Appeal Details
Counselvise Citation
[2017] 127 COUNSELVISE.COM (IT) 5159 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
4 year(s) 5 month(s) 12 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
18-08-2017
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
E
Next Hearing Date
01-06-2017
Assessment Year
2005-2006
Appeal Filed On
07-03-2013
Judgement Text
MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 1 IN THE INCOME TAX APPELLATE TRIBUNAL [DELHI BENCHES: E NEW DELHI] BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER IT. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & 3176 & 3177/DEL/2014 ASSESSMENT YEARS: 2005-06, 2006-07, & 2007-08. M/S. MAGNUM STEELS LIMITED, ASSTT. COMMISSIONER 312 ESSEL HOUSE, VS. OF INCOME TAX, 10, ASAF ALI ROAD, DARYA GANJ, CENTRAL CIRCLE : 16, NEW DELHI 110 002. NEW DELHI. PAN : AADCM 6400 E (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJEEV SAXENA, ADV.; SHRI S. C. JAIN, C. A.; MS. SUMANGLA SAXENA, ADV.; & SHRI SHYAM SUNDER, A.R. REVENUE BY : SHRI H. K. CHOUDHARY, CIT [DR] DATE OF HEARING : 01.06.2017. DATE OF PRONOUNCEMENT : 18.08.2017 O R D E R PER I. C. SUDHIR, J. M. : 01 ALL THE AFORESAID FIVE APPEALS HAVE BEEN FILED BY THE ASSESSEE AND OUT OF THE AFORESAID, ITA NO. 3176/DEL/2014 & 3177/DEL/2014 ARE MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 2 THE APPEALS IN PURSUANCE TO THE ASSESSMENT FRAMED U/S 143(3) OF THE INCOME TAX ACT, 1961 AND REMAINING THREE APPEALS I.E. ITA NO. 1342/DEL/2013, 1343/DEL/2013 & 2004/DEL/2013 ARE IN RESPECT OF THE ORDERS OF ASSESSMENT SUBSEQUENTLY PASSED U/S 153A OF THE ACT FOR THE ASSESSMENT YEARS RELATING TO AY 2005-06, 2006-07 & 2007-08 RESPECTIVELY. THEREFORE, FOR THE AY 2006-07 AND 2007-08, ASSESSEE HAS FILED TWO APPEALS, ONE IN PURSUANCE TO THE ORDER PASSED U/S 143(3) OF THE ACT AND ANOTHER IN PURSUANCE TO THE ORDER PASSED U/S 153A OF THE ACT. FOR AY 2005-06 THERE IS ONLY ONE APPEAL IN PURSUANCE TO THE ORDER PASSED U/S 153A OF THE ACT. SINCE ALL THE AFORESAID FIVE APPEALS PERTAIN TO THE SAME ASSESSEE AND ALL THE FIVE APPEALS INVOLVE CONSIDERATION OF SOME COMMON ISSUES AS SUCH, FOR THE SAKE OF CONVENIENCE, ALL THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER. 02 THE GROUNDS ON THE BASIS OF WHICH ASSESSEE HAS CHALLENGED THE FIRST APPELLATE ORDER ARE REPRODUCED HEREUNDER: A) IN ITA NO. 3176/DEL/2014 FOR THE AY 2006-07, ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 3 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) XXXII, NEW DELHI HAS GROSSLY ERRED BOTH IN LAW AND ON FACTS IN DISMISSING THE APPEAL FILED BY ASSESSEE AGAINST THE ORDER OF ASSESSMENT DATED 29.12.2008 U/S 143(3) OF THE ACT. 1.1 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THAT THERE IS NO CONCEPT OF ABATEMENT OF A PENDING APPEAL UNDER SECOND PROVISO TO SECTION 153A OF THE ACT AND AS SUCH ERRONEOUS LEGAL MISCONCEPTION OF THE ASSESSEE COULD NOT BE A VALID GROUND TO HOLD THAT APPELLANT DOES NOT WANT TO PURSE THE APPEAL AND THEREFORE THE ORDER MADE IS LEGALLY INVALID AND VITIATED. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BOTH IN LAW AND ON FACTS IN SUSTAINING AN ADDITION OF RS. 36,72,01649/- REPRESENTING THE LONG TERM CAPITAL GAIN DECLARED BY THE APPELLANT AND HELD TO BE TAXED AS SHORT TERM CAPITAL GAIN. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED BOTH IN LAW AND ON THE FACTS IN UPHOLDING THE CONCLUSION THAT SUM OF RS. 50,36,977/- REPRESENTS SPECULATION INCOME OF THE APPELLANT IN DISREGARD OF THE CLAIM THAT APPELLANT HAD EARNED ON SHORT TERM CAPITAL GAIN OF RS. 53,51,489/- IN THE INSTANT YEAR. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 4 4. THAT BOTH THE AFORESAID ADDITIONS HAS BEEN SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ON COMPLETE MISCONCEPTION OF FACTS AND, MISINTERPRETATION OF OF PROVISIONS OF LAW AND AS SUCH THE SAME ARE UNTENABLE. 5. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BOTH IN LAW AND ON FACTS IN UPHOLDING THE LEVY OF INTERNET OF RS. 12,42,48,768/- UNDER SECTION 234B OF THE ACT WHICH IS NOT LEVIABLE ON THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT. IT IS THEREFORE PRAYED THAT, IT BE HELD THAT, THE DISMISSAL OF THE APPEAL BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT IN ACCORDANCE WITH LAW AND FURTHERMORE DISALLOWANCE MADE BY LEARNED ASSESSING OFFICER AND, SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ALONGWITH INTEREST LEVIED MAY KINDLY BE DELETED AND APPEAL OF THE APPELLANT COMPANY BE ALLOWED. B) IN ITA NO. 3177/DEL/2014 FOR THE AY 2007-08, ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL :- 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) XXXII, NEW DELHI HAS GROSSLY ERRED BOTH IN LAW AND ON FACTS IN DISMISSING THE APPEAL FILED BY ASSESSEE AGAINST THE ORDER OF ASSESSMENT DATED 12.10.2009 U/S 143(3) OF THE ACT. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 5 1.1 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THAT THERE IS NO CONCEPT OF ABATEMENT OF PENDING APPEAL UNDER SECOND PROVISO TO SECTION 153A OF THE ACT AND AS SUCH ERRONEOUS LEGAL MISCONCEPTION OF THE ASSESSEE COULD NOT BE A VALID GROUND TO HOLD THAT APPELLANT DOES NOT WANT TO PURSE THE APPEAL AND THEREFORE THE ORDER MADE IS LEGALLY INVALID AND VITIATED. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BOTH IN LAW AND, ON FACTS IN UPHOLDING DISALLOWANCE OF A SUM OF RS. 3,06,421/- BY INCORRECTLY INVOKING SECTION 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES 1962 3. THAT BOTH THE AFORESAID ADDITIONS HAS BEEN SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ON COMPLETE MISCONCEPTION OF FACTS AND, MISINTERPRETATION OF OF PROVISIONS OF LAW AND AS SUCH THE SAME ARE UNTENABLE. 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BOTH IN LAW AND ON FACTS IN UPHOLDING THE LEVY OF INTERNET OF RS. 10,304/- UNDER SECTION 234B OF THE ACT AND RS. 34,378/- UNDER SECTION 234C OF THE ACT WHICH ARE NOT LEVIABLE ON THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT. IT IS THEREFORE PRAYED THAT, IT BE HELD THAT, THE DISMISSAL OF THE APPEAL BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT IN ACCORDANCE WITH LAW AND FURTHERMORE DISALLOWANCE MADE BY LEARNED ASSESSING OFFICER AND, MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 6 SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ALONG WITH INTEREST LEVIED MAY KINDLY BE DELETED AND APPEAL OF THE APPELLANT COMPANY BE ALLOWED. C) IN ITA NO. 1342/DEL/2013 FOR THE AY 2005-06, ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN DISMISSING APPELLANTS GROUND NO. 1 AGAINST PASSING OF ORDER BY THE ASSESSING OFFICER U/S 153A/143(3) OF THE ACT IN THE CASE WHEN THERE WAS NO UNDISCLOSED INCOME OR ANY INCRIMINATING DOCUMENTS FOUND IN THE SEARCH. 2. THE LD. CIT(A) ERRED IN DISMISSING APPELLANTS GROUND NO. 2 AGAINST ASSESSING OFFICERS PASSING THE ORDER IN VIOLATION OF THE PRINCIPAL OF NATURAL JUSTICE AND WITHOUT GIVING ADEQUATE TIME AND OPPORTUNITY TO THE ASSESSEE TO REPRESENT ITS CASE AND TO FILE ITS REPLIES AND CLARIFICATION. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT (A) ERRED IN CONFIRMING THE ADDITION OF RS. 5 CRORES IN RESPECT OF SHARE CAPITAL OF THE APPELLANT CONSIDERING THE SAME AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 7 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT (A) ERRED IN MAKING ADDITION OF RS. 6,59,04,383/- IN RESPECT OF LONG TERM CAPITAL GAINS EXEMPT U/S 10 (38) CONSIDERING THE SAME AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. 5. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE THE LD. CIT (A) ERRED IN NOT DELETING THE INTEREST U/S 234A AND 234B OF THE ACT. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR RESCIND ANY OF THE GROUND OF APPEAL. D) IN ITA NO. 1343/DEL/2013 FOR THE AY 2006-07, ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN DISMISSING APPELLANTS GROUND NO. 1 AGAINST PASSING OF ORDER BY THE ASSESSING OFFICER U/S 153A/143(3) OF THE ACT IN THE CASE WHEN THERE WAS NO UNDISCLOSED INCOME OR ANY INCRIMINATING DOCUMENTS FOUND IN THE SEARCH. 2. THE LD. CIT(A) ERRED IN DISMISSING APPELLANTS GROUND NO. 2 AGAINST ASSESSING OFFICERS PASSING THE ORDER IN VIOLATION OF THE PRINCIPAL OF NATURAL JUSTICE AND WITHOUT MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 8 GIVING ADEQUATE TIME AND OPPORTUNITY TO THE ASSESSEE TO REPRESENT ITS CASE AND TO FILE ITS REPLIES AND CLARIFICATION. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT (A) ERRED IN MAKING ADDITION OF RS. 36,72,01,668/- IN RESPECT OF LONG TERM CAPITAL GAINS EXEMPT U/S 10(38) CONSIDERING THE SAME AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT (A) ERRED IN NOT DELETING THE INTEREST U/S 234A AND 234B OF THE ACT. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR RESCIND ANY OF THE GROUND OF APPEAL. E) IN ITA NO. 2004/DEL/2013 FOR THE AY 2007-08, ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THE LD. CIT(A) ERRED ON FACTS AND IN LAW TO DISMISS APPELLANTS GROUND THAT THE ORDER PASSED BY ASSESSING OFFICER U/S 153A/143(3) OF THE INCOME-TAX ACT, 1961 IS BAD BOTH ON FACTS AND IN LAW MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 9 2. THE LD. CIT(A) ERRED ON FCATS AND IN LAW TO DISMISS APPELLANTS GROUND THAT THE ASSESSMENT ORDER HAVING BEEN PASSED IN VIOLATION OF THE PRINCIPAL OF NATURAL JUSTICE AND WITHOUT GIVING ADEQUATE TIME AND OPPORTUNITY TO THE APPELLANT TO REPRESENT ITS CASE AND TO FILE ITS REPLIES AND CLARIFICATION, IS BAD IN THE EYES OF LAW AND LIABLE TO BE QUASHED. 3. THE LD. CIT (A) ERRED ON FACTS IN LAW IN CONFIRMING ADDITION OF RS. 3.06.421/- U/S. 14A OF THE ACT READ WITH RULE 8D OF THE IT RULES; 4. THE LD. CIT (A) ERRED ON FACTS AND IN LAW TO DISMISS APPELLANTS GROUND AGAINST THE CHARGING OF INTEREST U/S 234A AND 234B OF THE ACT. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR RESCIND ANY OF THE GROUND OF APPEAL. 03 IN RESPECT OF THE AFORESAID FIVE APPEALS, ASSESSEE HAS FILED FIVE PAPER BOOKS CONTAINING THE NOTICES ISSUED, REPLY AND WRITTEN SUBMISSIONS OF THE ASSESSEE FILED BEFORE THE AO/CIT (APPEALS), DOCUMENTS/EVIDENCES FILED BEFORE THE AO/CIT(APPEALS), REMAND REPORTS ETC. ADDITIONALLY, ASSESSEE HAS ALSO FILED A COMMON WRITTEN MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 10 SYNOPSIS IN RESPECT OF AFORESAID FIVE APPEALS AND A JUDGMENT PAPER BOOK OF THE RELEVANT JUDGMENTS ON WHICH IT HAS PLACED RELIANCE ON PLETHORA OF DECISIONS. 04 FOR ALL THE THREE ASSESSMENT YEARS 2005-06 TO 2007-08, ASSESSMENTS WERE ORIGINALLY MADE U/S 143(3) OF THE ACT AND BRIEF FACTS RELATING TO SUCH ASSESSMENT YEARS IN CHRONOLOGICAL ORDER ARE AS UNDER: ITA NO. 1342/DEL/2013 AY: 2005-06 05 THE ASSESSEE FILED RETURN OF INCOME ON 10.10.2005 DISCLOSING AN INCOME OF RS. 86,11,500/-. IN THIS YEAR, ASSESSEE HAS ISSUED SHARE CAPITAL AND HAS DECLARED LONG-TERM CAPITAL GAIN FROM THE SALE OF THE LISTED SECURITIES CLAIMING EXEMPTION U/S 10(38) OF THE ACT. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS ON THE BASIS OF AIR INFORMATION TO EXAMINE THE SOURCE OF INVESTMENT REFLECTED IN AIR. AO COMPLETED THE ASSESSMENT ON 09.10.2007 AT RETURNED INCOME U/S 143(3) OF THE ACT. THUS, IT IS CLAIMED THAT ALL THE INVESTMENTS WERE ACCEPTED, AND THEREFORE ISSUES INVOLVED IN THIS YEAR HAS BECOME FINAL. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 11 ITA NO. 3176/DEL/2014 & 1343/DEL/2013 AY 2006-07 06 THE ASSESSEE FILED ITS RETURN OF INCOME ON 29.11.2006 DECLARING AN INCOME OF RS. 67,68,900/-. IN THE RETURN OF INCOME, ASSESSEE DECLARED A LONG TERM CAPITAL GAIN OF RS. 36,72,01,648/- IN RESPECT OF SALE OF LISTED SECURITIES THROUGH STOCK EXCHANGE ON WHICH STT WAS PAID, AND SAME WAS CLAIMED AS EXEMPT U/S 10(38) OF THE ACT. DURING ASSESSMENT PROCEEDINGS, AO EXAMINED THE DETAILS OF CAPITAL GAIN ACCRUED TO THE ASSESSEE, DEMAT ACCOUNT, BROKER NOTE FOR PURCHASE OF SHARES OFFLINE AND SALE OF SHARES THROUGH STOCK EXCHANGE, DETAILS OF THE SHARES PURCHASED IN THE EARLIER YEARS AND DURING THE YEAR AND SOLD DURING THE YEAR, PAYMENT OF COST OF SHARES PURCHASED FROM THE BROKERS, BROKER ACCOUNTS IN THE BOOKS OF THE ASSESSEE, CAPITAL GAIN ACCOUNT, THE LEDGER ACCOUNT OF INVESTMENT IN SHARES AND THE BANK STATEMENTS SHOWING PAYMENTS MADE FOR PURCHASE OF SHARES FILED BY THE ASSESSEE. THE AO ALSO MADE ENQUIRIES FROM THE DEPOSITORY I.E. M/S IKM INVESTOR SERVICES LTD. WITH WHOM ASSESSEE HAS MAINTAINED ITS DEMAT ACCOUNT, AND FROM THE STOCK EXCHANGE IN RESPECT OF THE PURCHASE OF THE SHARES THROUGH THE STOCKBROKERS. M/S IKM INVESTOR SERVICES LTD. PROVIDED MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 12 THE DEMAT ACCOUNT CONFIRMING THE TRANSACTION AND STOCK EXCHANGE CONFIRMED THAT SUCH SHARES HAVE NOT BEEN PURCHASED THROUGH ONLINE TRADING OF THE STOCK EXCHANGE. LD AO HELD THAT THE AFORESAID CAPITAL GAIN IS NOT LONG TERM CAPITAL GAIN BUT IS A SHORT TERM CAPITAL GAIN SINCE PAYMENT OF STT HAS NOT BEEN CONFIRMED AND DATE OF ENTRY AND EXIT FROM DEMAT ACCOUNT IS TAKEN AS THE TIME PERIOD FOR WHICH SHARES WERE ACTUALLY HELD BY THE ASSESSEE COMPANY. ON SIMILAR BASIS SHORT TERM CAPITAL GAIN DECLARED BY THE ASSESSEE WAS TAXED AS SPECULATIVE INCOME AND THEREFORE INCOME WAS COMPUTED AT RS. 37,36,26,040/-. 07 AGAINST THE ORDER OF ASSESSMENT DATED 29.12.2008, ASSESSEE FILED APPEAL BEFORE THE LD. CIT (APPEALS) WITHIN THE DUE DATE OF FILING OF THE APPEAL. PENDING THE APPEAL BEFORE THE LD. CIT (APPEALS), ASSESSEE SENT LETTER TO THE STOCK BROKER M/S PK AGGARWAL & CO REQUIRING HIM TO CLARIFY CERTAIN ISSUES AS REQUIRED BY THE AO AND IN REPLY THE STOCK BROKER IN ITS LETTER DATED 31.08.2009 CONFIRMED THAT SHARES WERE PURCHASED OFF MARKET AND THE SHARES WERE DELIVERED IN PHYSICAL FORM AFTER THE PURCHASE, AND AS ASSESSEE REQUIRED THE SHARES IN ITS DEMAT ACCOUNT AS SUCH, AFTER DEMATERIALIZATION, SUCH MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 13 SHARES WERE TRANSFERRED IN THE DEMAT ACCOUNT OF THE ASSESSEE. DUE TO AFORESAID REASONS OF FRESH EVIDENCE OBTAINED AFTER THE ASSESSMENT, ASSESSEE ON 12.01.2010 FILED WRITTEN SUBMISSIONS ALONG WITH AN APPLICATION UNDER RULE 46A PROVIDING THE ADDITIONAL EVIDENCES IN THE FORM OF CERTIFICATE FROM THE BROKER REGARDING PURCHASE AND SALE OF SHARES AND THE CONTRACT NOTES EVIDENCING THE PAYMENT OF THE STT. 08 THE LD. CIT (APPEALS) SENT THE AFORESAID SUBMISSIONS AND ADDITIONAL EVIDENCES TO THE ASSESSING OFFICER FOR VERIFICATION AND DIRECTED THE ASSESSING OFFICER TO MAKE NECESSARY ENQUIRY TO VERIFY THE CONTENTION OF THE ASSESSEE. 09 DURING THE REMAND PROCEEDINGS, ASSESSING OFFICER ISSUED NOTICES TO ALL THE SHARE BROKERS I.E. M/S P.K. AGGARWAL & COMPANY, M/S S.K. KHEMKA AND M/S S.B BHUTRA & CO. TO VERIFY THE SALE AND PURCHASE OF THE SHARES OF THE APPELLANT COMPANY. IN THE REMAND REPORT DATED 11.02.2010, ASSESSING OFFICER SOUGHT TIME FROM THE LD. CIT (APPEALS) TO FURNISH HIS COMMENT AFTER THE RECEIPT OF REPLY FROM THE STOCK BROKERS IN ORDER TO CONFIRM THE TRANSACTION OF MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 14 PURCHASE AND SALE OF SHARES, DATE OF PURCHASE OF SHARES, PAYMENT OF STT AND ALSO WHETHER THE SHARES WERE PURCHASED IN PHYSICAL FORM OR IN DEMATERIALIZED FORM. ON 25.03.2010, ASSESSING OFFICER FURNISHED HIS SECOND REMAND REPORT ALONG WITH THE REPLY OF TWO STOCK BROKERS I.E. M/S S.B. BHUTRA & CO. DATED 05.03.2010 AND S.K. KHEMKA DATED 10.03.2010 WHEREIN SHARE BROKERS CONFIRMED THE TRANSACTION OF PURCHASE OF SHARES AND ALSO PROVIDED THE DOCUMENTARY EVIDENCES WITH REGARD TO SUCH SHARES. ON 31.03.2010, LD. ASSESSING OFFICER FURNISHED HIS THIRD REMAND REPORT ALONG WITH THE REPLY OF THIRD SHARE BROKER M/S P.K. AGARWAL & CO. CONFIRMING THAT THE PURCHASES OF SHARES WERE MADE OFF MARKET AND PHYSICAL DELIVERY OF SHARES WERE TAKEN BY THE BROKER ON BEHALF OF THE ASSESSEE WHICH AFTER DEMATERIALIZATION WERE TRANSFERRED IN THE DEMAT ACCOUNT OF THE ASSESSEE. THE BROKER ALSO CONFIRMED THAT STT WAS INTRODUCED W.E.F. 01.10.2004 HENCE NOT APPLICABLE ON THE PURCHASE TRANSACTION AND IN RESPECT OF THE SALE OF THE SHARES THROUGH STOCK EXCHANGE, STT WAS PAID. 10 BEFORE US, A COMMUNICATION DATED 20.09.2010 OF THE LD. CIT (APPEALS) SENT TO THE LD. ASSESSING OFFICER WAS ALSO BROUGHT ON MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 15 RECORD. IN REPLY TO THE AFORESAID COMMUNICATION LD. ASSESSING OFFICER SENT HIS FOURTH REMAND REPORT DATED 29.09.2010 WHEREIN HE MERELY REITERATED HIS FINDING RECORDED IN THE ORDER OF ASSESSMENT. AY 2007-08: ITA NO. 3177/DEL/2014 & 2004/DEL/2013 11 THE ASSESSEE FILED RETURN OF INCOME ON 03.11.2007 AT AN INCOME OF RS. 1,00,71,620/-. ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT ON 12.10.2009 WHEN LD. ASSESSING OFFICER MADE A DISALLOWANCE OF RS. 3,06,421/- U/S 14A OF THE I. T. ACT R.W.R. 8D OF THE INCOME TAX RULES. AGAINST THIS ORDER, ASSESSEE FILED APPEAL BEFORE LD. CIT (APPEALS) WITHIN THE PERIOD OF LIMITATION. SEARCH U/S 132(1) OF THE ACT : 12 A SEARCH U/S 132(1) OF THE ACT WAS CONDUCTED AT THE PREMISES OF THE ASSESSEE ON 26.03.2010, AND ON ACCOUNT OF THE AFORESAID SEARCH, PROCEEDINGS U/S 153A OF THE ACT WAS UNDERTAKEN FOR THE AFORESAID ASSESSMENT YEARS AND ASSESSMENT ORDERS U/S. 153A OF MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 16 THE ACT WERE FRAMED ON 30.12.2011, WHEREIN AGAIN ADDITIONS MADE IN THE ORDERS OF ASSESSMENT MADE U/S 143(3) OF THE ACT WAS REPEATED. AGAINST THE AFORESAID ORDERS PASSED U/S. 153A OF THE ACT, ASSESSEE FILED APPEAL BEFORE THE LD. CIT (APPEALS). HOWEVER, WHEN THE ASSESSEE RECEIVED NOTICE OF HEARING FOR THE APPEALS FROM THE LD. CIT (APPEALS) DATED 25.04.2012, ASSESSEE WITHDREW ITS APPEAL ON THE ASSUMPTION THAT SUCH APPEALS HAVE BEEN ABATED ON ACCOUNT OF SEARCH AND HENCE LD. CIT (APPEALS) DISMISSED THE APPEAL OF THE ASSESSEE ON 14.05.2012 FOR THE ASSESSMENT YEARS 2006-07 AND 2007-08 FILED AGAINST THE ORDER OF ASSESSMENT PASSED U/S 143(3) OF THE ACT WITHOUT ADJUDICATING THE GROUNDS OF APPEAL RAISED BEFORE HIM AND WITHOUT TAKING INTO ACCOUNT THE DOCUMENTARY EVIDENCES FURNISHED BY THE ASSESSEE BEFORE THE LD. ASSESSING OFFICER AND ALSO REPLIES RECEIVED BY THE LD. ASSESSING OFFICER IN THE REMAND PROCEEDINGS FROM THE THREE BROKERS. SUBSEQUENT TO THE AFORESAID ORDER OF LD. CIT (APPEALS) DATED 14.05.2012, APPEALS FILED BY THE ASSESSEE AGAINST THE ORDERS OF ASSESSMENT PASSED U/S. 153A OF THE ACT WERE ALSO DISMISSED BY THE LD. CIT (APPEALS) BY ORDERS DATED 28.12.2012 FOR THE AY 2005-06 AND 2006-07 AND ON 23.01.2013 FOR THE AY 2007-08. THOUGH THE ASSESSEE FILED THE MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 17 APPEAL AGAINST THESE ORDERS OF LD. CIT (APPEALS) WITHIN TIME, HOWEVER IN RESPECT OF SEPARATE ORDERS DATED 14.05.2012 OF THE LD. CIT (APPEALS) FOR THE ASSESSMENT YEARS 2006-07 AND 2007-08, APPEALS WERE FILED ON 23.05.2014, AND AS SUCH, THESE TWO APPEALS ARE BELATED. CONDONATION OF DELAY IN ITA NO. 3176/DEL/2014 & 3177/DEL/2014: 13 THE FIRST AND FOREMOST ISSUES INVOLVE FOR OUR CONSIDERATION IS THAT, WHETHER THE AFORESAID TWO APPEALS SHOULD BE ADMITTED AND DELAY IN FILING OF THE APPEAL REQUIRED TO BE CONDONED. THE ASSESSEE FOR BOTH THE APPEALS HAS FILED APPLICATION FOR CONDONATION OF DELAY ALONG WITH AFFIDAVIT IN SUPPORT OF THE APPLICATION. THE APPLICATION FILED BY THE ASSESSEE IN ITA NO. 3176/DEL/2014 STATING THE REASONS OF DELAY WHICH IS IDENTICAL TO APPLICATION PRAYING FOR CONDONATION OF DELAY IN ITA NO 3177/DEL/2014 IS REPRODUCED HEREUNDER :- 1. IT IS RESPECTFULLY SUBMITTED THAT INSTANT APPEAL WAS FILED BY THE ASSESSEE BEFORE THE HONBLE TRIBUNAL ON 23.05.2014 AGAINST THE ORDER OF THE LEARNED CIT (APPEALS) 14.05.2012 WHICH ORDER WAS RECEIVED BY THE ASSESSEE ON 17.05.2012, AS SUCH, THERE WAS DELAY OF 676 DAYS IN FILING OF THE APPEAL. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 18 2. IT IS RESPECTFULLY SUBMITTED THAT DELAY CAUSED IN FILING OF THE APPEAL BEFORE THE HONBLE TRIBUNAL HAS OCCASIONED ON ACCOUNT OF BONAFIDE AND SUFFICIENT CAUSE STATED HEREUNDER, AS SUCH, IT IS PRAYED THAT DELAY IN FILING OF THE INSTANT APPEAL MAY KINDLY BE CONDONED. 3. IT IS SUBMITTED THAT FOR THE YEAR UNDER CONSIDERATION, APPELLANT HAS FILED ITS RETURN OF INCOME ON 29.11.2006 DECLARING AN INCOME OF RS. 67,68,900/-. THAT AFORESAID RETURN OF INCOME OF THE APPELLANT WAS TAKEN UP FOR SCRUTINY BY ISSUING OF NOTICE U/S 143(2) OF THE ACT WHICH CULMINATED IN THE ASSESSMENT MADE U/S 143(3) OF THE ACT ON 29.12.2008 WHEREIN LEARNED ASSESSING OFFICER DETERMINED THE INCOME OF THE APPELLANT AT RS. 37,36,26,036/- BY MAKING FOLLOWING ADDITIONS /DISALLOWANCES : I. INCOME FROM SHORT TERM CAPITAL GAIN RS. 36,72,01,649/- II. SPECULATION INCOME RS. 50,36,977/- 4. AGAINST THE ADDITIONS MADE IN THE AFORESAID ORDER OF THE ASSESSMENT, ASSESSEE DULY FILED AN APPEAL BEFORE THE LEARNED CIT (APPEALS) WITHIN THE PERIOD OF LIMITATION ON 28.01.2009. 5. IT IS SUBMITTED THAT DURING THE COURSE OF THE APPELLATE PROCEEDINGS, APPELLANT ON 12.01.2010 ALSO FILED AN APPLICATION U/R. 46 OF THE INCOME TAX RULES ALONG WITH ADDITIONAL EVIDENCES AND ALSO FILED ITS WRITTEN SUBMISSIONS IN SUPPORT OF THE GROUNDS OF MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 19 APPEAL RAISED BEFORE THE LEARNED CIT (APPEALS), WHICH CLEARLY SHOWS THAT APPELLANT WAS SERIOUSLY PURSUING ITS APPEAL AGAINST THE ORDER OF ASSESSMENT PASSED U/S. 143(3) OF THE ACT. 6. IT IS HOWEVER SUBMITTED THAT SUBSEQUENTLY, ON 26.03.2010 A SEARCH AND SEIZURE OPERATION U/S 132(1) OF THE ACT WAS CONDUCTED AT THE PREMISES OF THE APPELLANT AND IN PURSUANCE TO THE AFORESAID SEARCH, AN ASSESSMENT U/S 153A OF THE ACT WAS MADE ON 30.12.2011 AT AN INCOME OF RS. 37,42,08,170/- BY MAKING THE SIMILAR ADDITIONS AS WERE MADE IN THE ORDER OF ASSESSMENT DATED 29.12.2008 PASSED U/S. 143(3) OF THE ACT. THE ADDITIONS MADE IN THE AFORESAID ORDER ARE AS UNDER : I. UNEXPLAINED CASH CREDIT (BEING THE AMOUNT OF CAPITAL GAIN) RS. 36,72,01,648/- II. DISALLOWANCE U/S 14A OF THE ACT RS. 2,37,624/- THAT AGAINST THE AFORESAID ORDER OF ASSESSMENT DATED 30.12.2011 PASSSED U/S. 153A OF THE ACT ASSESSEE DULY FILED THE APPEAL BEFORE THE LEARNED CIT (APPEALS) WITHIN THE PERIOD OF LIMITATION ON 20.01.2012. 7. IT IS HOWEVER SUBMITTED THAT WHEN THE APPEAL AGAINST THE ORDER OF ASSESSMENT DATED 29.12.2008 MADE U/S 143(3) OF THE ACT, CAME UP FOR HEARING, AND A NOTICE DATED 25.04.2012 WAS SERVED ON THE APPELLANT, APPELLANT ON AN INCORRECT UNDERSTANDING MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 20 OF LAW THAT SINCE A SEARCH U/S 132(1) OF THE ACT HAS BEEN CONDUCTED AND ASSESSMENT HAS ALSO BEEN FRAMED U/S 153A OF THE ACT, AS SUCH, ALL THE PROCEEDINGS FALLING WITHIN THE PERIOD OF SIX YEARS GETS ABATED, SUBMITTED BEFORE THE LEARNED CIT(A) VIDE ITS SUBMISSIONS DATED 01.05.2012 THAT APPEAL FILED BEFORE THE LEARNED CIT(A) HAS BEEN ABATED AS SUCH, ASSESSEE SEEKS TO WITHDRAW THE SAME. THAT ON THE BASIS OF THE AFORESAID REPLY LEARNED CIT(A) WITHOUT APPRISING THE ASSESSEE ABOUT THE CORRECT POSITION OF LAW, DISMISSED THE APPEAL OF THE ASSESSEE ON 14.05.2012 BY HOLDING THAT ASSESSEE DOES NOT WANT TO PURSUE THE APPEAL. THAT AFORESAID ORDER OF THE LEARNED CIT(A) WAS RECEIVED BY THE ASSESSEE ON 17.05.2012. 8. THAT THEREAFTER ON 28.12.2012, APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE ASSESSMENT DATED 30.12.2011 PASSED U/S 153A OF THE ACT WAS DISPOSED OFF AND AFORESAID ORDER WAS RECEIVED ON 28.01.2013. THAT AGAINST THE AFORESAID ORDER OF LEARNED CIT (APPEALS), ASSESSEE PREFERRED AN APPEAL BEFORE THE HONBLE TRIBUNAL ON 07.03.2013 WHICH IS NUMBERED AS ITA NO. 1342/DEL/2013. IT IS RESPECTFULLY SUBMITTED THAT AFORESAID APPEAL WAS FILED ON THE ADVISE OF SHRI. SIKANDAR KHAN ADVOCATE, WHO REPRESENTED THE ASSESSEE BEFORE LEARNED CIT (APPEALS) AGAINST THE ORDER OF ASSESSMENT DATED 30.12.2011 PASSED U/S. 153A OF THE ACT. IT IS SUBMITTED THAT THOUGH THE APPEAL WAS ADVISED TO BE FILED AGAINST THE ORDER OF LD. CIT (APPEALS) DATED MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 21 28.12.2012, HOWEVER, ASSESSEE WAS NOT ADVISED TO FILE APPEAL AGAINST THE ORDER OF LD. CIT (APPEALS) DATED 14.05.2012. 9. IT IS SUBMITTED THAT SUBSEQUENT TO FILING OF THE AFORESAID APPEAL IN RESPECT OF ASSESSMENT MADE U/S 153A OF THE ACT, WHEN ASSESSEE CONSULTED HIS FRIEND SHRI. S.C. JAIN, CHARTERED ACCOUNTANT, ASSESSEE WAS ADVISED THAT APPEAL FILED AGAINST THE REGULAR ASSESSMENT WOULD NOT ABATE, AND IT IS ONLY THE ASSESSMENT PENDING ON THE DATE OF SEARCH WOULD ABATE AND HENCE, IMMEDIATELY THEREAFTER PRESENT APPEAL BEARING ITA NO. 3176/D/2014 WAS FILED AND THAT IS HOW THE DELAY OF 676 DAYS OCCURRED. 10. THUS, SINCE THE CIRCUMSTANCES STATED ABOVE CONSTITUTE SUFFICIENT CAUSE, THE APPELLANT PRAYS THAT DELAY IN FILING OF APPEAL BE CONDONED U/S. 253(5) OF THE ACT. THE SUBMISSION OF THE APPELLANT IS THAT TECHNICAL CONSIDERATIONS CANNOT AND SHOULD NOT ACT AS BAR TO THE CAUSE OF SUBSTANTIAL JUSTICE. IT IS FURTHER SUBMITTED THAT HONBLE APEX COURT IN ITS JUDGMENT IN THE CASE OF IMPROVEMENT TRUST VS. UJAGAR SINGH REPORTED IN (2010) 6 SCC 786 HAS HELD THAT, UNLESS MALA FIDES ARE WRIT LARGE, DELAY SHOULD BE CONDONED. MATTERS SHOULD BE DISPOSED OF ON MERITS AND NOT TECHNICALITIES . IN FACT, THE APEX COURT IN THE CASE OF MRS. KATIJI & OTHERS REPORTED IN 167 ITR 471 HAS HELD THAT W HEN SUBSTANTIAL JUSTICE AND TECHNICAL CONSIDERATIONS ARE PITTED AGAINST EACH OTHER, THE CAUSE OF SUBSTANTIAL JUSTICE DESERVES TO MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 22 BE PREFERRED . IT IS SUBMITTED THAT, APEX COURT IN THE CASE OF RAM NATH SAO VS. GOBARDHAN SAO AND OTHERS REPORTED IN AIR 2002 SC 1201 HELD AS UNDER : THUS IT BECOMES PLAIN THAT THE EXPRESSION 'SUFFICIENT CAUSE' WITHIN THE MEANING OF SECTION 5 OF THE ACT OR ORDER 22 RULE 9 OF THE CODE OR ANY OTHER SIMILAR PROVISION SHOULD RECEIVE A LIBERAL CONSTRUCTION SO AS TO ADVANCE SUBSTANTIAL JUSTICE WHEN NO NEGLIGENCE OR INACTION OR WANT OF BONA FIDES IS IMPUTABLE TO A PARTY. IN A PARTICULAR CASE WHETHER EXPLANATION FURNISHED WOULD CONSTITUTE 'SUFFICIENT CAUSE' OR NOT WILL BE DEPENDENT UPON FACTS OF EACH CASE. THERE CANNOT BE A STRAITJACKET FORMULA FOR ACCEPTING OR REJECTING EXPLANATION FURNISHED FOR THE DELAY CAUSED IN TAKING STEPS. BUT ONE THING IS CLEAR THAT THE COURTS SHOULD NOT PROCEED WITH THE TENDENCY OF FINDING FAULT WITH THE CAUSE SHOWN AND REJECT THE PETITION BY A SLIPSHOD ORDER IN OVER-JUBILATION OF DISPOSAL DRIVE. ACCEPTANCE OF EXPLANATION FURNISHED SHOULD BE THE RULE AND REFUSAL, AN EXCEPTION, MORE SO WHEN NO NEGLIGENCE OR INACTION OR WANT OF BONA FIDES CAN BE IMPUTED TO THE DEFAULTING PARTY. ON THE OTHER HAND, WHILE CONSIDERING THE MATTER THE COURTS SHOULD NOT LOSE SIGHT OF THE FACT THAT BY NOT TAKING STEPS WITHIN THE TIME PRESCRIBED A VALUABLE RIGHT HAS ACCRUED TO THE OTHER PARTY WHICH SHOULD NOT BE LIGHTLY DEFEATED BY CONDONING DELAY IN A ROUTINE-LIKE MANNER. HOWEVER, BY TAKING A PEDANTIC AND HYPERTECHNICAL VIEW OF THE MATTER THE EXPLANATION FURNISHED SHOULD NOT BE REJECTED WHEN STAKES ARE HIGH AND/OR ARGUABLE MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 23 POINTS OF FACTS AND LAW ARE INVOLVED IN THE CASE, CAUSING ENORMOUS LOSS AND IRREPARABLE INJURY TO THE PARTY AGAINST WHOM THE LIS TERMINATES, EITHER BY DEFAULT OR INACTION AND DEFEATING VALUABLE RIGHT OF SUCH A PARTY TO HAVE THE DECISION ON MERIT. WHILE CONSIDERING THE MATTER, COURTS HAVE TO STRIKE A BALANCE BETWEEN RESULTANT EFFECT OF THE ORDER IT IS GOING TO PASS UPON THE PARTIES EITHER WAY. [EMPHASIS SUPPLIED] 11. IT IS THE SUBMISSION OF THE APPELLANT THAT IN CASE THE APPEAL IS NOT HEARD ON MERITS, IT WOULD CAUSE ENORMOUS LOSS AND, IRREPARABLE INJURY, PARTICULARLY SINCE DISALLOWANCE MADE AND DEMAND RAISED IS UNSUSTAINABLE IN LAW. 12. IT IS THEREFORE PRAYED THAT SINCE THE DELAY IN FILING THE PRESENT APPEAL WAS AS A RESULT OF BONAFIDE BELIEF / CIRCUMSTANCES AS EXPLAINED ABOVE AND IT IS THEREFORE PRAYED THAT THE DELAY MAY PLEASE BE CONDONED AND APPEAL MAY PLEASE BE ADMITTED AND HEARD ON MERITS. 14 THAT THE ASSESSEE HAS ALSO FILED AN AFFIDAVIT OF SHRI. S. C. JAIN, CHARTERED ACCOUNT, WHO ADVISED IT FOR FILING OF THE APPEAL BEFORE THE TRIBUNAL. 15 THE LEARNED CIT [DR], ON THE OTHER HAND, SUBMITTED THAT ASSESSEE HIMSELF HAS WITHDREW ITS APPEAL BEFORE THE LD. CIT (APPEALS) ON THE MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 24 GROUND THAT THE APPEAL HAS BEEN ABATED IN VIEW OF THE SEARCH U/S 132(1) OF THE ACT, AND THERE IS AN INORDINATE DELAY OF 676 DAYS IN FILING OF THE APPEAL, AS SUCH, DELAY IN FILING OF THE APPEAL SHOULD NOT BE CONDONED. 16 WE ARE OF THE OPINION THAT IT IS NOT OF MUCH MATERIAL HOW INORDINATE DELAY IS, THE REQUIREMENT IS AS TO WHETHER THE ASSESSEE HAS BEEN ABLE TO EXPLAIN THE DELAY. IN VIEW OF THIS APPROACH WHEN WE EXAMINE THE REASONS LEADING TO THE DELAY IN FILING THE APPEALS BEFORE THE TRIBUNAL, WE CAME TO THE CONCLUSION THAT THE ASSESSEE HAS BEEN ABLE TO EXPLAIN THE DELAY AND DELAY IN FILING OF THE APPEAL DESERVES TO BE CONDONED AND THE APPEALS SHOULD BE ADMITTED AS DELAY IN FILING OF THE APPEAL WAS WHOLLY ON ACCOUNT OF SUFFICIENT CAUSE AND DELAY HAS NOT OCCASIONED ON ACCOUNT OF DELIBERATE ACT OF THE ASSESSEE. FROM THE FACTS, IT IS EVIDENT THAT AGAINST THE ORDERS OF ASSESSMENT PASSED U/S 143(3) OF THE ACT, ASSESSEE DULY FILED THE APPEAL BEFORE THE LD. CIT (APPEALS) WITHIN THE PERIOD OF LIMITATION AND ALSO FILED ITS WRITTEN SUBMISSIONS DATED 12.01.2010. THE ASSESSEE ON THE SAME DATE ALSO FILED AN APPLICATION U/R 46A OF THE INCOME TAX RULES ALONG WITH ADDITIONAL EVIDENCES. THESE ACTIONS OF MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 25 THE ASSESSEE CLEARLY DEMONSTRATE THAT ASSESSEE WAS VERY MUCH SERIOUS IN PURSUING THE APPEALS. HOWEVER, WHEN THE PROCEEDINGS BEFORE THE LD. CIT (APPEALS) WAS GOING ON, SEARCH U/S 132(1) OF THE ACT WAS CONDUCTED ON 26.03.2010 AND ON ACCOUNT OF THE SEARCH, ASSESSMENTS U/S 153A OF THE ACT WERE FRAMED ON 30.12.2011 BY REPEATING THE ADDITIONS MADE EARLIER IN THE ORDERS PASSED U/S 143(3) OF THE ACT AND AGAINST THIS ORDER, ASSESSEE FILED APPEAL BEFORE LD. CIT (APPEALS) ON 20.01.2012 IN RESPECT OF SIMILAR ADDITION WHICH WERE CHALLENGED EARLIER IN THE APPEAL AGAINST THE ORDERS PASSED U/S 143(3) OF THE ACT. SUBSEQUENTLY, WHEN THE ASSESSEE RECEIVED NOTICE DATED 25.04.2012 FROM LD. CIT (APPEALS) IN RESPECT OF APPEAL AGAINST ORDER PASSED U/S 143(3) OF THE ACT, ASSESSEE ON AN ERRONEOUS ASSUMPTION OF LAW THAT WHEN THE SEARCH IS CONDUCTED U/S 132(1) OF THE ACT AND ASSESSMENT FOR SIX YEARS WERE ALREADY FRAMED U/S 153A OF THE ACT, ALL THE EARLIER PROCEEDINGS RELATED TO THOSE ASSESSMENT YEARS WOULD AUTOMATICALLY ABATE AND HENCE WITHDREW THE APPEALS PENDING BEFORE THE LD. CIT (APPEALS). WE CLEARLY UNDERSTAND THAT DUE TO MISUNDERSTANDING OF THE LAW, ASSESSEE WITHDREW THE APPEAL SINCE ONLY PENDING ASSESSMENT ON THE DATE OF SEARCH WOULD ABATE AND PENDING APPEALS WOULD NOT MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 26 ABATE, AND AS SUCH, WHEN SUCH APPEALS WERE DISMISSED BY THE LD. CIT (APPEALS), ASSESSEE ON THE AFORESAID INCORRECT ASSUMPTION DID NOT FILE APPEAL BEFORE THE TRIBUNAL. IT IS IMPORTANT TO NOTICE THAT FOR THE SAME ADDITIONS MADE U/S 153A, ASSESSEE DULY FILED APPEALS BEFORE THE TRIBUNAL AGAINST THE ORDERS OF LD. CIT (APPEALS). AS SUCH, IT IS CLEAR THAT ASSESSEE WAS SERIOUSLY CONTESTING THE ADDITIONS MADE IN THE ORDERS OF ASSESSMENT AND SUCH ADDITIONS WERE NOT ACCEPTED BY IT. HOWEVER WHEN IT WAS ADVISED BY SHRI. S. C. JAIN, CHARTERED ACCOUNTANT, WHO HAS ALSO FILED HIS AFFIDAVIT BEFORE US, ASSESSEE IMMEDIATELY FILED APPEALS BEFORE THE TRIBUNAL AND FILED APPLICATION-EXPLAINING REASONS FOR THE CONDONATION OF DELAY DULY SUPPORTED BY THE AFFIDAVIT OF THE ASSESSEE. HON SUPREME COURT IN COLLECTOR OF LAND ACQUISITIONS VS MST KATIJI & ORS 167 ITR 141 HAS HELD THAT :- AND SUCH A LIBERAL APPROACH IS ADOPTED ON PRINCIPLE AS IT IS REALIZED THAT : 1. ORDINARILY, A LITIGANT DOES NOT STAND TO BENEFIT BY LODGING AN APPEAL LATE. 2. REFUSING TO CONDONE DELAY CAN RESULT IN A MERITORIOUS MATTER BEING THROWN OUT AT THE VERY THRESHOLD AND CAUSE OF JUSTICE BEING DEFEATED. AS AGAINST THIS, WHEN DELAY IS CONDONED, THE HIGHEST THAT CAN HAPPEN IS THAT A CAUSE WOULD BE DECIDED ON MERITS AFTER HEARING THE PARTIES. --------------------------------------------------------------------------- 1.' ANY APPEAL OR ANY APPLICATION, OTHER THAN AN APPLICATION UNDER ANY OF THE PROVISIONS OF ORDER XXI OF THE CODE OF CIVIL PROCEDURE, 1908, MAY BE ADMITTED AFTER THE PRESCRIBED PERIOD IF THE APPELLANT OR THE APPLICANT SATISFIES THE COURT MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 27 THAT HE HAD SUFFICIENT CAUSE FOR NOT PREFERRING THE APPEAL OR MAKING THE APPLICATION WITHIN SUCH PERIOD.' PAGE NO : 0473 3. ' EVERY DAY'S DELAY MUST BE EXPLAINED ' DOES NOT MEAN THAT A PEDANTIC APPROACH SHOULD BE MADE. WHY NOT EVERY HOUR'S DELAY, EVERY SECOND'S DELAY? THE DOCTRINE MUST BE APPLIED IN A RATIONAL, COMMON SENSE AND PRAGMATIC MANNER. 4. WHEN SUBSTANTIAL JUSTICE AND TECHNICAL CONSIDERATIONS ARE PITTED AGAINST EACH OTHER, THE CAUSE OF SUBSTANTIAL JUSTICE DESERVES TO BE PREFERRED, FOR THE OTHER SIDE CANNOT CLAIM TO HAVE VESTED RIGHT IN INJUSTICE BEING DONE BECAUSE OF A NON-DELIBERATE DELAY. 5. THERE IS NO PRESUMPTION THAT DELAY IS OCCASIONED DELIBERATELY, OR ON ACCOUNT OF CULPABLE NEGLIGENCE, OR ON ACCOUNT OF MALA FIDES. A LITIGANT DOES NOT STAND TO BENEFIT BY RESORTING TO DELAY. IN FACT, HE RUNS A SERIOUS RISK. 6. IT MUST BE GRASPED THAT THE JUDICIARY IS RESPECTED NOT ON ACCOUNT OF ITS POWER TO LEGALIZE INJUSTICE ON TECHNICAL GROUNDS BUT BECAUSE IT IS CAPABLE OF REMOVING INJUSTICE AND IS EXPECTED TO DO SO. MAKING A JUSTICE-ORIENTED APPROACH FROM THIS PERSPECTIVE, THERE WAS SUFFICIENT CAUSE FOR CONDONING THE DELAY IN THE INSTITUTION OF THE APPEAL. THE FACT THAT IT WAS THE ' STATE ' WHICH WAS SEEKING CONDONATION AND NOT A PRIVATE PARTY WAS ALTOGETHER IRRELEVANT. THE DOCTRINE OF EQUALITY BEFORE LAW DEMANDS THAT ALL LITIGANTS, INCLUDING THE STATE AS A LITIGANT, ARE ACCORDED THE SAME TREATMENT AND THE LAW IS ADMINISTERED IN AN EVEN-HANDED MANNER. THERE IS NO WARRANT FOR ACCORDING A STEP-MOTHERLY TREATMENT WHEN THE ' STATE ' IS THE APPLICANT PRAYING FOR CONDONATION OF DELAY. IN FACT, EXPERIENCE SHOWS THAT ON ACCOUNT OF AN IMPERSONAL MACHINERY (NO ONE IN CHARGE OF THE MATTER IS DIRECTLY HIT OR HURT BY THE JUDGMENT SOUGHT TO BE SUBJECTED TO APPEAL) AND THE INHERITED BUREAUCRATIC METHODOLOGY IMBUED WITH THE NOTE-MAKING, FILE-PUSHING, AND PASSING-ON-THE-BUCK ETHOS, DELAY ON ITS PART IS LESS DIFFICULT TO UNDERSTAND THOUGH MORE DIFFICULT TO APPROVE. IN ANY EVENT, THE STATE WHICH REPRESENTS THE COLLECTIVE CAUSE OF THE COMMUNITY, DOES NOT DESERVE A LITIGANT NON GRATA STATUS. THE COURTS, THEREFORE, HAVE TO BE INFORMED OF THE SPIRIT AND PHILOSOPHY OF THE PROVISION IN THE COURSE OF THE INTERPRETATION OF THE EXPRESSION ' SUFFICIENT CAUSE '. SO ALSO THE SAME APPROACH HAS TO BE EVIDENCED IN ITS APPLICATION TO MATTERS AT HAND WITH THE END IN VIEW TO DO EVEN-HANDED JUSTICE ON MERITS IN PREFERENCE TO THE APPROACH WHICH SCUTTLES A DECISION ON MERITS. TURNING TO THE FACTS OF THE MATTER GIVING RISE TO THE PRESENT APPEAL, WE ARE SATISFIED THAT SUFFICIENT CAUSE EXISTS FOR THE DELAY. THE ORDER OF THE HIGH COURT DISMISSING THE APPEAL BEFORE IT AS TIME-BARRED, IS THEREFORE, SET ASIDE. DELAY IS CONDONED. AND THE MATTER IS REMITTED TO THE HIGH COURT. THE HIGH COURT WILL NOW PAGE NO : 0474 MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 28 DISPOSE OF THE APPEAL ON MERITS AFTER AFFORDING REASONABLE OPPORTUNITY OF HEARING TO BOTH THE SIDES. [EXTRACTED FROM ITR ONLINE TRUE PAGES] IN THE AFORESAID CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT DELAY IN FILING OF THE APPEALS HAS OCCASIONED ONLY ON ACCOUNT OF THE SUFFICIENT CAUSE AND THE ACTION OF THE ASSESSEE CANNOT BE IMPUTED WITH NEGLIGENCE, INACTION OR LACK OF BONA FIDES, AS ASSESSEE WAS SERIOUSLY CONTESTING ADDITIONS MADE IN THE ORDERS OF ASSESSMENT PASSED U/S 143(3) OF THE ACT IN THE APPEAL PROCEEDINGS U/S 153A OF THE ACT SUCH ADDITIONS WERE ALREADY CHALLENGED BEFORE US, WHICH ADDITIONS WERE MERE REPETITION OF THE ADDITIONS MADE IN THE ORDERS PASSED U/S 143(3) OF THE ACT, AS SUCH DELAY CANNOT BE ATTRIBUTED TO ANY DELIBERATE ACT OF THE ASSESSEE, AND HENCE THE DELAY IN FILING OF THE APPEALS IN ITA NO. 3176/DEL/2014 & 3177/DEL/2014 IS CONDONED AND WE PREFERRED TO DISPOSE OFF THESE APPEALS ON MERITS. 17 NOW COMING TO THE ISSUES INVOLVED IN THE PRESENT BATCH OF FIVE APPEALS. THE ISSUES INVOLVED AS EMANATING FROM THE GROUNDS OF APPEAL ARE SUMMARIZED HEREUNDER :- MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 29 S.NO. ISSUES INVOLVED APPEALS IN WHICH SUCH ISSUES ARE INVOLVED ITA NO. AY A WHETHER ANY INCRIMINATING MATERIAL WAS FOUND AS A RESULT OF SEARCH U/S 132(1) OF THE ACT WARRANTING ANY ADDITION IN THE ORDERS PASSED UNDER SECTION 153A OF THE ACT. 1342/DEL/2013 1343/DEL/2013 2004/DEL/2013 2005 - 06 2006- 07 2007- 08 IF ANSWER TO THE AFORESAID QUESTION IS IN AFFIRMATIVE, WHETHER FOLLOWING ADDITIONS ARE SUSTAINABLE IN LAW AND ON FACTS OF THE INSTANT CASE: B ADDITION MADE U/S 68 OF THE ACT IN RESPECT OF THE SHARE CAPITAL RECEIVED BY THE ASSESSEE FROM SEVEN CORPORATE ENTITIES. 1342/DEL/2013 200 5 - 06 C ADDITION MADE U/S 68 OF THE ACT IN RESPECT OF THE LONG-TERM CAPITAL GAIN, WHICH WAS CLAIMED AS EXEMPT. 1342/DEL/2013 1343/DEL/2013 2005 - 06 2006- 07 D LONG - TERM CAPITAL GAIN ON ACCOUNT OF SALE OF THE LISTED SECURITIES CLAIMED EXEMPT U/S 10(38) OF THE ACT WHICH WAS TREATED AS SHORT-TERM CAPITAL GAIN. 3176/DEL/2014 2006 - 07 E DISALLOWANCE U/S 14A OF THE ACT IS SUSTAINABLE IN LAW 2004/DEL/2013 3177/DEL/2014 2007 - 08 2007- 08 MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 30 18 ON PERUSAL OF THE ABOVE TABLE, IT IS SEEN THAT THERE ARE BROADLY FIVE ISSUES IN ALL THE AFORESAID FIVE APPEALS. HENCE INSTEAD OF DEALING WITH EACH APPEAL SEPARATELY, WE SHALL DEAL HEREUNDER EACH OF THE AFORESAID FIVE ISSUES FORMULATED BY US AND RECORD OUR FINDING IN RESPECT THEREOF. A: WHETHER ANY INCRIMINATING MATERIAL WAS FOUND AS A RESULT OF SEARCH U/S 132(1) OF THE ACT WARRANTING ANY ADDITION IN THE ORDERS PASSED UNDER SECTION 153A OF THE ACT : 19 THIS ISSUE IS INVOLVED IN THREE APPEALS I.E. ITA. NOS. 1342/DEL/2013, 1343/DEL/2013 & 2004/DEL/2013. BRIEF FACTS RELATING TO THIS ISSUE ARE THAT IN THE PRESENT CASE, SEARCH U/S 132(1) OF THE ACT WAS CONDUCTED AT THE PREMISES OF THE APPELLANT ON 26/27.03.2010. SIMULTANEOUSLY SEARCH WAS ALSO CONDUCTED AT VARIOUS OTHER GROUP COMPANIES AND AT THE RESIDENTIAL PREMISES OF THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY. ON ACCOUNT OF THE SEARCH CONDUCTED AT THE PREMISES OF THE ASSESSEE, NO INCRIMINATING MATERIAL WAS NEITHER FOUND NOR REFERRED TO BY THE LD. ASSESSING OFFICER IN THE ORDER OF ASSESSMENT PASSED U/S 153A OF THE ACT IN RELATION TO THE ADDITIONS MADE BY HIM DURING THESE YEARS. IN FACT, MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 31 IN ALL THESE YEARS, ASSESSMENTS WERE ALREADY MADE U/S 143(3) OF THE ACT. IN AY 2006-07 & 2007-08, IDENTICAL ADDITIONS WERE REPEATED BY THE ASSESSING OFFICER IN THE ASSESSMENTS MADE U/S 153A OF THE ACT. IN AY 2005-06, RETURN WAS ACCEPTED AFTER EXAMINATION OF THE INVESTMENT FOR WHICH RETURN WAS TAKEN FOR SCRUTINY AS PER CBDT GUIDELINES. IN ASSESSMENT YEARS 2005-06 AND 2006-07, THE ASSESSING OFFICER THOUGH NOT REFERRED TO ANY INCRIMINATING MATERIAL FOUND AS A RESULT OF SEARCH, BUT RELIED UPON THE STATEMENT OF SHRI IC JINDAL, MANAGING DIRECTOR OF THE ASSESSEE COMPANY RECORDED U/S 132(4) OF THE ACT FOR MAKING THE ADDITIONS. IN THE APPEAL BEFORE THE LD. CIT (APPEALS), ASSESSEE CHALLENGED THE ADDITIONS ON THE GROUND THAT ADDITIONS MADE WITHOUT ANY INCRIMINATING MATERIAL IS UNSUSTAINABLE IN LAW AND STATEMENT OF SHRI. JINDAL IS NOT INCRIMINATING AS IT HAS BEEN RETRACTED IMMEDIATELY AFTER SEARCH, HOWEVER, LD. CIT (APPEALS) DISMISSED THE AFORESAID GROUND. IN THE APPEAL BEFORE US, IN SUPPORT OF THE AFORESAID ISSUE, APPELLANT ASSESSEE HAS FILED WRITTEN SYNOPSIS REFERRING TO VARIOUS DOCUMENTS ETC, THE RELEVANT CONTENTS THEREOF ARE REPRODUCED HEREUNDER: 6. ADDITION MADE IS OUTSIDE THE SCOPE OF SECTION 153A OF THE ACT : MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 32 .. 6.1 IT IS RESPECTFULLY SUBMITTED THAT DURING THE COURSE OF THE SEARCH ON THE APPELLANT COMPANY NO INCRIMINATING MATERIAL WAS FOUND FROM THE PREMISES OF THE APPELLANT, AS NO DOCUMENT WHAT SO EVER HAS BEEN REFERRED IN THE ORDER OF THE ASSESSMENT WHILE MAKING THE IMPUGNED ADDITIONS. FOR THE SAKE OF CONVENIENCE, THE ADDITIONS MADE IN THE ORDERS OF ASSESSMENT FOR THE AY 2005-06 TO 2007-08 ARE TABULATED HEREUNDER: S.NO. AY NATURE OF ADDITION AMOUNT WHETHER ADDITION WAS ORIGINALLY MADE IN THE ORDER OF ASSESSMENT PASSED U/S 143(3) OF THE ACT I. 2005- 06 I. ADDITION U/S 68 IN RESPECT OF THE SHARE CAPITAL RECEIVED BY THE APPELLANT. II. ADDITION U/S 68 BY HOLDING THE LONG TERM CAPITAL GAIN AS UNDISCLOSED INCOME. III. DISALLOWANC E U/S 14A OF THE ACT RS. 5,00,00,000/- RS. 6,59,04,383/- RS. 74,741 RETURN WAS SELECTED UNDER CASS TO SCRUTINIZE THE INVESTMENT, AND AFTER VERIFICATION, SAME WAS ACCEPTED. II. 2006- 07 I. ADDITION U/S 68 BY HOLDING THE LONG TERM CAPITAL RS. 36,72,01,648/- ADDITION WAS MADE IN THE ORDER OF MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 33 GAIN AS UNDISCLOSED INCOME. II. DISALLOWANC E U/S 14A OF THE ACT RS. 2,37,624/- ASSESSMENT. NO DISALLOWANCE WAS MADE. III. 2007- 08 I. DISALLOWANC E U/S 14A OF THE ACT. RS. 3,06,421/- ADDITION WAS MADE IN THE ORDER OF ASSESSMENT. 6.2 FROM THE PERUSAL OF THE AFORESAID TABLE, IT WOULD BE SEEN IN THE AY AFTER VERIFICATION, INVESTMENTS WERE ACCEPTED. FURTHER IN THE AY 2006-07 AND 2007-08, SAME ADDITION WERE REPEATED IN THE ORDERS PASSED U/S 153A OF THE ACT AS WERE EARLIER MADE IN THE ORDER PASSED U/S 143(3) OF THE ACT, AND WHILE MAKING THE ADDITION, NO DOCUMENT WHAT SO EVER HAS BEEN REFERRED WHICH HAS BEEN FOUND FROM THE PREMISES OF THE APPELLANT, EXCEPT THE RETRACTED STATEMENT OF SHRI. ISHWAR CHAND JINDAL AND STATEMENT OF SHRI. ASEEM KUMAR GUPTA (WITHOUT PROVIDING AN OPPORTUNITY OF CROSS EXAMINATION). IT IS SUBMITTED THAT NEITHER THE STATEMENT OF SHRI. ISHWAR CHAND JINDAL NOR THE STATEMENT OF SHRI. ASEEM KUMAR GUPTA CAN BE HELD TO BE INCRIMINATING MATERIAL FOUND AS A RESULT OF SEARCH FOR THE REASONS STATED HEREUNDER: 6.3 IN FACT, ALONG WITH THE SEARCH ON THE ASSESSEE, SEARCH WAS ALSO CONDUCTED ON 26.03.2010 AT THE RESIDENTIAL PREMISES OF SHRI. ISHWAR CHAND JINDAL, MD OF THE APPELLANT COMPANY. THE SEARCH COMMENCED AROUND 8.00AM IN THE MORNING OF 26.03.2010, AND IN THE EVENING OF 26.03.2010 FROM 8.40 PM, INVESTIGATION WING CONTINUED TO RECORD THE MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 34 STATEMENT OF SHRI. JINDAL PLACED AT PAGES 118 135 OF PB 2 WHICH RECORDING OF THE STATEMENT CONTINUED TILL WHOLE NIGHT, AND WHOLE NIGHT HE WAS PRESSURIZED TO SURRENDER AND IN THE EARLY MORNING WHEN SHRI. JINDAL WAS FULLY EXHAUSTED AND WAS NOT IN THE PROPER STATE OF MIND, HE WAS CONFRONTED WITH SHRI. ASEEM KUMAR GUPTA, WHO IN HIS STATEMENT HAS ALLEGED AS UNDER: I HAVE GIVEN RS. 2 CRORES FROM M/S MODERATE CREDIT CORPORATION LTD. TO M/S MAGNUM STEEL LIMITED AND ANOTHER RS. 80 LAKHS THROUGH RAVNET SOLUTIONS PVT. LTD. IN LIEU OF CASH RECEIVED ON HIS INSTRUCTION FROM HIS OFFICE. I ARRANGED A DEAL OF CAPITAL GAIN AMOUNTING TO RS. 20 CRORES BETWEEN MAGNUM STEEL LIMITED AND SHRI. SANTOSH SHAH R/O LAL BAZAR, KOLKATA (MOBILE NO. 09830053858) IN LIEU OF CASH RECEIVED FROM HIS OFFICE. THIS MONEY WAS HANDED OVER TO ME BY EMPLOYEES OF M/S MAGNUM STEEL LIMITED WHOSE NAME ARE SHRI. SOM NATH. SHRI SOM NATH WAS INTRODUCED ME BY SHRI. I.C. JINDAL, MD MAGNUM STEEL LIMITED. I GAVE RS. 20 CRORES TO SHRI. SANTOSH SHAH WHO ARRANGED CAPITAL GAIN FOR SHRI. I.C. JINDAL AND HIS COMPANY THROUGH STOCK BROKER SH. P.K. AGGARWAL RESIDENT OF KOLKATA. 6.4 AFTER RECORDING THE AFORESAID STATEMENT OF SHRI. ASEEM KUMAR GUPTA, SHRI, JINDAL WAS ASKED TO CROSS EXAMINE HIM AND IN THE CROSS EXAMINATION, HE HAS CONFIRMED THAT HE HAS NOT RECEIVED ANY CASH FROM MR. JINDAL. HE HAS ALSO STATED THAT HE HAS NOT INTRODUCED SH. P.K. AGGARWAL AND SHRI. SANTOSH SHAH TO THE ASSESSEE. THEREAFTER SHRI. JINDAL WAS FORCED BY THE INVESTIGATION WING TO SURRENDER AND IN THE FORCED CIRCUMSTANCES, WHEN HE WAS TOTALLY EXHAUSTED AS HE DID NOT MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 35 SLEEP WHOLE NIGHT DUE TO RECORDING OF THE STATEMENT IN WHOLE NIGHT AND UNDER DURESS, SHRI. JINDAL WAS MADE TO SURRENDER A SUM OF RS. 51 CRORES IN RESPECT OF FOLLOWING COMPANIES: I. M/S MAGNUM STEELS LTD. II. M/S MAGNUM INTERNATIONAL LTD. III. M/S COURAGE FINANCIAL SERVICES PVT. LTD. IV. M/S N.R. SPONGE PVT. LTD. IN RESPECT OF THE AFORESAID SURRENDER, FOLLOWING TWO CHEQUES WERE ALSO TAKEN BY THE OFFICIALS: I. CHEQUE NO. 252775 OF RS. 3.4 CRORES DRAWN ON AXIS BANK DATED 30.04.2010. II. CHEQUE NO. 252776 OF RS. 12.37 CRORES DRAWN ON AXIS BANK DATED 31.07.2010. (SHRI JINDAL STATED THAT THESE CHEQUES HAVE BEEN ISSUED FROM THE PERSONAL ACCOUNT AND WOULD BE REPLACED.) 6.5 IT IS RESPECTFULLY SUBMITTED THAT SINCE THE SURRENDER WAS NOT VOLUNTARY AND SUCH SURRENDER WAS OBTAINED BY THE REVENUE BY USING FORCE AND UNDER FORCED CIRCUMSTANCES, IMMEDIATELY AFTER THE SEARCH AS 27 TH AND 28 TH MARCH 2010 WERE HOLIDAYS, ASSESSEE MET WITH THE DGIT(INV) ON 29.03.2010 STATING THE CIRCUMSTANCES UNDER WHICH STATEMENT WAS RECORDED AND HE RETRACTED THE STATEMENT RECORDED DURING THE COURSE OF SEARCH AND ALSO REQUESTED TO NOT TO DEPOSIT THE CHEQUES IN RESPECT OF ALLEGED SURRENDER. THE DIRECTOR OF THE ASSESSEE ON THE SAME DATE ALSO MET WITH ACIT (INV) AND STATING THE AFORESAID FACTS, REQUESTED TO RETURN THE CHEQUES, WHICH CHEQUES WERE THOUGH NOT RETURNED, HOWEVER, BECAUSE OF THE AFORESAID RETRACTION, THE CHEQUES MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 36 GIVEN BY THE ASSESSEE IN RESPECT OF THE TAX LIABILITY ON ACCOUNT OF SURRENDERED SUM WAS NEVER DEPOSITED. 6.6 IT IS RELEVANT TO STATE HEREITSELF THAT THE ALLEGATION OF SHRI. ASEEM KUMAR GUPTA THAT HE HAS GIVEN RS. 2 CRORES FROM M/S MODERATE CREDIT CORPORATION LTD. AND RS. 80 LACS FROM M/S RAVNET SOLUTIONS PVT. LTD. IN LIEU OF CASH TO M/S MAGNUM STEEL LTD. IS FACTUALLY INCORRECT AS M/S MAGNUM STEEL LTD HAS NOT RECEIVED ANY SUM FROM M/S MODERATE CREDIT CORPORATION LTD. AND FURTHER ONLY A SUM OF RS. 71 LAKHS HAS BEEN RECEIVED FROM M/S RAVNET SOLUTIONS PVT. LTD. AS SHARE APPLICATION MONEY AND NO AMOUNT OF CASH HAS BEEN PAID TO ANY PERSON, AND SHARE CAPITAL RECEIVED BY SUCH COMPANY IS GENUINE. 6.7 THAT WHEN THE PROCEEDINGS U/S 153A OF THE ACT WAS INITIATED BY ISSUANCE OF NOTICE U/S 153A OF THE ACT DATED 20.04.2011, APPELLANT FILED A REPLY DATED 15.09.2011 (SEE PAGE 115-117 OF PB-2), WHEREIN IT WAS SUBMITTED AS UNDER: ..THE RECORDING OF STATEMENT WAS STARTED AT 8:40 PM, ON 26-03- 2010 AND CONTINUED TILL 27-03-2010 UP TO 10:00 AM IN WHICH MERELY 20 QUESTIONS HAVE BEEN ASKED AND I WAS REGULARLY FORCED TO SURRENDER INCOME. I FINALLY HAVE TO SURRENDER RS.51 CRORES AS ADDITIONAL UNDISCLOSED INCOME FOR BUYING PEACE OF MIND AND IN RESPECT OF THE FOLLOWING: MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 37 1. MAGNUM STEELS LTD.- RS.2.80 CRORES AS INTRODUCTION IN SHARE CAPITAL 2. OTHER FLAGSHIP CONCERNS RS.48.20 CRORES AS INCOME FROM OPERATIONS OF GROUP COMPANIES I.E. I) M/S MAGNUM STEEL LTD. II) M/S MAGNUM INTERNATIONAL LTD. III) M/S COURAGE FINANCIAL SERVICES PVT. LTD. IV) M/S N.R. SPONGE PVT. LTD. IT WAS ALSO STATED BY ME THAT THE DETAILS OF ABOVE MENTIONED SURRENDER COMPANY WISE WILL BE SUBMITTED LATER ON. I ALSO PRESENTED 2 CHEQUES TOWARDS PAYMENT OF TAX ON SURRENDERED ADDITIONAL UNDISCLOSED INCOME OF RS.51 CRORES, OF RS.3.40 CRORES DATED ON 30-04-2010 AND RS.12.91 CRORES DATED 31-07-2010 BEARING NO.252775 AND 252776 RESPECTIVELY DRAWN ON AXIS BANK LTD., GWALIOR. IT IS SUBMITTED THAT THE SUMMONS HAVE BEEN ISSUED IN THE NAME OF THE UNDERSIGNED AND OTHER TO APPEAR PERSONALLY AT VARIOUS PLACES ON 26- 03-2010 AND 27-03-2010 TO APPEAR ON 29-03-2010 AND 30-03-2010. THAT ON 28-03-2010 IT WAS SUNDAY AND SO ON 29-03-2010 I PERSONALLY MET D.G.IT(INV.) AT DELHI AND NARRATED TO HER ALL FACTS AND CIRCUMSTANCES UNDER WHICH STATEMENTS WERE RECORDED DUE TO WHICH I WAS FORCED TO SURRENDER AND I REQUESTED D.G.IT(INV.) THAT I WANTED TO RETRACT FROM THE STATEMENT BECAUSE THE SURRENDER WAS MADE UNDER FORCED CIRCUMSTANCES AND ALSO REQUESTED HER TO GIVE SUITABLE DIRECTIONS FOR NOT DEPOSITING CHEQUES. SHE IMMEDIATELY CALLED THE CONCERNED MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 38 OFFICIALS AND ASKED THEM NOT TO DEPOSIT AND CHEQUE. ON THE SAME DATE I ALSO MET ACIT(INV.) IN RESPONSE TO SUMMON AND ASKED HIM TO RETURN THE CHEQUES AS I STATED THAT NEITHER I AM SURRENDERING ANY INCOME NOR DEPOSITING ANY TAX BECAUSE IT WAS FORCEFUL SURRENDER AND STATEMENT WAS NOT RECORDED WITH FREE WILL. YOUR GOODSELF ARE AWARE THAT DUE TO RETRACTION NO CHEQUE WAS DEPOSITED. IT IS THUS SUBMITTED THAT NO ADVERSE INFERENCE BE DRAWN IN OUR CASE IN VIEW OF AFORESAID FORCEFUL SURRENDER AND STATEMENT OF SHRI ASEEM GUPTA, CA AND SHRI SOMNATH, EMPLOYEE OF M/S MAGNUM STEEL LTD BE TAKEN IN MY PRESENCE BY GIVING OPPORTUNITY TO CROSS EXAMINING THEM BEFORE DRAWING ANY ADVERSE VIEW ON THE BASIS OF FORCED SURRENDER MADE BY ME AS WELL AS FORCED STATEMENT TAKEN FROM SHRI ASEEM GUPTA AS NEITHER ANY MONEY TRANSACTED BETWEEN SHRI SOMNATH MY EMPLOYEE AND SHRI ASEEM GUPTA NOR ANY DEALINGS OF SHARES WERE MADE THROUGH SHRI ASEEM GUPTA. IN FACT, ASEEM GUPTA ALREADY DENIED HAVING ANY RELATIONSHIP WITH P.K. AGGARWAL & CO. DURING THE COURSE OF STATEMENT RECORDED DURING SEARCH. THE SHARES WERE PURCHASED AND SOLD ONLY THROUGH BROKER P.K. AGGARWAL & CO., KOLKATA 6.8 .. 6.9 AGAIN DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, IN RESPONSE TO THE SHOW CAUSE NOTICE DATED 15.12.2011, APPELLANT FILED ITS REPLY ON 19.12.2011 (SEE PAGE 151-159 OF PB-1), AND AT PAGE 157, IT WAS AGAIN REITERATED THAT STATEMENT MADE DURING THE COURSE OF SEARCH WAS NOT VOLUNTARY AND SUCH STATEMENT WAS OBTAINED UNDER PRESSURE. IT WAS ALSO STATED THAT STATEMENT OF SHRI. ASEEM GUPTA IS ALSO INCORRECT. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 39 IT IS FURTHER SUBMITTED THAT BEFORE THE LEARNED CIT(A), APPELLANT FILED ITS WRITTEN SUBMISSION WHEREIN AGAIN IT WAS STATED THAT STATEMENT MADE BY THE SHRI. JINDAL HAS IMMEDIATELY BEEN RETRACTED. AFORESAID SUBMISSION OF THE APPELLANT HAS ALSO BEEN EXTRACTED BY THE LEARNED CIT(A) WHICH IS APPEARING AT PAGE 10 OF THE ORDER OF THE LEARNED CIT(A). FOR THE SAKE OF CONVENIENCE, AFORESAID PARA IS EXTRACTED HEREUNDER: 6.6 THE STATEMENT OF I.C. JINDAL RECORDED DURING THE SEARCH OPERATION ON 27.03.2010 WAS NOT VALID IN LAW BECAUSE IT WAS GIVEN UNDER PRESSURE, THREAT AND COERCION. I.C. JINDAL WAS ALSO NOT IN PROPER STATE OF MIND AT THAT TIME. THE SURRENDER OF AMOUNT OF RS. 51 CRORES WAS OBTAINED UNDER PRESSURE, THREAT AND COERCION AND AS SUCH IT WAS NOT VALID IN LAW. I.C. JINDAL HAD RETRACTED THE STATEMENT AS WELL AS THE SURRENDER IMMEDIATELY AFTER THE SEARCH . NO INCRIMINATING MATERIAL WAS FOUND DURING THE SEARCH WHICH COULD INDICATE SO MUCH UNDISCLOSED INCOME. SUCH SURRENDER IS NOT VALID IN LAW AS HELD BY THE HONBLE SUPREME COURT IN PULLANGODE RUBBER PRODUCE CO. LIMITED 91 ITR 18, NAGUBAI ANNAL V SHAMA RAO (AIR) 1956 SC 100. 6.7 SIMILARLY, THE STATEMENT OF ASEEM GUPTA IS NOT VALID IN LAW AS THE SAME WAS ALSO OBTAINED UNDER PRESSURE, THREAT AND COERCION 6.10 IT IS SUBMITTED THAT DESPITE THE AFORESAID SPECIFIC SUBMISSION, ADDITION HAS ARBITRARILY BEEN SUSTAINED. 6.11 IN FACT IN THE CASE OF KAILASHBEN MANHARLAL CHOKSHI VS. CIT REPORTED IN [2010] 328 ITR 411 (GUJARAT), WHEREIN ALSO STATEMENT OF THE MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 40 ASSESSEE HAD BEEN RECORDED UNDER SECTION 132(4) AT MID NIGHT, AND SUCH STATEMENT WAS ALSO RETRACTED AFTER A LAPSE OF TWO MONTHS AND LEARNED AO DID NOT ACCEPT THE RETRACTION AND ACCORDINGLY, MADE AN ADDITION REPRESENTING INCOME DISCLOSED BY THE ASSESSEE UNDER SECTION 132(4). ON APPEAL, THE COMMISSIONER (APPEALS) AND THE TRIBUNAL UPHELD THE IMPUGNED ADDITION. HOWEVER, THE HONBLE HIGH COURT REVERSED THE FINDING BY HOLDING AS UNDER: 22. WE HAVE HEARD LEARNED COUNSELS APPEARING FOR THE RESPECTIVE PARTIES AT GREAT LENGTH AND CONSIDERED THE SUBMISSIONS. WE HAVE ALSO GONE THROUGH THE ORDERS PASSED BY THE AUTHORITIES BELOW. IT IS TRUE THAT IN NORMAL CIRCUMSTANCES THIS COURT WOULD NOT INTERFERE IN THE FINDING OF FACT ARRIVED AT BY THE AUTHORITIES. IT IS, HOWEVER, TO BE SEEN AS TO WHETHER THE EXPLANATION TENDERED BY THE ASSESSEE WOULD BE CONSIDERED BY THE AUTHORITIES BELOW. IT IS ALSO TO BE SEEN AS TO WHETHER AN ADDITION MADE IS MERELY BASED ON THE STATEMENT RECORDED BY THE ASSESSING OFFICER UNDER SECTION 132(4) OF THE ACT AND WHETHER ANY COGNIZANCE MAY BE TAKEN OF THE RETRACTED STATEMENT. SO FAR AS CASE ON HAND IS CONCERNED, THE GLARING FACT REQUIRED TO BE NOTED IS THAT THE STATEMENT OF THE ASSESSEE WAS RECORDED UNDER SECTION 132(4) OF THE ACT AT MID NIGHT. IN NORMAL CIRCUMSTANCES, IT IS TOO MUCH TO GIVE ANY CREDIT TO THE STATEMENT RECORDED AT SUCH ODD HOURS. THE PERSON MAY NOT BE IN A POSITION TO MAKE ANY CORRECT OR CONSCIOUS DISCLOSURE IN A STATEMENT IF SUCH STATEMENT IS RECORDED AT SUCH ODD HOURS. MOREOVER, THIS STATEMENT WAS RETRACTED AFTER TWO MONTHS . ------ MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 41 ----- 26. IN VIEW OF WHAT HAS BEEN STATED HEREINABOVE WE ARE OF THE VIEW THAT THIS EXPLANATION SEEMS TO BE MORE CONVINCING, HAS NOT BEEN CONSIDERED BY THE AUTHORITIES BELOW AND ADDITIONS WERE MADE AND/OR CONFIRMED MERELY ON THE BASIS OF STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT. DESPITE THE FACT THAT THE SAID STATEMENT WAS LATER ON RETRACTED NO EVIDENCE HAS BEEN LED BY THE REVENUE AUTHORITY. WE ARE, THEREFORE, OF THE VIEW THAT MERELY ON THE BASIS OF ADMISSION THE ASSESSEE COULD NOT HAVE BEEN SUBJECTED TO SUCH ADDITIONS UNLESS AND UNTIL, SOME CORROBORATIVE EVIDENCE IS FOUND IN SUPPORT OF SUCH ADMISSION. WE ARE ALSO OF THE VIEW THAT FROM THE STATEMENT RECORDED AT SUCH ODD HOURS CANNOT BE CONSIDERED TO BE A VOLUNTARY STATEMENT, IF IT IS SUBSEQUENTLY RETRACTED AND NECESSARY EVIDENCE IS LED CONTRARY TO SUCH ADMISSION. HENCE THERE IS NO REASON NOT TO DISBELIEVE THE RETRACTION MADE BY THE ASSESSING OFFICER AND EXPLANATION DULY SUPPORTED BY THE EVIDENCE. WE ARE, THEREFORE, OF THE VIEW THAT THE TRIBUNAL WAS NOT JUSTIFIED IN MAKING ADDITION OF RS. 6 LAKHS ON THE BASIS OF STATEMENT RECORDED BY THE ASSESSING OFFICER UNDER SECTION 132(4) OF THE ACT. THE TRIBUNAL HAS COMMITTED AN ERROR IN IGNORING THE RETRACTION MADE BY THE ASSESSEE. 6.12 IN VIEW OF THE AFORESAID SINCE THE STATEMENT OF THE SHRI. JINDAL HAS BEEN RECORDED IN THE NIGHT, WHICH HAS IMMEDIATELY BEEN RETRACTED SAME CANNOT BE TREATED AS INCRIMINATING MATERIAL. IT IS SUBMITTED THAT IN THE INSTANT CASE, APART FROM THE RETRACTED STATEMENT OF SHRI. IC JINDAL, AND UNSUBSTANTIATED ALLEGATION OF SHRI. ASEEM KUMAR GUPTA, NO MATERIAL WAS FOUND FROM THE PREMISES OF THE APPELLANT. IT IS MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 42 SUBMITTED THAT IN FACT IN THE CASE OF CIT VS. HARJEEV AGGARWAL REPORTED IN [2016] 70 TAXMANN.COM 95 (DELHI), IT HAS BEEN HELD THAT STATEMENTS RECORDED DURING SEARCH AND SEIZURE OPERATIONS ARE NOT EVIDENCE FOUND AS A RESULT OF SEARCH. HOWEVER, IT WAS HELD THAT THE STATEMENTS RECORDED WOULD CERTAINLY CONSTITUTE INFORMATION AND IF SUCH INFORMATION IS RELATABLE TO THE EVIDENCE OR MATERIAL FOUND DURING SEARCH, THE SAME COULD CERTAINLY BE USED IN EVIDENCE IN ANY PROCEEDINGS UNDER THE ACT AS EXPRESSLY MANDATED BY VIRTUE OF THE EXPLANATION TO SECTION 132(4) OF THE ACT. HOWEVER, SUCH STATEMENTS ON A STAND-ALONE BASIS WITHOUT REFERENCE TO ANY OTHER MATERIAL DISCOVERED DURING SEARCH AND SEIZURE OPERATIONS WOULD NOT EMPOWER THE AO TO MAKE A BLOCK ASSESSMENT MERELY BECAUSE ANY ADMISSION WAS MADE BY THE ASSESSEE DURING SEARCH OPERATION. 6.13 FURTHER IN THE CASE OF COMMISSIONER OF INCOME-TAX V. NARESH KUMAR AGARWAL REPORTED IN [2015] 53 TAXMANN.COM 306, HONBLE HIGH COURT OF ANDHRA PRADESH HAS HELD AS UNDER: 24..IN SUCH A CASE, WHEN THE MANAGING DIRECTOR OR ANY OTHER PERSONS WERE FOUND TO BE NOT IN POSSESSION OF ANY INCRIMINATING 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 UNDER SECTION132(4) OF THE ACT, DOES NOT ARISE. THEREFORE, THE STATEMENT OF THE MANAGING DIRECTOR OF THE ASSESSEE, RECORDED PATENTLY UNDER SECTION 132(4) OF THE ACT, DOES NOT HAVE ANY EVIDENTIARY VALUE. THIS PROVISION EMBEDDED IN SUB-SECTION (4) IS MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 43 OBVIOUSLY BASED ON THE WELL ESTABLISHED RULE OF EVIDENCE THAT MERE CONFESSIONAL STATEMENT WITHOUT THERE BEING ANY DOCUMENTARY PROOF SHALL NOT BE USED IN EVIDENCE AGAINST THE PERSON WHO MADE SUCH STATEMENT. THE FINDING OF THE TRIBUNAL WAS BASED ON THE ABOVE WELL SETTLED PRINCIPLE. 6.14 FURTHER IN RESPECT OF THE MR. ASSEM KUMAR GUPTA, IT IS SUBMITTED THAT HIS STATEMENT ON THE FIRST PLACE IS FACTUALLY INCORRECT AND SECONDLY HIS STATEMENT WAS ALSO RECORDED IN THE FORCED CIRCUMSTANCES AND THIRDLY DESPITE THE SPECIFIC REQUESTED HE HAS NOT BEEN CONFRONTED FOR THE CROSS EXAMINATION. IN FACT, IN HIS STATEMENT HE HAS ALLEGED THAT SHRI. SOM NATH ON BEHALF OF THE ASSESSEE HAS GIVEN CASH TO HIM, AND SAME HAS SPECIFICALLY BEEN DENIED BY THE ASSESSEE VIDE ITS REPLY DATED 15.10.2011 AND INFACT ASSESSEE HAS REQUESTED THE LEARNED AO TO RECORD THE STATEMENT OF SHRI. SOM NATH, WHICH STATEMENT HAS NOT BEEN RECORDED BY THE LEARNED AO. FURTHER, IN THE STATEMENT HE HAS ALLEGED THAT HE HAS ARRANGED ALLEGED ACCOMMODATION ENTRY OF CAPITAL GAIN THROUGH SANTOSH SHAH, HOWEVER BEFORE DRAWING ANY ADVERSE INFERENCE, SHRI. SANTOSH SHAH HAS NOT BEEN EXAMINED. IT IS RELEVANT TO STATE HERE THAT ASSESSEE HAS PURCHASED AND SOLD THE SHARES THROUGH STOCK BROKER SHRI. P.K. AGGARWAL, M/S S.K. KHEMKA AND M/S S.B. BUTHRA & CO AND ON THE BASIS OF THE INDEPENDENT ENQUIRY CONDUCTED BY THE LEARNED AO, AFORESAID THREE BROKERS HAVE CONFIRMED THE FACTUM OF SALE AND PURCHASE OF THE SHARES, IN SUCH CIRCUMSTANCES, THE STATEMENT OF SHRI. ASEEM KUMAR GUPTA IS OF NO MUCH CREDENCE, MORE SO WHEN HE HAS ALSO NOT BEEN CONFRONTED FOR THE CROSS EXAMINATION OF THE ASSESSEE, MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 44 DESPITE SPECIFIC REQUEST. IT IS SUBMITTED THAT AO ALSO RELIED UPON THE STATEMENT OF SH. ASEEM GUPTA DURING ASSESSMENT BUT SUCH STATEMENT WAS NEITHER SUPPLIED NOR OPPORTUNITY TO CROSS EXAMINE WAS PROVIDED WHICH WAS OTHERWISE ALSO REQUESTED BY APPELLANT SPECIFICALLY VIDE LETTER DATED 15-09-2011 (PB 2 PG 115 117). THIS EVIDENCE CANNOT BE RELIED UPON IN VIEW OF THE FOLLOWING JUDGMENTS, IT IS SUBMITTED THAT SUCH, STATEMENT CANNOT BE RELIED TO MAKE ADDITION U/S 153A OF THE ACT: A. ANDAMAN TIMBER INDUSTRIES VS. COMMISSIONER OF CENTRAL EXCISE (2015) 281 CTR (SC) 241 B. VINOD SOLANKI VS. UNION OF INDIA (2008) 16 SCC 535 (SC) C. KISHNI CHAND CHELLA RAM V CIT 125 ITR 713 (SC) D. CIT V SMC SHARE STOCK BROKERS 288 ITR 345 (DEL) E. CIT V S M AGGARWAL 293 ITR 43 (DEL) F. CIT VS DHARAM PAL PREM CHAND LTD 295 ITR 105(DEL) G. CIT VS PRADEEP KUMAR GUPTA 207 CTR 115 6.15 IT IS SUBMITTED THAT IT IS SETTLED LAW THAT WHERE ADDITION OF UNDISCLOSED INCOME WAS MADE ON BASIS OF MERE STATEMENT UNDER SECTION 132(4) WHICH WAS NOT CORROBORATED BY ANY MATERIAL EVIDENCE, NEITHER SUCH STATEMENT WOULD BE A CONCLUSIVE EVIDENCE, NOR ANY ADDITION COULD BE MADE. IT IS SUBMITTED THAT IN INSTRUCTION NO. F NO. 286/2/2003- IT (INV) DATED 10.03.2003), THE CBDT HAS DIRECTED THAT, INSTANCES HAVE COME TO THE NOTICE OF THE BOARD WHERE ASSESSEE HAVE CLAIMED THAT THEY HAVE BEEN FORCED TO CONFESS THE UNDISCLOSED INCOME DURING THE COURSE OF SEARCH & SEIZURE AND SURVEY OPERATIONS. SUCH MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 45 CONFESSIONS, IF NOT BASED UPON RELIABLE EVIDENCE, ARE LATER RETRACTED BY THE CONCERNED ASSESSEES WHILE FILING RETURN OF INCOME. IN THESE CIRCUMSTANCES, ON CONFESSIONS DURING THE COURSE OF SEARCH & SEIZURE AND SURVEY OPERATIONS DO NOT SERVE ANY USEFUL PURPOSE. IT IS, THEREFORE ADVISED THAT THERE SHOULD BE FOCUS AND CONCENTRATION ON COLLECTION OF EVIDENCE OF INCOME WHICH LEADS TO INFORMATION ON WHAT HAS NOT BEEN DISCLOSED OR IS NOT LIKELY TO BE DISCLOSED BEFORE INCOME TAX DEPARTMENTS. SIMILARLY, WHILE STATEMENT DURING THE COURSE OF SEARCH & SEIZURE AND SURVEY OPERATIONS, NO ATTEMPT SHOULD BE MADE TO OBTAIN CONFESSION AS TO THE UNDISCLOSED INCOME. ANY ACTION ON THE CONTRARY SHALL BE VIEWED ADVERSELY. FURTHER IN RESPECT OF PENDING ASSESSMENT PROCEEDINGS ALSO, ASSESSING OFFICER SHOULD BE RELY UPON THE EVIDENCES/MATERIAL GATHERED DURING THE COURSE OF SEARCH/SURVEY OPERATIONS OR THEREAFTER WHILE FRAMING THE RELEVANT ASSESSMENT ORDERS. 6.16 IN FACT, CBDT IN INSTRUCTION NO. F.NO. 286/98/2013-IT (INV.II) DATED 18.12.2014 HAS AGAIN STATED AS UNDER :- INSTANCES/COMPLAINTS OF UNDUE INFLUENCE/COERCION HAVE COME TO NOTICE OF THE CBDT THAT SOME ASSESSEES WERE COERCED TO ADMIT UNDISCLOSED INCOME DURING SEARCH/SURVEYS CONDUCTED BY THE DEPARTMENT. IT IS ALSO SEEN THAT MANY SUCH ADMISSIONS ARE RETRACTED IN THE SUBSEQUENT PROCEEDINGS SINCE THE SAME ARE NOT BACKED BY CREDIBLE EVIDENCE. SUCH ACTION DEFEAT THE VERY PURPOSE OF SEARCH/SURVEY MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 46 OPERATIONS AS THEY FAIL TO BRING THE UNDISCLOSED INCOME TO TAX IN A SUSTAINABLE MANNER LEAVE ALONE LEVY OF PENALTY OR LAUNCHING OF PROSECUTION. FURTHER SUCH ACTIONS SHOW THE DEPARTMENT AS A WHOLE AND OFFICERS CONCERNED IN POOR LIGHT. 2 I AM FURTHER DIRECTED TO INVITE YOUR ATTENTION TO THE INSTRUCTIONS/GUIDELINES ISSUED BY CBDT FROM TIME TO TIME, AS REFERRED ABOVE, THROUGH WHICH THE BOARD HAS EMPHASIZED UPON THE NEED TO FOCUS ON GATHERING EVIDENCES DURING SEARCH/SURVEY AND TO STRICTLY AVOID OBTAINING ADMISSION OF UNDISCLOSED INCOME UNDER COERCION/UNDUE INFLUENCE 3 IN VIEW OF THE ABOVE, WHILE REITERATING THE AFORESAID GUIDELINES OF THE BOARD, I AM DIRECTED TO CONVEY THAT ANY INSTANCE OF UNDUE INFLUENCE/COERCION IN THE RECORDING OF THE STATEMENT DURING SEARCH/SURVEY/OTHER PROCEEDINGS UNDER THE I.T. ACT, 1961 AND/OR RECORDING A DISCLOSURE OF UNDISCLOSED INCOME UNDER UNDUE PRESSURE/COERCION SHALL BE VIEWED BY THE BOARD OF ADVERSELY. 6.17 IT WOULD BE EVIDENT FROM THE AFORESAID INSTRUCTION THAT STATEMENT/SURRENDER BY ITSELF CANNOT BE MADE A BASIS TO MAKE ADDITION. IN THE INSTANT CASE, SINCE THE SURRENDER WAS MADE UNDER PRESSURE WHICH WAS IMMEDIATELY RETRACTED, AND EXCEPT THE AFORESAID, NO ADVERSE MATERIAL HAS BEEN FOUND FROM THE PREMISES OF THE APPELLANT, AS SUCH, SUCH STATEMENT CANNOT BE MADE THE BASIS FOR THE ASSESSMENT. FURTHERMORE IN THE CASE OF G. CHINNA YELLLAPPA VS ITO IN ITA NO. 268 OF MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 47 2003 DATED 6.11.2014, HONBLE ANDHRA PRADESH HIGH COURT HAS HELD AS UNDER :- IT IS NOT AS IF THE RETRACTION FROM A STATEMENT BY AN ASSESSEE WOULD PUT AN END TO THE PROCEDURE THAT ENSUED ON ACCOUNT OF SURVEY OR SEARCH. THE ASSESSING OFFICER CAN VERY WELL SUPPORT HIS FINDINGS ON THE BASIS OF OTHER MATERIAL. IF HE DID NOT HAVE ANY OTHER MATERIAL, IN A WAY, IT REFLECTS UPON THE VERY PERFUNCTORY NATURE OF THE SURVEY. WE FIND THAT THE APPELLATE AUTHORITY AND THE TRIBUNAL DID NOT APPLY THE CORRECT PARAMETERS, WHILE ADJUDICATING THE APPEALS FILED BEFORE THEM. ON THE UNDISPUTED FACTS OF THE CASE, THERE WAS ABSOLUTELY NO BASIS FOR THE ASSESSING OFFICER TO FASTEN THE LIABILITY UPON THE APPELLANTS. OUR CONCLUSION FIND SUPPORT FROM THE CIRCULAR DATED 10.03.2003 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES, WHICH TOOK EXCEPTION TO THE INITIATION OF THE PROCEEDINGS ON THE BASIS OF RETRACTED STATEMENTS. 6.18 IN THE CASE OF CIT VS. SMT. S. JAYALAKSHMI AMMAL REPORTED IN [2016] 74 TAXMANN.COM 35 (MADRAS), HONBLE HIGH COURT HAS HELD AS UNDER: 20. IN THE CASE ON HAND, STATEMENT RECORDED ON 29.12.1999 FROM THE SON OF THE ASSESSEE UNDER SECTION 132(4) OF THE ACT IS NOT CORROBORATED BY ANY MATERIAL DOCUMENT. ADMITTEDLY, REVENUE HAS ALSO NOT CONFRONTED THE ASSESSEE, WITH THE SAID STATEMENT OF HIS SON. IF THAT BE THE CASE, IT CAN BE SAFELY CONCLUDED THAT, THERE WAS MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 48 NO MATERIAL DOCUMENTARY EVIDENCE, TO SUBSTANTIATE AND CORROBORATE THE STATEMENT OF MR. NATARAJAN, SON OF THE ASSESSEE. IF THE ASSESSEE MAKES A STATEMENT UNDER SECTION 132(4) OF THE ACT, AND IF THERE ARE ANY INCRIMINATING DOCUMENTS FOUND IN HIS POSSESSION, THEN THE CASE IS DIFFERENT. ON THE CONTRA, IF MERE STATEMENT MADE UNDER SECTION 132(4) OF THE ACT, WITHOUT ANY CORROBORATIVE MATERIAL, HAS TO BE GIVEN CREDENCE, THAN IT WOULD LEAD TO DISASTROUS RESULTS. CONSIDERING THE NATURE OF THE ORDER OF ASSESSMENT, IN THE INSTANT CASE CHARACTERISED AS UNDISCLOSED AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT MERE STATEMENT WITHOUT THERE BEING ANY CORROBORATIVE EVIDENCE, SHOULD NOT BE TREATED AS CONCLUSIVE EVIDENCE AGAINST THE MAKER OF THE STATEMENT. SAME VIEW HAS BEEN TAKEN IN THE FOLLOWING JUDICIAL PRONOUNCEMENTS: A) CIT VS. M.P. SCRAP TRADERS [2015] 372 ITR 507 (GUJARAT) B) CIT VS. VIVEK AGGARWAL [2015] 231 TAXMAN 392 (DELHI) C) CIT VS. TARA CHAND MAHIPAL [2016] 65 TAXMANN.COM 29 (CALCUTTA) D) CIT VS. SUNIL AGGARWAL [2015] 379 ITR 367 (DELHI) 6.19 IT IS ALSO SUBMITTED THAT STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT DOES NOT CONSTITUTE INCRIMINATING MATERIAL FOUND AS A RESULT OF SEARCH. AFORESAID SUBMISSIONS IS SUPPORTED BY THE ORDER OF THE TRIBUNAL IN THE CASE OF DCIT VS. PRATAP SINGH RAJENDRA HAMOLA & CO. REPORTED IN 19 DTR (CHD) 182, WHEREIN IT HAS BEEN HELD THAT STATEMENTS RECORDED BY ITSELF CANNOT CONSTITUTE EVIDENCE FOUND AS A RESULT OF SEARCH FOR PURPOSE OF DETERMINING UNDISCLOSED INCOME UNDER MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 49 CHAPTER XIV-B OF THE ACT. THE JODHPUR BENCH OF THE TRIBUNAL IN THE CASE OF SHREE CHAND SONI VS. DY. CIT REPORTED IN 101 TTJ HAS HELD AS UNDER :- ' 47. THIS ADDITION IS BASED ON THE STATEMENT ALONE AND NO SUCH INCOME WAS DISCLOSED IN THE RETURNS FILED FOR THE BLOCK PERIOD. ADMITTEDLY NO INCRIMINATING DOCUMENT WAS FOUND TO SUPPORT THE IMPUGNED ADDITION. THIS BENCH HAS BEEN CONTINUOUSLY TAKING THE VIEW THAT A STATEMENT RECORDED UNDER S. 132(4) OF THE ACT DOES NOT TANTAMOUNT TO UNEARTHING ANY INCRIMINATING EVIDENCE DURING THE COURSE OF SEARCH, THEREFORE, NO ADDITION CAN BE MADE ON THAT SCORE ALONE. THEREFORE, IN OUR OPINION, THE IMPUGNED ADDITION CANNOT SURVIVE, AND THE SAME HAS TO BE DELETED. [EMPHASIS SUPPLIED[ 6.18 IN VIEW OF THE AFORESAID, THE SUBMISSION OF THE APPELLANT IS THAT, THE ADDITION CAN BE MADE ONLY QUA THE INCRIMINATING MATERIAL FOUND AS A RESULT OF SEARCH; WHICH IS NONE IN THE INSTANT CASE. RELIANCE IS PLACED ON THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. KABUL CHAWLA REPORTED IN 380 ITR 573 WHEREIN THEIR LORDSHIPS HAVE HELD AS UNDER :- 37. ON A CONSPECTUS OF SECTION 153A(1) OF THE ACT, READ WITH THE PROVISOS THERETO, AND IN THE LIGHT OF THE LAW EXPLAINED IN THE AFOREMENTIONED DECISIONS, THE LEGAL POSITION THAT EMERGES IS AS UNDER :- MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 50 I. ONCE A SEARCH TAKES PLACE UNDER SECTION 132 OF THE ACT, NOTICE UNDER SECTION 153 A (1) WILL HAVE TO BE MANDATORILY ISSUED TO THE PERSON SEARCHED REQUIRING HIM TO FILE RETURNS FOR SIX AYS IMMEDIATELY PRECEDING THE PREVIOUS YEAR RELEVANT TO THE AY IN WHICH THE SEARCH TAKES PLACE. II. ASSESSMENTS AND REASSESSMENTS PENDING ON THE DATE OF THE SEARCH SHALL ABATE. THE TOTAL INCOME FOR SUCH AYS WILL HAVE TO BE COMPUTED BY THE AOS AS A FRESH EXERCISE. III. THE AO WILL EXERCISE NORMAL ASSESSMENT POWERS IN RESPECT OF THE SIX YEARS PREVIOUS TO THE RELEVANT AY IN WHICH THE SEARCH TAKES PLACE. THE AO HAS THE POWER TO ASSESS AND REASSESS THE 'TOTAL INCOME' OF THE AFOREMENTIONED SIX YEARS IN SEPARATE ASSESSMENT ORDERS FOR EACH OF THE SIX YEARS. IN OTHER WORDS THERE WILL BE ONLY ONE ASSESSMENT ORDER IN RESPECT OF EACH OF THE SIX AYS IN WHICH BOTH THE DISCLOSED AND THE UNDISCLOSED INCOME WOULD BE BROUGHT TO TAX. IV. ALTHOUGH SECTION 153 A DOES NOT SAY THAT ADDITIONS SHOULD BE STRICTLY MADE ON THE BASIS OF EVIDENCE FOUND IN THE COURSE OF THE SEARCH, OR OTHER POST-SEARCH MATERIAL OR INFORMATION AVAILABLE WITH THE AO WHICH CAN BE RELATED TO THE EVIDENCE FOUND, IT DOES NOT MEAN THAT THE ASSESSMENT CAN BE ARBITRARY OR MADE WITHOUT ANY RELEVANCE OR NEXUS WITH THE SEIZED MATERIAL. OBVIOUSLY AN ASSESSMENT HAS TO BE MADE UNDER THIS SECTION ONLY ON THE BASIS OF SEIZED MATERIAL. V. IN ABSENCE OF ANY INCRIMINATING MATERIAL, THE COMPLETED ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSMENT OR REASSESSMENT CAN BE MADE. THE WORD 'ASSESS' IN SECTION 153 A IS RELATABLE TO ABATED MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 51 PROCEEDINGS (I.E. THOSE PENDING ON THE DATE OF SEARCH) AND THE WORD 'REASSESS' TO COMPLETED ASSESSMENT PROCEEDINGS. VI. INSOFAR AS PENDING ASSESSMENTS ARE CONCERNED, THE JURISDICTION TO MAKE THE ORIGINAL ASSESSMENT AND THE ASSESSMENT UNDER SECTION 153A MERGES INTO ONE. ONLY ONE ASSESSMENT SHALL BE MADE SEPARATELY FOR EACH AY ON THE BASIS OF THE FINDINGS OF THE SEARCH AND ANY OTHER MATERIAL EXISTING OR BROUGHT ON THE RECORD OF THE AO. VII. COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 153 A ONLY ON THE BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH OR REQUISITION OF DOCUMENTS OR UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEARCH WHICH WERE NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT. CONCLUSION 38. THE PRESENT APPEALS CONCERN AYS, 2002-03, 2005-06 AND 2006- 07.ON THE DATE OF THE SEARCH THE SAID ASSESSMENTS ALREADY STOOD COMPLETED. SINCE NO INCRIMINATING MATERIAL WAS UNEARTHED DURING THE SEARCH, NO ADDITIONS COULD HAVE BEEN MADE TO THE INCOME ALREADY ASSESSED. [EMPHASIS SUPPLIED] 6.19 IN FACT, IN THE SUBSEQUENT JUDGMENT IN THE CASE OF PR. CIT V. LATA JAIN REPORTED IN 384 ITR 543 (DEL)), IT WAS ALSO HELD THAT IN ABSENCE OF ANY INCRIMINATING MATERIAL FOUND AS A RESULT OF SEARCH, ASSUMPTION OF JURISDICTION WAS ALSO NOT IN ACCORDANCE WITH LAW. RELIANCE IS ALSO PLACED ON THE FOLLOWING JUDGMENTS :- MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 52 I) ITA NO. 369/2015 CIT VS. KURELE PAPER MILLS P LTD. DATED 06.07.2015 II) 63 TAXMANN.COM 137 (DEL) CIT VS. MGF AUTOMOBILES LTD. III) ITA NO. 634/2015 PR. CIT VS. SMT. KUSUM GUPTA DATED 01.09.201 IV) 49 TAXMANN.COM 172 (BOM) CIT VS. M/S MURLI AGRO PRODUCTS LTD. V) ITA NO. 1969 OF 2013 CIT VS. ALL CARGO GOBAL LOGISTICS LTD. VI) 58 TAXMANN.COM 78 (BOM) CIT VS. CONTINENTAL WAREHOUSING CORPORATION (NHAVA SHEVA) LTD. VII) 259 CTR 281 (RAJ) JAI STEEL INDIA VS ACIT VIII) 120 DTR 79 (BOM) CIT VS. SINHGAD TECHNICAL EDUCATION SOCIETY IX) W.P. (C) 8721/2014 & CM NO. 20052/2014 PRAVEEN KUMAR JOLLY RECENTLY HONBLE DELHI HIGH COURT ON 25-05-2017 HELD IN ITA NO. 306 TO 310 OF 2017 IN THE CASE OF PR.CIT V. MEETA GUTGUTIA PROP. FERNS N PETALS, AGAIN ANALYZED ALL THE ASPECTS AND THE DECISIONS LAID DOWN AND HELD AT PARA 71 THAT INVOCATION OF SECTION 153A BY THE REVENUE FOR AYS 2000-01 TO 2003-04 WAS WITHOUT ANY LEGAL BASIS AS THERE WAS NO INCRIMINATING MATERIAL QUA EACH OF THOSE AYS. 6.20 IN VIEW OF THE AFORESAID, IT IS SUBMITTED THAT SINCE WHILE MAKING THE ADDITIONS IN THE ORDERS OF ASSESSMENT FOR THE AY 2005-06, 2006-07 AND 2007-08, NO INCRIMINATING MATERIAL WHICH CAN BE SAID TO BE FOUND FROM THE PREMISES OF THE APPELLANT HAS EVEN BEEN REFERRED TO AS SUCH, ADDITION MADE IS OUTSIDE THE SCOPE OF SECTION 153A OF THE ACT AS SUCH, ADDITIONS MADE ARE LIABLE TO BE DELETED. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 53 20 LEARNED CIT [DR], ON THE OTHER HAND, PLACED RELIANCE ON THE ORDERS OF THE LD AO AND CIT (A) AND REITERATED VEHEMENTLY THE CONTENT OF THESE ORDERS. THE LEARNED CIT [DR] HAS ALSO FILED SYNOPSIS OF ARGUMENTS WHICH ARE ON JURISDICTIONAL GROUND AS WELL AS ON MERITS OF THE CASE ARE AS UNDER :- 1. JURISDICTIONAL GROUND I) BEFORE THE HON'BLE ITAT, THE LD. AR HAS FILED COPY OF LETTER DATED 15.09.2011 CLAIMED TO HAVE FILED BEFORE THE ASSESSING OFFICER IN SUPPORT OF RETRACTION. THIS LETTER IS AFTER ALMOST 1 YEAR AND 6 MONTHS FROM THE DATE OF SEARCH I.E. ON 26.03.2010 WHEN STATEMENT WAS RECORDED U/S 132(4). FURTHER REFERENCE OF THIS LETTER IS NOT MENTIONED EITHER IN THE ASSESSMENT ORDER OR IN CIT (A)'S ORDER. STILL FURTHER, THERE IS NO ORDER SHEET ENTRY OF RECEIVING THIS LETTER IN THE ASSESSMENT RECORD NOR THERE IS RECEIPT OF THE ASSESSING OFFICER ON THIS LETTER. THEREFORE, THIS LETTER THOUGH PART OF ASSESSMENT RECORD PRESENTLY DOES NOT PROVE THAT THIS LETTER WAS FILED DURING THE ASSESSMENT PROCEEDINGS. HENCE, THIS LETTER DOES NOT SUBSTANTIATE RETRACTION EVEN ON 15.09.2011. II) FURTHER, THERE IS NO EVIDENCE OF RETRACTION BEFORE DGIT (INV.) AFTER TWO DAYS. AS PER LETTER OF ASSESSEE DATED 15.09.2011 THE DIRECTOR OF THE ASSESSEE COMPANY HAS MET THE DGIT (INVESTIGATION), NEW & CLAIMED RETRACTION. HENCE, EVEN IF IT IS TREATED THAT THE LETTER IS FILED ON 15.09.2011 THE SAME IS AFTER 1 YEAR 6 MONTH. III) RETRACTION LETTER DOES NOT STATE AS TO HOW PRESSURE & COERCION WAS APPLIED. THE SEARCH WAS CARRIED IN THE PRESENCE OF WITNESS FOR FAIR CONDUCT OF SEARCH. SH. ASEEM GUPTA WHO IS A PARTY TO THE STATEMENT IS STILL CONFIRMING THE STATEMENT. DURING THE ASSESSMENT PROCEEDING ALSO HE HAS CONFIRMED HIS EARLIER STATEMENT. THIS PROVES THAT THERE WAS NO COERCISION OR UNDUE PRESSURE WHILE RECORDING STATEMENT. IV) THE RETRACTION LETTER DOES NOT STATE SPECIFICALLY THAT THE EMPLOYEE OF THE COMPANY HAS NOT GIVEN CASH, AS MENTIONED IN THE STATEMENT. IT ONLY STATES THE SURRENDER OF DISCLOSURE OF ADDITIONAL INCOME, WAS FOR PURCHASE OF PEACE. IN VIEW OF THE ABOVE FACTS, IT IS CLEAR THAT THERE IS NO VALID RETRACTION OF STATEMENT U/S 132(4). EVEN IF SUCH RETRACTION LETTER IS TREATED AS FILED IT DOES NOT HAVE SATISFACTORY EXPLANATION FOR SUCH RETRACTION. THEREFORE, THE RETRACTION IS NOT BONAFIDE. I RELY ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 54 PCIT (CFO-2 VS. AVINASH KUMAR SETIA (2017) 81 TAXMANN.COM 476 (DEL), BHAGIRATH AGGARWAL VS. CIT (2013) 351 ITR 143(DEL). A) STATEMENT RECORDED U/S 132(4] IN ITSELF AN INCREMENTING EVIDENCES FOUND AS A RESULT OF SEARCH. B) STATEMENT IS SUPPORTED WITH SUBSEQUENT ENQUIRY BY THE ASSESSING OFFICER BY TRACKING MONEY TRAIL FOR INTRODUCTION OF CAPITAL INTRODUCED AND ISSUANCE OF NOTICE U/S 133(6) TO THOSE SHARE APPLICANTS AND THEIR NON COMPLIANCE SHOWS \ FURTHER STEPS TAKEN BY A.O. ON THE ISSUE OF ADDITIONS ACCOUNT OF SHARE CAPITAL. ISSUANCE OF COMMISSION TO CALCUTTA STOCK EXCHANGE AND INVESTIGATION WING LEADING TO ADDITION ON ACCOUNT OF LTCG SUPPORT STATEMENT U/S 132(4). ADDITION IS NOT MERELY ON STATEMENT BUT ALSO ON RECORDS SUCH AS BOOKS OF ACCOUNT CONTAINING ENTRY OF SHARE APPLICATION MONEY AND LTCG. C) BOOKS OF ACCOUNT FOUND DURING SEARCH CONTAINING INCRIMINATING ENTRY OF SHARE CAPITAL AND LTCG CONSTITUTE INCRIMINATING MATERIAL FOUND AS A RESULT OF SEARCH. D) THEREFORE, THE RELIANCE OF LD. AR ON VARIOUS JUDICIAL AUTHORITY SUCH AS KABUL CHAWLA AND OTHER CASES WILL NOT APPLY TO THE FACTS OF THE CASE. E) I RELY ON DECISION ANIL BHATIA OF HON*BLE HIGH COURT OF DELHI 352 ITR 493 (DEL) THAT IF INCREMENTING DOCUMENT IS FOUND FOR ANY ASSESSMENT YEAR, THEN AO HAS AUTHORITY TO ASSESS TOTAL INCOME REFERENCE PARE 19, 20, 21 & 22 OF THE ORDER. MERITS A) SHARE CAPITAL: I) AO HAS RELIED ON THE STATEMENT U/S 132(4) OF THE IT ACT OF MD OF THE COMPANY NAMELY SH. I. C. JINDAL & STATEMENT OF SH. ASEEM GUPTA WHO I HAS ACCEPTED TO PROVIDE ENTRY FOR SHARE CAPITAL. II) A.O. HAS ISSUED NOTICE 133(6) OF I.T. ACT TO SHARE APPLICANTS WHICH WERE EITHER RETURNED BACK OR NON COMPLIED. ASSESSEE HAS NOT BEEN ABLE TO PRODUCE DIRECTORS OF THE SHARE APPLICANT COMPANY. III) THE SHARE APPLICANT COMPANIES ARE CONTROLLED BY SH. ASEEM GUPTA, AN ENTRY OPERATOR WHO IS CONFIRMING TO HIS STATEMENT THAT THESE TRANSACTION OF SHARE CAPITAL IS NOTHING BUT BOOK ENTRY. THEREFORE, THERE IS NO CHANCE OF PRODUCTION OF DIRECTOR OF THESE APPLICANT COMPANY TO PROVE GENUINENESS OF THESE SHARE CAPITAL. IV) HENCE, GENUINENESS OF THE TRANSACTION WAS AND CAN NOT BE PROVED. RELIANCE IS PLACE CASE LAWS FOR APPLICATION OF SECTION 68:- A) MAP ACADEMY 361 ITR 258 (DELHI) B) NR PORTFOLIO P. LTD. 264 CTR 258(DELHI) C) NOVA PROMOTERS & UNLESS LTD. 342 ITR 169 (DELHI) D) CIT VS. NIPUL BUILDERS 350 ITR 169 (DELHI) MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 55 V) SHARE ALLOTTED TO THESE SHARE APPLICANT AT PREMIUM OF RS. 90 WERE REPURCHASED BY THE FAMILY MEMBER OF SH. I. C. JINDAL AT FACE VALUE OF RS. 10. B) LTCG I) IN THE STATEMENT SH. ASEEM GUPTA IF NOT INVOLVED IN PROVIDING ENTRY PROVIDE BOOKS OF LTCG, THEN HOW HE CAME TO KNOW THE NAME OF SHARE BROKERS THROUGH WHOM LTCG WAS BOOKED. II) BEHAVIOUR/ VARIOUS ACTION TAKEN AGAINST THE SHARE BROKER AS MENTIONED IN THE ASSESSMENT ORDER PROVES THE NON GENUINENESS OF ALLEGED LTCG. III) VARIOUS ACTION AGAINST SCRIP IN RESPECT OF WHICH LTCG HAS BEEN CLAIMED BY SEBI/STOCK EXCHANGE. IV) STOCKS WERE PURCHASED FROM OFF MARKET WHEN THE SHARES WERE AVAILABLE ON LINE & PAYMENT WAS MADE AFTER LONG TIME ADMITTEDLY. V) AUTHENTICITY OF CONTRACT NOTE IS NOT PROVED (REFER PAGE 16 OF CIT(A)'S ORDER). VI) THE IMPUGNED SHARES WERE DEMATERIALISED IN ASSESSEE'S A/C BY THE BROKER AFTER LAPSE OF LONG PERIOD. THE SHARES REMAINED IN D-MAT ACCOUNT FOR FEW DAYS OR FEW MONTHS IN ASSESSEE'S ACCOUNT. VII) THERE IS NO EVIDENCE OF DELIVERY OF SCRIPT ON PURCHASE DATE. THERE WAS HEARING ON SUBSEQUENT DATES ON 07.06.2017 IN THE CASE OF B.R. ASSOCIATES PVT. LTD. IN IT-4964, 4965 & 4966 BEFORE HON'BLE E-BENCH WHICH IS GROUP COMPANY OF M/S MANGLAM STEEL LTD. FURTHER, ADMITTEDLY THE STATEMENT U/S 132(4) AND DISCLOSURE INVOLVES OTHER ASSESSEE'S NAMELY M/S MANGLAM INTERNATIONAL LTD., M/S COURAGE FINANCIAL SERVICES P. LTD. & M/S N.R. SPONGE PVT. LTD. THEREFORE, AS ORDER IS YET TO DECLARED I PRAY FOR CONSOLIDATION OF THESE CASES BEFORE TAKING FINAL DECISION. DELAY IN FILING SYNOPSIS IS ON ACCOUNT OF CALLING OF CASE RECORDS OF THE APPELLANT, TO VERIFY THE GENUINENESS OF LETTER DATED 15.09.2011 FILED BY THE LD. AR DURING THE HEARING. 21 THE MAIN ARGUMENT RAISED BY HIM WAS THAT THE STATEMENT OF SHRI IC JINDAL IS AN INCRIMINATING MATERIAL EVEN IF IT IS RETRACTED ON 15.09.2011, BECAUSE THE RETRACTION WAS FILED AFTER ONE AND HALF YEARS AFTER THE DATE OF RECORDING OF STATEMENT AND REFERENCE OF RETRACTION MADE BEFORE DGIT ON 29.03.2010 IS NOT BORNE OUT FROM MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 56 RECORD. IT WAS ARGUED BY HIM THAT EVEN IF RETRACTION WAS MADE, IT WAS NOT SHOWN THAT HOW THE PRESSURE AND COERCION WAS APPLIED. HE ALSO REFERRED THAT ONE SHRI. ASEEM GUPTA HAS ACCEPTED THAT IN LIEU OF CASH, M/S MODERATE CREDIT CORPORATION LTD AND M/S RAVNET SOLUTIONS PVT. LTD. HAVE MADE INVESTMENT IN THE ASSESSEE COMPANY AND BOOKS OF ACCOUNT OF ASSESSEE ITSELF CONSTITUTE INCRIMINATING MATERIAL. HOWEVER, NO OTHER MATERIAL OR DOCUMENT WAS REFERRED TO BY HIM WHICH WAS FOUND AS A RESULT OF SEARCH CONSTITUTING INCRIMINATING MATERIAL IN ORDER TO MAKE ADDITIONS IN ALL THESE YEARS. THE LEARNED CIT [DR] ALSO CITED THE JUDGMENT OF BHAGIRATH AGGARWAL VS. CIT REPORTED IN 351 ITR 143 AND PCIT VS. AVINASH KUMAR SETIA 81 TAXMANN.COM 486. 22 THE LEARNED AR FILED REJOINDER HIGHLIGHTING THAT IT IS INCORRECT THAT RETRACTION WAS ONE AND HALF YEAR LATE AS THE RETRACTION WAS MADE IMMEDIATELY ON THE VERY NEXT WORKING DATE I.E. 29.03.2010 (BECAUSE 28.03.2010 WAS SUNDAY) BEFORE THE DGIT AND ADIT AND DUE TO RETRACTION, CHEQUES ISSUED WERE NEVER ENCASHED BY REVENUE. IT WAS SUBMITTED THAT LETTER DATED 15.09.2011 WAS MERE REITERATION OF THE RETRACTION MADE ON 29.03.2010 AND WAS FILED ON MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 57 THE FIRST AVAILABLE OPPORTUNITY BEFORE THE ASSESSING OFFICER. IT WAS THEREFORE SUBMITTED THAT THE CONTENTION OF THE REVENUE THAT THE RETRACTION WAS LATE IS INCORRECT. IT WAS ALSO SUBMITTED THAT ASSESSEE HAD FURNISHED DOCUMENTARY EVIDENCES IN SUPPORT OF THE TRANSACTIONS AND REQUESTED TO RECORD THE STATEMENT OF SHRI ASEEM GUPTA IN ITS PRESENCE AND ALLOW CROSS-EXAMINATION; REVENUE APART FROM THE RETRACTED STATEMENT COULD NOT BRING ANY MATERIAL BEFORE MAKING THE ADDITION. HIS REJOINDER IS AS UNDER :- AR SUBMISSION THAT THE CAPTIONED APPEALS WERE HEARD ON 1 ST JUNE, 2017. THAT AFTER CONCLUDING THE ORAL ARGUMENTS, LEARNED CIT DR MADE A REQUEST FOR FILING HIS WRITTEN SYNOPSIS OF ARGUMENTS TO BE TAKEN ON RECORD AND ASSESSEE ALSO MADE A REQUEST TO FILE ITS REJOINDER SUBMISSIONS. THAT COPY OF THE WRITTEN SYNOPSIS OF ARGUMENTS OF THE LEARNED CIT DR HAS BEEN PROVIDED TO THE ASSESSEE. AS SUCH, IN REJOINDER TO THE AFORESAID WRITTEN SYNOPSIS OF ARGUMENTS, PARAWISE SUBMISSIONS OF THE ASSESSEE IS AS UNDER: IN PARA L(I) TO L(IV), RELATES TO THE RETRACTION OF THE STATEMENT RECORDED DURING THE COURSE OF SEARCH U/S 132(1) OF THE ACT ON 26/27-03.2010 VIDE LETTER DATED 15.09.2011. IT IS SUBMITTED THAT THE PRIMARY OBJECTION TAKEN BY THE LEARNED CIT DR THAT THIS LETTER WAS FILED AFTER 1 YEAR AND SIX MONTHS AND ITS REFERENCE IS NOT GIVEN IN THE ASSESSMENT ORDER OR CIT(A) ORDER NOR THERE IS ANY ORDER SHEET ENTRY OR RECEIPT OF THE LEARNED AO ON THIS LETTER. IT IS SUBMITTED THAT IT IS INCORRECT THAT THE RETRACTION WAS MADE ONE AND HALF YEAR, AS THE SAME WAS MADE IMMEDIATELY AFTER THE SEARCH ON THE FIRST WORKING DATE I.E. 29.03.2010 BEFORE THE LEARNED DGIT INVESTIGATION AS WELL AS BEFORE THE LEARNED ADIT DUE TO WHICH NO ACTION WAS TAKEN TO ENCASH THE CHEQUES TAKEN TOWARDS THE DEMAND OF TAX IN RESPECT OF SURRENDER MADE IN THE STATEMENT RECORDED DURING THE SEARCH. THAT THE LEARNED CIT DR MADE NO REPLY OR REBUT THE AFORESAID FACTUAL POSITION WHICH CLEARLY ESTABLISH THAT THE AFORESAID FACT IS TRUE AND CORRECT. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 58 2.2 FURTHER IN SO FAR AS THE LETTER DATED 15.09.2011 FILED BY THE ASSESSEE RETRACTING THE STATEMENT DATED 26/27-03-2010 IS CONCERNED, IT IS SUBMITTED THAT THIS LETTER WAS FILED AFTER THE RECEIPT OF THE NOTICE U/S 153 A OF THE ACT AND BEFORE FILING OF ANY RETURN IN RESPONSE TO THE AFORESAID NOTICE AND WAS MERELY A REITERATION OF THE AFORESAID RETRACTION WHICH WAS ALREADY MADE IMMEDIATELY AFTER THE SEARCH. IT IS SUBMITTED THIS WAS THE FIRST OCCASION TO BRING ON RECORD THE RETRACTION OF THE ASSESSEE BEFORE THE ASSESSING OFFICER WHO INITIATED THE ASSESSMENT PROCEEDINGS BY ISSUING NOTICE U/S 153A OF THE ACT. IT IS THUS SUBMITTED THAT RETRACTION WAS MADE ON THE FIRST WORKING DATE AFTER THE SEARCH BEFORE THE INVESTIGATION AUTHORITIES AND ON THE FIRST AVAILABLE OPPORTUNITY BEFORE THE ASSESSING OFFICER THAT TOO BEFORE FILING OF THE RETURN OF INCOME U/S 153 A OF THE ACT. 2.3 IT IS SUBMITTED THAT THE ASSESSMENT PROCEEDINGS STARTS AFTER FILING OF THE RETURN OF INCOME AND THE RETRACTION WAS FILED BEFORE THE FILING OF THE RETURN OF INCOME IN RESPONSE TO THE NOTICE U/S 153A OF THE ACT, IT IS THEREFORE SUBMITTED THAT MERELY BECAUSE THE ORDER SHEET WAS NOT PROPERLY MAINTAINED BY THE LEARNED AO BY BRINING IT ON RECORD, NO FAULT CAN BE IMPUTED ON THE ASSESSEE. IN THIS CONNECTION, IT IS NECESSARY TO BRING ON RECORD PAGE 47 OF THE PB-2, OBTAINED DURING THE INSPECTION WHERE LEARNED CIT, DELHI-2, IN THE CASE OF THE ASSESSEE ITSELF, WHILE REVIEWING THE COMPLETED ASSESSMENT, HAS NOTICED THAT IN RESPECT OF ORDERS PASSED U/S 143(3) OF THE ACT HAS OBSERVED THAT ORDER SHEET HAS NOT BEEN MAINTAINED. AS SUCH, NON MAINTAINING THE ORDER SHEET ENTRY PROPERLY IS NO GROUND TO MAKE SUCH COMMENT OR ARGUMENT THOUGH NOTICING THAT THE LETTER DATED 15.09.2011 IS PART OF THE ASSESSMENT RECORD. INTACT, THE LEARNED AO AND LEARNED CIT(A) HAVE ALSO NOT RECORDED VARIOUS REPLIES RECEIVED BY THEM IN RESPONSE TO THE SUMMONS U/S 131/133 FROM THE CALCUTTA STOCK EXCHANGE AND BROKERS OBTAINED DURING ORIGINAL ASSESSMENT PROCEEDINGS AND ALSO DURING SUBSEQUENT PROCEEDINGS U/S 153A OF THE ACT. CERTIFIED COPIES OF THE AFORESAID DOCUMENTS WERE ALSO PROVIDED BY THE LEARNED AO AND ARE FORMING PART OF PB-2. 2.4 IT IS SUBMITTED THAT ASSESSEE FILED A LETTER TO OBTAIN CERTIFIED COPIES OF THE RELEVANT DOCUMENTS AS DUE TO CHANGE OF VARIOUS COUNSELS AT DIFFERENT STAGES, COMPLETE RECORDS WERE NOT AVAILABLE WITH THE ASSESSEE AND IN RESPONSE TO THE AFORESAID LETTER, THE ASSESSING OFFICER HIMSELF HAS PROVIDED THE CERTIFIED TRUE COPIES OF ALL THE NOTICES AND REPLIES RECEIVED EITHER FROM THE ASSESSEE OR FROM THE RELATED PARTIES SUCH AS BROKERS, DEPOSITORY AND STOCK EXCHANGE ETC. THAT ALL THESE DOCUMENTS OBTAINED WERE COMPILED AND FILED BEFORE THE HON'BLE TRIBUNAL AND MARKED AS PAPER BOOK-2. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 59 2.5 IT IS FURTHER SUBMITTED THAT IN THE WRITTEN SUBMISSIONS BEFORE THE CIT(A), WHICH HAS BEEN EXTRACTED BY THE ID. CIT(A) AT PAGE 10, REFERRING TO PARA 6.6 OF THE SUBMISSIONS, IN WHICH RETRACTION OF THE STATEMENT OF SHRI. I.C. JINDAL AS WELL AS OF SURRENDER IMMEDIATELY AFTER THE SEARCH WAS SPECIFICALLY BROUGHT TO THE NOTICE OF THE LEARNED CIT(A), AND LEARNED AO HAS NEVER RAISED ANY OBJECTION ON THESE SUBMISSIONS. THE WORD IMMEDIATELY USED CANNOT BE TREATED AS ONE AND HALF YEAR AS NOTICED BY LEARNED CIT DR. THIS CLEARLY PROVES THAT RETRACTION WAS MADE ON 29.03.2010 WHICH WAS TAKEN NOTE BY THE REVENUE AUTHORITIES BY NOT ENCASHING THE CHEQUES OR TAKING ANY ACTION AGAINST THE ASSESSEE AFTER THE SEARCH. 2.6 IT IS THEREFORE SUBMITTED ALL THE AFORESAID FACTS CLEARLY ESTABLISH THAT RETRACTION WAS IMMEDIATELY AFTER THE SEARCH AND ALSO BROUGHT INTO THE NOTICE OF THE AO DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. 2.7 IT IS SUBMITTED THAT STATEMENT WAS RECORDED IN THE LATE EVENING AND COMPLETED AT LATE MORNING ON THE NEXT DATE, CLEARLY ESTABLISH THAT STATEMENT WAS NOT RECORDED WHEN SHRI. 1C JINDAL WAS NOT IN FIT STATE OF MIND AS HE WAS PHYSICALLY AND MENTALLY EXHAUSTED AND WAS IN HALF SLEEP. FURTHER WHOLE NIGHT DEPARTMENT KEPT PRESSURING TO SHRI. 1C. JINDAL TO SURRENDER AND HE SUCCUMB TO THE PRESSURE. THIS FACT WAS ALSO BROUGHT DURING THE ASSESSMENT PROCEEDING VIDE LETTER DATED 15.09.2011 AND 19.12.2011 (IN PARA 4 AT PAGE 157 OF PB-1). FURTHER IN SO FAR AS THE STATEMENT OF SHRI. ASEEM KUMAR GUPTA IS CONCERNED, IT IS SUBMITTED THAT HIS STATEMENT IS CONTRARY TO THE ADMITTED FACTS AND DESPITE REQUEST OF THE ASSESSEE VIDE ITS LETTER DATED 15.09.2011, HE WAS NOT CONFRONTED FOR CROSS EXAMINATION OF THE ASSESSEE. FURTHER THE ALLEGED STATEMENT RECORDED IN THE ASSESSMENT PROCEEDINGS OF SHRI. ASEEM KUMAR GUPTA IS CONCERNED, SAME WAS NEVER MADE AVAILABLE TO THE ASSESSEE, AS SUCH, IN VIEW OF THE SETTLED LEGAL POSITION OF THE APEX COURT, SUCH STATEMENT/EVIDENCE CANNOT BE RELIED AND MUST BE EXCLUDED. 2.8 IT IS INCORRECT THAT IN THE LETTER DATED 15.09.2011, REFERRED BY THE LEARNED CIT DR NO REFERENCE WAS MADE ON CASH GIVEN BY THE EMPLOYEE. IT IS SUBMITTED THAT WHILE MAKING THE AFORESAID SUBMISSIONS, LEARNED CIT DR HAS COMPLETELY OVERLOOKED THE RELEVANT PORTION OF THE LETTER, WHEREIN ASSESSEE SPECIFICALLY STALED THAT NO MONEY WAS TRANSACTED AND A REQUEST WAS ALSO MADE TO RECORD HIS STATEMENT IN THE PRESENCE OF THE ASSESSEE AS SUCH, THE CONTENTION THAT NO REFERENCE WAS MADE IN RESPECT OF CASH GIVEN BY THE EMPLOYEE IS FACTUALLY INCORRECT AND CONTRARY TO RECORD. 2.9 IT IS SUBMITTED THAT ADMITTEDLY AND UNDISPUTEDLY, RECORDING OF STATEMENT OF SHRI. I.C. JINDAL STARTED AT 8.40 PM ON 26.03.2010 AND MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 60 CONTINUED FOR WHOLE NIGHT AND CONCLUDED ON 27.03.2010 AT 10 AM, WHICH ITSELF SHOWS THAT STATEMENT RECORDED IS NOT VOLUNTARY. IT IS SUBMITTED THAT WHOLE NIGHT REVENUE AUTHORITIES KEPT PRESSURIZING SHRI. JINDAL TO SURRENDER, AND BECAUSE SHRI. JINDAL WAS FULLY EXHAUSTED AS HE WAS NOT ALLOWED TO SLEEP, HE HAS NO OPTION BUT TO AGREE WITH THE DEPARTMENT AND HENCE UNDER FORCED CIRCUMSTANCES, HE WAS MADE TO SURRENDER. IT IS HOWEVER SUBMITTED THAT IMMEDIATELY AFTER THE SEARCH, ON THE VERY NEXT WORKING DAY I.E. 29.03.2010 (AS 28 IH MARCH, 2010 WAS SUNDAY), ASSESSEE MET WITH DGIT AND ADIT AND RETRACTED HIS STATEMENT AND ALSO REQUESTED NOT TO DEPOSIT THE CHEQUES WHICH WAS TAKEN BY THE DEPARTMENT DURING THE COURSE OF THE SURRENDER TOWARDS THE TAX DEMAND ON ACCOUNT OF SURRENDER, AND ON ACCOUNT OF THE AFORESAID RETRACTION, REVENUE DID NOT DEPOSIT THE CHEQUES. FURTHER, ASSESSEE HAS LAID COMPLETE DOCUMENTARY EVIDENCES DURING THE COURSE OF THE ASSESSMENT IN RESPECT OF EACH AND EVERY TRANSACTION, AND DESPITE THE COMPREHENSIVE SEARCH ON THE WHOLE GROUP OF THE ASSESSEE COVERING VARIOUS LOCATIONS, NO INCRIMINATING MATERIAL/DOCUMENT WAS FOUND FROM THE PREMISES OF THE ASSESSEE IN RESPECT OF THE ALLEGED TRANSACTIONS. EVEN NO EXCESS CASH WAS FOUND WHICH COULD BE HELD TO BE NOT RECORDED IN THE BOOKS OF THE ASSESSEE. IN FACT, AVERMENTS MADE IN THE LETTER DATED 15.09.2011, IS MERE RECORDING OF WHAT HAS BEEN HAPPENED PRIOR TO THE ASSESSMENT, AND IT IS NOT SO THAT RETRACTION WAS MADE FIRST TIME ON 15.09.2011, AS RETRACTION WAS MADE ON THE NEXT DATE OF SEARCH I.E. 29.03.2010. IT IS SUBMITTED THAT SINCE THE PROCEEDINGS U/S 153A OF THE ACT WAS INITIATED, AS SUCH ON THE FIRST AVAILABLE OCCASION, APPELLANT NARRATED THE COMPLETE FACTS AND ALSO REQUESTED TO VERIFY THE TRANSACTION AND RECORD THE STATEMENT OF SHRI. ASEEM KUMAR GUPTA AND SHRI. SOMNATH IN ITS PRESENCE. IN SUCH CIRCUMSTANCES, THE CONTENTION OF THE REVENUE THAT THE RETRACTION-IS NOT BONAFIDE IS WHOLLY MISCONCEIVED AND LEGALLY UNSUSTAINABLE. AT THIS STAGE, RELIANCE IS PLACED ON THE JUDGMENT OF THE HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF KAILASHBEN MANHARLAL CHOKSHI VS. CIT REPORTED IN [2010] 328 ITR 411 (GUJARAT), 3. IT IS SUBMITTED THAT AT SI NO. (A) TO (E) THRUST UPON TO TREAT THE STATEMENT RECORDED AS INCRIMINATING EVIDENCES AND ALSO REFERRED TO THE MONEY TRAIL AS WELL TO TREAT BOOKS OF ACCOUNT AS INCRIMINATING MATERIAL AS SUCH, IT HAS BEEN CONTENDED THAT JUDGMENT OF KABUL CHAWLA IS NOT APPLICABLE. IT IS SUBMITTED THAT THE LEARNED CIT DR HAS FAILED TO NOTICE THAT DESPITE THE SEARCH MADE AT SEVERAL PLACES IN VARIOUS GROUP COMPANIES, A MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 61 MEAGER CASH OF RS. 5,00,0007- WAS SEIZED FROM THE FACTORY PREMISES AT GWALIOR. IT IS SUBMITTED THAT IN THE STATEMENT, ALLEGATION HAS BEEN MADE OF THE TRANSACTIONS OF 2004-05, 2005-06 I.E. FIVE YEARS BEFORE THE DATE OF SEARCH WHICH WAS COMPLETELY DENIED BY THE ASSESSEE IN THE RETRACTION LETTER. IN CASE, OF MONEY TRAIL NOTICED BY THE AO AND ALSO BY THE CIT DR, THERE HAS TO BE SOME CASH TRANSACTION BETWEEN THE ASSESSEE AND INVESTOR AND THERE IS NO EVIDENCE FOUND EITHER DURING THE SEARCH OR IN THE POST SEARCH ENQUIRY THAT THERE AWAS CASH TRANSACTED BETWEEN THE ASSESSEE AND INVESTOR AND THE SEARCH MADE AFTER FIVE YEARS AND FINDING A MEAGER CASH ALSO SHOWS THAT THE STORY OF THE AO IN THE ASSESSMENT ORDER IS FRIVOLOUS SPECIFICALLY IN THE ABSENCE OF ANY MATERIAL BROUGHT IN THE NOTICE. THE BOOKS FO THE ACCOUNTS OR THE STATEMENT CAN ONLY BECOME INCRIMINATING EVIDENCE WHEN ANY CORROBORATIVE EVIDENCE IS FOUND IN SUPPORT OF THE STATEMENT OR ENTRIES IN THE BOOKS OF THE ACCOUNT BUT NOT OTHERWISE. THE ASSESSING OFFICER DID NOT BRING ANY MATERIAL IN FACT SUMMONS ISSUED TO ALMOST ALL THE SHAREHOLDERS WERE DULY SERVED, AND THOSE COMPANIES AHAVE PROVIDED COMPLETE DETAILS I.E. CONFIRMATION, COMPANY MASTER DATA AS PROOF OF ADDRESS, PAN, ITR, MOA/AOA, SHARE APPLICATION FORM, BANK STATEMENT, AUDIT REPORT, AND NO EFFORTS WERE EVER MADE BY THE AO TO EXAMINE THE SHAREHOLDERS THROUGH THE BANKERS, ROC OR THEIR OWN ASSESSMENT RECORDS. IN FACT, MONEY TRAIL DOES NOT SHOW THAT ANY MONEY WAS TRANSACTED BY THE ASSESSEE FOR ANY INVESTMENT RECEIVED BY IT. DURING THE COURSE OF HEARING A CHART WAS FURNISHED TO SHOW THAT VALUE OF SHARES OF THE APPELLANT WAS ALMOST RS. 100 PER SHARES DUE TO RESERVES AND THE SHAREHOLDERS HAVE INVESTED AT THE SAME PRICE. 4. IT IS THEREFORE HUMBLY SUBMITTED THAT IN THE ABSENCE OF ANY CORROBORATIVE MATERIAL FOUND DURING THE SEARCH OR OBTAINED IN THE POST SEARCH ENQUIRY, NEITHER THE STATEMENT NOR THE BOOKS OF ACCOUNT BECOME INCRIMINATING EVIDENCE SO AS TO MAKE ADDITION AND IN ABSENCE OF ANY INCRIMINATING MATERIAL ADDITIONS CANNOT BE MADE AS HAS BEEN HELD BY THE CIT V. KABUL CHAWLA REPORTED IN 380 ITR 573. IT IS SUBMITTED THAT THE JUDGMENT OF THE THE ANIL KUMAR BHATIA CAN BE APPLIED ONLY WHEN ANY INCRIMINATING MATERIAL IS FOUND, BUT NOT OTHERWISE, AS EXPRESSED ABOVE DID NOT BRING ANY CORROBORATIVE EVIDENCE IN SUPPORT OF THE SO CALLED STORY BROUGHT BY HIM EITHER OF THE MONEY TRAIL OR OF SHRI. ASEEM KUMAR GUPTA, AS SUCH, AFORESAID JUDGMENT IS INAPPLICABLE. 5. IT IS SUBMITTED THAT IN RESPECT OF THE MERITS OF THE ADDITIONS, THE LEARNED CIT DR HAS MERELY REPEATED THE FINDING AO/CIT(A), WHICH WAS ALSO ARGUED DURING THE COURSE OF HEARING AND ALL THE ISSUES RAISED BY HIM HAS BEEN DEALT BY THE ASSESSEE IN ITS SYNOPSIS AS SUCH FOR THE SAKE OF MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 62 BREVITY SAME IS NOT REPEATED HERE. HOWEVER, IN BRIEF, IN REJOINDER TO THE SAME, IT IS SUBMITTED AS UNDER: 5.1 IT IS SUBMITTED IN PARA (A)(I) TO (A)(III), THE LEARNED CIT DR MERELY REPEATED ON THE STATEMENT RECORDED OF SHRI. 1C JINDAL AND STATEMENT OF SHRI. ASEEM GUPTA. IT IS SUBMITTED THAT AS ALREADY SUBMITTED EARLIER, THE STATEMENT OF SHRI. 1C JINDAL WAS UNDER FORCED CIRCUMSTANCES WHICH WAS IMMEDIATELY RETRACTED AND NOTHING WAS ACCEPTED EVEN IN THE STATEMENT DURING THE COURSE OF SEARCH, AND INCOME SURRENDERED WAS IMMEDIATELY RETRACTED ON THE FIRST AVAILABLE OPPORTUNITY. FURTHER, AS HAS ALREADY BEEN SUBMITTED, AO DID NOT BRING ANY CORROBORATIVE EVIDENCE AND CBDT IN ITS INSTRUCTION NO. F.NO. 286/98/2013-IT (INV.II) DATED 18.12.2014 AND INSTRUCTION NO. F NO. 286/2/2003- IT (INV) DATED 10.03.2003) HAS EMPHASIZED UPON THE NEED TO FOCUS ON GATHERING EVIDENCES DURING SEARCH/SURVEY AND TO STRICTLY AVOID OBTAINING ADMISSION OF UNDISCLOSED INCOME UNDER COERCION/UNDUE INFLUENCE. 5.2 IT IS SUBMITTED THAT DECISIONS CITED BY THE LEARNED CIT DR IN PARA (A)(IV) AT PAGE 3 ARE INAPPLICABLE AS IN THE CASE OF THE ASSESSEE, ASSESSEE HAS DISCHARGED ITS BURDEN, HOWEVER AO HAS NOT MADE ANY EFFORTS TO BRING ANY ADVERSE MATERIAL IN SUPPORT OF THE FINDING. FURTHER, IN THE LATEST CASE OF CIT V. SVP BUILDERS (INDIA) LTD. REPORTED ON 238 TAXMAN 653 (DEL) AND CIT VS. FIVE VISION PROMOTERS (P.) LTD. REPORTED IN [2016] 380 ITR 289 (DELHI), AFORESAID JUDGMENT CITED BY THE REVENUE HAS BEEN CONSIDERED AND WHEREIN IT HAS BEEN HELD THAT WHERE ADDITION HAS BEEN MADE WITHOUT BRINGING ANY ADVERSE MATERIAL, SAME DESERVES TO BE DELETED. 6. IT IS SUBMITTED THAT AT PAGE 3 IN PARA B(I) TO B(VII), LEARNED CIT DR COMMENTED ON THE LTCG. PARAWISE, REJOINDER IS AS UNDER: 6.1 PARA B(I); IT IS NOT DISPUTED THAT SHRI. ASEEM GUPTA RESIDES NEREBY AND SEARCH ALSO TOOK PLACE AT HIS PREMISES ON THE SAME DATE AND FEW OF THE COMPANIES IN WHICH HE IS A SHAREHOLDER HAS ALSO MADE INVESTMENT IN THE ASSESSEE COMPANY. AS SUCH, BEING THE INVESTOR AND ALSO PROXIMITY WITH THE ASSESSEE, MERELY BECAUSE HE IS AWARE ABOUT ONE OF THE BROKER THROUGH WHICH SALE AND PURCHASE OF SHARES HAVE TAKEN PLACE IS WHOLLY IRRELEVANT, AND DOES NOT LEAD TO A CONCLUSION THAT LTCG IS NOT GENUINE. IT IS FURTHER SUBMITTED THAT EACH OF THE BROKER IN RESPONSE TO THE NOTICES ISSUED U/S 131/133 HAS INDEPENDENTLY CONFIRMED THE PURCHASE AND SALE OF THE SHARES, AND APPELLANT HAS PRODUCED COMPLETE DOCUMENTARY EVIDENCES IN RESPECT OF THE SALE AND PURCHASE OF THE SHARES. FURTHER, WHY SHRI. ASEEM GUPTA WHEN QUESTIONED COULD NOT STATE TRUE STATE OF FACTS DUE TO PRESSURE TACTIC ADOPTED BY THE REVENUE ON THE ASSESSEE AND ON HIM AND DESPITE THE REQUEST OF THE ASSESSEE HAS NOT BEEN PUT FOR THE CROSS EXAMINATION OF THE ASSESSEE AND MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 63 AO COULD NOT BROUGHT ANY CORROBORATIVE EVIDENCE IN SUPPORT OF THE THAT STATEMENT. 6.2 PARA B(II) & B(III) RELATES TO VARIOUS ACTIONS TAKEN BY THE STOCK EXCHANGE AGAINST THE BROKER M/S P.K. AGARWAL & CO. THE AO IN PARA 4.8 AT PAGE 10-11 OF THE ASSESSMENT ORDER PASSED U/S 153A OF THE ACT REFERRED TO VARIOUS ACTIONS OF THE SEBI AGAINST COMPANIES IN WHICH ASSESSEE HAS INVESTED AND AGAINST THE BROKER. EXCEPT AT SI. NO. (X), ALL THE OTHER ENQUIRIES RELATE TO YEAR 2009-2010 WHICH HAS NO RELATION WITH THE TRANSACTION MADE BY THE ASSESSEE COMPANY. AT SI. NO. (I), A REFERENCE OF ONE OF THE ORDER DATED 31.05.2006 WAS MADE WHICH WAS ALSO MUCH AFTER THE LAST TRANSACTION MADE BY THE ASSESSEE FOR THE SALE OF THE SHARES. AT SI. NO. (X), REFERENCE OF M/S P.K. AGARWAL & CO. WAS MADE AND ORDER DATED 29.09.2005 WHICH RESTRICTED HIM TO BUY SELL OF THE SECURITIES IN ANY MANNER. IT IS SUBMITTED THAT COPY OF THE ORDER DATED 11.08.2008 IS HEREBY IS ENCLOSED GIVING COMPLETE DESCRIPTION OF THE RESTRICTIONS IMPOSED ON M/S P.K. AGARWAL & CO.. IT WOULD BE SEEN THAT IN PARA 2, INVESTIGATION WAS MADE BY THE SEBI IN RESPECT OF SIX COMPANIES, AND NONE OF THE COMPANIES IN WHICH ASSESSEE INVESTED WAS REFERRED TO. IN THIS PARA, INTERIM ORDER OF SEBI DATED 29.09.2005 (ALSO REFERRED BY THE AO), RESTRICTION WAS IMPOSED ON THE 11 STOCK BROKERS, IN WHICH NAME OF M/S P.K. AGARWAL & CO WAS NOT MENTIONED AT ALL. IT IS INCORRECT OBSERVATION MADE BY THE AO IN THE ASSESSMENT ORDER, WHICH HAS BEEN CASUALLY BEEN REFERRED BY THE CIT DR. WITHOUT EXAMINING THE REPORT, AS MENTIONED ABOVE. FURTHER IN PARA 3 OF THE AFORESAID ORDER DATED 11.08.2008, A RESTRICTION WAS IMPOSED ON 30.11.2005 ON P K AGARWAL & CO. THAT TOO IN RESPECT OF SCRIPS OF M/S NAGESWAR INVESTMENT LTD. AS MAY BE SEEN FROM THE CHART PROVIDED IN PARA 4 WHERE AT SI. NO 14, NAME OF THE P K AGARWAL & CO. WAS REFERRED TO. IT IS INCORRECT THAT ANY RESTRICTION WAS IMPOSED ON P K AGARWAL & CO. ON 29.09.2005 FOR THE SALE AND PURCHASE OR TO DEAL IN SECURITIES BY SEBI. IN FACT THE AO HAS MISREAD THE ORDER AND RECORDED SUCH A FINDING WITHOUT EXAMINING THE TRUE FACTS WHICH LEADS TO LACKING DUTIES OF REVENUE AUTHORITIES DUE TO WHICH ASSESSEE HAS TO SUFFER TOO MUCH. 6.3 IN PARA B(IV) TO B(VII), THE LEARNED CIT DR FINDING FAULT IN THE DOCUMENTS INSTEAD REFERRING TO ANY MATERIAL CONTRARY TO THE EVIDENCE FILED BY THE ASSESSEE. IT IS TRUE THAT STOCKS WERE PURCHASED OFF MARKET WHICH ARE TRULY DECLARED BY THE ASSESSEE, PAYMENTS WERE MADE BEFORE MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 64 DEMATERIALIZATION OF THE SAME WHICH IS NOT DISPUTED, THE AUTHENTICITY OF THE CONTRACT NOTE CANNOT BE DOUBTED WITHOUT BRINING ANY MATERIAL. THE BROKERS HAVE REPEATEDLY CONFIRMED DIRECTLY TO THE AO IN RESPONSE TO THE NOTICE U/S 133 WHICH HAS ALSO BEEN NOTED BY THE AO IN THE REMAND REPORTS IN THE APPELLATE PROCEEDINGS AGAINST THE ORDER PASSED U/S 143(3) OF THE ACT. THE BROKER HAS CONFIRMED TAKING PHYSICAL DELIVERY AND FOR KEEPING THE SCRIPS FOR DEMATERIALIZATION TO BE MADE IN SIZABLE LOT BEFORE TRANSFER TO THE DEMAT ACCOUNT OF THE ASSESSEE. THE DELIVERY OF THE SCRIPS CANNOT BE DOUBTED ONCE BROKER HAS CONFIRMED IN THIS CONNECTION DIRECTLY TO THE AO AND IS EVIDENT FROM PAGES 84-114 OF THE PB-2. THE AO THOUGH REFERRED THE SAME IN THE REMAND REPORT BUT INTENTIONALLY AVOIDED THIS REPLY IN THE ASSESSMENT ORDER PASSED U/S 153 A OF THE ACT LIKE OTHER FAVORABLE DOCUMENTS SUCH AS RETRACTION, AS WELL AS REPLIES SENT BY KOLKATA STOCK EXCHANGE IN RESPOSE TO SUMMONS U/S 133. A CHART WAS PREPARED AFTER OBTAINING THESE DOCUMENTS INCLUDING REPLY FURNISHED BY KOLKATA STOCK EXCHANGE IN ORDER TO SHOW THAT THE RATE OF OFF MARKET PURCHASE OF SHARES WERE ALMOST SAME WITH THE RATE OF ONLINE TRANSACTION. 6.4 IT IS SUBMITTED THAT ONCE THE PHYSICAL DELIVER HAS BEEN OBTAINED, AO HAS TO ADOPT THE DATE STATED IN THE CONTRACT NOTE TO DETERMINE THE HOLDING PERIOD OF THE SHARES IN ORDER TO COMPUTE THE LTCG. COPY OF THE CIRCULAR NO. 768 DATED 24.06.1998 AND 704 DATED 28.04.1995 WERE ALREADY PLACED ON THE RECORD ALONGWITH THE SYNOPSIS. 7. IT IS SUBMITTED THAT FRIVOLOUS REQUEST WAS MADE AFTER THE COMPLETION OF THE HEARING AFTER A LONG TIME TO CONSOLIDATE THE APPEAL WITH THE OTHER CASES. IT IS SUBMITTED THAT THE AFORESAID REQUEST IS AGAINST THE SETTLED PRINCIPLES OF THE JUDICIAL NORMS THAT AFTER THE HEARING IS CONCLUDED, NO SUCH REQUEST CAN BE ENTERTAINED. 23 HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY THE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW, MATERIAL AVAILABLE ON RECORD AND THE DECISIONS RELIED UPON. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 65 24 FROM THE FACTS EMANATING FROM RECORD AND SUBMISSIONS OF THE PARTIES, IT IS SEEN THAT IN THE PRESENT CASE, FOR ALL THESE THREE ASSESSMENT YEARS, ASSESSMENTS WERE ALREADY MADE U/S 143(3) OF THE ACT WHEN ASSESSING OFFICER HAD EXAMINED INVESTMENT AND TRANSACTIONS MADE BY THE ASSESSEE AND DULY DISCLOSED IN THE RETURN OF INCOME. IN FACT, IN ASSESSMENT YEAR 2005-06, AS PER CBDT GUIDELINES THE ASSESSMENT WAS TAKEN UNDER CASS ON THE BASIS OF AIR INFORMATION SPECIFICALLY TO EXAMINE THE INVESTMENTS OF SHARE CAPITAL. IN THIS YEAR, SEVEN COMPANIES MADE INVESTMENTS AND SHARES WERE ALLOTTED TO THEM. APART FROM THIS, THE ASSESSEE ALSO DECLARED LONG TERM CAPITAL GAIN FROM THE SALE OF LISTED SECURITIES ON WHICH STT WAS PAID AND SAME WAS CLAIMED AS EXEMPT U/S 10(38) OF THE ACT. AFTER EXAMINATION, THE ASSESSMENT WAS COMPLETED, NO ADDITION WAS MADE, AND RETURNED INCOME WAS ACCEPTED. IN ASSESSMENT YEARS 2006-07 AND 2007-08, ASSESSMENTS WERE AGAIN MADE U/S 143(3) OF THE ACT AND THE ASSESSING OFFICER MADE THE ADDITIONS, WHICH WERE EXACTLY THE SAME AS WAS MADE IN THE ORDER PASSED UNDER SECTION 153A OF THE ACT. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 66 25 WE FIND THAT ON 26.03.2010 A SEARCH AND SEIZURE OPERATION U/S 132(1) OF THE ACT WAS CONDUCTED AT THE PREMISES OF THE ASSESSEE. ON THE SAME DATE, SEARCH WAS ALSO CONDUCTED AT THE OTHER GROUP OF COMPANIES AS WELL AS AT THE RESIDENTIAL PREMISES OF THE MANAGING DIRECTOR OF THE APPELLANT COMPANY. THE PLACES COVERED UNDER THE SEARCH WAS NEW DELHI, GWALIOR, RAIPUR, INDORE AND BANMORE AND FROM ALL THE AFORESAID PREMISES A CASH OF RS.5,62,635/- WAS FOUND AND OUT OF THE AFORESAID A SUM OF RS.5,00,000/-, WAS SEIZED HOWEVER AFORESAID CASH WAS FOUND DULY RECORDED IN THE BOOKS AS SUCH NO ADDITION WAS MADE IN RESPECT THEREOF. APART FROM THE AFORESAID, NO OTHER MATERIAL WHICH CAN BE HELD TO BE INCRIMINATING MATERIAL WAS REFERRED TO WHICH WAS FOUND FROM ANY OF THE PREMISES DESPITE THE SEARCH UNDERTAKEN BY THE REVENUE WHICH FORMED THE BASIS FOR MAKING ADDITIONS IN THESE YEARS. IN FACT, IN TWO YEARS I.E. 2006-07 AND 2007-08 ADDITIONS MADE IN THE ASSESSMENTS ORDERS U/S 143(3) WERE REPEATED IN ORDERS PASSED U/S 153A OF THE ACT. 26 THE LEGISLATURE HAS INTRODUCED SECTION 153A OF THE ACT BY THE FINANCE ACT, 2003 W.E.F. 01.06.2003 IN ORDER TO FRAME ASSESSMENT IN THE CASES, WHEREIN SEARCH IS INITIATED U/S 132 OF THE ACT AS MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 67 APPLICABLE IN THE PRESENT CASE. THE ASSESSING OFFICER IS EMPOWERED TO ISSUE NOTICE TO ASSESSEE FOR MAKING ASSESSMENT FOR THE SIX YEARS PRECEDING THE ASSESSMENT YEAR IN WHICH SEARCH IS CONDUCTED. SECTION 132 HAS BEEN REFERRED (APART FROM SECTION 132A THOUGH NOT APPLICABLE IN THIS CASE), WHICH CLEARLY INDICATES THAT THERE HAS TO BE UNDISCLOSED INCOME FOUND DURING THE SEARCH. AFTER EXAMINING SECTION 132, IT CLEARLY INDICATES THAT UNDER SUB SECTION (1)(C) [AS CLAUSE (A) & (B) RELATES TO NON COMPLIANCE OF SUMMON OR AVOIDANCE OF SUMMON ISSUED U/S 131 OF THE ACT], THAT SEARCH CAN BE CONDUCTED ON THE DIRECTIONS OF OFFICERS AS STATED IN SUBSECTION (1), IN CONSEQUENCE OF INFORMATION IN THEIR POSSESSION AND THEY HAVE REASON TO BELIEVE THAT ANY PERSON IS IN POSSESSION OF ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING WHICH HAS NOT BEEN OR WOULD NOT BE DISCLOSED (REFERRED TO AS UNDISCLOSED INCOME OR PROPERTY). THUS, THE CRUX OF THE MATTER HERE IS THAT THE ASSESSING OFFICER IS EMPOWERED TO MAKE ASSESSMENT U/S 153A OF THE ACT ONLY WHEN THERE IS AN UNDISCLOSED INCOME OR PROPERTY. THUS, THE PURPOSE OF SECTION 132 IS FULFILLED ONCE UNDISCLOSED INCOME IS FOUND WHICH IS ASSESSED U/S. 153A OF THE ACT IN ORDER TO RECOVER TAX ON SUCH UNDISCLOSED INCOME. THE INTENTION OF THE LEGISLATURE IS CLEARLY MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 68 MANDATED BY MENTIONING INITIATION OF SEARCH UNDER SECTION 132 IN SECTION 153A SO THAT NO ASSESSEE SHOULD BE LEFT UN-ASSESSED FOR SUCH UNDISCLOSED INCOME OR PROPERTY, WHICH OTHERWISE WOULD NOT HAVE ASSESSED BEING NOT DISCLOSED BY HIM. 27 IT IS NECESSARY TO STATE HERE THAT LEGISLATURE HAS INTRODUCED THE SECOND PROVISO TO SECTION 153A, WHICH SPECIFICALLY PROVIDE THAT ASSESSMENT OR REASSESSMENT, IF ANY, RELATING TO ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF SIX ASSESSMENT YEARS PENDING ON THE DATE OF INITIATION OF SEARCH U/S 132 WOULD ABATE. THIS IF READ WITH FIRST PROVISO AND SECTION 153A(1) OF THE ACT, ONLY PENDING ASSESSMENTS SHALL ABATE BUT NOT OTHERWISE. SECTION 153A(1)(A) EMPOWERS THE ASSESSING OFFICER TO OBTAIN RETURNS AND ASSESS OR REASSESS SUCH INCOME / PROPERTY WHICH IS UNDISCLOSED AND FOUND DURING THE SEARCH BUT SECOND PROVISO CLEARLY INDICATES THAT OUT OF THOSE SIX ASSESSMENT YEARS, ONLY THOSE SHALL ABATE WHICH ARE PENDING ON THE DATE OF INITIATION OF THE SEARCH. 28 WE HAVE OCCASIONS TO DEAL WITH THESE ISSUES SEVERAL TIMES AND IN VIEW OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. KABUL MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 69 CHAWLA REPORTED IN 380 ITR 573 (DEL.) IN PARA 37 HAS HELD AS UNDER :- SUMMARY OF THE LEGAL POSITION 37. ON A CONSPECTUS OF SECTION 153A(1) OF THE ACT, READ WITH THE PROVISOS THERETO, AND IN THE LIGHT OF THE LAW EXPLAINED IN THE AFOREMENTIONED DECISIONS, THE LEGAL POSITION THAT EMERGES IS AS UNDER: I . ONCE A SEARCH TAKES PLACE UNDER SECTION 132 OF THE ACT, NOTICE UNDER SECTION 153 A(1) WILL HAVE TO BE MANDATORILY ISSUED TO THE PERSON SEARCHED REQUIRING HIM TO FILE RETURNS FOR SIX AYS IMMEDIATELY PRECEDING THE PREVIOUS YEAR RELEVANT TO THE AY IN WHICH THE SEARCH TAKES PLACE. II . ASSESSMENTS AND REASSESSMENTS PENDING ON THE DATE OF THE SEARCH SHALL ABATE. THE TOTAL INCOME FOR SUCH AYS WILL HAVE TO BE COMPUTED BY THE AOS AS A FRESH EXERCISE. III . THE AO WILL EXERCISE NORMAL ASSESSMENT POWERS IN RESPECT OF THE SIX YEARS PREVIOUS TO THE RELEVANT AY IN WHICH THE SEARCH TAKES PLACE. THE AO HAS THE POWER TO ASSESS AND REASSESS THE 'TOTAL INCOME' OF THE AFOREMENTIONED SIX YEARS IN SEPARATE ASSESSMENT ORDERS FOR EACH OF THE SIX YEARS. IN OTHER WORDS THERE WILL BE ONLY ONE ASSESSMENT ORDER IN RESPECT OF EACH OF THE SIX AYS 'IN WHICH BOTH THE DISCLOSED AND THE UNDISCLOSED INCOME WOULD BE BROUGHT TO TAX'. IV . ALTHOUGH SECTION 153 A DOES NOT SAY THAT ADDITIONS SHOULD BE STRICTLY MADE ON THE BASIS OF EVIDENCE FOUND IN THE COURSE OF THE SEARCH, OR OTHER POST-SEARCH MATERIAL OR INFORMATION AVAILABLE WITH THE AO WHICH CAN BE RELATED TO THE EVIDENCE FOUND, IT DOES NOT MEAN THAT THE ASSESSMENT 'CAN BE ARBITRARY OR MADE WITHOUT ANY RELEVANCE OR NEXUS WITH THE SEIZED MATERIAL. OBVIOUSLY AN ASSESSMENT HAS TO BE MADE UNDER THIS SECTION ONLY ON THE BASIS OF SEIZED MATERIAL.' V . IN ABSENCE OF ANY INCRIMINATING MATERIAL, THE COMPLETED ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSMENT OR REASSESSMENT CAN BE MADE. THE WORD 'ASSESS' IN SECTION 153 A IS RELATABLE TO ABATED PROCEEDINGS (I.E. THOSE PENDING ON THE DATE OF SEARCH) AND THE WORD 'REASSESS' TO COMPLETED ASSESSMENT PROCEEDINGS. VI . INSOFAR AS PENDING ASSESSMENTS ARE CONCERNED, THE JURISDICTION TO MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 70 MAKE THE ORIGINAL ASSESSMENT AND THE ASSESSMENT UNDER SECTION 153A MERGES INTO ONE. ONLY ONE ASSESSMENT SHALL BE MADE SEPARATELY FOR EACH AY ON THE BASIS OF THE FINDINGS OF THE SEARCH AND ANY OTHER MATERIAL EXISTING OR BROUGHT ON THE RECORD OF THE AO. VII . COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 153 A ONLY ON THE BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH OR REQUISITION OF DOCUMENTS OR UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEARCH WHICH WERE NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT. 29 ACCORDINGLY, IN RESPECT OF PENDING ASSESSMENTS THE JURISDICTION TO MAKE THE ORIGINAL ASSESSMENT AND THE ASSESSMENT UNDER SECTION 153A MERGES INTO ONE. ONLY ONE ASSESSMENT SHALL BE MADE SEPARATELY FOR EACH AY ON THE BASIS OF THE FINDINGS OF THE SEARCH AND ANY OTHER MATERIAL EXISTING OR BROUGHT ON THE RECORD OF THE AO. THE COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 153 A ONLY ON THE BASIS OF INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH OR REQUISITION OF DOCUMENTS OR UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEARCH WHICH WERE NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 71 30 ABOVE VIEW HAS FURTHER BEEN EXPLAINED BY THE HONOURABLE DELHI HIGH COURT IN PR. CIT V MEETA GUTGUTIA 82 TAXMANN.COM 287 ( DEL) CONSIDERING THE DECISION RELIED UP ON BY REVENUE IN SMT. DAYAWANTI GUPTA V. CIT [2016] 390 ITR 496/[2017] 245 TAXMAN 293/[2016] 75 TAXMANN.COM 308 (DELHI) (PARA 70) WAS DISTINGUISHED AS UNDER :- 63. EVEN THIS COURT HAS IN MAHESH KUMAR GUPTA ( SUPRA ) AND RAM AVTAR VERMA ( SUPRA ) FOLLOWED THE DECISION IN KABUL CHAWLA ( SUPRA ). THE DECISION OF THIS COURT IN KURELE PAPER MILLS (P.) LTD. ( SUPRA ) WHICH WAS REFERRED TO IN KABUL CHAWLA ( SUPRA ) HAS BEEN AFFIRMED BY THE SUPREME COURT BY THE DISMISSAL OF THE REVENUE'S SLP ON 7TH DECEMBER, 2015. THE DECISION IN DAYAWANTI GUPTA 64. THAT BRINGS US TO THE DECISION IN SMT. DAYAWANTI GUPTA ( SUPRA ). AS RIGHTLY POINTED OUT BY MR. KAUSHIK, LEARNED COUNSEL APPEARING FOR THE RESPONDENT, THAT THERE ARE SEVERAL DISTINGUISHING FEATURES IN THAT CASE WHICH MAKES ITS RATIO INAPPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THE FIRST PLACE, THE ASSESSEES THERE WERE ENGAGED IN THE BUSINESS OF PAN MASALA AND GUTKHA ETC. THE ANSWERS GIVEN TO QUESTIONS POSED TO THE ASSESSEE IN THE COURSE OF SEARCH AND SURVEY PROCEEDINGS IN THAT CASE BRING OUT THE POINTS OF DISTINCTION. IN THE FIRST PLACE, IT WAS STATED THAT THE STATEMENT RECORDED WAS UNDER SECTION 132(4) AND NOT UNDER SECTION 133A. IT WAS A STATEMENT BY THE ASSESSEE HIMSELF. IN RESPONSE TO QUESTION NO. 7 WHETHER ALL THE PURCHASES MADE BY THE FAMILY FIRMS, WERE ENTERED IN THE REGULAR BOOKS OF ACCOUNT, THE ANSWER WAS: MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 72 'WE AND OUR FAMILY FIRMS NAMELY M/S. ASSAM SUPARI TRADERS AND M/S. BALAJI PERFUMES GENERALLY TRY TO RECORD THE TRANSACTIONS MADE IN RESPECT OF PURCHASE, MANUFACTURING AND SALES IN OUR REGULAR BOOKS OF ACCOUNTS BUT IT IS ALSO FACT THAT SOME TIME DUE TO SOME FACTORS LIKE INABILITY OF ACCOUNTANT, OUR BUSY SCHEDULE AND SOME FAMILY PROBLEMS, VARIOUS PURCHASES AND SALES OF SUPARI, GUTKA AND OTHER ITEMS DEALT BY OUR FIRMS IS NOT ENTERED AND SHOWN IN THE REGULAR BOOKS OF ACCOUNTS MAINTAINED BY OUR FIRMS.' 65. THEREFORE, THERE WAS A CLEAR ADMISSION BY THE ASSESSEES IN SMT. DAYAWANTI GUPTA ( SUPRA ) THERE THAT THEY WERE NOT MAINTAINING REGULAR BOOKS OF ACCOUNTS AND THE TRANSACTIONS WERE NOT RECORDED THEREIN. 66. FURTHER, IN ANSWER TO QUESTION NO. 11, THE ASSESSEE IN SMT. DAYAWANTI GUPTA ( SUPRA ) WAS CONFRONTED WITH CERTAIN DOCUMENTS SEIZED DURING THE SEARCH. THE ANSWER WAS CATEGORICAL AND READS THUS: 'ANS:- I HEREBY ADMIT THAT THESE PAPERS ALSO CONTEND DETAILS OF VARIOUS TRANSACTIONS INCLUDE PURCHASE/SALES/MANUFACTURING TRADING OF GUTKHA, SUPARI MADE IN CASH OUTSIDE BOOKS OF ACCOUNTS AND THESE ARE ACTUALLY UNACCOUNTED TRANSACTIONS MADE BY OUR TWO FIRMS NAMELY M/S. ASOM TRADING AND M/S. BALAJI PERFUMES.' 67. BY CONTRAST, THERE IS NO SUCH STATEMENT IN THE PRESENT CASE WHICH CAN BE SAID TO CONSTITUTE AN ADMISSION BY THE ASSESSEE OF A FAILURE TO RECORD ANY TRANSACTION IN THE ACCOUNTS OF THE ASSESSEE FOR THE AYS IN QUESTION. ON THE CONTRARY, THE ASSESSEE HEREIN STATED THAT, HE IS REGULARLY MAINTAINING THE BOOKS OF ACCOUNTS. THE DISCLOSURE MADE IN THE SUM OF RS. 1.10 CRORES WAS ONLY FOR THE YEAR OF SEARCH AND NOT FOR THE EARLIER YEARS. AS ALREADY NOTICED, THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE IN THE PRESENT CASE HAVE BEEN ACCEPTED BY THE AO. IN RESPONSE TO QUESTION NO. 16 POSED TO MR. PAWAN GADIA, HE STATED THAT THERE WAS NO POSSIBILITY OF MANIPULATION OF THE ACCOUNTS. IN SMT. DAYAWANTI GUPTA ( SUPRA ), BY CONTRAST, THERE WAS A CHART PREPARED CONFIRMING THAT THERE HAD BEEN A YEAR-WISE NON-RECORDING OF TRANSACTIONS. IN SMT. DAYAWANTI GUPTA ( SUPRA ), ON THE BASIS OF MATERIAL RECOVERED DURING SEARCH, THE ADDITIONS WHICH WERE MADE FOR ALL THE YEARS WHEREAS ADDITIONS IN THE PRESENT CASE MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 73 WERE MADE BY THE AO ONLY FOR AY 2004-05 AND NOT ANY OF THE OTHER YEARS. EVEN THE ADDITIONS MADE FOR AYS 2004-05 WERE SUBSEQUENTLY DELETED BY THE CIT (A), WHICH ORDER WAS AFFIRMED BY THE ITAT. EVEN THE REVENUE HAS CHALLENGED ONLY TWO OF SUCH DELETIONS IN ITA NO. 306/2017. 68. IN PARA 23 OF THE DECISION IN SMT. DAYAWANTI GUPTA ( SUPRA ), IT WAS OBSERVED AS UNDER: '23. THIS COURT IS OF OPINION THAT THE ITAT'S FINDINGS DO NOT REVEAL ANY FUNDAMENTAL ERROR, CALLING FOR CORRECTION. THE INFERENCES DRAWN IN RESPECT OF UNDECLARED INCOME WERE PREMISED ON THE MATERIALS FOUND AS WELL AS THE STATEMENTS RECORDED BY THE ASSESSEES. THESE ADDITIONS THEREFORE WERE NOT BASELESS. GIVEN THAT THE ASSESSING AUTHORITIES IN SUCH CASES HAVE TO DRAW INFERENCES, BECAUSE OF THE NATURE OF THE MATERIALS - SINCE THEY COULD BE SCANTY (AS ONE HABITUALLY CONCEALING INCOME OR INDULGING IN CLANDESTINE OPERATIONS CAN HARDLY BE EXPECTED TO MAINTAIN METICULOUS BOOKS OR RECORDS FOR LONG AND IN ALL PROBABILITY BE ANXIOUS TO DO AWAY WITH SUCH EVIDENCE AT THE SHORTEST POSSIBILITY) THE ELEMENT OF GUESS WORK IS TO HAVE SOME REASONABLE NEXUS WITH THE STATEMENTS RECORDED AND DOCUMENTS SEIZED. IN TILLS CASE, THE DIFFERENCES OF OPINION BETWEEN THE CIT (A) ON THE ONE HAND AND THE AO AND ITAT ON THE OTHER CANNOT BE THE SOLE BASIS FOR DISAGREEING WITH WHAT IS ESSENTIALLY A FACTUAL SURMISE THAT IS LOGICAL AND PLAUSIBLE. THESE FINDINGS DO NOT CALL FOR INTERFERENCE. THE SECOND QUESTION OF LAW IS ANSWERED AGAIN IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE.' 69. WHAT WEIGHED WITH THE COURT IN THE ABOVE DECISION WAS THE 'HABITUAL CONCEALING OF INCOME AND INDULGING IN CLANDESTINE OPERATIONS' AND THAT A PERSON INDULGING IN SUCH ACTIVITIES 'CAN HARDLY BE ACCEPTED TO MAINTAIN METICULOUS BOOKS OR RECORDS FOR LONG.' THESE FACTORS ARE ABSENT IN THE PRESENT CASE. THERE WAS NO JUSTIFICATION AT ALL FOR THE AO TO PROCEED ON SURMISES AND ESTIMATES WITHOUT THERE BEING ANY INCRIMINATING MATERIAL QUA THE AY FOR WHICH HE SOUGHT TO MAKE ADDITIONS OF FRANCHISEE COMMISSION. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 74 70. THE ABOVE DISTINGUISHING FACTORS IN SMT. DAYAWANTI GUPTA ( SUPRA ), THEREFORE, DO NOT DETRACT FROM THE SETTLED LEGAL POSITION IN KABUL CHAWLA ( SUPRA ) WHICH HAS BEEN FOLLOWED NOT ONLY BY THIS COURT IN ITS SUBSEQUENT DECISIONS BUT ALSO BY SEVERAL OTHER HIGH COURTS. 31 SIMILARLY, THE PRESENT CASE IS ALSO DISTINGUISHABLE ON THE IDENTICAL FACTS FOR THE REASON THAT IN THE PRESENT CASE ASSESSEE IS MAINTAINING REGULAR BOOKS OF ACCOUNTS, NO OTHER MATERIAL WAS FOUND WHICH SUGGEST THAT ASSESSEE IS IN A HABITUAL CONCEALMENT OF INCOME OR BOOKS OF ACCOUNTS OF THE ASSESSEE ARE NOT FUND TO BE RELIABLE. NO OTHER INCRIMINATING MATERIAL EXCEPT THE RETRACTED STATEMENT IS MADE THE BASIS OF THE ADDITION. HENCE RELIANCE PLACED BY REVENUE ON THE DECISION OF THE MS DYAWANTI (SUPRA) IS REJECTED BECAUSE OF DISTINGUISHING FEATURES. HENCE THE CASE OF THE ASSESSEE FALLS SQUARELY WITHIN THE PRINCIPLES LAID DOWN BY HON DELHI HIGH COURT IN SERIES OF DECISIONS, LEAD CASE BEING OF KABUL CHAWLA( SUPRA). 32 IN VIEW OF THE AFORESAID DECISION, IT IS NECESSARY FOR THE ASSESSING OFFICER TO EXAMINE THE UNDISCLOSED INCOME OR PROPERTY OF THE ASSESSEE FOUND DURING THE SEARCH IN ORDER TO DISTURB THE COMPLETED ASSESSMENT BUT NOT OTHERWISE. THE COMPLETED ASSESSMENTS OF THE ASSESSEE FOR ALL THESE ASSESSMENT YEARS IN APPEAL WHEN MADE U/S MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 75 143(3) OF THE ACT, THE ASSESSING OFFICER HAD OPPORTUNITY TO EXAMINE EACH AND EVERY ASPECT. THE REVENUE IS EMPOWERED UNDER VARIOUS PROVISIONS OF THE I. T. ACT, TO REOPEN / REVISE SUCH ASSESSMENTS IF THERE IS ANY MATERIAL OR INFORMATION FOUND IN THEIR POSSESSION. SECTION 153A LIMITS THEIR POWER ONLY TO THE MATERIAL FOUND DURING THE SEARCH IN ORDER TO ASSESS THE UNDISCLOSED INCOME OR PROPERTY. REVENUE COULD NOT SHOW US ANY MATERIAL REFERRED TO BY THE ASSESSING OFFICER IN THE ORDERS PASSED U/S 153A OF THE ACT WHICH LED HIM TO ASSESS U/S 153A OF THE ACT AS THOSE ASSESSMENT WERE ALREADY COMPLETED AND CAN BE INTERFERED ONLY ON THE BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH. FINDING AND CONCLUSION ON 153A WHETHER THERE WAS ANY INCRIMINATING MATERIAL 33 NOW WE SHALL EXAMINE THE ADDITIONS MADE BY THE AO IN EACH OF THREE ASSESSMENT YEARS SEPARATELY. 34 IN AY 2005-06, THE ADDITIONS WERE MADE ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT (I) RS. 5 CRORES RELATES TO SHARE CAPITAL ALLOTTED TO 7 COMPANIES AND (II) RS. 6,59,04,383/- RELATING TO LONG TERM CAPITAL GAIN DECLARED BY THE ASSESSEE AS UNDISCLOSED INCOME. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 76 APART FROM THIS THERE IS A DISALLOWANCE OF R. 74,741/- U/S 14A OF THE ACT. AFTER EXAMINING THE ORDER OF ASSESSMENT, ON THE AFORESAID ADDITIONS, WE FIND THAT THERE WERE A LOT OF DISCUSSION BUT NO MATERIAL HAS BEEN REFERRED TO WHICH WAS RELIED UPON AND FOUND DURING THE SEARCH. IN FACT, SHARE CAPITAL AND LONG-TERM CAPITAL GAIN WERE DECLARED BY THE ASSESSEE IN THE BOOKS OF ACCOUNT AND ALONG WITH THE RETURN ALL THE NECESSARY DETAILS WERE FILED. FURTHER THIS ASSESSMENT WAS SPECIFICALLY TAKEN UNDER SCRUTINY TO EXAMINE THE INVESTMENTS. 35 IN AY 2006-07 ALSO ASSESSEE HAS DECLARED LONG TERM CAPITAL GAIN IN THE RETURN OF INCOME AND THE AO WHILE MAKING THE ASSESSMENT U/S 143(3), HAS MADE DISALLOWANCE OF LTCG BY TREATING THEM AS STCG AND ADDITION OF RS. 36,72,01,641/- WAS MADE. IN THE ASSESSMENT MADE U/S 153A OF THE ACT, THE AO HAS TREATED THE SAME FIGURE THAT WAS ALREADY ADDED DURING THE 143(3) ASSESSMENT AS UNDISCLOSED INCOME. IT IS NOT UNDERSTOOD THE INCOME ALREADY DISCLOSED, HOW CAN BE TREATED AS UNDISCLOSED. HERE AGAIN REVENUE HAS FAILED TO REFER TO ANY MATERIAL UNEARTHED DURING THE SEARCH WHICH COULD LED LD. ASSESSING OFFICER TO SUCH CONCLUSION. THIS ASSESSMENT CAN ONLY BE DISTURBED AS WE DISCUSSED IN THE PRECEDING PARAGRAPHS ABOVE, IF MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 77 ANY INCRIMINATING MATERIAL IS FOUND DURING THE COURSE OF SEARCH, BUT NOT OTHERWISE. 36 IN AY 2007-08, ORIGINALLY THE ASSESSING OFFICER FRAMED ASSESSMENT ALSO U/S 143(3) OF THE ACT BY MAKING A DISALLOWANCE OF RS. 3,06,421/- U/S 14A OF THE ACT R/W RULE 8D. IN THE ASSESSMENT U/S 153A AO HAS MERELY REPEATED THE DISALLOWANCE WITHOUT REFERRING TO ANY INCRIMINATING MATERIAL UNEARTHED DURING THE SEARCH. 37 IN MAKING ASSESSMENT U/S 153A OF THE ACT, THE AO HAS TO BRING AN INCRIMINATING MATERIAL, WHICH IS CONTRARY TO DECLARATION MADE BY THE ASSESSEE. THE RELIANCE IN MAKING ASSESSMENT FOR THE AY 2005- 06 AND 2006-07 WAS MADE ON THE SURRENDER MADE IN THE STATEMENT RECORDED DURING THE SEARCH U/S 132(4) OF THE ACT AND THE STATEMENT OF ONE SHRI. ASEEM GUPTA BUT NO DISCUSSION HAS BEEN MADE OF THE PROCEEDINGS AFTER THE STATEMENT ON THE ENCASHMENT OF CHEQUES TAKEN TOWARDS TAX PAYMENT REFERRED TO IN THAT STATEMENT. THE LD DR VEHEMENTLY OBJECTED THAT DEPOSITION OF CHEQUES IS THE SOLE DISCRETION OF THE LD AO AND REVENUE CAN ONLY DEPOSIT CHEQUES AGAINST THE TAX DEMANDED WHICH EVENT HAS HAPPENED LATER ON. WE DO NOT SEE ANY REASON WHY THESE CHEQUES WHICH HAVE BEEN PART OF MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 78 THE STATEMENT WERE NOT ENCASHED WHEN THEY HAVE BEEN TAKEN., WHEN THEY HAVE BEEN TAKEN THOSE CHEQUES COULD HAVE BEEN DEPOSITED ON ACCOUNT OF ADVANCE TAX ALSO, IN ANY CASE IF THE REVENUE IS NOT AUTHORIZED TO TAKE THOSE CHEQUES OR DEPOSIT IT, WE SEE NO REASONS WHY THE SEARCH PARTY HAS ACCEPTED THOSE CHEQUES. HON DELHI HIGH COURT IN CASE OF DIGIPRO IMPORT & EXPORT PVT LIMITED V UNION OF INDIA W.P. (C) 3070/2017 & CM NO. 13393/2017 DATED 15/5/2017 HAS CONDEMNED SUCH AN ACT , WHICH IS WITHOUT AUTHORITY OF LAW. SIMILAR VIEW IS ALSO EXPRESSED BY THE HON. HIGH COURT IN CAPRI BATHAID PRIVATE LIMITED V. COMMISSIONER OF TRADE & TAXES 2016 (155) DRJ 526 . FURTHER NO ORDERS WERE ALSO PASSED U/S 210(3) OF THE ACT, OR ANY OTHER ACTION HAS BEEN TAKEN TO RECOVER THE DEMAND ON THE INCOME SURRENDERED BY SHRI. IC JINDAL IN RELATION TO AFORESAID ASSESSEE. THIS ACTION ITSELF PROVES THAT THE ASSESSEE WAS UNDER FINANCIAL THREAT FOR PAYMENT OF SUCH TAXES , WHICH MAY HAVE DIRE CONSEQUENCES. THE ASSESSMENT PROCEEDINGS WERE INITIATED AFTER ONE AND HALF YEAR LATER BUT DURING THIS PERIOD, THERE IS NO PROCEEDINGS OR ACTION BY LD AO OR FRESH STATEMENTS RECORDED AS THE SAME WAS RETRACTED IF CHEQUES WERE NOT ENCAHSED. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 79 38 NOW WE HAVE TO EXAMINE WHETHER SUCH STATEMENT OF SHRI. IC JINDAL, MD OF THE ASSESSEE COMPANY RECORDED ON 26/-27.03.2010 CAN BE TREATED AS INCRIMINATING MATERIAL, SPECIFICALLY WHEN IT WAS RETRACTED AND NO OTHER INCRIMINATING MATERIAL SUPPORTING THE STATEMENT WAS FOUND. THIS STATEMENT OF SHRI. I.C. JINDAL WAS MADE THE BASIS FOR MAKING THE ADDITION IN AY 2005-06 AND 2006-07, HOWEVER SAME WAS NOT REFERRED TO AT ALL IN AY 2007-08. 39 LD AR HAS CLAIMED THAT THE EXAMINATION OF SHRI. IC JINDAL WAS STARTED AFTER THE SEARCH WHOLE DAY AT ALL THE PLACES AT LATE EVENING HOURS OF 26.03.2010 AT 8.40 PM, WHICH CONTINUED FOR WHOLE NIGHT, AND MERELY 7 QUESTIONS WERE ASKED TILL MIDNIGHT ON THE INVESTMENT OF PROPERTIES AND ALSO INVESTMENT IN SHARES OF VARIOUS COMPANIES. QUESTION NO. 7 WAS IN RELATION TO DETAILS OF VARIOUS IMMOVABLE PROPERTIES AS PER DETAILS FURNISHED BY SMT. SHASHI PRABHA JINDAL, WIFE OF SHRI. IC JINDAL TO INCOME TAX DEPARTMENT WHO ASSESSEE CLAIMED, HAD STRAINED RELATIONSHIP WITH SHRI. IC JINDAL AS SHE HAD FILED CIVIL AND CRIMINAL CASES AGAINST HIM. OTHER FEW QUESTIONS WERE ASKED IN THE NIGHT TILL MORNING, AS DATE WAS MENTIONED 27.03.2010 MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 80 THEREAFTER. SHRI. ASEEM GUPTA WAS CALLED IN THE MORNING OF 27.03.2010 WHEN HE STATED THAT HE HAS GIVEN RS. 2 CRORES FROM M/S MODERATE CREDIT CORPORATION LTD. AND RS. 80 LACS FROM M/S RAVNET SOLUTIONS PVT. LTD. IN LIEU OF CASH TO THE ASSESSEE. HE FURTHER STATED THAT HE HAS RECEIVED RS. 20 CRORES IN CASH FOR ARRANGING CAPITAL GAIN. HE STATED CASH WAS RECEIVED BY HIM FROM SHRI SOMNATH, EMPLOYEE OF THE ASSESSEE COMPANY. IT WAS STATED BY HIM THAT CASH WAS PAID TO SHRI. SANTOSH SHAH WHO ARRANGED CAPITAL GAIN THROUGH STOCK BROKER M/S P.K. AGGARWAL & CO. ON CROSS EXAMINATION BY SHRI. JINDAL, HE CONFIRMED THAT HE HAD NOT RECEIVED ANY CASH FROM HIM. HE ALSO CONFIRMED THAT HE HAD NEVER INTRODUCED M/S P.K. AGGARWAL & CO. AND SHRI. SANTOSH SHAH TO THE ASSESSEE. AND AT THE END, SHRI. I.C. JINDAL SURRENDERED RUPEES FIFTY ONE CRORES IN THE HANDS OF FOUR COMPANIES AND PAID CHEQUES IN RESPECT OF TAX DEMAND ARISING ON ACCOUNT OF SURRENDER. 40 AS SUBMITTED, SHRI IC JINDAL RETRACTED THIS STATEMENT ON 29.03.2010 BEFORE THE DGIT (INV) AND ADIT (INV) AS 28 TH MARCH, 2010 WAS SUNDAY. THE ASSESSEE FURTHER SUBMITTED A DETAILED LETTER MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 81 ON 15/09/2010 OF WHICH CERTIFIED COPY IS PRODUCED BEFORE US, WHERE IN SUCH CLAIM IS MADE. 41 THE ARGUMENT OF THE LEARNED CIT DR OF FINDING NO EVIDENCE ON RECORD CANNOT BE ACCEPTED IN VIEW OF THE ASSESSEE SUBMITTING A COPY OF LETTER BEFORE US WHICH IS CERTIFIED BY THE LD AO. IT IS ALSO CONFIRMED BEFORE US THAT ABOVE LETTER ARE PART OF THE RECORD OF THE ASSESSMENT AND LD CIT (A) HAS MENTIONED IT IN HIS ORDER. IT IS SURPRISING THAT REVENUE AUTHORITIES WERE SITTING ON CHEQUES COLLECTED AND NOT ENCASHING THEM EVEN AFTER ONE AND HALF YEAR WITHOUT PURSUING WHETHER ASSESSEE OR RELATED PERSONS HAS ACCEPTED THE DISCLOSURE OR NOT. IN THE LETTER DATED 15.09.2010, ASSESSEE HAD STATED THE CIRCUMSTANCES IN WHICH THE STATEMENT WAS RECORDED AND ASKED THE REVENUE AUTHORITIES TO EXAMINE SHRI. ASEEM GUPTA AND SHRI. SOMNATH AND ALSO INSISTED TO VERIFY EACH AND EVERY TRANSACTION BEFORE DRAWING ANY CONCLUSION. IT WAS STATED THAT NO ADVERSE INFERENCE BE DRAWN IN VIEW OF FORCED SURRENDER. THE ASSESSING OFFICER HAS NEITHER EXAMINED SHRI. SOMNATH NOR SHRI. ASEEM GUPTA, DESPITE THE REQUEST OF THE ASSESSEE AND RELIED UPON THE STATEMENT OF SHRI ASEEM GUPTA THAT TOO IN HIS ASSESSMENT PROCEEDINGS. SUCH EVIDENCE WHICH WAS TAKEN AT THE MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 82 BACK OF THE ASSESSEE AND NO OPPORTUNITY WAS PROVIDED TO CROSS EXAMINE THEM CANNOT BE A PIECE OF EVIDENCE WHICH CAN BE RELIED UPON FOR MAKING THE ADDITION. HONBLE SUPREME COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES VS. COMMISSIONER OF CENTRAL EXCISE (2015) 281 CTR (SC) 241, HAS AGAIN REITERATED THEIR EARLIER VIEW AND EXPRESSED THEIR OPINION THAT THE EVIDENCE/STATEMENT RELIED UPON BY THE ASSESSING OFFICER FOR MAKING ADDITION WHICH WAS NOT CONFRONTED CANNOT BE USED AGAINST THE ASSESSEE. THE HON. SC HAS HELD THAT : 6.ACCORDING TO US, NOT ALLOWING THE ASSESSEE TO CROSS-EXAMINE THE WITNESSES BY THE ADJUDICATING AUTHORITY THOUGH THE STATEMENTS OF THOSE WITNESSES WERE MADE THE BASIS OF THE IMPUGNED ORDER IS A SERIOUS FLAW WHICH MAKES THE ORDER NULLITY INASMUCH AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BECAUSE OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED. IT IS TO BE BORNE IN MIND THAT THE ORDER OF THE COMMISSIONER WAS BASED UPON THE STATEMENTS GIVEN BY THE AFORESAID TWO WITNESSES. EVEN WHEN THE ASSESSEE DISPUTED THE CORRECTNESS OF THE STATEMENTS AND WANTED TO CROSS-EXAMINE, THE ADJUDICATING AUTHORITY DID NOT GRANT THIS OPPORTUNITY TO THE ASSESSEE. IT WOULD BE PERTINENT TO NOTE THAT IN THE IMPUGNED ORDER PASSED BY THE ADJUDICATING AUTHORITY HE HAS SPECIFICALLY MENTIONED THAT SUCH AN OPPORTUNITY WAS SOUGHT BY THE ASSESSEE. HOWEVER, NO SUCH OPPORTUNITY WAS GRANTED AND THE AFORESAID PLEA IS NOT EVEN DEALT WITH BY THE ADJUDICATING AUTHORITY. AS FAR AS THE TRIBUNAL IS CONCERNED, WE FIND THAT REJECTION OF THIS PLEA IS TOTALLY UNTENABLE. THE TRIBUNAL HAS SIMPLY STATED THAT CROSS-EXAMINATION OF THE SAID DEALERS COULD NOT HAVE BROUGHT OUT ANY MATERIAL WHICH WOULD NOT BE IN POSSESSION OF THE APPELLANT THEMSELVES TO EXPLAIN AS TO WHY THEIR EX-FACTORY PRICES REMAIN STATIC. IT WAS NOT FOR THE TRIBUNAL TO HAVE GUESS WORK AS TO FOR WHAT PURPOSES THE APPELLANT WANTED TO CROSS-EXAMINE THOSE DEALERS AND WHAT EXTRACTION THE APPELLANT WANTED FROM THEM. 7. AS MENTIONED ABOVE, THE APPELLANT HAD CONTESTED THE TRUTHFULNESS OF THE STATEMENTS OF THESE TWO WITNESSES AND WANTED TO DISCREDIT THEIR TESTIMONY FOR WHICH PURPOSE IT WANTED TO AVAIL THE OPPORTUNITY OF CROSS-EXAMINATION. THAT APART, THE ADJUDICATING AUTHORITY SIMPLY RELIED UPON THE PRICE LIST AS MAINTAINED AT THE DEPOT TO DETERMINE THE PRICE FOR THE PURPOSE OF LEVY OF EXCISE DUTY. WHETHER THE GOODS WERE, IN FACT, SOLD TO THE SAID DEALERS/WITNESSES AT THE PRICE MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 83 WHICH IS MENTIONED IN THE PRICE LIST ITSELF COULD BE THE SUBJECT MATTER OF CROSS- EXAMINATION. THEREFORE, IT WAS NOT FOR THE ADJUDICATING AUTHORITY TO PRESUPPOSE AS TO WHAT COULD BE THE SUBJECT MATTER OF THE CROSS-EXAMINATION AND MAKE THE REMARKS AS MENTIONED ABOVE. WE MAY ALSO POINT OUT THAT ON AN EARLIER OCCASION WHEN THE MATTER CAME BEFORE THIS COURT IN CIVIL APPEAL NO. 2216 OF 2000, ORDER DATED 17.03.2005 WAS PASSED REMITTING THE CASE BACK TO THE TRIBUNAL WITH THE DIRECTIONS TO DECIDE THE APPEAL ON MERITS GIVING ITS REASONS FOR ACCEPTING OR REJECTING THE SUBMISSIONS. 8. IN VIEW THE ABOVE, WE ARE OF THE OPINION THAT IF THE TESTIMONY OF THESE TWO WITNESSES IS DISCREDITED, THERE WAS NO MATERIAL WITH THE DEPARTMENT ON THE BASIS OF WHICH IT COULD JUSTIFY ITS ACTION, AS THE STATEMENT OF THE AFORESAID TWO WITNESSES WAS THE ONLY BASIS OF ISSUING THE SHOW CAUSE NOTICE. 42 IN THE PRESENT CASE, THE STATEMENT OF SHRI. ASSEM GUPTA RECORDED IN HIS ASSESSMENT WAS NEVER CONFRONTED AND AFTER RETRACTION BY SHRI. IC JINDAL, DESPITE SPECIFIC REQUEST, SHRI. ASEEM GUPTA WAS NOT CONFRONTED FOR CROSS EXAMINATION. THEREFORE, SUCH STATEMENT CANNOT BE HELD TO BE AN EVIDENCE FOR MAKING THE ADDITION. EVEN OTHERWISE, NO SUPPORTING MATERIAL WAS BROUGHT ON RECORD DESPITE HIGHLIGHTING THAT THE STATEMENT OF SHRI. ASEEM GUPTA IS FACTUALLY INCORRECT. 43 REGARDING THE AUTHENTICITY OF THE RETRACTION STATEMENT THE ARGUMENTS OF THE REVENUE FAILS WHEN THE SAME IS AVAILABLE ON THE FILE OF THE LD AO AND LD AO HIMSELF HAS ISSUED CERTIFIED COPY OF THAT RETRACTION LETTER, SAME LETTER IS ALSO REFERRED TO IN THE ORDER OF LD CIT (A). REVENUE BEFORE US COULD NOT SUBMIT ANY EVIDENCES THAT THE MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 84 RETRACTION STATEMENT IS NOT AUTHENTIC. FURTHER REVENUE HAS NO ANSWER WHY IT TOOK THE CHEQUES FOR TAXES WHEN IT IS SO SURE OF THE UNDISCLOSED INCOME AND FURTHER NOT DEPOSITED THE SAME AT ALL LEAVE ASIDE ON TIME. ALL THESE CUMULATIVE FACTORS GO STRONGLY IN FAVOUR OF THE ASSESSEE ABOUT ITS TIMELY RETRACTION OF THE ADMISSION. 44 WE FIND THAT THE STATEMENT WAS RECORDED AT ODD HOURS AND NOTHING CONCRETE RELATED TO ANY OTHER EVIDENCE IN SUPPORT ARRIVED AT. THE FIGURES OF INVESTMENT MADE BY THE COMPANIES WERE NOT MATCHING WITH THE STATEMENT OF SHRI. ASEEM GUPTA AS ASSESSEE HAS NOT RECEIVED ANY SUM FROM M/S MODERATE CREDIT CORPORATION LTD. AND FURTHER ONLY A SUM OF RS. 71 LAKHS AS AGAINST RS. 80 LAKHS (STATED BY SHRI. ASEEM GUPTA) HAS BEEN RECEIVED FROM M/S RAVNET SOLUTIONS PVT. LTD. AS SHARE APPLICATION MONEY. DESPITE REFERRING NAME OF SHRI. SOMNATH AND SHRI. SANTOSH SHAH AND THE BROKER SHRI. P.K. AGGARWAL & CO. IN THE STATEMENT, NOBODY WAS EVER EXAMINED BY THE REVENUE DESPITE TIME AND AGAIN SHRI P.K. AGGARWAL CONFIRMING THE TRANSACTIONS. THE REVENUE CANNOT MAKE ALLEGATION UNLESS PROVE THEM BY BRINING TANGIBLE MATERIAL ON RECORD. THE STATEMENT, WHICH WAS RECORDED IN MID NIGHT, CANNOT BE SAID TO BE MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 85 VOLUNTARY AS RECORDING OF STATEMENT IN THE MIDNIGHT ITSELF SHOWS THAT THE STATEMENT WAS RECORDED WHEN THE PERSON WAS NOT IN A FIT STATE OF MIND AND WOULD BE FULLY EXHAUSTED. FROM THE QUESTIONS RAISED AND ANSWERED, WHOLE NIGHT IT IS EVIDENT THAT THE STATEMENT WAS MADE UNDER FORCEFUL CIRCUMSTANCES AND HENCE CANNOT BE TREATED AS VOLUNTARY. IN FACT IN THE IDENTICAL CIRCUMSTANCES, THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF KAILASHBEN MANHARLAL CHOKSHI VS. CIT REPORTED IN [2010] 328 ITR 411 (GUJARAT) HAS BEEN PLEASED TO HOLD THAT THE STATEMENT RECORDED AT ODD HOURS CANNOT BE CONSIDERED TO BE A VOLUNTARY STATEMENT, IF IT IS SUBSEQUENTLY RETRACTED AND NECESSARY EVIDENCE IS LED CONTRARY TO SUCH ADMISSION. IN THIS CASE ALSO, ASSESSEE HAS IMMEDIATELY RETRACTED THE STATEMENT AND FURNISHED COMPLETE DOCUMENTARY EVIDENCES IN SUPPORT OF THE TRANSACTIONS. 45 THE CBDT IN INSTRUCTION NO. F.NO. 286/98/2013-IT (INV.II) DATED 18.12.2014 AND INSTRUCTION NO. F NO. 286/2/2003- IT (INV) DATED 10.03.2003) HAS EMPHASIZED UPON THE NEED TO FOCUS ON GATHERING EVIDENCES DURING SEARCH/SURVEY AND TO STRICTLY AVOID OBTAINING ADMISSION OF UNDISCLOSED INCOME UNDER COERCION/UNDUE INFLUENCE. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 86 THE REASON BEHIND IS THAT IN CASE OF RETRACTION, THE CASE OF REVENUE SHOULD NOT FAIL. IN THE PRESENT CASE ALSO, APART FROM THE STATEMENT, NO EFFORTS WERE MADE BY THE REVENUE TO GATHER EVIDENCE DURING THE SEARCH. 46 LD DR HAS RELIED UP ON THE DECISION OF PCIT V BHAGIRATH AGARWAL 351 ITR 143. WE HAVE CAREFULLY PERUSED THAT DECISION. IN THAT DECISION THE FACTS WERE THAT IT WAS NOT A CASE OF RETRACTED CONFESSION BUT IN FACT STATEMENT WAS FURTHER CONFIRMED BY THE ASSESSEE VIDE LETTER DATED 9/1/2006. IN THE PRESENT CASE THERE IS RETRACTION OF THE STATEMENT, WHICH IS BY WAY OF STATED MEETING WITH THE HIGHER OFFICIAL AS WELL AS BEFORE LD AO REITERATED BEFORE CIT (A). IN VIEW OF THIS, RELIANCE ON THE ABOVE DECISION IS MISPLACED. 47 SECOND DECISION RELIED UP ON BY REVENUE IS IN THE CASE PCIT VS. AVINASH KUMAR SETIA 81 TAXMANN.COM 486. IN THIS CASE, STATEMENT WAS RECORDED DURING THE SURVEY AND NOT DURING THE SEARCH. ASSESSEE MADE A STATEMENT AFTER TWO MONTHS OF SURVEY ON HIS OWN AND ASSESSEE WAITED FOR TWO YEARS TO RETRACT IT. ASSESSEE IN THAT CASE PLEADED THAT NON-DISCLOSURE OF SUM IN THE RETURN OF INCOME IS A RETRACTION BY THE ASSESSEE AND RETRACTION IN WRITING MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 87 WAS ONLY ON 16/12/2010. THEREFORE HON HIGH COURT HELD THAT RETRACTION IS TOO MUCH DELAYED AND NOT BONAFIDE. FACTS IN THAT CASE WERE AS UNDER :- 11. THE FACTS OF THE CASE ON HAND ARE PLAINLY DIFFERENT. HERE, THERE WAS NO STATEMENT OF THE ASSESSEE RECORDED DURING THE SURVEY UNDER SECTION 133A OF THE ACT. AS OBSERVED BY THE COMMISSIONER OF INCOME-TAX (APPEALS), THE ASSESSEE VOLUNTARILY MADE A DECLARATION TWO MONTHS AFTER THE SURVEY. THERE WAS ABSOLUTELY NO COMPULSION ON THE ASSESSEE TO MAKE SUCH A DECLARATION. THE ASSESSEE WAITED FOR TWO YEARS TO RESILE FROM THE SAID DECLARATION. THE SUBMISSION OF LEARNED COUNSEL FOR THE ASSESSEE THAT SINCE HE HAD FILED A RETURN ON SEPTEMBER 26, 2009 WITHOUT DISCLOSING THE SUM OF RS. 1.25 CRORES, HE SHOULD BE DEEMED TO HAVE RESILED FROM THE SAID DECLARATION CANNOT BE ACCEPTED. THE RETRACTION IN WRITING HAPPENED ONLY ON DECEMBER 16, 2010. IT WAS MUCH TOO DELAYED TO BE TAKEN TO BE BONA FIDE. THE CIRCUMSTANCES UNDER WHICH THE RETRACTION WAS MADE HAS ALSO NOT BEEN EXPLAINED. THE COURT FINDS THAT THE ABOVE RETRACTION, WITHOUT ANY EXPLANATION WHATSOEVER, AND WITHOUT MENTIONING THE OFFER OF SURRENDER OF RS. 1.25 CRORES MADE EARLIER ON DECEMBER 18, 2008 IS NOT A RETRACTION AT ALL IN THE EYES OF LAW. THE ABOVE DECISION OF THIS COURT, THEREFORE, DOES NOT COME TO THE ASSISTANCE OF THE ASSESSEE. 12. LEARNED COUNSEL FOR THE ASSESSEE NEXT RELIED UPON THE DECISION OF THIS COURT DATED OCTOBER 4, 2010 IN I. T. A. NO. 1111 OF 2010 (CIT V. DHINGRA METAL WORKS [2010] 328 ITR 384 (DELHI)). HERE AGAIN, DURING THE COURSE OF THE SURVEY CONDUCTED ON SEPTEMBER 14, 2004, THE RESPONDENT-ASSESSEE SURRENDERED AN AMOUNT OF RS. 99.5 LAKHS AND OFFERED IT TO TAX. WITHIN A PERIOD OF SLIGHTLY OVER TWO MONTHS THEREAFTER, ON NOVEMBER 29, 2004, HE GAVE A LETTER STATING THAT THE STATEMENT WAS INCORRECT AND THAT NO DISCREPANCY HAD TO BE RECONCILED AS IT WAS ONLY A MISTAKE. 13. AGAIN, THE DISTINGUISHING FEATURE IS THAT THE RETRACTION WAS WITHIN A SHORT PERIOD OF TWO MONTHS. THIS SINGULAR FACT IS SUFFICIENT TO DISTINGUISH THE SAID CASE FROM THE CASE ON HAND. 48 IN THE PRESENT CASE, THE FACTS ARE QUITE DIFFERENT, AS IN THAT CASE THE FACTS RELATING TO RETRACTION WERE ALSO NOT DISCLOSED. IN THE PRESENT CASE, ASSESSEE HAS SUBMITTED THAT HE HAS APPROACHED THE HIGHER MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 88 AUTHORITY AT THE FIRST AVAILABLE INSTANCES, AGITATING THE RETRACTION BEFORE LD AO, BEFORE CIT (A) ALSO. THE STATEMENT OF FACTS MADE BY THE ASSESSEE BEFORE LOWER AUTHORITIES THAT HE IMMEDIATELY MET THE HIGHER OFFICIAL STATING HIS RETRACTION AND WHICH WAS ALSO MENTIONED BEFORE THE LD AO AND CIT (A) ALSO MENTIONING THIS FACT IN HIS APPELLATE ORDER, IT IS NOT CORRECT TO SAY THAT ASSESSEE HAS NOT RETRACTED THE STATEMENT IN TIME. FURTHER, THE FACTS RECORDED IN THE STATEMENT ARE ALSO NOT MATCHING WITH THE OTHERS SUMS MENTIONED IN THE TRANSACTION. THE RETRACTION LETTER IS ALSO PART OF THE RECORD OF THE LD AO WHO HAS ISSUED THE CERTIFIED COPY OF THAT LETTER , THEREFORE, IN VIEW OF THE ABOVE FACTS, RELIANCE ON THE ABOVE DECISION BY THE REVENUE IS MISPLACED. 49 IN VIEW OF THE AFORESAID, WE HEREBY HOLD THAT STATEMENT OF SHRI. I C. JINDAL IS NOT INCRIMINATING MATERIAL ONCE THE SAME HAS BEEN RETRACTED AND THE STATEMENT OF SHRI. ASEEM GUPTA RECORDED ON THE SAME DATE IS ALSO NOT INCRIMINATING MATERIAL AS AFTER THE RETRACTION, NO EFFORTS HAVE BEEN MADE BY THE AO TO BRING ANY OTHER MATERIAL IN SUPPORT OF THAT STATEMENT. MOREOVER, FACTS AND FIGURES STATED BY SHRI. ASEEM GUPTA ARE TOTALLY INCORRECT AS PER RECORD. THE MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 89 ADDITIONS HAD ALREADY BEEN MADE IN THE ORIGINAL ASSESSMENT U/S 143(3) IN AY 2006-07 AND 2007-08 AND WHICH WERE MERELY REPEATED IN THE ORDER U/S 153A OF THE ACT. IN AY 2005-06, ADDITIONS MADE ALSO ARE NOT RELATED TO INCRIMINATING MATERIAL. WE HAVE REPEATEDLY HELD THAT NO ADDITION CAN BE MADE IN THE ABSENCE OF INCRIMINATING MATERIAL AND OUR VIEW WAS FURTHER STRENGTHENED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. KABUL CHAWLA REPORTED IN 380 ITR 573 (DEL.) WHICH WAS FURTHER FOLLOWED IN SUBSEQUENT DECISIONS. ALL THESE DECISIONS PROPOUNDED THE LAW THAT NO ADDITIONS CAN BE MADE IN ABSENCES OF INCRIMINATING MATERIAL FOR EACH OF THE YEARS AND ON THAT BASIS, ADDITION U/S 153A BY THE REVENUE FOR AYS 2000-01 TO 2003-04 WAS WITHOUT ANY LEGAL BASIS AS THERE WAS NO INCRIMINATING MATERIAL QUA EACH OF THOSE AYS. WE THEREFORE HOLD THAT ADDITIONS MADE U/S 153A OF THE ACT, IN THE ABSENCE OF INCRIMINATING MATERIAL FOUND AS A RESULT OF SEARCH IS OUTSIDE THE SCOPE OF SECTION 153A OF THE ACT AND THE ADDITIONS IN ALL THESE THREE ASSESSMENTS FRAMED U/S. 153A OF THE ACT I.E. ITA NO. 1342/DEL/2013, 1343/DEL/2013 & 2004/DEL/2013, DO NOT STAND AND DIRECTED TO BE DELETED. IN RESULT, APPEALS ARE ALLOWED. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 90 B. SECOND ISSUE PERTAINS TO THE ADDITION MADE U/S 68 OF THE ACT IN RESPECT OF THE SHARE CAPITAL RECEIVED BY THE ASSESSEE FROM SEVEN CORPORATE ENTITIES : 50 THIS ISSUE IS INVOLVED ONLY IN ITA NO. 1342/DEL/2013 FOR THE ASSESSMENT YEAR 2005-06. AFTER EXAMINING THE FACTS OF THE CASE, WE FIND THAT ASSESSMENT IN THIS CASE WAS ORIGINALLY FRAMED U/S 143(3) OF THE ACT SPECIFICALLY AFTER EXAMINING THE INVESTMENT AND ASSESSING OFFICER DID NOT FIND ANY ERROR AND COMPLETED THE ASSESSMENT AFTER ACCEPTING THE INVESTMENTS. THESE INVESTMENTS HAVE BEEN DECLARED IN THE BOOKS OF ACCOUNTS AND THE CONTENTION OF THE ASSESSEE IS THAT IT HAS FILED ALL THE DETAILS SUCH AS THE CONFIRMATION, COMPANY MASTER DATA AS PROOF OF ADDRESS, PAN, AUDITORS REPORT ALONG WITH BALANCE SHEET, ITR, MOA/AOA, SHARE APPLICATION FORM ETC, AND THE AO DID NOT FIND ANY MATERIAL ADVERSE TO THE EVIDENCES FURNISHED BY ASSESSEE. IT WAS ALSO SUBMITTED THAT NOTICES ISSUED WERE SERVED TO THE SHAREHOLDERS AND AO APART FROM ISSUING NOTICES TO THE SHAREHOLDERS DID NOT MAKE ANY FURTHER ENQUIRY / EFFORTS TO BRING ANY MATERIAL CONTRARY TO THE EVIDENCES FURNISHED BY ASSESSEE, AS SUCH, ASSESSEE SUBMITTED THAT ADDITION MADE IS NOT SUSTAINABLE. ON THE OTHER HAND, LEARNED CIT DR PLACED RELIANCE ON THE ORDERS OF MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 91 THE AUTHORITIES BELOW. SINCE WE HAVE ALREADY DEALT THE LEGAL ISSUE IN FAVOUR OF THE ASSESSEE BY DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITIONS MADE IN THE ASSESSMENT FRAMED UNDER SECTION 153A IN ABSENCE OF INCRIMINATING MATERIAL DURING THE SEARCH, FOLLOWING THE SAME THE ADDITION IN QUESTION IN ABSENCE OF INCRIMINATING MATERIAL AND NON-ABATEMENT OF ASSESSMENT ALREADY FRAMED UNDER SECTION 143(3) BEFORE THE DATE OF SEARCH, DOES NOT STAND AND DIRECTED TO BE DELETED. C. ADDITION MADE U/S 68 OF THE ACT IN RESPECT OF THE LONG TERM CAPITAL GAIN, WHICH WAS CLAIMED AS EXEMPT. 51 THIS ISSUE IS INVOLVED IN ITA NO. 1342/DEL/2013 FOR THE AY 2005- 06, ITA NO. 1343/DEL/2013 IN THE AY 2006-07. THE ASSESSEE HAS SUBMITTED THAT FOR BOTH THE AFORESAID ASSESSMENT YEARS, ASSESSMENTS WERE MADE ORIGINALLY U/S 143(3) OF THE ACT. IN AY 2005-06, THE ASSESSMENT WAS SPECIFICALLY TAKEN ON THE BASIS OF AIR INFORMATION TO EXAMINE THE INVESTMENTS, AND AO ACCEPTED THE INVESTMENTS. IN AY 2006-07, IN THE ORIGINAL ASSESSMENT, THE AO TREATED THE LONG TERM CAPITAL GAIN CLAIMED AS EXEMPT AS SHORT TERM CAPITAL GAIN, AND SUBSEQUENTLY IN THE ASSESSMENT FRAMED U/S 153A MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 92 OF THE ACT, HE HAS MADE THE SAME ADDITION U/S 68 OF THE ACT. THE ASSESSEE HAS FILED THE DEMAT ACCOUNT, CONTRACT NOTES AND PURCHASE BILL, CONTRACT NOTES AND SALE BILL, INVESTMENT LEDGER ACCOUNT, WORKING OF CAPITAL GAIN, LEDGER ACCOUNT OF M/S P.K. AGARWAL & CO. FOR THE PERIOD OF 01.04.2003 TO 31.03.2005, ACCOUNT OF S.K. FINANCIAL SERVICES PVT. LTD. IN RESPECT OF PURCHASE OF SHARES, THE INVESTMENT ACCOUNT AS ON 31.03.2004, AUDITED BALANCE SHEET AS ON 31.03.2004, PROOF OF PAYMENT OF STT ETC. IT WAS SUBMITTED THAT THE AO HAD ALSO MADE ENQUIRY FROM THE ALL THE THREE BROKERS I.E. M/S P.K. AGARWAL & CO., M/S S.B. BHUTRA & CO. AND S.K. KHEMKA, CALCUTTA STOCK EXCHANGE AND ALSO FROM THE DEPOSITORY M/S IKM INVESTOR SERVICES LTD. THE BROKERS HAVE CONFIRMED THE TRANSACTIONS MADE THROUGH THEM AND PURCHASES WERE MADE OFF MARKET AND PHYSICAL DELIVERY WAS TAKEN AND AFTER DEMATERIALIZATION THE SHARES WERE CREDITED IN THE DEMAT ACCOUNT OF THE ASSESSEE FROM WHERE SHARES WERE SUBSEQUENTLY SOLD THROUGH STOCK EXCHANGE AND STT WAS PAID. THE CALCUTTA STOCK EXCHANGE TO WHOM NOTICE WAS SENT U/S 133(6) THROUGH EMAIL, WAS ALSO REPLIED AND FURNISHED THE DETAILS CONFIRMING THAT THE PRICE OF THE SHARES PURCHASED OFF MARKET IS ALSO MATCHING WITH THE PRICE TRADED ON THE STOCK EXCHANGE. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 93 FURTHER, IN RESPONSE TO THE ENQUIRY, DEPOSITORY M/S IKM INVESTOR SERVICES LTD ALSO FILED THE NECESSARY DETAILS WHICH CONFIRM THE DETAILS FILED BY THE ASSESSEE. IT WAS ALSO SUBMITTED THAT THE FINDING OF THE AO THAT CONTRACT NOTES SUBMITTED AT THE TIME OF ORIGINAL ASSESSMENT WERE DIFFERENT WITH THE CONTRACT NOTES SUBMITTED IN THE ASSESSMENT PROCEEDINGS PASSED U/S 153A OF THE ACT AS IN THE EARLIER CONTRACT NOTES THERE WAS NO MENTION OF STT, WHEREAS STT HAS BEEN PAID IN THE CONTRACT SUBMITTED SUBSEQUENTLY, IS FACTUALLY INCORRECT AS AT THE TIME OF PURCHASE, STT WAS NOT APPLICABLE AS SUCH ON THE PURCHASE STT HAS NOT BEEN PAID, AS SUCH IN THE CONTRACT NOTE OF PURCHASE THERE IS NO MENTION OF STT. IT WAS SUBMITTED THAT SHARES WERE SOLD THROUGH STOCK EXCHANGE AND IN RESPECT OF SALE OF SHARES STT WAS DULY PAID WHICH WAS REFLECTED IN THE CONTRACT NOTES. IN VIEW OF THE AFORESAID, IT WAS SUBMITTED THAT PROVISION OF SECTION 68 ARE INAPPLICABLE SPECIFICALLY WHEN NOTHING ADVERSE WAS BROUGHT ON RECORD AND AS SUCH, EXEMPTION U/S 10(38) CANNOT BE DENIED. ON THE OTHER HAND, LEARNED CIT [DR] PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 94 52 SINCE WE HAVE ALREADY DEALT THE LEGAL ISSUE IN FAVOUR OF THE ASSESSEE BY DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITIONS MADE IN THE ASSESSMENT FRAMED U/S. 153A OF THE ACT FOR THE AFORESAID ASSESSMENT YEAR, IN ABSENCE OF INCRIMINATING MATERIAL FOUND DURING SEARCH AND IN ABSENCE OF ABATEMENT OF ASSESSMENT ORDER ALREADY FRAMED BEFORE THE SEARCH, AS SUCH, THIS ISSUE DOES NOT SURVIVE FOR ADJUDICATION AND STANDS TO BE DELETED. D LONG TERM CAPITAL GAIN ON ACCOUNT OF SALE OF THE LISTED SECURITIES CLAIMED EXEMPT U/S 10(38) OF THE ACT WHICH WAS TREATED AS SHORT TERM CAPITAL GAIN : 53 BEFORE US, APART FROM ORAL ARGUMENTS, THE AR OF THE ASSESSEE HAS FILED WRITTEN SYNOPSIS, THE RELEVANT CONTENTS ARE REPRODUCED HEREUNDER : 9.1 IT IS SUBMITTED THAT IN THE ASSESSMENT YEARS 2005-2006 AND 2006-07 THE LEARNED ASSESSING OFFICER HAS MADE ADDITIONS OF RS. 6,59,04,383 /- AND RS. 36,72,01,648 /- RESPECTIVELY UNDER SECTION 68 OF THE ACT BY HOLDING THAT THE LONG TERM CAPITAL GAIN ACCRUED TO THE ASSESSEE FROM THE SALE OF SHARES WHICH WAS CLAIMED AS EXEMPT U/S 10(38) OF THE ACT AS UNDISCLOSED INCOME OF THE ASSESSEE. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 95 9.2 THE DETAILS OF LONG TERM CAPITAL GAIN DECLARED BY THE APPELLANT ARE AS UNDER :- S.NO. PARTICULARS ASSESSMENT YEAR 2005-06 (PB-3) 2006-07 (PB-4) I) DETAILS OF SHARES PURCHASED WHICH ARE SOLD DURING THE YEAR PAGE 285 PAGE 1 II) NUMBER OF COMPANIES WHOSE SHARES ARE SOLD DURING THE YEAR 3 9 III) DATE OF PURCHASE OF SHARES 09.04.2003 TO 24.06.2003 06.04.2004 TO 23.06.2004 IV) CONTRACT NOTE AND PURCHASE BILL 289-299 24-66 V) PURCHASE CONSIDERATION RS. 43,25,800/- RS. 1,78,46,275/- VI) DETAILS OF SALES OF SHARES MADE DURING THE YEAR PAGE 285 PAGE 67-69 VII) DATE OF SALE OF SHARES 06.01.2005 TO 17.03.2005 06.07.2005 TO 29.11.2005 VIII) CONTRACT NOTES AND SALE BILL 318-377 118-284 IX) GROSS AMOUNT OF SALE CONSIDERATION RS. 7,02,90,273/- RS. 38,54,73,308/- X) STT PAID ON THE SALE OF SUCH SHARES AS REFLECTED IN THE CONTRACT NOTES RS. 52,772/- RS. 3,84,277/- XI) SERVICE TAX PAID ON THE SALE OF SUCH SHARES AS REFLECTED IN THE CONTRACT NOTES RS. 7,319/- RS. 41,224/- XII) NET SALE CONSIDERATION RS. 7,02,30,182/- RS. 38,50,47,806/- XIII) LONG TERM CAPITAL GAIN RS. RS. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 96 WHICH HAS BEEN CLAIMED AS EXEMPT U/S 10(38) OF THE ACT 6,59,04,382/- 36,72,01,531/- 9.3 IT IS SUBMITTED THAT DURING THE COURSE OF THE ASSESSMENT, EVIDENCES FURNISHED BY THE APPELLANT IN RESPECT OF SALE AND PURCHASE OF SHARES ARE REPRODUCED HEREUNDER :- S.NO. ASSESSMENT YEAR 2005-06 ASSESSMENT YEAR 2006-07 1. REPLY DATED 09.11.2011 (PG 53-55 OF PB-1) COPY OF DEMAT ACCOUNT (PG. 26-30 OF PB-2). CONTRACT NOTES AND PURCHASE BILL (PG. 289-299 OF PB-3) CONTRACT NOTES AND SALE BILL (PG. 318-3177 OF PB-3). INVESTMENT LEDGER ACCOUNT (PG. 287 OF PB-3). WORKING OF CAPITAL GAIN REPLY DATED 24.11.2011 (PG 146-148 OF PB-1) COPY OF DEMAT ACCOUNT (PG. 26-30 OF PB-2). CONTRACT NOTES AND PURCHASE BILL (PG. 24-66 OF PB-4) CONTRACT NOTES AND SALE BILL (PG. 118-284 OF PB- 4). INVESTMENT LEDGER ACCOUNT (PG. 79-87 OF PB-4). WORKING OF CAPITAL GAIN 2. REPLY DATED 19.12.2011 (PG 53-55 OF PB-1) COPY OF LEDGER ACCOUNT OF M/S P.K. AGARWAL & CO. FOR THE PERIOD OF 01.04.2003 TO 31.03.2005. COPY OF ACCOUNT OF S.K. FINANCIAL SERVICES PVT. LTD. IN RESPECT OF PURCHASE OF SHARES. REPLY DATED 19.12.2011 (PG 151-159 OF PB-1) APPELLANT RELIED ON ITS SUBMISSIONS AND EVIDENCES FURNISHED IN THE ORIGINAL ASSESSMENT PROCEEDINGS. IN THE COURSE OF THE ORIGINAL MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 97 COPY OF THE INVESTMENT ACCOUNT AS ON 31.03.2004. COPY OF THE AUDITED BALANCE SHEET AS ON 31.03.2004. COPY OF THE DEMAT ACCOUNT THE COPIES OF THE CONTRACT NOTES AND BILLS FOR THE PURCHASE AND SALE OF THE SHARES. PROOF OF PAYMENT OF STT.. ASSESSMENT PROCEEDINGS, ASSESSEE HAS FURNISHED FOLLOWING REPLY ALONG WITH FOLLOWING EVIDENCES: 1) REPLY DATED 25.06.2008 (PG 10-14 OF PB-2): DETAILS OF LONG TERM CAPITAL GAIN. 2) REPLY DATED 21.10.2008 (PG 16 OF PB-2): DETAIL OF THE DEPOSITORY WITH WHOM ASSESSEE IS MAINTAINING ITS DEMAT A/C. COPY OF THE DEMAT ACCOUNT. COPY OF THE BROKER NOTE IN RESPECT OF SALE AND PURCHASE OF SHARES. 3) REPLY DATED 25.11.2008 (PG 31-33 OF PB-2): STATEMENT SHOWING COMPLETE DETAILS OF SHARES PURCHASED IN EARLIER YEAR AND DURING THE YEAR UNDER ASSESSMENT AND SOLD DURING THE YEAR. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 98 DETAILED STATEMENT SHOWING PAYMENT OF COST OF SHARES PURCHASED FROM BOTH THE BROKERS. COPIES OF BROKER ACCOUNT FOR THE FY 2004-05 AND 2005-06. COPY OF CAPITAL GAIN ACCOUNT COPY OF LEDGER ACCOUNT OF INVESTMENT IN SHARES. COPY OF THE RELEVANT BANK STATEMENT SHOWING THE PAYMENT MADE FOR PURCHASE OF SHARES. 4) REPLY DATED 27.11.2008 (PG. 34 OF PB- 2): COPY OF THE BANK STATEMENT. 5) REPLY DATED 01.12.2008 (PG. 35-38 OF PB-2) 6) REPLY DATED 18.12.2008 (PG. 39-45 OF PB-2). 9.4 IT IS RELEVANT TO STATE HERE THAT IN THE COURSE OF THE REGULAR ASSESSMENT FOR THE ASSESSMENT YEAR 2006-07, LEARNED AO TO VERIFY THE SALE AND PURCHASE OF THE SHARES HAS MADE FOLLOWING ENQUIRIES :- MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 99 S.NO. NATURE OF ENQUIRY OUTCOME ENQUIRIES MADE BY THE AO IN THE ORIGINAL ASSESSMENT PROCEEDINGS: I . 05.11.2008 (PG 18-20 OF PB-2) : NOTICE U/S 133(6) OF THE ACT WAS SENT TO THE CALCUTTA STOCK EXCHANGE TO VERIFY THE CONTRACT NOTES FOR THE PURCHASE OF THE SHARES THROUGH FOLLOWING STOCK BROKERS: M/S P.K. AGARWAL & CO. M/S S.B. BHUTRA & CO. S.K. KHEMKA 14.11.2008 (PG 21 OF PB- 2) : REPLY WAS RECEIVED FROM THE STOCK EXCHANGE WHEREIN NONE OF THE CONTRACT NOTES WERE HELD TO BE NOT GENUINE. IT WAS ALSO STATED BY THE STOCK EXCHANGE THAT SHARES WERE NOT TRADED IN THE ONLINE TRADING SYSTEM OF THE STOCK EXCHANGE, WHICH HAS ALSO BEEN STATED BY THE ASSESSEE. II . 19.11.2008 (PG 22 OF PB-2) : SUMMONS WERE SENT TO THE DEPOSITORY WITH WHOM ASSESSEE HAS MAINTAINED ITS DEMAT ACCOUNT. 25.11.2008 (PG 25-30 OF PB-2): REPLY OF THE DEPOSITORY WHEREBY DEMAT ACCOUNT OF THE ASSESSEE WAS PROVIDED. ENQUIRIES MADE BY THE AO IN THE REMAND PROCEEDINGS OF APPEAL FILED AGAINST THE ORDER PASSED U/S 143(3) OF THE ACT. III . 09.02.2010 (PG 59-64 OF PB-2) : NOTICES WERE SENT TO THE FOLLOWING STOCK BROKERS TO FURNISH THE CONTRACT NOTES/PURCHASE PROOF TO EACH OF THE FOLLOWING STOCK BROKERS: M/S P.K. AGARWAL & CO. M/S S.B. BHUTRA & CO. S.K. KHEMKA 05.03.2010: REPLY OF M/S S.B. BHUTRA & CO.: (PG 68 OF PB-2): SHARE BROKER FILED ITS REPLY ALONGWITH RELEVANT DOCUMENTS AND CONFIRMED THE SALE OF SHARES TO THE ASSESSEE AND ALSO CONFIRMED THAT DELIVERY OF THE SHARES WERE MADE IN PHYSICAL FORM. 10.03.2010: REPLY MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 100 OF S.K. KHEMKA.: (PG 69- 76 OF PB-2): SHARE BROKER FILED ITS REPLY ALONGWITH RELEVANT DOCUMENTS AND CONFIRMED THE SALE OF SHARES TO THE ASSESSEE 24.03.2010: REPLY OF M/S P.K. AGARWAL & CO. (PG 84-114 OF PB-2 ): SHAREBROKER FILED ITS DETAILED REPLY PROVIDING COMPLETE DETAIL OF PURCHASE AND SALE OF THE SHARES, A COPY OF THE SAME WAS ALSO SENT TO THE ASSESSEE. IV . 22.11.2011 (PG 81 OF PB-2 ): NOTICE U/S 133(6) OF THE ACT WAS SENT TO M/S S.B. BHUTRA & CO. 29.11.2010: REPLY OF M/S S.B. BHUTRA & CO.: (PG 68 OF PB-2): REPLY WAS SENT BY THE STOCK BROKER STATING THAT TRANSACTION WAS OFF MARKET. ENQUIRIES MADE BY THE AO IN THE PROCEEDINGS U/S 153A OF THE ACT: V . 02.12.2011 (PG 136-137 OF PB- 2 ): AN EMAIL WAS SENT TO THE CALCUTTA STOCK EXCHANGE, TO VERIFY WHETHER THE TRANSACTIONS WERE DONE THROUGH STOCK EXCHANGE, WHETHER STT WAS PAID, NAME OF THE STOCK BROKERS INVOLVED AND WHETHER THERE WAS ANY IRREGULARITY. 09.12.2012 (PG 138-214 OF PB-2 ): REPLY WAS RECEIVED FROM THE STOCK EXCHANGE, CONFIRMING THAT STT WAS PAID ON THE EXECUTED TRANSACTION. FURTHER TO THE AFORESAID NO ADVERSE COMMENT WAS GIVEN. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 101 9.5 IN FACT, LEARNED AO DURING THE REMAND PROCEEDINGS FOR THE AY 2006-07 ALSO SENT FOLLOWING REMAND REPORTS: A. 11.02.2010 (PG 65-66 OF PB-2 ): IN THE REMAND REPORT, IT HAS BEEN ADMITTED THAT SHARES HAVE BEEN PURCHASED OFF MARKET, AS SUCH, CONFIRMATION FROM THE BROKER IN RESPECT OF PURCHASE OF THE SHARES IS IMPORTANT. IN RESPECT OF PAYMENT OF PURCHASE CONSIDERATION, IT HAS ALSO BEEN ADMITTED THAT PAYMENT HAVE BEEN MADE, WHEN LEARNED AO IN HIS REMAND REPORT HAS STATED THAT IN THE MATTER OF PAYMENTS THE ASSESSEE HAS FURNISHED THE ACCOUNT OF THESE BROKERS IN ITS BOOKS AND HAS CLAIMED THAT THE RUNNING ACCOUNT SHOW THAT PAYMENTS HAVE DULY BEEN MADE, HOWEVER THE ACCOUNT OF THE ASSESSEE IN THE BOOKS OF THE BROKERS HAVE BEEN CALLED FOR. B. 25.03.2010 (PG 67 OF PB-2 ): LEARNED AO SENT HIS SECOND REMAND REPORT ALONGWITH THE REPLIES OF THE TWO STOCK BROKERS I.E. M/S S.B. BHUTRA & CO. AND S.K. KHEMKA. C. 29.09.2010 (PG 78-80 OF PB-2 ): IN THIS REMAND REPORT, LEARNED AO DID NOT DISPUTE THAT ALL THE SHARE BROKERS HAS FILED THEIR REPLIES (AS IS NOTICED BY THE LEARNED CIT(A) IN HIS LETTER DATE 20.09.2010 PLACED AT PAGE 77 OF PB-2), HOWEVER HE MERELY RELIED UPON THE ORDER OF ASSESSMENT PASSED BY THE LEARNED AO. IT IS FURTHER SUBMITTED THAT FROM THE DETAILED ENQUIRY CONDUCTED BY THE STOCK EXCHANGES, STOCK BROKERS AND ALSO FROM THE DEPOSITORY, THE GENUINENESS OF THE TRANSACTION WAS NOT DISPUTED, AND AS PER THE LEARNED AO ONLY DISPUTE WAS WHETHER THE GAIN WAS SHORT TERM OR LONG TERM. IN RESPECT OF REPLIES FURNISHED BY THE MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 102 STOCK BROKERS, IT WAS ARBITRARILY STATED THAT APPELLANT WAS IN COLLUSION WITH THE STOCK BROKERS AS SUCH, SUCH REPLIES SHOULD BE IGNORED. 9.6 FROM THE PERUSAL OF THE AFORESAID, IT IS EVIDENT THAT DURING THE COURSE OF THE ASSESSMENT, APPELLANT FURNISHED COMPLETE DOCUMENTARY EVIDENCES, IN RESPECT OF THE PURCHASE AND SALE OF THE SHARES. IT ALSO FURNISHED COPY OF THE CONTRACT NOTES AND PURCHASE BILL EVIDENCING THE RELEVANT DATE WHEN THE PURCHASE OF SHARES HAD BEEN MADE. THE SHARE BROKERS IN THEIR REPLIES HAD CONFIRMED THAT SHARES HAD BEEN PURCHASED OFF LINE. ALL THE SHARES BROKERS HAVE CONFIRMED THE PURCHASE OF SHARES ON BEHALF OF THE ASSESSEE, AND NONE OF THE SHARE BROKER HAVE EVER DENIED THE FACTUM OF THE PURCHASE OF THE SHARES BY THE APPELLANT COMPANY. INFACT, ALL THE CONTRACT NOTES FOR THE PURCHASE OF SHARES WERE ALSO SENT TO THE STOCK EXCHANGE AND STOCK EXCHANGE IN ITS REPLY DATED 14.11.2008 (PG. 21 OF PB-2) HAS CONFIRMED THAT SUCH SHARES HAD BEEN PURCHASED OFF LINE WHEN IT WAS STATED BY THEM THAT SUCH SHARES HAD NOT BEEN PURCHASED IN ONLINE TRADING SYSTEM. FURTHER NONE OF THE CONTRACT NOTES WERE HELD TO BE BOGUS BY THE STOCK EXCHANGE. 9.7 DURING THE COURSE OF THE REMAND PROCEEDINGS, LEARNED AO MADE EXTENSIVE ENQUIRES FROM THE STOCK BROKERS AND AFTER RECEIVING THE REPLIES FROM THE STOCK BROKERS, PURCHASE OF THE SHARES HAD NOT BEEN DISPUTED BY THE LEARNED AO, HOWEVER, AS PER THE AO ONLY DISPUTE IS WITH REGARD TO THE FACT THAT WHETHER THE GAIN ACCRUED TO THE ASSESSEE IS LONG TERM OR SHORT TERM. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 103 9.8 IT IS SUBMITTED AT THIS STAGE ITSELF THAT THE IN THE CASE OF THE APPELLANT LEARNED AO HAS MADE ADDITION UNDER SECTION 68 OF THE ACT BY HOLDING THAT ALLEGED LONG TERM CAPITAL GAIN S UNEXPLAINED CASH CREDIT IN THE BOOKS OF THE ASSESSEE. IT IS SUBMITTED THAT IN VIEW OF THE REMAND REPORTS OF THE LEARNED AO, WHICH REMAND REPORTS HAVE BEEN SUBMITTED AFTER EXTENSIVE ENQUIRIES, AND LAST REMAND REPORT DATED 29.09.2010 WAS EVEN SUBMITTED AFTER THE SEARCH ON THE APPELLANT, IT HAS BEEN ADMITTED THAT SALE AND PURCHASE OF THE SHARES BY THE APPELLANT IS GENUINE AND ONLY DISPUTE IS WITH REGARD TO THE HOLDING PERIOD OF THE SHARES. IN SUCH CIRCUMSTANCES, ONCE IN THE OWN ADMISSION OF THE REVENUE, ONCE THE SALE OF THE SHARES IS GENUINE, AS SUCH, ADDITION MADE U/S 68 OF THE ACT IS LIABLE TO BE DELETED HEREITSELF AS CREDIT APPEARING IN THE BOOKS OF THE ASSESSEE CANNOT BE HELD TO BE UNEXPLAINED . 9.9 WITHOUT PREJUDICE TO THE AFORESAID, IT IS FURTHER SUBMITTED THAT SHARES PURCHASED BY THE ASSESSEE IN AY 2004-05 AND AY 2005-06 HAS DULY BEEN REFLECTED IN ITS BOOKS OF ACCOUNT AND BOOKS OF ACCOUNT OF THE ASSESSEE IS DULY AUDITED AND IN THE REGULAR BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE, NO DISCREPANCY HAS BEEN NOTED, AND SAME HAS BEEN ACCEPTED AS TRUE AND CORRECT. IT IS SUBMITTED THAT SHARES SOLD IN THE AY 2005-06 WERE PURCHASED BETWEEN 09.04.2003 TO 24.06.2003 WHEREAS SHARES SOLD IN THE AY 2006-07 WERE PURCHASED BETWEEN 06.04.2004 TO 23.06.2004, I.E. ALL THE SHARES WERE PURCHASED TILL JUNE, 2004. IT IS SUBMITTED THAT SINCE THE SHARES WERE PURCHASED OFF LINE AND WERE PURCHASED BEFORE 1 ST OCTOBER, 2004, AS SUCH IN RESPECT OF MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 104 PURCHASE OF SHARES, STT HAS NOT BEEN PAID AS AT THAT TIME STT WAS NOT APPLICABLE, WHICH BECAME APPLICABLE ONLY W.E.F. 01.10.2004. 9.10 IT IS SUBMITTED THAT SUCH SHARES WERE PURCHASED IN THE PHYSICAL FORM AND SAME HAS ALSO BEEN CONFIRMED BY EACH OF THE STOCK BROKER. HOWEVER, ASSESSEE INSTEAD OF TAKING THE POSSESSION OF THE SHARES IN PHYSICAL FORM INSTRUCTED THE SHARE BROKERS TO KEEP THE POSSESSION OF SUCH SHARES WITH THEM AND AFTER GETTING THE SHARES DEMATERIALIZED, TRANSFER IN THE DEMAT ACCOUNT OF THE ASSESSEE. THIS FACT IS ALSO DEMONSTRATED FROM THE REPLY OF THE P.K. AGARWAL & CO. (SEE PAGE 84-85 OF PB). IT IS SUBMITTED THAT AFTER DEMATERIALIZATION, SHARES WERE TRANSFERRED IN THE DEMAT ACCOUNT OF THE ASSESSEE WHICH WERE SUBSEQUENTLY SOLD. IT IS SUBMITTED THAT SALE OF SHARES IS DULY SUPPORTED BY THE SALE BILL AND CONTRACT NOTE. SALE OF THE SHARES WERE MADE THROUGH STOCK EXCHANGE ON WHICH STT WAS DULY PAID AND HAD INFACT CONFIRMED BY THE STOCK EXCHANGE IN ITS REPLY DATED 09.12.2011 (SEE PAGE 138 OF PB). 9.11 IT IS SUBMITTED THAT DESPITE THE AFORESAID FACTUAL POSITION, LEARNED AO PLACED HEAVY RELIANCE ON THE STATEMENT OF SHRI. ASEEM KUMAR GUPTA AND SURRENDER MADE BY SHRI. I.C. JINDAL DURING THE COURSE OF SEARCH. IN THE FORGOING PARAS, ASSESSEE HAS ALREADY SUBMITTED THAT STATEMENT OF SHRI. ASEEM KUMAR GUPTA AND STATEMENT OF SHRI. I.C. JINDAL ALSO CANNOT BE RELIED FOR THE REASONS STATED HEREINABOVE. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 105 9.12 FURTHER WHILE MAKING THE IMPUGNED ADDITION, LEARNED AO HAS HELD AS UNDER: S.NO. FINDINGS OF THE LEARNED AO REBUTTAL SUBMISSION 1. ALL THE SHARES SOLD WERE PENNY STOCK COMPANIES. IT IS RESPECTFULLY SUBMITTED THAT ASSESSEE HAS PURCHASED THE SHARES OF PUBLIC LIMITED COMPANIES AND SUCH COMPANIES ARE LISTED ON STOCK EXCHANGE. SHARES WERE PURCHASED AT MARKET VALUE AND IS ALSO EVIDENT FROM PAGES 136 - 214 OF THE PB 2 AND ANALYSIS HAS BEEN MADE IN ANNEXURE C ENCLOSED WITH SYNOPSIS. SHARES WERE SOLD THROUGH STOCK EXCHANGE AT A PRICE QUOTED ON THE STOCK EXCHANGE. SALES CONSIDERATION HAS DULY BEEN RECEIVED BY THE ASSESSEE IN ITS BANK ACCOUNT. ON THE SALE OF THE SHARES STT HAS BEEN PAID. ONCE THE SHARES ARE LISTED ON THE STOCK EXCHANGE AND SALE OF SUCH SHARES ARE MADE THROUGH STOCK EXCHANGE AT A PRICE QUOTED ON THE STOCK EXCHANGE, THE CONTENTION OF THE REVENUE IS WHOLLY IRRELEVANT. 2. THE PRICE RISE IN SUCH SHARES IS NOT SUPPORTED BY ANY LOGIC. THE AFORESAID FINDING IS PURE SUSPICION AND NOTHING MORE. AN ASSESSEE CANNOT CONTROL THE PRICE OF THE SHARES WHICH ARE TRADED THROUGH STOCK EXCHANGE. 3. M/S P.K. AGARWAL HAS BEEN PENALIZED BY THE STOCK FIRSTLY NO SUCH MATERIAL WAS PROVIDED TO THE ASSESSEE. EVEN IF HE HAS BEEN DEBARRED FROM MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 106 EXCHANGE. ASSESSING THE MARKET, BUT FOR THE PERIOD IN WHICH TRANSACTION OF THE ASSESSEE WAS UNDERTAKEN, THERE WAS NO SUCH DIRECTION. EVEN STOCK EXCHANGE IN ITS REPLY DATED 14.11.2008 AND 09.12.2011 HAS NOT ADVERSELY COMMENTED IN RESPECT OF THE TRADING THROUGH M/S P.K. AGARWAL. AS SUCH, THIS CONTENTION OF THE LEARNED AO IS WHOLLY MISCONCEIVED. 4. ASSESSEE HAS SUBMITTED THE COPIES OF THE CONTRACT NOTES WHICH DO NOT HAVE MENTION OF STT. THIS IS FACTUALLY INCORRECT. SINCE AT THE TIME OF PURCHASE, STT WAS NOT APPLICABLE AS SUCH ONLY ON THE PURCHASE STT HAS NOT BEEN PAID. IN RESPECT OF SALE OF SHARES, STT HAS BEEN PAID AND IS ALSO DULY REFLECTED IN THE CONTRACT NOTES. 5. AT THE TIME OF ASSESSMENT, ASSESSEE FAILED TO PRODUCE ANY PROOF OF PAYMENT OF STT AND IN THE CONTRACT NOTES THERE WAS NO MENTION OF STT. THIS IS FACTUALLY INCORRECT, AS ASSESSEE HAS SUBMITTED THE COPY OF THE CONTRACT NOTES FOR THE PURCHASE AS WELL AS SALE AND ONLY IN RESPECT OF CONTRACT NOTES FOR PURCHASE, STT HAS NOT BEEN MENTIONED, WHEREAS IN RESPECT OF SALE, STT HAS BEEN PAID AND DULY REFLECTED IN THE CONTRACT NOTES. AO ALSO MADE ENQUIRY FROM THE STOCK EXCHANGE, AND STOCK EXCHANGE IN ITS REPLY DATED 09.12.2011(SEE PAGE 138) HAS CONFIRMED THAT STT HAS BEEN PAID IN RESPECT OF SALE OF SHARES. 6. PRICES OF THE SHARES HAVE BEEN MANIPULATED. THERE IS NO PUBLIC DATA EVIDENCE OF FINANCIAL MARKET TO SUPPORT THE VERSION OF A.O. IN ANY CASE, ASSESSEE HAS NO ROLE TO PLAY AS IT HAS SOLD THE SHARES THROUGH STOCK EXCHANGE. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 107 9.13 IT IS SUBMITTED THAT DURING THE COURSE OF THE ASSESSMENT, APPELLANT HAS DULY SUBMITTED THAT PURCHASE AND SALE OF SHARES WERE THROUGH BANKING CHANNELS AND, APPELLANT HAD ALSO PRODUCED COMPLETE DOCUMENTARY EVIDENCE IN SUPPORT OF GENUINENESS OF SALE AND PURCHASE OF THE SHARES. IN FACT IN THE ORIGINAL ASSESSMENT PROCEEDINGS, LEARNED AO MERELY DOUBTED THE DATE OF PURCHASE OF SHARES AND HELD THAT DATE OF PURCHASE OF THE SHARES WOULD BE THE DATE WHEN THE SHARES ARE CREDITED IN THE DEMAT ACCOUNT OF THE ASSESSEE. IT IS SUBMITTED THAT WHILE HOLDING SO, HE HAS TOTALLY IGNORED THE CONTRACT NOTES FURNISHED BY THE ASSESSEE. INFACT, WHILE SO HOLDING, NO ENQUIRES WERE MADE FROM THE STOCK BROKER AT THE TIME OF ASSESSMENT, WHICH ENQUIRIES WERE MADE AFTER THE ASSESSMENT IN THE REMAND PROCEEDINGS, WHEN EACH OF THE STOCK BROKER HAS CONFIRMED THE FACTUM OF THE PURCHASE BY THE ASSESSEE ON THE DATE STATED IN THE CONTRACT NOTES. FURTHER HE HAS ALSO IGNORED THE CIRCULAR : NO . 704 , DATED 28-4-1995 ISSUED BY CBDT WHEREIN IT HAS BEEN HELD THAT DATE MENTIONED IN THE CONTRACT NOTE SHOULD BE TAKEN AS THE DATE OF PURCHASE OF THE SHARES AND DATE OF TRANSFER IN THE DEMAT ACCOUNT IS NOT RELEVANT FOR THE DETERMINATION OF THE HOLDING PERIOD FOR THE COMPUTATION OF THE CAPITAL GAIN. 9.14 IT IS FURTHER SUBMITTED THAT AFORESAID SALE OF THE SHARES WERE THROUGH A BROKER M/S P.K. AGGARWAL & CO., WHO IS REGISTERED WITH CALCUTTA STOCK EXCHANGE. FURTHER THE SHARES WHICH WERE SOLD WERE ALSO TRADED IN STOCK EXCHANGE AND, IN RESPECT OF WHICH STT HAS ALSO BEEN PAID. AS SUCH, NEITHER THE PURCHASE OF THE SHARES NOR THE SALE OF MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 108 THE SHARES CAN BE DOUBTED. AT THIS STAGE, RELIANCE IS PLACED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: A) HIGH COURT OF GUJARAT IN CASE OF COMMISSIONER OF INCOME-TAX-I VS. MAHESHCHANDRA G. VAKIL [2013]40 TAXMANN.COM 326 (GUJARAT) HELD THAT WHERE ASSESSEE PROVED GENUINENESS OF SHARE TRANSACTIONS BY CONTRACT NOTES FOR SALE AND PURCHASE, BANK STATEMENT OF BROKER, DEMAT ACCOUNT SHOWING TRANSFER IN AND OUT OF SHARES, AS ALSO ABSTRACT OF TRANSACTIONS FURNISHED BY STOCK EXCHANGE, ASSESSING OFFICER WAS NOT JUSTIFIED IN TREATING CAPITAL GAIN ARISING FROM SALE OF SHARES AS UNEXPLAINED CASH CREDIT. B) HIGH COURT OF GUJARAT IN CASE OF COMMISSIONER OF INCOME-TAX-I VS. HIMANI M VAKIL [2013]10 TAXMANN.COM 326 (GUJARAT) HELD THAT WHERE ASSESSEE DULY PROVED GENUINENESS OF SHARE TRANSACTIONS BY BRINGING ON RECORD CONTRACT NOTES FOR SALE AND PURCHASE, BANK STATEMENT OF BROKER AND DEMAT ACCOUNT SHOWING TRANSFER IN AND OUT OF SHARES, ASSESSING OFFICER WAS NOT JUSTIFIED IN BRINGING TO TAX CAPITAL GAIN ARISING FROM SALE OF SHARES AS UNEXPLAINED CASH CREDIT. C) TRIBUNAL AT KOLKATA IN CASE OF DCIT VS SUNITA KHEMA IN ITA NOS 714 TO 718/ KOL/2011 HAS HELD THAT :- THE AO CANNOT TREAT A TRANSACTION AS BOGUS ONLY ON THE BASIS OF SUSPICION OR SURMISE. HE HAS TO BRING MATERIAL ON RECORD TO SUPPORT HIS MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 109 FINDING THAT THERE HAS BEEN COLLUSION/CONNIVANCE BETWEEN THE BROKER AND THE ASSESSEE FOR THE INTRODUCTION OF ITS UNACCOUNTED MONEY. A TRANSACTION OF PURCHASE AND SALE OF SHARES, SUPPORTED BY CONTRACT NOTES AND DEMAT STATEMENTS AND ACCOUNT PAYEE CHEQUES CANNOT BE TREATED AS BOGUS. D) FURTHER IN THE IDENTICAL CIRCUMSTANCES, IN THE CASE OF SRI DOLARRAI HEMANI VS. INCOME-TAX OFFICER (I.T.A NO. 19/KOL/2014), HONBLE TRIBUNAL HAS HELD AS UNDER: 2.9.3. WE FIND THAT THE REVENUE HAD MADE A REMARK THAT THE SUBJECT MENTIONED SHARES OF G.K.CONSULTANTS LTD WERE BOUGHT BY THE ASSESSEE IN OFF MARKET WHICH IS AGAINST THE RULES FRAMED BY SEBI AND OTHERS. WE FIND FROM THE BYE LAWS OF CSE PLACED ON RECORD IN THE PAPER BOOK , THAT THE SAID BYE LAWS (VIDE BYE LAW NO. 9) PERMIT PURCHASE AND SALE OF SHARES IN OFF MARKET. IN ANY CASE, THIS IS NOT RELEVANT IN AS MUCH AS THE ISSUE BEFORE US IS NOT ON THE PURCHASE OF SHARES BUT ONLY THE TREATMENT OF SALE CONSIDERATION RECEIVED ON SALE OF THOSE SHARES. 2.9.4. WE FIND THAT ON VERIFICATION BY THE LD AO WITH THE CALCUTTA STOCK EXCHANGE LTD REGARDING THE PURCHASE AND SALE OF SHARES OF G.K.CONSULTANTS LTD BY THE ASSESSEE THROUGH THE BROKER MR RAJENDRA PRASAD SHAH, CSE HAD CONFIRMED THE FACT THAT THE SHARE PURCHASE AND SALE TRANSACTIONS OF ASSESSEE HAD HAPPENED THROUGH THE BROKER MR RAJENDRA PRASAD SHAH ON THE SAID DATE BUT HAD ONLY STATED THERE WAS MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 110 NO TRADE VIDE TRADE NO. 1586. THIS ALONE WOULD NOT AUTOMATICALLY MAKE THE ENTIRE TRANSACTION AS SHAM AND BOGUS WHEN OTHER DOCUMENTS AS STATED SUPRA PROVE THE CONTRARY. 2.9.5. WE FIND THAT THE SIMILAR ISSUE HAD BEEN ADJUDICATED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DCIT VS SUNITA KHEMKA IN ITA NOS. 714 TO 718/KOL/2011 DATED 28.10.2015 AND IN THE CASE OF ITO VS RAJKUMAR AGARWAL IN ITA NO. 1330 (KOL) OF 2007 DATED 10.8.2007 WHEREIN IT WAS HELD THAT WHEN PURCHASE AND SALE OF SHARES WERE SUPPORTED BY PROPER CONTRACT NOTES , DELIVERIES OF SHARES WERE RECEIVED THROUGH DEMAT ACCOUNTS MAINTAINED WITH VARIOUS AGENCIES, THE SHARES WERE PURCHASED AND SOLD THROUGH RECOGNIZED BROKER AND THE SALE CONSIDERATIONS WERE RECEIVED BY ACCOUNT PAYEE CHEQUES, THE TRANSACTIONS CANNOT BE TREATED AS BOGUS AND THE INCOME SO DISCLOSED WAS ASSESSABLE AS LTCG. WE FIND THAT IN THE INSTANT CASE, THE ADDITION HAS BEEN MADE ONLY ON THE BASIS OF THE SUSPICION THAT THE DIFFERENCE IN PURCHASE AND SALE PRICE OF THESE SHARES IS UNUSUALLY HIGH. THE REVENUE HAD NOT BROUGHT ANY MATERIAL ON RECORD TO SUPPORT ITS FINDING THAT THERE HAS BEEN COLLUSION / CONNIVANCE BETWEEN THE BROKER AND THE ASSESSEE FOR THE INTRODUCTION OF ITS UNACCOUNTED MONEY. 2.9.6. IN VIEW OF THE AFORESAID FACTS AND FINDINGS AND THE JUDICIAL PRECEDENTS RELIED UPON , WE HAVE NO HESITATION IN DIRECTING THE LD AO TO ACCEPT THE CLAIM OF EXEMPTION OF LTCG OF THE ASSESSEE ARISING OUT OF SALE OF SHARES OF G.K.CONSULTANTS LTD AND ACCORDINGLY ALLOW THE GROUND RAISED BY THE ASSESSEE IN THIS REGARD. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 111 E) TRIBUNAL AT MUMBAI IN CASE OF TEKCHAND RAMBHIYA HUF IN ITA NOS 930/MUM/2012 HAS HELD THAT THE HONBLE HIGH COURT, IN THE CASE OF CIT VS. JAMNADEVI (328 ITR 656) HAS OBSERVED IN PARAGRAPHS 11 & 12 AS UNDER: 11. WE SEE NO MERIT IN THE ABOVE CONTENTIONS. THE FACT THAT THE ASSESSEES IN THE GROUP HAVE PURCHASED AND SOLD SHARES OF SIMILAR COMPANIES THROUGH THE SAME BROKER CANNOT BE A GROUND TO HOLD THAT THE TRANSACTIONS ARE SHAM AND BOGUS, ESPECIALLY WHEN DOCUMENTARY EVIDENCE WAS PRODUCED TO ESTABLISH THE GENUINENESS OF THE CLAIM. 12. FROM THE DOCUMENTS PRODUCED BEFORE US, WHICH WERE ALSO IN THE POSSESSION OF THE ASSESSING OFFICER, IT IS SEEN THAT THE SHARES IN QUESTION WERE IN FACT PURCHASED BY THE ASSESSEES ON THE RESPECTIVE DATES AND THE COMPANY HAS CONFIRMED TO HAVE HANDED OVER THE SHARES PURCHASED BY THE ASSESSEES. SIMILARLY, THE SALE OF THE SHARES TO THE RESPECTIVE BUYERS IS ALSO ESTABLISHED BY PRODUCING DOCUMENTARY EVIDENCE. IT IS TRUE THAT SOME OF THE TRANSACTIONS WERE OFF-MARKET TRANSACTIONS HOWEVER, THE PURCHASE AND SALE PRICE OF THE SHARES DECLARED BY THE ASSESSEES WERE IN CONFORMITY WITH THE MARKET RATES PREVAILING ON THE RESPECTIVE DATES AS IS SEEN FROM THE DOCUMENTS FURNISHED BY THE ASSESSEES. THEREFORE, THE FACT THAT SOME OF THE TRANSACTIONS WERE OFF-MARKET TRANSACTIONS CANNOT BE A GROUND TO TREAT THE TRANSACTIONS AS SHAM TRANSACTIONS. AS A SHAM TRANSACTION. THUS THE FACT THAT SOME OF THE TRANSACTIONS WERE OFF MARKED TRANSACTION CANNOT BE A GROUND TO TREAT THE TRANSACTION IN VIEW OF THE MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 112 ABOVE FACTS AND DISCUSSION, AS WELL AS THE DECISIONS OF THE HONBLE JURISDICTIONAL HIGH COURT, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE HAS DISCHARGED ITS ONUS OF PROVING THE FACT THAT SHARES WERE PURCHASED BY THE ASSESSEE IN THE YEAR 2002 WHICH WERE DEMATERIALIZED IN THE DEMAT ACCOUNT OF THE ASSESSEE ON 23/5/2003 AND THEREFORE THESE SHARES WERE HELD BY THE ASSESSEE UP TILL THE SAME WERE SOLD FROM THE DEMAT ACCOUNT OF THE ASSESSEE. THE TRANSACTION OF HOLDING SHARES ARE REFLECTED IN THE DEMAT ACCOUNT AND THE SALE OF SHARES ARE ALSO THROUGH DEMAT ACCOUNT AND CONSEQUENTLY THE TRANSACTION CANNOT BE DOUBTED AS SHAM OR BOGUS TRANSACTION. 9.15 IT IS SUBMITTED THAT DESPITE THE AFORESAID EVIDENCES, THE LEARNED ASSESSING OFFICER ON THE BASIS OF THE STATEMENT OF THE APPELLANT AND ALSO ADVERSE ACTION TAKEN BY THE SEBI AGAINST THE STOCK BROKER HELD THAT APPELLANT HAD OBTAINED ACCOMMODATION ENTRY FROM M/S P.K. AGGARWAL & CO. AND HAS INTRODUCED MONEY IN THE GARB OF THE CAPITAL GAIN. IT IS SUBMITTED THAT MERELY BECAUSE THE SHARE BROKER WAS INDULGED IN MALPRACTICES, WOULD NOT IPSO FACTO LEAD TO A CONCLUSION THAT SALE AND PURCHASE OF SHARES THROUGH SUCH STOCK BROKER IS NOT GENUINE. IT IS SUBMITTED THAT M/S P.K. AGGARWAL & CO. HAS NOT STATED THAT SALE AND PURCHASE OF THE SHARES ON BEHALF OF THE APPELLANT COMPANY IS NOT GENUINE NOR THE SHARE BROKER HAS EVER STATED THAT HE HAS PROVIDED ANY ACCOMMODATION ENTRY TO THE APPELLANT COMPANY. IT IS FURTHER SUBMITTED THAT BEFORE DRAWING THE ADVERSE CONCLUSION, THE LEARNED ASSESSING OFFICER HAS PLACED RELIANCE ON THE ACTION TAKEN BY THE SEBI AGAINST THE SHARE BROKER. IT IS FURTHER SUBMITTED THAT IT IS NOT IN DISPUTE THE SUCH MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 113 SHARE BROKER IS REGISTERED WITH THE STOCK EXCHANGE AND WAS TRADING IN SHARES ON BEHALF OF THE CLIENTS. IN THE INSTANT CASE, LEARNED AO HAS ALSO NOT DOUBTED THE SALE OF THE SHARES TO THE INDEPENDENT PARTIES. IT IS THEREFORE SUBMITTED THAT BECAUSE THE SHARE BROKER IS ALLEGEDLY INVOLVED IN PRICE MANIPULATION AND CROSS TRADING, SAME WOULD NOT AFFECT THE GENUINENESS OF THE PURCHASE AND SALE OF THE SHARES. 9.16 THE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. KORLAY TRADING CO. LTD. REPORTED IN 232 ITR 820 (CAL) HAS HELD THAT 'ONCE THE ASSESSEE HAS FURNISHED THE NAME OF THE COMPANY, NUMBER OF SHARES PURCHASED, DATE OF SALE, AMOUNT OF PURCHASE MONEY, AMOUNT OF SALE MONEY, ETC. THE ASSESSEE HAD DISCHARGED ITS INITIAL BURDEN AND IF THE BROKER DID NOT MAINTAIN ANY ACCOUNTS, THE TRANSACTION COULD NOT BE DOUBTED FOR NO FAULT OF THE ASSESSEE. ONCE THE ASSESSEE HAD DISCHARGED ITS INITIAL BURDEN, NO INVESTIGATION OR PROPER STEPS HAD BEEN TAKEN BY THE ITO TO BRING ON RECORD THE MATERIALS TO CONTROVERT THE CLAIM OF THE ASSESSEE. ' 9.17 IT IS SETTLED LAW THAT NO ADDITION CAN BE MADE ON THE BASIS OF SURMISES, SUSPICION AND CONJECTURES. RELIANCE FOR THIS PROPOSITION IS PLACED ON 37 ITR 271 (SC) UMA CHARAN SHAW & BROS. CO. V. CIT. IT HAS BEEN FURTHER HELD IN THE FOLLOWING CASES THAT SUSPICION HOWSOEVER STRONG CANNOT TAKE THE PLACE OF PROOF: I) 37 ITR 151(SC) OMAR SALAY MOHAMMAD SAIT V CIT THE CONCLUSIONS REACHED BY THE TRIBUNAL SHOULD NOT BE COLOURED BY ANY IRRELEVANT CONSIDERATIONS OR MATTERS OF PREJUDICE AND IF THERE ARE ANY MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 114 CIRCUMSTANCES WHICH REQUIRED TO BE EXPLAINED BY THE ASSESSEE, THE ASSESSEE SHOULD BE GIVEN AN OPPORTUNITY OF DOING SO. ON NO ACCOUNT WHATEVER SHOULD THE TRIBUNAL BASE ITS FINDINGS ON SUSPICIOUS, CONJECTURES OR SURMISES NOR SHOULD IT ACT ON NO EVIDENCE AT ALL OR ON IMPROPER REJECTION OF MATERIAL AND RELEVANT EVIDENCE OR PARTLY ON EVIDENCE AND PARTLY ON SUSPICIONS, CONJECTURES OR SURMISES AND IF IT DOES ANYTHING OF THE SORT, ITS FINDINGS, EVEN THOUGH ON QUESTIONS OF FACT, WILL BE LIABLE TO BE SET ASIDE BY THIS COURT. II) 26 ITR 736 (SC) DHIRAJLAL GIRDHARILAL V CIT, BOMBAY WHEN A COURT OF FACT ACTS ON MATERIAL, PARTLY RELEVANT AND PARTLY IRRELEVANT, IT IS IMPOSSIBLE TO SAY TO WHAT EXTENT THE MIND OF THE COURT WAS AFFECTED BY THE IRRELEVANT MATERIAL USED BY IT IN ARRIVING AT ITS FINDING. SUCH A FINDING IS VITIATED BECAUSE OF THE USE OF INADMISSIBLE MATERIAL III) 26 ITR 775 (SC) DHAKESHWARI COTTON MILLS LTD. V CIT THE ESTIMATE OF THE GROSS RATE OF PROFIT ON SALES, BOTH BY THE INCOME-TAX OFFICER AND THE TRIBUNAL, SEEMS TO BE BASED ON SURMISES, SUSPICIONS AND CONJECTURES. IT IS SOMEWHAT SURPRISING THAT THE TRIBUNAL TOOK FROM THE REPRESENTATIVE OF THE DEPARTMENT A STATEMENT OF GROSS PROFIT RATES OF OTHER COTTON MILLS WITHOUT SHOWING THAT STATEMENT TO THE ASSESSEE AND WITHOUT GIVING HIM AN OPPORTUNITY TO SHOW THAT THAT STATEMENT HAD NO RELEVANCY WHATSOEVER TO THE CASE OF THE MILL IN QUESTION. BOTH THE INCOME-TAX OFFICER AND THE TRIBUNAL IN ESTIMATING THE GROSS PROFIT RATE MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 115 ON SALES DID NOT ACT ON ANY MATERIAL BUT ACTED ON PURE GUESS AND SUSPICION. IV) 37 ITR 288 (SC) LAL CHAND BHAGAT AMBICA RAM V CIT THE TRIBUNAL IN ARRIVING AT THE CONCLUSION IT DID IN THE PRESENT CASE INDULGED IN SUSPICIONS, CONJECTURES AND SURMISES AND ACTED WITHOUT ANY EVIDENCE OR UPON A VIEW OF THE FACTS WHICH COULD NOT REASONABLY BE ENTERTAINED OR THE FACTS FOUND WERE SUCH THAT NO PERSON ACTING JUDICIALLY AND PROPERLY INSTRUCTED AS TO THE RELEVANT LAW COULD HAVE FOUND, OR THE FINDING WAS, IN OTHER WORDS, PERVERSE AND THE COURT IS ENTITLED TO INTERFERE. 10 LASTLY IT IS SUBMITTED IN THE INSTANT CASES, IN THE ASSESSMENT PASSED U/S 143(3) OF THE ACT, AO HAS HELD THAT GAIN IS SHORT TERM, AS DATE OF PURCHASE WAS TREATED AS DATE WHEN THE SHARES WERE TRANSFERRED IN THE DEMAT ACCOUNT OF THE ASSESSEE, HOWEVER SINCE SUCH FINDING WAS RECORDED WITHOUT MAKING ENQUIRY FROM THE SHARE BROKERS AS SUCH, SAME IS MISCONCEIVED. IT IS RESPECTFULLY SUBMITTED THAT EACH OF THE SHARE BROKER HAS CONFIRMED THE FACT OF PURCHASE OF SHARES ON THE DATE STATED IN THE CONTRACT NOTES, AND IN RESPECT OF TRANSFER OF SHARES IN THE DEMAT ACCOUNT OF THE ASSESSEE IT HAS BEEN STATED BY THE BROKER THAT SUCH SHARES HAVE BEEN TRANSFERRED AFTER DEMATERIALIZATION, AS SUCH, FINDING OF THE LEARNED AO IN THE ORDER OF ASSESSMENT PASSED U/S 143(3) DESERVES TO BE REJECTED. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 116 11 FURTHER IN RESPECT OF FINDING OF THE LEARNED AO IN THE ORDER PASSED U/S 153A OF THE ACT AND UPHELD BY THE LEARNED CIT(A), IT IS RESPECTFULLY SUBMITTED THAT DESPITE THE DETAILED ENQUIRY FROM THE STOCK BROKER, STOCK EXCHANGE AND ALSO FROM THE DEPOSITORY, NO ADVERSE MATERIAL HAS BEEN BROUGHT ON RECORD, AND INFACT STOCK BROKER, STOCK EXCHANGE AND THE DEPOSITORY HAS CONFIRMED THE TRANSACTION OF THE ASSESSEE. EXCEPT HARBORING DOUBT PURELY ON SUSPICION AND ON THE BASIS OF STATEMENT OF SHRI ASEEM KUMAR GUPTA, AND SHRI. I.C. JINDAL (WHICH STATEMENT CANNOT BE RELIED FOR THE REASONS STATED HEREINABOVE), NO ADVERSE MATERIAL HAS BEEN BROUGHT ON RECORD TO HOLD THAT CAPITAL GAIN RECEIVED BY THE ASSESSEE IS UNEXPLAINED. IN FACT WHILE HOLDING THAT CAPITAL GAIN RECEIVED BY THE ASSESSEE AS UNEXPLAINED, AO HAS ACCEPTED THE GENUINENESS OF THE PURCHASE, AS SUCH, ONCE THE PURCHASE OF THE SHARES HAS BEEN ACCEPTED, SUBSEQUENT SALE OF SHARES CANNOT BE DOUBTED. IN SUCH CIRCUMSTANCES, IT IS SUBMITTED WITH RESPECT THAT ADDITION MADE BY THE LEARNED AO AND SUSTAINED BY THE LEARNED CIT(A) DESERVES TO BE DELETED. 54 THE LEARNED CIT [DR] APART FROM RELYING ON THE ORDER OF ASSESSMENT, HAS ALSO SUBMITTED THAT SHRI. ASEEM GUPTA IN HIS STATEMENT HAS STATED THAT HE HAD ARRANGED CAPITAL GAIN FOR SHRI. IC JINDAL AND HIS COMPANIES THROUGH SHRI. SANTOSH SHAH. HE FURTHER SUBMITTED THAT VARIOUS ACTIONS WERE TAKEN AGAINST THE SHARE BROKER BY THE SEBI AND STOCKS WERE PURCHASED FROM OFF MARKET, AUTHENTICITY OF THE CONTRACT NOTES WERE NOT PROVED AND SHARES WERE MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 117 DEMATERIALIZED AFTER A LONG TIME AND THERE IS NO EVIDENCE OF DELIVERY OF THE SHARES. 55 THE LEARNED AR IN THE REJOINDER SUBMITTED THAT THE SHRI. ASEEM GUPTA HAS MADE STATEMENT WHICH IS FACTUALLY INCORRECT. IT WAS SUBMITTED THAT SHRI. IC JINDAL SPECIFICALLY REQUESTED AS THE STATEMENT WAS RECORDED U/S 132(4) IN THE MID NIGHT AND WHOLE NIGHT HE WAS NOT ALLOWED TO SLEEP AND HE WAS FULLY EXHAUSTED AND WAS NOT IN THE FIT STATE OF MIND WHEN THE STATEMENT OF SHRI. ASEEM GUPTA WAS RECORDED IN HIS PRESENCE, AS SUCH, ASSESSEE VIDE ITS LETTER DATED 15.09.2011 DULY REQUESTED TO RECORD THE STATEMENT OF SHRI. ASEEM GUPTA IN HIS PRESENCE WHICH WAS NEVER DONE. IN RESPECT OF ACTION TAKEN BY SEBI AGAINST THE STOCK BROKER, IT WAS SUBMITTED THAT SAME IS WHOLLY IRRELEVANT BECAUSE THERE WAS NO RESTRICTION BROUGHT TO HIS NOTICE ON THE BROKER FOR SALE AND PURCHASE OR DEAL IN SHARES WHEN THE TRANSACTION OF THE ASSESSEE TOOK PLACE. IT WAS SUBMITTED THAT ALL THE TRANSACTION OF THE ASSESSEE TOOK PLACE TILL 29.11.2005, AND TILL THAT DATE THERE WAS NO RESTRICTION ON THE STOCK BROKER. THE LEARNED AR ALSO FILED A COPY OF THE ORDER OF THE SEBI AND SUBMITTED THAT RESTRICTION WAS IMPOSED MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 118 ON THE BROKER ON 30.11.2005 THAT TOO IN RESPECT OF SCRIPTS OF NAGESWAR INVESTMENT LTD. BUT NOT IN ANY OF THE SCRIPTS SOLD BY THE ASSESSEE. IT IS ALSO SUBMITTED THAT IT IS AN ADMITTED FACT THAT THE SHARES WERE PURCHASED OFF MARKET AND DELIVERY OF SCRIPTS WERE TAKEN IN PHYSICAL FORM WHICH WAS DULY CONFIRMED BY THE BROKERS IN THEIR RESPECTIVE REPLY GIVEN TO THE AO IN RESPONSE TO THE NOTICES U/S 131/133(6) AND SUBSEQUENTLY THE SHARES WERE DEMATERIALIZED AND CREDITED IN THE DEMAT ACCOUNT OF THE ASSESSEE AND ONLY THEREAFTER THE SHARES WERE SOLD THROUGH STOCK EXCHANGE. IT WAS ALSO SUBMITTED THAT CBDT IN ITS CIRCULAR NOS. 768 DATED 24.06.1998 AND 704 DATED 28.04.1995 HAS PROVIDED THAT DATE MENTIONED IN THE CONTRACT NOTE SHOULD BE TAKEN AS THE DATE OF PURCHASE OF THE SHARES AND DATE OF TRANSFER IN THE DEMAT ACCOUNT IS NOT RELEVANT FOR THE DETERMINATION OF THE HOLDING PERIOD FOR THE COMPUTATION OF THE CAPITAL GAIN. THE DATE OF PURCHASE MENTIONED IN THE CONTRACT NOTE SHOULD BE TAKEN TO DETERMINE THE HOLDING PERIOD OF THE SHARES IN ORDER TO COMPUTE THE LTCG. ASSESSEE FURTHER RELIED ON SEVERAL DECISIONS ON THIS COUNT. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 119 56 WE HAVE EXAMINED THE DOCUMENTS FILED ON RECORD, SUBMISSIONS OF THE LEARNED AR AND LEARNED CIT DR AS WELL AS THE ORDERS OF THE ASSESSING OFFICER. THE CIT(A) HAS NOT ADJUDICATED THE GROUNDS OF APPEAL RAISED BEFORE HIM. WE FAILED TO UNDERSTAND WHEN THE ASSESSEE FILED DETAILED WRITTEN SUBMISSIONS, ADDITIONAL EVIDENCE ALONG WITH AN APPLICATION U/R 46A, ON WHICH FOUR REMAND REPORTS WERE FILED BY THE AO AFTER DETAILED ENQUIRY FROM THE BROKERS, WHY THE LD. CIT (APPEALS) HAS NOT DECIDED THE APPEAL ON MERITS. THE REVENUE AUTHORITIES SHOULD NOT TAKE ADVANTAGE OF THE IGNORANCE OF THE ASSESSEE OF THE LEGAL PROVISIONS. IN FACT THEY SHOULD ASSIST THEM TO RECTIFY THE ERRORS COMMITTED BY AN ASSESSEE DUE TO IGNORANCE OF LAW. THE LD. CIT (APPEALS) WAS WELL AWARE THAT ONLY ASSESSMENT PROCEEDINGS WHICH ARE PENDING ON THE DATE OF SEARCH ARE ABATED BUT NOT THE COMPLETED ASSESSMENTS CHALLENGED IN THE APPELLATE PROCEEDINGS. SECTION 250(6) OF THE INCOME TAX ACT, REQUIRES THAT LD. CIT (APPEALS) SHOULD DISPOSE OFF THE APPEAL BY STATING THE POINTS FOR DETERMINATION AND REASONS FOR THE DECISION. THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. PREMKUMAR ARJUNDAS LUTHRA (HUF) REPORTED IN [2016] 69 TAXMANN.COM 407 (BOMBAY) HAS HELD AS UNDER: MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 120 8. FROM THE AFORESAID PROVISIONS, IT IS VERY CLEAR ONCE AN APPEAL IS PREFERRED BEFORE THE CIT(A), THEN IN DISPOSING OF THE APPEAL, HE IS OBLIGED TO MAKE SUCH FURTHER INQUIRY THAT HE THINKS FIT OR DIRECT THE ASSESSING OFFICER TO MAKE FURTHER INQUIRY AND REPORT THE RESULT OF THE SAME TO HIM AS FOUND IN SECTION 250(4) OF THE ACT. FURTHER SECTION 250(6) OF THE ACT OBLIGES THE CIT(A) TO DISPOSE OF AN APPEAL IN WRITING AFTER STATING THE POINTS FOR DETERMINATION AND THEN RENDER A DECISION ON EACH OF THE POINTS WHICH ARISE FOR CONSIDERATION WITH REASONS IN SUPPORT. SECTION 251(1)(A) AND (B) OF THE ACT PROVIDE THAT WHILE DISPOSING OF APPEAL THE CIT(A) WOULD HAVE THE POWER TO CONFIRM, REDUCE, ENHANCE OR ANNUL AN ASSESSMENT AND/OR PENALTY. BESIDES EXPLANATION TO SUB-SECTION (2) OF SECTION 251 OF THE ACT ALSO MAKES IT CLEAR THAT WHILE CONSIDERING THE APPEAL, THE CIT(A) WOULD BE ENTITLED TO CONSIDER AND DECIDE ANY ISSUE ARISING IN THE PROCEEDINGS BEFORE HIM IN APPEAL FILED FOR ITS CONSIDERATION, EVEN IF THE ISSUE IS NOT RAISED BY THE APPELLANT IN ITS APPEAL BEFORE THE CIT(A). THUS ONCE AN ASSESSEE FILES AN APPEAL UNDER SECTION 246A OF THE ACT, IT IS NOT OPEN TO HIM AS OF RIGHT TO WITHDRAW OR NOT PRESS THE APPEAL. IN FACT THE CIT(A) IS OBLIGED TO DISPOSE OF THE APPEAL ON MERITS. IN FACT WITH EFFECT FROM 1ST JUNE, 2001 THE POWER OF THE CIT(A) TO SET ASIDE THE ORDER OF THE ASSESSING OFFICER AND RESTORE IT TO THE ASSESSING OFFICER FOR PASSING A FRESH ORDER STANDS WITHDRAWN. THEREFORE, IT WOULD BE NOTICED MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 121 THAT THE POWERS OF THE CIT(A) IS CO-TERMINUS WITH THAT OF THE ASSESSING OFFICER I.E. HE CAN DO ALL THAT ASSESSING OFFICER COULD DO. THEREFORE JUST AS IT IS NOT OPEN TO THE ASSESSING OFFICER TO NOT COMPLETE THE ASSESSMENT BY ALLOWING THE ASSESSEE TO WITHDRAW ITS RETURN OF INCOME, IT IS NOT OPEN TO THE ASSESSEE IN APPEAL TO WITHDRAW AND/OR THE CIT(A) TO DISMISS THE APPEAL ON ACCOUNT OF NON-PROSECUTION OF THE APPEAL BY THE ASSESSEE. THIS IS AMPLY CLEAR FROM THE SECTION 251(1)(A) AND (B) AND EXPLANATION TO SECTION 251(2) OF THE ACT WHICH REQUIRES THE CIT(A) TO APPLY HIS MIND TO ALL THE ISSUES WHICH ARISE FROM THE IMPUGNED ORDER BEFORE HIM WHETHER OR NOT THE SAME HAS BEEN RAISED BY THE APPELLANT BEFORE HIM. ACCORDINGLY, THE LAW DOES NOT EMPOWER THE CIT(A) TO DISMISS THE APPEAL FOR NON- PROSECUTION AS IS EVIDENT FROM THE PROVISIONS OF THE ACT . 57 IN VIEW OF THE AFORESAID DECISION, WE THEREFORE HOLD THAT THE ACTION OF THE LD. CIT (APPEALS) IS NOT IN ACCORDANCE WITH LAW AND HE HAS TO DECIDE THE APPEAL ON MERITS. 58 NOW COMING TO THE ISSUE OF TAXABILITY OF LONG TERM CAPITAL GAINS TREATED AS SPECULATION AND SHORT TERM CAPITAL GAIN, WE HAVE EXAMINED THAT THE ASSESSEE HAS PRODUCED ALL SUCH NECESSARY DOCUMENTS, SUCH AS DEMAT ACCOUNT, CONTRACT NOTES AND PURCHASE BILL, CONTRACT NOTES AND SALE BILL, INVESTMENT LEDGER ACCOUNT, MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 122 WORKING OF CAPITAL GAIN, LEDGER ACCOUNT OF M/S P.K. AGARWAL & CO. FOR THE PERIOD OF 01.04.2003 TO 31.03.2005, ACCOUNT OF S.K. FINANCIAL SERVICES PVT. LTD. IN RESPECT OF PURCHASE OF SHARES, THE INVESTMENT ACCOUNT AS ON 31.03.2004, AUDITED BALANCE SHEET AS ON 31.03.2004, PROOF OF PAYMENT OF STT ETC. THE AO HAD MADE ENQUIRY IN THE ASSESSMENT PROCEEDINGS AS WELL AS IN THE REMAND PROCEEDINGS FROM ALL THE RELATED PARTIES INVOLVED SUCH AS ALL THE THREE BROKERS I.E. M/S P.K. AGARWAL & CO., M/S S.B. BHUTRA & CO. AND S.K. KHEMKA, CALCUTTA STOCK EXCHANGE AND DEPOSITORY M/S IKM INVESTOR SERVICES LTD. THE BROKERS HAVE CONFIRMED THE PURCHASES WERE MADE THROUGH THEM OFF LINE AND PHYSICAL DELIVERY WAS TAKEN AND AFTER DEMATERIALIZATION THE SHARES WERE CREDITED IN THE DEMAT ACCOUNT OF THE ASSESSEE FROM WHERE SHARES WERE SUBSEQUENTLY SOLD THROUGH STOCK EXCHANGE AND STT WAS ALSO PAID. THE CALCUTTA STOCK EXCHANGE TO WHOM NOTICE WAS SENT U/S 133(6) THROUGH EMAIL, HAS ALSO REPLIED AND FURNISHED THE DETAILS WHICH INFORMATION INDICATES THAT THE PRICE OF THE SHARES PURCHASED OFF LINE IS MATCHING WITH THE PRICE TRADED ON THE STOCK EXCHANGE. FURTHER, IN RESPONSE TO THE ENQUIRY, DEPOSITORY M/S IKM INVESTOR SERVICES LTD ALSO FILED THE NECESSARY DETAILS WHICH CONFIRM THE DETAILS FILED MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 123 BY THE ASSESSEE. THE AO ALSO MADE ENQUIRY U/S 133(6) THROUGH EMAIL FROM CALCUTTA STOCK EXCHANGE AT THE TIME OF COMPLETING ASSESSMENT U/S 153A OF THE ACT, THOUGH NOT QUOTED IN THE ORDER OF ASSESSMENT AND FOUND THAT IN REPLY NO ADVERSE COMMENTS WAS MADE BY CALCUTTA STOCK EXCHANGE. EVEN FINDING OF THE AO WHILE PASSING THE ORDER U/S 153A OF THE ACT IS INCORRECT THAT CONTRACT NOTES SUBMITTED AT THE TIME OF ORIGINAL ASSESSMENT WERE DIFFERENT THAN LATER FILED. THE CONTRACT NOTE OF PURCHASES MADE WERE OF MUCH EARLIER DATE WHEN STT WAS NOT APPLICABLE AS SAME WAS APPLICABLE W.E.F. 01.10.2004 AND ALL THE PURCHASES WERE MADE PRIOR TO THAT DATE. STT HAS BEEN PAID IN THE CONTRACT FOR THE SALES MADE STOCK EXCHANGE. 59 AFTER EXAMINING ALL THE DOCUMENTS, CONFIRMATION BY THE STOCK BROKERS AND NECESSARY REPLIES FILED BY THE RELATED PARTIES, WE DO NOT HESITATE IN HOLDING THAT BOTH THE LOWER AUTHORITIES HAVE NOT CORRECTLY EXAMINED THE FACTS AND CIRCUMSTANCES IN ACCORDANCE WITH LAW. THE AO HAS TREATED LONG TERM CAPITAL GAIN DECLARED BY THE ASSESSEE AS SHORT TERM BY OBSERVING AS UNDER: MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 124 IN THE LIGHT OF WHAT HAS BEEN WRITTEN ABOVE, RS. 36,72,01,649/- IS TREATED AS SHORT TERM CAPITAL GAIN [ON WHICH SECURITY TRANSACTION TAX (STT) IS NOT PAID] UNDER THE IT ACT, 1961 SINCE PAYMENT OF STT TOO HAS NOT BEEN CONFIRMED (IT HAS BEEN ALLEGEDLY PAID BY THE BROKER ON BEHALF OF THE ASSESSEE BUT NO DOCUMENTARY PROOF HAS BEEN FURNISHED) AND THE DATE OF ENTRY AND EXIT FROM DEMAT ACCOUNT IS TAKEN AS THE TIME PERIOD FOR WHICH SHARES ARE ACTUALLY HELD BY THE ASSESSEE COMPANY. 60 WE FIND THAT CONTRACT NOTES ISSUED BY THE BROKERS FOR THE PURCHASE OF THE SHARES HAVE DULY BEEN CONFIRMED BY THEM DIRECTLY TO AO IN RESPONSE TO NOTICES U/S 133(6) SUBMITTED BY HIM IN THE REMAND REPORT BEFORE THE LD. CIT (APPEALS). THE BROKERS HAVE CONFIRMED THE PHYSICAL DELIVERY WAS TAKEN OF THE SCRIPTS PURCHASED BY THE ASSESSEE AND ON THE REQUEST OF THE ASSESSEE THEY WERE KEPT FOR DEMATERIALIZATION AND AFTER DEMATERIALIZATION THE SHARES WERE CREDITED TO THE DEMAT ACCOUNT OF THE ASSESSEE. IN VIEW THEREOF IT IS HELD THAT AO IS INCORRECT IN HOLDING THAT DELIVERY OF THE SHARES HAS NOT BEEN TAKEN BY THE ASSESSEE. ALL THE SALES WERE EFFECTED THROUGH STOCK EXCHANGE, STT HAS BEEN PAID WHICH IS CLEARLY DEPICTED IN THE CONTRACT NOTES, AND DETAILS PROVIDED AND WERE CONFIRMED BY THE BROKERS AS WELL AS DEPOSITORY. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 125 61 THE CBDT IN THEIR CIRCULARS QUOTED ABOVE HAVE EXPRESSED THAT DATE MENTIONED IN THE CONTRACT NOTE SHOULD BE TAKEN AS THE DATE OF PURCHASE OF THE SHARES AND DATE OF TRANSFER IN THE DEMAT ACCOUNT IS NOT RELEVANT FOR THE DETERMINATION OF THE HOLDING PERIOD FOR THE COMPUTATION OF THE CAPITAL GAIN. WE, THEREFORE, HOLD THAT DATE MENTIONED IN THE CONTRACT NOTE OF PURCHASE BE TAKEN TO DETERMINE THE HOLDING PERIOD OF THE SHARES IN ORDER TO COMPUTE THE LTCG. 62 WE FIND THAT AFTER THIS ASSESSMENT, ENQUIRES MADE BY SUBMITTING THE REMAND REPORT, SUBSEQUENT AO WHILE COMPLETING THE ASSESSMENT U/S 153A OF THE ACT HAS MADE POST ENQUIRIES AND HAS OBSERVED THAT VARIOUS ACTIONS HAVE BEEN TAKEN AGAINST THE SHARE BROKER AND AGAINST THE SCRIPT IN RESPECT OF WHICH LTCG HAS BEEN CLAIMED. THE DATES OF ENQUIRY MENTIONED IN THE ASSESSMENT ORDER PASSED U/S 153A OF THE ACT ARE MUCH AFTER THE DATE OF SALE OF SHARES BY THE ASSESSEE EXCEPT ORDER DATED 29.09.2005 OF THE SEBI RESTRICTING P K AGARWAL & CO. NOT TO BUY SALE OR DEAL IN SECURITIES IN ANY MANNER. THE LEARNED AR HAS FILED ORDER DATED 11.08.2008 BY WHICH THE RESTRICTIONS HAVE BEEN VACATED OF THE EARLIER ORDERS. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 126 IN THIS ORDER, RESTRICTIONS ON P K AGARWAL & CO. HAVE BEEN MADE BUT ONLY FROM 30.11.2005 IN RESPECT OF SCRIPTS OF NAGESWAR INVESTMENT LTD. 63 HON CALCUTTA HIGH COURT IN CASE OF PR CIT V RUNGTA PROPERTIES LIMITED 83 TAXMANN.COM 106( CAL) HAS DEALT WITH IDENTICAL SITUATION WHERE BROKER WAS SUSPENDED AND IT HELD AS UNDER :- 11. ON THE LAST POINT, THE TRIBUNAL HELD THAT THE ASSESSING OFFICER HAD NOT BROUGHT ON RECORDS ANY MATERIAL TO SHOW THAT THE TRANSACTIONS IN SHARES OF THE COMPANY INVOLVED WERE FALSE OR FICTITIOUS. IT IS FINDING OF THE ASSESSING OFFICER THAT THE SCRIPTS OF THIS COMPANY WAS EXECUTED BY A BROKER THROUGH CROSS DEALS AND THE BROKER WAS SUSPENDED FOR SOME TIME. IT IS ASSESSEE'S CONTENTION ON THE OTHER THAT EVEN THOUGH THERE ARE ALLEGATIONS AGAINST THE BROKER, BUT FOR THAT REASON ALONE THE ASSESSEE CANNOT BE HELD LIABLE. ON THIS POINT THE TRIBUNAL HELD - 'AS A MATTER OF FACT THE AO DOUBTED THE INTEGRITY OF THE BROKER OR THE MANNER IN WHICH THE BROKER OPERATION AS PER THE STATEMENT OF ONE OF THE DIRECTORS OF THE BROKER FIRM AND ALSO AO OBSERVED THAT ASSESSEE HAD NOT FURNISHED ANY EXPLANATION IN RESPECT OF THE INTENTION OF SHOWING TRADING OF SHARES ONLY IN THREE PENNY STOCKS. AO RELIED THE LOSS OF RS. 25,30, 396/- ONLY ON THE BASIS OF INFORMATION SUBMITTED BY THE STOCK FICTITIOUS. AO HAS ALSO NOT DOUBTED THE GENUINENESS OF THE DOCUMENTS PLACED ON RECORD BY THE ASSESSEE. AO'S OBSERVATION AND CONCLUSION ARE MERELY BASED ON THE INFORMATION REPRESENTATIVE. THEREFORE ON SUCH BASIS NO DISALLOWANCE CAN BE MADE AND ACCORDINGLY WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT (A), WHO HAS RIGHTLY ALLOWED THE CLAIM OF ASSESSEE. THUS GROUND NO. 1 OF THE REVENUE IS DISMISSED.' MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 127 WE AGREE WITH THE REASONING OF THE TRIBUNAL ON THIS POINT ALSO. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE IMPUGNED ORDER. THE SUGGESTED QUESTIONS, IN OUR OPINION DO NOT RAISE ANY SUBSTANTIAL QUESTION OF LAW. 64 FURTHER COORDINATE BENCH IN CASE OF [2017] 77 TAXMANN.COM 260 (AHMEDABAD - TRIB.) PRATIK SURYAKANT SHAH V. INCOME-TAX OFFICER, WARD- 10 (3), AHMEDABAD, WHERE THE FACTS ARE ALMOST IDENTICAL AS ARE BEFORE US, HAS HELD AS UNDER :- 13. HAVING HEARD THE RIVAL CONTENTIONS, WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW. AS MENTIONED ELSEWHERE, WE HAVE CONSIDERED THE FACTS IN ITA NO.810/AHD/2015. WE FIND THAT THE ASSESSEE HAD PURCHASED 3000 SHARES OF TELANT INFO LTD FROM M/S. MAHASAGAR SECURITIES PVT LTD ON APRIL 2004. THE CONSIDERATION WAS PAID AND THE PAYMENT OF CONSIDERATION IS NOT IN DISPUTE. THE SHARES OF TELANT INFO LTD WERE LISTED IN THE BOMBAY STOCK EXCHANGE AT THAT POINT OF TIME. THE SHARES SO PURCHASED WERE SOLD THROUGH M/S. ALLIANCE INTERMEDIATERIES & NETWORK PVT LTD AND THE CONSIDERATION WAS RECEIVED BY CHEQUE. IT WOULD BE PERTINENT TO MENTION HERE THAT THOUGH THE SHARES WERE PURCHASED IN PHYSICAL FORM, THE SAME WERE SENT TO THE COMPANY WITH SHARE APPLICATION FORM AND THE SHARES WERE TRANSFERRED BY THE COMPANY IN THE NAME OF THE PURCHASER. THEREAFTER, THE SHARES WERE TRANSFERRED IN THE DEMAT ACCOUNT, FROM WHERE THEY WERE SOLD. IT IS NOT THE CASE OF THE REVENUE THAT THE CONSIDERATION PAID BY THE ASSESSEE AT THE TIME OF PURCHASE OF SHARES WAS RECEIVED BACK IN CASH, NOR IT IS THE CASE OF THE REVENUE THAT THE SALE CONSIDERATION RECEIVED BY THE ASSESSEE WAS RETURNED BACK IN CASH. IT IS ALSO NOT THE CASE OF THE REVENUE THAT THE SHARES IN QUESTION ARE STILL LYING WITH THE ASSESSEE, NOR IT IS THE CASE OF THE REVENUE THAT THE AMOUNTS RECEIVED BY THE ASSESSEE ON SALE OF THE SHARES IS MORE THAN WHAT IS DECLARED BY THE ASSESSEE. 14. THE ENTIRE ASSESSMENT IS BASED UPON THE STATEMENT OF SHRI MUKESH CHOKSI. IT IS AN UNDISPUTED FACT THAT NEITHER A COPY OF THE STATEMENT WAS SUPPLIED TO THE ASSESSEE NOR ANY OPPORTUNITY OF CROSS-EXAMINATION WAS GIVEN BY THE ASSESSING OFFICER/CIT(A). THE HON'BLE SUPREME COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES [CIVIL APPEAL NO. 4228 OF 2006] WAS SEIZED WITH THE FOLLOWING ACTION OF THE TRIBUNAL: '6. THE PLEA OF NO CROSS EXAMINATION GRANTED TO THE VARIOUS DEALERS WOULD NOT HELP THE APPELLANT CASE SINCE THE EXAMINATION OF THE DEALERS WOULD NOT BRING OUT ANY MATERIAL WHICH WOULD NOT BE IN THE POSSESSION OF THE APPELLANT THEMSELVES TO EXPLAIN AS TO WHY THEIR EX FACTORY PRICES REMAIN STATIC. SINCE WE ARE NOT UPHOLDING AND APPLYING THE EX FACTORY PRICES, AS WE FIND THEM CONTRAVENED AND MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 128 NOT NORMAL PRICE AS ENVISAGED UNDER SECTION 4(1), WE FIND NO REASON TO DISTURB THE COMMISSIONERS ORDERS.' 15. THE HON'BLE APEX COURT HELD AS UNDER: 'ACCORDING TO US, NOT ALLOWING THE ASSESSEE TO CROSS-EXAMINE THE WITNESSES BY THE ADJUDICATING AUTHORITY THOUGH THE STATEMENTS OF THOSE WITNESSES WERE MADE THE BASIS OF THE IMPUGNED ORDER IS A SERIOUS FLAW WHICH MAKES THE ORDER NULLITY INASMUCH AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BECAUSE OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED. IT IS TO BE BORNE IN MIND THAT THE ORDER OF THE COMMISSIONER WAS BASED UPON THE STATEMENTS GIVEN BY THE AFORESAID TWO WITNESSES. EVEN WHEN THE ASSESSEE DISPUTED THE CORRECTNESS OF THE STATEMENTS AND WANTED TO CROSS-EXAMINE, THE ADJUDICATING AUTHORITY DID NOT GRANT THIS OPPORTUNITY TO THE ASSESSEE. IT WOULD BE PERTINENT TO NOTE THAT IN THE IMPUGNED ORDER PASSED BY THE ADJUDICATING AUTHORITY HE HAS SPECIFICALLY MENTIONED THAT SUCH AN OPPORTUNITY WAS SOUGHT BY THE ASSESSEE. HOWEVER, NO SUCH OPPORTUNITY WAS GRANTED AND THE AFORESAID PLEA IS NOT EVEN DEALT WITH BY THE ADJUDICATING AUTHORITY. AS FAR AS THE TRIBUNAL IS CONCERNED, WE FIND THAT REJECTION OF THIS PLEA IS TOTALLY UNTENABLE. THE TRIBUNAL HAS SIMPLY STATED THAT CROSS-EXAMINATION OF THE SAID DEALERS COULD NOT HAVE BROUGHT OUT ANY MATERIAL WHICH WOULD NOT BE IN POSSESSION OF THE APPELLANT THEMSELVES TO EXPLAIN AS TO WHY THEIR EX-FACTORY PRICES REMAIN STATIC. IT WAS NOT FOR THE TRIBUNAL TO HAVE GUESS WORK AS TO FOR WHAT PURPOSES THE APPELLANT WANTED TO CROSS-EXAMINE THOSE DEALERS AND WHAT EXTRACTION THE APPELLANT WANTED FROM THEM. AS MENTIONED ABOVE, THE APPELLANT HAD CONTESTED THE TRUTHFULNESS OF THE STATEMENTS OF THESE TWO WITNESSES AND WANTED TO DISCREDIT THEIR TESTIMONY FOR WHICH PURPOSE IT WANTED TO AVAIL THE OPPORTUNITY OF CROSS-EXAMINATION. THAT APART, THE ADJUDICATING AUTHORITY SIMPLY RELIED UPON THE PRICE LIST AS MAINTAINED AT THE DEPOT TO DETERMINE THE PRICE FOR THE PURPOSE OF LEVY OF EXCISE DUTY. WHETHER THE GOODS WERE, IN FACT, SOLD TO THE SAID DEALERS/WITNESSES AT THE PRICE WHICH IS MENTIONED IN THE PRICE LIST ITSELF COULD BE THE SUBJECT MATTER OF CROSS- EXAMINATION. THEREFORE, IT WAS NOT FOR THE ADJUDICATING AUTHORITY TO PRESUPPOSE AS TO WHAT COULD BE THE SUBJECT MATTER OF THE CROSS-EXAMINATION AND MAKE THE REMARKS AS MENTIONED ABOVE. WE MAY ALSO POINT OUT THAT ON AN EARLIER OCCASION WHEN THE MATTER CAME BEFORE THIS COURT IN CIVIL APPEAL NO. 2216 OF 2000, ORDER DATED 17.03.2005 WAS PASSED REMITTING THE CASE BACK TO THE TRIBUNAL WITH THE DIRECTIONS TO DECIDE THE APPEAL ON MERITS GIVING ITS REASONS FOR ACCEPTING OR REJECTING THE SUBMISSIONS. IN VIEW THE ABOVE, WE ARE OF THE OPINION THAT IF THE TESTIMONY OF THESE TWO WITNESSES IS DISCREDITED, THERE WAS NO MATERIAL WITH THE DEPARTMENT ON THE BASIS OF WHICH IT COULD JUSTIFY ITS ACTION, AS THE STATEMENT OF THE AFORESAID TWO WITNESSES WAS THE ONLY BASIS OF ISSUING THE SHOW CAUSE MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 129 WE, THUS, SET ASIDE THE IMPUGNED ORDER AS PASSED BY THE TRIBUNAL AND ALLOW THIS APPEAL.' 16. ON THE STRENGTH OF THE AFOREMENTIONED DECISION OF THE HON'BLE SUPREME COURT, THE ASSESSMENT ORDER HAS TO BE QUASHED. 17. FOR THE SAKE OF THE COMPLETENESS OF THE ADJUDICATION, EVEN ON FACTS OF THE CASE, THE ORDERS OF THE AUTHORITIES BELOW CANNOT BE ACCEPTED. THERE IS NO DENYING THAT CONSIDERATION WAS PAID WHEN THE SHARES WERE PURCHASED. THE SHARES WERE THEREAFTER SENT TO THE COMPANY FOR THE TRANSFER OF NAME. THE COMPANY TRANSFERRED THE SHARES IN THE NAME OF THE ASSESSEE. THERE IS NOTHING ON RECORD WHICH COULD SUGGEST THAT THE SHARES WERE NEVER TRANSFERRED IN THE NAME OF THE ASSESSEE. THERE IS ALSO NOTHING ON RECORD TO SUGGEST THAT THE SHARES WERE NEVER WITH THE ASSESSEE. ON THE CONTRARY, THE SHARES WERE THEREAFTER TRANSFERRED TO DEMAT ACCOUNT. THE DEMAT ACCOUNT WAS IN THE NAME OF THE ASSESSEE, FROM WHERE THE SHARES WERE SOLD. IN OUR UNDERSTANDING OF THE FACTS, IF THE SHARES WERE OF SOME FICTITIOUS COMPANY WHICH WAS NOT LISTED IN THE BOMBAY STOCK EXCHANGE/NATIONAL STOCK EXCHANGE, THE SHARES COULD NEVER HAVE BEEN TRANSFERRED TO DEMAT ACCOUNT. SHRI MUKESH CHOKSI MAY HAVE BEEN PROVIDING ACCOMMODATION ENTRIES TO VARIOUS PERSONS BUT SO FAR AS THE FACTS OF THE CASE IN HAND SUGGEST THAT THE TRANSACTIONS WERE GENUINE AND THEREFORE, NO ADVERSE INFERENCE SHOULD BE DRAWN. 18. IN THE LIGHT OF THE DECISIONS OF THE HON'BLE SUPREME COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES ( SUPRA ) AND CONSIDERING THE FACTS IN TOTALITY, THE CLAIM OF THE ASSESSEE CANNOT BE DENIED ON THE BASIS OF PRESUMPTION AND SURMISES IN RESPECT OF PENNY STOCK BY DISREGARDING THE DIRECT EVIDENCES ON RECORD RELATING TO THE SALE/PURCHASE TRANSACTIONS IN SHARES SUPPORTED BY BROKER'S CONTRACT NOTES, CONFIRMATION OF RECEIPT OF SALE PROCEEDS THROUGH REGULAR BANKING CHANNELS AND THE DEMAT ACCOUNT. 19. AS MENTIONED ELSEWHERE AND AS AGREED BY THE REPRESENTATIVES OF BOTH THE SIDES; SINCE THE FACTS ARE COMMON IN ALL THE IMPUGNED APPEALS, ALL THE APPEALS BY THE ASSESSEES ARE ALLOWED. THE ASSESSING OFFICER IS DIRECTED TO TREAT THE SURPLUS AS LONG TERM CAPITAL GAINS AND ALLOW THE EXEMPTION AS CLAIMED BY THE ASSESSES. 65 FURTHER MERELY BECAUSE SHARES PURCHASED BY ASSESSEE WERE TRANSFERRED TO HIS DEMAT ACCOUNT ON A LATER DATE, DATE OF TRANSFER TO DEMAT ACCOUNT COULD NOT BE TAKEN AS DATE OF PURCHASE IN [2013] 33 TAXMANN.COM 145 (KOLKATA - TRIB.) INCOME-TAX OFFICER, WARD - MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 130 41(2), KOLKATA V. RAM KRISHNA GHOSH WHERE LD AO HAS TREATED SUCH LONG TERM CAPITAL GAINS AS SHORT TERM CAPITAL GAIN HAS ALSO HELD AS UNDER :- 2. BRIEFLY, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. IT IS A CASE OF REOPENED ASSESSMENT. DURING THE COURSE OF REASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD EARNED CAPITAL GAINS OF RS.10,23,540/- ON SALE OF 10,500 SHARES IN SANGOTRI CONSTRUCTIONS LTD. THE ASSESSEE'S CLAIM WAS THAT THESE SHARES WERE PURCHASED ON 09.01.2003 AND SOLD ON 23.04.2004. ACCORDINGLY, THE HOLDING PERIOD BEING MORE THAN TWELVE MONTHS, THESE GAINS WERE REQUIRED TO BE TREATED AS LONG-TERM CAPITAL GAINS AND THE ASSESSEE WAS ENTITLED TO EXEMPTION U/S. 54EC OF THE ACT. THE ASSESSING OFFICER, HOWEVER, DISPUTED THIS CLAIM. AS PER INFORMATION AVAILABLE TO HIM FROM THE INCOME TAX INVESTIGATION WING, THESE SHARES WERE TRANSFERRED TO DEMAT ACCOUNT OF BUBNA STOCK BROKING SERVICES LTD. TO THE DEMAT ACCOUNT OF THE ASSESSEE ON 05.03.2004, AND BACK TO DEMAT ACCOUNT OF BUBNA STOCK BROKING SERVICES LTD. ON 23.04.2004. ACCORDINGLY, IN THE OPINION OF THE ASSESSING OFFICER, THE HOLDING PERIOD OF SHARES BY THE ASSESSEE WAS LESS THAN TWELVE MONTHS, AND GAIN ON ALE OF SUCH SHARES WAS REQUIRED TO BE TREATED AS SHORT-TERM CAPITAL GAINS. IN EFFECT, ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE WAS NOT ELIGIBLE FOR EXEMPTION U/S. 54EC. IT WAS IN THIS BACKDROP THAT AN ADDITION OF RS. 10,23,540/- WAS MADE TO THE RETURNED INCOME OF THE ASSESSEE. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(APPEALS). LEARNED CIT(APPEALS) NOTED THAT THE ASSESSEE DID NOT HAVE ANY DE- MAT ACCOUNT AT THE POINT OF TIME WHEN SHARES WERE PURCHASED AND IT WAS DULY ON 05.03.2004 THAT THE ASSESSEE OPENED A DE-MAT ACCOUNT, WHICH EXPLAINS THAT THE DATE OF PURCHASES BY THE ASSESSEE CANNOT BE TAKEN AS DATE OF PURCHASES. AFTER NOTING THIS AND OTHER ARGUMENTS OF THE ASSESSEE RATHER ELABORATELY, THE CIT(APPEALS) CONCLUDED AS FOLLOWS :- '4. AFTER EXAMINING THE A.O'S ORDER, PROFIT AND LOSS ACCOUNT AND DOCUMENTS IT IS NOTICED THAT THE ASSESSEE HAD PURCHASED 1050 SHARES OF M/S. SANGOTRI CONSTRUCTION LTD. ON 09.01.2003 THROUGH SHARE BROKER M/S. BUBNA STOCK BROKING SERVICES LTD. AT THAT TIME ASSESSEE WAS NOT HAVING DEMAT A/C. WAS SUBSEQUENTLY OPENED ON 05.03.2004 AND SHARES WERE SOLD ON 23.04.2004 RESULTING IN CAPITAL GAIN OF RS.10,48,950/- WHICH WAS INVESTED IN BONDS OF REC ON 19.10.2004. THE PURCHASE TRANSACTION IS SUPPORTED BY THE CONTRACT NOTE FROM THE BROKER AND ALSO REFLECTED IN THE BALANCE SHEET AS ON 31.03.2003. THE LEGAL REPRESENTATIVE OF DECEASED ASSESSEE HAS MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 131 PLACED RELIANCE ON CIRCULAR NO. 704 DT. 28.04.1995 IN THE ABOVE WRITTEN SUBMISSION. IN SUPPORT OF HIS CLAIM THAT SHARES WERE HELD FOR MORE THAN 1 YEAR. KEEPING IN VIEW OF THIS CIRCUMSTANCES THE A.O. IS DIRECTED TO TREAT THE GAIN ON SALES OF SHARES AS LONG TERM CAPITAL GAIN AND ALLOW THE CLAIM OF SEC. 54EC AS PER LAW. THEREFORE, GROUND NO.1 IS ALLOWED'. 3. THE ASSESSING OFFICER IS AGGRIEVED AND IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 5. LEARNED COUNSEL HAS LAID ON LOT OF EMPHASIS ON THE FACT THAT THE REVENUE AUTHORITIES HAVE NOT QUESTIONED THE BONAFIDES OF DATE OF PURCHASE, WHICH IS DULY SUPPORTED BY THE CONTRACT NOTE AND BALANCE SHEET AS ON 31.03.2004, AND, THEREFORE, IT IS NOT OPEN TO ANYONE TO TINKER WITH THE SAME. HIS CONTENTION IS THAT SINCE DATE OF PURCHASE OF SHARES IS UNCHALLENGED, AND THE DATE OF SALE OF SHARES IS UNDISPUTED, AND THE DIFFERENCE BETWEEN THE TWO DATES IS MORE THAN ONE YEAR, THE CAPITAL GAINS ON THE SALE OF THESE SHARES CAN ONLY BE TREATED AS CAPITAL GAINS. WE SEE MERITS IN THIS PLEA. ONCE THE ASSESSING OFFICER DOES NOT DISPUTE THE DATE OF PURCHASES, MERELY BECAUSE THE DATE OF TRANSFER OF SHARES TO ASSESSEE'S DE-MAT ACCOUNT IS A LATER DATE, THE DATE OF TRANSFER TO DE-MAT ACCOUNT CANNOT BE TAKEN AS DATE OF PURCHASES. THE ASSESSEE HAS GIVEN AN EXPLANATION FOR DELAY IN TRANSFER TO HIS DE-MAT ACCOUNT, AND THIS EXPLANATION HAS NOT EVEN BEEN CHALLENGED OR CONTROVERTED. IN THESE CIRCUMSTANCES, ASSESSING OFFICER'S CHALLENGE TO THE CAPITAL GAINS BEING TREATED AS LONG-TERM CAPITAL GAINS IS INDEED DEVOID OF LEGALLY SUSTAINABLE BASIS. ONCE ASSESSING OFFICER DOES NOT CHALLENGE GENUINENESS OF A TRANSACTION, IT CANNOT BE OPEN TO HIM TO ALTER THE DATE OF PURCHASES, AS CLAIMED BY THE ASSESSEE, AND ONCE THIS DATE REMAINS UNCHALLENGED, THERE IS NO BASIS FOR HEARING THE CAPITAL GAINS AS A SHORT-TERM CAPITAL GAIN. THERE IS NOT EVEN A WHISPER OF AN ALLEGATION ABOUT GENUINENESS OF THE TRANSACTION EVEN THOUGH IT IS A CASE OF, WHAT IS COMMONLY KNOWN AS, PENNY STOCK AND THE VALUE OF THE SHARES HAS GONE UP ALMOST 40 TIMES WITHIN ONE YEAR. ON THESE FACTS, THE ASSESSING OFFICER DOES NOT QUESTION OR PROBE GENUINENESS OF TRANSACTION AND YET CLAIMS THAT THESE GAINS SHOULD BE TREATED AS SHORT-TERM CAPITAL GAINS. WE LEAVE IT AT THAT. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 132 66 FURTHER HONOURABLE BOMBAY HIGH COURT WHERE DMAT ACCOUNT AND CONTRACT NOTE SHOWED DETAILS OF SHARE TRANSACTION, AND ASSESSING OFFICER HAD NOT PROVED SAID TRANSACTION AS BOGUS, CAPITAL GAIN EARNED ON SAID TRANSACTION COULD NOT BE TREATED AS UNACCOUNTED INCOME UNDER SECTION 68 [2015] 54 TAXMANN.COM 108 (BOMBAY) COMMISSIONER OF INCOME-TAX-13 V. SHYAM R. PAWAR HAS HELD THAT :- 2. MR.SURESHKUMAR WOULD SUBMIT THAT THE TRIBUNAL SERIOUSLY ERRED AND IN LAW IN REVERSING THE FINDING OF FACT BY THE COMMISSIONER AND THE ASSESSING OFFICER. THAT WAS BASED ON A REPORT OF THE INVESTIGATION BRANCH OF THE DEPARTMENT, BHUVANESHWAR. THAT REVEALED AND AS THE COMMISSIONER NOTED THAT THERE WAS AN ERRONEOUS CLIENT HEAD MENTIONED. THAT WOULD PROVE THAT THE DEPARTMENT DID NOT PROCEED MERELY ON SUSPICION BUT ON COGENT AND SATISFACTORY EVIDENCE WITH IT. THE TRIBUNAL SHOULD NOT HAVE REVERSED THIS CONCURRENT FINDING AND BY RELYING UPON SOME OF THE CONCLUSIONS IN THE REPORT. THE TRIBUNAL SHOULD HAVE ADVERTED TO THIS SPECIFIC FINDING OF THE COMMISSIONER. IN PARA 21 OF THE COMMISSIONER'S ORDER, IN AN APPEAL PERTAINING TO 2003-04, HE HAS OBSERVED THAT THE DEPARTMENT IS HAVING MATERIAL TO SHOW THAT THE DIRECTORS OF A COMPANY NAMELY BOLTON PROPERTIES LTD. HAVE MANIPULATED THE SHARE PRICE OF BOLTON PROPERTIES LTD. INVESTIGATING WING HAS REVEALED IN ITS REPORT AS TO HOW THERE WERE TWO OPERATORS NAMELY MR.SUSHIL PUROHIT AND SHRI JAGDISH PUROHIT AND ONE OF THEM WAS THE DIRECTOR OF THIS COMPANY. MR.JAGDISH REPORTEDLY FLOATED SEVERAL INVESTMENT COMPANIES WHICH WERE AGGRESSIVELY USED IN THE ENTIRE DEAL WITH THE BROKER M/S.PRAKASH NAHATA & CO. THE SHARES OFFLOADED BY THE BENEFICIARIES THROUGH M/S.PRAKASH NAHATA & CO. WERE ULTIMATELY PURCHASED BY THE INVESTMENT COMPANIES CONTROLLED BY SHRI PUROHIT, AND SOME OF SUCH COMPANIES HAVE BEEN ENLISTED. THE NAME OF THE ASSESSEE MR.SHYAM PAWAR FIGURED DURING THE COURSE OF THE INVESTIGATION. THE COMMISSIONER HAS OBSERVED THAT THE ASSESSEE IS NOT NEW TO SHARES DEALING. HE IS PURCHASING AND SELLING THE SHARES THROUGH A BROKER IN MUMBAI. FOR THE IMPUGNED PENNY STOCK, HE HAS TRANSACTED THROUGH THE BROKER AT CALCUTTA, WHICH ITSELF RAISES DOUBT ABOUT THE GENUINENESS OF THE TRANSACTION. THE ENTITIES/ COMPANIES, WHOSE SHARES WERE TRADED ON EXCHANGE NAMELY M/S.BOLTON PROPERTIES LTD., PRIME CAPITAL AND M/S.MANTRA WERE NOT HAVING SUFFICIENT BUSINESS ACTIVITIES JUSTIFYING THE INCREASE IN THEIR SHARES PRICES. THE COMMISSIONER, THEREFORE, CONCLUDED THAT CERTAIN OPERATORS AND BROKERS DEVISED A SCHEME TO CONVERT THE MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 133 UNACCOUNTED MONEY OF THE ASSESSEE TO ACCOUNTED INCOME AND THE ASSESSEE UTILIZED THIS SCHEME. THEREFORE, THE CLAIM THAT THE ASSESSEE EARNED CAPITAL GAIN WAS DISALLOWED AND ADDITION OF RS.25,93,150/- MADE UNDER SECTION 68 OF THE IT ACT WAS UPHELD. 3. MR.SURESHKUMAR SERIOUSLY COMPLAINED THAT SUCH FINDING RENDERED CONCURRENTLY SHOULD NOT HAVE BEEN INTERFERED WITH BY THE TRIBUNAL. IN FURTHER APPEAL, THE TRIBUNAL PROCEEDED NOT BY ANALYZING THIS MATERIAL AND CONCLUDING THAT FINDINGS OF FACT CONCURRENTLY RENDERED BY THE ASSESSING OFFICER AND THE COMMISSIONER ARE PERVERSE. THE TRIBUNAL PROCEEDED ON THE FOOTING THAT ONUS WAS ON THE DEPARTMENT TO NAIL THE ASSESSEE THROUGH A PROPER EVIDENCE AND THAT THERE WAS SOME CASH TRANSACTION THROUGH THESE SUSPECTED BROKERS, ON WHOM THERE WAS AN INVESTIGATION CONDUCTED BY THE DEPARTMENT. ONCE THE ONUS ON THE DEPARTMENT WAS DISCHARGED, ACCORDING TO MR.SURESHKUMR, BY THE REVENUE-DEPARTMENT, THEN, SUCH A FINDING BY THE TRIBUNAL RAISES A SUBSTANTIAL QUESTION OF LAW. THE APPEAL, THEREFORE, BE ADMITTED. 4. MR.GOPAL, LEARNED COUNSEL APPEARING ON BEHALF OF THE ASSESSEE IN EACH OF THESE APPEALS, INVITES OUR ATTENTION TO THE FINDING OF THE TRIBUNAL. HE SUBMITS THAT IF THIS WAS NOTHING BUT AN ACCOMMODATION OF CASH OR CONVERSION OF UNACCOUNTED MONEY INTO ACCOUNTED ONE, THEN, THE EVIDENCE SHOULD HAVE BEEN COMPLETE. CHANGE OF CIRCUMSTANCES OUGHT TO HAVE, AFTER THE RESULT OF THE INVESTIGATION, CONNECTED THE ASSESSEE IN SOME WAY OR EITHER WITH THESE BROKERS AND THE PERSONS FLOATING THE TWO COMPANIES. IT IS ONLY, AFTER THE ASSESSEE WHO IS SUPPOSED TO DEALING IN SHARES AND PRODUCING ALL THE DETAILS INCLUDING THE DMAT ACCOUNT, THE EXCHANGE AT CALCUTTA CONFIRMING THE TRANSACTION, THAT THE APPEAL OF THE ASSESSEE HAS BEEN RIGHTLY ALLOWED. THE TRIBUNAL HAS NOT MERELY INTERFERED WITH THE CONCURRENT ORDERS BECAUSE ANOTHER VIEW WAS POSSIBLE. IT INTERFERED BECAUSE IT WAS REQUIRED TO INTERFERE WITH THEM AS THE COMMISSIONER AND THE ASSESSING OFFICER FAILED TO NOTE SOME RELEVANT AND GERMANE MATERIAL. IN THESE CIRCUMSTANCES, HE SUBMITS THAT THE APPEALS DO NOT RAISE ANY SUBSTANTIAL QUESTION OF LAW AND DESERVE TO BE DISMISSED. 5. WE HAVE PERUSED THE CONCURRENT FINDINGS AND ON WHICH HEAVY RELIANCE IS PLACED BY MR.SURESHKUMAR. WHILE IT IS TRUE THAT THE COMMISSIONER EXTENSIVELY REFERRED TO THE CORRESPONDENCE AND THE CONTENTS OF THE REPORT OF THE INVESTIGATION CARRIED OUT IN PARAS 20, 20.1, 20.2 AND 21 OF HIS ORDER, WHAT WAS IMPORTANT AND VITAL FOR THE PURPOSE OF THE PRESENT CASE WAS WHETHER THE TRANSACTIONS IN SHARES WERE GENUINE OR SHAM AND MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 134 BOGUS. IF THE PURCHASE AND SALE OF SHARES ARE REFLECTED IN THE ASSESSEE'S DMAT ACCOUNT, YET THEY ARE TERMED AS ARRANGED TRANSACTIONS AND PROJECTED TO BE REAL, THEN, SUCH CONCLUSION WHICH HAS BEEN REACHED BY THE COMMISSIONER AND THE ASSESSING OFFICER REQUIRED A DEEPER SCRUTINY. IT WAS ALSO REVEALED DURING THE COURSE OF INQUIRY BY THE ASSESSING OFFICER THAT THE CALCUTTA STOCK EXCHANGE RECORDS SHOWED THAT THE SHARES WERE PURCHASED FOR CODE NUMBERS S003 AND R121 OF SAGAR TRADE PVT LTD. AND ROCKEY MARKETING PVT. LTD. RESPECTIVELY. OUT OF THESE TWO, ONLY ROCKEY MARKETING PVT.LTD. IS LISTED IN THE APPRAISAL REPORT AND IT IS STATED TO BE INVOLVED IN THE MODUS- OPERANDI. IT IS ON THIS MATERIAL THAT HE HOLDS THAT THE TRANSACTIONS IN SALE AND PURCHASE OF SHARES ARE DOUBTFUL AND NOT GENUINE. IN RELATION TO ASSESSEE'S ROLE IN ALL THIS, ALL THAT THE COMMISSIONER OBSERVED IS THAT THE ASSESSEE TRANSACTED THROUGH BROKERS AT CALCUTTA, WHICH ITSELF RAISES DOUBT ABOUT THE GENUINENESS OF THE TRANSACTIONS AND THE FINANCIAL RESULT AND PERFORMANCE OF THE COMPANY WAS NOT SUCH AS WOULD JUSTIFY THE INCREASE IN THE SHARE PRICES. THEREFORE, HE REACHED THE CONCLUSION THAT CERTAIN OPERATORS AND BROKERS DEVISED THE SCHEME TO CONVERT THE UNACCOUNTED MONEY OF THE ASSESSEE TO THE ACCOUNTED INCOME AND THE PRESENT ASSESSEE UTILIZED THE SCHEME. 6. IT IS IN THAT REGARD THAT WE FIND THAT MR.GOPAL'S CONTENTIONS ARE WELL FOUNDED. THE TRIBUNAL CONCLUDED THAT THERE WAS SOMETHING MORE WHICH WAS REQUIRED, WHICH WOULD CONNECT THE PRESENT ASSESSEE TO THE TRANSACTIONS AND WHICH ARE ATTRIBUTED TO THE PROMOTERS/DIRECTORS OF THE TWO COMPANIES. THE TRIBUNAL REFERRED TO THE ENTIRE MATERIAL AND FOUND THAT THE INVESTIGATION STOPPED AT A PARTICULAR POINT AND WAS NOT CARRIED FORWARD BY THE REVENUE. THERE ARE 1,30,000 SHARES OF BOLTON PROPERTIES LTD. PURCHASED BY THE ASSESSEE DURING THE MONTH OF JANUARY 2003 AND HE CONTINUED TO HOLD THEM TILL 31 MARCH 2003. THE PRESENT CASE RELATED TO 20,000 SHARES OF MANTRA ONLINE LTD FOR THE TOTAL CONSIDERATION OF RS.25,93,150/-. THESE SHARES WERE SOLD AND HOW THEY WERE SOLD, ON WHAT DATES AND FOR WHAT CONSIDERATION AND THE SUMS RECEIVED BY CHEQUES HAVE BEEN REFERRED EXTENSIVELY BY THE TRIBUNAL IN PARA 10. A COPY OF THE DMAT ACCOUNT, PLACED AT PAGES 36 & 37 OF THE APPEAL PAPER BOOK BEFORE THE TRIBUNAL SHOWED THE CREDIT OF SHARE TRANSACTION. THE CONTRACT NOTES IN FORM-A WITH TWO BROKERS WERE AVAILABLE AND WHICH GAVE DETAILS OF THE TRANSACTIONS. THE CONTRACT NOTE IS A SYSTEM GENERATED AND PRESCRIBED BY THE STOCK EXCHANGE. FROM THIS MATERIAL, IN PARA 11 THE TRIBUNAL CONCLUDED THAT THIS WAS NOT MERE ACCOMMODATION OF CASH AND ENABLING IT TO BE CONVERTED INTO ACCOUNTED OR REGULAR PAYMENT. THE DISCREPANCY POINTED OUT BY THE CALCUTTA STOCK EXCHANGE REGARDING CLIENT CODE HAS BEEN REFERRED TO. BUT THE TRIBUNAL CONCLUDED THAT ITSELF, IS NOT ENOUGH TO PROVE THAT THE TRANSACTIONS IN THE IMPUGNED SHARES WERE BOGUS/SHAM. THE DETAILS RECEIVED FROM STOCK EXCHANGE HAVE BEEN RELIED UPON AND FOR THE PURPOSES OF FAULTING THE REVENUE IN FAILING TO DISCHARGE THE BASIC ONUS. IF THE TRIBUNAL PROCEEDS ON THIS LINE AND CONCLUDED THAT INQUIRY WAS NOT CARRIED FORWARD AND WITH A VIEW TO DISCHARGE THE INITIAL OR BASIC ONUS, THEN SUCH CONCLUSION OF THE TRIBUNAL CANNOT BE TERMED AS MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 135 PERVERSE. THE CONCLUSIONS AS RECORDED IN PARA 12 OF THE TRIBUNAL'S ORDER ARE NOT VITIATED BY ANY ERROR OF LAW APPARENT ON THE FACE OF THE RECORD EITHER. 7. AS A RESULT OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY SUBSTANCE IN THE CONTENTION OF MR.SURESHKUMAR THAT THE TRIBUNAL MISDIRECTED ITSELF AND IN LAW. WE HOLD THAT THE APPEALS DO NOT RAISE ANY SUBSTANTIAL QUESTION OF LAW. THEY ARE ACCORDINGLY DISMISSED. THERE WOULD NO ORDER AS TO COSTS. 67 FURTHER WHERE ASSESSEE HAVING PURCHASED SHARES IN PHYSICAL FORM, CONVERTED THEM IN D-MAT FORM AND THEREUPON SALE OF THOSE SHARES WAS CARRIED OUT THROUGH RECOGNIZED STOCK EXCHANGE AFTER PAYING SECURITIES TRANSACTION TAX, SAID TRANSACTIONS WERE TO BE REGARDED AS GENUINE IN NATURE AND, THEREFORE, ASSESSEE'S CLAIM FOR EXEMPTION UNDER SECTION 10(38) WAS TO BE ALLOWED AS HELD IN [2014] 41 TAXMANN.COM 118 (HYDERABAD - TRIB.) INCOME-TAX OFFICER, WARD 2, NIZAMABAD V. SMT. AARTI MITTAL HAS HELD THAT :- 2. BRIEF FACTS OF THE CASE ARE THAT AS PER THE ASSESSMENT ORDER THE AD NOTICED THAT THE ASSESSEE ALONG WITH OTHERS HAD CLAIMED LONG TERM CAPITAL GAINS ON SHARES TRADED IN CALCUTTA STOCK EXCHANGE AND THAT SUCH TRANSACTIONS WERE TRADED THROUGH THREE CALCUTTA SHARE BROKERS VIZ., N.M. LODHA & CO., BASANTH PERIWAL & CO., AND RAJENDRA PRASAD SHAH. THE SCRIPS IN WHICH THEY TRADED ARE 1. NAVKETAN MERCHANTS LTD., 2. SANGOTRI CONSTRUCTIONS LTD., 3. PSL FINANCE LTD. 4. SHREE TULSI ONLINE. COM LTD. 5. OFFSHORE FINVEST LTD. AND 6. SCINTILLA COMMERCIAL & CREDIT LTD. THE ENTIRE SALE PROCEEDS REALIZED ON SALE OF SHARES WAS TREATED AS LONG TERM CAPITAL GAIN. SINCE THE SALE TRANSACTIONS TOOK PLACE THROUGH AUTHORIZED STOCK EXCHANGE AND SECURITIES TRANSACTION TAX WAS PAID, THE ASSESSEE CLAIMED THE ENTIRE SALE PROCEEDS MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 136 ARISING OUT OF THE TRANSACTION AS LONG TERM CAPITAL GAIN EXEMPT FROM TAX U/S. 10(38) OF THE IT ACT. THE AO DID NOT BELIEVE THE TRANSACTION AS GENUINE ON THE BASIS OF CERTAIN OBSERVATIONS AND TREATED THE ENTIRE SALE PROCEEDS AS 'INCOME FROM OTHER SOURCES' AND ADDED IT TO THE TOTAL INCOME. 3. THE BASIS OF DISBELIEVING THE TRANSACTIONS OF PURCHASE AND SALE AS NON-GENUINE, AS IT APPEARS FROM THE ASSESSMENT ORDER ARE AS FOLLOWS: ( I ) THE AO OBSERVED THAT THE PURCHASE AND THE SALE IN THE SHARES OF ABOVE LISTED COMPANIES ARE BOGUS. ( II ) THE AO CONDUCTED ENQUIRY THROUGH CALCUTTA STOCK EXCHANGE (CSE) REGARDING THE PURCHASES OF THE IMPUGNED SALES AND ON THE BASIS OF THE REPORT OF THE CSE THE AO CAME TO A CONCLUSION THAT NO PURCHASE TOOK PLACE THROUGH THE FLOORS OF CSE. HAVING RECEIVED A CONFIRMATION FROM CSE THE AO CAME TO A CONCLUSION THAT THE PURCHASES ARE NON-GENUINE. ( III ) SINCE ON THE BASIS OF THE REPORT OF CSE THE PURCHASES WERE TREATED AS NON GENUINE THE AO CAME A TO A CONCLUSION THAT THE SALES ARE ALSO NON GENUINE. ( IV ) THE AO ALSO REFERRED THE MATTER TO SEBI . ON THE BASIS OF THE REPLY RECEIVED FROM SEBI THAT ACTIONS WE, INITIATED IN THE NAMES OF THE BROKERS THROUGH WHOM THE PURCHASE TRANSACTIONS TOOK PLACE, THE AO SUSPECTED THE ENTIRE TRANSACTION OF PURCHASE AND SALES AS NON GENUINE. ( V ) THE AO OBSERVED THAT THE PURCHASE AND SALE OF SHARES RELATE TO PENNY STOCKS. THE PRICES OF THESE STOCKS WERE VERY NOMINAL WHEREAS THE SALE PRICES WERE QUIET HIGH. ( VI ) THE AO ALSO OBSERVED THAT THE ASSESSEE FAILED TO TAKE INTO ACCOUNT THE FINANCIAL STANDING OF THE COMPANIES WHOSE SHARES WERE PURCHASED AND SOLD. ( VII ) IT WAS OBSERVED IN THE ORDER THAT THE ASSESSEE ONLY TRANSACTED IN PENNY STOCKS AND NEVER HAD AN EXPERIENCE IN SHARE TRANSACTION EARLIER. ( VIII ) IT WAS OBSERVED THAT BOTH D-MAT ACCOUNT AND TRADING ACCOUNTS WERE OPENED FOR SPECIFIC PURPOSE OF TRADING IN THESE STOCKS. ( IX ) THE AO HAD HAD REFERRED TO THE FINDINGS OF ENQUIRY DONE CARRIED OUT THROUGH THE DCIT CALCUTTA. IN THE ENQUIRY REPORT THE DCLT HAD MENTIONED THAT THE SUMMONS COULD NOT BE SERVED ON THE BROKERS AS WELL AS ON THE COMPANIES WHOSE SHARES WERE TRADED. ON THE BASIS OF THIS THE AO SUSPECTED THAT THE TRANSACTIONS ARE NOT GENUINE. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 137 4. THE ASSESSEE SUBMITTED BEFORE CIT(A) AS FOLLOWS : THE ASSESSEE HAS FILED ALL THE RELEVANT DOCUMENTS FOR THE ENTIRE TRANSACTION STARTING FROM PURCHASE OF SHARES, SUBSEQUENT D-MAT OF THE SHARES AND THE FINAL SALE OF THE SHARES. THE ASSESSEE HAS ALSO FILED COPIES OF THE RELEVANT ACCOUNT COPY IN THE BOOKS OF THE PURCHASING BROKER AS WELL AS SALE BROKER. THUS, THE ASSESSEE HAS CLEARLY FILED THE EVIDENCE IN SUPPORT OF ITS CLAIM. 4.1 THE ASSESSEE HAS ALSO FILED DETAILED EXPLANATION TO THE SHOW CAUSE NOTICE DATED 01.12.2008 ISSUED BY THE AO, VIDE REPLY DT. 22.12.2008. HOWEVER, THE AO FAILED TO TAKE INTO ACCOUNT THIS EXPLANATIONS FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IN THE ASST. ORDER, THE AO HAS LISTED VARIOUS TRANSACTION DETAILS CARRIED OUT BY THE BROKER, IN CSE AND OBSERVED THAT THE ASSESSEE'S TRANSACTION OF PURCHASE OF SHARES ARE NOT FOUND IN SUCH LIST. IT IS SUBMITTED, FURTHER, THAT THE DETAILS OF SOME OF SUCH LIST AND THE COPIES OF EVIDENCE THEREOF HAS NOT BEEN FURNISHED TO THE ASSESSEE. HENCE, THE ASSESSEE IS UNABLE TO MAKE ANY SUBMISSION THEREON. FURTHER, THE SAID IS A LIST OF ONLINE TRANSACTION WHEREAS THE PURCHASE MADE BY THE PURCHASER IS A PHYSICAL TRANSACTION OR OFF MARKET PURCHASE'. THOUGH NO ADVERSE CONDITION AGAINST THE ASSESSEE CAN BE DRAWN, WHEN ALL OTHER CONTEMPARANEOUS EVIDENCE IS AVAILABLE AND FILED BY THE ASSESSEE. 4.2 THE ASSESSEE HAS ALSO SUBMITTED THAT THE BROKER THROUGH WHOM THE SHARES PURCHASES WERE CARRIED OUT WAS NEITHER SUSPENDED NOR DEBARRED AS ON THE DATE OF THE ABOVE SAID PURCHASE. IN FACT, THE ONLINE TRADING TRANSACTION DETAILS FURNISHED BY THE CSE AND RELIED UPON BY THE AO ITSELF SHOWS THAT SRI. N.M. LOHIA, THE BROKER HAD CARRIED OUT TRANSACTION IN JULY AND AUGUST, 2003. 4.3 THE ASSESSEE HAS INFORMED AND HAS ALSO FURNISHED EVIDENCE THAT THE SAID SHARES HAVE BEEN PHYSICALLY PRESENTED TO M/S. KARVY & CO. FOR THE PURPOSE OF D-MAT AND THAT THE SAID AGENCY WHICH IS A REPUTED AND INDEPENDENT AGENCY HAS ISSUED D-MAT CERTIFICATES TO THE ASSESSEE. IT CLEARLY SHOWS THAT THE ASSESSEE WAS THE OWNER OF THE SHARES IN THE YEAR 2004 ITSELF BY WHICH TIME THE D-MAT PROCESS WAS COMPLETED. IT IS SUBMITTED THAT A FACT WHICH IS APPARENT FROM THIRD PARTY RECORDS, ABOUT THE OWNERSHIP MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 138 OF THE SHARES OF THE ASSESSEE IS DEEMED TO BE CORRECT UNLESS THE CONTRARY IS PROVED. THE AO HAS NO MATERIAL ON RECORD TO DISBELIEVE THE ABOVE CERTIFICATE OF OWNERSHIP OF THE SHARES IN FAVOUR OF THE ASSESSEE ISSUED BY AN INDEPENDENT THIRD PARTY AGENCY. 4.4 IT IS PRAYED THAT THE IMPUGNED ADDITION OF LONG TERM CAPITAL GAINS TREATED AS 'INCOME FROM OTHER SOURCES' BE RECLASSIFIED AND ASSESSED AS 'CAPITAL GAIN' AND THE EXEMPTION U/S.10(38) OF THE IT ACT, BE GRANTED TO THE ASSESSEE AS THE REQUIREMENTS OF THE SAID SECTION INCLUDING PAYMENT OF SIT ARE FULFILLED'. 5. IT WAS FURTHER PLEADED BEFORE THE CIT(A) THAT THE ASSESSEE HAD BEEN ENGAGED IN CARRYING OUT TRANSACTIONS DURING THE EARLIER YEARS ALSO AND DURING THE YEAR 2003-04 THE SHARES OF OFFSHORE FINVEST LTD WERE PURCHASED WITH A GENUINE INTENTION THAT THE SAME WOULD YIELD GOOD RESULTS. WITH REGARD TO THE PROPOSAL TO HOLD THE SHARE TRANSACTIONS AS PRE ARRANGED IT WAS SUBMITTED THAT THE SAME WAS NOT, BASED ON PROPER APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE 'CASE AND EVIDENCE AVAILABLE ON RECORD. IT WAS PLEADED THAT ON THE CONTRARY THE EVIDENCE CLEARLY PROVES THE GENUINENESS OF THE TRANSACTIONS AND THAT THERE IS NO BASIS FOR PRE CONCLUSIONS. IT WAS FURTHER AVERRED THAT THE TRANSACTIONS WERE AT ARMS LENGTH AND THEY WERE WITH THE UNRELATED PARTIES IN THE NORMAL COURSE AND THE INVESTMENT IN SHARES WERE MADE THROUGH STOCK EXCHANGES. THE APPELLANT SUBMITTED THAT THE OBSERVATION THAT THE TRANSACTIONS WERE ENTERED TO LEGITIMIZE UNDISCLOSED INCOME EARNED NORMAL COURSE OF BUSINESS IS DENIED. IT WAS PLEADED THAT THE CLAIM OF LONG TENN CAPITAL GAINS WAS CORRECT AND IS BASED ON FACTS AND CIRCUMSTANCES OF THE CASE AND THAT THE SAME SHALL BE ALLOWED. IN THIS CONNECTION, THE ASSESSEE ALSO DREW ATTENTION TO THE OBSERVATION OF ITAT BOMBAY IN THE CASE OF MUKESH R. MAROLIA V. ADDL. CIT [2006] 6 SOT 247. THE APPELLANT ALSO RELIED ON THE DECISION OF HON'BLE ITAT NAGPUR BENCH IN ASSTT. CIT V. KAMAL KUMAR S. AGARWAL [2012] 20 TAXMANN.COM 338. IT WAS SUBMITTED THAT IN THE SAID CASE, ON EXACTLY SIMILAR FACTS THE ITAT UPHELD THE GENUINENESS OF THE TRANSACTION OF PURCHASE AND SALE OF SHARES AND THE CLAIM OF CAPITAL GAINS BY THE ASSESSEE, AFTER AN ELABORATE DISCUSSION. 6. THE AO HAS NOT PROPERLY APPRECIATED THE MODUS OPERANDI FOLLOWED IN COURSE OF SHARE TRANSACTION IN CASE OF OFF MARKET TRANSACTION. AS REGARDS PURCHASES, IT IS SUBMITTED THAT THESE SHARES WERE PURCHASED OFF MARKET AND DELIVERY WAS AFFECTED BY HAND PHYSICALLY. THEREAFTER, THE APPELLANT FOLLOWED, DUE PROCEDURE STEP BY STEP TILL THE SHARES WERE DEMATED. AFTER PURCHASE OF SHARES PHYSICALLY, THESE SHARES WERE MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 139 LODGED WITH THE RESPECTIVE COMPANIES FOR MAKING NECESSARY CHANGES IN THE NAMES OF THE PURCHASERS. AFTER THE COMPANY AFFECTED NECESSARY CHANGES IN THE PURCHASER'S NAME, THE SHARES WERE DELIVERED BACK TO THE APPELLANTS AND THEN SENT TO DEPOSITORY PARTICIPANT (DP) FOR DEMAT WITH A REQUEST FORM. THE DP, THEN VERIFIED THE PURCHASES WITH THE COMPANY WHOSE SHARES WERE PURCHASED. IT WAS ONLY AFTER SUCH VERIFICATIONS WERE COMPLETED WITH RESPECTIVE COMPANIES AND THE DP WAS SATISFIED ABOUT THE ACCURACY WITH REGARD TO THE HOLDER THAT THE DP CREDITED THE AMOUNTS TO THE DEMAT ACCOUNT. SHARES WERE THEN READY FOR TRADING IN ELECTRONIC PLATFORM OF STOCK EXCHANGES. THUS, THE MOMENT THESE SHARES WERE DEMATED AFTER FOLLOWING THE DUE PROCEDURE, ALL THE PREVIOUS STEPS STARTING FROM PURCHASE CULMINATING IN DEMAT, FORM STOOD VALIDATED AS OTHERWISE DEMAT COULD NOT HAVE BEEN POSSIBLE. 7. AS REGARDS SALE OF DEMATED SHARES, THE SALES WERE MADE IN ELECTRONIC PLAT FORMS OF RECOGNIZED STOCK EXCHANGES THROUGH REPUTED BROKERS WITH WHOM VARIOUS ASSESSEE; OF THE GROUP WERE MAINTAINING TRADING ACCOUNT. THE APPELLANT MAINTAINED ACCOUNT WITH KARVY STOK BROKING LTD HYDERABAB. STT WAS PAID IN ALL THE TRANSACTIONS. THE MOMENT SALES WERE EFFECTED, THE DEMAT ACCOUNTS WERE DEBITED. IT IS SUBMITTED FOR KIND CONSIDERATION THAT C: SALE THROUGH A RECOGNIZED STOCK EXCHANGE WHICH WERE ELECTRONICALLY MADE CANNOT BE MANIPULATED. SO ALSO DEBIT AND CREDIT ENTRIES IN THE DEMAT ACCOUNT WHICH WERE MAINTAINED BY REPUTED DPS. THE PROCESS INVOLVED IS AUTOMATIC TRANSMISSION OF THE INFORMATION THROUGH ELECTRONIC DEVICE REGARDING SALE OF SHARES. THE SALE PROCEEDS WERE THEN RECEIVED BY ACCOUNT PAYEE CHEQUES/DRAFTS FROM THE BROKERS WHERE THE APPELLANTS MAINTAINED TRADING ACCOUNT. THESE WERE CREDITED IN THE BANK ACCOUNTS AND RECORDED IN REGULAR BOOKS OF THE APPELLANT IN REGULAR COURSE. THE BANK ACCOUNTS OF THE ASSESSEES EVIDENCE RECEIPT OF SALE CONSIDERATION BY ACCOUNT PAYEE CHEQUE/DRAFT. THE RESULTANT GAINS WERE REFLECTED IN THE BOOKS OF ACCOUNTS AND SHOWN IN THE RETURNS FILED IN THE REGULAR COURSE. HENCE THERE IS NO SCOPE FOR DISBELIEVING MY SALE TRANSACTIONS. AO HAS NOT APPRECIATED THAT THERE CANNOT BE A SALE WITHOUT A PURCHASE. THE PURCHASES HAVING DONE PHYSICALLY AND THE SAME HAVING BEEN DEMATED AS EXPLAINED ABOVE BY FOLLOWING PRESCRIBED STEPS, THERE WAS NO SCOPE FOR SUSPECTING THESE TRANSACTIONS. 8. ANOTHER ALLEGATION OF THE ASSESSING OFFICER IS THAT THE APPELLANT PURCHASED PENNY STOCKS AT A NOMINAL PRICE AND SOLD THE SAME AT A PRICE MAKING PROFIT. IN THIS REGARD, THE FOLLOWING FACTS WERE BROUGHT BY THE LEARNED A.R. BEFORE THE CIT(A) FOR CONSIDERATION : ( A ) IT MAY FURTHER BE MENTIONED HERE THAT ALL THE SALE TRANSACTIONS WERE DONE THROUGH MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 140 EXCHANGES, STT WAS PAID, SALE PROCEEDS WERE REALIZED BY ACCOUNT PAYEE DRAFT/CHEQUE. THEREFORE, MERELY BECAUSE THE STOCKS WERE OF LOW VALUE, PER SE , WOULD NOT LEAD TO A CONCLUSION THAT THE TRANSACTIONS WERE NOT GENUINE. IT IS SUBMITTED THAT SUSPICION, HOWEVER, STRONG CANNOT TAKE THE PLACE OF PROOF AS HELD BY THE APEX COURT IN MANY CASES. ( B ) THE A.O. HAS NOT BROUGHT OUT ANY CLEAR CUT MATERIAL TO SHOW THAT THE ASSESSEE WAS INVOLVED IN PRICE MANIPULATION EXCEPT RELYING ON PRESUMPTION. ( C ) FURTHER IN RESPECT OF ALL THESE TRANSACTIONS SECURITY TRANSACTION TAX (STT) WAS PAID WHEREVER APPLICABLE AFTER 01.10.2004. THIS IS IN THE NATURE OF CONTEMPORARY EVIDENCE. ( D ) NOTHING COGENT AND CONCRETE HAVE BEEN MENTIONED IN THE ASSESSMENT ORDER TO INDICATE AS TO HOW THE APPELLANT WAS IN LEAGUE WITH THE BROKERS IN THE TRANSACTION OF SPECIFIC SCRIPS. EVEN IN COURSE OF RECORDING THE STATEMENTS OF THESE BROKERS, NO QUESTION WAS PUT TO ELICIT ANY ANSWER. ( E ) EVEN OTHERWISE THE FINDINGS OF AUTHORITIES, UNDER ANY OTHER STATUTE, HAVE GOT NO BEARING TO THE INCOME TAX PROCEEDINGS. INCOME TAX OFFICER HAS TO CONDUCT HIS OWN ENQUIRIES WHILE COMPLETING THE ASSESSMENT AND REACH HIS OWN FINDING. THIS IS WHAT LAW ENJOINS UPON HIM AS A QUASI JUDICIAL AUTHORITY UNDER A STATUTE. 9. FURTHER, THE LEARNED A.R. SUBMITTED BEFORE THE CIT(A) THAT ACTION INITIATED/TAKEN BY ANY ANOTHER AUTHORITY ADMINISTERING A STATUTE CANNOT BE USED AGAINST THE ASSESSEE TO WHICH HE WAS NOT PARTY. THE SO CALLED ORDER OF SEBI, WHICH WAS NOT MADE AVAILABLE TO THE ASSESSEE'S, MAY HAVE IMPACT ON THE PERSONS WHO ARE PARTIES TO THE PROCEEDING BUT CERTAINLY NOT ON THE ASSESSEES. IT IS AN ESTABLISHED POSITION OF LAW, AS STATED BY THE HON'BLE SUPREME COURT IN CHHATRASINHJI KESARISINHJI THAKORE V. CIT [1966] 59 ITR 562, THAT THE INCOME-TAX OFFICER IS, WITHIN THE LIMITS ASSIGNED TO HIM UNDER THE ACT, A TRIBUNAL OF EXCLUSIVE JURISDICTION FOR PURPOSES OF ASSESSMENT AND HE HAS, UNDER THE ACT, TO DECIDE WHETHER A PARTICULAR RECEIPT IS 'INCOME' AND IT IS NOT, NECESSARY THAT HE MUST MAKE SOME PERSON OR BODY OTHER THAN THE ASSESSEE, A PARTY TO THE PROCEEDINGS BEFORE HE DECIDES THE QUESTION; AND AS BETWEEN THE STATE AND THE ASSESSEE, IT IS HIS FUNCTION ALONE TO DETERMINE WHETHER THE RECEIPT IS INCOME AND IS TAXABLE. IT IS EQUALLY BEYOND DOUBT THAT A STATUTORY AUTHORITY IS BOUND TO HOLD STATUTORY INQUIRY AND PERFORM STATUTORY DUTIES TO DETERMINE LIABILITY UNDER THE STATUTE THEY ACT AND THE SAME CANNOT BE ABDICATED IN ANY MANNER BASING ON THE DECISION OF ANOTHER AUTHORITY. THE ASSESSEE'S, THEREFORE PRAYED BEFORE THE CIT(A) THAT THEY SHOULD NOT BE PENALIZED FOR THE ACTS OF OMISSIONS AND COMMISSIONS OF THE BROKERS IN A PROCEEDING BEFORE ANOTHER AUTHORITY TO WHICH ASSESSEE'S WERE NOT A PARTY AND IN THE ABSENCE OF ANY ENQUIRY BY THE ASSESSING OFFICER. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 141 10. IT WAS FURTHER SUBMITTED BY THE LEARNED A.R. BEFORE THE CIT(A) THAT THE ROLE OF SEBI IS DIFFERENT AND THE ORDER PASSED BY THEM HAVE DIFFERENT OBJECTIVES SUCH AS ORDERLY CONDUCT OF SHARE MARKET AND INVESTOR'S PROTECTION. THEREFORE, SUCH ORDERS CANNOT BE CONCLUSIVE AS REGARDS GENUINENESS OF THE TRANSACTION DONE BY THE ASSESSEES. MOREOVER, IN THE CASE OF THE ASSESSEE'S SEBI HAS NOT STARTED ANY ENQUIRY AGAINST THE ASSESSEES. EVIDENCE SHOWING PAYMENT AND RECEIPT OF CONSIDERATION FOR PURCHASE AND SALE OF SHARES. BOOKS OF ACCOUNT OF THE APPELLANT. ALL THE ABOVE EVIDENCES ARE IN THE REALM OF DOCUMENTARY EVIDENCES. THUS PRIMARY ONUS WAS DISCHARGED AND THIS COMPLETELY ABSOLVED THE ASSESSEE'S FROM ADDUCING ANY FURTHER PROOF DOES NOT ARISE AS THE ASSESSEE'S HAD DISCHARGED THE PRIMARY ONUS. ON THE OTHER HAND THERE IS NOTHING IN THE ASSESSMENT ORDER EXCEPT SUSPICION TO SHOW THAT THE DEPARTMENT HAS FOUND ANYTHING FURTHER. 11. IT IS SETTLED LAW THAT IN THE MATTER OF AN ASSESSMENT, PRESUMPTION HOWEVER STRONG CANNOT TAKE THE PLACE OF PROOF. IN THE CASE OF THE ASSESSEE'S, THE ASSESSING OFFICER HAS NOT BROUGHT OUT ANY COGENT AND CONCRETE EVIDENCE AGAINST THE ASSESSEE'S TO COME TO A CONCLUSION THAT THE TRANSACTIONS IN SHARES ARE BOGUS. HIS ENTIRE EVIDENCE IS BASED ON SURMISES AND SUSPICION. SUCH AN ASSESSMENT CANNOT BE SUSTAINED IN THE EYE OF LAW. IN THIS REGARD THE ASSESSEE'S PLACED RELIANCE ON THE FOLLOWING JUDGMENTS OF THE APEX COURT. IT IS A SETTLED PRINCIPLE THAT MERE CONJECTURE, SURMISE OR ASSUMPTION OF FACTS AS DISTINCT FROM INFERENCE FROM PROVED CIRCUMSTANCES DO NOT AMOUNT TO EVIDENCE WITHIN THE MEANING OF SECTION 143(3) FOR THE PURPOSES OF BEING UTILIZED IN THE ASSESSMENT. THIS IS A CASE IN WHICH THERE IS NO EVIDENCE AGAINST THE ASSESSEE'S EXCEPT SOME VAGUE, CONFUSING ENQUIRIES THE ASSESSING OFFICER HAS SOUGHT TO DRAW CONCLUSION AGAINST THE ASSESSEE'S. IT WAS HELD BY APEX COURT THAT 'THE INCOME TAX OFFICER IS NOT ENTITLED TO MAKE A PURE GUESS AND MAKE AN ASSESSMENT WITHOUT REFERENCE TO ANY EVIDENCE AND MATERIAL AT ALL. THERE MUST BE SOMETHING MORE THAN SUSPICION TO SUPPORT THE ASSESSMENT. ( DHAKESWARI COTTON MILLS LTD. V. CIT [1954] 26 ITR 775 (SC). THE SAME PRINCIPLE IS ALSO REITERATED IN THE CASE OF UMACHARAN SHAW & BROS. V. CIT [1959] 37 ITR 271 (SC). IT WAS HELD THAT A SUSPICION HOWEVER, STRONG MAY NOT TAKE THE PLACE OF PROOF. THE CONCLUSIONS WHICH MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 142 ARE BASED ON SURMISES AND CONJECTURES, CANNOT TAKE THE PLACE OF PROOF. THEREFORE THE ASSESSMENT MADE BY THE AO WHICH IS PREDOMINANTLY INFLUENCED BY SUSPICION IS LIABLE TO SET ASIDE.' 11.1 IT IS SUBMITTED THAT ENTRIES IN BOOKS OF ACCOUNTS REGULARLY KEPT ARE PRESUMED TO BE CORRECT UNLESS PROVED OTHERWISE. IN THE CASE OF THE ASSESEE'S, ALL THE TRANSACTIONS IN SHARES WERE RECORDED IN THE BOOKS OF ACCOUNT. THIS WAS FURTHER EVIDENCED BY FILING OF RETURNS. SALE OF SHARES BASING ON THESE BOOKS. THESE RETURNS WERE ACCEPTED UNDER SECTION 143(1). NO SERIOUS CHALLENGE WAS EVER MADE ABOUT THEIR GENUINENESS OR THAT THEY WERE KEPT REGULARLY IN THE COURSE OF BUSINESS. THAT BEING THE CASE, THE ACCOUNTS ARE RELEVANT AND AFFORD PRIMA FACIE PROOF OF THE ENTRIES AND THE CORRECTNESS THEREOF UNDER SECTION 34 OF THE EVIDENCE ACT. THE PRESUMPTION THAT BOOKS OF ACCOUNTS REGULARLY KEPT ARE PRESUMED TO BE CORRECT IS SUPPORTED BY THE FOLLOWING DECISIONS. 11.2 THE AO HAS APPLIED THE RATIO OF THE DECISION OF HON'BLE APEX COURT IN THE CASE OF CIT V. DURGA PRASAD MORE [1971] 82 ITR 540 AND SOUGHT TO TAKE HELP OF THE SURROUNDING CIRCUMSTANCES. THE FACTS OF THE CASE BEFORE THE HON'BLE COURT WERE DIFFERENT. THE FACTS OF SUMATI DAYAL'S CASE ( SUPRA ) STOOD ON ITS OWN FOOTING. THERE WERE A NUMBER OF SPECIFIC FACTUAL INACCURACIES IN THAT CASE WHICH COUPLED WITH OTHER FACTORS LED THE COURT TO APPLY THE TEST OF HUMAN PROBABILITY. AS OBSERVED BY THE COURT, THE CLAIM WAS FOUND TO BE FANTASTIC. THE ABOVE FACTS WHICH WERE PECULIAR TO THE CASE OF SUMATI DAYAL ( SUPRA ) ARE ABSENT IN THE CASE OF THE APPELLANT. THE APPELLANTS WERE REGULAR INVESTORS IN SHARES. THE TRANSACTIONS WERE ENTERED IN THE BOOKS. 11.3 THE ASSESSING OFFICER HAS ADDED THE ENTIRE SALE PROCEEDS AS NON GENUINE AND ADDED TO THE TOTAL INCOME. IT IS SUBMITTED THAT THE APPELLANT HAVING PROVED THE FACTUM OF PURCHASE AND SALE AND IDENTITY OF THE BROKERS FROM/THROUGH WHOM THESE TRANSACTIONS TOOK PLACE AND SALE PROCEEDS HAVING BEEN RECEIVED BY ACCOUNT PAYEE DRAFTS, THERE WAS NO OCCASION TO TREAT THE SALE PROCEEDS AS UNEXPLAINED INCOME. HENCE THERE IS NO BASIS OF THE ADDITION. THE ASSESSING OFFICER HAS NOT SPELT OUT THE SECTION UNDER WHICH THE ADDITIONS WERE MADE. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 143 11.4 THE ASSESSEES HAVE RELIED ON THE FOLLOWING DECISIONS: KORLAY TRADING CO LTD. V. CIT [1998] 232 ITR 820 (CAL.) CIT V. DHAWAN INVESTMENT & TRADING CO. LTD. [1999] 238 ITR 486 (CAL.) MUKESH R. MAROLIA CASE ( SUPRA ) ITO V. SMT. NEELAM CHAWLA [I.T. APPEAL NO. 5335 (DELHI) OF 2004 DT. 31-12-2007] SHRIPAL SINGH GULATI V. ITO [I.T. APPEAL NO. 285 (AGRA.) OF 2004 DT. 30-4-2008] KAMAL KUMAR S AGRAWAL CASE ( SUPRA ) 12. THE CIT(A), ON CAREFUL CONSIDERATION OF VARIOUS CONTENTIONS OF THE ASSESSEES BEFORE HIM, ON AN OVERALL APPRECIATION OF FACTS AND CIRCUMSTANCES OF THESE CASES, THE CIT(A) WAS OF THE CONSIDERED VIEW THAT WHEN THERE IS NO DISPUTE WITH REGARD TO OFF MARKET TRANSACTIONS, IN VIEW OF THE OBSERVATIONS OF THE TRIBUNAL IN VARIOUS DECISIONS, RELIANCE PLACED BY THE AO ON THE REPLIES RECEIVED FROM CSE ARE OF NO PROBATIVE VALUE TO DRAW AN ADVERSE CONCLUSION AGAINST THE ASSESSEES. THE CIT(A) CONCLUDED THAT IN ALL THESE CASES INVOLVING SIMILAR FACTS, IN THE ABSENCE OF ANY POSITIVE EVIDENCE, AND MERELY ON THE BASIS OF MERE SUSPICION THE TRANSACTIONS CANNOT BE HELD TO BE NOT GENUINE. 13. AGGRIEVED, DEPARTMENT IS IN APPEAL BEFORE US. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS BEFORE THE CIT(A). 14. THE LEARNED D.R. BESIDES RELYING UPON THE ORDER OF THE A.O. SUBMITTED BEFORE THE TRIBUNAL AS FOLLOWS : ( A ) IT HAS BEEN VERIFIED FROM THE WEBSITE OF SEBI (WWW.SEBI.GOV.IN) THAT CERTAIN BROKERS OF CALCUTTA STOCK EXCHANGE INCLUDING THE BROKERS WITH WHOM THE ASSESSEE HAS PURPORTEDLY DEALT OR HAS MADE PURPORTED TRANSACTIONS WERE INDICTED BY SEBI FOR UNETHICAL PRACTICES OF CREATING A ARTIFICIAL MARKED JACKING UP PRICES OF SHARES. IT IS ALSO WORTHWHILE TO NOTE THAT SEBI'S VARIOUS ADJUDICATION ORDERS HAD CLEARLY ESTABLISHED THAT THE SAID BROKERS HAD A ACTIVE ROLE IN MANIPULATING THE PRICES OF SHARES FOR WHICH THEY ARE PENALIZED AS PER THE SEBI RULES AND SOME OF THEM ALSO WERE SUSPENDED FOR A PARTICULAR PERIOD DURING THE MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 144 INVESTIGATION. ( B ) THE ASSESSEE'S OF THE GROUP HAVE PURPORTEDLY TO HAVE DEALT BASICALLY WITH : ( A ) NM LOHIA & CO. ( B ) BASANTH PERIMAL & CO. ( C ) RAJENDRAPRASAD SHAH & CO. THE ASSESSEE'S HAVE SHOWN PURPORTED PURCHASE / SALE OF SHARES OF THE FOLLOWING COMPANIES : (1) PSL FINANCIAL SERVICES LTD. (2) SANGOTHRI CONSTRUCTIONS LTD. (3) NAVKETAN MERCHANTS LTD. (4) SCINTILLA COMMERCIAL AND CREDIT LTD. (5) SRI TULASI ONLINE. COM.LTD. (6) OFFSHORE FINVEST LTD. ( C ) IT MAY BE BROUGHT ON RECORD OF THE HON'BLE BENCH OF THE 3 BROKERS WITH WHOM THE ASSESSE'S PURPORTEDLY TO HAVE DULY DEALT WITH WERE INDICTED BY SEBI FOR DEALING IN ONE OR THE OTHER SHARES OF THE ABOVE AND FOR MANIPULATING THE SHARE PRICES OF SOME OF THE SHARES LISTED ABOVE. SOME OF THE ADJUDICATING ORDERS DOWN LOADED FROM THE WEBSITE OF SEBI ARE PLACED BEFORE THE HON'BLE BENCH IN SUPPORT OF THE CONTENTION THAT TRANSACTIONS OF THE PRICE SHOWN BY THE ASSESSEE'S WERE NOT THE REAL PRICE BUT THE ARTIFICIAL PRICE CREATED BY THE SHARE BROKERS FOR THEIR OWN BENEFIT AS ALSO FOR BENEFIT OF THE SAME TO THE CLIENTS. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 145 ( C ) SRI NETHMAL LOHIA IS THE PROPRIETOR OF M / S. N.M. LOHIA & CO., MEMBER OF CALCUTTA STOCK EXCHANGE. HE HAS BEEN PENALIZED ON SEVERAL OCCASIONS FOR VIOLATION OF PREVENTION OF FRAUDULENT AND UNFAIR TRADE PRACTICES REGULATIONS, 2003 AND CODE OF CONDUCT FOR BROKERS AS SPECIFIED IN SCHEDULE-II UNDER REGULATION 7 OF SEBI REGULATIONS, 1992. THE ADJUDICATION OFFICER OF SEBI IN HIS ORDER DATED 21/2/2010 AS SEVERELY INDICTED SRI NETHMAL LOHIA FOR VARIOUS FRAUDULENT AND UNFAIR TRADE PRACTICES INDULGED BY HIM AND LEVIED A PENALTY OF RS.1,00,000/- FOR FRAUDULENTLY DEALING IN THE SHARE OF M/S.PSL FINANCIAL SERVICES LTD. SIMILARLY, HE WAS PENALIZED FOR RS.2,00,000/- FOR UNFAIR TRADE PRACTICES LIKE INDULGING IN FRAUDULENT AND UNFAIR TRADE PRACTICES BY THE ADJUDICATING OFFICER OF SEBI IN ITS ORDER DATED 22-02-2010 IN THE CASE OF M/S. SANGOTRI CONSTRUCTIONS LTD. (IN SHORT 'SCL'). SIMILARLY, M/S. N.M. LOHIA, STOCK BROKER WAS PENALIZED ON 4 OTHER OCCASIONS AS PER THE LIST ENCLOSED BY JACKING UP THE PRICES OF SCRIPS TRADED BY HIM INCLUDING PSL FINANCIAL SERVICES LTD., SANGOTRI CONSTRUCTIONS LTD., RICHFIELD FINANCIAL SERVICES LTD., STENLY CREDIT CAPITAL LTD., EXCELLON AGENCIES LTD. THE ADJUDICATION ORDER OF THE SEBI ARE ENCLOSED FOR KIND PERUSAL OF THE HON'BLE TRIBUNAL. ( D ) IN THIS CONNECTION, IT IS HUMBLY SUBMITTED THAT THE SHARE TRANSACTIONS OF M/S. N.M. LOHIA AND CO-REPRESENTED BY ITS PROPRIETOR SRI NETHMAL LOHIA HAS BEEN INDICATED SEVERELY BY THE ADJUDICATING OFFICER BY LEVYING PENALTIES. ( E ) SIMILARLY, THE OTHER BROKER, WHICH THE PRESENT GROUP HAS PURPORTEDLY DEALT WITH IS SRI RAJENDRA PRASAD SHAH, THROUGH WHOM SHARES OF M/S. SANGOTRI CONSTRUCTIONS LTD. M/S. SCINTILLA COMMERCIAL AND CREDIT LTD. AND M/S. OFFSHORE FINVEST LTD. WERE PURPORTED TO HAVE BEEN ACQUIRED BY THE ASSESSEE'S. CERTIFICATE OF REGISTRATION OF SRI RAJENDRA PRASAD SHAH, MEMBER, CALCUTTA STOCK EXCHANGE WAS SUSPENDED FOR 2 MONTHS AND ALSO FINED ON SEVERAL OCCASIONS AS PER LIST ENCLOSED FOR INDULGING IN FRAUDULENT AND UNFAIR TRADE PRACTICES CARRIED OUT DURING THE INVESTIGATION PERIOD WHEN THE SHARES WERE SHOWN TO HAVE BEEN ACQUIRED BY THE ASSESSEE'S OF THIS GROUP. ( F ) SRI RAJENDRA PRASAD SHAH WAS ALSO PENALIZED BY RS. 9.5 LAKHS AND 3 LAKHS FOR FRAUDULENT AND UNFAIR TRADE PRACTICES IN THE CASE OF SANGOTRI CONSTRUCTIONS LTD. AND SCINDIA COMMERCIAL AND CREDIT LTD. RESPECTIVELY AND HIS CERTIFICATE OF REGISTRATION AS A MEMBER OF CALCUTTA STOCK EXCHANGE WAS SUSPENDED FOR 2 MONTHS BY AN ORDER DATED APRIL, 2010 FOR THE FRAUD COMMITTED BY HIM WHILE DEALING WITH M/S. OFFSHORE FINVEST LTD. THIS ORDER IS PLACED BEFORE US AT PAGE NO.138 TO 140 OF THE PAPER BOOK. SRI RAJENDRA PRASAD SHAH INDULGED IN FRAUDULENT AND UNFAIR PRACTICES WHILE RIGGING THE PRICES OF SCRIPS OF MINOLTA FINANCE LTD, STENLY CREDIT CAPITAL LTD AND M/S. KAY VEE AAR LTD AND PENALIZED FOR RS.4 LAKHS, RS. 3 LAKHS AND RS. 3 LAKHS RESPECTIVELY. THE ADJUDICATION ORDERS ARE ENCLOSED AS ANNEXURE-II AT PAGES 100 TO 195 OF THE PAPER BOOK. ( G ) IN THE CASE OF 3RD BROKER, M/S. BASANTH PERIMAL & CO HAS ALSO BEEN PENALIZED FOR FRAUDULENT AND UNFAIR TRADE PRACTICES BY THE ADJUDICATION OFFICER OF SEBI ON TWO OCCASIONS AND THE COPIES OF THE ADJUDICATION ORDERS ARE ENCLOSED AS ANNEXURE-III AT PAGES 196A TO 230 OF THE PAPER BOOK. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 146 ( H ) THUS, IT IS NOT A COINCIDENCE BUT, A WELL DESIGNED PLAN FOR CONVERSATION OF UNACCOUNTED MONEY THROUGH PURPORTED SHARE TRANSACTIONS. INCIDENTALLY, THE CONTRACT NOTE SHOWS TRADE NOS WHICH DO NOT MATCH WITH THE TRADE NUMBERS AS CONFIRMED BY CALCUTTA STOCK EXCHANGE IN RESPONSE TO THE LETTER OF ASSESSING OFFICER. IN SUPPORT OF THE ABOVE CONTENTIONS, THE LEARNED D.R. CITED SOME OF THE EXAMPLES AS UNDER : ( I ) THE ASSESSEE SMT. AARTI DEVI MITTAL IS STATED TO HAVE PURCHASED 17,000 SHARES OF M/S. NAVKETAN MERCHANTS LTD FROM M/S. N.M. LOHIA & CO. DURING THE FINANCIAL YEAR 2003-04. 1. 10,000 SHARES ON 04/08/2003 - RS.27,200/- ( PAGE NO. 21 OF PAPER BOOK) 2. 7,000 SHARES ON 05/08/2003 - RS.21,140/- ( PAGE NO.22 OF PAPER BOOK) ( J ) THE CONTENTION OF THE ASSESSEE BEFORE THE ASSESSING OFFICER AND CIT(A) (AT PAGE 8, PARA 3) WAS THAT THE SAID SHARES WERE PURCHASED ON OFF MARKET BASIS. HOWEVER, AS PER THE PAPER BOOKS SUBMITTED BEFORE THE HON'BLE ITAT, IT IS FOUND THAT THE ASSESSEE HAS SUBMITTED CONTRACT NOTES ISSUED BY M/S. NM LOHIA &, CO, WHICH BEARS TRADE NO. AND TRADE TIME OF CALCUTTA STOCK EXCHANGE (PAGE NO. 21 AND 22 OF ASSESSEE'S PAPER BOOK). ( K ) WHEN THE SHARE IS TRANSACTED THROUGH OFF MARKET, THERE CANNOT BE ANY TRADE NO. OF THE CALCUTTA STOCK EXCHANGE SINCE THE PURCHASE IS NOT ROUTED THROUGH THE STOCK EXCHANGE. THUS, IT IS PROVED THAT THE ASSESSEE'S CONTENTION OF OFF MARKET PURCHASE IS AGAINST THE EVIDENCE AVAILABLE ON RECORD. FURTHER, THE SAID TRANSACTIONS IN THE F.Y.2003-04 DO NOT APPEAR IN THE TRANSACTION LIST QUOTED IN THE ASSESSMENT ORDER (PAGE NO.L5 OF THE PAPER BOOK). THIS SHOWS THAT THE ASSESSEE HAS SIMPLY SHOWN BOGUS PURCHASES DEPICTING WITH A IMAGINARY TRADE NO. SIMILARLY, ALL OTHER PURCHASES OF THE INDIVIDUALS OF THE GROUP WHERE THE ASSESSEE CLAIMED IT TO BE OFF MARKET PURCHASE BUT THE BROKER NOTE DEPICTS THE TRADE NO. OF CALCUTTA STOCK EXCHANGE. ( L ) THE ASSESSES OF THIS GROUP HAVE ALLEGEDLY PURCHASED THE SHARES OF M/S. NAVKETAN MERCHANTS LTD. THIS COMPANY IS A STOCK BROKING FIRM IN OTCEI (OVER THE COUNTER EXCHANGE OF INDIA). DUE TO UNETHICAL PRACTICES, M/S. NAVKETAN MERCHANTS LTD WAS EXPELLED W.E.F. 22.12.2003 AND CEASED TO BE MEMBER OF THE OTCEI, AS A CONSEQUENCE, SEBI ALSO CANCELLED CERTIFICATE OF REGISTRATION GRANTED TO M/S. NAVKETAN MERCHANTS LTD. W.E.F. 22.06.2004. THE ORDER OF THE SEBI IN THE CASE OF M/S. NAVKETAN MERCHANTS LTD. IS PLACED ON RECORD AS ANNEXURE-IV FOR PERUSAL OF THE HON'BLE TRIBUNAL. ( M ) IT IS SURPRISING TO NOTE THAT M/S. NAVKETAN MERCHANTS LTD., WHICH HAS BEEN BLACKLISTED IS MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 147 QUOTING MUCH HIGHER RATE WHEN IT WAS NOT OPERATING THAN WHEN IT WAS OPERATING AS A STOCK BROKER. IN OTHER WORDS, M/S. NAVKETAN MERCHANTS LTD. PRICE OF THE SHARE WAS RS.2.84 AS ON 5.8.2003 WHEN IT WAS OPERATIONAL. M/S. NAVKETAN MERCHANTS LTD., CEASED TO BE MEMBER OF OTCEL W.E.F. 22.12.2003. SUBSEQUENTLY , WHEN SHARES OF THIS COMPANY WERE SOLD IN THE MARKET ON 16-5-2005, THE SHARE PRICE WAS RS.199.50. IT IS PERTINENT TO NOTE THAT SEBI HAS ALSO CANCELLED REGISTRATION OF M/S. NAVKETAN MERCHANTS LTD. BY ITS ORDER DATED 22-6-2004 (PLACED BEFORE THE TRIBUNAL AS ANNEXURE-IV). SO IT IS INTRIGUING AS TO HOW THE COMPANY WHICH IS NOT ON THE OTCEI AND SEBI COULD COMMAND A PRICE OF RS.199 WHEN ITS OWN SHARES WERE SOLD AT RS.2.84 WHEN THE SAME COMPANY WAS FUNCTIONAL. THIS SHOWS THAT SHARE PRICES OF M/S. NAVKETAN MERCHANTS LTD WERE MANIPULATED. 15. THE LEARNED D.R. FURTHER EMPHASIZED THAT THE BROKERS WHO HAVE DEALT IN THE SHARES HAVE ALREADY EARNED A BAD NAME AND WERE INDICTED BY SEBI FOR MANIPULATING MARKET SHARES OF MANY OTHER COMPANIES AND THE ADJUDICATING ORDERS OF THE SEBI ARE FILED BEFORE THE TRIBUNAL. IT IS SUBMITTED IN THIS BEHALF AS FOLLOWS: ( A ) THERE WAS FRAUDULENT AND UNFAIR TRADE PRACTICES LIKE PURCHASING AND SELLING OF M/S. SCINTILLA COMMERCIAL AND CREDIT LTD., M/S. OFFSHORE FINVEST LTD., M/S.PSL FINANCIAL SERVICES LTD BY OTHER BROKERS ALSO WHO WERE PENALIZED BY VIRTUE OF THE ADJUDICATING ORDERS WHICH HAS BEEN FILED BEFORE THE TRIBUNAL AT PAGE NO.231 TO 288 OF THE PAPER BOOK AS ANNEXURE-V. ( B ) THIS SHOWS THAT ALL THE SCRIPS PURPORTED TO HAVE BEEN TRADED BY THE ABOVE 3 BROKERS ARE FICTITIOUS AND NOT REAL. THE ADJUDICATION ORDERS, OF SEBI SUPPORT THE SAME. ( C ) THEREFORE, THE LEARNED D.R. PLEADED BEFORE THE TRIBUNAL THAT THE ADJUDICATION ORDERS OF THE SEBI, WHICH HAVE COME INTO EXISTENCE AFTER THE PASSING OF THE ASSESSMENT ORDER BY THE ASSESSING OFFICER MAY PLEASE BE ADMITTED AND TAKEN ON RECORD SINCE THEY RELATE TO COMMISSION OF OFFENCE AND FRAUD COMMITTED BY THE 3 BROKERS DURING THE RELEVANT PERIOD OF TIME WHEN THE ALLEGED PURCHASE AND SALE OF SHARE TOOK PLACE. THE OTHER ORDERS WERE REFERRED TO BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER REFERRING TO THE WEBSITE OF WW.SEBI.GOV.IN WHICH WAS CONTAINING SUCH ADJUDICATING ORDERS. 16. THE LEARNED COUNSEL FOR THE ASSESSEES, ON THE OTHER HAND, STRONGLY OPPOSING THE ABOVE COTENNTIOSN OF TEH LEARNED DEPARTMENTAL REPRESENTATIVE, SUPPORTED THE ORDERS OF THE CIT(A), AND SUBMITTED THAT THE ASSESSING OFFICER, WITHOUT BRINGING ANY POSITIVE EVIDENCE ON RECORD, COULD NOT HAVE CONCLUDED THAT THE TRANSACTIONS IN QUESTION ARE NOT GENUINE. HE SUBMITTED THAT SINCE PRESCRIBED PROCEDURE HAS BEEN FOLLOWED FROM MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 148 THE STAGE OF PURCHASE TILL THE ULTIMATE STAGE OF SHARES BEING D-MATTED, THERE IS HARDLY ANY ROOM TO DOUBT OR SUSPECT THAT THE TRANSACTIONS IN PURCHASE ARE NOT GENUINE. IN ORDER TO HOLD SO, IT IS SUBMITTED BY THE LEARNED COUNSEL, THAT THE ASSESSING OFFICER IS REQUIRED TO BRING IN COGENT EVIDENCE TO PROVE THAT THE PURCHASES WERE NOT GENUINE. NO SUCH COGENT EVIDENCE HAS BEEN BROUGHT ON RECORD EXCEPT MERE SURMISE AND SUSPICION THAT THE PURCHASE TRANSACTIONS ARE BOGUS. REFERRING TO THE SECOND OBJECTION OF THE ASSESSING OFFICER THAT THE ENQUIRY WITH CSE REVEALED THAT NO PURCHASE HAS TAKEN PLACE THROUGH CSE, IT IS EXPLAINED BY THE LEARNED COUNSEL FOR THE ASSESSEES THAT SINCE THE TRANSACTIONS WERE IN PHYSICAL FORM AND DONE THROUGH OFF MARKET, THE QUESTION OF THE SAME BEING ROUTED THROUGH THE FLOOR OF A RECOGNIZED STOCK EXCHANGE DOES NOT ARISE. 17. AS REGARDS THE NEXT OBSERVATION OF THE AO WHICH RELATES TO THE SALE OF SHARES, THE LEARNED COUNSEL SUBMITTED THAT WHEN THE AO WAS OF THE VIEW THAT PURCHASES ARE NOT GENUINE, THE SALES ARE ALSO NOT GENUINE, SINCE THERE CANNOT BE A SALE WITHOUT A PURCHASE. THEREFORE, IT IS SUBMITTED THAT THE FACT THAT THE PURCHASES ULTIMATELY RESULTED IN CONVERSION OF SHARES INTO ELECTRONIC FORM AND CREDIT OF THE SAME IN THE D- MAT ACCOUNT CANNOT BE DOUBTED. ONCE IT IS CREDITED TO THE D-MAT ACCOUNT, THE SALES ARE EFFECTED THROUGH THE FLOOR OF THE STOCK EXCHANGE. HE SUBMITTED THAT AS OBSERVED BY THE CIT(A) IN THE IMPUGNED ORDER, THE AO HAS NOT BROUGHT OUT ANYTHING TO EVEN REMOTELY SUGGEST THAT THE SALE TRANSACTIONS WERE ARRANGED BY THE ASSESSEES. THERE IS NO MENTION ANYWHERE IN THE ASSESSMENT ORDERS IN THESE MATTERS ABOUT THE IDENTITY OF THE PARTY WHO HAS PURCHASED THE SAME THROUGH ELECTRONIC STOCK EXCHANGE, MUCH LESS ANY WHISPER ABOUT THE NEXUS BETWEEN THE ASSESSEES AND THE SAID PARTY COULD NOT BE ESTABLISHED. THE MOST CRUCIAL ASPECT WHICH COULD BE CONSIDERED AS INCRIMINATING IN SUCH TRANSACTIONS MAY RELATE TO A CASE WHERE COMPENSATORY PAYMENTS ARE MADE BY THE SELLER TO THE BUYER. NO EVIDENCE HAS BEEN BROUGHT ON RECORD TO PIN POINT THAT THE ASSESSEES OF THIS GROUP HAVE MADE ANY SUCH COMPENSATORY PAYMENT TO THE BUYER OF THE STOCKS. IN THE ABSENCE OF ANY SUCH OBSERVATION, IT IS SUBMITTED THAT THE SALE TRANSACTIONS CANNOT BE DOUBTED ON SUSPICION. MOREOVER, THESE ARE THE CASES IN WHICH THE TRANSACTIONS HAVE TAKEN PLACE THROUGH THE FLOOR OF THE STOCK EXCHANGE AND SECURITIES TRANSACTIONS TAX HAVE BEEN PAID. IN VIEW OF THESE EVIDENCES WHICH HAVE NOT BEEN REBUTTED BY THE A.O. IT IS DIFFICULT TO HOLD THAT THE SALE TRANSACTIONS ARE NON-GENUINE AND THE PROCEEDS THEREOF ARE LIABLE TO BE TAXED UNDER THE HEAD OTHER SOURCES. 18. AS REGARDS THE OBSERVATIONS OF THE ASSESSING OFFICER WITH REGARD TO CERTAIN ENQUIRIES MADE BY THE SEBI WHICH REVEALED THAT SOME OF THE BROKERS NAMED ABOVE MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 149 HAVE BEEN SUSPENDED FOR SOME ACT OF COMMISSION OR OMISSION, AND HIS CONSEQUENT CONCLUSION THAT THE TRANSACTIONS ENTERED THROUGH THESE BROKERS ARE NOT GENUINE, LEARNED COUNSEL SUBMITTED THAT THE TRANSACTIONS OF THE ASSESSEES IN DISPUTE CANNOT BE TREATED AS SHAM MERELY FOR SOME DISCREPANCIES OR ADVERSE REPORT BY THE SEBI. LEARNED COUNSEL FURTHER SUBMITTED THAT THE AO HAS NOT BROUGHT OUT ANY MATERIAL TO ESTABLISH THE FINAL OUTCOME OF THE ENQUIRY INITIATED BY SEBI AND SPECIFIC SHARES PURCHASED BY THE ASSESSEES IN THE COURSE OF COURSE OF MAKING INVESTMENT. THEREFORE, IT IS NOT POSSIBLE TO TAKE ANY ADVERSE VIEW ON THE BASIS OF MERE SUSPICION THAT SEBI HAD INITIATED SOME ACTION AND FOUND THE BROKERS VIOLATING THE RULES OF SEBI. 19. AS REGARDS THE NEXT ALLEGATION THAT PURCHASES AND SALES OF SHARES WERE MADE WITH REFERENCE TO PENNY STOCKS WHICH WERE PURCHASED AT A NOMINAL PRICE AND SOLD AT A VERY HIGH PRICE, IT IS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT ALL THE SALE TRANSACTIONS WERE MADE THROUGH STOCK EXCHANGES, AND AS SUCH THERE IS HARDLY ANY SCOPES FOR PRICE MANIPULATION. MORE OVER, IT IS SUBMITTED THAT THESE ARE THE TRANSACTIONS ON WHICH STT WAS PAID. AS A COMMON KNOWLEDGE NO PRUDENT SHARE HOLDER WOULD STAND STATIC WHEN THE MARKET IS IN UPSWING. TAKING ALL THESE FACTORS INTO ACCOUNT AND AS THE AO HAS FAILED TO PROVE ANY NEXUS BETWEEN THE ASSESSEES AND THE PURCHASERS WITH ANY COGENT EVIDENCE, THE MERE FACT THAT SALES WERE MADE IN PENNY STOCKS WOULD NOT RESULT IN ANY ADVERSE INFERENCE THAT THESE TRANSACTIONS AS NON GENUINE. 20. REFERRING TO THE OBSERVATION OF THE AO THAT BEFORE PURCHASING THE SHARES THE ASSESSEES DID NOT TAKE INTO ACCOUNT THE FINANCIAL STANDING OF THE COMPANIES, IT IS SUBMITTED THAT THE SHARE MARKET IS GENERALLY SENTIMENT DRIVEN. THEREFORE, THE OBSERVATION OF THE AO THAT BEFORE MAKING PURCHASES THE ASSESSEES HAS NOT MADE ANY ANALYSIS ABOUT THE FINANCIAL STATUS OF THE COMPANY DOES NOT HOLD MUCH WATER TO DOUBT THE GENUINENESS OF THE TRANSACTION IN SHARES. WITH REGARD TO THE OBSERVATION OF THE AO THAT THE ASSESSEE HAD NEVER HAD ANY EXPERIENCE IN TRANSACTION OF THE SHARES EXCEPT DEALING IN THESE PENNY STOCKS, IT IS SUBMITTED THAT THIS BY ITSELF CANNOT BE A REASON EITHER TO CONCLUDE OR DRAW ANY ADVERSE INFERENCE AGAINST THE ASSESSEES TO THE EFFECT THAT THE TRANSACTIONS ARE NON GENUINE. THE LEARNED COUNSEL ALSO SUBMITTED THAT OPENING OF THE D-MAT ACCOUNTS AT A DISTANT PLACE LIKE CALCUTTA, CANNOT BE A REASON TO DRAW ANY ADVERSE INFERENCE AGAINST THE ASSESSEE. IT IS ALSO SUBMITTED AT THIS JUNCTURE THAT FAILURE TO TRACE THE BROKERS AND THE COMPANY IS IN THE COURSE OF ENQUIRIES GOT CONDUCTED BY THE ASSESSING OFFICER THROUGH DCIT CALCUTTA ALSO CANNOT BE HELD TO BE FATAL TO THE TRANSACTIONS BEING GENUINE. PLACING RELIANCE ON A NUMBER OF DECISIONS, SOME OF WHICH HAVE ALSO BEEN CITED BEFORE THE CIT(A), AND EVEN REFERRED MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 150 TO BY THE CIT(A) IN THE IMPUGNED ORDERS, IT WAS CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US THAT SINCE THE PROOF OF INVESTMENT IN SHARES AND SALE OF THE SAME WAS PROVED BEYOND DOUBT, THE ASSESSEES HAD DISCHARGED THE ONUS ON THEM TO PROVE THE GENUINENESS OF THE TRANSACTIONS, AND THE ASSESSING OFFICER HAS NOT BROUGHT ANYTHING ON RECORD TO DISPROVE THE CONTENTIONS OF THE ASSESSEE WITH REGARD TO THE GENUINENESS OF THE TRANSACTIONS, AND IN THE CIRCUMSTANCES, THE CIT(A), ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE WAS JUSTIFIED IN DELETING THE ADDITIONS MADE BY THE ASSESSING OFFICER, BY HOLDING THE SHARE TRANSACTIONS OF THE ASSESSEES AS NOT GENUINE. 21. THE LEARNED COUNSEL FOR THE ASSESSEES SUBMITTED THAT MERE SUSPICION AND SURMISE CANNOT TAKE THE PLACE OF TRUTH. IT WAS POINTED OUT THAT IN THE WHOLE CASE THE AO HAS RAISED SUSPICIONS WITHOUT ANY CONCRETE PROOF. FOR THIS PURPOSE THE LEARNED COUNSEL RELIED ON THE DECISION OF DHAKESWARI COTTON MILLS V. CIT [1954] 26 ITR 775 (SC). BASED ON THE PRINCIPLES ENUNCIATED BY THE APEX COURT IN THE CASE OF DHAKESWARI COTTON MILLS LTD. ( SUPRA ) AND UMACHARAN SHAW & BROS V. CIT [1959] 37 ITR 271, IT IS SUBMITTED THAT A SUSPICION HOWEVER STRONG MAY NOT TAKE THE PLACE OF PROOF. THE CONCLUSIONS WHICH ARE BASED ON SURMISES AND CONJECTURES CANNOT TAKE THE PLACE OF PROOF THEREFORE THE ASSESSMENT MADE BY THE AO WHICH IS PREDOMINATELY INFLUENCED BY SUSPICION IS LIABLE TO BE SET ASIDE. THESE PRINCIPLES ENUNCIATED BY THE APEX COURT HAVE BEEN FOLLOWED BY VARIOUS TRIBUNALS. IN THIS REGARD THE NOTABLE CASES ARE DN KAMANI (HUF) V. DY.CIT [1999] 70 ITD 77 (TM), POOJA BHAT V. ASSTT. CIT [2000] 73 ITD 205 (MUM.) AND MRS. AISHWARYA K. RAI V. DY. CIT [2007] 104 ITD 166 (MUM.) (TM). 22. IN SUPPORT OF HIS CONTENTIONS, THE LEARNED COUNSEL FOR THE ASSESSEES ALSO PLACED RELIANCE ON THE FOLLOWING DECISIONS I. SMT. MEMO DEVI V. ASSTT. CIT [I.T. APPEAL NO. 396 (AGRA.) OF DATED 14-3-2008] II. SMT. NEELAM CHAWLA CASE ( SUPRA ) III. SHRIPAL SINGH GULATI CASE ( SUPRA ) IV. KAMAL KUMAR S. AGRAWAL (INDL.) CASE ( SUPRA ) V. MEENA DEVI N. GUPTA V. ASSTT. CIT [2013] 35 TAXMAN.COM 211 (AHD. - TRIB.). MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 151 VI. MANOJKUMAR SARAWAGI (HUF) (ITAT 'A' BENCH, AHMEDABAD ORDER DATED 16.3.2012 IN ITA NO. 3233 & 3156/AHD/2010) VII . JAGDISH PRASAD GOEL (ITAT 'C' BENCH, KOLKATA, ORDER DATED 13.4.2011 IN ITA NO.541/KOL/2010) VIII . LATA SONI , (ITAT, JODHPUR BENCH ORDER DATED 19.1.2012 IN ITA NO.77/JU/2010) IX . RAJESH GUPTA, L/H OF LATE SHRI MOHAN V. DEPTT. OF INCOME TAX (ITAT AGRA BENCH ORDER DATED 24.5.2013 IN ITA NO.10/AGRA/2011) X . JATIN CHHADWA V. ACIT (ITAT, 'I' BENCH, MUMBAI ORDER DATED 24.8.2012 IN ITA NO.8573/MUM/2010) XI . SHRI SANJAY JAIN, LUDHIANA (ITAT 'B' BENCH, CHANDIGARH ORDER DATED 17.5.2012 IN ITA NO.992/CHD/2009) XII . KORLAY TRADING CO. LTD. CASE ( SUPRA ) XIII . CIT V. SMT. JAMNA DEVI AGARWAL [2010] 328 ITR 656/[2012] 20 TAXMANN.COM 529 (BOM.) XIV . CIT V. ARUN KUMAR AGARWAL (HUF) [2012] 210 TAXMAN 405/26 TAXMANN.COM 113 (JHARKHAND) 23. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO GONE THROUGH THE WRITTEN SUBMISSIONS FILED BY THE PARTIES AND PLETHORA OF DECISIONS RELIED UPON BY THEM IN THE COURSE OF HEARING BEFORE US. THE QUESTION BEFORE US RELATES TO GENUINENESS OF THE SHARE TRANSACTIONS ENTERED INTO BY THE ASSESSEES, AND THE JUSTIFICATION FOR THE ASSESSING OFFICER TO MAKING THE IMPUGNED ADDITIONS, TREATING SUCH TRANSACTIONS AS NOT GENUINE. THE CIT(A) HAS PASSED ELABORATE ORDERS AND THE CIT(A), AS NOTED ABOVE, CONSIDERING THE ABSENCE OF ANY POSITIVE CORROBORATIVE EVIDENCE BROUGHT ON RECORD BY THE ASSESSING OFFICER TO SUBSTANTIATE HIS ALLEGATION OF THE ASSESSING OFFICER AS TO THE NON-GENUINE NATURE OF THE TRANSACTIONS, CONCLUDED THAT THE CONCLUSIONS OF THE ASSESSING OFFICER ARE BASED ON MERE SUSPICION, SURMISES AND CONJECTURES AND CONSEQUENTLY, HIS ORDERS CANNOT BE SUSTAINED. WE ARE IN AGREEMENT WITH THE DETAILED REASONS DISCUSSED BY THE CIT(A) IN THE IMPUGNED ORDER IN SUPPORT OF HIS CONCLUSIONS. THE PRESCRIBED PROCEDURE, HAVING BEEN FOLLOWED BY THE ASSESSEES FROM THE STAGE OF PURCHASE TILL THE SHARES ARE D-MATTED THERE IS HARDLY ANY ROOM TO DOUBT OR SUSPECT THAT THE TRANSACTIONS IN PURCHASE ARE NOT GENUINE. IN ORDER TO HOLD SO, AS OBSERVED BY THE CIT(A), THE A.O. IS REQUIRED TO BRING IN COGENT EVIDENCE TO PROVE THAT THE PURCHASES WERE NOT GENUINE. NO SUCH COGENT EVIDENCE HAS MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 152 BEEN BROUGHT ON RECORD, BUT MERELY PROCEEDED TO ARRIVE AT HIS CONCLUSIONS BASING ON MERE SURMISE AND SUSPICION THAT THE PURCHASE TRANSACTIONS ARE BOGUS. EVEN THOUGH ENQUIRY WITH CSE REVEALED THAT NO PURCHASE HAS TAKEN PLACE THROUGH CSE, SINCE THE TRANSACTIONS WERE IN PHYSICAL FORM AND DONE THROUGH OFF MARKET, THE QUESTION OF THE SAME BEING ROUTED THROUGH THE FLOOR OF A RECOGNIZED STOCK EXCHANGE DOES NOT ARISE. FURTHER, ON AN OVERALL APPRECIATION OF FACTS AND WHEN THERE IS NO DISPUTE WITH REGARD TO OFF MARKET TRANSACTIONS, THE CIT(A) WAS CORRECT IN OBSERVING THAT RELIANCE PLACED BY THE AO ON THE REPLIES RECEIVED FROM CSE ARE OF NO PROBATIVE VALUE TO DRAW AN ADVERSE CONCLUSION AGAINST THE ASSESSEE. IN CONSONANCE WITH THE FUNDAMENTAL PRINCIPLE THAT THERE CANNOT BE A SALE WITHOUT A PURCHASE, IF THE PURCHASE OF SHARES BY THE ASSESSEES IS DISBELIEVED, THERE CANNOT BE CONSEQUENT SALE OF THE SAID SHARES BY THE ASSESSEE. THEREFORE, THE FACT OF THE PURCHASES CANNOT BE DOUBTED, SINCE THE SAME ULTIMATELY RESULTED IN CONVERSION OF SHARES INTO ELECTRONIC FORM AND CREDIT OF THE SAME IN THE D-MAT ACCOUNT. ONCE IT IS CREDITED TO THE D-MAT ACCOUNT THE SALES ARE EFFECTED THROUGH THE FLOOR OF THE STOCK EXCHANGE. THE AO HAS NOT BROUGHT OUT ANYTHING TO EVEN REMOTELY SUGGEST THAT THE SALE TRANSACTIONS WERE ARRANGED BY THE ASSESSEE. THERE IS NO MENTION IN THE ENTIRE ORDER ABOUT THE IDENTITY OF THE PARTY WHO HAS PURCHASED THE SAME THROUGH ELECTRONIC STOCK EXCHANGE, THE NEXUS BETWEEN THE ASSESSEES AND THE SAID PARTY COULD NOT BE ESTABLISHED. THE MOST CRUCIAL ASPECT WHICH COULD BE CONSIDERED AS INCRIMINATING IN SUCH TRANSACTIONS MAY RELATE TO A CASE WHERE COMPENSATORY PAYMENTS ARE MADE BY THE SELLER TO THE BUYER. NO EVIDENCE HAS BEEN BROUGHT ON RECORD THAT THE ASSESSEE'S OF THIS GROUP HAVE MADE ANY SUCH COMPENSATORY PAYMENT TO THE BUYER OF THE STOCKS. IN THE ABSENCE OF ANY SUCH OBSERVATION, AS SUBMITTED BY THE ASSESSEE'S, THE CIT(A) WAS CORRECT IN HOLDING THE VIEW THAT THE SALE TRANSACTIONS CANNOT BE DOUBTED ON SUSPICION. MOREOVER, THESE ARE THE CASES IN WHICH THE TRANSACTIONS HAVE TAKEN PLACE THROUGH THE FLOOR OF THE STOCK EXCHANGE AND SECURITIES TRANSACTIONS TAX HAVE BEEN PAID. IN VIEW OF THESE EVIDENCES WHICH HAVE NOT BEEN REBUTTED BY THE A.O., IT IS DIFFICULT TO HOLD THAT THE SALE TRANSACTIONS ARE NON- GENUINE AND THE PROCEEDS THEREOF ARE LIABLE TO BE TAXED UNDER THE HEAD OTHER SOURCES. ON THE BASIS OF THE REPORT RECEIVED FROM SEBI, UPON ENQUIRIES GOT CONDUCTED THAT SOME OF THE BROKERS NAMED ABOVE HAVE BEEN SUSPENDED FOR SOME ACT OF OMISSION AND COMMISSION, THE AO HELD THAT THE TRANSACTIONS ENTERED THROUGH THESE BROKERS ARE NOT GENUINE. BUT MERELY BASED ON SUCH A REPORT, SUCH TRANSACTIONS CANNOT BE TREATED AS SHAM MERELY FOR SOME DISCREPANCIES OR ADVERSE REPORT BY THE SEBI. IT IS FOUND THAT THE AO HAS NOT BROUGHT OUT ANY MATERIAL TO ESTABLISH THE FINAL OUTCOME OF THE ENQUIRY INITIATED BY SEBI AND SPECIFIC SHARES PURCHASED BY THE ASSESSEE IN COURSE OF MAKING INVESTMENT. THEREFORE, IT IS NOT POSSIBLE TO TAKE ANY ADVERSE VIEW ON THE BASIS OF MERE SUSPICION THAT SEBI HAD INITIATED SOME ACTION AND FOUND THE BROKERS VIOLATING THE RULES OF SEBI. THE CIT(A) IS FURTHER CORRECT IN HOLDING THAT NOTWITHSTANDING THE OBSERVATIONS OF THE AO THAT THE PURCHASES AND SALES OF SHARES WERE MADE WITH REFERENCE TO PENNY STOCKS WHICH WERE PURCHASED AT A NOMINAL PRICE AND SOLD AT A VERY HIGH PRICE, SINCE ALL THE SALE TRANSACTIONS WERE MADE THROUGH STOCK EXCHANGES THERE IS HARDLY ANY SCOPES FOR PRICE MANIPULATION. IT IS ALL THE MORE SO, SINCE THE ASSESSEE HAS PAID STT. EVEN WITH REGARD TO THE OBSERVATION OF THE ASSESSING OFFICER THAT THE MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 153 ASSESSEE BEFORE PURCHASING THE SHARES THE ASSESSEES DID NOT TAKE INTO ACCOUNT THE FINANCIAL STANDING OF THE COMPANIES, THE CIT(A) WAS CORRECT IS OBSERVING THAT THE SHARE MARKET IS GENERALLY SENTIMENT DRIVEN AND THE ASSESSEES CANNOT REMAIN STATIC. EVEN THE ABSENCE OF EXPERIENCE OF THE ASSESSEES IN TRANSACTION OF THE SHARES EXCEPT DEALING IN THESE PENNY STOCKS, DOES NOT CLINCH THE ISSUE AGAINST THE ASSESSEE. THIS MAY AT THE MOST LEAD TO A SUSPICION BUT THE SAME CANNOT BE TREATED AS CONCLUSIVE TO DRAW ANY ADVERSE INFERENCE AGAINST THE ASSESSEES TO THE EFFECT THAT THE TRANSACTIONS ARE NOT GENUINE. SIMILARLY, EVEN THE OPENING OF D-MAT ACCOUNTS AT CALCUTTA, A REMOTE PLACE MAY GIVE RISE TO A SUSPICION, BUT THE SAME CANNOT LEAD TO ANY ADVERSE INFERENCE AGAINST THE ASSESSEE. IN COURSE OF HEARING, THE ASSESSEE'S HAD PRODUCED ITS BOOKS, THERE IS NO FINDING IN THE ASSESSMENT ORDER THAT PAYMENTS WERE NOT MADE TO THE BROKERS SIMILARLY THERE IS NO OBSERVATION IN THE ORDER THAT THE SALES WERE ARRANGED BETWEEN THE ASSESSEE'S AND THE BUYER. IN THE ABSENCE OF ANY COGENT FINDING BY THE AO THE OBSERVATION MERELY RAISES SOME SUSPICION BUT THIS SUSPICION CANNOT TAKE THE PLACE OF PROOF. EVEN WITH REGARD TO THE ENQUIRY GOT CONDUCTED BY THE ASSESSING OFFICER THROUGH THE DCLT CALCUTTA, WHICH REVEALED THAT MOST OF THE BROKERS AND THE COMPANIES WERE NOT TRACEABLE, THE CIT(A) IS CORRECT IN CONCLUDING THAT MERE FAILURE TO TRACE THE BROKERS AND COMPANIES CANNOT BE HELD AS FATAL TO THE TRANSACTION OF BOTH PURCHASE AND SALE, WHEN THE DETAILS OF WHICH HAVE BEEN DULY EXPLAINED BY THE ASSESSEES. THE ASSESSEE, IN OUR CONSIDERED OPINION, HAS DULY DISCHARGED THE ONUS THAT LIES ON IT, IN ESTABLISHING THE GENUINENESS OF THE TRANSACTIONS, AND THAT BEING SO, IT IS FOR THE REVENUE TO DISPROVE THE CLAIM OF THE ASSESSEE, BY BRINGING ON RECORD THE EVIDENCE TO THE CONTRARY, AS HELD BY THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT V. GOBI TEXTILES LTD [2007] 294 ITR 663/[2008] 170 TAXMAN 142. 24. WE FIND THAT THE CASE-LAW RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE GENERALLY SUPPORTS THE CASE OF THE ASSESSEE, AND IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY VARIOUS HIGH COURTS AND TRIBUNALS IN THE CASES RELIED UPON BY THE ASSESSEE, AS NOTED ABOVE. IT IS WORTHWHILE, TO REFER, AT THIS JUNCTURE, TO THE DECISION OF HON'BLE HIGH COURT OF JHARKHAND IN THE CASE OF ARUN KUMAR AGARWAL (HUF) ( SUPRA ), WHEREIN IT HAS BEEN HELD AS UNDER : '10. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE PARTIES AND WE ARE OF THE CONSIDERED OPINION THAT THE LEARNED ASSESSING OFFICER WAS MUCH INFLUENCED BY THE ENQUIRY REPORT WHICH MAY HAS BEEN BROUGHT ON RECORD BY THE EFFORTS OF THE ASSESSING OFFICER AND THAT ENQUIRY REPORT WAS PREPARED BY THE SEBI AND FROM THE OBSERVATIONS MADE BY THE TAX APPEAL NO.4 OF 2011 WITH ANALOGOUS CASE ASSESSING OFFICER HIMSELF, IT IS CLEAR THAT AFTER GETTING THAT ENQUIRY REPORT, THE MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 154 SEBI PRIMA FACIE FOUND INVOLVEMENT OF SOME OF THE SHARE BROKERS IN UNFAIR TRADE PRACTICES. EVEN IN A CASE WHERE THE SHARE BROKER WAS FOUND INVOLVED IN UNFAIR TRADE PRACTICE AND WAS INVOLVED IN LOWERING AND RISING OF THE SHARE PRICE, AND ANY PERSON, WHO HIMSELF IS NOT INVOLVED IN THAT TYPE OF TRANSACTION, IF PURCHASED THE SHARE FROM THAT BROKER INNOCENTLY AND BONAFIDELY AND IF HE SHOW HIS BONAFIDE IN TRANSACTION BY SHOWING RELEVANT MATERIAL, FACTS AND CIRCUMSTANCES AND DOCUMENTS, THEN MERELY ON THE BASIS OF THE REASON THAT SHARE BROKER WAS INVOLVED IN DEALING IN THE SHARE OF A PARTICULAR COMPANY IN COLLUSION WITH OTHERS OR IN THE MANNER OF UNFAIR TRADE PRACTICES AGAINST THE NORMS OF S.E.B.I AND STOCK EXCHANGE, THEN MERELY BECAUSE OF THAT FACT A PERSON WHO BONAFIDELY ENTERED INTO SHARE TRANSACTION OF THAT COMPANY THROUGH SUCH BROKER THEN ONLY BY MERE ASSUMPTION SUCH TRANSACTIONS CANNOT BE HELD TO BE A SHAME TRANSACTION. FACT OF TINTED BROKER MAY BE RELEVANT FOR SUSPICION BUT IT ALONE NECESSARILY DOES LEAD TO CONCLUSION OF ALL TRANSACTION OF THAT BROKER AS TINTED. IN SUCH CIRCUMSTANCES, FURTHER ENQUIRY IS NEEDED AND THAT IS FOR INDIVIDUAL CASE. SUCH FURTHER ENQUIRY WAS NOT CONDUCTED IN THAT CASE. 11. AT THIS JUNCTURE, IT WOULD BE RELEVANT TO MENTION HERE THAT IT IS NOT DISPUTED BY THE REVENUE BEFORE US THAT THE SHARES OF THESE ASSESSEES WERE ALREADY SHOWN IN THE EARLIER BALANCE SHEET SUBMITTED BY THE ASSESSEES, AND THEREFORE, IN THAT SITUATION, HOW THE REVENUE CONDEMNED THE TRANSACTION EVEN ON THE GROUND OF STEEP RISE IN THE SHARES. IF WITHIN A PERIOD OF ONE YEAR, THE SHARE PRICE HAS RISEN FROM RS.5 TO 55 AND FROM 9 TO 160 AND ONE PERSON WAS HOLDING THE SHARES MUCH PRIOR TO THAT START OF RISE OF THE SHARE, THEN HOW IT CAN BE INFERRED THAT SUCH PERSON ENTERED INTO SHAM TRANSACTION FEW YEARS AGO AND PREPARED FOR GETTING THE BENEFIT TAX APPEAL NO.4 OF 2011 WITH ANALOGOUS CASE AFTER FEW YEARS WHEN THE SHARE WILL START RISING STEEPLY. IN PRESENT CASE EVEN THERE WAS NO REASON FOR SUCH SUSPICION WHEN THE SHARES WERE PURCHASED YEARS BEFORE THE UNUSUAL FLUCTUATION IN THE SHARE PRICE. HERE IN THIS CASE, WE HAVE GIVEN EXAMPLE OF ONE OF THE TAX APPEAL WHEREIN THE SHARES WERE PURCHASED IN THE YEAR 2004 AND WERE SOLD IN THE YEAR 2006, WHICH IS SAID TO BE ONE OF THE CASE WHEREIN THE GAP IN THE PURCHASE AND SALE OF THE SHARES WAS NARROWEST. IN OTHER CASES AS WE HAVE NOTICED FROM THE VARIOUS ORDERS OF THE C.I.T(APPEALS) THAT, THE SHARES OF SOME OF THE COMPANIES WERE PURCHASED BY THE ASSESSEES EVEN FIVE YEARS AGO FROM THE TIME OF SALE AND THOSE PURCHASERS WERE ALREADY DISCLOSED IN THE BALANCE SHEET OF THE ASSESSEE, THEN FROM ANY ANGLE, IT IS PROVED THAT THE ASSESSEES HAD HELD THE SHARES MUCH PRIOR TO 12 MONTHS OF THE SALE OF THE SHARES.' 12. HENCE, THESE APPEALS ARE DISMISSED.' MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 155 25. FURTHER, COORDINATE BENCH OF THE DELHI TRIBUNAL IN THE CASE OF SMT. NEELAM CHAWLA ( SUPRA ), HAS BEEN HELD AS FOLLOWS : '.... AFTER THE ASSESSEE FURNISHED PROOF FOR PURCHASE, SALE, REGISTRATION OF SHARES IN HER NAME DULY SUPPORTED BY MARKET QUOTATIONS ETC. AND AO IGNORED THE SAME ON THE BASIS OF THE STATEMENT OF THE SHARE BROKER THROUGH WHOM THE ASSESSEE HAS SOLD THE SHARES, THE PURCHASE OF SHARES MADE IN EARLIER YEARS CANNOT BE DOUBTED. WE FIND THAT THE CIT(A) HAS CONSIDERED THE FACTUAL MATRIX OF THE CASE IN DETAIL AND THE PROPOSITIONS OF THE ASSESSEE ARE SUPPORTED BY THE LEGAL PRECEDENTS CITED SUPRA. IN VIEW OF THE SAME, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) AND THE REVENUE'S APPEAL IS DISMISSED'. 26. SIMILARLY, THE COORDINATE BENCH OF THE AHMEDABAD TRIBUNAL IN THE CASE OF MEENA DEVI N. GUPTA ( SUPRA ) HELD AS UNDER : '5. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW IN THE LIGHT OF THE COMPILATION FILED AND CASE LAWS CITED. ACCORDING TO US, THERE ARE CERTAIN COGENT EVIDENCES WHICH OTHERWISE CORROBORATE THE CLAIM OF THE ASSESSEE. ACCORDING TO US, EVEN IN THE ABSENCE OF THE CONFIRMATION BY THOSE SHARE BROKERS ONE HAS TO EXAMINE THAT WHETHER THE SHARES HAVE BEEN PURCHASED AND AFTER RETAINING THEM FOR A CERTAIN PERIOD THOSE SHARES HAVE ACTUALLY BEEN SOLD BY THE ASSESSEE. IN THE PRESENT CASE, FACTS HAVE REVEALED THAT THE SHARES OF SARANG CHEMICALS WERE DULY DEMATED AND THEREUPON THE SALES WERE MADE THROUGH BANKING TRANSACTIONS. THE DEMAT ACCOUNT MAINTAINED WITH ICICI BANK HAS REVEALED THE SHARES NUMBERS, ETC. FROM THE SIDE OF THE ASSESSEE, IT IS VEHEMENTLY CONTESTED THAT THERE WAS A REASON OF DENIAL OF TRANSACTION BY THOSE SHARE-BROKERS BECAUSE THEY HAVE NOT INTIMATED THE TRANSACTION TO THE SEBI AND THAT ONE OF THEM HAS ALSO MADE THE PURCHASE TRANSACTION IN CASH WHICH WAS AGAINST THE SEBI GUIDELINES. APARTMENT FROM THESE EVIDENCES, OUR ATTENTION HAS ALSO BEEN DRAWN ON A CERTIFICATE ISSUED BY 'SHARE TRANSFER AGENT' THAT THE TRANSFER OF THOSE SHARES IN THE NAME OF THE ASSESSEE WAS DULY APPROVED. THE ASSESSEE HAS EXPRESSED TO HOLD THOSE SHARES IN 'DEMATERIALIZED FORM' THEREFORE THE ASSESSEE WAS ASKED TO FILL UP THE 'DEMATERIALIZATION REQUEST FORM'. THIS INFORMATION IS VERY VITAL AND PROVES THE FACT THAT THE ASSESSEE HAD IN FACT PURCHASED THE SHARES OF SARANG CHEMICALS LTD. IT IS ALSO DIFFICULT TO IGNORE AN ANOTHER FACTUAL POSITION THAT THE ASSESSEE IS IN THE PAST ASSESSMENT YEAR HAD DULY DISCLOSED IN THE BALANCE-SHEET THE PURCHASE OF THOSE SHARES. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 156 ALTHOUGH, IT WAS AN OFF MARKET TRANSACTION BUT IT WAS PROPERLY DOCUMENTED AND DULY SUPPORTED BY RELEVANT EVIDENCES. WE HAVE EXAMINED FEW CASE-LAWS, WHEREIN THE RESPECTED CO-ORDINATE BENCHES HAVE ALSO TAKEN A VIEW THAT ONCE THE PURCHASE OF SHARES HAVE DULY BEEN RECORDED IN THE BALANCE-SHEET IN ONE FINANCIAL YEAR AND LATER ON, THOSE VERY SHARES HAVE BEEN SOLD IN ANOTHER FINANCIAL YEAR, THEN THE PURCHASE OF SHARES SHOULD NOT HAVE BEEN DOUBTED, IF DULY RECOGNIZED BY THE SAID COMPANY AND LATER ON TRANSACTED THROUGH BANKING CHANNEL. TO KEEP BREVITY IN MIND, WE ARE NOT DISCUSSING ALL THOSE CASE-LAWS OR CITED DECISION OF THE TRIBUNAL, WHEREIN ALMOST ON IDENTICAL FACTS WHEN THE PURCHASES WERE DOUBTED BY THE REVENUE DEPARTMENT, BUT CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE A CONSCIOUS VIEW HAVE BEEN TAKEN THAT ONCE THE SHARES WERE IN RESPECT OF A LISTED COMPANY AND TRANSACTION WAS THROUGH DEMAT ACCOUNT WHICH WAS AS PER THE RECOGNIZED STOCK EXCHANGE QUOTED PRICE, THEN THERE WAS NO REASON TO HOLD SUCH NATURE OF TRANSACTION AS NON-GENUINE. RESPECTFULLY FOLLOWING THESE DECISIONS AND OTHER CASE LAWS, WE HEREBY REVERSE THE FACTUAL AS ALSO LEGAL FINDINGS OF THE AUTHORITIES BELOW AND DIRECT TO ASSESS THE IMPUGNED TRANSACTION UNDER THE HEAD LONG TERM CAPITAL GAIN'. 27. THE FACTS WHICH WERE PECULIAR TO THE CASE OF SUMATI DAYAL ( SUPRA ), RELIED UPON BY THE ASSESSING OFFICER AS WELL AS THE LEARNED DEPARTMENTAL REPRESENTATIVE, ARE ABSENT IN THE CASES OF THESE ASSESSEES. THE ASSESSEES WERE REGULAR INVESTORS IN SHARES. IN THE FACTS OF THE PRESENT CASES, THE TRANSACTIONS WERE ENTERED IN THE BOOKS; AND INVESTMENT IN SHARES DOES NOT REQUIRE THE EXPERTISE AS IN CASE OF HORSE RACES AND THE SAME ARE DONE THROUGH BROKERS DULY EVIDENCED BY DOCUMENT. IN THE CIRCUMSTANCES THEREFORE, THE CASE OF SUMATI DAYAL ( SUPRA ), WHICH IS BASED ON THE THEORY OF HUMAN PROBABILITY, HAS NO APPLICATION TO THE FACTS OF THE PRESENT CASE. THE RATIO LAID DOWN IN THE CASE OF DURGA PRASAD MORE ( SUPRA ), ALSO RELIED UPON BY THE LEARNED ASSESSING OFFICER AND THE LEARNED DEPARTMENTAL REPRESENTATIVE BEFORE US, HAS NO APPLICATION TO THE FACTS OF THE CASE, AS BROUGHT OUT BY THE LEARNED COUNSEL FOR THE ASSESSEES. 28. IN THE LIGHT OF THE FOREGOING DISCUSSION, RESPECTFULLY FOLLOWING THE DECISION OF THE JHARKHAND HIGH COURT IN THE CASE OF ARUN KUMAR AGARWAL(HUF) ( SUPRA ), BESIDES OTHER DECISIONS OF THE TRIBUNAL REFERRED TO ABOVE, WE FIND NO INFIRMITY IN THE IMPUGNED ORDERS OF THE CIT(A). THE SAME ARE ACCORDINGLY CONFIRMED AND THE GROUNDS OF THE REVENUE IN THESE APPEALS ARE REJECTED. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 157 68 FURTHER IDENTICAL QUESTION OF SHARE PURCHASE AND SALES WAS ALSO CONSIDERED BY HON DELHI HIGH COURT ITA NOS. 43/2016 & 44/2016 PR. COMMISSIONER OF INCOME TAX 5 JATIN INVESTMENT PVT. LTD. DATED 18/1/2017 WHERE THE FINDINGS OF THE CIT (A) AND ITAT WERE UPHELD THAT UNLESS THE REVENUE ESTABLISHES THAT THE MONEY HAS GONE FOR PROFITS ON SHARES FROM THE COFFERS OF THE UNACCOUNTED INCOME OF THE ASSESSEE, IN VIEW OF EXHAUSTIVE EVIDENCES PRODUCED BY THE ASSESSEE, WHICH WERE NOT FURTHER PROBED AND PROVED FALSE. 69 THE ASSESSEE HAS SUPPORTED THE TRANSACTIONS WITH OVERWHELMING DOCUMENTARY EVIDENCES WHICH WERE NOT PROVED TO BE FALSE AS WELL AS PRICES AT WHICH TRANSACTION TOOK PLACES WAS ALSO NOT HELD BY LD AO TO BE FALSE OR INFLATED AND LD AO HIMSELF TAXING IT AS SHORT TERM CAPITAL GAIN OR SPECULATION INCOME, WE ARE OF THE OPINION THAT IN THE ABSENCE OF ANY MATERIAL CONTRARY FOUND BY THE AO DURING THE ENQUIRY MADE IN THE ASSESSMENT AND LATER IN THE REMAND PROCEEDINGS, THE EXEMPTION CLAIMED BY THE ASSESSEE U/S 10(38) CANNOT BE DENIED. THE PURCHASES WERE MADE WHEN PHYSICAL DELIVERY WAS TAKEN WHICH WAS CONFIRMED BY THE BROKERS ALSO AND STT WAS NOT APPLICABLE DURING THAT PERIOD ON THE PURCHASES WHICH WAS MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 158 INTRODUCED AFTER 01.10.2004 AND STT WAS DULY PAID ON THE SALE OF THE SHARES MADE THROUGH STOCK EXCHANGE. IT IS NECESSARY TO ADD THAT IN THE PRESENT CASE SEARCH HAS TAKEN PLACE AT VARIOUS PLACES AND AFTER THE PERIOD OF MORE THAN FOUR YEARS, MERELY PETTY CASH ALREADY DECLARED WAS FOUND AND THERE IS NO IOTA OF EVIDENCE FOUND DURING THE SEARCH WHICH COULD JUSTIFY THE ASSESSING OFFICER TO MAKE DOUBTS. THE LTCG DULY BEEN DECLARED AND ALL THE TRANSACTIONS WERE CONFIRMED BY THE RESPECTIVE PARTIES AND PRICES OF THE SHARES WERE ALSO MATCHING WITH THE PRICES PROVIDED BY THE CALCUTTA STOCK EXCHANGE EVEN ON THE OFF MARKET PURCHASE, WE FAILED TO UNDERSTAND AS TO WHY THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE. FURTHERMORE, LD. AO HAS HELD SOME OF THESE TRANSACTIONS TO BE SHORT-TERM CAPITAL GAIN. SHORT-TERM CAPITAL GAINS ARISE ON THE ASSETS TRANSFERRED BY THE ASSESSEE FOR HOLDING LESS THAN SPECIFIED PERIOD. THEREFORE HERE THE LD AO HAS ONLY DOUBTED THE HOLDING PERIOD OF ASSETS TRANSFERRED AND NOT THE GENUINENESS OF THE TRANSACTIONS. FURTHER SOME OF THE TRANSACTIONS ARE HELD BY THE LD AO AS SPECULATIVE IN NATURE WHICH SHOWS THAT TRANSACTIONS HAVE TAKEN PLACE BUT WITHOUT ACTUAL DELIVERY. THEREFORE ON THE BOTH THE CASES LD AO HAS NOT DENIED THE EXISTENCE OF GENUINE TRANSACTIONS. MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 159 70 IN VIEW OF ABOVE DISCUSSED BINDING JUDICIAL PRECEDENTS, EVIDENCES PRODUCED BY ASSESSEE, ABSENCE OF ADEQUATE INQUIRY CONDUCTED BY THE LD AO TO PROVE THOSE DOCUMENTS FALSE, ABSENCE OF ANY INCRIMINATING MATERIAL DURING THE SEARCH AND MAINLY WHERE THE LD AO HIMSELF TREATED THE SHARES SALE TRANSACTION AS SHORT TERM CAPITAL GAIN AND SPECULATION INCOME WHICH ITSELF SHOWS THAT THERE IS A TRANSFER OF CAPITAL ASSETS BY THE ASSESSEE OR THERE IS TRADING IN SHARES WITH DELIVERY, WE ARE UNABLE TO UPHOLD THE ADDITION MADE . IN THE RESULT, ADDITION MADE ON ACCOUNT OF LONG TERM CAPITAL GAIN IS DIRECTED TO BE DELETED. 71 IN THE RESULT APPEAL OF THE ASSESSEE ARE ALLOWED. 72 THE ORDER IS PRONOUNCED IN THE OPEN COURT ON : 18 TH AUGUST 2017 . SD/- SD/- (PRASHANT MAHARISHI) ( I. C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 18 TH AUGUST 2017 . *MEHTA* MAGNUM STEELS LIMITED V ACIT I. T. APPEAL NOS. 1342, 1343 & 2004/DEL/2013 & I. T. APPEAL NOS. 3176 & 3177/DEL/2014 ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08. 160 COPY OF THE ORDER FORWARDED TO :- 1. APPELLANT; 2. RESPONDENT; 3. CIT; 4. CIT (A); 5. DR; BY ORDER ASSISTANT REGISTRAR DATE DRAFT DICTATED ON 18.08.2017 DRAFT PLACED BEFORE AUTHOR 18.08.2017 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. APPROVED DRAFT COMES TO THE SR.PS/PS KEPT FOR PRONOUNCEMENT ON FILE SENT TO THE BENCH CLERK DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.
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