TMI Blog2018 (4) TMI 1620X X X X Extracts X X X X X X X X Extracts X X X X ..... y with such a higher premium of ₹ 328 per share, whose net worth was not known by the assessee and the company is not listed with any Exchange cuts no ice. Another important factor considered is that the assessee has made transaction with share broker Sh. S.M. Khemka banking channels and subsequent years still the assessee has made transaction in cash for the year under consideration accords credence to the non reliability of the entire transaction of shares giving rise to such capital gains. As coupled with the fact that the transfer of money in cash from Ludhiana to Delhi and a person representing the broker operating at Kolkata has collected the money at Delhi cannot be accepted. The tax authorities are entitled to look into the surrounding circumstances to find out the realities and the matter has to be considered by applying test of human probabilities as enunciated by the Honble Supreme Court. The fact that inspite of earning 3072% of profits, the assessee never ventured to involve himself in any other transactions with the broker which gave him even much lower profits during the period which cannot be a mere coincidence or lack of interest or absence of advice from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso of view that it was quite possible that the appellant had not purchased the shares of M/s Sharp Transport Ltd. as was claimed by the appellant, in 2008 and had fictitiously arranged to show the same afterwards. The matter was examined on the genuineness of the purchase and sale of the shares. 6. In response to the notices issued by the Assessing Officer under section 133(6) on 19.12.2013, the following points emerged: i. Sharp Transport Pvt. Ltd., Registration. No. 119293ROC, Kolkata. Addressed at 4, Fairelie place, First Floor Room No. 109 Kolkata ii. The details of the selling of the shares of OCL on the dates 12/05/2010, 13/05/2010 and 14/05/2010 revealed that the sale had taken place in the name of Client Code NJ06 which is that of the assessee and it was observed that circular transactions had taken place among the brokers for the scrip. 6.1 It was also examined by the Assessing Officer regarding the purchase of the scrips from one Sh. S.K. Khemka (broker) u/s 133(6) vide notice dated 27.01.2014. The broker was asked to provide details of payment made by the assessee with respect to the said purchase of shares on 02.12.2008. In response to this, reply was recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent by the broker. xii. This is the first deal with the broker S.K. Khemka. xiii. The assessee was also involved in taking tuition classes to students in small groups. 6.3 The Assessing Officer after while treating the receipt of ₹ 83,57,578/- which was received by the assessee as undisclosed income under section 68 rationale for the addition as under: (i) The assessee was not even present in India at the time of purchase of shares i.e. 02.12.2008 (as per the passport details assessee was outside India from 15.08.2008 to 19.12.2008). It is difficult to understand as to how the assessee performed the necessary formalities for acquiring shares i.e. even if the investment activities are taken care by the father of the assessee, still the assessee has to sign on some necessary papers in original if the scrips are not traded on any stock exchange and are not purchased electronically. (ii) The assessee was asked his source of income to which the assessee replied that he was drawing salary from Sabar Paper Boards Pvt. Ltd., Ludhiana. In the earlier years, he was having certain income from investments in the form of purchase and sale of shares. The investments are be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of the said amount of ₹ 2,72,000/- it was told by him that he had earned tuition income of ₹ 1,60,000/- during the year and also had received gift of ₹ 15,50,000/- from his father. This claim of the assessee was not acceptable based on the following reasons:- (a) Out of ₹ 15.5 lacks received from the father ₹ 14 lacks have been transferred back to the company i.e. Saber Paper Ltd. (as per bank records), So only ₹ 1.5 lakhs from the father as gift can be at max accepted as available said purchase of ₹ 2,72,000/-. (b) The claim of the assessee that he has earned tuition income during the is also untenable. (c) Further the fact that the assessee has never given any tuition can be inferred from the fact that on being asked vide question no. 30 as if the assessee has undertaken tuition classes in other years also it was replied by the assessee that only up to financial year 2009-10 he has undertaken tuition classes. However the perusal of the passport shows that during the financial year 2009-10 the assessee was present only for a brief period from 30.07.2009 to 22.08.2008 and rest of the time the assessee was abroad to pursue his st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on 31.03.2009 and 31.03.2011 enclosed at Page No. 11 to 12 of the Paper Book. Besides the above, the broker has given independent verification in response to the enquiry made by the AO u/s 133(6) of the Act. Despite all of the above evidences produced by the assessee, the Assessing officer has completely overlooked the said evidences without giving any cogent reasons and has passed the impugned assessment order making the additions. 8.1 The Ld. AR further argued that when the sale transaction has been confirmed by the Calcutta stock exchange, the focus of the A.O shifted towards the purchase transaction and he has stated in the assessment order that the purchase of shares is bogus. Regarding the purchase of the shares of M/s Sharp Transport Pvt. Ltd., it is submitted that the assessee has purchased 800 shares of the said company at price of ₹ 340 per share and to vouch that we have already submitted the contract note above evidencing the purchase of shares and it is pertinent to mention that the information provided by the broker of the assessee u/s 133(6) of the Act regarding the purchase of the shares wherein he has categorically stated that the assessee had purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out with registered broker, copy of contract notes, assessee's demat account, copy of bank Pass books etc. Were produced and placed. The Tribunal found that the AO carried out the entire exercise just on the basis of conjecture and surmises and disallowed the exemption claimed by the assessee without any basis. The Tribunal has found a weightage on the point that when the assessee has proved that the transactions are accounted for and STT is also charged onthe transaction. The assessee has produced complete evidence to support her claim and CIT(A) has rightly treated the sale transaction as LTCG. COMMISSIONER OF INCOME TAX vs. ANIRUDH NARAYAN AGARWAL(2013) 84 CCH 028 ALL HC. Income-Cash credits- Addition- Substantially - Assessee's case was selected for scrutiny and income from LTCG on sale of shares through broker was investigated -AO disallowed plea of LTCG on ground that broker had not given 'details and furnished documents transaction appeared to be fake - Therefore , added differential amount as income from other sources - CIT (A) deleted addition- Held, there was no evidence on record or in assessment order to prove that proceeds received against sale of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntative of the broker of Kolkata who has received the money at Delhi from the assessee having business at Ludhiana and consequent sale of shares at 34 times of the investment cannot be accepted as the assessee has failed to discharge even the basic credentials of the company in which the investments have been made. The assessee has also failed to satisfactorily explain the reason of investment of shares. 9.1 The Ld. DR relied on the case recent decision by Hon. Indore Bench of ITAT in case of Agrawal Coal Corpn. (P.) Ltd. v. Asstt. CIT 63 DTR 201. In this case it was held by the Tribunal that merely because the companies were registered with ROC, were filling return of income, having PANs/bank accounts, share application forms were submitted but the same did not establish their identity as these companies might have been existing on papers or in real sense at the time of registration. 9.2 Ld. DR further placed reliance on the theory of preponderance of human probability as pronounced by the Hon. Apex Court in the cases of Cit v. Durga Prasad More [1971] 82 ITR 540 and Sumati Dayal v. Commissioner Of Income Tax, Bangalore. [1995] 80 Taxman 89/214 ITR 801 (SC) is of utmost impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inion of the Assessing Officer, not satisfactory. 9.4 The Ld. DR argued that this case is one of its special kinds, and in the operation in toto relates and similar to the test of human probability enumerated in the judgment Honble Punjab Haryana High Court in case of Som Nath Maini v. CIT [2008] 306 ITR 414 (Punj. Har.). In this case, the assessee in his return declared loss from sale of gold jewellery and also declared a short-term capital gain from sale of shares so that the two almost match each other. This simple tax planning became ineffective after the Assessing Officer disbelieved the astronomical share price increase applying the test of human probability. The Assessing Officer observed that short-term capital gains were not genuine in as much as the assessee had purchased 45000 shares of Ankur International Ltd. at varying rates from ₹ 2.06 to ₹ 3.10 per share and sold them within a short span of six-seven months at the rate varying from ₹ 47.75 paisa to ₹ 55. Even though -the two respective transactions for purchase and sale of shares were routed through two different brokers, yet the Assessing Officer did not believe the astronomical rise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee, the transaction has held in genuine on the ground that the assessee has failed to prove the source of investment, failed to prove the channel of cash payment to the broker and on the ground of surrounding circumstances. (v) ITO Vs. Ajay Shantilal Lalwani ITA No. 163 (Pune) 2010:- In this case, the Assessing Officer has denied exemption u/s 10(38) in respect of LTCG mainly on the basis that there was substantial delay in transferring the shares in to D-MAT account from the date of purchase. Thus, the facts of the case of the assessee are different from this case. (vi) DCIT Vs. Sanjay Jain ITA No. 992/Chd./2009:- In this case , the share broker has failed to produce the directors of the company whose shares were traded by the assessee and the Inspector of the Department also could not trace the concern.Thus, the facts of the case of the assessee are different from this case. The assessee has also placed reliance on the judgements of Hon. Courts. Perusal of these judgements reveals that facts of the cases mentioned in the judgements are different from the case of the assessee. 10. We have carefully considered the submissions of both the parties and also t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dentity of the investors; (ii) their creditworthiness/ investments; and (Hi) genuineness of the transaction. Only when these three ingredients are established prima facie, the department is required to undertake further exercise. 10.2 In the case of CIT Vs Prescision Finance P. LTD. (Cal)208 ITR 465, K.C.N. Chandrasekhar Vs AC IT (ITAT.Bang) 66 TTJ 355, CIT Vs United Commercial industrial Co.(P) ltd.(Cal)187 ITR. It is necessary for the assessee to prove prima face the transaction which results in a cash credit in his books of account. Such proof includes proof of the identity of his creditor, the capacity of such creditor to advance the money and, lastly, the genuineness of the transaction. These things must be proved prima facie by the assessee and only after the assessee has adduced evidence to establish prima facie the aforesaid, the onus shifts on the department. Merely establishing the identity of the creditor is not enough 11. The assessee has failed to prove that the purchase and sale transactions are genuine and could not even furnish and iota of evidence regarding the sale of shares. Similarly in the case of Hon. ITAT Indore Bench in the case of Vaibhav Cotton ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 801 is squarely applicable in this case. Though the assessee has received the amounts by the way of account payee cheques, the assessee could nowhere prove the purchase of shares as claimed to have been made on 02/12/2008 in cash and it was also not proved about the availability of the funds with the assessee as on the date of purchase of shares. The assessee was not in India as per the passport details available as per the record. This, coupled with the fact that the transfer of money in cash from Ludhiana to Delhi and a person representing the broker operating at Kolkata has collected the money at Delhi cannot be accepted. The tax authorities are entitled to look into the surrounding circumstances to find out the realities and the matter has to be considered by applying test of human probabilities as enunciated by the Honble Supreme Court. The fact that inspite of earning 3072% of profits, the assessee never ventured to involve himself in any other transactions with the broker which gave him even much lower profits during the period which cannot be a mere coincidence or lack of interest or absence of advice from the financial institutions as done earlier. 15. In view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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