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Anil Nandkishor Goyal, Jaibhagwan Banarsidas Jindal, Malti Ghanshyam Goyal, Naresh Banarsidas Jindal, Ghanshyam Chunilal Goyal, Sunil Nandkishor Goyal and Nandkishor Teluram Goyal Versus ACIT Central Circle, Aayakar Bhavan, Aurangabad

2013 (4) TMI 873 - ITAT PUNE

ITA.No.1256/PN/2012, ITA.No.1249/PN/2012, ITA.No.1250/PN/2012, ITA.No.1252/PN/2012, ITA.No.1253/PN/2012, ITA.No.1254 and 1255/PN/2012, ITA.No.1257/PN/2012 - Dated:- 19-4-2013 - Shri Shailendra Kumar Yadav, Judicial Member and Shri R.K. Panda, Accountant Member Assessee by : Shri J.P. Bairagra Revenue by : Shri S.K. Singh ORDER PER R.K. PANDA, AM: The above appeals filed by the respective assessees are directed against the separate orders dated 14-05-2012 of the CIT(A), Aurangabad for the respect .....

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up of Jalna. The assessee was one of the members of the above group. In response to notice issued u/s.153A the assessee filed his return of income on 20-07-2011 declaring total income at ₹ 35,63,110/-. During the course of assessment proceedings the Assessing Officer noted from the computation of income, capital account of the assessee and other details furnished by him that the assessee had shown capital gain of ₹ 20,67,286/- on sale of shares and claimed the same as exempt u/s.10(3 .....

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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 tracke .....

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t at a higher price. The entire operation is a mere book entry. 3.1 The AO noted that in the peety group of Jalna the department had carried out search in 2005-06 wherein such manipulation was noticed. The assessee initially had admitted having involved in such manipulation. Though declaration of undisclosed income was made by the group, the same was later on retracted and while completing the assessment, income claimed exempt was charged to tax and the matter is pending before the ITAT, Pune in .....

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, in the case of remaining assessees of kalika group the assessees have shown income on sale of shares of Fast Tract Entertainment Ltd. as exempt even in returns filed in response to the notices issued u/s.153A/153C of the Act. He observed that the persons are closely connected and most of their transactions take place jointly such as buying or selling of lands/plots etc. and they are involved jointly in many business concerns. Therefore, it is obvious that in the manipulation mentioned above th .....

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55/- 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 .....

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any penny stock. Therefore, a person earning abnormal profit in trading of stock for the first time would certainly go for trading in some more stocks. In absence of such trading, earning of such huge income from such penny stock is against the human tendency. He referred to the decision of Hon ble Supreme Court in the case of Sumati Dayal Vs. CIT reported in 214 ITR 801 and concluded that the assessee has never earned any income from long term capital gain or short term capital gain but it was .....

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20,70,497/- as income from undisclosed sources. 2. The learned Commissioner of Income Tax (Appeals) further erred in confirming the long term capital gain on sale of shares of ₹ 20,70,497/- earned by the appellant as income from undisclosed sources merely on the basis of similar income offered for tax as share trading profit by Shri Arun Agarwal and family. 3. The learned Commissioner of Income Tax (Appeals) further erred in holding that the long term capital gain on sale of shares earned .....

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assessee has purchased 23500 shares of Fast Track Entertainment Ltd. at a cost of ₹ 43,800/- on 25-06-2003. Referring to Page 30 and 31 of the Paper Book he drew the attention of the Bench to the contract note for purchase of such shares. Referring to Page 23 and 24 of the Paper Book he submitted that the assessee in the balance sheet as on 31-03-2004 and 31-03-2005 has shown the purchase of shares of Fast Track Entertainment Ltd. under the head investment . Referring to Page 26 of the Pap .....

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sessee. 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 submitte .....

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amily members order dated 28-09-2012 he submitted that the Tribunal has already allowed the long term and short term capital gain claimed by the assessee and other family members and the appeal filed by the revenue has been dismissed. Referring to page 24 of the order of the Tribunal he submitted that the said group has also traded in the shares of Fast Track Entertainment Ltd. and earned capital gain on shares of such shares apart from other shares. Relying on decisions of various High Courts a .....

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they had claimed the income from such capital gain as exempt. He submitted that the assessee being very new to trading in penny stock has infact brought his own money and has not earned any such long term capital gain as claimed. The earning of such huge income by a person not known to such type of trading is against human probabilities. For this proposition he relied on the decision of Hon ble Supreme Court in the case of Sumati Dayal Vs. CIT (Supra) and Durga Prasad More reported in 72 ITR 80 .....

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es, perused the orders of the AO and the CIT(A) and the Paper Book 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 fac .....

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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 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 .....

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assessee and on further appeal by the revenue, the Tribunal, after considering various decisions has allowed the claim of long term and short term capital gain by the assessee and dismissed the appeal filed by the revenue by holding as under : 14. We have considered the rival submissions made by both the sides, perused the orders of the Assessing Officer and CIT(A) and the paper books filed on behalf of the assessees. We find, Respondent No.1 is an individual belonging to the Peety Group of Jaln .....

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where sponge iron is manufactured and Sri Om Rolling Mills Pvt. Ltd., wherein mild steel bars are manufactured. 14.1. Returns of income for A.Ys. 2002-03 to 2005-06 were filed u/s.139(1) of the Act accompanied by all requisite documents and were processed u/s.143(1) for each of the years under consideration. In the returns for each year, assessee had shown an income under the head Long Term Capital Gains pertaining to sale of shares held as investment which was accepted as such by the Departmen .....

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rchase 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 .....

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Such transferred shares were received by the respondent and were demated before the sale of the same. j) The payment consideration for the purchase of the shares was either through regular banking channels or through running account maintained with the concerned broker. Copies of contract notes, purchase bills, broker ledger account, client ledger in the books of broker, day trading profit bills against which purchase consideration is set off, bank statements and Demat account are attached as pa .....

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ed during the regular course. Form No.10DB evidencing payment of SST on transaction entered on Stock Exchange signed by the broker is on record. Copies of the said form/confirmation has been placed at Pages 388, 389, 504-508 of the Paper Book-l. n) All the sales were supported by contract notes giving full details as to name of the scrip, quantity, price at which sold, total sale consideration, brokerage, settlement no, trade no, order no, bills of brokers, etc. All the contract notes were found .....

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y the assessee. p) The transactions were duly recorded in the books of the share brokers. q) Shares sold have been actually delivered and routed through Demat accounts identifying the brokers to whom the delivery 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, .....

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8) 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 17.03.2006. Assessee claimed that during the course of search, no incriminating evidences was found to draw .....

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7 for the A.Ys. 2000-01 to 2006-07 of Sri Surendra S Peety as detailed earlier also: Assessment Year Returned Income Income returned u/s 153A Income assessed u/s 153A/143(3) 2000-01 7,93,527 8,51,027 8,51,027 2001-02 17,51,567 17,77,367 17,77,367 2002-03 10,31,820 LTCG 15,07,332 10,62,520 LTCG 15,07,332 36,25,725 2003-04 1,25,854 LTCG 42,34,900 1,25,854 LTCG 42,34,900 46,58,190 2004-05 4,81,877 LTCG 34,90,640 4,96,524 LTCG 34,90,640 40,76,330 2005-06 -27,891 STCG 51,16,735 LTCG 19,27,680 Exempt .....

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income for the A.Ys. 2002-03 to 2005-06 had already been filed u/s.139(1) of the Act accompanied by all the requisite documents and processing u/s.143(1) of the Act stood completed. During the course of search no incriminating materials 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 .....

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umstances 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 Long Term Capital Gain, Short Term Capital Gain and Share Dealing Profits earn .....

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tation of income filed by the assessee in the original return as well as in the returns filed u/s. 153A showing the inclusion of the day trading profit in the total taxable income for the relevant year which has been accepted by the Assessing Officer. This establishes the source of investment in purchases of the relevant year whereas in the discussions on the issue of capital gain the Assessing Officer has expressed his reservation and has doubted these very transactions without justifying the s .....

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ment, various notices and questionnaires were issued to the assessee. Same were replied. The details of the correspondences between the assessee and the Department are as under: 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 let .....

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he 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 & 529 of the Paper Book-I. e) The Demat statements of various banks were submitted on 10.12.2007. f) In reply to the not .....

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on record and those produced by assessee without assigning any reason for same. While arriving at the above conclusion, the Assessing Officer mainly relied on the following evidences: a) The statement recorded u/s. 132(4) of Sri Surendra Peety on the date of the search offering the income shown in the regular return under the head LTCG as undisclosed income in various hands which was subsequently retracted at the time of filing the return. b) The statements recorded by the Department from certa .....

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the concerned CIT(A) on the following lines: a) That the AO. erred in placing undue weight on the admission made by the appellant under section 132(4) of the Income tax Act, 1961, totally ignoring the appellant's repeated submissions that the statements were made in a hurry, in a confused state of mind and without having the benefit of referring to the various documents which conclusively proved the genuineness of the transactions. b) That the A.O. was not justified in making the addition o .....

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es 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. .....

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resent case. A search assessment u/s. 153A 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. This is the reason why separate and special provisions have been made to complete search related assessments. An assessment u/s. 153A is n .....

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be added back in the proceedings u/s. 153A when no incriminating documents were found in respect of the disallowed amounts in the search proceedings. Assessments or reassessments made pursuant to notice u/s. l53A are not de novo assessments and therefore no new claim of deduction or allowance can be made by assessee where admittedly the regular assessments are shown as completed assessments on the date of initiation of action u/s. 132. 14.13.3. In the present case, the search was initiated on 17 .....

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s u/s. 153A. All the details regarding the Long Term Capital Gain earned on sale of shares by each of the assessees for each of the years under consideration were already available on record before concerned Revenue authorities which was accepted year after year along with the returns. 14.13.4. The statements recorded during 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 addi .....

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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 asses .....

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circumstances, does not have much evidentiary value and mere confessional statement without there being any documentary proof shall not be used as evidence against the person who made the statement: a) ITAT Ahmedabad Bench in the case of Smt.Sushiladevi S. Agarwal [1994] 50 ITD 524 (Ahmedabad) - it was held that all that is stated by any deponent on the search day should not be taken as truth, the whole truth and nothing but truth. Such statements undoubtedly have evidentiary value and credibili .....

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hat the surrender made by him at the time of search was under compulsion and not with free mind or that the addition is not warranted on the basis of available material..... Addition should be considered on merits rather on the basis of fact that the amount was surrendered by the assessee. c) Hon'ble Andhra Pradesh High Court in the case of CIT vs. Shri Ramdas Motor Transport [1999] 238 ITR 177 (AP) held that under the provisions of section 132(4) as it existed at the relevant time the quest .....

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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 stateme .....

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an unduly long period could not be considered to be free, fearless and voluntary. Additions cannot be sustained on the basis of statements of partners recorded at the time of prolonged search operation which were retracted later on. e) Hon'ble Supreme Court in the case of Pullangode Rubber Produce Co. Ltd. Vs. State of Kerala 91 ITR 18 (SC) held that an admission made by a person is relevant but not conclusive. It is always open to a person, who admitted a fact, to explain or clarify that wh .....

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f so called confessionary statements of assessees made during the course of the search. The Board's letter issued from F.No.286/2/2003/IT(Inv) dated l1.03.2003 is extracted below: "Instances have come to the notice of the Board where the assesses have claimed that they have been forced to confess the undisclosed income during course of search and seizure and survey. Such confession, if not based on credible evidence, are altered/retracted by the concerned assesses while filing returns o .....

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ssion as to undisclosed income." The above circular goes into the purpose and scope of search and emphasizes following aspects: a) The purpose of search is evidence gathering with regard to undisclosed income. b) It is not for obtaining confession as to the undisclosed income and adopting the same in the assessment without any corroborative evidence. c) The evidence should be in the realm of demonstrable evidence to sustain assessment. d) In the absence of corroborative evidence, there is a .....

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al 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 undisclos .....

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e assessee as there was no incriminating material found during the course of search. During the course of search action, statement of Shri Surendra S. Peety was recorded u/s. 132(4) of the Act on 24.03.2006. He was confronted with the statement of certain brokers namely, Dhawal R. Shah. Director of Trimiti Investment and Financial Services Ltd., Pune, Milan R. Parikh, MD of Action Financial Services Pvt. Ltd. and Shri Vijay Bhagwandas of Vijay Bhagwandas & Co. In this regard it is pertinent .....

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taining to the genuineness of the share transaction. The Assessing Officer failed to appreciate the circumstances in which statements were obtained and totally ignored the respondents repeated submissions that the statements was made peculiar circumstances in a particular state of mind and without having the benefit of referring to the various documents which conclusively proved the genuineness of the transactions. There is nothing on record to suggest that evidences were found in course of sear .....

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e in possession of the Assessing Officer relates to some oral statement of some brokers who alleged, without substantiating, 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 sear .....

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ses 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 making available copy of the same coupled with the mental condition of various members of assessee s family in course of prolonged search beyond normal hours would suggest that the ad .....

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act the same if he can establish that the admission was made in abnormal circumstances or that the contents of the admission are not borne out by facts and materials available. In the instant case, it is evident from the facts as discussed above that the so-called disclosure of Shri Surendra Peety was extracted under exceptional circumstances based on helpless situation in which he was put at the time of making the disclosure and furthermore, it has not even been substantiated by linking it up w .....

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e brokers, filed their returns in response to the notice u/s. l53A without including the income so offered in the course of search. Subsequently, on a statement recorded of assessee Shri Surendra S Peety u/s. 131 of the Act on 14.12.2007 as to why his acceptance of undisclosed income is not reflected in the return of income filed in pursuance to the notice u/s.153A, he stated that the same was made under pressure as he did not have access to the papers and documents lying at his factory premises .....

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eded 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 vi .....

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ing to support the addition. In the present case also the alleged statement was retracted by Shri Surendra S Peety. As regards retraction, the principle is that it should be retracted before the concerned authority decides the matter. In other words, the respondent should not place the authorities in such a position so as to thwart the process of investigation. In the case of the assessee, the retraction was well evident from the returns filed in response to notice u/s. 153A and respondent's .....

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t;I have carefully studied and analyzed factual position as stated above which cannot be disputed and is a matter of record; I have also examined various case laws, relied on by the AO, on the issue of admission / retraction. On the issue of retraction, the AO relied on the following case laws all of which are distinguishable on facts and therefore, not applicable to the case of the respondent ... Therefore, it is held that the issue of genuineness of claim of LTCG & STCG of the respondent g .....

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assessees till the concluding stage of the proceeding. A request was made by the assessee vide letter dated 19.12.2007 and these statements were made available to the assessee on 25.12.2007 which happened to be a public holiday. The opportunity for cross examination was afforded to the respondent on 26.12.2007 and 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 ti .....

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s 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 .....

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16.3. The Assessing Officer has acted solely on the statement of a third party without conducting any valid inquiry of its own to counter the statements made. The Assessing Officer has not brought on record any evidence to falsify the claim of the assessee or that the share transactions were bogus. The Assessing Officer has acted wholly on the alleged statement of a third person behind the back of the assessee without bringing on record any evidence in support of such suspicion and without affo .....

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he broker without testing its correctness. Further the Assessing Officer has not placed any material on record to question the genuineness of the documentary evidences furnished on behalf of the assessee. The ITAT, Mumbai Bench in the case of DCIT vs. Premsons reported in 130 TTJ 159 held that the statement recorded had no evidentiary value until it has some corroborative material/evidence. The relevant extract of the same is reproduced as under: Going by the verdict of the High Courts and the p .....

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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 thr .....

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Marolia vs. Addl. CIT, Range-15(2) (2006) 6 SOT 247 (Mum), held that an assessment has to be completed, on the basis of records and material available before the assessing authority. Personal knowledge and excitement on events should not lead the Assessing Officer to a state of affairs where salient evidences are overlooked. In case the testimony of a witness, the assessee is required to be afforded an opportunity to cross examine him failing which the testimony cannot be utilized against the a .....

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o prayed for an opportunity to cross-examine the auctioneers. When such a request was made it was incumbent on the officer to afford opportunity to the assessee to cross examine the authors of those books. The petitioner had been denied the reasonable opportunity which was due in law, in relation to the assessment, and that was sufficient to vitiate the order. The order of reassessment was not valid and was liable to be quashed." 16.5. We find Hon'ble Bombay High Court in the case of C. .....

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ffidavit whereby Shri Mukesh Choksi had, against the earlier statements given by him, confirmed the transactions. It is also seen that the assessee was not given a chance to examine Shri Mukesh Choksi despite request. Hon'ble Supreme Court has in the case of Mehta Parikh vs. CIT (30 ITR 181) laid down the law that where a person who has given an affidavit was not cross examined, it would not be open to challenge the correctness of the statements therein. Here, Shri Mukesh Choksi was not allo .....

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er 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 concl .....

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I which is evident from the fact that majority of the purchases of the members of the Peety family were from Trimiti Investments and Financial Services. Purchase of scrips of Prannet Industries and part purchases of Fast Track Entertainment are from DPS Shares and Securities. 16.7. The Assessing Officer failed to evaluate the transaction in shares in its entirety and the evidences available in respect thereof and has relied primarily on some unsubstantiated allegations of some brokers while most .....

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ommodation. They also confirmed of having had transactions with the members of the Peety family. They have also not disputed the payment of purchase and sale consideration either through running settlement or by cheques/demand drafts. 16.8. Further Action Financial Services has confirmed that the members of the Peety family are his registered clients and that he has done genuine sales on behalf of them. Since no purchases were made from the Action Financial Services, his contention that he has n .....

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t has to be taken as a whole and the Assessing Officer should not pick and choose those parts of the statements 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 .....

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ransactions 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 assertion of the assessee. For ready reference relevant portion of his statement dated 28.11.2007 is reproduced below: Q. No.5: Please mention whether you have traded the shares of Fast Track Entertainm .....

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l etc., they stated before officials of IT Dept. that the transaction in these share actually did not happen. They had issued bogus purchase bills to the needy people without any real transaction & these bills were back dated you have stated that you have purchased these shares from the above mentioned brokers. Considering this why it shall not be assumed that you had also issued bogus purchase bill to Peety family of Jalna for these shares. A. I had purchased the share from broker at Mumbai .....

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by you in your statement on 28.11.07 that you have purchased these shares is physical format from T.H.Vakil, Vijay Bhagwandas, DPS for Peety family. It was found that all these purchase bills issued by the brokers were bogus, this was also communicated to you on 28.11.07. These brokers of Bombay admitted that these Bills are backdated i.e. these had been prepared just before the sale of these shares through D-mat? As you were sub-broker & had arranged these shares for Peety family from these .....

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ment 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 as .....

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and the assessee company is not concerned in any way unless action is based on transactions including assessee s transactions. There is nothing on record to suggest that transactions with assessee are also basis for SEBI s action against alleged brokers. The Hon'ble Kolkata High Court in the case of CIT vs. Korlay Trading Co. Ltd. (1998) 232 ITR 820 (Kol) held that once the assessee has furnished the name of the company, number of shares purchased, date of sale, amount of purchase money, amo .....

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nd exemption u/s. 54F was sought from long term capital gain earned on the transaction. The purchase and sale of shares were duly supported by bills and contract notes. Further, the share broker accepted having undertaken the sale and purchase transaction on behalf of the assessee. The share issuing company i.e., Coronet Industries Ltd., however stated that as per their records, no shares were transferred in the name of the assessee and further stated that the folio No. written on the share scri .....

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stered broker is proved by documentary evidence filed on record. The payments of sale proceeds of 20,000 shares were received by the assessee by account payee cheques. It was found that the transaction has been entered into through a registered broker at prevalent market price and was supported by documentary 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 A .....

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ed 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 mo .....

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of Form B was in filed in CSE. For these reasons it is not verifiable as to whether the trades in question were done through the trading system of the exchange or not. The answer of the assessee to these deficiencies and irregularities is that he could not be held responsible for the same. It was not the assessee but the three Kolkata brokers who were members of the CSE .... The AO does not have support from the Special auditors, CSE or any other quarter to that effect whereas the assessee has r .....

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in an assessment u/s.153A without any material being found during search but simply on presumptions. This is a case in which there is no evidence against the respondent except some vague, confusing, contradictory, self serving unsubstantiated statement of witnesses from which the Assessing Officer has inferred the conclusion against the assessee. Hon'ble Supreme Court In Dhakeshwari Cotton Mills Ltd. vs. CIT (1954) 261TR 775 (SC), has held that the Income Tax Officer is not entitled to make .....

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rm 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 no .....

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shares purchased or sold through them and the Long Term Capital Gains or Short Term Capital Gains as the case may be earned in respect thereof. The sale proceeds of shares have been recorded in the books of accounts maintained by the assessee and capital gain arising on the same has been shown for all the years in their respective Income Tax Returns on which appropriate taxes were also paid. The charging section 69A provides for addition of unrecorded income and wealth when either no explanatio .....

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contention of the assessee, the CIT(A) vide its appellate order dated 18.06.2008, has rightly stated in para 18.1 and 18.2 as under (page 74 & 75 of the order): "18.1. Thus there is an inherent contradiction in the impugned assessments as far as the applicability of Section 69A is concerned. A plain and simple reading of Section 69A makes it abundantly clear that the provisions of this section cannot be applied in a case where the money, bullion or jewellery or any other receipt has alr .....

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subsequent proceedings as well, no such undisclosed receipts have been found. Thus, applicability of Section 69A becomes null and void, ab-initio. This also implies that assessee's claim with regard to capital gain in each year remains unaltered as per the computation filed along with the return. 18.2. Moreover, the computation of income filed by the assessee in the original return as well as in the returns filed u/s 153A shows that the day trading profit has been included in the total taxab .....

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eclared 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 it .....

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Officer regarding this profit. This day trading profit clearly establishes the source of purchases of investments of each of the relevant year as claimed by the assessee. In discussions on the issue of capital gain the Assessing Officer has expressed his reservation about the same and has doubted these very transactions which are financed through day trading profit only. In this manner the Assessing Officer takes stand which is contrary to the material on record. All the documents supporting th .....

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r, day trading profit bills evidencing the payments settled against the day trading profits, Demat Accounts. Copies of the Bills of Day Trading Profit shown as Income from other sources for various years were attached at pages 80 to 171, 225 to 254 and 307 to 331 of the Paper Book-I. 18.2. Few of the brokers employed for the day trading of shares were the same as the ones who bought and sold the shares held as investment. The Assessing Officer was not justified in placing part reliance on the sa .....

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be deliberately relied only on those evidences and enquiry results which were against the assessee while diluting 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 se .....

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n 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 alleging the same to be incorrect and that a satisfactory/convincing corroboration of the said statement, by a reliable evidence, is essentially needed to justifiably base the addition thereon. T .....

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amine them. 18.4. In view of the above, the CIT(A) has rightly concluded that the Assessing Officer has arbitrarily adopted a pick and choose policy in respect of both the statements recorded of the brokers as well as in treating the share trading profit as genuine while not accepting the capital gains earned by the assessee in respect of the investment made in shares. 18.5. The Assessing Officer has added the entire sale proceeds of shares as undisclosed income of the assessee. When the Long Te .....

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the assessees. The capital gain arising on the same has been shown for all the years in their respective Income Tax Returns and appropriates taxes were paid on the same. The charging section 69A provides for addition of only unrecorded income and wealth and when no explanation is given by the appellant or the explanation given by assessee is not up to the satisfaction of the Assessing Officer regarding its nature and source of acquisition. The assessee has recorded the sale proceeds and purchase .....

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9;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 th .....

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sclosed, only the excess over the cost incurred could be treated as profit. In view of the above discussion and the case laws relied upon, it can be inferred that the approach adopted by the Assessing Officer in adding the entire sale proceeds of shares as undisclosed income of the assessee is not justified. 19. An alternative attempt has been made by the Assessing Officer to tax the profit arising out of sale of shares as an adventure in the nature of trade which is based on wrong assumption of .....

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ting the share transactions as bogus relying on the statements made by the brokers which have been discussed earlier. All this exercise of verification of share transactions was undertaken with an approach to bring the capital gain under a particular head that is liable to be taxed at the maximum rate. The alternate proposition made by the Assessing Officer to now treat the same as adventure in the nature of trade shows absolute lack of conviction on his part. The assessee vide his submission da .....

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pective capital accounts. e) The investments were made by them as ordinary investors. f) In all cases delivery of shares were taken and transactions were not speculative in nature. g) The holdings had continued for a fairly long time. h) In the books and returns filed, the 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 n .....

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ken 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 present in order to classify an activity as .....

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n the nature of trade, (ii) whether the transaction is an isolated one or forms part of a series of transactions showing the transaction to be in the nature of adventure in trade, (iii) the fact that the property was sold within a short time by itself does not indicate that the transaction was in the nature of trade, (iv) whether property was purchased with the intention of investment and not an adventure in the nature of trade, and (v) it is not a case merely on the facts and circumstances of t .....

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urely of investment and the fact that the shares were sold within a short time did not indicate that the transaction was in the nature of trade. There was no material to suggest that the motive was to sell the shares and earn some quick profit. Therefore, the transactions were not an adventure in the nature of trade and the profit arising from sale of the shares was not assessable as income from business. 19.4. In this background, it is clear that the Assessing Officer was not able to establish .....

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me 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 .....

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nce and fails miserably. AO's attempts to examine the matter afresh at appellate stage from an entirely new angle is beyond permissible limits under the Act. The AO making original addition u/s 69A made a technical and legal mistake. His alternative proposition for taxing the same as business income. This shows that the AO is not confident of either of his moves making them self-effacing and mutually destructive. I may also add, though at the cost of repetition, that initially the Department .....

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he IT Department and it was never frowned upon. Moreover, search per se in appellant-group did not reveal anything to justify viewing of these transactions with suspicion. All this exercise of verification of share transactions was undertaken with a different approach, i.e. to bring the whopping amount of capital gain under a particular head that is liable to be taxed at the maximum rate. In the facts of the case as brought out above and in view of legal position sufficiently discussed by me thi .....

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al gains on sale of shares which was accepted by the Assessing Officer in the respective assessments. Subsequently, there was a search action in the case of various assessees belonging to a group and the group offered additional income of ₹ 2 crores, out of which ₹ 3 lakhs were offered in the hands of the assessee for the assessment year 2004-05 and ₹ 7 lakhs in the assessment year 2005-06. The Assessing Officer on the basis of the seized material issued notice under section 15 .....

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e 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 confir .....

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ansactions were off-market transactions could not be aground to treat the transactions as sham transactions. On a perusal of the documentary evidence, the Tribunal had arrived at a finding of fact that the transactions were genuine. The Tribunal had further recorded a finding of fact that the cash credits in the bank accounts of some of the buyers of shares could not be linked to the assessees. There was no substantial question of law. 19.5.1. We find the Hon'ble Jharkhand High Court in the .....

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ous case Assessing Officer himself, it is clear that after getting that enquiry report, the SEBI prima facie found involvement of some of the share brokers in unfair trade practices. Even in a case where the share broker was found involved in unfair trade practice and was involved in lowering and rising of the share price, and any person, who himself is not involved in that type of transaction, if purchased the share from that broker innocently and bonafidely and if he show his bonafide in trans .....

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be a sham transaction. 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 subm .....

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tion 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 in physical form were provided which contained complete relevant details such as address of registered office of the company, signatures of the authorized signatory along with two directors signatures, value of shares with paidup amount of shares purchased in each company, date of iss .....

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. and by broker. Merely because there was substantial delay in transferring the shares into D-mat account from the date of purchase and the transactions not routed through Calcutta stock exchange, the AO was not justified in doubting the declared date of purchase of the shares ignoring the above evidences. In off market transaction in shares, any enquiry from the stock exchange will not yield result in favour of Revenue. Revenue has to see whether the sale has been effected or not as per the acc .....

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sessee. The same is upheld. 19.5.3. We find the Mumbai Bench of the Tribunal in the case of Shri Jafferali K Rattonsey vs. DCIT reported in 2012-TIOL-236-ITAT-MUM, has held as under: 9. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. In the instant case the A.O. made addition of ₹ 5,09,25,802/- as unexpl .....

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5/- 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 o .....

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investment in the hands of the assessee and the difference between in sale and purchase of shares has to be treated as short term capital gain since the assessee could not substantiate the purchases. Therefore, the question that has to be answered in the grounds raised by the assessee is as to whether the purchase of shares by the assessee are genuine or not and whether the holding period is more than 12 months or not. 9.2 We find the assessee before the A.O. has filed the copies of contract not .....

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s of MSPL were also filed before the A.O. Similarly the copies of contract notes and sale bills of all the shares transferred to Techno Shares & Stocks Ltd. with copy of D-Mat account and copy of confirmation letter dtd. 28.10.2005 from Sunchem Securities P. Ltd. were also filed before the A.O. Nothing was brought by the A.O. to prove that any of these evidences filed by the assessee is false or untrue. The Revenue has basically gone on the statement of Mr. Mukesh Choksi who denied to have k .....

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t. Hamida J. Rattonsey. From this account it is seen that the assessee have carried out regular transaction with Mahasagar Securities Pvt. Ltd. Pl. confirm the ledger account furnished by the assessee 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 .....

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e 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 relevant question No. 2 and answer thereof is as under:- Q.2. Question put up by Shri Digant Bhatt - We have issued a C .....

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Ans. I have not given any instructions. Q.4 Question put up by Dr. Mahesh Akhade * In the statement recorded u/s.131 of the IT. Act on 24.12.2008, you have denied in the answer to Question No.8, 9, 12 & 13 that Mahasagar Securities Pvt. Ltd. and Alliance Intermediaries Network Pvt. Ltd. has no relationship to the assessees J.K. Rattonsey, Hamida Rattonsey, Sunay Mehta and Samit Mehta. You have also denied you have any share transactions with these persons. Kindly confirm the same. Ans. I am .....

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,91,378/- have been deposited. Ans. At present they are not available with me, I will furnish the same after receipt of the same. 9.5 From the above, it is clear that Mr. Mukesh Choksi is double speaking in his statements i.e. one given before the A.O. and the one during cross examination before the A.O. Under these circumstances one has to see the evidentiary value of a person making double speaking. We find the Hon bleCalcutta High Court in the case of Eastern Commercial Enterprises (supra) ha .....

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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 .....

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hat it is the date of broker s note that should be treated as the date of transfer in cases of sale transactions of securities provided such transactions are followed up by delivery of shares and also the transfer deeds. Similarly, in respect of the purchasers of the securities, the holding period shall be reckoned from the date of the broker s note for purchase on behalf of the investors. The CBDT Circular No. 768 dtd. 24.6.1998 was issued to clarify the determination of date of transfer and th .....

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and not from the date of dematerialization . Since the holding period of the shares as per the broker s note and its subsequent sale after dematerialization is more than 12 months, therefore, the shares become long term capital asset and the assessee s claim of long term capital gain is correct. In this view of the matter we set aside the order of the ld. CIT(A) and direct the A.O. to accept the long term capital gain declared by the assessee. We hold and direct accordingly. The grounds raised .....

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se of Sharada Credit and Mukesh R Marolia has upheld the orders of the ITAT, Mumbai. In those cases it has been held that shares purchased/sold in the off market cannot be considered illegal transactions. We find that the AO had not afforded opportunity of crossexamination of Shri Mukesh Choksi to the assessee. It is noteworthy that Sh. 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 .....

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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 w .....

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kers namely, M/s Richmond Securities Pvt. Ltd. and M/s. Scorpio Management Consultants Pvt. Ltd. cannot be disputed, because the fact that the Assessee has received the said amount is not in dispute. It is neither the case of the Revenue that the shares in question are still lying with the Assessee nor it is the case of the Revenue that the amounts received by the Assessee on sale of the shares is more than what is declared by the Assessee. Though there is some discrepancy in the statement of th .....

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ax Act, 1961 cannot be faulted. We are of the opinion that the facts of the case of Mukesh R Marolia are similar to the facts of the cases under consideration. Respectfully following the orders of the Hon ble High Court and the coordinating benches of the Tribunal we hold that purchase and sale of shares by the assessee was a genuine transaction, and hence, addition made by the AO cannot be endorsed. Upholding the orders of the FAA, we dismiss the appeals filed by the AO. 19.5.5. We find the Nag .....

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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, s .....

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ns, it is noted that neither these are illegal nor prohibited and only some of the compliances have to be made by the brokers. As regards the aspect of such compliances, it is not the case that all the off market transactions have not been reported by the concerned brokers to the stock exchange as per rules and even otherwise, any failure on the part of the brokers in doing such compliance cannot make the contract between the assessee and the broker illegal or void as the broker may face the con .....

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ave not been reported to the stock exchange, how such contract notes can be matched with the records of stock exchange. Economic consequences as a result of off market transactions or otherwise have taken place and, therefore, such transactions cannot be treated as sham merely for some discrepancies or for the view of the AO in regard to genuineness of these transactions. The Revenue has also relied on the decisions of SEBI involving some scrips. The role of SEBI is different and the orders pass .....

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mainly on the aspect of price rigging in such manner. Hence, the same cannot be of any assistance to the cause of the Revenue. Thus, on the basis of appreciation of facts and circumstances of the case as a whole and considering the documentary evidences on record, the share transactions cannot be considered as ingenuine/sham and, therefore, the sale proceeds of such share transactions cannot be taxed under s.68. As regards the plea of the Revenue regarding treatment of share transactions as an .....

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e 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 .....

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olume, line of trade in which the assessee is mainly engaged and the decision of the CIT(A) is correct in law on that count also. 19.5.6. So far as the decision of the Pune Bench of ITAT relied on by the Revenue in the case of Smt. Surekha Bhagvatiprasad Mundada v. ITO & Ors. in ITA No. 1332/PN/2009, we find the same is not applicable to the facts of the present case. In this case, the Hon. Tribunal has deleted the addition u/ s. 68 on account of long term capital gains declared by the appel .....

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r produced by the assessee. (vi) There was no delivery to the assessee in the normal period prescribed in the SEBI Rules. (vii) The assessee made payment to the broker after a period of 18 months from the date of broker's note. (viii) Enquiry by SEBI was going on against broker R. P. Shah for price rigging of shares, who was suspended by SEBI. (ix) Broker's husband is a relative of the family. (x) Absence of relevant entries" in the records of Calcutta Stock Exchange. (xi) It was he .....

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ant case. The various other decisions relied on by the Ld. Departmental Representative as well 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 u .....

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assed 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 Jindal) (A.Y.2005-06) : ITA No.1253/PN/2012 (Ghanshyam Chunilal Goyal) (A.Y. 2006-07) : ITA No.1255/PN/2012 (Sunil Nandkishor Goyal) (A.Y. 2006-07) : ITA No.1257/PN/2012 (Nandkishor Teluram Goyal (A.Y. 2006-07) : 12. After hearing both .....

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nt of sale of shares of Fast Track Entertainment Ltd. in the above appeals are allowed. ITA No.1254/PN/2012 (Sunil Nandkishor Goyal) (A.Y. 2005-06) : 13. Facts of the case, in brief, are that the AO during the course of assessment proceedings noted that the assessee has credited an amount of ₹ 15 lakhs on 31-03- 2005 as gift received. From the various details furnished by the assessee during the course of assessment proceedings he noted that the assessee has shown to have received ₹ .....

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er, the amount so received was offered to tax later on during the course of survey action u/s.133A. Since the gift so received was from a person who is not a relative of the assessee nor he has any business connections with the assessee, therefore, the AO asked the assessee to justify the gift so received from the said person. The assessee submitted that it has explained the source of investment and the asset acquired by furnishing the details of gift along with the copy of Demand Draft copy of .....

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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 cred .....

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om other sources . Since the donor has no relationship with the assessee or the gift was not made on the instances mentioned as exceptions in the said provisions, the Assessing Officer held that the gift gets charged to income. He further noted that the assessee has never gifted any amount to any person including Jadhumani Pradhan. According to the AO gift is such a thing which is always reciprocated to show the goodness gesture. However, the assessee has never done so. In view of the above, the .....

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t the appellant is not relative or business associate of Shri Jadhumani Pradhan from whom he has claimed receipt of gift of ₹ 15 Lakhs. It is also undisputed fact that Shri Anil Goyal, i.e., brother of the appellant who has also claimed to have received gift from Shri Jadhumani Pradhan, has surrendered the said gift as his own income and offered the same to tax. The appellant has not given any gift to any person including Shri Jadhumani Pradhan. In view of the above facts, I am of the cons .....

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is in appeal before us with the following grounds : 1. The learned Commissioner of Income Tax (Appeals) erred in confirming the action of the Assessing Officer in treating the gift of ₹ 15,00,000/- received 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 .....

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come 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. 17. The Ld.counsel for the assessee submitted that the assessee has received gift of ₹ 15 lakhs f .....

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mani Pradhan and has surrendered the said gift as his own income and offered the same to tax he referred to the copy of the assessment order of Anil Goyal at Page 9 of the Paper Book and submitted that Shri Anil Goyal had received gift from one Mr. Naresh Singhvi and not from Jadhumani Pradhan as observed by the Ld.CIT(A). He submitted that the gift deed is signed by the assessee and copy of signed gift deed is given to the AO. However, earlier, the accountant of the assessee has given the copy .....

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O and CIT(A) have wrongly invoked the provisions of section 56(v) which was introduced by The Finance Act 2004 and is applicable to any sum of money exceeding 25000 received from any person on or after 01-09-2004. Since in the instant case the gift has been received on 24-05-2004 which is much before 01-09-2004, therefore, no addition can be made u/s.56(v) of the Income Tax Act. He accordingly submitted that the addition made by the AO and sustained by the CIT(A) should be deleted. 17.1 The Ld. .....

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e 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 Offi .....

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claimed to have received gift from Sri Jadhumani Pradhan has surrendered the said gift as his own income. Further, the assessee has not given any gift to any person including Sri Jadhumani Pradhan and the provisions of section 56(v) are applicable. 19. It is the submission of the ld. Counsel for the assessee that the brother of the assessee Sri Anil Goyal has not received any gift from Sri Jadhumani Pradhan and that the provisions of section 56(v) are not applicable to the facts of the case sin .....

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