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A.C.I.T. Circle 1, Gwalior Versus M/s. J.C. Agarwal, HUF

2011 (3) TMI 1737 - ITAT AGRA

ITA No.32/Agra/2007 - Dated:- 10-3-2011 - SHRI P.K. BANSAL, ACCOUNTANT MEMBER AND SHRI H.S. SIDHU, JUDICIAL MEMBER For Appellant : Shri A.K. Sharma, Jr. D.R. For Respondent : Shri Navin Gargh, Advocate. ORDER Per P.K. Bansal, A.M. : This appeal has been filed by the Revenue against the order of the learned CIT(A) dated 25.09.2006. The only issue involved in appeal filed by the revenue relates to the sum of ₹ 24,34,665/- declared by the assessee in the return under the head long-term capita .....

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hrough Agarwal and Company. The shares were purchased through North Indian Securities Pvt. Ltd. The payment was received through demand draft. During the year under consideration, the assessee-HUF purchased 35000 shares of Suma Finance & Investment Ltd. on 07.06.2000 for a sum of ₹ 1,17,985/- through North India Securities Pvt. Ltd., a registered broker. Copy of broker s note was filed. The shares were got transferred in the name of HUF on 30.06.2000. Copy of transfer letter from the c .....

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shown by the assessee to be the income from other sources by holding that the assessee could not prove the sale of shares and genuineness of the receipt of money. The assessee went in appeal before the CIT(A). The CIT(A) deleted the addition by reproducing the submissions of the assessee and giving following finding : Considering the above, the share transaction is treated as genuine and the Assessing Officer is directed to tax the income derived from the sale of the same as income from capital .....

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on the order of this Tribunal in ITA No. 15/Agra/2008 in the case of Shri Satya Pal Singh, Ghaziabad vs. ITO, in which case also, the question related to long-term capital gains on the sale of shares of Suma Finance & Investment Pvt. Ltd. on 19.07.2000. In this case, the shares were purchased on 05.05.1999 for ₹ 21,663/- at the rate of ₹ 7.22 per share while the shares were sold on 19.07.2000 @ 108/- per share. It was pointed out that when the matter traveled to the Tribunal, th .....

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2005 for the Assessment Year 2001-02. We noted, in that case the assessee has purchased the shares and sold those shares through M/s P.K. Jain & Associates, i.e. the broker. The purchase of the shares has not been doubted by the Assessing Officer. The Assessing Officer had doubted the sale consideration which was received by the assessee through Demand Draft issued from the account of M/s. P.K. Jain & Associates. The Assessing Officer has also doubted the sale price at which the shares w .....

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rder in that case the ld. A.M. has relied on the decision of Shri Ashok Kumar Lavania (ITA No.112/Agr/2004). I have gone through the decision of Shri Ashok Kumar Lavania in ITA No.112/Agr/2004 which was decided by the Bench constituting of same ld. J.M. and ld. A.M. vis-à-vis the facts of the case of the assessee. In that case also the transaction of sales has not been accepted by the A.O. as he doubted the sale prices and also relied on the statement of Shri Ashok Gupta, Director of M/s. .....

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c. during the course of assessment proceedings alongwith details of demand draft through which the sale proceeds has been received. It was also pointed out that the purchases were made through broking concern M/s. JRD Stock Brokers Pvt. Ltd. The A.O. noticed that the shares were purchased @ ₹ 4/- per share and sold @ ₹ 65/- to ₹ 84/- per share. The A.O. was of the view that the transactions were not genuine and are only accommodation entries. The broker pointed out that he was .....

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er providing copies of such adverse statements to cross-examine. Otherwise also the statement of Shri Ashok Gupta is too vague to be of any evidentiary value. He has nowhere stated that the transaction of the assessee was bogus or not genuine. He has no corroborative evidence to show that the cash for drafts was received from the assessee. In the absence of any corroborative evidence his statement cannot be accepted as true on his mere ipse dixit. Shri Manoj Agarwal was not produced for cross-ex .....

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ssee. The A.O. has not said anything about the transactions entered through this broker. Whereas the assessee has produced : i) copies of sales and purchase bills; ii) share certificates and transfer letters; iii) contract notes; iv) duly transferred share certificates received from the companies; and v) affidavit. (11) There is no doubt, in such cases, the brokers become the witnesses of the department. The department has got statements of these brokers which are used against the assessee. Irre .....

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der the provisions of the Companies Act. The brokers were never confronted with the evidences produced by the assessee. The apparent has to be treated as a real unless proved otherwise. Long ago Hon ble Supreme Court has laid this law while rendering the celebrated decision in the case of CIT Vs. Daulat Ram Rawatmal (1964) 53 ITR 574 (SC). The assessee has countered the statements of brokers by way of his duly sworn-in affidavit. We have examined the entire evidences placed in the paper book of .....

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sed shares from MS. These purchases are evidenced from the contract note. The payment was made by cheque. These shares were transferred in the name of the assessee. The assessee held these shares for more than one year. She sold these shares to J, a member of stock exchange. J in his letter has confirmed that transaction and the payment was made through cheque. The assessee has provided all the requisite evidences in support of all transactions. Simply because J could not produce his books of ac .....

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the bank account of J is by clearance. Therefore, the allegation of the A.O. that the amount was deposited in cash has no basis. The assessee has accepted having invested her funds on the advice of her father-in-law. The burden of proving a transaction is always on the person asserting it to be bogus and this burden has to be strictly discharged by adducing legal evidence of a character, which would either directly prove the fact of bogusness or establish circumstances unerringly and reasonably .....

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t the assessee acquired the shares to earn profit. There is no evidence except speculation that this profit is not from the sale of shares. The A.O. has failed to establish his case and to discharge the requisite burden cast on him. The Authorised Representative has filed the requisite quotation of 18th July, 1996 along with the requisite proof of transactions of 9000 shares along with transfer of share certificate. Therefore, in the given facts and circumstances of the case, the CIT(A) has corr .....

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is case, the decision of Hon ble Punjab & Haryana Court relied by learned A.R. in the case of CIT vs. Anupam Kapoor reported in (2008) 299 ITR 179 (P&H) is very much relevant. The held portion of this decision is extracted herein below :- Held, dismissing the appeals, that there was no material before the Assessing Officer which could have led to a conclusion that the transaction was a device to camouflage activities to defraud the Revenue. No such presumption could be drawn by the Asses .....

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ficer could not have added the income, which was rightly deleted by the Commissioner (Appeals) as well as the Tribunal (16) Thus, the sum total of the foregoing discussions go to, cumulatively, establish that the assessee has been successful in proving the long term capital gain earned by him in this case. He has also established that he is exempt from tax qua long term capital gains as has been claimed. 11. In my opinion, this case is equally applicable in the case of the assessee. In the case .....

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e identity of the broker is proved. Purchases were not doubted by the A.O. The demand draft for the sale consideration was issued from the account of M/s. P.K. Jain & Associates i.e. brokers. The money has not been deposited in cash in this account but has come to this account by way of transfer from the account of M/s. S.G. Fincap Limited. The ld. A.M. has distinguished the decision of Ashok Kumar Lavania. On the basis of that, in Ashok Kumar Lavania s case purchase of the shares was not in .....

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are @ ₹ 4/- per share and sold @ ₹ 65/- to 84/- per share. In that case also the broker has not accepted the transaction but on the basis of the evidence the Tribunal has accepted the transaction to be genuine one as there was no corroborative evidence to support the statement of the broker. In this case, I noted that the statements of the broker couldn t be given any credence as he has stated differently vide different letters. Earlier he denied the transaction being entered into. S .....

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assessee was not provided cross-examination. The statement has been recorded at the back of the assessee. This is a settled law that no addition can be sustained on the basis of the statement recorded at the back of the assessee and without giving opportunity to the assessee to cross examine the person who has given the statement at the back of the assessee. I have also gone through the decision of Delhi High Court in the case of SMC Share Brokers Limited, 288 ITR 345 (Delhi) and that of Kishan .....

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as the record does not show that any such opportunity was provided. In almost similar circumstances, Hon ble Calcutta High Court in the case of Eastern Commercial Enterprises (210 ITR 103) observed as under :- At the earlier occasion he claimed all his sales to be genuine but before the Assessing Officer in the case of the assessee, he disowned the sales specifically made to the assessee. This statement can at the worst show that S is not a trustworthy witness and little value can be attached to .....

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er. ITAT, Delhi in the case of Rajeev Agarwal (139 Taxman 170 (Mag.)) has observed as under :- The mere reliance on the statement of third parties who were never examined by the Assessing Officer himself cannot be held to be sufficient to come to the finding that the transaction was not genuine and more so when there are other material and evidences to support the transaction. 13. Hon ble Delhi High Court in the case of CIT Vs. SMC Share Brokers Ltd (288 ITR 345) also observed as under :- There .....

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2004 which has been decided by the Bench constituting of the same very learned Members. Judicial discipline demands that on the similar facts the Bench is bound to follow its earlier decisions. The principles of judicial discipline require that the order of the Co-ordinate Bench has to be followed. 15. I have also been nominated as Third Member in the case of Shri Baijnath Agarwal, ITA No.133/Agr/2005 which also I disposed of with my order of even date. In that case also I have held that the ass .....

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in 15 to 16 months by 16 times. Although the rate of ₹ 72/- was quoted on 28.11.2000 in M.P. Stock Exchange is apparent from page 11, para (iii) of the Assessment Order. It was further observed that in such a short period, share of no other reputed company has increased so much and the share market has also not shown such a rise. In my opinion, the share market is quite volatile and prices do fluctuate abnormally. It is seen that the shares dealt by the assessee were quoted at M.P. Stock E .....

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e Bench observed as under :- The assessee has no relation with the directors of the company and was in no way in the capacity to affect the market price of shares. The increase in share prices by more than 25 times too cannot be the basis to assume that the transaction was bogus. Abnormal fluctuation in share prices is a normal phenomena - the learned counsel for the assessee filed a chart showing low and high prices of some quoted shares during the 52 weeks as per Economic Times dated 27.02.200 .....

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ee had taken shares from the market, the shares were listed and the transaction took place through a registered broker of the stock exchange. There was no material before the AO, which could have lead to a conclusion that the transaction was simpliciter a device to camouflage activities to defraud the Revenue. No such presumption could be drawn by the AO, merely on surmises and conjectures. 18. In the stock Exchange when the transaction is entered into, the assessee is not aware of about the buy .....

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only blank transfer share certificate to the broker without mentioning the name of the buyer. There is nothing wrong in my opinion and this is a usual practice in the business. From the entire appreciation of the evidence, I noted that the assessee had acquired the shares, the purchase made on 15.07.1999 was duly declared by the assessee in earlier years which stand accepted by the Revenue. The shares were sold through stock brokers who were registered with the Stock Exchange. Shares were sold a .....

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ntries. This approach does not have any leg to stand. Hon ble Supreme Court in the case of Umacharan Shaw & Bros vs. CIT, 37 ITR 271 (SC) has clearly laid down that suspicion howsoever strong cannot take place of proof. From the entire appreciation of evidence, I noted that Assessing Officer has failed to establish that the assessee has introduced his own unaccounted money in the shape of alleged sale proceeds of shares. Hon ble Supreme Court in the case of Kishan Chand Chellaram vs. CIT rep .....

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hat in lieu of the aforesaid sale proceeds, the assessee has surreptitiously introduced his unaccounted money in the bank account. After having perused the entire material that is available on record, there is no averment, much less any evidence, with the Revenue in this regard. While there may be enough grounds with the AO to carry out the impugned verification exercise to test the efficacy of the transactions resulting in long term material gains in the hand of the assessee but there is no cog .....

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tions or the twisting statements of M/s P.K. Jain & Associates which remain untested by the A.O. himself. None of the judicial precedent supports the case of the Revenue. While making addition as income from undisclosed sources burden on the department is very heavy to establish that the alleged receipt was actually income of the assessee from the undisclosed sources. Jodhpur Bench of the ITAT in the case of ITO Vs. Smt. Kusumlata (reported in 105 TTJ 265), copy of which is placed in the com .....

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shares were transferred in the name of the assessee. The assessee held these shares for more than one year. She sold these shares to the member of stock exchange Shri J.K. Jain. Shri J.K. Jain in his letter dt. 22nd Dec., 1999 has confirmed the transaction and the payment was made through cheque. The assessee has provided all the requisite evidences in support of all transactions. Simply because Shri J.K. Jain could not produce his books of account or the quoted rate of shares in Delhi Stock Exc .....

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Jain is by clearance. Therefore, the allegation of the AO that the amount was deposited in cash has no basis. The assessee has accepted having invested her funds on the advice of her father-in-law. The burden of proving a transaction is always on the person asserting it to be bogus and this burden has to be strictly discharged by adducing legal evidence of a character which would either directly prove the fact of bogusness or establish circumstances unerringly and reasonably raising an inference .....

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case of Smt. Sunita Oberoi vs. ITO (Agra) (TM) ITA No.273/Agr/2004 A.Y. 1995-96 dated 07.08.2009, 30 DTR (Agra) (TM) (Trib.) 474 in which on difference of opinion on the question under the similar circumstances whether the assessee can be said to have discharged her burden to prove the genuineness of the transaction in shares of M/s. Prasidh Exports Limited and M/s. K.L.P. Finance Limited or that the burden had shifted on the Revenue that can be held to have not discharged by them, the decision .....

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buyer to whom the ultimately shares were sold through the broker were not known to the assessee. The assessee was not in a position to compel the share broker for confirming the transaction, she being neither a director nor having large scale dealings with the brokers over the years so as to show that she was personally in a position to compel them on account of the magnitude of transaction done through them. It was her father who knew the brokers and she acted on his advice and had no contact .....

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show that Shri Praveen Mittal was ever in a position to declare the transactions of an acquaintance broker as bogus transactions neither any evidence has been led nor reasons advanced to support how he could be considered to be a reliable person so as to ignore the evidences available on record i.e. contract notes of sale and of the specific shares of specific rates on specific dates. Shri Praveen Mittal was the witness of the Department, the onus was therefore on the Department to produce him a .....

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