TMI Blog2012 (10) TMI 1034X X X X Extracts X X X X X X X X Extracts X X X X ..... of the shares sold and the shares purchased are the same. Therefore, we, in the interest of justice, deem it proper to restore the issue to the file of the AO with the direction to give an opportunity to the assessee to substantiate with evidence to his satisfaction that the assessee has infact sent the consolidated share certificates to the respective companies for splitting and the distinctive numbers of such splitted share certificates which has gone to the DMAT account and subsequently sold are same. We accordingly restore the issue to the file of the AO for deciding the issue afresh in the light of our above observations and in accordance with law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes. - ITA No. 659/PN/2011. 651 to 657, 662, 663, 665, 675, 666, 667, 669, 670, 672, 673, 674, 676, 677, 678, 679, 644, & ITA No. 723/PN/2011 - - - Dated:- 31-10-2012 - Shri Shailendra Kumar Yadav, Judicial Member and Shri R.K. Panda, Accountant Member For the Appellant: Sri Neelesh Khandelwal For the Respondent: Sri V. Anandarajan, CIT Ms. Ann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are also in line with the evidences emanating from the material seized/impounded. Since the assessee group as a whole has systematically created documents/correspondences in order to give colour of genuine long term capital gains to otherwise fake transactions involving purchase and sale of various shares, and since the evidences found are inter related and throw light on the modus operandi adopted, the AO covering the overall scheme of things discussed thoroughly the modus operandi adopted by the assessee for purchase and sale of the shares and came to the conclusion that the assessee has shown long term capital gain which is beneficial to him since there was nil tax or tax @10% on long term capital gain. 4. The AO noted that the assessee has purchased 15000 shares of Silicon Valley Technologies Ltd. @ ₹ 58.65 per share and sold these @ ₹ 330/- per share. The shares have been purchased from Barkha investments which was located at Patna. The assessee could not give any reasons for purchasing shares at Patna which has Magadh stock exchange and where the assessee had no links. SriMoti U. Panjabi could not provide any details regarding contact persons in M/s.Barkha I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Ltd. 6. In the case of Havemore Co. Ltd. the AO noted that shares of this company have been purchased from Vijay Bhagwandas Co. He observed that floppies and CDs seized during search on the Panjabi group provided clear evidence of fabrication of records to give the colour of genuineness to the transaction in respect of these shares. The broker through whom purchase is claimed to have been made namely, M/s. Vijay Bhagwandas Co. was declared a defaulter and was banned from doing any share transaction at BSE. As in other cases, distinctive numbers, share certificate numbers of the shares purchased, date of taking delivery, etc. were not provided by the assessee and no correlation between shares claimed to have been purchased and sold could be established by the assessee. M/s. Havemore Finance Ltd. fits the profile of a typical penny stock . It has no standing in the market. The AO accordingly disbelieved the transactions as genuine. 7. In the case of Media Matrix Ltd. the AO noted that the assessee group has purchased 9600 shares of Media Matrix Ltd. from Mohit securities in July 2001 @ ₹ 59.11 to ₹ 60.51 per share. These shares have been steadily sold @ 47.50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell as stock exchanges he observed that there could not have been any purchase of shares from Subha Financial Service Pvt. Ltd. because it is not registered with the stock exchange. Similarly Baffin Engineering Pvt. Ltd. and Bafna Engineering Projects Ltd. are not listed in the National Stock Exchange, therefore, the purchases are bogus. As far as Mohit securities is concerned the AO noted that the modus operandi is same as in the case of Database Finance Ltd. 10. From the various evidences gathered by the AO including the seized material, statement of brokers denying the transactions, reply received from Magadh stock exchange, Bombay stock exchange and National stock exchange he came to the conclusion that the assessee group booked bogus long term capital gains and introduced unaccounted income into the books/bank accounts in the guise of long term capital gains. Further the assessee group had admitted additional income at the time of search and the same was in line with the evidences which go against the case of the assessee. The subsequent denial/retraction according to the AO was not substantiated by any corroborative evidence and reasonable explanation. In view of the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of the following important documents : (a) The distinctive numbers and certificate numbers of shares that were purchased; (b) The date(s) of taking delivery of identifiable shares from assessee s share broker; (c) Delivery of transfer deeds duly signed by registered share holder in respect of shares that were taken delivery of from the share broker; and (d) Identification of/relationship with shares given for D-MAT with those purchased and ultimately sold in D-MAT form. 13. The learned CIT(A) gave a copy of the remand report to the assessee for his comments. In the comments the assessee stated that the AO has not dealt with the various issues raised by him which include non granting of opportunity to cross examine the evidences gathered and relied upon by the AO. Relying on various decisions it was submitted that in absence of cross examination, the evidences relied on by the AO while framing the assessment order do not carry any evidentiary value. It was submitted that the AO had taken some new plea in the remand proceedings. It was submitted that the remand proceedings should not be used by the AO to improve or to enlarge the assessment order. The decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... embers in respect of shares of Silicon Valley Technologies Ltd., Database Finance Ltd., Baffin Engineering Projects and Havemore Co. Ltd. are not genuine. He noted that the assessee during the course of survey had categorically stated that transactions relating to Database Finance Ltd. are bogus and therefore came out with the declaration of undisclosed income of ₹ 1,57,31,579 on account of long term capital gains relating to shares of Database Finance Ltd. However, he had retracted from such statement. Relying on a couple of decisions he held that the contention of the assessee regarding the genuineness of shares of Database Finance Ltd. cannot be accepted. The sale proceeds credited in the books/bank account represents undisclosed income of these persons. The AO has correctly treated the sale proceeds on account of alleged sales of shares as undisclosed income of the respective persons. He accordingly upheld the action of the AO in treating the sale proceeds of the shares as undisclosed income in the hands of the assessee. However, he held that the transaction of shares of Media Matrix Ltd. has to be treated as short term capital gain. 18. The learned CIT(A) also upheld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by payment of consideration in cash or cheque have been transferred in the name of the assessee prior to more than one year from the date of sale which is evident from the letters of the company, share transfer deeds, share certificate etc. 21. Referring to the purchase of shares of Database Finance Ltd. by the assessee Sri Govind Udharam Panjabi as a sample case the learned counsel for the assessee referred to reverse of Page 1 of Paper Book and submitted that vide Bill No.A01057915, dated 28-04-2001 Sri Govind Udharam Panjabi has purchased 700 shares of Database Finance Ltd. Referring to page 2 of the Paper Book the learned counsel for the assessee referred to statement of accounts of Mohit securities according to which they have purchased 700 shares of Database Finance Ltd. for Govind Udharam Panjabi as per their invoice dated 27-04-2001 and confirmation No. A0105452. Referring to reverse of Page 2 he submitted that Mohit securities have issued Money Receipt for ₹ 9,687/- paid by cash on account of share purchase. Referring to Page Nos. 6 and 7 of the Paper Book the learned counsel for the assessee drew the attention of the Bench to the share transfer application dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew the attention of the Bench to the ledger account of investment in shares as appearing in the books of the assessee. Referring to page No. 20 of the paper Book he drew the attention of the Bench to the ledger account of M/s. Prince Securities in the books of the assessee. Referring to page Nos. 37 and 38 of the Paper Book he drew the attention of the Bench to the Wealth Tax Assessment order for Asst. Year 2003-04. Referring to Page No.30 of the Paper Book he submitted that the investment in shares for Financial Year 2001-02 are appearing in the regular books. He submitted that the regular returns of the assessee have been filed before due dates and the investment has been duly reflected in the regular books of account. Referring to reverse of Page No. 15 of the Paper Book he submitted that the same shows the split of shares and issue of new shares directly into the D-MAT account. The fact that the shares have been transferred to the D-MAT account can be verified from the client ID which is the same in the said letter and the acknowledgement of deposit of shares in D-MAT account. 22. Referring to page No. 32 of the Paper Book-I he drew the attention of the Bench to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Third Member) in the case of Baijnath Agarwal Vs. ACIT reported in 133 TTJ 129 (Agra) (TM). Referring to the decision of the Jodhpur Bench of the Tribunal in the case of Dalpat Singh Choudhary Vs. ACIT reported in 143 TTJ 500 he submitted that the Tribunal in the said decision has held that where the assessee has purchased shares more than one year before the date of sale and purchase was accepted as genuine the AO was not justified in making addition of sale proceeds of such shares as undisclosed income of the assessee merely on the base of statement of the broker that he was issuing accommodation entries. 25. He also referred to the following decisions : 1. Prashant Pralhad Ashekar Vs. ITO vide ITA No.881/PN/2010 for A.Y 2003-04 order dated 28-03-2012. 2. Mukesh R. Marolia Vs. ACIT reported in 6 SOT 247 (ITAT Mumbai). 3. Acchyalal Shaw Vs. ITO reported in 121 TTJ 695. (ITAT Kolkata) 4. ACIT Vs. J.R. Solvent Industries (P) Ltd.reported in 24 DTR (Chd.) (Trib) 387. 5. Nisraj Real Estate Export (P) Ltd. Vs. ACIT reported in 31 DTR (Jp) (Trib) 456. 6. DCIT Vs. Smt. Hansa Choudhary reported in 143 TTJ 76 (Jd) (UO) He submitted that the entire tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by such person during such examination can also be used in evidence under the Act. However, a statement recorded u/s.133A has got no evidentiary value for the reason that the officer is not authorised to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under the law. He submitted that the material or information found in the course of survey proceeding could not be a basis for making any addition in the block assessment. Referring to the said decision he submitted that the materials collected and the statement recorded during the survey u/s.133A are not conclusive piece of evidence by itself. Referring to the CBDT Instruction dated 10-03-2003 he drew the attention of the Bench to the following : Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search and seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search and seizure and survey operati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the said decision has held that confession made by the assessee during survey proceeding is not conclusive and it is open to the assessee to establish by filing cogent evidence that the same was not true and correct. Referring to the said decision he submitted that retraction made during the assessment proceeding was accepted. Therefore, much importance should not be given to the statement of the assessee made during the course of survey which has subsequently been retracted by not disclosing the same in the Income Tax return filed. 30. As regards the report of the AO during remand proceedings that distinctive numbers of shares that were purchased were not available and identification/relationship with shares given for D-MAT with those purchased and ultimately sold in the D-MAT form were also not available he submitted that where the shares were received in consolidated form, those were splitted subsequently and then transferred to the D-MAT account which were subsequently sold. This aspect was not properly verified by the revenue authorities. He submitted that given an opportunity the assessee is in a position to satisfy the AO that the consolidated share certificates obtaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The legal relevance of distinctive numbers, share certificate numbers, the share transfer forms, share D-MAT request forms etc. have been discussed in detail and brought out very clearly by the AO and constitute a part of the CIT(A) s order (Pages 20-25). He submitted that it is the legal requirement for each share to have a distinctive number for identification. Share transactions take place in specific shares, (duly identified by their distinctive numbers) and not on the basis merely of total number of shares bought or sold). Almost all the shares sold were dematted just prior to sale. In one case, namely, Radha M. Panjabi, transfer to D-MAT account and sale are claimed to have taken place on the same day (06-05-02). In yet another case, namely Kaushalya S. Panjabi, shares are claimed to have been dematted on 06-05-02 but sale was made on 30-04-02, 02-05-02, and 03-05-02, i.e. prior to being dematerialised, which was not possible under the rules. Sri Moti U. Panjabi, who, as per his own statement as well as the statement of other family members, was taking all the investment decisions, when confronted with the letter of Dhyan Stock broking Pvt. Ltd. and other evidence, admitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be related to the specific shares which were purchased and taken delivery of by the assessee The legal relevance of distinctive numbers, share certificate numbers, the share transfer forms, share D-MAT request forms etc. have been discussed in detail and brought out very clearly by the AO and constitute a part of the CIT(A) s order (Pages 20-25). It is the legal requirement for each share to have a distinctive number for identification. Share transactions take place in specific shares, (duly identified by their distinctive numbers) and not on the basis merely of total number of shares bought or sold). Almost all the shares sold were Dematted just prior to sale. In one case, namely, Radha M. Panjabi, transfer to D-MAT account and sale are claimed to have taken place on the same day (06-05-02). In yet another case, namely Kaushalya S. Panjabi, shares are claimed to have been Dematted on 06-05-02 but sale was made on 30-04-02, 02-05-02, and 03-05-02, i.e. prior to being Dematerialised, which was not possible under the rules. Sri Moti U. Panjabi, who, as per his own statement as well as the statement of other family ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re correspondence (including the contract note) between the broker and themselves. A detailed analysis on the contents of the CDs is available on Pages 49-52 of CIT(A) s order. The broker through whom purchase is claimed to have been made namely, M/s. Vijay Bhagwandas Co. was declared a defaulter and was banned from doing any share transaction at BSE. The broker through whom purchase is claimed to have been made namely, M/s. Vijay Bhagwandas Co. was declared a defaulter and was banned from doing any share transaction at BSE. M/s. Havemore Finance Ltd. fits the profile of a typical penny stock . It has no standing in the market. 4. Baffin Engineering Projects Ltd. Baffin Engineering Projects Ltd. The assessee at first claimed that the shares were sold through the stock exchange. However, NSE vide letter dated 07-11-2007, denied M/s. Subha Financial Pvt. Ltd. was affiliated to them. Later from NSE also mentioned that no scrip in the name of M/s. Bafin Engineering Projects Ltd. was listed on that Exchange The assessee th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chandigarh B Bench ,Order dated 31-10- 2008 (2009) 24 DTR (Chd) 387 This case too is distinguishable. The purchase transactions as per contract notes were duly supported by bank pass books which reflected payments made for purchase of shares. They were also found duly reflected in investment account of the assessee. 4. Nisraj Real Estate Export (P) Ptd. Vs. ACIT.ITAT Jaipur A Bench ,Order dated 15-05- 2009 (2009) 32 DTR (Jp) 456 AO relied on the fact that summons issued by him were returned unserved. But since sales had been proved, it was held that surely purchases must have been made. Even so, ITAT doubted the nature of the purchases and sustained invoking of section 145(3) for making best judgment assessment. 5. DCIT Vs. Smt. Hansa Choudhary, ITAT Jodhpur Bench,Order dated 15-12-2011 (2012) 143 TTJ (Jd) (UO) 76 Wholly distinguishable. The purchase of shares were not doubted by AO but accepted. Sale consideration too was routed through banking channels. Hence it was held that sale consideration could not be called assessee s own money. 6. Dalpat Singh Choudhary Vs. ACIT, ITAT Jodhpur Bench, 30-11-2011, (2012) 143 TTJ (Jd) 500 : (2012) 65 DTR 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of shares were shown by the assessees in their balance sheet for the last five years and the genuineness of the books of account had never been questioned. Moreover, the payment for purchase had been made through bank, which was also verified from the bank statement. 13. ACIT Vs. Anoop Kumar 94 TTJ 299 (ITAT Amritsar SMC Bench) order dated 28-12-2004 The case is entirely distinguishable. The issue before the Amritsar Bench in that case was the effect of retraction of a statement made under 132(4). No incriminating material was found to justify the additions made. It was held by the ITAT that the disclosure was bald and had no legs to stand on. In the present case there are a number of facts and circumstances supporting the AO s conclusion. Besides, even as regards the effect of retraction, the more recent decision of the Ahmedabad Bench in Kantilal C. Shah 14 Taxmann.com 108 (Ahd) is against the assessee. 14. ACIT Vs. Kamal Kumar S. Agrawal and Others 133 TTJ 818 (ITAT Nagpur Bench) order dated 24-07-2009 This case too is entirely distinguishable on facts. The assessee had disclosed all the share transactions in the returns for relevant years in the normal c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the group for different Asst. Years are not genuine and the same are based on fictitious documents created. According to the AO the assessee group was booking bogus long term capital gains and introduced unaccounted income into the books/bank account in the guise of long term capital gains which is also as per the evidences gathered from the seized material, statement of brokers denying transactions, reply received from various stock exchanges etc. It is also the case of the AO that the assessee group had admitted additional income at the time of search/survey and such admission was in line with the evidences which go against the assessee. The AO apart from treating the long term capital gain declared by the assessee as bogus treated the same as income from other sources and made further addition of 6% of the amount credited in the books as commission expenses for such accommodation. 38. We find in appeal the learned CIT(A) also upheld the action of the AO. It is the submission of the learned counsel for the assessee that all the share transactions are genuine, the sales have not been doubted by the revenue and they have only doubted the purchase of the shares. According to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 30th November 2004 in the F.Y. 2004-05. The date of purchase of shares is 25.11.2003 and not 25.11.2005. The said date falls in the A.Y. 2006-07. It was explained that shares were kept in the physical form till the shares were held by the assessee. When the assessee had decided to sell the shares, he had sent the shares to D.P. (Stock Holding Corporation of India Ltd.) for dematerialization. Assessee had submitted a copy of D-MAT A/c. statement received from the D.P in his first submission dated 19.6.2008. The D-MAT A/c. statements revealed that the shares D-MAT request was received by the D.P. from the assessee , and after some days, D-MAT was confirmed by the D.P. It proves that the shares were in the possession of the assessee before dematerialization, explained the assessee. The fact that investment in purchase of shares disclosed in the preceding year's return is very well accepted by the Department. The assessee all along displayed the characteristics of an investor and there was nothing on record to suggest that the assessee had ever indulged in any manipulation in the market. It was submitted that while comparing the date of purchase of shares in physical form of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given date. It was submitted that it is for the assessee to hold the shares in physical form or dematerialized form. The assessee could not be penalized either for not opening D-MAT A/c. when he had purchased shares in the physical form. It was further submitted by the assessee that during the inspection of records allowed by A.O. (after completion of assessment and for the purpose of preparation of first appeal), it was noticed that the broker M/s. S.B. Buthra Co. in their letter dt. 10.11.2008 had informed the A.O that they had transactions with Shri Ajay Lalwani during F.Y. 2003-04 as per ledger account furnished with the said letter. From the copy of the ledger A/c. extract received from the said broker, it would be seen that the names of both the companies that relevant details i.e. quantities of shares and the amount of purchases are duly reflected. It was submitted that the assessee is assessed to tax since A.Y. 1991-92 having substantial income out of which, he had purchased shares; the contract note and bill issued by the broker is full and complete supporting evidence for purchase of shares. 11. In case of Oasis Cine Communications Ltd., it was submitted that shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the transactions not routed through Calcutta Stock Exchange , the A.O was not justified in doubting the declared date of purchase of the shares ignoring the above evidences. In the case of CIT Vs. Smt. Jamnadevi Agrawal Ors., ITA No. 40 of 2010 (Bombay High Court - Nagpur Bench), copy supplied, the property broker had stated the share transactions as sham and bogus. However, the purchase and sale price of the shares declared by the assessee were in conformity with the market sales prevailing on the respective dates, the related company had confirmed to have handed over the shares purchased by the assessee, sale of the shares to the respective buyers was also supported by the documents, the Hon'ble High Court has been pleased to uphold the finding of the Tribunal that transactions were genuine. Likewise in the case of ACIT Vs. Kamal Kumar S. Agrawal (Ind.) Ors (Supra) that Nagpur Bench of the Tribunal has also held that the fact that there were difference in the information as per contract notes and that received from the stock exchange is not material as admittedly some off market transactions were not reported to the stock exchange, therefore such transactions cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of the reason that share broker was involved in dealing in the share of a particular company in collusion with others or in the manner of unfair trade practices against the norms of S.E.B.I and Stock Exchange, then merely because of that fact a person who bonafidely entered into share transaction of that company through such broker then only by mere assumption such transactions cannot be held to be a shame transaction. Fact of tinted broker may be relevant for suspicion but it alone necessarily does lead to conclusion of all transaction of that broker as tinted. In such circumstances, further enquiry is needed and that is for individual case. Such further enquiry was not conducted in that case. 11. At this juncture, it would be relevant to mention here that it is not disputed by the Revenue before us that the shares of these assessees were already shown in the earlier Balance Sheet submitted by the assessees, and therefore, in that situation, how the revenue condemned the transaction even on the ground of steep rise in the shares. If within a period of one year, the share price has risen from ₹ 5 to 55 and from 9 to 160 and one person was holding the shares mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the shares bought from Mr. A and subsequently I pay the sale proceeds in cheque/DD to Mr. A after deducting my brokerage. Subsequently, Mr. A on receipt of the sale proceeds by cheques/DD pays Mr. X, the same proceeds by cheques/DD pays Mr. X the same amount by cash (No. 2 account), i.e. ₹ 100 and Mr. X pays the same to Mr. C. In this way, Mr. A converts the black money into white and avails long-term capital gain. (c) The sale transactions were off-market transactions and the Calcutta Stock Exchange by its letter dt. 26th May, 2005 has confirmed that quite a few of the transactions carried out by Shri Pradeep Kumar Daga were not borne on the records of the exchange and that the details noted on some of the other contract notes did not match. (d) There were unexplained cash credits in some of the buyers' bank accounts prior to issuance of cheques to the assessees. 11. We see no merit in the above contentions. The fact that the assessees in the group have purchased and sold shares of similar companies through the same broker cannot be a ground to hold that the transactions are sham and bogus, especially when documentary evidence was produced to establis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing in the stock market and there was no question of introducing unaccounted money by the assessees. Thus, the decision relied upon by the counsel for the Revenue is wholly distinguishable on facts. 16. For all the aforesaid reasons, we hold that the decision of the Tribunal is based on finding of facts. No substantial question of law arises from the order of the Tribunal. Accordingly, all these appeals are dismissed. No order as to costs. 43. We find in the instant case sale of shares from the D-MAT account has not been proved to be false. The dispute is only regarding the purchase of the shares. Since the assessee was not able to satisfy the revenue authorities with the distinctive numbers of the original shares which were subsequently dematerialised and sold, the lower authorities had doubted the genuineness of the transactions. It is the submission of the learned counsel for the assessee that he is in a position to demonstrate before the AO that the consolidated share certificates received on purchase of the shares in physical form were subsequently splitted into smaller denomination and the splitted shares were sent for dematerialisation and the shares bearing the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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