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TMI Blog2010 (9) TMI 1190X X X X Extracts X X X X X X X X Extracts X X X X ..... f the original Cross Objection Nos.20, 23 & 21/Agr/2010. It was pointed out that in all these Cross Objections there are delay between 44 to 50 days as the notice/memorandum of appeal filed by the Department was received by the servant of the assessee as the family members have gone out of Agra. The servant of the assessee is illiterate and was not aware of the gravity of the notice and forgot to give the notice to the assessee. The notices were given to the assessee only on 20.03.2010 and the assessees immediately approached their Counsel and filed Cross Objection in each case. It was pointed out that the delay was unintentional and may be condoned. The ld. D.R., on the other hand, vehemently contended that there is no reasonable cause on the part of the assessees to condone the delay. 3. After carefully considering the rival submissions and going through the application filed by the assessees for condonation of delay, we condone the delay in each of the case as we are of the view that the respective assessee was prevented by sufficient cause to file the Cross Objection in each of the case within time. 4. The ld. A.R., at the outset, pointed out that the facts involved in all th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the share transactions. Since the assessee failed to prove the genuineness, therefore, the A.O. has rightly made the addition under section 68 of the Act. 6. The ld. A.R., on the other hand, referred to the Paper Book and the written submissions filed before the CIT(A) and pointed out that in this case the original assessment has been completed on 31.7.2001. The A.O. has given clear cut finding that the assessee has shown the Long Term Capital Gain (LTCG) and the interest income from other sources. The profit earned on sales of shares has duly been shown by the assessee in his income tax return and all the evidences relating to the purchases and sales of the shares were produced. There were LTCG on the sales of shares to the extent of ₹ 49,47,778/-. The A.O. had duly considered the evidences filed by the assessee. The LTCG on the sales of shares were duly shown in the income tax return, copy of which is available at page 35 of the Paper Book. Thus, it was pointed out that the assessee has duly disclosed the transaction of purchases and sales of shares and the capital gain earned by him in his income tax return which was duly accepted in the Assessment Order passed under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been completed by the A.O. vide the orders detailed as under :- Jagjeet Kaur 31.07.2001 Ranjeeta Kaur 27.07.2001 Surjeet Singh HUF (A.Y. 1999-2000) 30.07.2001 Surjeet Singh HUF (A.Y. 2000-01) 03.12.2001 Gurinder Kaur 03.12.2001 10. In each of the case, the proceedings under section 147 of the Act was initiated by the A.O. by issue of notice dated 30.03.2006. By initiating the proceedings, the following reasons were recorded in the case of Smt. Jagjeet Kaur :- "During the year the assessee has shown/worked out capital gain on sale of shares as under :- Name of the assessee Name of Share Co Date of Sale Sale Amount Sale Sale though Broker Smt. Jagjeet Kaur Status Management Services Ltd 28.4.98 29,60,550 Yadav & Co. vide bill no.DI-PC/9805/16 dt. 4.5.98 Smt. Jagjeet Kaur Cabtree Securities Ltd 10.7.98 26,92,912 Navrang Capital Management Ltd. vide bill no.NRCM/08/1809 dt. 18.9.98 The investigation wing has made detailed enquiries to verify the claim of long term capital gain on sale of shares in mass cases and come to the conclusion that Yadav & Co. & Navrang Capital Management Ltd., share broker have provided the bogus accommodation entries to the ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the a.y. concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year). Provided that where an assessment under subsection (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. Explanation 1.- Production before the assessing officer of account books or other evidence from which material evidence could with due diligence have been discovered by the AO will not nec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral cases. In the case of Calcutta Discount Co Ltd v. ITO 41 ITR 191 (SC), it was observed that it is the duty of the assessee to disclose all the primary facts which have a bearing on the liability of income earned by the assessee being subjected to tax. It is for the AO to draw inferences from the facts and apply the law determining the liability of the assessee. The assessee cannot draw the conclusions drawn by the AO and once the conclusion is drawn and the assessment order framed, the AO cannot at a later point of time form a different opinion by giving a second thought to the facts disclosed by the assessee, holding that he committed an error in computing taxable income and reopen the assessment u/s 147. Discovery of new and important matters or knowledge of fresh facts which were not present at the time of original assessment would constitute a 'reason to believe' that income had escaped assessment' within the meaning of section 147. Our aforesaid view is supported by the following cases decided by Hon'ble apex Court : - i) Phool Chand Bajrang Lal v. ITO 203 ITR 456, 477; ii) ALA Firm v. CIT 189 ITR 285, 298; iii) Indian and Eastern Newspaper Society v. CIT 119 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... modation entries to the beneficiaries in the garb of sale of shares of different companies and accordingly he was of the view that the assessee has also taken the bogus entries and LTCG shown by the assessee on sale of shares through these brokers was not genuine. In other cases also such entries were treated as bogus accommodation entries and the additions were made. Thus, the A.O. recorded the reasons on the basis of information received from Investigation Wing. This information nowhere speaks of the name of the assessee or enquiries conducted by investigation wing depicts that these parties has given the bogus entries to the assessee. 16. Now the question arises whether, under these facts, the reasons recorded by the A.O. are bonafide or not. In this regard, we have gone through the various case laws as has been relied before us. The same are discussed as under :- (i) CIT vs. Kelvinator of India Limited, 320 ITR 561 (SC) In this case, a short question which arises for determination by Hon'ble Supreme Court is, whether the concept of 'change of opinion' stands obliterated w.e.f. 01.04.1989 i.e. after substitution of section 147 of the I.T. Act, 1961 by the Direct Tax Laws ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. on the basis of reasons recorded as above." When the matter went before the Hon'ble High Court, the Hon'ble High Court held, on the basis of the reasons recorded by the A.O., that the first sentence of the so-called reasons recorded by the A.O. is mere information received from the Dy. Director of IT (Inv.). The second sentence is a direction given by the very same Dy. Director to issue a notice under s.148 and the third sentence again comprises of a direction given by the Addl. CIT to initiate proceedings under s.148 in respect of cases pertaining to the relevant ward. These three sentences are followed by the following sentence, which is the concluding portion of the socalled reasons: "Thus, I have sufficient information in my possession to issue notice under s.148 in the case of M/s SFIL Stock Broking Limited on the basis of reasons recorded as above." From the above, it is clear that the A.O. referred to the information and the two directions as 'reasons' on the basis of which he was proceeding to issue notice under s.148. These cannot be the reason for proceeding under s.147/148. The first part is only information and the second and the third parts of the beginning para of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er in his final assessment, it could not be said that he had not applied his mind. Even the explanation of section 147 was not applicable. (v) CIT & Another vs. Foramer France, 264 ITR 566 (SC) In this case, the Hon'ble Supreme Court confirmed the order of the Allahabad High Court in the case of Foramer vs. CIT, 247 ITR 436 . Head note of the ITR reads as under:- "From the decision of the High Court (see [2001] 247 ITR 436) that (i) section 147 substituted in the Income-tax Act, 1961, by the Direct Tax Laws (Amendment) Act, 1987, had made a radical departure from the original section 147, inasmuch as clauses (a) and (b) had been deleted and under the proviso thereto notice for reassessment would be illegal if issued more than four years after the end of the assessment year, if the original assessment were made under section 143(3); (ii) section 153 related to the passing of an order of assessment and not to the issuing of a reassessment notice under section 147/148, (iii) the direction or finding contemplated by section 153(3)(ii) had to be a finding in relation to the particular assessee and the particular year and to be a finding it had to be directly involved in the disposal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s nowhere speaks of the material collected during the enquiry relates to the assessee. The assessee has duly disclosed the capital gain earned by him which was duly enquired of by the A.O. while framing the assessment and the assessee has replied to all the queries raised by the A.O. The A.O. completed the assessment, accepting the capital gain shown by the assessee in the original assessment. All the material relating to the capital gain was before the A.O. during the course of original assessment. Merely the A.O. has framed the assessment not incorporating the queries raised and the contention taken by the assessee does not mean that the A.O. has not applied his mind. This is a settled law that an assessment completed cannot be reviewed at the garb of reopening. What the A.O., in our opinion, tried to do is, to review the assessment which has been completed on the basis of some material. No fresh material is being brought on record. This, in our opinion, is not permissible under the law. Only on this basis itself the assessment framed stands annulled. We also noted that in view of proviso to section 147, as has been reproduced hereinabove, the assessment can be reopened after exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.2008. Similarly a letter no. A.No.CIT(A)- I/Agra/346/ITO-1(1)/Agra/2007-08/1318 dated 27.11.2008 was addressed to the A.O. as reproduced below:- "With reference to the above pending appeal, you are requested to furnish to this office all materials, documents and other evidences received by you from the Inv. Wing and collected by you in support of the addition of bogus Long Term Capital Gains made in the assessment order passed by you u/s.147/143(3) of the Act. The requisite information should be furnished positively by 17.12.2008." 20. The Addl. DIT replied vide letter no. F.No.ADIT(Inv.)/Unit-I/LTCG/2008-09/Agra/267 dated 02.02.2009 stated as under :- "Kindly refer to your office letters no.1262, 1264, 1268, 1270, 1286, 1287, 1290, 1300, 1336, 1338, 1339, 1340, 1342, 1343, 1344, 1345, 1442, 1443 and 1446 of different dates on the above subject. As desired, the requisite information/material/evidence/statement/bank account extracts etc. in respect of following brokers in the spiral binding in original are being sent to you which may kindly be returned to this office after doing the needful at your end. S. No. Name & address Broker No. of pages 1 Deeapk Securities & ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. A.R., the case of the assessee is duly covered by the decision of Third Member in the case of Smt. Sunita Oberoi vs. ITO, 126 TTJ (Agra)(TM) 745 and that of ITO vs. Smt. Bibi Rani Bansal in ITA No.101/Agr/05 in which vide order dated 09.02.2010 it was held as under:- "10. I have carefully considered the rival submissions alongwith the orders of the Tax Authorities below as well as the order of my ld. colleague Members. I noted that while passing the dissent order the ld. A.M. has mainly relied on its separate order passed in the case of Shri Baijnath Agarwal (ITA No.133/Agr/2005). I have gone through the order of Shri Baijnath Agarwal and noted that in his dissent order in that case the ld. A.M. has relied on the decision of Shri Ashok Kumar Lavania (ITA No.112/Agr/2004). I have gone through the decision of Shri Ashok Kumar Lavania in ITA No.112/Agr/2004 which was decided by the Bench constituting of same ld. J.M. and ld. A.M. vis-à-vis the facts of the case of the assessee. In that case also the transaction of sales has not been accepted by the A.O. as he doubted the sale prices and also relied on the statement of Shri Ashok Gupta, Director of M/s. JRD Stock Broke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... & Company, there are no adverse comments in the Assessment Order against the assessee. The A.O. has not said anything about the transactions entered through this broker. Whereas the assessee has produced : i) copies of sales and purchase bills; ii) share certificates and transfer letters; iii) contract notes; iv) duly transferred share certificates received from the companies; and v) affidavit. (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 afforded opportunity for cross-examination, when overwhelming documentary evidences are produced by the assessee, the burden shifts on the Revenue to explain away them. Every time the statements cannot help the department. How the above mentioned evidences could be ignored ? The Revenue has to give reasons for rejecting them. These are important documents, some of them arise under the provisions of the Companies Act. The brokers were never confronted with the evidences produced by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aising an inference to that effect. The assessee made payment for the purchase from her own sources through banking channel. The shares were transferred in the name of the assessee and were held by her for more than one year. There is no relationship between the party from whom the assessee purchased the shares and the party to whom these were sold. The shares were delivered after its sale and the assessee did not remain in possession of those shares. From the above facts, it is established that the assessee acquired the shares to earn profit. There is no evidence except speculation that this profit is not from the sale of shares. The A.O. has failed to establish his case and to discharge the requisite burden cast on him. The Authorised Representative has filed the requisite quotation of 18th July, 1996 along with the requisite proof of transactions of 9000 shares along with transfer of share certificate. Therefore, in the given facts and circumstances of the case, the CIT(A) has correctly come to the conclusion that the assessee has dealt in these shares and these transactions cannot be held bogus. The deletion of addition of ₹ 4,99,062/- is confirmed." (13) The above deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale consideration was issued from the account of M/s. P.K. Jain & Associates i.e. brokers. The money has not been deposited in cash in this account but has come to this account by way of transfer from the account of M/s. S.G. Fincap Limited. The ld. A.M. has distinguished the decision of Ashok Kumar Lavania. On the basis of that, in Ashok Kumar Lavania's case purchase of the shares was not in dispute. While in fact in assessee's case the purchase of shares is also not in dispute but rather the company has directly confirmed to the A.O. the purchase of the shares by the assessee in reply to the notice issued under section 133(6). The ld. A.M. was also the party to that decision. I noted that in this case the A.O. has doubted the sale consideration because the share price has increased tremendously. I noted that in the case of Ashok Kumar Lavania also the assessee has purchased the share @ ₹ 4/- per share and sold @ ₹ 65/- to 84/- per share. In that case also the broker has not accepted the transaction but on the basis of the evidence the Tribunal has accepted the transaction to be genuine one as there was no corroborative evidence to support the statement of the broker ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... truthful man at any stage and no court can decide on which occasion he was truthful." 12. Further, as noted, the statement was recorded by the DDI, Investigation Wing, Agra and not by the Assessing Officer himself. Thus, the truthfulness of the statement remained untested by the Assessing Officer. ITAT, Delhi in the case of Rajeev Agarwal (139 Taxman 170 (Mag.)) has observed as under :- "The mere reliance on the statement of third parties who were never examined by the Assessing Officer himself cannot be held to be sufficient to come to the finding that the transaction was not genuine and more so when there are other material and evidences to support the transaction." 13. Hon'ble Delhi High Court in the case of CIT Vs. SMC Share Brokers Ltd (288 ITR 345) also observed as under :- "There is no doubt that the statement of Manoj Agarwal had evidentiary value but weight could not be given to it in proceedings against the assessee without it being tested under cross-examination. In the absence of statement being tested, it cannot be said that it should be believed completely to the prejudice of assessee." 14. Under these facts, I am of the opinion that the case of the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fluctuation in share prices is a normal phenomena - the learned counsel for the assessee filed a chart showing low and high prices of some quoted shares during the 52 weeks as per Economic Times dated 27.02.2007 from which it can be seen that some shares increased even by more than 100 times." 17. In almost similar circumstances the Hon'ble Punjab & Haryana High Court in the case of CIT Vs. Anupam Kapoor (299 ITR 179) has also observed as under :- "The Tribunal was right in rejecting the appeal of the revenue by holding that the assessee was simply a shareholder of the company. He had made the investment in a company in which he was neither a director nor was he in control of the company. The assessee had taken shares from the market, the shares were listed and the transaction took place through a registered broker of the stock exchange. There was no material before the AO, which could have lead to a conclusion that the transaction was simpliciter a device to camouflage activities to defraud the Revenue. No such presumption could be drawn by the AO, merely on surmises and conjectures." 18. In the stock Exchange when the transaction is entered into, the assessee is not aware of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by ld. A.R., has observed as under :- "Nevertheless, it is also noteworthy that the A.O. has failed to establish that in lieu of the aforesaid sale proceeds, the assessee has surreptitiously introduced his unaccounted money in the bank account. After having perused the entire material that is available on record, there is no averment, much less any evidence, with the Revenue in this regard. While there may be enough grounds with the AO to carry out the impugned verification exercise to test the efficacy of the transactions resulting in long term material gains in the hand of the assessee but there is no cogent material or evidence to indicate that the impugned sale proceeds reflected unaccounted income of the assessee." 20. It was the duty of the A.O. to bring on record sufficient evidences and material to prove that the documents filed by the assessee were bogus, false or fabricated and the long term capital gain shown by him was actually his income from undisclosed sources. The only material to support such conclusion of the lower authorities is either the findings of the DDI in general investigations or the twisting statements of M/s P.K. Jain & Associates which remain untest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing an inference to that effect." 21. I have also gone through various other decisions on similar issue under the similar facts and I noted that this Tribunal had consistently accepted the genuineness of the share transaction. Those cases are as under :- ITO vs. Sunita Gupta - ITA No.881/Del/2004 (Delhi Bench 'SMC') Dilip Gargh vs. ITO - ITA No.470/Agr/2004 Gopal Prasad Agarwal vs. ACIT - ITA No.128/Agr/2004 22. I also noted that the case of the assessee is duly covered by the decision of the Third Member in the case of Smt. Sunita Oberoi vs. ITO (Agra) (TM) ITA No.273/Agr/2004 A.Y. 1995-96 dated 07.08.2009, 30 DTR (Agra) (TM) (Trib.) 474 in which on difference of opinion on the question under the similar circumstances whether the assessee can be said to have discharged her burden to prove the genuineness of the transaction in shares of M/s. Prasidh Exports Limited and M/s. K.L.P. Finance Limited or that the burden had shifted on the Revenue that can be held to have not discharged by them, the decision to uphold accepting of alleged profit on alleged share of M/s. Prasidh Exports Limited and M/s. K.L.P. Finance Limited as income from other sources instead of assessee has claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The claim of the assessee in regard to the first issue is to be allowed." 23. Thus, in view of the aforesaid discussions, the decisions of the third member, the decisions of the coordinate benches, totality of the facts and circumstances and evidence on record, I am of the considered view that the action of the CIT(A) was not correct in confirming the assessment of ₹ 12,19,538/- as the income from undisclosed sources as against the sale consideration of shares declared by the assessee. The CIT(A) was not justified in rejecting the claim of Long Term Capital Gain of the assessee from sale of shares. I accordingly direct the Assessing Officer to assess the income declared from the sale of shares under the head income from Long Term Capital Gain. Thus, the grounds no.1 & 2 of assessee's appeal should be allowed. Ground no.3 of assessee's appeal is consequential in nature, does not require any adjudication. So far the ground no.1 of Revenue's appeal is concerned, the same should stand dismissed as infructuous in view of my decision on grounds no.1 & 2 of assessee's appeal. Ground no.2 in Revenue's appeal is also consequential in nature and should stand dismissed." 23. Decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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