TMI Blog2010 (9) TMI 1206X X X X Extracts X X X X X X X X Extracts X X X X ..... to his wife Mrs. Nilanjana Matkar, one appeal of his son Mr. Kunal Matkar, two appeals of Ramesh Matkar-HUF and one appeal for the firm Jaykay Enterprises. 3. Search and seizure action u/s. 132 of the Act was carried out at the premises of Shri Ramesh D. Matkar at 305-A, Sky Lark, Swami Samarth Nagar, Andheri (West), Mumbai-400053 on 24.1.2006. Revenue s case is that the assessee has purchased penny stocks at the lower price and thereafter sold these stocks at a higher price and declared artificial capital gain thereon. For A.Y. 2002-03, stocks that were purchased and sold are that of M/s Baffin Engineering Projects Ltd., which was purchased through M/s Richmond Securities Pvt. Ltd. and sold through M/s Omnesys Tradenet Pvt. Ltd. and shares of M/s. Hindustan Stockland Ltd. which were purchased and sold through M/s Thakkar Stock Brokers Pvt. Limited. Transactions in question for A.Y. 2003-04 are the shares of M/s Database Finance Ltd. purchased through the broker Shri Bhavesh R. Mehta and sold through Hem Securities Ltd. The Assessing Officer completed assessment of Ramesh Matkar, individual, Nilanjana Matkar and Kunal Matkar u/s. 153A read with section 143(3) of the Act. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 8.1 Further verification of the copies of the bills of Thakkar Stock Brokers Pvt. Ltd., Vadodara, the share broker through whom the shares of Hindustan Stockland Ltd. were claimed to have been purchased, revealed some surprising facts as under :- i) The shares of Hindustan Stockland Ltd. were purchased on 28.3.2000 where as the speculation income was earned after a month i.e. on 1.5.2000. ii) The above shares were purchased not only by the assessee, but its Karta, Co-pareener, member and firm also. iii) The costs of above shares were not paid immediately by any of them, but were claimed to have been adjusted by the above share broker out of the speculation income earned by them, after a month i.e. on 1.5.2000, through same share broker. The speculation income claimed to have been earned by the assessee was ₹ 38,888/- and its Karta, Copareener, member of the firm of the same amount i.e. equal to the cost of the shares of above penny stock company. iv) No share broker allows so much time to collect the cost of shares. They collect the cost of the shares immediately. v) Thakkar Stock Brokers Pvt. Ltd., Vadodara, the share broker would not have visualized the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not continue the speculation transaction with Vadodara share broker or had any transaction in future. f) The copies of documents submitted by the assessee to prove the genuineness of purchases were easily manageable by the operator, against the commission/service charges charged by him. g) For getting dividend it is not necessary to hold the shares of a company for a year or more. Even purchase of shares/units pregnant with dividend yields dividends within one or two days of closure of the books of the company. The sole criteria for this, is that the shares/units should stand in his name on the record date. The dividend stripping transactions are clear cut examples of it. Secondly in bank summary ₹ 1,250/- is stated to be dividend to Mutual Fund and not from Hindustan Stockland Ltd. h) The Board Circular No. 704 dated 28.4.1995 is applicable in case of genuine purchase of shares and not in cases of arrangement of pre dated purchase bills. i) The speculation income was declared by the assessee in the return of income for A.Y. 2001-02 on the basis of requirement to prove the genuineness of purchase of shares of penny stock companies and not on the basis of its a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition u/s. 69C on the ground of unexplained purchase. Addition has been made at the same purchase price as discussed by the assessee. Thereafter, the Assessing Officer assessed, the long term capital gain disclosed by the assessee, under the head income from other sources on the ground that capital gains are not genuine. Addition in question was of the amount disclosed by the assessee and alleged commission has also been added. He took this Bench to the reasons and conclusions given by the Assessing Officer as well as finding of the learned CIT(A). Thereafter he took this Bench to the additions made for A.Y. 2003-04. 12. After pointing out the facts, learned counsel for the assessee raised arguments on the issue of jurisdiction, which is an additional ground of appeal. He submitted that assessments are ab initio, void in the case of Smt. Nilanjana Matkar and Kunal Matkar for the reasons that search u/s. 132 was conducted in the case of Shri Ramesh Matkar. He submitted that just because Ramesh matkar has been searched, it does not mean that his wife and son were also searched u/s. 132 and for this reason, their assessments cannot be made u/s. 153A of the Act. He submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... note from M/s Thakkar Stock Brokers Pvt. Ltd. He drew attention of the Bench to the contract note issued by M/s Richmond Securities Pvt. Ltd. and Contract note of M/s Omnesys Tradenet Pvt. Ltd. and pointed out that brokerage has been separately mentioned. He vehemently contended that, before the Assessing Officer as well as learned CIT(A), the assessee has furnished numerous documentary evidences, in support of the transaction, copies of which are filed before the Tribunal by way of paper book. He submitted that in addition to the documentary evidence, which as per the learned counsel for the assessee, vouched for the genuineness of the transactions, the assessee furnished confirmation from the third party. He argued that, the fact that the shares were indeed purchased by the assessee, cannot be disputed because, the assessee took delivery of the shares and got them entered into their D mat account. Shares were subsequently sold from D mat account of the assessee. In many cases, distinctive numbers of shares were also available. He referred to the photocopies of shares certificate, divided warrant, shares transfer registration certificate etc, copies of which are filed in the pap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd as a result of these inquiries are withheld by the Assessing Officer, as well as learned CIT(A), for the simple reason that they support transactions disclosed by the assessee. He placed reliance on the remand report dated 22.9.2009 from ACIT Central Circle-12, Mumbai to learned CIT(A) Circle-3, Mumbai; which is at page 75-76 of the paper book; wherein it has clearly stated that the Assessing Officer has verified the said share transactions in the scrip of Hindustan Stockland Ltd. through broker Thakkar Stock Brokers Pvt. Ltd. in the case of Ramesh Matkar HUF and Jaykay Enterprises. He pointed out that thereafter inquiries were made during the course of first appellate proceedings, by ACIT, Central Circle-12, Mumbai from Richmond Securities Pvt. Ltd. and Thakkar Stock Brokers Pvt. Ltd. and in response, both the parties forwarded and confirmed the particulars of transactions made through them, by the assessee therein. Learned counsel for the assessee contended that this inquiry was found satisfactory by ACIT; and furnished remand report to learned CIT(A). He argued that learned CIT(A) has not considered it necessary, to pursue any further inquiry or investigation. He submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een brought out in details in the order of learned CIT(A). Shri Rana submitted that he had made certain research and study through Internet and claimed that he has found certain information which is vital in the matter. He submitted that the Assessing Officer has not properly investigated the matter and has not brought all proper material on record and that such sloppy and inefficient investigation, is making claims of the assessee very strong. On a query from the Bench, Shri Rana submitted that he would approach the Assessing Officer, as well as concerned Commissioner of Income-tax, and request them to make further investigation to gather relevant evidence and after obtaining sufficient evidence against the assessee, he would like to file additional evidence, so that the Bench may consider the evidence and arrive at appropriate conclusions. He took this Bench to the order of the Assessing Officer specifically paragraphs 14.1, 14.2 15 which is extracted above as well as findings of the learned CIT(A) at para 2.3 and relied on the same. Shri Rana reiterated his prayer that he should be granted an opportunity to investigate further and bring out the evidence against the assessee, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when the Bench sat for hearing, none appeared on behalf of the revenue. There was no application for adjournment either. Learned counsel for the assessee, Shri Tiwari strongly opposed any further adjournment and submitted that the additional evidence that are sought to be obtained on further investigation and thereafter filed as additional evidence before the Bench, has not been done by the revenue despite grant of numerous adjournments; and as this is a stay granted matter; and stay would be expiring, and that the assessee would be put to a lot of hardship. He submitted that his submission be taken on record and case disposed off on merits. He reiterated his contentions made earlier and pointed out to the list of documents that were filed before assessing authorities. He pointed out that till date no action is even initiated by the AO in this matter. After hearing these submissions, the hearing was closed and judgment was reserved. 21. After closure of the hearing, one Senior AR, Mr. Harigovind Singh signing for Mr. Naresh KR. Balodia, CIT-DR, filed a letter for adjournment in the matter on the ground that Shri S.S. Rana is transferred and relieved and; he had expressed his ina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es were first purchased in physical form and then converted into D mat form, held for some time and sold. The doubt of the Revenue is that the shares were not purchased in physical form, on the date, the assessee claims to have purchased them. For disbelieving this claim of the assessee, the Department has no evidence. The fact remain that D mat account evidences purchase and sale of shares. Thus the fact that the assessee has purchased shares, fact that these shares were converted from physical shares into Dmat form and the fact that they were sold thereafter, and fact that the amounts were received in account payee cheques and the fact that purchase and sale transactions are evidenced by recording in the respective company s records, is not in disproved. Share brokers have issued broker Notes and have also confirmed the transactions. No contrary evidence is brought on record. Assessee has filed following documents before the Assessing Officer:- a) Shares transfer letter from Hindustan Stockland Limited. b) Share certificates of Hindustan Stockland Ltd. (as sample) c) Contract note for speculation profit earned, issued by Thakkar Stock Brokers P. Ltd. d) Purchase bill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son: 1) Jaykay Enterprises (A.Y. 2002-03) 2) Shri Ramesh Matkar (A.Y. 2002-03) 3) Shri Ramesh Matkar HUF (A.Y. 2002-03) 4) Shri Kunal Matkar (A.Y. 2002-03) 5) Mrs. Nilanjana D. Matkar HUF (A.Y. 2002-03) Copies of the same are forwarded for your perusal and ready reference. Similarly Thakkar Stock Brokers P. Ltd. vide their letter dated 9.9.2009 forwarded copies of ledger account and confirmation note in the name of following persons :- 1) Shri Ramesh Matkar 2) Shri Kanchan Matkar 3) Shri Kunal Matkar 4) Mrs. Nilanjana D. Matkar Copies of the same is forwarded for your perusal and ready reference Annex-B During the course of assessment proceedings the then Assessing Officer has also verified the share transaction in the scrip of Hindustan Stockland Ltd. through broker Thakkar Stock Brokers P. Ltd. in the name of Shri Ramesh D. Matkar HUF and Jaykay Enterprises. Copies of the same are forwarded for your perusal and ready reference Annex-C. In the light of above facts your honour is requested to take necessary decision at your end. 26. From the above, it is clear that the Assessing Officer has verified the transactions in question with eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transaction, the onus had shifted to the Assessing Officer to prove that the evidence furnished by the appellant was false and fabricated the company s management was in collusion with the broker and all the transactions were arranged simple to create evidence of artificial long term capital gain. From perusal of the assessment order and record, it is seen that the Assessing Officer had not brought on record any concrete evidence or material to prove that transfer of shares in the name of the appellant in the records of the company was a manipulated/fabricated exercise. Under the circumstances, I agree with the AR that in view of the confirmation from the company that shares stood transferred in the appellant s name as on 10.4.1999, the appellant s claim that he had purchased the shares on or before 30.4.1999 cannot be doubted. Since the shares stood sold w.e.f. 19.6.2000 onwards and payments received through cheques i.e. after a period of more than 12 months, even assuming that the shares stood purchased only in April, 1999 the claim of long term capital gain deserved to be accepted. I agree with learned AR that mere inability of Rajkot based share broker to produce supporting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without any basis and merely on conjecture and surmises. It also held that learned CIT(A) while confirming the case of the Assessing Officer, has merely referred to certain deficiency in the documents filed by the assessee, in support of their claim of income under the head capital gain . These deficiencies pointed out, in the opinion of the bench, was not sufficient to come to the conclusion that there was no transactions of actual purchase and sale of shares by the assessee,which resulted in capital gain. In the case of Smt. Jimit R. Shah (supra), J Bench of the Tribunal at para 3 held as follows :- 3. We have heard the arguments of both the sides and also perused the relevant material on record. As agreed by the Learned Representatives of both the sides before us, the issue involved in the present appeal is squarely covered in favour of the assessee by the decision of co-ordinate Bench of this Tribunal in the case of Smt Pushpa R Shah and Shri Ramesh V Shah rendered vide its order dated 29.7.2008 passed in ITA 2669 and 2607/Mum/2006. A copy of the said order is also placed on record and a perusal of the same shows that similar addition made in the said cases by the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough Sunil Shares Stock Pvt Ltd, but the Assessing Officer has treated entire 35,000 shares as bogus. Thus, there has been lack of application of mind on the part of the Assessing Officer. Besides the above, we notice in both the cases, company has duly recorded the transfer of shares in the name of the assessee. Ownership of shares was also recorded in the form of de-mat account. All these evidences show that there cannot be any doubt or dispute regarding ownership of the shares as that of the assessees. In the facts and circumstances of the case, we are of the view that capital gain as declared by the assessee has to be accepted and the addition made by the Assessing Officer deserves to be deleted. The same is directed to be deleted. In the case of Smt. Sunita Oberoi (supra), Hon'ble Bench held as follows :- Moreover, said statements have been recorded at the back of the assessee and P was not made available to the assessee for cross-examination-No adverse inference could be drawn for the reason that the assessee could not file confirmation from the broker, as she being neither a director of the company nor a person having large scale dealings with the broker, was no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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