DCIT, Circle-9(1), Hyd, Hyderabad V. Sri Vinay Kumar Agarwal, Hyd, Hyderabad

CO 16/HYD/2015

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1237 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 04-09-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 26-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 01-05-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAMAKRISHNA BANDI
• Keywords: Unexplained investment
• Section: 143(3); 147; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 153/HYD/2015 ASSESSMENT YEAR: 2008-09 DY. COMMISSIONER OF INCOME- TAX, CIRCLE 9(1), HYDERABAD. VS. VINAY KUMAR AGARWAL, HYDERABAD PAN AEMPK0188B (APPELLANT) (RESPONDENT) C.O. NO. 16/HYD/2015 (IN ITA NO. 153/HYD/2015 ASSESSMENT YEAR: 2008-09) VINAY KUMAR AGARWAL, HYDERABAD PAN AEMPK0188B VS. DY. COMMISSIONER OF INCOME- TAX, CIRCLE 9(1), HYDERABAD. (CROSS OBJECTOR) (RESPONDENT) REVENUE BY : SHRI RAMAKRISHNA BANDI ASSESSEE BY : SHRI K.C. DEVDAS DATE OF HEARING : 26-08-2015 DATE OF PRONOUNCEMENT : 04-09-2015 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL OF THE DEPARTMENT AND C.O. BY ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 11/11/2014 OF LD. CIT(A) VI, HYDERABAD FOR THE AY 2008-09. 2. AT THE OUTSET, LD. AR SUBMITTED BEFORE US, ON TH E INSTRUCTION OF ASSESSEE, HE WOULD NOT LIKE TO PRESS GROUNDS RAISED IN THE CROSS 2 ITA NO. 153 /HYD/2015 & CO NO. 16/H/15 VINAY KUMAR AGARWAL OBJECTION AND ACCORDINGLY SOUGHT WITHDRAWAL OF THE C.O. CONSIDERING THE AFORESAID SUBMISSIONS OF LD. AR, WE DISMISS C.O . AS WITHDRAWN. 3. AS FAR AS THE APPEAL OF THE DEPARTMENT IS CONCE RNED, GROUNDS RAISED ARE AS UNDER: I. THE ORDER OF THE CIT(A) IS ERRONEOUS AND IS PREJ UDICIAL TO THE INTEREST OF REVENUE. II. THE DECISION OF LD. CIT(A) IS NOT ACCEPTABLE A S THE CIT(A) ERRED IN TAKING INTO CONSIDERATION THE INFORMATION RECEIVED FROM INTELLIGENCE AUTHORITIES AND ALSO THAT THE ASSESSE E FAILED TO FURNISH EVIDENCE IN SUPPORT OF PURCHASE DATE OF SH ARES. 4. AS COULD BE SEEN, THE ONLY ISSUE RAISED BY THE D EPARTMENT IS WITH REGARD TO ASSESSEES CLAIM OF EXEMPTION U/S 10 (38) ON LONG TERM CAPITAL GAIN FROM SALE OF SHARES AMOUNTING TO RS. 1 6,03,050. 5. BRIEFLY THE FACTS ARE, ASSESSEE AN INDIVIDUAL DE RIVES INCOME FROM PARTNERSHIP BUSINESS AS WELL AS TRADING IN SHA RES, DERIVATIVES AND COMMODITIES. FOR THE YEAR UNDER CONSIDERATION, ASSESSEE FILED HIS RETURN OF INCOME ON 01/10/08, DECLARING TOTAL I NCOME OF RS. 1,00,017. SUBSEQUENTLY, ASSESSEE FILED REVISED RETU RN OF INCOME ON 30/09/09 DECLARING INCOME OF RS. 14,92,010. ASSESSM ENT IN CASE OF ASSESSEE WAS ORIGINALLY COMPLETED U/S 143(3) OF THE ACT ON 31/12/10 ACCEPTING THE INCOME RETURNED. SUBSEQUENTLY, ON THE BASIS OF CERTAIN INFORMATION AVAILABLE WITH REGARD TO THE GENUINENES S OF THE SHARE TRANSACTIONS CARRIED ON BY ASSESSEE THROUGH ONE OF THE BROKER, ASSESSMENT WAS REOPENED U/S 147 OF THE ACT. DURING THE REASSESSMENT PROCEEDING, AO FOUND THAT ONE SHRI MUK ESH CHOKSI HAD CREATED CERTAIN FICTITIOUS COMPANIES FOR PROVIDING BOGUS ACCOMMODATIVE ENTRIES, ONE OF THEN, BEING M/S ALLIA NCE INTERMEDIATERIES & NETWORK PVT. LTD. AND ASSESSEE IS ONE OF THE BENEFICIARIES OF THE SAID COMPANY. HE FOUND THAT, I T WAS CLAIMED BY ASSESSEE THAT SHARES OF M/S JAI CORPORATION LTD. CL AIMED TO BE PURCHASED THROUGH M/S M/S ALLIANCE INTERMEDIATERIES & NETWORK PVT. LTD. WERE HELD IN ITS POOL ACCOUNT TILL IT WAS TRAN SFERRED TO ASSESSEES 3 ITA NO. 153 /HYD/2015 & CO NO. 16/H/15 VINAY KUMAR AGARWAL D-MAT ACCOUNT ON 15/05/07. AS OBSERVED BY AO, ENQUI RIES MADE WITH BOMBAY STOCK EXCHANGE REVEALED THAT M/S ALLIANCE IN TERMEDIATERIES & NETWORK PVT. LTD. IN WHOSE POOL ACCOUNT SHARES OF M/S JAI CORPORATION LTD. WERE HELD FROM 03/04/06 TO 16/05/0 7 WAS NEITHER REGISTERED AS A TRADING PER OF EXCHANGE NOR REGISTE RED AS A SUB- BROKER AFFILIATED TO ANY TRADING MEMBER OF EXCHANGE . FURTHER, ENQUIRIES MADE ON NATIONAL STOCK EXCHANGE ALSO REVE AL THAT M/S ALLIANCE INTERMEDIATERIES & NETWORK PVT. LTD. WAS A REGISTERED SUB- BROKER AFFILIATED TO M/S ISE SECURITIES AND SERVICE S LTD. AND WAS REGISTERED IN THE CAPITAL MARKET SEGMENT ON 12/10/2 000 AND REGISTRATION WAS CANCELLED ON 19/02/04. AO ACCORDIN GLY ISSUED A SHOW CAUSE NOTICE TO ASSESSEE PROPOSING TO TREAT CAPITAL GAIN DERIVED ON SALE OF SHARES OF M/S JAI CORPORATION LTD AS ASSESS EES INCOME. IN RESPONSE TO THE SHOW CAUSE NOTICE, SUBMITTED AS UN DER: A) THE COMPANY MIS ALLIANCE INTERMEDIATERIES & NE T WORK PVT. TTD., IS IN EXISTENCE AND IS FILING ITS ANNUAL RET URNS WITH THE REGISTRAR OF COMPANIES. IN SUPPORT OF HIS ARGUMENT , THE ASSESSEE HAD ENCLOSED COMPANY/LLP MASTER DATA DOWN LOADED FROM THE ROC WEBSITE, WHICH STATES THAT THE COMPAN Y M/S ALLIANCE INTERMEDIATERIES & NET WORK PVT. LTD IS I N EXISTENCE AND STATUS OF THE COMPANY IS ACTIVE'. B) REGARDING THE PAYMENT MADE TO MIS ALLIANCE INTERMEDIATERIES & NET WORK PVT. LTD., THE ASSESSE E STATED THAT, THE DETAILS OF PAYMENT MADE WERE ENCLOSED WITH THE LETTER DATED 17/10/2013 AND HOWEVER ENCLOSED A COPY OF THE SAME . C) THE ASSESSEE ALREADY FILED COMPLETE EVIDENCE OF PURCHASE AND SALES WITH CONTRACT NOTES EVIDENCINQ THE TRANS ACTIONS, AND THE AMOUNT HAS BEEN RECEIVED BY ACCOUNT PAYEE CHEQ UES. THUS, ALL THE TRANSACTIONS ARE GENUINE. D) SINCE ENTIRE DOCUMENTARY EVIDENCE HAVE BEEN FLI ED TO SUPPORT THE TRANSACTIONS AND MERE RELIANCE ON THE INVESTIGATION REPORT RECEIVED BY THE ASSESSING OFFICER CANNOT BE A GROUND TO T REAT THE TRANSACTIONS AS BOGUS AND ADDITION OF RS. 22,19,093/- CANNOT BE MADE AS PER SHOW-CAUSE NOTICE ISSUED. E) THE ENTIRE ADDITION PROPOSED IN THE SHOW CAUSE LETTER DATED 27/01/2014 IS TOTALLY CONTRARY TO THE FACTS AND EV IDENCE ON THE RECORDS AND THE ADDITIONS ARE PROPOSED TO BE MADE MERELY ON 4 ITA NO. 153 /HYD/2015 & CO NO. 16/H/15 VINAY KUMAR AGARWAL INVESTIGATION REPORT, A COPY OF WHICH WAS NOT MADE AVAILABLE TO THE ASSESSEE. AO AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE, H OWEVER, NOTED THAT AS PER THE DETAILS OF PURCHASE AND SALE OF SHA RES, IT WAS FOUND THAT ONLY THE SHARES OF M/S JAI CORPORATION LTD. WE RE TRANSACTED THROUGH M/S ALLIANCE INTERMEDIATERIES & NETWORK PVT . LTD. AND ASSESSEE DERIVED LONG TERM CAPITAL GAIN OF RS. 22,1 9,093. HOWEVER, ON VERIFICATION OF D-MAT ACCOUNT OF ASSESSEE, IT WA S FOUND THAT OPENING BALANCE OF SHARES OF M/S JAI CORPORATION LT D. FOR THE YEAR IS O AND 1000 SHARES WERE CREDITED TO D-MAT ACCOUNT OF ASSESSEE ON 15/05/07 AND ANOTHER 250 SHARES WERE CREDITED ON 17 /05/07. THE SAID SHARES OF M/S JAI CORPORATION LTD. WERE SOLD ON 16 TH AND 17 TH MAY, 07 RESPECTIVELY. THUS, AO NOTED THAT AS PER THE INFORM ATION REVEALED FROM THE D-MAT ACCOUNT SALE PROCEEDS OF THE SHARES OF M/S JAI CORPORATION LTD. GIVES RISE TO SHORT TERM CAPITAL G AIN. THOUGH, ASSESSEE PRODUCED A CERTIFICATE FROM M/S ALLIANCE I NTERMEDIATERIES & NETWORK PVT. LTD. STATING THEREIN THAT SHARES OF M/ S JAI CORPORATION LTD WERE HELD ON BEHALF OF ASSESSEE IN THE POOL ACC OUNT FROM THE DATE OF PURCHASE TILL THE DATE OF TRANSFER TO D-MAT ACCO UNT AND ASSESSEE ALSO FURNISHED PURCHASE AND SALE CONTRACT NOTES FOR SHARES OF M/S JAI CORPORATION LTD., BUT, AO WAS NOT CONVINCED WITH TH E SAME. AO OBSERVED THAT ASSESSEE COULD NOT PRODUCE EVIDENCE T O SHOW THAT PURCHASE PRICE OF SHARES WAS PAID TO M/S ALLIANCE I NTERMEDIATERIES & NETWORK PVT. LTD. THOUGH, ASSESSEE SUBMITTED A RECE IPT FROM M/S ALLIANCE INTERMEDIATERIES & NETWORK PVT. LTD. ACKNO WLEDGING RECEIPT OF RS. 1,58,294 IN CASH TOWARDS PURCHASE PRICE OF S HARES OF M/S JAI CORPORATION LTD., BUT, AO DID NOT ACCEPT THE SAME O N THE GROUND THAT HOW COULD ASSESSEE SITTING AT HYDERABAD CAN PAY CAS H TO THE COMPANY, WHICH IS IN MUMBAI. HE ALSO OBSERVED THAT AMOUNT OF RS. 1,58,294 DOES NOT MATCH WITH PURCHASE PRICE QUOTED BY ASSESSEE IN THE CAPITAL GAIN COMPUTATION STATEMENT. AO FURTHER OBSERVED, TO VERIFY THE GENUINENESS OF ASSESSEES CLAIM LETTERS WERE AD DRESSED TO BOMBAY STOCK EXCHANGE AND NATIONAL STOCK EXCHANGE C ALLING FOR 5 ITA NO. 153 /HYD/2015 & CO NO. 16/H/15 VINAY KUMAR AGARWAL INFORMATION REGARDING M/S ALLIANCE INTERMEDIATERIES & NETWORK PVT. LTD. AND IN RESPONSE TO THE SAID LETTERS, NATIONAL STOCK EXCHANGE VIDE ITS LETTER DATED 08/01/04 INFORMED THAT, THOUGH, M/ S ALLIANCE INTERMEDIATERIES & NETWORK PVT. LTD. WAS A REGISTER ED SUB-BROKER, BUT, THE REGISTRATION WAS CANCELLED ON 109/02/04. BOMBAY STOCK EXCHANGE ALSO VIDE LETTER DATED 10/01/14 REPLIED THAT M/S AL LIANCE INTERMEDIATERIES & NETWORK PVT. LTD. WAS NEITHER R EGISTERED AS TRADING MEMBER NOR AS A SUB-BROKER AFFILIATED TO AN Y TRADING MEMBERS OF THE EXCHANGE. ON THE BASIS OF THE AFORESAID INFO RMATION OBTAINED BY AO, HE CONCLUDED THAT ASSESSEES CLAIM OF PURCHA SING SHARES OF M/S JAI CORPORATION LTD ON 03/04/06 AND 04/04/06 CA NNOT BE ACCEPTED. AO FURTHER NOTED, THOUGH, LETTER DATED 07 /02/14 WAS ADDRESSED TO M/S ALLIANCE INTERMEDIATERIES & NETWOR K PVT. LTD. CALLING FOR INFORMATION WITH REGARD TO SHARE TRANSACTION, B UT, THERE WAS NO RESPONSE FROM THE SAID COMPANY. THUS, ON THE BASIS OF THE AFORESAID INFORMATION, AO FINALLY CONCLUDED THAT SALE TRANSAC TIONS OF SHARES RELATING TO M/S JAI CORPORATION LTD. ARE NOT LONG T ERM CAPITAL GAIN, BUT, SHORT TERM CAPITAL GAIN AS PER THE ENTRIES MADE IN D-MAT ACCOUNT OF ASSESSEE. HE, THEREFORE, TREATED THE GAIN DERIVED F ROM SALE OF SHARES AMOUNTING TO RS. 82,613 AS SHORT TERM CAPITAL GAIN. FURTHER, AO OBSERVED THAT ASSESSEE HAS NOT DECLARED THE SOURCE OF PURCHASE OF SHARES OF M/S JAI CORPORATION LTD. AS ON 15 TH AND 17 TH MAY, 07, ON WHICH DATES THE SHARES WERE TRANSFERRED TO ASSESSEE S D-MAT ACCOUNT. HE, THEREFORE, OPINED THAT THE INVESTMENT MADE HAS TO BE TREATED AS UNEXPLAINED INVESTMENT U/S 69A OF THE AC T. BY CONSIDERING THE MARKET PRICE OF THE SHARES AS ON 15 TH AND 17 TH MAY, 07, AS OBTAINED FROM NSE WEBSITE, HE TREATED THE AMOUNT OF RS. 22,94,500 AS UNEXPLAINED INCOME. ACCORDINGLY, HE COMPLETED TH E ASSESSMENT. BEING AGGRIEVED OF THE ASSESSMENT ORDER SO PASSED, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A). 6. IN COURSE OF HEARING BEFORE LD. CIT(A), ASSESSEE REITERATING THE SUBMISSIONS MADE BEFORE AO CONTENDED THAT WHEN DOCU MENTARY 6 ITA NO. 153 /HYD/2015 & CO NO. 16/H/15 VINAY KUMAR AGARWAL EVIDENCES IN THE FORM OF CONTRACT NOTES TOWARDS PUR CHASE OF SHARES WERE FURNISHED BEFORE AO, HE WAS COMPLETELY WRONG I N HOLDING THE TRANSACTIONS AS SHORT TIME CAPITAL GAIN BY CONSIDER ING THE DATE OF PURCHASE OF SHARES AS 15 TH AND 17/0507. IT WAS SUBMITTED BY ASSESSEE, PURCHASE OF SHARES OF M/S JAI CORPORATIO N LTD WERE REFLECTED BY ASSESSEE IN THE FINAL ACCOUNTS FORMING PART OF THE RETURN OF INCOME FILED FOR AY 2007-08. THEREFORE, CONCLUSI ON DRAWN BY AO IS TOTALLY INCORRECT. ASSESSEE SUBMITTED THAT ONLY BEC AUSE THESE SHARES WERE TRANSFERRED TO ASSESSEES D-MAT ACCOUNT ON 15/ 05/07 WOULD NOT MEAN THAT SHARES WERE NOT HELD BY M/S ALLIANCE INTE RMEDIATERIES & NETWORK PVT. LTD. ON ASSESSEES BEHALF IN ITS POOL ACCOUNT WHEN THERE ARE DOCUMENTARY EVIDENCES TO PROVE SUCH FACT. ASSES SEE SUBMITTED, SINCE ASSESSEE WAS HOLDING THE SHARES OF M/S JAI CO RPORATION LTD. FOR MORE THAN 12 MONTHS, GAIN DERIVED FROM SALE OF SHAR ES CAN BE TREATED AS LONG TERM CAPITAL GAIN, WHICH IS EXEMPT U/S 10(3 8) OF THE ACT. AS FAR AS ADDITION MADE U/S 69A IS CONCERNED, IT WAS S UBMITTED BY ASSESSEE, WHEN ASSESSEE HAS PURCHASED THE SHARES IN 2006, AO WAS NOT JUSTIFIED IN MAKING THE ADDITION U/S 69A BY CON SIDERING THE MARKET PRICE OF THE SHARE AS ON 15 TH AND 17/05/07 WHEN THE SHARES WERE TRANSFERRED TO ASSESSEES D-MAT ACCOUNT. 7. LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE IN THE LIGHT OF FACTS AND MATERIALS BROUGHT ON RECORD OBSE RVED THAT PURCHASE OF SHARES ARE SUPPORTED BY RECEIPT EXECUTED BY BROK ER ON 05/04/06 AS WELL AS FROM THE FACT THAT THE AMOUNT WAS PAID OUT OF CASH WITHDRAWN FROM FIRMS ACCOUNT. HE FURTHER NOTED, INVESTMENTS IN SHARES OF M/S JAI CORPORATION LTD. WERE REFLECTED IN THE BALANCE SHEET OF ASSESSEE FOR AY 2007-08, WHICH WERE CARRIED OVER TO THE NEXT YEAR AND THIS FACT WAS NOT DISPUTED BY AO. LD. CIT(A) OBSERVED, ONLY BECAUSE SHARES WERE TRANSFERRED TO ASSESSEES D-MAT ACCOUNT ON 15 TH AND 17/05/07, IT CANNOT BE SAID THAT SHARES WERE NOT PURCHASED BY ASSESSEE IN APRIL06. IN THIS CONTEXT, LD. CIT(A) REFERRED TO T HE CONFIRMATION ISSUED BY M/S ALLIANCE INTERMEDIATERIES & NETWORK PVT. LTD . TO THE EFFECT THAT 7 ITA NO. 153 /HYD/2015 & CO NO. 16/H/15 VINAY KUMAR AGARWAL SHARES WERE KEPT IN THEIR POOL ACCOUNT TILL THE TIM E IT WAS TRANSFERRED TO ASSESSEES D-MAT ACCOUNT. AS FAR AS ALLEGATION O F AO THAT M/S ALLIANCE INTERMEDIATERIES & NETWORK PVT. LTD. IS NO T A MEMBER OF ANY STOCK EXCHANGE, LD. CIT(A) OBSERVED THAT ENTRIES IN D-MAT ACCOUNT CLEARLY INDICATE THE TRANSFER OF SHARES FROM M/S AL LIANCE INTERMEDIATERIES & NETWORK PVT. LTD. AND NOT AS PUR CHASES. HE ALSO NOTED THAT, IF AT ALL, THE PURCHASE TRANSACTIONS CO ULD HAVE ALSO BEEN VERIFIED FROM THE SELLER OF SHARES, WHO HAPPENED TO BE M/S ISE SECURITIES AND SERVICES LTD., UNDER WHICH, M/S ISE SECURITIES AND SERVICES LTD. WAS A SUB-BROKER. THUS, ON THE BASIS OF MATERIAL EVIDENCES SUBMITTED BEFORE HIM, LD. CIT(A) OBSERVED , AOS CONCLUSION THAT PURCHASES OF SHARES OF M/S JAI CORPORATION LTD . WERE MADE ONLY ON 15 TH AND 17/05/07 CANNOT BE ACCEPTED. AS FAR AS OBSERVA TION OF AO THAT ASSESSEE COULD NOT EXPLAIN THE PURCHASE OF SHA RES ON 15 TH AND 17/05/07 WHILE MAKING ADDITION OF RS. 22,954,500, L D. CIT(A) OBSERVED THAT THERE IS NO EVIDENCE TO SHOW THAT ASS ESSEE HAS PAID CASH EQUIVALENT TO THE AMOUNT OF RS. 22,94,500 ON T HE DATE OF TRANSFER TO D-MAT ACCOUNT. THUS, LD. CIT(A) FINDING THAT ASSESSEE HAS SHOWN THE INVESTMENT IN SHARES OF M/S JAI CORPORATI ON LTD. IN ITS ACCOUNT FOR AY 2007-08, WHICH HAS NOT BEEN DISPUTED BY AO, ULTIMATELY, HELD THAT THE GAIN DERIVED FROM TRANSAC TION IN SHARES CANNOT BE TREATED AS SHORT TERM CAPITAL GAIN. CONSE QUENTLY, HE ALSO HELD THAT THE CONCLUSION DRAWN BY AO THAT SOURCE OF INVESTMENT IN SHARES ON 15 TH ND 17/05/07 WAS NOT EXPLAINED BY ASSESSEE WHILE MAKING ADDITION U/S 69A CANNOT BE SUSTAINED. ACCORD INGLY, HE DELETED THE ADDITION MADE U/S 69A OF THE ACT. 8. LD. DR, MORE OR LESS, RELYING UPON THE OBSERVATI ONS MADE BY AO IN THE ASSESSMENT ORDER, SUBMITTED, AO IN COURSE OF ASSESSMENT PROCEEDING HAS ENQUIRED WITH THE CONCERNED STOCK EX CHANGES AND FOUND THAT ASSESSEES REGISTRATION WITH NATIONAL ST OCK EXCHANGE WAS CANCELLED LONG BEFORE THE SHARE TRANSACTION WAS ENT ERED INTO BETWEEN ASSESSEE ANDM/S ALLIANCE INTERMEDIATERIES & NETWORK PVT. LTD. 8 ITA NO. 153 /HYD/2015 & CO NO. 16/H/15 VINAY KUMAR AGARWAL FURTHER, NOTICE ISSUED TO M/S ALLIANCE INTERMEDIATE RIES & NETWORK PVT. LTD.. BY AO CALLING FOR INFORMATION WAS NOT RESPOND ED TO. IN THESE CIRCUMSTANCES, CLAIM OF ASSESSEE THAT SHARES WERE P URCHASED IN FY 2006-07 AND WAS HELD BY BROKER IN ITS POOL ACCOUNT ON BEHALF OF ASSESSEE CANNOT BE BELIEVED. LD. DR SUBMITTED, ONUS IS ON ASSESSEE TO ESTABLISH WITH PROPER FACT AND EVIDENCE THAT SH ARES WERE ACTUALLY PURCHASED AND HELD BY HIM FOR A PERIOD EXCEEDING 12 MONTHS FOR CLAIMING IT AS LONG TERM CAPITAL GAIN. IT WAS SUBMI TTED, WHEN ASSESSEE HAS FAILED TO ESTABLISH SUCH FACT WITH PROPER EVIDE NCE, AO WAS JUSTIFIED IN TREATING THE GAIN DERIVED FROM SALE OF SHARES AS SHORT TERM CAPITAL GAIN CONSIDERING THE FACT THAT AS PER THE D -MAT ACCOUNT SHARES WERE PURCHASED BY ASSESSEE ON 15 AND 17/05/07 AND W ERE SOLD ON 16 AND 18/05/07 RESPECTIVELY. 9. LD. AR, ON THE OTHER HAND, SUPPORTING THE FINDIN G OF LD. CIT(A) SUBMITTED BEFORE US, ASSESSEE NOT ONLY IN THE COURS E OF ASSESSMENT PROCEEDING, BUT DURING THE PROCEEDING BEFORE LD. CI T(A) HAS BROUGHT ALL DOCUMENTARY EVIDENCE TO ESTABLISH THE FACT THAT 1250 SHARES OF M/S JAI CORPORATION LTD WERE PURCHASED BY ASSESSEE IN A PRIL06 AND WAS HELD IN THE POOL ACCOUNT OF THE SUB-BROKER M/S ISE SECURITIES AND SERVICES LTD. IN AY 2007-08. IN THIS CONTEXT, LD. A R REFERRED TO RETURN OF INCOME FILED FOR AY 2007-08 AS WELL AS THE FINAN CIAL STATEMENTS LIKE BALANCE SHEET AND CASH BOOK EXTRACT OF THE ASSESSEE AS WELL AS FIRM WHERE HE IS PARTNER. LD. AR SUBMITTED, WHEN ASSESSE E THROUGH DOCUMENTARY EVIDENCE PROVED THE PURCHASE OF SHARES OF M/S JAI CORPORATION LTD IN APRIL06, THERE IS NO REASON TO DISBELIEVE ASSESSEES CLAIM OF PURCHASE OF SHARES IN APRIL06 WHEN THE DEPARTMENT HAS ACCEPTED SALES OF SUCH SHARES. HE SU BMITTED, WHEN DEPARTMENT IS NOT DISPUTING SALES OF SUCH SHARES, I T CANNOT TREAT THE PURCHASES AS BOGUS. LD. AR SUBMITTED, WHEN ASSESSE E HAS SUBMITTED THE CONTRACT NOTE FOR PURCHASE OF SHARES AS WELL AS SALE OF SHARES AND ALSO CERTIFICATE GIVEN BY THE BROKER CON FIRMING THEREIN THAT SHARES WERE PURCHASED BY ASSESSEE IN APRIL06 AND H ELD WITH THE 9 ITA NO. 153 /HYD/2015 & CO NO. 16/H/15 VINAY KUMAR AGARWAL BROKER IN ITS POOL ACCOUNT, THERE IS NO REASON TO D ISBELIEVE THE SAME AS SHARES WERE SOLD THROUGH THE SAME BROKER ULTIMAT ELY. IN THIS CONTEXT, LD. AR REFERRED TO THE CONTRACT NOTE OF PU RCHASE OF SHARES, RECEIPTS OF CASH PAYMENTS TOWARDS PURCHASE VALUE OF SHARES, ENTRIES MADE IN CASH BOOK OF ASSESSEE AS WELL AS PARTNERSHI P FIRM SHOWING WITHDRAWAL OF CASH FOR PURCHASE OF SHARES. LD. AR S UBMITTED, WHEN ASSESSEE HAS BROUGHT THE ENTIRE EVIDENCE ON RECORD TO SHOW THAT SHARES IN FACT WERE PURCHASED AND HELD BY ASSESSEE FOR MORE THAN A PERIOD OF 12 MONTHS, AO MERELY ON THE BASIS THAT SU CH SHARES WERE TRANSFERRED TO D-MAT ACCOUNT ON 15 TH AND 17/05/07 TREATED THE GAIN DERIVED FROM SHARES AS SHORT TERM CAPITAL GAIN. IN SUPPORT OF SUCH CONTENTION, ASSESSEE RELIED ON THE FOLLOWING DECISI ONS: 1. CIT VS. SHYAM R. PAWAR, [2015] 54 TAXMANN.COM 1 08 (BOM.) 2. JAFFERALI K. RATTONSEY, [2012] 23 TAXMANN.COM 2 1 (MUM.) 3. SMT. JIMIT R. SHAH VS. ITO, ITA NO. 3643/MUM/0 7, DT. 05/01/10. 4. SHRI PARESH M. KARIYA (HUF), VS. ACIT, ITA NO. 7023/MUM/10, DT. 13/05/15. 10. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PART IES AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL A S OTHER MATERIALS ON RECORD. WE HAVE ALSO CAREFULLY GONE THROUGH THE DECISIONS RELIED UPON BY LD. AR. AS COULD BE SEEN FROM THE ASSESSMEN T ORDER, AO AS SUCH, HAS NOT DISPUTED THE SHARE TRANSACTION CONDUC TED THROUGH M/S ALLIANCE INTERMEDIATERIES & NETWORK PVT. LTD. SINCE HE HAS ULTIMATELY ACCEPTED THE GAIN FROM SALE OF SHARE TRANSACTION AS CAPITAL GAIN, THOUGH HE TREATED IT AS SHORT TERM CAPITAL GAIN AS AGAINST LONG TERM CAPITAL GAIN CLAIMED BY ASSESSEE. THE ONLY DISPUTE AO IS HAVING IS WITH THE PERIOD OF HOLDING OF SHARES OF M/S JAI CO RPORATION LTD. IT IS THE VIEW OF AO THAT SINCE THE SHARES OF M/S JAI COR PORATION LTD. WERE TRANSFERRED TO ASSESSEES D-MAT ACCOUNT ON 15 TH AND 17/5/07 AND ASSESSEE HAS SOLD SHARES ON 16 TH &18/05/07 RESPECTIVELY, GAIN DERIVED FROM SALE OF SUCH SHARES HAS TO BE TREATED AS SHORT TERM 10 ITA NO. 153 /HYD/2015 & CO NO. 16/H/15 VINAY KUMAR AGARWAL CAPITAL GAIN. IN THE PROCESS, AO HAS DISBELIEVED AS SESSEES CLAIM THAT SHARES OF M/S JAI CORPORATION LTD WERE PURCHASED IN APRIL06 AND WERE HELD ON BEHALF OF ASSESSEE IN THE POOL ACCOUNT OF M/S ALLIANCE INTERMEDIATERIES & NETWORK PVT. LTD. IN THIS CONTEX T, IT IS TO BE OBSERVED THAT ON PERUSAL OF THE BALANCE SHEET OF A SSESSEE FILED ALONG WITH THE RETURN OF INCOME FOR AY 2007-08, COP IES OF WHICH ARE AT PAGE 62 OF ASSESSES PAPER BOOK, IT IS OBSERVED THA T ASSESSEE HAS SHOWN INVESTMENTS IN SHARES UNDER THE HEAD CURRENT ASSETS FOR AN AMOUNT OF RS. 32,68,789.45. THE DETAILS OF INVESTME NT AS FURNISHED IN PAGE 63 OF THE PAPER BOOK SHOWS INVESTMENT IN SHARE S OF M/S JAI CORPORATION LTD AT RS. 1,58,080. CASH BOOK MAINTAIN ED BY ASSESSEE, EXTRACT OF WHICH IS AT PAGE 92 OF PAPER BOOK ALSO R EVEALS THAT ASSESSEE HAS WITHDRAWN THE AMOUNT OF RS. 2 LAKHS FR OM THE PARTNERSHIP FIRM M/S P. SATYANARAYANA AND SONS ON 0 1/04/06 AND PAID AN AMOUNT OF RS. 1,58,293.70 TO M/S ALLIANCE I NTERMEDIATERIES & NETWORK PVT. LTD. ON 05/04/06. CORRESPONDING ENTRIE S WERE ALSO FOUND IN THE BOOKS OF ACCOUNT OF PARTNERSHIP FIRM M/S P. SATYANARAYANA & SONS, EXTRACT OF WHICH IS AT PAGE 93 OF THE PAPER B OOK. CASH PAYMENT OF RS. 1,58,000 TOWARDS PURCHASE OF SHARES OF M/S J AI CORPORATION LTD. WAS ALSO ACKNOWLEDGED BY M/S ALLIANCE INTERMED IATERIES & NETWORK PVT. LTD. THROUGH RECEIPT EXECUTED BY IT ON 05/04/06, A COPY OF WHICH IS AT PAGE 53 OF THE PAPER BOOK. THE CONTR ACT NOTE FOR PURCHASE OF SHARES OF M/S JAI CORPORATION LTD., A C OPY OF WHICH IS AT PAGE 34 OF THE PAPER BOOK CLEARLY INDICATE THE PURC HASE OF SHARES BY ASSESSEE FROM M/S ALLIANCE INTERMEDIATERIES & NETWO RK PVT. LTD. ON 04/04/06 THROUGH PROPER PROCEDURE AFTER PAYMENT OF SERVICE TAX AND SECURITY TRANSACTION TAX. THUS, AS FAR AS ASSESSEE S CLAIM OF PURCHASE OF SHARES OF M/S JAI CORPORATION LTD. THROUGH M/S A LLIANCE INTERMEDIATERIES & NETWORK PVT. LTD. IS CONCERNED, IT HAS BEEN PROVED THROUGH DOCUMENTARY EVIDENCE BROUGHT ON RECORD. THO UGH, IT MAY BE A FACT THAT THE SHARES OF M/S JAI CORPORATION LTD. WERE TRANSFERRED TO ASSESSEES D-MAT ACCOUNT ON 15 & 17/05/07, BUT, THA T ALONE CANNOT DILUTE THE FACT THAT ASSESSEE DID PURCHASE SHARES O F M/S JAI 11 ITA NO. 153 /HYD/2015 & CO NO. 16/H/15 VINAY KUMAR AGARWAL CORPORATION THROUGH M/S ALLIANCE INTERMEDIATERIES & NETWORK PVT. LTD. IN APRIL06. THIS FACT HAS BEEN CLEARLY DEMONSTRATE D BY ASSESSEE BY PRODUCING ADEQUATE AND COGENT DOCUMENTARY EVIDENCES BY WAY OF CONTRACT NOTE AND OTHER EVIDENCES INCLUDING THE RET URN OF INCOME FILED FOR AY 2007-08, WHICH HAS NOT BEEN CONTROVERTED BY THE DEPARTMENT. IT IS ALSO A FACT ON RECORD THAT SUB-BROKER M/S ALL IANCE INTERMEDIATERIES & NETWORK PVT. LTD. ISSUED CONFIRM ATION CERTIFICATES ACKNOWLEDGING THE FACT THAT SHARES WERE HELD IN ITS POOL ACCOUNT ON BEHALF OF ASSESSEE TILL IT IS TRANSFERRED TO ASSESS EES D-MAT ACCOUNT. WHEN ASSESSEE HAS PRODUCED ALL DOCUMENTARY EVIDENCE S AND HAS ALSO SUBMITTED ITS EXPLANATION BEFORE AO AS WELL AS LD. CIT(A), THERE IS NO REASON TO DISBELIEVE THE SAME UNLESS STRONG A ND POSITIVE EVIDENCE IS BROUGHT ON RECORD TO DISPROVE THE SAME. AS IT APPEARS, AO ONLY ON EXTRANEOUS CONSIDERATIONS AND PRESUMPTIO NS & SURMISES HAS CONCLUDED THAT ASSESSEE HAS PURCHASED THE SHARE S ONLY ON 15 & 17/05/07 WHILE TREATING THE GAIN DERIVED FROM SALE OF SHARES AS SHORT TERM CAPITAL GAIN. ITAT, MUMBAI BENCH IN CASE OF J AFFERALI K. RATTONSEY VS. DCIT, [2012] 23 TAXMANN.COM 21 (MUM) WHILE DEALING WITH IDENTICAL NATURE OF DISPUTE HELD AS UNDER: 9.7 THE CBDT CIRCULAR NO. 704 DTD. 28.4.1995 STATES THAT IT IS THE DATE OF BROKERS NOTE THAT SHOULD BE TREATED AS THE DA TE OF TRANSFER IN CASES OF SALE TRANSACTIONS OF SECURITIES PROVIDED SUCH TRANSACTIONS ARE FOLLOWED UP BY DELIVERY OF SHARES AND ALSO THE TRA NSFER DEEDS. SIMILARLY, IN RESPECT OF THE PURCHASERS OF THE SEC URITIES, THE HOLDING PERIOD SHALL BE RECKONED FROM THE DATE OF THE BRO KERS NOTE FOR PURCHASE ON BEHALF OF THE INVESTORS. THE CBDT CIR CULAR NO. 768 DTD. 24.6.1998 WAS ISSUED TO CLARIFY THE DETERMINATION OF DATE OF TRANSFER AND THE PERIOD OF HOLDING OF SECURITIES HELD IN DE MAT FORM. IT HAS BEEN STATED THERE IN THAT EARLIER CIRCULAR NO. 704 ISSU ED BY THE CBDT RELATING TO THE DATE OF TRANSFER AND PERIOD OF HOLDING DOES NOT CHANGE EVEN WHEN SECURITIES ARE HELD IN THE DEMATERIALIZ ED FORM. THEREFORE IN VIEW OF THE ABOVE TWO CIRCULARS OF CBDT IT IS CLE AR THAT IN CASE OF SECURITIES THE DATE OF PURCHASE HAS TO BE TAKEN FROM THE BROKERS NOTE/CONTRACT NOTE AND THE PERIOD OF HOLDING IS AL SO TO BE RECKONED FROM THE DATE OF PURCHASE AND NOT FROM THE DATE OF DEMATERIALIZATION. SINCE THE HOLDING PERIOD OF THE SHARES AS PER THE BROKERS NOTE AND ITS SUBSEQUENT SALE AFTER DEMATERIALIZATION IS MO RE THAN 12 MONTHS, THEREFORE, THE SHARES BECOME LONG TERM CAPITAL AS SET AND THE ASSESSEES CLAIM OF LONG TERM CAPITAL GAIN IS CORR ECT. IN THIS VIEW OF THE 12 ITA NO. 153 /HYD/2015 & CO NO. 16/H/15 VINAY KUMAR AGARWAL MATTER WE SET ASIDE THE ORDER OF THE LD. CIT(A) AN D DIRECT THE A.O. TO ACCEPT THE LONG TERM CAPITAL GAIN DECLARED BY THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THE GROUNDS RAISED BY THE ASS ESSEE ARE ACCORDINGLY ALLOWED. THE OTHER DECISIONS RELIED UPON ALSO SUPPORT THE CL AIM OF ASSESSEE AND VIEW EXPRESSED BY LD. CIT(A). IN THE PRESENT CASE, THE C ONTRACT NOTE OF PURCHASE OF SHARES CLEARLY INDICATE THE DATE OF PURCHASE AS 04/ 04/2006. IN THE AFORESAID VIEW OF THE MATTER, FINDING NO INFIRMITY IN THE ORD ER OF LD. CIT(A), WE ARE INCLINED TO UPHOLD THE SAME AND DISMISS THE GROUNDS RAISED B Y THE DEPARTMENT. 11. IN THE RESULT, APPEAL OF DEPARTMENT AS WELL AS C.O BY ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 4 TH SEPTEMBER, 2015. SD/- SD/- (P.M. JAGTAP) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 4 TH SEPTEMBER, 2015 KV COPY TO:- 1) DCIT, CIRCLE 9(1), ROOM NO. 245, BLOCK D, 2 ND FLOOR, IT TOWERS, AC GUARDS, MASAB TANK, HYDERABAD. 2) SRI VINAY KUMAR AGARWAL, H.NO. 22-6-84, MACHILIK AMAN, HYDERABAD. 3) CIT(A) VI, HYDERABAD 4) CIT-VI, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 13 ITA NO. 153 /HYD/2015 & CO NO. 16/H/15 VINAY KUMAR AGARWAL DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S. 2. DRAFT PLACED BEFORE AUTHOR SR.P.S 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER VP 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P S. 7. FILE SENT TO THE BENCH CLERK SR.P.S. 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER