DCIT, Pune V. Shri Yashraj P Patil, Pune

ITA 1404/PUN/2012

• Counselvise Citation: 140424514 RSA 2012
• Duration Of Justice: 1 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 21-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Keywords: Bogus purchase; Income from undisclosed sources; Search and seizure; Penny stocks
• Section: 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO S . 1 400 / PUN/ 201 2 (ASST. YEAR: 200 6 - 0 7 ) ACIT, CENTRAL CIRCLE 2(1) , PUNE APPELLANT VS. SMT. BHAGYASH RI P. PATIL B 14/15, ASHOKA HSG. SOCIETY, 3, NAYLOR ROAD, KOREGAON PARK, PUNE - 411001 PAN:A BQPP3275R RESPONDENT ITA NOS.140 1 /PUN/2012 (ASST. YEAR: 200 7 - 0 8 ) ACIT, CENTRAL CIRCLE 2(1), PUNE APPELLANT VS. S HRI SOMNATH P. PATIL B 14/15, ASHOK A HSG. SOCIETY, 3, NAYLOR ROAD, KOREGAON PARK, PUNE - 411001 PAN:A HRPP3186G RESPONDENT ITA NOS.140 2 /PUN/2012 (ASST. YEAR: 2006 - 07) ACIT, CENTRAL CIRCLE 2(1), PUNE APPELLANT VS. S HRI PRASAD D . PATIL B 14/15, ASHOKA HSG. SOCIETY, 3, NAYLOR ROAD, KOREGAON PARK, PUNE - 411001 PAN:AB FPP2109K RESPONDENT 2 ITA NOS.140 3 /PUN/2012 (ASST. YEAR: 2006 - 07) ACIT, CENTRAL CIRCLE 2(1), PUNE APPELLANT VS. S HRI PRASAD D . PATIL (HUF) B 14/15, ASHOKA HSG. SOCIETY, 3, NAYLOR ROAD, KOREGAON PARK , PUNE - 411001 PAN:A AGHP2154Q RESPONDENT ITA NOS.140 4 /PUN/2012 (ASST. YEAR: 2006 - 07) ACIT, CENTRAL CIRCLE 2(1), PUNE APPELLANT VS. S HRI YASHRAJ P. PATIL B 14/15, ASHOKA HSG. SOCIETY, 3, NAYLOR ROAD, KOREGAON PARK, PUNE - 411001 PAN:AB GPP 3257R RESPONDENT DEPARTMENT BY : SHRI P.L. PATHADE ASSESSEE BY : SHRI NIKHIL PATHAK ORDER PER R.S. PADVEKAR, JM: ALL T H ESE BATCH OF F IVE APPEALS OF DIFFERENT ASSESSEES ARE FILED BY THE REVENUE RAISING THE GRIEVANCE AGAINST THE IMPUGNED O RDER OF THE LD. CIT(A) - CENTRAL, PUNE DATED 26 - 0 3 - 2012 AND ALL APPEALS PERTAINS TO THE A.Y. 2006 - 07 . THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS IN THE APPEAL WHICH ARE VERBATIM IN ALL THE APPEALS AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) OUGHT TO HAVE CONSIDERED THAT ASSESSEE IS HABITUALLY ENGAGED IN DEALING OF PENNY STOCKS AND IT CANNOT BE CASE THAT IN PARTICULAR YEAR IN PARTICULAR STOCK, HE HAS NOT DONE THE BOGUS PURCHASES. 3 2. ON THE F ACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) OUGHT TO HAVE CONSIDERED THE TOTALITY OF CIRCUMSTANTIAL EVIDENCES AS PER JUDGMENT' HELD BY HON'BLE APEX COURT IN THE CASE OF 'SUMATI DAYAL'. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) SHOULD HAVE NOTICED THAT AN APPRECIATION OF 3000% IN SHORT SPAN OF SIX MONTH IS UNTHINKABLE IN THE CASE OF PENNY STOCKS. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) SHOULD HAVE RESORTED TO INVESTIGATE THE TRANSACTION OF SCRIP IN WHICH HE HAS GIVEN THE RELIEF TO THE ASSESSEE AS CIT(A) HAS CO - TERMINUS POWERS AT HIS DISPOSAL AS PER ACT. 2. THE FACTS WHICH ARE REVEALED FROM THE RECORD AS UNDER. A SEARCH AND SEIZURE OP ERATION U/S. 132(1) OF THE INCOME - TAX ACT WAS CARRIED OUT ON 17 - 03 - 2006 AGAINST THESE ASSESSEES. ALL THESE ASSESSEES WERE ISSUED NOTICES U/S. 153A ON 01 - 03 - 2007. THE ASSESSING OFFICER HAS NOTED THAT IN THE COURSE OF THE SEARCH OPERATION , CERTAIN INCRIMIN ATING EVIDENCES WERE SEIZED/IMPOUNDED FROM WHICH IT WAS SUGGESTED THAT THE LONG TERM CAPITAL GAINS DECLARED BY THE ASSESSEE ON THE SALE OF THE SHARES ARE NOT GENUINE AND THE SHARE TRANSACTIONS ARE BASED ON THE FICTITIOUS DOCUMENTS WHICH WERE CREATED BY THE SE ASSESSEES. AS NOTED BY THE ASSESSING OFFICER EVIDENCES WERE COLLECTED FROM THE STOCK EXCHANGES AND BROKERS. IT APPEARS THAT THE ASSESSING OFFICER ASKED THE ASSESSEES FOR PRODUCING THE BROKERS WHO SAID TO HAVE DONE TRANSACTED IN THE SHARES FOR THE ASSE SSEE. THE ASSESSING OFFICER ISSUED THE NOTICES FROM TIME TO TIME AND THE ASSESSEES HAVE FURNISHED THE EXPLANATIONS. IT IS STATED IN THE ASSESSMENT ORDER THAT THE ASSESSEE GROUP AS A WHOLE, SYSTEMATICALLY CREATED DOCUMENTS/CORRESPONDENCE IN ORDER TO GIVE COLOUR OF GENUINE LONG TERM GAINS TO THOSE TRANSACTIONS WHICH ARE OTHERWISE FAKE TRANSACTIONS BY 4 SHOWING PURCHASE AND SALE OF VARIOUS SHARES. THE ASSESSING OFFICER ALSO STATED IN THE ASSESSMENT ORDER THAT SHOWING LONG TERM CAPITAL GAIN WAS BENEFICIAL TO T HESE ASSESSEES AS EITHER THERE WAS NO TAX OR TAX RATE OF 10% ON THE L.T.C.G. DEPENDING UPON THE RELEVANT PERIOD. 3 . THESE ASSESSEES HAVE ENTERED INTO THE TRANSACTIONS FOR THE PURCHASE AND SALES OF THE SHARES WHICH ARE CALLED A PENNY STOCKS, ARE SUMMARIZED AS UNDER: A). NAME: MRS. BHAGYASHREE P PATIL SR. NO. ASST. YEAR NAME OF SCRIP DATE OF PURCHASE NO. OF SHARES BROKERS NAME FROM WHOM SHARES ARE PURCHASED DATE OF SALE NO. OF SHARES BROKERS NAME FROM WHOM SHARES ARE SOLD 1 2 3 4 5 6 2004 - 05 2005 - 06 2005 - 06 2005 - 06 2005 - 06 2006 - 07 G TECH INFO LTD. FAST TRACK ENTERTAINMENT LTD. TALENT INFO LTD SANGOTRI CONSTRUCTION NIHARIKA IND. LTD PRRANETTA IND LTD 05.04.2002 06.05.2002 06.06.2002 16,300 14,500 10,500 T.H. VAKIL 27.12.2003 01.01.2004 23.02.2004 20,000 14,500 6,800 RUCHIRAJ INVESTMENTS 80000 SHARES SOLD THROUGH KNC SHARES & SECURITIES, 20000 SHARES SOLD THROUGH DPS SHARES & SECURITIES, 20000 SHARES SOLD THROUGH VIJAY BHAGWANDAS & CO & BALANCE 109000 SHARES SOLD THROUGH IL & FS INVESTMENT MAHASAGAR SECURITIES BUBNA STOCK BROKING BUBNA STOCK BROKING VRAJ FINANCE TOTAL 41,300 41,300 10.04.2003 16.04.200 3 06.05.2003 22.05.2003 30.05.2003 03.06.2003 40,000 40,000 20,000 43,000 66,000 20,000 120000 SHRES PURCHASED FROM VIJAY BHAGWANDAS & CO. AND BALANCE 109000 SHARES PURCHASED FROM DPS SHARES AND SECURITIES 17.06.2004 18.06.2004 21.06.2004 22.09.2004 11.1 0.2004 16.12.2004 17.12.2004 21.12.2004 22.12.2004 23.12.2004 24.12.2004 27.12.2004 28.12.2004 29.12.2004 40,000 30,000 10,000 20,000 20,000 10,000 10,000 10,000 10,000 5,000 15,000 15,000 20,000 14,000 TOTAL 229,000 229,000 24.04.2003 28.04.20 03 10,000 11,000 MAHASAGAR SECURITIES 17.06.2004 07.07.2004 16.07.2004 7,000 1,800 12,200 TOTAL 21,000 21,000 13.06.2003 09.06.2003 22,000 12,000 BUBNA STOCK BROKING BUBNA STOCK BROKING 18.06.2004 23.06.2004 15.07.2004 21.07.2004 22.07.2004 10,000 12,000 2,000 6,000 4,000 TOTAL 12,000 12,000 07.04.2004 08.04.2004 16.04.2004 300,000 170,000 280,000 VIJAY BHAGWANDAS & CO 27.05.2005 30.05.2005 31.05.2005 160,000 4000,000 190,000 TOTAL 750,0 00 750,000 5 B). NAME: PRASAD D PATIL SR. NO. ASST. YEAR NAME OF SCRIP DATE OF PURCHASE NO. OF SHARES BROKERS NAME FROM WHOM SHARES ARE PURCHASED DATE OF SALE NO. OF SHARES BROKERS NAME FROM WHOM SHARES ARE SOLD 1 2 2004 - 05 2006 - 07 SANGOTRI CONSTRUCTION PRRANETTA IND LTD 04.06.2003 13.06.2003 1,000 21,000 BUBNA STOCK BROKING 08.06.2004 22.06.2004 1,000 21,000 BUBNA STOCK BROKING VRAJ FINANCE TOTAL 22,000 22,000 07.04.2004 13.04. 2004 15.04.2004 500,000 610,000 630,000 DPS SHARES AND SECURITIES 16.06.2005 17.06.2005 20.06.2005 21.06.2005 07.07.2005 08.07.2005 11.07.2005 300,000 300,000 250,000 150,000 200,000 300,000 240,000 TOTAL 1,740,000 1,740,000 C). NAM E: MS. SMITA PATIL SR. N ASST. YEAR NAME OF THE SCRIP DATE OF PURCHASE NO. OF SHARES BROKER'S NAME FROM WHOM SHARES ARE PURCHASED DATE OF SALE NO. OF SHARES BROKER'S NAME FROM WHOM SHARES ARE SOLD 1 2 3 4 5 6 2004 - 05 2005 - 06 2005 - 06 2005 - 06 2005 - 06 2006 - 07 G TECH INFO LTD. FAST TRACK ENTERTAINME NT LTD. TALENT INFO LTD SANGOTRI CONSTRUCTION NIHARIKA IND. LTD PRRANETTA IND LTD 05.04.2002 08.04.2002 16,000 13,000 T.H. VAKIL 13.01.2004 29,000 ACTION FINANCIAL SERVICES LTD. 80000 SHARES SOLD THROUGH DPS SHARES & SECURITIES, 1 7500 SHARES SOLD THROUGH ACTION FINANCE SERVICES & BALANCE 9 1000 SHARES SOLD THROUGH IL & FS INVESTMENT MAHASAGAR SECURI TIES BUBNA STOCK BROKING | BUBNA STOCK BROKING VRAJ FINANCE TOTAL 29,000 29000 24.04.2003 14.05.2003 20.05.2003 22.05.2003 03.06.2003 04.06.2003 35,200 24,800 50,000 41,000 29,500 8,000 97500 SHARES PURCHASED FROM VIJAY BHAGWANDAS & CO. AND BALANCE 91000 SHARES PURCHASED FROM DPS SHARES AND SECURITIES 02.06.2004 06.07.2004 13.09.2004 10.12.2004 14.12.2004 16.12.2004 18.12.2004 21.12.2004 22.12.2004 60000 20000 17500 31000 25000 3000 15000 7000 10 000 TOTAL 188,500 188,500 24.04.2003 28.04.2003 05.08.2003 10,000 12,000 18,000 MAHASAGAR SECURITIES 16.06.2004 15.12.2004 22,000 18,000 TOTAL TOTAL 40,000 40,000 11.06.2003 20.06.2003 25.06.2003 10.06.20 03 7,000 8,000 7,000 22,000 10,000 BUBNA STOCK BROKING BUBNA STOCK BROKING 02.07.2004 08.07.2004 13.07.2004 19.07.2004 20.07.2004 20,000 2,000 22,000 2,000 6,000 2,000 TOTAL TOTAL 10,000 10,000 06.04.2004 08.04.2004 13.04.20 04 300,000 250,000 300,000 VIJAY BHAGWANDAS & CO. 12.05.2005 23.05.2005 27.05.2005 580,000 230,000 40,000 TOTAL TOTAL 850,000 850,000 6 D). NAME: SOMNATH PRASAD PATIL SR. NC ASST. YEA NAME OF THE SCRIP DATE OF PURCHA. NO. OF SHARES BROKER'S NAME FROM WHOM SHARES ARE PURCHASED DATE OF SALE NO. OF SHARES BROKER'S NAME FROM WHOM SHARES SHARES ARE SOLD 1 2 3 4 5 6 2004 - 05 2005 - 06 2005 - 06 2005 - 06 2005 - 06 2006 - 07 G TECH INFO LTD. FAST TRACK ENTERTAIN MENT LTD. TALENT INFO LTD SANGOTRI CONSTUCTI ON NIHARIKA IND. LTD PRRANETTA IND LTD 05.04.2002 10,800 T.H. VAKIL 01.04.2003 21,500 RUCHIRAJ INVESTMENTS 80000 SHARES SOLD THROUGH KNC SHARES & SECURITIES, 17500 SHARES SOLD THROUGH RUCHIRAJ INVESTMENTS & BALANCE 94000 SHARES SOLD THROUGH IL & FS INVESTMENT MAHASAGAR SECURITIES BUBNA STOCK BROKING BUBNA STOCK BRO KING VRAJ FINANCE 22.05.2002 10,700 TOTAL 21,500 29000 16.04.2003 19.05.2003 22.05.2003 23.05.2003 03.06.2003 08.07.2003 15.07.2003 25,000 50,000 44,000 35,000 20,000 9,500 8,000 07.06.2004 08.06.2004 09.06.2004 10.06.2004 14.06.2004 06.09.2004 07.09.2004 30.12.2004 31.12.2004 03.01.2005 04.01.2005 06.01.2005 07.01.2005 10.07.2005 20000 20000 10000 10000 20000 6000 11500 20000 10000 7500 16500 15000 10000 15000 97500 SHARES PURCHASED FROM VIJAY BHAGWANDA S & CO. AND BALANCE 94000 SHARES PURCHASED FROM DPS SHARES AND SECURITIES TOTAL 191,500 191,500 24.04.2003 10,000 MAHASAGAR SECURITIES 16. 06.2004 21,500 28.04.2003 11,500 15.12.2004 18,000 05.08.2003 18,000 TOTAL 39,500 39,500 23.04.2003 2,000 BUBNA STOCK BROKING 22.06.2004 20,000 11.06.2003 20,000 08.07.2004 2,000 TOTAL 22,000 22,000 11.06.2003 9,500 BUBNA STOCK BROKING 15.07.2004 2,000 22.07.2004 6,000 23.07.2004 1,500 TOTAL 9,500 9,500 12.04.2004 311,000 DPS SHARES & SECURITIES 19.04.2005 250,000 08.04.2004 289,000 25.04.2005 150,000 26.04.2005 200,000 TOTAL 600,000 600,000 E). NAME: PRASAD D PATIL (HUF) SR. NC ASST. YEAR NAME OF THE SCRIP DATE OF PURCHA NO. OF SHARES BROKER'S NAME FROM WHOM SHARES ARE PURCHASED DATE OF SALE NO. OF SHARES BROKER'S NAME FROM WHOM NO. SCRIP PURCHASE SHARES SHARES ARE SOLD 1 2005 - 06 FAST TRACK ENTERTAINMENT LTD. PRRANETTA IND LTD 11.11.2003 12,500 DPS SHARES & SECUR 20. 01.2005 5500 IL & FS INVESTMENT 110000 SHARES SOLD THROUGH IL & FS INVESTMENT & BALANCE 640000 SHARES SOLD THROUGH KARVY STOCK BROKING 19.12.2003 13,000 27.01.2005 8000 28.01.2005 10000 01.02.2005 2000 2 2006 - 07 TOTAL 25,500 25,500 21.04.2004 21.04.2004 325,000 DPS SHARES & SECURITIES 16.09.2005 19.09.2005 20.09.2005 21.09.2005 22.09.2005 23.09.2005 26.09.2005 14.10.2005 17.10.2005 18.10.2005 25.10.2005 03.01.2006 04.01.2006 05 .01.2006 09.01.2006 12.01.2006 25,000 75,000 35,000 105,000 35,000 80,000 45,000 45,000 45,000 50,000 50,000 40,000 30,000 30,000 30,000 30,000 22.04.2004 425,000 TOTAL 750,000 750,000 7 F). NAME: YASHRAJ PRASAD PATIL SR. NO. ASST. YEAR NAME OF THE SCRIP DATE OF PURCHASE NO. OF SHARES BROKER'S NAME FROM WHOM SHAR ES ARE PURCHASED DATE OF SALE NO. OF SHARES BROKER'S NAME FROM WHOM SHARES ARE SOLD 1 2006 - 07 PRRANETTA IND LTD 07.04.2004 21.04.2004 22.04.2004 630,000 270,000 479,101 DPS SHARES & SECURITIES 08.08.2005 10. 08.2005 11.08.2005 04.10.2005 05.10.2005 06.10.2005 07.10.2005 10.10.2005 11.10.2005 13.10.2005 14.10.2005 17.10.2005 18.10.2005 20.10.2005 25.10.2005 03.01.2006 04.01.2006 05.01.2006 09.01.2006 12.01.2006 13.01.2006 250,000 300,000 80,000 50,000 50,000 3 0,000 40,000 100,000 30,000 45,000 45,000 50,000 35,000 25,000 25,000 25,000 30,000 40,000 30,000 30,000 69,101 630000 SHARES SOLD THROUGH VRAJ FINANCE, 95 000 SHARES SOLD THROUGH IL & FS INVESTMENT & BALANCE 654101 SHARES SOLD THROUGH KARVY STOCK BROKING TOTAL 1,379,101 1,379,101 4 . ON THE BASIS OF THE EVIDENCES FOUND AND ENQUIRIES MADE, AS NOTED BY THE ASSESSING OFFICER, THE FOLLOWING FACTS WERE REVEALED: (I) THE PECULIAR PA TTERN WAS EMERGED THAT THE SHARES HAVE BEEN PURCHASED AT A NOMINAL PRICE BUT HAVE BEEN SOLD AT A VERY HIGH PRICE WITHIN A SHORT TIME. (II) THE RISE SHOWN IN THE VALUE OF THE SHARES WAS PHENOMENAL WHICH DID NOT MEET THE EYE PARTICULARLY IN SHARP CONTRAST TO THE MARKET AND FINANCIAL STANDING OF THOSE COMPANIES. (III) THE DEMAT ACCOUNT HAS BEEN OPENED JUST BEFORE THE SALE OF SHARES OF THE ABOVE SCRIP AND SHARES HAVE BEEN TRANSFERRED TO THE DEMAT ACCOUNT SHORTLY BEFORE THEIR SALE. SO FAR AS INTERVENING PERIOD THAT IS PERIOD THE DATE OF PURCHASE OF THE ABOVE SHARES AND THE DATE OF DEMATERIALIZATION NOTHING IS SHOWN. 8 (IV) THERE IS NO PROOF OF DELIVERY OF THE SHARES ALLEGEDLY PURCHASE BY THESE ASSESSEES. (V) THERE IS NO EVIDENCE THAT IN THE INTERVENING PERIOD THE SHARES WERE EVER PHYSICALLY TRANSFERRED IN THE NAME OF THE ASSESSEE BEFORE DEMATERIALIZATION. (VI) EVEN THOUGH THE BROKERS WERE SITUATED AT KOLKATA AND AHMEDABAD THE PAYMENTS OF THE ALLEGED SALE THEREOF WERE RECEIVED BY MEANS OF DDS FROM BOMBAY. (VII) FULL - FLEDGED ENQUIRIES WERE LAUNCHED BY THE BOMBAY STOCK EXCHANGE (BSE) AND SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI) INTO THE PURCHASE AND SALE OF THOSE SHARES AND IT WAS FOUND BY THEM THAT THE PRICES OF THE SHARES WERE MANIPULATED. THE ASSESSING OFFICER HAS NOTED THAT SEBI SUSPENDED SOME OF THE BROKERS INCLUDING THE BROKERS VIJAY BHAGWANDAS AND CO., DPS SHARES AND SECURITIES PVT. LTD AND T.H. VAKIL. IT APPEARS THAT ASSESSES INITIALLY TOOK THE STAND THAT, AS NOTED BY THE ASSESSING OFFICER , ALL THE SHARES IN RESPECT OF WHICH LONG TERM CAPITAL GAIN HAS BEEN DECLARED WERE PURCHASED THROUGH THE STOCK EXCHANGE AND IT WAS DENIED THAT THERE WAS ANY OFF - MARKET TRANSACTIONS. THE ASSESSING OFFICER MADE THE ENQUIRY WITH THE STOCK EXCHANGES AND IT WAS CONFIRMED BY T HE SAID EXCHANGES THAT THE PURCHASE OF THE SHARES WERE NOT DONE ON - LINE. INDEPENDENTLY, LETTERS WERE ALSO ADDRESSED BY THE ASSESSING OFFICER TO THE BOMBAY STOCK EXCHANGE (BSE), AHMEDABAD STOCK EXCHANGE AND KOLKATA STOCK EXCHANGE AND THE SAID LETTERS ARE MADE ANNEXURES TO THE ASSESSMENT ORDERS. THE ASSESSING OFFICER ISSUED SUMMONS TO THE BROKERS, MORE PARTICULARLY TO M/S. VIJAY BHAGWANDAS & CO., DPS SHARES & SECURITIES PVT. LTD. AND M/S. MAHASAGAR SECURITIES LTD. THEIR STATEMENTS WERE RECORDED 9 AND THE BRO KERS DENIED HAVING SOLD THE SHARES TO THESE ASSESSEES AS NOTED IN PARA NO. 3.5 OF THE ASSESSMENT ORDER IN THE CASE OF SMT. BHAGYASHREE PATIL. IT APPEARS THAT THE ASSESSEES TOOK THE STAND THAT THE BROKERS HAVE GIVEN STATEMENT AGAINST THE ASSESSEES TO SAVE THEIR OWN SKIN AND ALL THESE ASSESSEES REQUESTED FOR OPPORTUNITY TO CROSS EXAMINE THOSE BROKERS. THE ASSESSING OFFICER DENIED THE REQUEST OF THE ASSESSEES TO CROSS EXAMINE THE BROKER BY EXPRESSING HIS OPINION THAT THERE IS NOTHING RELEVANT IN THE ABOVE A S ALL THE STOCK EXCHANGES I.E. KOLKATA, AHMEDABAD AND MUMBAI, HAVE CONFIRMED THAT NONE OF THE SHARES HAVE BEEN PURCHASED IN ON - LINE TRADING. 4 .1 THE ASSESSING OFFICER ALSO RAISED A QUESTION ON THE CONTRACT NOTES ISSUED BY THE BROKERS AND IN HIS OPINION WHEN THE TRANSACTIONS ARE NOT DONE THROUGH THE STOCK EXCHANGES THEN HOW THOSE CONTRACT NOTES WERE ISSUED BY THE BROKERS. IN THE OPINION OF THE ASSESSING OFFICER AS THESE ASSESSEES HAVE DECLARED THE CAPITAL GAINS TO THE EXTENT OF RS.11,65,61,434/ - , THE ON US IS ON THESE ASSESSEES TO PROVE THAT THE PURCHASE AND SALE TRANSACTION OF THE SHARES ARE GENUINE. THEREAFTER, THE ASSESSING OFFICER PROCEEDED TO EXAMINE THE SCRIP - WISE TRANSACTION IN ALL THE CASE OF THE ASSESSEES. THE ASSESSING OFFICER PLACED HIS RELIAN CE PARTICULARLY ON THE DENIAL MADE BY THE BROKERS FOR DEALING WITH THE SHARES ON BEHALF OF THESE ASSESSEES MORE PARTICULARLY M/S. VIJAY BHAGWANDAS & CO., DPS SHARES & SECURITIES PVT. LTD. AND M/S. MAHASAGAR SECURITIES LTD. 5 . THE ASSESSING OFFICER ALSO TOOK THE COGNIZANCE OF THE FACT THAT INVESTIGATION DEPARTMENT OF SECURITIES AND EXCHANGE BOARD OF INDIA 10 (SEBI) IN THE CONTEXT OF THE IRREGULARITIES INVOLVING THE SCRIP OF FAST TRACK ENTERTAINMENT PVT. LTD. HAS ALSO QUESTIONED THESE ASSESSEES. THE ASSESSIN G OFFICER PLACED RELIANCE ALSO ON THE INVESTIGATION MADE BY THE BOMBAY STOCK EXCHANGE (BSE) IN THE SCRIP OF FAST TRACK ENTERTAINMENT LTD., G - TECH INFO AND PRANNETA INDUSTRIES LTD. THE ASSESSING OFFICER HAS OBSERVED THAT IN THE CASE OF FAST TRACK ENTERTAIN MENT LTD. IT WAS REVEALED BY THE BSE THAT SAID COMPANY HAS DECLARED VERY LOW INCOME OF RS.2.1 LACS AND MARGINAL NET PROFIT OF RS.1.1 LACS DURING THE F.Y. 2003 - 04. HOWEVER, THE PRICE OF THE SAID SCRIP INCREASED FROM RS.13.16 TO RS.33.30 (153%) AND THE PRIC E CONTINUED TO INCREASE AND REACH RS.60 DURING THE RELEVANT PERIOD I.E. 25 TH MARCH, 2004 TO 30 TH JUNE, 2004. IT IS ASSERTED BY THE ASSESSING OFFICER THAT DPS SHARES AND SECURITIES LTD., VIJAY BHAGWANDAS AND CO., ACTION FINANCIAL SERVICES AND OTHERS WERE F OUND TO BE ACTING IN CONCERT WITH CERTAIN ENTITIES AND PROMOTERS IN OFF MARKET TRANSACTIONS IN THE SCRIP. THE ASSESSING OFFICER HAS ALSO NOTED THAT THE CLIENTS CONNECTED TO THE BROKERS ACCOUNTED FOR 71% OF THE TOTAL BUY ORDERS DURING THE PERIOD FROM 01 - 01 - 2004 TO 24 - 03 - 2004. THE ASSESSING OFFICER HAS NOTED THAT INSPITE OF THE SAID DEALINGS, NO DISCLOSURES WERE FILED BY THE COMPANY FAST TRACK ENTERTAINMENT LTD. UNDER THE SEBI REGULATIONS. THE ASSESSING OFFICER HAS NOTED THAT IT WAS REPORTED THAT ACTION WA S INITIATED AGAINST THE SAID BROKERS FOR ACTING IN CONCERT WITH PROMOTERS/CONNECTED ENTITIES AND ENTERING INTO CIRCULAR DEALS VIA MARKET AND OFF - MARKET TRANSACTIONS. IN ALL THESE TRANSACTIONS THE CHARGE OF NON - GENUINE OF TRANSACTION IS BASED ON THE INVEST IGATION CARRIED OUT BY BSE IN RESPECT OF TRADING IN SHARES OF FAST TRACK ENTERTAINMENT LTD. AND PRANNETA INDUSTRIES BY M/S. VIJAY BHAGWANDAS SHAH, DPS SHARES AND SECURITIES LTD. WHICH ALLEGEDLY MADE 11 MAJOR ROLE IN INFLUENCING THE PRICE OF THOSE SHARES/SCRIP S. SAME WAY THE ASSESSING OFFICER HAS DISCUSSED EACH SCRIP IN THE ASSESSMENT ORDER TO MAKE OUT A CASE THAT ALL THESE COMPANIES WERE NOT HAVING THE GOOD FINANCIAL STANDING AND IN RESPECT OF ALL INVESTEE COMPANIES THERE WAS RISE IN PRICES OF THE SHARES IN S HORT SPAN WHICH WAS UNBELIEVABLE. THE ASSESSING OFFICER, THEREFORE, RELYING ON THE STATEMENTS OF THE BROKERS DENYING THE TRANSACTIONS, FACTS REPORTED BY MAGADH STOCK EXCHANGE, BOMBAY STOCK EXCHANGE AND NATIONAL STOCK EXCHANGE CONCLUDED THAT THESE ASSESSEE S BOOKED BOGUS LONG TERM CAPITAL GAINS (L.T.C.G.) AND INTRODUCED UNACCOUNTED INCOME INTO THE BOOKS/BANK ACCOUNTS IN THE GUISE OF LONG TERM CAPITAL GAINS AND MADE THE ADDITION ON THE CHARGE OF FICTITIOUS PURCHASES/SALES OF THE SHARES, INCLUSIVE OF BROKERAGE @ 6%. THE WORKING OF THE BROKERAGE @ 6% HAS NOT BEEN SEPARATELY DISCUSSED. THE ASSESSING OFFICER MADE THE ADDITIONS OF THE ENTIRE SALE PROCEEDS ON SHARES SHOWN BY THE ASSESSEES TREATING THE SAME AS UNDISCLOSED INCOME. ALL THESE ASSESSEES CARRIED THE IS SUES BEFORE THE LD. CIT(A). 6 . THE LD. CIT(A) HAS CONFIRMED THE ORDER OF THE ASSESSING OFFICER IN RESPECT OF THE SCRIPT MENTIONED HEREINABOVE. WHEN THE MATTER REACHED BEFORE THE TRIBUNAL, THE TRIBUNAL HAS ALLOWED THE CLAIM OF THE ASSESSEE . THE OPERATIVE PART OF THE FINDINGS OF THE TRIBUNAL ORDER IS AS UNDER: 29. AFTER EXAMINING FACTS AS WELL AS EVIDENCE ON RECORD IN THE BACK DROP OF THE LEGAL PRINCIPLES LAID DOWN IN ABOVE DECISIONS WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER HAS FAILED TO ESTABLISH A CLEAR CASE AGAINST THE ASSESSEES THAT THE SHARE TRANSACTIONS, ON WHICH THE LONG TERM CAPITAL GAINS HAVE BEEN DECLARED ARE SHAM AND CAMOUFLAGE. IN OUR CONSIDERED OPINION THE RELIANCE PLACED BY THE 12 ASSESSING OFFICER ON THE EVIDENCE WITHOUT AF FORDING OPPORTUNITY TO THE ASSESSEE TO CROSS - EXAMINE THE THREE BROKERS WHO HAVE ALLEGEDLY DENIED THE ISSUANCE OF THE CONTRACT NOTES IS ALSO GOES IN FAVOUR OF THE ASSESSEES ON THE WELL SETTLED JUDICIAL PRINCIPLES THAT NO EVIDENCE SHOULD BE USED AGAINST THE ASSESSEE UNLESS THE ASSESSEE HAS BEEN GIVEN OPPORTUNITY TO CROSS - EXAMINE THE DEPONENTS. MOREOVER, AS ADMITTEDLY ALL THE SALES ARE ROUTED THROUGH THE DEMAT ACCOUNT, CHARGE OF MANIPULATION BY THE ASSESSING OFFICER IS TOTALLY BASELESS. ONCE THE DOCUMENTARY EVIDENCE IS FILED BY THE ASSESSEE POINTING OUT SOME MINOR DISCREPANCIES AND WITHOUT AFFORDING OPPORTUNITY TO CROSS - EXAMINE THE SAID BROKERS HAS NO WEIGHTAGE AS EVIDENCE IN THE JUDICIAL PROCEEDINGS. THE CHARGE OF SHARP RISE IN THE SHARE PRICES WITHOUT PROP ER FINANCIAL FOOTING OF THE INVESTEE COMPANIES IS GENERAL CHARGE AND IS NOT ESTABLISHED BY THE ASSESSING OFFICER. WE ALSO HOLD THAT MERELY THERE IS A DELAY IN CONVERTING THE PHYSICAL SHARES INTO ELECTRONIC FORM I.E. THE DEMAT ACCOUNT, THAT CANNOT BE THE CR ITERIA TO HOLD THAT THE SHARES TRANSACTIONS ARE ARRANGED AND CAMOUFLAGED AS IN ALL THE CASES THE ASSESSEES HAVE RECORDED THEIR SHARE TRANSACTIONS IN THE REGULAR BOOKS OF ACCOUNT PRIOR TO THE DATE OF SEARCH. THERE WAS HEAVY BURDEN ON THE ASSESSING OFFICER T O DESTROY THE CLAIM OF THE ASSESSEE BUT EXCEPT GOING ON THE GENERAL PHILOSOPHY, NOTHING HAS BEEN MADE OUT THE ASSESSING OFFICER TO SHOW THAT THE CLAIM OF THE ASSESSEE IN RESPECT OF THE SALE OF SHARES IS NOT CORRECT. WE, THEREFORE, HOLD THAT BOTH THE AUTHO RITIES BELOW ARE NOT JUSTIFIED IN HOLDING THAT THE ENTIRE SALE PROCEEDS SHOWN BY THE ASSESSEES ARE OUT OF SHAM AND BOGUS ARRANGED SHARE TRANSACTIONS. WE ALSO HOLD THAT ALL CONTRACT NOTES ARE GENUINE. WE, THEREFORE, ALLOW THE GROUNDS TAKEN BY THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO ACCEPT THE CLAIM OF THE LONG TERM AS WELL AS SHORT TERM CAPITAL GAINS BY HOLDING THAT ALL THE PURCHASES AND SALES OF THE SHARES ARE THE GENUINE TRANSACTIONS. 30. SO FAR AS THE ADDITION TOWARDS COME @ 6% IS CONCERNED, IN OUR OPINION, IT HAS NO BASE AT ALL NOR THERE IS ANY IOTA OF EVIDENCE. SAID ADDITION IS ONLY BASED ON THE PRESUMPTION BY THE ASSESSING OFFICER AS IT IS CLEAR FROM ALL THE ASSESSMENT ORDERS. MOREOVER, NOTHING WAS 13 FOUND IN THE COURSE OF SEARCH ALSO AGAIN ST THESE ASSESSEES. WE, THEREFORE, HOLD THAT THE ADDITION OF THE ALLEGED PAYMENT OF COMMISSION @ 6% IS ALSO WITHOUT ANY MERIT AND ACCORDINGLY GROUNDS ARE ALSO DECIDED IN FAVOUR OF THESE ASSESSEES. 7 . IN S UM AND SUBSTANCE IN RESPECT OF THE ABOVE SCRIPT, THE TRIBUNAL HELD THAT THE LONG TERM CAPITAL GAIN DECLARED IN RESPECT OF THE ABOVE MENTIONED SCRIPT IS GENUINE. THE TRIBUNAL ALSO H E LD THAT THE PERIOD OF HOLDING DECLARED BY THE ASSESSEE ON THE BASIS OF CONTRACT N OTES IS ALSO CORRECT. THE TRIBUNAL ALSO D ELETED THE ADDITION MADE ON ACCOUNT OF THE ALLEGED PAYMENT OF COMMISSION. 8. SO FAR AS THE PRESENT APPEALS ARE CONCERNED IN RESPECT OF THE FOLLOWING SCRIPT, THE LD. CIT(A) HELD THAT THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE WERE GENUINE AND HE ALLOWED THE CLAIM OF THE ASSESSEE WHICH IS AS UNDER : SR. NO. NAME OF THE COMPANY 1 KARUNA CABLES LTD. 2 KONARK COMMERCE LTD. 3 GTL 4 ESCORTS LTD. 9. THE REASONS GIVEN BY THE LD.CIT(A) IN ALL THE APPEALS ARE IDENTICAL BUT WE MAY LIKE TO REPRODUCE THE REA SONS GIVEN IN THE CASE OF SMT. BHAGYASHRI P. PATIL AS A LEAD CASE . 5.4 TRANSACTIONS IN RESPECT OF SHARES OF KONARK COMMERCE : THE AO TREATED THE SALE PROCEEDS OF THE SHARES OF KONARK COMMERCE AS INCOME FROM UNDISCLOSED SOURCES. HOWEVER, HE HAS NOT BRO UGHT ON 14 RECORD ANY MATERIAL TO PROVE THAT TRANSACTIONS RELATING TO THESE SHARES WERE BOGUS. NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE RESPECTIVE SHARE BROKERS AND / OR RESPECTIVE STOCK EXCHANGES DENIED THESE TRANSACTIONS. UNDER THE CIRCUMSTANCES, THE AO WAS NOT JUSTIFIED IN TREATING TRANSACTIONS RELATING TO THESE SHARES AS BOGUS. THEREFORE, HIS ACTION IN TREATING SALE PROCEEDS FROM THESE SHARES AS INCOME FROM UNDISCLOSED SOURCES CANNOT BE SUSTAINED. THE APPELLANT HAS SHOWN SALE PROCEEDS OF RS.11,8 9,320 / - FROM THIS SHARE. THUS, THE APPELLANT GETS A RELIEF OF RS.11,89,320 / - OUT OF ADDITION ON ACCOUNT OF INCOME FROM UNDISCLOSED SOURCES. NOW THE REVENUE IS IN APPEAL US. 10. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. WE FIND THAT THERE IS NO DI SCUSSION IN THE ASSESSMENT ORDER IN RESPECT OF THE ABOVE SCRIP TS. EVEN IF THE ASSESSING OFFICER HAS DISCUSSED THE REASONS FOR THE ADDITION IN RESPECT OF SMT. BHAGYASHRI P. PATIL, SHRI SOMNATH P. PATIL, SHRI PRASAD D. PATIL, SHRI PRASAD D. PATIL (HUF) AND S HRI YASHRAJ P. PATIL . IT IS VERY DIFFICULT TO UNDER STAND THE APPROACH OF THE ASSESSING OFFICER WITHOUT GIVING ANY REASONS HOW THE ADDITIONS ARE MADE. MOREOVER, WHILE ADJUDICATING THE CONTROVERSY IN ASSESSEES APPEAL IN RESPECT OF THE SCRIPTS ALLOWING THE CLAIM OF THE ASSESSEE , WE HAVE GIVEN THE DETAILED REASONS. WE, THEREFORE, FOLLOWING OUR REASONS AND FINDINGS IN THE ASSESSEES APPEAL FOR A.Y. 2006 - 07 ON MERIT, WE HOLD THAT THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE IN RESPECT OF KARUNA CABLES LTD., KONARK COMMERCE LTD., GTL, ESCORTS LTD. AR E GENUINE TRANSACTIONS AND THERE IS NO EVIDENCE BROUGHT ON RECORD IN RESPECT OF THIS SCRIPT BY THE ASSESSING OFFICER TO SUPPORT HIS CASE T HOUGH THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE IN RESPECT OF THESE FOUR SCRIPTS ARE NOT GENUINE. THE ASSESSING OFFICER HAS TO GIVE THE REASON S FOR FASTENING THE TAX LIABILITY ON THE ASSESSEE AND ALSO TO BRING ON RECORD 15 THE EVIDENCE IN SUPPORT OF THE REASONS WHICH HAS NOT BEEN DONE BY THE ASSESSING OFFICER AND HENCE THE LD. C IT(A) HAS RIGHTLY DELETED THE ADDITIONS IN RESPECT OF ABOVE FOUR SCRIPT. WE FIND NO REASONS TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) IN RESPECT OF THE ISSUE BEFORE US. ACCORDINGLY, ALL THE GROUNDS ARE DISMISSED IN ALL THE APPEALS. 1 1 . IN THE RESU LT, ALL THE APPEALS OF THE REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 30 TH DAY OF DECEMBER , 2013. SD/ - SD/ - ( R.K. PANDA ) (R.S. PADVEKAR) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED 30 TH DECEMBER , 2013 GCVSR /RK COPY TO: - 1) DEPARTMENT, 2) ASSESSEE 3) THE CIT(A) - CENTRAL, PUNE 4) THE CIT - CENTRAL, PUNE 5) THE DR, A BENCH, I.T.A.T., PUNE 6) GUARD FILE //TRUE COPY// BY ORDER SENIOR PRIVATE SECRETARY ITAT , PUNE