Sumanlata Agarwal, Hyderabad, Hyderabad V. ITO, Ward-8(2), Hyderabad, Hyderabad

CO 31/Hyd/2017

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3883 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 16 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 15-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 29-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M NAVEEN
• Keywords: Reopening of assessment; Unexplained cash credit; Unexplained investment; Capital asset; Income from undisclosed sources; Accommodation entries; Sham transactions
• Section: 133A; 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NOS. A.Y APPELLANT RESPONDENT 984/HYD/2017 2008-09 ITO, WARD 8(2), HYDERABAD. SMT. SUMANLATA AGARWAL, HYDERBAD. PAN AFIPA3052K 985/HYD/2017 2008-09 ITO, WARD 8(2), HYDERABAD. SRI BAJRANGLAL AGARWAL L/R OF PREMALATA BAI, HYDERABAD. PAN AAZPL8574D 986/HYD/2017 2008-09 ITO, WARD 8(2), HYDERABAD SMT. RACHITA AGARWAL, HYDERABAD. PAN AFSPA2252E 987/HYD/2017 2008-09 ITO, WARD 8(2), HYDERABAD SHRI ANIL KUMAR, HUF, HYDERBAD. PAN AACHA0973Q C.O. NOS. A.Y CROSS-OBJECTOR RESPONDENT C.O NO. 31/HYD/2017 (IN ITA NO. 984/HYD/2017) 2008-09 SMT. SUMANLATA AGARWAL, HYDERBAD. PAN AFIPA3052K ITO, WARD 8(2), HYDERABAD. C.O NO. 32/HYD/2017 (IN ITA NO. 985/HYD/2017) 2008-09 SRI BAJRANGLAL AGARWAL L/R OF PREMALATA BAI, HYDERABAD. PAN AAZPL8574D ITO, WARD 8(2), HYDERABAD. C.O NO. 33/HYD/2017 (IN ITA NO. 986/HYD/2017) 2008-09 SMT. RACHITA AGARWAL, HYDERABAD. PAN AFSPA2252E ITO, WARD 8(2), HYDERABAD C.O NO. 34/HYD/2017 (IN ITA NO. 987/HYD/2017) 2008-09 SHRI ANIL KUMAR, HUF, HYDERBAD. PAN AACHA0973Q ITO, WARD 8(2), HYDERABAD REVENUE BY : SHRI M. NAVEEN ASSESSEE BY : SHRI K.C. DEVDAS DATE OF HEARING : 30-05-2018 DATE OF PRONOUNCEMENT : 15-06-2018 2 ITA NOS. 984 TO 987/HYD/2017 C.O NOS. 31 TO 34/HYD/2017. ORDER PER D. MANMOHAN, VICE PRESIDENT: ALL THESE APPEALS PERTAIN TO THE A.Y 2008-09. THERE ARE FOUR APPEALS BY THE REVENUE, DIRECTED AGAINST THE ORDERS PASSED BY THE CIT(A)-2, HYDERABAD. ASSESSEE FILED CROSS OBJECTIONS WHEREIN THE REOPENING OF ASSESSMENT WAS CHALLENGED. LD. COUNSEL SUBMITS THAT THIS ISSUE WAS CONSIDERED BY THE ITAT IN THE CASE OF SMT. SARITHA DEVI W/O SHRI ANIL KUMAR (ITA NO. 1228/HYD/2016, DATED 05.052017), WHEREIN THE FACTS ARE IDENTICAL AND THE TRIBUNAL OBSERVED THAT THE REOPENING OF ASSESSMENT IS BAD IN LAW. IN THIS REGARD THE TRIBUNAL OBSERVED, VIDE PARA 10 & 10.1 PAGE 5 OF THE PAPER BOOK, AS UNDER: 10. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND CAREFULLY PERUSED THE EVIDENCE PLACED ON RECORD AND ORDERS OF THE AUTHORITIES. IT WAS ADMITTED BY THE ORDER OF AO AND CIT(A) THAT SOME COMMUNICATION WAS RECEIVED FROM CCIT, MUMBAI THAT MR. CHOKSHI HAS GIVEN A STATEMENT THAT HE HAS PROVIDED ACCOMMODATION ENTRIES. HOW THOSE STATEMENTS ARE RELEVANT TO THE ASSESSEE OR WHETHER ANY TRANSACTIONS OF THE ASSESSEES WERE SPECIFICALLY STATED IS NOT FORTHCOMING EITHER FROM THE ORDERS OF THE AUTHORITIES OR FROM THE DOCUMENTS FURNISHED BEFORE US. IN FACT, NEITHER THE STATEMENT OF MR. CHOKSHI WAS PROVIDED TO THE ASSESSEES NOR THE CROSS-EXAMINATION WAS ALLOWED. THE SAME WAS NOT EVEN ON RECORD. EVEN THOUGH LD. CIT(A) GAVE A FINDING THAT THE ASSESSMENT WAS REOPENED ON THE BASIS OF THE COMMUNICATION OF THE CCIT, WHETHER THERE WAS ANY STATEMENT ENCLOSED OR NOT COULD NOT BE VERIFIED. SURPRISINGLY, THE A.O. HIMSELF INFORMED ASSESSEE THAT REOPENING WAS NOT BASED ON THE STATEMENT OF MR. CHOKSHI. THE COMMUNICATION GIVEN TO ASSESSEE VIZ., SMT. SARITA DEVI VIDE LETTER DATED 16.03.2015 PLACED IN PAPER BOOK AT PAGE 85 IS EXTRACTED HEREUNDER FOR READY REFERENCE: THE SCRUTINY ASSESSMENT PROCEEDINGS FOR THE ASST. YEAR 2007- 08 IN YOUR CASE ARE PENDING WITH THE UNDERSIGNED. AS REQUESTED BY YOU, LETTER FROM NSE STATING THAT M/S. ALLIANCE 3 ITA NOS. 984 TO 987/HYD/2017 C.O NOS. 31 TO 34/HYD/2017. INTERMEDIARIES & NETWORK PVT. LTD. IS NOT A BROKER/SUB-BROKER WITH THEM IS HEREBY PROVIDED. YOU HAVE REQUESTED THIS OFFICE TO SUMMON MR. MUKESH CHOKSI FOR CROSS-VERIFICATION. BUT, THE ASSESSMENT IN YOUR CASE IS MADE BASING ON THE INFORMATION FURNISHED BY NSE AND THE MATERIAL PROVIDED BY YOURSELF. HENCE, THERE IS NO NECESSITY OF PRODUCING MR. MUKESH CHOKSI FOR YOUR CROSS VERIFICATION. (EMPHASIS SUPPLIED) 10.1 THIS INDICATES THAT REVENUE IS NOT HAVING ANY INFORMATION AND EVEN THOUGH THE ASSESSMENT IS REOPENED ON THAT BASIS AS COMMUNICATED IN THE REASONS FOR REOPENING, A.O. SIMPLY DENIES THE SAME IN ORDER TO AVOID CROSS-EXAMINATION TO BE PROVIDED TO THE ASSESSEE. UNDER THESE CIRCUMSTANCES, SINCE NEITHER THE COMMUNICATION FROM CCIT, MUMBAI NOR THE SO-CALLED STATEMENT OF MR. MUKESH CHOKSHI WAS PROVIDED EITHER FOR VERIFICATION OR FOR CROSS-EXAMINATION, IT CANNOT BE STATED THAT A.O. HAS ANY TANGIBLE INFORMATION SO AS TO REOPEN THE ASSESSMENTS UNDER SECTION 147. THE RETURNS WERE ALREADY FILED ADMITTING INCOMES UNDER CAPITAL GAINS. THESE WERE ACCEPTED UNDER SECTION 143(1). ASSESSEES HAVE FURNISHED THE NECESSARY INFORMATION OF PURCHASE BILLS, SALE BILLS, LEDGER ACCOUNTS, DE-MAT ACCOUNT COPIES IN SUPPORT OF TRANSACTIONS. SINCE THERE IS NO OTHER INFORMATION SO AS TO COME TO CONCLUSION THAT THE TRANSACTIONS ENTERED BY THE ASSESSEE ARE BOGUS, THESE ARE TO BE ACCEPTED AS TRANSACTIONS ENTERED IN NORMAL COURSE. THE ENQUIRY FROM THE NSE THAT M/S. ALLIANCE INTERMEDIARIES AND NET WORK P. LTD., IS NOT A BROKER OR SUB-BROKER DOES NOT ESTABLISH THAT THE TRANSACTIONS WITH THAT COMPANY IS BOGUS. MOREOVER, AS FAR AS SMT. SARITA DEVI IS CONCERNED, THE PURCHASE TRANSACTIONS MOSTLY PERTAIN TO LONG TERM CAPITAL GAINS AND HAVE BEEN ENTERED IN EARLIER YEAR AND HAVE BEEN RECORDED AS ON 31.03.2006. A.O. EVEN THOUGH HAS REOPENED THE ASSESSMENT IN THAT YEAR ALSO, MUCH BEFORE THIS ASSESSMENT WAS REOPENED, THE SAID PROCEEDINGS WERE DROPPED WITHOUT TAKING ANY ADVERSE VIEW. CONSEQUENTLY, THE PURCHASES SHOWN IN THAT YEAR IN THE BALANCE SHEET HAS TO BE ACCEPTED AS GENUINE AND SUBSEQUENT SALE THEREON CANNOT BE CONSIDERED AS BOGUS, ON PRESUMPTIONS AND ASSUMPTIONS. IN VIEW OF THAT WE HAVE NO HESITATION IN HOLDING THAT THE CAPITAL GAINS DECLARED BY THE ASSESSEE SHOULD BE ASSESSED AS CAPITAL GAINS ONLY. 2. THE ONLY GROUND OF THE REVENUES APPEALS IS WITH REGARD TO CORRECTNESS OF EXEMPTION CLAIMED U/S 10(38) OF 4 ITA NOS. 984 TO 987/HYD/2017 C.O NOS. 31 TO 34/HYD/2017. THE IT ACT. GROUNDS BEING IDENTICAL, WE REPRODUCE GROUNDS RAISED IN THE CASE OF SMT. SUMANLATA AGARWAL: 1. THE LD. CIT(A) ERRED BOTH ON FACTS AND IN LAW. 2. THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF A.O DISALLOWING THE EXEMPTION CLAIMED U/S 10(38) OF IT ACT AND TREATING THE SAME AS UNEXPLAINED CASH CREDIT AS THE ASSESSEES CLAIM OF LTCG IS PROVED TO BE BOGUS. THE ASSESSEE PURCHASED SHARES THROUGH OFF MARKET BY PAYING CASH AND SUBSEQUENTLY SOLD THEM THROUGH STOCK EXCHANGE TO AVAIL THE EXEMPTIONS U/S 10(38) OF THE IT ACT. 3. THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF A.O RELYING ON THE HONBLE ITAT, A BENCH IN THE CASE OF KAMLCHAND NATHMAL LUNIA VS ITO (ITA NO. 436/AHD/2013) WHEREIN IT WAS HELD THAT THE PURCHASE AS WELL AS THE SALE TRANSACTIONS OF THE SCRIPTS IN QUESTION WAS NOT GENUINE AND THE PURCHASE RATE HAD NOT TALLIED WITH THE RATE AS PER BSE WEBSITE AND THE PURCHASES HAVE ALSO BEEN MADE IN CASH. ONLY PAPER TRANSACTIONS HAVE BEEN MADE AND NO EVIDENCE OF PHYSICAL DELIVERY OF THE SHARES. 4. CIT(A) OUGHT TO HAVE CONSIDERED THE DECISION OF HONBLE ITAT MUMBAI IN THE CASE OF RATNAKAR M. PUJARI IN ITA NO. 995/MUM/2012 WHICH ESTABLISHED VIOLATION OF OFF MARKET TRANSACTIONS AND CASH PURCHASES ETC AS NOT ACCEPTABLE AND DISTINGUISHABLE. FURTHER, THE ASSESSEE DID SHARE TRADING THROUGH M/S ALLIANCE INTERMEDIARIES & NET WORK PVT LTD., ONE OF THE SUB-BROKER OF M/S. MAHASAGAR GROUP ENGAGED IN THE BUSINESS OF ISSUANCE OF FRAUDULENT BILLS. 5. IN THE FACT AND CIRCUMSTANCES OF THE CASE, WHETHER THE LD. CIT(A) IS CORRECT IN LAW IN DECIDING THE APPEAL IN FAVOUR OF THE ASSESSEE WITHOUT TAKING INTO CONSIDERATION THE ENTIRE MATERIAL FACTS AS DISCUSSED BY THE A.O. 6. THE JUDICIAL PRONOUNCEMENTS RELIED ON BY LD. CIT(A) IN THE CASE OF SRI VINAY KUMAR, PERTAINS TO WHETHER THE TRANSACTIONS WAS STCG OR LTCG BUT HAVE NO RELEVANCE TO THE FACTS OF THE CASE AND ARE NOT DEALING WITH GENUINENESS OF THE TRANSACTION 7. THE LD. CIT(A) OUGHT TO HAVE UPHELD THE DECISION OF A.O RELYING ON THE HONBLE GUWAHATI HIGH COURT DECISION IN THE CASE OF CIT VS SANGAMITRA BHARALI (361 ITR 481) WHEREIN IT WAS HELD THAT THE CAPITAL GAINS ARE SHAM TRANSACTIONS ENTERED ONLY TO GIVE COLOUR OF GENUINENESS AND THEREFORE, HELD THAT THE CAPITAL 5 ITA NOS. 984 TO 987/HYD/2017 C.O NOS. 31 TO 34/HYD/2017. GAIN ARISING OUT OF THESE TRANSACTIONS CANNOT BE BELIEVED AS GENUINE AND UPHELD TAXING THE SAID AMOUNT AS UNACCOUNTED INCOME BROUGHT INTO BOOKS IN THE GUISE OF EXEMPTED CAPITAL GAINS. 8. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 3. THE FOLLOWING ARE THE FACTS CONCERNING SMT. SUMANLATA AGARWAL. THE ASSESSEE, AN INDIVIDUAL BY STATUS, HAS INCOME FROM CAPITAL GAINS AND INCOME FROM OTHER SOURCES. FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE CLAIMED EXEMPTION OF LONG TERM CAPITAL GAIN OF 49,89,478/- U/S 10(38) OF THE IT ACT. THE LTCG WAS STATED TO BE ARISING OUT OF SALE OF SHARES OF M/S ZEN SHAVING LTD. 4. THOUGH THE ORIGINAL ASSESSMENT WAS COMPLETED ON THE ADMITTED INCOME THE SAME WAS REOPENED ON THE GROUND THAT INCOME CHARGED TO TAX HAS ESCAPED ASSESSMENT. IN RESPONSE TO THE NOTICE THE ASSESSEE APPEARED FROM TIME TO TIME AND FURNISHED DETAILS. THE ASSESSEE PRODUCED SALE BILLS, PURCHASE CONTRACT NOTES, DE-MAT ACCOUNT CASH PAYMENT RECEIPT TOWARDS PURCHASE OF SHARES ETC. IT WAS ALSO SUBMITTED THAT ALL THE PURCHASES AND SALES WERE ROUTED THROUGH M/S ALLIANCE INTERMEDIARIES & NET WORK (P) LTD. THE A.O WAS HOWEVER OF THE OPINION THAT THE PURCHASE OF SHARES WAS BOGUS AND CONSEQUENTLY THE SALE CONSIDERATION SHOWN WAS TREATED AS UNEXPLAINED INVESTMENT AND HENCE THE ASSESSEE IS NOT ENTITLED TO EXEMPTION U/S 10(38) OF THE IT ACT. THE OPERATIVE PORTION OF THE ORDER OF THE A.O READS AS UNDER: 6. TO SUM UP THE ASSESSEE CLAIMS THAT THE SHARES WERE TRADED THROUGH NSE THROUGH BROKER M/S ALLIANCE INTERMEDIARIES 6 ITA NOS. 984 TO 987/HYD/2017 C.O NOS. 31 TO 34/HYD/2017. & NET WORK PVT LTD AND NSE CONFIRMS NO SUCH SALES AND THE BROKERS REGISTRATION WAS CANCELLED LONG BEFORE THE PURCHASE AND SALE OF SHARES. THE ASSESSEES CLAIM OF LONG TERM CAPITAL GAIN IS PROVED TO BE BOGUS, THE AMOUNT OF RS. 49,89,478/- SHOWN AS SALE PROCEEDS AND SHARES ON WHICH EXEMPTION U/S 10(38) CLAIMED IS DISALLOWED. THE SAID AMOUNT OF RS. 49,89,478/- SAID TO BE SALE PROCEEDS AS MENTIONED ABOVE IS TREATED AS UNEXPLAINED CASH CREDIT UNDER THE PROVISIONS OF SEC. 68 OF THE INCOME TAX ACT. 7. FURTHER IT IS EVIDENT THAT THE ASSESSEE HAS EARNED UNDISCLOSED INCOME WHICH IS NOT DISCLOSED TO THE DEPARTMENT AND THE SAME WAS SHOWN UNEXPLAINED CREDITS IN THE CAPITAL ACCOUNT UNDER THE GUISE OF EXEMPT CAPITAL GAINS. THEREFORE, THE ASSESSEE HAS CONCEALED AND FURNISHED INACCURATE PARTICULARS OF HIS INCOME AND HENCE, THE CASE OF THE ASSESSEE CLEARLY FALLS WITHIN THE PURVIEW OF THE PENALTY PROVISIONS UNDER SEC. 271(1)(C) OF THE ACT. THEREFORE, PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT ARE INITIATED SEPARATELY. 5. THE A.O RELIED UPON THE DECISION OF THE ITAT A BENCH AHMADABAD IN THE CASE OF KAMALCHAND NATHMAL LUNIA, WHEREIN THE BENCH OBSERVED THAT THE ENTRIES IN THE DE-MAT ACCOUNT ARE NOT SACROSANCT, WHEN THE A.O FINDS ON INVESTIGATION THAT THEY ARE OFF-MARKET TRANSACTIONS AND THE OTHER PARTY AGREED THAT HE HAD ISSUED FRAUDULENT BILLS. 6. AGGRIEVED, ASSESSEE CONTENDED BEFORE THE CIT(A) THAT THE A.O FAILED TO BRING ANY EVIDENCE ON RECORD TO PROVE THAT THE PROCEEDS RECEIVED AGAINST SALE OF SHARES REPRESENT ASSESSEES UNDISCLOSED INCOME. IN THE ABSENCE OF DISCHARGING BURDEN THAT LAY UPON THE A.O TO PROVE THAT THE MONEY BELONGS TO THE ASSESSEE, NO ADDITION CAN BE MADE. 7. IT WAS ALSO SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS ASSESSEE REQUESTED THE A.O FOR A COPY OF THE SWORN STATEMENT OF SHRI MUKESH CHOKSI BUT THE SAME WAS NOT GIVEN BY THE A.O DESPITE THE FACT THAT THE 7 ITA NOS. 984 TO 987/HYD/2017 C.O NOS. 31 TO 34/HYD/2017. STATEMENT OF SHRI MUKESH CHOKSI WAS TAKEN AS THE SOLE BASIS FOR MAKING THE ADDITION. IT WAS ALSO STATED THAT THE COPIES OF MATERIAL / INFORMATION GATHERED BY THE A.O BEHIND THE BACK OF THE ASSESSEE AND CLAIMED TO HAVE BEEN OBTAINED FROM SHRI MUKESH CHOKSI, WAS NOT PROVIDED TO THE ASSESSEE. 8. LD. CIT(A) NOTICED THAT IDENTICAL ISSUE WAS CONSIDERED BY THE ITAT, HYDERABAD BENCH IN THE CASE OF SHRI VINAY KUMAR AGARWAL (ITA NO. 153/HYD/2015 DATED 04.09.2015) FOR THE SAME ASSESSMENT YEAR WHEREIN THE BENCH OBSERVED AS UNDER: 10. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. WE HAVE ALSO CAREFULLY GONE THROUGH THE DECISIONS RELIED UPON BY LD. AR. AS COULD BE SEEN FROM THE ASSESSMENT ORDER, AO AS SUCH, HAS NOT DISPUTED THE SHARE TRANSACTION CONDUCTED THROUGH M/S ALLIANCE INTERMEDIARIES & 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 CORPORATION LTD. IT IS THE VIEW OF AO THAT SINCE THE SHARES OF M/S JAI CORPORATION LTD. WERE TRANSFERRED TO ASSESSEES D-MAT ACCOUNT ON 15TH AND 17/5/07 AND ASSESSEE HAS SOLD SHARES ON 16TH &18/05/07 RESPECTIVELY, GAIN DERIVED FROM SALE OF SUCH SHARES HAS TO BE TREATED AS SHORT TERM CAPITAL GAIN. IN THE PROCESS, AO HAS DISBELIEVED ASSESSEES 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 INTERMEDIARIES & NETWORK PVT. LTD. IN THIS CONTEXT, IT IS TO BE OBSERVED THAT ON PERUSAL OF THE BALANCE SHEET 8 ITA NOS. 984 TO 987/HYD/2017 C.O NOS. 31 TO 34/HYD/2017. OF ASSESSEE FILED ALONG WITH THE RETURN OF INCOME FOR AY 2007- 08, COPIES OF WHICH ARE AT PAGE 62 OF ASSESSES PAPER BOOK, IT IS OBSERVED THAT ASSESSEE HAS SHOWN INVESTMENTS IN SHARES UNDER THE HEAD CURRENT ASSETS FOR AN AMOUNT OF RS. 32,68,789.45. THE DETAILS OF INVESTMENT AS FURNISHED IN PAGE 63 OF THE PAPER BOOK SHOWS INVESTMENT IN SHARES OF M/S JAI CORPORATION LTD AT RS. 1,58,080. CASH BOOK MAINTAINED BY ASSESSEE, EXTRACT OF WHICH IS AT PAGE 92 OF PAPER BOOK ALSO REVEALS THAT ASSESSEE HAS WITHDRAWN THE AMOUNT OF RS. 2 LAKHS FROM THE PARTNERSHIP FIRM M/S P. SATYANARAYANA AND SONS ON 01/04/06 AND PAID AN AMOUNT OF RS. 1,58,293.70 TO M/S ALLIANCE INTERMEDIARIES & NETWORK PVT. LTD. ON 05/04/06. CORRESPONDING ENTRIES 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 BOOK. CASH PAYMENT OF RS. 1,58,000 TOWARDS PURCHASE OF SHARES OF M/S JAI CORPORATION LTD. WAS ALSO ACKNOWLEDGED BY M/S ALLIANCE INTERMEDIARIES & 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 CONTRACT NOTE FOR PURCHASE OF SHARES OF M/S JAI CORPORATION LTD., A COPY OF WHICH IS AT PAGE 34 OF THE PAPER BOOK CLEARLY INDICATE THE PURCHASE OF SHARES BY ASSESSEE FROM M/S ALLIANCE INTERMEDIARIES & NETWORK PVT. LTD. ON 04/04/06 THROUGH PROPER PROCEDURE AFTER PAYMENT OF SERVICE TAX AND SECURITY TRANSACTION TAX. THUS, AS FAR AS ASSESSEES CLAIM OF PURCHASE OF SHARES OF M/S JAI CORPORATION LTD. THROUGH M/S ALLIANCE INTERMEDIARIES & NETWORK PVT. LTD. IS CONCERNED, IT HAS BEEN PROVED THROUGH DOCUMENTARY EVIDENCE BROUGHT ON RECORD. THOUGH, 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, THAT ALONE CANNOT DILUTE THE FACT THAT ASSESSEE DID PURCHASE SHARES OF M/S JAI CORPORATION THROUGH M/S ALLIANCE INTERMEDIARIES & NETWORK PVT. LTD. IN APRIL06. THIS FACT HAS BEEN CLEARLY DEMONSTRATED BY ASSESSEE BY PRODUCING ADEQUATE AND COGENT DOCUMENTARY EVIDENCES BY WAY OF CONTRACT 9 ITA NOS. 984 TO 987/HYD/2017 C.O NOS. 31 TO 34/HYD/2017. NOTE AND OTHER EVIDENCES INCLUDING THE RETURN 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 ALLIANCE INTERMEDIARIES & NETWORK PVT. LTD. ISSUED CONFIRMATION CERTIFICATES ACKNOWLEDGING THE FACT THAT SHARES WERE HELD IN ITS POOL ACCOUNT ON BEHALF OF ASSESSEE TILL IT IS TRANSFERRED TO ASSESSEES D-MAT ACCOUNT. WHEN ASSESSEE HAS PRODUCED ALL DOCUMENTARY EVIDENCES AND HAS ALSO SUBMITTED ITS EXPLANATION BEFORE AO AS WELL AS LD. CIT(A), THERE IS NO REASON TO DISBELIEVE THE SAME UNLESS STRONG AND POSITIVE EVIDENCE IS BROUGHT ON RECORD TO DISPROVE THE SAME. AS IT APPEARS, AO ONLY ON EXTRANEOUS CONSIDERATIONS AND PRESUMPTIONS & SURMISES HAS CONCLUDED THAT ASSESSEE HAS PURCHASED THE SHARES 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 JAFFERALI 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 DATE OF TRANSFER IN CASES OF SALE TRANSACTIONS OF SECURITIES PROVIDED SUCH TRANSACTIONS ARE FOLLOWED UP BY DELIVERY OF SHARES AND ALSO THE TRANSFER DEEDS. SIMILARLY, IN RESPECT OF THE PURCHASERS OF THE SECURITIES, THE HOLDING PERIOD SHALL BE RECKONED FROM THE DATE OF THE BROKERS NOTE FOR PURCHASE ON BEHALF OF THE INVESTORS. THE CBDT CIRCULAR 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 DEMAT FORM. IT HAS BEEN STATED THERE IN THAT EARLIER CIRCULAR NO. 704 ISSUED BY THE CBDT RELATING TO THE DATE OF TRANSFER AND PERIOD OF HOLDING DOES NOT CHANGE EVEN WHEN SECURITIES ARE HELD IN THE DEMATERIALIZED FORM. THEREFORE IN VIEW OF THE ABOVE TWO CIRCULARS OF CBDT IT IS CLEAR THAT IN CASE OF SECURITIES THE DATE OF PURCHASE HAS TO BE TAKEN FROM THE BROKERS 10 ITA NOS. 984 TO 987/HYD/2017 C.O NOS. 31 TO 34/HYD/2017. NOTE/CONTRACT NOTE AND THE PERIOD OF HOLDING IS ALSO 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 MORE THAN 12 MONTHS, THEREFORE, THE SHARES BECOME LONG TERM CAPITAL ASSET AND THE ASSESSEES CLAIM OF LONG TERM CAPITAL GAIN IS CORRECT. IN THIS VIEW OF THE MATTER WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND 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 ASSESSEE ARE ACCORDINGLY ALLOWED. THE OTHER DECISIONS RELIED UPON ALSO SUPPORT THE CLAIM OF ASSESSEE AND VIEW EXPRESSED BY LD. CIT(A). IN THE PRESENT CASE, THE CONTRACT 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 ORDER OF LD. CIT(A), WE ARE INCLINED TO UPHOLD THE SAME AND DISMISS THE GROUNDS RAISED BY THE DEPARTMENT. 11. IN THE RESULT, APPEAL OF DEPARTMENT AS WELL AS C.O BY ASSESSEE ARE DISMISSED. 9. RELIANCE WAS ALSO PLACED UPON ANOTHER DECISION OF THE ITAT, HYDERABAD BENCH IN THE CASE OF SHRI PADUCHURI JEEVAN PRASANT (ITA NO. 452/HYD/2015 DATED 19.08.2016), WHEREIN THE TRIBUNAL OBSERVED THAT IN THE ABSENCE OF GIVING AN OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE SHRI MUKESH CHOKSI THE CLAIM OF THE ASSESSEE THAT IT HAS PURCHASED SHARES CANNOT BE DISREGARDED. NO DOUBT SHRI MUKESH CHOKSI IN HIS STATEMENT STATED THAT HE WAS INDULGING IN BOGUS TRANSACTIONS BUT AT THE SAME TIME THE SAME PERSON HAS ALSO RECONFIRMED THAT THE TRANSACTIONS 11 ITA NOS. 984 TO 987/HYD/2017 C.O NOS. 31 TO 34/HYD/2017. WERE GENUINE. IN FACT HIS STATEMENT DOES NOT IMPLICATE THE TRANSACTION OF THE ASSESSEE THEREIN. UNDER THE CIRCUMSTANCES THE TRIBUNAL SET ASIDE THE ADDITION MADE BY THE A.O. 10. THE CONTENTIONS OF THE ASSESSEE BEFORE THE LD. CIT(A) CAN BE SUMMARIZED ITEM WISE. (A) THE SHARES OF LISTED COMPANIES WERE PURCHASED AND SOLD THROUGH THE STOCK EXCHANGE BY THE SHARE BROKER M/S ALLIANCE INTERMEDIARIES & NET WORK (P) LTD PAYING SECURITY TRANSACTION TAX. (B) SHARE WERE HELD FOR A PERIOD OF MORE THAN 12 MONTHS, RECKONED FROM THE DATE OF PURCHASE BILL. (C) THE A.O MERELY RELIED UPON THE STATEMENT OF ONE SHRI MUKESH CHOKSI, DIRECTOR OF MAHASAGAR GROUP OF CASES WHICH INCLUDES A COMPANY BY NAME M/S ALLIANCE INTERMEDIARIES & NET WORK (P) LTD. THIS MATERIAL WAS GATHERED BEHIND THE BACK OF THE ASSESSEE AT THE PREMISES OF A THIRD PARTY BUT THE COPIES OF THE MATERIAL GATHERED THEREIN WERE NOT PROVIDED TO THE ASSESSEE DESPITE A SPECIFIC REQUEST. (D) DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE HAS FURNISHED ALL THE DETAILS TO PROVE THE GENUINENESS OF THE PURCHASES OF THE SHARES, IN THE FORM OF PURCHASE BILL ISSUED BY THE BROKER ALONG WITH CONTRACT NOTES, COPY OF RECEIPTS / PAYMENTS MADE FOR PURCHASE OF SHARES GIVEN BY THE BROKERS, COPY OF THE ACCOUNT OF THE ASSESSEE IN THE BOOKS OF M/S ALLIANCE INTERMEDIARIES & NET WORK (P) LTD, COPY OF DE-MAT ACCOUNT, COPY OF SHAREHOLDING CERTIFICATE, COPY OF BANK STATEMENT AND THE COPY OF THE CAPITAL FOR THE YEAR ENDING ON 31.03.2008. IT WAS FURTHER CONTENDED THAT IDENTICAL ISSUE 12 ITA NOS. 984 TO 987/HYD/2017 C.O NOS. 31 TO 34/HYD/2017. WAS CONSIDERED BY THE ITAT IN NUMBER OF CASES, LISTED IN PAGE 16 OF THE ORDER OF CIT(A): 1. DALPAT SINGH CHOUDHARY VS ACIT (2012) 143 TTH (3D) 500. 2. DCIT VS. SMT. HANSA CHOUDHARY (2012) 143 TTJ (3D)(UO) 76. 3. SHRI VINAY KUMAR AGARWAL VS DCIT, IN ITA NO. 153/HYD/2015. 4. SHRI PADUCHURI JEEVAN PRASHANTH VS. ITO, IN ITA NO. 452/HYD/2015. 5. RAMESH KUMAR JAIN (HUF) VS. DCIT, (2013) 144 ITD 383 (3D). 6. KASTURBEN H. GADA, MUMBAI VS DEPARTMENT OF INCOME TAX, IN ITA NO. 1773/MUM/2010. 7. CIT VS. MUKESH RATILAL MAROLIA, (2014) 88 CCH 027 ISCC. 8. RAVINDRAKUMAR TOSHNIWAL, MUMBAI VS. DEPARTMENT OF INCOME TAX, IN ITA NO. 5301/MUM/2008. 9. ITO VS. AARTI MITAL, (2013) 37 CCH 227 HYD TRIB. 11. HAVING REGARD TO THE CIRCUMSTANCES THE LD. CIT(A) OBSERVED THAT THE EVIDENCE CLEARLY PROVES THAT THE ASSESSEE HAS PURCHASED AND SOLD SHARES THROUGH M/S ALLIANCE INTERMEDIARIES & NET WORK (P) LTD AFTER PAYMENT OF SERVICE TAX AND SECURITY TRANSACTION TAX AND HENCE TREATING THE TRANSACTION OF PURCHASE AND SALE AS NOT GENUINE HAS NO BASIS. HE THEREFORE CONCLUDED AS UNDER: 5.3 SINCE THE ISSUE INVOLVED IS SIMILAR, RESPECTFULLY FOLLOWING THE RATION LAID DOWN BY THE HONBLE ITAT IN THE ABOVE MENTIONED CASES, THE A.O IS HEREBY DIRECTED TO ALLOW THE ASSESSEES CLAIM FOR EXEMPTION OF LONG TERM CAPITAL GAINS OF RS. 49,89,478/- U/S 10(38) OF THE ACT. AS A RESULT, THE GROUNDS RAISED ARE ALLOWED. 12. LD. COUNSEL FOR THE ASSESSEE FILED A PAPER BOOK WHICH CONSISTS OF ALL THE CASE-LAW RELIED UPON BEFORE THE CIT(A). IT WAS ADMITTED BY THE LD. COUNSEL THAT THE FACTS IN ALL THE CASES ARE IDENTICAL AND, HE HAS NOT SERIOUSLY CONTESTED THE CROSS OBJECTIONS FILED BEFORE US. 13. LD. DR MORE OR LESS RELIED UPON THE OBSERVATIONS MADE BY THE A.O AND CONTENDED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS ENQUIRIES ARE MADE WITH THE 13 ITA NOS. 984 TO 987/HYD/2017 C.O NOS. 31 TO 34/HYD/2017. CONCERNED STOCK EXCHANGES AND FOUND THAT REGISTRATION WITH THE NSE WAS CANCELLED LONG BEFORE THE SHARE TRANSACTION WAS ENTERED INTO BETWEEN THE ASSESSEE AND M/S ALLIANCE INTERMEDIARIES & NET WORK (P) LTD. IT WAS ALSO SUBMITTED THAT THE NOTICE ISSUED TO M/S ALLIANCE INTERMEDIARIES & NET WORK (P) LTD WAS NOT RESPONDED TO. UNDER THESE CIRCUMSTANCES THE ONUS IS ON THE ASSESSEE TO ESTABLISH THAT THE SHARES WERE ACTUALLY PURCHASED AND HELD BY HIM FOR A PERIOD EXCEEDING 12 MONTHS FOR CLAIMING IT AS LONG TERM CAPITAL GAINS. 14. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. IDENTICAL ISSUES COME UP BEFORE THE ITAT A BENCH HYDERABAD IN THE CASE OF SMT. SARITHA DEVI, WHEREIN ONE OF US (THE HONBLE ACCOUNTANT MEMBER) IS A PARTY. IN THIS CASE THE TRIBUNAL OBSERVED, WITH REGARD TO THE STATEMENT OF SHRI MUKESH CHOKSI, AS UNDER: 7.1 WITH REFERENCE TO THE STATEMENT RECORDED FROM SHRI MUKESH CHOKSI, EXCEPT THE INTER OFFICE COMMUNICATION, NOTHING WAS BROUGHT ON RECORD BY REVENUE. THE SO CALLED STATEMENT ITSELF WAS NOT ON RECORD. NO CROSS-EXAMINATION WAS FURNISHED TO ASSESSEE. MOREOVER, THE STATEMENT SEEMS TO HAVE BEEN RECORDED ON 16-01-2013 AS REPRODUCED IN THE ASSESSMENT ORDER WHICH INDICATE GENERALLY THE TRANSACTIONS UNDERTAKEN BY THE GROUP COMPANIES AND THERE IS NO SPECIFIC REFERENCE TO THE TRANSACTIONS OF ASSESSEE IN THE STATEMENT. SURPRISINGLY, THIS IS NOT THE FIRST STATEMENT OF SHRI MUKESH CHOKSI. EARLIER ALSO ON 26-04-2002, HE HAS ADMITTED TO SUCH BOGUS TRANSACTION IN THE GOLDSTAR FINVEST PVT. LTD., AND RICHMOND SECURITIES PVT. LTD., (AS CAN BE SEEN FROM THE ORDER OF SATISH N. DOSHI HUF VS. ITO IN ITA NO. 2329/MUM/2009). NO ACTION SEEMS TO HAVE BEEN TAKEN TO BLACK 14 ITA NOS. 984 TO 987/HYD/2017 C.O NOS. 31 TO 34/HYD/2017. LIST THOSE COMPANIES AND THESE COMPANIES WERE CONTINUING THE BUSINESS LATER ON ALSO. IN FACT IN THE CASE OF RAVINDRAKUMAR TOSHNIWAL IN ITA NO. 5302/MUM/2008 DT. 24-02-2010 FOR AY. 2005-06, THE ITAT IN PARA 3 RECORDS THE FACT THAT THE SHARE TRANSACTION IN THE SAID CASE WERE VERIFIED AND SHRI MUKESH CHOKSI VIDE STATEMENT U/S. 131 CONFIRMED THE TRANSACTIONS. LATER IN SURVEY U/S. 133A ON 30-11- 2007, SHRI MUKESH CHOKSI HAS STATED TO HAVE INFORMED THAT THE TRANSACTION WAS VERIFIED AT HIS INSTANCE. THE AO TREATED THE TRANSACTIONS AS BOGUS. IT WAS THE CONTENTION OF LD. COUNSEL THAT THE VERACITY OF SO CALLED STATEMENTS FROM SHRI MUKESH CHOKSI CANNOT BE ACCEPTED AS HE WAS REPEATEDLY STATING SO, BUT NO ACTION SEEM TO HAVE BEEN TAKEN SO FAR. MOREOVER, IN 2007 ITSELF THE SAID SHRI MUKESH CHOKSI CONFIRMED THE TRANSACTIONS AND HOW THEY BECAME BOGUS IN 2013 WAS NOT FORTHCOMING. IN THE ABSENCE OF CROSS- EXAMINATION OF SHRI MUKESH CHOKSI, HIS STATEMENT THAT THOSE COMPANIES ARE INDULGING IN BOGUS TRANSACTIONS CANNOT BE ACCEPTED AS GENUINE. MOREOVER, THERE ARE SERIES OF ACTIONS ON SHRI MUKESH CHOKSI AND AT THE RELEVANT POINT OF TIME, THERE WERE STATEMENTS FROM HIM WHICH DOES NOT IMPLICATE THE TRANSACTION OF ASSESSEE. HOW THEY CAN BECOME BOGUS AT THE LATER POINT OF TIME ON THE BASIS OF STATEMENT RECORDED IN 2013 IS ALSO NOT EXPLAINED. CONSIDERING THE FACT THAT AO WHO CONDUCTED SURVEY OPERATION ON ASSESSEE, MUCH PRIOR TO FILING OF RETURN, DID NOT FIND ANY TRANSACTION OF BOGUS NATURE AND THE FACT THAT THE LONG TERM CAPITAL GAIN WAS ACCEPTED DO INDICATE THAT THE TRANSACTIONS ARE GENUINE AND CANNOT BE HELD TO BE SHAM ON THE BASIS OF SO CALLED STATEMENT OF MR MUKESH CHOKSI ON 16-01- 2013. THE GENUINENESS OF STATEMENT ITSELF CANNOT BE ACCEPTED. 15. IT IS NOT DISPUTED THAT THE FACTS ARE MUTATIS MUTANDIS IDENTICAL IN THE CASE OF SMT. SARITHA DEVI W/O SHRI ANIL KUMAR AND SMT. NITIKA KUMARI (ITA NO. 1228 & 1229/HYD/2016 DATE 05.052017), WHEREIN THE BENCH 15 ITA NOS. 984 TO 987/HYD/2017 C.O NOS. 31 TO 34/HYD/2017. OBSERVED (WHEREIN LD. ACCOUNTANT MEMBER IS A PARTY) THAT EVEN REOPENING OF THE ASSESSMENT IS BAD IN LAW APART FROM THE FACT THAT THE DECLARATION OF CAPITAL GAINS CANNOT BE DOUBTED. WE HAVE ALREADY EXTRACTED PARA 10 AND 10.1 OF THIS ORDER WITH REGARD TO REOPENING OF ASSESSMENT. ON MERITS ALSO THE TRIBUNAL OBSERVED AS UNDER: 11. AS SEEN FROM THE ORDERS, THE A.O. HAS TREATED THE ENTIRE SALE CONSIDERATION RECEIVED AS BOGUS AND BROUGHT TO TAX THE ENTIRE AMOUNT AS STATED TO HAVE COMMUNICATED TO HIM. THE LD. CIT(A) EXAMINED THIS ASPECT AND GAVE FINDING THAT THE TRANSACTIONS IN THE CASE OF SMT. SARITA DEVI ARE NOT TO THE EXTENT OF RS.2.20 CRORES AND RESTRICTED THE SALE AMOUNT TO THE EXTENT OF RS.90.75 LAKHS CORRECTLY. SHE ALSO GAVE CORRECT FINDING THAT THE ENTIRE GROSS RECEIPTS CANNOT BE BROUGHT TO TAX AND ONLY THE GAIN CAN BE TAXED. SIMILARLY IN THE CASE OF MS. NITIKA ALSO, THE CORRECT AMOUNT WAS DETERMINED AND AMOUNT TO BE TAXED WAS THE SHORT TERM CAPITAL GAIN RECEIVED BY ASSESSEE. TO THAT EXTENT FINDINGS OF LD. CIT(A) ARE CORRECT. IT IS TO BE NOTED THAT THE REVENUE HAS NOT COME IN APPEAL ON THAT ASPECT. THEREFORE, ONLY ISSUE TO BE CONSIDERED IS WITH THE DIRECTION OF THE CIT(A) TO TAX THE SAID AMOUNTS AS INCOME FROM OTHER SOURCES. FOR THE REASONS STATED ABOVE, WE ARE NOT IN AGREEMENT WITH THE ACTION OF THE A.O. EITHER FOR REOPENING OF ASSESSMENT OR FOR TREATING THE TRANSACTIONS AS BOGUS, SINCE THE VERY BASIS FOR REOPENING THE ASSESSMENT WAS NOT PROVIDED TO THE ASSESSEE NOR AN OPPORTUNITY WAS GIVEN TO CROSS-EXAMINE THE SOCALLED MR. CHOKSHI. THERE IS NO BASIS FOR TREATING THE SAID TRANSACTIONS AS NOT GENUINE. CONSIDERING THE DOCUMENTS PLACED ON RECORD AND THE CASE LAW RELIED, WE HAVE NO HESITATION IN DIRECTING THE A.O. TO ACCEPT THE LONG TERM CAPITAL GAINS AND SHORT TERM CAPITAL GAINS DECLARED BY SMT. SARITA DEVI AND SHORT TERM CAPITAL GAINS DECLARED BY MS. NITIKA KUMARI UNDER THE HEAD CAPITAL GAINS ONLY. THE GROUNDS ARE ACCORDINGLY ALLOWED. 16 ITA NOS. 984 TO 987/HYD/2017 C.O NOS. 31 TO 34/HYD/2017. 16. THE LD. DR DID NOT CONTRADICT THE FINDINGS OF THE TRIBUNAL AND ADMITTED THAT THE FACTS ARE IDENTICAL IN THE CASE ON HAND. UNDER THESE CIRCUMSTANCES, WE DISMISS THE APPEALS FILED BY THE REVENUE AND ALLOW THE CROSS OBJECTIONS FILED BY THE ASSESSEE. PRONOUNCED IN THE OPEN COURT ON 15 TH JUNE, 2018. SD/- SD/- (B. RAMAKOTAIAH) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT HYDERABAD, DATED: 15 TH JUNE 2018. KRK 1 SMT. SUMANLATA AGARWAL, 21-2-152, CHARKAMAN, HYDERABAD. 2 SRI BAJRANGLAL AGARWAL, 21-2-449-450, CHARKAMAN, HYDERABAD. 3 SMT. RACHITA AGARWAL, 21-2-152, CHARKAMAN, HYDERABAD. 4 SHRI ANIL KUMAR HUF, 21-2-450, CHARKAMAN, HYDERBAD. 5 6 7 8 THE ITO, WARD-8(2), HYDERABAD. CIT(A)-2, HYDERABAD. PR. CIT-2, HYDERABAD. THE DR, ITAT HYDERABAD 9 GUARD FILE