ITO, JODHPUR V. ShriRajendra Kumar, JODHPUR

ITA 120/JODH/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9660 (ITAT-JODHPUR)
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 12-01-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 23-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Bonafide belief; Transactions in derivatives; Sham transactions

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, JODHPUR BEFORE SHRI B.P JAIN ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY JUDICIAL MEMBER ITA NO. 120/JODHPUR/2016 ASSESSMENT YEAR: 2010 - 11 THE ITO VS. SHRI RAJENDRA KUMA R WARD - 3(4) 18 - E - 24, CHOPASNI HOUSING BOARD JODHPUR JODHPUR PAN NO. ANWPK8275G (APPELLANT) (RESPONDENT) A SSESSEE BY : NONE DEPARTMENT BY : SMT. RUNI PAL DATE OF HEARING : 12/01/2017 DATE OF PRONOUNCEMENT : 13/01/2017 ORDER PER PARTHA SARATHI CHAUDHURY , JM THIS APPEAL PREFERRED BY THE REVENUE EMANATES FROM THE ORDER OF THE LD. CIT(A) DT. 20/01/2016 ON THE FOLLOWING GROUNDS OF APPEAL: (I) DELETING ADDITION OF RS. 37,87,881/ - BY IGNORING THE FACT THAT ACCORDING TO NATIONAL STOCK EXCH ANGE (NSE), AMI SECURITIES IS NOT A TRADING MEMBER IN F&O SEGMENT DURING THE RELEVANT FINANCIAL YEAR AS IT WAS EXPELLED BY NSE WAY BACK ON 16 - 05 - 2000. (II) DELETING ADDITION OF RS. 37,87,881/ - BY IGNORING THE FACT THAT THE TRANSACTIONS SHOWN TO HAVE BEEN CARRIED OUT THROUGH AMI SECURITIES WERE NOT ENTERED IN THE RECORD OF THE NSE. (III) DELETING ADDITION OF RS. 37,87,881/ - BY IGNORING THE FACT THAT THE GENUINESS OF THE ALLEGED TRANSACTIONS CARRIED OUT THROUGH AMI SECURITIES COULD NOT BE VERIFIED AS THE LETTERS S ENT ON THE ADDRESS MENTIONED IN THE CONTRACT NOTES AND ON 2 THE ADDRESSES PROVIDED BY THE ASSESSEE RECEIVED BACK UNDELIVERED BY THE POSTAL AUTHORITIES. (IV) DELETING ADDITION OF RS. 37,87,881/ - BY IGNORING THE FACT THAT DEPARTMENTAL INQUIRIES GOT CONDUCTED THROUG H THE ADDL. DIT (INV), MUMBAI ALSO DENIED EXISTENCE OF AMI SECURITIES ON THE ADDRESS GIVEN THE ASSESSEE HIMSELF. (V) DELETING ADDITION OF RS.37,87,881/ - BY IGNORING THE FACT THAT AKOLA JANATA COMM.. CO - OP. BANK LIMITED, KALBADEVI BRANCH, MUMBAI, WHERE MOST OF THE CHEQUES WERE CREDITED, HAD DENIED HAVING ANY BANK ACCOUNT IN THE NAME OF AMI SECURITIES WHICH CLEARLY PROVED THAT THE AMOUNTS DID NOT REACH AMI SECURITIES BUT GOT CREDITED IN THE ACCOUNT OF M/S. JALA RAM FINEVEST LIMITED. (VI) DELETING ADDITION OF RS.37,87, 881/ - BY IGNORING THE FACT THAT THE CLAIM OF THE ASSESSEE THAT THE LIABILITY OF RS. 37,87,881/ - HAD BEEN PAID OFF IS NOT TENABLE AS THE AMOUNT HAS NOT REACHED AMI SECURITIES BUT HAD GONE IN THE ACCOUNT OF M/S JALA RAM FINEVEST LIMITED 2. THAT THOUGH REVEN UE HAS PREFERRED MULTIPLE GROUND OF APPEAL HOWEVER THE ISSUE IS DELETION OF ADDITION OF RS. 37,87,881/ - WHICH WAS ADDED BY THE AO TO THE INCOME OF THE ASSESSEE DISALLOWING THE LOSS SUFFERED IN RESPECT OF TRANSACTION IN FUTURE & OPTION (F&O) SEGMENT. THAT T HEREFORE, ALL THE GROUNDS OF APPEAL PERTAINING TO THE DELETION OF ADDITION OF RS. 37,87,881/ - SHALL BE DEALT AND DECIDE D TOGETHER FOR THE SAKE OF CONVENIENCE. 3. DETAILS FACTS REGARDING THE DISALLOWANCE OF RS. 37,87,881/ - ARE STATED IN THE ASSESSMENT ORDE R AND THEREFORE, THE SAME ARE NOT REPEATED AT LENGTH HERE FOR THE SAKE OF BREVITY. HOWEVER, THE ESSENTIAL FACTS OF THE CASE WHICH EMERGE FROM THE ASSESSMENT ORDER ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 09 - 10 - 20 10, DECLARING THE TOTAL INCOME AT RS. 11,44,408/ - . DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE RECEIVED SALARY FROM M/S. VINOD & CO. BESIDES, THE ASSESSEE WAS ENGAGED IN TRADING OF SHARES AND COMMODITIES. UPON EXAMINATION OF SHARE TRADING ACTIVITIES, THE ASSESSING OFFICER OBSERVED FOLLOWING FACTS: - 1. SPECULATIVE TRANSACTION OF COMMODITY RESULTING IN PROFIT OF RS. 4,26,27,706/ - 2. TRADING IN DERIVATIVES OF SHARE RESULTING IN LOSS OF RS. 37,87,881/ - FROM AMI SECURITIES AND RS. 3,36,01,294/ - FROM M/S. VINOD SHARES LTD. 3. TRADING OF SHARES WITH TURNOVER OF RS. 2,83,71,038/ - . THE ASSESSEE SUFFERED A LOSS OF RS. 43,49,687/ - . 3.1 THE ASSESSING OFFICER FURTHER OBSERVED THAT AFTER SETTING OFF THREE LOSSES I.E. LOSS OF RS. 37,87,881/ - FROM AMI SECURITIES, RS. 3,36,01,294/ - FROM M/S. VINOD SHARES 3 LTD. AND LOSS OF RS. 43,49,687/ - AND CLAIMING VARIOUS EXPENSES, THE ASSESSEE HAD DECLARED NET PROFIT OF RS. 7,48,246/ - . ON BEING ASKED, THE ASSESSEE PROVIDED THE CONTRACT OF THE TRADING IN DERIVATIVES OF SHARES AND TRADING OF SHARES. UPON PERUSAL OF THESE DETAILS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD DECLARED A LOSS OF RS. 37,87, 881/ - BY TRADING IN DERIVATES OF SHARES (F&O SEGMENT) THROUGH THE BROKER M/S. AMI SECURITIES. THE AMI SECURITIES WAS SHOWN AS A CREDITOR OF RS. 37,87,881/ - . THE ASSESSING OFFICER FURTHER NOTICED THAT NO PAYMENT WAS EVER MADE BY THE ASSESSEE TO AMI SECURITI ES AND AS A RESULT OF DERIVATIVES, THE ASSESSEE INCURRED A LOSS OF RS. 37,87,881/ - WHICH WAS SHOWN AS OUTSTANDING AT THE END OF THE YEAR. 3.2 IN ORDER TO VERIFY THE GENUINENESS OF THE TRANSACTIONS CARRIED OUT WITH AMI SECURITIES, THE ASSESSING OFFICER CON DUCTED INQUIRIES WITH AMI SECURITIES ITSELF AS WELL AS FROM NATIONAL STOCK EXCHANGE (NSE). THE ASSESSING OFFICER HAD ALSO REFERRED THE MATTER TO THE INVESTIGATION WING, MUMBAI FOR FURTHER INQUIRES. HE ALSO INQUIRED WITH THE DHANLAXMI BANK AS WELL AS OTHER BANKS. AS A RESULT OF INQUIRIES CONDUCTED, THE FOLLOWING FACTS CAME TO THE NOTICE OF THE ASSESSING OFFICER: - I. AMI SECURITIES WAS NOT A TRADING MEMBER IN FUTURE AND OPTION SEGMENT OF THE NSE AS IT GOT EXPELLED ON 16 - 5 - 2000 - THE ASSESSING OFFICER OBSERVED THAT THE TRANSACTION COULD NOT BE ESTABLISHED AS THE NSE CLEARLY DENIED THE MEMBERSHIP OF AMI SECURITIES II. LETTERS WRITTEN TO AMI SECURITIES WERE RETURNED BACK TO THE ASSESSING OFFICER - THE SAID AMI SECURITIES WAS NOT FOUND TO BE EXISTING AT THE GIVEN ADDRESS. III. THE AMOUNTS WERE NEVER CREDITED IN THE ACCOUNT OF AMI SECURITIES - THE AMOUNT DID NOT REACH AMI SECURITIES, INSTEAD GOT DEPOSITED INTO THE ACCOUNT OF OTHER COMPANY IV. THE PROPRIETOR OF AMI SECURITIES, SH. ALOK BIMALCHAND AGARWAL DID NOT FILE HIS RETURN OF INCOME FOR AY 2004 - 05 - 3.3 FROM THE ABOVE FACTS, THE ASSESSING OFFICER HELD THAT THE GENUINENESS OF THE TRANSACTIONS CARRIED OUT THROUGH AMI SECURITIES COULD NOT BE ESTABLISHED. ACCORDINGLY, HE REJECTED THE ASSESSEES CLAIM THAT THE LIABILITY OF RS. 37,87,881/ - 4 HAD BEEN DISCHARGED O N THE GROUND THAT AMOUNT DID NOT REACH THE ACCOUNT OF AMI SECURITIES BUT HAD INSTEAD REACHED M/S. JALARAM FINVEST LTD. 3.4 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE BY FURNISHING THE CONTRACT NOTES ISSUED BY AMI SECURITIES TRIED TO CONVINCE THE ASSESSING OFFICER THAT TRANSACTION SO ENTERED WERE GENUINE AND THE ASSESSEE WAS ELIGIBLE FOR SET OFF OF LOSSES INCURRED ON ACCOUNT OF SHARE TRADING ACTIVITY. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THIS PLEA OF THE ASSESSEE BY STATING THAT CONTR ACT NOTES ARE ONLY PIECES OF STATIONERY UNLESS THE TRANSACTION REFLECTED IN THEM IS FOUND TO BE AUTHENTIC. HE WAS OF THE OPINION THAT THE ASSESSEE COULD NOT DISCHARGE HIS ONUS OF PROVING THE GENUINENESS OF THE TRANSACTION. THE ASSESSING OFFICER HELD THAT T HE LOSS OF RS. 37,87,881 / - REMAINED UNVERIFIABLE AND ACCORDINGLY, HE DISALLOWED THE LOSS OF RS. 37,87,881/ - . 4. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE A SSESSEE MADE WRITTEN SUBMISSION THROUGH THE AUTHORIZED REPRESENTATIVE. IT WAS STATED THAT THE ASSESSEE HAD DULY EXPLAINED BEFORE THE ASSESSING OFFICER THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE TRADED IN SHARES OF LISTED COMPANIES ON F&O BASIS AND IN COMMODITIES THROUGH RECOGNIZED BROKERS. THE A SSESSEE HAD DECLARED BUSINESS PROFITS OF R S 7,48,246/ - IN RESPECT OF TRADING IN SHARES OF LISTED COMPANY ON F&O BASIS AND IN COMMODITIES THROUGH RECOGNIZED BROKERS, THE DETAILS WHICH ARE AS UNDER: - PROFIT IN THE BUSINESS OF TRADING OF COMMODITIES (SPECULATIVE TRANSITIONS) 4,26,27,706/ - LOSS IN RESPECT OF F&O TRADING 3,36,01,294/ - LOSS IN RESPECT OF F&O TRADING 37,87,880/ - LOSS IN RESPECT OF F&O TRADING 44,90,285/ - 4,18,79,459/ - NET PROFIT DISCLOSED BY ASSESSEE 7,48,247/ - 4.1 IT WAS CLAIMED BY THE AR THAT DURING THE ASSESSMENT PROCEEDINGS, THE FOLLOWING DOCUMENTS WERE FURNISHED BEFORE THE ASSESSING OFFICER: - I. COPIES OF SHARE BROKER BILL. II. COPIES OF CONTRACT NOTE. 5 III. COPY OF LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF BROKERS, IV. COPY OF BANK STATEMENT OF THE ASSESSEE. V. COPY OF CONFIRMATION OF ACCOUNTS DULY SIGNED BY BROKERS WITH PAN. 4.2 IT WAS CONTENDED THAT THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER DID NOT CONSIDER THESE VITAL DOCUMENTS AND DISALLOWED THE BUSINESS LOSS OF RS. 37,87,880/ - IN RESPECT OF F&O TRADING (SPECULATIVE TRANSACTIONS) THROUGH BROKER M/S AMI SECURITIES BY MAKING FOLLOWING OBSERVATIONS: - I. THE GENUINENESS OF THE TRANSACTIONS SHOWN TO HAVE BEEN CARRIED OUT THROUGH AMI SECURITIES REMAINS UN - ESTABLISHED. II. THE CLAIM OF THE ASSESSEE THAT THE LIABILITY OF RS. 37,87,881/ - HAS BEEN DISCHARGED CANNOT BE ACCEPTED AS THE AMOUNT HAS NOT REACHED THE ACCOUNTS OF AMI SECURITIES BUT HAS REACHED M/S JALARAM FINVEST LTD. 4.3 IT WAS FURTHER SUBMITTED THAT THE DECEASED ASSESSEE WAS NOT AWARE OF THE FACT THAT AMI SECURITIES WAS NOT ELIGIBLE FOR TRANSACTION THROUGH NSC BUT M/S AMI SECURITIES DID THE BUSINESS TRANSACTIONS ON BEHALF OF THE ASSESSEE AND ISSUED NECESSARY CONTRACT NOTE ETC. THUS THE LOSS SUFFERED BY ASSESSEE WA S REAL, THOUGH IT IS POSSIBLE THAT THE AMI SECURITIES MAY HAVE TRANSACTED THROUGH OTHER MEMBER OF EXCHANGE. FURTHER WHEN AMI SECURITIES ENTERED IN TO TRANSACTION WITH THE ASSESSEE AND ISSUED CONTRACT NOTES ETC THERE WAS NO CAUSE TO PRESUME THAT SAID CONCER N WAS EXPELLED FROM THE EXCHANGE. IT WAS FURTHER STATED THAT THE PAYMENT WAS MADE TO M/S AMI SECURITIES THROUGH PROPER BANKING CHANNEL, WHICH THE ASSESSING OFFICER HIMSELF VERIFIED DURING THE ASSESSMENT PROCEEDINGS FROM THE BANK STATEMENT, THAT THE CHEQUES GIVEN BY THE ASSESSEE WERE CREDITED IN THE ACCOUNT OF M/S AMI SECURITIES. THE COPY OF BANK STATEMENT OF THE ASSESSEE WAS PRODUCED BEFORE THE ASSESSING OFFICER, WHICH SHOWS THAT CHEQUES ISSUED WERE CLEARED BY AMI SECURITIES. IT WAS FURTHER STATED THAT M/S AMI SECURITIES HAD ISSUED THE CONTRACT NOTE & BILLS IN RESPECT OF EACH TRANSACTION. WHEN COMPLETE DETAILS OF EACH TRANSACTION I.E. TIME OF TRANSACTION, PURCHASES PRICE & SALES PRICE OF COMMODITIES TRADED IS IDENTIFIED AND SETTLED THAN HOW THE LOSS CAN BE D ISALLOWED IN LIGHT OF DOCUMENTARY EVIDENCES PLACED ON RECORD BY LATE SHRI RAJENDRA KHANDELWAL (THE A SSESSEE ). IT WAS FURTHER CONTENDED THAT THAT 6 THE A SSESSEE HAD DULY PROVED THAT TRANSACTIONS ENTERED WERE GENUINE BY PRODUCING ALL THE RELEVANT DOCUMENT/ MAT ERIAL BEFORE THE ASSESSING OFFICER. BUT THE ASSESSING OFFICER MERELY ON THE BASIS OF THE REASON THAT THE BROKER M/S AMI SECURITIES WAS INVOLVED IN UNFAIR TRADE PRACTICES AGAINST THE NORMS OF NSE AND STOCK EXCHANGE, DISALLOWED THE GENUINE LOSS SUFFERED BY T HE ASSESSEE WHILE TRANSACTING WITH M/S. AMI SECURITIES. IT WAS FURTHER CONTENDED THAT TRANSACTIONS ENTERED UNDER BONAFIDE BELIEF CANNOT BE HELD AS SHAM TRANSACTIONS. IT WAS FURTHER STATED THAT THE CASE HAS TO BE DECIDED ON THE BASIS OF EVIDENCE ADDUCED. IN THE INSTANT CASE THE ASSESSEE HAS PROVED THE TRANSACTIONS BY FILING DOCUMENTARY EVIDENCES IN FORM OF CONTRACT NOTES, BILLS, AND ACCOUNTS OF AMI SECURITIES (THE BROKERS), PURCHASE AND SALE CHART AND COPIES OF CONTRACT NOTES OF M/S VINOD COMMODITIES (OTHER BROKER) SHOWING THE RATE OF COMMODITIES AT THE RELEVANT TIMES, WHICH WERE DULLY APPROVED BY THE EXCHANGE, LETTERS FROM THE BROKER, CONFIRMING THE TRANSACTION OF THE COMMODITIES. ON AN INDEPENDENT INQUIRY BY THE AO FROM THE BANK, THE BANK HAS CONFIRMED THAT THE PAYMENT OF THE TRANSACTION WAS MADE THROUGH CHEQUE/ DRAFTS. FROM THE VOLUME OF DOCUMENTARY EVIDENCES, ACTUAL SALE AND PURCHASES TRANSACTIONS OF THE COMMODITIES HAD BEEN PROVED. PAYMENT WAS MADE BY THE ASSESSEE THROUGH BANK CHEQUE/DRAFT AND NOT IN CASH , AND AS SUCH DOCUMENTARY EVIDENCES COULD NOT BE DISCARDED FOR THE REASONS THAT THE NOTICES SENT BY AO DURING THE ASSESSMENT PROCEEDINGS WERE RETURNED UNSERVED. IT WAS FURTHER CLAIMED THAT THE ASSESSEE HAD DULY PROVIDED THE ADDRESS OF M/S. AMI SECURITIES A LONG WITH ITS PAN. UNDER SUCH CIRCUMSTANCES, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DOUBTING THE TRANSACTIONS ENTERED INTO WITH M/S. AMI SECURITIES. FURTHER THE COPY OF BANK STATEMENT SUBMITTED BY THE ASSESSEE CLEARLY SHOWS THAT THE AMOUNT OF RS. 37,87 ,881/ - WAS DEBITED/CLEARED IN THE NAME OF AMI SECURITIES. IN SUPPORT, THE AR OF THE A SSESSEE FURNISHED THE COPY OF BANK STATEMENT AND CONFIRMATION OF ACCOUNT AND ALSO RELIED ON VARIOUS JUDICIAL DECISIONS. THE AR THUS REQUESTED THAT THE TRANSACTIONS ENTERED INTO WITH M/S. AMI SECURITIES MAY BE TREATED AS 7 GENUINE AND LOSSES INCURRED THEREON MAY BE ALLOWED TO BE SET OFF AGAINST SPECULATIVE PROFIT. 5. THE LD. CIT(A) OBSERVED THAT THE ASSESSING OFFICER DISALLOWED THE BUSINESS LOSS OF RS. 37,87,880/ - IN RESPECT O F F&O TRADING (SPECULATIVE TRANSACTIONS) THROUGH BROKER M/S. AMI SECURITIES. ON THE BASIS OF VARIOUS INQUIRIES CONDUCTED DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HELD THAT THE SAID M/S. AMI SECURITIES WAS ACTUALLY NON - EXISTENT AND THEREFORE , THE ASSESSEES CLAIM REGARDING GENUINENESS OF THE TRANSACTIONS COULD NOT BE PROVED. IT WAS CONTENDED BEFORE ME THAT BY PRODUCING THE RELEVANT DOCUMENTS AS SUCH COPIES OF SHARE BROKER BILL, COPIES OF CONTRACT NOTE, COPY OF LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF BROKERS, COPY OF BANK STATEMENT, COPY OF CONFIRMATION ACCOUNTS DULY SINGED BY BROKER WITH PAN, THE A SSESSEE HAD DISCHARGED HIS BURDEN. IT WAS CLAIMED THAT THE A SSESSEE HAD BONAFIDELY ENTERED INTO SHARE TRANSACTION WITH M/S. AMI SECURITIES A ND IF THE SAID COMPANY HAD INDULGED IN SHAM TRANSACTIONS OR WAS NOT REGISTERED WITH NSE, THE A SSESSEE CANNOT BE HELD RESPONSIBLE FOR THE SAME. T HAT IN THE INSTANT CASE, THE ASSESSING OFFICER DOUBTED THE SHARE TRANSACTION SIMPLY ON THE BASIS THAT LETTER ISS UED TO AMI SECURITIES WAS RETURNED BACK TO HIM UNSERVED AND VARIOUS INQUIRIES SUGGESTED THAT AMI SECURITIES DID NOT EXIST AT THE GIVEN ADDRESS. THE LD. CIT(A) FIND THAT MERELY BECAUSE THE A SSESSEE COULD NOT PRODUCE M/S. AMI SECURITIES BEFORE THE ASSESSING OFFICER, THE SHARE TRANSACTIONS ENTERED WITH THIS COMPANY CANNOT BE DOUBTED WHEREAS OTHER VITAL EVIDENCES/ DOCUMENTS ARE ENOUGH TO ESTABLISH THAT THE TRANSACTIONS WERE GENUINE. CONTRACT NOTES ARE ONE OF THE MOST IMPORTANT LEGAL DOCUMENTS AVAILABLE TO STOCK MARKET INVESTOR. IT KEEPS TRACK OF ALL HIS TRANSACTIONS AT ONE PLACE TOGETHER WITH DATE OF PROFIT AND LOSS. CONTRACT NOTE IS THE LEGAL RECORD OF ANY TRANSACTION CARRIED OUT ON A STOCK EXCHANGE THROUGH A STOCK BROKER. IT SERVES AS THE CONFIRMATION OF TRADE DONE ON A PARTICULAR DAY ON BEHALF OF A CLIENT ON A STOCK EXCHANGE (BSE/NSE). THIS DOCUMENT IS ALSO AVAILABLE IN DIGITALLY SIGNED ELECTRONIC FORMAT. CONTRACT NOTE 8 DESCRIBES KEY DETAILS OF A PARTICULAR TRANSACTION TOGETHER WITH DATE, TIME, PRICE, QUANTITY TRADED ETC. A VALID CONTRACT NOTE SHOULD HAVE DETAILS OF TRADE LIKE, ORDER NUMBER, TRADE NUMBER, TRADE PRICE, TRADE EXECUTION TIME, TRADED QUANTITY, BROKERAGE CHARGED, SETTLEMENT REFERENCE NUMBER, DETAILS OF OTHER SERVICE CHARGES. IN THE INSTANT CASE, CONT RACT NOTES FURNISHED BY THE A SSESSEE CONTAINED ALL SUCH DETAILS. HENCE, IT IS NOT A PIECE OF PAPER AS ALLEGED BY THE ASSESSING OFFICER. APART FROM THAT, THE A SSESSEE HAS FURNISHED CONFIRMATION OF ACCOUNT DULY SIGNED UNDER THE SEAL OF M/S. AMI SECURITIES AL ONG WITH ITS PAN. MOREOVER, THE PAYMENTS WERE MADE BY THE A SSESSEE TO BROKER M/S. AMI SECURITIES THROUGH ACCOUNT PAYEE CHEQUES. THE COPY OF BANK STATEMENT REFLECTS THAT CHEQUES ISSUED BY THE A SSESSEE WERE DULY CREDITED IN THE ACCOUNT OF AMI SECURITIES. THU S, IT WAS WRONGLY ALLEGED BY THE ASSESSING OFFICER THAT THE AMOUNT WAS TRANSFERRED TO SOME OTHERS ACCOUNT I.E. JALARAM FINVEST LTD. IT IS TO BE NOTED THAT STOCK EXCHANGE HAD CONFIRMED THE PURCHASE AND SALES OF THE SHARES. ALL THESE FACTS CUMULATIVELY SUGGE ST THAT THERE IS NO REASON TO DOUBT THE TRANSACTIONS ENTERED INTO BY THE A SSESSEE THROUGH BROKER M/S. AMI SECURITIES. 5.1 THE HON'BLE ITAT, T BENCH, MUMBAI, IN THE CASE OF ACIT VS. CLARIDGES INVESTMENTS & FINANCES (P) LTD. DEALING WITH SIMILAR ISSUE WHERE THE ASSESSING OFFICER DENIED BUSINESS LOSS ON THE GROUND THAT SHARE TRANSACTIONS WERE NOT GENUINE, DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE, THE RELEVANT EXTRACT OF SUCH ORDER ARE REPRODUCED AS UNDER: BUSINESS INCOME - BUSINESS LOSS - ALLOWABILITY ASSE SSEE A SHAREBROKER HAD SHARE TRANSACTIONS WITH THREE KOLKATA BASED BROKERS ASSESSEES TRANSACTIONS ARE SUPPORTED BY THE MOVEMENT OF SHARES AS REFLECTED IN DEMAT ACCOUNT, MOVEMENT OF MONEY AS REFLECTED IN THE BANK ACCOUNT, ENTRIES IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, PREVALENT MARKET QUOTATIONS OF CSE, CONTRACT NOTES AND DELIVERY BILLS ISSUED BY KOLKATA BROKERS AND THEIR STATEMENTS IN RESPONSE TO THE ENQUIRIES MADE BY THE AO AND ASSESSEE HAD SHOWN NET PROFIT OF RS. 16.18 CRORES THE CONCLUSIONS OF THE AO THAT 'THESE TRANSACTIONS WERE SHOWN ONLY IN ORDER TO GENERATE LOSS OR PROFIT AND WERE NOT GENUINE SHARE TRANSACTIONS' COULD NOT BE REACHED FOR REASON ONLY OF DEFICIENCIES AND IRREGULARITIES IN THE DOCUMENTATION AT THE END OF KOLKATA BROKERS AO HAS ACTED UPON GROSSLY INADEQUATE MATERIAL AND HIS CONCLUSIONS ARE IN THE REALM OF SUSPICION, CONJECTURES AND SURMISES BUSINESS LOSS CLAIMED BY ASSESSEE WAS ALLOWABLE AS SHOWN IN ITS BOOKS OF ACCOUNT HELD: 9 AS THE MATTER STANDS THE ASSESSEE'S TRANSACTIONS ARE SUPPORTED BY THE MOVEMENT OF SHARES AS REFLECTED IN DEMAT ACCOUNT; MOVEMENT OF MONEY AS REFLECTED IN THE BANK ACCOUNT, ENTRIES IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, PREVALENT MARKET QUOTATIONS OF CSE, CONTRACT NOTES AND DELIVERY BILLS ISSUED BY KOLKATA BROKERS AND THEIR STATEMENTS IN RESPONSE TO THE ENQUIRIES MADE BY THE AO. LAST BUT NOT THE LEAST THE ASSESSEE HAS SHOWN NET PROFIT OF RS. 16.18 CRORES. AS AGAINST THESE THE CASE OF REVENUE IS THAT CERTAIN MATERIAL INFORMATION WAS NOT GIVEN IN THE CONTRACT NOTES AND COLUMNS IN THAT RESPECT WERE LEFT BLANK. COPY OF FORM B WAS NOT FILED IN CSE. FOR THESE REASONS IT IS NOT VERIFIABLE AS TO WHETHER THE TRADES IN QUESTION WERE DONE THROUGH THE TRADING SYSTEM OF THE EXCHANGE OR NOT. THE ANSWER OF THE ASSESSEE TO T HESE DEFICIENCIES AND IRREGULARITIES IS THAT IT COULD NOT BE HELD RESPONSIBLE FOR THE SAME. IT WAS NOT THE ASSESSEE BUT THE THREE KOLKATA BROKERS WHO WERE THE MEMBERS OF CSE. IT WAS THE OBLIGATION OF KOLKATA PARTIES TO COMPLY WITH THE PRESCRIPTIONS OF CALC UTTA STOCK EXCHANGE. BE HALF AS IT MAY, THE CONCLUSIONS OF THE AO THAT THESE TRANSACTIONS WERE SHOWN ONLY IN ORDER TO GENERATE LOSS OR PROFIT AND WERE NOT GENUINE SHARE TRANSACTIONS COULD NOT BE REACHED FOR REASON ONLY OF DEFICIENCIES AND IRREGULARITIES IN THE DOCUMENTATION AT THE END OF KOLKATA BROKERS. THE AO DOES NOT HAVE SUPPORT FROM THE SPECIAL AUDITORS, CSE OR ANY OTHER QUARTER TO THAT EFFECT WHEREAS THE ASSESSEE HAS RELIED UPON COGENT EVIDENCE AND MATERIAL. THE AO HAS ACTED UPON GROSSLY INADEQUATE MA TERIAL AND HIS CONCLUSIONS ARE IN THE REALM OF SUSPICION, CONJECTURES AND SURMISES. ACCORDINGLY IT IS DIRECTED THAT THE PROFIT/LOSS FROM THE ASSESSEE'S TRANSACTIONS WITH THE THREE KOLKATA BROKERS BE ASSESSED AS SHOWN IN THE BOOKS OF ACCOUNT OF THE ASSESSEE . MADDI VENKATARAMAN & CO. (P) LTD. VS. CIT (1998) 144 CTR (SC) 214 : (1998) 229 ITR 534 (SC), BOMBAY STOCK EXCHANGE VS. JAVA I. SHAH & ANR. (2003) 185 CTR (SC) 36 AND ASSTT. CIT VS. SUBHASH CHAND SHOREWALA (2004) 91 TTJ (DEL) 57 DISTINGUISHED. (PARA 72) CONCLUSION: ASSESSEES SHARE TRANSACTIONS BEING SUPPORTED BY MOVEMENT OF SHARES AND MONEY AS REFLECTED IN ITS BANK ACCOUNT, BOOKS OF ACCOUNT PREVALENT MARKET QUOTATIONS, CONTRACT NOTES AND DELIVERY BILLS ISSUED BY BROKERS AND BROKERS' STATEMENTS, AND ASSESSEE HAVING SHOWN NET PROFIT OF RS. 16.18 CRORES, LOSSES INCURRED IN THE TRANSACTIONS COULD NOT BE DISALLOWED TREATING THE TRANSACTIONS NON - GENUINE ON THE BASIS OF DEFICIENCIES IN DOCUMENTATION LEFT BY THE BROKERS.' 5.2 SIMILARLY, THE HON'BLE JHARKHAND HIGH COURT IN THE CASE OF CIT VS. ARUN KUMAR AGARWAL (HUF) HELD AS BELOW: - '10. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE PARTIES AND WE ARE OF THE CONSIDERED OPINION THAT THE LEARNED ASSESSING OFFICER WAS MUCH INFLUENCED BY THE EN QIURY REPORT WHICH MAY HAS BEEN BROUGHT ON RECORD BY THE EFFORTS OF THE ASSESSING OFFICER AND THAT ENQUIRY REPORT WAS PREPARED BY THE SEBI AND FROM THE OBSERVATIONS MADE BY THE ASSESSING OFFICER HIMSELF, IT IS CLEAR THAT AFTER GETTING THAT ENQUIRY REPORT, THE SEBI PRIMA FACIE FOUND INVOLVEMENT OF SOME OF THE SHARE BROKERS IN UNFAIR TRADE PRACTICES. EVEN IN A CASE WHERE THE SHARE BROKER WAS FOUND INVOLVED IN UNFAIR TRADE PRACTICE AND 10 WAS INVOLVED IN LOWERING AND RISING OF THE SHARE PRICE, AND ANY PERSON, WHO HIMSELF IS NOT INVOLVED IN THAT TYPE OF TRANSACTION, IF PURCHASED THE SHARE FROM THAT BROKER INNOCENTLY AND BONAFIDELY AND IF HE SHOW HIS BONAFIDE IN TRANSACTION BY SHOWING RELEVANT 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 NORMS OF S.E.B.I AND STOCK EXCHANGE, THEN MERELY BECAUSE OF THAT FACT A PERSON WHO BONAFIDELY ENTERED INTO SHARE TRANSACTION OF THAT COMPANY THROUGH SUCH BROKER THEN ONLY BY MERE ASSUMPTION SUCH TRANSACTIONS CANNOT BE HELD TO BE A SHAME TRANSACTION. FACT OF TINTED BROKER MAY BE RELEVANT FOR SUSPICION BUT IT ALONE NECESSARILY DOES LEAD TO CONCLUSION OF ALL TRANSACTION THAT BROKER AS TINTED. IN SUCH CIRCUMSTANCES, FURTHER ENQUIRY IS NEEDED AND THAT IS FOR INDIVIDUAL CASE. SUCH FURTHER ENQUIRY WAS NOT CONDUCTED IN THAT CASE. AT THIS JUNCTURE, IT WOULD BE RELEVANT TO MENTION HERE THAT IT IS NOT DISPUTED BY THE REVENUE BEFORE US THAT THE SHARES OF THESE ASSESSEES WERE ALREADY SHOWN IN THE EARLIER BALANCE SHEET SUBMITTED BY THE ASSESSEES, AND THEREFORE, IN THAT SITUATION, HOW THE REVENUE CONDEMNED THE TRANSACTION EVEN ON THE GROUND OF STEEP RISE IN THE SHARES. IF WITHIN A PERIOD OF ONE YEAR, THE SHARE PRICE HAS RISEN FROM RS.5 TO 55 AND FROM 9 TO 160 AND ONE PERSON WAS HOLDING THE SHARES MUCH PRIOR TO THAT START OF RISE OF THE SHARE, THEN HOW IT CAN BE INFERRED THAT SUCH PERSON ENTERED INTO S HAM TRANSACTION FEW YEARS AGO AND PREPARED FOR GETTING THE BENEFIT AFTER FEW YEARS WHEN THE SHARE WILL START RISING STEEPLY. IN PRESENT CASE EVEN THERE WAS NO REASON FOR SUCH SUSPICION WHEN THE SHARES WERE PURCHASED YEARS BEFORE THE UNUSUAL FLUCTUATION IN THE SHARE PRICE. 6. THAT FROM THE FACTS AS DISCUSSED ABOVE AND ON BASIS OF THE RATIO DECEDENDI THE LD. CIT(A) HELD IN HIS ORDER ON RECORD THAT WHERE A SHARE TRANSACTION IS DULY SUPPORTED BY CONTRACT NOTE, MOVEMENT OF MONEY AS REFLECTED IN THE BANK ACCOUN T, ENTRIES IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND DELIVERY BILLS ISSUED BY BROKERS AND THEIR CONFIRMATION, THE SAME CANNOT BE DOUBTED SIMPLY BECAUSE BROKER WAS NOT REGISTERED WITH NSE. THE ASSESSEE HAS SATISFACTORILY EXPLAINED THAT THE TRANSACTIONS WE RE GENUINE AND CREDIT APPEARING IN THE BALANCE SHEET WAS DUE TO LOSS ON TRADING OF COMMODITIES THROUGH AMI SECURITIES DURING THE YEAR UNDER CONSIDERATION. ACCORDINGLY THE LD. CIT(A) HELD THAT THE AO WAS NOT JUSTIFIED IN NOT ALLOWING THE LOSS OF RS. 37,87,8 80/ - INCURRED IN RESPECT OF TRANSACTION IN F&O SEGMENT CARRIED THROUGH M/S. AMI SECURITIES. THE ADDITION MADE BY THE AO ON THIS ACCOUNT WAS DELETED. 11 7. THAT AT THE TIME OF HEARING NONE APPEARED ON BEHALF OF THE ASSESSEE AND WE DECIDE THIS APPEAL BASED ON T HE MATERIAL PLACED ON RECORD AND THE SUBMISSIONS OF THE LD. DR. 8. WE HAVE PERUSED THE CASE RECORDS IN ENTIRETY, THE SUBMISSIONS OF THE LD. DR AND AS WELL AS ORDER OF THE LD. CIT(A) AND WE ARRIVE AT OUR CONSIDERED VIEW THAT AT THE OUTSET THE INCOME TAX LA WS ARE WELFARE LEGISLATION AND ARE NOT PENAL IN NATURE. THAT THEREBY THE SPIRIT OF INCOME TAX LAWS ESSENTIALLY PROVIDES THAT EVEN IF THERE ARE NO DIRECT EVIDENCE BUT THERE ARE CIRCUMSTANTIAL EVIDENCE TO SPECIFY THE FACT THAT AN ASSESSEE IS CARRYING ON CERT AIN TRANSACTION THEN HIS RIGHTS AND LIABILITIES TO BE DECIDED ACCORDINGLY. THAT MERE TECHNICAL ERROR SHOULD NOT HAMPER THE LEGAL RIGHTS OF AN ASSESSEE UNDER A WELFARE LEGISLATION. THAT IN THE INSTANT CASE IT IS ON RECORD THAT THE ASSESSEE HAS REFLECTED HIS TRANSACTION SUPPORTED BY THE BANK ACCOUNT, ENTRIES IN THE BOOKS OF ACCOUNT AND DELIVERY BILLS ALONGWITH THERE CONFIRMATION. THE ASSESSEE HAS THEREFORE SATISFACTORILY EXPLAINED THAT THE TRANSACTION WERE GENUINE AND CREDIT APPEARING IN THE BALANCE SHEET WAS DUE TO LOSS ON TRADING OF COMMODITIES THROUGH AMI SECURITIES DURING THE YEAR UNDER CONSIDERATION. THAT WE FIND NO INFIRMITY WITH THE FINDINGS OF THE LD. CIT(A) AND THEREFORE WE SUSTAIN THE RELIEF GRANTED BY THE LD. CIT(A) TO THE ASSESSEE AND THE SAID DELE TION OF LOSS OF RS. 37,87,881/ - IS THEREFORE ALLOWED. THAT THEREFORE ALL THE GROUNDS OF APPEAL BY THE REVENUE IS DISMISSED. 9. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/ - SD/ - (B.P. JAIN) ( PARTHA SARATHI CHAUDHURY ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13/01/2017 AG 12 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR