Amita Mukesh Mody, Ahmedabad V. The Income Tax Officer, Ward-3(4), Ahmedabad

ITA 1863/AHD/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9655 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 30-11-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 22-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VILAS V SHINDE
• Assessee Lawyers: S N DIVATIA
• Keywords: Capital asset; Income from undisclosed sources; Search and seizure; Principle of natural justice; Earning of tax free income; Corroborative evidences; Accommodation entries; Reason to believe
• Section: 143(3); 142(1); 133A; 115JB; 133(6); 32; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE S/SHRI RAJPAL YADAV, JM, & MANISH BORAD, AM. ITA NO.1863/AHD/2015 ASST. YEAR: 2006-07 AMITA MUKESH MODY 74, SARDAR PATEL MARKET, O/S JAMALPUR GATA, AHMEDABAD VS. ITO, WARD 3(4), AHMEDABAD. APPELLANT RESPONDENT PAN AAPPM 4760L APPELLANT BY SHRI S. N. DIVATIA, AR RESPONDENT BY VILAS V. SHINDE, DR DATE OF HEARING: 30/11/2015 DATE OF PRONOUNCEMENT: 05/02/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF CIT(A) -10, AHMEDABAD, DATED 23.04.2015. ASSESSMENT WAS FRAMED U/S 143(3) R.W.S. 147 OF THE INCOME-TAX ACT, 1961 ( IN SHORT THE ACT) BY ITO, WD-3(4), AHMEDABAD FOR ASST. YEAR 2006-07. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL :- 1.1 THE ORDER PASSED U/S 250 ON 23.4.2015 FOR ASST. YEAR 2006-07 BY CIT(A)-10 AHMEDABAD, UPHOLDING THE ADDITION OF RS.1,43,042/- IS WHOLLY ILLEGAL, UNLAWFUL AND AGAIN ST THE PRINCIPLES OF NATURAL JUSTICE. ITA NO. 1863/AHD/2015 ASST. YEAR 2006-07 2 1.2 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND OR ON FACTS IN NOT CONSIDERING FULLY AND PROPERLY THE EXPLANATIONS FUR NISHED AND THE EVIDENCE PRODUCED BY THE APPELLANT. 1.3 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN CONFIRMI NG THE ADDITION OF RS.1,43,042/- WITHOUT GIVING TO THE APPELLANT COPY OF THE MATERIAL, STATEMENT REPORT U/S 133(6) ETC. RELIED I N ASSESSMENT AND THEREBY VIOLATING THE PRINCIPLES OF NATURAL JUS TICE. LD. CIT(A) OUGHT TO HAVE HELD THE IMPUGNED ORDER ILLEGAL AND U NLAWFUL. 2.1 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND OR ON FACTS IN CONFIRMING THE ADDITION OF RS.1,43,042/- AS UNEXPLA INED INCOME FROM FICTITIOUS TRANSACTION WITH MAHASAGAR SECURITI ES LTD. GROUP, THOUGH THE SAME WAS DULY SUPPORTED BY EVIDENCE AND REFLECTED IN THE ORIGINAL RETURN. 2.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN UPHOLDI NG ADDITION OF RS.1,43,042/- AS UNEXPLAINED INCOME FROM FICTITIOUS TRANSACTION WITH MAHASAGAR SECURITIES LTD. GROUP. 3.1 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN UPHOLDIN G THAT NOTICE OF REOPENING U/S 148 AND PROCEEDINGS INITIATED WERE NO T ILLEGAL AND UNLAWFUL. SINCE THE CONDITIONS PRECEDENT FOR RE OPENING THE ASSESSMENT WERE NOT SATISFIED THE ENTIRE REOPENING U/S 147 WAS BAD IN LAW AND WITHOUT JURISDICTION. 4.1 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN HOLDING THAT LTCH ON SALE OF SSNL BONDS WAS NOT EXEMPT FROM TAX. 2. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS AN INDIVIDUAL. SHE FILED HER RETURN OF INCOME ON 27/12/2006 DECLARING TOTAL INCOME AT RS.1,48,989/- AND THE SAID RETURN WAS PROCESSED U/S 143(1) OF THE ACT. FURTHER ON THE BASIS OF INFORMATION WITH THE D EPARTMENT PURSUANT TO SEARCH AND SEIZURE ACTION CARRIED OUT ON 25/11/2 009 IN THE CASE OF M/S MAHASAGAR SECURITIES LTD. AND OTHER GROUP COMPA NIES AND THE INFORMATION RECEIVED FROM DIT (SYSTEM), NEW DELHI, IT WAS ITA NO. 1863/AHD/2015 ASST. YEAR 2006-07 3 ASCERTAINED BY THE DEPARTMENT THAT THE ASSESSEE IS ALSO INVOLVED IN TAKING ENTRIES FROM GROUP COMPANIES BELONGING TO MU KESH CHOKSHI GROUP DURING F.Y. 2005-06 AND TOTAL TRANSACTION INV OLVED IS RS.1,43,042/-. ON THE BASIS OF THIS INFORMATION THE ASSESSMENT WAS REOPENED U/S 147 OF THE ACT AND NOTICE U/S 148 OF T HE ACT WAS ISSUED ON 30/03/2013 AFTER RECORDING THE REASONS. IN RESPO NSE TO THIS NOTICE, ASSESSEE SUBMITTED ON 4.4.2013 THAT THE ORIGINAL RE TURN WHICH WAS FILED ON 27.12.2006 MAY BE CONSIDERED AS RETURN FIL ED IN COMPLIANCE WITH NOTICE U/S 148 OF THE ACT. THEREAFTER NOTICES U/S 143(1) AND U/S 142(1) OF THE ACT WERE ISSUED ON 3.12.2013. 3. DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS T HE ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS SHOWN LONG TERM CAPITAL GAIN AT RS.1,31,208/- ON ACCOUNT OF SALE OF SARDAR SAROVAR BONDS FOR RS.1,42,008/- THROUGH SUB-BROKER ALLIANCE INTERMEDI ARIES & NETWORK PVT. LTD. ON THE BASIS OF INFORMATION AVAILABLE WIT H THE ASSESSING OFFICER MENTIONING THAT THE REGISTRATION OF SUB-BRO KERSHIP OF M/S ALLIANCE INTERMEDIARIES & NETWORK PVT. LTD. WAS CAN CELLED ON 19/02/2004 WHEREAS THE ASSESSEE HAS FURNISHED THE S ALE BILL DATED 9/8/2005 OF ALLIANCE INTERMEDIARIES & NETWORK PVT. LTD. DUE TO THIS REASON THE ASSESSING OFFICER CAME TO A CONCLUSION T HAT THIS TRANSACTION OF RECEIPT OF RS.1,43,042/- FOR SALE OF SARDAR SAROVAR BONDS WAS BOGUS AND ADDED THE SAME TO THE TOTAL INC OME OF THE ASSESSEE AS UNDISCLOSED INCOME AND ASSESSED THE INC OME OF THE ASSESSEE AT RS.2,92,030/- BY OBSERVING AS UNDER :- ITA NO. 1863/AHD/2015 ASST. YEAR 2006-07 4 6.2 FURTHER, INQUIRIES WERE CARRIED OUT BY THE UND ERSIGNED BY ISSUING NOTICE U/S 133(6) TO THE NATIONAL STOCK EXC HANGE INDIA LTD. IN RESPONSE TO WHICH IT IS CATEGORICALLY STATE D VIDE LETTER DTD.19/11/2013 THAT FROM THE RECORDS AVAILABLE WITH EXCHANGE, M/S ALLIANCE INTERMEDIARIES & NETWORK PVT. LTD. IS A REGISTERED SUB-BROKER (INS 230783537) AFFILIATED TO M/S ISE SE CURITIES & SERVICES LTD. (TM CODE 10777), A REGISTERED TRADING NUMBER OF THE EXCHANGE. THE DATE OF REGISTRATION OF M/S ALLIA NCE INTERMEDIARIES & NETWORK PVT. LTD. IN THE CAPITAL M ARKET SEGMENT IS OCTOBER 12,2000. THE REGISTRATION WAS CA NCELLED ON FEBRUARY 19, 2004. THE ASSESSEE HAS FURNISHED THE B ILLS DATED 9/8/2005 OF ALLIANCE INTERMEDIARIES & NETWORK PVT. LTD. THROUGH WHOM THE ASSESSEE HAS SHOWN SARDAR SAROVAR BONDS WE RE AS THE REGISTRATION OF THE SAID HAS BEEN CANCELLED BY THE NSC ON 19/2/2004 NAME ALLIANCE INTERMEDIARIES & NETWORK PV T. LTD. IN THE RETURN OF INCOME ASSESSEE HAS SHOWN ONLY INCOME FROM OTHER SOURCE OF RS.2,48,989/- AND AFTER CLAIMING TH E DEDUCTION OF RS.1,00,000/- THE NET INCOME IS SHOWN OF RS.1,48 ,989/-. THE INCOME FROM LONG TERM CAPITAL GAIN ON SALE OF SARDA R SAROVAR BOND HAS BEEN CLAIMED AS EXEMPT INCOME U/S 10(38) O F THE IT ACT. 6.3 CONSIDERING THE ABOVE FACTS, IT IS PROVED THAT THE ASSESSEE HAS TAKEN ACCOMMODATION ENTRIES FROM THE MAHASAGAR GROUP OF COMPANIES AND IS NOT ABLE TO PRO VE TRANSACTIONS OF SHARES OF RS.1,43,042/-. THEREFORE, THE AMOUNT OF INVESTMENT IN SHARES OF RS.1,43,042/- IS TREATED AS UNEXPLAINED INCOME AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. SINCE THE ASSESSEE HAS CONCEALE4D THE PAR TICULARS OF INCOME AND ALSO FURNISHED IN ACCURATE PARTICULAR S OF INCOME, THE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE IT ACT , IS INITIATED. 4. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE CIT(A) WHICH ALSO DID NOT BRING RELIEF TO THE ASSESSEE AND LD. CIT(A) WHILE DISMISSING THE APPEAL OF ASSESSEE IN RELATION TO VALIDITY OF R EOPENING OF ASSESSMENT U/S 147 OF THE ACT, HAS OBSERVED AS UNDE R :- ITA NO. 1863/AHD/2015 ASST. YEAR 2006-07 5 THE RIVAL SUBMISSIONS HAVE BEEN CONSIDERED. I HOLD THAT THE CONTENTIONS OF THE APPELLANT ARE DEVOID OF MERIT. A S MENTIONED ABOVE, THE AO HAD INFORMATION THAT THE APPELLANT WA S ONE OF THE BENEFICIARIES TO WHOM MUKESH CHOKSI THROUGH ONE OF HIS BOGUS COMPANIES, HAD PROVIDED ACCOMMODATION ENTRIES. THE AO OBSERVED THAT THE APPELLANT HAD SHOWN LTCG SALE OF BONDS THROUGH ONE OF THE BOGUS COMPANIES FLOATED BY MUKES H CHOKSI. BASED ON THIS, THE AO HAD REASON TO BELIEVE THE INC OME HAD ESCAPED ASSESSMENT. THE COURTS HAVE HELD THAT THE A O MUST HAVE A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT AN D THAT THE REQUIREMENT IS NOT THAT THE AO SHOULD HAVE FINALLY ASCERTAINED THE FACT BY LEGAL EVIDENCE OR CONCLUSION. HONBLE S UPREME COURT IN ACIT VS. RAJESH ZAVERI STOCK BROKERS PVT. LTD. ( 2007) 291 ITR 500 (SC) HAS HELD AS FOLLOWS : 16. SECTION 147 AUTHORISES AND PERMITS THE ASSESSING OFFICER TO ASSESS OR REASSESS INCOME CHARGEABLE TO TAX IF HE H AS REASON TO BELIEVE THAT INCOME FOR ANY ASSESSMENT YEAR HAS ESC APED ASSESSMENT. THE WORD REASON IN THE PHRASE REASON TO BELIEVE WOULD MEAN CAUSE OR JUSTIFICATION. IF THE ASSESSING OFFICER HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCO ME HAD ESCAPED ASSESSMENT, IT CAN BE SAID TO HAVE REASON TO BELIEV E THAT AN INCOME HAD ESCAPED ASSESSMENT. THE EXPRESSION CANNOT BE RE AD TO MEAN THAT THE ASSESSING OFFICER SHOULD HAVE FINALLY ASCE RTAINED THE FACT BY LEGAL EVIDENCE OR CONCLUSION. HONBLE PUNJAB & HARYANA HIGH COURT IN ARUNKUMAR GO YAL VS. CIT (2012) 28 TAXMANN.COM 248 (P & H) HAS HELD AS U NDER :- (13). THE EXPRESSION 'REASON TO BELIEVE' THUS CANN OT BE RESTRICTIVELY CONSTRUED TO SAY AS IF THE AO IS OBLI GATED FIRSTLY TO FINALLY ASCERTAIN THE FACTUM OF ESCAPED INCOME ON T HE BASIS OF ADMISSIBLE EVIDENCE AND THEN ONLY TO ISSUE SHOW CAU SE TO THE ASSESSEE. THE SUPREME COURT HELD THAT THE FINAL OUT COME OF THE PROCEEDINGS INITIATED UNDER SECTION 147 IS NOT RELEVANT AND WHAT IS OF RELEVANCE IS THE EXISTENCE OF REASONS TO MAKE TH E AO BELIEVE THAT THERE HAS BEEN UNDER- ASSESSMENT OF THE ASSESSEE'S INCOME FOR A PARTICULAR YEAR.[REF, CENTRAL PROVINCES MANGANESE O RE CO. LTD. VS. ITO (1991) 59 TAXMANN 17 (SC) FURTHER HONBLE PATNA HIGH COURT IN MAHASUKHRAM MAD ANLAL VS. CIT (1956) 28 ITR 299 (PATNA) HELD AS FOLLOWS :- ITA NO. 1863/AHD/2015 ASST. YEAR 2006-07 6 THE ITO HAS JURISDICTION TO INITIATE A PROCEEDING UNDER SECTION 34 OF THE 1922 ACT IF UPON INFORMATION PRES ENTED BEFORE HIM THE ITO BELIEVES IN GOOD FAITH THAT INCO ME HAS ESCAPED ASSESSMENT. THE JURISDICTION OF THE ITO TO START A PROCEEDING UNDER SECTION 34 OF THE 1922 ACT CANNOT OBVIOUSLY DEPEND UPON THE ULTIMATE RESULT OF THE PROCEEDINGS. EVEN IF IT IS FOUND ULTIMATELY UPON EN QUIRY THAT THERE HAS BEEN NO ESCAPEMENT OF INCOME, IT IS, NOT A SOUND ARGUMENT TO ADVANCE THAT THE ITO HAS NO JURISDICTION TO INITIATE THE PROCEEDING. THE TEST O F JURISDICTION IS NOT THE ULTIMATE RESULT OF THE ENQU IRY BUT THE TEST IS, WHETHER THE ITO ENTERTAINED A BONA FIDE BE LIEF UPON THE DEFINITE INFORMATION PRESENTED BEFORE HIM THAT INCOME HAS ESCAPED. THE RATIO OF ABOVE JUDGMENTS ARE SQUARELY APPLICABL E TO THE PRESENT CASE IN THE PRESENT CASE, BASED ON INFORMAT ION IN HIS POSSESSION THE AO HAD REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. FURTHER, THE AO RE-OPENED THE ASSESSMENT AFTER RECO RDING REASONS TO DO SO. COPY OF REASONS WAS PROVIDED TO T HE APPELLANT. THE APPELLANT RAISED OBJECTIONS TO RE-OPENING VIDE LETTER DATED 23.12.2013. THE AO REJECTED THE OBJECTIONS BY A SPE AKING ORDER DATED 24.12.13. THUS IT IS SEEN THAT THE AO HAD REO PENED THE ASSESSMENT AFTER FOLLOWING DUE PROCEDURE AS PRESCRI BED IN THE ACT. HENCE, I FIND NO INFIRMITY IN THE ACTION OF TH E AO IN RE- OPENING THE ASSESSMENT. WITH DUE REGARD TO RATIO OF JUDGMENTS RELIED ON BY THE APPELLANT, THE SAME ARE NOT APPLIC ABLE IN THE PRESENT CASE AS THE FACTS ARE DIFFERENT. HENCE, I U PHOLD THE ACTION OF THE AO OF RE-OPENING THE ASSESSMENT. THE GROUND OF APPEAL IS DISMISSED. IN RELATION TO ADDITION OF RS.1,43,042/- AS UNEXPLA INED INCOME- DURING THE ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE APPELLANT HAD SHOWN LTCG OF RS.1,43,042/- ON SALE O F SARDAR SAROVAR BONDS WHICH WERE CLAIMED AS EXCEPT U/S 10( 38) OF THE ACT. THE AO OBSERVED THAT THE ABOVE TRANSACTIONS WE RE MADE THROUGH. ALLIANCE INTERMEDIARIES NET WORK PVT. LTD. COMPANY WHICH WAS ENGAGED IN PROVIDING ACCOMMODATION ENTRIE S. THE AO ITA NO. 1863/AHD/2015 ASST. YEAR 2006-07 7 OBSERVED THAT THIS SHARE BROKER WAS NOT REGISTERED WITH NATIONAL STOCK EXCHANGE (NSE) AS PER INFORMATION RECEIVED FR OM THIS STOCK EXCHANGE AND THAT REGISTRATION OF ALLIANCE IN TERMEDIARIES WAS CANCELLED ON 19.2.2004, MUCH BEFORE THE APPELLA NT MADE THE TRANSACTIONS. BASED ON ALL THIS, THE AO CONCLUD ED THAT THE APPELLANT HAD NOT CARRIED OUT ANY GENUINE TRANSACTI ON FOR SALE/PURCHASE OF BONDS AND THAT THE ALLEGED TRANSAC TIONS FROM WHICH THE APPELLANT HAS EARNED LTCG WERE ONLY ACCOM MODATION ENTRIES. THE AO CONCLUDED THAT THE SALE CONSIDERATI ON SHOWN TO HAVE BEEN RECEIVED BY THE APPELLANT WAS NOTHING BUT APPELLANTS OWN INCOME FROM UNDISCLOSED SOURCES. THUS THE AO AD DED RS.1,43,042/- AS UNEXPLAINED INCOME. DURING THE APPEAL PROCEEDINGS, THE APPELLANT SUBMI TTED AS FOLLOWS THE APPELLANT SUBMITS THAT THE IMPUGNED ADDITION MADE BY AO IS WHOLLY UNJUSTIFIED BOTH ON FACTS AND IN LAW AS U NDER :- (A) FIRSTLY, THE AO HAS OBSERVED THAT SHRI MUKESH C HOKSHI IN HIS STATEMENT ON 16/1/2013 ADMITTED TO HAVE PROVIDED ACCOMMODATION E NTRIES WHEREIN THERE WERE 829 BENEFICIARIES INCLUDING THE PRESENT APPELL ANT. HOWEVER, THE AO HAD NOT PROVIDED COPY OF SAID STATEMENT OF SHRI CHOKSHI ON WHICH HE HAS PLACED HEAVY RELIANCE THOUGH THE APPELLANT HAD ASKED FOR T HE COPY AS WELL AS CROSS EXAMINATION OF SHRI CHOKSHI VIDE LETTER DATED 6/1/2 014. IT IS NOW WELL SETTLED POSITION IN LAW THAT THE ASSESSMENT MADE BY AO WITH OUT FURNISHING THE COPY OF ALL SUCH MATERIAL RELIED UPON FOR THE PURPOSE OF ASSESSMENT IS ILLEGAL AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE AND EQUIT Y. REFER TO CASE OF DAKESHWARI COTTOM MILLS LTD. ITR.. IN CASE OF KISH ANCHAND CHETLARAM VS. CIT 125 ITR 713)(SC) IT WAS HELD THAT THE ADDITION MADE ON THE BASIS OF MATERIAL COLLECTED BEHIND THE BACK OF THE ASSESSEE AND WITHOUT ALLOWING OPPORTUNITY TO CROSS EXAMINE WAS UNJUSTIFIED, SIMIL ARLY, IN CASE OF SHRI MAULIK SHAH (307 ITR 137 ) (GUJ) (SLP REJECTED AS PER 322 ITR-2 (ST), IT WAS HELD THAT SIMPLY ON THE BASIS OF STATEMENT OF A THIRD PA RTY WITHOUT ANY CORROBORATIVE EVIDENCE, NO ADVERSE VIEW CAN BE TAKEN OR ADDITION MADE. (B) SECONDLY, THE AO HAS FAILED TO APPRECIATE THAT THE TESTIMONY OF S HRI CHOKSHI WAS NOT RELIABLE IN THE SENSE THAT HE HAS SUBSEQUENTLY CHAN GES HIS STATEMENTS TO SUIT HIS CONVENIENCE AT VARIOUS POINTS OF TIME. AT THE T IME OF SEARCH IN HIS CASE, HE STATED THAT MANY OF THE TRANSACTIONS WERE BOGUS WHEREAS SUBSEQUENTLY HE CONFIRMED THAT THE TRANSACTIONS OF THE ASSESSEE- RA JKUMAR R. SHOREWALA WERE GENUINE BY WAY OF AFFIDAVIT. THERE WAS NO REAS ON OR EVIDENCE TO RETRACT, FROM THIS AFFIDAVIT AND GIVE ANOTHER STATEMENT AGAI N REAFFIRMING THAT THE TRANSACTIONS WERE BOGUS. THIS CONDUCT OF THE SAID P ARTY CANNOT BE RELIED UPON AND SAID TO BE A CREDIBLE WITNESS. RELIANCE IS PLAC ED ON THE DECISION IN CASE OF CIT V. EASTERN COMMERCIAL ENTERPRISES ( 210 ITR 103)(CAL) WHEREIN IT IS OBSERVED THAT A MAN INDULGING INTO DOUBLE SPEAK CAN NOT BE STATED BY ANY MEANS A TRUTHFUL MAN AT ANY STAGE AND NO COURT CAN DECIDE ON WHICH OCCASION NE WAS TRUTHFUL. (REFER TO DECISION IN CAS E OF RAJKUMAR SHOREWALA ITA NO. 1863/AHD/2015 ASST. YEAR 2006-07 8 ITA NO. 10S-11 O/MUM/2010 DT14-5-2010 AT PAGE-5 OF THE ORDER) (C) THIRDLY, AS REGARDS THE MERITS OF THE CASE, THE APPELLANT HA CL FURNISHED THE EVIDENCE BY WAY OF BOUGHT NOTES AND CONTRACT NOTES IN RESPEC T OF PURCHASE AND SALE OF SHARES, COPY OF BANK, PASSBOOK WITH UCO BANK A/C 15 7280. THE AO HAS OBSERVED IN SHOW CAUSE NOTICE DT 1612.2013 THAT AS PER INFORMATION GATHERED AND ADMITTED BY SHRI CHOKSI, THE PRESENT A PPELLANT WAS ONE OF THE ENTITIES TO WHOM ENTRY WAS PROVIDED, BUT AO HAS FAI LED TO BRING ANY MATERIAL TO ESTABLISH THE SAME. EVEN IN PARA-5 OF THE IMPUGN ED ORDER, NO SUCH FINDING HAS BEEN GIVEN BY AO. RECENTLY, IN THE CASE OF ITO VS. SRNT. BIBI RANI BANSAL (133 TTJ 394) [AGRA) (TM], IT HAS BEEN HELD THAT THE ASSESSEE HAD FURNISHED CONTRACT NOTE, BILL, STATEMENT OF ACCOUNT FROM SHARE BROKER IN CONNECTION WITH THE SALE OF SHARES, AO WAS NOT JUST IFIED IN REJECTING THE GENUINENESS OF RECEIPT OF MONEY FROM SALE OF SHARES AND TREATING THE ENTIRE AMOUNT AS INCOME FROM UNDISCLOSED SOURCES. THE CONT ENTION OF AO THAT THE REGISTRATION OF THE BROKING FIRM WITH NSE WAS CANCE LLED ON 19-2-2004 HAS NO RELEVANCE BECAUSE THE CUSTOMER DEALING WITH THE BRO KER IS NOT SUPPOSED TO VERIFY THE SAID DETAILS AND HE IS ENTITLED TO PRESU ME FROM THE DETAILS GIVEN ON THE , . CONTRACT NOTES ETC THAT HE WAS HAVING SUCH REGISTRATION (UNLESS CIRCUMSTANCES ARE SUCH AS MAY GIVE RISE TO DISBELIE VE IT AND ASK FOR VERIFICATION)'. THE APPELLANT RELIED ON SEVERAL JUDGMENTS IN SUPPOR T OF HER CONTENTIONS. THE RIVAL SUBMISSIONS HAVE BEEN CONSIDERED. IN THIS CASE, THE APPELLANT HAD CARRIED OUT SHARE TRANSACTIONS THROUG H SHARE BROKER ALLIANCE INTERMEDIARIES (P) LTD. HON'BLE ITA T, MUMBAI IN MUKESH CHOKSI VS. ACIT IN ITA NO. 2299/M/2010 A.Y.0 2-03, ITA NO. 2300/M/2010, A.Y.2006-07 AND IN ITA NO 2301/M/2 010, A.Y.07-08 HAVE OBSERVED AS FOLLOWS:- '2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THERE WAS A SEARCH CONDUCTED IN CASE OF ONE SHRI HITESH M.BAGTHARIYA ON 28.6.2006 D URING THE COURSE OF WHICH IN HIS STATEMENT RECORDED UNDER SECTION '! 32 (4) HE HAD STATED THAT HE WAS AN ENTRY OPERATOR AND HE USED TO ARRANGE CHEQUE S OF M/S MAHASAGAR SECURITIES PVT. LTD. AND M/S.GOLDSTAR FINVEST PVT. LTD. IT WAS ALSO STATED BY HIM THAT MR. MUKESH CHOWKSHI, THE ASSESSEE IN THIS APPEAL, HAD FLOATED VARIOUS COMPANIES INCLUDING HIS PERSONAL CAPACITY F OR PROVIDING ACCOMMODATION ENTRIES TO THE ENTRY SEEKERS. A SURVE Y UNDER SECTION 133A WAS ALSO CARRIED OUT ON THE SAME DAY AT THE BUSINES S PREMISES OF MR. MUKESH CHOWKSHI AND HIS CONCERN M/S. MAHASAGAR SECU RITIES PVT, LTD. SHRI CHOWKSHI AT THE TIME OF SURVEY ADMITTED THAT THE FO LLOWING COMPANIES HAD BEEN OPERATING AT THE ADDRESS AND THEY WERE ENGAGED IN PROVIDING ACCOMMODATION ENTRIES: I) M/S.GOLDSTARFINVEST (P) LTD. II) M/S.RICHMOND SECURITIES (P) LTD. III) M/S. ALLIANCE INTERMEDIATERIES (P) LTD. ITA NO. 1863/AHD/2015 ASST. YEAR 2006-07 9 IV) M/S.MAHASAGAR SECURITIES (P) LTD. (FORMERLY K NOWN AS RICHMOND SECURITIES (P) LTD. V) M/S.ALPHACHEMIE TRADE AGENCY (P) LTD. VI) M/S.MIHIR AGENCIES (P) LTD. VII) M/S.TALENTINFOWAY (P) LTD. VIII) M/S. BUNIYAD CHEMICALS LTD. IX) MUKESHCHOWKSHI, INDIVIDUAL 3. THE AO NOTED THAT THE MODUS OPERAND! ADOPTE D BY THE ASSESSEE WAS THAT HE FIRST RECEIVED CASH FROM ENTRY SEEKERS WHIC H WERE DEPOSITED IN THE BANK ACCOUNT OF ONE OF THE GROUP COMPANIES E ND AFTER DEPOSITING THE CASH IN THE BANK ACCOUNTS, A ; CHEQUE WAS ISSUED AN D THE EQUAL AMOUNT IN FAVOUR OF ENTRY . SEEKERS. THE ASSESSEE THUS RET URNED THE CASH OF THE ENTRY SEEKERS IN THE GUISE OF CHEQUE AFTER RETAININ G COMMISSION.' FROM THE ABOVE IT IS ESTABLISHED THAT ALLIANCE INTE RMEDIARIES WAS INVOLVED IN PROVIDING ACCOMMODATION ENTRIES. FROM T HE MODUS EXPLAINED ABOVE, IT IS CLEAR THAT WHAT APPELLANT HA S SHOWN AS LTCG IS APPELLANT'S OWN MONEY FROM UNDISCLOSED SOUR CES WHICH WAS SHOWN TO HAVE BEEN RECEIVED AS SALE CONSIDERATI ON BY THE ABOVE MODUS. FURTHER, THE AO HAS MENTIONED THAT REG ISTRATION OF ALLIANCE INTERMEDIARIES WAS CANCELLED WAY BACK IN 2 004 MUCH BEFORE THE APPELLANT UNDERTOOK THE SHARE TRANSACTIO NS. FURTHER, THE AO HAS ALSO OBSERVED THAT NSE HAS INFORMED THAT ALLIANCE INTERMEDIARIES IS NOT REGISTERED WITH THEM. IN THE ABSENCE OF REGISTRATION WITH NSE, HOW CAN THE SHARE BROKER ENT ER INTO TRANSACTIONS. THE APPELLANT HAS NOT BROUGHT OUT ANY THING TO CONTROVERT THESE FINDINGS OF THE AO. WITH DUE REGAR D TO RATIO OF JUDGMENTS RELIED ON BY THE APPELLANT, THE SAME ARE NOT APPLICABLE IN THE PRESENT CASE AS THE FACTS ARE DIF FERENT. THUS THE AO WAS JUSTIFIED IN TREATING THE SHARE TRANSACTIONS SHOWN BY THE APPELLANT AS BOGUS. IN VIEW OF DISCUSSION, I HOLD THAT THE AO WAS JUSTI FIED IN TREATING THE AMOUNT OF RS.1,43,042/- AS UNDISCLOSED INCOME O F THE APPELLANT. ACCORDINGLY, ADDITION OF RS.1,43,042/- I S UPHELD AND THE SAME IS CONFIRMED. THIS GROUND OF APPEAL IS DIS MISSED. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. FROM GOING THROUGH THE GROUNDS WE FIND T HAT THERE ARE TWO ISSUES WHICH NEED TO BE ADJUDICATED. ITA NO. 1863/AHD/2015 ASST. YEAR 2006-07 10 (1) THAT LD. CIT(A) HAS GRIEVOUSLY ERRED IN UPHOLDI NG THAT NOTICE OF REOPENING U/S 148 OF THE ACT AND PROCEEDINGS INITIA TED WERE NOT ILLEGAL AND UNLAWFUL. (2) TREATING THE SALE CONSIDERATION OF SALE OF SARD AR SAROVAR BONDS AS UNEXPLAINED INCOME AT RS.1,43,042/-. 6. FIRST WE TAKE THE LEGALITY OF REOPENING OF THE C ASE U/S 147 OF THE ACT BY ISSUING NOTICE U/S 148 OF THE ACT. DURING TH E COURSE OF HEARING BEFORE US LD. AR HAS REFERRED AND RELIED ON THE DEC ISION OF CO- ORDINATE BENCH IN THE CASE OF SONAL ARPIT DOSHI VS. ITO IN ITA NO. 366/AHD/2015 FOR ASST. YEAR 2006-07 VIDE ORDER DATE D 21.10.2015 WHEREIN IT WAS SUBMITTED THAT SIMILAR REASONS OF RE OPENING OF ASSESSMENT U/S 147 OF THE ACT WERE GIVEN BY THE ASS ESSING OFFICER, WHEREIN PURCHASE AND SALE TRANSACTION REGARDING SHA RES AND SECURITIES MADE THROUGH GROUP COMPANIES BELONG TO S HRI MUKESH CHOKSI WHICH WAS KNOWN AS MAHASAGAR SECURITIES LTD. AND CO- ORDINATE BENCH QUASHED THE ASSESSMENT ORDER BY DECI DING THAT THE NOTICE U/S 148 OF THE ACT WAS NOT VALID BECAUSE ASS ESSING OFFICER HAS NOT RECORDED HIS SATISFACTION IN THE NOTICE WITH RE GARD TO ESCAPEMENT OF INCOME. 7. FROM GOING THROUGH THE FACTS OF THE CASE WE FIND THAT THE FACTS ARE NOT SIMILAR TO THE FACTS OF THE CASE REFERRED B Y LD. AR IN THE DECISION OF CO-ORDINATE BENCH IN THE CASE OF SONAL ARPIT DOSHI VS. ITO (SUPRA) WHICH CAN BE VERIFIED BY GOING THROUGH THE NOTICE U/S 148 OF THE ACT ISSUED BY THE ASSESSING OFFICER IN THE CASE OF ASSESSEE WHICH IS REPRODUCED BELOW :- ITA NO. 1863/AHD/2015 ASST. YEAR 2006-07 11 TO AMITA MUKESH MODY C/O M/S JAMNADAS MULJIBHAI, 14 SARDAR PATEL MARKET, JAMALPUR, AHMEDABAD. SIR, SUB: RE-ASSESSMENT PROCEEDINGS IN THE CASE OF AMITA MUKESH MODY FOR AY 2006-07 SHOW CAUSE NOTICE REGARDING. PLEASE REFER TO THE ABOVE. 2. AS PER YOUR REQUEST LETTER DTD.4.4.2013, THE COP Y OF REASONS RECORDED FOR REOPENING THE ASSESSMENT IS ENCLOSED HEREWITH. 3. ON PERUSAL OF THE REASONS RECORDED IT REVEALED T HAT THERE WAS SEARCH IN THE CASE OF M/S MAHASAGAR SECURITIES LTD. GROUP ON 25/11/2009 AND THE STATEMENT ON OATH OF SHRI MUKESH M. CHOKSHI HAS BEE N RECORDED IN WHICH IT IS ADMITTED THAT THE GROUPS COMPANIES ARE PROVIDING ENTRIES FOR TAKING PROFIT/LOSS BY SHOWING PURCHASE AND SALE OF SHARES IN THE NAME OF VARIOUS PARTIES. FURTHER, ON VERIFICATION OF DATA IT IS ASC ERTAINED THAT YOU ARE ALSO INVOLVED IN TAKING ENTRIES FROM ABOVE GROUP OF COMP ANIES BELONGING TO SHRI MUKESH CHOKSHI. DURING THE YEAR UNDER CONSIDERATION YOU HAVE MADE TOTAL TRANSACTION OF RS.1,43,042/- FOR TAKING FICTI TIOUS AND BOGUS ENTRIES BY SHOWING PURCHASE AND SALE OF SHARES AND SECURITIES. YOU ARE THEREFORE, REQUIRED TO SHOW CAUSE AS TO WHY THE AMOUNT OF RS.1,43,042/- SHOULD NOT BE ADDED TO YOUR TOTAL INCOME AS INCOME FROM UNDISCLOSED SOURCES. 4. IN THIS CONNECTION, YOU ARE REQUESTED TO ATTEND MY OFFICE ON 23/12/2013 AT 11.30 A.M. AND FURNISH YOUR REPLY TO THE ABOVE ISSUES OF SHOW CAUSE NOTICE, AS MENTIONED ABOVE FAILING WHICH THE DECISION FOR MAKING ADDITION ON THE ABOVE ISSUE WILL BE TAKEN ON MERITS ON THE BASIS OF DETAILS AVAILABLE ON RECORD. YOURS FAITHFULLY, SD/- (R.A. RATHOD) INCOME-TAX OFFICER, WARD-3(4), AHMEDABAD. 8. FROM GOING THROUGH THE ABOVE REFERRED NOTICE WE FIND THAT THE ASSESSING OFFICER HAS INITIATED PROCEEDINGS ON THE BASIS OF INFORMATION RECEIVED FROM THE DOCUMENTS PERTAINING TO SEARCH ITA NO. 1863/AHD/2015 ASST. YEAR 2006-07 12 OPERATION IN THE CASE OF MAHASAGAR SECURITIES LTD. AND FURTHER THE ASSESSING OFFICER HAS SPECIFICALLY MENTIONED THE TO TAL VALUE OF TRANSACTIONS RELATING TO PURCHASE AND SALE OF SECUR ITIES AND PROCEEDINGS HAVE BEEN INITIATED FOR REASSESSMENT TO VERIFY THE VALUE OF TRANSACTIONS OF RS.1,43,042/- WHICH WAS SALE CON SIDERATION OF SARDAR SAROVAR BONDS EFFECTED BY THE ASSESSEE THROU GH ALLIANCE INTERMEDIARIES & NETWORK PVT. LTD. ON 9.8.2005. WE, THEREFORE, ARE OF THE VIEW THAT LD. CIT(A) WAS CORRECT IN UPHOLDING T HAT NOTICE OF REOPENING U/S 148 WAS NOT ILLEGAL AND UNLAWFUL. THE REFORE, THIS GROUND OF THE ASSESSEE IS DISMISSED. 9. THE NEXT GROUND IS AGAINST THE ACTION OF LD. CIT (A) CONFIRMING THE ADDITION OF RS.1,43,042/- AS UNEXPLAINED INCOME FROM FICTITIOUS TRANSACTION WITH MAHASAGAR SECURITIES LTD. GROUP. D URING ASSESSMENT PROCEEDINGS U/S 143(3) R.W.S. 147 OF THE ACT THE AS SESSING OFFICER OBSERVED THAT IN THE COMPUTATION OF INCOME ASSESSEE HAS SHOWN LONG TERM CAPITAL GAIN OF RS.1,31,208/- FROM SALE OF SAR DAR SAROVAR BONDS ON 9.8.2005 AND THE SALE CONSIDERATION OF RS.1,42,0 08/-. THIS SALE OF SARDAR SAROVAR BONDS WAS EFFECTED THROUGH SUB-BROKE R OF NSE NAMELY M/S ALLIANCE INTERMEDIARIES & NETWORK PVT. L TD. THROUGH SETTLEMENT NO.2005152 DATED 9.8.2005. ON GOING THRO UGH THE SEARCH RECORDS OF MUKESH CHOKSI GROUP IT WAS NOTICED BY AS SESSING OFFICER THAT THE REGISTRATION OF M/S ALLIANCE INTERMEDIARIE S & NETWORK PVT. LTD. WAS CANCELLED ON 19 TH FEBRUARY, 2004 WHEREAS ASSESSEE HAS FURNISHED CONTRACT NOTE DATED 9.8.2005 AND DUE TO T HIS REASON THE AMOUNT OF RS.1,43,042/- WAS ADDED TO THE INCOME OF THE ASSESSEE AS ITA NO. 1863/AHD/2015 ASST. YEAR 2006-07 13 UNEXPLAINED INCOME ON ACCOUNT OF INVESTMENT IN SHAR ES OF RS.1,43,042/-. 10. FROM GOING THROUGH THE ABOVE OBSERVATION, WE FI ND THAT THE ASSESSING OFFICER HAS MENTIONED THE AMOUNT OF RS.1, 43,042/- IN HIS ASSESSMENT ORDER. THE LD. CIT(A) IN HER ORDER HAS M ENTIONED THE LONG TERM CAPIAL GAIN OF RS.1,43,042/- ON SALE OF SARDAR SAROVAR BONDS WHICH HAVE BEEN CLAIMED AS EXEMPT U/S 10(38) OF THE ACT BY ASSESSEE AND SHE HAS CONFIRMED THE ADDITION OF RS.1 ,43,042/- ASSESSED BY THE ASSESSING OFFICER AS UNEXPLAINED IN COME. 10.1 ON THE OTHER HAND, FROM GOING THROUGH THE COMP UTATION OF INCOME SUBMITTED BY ASSESSEE IN THE PAPER BOOK LONG TERM CAPITAL GAIN CLAIMED TO BE EXEMPT U/S 10(38) IS SHOWN AT RS .1,31,208/- WHICH HAS BEEN ARRIVED AT AFTER DEDUCTING COSTING OF RS.1 0,800/- FROM SALE CONSIDERATION OF RS.1,42,008/- EFFECTED ON 9.8.2005 . IT SEEMS THAT THERE IS SOME CONFUSION IN BETWEEN THE RECORDS MADE AVAILABLE BY THE ASSESSEE AND INFORMATION AVAILABLE WITH THE ASS ESSING OFFICER AND FURTHER FIGURES MENTIONED BY LD. CIT(A) IN HER ORDER. TO ARRIVE AT THE CORRECT FIGURE OF SALE CONSIDERATION AS WELL AS CAPITAL GAIN THE MATTER NEEDS TO BE RE-EXAMINED BY THE ASSESSING OFF ICER BY TAKING APPROPRIATE INFORMATION FROM ASSESSEE AS WELL AS VE RIFYING THE RECORDS AT THE END OF AO IN RELATION TO INFORMATION RECEIVED WITH THE I.T. DEPARTMENT. 10.2 FURTHER AS REGARDS THE TRANSACTION OF SALE OF SARDAR SAROVAR BONDS, FROM GOING THROUGH COMPUTATION OF INCOME AND RETURN OF ITA NO. 1863/AHD/2015 ASST. YEAR 2006-07 14 INCOME FILED ON 27.12.2006 WE FIND THAT THIS RETURN WAS FILED MUCH BEFORE THE DATE OF SEARCH I.E. 25.11.2009, COMPLETE DETAILS HAVE BEEN MENTIONED ABOUT LONG TERM CAPITAL GAIN ARISING FROM SALE OF SARDAR SAROVAR BONDS. THE ASSESSEE HAS CLEARLY MENTIONED A LL THE TRANSACTIONS RELATING TO SALE OF SARDAR SAROVAR BON DS ON 9.8.2005 IN ITS COMPUTATION OF INCOME ALONG WITH SHOWING THE DA TE OF ACQUISITION AS JANUARY, 1995 AND COST PRICE OF THREE SARDAR SAR OVAR BONDS FOR RS.3,600/- EACH. THE LD. ASSESSING OFFICER HAS MADE ADDITION ONLY ON THE BASIS OF INFORMATION OF THE REGISTRATION BEING CANCELLED OF M/S ALLIANCE INTERMEDIARIES & NETWORK PVT. LTD. HE OUGH T TO HAVE APPRECIATED THE FACT THAT SARDAR SAROVAR BONDS ARE GOVERNMENT SECURITIES AND ASSESSEE HAS MENTIONED THE PURCHASE AND SALE DATES OF THE BONDS AND FURTHER DETAILS OF THE TRANSFER OF THE SARDAR SAROVAR BONDS MENTIONED IN THE CONTRACT NOTE MAY HAVE BEEN EASILY VERIFIED BY TAKING INFORMATION FROM SARDAR SAROVAR OFFICE RE GARDING SHARE TRANSFER. THIS EXERCISE SEEMS TO HAVE NOT BEEN DONE BY THE ASSESSING OFFICER. IN VIEW OF THE FACT THAT ASSESS EE HAS SUBMITTED VARIOUS INFORMATION ALONG WITH COMPUTATION OF INCOM E FILED WITH ORIGINAL RETURN OF INCOME PRIOR TO DATE OF SEARCH A ND FURTHER SUPPORTING EVIDENCE SUPPLIED BY ASSESSEE PROVING THAT SOME TRA NSACTION HAS HAPPENED ON 9.8.2005 BY SALE OF SARDAR SAROVAR BOND S WHICH HAVE BEEN ACQUIRED BY THE ASSESSEE IN JANUARY, 1995 AND HAVE BEEN SOLD ON 9.8.2005 AFTER PAYING SERVICE TAX AND TURNOVER C HARGES THROUGH BROKER OF NATIONAL STOCK EXCHANGE MENTIONING THREE BONDS IN THE CONTRACT NOTE, THEN IT WAS THE DUTY OF THE ASSESSIN G OFFICER TO VERIFY THE GENUINENESS OF THE TRANSACTION THROUGH THE SHAR E TRANSFER DEPARTMENT OF SARDAR SAROVAR BONDS AFTER TAKING NEC ESSARY ITA NO. 1863/AHD/2015 ASST. YEAR 2006-07 15 INFORMATION INCLUDING DISTINCTIVE NUMBER OF SARDAR SAROVAR BONDS FROM THE ASSESSEE. THEREFORE, IN OUR VIEW THIS MATT ER NEEDS TO BE REMITTED BACK TO THE FILE OF ASSESSING OFFICER WITH THE INSTRUCTION OF PROVIDING NECESSARY OPPORTUNITY OF HEARING TO THE A SSESSEE AFTER CALLING UPON THE DISTINCTIVE NUMBER OF SARDAR SAROV AR BONDS AND GET THE SAME VERIFIED WITH THE HELP OF ASSESSEE FROM TH E DEPARTMENT OF SARDAR SAROVAR LTD. KEEPING RECORD OF SHARES TRANSF ER SO AS TO VERIFY THAT WHETHER THE ASSESSEE WAS THE OWNER OF THREE BO NDS OF SARDAR SAROVAR FROM JANUARY, 1995 ONWARDS TILL THE DATE OF SALES I.E. 9.8.2005 AND WHETHER THERE WAS TRANSFER OF BONDS FR OM ASSESSEES ACCOUNT TO SOME OTHER PERSONS ACCOUNT PURSUANT TO SALE OF BONDS. THE ASSESSING OFFICER SHOULD FRAME A FRESH ASSESSME NT ORDER ON THE BASIS OF THIS INFORMATION WHICH IS CRUCIAL FOR DECI DING THAT WHETHER TRANSACTION SHOWN BY THE ASSESSEE IS LONG TERM CAPI TAL GAIN WAS GENUINE OR IT WAS A SHAM TRANSACTION. 10.3 FURTHER IN THE ASSESSMENT ORDER ASSESSING OFFI CER HAS MENTIONED THAT ASSESSEE IS NOT ELIGIBLE TO CLAIM EX EMPTION U/S 10(38) OF THE ACT BECAUSE SARDAR SAROVAR BONDS ARE NEITHER EQUITY SHARES NOR EQUITY ORIENTED FUNDS. BUT WHILE FRAMING THE AS SESSMENT ORDER, ASSESSING OFFICER HAS ONLY MADE AN ADDITION ON ACCO UNT OF UNEXPLAINED INCOME AND HAS NOT MADE ADDITION BY DEN YING THE LONG TERM CAPITAL GAIN AT RS.1,31,208/- AND HAS ONLY MEN TIONED IN THE ASSESSMENT ORDER THAT LONG TERM CAPITAL GAIN OF RS. 1,31,208 IS CHARGEABLE TO TAX U/S 45 OF THE ACT AS LONG TERM CA PITAL GAIN FROM SALE OF SARDAR SAROVAR BONDS. ITA NO. 1863/AHD/2015 ASST. YEAR 2006-07 16 10.4 FROM GOING THROUGH THE ASSESSMENT ORDER WE FIN D THAT ASSESSING OFFICER HAS NOT MADE ANY SEPARATE DISALLO WANCE IN COMPUTING THE ASSESSED INCOME BY DENYING EXEMPTION U/S 10(38) OF THE ACT. HOWEVER, LD. ASSESSING OFFICER HAS SPECIF ICALLY MENTIONED IN HIS ORDER THAT SARDAR SAROVAR BONDS ARE NOT EQUITY SHARES AND THEY ARE IN THE NATURE OF BONDS ON WHICH THE BOND HOLDER RECEIVES INTEREST. SECTION 10(38) OF THE ACT READS AS UNDER :- SEC. 10(38) ANY INCOME ARISING FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET, BEING AN EQUITY SHARE IN A COMPANY OR A UNIT OF AN EQUITY OR IENTED FUND [ OR A UNIT OF A BUSINESS TRUST ] WHERE ( A ) THE TRANSACTION OF SALE OF SUCH EQUITY SHARE OR U NIT IS ENTERED INTO ON OR AFTER THE DATE ON WHICH CHAPTER VII OF THE FINANCE (NO. 2) ACT, 20 04 COMES INTO FORCE; AND ( B ) SUCH TRANSACTION IS CHARGEABLE TO SECURITIES TRAN SACTION TAX UNDER THAT CHAPTER : [ PROVIDED THAT THE INCOME BY WAY OF LONG-TERM CAPITAL GAIN O F A COMPANY SHALL BE TAKEN INTO ACCOUNT IN COMPUTING THE BOOK PROFIT AND INCOM E-TAX PAYABLE UNDER SECTION 115JB .] EXPLANATION.FOR THE PURPOSES OF THIS CLAUSE, EQUI TY ORIENTED FUND MEANS A FUND ( I ) WHERE THE INVESTIBLE FUNDS ARE INVESTED BY WAY OF EQUITY SHARES IN DOMESTIC COMPANIES TO THE EXTENT OF MORE THAN 41 [SIXTY-FIVE] PER CENT OF THE TOTAL PROCEEDS OF SUCH FUND; AND ( II ) WHICH HAS BEEN SET UP UNDER A SCHEME OF A MUTUAL FUND SPECIFIED UNDER CLAUSE (23D) : PROVIDED THAT THE PERCENTAGE OF EQUITY SHAREHOLDING OF THE FUND SHALL BE COMPUTED WITH REFERENCE TO THE ANNUAL AVERAGE OF THE MONTHLY AVER AGES OF THE OPENING AND CLOSING FIGURES;] FROM GOING THROUGH THE ABOVE PROVISIONS WE FIND THA T EXEMPTION U/S 10(38) OF THE ACT IS AVAILABLE ONLY IF THERE IS A T RANSFER OF LONG TERM CAPITAL ASSET (HELD FOR MORE THAN ONE YEAR) AS EXEM PT IF IT IS EQUITY SHARE IN A COMPANY OR A UNIT OF EQUITY ORIENTED FUN D. WITH REFERENCE TO SARDAR SAROVAR BONDS THAT WHETHER THEY ARE IN NA TURE OF EQUITY SHARES OR DEBENTURE IS NOT CLEARLY AVAILABLE ON REC ORD AND FOR THIS REASON THIS ISSUE IS ALSO REMITTED TO THE FILE OF A SSESSING OFFICER TO ITA NO. 1863/AHD/2015 ASST. YEAR 2006-07 17 TAKE NECESSARY INFORMATION FROM SARDAR SAROVAR LTD. THAT WHETHER SARDAR SAROVAR BONDS ARE IN THE NATURE FO EQUITY SH ARES OR DEBENTURE. IF THE ASSESSING OFFICER COMES ACROSS TO THIS EFFECT THAT SARDAR SAROVAR BONDS ARE NOT EQUITY SHARES AND ONLY IN THE NATURE OF DEBENTURE ON WHICH INTEREST INCOME IS RECEIVED BY T HE DEBENTURE HOLDER THEN THE ASSESSEE WILL NOT BE ELIGIBLE FOR E XEMPTION INCOME U/S 10(38) OF THE ACT. 11. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH FEBRUARY, 2016 SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 05/02/2016 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD ITA NO. 1863/AHD/2015 ASST. YEAR 2006-07 18 1. DATE OF DICTATION: __/02/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: __4/02/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 5/2/16 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: