TMI Blog2013 (4) TMI 873X X X X Extracts X X X X X X X X Extracts X X X X ..... the revenue that the income so claimed as exempt u/s.10(38) is not long term capital gain and has to be treated as income from other sources since the shares so sold are penny stocks and the assessee, neither in the past nor in subsequent years, has traded in such shares and earned such huge income. Further, Arun Agrawal family, who originally had claimed such long term capital gain as exempt had subsequently offered such income as business income in the returns filed and earning of such huge income is against all human probabilities. Identical facts and circumstances we are of the considered opinion that the assessee is entitled to claim exemption u/s.10(38) of long term capital gain on account of sale of shares of Fast Tract Entertainment Ltd. decided by him. Accordingly, the order passed by the Ld. CIT(A) is set-aside and the AO is directed to allow the claim of the assessee. Application of section 056(v) of income tax on the facts of the case, admittedly the provision was introduced by the Finance Act, 2004 and is applicable to any sum of money exceeding ₹ 25,000/- received from any person other than the persons specified in the said provision on or after 01-09- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... market and dematerialised later on before the same were sold. After selling the shares the profit has been claimed as exempt u/s.10(38) of the Act. From the various details furnished by the assessee he noted that the shares which the assessee sold was a penny stock . 3. The Assessing Officer noted that the assessee is an associate of Kalika group of Jalna which consists of 4 families, i.e. Arun Agrawal family, Ghansyam Goyal family, Anil Goyal family Naresh Jindal family. He noted that several members of this group were indulged in such type of purchase and sale of shares of the same stock, i.e. Fast Track Entertainment Ltd. He noted that in the year 2006 Income Tax Department tracked down the racket of manipulation in the above-mentioned stock. It was grossly manipulated by market operators for helping individuals bring unaccounted funds to the main stream financial system. The modus operandi was buying these stocks at a back date and then claiming capital gains or losses to net off the taxes. The individuals had bought bills showing purchases of penny stocks a year back from the market operators. Then these share certificates were dematerialised and sold in the open market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- 2005-06 6 Leeladevi S. Agrawal 12,90,536/- 2005-06 He, therefore, was of the opinion that the claim of exemption of income of the assessee was a bogus claim and no real capital gain arose to the assessee. He, therefore, confronted the same to the assessee and asked him to explain as to why the claim of exempt income should not be rejected. It was submitted by the assessee that he has earned income from sale of shares and the holding period of such shares is more than 12 months. The details of contract notes of the purchase and sale of shares were furnished and accordingly it was claimed that the income being long term capital gain of the Act is exempt u/s.10(38). 5. However, the Assessing Officer was not convinced with the explanation given by the assessee. He noted that the Arun Agrawal family has offered such income to tax way back in 2007 by filing revised returns. Most of the persons of the group have never purchased or sold any stock either previously or afterwards including any penny stock. Therefore, a person earning abnormal profit in trading of stock for the first tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring to Page 26 of the Paper Book he submitted that the assessee has received letter from M/s. Fast Track Entertainment Ltd. on 07-10-2003 wherein 23500 shares are duly transferred in the name of the assessee. Referring to page 27 of the Paper Book he submitted that the assessee has received letter from M/s. Fast Track Entertainment Ltd. on 17-03-2004 to get the shares dematerialised. Referring to page 28 of the Paper Book he drew the attention of the Bench to the share certificate for 23,500 shares in the name of the assessee. Referring to Page 33 of the paper book he submitted taht the shares were sold on 06-05-2005 for a consideration of ₹ 21,15,154.40. Referring to page 44 of the Paper Book he drew the attention of the Bench to the request by the assessee for dematerialisation of the shares on 09-02-2005. Referring to page 45 of the Paper Book he drew the attention of the Bench to the demat certificate issued by IDBI Bank Ltd. according to which the shares got dematerialised on 07-03-2005. He submitted that all the 23500 shares got sub-divided into 23500 shares on 19-03-2005. Referring to Page 36 to 41 of the Paper Book he drew the attention of the Bench to the copy of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k filed on behalf of the assessee. We have also considered the various decisions cited before us. There is no dispute to the fact that the assessee as per documents produced has purchased 23,500 shares of Fast Track Entertainment Ltd off market on 25-06-2003 for a consideration of ₹ 43,800/- paid in cash. There is also no dispute to the fact that the shares got dematerialised on 07-03-2005. There is also no dispute to the fact that the assessee in his balance sheet as on 31-03-2004 and 31-03-2005 (copies of which are placed at Paper Book 23 to 24 respectively) has shown such shares under the head investment . There is also no dispute to the fact that the shares are sold after dematerialisation on 06-05-2005. According to the assessee since shares were held for a period of more than 12 months, therefore, the income from sale of such shares is long term capital gain and the same is exempt u/s.10(38) of the Income Tax Act. It is the case of the revenue that the income so claimed as exempt u/s.10(38) of the Act is not long term capital gain and has to be treated as income from other sources since the shares so sold are penny stocks and the assessee, neither in the past nor in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight from the beginning. Copies of Balance Sheet, P L A/c and computation of income for the assessment years under consideration are attached as pages 1 to 30 of Paper Book-I. b) The purchases and sales of shares in question were duly accounted for in the regular books of accounts for the years in which the purchases/sales were made. c) The purchase and sale of the shares were evidenced by their having been shown in the Annual Accounts attached with the regular returns of income for relevant year/years. d) The shares which were held as investment are listed on recognised stock exchanges. e) All purchases are supported by contract notes giving full details as to the name of the scrip, quantity, price at which purchased, total purchase consideration, brokerage, bills of brokers etc. All the contract notes were found at the time of the action u/s.132 and some of the contract notes were also seized by the raiding party. f) The transactions are duly recorded in the books of the share brokers. Confirmations of the share brokers were also found at the time of search action. g) Actual delivery of the shares were claimed to be taken physically. h) Shares so purchased ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elivery of the shares were made. r) The debit entries in the Demat Account evidences the delivery of the shares. s) Copies of contract notes, Sales bills, broker account, client ledger in the books of broker, Bank statements, Demat Account and BSE Stock Price list are submitted as Pages 33-60, 174-202, 257-262, 278-291, 334-387,419-440, 462-503 523- 528 of the Paper Book-I. 14.3. All the above details indicate that the transactions in shares were well regulated and were through authorized brokers, routed through appropriate channels including banks and the assessee had recorded the sale proceeds of the shares in its books of accounts and had very well explained its nature and source of acquisition. The Long term capital gains on the sale of shares was claimed as exempt u/s. 10(38) of the Act in the returns for A.Ys. 2005-06 and 2006-07 as per the amendment brought about by the Finance Act, 2004 w.e.f. 1.10.2004 and paid the tax on STCG earned in these two years. Further, assessee paid tax as per applicable rate on LTCG earned from A.Y. 2002-03 to 2004-05. 14.4. A search action u/s. 132 was carried out in the residential and business premises of the Peety Group on 17.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterials were found relating to these years which could have been added back in the proceedings u/s.153A. The details regarding the transaction in shares for each of the year under consideration were very well placed before the Department in the computation of income of each year and no query was ever raised by the Department. There was nothing in the intimation u/s.143(1) to indicate any deficiency with regard to the assessee s claim of transaction in shares, the income shown and the evidences furnished in respect thereof. 14.6. The additions made u/s. 153A were based on the statement of some brokers which were recorded behind the back of the assessee without producing them before the assessee for cross examination despite specific request. Under peculiar circumstances assessee offered this amount in his statement recorded u/s. 132(4) though as such nothing incriminating was found in the course of search relating to assessment years under consideration. Normally no new addition should be made where all the facts were placed before the department during the course of regular assessments which stood completed on the date of initiation of action u/s. 132. 14.7. The details of L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : a) In response to a notice u/s. 142(1) dated 10.08.2007, the assessee vide his reply dated 24.08.2007 gave the year-wise details of shares and deposits held by him for all the years under consideration. Copies of bank statements, Contract notes/Broker notes, Purchase Bills of shares were also submitted. A copy of the letter dated 24.08.2007 is attached as Pages l-3 of the Paper Book- II. b) In reply to notice dated 5.09.2007, details of purchase and sale of shares held on long term basis were submitted. A copy of the statement is attached as Pages 32, 61, 173, 203, 256, 277, 263, 292, 333, 390, 461 509 of the Paper Book-I. c) In reply to notice dated 15.10.2007, details of Long term Capital gains and Short Term Capital Gain earned by the assessee for the various assessment years was submitted. A copy of the statement of Long term Capital gains for each of the year is attached as Pages 31, 172, 255, 332 460 and of Short term Capital gains is attached as Pages 417 521 of the Paper Book-I. d) In reply to notice dated 2.11.2007, details of purchase and sale of shares held on short term basis were submitted. A copy of the statement is attached as Pages 418, 441, 522 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO. was not justified in observing that the above sums would be taxed as business income/adventure in the nature of trade if at any point of time the transactions were found to be genuine. d) That the A.O. was not justified in treating the purchases of shares of Fast Track and Pranneta Industries Ltd. as not genuine. e) That the A.O. was not justified in rejecting the claim of the assessee in respect of capital gains. f) That the A.O. was not justified in charging interest under section 234A, 234B and 234C of the Income tax Act, 1961. g) That the A.O. was not justified in initiating penalty proceedings under section 271(1)(c) of the Income tax Act, 1961. 14.13. In appeal, the concerned CIT(A)-I, Nagpur, vide his Appellate Order dated 18.06.2008 allowed the appeal of the respondent for all the years under consideration, thus reversing the Assessing Officer's findings on the issue. The same has been agitated before us on behalf of the Revenue. The various issues have been argued before us. Each of the grounds taken by the Department and the respondents arguments in respect thereto are dealt as under: 14.13.1. Let us first analyse whether the provisions of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the course of search could not be said to be evidence found as a result of search , though the same may be obtained during the search . In case an addition is intended to be made as the undisclosed income on the basis of such statements, it has to be first proved that these statements are relatable to such evidence. The only evidence relied upon by the Assessing Officer is the statement of Sri Surendra S Peety recorded in the course of search. There is nothing on record to suggest that any incriminating document or material was discovered as a result of search. Above statement was made without having the benefit of referring to any document in certain state of mind and was made on the assertion of the department that they have evidence against the assessee by way of some statements of brokers which were not made available to the assessee. Therefore, the respondent could not be held liable on the basis of a mere statement which was made under exceptional circumstance as mentioned above. As such, the validity of such statement, which is in no manner related to any evidence or materials found in the course of search in assessee's premises, is in itself not justified. 14. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the premises of the company or from the residential houses of the managing director and other directors. In such a case, when the managing director or any other persons were not found to be in possession of any incriminating material, the question of examining them by the authorised officer during the course of search and recording any statement from them by invoking the powers under section 132(4) did not arise. The Explanation to section 132(4) permitting such examination came into effect only from April 1, 1989. Even if it were held that the statement of the managing director fell under the Explanation to section 132(4), the Tribunal had recorded a finding of fact to the effect that the statement of the managing director or that of other partners had no evidentiary value as they were not supported by any documentary proof. No question of law arose from the order of the Tribunal. d) Mumbai Bench in the case of Deepchand Co. vs. ACIT [1995] 51 TTJ 421 held that statements recorded during course of search proceeding which continued for an unduly long period could not be considered to be free, fearless and voluntary. Additions cannot be sustained on the basis of statements o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action in the return of income filed subsequent to search. e) It recognizes that a mere confession by an oral statement would not suffice unless there is enough evidence to corroborate such confession. 14.14. On the basis of the above factual discussion, not much reliance should be placed on statements made by the assessee during the course of search because no corresponding seized material was found in the course of search to justify the additions in question. The verbal statement of the assessee without any connection with the other materials found during the search cannot be considered to be materials found during the search. Relevant income tax returns for the past years were filed prior to the search in the normal course suo moto disclosing the particulars of subject additions which stood accepted u/s 143(l) of the Act. Assessment as contemplated u/s 153A is not a de novo assessment and additions made therein, has to be necessarily restricted to undisclosed income unearthed during search. There is nothing on record to suggest that any corroborative evidence was found to justify the addition in question. 15. The next issue raised by the Revenue is regarding statement r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iating, that the purchases and sales were by way of accommodation entries. Thus, the statement given by the assessee should not bind him on the face of the overwhelming nature of evidences available in the record of the department and those produced by the assessee in the absence of any other adverse evidences produced by the department to supporting its stand. The measure of search is to unearth documents revealing concealed income and wealth. Since interrogation is not an object of the search, it is expected that a respondent is not put to pressure into making an admission and the statement should not go beyond what is discovered in course of search from the premises of the assessee. In the case of the assessee, there is nothing on record to suggest that any incriminating evidence was found in connection with the share transactions from the residential and office premises of the Peety group. The entire declaration pertaining to the shares transactions were arrived at only on the basis of the statements recorded of the brokers and the returns of incomes filed during the regular course. The circumstances in which third party statements were shown just on the date of search without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a party is entitled to show and prove that an admission made by him previously was in fact not correct and true. It was incumbent upon the Inspecting Assistant Commissioner to have afforded the assessee full opportunity to prove his assertions. The Inspecting Assistant Commissioner proceeded to impose penalty solely on the basis of the fact that the amounts were surrendered by the assessee at the time of the assessment. Even treating the surrender as an admission of the concealment of undisclosed income, the Inspecting Assistant Commissioner could not deny the assessee its right to prove that the fact of surrender was not such admission and that the so-called admission was in fact wrong and the surrender was made solely to avoid botheration as stated by the assessee. Similar view has been taken in Pullangode Rubber Produce Co. Ltd. (supra) and Deepchand Co. (supra). We also find that ITAT Mumbai Bench in Pushpa Vihar vs. ACIT (1994) 48 TTJ 389 (Bom), held that in surrounding circumstances, it cannot be concluded that what the assessee said originally was sacrosanct and the assessee is not at a liberty to correct the error, originally committed by giving a different version of tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd assessee was directed to be present at the office of the Director of Investigation at Scindia House, Ballard Estate, Bombay. Despite all inconveniences caused due to constraints of time, the respondent along with his Authorized Representatives were present but the department failed to produce their witnesses. Another opportunity was given on 31.12.2007 at the same premises and yet again the department failed to produce the witnesses. Thereafter an email was sent to the concern Assessing Officer requesting him not to rely on these ex-parte statements while framing the order and determining the income of various members in the group. 16.1 Thus affording of opportunity for cross examination was an empty formality and only to technically comply with the respondent's request which could never materialize. However, there was no whisper in the said order as to the request of the assessee for cross examination and its results which was crucial for fastening a liability against the assessee. It reveals that the authorities worked with predetermined mind on the issue. Non providing of due opportunity of hearing was denied in this case which is in violation of principles of natural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the facts of the instant case, only to the extent of ₹ 21.14 lakhs there is a material to co-relate with the admission, representing the excess stock found at the time of survey. Evidently the surrender made by the assessee at the time of survey to that extent and offered for taxation in the return of income is in order. But insofar as the amount in dispute to the tune of ₹ 28. 85 lakhs is concerned, such surrender was specifically made towards any other discrepancy . There is no mention in the assessment order of any such discrepancy found as a result of survey throwing light on the undisclosed income. Even the Departmental Representative could not point out any material showing the existence of undisclosed income earned by the assessee which was unearthed during the course of survey. There is nothing on record which could correlate such additional income offered by the assessee during the course of survey with any other discrepancy. There is no basis for sustaining the addition in question. We also find that the ITAT Mumbai Bench in the case of Mukesh R. Marolia vs. Addl. CIT, Range-15(2) (2006) 6 SOT 247 (Mum), held that an assessment has to be completed, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be cross examined despite assessee's request nor was he cross examined by the A.O. vis-a-vis the affidavit. Therefore, in our opinion, the A.O. could not have brushed aside such affidavit. Hence no mistake can be seen in the order of the Ld CIT(A) in following the decision of this Tribunal in the case of Mukesh R Marolia(supra). 16.6. In the case before us, the transactions in question routed through authorized channel, carried out at prevalent market rates and supported by proper bills and documents. The assessee has discharged the onus cast upon him by furnishing before the Assessing Officer all necessary documents, being bills and contract notes, in support of the purchases and sales made by him. The Assessing Officer is supposed to negate the documentary evidence produced in favour of the transactions of purchase and sale of shares which has not been done by the Assessing Officer. The Assessing Officer is not supposed to wash away on assumptions and arbitrary conclusions. As stated above, the assessee group had purchased the alleged scrips on which LTCG has been claimed from only three brokers, namely, (1) Trimiti Investments and Financial Services, Pune, (2) DPS Sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tements which suits him and totally reject those parts of the same statements which are in support of the assessee. Therefore, either the Assessing Officer should not rely on the statements at all or if he uses these statements as evidence against the assessee then he should read it as a whole and also accept those parts of the statements which support the assessee. One of the most significant evidence which has been conveniently ignored in the assessment order relates to transaction with Trimiti Investment from whom bulk of shares pertaining to G Tech Info, Highland Industries, Fast Track Entertainment and Database Finance were purchased. Prior to search, statement of Dhaval Shah and during the course of post search enquiries, the statement of its Director Shri Sourin Mehta were recorded by the department and its books were a subject matter of scrutiny. They have confirmed all the transactions with the Peety Family and have also confirmed that the payments for these purchases were made by DD/Cheques or settled against day Trading Profits also done through them. Shri Sourin Mehta has unequivocally stated that the transactions with the Peety family are genuine. This shows the assert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s bills. 16.9. The extract of the above statement shows that the transactions with Trimiti Investment were not bogus. Therefore, any documents with this concern should not be suspected unless there is anything otherwise on record. Moreover, during the course of assessment proceeding, the statement of Shri Sourin Mehta was before the Assessing Officer which was accepted as no adverse inference has been drawn with regard to this transaction in the assessment order. As stated above M/s.Trimiti Investments through whom majority of transactions of purchases were effected has stated that the transactions are genuine. There is no discussion about the statement of this broker in the assessment order. Thus, the selective use of evidence by the Assessing Officer is not justified. 16.10. The assessee is not concerned with the modus operandi of the broker's trading with its other clients. As long as he had purchased and sold the shares of the assessee through known and accepted procedure, the broker's misdealing with others should not be a criteria to suspect the appellant's genuine share transactions and capital gain thereupon. If these brokers were suspended by SEBI subsequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntary evidence. The transaction of sale and purchase of shares had been confirmed by the share broker both in his statement recorded u/s.131 of the Act and also by an affidavit filed before the Assessing Officer. In these facts, the Tribunal held that no case of addition u/s.68 of the Act is made by Revenue against the assessee and the fact of purchase and sale is proved by documentary evidence filed before Assessing Officer. 16.11. In case of Shri Acchyalal Shaw ITA No.1977/KoI/2008, the ITAT Kolkata Bench has held as under: In our considered opinion, suspicion cannot replace the real evidential document. Simply by arguing it to be a case of manipulation the Revenue is not supposed to succeed in their contention without proper evidence. Holding this view of the matter on the factual matrix and respectfully following the case laws cited above, we allow the assessee's second appeal. 16.12. Again in the case of ACIT vs. Claridges Investment Finances (P) Ltd. (2007) 18 SOT 390 (Mum), ITAT held as under: As the matter stands we find that the assessee's transactions are supported by the movement of shares as reflected in demat account, movement of money as refle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence and material available with the assessee to prove the transactions of Long Term Capital Gain, the Assessing Officer tried to analyze the transactions of only two scrips namely Fast Track Entertainment (paras 13 to 24 of the assessment order) and Prannet Industries (paras 26 to 28) and concluded that the transactions of all scrips of all the assessees and for all the years were not genuine which is not justified. 18. A search assessment u/s. I53A should be evidence based. A search is authorized to unearth undisclosed assets or transactions resulting in income which are not recorded in the books of account of a person. Therefore, a search puts in motion the process of assessment of the undisclosed income of a tax payer which is not disclosed to the department. In other words, items of regular assessment normally should not form a part of a search assessment u/s. I53A unless there is otherwise contrary on the record. Vide its submission dated 04.03.2008/ 24.03.2008 placed at pages 69 to 82 of the Paper book-II, the assessee gave the details of all the brokers, the shares purchased or sold through them and the Long Term Capital Gains or Short Term Capital Gains as the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant year. The same has been accepted by the AO while making his own computation in the impugned orders. This clearly establishes the source of investment in purchases of the relevant year as claimed by the assessee whereas in the discussions on the issue of capital gain the AO has expressed his reservation about the original date of purchase and has doubted these very transactions which are financed through day trading profit only, as stated above day trading profits are declared in each year when the same accrued to the assessee. In this manner the AO blows hot and cold at the same time which cannot be accepted. Picking up the entire sale proceeds on account of share transactions separately and adding it u/s.69A would establish that the assessee was found in possession of this amount which was not disclosed in his books of account while the fact remains that the capital gains, short term as well as long term, has already been recorded by the assessee in its books of accounts. Thus the provisions of section 69A of the Act has not been judicially applied. 18.1. As stated above, the computation of income filed by the assessee in the original return as well as in the retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the significance of other evidences which were in favour of the assessee. 18.3. It is settled legal position that seized material has to be read and accepted as a whole and it is not permissible to pick and choose or make further estimate therefrom unless and until there is cogent evidence in support of undertaking such an exercise. The settled principle is that documents found in search should be treated as genuine with respect to all entries recorded therein. The Revenue is not justified in taking a view that only part of the contents is correct. Entire document should be read as a whole and contents of the documents should be treated as correct or rejected as a whole. Therefore, when the department can accept transactions relating to share trading profit, there is no reason as to why it should not accept the transactions relating to capital gains. The ITAT Mumbai Bench in the case of Shri Bhagvandas Gordhandas vs. DCIT in ITA.No.5201/Mum/96 has held that a bare statement of a deponent may not justifiably be treated as sufficient enough to fasten a liability on another person, say assessee, when that another person is denying the facts contained in that statement and is alleg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax payee, received money from them through appropriate banking channels which are duly confirmed by them. Such additions made by treating the sale proceeds of shares as unexplained income and not recorded in books of accounts and adding it u/s. 69A of the Act is not justified. 18.6. The Hon'ble MP High Court in the case of Man Mohan Sadani vs. CIT (2008) 304 ITR 52 (MP) has held that the entire sale proceeds cannot be regarded as profit or treated as undisclosed income of the assessee. On the contrary, it is the net profit rate which has to be adopted in such cases. Further Hon'ble MP High Court in CIT vs. Balchand Ajit Kumar (2003) 263 ITR 610 (MP) has taken similar view. The Hon'ble Gujarat High Court in CIT vs. President Industries (2002) 258 ITR 654 (Guj) held that the amount of sales could not represent the income of the assessee who had not disclosed the sales. The sales only represented the price received by the seller of the goods; only the realisation of the excess over the cost incurred could form part of the profit included in the consideration for the sales. Since there was no finding to the effect that investment by way of incurring the cost in acquiri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares were shown as investment and not as stock in trade which was accepted by the department for a long period of time. Since the amounts received were realization of capital, it was clearly a capital receipt. i) There was no concept of venture or organized trade attached with the activity. There was no organization associated with trade. A business requires greater activity and a greater organization which were conspicuously absent in these cases. j) There is no element of adventure or trade in the shares transaction. k) Although the department carried out search, no evidence was found to indicate that the transactions were carried out in the capacity of a trader. 19.1. All these factors have to be cumulatively taken into consideration in order to decide whether the nature of transactions were such that it would fall under the head of adventure in the nature of trade. The Hon'ble Supreme Court in the case of Karnani Properties Ltd. (1971) 82 ITR 547 has held that activities carried on continuously in an organized manner, with a set purpose and with a view to earn profits have to be considered as business activities. Therefore the four elements which must be prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case, was unduly governed by his, wish to bring the entire sale receipts of shares under the maximum rate of tax. In the process he has ignored the fact that the Income Tax Act lays down specific laws/method to compute different heads of income with varying tax slabs/rates. Once the AO decided to approach the issue with this mind set he started looking for various methods to achieve this purpose. Originally in the assessment he taxed the entire receipts as unexplained receipts u/s. 69A which is legally not tenable. Thereafter, he came up with a new theory of assessment so that if his proposition to tax the receipt at maximum rate u/s. 69A fails he can still retrieve the assessment at maximum rate by resorting to the alternate method of taxing the same as business income arising from adventure in the nature of trade. Looking to the huge amount of capital gains shown by the assesses of this group he was tempted to bring it to the maximum tax by treating the whole amount as not genuine. But this exercise, as demonstrated above while discussing factual aspects of the same, is based on incomplete and incorrect appreciation of facts and documentary evidence and fails miserably. AO' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer on the basis of the seized material issued notice under section 153A of the Income Tax Act, 1961, for assessment year 2001-02 and subsequently passed an assessment order under section 153A read with section 143(3) computing the total income disallowing the long-term capital gain and adding the entire sale proceeds received on sale of shares amounting to ₹ 10,14,324 as income from undisclosed sources under section 68 of the Act. The Commissioner(Appeals) held that section 68 of the Act was not applicable to the facts of the case and accordingly deleted the addition. The appeal filed against this order was dismissed by the Tribunal. On appeal: Held, dismissing the appeals, that the fact that the assessees in the group had purchased and sold shares of similar companies through the same broker could not be a ground to hold that the transactions were sham and bogus, especially when documentary evidence was produced to establish the genuineness of the claim. The shares were purchased by the assessees on the respective dates and the company had confirmed to have handed over the shares purchased by the assessees. Similarly, the sale of the shares to the respective buyers was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Fact of tinted broker may be relevant for suspicion but it alone necessarily does lead to conclusion of all transaction of that broker as tinted. In such circumstances, further enquiry is needed and that is for individual case. Such further enquiry was not conducted in that case. 11. At this junction, it would be relevant to mention here that it is not disputed by the Revenue before us that the shares of these assessees were already shown in the earlier Balance Sheet submitted by the assessees, and therefore, in that situation, how the revenue condemned the transaction even on the ground of steep rise in the share. ... 19.5.2. Similarly, we find that Pune Bench of ITAT in the case of ITO vs. Ajay Shantilal Lalwani reported in (2012) 145 TTJ 511, has held as under: Admittedly, in the present case, the assessee has purchased the shares outside stock exchange directly from the broker in physical form though D-mat account was opened on belated date with this explanation that at the time of purchase of shares, he was not having D-mat account and on opening of D-mat account, the shares were transferred to the same. Before the AO copies of the share certificates held by assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the statement given by Mr. Mukesh Choksi wherein he has stated that the transactions of purchase of shares are not carried out through them and the name of his company has been wrongly used and no transaction mentioned in the ledger has been carried out through them. The A.O. had also another proposition that the total purchase price on the date of dematerialisation comes to ₹ 44110775/- which becomes unexplained investment in shares. After deducting the investment in shares from sale price the short term capital gain comes to ₹ 80,03,027/-. However, since he considered the entire receipt on the sale of shares as un- accounted income and added the same to the total income of the assessee u/s 68 of the I.T. Act he did not make any separate addition under the head unexplained investment and short term capital gain. 9.1 We find the ld. CIT(A) deleted the addition u/s 68 on the ground that the sale of shares has not been doubted by the A.O. in the assessment proceedings as well as during remand proceedings and the assessee has proved the genuineness of the sale of shares, therefore, no addition can be made u/s 68 of the Act. The Revenue is not in appeal before us agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee with the copy of ledger account of J.K. Rattonsey and Smt. Hamida J. Rattonsey appearing in the books of Mahasagar Securities Pvt. Ltd. Ans.: I have seen the ledger and on the perusal of the same I found that the transactions are not carried out through us. It seems that our name has been used and no transaction mentioned in the ledger have been carried out through us. Mahasagar Securities have no relations with the J.K. Rattonsey and Smt. Hamida J. Rattonsey. 9.3. On the basis of the above statement of Mr. Mukesh Choksi the ld. CIT(A) upheld the alternate proposition of the A.O. that total purchase price on the date of dematerialisation of shares amounting to ₹ 4,41,10,775/- becomes unexplained investment since the purchases are not recorded in the books of the assessee on that date and the difference between the sale price and the purchase price amounting to ₹ 80,03,027/- becomes short term capital gain since the holding period of the shares is less than 12 months. 9.4 However, we find during the course of cross examination by the assessee before the A.O. on 29.12.2008 Mr. Mukesh Choksi confirmed to have received the cheques from the assessee. The rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which one of us the Accountant Member is a party) following the decision of Hon ble Calcutta High Court upheld the order of the ld. CIT(A) in holding that the A.O. cannot make any addition in the assessee s hands despite the assessee not having made any payment to the entities mentioned by Shri Choksi, whose statement is being relied upon by him. The CIT (A) also noted that Mr.Mukesh Choksi has been vacillating right through and has given different versions at different stages of the proceedings and therefore his evidence was unreliable. 9.6 In view of the above judicial decisions the statement of Mr. Mukesh Choksi cannot be a deciding factor for rejecting the genuineness of the purchase of shares by the assessee especially when all other supporting evidences filed by the assessee were neither proved to be false or untrue. We further find merit in the submission of the ld. counsel for the assessee that the dematerialization of shares from physical holding is a lengthy process and takes considerable time. Therefore, when there is no dispute to the dematerialization of shares before the date of sale, therefore, the shares were purchased much prior to the date of sale. 9.7 The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Choksi had not named the assessee in his statements as the beneficiary who had availed bogus entries. We have noticed that the assessee had shown the investment in shares in the balancesheet of the earlier assessment year and her return of income was accepted by the Department. We are of the opinion that once sales/purchase of shares is accompanied by this kind of evidences the genuineness of the said transactions cannot be doubted. Non-payment of STT cannot be and should not be basis for making addition of the section 68 of the Act. FAA has categorically held that all the necessary details about purchase and sale of shares were made available to the AO during assessment proceedings. We have perused the case laws relied upon by the AR. In the case of Mukesh R Marolia (supra) Hon ble jurisdictional High Court has held as under: .On further Appeal, the ITAT by the impugned order allowed the claim of the Assessee by recording that the purchase of shares during the year 1999-2000 and 2000-2001 were duly recorded in the books maintained by the Assessee. The ITAT has recorded a finding that the source of funds for acquisition of the shares was the agricultural income which was dul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry important to note that no incriminating material has been found during the course of search which could have cast doubt on the genuineness of the transactions or could have indicated that it was a case of assessee s own undisclosed money utilized in the execution of such transactions. Voluminous documentary evidences have been filed by the assessee to prove its claim which support the genuineness of the transaction. However, the AO has utilized the statements of the persons who were not cross-examined by the assessee. Hence, as per the settled judicial principle, such statements cannot be given any weightage. When there arises a question of appreciation of documentary evidences, then a holistic view has to be taken and in the present case majority of the brokers have supported the claims of the assessee and surprisingly some of them have not been approached by the AO at all. Thus, on appreciation of documentary evidences submitted by the assessee, the genuineness of the transactions appears to be established. As regards the aspect of off market transactions, it is noted that neither these are illegal nor prohibited and only some of the compliances have to be made by the brokers. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of trade taken during the course of appellate proceedings for the first time, in the course of assessment proceedings, the AO has taken a definite stand of such transactions being bogus or sham. Hence, such plea has rightly been rejected by the CIT(A) after examining the scope of the powers of the CIT(A) as well as role of the AO in the scheme of Act. Under the scheme of the Act, income is to be assessed under different heads depending upon the source/nature of such income and if the AO has assessed the same under a specific head which is subsequently deleted, then, it cannot be taxed under any other head merely for this reason. The stand of the assessee is of long-term capital gain which has also been accepted by the Department in assessment proceedings completed before the search and in the course of search, no incriminating material has been found to cast a shadow on the nature of such transactions and the AO in s. 153A proceedings has taken a different stand and, therefore, if such stand of the AO has not been accepted, then, the AO cannot take an alternate stand for taxing it under a different head in the course of appellate proceedings. Certain judicial decisions regarding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the Assessing Officer also do not apply to the facts of the present case. 19.6. Considering the totality of the facts of the case and relying on various decisions cited supra and considering the elaborate discussion by the Ld. CIT(A) we find no infirmity in his order accepting the Long Term Capital Gains and Short Term Capital Gains declared by the assessee. Accordingly, the order of the CIT(A) is upheld and the grounds raised by the Revenue are dismissed. 11. Since facts of the impugned appeal are identical to the facts of the case decided by the Tribunal cited (Supra), therefore, respectfully following the decision of the Tribunal under identical facts and circumstances we are of the considered opinion that the assessee is entitled to claim exemption u/s.10(38) of long term capital gain on account of sale of shares of Fast Tract Entertainment Ltd. decided by him. Accordingly, the order passed by the Ld. CIT(A) is set-aside and the AO is directed to allow the claim of the assessee. ITA No.1249/PN/2012 (Jaibhagwan Banarsidas Jindal) (A.Y. 2005-06) : ITA No.1250/PN/2012 (Malti Ghanshyam Goyal) (A.Y. 2005-06) : ITA No.1252/PN/2012 (Naresh Banarsidas Jind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee Mr.Anil Goyal has already offered receipt of such gift from a non relative as his own income. The family of the assessee has been in receipt of gifts from their relatives based in USA. It is very strange that in addition to such gifts the assessee also received a gift from a person who is not distinctly related nor having any personal or business connection. In the gift deed, it has been mentioned that the same is out of love and affection. Since the assessee does not have any connection with the said person, therefore, it is not possible to have any such love and affection. He noted that the gift deed has been signed only by Shri Jadhumani Pradhan and two witnesses whose names do not appear. The signature of the assessee is not there in the gift deed. The place of preparation of the deed is also not mentioned. Further, the amount was initially credited to assessee s account with Siva Agro Industries, Jalna , a partnership firm where assessee is a partner on 29-05-2004. Later on, on 31-03-2005 this amount has been transferred to the capital account of the assessee. Therefore, even if it is to be considered that Shri Sunil Goyal, being the donee, had accepted the gift, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellant as income of the appellant from undisclosed sources. 2. The learned Commissioner of Income Tax (Appeals) further erred in confirming the gift received by the appellant as income from undisclosed sources merely on the basis of similar gift declared as income by Shri Anil Goyal. 3. The learned Commissioner of Income Tax (Appeals) further erred in confirming the gift received by the appellant as income from undisclosed sources without considering and taking into account the various evidences produced by the appellant. 4. The learned Commissioner of Income Tax (Appeals) further erred in confirming the gift received by the appellant as income from undisclosed sources in view of the provisions of Section 56(v) of the Income Tax Act. 5. The learned Commissioner of Income Tax (Appeals) further erred in confirming the action of the Assessing Officer in treating gift received by the appellant as income from undisclosed sources even though there was no incriminating material or evidence found during the course of search. 6. The appellant craves to add to, alter or amend the foregoing grounds, which are without prejudice to one another, at the time of hearing. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned appeal is regarding taxability of the gift of ₹ 15 lakhs received by the assessee from one Sri Jadhumani Pradhan. We find the Assessing Officer disallowed the claim of gift on the ground that (1) the donor is not a relative of the assessee, (2) the brother of the assessee Sri Anil Goyal had already offered the receipt of such gift during the assessment year under consideration as his own income (3) apart from receiving the gifts from relatives based in USA the assessee has also received gift from a person who is not distinctly related nor having any personal or business connection with the assessee and (4) there are certain defects in the gift deed. Further, according to the Assessing Officer this gift was initially credited to assessee s account with Siva Agro Industries, Jalna, a partnership firm, where assessee is a partner on 29-05-2004 and on 31-03-2005 this amount was transferred to the capital account of the assessee. The Assessing Officer therefore applied the provisions of section 56(v) and brought to tax the above gift. We find in appeal the Ld. CIT(A) upheld the action of the Assessing Officer on the ground that Sri Anil Goyal, i.e. brother of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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