Appeal Details
Counselvise Citation
125624514 RSA 2012
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
10 month(s) 7 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
19-04-2013
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
B
Assessment Year
2006-2007
Appeal Filed On
11-06-2012
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. ITA.NO.1256/PN/2012 (ASSESSMENT YEAR 2006-07) ANIL NANDKISHOR GOYAL, PLOT NO.18-19, PRITI SUDHA NAGAR, JALNA. .. APPELLANT PAN NO.AAWPG 1283B VS. ACIT CENTRAL CIRCLE, AAYAKAR BHAVAN, BEHIND HOLY CROSS ENGLISH SCHOOL, CANTONMENT, AURANGABAD 431 001. .. RESPONDENT ITA.NO.1249/PN/2012 (ASSESSMENT YEAR 2005-06) JAIBHAGWAN BANARSIDAS JINDAL, JINDAL HOUSE SAMBHAJI NAGAR, JALNA. .. APPELLANT PAN NO.AAQPJ 5374E VS. ACIT CENTRAL CIRCLE, AAYAKAR BHAVAN, BEHIND HOLY CROSS ENGLISH SCHOOL, CANTONMENT, AURANGABAD 431 001. .. RESPONDENT ITA.NO.1250/PN/2012 (ASSESSMENT YEAR 2005-06) MALTI GHANSHYAM GOYAL, AT. GIRIRAJ, CIVIL CLUB ROAD, JALNA. .. APPELLANT PAN NO.AGVPG 7466P VS. ACIT CENTRAL CIRCLE, AAYAKAR BHAVAN, BEHIND HOLY CROSS ENGLISH SCHOOL, CANTONMENT, AURANGABAD 431 001. .. RESPONDENT ITA.NO.1252/PN/2012 (ASSESSMENT YEAR 2005-06) NARESH BANARSIDAS JINDAL, FLAT NO.102/B, SR.NO.208, SIDDHARTH GANGA TOWER, KALYANI NAGAR, PUNE. .. APPELLANT PAN NO.AAPPJ 1517J VS. ACIT CENTRAL CIRCLE, AAYAKAR BHAVAN, BEHIND HOLY CROSS ENGLISH SCHOOL, CANTONMENT, AURANGABAD 431 001. .. RESPONDENT ITA.NO.1253/PN/2012 (ASSESSMENT YEAR 2005-06) GHANSHYAM CHUNILAL GOYAL, AT. GIRIRAJ, CIVIL CLUB ROAD, JALNA. .. APPELLANT PAN NO.AIAPG 3250C 2 VS. ACIT CENTRAL CIRCLE, AAYAKAR BHAVAN, BEHIND HOLY CROSS ENGLISH SCHOOL, CANTONMENT, AURANGABAD 431 001. .. RESPONDENT ITA.NO.1254 AND 1255/PN/2012 (ASSESSMENT YEARS 2005-06 AND 2006-07) SUNIL NANDKISHOR GOYAL, PLOT NO.18-19, PRITI SUDHA NAGAR, JALNA .. APPELLANT PAN NO.AAWPG 1295K VS. ACIT CENTRAL CIRCLE, AAYAKAR BHAVAN, BEHIND HOLY CROSS ENGLISH SCHOOL, CANTONMENT, AURANGABAD 431 001. .. RESPONDENT ITA.NO.1257/PN/2012 (ASSESSMENT YEAR 2006-07) NANDKISHOR TELURAM GOYAL, PLOT NO.18-19, PRITI SUDHA NAGAR, JALNA .. APPELLANT PAN NO.AAWPG 1289M VS. ACIT CENTRAL CIRCLE, AAYAKAR BHAVAN, BEHIND HOLY CROSS ENGLISH SCHOOL, CANTONMENT, AURANGABAD 431 001. .. RESPONDENT ASSESSEE BY : SHRI J.P. BAIRAGRA REVENUE BY : SHRI S.K. SINGH DATE OF HEARING : 09-04-2013 DATE OF PRONOUNCEMENT : 19-04-2013 ORDER PER R.K. PANDA, AM : THE ABOVE APPEALS FILED BY THE RESPECTIVE ASSESSEES ARE DIRECTED AGAINST THE SEPARATE ORDERS DATED 14-05-2012 OF THE CIT(A), AUR ANGABAD FOR THE RESPECTIVE ASSESSMENT YEARS MENTIONED ABOVE. SINCE COMMON ISS UES ARE INVOLVED IN ALL THESE APPEALS, THEREFORE, THESE WERE HEARD TOGETHER AND A RE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.1256/PN/2012 (ANIL NANDKISHOR GOYAL) (A.Y. 2 006-07) : 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN INDIVIDUAL. A SEARCH ACTION U/S.132 OF THE ACT WAS CONDUCTED ON 16-06-2009 AT T HE BUSINESS AND RESIDENTIAL PREMISES 3 OF DIFFERENT MEMBERS/ASSOCIATE CONCERNS OF THE KALI KA GROUP OF JALNA. THE ASSESSEE WAS ONE OF THE MEMBERS OF THE ABOVE GROUP. IN RESPONS E TO NOTICE ISSUED U/S.153A THE ASSESSEE FILED HIS RETURN OF INCOME ON 20-07-2011 D ECLARING TOTAL INCOME AT RS.35,63,110/-. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS THE ASSESSING OFFICER NOTED FROM THE COMPUTATION OF INCOME, CAPITAL ACCOU NT OF THE ASSESSEE AND OTHER DETAILS FURNISHED BY HIM THAT THE ASSESSEE HAD SHOWN CAPITA L GAIN OF RS.20,67,286/- ON SALE OF SHARES AND CLAIMED THE SAME AS EXEMPT U/S.10(38) OF THE INCOME TAX ACT. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE DURING TH E COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS P URCHASED THE SHARES OF A LESS KNOWN AND TRADED STOCK OF FAST TRACK ENTERTAINMENT LTD. HE NOTED THAT THE SHARES WERE PURCHASED OFF MARKET AND DEMATERIALISED LATER ON BE FORE THE SAME WERE SOLD. AFTER SELLING THE SHARES THE PROFIT HAS BEEN CLAIMED AS E XEMPT U/S.10(38) OF THE ACT. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE HE NOTED THAT THE SHARES WHICH THE ASSESSEE SOLD WAS A PENNY STOCK. 3. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE IS AN ASSOCIATE OF KALIKA GROUP OF JALNA WHICH CONSISTS OF 4 FAMILIES, I.E. ARUN AGRAW AL FAMILY, GHANSYAM GOYAL FAMILY, ANIL GOYAL FAMILY & NARESH JINDAL FAMILY. HE NOTED THAT SEVERAL MEMBERS OF THIS GROUP WERE INDULGED IN SUCH TYPE OF PURCHASE AND SALE OF SHARES OF THE SAME STOCK, I.E. FAST TRACK ENTERTAINMENT LTD. HE NOTED THAT IN THE YEAR 2006 INCOME TAX DEPARTMENT TRACKED DOWN THE RACKET OF MANIPULATION IN THE ABOV E-MENTIONED STOCK. IT WAS GROSSLY MANIPULATED BY MARKET OPERATORS FOR HELPING INDIVID UALS BRING UNACCOUNTED FUNDS TO THE MAIN STREAM FINANCIAL SYSTEM. THE MODUS OPERANDI W AS BUYING THESE STOCKS AT A BACK DATE AND THEN CLAIMING CAPITAL GAINS OR LOSSES TO N ET OFF THE TAXES. THE INDIVIDUALS HAD BOUGHT BILLS SHOWING PURCHASES OF PENNY STOCKS A YE AR BACK FROM THE MARKET OPERATORS. THEN THESE SHARE CERTIFICATES WERE DEMATERIALISED A ND SOLD IN THE OPEN MARKET AT A HIGHER PRICE. THE ENTIRE OPERATION IS A MERE BOOK ENTRY. 3.1 THE AO NOTED THAT IN THE PEETY GROUP OF JALNA T HE DEPARTMENT HAD CARRIED OUT SEARCH IN 2005-06 WHEREIN SUCH MANIPULATION WAS NOT ICED. THE ASSESSEE INITIALLY HAD ADMITTED HAVING INVOLVED IN SUCH MANIPULATION. THO UGH DECLARATION OF UNDISCLOSED INCOME WAS MADE BY THE GROUP, THE SAME WAS LATER ON RETRACTED AND WHILE COMPLETING 4 THE ASSESSMENT, INCOME CLAIMED EXEMPT WAS CHARGED T O TAX AND THE MATTER IS PENDING BEFORE THE ITAT, PUNE IN APPEAL. 4. HE NOTED THAT IN THE CASE OF JHUNJHUNWALA GROUP OF AURANGABAD A SEARCH WAS CONDUCTED IN THE A.Y. 2007-08 AND THE GROUP IN THE RETURNS FILED SUBSEQUENTLY HAD OFFERED THE INCOME SHOWN BY SUCH TRANSACTION AS INC OME CHARGEABLE TO TAX. SIMILARLY, ARUN AGRAWAL FAMILY OF KALIKA GROUP WHO HAD ALSO DO NE SUCH TRANSACTIONS AND CLAIMED SUCH INCOME AS EXEMPT HAD REVISED THE RETURNS IN AL L THE CASES AND OFFERED THE INCOME AS TRADING INCOME WHERE CLAIMS OF EXEMPT INCOME WERE MADE INITIALLY. HOWEVER, IN THE CASE OF REMAINING ASSESSEES OF KALIKA GROUP THE ASS ESSEES HAVE SHOWN INCOME ON SALE OF SHARES OF FAST TRACT ENTERTAINMENT LTD. AS EXEMPT E VEN IN RETURNS FILED IN RESPONSE TO THE NOTICES ISSUED U/S.153A/153C OF THE ACT. HE OBSERV ED THAT THE PERSONS ARE CLOSELY CONNECTED AND MOST OF THEIR TRANSACTIONS TAKE PLACE JOINTLY SUCH AS BUYING OR SELLING OF LANDS/PLOTS ETC. AND THEY ARE INVOLVED JOINTLY IN M ANY BUSINESS CONCERNS. THEREFORE, IT IS OBVIOUS THAT IN THE MANIPULATION MENTIONED ABOVE TH EY HAVE INVOLVED JOINTLY. THE ASSESSING OFFICER NOTED DOWN THE DETAILS OF PERSONS WHO HAVE DONE SUCH EXEMPT INCOME FROM OTHER 3 FAMILIES, I.E. GHANSHYAN GOYAL FAMILY, ANIL GOYAL FAMILY AND NARESH JINDAL FAMILY THE DETAILS OF WHICH ARE AS UNDER : SR.NO. NAME OF THE PERSON INCOME OFFERED A.Y. 1 ARUN AGRAWAL (INDL.) 12,55,640/- 2005-06 2 NARENDRA AGRAWAL (INDL) 12,32,475/- 2005-06 3 ARUN AGRAWAL (HUF) 12,82,673/- 2005-06 4 NARENDRA AGRAWAL (HUF) 9,85,688/- 2006-07 5 SHRIKISHAN AGRAWAL (HUF) 10,03,355/- 2005-06 6 LEELADEVI S. AGRAWAL 12,90,536/- 2005-06 HE, THEREFORE, WAS OF THE OPINION THAT THE CLAIM OF EXEMPTION OF INCOME OF THE ASSESSEE WAS A BOGUS CLAIM AND NO REAL CAPITAL GAIN AROSE TO THE ASSESSEE. HE, THEREFORE, CONFRONTED THE SAME TO THE ASSESSEE AND ASKED HIM T O EXPLAIN AS TO WHY THE CLAIM OF EXEMPT INCOME SHOULD NOT BE REJECTED. IT WAS SUBMI TTED BY THE ASSESSEE THAT HE HAS EARNED INCOME FROM SALE OF SHARES AND THE HOLDING P ERIOD OF SUCH SHARES IS MORE THAN 12 MONTHS. THE DETAILS OF CONTRACT NOTES OF THE PURCH ASE AND SALE OF SHARES WERE FURNISHED AND ACCORDINGLY IT WAS CLAIMED THAT THE INCOME BEIN G LONG TERM CAPITAL GAIN OF THE ACT IS EXEMPT U/S.10(38). 5 5. HOWEVER, THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE NOTED THAT THE ARUN AGRAWAL FAMILY HAS OFFERED SUCH INCOME TO TAX WAY BACK IN 2007 BY FILING REVISED RETURNS. MOST OF THE PERSONS OF THE GROUP HAVE NEVER PURCHASED OR SOLD ANY STOCK EITHER PREVIOUSLY OR AF TERWARDS INCLUDING ANY PENNY STOCK. THEREFORE, A PERSON EARNING ABNORMAL PROFIT IN TRAD ING OF STOCK FOR THE FIRST TIME WOULD CERTAINLY GO FOR TRADING IN SOME MORE STOCKS. IN AB SENCE OF SUCH TRADING, EARNING OF SUCH HUGE INCOME FROM SUCH PENNY STOCK IS AGAINST THE HU MAN TENDENCY. HE REFERRED TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SU MATI DAYAL VS. CIT REPORTED IN 214 ITR 801 AND CONCLUDED THAT THE ASSESSEE HAS NEVER E ARNED ANY INCOME FROM LONG TERM CAPITAL GAIN OR SHORT TERM CAPITAL GAIN BUT IT WAS THE INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCES INTRODUCED IN THE GUISE OF CAPI TAL GAIN. 6. IN APPEAL THE LD. CIT(A) UPHELD THE ACTION OF TH E ASSESSING OFFICER ON THE BASIS OF THE ELABORATE DISCUSSION MADE THEREIN. AGGRIE VED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN T REATING THE LONG TERM CAPITAL GAIN ON SALE OF SHARES OF RS.20,70,497/- AS INCOME FROM UNDISCLOSED SOURCES. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FURTHER ERRED IN CONFIRMING THE LONG TERM CAPITAL GAIN ON SALE OF SHARES OF RS.20,70,497/- EARNED BY THE APPELLANT AS INCOME FROM UNDISCLOSED SOURCES MERELY ON THE BASIS OF SIMILAR INCOME OFFERED FOR TAX AS SHAR E TRADING PROFIT BY SHRI ARUN AGARWAL AND FAMILY. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FURTHER ERRED IN HOLDING THAT THE LONG TERM CAPITAL GAIN ON SALE OF SHARES EARNED BY THE APPELLANT IS NOT EXEMPTED U/S. 10(38) OF THE INCOME TAX ACT. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FURTHER ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER I N TREATING THE LONG TERM CAPITAL GAIN ON SALE OF SHARES EARNED BY THE APPELL ANT AS INCOME FROM UNDISCLOSED SOURCES WHEN NO INCRIMINATING MATERIALS OR EVIDENCES ON THIS ISSUE WERE FOUND DURING THE COURSE OF THE SEAR CH. 7. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRING T O PAGE 4 OF THE PAPER BOOK SUBMITTED THAT THE ASSESSEE HAS PURCHASED 23500 SHA RES OF FAST TRACK ENTERTAINMENT LTD. AT A COST OF RS.43,800/- ON 25-06-2003. REFERRING TO PAGE 30 AND 31 OF THE PAPER BOOK HE DREW THE ATTENTION OF THE BENCH TO THE CONTRACT NOTE FOR PURCHASE OF SUCH SHARES. 6 REFERRING TO PAGE 23 AND 24 OF THE PAPER BOOK HE SU BMITTED THAT THE ASSESSEE IN THE BALANCE SHEET AS ON 31-03-2004 AND 31-03-2005 HAS S HOWN THE PURCHASE OF SHARES OF FAST TRACK ENTERTAINMENT LTD. UNDER THE HEAD INVES TMENT. REFERRING TO PAGE 26 OF THE PAPER BOOK HE SUBMITTED THAT THE ASSESSEE HAS RECEI VED LETTER FROM M/S. FAST TRACK ENTERTAINMENT LTD. ON 07-10-2003 WHEREIN 23500 SHAR ES ARE DULY TRANSFERRED IN THE NAME OF THE ASSESSEE. REFERRING TO PAGE 27 OF THE PAPER BOOK HE SUBMITTED THAT THE ASSESSEE HAS RECEIVED LETTER FROM M/S. FAST TRACK E NTERTAINMENT LTD. ON 17-03-2004 TO GET THE SHARES DEMATERIALISED. REFERRING TO PAGE 2 8 OF THE PAPER BOOK HE DREW THE ATTENTION OF THE BENCH TO THE SHARE CERTIFICATE FOR 23,500 SHARES IN THE NAME OF THE ASSESSEE. REFERRING TO PAGE 33 OF THE PAPER BOOK H E SUBMITTED TAHT THE SHARES WERE SOLD ON 06-05-2005 FOR A CONSIDERATION OF RS.21,15,154.4 0. REFERRING TO PAGE 44 OF THE PAPER BOOK HE DREW THE ATTENTION OF THE BENCH TO THE REQU EST BY THE ASSESSEE FOR DEMATERIALISATION OF THE SHARES ON 09-02-2005. REF ERRING TO PAGE 45 OF THE PAPER BOOK HE DREW THE ATTENTION OF THE BENCH TO THE DEMAT CER TIFICATE ISSUED BY IDBI BANK LTD. ACCORDING TO WHICH THE SHARES GOT DEMATERIALISED ON 07-03-2005. HE SUBMITTED THAT ALL THE 23500 SHARES GOT SUB-DIVIDED INTO 23500 SHARES ON 19-03-2005. REFERRING TO PAGE 36 TO 41 OF THE PAPER BOOK HE DREW THE ATTENTION OF THE BENCH TO THE COPY OF THE BILL AND CONTRACT NOTES FOR SALE OF SHARES. HE SUBMITTED TH AT SINCE THE SHARES WERE HELD BY THE ASSESSEE FOR MORE THAN 12 MONTHS, THEREFORE, THE AS SESSEE IS ENTITLED TO CLAIM EXEMPTION U/S.10(38) OF THE ACT. REFERRING TO THE DECISION O F THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SHRI SURENDRA SHANTILAL PEETY AND OTHER FAM ILY MEMBERS ORDER DATED 28-09-2012 HE SUBMITTED THAT THE TRIBUNAL HAS ALREADY ALLOWED THE LONG TERM AND SHORT TERM CAPITAL GAIN CLAIMED BY THE ASSESSEE AND OTHER FAMILY MEMBE RS AND THE APPEAL FILED BY THE REVENUE HAS BEEN DISMISSED. REFERRING TO PAGE 24 O F THE ORDER OF THE TRIBUNAL HE SUBMITTED THAT THE SAID GROUP HAS ALSO TRADED IN TH E SHARES OF FAST TRACK ENTERTAINMENT LTD. AND EARNED CAPITAL GAIN ON SHARES OF SUCH SHAR ES APART FROM OTHER SHARES. RELYING ON DECISIONS OF VARIOUS HIGH COURTS AND DIFFERENT B ENCHES OF THE TRIBUNAL THE CLAIM OF SHORT TERM AND LONG TERM CAPITAL GAIN CLAIMED BY TH E ASSESSEE HAS BEEN ALLOWED. THEREFORE, THIS BEING A COVERED MATTER THE APPEAL O F THE ASSESSEE SHOULD BE ALLOWED. 7 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE O THER HAND HEAVILY RELIED ON THE ORDER OF THE AO AND THE CIT(A). HE SUBMITTED THA T ARUN AGRAWAL GROUP WHO HAD INDULGED IN SUCH TYPE OF TRANSACTIONS HAVE OFFERED THE INCOME AS BUSINESS INCOME BY REVISING THEIR RETURNS WHEREIN ORIGINALLY THEY HAD CLAIMED THE INCOME FROM SUCH CAPITAL GAIN AS EXEMPT. HE SUBMITTED THAT THE ASSESSEE BEI NG VERY NEW TO TRADING IN PENNY STOCK HAS INFACT BROUGHT HIS OWN MONEY AND HAS NOT EARNED ANY SUCH LONG TERM CAPITAL GAIN AS CLAIMED. THE EARNING OF SUCH HUGE INCOME BY A PERS ON NOT KNOWN TO SUCH TYPE OF TRADING IS AGAINST HUMAN PROBABILITIES. FOR THIS P ROPOSITION HE RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SUMATI DAYAL V S. CIT (SUPRA) AND DURGA PRASAD MORE REPORTED IN 72 ITR 807. 9. THE LD. COUNSEL FOR THE ASSESSEE IN HIS REJOINDE R SUBMITTED THAT ALL THE ASPECTS ARGUED BY LD. DEPARTMENTAL REPRESENTATIVE HAS BEEN CONSIDERED BY THE HONBLE TRIBUNAL IN THE PEETY GROUP OF CASES. HE SUBMITTED THAT MERELY BECAUSE SOME BODY HAS OFFERED THE LONG TERM CAPITAL GAIN AS BUSINESS INCO ME THE SAME CANNOT BE A GROUND BY THE REVENUE FOR CONSIDERING THE LONG TERM CAPITAL G AIN AS BUSINESS INCOME IN THE CASE OF THE ASSESSEE. 10. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BE FORE US. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE AS PER DOCUMENTS PRODUCED HA S PURCHASED 23,500 SHARES OF FAST TRACK ENTERTAINMENT LTD OFF MARKET ON 25-06-2003 FO R A CONSIDERATION OF RS.43,800/- PAID IN CASH. THERE IS ALSO NO DISPUTE TO THE FACT THAT THE SHARES GOT DEMATERIALISED ON 07-03-2005. THERE IS ALSO NO DISPUTE TO THE FACT T HAT THE ASSESSEE IN HIS BALANCE SHEET AS ON 31-03-2004 AND 31-03-2005 (COPIES OF WHICH ARE P LACED AT PAPER BOOK 23 TO 24 RESPECTIVELY) HAS SHOWN SUCH SHARES UNDER THE HEAD INVESTMENT. THERE IS ALSO NO DISPUTE TO THE FACT THAT THE SHARES ARE SOLD AFTER DEMATERIALISATION ON 06-05-2005. ACCORDING TO THE ASSESSEE SINCE SHARES WERE HELD FO R A PERIOD OF MORE THAN 12 MONTHS, THEREFORE, THE INCOME FROM SALE OF SUCH SHARES IS L ONG TERM CAPITAL GAIN AND THE SAME IS EXEMPT U/S.10(38) OF THE INCOME TAX ACT. IT IS THE CASE OF THE REVENUE THAT THE INCOME 8 SO CLAIMED AS EXEMPT U/S.10(38) OF THE ACT IS NOT L ONG TERM CAPITAL GAIN AND HAS TO BE TREATED AS INCOME FROM OTHER SOURCES SINCE THE SH ARES SO SOLD ARE PENNY STOCKS AND THE ASSESSEE, NEITHER IN THE PAST NOR IN SUBSEQUENT YEA RS, HAS TRADED IN SUCH SHARES AND EARNED SUCH HUGE INCOME. FURTHER, ARUN AGRAWAL FA MILY, WHO ORIGINALLY HAD CLAIMED SUCH LONG TERM CAPITAL GAIN AS EXEMPT HAD SUBSEQUEN TLY OFFERED SUCH INCOME AS BUSINESS INCOME IN THE RETURNS FILED AND EARNING OF SUCH HUG E INCOME IS AGAINST ALL HUMAN PROBABILITIES IN VIEW OF THE DECISION OF HONBLE SU PREME COURT IN THE CASE OF SUMATI DAYAL VS. CIT(SUPRA). 10.1 WE FIND IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN THE CASE OF SURENDRA SHANTILAL PEETY AND OTHER FAMILY MEMBERS WHERE THE CLAIM OF EXEMPT LONG TERM CAPITAL GAIN WAS DENIED BY THE ASSESSING OFFICER. THE SALE OF SUCH SHARES INCLUDED THE SHARES OF FAST TRACK ENTERTAINMENT LTD. WE FIND THE CIT(A) A LLOWED THE CLAIM OF THE ASSESSEE AND ON FURTHER APPEAL BY THE REVENUE, THE TRIBUNAL, AFTER CONSIDERING VARIOUS DECISIONS HAS ALLOWED THE CLAIM OF LONG TERM AND SHORT TERM C APITAL GAIN BY THE ASSESSEE AND DISMISSED THE APPEAL FILED BY THE REVENUE BY HOLDIN G AS UNDER : 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY 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 PEETY GROUP OF JALNA. THIS GROUP CONSISTS OF SHRI SHANTILAL GOVARDHANDAS PEETY, HIS SPOUSE SMT.SHARDA S.PEETY, THEIR SONS SH RI SURENDRA S PEETY, RAVINDRA S PEETY AND JITENDRA S PEETY, THEIR DAUGHT ERS IN LAW SMT.VARSHA S PEETY, SMT.RACHANA R PEETY AND SMT. NAMRATA J PEETY , HUF OF SHRI RAVINDRA PEETY AND HUF OF SHRI JITENDRA PEETY. THE BUSINESS CONCERNS OF THE PEETY GROUP ARE SRJ PEETY STEELS PVT. LTD. WHEREIN MILD STEEL I NGOTS/BILLETS ARE MANUFACTURED, DHANLAKSHMI SPONGE IRON, A BRANCH OF SRJ PEETY STEE LS (P) LTD., WHERE SPONGE IRON IS MANUFACTURED AND SRI OM ROLLING 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 REQUISITE DOCUMENTS AND WERE PROCESSED U/S.143(1) FOR EACH OF THE YEARS UNDER CO NSIDERATION. IN THE RETURNS FOR EACH YEAR, ASSESSEE HAD SHOWN AN INCOME UNDER T HE HEAD LONG TERM CAPITAL GAINS PERTAINING TO SALE OF SHARES HELD AS INVESTME NT WHICH WAS ACCEPTED AS SUCH 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. COPIES OF BALANCE SHEET, P & L A/C AND COMPUTATION OF INCOME FOR THE ASSESSMENT YEARS UNDER CONSIDERATION ARE ATTACHED AS 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 TH E PURCHASES/SALES WERE MADE. 9 C) THE PURCHASE AND SALE OF THE SHARES WERE EVIDENCED BY THEIR HAVING BEEN SHOWN IN THE ANNUAL ACCOUNTS ATTACHED WITH THE REGULAR RE TURNS OF INCOME FOR RELEVANT YEAR/YEARS. 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, PRICE AT WHICH PURCHASED, T OTAL 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 ALSO 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 INTIMAT ION 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. COPIES OF CONTRACT NOTES, PURCHA SE BILLS, BROKER LEDGER ACCOUNT, CLIENT LEDGER IN THE BOOKS OF BROKER, DAY TRADING PROFIT BILLS 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 PAID AND THIS FACT WAS AL SO MENTIONED IN THE INVESTMENT ACCOUNT FILED DURING THE REGULAR COURSE. FORM NO.10DB EVIDENCING PAYMENT OF SST ON TRANSACTION ENTERED ON STOCK EXCH ANGE SIGNED BY THE BROKER IS ON RECORD. COPIES OF THE SAID FORM/CONFIRMATION 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 SAL E CONSIDERATION, BROKERAGE, SETTLEMENT NO, TRADE NO, ORDER NO, BILLS OF BROKERS , ETC. ALL THE CONTRACT NOTES 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 ABOVE BILLS REVEAL THAT THE SALE WAS EFFECTED THROUGH THE ELECTRONIC TRADING PLATFORM OF RECOGNIZ ED STOCK EXCHANGE. THERE IS NO DISPUTE WITH REGARD TO DATE OF SALES WHICH IS A MATTER OF RECORD. O) THE SALE CONSIDERATION OF THE SALE OF SHARES IS REC EIVED THROUGH REGULAR BANKING CHANNELS IN THE FORM OF ACCOUNT PAYEE CHEQUES/DRAFT S AND THE SAME WERE CREDITED IN REGULAR 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. 10 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, DEMAT ACCOUNT AND BSE STOC K PRICE LIST ARE SUBMITTED AS PAGES 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 AUTHORIZED BROKERS, ROUTED THROUGH APPROPRIATE CHANNELS INCLUDING BANKS AND THE ASSESSEE HAD RECOR DED THE SALE PROCEEDS OF THE SHARES IN ITS BOOKS OF ACCOUNTS AND HAD VERY WELL E XPLAINED ITS NATURE AND SOURCE OF ACQUISITION. THE LONG TERM CAPITAL GAINS ON THE SAL E OF SHARES WAS CLAIMED AS EXEMPT U/S. 10(38) OF THE ACT IN THE RETURNS FOR A. YS. 2005-06 AND 2006-07 AS PER THE AMENDMENT BROUGHT ABOUT BY THE FINANCE ACT, 2004 W. E.F. 1.10.2004 AND PAID THE TAX ON STCG EARNED IN THESE TWO YEARS. FURTHER, AS SESSEE PAID TAX AS PER APPLICABLE RATE ON LTCG EARNED FROM A.Y. 2002-03 TO 2004-05. 14.4. A SEARCH ACTION U/S. 132 WAS CARRIED OUT IN THE RESIDENTIAL AND BUSINESS PREMISES OF THE PEETY GROUP ON 17.03.2006. ASSESSEE CLAIMED THAT DURING THE COURSE OF SEARCH, NO INCRIMINATING EVIDENCES WA S FOUND TO DRAW ANY ADVERSE CONCLUSION IN RESPECT OF THE TRANSACTIONS IN SHARES AND THE COMPUTATION OF INCOME IN RESPECT THEREOF. NOTICES U/S. 153A WERE ISSUED FOR ALL THE YEARS UNDER CONSIDERATION TO ALL THE ASSESSEES OF THE GROUP AND THE RETURNS O F INCOME WERE FILED ON 29.08.2006 FOR EACH YEAR. THE TABLE BELOW INDICATES THE DETAIL S 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/143(3) VIDE ORDER DAT ED 31.12.2007 FOR THE A.YS. 2000-01 TO 2006-07 OF SRI SURENDRA S PEETY AS DETAI LED 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 2006-07 3,38,251 STCG 11,78,132 LTCG EXEMPT 1,39,20,086 5,38,251 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 THAT THESE AMOUNTS REPRESE NT THE UNEXPLAINED MONEY OF THE COMPANY. IT WAS CONTENDED THAT PRIOR TO THE SEA RCH, 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 COURSE OF SEARCH NO INC RIMINATING MATERIALS WERE FOUND RELATING TO THESE YEARS WHICH COULD HAVE BEEN ADDED BACK IN THE PROCEEDINGS U/S.153A. THE DETAILS REGARDING THE TRA NSACTION IN SHARES FOR EACH OF THE YEAR UNDER CONSIDERATION WERE VERY WELL PLACED BEFORE THE 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 11 DEFICIENCY WITH REGARD TO THE ASSESSEES CLAIM OF T RANSACTION IN SHARES, THE INCOME SHOWN AND 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 BEHIND THE BACK OF THE ASSESSEE WITHOUT PRODUCING THEM BEFORE THE ASSESSEE FOR CROSS EXAMIN ATION DESPITE SPECIFIC REQUEST. UNDER PECULIAR CIRCUMSTANCES ASSESSEE OFF ERED THIS AMOUNT IN HIS STATEMENT RECORDED U/S. 132(4) THOUGH AS SUCH NOTHI NG INCRIMINATING WAS FOUND IN THE COURSE OF SEARCH RELATING TO ASSESSMENT YEAR S UNDER CONSIDERATION. NORMALLY NO NEW ADDITION SHOULD BE MADE WHERE ALL T HE FACTS WERE PLACED BEFORE THE DEPARTMENT DURING THE COURSE OF REGULAR ASSESSM ENTS WHICH STOOD COMPLETED ON THE DATE OF INITIATION OF ACTION U/S. 132. 14.7. THE DETAILS OF LONG TERM CAPITAL GAIN, SHORT TERM CAPITAL GAIN AND SHARE DEALING PROFITS EARNED BY THE ASSESSEE FO R 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 ASSESSEE IN THE ORIGINAL RETURN AS WELL AS IN THE RETURNS FILED U/S. 153A SHOWING THE INCLUSION O F THE DAY TRADING PROFIT IN THE TOTAL TAXABLE INCOME FOR THE RELEVANT YEAR WHICH HA S BEEN ACCEPTED BY THE ASSESSING OFFICER. THIS ESTABLISHES THE SOURCE OF I NVESTMENT IN PURCHASES 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 POI NT 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 ASS ESSMENT U/S.153A OF THE ACT. WHEN THE LONG TERM CAPITAL GAINS AND SHORT TERM CAP ITAL GAINS EMANATING FROM THE SAID SALE PROCEEDS HAVE BEEN OFFERED FOR T AXATION, THE ENTIRE SALE PROCEEDS IN OUR OPINION CANNOT BE ADDED AGAIN TO TH E 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 WERE REPLIED. TH E DETAILS OF THE CORRESPONDENCES BETWEEN THE ASSESSEE AND THE DEPARTMENT ARE AS UNDE R: 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 YEAR-WISE DETAILS O F SHARES AND DEPOSITS HELD BY HIM FOR ALL THE YEARS UNDER CONSIDERATION. COPIE S OF BANK STATEMENTS, CONTRACT NOTES/BROKER NOTES, PURCHASE BILLS OF SHAR ES WERE ALSO 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 SUBMITTED. A COPY OF THE ST ATEMENT IS ATTACHED AS PAGES 32, 61, 173, 203, 256, 277, 263, 292, 333, 39 0, 461 & 509 OF THE PAPER BOOK-I. 12 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 SUBMITTED. A COPY OF THE STATEMENT OF LON G TERM CAPITAL GAINS FOR EACH OF THE YEAR IS ATTACHED AS PAGES 31, 172, 255, 332 & 460 AND OF SHORT TERM CAPITAL GAINS IS ATTACHED AS PAGES 417 & 521 O F 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 SUBMITTED. A COPY OF THE S TATEMENT 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 SHARE TRANSACTIONS. A COP Y OF THE LETTER DATED 17.12.2007 IS ATTACHED AS PAGES 4-11 OF THE PAPER B OOK-II. 14.11. THE ASSESSMENT WAS COMPLETED ON 31.12.2007 A FTER TREATING THE SHARE TRANSACTIONS DISCLOSED IN THE REGULAR RETURN OF INC OME AS BOGUS AND AS UNDISCLOSED INCOME OF THE RESPONDENT U/S 69A OF THE ACT. WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER HAS TOTALLY IGNORED THE DOCUMENTA RY EVIDENCES PLACED ON RECORD AND THOSE PRODUCED BY ASSESSEE WITHOUT ASSIGNING AN Y REASON FOR SAME. WHILE ARRIVING AT THE ABOVE CONCLUSION, THE ASSESSING OFF ICER MAINLY RELIED ON THE FOLLOWING EVIDENCES: 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 RET URN UNDER THE HEAD LTCG AS UNDISCLOSED INCOME IN VARIOUS HANDS WHICH WAS SUBSE QUENTLY RETRACTED AT THE TIME OF FILING THE RETURN. B) THE STATEMENTS RECORDED BY THE DEPARTMENT FROM CERT AIN BROKERS NAMELY VISHAL BHAGWANDAS OF VIJAY BHAGWANDAS & CO., PRATIK SHAH O F DPS SHARES AND SECURITIES AFTER THE DATE OF SEARCH IN WHICH THEY H AD ALLEGED THAT THE TRANSACTIONS 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. 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 INCOME TAX AC T, 1961, TOTALLY IGNORING THE APPELLANT'S REPEATED SUBMISSIONS THAT THE STATEMENT S WERE MADE IN A HURRY, IN A CONFUSED STATE OF MIND AND WITHOUT HAVING THE BENEF IT OF REFERRING TO THE VARIOUS DOCUMENTS WHICH CONCLUSIVELY 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 2002-03 TO 2006-07 RESPECTIVELY BY TREATING THE SUM AS UNEXPLAINED 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 TRANSACTIONS 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. AS 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 TAX ACT, 1961. 13 14.13. IN APPEAL, THE CONCERNED CIT(A)-I, NAGPUR, V IDE HIS APPELLATE ORDER DATED 18.06.2008 ALLOWED THE APPEAL OF THE RESPONDE NT FOR ALL THE YEARS UNDER CONSIDERATION, THUS REVERSING THE ASSESSING OFFICER 'S FINDINGS ON THE ISSUE. THE SAME HAS BEEN AGITATED BEFORE US ON BEHALF OF THE R EVENUE. THE VARIOUS ISSUES HAVE BEEN ARGUED BEFORE US. EACH OF THE GROUNDS TAKEN 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 FACTS OF THE PRESENT C ASE. A SEARCH ASSESSMENT U/S. 153A SHOULD BE EVIDENCE BASED. A SEARCH IS AUTHORIZ ED TO UNEARTH UNDISCLOSED ASSETS OR TRANSACTIONS RESULTING IN INCOME WHICH ARE NOT R ECORDED IN THE BOOKS 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 DISC LOSED TO THE DEPARTMENT. THIS IS THE REASON WHY SEPARATE AND SPECIAL PROVISIONS HAVE BEEN MADE TO COMPLETE SEARCH RELATED ASSESSMENTS. AN ASSESSMENT U/S. 153A IS NOT MEANT TO UNSETTLE THE INCOME SHOWN IN THE REGULAR RETURN IN THE ABSENCE OF EVIDE NCE FOUND AS A RESULT OF SEARCH. IT IS NOT MEANT TO MAKE A ROVING AND FISHING ENQUIRY. THIS NOTICE IS MEANT TO ASSESS THE UNDISCLOSED INCOME, IF ANY, DISCOVERED IN COURSE OF SEARCH BASED ON THE MATERIALS FOUND. 14.13.2. WHEN NOTHING INCRIMINATING IS FOUND IN THE COURSE OF SEARCH RELATING TO ANY ASSESSMENT YEARS, THE ASSESSMENTS FOR SUCH YEAR S SHOULD NOT BE DISTURBED AS SUCH. ITEMS OF REGULAR ASSESSMENT SHOULD NOT BE AD DED BACK IN THE PROCEEDINGS U/S. 153A WHEN NO INCRIMINATING DOCUMENTS WERE FOUND IN RESPECT OF THE DISALLOWED AMOUNTS IN THE SEARCH PROCEEDINGS. ASSESSMENTS OR R EASSESSMENTS MADE PURSUANT TO NOTICE U/S. L53A ARE NOT DE NOVO ASSESSMENTS AND TH EREFORE NO NEW CLAIM OF DEDUCTION OR ALLOWANCE CAN BE MADE BY ASSESSEE WHER E ADMITTEDLY THE REGULAR ASSESSMENTS ARE SHOWN AS COMPLETED ASSESSMENTS ON T HE DATE OF INITIATION 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 GROU P, JALNA COVERING ALL THE INDIVIDUALS AND HUFS OF THE GROUP AS WELL. PRIOR TO THE SEARCH, THE RETURNS OF INCOME FOR THE ASSESSMENT YEARS 2000-01 TO 2005-06 HAD ALREADY BEEN FILED U/S. 139(1) OF THE ACT, ACCOMPANIED BY REQUISITE DOCUMEN TS AND PROCESSING U/S. 143(1) OF THE ACT, STOOD COMPLETED. DURING THE COURSE OF SEAR CH 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 TH E LONG TERM CAPITAL GAIN EARNED ON SALE OF SHARES BY EACH OF THE ASSESSEES FOR EACH OF THE YEARS UNDER CONSIDERATION WERE ALREADY AVAILABLE ON RECORD BEFORE CONCERNED R EVENUE AUTHORITIES WHICH WAS ACCEPTED YEAR AFTER YEAR 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', THOUG H 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 B E FIRST PROVED THAT THESE STATEMENTS ARE RELATABLE TO 'SUCH EVIDENCE.' THE ONLY EVIDENCE RELIED UPON BY THE ASSESSING OFFICER IS THE STATEMENT OF SRI SURENDRA S PEETY RE CORDED IN THE COURSE OF SEARCH. THERE IS NOTHING ON RECORD TO SUGGEST THAT ANY INCR IMINATING DOCUMENT OR MATERIAL WAS DISCOVERED AS A RESULT OF SEARCH. ABOVE STATEME NT WAS MADE WITHOUT HAVING THE BENEFIT OF REFERRING TO ANY DOCUMENT IN CERTAIN STA TE OF MIND AND WAS MADE ON THE ASSERTION OF THE DEPARTMENT THAT THEY HAVE EVIDENCE AGAINST THE ASSESSEE BY WAY OF SOME STATEMENTS OF BROKERS WHICH WERE NOT MADE AVAI LABLE TO THE ASSESSEE. THEREFORE, THE RESPONDENT COULD NOT BE HELD LIABLE ON THE BASIS OF A MERE STATEMENT WHICH WAS MADE UNDER EXCEPTIONAL CIRCUMSTANCE AS ME NTIONED ABOVE. AS SUCH, THE VALIDITY OF SUCH STATEMENT, WHICH IS IN NO MANNER R ELATED TO ANY EVIDENCE OR MATERIALS FOUND IN THE COURSE OF SEARCH IN ASSESSEE 'S PREMISES, IS IN ITSELF NOT JUSTIFIED. 14 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 SURENDRA S. PEETY WITHOUT COR ROBORATING BY ANY EVIDENCE OR MATERIAL FOUND DURING THE COURSE OF SEARCH CANNOT B E THE SOLE BASIS FOR MAKING 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 CIRCUMSTANCES, D OES NOT HAVE MUCH EVIDENTIARY VALUE AND MERE CONFESSIONAL STATEMENT WITHOUT THERE BEING ANY DOCUMENTARY PROOF SHALL NOT BE USED AS EVIDENCE AGAINST THE PERSON WH O 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 SHOULD NOT BE TAKEN AS TRUTH, THE WHOLE TRUTH AND NOTHING BUT TRUTH. SUCH STATEMENTS UNDOUBTEDLY HAVE EVIDENTIARY VALUE AND C REDIBILITY IN LAW, BUT THE SAME SHOULD BE VIEWED WITH GREAT CAUTION, PARTICULARLY W HEN, THE SAME IS DENIED, VARIED OR RETRACTED OR ESTABLISHED BY THE DEFENDANT TO HAV E BEEN OBTAINED OR GIVEN UNDER MENTAL STRESS, COERCION, UNDUE INFLUENCE, OR DUE TO ANY OTHER ABNORMAL CONDITION AND CIRCUMSTANCES WHEN SUCH STATEMENT WAS GIVEN. B) HON'BLE ITAT JODPUR SMC BENCH, IN MAHESHWARI INDUST RIES 81 TTJ 914 (ITAT, JODHPUR, SMC BENCH), HELD THAT IT WAS OPEN TO THE A SSESSEE AT THE STAGE OF ASSESSMENT TO ESTABLISH THAT THE SURRENDER MADE BY HIM AT THE TIME OF SEARCH WAS UNDER COMPULSION AND NOT WITH FREE MIND OR THAT THE ADDITION IS NOT WARRANTED ON THE BASIS OF AVAILABLE MATERIAL..... ADDITION SHOULD BE CONSIDERED ON MERITS RATHER ON THE BASIS OF FACT THAT THE AMOUNT WAS SURRENDERED BY TH E 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 T HE PROVISIONS OF SECTION 132(4) AS IT EXISTED AT THE RELEVANT TIME THE QUESTION OF EXAMINING ANY PERSON BY THE AUTHORISED OFFICER WOULD ARISE ONLY WHEN HE FOUND S UCH PERSON TO BE IN POSSESSION OF ANY UNDISCLOSED MONEY OR BOOKS OF ACCOUNT. BUT, IN THIS CASE, IT WAS ADMITTED BY THE REVENUE THAT ON THE DATES OF SEARCH, THE DEPARTMENT WAS NOT ABLE TO FIND ANY UNACCOUNTED MONEY, UNACCOUNTED BULLION NOR ANY OTHE R VALUABLE ARTICLES OR THINGS, NOR ANY UNACCOUNTED DOCUMENTS NOR ANY SUCH INCRIMIN ATING MATERIAL EITHER FROM THE PREMISES OF THE COMPANY OR FROM THE RESIDENTIAL HOU SES OF THE MANAGING DIRECTOR AND OTHER DIRECTORS. IN SUCH A CASE, WHEN THE MANAGING DIRECTOR OR ANY OTHER PERSONS WERE NOT FOUND TO BE IN POSSESSION OF ANY INCRIMINA TING MATERIAL, THE QUESTION OF EXAMINING THEM BY THE AUTHORISED OFFICER DURING THE COURSE OF SEARCH AND RECORDING ANY STATEMENT FROM THEM BY INVOKING THE POWERS UNDE R SECTION 132(4) DID NOT ARISE. THE EXPLANATION TO SECTION 132(4) PERMITTING SUCH E XAMINATION CAME INTO EFFECT ONLY FROM APRIL 1, 1989. EVEN IF IT WERE HELD THAT THE S TATEMENT OF THE MANAGING DIRECTOR FELL UNDER THE EXPLANATION TO SECTION 132(4), THE T RIBUNAL HAD RECORDED A FINDING OF FACT TO THE EFFECT THAT THE STATEMENT OF THE MANAGI NG DIRECTOR OR THAT OF OTHER PARTNERS HAD NO EVIDENTIARY VALUE AS THEY WERE NOT SUPPORTE D BY ANY DOCUMENTARY 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 COURSE OF SEARCH PR OCEEDING WHICH CONTINUED FOR AN UNDULY LONG PERIOD COULD NOT BE CONSIDERED TO BE FR EE, FEARLESS AND VOLUNTARY. ADDITIONS CANNOT BE SUSTAINED ON THE BASIS OF STATE MENTS OF PARTNERS RECORDED AT THE TIME OF PROLONGED SEARCH OPERATION WHICH WERE RETRA CTED 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 MAD E BY A PERSON IS RELEVANT BUT NOT CONCLUSIVE. IT IS ALWAYS OPEN TO A PERSON, WHO ADMITTED A FACT, TO EXPLAIN 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 SEARCH PARTY IN THE C OURSE OF SEARCH. IN THE BUDGET SPEECH FOR 2003-04, THE FINANCE MINISTER INFORMED T HE PARLIAMENT THAT NO 15 CONFESSIONAL STATEMENT SHALL BE OBTAINED DURING SEA RCH AND SEIZURE OPERATION. (P 29 OF 260 ITR AT 29). IN THIS REGARD, THE ATTENTION WA S DRAWN TO DEPARTMENTAL INSTRUCTION ISSUED BY THE CBDT TO ITS OFFICERS IN M ANNER OF ACTING ON BASIS OF SO CALLED CONFESSIONARY STATEMENTS OF ASSESSEES MADE D URING THE COURSE OF THE SEARCH. THE BOARD'S LETTER ISSUED FROM F.NO.286/2/2003/IT(I NV) DATED L1.03.2003 IS EXTRACTED BELOW: 'INSTANCES HAVE COME TO THE NOTICE OF THE BOARD WHE RE THE ASSESSES HAVE CLAIMED THAT THEY HAVE BEEN FORCED TO CONFESS THE UNDISCLOS ED INCOME DURING COURSE OF SEARCH AND SEIZURE AND SURVEY. SUCH CONFESSION, IF NOT BASED ON CREDIBLE EVIDENCE, ARE ALTERED/RETRACTED BY THE CONCERNED AS SESSES WHILE FILING RETURNS OF INCOME. IN SUCH CIRCUMSTANCES, CONFESSIONS IN THE C OURSE OF SEARCH AND SEIZURE AND SURVEY OPERATIONS DO NOT SERVE ANY USEFUL PURPO SE. IT IS THEREFORE ADVISED THAT THERE SHOULD BE FOCUS AND CONCENTRATION ON COL LECTION OF EVIDENCE OF INCOME WHICH LEADS TO INFORMATION ON WHAT HAS NOT BEEN DIS CLOSED OR IS NOT LIKELY TO BE DISCLOSED BEFORE INCOME TAX DEPARTMENT. SIMILARLY W HILE RECORDING STATEMENTS DURING COURSE OF SEARCH AND SEIZURES AND SURVEY OPE RATIONS, NO ATTEMPT SHOULD BE MADE TO OBTAIN CONFESSION AS TO UNDISCLOSED INCO ME.' 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 EV IDENCE. 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 SUBSEQUENT TO SEARCH. E) IT RECOGNIZES THAT A MERE CONFESSION BY AN ORAL STA TEMENT WOULD NOT SUFFICE UNLESS THERE IS ENOUGH EVIDENCE TO 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 TH E COURSE OF SEARCH BECAUSE NO CORRESPONDING SEIZED MATERIAL WAS FOUND IN THE COUR SE OF SEARCH TO JUSTIFY THE ADDITIONS IN QUESTION. THE VERBAL STATEMENT OF THE ASSESSEE WITHOUT ANY CONNECTION WITH THE OTHER MATERIALS FOUND DURING THE SEARCH CA NNOT BE CONSIDERED TO BE MATERIALS FOUND DURING THE SEARCH. RELEVANT INCOME TAX RETURNS FOR THE PAST YEARS WERE FILED PRIOR TO THE SEARCH IN THE NORMAL COURSE SUO MOTO DISCLOSING THE PARTICULARS OF SUBJECT ADDITIONS WHICH STOOD ACCEPT ED U/S 143(L) OF THE ACT. ASSESSMENT AS CONTEMPLATED U/S 153A IS NOT A DE NOV O ASSESSMENT AND ADDITIONS MADE THEREIN, HAS TO BE NECESSARILY RESTRICTED TO U NDISCLOSED INCOME UNEARTHED DURING SEARCH. THERE IS NOTHING ON RECORD TO SUGGE ST THAT ANY CORROBORATIVE EVIDENCE WAS FOUND TO JUSTIFY THE ADDITION IN QUEST ION. 15. THE NEXT ISSUE RAISED BY THE REVENUE IS REGAR DING STATEMENT RECORDED U/S.132(4) OF THE ACT. THE DEPARTMENT ALLEGES THAT THE CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER BY HOLDING T HAT THE VOLUNTARY ADMISSION OF THE BOGUS 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 N O INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH. DURING THE COURSE OF SEARCH ACTION, STATEMENT OF SHRI SURENDRA S. PEETY WAS RECORDED U/S. 132(4) OF THE A CT ON 24.03.2006. HE WAS CONFRONTED WITH THE STATEMENT OF CERTAIN BROKERS NA MELY, DHAWAL R. SHAH. DIRECTOR OF TRIMITI INVESTMENT AND FINANCIAL SERVICES LTD., PUNE, MILAN R. PARIKH, MD OF ACTION FINANCIAL SERVICES PVT. LTD. AND SHRI VIJAY BHAGWANDAS OF VIJAY BHAGWANDAS & CO. IN THIS REGARD IT IS PERTINENT TO APPRECIATE THAT WHILE RECORDING STATEMENT ASSESSEE DID NOT HAVE BENEFIT OF REFERRIN G TO THE EVIDENCES AVAILABLE IN THEIR OFFICES WHICH WERE IN THE NATURE OF DOCUMENTA RY EVIDENCE LIKE THE CONTRACT NOTES, BILLS OF THE BROKERS FOR THE PURCHASE AND SA LE OF THE ALLEGED SHARES, BANK STATEMENTS ETC., NOR WAS HE PROVIDED WITH THE COPIE S OF THE ABOVE STATEMENTS. 16 15.1. THE ASSESSING OFFICER LAID UNDUE EMPHASIS ON THE ADMISSION MADE BY SRI SURENDRA S. PEETY DURING THE COURSE OF THE A CTION U/S.132(4) PERTAINING TO THE GENUINENESS OF THE SHARE TRANSACTION. THE ASSESSING OFFICER FAILED TO APPRECIATE THE CIRCUMSTANCES IN WHICH STATEMENTS WERE OBTAINED AND TOTALLY IGNORED THE RESPONDENTS REPEATED SUBMISSIONS THAT THE STATEMENT S WAS MADE PECULIAR CIRCUMSTANCES IN A PARTICULAR STATE OF MIND AND WIT HOUT HAVING THE BENEFIT OF REFERRING TO THE VARIOUS DOCUMENTS WHICH CONCLUSIVE LY PROVED THE GENUINENESS OF THE TRANSACTIONS. THERE IS NOTHING ON RECORD TO SUGGEST THAT EVIDENCES WERE FOUND IN COURSE OF SEARCH IN THE OFFICE AND RESIDENTIAL PREM ISES OF THE GROUP TO ESTABLISH THAT THE TRANSACTIONS IN SHARES WERE NOT GENUINE. EVEN T HERE IS NO EVIDENCE TO SUGGEST FLOW OF CASH FROM THE ASSESSEE TO THE BROKERS FOR I NDULGING IN SUCH ACTIVITIES. ON THE CONTRARY, 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 TIME. ON THE FACE OF THESE CLINCHING EVIDENCES, THE EVIDENCE IN POSSESSION OF THE ASSESSING OFFICER REL ATES TO SOME ORAL STATEMENT OF SOME BROKERS WHO ALLEGED, WITHOUT SUBSTANTIATING, T HAT THE PURCHASES AND SALES WERE BY WAY OF ACCOMMODATION ENTRIES. THUS, THE STATEME NT GIVEN BY THE ASSESSEE SHOULD NOT BIND HIM ON THE FACE OF THE OVERWHELMING NATURE OF EVIDENCES AVAILABLE IN THE RECORD OF THE DEPARTMENT AND THOSE PRODUCED BY THE ASSESSEE IN THE ABSENCE OF ANY OTHER ADVERSE EVIDENCES PRODUCED BY THE DEPARTMENT TO SUPPORTING ITS STAND. THE MEASURE OF SEARCH IS TO UNEARTH DOCUMENTS REVEALING CONCEALED INCOME AND WEALTH. SINCE INTERROGATION IS NOT AN OBJECT OF THE SEARCH, IT IS EXPECTED THAT A RESPONDENT IS NOT PUT TO PRESSURE INTO MAKING AN ADMISSION AND TH E STATEMENT SHOULD NOT GO BEYOND WHAT IS DISCOVERED IN COURSE OF SEARCH FROM THE PREMISES OF THE ASSESSEE. IN THE CASE OF THE ASSESSEE, THERE IS NOTHING ON RECOR D TO SUGGEST THAT ANY INCRIMINATING EVIDENCE WAS FOUND IN CONNECTION WITH THE SHARE TRA NSACTIONS FROM THE RESIDENTIAL AND OFFICE PREMISES OF THE PEETY GROUP. THE ENTIRE DECLARATION PERTAINING TO THE SHARES TRANSACTIONS WERE ARRIVED AT ONLY ON THE BAS IS OF THE STATEMENTS RECORDED OF THE BROKERS AND THE RETURNS OF INCOMES FILED DURING THE REGULAR COURSE. THE CIRCUMSTANCES IN WHICH THIRD PARTY STATEMENTS WERE SHOWN JUST ON THE DATE OF SEARCH WITHOUT MAKING AVAILABLE COPY OF THE SAME COUPLED W ITH THE MENTAL CONDITION OF VARIOUS MEMBERS OF ASSESSEES FAMILY IN COURSE OF P ROLONGED SEARCH BEYOND NORMAL HOURS WOULD SUGGEST THAT THE ADMISSION SO MADE WAS NOT VOLUNTARY 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 THER EIN. IT IS ONLY A PIECE OF EVIDENCE, THE RELEVANCY OF WHICH IS REQUIRED TO BE JUDGED BAS ED ON THE MATERIAL EVIDENCE AND CIRCUMSTANCES IN WHICH IT IS MADE. ALTHOUGH AN ADMI SSION MAY BE A GOOD EVIDENCE, BUT AT THE SAME TIME, IT IS NOT AT ALL A CONCLUSIVE EVIDENCE AND THE PERSON MAKING THE ADMISSION CAN ALWAYS RETRACT THE SAME IF HE CAN EST ABLISH THAT THE ADMISSION WAS MADE IN ABNORMAL CIRCUMSTANCES OR THAT THE CONTENTS OF THE ADMISSION ARE NOT BORNE OUT BY FACTS AND MATERIALS AVAILABLE. IN THE INSTAN T CASE, IT IS EVIDENT 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 FU RTHERMORE, IT HAS NOT EVEN BEEN SUBSTANTIATED BY LINKING IT UP WITH ANY PROPER MATE RIALS FOUND DURING 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 FAMI LY WOULD COME OUT WITH THE CORRECT POSITION OF THE INCOME FROM THE SHARES INVE STMENT/BUSINESS AFTER EVALUATING THE EVIDENCES. THEY, HOWEVER, AFTER EVALUATING THE EVIDENCE AVAILABLE WITH THEM AND AFTER OBTAINING THE MISSING PAPERS FROM THE BROKERS , FILED THEIR RETURNS IN RESPONSE TO THE NOTICE U/S. L53A WITHOUT INCLUDING THE INCOME S O OFFERED IN THE COURSE OF SEARCH. SUBSEQUENTLY, ON A STATEMENT RECORDED OF ASSESSEE S HRI SURENDRA S PEETY U/S. 131 OF THE ACT ON 14.12.2007 AS TO WHY HIS ACCEPTANCE OF U NDISCLOSED 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 PRESSURE AS HE DID NOT HAVE ACCESS TO THE PAPERS AND DOCUMENTS LYING AT HIS FACTORY PREMISES TO VERIFY H IS CLAIM. 17 15.3.1. REGARDING RETRACTION, HON'BLE PUNJAB AND HA RYANA HIGH COURT IN THE CASE OF KISHANLAL SHIVCHAND RAI 88 ITR 293 (P&H), HAS HELD THAT IT IS AN ESTABLISHED PRINCIPLE OF LAW THAT A PARTY IS ENTITL ED TO SHOW AND PROVE THAT AN ADMISSION MADE BY HIM PREVIOUSLY WAS IN FACT NOT CO RRECT AND TRUE. IT WAS INCUMBENT UPON THE INSPECTING ASSISTANT COMMISSIONER TO HAVE AFFORDED 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 ASSE SSMENT. EVEN TREATING THE SURRENDER AS AN ADMISSION OF THE CONCEALMENT OF UND ISCLOSED INCOME, THE INSPECTING ASSISTANT COMMISSIONER COULD NOT DENY THE ASSESSEE ITS RIGHT TO PROVE THAT THE FACT OF SURRENDER WAS NOT SUCH ADMISSION AND THAT THE SO-CA LLED ADMISSION WAS IN FACT WRONG AND THE SURRENDER WAS MADE SOLELY TO AVOID BO THERATION AS STATED BY THE ASSESSEE. SIMILAR VIEW HAS BEEN TAKEN IN PULLANGO DE RUBBER PRODUCE CO. LTD. (SUPRA) AND DEEPCHAND & CO. (SUPRA). WE ALSO FIND THAT ITAT MUMBAI BENCH IN PUSHPA VIHAR VS. ACIT (1994) 48 TTJ 389 (BOM), HELD THAT IN SURROUNDING CIRCUMSTANCES, IT CANNOT BE CONCLUDED THAT WHAT THE ASSESSEE SAID ORIGINALLY WAS SACROSANCT AND THE ASSESSEE IS NOT AT A LIBERTY TO CORRECT THE ERROR, ORIGINALLY COMMITTED BY GIVING A DIFFERENT VERSION OF TRUTH. I N THE ABSENCE OF ANY OTHER MATERIAL EXCEPT THE ORIGINAL ADMISSION THERE IS NOTHING TO S UPPORT THE ADDITION. IN THE PRESENT CASE ALSO THE ALLEGED STATEMENT WAS RETRACTED BY SH RI SURENDRA S PEETY. AS REGARDS RETRACTION, THE PRINCIPLE IS THAT IT SHOULD BE RETR ACTED BEFORE THE CONCERNED AUTHORITY DECIDES THE MATTER. IN OTHER WORDS, THE RESPONDENT SHOULD NOT PLACE THE AUTHORITIES IN SUCH A POSITION SO AS TO THWART THE PROCESS OF INVE STIGATION. IN THE CASE OF THE ASSESSEE, THE RETRACTION WAS WELL EVIDENT FROM THE RETURNS FILED IN RESPONSE TO NOTICE U/S. 153A AND RESPONDENT'S LETTERS ADDRESSED TO THE DEPARTMENT. THIS GAVE THE AUTHORITIES SUFFICIENT TIME TO COLLECT CORROBORATIV E EVIDENCE WHICH THEY HAVE FAILED TO DO AS EXPLAINED ABOVE. 15.4. THE RETRACTION CAN BE MADE BEFORE FILING THE RETURN IS ACCEPTED IN PRINCIPLE IN THE CASE OF R.P.MONGA VS DCIT (2004) 2 69 ITR(AT) 1 (DELHI). ACCORDING TO US THE FIRST APPELLATE AUTHORITY IN IT S ORDER DATED 18.06.2008 HAS RIGHTLY ACCEPTED THE RETRACTION OF THE ASSESSEE AND HAS STA TED AS FOLLOWS ON PAGE 15 IN PARA 5.3 AS UNDER: 'I HAVE CAREFULLY STUDIED AND ANALYZED FACTUAL POSI TION AS STATED ABOVE WHICH CANNOT BE DISPUTED AND IS A MATTER OF RECORD; I HAV E ALSO EXAMINED VARIOUS CASE LAWS, RELIED ON BY THE AO, ON THE ISSUE OF ADMISSIO N / 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 APPLICA BLE 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 DOCUMENTARY AND OTHER THIRD PARTY CONTEMPORARY EVID ENCES, IRRESPECTIVE OF THE ADMISSION / RETRACTION OF THE ASSESSEE ...' THIS FACTUAL REASONED FINDING OF FIRST APPELLATE AU THORITY NEED NO INTERFERENCE FROM OUR SIDE. 16. REGARDING STATEMENT OF BROKER WE FIND THAT THE ASSESSING OFFICER HAS HEAVILY RELIED ON THE STATEMENTS OF VARIOUS STOCK/S HARE BROKERS WHICH WERE RECORDED BEHIND THE BACK OF THE RESPONDENT AND WAS NOT PROVIDED TO ASSESSEES TILL THE CONCLUDING STAGE OF THE PROCEEDING. A REQU EST WAS MADE BY THE ASSESSEE VIDE LETTER DATED 19.12.2007 AND THESE STATEMENTS W ERE 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 THE RESPONDEN T ON 26.12.2007 AND ASSESSEE WAS DIRECTED TO BE PRESENT AT THE OFFICE O F THE DIRECTOR OF INVESTIGATION AT SCINDIA HOUSE, BALLARD ESTATE, BOMBAY. DESPITE A LL INCONVENIENCES CAUSED DUE TO CONSTRAINTS OF TIME, THE RESPONDENT ALONG WI TH HIS AUTHORIZED REPRESENTATIVES WERE PRESENT BUT THE DEPARTMENT FAI LED TO PRODUCE THEIR 18 WITNESSES. ANOTHER OPPORTUNITY WAS GIVEN ON 31.12.2 007 AT THE SAME PREMISES AND YET AGAIN THE DEPARTMENT FAILED TO PRODUCE THE WITNESSES. THEREAFTER AN E- MAIL WAS SENT TO THE CONCERN ASSESSING OFFICER REQU ESTING HIM NOT TO RELY ON THESE EX-PARTE STATEMENTS WHILE FRAMING THE ORDER A ND DETERMINING THE INCOME OF VARIOUS MEMBERS IN THE GROUP. 16.1 THUS AFFORDING OF OPPORTUNITY FOR CROSS EXAMI NATION WAS AN EMPTY FORMALITY AND ONLY TO TECHNICALLY COMPLY WITH THE R ESPONDENT'S REQUEST WHICH COULD NEVER MATERIALIZE. HOWEVER, THERE WAS NO WHIS PER IN THE SAID ORDER AS TO THE REQUEST OF THE ASSESSEE FOR CROSS EXAMINATION A ND ITS RESULTS WHICH WAS CRUCIAL FOR FASTENING A LIABILITY AGAINST THE ASSES SEE. IT REVEALS THAT THE AUTHORITIES WORKED WITH PREDETERMINED MIND ON THE I SSUE. NON PROVIDING OF DUE OPPORTUNITY OF HEARING WAS DENIED IN THIS CASE WHIC H IS IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. 16.2. IT IS IMPORTANT THAT STATEMENTS GIVEN BY A T HIRD PARTY SHOULD BE RELIED VIS-A-VIS EVIDENCE AVAILABLE ON RECORD. A PE RSON 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 STATEM ENT 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 INQUIRY OF ITS O WN TO COUNTER THE STATEMENTS MADE. THE ASSESSING OFFICER HAS NOT BROUGHT ON RECO RD ANY EVIDENCE TO FALSIFY THE CLAIM OF THE ASSESSEE OR THAT THE SHARE TRANSAC TIONS WERE BOGUS. THE ASSESSING OFFICER HAS ACTED WHOLLY ON THE ALLEGED S TATEMENT OF A THIRD 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 AS RELI ABLE EVIDENCE FOR MAKING ADDITIONS/DISALLOWANCES. HON'BLE BOMBAY HIGH COURT IN CASE OF CIT VS. OMPRAKASH JAIN REPORTED 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 PREVAIL OVER THE ORAL STATEMENT. IN TH E CASE OF THE ASSESSEE, THE DEPARTMENT HAS DISBELIEVED THE TRANSACTION ONLY ON THE BASIS OF THE ORAL STATEMENT OF THE BROKER WITHOUT TESTING ITS CORRECT NESS. FURTHER THE ASSESSING OFFICER HAS NOT PLACED ANY MATERIAL ON RECORD TO QU ESTION THE GENUINENESS OF THE DOCUMENTARY EVIDENCES FURNISHED ON BEHALF OF THE AS SESSEE. THE ITAT, MUMBAI BENCH IN THE CASE OF DCIT VS. PREMSONS REPORTED IN 130 TTJ 159 HELD THAT THE STATEMENT RECORDED HAD NO EVIDENTIARY VALUE UNTIL I T 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 BECOMES ABUNDANTL Y CLEAR THAT NO ADDITION CAN BE MADE OR SUSTAINED SIMPLY ON THE BAS IS OF STATEMENT RECORDED AT THE TIME OF SURVEY/SEARCH. IN ORDER TO MAKE AN ADDITION ON THE BASIS OF SURRENDER DURING SEARCH OR SURVEY, IT IS SINE QUA NON THAT THERE SHOULD BE SOME OTHER MATERIAL TO CORRELATE TH E UNDISCLOSED INCOME WITH SUCH STATEMENT. ADVERTING TO 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 T HE TIME OF SURVEY. EVIDENTLY THE SURRENDER MADE BY THE ASSESSEE AT THE TIME OF SURVEY TO THAT EXTENT AND OFFERED FOR TAXATION IN THE RETURN OF IN COME IS IN ORDER. BUT INSOFAR AS THE AMOUNT IN DISPUTE TO THE TUNE OF RS. 28. 85 LAKHS IS CONCERNED, SUCH SURRENDER WAS SPECIFICALLY MADE 'TO WARDS ANY OTHER DISCREPANCY'. THERE IS NO MENTION IN THE ASSESSMENT ORDER OF ANY SUCH DISCREPANCY FOUND AS A RESULT OF SURVEY THROWING LI GHT ON THE UNDISCLOSED INCOME. EVEN THE DEPARTMENTAL REPRESENTATIVE COULD NOT POINT OUT ANY MATERIAL SHOWING THE EXISTENCE OF UNDISCLOSED INCOM E EARNED BY THE ASSESSEE WHICH WAS UNEARTHED DURING THE COURSE OF S URVEY. THERE IS 19 NOTHING ON RECORD WHICH COULD CORRELATE SUCH ADDITI ONAL INCOME OFFERED BY THE ASSESSEE DURING THE COURSE OF SURVEY WITH AN Y OTHER DISCREPANCY. THERE IS NO BASIS FOR SUSTAINING THE ADDITION IN QU ESTION. 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 BASIS OF RECORDS AND MATERIAL AVAILABLE BEFORE THE ASSESSING AUTHORITY. PERSONAL KNOWLEDGE AND EXCITEMENT ON EVE NTS SHOULD NOT LEAD THE ASSESSING OFFICER TO A STATE OF AFFAIRS WHERE SALIE NT EVIDENCES ARE OVERLOOKED. IN CASE THE TESTIMONY OF A WITNESS, THE ASSESSEE IS RE QUIRED TO BE AFFORDED AN OPPORTUNITY TO CROSS EXAMINE HIM FAILING WHICH THE TESTIMONY CANNOT BE UTILIZED AGAINST THE ASSESSEE. IF THIS PROCEDURE IS NOT FOLL OWED, THEN THERE WOULD BE A CASE OF DENIAL OF NATURAL JUSTICE TO THE ASSESSEE AS HEL D BY HON'BLE DELHI HIGH COURT IN CIT VS. SMC SHARE BROKERS LTD. (2007) 288 ITR 34 5 (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 10 3 (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 ASSESSEE TO CR OSS EXAMINE THE AUTHORS OF THOSE BOOKS. THE PETITIONER HAD BEEN DENIED THE REASONABLE OPPORTUNITY WHICH WAS DUE IN LAW, IN RELATION TO TH E ASSESSMENT, AND THAT WAS SUFFICIENT TO VITIATE THE ORDER. THE ORDER OF R EASSESSMENT 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, DIS MISSED 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, WHI CH IS ALSO ONE AMONG THE TWO BROKERS THROUGH WHICH THE ASSESSEE HAD ALLE GEDLY DEALT WITH. ASSESSEE HAD ALSO FILED AN AFFIDAVIT WHEREBY SHRI M UKESH CHOKSI HAD, AGAINST THE EARLIER STATEMENTS GIVEN BY HIM, CONFIR MED THE TRANSACTIONS. IT IS ALSO SEEN THAT THE ASSESSEE WAS NOT GIVEN A CHAN CE TO EXAMINE SHRI MUKESH CHOKSI DESPITE REQUEST. HON'BLE SUPREME COUR T HAS IN THE CASE OF MEHTA PARIKH VS. CIT (30 ITR 181) LAID DOWN THE LAW THAT WHERE A PERSON WHO HAS GIVEN AN AFFIDAVIT WAS NOT CROSS EXA MINED, IT WOULD NOT BE OPEN TO CHALLENGE THE CORRECTNESS OF THE STATEME NTS 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 SEEN IN THE ORDE R 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 PREVALENT MARKET RATES AND SUPPORTED BY PROPER BILLS AND DOCUMENTS. THE ASSESSEE HAS DISCHA RGED THE ONUS CAST UPON HIM BY FURNISHING BEFORE THE ASSESSING OFFICER ALL NECE SSARY DOCUMENTS, BEING BILLS AND CONTRACT NOTES, IN SUPPORT OF THE PURCHASES AND SALES MADE BY 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 OFFICER. THE ASSESSING OFFIC ER IS NOT SUPPOSED TO WASH AWAY ON ASSUMPTIONS AND ARBITRARY CONCLUSIONS. AS S TATED ABOVE, THE ASSESSEE GROUP HAD PURCHASED THE ALLEGED SCRIPS ON WHICH LTC G HAS BEEN CLAIMED FROM 20 ONLY THREE BROKERS, NAMELY, (1) TRIMITI INVESTMENTS AND FINANCIAL SERVICES, PUNE, (2) DPS SHARES AND SECURITIES, MUMBAI, (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 PAGES 32, 61, 173, 203, 256, 277, 263, 292, 333, 390, 461 & 509 O F THE PAPER BOOK-I WHICH IS EVIDENT FROM THE FACT THAT MAJORITY OF THE PURCHASE S OF THE MEMBERS OF THE PEETY FAMILY WERE FROM TRIMITI INVESTMENTS AND FINANCIAL SERVICES. PURCHASE OF SCRIPS OF PRANNET INDUSTRIES AND PART PURCHASES OF FAST TR ACK 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 RESP ECT THEREOF AND HAS RELIED PRIMARILY ON SOME UNSUBSTANTIATED ALLEGATIONS OF SO ME BROKERS WHILE MOST OF THE STATEMENTS FAVOURABLE TO THE ASSESSEE WERE IGNORED BY THE ASSESSING OFFICER WHICH IS NOT JUSTIFIED. ALL THE DEPONENTS HAVE AFF IRMED THAT THEY WERE INVOLVED IN SHARE BROKING BUSINESS AND THAT THEY EITHER DID NOT MAINTAIN ANY BOOKS OF ACCOUNTS OR THEIR BOOKS OF ACCOUNTS AND RELEVANT RE CORDS WERE LOST OR MISPLACED OR DID NOT RECORD IN THEIR BOOKS OF ACCOUNT ANY REC ORD OF THE ACCOMMODATION BILLS FOR THE PURCHASE OF THE SHARES OF A PARTICULA R COMPANY ISSUED BY THEM TO PARTIES SEEKING SUCH ACCOMMODATION. THEY ALSO CONFI RMED OF HAVING HAD TRANSACTIONS WITH THE MEMBERS OF THE PEETY FAMILY. THEY HAVE ALSO NOT DISPUTED THE PAYMENT OF PURCHASE AND SALE CONSIDERATION EITH ER THROUGH RUNNING SETTLEMENT OR BY CHEQUES/DEMAND DRAFTS. 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 CONTENTION THAT HE HAS NOT PURCHASED SHARES FOR THE PEETY FAMILY HAS NOT BEEN DISPUTED BY THE ASSESSEE. DPS SHARES AND SECURITIES CONFIRMED THAT THEY HAVE DONE GENUINE SALES OF SCRI PS OF FAST TRACK, PRANNET INDUSTRIES ON BEHALF OF PEETY FAMILY. THE ASSESSIN G OFFICER HIMSELF HAS ACCEPTED THAT THE BROKERS HAVE CONFIRMED THAT THE SALE OF TH E IMPUGNED SHARES WERE UNDERTAKEN BY THEM BUT HAS GONE ON TO DRAW A CONCLU SION THAT SINCE THERE WERE NO PURCHASES, THE SALE OF THE SHARES MADE THROUGH T HEM WERE NOT GENUINE. ANY DOCUMENT HAS TO BE TAKEN AS A WHOLE AND THE ASSESSI NG OFFICER SHOULD NOT PICK AND CHOOSE THOSE PARTS OF THE STATEMENTS WHICH SUIT S HIM AND TOTALLY REJECT THOSE PARTS OF THE SAME STATEMENTS WHICH ARE IN SUPPORT O F THE ASSESSEE. THEREFORE, EITHER THE ASSESSING OFFICER SHOULD NOT RELY ON THE STATEMENTS AT ALL OR IF HE USES THESE STATEMENTS AS EVIDENCE AGAINST THE ASSESSEE T HEN HE SHOULD READ IT AS A WHOLE 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 TRANSACTION WITH TRIMIT I INVESTMENT FROM WHOM BULK OF SHARES PERTAINING TO G TECH INFO, HIGHLAND INDUS TRIES, FAST TRACK ENTERTAINMENT AND DATABASE 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 DEPARTMENT AND ITS BOOKS WERE A SUBJECT MATTER OF SCRUTINY. THEY HAVE CONFIR MED ALL THE TRANSACTIONS WITH THE PEETY FAMILY AND HAVE ALSO CONFIRMED THAT THE P AYMENTS FOR THESE PURCHASES WERE MADE BY DD/CHEQUES OR SETTLED AGAINST DAY TRAD ING PROFITS ALSO DONE THROUGH THEM. SHRI SOURIN MEHTA HAS UNEQUIVOCALLY S TATED THAT THE TRANSACTIONS WITH THE PEETY FAMILY ARE GENUINE. THIS SHOWS THE A SSERTION OF THE ASSESSEE. FOR READY REFERENCE RELEVANT PORTION OF HIS STATEMENT D ATED 28.11.2007 IS REPRODUCED BELOW: Q. NO.5: PLEASE MENTION WHETHER YOU HAVE TRADED THE SHARES OF FAST TRACK ENTERTAINMENT, HIGH LAND INDUSTRIES, DATA 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. 21 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 WELL AS SPECULATIVE PR OFIT 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 ACTUALLY DID NOT HAPPEN. THEY HAD ISSUE D BOGUS PURCHASE BILLS TO THE NEEDY PEOPLE WITHOUT ANY REAL TRANSACTION & THESE B ILLS WERE BACK DATED YOU HAVE STATED THAT YOU HAVE PURCHASED THESE SHARES FR OM THE ABOVE MENTIONED BROKERS. CONSIDERING THIS WHY IT SHALL NOT BE ASSUM ED THAT YOU HAD ALSO ISSUED BOGUS PURCHASE BILL TO PEETY FAMILY OF JALNA FOR TH ESE SHARES. 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 WAS MADE ON THE DATE TO P EETY FAMILY AS PER YOUR BILLS. THE COPY OF BILLS REGARDING SHARES OF THE SAID COMP ANY TO PEETY FAMILY 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, VIJ AY BHAGWANDAS, DPS FOR PEETY FAMILY. IT WAS FOUND THAT ALL THESE PURCHASE BILLS ISSUED BY THE BROKERS WERE BOGUS, THIS WAS ALSO COMMUNICATED TO YOU ON 28.11.0 7. THESE BROKERS OF BOMBAY ADMITTED THAT THESE BILLS ARE BACKDATED I.E. THESE HAD BEEN PREPARED JUST BEFORE THE SALE OF THESE SHARES THROUGH D-MAT? AS YOU WERE SUB-BROKER & HAD ARRANGED THESE SHARES FOR PEETY FAMILY FROM THESE BROKERS. H ENCE WHY IT SHALL NOT BE PRESUMED THAT THE BILLS ISSUED BY YOUR CONCERN TRIM ITI INV. & FIN. SERVICES PVT. LTD., CANNOT BE TREATED AS 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 ANY THING OTHERWISE ON RECORD. MOREOVER, DURING THE COURSE OF ASSESSMENT PROCEEDIN G, THE STATEMENT OF SHRI SOURIN MEHTA WAS BEFORE THE ASSESSING OFFICER WHICH WAS ACCEPTED AS NO ADVERSE INFERENCE HAS BEEN DRAWN WITH REGARD TO THI S TRANSACTION 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 AB OUT THE STATEMENT OF THIS BROKER IN THE ASSESSMENT ORDER. THUS, THE SELECTIVE USE OF EVIDENCE BY THE ASSESSING OFFICER 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 P URCHASED AND SOLD THE SHARES OF THE ASSESSEE THROUGH KNOWN AND ACCEPTED PROCEDURE, THE BROKER'S MISDEALING WITH OTHERS SHOULD NOT BE A CRITERIA TO SUSPECT THE APPELLANT'S GENUINE SHARE TRANSACTIONS AND CAPITAL GAIN THEREUPON. IF THESE B ROKERS WERE SUSPENDED BY SEBI SUBSEQUENT TO THE ASSESSEES COMPANY'S DEALING WITH THEM, IT IS THE MATTER BETWEEN SEBI AND THE BROKER AND THE ASSESSEE COMPAN Y IS NOT CONCERNED IN ANY WAY UNLESS ACTION IS BASED ON TRANSACTIONS INCLUDIN G ASSESSEES TRANSACTIONS. THERE IS NOTHING ON RECORD TO SUGGEST THAT TRANSACT IONS WITH ASSESSEE ARE ALSO BASIS FOR SEBIS ACTION AGAINST ALLEGED BROKERS. T HE 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 COMPANY, NUMBER OF 22 SHARES PURCHASED, DATE OF SALE, AMOUNT OF PURCHASE MONEY, AMOUNT OF SALE MONEY, ETC., THE ASSESSEE HAD DISCHARGED ITS INITIA L BURDEN AND IF THE BROKER DID NOT MAINTAIN ANY ACCOUNTS, THE TRANSACTION COULD NO T 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 F OR A.Y. 2001-02, HAS DECIDED THE CASE WHEREIN THE ASSESSEE HAD ACQUIRED SHARES OF M/S. CORONET INDUSTRIES LTD., THROUGH A BROKER M/S. JAJODIA & CO . SUBSEQUENTLY THE SAID SHARES WERE SOLD AND EXEMPTION U/S. 54F WAS SOUGHT FROM LONG TERM CAPITAL GAIN EARNED ON THE TRANSACTION. THE PURCHASE AND SALE O F SHARES WERE DULY SUPPORTED BY BILLS AND CONTRACT NOTES. FURTHER, THE SHARE BRO KER ACCEPTED HAVING UNDERTAKEN THE SALE AND PURCHASE TRANSACTION ON BEH ALF OF THE ASSESSEE. THE SHARE ISSUING COMPANY I.E., CORONET INDUSTRIES LTD. , HOWEVER STATED THAT AS PER THEIR RECORDS, NO SHARES WERE TRANSFERRED IN THE NA ME OF THE ASSESSEE AND FURTHER STATED THAT THE FOLIO NO. WRITTEN ON THE SHARE SCRI P DID NOT EXIST. 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 INTERACT WITH THE SH ARE ISSUING COMPANY AS THE ASSESSEE HAD NOT PURCHASED SHARES DIRECTLY FROM THE COMPANY AND THAT THE ALLEGED DENIAL 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 ASSESSEE IS CONCERNED, THE TRANSACTION OF PURCHASE AND SALE OF 20,000 SHARES THROUGH THE REGISTERED BROKER IS PROVED BY DOCUMENTARY EVIDENCE FILED ON RECORD. THE PAYMENTS OF SALE PROCEEDS OF 20,000 SHARES WERE REC EIVED BY THE ASSESSEE BY ACCOUNT PAYEE CHEQUES. IT WAS FOUND THAT THE TRANSA CTION HAS BEEN ENTERED INTO THROUGH A REGISTERED BROKER AT PREVALENT MARKET PRI CE 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 AN AFFIDAVIT FILED BEFORE THE ASSESSING OFFICER. IN THESE FACTS, THE TRIBUNAL HELD THAT NO CASE OF ADDITION U/S.68 OF TH E ACT IS MADE BY REVENUE AGAINST THE ASSESSEE AND THE FACT OF PURCHASE AND S ALE IS PROVED 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 CASE OF MANI PULATION THE REVENUE IS NOT SUPPOSED TO SUCCEED IN THEIR CONTENTION WITH OUT PROPER EVIDENCE. HOLDING THIS VIEW OF THE MATTER ON THE FACTUAL MATR IX AND RESPECTFULLY FOLLOWING THE CASE LAWS CITED ABOVE, WE ALLOW THE A SSESSEE'S SECOND APPEAL.' 16.12. AGAIN IN THE CASE OF ACIT VS. CLARIDGES INVE STMENT & FINANCES (P) LTD. (2007) 18 SOT 390 (MUM), ITAT HELD AS UNDER: 'AS THE MATTER STANDS WE FIND THAT THE ASSESSEE'S T RANSACTIONS 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 ACCOUNTS OF THE ASSESSEE, PREVALENT MARKET QUOTA TIONS OF THE CSE, CONTRACT NOTES AND DELIVERY BILLS ISSUED BY THE KOL KATA 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 RESP ECT WERE LEFT BLANK. COPY OF FORM B WAS IN FILED IN CSE. FOR THESE REASO NS IT IS NOT VERIFIABLE AS TO WHETHER THE TRADES IN QUESTION WERE DONE THRO UGH THE TRADING 23 SYSTEM OF THE EXCHANGE OR NOT. THE ANSWER OF THE AS SESSEE TO THESE DEFICIENCIES AND IRREGULARITIES IS THAT HE COULD NO T BE HELD RESPONSIBLE FOR THE SAME. IT WAS NOT THE ASSESSEE BUT THE THREE KOL KATA BROKERS WHO WERE MEMBERS OF THE CSE .... THE AO DOES NOT HAVE SUPPOR T FROM THE SPECIAL AUDITORS, CSE OR ANY OTHER QUARTER TO THAT EFFECT W HEREAS THE ASSESSEE HAS RELIED UPON COGENT EVIDENCE AND MATERIAL. WE HOLD T HAT THE AO HAS ACTED UPON GROSSLY INADEQUATE MATERIALS AND HIS CONCLUSIO NS ARE IN THE REALM OF SUSPICION, CONJECTURES AND SURMISES ...' 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 PRODUCING ANY EVIDENCE TO PROVE THE SAME. NO ADDITION SHOULD BE MADE IN AN ASSESSMENT U/S.153A WITHOUT ANY MATER IAL BEING FOUND DURING SEARCH BUT SIMPLY ON PRESUMPTIONS. THIS IS A CASE I N WHICH THERE IS NO EVIDENCE AGAINST THE RESPONDENT EXCEPT SOME VAGUE, CONFUSING , CONTRADICTORY, SELF SERVING UNSUBSTANTIATED STATEMENT OF WITNESSES FROM WHICH T HE ASSESSING OFFICER HAS INFERRED THE CONCLUSION AGAINST THE ASSESSEE. HON'B LE SUPREME COURT IN DHAKESHWARI COTTON MILLS LTD. VS. CIT (1954) 261TR 775 (SC), HAS 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 A LL. THERE MUST BE SOMETHING MORE THAN SUSPICION TO SUPPORT THE ASSESSMENT. IT W AS HELD THAT A SUSPICION HOWEVER STRONG MAY NOT TAKE THE PLACE OF PROOF. THE REFORE THE ASSESSMENT MADE BY THE ASSESSING OFFICER WHICH IS PREDOMINANTLY INF LUENCED 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 T RANSACTIONS OF LONG TERM CAPITAL GAIN, THE ASSESSING OFFICER TRIED TO ANALYZ E THE TRANSACTIONS OF ONLY TWO SCRIPS NAMELY FAST TRACK ENTERTAINMENT (PARAS 13 TO 24 OF THE ASSESSMENT 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 YEA RS 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 TRANSAC TIONS RESULTING IN INCOME WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNT OF A PERSON. THEREFORE, A SEARCH PUTS IN MOTION THE PROCESS OF ASSESSMENT OF THE UND ISCLOSED 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. V IDE ITS SUBMISSION DATED 04.03.2008/ 24.03.2008 PLACED AT PAGES 69 TO 82 OF THE PAPER BOOK-II, THE ASSESSEE GAVE THE DETAILS OF ALL THE BROKERS, THE S HARES PURCHASED OR SOLD THROUGH THEM AND THE LONG TERM CAPITAL GAINS OR SHORT TERM CAPITAL GAINS AS THE CASE MAY BE EARNED IN RESPECT THEREOF. THE SALE PROCEED S OF SHARES HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE AND CAPITAL GAIN ARISING ON THE SAME HAS BEEN SHOWN FOR ALL THE YEAR S IN THEIR RESPECTIVE INCOME TAX RETURNS ON WHICH APPROPRIATE TAXES WERE ALSO PA ID. THE CHARGING SECTION 69A PROVIDES FOR ADDITION OF UNRECORDED INCOME AND WEALTH WHEN EITHER NO EXPLANATION IS GIVEN BY THE ASSESSEE OR THE EXPLANA TION 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 ACQUISITION AND HAS SOLD THE SHARES THROUGH KNOWN REGISTERED BROKERS, RECEIVED MONEY FROM THEM THROUGH APPROPRIATE BANKING CHANNELS AND RECEIVED CONFIRMATIONS FROM TH EM AS WELL. THUS, THE ADDITION MADE BY TREATING THE SALE PROCEEDS OF SHAR ES AS UNEXPLAINED INCOME U/S.69A OF THE ACT IS NOT JUSTIFIED. AGREEING WITH THE CONTENTION OF THE ASSESSEE, THE CIT(A) VIDE ITS APPELLATE ORDER DATED 18.06.200 8, 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 SECTION 69A MAKES IT AB UNDANTLY CLEAR THAT THE PROVISIONS OF THIS SECTION CANNOT BE APPLIED IN A CASE WHERE THE 24 MONEY, BULLION OR JEWELLERY OR ANY OTHER RECEIPT HA S ALREADY BEEN RECORDED BY THE ASSESSEE IN HIS/HER BOOKS OF ACCOUN TS. 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 DESCRIB ED IN SECTION 69A. PICKING UP THE ENTIRE SALE PROCEEDS ON ACCOUNT OF S HARE TRANSACTIONS SEPARATELY AND ADDING IT U/S 69A WOULD MEAN THAT TH E ASSESSEE WAS FOUND IN POSSESSION OF THIS AMOUNT WHICH WAS NOT DISCLOSE D IN HIS BOOKS OF ACCOUNTS; DURING SEARCH IN ASSESSEE'S PREMISES AND IN THE SUBSEQUENT PROCEEDINGS AS WELL, NO SUCH UNDISCLOSED RECEIPTS H AVE BEEN FOUND. THUS, APPLICABILITY OF SECTION 69A BECOMES NULL AND VOID, AB-INITIO. THIS ALSO IMPLIES THAT ASSESSEE'S CLAIM WITH REGARD TO CAPITA L GAIN IN EACH YEAR REMAINS UNALTERED AS PER THE COMPUTATION FILED ALON G WITH THE RETURN. 18.2. MOREOVER, THE COMPUTATION OF INCOME FILED BY THE ASSESSEE IN THE ORIGINAL RETURN AS WELL AS IN THE RETURNS FI LED U/S 153A SHOWS THAT THE DAY TRADING PROFIT HAS BEEN INCLUDED IN THE TOT AL TAXABLE INCOME FOR THE RELEVANT YEAR. THE SAME HAS BEEN ACCEPTED BY TH E AO WHILE MAKING HIS OWN COMPUTATION IN THE IMPUGNED ORDERS. THIS CL EARLY ESTABLISHES THE SOURCE OF INVESTMENT IN PURCHASES OF THE RELEVANT Y EAR AS CLAIMED BY THE ASSESSEE WHEREAS IN THE DISCUSSIONS ON THE ISSUE OF CAPITAL GAIN THE AO HAS EXPRESSED HIS RESERVATION ABOUT THE ORIGINAL DA TE OF PURCHASE AND HAS DOUBTED THESE VERY TRANSACTIONS WHICH ARE FINANCED THROUGH DAY TRADING PROFIT ONLY, AS STATED ABOVE DAY TRADING PROFITS AR E DECLARED IN EACH YEAR WHEN THE SAME ACCRUED TO THE ASSESSEE. IN THIS MANN ER THE AO BLOWS HOT AND COLD AT THE SAME TIME WHICH CANNOT BE ACCEPTED. ' PICKING UP THE ENTIRE SALE PROCEEDS ON ACCOUNT OF S HARE TRANSACTIONS SEPARATELY AND ADDING IT U/S.69A WOULD ESTABLISH THAT THE ASSE SSEE WAS FOUND IN POSSESSION OF THIS AMOUNT WHICH WAS NOT DISCLOSED IN HIS BOOKS OF ACCOUNT WHILE THE FACT REMAINS 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 JUDICIALLY APPLIED. 18.1. AS STATED ABOVE, THE COMPUTATION OF INCOME F ILED BY THE ASSESSEE IN THE ORIGINAL RETURN AS WELL AS IN THE RETURNS FI LED U/S.L53A REVEALS THAT THE DAY TRADING PROFIT HAS BEEN INCLUDED IN THE TOTAL TAXAB LE INCOME FOR THE ASSESSMENT YEARS UNDER CONSIDERATION. THIS DAY TRADING PROFIT HAS BEEN ACCEPTED BY THE ASSESSING OFFICER YEAR AFTER YEAR AND NO RESERVATIO N HAS EVER BEEN MADE BY THE ASSESSING OFFICER REGARDING THIS PROFIT. THIS DAY T RADING PROFIT CLEARLY ESTABLISHES THE SOURCE OF PURCHASES OF INVESTMENTS OF EACH OF THE RELEVANT YEAR AS CLAIMED BY THE ASSESSEE. IN DISCUSSIONS ON THE ISSU E OF CAPITAL GAIN THE ASSESSING OFFICER HAS EXPRESSED HIS RESERVATION ABOUT THE SAM E AND HAS DOUBTED THESE VERY 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 SUPPORTING THE PURCHASE AND SALES OF SHARES AS CLAIMED BY THE ASSESSEE IN ITS RETURN OF INCOME WHETHER PERTAINING TO CAPITAL GAINS OR TO INCOME FROM OTHER SOURCES, SHARE DEALING PROFIT, WERE SUBM ITTED BEFORE THE DEPARTMENT WHICH SHOULD HAVE BEEN READ AND ACCEPTED AS A WHOLE . THE ASSESSEE HAS FILED VOLUMINOUS EVIDENCES BEFORE THE ASSESSING OFFICER S UCH AS BROKER CONTRACT NOTES, LETTERS RECEIVED FROM THE COMPANIES INTIMATI NG THE TRANSFER OF SHARE CERTIFICATES, BANK ACCOUNTS EVIDENCING THE PAYMENTS TO THE BROKER, DAY TRADING PROFIT BILLS EVIDENCING THE PAYMENTS SETTLED AGAINS T THE DAY TRADING PROFITS, DEMAT ACCOUNTS. COPIES OF THE BILLS OF DAY TRADING PROFIT SHOWN AS INCOME FROM OTHER SOURCES FOR VARIOUS YEARS 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 SHARES HELD AS INVESTMENT. THE ASSESSING OFFICER WAS NOT JUSTIFIED IN PLACING PART RELIANCE ON THE SAME AND ADOPTING PICK AND CHOOSE POLICY TO MAKE ADDITIONS O F THE AMOUNT OF SALE PROCEEDS REALIZED ON ACCOUNT OF TRANSACTION IN SHAR ES LEADING TO CAPITAL GAINS IN 25 THE ABSENCE OF COGENT MATERIAL IN SUPPORT OF UNDERT AKING SUCH AN EXERCISE. WHERE THE SHARE DEALING PROFIT WERE HELD AS GENUINE BY THE ASSESSING OFFICER, HE SHOULD HAVE ALSO ACCEPTED THE CAPITAL GAINS REFLECT ED IN THE VERY SAME BOOKS OF ACCOUNTS. WHILE ARRIVING AT AN ADVERSE CONCLUSION AGAINST THE ASSESSEE, THE ASSESSING OFFICER SEEMS TO BE DELIBERATELY RELIED O NLY ON THOSE EVIDENCES AND ENQUIRY RESULTS WHICH WERE AGAINST THE ASSESSEE WHI LE 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 PERMISSIBLE TO PI CK AND CHOOSE OR MAKE FURTHER ESTIMATE THEREFROM UNLESS AND UNTIL THERE IS COGENT EVIDENCE IN SUPPORT OF UNDERTAKING SUCH AN EXERCISE. THE SETTLED PRINCIPL E IS THAT DOCUMENTS FOUND IN SEARCH SHOULD BE TREATED AS GENUINE WITH RESPECT TO ALL ENTRIES RECORDED THEREIN. THE REVENUE IS NOT JUSTIFIED IN TAKING A VIEW THAT ONLY PART OF THE CONTENTS IS CORRECT. ENTIRE DOCUMENT SHOULD BE READ AS A WHOLE AND CONTENTS OF THE DOCUMENTS SHOULD BE TREATED AS CORRECT OR REJECTED AS A WHOLE. THEREFORE, WHEN THE DEPARTMENT CAN ACCEPT TRANSACTIONS RELATING TO SHARE TRADING PROFIT, THERE IS NO REASON AS TO WHY IT SHOULD NOT ACCEPT THE TRANSA CTIONS RELATING TO CAPITAL GAINS. THE ITAT MUMBAI BENCH IN THE CASE OF SHRI B HAGVANDAS GORDHANDAS VS. DCIT IN ITA.NO.5201/MUM/96 HAS HELD THAT A BARE STA TEMENT OF A DEPONENT MAY NOT JUSTIFIABLY BE TREATED AS SUFFICIENT ENOUGH TO FASTEN A LIABILITY ON ANOTHER PERSON, SAY ASSESSEE, WHEN THAT ANOTHER PERSON IS D ENYING THE FACTS CONTAINED IN THAT STATEMENT AND IS ALLEGING THE SAME TO BE INCOR RECT AND THAT A SATISFACTORY/CONVINCING CORROBORATION OF THE SAID S TATEMENT, BY A RELIABLE EVIDENCE, IS ESSENTIALLY NEEDED TO JUSTIFIABLY BASE THE ADDITION THEREON. THIS TESTIMONY OF A WITNESS CANNOT BE RELIED UPON INDEPE NDENT OF ANY ANOTHER CORROBORATIVE EVIDENCE, WHICH IS NOT JUSTIFIED. UN LESS STATEMENTS ARE COUNTERED OR THEY HAVE BEEN PUT TO CROSS EXAMINATION AND THEI R STATEMENTS HAVE BEEN SUBSTANTIATED WITH DOCUMENTARY EVIDENCE, IT WOULD B E UNREASONABLE TO PLACE RELIANCE ON SUCH STATEMENTS. THE ASSESSING OFFICER HAS PLACED UNDUE RELIANCE ON THE STATEMENTS OF THE BROKERS WHICH WERE RECORDED B EHIND THE BACK OF THE ASSESSEE WITHOUT ALLOWING THEM TO CROSS EXAMINE THE M. 18.4. IN VIEW OF THE ABOVE, THE CIT(A) HAS RIGHTLY CONCLUDED THAT THE ASSESSING OFFICER HAS ARBITRARILY ADOPTED A PICK AN D CHOOSE POLICY IN RESPECT OF BOTH THE STATEMENTS RECORDED OF THE BROKERS AS WELL AS IN TREATING THE SHARE TRADING PROFIT AS GENUINE WHILE NOT ACCEPTING THE C APITAL GAINS EARNED BY THE ASSESSEE IN RESPECT OF THE INVESTMENT MADE IN SHARE S. 18.5. THE ASSESSING OFFICER HAS ADDED THE ENTIRE S ALE PROCEEDS OF SHARES AS UNDISCLOSED INCOME OF THE ASSESSEE. WHEN THE LONG TERM CAPITAL GAINS EMANATING FROM THE SAID SALE PROCEEDS HAVE BE EN 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 T HE 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 ESTIMAT ED PROFITS EMBEDDED IN THE SALES. THE SALE PROCEEDS OF SHARES HAS BEEN RECORD ED IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEES. THE CAPITAL GAIN ARISI NG ON THE SAME HAS BEEN SHOWN FOR ALL THE YEARS IN THEIR RESPECTIVE INCOME TAX RETURNS AND APPROPRIATES TAXES WERE PAID ON THE SAME. THE CHARGING SECTION 6 9A 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 N OT UP TO THE SATISFACTION OF THE ASSESSING OFFICER REGARDING ITS NATURE AND SOURCE O F ACQUISITION. THE ASSESSEE HAS RECORDED THE SALE PROCEEDS AND PURCHASE CONSIDE RATION IN THEIR BOOKS OF ACCOUNTS AND VERY WELL EXPLAINED ITS NATURE AND SOU RCE OF ACQUISITION. ASSESSEE GROUP HAVE SOLD THE SHARES THROUGH REGISTERED BROKE RS WHO ARE KNOWN AND IDENTIFIABLE INCOME TAX PAYEE, RECEIVED MONEY FROM THEM THROUGH APPROPRIATE BANKING CHANNELS WHICH ARE DULY CONFIRMED BY THEM. SUCH ADDITIONS MADE BY 26 TREATING THE SALE PROCEEDS OF SHARES AS UNEXPLAINED INCOME AND NOT RECORDED 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 EN TIRE 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 KUMA R (2003) 263 ITR 610 (MP) HAS TAKEN SIMILAR VIEW. THE HON'BLE GUJARAT HI GH COURT IN CIT VS. PRESIDENT INDUSTRIES (2002) 258 ITR 654 (GUJ) HELD THAT THE AMOUNT OF SALES COULD NOT REPRESENT THE INCOME OF THE ASSESSEE WHO HAD NOT DISCLOSED THE SALES. THE SALES ONLY REPRESENTED THE PRICE RECEIVED BY TH E SELLER OF THE GOODS; ONLY THE REALISATION OF THE EXCESS OVER THE COST INCURRED CO ULD FORM PART OF THE PROFIT INCLUDED IN THE CONSIDERATION FOR THE SALES. SINCE THERE WAS NO FINDING TO THE EFFECT THAT INVESTMENT BY WAY OF INCURRING THE COST IN ACQUIRING THE GOODS WHICH WERE SOLD HAD BEEN MADE BY THE ASSESSEE AND THAT TH AT INVESTMENT WAS ALSO NOT DISCLOSED, ONLY THE EXCESS OVER THE COST INCURRED C OULD 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 OFFICER IN ADDING THE ENTIRE SALE PROCEEDS OF SHARES AS UNDISCLOSED INCOME OF THE ASS ESSEE IS NOT JUSTIFIED. 19. AN ALTERNATIVE ATTEMPT HAS BEEN MADE BY THE AS SESSING OFFICER TO TAX THE PROFIT ARISING OUT OF SALE OF SHARES AS AN ADVENTURE IN THE NATURE OF TRADE WHICH IS BASED ON WRONG ASSUMPTION OF FACTS AND CON TRARY TO THE PRINCIPLES LAID DOWN ON THE ISSUE. INITIALLY THE DEPARTMENT WAS FU LLY SATISFIED WITH THE TREATMENT OF THESE ALLEGED TRANSACTIONS AS CAPITAL GAIN IN THE O RIGINAL ASSESSMENTS 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 W ITH SUSPICION. THE ASSESSING OFFICERS ENTIRE ENDEAVOUR WAS DIRECTED TOWARDS THE ISSUE OF CAPITAL GAIN ALTHOUGH HE SUBJECTED THE SAME TO TAX U/S.69A BY TREATING TH E SHARE TRANSACTIONS AS BOGUS RELYING ON THE STATEMENTS MADE BY THE BROKERS WHICH HAVE BEEN DISCUSSED EARLIER. ALL THIS EXERCISE OF VERIFICATION OF SHARE TRANSACT IONS WAS UNDERTAKEN WITH AN APPROACH TO BRING THE CAPITAL GAIN UNDER A PARTICUL AR HEAD THAT IS LIABLE TO BE TAXED AT THE MAXIMUM RATE. THE ALTERNATE PROPOSITION MADE BY THE ASSESSING OFFICER TO NOW TREAT THE SAME AS ADVENTURE IN THE NATURE OF TR ADE SHOWS ABSOLUTE LACK OF CONVICTION ON HIS PART. THE ASSESSEE VIDE HIS SUBM ISSION DATED 07.05.2008, ATTACHED AS PAGES 86 TO 97 OF THE PAPERBOOK-II, EXP LAINED THE CONCEPT OF ADVENTURE IN THE NATURE OF TRADE AND HOW IT IS NOT APPLICABLE TO THE ASSESSES OF THE GROUP AS UNDER: 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 WER E SHOWN AS INVESTMENT AND NOT AS STOCK IN TRADE WHICH WAS ACCEPTED BY THE DEP ARTMENT FOR A LONG PERIOD OF TIME. SINCE THE AMOUNTS RECEIVED WERE REA LIZATION OF CAPITAL, IT WAS CLEARLY A CAPITAL RECEIPT. I) THERE WAS NO CONCEPT OF VENTURE OR ORGANIZED TR ADE ATTACHED WITH THE ACTIVITY. THERE WAS NO ORGANIZATION ASSOCIATED WITH TRADE. A BUSINESS REQUIRES GREATER ACTIVITY AND A GREATER ORGANIZATIO N WHICH WERE CONSPICUOUSLY ABSENT IN THESE CASES. J) THERE IS NO ELEMENT OF ADVENTURE OR TRADE IN TH E SHARES TRANSACTION. 27 K) ALTHOUGH THE DEPARTMENT CARRIED OUT SEARCH, NO EVIDENCE WAS FOUND TO INDICATE THAT THE TRANSACTIONS WERE CARRIED 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 TRANSACTIO NS WERE SUCH THAT IT WOULD FALL UNDER THE HEAD OF ADVENTURE IN THE NATURE OF TRADE. THE HON'BLE SUPREME COURT IN THE CASE OF KARNANI PROPERTIES LTD. (1971) 82 ITR 5 47 HAS HELD THAT ACTIVITIES CARRIED ON CONTINUOUSLY IN AN ORGANIZED MANNER, WIT H A SET PURPOSE AND WITH A VIEW TO EARN PROFITS HAVE TO BE CONSIDERED AS BUSINESS A CTIVITIES. THEREFORE THE FOUR ELEMENTS WHICH MUST BE PRESENT IN 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 DOWN CERTAIN PRINCIPLES TO FIND OUT WHETHER OR NOT THE TRANSACTION IN QUESTION IS AN ADVENTURE IN THE NATURE OF TRADE. THESE PRINCIPLES ARE AS FOLLOWS: (I) NO PRINCIPLE CAN BE LAID DOWN IN DECIDING WHET HER A PERSON IS INDULGING IN BUSINESS IN THE NATURE OF TRADE, (II) WHETHER THE TRANSACTION IS AN ISOLATED ONE OR FORMS PART OF A SERIES OF TRANSACTIONS SHOWING THE TRANSACTION TO BE IN THE N ATURE 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 IN THE NATURE OF TRADE, (IV) WHETHER PROPERTY WAS PURCHASED WITH THE INTEN TION OF INVESTMENT AND NOT AN ADVENTURE IN THE NATURE OF TRADE, AND (V) IT IS NOT A CASE MERELY ON THE FACTS AND CIRCU MSTANCES OF THE CASE BUT TO CONSIDER THEIR DISTINCTIVE CHARACTER 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 WERE SHOWN AS INVESTMENT AND HE WAS TREATED AS AN INVESTOR IN THE PAST. THE TRANSACTION S 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 SHORT TIME DID NOT IN DICATE THAT THE TRANSACTION WAS IN THE NATURE OF TRADE. THERE WAS NO MATERIAL TO SU GGEST THAT THE MOTIVE WAS TO SELL THE SHARES AND EARN SOME QUICK PROFIT. THEREFORE, T HE 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 BUSINESS. 19.4. IN THIS BACKGROUND, IT IS CLEAR THAT THE ASS ESSING OFFICER WAS NOT ABLE TO ESTABLISH THAT THE ASSESSEES WERE ENGAGED I N ADVENTURE IN THE NATURE OF TRADE. THE CIT(A) WHILE REJECTING THE PROPOSITIONS MADE BY THE ASSESSING OFFICER, TO TREAT 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 RECEIPTS OF S HARES UNDER THE MAXIMUM RATE OF TAX. IN THE PROCESS HE HAS IGNORED THE FACT THAT THE INCOME TAX ACT LAYS DOWN SPECIFIC LAWS/METHOD TO COMPUTE DIFFERENT HEADS OF INCOME WITH VARYING TAX SLABS/RATES. ONCE THE AO DECIDED T O APPROACH THE ISSUE WITH THIS MIND SET HE STARTED LOOKING FOR VARIOUS M ETHODS TO ACHIEVE THIS PURPOSE. ORIGINALLY IN THE ASSESSMENT HE TAXED THE ENTIRE RECEIPTS AS 28 UNEXPLAINED RECEIPTS U/S. 69A WHICH IS LEGALLY NOT TENABLE. THEREAFTER, HE CAME UP WITH A NEW THEORY OF ASSESSMENT SO THAT IF HIS PROPOSITION TO TAX THE RECEIPT AT MAXIMUM RATE U/S. 69A FAILS HE CAN S TILL RETRIEVE THE ASSESSMENT AT MAXIMUM RATE BY RESORTING TO THE ALTE RNATE METHOD OF TAXING THE SAME AS BUSINESS INCOME ARISING FROM ADV ENTURE IN THE NATURE OF TRADE. LOOKING TO THE HUGE AMOUNT OF CAPITAL GAI NS SHOWN BY THE ASSESSES OF THIS GROUP HE WAS TEMPTED TO BRING IT T O THE MAXIMUM TAX BY TREATING THE WHOLE AMOUNT AS NOT GENUINE. BUT THI S EXERCISE, AS DEMONSTRATED ABOVE WHILE DISCUSSING FACTUAL ASPECTS OF THE SAME, IS BASED ON INCOMPLETE AND INCORRECT APPRECIATION OF F ACTS AND DOCUMENTARY EVIDENCE AND FAILS MISERABLY. AO'S ATTEMPTS TO EXA MINE THE MATTER AFRESH AT APPELLATE STAGE FROM AN ENTIRELY NEW ANGLE IS BE YOND PERMISSIBLE LIMITS UNDER THE ACT. THE AO MAKING ORIGINAL ADDITION U/S 69A MADE A TECHNICAL AND LEGAL MISTAKE. HIS ALTERNATIVE PROPO SITION FOR TAXING THE SAME AS BUSINESS INCOME. THIS SHOWS THAT THE AO IS NOT CONFIDENT 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 ASSESSEES' 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 FOUND IN ORDER. T HIS 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. MO REOVER, SEARCH PER SE IN APPELLANT-GROUP DID NOT REVEAL ANYTHING TO JU STIFY VIEWING OF THESE TRANSACTIONS WITH SUSPICION. ALL THIS EXERCISE OF V ERIFICATION OF SHARE TRANSACTIONS WAS UNDERTAKEN WITH A DIFFERENT APPROA CH, I.E. TO BRING THE WHOPPING AMOUNT OF CAPITAL GAIN UNDER A PARTICULAR HEAD THAT IS LIABLE TO BE TAXED AT THE MAXIMUM RATE. IN THE FACTS OF THE C ASE AS BROUGHT OUT ABOVE AND IN VIEW OF LEGAL POSITION SUFFICIENTLY DI SCUSSED BY ME THIS APPROACH 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 REPRESENTATIVE. WE FIND THE HON'BLE BO MBAY HIGH COURT IN THE CASE OF CIT VS. SMT.JAMNADEVI AGRAWAL REPORTED IN (2010) 328 ITR 656 (BOM.), HAS HELD AS UNDER: THE ASSESSEE PURCHASED 30,000 SHARES ON APRIL 8, 1 999 AND SOLD THEM ON JULY 7, 14, 21, 2000. THE ASSESSEE OFFERED LONG -TERM CAPITAL GAINS ON SALE OF SHARES WHICH WAS ACCEPTED BY THE ASSESSING OFFICER IN THE RESPECTIVE ASSESSMENTS. SUBSEQUENTLY, THERE WAS A SEARCH ACTION IN THE CASE OF VARIOUS ASSESSEES BELONGING TO A GROUP AND THE GROUP OFFERED ADDITIONAL INCOME OF RS.2 CRORES, OUT OF WHICH RS.3 LAKHS WERE OFFERED IN THE HANDS OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2 004-05 AND RS.7 LAKHS IN THE ASSESSMENT YEAR 2005-06. THE ASSESSING OFFIC ER ON THE BASIS OF THE SEIZED MATERIAL ISSUED NOTICE UNDER SECTION 153A O F THE INCOME TAX ACT, 1961, FOR ASSESSMENT YEAR 2001-02 AND SUBSEQUENTLY PASSED AN ASSESSMENT ORDER UNDER SECTION 153A READ WITH SECTI ON 143(3) COMPUTING THE TOTAL INCOME DISALLOWING THE LONG-TERM CAPITAL GAIN AND ADDING 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 6 8 OF THE ACT WAS NOT APPLICABLE TO THE FACTS OF THE CASE AND ACCORDINGLY DELETED THE ADDITION. THE APPEAL FILED AGAINST THIS ORDER WAS DISMISSED B Y THE TRIBUNAL. ON APPEAL: 29 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 HOLD THAT THE TRANS ACTIONS WERE SHAM AND BOGUS, ESPECIALLY WHEN DOCUMENTARY EVIDENCE WAS PRO DUCED TO ESTABLISH THE GENUINENESS OF THE CLAIM. THE SHARES WERE PURC HASED 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 THE RESPECTIVE BUYERS WAS ALSO ESTABL ISHED BY PRODUCING DOCUMENTARY EVIDENCE. IT WAS TRUE THAT SOME OF THE TRANSACTIONS WERE OFF- MARKET TRANSACTIONS. HOWEVER, THE PURCHASE AND SAL E PRICE OF THE SHARES DECLARED BY THE ASSESSEES WERE IN CONFORMITY WITH T HE MARKET RATES PREVAILING ON THE RESPECTIVE DATES AS WAS SEEN FROM THE DOCUMENTS FURNISHED BY THE ASSESSEES. THEREFORE, THE FACT TH AT SOME OF THE TRANSACTIONS WERE OFF-MARKET TRANSACTIONS COULD NOT BE AGROUND TO TREAT THE TRANSACTIONS AS SHAM TRANSACTIONS. ON A PERUSA L OF THE DOCUMENTARY EVIDENCE, THE TRIBUNAL HAD ARRIVED AT A FINDING OF FACT THAT THE TRANSACTIONS WERE GENUINE. THE TRIBUNAL HAD FURTHE R 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 ASSESSEES. 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 LEAR NED COUNSEL FOR THE PARTIES AND WE ARE OF THE CONSIDERED OPINION THAT T HE LEARNED ASSESSING OFFICER WAS MUCH INFLUENCED BY THE ENQUIRY REPORT W HICH MAY HAS BEEN BROUGHT ON RECORD BY THE EFFORTS OF THE ASSESSING O FFICER AND THAT ENQUIRY REPORT WAS PREPARED BY THE SEBI AND FROM THE OBSERV ATIONS MADE BY THE TAX APPEAL NO.4 OF 2011 WITH ANALOGOUS CASE ASSESSI NG 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 INV OLVED IN UNFAIR TRADE PRACTICE AND WAS INVOLVED IN LOWERING AND RISING OF THE SHARE PRICE, AND ANY PERSON, WHO HIMSELF IS NOT INVOLVED IN THAT TYP E OF TRANSACTION, IF PURCHASED THE SHARE FROM THAT BROKER INNOCENTLY AND BONAFIDELY AND IF HE SHOW HIS BONAFIDE IN TRANSACTION BY SHOWING RELEVAN T MATERIAL, FACTS AND CIRCUMSTANCES AND DOCUMENTS, THEN MERELY ON THE BAS IS OF THE REASON THAT SHARE BROKER WAS INVOLVED IN DEALING IN THE SHARE O F A PARTICULAR COMPANY IN COLLUSION WITH OTHERS OR IN THE MANNER O F UNFAIR TRADE PRACTICES AGAINST THE NORMS OF S.E.B.I. AND STOCK E XCHANGE, THEN MERELY BECAUSE OF THAT FACT A PERSON WHO BONAFIDELY ENTERE D INTO SHARE TRANSACTION OF THAT COMPANY THROUGH SUCH BROKER THE N ONLY BY MERE ASSUMPTION SUCH TRANSACTIONS CANNOT BE HELD TO BE A SHAM TRANSACTION. 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 ENQUIRY IS NEEDED AND THAT IS FOR INDIVIDUAL CASE. SUCH FURTHER ENQUIRY WAS NOT COND UCTED 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 SHARES O F THESE ASSESSEES WERE ALREADY SHOWN IN THE EARLIER BALANCE SHEET SUBMITTE D BY THE ASSESSEES, AND THEREFORE, IN THAT SITUATION, HOW THE REVENUE C ONDEMNED THE TRANSACTION 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) 145 TTJ 511, H AS HELD AS UNDER: 30 ADMITTEDLY, IN THE PRESENT CASE, THE ASSESSEE HAS PURCHASED THE SHARES OUTSIDE STOCK EXCHANGE DIRECTLY FROM THE BROKER IN PHYSICAL FORM THOUGH D-MAT ACCOUNT WAS OPENED ON BELATED DATE WITH THIS EXPLANATION THAT AT THE TIME OF PURCHASE OF SHARES, HE WAS NOT HAVING D -MAT ACCOUNT AND ON OPENING OF D-MAT ACCOUNT, THE SHARES WERE TRANSFERR ED TO THE SAME. BEFORE THE AO COPIES OF THE SHARE CERTIFICATES HELD BY ASSESSEE IN PHYSICAL FORM WERE PROVIDED WHICH CONTAINED COMPLETE RELEVAN T DETAILS SUCH AS ADDRESS OF REGISTERED OFFICE OF THE COMPANY, SIGNAT URES OF THE AUTHORIZED SIGNATORY ALONG WITH TWO DIRECTORS SIGNATURES, VAL UE OF SHARES WITH PAID- UP AMOUNT OF SHARES PURCHASED IN EACH COMPANY, DATE OF ISSUE OF CERTIFICATE, CERTIFICATE NUMBER, REGISTERED FOLIO, NUMBER OF SHARES WITH THEIR DISTINCTIVE NUMBERS, DATE OF TRANSFER OF SHAR ES IN THE NAME OF ASSESSEE AND ALSO COPIES OF CONTRACT NOTES ALONG WI TH BILLS ISSUED BY SHARE BROKER. THE ASSESSEE ALSO FURNISHED RETURNS OF INCOME ALONG WITH BALANCE SHEET FOR THE ASST. YRS. 2004-05 AND 2005-0 6 DURING WHICH PERIOD, ASSESSEE CLAIMED TO HAVE PURCHASED THOSE SH ARES IN QUESTION, COPY OF CONTRACT NOTES ISSUED BY THE BROKER AND CON FIRMATIONS GIVEN BY S.LTD. AND BY BROKER. MERELY BECAUSE THERE WAS SUB STANTIAL DELAY IN TRANSFERRING THE SHARES INTO D-MAT ACCOUNT FROM THE DATE OF PURCHASE AND THE TRANSACTIONS NOT ROUTED THROUGH CALCUTTA STOCK EXCHANGE, THE AO WAS NOT JUSTIFIED IN DOUBTING THE DECLARED DATE OF PURC HASE OF THE SHARES IGNORING THE ABOVE EVIDENCES. IN OFF MARKET TRANSA CTION IN SHARES, ANY ENQUIRY FROM THE STOCK EXCHANGE WILL NOT YIELD RESU LT IN FAVOUR 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 S ET ASIDE TO THIS EXTENT THAT SHARES IN QUESTION WERE NOT PURCHASED ON THE D ECLARED 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 APPELLATE ORDER WHEREBY THE CIT(A) HAS RIGHTLY ACCEPTED THE COST OF PURCHASE/ACQUISITION O F SHARES AS STATED BY THE ASSESSEE. 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 2012-TIOL-236-ITAT-M UM, HAS HELD AS UNDER: 9. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. 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 HEA VILY ON THE STATEMENT GIVEN BY MR. MUKESH CHOKSI WHEREIN HE HAS STATED TH AT THE TRANSACTIONS OF PURCHASE OF SHARES ARE NOT CARRIED OUT THROUGH T HEM AND THE NAME OF HIS COMPANY HAS BEEN WRONGLY USED AND NO TRANSACTIO N MENTIONED IN THE LEDGER HAS BEEN CARRIED OUT THROUGH THEM. THE A.O. HAD ALSO ANOTHER PROPOSITION THAT THE TOTAL PURCHASE PRICE ON THE DA TE OF DEMATERIALISATION COMES TO RS.44110775/- WHICH BECOMES UNEXPLAINED IN VESTMENT IN SHARES. AFTER DEDUCTING THE INVESTMENT IN SHARES FR OM SALE PRICE THE SHORT TERM CAPITAL GAIN COMES TO RS. 80,03,027/-. HOWEVER , SINCE HE CONSIDERED THE ENTIRE RECEIPT ON THE SALE OF SHARES AS UN- ACC OUNTED INCOME AND ADDED 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 REMAND PROCEEDINGS AN D THE ASSESSEE HAS PROVED THE GENUINENESS OF THE SALE OF SHARES, THERE FORE, NO ADDITION CAN BE MADE U/S 68 OF THE ACT. THE REVENUE IS NOT IN AP PEAL BEFORE US AGAINST THE SAID OBSERVATION OF THE LD. CIT(A). HOWEVER, TH E LD. CIT(A) UPHELD THE 31 ALTERNATE PROPOSITION OF THE A.O. THAT THE PURCHASE PRICE ON THE DATE OF DEMATERIALISATION OF SHARES BECOME UNEXPLAINED INVE STMENT IN THE HANDS OF THE ASSESSEE AND THE DIFFERENCE BETWEEN IN SALE AND PURCHASE OF SHARES HAS TO BE TREATED AS SHORT TERM CAPITAL GAIN SINCE THE ASSESSEE COULD NOT SUBSTANTIATE THE PURCHASES. THEREFORE, THE QUESTION THAT HAS TO BE ANSWERED IN THE GROUNDS RAISED BY THE ASSESSEE IS A S TO WHETHER THE PURCHASE OF SHARES BY THE ASSESSEE ARE GENUINE OR N OT 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 PURCHASE D FROM MSPL (COPIES OF WHICH ARE PLACED AT PAPER BOOK PAGE 18 TO 43). S IMILARLY THE BANK STATEMENT MAINTAINED WITH HDFC BANK SHOWS EVIDENCE OF PAYMENT TO MSPL. THE XEROX COPY OF THE ACCOUNT PAYEE CHEQUE I SSUED TO MSPL DTD. 1.12.05 FOR 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 LEDGER AC COUNT OF THE ASSESSEE IN BOOKS OF MSPL WERE ALSO FILED BEFORE THE A.O. SI MILARLY THE COPIES OF CONTRACT NOTES AND SALE BILLS OF ALL THE SHARES TRA NSFERRED TO TECHNO SHARES & STOCKS LTD. WITH COPY OF D-MAT ACCOUNT AND COPY OF CONFIRMATION LETTER DTD. 28.10.2005 FROM SUNCHEM SE CURITIES P. LTD. WERE ALSO FILED BEFORE THE A.O. NOTHING WAS BROUGHT BY T HE A.O. TO PROVE THAT ANY OF THESE EVIDENCES FILED BY THE ASSESSEE IS FAL SE OR UNTRUE. THE REVENUE HAS BASICALLY GONE ON THE STATEMENT OF MR. MUKESH CHOKSI WHO DENIED TO HAVE KNOWN THE ASSESSEE AND DENIED TO HAV E MADE ANY TRANSACTION WITH THE ASSESSEE ON ACCOUNT OF PURCHAS E OF SHARES. THE RELEVANT QUESTIONS AND ANSWERS OF MR. MUKESH CHOKSI RECORDED BY THE A.O. ON 24.12.2008, COPY OF WHICH IS PLACED AT PAPE R 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 MA HASAGAR SECURITIES PVT. LTD. IN THE BOOKS OF SHRI J.K. RATTONSEY AND S MT. HAMIDA J. RATTONSEY. FROM THIS ACCOUNT IT IS SEEN THAT THE AS SESSEE HAVE CARRIED OUT REGULAR TRANSACTION WITH MAHASAGAR SECURITIES PVT. LTD. PL. CONFIRM THE LEDGER ACCOUNT FURNISHED BY THE ASSESSEE WITH THE C OPY OF LEDGER ACCOUNT OF J.K. RATTONSEY AND SMT. HAMIDA J. RATTONSEY APPE ARING 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 AND NO TRANSACTION MENTIONED IN THE L EDGER HAVE BEEN CARRIED OUT THROUGH US. MAHASAGAR SECURITIES HAVE N O RELATIONS WITH THE J.K. RATTONSEY AND SMT. HAMIDA J. RATTONSEY. 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 DEMATERIALISATION OF SHARES AM OUNTING TO RS.4,41,10,775/- BECOMES UNEXPLAINED INVESTMENT SIN CE THE PURCHASES ARE NOT RECORDED IN THE BOOKS OF THE ASSESSEE ON THAT D ATE AND THE DIFFERENCE BETWEEN THE SALE PRICE AND THE PURCHASE PRICE AMOUN TING TO RS. 80,03,027/- BECOMES SHORT TERM CAPITAL GAIN SINCE T HE HOLDING PERIOD 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. MUKESH CHOKSI CON FIRMED TO HAVE RECEIVED THE CHEQUES FROM THE ASSESSEE. THE RELEVANT QUESTIO N NO. 2 AND ANSWER THEREOF IS AS UNDER:- 32 Q.2. QUESTION PUT UP BY SHRI DIGANT BHATT WE HAVE ISSUED A CHEQUE FROM JAFFERALLI K. RATTONSEY, HAMIDA RATTONSEY FOR RS.12,40,565/- AND RS.11,91,378/- RESPECTIVELY, WHICH YOU HAVE RECEIVE D, KINDLY CONFIRM. 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 JAFFERALLI K. RATTONSEY AN D HAMIDA RATTONSEY FROM SUNCHAN SECURITIES LTD. ON YOUR BEHALF, KINDLY CONFIRM. ANS. I HAVE NOT GIVEN ANY INSTRUCTIONS. Q.4 QUESTION PUT UP BY DR. MAHESH AKHADE * IN THE S TATEMENT RECORDED U/S.131 OF THE IT. ACT ON 24.12.2008, YOU HAVE DENI ED IN THE ANSWER TO QUESTION NO.8, 9, 12 & 13 THAT MAHASAGAR SECURITIES PVT. LTD. AND ALLIANCE INTERMEDIARIES NETWORK PVT. LTD. HAS NO RE LATIONSHIP TO THE ASSESSEES J.K. RATTONSEY, HAMIDA RATTONSEY, SUNAY M EHTA AND SAMIT MEHTA. YOU HAVE ALSO DENIED YOU HAVE ANY SHARE TRAN SACTIONS WITH THESE PERSONS. KINDLY CONFIRM 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 WH ICH THE COMMISSION EARNED BY ME HAS BEEN ACCOUNTED FULLY. HERE THE SHA RES HAVE BEEN DELIVERED BY SUNCHAN SECURITIES, I HAVE NOT GIVEN A NY INSTRUCTIONS 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 TWO CHEQUES AMOUNTING TO RS.12, 40,565/- AND RS.11,91,378/- 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 THE A.O. AND THE O NE DURING CROSS EXAMINATION BEFORE THE A.O. UNDER THESE CIRCUMSTANCES ONE HAS T O SEE THE EVIDENTIARY VALUE OF A PERSON MAKING DOUBLE SPEAKING. WE FIND THE HON BLECALCUTTA HIGH COURT IN THE CASE OF EASTERN COMMERCIAL ENTERPRISES (SUPRA) HAS HELD THAT A MAN INDULGING IN 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 TRIBUNAL IN THE CASE OF MR S. UTTARA S. SHOREWALA (SUPRA) (IN WHICH ONE OF US THE ACCOUNTANT MEMBER IS A PARTY) FOLLOWING THE DECISION 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 MADE ANY PAYMENT TO THE ENT ITIES MENTIONED BY SHRI CHOKSI, WHOSE STATEMENT IS BEING RELIED UPON BY HIM . THE CIT (A) ALSO NOTED THAT MR.MUKESH CHOKSI HAS BEEN VACILLATING RIGHT THROUGH AND HAS GIVEN DIFFERENT VERSIONS AT DIFFERENT STAGES OF THE PROCEEDINGS AND THEREFORE HIS EVIDENCE WAS UNRELIABLE. 9.6 IN VIEW OF THE ABOVE JUDICIAL DECISIONS THE ST ATEMENT OF MR. MUKESH CHOKSI CANNOT BE A DECIDING FACTOR FOR REJECTING THE GENUI NENESS OF THE PURCHASE OF SHARES BY THE ASSESSEE ESPECIALLY WHEN ALL OTHER SU PPORTING EVIDENCES FILED 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 TAKE S CONSIDERABLE TIME. THEREFORE, WHEN THERE IS NO DISPUTE TO THE DEMATERI ALIZATION OF SHARES BEFORE THE DATE OF SALE, THEREFORE, THE SHARES WERE PURCHASED MUCH PRIOR TO THE DATE OF SALE. 33 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 SECURITIES PROVIDED SUCH TRANSACTIO NS ARE FOLLOWED UP BY DELIVERY OF SHARES AND ALSO THE TRANSFER DEEDS. SIMILARLY, I N RESPECT OF THE PURCHASERS OF THE SECURITIES, THE HOLDING PERIOD SHALL BE RECKONE D FROM 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 CLARI FY THE DETERMINATION OF DATE OF TRANSFER AND THE PERIOD OF HOLDING OF SECURITIES HELD IN DEMAT FORM. IT HAS BEEN STATED THERE IN THAT EARLIER CIRCULAR NO. 704 ISSUE D BY THE CBDT RELATING TO THE DATE OF TRANSFER AND PERIOD OF HOLDING DOES NOT CHANGE EVEN WHEN SECURITIES ARE HELD IN THE DEMATERIALIZED FORM. THEREFORE IN V IEW OF THE ABOVE TWO CIRCULARS OF CBDT IT IS CLEAR THAT IN CASE OF SECURITIES THE DATE OF PURCHASE HAS TO BE TAKEN FROM THE BROKERS NOTE/CONTRACT NOTE AND THE PERIOD OF HOLDING IS ALSO TO BE RECKONED FROM THE DATE OF PURCHASE AND NOT FROM T HE DATE OF DEMATERIALIZATION. SINCE THE HOLDING PERIOD OF THE SHARES AS PER THE BROKERS NOTE AND ITS SUBSEQUENT SALE AFTER DEMATERIALIZATIO N IS MORE THAN 12 MONTHS, THEREFORE, THE SHARES BECOME LONG TERM CAPITAL ASSE T AND THE ASSESSEES CLAIM OF LONG TERM CAPITAL GAIN IS CORRECT. IN THIS VIEW OF THE MATTER 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 ACCORD INGLY. THE GROUNDS RAISED BY THE ASSESSEE 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 CONSOLIDATED 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 LEGAL INFIRMITY. H ONBLE BOMBAY HIGH COURT IN THE CASE OF SHARADA CREDIT AND MUKESH R MA ROLIA HAS UPHELD THE ORDERS OF THE ITAT, MUMBAI. IN THOSE CASES IT H AS BEEN HELD THAT SHARES PURCHASED/SOLD IN THE OFF MARKET CANNOT BE C ONSIDERED ILLEGAL TRANSACTIONS. WE FIND THAT THE AO HAD NOT AFFORDED OPPORTUNITY OF CROSS- EXAMINATION OF SHRI MUKESH CHOKSI TO THE ASSESSEE. IT IS NOTEWORTHY THAT SH. CHOKSI HAD NOT NAMED THE ASSESSEE IN HIS STATEM ENTS AS THE BENEFICIARY WHO HAD AVAILED BOGUS ENTRIES. WE HAVE NOTICED THAT THE ASSESSEE HAD SHOWN THE INVESTMENT IN SHARES IN THE BALANCESHEET OF THE EARLIER ASSESSMENT YEAR AND HER RETURN OF INCOME WA S ACCEPTED BY THE DEPARTMENT. WE ARE OF THE OPINION THAT ONCE SALES/P URCHASE OF SHARES IS ACCOMPANIED BY THIS KIND OF EVIDENCES THE GENUINENE SS OF THE SAID TRANSACTIONS CANNOT BE DOUBTED. NON-PAYMENT OF STT CANNOT BE AND SHOULD NOT BE BASIS FOR MAKING ADDITION OF THE SECT ION 68 OF THE ACT. FAA HAS CATEGORICALLY HELD THAT ALL THE NECESSARY DETAI LS ABOUT PURCHASE AND SALE OF SHARES WERE MADE AVAILABLE TO THE AO DURING ASSESSMENT PROCEEDINGS. WE HAVE PERUSED THE CASE LAWS RELIED U PON 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 PUR CHASE OF SHARES DURING THE YEAR 1999-2000 AND 2000-2001 WERE DULY R ECORDED 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 AGRICULTURAL INCOME WHICH WAS DULY OFFERED AND ASSESSED TO TAX IN THOSE ASSESSMENT YEARS. THE ASSESSEE HAS PRO DUCED CERTIFICATES FROM THE AFORESAID FOUR COMPANIES TO T HE EFFECT THAT THE SHARES WERE IN-FACT TRANSFERRED TO THE NAME OF THE ASSESSEE. IN THESE CIRCUMSTANCES, THE DECISION OF THE ITAT IN HO LDING THAT THE 34 ASSESSEE HAD PURCHASED SHARES OUT 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. LT D. 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 REVEN UE THAT THE SHARES IN QUESTION ARE STILL LYING WITH THE ASSESSEE NOR I T IS THE CASE OF THE REVENUE THAT THE AMOUNTS RECEIVED BY THE ASSESSEE O N SALE OF THE SHARES IS MORE THAN WHAT IS DECLARED BY THE ASSESSE E. THOUGH THERE IS SOME DISCREPANCY IN THE STATEMENT OF THE D IRECTOR OF M/S. RICHMAND SECURITIES PVT. LTD. REGARDING THE SALE TR ANSACTION, THE TRIBUNAL RELYING ON THE STATEMENT OF THE EMPLOYEE O F M/S. RICHMAND SECURITIES PVT. LTD. HELD THAT THE SALE TR ANSACTION WAS GENUINE. IN THESE CIRCUMSTANCES, THE DECISION OF THE ITAT IN HOLDING THAT THE PURCHASE AND SALE OF SHARES ARE GENUINE AND THE REFORE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN HOLDING THAT THE AMOUN T OF RS. 1,41,08,484/- REPRESENTED UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE INCOME 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 UNDER CONSIDERATI ON. RESPECTFULLY FOLLOWING THE ORDERS OF THE HONBLE HIGH COURT AND THE COORDINATI NG BENCHES OF THE TRIBUNAL WE HOLD THAT PURCHASE AND SALE OF SHARES BY THE ASS ESSEE WAS A GENUINE TRANSACTION, AND HENCE, ADDITION MADE BY THE AO CAN NOT 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 TTJ 818, HA S HELD AS UNDER: THE ASSESSEE EARNED CAPITAL GAINS DURING THE PERIO D COVERED BY S.153A PROCEEDINGS. IT IS ALSO NOTED THAT ALL SUCH TRANSA CTIONS HAVE BEEN TAKEN INTO CONSIDERATION WHILE FILING THE RETURNS FOR THE SE YEARS IN THE NORMAL COURSE AND THE DEPARTMENT HAS ALSO ACCEPTED THE NAT URE OF SUCH TRANSACTIONS. IT IS VERY IMPORTANT TO NOTE THAT NO INCRIMINATING MATERIAL HAS BEEN FOUND DURING THE COURSE OF SEARCH WHICH CO ULD HAVE CAST DOUBT ON THE GENUINENESS OF THE TRANSACTIONS OR COULD HAV E INDICATED THAT IT WAS A CASE OF ASSESSEES OWN UNDISCLOSED MONEY UTILIZED IN THE EXECUTION OF SUCH TRANSACTIONS. VOLUMINOUS DOCUMENTARY EVIDENCE S HAVE BEEN FILED BY THE ASSESSEE TO PROVE ITS CLAIM WHICH SUPPORT TH E GENUINENESS OF THE TRANSACTION. HOWEVER, THE AO HAS UTILIZED THE STAT EMENTS OF THE PERSONS WHO WERE NOT CROSS-EXAMINED BY THE ASSESSEE. HENCE , AS PER THE SETTLED JUDICIAL PRINCIPLE, SUCH STATEMENTS CANNOT BE GIVEN ANY WEIGHTAGE. WHEN THERE ARISES A QUESTION OF APPRECIATION OF DOCUMENT ARY EVIDENCES, THEN A HOLISTIC VIEW HAS TO BE TAKEN AND IN THE PRESENT CA SE MAJORITY OF THE BROKERS HAVE SUPPORTED THE CLAIMS OF THE ASSESSEE A ND SURPRISINGLY 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 APPEARS TO BE ESTAB LISHED. AS REGARDS THE ASPECT OF OFF MARKET TRANSACTIONS, IT IS NOTED THAT NEITHER THESE ARE ILLEGAL NOR PROHIBITED AND ONLY SOME OF THE COMPLIANCES HAV E TO BE MADE BY THE BROKERS. AS REGARDS THE ASPECT OF SUCH COMPLIANCES , IT IS NOT THE CASE THAT ALL THE OFF MARKET TRANSACTIONS HAVE NOT BEEN REPOR TED BY THE CONCERNED BROKERS TO THE STOCK EXCHANGE AS PER RULES AND EVEN OTHERWISE, ANY FAILURE ON THE PART OF THE BROKERS IN DOING SUCH CO MPLIANCE CANNOT MAKE THE CONTRACT BETWEEN THE ASSESSEE AND THE BROKER IL LEGAL OR VOID AS THE 35 BROKER MAY FACE THE CONSEQUENCES FOR HIS DEFAULT UN DER 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 JUSTIFY SUCH ADDITION. THE DEPARTMENTAL REPRESENTATIVE HAS ALSO ARGUED THAT THERE WERE DIFF ERENCES IN THE INFORMATION AS PER CONTRACT NOTES AND AS PER INFORM ATION RECEIVED FROM THE STOCK EXCHANGE WHICH FACT IS ALSO NOT MATERIAL BECAUSE WHEN SOME OFF MARKET TRANSACTIONS HAVE NOT BEEN REPORTED TO THE S TOCK EXCHANGE, HOW SUCH CONTRACT NOTES CAN BE MATCHED WITH THE RECORDS OF STOCK EXCHANGE. ECONOMIC CONSEQUENCES AS A RESULT OF OFF MARKET TRA NSACTIONS OR OTHERWISE HAVE TAKEN PLACE AND, THEREFORE, SUCH TRA NSACTIONS CANNOT BE TREATED AS SHAM MERELY FOR SOME DISCREPANCIES OR FO R THE VIEW OF THE AO IN REGARD TO GENUINENESS OF THESE TRANSACTIONS. TH E REVENUE HAS ALSO RELIED ON THE DECISIONS OF SEBI INVOLVING SOME SCRI PS. 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 PROTE CTION AND, THEREFORE, SUCH ORDER CANNOT BE CONCLUSIVE AS REGARDS THE GENU INENESS OF THE TRANSACTIONS. IN THIS REGARD, IT WOULD NOT BE OUT OF PLACE TO MENTION THAT STOCK MARKET OPERATIONS ARE SUBJECT TO DIFFERENT RE GULATIONS 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 MAINLY ON THE ASPE CT OF PRICE RIGGING IN SUCH MANNER. HENCE, THE SAME CANNOT BE OF ANY ASSI STANCE TO THE CAUSE OF THE REVENUE. THUS, ON THE BASIS OF APPRECIATION OF FACTS AND CIRCUMSTANCES OF THE CASE AS A WHOLE AND CONSIDERIN G THE DOCUMENTARY EVIDENCES ON 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 TAKEN A DEFINITE STAND OF SUCH TRANSACTIONS BEING BOGUS OR SHAM. HENCE, SUCH PLEA HAS RIGHTLY BEEN REJECTED BY THE CIT(A) AFTER EXAMINING THE SCOPE OF THE POWERS OF THE CIT(A) AS WELL AS ROLE OF THE AO IN THE SCHEME OF A CT. UNDER THE SCHEME OF THE ACT, INCOME IS TO BE ASSESSED UNDER DIFFEREN T HEADS DEPENDING UPON THE SOURCE/NATURE OF SUCH INCOME AND IF THE AO HAS ASSESSED THE SAME UNDER A SPECIFIC HEAD WHICH IS SUBSEQUENTLY DELETED , THEN, IT CANNOT BE TAXED UNDER ANY OTHER HEAD MERELY FOR THIS REASON. THE STAND OF THE ASSESSEE IS OF LONG-TERM CAPITAL GAIN WHICH HAS ALS O BEEN ACCEPTED BY THE DEPARTMENT IN ASSESSMENT PROCEEDINGS COMPLETED BEFO RE 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 AO IN S. 153A PROCEEDINGS HAS TAKEN A DIFFERENT STAND AND, THEREF ORE, IF SUCH STAND OF THE AO HAS NOT BEEN ACCEPTED, THEN, THE AO CANNOT T AKE AN ALTERNATE STAND FOR TAXING IT UNDER A DIFFERENT HEAD IN THE C OURSE OF APPELLATE PROCEEDINGS. CERTAIN JUDICIAL DECISIONS REGARDING THE SCOPE OF POWERS OF CIT(A) ALSO SUPPORT THE CLAIM OF THE ASSESSEE THAT NO NEW SOURCE OF INCOME CAN BE FOUND IN THE COURSE OF APPELLATE PROC EEDINGS. HOWEVER, THE CIT(A) HAS EXAMINED THE FACTUAL DETAILS OF THES E TRANSACTIONS ON THE BASIS OF VARIOUS PARAMETERS LIKE FREQUENCY, VOLUME, LINE OF TRADE IN WHICH THE ASSESSEE IS MAINLY ENGAGED AND THE 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 BHAGVATIPRASAD MUNDADA V. ITO & ORS. IN ITA NO. 1332/PN/2009, WE FIND THE SAME IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THIS CASE, THE HON. TRIBUNAL HAS DELETED THE ADD ITION U/ S. 68 ON ACCOUNT OF 36 LONG TERM CAPITAL GAINS DECLARED BY THE APPELLANT, BUT ACCEPTED 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. (II) SETTLEMENT NO. DID NOT TALLY WITH THE POOL ACCOUNT OF THE BROKER. (III) SHARES ARE TRANSFERRED TO THE DEMAT ACCOUNT AFTER C OMPLETION OF 18 MONTHS FROM THE DATE OF THE CONTRACT 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 SEBI. (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 C ONSIDERATION AND THE SAME IS AGAINST THE SALE OF SHARES, ADDITION CANNOT BE MADE U/ S. 68 OF THE I. T. ACT. IT WAS FURTHER HELD THAT FROM THE DATE O F TRANSFER OF SHARES IN THE DEMAT ACCOUNT OF THE ASSESSEE AND ITS SALE, PERIOD OF HOLDING IS TO BE COUNTED. THE PLEA TAKEN BY THE ASSESSEE THAT THE AS SESSEE HAS PURCHASED THE SHARES OFF MARKET WAS NOT ACCEPTED AT THIS STAG E. ACCORDINGLY, THE FACTS OF THIS CASE ARE ENTIRELY DIFFERENT FROM THE FACTS OF THE INSTANT CASE. THE VARIOUS OTHER DECISIONS RELIED ON BY THE LD. DE PARTMENTAL REPRESENTATIVE AS WELL AS THE ASSESSING OFFICER ALS O DO NOT APPLY TO THE FACTS OF THE PRESENT CASE. 19.6. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND RELYING ON VARIOUS DECISIONS CITED SUPRA AND CONSIDERING THE E LABORATE DISCUSSION BY THE LD. CIT(A) WE FIND NO INFIRMITY IN HIS ORDER ACCEPTING THE LONG TERM CAPITAL GAINS AND SHORT TERM CAPITAL GAINS DECLARED BY THE ASSESS EE. ACCORDINGLY, THE ORDER OF THE CIT(A) IS UPHELD AND THE GROUNDS RAISED BY T HE REVENUE ARE DISMISSED. 11. SINCE FACTS OF THE IMPUGNED APPEAL ARE IDENTICA L TO THE FACTS OF THE CASE DECIDED BY THE TRIBUNAL CITED (SUPRA), THEREFORE, RESPECTFU LLY FOLLOWING THE DECISION OF THE TRIBUNAL UNDER IDENTICAL FACTS AND CIRCUMSTANCES WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE IS ENTITLED TO CLAIM EXEMPTION U/S.10( 38) OF LONG TERM CAPITAL GAIN ON ACCOUNT OF SALE OF SHARES OF FAST TRACT ENTERTAINME NT LTD. DECIDED BY HIM. ACCORDINGLY, THE ORDER PASSED BY THE LD. CIT(A) IS SET-ASIDE AND THE AO IS DIRECTED TO ALLOW THE CLAIM OF THE ASSESSEE. ITA NO.1249/PN/2012 (JAIBHAGWAN BANARSIDAS JINDAL) (A.Y. 2005-06) : ITA NO.1250/PN/2012 (MALTI GHANSHYAM GOYAL) (A.Y. 2 005-06) : ITA NO.1252/PN/2012 (NARESH BANARSIDAS JINDAL) (A.Y .2005-06) : ITA NO.1253/PN/2012 (GHANSHYAM CHUNILAL GOYAL) (A.Y . 2006-07) : ITA NO.1255/PN/2012 (SUNIL NANDKISHOR GOYAL) (A.Y. 2006-07) : ITA NO.1257/PN/2012 (NANDKISHOR TELURAM GOYAL (A.Y. 2006-07) : 37 12. AFTER HEARING BOTH THE SIDES WE FIND THE GROUND S RAISED BY THE ABOVE ASSESSEES RELATE TO CLAIM OF EXEMPTION U/S.10(38) ON ACCOUNT OF SALE OF SHARES OF FAST TRACK ENTERTAINMENT LTD. WE FIND THE GROUNDS RAISED BY T HE ABOVE ASSESSEES ARE IDENTICAL TO GROUND OF APPEAL IN ITA NO.1256/PN/2012. WE HAVE A LREADY DECIDED THE ISSUE AND THE CLAIM OF EXEMPTION OF LONG TERM CAPITAL GAIN U/S.10 (38) HAS BEEN ACCEPTED FOR THE REASONS GIVEN THEREIN. FOLLOWING THE SAME RATIO, T HE CLAIM OF EXEMPTION OF LONG TERM CAPITAL GAIN ON ACCOUNT OF SALE OF SHARES OF FAST T RACK ENTERTAINMENT LTD. IN THE ABOVE APPEALS ARE ALLOWED. ITA NO.1254/PN/2012 (SUNIL NANDKISHOR GOYAL) (A.Y. 2005-06) : 13. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO DU RING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAS CREDITED AN AMOUNT OF RS.15 LAKHS ON 31-03- 2005 AS GIFT RECEIVED. FROM THE VARIOUS DETAILS FU RNISHED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS HE NOTED THAT THE ASSESSEE HAS SHOWN TO HAVE RECEIVED RS.15 LAKHS FROM ONE MR. JADHUMANI PRADHAN, R/O. AB HIMANYU, BALIA, JAJPUR, ORISSA, ON 24-05-2004 BY WAY OF GIFT. THE PERSON WAS STATE D TO BE A NON-RESIDENT INDIAN AND THE GIFT WAS RECEIVED VIDE DD NO.260327 DATED 24-05-200 4 ISSUED BY THOMOS COOK AL- ROSTAMANI EXCHANGE COMPANY, DUBAI PAYABLE ON CENTRA L BANK OF INDIA, AURANGABAD BRANCH. HE NOTED THAT ANOTHER FAMILY MEMBER OF THE ASSESSEE NAMELY MR.ARUN GOYAL HAD RECEIVED A GIFT OF RS.15 LAKHS DURING THE ASSES SMENT YEAR UNDER CONSIDERATION. HOWEVER, THE AMOUNT SO RECEIVED WAS OFFERED TO TAX LATER ON DURING THE COURSE OF SURVEY ACTION U/S.133A. SINCE THE GIFT SO RECEIVED WAS F ROM A PERSON WHO IS NOT A RELATIVE OF THE ASSESSEE NOR HE HAS ANY BUSINESS CONNECTIONS WI TH THE ASSESSEE, THEREFORE, THE AO ASKED THE ASSESSEE TO JUSTIFY THE GIFT SO RECEIVED FROM THE SAID PERSON. THE ASSESSEE SUBMITTED THAT IT HAS EXPLAINED THE SOURCE OF INVES TMENT AND THE ASSET ACQUIRED BY FURNISHING THE DETAILS OF GIFT ALONG WITH THE COPY OF DEMAND DRAFT COPY OF GIFT DEED ETC. 14. HOWEVER, THE AO WAS NOT CONVINCED WITH THE EXPL ANATION GIVEN BY THE ASSESSEE. HE NOTED THAT THE BROTHER OF THE ASSESSEE MR.ANIL G OYAL HAS ALREADY OFFERED RECEIPT OF SUCH GIFT FROM A NON RELATIVE AS HIS OWN INCOME. T HE FAMILY OF THE ASSESSEE HAS BEEN IN RECEIPT OF GIFTS FROM THEIR RELATIVES BASED IN USA. IT IS VERY STRANGE THAT IN ADDITION TO SUCH GIFTS THE ASSESSEE ALSO RECEIVED A GIFT FROM A PERSON WHO IS NOT DISTINCTLY RELATED 38 NOR HAVING ANY PERSONAL OR BUSINESS CONNECTION. IN THE GIFT DEED, IT HAS BEEN MENTIONED THAT THE SAME IS OUT OF LOVE AND AFFECTION. SINCE THE ASSESSEE DOES NOT HAVE ANY CONNECTION WITH THE SAID PERSON, THEREFORE, IT IS N OT POSSIBLE TO HAVE ANY SUCH LOVE AND AFFECTION. HE NOTED THAT THE GIFT DEED HAS BEEN SI GNED ONLY BY SHRI JADHUMANI PRADHAN AND TWO WITNESSES WHOSE NAMES DO NOT APPEAR. THE S IGNATURE OF THE ASSESSEE IS NOT THERE IN THE GIFT DEED. THE PLACE OF PREPARATION OF THE DEED IS ALSO NOT MENTIONED. FURTHER, THE AMOUNT WAS INITIALLY CREDITED TO ASSESSEES ACCOUNT WITH SIVA AGRO INDUSTRIES, JALNA, A PARTNERSHIP FIRM WHERE ASSESSEE IS A PARTNER ON 29- 05-2004. LATER ON, ON 31-03-2005 THIS AMOUNT HAS BEEN TRANSFERRED TO THE CAPITAL ACC OUNT OF THE ASSESSEE. THEREFORE, EVEN IF IT IS TO BE CONSIDERED THAT SHRI SUNIL GOYAL, BE ING THE DONEE, HAD ACCEPTED THE GIFT, THE DATE TO BE RECKONED WOULD BE 31-03-2005. FOLLOWING THE PROVISIONS OF SECTION 56(V) OF THE INCOME TAX ACT THE AO HELD THAT THE GIFT WOULD BE CHARGEABLE TO TAX AS INCOME FROM OTHER SOURCES. SINCE THE DONOR HAS NO RELATI ONSHIP WITH THE ASSESSEE OR THE GIFT WAS NOT MADE ON THE INSTANCES MENTIONED AS EXCEPTIO NS IN THE SAID PROVISIONS, THE ASSESSING OFFICER HELD THAT THE GIFT GETS CHARGED T O INCOME. HE FURTHER NOTED THAT THE ASSESSEE HAS NEVER GIFTED ANY AMOUNT TO ANY PERSON INCLUDING JADHUMANI PRADHAN. ACCORDING TO THE AO GIFT IS SUCH A THING WHICH IS A LWAYS RECIPROCATED TO SHOW THE GOODNESS GESTURE. HOWEVER, THE ASSESSEE HAS NEVER DONE SO. IN VIEW OF THE ABOVE, THE AO REJECTED THE CLAIM OF GIFT RECEIVED BY THE ASSES SEE AND TREATED THE SAME AS ASSESSEES INCOME FROM UNDISCLOSED SOURCE INTRODUCED IN THE GU ISE OF A GIFT. THE ASSESSING OFFICER ACCORDINGLY MADE ADDITION OF RS.15,00,000/- TO THE TOTAL INCOME OF THE ASSESSEE. 15. IN APPEAL THE LD. CIT(A) UPHELD THE ACTION OF T HE AO BY HOLDING AS UNDER : 6.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE RIVAL CONTENTIONS. ON PERUSAL OF THE SAME IT HAS BEEN NO TICED THAT IT IS UNDISPUTABLE FACT THAT THE APPELLANT IS NOT RELATIVE OR BUSINESS ASSOCIATE OF SHRI JADHUMANI PRADHAN FROM WHOM HE HAS CLAIMED RECEIPT OF GIFT OF RS.15 LAKHS. IT IS ALSO UNDISPUTED FACT THAT SHRI ANIL GOYAL, I.E., BROTHER OF THE APPELLANT WHO HAS ALSO CLAIMED TO HAVE RECEIVED GIFT FROM SHRI JADHUMANI P RADHAN, HAS SURRENDERED THE SAID GIFT AS HIS OWN INCOME AND OFFERED THE SAME TO TAX. THE APPELLANT HAS NOT GIVEN ANY GIFT TO ANY PERSON INCLUDING SHRI JADHUMA NI PRADHAN. IN VIEW OF THE ABOVE FACTS, I AM OF THE CONSIDERED VIEW THAT THE A .O. IS JUSTIFIED IN TREATING THE SAID GIFT AS NON-GENUINE AND MAKING ADDITION OF RS.15,00 ,000/-. THE ADDITION IS ALSO JUSTIFIED IN VIEW OF THE PROVISIONS OF SECTION 56(V ) OF THE ACT WHICH HAVE BEEN INTRODUCED IN THE STATUTE BY FINANCE ACT (NO.2), 20 04 W.E.F. A.Y.2005-06. IN VIEW OF THE ABOVE FACTS AND DISCUSSION, THE ADDITION OF RS.15,00,000/- IS, THEREFORE, CONFIRMED. GROUND NOS.2, 3 & 5 ARE DISMISSED. 39 16. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN T REATING THE GIFT OF RS. 15,00,000/- RECEIVED BY THE APPELLANT AS INCOME OF THE APPELLANT FROM UNDISCLOSED SOURCES. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FURTHER ERRED IN CONFIRMING THE GIFT RECEIVED BY THE APPELLANT AS INCOME FROM UNDISCLOSED SOURCES MERELY ON THE BASIS OF SIMILAR GIFT DECLARE D AS INCOME BY SHRI ANIL GOYAL. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FURTHER ERRED IN CONFIRMING THE GIFT RECEIVED BY THE APPELLANT AS INCOME FROM UNDISCLOSED SOURCES WITHOUT CONSIDERING AND TAKING INTO ACCOUNT THE VARIOUS EVIDENCES PRODUCED BY THE APPELLANT. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FURTHER ERRED IN CONFIRMING THE GIFT RECEIVED BY THE APPELLANT AS INCOME FROM UNDISCLOSED SOURCES IN VIEW OF THE PROVISIONS OF SECTION 56(V) OF THE INCOME TAX ACT. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FURTHER ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER I N TREATING GIFT RECEIVED BY THE APPELLANT AS INCOME FROM UNDISCLOSED SOURCES EVEN THOUGH THERE WAS NO INCRIMINATING MATERIAL OR EVIDENCE FOUND DUR ING THE COURSE OF SEARCH. 6. THE APPELLANT CRAVES TO ADD TO, ALTER OR AMEND T HE FOREGOING GROUNDS, WHICH ARE WITHOUT PREJUDICE TO ONE ANOTHER , AT THE TIME OF HEARING. 17. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS RECEIVED GIFT OF RS.15 LAKHS FROM JADHUMANI PRADHAN ON 24-05-2004 VI DE DD NO.260327 DRAWN FROM THOMOS COOK AL-ROSTAMANI EXCHANGE COMPANY, DUBAI. REFERRING TO THE COPY OF THE BANK STATEMENT AT PAGE 6 OF THE PAPER BOOK HE SUBMI TTED THAT THE GIFT SO RECEIVED BY DD IS CLEARED IN BANK ACCOUNT OF SIVA AGRO INDUSTRIES IN WHICH THE ASSESSEE IS A PARTNER. THE SAID AMOUNT OF GIFT IS TRANSFERRED TO CAPITAL A CCOUNT OF SUNILKUMAR GOYAL ON 31-03- 2005. SO FAR AS THE ALLEGATION OF THE LD. CIT(A) T HAT ANIL GOYAL HAS RECEIVED GIFT FROM JADHUMANI PRADHAN AND HAS SURRENDERED THE SAID GIFT AS HIS OWN INCOME AND OFFERED THE SAME TO TAX HE REFERRED TO THE COPY OF THE ASSESSME NT ORDER OF ANIL GOYAL AT PAGE 9 OF THE PAPER BOOK AND SUBMITTED THAT SHRI ANIL GOYAL H AD RECEIVED GIFT FROM ONE MR. NARESH SINGHVI AND NOT FROM JADHUMANI PRADHAN AS OB SERVED BY THE LD.CIT(A). HE SUBMITTED THAT THE GIFT DEED IS SIGNED BY THE ASSES SEE AND COPY OF SIGNED GIFT DEED IS GIVEN TO THE AO. HOWEVER, EARLIER, THE ACCOUNTANT OF THE ASSESSEE HAS GIVEN THE COPY OF GIFT DEED NOT SIGNED BY THE ASSESSEE TO THE AO AS T HE COPY WAS AVAILABLE WHEN IT WAS 40 RECEIVED FROM THE DONOR FROM DUBAI. HE SUBMITTED T HAT THE GIFT DEED IS SIGNED BY 2 WITNESSES ON BEHALF OF DONOR AT DUBAI WHEREIN THEY HAVE FORGOTTEN TO MENTION THE NAMES OF THE WITNESSES. HE SUBMITTED THAT THE IRREGULARI TIES AS ALLEGED BY THE ASSESSING OFFICER WERE EXPLAINED TO CIT(A) AND HE HAS ACCEPTED THE SA ME AS HE HAS NOT COMMENTED ON THE ASPECT OF IRREGULARITIES IN THE GIFT DEED. HE SUBM ITTED THAT THE AO AND CIT(A) HAVE WRONGLY INVOKED THE PROVISIONS OF SECTION 56(V) WHI CH WAS INTRODUCED BY THE FINANCE ACT 2004 AND IS APPLICABLE TO ANY SUM OF MONEY EXC EEDING 25000 RECEIVED FROM ANY PERSON ON OR AFTER 01-09-2004. SINCE IN THE INSTAN T CASE THE GIFT HAS BEEN RECEIVED ON 24-05-2004 WHICH IS MUCH BEFORE 01-09-2004, THEREFO RE, NO ADDITION CAN BE MADE U/S.56(V) OF THE INCOME TAX ACT. HE ACCORDINGLY SU BMITTED THAT THE ADDITION MADE BY THE AO AND SUSTAINED BY THE CIT(A) SHOULD BE DELETE D. 17.1 THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTH ER HAND HEAVILY RELIED ON THE ORDER OF THE AO AND THE CIT(A). 18. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. THE ONLY DISPUTE IN THE IMPUGNED APPEAL IS REGARDIN G TAXABILITY OF THE GIFT OF RS.15 LAKHS RECEIVED BY THE ASSESSEE FROM ONE SRI JADHUMANI PRA DHAN. WE FIND THE ASSESSING OFFICER DISALLOWED THE CLAIM OF GIFT ON THE GROUND THAT (1) THE DONOR IS NOT A RELATIVE OF THE ASSESSEE, (2) THE BROTHER OF THE ASSESSEE SRI A NIL GOYAL HAD ALREADY OFFERED THE RECEIPT OF SUCH GIFT DURING THE ASSESSMENT YEAR UND ER CONSIDERATION AS HIS OWN INCOME (3) APART FROM RECEIVING THE GIFTS FROM RELATIVES B ASED IN USA THE ASSESSEE HAS ALSO RECEIVED GIFT FROM A PERSON WHO IS NOT DISTINCTLY R ELATED NOR HAVING ANY PERSONAL OR BUSINESS CONNECTION WITH THE ASSESSEE AND (4) THERE ARE CERTAIN DEFECTS IN THE GIFT DEED. FURTHER, ACCORDING TO THE ASSESSING OFFICER THIS GI FT WAS INITIALLY CREDITED TO ASSESSEES ACCOUNT WITH SIVA AGRO INDUSTRIES, JALNA, A PARTNER SHIP FIRM, WHERE ASSESSEE IS A PARTNER ON 29-05-2004 AND ON 31-03-2005 THIS AMOUNT WAS TR ANSFERRED TO THE CAPITAL ACCOUNT OF THE ASSESSEE. THE ASSESSING OFFICER THEREFORE APPLI ED THE PROVISIONS OF SECTION 56(V) AND BROUGHT TO TAX THE ABOVE GIFT. WE FIND IN APPEAL T HE LD. CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER ON THE GROUND THAT SRI ANIL GOYAL , I.E. BROTHER OF THE ASSESSEE WHO HAS ALSO CLAIMED TO HAVE RECEIVED GIFT FROM SRI JADHUMA NI PRADHAN HAS SURRENDERED THE SAID 41 GIFT AS HIS OWN INCOME. FURTHER, THE ASSESSEE HAS NOT GIVEN ANY GIFT TO ANY PERSON INCLUDING SRI JADHUMANI PRADHAN AND THE PROVISIONS OF SECTION 56(V) ARE APPLICABLE. 19. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE BROTHER OF THE ASSESSEE SRI ANIL GOYAL HAS NOT RECEIVED ANY GIFT F ROM SRI JADHUMANI PRADHAN AND THAT THE PROVISIONS OF SECTION 56(V) ARE NOT APPLICABLE TO THE FACTS OF THE CASE SINCE THE SAID PROVISION WAS INTRODUCED BY THE FINANCE ACT, 2004 A ND IS APPLICABLE TO ANY SUM OF MONEY EXCEEDING RS.25,000/- RECEIVED FROM ANY PERSO N ON OR AFTER 01-09-2004. HOWEVER, IN THE INSTANT CASE THE ASSESSEE HAS RECEI VED THE GIFT ON 24-05-2004 WHICH IS MUCH BEFORE 01-09-2004, THEREFORE, THE PROVISIONS O F SECTION 56(V) ARE NOT APPLICABLE. 20. FROM THE COPY OF THE ASSESSMENT ORDER PASSED U/ S.153C R.W.S. 143(3) OF THE I.T. ACT FOR THE A.Y. 2005-06 ( A COPY OF WHICH IS PLACE D AT PB 9 TO 11) WE FIND SRI ANIL GOYAL HAD RECEIVED GIFT OF RS.15 LAKHS FROM SRI NAR ESH SINGHVI AND OFFERED THE SAME TO TAX SINCE HE WAS NOT IN A POSITION TO SUBSTANTIATE HIS CLAIM. HE HAS NOT RECEIVED ANY GIFT FROM SHRI JADHUMANI PRADHAN. THEREFORE, THE LD. CIT (A) WAS NOT CORRECT IN STATING THAT SRI ANIL GOYAL WHO HAD RECEIVED GIFT FROM SRI JADHU MANI PRADHAN HAD SURRENDERED THE GIFT AS HIS INCOME. 21. SO FAR AS THE APPLICATION OF SECTION 56(V) TO T HE FACTS OF THE CASE, ADMITTEDLY THE PROVISION WAS INTRODUCED BY THE FINANCE ACT, 2004 A ND IS APPLICABLE TO ANY SUM OF MONEY EXCEEDING RS.25,000/- RECEIVED FROM ANY PERSO N OTHER THAN THE PERSONS SPECIFIED IN THE SAID PROVISION ON OR AFTER 01-09-2004. IN T HE INSTANT CASE THE ASSESSEE HAS RECEIVED THE GIFT ON 24-05-2004 WHICH WAS CREDITED IN THE BANK ACCOUNT OF THE FIRM SIVA AGRO INDUSTRIES IN WHICH THE ASSESSEE IS A P ARTNER. THEREFORE, THE PROVISIONS OF SECTION 56(V) ARE NOT APPLICABLE TO THE FACTS OF TH E PRESENT CASE. MERELY BECAUSE THE AMOUNT WAS CREDITED TO THE CAPITAL ACCOUNT OF THE P ARTNER ON 31-03-2005 CANNOT BE A GROUND TO APPLY THE PROVISIONS OF SECTION 56(V) WHE N THE GIFT WAS RECEIVED ON 29-05- 2004 BY THE ASSESSEE AND THE SAME WAS CREDITED TO T HE BANK ACCOUNT IN THE FIRM WHEREIN HE IS A PARTNER. IN THIS VIEW OF THE MATTER, WE SE T-ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION . THIS GROUND BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 42 22. IN THE RESULT, ALL THE APPEALS FILED BY THE RES PECTIVE ASSESSEES ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 19 TH DAY OF APRIL, 2013. SD/- SD/- (SHAILENDRA KUMAR YADAV ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER SATISH PUNE, DATED THE 19 TH APRIL 2013. COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A), AURANGABAD 4. THE CIT CENTRAL CIRCLE, NAGPUR 5. THE DR B BENCH, PUNE. 6. GUARD FILE BY ORDER // TRUE COPY // PRIVATE SECRETARY, INCOME TAX APPELLATE T RIBUNAL,PUNE.
Other Referred Cases
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Laws Referred To
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1:1 Consultation on Business Valuations
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1:1 Consultation on Business Development
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Sales Forecasting Sheet
₹100
Assignment of Registered Trademark
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