Sarita Bagdi , Indore V. The ITO Ward-4(1), INDORE

ITA 06/Ind/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3850 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 06-04-2021
• Assessment Year: 2011-2012
• Appeal Filed On: 08-01-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S N GOYAL ARS
• Keywords: Unexplained cash credit; Income from undisclosed sources; Principle of natural justice; Opportunity of cross examination; Earning of tax free income; Question of law; Cost of acquisition; Accommodation entries; Benefit of exemption; Onus to prove; Set aside; Capital Gains
• Section: 142(1); 113; 13; 22; 131; 68; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE HONBLE MANISH BORAD, ACCOUNTANT MEMBER AND HONBLE MADHUMITA ROY, JUDICIAL MEMBER ITA NO.06/IND/2019 ASSESSMENT YEAR 2011-12 SMT. SARITA BAGDI, : APPELLANT 30, SHRADHANAND MARG, INDORE PAN : AFIPB9540B V/S INCOME TAX OFFICER 4(1) INDORE : RESPONDENT REVENUE BY SHRI HARSHIT BARI, SR.DR ASSESSEE BY S/ SHRI PRANAY GOYAL & S.N. GOYAL, ARS DATE OF HEARING 0 6 .04 .2021 DATE OF PRONOUNCEMENT 25.05 . 202 1 O R D E R PER MANISH BORAD, A.M THE ABOVE CAPTIONED APPEAL FILED AT THE INSTANCE O F THE ASSESSEE FOR ASSESSMENT YEAR 2011-12 IS DIRECTED AGAINST THE SMT. SARITA BAGDI ITA NO.06/IND/2020 2 ORDERS OF LD. COMMISSIONER OF INCOME TAX(APPEALS)-I I (IN SHORT LD. CIT], INDORE DATED 11.10.2018 WHICH IS ARISING OUT OF THE ORDER U/S 143(3)/147 OF THE INCOME TAX ACT 1961(IN SHORT THE ACT) DATED 16.12.2016 FRAMED BY ITO-4(1), INDORE. 2. ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASES: - 1. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, LD. COMMISSIONER OF INCOME TAX (APPEALS) - IL, INDORE H AS ERRED IN CONFORMING ADDITION TO THE EXTENT OF RS. 48,85,547/- TO THE TOTAL INCOME OF THE APPELLANT BY DISALLOWING THE CLAIM OF EXEMPTION MADE U/S 10(38) OF THE INCOME TAX ACT' 1956. 2.THAT, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) -IL, INDORE HAS ERRED TO CONFIRM THE ADDITION MADE IN THE PRESENT CA SE MADE BY THE LD. A.O. MERELY ON THE BASIS OF INFORMATION RECEIVE D FROM FINANCIAL INVESTIGATION UNIT-MOU, NEW DELHI RELYING ON WHICH INVESTIGATION WAS CARRIED OUT BY DDIT (INV.), INDORE, HOWEVER SUCH ADDITION IS BAD IN LAW IN ABSENCE OF ANY FURTHER ENQUIRY I INVESTIGATION CARRIED ON BY THE LD. A.O. 3. THAT, ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, LD. COMMISSIONER OF INCOME TAX (APPEALS)-IL, INDORE HAS ERRED TO CONFIRM THE DISALLOWANCE OF EXEMPTION US. 10(38) CONSIDERING IT TO BE NOT GENUINE, SUCH ACT IS TOTALLY BAD IN LAW, AS ALL THE TRANSACTION WERE HELD THROUGH BANKING CHANNEL AND THERE WAS NO FINDING OR ENQUIRY INTO THE APPELLANT CASE REGARDING GENERATION OF UNAC COUNTED MONEY SMT. SARITA BAGDI ITA NO.06/IND/2020 3 AND THAT, IT WAS HER OWN MONEY WHICH WAS DIVERTED AS LTCG. 4. THAT, ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE , LD. COMMISSIONER OF INCOME TAX (APPEALS)-IL, INDORE HAS ERRED TO CONFIRM DISALLOWANCE OF THE EXEMPTION CLAIMED ON THE GROUND, THAT TRANSACTION OF PURCHASE WAS EFFECTED THROUGH A DERECOGNIZED ENTIT Y, AS APPELLANT WAS TOTALLY UN AWARE OF SUCH FACT AND WAS UNDER THE BONA FIDE BELIEVE THAT SUCH ENTITY WAS DULY RECOGNIZED AS ALSO IN ALL THE COMMUNICATION MADE BY SUCH ENTITY REGISTRATION NO. WAS MENTIONED, HENCE APPELLANT WAS A BONA FIDE PURCHASE, WHO PURCH ASED SECURITY THROUGH BANKING CHANNEL AND IN FACT SECURITY WAS UL TIMATELY TRANSFERRED TO THE APPELLANT. 5. THAT, LD. COMMISSIONER OF INCOME TAX (APPEALS)-II, FURTHER ERRED NOT TO CONSIDER THE GENUINE L TGC AND EXEMPTION CLAIMED UL S 10(38), MORE PARTICULARLY THE TRANSACTION WAS DONE THROUGH BANKIN G CHANNEL AND SALE WAS MADE THROUGH NSE, AS WELL AS STT WAS PAID O N THE SAME. 6. THAT, THE LD. COMMISSIONER OF INCOME TAX (APPEALS)- II, ERRED NOT TO FOLLOW THE PRINCIPLE OF NATURAL JUSTICE AND NOT TO PROVIDE OPPORTUNITY OF CROSS EXAMINATION AT ANY LEVEL DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ESPECIALLY WHEN THE FACT OF TRANSACTIO N EFFECTED WITH DERECOGNIZED ENTITY WAS THE PREDOMINANT REASON OF DIS ALLOWING EXEMPTION U IS 10(38), AND APPELLANT WAS TOTALLY UN AWARE OF SUCH DE RECOGNITION AND WAS A BONA FIDE PURCHASER. 7. THAT, THE LD. COMMISSIONER OF INCOME TAX (APPEALS)- II, ERRED TO CONFIRM THE ADDITION MADE IN THE PRESENT CASE RELYIN G UPON VARIOUS JUDICIAL PRONOUNCEMENT MORE PARTICULARLY WHEN SUCH C ASES ARE CLEAR DISTINGUISHABLE FROM THE FACTS OF PRESENT CASE AND CO NTRARY DECISIONS ARE ALSO PRONOUNCED IN FAVOR OF APPELLANT. 8. THAT, THE APPELLANT, CARVES LEAVE TO ADD, AMEND OR MO DIFY ANY OF THE GROUNDS OF THE APPEAL. SMT. SARITA BAGDI ITA NO.06/IND/2020 4 3. BRIEF FACTS OF THE CASE AS CULLED OUT FROM THE R ECORDS ARE THAT THE ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM WAREHOUSE RECEIPTS, SHARE IN PARTNERSHIP FIRM, CAPITAL GAINS AND OTHER SOURCES. THE RETURN OF INCOME FOR ASSESSMENT YEAR 2011-12 WA S FILED ON 27.03.2012 DECLARING TOTAL INCOME OF RS.9,10,070/- AND ALSO CLAIMING EXEMPTION U/S 10(38) OF THE ACT AT RS.48,8 5,547/- FOR LONG TERM CAPITAL GAIN (IN SHORT LTCG) FROM SALES OF SHARES OF VIP INDUSTRIES LTD. THERE WAS AN INFORMATION RECEIVED FROM FINANCIAL INVESTIGATION UNIT, NEW DELHI AND IN REFERENCE TO I T DDIT (INVESTIGATION), INDORE CARRIED OUT INVESTIGATION A ND OBSERVED THAT HIGH OFF MARKET TRANSFER IN THE CLIENTS DP ACCOUNT OF 6000 SHARES OF VIP INDUSTRIES LTD HAS HAPPENED IN THE ACCOUNT OF T HE ASSESSEE. SUMMONS U/S 131 OF THE ACT WAS ISSUED TO THE ASSESS EE NAMELY SMT. SARITA BAGADIA FOR PERSONAL ATTENDANCE ALONG W ITH REQUIRED DOCUMENTS. SUMMONS WERE ALSO ISSUED TO OTHER CONNE CTED PARTIES. ASSESSEES CASE WAS REOPENED FOR REASSESSMENT PROCE EDINGS. NOTICE U/S 148 OF THE ACT WAS ISSUED ON 28.3.2016 AFTER RE CORDING REASONS AND GETTING PRIOR APPROVAL FROM THE COMPETENT AUTHO RITY. NOTICE U/S 142(1) OF THE ACT WAS SERVED UPON THE ASSESSEE. COPY OF THE SMT. SARITA BAGDI ITA NO.06/IND/2020 5 RETURN FILED ON 27.03.2012 DECLARING INCOME OF RS.9 ,10,070/- WAS AGAIN FILED IN RESPONSE TO NOTICE U/S 148 OF THE AC T. DURING THE PROCEEDINGS IT WAS SUBMITTED BY THE ASSESSEE THAT S HE HAD PURCHASED 9000 EQUITY SHARES OF VIP INDUSTRIES LTD FROM EDEN FINANCIAL SERVICES, MUMBAI DURING APRIL, 2009 AT A COST OF RS. 4,02,160/-. PAYMENT FOR PURCHASE WAS MADE DURING F INANCIAL YEAR 2010-11 AND 9000 SHARES WERE SOLD THROUGH REGISTERE D BROKER AT RECOGNIZED STOCK EXCHANGE AT A SALE PRICE OF RS.52, 87,709/-. ON EXAMINING THESE DETAILS LD. A.O OBSERVED THAT R EGISTRATION CERTIFICATE OF M/S EDEN FINANCIAL SERVICES WAS CANC ELLED BY SECURITIES EXCHANGE BOARD OF INDIA (IN SHORT SEBI ) VIDE ITS ORDER DATED 28.8.2004. BASED ON THIS FACT LD. A.O CONCLU DED THAT THE ALLEGED TRANSACTION OF PURCHASE IS A FRAUDULENT TRA NSACTION WHICH WAS DONE THROUGH DERECOGNIZED ENTITY AND FURTHER HE LD THAT THE PROFIT OF SALE OF SHARES OF VIP INDUSTRIES WAS GOT FRAUDULENTLY SO AS TO ENJOY THE BENEFIT OF EXEMPTION U/S 10(38) OF THE ACT AND THE SAME DESERVES TO BE DISALLOWED. LD. A.O ACCORDINGLY MAD E THE ADDITION FOR THE NET CAPITAL GAIN AT RS.48,85,547/- DENYING THE BENEFIT OF SECTION 10(38) OF THE ACT. INCOME ASSESSED AT RS.57 ,95,617/-. SMT. SARITA BAGDI ITA NO.06/IND/2020 6 AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE LD. CIT( A) BUT FAILED TO SUCCEED AS THE VIEW TAKEN BY LD. A.O WAS CONFIRMED BY THE LD. CIT(A). LD. CIT(A) APART FROM HOLDING THAT THE PUR CHASES ARE NOT GENUINE ALSO HELD THAT M/S VIP INDUSTRIES LIMITED I S A PENNY STOCK COMPANY AND THE APPELLANT IS INDULGED IN GETTING BO GUS LONG TERM CAPITAL GAIN BY ENTERING INTO SHAM TRANSACTION JUST IN ORDER TO TAKE BENEFIT OF EXEMPTION U/S 10(38) OF THE ACT. 4. AGGRIEVED ASSESSEE IS NOW IN APPEAL BEFORE THE T RIBUNAL. 5. LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED R EFERRING TO THE WRITTEN SUBMISSIONS CONTENDING THAT BOTH THE TR ANSACTIONS OF PURCHASE AND SALES ARE GENUINE AND RIGHTFUL CLAIM H AS BEEN MADE FOR LONG TERM CAPITAL GAIN ON SALE OF SHARES OF VIP INDUSTRIES LIMITED AND FURTHER ADDED THAT AS ON DATE ALSO VIP INDUSTRIES LIMITED IS A LISTED COMPANY AND THE SHARE PRICE HAV E INCREASED ALMOST FOUR TIMES THAN THE PRICE AT WHICH THEY WERE SOLD DURING FINANCIAL YEAR 2010-11 AND THE TURNOVER OF VIP INDU STRIES LIMITED DURING FINANCIAL YEAR 2019-20 WAS RS. 1718 CRORES A ND PROFIT BEFORE TAX STOOD AT RS.147 CRORES WHICH IS SUFFICIENT TO P ROVE THAT VIP SMT. SARITA BAGDI ITA NO.06/IND/2020 7 INDUSTRIES IS NOT A PENNY STOCK OR A PAPER COMPANY. RELEVANT EXTRACT OF WRITTEN SUBMISSION BY THE ASSESSEE IS RE PRODUCED BELOW:- THAT, DURING THE COURSE OF REASSESSMENT PROCEEDING S THE LD. AO VIDE ORDER DT. 16.12.2016 MADE AN ADDITION OF RS. 48,85 ,547/- BY DISALLOWING THE EXEMPTION CLAIMED U/S 10(38) OF THE ACT. FURTH ER, THE SOLE GROUND OF DISALLOWANCE OF SUCH EXEMPTION CLAIMED WAS CIRCULA R NO. 421 DT. 10.09.2004, ISSUED BY NATIONAL STOCK EXCHANGE OF I NDIA LTD. WHEREIN IT WAS INFORMED THAT SEBI HAS CANCELLED THE REGISTRAT ION CERTIFICATE OF M/S EDEN FINANCIAL SERVICES (INTERMEDIARY OF APPELLANT ) VIDE ORDER DT. 28.08.2004. THAT, UPON SUCH CONTENTION, THE APPELLANT STATED TH AT THE APPELLANT HAS EARNED GENUINE LONG-TERM CAPITAL GAIN OF RS. 48,85, 547/- FROM THE SALE OF SHARES OF VIP INDUSTRIES LTD, WHICH CAN BE SUBSTANT IATED FROM THE FOLLOWING EXHAUSTIVE & VOLUMINOUS DOCUMENTS, WHICH ARE ALSO ENCLOSED HEREWITH FOR YOUR READY PERUSAL; BILL OF THE BROKER EDEN FINANCIAL SERVICES CERTIF YING THE PURCHASE OF THE 4000 SHARES ON 23.04.2009 AND 5000 SHARES ON 15 .04.2009 (PAGE15-18). ADVICE OF THE AFORESAID BROKER DT. 31.12.2010, CERT IFYING THE HOLDING OF THE SAID SHARES. STATEMENT OF SHARES REFLECTING THE CONVERSION OF PH YSICAL HOLDING OF SHARES TO THE DEMAT FORM DURING THE CONCERNED YEAR AND THE SALE OF THE SAME SHARES AFTER THE SAID CONVERSION RESPECTIV ELY. SETTLEMENT STATEMENT OF THE BROKER ANGEL BROKING L TD. STATING THE SALE OF AFORESAID MENTIONED SHARES ON VARIOUS DATES DURING THE YEAR UNDER CONSIDERATION NSECM LEDGER AND BSECM LEDGER CERTIFYING THE SALE T RANSACTIONS OF THE ABOVE-MENTIONED SHARES THROUGH NSE AND BSE STOC K EXCHANGES RESPECTIVELY DURING THE YEAR UNDER CONSIDERATION. THUS, IN LIGHT OF THE ABOVE DOCUMENTATION APPELLANT SUBMITS THAT HE HAS SUFFICIENTLY PROVED ALL THE BONA FIDES OF THE TRANS ACTION PERTAINING TO SMT. SARITA BAGDI ITA NO.06/IND/2020 8 EARNING LONG TERM CAPITAL GAIN & SUCH TRANSACTION H AS BEEN UNDERTAKEN THROUGH BANKING CHANNEL AS WELL AS ON THE RECOGNIZE D STOCK EXCHANGE. THAT, THE ONLY BASIS RELYING UPON WHICH THE CONCLUS ION OF NON- GENUINENESS OF THE LONG-TERM CAPITAL GAIN EARNED WA S DRAWN BY THE LD. AO, IS THE INFORMATION RECEIVED FROM FINANCIAL INVE STIGATION UNIT-MOU, NEW DELHI AND ENQUIRY CONDUCTED BY DDIT(INV), INDOR E IN THE PRESENT CASE, WHEREBY THE RESULT OF ENQUIRY CONDUCTED BY DD IT(INV), INDORE WAS PREDOMINATED AND TOTALLY BASED ON THE INFORMATION R ECEIVED FROM FINANCIAL INVESTIGATION UNIT-MOU, NEW DELHI. HOWEVE R, NO ANY SPECIFIC ENQUIRY RELATING TO THE TRANSACTION UNDERTAKEN BY T HE APPELLANT WAS BEEN MADE BY THE LD. AO AND JUST ON THE BASIS OF ENQUIRY CONDUCTED BY DDIT(INV), INDORE WHICH WAS PREDOMINATED BY THE INF ORMATION RECEIVED FROM FINANCIAL INVESTIGATION UNIT-MOU, NEW DELHI, P ARTICULARLY WHEN APPELLANT WAS NOT AT ALL CONFRONTED FOR THE STATEME NT MADE AND MATERIAL USED BEHIND HIS BACK, THE HUGE ADDITION OF LONG TER M CAPITAL GAIN EARNED OF RS.48,85,547 /- WAS MADE, WHICH IS TOTALLY UNJUSTIFIED AND UN LAWFUL, PARTICULARLY WHEN NO DEFECT AT ALL HAS BEEN POINTED OUT IN THE DOCUMENT SUBMITTED BY THE APPELLANT TO SUPPORT SUCH CLAIM OF LONG TERM CAPITAL GAIN BEING EARNED. THAT, NO EFFORTS WERE MADE BY THE LD AO. TO ENQUIRE INTO THE GENUINENESS OF THE TRANSACTION ENTERED INTO BY THE APPELLANT AN D YET JUST ON THE BASIS OF INFORMATION RECEIVED AND ENQUIRY CONDUCTED ON TH E BASIS OF SUCH INFORMATION, REGARDED THE BONA FIDE LONG TERM CAPIT AL GAIN EARNED AS NOT GENUINE, IN SPITE OF THE FACT PROVEN BY THE APPELLA NT BEFORE HIM THAT TRANSACTION WAS GENUINE UNDERGONE THROUGH BANKING C HANNEL, STT WAS DULY PAID ON THE SAME, HAS BEEN UNDERTAKEN ON RECOG NIZED STOCK EXCHANGE THROUGH PROPER DEMAT ACCOUNT, FURTHER, THE RE WAS NO ANY DENIAL FROM ANY BROKER OR OTHER PERSON CONCERNED RE GARDING THE GENUINENESS OF THE TRANSACTION AND ALSO NOTHING WAS PROVED TO THE EFFECT SMT. SARITA BAGDI ITA NO.06/IND/2020 9 THAT IT WAS APPELLANTS OWN UNACCOUNTED MONEY THAT G OT CREDITED IN THE FORM OF LONG TERM CAPITAL GAIN. THUS, IT IS CLEAR T HAT DEPARTMENT HAS NOT AT ALL DISCHARGED ITS BURDEN TO PROVE THAT APPELLAN TS TRANSACTION IS IN GENUINE AND JUST ON THE BASIS OF CONJECTURE, SURMIS ES AND GUESS WORK MADE HUGE ADDITION IN THE HANDS OF APPELLANT WHICH IS GROSSLY UNFAIR, UNJUSTIFIED AND ILLEGAL. THAT, THE LD. A.O. MADE ADDITION SUBSTANTIALLY RELY ING UPON THE FACT THAT THE TRANSACTION HAS BEEN UNDERTAKEN THROUGH DERECOG NIZED ENTITY, BUT IT WAS SUBMITTED BEFORE HIM THAT APPELLANT WAS TOTALLY UN AWARE OF SUCH FACT AND THIS ALONE CANNOT BECOME BASIS TO CONSIDER THE ENTIRE TRANSACTION OF SALE AND PURCHASE OF SHARE TO BE BOG US, FOR SUCH CONTENTION APPELLANT RELIES UPON THE DECISION OF IT AT MUMBAI BENCH IN THE CASE OF ITO VS. ARVIND KUMAR JAIN HUF, ITA NO. 4862/MUM/201 4 WHEREIN IT IS HELD BY THE HONBLE COURT THAT; WHEN PURCHASES PAYMENT HAS BEEN MADE BY ACCOUNT PA YEE CHEQUE, DELIVERY OF SHARES WAS TAKEN, CONTRACT OF S ALE WAS ALSO COMPLETE AS PER THE CONTRACT ACT, THEREFORE, THE AS SESSEE IS NOT CONCERNED WITH ANY WAY OF THE BROKER. NOWHERE THE A O HAS ALLEGED THAT THE TRANSACTION BY THE ASSESSEE WITH THESE PAR TICULAR BROKER OR SHARE WAS BOGUS, MERELY BECAUSE THE INVESTIGATION W AS DONE BY SEBI AGAINST BROKER OR HIS ACTIVITY, ASSESSEE CANNO T BE SAID TO HAVE ENTERED INTO INGENUINE TRANSACTION, INSOFAR AS ASSE SSEE IS NOT CONCERNED WITH THE ACTIVITY OF THE BROKER AND HAVE NO CONTROL OVER THE SAME ACCORDINGLY, THE APPEAL WAS ALLOWED, THUS IN THE PR ESENT CASE ALSO THE ADDITION IS NOT WARRANTED AND LIABLE TO BE DELETED. THAT, THE ASSESSEE RELIES UPON THE FOLLOWING JUDICI AL PRECEDENTS IN SUPPORT OF HIS CLAIM THAT HE HAS ENTERED INTO ABSOL UTELY BONA FIDE SMT. SARITA BAGDI ITA NO.06/IND/2020 10 TRANSACTION AND THUS THE ADDITION MADE BY THE LD. A O. IS LIABLE TO BE DELETED AT THE APPELLATE STAGE: CIT V. SMT. JAMNADEVI AGRAWAL [2010] 328 ITR 656/[2012] 20 TAXMANN.COM 529 (BOM.) : IN THIS CASE IT WAS VERY CLEARLY HELD BY THE HON'BLE COURT THAT THE FACT THAT ASSESSEE IN THE GR OUP HAD PURCHASED AND SOLD SHARES OF SIMILAR COMPANIES THROUGH THE SA ME BROKER CANNOT BE A GROUND TO HOLD THAT THE TRANSACTIONS ARE SHAM AND BOGUS, ESPECIALL Y WHEN THE DOCUMENTARY EVIDENCE WAS PRODUCED TO EST ABLISH THE GENUINENESS OF TRANSACTION . FURTHER, EVEN THE GROUND THAT SOME TRANSACTIONS OF SHARES WERE OFF- MARKET TRANSACTIONS, WAS HELD TO BE AN INVALID GROUND FOR HOLDING THAT THE TRANSACTIONS WERE SHAM. HENCE, IT WAS MADE CLEAR THAT WHEN AN ASSESSEE, OUT OF A GROUP OF ASSESSEES WHICH BOUGHT SAME SHARES, IS ABLE TO ESTA BLISH THE GENUINENESS OF TRANSACTIONS ENTERED INTO BY HIM, HE CANNOT BE PUNISHED FOR BUYING THE SAME SHARE AND THUS, ADDITION CANNOT BE MADE. CIT V. UDIT NARAIN AGRAWAL [2013] 31 TAXMANN.COM 76/213 TAXMAN 178 (MAG.)(ALL.) : IN THIS CASE, IT WAS CONTENDED BY ASSESSEE'S COUNSE L THAT AF TER THE ALLOTMENT OF SHARES, THE SAME WERE TRANSFER RED TO DEMAT ACCOUNT OF THE BUYER AND REMAINED THERE DURIN G THE PERIOD OF HOLDING, WHICH SIGNIFIES THE GENUINENESS OF THE TRA NSACTION. RELIANCE WAS PLACED ON THE DECISION REPORTED IN DHAKESWARI C OTTON MILL S LTD. V. CIT [1954] 26 ITR 775 (SC) , LALCHAND BHAGAT AMBICA RAM V. CIT [1959] 37 ITR 288 (SC) , CIT V. EAST COAST COMMERCIAL CO. LTD. [1967] 63 ITR 449 (SC) AND ANIL TIBREWALAV. ITO [2004] 1 SOT 90 (MUM) TO SUPPORT THAT SUSPICION EVEN STRONG ENOUGH CANNOT TA KE THE CHARACTER OF EVIDENCE. HIMANI M. VAKILV. DIT [IT APPEAL NO. 3106] (ITAT AH D.) : IN THIS CASE, IT WAS OBSERVED THAT THE ASSESSEE HAD FURNISHED COM PLETE DETAILS BEFORE THE A.O. WHICH WERE NOT FOUND FALSE OR BOGUS BY THE A.O. AND ONLY ON DOUBTS AND SUSPICION THE A.O. TREATED THE C APITAL GAIN DECLARED BY THE ASSESSEE AS UNEXPLAINED CREDIT UNDE R SECTION 68. ACCORDINGLY, THE APPEAL OF THE ASSESSEE WAS ALLOWED . SMT. SARITA BAGDI ITA NO.06/IND/2020 11 MAHESH G. VAKILV. DIT [IT APPEAL NO. 218 OF 2010] : IN THIS CASE, THE QUESTION OF SHORT TERM CAPITAL GAIN WHICH WAS HELD TO BE BOGUS BY A.O. CAME BEFORE THE AHMEDABAD BENCH OF ITAT. THE MAIN R EASON FOR NOT ALLOWING THE CLAIM OF THE ASSESSEE BY THE A.O. WAS THE SHARP RISE IN THE PRICE OF SHARES. THE ITAT FOUND THAT THE ASSESSEE H AD SUBSTANTIATED THEIR CLAIM WITH THE RELEVANT DOCUMENTS FOR EXAMPLE , BANK STATEMENT, DEMAT ACCOUNT STATEMENT AND CONTRACT NOTES ETC. WHI CH WERE NOT FOUND FALSE OR BOGUS BY THE A.O. THUS, IT WAS HELD THAT THE CLAIM OF THE ASSESSEE REGARDING THE CAPITAL GAIN WAS GENUINE AND THE ADDITION MADE BY A.O. WAS THEREFORE, DELETED. MUKESHR.MAROLIA V. ADDL. CIT [2006] 6 SOT 247 (MUM) : IN THIS CASE, IT WAS OBSERVED THAT THE ASSESSEE WAS EARNING AGRIC ULTURAL INCOME WHICH WAS DULY DECLARED IN HIS RETURN FOR THE LAST FEW YEARS AND THE ASSESSEE HAD SUFFICIENT CASH IN HAND FOR BUYING THE SHARES. HENCE, IT WAS OPINED THAT THE PURCHASE OF SHARES WAS MADE AGA INST CASH AVAILABLE WITH THE ASSESSEE. WITH REGARD TO OFF MAR KET TRANSACTION OF PURCHASE AND SALE OF SHARE, IT WAS FOUND THAT THE O FF- MARKET TRANSACTIONS ARE NOT ILLEGAL. IT WAS ALSO OBSERVED THAT THE ASSESSMENT HAS TO BE COMPLETED ON THE BASIS OF RECORDS AND MAT ERIAL AVAILABLE BEFORE THE ASSESSING AUTHORITY AND THAT PERSONAL KN OWLEDGE AND EXCITEMENT ON EVENTS SHOU LD NOT LEAD THE A.O. TO A STATE OF AFFAIRS WHERE RELEVANT EVIDENCES ARE OVERLOOKED. CIT V.ARUN KUMAR AGARWAL (HUF) [2012] 210 TAXMAN 405/26 TAXMANN.COM 113 (JHARKHAND) : IN THIS CASE TOO, THE ISSUE OF ALLEGED BOGUS LONG TERM CAPITAL GAIN WAS DEALT WITH FOR A G ROUP OF ASSESSEES, WHERE THE A.O. HAD PASSED THE ASSESSMENT ORDER ON T HE BASIS OF THE REPORT OF SEBI WHEREIN DETAILED FINDINGS WERE MADE WITH REGARD TO SHARES WHOSE PRICES ROSE VERY HIGH IN SHORT SPAN OF TIME. THE A.O. OBSERVED THAT THE SAME MODUS OPERANDI WAS FOLLOWED. THE CIT(A) HAD OBSERVED THAT THE PURCHASE OF SHARES WERE SHOWN BY THE ASSESSEES IN THEIR BALANCE SHEET, THE PURCHASE CONS IDERA TION WAS PAID THROUGH BANK ACCOUNT AND THAT SHARES WERE THER E IN THE DEMAT ACCOUNT. ACCORDINGLY, IT WAS HELD BY CIT(A) THAT TH E TRANSACTION ENTERED INTO BY THE ASSESSEE WAS GENUINE. ITAT ALSO AFFIRMED THE ORDER PASSED BY THE CIT(A). ACCORDINGLY, THE MATTER REACHED BEFORE SMT. SARITA BAGDI ITA NO.06/IND/2020 12 HIGH COURT, WHICH OBSERVED THAT THE A.O. WAS MUCH I NFLUENCED BY THE ENQUIRY REPORT PREPARED BY THE SEBI WHEREIN FINDING RELATED TO INVOLVEMENT OF SOME OF THE SHARE BROKERS IN UNFAIR TRADE PRACTICES WERE MADE. 1. THE HON'BLE HIGH COURT MADE LA NDMARK OBSERVATION THAT EVEN IN A CASE WHERE A SHARE BROKER WAS FOUND INVOLVED IN UNF AIR TRADE PRACTICES OR ACTING AGAINST THE SEBI NORMS THEN MER ELY BECAUSE OF THIS FACT A PERSON WHO BOUGHT THE SHARES OF A COMPA NY FROM SUCH BROKER WITH A BONA FIDE BELIEF AND WITHOUT KNOWING THAT SUCH SHARE BROKER HAD SOME ARRANGEMENT FOR DEALING IN THE SHAR E OF THAT PARTICULAR COMPANY IN COLLUSION WITH OTHERS, SUCH P ERSON CANNOT BE ASSUMED TO HAVE ENTERED INTO A SHAM TRANSACTION AS THE FACT OF TINTED SHARE BROKER MAY BE RE LEVANT FOR SUSPICION WHICH REQUIRES FURTHER ENQUIRY IN INDIVIDUAL CASE. HOWEVER, SUCH FURTHER E NQUIRY WAS NOT CONDUCTED IN THAT CASE. IN VIEW OF THIS, THE APPEAL OF THE REVENUE WAS DISMISSED. IN CASE OF CIT VS. SHYAM R. PAWAR [2015] 54 TAXMANN .COM 108 (BOMBAY) IT WAS OBSERVED THAT ASSESSEE DECLARED CAPITAL GAIN ON SALE OF SHARES OF TWO COMPANIES - ASSESSING OFFICER , OBSERVING THAT TRANSACTION WAS DONE THROUGH BROKERS AT CALCUT TA AND PERFORMANCE OF CONCERNED COMPANIES WAS NOT SUCH AS WOULD JUSTIFY INCREASE IN SHARE PRICES, HELD SAID TRANSAC TION AS BOGUS AND HAVING BEEN DONE TO CONVERT UNACCOUNTED MONEY O F ASSESSEE TO ACCOUNTED INCOME AND, THEREFORE, MADE A DDITION UNDER SECTION 68 - ON APPEAL, TRIBUNAL DELETED ADDI TION OBSERVING THAT DMAT ACCOUNT AND CONTRACT NOTE SHOWE D CREDIT/DETAILS OF SHARE TRANSACTIONS; - WHETHER ON FACTS, TRANSACTIONS IN SHARES WERE RIGHTLY HELD TO BE GENU INE AND ADDITION MADE BY ASSESSING OFFICER WAS RIGHTLY DELE TED - HELD, YES FROM THE ABOVE CITED DECISIONS IN THE FAVOR OF THE ASSESSEE, IT IS CLEAR THAT THE ASSESEE HAS ENTERED INTO BONA FIDE TRANSAC TIONS AND GENUINELY INCURRED SHORT TERM CAPITAL LOSS ON SUCH TRANSACTIO N. SMT. SARITA BAGDI ITA NO.06/IND/2020 13 THAT, IT IS SPECIFICALLY HELD BY HONBLE COURTS THA T, MERELY ON THE BASIS OF INVESTIGATION REPORT OF THE INCOME TAX OFFICER OR S URVEY CONDUCTED AT THE PREMISES OF OTHER ASSESSEE/COMPANY CONCLUDING THE I NVOLVEMENT OF ACCOMMODATION ENTRIES, NO ADDITION IN THE HANDS OF ASSESSEE CAN BE MADE, PARTICULARLY WHEN NO SPECIFIC ENQUIRY RELATIN G TO THE TRANSACTION OF THE ASSESSEE HAS BEEN MADE AND NO ANY OPPORTUNITY O F CROSS EXAMINATION HAS BEEN PROVIDED TO THE ASSESSEE. HENC E IN SUCH CIRCUMSTANCES ADDITION MADE IS LIABLE TO BE DELETED . RELIANCE IS ALSO PLACED ON; CIT VS. RAHUL VINEET TRADERS [2014] 41 TAXMANN.COM 86 (ALLAHABAD HC) ABHIK JAIN VS. ITO [2013] 33 TAXMANN.COM 577 (DELHI TRIB) ACIT VS. BAHUBALI DYES LTD. [2015] 55 TAXMANN.COM 3 57 (DELHI TRIB.) BHARTI SYNTEX LTD. VS. DCIT [2012] 19 TAXMANN.COM 3 61 (JAIPUR TRIB.) CIT VS. PRIYANKA SHIP BREAKING CO. (P.) LTD. [2012] 26 TAXMANN.COM 321 (DELHI HC) CIT VS. GANGESHWARI METALS PVT. LTD. [2013] 30 TAXM ANN.COM 328 (DELHI HC) CIT VS. VIJAY KUMAR JAIN [2014] 41TAXMANN.COM 433 ( ALLAHABAD HC) CIT VS. FAIR FINVEST LTD. [2014] 44 TAXMANN.COM 356 (DELHI HC) ITO VS. NEELKANTH FINBUILD LTD. [2015] 61 TAXMANN.C OM 132 (DELHI TRIB.) ACIT VS. JOGIA PROPERTIES LTD. ITA NO. 6106 AND 610 7 M/2012 (MUM. TRIB.) THUS, YOUR HONOR IN LIGHT OF THE ABOVE FACT & CIRCU MSTANCES AS WELL AS ON THE BASIS OF DECISIONS OF VARIOUS HONBLE COURTS, P LEASE CONSIDER OUR HUMBLE SUBMISSION THAT THE ADDITION MADE IN THE PRE SENT CASE IS UNLAWFUL AND IT IS PRAYED THAT THE SAME SHALL BE DE LETED. SMT. SARITA BAGDI ITA NO.06/IND/2020 14 6. LD. DEPARTMENTAL REPRESENTATIVE MADE DETAILED SU BMISSIONS REFERRING TO THE FINDING OF BOTH THE LOWER AUTHORIT IES AND ALSO RELYING ON THE DECISIONS RELIED BY LD. CIT(A) AND LD. A.O. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE RECORDS PLACED BEFORE US AND CAREFULLY GONE THROUGH THE DEC ISIONS REFERRED AND RELIED BY BOTH THE PARTIES. THROUGH GROUND NO. 1 TO 7 ASSESSEE HAS CHALLENGED THE FINDING OF LD. CIT(A) DENYING TH E BENEFIT OF EXEMPTION OF LTCG FROM SALE OF EQUITY SHARES OF VIP INDUSTRIES LTD AT RS. 48,85,547/-. WE NOTE THAT ASSESSEE PURCHASE D 9000 EQUITY SHARES OF VIP INDUSTRIES LTD DURING APRIL 2009 (FIN ANCIAL YEAR 2009-10)AT A COST OF RS. 4,02,162/- UNDER A CONTRAC T NOTE ISSUED BY EDEN FINANCIAL SERVICES, MUMBAI. THE PAYMENT TO BR OKER REMAINED OUTSTANDING FOR 18 MONTHS AND ON 25.1.2011 IT WAS PAID THROUGH CHEQUE NO. 998105 OF STATE BANK OF BIKANER & JAIPUR , INDORE OF RS. 4,02,161.99. ALL THE 9000 SHARES WERE SOLD AT THE MARKET RATE APPEARING ON THE PORTAL OF THE RECOGNIZED STOCK EXC HANGE (UNDER THE PORTAL OF SEBI) DURING THE FOURTH QUARTER OF FINANC IAL YEAR 2010-11. JUST BEFORE ENTERING INTO SALE TRANSACTIONS, 9000 E QUITY SHARES OF VIP INDUSTRIES LTD WERE TRANSFERRED TO THE DEMAT AC COUNT OF THE SMT. SARITA BAGDI ITA NO.06/IND/2020 15 ASSESSEE FROM THE POOL ACCOUNT OF BROKER (AS CLAIME D BY THE ASSESSEE). THESE SHARES WERE SOLD THROUGH REGISTER ED BROKER M/S ANGEL BROKING LTD, INDORE (MEMBER OF NATIONAL STOCK EXCHANGE LTD) AND CONTRACT CUM BILL HAVE BEEN ISSUED FOR THE SALE S TRANSACTIONS. SALE CONSIDERATION OF RS.52,87,709/- WAS RECEIVED T HROUGH BANKING CHANNEL AND NET LTCG OF RS.48,85,547/- CLAIMED EXEM PT U/S 10(38) OF THE ACT BY THE ASSESSEE IN THE RETURN OF INCOME. 8. NOW THE BONE OF CONTENTION IS ONLY LIMITED TO TH E GENUINENESS OF TRANSACTION OF PURCHASE. LD. A.O HAS NOT DOUBTE D THE SALE TRANSACTION AND THE FACT THAT 9000 EQUITY SHARES OF VIP INDUSTRIES LTD HAVE BEEN TRANSFERRED FROM THE DEMAT ACCOUNT HE LD IN THE NAME OF THE ASSESSEE TO ANOTHER BUYER AFTER EFFECTING TH E SALE THROUGH REGISTERED BROKER ON A RECOGNIZED STOCK EXCHANGE. LD. A.O HAS DOUBTED THE PURCHASE TRANSACTION SINCE THE REGISTRA TION OF EDEN FINANCIAL SERVICE WAS CANCELLED BY SEBI AND THIS IN FORMATION WAS GIVEN TO NATIONAL STOCK EXCHANGE OF INDIA LTD VIDE CIRCULAR NO.421 DATED 10.09.2004 WHICH WAS MADE PUBLIC. REVENUES C ONTENTION IS THAT WHEN THE PARTY WHICH HAS SOLD THE SHARES TO TH E ASSESSEE IS ITSELF NOT A LEGAL ENTITY TO TRADE AND SELL THE SHA RES TO THE ASSESSEE, SMT. SARITA BAGDI ITA NO.06/IND/2020 16 ALL WHAT HAS IS HAPPENED SINCE PURCHASE IS FRAUDULE NT AND IS A MANAGED AFFAIR TO EVADE TAX BY GETTING AN ACCOMMODA TION ENTRY AND CLAIM EXEMPT INCOME. 9. THERE IS NO DISPUTE AT THE END OF THE ASSESSEE A BOUT THE CORRECTNESS OF THE FACT THAT REGISTRATION CERTIFICA TE OF EDEN FINANCIAL SERVICES IS CANCELLED BUT IT WAS SUBMITTED THAT TH E ASSESSEE WAS NOT AWARE OF THIS FACT AT THE TIME OF PURCHASE AND A CONTRACT NOTE WAS ISSUE IN LIEU OF PURCHASE AND PAYMENT HAS BEEN MADE THROUGH BANKING CHANNEL AND 9000 EQUITY SHARES WERE TRANSFE RRED TO THE DEMAT ACCOUNT OF THE ASSESSEE. 10. WE OBSERVE THAT 9000 EQUITY SHARES HAVE BEEN TR ANSFERRED TO THE DEMAT ACCOUNT OF THE ASSESSEE AND THE PAYMENT H AS ALSO BEEN MADE AT RS.4,02,161.99 ON 25.1.2011. SO ONE CANNOT DENY THE FACT THAT 9000 EQUITY SHARES OF VIP INDUSTRIES LIMITED H AVE MOVED FROM THE DEMAT ACCOUNT OF THE SELLER TO THAT OF THE PURC HASER I.E. ASSESSEE FOR CONSIDERATION OF RS.4,02,161.99. THER E IS NO EVIDENCE ON RECORD PLACED BY THE REVENUE AUTHORITIES ABOUT T HE SELLER WHO HAS TRANSFERRED THE EQUITY SHARES TO THE ASSESSEE. HOWEVER THERE IS A SUSPICION WITH REGARD TO THE TIMING OF THE PAYMEN T OF PURCHASE. SMT. SARITA BAGDI ITA NO.06/IND/2020 17 CONTRACT NOTE OF EDEN FINANCIAL SERVICES ARE ISSUED IN APRIL, 2009 AND THE PAYMENTS HAVE BEEN MADE ALMOST AFTER 21 MON THS AND THAT TOO AT THE TIME WHEN THE SHARE HAVE BEEN SOLD BY TH E ASSESSEE. SURPRISINGLY PAYMENT FOR THE PURCHASE HAS BEEN MAD E AFTER COMPLETING 3 TRANSACTIONS OF SALE OF THE EQUITY SHA RES OF VIP INDUSTRIES LIMITED. SO ONE CANNOT DENY THAT THERE IS SOME FLOW IN THIS TRANSACTION. HOWEVER THE FACT REMAINS THAT TH E VIP INDUSTRIES LIMITED IS A LISTED COMPANY AND AS ON DATE ALSO IT IS REGULARLY TRADED AND AS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THE CURRENT PRICE ARE ALMOST FOUR TIMES OF THE PRICE TH E ASSESSEE RECEIVED AT THE TIME OF SALE. SO SALE TRANSACTION I S FAR FROM ANY DISPUTE AS IT HAS BEEN ENTERED THROUGH THE REGISTER ED BROKER ON RECOGNIZED STOCK EXCHANGE AND CONSIDERATION RECEIV ED. AS FAR AS PURCHASE IS CONCERNED THERE IS A PURCHASE ON RECORD AND 9000 EQUITY SHARES HAVE COME INTO THE DEMAT ACCOUNT OF T HE ASSESSEE AND CONSIDERATION HAS BEEN PAID. SO ONE CANNOT DOU BT THE TRANSACTION OF PURCHASE AND SALES BUT DOUBT CAN BE RAISED ABOUT THE PERIOD OF HOLDING OF THE EQUITY SHARES. SMT. SARITA BAGDI ITA NO.06/IND/2020 18 11. SO IN THIS CASE THE SELLER OF THE SHARES I.E. E DEN FINANCIAL SERVICES IS ITSELF IN DISPUTE HAVING NO AUTHORITY T O TRADE BUT THE MOMENT THE SHARE ARE TRANSFERRED TO THE DEMAT ACCOU NT THEN FROM THAT MOMENT THERE IS HARDLY ANY POSSIBILITY TO QUES TION THE GENUINENESS OF PURCHASE UNLESS UNTIL ANYTHING CONTR ARY HAD BEEN UNEARTHED BY THE REVENUE AUTHORITIES. 12. SINCE THE GENUINENESS OF SALE IS NOT DOUBTED, T HE COMPANY OF WHICH THE EQUITY SHARES ARE SOLD I.E. VIP INDUSTRIE S LIMITED IS NOT A PENNY STOCK COMPANY AND SALE EFFECTED THROUGH REGIS TERED BROKER, WE ARE SATISFIED WITH THE GENUINENESS OF SALE TRANS ACTIONS. AS REGARDS PURCHASE WHICH IS MADE BY THE PAYMENT OF RS .4,02,161.99 THROUGH ACCOUNT PAYEE CHEQUE, THERE IS A CORRESPOND ING RECEIPT OF 9000 EQUITY SHARES OF VIP INDUSTRIES LIMITED IN THE DEMAT ACCOUNT OF THE ASSESSEE. HAD THE IDENTITY OF THE BROKER HA S NOT BEEN IN DOUBT THEN THIS TRANSACTION OF EARNING LTCG WOULD B E COVERED UNDER THE PROVISION OF SECTION 10(38) OF THE ACT BU T SINCE THE IDENTITY OF BROKER IS IN DISPUTE THE ALLEGED TRANSA CTION NEEDS TO BE EXAMINED WITH THE PERIOD OF HOLDING OF EQUITY SHARE S IN THE DEMAT ACCOUNT OF THE ASSESSEE. AS THE IDENTITY OF SELLER IS IN DOUBT AND SMT. SARITA BAGDI ITA NO.06/IND/2020 19 9000 EQUITY SHARES ARE HELD IN THE DEMAT ACCOUNT FO R LESS THAN 12 MONTHS, THE NET GAIN DESERVES TO BE TAXED AS SHORT TERM CAPITAL GAIN. 13. WE FIND THAT SIMILAR TYPE OF ISSUE CAME UP BEFO RE THIS TRIBUNAL IN THE CASE OF SMT. ANNAPURNA MAHESHWARI V/S ACIT ITA NO. 315/IND/2012 DATED 31.10.2018 WHEREIN TRANSACTION OF LTCG WAS IN DISPUTE AND REVENUE AUTHORITIES QUESTIONED THE G ENUINENESS OF PURCHASE BUT SINCE THE SHARES WERE FINALLY TRANSFE RRED TO THE DEMAT ACCOUNT AND HAVE BEEN FURTHER TRANSFERRED AT THE TIME OF SALE THE TRANSACTION WAS HELD TO BE TAXABLE AS SHOR T TERM CAPITAL GAIN FROM SALE OF EQUITY SHARES CHARGEABLE TO TAX U /S 111A OF THE ACT @15% AND BENEFIT U/S 10(38) OF THE ACT WAS DENI ED OBSERVING AS FOLLOWS:- 10. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. IN THE INSTANT APPEAL RELATING TO SMT. ANNAPURNA MAHESHWARI FOR ASSESSMENT YEAR 2008-09, THE SOLE GRIEVANCE OF THE ASSESSEE IS AGAINST THE FINDING OF LD.CIT(A) CONFIRMING THE ACT ION OF THE LD.A.O TREATING THE SHORT TERM CAPITAL GAIN FROM PURCHASE/SALE OF E QUITY SHARES OF IFCI LTD AT RS.46,91,512/- AS INCOME FROM OTHER SOURCES AND ALSO HOLDING THAT THESE TRANSACTIONS ARE SHAM AND BOGUS. FROM PERUSA L OF DETAILS, WE FIND THAT THERE WERE THREE TRANSACTIONS FOR PURCHASE AND SALE OF EQUITY SHARES OF IFCI LTD. PURCHASES WERE MADE ON 19.7.2006, 26. 09,2006 AND SMT. SARITA BAGDI ITA NO.06/IND/2020 20 27.09.2006 OF 35,000/-, 15,000/- AND 40,000/- EQUIT Y SHARES OF IFCI LTD FOR A SUM OF RS.2,86,412/-, RS.1,43,250/- AND RS.4, 23,591/- RESPECTIVELY. THESE PURCHASES WERE MADE THROUGH SETTLEMENT NO.060 7079, 0607127 AND 060712B ISSUED BY THE STOCK BROKER M/S. VIJAY B HAGVANDAS & COMPANY WHO IS THE MEMBER OF STOCK EXCHANGE, BOMBAY AND REGISTERED WITH SEBI REG. NO.INB 011194819. ALL THE ABOVE REFE RRED EQUITY SHARES OF IFCI LTD WERE DULY TRANSFERRED INTO THE D-MAT ACCOU NT HELD BY THE ASSESSEE AND THE SHARES WERE SOLD ON 15.5.2007, 15.7.2007 AN D 14.8.2007 AT THE SALE CONSIDERATION OF RS.16,43,711/-, 7,04,448/- AN D RS.26,34,606/- RESPECTIVELY. REVENUE HAS NOT DISPUTED THIS FACT T HAT THE ALLEGED EQUITY SHARES OF IFCI LTD WERE TRANSFERRED IN THE D-MAT AC COUNT OF THE ASSESSEE AFTER THE PURCHASE AND TRANSFERRED OUT FROM THE DEM AT ACCOUNT AT THE TIME OF SALE. REVENUE HAS ALSO NOT DISPUTED THAT THE PA YMENTS HAVE BEEN MADE THROUGH ACCOUNT PAYEE CHEQUE AND SIMILARLY GEN UINENESS OF SALE CONSIDERATION HAS ALSO NOT BEEN DOUBTED WHICH WERE MADE THROUGH A REGISTERED BROKER OF RECOGNIZED STOCK EXCHANGE. 11. THE BONE OF CONTENTION WAS THAT THERE WAS A SIG NIFICANT GAP BETWEEN THE DATE OF PURCHASE AND THE DATE OF PAYMEN T FOR THE PURCHASES WHICH IS AROUND 8 TO 9 MONTHS AND THE SAME HAS BEEN THE MAIN CAUSE FOR TREATING THE ALLEGED TRANSACTION AS BOGUS. THE LD .A.O ALSO TOOK SUPPORT OF THE STATEMENT GIVEN BY MR. VISHAL VJAY J SHAH W HO IS THE SON OF THE PROPRIETOR OF THE STOCK BROKING FIRM M/S. VIJAY BHA GVANDAS & COMPANY WHO DENIED THE ALLEGED TRANSACTION OF PURCHASES WER E DENIED. HOWEVER NOTHING ODD WAS NOTICED ABOUT THE PAYMENT FOR PURCH ASES MADE THROUGH ACCOUNT PAYEE CHEQUE. THESE TWO REASONS LEAD THE W AY OF THE ALLEGED TREATMENT OF SHORT TERM CAPITAL GAIN FROM SALE OF S HARES DECLARED BY THE ASSESSEE AS INCOME FROM OTHER SOURCES ALONG WITH TR EATING THEM AS SHAM AND BOGUS TRANSACTIONS. SMT. SARITA BAGDI ITA NO.06/IND/2020 21 12. WE FIND THAT VERY SAME SET OF FACTS CAME UP BEF ORE THE CO-ORDINATE BENCH IN THE CASE OF SHRI OMPRAKASH PHATANDAS PHAJW ANI V/S ACIT (SUPRA) WHEREIN THE SHARES OF IFCI LTD WERE PURCHAS ED AND THERE WAS A SIGNIFICANT GAP IN BETWEEN THE DATE OF PURCHASE AS PER THE CONTRACT NOTE AND DATE OF PAYMENT FOR THE PURCHASES. THE TRIBUNA L DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE OBSERVING AS FOLLOWS; 7. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS CAREFULLY. 8. IN GROUND NO.1 TO 6 RAISED BY THE ASSESSEE, THE SOLE GRIEVANCE IS AGAINST THE ORDER OF LD.CIT(A) PARTLY CONFIRMING TH E ADDITION MADE BY LD. A.O BY TREATING THE SHORT TERM CAPITAL GAIN OF RS.6,62,870/AS INCOME FROM UNDISCLOSED SOURCES WHICH WAS ADDED BY THE LD.A.O APPLYING PROVISIONS OF SECTION 68 OF THE ACT. WE OB SERVE THAT THE ISSUE REVOLVES ROUND THE TRANSACTION OF SHORT TERM CAPITAL GAIN FROM SALE OF SHARES. THE LD.A.O HAS DOUBTED THE GENUINEN ESS OF PURCHASE OF IFCI SHARES WHICH WERE BOUGHT THROUGH THE BROKER M/S. CHANDRAVAN BHAICHAND MUCHCHALA, MUMBAI BY CONTRACT NOTE NO.7024 DATED 17.10.2006. AT THAT POINT OF TIME PRI CE PER EQUITY SHARE OF IFCI LTD WAS RS.9.95. HOWEVER THE PAYMENT FOR THIS PURCHASE OF RS.1,19,530/- WAS MADE AFTER NINE MONTH S I.E. 1.7.2007. THE 12000 EQUITY SHARES BOUGHT BY THE ASS ESSEE @RS.9.95 PER SHARE WERE TRANSFERRED TO DMAT ACCOUNT ON 13.8.2007 AND THEN THESE WERE SOLD ON 17.8.2007 AND THE PRICE PER EQUITY SHARE ON THE DATE OF SALE WAS AROUND RS.63. 9. THE LD.A.O DOUBTED THE IMPUGNED PURCHASE BECAUSE THE PAYMENT WAS MADE AFTER NINE MONTHS EVEN WHEN THERE WAS NO R EGULAR TRANSACTION BETWEEN THE ASSESSEE AND BROKER AND ALS O THERE WAS SMT. SARITA BAGDI ITA NO.06/IND/2020 22 EXTRA ORDINARY INCREASE IN THE PRICES OF THE EQUITY SHARES. AS MENTIONED BY THE LD.A.O IN THE IMPUGNED ASSESSMENT ORDER THAT NATIONAL STOCK EXCHANGE DENIED OF HAVING ANY TRANSA CTION OF PURCHASE OF IFCI TD. SHARES BY THE ASSESSEE DUE TO THIS REASON THE PURCHASES WERE DOUBTED AND THE TRANSACTION WAS TREA TED AS SPAM AND THE ALLEGED SALE RECEIPT FROM SALE OF SHARES WA S TREATED AS UNEXPLAINED INCOME. WHEN THE MATTER CAME UP BEFORE THE LD.CIT(A), HE IGNORED THE EXISTENCE OF ANY PURCHASE MADE ON 17 .10.2006 AND CALCULATED THE SHORT TERM CAPITAL GAIN BY TAKING CO ST OF EQUITY SHARES ON THE DATE OF DEMATIZING OF 12000 EQUITY SHARES. T HIS RESULTED INTO THE SHORT TERM CAPITAL GAIN LOSS TOTALING RS.18,504 /-. THE LD.CIT(A) ACCORDINGLY TREATED RS.6,62,870/- AS INCOME FROM UN KNOWN SOURCES AFTER GIVING BENEFIT OF PURCHASE COST OF RS.1,19,53 0/- AGAINST THE SALE CONSIDERATION. 10. BEFORE MOVING FURTHER WE WILL LIKE TO REPRODUCE THE FINDINGS OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V/S H IMANI M VAKIL [2014] 41 TAXMANN.COM 425 (GUJARAT HC) WHEREIN SIMI LAR ISSUE AND ALMOST IDENTICAL FACTS CAME UP FOR ADJUDICATION AND HON'BLE HIGH COURT DISMISSED THE REVENUE'S APPEAL OBSERVING AS F OLLOWS; WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE ITAT IS RIGHT IN DELETING THE ADDITION OF RS.36,72,631/ - MADE U/S 68 BY THE ASSESSING OFFICE R BY TREATING THE SHORT TERM CAPITAL GAIN AS UNEXPLAINED CASH CREDIT?' 2. THE ASSESSMENT YEAR IS 2006-07 AND THE RELEVANT ACCOUNTING PERIOD IS 1.04.2005 TO 31.3.2006. THE RESPONDENT - ASSESSEE, AN INDIVIDUAL, FILED HER RETURN OF INCOME SHOWING TOTA L INCOME OF RS.8,72,299/- INCLUDING SHORT TERM CAPITAL GAIN OF RS.2,78,413/ - AND LONG TERM CAPITAL GAIN OF RS.3,41,683/-. DURING THE YEAR UNDER SMT. SARITA BAGDI ITA NO.06/IND/2020 23 CONSIDERATION THE ASSESSEE CLAIMED LONG TERM CAPITA L GAIN OF RS.34,65,171/ - ON A SCRIP NAMED SHRI NIDHI TRADING LIMITED. ON SCRUTINIZING THE COMPLETE TRANSACTION THE TOTAL SAL E VALUE CAME TO RS.36,72,631/- AND TOTAL PURCHASE VALUE CAME TO RS. 2,07,460/-. THE ASSESSEE ACCORDINGLY SHOWED CAPITAL GAIN OF RS. 34,65,171/-. THE ASSESSING OFFICER AFTER SEEKING DETAILS FROM TH E PARTIES TREATED THE SUM OF RS.36,72,631/- CREDITED IN THE BOOKS OF ACCOUNTS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT AND BROUGHT IT TO TAX. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFO RE THE COMMISSIONER (APPEALS) WHO ALLOWED THE SAID GROUND OF APPEAL AND DIRECTED THE ASSESSING OFFICER TO ACCEPT THE CLAIM OF THE ASSESSEE OF RS.34,65,171/ - AS CAPITAL GAINS. THE REVENUE CARRI ED THE MATTER IN APPEAL BEFORE THE TRIBUNAL, BUT DID NOT SUCCEED. 3. MR. MANAV MEHTA, LEARNED COUNSEL FOR THE APPELLA NT HAS ASSAILED THE IMPUGNED ORDER BY PLACING RELIANCE UPON THE REA SONING ADOPTED BY THE ASSESSING OFFICER. 4. AS CAN BE SEEN FROM THE IMPUGNED ORDER, THE TRIB UNAL, AFTER APPRECIATING THE EVIDENCE ON RECORD, HAS FOUND THAT BEFORE THE ASSESSING OFFICER THE ASSESSEE HAD EXPLAINED THAT T HE PURCHASE TRANSACTIONS WERE MADE ON THE ONLINE TRADING SYSTE M' AND THESE TRANSACTIONS ARE GENUINE. EARLIER, THIS IS PRIOR TO 1.4.2005, IT WAS NOT COMPULSORY FOR THE CLIENT TO HAVE HIS OWN TRANSACTI ON RECORD UNDER SEBI GUIDELINES. THEREFORE, THE PURCHASES EARLIER W ERE MADE USING THE BROKER'S CODE, AND IT WAS FOR THIS REASON THAT THE BROKER HAD USED THE SELF CODE'. SINCE THE SHARES WERE SOLD AF TER 1.4.2005, THE TRANSACTIONS WERE NOT UNDER THE BROKER'S CODE. AS R EGARDS SERVICE TAX AND STAMP CHARGES THE CONTRACT NOTE OF THE BROK ER CLEARLY MENTIONED THAT THE BROKERAGE WAS INCLUSIVE OF SERVI CE TAX ETC. IN THE SMT. SARITA BAGDI ITA NO.06/IND/2020 24 CASE OF THE SELLING BROKER THE SERVICE TAX SECURITI ES TRANSACTION TAX AND EDUCATION CESS WERE SEPARATELY MENTIONED. AS RE GARDS THE POINT RAISED BY THE ASSESSING OFFICER THAT THERE WA S ABSENCE OF BROKER-CLIENT AGREEMENT, THE TRIBUNAL ACCEPTED THE SUBMISSION OF THE ASSESSEE THAT THE GENUINENESS OF THE TRANSACTIONS W AS ALREADY PROVED BY THE CONTRACT NOTES FOR SALE AND PURCHASE, THE BANK STATEMENT OF THE BROKER, THE DEMAT ACCOUNT SHOWING TRANSFER IN AND OUT OF SHARES, AS ALSO ABSTRACT OF TRANSACTIONS FUR NISHED BY THE CSE. THE TRIBUNAL, AFTER APPRECIATING THE EVIDENCE ON RE CORD, CONCURRED WITH THE FINDINGS RECORDED BY THE COMMISSIONER (APP EALS) THAT THE ASSESSEE HAD FURNISHED COMPLETE DETAILS WHICH WERE NOT FOUND FALSE OR BOGUS BY THE ASSESSING OFFICER AND THAT IT WAS O NLY ON SUSPICION THAT THE ASSESSING OFFICER HAD TREATED THE CAPITAL GAIN DECLARED BY THE ASSESSEE AS UNEXPLAINED CASH CREDIT UNDER SECTI ON 68 OF THE ACT. IN THE LIGHT OF THE AFORESAID FINDINGS OF FACT RECO RDED BY IT, THE TRIBUNAL DISMISSED THE APPEAL OF THE REVENUE. 5. IN THE LIGHT OF THE ABOVE FINDINGS OF FACT RECOR DED BY THE TRIBUNAL, IT IS NOT POSSIBLE TO STATE THAT THE VIEW ADOPTED B Y THE TRIBUNAL IS, IN ANY MANNER, UNREASONABLE OR PERVERSE. BESIDES, THE LEARNED COUNSEL FOR THE APPELLANT IS NOT IN A POSITION TO SHOW THAT THE TRIBUNAL HAS PLACED RELIANCE UPON ANY IRRELEVANT MATERIAL OR THA T ANY RELEVANT MATERIAL HAS BEEN IGNORED, NOR IS HE ABLE TO POINT OUT ANY MATERIAL TO THE CONTRARY SO AS TO DISLODGE THE CONCURRENT FINDI NGS OF FACT RECORDED BY THE TRIBUNAL. UNDER THE CIRCUMSTANCES, THE IMPUGNED ORDER BEING BASED UPON CONCURRENT FINDINGS OF FACT RECORDED BY THE TRIBUNAL UPON APPRECIATION OF THE EVIDENCE OF RECOR D, DOES NOT GIVE RISE TO ANY QUESTION OF LAW, MUCH LESS, A SUBSTANTI AL QUESTION OF LAW SO AS TO WARRANT INTERFERENCE. THE APPEAL IS, ACCOR DINGLY, DISMISSED.' SMT. SARITA BAGDI ITA NO.06/IND/2020 25 11. NOW IN ORDER TO APPRECIATE AND EXAMINE THE FA CTS IN THE LIGHT OF ABOVE JUDGMENT, WE FIND THAT THE ASSESSEE PLACED FO LLOWING DOCUMENTS BEFORE THE LOWER AUTHORITIES; 1.CONTRACT NOTE CUM BILL OF BROKER FROM WHOM SHARES WERE PURCHASED; 2. CONFIRMATION OF ACCOUNTS FROM THE SAME BROKER 3. COPY OF LEDGER ACCOUNTS OF BROKER 4. COPY OF BANK ACCOUNT OF THE ASSESSEE 5. COPY OF D-MAT ACCOUNT OF THE ASSESSEE 6. COPY OF STATEMENT OF AFFAIRS OF THE ASSESSEE 7. COPY OF CONTRACT NOTE CUM BILL FOR SALE OF SHARE S 12. NOW ABOVE REFERRED DETAILS EXCEPT FOR THE GENUI NENESS OF PURCHASE, THE LD.A.O HAS NOT CHALLENGED THE GENUINENESS OF OTHER DETAILS MOST IMPORTANTLY THE SALE OF SHARES WHICH HAVE BEEN EFFE CTED BY THE ASSESSEE THROUGH BOMBAY STOCK EXCHANGE PORTAL AND SOLD THROU GH ANGEL CAPITAL & DEBT MARKET LTD. THE RELEVANT DOCUMENTS IN THE PAPE R BOOK FROM PAGE 23 TO 30 PROVE BEYOND DOUBT THE GENUINENESS OF SALE OF EQUITY SHARES. IT IS ALSO NOT DISPUTED THAT THE SHARE OF IFCI LTD WERE D EMATIZED AFTER THE PURCHASE AND THEY HAVE BEEN DEBITED FROM THIS ACCOU NT AT THE TIME OF SALE. AS FAR AS PURCHASE IS CONCERNED THE SHARES HAVE BEE N PURCHASED THROUGH A REGISTERED BROKER WHO IS A MEMBER OF STOCK EXCHAN GE, BOMBAY HAVING SEBI REGISTRATION NO.INB010005219. FOR THE ONLY REA SON THAT THE PAYMENT OF PURCHASE HAS BEEN MADE AFTER A LAPSE OF 9 MONTHS CANNOT RENDER THE PURCHASE AS NON GENUINE UNLESS AND OTHERWISE ANY MA TERIAL IS BROUGHT ON RECORD WHICH COULD NEGATE THIS FACT. 13. FURTHER WE FIND THAT THE ADDITION HAS BEEN MADE FOR THE UNEXPLAINED CREDIT OF RS.7,64,346/- BUT NOWHERE RIGHT FROM THE ASSESSMENT SMT. SARITA BAGDI ITA NO.06/IND/2020 26 PROCEEDINGS AND TILL THE PROCEEDINGS BEFORE THE APP ELLATE AUTHORITY, REVENUE AUTHORITIES HAVE EVER DOUBTED THE SOURCE OF AMOUNT OF SALE CONSIDERATION OF RS.7,64,346/- WHICH THE ASSESSEE R ECEIVED THROUGH BANKING CHANNEL FROM SALE OF SHARES HELD IN DMAT AC COUNT THROUGH THE RECOGNIZED STOCK EXCHANGE WHICH IS VERIFIABLE FROM THE CONTRACT NOTE. 14. WE THEREFORE IN THE GIVEN FACTS AND CIRCUMSTANC ES OF THE CASE ARE OF THE CONSIDERED OPINION THAT BOTH THE LOWER AUTHORITIES ERRED IN TREATING THE ALLEGED TRANSACTION OF SALE OF EQUITY SHARES AS A S HAM TRANSACTION. WE ACCORDINGLY SET ASIDE THE FINDINGS OF BOTH THE LOWE R AUTHORITIES AND ALLOW THE APPEAL OF THE ASSESSEE AND FURTHER HOLD THAT TH E ASSESSEE HAS RIGHTLY SHOWN THE SHORT TERM CAPITAL AMOUNTING TO RS.6,44,8 16/- FROM SALE OF EQUITY SHARES OF IFCI LTD. IN THE RESULT GROUND NO. 1 TO 6 OF THE ASSESSEE'S APPEAL ARE ALLOWED. 15. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED. 13. FROM THE PERUSAL OF THE ABOVE FINDING OF THE CO -ORDINATE BENCH AS WELL AS IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE FACTS AND ISSUES ARE VERBATIM SIMILAR SO MUCH SO TH AT THE GENUINENESS OF THE SALE TRANSACTIONS HAS NOT BEEN DOUBTED BY THE R EVENUE AUTHORITIES. EQUITY SHARES OF THE IFCI LTD HAVE BEEN PURCHASED B Y MAKING PAYMENT THROUGH DISCLOSED SOURCES IN THE FORM OF ACCOUNT PA YEE CHEQUE. EQUITY SHARES HAVE BEEN DULY TRANSFERRED IN AND TRANSFERRE D OUT OF THE DEMAT ACCOUNT OF THE ASSESSEE AT THE TIME OF PURCHASE AND SALE RESPECTIVELY. THE ALLEGED ADDITION MADE U/S 68 OF THE ACT FOR UNEXPLA INED CASH CREDIT DO NOT APPLY IN THE GIVEN FACTS WHEN THE SALE CONSIDERATIO N HAS ITSELF BEEN FOUND TO BE GENUINE. THEREFORE FOR THE ONLY REASON THAT PAYMENTS HAVE BEEN MADE AFTER SIGNIFICANT TIME WHICH IS ALSO IN THE RA NGE OF 8 TO 9 MONTHS AND THE DENIAL OF THE SHARE BROKER OF THE ALLEGED TRANS ACTION EVEN WHEN THE SMT. SARITA BAGDI ITA NO.06/IND/2020 27 CONTRACT NOTE HAS BEEN ISSUED SHOWING COMPLETE DETA ILS OF THE SHARES PURCHASED, SETTLEMENT NUMBER, ORDER NUMBER, SECURIT Y NAME, PURCHASE RATE, SERVICE TAX CHARGED AND ALL THE NECESSARY ING REDIENTS ARE MENTIONED IN THE CONTRACT NOTE FOR THE PURCHASE OF EQUITY SHA RES OF WELL KNOWN COMPANY I.E. IFCI LTD, THEN IN SUCH SITUATION THE PURCHASE CANNOT BE DOUBTED. THEREFORE IF THE PURCHASE AND SALE ARE NO T DOUBTED AS THE PAYMENTS MADE FOR PURCHASE AND SALE CONSIDERATION R ECEIVED ARE ALSO GENUINE, DEMAT ACCOUNT HAS BEEN USED FOR THE ALLEGE D TRANSACTIONS OF PURCHASE AND SALE, THEN MERE DELAY IN PAYMENT ITSEL F CANNOT PROVE THAT THE TRANSACTIONS ARE SHAM AND BOGUS. WE THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH AND IN VIEW OF OU R ABOVE FINDING SET ASIDE THE ORDER OF THE LOWER AUTHORITIES AND ALLOW THE GROUND RAISED BY THE ASSESSEE AND DIRECT THE LD. ASSESSING OFFICER TO TR EAT THE ALLEGED PROFIT FROM SALE AND PURCHASE OF EQUITY SHARES OF IFCI LTD AT RS.41,29,512/- AS SHORT TERM CAPITAL GAIN AND TAX ACCORDINGLY. IN TH E RESULT APPEAL OF THE ASSESSEE IS ALLOWED. 14. WE THEREFORE ON EXAMINING THE FACTS OF THE INST ANT CASE IN THE LIGHT OF ABOVE DECISION WHICH IS APPLICABLE TO A GR EAT EXTENT ON THE FACTS AND ISSUE OF INSTANT APPEAL HOLD THAT THE ASS ESSEE HAD EARNED CAPITAL GAIN AT RS.48,85,547/- AFTER MAKING A GENUI NE SALES OF RS.52,87,709/- AND CLAIMING COST OF ACQUISITION OF SHARES AT RS.4,02,162/- BY PAYMENT THROUGH BANKING CHANNEL AN D TRANSACTION OF PURCHASE AND SALE EFFECTED THROUGH D EMAT ACCOUNT. SINCE THE SOURCE OF PURCHASE HAS BEEN DISPUTED AS T HE REGISTRATION OF BROKER WAS CANCELLED MUCH BEFORE THE TRANSACTION OF PURCHASE SMT. SARITA BAGDI ITA NO.06/IND/2020 28 MADE BY THE ASSESSEE, PERIOD OF HOLDING OF EQUITY S HARE IS RECKONED FROM THE DATE ON WHICH THE 9000 EQUITY SHARES OF VI P INDUSTRIES LIMITED WERE CREDITED TO THE DEMAT ACCOUNT OF THE A SSESSEE UP TO THE DATE WHEN THE SHARES WERE SOLD AND EQUITY SHARE S SOLD WERE DEBITED TO THE DEMAT ACCOUNT. THIS PERIOD IN THE I NSTANT CASE IS LESS THAN 12 MONTHS, WE THEREFORE HOLD THAT THE CAP ITAL GAIN OF RS.48,85,547/- IS SHORT TERM CAPITAL GAIN LIABLE TO BE TAXED U/S 111A OF THE ACT. ASSESSEE GET PART RELIEF AND GROU ND NO.1 TO 7 RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 15. GROUND NO.8 IS GENERAL IN NATURE WHICH NEEDS NO ADJUDICATION. THE ORDER PRONOUNCED AS PER RULE 34 OF ITAT RULES, 1963 ON 25.05.2021. SD/- SD/- (MADHUMITA ROY) (MANIS H BORAD) JUDICIAL MEMBER ACCOUNTANT ME MBER / DATED : 25.05. 2021 /DEV COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, SMT. SARITA BAGDI ITA NO.06/IND/2020 29 ASSTT.REGISTRAR, I.T.A.T., INDORE