ACIT,Cent. Cir., Aurangabad V. Shri Ravindra S Peety, Old Jalna

ITA 1179/PUN/2008

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9986 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-09-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 08-09-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Keywords: Bogus purchase; Unexplained cash credit; Unexplained investment; Capital asset; Gift; Business income; Income from undisclosed sources; Search and seizure; Share purchase agreement; Principle of natural justice; Opportunity of cross examination; Source of fund; Question of law; Corroborative evidences; Third party statement; Accommodation entries; Capital receipt; Retraction; Penny stocks; Reason to believe
• Section: 143(3); 54F; 142(1); 153A; 234B; 147; 131; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER , AND SHRI R.K.PANDA, ACCOUNTANT MEMBER. ACIT, CENTRAL CIRCLE-1, AURANGABAD. .. APPELLANT VS. 1) SHRI SURENDRA SHANTILAL PEETY .. RESPONDENTS (PAN: AJRPP4860F) ITA.NO.1157 TO 1161/PN/2008 (ASSTT. YEAR : 2002-03 TO 2006-07) 2) SMT.VARSHA SURENDRA PEETY (PAN: AJUPP4147N) ITA.NO.1162 TO 1165/PN/2008 (ASSTT. YEAR : 2003-04 TO 2006-07) 3) SMT.RACHNA JITENDRA PEETY (PAN: AJRPP4857A) ITA.NO.1166 TO 1169/PN/2008 (ASSTT. YEAR : 2003-04 TO 2006-07) 4) SHRI SHANTILAL GOVERDHAN PEETY (PAN: AJRPP4858R) ITA.NO.1170 TO 1174/PN/2008 (ASSTT. YEAR : 2003-04 TO 2006-07) 5) SHRI RAVINDRA SHANTILAL PEETY(HUF) (PAN: AAJHR8689F) ITA.NO.1175 TO 1177/PN/2008 (ASSTT. YEAR : 2004-05 TO 2006-07) 6) SHRI RAVINDRA SHANTILAL PEETY (PAN: AJRPP4859Q) ITA.NO.1178 TO 1181/PN/2008 (ASSTT. YEAR : 2003-04 TO 2006-07) 7) SMT. NAMRATA RAVINDRA PEETY (PAN: AJUPP4145Q) ITA.NO.1182 TO 1185/PN/2008 (ASSTT. YEAR : 2003-04 TO 2006-07) 8) SHRI JINTENDRA SHANTILAL PEETY (PAN: AJRPP4857A) ITA.NO.1186, 1187, 1189 & 1191/PN/2008 (ASSTT. YEAR : 2003-04 TO 2006-07) 2 9) SHRI JINTENDRA SHANTILAL PEETY (HUF) (PAN: AAEHJ2425G) ITA.NO.1188 & 1190/PN/2008 (ASSTT. YEAR : 2004-05 & 2005-06) AND ITA.NO.239 & 240/PN/2010 (ASSTT. YEAR : 2004-05 & 2005-06) ACIT, CIRCLE-1, AURANGABAD. .. APPELLANT VS. SHRI SURENDRA SHANTILAL PEETY(HUF), SHARDA KUTIR, SHANI MANDIR ROAD, JALNA .. RESPONDENT (PAN: AAPHS3399B) DEPARTMENT BY : SHRI S.K.SINGH ASSESSEE BY : SHRI J.P.BAIRAGRA DATE OF HEARING : 18.09.2012 DATE OF PRONOUNCEMENT : 28.09.2012 ORDER PER BENCH : ALL THESE APPEALS FILED BY THE REVENUE PERTAIN TO PEETY GROUP ON SIMILAR ISSUE, SO THEY ARE BEING DECIDED BY THIS CONSOLIDATED ORDER. 2. FIRST WE TAKE UP ITA.NO. 1157 TO 1161/PN/2008. IN ITA.NO.1157/PN/2008 REVENUE HAS RAISED THE FOLLOWIN G GROUNDS: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CLT (A)-I, NAGPUR WAS JUSTIFIED IN HOLDING THAT THE CON TRACT NOTES, AND BROKER'S BILLS ETC., FOUND AND SEIZED IN THE CO URSE OF SEARCH ACTION AND PROVED TO BE BOGUS BY THE STATEME NT OF THE BROKERS WHO ISSUED THESE BROKER NOTES DO NOT AMOUNT TO BE INCRIMINATING MATERIAL. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT (A)-I, NAGPUR WAS JUSTIFIED IN HOLDING THAT THE SEB I'S ACTION AGAINST THE BROKER AND CERTAIN COMPANIES CANNOT BE GIVEN ANY WEIGHTAGE AS THIS DOES NOT RELATE TO THE CASE OF TH E ASSESSEE EVEN THOUGH SAME BROKERS HAVE ADMITTED BEFORE THE D IFFERENT 3 INCOME TAX AUTHORITIES THAT THEY HAVE ISSUED BOGUS BROKER NOTES TO ASSESSEE. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT (A)-I, NAGPUR WAS JUSTIFIED IN HOLDING THAT THE BRO KER NOTE ISSUED BY THE BROKERS AND THE COMPANIES WHICH ARE T AINTED AS RELIABLE EVIDENCE FOR HOLDING THE TRANSACTION AS GE NUINE WHILE AT THE SAME TIME NOT ACCEPTING THE STATEMENTS GIVEN BY THE BROKERS AS CORRECT. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CIT(A )-I, NAGPUR WAS JUSTIFIED IN HOLDING THAT THE APPLICATIO N .OF SEC.69A OF THE I.T. ACT WAS NOT WARRANTED EVEN THOU GH IT WAS PROVED THAT THE ASSESSEE WAS IN POSSESSION OF MONEY CLAIMED TO HAVE BEEN EARNED BY LONG TERM AND SHORT TERM CAP ITAL GAIN. 5. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT (A)-I, NAGPUR WAS JUSTIFIED IN HOLDING THE APPLICAT ION OF THE ISSUE OF HUMAN PROBABILITY AS ENUNCIATED BY THE SUP REME COURT IN SUMATI DAYAL VS. CIT 214 ITR 801 (1995) AN D MCDOWELL AND CO. LTD. VS. CTO 154 ITR 148 (SC) IS N OT APPLICABLE IN THE PRESENT CASE EVEN THOUGH IT IS PR OVED THAT THIS IS A FIT CASE FOR APPLICATION OF PRINCIPALS EN UNCIATED BY THE SUPREME COURT IN ABOVE TWO CASES. 6. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT (A)-I, NAGPUR WAS JUSTIFIED IN HOLDING THAT THE INC OME CLAIMED AS LONG TERM CAPITAL GAINS CANNOT BE HELD AS BUSINE SS INCOME AS ADVENTURE IN NATURE OF TRADE. 7. THE APPELLANT CRAVES LEAVES TO ADD, AMEND OR ALTER ANY GROUNDS IF APPEAL AT THE TIME OF HEARING. 8. ON THE ABOVE GROUNDS THE ORDER OF THE LEARNED CIT(A ) BE SET ASIDE AND THE ORDER OF THE ASSESSING OFFICER BE RES TORED. 3. THE ASSESSEE IS AN INDIVIDUAL BELONGING TO PEETY GROUP OF JALNA. THIS GROUP CONSISTS OF SHRI SHANTILAL GOVAR DHAN PEETY, HIS SPOUSE SMT.SHARDA PEETY, THEIR SONS, SHRI SURENDRA SHANTILAL PEETY, SHRI RAVINDRA SHANTILAL PEETY, SHRI JITENDRA SHANTILAL PEETY AND THEIR DAUGHTERS-IN-LAW SMT.VARSHA SURENDRA PEET Y, SMT.RACHNA JITENDRA PEETY AND SMT.NAMRATA RAVINDRA PEETY, AND HUF OF SHRI RAVINDRA SHANTILAL PEETY. SEARCH & SEIZ URE OPERATIONS U/S.132(1) OF THE ACT WERE CONDUCTED ON 17.03.2006 IN THIS GROUP. AS STATED ABOVE, THIS SEARCH COVERED FOLLOWING ENTI TIES: PREMISES SEARCHED BUSINESS/ RESIDENTIAL NATURE OF ACTIVITY/ SOURCES OF INCOME REMARK SRJ PEETY STEELS P. LTD. BUSINESS MANUFACTURE OF MILD STEEL INGOTS --- 4 SRI OM ROLLING MILLS P. LTD. - DO - MANUFACTURE OF MILD STEEL BARS --- S/SHRI SHANTILAL PEETY, SURENDRA PEETY, RAVINDRA PEETY, JITENDRA PEETY, VARSHA PEETY, NAMRATA PEETY AND RACHANA PEETY (ALL INDIVIDUALS) RESIDENTIAL PREMISES AT SHARDA KUTIR, SHANI MANDIR ROAD, OLD JALNA, JALNA CAPITAL GAIN, SALARY, HOUSE RENT, BUSINESS INCOME ALL BELONG TO PEETY FAMILY WHO RESIDE IN A COMMON RESIDENCE. THE SEARCHES WERE CARRIED OUT ON THE STRENGTH OF JOINT/COMMON WARRANT OF AUTHORIZATION ISSUED IN THEIR NAMES. RAVINDRA PEETY (HUF) --- CAPITAL GAIN AND BUSINESS INCOME THERE WAS NO WARRANT OF AUTHORIZATION AGAINST THIS ENTITY. JITENDRA PEETY (HUF) DO DO DO 4. THE ASSESSEES WERE REGULARLY FILING RETURNS OF I NCOME UNDER THE JURISDICTION OF ACIT, CIRCLE-1, AURANGABAD. CO NSEQUENT TO SEARCH, CASE WAS CENTRALISED WITH ACIT, CENTRAL CIR CLE-1, AURANGABAD. ASSESSMENT PARTICULARS OF THE ASSESSEE SHRI SURENDRA PEETY ARE MENTIONED BELOW: ASST YEAR RETURNED INCOME (ORIGINAL) INCOME RETURNED U/S.153A INCOME ASSESS ED U/S.153A/143(3) 2000 - 01 793,527 851,027 851,027 2001 - 02 17,51,567 17,77,367 17,77,367 2002 - 03 10,31,820 LTCG - 15,07,332 10,62,520 LTCG 15,07,332 36,25,725 2003 - 04 125,854 LTCG 4234,900 125,854 LTCG 4234,900 46,58,190 2004 - 05 481,877 LTCG 3490,640 496,524 LTCG 3490,640 40,76,330 2005 - 06 - 27,891 STCG 5116,735 LTCG 1927,680 EXEMPT LTCG 107,77,291 - 27,891 STCG 5116,735 LTCG 1927,680 EXEMPT LTCG 107,77,291 196,24,860 5 2006 - 07 338,251 STCG 11,78,132 EXEMPT LTCG 139,20,086 538,2 51 STCG 11,78,132 EXEMPT LTCG - 139,20,086 164,00,910 5. THE INCOME SHOWN IN REGULAR RETURNS WERE ACCEPTE D U/S.143(1) FOR VARIOUS ASSESSMENT YEARS AS INDICATE D ABOVE. INCOME RETURNED BY THE ASSESSEE IN REGULAR COURSE, AMONG OTHER ITEMS, COMPRISED OF LONG TERM CAPITAL GAINS (HEREIN AFTER CALLED LTCG) AS INDICATED ABOVE. THIS INCOME WAS CLAIME D AS EXEMPT U/S.10(38) OF THE ACT BOTH IN REGULAR AND IN THE RE TURNS FILED IN RESPONSE TO NOTICE U/S.153A FOR A.Y. 2005-06 AND 20 06-07 AND PRIOR TO IT PAID APPLICABLE TAX FOR A.Y. 2002-03 TO 2004-05. ASSESSEES ALSO PAID TAX ON SHORT TERM CAPITAL GAINS FOR A.Y. 2005- 06 AND 2006-07. HOWEVER, IN ORDERS PASSED U/S.153A R.W.S. 143(3) CONSEQUENT TO SEARCH, WHICH WAS SUBJECT MATTER OF P RESENT APPEAL, THE ASSESSING OFFICER SOUGHT TO TAX THE INCOME FROM LTCG U/S.69A OF THE ACT. IT WAS THE CASE OF THE ASSESSING OFFIC ER THAT INCOME UNDER THE HEAD LTCG SHOWN IN RETURN FOR ALL THE ABO VE MENTIONED ASSESSMENT YEARS IS SHAM AND, THEREFORE, THE AMOUNT SO GENERATED REPRESENTED UNEXPLAINED MONEY LIABLE TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES U/S.69A OF THE ACT . AN ALTERNATIVE PLEA WAS TAKEN BY THE ASSESSING OFFICER THAT INCOME IF NOT ASSESSABLE U/S.69A, WOULD FALL TO BE ASSESSED U NDER THE HEAD ADVENTURE IN THE NATURE OF TRADE. WHILE ARRIVING AT THE ABOVE CONCLUSION, THE ASSESSING OFFICER MAINLY RELIED ON THE FOLLOWING EVIDENCES TO SUPPORT HIS CASE: 1. STATEMENT U/S.132(4) RECORDED FROM SHRI SURENDRA SH ANTILAL PEETY ON THE DATE OF SEARCH OFFERING THE INCOME SHO WN IN THE REGULAR RETURN UNDER THE HEAD LTCG AS UNDISCLOSED I NCOME IN VARIOUS HANDS WHICH WAS SUBSEQUENTLY RETRACTED AT T HE TIME OF FILING THE RETURN. 2. STATEMENTS RECORDED BY THE DEPARTMENT FROM FEW BROK ERS NAMELY VISHAL BHAGWANDAS OF VIJAY BHAGWANDAS AND CO ., PRATIK SHAH OF DPS SHARES AND SECURITIES AFTER THE DATE OF 6 SEARCH IN WHICH THEY HAD ALLEGED THAT THE TRANSACTI ONS OF PURCHASES AND SALES OF SHARES BY VARIOUS MEMBERS OF PEETY FAMILY DO NOT REPRESENT THE CORRECT POSITION. 3. CERTAIN REPORTS FROM STOCK EXCHANGES (DETAILS OF WH ICH WERE NOT MENTIONED IN THE ORDER). 4. ALTERNATIVE COURSE ADOPTED BY THE ASSESSING OFFICER IN TREATING THE TRANSACTIONS AS ADVENTURE IN THE NATURE OF TRAD E WAS BASED ON SOME GENERAL OBSERVATION AS TO THE NATURE OF TRA NSACTION AND JUDICIAL PROPOSITION ON THE ISSUE. 5. WHILE COMING TO THE ABOVE CONCLUSION THE ASSESSING OFFICER RELIED ON VARIOUS CASE LAWS TO SUPPORT HIS FINDINGS PARTICULARLY IN THE MATTER OF ADMISSION U/S.132(4) OF THE ACT. 6. MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AU THORITY WHEREIN STAND OF THE ASSESSEES HAS BEEN EVIDENT FROM STATEM ENT OF FACTS, GROUNDS OF APPEAL, SUBMISSIONS ON VARIOUS DATES, RE PLY TO THE REMAND REPORTS OF ASSESSING OFFICER, NOTE ON ADVENT URE IN THE NATURE OF TRADE, REBUTTING ASSESSING OFFICERS CONT ENTION IN ASSESSMENT ORDER DATED 07.05.2008, REPLY TO THE REP ORT OF ASSESSING OFFICER DATED 09.06.2008, REPLY TO THE REMAND REPOR T OF THE ASSESSING OFFICER RECEIVED ON 10.06.2008. 7. THE FIRST APPELLATE AUTHORITY HAS ADDRESSED AND ADJUDICATED THE MAJOR ISSUES BEING SUBJECT MATTER OF ADJUDICATI ON AS UNDER: 1. WHETHER ON THE SOLE BASIS OF ADMISSION MADE IN THE STATEMENT RECORDED U/S.132(4) BY SHRI SURENDRA SHANTILAL PEET Y IN COURSE OF SEARCH OFFERING THE INCOME SHOWN UNDER TH E HEAD LTCG FOR TAXATION, THE ASSESSING OFFICER CAN FASTEN A LIABILITY AGAINST THE ASSESSEE? IN OTHER WORDS WHETHER AN AD MISSION DE-HORS CORROBORATIVE EVIDENCE COULD FORM THE BASIS OF ASSESSMENT IN A SEARCH CASE. 2. WHETHER THE STATEMENTS OF BROKERS RECORDED PRIOR TO SEARCH, AND IN SOME CASES AFTER SEARCH WHICH FORMS THE SHEE T ANCHOR OF EVIDENCE AGAINST THE ASSESSEE, AND WHO COULD NOT BE 7 PRODUCED FOR CROSS-EXAMINATION AS DEMANDED BY THE A SSESSEE, COULD BE UTILIZED AGAINST THE ASSESSEE TO DRAW ANY ADVERSE CONCLUSION. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, EVIDENCES GATHERED BY THE ASSESSING OFFICER IN COURSE OF ASSE SSMENT PROCEEDINGS AND SUBSEQUENTLY AND THOSE ADDUCED BY T HE ASSESSEE, THE LEGAL POSITION ON VARIOUS ISSUES AND JUDICIAL EXPOSITION ON THE SUBJECT, THE ASSESSMENT MADE BY T HE ASSESSING OFFICER COULD BE SUSTAINED ON THE ISSUE O F TREATING THE LTCG AS SHAM AND TREATING THE SAME AS UNEXPLAIN ED MONEY U/S.69A OF THE ACT. 4. WHETHER THE ALTERNATIVE APPROACH OF THE ASSESSING O FFICER IN TREATING THE ENTIRE TRANSACTION UNDER THE HEAD AN ADVENTURE IN THE NATURE OF TRADE IS SUSTAINABLE. 8. FIRSTLY THE ISSUE OF ADMISSION AS THE BASIS OF A SSESSMENT AND RETRACTION THEREOF HAS BEEN ADDRESSED BY THE FIRST APPELLATE AUTHORITY. IN THIS REGARD, OBSERVATIONS OF ASSESSING OFFICER ARE AS UNDER: (A) THAT SHRI SURENDRA SHANTILAL PEETY HAD GIVEN A STAT EMENT U/S.132(4) ON 24.03.2006, WHEN CONFRONTED WITH THE STATEMENTS OF CERTAIN BROKERS NAMELY, DHAWAL R SHAH , DIRECTOR, TRIMITI INVESTMENT AND FINANCIAL SERVICES LTD., PUNE, MILAN R PARIKH, MD ACTION FINANCIAL SERVICES P LTD. , AND VIJAY BHAGABANDAS, VIJAY BHAGABAN DAS & CO., MUMBAI, THAT THE LTCG SHOWN BY VARIOUS FAMILY MEMBERS IS NOT GENUINE AND THAT THE SAME IS OFFERED FOR TAXATION. SAME WAS LA TER CONFIRMED IN A LETTER DATED 29.04.2006. (B) THAT THE INCOME SO OFFERED IN COURSE OF SEARCH WAS NOT INCLUDED IN THE RETURNS FILED IN RESPONSE TO NOTICE U/S.153A AND THE SAME AMOUNTS TO A RETRACTION WHICH IS NOT P ERMISSIBLE UNDER LAW. (C) THAT IN THE SUBSEQUENT STATEMENT RECORDED ON 14.12. 2007, SRI SURENDRA PEETY DENIED ANY COERCION HAVING BEEN PUT ON HIM IN COURSE OF RECORDING THE STATEMENT ON 24.03.2006 AND THEREFORE THE STATEMENT PER SE HAS EVIDENTIARY VALUE TO FRAME THE ASSESSMENT. (D) THE ASSESSING OFFICER ALSO RELIED ON CERTAIN DECISI ONS WHEREIN THE STATEMENTS RECORDED U/S.132(4), THOUGH RETRACTE D, FORMED THE BASIS OF ASSESSMENT. 8 (I) RAMJAS VS. CIT 183 CTR 144 RAJ. (II) GREEN VIEW RESTAURANT VS. ACIT 263 ITR 169 GAU. (III) DR.S.C.GUPTA VS. CIT 248 ITR 782 (ALL.). (IV) V.KUNHAMBU & SONS 219 ITR 235 KER. (V) S.S.RATAN CHAND BHOLANATH VS. CIT 210 ITR 682 MP. (VI) HIRASINGH & CO. VS. CIT 230 ITR 791 HP (VII) MAHESH B SAHA VS. ACIT 238 ITR 130 KER. IN VIEW OF ABOVE, THE ASSESSING OFFICER OBSERVED TH AT THERE WAS NO VALID REASON FOR RETRACTION. 8.1. ON THE ISSUE OF ADMISSION U/S.132(4), THE ASSE SSEE SUBMITTED HIS DETAILED REPLY VIDE HIS SUBMISSION DATED 04.03. 2008, 07.05.2008 AND 04.06.2008. IN SUBMISSION DATED 04. 03.2008, THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAS L AID DOWN UNDUE EMPHASIS ON ADMISSION MADE BY SHRI SURENDRA SHANTIL AL PEETY DURING COURSE OF SEARCH ACTION U/S.132(4) OF THE AC T PERTAINING TO THE MATTER OF GENUINENESS OF THE SHARE TRANSACTIONS . HE FAILED TO APPRECIATE THE CIRCUMSTANCES IN WHICH STATEMENT WAS OBTAINED AS HAS BEEN EXPLAINED BY THE ASSESSEE IN COURSE OF ASS ESSMENT PROCEEDINGS VIDE LETTER DATED 24.08.2007. THE ASSE SSEE RAISED FOLLOWING OBJECTIONS IN THIS REGARD: I) IN COURSE OF SEARCH, THE ASSESSEE WAS SHOWN SOME ST ATEMENTS OF BROKERS (WITHOUT PROVIDING COPIES THEREOF) AND I T WAS IMPRESSED UPON THAT THE BROKERS HAVE DENIED THE TRA NSACTIONS. THE ASSESSEES NEVER HAD ANY OCCASION TO KNOW UNDER WHAT CIRCUMSTANCES THE BROKERS HAVE GIVEN THE STATEMENTS AND IN WHAT MANNER. II) ASSESSEE WAS IN A STATE OF SHOCK AND CONFUSION BECA USE OF SEARCH WHICH CONTINUED BEYOND NORMAL HOURS. III) ASSESSEES DID NOT HAVE THE BENEFIT OF REFERRING TO THE EVIDENCES AVAILABLE IN THEIR OFFICES WHICH WERE IN THE NATURE OF DOCUMENTARY EVIDENCE LIKE THE CONTRACT NOTES, BILLS OF THE BROKERS FOR THE PURCHASE AND SALE OF THE ALLEGED SH ARES, BANK STATEMENTS, ETC. IV) IN THE STATEMENT RECORDED U/S. 132(4) SHRI SURENDRA SHANTILAL PEETY ASSERTED THAT ALL THE MEMBERS OF THE PEETY FA MILY WOULD 9 COME OUT WITH THE CORRECT POSITION OF THE NATURE OF INCOME FROM THE ALLEGED SHARES INVESTMENT/BUSINESS AFTER E VALUATING THE EVIDENCES. V) MEMBERS OF THE PEETY FAMILY, AFTER EVALUATING THE E VIDENCE AVAILABLE WITH THEM AND AFTER OBTAINING THE MISSING PAPERS FROM THE BROKERS, FILED THEIR RETURNS WITHOUT ADMIT TING THAT THE TRANSACTIONS WERE NOT GENUINE. VI) IT IS NOT UNCOMMON THAT SUCH STATEMENTS ARE RECORDE D UNDER INDUCEMENT, PROMISE, PERSUASION, UNDER EXCEPTIONAL CIRCUMSTANCES AND IN AN ATMOSPHERE OF HIGH PRESSURE LIABLE TO CAUSE NERVOUSNESS AMOUNTS TO INVOLUNTARY STATEMENTS DIVORCED FROM THE ACTUAL FACTS ON RECORD. THUS STAT EMENT GIVEN BY THE ASSESSEE CANNOT BIND HIM ON THE FACE OF OTHE R EVIDENCES SUPPORTING HIS CASE. IN THIS REGARD THE ASSESSEE R ELIED ON THE DECISION IN THE CASE OF DEEPCHAND AND CO. VS. ACIT (1995) 51 TTJ BOM 421, WHEREIN IT WAS HELD THAT A STATEMENT R ECORDED DURING SEARCH PROCEEDING WHICH CONTINUED FOR AN UND ULY LONG PERIOD CANNOT BE CONSIDERED TO BE FREE, FEARLESS AN D VOLUNTARY. THUS, AN ELEMENT OF COMPULSION IS DISCERNIBLE IN TH E CASE OF THE ASSESSEE ON THE FACTS AND CIRCUMSTANCES OF CASE JUSTIFYING RETRACTION. VII) IT WAS SUBMITTED THAT THE MEASURE OF SEARCH IS TO U NEARTH DOCUMENTS, REVEALING CONCEALED INCOME AND WEALTH SI NCE STRICTLY SPEAKING INTERROGATION IS NOT A PART OF T HE OBJECT OF THE SEARCH. IT IS EXPECTED THAT ASSESSEE IS NOT PUT TO PRESSURE FOR MAKING AN ADMISSION AND THE STATEMENT SHOULD NOT GO BEYOND WHAT IS DISCOVERED IN COURSE OF SEARCH FROM THE PRE MISES OF THE ASSESSEE. IN THE CASE OF THE ASSESSEE, NO INCRIMINA TING EVIDENCE WAS FOUND IN CONNECTION WITH SHARE TRANSAC TIONS FROM THE RESIDENTIAL AND OFFICE PREMISES OF THE PEE TYS AND THE ENTIRE DECLARATION PERTAINING TO THE SHARES TRANSAC TIONS WERE TAKEN ONLY ON THE BASIS OF THE STATEMENTS RECORDED OF THE BROKERS AND THE RETURNS OF INCOMES FILED DURING THE REGULAR COURSE. THE CIRCUMSTANCES IN WHICH THIRD PARTY STAT EMENTS WERE JUST SHOWN ON THE DATE OF SEARCH WITHOUT MAKIN G 10 AVAILABLE COPY OF THE SAME COUPLED WITH THE MENTAL CONDITION OF VARIOUS MEMBERS OF ASSESSEE'S FAMILY IN THE COUR SE OF PROLONGED SEARCH BEYOND NORMAL HOURS WOULD INDICATE THAT THE ADMISSION SO MADE WERE NOT VOLUNTARY AND HAVE NO EVIDENTIARY VALUE. VIII) EVEN THE GOVERNMENT HAD REASON TO BELIEVE THAT THER E IS WIDESPREAD PRACTICE OF OBTAINING CONFESSION. IN THE BUDGET SPEECH FOR 2003-04, THE FINANCE MINISTER INFORMED T HE PARLIAMENT THAT NO CONFESSIONAL STATEMENT SHALL BE OBTAINED DURING SEARCH AND SEIZURE OPERATION. IN PURSUANCE T O SAME BOARD'S LETTER WAS ISSUED NUMBERED AS FROM F.NO 286/2/2003/IT(INV) DT. 11.03.2003. IT SHOWS THAT NOT AN IOTA OF EVIDENCE WAS FOUND IN COURSE OF SEARCH FROM THE OFFICE AND RESIDENTIAL PREMISES OF PEETY GROUP TO INDICATE THAT THE TRANSACTIONS IN SHARES ARE NOT GENUINE. THERE WAS NO EVIDENCE SHOWING FLOW OF CASH FROM THE ASSESSEE TO THE BROKERS FOR INDULGING IN SUCH ACTIVITIES. TH ERE WAS EVIDENCE AVAILABLE IN THE PREMISES OF THE ASSESSEE IN THE FORM OF RECORDS OF THE DEPARTMENT BY WAY OF RETURNS AND OTHER SUPPORTING EVIDENCE TO SUGGEST THAT THE TRANSACTION S WERE GENUINE. AGAINST THIS THE ASSESSING OFFICER WAS IN POSSESSION OF SOME ORAL AND HEARSAY EVIDENCE FROM SOME BROKERS WHO ALLEGED WITHOUT SUBSTANTIATING THAT THE PURCHASES A ND SALES WERE BY WAY OF ACCOMMODATION ENTRIES. SUCH UNSUBST ANTIATED EVIDENCES SHOULD NOT BE GIVEN UNDUE WEIGHTAGE. IX) IT IS A SETTLED PRINCIPLE OF LAW THAT THE APPRO ACH OF A COURT IS FIRST TO MARSHALL EVIDENCE AGAINST THE ACCUSED EXCL UDING CONFESSION ALTOGETHER AND SEE WHETHER THE ACCUSED C AN BE HELD GUILTY. IN THE CASE OF THE ASSESSEE, ON THE FACE OF THE OVERWHELMING NATURE OF EVIDENCES AVAILABLE IN THE R ECORDS OF THE DEPARTMENT AND THOSE PRODUCED BY THE ASSESSEE D URING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER 11 OUGHT NOT HAVE PLACED UNDUE IMPORTANCE ON THE ADMIS SION IN ABSENCE OF CLINCHING CORROBORATIVE EVIDENCE FOR SAM E. X) IT IS ALSO A WELL ACCEPTED PRINCIPLE THAT AN ADM ISSION IS NOT CONCLUSIVE EVIDENCE AS TO THE TRUTH OF THE MATTERS STATED THEREIN. IT IS ONLY A PIECE OF EVIDENCE, THE RELEVA NCY OF WHICH IS REQUIRED TO BE JUDGED BASING ON THE MATERIAL EVIDEN CE AND CIRCUMSTANCES IN WHICH IT IS MADE. IN THE CASE OF T HE ASSESSEE AS EXPLAINED ABOVE, THE STATEMENT WAS MADE WITHOUT HAVING THE BENEFIT OF REFERRING TO ANY DOCUMENT IN CONFUSI ON AND ON THE ASSERTION OF THE DEPARTMENT THAT THEY HAVE EVID ENCE AGAINST THE ASSESSEE BY WAY OF SOME STATEMENTS OF B ROKERS WHICH WERE NOT MADE AVAILABLE TO THE ASSESSEE. XI) A MERE CONFESSIONAL STATEMENT WITHOUT THERE BEI NG ANY DOCUMENTARY PROOF SHALL NOT BE USED AS EVIDENCE AGA INST THE ASSESSEE. THE STATEMENT OF MANAGING DIRECTOR WAS RE CORDED IN COURSE OF SEARCH WHEREIN HE ADMITTED UNDISCLOSED IN COME BUT LATER RETRACTED FROM THE SAID STATEMENT AND ACCORDI NGLY THE COURT HELD THAT WITHOUT DOCUMENTARY PROOF, A STATEM ENT ALONE CANNOT BE UTILIZED AGAINST THE ASSESSEE AS HELD IN CIT VS. SHREE RAMADAS MOTOR TRANSPORT, 238 ITR 177 (183) AP . IN THE CASE OF THE ASSESSEE, NO EVIDENCE WHATSOEVER WA S FOUND IN COURSE OF SEARCH REGARDING THE NON GENUINENESS OF T HE TRANSACTIONS PERTAINING TO THE SHARES TRANSACTION I N QUESTION. THE PRINCIPLE EVOLVED IN THE ABOVE CASE CAN BE APPL IED TO THE CASE OF THE ASSESSEE. XII) IT IS A SETTLED PRINCIPLE THAT IN CASE EVIDENC E IS IN THE FORM OF STATEMENT WHICH IS SOUGHT TO BE UTILISED AG AINST THE ASSESSEE PERTAINS TO AN EX PARTE STATEMENT OF WITNE SS, THE SAME CANNOT BE UNILATERALLY UTILIZED AGAINST THE AS SESSEE WITHOUT THE WITNESS BEING PUT TO CROSS EXAMINATION. IN THIS REGARD, THE ASSESSEE PLACED RELIANCE ON THE DECISIO N IN THE CASE OF JAIKISHAN R AGARWAL VS. ACIT (2000) 66 TTJ 704, 12 WHEREIN IT WAS HELD THAT IN A CASE WHERE NO DOCUMEN T WAS SEIZED IN COURSE OF A SEARCH SHOWING PAYMENT OF EXT RA CONSIDERATION FOR PURCHASE OF A PROPERTY, NO ADDITI ONS CAN BE MADE ON THE BASIS OF STATEMENT RECORDED FROM THIRD PARTIES. IT WAS HELD THAT ANY STATEMENT RECORDED AT THE BACK OF THE ASSESSEE HAS NO EVIDENTIARY VALUE AND IN THE ABSENC E OF ANY EVIDENCE FOUND IN THE COURSE OF SEARCH INDICATING P AYMENT OF EXTRA CONSIDERATION OVER AND ABOVE WHAT IS MENTIONE D IN THE DOCUMENT, THE ADDITION CANNOT BE SUSTAINED. THE FAC TS OF THE CASE OF THE ASSESSEE ARE AKIN TO THE FACTS OF THE D ECIDED CASE CITED SUPRA AND THEREFORE THE PRINCIPLE EVOLVED IN THE SAID CASE IS EQUALLY APPLICABLE TO THE CASE OF THE ASSESSEE W HERE THE DEPARTMENT HAS RELIED ON THE STATEMENT OF THIRD PAR TIES WHICH WERE RECORDED BEHIND THE BACK OF THE ASSESSEE AND W HO WERE NOT MADE AVAILABLE FOR CROSS-EXAMINATION DESPITE SP ECIFIC REQUEST AND DESPITE THE FACT THAT THE ASSESSEE WAS AVAILABLE FOR SUCH EXAMINATION AT A PLACE SELECTED BY THE DEPARTM ENT TO FACILITATE THE PROCESS OF ENQUIRY. THUS, THE PROCES S OF TAKING EVIDENCE IS COMPLETE AND SUCH EX PARTE STATEMENTS C ANNOT BE UTILIZED AGAINST THE ASSESSEE. XIII) THE ASSESSEE FURTHER SUBMITTED THAT WHEN AN E X PARTE STATEMENT IS RECORDED AT THE BACK OF THE ASSESSEE, WITHOUT AFFORDING AN OPPORTUNITY TO CROSS EXAMINE THE WITNE SS, THE STATEMENT CANNOT BE MADE USE OF IN FRAMING AN ASSES SMENT. IN THIS REGARD, THE ASSESSEE PLACED RELIANCE ON THE DE CISION OF THE HON'BLE SUPREME COURT IN THE CASE OF KALRA GLUE FAC TORY VS. SALES TAX TRIBUNAL (1987) 167 ITR 498 SC AND KISHNI NCHAND CHELLARAM VS. CIT (1980) 125 ITR 713 SC. THESE ARE CASES WHERE DEPARTMENT FAILED TO PRODUCE THE WITNESSES, T HUS BRINGING TO AN END THE PROCESS OF TAKING EVIDENCE. IN OTHER WORDS, THE EVIDENCE IS CLOSED ON THIS ISSUE IN FAVO UR OF THE ASSESSEE. 13 XIV) AS REGARDS RETRACTION, THE PRINCIPLE IS THAT I T SHOULD BE RETRACTED BEFORE THE CONCERNED AUTHORITY DECIDES TH E MATTER. IN OTHER WORDS, THE ASSESSEE SHOULD NOT PLACE THE AUTH ORITIES IN SUCH A POSITION SO AS TO THWART THE PROCESS OF INVE STIGATION. IN THE CASE OF THE ASSESSEE, THE RETRACTION WAS WELL E VIDENT FROM THE RETURNS FILED IN RESPONSE TO NOTICE UNDER SECTI ON 153A AND ASSESSEE'S LETTERS ADDRESSED TO THE DEPARTMENT. THI S GAVE THE AUTHORITIES SUFFICIENT TIME TO COLLECT CORROBORATIV E EVIDENCE WHICH THEY HAVE FAILED TO DO AS EXPLAINED IN THE PR ECEDING PARAS. XV) IT WAS SUBMITTED THAT ESTOPPEL IS A RULE OF EVI DENCE BUT NOT A CAUSE OF ACTION AND THAT IT CANNOT BE A BASIS OF ASSESSMENT AND CREATION OF A LIABILITY UNDER THE ACT AS HELD I N CIT VS. ASIT KUMAR GHOSH (1953) 24 ITR 576 (SC). THEREFORE THE A SSESSEE CANNOT BE HELD LIABLE ON THE BASIS OF A MERE STATEM ENT WHICH WAS MADE UNDER EXCEPTIONAL CIRCUMSTANCE AS EXPLAINE D ABOVE. ASSESSING OFFICER CANNOT UTILIZE CONTENTS OF SUCH A STATEMENT TO FRAME ASSESSMENT WHICH IS DEFICIENT IN OTHER ASP ECTS. 8.2. VIDE SUBMISSION DATED 07.05.2008, THE ASSESSEE REITERATED THE ABOVE SUBMISSIONS AND THE RELEVANT PORTION OF THE S UBMISSION IS EXTRACTED BELOW: I) A STATEMENT WHICH IS IN THE REALM OF ORAL EVIDEN CE IS INTENDED TO SUPPLEMENT DOCUMENTARY EVIDENCE BUT NOT TO SUPPLANT THE SAME. IF THE LOGIC OF THE ASSESSING OF FICER IS ACCEPTED, THEN IT WOULD AMOUNT TO COMPLETELY DISPLA CING THE VOLUMINOUS EVIDENCE WHICH ARE DOCUMENTARY IN NATURE REFLECTING THE CORRECT STATEMENT OF AFFAIR OF ASSE SSEE AS EXPLAINED IN COURSE OF HEARING AND IN THIS EXPLANAT ION. THIS IS NOT PERMISSIBLE. FURTHER PITTED AGAINST DOCUMENTARY EVIDENCE, THE ORAL EVIDENCE LOOSES ITS SIGNIFICANCE FOR ALL P URPOSES WHICH IS A SOUND RULE OF EVIDENCE. II)THE RETURN OF INCOME FILED BY THE APPELLANT IN R ESPONSE TO NOTICE UNDER SECTION 153A WITHOUT ALTERING THE POSI TION VIS-A- VIS THE ORIGINAL RETURN HAS BEEN LOOSELY TERMED AS A RETRACTION BY THE ASSESSING OFFICER. THIS IS NOT SO. ANY RETUR N OF INCOME SHOULD FAITHFULLY REFLECT THE ACTUAL TRANSACTION BA SED ON EVIDENCE. THIS IS WHAT THE ASSESSEE HAS DONE ON CAR EFUL 14 APPRECIATION OF FACTS OF THE CASE. LAW CANNOT COMPE L A PERSON TO BE ASSESSED ON INCOME WHICH HE HAS NOT EARNED ME RELY ON THE BASIS OF A STATEMENT IGNORING THE ACTUAL STATE OF AFFAIRS. III) IT IS SUBMITTED THAT IN COURSE OF SEARCH, THE ASSESSEE WAS SHOWN CERTAIN STATEMENTS OF BROKERS RECORDED AT THE BACK OF THE APPELLANT. THERE WAS HARDLY ANY TIME TO REFER T O ORIGINAL DOCUMENTS AND THEREFORE UNDER THE CIRCUMSTANCES WHI CH GENERALLY FOLLOWS A SEARCH, THERE WAS A STATEMENT O F A GENERAL NATURE MADE BY THE APPELLANT. THE SHEET ANCHOR OF DEPARTMENT'S EVIDENCE UTILIZED IN THE CONTEXT OF AD MISSION AND IN THE ASSESSMENT IS THE ORAL TESTIMONY OF THE BROK ERS. THE APPELLANT IS STILL AT LOSS TO FIND OUT UNDER WHAT C IRCUMSTANCES THESE BROKERS WERE MADE TO GIVE STATEMENTS INCRIMIN ATING THE APPELLANT WHEN FACTS OF THE CASE SHOW OTHERWISE. NO ATTEMPT WAS MADE TO MAKE AVAILABLE THESE STATEMENTS TILL TH E LAST MOMENT KEEPING THE APPELLANT IN DARK ABOUT WHAT THE DEPARTMENT WISHED TO UTILIZE IN THE ASSESSMENT. ON APPELLANT'S INSISTENCE, THE ASSESSING OFFICER GAVE OPPORTUNITY TO THE APPELLANT TO CROSS-EXAMINE THESE WITNESSES AT MUMBA I IN THE LAST WEEK OF DEC '07. HOWEVER THE DEPARTMENT FAILED TO PRODUCE THESE BROKERS TWICE.... A THIRD OPPORTUNITY WAS GIV EN AT THE INSTANCE OF THIS AUTHORITY IN COURSE OF APPELLATE P ROCEEDINGS TO PRODUCE THE BROKERS. THE ASSESSING OFFICER FAILED TO PRODUCE THESE BROKERS, THEREBY CLOSING THE EVIDENCE FOR ALL INTENTS AND PURPOSES. IT MAY BE WORTHWHILE TO MENTION HERE THAT ALTHOUGH THE ASSESSING OFFICER FAILED TO PRODUCE THE BROKERS FOR CROSS- EXAMINATION BEFORE CONCLUSION OF ASSESSMENT PROCEED ING, THERE IS NO WHISPER IN THE ASSESSMENT ORDER IN THIS REGARD.... THE THIRD FAILURE NOT ONLY COMPOUNDS THE MATTER BUT ALSO GIVES AN UNMISTAKABLE IMPRESSION THAT CONTENTS OF THE STA TEMENTS WHICH WERE SHOWN TO THE APPELLANT IN COURSE OF SEAR CH WERE SUSPECT AND NOT RECORDED BY FOLLOWING THE DUE PROCE DURE OF LAW. THE ADMISSION OF THE APPELLANT IN COURSE OF S EARCH MAY BE READ IN CONJUNCTION WITH THE SO CALLED UNSUBSTAN TIATED STATEMENTS OF BROKERS BUT NOT IN ISOLATION, APPRECI ATING THE ENTIRETY OF THE CIRCUMSTANCES AND IN THE BACKGROUND OF DOCUMENTARY EVIDENCE SUPPORTING THE CASE OF THE APP ELLANT WHICH THE DEPARTMENT HAS FAILED TO IMPEACH TILL THE STAGE OF APPELLATE PROCEEDING. 8.3. IN THIS REGARD, IT WAS SUBMITTED THAT IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS MADE AN OBSERVATION THAT THE ASSESSEE HAS RECONFIRMED THE DECLARATION VIDE ANOTH ER LETTER DATED 29.04.2006. IN THIS REGARD IT WAS SUBMITTED THAT I T IS NOT A FACT. IN FACT, THE ASSESSEE WAS ASKED TO FURNISH DETAILS REG ARDING EXTENT OF CAPITAL GAIN REFLECTED IN THE RETURNS OF VARIOUS ME MBERS OF PEETY FAMILY AND ACCORDINGLY THE SAME WAS FURNISHED VIDE FORWARDING LETTER DATED 29.04.2006. THIS LETTER WAS PRODUCED BY THE ASSESSING 15 OFFICER IN COURSE OF HEARING ON 24.04.2008 BEFORE T HE FIRST APPELLATE AUTHORITY. NOWHERE DOES THE LETTER INDICATE THAT T HE ASSESSEE CONFIRMED THE DISCLOSURE IN THE SAID LETTER. IN TH IS REGARD, THE CATEGORICAL OBSERVATIONS OF THE ASSESSING OFFICER I N THE ASSESSMENT ORDER ARE MISLEADING. 8.4. THE ASSESSEE ALSO FILED LEGAL EXPLANATION WHER EIN DISTINGUISHING THE JUDGMENTS CITED BY THE ASSESSING OFFICER IN HIS ORDER. THE STAND OF THE ASSESSEE HAS BEEN THAT THE RE WAS NO ALLEGATION OF COERCION. ON THE OTHER HAND, IT WAS A RGUED THAT IN COURSE OF RECORDING THE STATEMENT THE ASSESSEE WAS NOT IN A POSITION TO REFER TO THE DOCUMENTS, RETURNS OF INCOME AND WA S UNDULY INFLUENCED BY THE STATEMENTS OF CERTAIN BROKERS SHO WN TO HIM (WITHOUT PROVIDING COPIES OF THE SAME) WHICH WERE R ECORDED PRIOR TO SEARCH BEHIND THE BACK OF THE ASSESSEE. IT WAS EXP LAINED IN COURSE OF APPEAL PROCEEDINGS THAT COUPLED WITH ALL THESE E XTRANEOUS FACTORS AND UNDER STRESS WHICH PREVAILED DURING THE SEARCH OPERATION IN THE PREMISES OF THE ASSESSEE FOR LONG HOURS AND OUT OF CONFUSION, THE ASSESSEE MADE STATEMENT ADMITTING THE TRANSACTIONS AS NOT GENUINE FOR BUYING PEACE AND PUT AN END TO PROTRACTED SEARC H PROCEEDINGS. THIS STATEMENT WAS CONTRARY TO FACTUAL EVIDENCE OBT AINING FROM THE RECORDS OF THE ASSESSEE. 8.5. THE FIRST APPELLATE AUTHORITY ANALYSED THE FAC TUAL POSITION AND ALSO EXAMINED VARIOUS CASE LAWS RELIED ON BY THE AS SESSING OFFICER. ON THE ISSUE OF RETRACTION, CASE LAWS RELIED ON BY THE ASSESSING OFFICER WERE DISTINGUISHED BY THE FIRST APPELLATE A UTHORITY AND, ACCORDINGLY, HELD THAT THEY ARE NOT APPLICABLE TO T HE FACTS OF THE ASSESSEE. THE CASE LAWS RELIED BY THE ASSESSING OF FICER HAVE BEEN DISCUSSED BY THE FIRST APPELLATE AUTHORITY AS UNDER : A. RAMJAS NAWAL VS. CIT & ANR. 183 CTR 144 RAJ. IN ABOVE CASE, THE ASSESSEE ADMITTED THE EXPORT PR OFIT AND CERTAIN GIFTS AS UNDISCLOSED INCOME IN HIS STATEMEN T RECORDED 16 U/S.132(4) AND OFFERED THE INCOME TO TAX. WHILE FI LING RETURN THE ASSESSEE RETRACTED FROM THE STATEMENT AND OFFERED N O INCOME. IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER ASKED THE ASSESSEE TO PRODUCE EVIDENCE TO PROVE THAT THE CLAI M REGARDING EXPORT INCOME AND GENUINENESS OF GIFTS. THE ASSESS EE APPARENTLY FAILED TO PRODUCE ANY DOCUMENTARY EVIDENCE EITHER I N COURSE OF SEARCH OR BEFORE ASSESSING OFFICER TO SUPPORT HIS C ONTENTION THAT THE EXPORT PROFIT/GIFTS ARE GENUINE. THE ASSESSEE ALSO FAILED TO SUBSTANTIATE THE ALLEGATION THAT THE STATEMENT WAS TAKEN ON DURESS, A GROUND TAKEN SUBSEQUENT TO ADMISSION. THE ASSESS ING OFFICER ALSO CAME TO A FINDING THAT THESE RECEIPTS WERE INT RODUCED TO EXPLAIN INVESTMENTS MADE DURING THE PERIOD. THEREFORE, THE ASSESSING OFFICER CAME TO A CONCLUSION THAT THE CLAIM OF THE ASSESSEE IS NOT ACCEPTABLE AND HIS RETRACTION IS AN AFTERTHOUGHT. IN THIS REGARD, THE FIRST APPELLATE AUTHORITY OBSERVED, I) THAT THE ASSESSEE FAILED TO PRODUCE ANY DOCUMENTARY EVIDENCE AT THE TIME OF SEARCH REGARDING GENUINENESS OF EXPO RT PROFIT AND NRI GIFT. II) THAT NO EVIDENCE WAS FOUND IN COURSE OF SEARCH TO C ORROBORATE ASSESSEES CLAIM THAT HE HAD EARNED EXPORT PROFIT O R RECEIVED NRI GIFT. III) THAT THE ASSESSEE FAILED TO PRODUCE ANY DOCUMENTARY EVIDENCE IN COURSE OF ASSESSMENT PROCEEDINGS REGARDING GENUI NENESS OF EXPORT PROFIT AND NRI GIFT. IV) THAT THE ASSESSEE FAILED TO CORROBORATE THE ALLEGAT ION THAT THE STATEMENT WAS TAKEN UNDER DURESS. V) THAT THE ASSESSING OFFICER MADE OUT A CASE DE HORS THE STATEMENT AGAINST THE ASSESSEE. IT IS NOT A CASE W HERE THE ASSESSING OFFICER SOLELY RELIED ON THE ADMISSION AT THE TIME OF SEARCH AND CAME TO A FINDING AGAINST THE ASSESSEE W ITHOUT CORROBORATIVE EVIDENCE. THE FIRST APPELLATE AUTHORITY OBSERVED THAT ALL THE ABOVE ELEMENTS ARE ABSENT IN ASSESSEES CASE FOR FOLLOWIN G REASONS: 17 I) DOCUMENTARY EVIDENCE WAS FOUND IN COURSE OF SEARCH BY WAY OF CONTRACT NOTES, BILLS OF BROKERS, ETC., SHOW ING THAT VARIOUS MEMBERS OF ASSESSEES FAMILY WERE INVESTING IN SHARES. II) THE TRANSACTIONS IN SHARES WERE WELL DOCUMENTED BY WAY OF VARIOUS COMMUNICATION OF BROKERS, PASSING OF TRANSACTIONS THROUGH DEMAT ACCOUNTS, PAYMENTS THROU GH BANKING CHANNELS, ETC., AS EXPLAINED IN DETAIL ABOV E. III) ALL THE SUPPORTING DOCUMENTS WERE PRODUCED BEFORE T HE ASSESSING OFFICER IN COURSE OF ASSESSMENT PROCEEDIN GS. IV) THE ASSESSING OFFICER SOLELY RELIED ON THE UNSUBSTANTIATED STATEMENTS OF SOME BROKERS IN FRAMI NG THE ASSESSMENT AND AT THE SAME TIME FAILED TO PRODU CE THE BROKERS FOR CROSS EXAMINATION. THEREFORE, THE ASSESSING OFFICER FAILED TO DISCHARGE THE BURDEN WH ICH LAY ON HIM. V) THE ASSESSMENTS ARE FOR MOST PART BASED ON SURMISES , SUSPICION AND PRESUMPTION. IN THIS BACKGROUND, THE FIRST APPELLATE AUTHORITY H ELD THAT THE ADMISSIONS MADE BY THE ASSESSEE IN COURSE OF SEARCH AND SUBSEQUENT NON-DISCLOSURE OF THE INCOME IN THE RETU RNS ARE WELL SUPPORTED BY EVIDENCE. IT WAS NOT A CASE WHERE IN THE ABSENCE OF EVIDENCE OR FAILURE TO PRODUCE SUCH EVIDENCE, THE I SSUE OF RETRACTION NEEDS TO BE JUDGED. WHAT EMINENTLY DISTINGUISHES T HE CASE OF THE ASSESSEE FROM THE ONE RELIED ON BY THE ASSESSING OF FICER IS THE ABILITY OF THE ASSESSEE TO ADDUCE EVIDENCE IN COURS E OF ASSESSMENT PROCEEDINGS AND FAILURE OF THE DEPARTMENT TO COMPLY TO ALL LEGAL REQUIREMENTS IN THE PROCESS OF EVIDENCE GATHERING A ND APPRECIATING THE SAME IN ITS TOTALITY AND IN THE CORRECT PERSPEC TIVE. B. GREEN VIEW RESTAURANT VS. ACIT (2003) 263 ITR 16 9 (GAU) IN THIS CASE RELIED ON BY THE ASSESSING OFFICER, WE FIND THAT THE ASSESSEE IN THIS CASE ADMITTED INCOME OF RS.4,00,00 0/- IN THE 18 STATEMENT RECORDED U/S.132(4) OF THE ACT. SUBSEQUE NTLY THE ADMISSION WAS RETRACTED AND THE INCOME SO ADMITTED WAS NOT INCLUDED IN THE RETURN. IT WAS ALLEGED THAT THE ST ATEMENT WAS RECORDED UNDER FORCE AND COERCION. SINCE THE ASSES SEE FAILED TO SUBSTANTIATE ITS ASSERTION THAT THE DEPARTMENT COER CED THE ASSESSEE IN MAKING THE ADMISSION, THE ASSESSING OFFICER ADDE D THE AMOUNT AS ADMITTED. THIS WAS UPHELD BY THE ITAT FOR SIMIL AR REASONS. BEFORE THE HON'BLE HIGH COURT, TWO ISSUES WERE RAIS ED. (A) THE PLEA OF COERCION (B) IT WAS ALSO ARGUED THAT A MERE STAT EMENT CANNOT BE SOLE BASIS OF ASSESSMENT MADE U/S.143(3). THE CONC ERNED HON'BLE HIGH COURT DISMISSED THE ALLEGATION OF COERCION AS UNTENABLE. AT THE SAME TIME THE COURT REMANDED THE MATTER FOR THE REASON THAT THE ORDER FAILED TO REVEAL ON WHAT EVIDENCE THE ASS ESSMENT WAS MADE AS THE SAME IS THE SPECIFIC MANDATE OF LAW WHI LE FRAMING THE ASSESSMENT U/S.143(3). THE FIRST APPELLATE AUTHORI TY OBSERVED THAT THE RATIO OF THE ABOVE CASE DOES NOT APPLY TO FACTS OF THE PRESENT CASE FOR THE FOLLOWING REASONS: I) THE ASSESSEE HAS NOT RAISED THE PLEA OF COERCION. II) THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO ADDUCE EVIDENCE. THE CONTENTION OF THE ASSESSEE IS THAT U NDUE EMPHASIS SHOULD NOT BE PLACED ON A STATEMENT RECORD ED U/S.132(4) TO FRAME AN ASSESSMENT U/S.143(3) AND SA ME CANNOT BE SOLE BASIS OF AN ASSESSMENT IGNORING DOCU MENTARY EVIDENCE. IN OTHER WORDS IT WAS THE CONTENTION OF THE ASSESSEE THAT IN THE LIGHT OF OVERWHELMING NATURE OF MATERIA L EVIDENCE FOUND DURING THE COURSE OF SEARCH AND THOSE PLACED IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER SH OULD HAVE APPLIED HIS MIND TO THE ISSUES PENDING BEFORE HIM I N THE CORRECT PERSPECTIVE AND DONE THE ASSESSMENT AS REQU IRED UNDER LAW INSTEAD OF BASING THE ASSESSMENT ON SURMI SES AND CONJECTURES. C. THE ASSESSING OFFICER HAS RELIED ON DECISION IN THE CASE OF V.KUNHAMBU & SONS VS. CIT (1996) 219 ITR 235 KER . IN THIS 19 CASE THE ASSESSEE DECLARED UNDISCLOSED INCOME ON AC COUNT OF SUPPRESSION OF STOCK TO THE TUNE OF RS.3,00,000/- I N THE STATEMENT RECORDED U/S.132(4) OF THE ACT. SUBSEQUENTLY, IT R AISED THE PLEA OF COERCION AND INTIMIDATION AND RETRACTED FROM THE AD MISSION. THE ASSESSMENT WAS COMPLETED ADDING THE ABOVE AMOUNT AS THE ASSESSEE FAILED TO SUBSTANTIATE HIS ALLEGATIONS. S AME WAS UPHELD IN APPEAL BEFORE THE ITAT FOR SIMILAR REASONS. BEFORE THE HIGH COURT SIMILAR PLEA WAS RAISED IN ADDITION TO PLEA OF COMP ETENCE OF THE AUTHORISED OFFICER TO RECORD THE STATEMENT. THE H ON'BLE CONCERNED HIGH COURT DID NOT UPHELD THE ARGUMENTS OF THE ASSE SSEE FOR SIMILAR REASONS AS HELD BY THE ITAT. THE FIRST APPELLATE A UTHORITY IN PRESENT CASE FOUND THE FACTS OF THE CASE ARE DISTIN GUISHABLE SO AS NOT APPLICABLE TO FACTS OF ASSESSEE, FOR THE FOLLOW ING REASONS: I) IN THE CASE OF THE ASSESSEE THERE WAS NO ALLEGATION OF USE OF COERCION AND INTIMIDATION. II) THE GRIEVANCE OF THE ASSESSEE WAS THAT THE ASSESSIN G OFFICER SHOULD HAVE APPRECIATED THE ENTIRE EVIDENCE AVAILAB LE IN COURSE OF SEARCH AND PLACED BEFORE HIM IN COURSE OF ASSESSMENT TO COME TO A CORRECT CONCLUSION INSTEAD OF LAYING UNDUE EMPHASIS ON THE ADMISSION. III) IT WAS WORTHWHILE TO POINT OUT THAT IN THE CASE BEF ORE APPELLATE FORUM, NO ATTEMPT WAS MADE BY THE ASSESSEE TO FACTU ALLY DISLODGE THE ADMISSION BY PLACING INDEPENDENT EVIDE NCE AND THIS INFLUENCED THE APPELLATE FORUM TO DECIDE THAT THE STATEMENT COULD BE A BASIS FOR ASSESSMENT. IN THE CASE OF THE ASSESSEE, THE DOCUMENTARY EVIDENCE PRODUCED BY THE ASSESSEE WAS OVERWHELMING IN NATURE AND THEREFORE THE ASSESS ING OFFICER SHOULD HAVE REACHED THE CORRECT CONCLUSION IN APPRECIATION OF THESE FACTS IN TOTALITY IN AN ORDER PASSED U/S.153A R.W.S. 143(3). D. THE ASSESSING OFFICERS NEXT RELIEANCE IS DR. S. C.GUPTA VS. CIT (2000) 248 ITR 782 (ALL.) . THE FACTS IN THE SAID CASE ARE THAT IN COURSE OF SURVEY THE ASSESSEE ADMITTED CERTAIN INCO ME AS 20 UNDISCLOSED BUT SUBSEQUENTLY RETRACTED FROM THE SAM E ON THE GROUNDS OF COERCION. THE ASSESSEE FAILED TO PROVE T HE ALLEGATION. FURTHER ASSESSEE DID NOT GO BEYOND MERE ALLEGATION AND FAILED TO PRODUCE ANY EVIDENCE THAT HE HAS NOT EARNED THE ADM ITTED INCOME. UNDER SUCH CIRCUMSTANCES THE APPELLATE FORUM DECIDE D AGAINST THE ASSESSEE. THE CASE OF THE ASSESSEE IS DIFFERENT A S THERE IS NO ALLEGATION OF DURESS. THE ASSESSEE PRODUCED VOLUMI NOUS DOCUMENTARY EVIDENCE BEFORE THE ASSESSING OFFICER T O PROVE THAT THE TRANSACTIONS IN SHARES ARE GENUINE BUT THE ASSESSIN G OFFICER FAILED TO CONSIDER THE SAME IN ITS TOTALITY AND FRAMED THE ASSESSMENT ON MERE SURMICE AND CONJECTURE. SIMILARLY THE FIRST AP PELLATE AUTHORITY DISTINGUISHED CASE OF SARATCHAND BHOLANAT H VS. CIT (1994) 210 ITR 682 (MP) AND MAHESH B SHAH VS. ACIT (1999) 238 ITR 130 KER, RELIED BY THE ASSESSING OFFICER. 8.6. IN VIEW OF THE ABOVE, THE FIRST APPELLATE AUTH ORITY HELD THAT THE ISSUE OF GENUINENESS OF THE CLAIM OF LTCG AND STCG OF ASSESSEE GROUP SHOULD BE JUDGED INDEPENDENTLY ON THE STRENGT H AND MERIT OF DOCUMENTARY AND OTHER THIRD PARTY CONTEMPORARY EVID ENCES, IRRESPECTIVE OF THE ADMISSION/RETRACTION OF THE ASS ESSEE. THIS EXERCISE WAS CARRIED OUT BY THE FIRST APPELLATE AUT HORITY IN THE SUBSEQUENT PART OF THE ORDER. 9. SECOND ISSUE ADDRESSED BY FIRST APPELLATE AUTHOR ITY IS WITH REGARD TO LONG TERM CAPITAL GAINS AND GENUINENESS T HEREOF. 9.1. THE ASSESSEES OF THIS GROUP HAVE DECLARED LTCG IN THEIR RESPECTIVE RETURNS FILED IN REGULAR COURSE AND ALSO IN THE RETURNS FILED IN RESPONSE TO NOTICE U/S.153A OF THE ACT. A S STATED ABOVE, THE INCOME ARISING FROM THE LTCG WAS CLAIMED AS EXEMPT U/S.10(38) OF THE ACT WHEREVER THE SAME WAS IN CONFORMITY WITH TH E SAID PROVISIONS BY ASSESSEE. THE DETAILS OF THE CAPITAL GAINS SHOWN IN THE RETURNS ARE GIVEN BELOW: 21 NAME OF THE ASSESSEE ASSESSMENT YEAR LONG TERM CAPITAL GAINS SHORT TERM CAPITAL GAINS SHANTILAL PEETY 2002 - 2003 2,022,084 2003 - 2004 3,414,411 2004 - 2005 1,516,204 2005 - 2006 9,77 9,172 2,556,494 2006 - 2007 7,927,974 ------------- ------------- 24,659,845 2,556,494 SURENDRA PEETY 2002 - 2003 1,507,332 2003 - 2004 4,234,900 2004 - 2005 3,490,640 2005 - 2006 12,704,971 5,116,736 2006 - 2007 13,920,086 1,178,132 ----- -------- ------------- 35,857,929 6,294,868 RAVINDRA PEETY 2003 - 2004 2,217,617 2004 - 2005 3,417,070 2005 - 2006 13,506,996 5,112,199 2006 - 2007 14,121,867 1,187,900 ------------- ------------- 33,263,550 6,300,099 JITENDRA PEETY 20 03 - 2004 572,400 2004 - 2005 3,123,440 2005 - 2006 10,380,183 2,896,856 2006 - 2007 16,277,690 1,205,873 ------------- ------------- 30,353,713 4,102,729 RAVINDRA PEETY HUF 2004 - 2005 1,241,154 2005 - 2006 10,010,858 4,366,231 2006 - 2007 14,3 75,252 144,763 ------------- ------------- 25,627,264 4,510,994 JITENDRA PEETY HUF 2004 - 2005 1,256,060 2005 - 2006 8,591,274 410,329 ------------- ------------- 9,847,334 410,329 VARSHA PEETY 2003 - 2004 2,628,465 2004 - 2005 2,456, 940 2005 - 2006 8,820,174 129,015 2006 - 2007 22,819,621 252,827 ------------- ------------- 36,725,200 381,842 22 NAMRATA PEETY 2003 - 2004 2,628,194 2004 - 2005 2,462,010 2005 - 2006 8,859,802 129,015 2006 - 2007 15,010,902 225,037 --------- ---- ------------- 28,960,908 354,052 RACHNA PEETY 2003 - 2004 2,569,923 2004 - 2005 2,485,000 2005 - 2006 8,835,795 128,515 2006 - 2007 7,915,540 251,399 ------------- ------------- 21,806,258 379,914 SCRIP AND YEAR-WISE DETAILS ASST YEAR NAME OF SCRIP NAME OF ASSESSEE AMOUNT OF INVESTMENT 2001 - 2002 BHARAT HEAVY SURENDRA PEETY 214,266 SHANTILAL PEETY 212,198 ----------- 397,148 2001 - 2002 CORPORATION BANK SHANTILAL PEETY 169,989 2001 - 2002 HINDUSTAN ZINC SHANTILAL PE ETY 60,275 2001 - 2002 HI TECH DRILL SHANTILAL PEETY 118,845 SURENDRA PEETY 117,531 ----------- TOTAL 236,376 2001 - 2002 KARUR VYSYA SHANTILAL PEETY 245,647 SURENDRA PEETY 245,345 ----------- TOTAL 490,992 2001 - 2002 NATIO NAL ALU. SHANTILAL PEETY 190,054 SURENDRA PEETY 186,391 ----------- TOTAL 376,444 2001 - 2002 SAW PIPES SHANTILAL PEETY 120,349 SURENDRA PEETY 96,688 ----------- TOTAL 217,036 2001 - 2002 TATA POWER SHANTILAL PEETY 119,463 SU RENDRA PEETY 120,316 23 ----------- TOTAL 239,779 2001 - 2002 VOLTAS LIMITED SURENDRA PEETY 75,338 2002 - 2003 AFTEK INFORMATION. SHANTILAL PEETY 93,006 2002 - 2003 DATABASE FIN. SHANTILAL PEETY 24,150 SURENDRA PEETY 61,110 RAVINDRA P EETY 36,640 ----------- TOTAL 121,900 2002 - 2003 GEOMETRICK SOFT SHANTILAL PEETY 111,659 2002 - 2003 BHARAT ELECTRICALS SURENDRA PEETY 184,950 JITENDRA PEETY 102,900 ----------- TOTAL 287,850 2002 - 2003 MASTEK LIMITED SURENDR A PEETY 51,184 JITENDRA PEETY 92,748 ----------- TOTAL 143,932 2002 - 2003 HINDUJA TMT SHANTILAL PEETY 129,795 2002 - 2003 KPIT SYS. LTD. SHANTILAL PEETY 43,920 2002 - 2003 JAY KAY DEE VARSHA PEETY 101,193 NAMRATA PEETY 97,153 R ACHNA PEETY 95,278 ----------- TOTAL 293,625 2003 - 2004 G - TECH INFO SURENDRA PEETY 44,114 RAVINDRA PEETY 44,154 JITENDRA PEETY 33,085 RAVINDRA PEETY HUF 11,028 JITENDRA PEETY HUF 11,028 VARSHA PEETY 22,057 NAMRATA PEETY 22,057 RACHNA PEETY 22,057 ----------- TOTAL 209,580 24 2003 - 2004 HIGHLAND INDUSTRIES SHANTILAL PEETY 28,809 SURENDRA PEETY 43,966 RAVINDRA PEETY 43,925 JITENDRA PEETY 44,168 RAVINDRA PEETY HUF 14,271 JITENDRA PEETY HUF 14,441 VARS HA PEETY 28,857 NAMRATA PEETY 28,806 RACHNA PEETY 28,834 ----------- TOTAL 276,076 2004 - 2005 FAST TRACK SHANTILAL PEETY 160,097 SURENDRA PEETY 274,025 RAVINDRA PEETY 277,385 JITENDRA PEETY 252,845 RAVINDRA PEETY HUF 170,558 JITENDRA PEETY HUF 169,680 VARSHA PEETY 216,717 NAMRATA PEETY 215,447 RACHNA PEETY 212,412 ----------- TOTAL 1,949,166 2005 - 2006 PRANNET INDUSTRIES SHANTILAL PEETY 146,280 SURENDRA PEETY 304,509 RAVINDRA PEETY 307,510 JITEN DRA PEETY 304,960 RAVINDRA PEETY HUF 137,524 VARSHA PEETY 306,610 NAMRATA PEETY 297,259 RACHNA PEETY 149,845 ----------- TOTAL 1,954,497 9.2. THE SHARES PURCHASED WERE CLAIMED TO BE RECEI VED IN PHYSICAL FORM IN ALL THE SCRIPS EXCEPT FOR FEW TRANSACTIONS OF SCRIP, I.E., FAST TRACK ENT, RECEIVED IN ELECTRONIC MODE. ALL SCRIPS PURCHASED IN AY 2001-2002 AND SCRIPS PURCHASED IN 2002-03 EXCEPT FO R DATABASE FINANCE WERE SOLD IN PHYSICAL FORM. FOR THE OTHER S CRIPS THE PHYSICAL SHARES PURCHASED WERE GOT DEMATED AND SALE S WERE 25 EFFECTED THROUGH STOCK EXCHANGE AND PAYMENTS WERE R ECEIVED THROUGH BANKING CHANNEL. 9.3. IN THE ASSESSMENT THE CONCLUSION WAS DRAWN THA T THE TRANSACTIONS IN THESE SCRIPS ARE NOT GENUINE AND AC CORDINGLY THE FULL VALUE OF CONSIDERATION RECEIVED IS LIABLE AS INCOME FROM OTHER SOURCES U/S. 69A OF THE ACT. IN CASE OF ALL ASSESSE ES THE ASSESSING OFFICER HAS BASED HIS FINDINGS AND INFERENCES ON TH E SAME REASONING. FOR COMING TO THIS CONCLUSION, THE ASSES SING OFFICER HAS PLACED RELIANCE ON THE FOLLOWING EVIDENCES. I. ADMISSION BY SRI SURENDRA SHANTLLAL PEETY. II. STATEMENTS OF CERTAIN BROKERS, NAMELY; VISHAL BHAGWANDAS OF VLJAY BHAGWANDAS AND COMPANY, AND PRATIK SHAH OF DPS SHARES AND SECURITIES THROUGH WH OM TRANSACTIONS OF PURCHASES AND SALES WERE EFFECTED W HO HAVE GIVEN ADVERSE STATEMENTS AGAINST THE ASSESSEES . III. VERACITY OF PURCHASES IN PHYSICAL FORM AND, PAYMENT S MADE TOWARDS PURCHASE CONSIDERATION. IV. VERIFICATION WITH BOMBAY AND SAURASTRA STOCK EXCHAN GES REGARDING PURCHASES. V. INVESTIGATION CARRIED OUT BY THE BSE AGAINST SOME BROKERS. VI. OFFER OF INCOME BY SOME ASSESSEES (NOT RELATED TO P EETY GROUP) IN RELATION TO TRANSACTIONS IN PENNY STOCKS. VII. NEWSPAPER REPORTS. VIII. BACKGROUND OF CERTAIN COMPANIES WHOSE SHARES WERE PURCHASED AND SOLD. IX. CASE LAWS ON HUMAN PROBABILITY.' 9.4. THE ABOVE EVIDENCES RELIED ON IN ASSESSMENT O RDER WERE BROADLY DIVIDED INTO TWO CATEGORIES. THE FIRST CAT EGORY RELATES TO ADMISSION BY SHRI SURENDRA SHANTILAL PEETY, ADVERSE STATEMENT OF SOME BROKERS THROUGH WHOM TRANSACTIONS IN PURCHASE AND SALES WERE EFFECTED. THE SECOND CATEGORY RELATES TO CIRC UMSTANTIAL 26 EVIDENCES. IN COURSE OF HEARING BEFORE THE FIRST A PPELLATE AUTHORITY FROM TIME TO TIME, THE ASSESSEES HAVE FILED THEIR E XPLANATIONS ON THE OBSERVATIONS MADE BY THE ASSESSING OFFICER IN THE O RDER, WHICH ARE BEING DISCUSSED BELOW, AS APPRECIATED BY THE FIRST APPELLATE AUTHORITY: 9.5. ASSESSEES RELIED ON SUBMISSIONS DATED 04.03.20 08. IN THIS REGARD, THE FIRST APPELLATE AUTHORITY OBSERVED THAT WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER HAS TOTALLY I GNORED THE UNREBUTTABLE DOCUMENTARY EVIDENCE ON RECORD AND THO SE PRODUCED BY ASSESSEE WITHOUT ANY VALID MATERIAL TO THE CONTR ARY. I) THE ASSESSING OFFICER WHILE FRAMING THE ORDER R ELIED ON THE STATEMENTS RECORDED OF VARIOUS STOCK/SHARE BROK ERS. THE STATEMENTS OF THE BROKERS WERE RECORDED BEHIND THE BACK OF THE ASSESSEE WHICH WERE NOT PROVIDED TO THE ASSESSE E TILL CONCLUDING STAGE OF THE PROCEEDINGS, ALTHOUGH FOR A LL INTENTS AND PURPOSES THE ASSESSING OFFICER SOUGHT TO UTILIZ E THE SAME IN THE ASSESSMENT. THE ASSESSEE WAS QUITE APPREHENS IVE ABOUT THE LEGALITY OF THE ACTION ON DEPARTMENT'S SILENCE ON THE VITAL ISSUE INVOLVING SHARE TRANSACTION. THIS PROMPTED TH E ASSESSEE TO ASK FOR THE COPIES OF THE STATEMENTS VIDE LETTER DATED 19.12.2007 AFTER PAYING THE NECESSARY COPYING CHARG ES. THESE STATEMENTS WERE MADE AVAILABLE TO THE ASSESSEE ON 25.12.2007. THE OPPORTUNITY FOR CROSS-EXAMINATION W AS AFFORDED TO THE ASSESSEE ON 26-12-2007. THE ASSESSE E WAS DIRECTED TO BE PRESENT AT THE OFFICE OF DIRECTOR OF INVESTIGATION SITUATED AT SCINDIA HOUSE AT BALLARD ESTATE, MUMBAI FOR CROSS- EXAMINATION OF DEPARTMENT'S WITNESSES. THE ASSESSEE ALONG WITH HIS AUTHORIZED REPRESENTATIVES WAS PRESENT IN MUMBAI. HOWEVER, THE DEPARTMENT FAILED TO PRODUCE THEIR WIT NESSES FOR CROSS EXAMINATION. ANOTHER OPPORTUNITY WAS GIVEN ON 31-12- 2007 AT THE SAME PREMISES BUT AGAIN THERE WAS FAILU RE ON THE PART OF THE DEPARTMENT TO PRODUCE THE WITNESSES. AS THE CROSS- EXAMINATION COULD NOT BE DONE BECAUSE OF FAILURE OF THE 27 DEPARTMENT TO PRODUCE THE WITNESSES, AN EMAIL WAS S ENT TO THE ASSESSING OFFICER IMMEDIATELY REQUESTING HIM NO T TO RELY ON THE EX-PARTE STATEMENTS RECORDED EARLIER WHILE F RAMING THE ORDER AND DETERMINING THE INCOME OF VARIOUS MEMBERS IN THE GROUP. THE ORDER WAS ORIGINALLY DATED 28-12-2007 WH ICH WAS OVER WRITTEN AS 31-12-2007 WHICH INDICATES THAT AFF ORDING THE OPPORTUNITY FOR CROSS-EXAMINATION WAS AN EMPTY FORM ALITY AND ONLY TO TECHNICALLY COMPLY TO ASSESSEE'S REQUEST TO CROSS- EXAMINE THE BROKERS WHICH COULD NEVER MATERIALISE. THEREFORE A DECISION REACHED MUCH AHEAD OF COMPLIANCE TO LEGA L PROCEDURES/PROCEDURES WOULD SHOW THAT THE CONCLUSIO N WAS PREDETERMINED. II) THE XEROX COPY OF THE SAME WERE FILED BEFORE TH E FIRST APPELLATE AUTHORITY FOR PERUSAL AT PAGE NO.301 TO 3 27 OF THE PAPER BOOK. THIS PROVES THAT THE STATEMENTS GIVEN B Y THEM AGAINST THE ASSESSEES HAVE NO LEGAL SANCTITY AND TH E SAME CANNOT BE USED AGAINST THE ASSESSEE. III) AT THAT STAGE, THE ASSESSEE CONTENDED THAT THE ASSESSING OFFICER PASSED THE ORDER ON 28.12.2007 AS WOULD BE EVIDENT FROM ASSESSMENT ORDER. THIS WAS CHANGED TO 31.12.2 007. THE INFERENCES AGAINST THE ASSESSEES FOR ALL INTENTS AN D PURPOSES WERE DRAWN ON 28.12.2007 ITSELF AND EX PARTE EVIDEN CE WAS MADE USE OF WITHOUT FOLLOWING ANY LEGAL PROCEDURE A S MANDATED BY LAW. THERE WAS NO WHISPER IN THE SAID ORDER AS TO THE REQUEST OF THE ASSESSEE FOR CROSS-EXAMINATIO N AND RESULTS THEREOF WHICH WAS MOST CRUCIAL ASPECT OF TH E PROCEEDING FOR FASTENING A LIABILITY AGAINST THE AS SESSEE. THIS FURTHER SHOWS THAT THE AUTHORITIES WORKED WITH A CL OSED AND PREDETERMINED MIND TO TAX THE ASSESSEE ON EVIDENCES NOT RECOGNIZED IN LAW. THUS AFFORDING OF THE OPPORTUNIT Y WAS A MERE IDLE FORMALITY. 28 IV) THE ASSESSING OFFICER HAS TOTALLY IGNORED VARI OUS WRITTEN SUBMISSIONS SUBMITTED BY THE ASSESSEE FROM TIME TO TIME, REGARDING THE ENTIRE SHARE TRANSACTIONS, IN REPLY T O HIS VARIOUS QUESTIONNAIRES OR HAS NOT DEALT WITH THEM PROPERLY. WRITTEN SUBMISSIONS WERE FILED BY THE ASSESSEE ON 24.08.200 7, 07.09.2007, 20.10.2007, 08.11.2007 AND 17.12.2007. THE SAME WERE ANNEXED BEFORE THE FIRST APPELLATE AUTHOR ITY IN THE PAPER BOOK WHICH HAS NOT BEEN DISPUTED BY REVENUE. IN ALL THESE SUBMISSIONS AN ATTEMPT WAS MADE TO PLACE ALL THE EVIDENCES AVAILABLE WITH THE ASSESSEE WITH REGARD T O THE GENUINENESS OF SHARE TRANSACTIONS. V) THE ASSESSING OFFICER WHILE FRAMING THE ORDER S ELECTIVELY RELIED ON SOME UNCORROBORATED STATEMENTS OF SOME OF THE BROKERS WHICH WERE OBTAINED BEHIND THE BACK OF THE ASSESSEE. HE FAILED TO EVALUATE THE TRANSACTION IN SHARES IN ITS ENTIRETY. THE ASSESSING OFFICER RELIED ONLY ON ,SOME UNSUBSTA NTIATED ALLEGATIONS OF SOME OF THE BROKERS. SOME OF THE ST ATEMENTS FAVOURABLE TO THE ASSESSEE WERE IGNORED BY HIM IN T OTO. 9.6. THE APPELLANT FURTHER STATED BEFORE THE FIRST APPELLATE AUTHORITY THAT IT MAY BE SEEN THAT ALL THE STATEMENTS REFERRE D TO BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER ARE SELEC TIVE AND THEREFORE SELF-SERVING, TO SAY THE LEAST, AND, THER EFORE, NOT ADMISSIBLE AS EVIDENCE, INTER ALIA, FOR THE FOLLOWI NG REASONS: I) ALL THE DEPONENTS HAVE AFFIRMED THAT THEY WERE I NVOLVED IN SHARE BROKING BUSINESS. II) ALL OF THEM HAVE ADMITTED THAT THEY HAD TRANSAC TIONS WITH THE MEMBERS OF THE PEETY FAMILY. III) THEY HAVE NOT DISPUTED THE PAYMENT OF PURCHASE AND SALE CONSIDERATION EITHER THROUGH RUNNING SETTLEMENT OR BY CHEQUES/DEMAND DRAFTS. IV) AT THE SAME TIME, SOME OF THEM NAMELY PRATIK SH AH OF DPS SHARES AND SECURITIES HAVE STATED THAT THEY USED TO ISSUE BOGUS 29 PURCHASE BILLS OF THE SHARES OF PARTICULAR COMPANY( S) TO PARTIES SEEKING ACCOMMODATION ENTRY. V) ALL OF THEM HAVE STATED THAT THEY WERE INVOLVED IN SHARE BROKING BUSINESS, THEY EITHER DID NOT MAINTAIN ANY BOOKS OF ACCOUNTS OR; THEIR BOOKS OF ACCOUNTS AND RELEVANT RECORDS ARE LO ST / MISPLACED OR DID NOT RECORD IN THEIR BOOKS OF ACCOUNT ANY RECORD OF THE ACCOMMODATION BILLS FOR THE PURCHASE OF THE SHARES OF A PARTICULAR COMPANY ISSUED BY THEM TO PARTIES SEEKING SUCH ACCO MMODATION. 9.7. IN THE STATEMENTS RECORDED BY THE DEPARTMENT O NE OF THE BROKER SRI VISHAL SHAH OF VIJAY BHAGWANDAS AND CO. HAS CLEVERLY STATED THAT THEY MAINTAINED DUPLICATE BOOKS FOR SUC H ACCOMMODATION AND THAT THEIR BOOKS HAVE BEEN LOST, WHILE SRI PRATIK SHAH OF DPS HAS STATED THAT PARALLEL BOOKS O F ACCOUNTS WERE MAINTAINED. WHILE STATING SO THEY WERE WELL AWARE O F THE FALSITY OF THEIR ASSERTION THAT THEY WOULD NOT BE ABLE TO ESTA BLISH THEIR CONTENTION WITH ANY DOCUMENTARY EVIDENCE. THIS PROV ES BEYOND DOUBT THAT THE STATEMENTS GIVEN BY THEM WERE IN THE CAPACITY OF INTERESTED WITNESS RATHER THAN AS AN INDEPENDENT WI TNESS. 9.8. THE APPELLANT STATED THAT AS TO HOW A QUASI JU DICIAL AUTHORITY CAN UTILISE SUCH STATEMENTS WHICH ARE EVASIVE AND C ONTRADICTORY AND NOT SUPPORTED BY ANY MATERIAL EVIDENCE BEYOND O RAL EVIDENCE. FOR ALL PURPOSES THESE ARE CIRCUMSTANTIAL IN NATURE . SUCH STATEMENTS SHOULD NOT BE RELIED ON FOR REACHING REA SONABLE CONCLUSIONS. THE MOOT QUESTION THAT ARISES IS, CAN SUCH STATEMENTS BE AVAILABLE AS EVIDENCE TO BE USED AGAINST ANOTHER PERSON AS SUCH. 9.9. AS AGAINST THE PRESUMPTIONS AND ASSUMPTIONS O F THE ASSESSING OFFICER, THE APPELLANT CONTENDED THAT HE HAS STRONG EVIDENCE THAT SHARE TRANSACTIONS ARE GENUINE WHICH IS EVIDENT FROM FOLLOWING FACTS: I) AS MENTIONED EARLIER REGULAR BOOKS OF ACCOUNTS A RE MAINTAINED BY ALL THE MEMBERS OF THE PEETY FAMILY RIGHT FROM DAY ONE. 30 II) THE PURCHASES AND SALES OF SHARES IN QUESTION W ERE DULY ACCOUNTED IN THE REGULAR BOOKS OF ACCOUNTS FOR THE YEAR/S IN WHICH THE PURCHASES/SALES WERE MADE. III) THE PURCHASE AND SALE OF THE SHARES WERE EVIDE NCED BY THEIR HAVING BEEN SHOWN IN THE ANNUAL ACCOUNTS ATTACHED W ITH THE REGULAR RETURNS OF INCOME FOR THE RELEVANT YEAR/S. IV) THE PURCHASE OF THE SHARES WAS FURTHER EVIDENCE D BY : A) THE SHARES WHICH WERE HELD AS AN INVESTMENT ARE LISTED ON RECOGNISED STOCK EXCHANGE. B) ALL THE PURCHASES ARE SUPPORTED BY CONTRACT NOTE S GIVING FULL DETAILS AS TO THE NAME OF THE SCRIP, QUANTITY, PRIC E AT WHICH PURCHASED, TOTAL PURCHASE CONSIDERATION, BROKERAGE, BILLS OF BROKERS, ETC. ALL THE CONTRACT NOTES WERE FOUND AT THE TIME OF ACTION U/S 132 AND SOME OF THE CONTRACT NOTES WERE ALSO SEIZED BY THE RAIDING PARTY. C) THE TRANSACTIONS ARE DULY RECORDED IN THE BOOKS OF THE SHARE BROKERS. CONFIRMATIONS OF THE SHARE BROKERS WERE AL SO FOUND AT THE TIME OF ACTION. D) ACTUAL DELIVERY OF SHARES WERE TAKEN PHYSICALLY. E) SHARES SO PURCHASED ARE DULY TRANSFERRED IN THE NAME OF THE APPELLANT IN THE RECORDS OF RESPECTIVE COMPANIES. C OMPANY'S INTIMATION OF TRANSFER OF SHARES IS ON RECORD. F) THE COMPANY HAS ALSO DULY TRANSFERRED THE SHARES IN THE NAME OF THE APPELLANT FROM THE PREVIOUS OWNER AND S UCH TRANSFERRED SHARES WERE RECEIVED BY THE APPELLANT. G) SUCH SHARES DULY TRANSFERRED IN THE NAME OF THE APPELLANT WERE DEMATERIALISED BEFORE THE SALE OF THE SAME. HERE IT SHOULD BE NOTED THAT THE DATE OF DEMATERIALISATION CANNOT BE CONSID ERED AS THE DATE OF ACQUISITION OF THE SAID SHARES. THERE IS NO DISP UTE WITH RESPECT TO GENUINITY OF SHARES. H) THE PAYMENT CONSIDERATION FOR THE PURCHASE OF TH E SHARES WAS EITHER THROUGH REGULAR BANKING CHANNELS OR THROUGH RUNNING ACCOUNT MAINTAINED WITH THE CONCERNED BROKER. THE A SSESSING OFFICER HAS NOT OBJECTED TO DATE OF PAYMENT. 31 I) THE SHARES PURCHASED BY THE APPELLANT HAVE BEEN SOLD DURING THE YEAR ON DIFFERENT DATES. 9.10. THE ASSESSEES JUSTIFIED THE SALE OF SHARES A S UNDER: I) THE ABOVE REFERRED SHARES WERE SOLD THROUGH THE SHARE BROKERS REGISTERED WITH SEBI AND CONCERNED STOCK EXCHANGES. II) SECURITIES TRANSACTION TAX CHARGED BY THE BROKE RS ON TRANSACTIONS EFFECTED AFTER 01-10-2004 WERE DULY PA ID AND THIS FACT WAS ALSO MENTIONED IN THE INVESTMENT ACCOUNT FILED DURING THE REGULAR COURSE. FORM NO.10DB EVIDENCING PAYMENT OF SECURITY TRANSACTION TAX ON TRANSACTION ENTERED ON STOCK EXC HANGE SIGNED BY THE BROKER WAS PLACED ON RECORD BEFORE THE FIRST APPELLATE AUTHORITY. III) ACCORDING TO THE ASSESSEES ALL THE SALES ARE S UPPORTED BY CONTRACT NOTES GIVING FULL DETAILS AS TO NAME OF TH E SCRIP, QUANTITY, PRICE AT WHICH SOLD, TOTAL SALE CONSIDERATION, BROK ERAGE, SETTLEMENT NO., TRADE NO., ORDER NO., BILLS OF BROKER, ALL THE CONTRACT NOTES WERE FOUND AT THE TIME OF ACTION U/S 132 AND SOME OF THE CONTRACT NOTES WERE ALSO SEIZED BY THE RAIDING PARTY. THE ABOVE BI LLS SHOW THAT THE SALE WAS EFFECTED THROUGH THE ELECTRONIC TRADING PL ATFORM OF RECOGNIZED STOCK EXCHANGE. IV) THERE WAS NO DISPUTE WITH REGARD TO DATE OF SAL ES. V) THE SALE CONSIDERATION ON SALE OF SHARES WAS REC EIVED THROUGH REGULAR BANK CHANNEL IN THE FORM OF ACCOUNT PAYEE C HEQUES/DRAFTS AND THE SAME WERE CREDITED IN REGULAR BANK ACCOUNT MAINTAINED BY THE APPELLANT. THERE IS NO DISPUTE THAT THE SALE PR ICE IS ACTUALLY RECEIVED BY THE APPELLANT FROM BROKERS AND WAS DULY SUPPORTED BY THEIR BILLS, ETC. THERE IS NO DISPUTE WITH REGARD T O DATE OF RECEIPT OF THE SALE PROCEEDS. VI) THE TRANSACTIONS ARE DULY RECORDED IN THE BOOKS OF THE SHARE BROKERS. BROKERS CONFIRMATION STATEMENT ARE SUBMITT ED BEFORE THE FIRST APPELLATE AUTHORITY. VII) SHARES SOLD HAVE BEEN ACTUALLY DELIVERED AND R OUTED THROUGH DEMAT ACCOUNTS IDENTIFYING THE BROKERS TO WHOM THE DELIVERY OF SHARES ARE GIVEN. 32 VIII) THE DEBIT ENTRIES IN ASSESSEES DEMAT ACCOUNT EVIDENCING DELIVERY OF THE SHARES. IX) SALE OF SAME COULD NOT HAVE BEEN POSSIBLE WITHO UT A PURCHASE. 9.11. IN THE LIGHT OF THE ABOVE THE APPELLANT SUBM ITTED THAT IN VIEW OF THE VOLUMINOUS DOCUMENTARY EVIDENCE AND MAT ERIAL ON RECORD AND THERE BEING NO MATERIAL IN THE POSSESSIO N OF THE ASSESSING OFFICER TO REBUT THE SAID EVIDENCE, THE T RANSACTIONS OF PURCHASE AND SALE OF SHARES WERE CONCLUSIVELY PROVE D BY THE APPELLANT. THE SAME SHOULD NOT HAVE BEEN WASHED AWA Y BY THE REVENUE BY INDULGING IN ASSUMPTIONS AND ARBITRARY C ONCLUSIONS, AND BY SELECTIVELY REFERRING TO SOME STRAY PIECES O F SO-CALLED EVIDENCE. DRAWING INFERENCES WHICH ON THE FACE OF I T IS NOT TENABLE. THE ASSESSING OFFICER FAILED TO PROVIDE ADEQUATE OP PORTUNITY TO THE APPELLANT FOR CROSS-EXAMINATION OF BROKERS WHOSE ST ATEMENTS WERE RECORDED BEHIND THE BACK OF THE APPELLANT AND WERE USED TO THE DETRIMENT OF THE APPELLANT. THE ASSESSING OFFICER DID NOT REFER TO THE VARIOUS REPLIES FILED BY THE ASSESSEES TO ASSES SING OFFICER'S QUERIES. ALL THESE HAVE RENDERED THE ASSESSMENT OR DER TO BE BAD IN LAW AND ABSOLUTELY UNJUSTIFIED. 9.12. THE ASSESSEES ALSO FILED PARA-WISE COMMENTS ON ORDER OF THE ASSESSING OFFICER. THE ASSESSEE SUBMITTED THAT THERE IS NO EVIDENCE ON RECORD WHICH FALSIFIES THE TRANSACTIONS OF PURCHASE / SALE OF SHARES OF THE PEETY GROUP. 10. STAND OF THE ASSESSEE HAS BEEN THAT SEARCH ASSE SSMENT SHOULD BE EVIDENCE BASED. IN THIS REGARD IT IS IMPORTANT TO UNDERSTAND THE PROVISIONS AND METHOD DEVISED FOR SEARCH ASSESSMENT S AS LAID DOWN IN THE INCOME TAX ACT SUBMITTED BY ASSESSEE BEFORE THE FIRST APPELLATE AUTHORITY. I) A SEARCH ASSESSMENT UNDER SECTION 153A SHOULD B E EVIDENCE BASED. A SEARCH IS AUTHORIZED TO UNEARTH UNDISCLOSE D ASSETS OR TRANSACTIONS RESULTING IN INCOME WHICH ARE NOT RECO RDED IN THE BOOKS OF ACCOUNT OF A PERSON. THEREFORE, A SEARCH P UTS IN 33 MOTION THE PROCESS OF ASSESSMENT OF THE UNDISCLOSED INCOME OF A TAX PAYER WHICH IS NOT DISCLOSED TO THE DEPARTMEN T. II) THIS IS THE REASON WHY SEPARATE AND SPECIAL PR OVISIONS HAVE BEEN MADE TO COMPLETE SEARCH RELATED ASSESSMENTS. S ECTION 153A,B,C THEREFORE DEALS WITH SEARCH ASSESSMENTS. T HEREFORE THE ASSESSMENT SHOULD NORMALLY BASE ON EVIDENCES FO UND DURING THE COURSE OF SEARCH. III) ALTHOUGH A NOTICE COULD BE ISSUED UNDER SECTI ON 153A CALLING FOR RETURN ON EXECUTION OF A WARRANT, THE SAME IS A N ENABLING PROVISION TO START THE PROCESS OF ASSESSMENT WITHOU T GOING THROUGH THE REQUIREMENTS OF LAW AS CONTEMPLATED IN SECTION 139/147. IV) IT MAY BE APPRECIATED THAT 'REASON TO BELIEVE' BEING ESSENTIAL STIPULATION IN LAW TO ISSUE A WARRANT, ANY FURTHER SATISFACTION BY THE ASSESSING OFFICER, AT THE THRESHOLD STAGE HA S BEEN DISPENSED WITH IN THE MATTER OF ISSUANCE OF A NOTIC E CONSEQUENT TO SEARCH. THE SAME DOES NOT MEAN THAT M ERE ISSUANCE OF A NOTICE WOULD GIVE UNFETTERED FREEDOM TO THE ASSESSING OFFICER TO COMPLETE THE ASSESSMENT WHEN N O EVIDENCE IS DISCOVERED IN SEARCH. V) AN ASSESSMENT PROCEEDING CONSEQUENT TO SEARCH I S NOT MEANT TO UNSETTLE THE INCOME SHOWN IN THE REGULAR RETURN IN THE ABSENCE OF EVIDENCE. IT IS NOT MEANT TO MAKE ROVING AND FISHING ENQUIRY. THIS NOTICE IS MEANT TO ASSESS THE UNDISCL OSED INCOME, IF ANY DISCOVERED IN COURSE OF SEARCH BASIN G ON THE MATERIAL FOUND. VI) THE LEGISLATURE COULD NEVER HAVE INTENDED TO GI VE UNFETTERED FREEDOM TO UNSETTLE THE ENTIRE PROCESS OF ASSESSMEN T OF ALL THE EARLIER YEARS IN THE ABSENCE OF EVIDENCE DISCOVERED IN COURSE OF SEARCH. A SEARCH U/S. 132 IS AUTHORISED TO UNEARTH UNDISCLOSED INCOME WHICH THE ASSESSEE WOULD NOT DIS CLOSE IN NORMAL COURSE. SECTION 153A WHICH IS THE CHARGING SECTION IN SEARCH CASES SHOULD NORMALLY BE READ HARMONIOUSLY I N THE CONTEXT OF THE PURPOSE FOR WHICH A SEARCH IS AUTHOR IZED. THE ASSESSING OFFICER IS EXPECTED TO FRAME THE ASSESSME NT UNDER 34 THE NEW PROVISIONS BASING THE MATERIAL FOUND IN COU RSE OF SEARCH. VII) IT WAS SUBMITTED THAT THE REQUIREMENTS OF SEC TION 147 FOR ASSESSING THE ESCAPED/UNDISCLOSED INCOME IS EQUALLY APPLICABLE TO A PROCEEDING UNDER SECTION 153A, ALTH OUGH FOR LIMITED PURPOSE, SOME OF THE PROCEDURAL REQUIREMENT S OF SECTION 147 (ISSUE OF NOTICE WITHOUT RECORDING REAS ONS, SANCTION FOR ISSUE OF NOTICE) HAVE BEEN DISPENSED W ITH BECAUSE OF THE NON OBSTANTE CLAUSE IN SECTION 153A. THIS DO ES NOT MEAN THAT ALL THE SETTLED PRINCIPLES WITH REGARD TO REASSESSMENT OF INCOME HAVE BEEN GIVEN A GO-BYE UND ER THE NEW PROCEDURE. WHERE NO INCRIMINATING MATERIAL IS F OUND IN COURSE OF SEARCH, THE SAME CANNOT EVEN JUSTIFY ASSU MPTION OF NORMAL JURISDICTION UNDER SECTION 147. THEREFORE, T HE PROVISIONS OF SECTION 153A MAY BE READ DOWN TO JUST IFY AN ASSESSMENT WHERE INCRIMINATING MATERIAL IS FOUND TO JUSTIFY LIABILITY. AS OTHERWISE, THE NEW PROCESS OF ASSESSM ENT WOULD MILITATE AGAINST CERTAIN BASIC PRINCIPLES OF LAW EN UNCIATED BY THE LEGISLATURE PARTICULARLY THE STRINGENT CONDITIO NS AND SAFEGUARDS PROVIDED IN ASSESSING ESCAPED INCOME. 11. THE OBJECTIVES ARE KEPT IN VIEW OF THE CONTEXT OF FRAMING ASSESSMENTS UNDER NEW PROVISIONS 153A, IT WOULD I NDICATE THAT THE BASIC STRUCTURE OF SEARCH ASSESSMENTS ARE RETAI NED AND THE NEW PROVISIONS AIM AT TRUST BASED, HASSLE FREE ASSESSME NT. IF THESE ARE THE AVOWED OBJECTIVES, THE SEARCH RELATED ASSESSMEN T SHOULD BASE ON EVIDENCE FOUND ON SEARCH. IN COURSE OF SEARCH, N O SUCH EVIDENCE WAS FOUND INDICATING THAT THE SHARE TRANSACTIONS AR E BOGUS. HENCE THE ASSESSMENT MADE BY THE ASSESSING OFFICER ON SUR MISES AND PRESUMPTIONS IS NOT SUSTAINABLE. 11.1. THE FIRST APPELLATE AUTHORITY ALSO ANALYSED THE FACTS OF THE CASE, THE REMAND REPORT AND COMMENTS OF ASSESSEES O N REMAND REPORT. THE FIRST APPELLATE AUTHORITY MADE SCRIP-W ISE, ASSESSEE-WISE AND YEAR-WISE ANALYSIS OF FACTS AND SCANNED THE SAM E IN LEGAL 35 PROPOSITIONS ON THE ISSUE. THE FIRST APPELLATE AUT HORITY APPRECIATED FACTS OF THE CASE WITH REGARD TO ROLE OF CONCERNED BROKERS. THE FIRST APPELLATE AUTHORITY HAS ALSO EXAMINED THE MATTER IN LIGHT OF APPROACH ADOPTED BY THE ASSESSING OFFICER FOR BRING ING THE ENTIRE SALE PROCEEDS ON SHARE TRANSACTIONS TO TAX AT MAXIM UM RATE AND APPLICABILITY OF SECTION 69A OF THE ACT FOR ALL YEA RS FOR ALL ASSESSEES. THE FIRST APPELLATE AUTHORITY ALSO APPRECIATED THE ALTERNATE STAND OF THE ASSESSING OFFICER WHETHER ASSESSEES WERE INVEST ORS OR ENGAGED IN ADVENTURE OF TRADE OF SHARE BUSINESS. THE FIRST APPELLATE AUTHORITY FOUND THE APPROACH OF ASSESSING OFFICER A HALF HEARTED AND TENTATIVE TO THE ISSUES INVOLVED. HE ALSO ADDR ESSED SOME SIGNIFICANT ASPECTS OF ASSESSMENT ORDER VIS-A-VIS T HE RETURNS FILED IN REGULAR COURSE AND ALSO AFTER SEARCH. THE FIRST AP PELLATE AUTHORITY SUMMED UP THE TRANSACTIONS AS UNDER: I) THAT THE CONTRACT NOTES WERE GENUINE AND WERE AC TED UPON AND THERE IS NOTHING IN THE SUBMISSIONS OF THE ASSE SSING OFFICER EXCEPT SUSPICION TO ASSAIL THE GENUINENESS OF THE CONTRACT NOTES AND ALL OTHER SUBSEQUENT ACTION. II) THAT SINCE THE CONTRACT NOTES WERE ACTED UPON CULMINATING IN CREDIT OF THESE SHARES IN THE DEMAT ACCOUNT, AFTER FOLLOWING SUCCESSIVE STEPS AND PROCEDURES, THERE IS NO ROOM F OR ANY SUSPICION IN RESPECT OF THE INCOME EARNED FROM THE TRANSACTION IN SHARES. III) THAT THE DATE OF CONTRACT NOTE IS THE DATE OF HOLDING OF THE SHARES AS THE SAME ARE FOLLOWED BY DELIVERY OF SHAR ES AND PERIOD OF HOLDING SHOULD BE RECKONED FROM THE DATE OF CONTRACT NOTE TO WORK OUT LONG TERM CAPITAL GAIN OR SHORT TE RM CAPITAL GAIN AS APPLICABLE. THIS ACCORDS WITH THE BOARD'S I NSTRUCTION ON THE SUBJECT (CITED SUPRA). IV) THAT THE APPELLANTS HAD CORRECTLY DECLARED THE CAPITAL GAIN IN THE RETURNS FILED IN REGULAR COURSE WHICH WERE ACCE PTED BY THE DEPARTMENT OVER A PERIOD OF YEARS. THEREFORE, THE S AME SHOULD HAVE BEEN ACCEPTED AS NO INCRIMINATING MATERIAL WAS FOUND TO PROVE TO THE CONTRARY EITHER DURING THE COURSE OF S EARCH, POST 36 SEARCH INVESTIGATION OR DURING THE COURSE OF ASSESS MENT PROCEEDINGS. THE VERY FACT THAT THERE WAS NO WHISPE R IN THE ASSESSMENT ORDER FRAMED AFTER SEARCH ABOUT THE GENU INENESS OF THE TRANSACTION IN SHARES GOES TO PROVE THAT THE AO HAS ACCEPTED THE SAME AFTER DUE VERIFICATION AND APPLIC ATION OF HIS MIND AS TO THE GENUINENESS OF THE TRANSACTIONS. THE PRESENT ATTEMPT TO FIND FAULT WITH THE SAME ON SOME FLIMSY AND TECHNICAL GROUNDS UNSUPPORTED BY ANY SUSTAINABLE EV IDENCE SHOWS CHANGE OF MIND ON THE PART OF THE AO, WHICH I S NOT PERMISSIBLE UNDER LAW FOR TAKING ANY ADVERSE VIEW O N THE SAME ISSUES. THE PRESENT SUBMISSIONS ARE GROSSLY IN VARI ANCE WITH THE SUBMISSIONS IN THE ASSESSMENT ORDER. V) THE AO'S ATTEMPT TO REACTIVATE THE STALE AND SE TTLED ISSUES DIGRESSING FROM THE MAIN ISSUES DEALT WITH AND CONS IDERED IN THE ASSESSMENT ORDER IS NOT PERMISSIBLE UNDER LAW. APPELLANT HAS MADE ELABORATE SUBMISSIONS ON THE ISSUES DEALT WITH IN THE ORDER. VI) FOR ANY ASSUMPTION OF THE AO THAT INCOME ARISI NG OUT OF SALE OF SHARE IS BOGUS AND THEREFORE ASSESSABLE UNDER TH E HEAD 'OTHER SOURCES' HAS TO BE SUPPORTED BY COGENT EVIDE NCE AND REASONS. HIS ORDER AND SUBSEQUENT SUBMISSIONS ARE B EREFT OF ANY SUCH FINDING AND EVIDENCE. VII) THAT NO ASSESSMENT CAN BE FRAMED ON SUSPICION, AN ISSUE SETTLED BY THE APEX COURT IN A NUMBER OF CASES AS S USPICION CANNOT BE TREATED AS AN EVIDENCE. IT IS SEEN, ON TH E BASIS OF EXHAUSTIVE DISCUSSIONS SUPRA THAT THE FINAL SUBMISS IONS OF THE AO COULD NOT DISPROVE THE TRANSACTIONS OF THE GROUP . THE APPELLANTS HAVE RIGHTLY EXPLAINED THEIR INVESTMENT AND CLAIMED LONG TERM CAPITAL GAIN/SHORT TERM CAPITAL GAIN. HAVING ANALYSED ALL FACTS AND CIRCUMSTANCES, THE F IRST APPELLATE AUTHORITY GRANTED RELIEF TO ASSESSEES. S AME HAS BEEN OPPOSED BEFORE US. 12. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED T HAT THE CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE CONTRA CT NOTES, AND 37 BROKER'S BILLS ETC., FOUND AND SEIZED IN THE COURSE OF SEARCH ACTION AND PROVED TO BE BOGUS BY THE STATEMENT OF THE BROK ERS WHO ISSUED THESE BROKER NOTES DO NOT AMOUNT TO BE INCRIMINATIN G MATERIAL. THE CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE SEBI'S ACTION AGAINST THE BROKER AND CERTAIN COMPANIES CANNOT BE GIVEN ANY WE IGHTAGE AS THIS DOES NOT RELATE TO THE CASE OF THE ASSESSEE EV EN THOUGH SAME BROKERS HAVE ADMITTED BEFORE DIFFERENT INCOME TAX A UTHORITIES THAT THEY HAD ISSUED BOGUS BROKER NOTES TO ASSESSEE. THE CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE BROKER NOTES ISSUED B Y THE BROKERS AND THE COMPANIES WHICH ARE TAINTED AS RELIABLE EVIDENC E FOR HOLDING THE TRANSACTION AS GENUINE WHILE AT THE SAME TIME NOT A CCEPTING THE STATEMENTS GIVEN BY THE BROKERS AS CORRECT. THE CIT (A) WAS ALSO NOT JUSTIFIED IN HOLDING THAT THE APPLICATION OF SECTIO N 69A OF THE ACT WAS NOT WARRANTED EVEN THOUGH IT WAS PROVED THAT TH E ASSESSEE WAS IN POSSESSION OF MONEY CLAIMED TO HAVE BEEN EARNED BY LONG TERM AND SHORT TERM CAPITAL GAIN. THE CIT(A) WAS ALSO N OT JUSTIFIED IN HOLDING THAT THE APPLICATION OF THE ISSUE OF HUMAN PROBABILITY AS ENUNCIATED BY HON'BLE SUPREME COURT IN THE CASE OF SUMATI DAYAL VS. CIT 214 ITR 801 (1995) AND MCDOWELL AND CO. LTD . VS. CTO 154 ITR 148 (SC) IS NOT APPLICABLE IN THE PRESENT CASE EVEN THOUGH IT IS PROVED THAT THIS IS A FIT CASE FOR APPLICATION OF P RINCIPLES ENUNCIATED BY THE SUPREME COURT IN ABOVE TWO CASES. THE LD. DE PARTMENTAL REPRESENTATIVE ALSO RELIED ON THE DECISION OF ITAT PUNE BENCH IN THE CASE OF SUREKHA BHAGVATIPRASAD MUNDADA VS ITO AND O RS., IN ITA.NO.1332/PN/2009 DATED 16.02.2010, AND IN THIS B ACKGROUND LD. DEPARTMENTAL REPRESENTATIVE ALSO PLACED RELIANC E ON THE DECISIONS RELIED ON BY THE ASSESSING OFFICER AND SU BMITTED THAT THE CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT INCOME AS LONG TERM CAPITAL GAINS CANNOT BE HELD AS BUSINESS INCOME AS ADVENTURE IN THE NATURE OF TRADE. ACCORDINGLY, HE VEHEMENTLY SU BMITTED THAT THE ORDER OF THE ASSESSING OFFICER BE RESTORED AND THAT OF THE CIT(A) BE SET ASIDE. 13. ON THE OTHER HAND, LD. AUTHORISED REPRESENTATIV E HEAVILY RELIED ON THE ORDER OF THE CIT(A). THE ASSESSEE HA S ALSO FILED 38 DETAILED PAPER BOOK HAVING COMPILATIONS OF FACTS AS WELL AS CASE LAWS. HE SUBMITTED THAT MAIN ISSUE INVOLVED IS WIT H REGARD TO LONG TERM CAPITAL GAINS EARNED BY THE ASSESSEE IN DIFFER ENT YEARS AND DECLARED THE INCOME AS LONG TERM CAPITAL GAINS IN R ESPECTIVE YEARS RETURNS. THE ASSESSING OFFICER AT HIS OWN WILL AND ASSUMPTION HELD THE INCOME DECLARED BY VARIOUS MEMBERS OF THE PEETY GROUP IN DIFFERENT YEARS AS BOGUS AND THAT THE SALE PROCEEDS RECEIVED ON SALE OF SHARES BY ALL ASSESSEES AND FOR ALL THE YEARS AS UNDISCLOSED INCOME OF THE GROUP AND ENTIRE SALE PROCEEDS WERE A SSESSED AS UNEXPLAINED CASH CREDIT U/S.69A OF THE ACT. IN TH IS REGARD IT WAS SUBMITTED THAT THE SALE PROCEEDS OF THE SHARES HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEES . SAME HAVE BEEN SHOWN AS LONG TERM CAPITAL GAINS/ SHORT TERM C APITAL GAINS AS THE CASE MAY BE IN THEIR RESPECTIVE I.T. RETURNS FOR ALL THE YEARS. THE CHARGING SECTION 69A PROVIDES FOR ADDITION OF O NLY UNRECORDED INCOME, BULLION, JEWELLERY OR OTHER VALUABLE ARTICL ES WHERE NO SATISFACTORY EXPLANATION IS GIVEN BY THE ASSESSEE R EGARDING ITS NATURE AND SOURCE OF ACQUISITION. ASSESSEES HAVE R ECORDED THE SALES IN THEIR BOOKS OF ACCOUNT AND EXPLAINED ITS N ATURE AND SOURCE OF ACQUISITION. SUCH ADDITION MADE BY TREATING THE SALE PROCEEDS OF SHARES AS UNEXPLAINED INCOME AND UNRECORDED IN BOOK S OF ACCOUNT AND ADDING U/S.69A OF THE ACT IS NOT JUSTIFIED. TH E ASSESSING OFFICER HAS ERRED IN PLACING UNDUE WEIGHTAGE TO THE ADMISSION MADE BY THE ASSESSEE U/S.132(4) OF THE ACT TOTALLY IGNOR ING ASSESSEES REPEATED SUBMISSIONS THAT THE STATEMENT WAS GIVEN I N A CONFUSED STATE OF MIND AND WITHOUT HAVING BENEFIT OF REFERRI NG TO VARIOUS DOCUMENTS WHICH CONCLUSIVELY PROVED THE GENUINENESS OF THE TRANSACTIONS. THE ASSESSING OFFICER WAS NOT JUSTIF IED IN MAKING ADDITION BY TREATING THE SAME AS UNEXPLAINED MONEY U/S.69A OF THE ACT. THE ASSESSING OFFICER WAS NOT JUSTIFIED IN OB SERVING THAT AMOUNT IN QUESTION BE TAXED AS BUSINESS INCOME/ADVE NTURE IN THE NATURE OF TRADE IF AT ANY POINT OF TIME TRANSACTION S WERE FOUND TO BE GENUINE. THE ASSESSING OFFICER WAS NOT JUSTIFIED I N TREATING CERTAIN SHARES OF FAST TRACT ENTERTAINMENT AND PRANNET INDU STRIES AS NOT GENUINE. 39 13.1. REFERRING TO THE FOLLOWING DECISIONS THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ALL THE ISSUES RAISED B Y THE ASSESSING OFFICER AND LD. DEPARTMENTAL REPRESENTATIVE HAVE BE EN DEALT WITH AND THE ORDER OF THE LD. CIT(A) BEING IN CONSONANCE WITH THE JUDICIAL PRONOUNCEMENTS, SHOULD BE UPHELD. I) CIT VS. SMT.JAMNADEVI AGRAWAL (2010) 328 ITR 656 (BOM.) II) CIT VS. ARUN KUMAR AGARWAL & ORS., 2012-TIOL-603-HC - JHARKHAND-IT III) ITO VS. AJAY SHANTILAL LALWANI (2012) 145 TTJ 511 IV) SHRI JAFFERALI K RATTONSEY VS. DCIT 2012-TIOL-236-I TAT- MUM V) ITO VS. MRS.RASILA N GADA & ORS. (ITAT, MUMBAI.) VI) ACIT VS. KAMAL KUMAR S.AGRAWAL & ORS., 133 TTJ 818 (ITAT, NAGPUR). VII) TUSHAR TANNA VS. CIT (2006) 284 ITR 453 (BOM) VIII) SMT.SUSHILADEVI S. AGARWAL [1994] 50 ITD 524 (AHMEDABAD) IX) MAHESHWARI INDUSTRIES 81 TTJ 914 (ITAT, JODHPUR, SM C BENCH) X) CIT VS. SHRI RAMDAS MOTOR TRANSPORT [1999] 238 ITR 177 (AP) XI) DEEPCHAND & CO. VS. ACIT [1995] 51 TTJ 421 (ITAT, MUMBAI) XII) PULLANGODE RUBBER PRODUCE CO. LTD. VS. STATE OF KER ALA 91 ITR 18 (SC) XIII) CIT VS. KISHANLAL SHIVCHAND RAI 88 ITR 293 (P&H) XIV) R.P.MONGA VS. DCIT (2004) 269 ITR(AT) 1 (DELHI) XV) DCIT VS. PREMSONS 130 TTJ 159 XVI) CIT VS. OMPRAKASH JAIN 24 DTR 157 (BOM.) XVII) MUKESH R. MAROLIA VS. ADDL. CIT, RANGE-15(2) (2006) 6 SOT 247 (MUM) XVIII) P.S.ABDUL MAJEED (1994) 209 ITR 821 (KER) XIX) CIT VS. SHRI SANDEEP SHOREWALA(HUF) IN ITA NO. 2010 OF 2009 (MUMBAI HIGH COURT) XX) MAN MOHAN SADANI VS. CIT (2008) 304 ITR 52 (MP) XXI) ANUP KUMAR JAYASWAL IN ITA NOS.1678/KOL/2004 & 1679/KOL/2004 (ITAT, KOLKATA) XXII) SHRI ACCHYALAL SHAW ITA NO.1977/KOI/2008 (ITAT, KOLKATA) XXIII) ACIT VS. CLARIDGES INVESTMENT & FINANCES (P) LTD. ( 2007) 18 SOT 390 (MUM) HE ALSO RELIED ON VARIOUS OTHER DECISIONS COPIES O F WHICH ARE FILED IN THE PAPER BOOKS. 40 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE B Y BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND CIT(A) AND THE PAPER BOOKS FILED ON BEHALF OF THE ASSESSEES. WE FIND, RESPONDENT NO.1 IS AN INDIVIDUAL BELONGING TO THE P EETY GROUP OF JALNA. THIS GROUP CONSISTS OF SHRI SHANTILAL GOVARD HANDAS PEETY, HIS SPOUSE SMT.SHARDA S.PEETY, THEIR SONS SHRI SURE NDRA S PEETY, RAVINDRA S PEETY AND JITENDRA S PEETY, THEIR DAUGHT ERS IN LAW SMT.VARSHA S PEETY, SMT.RACHANA R PEETY AND SMT. NA MRATA J PEETY, HUF OF SHRI RAVINDRA PEETY AND HUF OF SHRI J ITENDRA PEETY. THE BUSINESS CONCERNS OF THE PEETY GROUP ARE SRJ PE ETY STEELS PVT. LTD. WHEREIN MILD STEEL INGOTS/BILLETS ARE MANUFACT URED, DHANLAKSHMI SPONGE IRON, A BRANCH OF SRJ PEETY STEE LS (P) LTD., WHERE SPONGE IRON IS MANUFACTURED AND SRI OM ROLLIN G MILLS PVT. LTD., WHEREIN MILD STEEL BARS ARE MANUFACTURED. 14.1. RETURNS OF INCOME FOR A.YS. 2002-03 TO 2005- 06 WERE FILED U/S.139(1) OF THE ACT ACCOMPANIED BY ALL REQU ISITE DOCUMENTS AND WERE PROCESSED U/S.143(1) FOR EACH OF THE YEARS UNDER CONSIDERATION. IN THE RETURNS FOR EACH YEAR, ASSES SEE HAD SHOWN AN INCOME UNDER THE HEAD LONG TERM CAPITAL GAINS PERTAINING TO SALE OF SHARES HELD AS INVESTMENT WHICH WAS ACCEPTED AS SUC H BY THE DEPARTMENT. 14.2. IN RESPECT OF ABOVE, STAND OF THE ASSESSEE H AS BEEN THAT- A) REGULAR BOOKS OF ACCOUNTS ARE MAINTAINED BY ALL THE MEMBERS OF THE PEETY FAMILY RIGHT FROM THE BEGINNING. COPIE S OF BALANCE SHEET, P & L A/C AND COMPUTATION OF INCOME FOR THE ASSESSMENT YEARS UNDER CONSIDERATION ARE ATTACHED A S PAGES 1 TO 30 OF PAPER BOOK-I. B) THE PURCHASES AND SALES OF SHARES IN QUESTION WERE DULY ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOUNTS FOR THE YEARS IN WHICH THE PURCHASES/SALES WERE MADE. C) THE PURCHASE AND SALE OF THE SHARES WERE EVIDENCED BY THEIR HAVING BEEN SHOWN IN THE ANNUAL ACCOUNTS ATTACHED W ITH THE REGULAR RETURNS OF INCOME FOR RELEVANT YEAR/YEARS. 41 D) THE SHARES WHICH WERE HELD AS INVESTMENT ARE LISTED ON RECOGNISED STOCK EXCHANGES. E) ALL PURCHASES ARE SUPPORTED BY CONTRACT NOTES GIVIN G FULL DETAILS AS TO THE NAME OF THE SCRIP, QUANTITY, PRIC E AT WHICH PURCHASED, TOTAL PURCHASE CONSIDERATION, BROKERAGE, BILLS OF BROKERS ETC. ALL THE CONTRACT NOTES WERE FOUND AT THE TIME OF THE ACTION U/S.132 AND SOME OF THE CONTRACT NOTES W ERE ALSO SEIZED BY THE RAIDING PARTY. F) THE TRANSACTIONS ARE DULY RECORDED IN THE BOOKS OF THE SHARE BROKERS. CONFIRMATIONS OF THE SHARE BROKERS WERE A LSO FOUND AT THE TIME OF SEARCH ACTION. G) ACTUAL DELIVERY OF THE SHARES WERE CLAIMED TO BE TA KEN PHYSICALLY. H) SHARES SO PURCHASED ARE DULY TRANSFERRED IN THE NAM E OF THE RESPONDENT IN THE RECORDS OF RESPECTIVE COMPANIES. COMPANYS INTIMATION OF TRANSFER OF SHARES HAS BEEN PLACED ON THE RECORD. I) SUCH TRANSFERRED SHARES WERE RECEIVED BY THE RESPON DENT AND WERE DEMATED BEFORE THE SALE OF THE SAME. J) THE PAYMENT CONSIDERATION FOR THE PURCHASE OF THE S HARES WAS EITHER THROUGH REGULAR BANKING CHANNELS OR THROUGH RUNNING ACCOUNT MAINTAINED WITH THE CONCERNED BROKER. COPI ES OF CONTRACT NOTES, PURCHASE BILLS, BROKER LEDGER ACCOU NT, CLIENT LEDGER IN THE BOOKS OF BROKER, DAY TRADING PROFIT B ILLS AGAINST WHICH PURCHASE CONSIDERATION IS SET OFF, BANK STATE MENTS AND DEMAT ACCOUNT ARE ATTACHED AS PAGES 62-79, 204-224, 264- 277, 293-306, 391-416, 442-459, 510-520 AND 530-534 OF THE PAPER BOOK-I. K) THE SHARES PURCHASED BY THE RESPONDENT HAVE BEEN SO LD IN THE RESPECTIVE ASSESSMENT YEARS ON DIFFERENT DATES. L) THE ABOVE REFERRED SHARES WERE SOLD THROUGH SHARE B ROKERS REGISTERED WITH SEBI AND CONCERNED STOCK EXCHANGES. M) SECURITIES TRANSACTION TAX (STT) CHARGED BY THE BRO KERS ON TRANSACTIONS EFFECTED AFTER 1.10.2004 WERE DULY PAI D AND THIS FACT WAS ALSO MENTIONED IN THE INVESTMENT ACCOUNT F ILED DURING THE REGULAR COURSE. FORM NO.10DB EVIDENCING PAYMENT OF SST 42 ON TRANSACTION ENTERED ON STOCK EXCHANGE SIGNED BY THE BROKER IS ON RECORD. COPIES OF THE SAID FORM/CONFIR MATION HAS BEEN PLACED AT PAGES 388, 389, 504-508 OF THE PAPER BOOK-L N) ALL THE SALES WERE SUPPORTED BY CONTRACT NOTES GIVI NG FULL DETAILS AS TO NAME OF THE SCRIP, QUANTITY, PRICE AT WHICH SOLD, TOTAL SALE CONSIDERATION, BROKERAGE, SETTLEMENT NO, TRADE NO, ORDER NO, BILLS OF BROKERS, ETC. ALL THE CONTRACT N OTES WERE FOUND AT THE TIME OF ACTION U/S. 132 AND SOME OF TH E CONTRACT NOTES WERE ALSO SEIZED BY THE RAIDING PARTY. THE AB OVE BILLS REVEAL THAT THE SALE WAS EFFECTED THROUGH THE ELECT RONIC TRADING PLATFORM OF RECOGNIZED STOCK EXCHANGE. THERE IS NO DISPUTE WITH REGARD TO DATE OF SALES WHICH IS A MATTER OF R ECORD. O) THE SALE CONSIDERATION OF THE SALE OF SHARES IS REC EIVED THROUGH REGULAR BANKING CHANNELS IN THE FORM OF ACCOUNT PAY EE CHEQUES/DRAFTS AND THE SAME WERE CREDITED IN REGULA R BANK ACCOUNT MAINTAINED BY THE ASSESSEE. P) THE TRANSACTIONS WERE DULY RECORDED IN THE BOOKS OF THE SHARE BROKERS. Q) SHARES SOLD HAVE BEEN ACTUALLY DELIVERED AND ROUTED THROUGH DEMAT ACCOUNTS IDENTIFYING THE BROKERS TO WHOM THE DELIVERY OF THE SHARES WERE MADE. R) THE DEBIT ENTRIES IN THE DEMAT ACCOUNT EVIDENCES TH E DELIVERY OF THE SHARES. S) COPIES OF CONTRACT NOTES, SALES BILLS, BROKER ACCOU NT, CLIENT LEDGER IN THE BOOKS OF BROKER, BANK STATEMENTS, DEM AT ACCOUNT AND BSE STOCK PRICE LIST ARE SUBMITTED AS P AGES 33- 60, 174-202, 257-262, 278-291, 334-387,419-440, 462 -503 & 523-528 OF THE PAPER BOOK-I. 14.3. ALL THE ABOVE DETAILS INDICATE THAT THE TRAN SACTIONS IN SHARES WERE WELL REGULATED AND WERE THROUGH AUTHORI ZED BROKERS, ROUTED THROUGH APPROPRIATE CHANNELS INCLUDING BANKS AND THE ASSESSEE HAD RECORDED THE SALE PROCEEDS OF THE SHAR ES IN ITS BOOKS OF ACCOUNTS AND HAD VERY WELL EXPLAINED ITS NATURE AND SOURCE OF ACQUISITION. THE LONG TERM CAPITAL GAINS ON THE SAL E OF SHARES WAS 43 CLAIMED AS EXEMPT U/S. 10(38) OF THE ACT IN THE RET URNS FOR A.YS. 2005-06 AND 2006-07 AS PER THE AMENDMENT BROUGHT AB OUT BY THE FINANCE ACT, 2004 W.E.F. 1.10.2004 AND PAID THE TAX ON STCG EARNED IN THESE TWO YEARS. FURTHER, ASSESSEE PAID TAX AS PER APPLICABLE RATE ON LTCG EARNED FROM A.Y. 2002-03 T O 2004-05. 14.4. A SEARCH ACTION U/S. 132 WAS CARRIED OUT IN THE RESIDENTIAL AND BUSINESS PREMISES OF THE PEETY GROU P ON 17.03.2006. ASSESSEE CLAIMED THAT DURING THE COURSE OF SEARCH, NO INCRIMINATING EVIDENCES WAS FOUND TO DRAW ANY ADVER SE CONCLUSION IN RESPECT OF THE TRANSACTIONS IN SHARES AND THE CO MPUTATION OF INCOME IN RESPECT THEREOF. NOTICES U/S. 153A WERE I SSUED FOR ALL THE YEARS UNDER CONSIDERATION TO ALL THE ASSESSEES OF T HE GROUP AND THE RETURNS OF INCOME WERE FILED ON 29.08.2006 FOR EACH YEAR. THE TABLE BELOW INDICATES THE DETAILS OF THE AMOUNT OF INCOME RETURNED U/S.139, INCOME SHOWN IN THE RETURN FILED IN COMPLI ANCE TO THE NOTICE U/S.153A AND THE INCOME ASSESSED U/S. 153A/1 43(3) VIDE ORDER DATED 31.12.2007 FOR THE A.YS. 2000-01 TO 200 6-07 OF SRI SURENDRA S PEETY AS DETAILED EARLIER ALSO: ASSESSMENT YEAR RETURNED INCOME INCOME RETURNED U/S 153A INCOME ASSESSED U/S 153A/143(3) 2000 - 01 7,93,527 8,51,027 8,51,027 2001 - 02 17,51,567 17,77,367 17,77,367 2002 - 03 10,31,820 LTCG 15,07,332 10,62,520 LTCG 15,07,332 36,25,725 2003 - 04 1,25,854 LTCG 42,34,900 1,25,854 LTCG 42,34,900 46,58,190 2004 - 05 4,81,877 LTCG 34,90,640 4,96,524 LTCG 34,90,640 40,76,330 2005 - 06 - 27,891 STCG 51,16,735 LTCG 19,27,680 EXEMPT LTCH 1,07,77,291 - 27,891 STCG 51,16,735 LTCG 19,27,680 EXEMPT LTCH 1,07,77,291 1,96,24,860 44 2006 - 07 3,38,251 STCG 11,78,132 LTCG EXEMPT 1,39,20,086 5,38,25 1 STCG 11,78,132 LTCG EXEMPT 1,39,20,086 1,64,00,910 14.5. BASICALLY, THE SALE PROCEEDS OF THE SHARES, HELD AS INVESTMENT, HAS BEEN ADDED TO THE INCOME RETURNED U /S.153A FOR EACH OF THE YEAR UNDER CONSIDERATION BY HOLDING THA T THESE AMOUNTS REPRESENT THE UNEXPLAINED MONEY OF THE COMPANY. IT WAS CONTENDED THAT PRIOR TO THE SEARCH, THE RETURNS OF INCOME FOR THE A.YS. 2002-03 TO 2005-06 HAD ALREADY BEEN FILED U/S.139(1) OF THE ACT ACCOMPANIED BY ALL THE REQUISITE DOCUMENTS AND PROC ESSING U/S.143(1) OF THE ACT STOOD COMPLETED. DURING THE C OURSE OF SEARCH NO INCRIMINATING MATERIALS WERE FOUND RELATING TO T HESE YEARS WHICH COULD HAVE BEEN ADDED BACK IN THE PROCEEDINGS U/S.1 53A. THE DETAILS REGARDING THE TRANSACTION IN SHARES FOR EAC H OF THE YEAR UNDER CONSIDERATION WERE VERY WELL PLACED BEFORE TH E DEPARTMENT IN THE COMPUTATION OF INCOME OF EACH YEAR AND NO QUERY WAS EVER RAISED BY THE DEPARTMENT. THERE WAS NOTHING IN THE INTIMATION U/S.143(1) TO INDICATE ANY DEFICIENCY WITH REGARD T O THE ASSESSEES CLAIM OF TRANSACTION IN SHARES, THE INCOME SHOWN AN D THE EVIDENCES FURNISHED IN RESPECT THEREOF. 14.6. THE ADDITIONS MADE U/S. 153A WERE BASED ON T HE STATEMENT OF SOME BROKERS WHICH WERE RECORDED BEHIN D THE BACK OF THE ASSESSEE WITHOUT PRODUCING THEM BEFORE THE ASSE SSEE FOR CROSS EXAMINATION DESPITE SPECIFIC REQUEST. UNDER PECULI AR CIRCUMSTANCES ASSESSEE OFFERED THIS AMOUNT IN HIS STATEMENT RECOR DED U/S. 132(4) THOUGH AS SUCH NOTHING INCRIMINATING WAS FOUND IN T HE COURSE OF SEARCH RELATING TO ASSESSMENT YEARS UNDER CONSIDERA TION. NORMALLY NO NEW ADDITION SHOULD BE MADE WHERE ALL THE FACTS WERE PLACED BEFORE THE DEPARTMENT DURING THE COURSE OF REGULAR ASSESSMENTS WHICH STOOD COMPLETED ON THE DATE OF INITIATION OF ACTION U/S. 132. 45 14.7. THE DETAILS OF LONG TERM CAPITAL GAIN, SHORT TERM CAPITAL GAIN AND SHARE DEALING PROFITS EARNED BY TH E ASSESSEE FOR THE VARIOUS ASSESSMENT YEARS, ARE AS UNDER: A.Y. SALE AMOUNT (ADDED BY THE A.O.) PURCHASE AMOUNT LTCG STCG SHARE DEALING PROFIT 2002-03 25,63,206 10,55,874 15,07,332 15,13,568 2003-04 45,32,143 2,97,244 42,34,899 4,51,762 2004-05 35,78,717 88,079 34,90,638 8,61,384 2005-06 1,29,94,997 66,57,755 290,027 15,41,021 1,27,04,970 51,16,734 2006-07 1,42,51,320 17,61,336 3,31,234 5,83,204 1,39,20,086 11,78,132 14.8. ASSESSMENT MADE U/S. 153A IN THE PRESENT CAS E SHOW THAT THE COMPUTATION OF INCOME FILED BY THE ASSESSE E IN THE ORIGINAL RETURN AS WELL AS IN THE RETURNS FILED U/S. 153A SH OWING THE INCLUSION OF THE DAY TRADING PROFIT IN THE TOTAL TA XABLE INCOME FOR THE RELEVANT YEAR WHICH HAS BEEN ACCEPTED BY THE ASSESS ING OFFICER. THIS ESTABLISHES THE SOURCE OF INVESTMENT IN PURCHA SES OF THE RELEVANT YEAR WHEREAS IN THE DISCUSSIONS ON THE ISS UE OF CAPITAL GAIN THE ASSESSING OFFICER HAS EXPRESSED HIS RESERVATION AND HAS DOUBTED THESE VERY TRANSACTIONS WITHOUT JUSTIFYING THE SAME. THIS POINT WILL BE DEALT WITH IN SUCCEEDING PARAS. 14.9. THE ASSESSING OFFICER HAS ADDED THE ENTIRE S ALE PROCEEDS OF SHARES AS UNDISCLOSED INCOME OF THE ASSESSEE IN ASSESSMENT U/S.153A OF THE ACT. WHEN THE LONG TERM CAPITAL GAI NS AND SHORT TERM CAPITAL GAINS EMANATING FROM THE SAID SALE PRO CEEDS HAVE BEEN OFFERED FOR TAXATION, THE ENTIRE SALE PROCEEDS IN OUR OPINION CANNOT BE ADDED AGAIN TO THE RETURNED INCOME SINCE THE SAME IS NOT JUSTIFIED ON FACT OF IT. 14.10. DURING THE COURSE OF ASSESSMENT, VARIOUS NOT ICES AND QUESTIONNAIRES WERE ISSUED TO THE ASSESSEE. SAME WE RE REPLIED. THE DETAILS OF THE CORRESPONDENCES BETWEEN THE ASSESSEE AND THE DEPARTMENT ARE AS UNDER: A) IN RESPONSE TO A NOTICE U/S. 142(1) DATED 10.08.2 007, THE ASSESSEE VIDE HIS REPLY DATED 24.08.2007 GAVE THE Y EAR-WISE DETAILS OF SHARES AND DEPOSITS HELD BY HIM FOR ALL THE YEARS UNDER CONSIDERATION. COPIES OF BANK STATEMENTS, CON TRACT 46 NOTES/BROKER NOTES, PURCHASE BILLS OF SHARES WERE A LSO SUBMITTED. A COPY OF THE LETTER DATED 24.08.2007 IS ATTACHED AS PAGES L-3 OF THE PAPER BOOK-II. B) IN REPLY TO NOTICE DATED 5.09.2007, DETAILS OF PU RCHASE AND SALE OF SHARES HELD ON LONG TERM BASIS WERE SUBMITT ED. A COPY OF THE STATEMENT IS ATTACHED AS PAGES 32, 61, 173, 203, 256, 277, 263, 292, 333, 390, 461 & 509 OF THE PAPER BOO K-I. C) IN REPLY TO NOTICE DATED 15.10.2007, DETAILS OF L ONG TERM CAPITAL GAINS AND SHORT TERM CAPITAL GAIN EARNED BY THE ASSESSEE FOR THE VARIOUS ASSESSMENT YEARS WAS SUBMI TTED. A COPY OF THE STATEMENT OF LONG TERM CAPITAL GAINS FO R EACH OF THE YEAR IS ATTACHED AS PAGES 31, 172, 255, 332 & 4 60 AND OF SHORT TERM CAPITAL GAINS IS ATTACHED AS PAGES 417 & 521 OF THE PAPER BOOK-I. D) IN REPLY TO NOTICE DATED 2.11.2007, DETAILS OF PU RCHASE AND SALE OF SHARES HELD ON SHORT TERM BASIS WERE SUBMIT TED. A COPY OF THE STATEMENT IS ATTACHED AS PAGES 418, 441 , 522 & 529 OF THE PAPER BOOK-I. E) THE DEMAT STATEMENTS OF VARIOUS BANKS WERE SUBMIT TED ON 10.12.2007. F) IN REPLY TO THE NOTICE DATED 10.12.2007, THE ASSE SSEE SUBMITTED ITS REPLY ON 17.12.2007 EXPLAINING HIS SH ARE TRANSACTIONS. A COPY OF THE LETTER DATED 17.12.2007 IS ATTACHED AS PAGES 4-11 OF THE PAPER BOOK-II. 14.11. THE ASSESSMENT WAS COMPLETED ON 31.12.2007 A FTER TREATING THE SHARE TRANSACTIONS DISCLOSED IN THE RE GULAR RETURN OF INCOME AS BOGUS AND AS UNDISCLOSED INCOME OF THE RE SPONDENT U/S 69A OF THE ACT. WHILE COMPLETING THE ASSESSMENT, TH E ASSESSING OFFICER HAS TOTALLY IGNORED THE DOCUMENTARY EVIDENC ES PLACED ON RECORD AND THOSE PRODUCED BY ASSESSEE WITHOUT ASSIG NING ANY REASON FOR SAME. WHILE ARRIVING AT THE ABOVE CONCL USION, THE ASSESSING OFFICER MAINLY RELIED ON THE FOLLOWING EV IDENCES: A) THE STATEMENT RECORDED U/S. 132(4) OF SRI SURENDRA PEETY ON THE DATE OF THE SEARCH OFFERING THE INCOME SHOWN IN THE REGULAR RETURN UNDER THE HEAD LTCG AS UNDISCLOSED INCOME IN VARIOUS HANDS WHICH WAS SUBSEQUENTLY RETRACTED AT THE TIME OF FILING THE RETURN. B) THE STATEMENTS RECORDED BY THE DEPARTMENT FROM CERT AIN BROKERS NAMELY VISHAL BHAGWANDAS OF VIJAY BHAGWANDA S & CO., PRATIK SHAH OF DPS SHARES AND SECURITIES AFTER THE DATE OF SEARCH IN WHICH THEY HAD ALLEGED THAT THE TRANSACTI ONS OF PURCHASES AND SALES OF SHARES BY VARIOUS MEMBERS OF THE PEETY FAMILY DO NOT REPRESENT THE CORRECT POSITION. C) THE ALTERNATIVE COURSE ADOPTED BY THE A.O. IN TREAT ING THE TRANSACTIONS AS ADVENTURE IN THE NATURE OF TRADE. 47 14.12. AGGRIEVED BY THE SAID ORDER OF THE ASSESSING OFFICER, THE ASSESSEE FILED AN APPEAL BEFORE THE CONCERNED CIT(A ) ON THE FOLLOWING LINES: A) THAT THE AO. ERRED IN PLACING UNDUE WEIGHT ON THE A DMISSION MADE BY THE APPELLANT UNDER SECTION 132(4) OF THE I NCOME TAX ACT, 1961, TOTALLY IGNORING THE APPELLANT'S REPEATE D SUBMISSIONS THAT THE STATEMENTS WERE MADE IN A HURR Y, IN A CONFUSED STATE OF MIND AND WITHOUT HAVING THE BENEF IT OF REFERRING TO THE VARIOUS DOCUMENTS WHICH CONCLUSIVE LY PROVED THE GENUINENESS OF THE TRANSACTIONS. B) THAT THE A.O. WAS NOT JUSTIFIED IN MAKING THE ADDIT ION OF RS 25,63,205/-, RS. 45,32,334/-, RS. 35,79,802/-, RS.1,29,94,996/- AND RS. 1,42,51,3201- FOR AY.'S 20 02-03 TO 2006-07 RESPECTIVELY BY TREATING THE SUM AS UNEXPLA INED MONEY UNDER SECTION 69A OF THE INCOME-TAX ACT. C) THAT THE AO. WAS NOT JUSTIFIED IN OBSERVING THAT TH E ABOVE SUMS WOULD BE TAXED AS BUSINESS INCOME/ADVENTURE IN THE NATURE OF TRADE IF AT ANY POINT OF TIME THE TRANSAC TIONS WERE FOUND TO BE GENUINE. D) THAT THE A.O. WAS NOT JUSTIFIED IN TREATING THE PUR CHASES OF SHARES OF FAST TRACK AND PRANNETA INDUSTRIES LTD. A S NOT GENUINE. E) THAT THE A.O. WAS NOT JUSTIFIED IN REJECTING THE CL AIM OF THE ASSESSEE IN RESPECT OF CAPITAL GAINS. F) THAT THE A.O. WAS NOT JUSTIFIED IN CHARGING INTERES T UNDER SECTION 234A, 234B AND 234C OF THE INCOME TAX ACT, 1961. G) THAT THE A.O. WAS NOT JUSTIFIED IN INITIATING PENAL TY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE INCOME T AX ACT, 1961. 14.13. IN APPEAL, THE CONCERNED CIT(A)-I, NAGPUR, V IDE HIS APPELLATE ORDER DATED 18.06.2008 ALLOWED THE APPEAL OF THE RESPONDENT FOR ALL THE YEARS UNDER CONSIDERATION, T HUS REVERSING THE ASSESSING OFFICER'S FINDINGS ON THE ISSUE. THE SAM E HAS BEEN AGITATED BEFORE US ON BEHALF OF THE REVENUE. THE V ARIOUS ISSUES HAVE BEEN ARGUED BEFORE US. EACH OF THE GROUNDS TAK EN BY THE DEPARTMENT AND THE RESPONDENTS ARGUMENTS IN RESPECT THERETO ARE DEALT AS UNDER: 14.13.1. LET US FIRST ANALYSE WHETHER THE PROVISION S OF SECTION 153A OF THE ACT HAS BEEN PROPERLY APPLIED TO THE FA CTS OF THE PRESENT CASE. A SEARCH ASSESSMENT U/S. 153A SHOULD BE EVID ENCE BASED. A SEARCH IS AUTHORIZED TO UNEARTH UNDISCLOSED ASSETS OR TRANSACTIONS 48 RESULTING IN INCOME WHICH ARE NOT RECORDED IN THE B OOKS OF ACCOUNT OF A PERSON. THEREFORE, A SEARCH PUTS IN MOTION THE PROCESS OF ASSESSMENT OF THE UNDISCLOSED INCOME OF A TAX PAYER WHICH IS NOT DISCLOSED TO THE DEPARTMENT. THIS IS THE REASON WHY SEPARATE AND SPECIAL PROVISIONS HAVE BEEN MADE TO COMPLETE SEARC H RELATED ASSESSMENTS. AN ASSESSMENT U/S. 153A IS NOT MEANT T O UNSETTLE THE INCOME SHOWN IN THE REGULAR RETURN IN THE ABSENCE O F EVIDENCE FOUND AS A RESULT OF SEARCH. IT IS NOT MEANT TO MAK E A ROVING AND FISHING ENQUIRY. THIS NOTICE IS MEANT TO ASSESS THE UNDISCLOSED INCOME, IF ANY, DISCOVERED IN COURSE OF SEARCH BASE D ON THE MATERIALS FOUND. 14.13.2. WHEN NOTHING INCRIMINATING IS FOUND IN THE COURSE OF SEARCH RELATING TO ANY ASSESSMENT YEARS, THE ASSESS MENTS FOR SUCH YEARS SHOULD NOT BE DISTURBED AS SUCH. ITEMS OF RE GULAR ASSESSMENT SHOULD NOT BE ADDED BACK IN THE PROCEEDI NGS U/S. 153A WHEN NO INCRIMINATING DOCUMENTS WERE FOUND IN RESPE CT OF THE DISALLOWED AMOUNTS IN THE SEARCH PROCEEDINGS. ASSES SMENTS OR REASSESSMENTS MADE PURSUANT TO NOTICE U/S. L53A ARE NOT DE NOVO ASSESSMENTS AND THEREFORE NO NEW CLAIM OF DEDUCTION OR ALLOWANCE CAN BE MADE BY ASSESSEE WHERE ADMITTEDLY THE REGULA R ASSESSMENTS ARE SHOWN AS COMPLETED ASSESSMENTS ON THE DATE OF I NITIATION OF ACTION U/S. 132. 14.13.3. IN THE PRESENT CASE, THE SEARCH WAS INI TIATED ON 17.03.2006 IN THE RESIDENTIAL AND BUSINESS PREMISES OF SRJ PEETY GROUP, JALNA COVERING ALL THE INDIVIDUALS AND HUFS OF THE GROUP AS WELL. PRIOR TO THE SEARCH, THE RETURNS OF INCOME FO R THE ASSESSMENT YEARS 2000-01 TO 2005-06 HAD ALREADY BEEN FILED U/S . 139(1) OF THE ACT, ACCOMPANIED BY REQUISITE DOCUMENTS AND PROCESS ING U/S. 143(1) OF THE ACT, STOOD COMPLETED. DURING THE COUR SE OF SEARCH NO INCRIMINATING MATERIAL WERE FOUND RELATING TO THESE YEARS WHICH COULD HAVE BEEN ADDED BACK IN THE PROCEEDINGS U/S. 153A. ALL THE DETAILS REGARDING THE LONG TERM CAPITAL GAIN EARNED ON SALE OF SHARES BY EACH OF THE ASSESSEES FOR EACH OF THE YEA RS UNDER 49 CONSIDERATION WERE ALREADY AVAILABLE ON RECORD BEFO RE CONCERNED REVENUE AUTHORITIES WHICH WAS ACCEPTED YEAR AFTER Y EAR ALONG WITH THE RETURNS. 14.13.4. THE STATEMENTS RECORDED DURING THE COUR SE OF SEARCH COULD NOT BE SAID TO BE EVIDENCE 'FOUND AS A RESULT OF SEARCH', THOUGH THE SAME MAY BE 'OBTAINED DURING THE SEARCH' . IN CASE AN ADDITION IS INTENDED TO BE MADE AS THE UNDISCLOSED INCOME ON THE BASIS OF SUCH STATEMENTS, IT HAS TO BE FIRST PROVED THAT THESE STATEMENTS ARE RELATABLE TO 'SUCH EVIDENCE.' THE ON LY EVIDENCE RELIED UPON BY THE ASSESSING OFFICER IS THE STATEMENT OF S RI SURENDRA S PEETY RECORDED IN THE COURSE OF SEARCH. THERE IS NO THING ON RECORD TO SUGGEST THAT ANY INCRIMINATING DOCUMENT OR MATER IAL WAS DISCOVERED AS A RESULT OF SEARCH. ABOVE STATEMENT W AS MADE WITHOUT HAVING THE BENEFIT OF REFERRING TO ANY DOCUMENT IN CERTAIN STATE OF MIND AND WAS MADE ON THE ASSERTION OF THE DEPARTMEN T THAT THEY HAVE EVIDENCE AGAINST THE ASSESSEE BY WAY OF SOME S TATEMENTS OF BROKERS WHICH WERE NOT MADE AVAILABLE TO THE ASSESS EE. THEREFORE, THE RESPONDENT COULD NOT BE HELD LIABLE ON THE BASI S OF A MERE STATEMENT WHICH WAS MADE UNDER EXCEPTIONAL CIRCUMST ANCE AS MENTIONED ABOVE. AS SUCH, THE VALIDITY OF SUCH STAT EMENT, WHICH IS IN NO MANNER RELATED TO ANY EVIDENCE OR MATERIALS F OUND IN THE COURSE OF SEARCH IN ASSESSEE'S PREMISES, IS IN ITSE LF NOT JUSTIFIED. 14.13.5. ANY STATEMENT MADE DURING THE SEARCH IN OUR OPINION SHOULD BE CORROBORATED BY DOCUMENTARY EVIDENCE AND SHOULD NOT BE DEVOID OF THE SAME. SIMPLY THE STATEMENT OF SHRI SU RENDRA S. PEETY WITHOUT CORROBORATING BY ANY EVIDENCE OR MATERIAL F OUND DURING THE COURSE OF SEARCH CANNOT BE THE SOLE BASIS FOR MAKIN G THE ADDITION IN QUESTION. 14.13.6. IT HAS BEEN HELD IN THE FOLLOWING CASES THAT A STATEMENT MADE ON THE DATE OF THE SEARCH UNDER DIFFICULT CIRC UMSTANCES, DOES NOT HAVE MUCH EVIDENTIARY VALUE AND MERE CONFESSION AL STATEMENT 50 WITHOUT THERE BEING ANY DOCUMENTARY PROOF SHALL NOT BE USED AS EVIDENCE AGAINST THE PERSON WHO MADE THE STATEMENT: A) ITAT AHMEDABAD BENCH IN THE CASE OF SMT.SUSHILADEVI S. AGARWAL [1994] 50 ITD 524 (AHMEDABAD) - IT WAS HELD THAT ALL THAT IS STATED BY ANY DEPONENT ON THE SEARCH DAY SH OULD NOT BE TAKEN AS TRUTH, THE WHOLE TRUTH AND NOTHING BUT TRU TH. SUCH STATEMENTS UNDOUBTEDLY HAVE EVIDENTIARY VALUE AND C REDIBILITY IN LAW, BUT THE SAME SHOULD BE VIEWED WITH GREAT CAUTI ON, PARTICULARLY WHEN, THE SAME IS DENIED, VARIED OR RE TRACTED OR ESTABLISHED BY THE DEFENDANT TO HAVE BEEN OBTAINED OR GIVEN UNDER MENTAL STRESS, COERCION, UNDUE INFLUENCE, OR DUE TO ANY OTHER ABNORMAL CONDITION AND CIRCUMSTANCES WHEN SUC H STATEMENT WAS GIVEN. B) HON'BLE ITAT JODPUR SMC BENCH, IN MAHESHWARI INDUST RIES 81 TTJ 914 (ITAT, JODHPUR, SMC BENCH), HELD THAT IT WA S OPEN TO THE ASSESSEE AT THE STAGE OF ASSESSMENT TO ESTABLIS H THAT THE SURRENDER MADE BY HIM AT THE TIME OF SEARCH WAS UND ER COMPULSION AND NOT WITH FREE MIND OR THAT THE ADDIT ION IS NOT WARRANTED ON THE BASIS OF AVAILABLE MATERIAL..... A DDITION SHOULD BE CONSIDERED ON MERITS RATHER ON THE BASIS OF FACT THAT THE AMOUNT WAS SURRENDERED BY THE ASSESSEE. C) HON'BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF C IT VS. SHRI RAMDAS MOTOR TRANSPORT [1999] 238 ITR 177 (AP) HELD THAT UNDER THE PROVISIONS OF SECTION 132(4) AS IT EXISTE D AT THE RELEVANT TIME THE QUESTION OF EXAMINING ANY PERSON BY THE AU THORISED OFFICER WOULD ARISE ONLY WHEN HE FOUND SUCH PERSON TO BE IN POSSESSION OF ANY UNDISCLOSED MONEY OR BOOKS OF ACC OUNT. BUT, IN THIS CASE, IT WAS ADMITTED BY THE REVENUE THAT O N THE DATES OF SEARCH, THE DEPARTMENT WAS NOT ABLE TO FIND ANY UNA CCOUNTED MONEY, UNACCOUNTED BULLION NOR ANY OTHER VALUABLE A RTICLES OR THINGS, NOR ANY UNACCOUNTED DOCUMENTS NOR ANY SUCH INCRIMINATING MATERIAL EITHER FROM THE PREMISES OF THE COMPANY OR FROM THE RESIDENTIAL HOUSES OF THE MANAGING DIRE CTOR AND OTHER DIRECTORS. IN SUCH A CASE, WHEN THE MANAGING DIRECT OR OR ANY 51 OTHER PERSONS WERE NOT FOUND TO BE IN POSSESSION OF ANY INCRIMINATING MATERIAL, THE QUESTION OF EXAMINING T HEM BY THE AUTHORISED OFFICER DURING THE COURSE OF SEARCH AND RECORDING ANY STATEMENT FROM THEM BY INVOKING THE POWERS UNDER SE CTION 132(4) DID NOT ARISE. THE EXPLANATION TO SECTION 13 2(4) PERMITTING SUCH EXAMINATION CAME INTO EFFECT ONLY FROM APRIL 1 , 1989. EVEN IF IT WERE HELD THAT THE STATEMENT OF THE MANAGING DIRECTOR FELL UNDER THE EXPLANATION TO SECTION 132(4), THE TRIBUN AL HAD RECORDED A FINDING OF FACT TO THE EFFECT THAT THE S TATEMENT OF THE MANAGING DIRECTOR OR THAT OF OTHER PARTNERS HAD NO EVIDENTIARY VALUE AS THEY WERE NOT SUPPORTED BY ANY DOCUMENTAR Y PROOF. NO QUESTION OF LAW AROSE FROM THE ORDER OF THE TRIBUNA L. D) MUMBAI BENCH IN THE CASE OF DEEPCHAND & CO. VS. ACI T [1995] 51 TTJ 421 HELD THAT STATEMENTS RECORDED DURING COU RSE OF SEARCH PROCEEDING WHICH CONTINUED FOR AN UNDULY LON G PERIOD COULD NOT BE CONSIDERED TO BE FREE, FEARLESS AND VO LUNTARY. ADDITIONS CANNOT BE SUSTAINED ON THE BASIS OF STATE MENTS OF PARTNERS RECORDED AT THE TIME OF PROLONGED SEARCH O PERATION WHICH WERE RETRACTED LATER ON. E) HON'BLE SUPREME COURT IN THE CASE OF PULLANGODE RUB BER PRODUCE CO. LTD. VS. STATE OF KERALA 91 ITR 18 (SC) HELD THAT AN ADMISSION MADE BY A PERSON IS RELEVANT BUT NOT CONC LUSIVE. IT IS ALWAYS OPEN TO A PERSON, WHO ADMITTED A FACT, TO EX PLAIN OR CLARIFY THAT WHAT WAS STATED WAS UNTRUE. F) EVEN THE GOVERNMENT HAD REASON TO BELIEVE THAT THER E IS WIDE SPREAD PRACTICE OF OBTAINING CONFESSION FROM THE SE ARCH PARTY IN THE COURSE OF SEARCH. IN THE BUDGET SPEECH FOR 2003 -04, THE FINANCE MINISTER INFORMED THE PARLIAMENT THAT NO CO NFESSIONAL STATEMENT SHALL BE OBTAINED DURING SEARCH AND SEIZU RE OPERATION. (P 29 OF 260 ITR AT 29). IN THIS REGARD, THE ATTENT ION WAS DRAWN TO DEPARTMENTAL INSTRUCTION ISSUED BY THE CBDT TO I TS OFFICERS IN MANNER OF ACTING ON BASIS OF SO CALLED CONFESSIONAR Y STATEMENTS OF ASSESSEES MADE DURING THE COURSE OF THE SEARCH. THE BOARD'S LETTER ISSUED FROM F.NO.286/2/2003/IT(INV) DATED L1 .03.2003 IS EXTRACTED BELOW: 52 'INSTANCES HAVE COME TO THE NOTICE OF THE BOARD WHE RE THE ASSESSES HAVE CLAIMED THAT THEY HAVE BEEN FORCED TO CONFESS THE UNDISCLOSED INCOME DURING COURSE OF SEARCH AND SEIZURE AND SURVEY. SUCH CONFESSION, IF NOT BASED ON CREDIB LE EVIDENCE, ARE ALTERED/RETRACTED BY THE CONCERNED AS SESSES WHILE FILING RETURNS OF INCOME. IN SUCH CIRCUMSTANC ES, CONFESSIONS IN THE COURSE OF SEARCH AND SEIZURE AND SURVEY OPERATIONS DO NOT SERVE ANY USEFUL PURPOSE. IT IS T HEREFORE ADVISED THAT THERE SHOULD BE FOCUS AND CONCENTRATIO N ON COLLECTION OF EVIDENCE OF INCOME WHICH LEADS TO INF ORMATION ON WHAT HAS NOT BEEN DISCLOSED OR IS NOT LIKELY TO BE DISCLOSED BEFORE INCOME TAX DEPARTMENT. SIMILARLY WHILE RECOR DING STATEMENTS DURING COURSE OF SEARCH AND SEIZURES AND SURVEY OPERATIONS, NO ATTEMPT SHOULD BE MADE TO OBTAIN CON FESSION AS TO UNDISCLOSED INCOME.' THE ABOVE CIRCULAR GOES INTO THE PURPOSE AND SCOPE OF SEARCH AND EMPHASIZES FOLLOWING ASPECTS: A) THE PURPOSE OF SEARCH IS EVIDENCE GATHERING WITH RE GARD TO UNDISCLOSED INCOME. B) IT IS NOT FOR OBTAINING CONFESSION AS TO THE UNDISC LOSED INCOME AND ADOPTING THE SAME IN THE ASSESSMENT WITHOUT ANY CORROBORATIVE EVIDENCE. C) THE EVIDENCE SHOULD BE IN THE REALM OF DEMONSTRABLE EVIDENCE TO SUSTAIN ASSESSMENT. D) IN THE ABSENCE OF CORROBORATIVE EVIDENCE, THERE IS A POSSIBILITY OF VALID RETRACTION IN THE RETURN OF INCOME FILED S UBSEQUENT TO SEARCH. E) IT RECOGNIZES THAT A MERE CONFESSION BY AN ORAL STA TEMENT WOULD NOT SUFFICE UNLESS THERE IS ENOUGH EVIDENCE T O CORROBORATE SUCH CONFESSION. 14.14. ON THE BASIS OF THE ABOVE FACTUAL DISCUSSION , NOT MUCH RELIANCE SHOULD BE PLACED ON STATEMENTS MADE BY THE ASSESSEE DURING THE COURSE OF SEARCH BECAUSE NO CORRESPONDIN G SEIZED MATERIAL WAS FOUND IN THE COURSE OF SEARCH TO JUSTI FY THE ADDITIONS IN QUESTION. THE VERBAL STATEMENT OF THE ASSESSEE WITHOUT ANY CONNECTION WITH THE OTHER MATERIALS FOUND DURING TH E SEARCH CANNOT BE CONSIDERED TO BE MATERIALS FOUND DURING THE SEAR CH. RELEVANT 53 INCOME TAX RETURNS FOR THE PAST YEARS WERE FILED PR IOR TO THE SEARCH IN THE NORMAL COURSE SUO MOTO DISCLOSING THE PARTIC ULARS OF SUBJECT ADDITIONS WHICH STOOD ACCEPTED U/S 143(L) OF THE AC T. ASSESSMENT AS CONTEMPLATED U/S 153A IS NOT A DE NOVO ASSESSMEN T AND ADDITIONS MADE THEREIN, HAS TO BE NECESSARILY RESTR ICTED TO UNDISCLOSED INCOME UNEARTHED DURING SEARCH. THERE IS NOTHING ON RECORD TO SUGGEST THAT ANY CORROBORATIVE EVIDENCE W AS FOUND TO JUSTIFY THE ADDITION IN QUESTION. 15. THE NEXT ISSUE RAISED BY THE REVENUE IS REGAR DING STATEMENT RECORDED U/S.132(4) OF THE ACT. THE DEPARTMENT ALL EGES THAT THE CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE A SSESSING OFFICER BY HOLDING THAT THE VOLUNTARY ADMISSION OF THE BOGU S LONG TERM CAPITAL GAIN BY THE ASSESSEE U/S. 132(4) OF THE ACT , COULD NOT FASTEN ANY LIABILITY ON THE ASSESSEE AS THERE WAS NO INCRI MINATING MATERIAL FOUND DURING THE COURSE OF SEARCH. DURING THE COUR SE OF SEARCH ACTION, STATEMENT OF SHRI SURENDRA S. PEETY WAS REC ORDED U/S. 132(4) OF THE ACT ON 24.03.2006. HE WAS CONFRONTED WITH THE STATEMENT OF CERTAIN BROKERS NAMELY, DHAWAL R. SHAH . DIRECTOR OF TRIMITI INVESTMENT AND FINANCIAL SERVICES LTD., PUN E, MILAN R. PARIKH, MD OF ACTION FINANCIAL SERVICES PVT. LTD. A ND SHRI VIJAY BHAGWANDAS OF VIJAY BHAGWANDAS & CO. IN THIS REGARD IT IS PERTINENT TO APPRECIATE THAT WHILE RECORDING STATEM ENT ASSESSEE DID NOT HAVE BENEFIT OF REFERRING TO THE EVIDENCES AVAI LABLE IN THEIR OFFICES WHICH WERE IN THE NATURE OF DOCUMENTARY EVI DENCE LIKE THE CONTRACT NOTES, BILLS OF THE BROKERS FOR THE PURCHA SE AND SALE OF THE ALLEGED SHARES, BANK STATEMENTS ETC., NOR WAS HE PR OVIDED WITH THE COPIES OF THE ABOVE STATEMENTS. 15.1. THE ASSESSING OFFICER LAID UNDUE EMPHASIS ON THE ADMISSION MADE BY SRI SURENDRA S. PEETY DURING THE COURSE OF THE ACTION U/S.132(4) PERTAINING TO THE GENUINENESS OF THE SHARE TRANSACTION. THE ASSESSING OFFICER FAILED TO APPREC IATE THE CIRCUMSTANCES IN WHICH STATEMENTS WERE OBTAINED AND TOTALLY IGNORED THE RESPONDENTS REPEATED SUBMISSIONS THAT T HE STATEMENTS 54 WAS MADE PECULIAR CIRCUMSTANCES IN A PARTICULAR STA TE OF MIND AND WITHOUT HAVING THE BENEFIT OF REFERRING TO THE VARI OUS DOCUMENTS WHICH CONCLUSIVELY PROVED THE GENUINENESS OF THE TR ANSACTIONS. THERE IS NOTHING ON RECORD TO SUGGEST THAT EVIDENCE S WERE FOUND IN COURSE OF SEARCH IN THE OFFICE AND RESIDENTIAL PREM ISES OF THE GROUP TO ESTABLISH THAT THE TRANSACTIONS IN SHARES WERE N OT GENUINE. EVEN THERE IS NO EVIDENCE TO SUGGEST FLOW OF CASH FROM T HE ASSESSEE TO THE BROKERS FOR INDULGING IN SUCH ACTIVITIES. ON THE CO NTRARY, THERE WAS EVIDENCE IN THE RECORDS OF THE DEPARTMENT BY WAY OF RETURNS AND OTHER SUPPORTING EVIDENCES TO SUGGEST THAT THE TRAN SACTIONS WERE GENUINE AND MATTER OF RECORD AT RELEVANT POINT OF T IME. ON THE FACE OF THESE CLINCHING EVIDENCES, THE EVIDENCE IN POSSE SSION OF THE ASSESSING OFFICER RELATES TO SOME ORAL STATEMENT OF SOME BROKERS WHO ALLEGED, WITHOUT SUBSTANTIATING, THAT THE PURCH ASES AND SALES WERE BY WAY OF ACCOMMODATION ENTRIES. THUS, THE ST ATEMENT GIVEN BY THE ASSESSEE SHOULD NOT BIND HIM ON THE FACE OF THE OVERWHELMING NATURE OF EVIDENCES AVAILABLE IN THE R ECORD OF THE DEPARTMENT AND THOSE PRODUCED BY THE ASSESSEE IN TH E ABSENCE OF ANY OTHER ADVERSE EVIDENCES PRODUCED BY THE DEPARTM ENT TO SUPPORTING ITS STAND. THE MEASURE OF SEARCH IS TO U NEARTH DOCUMENTS REVEALING CONCEALED INCOME AND WEALTH. SI NCE INTERROGATION IS NOT AN OBJECT OF THE SEARCH, IT IS EXPECTED THAT A RESPONDENT IS NOT PUT TO PRESSURE INTO MAKING AN AD MISSION AND THE STATEMENT SHOULD NOT GO BEYOND WHAT IS DISCOVER ED IN COURSE OF SEARCH FROM THE PREMISES OF THE ASSESSEE. IN THE CA SE OF THE ASSESSEE, THERE IS NOTHING ON RECORD TO SUGGEST THA T ANY INCRIMINATING EVIDENCE WAS FOUND IN CONNECTION WITH THE SHARE TRANSACTIONS FROM THE RESIDENTIAL AND OFFICE PREMIS ES OF THE PEETY GROUP. THE ENTIRE DECLARATION PERTAINING TO THE SH ARES TRANSACTIONS WERE ARRIVED AT ONLY ON THE BASIS OF THE STATEMENTS RECORDED OF THE BROKERS AND THE RETURNS OF INCOMES FILED DURING THE REGULAR COURSE. THE CIRCUMSTANCES IN WHICH THIRD PARTY STATEMENTS W ERE SHOWN JUST ON THE DATE OF SEARCH WITHOUT MAKING AVAILABLE COPY OF THE SAME COUPLED WITH THE MENTAL CONDITION OF VARIOUS MEMBER S OF ASSESSEES FAMILY IN COURSE OF PROLONGED SEARCH BEYOND NORMAL HOURS WOULD 55 SUGGEST THAT THE ADMISSION SO MADE WAS NOT VOLUNTAR Y AND HAS NO EVIDENTIARY VALUE. 15.2. IT IS WELL SETTLED PRINCIPLE THAT AN ADMISSI ON IS NOT IRREFUTABLE EVIDENCE AS TO THE TRUTH OF THE MATTERS STATED THEREIN. IT IS ONLY A PIECE OF EVIDENCE, THE RELEVANCY OF WHICH IS REQUIRED TO BE JUDGED BASED ON THE MATERIAL EVIDENCE AND CIRCUMSTA NCES IN WHICH IT IS MADE. ALTHOUGH AN ADMISSION MAY BE A GOOD EVI DENCE, BUT AT THE SAME TIME, IT IS NOT AT ALL A CONCLUSIVE EVIDEN CE AND THE PERSON MAKING THE ADMISSION CAN ALWAYS RETRACT THE SAME IF HE CAN ESTABLISH THAT THE ADMISSION WAS MADE IN ABNORMAL C IRCUMSTANCES OR THAT THE CONTENTS OF THE ADMISSION ARE NOT BORNE OUT BY FACTS AND MATERIALS AVAILABLE. IN THE INSTANT CASE, IT IS EVI DENT FROM THE FACTS AS DISCUSSED ABOVE THAT THE SO-CALLED DISCLOSURE OF SHRI SURENDRA PEETY WAS EXTRACTED UNDER EXCEPTIONAL CIRCUMSTANCES BASED ON HELPLESS SITUATION IN WHICH HE WAS PUT AT THE TIME OF MAKING THE DISCLOSURE AND FURTHERMORE, IT HAS NOT EVEN BEEN SU BSTANTIATED BY LINKING IT UP WITH ANY PROPER MATERIALS FOUND DURIN G THE SEARCH. THIS UNSUBSTANTIATED DISCLOSURE SHOULD NOT BE ACTED UPON FOR MAKING ADDITION IN QUESTION. 15.3. IN THE STATEMENT RECORDED U/S. 132(4), THE A SSESSEE SHRI SURENDRA S PEETY HAD STATED THAT ALL THE MEMBERS OF THE FAMILY WOULD COME OUT WITH THE CORRECT POSITION OF THE INC OME FROM THE SHARES INVESTMENT/BUSINESS AFTER EVALUATING THE EVI DENCES. THEY, HOWEVER, AFTER EVALUATING THE EVIDENCE AVAILABLE WI TH THEM AND AFTER OBTAINING THE MISSING PAPERS FROM THE BROKERS, FILE D THEIR RETURNS IN RESPONSE TO THE NOTICE U/S. L53A WITHOUT INCLUDING THE INCOME SO OFFERED IN THE COURSE OF SEARCH. SUBSEQUENTLY, ON A STATEMENT RECORDED OF ASSESSEE SHRI SURENDRA S PEETY U/S. 13 1 OF THE ACT ON 14.12.2007 AS TO WHY HIS ACCEPTANCE OF UNDISCLOSED INCOME IS NOT REFLECTED IN THE RETURN OF INCOME FILED IN PURSUANC E TO THE NOTICE U/S.153A, HE STATED THAT THE SAME WAS MADE UNDER PR ESSURE AS HE DID NOT HAVE ACCESS TO THE PAPERS AND DOCUMENTS LYI NG AT HIS FACTORY PREMISES TO VERIFY HIS CLAIM. 56 15.3.1. REGARDING RETRACTION, HON'BLE PUNJAB AND HA RYANA HIGH COURT IN THE CASE OF KISHANLAL SHIVCHAND RAI 88 IT R 293 (P&H), HAS HELD THAT IT IS AN ESTABLISHED PRINCIPLE OF LAW THAT A PARTY IS ENTITLED TO SHOW AND PROVE THAT AN ADMISSION MADE B Y HIM PREVIOUSLY WAS IN FACT NOT CORRECT AND TRUE. IT WAS INCUMBENT UPON THE INSPECTING ASSISTANT COMMISSIONER TO HAVE AFFOR DED THE ASSESSEE FULL OPPORTUNITY TO PROVE HIS ASSERTIONS. THE INSPECTING ASSISTANT COMMISSIONER PROCEEDED TO IMPOSE PENALTY SOLELY ON THE BASIS OF THE FACT THAT THE AMOUNTS WERE SURRENDERED BY THE ASSESSEE AT THE TIME OF THE ASSESSMENT. EVEN TREATING THE SU RRENDER AS AN ADMISSION OF THE CONCEALMENT OF UNDISCLOSED INCOME, THE INSPECTING ASSISTANT COMMISSIONER COULD NOT DENY THE ASSESSEE ITS RIGHT TO PROVE THAT THE FACT OF SURRENDER WAS NOT SUCH ADMIS SION AND THAT THE SO-CALLED ADMISSION WAS IN FACT WRONG AND THE S URRENDER WAS MADE SOLELY TO AVOID BOTHERATION AS STATED BY THE A SSESSEE. SIMILAR VIEW HAS BEEN TAKEN IN PULLANGODE RUBBER PRODUCE CO . LTD. (SUPRA) AND DEEPCHAND & CO. (SUPRA). WE ALSO FIND THAT ITA T MUMBAI BENCH IN PUSHPA VIHAR VS. ACIT (1994) 48 TTJ 389 (B OM), HELD THAT IN SURROUNDING CIRCUMSTANCES, IT CANNOT BE CONCLUDE D THAT WHAT THE ASSESSEE SAID ORIGINALLY WAS SACROSANCT AND THE ASSESSEE IS NOT AT A LIBERTY TO CORRECT THE ERROR, ORIGINALLY COMMI TTED BY GIVING A DIFFERENT VERSION OF TRUTH. IN THE ABSENCE OF ANY O THER MATERIAL EXCEPT THE ORIGINAL ADMISSION THERE IS NOTHING TO S UPPORT THE ADDITION. IN THE PRESENT CASE ALSO THE ALLEGED STAT EMENT WAS RETRACTED BY SHRI SURENDRA S PEETY. AS REGARDS RETR ACTION, THE PRINCIPLE IS THAT IT SHOULD BE RETRACTED BEFORE THE CONCERNED AUTHORITY DECIDES THE MATTER. IN OTHER WORDS, THE R ESPONDENT SHOULD NOT PLACE THE AUTHORITIES IN SUCH A POSITION SO AS TO THWART THE PROCESS OF INVESTIGATION. IN THE CASE OF THE ASSESS EE, THE RETRACTION WAS WELL EVIDENT FROM THE RETURNS FILED IN RESPONSE TO NOTICE U/S. 153A AND RESPONDENT'S LETTERS ADDRESSED TO THE DEPA RTMENT. THIS GAVE THE AUTHORITIES SUFFICIENT TIME TO COLLECT COR ROBORATIVE EVIDENCE WHICH THEY HAVE FAILED TO DO AS EXPLAINED ABOVE. 57 15.4. THE RETRACTION CAN BE MADE BEFORE FILING THE RETURN IS ACCEPTED IN PRINCIPLE IN THE CASE OF R.P.MONGA VS D CIT (2004) 269 ITR(AT) 1 (DELHI). ACCORDING TO US THE FIRST APPEL LATE AUTHORITY IN ITS ORDER DATED 18.06.2008 HAS RIGHTLY ACCEPTED THE RET RACTION OF THE ASSESSEE AND HAS STATED AS FOLLOWS ON PAGE 15 IN PA RA 5.3 AS UNDER: 'I HAVE CAREFULLY STUDIED AND ANALYZED FACTUAL POSI TION AS STATED ABOVE WHICH CANNOT BE DISPUTED AND IS A MATT ER OF RECORD; I HAVE ALSO EXAMINED VARIOUS CASE LAWS, REL IED ON BY THE AO, ON THE ISSUE OF ADMISSION / RETRACTION. ON THE ISSUE OF RETRACTION, THE AO RELIED ON THE FOLLOWING CASE LAW S ALL OF WHICH ARE DISTINGUISHABLE ON FACTS AND THEREFORE, NOT APP LICABLE TO THE CASE OF THE RESPONDENT ... THEREFORE, IT IS HELD THAT THE ISSUE OF GENUINENESS OF CLAIM OF LTCG & STCG OF THE RESPONDENT GROUP SHALL BE JUDGED INDEPENDENTLY ON THE STRENGTH AND MERIT OF DOCUMENT ARY AND OTHER THIRD PARTY CONTEMPORARY EVIDENCES, IRRESPECT IVE OF THE ADMISSION / RETRACTION OF THE ASSESSEE ...' THIS FACTUAL REASONED FINDING OF FIRST APPELLATE A UTHORITY NEED NO INTERFERENCE FROM OUR SIDE. 16. REGARDING STATEMENT OF BROKER WE FIND THAT THE ASSESSING OFFICER HAS HEAVILY RELIED ON THE STATEMENTS OF VAR IOUS STOCK/SHARE BROKERS WHICH WERE RECORDED BEHIND THE BACK OF THE RESPONDENT AND WAS NOT PROVIDED TO ASSESSEES TILL THE CONCLUDING S TAGE OF THE PROCEEDING. A REQUEST WAS MADE BY THE ASSESSEE VIDE LETTER DATED 19.12.2007 AND THESE STATEMENTS WERE MADE AVAILABLE TO THE ASSESSEE ON 25.12.2007 WHICH HAPPENED TO BE A PUBLI C HOLIDAY. THE OPPORTUNITY FOR CROSS EXAMINATION WAS AFFORDED TO T HE RESPONDENT ON 26.12.2007 AND ASSESSEE WAS DIRECTED TO BE PRESE NT AT THE OFFICE OF THE DIRECTOR OF INVESTIGATION AT SCINDIA HOUSE, BALLARD ESTATE, BOMBAY. DESPITE ALL INCONVENIENCES CAUSED DUE TO CO NSTRAINTS OF TIME, THE RESPONDENT ALONG WITH HIS AUTHORIZED REPR ESENTATIVES WERE PRESENT BUT THE DEPARTMENT FAILED TO PRODUCE T HEIR WITNESSES. ANOTHER OPPORTUNITY WAS GIVEN ON 31.12.2007 AT THE SAME PREMISES AND YET AGAIN THE DEPARTMENT FAILED TO PRODUCE THE WITNESSES. THEREAFTER AN E-MAIL WAS SENT TO THE CONCERN ASSESS ING OFFICER REQUESTING HIM NOT TO RELY ON THESE EX-PARTE STATEM ENTS WHILE 58 FRAMING THE ORDER AND DETERMINING THE INCOME OF VAR IOUS MEMBERS IN THE GROUP. 16.1 THUS AFFORDING OF OPPORTUNITY FOR CROSS EXAMI NATION WAS AN EMPTY FORMALITY AND ONLY TO TECHNICALLY COMPLY W ITH THE RESPONDENT'S REQUEST WHICH COULD NEVER MATERIALIZE. HOWEVER, THERE WAS NO WHISPER IN THE SAID ORDER AS TO THE REQUEST OF THE ASSESSEE FOR CROSS EXAMINATION AND ITS RESULTS WHICH WAS CRU CIAL FOR FASTENING A LIABILITY AGAINST THE ASSESSEE. IT REVE ALS THAT THE AUTHORITIES WORKED WITH PREDETERMINED MIND ON THE I SSUE. NON PROVIDING OF DUE OPPORTUNITY OF HEARING WAS DENIED IN THIS CASE WHICH IS IN VIOLATION OF PRINCIPLES OF NATURAL JUST ICE. 16.2. IT IS IMPORTANT THAT STATEMENTS GIVEN BY A T HIRD PARTY SHOULD BE RELIED VIS-A-VIS EVIDENCE AVAILABLE ON RE CORD. A PERSON MAY MAKE ANY STATEMENT BUT THERE SHOULD BE EVIDENCE AVAILABLE TO ESTABLISH THE SAME. ASSESSEE IS IN NO WAY CONCERNED WITH WHAT A PERSON HAS STATED AS LONG AS HIS BOOKS AND RECORDS ARE IN ORDER AND SINCE THE PERSON MAKING THE STATEMENT DID NOT COME FORWARD TO CONFRONT HIM, HE IS NOT IN A POSITION TO DECIDE IN WHAT CONTEXT THE STATEMENTS HAVE BEEN MADE. 16.3. THE ASSESSING OFFICER HAS ACTED SOLELY ON TH E STATEMENT OF A THIRD PARTY WITHOUT CONDUCTING ANY VALID INQUI RY OF ITS OWN TO COUNTER THE STATEMENTS MADE. THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO FALSIFY THE CLAIM OF THE ASSESSEE OR THAT THE SHARE TRANSACTIONS WERE BOGUS. THE ASSE SSING OFFICER HAS ACTED WHOLLY ON THE ALLEGED STATEMENT OF A THIR D PERSON BEHIND THE BACK OF THE ASSESSEE WITHOUT BRINGING ON RECORD ANY EVIDENCE IN SUPPORT OF SUCH SUSPICION AND WITHOUT AFFORDING ANY OPPORTUNITY TO CROSS-EXAMINE HIM. SUCH STATEMENT CANNOT BE HELD A S RELIABLE EVIDENCE FOR MAKING ADDITIONS/DISALLOWANCES. HON'B LE BOMBAY HIGH COURT IN CASE OF CIT VS. OMPRAKASH JAIN REPORT ED IN 24 DTR 157 OBSERVED THAT THE TEST OF EVIDENTIARY VALUE OF THE ORAL EVIDENCE HAS TO BE BORNE IN MIND AND DOCUMENTARY EVIDENCE IF GENUINE MUST 59 PREVAIL OVER THE ORAL STATEMENT. IN THE CASE OF THE ASSESSEE, THE DEPARTMENT HAS DISBELIEVED THE TRANSACTION ONLY ON THE BASIS OF THE ORAL STATEMENT OF THE BROKER WITHOUT TESTING ITS CO RRECTNESS. FURTHER THE ASSESSING OFFICER HAS NOT PLACED ANY MATERIAL O N RECORD TO QUESTION THE GENUINENESS OF THE DOCUMENTARY EVIDENC ES FURNISHED ON BEHALF OF THE ASSESSEE. THE ITAT, MUMBAI BENCH I N THE CASE OF DCIT VS. PREMSONS REPORTED IN 130 TTJ 159 HELD THAT THE STATEMENT RECORDED HAD NO EVIDENTIARY VALUE UNTIL IT HAS SOME CORROBORATIVE MATERIAL/EVIDENCE. THE RELEVANT EXTRACT OF THE SAME IS REPRODUCED AS UNDER: GOING BY THE VERDICT OF THE HIGH COURTS AND THE PO SITION REAFFIRMED BY THE CBDT THROUGH ITS CIRCULAR, IT BEC OMES ABUNDANTLY CLEAR THAT NO ADDITION CAN BE MADE OR SU STAINED SIMPLY ON THE BASIS OF STATEMENT RECORDED AT THE TI ME OF SURVEY/SEARCH. IN ORDER TO MAKE AN ADDITION ON THE BASIS OF SURRENDER DURING SEARCH OR SURVEY, IT IS SINE QUA N ON THAT THERE SHOULD BE SOME OTHER MATERIAL TO CORRELATE TH E UNDISCLOSED INCOME WITH SUCH STATEMENT. ADVERTING T O THE FACTS OF THE INSTANT CASE, ONLY TO THE EXTENT OF RS .21.14 LAKHS THERE IS A MATERIAL TO CO-RELATE WITH THE ADMISSION , REPRESENTING THE EXCESS STOCK FOUND AT THE TIME OF SURVEY. EVIDENTLY THE SURRENDER MADE BY THE ASSESSEE AT THE TIME OF SURVEY TO THAT EXTENT AND OFFERED FOR TAXATION IN T HE RETURN OF INCOME IS IN ORDER. BUT INSOFAR AS THE AMOUNT IN DI SPUTE TO THE TUNE OF RS. 28. 85 LAKHS IS CONCERNED, SUCH SURREND ER WAS SPECIFICALLY MADE 'TOWARDS ANY OTHER DISCREPANCY'. THERE IS NO MENTION IN THE ASSESSMENT ORDER OF ANY SUCH DISCREP ANCY FOUND AS A RESULT OF SURVEY THROWING LIGHT ON THE U NDISCLOSED INCOME. EVEN THE DEPARTMENTAL REPRESENTATIVE COULD NOT POINT OUT ANY MATERIAL SHOWING THE EXISTENCE OF UNDISCLOS ED INCOME EARNED BY THE ASSESSEE WHICH WAS UNEARTHED DURING T HE COURSE OF SURVEY. THERE IS NOTHING ON RECORD WHICH COULD CORRELATE SUCH ADDITIONAL INCOME OFFERED BY THE ASS ESSEE DURING THE COURSE OF SURVEY WITH ANY OTHER DISCREPA NCY. THERE IS NO BASIS FOR SUSTAINING THE ADDITION IN QUESTION . WE ALSO FIND THAT THE ITAT MUMBAI BENCH IN THE CASE OF MUKESH R. MAROLIA VS. ADDL. CIT, RANGE-15(2) (2006) 6 SOT 247 (MUM), HELD THAT AN ASSESSMENT HAS TO BE COMPLETED, ON THE BASI S OF RECORDS AND MATERIAL AVAILABLE BEFORE THE ASSESSING AUTHORI TY. PERSONAL KNOWLEDGE AND EXCITEMENT ON EVENTS SHOULD NOT LEAD THE ASSESSING OFFICER TO A STATE OF AFFAIRS WHERE SALIENT EVIDENC ES ARE OVERLOOKED. IN CASE THE TESTIMONY OF A WITNESS, THE ASSESSEE IS REQUIRED TO BE 60 AFFORDED AN OPPORTUNITY TO CROSS EXAMINE HIM FAILIN G WHICH THE TESTIMONY CANNOT BE UTILIZED AGAINST THE ASSESSEE. IF THIS PROCEDURE IS NOT FOLLOWED, THEN THERE WOULD BE A CASE OF DENI AL OF NATURAL JUSTICE TO THE ASSESSEE AS HELD BY HON'BLE DELHI HI GH COURT IN CIT VS. SMC SHARE BROKERS LTD. (2007) 288 ITR 345 (DEL. ). SIMILAR VIEW HAS BEEN TAKEN IN BANGODAYA COTTON MILLS LTD. VS. CIT (2009) 21 DTR 200 (CAL.) AND EASTERN COMMERCIAL ENTERPRISE (1994) 210 ITR 103 (CAL). 16.4. WE FIND THAT HON'BLE KERALA HIGH COURT IN CA SE OF P.S.ABDUL MAJEED (1994) 209 ITR 821 (KER) OBSERVED AS UNDER: HE HAD ALSO PRAYED FOR AN OPPORTUNITY TO CROSS-EXA MINE THE AUCTIONEERS. WHEN SUCH A REQUEST WAS MADE IT WAS IN CUMBENT ON THE OFFICER TO AFFORD OPPORTUNITY TO THE ASSESSE E TO CROSS EXAMINE THE AUTHORS OF THOSE BOOKS. THE PETITIONER HAD BEEN DENIED THE REASONABLE OPPORTUNITY WHICH WAS DUE IN LAW, IN RELATION TO THE ASSESSMENT, AND THAT WAS SUFFICIENT TO VITIATE THE ORDER. THE ORDER OF REASSESSMENT WAS NOT VALID AND WAS LIABLE TO BE QUASHED.' 16.5. WE FIND HON'BLE BOMBAY HIGH COURT IN THE CAS E OF C.I.T. VS. SHRI SANDEEP SHOREWALA(HUF) IN ITA NO. 2010 OF 2009, DISMISSED THE APPEAL OF THE REVENUE VIDE ITS ORDER DATED 18.09.2009 AND UPHELD THE ORDER OF THE TRIBUNAL BY HOLDING AS UNDER: 'LD. CIT(A) HAS RELIED ON THE DECISION OF THIS TRIB UNAL IN THE CASE OF SHRI MUKESH R MAROLIA. THE CONCERNED BROKER THERE WAS M/S.RICHMOND SERVICES PVT. LTD. REPRESENTED BY ITS DIRECTOR, WHICH IS ALSO ONE AMONG THE TWO BROKERS T HROUGH WHICH THE ASSESSEE HAD ALLEGEDLY DEALT WITH. ASSESS EE HAD ALSO FILED AN AFFIDAVIT WHEREBY SHRI MUKESH CHOKSI HAD, AGAINST THE EARLIER STATEMENTS GIVEN BY HIM, CONFIRMED THE TRAN SACTIONS. IT IS ALSO SEEN THAT THE ASSESSEE WAS NOT GIVEN A CHAN CE TO EXAMINE SHRI MUKESH CHOKSI DESPITE REQUEST. HON'BLE SUPREME COURT HAS IN THE CASE OF MEHTA PARIKH VS. C IT (30 ITR 181) LAID DOWN THE LAW THAT WHERE A PERSON WHO HAS GIVEN AN AFFIDAVIT WAS NOT CROSS EXAMINED, IT WOULD NOT B E OPEN TO CHALLENGE THE CORRECTNESS OF THE STATEMENTS THEREIN . HERE, SHRI MUKESH CHOKSI WAS NOT ALLOWED TO BE CROSS EXAMINED DESPITE ASSESSEE'S REQUEST NOR WAS HE CROSS EXAMINED BY THE A.O. VIS- A-VIS THE AFFIDAVIT. THEREFORE, IN OUR OPINION, THE A.O. COULD NOT HAVE BRUSHED ASIDE SUCH AFFIDAVIT. HENCE NO MISTAKE CAN BE 61 SEEN IN THE ORDER OF THE LD CIT(A) IN FOLLOWING THE DECISION OF THIS TRIBUNAL IN THE CASE OF MUKESH R MAROLIA(SUPRA ).' 16.6. IN THE CASE BEFORE US, THE TRANSACTIONS IN Q UESTION ROUTED THROUGH AUTHORIZED CHANNEL, CARRIED OUT AT PREVALEN T MARKET RATES AND SUPPORTED BY PROPER BILLS AND DOCUMENTS. THE AS SESSEE HAS DISCHARGED THE ONUS CAST UPON HIM BY FURNISHING BEF ORE THE ASSESSING OFFICER ALL NECESSARY DOCUMENTS, BEING BI LLS AND CONTRACT NOTES, IN SUPPORT OF THE PURCHASES AND SALES MADE B Y HIM. THE ASSESSING OFFICER IS SUPPOSED TO NEGATE THE DOCUMEN TARY EVIDENCE PRODUCED IN FAVOUR OF THE TRANSACTIONS OF PURCHASE AND SALE OF SHARES WHICH HAS NOT BEEN DONE BY THE ASSESSING OFF ICER. THE ASSESSING OFFICER IS NOT SUPPOSED TO WASH AWAY ON A SSUMPTIONS AND ARBITRARY CONCLUSIONS. AS STATED ABOVE, THE ASS ESSEE GROUP HAD PURCHASED THE ALLEGED SCRIPS ON WHICH LTCG HAS BEEN CLAIMED FROM ONLY THREE BROKERS, NAMELY, (1) TRIMITI INVESTMENTS AND FINANCIAL SERVICES, PUNE, (2) DPS SHARES AND SECURITIES, MUMB AI, (3) M/S.VRP FINANCIAL SERVICES PVT. LTD. IN RESPONSE TO NOTICE DATED 05.09.2007, DETAILS OF PURCHASE AND SALE OF SHARES HELD ON LONG TERM BASIS WERE SUBMITTED. SAME IS ATTACHED AT PAGE S 32, 61, 173, 203, 256, 277, 263, 292, 333, 390, 461 & 509 OF THE PAPER BOOK-I WHICH IS EVIDENT FROM THE FACT THAT MAJORITY OF THE PURCHASES OF THE MEMBERS OF THE PEETY FAMILY WERE FROM TRIMITI INVES TMENTS AND FINANCIAL SERVICES. PURCHASE OF SCRIPS OF PRANNET I NDUSTRIES AND PART PURCHASES OF FAST TRACK ENTERTAINMENT ARE FROM DPS SHARES AND SECURITIES. 16.7. THE ASSESSING OFFICER FAILED TO EVALUATE THE TRANSACTION IN SHARES IN ITS ENTIRETY AND THE EVIDENCES AVAILABLE IN RESPECT THEREOF AND HAS RELIED PRIMARILY ON SOME UNSUBSTANTIATED AL LEGATIONS OF SOME BROKERS WHILE MOST OF THE STATEMENTS FAVOURABL E TO THE ASSESSEE WERE IGNORED BY THE ASSESSING OFFICER WHIC H IS NOT JUSTIFIED. ALL THE DEPONENTS HAVE AFFIRMED THAT TH EY WERE INVOLVED IN SHARE BROKING BUSINESS AND THAT THEY EITHER DID NOT MAINTAIN ANY BOOKS OF ACCOUNTS OR THEIR BOOKS OF ACCOUNTS AND RE LEVANT RECORDS WERE LOST OR MISPLACED OR DID NOT RECORD IN THEIR B OOKS OF ACCOUNT 62 ANY RECORD OF THE ACCOMMODATION BILLS FOR THE PURCH ASE OF THE SHARES OF A PARTICULAR COMPANY ISSUED BY THEM TO PA RTIES SEEKING SUCH ACCOMMODATION. THEY ALSO CONFIRMED OF HAVING H AD TRANSACTIONS WITH THE MEMBERS OF THE PEETY FAMILY. THEY HAVE ALSO NOT DISPUTED THE PAYMENT OF PURCHASE AND SALE CONSI DERATION EITHER THROUGH RUNNING SETTLEMENT OR BY CHEQUES/DEMAND DRA FTS. 16.8. FURTHER ACTION FINANCIAL SERVICES HAS CONFIR MED THAT THE MEMBERS OF THE PEETY FAMILY ARE HIS REGISTERED CLIE NTS AND THAT HE HAS DONE GENUINE SALES ON BEHALF OF THEM. SINCE NO PURCHASES WERE MADE FROM THE ACTION FINANCIAL SERVICES, HIS CONTEN TION THAT HE HAS NOT PURCHASED SHARES FOR THE PEETY FAMILY HAS NOT B EEN DISPUTED BY THE ASSESSEE. DPS SHARES AND SECURITIES CONFIRMED THAT THEY HAVE DONE GENUINE SALES OF SCRIPS OF FAST TRACK, PRANNET INDUSTRIES ON BEHALF OF PEETY FAMILY. THE ASSESSING OFFICER HIMS ELF HAS ACCEPTED THAT THE BROKERS HAVE CONFIRMED THAT THE SALE OF TH E IMPUGNED SHARES WERE UNDERTAKEN BY THEM BUT HAS GONE ON TO D RAW A CONCLUSION THAT SINCE THERE WERE NO PURCHASES, THE SALE OF THE SHARES MADE THROUGH THEM WERE NOT GENUINE. ANY DOCU MENT HAS TO BE TAKEN AS A WHOLE AND THE ASSESSING OFFICER SHOUL D NOT PICK AND CHOOSE THOSE PARTS OF THE STATEMENTS WHICH SUITS HI M AND TOTALLY REJECT THOSE PARTS OF THE SAME STATEMENTS WHICH ARE IN SUPPORT OF THE ASSESSEE. THEREFORE, EITHER THE ASSESSING OFFIC ER SHOULD NOT RELY ON THE STATEMENTS AT ALL OR IF HE USES THESE STATEM ENTS AS EVIDENCE AGAINST THE ASSESSEE THEN HE SHOULD READ IT AS A WH OLE AND ALSO ACCEPT THOSE PARTS OF THE STATEMENTS WHICH SUPPORT THE ASSESSEE. ONE OF THE MOST SIGNIFICANT EVIDENCE WHICH HAS BEEN CONVENIENTLY IGNORED IN THE ASSESSMENT ORDER RELATES TO TRANSACT ION WITH TRIMITI INVESTMENT FROM WHOM BULK OF SHARES PERTAINING TO G TECH INFO, HIGHLAND INDUSTRIES, FAST TRACK ENTERTAINMENT AND D ATABASE FINANCE WERE PURCHASED. PRIOR TO SEARCH, STATEMENT OF DHAVAL SHAH AND DURING THE COURSE OF POST SEARCH ENQUIRIES, THE STATEMENT OF ITS DIRECTOR SHRI SOURIN MEHTA WERE RECORDED BY THE DEP ARTMENT AND ITS BOOKS WERE A SUBJECT MATTER OF SCRUTINY. THEY H AVE CONFIRMED ALL THE TRANSACTIONS WITH THE PEETY FAMILY AND HAVE ALS O CONFIRMED THAT 63 THE PAYMENTS FOR THESE PURCHASES WERE MADE BY DD/CH EQUES OR SETTLED AGAINST DAY TRADING PROFITS ALSO DONE THROU GH THEM. SHRI SOURIN MEHTA HAS UNEQUIVOCALLY STATED THAT THE TRAN SACTIONS WITH THE PEETY FAMILY ARE GENUINE. THIS SHOWS THE ASSERT ION OF THE ASSESSEE. FOR READY REFERENCE RELEVANT PORTION OF HIS STATEMENT DATED 28.11.2007 IS REPRODUCED BELOW: Q. NO.5: PLEASE MENTION WHETHER YOU HAVE TRADED THE SHARES OF FAST TRACK ENTERTAINMENT, HIGH LAND INDUSTRIES, DAT A BASE FIN AND G TECH INFO TRADING IN LAST 6 YEARS. A. I HAVE PURCHASED SHARES FROM DIFFERENT BROKERS O F MUMBAI FOR MY CLIENTS AND SOLD TO THEM. Q.10. HAVE YOU TRADED THE SHARES MENTIONED IN Q.NO. 5 WITH PEETY FAMILY OF JALNA IN LAST 6 YEARS. A. YES I HAD SOLD SHARES IN PHYSICAL FORMAT TO THEM . THE PAYMENT WAS RECEIVED FROM THEM THROUGH CHEQUES AS W ELL AS SPECULATIVE PROFIT EARNED BY THEM. Q.NO.11: DURING THE ENQUIRY OF THE BROKER LIKE VIJA Y BHAGWANDAS, DPS, T.H.VAKIL ETC., THEY STATED BEFORE OFFICIALS OF IT DEPT. THAT THE TRANSACTION IN THESE SHARE ACTUAL LY DID NOT HAPPEN. THEY HAD ISSUED BOGUS PURCHASE BILLS TO THE NEEDY PEOPLE WITHOUT ANY REAL TRANSACTION & THESE BILLS W ERE BACK DATED YOU HAVE STATED THAT YOU HAVE PURCHASED THESE SHARES FROM THE ABOVE MENTIONED BROKERS. CONSIDERING THIS WHY IT SHALL NOT BE ASSUMED THAT YOU HAD ALSO ISSUED BOGUS PURCHASE BILL TO PEETY FAMILY OF JALNA FOR THESE SH ARES. A. I HAD PURCHASED THE SHARE FROM BROKER AT MUMBAI & SOLD TO PEETY FAMILY. Q.12. DO YOU MEAN TO SAY THAT YOU HAD PURCHASED THE SE SHARES AS PER THE BILLS ISSUED TO YOU & ALSO SALE W AS MADE ON THE DATE TO PEETY FAMILY AS PER YOUR BILLS. THE COP Y OF BILLS REGARDING SHARES OF THE SAID COMPANY TO PEETY FAMIL Y BY YOUR COMPANY I AM SHOWING YOU, PLEASE EXAMINE & CONFIRM WHETHER THESE BILLS WERE ISSUED ON THE SAME DATE? A. YES, I PURCHASED THESE SHARE FROM BROKER & SOLD TO PEETY FAMILY. FURTHER STATEMENT DATED 30.11.07 Q.7. AS MENTIONED BY YOU IN YOUR STATEMENT ON 28.11 .07 THAT YOU HAVE PURCHASED THESE SHARES IS PHYSICAL FORMAT FROM T.H.VAKIL, VIJAY BHAGWANDAS, DPS FOR PEETY FAMILY. IT WAS 64 FOUND THAT ALL THESE PURCHASE BILLS ISSUED BY THE B ROKERS WERE BOGUS, THIS WAS ALSO COMMUNICATED TO YOU ON 28.11.0 7. THESE BROKERS OF BOMBAY ADMITTED THAT THESE BILLS ARE BAC KDATED I.E. THESE HAD BEEN PREPARED JUST BEFORE THE SALE OF THE SE SHARES THROUGH D-MAT? AS YOU WERE SUB-BROKER & HAD ARRANGE D THESE SHARES FOR PEETY FAMILY FROM THESE BROKERS. HENCE W HY IT SHALL NOT BE PRESUMED THAT THE BILLS ISSUED BY YOUR CONCE RN TRIMITI INV. & FIN. SERVICES PVT. LTD., CANNOT BE TREATED A S BACK DATED & BOGUS. A. OUR CONCERN HAS NOT ISSUED BOGUS BILLS. 16.9. THE EXTRACT OF THE ABOVE STATEMENT SHOWS THA T THE TRANSACTIONS WITH TRIMITI INVESTMENT WERE NOT BOGUS . THEREFORE, ANY DOCUMENTS WITH THIS CONCERN SHOULD NOT BE SUSPECTED UNLESS THERE IS ANYTHING OTHERWISE ON RECORD. MOREOVER, DURING T HE COURSE OF ASSESSMENT PROCEEDING, THE STATEMENT OF SHRI SOURIN MEHTA WAS BEFORE THE ASSESSING OFFICER WHICH WAS ACCEPTED AS NO ADVERSE INFERENCE HAS BEEN DRAWN WITH REGARD TO THIS TRANSA CTION IN THE ASSESSMENT ORDER. AS STATED ABOVE M/S.TRIMITI INVE STMENTS THROUGH WHOM MAJORITY OF TRANSACTIONS OF PURCHASES WERE EFFECTED HAS STATED THAT THE TRANSACTIONS ARE GENUINE. THERE IS NO DISCUSSION ABOUT THE STATEMENT OF THIS BROKER IN THE ASSESSMEN T ORDER. THUS, THE SELECTIVE USE OF EVIDENCE BY THE ASSESSING OFFI CER IS NOT JUSTIFIED. 16.10. THE ASSESSEE IS NOT CONCERNED WITH THE MODUS OPERANDI OF THE BROKER'S TRADING WITH ITS OTHER CLIENTS. AS LONG AS HE HAD PURCHASED AND SOLD THE SHARES OF THE ASSESSEE THROU GH KNOWN AND ACCEPTED PROCEDURE, THE BROKER'S MISDEALING WITH OT HERS SHOULD NOT BE A CRITERIA TO SUSPECT THE APPELLANT'S GENUINE SH ARE TRANSACTIONS AND CAPITAL GAIN THEREUPON. IF THESE BROKERS WERE S USPENDED BY SEBI SUBSEQUENT TO THE ASSESSEES COMPANY'S DEALING WITH THEM, IT IS THE MATTER BETWEEN SEBI AND THE BROKER AND THE A SSESSEE COMPANY IS NOT CONCERNED IN ANY WAY UNLESS ACTION I S BASED ON TRANSACTIONS INCLUDING ASSESSEES TRANSACTIONS. TH ERE IS NOTHING ON RECORD TO SUGGEST THAT TRANSACTIONS WITH ASSESSEE A RE ALSO BASIS FOR SEBIS ACTION AGAINST ALLEGED BROKERS. THE HON'BLE KOLKATA HIGH COURT IN THE CASE OF CIT VS. KORLAY TRADING CO. LTD . (1998) 232 ITR 820 (KOL) HELD THAT ONCE THE ASSESSEE HAS FURNISHED THE NAME OF THE 65 COMPANY, NUMBER OF SHARES PURCHASED, DATE OF SALE, AMOUNT OF PURCHASE MONEY, AMOUNT OF SALE MONEY, ETC., THE ASS ESSEE HAD DISCHARGED ITS INITIAL BURDEN AND IF THE BROKER DID NOT MAINTAIN ANY ACCOUNTS, THE TRANSACTION COULD NOT BE DOUBTED FOR NO FAULT OF THE ASSESSEE. 16.10.1. THE KOLKATA BENCH OF THE ITAT IN THE CASE OF ANUP KUMAR JAYASWAL IN ITA NOS.1678/KOL/2004 & 1679/KOL/ 2004 FOR A.Y. 2001-02, HAS DECIDED THE CASE WHEREIN THE ASSE SSEE HAD ACQUIRED SHARES OF M/S. CORONET INDUSTRIES LTD., TH ROUGH A BROKER M/S. JAJODIA & CO. SUBSEQUENTLY THE SAID SHARES WE RE SOLD AND EXEMPTION U/S. 54F WAS SOUGHT FROM LONG TERM CAPITA L GAIN EARNED ON THE TRANSACTION. THE PURCHASE AND SALE OF SHARE S WERE DULY SUPPORTED BY BILLS AND CONTRACT NOTES. FURTHER, THE SHARE BROKER ACCEPTED HAVING UNDERTAKEN THE SALE AND PURCHASE TR ANSACTION ON BEHALF OF THE ASSESSEE. THE SHARE ISSUING COMPANY I .E., CORONET INDUSTRIES LTD., HOWEVER STATED THAT AS PER THEIR R ECORDS, NO SHARES WERE TRANSFERRED IN THE NAME OF THE ASSESSEE AND FU RTHER STATED THAT THE FOLIO NO. WRITTEN ON THE SHARE SCRIP DID NOT EX IST. THE HON'BLE KOLKATA BENCH OF THE ITAT HELD THAT THE FACT REMAIN S THAT AT NO POINT OF TIME THE ASSESSEE HAD AN OPPORTUNITY TO IN TERACT WITH THE SHARE ISSUING COMPANY AS THE ASSESSEE HAD NOT PURCH ASED SHARES DIRECTLY FROM THE COMPANY AND THAT THE ALLEGED DENI AL BY THE SHARES ISSUING COMPANY ABOUT THE TRANSFER OF THE SHARES IS BETTER KNOWN TO THEM AND NOT TO THE ASSESSEE. AS FAR AS THE ASSES SEE IS CONCERNED, THE TRANSACTION OF PURCHASE AND SALE OF 20,000 SHAR ES THROUGH THE REGISTERED BROKER IS PROVED BY DOCUMENTARY EVIDENCE FILED ON RECORD. THE PAYMENTS OF SALE PROCEEDS OF 20,000 SHA RES WERE RECEIVED BY THE ASSESSEE BY ACCOUNT PAYEE CHEQUES. IT WAS FOUND THAT THE TRANSACTION HAS BEEN ENTERED INTO THROUGH A REGISTERED BROKER AT PREVALENT MARKET PRICE AND WAS SUPPORTED BY DOCUMENTARY EVIDENCE. THE TRANSACTION OF SALE AND PURCHASE OF SHARES HAD BEEN CONFIRMED BY THE SHARE BROKER BOTH IN HIS STATEMENT RECORDED U/S.131 OF THE ACT AND ALSO BY A N AFFIDAVIT FILED BEFORE THE ASSESSING OFFICER. IN THESE FACTS, THE T RIBUNAL HELD THAT 66 NO CASE OF ADDITION U/S.68 OF THE ACT IS MADE BY RE VENUE AGAINST THE ASSESSEE AND THE FACT OF PURCHASE AND SALE IS P ROVED BY DOCUMENTARY EVIDENCE FILED BEFORE ASSESSING OFFICER . 16.11. IN CASE OF SHRI ACCHYALAL SHAW ITA NO.1977/K OI/2008, THE ITAT KOLKATA BENCH HAS HELD AS UNDER: 'IN OUR CONSIDERED OPINION, SUSPICION CANNOT REPLAC E THE REAL EVIDENTIAL DOCUMENT. SIMPLY BY ARGUING IT TO BE A C ASE OF MANIPULATION THE REVENUE IS NOT SUPPOSED TO SUCCEED IN THEIR CONTENTION WITHOUT PROPER EVIDENCE. HOLDING THIS VI EW OF THE MATTER ON THE FACTUAL MATRIX AND RESPECTFULLY FOLLO WING THE CASE LAWS CITED ABOVE, WE ALLOW THE ASSESSEE'S SECO ND APPEAL.' 16.12. AGAIN IN THE CASE OF ACIT VS. CLARIDGES INVE STMENT & FINANCES (P) LTD. (2007) 18 SOT 390 (MUM), ITAT HEL D AS UNDER: 'AS THE MATTER STANDS WE FIND THAT THE ASSESSEE'S T RANSACTIONS ARE SUPPORTED BY THE MOVEMENT OF SHARES AS REFLECTE D IN DEMAT ACCOUNT, MOVEMENT OF MONEY AS REFLECTED IN THE BANK ACCOUNT, ENTRIES IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, P REVALENT MARKET QUOTATIONS OF THE CSE, CONTRACT NOTES AND DE LIVERY BILLS ISSUED BY THE KOLKATA BROKERS AND THEIR STATEMENTS IN RESPONSE TO THE INQUIRIES MADE BY THE AO. LAST BUT NOT THE LEAST THE ASSESSEE HAS SHOWN NET PROFIT OF RS. 16.1 6 CRORES. AS AGAINST THESES THE CASE OF REVENUE IS THAT CERTAIN MATERIAL INFORMATION WAS NOT GIVEN IN THE CONTRACT NOTE AND COLUMNS IN THAT RESPECT WERE LEFT BLANK. COPY OF FORM B WAS IN FILED IN CSE. FOR THESE REASONS IT IS NOT VERIFIABLE AS TO W HETHER THE TRADES IN QUESTION WERE DONE THROUGH THE TRADING SY STEM OF THE EXCHANGE OR NOT. THE ANSWER OF THE ASSESSEE TO THESE DEFICIENCIES AND IRREGULARITIES IS THAT HE COULD NO T BE HELD RESPONSIBLE FOR THE SAME. IT WAS NOT THE ASSESSEE B UT THE THREE KOLKATA BROKERS WHO WERE MEMBERS OF THE CSE .... TH E AO DOES NOT HAVE SUPPORT FROM THE SPECIAL AUDITORS, CS E OR ANY OTHER QUARTER TO THAT EFFECT WHEREAS THE ASSESSEE H AS RELIED UPON COGENT EVIDENCE AND MATERIAL. WE HOLD THAT THE AO HAS ACTED UPON GROSSLY INADEQUATE MATERIALS AND HIS CON CLUSIONS ARE IN THE REALM OF SUSPICION, CONJECTURES AND SURM ISES ...' 17. IN VIEW OF THE ABOVE LEGAL DECISIONS, IT CAN BE INFERRED THAT THE TRANSACTIONS OF SALE AND PURCHASE UNDERTAKEN BY THE ASSESSEE SHOULD NOT BE REJECTED SIMPLY ON THE BASIS OF SOME UNCORROBORATED STATEMENTS OF A FEW OF THE BROKERS WITHOUT PRODUCIN G ANY EVIDENCE TO PROVE THE SAME. NO ADDITION SHOULD BE MADE IN AN ASSESSMENT 67 U/S.153A WITHOUT ANY MATERIAL BEING FOUND DURING SE ARCH BUT SIMPLY ON PRESUMPTIONS. THIS IS A CASE IN WHICH THE RE IS NO EVIDENCE AGAINST THE RESPONDENT EXCEPT SOME VAGUE, CONFUSING, CONTRADICTORY, SELF SERVING UNSUBSTANTIATED STATEME NT OF WITNESSES FROM WHICH THE ASSESSING OFFICER HAS INFERRED THE C ONCLUSION AGAINST THE ASSESSEE. HON'BLE SUPREME COURT IN DHAK ESHWARI COTTON MILLS LTD. VS. CIT (1954) 261TR 775 (SC), HA S HELD THAT THE INCOME TAX OFFICER IS NOT ENTITLED TO MAKE A PURE G UESS AND MAKE AN ASSESSMENT WITHOUT REFERENCE TO ANY EVIDENCE AND MATERIAL AT ALL. THERE MUST BE SOMETHING MORE THAN SUSPICION TO SUPPORT THE ASSESSMENT. IT WAS HELD THAT A SUSPICION HOWEVER ST RONG MAY NOT TAKE THE PLACE OF PROOF. THEREFORE THE ASSESSMENT M ADE BY THE ASSESSING OFFICER WHICH IS PREDOMINANTLY INFLUENCED BY UNCORROBORATED EVIDENCE DESERVES TO BE SET ASIDE. IN CASE BEFORE US AS AGAINST THE EVIDENCE AND MATERIAL AVAILABLE WITH THE ASSESSEE TO PROVE THE TRANSACTIONS OF LONG TERM CAPITAL GAIN, T HE ASSESSING OFFICER TRIED TO ANALYZE THE TRANSACTIONS OF ONLY T WO SCRIPS NAMELY FAST TRACK ENTERTAINMENT (PARAS 13 TO 24 OF THE ASS ESSMENT ORDER) AND PRANNET INDUSTRIES (PARAS 26 TO 28) AND CONCLUD ED THAT THE TRANSACTIONS OF ALL SCRIPS OF ALL THE ASSESSEES AND FOR ALL THE YEARS WERE NOT GENUINE WHICH IS NOT JUSTIFIED. 18. A SEARCH ASSESSMENT U/S. I53A SHOULD BE EVIDENC E BASED. A SEARCH IS AUTHORIZED TO UNEARTH UNDISCLOSED ASSETS OR TRANSACTIONS RESULTING IN INCOME WHICH ARE NOT RECORDED IN THE B OOKS OF ACCOUNT OF A PERSON. THEREFORE, A SEARCH PUTS IN MOTION THE PROCESS OF ASSESSMENT OF THE UNDISCLOSED INCOME OF A TAX PAYER WHICH IS NOT DISCLOSED TO THE DEPARTMENT. IN OTHER WORDS, ITEMS OF REGULAR ASSESSMENT NORMALLY SHOULD NOT FORM A PART OF A SEA RCH ASSESSMENT U/S. I53A UNLESS THERE IS OTHERWISE CONTRARY ON THE RECORD. VIDE ITS SUBMISSION DATED 04.03.2008/ 24.03.2008 PLACED AT P AGES 69 TO 82 OF THE PAPER BOOK-II, THE ASSESSEE GAVE THE DETAILS OF ALL THE BROKERS, THE SHARES PURCHASED OR SOLD THROUGH THEM AND THE L ONG TERM CAPITAL GAINS OR SHORT TERM CAPITAL GAINS AS THE CA SE MAY BE EARNED IN RESPECT THEREOF. THE SALE PROCEEDS OF SH ARES HAVE BEEN 68 RECORDED IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE AND CAPITAL GAIN ARISING ON THE SAME HAS BEEN SHOWN FOR ALL THE YEARS IN THEIR RESPECTIVE INCOME TAX RETURNS ON WHICH APPROP RIATE TAXES WERE ALSO PAID. THE CHARGING SECTION 69A PROVIDES F OR ADDITION OF UNRECORDED INCOME AND WEALTH WHEN EITHER NO EXPLANA TION IS GIVEN BY THE ASSESSEE OR THE EXPLANATION GIVEN IS NOT UP TO THE SATISFACTION OF THE ASSESSING OFFICER. IN THE PRESE NT CASE, THE ASSESSEE HAS EXPLAINED ITS NATURE AND SOURCE OF ACQ UISITION AND HAS SOLD THE SHARES THROUGH KNOWN REGISTERED BROKERS, R ECEIVED MONEY FROM THEM THROUGH APPROPRIATE BANKING CHANNELS AND RECEIVED CONFIRMATIONS FROM THEM AS WELL. THUS, THE ADDITIO N MADE BY TREATING THE SALE PROCEEDS OF SHARES AS UNEXPLAINED INCOME U/S.69A OF THE ACT IS NOT JUSTIFIED. AGREEING WITH THE CON TENTION OF THE ASSESSEE, THE CIT(A) VIDE ITS APPELLATE ORDER DATED 18.06.2008, HAS RIGHTLY STATED IN PARA 18.1 AND 18.2 AS UNDER (PAGE 74 & 75 OF THE ORDER): '18.1. THUS THERE IS AN INHERENT CONTRADICTION IN T HE IMPUGNED ASSESSMENTS AS FAR AS THE APPLICABILITY OF SECTION 69A IS CONCERNED. A PLAIN AND SIMPLE READING OF SEC TION 69A MAKES IT ABUNDANTLY CLEAR THAT THE PROVISIONS OF TH IS SECTION CANNOT BE APPLIED IN A CASE WHERE THE MONEY, BULLIO N OR JEWELLERY OR ANY OTHER RECEIPT HAS ALREADY BEEN REC ORDED BY THE ASSESSEE IN HIS/HER BOOKS OF ACCOUNTS. THE FACT OF CAPITAL GAIN - WHETHER LONG OR SHORT IS ALREADY RECORDED BY THE ASSESSEE AND THE SAME DOES NOT FALL IN THE CATEGORY OF ITEMS DESCRIBED IN SECTION 69A. PICKING UP THE ENTIRE SALE PROCEEDS ON ACCOUNT OF SHARE TRANSACTIONS SEPARATELY AND ADDING IT U/S 69A WOULD MEAN THAT THE ASSESSEE WAS FOUND IN POSSESSION OF T HIS AMOUNT WHICH WAS NOT DISCLOSED IN HIS BOOKS OF ACCO UNTS; DURING SEARCH IN ASSESSEE'S PREMISES AND IN THE SUB SEQUENT PROCEEDINGS AS WELL, NO SUCH UNDISCLOSED RECEIPTS H AVE BEEN FOUND. THUS, APPLICABILITY OF SECTION 69A BECOMES N ULL AND VOID, AB-INITIO. THIS ALSO IMPLIES THAT ASSESSEE'S CLAIM WITH REGARD TO CAPITAL GAIN IN EACH YEAR REMAINS UNALTER ED AS PER THE COMPUTATION FILED ALONG WITH THE RETURN. 18.2. MOREOVER, THE COMPUTATION OF INCOME FILED BY THE ASSESSEE IN THE ORIGINAL RETURN AS WELL AS IN THE R ETURNS FILED U/S 153A SHOWS THAT THE DAY TRADING PROFIT HAS BEEN INCLUDED IN THE TOTAL TAXABLE INCOME FOR THE RELEVANT YEAR. THE SAME HAS BEEN ACCEPTED BY THE AO WHILE MAKING HIS OWN COMPUT ATION IN THE IMPUGNED ORDERS. THIS CLEARLY ESTABLISHES THE S OURCE OF INVESTMENT IN PURCHASES OF THE RELEVANT YEAR AS CLA IMED BY THE 69 ASSESSEE WHEREAS IN THE DISCUSSIONS ON THE ISSUE OF CAPITAL GAIN THE AO HAS EXPRESSED HIS RESERVATION ABOUT THE ORIGINAL DATE OF PURCHASE AND HAS DOUBTED THESE VERY TRANSAC TIONS WHICH ARE FINANCED THROUGH DAY TRADING PROFIT ONLY, AS STATED ABOVE DAY TRADING PROFITS ARE DECLARED IN EACH YEAR WHEN THE SAME ACCRUED TO THE ASSESSEE. IN THIS MANNER THE AO BLOWS HOT AND COLD AT THE SAME TIME WHICH CANNOT BE ACCEP TED.' PICKING UP THE ENTIRE SALE PROCEEDS ON ACCOUNT OF S HARE TRANSACTIONS SEPARATELY AND ADDING IT U/S.69A WOULD ESTABLISH THAT THE ASSESSEE WAS FOUND IN POSSESSION OF THIS AMOUNT WHICH WAS NOT DISCLOSED IN HIS BOOKS OF ACCOUNT WHILE THE FACT RE MAINS THAT THE CAPITAL GAINS, SHORT TERM AS WELL AS LONG TERM, HAS ALREADY BEEN RECORDED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS. THUS THE PROVISIONS OF SECTION 69A OF THE ACT HAS NOT BEEN J UDICIALLY APPLIED. 18.1. AS STATED ABOVE, THE COMPUTATION OF INCOME F ILED BY THE ASSESSEE IN THE ORIGINAL RETURN AS WELL AS IN THE R ETURNS FILED U/S.L53A REVEALS THAT THE DAY TRADING PROFIT HAS BE EN INCLUDED IN THE TOTAL TAXABLE INCOME FOR THE ASSESSMENT YEARS U NDER CONSIDERATION. THIS DAY TRADING PROFIT HAS BEEN ACC EPTED BY THE ASSESSING OFFICER YEAR AFTER YEAR AND NO RESERVATIO N HAS EVER BEEN MADE BY THE ASSESSING OFFICER REGARDING THIS PROFIT . THIS DAY TRADING PROFIT CLEARLY ESTABLISHES THE SOURCE OF PURCHASES OF INVESTMENTS OF EACH OF THE RELEVANT YEAR AS CLAIMED BY THE ASSESSE E. IN DISCUSSIONS ON THE ISSUE OF CAPITAL GAIN THE ASSESSING OFFICER HAS EXPRESSED HIS RESERVATION ABOUT THE SAME AND HAS DOUBTED THESE VE RY TRANSACTIONS WHICH ARE FINANCED THROUGH DAY TRADING PROFIT ONLY. IN THIS MANNER THE ASSESSING OFFICER TAKES STAND WHICH IS CONTRARY TO THE MATERIAL ON RECORD. ALL THE DOCUMENTS SUPPORTIN G THE PURCHASE AND SALES OF SHARES AS CLAIMED BY THE ASSESSEE IN I TS RETURN OF INCOME WHETHER PERTAINING TO CAPITAL GAINS OR TO IN COME FROM OTHER SOURCES, SHARE DEALING PROFIT, WERE SUBMITTED BEFOR E THE DEPARTMENT WHICH SHOULD HAVE BEEN READ AND ACCEPTED AS A WHOLE . THE ASSESSEE HAS FILED VOLUMINOUS EVIDENCES BEFORE THE ASSESSING OFFICER SUCH AS BROKER CONTRACT NOTES, LETTERS RECE IVED FROM THE COMPANIES INTIMATING THE TRANSFER OF SHARE CERTIFIC ATES, BANK ACCOUNTS EVIDENCING THE PAYMENTS TO THE BROKER, DAY TRADING PROFIT 70 BILLS EVIDENCING THE PAYMENTS SETTLED AGAINST THE D AY TRADING PROFITS, DEMAT ACCOUNTS. COPIES OF THE BILLS OF DAY TRADING PROFIT SHOWN AS INCOME FROM OTHER SOURCES FOR VARIOUS YEAR S WERE ATTACHED AT PAGES 80 TO 171, 225 TO 254 AND 307 TO 331 OF THE PAPER BOOK-I. 18.2. FEW OF THE BROKERS EMPLOYED FOR THE DAY TRAD ING OF SHARES WERE THE SAME AS THE ONES WHO BOUGHT AND SOLD THE S HARES HELD AS INVESTMENT. THE ASSESSING OFFICER WAS NOT JUSTIFIED IN PLACING PART RELIANCE ON THE SAME AND ADOPTING PICK AND CHOOSE P OLICY TO MAKE ADDITIONS OF THE AMOUNT OF SALE PROCEEDS REALIZED O N ACCOUNT OF TRANSACTION IN SHARES LEADING TO CAPITAL GAINS IN T HE ABSENCE OF COGENT MATERIAL IN SUPPORT OF UNDERTAKING SUCH AN E XERCISE. WHERE THE SHARE DEALING PROFIT WERE HELD AS GENUINE BY TH E ASSESSING OFFICER, HE SHOULD HAVE ALSO ACCEPTED THE CAPITAL G AINS REFLECTED IN THE VERY SAME BOOKS OF ACCOUNTS. WHILE ARRIVING AT AN ADVERSE CONCLUSION AGAINST THE ASSESSEE, THE ASSESSING OFFI CER SEEMS TO BE DELIBERATELY RELIED ONLY ON THOSE EVIDENCES AND ENQ UIRY RESULTS WHICH WERE AGAINST THE ASSESSEE WHILE DILUTING THE SIGNIFICANCE OF OTHER EVIDENCES WHICH WERE IN FAVOUR OF THE ASSESSE E. 18.3. IT IS SETTLED LEGAL POSITION THAT SEIZED MAT ERIAL HAS TO BE READ AND ACCEPTED AS A WHOLE AND IT IS NOT PERMISSI BLE TO PICK AND CHOOSE OR MAKE FURTHER ESTIMATE THEREFROM UNLESS AN D UNTIL THERE IS COGENT EVIDENCE IN SUPPORT OF UNDERTAKING SUCH AN E XERCISE. THE SETTLED PRINCIPLE IS THAT DOCUMENTS FOUND IN SEARCH SHOULD BE TREATED AS GENUINE WITH RESPECT TO ALL ENTRIES RECO RDED THEREIN. THE REVENUE IS NOT JUSTIFIED IN TAKING A VIEW THAT ONLY PART OF THE CONTENTS IS CORRECT. ENTIRE DOCUMENT SHOULD BE REA D AS A WHOLE AND CONTENTS OF THE DOCUMENTS SHOULD BE TREATED AS CORRECT OR REJECTED AS A WHOLE. THEREFORE, WHEN THE DEPARTMEN T CAN ACCEPT TRANSACTIONS RELATING TO SHARE TRADING PROFIT, THER E IS NO REASON AS TO WHY IT SHOULD NOT ACCEPT THE TRANSACTIONS RELATING TO CAPITAL GAINS. THE ITAT MUMBAI BENCH IN THE CASE OF SHRI BHAGVANDA S GORDHANDAS VS. DCIT IN ITA.NO.5201/MUM/96 HAS HELD THAT A BARE 71 STATEMENT OF A DEPONENT MAY NOT JUSTIFIABLY BE TREA TED AS SUFFICIENT ENOUGH TO FASTEN A LIABILITY ON ANOTHER PERSON, SAY ASSESSEE, WHEN THAT ANOTHER PERSON IS DENYING THE FACTS CONTAINED IN THAT STATEMENT AND IS ALLEGING THE SAME TO BE INCORRECT AND THAT A SATISFACTORY/CONVINCING CORROBORATION OF THE SAID S TATEMENT, BY A RELIABLE EVIDENCE, IS ESSENTIALLY NEEDED TO JUSTIFI ABLY BASE THE ADDITION THEREON. THIS TESTIMONY OF A WITNESS CANN OT BE RELIED UPON INDEPENDENT OF ANY ANOTHER CORROBORATIVE EVIDENCE, WHICH IS NOT JUSTIFIED. UNLESS STATEMENTS ARE COUNTERED OR THEY HAVE BEEN PUT TO CROSS EXAMINATION AND THEIR STATEMENTS HAVE BEEN SU BSTANTIATED WITH DOCUMENTARY EVIDENCE, IT WOULD BE UNREASONABLE TO PLACE RELIANCE ON SUCH STATEMENTS. THE ASSESSING OFFICER HAS PLACED UNDUE RELIANCE ON THE STATEMENTS OF THE BROKERS WHI CH WERE RECORDED BEHIND THE BACK OF THE ASSESSEE WITHOUT AL LOWING THEM TO CROSS EXAMINE THEM. 18.4. IN VIEW OF THE ABOVE, THE CIT(A) HAS RIGHTLY CONCLUDED THAT THE ASSESSING OFFICER HAS ARBITRARILY ADOPTED A PICK AND CHOOSE POLICY IN RESPECT OF BOTH THE STATEMENTS RECORDED O F THE BROKERS AS WELL AS IN TREATING THE SHARE TRADING PROFIT AS GEN UINE WHILE NOT ACCEPTING THE CAPITAL GAINS EARNED BY THE ASSESSEE IN RESPECT OF THE INVESTMENT MADE IN SHARES. 18.5. THE ASSESSING OFFICER HAS ADDED THE ENTIRE S ALE PROCEEDS OF SHARES AS UNDISCLOSED INCOME OF THE ASSESSEE. WH EN THE LONG TERM CAPITAL GAINS EMANATING FROM THE SAID SALE PRO CEEDS HAVE BEEN OFFERED FOR TAXATION, HOW CAN THE ENTIRE SALE PROCEEDS BE ADDED AGAIN TO THE RETURNED INCOME. THIS WOULD RESULT IN DOUBLE TAXATION OF THE AMOUNT OF TAX ON THE LONG TERM CAPITAL GAINS . THUS, WHAT CAN BE TREATED AS UNDISCLOSED INCOME OF AN ASSESSEE IS NOT THE ENTIRE SALE PROCEEDS BUT ONLY TO THE EXTENT OF THE ESTIMATED PROFITS EMBEDDED IN THE SALES. THE SALE PROCEEDS OF SHARES HAS BEEN RECORDED IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEES. THE CAPITAL GAIN ARISING ON THE SAME HAS BEEN SHOWN FOR ALL THE YEARS IN THEIR RESPECTIVE INCOME TAX RETURNS AND APPROPRIATE S TAXES WERE 72 PAID ON THE SAME. THE CHARGING SECTION 69A PROVIDES FOR ADDITION OF ONLY UNRECORDED INCOME AND WEALTH AND WHEN NO EXPLA NATION IS GIVEN BY THE APPELLANT OR THE EXPLANATION GIVEN BY ASSESSEE IS NOT UP TO THE SATISFACTION OF THE ASSESSING OFFICER REG ARDING ITS NATURE AND SOURCE OF ACQUISITION. THE ASSESSEE HAS RECORDE D THE SALE PROCEEDS AND PURCHASE CONSIDERATION IN THEIR BOOKS OF ACCOUNTS AND VERY WELL EXPLAINED ITS NATURE AND SOURCE OF AC QUISITION. ASSESSEE GROUP HAVE SOLD THE SHARES THROUGH REGISTE RED BROKERS WHO ARE KNOWN AND IDENTIFIABLE INCOME TAX PAYEE, RE CEIVED MONEY FROM THEM THROUGH APPROPRIATE BANKING CHANNELS WHIC H ARE DULY CONFIRMED BY THEM. SUCH ADDITIONS MADE BY TREATING THE SALE PROCEEDS OF SHARES AS UNEXPLAINED INCOME AND NOT RE CORDED IN BOOKS OF ACCOUNTS AND ADDING IT U/S. 69A OF THE ACT IS NOT JUSTIFIED. 18.6. THE HON'BLE MP HIGH COURT IN THE CASE OF MA N MOHAN SADANI VS. CIT (2008) 304 ITR 52 (MP) HAS HELD THAT THE ENTIRE SALE PROCEEDS CANNOT BE REGARDED AS PROFIT OR TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE. ON THE CONTRARY, IT IS THE NET PROFIT RATE WHICH HAS TO BE ADOPTED IN SUCH CASES. FURTHER HON 'BLE MP HIGH COURT IN CIT VS. BALCHAND AJIT KUMAR (2003) 263 ITR 610 (MP) HAS TAKEN SIMILAR VIEW. THE HON'BLE GUJARAT HIGH COURT IN CIT VS. PRESIDENT INDUSTRIES (2002) 258 ITR 654 (GUJ) HELD THAT THE AMOUNT OF SALES COULD NOT REPRESENT THE INCOME OF THE ASSE SSEE WHO HAD NOT DISCLOSED THE SALES. THE SALES ONLY REPRESENTED THE PRICE RECEIVED BY THE SELLER OF THE GOODS; ONLY THE REALISATION OF TH E EXCESS OVER THE COST INCURRED COULD FORM PART OF THE PROFIT INCLUDE D IN THE CONSIDERATION FOR THE SALES. SINCE THERE WAS NO FIN DING TO THE EFFECT THAT INVESTMENT BY WAY OF INCURRING THE COST IN ACQ UIRING THE GOODS WHICH WERE SOLD HAD BEEN MADE BY THE ASSESSEE AND T HAT THAT INVESTMENT WAS ALSO NOT DISCLOSED, ONLY THE EXCESS OVER THE COST INCURRED COULD BE TREATED AS PROFIT. IN VIEW OF THE ABOVE DISCUSSION AND THE CASE LAWS R ELIED UPON, IT CAN BE INFERRED THAT THE APPROACH ADOPTED BY THE ASSESSING 73 OFFICER IN ADDING THE ENTIRE SALE PROCEEDS OF SHARE S AS UNDISCLOSED INCOME OF THE ASSESSEE IS NOT JUSTIFIED. 19. AN ALTERNATIVE ATTEMPT HAS BEEN MADE BY THE AS SESSING OFFICER TO TAX THE PROFIT ARISING OUT OF SALE OF SH ARES AS AN ADVENTURE IN THE NATURE OF TRADE WHICH IS BASED ON WRONG ASSU MPTION OF FACTS AND CONTRARY TO THE PRINCIPLES LAID DOWN ON THE ISS UE. INITIALLY THE DEPARTMENT WAS FULLY SATISFIED WITH THE TREATMENT O F THESE ALLEGED TRANSACTIONS AS CAPITAL GAIN IN THE ORIGINAL ASSESS MENTS PRIOR TO SEARCH. FURTHER, SEARCH PER SE IN THE PREMISES OF T HE ASSESSEE GROUP DID NOT REVEAL ANYTHING TO JUSTIFY VIEWING OF THESE TRANSACTIONS WITH SUSPICION. THE ASSESSING OFFICERS ENTIRE ENDEAVOUR WAS DIRECTED TOWARDS THE ISSUE OF CAPITAL GAIN ALTHOUGH HE SUBJE CTED THE SAME TO TAX U/S.69A BY TREATING THE SHARE TRANSACTIONS AS B OGUS RELYING ON THE STATEMENTS MADE BY THE BROKERS WHICH HAVE BEEN DISCUSSED EARLIER. ALL THIS EXERCISE OF VERIFICATION OF SHARE TRANSACTIONS WAS UNDERTAKEN WITH AN APPROACH TO BRING THE CAPITAL GA IN UNDER A PARTICULAR HEAD THAT IS LIABLE TO BE TAXED AT THE M AXIMUM RATE. THE ALTERNATE PROPOSITION MADE BY THE ASSESSING OFFICER TO NOW TREAT THE SAME AS ADVENTURE IN THE NATURE OF TRADE SHOWS ABSO LUTE LACK OF CONVICTION ON HIS PART. THE ASSESSEE VIDE HIS SUBM ISSION DATED 07.05.2008, ATTACHED AS PAGES 86 TO 97 OF THE PAPER BOOK-II, EXPLAINED THE CONCEPT OF ADVENTURE IN THE NATURE OF TRADE AND HOW IT IS NOT APPLICABLE TO THE ASSESSES OF THE GROUP AS U NDER: A) THE APPELLANTS IN THIS GROUP ARE INDIVIDUALS C OMPRISING ALSO OF THE LADY MEMBERS OF THE FAMILY AND HINDU UNDIVIDED FAMILIES OF VARIOUS MEMBERS. B) NONE OF THE FAMILY MEMBERS ARE DEALERS IN SHAR ES. C) THE ACTIVITY IS NOT IN THE USUAL LINE OF BUSIN ESS OF THE GROUP. D) THE INVESTMENT WAS MADE OUT OF THEIR RESPECTIV E CAPITAL ACCOUNTS. E) THE INVESTMENTS WERE MADE BY THEM AS ORDINARY I NVESTORS. F) IN ALL CASES DELIVERY OF SHARES WERE TAKEN AND TRANSACTIONS WERE NOT SPECULATIVE IN NATURE. G) THE HOLDINGS HAD CONTINUED FOR A FAIRLY LONG T IME. H) IN THE BOOKS AND RETURNS FILED, THE SHARES W ERE SHOWN AS INVESTMENT AND NOT AS STOCK IN TRADE WHICH WAS ACCE PTED BY THE DEPARTMENT FOR A LONG PERIOD OF TIME. SINCE THE 74 AMOUNTS RECEIVED WERE REALIZATION OF CAPITAL, IT WA S CLEARLY A CAPITAL RECEIPT. I) THERE WAS NO CONCEPT OF VENTURE OR ORGANIZED TR ADE ATTACHED WITH THE ACTIVITY. THERE WAS NO ORGANIZATI ON ASSOCIATED WITH TRADE. A BUSINESS REQUIRES GREATER ACTIVITY AND A GREATER ORGANIZATION WHICH WERE CONSPICUOUSLY ABSENT IN THESE CASES. J) THERE IS NO ELEMENT OF ADVENTURE OR TRADE IN TH E SHARES TRANSACTION. K) ALTHOUGH THE DEPARTMENT CARRIED OUT SEARCH, NO EVIDENCE WAS FOUND TO INDICATE THAT THE TRANSACTIONS WERE CA RRIED OUT IN THE CAPACITY OF A TRADER. 19.1. ALL THESE FACTORS HAVE TO BE CUMULATIVELY TA KEN INTO CONSIDERATION IN ORDER TO DECIDE WHETHER THE NATURE OF TRANSACTIONS WERE SUCH THAT IT WOULD FALL UNDER THE HEAD OF ADVE NTURE IN THE NATURE OF TRADE. THE HON'BLE SUPREME COURT IN THE C ASE OF KARNANI PROPERTIES LTD. (1971) 82 ITR 547 HAS HELD THAT ACT IVITIES CARRIED ON CONTINUOUSLY IN AN ORGANIZED MANNER, WITH A SET PUR POSE AND WITH A VIEW TO EARN PROFITS HAVE TO BE CONSIDERED AS BUS INESS ACTIVITIES. THEREFORE THE FOUR ELEMENTS WHICH MUST BE PRESENT I N ORDER TO CLASSIFY AN ACTIVITY AS A BUSINESS ACTIVITY ARE (A) IT MUST BE CONTINUOUS (B) IT MUST BE CARRIED OUT IN AN ORGANIZED MANNER (C) WITH A SET PURPOSE AND (D) TO EARN PROFITS. 19.2. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF TUSHAR TANNA VS. CIT (2006) 284 ITR 453 (BOM) HAS LAID DOW N CERTAIN PRINCIPLES TO FIND OUT WHETHER OR NOT THE TRANSACTI ON IN QUESTION IS AN ADVENTURE IN THE NATURE OF TRADE. THESE PRINCIPL ES ARE AS FOLLOWS: (I) NO PRINCIPLE CAN BE LAID DOWN IN DECIDING WHET HER A PERSON IS INDULGING IN BUSINESS IN THE NATURE OF TR ADE, (II) WHETHER THE TRANSACTION IS AN ISOLATED ONE OR FORMS PART OF A SERIES OF TRANSACTIONS SHOWING THE TRANSACTION TO BE IN THE NATURE OF ADVENTURE IN TRADE, (III) THE FACT THAT THE PROPERTY WAS SOLD WITHIN A SHORT TIME BY ITSELF DOES NOT INDICATE THAT THE TRANSACTION WAS I N THE NATURE OF TRADE, (IV) WHETHER PROPERTY WAS PURCHASED WITH THE INTEN TION OF INVESTMENT AND NOT AN ADVENTURE IN THE NATURE OF TR ADE, AND 75 (V) IT IS NOT A CASE MERELY ON THE FACTS AND CIRCU MSTANCES OF THE CASE BUT TO CONSIDER THEIR DISTINCTIVE CHARACTE R IN EACH CASE. 19.3. IN VIEW OF THE ABOVE PRINCIPLES IT CAN BE SA ID THAT IN THE PRESENT CASE THE SHARES ACQUIRED BY THE ASSESSEE WE RE SHOWN AS INVESTMENT AND HE WAS TREATED AS AN INVESTOR IN THE PAST. THE TRANSACTIONS INVOLVED IN SHARES WERE ISOLATED ONES, DID NOT SHOW ANY CONTINUITY AND DID NOT FORM PART OF A SERIES OF TRANSACTIONS. NONE OF THE SHARE TRANSACTIONS FORMED A PART OF THE LINE OF BUSINESS PURSUED BY THE ASSESSEE. THE INTENTION WAS PURELY O F INVESTMENT AND THE FACT THAT THE SHARES WERE SOLD WITHIN A SHO RT TIME DID NOT INDICATE THAT THE TRANSACTION WAS IN THE NATURE OF TRADE. THERE WAS NO MATERIAL TO SUGGEST THAT THE MOTIVE WAS TO SELL THE SHARES AND EARN SOME QUICK PROFIT. THEREFORE, THE TRANSACTIONS WERE NOT AN ADVENTURE IN THE NATURE OF TRADE AND THE PROFIT ARI SING FROM SALE OF THE SHARES WAS NOT ASSESSABLE AS INCOME FROM BUSINE SS. 19.4. IN THIS BACKGROUND, IT IS CLEAR THAT THE ASS ESSING OFFICER WAS NOT ABLE TO ESTABLISH THAT THE ASSESSEES WERE E NGAGED IN ADVENTURE IN THE NATURE OF TRADE. THE CIT(A) WHILE REJECTING THE PROPOSITIONS MADE BY THE ASSESSING OFFICER, TO TREA T THE SHARE TRANSACTIONS AS AN ADVENTURE IN THE NATURE OF TRADE HAS STATED IN PARA 19.3 OF HIS ORDER AS UNDER (PAGES 85 & 86): 'I WOULD REITERATE THAT THE AO, IN THE INSTANT CASE , WAS UNDULY GOVERNED BY HIS, WISH TO BRING THE ENTIRE SALE RECE IPTS OF SHARES UNDER THE MAXIMUM RATE OF TAX. IN THE PROCESS HE HA S IGNORED THE FACT THAT THE INCOME TAX ACT LAYS DOWN SPECIFIC LAWS/METHOD TO COMPUTE DIFFERENT HEADS OF INCOME WI TH VARYING TAX SLABS/RATES. ONCE THE AO DECIDED TO APP ROACH THE ISSUE WITH THIS MIND SET HE STARTED LOOKING FOR VAR IOUS METHODS TO ACHIEVE THIS PURPOSE. ORIGINALLY IN THE ASSESSMENT HE TAXED THE ENTIRE RECEIPTS AS UNEXPLAINED RECEIPT S U/S. 69A WHICH IS LEGALLY NOT TENABLE. THEREAFTER, HE CAME U P WITH A NEW THEORY OF ASSESSMENT SO THAT IF HIS PROPOSITION TO TAX THE RECEIPT AT MAXIMUM RATE U/S. 69A FAILS HE CAN STILL RETRIEVE THE ASSESSMENT AT MAXIMUM RATE BY RESORTING TO THE ALTE RNATE METHOD OF TAXING THE SAME AS BUSINESS INCOME ARISIN G FROM ADVENTURE IN THE NATURE OF TRADE. LOOKING TO THE HU GE AMOUNT OF CAPITAL GAINS SHOWN BY THE ASSESSES OF THIS GROU P HE WAS 76 TEMPTED TO BRING IT TO THE MAXIMUM TAX BY TREATING THE WHOLE AMOUNT AS NOT GENUINE. BUT THIS EXERCISE, AS DEMO NSTRATED ABOVE WHILE DISCUSSING FACTUAL ASPECTS OF THE SAME, IS BASED ON INCOMPLETE AND INCORRECT APPRECIATION OF FACTS A ND DOCUMENTARY EVIDENCE AND FAILS MISERABLY. AO'S ATT EMPTS TO EXAMINE THE MATTER AFRESH AT APPELLATE STAGE FROM A N ENTIRELY NEW ANGLE IS BEYOND PERMISSIBLE LIMITS UNDER THE AC T. THE AO MAKING ORIGINAL ADDITION U/S 69A MADE A TECHNICAL A ND LEGAL MISTAKE. HIS ALTERNATIVE PROPOSITION FOR TAXING TH E SAME AS BUSINESS INCOME. THIS SHOWS THAT THE AO IS NOT CON FIDENT OF EITHER OF HIS MOVES MAKING THEM SELF-EFFACING AND M UTUALLY DESTRUCTIVE. I MAY ALSO ADD, THOUGH AT THE COST OF REPETITION, T HAT INITIALLY THE DEPARTMENT WAS FULLY SATISFIED WITH THE ASSESSE ES' TREATMENT OF THESE TRANSACTIONS AS CAPITAL GAIN AS IT HAD ACCEPTED ITS VERY CLAIM WITH REGARD TO SAME IN THE ORIGINAL ASSESSMENTS PRIOR TO SEARCH IN APPELLANT-GROUP. THE ORIGINAL ASSESSMENTS WERE FRAMED U/S 143(1) OF THE ACT. EVEN IF NO SCRUTINY WAS MADE IN THESE CASES THERE WAS NO BAR O N THE DEPARTMENT TO SCRUTINISE THE SAME IF IT WAS NOT FOU ND IN ORDER. THIS SHOWS THAT THE VERY CLAIM OF THE ENTIRE GROUP WITH REGARD TO HUGE LTCG HAD THE APPROVAL OF THE IT DEPARTMENT AND IT WAS NEVER FROWNED UPON. MOREOVER, SEARCH PER SE IN APPELLANT- GROUP DID NOT REVEAL ANYTHING TO JUSTIFY VIEWING OF THESE TRANSACTIONS WITH SUSPICION. ALL THIS EXERCISE OF V ERIFICATION OF SHARE TRANSACTIONS WAS UNDERTAKEN WITH A DIFFERENT APPROACH, I.E. TO BRING THE WHOPPING AMOUNT OF CAPITAL GAIN U NDER A PARTICULAR HEAD THAT IS LIABLE TO BE TAXED AT THE M AXIMUM RATE. IN THE FACTS OF THE CASE AS BROUGHT OUT ABOVE AND I N VIEW OF LEGAL POSITION SUFFICIENTLY DISCUSSED BY ME THIS AP PROACH OF THE AO CANNOT BE ACCEPTED.' 19.5. WE FIND THE VARIOUS ISSUES RAISED BY THE REV ENUE HAVE ALSO BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN THE FOLLOWING DECISIONS RELIED ON BY THE LD. AUTHORISED REPRESENT ATIVE. WE FIND THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS . SMT.JAMNADEVI AGRAWAL REPORTED IN (2010) 328 ITR 65 6 (BOM.), HAS HELD AS UNDER: THE ASSESSEE PURCHASED 30,000 SHARES ON APRIL 8, 19 99 AND SOLD THEM ON JULY 7, 14, 21, 2000. THE ASSESSEE OF FERED LONG- TERM CAPITAL GAINS ON SALE OF SHARES WHICH WAS ACCE PTED BY THE ASSESSING OFFICER IN THE RESPECTIVE ASSESSMENTS. S UBSEQUENTLY, THERE WAS A SEARCH ACTION IN THE CASE OF VARIOUS AS SESSEES BELONGING TO A GROUP AND THE GROUP OFFERED ADDITION AL INCOME OF RS.2 CRORES, OUT OF WHICH RS.3 LAKHS WERE OFFERED I N THE HANDS OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2004-05 AND RS.7 LAKHS IN THE ASSESSMENT YEAR 2005-06. THE ASSESSING OFFICER 77 ON THE BASIS OF THE SEIZED MATERIAL ISSUED NOTICE U NDER SECTION 153A OF THE INCOME TAX ACT, 1961, FOR ASSESSMENT Y EAR 2001- 02 AND SUBSEQUENTLY PASSED AN ASSESSMENT ORDER UNDE R SECTION 153A READ WITH SECTION 143(3) COMPUTING THE TOTAL INCOME DISALLOWING THE LONG-TERM CAPITAL GAIN AND A DDING THE ENTIRE SALE PROCEEDS RECEIVED ON SALE OF SHARES AMO UNTING TO RS.10,14,324 AS INCOME FROM UNDISCLOSED SOURCES UND ER SECTION 68 OF THE ACT. THE COMMISSIONER(APPEALS) HELD THAT SECTION 68 OF THE ACT WAS NOT APPLICABLE TO THE FACTS OF THE C ASE AND ACCORDINGLY DELETED THE ADDITION. THE APPEAL FILED AGAINST THIS ORDER WAS DISMISSED BY THE TRIBUNAL. ON APPEAL: HELD, DISMISSING THE APPEALS, THAT THE FACT THAT TH E ASSESSEES IN THE GROUP HAD PURCHASED AND SOLD SHARES OF SIMILAR COMPANIES THROUGH THE SAME BROKER COULD NOT BE A GROUND TO HO LD THAT THE TRANSACTIONS WERE SHAM AND BOGUS, ESPECIALLY WHEN DOCUMENTARY EVIDENCE WAS PRODUCED TO ESTABLISH THE GENUINENESS OF THE CLAIM. THE SHARES WERE PURCHASE D BY THE ASSESSEES ON THE RESPECTIVE DATES AND THE COMPANY H AD CONFIRMED TO HAVE HANDED OVER THE SHARES PURCHASED BY THE ASSESSEES. SIMILARLY, THE SALE OF THE SHARES TO TH E RESPECTIVE BUYERS WAS ALSO ESTABLISHED BY PRODUCING DOCUMENTAR Y EVIDENCE. IT WAS TRUE THAT SOME OF THE TRANSACTION S WERE OFF- MARKET TRANSACTIONS. HOWEVER, THE PURCHASE AND SAL E PRICE OF THE SHARES DECLARED BY THE ASSESSEES WERE IN CONFOR MITY WITH THE MARKET RATES PREVAILING ON THE RESPECTIVE DATES AS WAS SEEN FROM THE DOCUMENTS FURNISHED BY THE ASSESSEES. THE REFORE, THE FACT THAT SOME OF THE TRANSACTIONS WERE OFF-MARKET TRANSACTIONS COULD NOT BE AGROUND TO TREAT THE TRANSACTIONS AS S HAM TRANSACTIONS. ON A PERUSAL OF THE DOCUMENTARY EVID ENCE, THE TRIBUNAL HAD ARRIVED AT A FINDING OF FACT THAT THE TRANSACTIONS WERE GENUINE. THE TRIBUNAL HAD FURTHER RECORDED A FINDING OF FACT THAT THE CASH CREDITS IN THE BANK ACCOUNTS OF SOME OF THE BUYERS OF SHARES COULD NOT BE LINKED TO THE ASSESSE ES. THERE WAS NO SUBSTANTIAL QUESTION OF LAW. 19.5.1. WE FIND THE HON'BLE JHARKHAND HIGH COURT IN THE CASE OF CIT VS. ARUN KUMAR AGARWAL & ORS., REPORTED IN 2012 -TIOL-603- HC-JHARKHAND-IT, HAS HELD AS UNDER: 10. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARN ED COUNSEL FOR THE PARTIES AND WE ARE OF THE CONSIDERE D OPINION THAT THE LEARNED ASSESSING OFFICER WAS MUCH INFLUEN CED BY THE ENQUIRY REPORT WHICH MAY HAS BEEN BROUGHT ON RECORD BY THE EFFORTS OF THE ASSESSING OFFICER AND THAT ENQUIRY R EPORT WAS PREPARED BY THE SEBI AND FROM THE OBSERVATIONS MADE BY THE TAX APPEAL NO.4 OF 2011 WITH ANALOGOUS CASE ASSESSI NG OFFICER HIMSELF, IT IS CLEAR THAT AFTER GETTING THAT ENQUIR Y REPORT, THE SEBI PRIMA FACIE FOUND INVOLVEMENT OF SOME OF THE SHARE BROKERS IN UNFAIR TRADE PRACTICES. EVEN IN A CASE WHERE THE S HARE BROKER WAS FOUND INVOLVED IN UNFAIR TRADE PRACTICE AND WAS INVOLVED IN 78 LOWERING AND RISING OF THE SHARE PRICE, AND ANY PER SON, WHO HIMSELF IS NOT INVOLVED IN THAT TYPE OF TRANSACTION , IF PURCHASED THE SHARE FROM THAT BROKER INNOCENTLY AND BONAFIDEL Y AND IF HE SHOW HIS BONAFIDE IN TRANSACTION BY SHOWING RELEVAN T MATERIAL, FACTS AND CIRCUMSTANCES AND DOCUMENTS, THEN MERELY ON THE BASIS OF THE REASON THAT SHARE BROKER WAS INVOLVED IN DEALING IN THE SHARE OF A PARTICULAR COMPANY IN COLLUSION WITH OTHERS OR IN THE MANNER OF UNFAIR TRADE PRACTICES AGAINST THE NO RMS OF S.E.B.I. AND STOCK EXCHANGE, THEN MERELY BECAUSE OF THAT FACT A PERSON WHO BONAFIDELY ENTERED INTO SHARE TRANSACTIO N OF THAT COMPANY THROUGH SUCH BROKER THEN ONLY BY MERE ASSUM PTION SUCH TRANSACTIONS CANNOT BE HELD TO BE A SHAM TRANS ACTION. FACT OF TINTED BROKER MAY BE RELEVANT FOR SUSPICION BUT IT ALONE NECESSARILY DOES LEAD TO CONCLUSION OF ALL TRANSACT ION OF THAT BROKER AS TINTED. IN SUCH CIRCUMSTANCES, FURTHER E NQUIRY IS NEEDED AND THAT IS FOR INDIVIDUAL CASE. SUCH FURTH ER ENQUIRY WAS NOT CONDUCTED IN THAT CASE. 11. AT THIS JUNCTION, IT WOULD BE RELEVANT TO MENTI ON HERE THAT IT IS NOT DISPUTED BY THE REVENUE BEFORE US THAT THE S HARES OF THESE ASSESSEES WERE ALREADY SHOWN IN THE EARLIER B ALANCE SHEET SUBMITTED BY THE ASSESSEES, AND THEREFORE, IN THAT SITUATION, HOW THE REVENUE CONDEMNED THE TRANSACTIO N EVEN ON THE GROUND OF STEEP RISE IN THE SHARE. ... 19.5.2. SIMILARLY, WE FIND THAT PUNE BENCH OF ITAT IN THE CASE OF ITO VS. AJAY SHANTILAL LALWANI REPORTED IN (2012) 1 45 TTJ 511, HAS HELD AS UNDER: ADMITTEDLY, IN THE PRESENT CASE, THE ASSESSEE HAS P URCHASED THE SHARES OUTSIDE STOCK EXCHANGE DIRECTLY FROM THE BROKER IN PHYSICAL FORM THOUGH D-MAT ACCOUNT WAS OPENED ON BE LATED DATE WITH THIS EXPLANATION THAT AT THE TIME OF PURC HASE OF SHARES, HE WAS NOT HAVING D-MAT ACCOUNT AND ON OPEN ING OF D- MAT ACCOUNT, THE SHARES WERE TRANSFERRED TO THE SAM E. BEFORE THE AO COPIES OF THE SHARE CERTIFICATES HELD BY ASS ESSEE IN PHYSICAL FORM WERE PROVIDED WHICH CONTAINED COMPLET E RELEVANT DETAILS SUCH AS ADDRESS OF REGISTERED OFFICE OF THE COMPANY, SIGNATURES OF THE AUTHORIZED SIGNATORY ALONG WITH T WO DIRECTORS SIGNATURES, VALUE OF SHARES WITH PAID-UP AMOUNT OF SHARES PURCHASED IN EACH COMPANY, DATE OF ISSUE OF CERTIFI CATE, CERTIFICATE NUMBER, REGISTERED FOLIO, NUMBER OF SHA RES WITH THEIR DISTINCTIVE NUMBERS, DATE OF TRANSFER OF SHARES IN THE NAME OF ASSESSEE AND ALSO COPIES OF CONTRACT NOTES ALONG WI TH BILLS ISSUED BY SHARE BROKER. THE ASSESSEE ALSO FURNISHE D RETURNS OF INCOME ALONG WITH BALANCE SHEET FOR THE ASST. YRS. 2004-05 AND 2005-06 DURING WHICH PERIOD, ASSESSEE CLAIMED TO HA VE PURCHASED THOSE SHARES IN QUESTION, COPY OF CONTRAC T NOTES ISSUED BY THE BROKER AND CONFIRMATIONS GIVEN BY S.L TD. AND BY BROKER. MERELY BECAUSE THERE WAS SUBSTANTIAL DELAY IN TRANSFERRING THE SHARES INTO D-MAT ACCOUNT FROM THE DATE OF 79 PURCHASE AND THE TRANSACTIONS NOT ROUTED THROUGH CA LCUTTA STOCK EXCHANGE, THE AO WAS NOT JUSTIFIED IN DOUBTIN G THE DECLARED DATE OF PURCHASE OF THE SHARES IGNORING TH E ABOVE EVIDENCES. IN OFF MARKET TRANSACTION IN SHARES, AN Y ENQUIRY FROM THE STOCK EXCHANGE WILL NOT YIELD RESULT IN FA VOUR OF REVENUE. REVENUE HAS TO SEE WHETHER THE SALE HAS B EEN EFFECTED OR NOT AS PER THE ACCEPTANCE AND ADMISSION OF THE RESPECTIVE STOCK BROKER. UNDER THESE CIRCUMSTANCES , THE FIRST APPELLATE ORDER IS SET ASIDE TO THIS EXTENT THAT SH ARES IN QUESTION WERE NOT PURCHASED ON THE DECLARED DATES AND THE AO IS DIRECTED TO ALLOW THE CLAIMED EXEMPTION UNDER S.10( 38) ON THE LONG-TERM CAPITAL GAIN SHOWN BY THE ASSESSEE ON THO SE SHARES. LIKEWISE NO INFIRMITY IS FOUND IN THE FIRST APPELLA TE ORDER WHEREBY THE CIT(A) HAS RIGHTLY ACCEPTED THE COST OF PURCHASE/ACQUISITION OF SHARES AS STATED BY THE ASS ESSEE. THE SAME IS UPHELD. 19.5.3. WE FIND THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF SHRI JAFFERALI K RATTONSEY VS. DCIT REPORTED IN 201 2-TIOL-236- ITAT-MUM, HAS HELD AS UNDER: 9. 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 AS SESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BE FORE US. IN THE INSTANT CASE THE A.O. MADE ADDITION OF RS.5,09, 25,802/- AS UNEXPLAINED CASH CREDIT HOLDING THE SALE OF SHARES BY THE ASSESSEE AS BOGUS. WHILE DOING SO HE RELIED HEAVILY ON THE STATEMENT GIVEN BY MR. MUKESH CHOKSI WHEREIN HE HAS STATED THAT THE TRANSACTIONS OF PURCHASE OF SHARES ARE NOT CARRIED OUT THROUGH THEM AND THE NAME OF HIS COMPANY HAS BEEN W RONGLY USED AND NO TRANSACTION MENTIONED IN THE LEDGER HAS BEEN CARRIED OUT THROUGH THEM. THE A.O. HAD ALSO ANOTHER PROPOSITION THAT THE TOTAL PURCHASE PRICE ON THE DATE OF DEMATE RIALISATION COMES TO RS.44110775/- WHICH BECOMES UNEXPLAINED INVESTMENT IN SHARES. AFTER DEDUCTING THE INVESTMEN T IN SHARES FROM SALE PRICE THE SHORT TERM CAPITAL GAIN COMES T O RS. 80,03,027/-. HOWEVER, SINCE HE CONSIDERED THE ENTIR E RECEIPT ON THE SALE OF SHARES AS UN- ACCOUNTED INCOME AND ADDE D THE SAME TO THE TOTAL INCOME OF THE ASSESSEE U/S 68 OF THE I.T. ACT HE DID NOT MAKE ANY SEPARATE ADDITION UNDER THE HEA D UNEXPLAINED INVESTMENT AND SHORT TERM CAPITAL GAIN . 9.1 WE FIND THE LD. CIT(A) DELETED THE ADDITION U/S 68 ON THE GROUND THAT THE SALE OF SHARES HAS NOT BEEN DOUBTED BY THE A.O. IN THE ASSESSMENT PROCEEDINGS AS WELL AS DURING REM AND PROCEEDINGS AND THE ASSESSEE HAS PROVED THE GENUINE NESS OF THE SALE OF SHARES, THEREFORE, NO ADDITION CAN BE M ADE U/S 68 OF THE ACT. THE REVENUE IS NOT IN APPEAL BEFORE US AGA INST THE SAID OBSERVATION OF THE LD. CIT(A). HOWEVER, THE LD. CIT (A) UPHELD THE 80 ALTERNATE PROPOSITION OF THE A.O. THAT THE PURCHASE PRICE ON THE DATE OF DEMATERIALISATION OF SHARES BECOME UNEXPLAI NED INVESTMENT IN THE HANDS OF THE ASSESSEE AND THE DIF FERENCE BETWEEN IN SALE AND PURCHASE OF SHARES HAS TO BE TR EATED AS SHORT TERM CAPITAL GAIN SINCE THE ASSESSEE COULD NO T SUBSTANTIATE THE PURCHASES. THEREFORE, THE QUESTION THAT HAS TO BE ANSWERED IN THE GROUNDS RAISED BY THE ASSESSEE I S AS TO WHETHER THE PURCHASE OF SHARES BY THE ASSESSEE ARE GENUINE OR NOT AND WHETHER THE HOLDING PERIOD IS MORE THAN 12 MONTHS OR NOT. 9.2 WE FIND THE ASSESSEE BEFORE THE A.O. HAS FILED THE COPIES OF CONTRACT NOTES AND PURCHASE BILLS OF ALL THE SHARES PURCHASED FROM MSPL (COPIES OF WHICH ARE PLACED AT PAPER BOOK PAGE 18 TO 43). SIMILARLY THE BANK STATEMENT MAINTAINED WITH H DFC BANK SHOWS EVIDENCE OF PAYMENT TO MSPL. THE XEROX COPY OF THE ACCOUNT PAYEE CHEQUE ISSUED TO MSPL DTD. 1.12.05 FO R RS.12,40.565/- IS PLACED AT PAPER BOOK PAGE 45 AND WAS ALSO FILED BEFORE THE A.O. AND CIT(A). THE COPY OF LEDGE R A/C OF MSPL IN THE BOOKS OF THE ASSESSEE AND THE COPY OF THE LE DGER ACCOUNT OF THE ASSESSEE IN BOOKS OF MSPL WERE ALSO FILED BE FORE THE A.O. SIMILARLY THE COPIES OF CONTRACT NOTES AND SALE BIL LS OF ALL THE SHARES TRANSFERRED TO TECHNO SHARES & STOCKS LTD. W ITH COPY OF D-MAT ACCOUNT AND COPY OF CONFIRMATION LETTER DTD. 28.10.2005 FROM SUNCHEM SECURITIES P. LTD. WERE ALSO FILED BEF ORE THE A.O. NOTHING WAS BROUGHT BY THE A.O. TO PROVE THAT ANY O F THESE EVIDENCES FILED BY THE ASSESSEE IS FALSE OR UNTRUE. THE REVENUE HAS BASICALLY GONE ON THE STATEMENT OF MR. MUKESH C HOKSI WHO DENIED TO HAVE KNOWN THE ASSESSEE AND DENIED TO HAV E MADE ANY TRANSACTION WITH THE ASSESSEE ON ACCOUNT OF PUR CHASE OF SHARES. THE RELEVANT QUESTIONS AND ANSWERS OF MR. M UKESH CHOKSI RECORDED BY THE A.O. ON 24.12.2008, COPY OF WHICH IS PLACED AT PAPER BOOK PAGE NO. 19 TO 23 ARE AS UNDER . Q NO. 7:- DO YOU KNOW SHRI JAFFERALI K. RATTONSEY A ND SMT. HAMIDA RATTONSEY? ANS. NO. I DO NOT KNOW THEM. Q NO. 8:- I AM SHOWING YOU THE LEDGER ACCOUNT OF MAHASAGAR SECURITIES PVT. LTD. IN THE BOOKS OF SHRI J.K. RATTONSEY AND SMT. HAMIDA J. RATTONSEY. FROM THIS ACCOUNT IT IS SEEN THAT THE ASSESSEE HAVE CARRIED O UT REGULAR TRANSACTION WITH MAHASAGAR SECURITIES PVT. LTD. PL. CONFIRM THE LEDGER ACCOUNT FURNISHED BY THE ASSESSE E WITH THE COPY OF LEDGER ACCOUNT OF J.K. RATTONSEY AND SM T. HAMIDA J. RATTONSEY APPEARING IN THE BOOKS OF MAHASAGAR SECURITIES PVT. LTD. ANS.: I HAVE SEEN THE LEDGER AND ON THE PERUSAL OF THE SAME I FOUND THAT THE TRANSACTIONS ARE NOT CARRIED OUT THROUGH US. IT SEEMS THAT OUR NAME HAS BEEN USED AN D NO TRANSACTION MENTIONED IN THE LEDGER HAVE BEEN CARRI ED OUT THROUGH US. MAHASAGAR SECURITIES HAVE NO RELATIONS WITH THE J.K. RATTONSEY AND SMT. HAMIDA J. RATTONSEY. 81 9.3. ON THE BASIS OF THE ABOVE STATEMENT OF MR. MUK ESH CHOKSI THE LD. CIT(A) UPHELD THE ALTERNATE PROPOSITION OF THE A.O. THAT TOTAL PURCHASE PRICE ON THE DATE OF DEMATERIALISATI ON OF SHARES AMOUNTING TO RS.4,41,10,775/- BECOMES UNEXPLAINED INVESTMENT SINCE THE PURCHASES ARE NOT RECORDED IN THE BOOKS OF THE ASSESSEE ON THAT DATE AND THE DIFFERENCE BETWEE N THE SALE PRICE AND THE PURCHASE PRICE AMOUNTING TO RS. 80,03 ,027/- BECOMES SHORT TERM CAPITAL GAIN SINCE THE HOLDING P ERIOD OF THE SHARES IS LESS THAN 12 MONTHS. 9.4 HOWEVER, WE FIND DURING THE COURSE OF CROSS EXA MINATION BY THE ASSESSEE BEFORE THE A.O. ON 29.12.2008 MR. MUKE SH CHOKSI CONFIRMED TO HAVE RECEIVED THE CHEQUES FROM THE ASS ESSEE. THE RELEVANT QUESTION NO. 2 AND ANSWER THEREOF IS AS UN DER:- Q.2. QUESTION PUT UP BY SHRI DIGANT BHATT WE HAVE ISSUED A CHEQUE FROM JAFFERALLI K. RATTONSEY, HAMID A RATTONSEY FOR RS.12,40,565/- AND RS.11,91,378/- RESPECTIVELY, WHICH YOU HAVE RECEIVED, KINDLY CONFI RM. ANS. I CONFIRM THE ABOVE CHEQUES HAVE BEEN RECEIVED BY ME. SIMILARLY, REPLY GIVEN BY SHRI MUKESH CHOKSI TO QUESTION NO. 3 TO 5 ARE AS UNDER:- Q.3 QUESTION PUT UP BY SHRI DIGANT BHATT - WE HAVE RECEIVED THE SHARES IN DEMAT ACCOUNT OF SHRI JAFFER ALLI K. RATTONSEY AND HAMIDA RATTONSEY FROM SUNCHAN SECURIT IES LTD. ON YOUR BEHALF, KINDLY CONFIRM. ANS. I HAVE NOT GIVEN ANY INSTRUCTIONS. Q.4 QUESTION PUT UP BY DR. MAHESH AKHADE * IN THE STATEMENT RECORDED U/S.131 OF THE IT. ACT ON 24.12. 2008, YOU HAVE DENIED IN THE ANSWER TO QUESTION NO.8, 9, 12 & 13 THAT MAHASAGAR SECURITIES PVT. LTD. AND ALLIANCE INTERMEDIARIES NETWORK PVT. LTD. HAS NO RELATIONSHI P TO THE ASSESSEES J.K. RATTONSEY, HAMIDA RATTONSEY, SUNAY MEHTA AND SAMIT MEHTA. YOU HAVE ALSO DENIED YOU HAV E ANY SHARE TRANSACTIONS WITH THESE PERSONS. KINDLY C ONFIRM THE SAME. ANS. I AM PREPARING ACCOUNTS ON RECEIPT BASIS AND T HE CHEQUES RECEIVED BY ME ARE ACCOUNTED AS A GENERAL RECEIPTS AND ON WHICH THE COMMISSION EARNED BY ME H AS BEEN ACCOUNTED FULLY. HERE THE SHARES HAVE BEEN DEL IVERED BY SUNCHAN SECURITIES, I HAVE NOT GIVEN ANY INSTRUC TIONS TO SUNCHAN SECURITIES. Q.NO.5 QUESTION PUT UP BY DR. MAHESH AKHADE KINDL Y FURNISH THE STATEMENT OF BANK ACCOUNTS OF MAHASAGAR SECURITIES PVT. LTD. IN WHICH THE ABOVE MENTIONED T WO 82 CHEQUES AMOUNTING TO RS.12,40,565/- AND RS.11,91,37 8/- HAVE BEEN DEPOSITED. ANS. AT PRESENT THEY ARE NOT AVAILABLE WITH ME, I W ILL FURNISH THE SAME AFTER RECEIPT OF THE SAME. 9.5 FROM THE ABOVE, IT IS CLEAR THAT MR. MUKESH CHO KSI IS DOUBLE SPEAKING IN HIS STATEMENTS I.E. ONE GIVEN BEFORE TH E A.O. AND THE ONE DURING CROSS EXAMINATION BEFORE THE A.O. UNDER THESE CIRCUMSTANCES ONE HAS TO SEE THE EVIDENTIARY VALUE OF A PERSON MAKING DOUBLE SPEAKING. WE FIND THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF EASTERN COMMERCI AL ENTERPRISES (SUPRA) HAS HELD THAT A MAN INDULGING I N DOUBLE SPEAKING CANNOT BE SAID BY ANY MEANS A TRUTHFUL MAN AT ANY STAGE AND NO COURT CAN DECIDE ON WHICH OCCASION HE WAS TRUTHFUL. WE FIND THE CO-ORDINATE BENCH OF THE TRIB UNAL IN THE CASE OF MRS. UTTARA S. SHOREWALA (SUPRA) (IN WHICH ONE OF US THE ACCOUNTANT MEMBER IS A PARTY) FOLLOWING THE DEC ISION OF HONBLE CALCUTTA HIGH COURT UPHELD THE ORDER OF THE LD. CIT(A) IN HOLDING THAT THE A.O. CANNOT MAKE ANY ADDITION IN T HE ASSESSEES HANDS DESPITE THE ASSESSEE NOT HAVING MA DE ANY PAYMENT TO THE ENTITIES MENTIONED BY SHRI CHOKSI, W HOSE STATEMENT IS BEING RELIED UPON BY HIM. THE CIT (A) ALSO NOTED THAT MR.MUKESH CHOKSI HAS BEEN VACILLATING RIGHT TH ROUGH AND HAS GIVEN DIFFERENT VERSIONS AT DIFFERENT STAGES OF THE PROCEEDINGS AND THEREFORE HIS EVIDENCE WAS UNRELIAB LE. 9.6 IN VIEW OF THE ABOVE JUDICIAL DECISIONS THE ST ATEMENT OF MR. MUKESH CHOKSI CANNOT BE A DECIDING FACTOR FOR REJEC TING THE GENUINENESS OF THE PURCHASE OF SHARES BY THE ASSESS EE ESPECIALLY WHEN ALL OTHER SUPPORTING EVIDENCES FILE D BY THE ASSESSEE WERE NEITHER PROVED TO BE FALSE OR UNTRUE. WE FURTHER FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE DEMATERIALIZATION OF SHARES FROM PHYSICAL HOLDING IS A LENGTHY PROCESS AND TAKES CONSIDERABLE TIME. THEREF ORE, WHEN THERE IS NO DISPUTE TO THE DEMATERIALIZATION OF SHA RES BEFORE THE DATE OF SALE, THEREFORE, THE SHARES WERE PURCHASED MUCH PRIOR TO THE DATE OF SALE. 9.7 THE CBDT CIRCULAR NO. 704 DTD. 28.4.1995 STATE S THAT IT IS THE DATE OF BROKERS NOTE THAT SHOULD BE TREATED AS THE DATE OF TRANSFER IN CASES OF SALE TRANSACTIONS OF SECURITIE S PROVIDED SUCH TRANSACTIONS ARE FOLLOWED UP BY DELIVERY OF SHARES AND ALSO THE TRANSFER DEEDS. SIMILARLY, IN RESPECT OF THE PURCHA SERS OF THE SECURITIES, THE HOLDING PERIOD SHALL BE RECKONED FR OM THE DATE OF THE BROKERS NOTE FOR PURCHASE ON BEHALF OF THE INVESTORS. THE CBDT CIRCULAR NO. 768 DTD. 24.6.1998 WAS ISSUED TO CLARIFY THE DETERMINATION OF DATE OF TRANSFER AND THE PERIO D OF HOLDING OF SECURITIES HELD IN DEMAT FORM. IT HAS BEEN STATED T HERE IN THAT EARLIER CIRCULAR NO. 704 ISSUED BY THE CBDT RELATIN G TO THE DATE OF TRANSFER AND PERIOD OF HOLDING DOES NOT CHANG E EVEN WHEN SECURITIES ARE HELD IN THE DEMATERIALIZED FORM. THE REFORE IN VIEW OF THE ABOVE TWO CIRCULARS OF CBDT IT IS CLEAR THAT IN CASE OF 83 SECURITIES THE DATE OF PURCHASE HAS TO BE TAKEN F ROM THE BROKERS NOTE/CONTRACT NOTE AND THE PERIOD OF HOLDI NG IS ALSO TO BE RECKONED FROM THE DATE OF PURCHASE AND NOT FRO M THE DATE OF DEMATERIALIZATION. SINCE THE HOLDING PERIOD OF THE SHARES AS PER THE BROKERS NOTE AND ITS SUBSEQUENT SALE AFTER DEMATERIALIZATION IS MORE THAN 12 MONTHS, THEREFORE , THE SHARES BECOME LONG TERM CAPITAL ASSET AND THE ASSESSEES C LAIM OF LONG TERM CAPITAL GAIN IS CORRECT. IN THIS VIEW OF THE M ATTER WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE A. O. TO ACCEPT THE LONG TERM CAPITAL GAIN DECLARED BY THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THE GROUNDS RAISED BY THE ASSES SEE ARE ACCORDINGLY ALLOWED. 10. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. 19.5.4. WE FIND THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. MRS.RASILA N GADA & ORS., IN THE CONSOLIDAT ED ORDER DATED 8 TH AUGUST, 2012, HAS HELD AS UNDER: 5.1. AFTER PERUSING THE MATERIAL AVAILABLE WE ARE OF THE OPINION THAT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE FAA DOES NOT SUFFER FROM ANY LE GAL INFIRMITY. HONBLE BOMBAY HIGH COURT IN THE CASE OF SHARADA CREDIT AND MUKESH R MAROLIA HAS UPHELD THE ORDERS O F THE ITAT, MUMBAI. IN THOSE CASES IT HAS BEEN HELD THAT SHARES PURCHASED/SOLD IN THE OFF MARKET CANNOT BE CONSIDER ED ILLEGAL TRANSACTIONS. WE FIND THAT THE AO HAD NOT AFFORDED OPPORTUNITY OF CROSS-EXAMINATION OF SHRI MUKESH CHOKSI TO THE A SSESSEE. IT IS NOTEWORTHY THAT SH. CHOKSI HAD NOT NAMED THE ASS ESSEE IN HIS STATEMENTS AS THE BENEFICIARY WHO HAD AVAILED B OGUS ENTRIES. WE HAVE NOTICED THAT THE ASSESSEE HAD SHOW N THE INVESTMENT IN SHARES IN THE BALANCESHEET OF THE EAR LIER ASSESSMENT YEAR AND HER RETURN OF INCOME WAS ACCEPT ED BY THE DEPARTMENT. WE ARE OF THE OPINION THAT ONCE SALES/P URCHASE OF SHARES IS ACCOMPANIED BY THIS KIND OF EVIDENCES THE GENUINENESS OF THE SAID TRANSACTIONS CANNOT BE DOUB TED. NON- PAYMENT OF STT CANNOT BE AND SHOULD NOT BE BASIS FO R MAKING ADDITION OF THE SECTION 68 OF THE ACT. FAA HAS CATE GORICALLY HELD THAT ALL THE NECESSARY DETAILS ABOUT PURCHASE AND S ALE OF SHARES WERE MADE AVAILABLE TO THE AO DURING ASSESSMENT PRO CEEDINGS. WE HAVE PERUSED THE CASE LAWS RELIED UPON BY THE AR . IN THE CASE OF MUKESH R MAROLIA (SUPRA) HONBLE JURISDICTI ONAL HIGH COURT HAS HELD AS UNDER: .ON FURTHER APPEAL, THE ITAT BY THE IMPUGNED ORD ER ALLOWED THE CLAIM OF THE ASSESSEE BY RECORDING THAT THE PURCHASE OF SHARES DURING THE YEAR 1999-2000 AND 20 00- 2001 WERE DULY RECORDED IN THE BOOKS MAINTAINED BY THE ASSESSEE. THE ITAT HAS RECORDED A FINDING THAT THE SOURCE OF FUNDS FOR ACQUISITION OF THE SHARES WAS THE AGRI CULTURAL 84 INCOME WHICH WAS DULY OFFERED AND ASSESSED TO TAX I N THOSE ASSESSMENT YEARS. THE ASSESSEE HAS PRODUCED CERTIFICATES FROM THE AFORESAID FOUR COMPANIES TO T HE EFFECT THAT THE SHARES WERE IN-FACT TRANSFERRED TO THE NAM E OF THE ASSESSEE. IN THESE CIRCUMSTANCES, THE DECISION OF T HE ITAT IN HOLDING THAT THE ASSESSEE HAD PURCHASED SHARES O UT OF THE FUNDS DULY DISCLOSED BY THE ASSESSEE CANNOT BE FAULTED. SIMILARLY, THE SALE OF THE SAID SHARES FOR RS.1,41,08,484/- THROUGH TWO BROKERS NAMELY, M/S RICHMOND SECURITIES PVT. LTD. AND M/S. SCORPIO MANAGEMENT CONSULTANTS PVT. LTD. CANNOT BE DISPUTED , BECAUSE THE FACT THAT THE ASSESSEE HAS RECEIVED THE SAID AMOUNT IS NOT IN DISPUTE. IT IS NEITHER THE CASE OF THE REVENUE THAT THE SHARES IN QUESTION ARE STILL LYING WITH THE ASSESSEE NOR IT IS THE CASE OF THE REVENUE THAT THE AMOUNTS RECEIVED BY THE ASSESSEE ON SALE OF THE SHA RES IS MORE THAN WHAT IS DECLARED BY THE ASSESSEE. THOUGH THERE IS SOME DISCREPANCY IN THE STATEMENT OF THE DIRECTO R OF M/S. RICHMAND SECURITIES PVT. LTD. REGARDING THE SA LE TRANSACTION, THE TRIBUNAL RELYING ON THE STATEMENT OF THE EMPLOYEE OF M/S. RICHMAND SECURITIES PVT. LTD. HELD THAT THE SALE TRANSACTION WAS GENUINE. IN THESE CIRCUMSTANCES, THE DECISION OF THE ITAT IN HOLDING THAT THE PURCHASE AND SALE OF SHARES ARE GE NUINE AND THEREFORE, THE ASSESSING OFFICER WAS NOT JUSTIF IED IN HOLDING THAT THE AMOUNT OF RS. 1,41,08,484/- REPRES ENTED UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE INCO ME TAX ACT, 1961 CANNOT BE FAULTED. WE ARE OF THE OPINION THAT THE FACTS OF THE CASE OF MUKESH R MAROLIA ARE SIMILAR TO THE FACTS OF THE CASES UND ER CONSIDERATION. RESPECTFULLY FOLLOWING THE ORDERS OF THE HONBLE HIGH COURT AND THE COORDINATING BENCHES OF THE TRIB UNAL WE HOLD THAT PURCHASE AND SALE OF SHARES BY THE ASSESS EE WAS A GENUINE TRANSACTION, AND HENCE, ADDITION MADE BY TH E AO CANNOT BE ENDORSED. UPHOLDING THE ORDERS OF THE FAA, WE DISMISS THE APP EALS FILED BY THE AO . 19.5.5. WE FIND THE NAGPUR BENCH OF THE ITAT IN THE CASE OF ACIT VS. KAMAL KUMAR S.AGRAWAL & ORS., REPORTED IN 133 T TJ 818, HAS HELD AS UNDER: THE ASSESSEE EARNED CAPITAL GAINS DURING THE PERIOD COVERED BY S.153A PROCEEDINGS. IT IS ALSO NOTED THAT ALL S UCH TRANSACTIONS HAVE BEEN TAKEN INTO CONSIDERATION WHI LE FILING THE 85 RETURNS FOR THESE YEARS IN THE NORMAL COURSE AND TH E DEPARTMENT HAS ALSO ACCEPTED THE NATURE OF SUCH TRA NSACTIONS. IT IS VERY IMPORTANT TO NOTE THAT NO INCRIMINATING MATERIAL HAS BEEN FOUND DURING THE COURSE OF SEARCH WHICH COULD HAVE CAST DOUBT ON THE GENUINENESS OF THE TRANSACTIONS OR COU LD HAVE INDICATED THAT IT WAS A CASE OF ASSESSEES OWN UNDI SCLOSED MONEY UTILIZED IN THE EXECUTION OF SUCH TRANSACTION S. VOLUMINOUS DOCUMENTARY EVIDENCES HAVE BEEN FILED BY THE ASSESSEE TO PROVE ITS CLAIM WHICH SUPPORT THE GENUI NENESS OF THE TRANSACTION. HOWEVER, THE AO HAS UTILIZED THE STATEMENTS OF THE PERSONS WHO WERE NOT CROSS-EXAMINED BY THE ASSE SSEE. HENCE, AS PER THE SETTLED JUDICIAL PRINCIPLE, SUCH STATEMENTS CANNOT BE GIVEN ANY WEIGHTAGE. WHEN THERE ARISES A QUESTION OF APPRECIATION OF DOCUMENTARY EVIDENCES, THEN A HO LISTIC VIEW HAS TO BE TAKEN AND IN THE PRESENT CASE MAJORITY OF THE BROKERS HAVE SUPPORTED THE CLAIMS OF THE ASSESSEE AND SURPR ISINGLY SOME OF THEM HAVE NOT BEEN APPROACHED BY THE AO AT ALL. THUS, ON APPRECIATION OF DOCUMENTARY EVIDENCES SUBMITTED BY THE ASSESSEE, THE GENUINENESS OF THE TRANSACTIONS APPEA RS TO BE ESTABLISHED. AS REGARDS THE ASPECT OF OFF MARKET T RANSACTIONS, IT IS NOTED THAT NEITHER THESE ARE ILLEGAL NOR PROHIBI TED AND ONLY SOME OF THE COMPLIANCES HAVE TO BE MADE BY THE BROK ERS. AS REGARDS THE ASPECT OF SUCH COMPLIANCES, IT IS NOT T HE CASE THAT ALL THE OFF MARKET TRANSACTIONS HAVE NOT BEEN REPOR TED BY THE CONCERNED BROKERS TO THE STOCK EXCHANGE AS PER RULE S AND EVEN OTHERWISE, ANY FAILURE ON THE PART OF THE BROKERS I N DOING SUCH COMPLIANCE CANNOT MAKE THE CONTRACT BETWEEN THE ASS ESSEE AND THE BROKER ILLEGAL OR VOID AS THE BROKER MAY FACE T HE CONSEQUENCES FOR HIS DEFAULT UNDER RELEVANT STATUTE . IT IS ALSO NOTED THAT ALL THE TRANSACTIONS ARE NOT OFF MARKET TRANSACTIONS, HENCE, THE AO'S APPROACH TO PICK AND CHOOSE ONLY SU CH INSTANCES WHICH ARE FAVOURABLE TO HIM CANNOT JUSTIF Y SUCH ADDITION. THE DEPARTMENTAL REPRESENTATIVE HAS ALSO ARGUED THAT THERE WERE DIFFERENCES IN THE INFORMATION AS P ER CONTRACT NOTES AND AS PER INFORMATION RECEIVED FROM THE STOC K EXCHANGE WHICH FACT IS ALSO NOT MATERIAL BECAUSE WHEN SOME O FF MARKET TRANSACTIONS HAVE NOT BEEN REPORTED TO THE STOCK EX CHANGE, HOW SUCH CONTRACT NOTES CAN BE MATCHED WITH THE RECORDS OF STOCK EXCHANGE. ECONOMIC CONSEQUENCES AS A RESULT OF OFF MARKET TRANSACTIONS OR OTHERWISE HAVE TAKEN PLACE AND, THE REFORE, SUCH TRANSACTIONS CANNOT BE TREATED AS SHAM MERELY FOR S OME DISCREPANCIES OR FOR THE VIEW OF THE AO IN REGARD T O GENUINENESS OF THESE TRANSACTIONS. THE REVENUE HAS ALSO RELIED ON THE DECISIONS OF SEBI INVOLVING SOME SCRIPS. THE ROLE OF SEBI IS DIFFERENT AND THE ORDERS PASSED BY THEM HAVE DIFFER ENT OBJECTIVES SUCH AS ORDERLY CONDUCT OF SHARE MARKETS AND INVESTOR PROTECTION AND, THEREFORE, SUCH ORDER CANN OT BE CONCLUSIVE AS REGARDS THE GENUINENESS OF THE TRANSA CTIONS. IN THIS REGARD, IT WOULD NOT BE OUT OF PLACE TO MENTIO N THAT STOCK MARKET OPERATIONS ARE SUBJECT TO DIFFERENT REGULATI ONS AND THE INTEREST OF GENERAL PUBLIC IS PROTECTED BY PROHIBIT ING THE MARKET INTERMEDIARIES FROM INDULGING IN UNFAIR TRADE PRACT ICES. THE ORDER OF THE SEBI RELIED ON BY THE REVENUE IS MAINL Y ON THE 86 ASPECT OF PRICE RIGGING IN SUCH MANNER. HENCE, THE SAME CANNOT BE OF ANY ASSISTANCE TO THE CAUSE OF THE REVENUE. THUS, ON THE BASIS OF APPRECIATION OF FACTS AND CIRCUMSTANCES OF THE CASE AS A WHOLE AND CONSIDERING THE DOCUMENTARY EVIDENCES O N RECORD, THE SHARE TRANSACTIONS CANNOT BE CONSIDERED AS INGENUINE/SHAM AND, THEREFORE, THE SALE PROCEEDS OF SUCH SHARE TRANSACTIONS CANNOT BE TAXED UNDER S.68. AS REGARDS THE PLEA OF THE REVENUE REGARDING TREATM ENT OF SHARE TRANSACTIONS AS AN ADVENTURE IN THE NATURE OF TRADE TAKEN DURING THE COURSE OF APPELLATE PROCEEDINGS FOR THE FIRST TIME, IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO HAS TA KEN A DEFINITE STAND OF SUCH TRANSACTIONS BEING BOGUS OR SHAM. HENCE, SUCH PLEA HAS RIGHTLY BEEN REJECTED BY THE C IT(A) AFTER EXAMINING THE SCOPE OF THE POWERS OF THE CIT(A) AS WELL AS ROLE OF THE AO IN THE SCHEME OF ACT. UNDER THE SCHEME O F THE ACT, INCOME IS TO BE ASSESSED UNDER DIFFERENT HEADS DEPE NDING UPON THE SOURCE/NATURE OF SUCH INCOME AND IF THE AO HAS ASSESSED THE SAME UNDER A SPECIFIC HEAD WHICH IS SUBSEQUENTL Y DELETED, THEN, IT CANNOT BE TAXED UNDER ANY OTHER HEAD MEREL Y FOR THIS REASON. THE STAND OF THE ASSESSEE IS OF LONG-TERM CAPITAL GAIN WHICH HAS ALSO BEEN ACCEPTED BY THE DEPARTMENT IN A SSESSMENT PROCEEDINGS COMPLETED BEFORE THE SEARCH AND IN THE COURSE OF SEARCH, NO INCRIMINATING MATERIAL HAS BEEN FOUND TO CAST A SHADOW ON THE NATURE OF SUCH TRANSACTIONS AND THE A O IN S. 153A PROCEEDINGS HAS TAKEN A DIFFERENT STAND AND, T HEREFORE, IF SUCH STAND OF THE AO HAS NOT BEEN ACCEPTED, THEN, T HE AO CANNOT TAKE AN ALTERNATE STAND FOR TAXING IT UNDER A DIFFERENT HEAD IN THE COURSE OF APPELLATE PROCEEDINGS. CERTA IN JUDICIAL DECISIONS REGARDING THE SCOPE OF POWERS OF CIT(A) A LSO SUPPORT THE CLAIM OF THE ASSESSEE THAT NO NEW SOURCE OF INC OME CAN BE FOUND IN THE COURSE OF APPELLATE PROCEEDINGS. HO WEVER, THE CIT(A) HAS EXAMINED THE FACTUAL DETAILS OF THESE TR ANSACTIONS ON THE BASIS OF VARIOUS PARAMETERS LIKE FREQUENCY, VOL UME, LINE OF TRADE IN WHICH THE ASSESSEE IS MAINLY ENGAGED AND T HE DECISION OF THE CIT(A) IS CORRECT IN LAW ON THAT COUNT ALSO . 19.5.6. SO FAR AS THE DECISION OF THE PUNE BENCH OF ITAT RELIED ON BY THE REVENUE IN THE CASE OF SMT. SUREKHA BHAGVATI PRASAD MUNDADA V. ITO & ORS. IN ITA NO. 1332/PN/2009, WE F IND THE SAME IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THIS CASE, THE HON. TRIBUNAL HAS DELETED THE ADDITION U/ S. 68 ON ACCOUNT OF LONG TERM CAPITAL GAINS DECLARED BY THE APPELLANT, BUT A CCEPTED THE GAIN AS SHORT TERM CAPITAL GAIN BECAUSE OF THE FOLLOWING REASONS - (I) IN THIS CASE, ASSESSEE PURCHASED SHARES ON LINE AND NOT OFF MARKET. 87 (II) SETTLEMENT NO. DID NOT TALLY WITH THE POOL ACCOUNT OF THE BROKER. (III) SHARES ARE TRANSFERRED TO THE DEMAT ACCOUNT AFTER COMPLETION OF 18 MONTHS FROM THE DATE OF THE CONTRA CT NOTES. (IV) SHARE BROKER TRANSFERRED SHARES TO THE ASSESSEE FRO M THE BENEFICIARY ACCOUNT AND NOT FROM THE POOL ACCOUNT. (V) ORIGINAL CONTRACT NOTES WERE NEVER PRODUCED BY THE ASSESSEE. (VI) THERE WAS NO DELIVERY TO THE ASSESSEE IN THE NORMAL PERIOD PRESCRIBED IN THE SEBI RULES. (VII) THE ASSESSEE MADE PAYMENT TO THE BROKER AFTER A PER IOD OF 18 MONTHS FROM THE DATE OF BROKER'S NOTE. (VIII) ENQUIRY BY SEBI WAS GOING ON AGAINST BROKER R. P. S HAH FOR PRICE RIGGING OF SHARES, WHO WAS SUSPENDED BY S EBI. (IX) BROKER'S HUSBAND IS A RELATIVE OF THE FAMILY. (X) ABSENCE OF RELEVANT ENTRIES' IN THE RECORDS OF CALC UTTA STOCK EXCHANGE. (XI) IT WAS HELD THAT SINCE THE ASSESSEE RECEIVED SALE CONSIDERATION AND THE SAME IS AGAINST THE SALE OF S HARES, ADDITION CANNOT BE MADE U/ S. 68 OF THE I. T. ACT. IT WAS FURTHER HELD THAT FROM THE DATE OF TRANSFER OF SHAR ES IN THE DEMAT ACCOUNT OF THE ASSESSEE AND ITS SALE, PER IOD OF HOLDING IS TO BE COUNTED. THE PLEA TAKEN BY THE ASS ESSEE THAT THE ASSESSEE HAS PURCHASED THE SHARES OFF MARK ET WAS NOT ACCEPTED AT THIS STAGE. ACCORDINGLY, THE FA CTS OF THIS CASE ARE ENTIRELY DIFFERENT FROM THE FACTS OF THE INSTANT CASE. THE VARIOUS OTHER DECISIONS RELIED O N BY THE LD. DEPARTMENTAL REPRESENTATIVE AS WELL AS THE ASSE SSING OFFICER ALSO DO NOT APPLY TO THE FACTS OF THE PRESE NT CASE. 19.6. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND RELYING ON VARIOUS DECISIONS CITED SUPRA AND CONSID ERING THE ELABORATE DISCUSSION BY THE LD. CIT(A) WE FIND NO I NFIRMITY IN HIS ORDER ACCEPTING THE LONG TERM CAPITAL GAINS AND SHO RT TERM CAPITAL GAINS DECLARED BY THE ASSESSEE. ACCORDINGL Y, THE ORDER OF 88 THE CIT(A) IS UPHELD AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 20. SINCE THE GROUNDS RAISED BY THE REVENUE IN ALL THE OTHER APPEALS ARE IDENTICAL TO THE GROUNDS RAISED IN ITA.NO.1157/PN/2008, THEREFORE, FOLLOWING THE SAME RATIO WE UPHOLD THE ORDERS OF THE CIT(A) IN ACCEPTING THE LO NG TERM CAPITAL GAINS AND SHORT TERM CAPITAL GAINS DECLARED BY THE RESPECTIVE ASSESSEES. THE GROUNDS RAISED BY THE REVENUE ARE A CCORDINGLY DISMISSED. 21. IN THE RESULT, ALL THE APPEALS FILED BY THE REV ENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 28 TH DAY OF SEPTEMBER, 2012. SD/- SD/- ( R.K.PANDA ) ( SHAILENDRA KUMAR YAD AV ) ACCOUNTANT MEMBER JUDICIAL MEMBER GSPS PUNE, DATED THE 28 TH SEPTEMBER, 2012 COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE ACIT, CIRCLE-1/CENTRAL CIRCLE-1, AURANGABAD. 3. THE CIT(A), AURANGABAD./CIT(A)-I, NAGPUR. 4. THE CIT, AURANGABAD/CIT(CENTRAL), NAGPUR. 5. THE DR B BENCH, PUNE. 6. GUARD FILE. BY ORDER //TRUE COPY// PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE.