9911796707
TMI Blog2010 (4) TMI 1092X X X X Extracts X X X X X X X X Extracts X X X X ..... ares. (3) That the order and findings of the authorities below are based purely on conjectures, surmises, suspicion and hypothesis and are liable to be set aside." 3. The grounds of appeal raised by the Revenue are as under : "(1) That the learned CIT(A)-II, Agra has erred in law and on facts in directing the AO to tax out of the total amount of unexplained income of the assessee of Rs. 12,19,538, the amount of Rs. 5,98,000 received through draft dt. 20th Jan., 2001 only in the asst. yr. 2001-02 and to bring to tax the remaining amount in the asst. yr. 2002-03 ignoring the fact that the assessee has followed mercantile system of accounting and accordingly she herself has claimed deduction under s. 54F of the IT Act on the total amount of alleged capital gain in the year under consideration, (2) That the decision of the learned CIT(A)-II, Agra being erroneous in law and on facts deserves to be quashed and that of the AO deserves to be restored, (3) That the appellant craves leave to add or alter any or more ground or grounds of appeal as may be deemed fit at the time of hearing of appeal." 4. Briefly stated, the facts of the case are that the assessee filed her return of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verifications, the learned AO inferred that the case of the assessee regarding genuineness of the share transaction was not established. The evidences so collected by him were confronted to the assessee and she was also required to produce the share broker and the representative of the company along with its books of accounts. The learned AO also directed the assessee to be personally present for further investigation. Thereafter, various query letters were sent to the assessee. Assessee furnished the present address of M/s Sudev Industries Ltd. as 247, Sector 19, Noida (UP). It was also submitted to counter the evidence with regard to enquiries conducted from the Jaipur Stock Exchange that trading of share was done through Madhya Pradesh Stock Exchange, Indore and not through Jaipur Stock Exchange. It was further explained that the number of bank draft issued by the State Bank of Indore, Branch Green Park, New Delhi is 389058 dt. 20th Jan., 2001 for an amount of Rs. 5,98,500 and D.D. No. 276880, dt. 8th Aug., 2001 for an amount of Rs. 6,17,993. Learned AO with a view to verify the above contention of the assessee made enquiries from M/s Sudev Industries at its present address give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isting at Jaipur. However it is noticed that Shri P.K. Jain was registered share broker in Jaipur Stock Exchange. (6) From Jaipur Stock Exchange it is inquired that there is no trading of shares of M/s Sudev Industries Ltd. during the period under consideration. (7) The assessee on being informed filed the rate of shares quoted in Madhya Pradesh Stock Exchange which means that the shares alleged to have been sold from Madhya Pradesh Stock Exchange. (8) On enquiries conducted from Madhya Pradesh Stock Exchange it is noticed that during the period trading of 200 shares was made. The shares alleged to have been sold by the assessee are not registered with Madhya Pradesh Stock Exchange and the trading of 200 shares was made under permitted category. As the assessee has claimed the sale of 17,000 shares of the company the trading of 200 shares cannot be trading of shares held by the assessee. (9) Meanwhile enquiries were conducted from M/s Sudev Industries Ltd. at the given address'Sector 19, Noida and it is noticed that the shares are still in the name of the assessee. (10) The assessee has never furnished any detail about name and address of person to whom the shares hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ategorically stated that they first received cash amounts from persons who used to seek entries from them and against the cash receipts they had given them cheques/drafts. (iii) that the increase of value of shares is highly abnormal and unrealistic. In just 15 to 16 months' time the prices of these shares have allegedly increased by more than 16 times. In the instant case, the information received from M/s Madhya Pradesh Stock Exchange reveals that the trading only of 200 shares is quoted with the exchange on 14th Nov., 2000 to 17th Nov., 2000, then on 20th Nov., 2000 and again on 28th Nov., 2000 @ Rs. 36.70, Rs. 39.60, Rs. 42.76, Rs. 46, Rs. 49.60 and Rs. 72 respectively which shows the tactics of increasing the rate of shares of a particular company to get such type of persons (as assessee) benefited with the trading of only 200 shares each day in the stock exchange. In such a short period the shares of no other reputed company has increased so much. The company under reference is small timers and is not reputed and known company. Even it is not known as to what business this company is doing. The share market as a whole had not increased to this extent. In fact, in this p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after accepting the sale proceeds of Rs. 12,19,438 as undisclosed income of the assessee, in principle, only a sum of Rs. 5,98,000 has to be added in the year under consideration as this amount was received vide draft dt. 20th Jan., 2001 and the balance amount has to be considered in asst. yr. 2002-03 because an amount of Rs. 5,98,000 was received through draft dt. 8th Aug., 2001. 8. Now, the assessee is aggrieved against entire addition and the Revenue is aggrieved against the spreading of this amount in two years and raised the above extracted grounds of appeal. 9. In effect the issue raised by both the parties are common and can be decided simultaneously. 10. We have heard the rival submissions in details and also gone through the entire pieces of evidences which are placed in the paper book of the assessee as well as the entire assessment order as well as the appellate order and have also considered the decisions relied before us. 11. First of all we have to address the grounds raised by the assessee to ascertain whether the impugned amount of Rs. 12,19,538 is actual sale consideration as has been claimed or it is only a ploy to convert the black money into white by resorti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter written by Addl. CIT, Khand-2, Jaipur by Income-tax Inspector Shri Manohar Vijay which was directly obtained by the H.O., Firozabad by G.P. Gargh, ITO while making enquiry in relation to Shri P.K. Jain. It was informed that P.K. Jain & Associates' owner Shri Jain was residing in C-9, Bapunagar which house has 3 portions, one of the portions was in occupation by one Shri Ajay Sharma during the period February, 2004 and that Shri Ajay Sharma purchased that portion of the house four years ago from Shri P.K. Jain. The Inspector has also clarified that Shri P.K. Jain was residing in this house four years back. At pp. 25 to 36 a copy of the third remand report sent by ITO is placed. From the remand report it is evident that the existence of Shri P.K. Jain, proprietor M/s P.K. Jain & Associates was confirmed but as per the correspondence between the ITO and Shri P.K. Jain the transaction mentioned by the assessee was fictitious. After examining the above-mentioned evidences it can be inferred that it is an undeniable fact that the purchase of shares is not at all in dispute but the learned AO doubts the sale of the shares. After examining the entire records, we are of the conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cting the sale of these shares by the learned AO is the exorbitantly high sale price of shares and that a scam of large scale fictitious share transactions were detected by the Department. The scam which was noticed in some other company's shares cannot be relevant insofar as this case is concerned. Even the transaction with the scammers (or brokers) who were indulging in illegal activities has to be examined according to its merits. Insofar as exorbitant price of the shares at that time is concerned, it is proved on record that the sale price of share on that date was actually very high which is proved from quotation of the Madhya Pradesh Stock Exchange which is on record. The learned Authorised Representative has referred to a paper placed in the paper book, according to which, it could be seen that there is a scintillating rise and fall of the prices of shares even on the very single day. It is not an uncommon fact. Rather this is the reason why shares are purchased. The people want to become rich overnight. The assessee has sold 17,000 shares through the share broker and the selling rate of the share is the same as quoted by the Madhya Pradesh Stock Exchange, on that day. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s true that the apparent must be treated as real until there are reasons to believe that the apparent is not real. The Department cannot act unreasonably while considering the explanations of the assessee. The facts of the given case have to be examined in their totality in the light of attending circumstances. The letters written by Shri P.K. Jain, copies of which are placed on record, have to be considered in view of the fact that earlier even when the assessee tried the whereabouts of Shri P.K. Jain was not found yet he has written three letters successfully on which the signatures of Shri Jain are found to be microscopically different. There is force in the submission of learned Authorized Representative that the fact of detection of the ongoing scam in Shri P.K. Jain's case, in order to save his own skin he may have written such letters that the bank account was fictitious and it was only an accommodation entry. It is found for certain that the share broker Shri P.K. Jain & Associates had actually issued the impugned drafts. The person who says that he gave accommodation entry after obtaining cash amount cannot be believed outright and his statement has to be taken with ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16,493 through D.D. whereas the amount shown as belonging to her as paid to the broker for payment of DDs. comes to Rs. 14 lakhs. The excess amount of Rs. 1,83,507 comes to nearly 15 per cent of the amount of DD prepared. So what happened to remaining amount because nobody would give such a huge commission. Whereas she had to pay tax on long-term capital gain at 10 per cent only without taking benefit of indexation. It clearly shows that no sane person could get the bogus entry in these circumstances. So the averments of the letter of Shri P.K. Jain seems to be vague and absurd and these cannot be accepted as correct. Shri P. K. Jain & Associates were share broker during 2000-01 it is established clearly from the records. He was also active member of Jaipur Stock Exchange. His residence was also proved even by the independent enquiries conducted by the learned AO. So it cannot be said that the broker had not entered into share transaction with the assessee. Rather the transaction with the assessee cannot be ruled out as he was very much in active business at that time and was also a member of stock exchange. On the letter heads used by that share broker wherein he has denied the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue arising in the assessee's appeal in the present case is the non-acceptance of its claim in respect of long-term capital gain on the sale of shares, which stands treated by the Revenue as income from other sources, as in its view the assessee was unable to prove the share transaction(s) yielding the 'capital gain' under reference. 3.1 For the detailed reasons listed in the case of Baijnath Agarwal (ITA No. 133/Agra/2005), I have, vide my dissenting order dt. 10th Feb., 2009, taken a different view from that by my learned Brother, dismissing the assessee's appeal on this ground, in that case. 3.2 On the basis of the hearing, and the examination of the record, I find the facts and circumstances in the present case, as also the respective cases of the opposing parties, as very similar to that obtaining in the case of Baijnath Agarwal (supra). As such, for the detailed reasons as mentioned therein, I consider the Revenue's case as legally sustainable, so that it would stand to be upheld, and the assessee's appeal, consequently, dismissed. A decision, it needs to be appreciated, is taken on the basis of a given complex of facts and circumstances, as obtain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised in ITA No. 101/Agra/2005 by Revenue : "(1) That the learned CIT(A)-II, Agra has erred in law and on facts in directing the AO to tax out of the total amount of unexplained income of the assessee of Rs. 12,19,538, the amount of Rs. 5,98,000 received through draft dt. 20th Jan., 2001 only in the asst. yr. 2001-02 and to bring to tax the remaining amount in the asst. yr. 2002-03 ignoring the fact that the assessee has followed mercantile system of accounting and accordingly she herself has claimed deduction under s. 54F of the IT Act on the total amount of alleged capital gain in the year under consideration. (2) That the decision of the learned CIT(A)-II, Agra being erroneous in law and on facts deserves to be quashed and that of the AO deserves to be restored." 2. The brief facts of the case are that the assessee filed her return of income on 31st Oct., 2001 at Rs. 2,08,100 which included long-term capital gain of Rs. 11,40,826 from sale of shares claimed exempt under s. 54F. As regards the capital gains, the assessee had furnished contract note, bill and statement of account from the share broker M/s P.K. Jain & Associates, C-9, Moti Marg, Bapu Nagar, Jaipur, who was a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... went before the CIT(A), the CIT(A) partly allowed the appeal of the assessee by observing as under : "5.12 Considering the above facts and the legal position it is held that the AO was justified in holding that the share transactions were sham and bogus. The same have been shown just to convert the appellant's unaccounted income into white. The alleged sale proceeds of Rs. 12,19,538 represented the assessee's undisclosed income. Thus, AO's action, in principle, is upheld. However, since in this year the assessee has received only Rs. 5,98,000 vide draft year i.e. asst. yr. 2002-03. In the result, in this year addition to the extent of Rs. 5,98,000 is confirmed. 6. In the result, the appeal is partly allowed." 4. When the matter came before the Tribunal, learned JM decided the case in favour of the assessee while the learned AM decided the case against the assessee. Learned JM noted all the facts in para Nos. 4 to 7 at page Nos. 2 to 7 of his order while his finding is given in para No. 11 from p. 7 onwards. Considering all the material, the JM reached on the following conclusion : 'Purchases are not in doubt. 'Existence of M/s P.K. Jain & Associates is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t testing them is a fatal mistake by the Department. The averments of the letters were disputed and did not inspire credence, yet the Department simply relied on them without examining the broker and his books of accounts and without providing cross-examination to the assessee. In the absence of letters of the broker being tested by the AO it cannot be said that they are completely believable. Reliance was placed on the decision in the case of CIT vs. SMC Share Brokers Ltd. (2007) 210 CTR (Del) 353 : (2007) 288 ITR 345 (Del). The sale consideration was received through demand drafts from the account of the broker. No cash was found credited in that account prior to issue of demand draft. Money came through transfer from the account of a limited company. In that situation, the Department has also not been able to establish on the basis of positive material that the sale consideration was actually against the cash given by the assessee. Therefore, the addition was not justified. Reliance was placed on the decision of Tribunal, Delhi in the case of ITO vs. Naveen Gupta (2006) 5 SOT 94 (Del) and also on Kishinchand Chellaram vs. CIT (1980) 19 CTR (SC) 360 : (1980) 125 ITR 713 (SC). The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions that cash received by him was routed through some bogus account and the balance came to his current account No. 6351026 from which the draft was issued by State Bank of Indore on behalf of ABN Amro Bank. In this letter, he did not disclose all the accounts through which the cash was routed and even the name of the banker in which the current account No. 351026 exists. Vide letter dt. 28th Sept., 2004 he informed that he has received Rs. 5,00,000 from the assessee and the same was deposited in two banks on 7th Aug., 2001. Particulars of the bank accounts were not given. When further enquired vide letter dt. 22nd Nov., 2004, he gives the details of the cash alleged to have been received but still did not disclose who were the owners of these companies, who was controlling them and what connection he had with these companies. He never pointed out that the cash was deposited into the account of the assessee. Even the sequence of subsequent transaction was also not explained. By referring to the sequence of receipt of demand drafts by the assessee as well as by the broker and the deposit of the cash, he pointed out that this gives an unbelievable picture. The details were given as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of M/s JRD Stock Brokers (P) Ltd. who stated that as a matter of fact there was no actual purchase and sale of shares as was reflected in the contract notes issued by M/s JRD Stock Brokers (P) Ltd. to the beneficiaries. In that case the assessee claimed long-term capital gain of Rs. 25,14,770 and claimed exemption under s. 54EA of the Act. The long-term capital gain was shown on account of sale of shares through the brokers. The assessee submitted the copies of bills, share certificates, contract notes etc. during the course of assessment proceedings along with details of demand draft through which the sale proceeds have been received. It was also pointed out that the purchases were made through broking concern M/s JRD Stock Brokers (P) Ltd. The AO noticed that the shares were purchased @ Rs. 4 per share and sold @ Rs. 65 to Rs. 84 per share. The AO was of the view that the transactions were not genuine and are only accommodation entries. The broker pointed out that he was engaged in giving bogus entries for the purchase and sale of the shares on commission basis. When the matter travelled to the Tribunal, the Tribunal deleted the addition by observing as under : "(10) So in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee. The apparent has to be treated as a real unless proved otherwise. Long ago Hon'ble Supreme Court has laid this law while rendering the celebrated decision in the case of CIT vs. Daulatram Rawatmull (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. (12) In the case of ITO vs. Smt. Kusumlata (2006) 105 TTJ (Jd) 265, copy placed at page No. 4 of assessee's paper book (judgments relied), the Hon'ble Jodhpur Bench has held as under : 'For making addition under s. 69, the Department is required to prove to the hilt that the impugned transactions are bogus. The burden cast on the Department is very high which is required to be discharged conclusively in this case; there is no such evidence. The assessee has purchased shares from MS. These purchases are evidenced from the contract note. The payment was made by cheque. These shares were transferred in the name of the assessee. The assessee held these shares for more than one year. She sold these shares to J, a member of stock exchange. J in his letter has confi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arly helps the case of the assessee. (14) Credence cannot be given to the statements of the persons who themselves admit and have dubious dealings as against the documentary evidences produced by the assessee. (15) Moreover, when purchases have not been doubted or disputed by the Revenue in this case, the decision of Hon'ble Punjab & Haryana High Court relied by learned Authorised Representative in the case of CIT vs. Anupam Kapoor (2007) 212 CTR (P&H) 491 : (2008) 299 ITR 179 (P&H) is very much relevant. The held portion of this decision is extracted hereinbelow : 'Held, dismissing the appeals, that there was no material before the AO which could have led to a conclusion that the transaction was a device to camouflage activities to defraud the Revenue. No such presumption could be drawn by the AO merely on surmises and conjectures. The Tribunal took into consideration that it was only on the basis of a presumption that the AO concluded that the assessee had paid cash and purchased the cheque. In the absence of any cogent material in this regard, having been placed on record, the AO could not have reopened the assessment. The assessee had made an investment in a compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e broker couldn't be given any credence as he has stated differently vide different letters. Earlier he denied the transaction being entered into. Subsequently he has accepted that he has issued the draft after receiving the cash. Again he said that the cash was routed through some bogus account but he accepted that the draft has been made from his account. Subsequently, again he pointed out that he received cash of Rs. 9,00,000 and Rs. 5,00,000 while he has issued drafts of Rs. 5,99,500 and Rs. 6,19,508 respectively. What happened to the balance amount ? Nothing has been brought on record or stated by the broker. The assessee was not provided cross-examination. The statement has been recorded at the back of the assessee. This is a settled law that no addition can be sustained on the basis of the statement recorded at the back of the assessee and without giving opportunity to the assessee to cross-examine the person who has given the statement at the back of the assessee. I have also gone through the decision of Delhi High Court in the case of SMC Share Brokers Ltd. (supra) and that of Kishinchand Chellaram (supra) and that of Umacharan Shaw & Bros. (supra). All those decisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this Tribunal in the case of Ashok Kumar Lavania in ITA No. 112/Agra/2004 which has been decided by the Bench constituting of the same very learned Members. Judicial discipline demands that on the similar facts the Bench is bound to follow its earlier decisions. The principles of judicial discipline require that the order of the Co-ordinate Bench has to be followed. 15. I have also been nominated as Third Member in the case of Baijnath Agarwal (ITA No. 133/Agra/2005) [reported at (2010) 133 TTJ (Agra)(TM) 129 : (2010) 43 DTR (Agra)(TM) (Trib) 149'Ed.] which also I disposed of with my order of even date. In that case also I have held that the assessee's case is duly covered by the decision of the Division Bench in the case of Ashok Kumar Lavania in ITA No. 112/Agra/2004. 16. I also noted from the assessment order and the order of the CIT(A) that while scrutinizing the evidence filed by the assessee and framing the order, their minds were influenced with the other consideration that the value of the shares has tremendously increased which was abnormal and indicates that the entire transaction is managed one. The prices have increased in 15 to 16 months by 16 times. Alth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surmises and conjectures." 18. In the stock exchange when the transaction is entered into, the assessee is not aware of the buyer of the shares. He enters into transaction only through a share broker. Therefore, the observation of the AO that the assessee could not identify the buyer cannot be the basis of regarding the transaction to be non-genuine one. I also noted that the AO has been influenced with the fact that the assessee has delivered the blank transfer share certificates to the broker when the delivery of the shares was given. Since the deal has to take place between the brokers, the assessee has to give only blank transfer share certificate to the broker without mentioning the name of the buyer. There is nothing wrong in my opinion and this is a usual practice in the business. From the entire appreciation of the evidence, I noted that the assessee had acquired the shares, the purchase made on 15th July, 1999 was duly declared by the assessee in earlier years which stand accepted by the Revenue. The shares were sold through stock brokers who were registered with the stock exchange. Shares were sold at the prices quoted at the stock exchange at the relevant time. The pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs of the DDI in general investigations or the twisting statements of M/s P.K. Jain & Associates which remain untested by the AO himself. None of the judicial precedents supports the case of the Revenue. While making addition as income from undisclosed sources, burden on the Department is very heavy to establish that the alleged receipt was actually income of the assessee from the undisclosed sources. Jodhpur Bench of the Tribunal in the case of ITO vs. Smt. Kusumlata (supra), copy of which is placed in the compilation of the assessee, held as under : "10. For making addition under s. 69 of the Act, the Department is required to prove to the hilt that the impugned transactions are bogus. The burden cast on the Department under s. 69C (sic-69) of the Act is very high which is required to be discharged conclusively in this case; there is no such evidence. The assessee has purchased shares from M/s Maheshwari Sons. These purchases are evidenced from the contract note. The payment was made by cheque. These shares were transferred in the name of the assessee. The assessee held these shares for more than one year. She sold these shares to the member of stock exchange Shri J.K. Jain. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofit on alleged share of M/s Prasidh Exports Ltd. and M/s K.L.P. Finance Ltd. as income from other sources instead of assessee has claimed the capital gain is a correct decision or not. The Hon'ble Third Member has held as under : "The only reason to make the addition is that confirmation from the share brokers could not be filed by the assessee and summons issued to the said persons were not served and returned unserved and the names and addresses of the buyer to whom the ultimately shares were sold through the broker were not known to the assessee. The assessee was not in a position to compel the share broker for confirming the transaction, she being neither a director nor having large scale dealings with the brokers over the years so as to show that she was personally in a position to compel them on account of the magnitude of transaction done through them. It was her father who knew the brokers and she acted on his advice and had no contact thereafter. The reasoning that summons issued to the parties came back unserved cannot by itself be held against the assessee as whether the share broker continues the business or discontinues the same or changed the addresses or for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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