Tax Management India. Com
                            Law and Practice: A Digital eBook ...
TMI - Tax Management India. Com
Case Laws Acts / Rules Notifications Circulars Tariff/ ITC HSN Forms Manuals SMS News Articles Highlights
        Home        
 
Extracts
Home List
← Previous Next →

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

Addition u/s 68 - Held that:- As find from the remand report that the AO declined to examine his witnesses nor allowed the assessee the opportunity of cross examination. We 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lity of the facts and evidences as brought on record and examined by the CIT(A) we find that there was no infirmity in the order of the CIT(A) deleting the addition of ₹ 67,04,678/- made u/s 68 of the Act. Accordingly we uphold the order of the CIT(A) and dismiss the revenue’s appeal. - 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, Jud .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e, all the six appeals are disposed of by a consolidated order for the sake of convenience. Therefore, we deal with appeal filed by the Revenue in ITA No.256/Kol/2011 for assessment year 2005-06 in the case of Rakesh Agarwal. 2. In ITA No.247/Kol/2011 the following grounds have been raised by 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

vidence at the time of hearing of the case. In respect of other ITA Nos. the figures are varying from each other. 3. The brief facts of this issue as observed by ld. CIT(A) in the impugned order at para 11 is as under :- 11. It is the AO s case that LTCG income of ₹ 67,04,678/- disclosed 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

statement u/s 132(4) Shri Khemka further admitted that the had received cash from the family members of Shri R.S.Agarwal & the same was returned in the form of sale proceeds of shares after paying STT. c) M/s. Ashish Stock Broking Pvt. Ltd. through whom the shares were sold on CSE; admitted 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tes on which Calcutta High Court passed orders approving amalgamation of the companies whose shares were purchased by the assessee. g) The amalgamating companies whose shares were purchased by the assessee did not file annual returns with the Registrar of Companies and the amalgamated did not 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 a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

se of Surjit Singh Chabra (AIR 1997 SC 2560) and therefore retraction affidavits could not be given credence. j) After 2004 few stock brokers had resorted to money laundering activities by using penny stocks . Share prices of the penny stocks were artificially inflated by the stock brokers so 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 enabli .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

assessee s transactions were manipulated and there was no real earning of capital gain by the assessee. 3.1. The First Appellate Authority, ld. CIT(A) has forwarded the submissions of assessee against the observations made by AO and after taking into consideration of the Remand Report he deleted 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 appare .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ompanies through Globe Stocks & Securities Ltd at aggregate cost of ₹ 2,07,000/-. The Contract notes and other supporting documents contained relevant information such as distinctive number of shares; share certificate numbers, folio numbers etc. The assessee also placed on record evidences 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 pro .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hat the amalgamated companies received share certificates from amalgamating companies for registration of shares in the assessee s name. pursuant to the order of amalgamation, approved by the Calcutta High Court; the amalgamated companies allotted their shares in the approved ratio in assesee 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he assessee had surrendered the share certificates to M/s. Eureka Stock & share Broking Services Ltd., a recognized depository participant of National Security Depository Limited (NSDL). On receipt of physical share scripts the assessee s demat account with NSDL was given credit for the shares 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ird parties the AO was not justified in doubting the genuineness of purchase of shares. The material on record rather supports the assessee s contention that he had purchased the shares of 5 private limited companies and thereafter he received the shares of amalgamated companies in lieu of shares 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 allegati .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e assessee on 29.08,2003 for ₹ 27,000/-. Payments of ₹ 16,000/- & ₹ 11,000/- there against were made on 12.09.2003 & 16.09.2003 respectively. According to AO the time gap between the dates of purchases and dates of payments is found to be 14 & 18 respectively and 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ording to AO the time gap was 38, 42 & 45 days respectively. The above empirical data proved that AO s conclusion that there was considerable time gap between the date of purchase and date of payment was factually untrue. 15. The shares in question were purchased from stock broker and the 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 thro .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

or antedated. Moreover even with reference to dates of payments, period of share holding exceeded 12 months and therefore AO s hypothesis that the back dating of purchases was made with an intention to show period of holding to be more than 12 months was not on sound footings. 16. The purchase 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the AO u/s 153C. since the documents evidencing purchase & sale of shares were found and seized in the course of search, the presumption u/s 132 was that the documents in the form as existed; reflected the true nature of transaction recorded therein. It was for the AO to disprove its genuineness 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

curred by the assessee himself and allowed deduction for the cost and arrived at taxable income of ₹ 67,04,678/-. In the circumstances, when the AO neither disproved the purchase of shares nor disputed or disbelieved incurring of the cost of acquisition then the AO could not hold that purchase 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

inst the assessee. In fact I find that even though serious allegation of money laundering were made against the assessee, the assessee was never confronted with these statements by the investigating authority nor assessee s statement was recorded with reference to the statements of Shri Khemka 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sh trail of cash which allegedly originated from assessee, the AO through my letter dated 20.04.2009 was directed to conduct enquiries to prove the chain of transaction leading to the ultimate destination of the cash. In spite of such specific direction and for that purpose examine the parties, 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 re .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f shares. 19. Having regard to the facts and material on record I therefore find that the impugned addition of ₹ 67,004,678/- substantially based on the statements of Shri Khemka and the Stock broker. These statements were however not recorded in the assessee s presence. Copies of the statement 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 con .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

essee was given reasonable opportunity of rebutting the statements of the departmental witnesses particularly when the statements originally recorded at the assessee s back were retracted by the parties. In the remand report the AO has stated that he was unable to examine the witnesses u/s 131 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 th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lso demanded that the assessee be allowed opportunity of cross examination of the persons whose statements were used in evidence. Despite giving the opportunity to overcome the omissions the AO chose not to conduct any enquiry as suggested. In my opinion the course adopted by the AO in the assessment 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 stat .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. In the present case however the assessee was not even confronted by the Investigating authority with the statements of Shri Khemka or stock broker. Moreover the statement of assessee was not recorded either by the Investigation authority or the AO. The assessee himself had never admitted of 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 eviden .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the ultimate destination of cash or investigate the chain of transaction. The AO was not able to bring to my attention any such material nor did the AO even examine the concerned party whose statement was used in evidence . On these facts therefore I am in agreement with the A/R that the decision 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 i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

vestigation of the transactions conducted by some of these CSE members, SEBI and Stock Exchange found that the brokers had indulged in circular trading because of which prices of shares of few companies, having low market capitalization got artificially inflated within short time. After an in 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ng Pvt. Ltd. manipulated shares prices of Khoobsurat Ltd & Emrald Commercial Ltd, then SEBI would have certainly indicted the brokers for that default as well. The order of SEBI however shows that it had found evidence of price manipulation by CSE brokers in respect to share prices of 5 companies 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 pr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

behalf of investing public. In the circumstances if the assessee conducted sale of shares through recognized stock broker then no adverse inference could be drawn against the assessee only because at a later date the broker was indicted on the charge of price manipulation of shares of some other 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 regar .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ted was much more than the value of assessee s transactions. The CSE s published data established that apart from the assessee, several other persons also traded in shares of Khoobsurat Ltd & Emrald Commercial Ltd at the similar prices. The AO placed much emphasis on the fact that prices at 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ared that in February 2009 also the prevailing market price of Emrald Commercial Ltd s share was ₹ 464.50 and that of Khoobsurat Ltd was ₹ 477.20 per share. The published CSE quotation therefore established that even after 4 years after sale by the assessee, shares of both the companies 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 tra .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ntract note in the prescribed form was issued by the broker. The contract note included relevant information such as date and time of transaction, contract note number, settlement number, details of service tax paid, details of brokerage and details of STT paid. No material was brought on record 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 o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ere could not have been delivery of shares through demat account of the assessee. The sale consideration was received through CSE channel. The documents and other evidences brought on record therefore cumulatively show that the assessee substantiated both purchase & sale of shares by producing 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 sh .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n to alleged chain of transactions leading to ultimate destination of the cash which proved his conclusions nor the AO examined either Shri Khemka or stockbroker, nor allowed the assessee opportunity of cross examination. In view of above facts and circumstances the only conclusion that can possibly 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 accommodat .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ap of 1 month 3 day. Delivery of shares was taken in assessee s demat account and the purchase was supported by contract notes in the form prescribed by CSE. 4000 shares were sold on 17.09.2003 @ ₹ 87.06 per share and 4500 shares were sold on 19.09.2003 @ ₹ 85.36 per share. Transactions 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ase & sale of shares were made through demat account. The broker also established that purchase & sale of shares were made through demat account. The broker also established that purchase and sale of shares was conducted at market prices prevailing at the relevant time and this fact was 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 u .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

account his undisclosed income. On facts the Tribunal held that the purchase & sale of shares was backed by proper contract notes. Deliveries of shares were received and given through demat account maintained with authorized agency. The shares were purchased and sold through the recognized 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 e .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

therefore upheld the order of the CIT(A) and held that income disclosed by the assessee was assessable as LTCG. 27. The decisions of the Calcutta High Court in the case of CIT vs Cargo Industrial Holding Ltd (244 ITR 422) and CIT vs Emrald Commercial Ltd (250 ITR 549) are relevant in this case 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 t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

alcutta High Court in the case of CIT vs Alpine Investment dated 26.08,2008 relied by the A/R is also relevant because facts in that case were similar to the assessee s case. In the course of search a statement was recorded form Shri Roopani; an employee at the assessee firm in which he had admitted 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hich showed that the shares were transacted through recognized stock brokers and through regular bank channel and supported by contract notes and bills. The stock broker also appeared and accepted the transactions to be genuine. The AO however relied solely on the statement of Shri Roopani at 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

laced before the Tribunal and after examining the same the Tribunal came to the conclusion and allowed the appeal filed by the assessee. In doing so, the tribunal held that the transaction fully supported by the documentary evidences could not be brushed aside on suspicion and surmises. However, 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 b .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

stock broker and the transaction was properly supported by proper documentary evidences it did not agree with AO s conclusion that the assessee in collusion with his tock broker introduced his unaccounted money in the form of LTCG. In the assessee s case also his transactions in purchase and sale 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 accou .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

es was given from assessee s demat account to broker s demat account maintained with NSDL. The AO did not establish infirmity in any of these documents or proved these documents to be false or fabricated. Having regard to totality of the facts and circumstances and the evidences on record I therefore 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 i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ct were discussed at length and submitted that all the assessees who are respondents in this batch of appeals are family member of Sri R. S. Agarwal. Sri R. S. Agarwal; his family members and the Companies belonging to the family were subjected to search & seizure operation u/s 132 of the 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

arwal Group, search & seizure proceedings were also conducted at the Office Premises of Sri Arun Kumar Khemka at 8, Ganesh Chandra Avenue, Kolkata, during which, statement u/s 132(4) was recorded by the ADIT (Inv.). In his statement, Sri Khemka confessed that he had arranged accommodation 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

his net earning from providing accommodation entries was only 1%. 4.2. Subsequent to recording of statement u/s 132(4) on 9th December 2006, M/s. Ashis Stock Broking Pvt. Ltd and Sri Sunil Kumar Kedia Stock Brokers through whom assessee had sold shares; filed letters before the ADIT (Inv.) dated 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

an admission made by an accused person; before the Revenue authorities; is an admissible evidence even if such confession is latter on retracted. He argued that before the AO the assessee filed copies of the retraction statements of the Brokers. However, the retraction affidavits were made in 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 evidenti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

used as evidence by the AO; against the assessee because in the statement recorded u/s 132(4) there was clear admission on the part of the brokers as also by Sri Arun Kumar Khemka that they had merely provided accommodation entries and share purchase/sale transactions were sham and not genuine. 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 circu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

erification from independent source. This fact raised serious question on actual purchase of shares. Further there was considerable time gap between the alleged date of purchases and the alleged dates of payments. The considerable time difference between the 2 dates clearly gave an impression 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 th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he assessment order, he submitted that he had conducted enquiries from the Office of the Registrar of Companies from which he ascertained that the amalgamating companies did not file annual returns for the financial year 2003-04 and therefore it could not be ascertained as to whether the assessees 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rchase and sale of shares. These facts further supported the confessional statement of Shri Khemka & the Stock Brokers. 4.5. The ld.DR then brought to our attention an order passed by SEBI in which the 2 Stock Brokers viz. Sunil Kumar Kedia & Ashis Stock Broking Pvt. Ltd were held guilty 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

o their tainted character the AO was well justified in holding the assessee s share sale transactions through these Brokers to be sham. 4.6. The ld.DR further submitted that both M/s. Khoobsurat Ltd & Emarald Commercial Ltd were Companies having no established track record and did not conduct 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 sh .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nature of trading and artificially high share prices of these 2 Companies, trading in shares of these Companies was banned by Calcutta Stock Exchange effective from 23rd November 2005. The ld.DR submitted that all the facts and evidences considered cumulatively not only supported the confessional 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 whic .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

; the A/R argued that the addition in the impugned order was made solely on the basis of statement of Sri Arun Kumar Khemka and the Stock Brokers. He submitted that the statements of the Brokers as also of Sri Khemka were recorded in the assessee s absence. Similarly, the retraction statements 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 level .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

show-cause why no addition should be made. The A/R therefore submitted that till November 2008 the assessee was not even made aware about the serious charges contained in the alleged confessional statement of Sri Khemka or the Stock Brokers. Only on getting information about the alleged confession 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 furnishe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y making general observations and allegations made the addition of capital gains. 5.1. The A/R further submitted that the decision of the Supreme Court in the case of Surjeet Singh Chhabra (supra) was not applicable in as much as in the assessee s case statement of the third party was used by 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 oppo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

confessional statement of the accused before FERA Authorities could not be used as sole evidence unless the said confessional statement was corroborated with some other independent verifiable evidence. The Supreme Court held that where the accused claims that the confession was obtained by coercion 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

erefore submitted that no addition could be made by the AO in the assessee s case solely on the basis of statement of Sri Khemka and the Stock Brokers because these statements were retracted by them in the sworn affidavits. 5.3. He further submitted that the confessional statements were not backed 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 suppo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

prove the allegation of cheques being issued in lieu of cash received. Referring to the assessment order he stated that even the AO had admitted that the payment for sale of shares was received by the assessee through Calcutta Stock Exchange. This fact proved that the payment for sale of shares 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 n .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

re sold; Brokers were active members of CSE and till then were not barred by SEBI from operating on CSE on the charges of price manipulation of shares. 5.4. Referring to the price quotations published by Calcutta Stock Exchange; the A/R submitted that the dates on which the assessee had sold shares 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 ot .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

5. The A/R therefore submitted that the AO was not justified in making addition u/s 68 of the Income Tax Act and urged us to uphold the order of the CIT (A). 6. After hearing the rival submissions and on perusal of materials available on record the facts of the case have been elaborately discussed 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

essee s transactions in shares resulting in earning of capital gains on sale of listed shares. Since the documents were found in the course of search u/s 132 of I T Act there was presumption that the documents found represented the state of affairs as appearing from the same. The seized documents 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

cost of purchase was doubted nor addition in respect thereof was made either in the year of purchase or in the year of sale. On these facts therefore we find that the purchase cost of shares per se was not disputed by the AO at any stage. In the circumstances the question is whether the AO could 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 s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

2007 given by M/s. Ashish Stock Broking Pvt. Ltd and Shri Sunil Kedia, stock brokers through whom the shares were sold. Before us, the Ld. CIT (D/R) placed strong reliance on the confessions of Shri Khemka and the Stock Brokers. He also strongly relied on the facts narrated in the assessment which 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 u .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

aragraphs in the impugned order the AO himself allowed deduction for cost of purchase and only the capital gains part was assessed. Once the AO accepted the cost of acquisition and allowed deduction therefore it was not open for the AO to dispute or disbelieve the purchase of shares. We further 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 regis .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

o number of shares, distinctive numbers of shares, folio number, share certificate numbers etc. Shares of the amalgamated companies were listed for trading on Calcutta Stock Exchange. As per SEBI regulations the shares were required to be held in dematerialized form. For this purpose the assessee 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 particip .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

brought on record which in any way suggested that the depository participant or NSDL were acting under the influence of Shri Khemka or the stock brokers. Admittedly NSDL is an independent body. Had there been no genuine purchase of shares by the assessee then it would not have been possible for 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 pur .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

#8377; 469 to ₹ 492. Sale of shares was evidenced by the Contract Notes issued by the brokers, copies of which were placed before us. The contract Notes were in the prescribed format and contained prescribed information. Transaction charges, STT and service tax thereon was paid to the brokers. 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

been manipulated by the assessee. In fact we find that even in February 2009 shares of Khoobsurat Ltd were transacted on CSE at ₹ 477 and shares of Emrald Commercial Ltd were transacted at ₹ 464.50. Even during the period January to March 2011 shares of both the companies were transacted 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 regula .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

efore showed that sale of shares was full verifiable with reference to credible third party evidences. Before the AO as well as before us the assessee was able to substantiate his purchase & sale of shares by producing documents and evidences which ordinarily an investor maintains in relation 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

list of companies in whose case SEBI found evidence of price manipulation. Although assessee s brokers were found guilty of manipulating prices of shares of 2 companies but no evidence was found by SEBI to show that the brokers were involved in manipulating share prices of Khoobsurat Ltd & 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 manipul .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y the AO principally on the basis of alleged confession of Shri Khemka. Even though in the confession of Shri Khemka, serious allegations were leveled against the assessee the ADIT(Inv) did not confront the assessee with the alleged confession statements of Shri Khemka nor allowed opportunity 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) w .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ore the ADIT (Inv.). Considering this glaring omission the CIT(A) had required the AO to personally examine the witnesses in remand proceeding. We however find from the remand report that the AO declined to examine his witnesses nor allowed the assessee the opportunity of cross examination. We 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

Discussion Forum
what is new what is new
 


|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.