/s Robinson Worldwide Trade Ltd shares have been included at 15500 shares amounting to ₹ 28810.54. This purchase has to be treated as accepted because this balance sheet was filed in A.Y 2004-05 and no adverse inference ha .....

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of Security Purchase Rate Brokerage Rate Plus Amount Brokerage Net Rate 29926007 0002407 10:22:45 15500 ROBINSON IMP PHY 1.45 0.02 1.47 22785.00 TOTAL: 22785.00 The above particulars would not indicate that it was a bogus transaction. In any case, assessee has no need to know whether the transaction was bogus or not because even invoice has been issued by M/s. DPS Shares & Securities Pvt. Ltd for purchase of these shares, copy of which is placed at page 39 of the paper book and delivery was .....

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at page 46. The demat account statement of the assessee with Action Financial Services (India) Ltd. shows that 15500 shares have been dematerialised. We fail to understand how the shares were actually transferred in physical form and later on dematerialised and how this whole process can be called bogus. This cannot be called bogus unless the connivance of M/s Robinson Worldwide Trade Ltd and Action Financial Services (India) Ltd. is also alleged and proved. But no enquiry seems to have been co .....

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sessee has proved the purchases as well as the sales transactions. The shares have been sold through BSE and it is not alleged that these transactions are also off market. All these facts clearly prove that the transactions are genuine and the same cannot be doubted unless and untill the other participants like depository known as Action Financial Services (India) Ltd. is also proved to be bogus or in connivance with the Penny Stock scam and even the sale conducted through Anugrah Stock and Brok .....

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should be assessed under the head capital gains. (emphasis by us) 5.5 It was submitted that addition upheld by Ld. CIT(A) in the present year are at par with the additions considered by the Tribunal in respect of A.Y.2005-06 and thus, the issue regarding addition of these shares is covered by aforementioned decision of Tribunal in asssessee s own case for A.Y 2005-06 by the aforementioned order. 5.6 It was further submitted that according to the decision of Tribunal in the case of Mukesh R. Maro .....

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entered into between parties outside their floors. Therefore, reliance placed by AO on the communications received from the stock exchanges that the particular share transactions entered into by the assessee were not available in their record will be out of place. 5.6 Ld. AR also placed reliance on the decision in the case of Pushpa R. Shah vs. ITO in ITA No.2669/Mum/2006 for assessment year 2002-03 and Remesh G. Shah vs. ITO, ITA No.2670/Mum/2006 for assessment year 2002-03 order dated 29/07/2 .....

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submitted by Ld. DR that assessee could not substantiate the purchase of the shares and since purchase of the shares could not be substantiated, the later sale thereof cannot be considered to be genuine. It was submitted that shares were shown to be purchased for a very low consideration and sold at a higher rate. Thus, all it was an arrangement just to introduce assessee on-money in the shape of sale consideration of the shares. He submitted that according to the facts of the case, Ld. CIT(A) h .....

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ating to a sum of ₹ 1,12,500/-and evidence relating to such purchase is filed at page 47 of the paper book. As per evidence filed at page 48 of the paper book, the assessee as on 1/4/2002 was having credit balance of ₹ 1,19,432/-. Against the said outstanding credit balance an amount of ₹ 1,12,500/- has been debited on account of purchase price of 15000 shares of Shalimar Agro Products and thus, even after the purchase of those shares the credit balance of the assessee with Shr .....

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mber Register of the company was granted, copy of which has been filed at page 53 to 68 of the paper book. At page 69 to 70, copy of form of Demat is filed which is dated 5/5/2003 vide which assessee had submitted Demat of the shares of Shalimar Agro Products Ltd.and at pages 71 to 140, the details of sales of these shares are filed. At page 24 the balance sheet of the assessee as on 31/3/2003 is filed, wherein total investment is shown at ₹ 8,32,213.24. The schedule of which is filed at p .....

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the Department in respect of A.Y 2003-04, shares of Shalimar Agro Products Ltd. were also outstanding and quantity thereof was also mentioned. 7.2 Similarly, in respect of shares of G-Tech Info Trading the purchase voucher is placed at page 20 & 27 of the paper book. 36000 shares were purchased for a sum of ₹ 45,360/- and the said purchase price was adjusted against profit shown by the assessee in the return of income at ₹ 1,49,600/-, copy of which is placed at page 21 of the pa .....

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Training Ltd. have been duly transferred in the name of the assessee and certificate numbers have also been mentioned along with folio number. Later on, jumbo certificate was issued by G-Tech Info Training Ltd. vide letter dated 22/4/2003 vide certificate No.20245, and copy of this letter is filed at page -31 of the paper book and on page 32, copy of jumbo certificate has been filed. These shares were dematerialized as per evidence filed in the share of deposit form with the depository namely Ac .....

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