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A.C.I.T., Central Circle-XXIV, Kolkata Versus Amita Agarwal, Poonam Agarwal Radheshyam Agarwal, HUF Rakesh Agarwal, Rakesh Agarwal, HUF and Smt. Manju Devi Agarwal

2011 (10) TMI 704 - ITAT KOLKATA

ITA No. 247/(Kol) of 2011, ITA No. 248/ (Kol) of 2011, ITA No. 255/(Kol) of 2011, ITA No. 256/(Kol) of 2011, ITA No. 257/(Kol) of 2011 ITA No. 259/(Kol) of 2011 - Dated:- 11-10-2011 - Shri B. R. Mittal, Judicial Member & Sri C.D.Rao, Accountant Member For the Appellant : Shri Shishir Sinha & M.Bhattacharya For the Respondent : Shri D.S.Damle ORDER Per Shri C.D.Rao, AM These six appeals filed by department in respect of six assessees mentioned above, are against separate orders of the C.I .....

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the Revenue.: 1. That in facts and circumstances of the case and in law the Ld.CIT(A) has erred in deleting the addition of ₹ 67,04,678/- made on account of rejection of assessee s claim of long term capital gain exempt from tax u/s 10(38) of the Act without proper appreciation of the evidences brought on record by the department that it was assesses own unaccounted money introduced as long term capital gain arranged accommodation entries in the books of accounts of brokers which the broke .....

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in the return, in reality represented introduction of assessee s unaccounted money. According to AO the assessee s alleged transactions of purchase & sale of shares were not real. The assessee had only attempted to present a fact that the amounts received from the stock broker represented sale proceeds of shares. However in reality there was no genuine or bonafide purchase & sale of shares. In support the AO had given the following reasons. a) In the statement u/s 132(4) recorded before .....

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d before the ADIT(Inv) that the share sale transactions were nothing but accommodation entries wherein cheques were issued in lieu of cash. d) The purchases of shares were antedated so as to prove that the shares were held for more than 12 months prior to date of sale, so that the shares could be considered to be long term capital asset. e) The antedating of purchases was apparent from the fact that the payments towards purchase consideration were made after long time gaps; ranging upto 45 days .....

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file returns of allotment in respect of shares allotted by them consequent to amalgamation. h) The assessee was shown sworn statements of Shri Khemka and Ashish Stock Broking Pvt. Ltd but assessee did not ask for copies thereof. In response to show cause, the assessee merely filed copies of retraction affidavits of Shri Khemka and Director of Ashish Stock Broking. The retraction affidavits could not be accepted because these were never filed before the ADIT(Inv) and there was considerable gap be .....

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that capital gain could be introduced in the books by converting black money into white. The modus operandi generally followed in such transactions was followed by the assessee s stock broker as well enabling the assessee to introduce his unaccounted money in his books in the form of long term capital gains on sale of shares & claim exemption u/s 10(38). k) The stock broker through whom the assessee conducted his share transactions were indicated by SEBI on the charges of price manipulation. .....

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ed the addition by observing as under : 12. After considering the AO s reasoning & subsequent conclusions discussed in the assessment order and the remand report I however find that there are few apparent contradictions. The AO has held that assessee s purchase & sale of shares were not real. At the same time however he also alleged that the purchases were in fact made; but were antedated for the purposes of accounting. The documents which are placed on record however show that there is .....

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idences which showed that after the shares were purchased they were delivered to respective companies for registration in assessee s name. The order of the Calcutta High Court approving the amalgamation proved that the shares purchased by assessee were validly issued by respective companies and the Calcutta High Court had permittedc these companies to amalgamate with Khoobsurat Ltd & Emrald Commercial Ltd. the amalgamation was approved by the Calcutta High Court in conformity with the Compan .....

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s favour. The letters of allotment issued by the amalgamated companies contained details of share certificate numbers, distinctive numbers of shares, folio no. etc. which proved the valid issuance of shares in assessee s name by the amalgamated companies. The shares received form the amalgamated companies were listed on CSE and the stock exchange had permitted dealing in these shares which was possible only when the amalgamated companies had complied with statutory formalities concerning valid i .....

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ares of Khoobsurat Ltd & Emrald Commercial Ltd. All these documentary evidences substantiated assessee s purchases of shares. Although the AO has doubted genuineness of the purchases he did not bring on record any material to show any specific infirmity or falsity in the documents produced by the assessee in support of purchases. Had there been no valid issuance and allotment of shares in assessee s favour then it could not have been possible for the assessee to get credit for these shares i .....

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res purchased in 5 amalgamating private limited companies. 14. The AO s 2nd conclusion that assessee had antedated the purchases also appears to be contrary to the facts on record. The AO made this allegation on the ground that there was considerable time difference between the dates of purchase and the dates of payments. The delay in making payments ranged upto 45 days. In the impugned order the AO tabulated a chart giving particulars of the dates on which shares were purchased and dates on whi .....

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not 45 days as alleged. Similarly shares of Bosky Marketing Pvt Ltd were purchased by the assessee on 21.08.2003 for ₹ 34,000/- whereas ₹ 15,000/- & ₹ 19,000/- were paid on 25.08.2003 & 26.08.2003 respectively. Full consideration was thus paid within 5 days of purchase. Yet according to AO the time gap between the purchase and payment was 22 & 23 days respectively. Again in the case of Bosky Tradecome Pvt. Ltd shares were purchased on 28.08.2003 at the cost of ͅ .....

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sale was complete only after delivery of shares in physical form along with signed share transfer forms was made. It was not a case where shares were transacted in demat form and delivery could be made through electronic exchange. Since delivery of shares involved compliance with elaborate procedure; time taken by the broker and the transferors for compelting formalities was sufficient to explain the gap between the dates of contract notes and dates of payments. Having regard to the fact that th .....

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of shares by the assessee was backed by cogent evidences such as contract notes, share transfer forms etc. The purchase of shares has been doubted by the AO but his suspicion is not supported by any cogent material. He has not established that contract notes etc were bogus or fabricated or that no payment were in fact made. On the other hand it is observed from the impugned order that the AO himself stated that in the course of search u/s 132 of the Act; copies of contract notes, share transfer .....

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neness by cogent material which the AO failed to do. Another aspect in the matter is that the AO has never disputed the correctness of cost of acquisition of shares which the assessee incurred. By AO s own admission the amounts which the assessee received during the relevant year from the share broker was ₹ 69,11,678/-. Deducting cost of acquisition of shares i.e. ₹ 2,07,000/- the net gain was ₹ 67,04,678/- which was assessed as income of the appellant for A.Y. 2005-06, These f .....

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rchase of shares was bogus or non existent. 17. In the impugned order the AO justified the addition of ₹ 67,04,678/- relying on the statements of Shri Khemka and Shri Sunil Kedia wherein these persons allegedly admitted that they had provided accommodation entries to the family members of Shri R.S.Agarwal. The alleged modus operandi adopted by them in providing accommodation entries was explained in their statements. The statements of Shri Khemka; Shri Sunil Kedia and the stock broker were .....

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and others by any of the authorities. It was also very surprising to note that even though the statements from Shri Khemka and the stock broker were recorded as far back in December 2006 & January 2007, the assessee was made aware of these statements for the first time only in November 2008 when the assessment was getting barred by limitation in December 2008. during the long intervening period neither the investigating authority nor the AO confronted the assessee with recorded statements o .....

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, the AO neither brought any material which proved the ultimate destination of cash nor conducted enquiries in the chain of transactions or examined any of the concerned parties to prove that the alleged receipt of cash was returned by the broker in the form of cheques. In absence of an enquiry on the AO s part which proved ultimate destination of cash or in absence of any investigation in the chain of transaction; the only conclusion that is possible to be drawn is that the AO did not have in h .....

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atement have also not been made available to the assessee. Even by AO s own admission these statements were shown to assesee s A/R in November 2008. on being confronted with these sttements the assessee confronted these person when the assessee received from the concerned parties copies of the affidavits made in February 2007 wherein they had retracted the statements earlier made. Despite the fact that the affidavits made in February 2007 were contrary to the statements originally recorded the A .....

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because no proceedings were pending. In my opinion this was a lame excuse which cannot be accepted at its face value because remand proceedings enable an appellate authority to get the enquiry conducted through the AO. Moreover, the AO s suggestion in the remand report that the appellate authority may examine the witness u/s 131 was not judicially or administratively proper. The appellate authority cannot conduct the primary investigation and fill in the void caused by the AO s acts of omission .....

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essment as also in the remand proceedings was completely contrary to the principles of natural justice because the assessee was not given effective and proper opportunity of testing the veracity of the statements originally recorded by the ADIT (Inv). 20. The AO s reliance on the decision of the Supreme Court in the case of Surjit Singh Chabra (Supra) appeared to be not justified on the facts of the assessee s case. In the case decided by the Supreme Court the accused himself had made confession .....

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availing accommodation entries nor the assessee ever admitted that his purchase & sale of shares were bogus. The statement srecorded in the assessee s absence from the 3rd party are being used in evidence against the assessee. The statements obtained behind assessee s back were never shown to the assessee till fag end of assessment proceeding. These statements were not only retracted by the parties but assessee also produced before the AO number of documents which substantiated his transacti .....

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sion of the Supreme Court was not applicable to assessee s case. 21. The AO disbelieved the genuineness of sale of shares on the ground that the stock broker through whom assessee sold shares had indulged in price manipulation activities. In support of the finding the AO relied on the SEBI s order u/s 11(1) 11(4) & 11 (B) of SEBI Act 1992 dated 30.11.2005 where under Ashish Stock Broking Pvt. Ltd. & Shri Sunil Kedia were debarred form operating on any stock exchange on the charge of shar .....

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depth investigation, SEBI found evidence against Ashish Stock Broking Pvt. Ltd and Shri Sunil Kedia only in respect of their transactions in the shares of only one company i.e. Goenka Business & Finance Ltd. The order of the SEBI showed that investigation was conducted by regulatory authority in respect of all the transactions of the assessee s broker but found evidence of price manipulation only in respect of shares of one company. No evidence was however found which showed that share price .....

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mpanies and names of Khoobsurat Ltd & Emrald Commercial Ltd did not find mention in the order of SEBI. 22. If the broker through whom the assessee conducted his share transactions was found guilty of price manipulation of some other company then for such reason; assessee s transactions through the broker could not held to be bogus or not genuine particularly when SEBI had not found any evidence which proved that all transactions whenever carried on by the said broker were bogus and not genui .....

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her company. 23. The A/R for the assessee furnished quotations published by CSE on the dates on which the assessee had conducted sale of his shares. The published quotations contained information with regard to number of shares traded, number of trades conducted, highest and lowest price of shares on the date and total value of shares traded on the stock exchange on the given date. From the CSE quotations it appeared that at the relevant time; there were regular transactions in shares of Khoobsu .....

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t which the assessee sold shares of these 2 companies were much higher than the break up value of the shares and this fact indicated the market price of the shares was artificially inflated. I however find that apart from the assessee several other persons also conducted purchase & sale of shares of the 2 companies at the same price at which the assessee conducted his sale. It was therefore not a case that the assessee alone realized very high price for his shares and other persons transacte .....

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anies were actively traded on CSE and their share prices had not recorded any decrease. Although this information was brought to the AO s attention he did not point out any infirmity or established that transactions in shares of these companies conducted by other investors were also false or bogus or fabricated. If the AO did not have any material which proved transactions in shares of these 2 companies carried out by other person were also manipulated or were bogus then only in the assessee s c .....

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rd by the AO which shoed that the information contained in contract note was false or that the sale of shares actually never happened on the other hand information shows that not only the assessee carried out sale of shares through CSE but the sale consideration was also received by him through CSE channel and this fact has not been disproved. On sale of shares, delivery of shares was made thorough assessee s demat account with Eurekha Stock & Share Broking Services Ltd. The entries in the d .....

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cing documents which were verifiable; independent of statements of Shri Khemka or the stock broker. The evidence also establish that apart from the assessee there were several other persons who traded in shares of both Khoobsurat Ltd & Emrald Commercial Ltd at the same time and at similar prices at which the assessee sold his shares. Having regard to all these facts and evidence I have no hesitation in holding that the assessee discharged the onus caste on him and established genuineness of .....

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ssibly be drawn is that the AO did not have in his possession any material except the so called sworn statement u/s 132(4) to corroborate or substantiate his finding that the assessee had availed accommodation entries and that purchase & sale of share was bogus. 26. The assessee s reliance on the decisions of the Kolkata Benches of ITAT is found relevant because facts in the decided cases were more or less similar with assessee s casde e.g. in the case of Rajkumar Agarwal (ITA 1330/Kol/2007 .....

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tions were conducted through the same stock broker. The delivery of shares was given through assessee s demat account and taken in broker s demat account. Sale proceeds were received by account payee cheque issued by the stock broker. The AO however, assessed gross sale proceeds as undisclosed income of the assessee because u/s 133(6) CSE reported that the stock broker had not executed any trade on 10.07.2002, 17.09.2003 & 19,.09.2003 in the scrips of Nageshwar Investments Ltd through online .....

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s backed by CSE market quotation. The AO made the addition holding that contract notes issued by the brokers were false and in reality the stock broker in collusion with the assessee introduced assessee s undisclosed money in the guise of LTCG. The addition was deleted by CIT(A). On 2nd appeal it was argued before the Tribunal by the D/R that Nageshwar Investment Pvt. Ltd. was a penny stock and the AO had acted on the information received from CSE which is a regulatory authority. CSE denied that .....

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d broker and the sale consideration was received by account payee cheque. The share broker had admitted the transaction when called upon u/s Sec 133(6). The AO failed to bring on record any evidence which established that documents filed either by assessee or stock broker were fabricated or false. The brokers was registered with CSE and had confirmed transaction by quoting registration number, contract number, settlement number etc. it was not the Revenue s case that the broker did not exit or t .....

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wherein the High Court had held as under : ……….Payment by account payee cheque had not been disputed. Payment on purchase and sale and payment received by account payee cheque was on two different dates. If the share broker, even after issue of summons, does not appear, for that reasons, the claim of the assessee should not be denied specially in case when the existence of the broker is not in dispute nor the payment is in dispute. Merely because some broker failed to appea .....

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mitted that share trading loss was not genuine. Later on during the course of cross examination conducted on 25.10.2002 Shri Roopani retracted his earlier statement recorded on 25.08.2000 on the ground that it was given by him under duress and coercion. He also submitted during the cross examination that he had produced contract notes, bills etc. in support of share trading transactions which were not considered by the search officials. Based on the statement of Shri Roopani; assessment u/s 158B .....

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the time of search without taking cognizance of cross examination and documents produced and disallowed the loss treating it to be bogus. The CIT(A) upheld the disallowance which was deleted by the tribunal. While dismissing the revenue s appeal u/s 260A the Calcutta High Court observed as follows : It appears that the share loss and the whole transactions were supported by contract notes, bills and were carried through recognized stock broker of the Calcutta Stock Exchange and all the payments .....

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r, it was held that the transaction of share are genuine. Therefore we do not find that there is any reason to hold that there is any substantial question of law involved in this matter. Hence, the appeal being ITA No.6f30 of 2008 is dismissed. 29. The above decisions squarely support the appellant s case. In the case of Rajkumar Agarwal the assessee had purchased and sold shares of Nageshwar Investments Pvt. Ltd. this company is one of the 5 companies, in whose case SEBI found evidence of price .....

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ale of shares are supported by proper documentary evidences. The shares received from the amalgamated companies were converted in dematerialized form for which the credit was given to assessee s demat account by NSDL over whom neither the assessee nor his broker had any control. The AO did not doubt the genuineness of cost of acquisition because the AO himself allowed deduction for the cost and assessed the net gains as income. Sale of shares was supported by contract note, issued in the prescri .....

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erefore hold the AO was not justified in assessing ₹ 67,04,678 as assessee s income. The AO is accordingly directed to assess ₹ 67,04,678/- as LTCG realized on sale of shares. Since the shares in question were held for period more than 12 months and the shares were sold on recognized stock exchange after payment of STT, the AO is directed to allow exemption u/s 10(38) of the Act in respect of the Long Term Capital Gains. 3.2. Aggrieved by this the revenue is in appeal before us. 4. A .....

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Income Tax act at Calcutta & Siliguri on 8th December 2006. During the course of search certain papers were found and seized which inter-alia included copies of the Contract Notes, Demat statements and other documents which indicated that 6 members of R.S. Agarwal Family had earned substantial capital gains on sale of shares of M/s. Khoobsurat Ltd & M/s. Emrald Commercial Ltd. These shares were allegedly sold on Calcutta Stock Exchange on payment of Security Transaction Tax; after allege .....

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entries for the family members of Sri R. S. Agarwal; whereby cash paid was returned in the form of Cheques against ostensible sale of shares of Khoobsurat Ltd & Emarald Commercial Ltd both of which were his controlled entities. Shri Khemka admitted that in fact no shares were actually purchased and sold by the assessees and he only arranged entries in support of purchase and sale of shares. The cash received from the individual members of R. S. Agarwal family were later on returned after ded .....

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ed 15.01.2007 in which they admitted that share sale transactions were nothing but accommodation entries. The Stock Brokers admitted that they had in fact issued cheques in lieu of cash received. The Ld. DR submitted that in the statements recorded u/s 132(4) there was clear admission on the part of Sri Khemka as also Stock Brokers that transactions of the assessees were not genuine and in fact they were sham and bogus. In the light of the clear and unambiguous confessional statements, the CIT ( .....

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February 2007 whereas the statements were given by Sri Khemka and the Stock Brokers during the course of search & these were on oath. The statements recorded u/s 132(4) of the Act carried more evidentiary value. He further submitted that the copies of the retraction affidavits were never furnished to the ADIT (Inv.). Even though in the retraction affidavits the Stock Brokers had alleged that the statements before the ADIT (Inv.) were obtained by coercion and undue influence but before the A .....

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e. 4.4. The Ld. DR further submitted that in the assessment order; besides relying on the confessional statements of Sri Khemka and the Stock Brokers the AO also brought on record cogent; relevant and circumstantial evidences & facts which clearly proved that in reality there was in fact no purchase & sale of shares of Khoobsurat Ltd & Emarald Commercial Ltd. Referring to the Assessment Order, he submitted that the assessee had allegedly purchased shares of 5 Companies through M/s. G .....

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that the purchases were anti-dated to enable the assessee to claim holding period to be more than 12 months. Referring to chart of share purchase and payments therefore in the assessment order, he stated that the time gap between the dates of contract and dates of payments ranged up to 45 days which clearly proved the inordinate delay in making payments and this fact raised serious question about genuineness of the shares purchase. The ld.DR further argued that the shares of 5 companies were all .....

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sees were the shareholders of the amalgamating companies. The AO also ascertained from ROC that the amalgamated companies did not file returns of allotment consequent to issue of shares to the shareholders of the amalgamating companies and therefore the AO could not verify the allotment of shares by Khoobsurat Ltd & Emarald Commercial Ltd to the assessees. In absence of these crucial evidences which should have been available with the authorities; actual purchase of shares by the assessee re .....

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ty of manipulating prices of shares of Companies listed on Calcutta Stock Exchange. Referring to the SEBI s order, the ld.DR pointed out that SEBI had found clear evidence to establish that M/s. Ashis Stock Broking Pvt. Ltd & Sunil Kedia were engaged in circular trading of shares of Companies whereby prices of shares were artificially inflated. As SEBI found the two brokers were involved in price manipulation activities, they were banned by SEBI from transacting any business on the floor of .....

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uct any substantial business so as to justify high market price for their shares. Referring to the assessment order, he submitted that the break-up value of shares of Khoobsurat Ltd was ₹ 52.45 per share and that of Emarald Commercial Ltd was ₹ 37.87; only. In view of such low break-up value of shares there was apparently no justification for these companies to have share price exceeding ₹ 450/- i.e. the price at which the shares were sold by the assessee. According to him, sha .....

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nal statement of Sri Khemka made before the ADIT (Inv.) u/s 132 but also proved that the amount received by the assessee in the garb of sale of shares was nothing but undisclosed income of the assessee which was taxable u/s 68 of the Income Tax Act. He therefore strongly urged for vacating the order of the CIT (A) and restoring the AO s order. 5. On the other hand the ld. AR appearing on behalf of assessee strongly relied on the order of the CIT (A). At the outset, he submitted that each and eve .....

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of the Stock Brokers were also made at the back of the assessee. The assessees were not parties to either of the statement or retraction affidavits. He submitted that even though serious charges were leveled against the assessees in the statements recorded u/s 132(4) of the Act, the assessees were never personally examined by the ADIT (Inv.) with reference to the alleged confessional statements of Sri Khemka or the stock Brokers. In fact the assessee was never given copy of these statements eit .....

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sion in November 2008; the assessee ascertained the facts from the Stock Brokers. At that stage the assessee was presented with the retraction affidavits by the Stock Brokers which were immediately furnished before the AO. The A/R further submitted that the assessee not only submitted the retraction affidavits of the brokers but also furnished before the AO all the cogent and relevant documentary evidences which substantiated both purchase & sale of shares. Even though these documentary evid .....

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the AO as sole evidence for justifying the addition. The A/R submitted that principles of natural justice demanded that before statement of Sri Khemka was used in or as evidence, the assessee was given opportunity of cross examining the witness on whose statement addition was sought to be justified. No such opportunity was allowed either in the course of assessment or in remand proceedings even though the CIT (A) had expressly directed AO to examine the Stock Brokers and to investigate the alleg .....

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rcion or force then it is the duty of the Court to see whether such confession was voluntary. The Court further held it is not for the accused to prove beyond doubt the use of coercion. The decision of the Supreme Court was followed by the Bombay High Court in the case of CIT Vs Uttamchand Jain wherein addition u/s 68 was deleted by the High Court. In that case the addition u/s.68 was made by the AO on the basis of alleged confessional statement of the Jeweller, who had purchased jewellery from .....

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cked by any independent verifiable evidence but contained bald statement accusing the assessee of availing accommodation entries. On the other hand, the retraction statements of the Stock Brokers were supported by large number of documentary evidences which were verifiable from independent sources. He stated that the shares in question were transacted through assessee s demat account maintained with depository participant of NSDL. The delivery of shares was given from the demat account of the as .....

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es was made from independent source and the transaction was fully verifiable from the Exchange. Referring to order of SEBI, the A/R pointed out that after conducting in depth investigation, SEBI had found no evidence to suggest that the assessee s brokers were guilty of manipulating shares prices of Khoobsurat Ltd or Emarald Commercial Ltd. Since no evidence was found by SEBI to establish that prices of Khoobsurat Ltd & Emarald Commercial Ltd were also manipulated, no adverse inference could .....

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hares of Khoobsurat Ltd & Emarald Commercial Ltd, there were several other transactions in shares of these 2 companies. The transaction in shares of these 2 Companies were also carried out by several other persons at the similar prices at which the assessee had sold his shares. It was not a case where only the assessee traded in shares of the 2 companies. Referring to CSE Publications for the year 2009 & 2011 the A/R submitted that Equity shares of both the companies were actively traded .....

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ssed by the AO as well as by the CIT(A) in their respective orders. The short question, to be adjudicated in the present appeal is whether the income by way of capital gains disclosed by the assessee in her return for A.Y. 2005-06 was entitled for exemption u/s 10(38) of the I.T Act or it was liable to be assessed as unexplained cash credit u/s 68 of the Act. 6.1. From the orders of the lower authorities we find that a search was conducted in the case of Shri R S Agarwal Group on 08.2.2006 at Ko .....

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nts indicated that during F Y 2003-04 the assessee had purchased shares of 5 private limited companies through stock broker at a cost of ₹ 2,07,000/-. The purchase cost of shares was accounted in the appellant s books of F.Y. 2003-04. No adverse inference with regard to purchase cost of shares was drawn by the AO. Even in the impugned order the addition u/s 68 was not made with reference to sale proceeds of ₹ 69,11,678/- realized on sale of shares but the addition was with reference .....

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ld draw adverse inference against the assessee only with regard to capital gains which was claimed exempt u/s 10(38) of the Act. 6.2. In the impugned order the AO discussed numerous facts which led him to suspect that sale of shares and consequent earning of capital gains was not genuine. The principal reason for the addition was the statement of Shri Arun Kumar Khemka recorded by ADIT(Inv) u/s 132(4) of the Act wherein he had allegedly admitted that he had provided accommodation entries in the .....

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hich indicated dubious mode adopted by parties for laundering of unaccounted money. On going through the order of the CIT(A) however we find that every allegation of the AO which was ably marshaled before us by the Ld DR was considered by the CIT(A) in his order which were incorporated by us in para no.3 of its order. 6.3. In the course of hearing of the present appeal the Ld. DR though contested the correctness of findings of CIT(A) he was not able to bring to our attention any cogent material .....

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r note that before the lower authorities as well as before us the assessee had filed evidence in the form of letters of amalgamating companies wherein they had acknowledged receipt of share scrips for registration of shares in the assessee s name. The amalgamation of the companies was approved by the Calcutta High Court and there was no material which showed that approval for the amalgamation was obtained by misrepresentation of facts. We also note that the assessee had furnished evidence in the .....

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see surrendered share certificates to Eureka Stock & Share Broking Services Ltd., a depository participant of NSDL. Before us the assessee filed copy of the application made with the depository participant for surrender of share scrips from which we find that the distinctive number of shares , share certificate numbers etc exactly tallied with the information mentioned in the letters of allotment issued in favour of the assessee by the amalgamated companies. On surrender of physical share sc .....

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r the assessee to deliver shares of these companies to NSDL for holding in dematerialized form. With reference to the dates of acquisition and dates of payments, we find that the AO s finding that share purchase was antedated was not a correct finding of fact. Having regard to overwhelming documentary evidences brought on record by the assessee and considering the fact that even the AO himself accepted and allowed the deduction for cost of purchase of shares, we do not find any justification in .....

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okers. No infirmity or falsity in any of the documents was proved before us. Sale consideration on sale of shares was received by account payee cheque. It is also admitted by the AO that payment on sale of shares was received through CSE which fact established that the payment was not received from the broker who had allegedly admitted that the cheque was issued in lieu of cash. We also note that at the time when assessee sold his shares, several other persons also transacted in these shares on .....

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sacted on CSE at prices ranging from ₹ 464 to ₹ 477 per share. These facts therefore show that long after the date on which the assessee sold his shares; shares of both the companies were regularly transacted on CSE at prices which are more or less similar to the prices at which the assessee sold his shares in 2005. We find there has been no fall in the market prices of these shares even after 6 years and the shares of these companies are still actively transacted on CSE. 6.5. We als .....

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ion to his transactions in shares. On these facts therefore we find that the assessee had discharged onus of substantiating his transactions of purchase & sale of shares. 6.6. We also do not find force in the submissions of the Ld. DR that assessee s share transactions should be considered to be bogus because the brokers through whom assessee sold shares were found guilty of price manipulation of shares by SEBI. From the copy of SEBI s order we note that SEBI conducted investigation in unusu .....

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Emrald Commercial Ltd. At the relevant time both the brokers were carrying on broking business and therefore merely because at a later date SEBI found evidence against these brokers regarding price manipulation of shares of some other companies, no adverse inference could be drawn against the assessee. 6.7. In the assessment order as also before us the Ld. DR put much emphasis on confessional statement of Shri Khemka and the stock broker to support the AO s conclusion that capital disclosed in .....

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of his cross examination to the assessee. When the CIT(A) noted this omission he required the AO to personally examine the stock brokers and Shri Khemka since their earlier statements before the ADIT(Inv) were retracted. We are of the opinion that when the confession of the department witness was retracted by him and the retraction was also backed by other documentary evidences; then it was necessary for the AO to personally examine the said person before using his alleged confession as the sole .....

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also note even though in the remand proceeding the CIT(A) expressly directed the AO to investigate the alleged trail of cash the AO did not bring on record any evidence to substantiate his conclusion that assessee s own cash was returned to him in form of cheques. Failure on the part of the AO to even investigate the alleged cash trail justifies the CIT(A) s conclusion that the AO had no material or evidence with him to prove that the capital gain earned by assessee on sale of shares represente .....

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