TMI Blog2011 (12) TMI 597X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and not in Section 68 of the Income Tax Act, 1961. The ld.CIT(A) held that the amount could not have been added u/s 68 of the Act. The Revenue in its grounds of appeal has nowhere mentioned that such addition should be considered u/s 69 of the Act. We therefore, hold that the ld.CIT(A) was justified in deleting the addition - ITA No.611/JU/2009 & 501/Jodh/2010 - - - Dated:- 16-12-2011 - SHRI R.K. GUPTA AND SHRI .N.L. KALRA For the Respondent : Shri G.R. Kokani For the Petitioner : Shri D.C. Agarwal ORDER PER N.L. KALRA, AM:- The Revenue has filed appeals against respective orders of the ld.CIT, Udaipur dated 16-09-2009 and 06-07-2010 for the assessment years 2005-06 and 2006-07 respectively. 2.0 The issues involved in both the appeals are the same. Therefore, these appeals are being disposed off by a single consolidated order for the sake of convenience. 3.1 The grounds of appeal raised by the Revenue for the assessment year 2005-06 are as under:- On the facts and in the circumstances of the case, the ld.CIT(A) has erred in:- 1. deleting the addition of ₹ 29,50,797/- as unexplained cash credit u/s 68 of the Act made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to question No 2, 3 4 he reaffirmed that he is in the business of issuing accommodation bills to the purchasers and sellers against the brokerage of 0.15% of the transaction value. He also confessed that he has issued sale confirmation memos against the fund provided to him. The relevant part of the statement is reproduced as under : Q.2 Please state whether Shri Raj Kumar Soni Smt Lata Soni have also made adjustment of their surplus cash by way of giving you cash and in lieu of the same by taking cheque from you equivalent to the amount of cash after reducing your commission of 0.15% for providing accommodation entries? Ans : I m doing the business of issuing accommodation bills to the purchasers and seller against the brokerage of 0.15% of the transaction value. So far as Shri Rajkumar Soni Smt Lata Soni is concerned I do not know them personally and I have not received cash from them but I have issued sales confirmation memos against the fund provided to me. I do not know whether Shri Rajkumar Soni Smt Lata Soni has made any adjustment of their surplus cash, I do not know them personally nor do they know me. Q 3: Please state whether purchases and sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Demand draft/cheque in lieu of sale consideration. In the entire transaction it can be said that although the sale were verifiable but the purchase is bogus. All the evidences go on to prove that the broker with the collision of the company issued back dated purchase bill to the assessee against the sale shown in the real time. In fact, this transaction has been used to bring in his income from undisclosed sources in the form of LTCG on sale of shares. The.assessee paid unaccounted money in cash which was deposited by the broker in some of his accounts then the assessee received the same back in the form of cheque/draft from the broker as alleged sale consideration. By above transaction, the assessee has masqueraded its undisclosed income as LTCG on shares. Thereby making the same white by paying taxes @ 10%. In fact the amount shown as the LTCG is liable to be taxed as unexplained cash credit u/s. 68 of the Act. since the assessee has brought in the unexplained cash in the books discussing the same in the form of LTCG on shares to build up its capital the assessee cannot use dubious method of tax planning to bring in the money in the books. The AO placed reliance in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nations is definitely due to arbitrary and unreasonable exercise of power. The AR further made reliance on the following case laws: 1) CIT Vs. Orissa Corporation P. Ltd. 159 ITR 78 (SC); 2) Lalchand Bhagat Ambica Ram Vs. CIT 37 ITR 288 (SC); 3) National Textiles Vs. CIT 249 ITR 125 (Guj) and 4) S.L. Ganeriwal Vs. CIT 192 ITR 347 (Raj.). In view of the above, the Id. AR submitted that the AO indulged in suspicions, conjectures and surmises without valid reasons and arbitrarily made addition of ₹ 29,50,797/- as unexplained cash credit is not justified and deserves to be deleted. 5. Decision; I have considered the facts of the case and submission of the Id. AR and found that the AO has based his assessment on the enquiry by sending letters u/s. 133(6) of the Act to M/s. Goldstar Finvest P. Ltd. The appellant purchased 62,500 equity shares of Talent Infoways Ltd. vide contract No. CC/2003/067/6(R) dated 07.04.2003, settlement dated 07.04.2003 @ ₹ 1.25 to ₹ 1.35 per share through Goldstar Finvest P. Ltd. and SEB1 Regn. No.23093243 1. The appellant has also furnished copy of transfer of share certificates issued by the company T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn of income for earlier assessment years showing shares in the balance and account confirmation. Thus the substantive part of the issue of dispute has been proved beyond doubt by the appellant. Undoubtedly, the appellant has furnished concrete documentary evidence for purchase and sale of shares and earning amount of capital gain as discussed above. The AO simply doubted the transaction of purchase and sale of shares on the ground of non-payment of purchase amount. Against this claim, the AO has not brought any material on record to rebut the plea of the appellant. In view of the documentary evidence furnished by the Id.AR substantiating the claim of capital gain, the AO was not justified in rejecting the claim of the appellant. As far as treatment of the sale proceeds as cash credit u/s. 68 of the Act is concerned, the same is not called for. As per section 68 of the Act where any sum is found credited in the books of an assessee and the assessee offers no explanation, the sum so credited may be charged to income tax as the income of the assessee. In this case, no sum has been credited in the books, as the payment of purchase of shares was made and the sale proceed of sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. Such credit in the pass book may fall within the ambit of Section 69 as unexplained investment and not in Section 68 of the Income Tax Act, 1961. The ld.CIT(A) held that the amount could not have been added u/s 68 of the Act. The Revenue in its grounds of appeal has nowhere mentioned that such addition should be considered u/s 69 of the Act. We therefore, hold that the ld.CIT(A) was justified in deleting the addition of ₹ 29,50,797/-. ITA No. 501/Jodh/2010 assessment year 2006-07 4.1 The ground of appeal No. 1 of the Revenue for the assessment year 2006-07 is similar to the grounds of appeal for the assessment year 2005-06. 4.2 The ld.CIT(A) has followed his decision for the earlier assessment year. We therefore, hold that the ld.CIT(A) was justified in deleting the addition of ₹ 12,07,985/ made u/s 68 of the Act. Thus Ground No. 1 of the Revenue is dismissed. 5.1 The second ground of Revenue is that the ld. CIT(A) has erred in deleting the addition of ₹ 624/- as commission paid on above addition out of undisclosed income. 5.2 The ld.CIT(A) in para 4.1 to 5.3 of his order has referred to this issue and these paragraphs are reproduced as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T (1972) 32 taxation 49 (all) wherein it was held that the disallowance was based on no valid reasons and was arbitrary. ..disallowance was not justified . Under the above facts and circumstance of the case, the Id AO indulged in suspicions, conjectures and surmises for making without valid reason and arbitrarily addition ofRs.624 as undisclosed commission based on surmises /adhoc basis is unjustified, unwarranted and bad in law and the same deserves to be deleted. 4.3.DECISION. I have considered the facts of the case. The A.O. has made the addition on the ground that commission payment for purchase and sale of shares has not been shown in the books of account. But the assessee must have paid it in cash to be broker. Therefore , commission is liable to be taxed as undisclosed cash payment for the accommodation entry. The learned A/R. has vehemently denied of any payment as the broker has already deducted the brokerage while issuing cheque for sale consideration. On going through the facts and submissions it is seen that it is very common thing that a broker has provided the services for purchase and sale of shares and has deducted his brokerage from the sale pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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