TMI Blog2015 (12) TMI 1711X X X X Extracts X X X X X X X X Extracts X X X X ..... Year 2005-06 and hence the Learned AO erred in invoking Rule 8D of the Rules for making disallowance u/s 14A of the Act. In the absence of these factual findings, AO cannot straight away resort to make disallowance u/s 14A of the Act and hence the addition made on this account for all the assesses are deleted. Accordingly, the grounds raised by all the assesses in this regard are allowed. - ITA No. 544/Kol/2013, ITA Nos. 546/Kol/2013 ITA No. 547/Kol/2013 & ITA No. 548/Kol/2013 - - - Dated:- 4-12-2015 - SHRI MAHAVIR SINGH,JUDICIAL MEMBER, AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER For the Petitioner : Shri Ravi Tulsiyan, FCA, ld.AR For the Respondent : Shri Sujit Kumar Das, JCIT, ld.Sr. DR ORDER SHRI M.BALAGANESH, AM : These appeals of the assessee arise out of independent orders of the Learned CIT(A)-II, Kolkata in Appeal No. 195/CC-XXVII/CIT(A)C-II/08-09 dated 4.1.2013 for AY 2005-06 in the case of Basant Kumar Baid (HUF) ; Appeal No. 196/CCXXVII/ CIT(A)C-II/08-09 dated 4.1.2013 for AY 2005-06 in the case of Basant Kumar Baid ; Appeal No. 193/CC-XXVII/CIT(A)C-II/08-09 dated 4.1.2013 for AY 2005-06 in the case of Bijoy Singh Baid (since deceased) re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, he denied knowing any person by the name of Shri Narendra Kumar Shyamsukha. The broker, through whom transactions of purchase and sale of shares took place, also denied knowing Shri Narendra Shyamsukha. However, the fact remains that the transactions recorded on the seized papers exactly matched with the details of long term capital gain filed by the various persons in their return of income including the assessee. Therefore, in the course of re-assessment proceedings, the Learned AO asked the assessee to explain as to why the transactions of long term capital gain shown in the return of income should not be treated as bogus and the addition is made u/s 68 of the Act. It was pleaded before the Learned AO that the assessee had disclosed long term capital gain on sale of shares of Continental Fiscal Management Limited and Swastik Securities and Finance Limited. These shares were bought by the assessee during the Financial Year 2002-03 and were duly shown in the Balance Sheet as on 31.3.2003 and 31.3.2004. The shares were purchased by making the payment through account payee cheques. The shares were sold by receiving account payee cheque through the broker Ahilya Commercial Pvt Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the shares concerned. 2(b) In arriving at his conclusion that the appellant had purchased bogus capital gains by paying cash money to Shri Narendra Shyamsukha in the year corresponding to AY 2005-0-6 the learned CIT(A) completely neglected to take into account the fact that the relevant shares had been purchased by the appellant two years back i.e in the FY 2002-03 and shown in its Balance Sheet for successive years, and about which purchases, no papers/documents had been found during the search in the premises of Shri Narendra Shyamsukha. 2( c ) In arriving at his conclusion that the appellant had purchase bogus capital gains by paying cash money to Shri Narendra Shyamsukha, the learned CIT(A) glossed over the fact that the seized papers showed the name of a different broker viz Ashika whereas the sale transactions were actually through a different broker viz. Ahila Commercial P.Ltd. 2(d) In arriving at his conclusion that the appellant had purchased bogus capital gains by paying cash money to Shri Narendra Shyamsukha, the learned CIT(A) gloss over the facts that although Shri Narendra Shyamsukha had mentioned the name of another intermediary, viz. Sureskh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned AO / Learned CIT(A) have not found these documents to be false or fabricated. They, however, allege that these documents speak about the process of transacting in listed shares and do not prove the genuineness of the transaction itself. The allegation that the assessees have converted their cash into cheque by way of trading in shares and raising bogus LTCG on the basis of documents found from the possession of a third person, is, in fact, avoiding the valid documents already placed on record without assigning any reason, whatsoever. The Learned AO/ Learned CIT(A) have not brought any evidence on record to falsify the claim of the assessee or that the share transactions were bogus. He argued that the contents of the seized documents vide reference NKS / 3 were not in the handwriting of the assesses herein. He further argued that in the relevant seized documents, the broker s name is mentioned as Ashika whereas the assesses have done their share transactions through Ahilya Commercial Pvt Ltd . He argued that when the ground itself is based on no evidence, the question of raising a presumption against the assesses does not arise. He further argued that just because Sri Nare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ha or to any other person with an intention to launder their cash for converting into cheque in the guise of long term capital gains. We find that even during the course of cross examination proceedings, Shri Narendra Kumar Shyamsukha could not prove that the assesses had paid any cash to him or any other person. 2.5.2. We also find that the Learned CIT(A) had confirmed the addition by making the following observations among others :- I also do not find any merit in the submission of the appellant that there is no direct evidence that any amount of cash was paid by the appellant. I am of the opinion that there could not be any eye witness for this, but, there are documentary and circumstantial evidences that the appellant had paid cash to obtain entry of long term capital gain. It is an open secret that during the Financial Years 2002-03 , 2003-04 and 2004-05 etc. the practice of taking accommodation entries of long term capital gain was rampant in Kolkata. Thus, the documents seized from the possession of Shri Narendra Shyamsukha cannot be ignored or cannot be treated as waste pieces of paper. We hold that the above observations only goes to prove that the entire addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , there is no mention of Suresh Kumar and further Shri Narendra Kumar Shyamsukha also did not provide the address of Suresh Kumar and hence there is no credibility that could be attached to the statement given by Shri Narendra Kumar Shyamsukha. 2.5.5. We find that the director of M/s Ahilya Commercial Pvt Ltd (stock broker) in his deposition u/s 131 of the Act also denied to have known Shri Narendra Kumar Shyamsukha. The seized documents reflect that the share transactions were carried out through the broker Ashika but enquiry from stock exchange revealed that M/s Ahilya Commercial Pvt Ltd was the broker for the said transaction. This itself goes to prove that the assesses herein have nothing to do with the seized papers found from the premises of Shri Narendra Kumar Shyamsukha. 2.5.6. With regard to the finding recorded by the Learned AO that the concerned broker M/s Ahilya Commercial Pvt Ltd had made a disclosure of ₹ 65 lacs on account of receipt of commission for raising bogus long term capital gains for his clients, we hold that the assesses are not concerned with the modus operandi of that broker s trading with his other clients. We hold that as long as the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arried out with some kind of connivance with the registered stock brokers for the introduction of unaccounted money and hence we hold that no addition could be made in these circumstances. Reliance in this regard is placed on the decision of Hon ble Calcutta High Court in the case of CIT vs Korlay Trading Co. Ltd reported in (1998) 232 ITR 820 (Cal) wherein it was held :- The assessee has given the name of the company, who issued the concerned shares, number of shares purchased, when purchased, for how much amount the same was purchased, when it was sold, for how much amount it was sold and through whom it was sold. Even the broker appeared before the ITO and prayed for time to produce his proper books. It is not the case of the Revenue that the assessee has not maintained the books. The case of the Revenue is that as the broker did not maintain the books and has failed to produce the books, the transaction is not genuine. Once the assessee has discharged its initial burden, no proper steps have been taken by the ITO to bring on record, the materials to controvert the claim of the assessee. The claim of the assessee cannot be denied only on the ground that the broker through w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re made by the assessee through account payee cheque have not been doubted by the Revenue. The action u/s. 68 of the Act has been taken on the basis of the statement of the third party. During the course of search at the premises of Shri Narendra Kumar Shyamsukha no iota of evidence was found which could prove/lead to any inference that assessee had paid cash to Shyamsukha or the cheque has been received or paid to the broker in lieu of cash except a statement which is not in the handwriting of the assessee and which contains numerous details. No action has been taken by the Revenue in treating the purchase to be the bogus. Under these facts and circumstances, I am of the view that it is not the case where the addition u/s. 68 of the Act could be made. The assessee duly proved the identity, creditworthiness and genuineness of the broker as well as that assessee received the consideration on the sale of the shares from the broker. I accordingly set aside the order of CIT(A). 7. In the result, all the appeals filed by the respective assessee are allowed. 2.5.10. In view of the aforesaid facts and circumstances and respectfully following the aforesaid judicial precedents ..... X X X X Extracts X X X X X X X X Extracts X X X X
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