Mitesh Jain, Bangalore V. ACIT, Bangalore

ITA 1002/BANG/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1456 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-03-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 18-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Set aside; Capital Gains
• Section: 143(3); 54F; 153A; 68; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE DR. O.K NARAYANAN, VICE PRESIDENT AND SMT. P MADHAVI DEVI, JUDICIAL MEMBER ITA NO. 1023/BANG/2010 (ASST. YEAR 2006-07) M/S MEDREICH LTD., NO.12/8, SARASWATHI AMMAL STREET, MARUTHI SEVA NAGAR, BANGALORE-560 033. . APPELLANT VS. THE DY. COMMISSIONER OF INCOME-TAX, LTU, BANGALORE. . RESPONDENT APPELLANT BY : SHRI PADAM CHAND KHINCHA, CHARTE RED ACCOUNTANT RESPONDENT BY : SHRI G.V GOPALA RAO, COMMISSIONER OF INCOME-TAX O R D E R PER BENCH : THIS IS A BUNCH OF THIRTY APPEALS. ALL THE APPEALS ARE FILED BY THE ASSESSEES. THE ASSESSEE INDIVIDUALS BELONGING TO DIFFERENT GROUPS SUCH AS MEHTA GROUP, CHAJJER GROUP, TAINWALA GROUP AND NAGORI GROUP ETC. ITA NO.1023/B/10 2 2. IN ALL THESE CASES, THE MAIN ISSUE IS THE DETERM INATION OF THE NATURE OF THE SURPLUS EARNED BY THE ASSESSEES ON SA LE OF SHARES HELD BY THEM. ALL THE ASSESSEES HAVE SOLD THEIR SHARES IN DIFFERENT COMPANIES IN THE PREVIOUS YEARS RELEVANT TO THE ASSESSMENT YE ARS UNDER APPEAL AND OFFERED THE SURPLUS AS LONG TERM CAPITAL GAINS FOR TAXATION, IN ALL THESE CASES, OTHER THAN IN THE CASE OF NAGORI GROUP , THE ASSESSING OFFICER TREATED THE SURPLUS AS INCOME FROM OTHER SO URCES AGAINT THE CLAIM OF LONG TERM CAPITAL GAINS MADE BY THE ASSESS EES. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE MEDIUM O F PURCHASE AND SALE OF SHARES WERE ADOPTED BY THE ASSESSEES TO CON VERT THEIR UNACCOUNTED MONEY UNDER THE HEAD LONG TERM CAPITAL GAINS IN RESPECT OF SHARES, ATTRACTING LEAST AMOUNT OF TAX AT 10%. IN THE CASES OF ASSESSEES BELONGING TO NAGORI GROU P, THE ASSESSEES HAVE ALSO RETURNED THE SURPLUS OF SALE OF SHARES AS LONG TERM CAPITAL GAINS. BUT THE ASSESSING OFFICER TREATED T HE LONG TERM CAPITAL GAIN AS SHORT TERM CAPITAL GAINS. WHEN THE MATTER WAS TAKEN BEFORE THE CIT(A), HE SET ASIDE THE VIEW OF THE ASSESSING OFFICER AND TREATED THE SURPLUS AS INCOME FROM OTHER SOURCES AGAINST TH E CONTENTION OF THE ASSESSEE THAT IT WAS LONG TERM CAPITAL GAINS AND AL SO AGAINST THE FINDINGS OF THE ASSESSING AUTHORITY THAT IT WAS SHO RT TERM CAPITAL GAINS. ITA NO.1023/B/10 3 NOW IN ALL THESE APPEALS ARE AT PRESENT PLACED BEF ORE US, THE QUESTION IS WHETHER THE SURPLUS ARISING OUT OF THE SALE OF SOHARES BY THESE ASSESSEES ARE IN THE NATURE OF LONG TERM CAPI TAL GAINS OR IN THE NATURE OF INCOME FROM OTHER SOURCES. IN ADDITION TO THE ABOVE QUESTION OF DECIDING DETE RMING THE NATURE OF SURPLUS, ANOTHER ISSUE HAS BEEN RAISED IN THE CASE OF VIMALA DEVI CHAJJER BELONGING TO CHAJJER GROUP. SHE HAS R ETURNED AGRICULTURAL INCOME FOR THE ASSESSMENT YEARS 2001-0 2, 2002-03, 2003- 04, 2004-05, 2005-06 AND 2006-07. THE ASSESSING OF FICER TREATED A PART OF THOSE AGRICULTURAL INCOME AS INCOME FROM OT HER SOURCES. THESE ARE THE OUT LINES OF THE DISPUTE ARISED IN T HIS APPEAL. THE RELEVANT ASSESSMENT YEARS INVOLVED IN THESE AP PEALS ARE 2001-02, 2002-03, 2003-04, 2004-05 AND 2006-07. AL L THESE APPEALS ARISES OUT OF THE ASSESSMENT COMPLETED UL/S 153A RE AD WITH SEC. 143(3) OF THE INCOME-TAX ACT 1961. FIRST, WE WILL CONSIDER THE ISSUE IN THE HANDS OF THE VEENA MEHTA, CHANDRAKANTHA MEHTA, PUSHPA DEVI MEHTA AND K ALAVATHI ITA NO.1023/B/10 4 MEHTA. IN THE CASES OF ALL THESE ASSESSES, THE ASS ESSING AUTHORITY AS WELL AS THE CIT(A) HAVE HELD THAT THE SURPLUS GENER ATED OUT OF THE SALE OF SHARES WERE IN THE NATURE OF INCOME FROM OTHER S OURCES. SHRI SVC FOR THE ASSESSMENT YEAR 2005-06 HAS OFFER ED LONG TERM CAPITAL GAINS ON SHARES HELD IN FAST TRACK ENT ERTAINMENT LTD. HE HELD 5000 NUMBER OF SHARES ON 13.4.2004 AND 28.4.20 04. THE SHARES WERE PURCHASES ON 7.4.2003 FOR RS.60710/- AND THE S HARES WERE SOLD FOR RS. 2,47,24,75,723/- IN THE CASE OF MEHTA GROUP FOUR ASSESSES NAMELY VEENA MEHTA, CHANDRAKANTHA MEHTA, PUSHPA DEV I MEHTA AND KALAVATHI MEHTA HAVE SOLD 1200 SHARES EACH OF COMPA NY TO M/S DATTA BASE FINANCE LTD., WHICH WERE PURCHASED ON 19.5.200 1. IN OTHER CASES, THE PURCHASE PRICES WER 15120 PER HEAD WHERE AS THEY SOLD THE SHARES FOR AMOUNT LIKE 8,62,800, 8,77,800, 8,48,640 AND 8,50,800/- IN THE CASE OF ASSESSEES BELONGING TO MEHTA GROUP, THE Y HAVE ALSO CLAIMED RELIEF U/S 54F AS THE SURPLUS WAS OFFERED B Y THEM AS LONGTERM CAPITAL GAINS. IN THE CASE OF ASSESSEES BELONGING TO CHAJJER GROU P NAMELY MANGILAL CHAJJER, CHETANA CHAJJER, MEENA DEVI CHAJJ ER, MANISH MUDITH CHAJJER AND VIMALA DEVI CHAJJER SHARES OF M/ S FAST TRACT ITA NO.1023/B/10 5 ENTERTAINMENT LTD. M/S NAGESHWAR INVESTMENT PVT. LT D. AND STRENCLEY CREDIT CAPITAL LTD. WERE SOLD IN THE PREVIOUS YEAR WHICH WERE PURCHASED IN THE MONTH OF APR, MAY AND JUL OF 2002 AND MONTH OF APR OF 2003. THIS SHARES WERE ALSO SOLD FOR A CONS IDERATION RANGING FROM 5,76,952/- TO 12,46,680/-. THE ASSESSEES SHUSHEELA DEVI TAINWALA, RAJESH TAIN WALA AND RAVIKANT TAINWALA BEONG TO TAINWALA GROUP AS SOLD S HARES FOR THE ASSESSMENT YEAR 2003-04 AND 2005-06. DURING THE PR EIVOUS YEAR, THE SHARES BELONG TO M/S DATA BASE FINANCE LTD AND FAST TRACK ENTERTAINMENT LTD. THE SHARES WERE PURCHASED IN TH E MONTH OF MAY 2001, AUG 2002. IN THIS CASE ALSO SALES WERE MADE FOR A PRICE MUCH HIGHER THAN THE PURCHASE PRICE. IN THE CASE OF RGND KUMAR GUPTA AND SURESH KUMAR C HOPRA THEY SOLD SHARES IN THE ASSESSMENT YEAR 2003-04 WHI CH REPORTED M/S DATA BASE FINANCE LTD. THE SHARES WERE SOLD FOR PR OFIT. THE NATURE OF THE SALES OF SHARES TO DIFFERENT PAR TIES AND THE NATURE OF SURPLUS ARISING OUT OF THOSE SALES WERE E XAMINED BY THE ASSESSING AUTHORITY IN THE LIGHT OF A SEARCH CONDUC TED U/S 132 OF THE ITA NO.1023/B/10 6 INCOME-TAX ACT 1961. IT IS THE CASE OF THAT SEARCH ALL THIS/THOSE ASSESSMENT HAVE BEEN COMPLETED U/S 153A READ WITH S EC. 143(3) OF THE INCOME-TAX ACT 1961. REITERATING ENQUIRIES MADE AS A CONSEQUENCE OF THE SEARCH, THE ASSESSING OFFICER HELD THAT ALL TRANSACTIONS OF SHA RES SALES WERE DUBIOUS AND THE ASSESSEE WERE CONVERTING THE UNCOUN TED MONEY INTO THE ACCOUNTED MONEY THROUGH THE COLOURABLE TYPES OF PURCHASE AND SALE OF SHARES. THE ASSESSING OFFICER HELD THAT TH E SHARES WERE PURCHASED FOR NORMALY PRICES WHICH IS ONE YEAR BACK AND THIS SHARES WERE SOLD FOR EXORBITANT PRICES AFTER ONE YEAR WHIC H DOES NOT JUSTIFY THE NORMALY BUSINESS PARAMETERS. HE HELD THAT EVEN THOUGH THE SHARES WERE SOLD THROUGH BROKERS AND STOCK EXCHANGE, THE A SSESSEES HAVE RETURNED THE SALE PROCEEDS TO THE BROKERS THEMSELVE S SO THAT THE SURPLUS SALE VALUE PAID BY THE PROGRESSION HAVE GON E BACK TO THEM AND SIMILARLY ASSESSEES HAVE COMPLETED THEIR UNACCOUNTE D MONEY INTO ACCOUNTED MONEY. HE HELD THAT THIS IS A COLOURABLE TYPES HE ALSO HELD THAT THIS METHOD OF BLOCK INTO WHITE MONEY THROUGH MEDIUM OF SALES OF SHARES ALSO ATTRACT LIST OF TAX UPTO 10%. HE FO UND THAT THE ASSESSEES HAVE NOT EXPLAINED THE REASONS WHY THEY COULD FETCH EXORBITANT AMOUNT OF SALE PRICES. HE ALSO EXAMINED THE BUSINE SS PROGRESS OF ITA NO.1023/B/10 7 POTENTIAL OF THE COMPANIES OF ITS SHARES WERE SOLD BY THE ASSESSEE AND FOUND THAT THOSE COMPANY DO NOT HAVE ANY POTENTIAL FOR EARNING HIG AMOUNT OF INCOME OR NET WORTH THE ASSESSING OFFICER ACCORDINLY CARRIED OUT HIS INVESTIGATION AND ENQULIRIES ON THE BASIS OF THE ABOVE PRIMISES AND COME TO THE CONCLUSION THAT THE TRANSA CTION WERE DUBIOUS AND THE ASSESSEE WAS CONVERTING THE BLOCK MONEOY AN D THEREFORE THE SURPLUS COULD NOT BE TREATED AS LONGTERM CAPITAL GI ANS. HE ACCORDILY TRATED THE SURPLUS AMOUNTS OFFERED BY THE ASSESSEE AS INCOME FROM OTHER SOURCES IN THE NATURE OF UNEXAPLINED CREDIT A NSWERABLE TO SEC. 68 OF THE INCOME-TAX ACT 1961. THIS POSITION HAS BEEN CONFIRMED BY THE CIT(A). WE HEARD SHRI H.N KHINCHA, THE LEARNED CHARTERRED ACCOUNTANT APPERING FOR THE ASSESSEE WHO HAVE ARGUED THE TAX A ND LAW RELTING TO THESE CASES IN DETAIL. THE LEARNED COUNSEL CONTENDED THAT THE SHARES WERE PURCHASED BY THE ASSESSEE FOR THE PRICES PREVAILING AT THAT P OINT OF TIME AND THE SHARES WERE THAT OF LISTED COMPANY IN THE STOCK EXC HANGE. THEREFORE THERE IS NO REASON TO SUSPECT VACUUM OF GENUINE PUR CHASE OF SHARES. THIS SHARES WERE SHOWN IN THE BALANCE SHEET OF THE ASSESSEES AS ITA NO.1023/B/10 8 INVESTMENT AT COST PRICES. THESE SHARES WERE SOLD IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEARS AGAIN ON THE FLOOR OF THE STOCK EXCHANGE. THE ASSESSEES HAVE SOLD THE SHARES THROU GH STOCK BROKERS ON HE FLOOR OF THE STOCK EXCHANGE. THEREFORE THERE CANNOT BE A HANKI PANGI IN THE MATTER OF SALES OF THOSE SHARES. THE SHARES ARE PROPERLY DOCUMENTED REFLECTED IN THE RECORDS OF THE STOCK BROKER. THE PAYMENTS HAVE BEEN MADE BY THE STOCK EXCHANGE THROU GH BANK INSTRUMENTS. THE SALES WERE MADE ON THE PRICES EQU ATED IN THE STOCK EXCHANGE ON THE DAYS OF SALES. THEREFORE IN THE LI GHT OF THE ACCOUNTS MAINTAINED BY THE ASSESSEE AND THE LIGHT OF THE EXT ERNAL EVIDENCES AVAILABLE IN THE HANDS OF THE BROKERS AND THE STOCK EXCHANGES, ABSOLUTELY THERE IS NO MERIT IN QUESTIONING VARACIT Y AND BONAFIEDES OF THE SALES OF SHARES. THE LEARNED CA FURTHER ARGUED THAT THE ASSESSING O FFICER HAS TRIED TO MAKE OUT A CASE AGAINST THE ASSESSEE ON TH E SO CALLED ENQUIRIES MADE BY HIM IN THE LIGHT OF THE SEARCH CARRIED OUT U/S 132. HE CONTENDED THAT THE SEARCH AS IN FACT BROUGHT POSITI VE MATERIALS TO SUPPORT THE ARGUMENTS OF THE ASSESSEE. THE ENTIRE TRANSACTIONS WERE RECORDED IN THE REGULAR BOOKS OF ACCOUNT OF THE ASS ESSEES. THE SHARES WERE LATER CONVERTED INTO DE-MAT FORM. SHARE CANNO T BE CONVERTED ITA NO.1023/B/10 9 INTO DIGITAL FORM UNLESS AND UNTIL THE SHARES ARE G ENUINE. IT IS ONLY BECAUSE THE SHARES WERE GENUINE THAT THE INTERNATIO NAL CREDIT AGENCY HAS CONVERTED THE PHYSICAL FORM OF SHARES OF THE AS SESSEES INTO DE-MAT FORM. THIS ITSELF IS A IMPEACHABLE EVIDENCE TO SHO W THAT THE SHARES WERE ACTUALLY HELD BY THE ASSESSEES IN THE COURSE OF SEARCH THE INVESTIGATING ASSESSIG OFFICER COULD LET THROUGH HA NDS THAT CONTRACT UNLESS FOR THE SALE OF SHARES, COPIES OF BILLS, DE -MAT BILLS AND ALL OTHER PARTICULARS REGARDING THE HOLDING OF SHARES AND SAL E OF SHARES. THEREFORE IN FACT THE MATERIAL QUOTED IN THE COURSE OF SEARCH NAMELY SUPPORT THE CONTENTION OF THE ASSESSEES. THE SEARC H HAS NOT BROUGHT OUT ANY MATERIAL AGAINST THE CONTENTION OF THE ASSE SSEES. NO INCRIMINATING MATERIALS WERE DEDUTABLE IN THE COURS E OF SEARACH AGAINST THE ASSESSEES IN THE MATTER OF PURCHASE AND SALE OF SHARES. THEREFORE, THERE IS NO MEANING IN THE ARGUMENTS OF THE REVENUE THAT THE SEARCH HAS STRENGTHENED THE PROPOSITION MADE OU T OF THE PROPOSITION AND FINDING MADE OUT BY THE REVENUE. HE HAS RELIED ON THE FOLLOWING DECISIONS IN SUPPOR T OF HIS ARGUMENTS: ---------- --------------- ITA NO.1023/B/10 10 SHRI HARSH PRAKASH, THE LEARNED CIT(A) APPEARING F OR THE REVENUE ON THE OTHER HAND ARGUED AT LENGTH ON THE B ASIS OF FINDING RECORDED BY THE ASSESSING AUTHORITY IN HIS ORDER. THE LEARNED CIT(A) HAS ARGUED THAT ALL THE ACTIVITIES ARE PART OF NATI ONAL WIDE RACKET ENGAGED IN MONEY LAUNDERING THROUGH VARIOUS DUBIOUS METHOD. HE HAS TAKEN US TO THE VARIOUS RELEVANT OBSERVATIONS R EFLECTED IN THE ASSESSMENT ORDERS. HE ALSO EXPLAINED MODUS OPERAND I OF THE ASSESSEE. MANY OF THE COMPANIES INVOLVED IN THESE TRANSACTION S ARE NON EXTENT AND EXTENT COMPANY DO NOT HAVE ANY BUSINESS ACTIVIT IES WORTH THE NAME. THEY ARE MAINLY BETTER COMPANIES THEY ARE AL L USED COLORABLE MEDIUM TO CONVERT THE UNACCOUNTED MONEY OF THE ASSE SSEES THIS IS A CAST OF MONEY LAUNDERING EVEN THOUGH SALES WERE MAD E ON THE FLOOR OF STOCK EXCHANGE THERE WAS A TAITY AGREEMENT BETWEEN THE BROKERS AND THE ASSESSEE WHEREBY THE APPARENT CONSIDERATION REC ORDED IN THE BOOKS WERE RETURNED BY THE ASSESSEE TO THE BROKERS AND IN THAT VACUUM, THE ASSESSEES ARE BELONGING UP THERE UNACCOUNTED MONEY . ALL THESE MANIPULATIONS HAVE BROUGHT TO LIGHT AS A RESULT OF ENQUIRIES MADE BY THE SEARCH CARRIED OUT IN THE PREMISES OF THE ASSES SEES U/S 132. HE THEREFORE SUBMITTED THAT THE ASSESSING OFFICER HAS RIGHTLY INVOKED U/S 68 TO TREAT THE SURPLUS INCOME AS INCOME FROM OTHER SOURCES. ITA NO.1023/B/10 11 THE LEARNED CIT(A) CONTENDED THAT IN SPITE OF THE DOCUMENTARY FRAMEWORK CONSITENTLY CRATED BY THE ASSESSEE, THEY HAVE NOT EXPLAINED THE REASONS WHY SHARES PURCHASED FOR NORM AL VALUE COULD FETCH HUGE AMOUNT OF SALE MADE JUST AFTER ONE YEAR PERIOD THERE MUST BE SOME REASONABLE EXPLANATION FOR THIS THE COMPANI ES WHOSE SHARES ARE --------- BY THE ASSESSEE ARE NOT COMPANIES OF REPAYMENT OR SUBSTANCE OR ASSETS OR BUSINESS PROGRESS. IN SUCH CIRCUMSTANCES, IT IS HIGHLY IMPROBABLE TO PRESUME THAT THE ASSESSEES COU LD HAVE SOLD THE SHARES OF THOSE COMPANIES IN SUCH HUGE SUMS OF MONE Y. THE LEARNED CIT(A) CONCLUDED THAT THE ASSESSING OF FICER HAS EXPLAINED THE ENTIRE SCHEME OF ACTIVITIES EXECUTED BY THE ASSESSEES AND HE HAS ESTABLISHED THAT THE TRANSACTIONS WERE DUBIO US AND CIT(A) HAS RIGHTLY CONFIRMED THE ASSESSMENT ORDER IN THIS REGA RD. WE THEREORE SUBMIT THAT THE GROUND OF THE ASSESSEES ON THIS POI NT MAY BE DISMISSED. WE HEARD BOTH SIDES IN DETAIL. IN THIS CONTEXT WE MAY THE DECISION OF ITAT MUMBAI BENCH IN THE CASE OF SHIR MUK MURALI ADD. CIT 006 SOT 247. IN THT CASE THE ITA NO.1023/B/10 12 ASSESSEE HAD PURCHASED SHARES FOR A LESSER AMOUNT A ND THEREAFTER HE SOLD THE SHARES IN HUGE AMOUNTS AND USING THE SALES PROCEEDS PURCHASED ON PLOT AT COLABA, BOMBAY. THE ASSESSEE HAD DISCLOSED THE SURPLUS AS LONGTERM CAPITAL GAINS AND ALSO CLAIMED DEDUCTION U/S 54E. AFTER HEARING BOTH SIDES IN DETAIL IN THE LIGHT OF THE MATERIAL PLACED BEFORE THE TRIBUNAL, THE TRIBUNAL COME TO A FINDING , AMONG SO THEY AS FOLLOWS : ========= PG. 21---------10.8------------ WE THINK THAT THE PRESENT CASES ARE ALSO IN THE SA ME PLOT FORM IN THE CASE THERE WAS A SURVEY IN THE PRESENT CASE IT WAS A SEARACH. THE SEARCH HAS BROUGHT OUT OF STORES OF PHOTS DOCUMENTA RY EVIDENCE TO SUPPORT THE CONTENTION OF THE ASSESSEES THAT THEY H AVE SOLD SHARES AS RECORDED IN THE BOOKS OF ACCOUNTS. THE SEARCH PART Y COULD RELY THE HANDS ON THE BOOKS OF ACCOUNTS WERE OF THESE TRANSA CTIONS EVEN THOUGH PURCHSE AND SALES HAVE BEEN PROPERLY ACCOUNT ED. THE PARTICULARS OF PURCHASE OF SHARES WERE AVAILABLE OF SEARCH AS THE PART OF THE RECORDS MAINTAINED BY THE ASSESSEES. THE PU RCHASE VALUATION HAVE BEEN PROPERLY RECORDED THEREIN. LATER ON, THE SHARES WERE CONVERTED INTO DE-MAT FORM THOSE DE-MAT PARTICULARS ARE ALSO AVAILABLE WITH THE ASSESSEE. SALE NOTES WERE SHARE S WERE FOUND IN THE ITA NO.1023/B/10 13 COURSE OF SEARCH. BROKERS NOTE ADVISE AND FOUND TH E DETAILS OF PAYMENT WERE AVAILABLE IN THE COURSE OF SEARCH. TH E PAYMENTS WERE MADE THROUGH BANK INSTRUMENTS. SUBJECT TO THE LOCA TIONS OF THE REVENUE, IF ONE TAKE NORMAL VIEW OF BUSINESS TRANSA CTIONS OF THE ABOVE DOCUMENTS ARE MORE THAN SUFFICIENT TO SUPPORT THE CONTENTION OF THE ASSESSEE THAT THEY HAVE BROUGHT AND SOLD SHARES IN THE PRICES REFLECTED IN THEIR ACCOUNTS. THE ABOVE POSITIVE EV IDENCES CAN BE OVERCOME BY THE DEPARTMENT ONLY IF THE REVENUE CAN BRING MORE FORCEFUL EVIDENCES TO CLUTTER THE ARGUMENTS OF THE ASSESSEES. NOW WHAT IS THE POSITION IN THE PRESENT CASES, IN SPITE OF THE SEARCH CARRIED OUT BY THE DEPARTMENT, NO MATERIALS INCRIMINATING THE ASSESSEES IN THE MATTER OF SALES OF SHARES WERE FOU ND OR SEIZED. THERE WERE NO MATERIALS AVAILABLE WITH THE ASSESSEES WHIC H GONE TO SHOW THAT THE APPARENT WAS NOT THE REAL TO CUT THE LONG STORE/STONE SO, WE HAVE TO STATE THAT THE SEARCH WAS NO UNWORTHY ANY A DVERSE MATERIALS AGAINST THE STAND TAKEN BY THE ASSESSEES. THIS IS THE SAME CASE WITH THE SUBSEQUENT ENQURIEI S CONDUCTED BY THE ASSESSING OFFICER, AS WELL. IN THE LIGHT OF THE LARGE SCALE INFORMATION AVAILABLE WITH THE DEPARTMENT, THE ASSE SSING OFFICER WAS ITA NO.1023/B/10 14 IN FACT FRAMING OUT A CASE ON THE BASIS OF INTELLIG ENT HYPOTHESIS. BEYOND THAT, WE DO NOT THINK THAT THE FINDINGS MADE BY THE ASSESSING AUTHORIYT HAVE ANY PROBATIVE VALUE IN THE EYES OF L AW. THE PURCHASE OF SHARES HAVE BEEN PROVED BY THE PRO CESS OF DEVASTING THE SHARES. SHARES HAVE BEEN REFLECTED I N THE BALNCESHEETS OF THE ASSESSEES AS INVESTIGATION, SHARES WEE SUBSE QUENTLY SOLD ON THE FLOOR OF STOCK EXCHANGE, THE SALES WERE ARRANGED TH ROUGH A ACCREDITED BROKER, THE SALES PROSPECTUS WERE RECEIVED FROM THE STOCK EXCHANGE AND ALL THESE THING PUT TOGETHER THE ASSESSEES MADE OUT A CLEAR CASE OF PURCHASE AND SALE OF SHARES RESULTING IN SURPLUS IN THEIR RESPECTIVE HANDS. IN THE ABSENCE OF ANY EVIDENCES TO CONTRARY , THIS IS A SURPLUS HAVE TO BE TREATED AS LONGTERM CAPITAL GAINS, AS TH E SHARES WERE HELD FOR A PERIOD OF MORE THAN ONE YEAR. THE REVENUE CA NNOT DISBELIEVE THE DOCUMENTARY EVIDENCES AND TRAAT THE SURPLUS AS INCOME FROM OTHER SOURCES ONLY FOR THE REASON THAT THE SALES VALUE OF THE SHARES WERE EXORBITANTLY HIGH WHEN COMPARED TO THE LOWER PURCHA SE COST. WHY SUCH A HUGE MARGIN WAS THERE IS A MATTER TO BE PROB ED INTO AND MADE OUT AGAINST THE ASSESSEE BY ANY IMPEACHABLE EVIDENC ES. AS FAR AS THESE CASES ARE CONCERNED, THE REVENUE HAS MADE A A TTEMPT TO EXPLAIN THE PROPOSITION AGAINST THE ASSESSEE ONLY ON THE BA SIS OF PRESUMPTION ITA NO.1023/B/10 15 AND HYPOTHESIS. SUCH PRESUMPTION AND HYPOTHESIS CA NNOT BE TREATED AS A SUBSTITUTE IN REASONABLE EVIDENCES EVEN THOUGH THE PROPOSITIONS ARE INTELLIGENT AND PERSUASIVE. THEREFORE IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, WE HOLD THAT THE LOWER AUTHORITIES ARE NOT JUSTIFIES IN TRE ATING THE SURPLUS OF SALE OF SHARES IN THE HANDS OF THESE ASSESSEES AS UNEXPL AINED CASH FALLING U/S 68 OF THE INCOME-TAX ACT 1961. THEREFORE THE O RDERS OF THE LOWER AUTHORITIES ON THIS ISSUE ARE VACATED. THE ASSESSI NG AUTHORITY IS DIRECTED TO TREAT THE SURPLUS AS LONGTERM CAPITAL G AINS AND THEREAFTER CONSIDER THE CLAIM OF EXEMPTION MADE BY THE ASSESSE ES OF MEHTA GROUP U/S 54F OF THE INCOME-TAX ACT 1961. NEXT, WE WILL CONSIDER THE APPEALS OF THE ASSESSEE S BELONGING TO NAGORI GROUP. THE ASSESSEES ARE SANJAY NAGORI, AJA Y NAGORI, MITESH JAIN, MOHANLAL SUMMERMAL, VIJAY NAGORI AND ASHOK KU MAR SUMARMAL. THESE ASSESSEES ALSO HAD SURPLUS IN THE HANDS OF SALE OF SHARES. THEY CLAIMED IT AS LONGTERM CAPITAL GAINS. THE ONLY DIFFERENCE IS THAT INSTEAD OF INVOKING SEC. 68 AS D ONE IN THE CASE OF OTHER ASSESSEES, THE ASSESSING OFFICER HAS TREATED THE SURPLUS AS ITA NO.1023/B/10 16 SHORTTERM CAPITAL GAINS WHICH HAS BEEN LATER ON CON VERTED BY THE CIT(A) AS INCOME FROM OTHER SOURCES FALLING U/S 68. THE CASE OF THE ASSESSING OFFICER WILL NOT STAND I N THESE APPEALS AS IT IS PROVED BEYOND DOUBT. THE SHARES W ERE HELD FOR A PERIOD OF MORE THAN ONE YEAR. THIS IS PROVED BEYON D DOUBT BY THE DE- MAT ACCOUNT OF THE ASSESSEE. THEREFORE, THE SURPLU S CANNOT BE TREATED AS SHORT-TERM CAPITAL GAINS. NOW COME TO TREATING THE SURPLUS AS INCOME FROM OT HER SOURCES IN NATURE OF UNEXPLAINED CREDIT BOUND BY SEC. 69, W E FIND THAT THE FACTS OF THESE CASES ARE EXACTLY SIMILAR TO THE FACTS OF THE OTHER ASSESSEES THEREFORE CASES HAVE ALREADY BEEN DISCUSSED IN IN PARAGRAPHS ABOVE. THEREFORE, WE HOLD THAT IN THE CASE OF THES E ASSESSEES ALSO THE SURPLUS HAVE TO BE TREATED AS LONG TERM CAPITAL GAI NS. THE REMAINING LAST ISSUE IS QUESTION OF DISALLOWAN CE OF AGRICULTURAL INCOME IN THE HANDS OF THE VIMAL DEVI CHAJJER OF CHAJJER GROUP. VIMAL DEVI CHAJJER HAS RETURNED AGRICULTURA L INCOME FOR A CONSECUTIVE ASSESSMENT YEARS 2001-02 TO 2006-07. T HE ASSESSING OFFICER HAS DISALLOWED A PORTION OF THE RETURNED AG RICULTURAL INCOME ITA NO.1023/B/10 17 AND TREATED IT AS INCOME FROM OTHER SOURCES. WE HA VE GONE THROUGH THE DETAILED REASONING GIVEN BY THE ASSESSING AUTHO RITY. WE FIND THAT THE DISALLOWANCE MADE BY THE ASSESSING AUTHORITY AS JUST AND PROPER. THEREFORE, THE ORDERS OF THE LOWER AUTHORITIES ON T HE QUESTION OF PARTIAL DISALLOWANCE OF AGRICULTURAL INCOME ARE UPHELD. IN RESULT, THE APPEALS FILED BY ALL THE ASSESSEES EXCEPT VIMAL DEVI CHAJJER ARE ALLOWED. IN THE CASE OF VIMAL DEV I CHAJJER, THE APPEALS ARE ALLOWED ON THE QUESTION OF SURPLUS ARIS ING ON SALE OF SHARES BUT DISMISS THE CLAIM REGARDING THE PARTIAL DISALLOWANCE OF AGRICULTURAL INCOME. THEREFORE, HER APPEALS ARE TR EATED AS PARTLY ALLOWED. ORDER PRONOUNCED ON ----------------- THE ------- DAY OF FEBRUARY, 2011, AT BANGALORE. (P MADHAVI DEVI) (DR. O.K NARAYANAN) JUDICIAL MEMBER VICE PRESIDENT VMS. COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. ITA NO.1023/B/10 18 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REGISTRAR, I TAT, BANGALORE. -