TMI Blog2011 (3) TMI 1724X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the nature of surplus earned by the assessees on sale of shares held by them. All the assessees have sold their shares in different companies in the previous years relevant to the assessment years under appeal and offered the surplus as long term capital gains for taxation. In all these cases, other than the case of Nagori Group, the Assessing Officer treated the surplus as 'income from other sources' against the claim of long term capital gains made by the assessees. The Assessing Officer was of the view that the medium of purchase and sale of shares was adopted by the assessees to convert their unaccounted money to accounted money under the head 'long term capital gains' attracting least amount of tax at 10%. 3. In the case of assessees belonging to Nagori Group, they also returned the surplus of sale of shares as long term capital gains. But, the Assessing Officer treated the long term capital gains as short term capital gains. When the matter was taken before the CIT(A), he set aside the view of the Assessing Officer and treated the surplus as income from other sources against the contention of the assessees that it was long term capital gains and also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re sold in the previous year which were purchased in the months of Apr, May and Jul of 2002 and in the month of April 2003. These shares were sold for a consideration ranging from ₹ 576,950/- to 1,246,680/-. 11. The assessees Shusheela Devi Tainwala, Rajesh Tainwala and Ravikant Tainwala beong to Tainwala Group have sold shares for the assessment years 2003-04 and 2005-06. The shares belonged to M/s Data Base Finance Ltd and Fast Track Entertainment Ltd. The shares were purchased in the month of May 2003 and Aug 2004. In this case also sales were made for a price much higher than the purchase price. 12. In the case of Rajendra Kumar Bhutra and Suresh Kumar Chopra they sold shares in the assessment year 2003-04 of M/s Data Base Finance Ltd. The shares were sold for profit. 13. The nature of the sales of shares to different parties and the nature of surplus arising out of those sales were examined by the assessing authority in the light of a search conducted u/s 132 of the Income-tax Act 1961. It is because of that search all these assessments have been completed u/s 153A read with sec. 143(3) of the Income-tax Act 1961. 14. Reiterating the enquiries made as a conse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he stock exchange. The assessees have sold the shares through stock brokers on the floor of the stock exchange. Therefore, there cannot be a hanky panky in the matter of sales of those shares. The shares are properly documented and reflected in the records of the stock broker. The payments have been made by the stock exchange through bank instruments. The sales were made on the prices offered in the stock exchange on the days of sales. Therefore, in the light of the accounts maintained by the assessees and in the light of the external evidences available in the hands of the brokers and the stock exchange, there is no merit in questioning the veracity and bonafides of the sales of shares. 17. The learned CA further argued that the Assessing Officer has tried to make out a case against the assessees on the so called enquiries made by him in the light of the search carried out u/s 132. He contended that the search, in fact has brought out positive materials to support the arguments of the assessees. The entire transactions were recorded in the regular books of account of the assessees. The shares were later converted into De-mat Form. Shares cannot be converted into digital form un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the brokers and the assessees whereby the excess consideration recorded in the books were returned by the assessees to the brokers and in that vacuum, the assessees were manipulating their unaccounted money. All these manipulations were brought to light as a result of enquiries made by the search carried out in the premises of the assessees u/s 132. He, therefore, submitted that the Assessing Officer has rightly invoked sec. 68 to treat the surplus income as income from other sources. 20. The learned CIT(A) contended that in spite of the documentary framework consistently created by the assessees, they have not explained the reasons as to why shares purchased for nominal value could fetch huge amount on sale made just after one year period. There must be some reasonable explanation for this. The companies whose shares were purchased by the assessees are not companies of reputation or substance or assets or business prospectus. In such circumstances, it is highly improbable to presume that the assessees could have sold the shares of those companies for such huge sum of money. 21. The learned CIT concluded that the Assessing Officer has explained the entire scheme of activitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res as recorded in the books of accounts. The search party could find books of accounts wherein all these transactions, the purchase and sales, have been properly accounted. The particulars of purchase of shares were available during the search, as the part of the records maintained by the assessees. The purchases have been properly recorded therein. Later on, the shares were converted into De-mat form. Those De-mat particulars are also available with the assessees. Contract notes for sale of shares were found in the course of search. Brokers note, advices and details of payments were available in the course of search. The payments were made through bank instruments. Subject to the allegation of the Revenue, if one takes a normal view of business transactions, the above documents are more than sufficient to support the contention of the assessees that they have brought and sold shares for the prices reflected in their accounts. The above positive evidences could overcome by the department only if the Revenue can bring more forceful evidences to counter the arguments of the assessees. Such evidences are not available. 25. Now, what is the position in the present cases? In spite o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r authorities on this issue are vacated. The assessing authority is directed to treat the surplus as long term capital gains and thereafter consider the claim of exemption made by the assessees of Mehta group u/s 54F of the Income-tax Act 1961. 29. Next, we will consider the appeals of the assessees belonging to Nagori Group. The assessees are Sanjay Nagori, Ajay Nagori, Mitesh Jain, Mohanlal Sumarmal, Vijay Nagori and Ashok Kumar Sumarmal. These assessees also had surplus in the hands of sale of shares. They claimed it as longterm capital gains. The only difference is that instead of invoking sec. 68 as done in the case of other assessees, the Assessing Officer has treated the surplus as short term capital gains, which has been later on converted by the CIT(A) as income from other sources falling u/s 68. 30. The case of the Assessing Officer will not stand in these appeals, as it is proved beyond doubt that the shares were held for a period of more than one year. This is proved beyond doubt by the De- mat account of the assessee. Therefore, the surplus cannot be treated as short-term capital gains. 31. Now coming to treating the surplus as income from other sources in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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