Gurukukh J Sukhwani, Pune V. DCIT, Pune

ITA 1032/PUN/2012

• Counselvise Citation: 103224514 RSA 2012
• Duration Of Justice: 2 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 10-02-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 22-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MINI VERMA
• Assessee Lawyers: VIPIN GUJRATHI
• Keywords: Business income; Income from undisclosed sources; Search and seizure; Question of law; Block assessment; Onus to prove; Retraction; Sham transactions; Penny stocks
• Section: 133A; 153A; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 1034/PN/2012 (ASSESSMENT YEAR : 2004-05) USHA GURUMUKH SUKHWANI, SUKHWANIS, 350, SINDH HOUSING SOCIETY, AUNDH, PUNE 411007 .. APPELLANT PAN NO.ACEPS8694Q VS. DCIT CENTRAL CIRCLE-1(1), PUNE .. RESPONDENT ITA NO. 1032/PN/2012 (ASSESSMENT YEAR : 2004-05) GURUMUKH J. SUKHWANI, SUKHWANIS, 350, SINDH HOUSING SOCIETY, AUNDH, PUNE 411007 .. APPELLANT PAN NO.ACEPS8693K VS. DCIT CENTRAL CIRCLE-1(1), PUNE .. RESPONDENT ASSESSEE BY : SHRI VIPIN GUJRATHI REVENUE BY : SMT. MINI VERMA DATE OF HEARING : 23-06-2014 DATE OF PRONOUNCEMENT : 22-08-2014 ORDER PER R.K. PANDA, AM : THE ABOVE 2 APPEALS FILED BY THE RESPECTIVE ASSESSE ES ARE DIRECTED AGAINST THE SEPARATE ORDERS DATED 04-11-20 11 AND 07-11- 2011 RESPECTIVELY OF THE CIT(A)-I, PUNE RELATING TO ASSESSMENT YEAR 2004-05. FOR THE SAKE OF CONVENIENCE BOTH THE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CO MMON ORDER. 2 2. GROUND OF APPEAL NO.1 BY THE ASSESSEE READS AS U NDER : 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE HONOURABLE CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 1,50 ,00,000/- AS THE UNDISCLOSED INCOME OF THE APPELLANT ON THE GROUND T HAT THE APPELLANT HAD GIVEN RS. 1,50,00,000/- TO HER HUSBAND ARE UNEX PLAINED CASH PAYMENTS WITHOUT APPRECIATING THE FACTS OF THE CASE IN PROPER PERSPECTIVE. THE APPELLANT HEREBY PRAYS THAT THE AD DITION MAY PLEASE BE DELETED. 2.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE IN AN INDIVIDUAL. THERE WAS A SEARCH AND SEIZURE ACTION U/S.132 OF THE I.T. ACT IN THE CASE OF SUKHWANI GROUP ON 14-06-200 6. THE ASSESSEE IS THE WIFE OF SHRI GURUMUKH SUKHWANI AND WARRANT OF AUTHORIZATION WAS ALSO ISSUED IN THE NAME OF THE AS SESSEE. IN RESPONSE TO NOTICE U/S.153A THE ASSESSEE FILED HER RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 13-03-2008 DISC LOSING TOTAL INCOME OF RS.46,24,450/-. IT MAY BE PERTINENT TO M ENTION HERE THAT THE ASSESSEE HAD FILED HER ORIGINAL RETURN OF INCOM E ON 31-10-2004 DISCLOSING TOTAL INCOME OF RS. 46,24,007/-. 2.2 DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT A BLACK CITY GOLD DIARY (BUNDLE NO.3) WAS FOUN D AND SEIZED DURING THE COURSE OF SEARCH AT THE RESIDENCE OF SMT . USHA SUKHWANI. ADMITTEDLY, THE DIARY BELONGED TO SHRI G URUMUKH SUKHWANI AND WAS WRITTEN BY MRS. USHA GURUMUKH SUKH WANI. ON THE REVERSE OF PAGE NO.59, THERE WERE CERTAIN EN TRIES. DURING THE COURSE OF SEARCH ACTION ON 14-06-2006, THE AUTH ORIZED OFFICER RECORDED THE STATEMENT OF MRS. USHA SUKHWANI U/S.13 2(4) OF THE I.T. ACT. THE ASSESSEE WAS ASKED TO EXPLAIN THE TR ANSACTIONS RECORDED ON REVERSE SIDE OF PAGE NO.59. IN RESPONSE TO THE SAME, THE ASSESSEE ADMITTED THAT RS.150 LAKHS WAS GIVEN BY HER TO SHRI 3 GURUMUKH SUKHWANI ON THE OCCASION OF HOUSE WARMING CEREMONY OF THEIR BUNGALOW AT 350, SINDH SOCIETY IN FEBRUARY 2004. HOWEVER, IN THE RETURN OF INCOME FILED BY HER FOR T HE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD NOT REFLECTED SUCH TRANSACTION. HE FURTHER NOTED THAT NEITHER THE ASSESSEE NOR HER HUS BAND HAVE THE SOURCE FOR SUCH HUGE TRANSACTION. THE AO, THEREFOR E, VIDE LETTER DATED 06-10-2008 ASKED THE ASSESSEE TO CLARIFY THE ISSUE. THE RELEVANT PORTION OF THE LETTER READS AS UNDER (PAGE 3 TO 5 OF THE ASSESSMENT ORDER) : DURING THE COURSE OF SEARCH A DIARY WAS SEIZED WHEREIN THERE WERE SOME RECORDINGS IN YOUR HAND WRITING. DURING T HE COURSE OF SEARCH, YOU ADMITTED THAT RS.150 LAKHS WAS PAID BY YOU TO YOUR HUSBAND IN FEBRUARY 2004. THE RELEVANT QUESTION AND ANSWER IS AS UNDER : Q.2 DURING THE SEARCH OF YOUR RESIDENCE A DIARY C ONTAINING PAGES 1 TO 70 HAS BEEN FOUND WITH CERTAIN NOTHINGS BY YOU . PLEASE EXPLAIN THE DETAILS OF SUCH JOTTINGS ON PAGE NO. 58. ANS. A) 150 LAKH G. J.:- THIS IS THE AMOUNT P AID TO SHRI. GURUMUKH SUKHWANI ON THE OCCASION OF OPENING OF THIS BUNGALOW IN FEB. 2004. B) 8 SAGAR TO GUDDU:- SAGAR HAD TAKEN RS. 8.000/- FR OM GUDDU. THIS AMOUNT WAS RETURNED TO HIM DURING THE YEAR 2004. C) 10 T SAGAR- THIS IS THE AMOUNT PAID ( RS. 10,000/-) AS HOSTEL FEES FOR SAGAR. D) 1 L SUNIL;- AT THE TIME OF OPENING CEREMONY OF T HE BUNGALOW, THERE WERE VARIOUS EXPENSES. THIS IS RS.1 LAKH ON A/C. OF ELECTRICAL DECORATION TO ONE MR. SUNIL. E) 3 T PRITI (BIG):- THERE ARE TWO LADIES BY NAME P RITI IN MY FAMILY. ONE IS MRS. PRITI BASANT SUKHWANI, OTHER ONE IS MY DAU GHTER MISS PRITI GURUMUKH SUKHWANI. THIS REPRESENTS THE AMOUNT OF RS. 3000/- PAID TO MRS. PRITI BASANT 'AS POCKET MONEY DURING THA T PERIOD. F) 4-T' G.J.;- THIS IS REGARDING THE AMOUNT OF RS. 4000/- PAID TO THE TAILOR AS THE STITCHING CHARGE, IRONING EXPENSES OF CLOTHES/ DRESSES OF SHRI. GURUMUKH SUKHWANI DURING THE TIME OF THE ABOVE OCCA SION. G) 6-T USHA:- THIS REPRESENT THE AMOUNT SPENT BY ME OF RS. 6000/- FOR MY DRESS OF OTHER HOUSEHOLD EXPENSES AT THE TIME OF HOUSE WORMING CEREMONY. 4 H) 1 LAKH - G. J. TO TIMMU:- THIS REPRESENTS THE AMOUN T OF RS, 1 LAKH GIVEN TO GURUMUKH SUKHWANI TO HANDOVER TO THE OFFICE BOY T TIMMU FOR PAYMENT OF VARIOUS OTHER EXPENSE LIKE PLUM BING, FURNITURE WORK, ETC. (PAYMENT TO LABORERS). I)25 USHA:- THIS REPRESENT THE AMOUNT OF RS. 25 THOUSAN D SPENT FOR THE HOSPITAL EXPENSES FOR MYSELF, WHEN I UNDERWENT A KIDNEY OPERATION AT RATNA HOSPITAL DURING THE YEAR 2004. J) 5 USHA:- THIS REPRESENT THE AMOUNT OF RS. 5000/- WHI CH WAS DISTRIBUTED PANDIT & OTHER PEOPLE FOR RELIGIONS & PUJ A ETC. EXPENSE AT THE TIME OF HOUSE WORMING. K) 10 T NANDU:- THIS REPRESENT THE AMOUNT OF RS, 10.00 0/-PAID TO OUR DRIVER - NANDU FOR PAYMENT OF HOSPITAL BILLS (JAH ANGIR) WHEN MY HUSBAND SHRI. GURUMUKH SUKHWANI WAS ADMITTED DURIN G THE YEAR 2004 FOR PILES. J) 10 THOUSAND 500 RS. TO RAHUL ( SUNIL ):- THIS IS THE AMOUNT OF RS. 10,500/- GIVEN TO OFFICE STAFF RAHUL FOR ADVANCE PAYMENT OF HOSPITAL BILLS, WHEN SONU GURUMUKH SUKHWANI NET WITH AN ACCIDENT AND WAS ADMITTED IN THE JAHANGIR HOSPITAL DU RING THE YEAR 2004'. 2.3 THE AO SIMILARLY REFERRED TO THE STATEMENT RECO RDED ON 20- 07-2006 WHILE COMPLETING THE SEARCH AND RELEVANT QU ESTION AND ANSWER OF THE ASSESSEE WHICH HAS BEEN REPRODUCED BY THE AO AT PARA 5.2 OF THE ORDER READS AS UNDER : 'Q.6 YOUR ATTENTION IS INVITED TO Q.NO. 2 OF YOUR STATEMENT RECORDED ON 14/6/2006. IN YOUR REPLY, IT WAS* STATED BY YOU ABOUT SOME HOUSE HOLD EXPENDITURE, HOSPITAL EXPENSES, PAYMENT OF 1.5 CRORE TO GURUMUKH SUKHWANI, PAYMENT TO NANDU DRIVER ETC. PLEASE STATE WHAT WAS THE MODE OF PAYMENT, I.E. WHETHE R IT IS PAID BY CASH OR CHEQUES. ALSO STATE THE SOURCES OF THESE PAYM ENTS. ANS. THESE PAYMENTS WERE MADE BY CASH OUT OF MONEY GIV EN BY MY HUSBAND. 2.4 THE AO ALSO REFERRED TO THE REPLY TO QUESTION N O.19 BY SHRI GURUMUKH SUKHWANI, HUSBAND OF THE ASSESSEE WHOSE ST ATEMENT WAS RECORDED ON 20-07-2006 WHEREIN HE WAS SPECIFICA LLY ASKED ABOUT THIS DIARY WHEREIN HE HAD CLARIFIED THAT THE FIRST ENTRY IS OF RS.1.5 LAKHS AND NOT 1.50 CRORES AS MENTIONED IN TH E DIARY IN PAGE 59. THE AO FURTHER REFERRED TO THE STATEMENT RECOR DED U/S.132(4) 5 IN THE CASE OF SHRI GURUMUKH SUKHWANI ON 14-06-2006 . HE NOTED THAT A SPECIFIC QUERY NO.9 WAS ASKED TO HIM REGARDI NG THE TRANSACTIONS RECORDED IN THE DIARY. HE NOTED THAT SHRI GURUMUKH SUKHWANI IN HIS REPLY TO QUESTION NO.9 HAD CATEGORI CALLY STATED THAT THE WRITINGS IN THE DIARY ARE IN THE HANDWRITI NG OF HIS WIFE AND HE HAS NO IDEA OF THE TRANSACTIONS RECORDED THEREIN . THE AO THEREFORE WAS OF THE OPINION THAT HIS ANSWER TO QUE STION NO.19 STATING THAT THE AMOUNT IS RS.1.50 LAKHS AND NOT RS .150 LAKHS IS ONLY AN AFTERTHOUGHT FOR THE REASONS BEST KNOWN TO HIM. HE, THEREFORE, AGAIN ASKED THE ASSESSEE TO EXPLAIN AND OFFER HER COMMENTS ON THIS. 2.5 IT WAS EXPLAINED BY THE ASSESSEE THAT THE STATE MENT DATED 14- 06-2006 IS BEING MISINTERPRETED AND THE AMOUNT OF R S.1.50 LAKHS IS BEING MISUNDERSTOOD AS RS.150 LAKHS. IT WAS SUBMIT TED THAT IN THE STATEMENT DATED 20-07-2006 THE ASSESSEE HAD ONLY CO NFIRMED THE MODE OF PAYMENT (CASH) AND SHE DID NOT CONFIRM THE AMOUNT. IT WAS SUBMITTED THAT NEITHER THE STATEMENT RECORDED O N 14-06-2006 NOR ANY DOCUMENT WERE SHOWN TO HER AT THE TIME OF R ECORDING STATEMENT ON 20-07-2006. IT WAS EXPLAINED THAT THE SEARCH PARTY HAS OBTAINED THE STATEMENT BY ASKING HER LEADING QU ESTIONS AND CONFUSING HER WITH THE SOLE OBJECT OF PREPARING GRO UND FOR BIG/HUGE ADDITION . THE ASSESSEE SUBMITTED THAT SH E HAS STUDIED UPTO 10 TH STANDARD IN GUJARATI LANGUAGE AND THEREFORE HAS REASONABLE KNOWLEDGE OF ENGLISH LIMITED TO SIGNING IN ENGLISH. THE STATEMENT WAS RECORDED IN ENGLISH AND SHE SIGNE D THE STATEMENT UNDER THE IMPRESSION THAT THERE IS NO MIS TAKE IN THE 6 SAME. THE SEARCH PARTY DELIBERATELY PUT QUESTION N O.19 IN THE STATEMENT DATED 20-07-2006 TO HER HUSBAND SHRI GURU MUKH SUKHWANI TO EXPLAIN THE SOURCE OF RS.1,52,81,500/- SPENT BY THE ASSESSEE. 2.6 IT WAS SUBMITTED THAT THE HUSBAND OF THE ASSESS EE HAD STATED THE CORRECT POSITION IN HIS STATEMENT DATED 20-07-2 006. IT WAS EXPLAINED THAT HER HUSBAND SHRI GURUMUKH SUKHWANI M AY NOT BE AWARE OF WHAT THE ASSESSEE HAD WRITTEN IN THE DIARY BUT HE IS CERTAINLY AWARE OF THE FACT THAT BIG AMOUNT OF RS.1 .50 CRORES WAS NEVER THERE EITHER WITH HER OR WITH HIM AND THE ASS ESSEE HAS NEVER GIVEN SUCH HUGE AMOUNT TO HIM. THE ASSESSEE SUBMIT TED THAT IN THE INDIAN CUSTOMS AND CULTURE THE BIG MONEY TRANSA CTIONS OF CONSIDERABLE AMOUNT ARE HANDLED BY MALE MEMBERS OF THE FAMILY AND NOT THE FEMALE MEMBERS. SHE SUBMITTED THAT NOR MALLY ANY BIG AMOUNT LIKE RS.1.50 CRORES NEVER REMAINS WITH A LAD Y FAMILY MEMBER. IT WAS BROUGHT TO THE NOTICE OF THE AO THE DIFFERENCE BETWEEN THE MANNER IN WHICH THE QUESTIONS WERE ASKE D TO HER AND HER HUSBAND BY THE SEARCH PARTY. THE SEARCH PARTY NEVER ASKED THE CLARIFICATION OF RS.150 LAKHS OR RS.1.50 CRORE TO T HE ASSESSEE WHEREAS THE SAID PARTY ASKED TO EXPLAIN RS.1,52,81, 500/- (ABSOLUTE AMOUNT) TO HER HUSBAND AFTER OBTAINING THE INCORREC T STATEMENT FROM THE ASSESSEE. 2.7 IT WAS EXPLAINED THAT THE SEARCH ACTION WAS COM PLETED ON 20-07-2006. THE ASSESSEE AFTER DISCUSSION WITH HER HUSBAND WAS APPREHENSIVE THAT THE FIGURE OF RS.1,50,000/- MIGHT BE MISCONSTRUED BY THE INCOME TAX DEPARTMENT AS RS.1.5 0 CRORES. 7 THEREFORE, THE ASSESSEE EXECUTED THE AFFIDAVIT ON 0 5-08-2006 CLARIFYING THE FACTUAL SITUATION. THE AFFIDAVIT DA TED 05-08-2006 EXECUTED BEFORE THE SPECIAL EXECUTIVE MAGISTRATE, P UNE WAS HANDED OVER TO THE AO. THE ASSESSEE ALSO ASKED THE AO AS TO WHETHER AMOUNT IN QUESTION IS HER UNDISCLOSED INCOM E OR UNDISCLOSED INVESTMENT. IT WAS BROUGHT TO THE NOTI CE OF THE AO THAT THE STATEMENT OF HER HUSBAND WAS ALSO RECORDED U/S.132(4) OF THE I.T. ACT ON 20-07-2006 AND HE HAS CORRECTLY STA TED THE POSITION. IT WAS ALSO STATED BEFORE THE AO THAT THE EVIDENTIA RY VALUE OF THE STATEMENT OF HER HUSBAND RECORDED U/S.132(4) CANNOT BE BRUSHED ASIDE. THE ASSESSEE FURTHER SUBMITTED THAT NO UNAC COUNTED CASH OR ANY UNDISCLOSED ASSETS OR INVESTMENT WERE FOUND AT THE TIME OF SEARCH ACTION. THE CASH FOUND AT THE TIME OF SEARC H ACTION AMOUNTING TO RS.2,87,700/- WAS FULLY ACCOUNTED FOR IN THE BOOKS OF HER HUSBAND. SIMILARLY, THE ENTIRE JEWELLERY FO UND AT THE TIME OF SEARCH WERE FULLY ACCOUNTED FOR EXCEPT JEWELLERY WO RTH RS.1,81,591/-. 3. HOWEVER, THE AO DID NOT AGREE WITH THE CONTENTIO N OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE IS PRETEND ING HER IGNORANCE ABOUT THE CONTENTS OF THE STATEMENT RECOR DED ON THE DATE OF SEARCH AND THE STATEMENT RECORDED ON 20-07-2006. ACCORDING TO THE AO, THE ASSESSEE COULD HAVE CORRECTED THE MISTA KE WHEN SHE WAS ASKED THE LAST QUESTION OF THE STATEMENT ON 14- 06-2006 AND 20-07-2006 AS TO WHETHER SHE WISHES TO SAY ANYTHING ON HER OWN. HOWEVER, SHE HAS CLARIFIED AS NOTHING. AS REGARD S THE AFFIDAVIT DATED 05-08-2006 IS CONCERNED THE ,AO HELD THAT THE AFFIDAVIT IS A 8 SELF-SERVING DOCUMENT AND THEREFORE CANNOT BE RELIE D UPON AS AN AUTHENTIC DOCUMENT REPRESENTING THE TRUTH. AS REGA RDS THE ISSUE RAISED BY THE ASSESSEE THAT THE DEPARTMENT HAS NOT BROUGHT ON RECORD ANY UNDISCLOSED SOURCE OF INCOME OUT OF WHIC H THE SOCALLED MONEY WAS GIVEN BY THE ASSESSEE TO HER HUSBAND, THE ORDER OF THE AO HOWEVER IS SILENT. 3.1 REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE AND OBSERVING THAT THE SOURCE OF RS.1.50 CRORES GIV EN TO SHRI GURUMUKH SUKHWANI IN FEBRUARY 2004 HAS NOT BEEN EXP LAINED BY THE ASSESSEE AND FURTHER OBSERVING THAT SHRI GURUMU KH SUKHWANI DOES NOT HAVE SOURCE FOR GIVING SUCH MONEY TO HIS W IFE AND CONSIDERING THE FACT THAT NOTINGS ARE IN THE HANDWR ITING OF THE ASSESSEE WHO HAS ADMITTED THE SAME IN HER STATEMENT RECORDED U/S.132(4) OF THE I.T. ACT, THE AO TREATED RS.1.50 CRORE AS UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE ON SUBSTANTIVE BASIS. SIMULTANEOUSLY THE AO ALSO MADE ADDITION OF RS.1.50 CRORE IN THE HANDS OF THE HUSBAND OF THE ASSESSEE ON PROT ECTIVE BASIS. 3.2 BEFORE THE CIT(A) THE ASSESSEE VEHEMENTLY CHALL ENGED THE ORDER OF THE AO. IT WAS SUBMITTED THAT THE ASSESS EE HAD NEVER MADE ANY ADMISSION THAT SHE HAS GIVEN RS. 1.50 CROR E TO HER HUSBAND. IT WAS EXPLAINED THAT DURING THE COURSE OF SEARCH THE ASSESSEE HAS EXPLAINED EACH AND EVERY FIGURE WHICH WAS HAVING SUFFIX SUCH AS T OR L OR WITHOUT ANY SUFFIX, I. E. FIGURES WITH NAMES ONLY. THE AUTHORIZED OFFICER OF THE SEARCH PARTY JUST WROTE THE ANSWER THAT THIS IS THE AMOUNT PAID TO SHRI GUR UMUKH SUKHWANI ON THE OCCASION OF OPENING OF THE BUNGALOW . 9 3.3 SO FAR AS REPLY TO QUESTION NO.6 RECORDED ON 20 -07-2006 IS CONCERNED THE ASSESSEE SUBMITTED THAT SHE HAS MEREL Y CONFIRMED THE MODE OF PAYMENT IN HER REPLY TO QUESTION NO.6 O N 14-06-2006. THE QUESTION PUT TO HER HUSBAND SHRI GURUMUKH SUKHW ANI AND HIS REPLY WERE ALSO BROUGHT TO THE NOTICE OF THE LD.CIT (A). IT WAS CATEGORICALLY STATED THAT THE ASSESSEE HAS NEVER AD MITTED THAT SHE HAS GIVEN RS.1.50 CRORES TO HER HUSBAND. ALTERNATI VELY, IT WAS SUBMITTED THAT EVEN IF IT IS ASSUMED THAT THE ASSES SEE HAS MADE ADMISSION, HOWEVER, THE SAME HAS BEEN RETRACTED BY HER VIDE AFFIDAVIT DATED 05-08-2006. RELYING ON VARIOUS DEC ISIONS, IT WAS ARGUED THAT EVIDENCES BROUGHT ON RECORD BY WAY OF C ONFESSION WHICH STOOD RETRACTED MUST BE SUBSTANTIALLY CORROB ORATED BY OTHER INDEPENDENT OR COGENT EVIDENCES WHICH WOULD LEND AD EQUATE ASSURANCE TO THE COURT THAT IT MAY SEEK TO RELY THE REUPON. THE INITIAL BURDEN TO PROVE THAT THE CONFESSION WAS VOL UNTARY IN NATURE AND IS CORRECT IS ON THE DEPARTMENT. IT WAS ARGUED THAT NO UNDISCLOSED INCOME OR ASSET WAS FOUND AT THE TIME O F SEARCH ACTION WHICH IS EVIDENT FROM THE CASH AND JEWELLERY FOUND. RELYING ON VARIOUS DECISIONS IT WAS SUBMITTED THAT THE ADDITIO N MADE SOLELY ON THE BASIS OF STATEMENT OF THE ASSESSEE RECORDED DUR ING THE COURSE OF SEARCH ACTION CANNOT BE THE BASIS FOR ADDITION. IT WAS ACCORDINGLY ARGUED THAT THE ADDITION SHOULD BE DELETED. 4. HOWEVER, THE LD.CIT(A) WAS ALSO NOT CONVINCED WI TH THE ARGUMENTS ADVANCED BY THE ASSESSEE AND UPHELD THE A DDITION MADE BY THE AO. HE DISTINGUISHED THE VARIOUS DECISIONS CITED BY THE ASSESSEE. WHILE DOING SO, HE RELIED ON THE PROVISI ONS OF SECTION 10 132(4A) AND PRESUMPTIONS THEREIN THAT THE BOOKS OF ACCOUNT, DOCUMENTS ETC. FOUND DURING THE COURSE OF SEARCH AC TION ARE TRUE AND CORRECT. ACCORDING TO HIM, SINCE THE ENTRY REL ATING TO RS.150 LAKHS APPEARING IN THE DIARY WAS SEIZED FROM THE PR EMISES OF THE ASSESSEE THEREFORE THE PRESUMPTION U/S.132(4A) WILL BE APPLICABLE. HE HELD THAT THE ADDITION MADE BY THE AO AMOUNTING TO RS.150 LAKHS IS BASED ON NOTINGS AVAILABLE IN THE DIARY AN D ALSO THE STATEMENT RECORDED ON OATH ON THE FIRST DAY OF THE SEARCH, I.E. 14- 06-2006 AND CONCLUDING DAY OF THE SEARCH. HE OBSER VED THAT THOUGH THE HUSBAND OF THE ASSESSEE HAD STATED ON 20 -07-2006 THAT THE FIGURE OF RS.150 LAKHS IS RS.1.50 LAKHS WHICH W AS ALSO SPECIFICALLY SUPPORTED BY AN AFFIDAVIT ON 05-08-200 6, HOWEVER THESE DEVELOPMENTS CANNOT BE GIVEN MUCH IMPORTANCE BECAUSE A CLEAR CUT ENTRY IS AVAILABLE IN THE DIARY WHICH HAS BEEN EXPLAINED PROPERLY BY THE PERSON WHO HAS ADMITTED AND NOTED I T. 4.1 AS REGARDS THE CONTENTION THAT THE QUESTIONS WE RE NOT FRAMED PROPERLY AND THAT NO LEADING QUESTIONS WERE ASKED, THE LD.CIT(A) HELD THAT THESE DO NOT SHOW ANYTHING STRO NG ENOUGH TO MITIGATE THE EVIDENCES GATHERED OR FINDINGS OBTAINE D DURING THE SEARCH. ACCORDING TO HIM, THE FINDING OF THE AO IS SUPPORTED BY THE STATEMENT DATED 14-06-2006 RECORDED U/S.132(4) WHICH IS ALSO CONFIRMED IN THEIR STATEMENT RECORDED U/S.132(4) ON 20-07-2006. ACCORDING TO HIM, IT IS A TRITE LAW THAT A STATEMEN T GIVEN ON OATH ON FIRST OCCASION GENERALLY GIVES A TRUE PICTURE OF TH E MATTER. AS REGARDS THE CONTENTION OF THE ASSESSEE THAT THE STA TEMENT OF THE ASSESSEE AND HER HUSBAND ON 20-07-2006 WERE RECORDE D IN SEPARATE 11 ROOMS AND THERE WERE NO OCCASION TO INTERACT, THE L D.CIT(A) HELD THAT IT IS NOT POSSIBLE THAT THE ASSESSEE AND HER H USBAND COULD NOT INTERACT FOR 28 DAYS BETWEEN 14-06-2006 TO 20-07-20 06. HE FURTHER OBSERVED THAT THE HUSBAND OF THE ASSESSEE H AD TAKEN A STAND THAT HE DOES NOT KNOW ABOUT THE WRITING IN THE DIAR Y. RELYING ON THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN T HE CASE OF DHANVARSHA BUILDERS AND DEVELOPERS PVT. LTD. VS. DC IT REPORTED IN 105 TTJ 376 TO THE PROPOSITION THAT THE STATEMEN T RECORDED U/S.132(4) CAN BE USED AS EVIDENCE IN THE CONTEXT O F FACTS FOUND IN SEARCH NOT WITHSTANDING RETRACTION BY THE ASSESSEE, HE UPHELD THE ACTION OF THE AO IN MAKING THE ADDITION OF RS.1.50 CRORES. 4.2 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US. 5. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALLE NGED THE ORDER OF THE CIT(A). REITERATING THE ARGUMENTS ADV ANCED BEFORE THE AO AND THE CIT(A) HE SUBMITTED THAT THERE WAS N O CATEGORICAL ADMISSION BY THE ASSESSEE AS TO THE UNDISCLOSED INC OME OR UNACCOUNTED INCOME. THE ASSESSEE, UNDER MISTAKEN B ELIEF OF FACT, STATED THAT SHE HAD GIVEN RS.150 LAKHS INSTEAD OF R S.1.50 LAKHS IN THE STATEMENT DATED 14-06-2006. IN THE SECOND STAT EMENT DATED 20- 07-2006 THE ASSESSEE ONLY CONFIRMED THE MODE OF PAY MENT. THE SEARCH PARTY TACTFULLY ASKED THE QUESTION WITHOUT R EFERRING TO OTHER AMOUNTS ON THE SAID PAPER AND REFERRING TO THE AMOU NT IN QUESTION AS RS.1.50 CRORE. HE SUBMITTED THAT NO FURTHER QUE STIONS OR QUERIES ABOUT THE UTILIZATION OF CASH WERE PUT TO THE ASSES SEE. HE SUBMITTED THAT NEITHER THE AO NOR THE CIT(A) HAD EN QUIRED ABOUT 12 THE SOCALLED UNDISCLOSED INCOME. HE BROUGHT TO THE NOTICE OF THE BENCH THE MANNER IN WHICH THE QUESTIONS WERE ASKED TO THE ASSESSEE AND HER HUSBAND. NO ENQUIRY WAS CONDUCTED AS TO THE UTILIZATION OF SUCH HUGE CASH HANDED OVER BY THE AS SESSEE TO HER HUSBAND. HE SUBMITTED THAT THE STATEMENT OF HUSBAN D OF THE ASSESSEE RECORDED U/S.132(4) WAS BRUSHED ASIDE. ME RELY BECAUSE THE ASSESSEE FORGOT TO PUT THE DOT MARK BETWEEN 1 A ND 50 THE DEPARTMENT IS TREATING THE FIGURE AS RS.150 LAKHS I NSTEAD OF RS.1.50 LAKHS. RELYING ON VARIOUS DECISIONS HE SUBMITTED T HAT THE PRESUMPTION U/S.132(4A) OF THE I.T. ACT, 1961 IS RE BUTTABLE. 5.1 THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT NO ADDITION CAN BE MADE ON THE BASIS OF RETRACTED STATEMENT OF THE ASSESSEE RECORDED DURING THE COURSE OF SEARCH ACTION UNLESS THE REVENUE BRINGS ON RECORD ANY CORROBORATIVE EVIDENCE. TO TH IS PROPOSITION, HE RELIED ON THE FOLLOWING DECISIONS : I. CIT VS. BHUVANENDARAN & OTHERS 303 ITR 235 (MAD) II. SHREE GANESH TRADING CO. VS. CIT 84 CCH 025 (JHARKHAND) III. KAILASHBEN MANHARILALA CHOKSHI VS. CIT 328 ITR 411 IV. CIT VS. UTTAMCHAND JAIN 320 ITR 554 (BOMBAY) V. N. NARAYAN BROS VS. ACIT 339 ITR 192 (MAD.) 5.2 HE SUBMITTED THAT PRESUMPTION U/S.132(4A) IS RE BUTTABLE ONE AND RELATES TO QUESTION OF FACT. IN ABSENCE OF ANY CORROBORATIVE MATERIAL NO ADDITION CAN BE MADE IN T HE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. FOR THIS PROPOSITIO N, HE RELIED ON THE FOLLOWING DECISIONS: 13 I. P.R. METRANI VS. CIT 287 ITR 209 (SC) II. CIT VS. S.M.S. INVESTMENT CORPORATION PVT.LTD. 207 ITR 364 (RAJ.) III. CIT VS. VEDPRAKASH CHOUDHARY 305 ITR 245 (DEL HI) 5.3 SO FAR AS THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF DHARVARSHA BUILDERS AND DEVELOPERS PVT. LTD., (SUPRA) RELIED ON BY THE LD.CIT(A) TO THE PROPOSITION THAT THE STATEMENT RECORDED U/S.132(4) CAN BE USED AS EVIDENCE IN THE BLOCK ASSESSMENT IN THE CONTEXT OF THE FACTS FOUND IN SEA RCH NOTWITHSTANDING RETRACTION, HE SUBMITTED THAT THE S AID JUDGMENT IS DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE FOR THE FOLLOWING REASONS : A) IN THE CASE CITED BY LD. CIT(A) THE ASSESSEE WAS FOUN D IN POSSESSION OF METICULOUS RECORD REGARDING ON MONIES RECEI VED IN RESPECT OF VARIOUS SHOPS AND GODOWN. THERE IS NO RECORD LEAVE ALONE METICULOUS RECORD. B) AFTER DECODING THE DOCUMENT IT TALLIED WITH THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THERE IS NO SUCH CASE OF FIGURES IN DIARY BEI NG TALLIED WITH ACCOUNTS C) DURING THE SEARCH COMPLETE DETAILS WERE FOUND SHOW ING THE NAME OF PURCHASERS, SALE CONSIDERATION, AMOUNT RECEIVED IN C ASH AND AMOUNT RECEIVED IN CHEQUE AND AMOUNT RECEIVABLE. NO SUCH CASE EXCEPT THE INCORRECT WRITING. D) THE DIRECTOR OF THE ASSESSEE COMPANY MADE A CATEGORI CAL ADMISSION THAT THE AMOUNT RECEIVED IN CASH IS NOT SHOWN IN THE B OOKS OF ACCOUNTS AND THAT THE SAME WILL BE DECLARED IN THE BLOCK RETU RN. THERE IS NO CATEGORICAL ADMISSION. THE AO AS WELL AS CIT(A) HAVE DR AWN INFERENCE. E) RETRACTION WAS AFTER FULL TWO MONTHS FROM THE DATE OF RECORDING OF STATEMENT. CLARIFICATION/RETRACTION WAS WITHIN FIFTEE N DAYS. F) THE AO HAD VERIFIED CASH RECEIPTS FROM SOME OF TH E CUSTOMERS. GURUMUKH SUKHWANI DENIED HAVING RECEIVED THE AMOUNT UNDER CONSIDERATION HE ACCORDINGLY SUBMITTED THAT THE ADDITION MADE BY THE AO SUSTAINED BY THE CIT(A) SHOULD BE DELETED. 14 6. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASSESSING OFFICER, IN THE INSTANT CASE, HAS MADE AD DITION OF RS.1,50,00,000/- IN THE HANDS OF THE ASSESSEE ON TH E BASIS OF A NOTING IN THE DIARY WHICH WAS FOUND AND SEIZED FROM THE RESIDENCE OF THE ASSESSEE. ADMITTEDLY, THE DIARY BELONGS TO THE HUSBAND OF THE ASSESSEE AND THE HANDWRITING IS THAT OF THE ASS ESSEE. ON THE BASIS OF THE NOTING IN THE DIARY AND THE STATEMENT OF THE ASSESSEE THAT SHE HAS PAID RS.150 LAKHS TO HER HUSBAND FOR T HE HOUSE OPENING CEREMONY, THE ASSESSING OFFICER MADE THE AD DITION WHICH HAS BEEN CONFIRMED BY THE CIT(A). 7.1 IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT SINCE THE ASSESSEE IS NOT AN EDUCATED LADY SHE HAD NOT PUT . AFTER 1 AND THE AMOUNT SHOULD BE READ AS RS.1.50 LAKHS AS AGAINST RS.150 LAKHS. IT IS ALSO THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT WHEN THE HUSBAND OF THE ASSESSEE WAS CONFRONTED, HE IN HIS STATEMENT RECORDED U/S.132(4) ON 20-07-2006 HAS CORRECTED THE STATED POSITION AND THEREFORE IF THE DEPARTMENT HAS TO RELY ON THE STATEMENT MADE U/S.132(4) BY THE ASSESSEE, THEN EQUALLY THEY HAVE TO GIVE IMPORTANCE TO THE STATEMENT OF THE HUS BAND OF THE ASSESSEE, ALSO RECORDED U/S.132(4) OF THE INCOME TA X ACT. 15 7.2 WE FIND SOME FORCE IN THE ABOVE SUBMISSION OF T HE LD. COUNSEL FOR THE ASSESSEE. THIS IS A FACTUAL ISSUE. AFTER PUTTING THE QUERY TO THE ASSESSEE DURING THE COURSE OF SEARCH U /S.132(4) THE SEARCH PARTY HAD NOT ASKED ANY FURTHER QUESTIONS AB OUT THE UTILISATION OF CASH EXCEPT THE MANNER OF PAYMENT OF SUCH CASH. FROM THE SCANNED DOCUMENT AND THE SUBSEQUENT QUESTI ONS AND ANSWERS REPRODUCED BY THE ASSESSING OFFICER FROM PA GE 3 ONWARDS OF THE ASSESSMENT ORDER, WE FIND ALL THESE ENTRIES ARE IN THOUSANDS EXCEPT ONE ITEM OF RS.1.00 LAKH FOR ELECT RICAL DECORATION EXPENSES PAID TO ONE MR. SUNIL AND ANOTH ER RS. 1 LAKH GIVEN TO SHRI GURUMUKH SUKHWANI TO BE HANDED OVER TO THE OFFICE BOY SHRI T. TIMMU FOR PAYMENT OF VARIOUS EXPENSES T O LABOURERS. THERE IS NO SUCH ENTRY BEYOND RS.1 LAKH EXCEPT THE SOCALLED ENTRY OF RS.150 LAKHS. THEREFORE, WHEN THE SEARCH PARTY HAD SEEN THE ENTRY OF RS.150 LAKHS PAID BY THE ASSESSEE TO SHRI GURUMUKH SUKHWANI ON THE OCCASION OF HOUSE OPENING CEREMONY OF THEIR BUNGALOW AT 350, SINDH SOCIETY IN FEBRUARY 2004, TH EY SHOULD HAVE ASKED ATLEAST SOME FURTHER QUESTIONS AS TO THE NATURE OF VARIOUS EXPENSES FOR THAT CEREMONY OR THE UTILISATI ON OF THE SOCALLED CASH HANDED OVER BY THE ASSESSEE TO HER HU SBAND SO AS TO JUSTIFY THE HUGE AMOUNT OF RS.150 LAKHS SPENT FOR T HE HOUSE OPENING CEREMONY. THE STATEMENT GIVEN BY THE HUSBA ND OF THE ASSESSEE U/S.132(4), IN OUR OPINION, COULD NOT HAVE BEEN BRUSHED ASIDE, CONSIDERING THE FACT THAT HUGE AMOUNT WAS GO ING TO BE TAXED BY THE REVENUE ON THE BASIS OF A SINGLE STATEMENT M ADE BY THE ASSESSEE. 16 7.3 IN THE INSTANT CASE, THE ASSESSEE WHO HAD ADMIT TED TO HAVE PAID RS.150 LAKHS TO HER HUSBAND IN THE MONTH OF FE BRUARY 2004 ON THE OCCASION OF HOUSE OPENING CEREMONY HAS SUBSE QUENTLY RETRACTED SUCH STATEMENT BY WAY OF MAKING AN AFFIDA VIT. ALTHOUGH THE DEPARTMENT HAS REJECTED THE AFFIDAVIT TREATING THE SAME AS SELF- SERVING DOCUMENT, AT THE SAME TIME, THEY SHOULD NOT HAVE BRUSHED ASIDE THE STATEMENT OF THE HUSBAND OF THE ASSESSEE RECORDED U/S.132(4) WHO HAS CLARIFIED THAT NO SUCH AMOUNT OF RS.150 LAKHS WAS RECEIVED BY HIM FROM HIS WIFE AT THE TIME OF H OUSE OPENING CEREMONY AND IT WAS ONLY RS.1.50 LAKHS. HE HAD CAT EGORICALLY STATED IN QUESTION NO.19 IN HIS STATEMENT RECORDED ON 20-07-2006 THAT THE FIRST ENTRY IS OF RS.1.50 LAKHS AND NOT RS .150 LAKHS AS MENTIONED IN THE DIARY IN PAGE NO.59. THE STATEMEN T OF THE ASSESSEE RECORDED ON 14-06-2006 WAS SHOWN TO HER HU SBAND FOR THE FIRST TIME ON 20-07-2006 WHO HAD CLARIFIED THE SAME. 7.4 ALTHOUGH THE SEARCH TOOK PLACE ON 14-06-2006 AN D THE DIARY CONTAINING THE NOTING WAS SEIZED ON THAT DATE AND T HE STATEMENT OF THE ASSESSEE WAS RECORDED ON 14-06-2006, HOWEVER, T HE SEARCH PARTY HAS NEVER CONFRONTED THE HUSBAND OF THE ASSES SEE ON THE DATE OF SEARCH REGARDING THE RECEIPT OF RS.150 LAKHS GIV EN BY HIS WIFE TO HIM ON ACCOUNT OF HOUSE OPENING CEREMONY. IN OU R OPINION, WHEN THE TWO STATEMENTS ARE RECORDED U/S.132(4), ON E FROM THE ASSESSEE AND ANOTHER FROM THE HUSBAND OF THE ASSESS EE ON THE SAME ISSUE ON DIFFERENT DATES, WHICH ARE CONTRADICTORY T O EACH OTHER, THE DEPARTMENT IN OUR OPINION IS DUTY BOUND TO MAKE FU RTHER ENQUIRY SO AS TO ARRIVE AT THE CORRECT POSITION. IN THE IN STANT CASE, THE 17 ASSESSEE, AFTER MAKING THE STATEMENT, HAS SUBSEQUEN TLY RETRACTED AT THE FIRST AVAILABLE OPPORTUNITY WHEN THE MISTAKE WA S NOTICED. THE HUSBAND OF THE ASSESSEE IN HIS STATEMENT RECORDED U /S.132(4) HAS CATEGORICALLY STATED THAT THE ENTRY IS RS.1.50 LAKH S AND NOT RS.150 LAKHS. THE DEPARTMENT HAS NOT MADE ANY FURTHER EFF ORT TO FIND OUT FROM ANY OF THE RECIPIENTS WHO MIGHT HAVE RECEIVED SUCH HUGE AMOUNTS FROM THE SOCALLED RS.150 LAKHS GIVEN BY THE ASSESSEE TO HER HUSBAND IN THE MONTH OF FEBRUARY 2004 FOR THE H OUSE OPENING CEREMONY. 7.5 NO ENQUIRY OR INVESTIGATION WAS MADE AS TO THE UTILISATION OF SUCH HUGE CASH HANDED OVER BY THE ASSESSEE TO HE R HUSBAND. NO UNDISCLOSED INVESTMENT OF EQUIVALENT MAGNITUDE HAS BEEN FOUND. FURTHER, IN THE STATEMENT RECORDED ON 20-07-2006, T HERE IS NO REFERENCE TO THE AMOUNTS OTHER THAN RS.150 LAKHS. WE, THEREFORE, FIND FORCE IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE, WHO IS NOT HIGHLY EDUCATED, HAD FORGOTTEN TO PUT . IN BETWEEN THE FIGURES. AT THE TIME SAME, IT I S ALSO NOT POSSIBLE TO BELIEVE THE THEORY THAT THE AMOUNT OF RS.150 LA KHS IS RS.1.50 LAKHS ONLY AND NOT RS.15.00 LAKHS. THE LD. COUNSEL FOR THE ASSESSEE COULD NOT EXPLAIN AS TO WHY IT SHOULD NOT BE READ AS RS.15.00 LAKHS. 7.6 IT HAS BEEN HELD IN VARIOUS JUDICIAL DECISIONS THAT PRESUMPTIONS U/S.132(4A) OF THE INCOME TAX ACT IS R EBUTTABLE ONE AND RELATES TO QUESTION OF FACT. IN ABSENCE OF ANY CORROBORATIVE MATERIAL OR EVIDENCE, NO ADDITION CAN BE MADE IN TH E FACTS AND IN THE CIRCUMSTANCES OF THE INSTANT CASE. SINCE NO MA TERIAL WAS FOUND 18 DURING THE COURSE OF SEARCH OTHER THAN THE NOTING O F THE SOCALLED RS.150 LAKHS AND THE DEPARTMENT HAS NOT MADE ANY EF FORT TO NEGATE THE STATEMENT GIVEN BY THE HUSBAND OF THE AS SESSEE RECORDED U/S.132(4) THAT THE AMOUNT IS RS.1.50 LAKHS AND NOT RS.150 LAKHS AND CONSIDERING THE FACT THAT THE ASSESSEE HAS ALSO RETRACTED HER STATEMENT, THEREFORE, APPLYING THE THEORY OF HUMAN PROBABILITY WE HOLD THAT THE AMOUNT SHOULD BE READ AS RS.15.00 LAK HS. THE ORDER OF THE CIT(A) IS ACCORDINGLY MODIFIED TO THIS EXTEN T AND THE ADDITION IS SUSTAINED TO THE EXTENT OF RS.15 LAKHS. THE ASSESSEE GETS RELIEF OF THE BALANCE AMOUNT. THE GROUND RAIS ED BY THE ASSESSEE IS ACCORDINGLY PARTLY ALLOWED. 8. GROUND OF APPEAL NO.2 BY THE ASSESSEE READS AS U NDER : 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE HONBLE CIT (APPEALS) ERRED IN UPHOLDING/CONFIRMING THE TRE ATMENT OF THE LONG TERM CAPITAL GAIN OF RS.44,25,000/- DECLARED BY THE APPELLANT ON SALE OF SHARES OF SURYADEEP SALT LIMITED BY THE LEARNED ASS ESSING OFFICER AS PROFITS AND GAINS OF THE APPELLANT ON THE GROUNDS A) THAT THE CLAIM OF THE APPELLANT IN RESPECT O F LONG TERM CAPITAL GAIN IS FICTITIOUS CLAIM AND B) THAT THE ASSESSEE IS TRADING IN SHARES THE HONBLE CIT(APPEALS) ERRED IN CONFIRMING THE AC TION LEARNED ASSESSING OFFICER OF TREATING THE LONG TERM CAPITAL GAINS AS PROFITS AND GAINS OF THE BUSINESS WITHOUT APPRECIATING THE FACTS OF THE CASE. THE APPELLANT HEREBY PRAYS THAT THE LONG TERM CAPITAL G AIN OF RS.44,25,000/- MAY PLEASE BE RESTORED AND ADDITION AS NORMAL BUSINESS INCOME MAY PLEASE BE DELETED. 8.1 THE AO DURING THE COURSE OF ASSESSMENT PROCEEDI NGS NOTED THAT ASSESSEE HAS DISCLOSED LONG TERM CAPITAL GAIN TO THE TUNE OF RS.44,28,795/- ON ACCOUNT OF PURCHASE AND SALE OF S HARES OF SURYADEEP SALT LTD., THE DETAILS OF PURCHASE AND SA LE OF SHARES ARE AS UNDER : 19 PURCHASES SALES DATE NO. OF SHARES AVERAGE RATE RS CONSIDERATION RS DATE NO. OF SHARES AVERAGE RATE RS CONSIDERATION RS 1-10-2002 40,000 3.30 1,32,000 12-12-2003 40,000 RUCHIRA'S 66.95 26,78,000 31-10-2002 30,000 3.10 93000 29-12-2003 15,000 RUCHIRA'S 65.80 9,87,000 30-12-2003 10,000 RUCHIRA'S 68 6,80,000 15-01-2004 5,000 RUCHIRA'S 61 3,05,000 2,25,000 46,50,000 NET PROFIT 44,25,000 8.2 IN WAS EXPLAINED BY THE ASSESSEE THAT THIS BEIN G LONG TERM CAPITAL GAIN THE SAME IS ELIGIBLE FOR INVESTMENT IN NEW HOUSE AND THE ASSESSEE HAS ACCORDINGLY CLAIMED DEDUCTION TO T HE TUNE OF RS.9,18,117/- OUT OF THE CAPITAL GAIN ON ACCOUNT OF INVESTMENT IN NEW HOUSE. ON THE BALANCE AMOUNT OF RS.35,10,678/- THE ASSESSEE HAS PAID TAX @10%. 8.3 THE AO REFERRED TO THE STATEMENT OF SHRI GURUMU KH SUKHWANI, HUSBAND OF THE ASSESSEE RECORDED ON THE D ATE OF SURVEY U/S.133A IN THE CASE OF SUKHWANI ASSOCIATES, 207/2A , STATION ROAD, PIMPRI ON 16-06-2006. IN HIS REPLY TO THE QU ESTION PUT BY THE AUTHORISED OFFICER, SHRI GURUMUKH SUKHWANI HAD ADMITTED THAT THE PROFIT ON ACCOUNT OF SALE OF SHARES OF SUR YADEEP SALT LTD. IS NOT A GENUINE LONG TERM CAPITAL GAIN AND HAD OFF ERED TO PAY TAX ON THE SAME AMOUNT. HOWEVER, THE AO NOTED THAT IN THE RETURN FILED BY THE ASSESSEE IN RESPONSE TO NOTICE U/S.153 A THE ASSESSEE HAS RETRACTED FROM THE COMMITMENT TO HER HUSBAND AN D CLAIMED THE GAIN ON ACCOUNT OF SALE OF SHARES OF SURYADEEP SALT LTD. AS LONG TERM CAPITAL GAIN. SINCE THE AO WAS OF THE OPINION THAT THERE WAS A QUESTION MARK ON THE GENUINENESS OF THE PURCHASE OF THESE SHARES 20 IN VIEW OF THE STATEMENT BY SHRI GURUMUKH SUKHWANI, THE AO ASKED THE ASSESSEE TO PROVE THE GENUINENESS OF SUCH LONG TERM CAPITAL GAIN ON ACCOUNT OF SALE OF SHARES OF SURYAD EEP SALT LTD. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASS ESSEE THE AO REJECTED THE CLAIM OF SUCH LONG TERM CAPITAL GAIN O N ACCOUNT OF PURCHASE AND SALE OF SHARES OF SURYADEEP SALT LTD. HOLDING THE SAME TO BE A SHAM TRANSACTION AND BROUGHT THE ENTIR E AMOUNT TO TAX. 9. IN APPEAL THE LD.CIT(A) UPHELD THE ACTION OF THE AO BY OBSERVING AS UNDER : 5.3. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND THE LAW AS ARE APPARENT FROM RECORDS. THE FINDINGS OF THE ASSESSING OFFICER AND THE SUBMISSIONS OF THE APPELLANT HAS ALREADY BEEN GIVEN IN PARA 5.1 AND 5.2 OF THIS ORDER. IT CAN BE SE EN THAT THE APPELLANT HAS DECLARED LONG TERM CAPITAL GAINS OF RS.4 4,28,795 ON PURCHASE AND SALE OF SHARES OF SURYADEEP SALT LTD. AS PE R THE DETAILS AVAILABLE ON RECORD. 70,000 SHARES OF SURYADEE P SALT LTD. WAS CLAIMED TO HAVE BEEN PURCHASED BY THE APPELLANT F OR A SUM OF RS.2,25,000 AT AN AVERAGE RATE OF RS.3.2 PER SHARE ON 1.10.2010 AND 31.10.2010 WHICH WAS SUBSEQUENTLY SOLD FOR RS.46,50, 000 ON 12.12.2003, 31.12.2003 AND 15.1.2004 ON AN AVERAGE RATE OF RS.67 PER SHARE TO DECLARE LONG TERM CAPITAL GAINS OF RS.44,25,000 TAXABLE @ 10%. AS NOTED ABOVE, SUKHWANI GROUP WAS SEAR CHED ON 16.6.2006 AND THEREFORE, DURING THE SIMULTANEOUS S URVEY CONDUCTED U/S 133A AT THE PREMISE OF SUKHWANI ASSOCIAT ES SITUATED AT 208/2A, STATION ROAD, PIMPRI SHRI GURUMU KH SUKHWANI, THE HUSBAND OF THE APPELLANT WAS QUESTIONED ON THIS ISSUE ON THE BASIS OF DETAILS FOUND RELATING TO THE ABOV E TRANSACTIONS AT THE AFORESAID PREMISE. MR. GURUMUKH SUK HWANI ADMITTED THAT THE PROFIT ON SALE OF SHARES OF SURYADEE P SALT LTD. IS NOT A GENUINE LONG TERM CAPITAL GAINS AND THEREFORE, IT WAS ADMITTED THAT THE INCOME AS PER REGULAR FULL RATE WI LL BE OFFERED. HOWEVER, THE SAME WAS NOT ADHERED TO BY THE APPELLAN T IN THE RETURN FILED IN RESPONSE TO NOTICE U/S 153A AND LONG TERM CAPITAL GAINS WAS CLAIMED. THE ASSESSING OFFICER OBSERVING THE SAME A SKED THE APPELLANT TO EXPLAIN THE ABOVE. IT WAS CLA'MED BY T HE APPELLANT THAT THE PURCHASES ARE SUPPORTED BY CONTRACT NOTES AND THE P AYMENT FOR THE SAME WAS MADE THROUGH CHEQUE AND THEREFORE, THE TRANSACTION IS GENUINE FOR LONG TERM CAPITAL GAINS. IT WAS ALSO CLA IMED THAT THE RELEVANT DOCUMENTS WERE SEIZED IN BUNDLE NO. 47. THE ASSESSING OFFICER WAS NOT SATISFIED AND AFTER NOTICING THAT ( A) THE SHARES OF SURYADEEP SALT LTD. IS PART OF THE PENNY STOCK IN W HICH MANIPULATION WERE CARRIED OUT BY SPECIFIED BROKERS FOR GIVING BO GUS LONG TERM CAPITAL GAINS, (B) THE AFORESAID SHARES HAS VERY LI TTLE FINANCIAL WORTH FOR WHICH ANY PERSON WOULD BE INTERESTED IN INVESTI NG IT, AND (C) FOR THIS REASON EVEN MR. GURUMUKH SUKHWANI ADMITTED THE SAME DURING 21 SURVEY, THE APPELLANT WAS ONCE AGAIN ASKED BY THE A SSESSING OFFICER TO ESTABLISH THE GENUINENESS OF THE TRANSACTIONS AN D ALSO TO SHOW CAUSE WHY EVEN IF THE AFORESAID TRANSACTION IS TREA TED AS GENUINE IT BE NOT CONSIDERED AS A BUSINESS ACTIVITY. THE APPELLAN T REITERATED HER CLAIM IN RESPECT OF TRANSACTION CARRIED OUT IN PENN Y STOCK. THE APPELLANT ALSO CLAIMED THAT THEY HAVE BEEN SHOWING T HE INVESTMENT IN SHARES FOR MANY YEARS AND THEREFORE, IT SHOULD NOT BE DISTURBED. IT WAS ALSO CONTENDED THAT THOUGH SHE COULD NOT PRODUCE THE BROKER FROM WHOM THE SHARES WERE PURCHASED AS HE IS NOT TRACEABLE, THE APPELLANT SHOULD NOT BE PENALIZED. ASSESSING OFFICE R WAS NOT SATISFIED AND AFTER POINTING OUT ALL THE TYPICAL FE ATURES OF WELL KNOWN PENNY STOCK TO BE EXISTING IN THIS CASE ALSO POINTE D OUT THAT EVEN THOUGH THE PAYMENT FOR PURCHASE WAS MADE BY CHEQUE BUT THE SAME WAS MADE ON 2.1.2003 I.E. ALMOST AFTER MORE THAN TWO MONTHS FROM THE DECLARED DATE OF PURCHASE, CONCLUDED THE TRANSA CTION TO BE SHOWN. THE ASSESSING OFFICER ALSO REFERRED TO AND Q UOTED THE REPLIES OF MR. GURUMUKH SUKHWANI ON THIS ISSUE ON DIFFERENT DATES TO ESTABLISH THAT MR. GURUMUKH SUKHWANI HAS CLEARLY ADM ITTED THAT THE LONG TERM CAPITAL GAINS SHOWN BY HIM AND HIS WIFE IN RESPECT OF PENNY STOCK LIKE THE SURYADEEP SALT LTD. THROUGH TH E BROKER DRISHTI SECURITIES ARE BOGUS. THE ASSESSING OFFICER ALSO PO INTED OUT THAT THE PURCHASE WAS ALSO MADE THROUGH A BOMBAY BROKER WHO I S NOT THE REGULAR BROKER OF THE APPELLANT. IT HAS ALSO BEEN P OINTED OUT THAT THE SHARES IN DEMAT ACCOUNT CAME ON TRANSFER ON 14.6.20 03 FEW MONTHS BEFORE SALE IN DEC, 2003 AND JAN. 2004 AND THEREFOR E, THE ASSESSING OFFICER CONCLUDED THAT THE LONG TERM CAPITAL GAINS IN RESPECT OF SURYADEEP SALT LTD. IS BOGUS AND THE AMOUNT CREDITE D IS TO BE ASSESSED AS UNEXPLAINED INCOME. THE ASSESSING OFFIC ER HAS ALSO ALTERNATIVELY ARGUED THAT SHRI GURUMUKH SUKHWANI HAS ADMITTED ON OATH THAT IT HAS SHARE TRANSACTIONS ON HIS BEHALF AS WELL AS ON BEHALF OF OTHER FAMILY MEMBERS AND AS THE TRANSACTIONS ARE FR EQUENT, REGULAR, VOLUMINOUS, REPETITIVE IN AN ORGANIZED MANNER, THE SAME SHOULD ALSO BE TREATED AS BUSINESS ACTIVITY. THE AB OVE FINDING WAS GIVEN WITHOUT PREJUDICE TO THE FINDING GIVEN THAT T HE LONG TERM CAPITAL GAINS ON SURYADEEP SALT LTD. IS BOGUS. AS A GAINST THIS THE APPELLANT HAS MADE THEIR SUBMISSION VIDE LETTER DAT ED 20.7.2009 AND IT HAS BEEN CONTENDED THAT THE ASSESSING OFFICER HAS ERRED IN TREATING THE LONG TERM CAPITAL GAINS RELATING TO SURYADEEP S ALT LTD. AS SHAM TRANSACTIONS BY PLACING HEAVY RELIANCE ON THE STATEMENT OF HER HUSBAND DURING SURVEY WHICH AS PER MANY JUDGMENTS C ANNOT HAVE MUCH EVIDENTIARY VALUE ON ITS OWN. THE APPELLANT AL SO CONTENDED THAT THE STATEMENT WAS GIVEN IN HIS CONFUSED STATE OF MIND. RELIANCE WAS AGAIN PLACED ON THE CONTRACT NOTE AND PAYMENT F OR PURCHASE BY CHEQUE. IT WAS ALSO STATED THAT THE PURCHASE TRANSAC TION CANNOT BE TREATED AS BOGUS ONLY BECAUSE THE SAME WAS NOT THROU GH BSE. ON THE POOR FINANCIAL NET WORTH OF THE SURYADEEP SALT LTD., IT WAS CONTENDED THAT NO ADVERSE INFERENCE CAN BE DRAWN. ON THE ALTER NATE ARGUMENT OF THE ASSESSING OFFICER TO TREAT THE TRANSACTION AS B USINESS, IT HAS BEEN STATED THAT THE APPELLANT HAS BEEN SHOWING SHARE TRA NSACTIONS UNDER THE HEAD INVESTMENT IN THE BALANCE SHEET AND THEREFORE, THE SAME COULD NOT BE DISTURBED. THE DETAILS OF FINDINGS OF THE ASSESSING OFFICER AND THE SUBMISSIONS OF THE APPELLANT CAN BE SEEN FROM PARA 5.1 AND 5.2 OF THIS ORDER. ON CAREFUL CONSIDERATION OF THE FACTS OF THE CASE AND THE LAW AS ARE APPARENT FROM THE RECORDS, IT CAN BE NOTED THAT DURING THE COURSE OF SEARCH AND SURVEY CONDUCT ED IN THE SUKHWANI GROUP, IT WAS FOUND AT THE BUSINESS PREMIS E OF THE APPELLANT GROUP THAT THE APPELLANT AS WELL AS OTHER FAMILY MEMBERS WERE HEAVILY ENGAGED IN THE SHARE TRANSACTIONS AND SHRI GURUMUKH SUKHWANI HAS BEEN MANAGING THIS ASPECT OF THE ACTIV ITY ON BEHALF OF THE FAMILY. THE STATEMENT OF SHRI GURUMUKH SUKHWANI WAS RECORDED ON OATH U/S 133A/ 131 WHEREIN HE CLEARLY ADMITTED TH E RELEVANT FACTS 22 AS CAN BE SEEN FROM THE EXTRACTS OF HIS STATEMENT Q UOTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. SO FAR A S THE ISSUE OF LONG TERM CAPITAL GAINS ON THE SALE OF PENNY STOCKS VIZ. SURYADEEP SALT LTD., IS CONCERNED , IT IS NOTED THAT SHRI GURUMUK SUKHWANI WAS CONFRONTED WITH THE RELEVANT FACTS VIZ. REASON FOR PURCHASE FROM A BOMBAY BROKER WHEN THE REGULAR TRANSACTIONS ARE THROUGH OTHER BROKERS, DELAY IN PAYMENTS FOR PURCHASE OF SURYADEEP SALT LTD., PURCHASE OF SURYADEEP SALT LTD. BEING NOT THROUGH STOCK EXCHANGE, ETC. AND MR. GURUMUKH CATEGORICALLY ADMITTED THAT THE LONG TERM CAPITAL GAINS DECLARED BY HIM AND HIS FAMILY MEMBER S ON SALE OF PENNY STOCKS IS BOGUS AND AGREED TO PAY THE TAX AT REGULAR RATES. HOWEVER, HE AND HIS FAMILY MEMBERS INCLUDING THE AP PELLANT DID NOT ADHERE TO THE AFORESAID COMMITMENT AND CLAIMED THE LONG TERM CAPITAL GAINS ON SALE OF SHARES OF SURYADEEP SALT L TD. AS TAXABLE AT CONCESSIONAL RATE OF 10%. IT IS A WELL KNOWN FACT THA T THE SHARES OF SURYADEEP SALT LTD. WAS PART OF THE BUNCH OF PENNY S TOCK WHICH WAS MANIPULATED DURING THIS PERIOD TO PROVIDE ENTRIES F OR LTCG TO PERSONS WHO WERE INTERESTED IN BUYING IT. THE MODUS OPERANDI OF THIS ACTIVITY IS ALSO WELL KNOWN. IN ALL SUCH TRANSA CTIONS THE BUYERS HAD TRANSACTED FOR PURCHASE OF PENNY STOCKS THROUGH SPECIFIED BROKERS OF MUMBAI GENERALLY, WHO ARE NOT THEIR REGUL AR BROKERS. THE PURCHASES WERE BACK DATED AND THEREFORE, EITHER THE PAYMENTS WERE MADE LATE IN CHEQUE OR MADE IN CASH OR INCOME WAS GE NERATED IN THE NAME OF THE BUYERS BY SHOWING SOME OTHER TRANSACTIO NS OF PROFIT ON TRADING OF SHARES WITH THE SAME BROKER FROM WHOM THE PENNY STOCKS WERE PURCHASED. THE BROKERS INVOLVED WERE HOLDING PENNY STOCKS IN SOME NAME OR THE OTHER WHEN THE PRICES WERE VERY VER Y LESS SO THAT THE PURCHASE TRANSACTION IS OF A NOMINAL AMOUNT. TH E BUYERS USE TO SALE THE STOCKS AFTER THE PRICES WERE JACKED UP THR OUGH CIRCULAR TRADING ETC. TO SHOW EARNING OF HUGE AMOUNT OF LONG TERM CAPITAL GAINS HAVING NO OR VERY LITTLE TAX IMPLICATION D EPENDING ON THE ASSESSMENT YEAR INVOLVED. AS THE SHARES WERE GIVEN IN PHYSICAL FORM, THE BUYERS USE TO SEND THE SHARES FIRST FOR RECORDI NG THEIR NAME AND EVEN THIS PROCESS WAS GENERALLY STAGE MANAGED AS EVEN THE MANAGEMENT OF PENNY STOCK COMPANIES WERE ALSO INVOL VED. THEREAFTER THE SHARES WERE DEMATERIALIZED BEFORE SE LLING IT THROUGH REGULAR BROKERS. IT HAS BEEN FOUND THAT THE PURCHAS ES ARE GENERALLY NOT THROUGH THE STOCK EXCHANGE BUT THE SALES ARE THROUG H THE STOCK EXCHANGES. THIS HAS BEEN THE STANDARD MODUS OP ERAND! FOR CONVERTING THE BLACK MONEY INTO THE WHITE MONEY. ALL T HESE FACTS ARE KNOWN AS THE SEBI, NSE, BSE AND THE INCOME TAX DEPARTMENT HAD INVESTIGATED THESE MATTERS IN DETAIL AND EVEN THE M EDIA HAD COVERED IT WIDELY. THE FACTS OF THE CASE OF THE APPEL LANT ARE EXACTLY SIMILAR TO THE MODUS OPERAND! FOLLOWED IN PENNY STOCKS . THE STOCK INVOLVED IS ALSO A PENNY STOCK. THE ASSESSING OF FICER HAS ANALYSED THESE FACTS IN DETAIL. IN THE CASE OF THE AP PELLANT, NOT ONLY THE FACTS WERE SIMILAR TO THE WELL KNOWN MODUS OPERAN D! BUT THE HUSBAND OF THE APPELLANT ADMITTED IN HIS STATEMENT REC ORDED ON OATH U/S 131 / 133A THAT THE TRANSACTIONS CARRIED OUT TO CLAIM LONG TERM CAPITAL GAINS ON SALE OF PENNY STOCKS LIKE S URYADEEP SALT LTD. ARE BOGUS AND HAS OFFERED TO PAY THE TAX ON TH E ENTIRE AMOUNT. HOWEVER, THE SAME WAS NOT HONOURED ON THE G ROUND THAT THE APPELLANT HAS NECESSARY EVIDENCE ON THE STRENGTH OF WHICH THE GENUINITY CAN BE HELD ESTABLISHED AND THE STATEMENT EA RLIER GIVEN WAS EITHER NOT RELIABLE OR CAN BE CONSIDERED TO HAVE B EEN GIVEN UNDER SOME CONFUSION. IT CAN ALSO BE SEEN THAT THE IS SUE RELATING TO ASSESSMENT OF TRANSACTIONS ARISING OUT OF PENNY ST OCK HAS REACHED UP TO THE STAGE OF DIFFERENT TRIBUNALS AND AR E, THEREFORE, AVAILABLE FOR GUIDANCE. IT IS ALSO A FACT THAT THERE IS A PARTICULAR PATTERN IN ALL THESE TRANSACTIONS WHICH ALSO EXISTS IN T HE CASE OF APPELLANT. THE APPELLANT HAS NOT BEEN ABLE TO DEMON STRATE THAT 23 THEIR CASE IS DIFFERENT FROM THE OTHER ASSESSEES INVOLV ED IN THE SAME ACTIVITY. AS CAN BE SEEN THAT THE SALES ARE GENE RALLY THROUGH STOCK EXCHANGE AND OTHER REGULAR BROKERS AND THE SH ARES ARE DEMATERIALIZED FEW DAYS TO MONTHS BEFORE THE SA LE. THEREFORE, IT CAN BE SEEN THAT THE SALE PROCEEDS ARE RECEIVED TH ROUGH STOCK EXCHANGE SYSTEMS BY CHEQUES WHICH ARE DEPOSITED IN BANKS. HOWEVER, IT IS WELL KNOWN THAT THE TRANSACTIONS HAVE B EEN MANIPULATED AND THE PURCHASES ARE NOT THROUGH REGULA R CHANNELS OF TRADING. THE APPELLANT ALSO AGREES TO THE SAME. H OWEVER, SHE CLAIMS THAT THIS FACT CANNOT BE HELD TO BE ESTABLISHING THAT THE TRANSACTION IS BOGUS. IT IS IMPORTANT TO NOTE THAT THE CLAIM HAS BEEN MADE BY THE APPELLANT REGARDING LONG TERM CAPITA L GAINS ON SALE OF SHARES OF SURYADEEP SALT LTD., ABOUT WHICH INFORMATION ARE AVAILABLE IN PUBLIC DOMAIN THAT IT WAS PART OF THE PENNY STOCK IN WHICH BOGUS TRANSACTIONS HAVE BEEN CARRIED OUT AND THE REFORE, A HEAVY ONUS WAS ON THE APPELLANT TO ESTABLISH THAT TH E TRANSACTIONS ARE GENUINE AND THEIR CASE IS DIFFERENT FROM THE OTHER PERSONS INVOLVED IN THE SAME ACTIVITY. FROM THE PERUSAL OF THE MATERIALS AVAILABLE ON THE RECORD, IT IS NOTED THAT THE APPELLAN T HAS FAILED TO DISCHARGE THE SAME. SHE HAS NOT BEEN ABLE TO SHOW AN YTHING TO DEMONSTRATE THAT THE FACTS IN THEIR CASE ARE DIFFERENT . THERE IS NO EXPLANATION AVAILABLE AS TO WHY THE APPELLANT TRANSAC TED WITH A BROKER INVOLVED IN THIS ACTIVITY WHEN HE IS NOT HER REGUL AR BROKER, THAT TOO WHEN NO OTHER TRANSACTION EVEN SUBSEQUENTLY WAS CARRIED OUT WITH HIM. THERE IS NO EXPLANATION WHY THE SA ID BROKER IS ABSCONDING AND HENCE COULD NOT BE PRODUCED. THERE IS NO EXPLANATION AVAILABLE FOR DELAYED PAYMENT, FOR TRANSA CTION NOT BEING THROUGH THE STOCK EXCHANGE, FOR DELAY IN PUTTIN G THE SHARES IN DEMAT ACCOUNT AND REASON FOR SELECTION OF THIS SCRIP WHEN THE FINANCIAL WORTH IS KNOWN TO BE DISMAL. THESE ASPECTS AL ONG WITH THE CONFESSIONAL STATEMENT GIVEN HAS CLEARLY ESTABLISH ED THAT THE ASSESSING OFFICER WAS RIGHT IN ASSESSING THE INCOME AS UNEXPLAINED MONEY OF THE APPELLANT INTRODUCED IN THE B OOKS THROUGH THE SHAM SHARE TRANSACTIONS OF SURYADEEP SAL T LTD. THIS FINDING GETS FURTHER SUPPORT FROM THE PRINCIPLE LAID IN SUMATI DAYAL VS. CIT (1995) 125 CTR (SC) 124 AND CIT VS. D URGA PRASAD MORE 1973 CTR (SC) 500. IT IS IMPORTANT TO FURTHER NO TE THAT HON'BLE ITAT, BANGALORE IN A SIMILAR CASE HAS HELD THE SE PRINCIPLES AS RELEVANT AND IMPORTANT, FOR DECIDING THE IS SUE OF ASSESSMENT OF LONG TERM CAPITAL GAINS ON SALE OF PENN Y STOCKS IN THE CASE OF ITO VS. SHANTILAL MUNNILAL (2009) 31 DTR (BANG) (TRIB) 388. HOWEVER, IN THE SAID CASE, THERE WAS NO CO NFESSIONAL STATEMENT AVAILABLE AND THEREFORE, THE HON'BLE ITAT AFTER CONSIDERING THE RELEVANCE OF AFORESAID PRINCIPLE LAID BY THE SUPREME COURT IN THE CASE OF SUMATI DAYAL AND DURGA P RASAD MORE, SET ASIDE THE ISSUE TO THE ASSESSING OFFICER FOR RE- EXAMINATION. IT IS ALSO IMPORTANT TO NOTE THAT OTHER TR IBUNALS INCLUDING ITAT, PUNE, IN CASES INVOLVING PENNY STOCKS HA VE ALLOWED THE LONG TERM CAPITAL GAINS TO BE ASSESSED AS SHORT TERM CAPITAL GAINS. REFERENCE FOR THIS CAN BE MADE TO THE C ASE OF SMT. SUREKHA BHAGVATIPRASADA MUNDADA VS. ITO 1(1), JALGAO N IN ITA NO. 1332/PN/2008 A.Y. 2005-06 AND OTHER CASES OF TH AT GROUP. THE ASSESSING OFFICER IN THE MUNDADA CASE, THROUGH INVE STIGATION HAS PROVED THAT THE PURCHASE BILLS ARE NOT RELIABLE BY MAKING ENQUIRIES WITH CALCUTTA STOCK EXCHANGE, AND THEREFORE, IT WAS HELD BY THE ITAT ON THE BASIS OF UNDISPUTED PERIOD OF HOLDIN G APPEARING IN THE DEMAT ACCOUNT THAT THE INCOME WILL BE SHORT TERM CAPITAL GAINS. HOWEVER, IN THE PRESENT CASE, THE ASSESSING OFFICER HAS ADDITIONALLY IN HIS POSSESSION, THE CONFESSION AL STATEMENT OF SHRI GURUMUKH SUKHWANI, WHEREIN THE FACT THAT THE TRANSACTIONS OF LONG TERM CAPITAL GAINS RELATING TO SUR YADEEP SALT 24 LTD. IS BOGUS, IS AVAILABLE. THEREFORE, THE FINDING OF T HE MUNDADA CASE CANNOT BE HELD TO BE APPLICABLE FULLY IN THE CA SE OF THE APPELLANT. CONSIDERING THE TOTALITY OF THE FACTS AND M ATERIALS AVAILABLE ON RECORDS, IT IS NOTED THAT SINCE THE TRANS ACTIONS ON WHICH LONG TERM CAPITAL GAINS WAS CLAIMED BY THE APPELL ANT RELATED TO PENNY STOCKS, THE ONUS WAS ON THE APPELL ANT TO SHOW THAT THEIR CASE IS DIFFERENT FROM THE OTHER PERSONS WH O WERE INVOLVED IN BUYING THE LONG TERM CAPITAL GAINS THROUGH P ENNY STOCKS. FURTHERMORE, THE APPELLANT ALSO HAD THE ONU S TO DISCHARGE AS TO WHY A WRONG CONFESSIONAL STATEMENT WAS GIVEN AN D WHETHER THE RETRACTION CAN BE TREATED AS CORRECT AND ACCEPTA BLE OR NOT. IT IS NOTED THAT THERE IS NO SATISFACTORY DISCHARGE OF THESE ONUSES. THEREFORE, IN THE ABSENCE OF THE SAME, IT CANNOT BE H ELD THAT THE APPELLANT HAS DISCHARGED THE ONUS CAST ON IT THAT THE TRANSACTION RELATING TO THE PENNY STOCK SHOWN BY IT WAS GENUINE IN ALL RESPECT. AS AGAINST THAT THE ASSESSING OFFICER IS ARMED WITH NUME ROUS EVIDENCES WHICH CLEARLY SHOWS THAT THE LTCG SHOWN IS B OGUS. IN VIEW OF THE ABOVE, I FIND NO INFIRMITY IN THE FINDING OF TH E ASSESSING OFFICER. AS THE SUBSTANTIVE FINDING HAS BEEN U PHELD, I DO NOT FIND IT NECESSARY TO ADJUDICATE ON THE STAND TAKEN BY THE ASSESSING OFFICER WITHOUT PREJUDICE TO THE ABOVE FINDING THAT THE SHARE TRANSACTION SHOULD BE TREATED AS ASSESSABLE UN DER THE HEAD BUSINESS. GROUND NO. 2 THEREFORE, FAILS. 9.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US. 10. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDER OF THE AO AND THE CIT(A) A ND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. THE LD. COUN SEL FOR THE ASSESSEE COULD NOT BRING ANY MATERIAL TO SUPPORT HI S CONTENTION THAT THE LONG TERM CAPITAL GAIN SHOWN ON ACCOUNT OF SALE AND PURCHASE OF SHARES OF SURYADEEP SALT LTD. ARE GENUINE. THE HUSBAND OF THE ASSESSEE HAD ALREADY ADMITTED THE SALE AND PURCHASE OF THE ABOVE SHARES ARE GENUINE. SINCE THE ORDER OF THE LD.CIT( A) COULD NOT BE CONTROVERTED BY THE LD. COUNSEL FOR THE ASSESSEE, T HEREFORE, WE FIND NO INFIRMITY IN THE SAME. ACCORDINGLY THE SAM E IS UPHELD AND THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. 25 11. GROUND OF APPEAL NO.3 BY THE ASSESSEE READS AS UNDER : 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE HONBLE CIT(A) ERRED CONFIRMING THE TREATMENT OF THE SHORT TERM CAPITAL GAIN OF RS.7,99,763/- ON SALE OF SHARES AS PR OFITS AND GAINS OF THE APPELLANT ON THE GROUNDS THAT THE ASSESSEE IS TRADING IN SHARES WITHOUT APPRECIATING THE FACTS OF THE CASE. T HE APPELLANT HEREBY PRAYS THAT THE SHORT TERM CAPITAL GAIN OF RS.7 ,99,763/- MAY PLEASE BE RESTORED AND ADDITION AS NORMAL BUSINESS INCO ME MAY PLEASE BE DELETED. 11.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THERE ARE SE VERAL PURCHASE AND SALE TRANSACTIONS OF SHARES DURING THE YEAR UND ER CONSIDERATION. HE, THEREFORE, ASKED THE ASSESSEE TO CLARIFY AS TO WHY THE SHARE TRANSACTIONS DONE BY HER FOR THE YEAR UNDER CONSIDE RATION SHOULD NOT BE TREATED AS TRADING IN SHARES AND WHY THE PRO FIT THEREON SHOULD NOT BE TAXED AS BUSINESS PROFIT. 11.2 IN RESPONSE TO THE SAME, IT WAS EXPLAINED BY T HE ASSESSEE THAT SHE IS DOING BUSINESS OF CONSTRUCTION AS PROMO TERS AND BUILDERS ALONG WITH CONSTRUCTION ACTIVITY. SHE ALS O MADE INVESTMENT IN SHARES. ALL THESE INVESTMENTS IN SHA RES HAVE BEEN SHOWN AS INVESTMENT AND WERE PURCHASED WITH AN INTE NTION OF EARNING DIVIDENDS AND WITH AN INTENTION OF HOLDING THESE SHARES FOR SUBSTANTIAL TIME. HOWEVER, WHENEVER THERE WAS SHOR TFALL OF MONEY IN THE BUSINESS, THE SAME WERE SOLD OUT. IT WAS EX PLAINED THAT THE ASSESSEE HAS TAKEN DELIVERY OF SHARES AND THE TRANS ACTIONS ARE FEW WHICH MAY BE 2 TO 3 IN A MONTH, HENCE, THE SAME CAN NOT BE TREATED AS BUSINESS IN THE NATURE OF TRADING OR EVEN IN NAT URE OF TRADE. THE CBDT CIRCULAR WAS ALSO BROUGHT TO THE NOTICE OF THE AO. 26 12. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPL ANATION GIVEN BY THE ASSESSEE. HE OBSERVED THAT ALTHOUGH I T IS TRUE THAT THE ASSESSEE WAS AN INVESTOR IN THE PAST AND THE CLAIM OF THE ASSESSEE REGARDING THE PROFIT ON SALE OF SHARES HAS BEEN ACC EPTED AS CAPITAL GAIN, HOWEVER, THE ASSESSEE DURING THE YEAR HAS DEA LT IN 38 SHARES AND THE FREQUENCY OF THE TRANSACTIONS ARE QUITE SIG NIFICANT. THERE ARE SEVERAL INSTANCES WHEREIN THE ASSESSEE HAS PURC HASED THE SHARES AND SOLD OUT THE SAME WITHIN A SPAN OF FEW D AYS. HE FURTHER NOTED THAT THE ASSESSEE HAS BORROWED INTEREST FREE FUNDS FROM THE ASSOCIATE CONCERNS TO EARN THE PROFIT AND CLAIMING BUSINESS PROFIT AS SHORT TERM CAPITAL GAIN. THE ASSESSEE IS ARRANG ING HER AFFAIRS IN SUCH A WAY THAT THERE IS MINIMUM TAX LIABILITY IN H ER CASE. SUCH AN ACT ON THE PART OF THE ASSESSEE CANNOT BE ACCEPTED. HE, THEREFORE, TREATED THE SHORT TERM CAPITAL GAIN OF RS.7,99,763/ - AS BUSINESS PROFIT. 13. IN APPEAL THE LD.CIT(A) UPHELD THE ACTION OF TH E AO BY OBSERVING AS UNDER : 6.3. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE LAW AS ARE APPARENT FROM RECORDS. FROM THE PERUSAL OF THE MATERIALS AVAILABLE ON THE RECORD, IT IS NOTED THAT THE APPELLANT HAS BEEN ENGAGED IN SHARE TRADING ON REGULAR, REPETITIV E AND ORGANIZED MANNER WHICH CAN ONLY HAPPEN IN THE CASE OF BUSINESS. THIS FACT WAS ALSO APPARENT FROM THE STATEMENT ON OA TH RECORDED OF SHRI GHANSHAM SUKHWANI WHICH HAS BEEN QUOTED IN THIS ORDER WHILE DEALING WITH THE ISSUE OF PENNY STOCKS. IT IS NOTE D THAT THE ASSESSING OFFICER HAS BROUGHT OUT THE RELEVANT FACTS ON RECORD TO DEMONSTRATE THAT THE ACTIVITY OF THE APPELLANT HAS AS SUME THE PROPORTION AND NATURE OF BUSINESS AND THEREFORE, ONLY BECAUSE IT IS BEING SHOWN IN THE BOOKS AS PART OF INVESTMENT ACTIVIT Y, IT CANNOT BE ACCEPTED. THE ASSESSING OFFICER HAS ALSO NO TED THAT THE APPELLANT HAS REFUSED TO SUBMIT THE RELEVANT DETAILS DUE TO INHERENT WEAKNESS OF FACTS. THE APPELLANT HAS ALSO N OT SUBMITTED ANY MATERIAL DURING APPEAL TO SHOW THAT THE FINDING OF THE ASSESSING OFFICER IS INCORRECT. IN FACT, THE APPELLANT HAS RELIED ON THE SUBMISSION MADE DURING ASSESSMENT AND THEREFORE, I DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE AS SESSING OFFICER AND GROUND NO. 3 IS TREATED AS DISMISSED. 27 13.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE A SSESSEE IS IN APPEAL BEFORE US. 14. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES. WE FIND AN IDENTICAL ISSUE HAD COME UP BEFO RE THE TRIBUNAL IN CASE OF THE HUSBAND OF THE ASSESSEE SHRI GURUMUK H SUKHWANI. WE FIND THE TRIBUNAL VIDE ITA NO.79/PN/2011 ORDER D ATED 30-04- 2014 FOR A.Y. 2006-07 WHILE DECIDING THE INCOME FR OM SHORT TERM CAPITAL GAIN AS BUSINESS INCOME OR SHORT TERM CAPIT AL GAIN HAS HELD AS UNDER: 12. NOW, IN SO FAR AS THE TRANSACTIONS GIVING RISE TO S HORT TERM CAPITAL GAINS IS CONCERNED, THE FACTUAL MATRIX THEREIN IS AS FOLLOWS. AT PAGES 5 TO 21 OF THE PAPER BOOK IS PLACED THE DET AILS OF SUCH TRANSACTIONS. THE TOTAL NUMBER OF TRANSACTIONS ARE 3 22 INVOLVING 71 SCRIPTS. THE LEARNED COUNSEL AT THE TIME OF HEARIN G POINTED OUT THAT INASMUCH AS 294 TRANSACTIONS OF SALE, THE PERIOD OF HOLDING WAS MORE THAN 30 DAYS AND FOR THE BALANCE OF THE TR ANSACTIONS, THE PERIOD OF HOLDING WAS LESS THAN 30 DAYS. IN THE PRES ENT CASE, ASSESSEE IS ENGAGED IN THE ACTIVITY OF SPECULATION IN SH ARES, WHICH IS A BUSINESS ACTIVITY. CONSIDERED IN THIS BACKGROUND, IT IS DIFFICULT TO ACCEPT THE PLEA OF THE ASSESSEE THAT EVEN IN TRAN SACTIONS WHICH INVOLVE SMALL PERIOD OF HOLDING OF SHARES PRIOR TO SALE , THE SAME HAVE BEEN UNDERTAKEN AS AN INVESTOR. SUCH LIKE TRAN SACTIONS ARE INDEED AKIN TO TRADING IN SHARES. 13. HOWEVER, IT IS A VEXED QUESTION TO LAY DOWN AN ABS OLUTE YARDSTICK ON THE BASIS OF PERIOD OF HOLDING OF SHARES T O DETERMINE WHETHER THE SAME IS TO BE ASSESSED AS A BUSINESS INCO ME OR CAPITAL GAINS, ESPECIALLY IN THE PRESENT CASE WHEN AS SESSEE IS MAINTAINING DUAL PORTFOLIO, I.E. AS AN INVESTOR AS WELL AS A TRADER IN SHARES. AT THE TIME OF HEARING, THE LEARNED COUNSE L HAS REFERRED TO A DECISION OF THE AHMADABAD BENCH OF THE TRIBUNAL IN THE CASE OF SUGAMCHAND C SHAH VS. ACIT, 139 TTJ 610 (AHD) TO EMPHASIZE THAT IN A SOMEWHAT SIMILAR SITUATION, THE TRIBUNAL HELD THAT THE PROFIT ON SALE OF SHARES HELD FOR MORE THAN 30 DAYS BUT LESS THAN ONE YEAR BE TREATED AS SHORT TERM CAPITAL GAIN WHEREA S PROFIT ON SALE OF SHARES HELD FOR LESS THAN 30 DAYS WAS LIABL E TO BE TREATED AS BUSINESS INCOME. THE LEARNED COUNSEL SUBMITTED THA T THE BENCH MAY CONSIDER THE AFORESAID PRECEDENT. WE ARE CONSCIOU S THAT THE THRESHOLD OF 30 DAYS CONSIDERED BY THE COORDINATE BEN CH, CANNOT BE CONSIDERED AS AN ABSOLUTE RULE, BUT THE INSTANT C ASE BEING A CASE WHERE ASSESSEE IS A TRADER AS WELL AS AN INVESTO R IN SHARES, SOME YARDSTICK HAS TO BE DEVISED TO DISTINGUISH BETWEEN TRADING AND INVESTMENT ACTIVITY. FOR THE SAID PURPOSE, WE ARE INCLINED TO GO BY THE YARDSTICK DEVISED BY THE AHMADABAD BENCH OF THE TRIBUNAL IN THE CASE OF SUGAMCHAND C SHAH (SUPRA), WH ICH IS BASED ON THE PERIODICITY OF HOLDING. THUS, FOLLOWING TH E NORM ADOPTED BY OUR CO-ORDINATE BENCH IN THE CASE OF SUGAM CHAND C 28 SHAH (SUPRA), WE HOLD THAT SO FAR AS THE PRESENT CA SE IS CONCERNED WHERE THE SHARES HAVE BEEN HELD FOR MORE THAN 30 DA YS THE PROFIT ON SALE THEREOF BE TREATED AS SHORT TERM CAPITAL GAIN AND FOR THE SHARES HELD FOR LESS THAN 30 DAYS THE PROFIT ON SALE THEREOF BE TREATED AS BUSINESS INCOME. IN THIS CONTEXT, THE LE ARNED COUNSEL HAS REFERRED TO THE SUMMARY OF TRANSACTIONS OF SHORT TERM CAPITAL GAIN PLACED AT PAGE 21 OF THE PAPER BOOK. AS PER TH E SUMMARY, THE DETAILS ARE AS UNDER :- SCRIPTS SALES PURCHASE SUMMARY SHORT TERM PROFIT- HOLDING MORE THAN 30 DAYS 666,990 47,250,872 40,510,270 6,740,600 SHORT TERM PROFIT- HOLDING LESS THAN 30 DAYS 62,548 3,342,916 3,004,616 338,300 SUB TOTAL 729,538 50,593,788 43,514,886 7,078,900 LESS: BROKERAGE 412,730 LESS: INT ON DELAYED PAYMENT 5,283 6,660,887 14. IN VIEW OF THE AFORESAID, THE ASSESSING OFFICER IS DIRECTED TO REWORK THE SHORT TERM CAPITAL GAINS ON THE BASIS OF SH ARES WHICH HAVE BEEN HELD FOR MORE THAN 30 DAYS AND UPTO ONE Y EAR; AND, THE BALANCE OF THE PROFIT BE ASSESSED AS BUSINESS INCOME. THUS, ON THIS ASPECT ASSESSEE PARTLY SUCCEEDS. 15. ACCORDINGLY, THE ORDER OF THE CIT(A) IS SET-ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO RE-WORK THE TOTAL INCO ME AS PER OUR AFORESAID DISCUSSION. 14.1 RESPECTFULLY FOLLOWING THE DECISION OF THE COO RDINATE BENCH OF THE TRIBUNAL IN THE CASE OF THE HUSBAND OF THE ASSESSEE, WE RESTORE THE ISSUE TO THE FILE OF THE AO WITH A D IRECTION TO RE- WORK THE PROFIT FROM SHORT TERM CAPITAL GAIN DECLAR ED BY THE ASSESSEE IN THE LIGHT OF THE ABOVE DIRECTION. THIS GROUND BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PUR POSES. ITA NO.1032/PN/2012 (SHRI GURUMUKH SUKHWANI) : 15. IN GROUND OF APPEAL NO.1 THE ASSESSEE HAS CHALL ENGED THE ORDER OF THE CIT(A) IN CONFIRMING THE TREATMENT OF LONG TERM CAPITAL GAIN OF RS.39,00,800/- DECLARED BY THE ASS ESSEE ON SALE OF SHARES OF SURYADEEP SALT LTD. AS PROFIT AND GAINS O F THE ASSESSEE. 29 15.1 AFTER HEARING BOTH THE SIDES, WE FIND THE ABOV E GROUND IS IDENTICAL TO GROUND OF APPEAL NO.2 IN ITA NO.1034/P N/2012. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUNDS RAIS ED BY THE ASSESSEE HAS BEEN DISMISSED. FOLLOWING THE SAME RA TIO, THE ABOVE GROUND IS DISMISSED. 16. IN GROUND OF APPEAL NO.2 THE ASSESSEE HAS CHALL ENGED THE TREATMENT OF LONG TERM CAPITAL GAIN OF RS.2,66,012/ - ON SALE OF SHARES AS PROFIT AND GAINS OF THE ASSESSEE. 16.1 AFTER HEARING BOTH THE SIDES, WE FIND AN IDENT ICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.79/PN/2011 ORDER DATED 30-04-2014 FOR A.Y. 2006- 07. THE TRIBUNAL HAS ACCEPTED THE LONG TERM CAPITAL GAIN DE CLARED BY THE ASSESSEE AS AGAINST BUSINESS INCOME TREATED BY THE AO AND UPHELD BY THE CIT(A). THE RELEVANT OBSERVATION OF THE TRI BUNAL AT PARA 8 TO 11 OF THE ORDER READS AS UNDER : 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. THERE IS NO GAINSAYING THAT THE QUESTION OF ASCERTAINING WHETH ER SALE AND PURCHASE OF SHARES IN QUESTION IS LIABLE TO BE TAXE D AS CAPITAL GAINS OR BUSINESS INCOME IS A MIXED QUESTION OF LAW AND F ACT; AND, EACH CASE IS LIABLE TO BE DECIDED HAVING REGARD TO ITS O WN FACTUAL MATRIX. NEVERTHELESS, IT IS ALSO AN ACCEPTED POSITION T HAT THERE IS A PLETHORA OF JUDICIAL PRONOUNCEMENTS ON SUCH ISSUES WHIC H PROVIDE GUIDING PRINCIPLES IN ORDER TO DETERMINE THE DISPUTE IN A PARTICULAR CASE. IN THE PRESENT CASE, IT IS QUITE EVID ENT THAT THE MAIN STREAM OF INCOME OF THE ASSESSEE IS BY WAY OF SHA RE OF PROFITS FROM THE PARTNERSHIP FIRMS WHERE HE IS A PARTNER BECA USE IN THE YEAR UNDER CONSIDERATION ASSESSEE HAS RECEIVED HIS SHAR E OF PROFITS FROM THE PARTNERSHIP FIRMS OF RS.6,35,00,310/- , WHICH IS QUITE SUBSTANTIAL IN COMPARISON TO THE OTHER INCOMES DE CLARED IN THE RETURN OF INCOME. THEREFORE, FACTUALLY SPEAKING, WE DO NOT FIND ANY JUSTIFICATION FOR ASSERTION MADE BY THE CIT(A) IN PARA 5.3 OF HIS ORDER TO THE EFFECT THAT MAJOR INCOME EARNED BY THE APPELLANT IS OUT OF TRANSACTIONS OF SALE AND PURCHA SE OF SHARES ONLY .. . 30 9. ANOTHER ASPECT WHICH HAS WEIGHED WITH THE LOWER AUTHORITIES IS THAT ASSESSEE HAS DECLARED CERTAIN INCOME F ROM THE DEALING IN SHARES AS BUSINESS INCOME ALSO. IN THE PAST YEARS ALSO THE SAID SITUATION PREVAILED. IN PARA 5.2 OF THE IMP UGNED ORDER, THE CIT(A) HAS NOTED THAT DURING THE YEAR UNDER CONSI DERATION, ASSESSEE HAS ADMITTED RS.24,00,527/- AS SPECULATION PROFITS AND IN THE PRECEDING ASSESSMENT YEAR ASSESSEE HAD IN-FACT SPECULAT ION LOSS OF RS.1,79,823/- ON SALE OF SHARES. SO HOWEVER, IN SO FAR AS THE IMPUGNED INCOME ON SALE AND PURCHASE OF SHARES (I.E. L ONG TERM AND SHORT TERM CAPITAL GAIN OF RS.15,53,844/- AND 66, 60,887/- RESPECTIVELY) ARE CONCERNED, IT HAS BEEN DECLARED BY THE ASSESSEE AS CAPITAL GAINS ON THE PREMISE THAT THE SAME HAS BEEN E ARNED AS AN INVESTOR AND NOT AS A TRADER. IN-PRINCIPLE, THER E CANNOT BE A DISPUTE TO THE PROPOSITION THAT IT IS OPEN FOR AN ASSESSEE TO TRADE IN THE SHARES AS WELL AS TO INVEST IN THE SHARES AND WH EREVER THE SHARES ARE HELD AS INVESTMENT THEN THE INCOME ARISING ON THE SALE OF SUCH SHARES IS LIABLE TO BE ASSESSED AS LONG TERM OR SHOR T CAPITAL GAINS, DEPENDING ON THE PERIOD OF HOLDING OF SHARES. THE SAID PROPOSITION HAS BEEN RECOGNIZED BY THE CBDT IN ITS CI RCULAR DATED 15.06.2007 (SUPRA) AND HAS ALSO BEEN UPHELD BY THE HON BLE BOMBAY HIGH IN THE CASE OF GOPAL PUROHIT (SUPRA). T HEREFORE, THE PRESENCE OF CERTAIN TRANSACTIONS UNDERTAKEN BY THE ASSESS EE AS A TRADING ACTIVITY CANNOT IPSO FACTO LEAD TO A CONCLUSI ON THAT FOR THE IMPUGNED TRANSACTIONS ALSO, ASSESSEE WAS ACTING AS A TRAD ER. NO DOUBT THE DECLARATION OF BUSINESS INCOME FROM CERTAIN TRANSACTIONS BY THE ASSESSEE WOULD LEAD TO A NATURAL QUEST ION AS TO WHETHER THE OTHER TRANSACTIONS OF SALE AND PURCHASE WHI CH ARE CLAIMED TO BE CARRIED OUT AS AN INVESTOR, ARE REALLY SO? FOR THE SAID PURPOSE THE TRANSACTIONS OF SALE AND PURCHASE CONSIDE RED BY THE ASSESSEE TO BE IN NATURE OF AN INVESTMENT ACTIVITY G IVING RISE TO INCOME BY WAY OF CAPITAL GAINS, ARE LIABLE TO BE EX AMINED INDEPENDENTLY. 10. THE ASSESSING OFFICER HAS EXTRACTED A PORTION OF THE STATEMENT OF THE ASSESSEE RECORDED DURING THE SURVEY 14 .06.2006, AND ON THAT BASIS HE HAS CONCLUDED THAT ASSESSEE WAS ENGAG ED IN THE TRADING OF SHARES. WE FIND IT APPROPRIATE TO REP RODUCE HEREINAFTER THE EXTRACT OF ASSESSEES STATEMENT WHICH HAS BEEN RELIED UPON BY THE ASSESSING OFFICER :- Q.2 PLEASE EXPLAIN THE QUANTUM OF TRADING AND THE INCOME EARNED BY YOU FROM YOUR BUSINESS OF SHARE TRADING? ANS. OFF HAND I CANNOT GIVE YOU THE EXACT FIGURE BU T I MUST HAVE TRADED IN AROUND 100 SCRIP'S. THE NET PROFIT EARNED BY ME DURING THE YEAR 2005-06 WAS AROUND RS.80-85 LAKHS. SIMILARLY, WE EARNED GOOD PROFITS IN THE SHARES TRA DED IN THE NAMES OF MY OTHER FAMILY MEMBERS. FOR EXACT DETAILS, I SHALL HAVE TO REFER TO THE BOOKS OF ACCOUNTS. Q.3 WHO ARE YOUR SHARE BROKERS AND WHY DID YOU CHOO SE THEM TO BE YOUR SHARE BROKERS? ANS. MY SHARE BROKERS ARE : (I) RIFCO (II) KOTAK SECURITIES (III) SAJJAD SECURITIES (IV) KAYMET (V) ANGEL SECURITIES APART FROM THE ABOVE NAMED BROKERS, I DO NOT HAVE A NY OTHER SHARE BROKER AT PRESENT. I CHOSE THEM AS MY S HARE BROKERS BECAUSE THEY ARE MEMBERS OF BSE / NSE AND T HEY 31 ARE DIRECT BROKERS, I.E. THEY ARE NOT SUB-BROKERS. THEY ENJOY A GOOD REPUTATION. MOREOVER SINCE THEY ARE NOT SU B BROKERS, THEY CHARGE A LESS COMMISSION. Q.4 SINCE WHEN ARE YOU TRADING IN SHARES? DURING THIS PERIOD, WHO ELSE WERE YOUR SHARE BROKER? ANS. I AM TRADING IN SHARES SINCE 1980-81. THERE H AVE BEEN MANY SHARE BROKERS DURING THIS TIME PERIOD. I DO NOT REM EMBER ALL THEIR NAMES. Q.5 PLEASE EXPLAIN THE WHOLE PROCESS INVOLVED IN YO UR SHARE TRADING BUSINESS. ANS. WE KEEP IN A VERY FREQUENT TOUCH WITH OUR BROK ERS. WE MAKE TELEPHONE CALLS TO THEM ALMOST 3-4 TIMES A DAY TO K EEP A TRACK OF THE MOVEMENT OF SCRIPS. AS PER THE SITUATI ON IN MARKET, WE DECIDE TO EITHER SELL OR PURCHASE A CERT AIN SCRIP. IF I HAVE TO PURCHASE A SCRIP I ASK MY BROKER TO DO SO . THE BROKERS BUY THE SCRIPS FOR ME AND SEND A BILL. FOR PURCHASE, THE SAID SCRIPT GETS TRANSFERRED TO THE DEMAT ACCOU NT OF THE BROKER. WHEN I MAKE HIM THE PAYMENTS, HE TRANSFERS THESE SHARES FROM HIS DEMAT ACCOUNT TO MINE. SIMILARLY, W HEN I ASK THE BROKER TO SELL SOME SCRIPS OWNED BY ME, HE DOES SO AND INFORMS ME. THEREAFTER, I TRANSFER THOSE SCRIPS FRO M MY DEMAT ACCOUNT TO THAT OF MY BROKER. I RECEIVE A CHE QUE FROM MY BROKER AGAINST THE SALES MADE. 11. ON THIS ASPECT, THE LEARNED COUNSEL SUBMITTED THA T QUESTIONS THAT WERE PUT TO THE ASSESSEE WERE LEADING Q UESTIONS INASMUCH AS ASSESSEE BEING A NON-PROFESSIONAL WOULD NOT UNDERSTAND THE DIFFERENCE BETWEEN BUSINESS OF SHARE TR ADING AND INVESTMENT IN SHARES. IT WAS POINTED OUT THAT BY WAY OF QUESTION NO.2, THE ASSESSING OFFICER REQUIRED THE ASSESSE E TO EXPLAIN THE QUANTUM OF TRADING AND THE INCOME EARNE D FROM THE BUSINESS OF SHARE TRADING BY PRESUMING THAT ASSESSEE WAS INDULGING IN BUSINESS OF SHARE TRADING. AT NO STAGE, TH E ASSESSEE WAS PUT A QUESTION AS TO WHETHER HE WAS INDULGING IN SA LE AND PURCHASE OF SHARES AS AN INVESTOR OR AS A TRADER IN SO FAR AS THE PRESENT TRANSACTIONS ARE CONCERNED. WE HAVE EXAMINED THE AFORESAID ASPECT AND FIND THAT THE QUESTIONS PUT BY THE ASSESSING OFFICER AND THE REPLIES OF THE ASSESSEE MERELY SPEAK ABOU T THE MECHANICS OF THE SALE AND PURCHASE OF SHARES BEING CARRI ED OUT BY THE ASSESSEE. IN-FACT, WHETHER AN ASSESSEE CARRIES OUT SALE AND PURCHASE OF SHARES AS AN INVESTOR OR AS A TRADER, T HE MECHANICS OF SALE AND PURCHASE WOULD BE SIMILAR. IN-FACT, THE Q UESTIONS PUT TO THE ASSESSEE CLEARLY SHOW THAT IT WAS FAR FROM THE M IND OF THE ASSESSING OFFICER THAT ASSESSEE WAS DECLARING INCOME ON SALE AND PURCHASE OF SHARES AS CAPITAL GAINS ALSO, OTHERWISE THE ASSESSEE WOULD HAVE BEEN PUT TO QUESTION. THUS, THE ANSWERS TO THE QUESTIONS PUT TO THE ASSESSEE DURING THE SURVEY ACTION, C ANNOT BE THE SOLE BASIS FOR THE ASSESSING OFFICER TO SAY THAT THE IM PUGNED CAPITAL GAINS ARE TO BE ASSESSED AS BUSINESS INCOME. IN ANY CASE, THE ANSWERS TO THE QUESTIONS PUT BY THE ASSESSING OFFICER D OES HELP TO CONCLUDE EITHER WAY. THE OTHER POINT RAISED BY THE ASSESSING OFFICER IS THAT IN THE PAST, ASSESSEE HAS SHOWN PROFI T ON SALE TRANSACTIONS AS BUSINESS PROFITS. OSTENSIBLY, WE HAVE ALREADY EXAMINED THE AFORESAID ASPECT IN EARLIER PARAS AND FOU ND THAT ASSESSEE HAS DUAL PORTFOLIO, NAMELY, ONE THAT OF INVESTO R AND ANOTHER OF TRADER IN SHARES. NOW, COMING BACK TO THE TRANSACTIONS OF SALE AND PURCHASE OF SHARES FOR THE YEAR UNDER CONSID ERATION WHICH HAVE BEEN OFFERED TO TAX AS LONG TERM AND SHORT TERM CAPITAL 32 GAINS. AT PAGE 1 OF THE PAPER BOOK IS THE SUMMARY OF SALE AND PURCHASE TRANSACTIONS. THE TOTAL NUMBER OF TRANSACTION S OF SHARES PURCHASED ARE 173 AND THE TOTAL NUMBER OF SCRIPTS INV OLVED ARE 93. THE TOTAL TRANSACTIONS OF SALE DURING THE YEAR AR E 347 INVOLVING 93 SCRIPTS. OUT OF THE SAME, IN RESPECT OF L ONG TERM CAPITAL GAIN THE TOTAL NUMBER OF SALE TRANSACTIONS ARE 25 AND THE TOTAL NUMBER OF SCRIPTS ARE 22 AND WE FIND THAT THE SH ARES HAVE BEEN HELD FOR A FAIRLY LONG PERIOD OF TIME. AT PAG ES 3 TO 4 OF THE PAPER BOOK IS PLACED A SUMMARY OF THE TRANSACTIONS GIVI NG RISE TO LONG TERM CAPITAL GAIN AND WE FIND THAT THE PERIOD OF HOLDING RANGES FROM ONE TO FIVE YEARS, AS POINTED OUT BY THE L EARNED COUNSEL FOR THE ASSESSEE. FOR INSTANCE IN THE CASE OF ADL ABS FILMS LTD. 2000 SHARES WERE PURCHASED ON 19.12.2003 WHICH W ERE SOLD ON 05.05.2006 THEREBY REFLECTING A HOLDING PERIOD O F 502 DAYS. IN THE CASE OF ESCORTS LTD. 1000 SHARES WERE PURCHASED ON 27.11.2003 AND SOLD ON 20.03.2006 THEREBY GIVING A H OLDING OF PERIOD OF 844 DAYS. EVEN IN RELATION TO THE SALE OF HDFC LTD. AND HFCL SHARES THE HOLDING PERIOD RANGES FROM 410 DAYS TO 498 DAYS. SIMILARLY, WITH RESPECT TO THE INDUSLAND BANK THE HOL DING PERIOD RANGES FROM 1687 TO 1755 DAYS. OTHER TRANSACTIONS ALSO REFLECT A SUBSTANTIAL HOLDING PERIOD. THEREFORE, CONSIDERING TH E PERIOD OF HOLDING, WE DO NOT FIND ANY REASON TO SAY THAT INVESTM ENT IN SUCH SHARES WAS MADE BY THE ASSESSEE WITH THE INTENTION OF TRAD ING IN SHARES. WE ARE COMING TO THE AFORESAID PREMISE ALSO FOR THE REASON THAT THE ASSESSEE HAS MADE SUCH INVESTMENTS OUT OF O WN SOURCES WITH NO BORROWINGS AND ALSO BECAUSE OF THE FACT THAT THERE IS NOTHING TO SAY THAT ASSESSEE HAS ANY FORMAL PARAPHERNAL IA WHICH WOULD SHOW THAT THERE WAS ANY INTENTION OF TRAD ING. THE DEPICTION IN THE BALANCE SHEET OF SUCH SHARES AS INVEST MENTS OVER THE PERIOD OF TIME IS ALSO REFLECTIVE OF ASSESSEES INTENT ION OF BEING AN INVESTOR IN SUCH SHARES. THEREFORE CONSIDERING THE FACTUAL MATRIX AND THE AFORESAID DISCUSSION IN SO FAR AS THE INC OME OF RS.15,53,844/- DECLARED AS LONG TERM CAPITAL GAIN IS C ONCERNED, WE ARE UNABLE TO UPHOLD THE ASSERTION OF THE REVENUE THA T SUCH TRANSACTIONS WERE IN THE NATURE OF BUSINESS. THUS, ASSE SSEE SUCCEEDS ON THIS ASPECT. 16.2 RESPECTFULLY FOLLOWING THE DECISION OF THE TRI BUNAL IN ASSESSEES OWN CASE, THE LONG TERM CAPITAL GAIN OF RS.2,66,012/- IS DIRECTED TO BE ACCEPTED. GROUND OF APPEAL NO.2 IS ACCORDINGLY ALLOWED. 17. GROUNDS OF APPEAL NO.3 & 4 RELATE TO THE ORDER OF THE CIT(A) IN CONFIRMING THE ADDITION OF RS.150 LAKHS M ADE BY THE AO IN THE HANDS OF THE ASSESSEE ON PROTECTIVE BASIS . 33 17.1 AFTER HEARING BOTH THE SIDES, WE FIND THE ABOV E GROUND IS CORRELATED TO THE GROUND OF APPEAL NO.1 IN ITA NO.1 034/PN/2012. WHILE DECIDING THE SAID GROUND, WE HAVE HELD THAT T HE AMOUNT INVOLVED IS NOT RS.150 LAKHS BUT IT IS RS.15 LAKHS AND THE ADDITION TO THE EXTENT OF RS.15.00 LAKHS HAS BEEN SUSTAINED IN THE HANDS OF SMT. USHA SUKHWANI, WIFE OF THE ASSESSEE. THEREFOR E, NO ADDITION IN THE HANDS OF THE ASSESSEE IS REQUIRED. THEREFOR E, THE PROTECTIVE ADDITION MADE BY THE AO AMOUNTING TO RS.150 LAKHS I N THE HANDS OF THE ASSESSEE IS DIRECTED TO BE DELETED. THIS GR OUND BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 18. IN THE RESULT, ITA NO. 1034/PN/2012 IS PARTLY A LLOWED FOR STATISTICAL PURPOSES AND ITA NO.1032/PN/2012 IS PAR TLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 22-08-2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: 22 ND AUGUST, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A)-I, PUNE 4. THE CIT-I, PUNE 5. THE D.R, A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE