ACIT, UDAIPUR V. Shri Raj Kumar Soni, UDAIPUR

ITA 10/JODH/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3117 (ITAT-JODHPUR)
• Duration Of Justice: 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2003-2004
• Appeal Filed On: 04-01-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: N A JOSHI
• Keywords: Unexplained cash credit; Income from undisclosed sources; Search and seizure; Principle of natural justice; Avoidance of tax; Accommodation entries; Non compliance; Onus to prove; Sham transactions
• Section: 69C; 143(3); 142(1); 133(6); 68

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO. 10 & 11/JODH/2013 ASSESSMENT YEARS : 2002-03 & 2004-05 PAN: AJEPS 4718 A THE ACIT VS. SHRI RAJ KUMAR SONI CIRCLE- 2 109, DAULAT CHAMBERS UDAIPUR 4, SARDARPURA, UDAIPUR (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI N.A. JOSHI APPELLANT BY : NONE DATE OF HEARING : 11-06-2013 DATE OF PRONOUNCEMENT : 13-06-2013 ORDER PER R.C. SHARMA , A.M. THESE ARE THE APPEALS FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A), UDAIPUR DATED 31 ST OCT. 2012 FOR THE ASSESSMENT YEARS 2003-03 AND 200 4-05 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 . 2.1 FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE REVENU E IN ASSESSMENT YEAR 2003-04. ON THE FACTS AND IN THE PRESENT CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN:- 1) DELETING THE ADDITION OF RS. 15,61,884/-MADE U/S 68 OF THE I.T. ACT . 2) DELETING THE ADDITION OF RS 78,100/- MADE ON ACC OUNT OF UNDISCLOSED EXPENDITURE. THAT THE APPELLANT CRAVES TO ADD, AMEND, ALTER, DEL ETE OR MODIFY ANY OR ALL THE ABOVE GROUNDS OF APPEAL BEFOR E OR AT THE TIME OF HEARING. 2 2.2 FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE REVENU E IN ASSESSMENT YEAR 2004-5 ON THE FACTS AND IN THE PRESENT CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN:- 1) DELETING THE ADDITION OF RS. 20,07,929/-MADE U/ S 68 OF THE I.T. ACT . 2) DELETING THE ADDITION OF RS. 1,00,000/- MADE ON ACCOUNT OF UNDISCLOSED EXPENDITURE. THAT THE APPELLANT CRAVES TO ADD, AMEND, ALTER, DEL ETE OR MODIFY ANY OR ALL THE ABOVE GROUNDS OF APPEAL BEFOR E OR AT THE TIME OF HEARING. 2.3 NOBODY APPEARED ON BEHALF OF THE ASSESSEE IN SP ITE OF SERVICE OF NOTICE NOR ANY ADJOURNMENT PETITION WAS FILED, THE BENCH THEREFORE DECIDED TO DISPOSE OFF THE APPEALS AFTER HEARING THE LD. DR AND CONSIDERING THE MATTER PLACE D ON RECORD. 2.4 WE HAVE CONSIDERED THE CONTENTIONS OF THE LD. D R AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE FACTS OF THE CASE IN BR IEF ARE THAT DURING THE COURSE OF SCRUTINY ASSESSMENT, THE ASSESSING OFFICER FOUND THAT THE AS SESSEE HAS CREDITED THE AMOUNT RECEIVED ON ACCOUNT OF SALE OF SHARES OF M/S BUNIYAD CHEMICALS, AHEMDABAD . TO FIND OUT THE GENUINENESS OF THE TRANSACTIONS, THE ASSESSING OFFI CER ISSUED NOTICES U/S 133(6) OF THE ACT TO THE DIRECTOR OF THE BROKER M/S GOLDSTAR FINVEST PVT. LTD. AND TO THE PRINCIPAL OFFICER, BUNIYAD CHEMICALS, AHEMDABAD. AFTER RECORDING THE S TATEMENT OF SHRI MUKESH MANAK LAL CHOKSI, MUMBAI U 131 OF THE ACT ON 11-12-2009, THE ASSESSING OFFICER REACHED TO THE CONCLUSION THAT TRANSACTIONS OF SALE OF SHARES AND CLAIM OF LONG TERM CAPITAL GAINS IN RESPECT OF SHARES OF M/S BUNIYAD CHEMICALS LTD . WAS NOT GENUINE. ACCORDINGLY, HE ADDED THE ENTIRE AMOUNTS U/S 68 OF THE ACT IN BOTH THE YEARS UNDER CONSIDERATION. BY THE IMPUGNED ORDER, THE LD. CIT(A) HAS DELETED THE ADDI TIONS AFTER OBSERVING AS UNDER:- 3.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELL ANT AS WELL AS THE FINDINGS OF THE AO. IT IS SEEN THAT AS FAR AS T REATMENT OF SALE PROCEEDS AS CASH CREDIT U/S. 68 OF THE ACT IS NOT JUSTIFIED AND TENABLE. AS PER SECTION 68 WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE AND THE ASSESSEE OFFERS NO EXPLANATION, THE SUMS OF SUCH CR EDITS MAY BE CHARGED 3 TO INCOME TAX AS THE INCOME OF THE ASSESSEE. IN THI S CASE, NO SUM HAS BEEN CREDITED IN THE BOOKS AS THE PAYMENT OF PURCHASE OF SHARES WAS MADE AND THE SALE PROCEED OF SHARES HAS BEEN RECEIVED THROUG H BANK. THUS, IT IS PROVED THAT THE SALE PROCEED IS AGAINST THE PURCHAS E OF SHARES. THEREFORE, THE AMOUNT CANNOT BE TREATED AS CASH CREDIT U/S. 68 OF THE ACT. THE STAND TAKEN BY THE AO IS NOT JUSTIFIED AND, THEREFORE, RE JECTED. MY PREDECESSOR HAS DECIDED THIS ISSUE ON THE SAME F ACTS IN APPEAL NO. 547/IT/UDR/2006-07 VIDE ORDER DATED 11.9.2007 W HEREIN IT HAS BEEN HELD THAT THE DOCUMENTS FURNISHED DURING THE COURSE OF APPELLATE PROCEEDINGS WERE ALSO FURNISHED BEFORE THE AO AT TH E TIME OF ASSESSMENT PROCEEDINGS AND ALLOWED THE APPELLANT'S APPEAL. FUR THER THE HON'BLE JURISDICTIONAL ITAT, JODHPUR IN ITS ORDER DATED 16. 12.2011 IN ITA NOS. 611/JU/2009 AND 501/JODH/2010 HAS DISMISSED THE REV ENUE'S APPEALS ON THE SAME ISSUE IN THE APPELLANT'S OWN CASE. RESPECTFULLY FOLLOWING THE DECISIONS OF THE ID. CIT (A) AND THE HON'BLE JURISDICTIONAL ITAT AS MENTIONED ABOVE, I D ELETE THE ADDITION MADE U/S. 68 OF THE ACT BY THE AO OF RS. 15,61,884/- FOR A.Y. 2003-04 AND RS. 20,07,929/- FOR A.Y. 2004-05. THIS GROUND OF APPEAL S IS ALLOWED. 4. THE SECOND GROUND APPEAL IS AS NDER:- FOR A.Y. 2003-04: 'THAT THE LEARNED ASSESSING OFFICER HAS FURTHER ERR ED IN MAKING ARBITRARILY ADDITION OF RS. 78,100/- AS UNDISCLOSED EXPENDITURE PAID WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANCES.' FOR A.Y. 2004-05: 'THAT THE LEARNED ASSESSING OFFICER HAS FURTHER ERR ED IN MAKING ARBITRARILY ADDITION OF RS. 1,00,000/- AS UNDISCLOSED EXPENDITU RE PAID WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANCES.' 4.1 THE ID. AO TREATED THE ABOVE MENTIONED SHARE TRANSACTION AS ACCOMMODATION ENTRIES AND HE ESTIMATED COMMISSIO N PAID TO THE BROKER @ 5% AND ADDED RS. 78,100/- AND RS.1,00,000/ - FOR A.Y. 2003-04 & 2004-05 RESPECTIVELY AS UNDISCLOSED COMMISSION PAID IN CASH. 4.2 DURING APPEAL PROCEEDINGS, THE APPELLANT HAS SUBMITTED THAT: 2.1 'THE LD. AO HAS DISCUSSED THE ABOVE ISSUE AT OF PAGE 15 OF THE ASSESSMENT ORDER. 2.2 THAT THE ID AO WHILE COMPLETING THE ASSESSMEN T MADE ADDITIONS AMOUNTING TO RS.78,100 AS COMMISSION WOUL D HAVE BEEN PAID TO SHARE BROKER ON SURMISES BASIS WITHOUT ANY EVIDENCE , WHICH IS UNJUSTIFIED AND BAD IN LAW DUE TO THE FOLLOWING FAC TS. 4 2.3 DURING THE YEAR UNDER CONSIDERATION (A.Y. 200 3-04), THE APPELLANT SOLD 18500 EQUITY SHARES OF BUNIYAD CHEMICALS LTD AMOUNTING TO RS. 15,62,425/- AND AFTER DEDUCTING COMMISSION NET PAYABLE WAS RS. 15,61,884 WHICH WERE PURCHASED IN THE YEAR 2001 AT A COST OF RS.11,193 AND EARNED LONG TERM CAPITAL GAINS OF RS. 15,50,690/-. AS REGARDS, A.Y. 2004-05, THE APPELLANT SOLD 17500 EQUITY SHARES OF BUNIYAD CHEMICALS LTD. NET AMOUNTING TO RS.20,18 ,519/- AND WHICH WERE PURCHASED IN THE YEAR 2001 AT A COST OF RS. 10 ,589/- AND EARNED LTCG OF RS.20,07,930/- 2.4 THE AFORESAID TRANSACTION WERE MADE THROUGH SHA RE BROKER ONLY AND DURING ASSESSMENT PROCEEDINGS APPELLANT SU BMITTED THE - - CONTRACT NOTES - CONTAINING DETAILS OF SERVIC E TAX, BROKERAGE, OTHER LEVIES; - BILLS - CONTAINING SERVICE TAX, TRANSACTION CHARGES 2.5 ON PERUSAL OF THE SAME YOUR HONOUR COULD APP RECIATE THAT THE BROKER HAS ALREADY STATED AND DEDUCTED OUT OF SALE PROCEEDS OF SHARES, THE VARIOUS CHARGES MADE BY THEM IN THERE C ONTRACT NOTE AND BILLS AS ALREADY PRODUCED BEFORE THE ID AO. IN ADDITION TO IT NO OTHER CHARGES HAS BEEN PAID BY APPELLANT. 2.6 THE ID AO WITHOUT ANY VALID REASONS, ARBITRAR ILY AND ON SURMISES BASIS MADE ADDITIONS STATING AS COMMISSION PAYMENT WITH THE BIASED VIEW ONLY WITHOUT ANY BASIS AND EVIDENCE ON RECORD.' 4.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPEL LANT AS WELL AS THE FINDINGS OF THE AO AND FOUND THAT MY PREDECESSO R HAS DECIDED THIS ISSUE ON THE SAME FACTS IN APPEAL NO. 547/IT/UDR/2006-07 VID E ORDER DATED 11.9.2007 WHEREIN IT HAS BEEN HELD THAT THE DOCUMEN TS FURNISHED DURING THE COURSE OF APPELLATE PROCEEDINGS WERE ALSO FURNISHED BEFORE THE AO AT THE TIME OF ASSESSMENT PROCEEDINGS AND ALLOWED THE APPE LLANT'S APPEAL. FURTHER THE HON'BLE JURISDICTIONAL ITAT, JODHPUR IN ITS ORDER D ATED 16.12.2011 IN ITA NOS. 611/JU/2009 AND 501/JODH/2010 HAS DISMISSED TH E REVENUE'S APPEALS ON THE SAME ISSUE IN THE APPELLANT'S OWN CASE. RESPECTFULLY FOLLOWING THE DECISIONS OF CIT(A) AND HON'BLE JURISDICTIONAL ITAT AS MENTIONED ABOVE, I DELETE TH E ADDITION MADE U/S. 69C OF THE ACT BY THE AO OF RS. 78,100/- FOR A.Y. 2003-04 AND RS. 1,00,000/- FOR A.Y. 2004-05. THIS GROUND OF APPEALS IS ALLOWED. 2.5 IT IS CLEAR FROM THE ORDER OF THE LD. CIT(A) TH AT WITHOUT CONTROVERTING THE FINDINGS RECORDED BY THE ASSESSING OFFICER WITH REGARD TO GE NUINENESS OF THE TRANSACTIONS ENTERED INTO IN RESPECT OF SHARES OF M/S BUNIYAD CHEMICALS LTD. , AHEMDABAD , ADDITIONS HAVE BEEN DELETED BY RELYING ON THE ORDER OF HIS PREDECE SSOR LD. CIT(A) AND THE TRIBUNAL DATED 5 16-12-2011. THE LD. CIT(A) OBSERVED THAT FACTS OF T HE CASE UNDER CONSIDERATION ARE THE SAME AS DECIDED BY HIS PREDECESSOR VIDE ORDER DATED 11-09-2007. HE FURTHER STATED THAT JURISDICTIONAL TRIBUNAL IN ITA NOS. 611/JU/2009 AND 501/JODH/2010 VIDE ITS ORDER DATED 16-12-2011 HAS DISMISSED THE REVENUES APPEALS ON T HE SAME ISSUE. WE FOUND THAT IN THE YEARS UNDER CONSIDERATION THE ISSUE WAS WITH REGARD TO GENUINENESS OF SHARES OF M/S BUNIYAD CHEMICALS LTD., AHEMDABAD , WHEREIN THE ASSESSING OFFICER FOUND THAT THE GENUINENESS OF TRANSACTIONS OF SALE OF SHARES OF M/S BUNIYAD CHEMICALS LTD. , AHEMDABAD AND THEREBY CLAIMING OF LONG TERM CAPITAL GAIN THE REON WAS NOT ESTABLISHED IN VIEW OF THE FACTS THAT THESE SHARES WERE NOT LIS TED IN THE STOCK EXCHANGE. THE ASSESSING OFFICER ALSO ISSUED NOTICE TO DIRECTOR OF M/S GOLD STAR FINVEST PVT. LTD. (WHO WAS BROKER) U/S 133(6) DATED 9-11-2010 AND SOUGHT INFORMATION A S CONTAINED AT PAGE 3 OF HIS ORDER. THE ASSESSING OFFICER ALSO ISSUED NOTICE TO THE PRINCIP AL OFFICER, M/S BUNIYAD CHEMICALS LTD. , AHEMDABAD U/S 133(6) DATED 9-11-2010. THE NOTICE WAS ALSO IS SUED TO THE PRINCIPAL OFFICER OF BOMBAY STOCK EXCHANGE AND PRINCIPAL OFFI CER, M/S NATIONAL STOCK EXCHANGE. THEREAFTER, THE ASSESSING OFFICER NOTED AS UNDER:- THE OUTCOMES OF THE INVESTIGATION CARRIED OUT THROU GH NOTICES U/S 133(6) AS ABOVE, ARE AS UNDER:- THE NOTICE U/S 133(6) ISSUED TO M/S GOLD S TAR FINVEST PVT. LTD. MUMBAI RETURNED UNSERVED BY THE POSTAL AUTHORI TIES. THE NOTICE U/S 133(6) ISSUED TO M/S BUNIYAD CHEMI CALS P.LTD., MUMBAI REMAINED UNCOMPLIED WITH. INCOMPLIANCE TO NOTICE U/S 133(6), '(THE VICE PRESI DENT CAPITAL MARKET) NATIONAL STOCK EXCHANGE VIDE HIS LETTER NO. NSE/CMO/533 DATED 09/12/2010 SUBMITTED THAT. 'IN THIS REGARD, YOU MAY PLEASE NOTE THAT, FROM THE RECORDS AVAILABLE WITH THE EXCHANGE, M/S GOLD STAR FINVEST PVT. LTD. IS A REGISTERED SUB-BROKER (INS230932431) AFFILIATED TO M/S ISE SECURITIES & SERVICES LIMITED (TM CODE: ,10777), A REGISTERED TRADING MEMBER OF THE EXCHANGE. HOWEVER, THE SECURITIES OF THE COMPANY 'BUNIYAD CHEMICAL LIMITED' AS REFLECTED IN THE COPIES OF CON TRACT NOTES 6 ATTACHED WITH YOUR LETTER IS NOT LISTED ON THE EXCH ANGE AND HENCE NO DETAILS ARE AVAILABLE WITH THE EXCHANGE WH ICH CAN BE FURNISHED. ' J INCOMPLIANCE TO NOTICE U/S 133(6), (THE DY. GENERA! MANAGER) BOMBAY STOCK EXCHANGE .VIDE HIS LETTER NO. L/DOSS/INV/RD/1543/2010-11/1654 DATED 26/11/2010 TO SUBMITTED THAT. 'IN THIS REGARDS, WE WOULD LIKE TO INFORM YOU THAT FROM THE CONTRACT NOTES PROVIDED BY YOU, IT APPEAR THAT TRAN SACTION STATED IN THE CONTRACT NOTES ARE EXECUTED AT THE NATIONAL STOCK EXCHANGE INDIA LTD. THEREFORE, WE REQUEST YOU TO TAKE IN THE MATTER WITH NATIONAL STOCK EXCHANGE LTD., ALSO, IT MAY BE NOTED THAT NO COMPANY WITH THE NAME BUNIYAD CHEMICALS LTD., IS/WA S LISTED ON THE BOMBAY STOCK EXCHANGE LTD. ' FROM ABOVE ENQUIRIES THROUGH NOTICE U/S 133(6) IT IS EVIDENT THAT THE TRANSACTIONS OF SHARES AS SHOWN BY THE SHARE BR OKER IN ITS CONTRACT NOTE/ BILLS HAVE NOT BEEN TAKEN PLACE AT T HE RECOGNIZED STOCK EXCHANGES I.E. AT BSE AND NSE AS THE SHARES OF THE COMPANY M/S BUNIYAD CHEMICALS LTD., ARE/WERE NOT LISTED IN THOS E STOCK EXCHANGES. FURTHER THE SHARE BROKING COMPANY WAS NOT TRACEABLE /AVAILABLE AS THE NOTICE U/S 133(6) WAS RETURNED UNSERVED BY THE POST AL AUTHORITIES AND THE COMPANY SHARE OF WHICH HAVE BEEN CLAIMED TRANSA CTED BY THE ASSESSEE AND WHO OFFERED THE DEMATERIALIZATION OF I TS SHARES TO THE ASSESSEE DID NOT RESPOND THE NOTICE U/S 133(6) ISSU ED BY THIS OFFICE. THUS NONE OF THE EVIDENCE FURNISHED BY THE ASSESSEE SHOWING TRANSACTIONS OF SALE AND PURCHASE OF SHARES DERIVIN G LTCG AS ABOVE STANDS VERIFIED. IN ADDITION TO ABOVE ENQUIRY, THE FINDI NGS BASED ON EVIDENCES GATHERED AND STATEMENTS OF SH.MUKESH MANA KLAL CHOKSI R/O FLAT NO.600, SHANTI KUTIR, 10 TH ROAD, SANTA KRUZ (E), MUMBAI RECORDED U/S 131 OF THE ACT ON 11/12/2009 DURING TH E PROCESS OF INVESTIGATION IN CONNECTION WITH SEARCH AND SEIZURE OPERATION U/S 132(1) OF THE ACT CARRIED OUT IN THE CASE OF M/S MA HASAGAR SECURITIES?.LTD., (NOW M/S ALAG SECURITIES P.LTD. ) ON 25/11/2009 ARE ALSO RELEVANT AND CONCLUSIVE. IN HIS REPORT THE DIT(INV.) MUMBAI VIDE HIS LETTER DATED 09/03/2010 PA SSING ON INFORMATION'S OF BENEFICIARIES OF M/S MAHASAGAR SECURITIES P..LTD., ELABORATELY DISCUSSED MODUS OPERAND! OF PROVIDING A CCOMMODATIONS ENTRIES IN THE GUISE OF LTCG/STCG, SPECULATION PROFIT, SHARE APPLICATION MONEY ETC., AND UNEARTHENED THE BOGUS TRANSACTIONS MADE BY THE ABOVE PARTIES AND THE BENEFICIARIES. RELEVANT PART OF THE STATEMENTS OF SH.MUKESH CHOKSI RECORDED ON OATH ARE REPRODUCED HERE- COPY OF STATEMENT OF SH MUKESH M C HOKSI WILL FORM PART OF THIS ANNEXURE A. 7 Q.2. KINDLY STATE YOUR EDUCATIONAL QUALIFICATION, A ND THE NATURE OF BUSINESS BEING CARRIED OUT BY YOU AT BLOC K NO.H, SHREE SADASHIV CHS LTD., 6 TH ROAD, SANTCRUZ (EAST) MUMBAI- 55. ANS. I AM A CHARTERED ACCOUNTANT BY TRAINING, HAVING COMPLETED MY CHARTERED ACCOUNTANCY IN 1978. I AM ENGAGED IN THE BUSINESS OF PROVIDING THE ACCOMMO DATION ENTRIES THROUGH VARIOUS COMPANIES FLOATED BY ME LIK E MAHASAGAR SECURITIES P.LTD.,, MIHIR AGENCIES P.LTD. ,, ALLIANCE INTERMEDIARIES & NETWORK P.LTD., GOLD STAR FINVEST P.LTD., ETC., WHICH ALL ARE RUN BY ME FROM THE OFFICER AT 6 TH ROAD SANTACRUZ (E) ABOVE. IN BRIEF THE VARIOUS BUSINESS ACTIVITIES CARRIED OUT BY MY COMPA NIES ARE AS BELOW; I) SPECULATION PROFIT ADJUSTMENT ENTRIES II) SHORT TERM PROFIT ADJUSTMENT ENTRIES III) LONG TERM CAPITAL GAINS ADJUSTMENT ENTRIES IV) SHARE APPLICATION ADJUSTMENT ENTRIES Q.3. KINDLY DESCRIBE IN DETAILS THE MODUS OPERANDI FOLLOWED BY YOU IN PROVIDING THESE DIFFERENT TYPES OF ENTRIES, DETAILS OF RECEIPT OF CASH/CHEQUES AND DETAILS OF S ERVICES PROVIDED BY YOU TO THE BENEFICIARIES. ANS. 1. --- 2. --- 3. LONG TERM GAIN: A) THE PARTY FIRST DECIDES THE AMOUNT OF LTG REQUIRED BY THEM. B) WE THEN DECIDE THE SCRIPE. C) THEY ACQUIRE THE SHARES IN THEIR DEMAT ACCOUNT OUT OF THEIR OWN FUNDS. D) THEY SELL THEM IN THE OPEN MARKET. E) WE SIMPLY PROVIDE PURCHASE BILL IN STG & LTG. 4. --- Q.5. KINDLY CONFIRM THAT THESE DIARIES/NOTE-BOOKS CONTAIN THE DETAILS OF VARIOUS BOGUS CONTRACT NOTES ISSUED BY YOU TO VARIOUS PARTIES OVER THE YEARS. 8 ANS. YES, I CONFIRM THE SAME. Q.7. HOW GENUINE ARE THESE SALES AND PURCHASES ( OF SHARES)? ANS. BOTH SALE AND PURCHASE BILLS ISSUED BY ME ARE BOGUS TRANSACTIONS. I WOULD LIKE TO CLARIFY HERE TH AT THE CLIENT MAY HAVE ACQUIRED THE SHARES FROM ELSEWHERE IN CASH BUT MOST DEFINITELY THE TRANSACTION AS MENTIONED BY ME IN MY SALE/PURCHASE BILL IS NOT A GENUINE ONE* Q.I2.IT IS SEEN THAT THE COMPANIES MAHASAGAR SECURITIES PRIVATE LIMITED, M/S ALLIANCE INTERMEDIA TORIES & NETWORK PVT. LIMITED AND M/S GOLD STAR FINVEST PVT LIMITED HAVE ENTERED INTO SUCH HUGE TRANSACTIONS AMOUNTING TO CRORES OF RUPEES. HAVE REGULAR BOOKS OF ACCOUNT BEE N MAINTAINED FOR THESE COMPANIES? IF SO, WHERE ARE TH EY BRING MAINTAINED? ANS. NO APART FROM BANK BOOK, NO BOOKS OF ACCOUNTS ARE BEING MAINTAINED FOR THESE COMPANIES AND THE TRANSACTIONS REFLECTED IN THEM ARE BOGUS TRANSACTIO NS . DETAILS OF ENTRIES RECORDED IN THE DIARY FOUND DURI NG THE COURSE OF SEARCH RELEVANT TO THE ASSESSEE, ARE AS DETAILED BELOW:- DATE COMPANY QTY. RATE CREDIT QTY. RATE DEBIT CHALL AN TRADE NO. 31/01/03 BUNIYAD CHEMICALS -900 84.55 -76095.00 2003020 412563 31/01/03 BUNIYAD CHEMICALS - 1100 84.50 -92950.00 2003020 412564 31/01/03 BUNIYAD CHEMICALS -800 84.40 -67520.00 2003020 415637 31/01/03 BUNIYAD CHEMICALS - 1700 84.35 - 143395.00 2003020 429562 31/01/03 BUNIYAD CHEMICALS - 1200 84.50 - 101400.00 2003020 484526 31/01/03 BUNIYAD CHEMICALS - 1300 84.45 - 109785.00 2003020 484884 31/01/03 BUNIYAD CHEMICALS - 2000 84.40 - 168800.00 2003020 491205 31/01/03 BUNIYAD CHEMICALS - 1500 84.55 - 126825.00 2003020 493021 9 31/01/03 BUNIYAD CHEMICALS - 1700 84.50 - 143650.00 2003020 415636 31/01/03 BUNIYAD CHEMICALS - 2000 84.40 - 168800.00 2003020 415638 31/01/03 BUNIYAD CHEMICALS - 1800 84.35 - 151830.00 2003020 429884 31/01/03 BUNIYAD CHEMICALS - 1600 8455 - 135280.00 2003020 492415 31/01/03 BUNIYAD CHEMICALS -900 84.55 -76095.00 2003020 493022 31/01/03 SERVICE TAX 385.00 2003020 31/01/03 TRANS. CHARGES 156.24 2003020 THUS THE EVIDENCES FURNISHED BY THE ASSESSEE ARE NO T SUBJECT TO VERIFICATION AND SHARES TRANSACTIONS CLAIMED TO HAV E ENTERED INTO DERIVING CAPITAL GAIN APPEARS BOGUS, HOWEVER FOR THE SAKE OF NATURAL JUSTICE THE ASSESSEE WAS PROVIDED THE COPIES OF EVIDENCES GATHERED AND COPIE S OF STATEMENTS OF SHRI MUKESH M. CHOKSI AND WAS ASKED TO FURNISH HIS EXPLA NATION AND ANY OTHER EVIDENCE IN SUPPORT OF HIS CLAIM OF SHARE TRANSACTI ONS DERIVING LTCG VIDE THIS OFFICE LETTER DATED 13.12.2010 AS DETAILED BELOW:- IN THIS CONNECTION, IT IS TO INFORM YOU THAT IN ORD ER TO EXAMINE THE GENUINENESS OF TRANSACTIONS OF SHARES O F M/S BUNIYAD CHEMICAL ENTERED INTO BY YOU DERIVING UNUSUAL LTCG OF RSL550690/- THROUGH THE SHARES BROKER M/S GOLD STAR FINEST (PVT.) LTD., LETTER'S DATED 09/11/2010 <& 10/11/201 0 TO THE FOLLOWING PERSONS REQUISITIONING THE CERTAIN INFORM ATION'S U/S 133(6) OF THE ACT, WERE ISSUED AND SENT BY THE SPEE D POST AT THE ADDRESSES FURNISHED BY YOU. - M/S GOLD STAR FINVEST PVT. LTD., MUMBAI THE BROKE R. - M/S BUNIYAD CHEMICALS LTD., MUMBAI THE COMPANY, S HARE OF WHICH CLAIMED TO HAVE BEEN TRANSACTED - THE NATIONAL STOCK EXCHANGE OF INDIA LTD. MUMBAI THE STOCK EXCHANGE - THE BOMBAY STOCK EXCHANGE LTD., MUMBAI THE STOCK EXCHANGE . 10 4. IN THIS REGARD OUTCOMES OF THE INVESTIGATION CAR RIED OUT THROUGH NOTICES U/S 133(6) AS ABOVE, ARE AS UND ER:- O THE NOTICE U/S 133(6) ISSUED TO M/S GOLD STAR FIN VEST P.LTD, MUMBAI RETURNED UNSERVED BY THE POSTAL AUTHORITIES. O THE NOTICE U/S 133(6) ISSUED TO M/S BUNIYAD CHEMI CALS P.LTD., MUMBAI REMAINED UNCOMPLIED WITH. O INCOMPLIANCE TO NOTICE U/S 133(6), '(THE VICE PR ESIDENT CAPITAL MARKET) NATIONAL STOCK EXCHANGE VIDE HIS LETTER NO. NSE/CMO/533 DATED 09/12/2010 SUBMITTED THAT. 'IN THIS REGARD, YOU MAY PLEASE NOTE THAT, FROM THE RECORDS AVAILABLE WITH THE EXCHANGE, M/S GOLD STAR FINVEST PVT. LTD. IS A REGISTERED SUB-BROKER (INS230932431) AFFILIATED T O M/S ISE SECURITIES & SERVICES LIMITED (TM CODE: 10777), A REGISTERED TRADING MEMBER OF THE EXCHANGE. HOWEVER, THE SECURITIES OF THE COMPANY 'BUNIYAD CHE MICAL LIMITED' AS REFLECTED IN THE COPIES OF CONTRACT NOT ES ATTACHED WITH YOUR LETTER IS NOT LISTED ON THE EXCH ANGE AND HENCE NO DETAILS ARE AVAILABLE WITH THE EXCHANG E WHICH CAN BE FURNISHED.' COPY OF LETTER IS ENCLOSED HEREWITH FOR YOUR INFORMATION AND REFERENCE. .O INCOMPLIANCE TO NOTICE U/S 133(6), (THE DY. GENERAL MANAGER) BOMBAY STOCK EXCHANGE .VIDE HIS LE TTER NO. L/DOSS/INV/RD/1543/2010-11/1654 DATED 26/11/2010 TO SUBMITTED THAT. 'IN THIS REGARDS, WE WOULD LIKE TO INFORM YOU THAT FROM THE CONTRACT NOTES PROVIDED BY YOU, IT APPEAR THAT TRANSACTION STATED IN THE CONTRACT NOTES ARE EXECUT ED AT THE NATIONAL STOCK EXCHANGE INDIA LTD. THEREFORE, W E REQUEST YOU TO TAKE IN THE MATTER WITH NATIONAL STO CK EXCHANGE LTD., ALSO, IT MAY BE NOTED THAT NO COMPAN Y WITH THE NAME BUNIYAD CHEMICALS LTD., IS/WAS LISTED ON THE B OMBAY STOCK EXCHANGE LTD. ' COPY OF LETTER IS ENCLOSED HEREWITH FOR YOUR INFORMATION AND REFERENCE. 5. IN THIS REGARD, THE COPIES OF STATEMENTS OF SHRI MUKESK M.CHOKSI RECORDED ON OATH U/S 131 OF TH E IT ACT IN CONNECTION WITH SEARCH AND SEIZURE OPERATION U/S 132(1) OF THE IT ACT IN THE CASE OF M/S MAHSAGAR SECURITIES P.LTD., MUMBAI WHEREIN IT HAS BEEN ADMIT TED BY 11 HIM THAT HE WAS INDULGED IN PROVIDING ACCOMMODATION ENTRIES IN THE GUISE OF VARIOUS MODES SUCH AS LTCG/ STCG SPECULATION PROFIT, SHARE APPLICATION MONEY ETC. AS PER RECORDS GATHERED FROM HIM YOU WERE ONE OF THE BENEFICIARIES. COPIES OF HIS STATEMENTS AND DETAILS GATHERED FROM HIM ARE ENCLOSED FOR YOUR INFORMATION AND COMMENTS. 6. IN VIEW OF ABOVE, IT IS EVIDENT THAT THE EVIDENCE FURNISHED BY YOU CLAIMING TRANSACTIONS OF SHARES STANDS NON-VERIFIABLE AND EVEN NEGATED BY THE ABOVE EVIDENCES GATHERED THROUGH THE INQUIRIES CARRIED OU T ABOVE AND AS SUCH THE GENUINENESS AND CORRECTNESS OF THE SHARE TRANSACTIONS ARE NOT SUBJECT TO VERIFICATION. IN TH ESE CIRCUMSTANCES ONUS TO PROVE THE GENUINENESS AND CORRECTNESS OF TRANSACTIONS SHIFT UPON YOU. THEREFO RE YOU ARE HEREBY PROVIDED OPPORTUNITY TO PRODUCE FURT HER EVIDENCE IF ANY, WITH YOU TO PROVE THE GENUINENESS AND VERACITY OF TRANSACTIONS OF SHARE FAILING WHICH THE TRANSACTIONS OF THE SHARES DERIVING LTCG WILL BE TR EATED AS BOGUS AND SHAME. YOUR REPLY IN THIS REGARD SHOULD R EACH THIS OFFICE ON 16.12.2010 AT 11.30A.M . FURTHER THE ASSESSEE WAS ALSO SUMMONED VIDE NOTICE U/S 131 DATED 13/12/2010 TO BRING THE EVIDENCES IN ORIGINAL , COPIES OF WHICH HAVE BEEN FURNISHED BY HIM EARLIER. SIMULTANEOUSLY IN ORDER TO VERIFY THE DEMATERIALIZATION OF SHARES OF SCRIP M/S BUNIYAD CHEMICALS, BY THE ASSESSEE INFORMATION U/S 133(6) O F THE IT ACT HAS BEEN CALLED FOR FROM THE ICICI BANK DEMAT SERVICES VIDE THIS OFFICE LETTER NO 1308 DATED 13.12.2010 AS DETAILED BELOW: IN THE MATTER, IT IS STATED THAT ASSESSMENT PROCEED INGS U/S 143(3) OF THE IT ACT ARE PENDING BEFORE THE UNDERSI GNED IN THE CASE OF SH.RAJ KUMAR SONIFOR A.YR. 2003-04. IN THIS REGARD, YOU ARE REQUESTED TO FURNISH THE FO LLOWING DETAILS AND DOCUMENTS IN RESPECT OF THE ABOVE ASSES SEE 'S WHO HAD HIS DE-MAT A/C WITH YOUR BANK DURING THE PERIOD RELEVAN T TO ASSESSMENT YEAR UNDER CONSIDERATION AS PER COPY OF DE-MAT A/C ANNEXED HEREWITH. 1. PLEASE SEND A CERTIFIED COPY OF DE-MAT A/C OF THE AFORESAID ASSESSEE FOR THE PERIOD 01.0 4.2002 TO31.03.2003. 2. PLEASE CONFIRM THE DEMATERIALIZATION OF SHARES OF M/SBUNIYAD CHEMICALS P. LTD., AS CLAIMED BY THE 12 ASSESSEEIN THE COPY OF A/C STATEMENT OF YOUR BANK A S ENCLOSED HEREWITH. PLEASE ALSO SEND THE COPIES OF RELEVANT DOCUMENTS F URNISHED BY THE ASSESSEE FOR DEMATERIALIZATION OF SHARES OF ABOVE SCRIP I.E. M/S BUNIYAD CHEMICALS AS CLAIMED BY THE ASSESSEE. IN RESPONSE TO NOTICE U/S 142(1) DATED 1 3.12.2010 THE ASSESSEE VIDE HIS SUBMISSION DATED 16.12.2010 CONTE NDED THAT 1. IT IS TO STATE VIDE THIS LETTER YOU HAVE ASKED F OR BANK ACCOUNTOF FINANCIAL YEARS 2000-01,2001-02 & 2002-03. FOR THE RELEVANT YEAR 2002-03 WE HAVE ALREADY SUBMITTED. IT IS A WELL KNOWN FACT THAT BANK ACCOUNTS OF LONG BACK PERIOD IS VERY DIFFICULT TO OBTAIN AND WE ARE TRYING TO GET T HE SAME AND IT WOULD TAKE TIME. WE ARE SOLELY DEPENDENT ON BANK FO R THE SAME AND WE HAVE ALREADY REQUESTED TO SUBMIT, ON RECEIPT WE SHALL SUBMIT TO YOU. MEANWHILE WE REQUEST TO BEAR WITH THIS SITUATI ON. 2. CORRESPONDANCE WITH BROKER AS STATED EARLIER, WE HAVE ALREADY SUBMITTED THE DO CUMENTS LYING WITH US AND INCOME WAS DECLARED BY US. FURTHER IN THE AS SESSMENT PROCEEDINGS WE HAVE DISCLOSED ALL FACTS AND FILED RETURN SHOWIN G PROFIT EARNED THEREON. DURING THE ASSESSMENT PROCEEDINGS WE HAVE ALREADY S UBMITTED THE DOCUMENTS AVAILABLE WITH US. HERE WE WOULD LIKE TO PLACE ON RECORD THAT WITH THE BROKER WE HAVE MADE CERTAIN TR ANSACTIONS AND HE IS NOT KNOWN TO US EARLIER AND WE HAVE NO RELATION OTHER THAN ABOVE. IN SUCH SITUATION WE CAN NOT COMMENT ON WHERE ABOUT AND HIS STATEMENTS IN OUR ABSENCE, NO COMMENT CAN BE MADE BY US. I WOULD LIKE TO FURTHER PLACE ON RECORD THAT I HAVE MADE BONAFIDE TRANSACTI ONS AND EARNED INCOME THERE FROM WHICH HAS BEEN OFFERED FOR TAX AS PER PROVISIONS OF THE IT ACT. FURTHER I HAVE PRODUCED ALL DETAILS, EXPLANATIONS AND EVIDENCES IN SUPPORT OF MY EARNED INCOME. IN COMPLIANCE TO NOTICE U/S 133(6),THE ICICI BANK L IMITED, UDAIPUR VIDE ITS LETTER DATED 20.12.2010 FURNISHED INFORMATION AS DETAILED BELOW: THIS IS WITH REFERENCE TO CAPTIONED SUBJECT: WE ARE IN RECEIPT OF YOUR AFORESAID NOTICE AND AFTER PERUSAL OF THE CONT ENTS THEREIN, IT REVEALS THAT THE DOCUMENTS ARE REQUIRED FOR INVESTI GATION PURPOSES. IN PURSUANT TO NOTICE RECEIVED BY US, WE HEREBY FURNISHING BELOW MENTIONED DETAILS AND DOCUMENTS FO R AND ON BEHALF OF THE BANK. KINDLY CONFIRM AND ACKNOWLEDGE RECEIPT OF THE SAME. 13 1. DEMAT STATEMENT FOR PERIOD 01.04.2002 TO 31,03.2 003 FOR ACCOUNT NUMBER IN30267931203163 IN THE NAME OF RAJ KUMAR SO NI. 2. WE HAVE NOT RECEIVED ANY REQUEST FOR DEMATERI ALIZATION FOR THE AFORESAID DEMAT ACCOUNT . FROM THE ABOVE DISCUSSION AND IN VIEW OF INQUIRIES CARRIED OUT THROUGH INFORMATION U/S 133(6) FROM VARIOUS AGENCIE S IT IS PROVED THAT THE EVIDENCES GATHERED ARE SUFFICIENT TO ESTAB LISHED THAT THE TRANSACTIONS CARRIED OUT CLAIMING LTCG ARE NOT REAL THESE ARE SHAM TRANSACTIONS! HOWEVER BEFORE ARRIVING AT CONCL USIONS THE OUTCOMES OF INQUIRIES AND FACTS OF THE CASE ARE SUM MARIZED AS UNDER: 1. THE DIRECTORS OF GOLD STAR PVT LTD, THE BROKER OF S HARES, THE PRINCIPAL OFFICER OF THE COMPANY M/S BUNIYAD CHEMICALS, THE S CRIP OF WHICH IS UNDER TRANSACTIONS ARE ONE AND THE SAME PERSONS MR MUKESH M CHOKSI WHO IS RELATED TO M/S MAHA SAGAR SECURITIES LTD, SEARCHED U/S 132(1) OF THE IT ACT. THE RECEIPT DATED 20.06.2010 OF M/S GOLD STAR FINVE ST PVT LTD FOR A SUM OF RS 11193.61/- FROM THE ASSESSEE AS PURCHASES COST OF S HARES, LETTER DATED 30.07.2001, 20.11.2001 AND 24.01.2003 OF M/S BUNIYA D CHEMICALS LTD. TRANSFERRING THE SHARES IN THE NAME OF ASSESSEE IN DEMATERIALIZATION THEREOF ARE SIGNED BY ONE AND THE SAME PERSON SH MUKESH M CHOKS I. IN THE STATEMENTS RECORDED ON OATH U/S 131(1) OF THE IT ACT, MR CHOKS I CATEGORICALLY ACCEPTED THE INVOLVEMENT OF PROVIDING ACCOMMODATION ENTRIES THROUGH LTCG. THESE EVIDENCES WILL FORM PART OF THIS ORDER AS PAGE NO 1 TO 10 OF ANNEXURE A. 2. THE CORRESPONDENCE MADE WITH M/S GOLD STAR FINVEST PVT LTD & M/S BUNIYAD CHEMICALS LTD FOR CONFIRMATION OF TRANSACTIONS OF SHARES CLAIMED BY THE ASSESSEE RETURNED UNSERVED, WHICH PROVES THAT TH E EVIDENCES PRODUCED BY THE ASSESSEE IN FORM OF CONTRACT NOTE AND BILL OF T HE SHARE BROKER AND PURCHASE AND TRANSFER OF SHARES OF M/S BUNIYAD CHEMICAL IN THE HANDS OF ASSESSEE STAND UNP ROVED AND ONUS TO PROVE THE TRANSACTIONS AND FURNISH FURTHER ADDITIONA L EVIDENCES LIES ON THE ASSESSEE AND FOR WHICH HE FAILED TO DISCHARGE HIS O NUS IN SPITE OF REPEATED CORRESPONDENCE. 3. THE ASSESSEE FAILED TO COMPLY WITH THE NOTI CE U/S 131(1) DATED 14.12.2010 & SUBSEQUENT OPPORTUNITY PROVIDE D VIDE LETTER DATED 23.12.2010 FOR THIS PURPOSE WITHOUT ANY REAS ONABLE CAUSE WHICH SHOWS THAT THE ASSESSEE HAS NO EVIDENCES WITH HIM TO PROVE THE GENUINENESS OF THE SHARE TRANSACTIONS CLAIMING LTCG . THE ISSUE OF NON COMPLIANCE OF SUMMONS U/S 131(1) IS BEING REFERRED SEPARATELY TO THE ADDL CIT RANGE-2, UDAIPUR FOR PENALTY PROVISIO NS U/S 272A(L)(C ) OF THE IT ACT. 14 4. THE NATIONAL STOCK EXCHANGE OF INDIA LTD AND TH E BOMBAY STOCK EXCHANGE LTD HAVE CATEGORICALLY DENIED THE LISTING OF SHARE OF M/S BUNIYAD CHEMICALS LTD, WHICH SHOWS THAT THE ALLEGED PURCHASE A ND SALE OF ABOVE SHARES HAVE NOT TAKEN PLACE AT THE \ STOCK EXCHANGE AS CLA IMED BY THE ASSESSEE. 5. THE ICICI DEMAT SERVICES, IN COMPLIANCE TO NOTICE U/S 133(6),INFORMED THAT THE DEMATERIALIZATION OF ABOVE SHARE WAS NOT C ARRIED BY THE ASSESSEE AND THE ASSESSEE HAS .NOT PUT ANY REQU EST FOR DEMATERIALIZATION OF ABOVE SHARES. HOWEVER, THE SHARES OF SCRIP M/S BUNI YAD CHEMICALS HAS BEEN TRANSFERRED IN THE DENIAL ACCOUNT OF THE ASSESSEE O N 24.01.2003 BY TRANSACTION NO. 563550 BY INFRA LEAS FIN SERVICES L TD/ 10680195 AND WERE TRANSFERRED OUT TO THE SAME THROUGH TRANSACTIONS NO . 590689 ON 01.02.2003. THIS SHOWS THAT SHARES OF ABOVE SCRIP WERE PURCHASE D THROUGH DEMAT ACCOUNT OF THE ASSESSEE ONLY ON 24.01.2003 AN D NOT ON 13.06.2001 AS CLAIMED BY THE ASSESSEE. FROM THESE EVIDENCES IT IS PROVED THAT THE ASSESSEE ; HAS NOT ENTERED INTO TRANSACTIONS DERIVING LTCG AND THE CREDIT ENTR Y IN THE BANK ACCOUNT OF THE ASSESSEE IN THE GUISE OF SALE CONSIDERATION OF SHARES OF ABOVE SCRIP THROUGH THE BROKER M/S GOLD STAR FINVEST PVT LTD IS NOTHING BUT AN ACCOMMODATION ENTRY AND THE TRANSACTIONS OF SHARES ARE SHAM AND BOGUS . IN THIS REGARDS THE FOLLOWING FACTS OF THE CASE AND JUDICIAL REFERENCES ON THE ISSUE ARE WORTH MENTION. THE ASSESSEE IS NOT A REGULAR INVESTOR IN SHARES.. HOWEVER, IN THE SHARES OF M/S. BUNIYAD CHEMICALS LT D., THE ASSESSEE HAS EARNED A PHENOMENAL RETURN OF OVER 16900% IN A SPAN OF 1.5 YEARS, WHICH IS EXTREMELY UNUSUAL. AS COMPARED TO THIS, SENSEX & OT HER INDICES HAVE HARDLY MOVED DURING THE SAME PERIOD. FROM THE ABOVE FACTS, IT IS CLEAR THAT THE ENTIRE T RANSACTION I.E RIGHT FROM THE PURCHASE TO THE SALE OF SHARES IS PART OF AN ACCOMMODATION ENTRY OBTAINED BY THE ASSESSEE THROUGH THE ROUTE OF CAPIT AL GAINS. AN ATTEMPT HAS BEEN MADE TO CONFER IT AN APPEARANCE OF GENUINE TRANSACT ION, BUT THE LACUNA/DISCREPANCIES NOTED ABOVE EXPOSE TRUTH BEHIN D IT. ALL THE ABOVE GOES ON TO PROVE THAT THE TRANSACTION DISGUISED AS LONG TERM CAPITAL GAIN IS A SHAM TRANSACTION. IT IS IN-F ACT, NOTHING BUT AN ACCOMMODATION ENTRY PROVIDED BY THE BROKER IN LIEU OF CASH. THE ASSESSEE RECEIVED A DEMAND DRAFT/CHEQUE IN LIEU OF SALE CONS IDERATION. ALL THE EVIDENCES GO ON TO PROVE THAT THE BROKER WITH THE C OLLISION OF THE COMPANY ISSUED BACK DATED PURCHASE BILL TO THE ASSESSEE AGA INST THE SALE SHOWN IN THE 15 REAL TIME. IN FACT THIS TRANSACTION HAS BEEN USED T O BRING IN HIS INCOME FROM UNDISCLOSED SOURCES IN THE FORM OF LTCG ON SALE OF SHARES. THE ASSESSEE PAID THE UNACCOUNTED MONEY IN CASH WHI CH WAS DEPOSITED BY THE BROKER IN SOME OF HIS ACCOUNTS. THEN THE ASSESS EE RECEIVED THE SAME BACK IN THE FORM OF CHEQUE/ DRAFT FROM THE BROKER AS ALLEGE D SALE CONSIDERATION. BY ABOVE TRANSACTION THE ASSESSEE HAS CAMOUFLAGED HIS UNDISCLOSED INCOME AS LONG TERM CAPITAL GAIN ON SHA RES, THEREBY, MAKING THE SAME WHITE BY PAYING TAXES AT THE RATE OF 10%. IN F ACT THE AMOUNT SHOWN AS THE LONG TERM CAPITAL GAIN IS LIABLE TO BE TAXED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE INCOME TAX ACT SINCE THE ASSESSEE HAS BROUGHT IN THE UNEXPLAINED CASH IN THE BOOKS DISGUISING THE SAME IN THE FORM O F LTCG ON SHARES TO BUILD UP ITS CAPITAL. IN THE CIT VS. DURGA PRASAD MORE [1 971] 82 ITR 540(SC) IT HAS BEEN HELD BY THE HON'BLE SUPREME COURT IN A CAS E WHERE A PARTY RELIES ON SELF-SERVING RECITALS IN A DOCUMENT, IT IS FOR T HAT PARTY TO ESTABLISH THE TRUTH OF THESE RECITALS. THE TAX AUTHORITIES ARE EN TITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY O F SUCH RECITAL. SC EVEN OBSERVED THAT IF THE FACTS OF THE LIFE CANNOT BE IGNORED, THE SAME ARE TO BE CONSIDERED. THE SURROUNDING CIRCUMSTANCES AND HUMAN PROBABILITIES ARE TO BE KEPT IN VIEW IN TAXATION MA TTERS AS HELD IN THE CASE OF SUMATIDAYAL (SC). FOR DETERMINING WHETHER A TRANSACTION IS SHAM AND ILLUSORY OR A DEVICE THE IT AUTHORITIES AR E ENTITLED TO PENETRATE THE VEIL COVERING IT AND ASCERTAIN THE TRUTH (L.N. DALMIA VS CIT, 207 ITR 276 (CAL.HC). IT FOLLOWS FROM THE RATIO OF DECISION OF SC IN THE CASE OF SUMATI DAYAL (214 ITR 801) THAT THE SCOPE OF SECTION 68 IS NOT CONFINED TO DEPOSIT OR LOAN CREDITS AND ENCOMPASSES ALL SUCH CR UDITS WHOSE SOURCE AND NATURE IS NOT EXPLAINED. IT SUPPORTS THE VIEW T AKEN IN THE FULL BENCH DECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS SOPHIA FINANCE LTD. 205 ITR 98 (DOCUMENTARY EVIDENCE.) IN REGARD TO UNE XPLAINED CREDITS IN THE BOOKS OF THE COMPANY BY WAY OF SHARE SUBSCRIPTI ON OF THE SHAREHOLDERS. THE ASSESSEE CAN NOT USE DUBIOUS METHOD OF TAX PLAN NING TO BRING IN THE MONEY IN THE BOOKS. THE HON'BLE SUPREME COURT IN TH E FAMOUS MCDOWELL AND CO. LIMITED, VS COMMERCIAL TAX OFFICE. REPORTED IN 154 ITR 148. HELD THAT COLOURABLE DEVICES CANNOT BE PART OF TAX PLANNING A ND IT IS WRONG TO 16 ENCOURAGE AVOIDANCE OF TAX BY DUBIOUS METHODS. IT I S FOR THE COURT TO TAKE STOCK AND DETERMINE THE NATURE OF LEGAL DEVICES TO AVOID TAXES, AND TO EXPOSE THESE DEVICES FOR WHAT THEY REALLY ARE. ONE HAS TO KEEP IN MIND THAT THE PROCEEDINGS UNDER INCOME TAX ACT ARE NOT JUDICIAL PROCEEDINGS IN THE SENSE IN WHICH THE PHRASE 'JUDICIAL PROCEEDINGS' IS ORDINARILY USED. THE ASSESSING OFFI CER IS NOT RESTRAINED BY TECHNICAL RULES ABOUT EVIDENCE CONTAINED IN THE IND IAN EVIDENCE ACT AND HE IS ENTITLED TO ACT ON MATERIAL WHICH MAY NOT BE ACC EPTED AS EVIDENCE IN A COURT OF LAW 26 ITR 775 (S.C), 45 ITR 206 (S.C), 63 ITR 449 (S.C). THUS, THE ASSESSMENT CAN BE MADE ON THE BASIS OF IN FERENCE ON EVIDENCE WHICH IN CRIMINAL OR CIVIL JUSTICE MAY BE INSUFFICI ENT. FURTHER, AS HELD BY THE SUPREME COURT IN THE CASE OF COLLECTOR OF CUSTO MS VS. D. BHOORMAL A.R. 1974 SC 859, THE DEPARTMENT IS NOT REQUIRED TO PROV E ITS CASE WITH MATHEMATICAL PRECISION TOWARDS DEMONSTRABLE DEGREE; FOR, IN ALL HUMAN AFFAIRS ABSOLUTE CERTAINTY IS A MYTH, AND AS PROOF. FUNDAME NTAL RULES OF EVIDENCE AND INTERPRETATION IN MIND RELATING TO PROOF IN ALL CRI MINAL OR QUASI-CRIMINAL PROCEEDINGS, WHERE THERE IS NO STATUTORY PROVISION TO THE CONTRARY. BUT IN APPRECIATING ITS SCOPE AND THE NATURE OF THE ONUS C AST BY IT, WE MUST PAY DUE REGARD TO OTHER KINDRED PRINCIPLES, NO LESS FUNDAME NTAL, OF UNIVERSAL APPLICATION. THE OTHER CARDINAL PRINCIPLE HAVING AN IMPORTANT BE ARING ON THE INCIDENCE OF BURDEN OF PROOF IS THAT SUFFICIENCY AN D WEIGHT OF THE EVIDENCE IS TO BE CONSIDERED - TO USE THE WORDS OF LORD MANSFIELD IN BLATCH VS. ARCHER ACCORDING TO THE PROOF WHICH IT WAS IN THE POWER OF ONE SIDE TO PROVE, AND IN THE POWER OF THE OTHER TO HAVE CONTRADICTED'. SINCE IT IS EXCEEDINGLY DIFFICULT, IF NOT ABSOLUTELY IMPOSSIBLE FOR THE DEPARTMENT TO PRO VE FACTS, WHICH ARE ESPECIALLY WITHIN THE KNOWLEDGE OF THE OPPONENT OR THE ACCUSED, IT IS NOT OBLIGED TO PROVE THEM AS PART OF ITS PRIMARY BURDEN . THEREFORE IN VIEW OF THE ABOVE FINDINGS AND DISCUSS ION I HOLD AT THE INCOME SHOWN AS LONG TERM CAPITAL GAIN IS A SHAM TR ANSACTION, IN REALITY THE ASSESSEE HAS NOT EARNED ANY LONG TERM CAPITAL G AIN. IT HAS BEEN USED TO BRING IN. THE MONEY TO BUILD UP CAPITAL BY PAYING T AXES AT LOWER RATE OF 10 %. THE SAME IS LIABLE TO BE TAXED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE INCOME 17 TAX ACT. HENCE THE WHOLE OF THE SALE CONSIDERATION OF RS 15,61,884/-- CREDITED IN THE BANK ACCOUNT OF THE ASSESSEE IS TRE ATED AS CREDIT OUT OF UNEXPLAINED SOURCES U/S 68 OF THE IT ACT FOR THE YE AR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION AND SAME IS ADD ED TO THE TOTAL INCOME OF THE ASSESSEE. 2.6 SIMILARLY, THE ADDITIONS MADE ON ACCOUNT OF UND ISCLOSED EXPENDITURE U/S 69C OF THE ACT WAS ALSO DELETED BY THE LD. CIT(A) BY FO LLOWING THE SAME REASONING. 2.7 IT IS CLEAR FORM THE ORDER OF THE ASSESSING OFF ICER IN ASSESSMENT YEARS 2003- 04 AND 2004-05 THAT THE ASSESSING OFFICER HAS MADE DETAILED ENQUIRY TO FIND OUT THE GENUINENESS OF THE TRANSACTIONS ENTERED INTO WITH R ESPECT TO SHARES OF M/S BUNIYAD CHEMICALS LTD., AHEMDABAD CAPITAL GAIN ON WHICH WAS CLAIMED AS EXEMPT ON TH E PLEA OF LONG TERM CAPITAL GAIN. THE ASSESSING OFFI CER ALSO QUOTED THE OUTCOME OF INVESTIGATIONS CARRIED OUT WHEREIN IT WAS FOUND TH AT M/S GOLD STAR FINVEST PVT. LTD. IS A REGISTERED SUB-BROKER. HOWEVER, THE SAID BROKI NG COMPANY WAS NOT TRACEABLE/ AVAILABLE AS THE NOTICE U/S 133(6) OF THE ACT WAS R ETURNED UNSERVED BY THE POSTAL AUTHORITY. THE ASSESSING OFFICER FURTHER FOUND THAT COMPANYS SHARE OF WHICH HAVE BEEN CLAIMED TRANSACTED BY THE ASSESSEE AND WHO OFF ERED THE DEMATERIALIZATION OF ITS SHARES TO THE ASSESSEE DID NOT RESPOND THE NOTICE U /S 133(6) ISSUED BY HIM. THUS NONE OF THE EVIDENCE FURNISHED BY THE ASSESSEE SHOW ING TRANSACTIONS OF SALE AND PURCHASE OF SHARES DERIVING LONG TERM CAPITAL GAIN STANDS VERIFIED. THE ASSESSING OFFICER ALSO NOTED THAT SEARCH AND SEIZURE OPERATIO N U/S 132(1) OF THE ACT WAS CARRIED OUT IN THE CASE OF M/S MAHASAGAR SECURITAS PVT. LTD. ON 25-11-2009. AS A RESULT OF SEARCH, THE DIT (INV.) MUMBAI VIDE HIS LE TTER DATED 09-03-2010 ELABORATELY DISCUSSED THE MODUS OPERANDI OF PROVIDING ACCOMMODA TION ENTRIES IN THE GUISE OF LONG TERM CAPITAL GAIN / SHORT TERM CAPITAL GAIN. S PECULATION PROFIT, SHARE APPLICATION MONEY ETC. DURING THE COURSE OF SEARCH THE STATEMEN T OF SHRI MUKESH CHOKSI WAS RECORDED ON OATH WHEREIN HE SAID THAT HE WAS ENGAGE D IN THE BUSINESS OF PROVIDING 18 ACCOMMODATION ENTRIES THROUGH VARIOUS COMPANIES FLO ATED BY HIM LIKE MAHASAGAR SECURITIES PVT. LTD., M/S GOLD STAR FINVEST PVT. LT D. ETC. , WHICH ALL ARE RUN BY HIM FROM THE OFFICER AT 6 TH ROAD SANTACRUZ(E). IT IS PERTINENT TO MENTION HERE THAT SHARES OF M/S BUNIYAD CHEMICALS LTD., AHEMDABAD WAS ALSO TRANSACTED THROUGH M/S GOLD STAR FINVEST PVT. LTD. WHO WAS FOUND TO BE ENG AGED IN PROVIDING ACCOMMODATION ENTRIES. THE ASSESSEE WAS ALSO PROV IDED THE COPIES OF EVIDENCE GATHERED AND COPIES OF STATEMENT OF SHRI MUKESH M C HOKSI AND WAS ASKED TO FURNISH THE EXPLANATION AND ANY OTHER EVIDENCE IN SUPPORT O F HIS CLAIM OF SHARES TRANSACTIONS DERIVING LONG TERM CAPITAL GAIN VIDE HIS LETTER DAT ED 13-12-2010. A CATEGORICAL FINDING HAS BEEN RECORDED BY THE ASSESSING OFFICER TO THE EFFECT THAT THE ASSESSEE WAS ONE OF THE BENEFICIARIES OF M/S GOLD STAR FINVE ST PVT. LTD. WHO WAS PROVIDING ACCOMMODATION ENTRIES BY CHARGING NOMINAL COMMISSIO N. HOWEVER, WITHOUT CONTROVERTING ALL THESE FINDINGS AS RECORDED BY THE ASSESSING OFFICER, THE LD. CIT(A) HAS DELETED THE ADDITIONS JUST BY FOLLOWING THE ORD ER OF HIS PREDECESSOR WHICH WAS UPHELD BY THE TRIBUNAL. WE FOUND THAT IN EARLIER YE ARS 2005-06 AND 2006-07, THE ISSUE BEFORE THE ASSESSING OFFICER WAS WITH REGARD TO GENUINENESS OF LONG TERM CAPITAL GAIN EARNED ON SHARES OF M/S TALENT INFOWAYS LTD . WHEREAS DURING THE YEARS 2003-04 AND 2004-05, THE ISSUE IS WITH REGARD TO SH ARES OF M/S BUNIYAD CHEMICALS LTD., AHEMDABAD. THUS THE FACTS FOR THE ASSESSMENT YEAR 2005-06 AND 2006-07 AS DISCUSSED BY THE LD. CIT(A) AND THE TRIBUNAL IN ITS ORDER DATED 16-12-2011 ARE QUITE DISTINGUISHABLE. THEREFORE, THE LD. CIT(A) WAS NOT JUSTIFIED BY RELYING ON THE FINDINGS OF HIS PREDECESSOR AND TRIBUNAL GIVEN IN I TS ORDER FOR THE ASSESSMENT YEAR 2005-06 AND 2006-07 WITH REGARD TO GENUINENESS OF S ALE OF SHARES OF M/S TALENT INFOWAYS LTD . DURING THE YEARS UNDER CONSIDERATION, THE CONTROV ERY IS WITH REGARD TO SHARES OF M/S BUNIYAD CHEMICALS LTD., AHEMDABAD WHICH WAS NOT FOUND TO BE REGISTERED AT STOCK EXCHANGE AND THE BROKER THROUGH WHICH SHARE TRANSACTIONS WERE 19 MADE HAS CATEGORICALLY GIVEN STATEMENT THAT HE WAS ENGAGED IN PROVIDING ACCOMMODATION ENTRIES. THEREFORE, IN THE INTEREST O F JUSTICE AND FAIR PLAY WE SET ASIDE THE ORDER OF THE LD. CIT(A) IN BOTH THE YEARS UNDER CONSIDERATION AND RESTORE THE MATTER BACK TO HIS [CIT(A)] FILE FOR DECIDING T HE ISSUES AFRESH. THE LD. CIT(A) IS DIRECTED TO FIRST CONTROVERT THE DETAILED FINDINGS RECORDED BY THE ASSESSING OFFICER WITH REGARD TO GENUINENESS OF THE TRANSACTIONS OF S HARES OF M/S BUNIYAD CHEMICALS LTD., AHEMDABAD . SINCE THE ISSUE UNDER CONTROVERY IN THE ASSESSMEN T YEARS 2005- 06 AND 2006-07 WERE IN RESPECT OF SHARES OF M/S TELENT INFOWAYS LTD ., FACTS OF WHICH CANNOT BE APPLIED IN RESPECT OF TRANSACTION O F SHARES OF M/S BUNIYAD CHEMICALS LTD., AHEMDABAD. THE ASSESSEE IS ALSO AT LIBERTY TO PLACE ON RECORD ANY EVIDENCE IN SUPPORT OF HIS CLAIM. ACCORDINGLY, THE LD. CIT(A) IS DIRECTED TO DECIDE THE ISSUES IN TERMS OF OUR ABOVE OBSERVATIONS. 3.0 IN THE RESULT, BOTH THE APPEALS OF THE REVE NUE ARE ALLOWED, IN TERMS INDICATED HEREINABOVE. (ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13-06 -2013.) SD/- SD/- (HARI OM MARATHA) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 13 TH JUNE, 2013 MISHRA COPY TO:- 1.THE APPELLANT 2. THE RESPONDENT 3. THE LD. CIT 4. THE LD. CIT(A) 5. THE DR 6. THE GUARD FILE ASSISTANT REGISTRAR ITAT, JODHPUR 20