Surya Prakash Toshniwal HUF, Kolkata V. ITO, WD-41(3), KOLKATA, Kolkata

ITA 1213/KOL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9601 (ITAT-KOLKATA)
• Duration Of Justice: 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 06-12-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 30-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PINAKI MUKHERJEE JCITSRDR
• Keywords: Business income; Income from undisclosed sources
• Section: 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI A.T.VARKEY, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 1213 / KOL / 2016 ASSESSMENT YEAR :2005-06 SURYA PRAKASH TOSHNIWAL HUF, C/O. NARENDRA GOYAL & CO., 16, N.S. ROAD, 2 ND , FLOOR, KOLKATA-700 001 [ PAN NO.AAGHS 7032 G ] V/S . INCOME TAX OFFICER, WARD-41(3), 3, GOVERNMENT PLACE, KOLKATA-7001 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI SUBASH AGARWAL, ADVOCATE /BY RESPONDENT SHRI PINAKI MUKHERJEE, JCIT-SR-DR /DATE OF HEARING 06-12-2016 /DATE OF PRONOUNCEMENT 11-01-2017 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF ORDE R OF COMMISSIONER OF INCOME TAX (APPEALS)-13, KOLKATA IN APPEAL NO.435/C IT(A)-13/W- 44(3)/KOL/2014-15 DATED 29.02.2016. ASSESSMENT WAS FRAMED BY ITO WARD- 41(2), KOLKATA U/S 263/143(3) OF THE INCOME TAX ACT , 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 28.1 2.2010 FOR ASSESSMENT YEAR 2005-06. SHRI SUBASH AGARWAL, LD. ADVOCATE APPEARED ON BEHAL F OF ASSESSEE AND SHRI PINAKI MUKHERJEE, LD. DEPARTMENTAL REPRESENTATIVE A PPEARED ON BEHALF OF REVENUE. ITA NO.1213/KOL/2016 A.Y. 2005-06 SURYA PRAKASH TOSHNIWAL HUF VS. ITO WD-41(3), KO L. PAGE 2 2. FIRST ISSUE RAISED BY ASSESSEE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF ASSESSING OFFICER BY HOLDIN G THAT THE PURCHASE-SALE OF SECURITIES IS A BUSINESS PROFIT. 3. BRIEFLY, THE FACTS ARE THAT THE ASSESSEE IN THE PRESENT CASE IS A HINDU UN-DIVIDED FAMILY (HUF) AND DERIVED HIS INCOME FROM TRADING IN SHARES AND SECURITIES. THE ASSESSEE IS ENGAGED IN SALES-PURCHA SE OF SECURITIES AND EARNED INCOME THEREON WAS OFFERED TO TAX UNDER THE HEAD CAPITAL GAINS. HOWEVER, AO TREATED THE INCOME FROM THE SALE-PURCHA SE OF SECURITIES AS BUSINESS INCOME ON ACCOUNT OF FOLLOWING REASONS:- I) THE DIVIDEND INCOME IN THE YEAR UNDER CONSIDER ATION IS NEGLIGIBLE; II) FREQUENCY FOR SALE-PURCHASE AND MAGNITUDE OF T RANSACTIONS REFLECTS ACTIVITIES OF ASSESSEE AS IN THE NATURE OF BUSINESS; III) THE MANNER IN WHICH TRANSACTIONS FOR SALE-PUR CHASE WAS RECORDED IN THE BOOKS OF ACCOUNT WAS SUFFICIENT TO JUSTIFY THE SAME AS BUSINESS TRANSACTIONS. FINALLY, AO TREATED THE ACTIVITY OF ASSESSEE AS BU SINESS AND ACCORDINGLY TAXED THE PROFIT UNDER THE HEAD BUSINESS INCOME 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHEREAS IT WAS SUBMITTED THAT ASSESSEE BEING KARTA OF HUF HA D NO KNOWLEDGE OF SHARE MARKET. SO THE ASSESSEE BEING HUF CANNOT DO BUSINES S IN SHARES. THE ASSESSEE HAS CONSISTENTLY BEEN OFFERING THE SAID IN COME UNDER THE CAPITAL GAINS IRRESPECTIVE OF THE FACT WHETHER THERE IS GA IN OR LOSS. THE ASSESSEE HAS SHOWN ALL ITS SECURITIES UNDER THE HEAD INVESTMENT AND IT HAS NEVER SHOWN ITS SHARE UNDER THE HEAD AS CLOSING STOCK. AFTER CONS IDERING THE SUBMISSIONS OF ASSESSEE LD. CIT(A) DISREGARDED THE CLAIM OF ASSESS EE BY OBSERVING AS UNDER:- THE GROUND OF APPEAL NUMBER 01 & 02 RELATES TO TRA CING CAPITAL GAIN AS BUSINESS INCOME IN THIS REGARD IT IS PERTINENT TO M ENTION HERE THAT AS PER FINDINGS OF THE AO, THE AO HAS NEVER TREATED INCOME OF SHARES TRANSACTIONS AS A BUSINESS INCOME RATHER THAN IT HAS BEEN TREATED A S A INCOME FROM UNDISCLOSED SOURCES. HENCE, THE GROUND NUMBER 01 & 02 ARE NOT AS PER FINDING OF THE AO. ITA NO.1213/KOL/2016 A.Y. 2005-06 SURYA PRAKASH TOSHNIWAL HUF VS. ITO WD-41(3), KO L. PAGE 3 IN THE SUBMISSION DATED 15-02-2016 THE APPELLANT HA S TAKEN GROUND OF ASSESSING THE CAPITAL GAIN INCOME AS A BUSINESS INC OME. AS THESE SUBMISSION ARE NOT RELEVANT WITH THE FINDINGS OF THE AO BECAUS E THE AO HAS NOT TREATED IT AS BUSINESS INCOME. HE HAS TREATED IT AS INCOME FRO M UNDISCLOSED SOURCES WHICH ARE BEING ASSESSED UNDER SECTION 68. BUT THES E SUBMISSION ARE MADE TREATING IT ASSESSED AS BUSINESS INCOME, HAS NO BEA RING OVER THE FINDINGS OF THE AO WHO HAS ASSESSED IT AS UNEXPLAINED CASH CRED IT U/S 68, AND IT IS MISS CONCEIVED BY THE APPELLANT. HENCE, THESE GROUNDS AR E IRRELEVANT. THEREFORE THE GROUND NUMBER 01 & 02 ARE HEREBY DISMISSED. BEING AGGRIEVED BY THIS, ASSESSEE HAS COME UP AN AP PEAL BEFORE US. 5. BEFORE US LD. AR FOR THE ASSESSEE FILED PAPER BO OK WHICH IS RUNNING PAGES FROM 1 TO 29 AND REITERATED SAME SUBMISSIONS AS MADE BEFORE LD. CIT(A). HE FURTHER SUBMITTED THAT VOLUME AND FREQUE NCY OF SHARES TRANSACTIONS CANNOT BE BASIS OF FORMING THE OPINION THAT ASSESSE E IS INTO THE BUSINESS OF SALE/ PURCHASE OF SHARES. ON THE OTHER HAND, LD. DR FOR THE REVENUE VEHEMENTL Y RELIED ON THE ORDER OF AUTHORITIES BELOW. 6. WE HAVE GONE THROUGH THE SUBMISSIONS MADE BY BO TH THE SIDES AND ORDER OF THE LOWER AUTHORITIES AS WELL AS JUDGMENTS RELIED UPON BEFORE US. IN THE PRESENT CASE THE ASSESSEE HAS SHOWN INCOME FROM THE SALE PURCHASE OF THE SHARES UNDER THE HEAD CAPITAL GAIN BUT THE AO T REATED THE SAME AS INCOME FROM THE BUSINESS ON ACCOUNT OF THE FOLLOWING REASO NS : 1. THE AMOUNT OF DIVIDEND EARNED BY THE ASSESSEE IN THE LAST 3 YEARS INCLUDING THE YEAR UNDER CONSIDERATION WAS NEGLIGIB LE AND ON THE CONTRARY THE INCOME FROM THE SALE PURCHASE OF SHARE S WAS SUBSTANTIAL COMPARATIVELY. 2. THE MAGNITUDE, FREQUENCY OF TRANSACTION AND THE PERIOD OF HOLDING OF THE SECURITIES JUSTIFY THE ACTIVITIES OF THE ASSESS EE IN THE NATURE OF TRADE. ACCORDINGLY THE ACTIVITY OF THE ASSESSEE CANNOT BE TREATED AS IN THE NATURE OF INVESTMENT ACTIVITY. HOWEVER THE LEARNED CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE BY CONFIRMING THE ORDER OF AO BY HOLDING THAT THE ISSU E RAISED BY THE ASSESSEE IS NOT ARISING OUT OF THE ORDER OF AO. AT THE OUTSET W E FIND THAT THE LEARNED CIT(A) ITA NO.1213/KOL/2016 A.Y. 2005-06 SURYA PRAKASH TOSHNIWAL HUF VS. ITO WD-41(3), KO L. PAGE 4 HAS MISUNDERSTOOD THE FACTS OF CASE OF THE ASSESSEE AS EVIDENT FROM THE ORDER OF LOWER AUTHORITIES. THE ISSUE RAISED BY THE ASSES SEE IS VERY MUCH ARISING OUT OF THE ORDER OF AO. ON PERUSAL OF ASSESSMENT ORDER THERE WAS NO ISSUE FOR TREATING THE INCOME FROM SHARE TRADING BUSINESS AS INCOME FROM OTHER SOURCES AS OBSERVED BY THE LEARNED CIT(A). SO WE FIND THAT THE LEARNED CIT(A) HAS NOT ADJUDICATED THE ISSUE RAISED BY THE ASSESSEE IN THE PROPER MANNER. HOWEVER WE FIND THAT THE ISSUE RAISED BY THE ASSESSEE IS WE LL SETTLED. THEREFORE WE ARE NOT INCLINED TO RESTORE THE ISSUE TO LEARNED CIT(A) FOR FRESH ADJUDICATION TO AVOID FURTHER LITIGATION. HENCE WE DECIDED TO PROCE ED TO DISPOSE OFF THE GROUND RAISED BY THE ASSESSEE BEFORE US. ON PERUSAL OF FIN AL ACCOUNTS OF THE ASSESSEE, FOR THE ASSESSMENT YEAR UNDER CONSIDERATI ON AND IMMEDIATELY PRECEDING ASSESSMENT YEAR 2004-05 WHICH ARE PLACED ON PAGES 3 TO 8 OF THE PAPER BOOK, WE FIND THAT THE ASSESSEE HAS BEEN SHOW ING ALL THE SECURITIES AS INVESTMENT IN ITS BOOKS OF ACCOUNTS. THE CORRESPOND ING INCOME ON SALE AND PURCHASE OF SECURITIES HAS BEEN OFFERED UNDER THE H EAD OF CAPITAL GAIN BY THE ASSESSEE FOR BOTH THE YEARS. THE AO HAS MERELY TREA TED THE TRANSACTION OF SALE PURCHASE OF SECURITIES AS AN ADVENTURE IN THE NATURE OF TRADE MERELY ON THE GROUND OF MAGNITUDE AND FREQUENCY OF THE TRANSA CTION. THE SECURITIES IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE WE RE CLASSIFIED AS INVESTMENT. THUS IN OUR CONSIDERED VIEW THE AO CANN OT STEP INTO THE SHOES OF THE ASSESSEE TO DECIDE THE BUSINESS DECISIONS FOR P URCHASE AND SALE OF SECURITIES. IT IS THE DISCRETION OF THE ASSESSEE TO CARRY OUT THE ACTIVITY TO THE BEST OF HIS WISDOM. THEREFORE WE DO NOT FIND ANY SU BSTANCE IN THE CASE BEFORE US. IN THIS REGARD, WE FIND THE CO-ORDINATE BENCH O F MUMBAI TRIBUNAL HAD AN OCCASION TO CONSIDER THE SAME IN THE CASE OF JANAK S. RANGAWALLA VS ACIT REPORTED IN (2007) 11 SOT 627 (MUM), WHEREIN IT WAS HELD THAT : 'IT IS THE INTENTION OF THE ASSESSEE WHICH IS TO BE SEEN TO DETERMINE THE NATURE OF TRANSACTION CONDUCTED BY THE ASSESSEE. THOUGH TH E INVESTMENT IN SHARES IS ON A LARGE MAGNITUDE BUT THE SAME SHALL NOT DECIDE THE NATURE OF TRANSACTION. SIMILAR TRANSACTIONS OF SALE AND PURCHASE OF SHARES IN THE PRECEDING YEARS HAVE BEEN HELD TO BE INCOME FROM CAPITAL GAINS BOTH ON LONG TERM AND SHORT TERM BASIS. THE TRANSACTION IN THE YEAR UNDER CONSI DERATION ON ACCOUNT OF SALE AND PURCHASE OF SHARES IS SAME AS IN THE PRECEDING YEARS AND THE SAME ITA NO.1213/KOL/2016 A.Y. 2005-06 SURYA PRAKASH TOSHNIWAL HUF VS. ITO WD-41(3), KO L. PAGE 5 MERITS TO BE ACCEPTED AS SHORT TERM CAPITAL GAINS. THERE IS NO BASIS FOR TREATING THE ASSESSEE AS A TRADER IN SHARES, WHEN H IS INTENTION TO HOLD THE SHAES IN INDIAN COMPANIES AS AN INVESTMENT AND NOT AS STOCK IN TRADE. THE MERE MAGNITUDE OF THE TRANSACTION DOES NOT CHANGE T HE NATURE OF TRANSACTION, WHICH ARE BEING ASSESSED AS INCOME FROM CAPITAL GAI NS IN THE PAST SEVERAL YEARS. THE ASSESSING OFFICER IS DIRECTED TO SET OFF THE LONG TERM CAPITAL LOSS AGAINST THE SHORT TERM CAPITAL GAIN OF THE YEAR UND ER CONSIDERATION. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWE D.' WE ALSO FIND THAT THE HON'BLE CALCUTTA HIGH COURT I N THE CASE OF CIT VS MERLIN HOLDING P LTD REPORTED IN (2015) 375 ITR 118 (CAL) FOR THE ASST YEARS 2005- 06 AND 2006-07 HAD HELD AS BELOW:- ' THE FREQUENCY OF TRANSACTIONS IN SHARES ALONE CANNO T SHOW THAT THE INTENTION OF THE INVESTOR WAS NOT TO MAKE AN INVESTMENT. THE LEGISLATURE HAS NOT MADE ANY DISTINCTION ON THE BASIS-OF FREQUENCY OF TRANSA CTIONS. THE BENEFIT OF SHORT - TERM CAPITAL GAINS CAN BE AVAILED OF FOR ANY PERIOD OF RETENTION OF SHARES UP TO 12 MONTHS. ALTHOUGH A CEILING HAS BEEN PROVIDED, TH ERE IS NO INDICATION AS REGARDS THE FLOOR, WHICH CAN BE AS LITTLE AS ONE DA Y. THE QUESTION ESSENTIALLY IS A QUESTION OF FACT. THE ASSESSEE WAS A CERTIFIED NO N-BANKING FINANCIAL CONCERN. ITS MAIN ACTIVITIES WERE GIVING LOANS AND TAKING LOANS AND-INVESTING IN SHARES AND SECURITIES. THE ASSESSING OFFICER, FOR T HE ASSESSMENT YEARS 2005- 06 AND 2006-07, OPINED THAT THE ACTIVITY WHICH, ACC ORDING TO THE ASSESSEE, WAS ON INVESTMENT ACCOUNT AMOUNTED TO BUSINESS ACTI VITY AND, THEREFORE, HE TREATED THE SHORT- TERM CAPITAL GAINS OF RS. 1,01,0 0,000 AS BUSINESS INCOME. THE COMMISSIONER (APPEALS) HELD THAT THE REFUSAL ON THE PART OF THE ASSESSING OFFICER TO ACCEPT THE SHORT-TERM CAPITAL GAINS WAS INCORRECT. THIS WAS CONFIRMED BY THE TRIBUNAL. ON APPEAL : HELD, DISMISSING THE APPEAL, THAT THE ASSESSEE HAD ADDUCED PROOF TO SHOW THAT SOME TRANSACTIONS WERE INTENDED TO BE BUSINESS TRANSACTIONS, SOME TRANSACTIONS WERE INTENDED TO BE BY WAY OF INVESTME NT AND SOME TRANSACTIONS WERE BY WAY OF SPECULATION. THE REVENUE HAD NOT BEE N ABLE TO FIND FAULT FROM THE EVIDENCE ADDUCED. THE MERE FACT THAT THERE WERE 1,000 TRANSACTIONS IN A YEAR OR THE MERE FACT THAT THE MAJORITY OF THE INCO ME WAS FROM THE SHARE DEALING OR THAT THE MANAGING DIRECTOR OF THE ASSESS EE WAS ALSO A MANAGING DIRECTOR OF A FIRM OF SHARE BROKERS COULD NOT HAVE ANY DECISIVE VALUE. THE COMMISSIONER (APPEALS) AND THE TRIBUNAL HAD CONCURR ENTLY HELD AGAINST THE VIEWS OF THE ASSESSING OFFICER. ON THE BASIS OF THE SUBMISSIONS MADE ON BEHALF OF THE REVENUE, IT WAS NOT POSSIBLE TO SAY T HAT THE VIEW ENTERTAINED BY THE COMMISSIONER (APPEALS) OR THE TRIBUNAL WAS NOT A POSSIBLE VIEW. THEREFORE, THE DECISION OF THE TRIBUNAL COULD NOT B E SAID TO BE PERVERSE. NO FRUITFUL PURPOSE WAS LIKELY TO BE SERVED BY REMANDI NG THE MATTER.' FOR THE AFORESAID REASONS, WE ARE OF THE OPINION TH AT THE INCOME SHOWN BY THE ASSESSEE UNDER THE HEAD OF CAPITAL GAIN IS CONSISTE NT WITH THE ACCOUNTING ITA NO.1213/KOL/2016 A.Y. 2005-06 SURYA PRAKASH TOSHNIWAL HUF VS. ITO WD-41(3), KO L. PAGE 6 TREATMENT MADE IN THE BOOKS OF ACCOUNTS. RESPECTFUL LY RELYING ON THE AFORESAID JUDGMENTS WE ALLOW THE GROUND OF APPEAL O F THE ASSESSEE. 7. NEXT ISSUE RAISED BY ASSESSEE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF AO BY SUSTAINING THE ADDITI ON OF RS.14,97,500/- BY TREATING THE SAME AS INCOME FROM UNDISCLOSED SOURCE . 8. THE ASSESSEE HAD PURCHASED 5000 SHARES OF M/S RO HON FINANCIAL AND SECURITIES LTD. (RFSL FOR SHORT) AT A COST OF RS.50 ,250/- IN AGGREGATE ON 26.12.2003. THE SAME SHARES WERE SOLD TO M/S AHILYA COMMERCIAL PVT. LTD. (ACPL FOR SHORT) BY ASSESSEE FOR RS.14.97 LAKHS ON 14.01.2005 RESULTING CAPITAL GAIN OF RS.14,46,750/-. THE AO, DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THERE WAS A SHARP RISE IN PRICE OF SHARES OF RFSL AND ACCORDINGLY THE AO VERIFIED THE TRANSACTIONS FR OM THE ON-LINE PORTAL OF SEBI WHICH REVEALED THAT ACPL WAS DIRECTED BY SEBI NOT TO BUY, SALE OR DEAL IN SECURITIES IN ANY MANNER EITHER DIRECTLY OR INDI RECTLY. IT WAS ALSO OBSERVED THAT ACPL HAS NOT FILED FINANCIAL STATEMENT BEFORE SEBI FOR THE YEAR ENDED ON 31.03.2005. IN VIEW OF THE ABOVE, AO HELD THAT THE TRANSACTIONS AS BOGUS AND ACCORDINGLY HE TREATED THE SAME AS INCOME OF ASSESS EE FROM UNDISCLOSED SOURCE. 9. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHEREAS ASSESSEE SUBMITTED THAT THE TRANSACTIONS FOR SALE-P URCHASE OF SHARE WITH RFSL WAS MADE THROUGH ACCOUNT PAYEE CHEQUES. THE SH ARES WERE SOLD AFTER 13 MONTHS THROUGH ON-LINE PORTAL OF KOLKATA STOCK E XCHANGE WITHOUT KNOWING DETAILS OF BUYER. THOSE TRANSACTIONS OF PURCHASE-SA LE ARE SUPPORTED WITH THE VALID CONTRACT NOTES. THE ASSESSEE FURTHER SUBMITTE D THAT IT CANNOT BE PENALIZED FOR NON-FILING OF FINANCIAL STATEMENT BY ACPL. HOWEVER LD. CIT(A) AFTER CONSIDERING ASSESSEES SUBMISSION HAS DISREGA RDED THE CLAIM OF ASSESSEE AND UPHELD THE ORDER OF AO BY OBSERVING AS UNDER:- IN THIS REGARD IT IS PERTINENT TO MENTION HERE T HAT THE APPELLANT SRI SURYA PRAKASH TOSHNIWAL (HUF) IS RUN BY SRI SURY PRAKASH TOSHNIWAL BROKER AND SRI SURYA PRAKASH TOSHNIWAL IS KARTA OF THE HUF THE REFORE, THE CASE LAW CITED BY HIM IS NOT APPLICABLE AS THE FACTS OF THE CASE A RE DIFFERENT. IN THIS CASE BUYING AND SELLING BOTH ACTIVITY HAS BEEN OPERATED BY SRI SURYA PRAKASH ITA NO.1213/KOL/2016 A.Y. 2005-06 SURYA PRAKASH TOSHNIWAL HUF VS. ITO WD-41(3), KO L. PAGE 7 TOSHNIWAL. THE IDENTITY OF M/S AHILYA COMMERCIAL PV T. LTD. WAS NOT PROVED. THE CREDITWORTHINESS OF THE BUYER WAS NOT ESTABLISH ED, EVEN NET WORTH OF THE SHARES COMPANY WAS NOT ESTABLISHED. IT WAS THE DUT Y OF THE APPELLANT TO DISCHARGE HIS ONUS AS THE CREDIT WAS MADE IN HIS BO OKS OF ACCOUNT BUT HE FAILED TO DO SO. NET WORTH OF BUYING AND SELLING CO MPANY WAS ALSO SNOT SUBSTANTIATED TO THE EXTENT OF PRICE RAISED, AND WO RTH AT WHICH IT WAS PURCHASED. IN THIS CASE THE BUYING AND SELLING WAS DONE BY THE SAME PERSON IN HIS FAVOUR UNDER DIFFERENT COVER OF STATUS BUT T HE BENEFICIARY WAS ULTIMATELY SAME. THE BENEFICIARY HAS TO DISCHARGE ITS PRIMARY ONUS FOR ANY TRANSACTION MADE IN IS BOOKS OF ACCOUNT. THE AO HAS VERY CATEGO RICALLY GIVEN THE FINDING BASED ON INQUIRY OF SEBI AND NON-DISCHARGING OF ONU S BY THE APPELLANT. EVEN AT APPEAL STAGE THE FACTS BROUGHT ON RECORD BY THE AO WERE NOT CONTROVERTED BY ANY MATERIAL FACTS. IN VIEW OF THE AFORESAID OBS ERVATION OF THE AO AND AS STATED ABOVE ABOUT THE OBSERVATION OF SEBI AND INVE STMENT OF SAME PERSON AS KARTA OF HUF BEING SELLER AND AS A BROKER BEING BUYER FROM M/S ROHAN INTERNATIONAL, I AGREE WITH THE ADDITION MADE BY TH E AO IS UPHELD AND THE APPEAL IS DISMISSED ON THIS GROUND. BEING AGGRIEVED BY THIS, ASSESSEE HAS COME UP AN AP PEAL BEFORE US. 10. BEFORE US LD. AR FOR THE ASSESSEE REITERATED SA ME SUBMISSIONS AS MADE BEFORE LD. CIT(A) AND FURTHER STATED THAT THE SHARES WERE SOLD AFTER THE PAYMENT OF SECURITY TRANSACTIONS TAX AND SHARES WER E SOLD AT A PRICE WHICH WAS LISTED ON THE STOCK EXCHANGE. ON THE OTHER HAND, LD. DR FOR THE REVENUE VEHEMENTL Y RELIED ON THE ORDER OF AUTHORITIES BELOW. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE PRESENT CASE THE ASSESS EE HAS SHOWN INCOME FROM LONG TERM CAPITAL GAIN FOR RS.14,46,529.00 WHICH WA S CLAIMED AS EXEMPTED INCOME UNDER SECTION 10(38) OF THE ACT. HOWEVER, TH E ASSESSING OFFICER TREATED THE SAME AS INCOME FROM OTHER SOURCES BY HO LDING SUCH INCOME AS BOGUS AND FROM UNDISCLOSED SOURCES WHICH WAS ROUTED IN THE DISGUISE OF LONG TERM CAPITAL GAIN. THE ADDITION MADE BY THE AO WAS ALSO UPHELD BY THE LEARNED CIT(A). NOW THE ISSUES BEFORE US ARISES FOR OUR ADJUDICATION SO AS TO WHETHER THE LONG TERM CAPITAL GAIN INCOME CLAIMED B Y THE ASSESSEE IS BOGUS INCOME IN THE AFORESAID FACTS AND CIRCUMSTANCES. IN THE CASE ON HAND ADMITTEDLY THE SHARES WERE SOLD BY THE ASSESSEE AFT ER PAYING THE SECURITY TRANSACTION TAX (STT). SIMILARLY THE PURCHASE PRICE OF THE SHARES AND THE SALE ITA NO.1213/KOL/2016 A.Y. 2005-06 SURYA PRAKASH TOSHNIWAL HUF VS. ITO WD-41(3), KO L. PAGE 8 PRICE OF THE SHARES WERE REFLECTING ON THE CALCUTTA STOCK EXCHANGE AS EVIDENT FROM PAGE NUMBER 19 AND 20 OF THE PAPER BOOK. IT IS ALSO NOT IN DISPUTE THAT THE PURCHASE AND SALE OF THE SHARES WERE ROUTED THR OUGH ACCOUNT PAYEE CHEQUES. THE LEARNED AR IN SUPPORT OF HIS CLAIM HAS ALSO PRODUCED THE CONTRACT NOTES FOR THE PURCHASE AND SALE OF THE SHA RES WHICH ARE PLACED ON PAGES 12 AND 13 OF THE PAPER BOOK. HOWEVER WE FIND THAT IN SPITE OF HAVING ALL THE AFORESAID INFORMATION THE LOWER AUTHORITIES HAV E HELD THE LONG TERM CAPITAL GAIN AS BOGUS AND FROM UNDISCLOSED SOURCES ON THE B ASIS OF CERTAIN FACTS AS REVEALED UNDER : 1. THE ASSESSEE IN THE PRESENT CASE IS A HUF AND TH E TRANSACTION WAS ROUTED FOR BOTH PURCHASE AND SALE OF THE SHARES THR OUGH AN INDIVIDUAL BROKER WHO HAPPENED TO BE THE KARTA OF ASSESSEE I.E . HUF. 2. THE SHARES WERE SOLD TO M/S AHILAYA COMMERCIAL P RIVATE LIMITED (FOR SHORT ACPL) BUT THE FINANCIAL STATEMENTS OF THE COM PANY WERE NOT FILED TO THE STOCK EXCHANGE. THE ASSESSEE ALSO FAIL ED TO FURNISH THE NECESSARY DETAILS OF ACPL TO ESTABLISH THE GENUINEN ESS OF THE TRANSACTIONS EXCEPT THAT THE TRANSACTIONS WERE ROUT ED THROUGH ACCOUNT PAYEE CHEQUES. 3. THE SEBI HAS ALSO DIRECTED TO M/S ACPL NOT TO CA RRY OUT ANY TRANSACTION OF PURCHASE AND SALE OF SECURITIES IN A NY MANNER EITHER DIRECTLY OR INDIRECTLY. 4. THE ASSESSEE HAS ALSO FAILED TO SUBMIT THE NET W ORTH OF M/S RFL AND ACPL TO JUSTIFY THE AMOUNT OF CAPITAL GAIN EARNED D URING THE YEAR. ON THE ANALYSIS OF THE ABOVE FACTS WE FIND THAT THE LOWER AUTHORITIES HAVE NOT BROUGHT ON RECORD ANY CONCRETE EVIDENCE FOR DISALLO WING THE LONG TERM CAPITAL GAIN OF THE ASSESSEE. THE AO SHOULD HAVE ISSUED NOT ICES AND SUMMONS TO M/S RFL AND ACPL UNDER SECTION 133(6) AND 131 OF TH E ACT FOR THE PRODUCTION OF THE NECESSARY FINANCIAL INFORMATION BEFORE REJEC TING THE CLAIM OF THE ASSESSEE. WE FIND THAT ALL THE NECESSARY INFORMATIO N WHICH WERE AVAILABLE WITH THE ASSESSEE HAD BEEN BROUGHT ON RECORD BY THE ASSE SSEE BEFORE THE LOWER AUTHORITIES. IN CASE ACPL HAS NOT FILED THE FINANCI AL STATEMENTS WITH THE STOCK ITA NO.1213/KOL/2016 A.Y. 2005-06 SURYA PRAKASH TOSHNIWAL HUF VS. ITO WD-41(3), KO L. PAGE 9 EXCHANGE THEN THE ASSESSEE FOR THE FAULT OF ACPL CA NNOT BE HELD GUILTY UNDER THE INCOME TAX PROCEEDINGS. THE ASSESSEE IN THE INS TANT CASE HAS MADE THE TRANSACTIONS FOR THE SALE AND PURCHASE OF THE SHARE S THROUGH A VALID STOCK BROKER WHO WAS IN EXISTENCE AT THE RELEVANT TIME WI TH THE STOCK EXCHANGE AND THIS FACT HAS NOT BEEN DOUBTED BY THE LOWER AUTHORI TIES. IN VIEW OF THE ABOVE WE HOLD THAT THE LOWER AUTHORITIES HAD NOT BROUGHT ON RECORD SUFFICIENT REASONS FOR DISALLOWING THE CLAIM OF THE ASSESSEE. IN THIS CONNECTION WE RELY IN THE CASE OF CIT VERSUS CARBO INDUSTRIAL HOLDINGS LIMITE D REPORTED IN 116TAXMAN159 WHERE THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD AS UNDER : IF THE SHARE BROKER, EVEN AFTER ISSUE OF SUMMONS D OES NOT APPEAR, FOR THAT REASON, THE CLAIM OF THE ASSESSEE SHOULD NOT BE DEN IED, SPECIALLY IN THE CASES WHEN THE EXISTENCE OF BROKER IS NOT IN DISPUTE, NOR THE PAYMENT IS IN DISPUTE. MERELY BECAUSE SOME BROKER FAILED TO APPEAR, ASSESS EE SHOULD NOT BE PUNISHED FOR THE DEFAULT OF A BROKER AND ON MERE SU SPICION THE CLAIM OF ASSESSEE SHOULD NOT BE DENIED. SIMILARLY WE ALSO FIND GUIDANCE AND SUPPORT FROM TH E JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. EM ERALD COMMERCIAL LTD. REPORTED IN 120 TAXMAN 282 WHEREBY IT WAS OBSERVED AS UNDER : BUSINESS INCOMEBUSINESS LOSSLOSS ON SALE OF SHAR ESDETAILS OF PURCHASE AND SALE OF SHARES FURNISHEDPAYMENT AND R ECEIPTS WERE THROUGH ACCOUNT PAYEE CHEQUEIDENTITY OF SELLER AND PURCHAS ER NOT DISPUTEDCLAIM FOR LOSS COULD NOT BE DISALLOWED ON THE MERE GROUND THAT THE ASSESSEE FAILED TO PRODUCE THE BROKERS FOR VERIFICATION OF THE TRAN SACTIONFINDING OF THE TRIBUNAL THAT THE LOSS INCURRED BY THE ASSESSEE IN THE SHARE DEALINGS IS GENUINE AND IS ALLOWABLE WAS BASED ON MATERIAL AND WAS NOT PERVERSECIT VS. CARBO INDUSTRIAL HOLDINGS LTD. (2000) 161 CTR (CAL) 282 : (2000) 244 ITR 422 (CAL) FOLLOWED RESPECTFULLY FOLLOWING THE AFORESAID JUDGMENTS WE F IND THAT THE PROPOSITION LAID DOWN BY THE HONBLE COURTS ARE APPLICABLE TO THE IN STANT CASE ON HAND. THE ADDITION WAS MADE BY THE LOWER AUTHORITIES ON SEVER AL GROUNDS AS DISCUSSED ABOVE BUT ON ANALYSIS OF THE FACTS WE FIND THAT THE RE WAS NO FAULT ON THE PART OF THE ASSESSEE. THEREFORE WE ARE INCLINED TO REVERSE THE ORDER OF LOWER AUTHORITIES. HENCE THIS GROUND OF APPEAL OF THE ASS ESSEE IS ALLOWED. ITA NO.1213/KOL/2016 A.Y. 2005-06 SURYA PRAKASH TOSHNIWAL HUF VS. ITO WD-41(3), KO L. PAGE 10 12. LAST ISSUE RAISED BY ASSESSEE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF AO BY DISALLOWING THE DIVID END INCOME FOR RS.24,983/- FROM UTI MASTER VALUE FUND WHEREIN THE AMOUNT OF RS .75,000/- WAS INVESTED. 13. THE AO OBSERVED THAT SUCH INVESTMENT WAS NOT RE FLECTING IN THE PREVIOUS YEARS BALANCE-SHEET ENDING ON 31.03.2004. THEREFORE, THE INVESTMENT WAS MADE DURING THE YEAR. ACCORDINGLY, A O WAS OF THE VIEW THAT PERIOD OF HOLDING OF THE INVESTMENT IS LESS THAN A YEAR AND IN SUCH SHORT SPAN OF TIME, THE DIVIDEND INCOME CANNOT BE EARNED BY AS SESSEE. THUS, AO TREATED THE DIVIDEND INCOME AS INCOME FROM UNDISCLOSED SOUR CE. 14. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHO UPHELD THE ORDER OF AO BY OBSERVING AS UNDER:- GROUND NUMBER 03 RELATES TO THE DISALLOWANCE OF DI VIDED OF RS.24983/-. THE AO HAS DISALLOWED THE SAME ON THE GROUND THAT NO SU CH INVESTMENT IS SEEN TO BE MADE. DURING THE AFORESAID PERIOD IN THE BALANCE SHEET AND THE APPELLANT CLAIM DIVIDEND INCOME OF RS.24983/- FROM UTI MASTER VALUE FUND OF RS.75000/-. THE AO FURTHER CONCLUDED THAT THIS CANN OT BE POSSIBLE AS PER THE PREVAILING RATE OF DIVIDEND ALLOWED BY THE UTI CONC ERNED. IT WAS FURTHER OBSERVED BY THE AO THAT INVESTMENT MADE DURING THE FINANCIAL YEAR 2004-05 WILL MAKE APPELLANT ELIGIBLE TO EARN DIVIDEND ONLY AT COMPLETION OF ONE YEAR THAT COULD BE FINANCIAL YEAR 2004-05 AND CONSIDERIN G THE AFORESAID FACT THE AO ADDED THE SAME UNDER SECTION 68 AS FROM UNDISCLOSED SOURCES. THE PERUSAL OF BANK ACCOUNT SUBMITTED AT APPELLATE STAGE BY THE APPELLANT SHOWS THAT SOME PAYMENT IS MADE ON 07-02-2005 AND S OME RECEIPT IS ALSO SHOWN TO BE RECEIVED ON 07-02-2005 WHICH CANNOT BE TRUE IN ANY CASE. NO CERTIFICATE OF MUTUAL FUND HAS BEEN SUBMITTED. THE ABOVE PAYMENT DETAIL THOUGH NOT ACCEPTED BUT FOR SAKE OF ARGUMENT, IF IT IS PRESUMED THAT THE SAME PERTAINS FOR PAYMENT MUTUAL FUNDS THAN IT CANNOT BE CASE IN ANY SITUATION THAT ON THE SAME DATE APPELLANT WILL RECEIVED DIVIDEND O F RS25000/-. CONSIDERING THE ABOVE FAT THE ACTION MADE BY THE AO IS HEREBY C ONFIRMED AND THE APPEAL IS DISMISSED. BEING AGGRIEVED BY THIS, ASSESSEE HAS COME UP AN AP PEAL BEFORE US. 15. AT THE OUTSET, WE FIND THAT ASSESSEE HAS MADE I NVESTMENT ON 07.02.2005 FOR RS.75,000/- AND ON SAME DAY THE DIVI DEND INCOME WAS RECEIVED FROM UTI AS EVIDENT FROM THE ACCOUNT STATE MENT WHICH IS PLACED ON PAGE 22 OF THE PAPER BOOK. WE ALSO FIND THAT THE SA ME AMOUNT OF DIVIDEND IS ALSO REFLECTING IN THE BANK STATEMENT OF ASSESSEE W HICH IS PLACED ON PAGE 23 ITA NO.1213/KOL/2016 A.Y. 2005-06 SURYA PRAKASH TOSHNIWAL HUF VS. ITO WD-41(3), KO L. PAGE 11 OF THE PAPER BOOK AND SAID AMOUNT WAS CREDITED IN T HE BANK OF ASSESSEE ON 19.02.2005 THROUGH ACCOUNT PAYEE CHEQUE. TO THIS PO INT, LD. DR FOR THE REVENUE HAS NOT BROUGHT ANYTHING ON RECORD TO CONTR ADICT THE ARGUMENT MADE BY LD. AR. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE REVERSE THE ORDER OF LD. CIT(A) AND THIS GROUND OF ASSESSEE IS ALLOWED. 16. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 11/ 01/2017 SD/- SD/- ( !') ( !') (A.T.VARKEY) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP, SR.P.S $!% &- 11 / 01 /201 7 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-SURYA PRKASH TOSHNIWAL, HUF, C/O. NAREND RA GOYAL & CO., 16 N.S. ROAD, 2 ND FLOOR, KOLKATA-700 001 2. /RESPONDENT-ITO WARD-41(3),3, GOVT. PLACE, KOLKATA- 700 001 3. %.%/0 1 1 2 / CONCERNED CIT KOLKATA 4. 1 1 2- / CIT (A) KOLKATA 5. 567 /0, 1 /0 , / DR, ITAT, KOLKATA 6. 7:; <= / GUARD FILE. BY ORDER/ 1! , /TRUE COPY/ / % 1 /0 ,