URMILA BHABHERA, MUMBAI V. ASST CIT 20(3), MUMBAI

ITA 2081/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70672 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 03-09-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 14-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V V SHASTRI
• Assessee Lawyers: PAYAL GADA
• Keywords: Business income; Income from undisclosed sources; Principle of natural justice; Source of fund; Cost of acquisition
• Section: 14A; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 2081/MUM/2011 ASSESSMENT YEAR : 2006-07 MRS. URMILA BHABHERA 704, ALKA SOCIETY, S.V. ROAD, ANDHERI(W) MUMBAI-400 058. PAN NO.AAJPB 6192 K VS. ACIT 20(3) B.K. COMPLEX, BANDRA (E) MUMBAI-400 051. (APPELLANT) (RESPONDENT) ASSESSEE BY : MS. PAYAL GADA REVENUE BY : SHRI V.V. SHASTRI DATE OF HEARING : 18/07/2013 DATE OF PRONOUNCEMENT : 20 / 0 8 /2013 O R D E R PER B. RAMAKOTAIAH, AM: THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A)-31 MUMBAI DATED 27.01.2011. THE ASSESSEE HAS RAISED SE VEN GROUNDS OUT OF WHICH GROUND NO.1 IS GENERAL IN NATURE WHICH DOES N OT REQUIRE ANY ADJUDICATION. GROUND NO.6 ON DISALLOWANCE UNDER SEC TION 40(A)(IA) AND GROUND NO.7 ON SECTION 14A WAS NOT PRESSED IN THE C OURSE OF ARGUMENTS. THEREFORE, ONLY GROUND NOS. 2 TO 5 ARE REQUIRED TO BE ADJUDICATED. 2. GROUND NO.2 IS WITH REFERENCE TO TREATMENT OF SHORT TERM CAPITAL GAIN OF RS.17,42,057/- AS BUSINESS INCOME AND GROUND NO. 3 IS WITH REFERENCE TO RESTRICTION BY CIT(A) OF TREATING LONG TERM CAPI TAL GAIN OF RS.73,488/- AS BUSINESS INCOME AND GROUND NO.4 IS WITH REFERENC E TO TREATING LONG ITA NO.2081/M/11 A.Y.06-07 URMILA BHABHERA 2 TERM CAPITAL GAIN OF RS.23,58,900/- AS BOGUS INCOME AND GROUND NO.5 IS ON THE ADDITION OF RS.1,17,945/- BEING ALLEGED COMM ISSION PAID AT 5% FOR ARRANGING LONG TERM CAPITAL GAIN. 2. BRIEFLY STATED, ASSESSEE IS AN INDIVIDUAL AND PR OPRIETOR OF M/S. URMI PLASTICS WHICH IS ENGAGED IN THE BUSINESS OF M ANUFACTURING OF PVC, POUCHES AND TUBING. APART FROM BUSINESS INCOME, ASS ESSEE ALSO SHOWED CAPITAL GAIN INCOME BOTH UNDER THE HEAD LONG TERM A ND SHORT TERM. THE AO ON THE REASON THAT ASSESSEES SHARE TRANSACTIONS ARE TO BE CONSIDERED AS TRADING TRANSACTIONS ASSESSED BOTH SHORT TERM CA PITAL GAIN AND LONG TERM CAPITAL GAIN OFFERED BY THE ASSESSEE AS BUSINE SS INCOME. OUT OF THE LONG TERM CAPITAL GAIN OFFERED, THE AO ALSO NOTICED THAT THE ASSESSEE EARNED THE GAIN OF RS.23,58,900/- ON SALE OF 10000 SHARES OF INTER-LINK FINANCE LTD. AND ON ENQUIRY CAME TO THE CONCLUSION THAT THIS TRANSACTION WAS BOGUS AND GAINS DECLARED ARE NOTHING BUT ASSESS EES UNDISCLOSED INCOME PROJECTED IN THE GUISE OF LONG TERM CAPITAL GAIN SO AS TO AVOID TAX. THEREFORE, TO THE ABOVE EXTENT, THE SAME WAS TREATE D AS INCOME FROM OTHER SOURCES. THE AO ALSO ADDED 5% OF THE ABOVE A MOUNT AS COMMISSION PAID OUTSIDE THE BOOKS OF ACCOUNT FOR AR RANGING LONG TERM CAPITAL GAIN. 3. THE LD. CIT(A) AFTER CONSIDERING THE ASSESSEES SUBMISSIONS HOWEVER, UPHELD THE AOS STAND THAT THE ASSESSEES SHORT TERM CAPITAL GAIN HAS TO BE TREATED AS BUSINESS INCOME. HOWEVER, OUT OF THE LONG TERM CAPITAL GAIN (OTHER THAN THE AMOUNT TREATED AS BOGU S INCOME) HE ANALYSED THE TRANSACTIONS, AND GAVE DIRECTION TO TR EAT MOST OF THE AMOUNT AS LONG TERM CAPITAL GAIN EXCEPT THE AMOUNT TO THE EXTENT OF RS.73,483/- ON THE TRANSACTIONS OF SALE OF AMTEK AU TO LTD. WHICH WERE ALSO ALLOWED TO BE TREATED AS BUSINESS INCOME. WITH REFERENCE TO THE TREATMENT OF BOGUS INCOME, HE WHILE CONSIDERING THA T THE ASSESSEE HAS NOT PROVED THE PURCHASE OF SHARES EXCEPT THAT SHARE S WERE AVAILABLE FOR ITA NO.2081/M/11 A.Y.06-07 URMILA BHABHERA 3 SALE AS THEY CAME INTO DEMAT ACCOUNT OF THE ASSESSE E AS ON 31.03.2005, BIFURCATED THE TRANSACTIONS AS THAT OF COST OF PURC HASE OF SHARES AT RS.22,48,000/- AS UNDISCLOSED INVESTMENT AND THE BA LANCE OF RS.2,46,900/- AS INCOME OF THE ASSESSEE. THEREFORE, THIS ORDER OF THE CIT(A) RESULTED IN ENHANCEMENT OF INCOME OF RS.1,36 ,000/- BEING COST SHOWN BY THE ASSESSEE. HE ALSO CONFIRMED THE ADDITI ON ON ACCOUNT OF 5% COMMISSION PAID. 4. THE ASSESSEE PLACED ON RECORD THE PAPER BOOK CON TAINING PAGE 1 TO 171 IN TWO VOLUMES AND DETAILED NOTE ON VARIOUS ISS UES. THE LD. DR ALSO SUBMITTED A NOTE ON VARIOUS CASES DECIDED BY THE IT AT ON THE ISSUE OF ASSESSING THE INCOME FROM PROFIT ON SHARES AS BUSIN ESS INCOME. WE HAVE HEARD THE LD. AR AND THE LD. DR AND THEIR CONTENTIO NS PLACED ON RECORD. 5. GROUND NO.2 AS BRIEFLY STATED ABOVE, PERTAINS TO TREATMENT OF AO AS CONFIRMED BY CIT(A), OF TREATING SHORT TERM CAPITAL GAIN OF RS.17,42,057/- AS BUSINESS INCOME. THE DETAILED REASONING GIVEN BY THE AO AND SUBMISSIONS OF THE ASSESSEE ON EACH OF THE CONTENTI ON ARE AS UNDER :- 1. SUBSTANTIAL ACTIVITY OF TRADING :- I) THE ASSESSEE HAS TRADED IN JUST 69 SCRIPS. AS SU CH IT CAN NOT BE SAID THAT THE TRADING ACTIVITY IS SUBSTANTIAL. II) (A) AO HAS GIVEN UNDUE WEIGHTAGE TO THE VOLUME OF SCRIPS. MERELY BECAUSE THE NUMBER OF SCRIPS ARE MORE THAN 50 WILL NOT LEAD TO THE CONCLUSION THAT THE INCOME EARNED FROM THE SAME IS BUSINESS INCOME. (B) FURTHER, IF EVALUATED VALUE WISE, THE NUMBER OF SCRIPS TRADED IS APPROXIMATELY 4 TO 5 ONLY. (C) OUT OF THE ABOVE MENTIONED SCRIPS, MOST OF THE SCRIPS WHEN SOLD WERE TRADING AUTHORIZED REPRESENTATIVE YEARLY HIGHS /LOWS CONNECTED WITH HOLDING OF INVESTMENT AND /OR MAXIMI ZE THE WEALTH A PRUDENT AND CONSCIOUS DECISION TO SELL WAS TAKEN. ITA NO.2081/M/11 A.Y.06-07 URMILA BHABHERA 4 III) EXCEPT IN THE CASE OF AMTEK AUTO, THE ASSESSEE HAS NOT TRADED IN ANY SCRIP MORE THAN ONE. IV) THE ASSESSEE IS ENGAGED IN THE ACTIVITY OF S ELLING SHARES HELD AS INVESTMENTS OVER PAST 5-6 YEARS. V) (A) THE SAID GAINS HAVE BEEN TAXED AS CAPIT AL GAINS IN THE PAST-REFER ASSESSMENT ORDER OF ASSESSMENT YEAR 2003-04.AS SUCH AO HAS NO JURISDICTION TO TREAT THE GAINS DIFFERENTLY ESPECI ALLY UNDER THE SAME FACTS AND CIRCUMSTANCES. (B) RELIANCE IN THIS REGARD IS PLACED ON T HE DECISION OF GOPAL PUROHIT VS. JT.CIT WHEREIN THE BOMBAY HIGH COURT ON EXACTLY IDENTICAL FACTS, HAS HELD THAT THE GAINS OUGHT TO BE TREATED AS CAPI TAL GAINS AND NOT BUSINESS INCOME. VI) THE GAINS EARNED ARE ON DELIVERY BASED TRANS ACTIONS AND AS SUCH OUGHT TO BE ASSESSED AS CAPITAL GAINS. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF SARNATH INFRASTRUCTURE PV T. LTD. VS. ASST. CIT (120 TTJ 216)(LUCK.). VII) IF THE INTENTION OF THE ASSESSEE WAS TO TRADE IN SHARES, THE ASSESSEE WOULD NOT HAVE VALUED THE SHARES AT COST AS AGAINST THE GENERAL PRACTICE OF VALUATION AT COST OR MARKET PRICE, WHIC HEVER IS LOWER. IF THE INTENTION WAS ONLY TO MAKE A PROFIT. THE ASSESS EE WOULD NOT HAVE BOUGHT SOME OF SCRIPS AGAIN, EG. AMTEK AUTO. VIII) THE ASSESSEE COULD HAVE CLAIMED A LOSS OF RS 21.66 LACS, BEING DIMINUTION IN VALUE OF SHARES IF THE INTENTION WA S TO TREAT THE SHARES AS STOCK-IN-TRADE. FURTHER, IF THE INTENTION WAS ONLY TO MAKE PROFITS BASED ON IMPULSIVE DECISIONS, NORMALLY AS I N BUSINESS, THE ASSESSEE COULD HAVE EARNED A PROFIT OF RS 9, 55,442 BY SELLING THE SHARES AND NOT WITHHELD THE SAID SHARES AS INVESTME NTS. 2. USUAL TRADE OR BUSINESS AS INCOME FROM BUSINESS IS ALMOST 90% OF THE TOTAL INCOME . I) THIS IS FACTUALLY INCORRECT IN AS MUCH THE BUSIN ESS INCOME IS APPROX 72% AND NOT 90%. IT WILL NOT BE OUT OF PLACE TO MEN TION THAT THE SAID BUSINESS INCOME COMPRISES OF RS 48.00 LACS FROM DER IVATIVE TRADING. (II) SUBSTANTIAL DIVIDEND INCOME EARNED. 3. HOLDING PERIOD ITA NO.2081/M/11 A.Y.06-07 URMILA BHABHERA 5 I) THE SCRIPS ON WHICH SHORT TERM CAPITAL GAIN IS E ARNED ARE HELD FOR A PERIOD RANGING FROM 1-9 MONTHS. HOLDING PERIOD OF T OP FOUR SCRIPS IN TERMS OF PROFIT VALUE SHOWS THAT THE HOLDING RANGES FROM 6 TO 9 MONTHS. II) STATEMENT SHOWING HOLDING PERIOD IN RANGE OF < 30 DAYS TO > 100 DAYS SHOWS THAT ALMOST 50% OF THE SCRIPS ON WHICH S HORT-TERM CAPITAL GAIN IS EARNED IS HELD FOR MORE THAN 60 DAY S. III) THE INVESTMENT IS MADE AFTER A DETAILED ANALYS IS OF THE FUTURE PROSPECTS OF THE INVESTEE COMPANY AND WITH AN INTEN TION TO HOLD THE SAME. FURTHER, THE SAME HAVE BEEN SOLD EITHER TO RE DUCE THE RISK/LOSS CONNECTED WITH HOLDING THE INVESTMENT OR MAXIMIZE THE WEALTH BY SELLING THE ASSET AT THE BEST POSSIBLE OP PORTUNITY. IV) THE INTENTION OF THE ASSESSING OFFICER TO CONSI DER THE SHARES SOLD DURING THE YEAR ONLY CLEARLY INDICATES THAT HIS INT ENTION WAS TO DENY THE ASSESSEE THE PREFERENTIAL RATE OF TAX. 4. VALUE OF SALES AND PURCHASES ARE SOMEWHAT NEAR TO E ACH OTHER : I) THE ASSESSEE IS UNABLE TO GATHER AS TO WHAT THE ASSESSING OFFICER IS TRYING TO CONCLUDE FROM THE SAME. FURTHER, THE TWO VALUES ARE NOT COMPARABLE INASMUCH AS THE VALUE OF PROFIT OR LOSS IS EMBEDDED IN THE SALE VALUE AND AS SUCH THE SAME ARE NOT COMPARA BLE. 5. MAJOR PORTION OF INCOME IS FROM SHARE DEALING: I) THE ASSESSEES MAIN BUSINESS ACTIVITY IS MANUFAC TURING OF PVC TUBES AND POUCHES AND NOT SHARE TRADING AS ALLEGED BY THE ASSESSING OFFICER II) DURING THE YEAR THE ASSESSEE HAS TRADED IN FUTU RES AND OPTIONS FOR THE FIRST TIME AND INCOME EARNED IS RS.47,88,079/- AND AS SUCH MERELY BECAUSE THE ASSESSEE HAS TRADED IN FUTURES A ND OPTIONS CANNOT LEAD TO THE CONCLUSION THAT THE ASSESSEE IS A TRADER IN SHARES AS WELL. 6. PURCHASES OUT OF BORROWED FUNDS. I) THE ASSESSEE SUBMITS THAT THE SAME IS FACTUALL Y INCORRECT INASMUCH THE ASSESSEE HAS REPAID HER BORROWINGS OVE R THE YEARS AND IN THE YEAR UNDER APPEAL AS WELL. ITA NO.2081/M/11 A.Y.06-07 URMILA BHABHERA 6 II) THE ASSESSEE HAS NOT TAKEN ANY FRESH LOAN DURIN G THE YEAR NOR IN PRECEDING YEARS. (III) (A) DURING THE YEAR THE ASSESSEE HAS REC EIVED A RENT DEPOSIT OF RS.32,00,000 WHICH IS NOT A LOAN. (B) THE ASSESSEE HAS UTILIZED THE SAID DEPOSIT TO BUY SHARES OF PRIVATE LIMITED COMPANIES AND AS SUCH THE ASSESSING OFFICER HAS WRONGLY COME TO THE CONCLUSION THAT BORROWED FUNDS HAVE BEEN USED FOR SHARE TRADING. 7. INVESTMENT IN SISTER CONCERNS . (I) THE ASSESSEE IS UNABLE TO GATHER AS TO WHAT THE ASSESSING OFFICER IS TRYING TO CONCLUDE FROM THE SAME. MERELY BECAUSE TH E ASSESSEE HAS PURCHASED SHARES IN ASSOCIATE CONCERNS DURING THE Y EAR, WILL NOT AFFECT THE INTENTION OF ASSESSEE, WHETHER INVESTMEN T OR TRADING. 5. WE HAVE CONSIDERED THE ISSUES AS RAISED BY THE A O AND DETAILED SUBMISSIONS AS STATED ABOVE. THERE IS NO DISPUTE WI TH REFERENCE TO THE FACT THAT ASSESSEES MAIN BUSINESS IS MANUFACTURING OF PVC POUCHES AND TUBINGS. THE ASSESSEE ALSO FOR THE FIRST TIME ENTER ED INTO SHARE TRADING IN F&A BUSINESS AND EARNED PROFIT OF RS.47,88,079/- WH ICH IS SHOWN AS BUSINESS INCOME. AS FAR AS SHARE TRANSACTIONS ARE C ONCERNED, ASSESSEE WAS INVOLVED IN SHARE TRANSACTIONS IN EARLIER YEARS AND ALSO IN LATER YEARS. CONSIDERING THE TRANSACTIONS AND SUBMISSIONS OF THE ASSESSEE, WE ARE OF THE OPINION THAT THE SAME CANNOT BE TREATED AS BUSINESS INCOME AS ASSESSEE HAD NO BORROWED FUNDS, NO SET UP TO DO SH ARE TRANSACTIONS AS A TRADING ACTIVITY AND FURTHER LONG TERM GAINS ASSESS ED AS BUSINESS INCOME WAS TREATED AS LONG TERM CAPITAL GAIN, FOLLO WING THE PRINCIPLES LAID DOWN BY THE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF GOPAL PUROHIT VS. JCIT 228 CTR582(BOM), THE INVESTMENT ACTIVITY IN EARLIER YEAR CAN NOT BE TAKEN AS BUSINESS ACTIVITY IN THIS YEAR. COU PLED WITH THE FACT THAT THE ASSESSEE HAS NEITHER CLAIMED BENEFIT OF OPENING AND CLOSING STOCK, ITA NO.2081/M/11 A.Y.06-07 URMILA BHABHERA 7 NOR AO DISTURBED THE WORKING OF THE ASSESSEE EXCEPT TREATING THE GAIN AS BUSINESS INCOME, WE ARE OF THE OPINION THAT INCOME DECLARED BY THE ASSESSEE AS SHORT TERM CAPITAL GAIN CAN NOT BE TREA TED AS BUSINESS INCOME. EVENTHOUGH BOTH THE PARTIES RELIED ON VARIO US CASE LAW ON THE ISSUE, BUT ISSUE IS TO BE DECIDED ON FACTS AND CONS IDERING THE CONDUCT OF THE ASSESSEE IN EARLIER YEARS AND LATER YEARS AND T HE FACT THAT THE ASSESSEE SEPARATELY DEALT WITH TRADING ACTIVITY AND INVESTMENT ACTIVITY, THE SHORT TERM CAPITAL GAIN HAS TO BE ACCEPTED AS S UCH AND CAN NOT BE CONSIDERED AS BUSINESS INCOME. ACCORDINGLY THIS GRO UND IS ALLOWED. 6. GROUND NO.3 PERTAINS TO CONFIRMING PART OF THE L ONG TERM CAPITAL GAIN OF RS.73,488/- ARISING FROM SALE OF SHARE INVE STMENTS AS BUSINESS INCOME. AS BRIEFLY STATED, AO TREATED THE LONG TERM CAPITAL GAIN (OTHER THAN AMOUNT CONTESTED GROUND NO.5) TO AN EXTENT OF RS.10,05,485/- AS BUSINESS INCOME. OUT OF THIS, THE LD.CIT(A) NOTICED THAT THERE ARE ONLY FEW COMPANIES IN WHICH ASSESSEE CLAIMED LONG TERM CAPIT AL GAIN AND AS FAR AS GAIN OF RELIANCE INDUSTRIES AND TATA FINANCE ARE CONSIDERED, THE ASSESSEE PURCHASED THEM LONG BACK AND SO THE GAIN T HEREON HAS TO BE ASSESSED AS LONG TERM CAPITAL GAIN. THIS PART OF TH E FINDING BY CIT(A) WAS ACCEPTED BY THE REVENUE. HOWEVER WITH REFERENCE TO GAIN OF AMTEK AUTO LTD., HE ANALYSED THE TRANSACTION AND CONFIRMED THE SAME STATING AS UNDER :- 3.3.4 HOWEVER, THE LONG TERM CAPITAL GAINS SHOWN IN RESPECT TO THE SHARES OF AMTEK AUTO LTD. DUE TO THE FACT THAT THE APPELLANT HAS ALSO SHOWN SHORT TERM CAPITAL GAINS ON SALE OF SAID SCRI PT WHICH IS TRANSACTED MORE THAN FOUR TIMES DURING THE RELEVANT ASSESSMENT YEAR, THEREFORE, TO MY CONSIDERED OPINION THE GAIN SHOWN THEREON CAN NOT B E ASSESSED AS HER LONG TERM CAPITAL GAIN. FROM THE DETAILS OF TRANSAC TIONS OF THE SAID SCRIPT OF THE APPELLANT, I FIND THAT THE PURCHASES MADE OF 10 00 SCRIPTS ON 24.12.2004 ARE SHOWN SOLD ON 20.09.2005 AND 29.09.2 005; WHEREAS 600 SHARES OF THE SAME COMPANY PURCHASED ON 28.11/12.20 04 ARE SHOWN TO HAVE BEEN SOLD ON 03.01.2006. IN BETWEEN, IT IS FUR THER NOTICED THAT THE APPELLANT HAS SHOWN PURCHASE OF 2000 SHARES OF THE SAME COMPANY ON 11.07.2005 AND FURTHER 2400 SHARES ON 31.08.2005, W HICH ARE STATED TO BE SOLD ON 03.01.2006 AND ON 01.03.2006. THEREFORE, THE CLAIM OF THE ITA NO.2081/M/11 A.Y.06-07 URMILA BHABHERA 8 APPELLANT THAT THESE 600 SHARES PURCHASED ON 28.12. 2004 WERE NOT SOLD ON 20.09.2005 AND ON 29.09.2005 BUT ONLY AS ON 30.0 1.2006 IS NOT ONLY UNCONVINCING BUT ALSO UNSUBSTANTIATED. MOREOVER, AS THE SHARES ARE DEMATERIALIZED, THEREFORE, FROM THE RELEVANT DEMAT ACCOUNT OF THE APPELLANT IT CANNOT BE HELD THAT THESE SHARES PURCHASED EARLI ER REMAINED UNSOLD AND THE SHARES PURCHASED LATER ON WERE SOLD BEFORE THE SALE OF THE SHARES PURCHASED EARLIER. ACCORDINGLY, THIS DELIBERATE FUR NISHING OF INACCURATE PARTICULARS ON THE PART OF THE APPELLANT WITH THE S OLE MOTIVE OF SHOWING THE SHORT TERM CAPITAL GAIN OR BUSINESS INCOME ON SALE OF SUCH SHARES AS LONG TERM CAPITAL GAIN AND THEREBY CLAIMING EXEMPTION U/ S. 10(38) OF THE ACT IS UNACCEPTABLE AS WELL AS AGAINST THE PROVISIONS OF T HE ACT. THEREFORE, ON ACCOUNT OF THE SAME AND FURTHER IN VIEW OF THE AFOR ESAID DISCUSSION, THE ENTIRE LONG TERM CAPITAL GAIN ON SALE OF 600 SHARES OF AMTEK AUTO LTD. IS DIRECTED TO BE CONSIDERED AS PART OF BUSINESS INCOM E OF THE APPELLANT INSTEAD OF LONG TERM CAPITAL GAIN SHOWN BY THE APPE LLANT. AS THE APPELLANT IS FOUND ENGAGED IN THE REPETITIVE PURCHASE AND SAL E OF THE SAME ITEM OR SCRIPT BEING THE SHARES OF AMTEK AUTO LTD. FOR MORE THAN FOUR TIMES DURING THE RELEVANT ASSESSMENT YEAR, I AM OF THE CONSIDERE D OPINION THAT THE INCOME ARISEN THEREON IS IN THE NATURE OF HER BUSIN ESS INCOME AND NOT IN THE NATURE OF CAPITAL GAINS. THIS GROUND OF APPEAL RAISED BY THE APPELLANT IS THEREFORE, PARTLY ALLOWED. 6.1 CONTESTING THE ABOVE, IT IS SUBMISSION OF ASSE SSEE THAT FURTHER SHARES ARE ALSO TO BE TREATED AS LONG TERM CAPITAL GAIN AND BALANCE, IF ANY SHOULD BE TREATED AS SHORT TERM CAPITAL GAIN. THE P URCHASE AND SALE ARE AS UNDER :- SR.N O. PARTI- CULARS DATE OF PURCHASE QTY DATE OF SALE QTY SOLD CUM. BAL REMARKS 1 AMTEK AUTO 24.12.2004 1000 1000 2 AMTEK AUTO 28.12.2004 600 1600 3 AMTEK AUTO 11.07.2005 2000 3600 4 AMTEK AUTO 31.08.2005 2400 6000 5 AMTEK AUTO 12.09.2005 2500 8500 6 AMTEK AUTO 16.09.2005 500 9000 7 AMTEK AUTO 20.09.2005 500 8500 OUT OF 1000 SHARES PURCHASED ON 24.12.2004 8 AMTEK AUTO 21.09.2005 500 9000 ITA NO.2081/M/11 A.Y.06-07 URMILA BHABHERA 9 9 AMTEK AUTO 29.09.2005 500 8500 OUT OF 1000 SHARES PURCHASED ON 24.12.2004 10 AMTEK AUTO 29.12.2005 2500 11000 11 AMTEK AUTO 03.01.2006 2500 8500 OUT OF 600 SHARES PURCHASED ON 28.12.2004, HENCE GAIN ON 600 SHARES IS LONG-TERM. 12 AMTEK AUTO OUT OF 2000 SHARES PURCHASED ON 11.07.2005, HENCE GAIN ON 1900 (2500-600) SHARES IS SHORT-TERM. 13 AMTEK AUTO 01.03.2006 2500 6000 OUT OF 2000 SHARES PURCHASED ON 11.07.2005, HENCE GAIN ON BALANCE 100 SHARES IS SHORT-TERM. 14 AMTEK AUTO OUT OF 2400 SHARES PURCHASED ON 31.08.2005, HENCE GAIN ON BALANCE 2400 SHARES IS SHORT-TERM. 15 AMTEK AUTO 03.03.2006 500 6500 16 AMTEK AUTO 07.03.2006 2500 9000 AS EVIDENT FROM THE ABOVE, THE APPELLANT FOLLOWS FI FO METHOD OF ACCOUNTING FOR SHARES PURCHASED AND SOLD DURING THE YEAR AND AS SU CH SINCE THE CIT(A) HAS ALLOWED RELIEF FOR TREATMENT OF LONG TERM CAPITAL G AINS ON SALE OF SCRIPS OTHER THAN AMTEK AUTO, THE SAME TREATMENT OUGHT TO HAVE B EEN ALLOWED FOR GAIN ON 600 SHARES OF AMTEK AUTO SOLD ON 03.01.2006 AS WELL . ITA NO.2081/M/11 A.Y.06-07 URMILA BHABHERA 10 6.2 CONSIDERING THE ABOVE DETAILS, SINCE CIT(A) HA S ACCEPTED PART OF THE SAME AS LONG TERM CAPITAL GAIN, WE DIRECT THE A O TO ACCEPT THE LONG TERM CAPITAL GAIN AS DETAILED ABOVE AND BALANCE OF THE AMOUNT AS SHORT TERM CAPITAL GAIN. SINCE ASSESSEES INVESTMENTS ARE NOT CONSIDERED AS TRADING ACTIVITY VIDE GROUND NO.2, THE GAIN ON THE BALANCE OF SHARES IN AMTEK AUTO LTD. ARE TO BE CONSIDERED AS SHORT TERM CAPITAL GAIN. WITH THESE DIRECTIONS GROUND NO.3 IS CONSIDERED AS ALLOW ED. 7. GROUND NO.4. THIS ISSUE ARISES IN THIS WAY. THE ASSESSEE HAD LONG TERM CAPITAL GAIN OF RS.33,64,385/- OUT OF WHICH A SUM OF RS.23,58,900/- PERTAINED TO LONG TERM CAPITAL GAIN ON SALE OF M/S. INTERLINK FINANCE AND INVESTMENT LTD. THE AO NOTICE D THAT THE SHARES HAVE BEEN PURCHASED ON 02.04.2004 FOR CONSIDERATION OF RS.1,36,000/- AND SOLD DURING THE YEAR ON 08.04.2006 FOR A SUM OF RS.24,94,900/- THEREBY EARNING THE GAIN. THE ASSESSEE CLAIMED THE ENTIRE GAIN AS EXEMPT UNDER SECTION 10(38) OF THE INCOME TAX ACT. THE AO ON ENQUIRY FOUND THAT CONTRACT NOTES AND PURCHASE BILLS WERE ISSUED BY BROKER M/S. T.H. VAKIL SHARES AND SECURITIES PVT. LTD. AND THERE WER E SOME OTHER TRANSACTIONS SHOWING SPECULATION PROFIT OF 197.18 T O THE ASSESSEE AS ON 31.03.2004. IT WAS ALSO FOUND OUT THAT ASSESSEE HAD NOT PAID THE AMOUNT TO THE SAID BROKER AND SHARES WERE TRANSFERRED TO T HE DEMAT ACCOUNT ONLY ON 31.03.05. THEREFORE, THE AO DOUBTED THE PURCHASE OF SHARES FROM M/S. T.H. VAKIL SHARES AND SECURITIES PVT. LTD. HE TREATED THE AMOUNT AS UNEXPLAINED AS THE SAID M/S.T.H. VAKIL SHARES AND S ECURITIES PVT. LTD. WAS NOT EXISTING WHEN THE SUMMONS ISSUED TO THE PAR TY, WERE RECEIVED BACK UNSERVED. IT WAS ALSO FURTHER BROUGHT ON RECOR D THAT THERE WAS SEARCH IN THE SAID CASE AND DIRECTOR OF THE COMPANY ADMITTED TO HAVE ISSUED THE BOGUS BILLS OF SHARES IN VARIOUS NAMES. SINCE GENUINENESS OF THE TRANSACTIONS WAS NOT PROVED, THE ENTIRE INCOME OF THE ASSESSEE WAS TREATED AS INCOME FROM UNEXPLAINED SOURCES. ITA NO.2081/M/11 A.Y.06-07 URMILA BHABHERA 11 7.1 BEFORE THE LD. CIT(A) IT WAS CONTENDED THAT THE ASSESSEE GENUINELY PURCHASED SHARES AND GOT IT TRANSFERRED INTO DEMAT ACCOUNT AND SUBSEQUENTLY SOLD THEM. THEREFORE, TREATING THE LO NG TERM CAPITAL GAIN AS UNEXPLAINED INCOME DOES NOT ARISE. THE ASSESSEE REL IED ON VARIOUS DOCUMENTS OF THE CONTRACT NOTES ISSUED BY SAID BROK ER. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS TREATED AN AMOU NT OF RS.22,48,000/- AS UNEXPLAINED PURCHASE AND BALANCE WAS ALSO CONFIR MED BY ENHANCING THE AMOUNT TO AN EXTENT OF RS.1,36,000/- BY STATING AS UNDER :- 3.3.5. REGARDING THE ADDITION OF RS.23,58,900/- ON ACCOUNT OF LONG TERM CAPITAL GAIN ON SALE OF SHARES OF INTERLINK FINANCE AND INVESTMENT LTD CONSIDERED AS UNDISCLOSED INCOME OF THE APPELLANT A SSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES, THE BASIC FACTS BRO UGHT ON RECORD BY THE AO ARE NOT DISPUTED BY THE AR EXCEPT SUBMITTING THA T THE EVIDENCES GATHERED BY THE AO AS A RESULT OF ENQUIRIES CARRIED OUT WERE NOT CONFRONTED TO THE APPELLANT BEFORE COMPLETING THE ASSESSMENT. THEREFORE, ACCORDING TO THE AR THE AO HAS VIOLATED THE PRINCIPLES OF NATURA L JUSTICE. IN VIEW OF THE SPECIFIC GRIEVANCE OF THE AR, THE AO WAS ASKED TO S UBMIT THE CASE RECORDS ALONG WITH THE DETAILS OF STATEMENTS AND OTHER EVID ENCES GATHERED BY HIM DURING THE ASSESSMENT PROCEEDINGS. THE RELEVANT ASS ESSMENT RECORDS SUBMITTED BY THE AO ON 16.12.2010 INTER-ALIA CONTAI NING A COPY OF THE STATEMENT OF SHRI NARENDRA R. SHAH DATED 14.09.2007 RECORDED BY ACIT CENTRAL CIRCLE-11, MUMBAI WAS SHOWN TO THE AR AND A COPY OF THE STATEMENT RECORDED WAS PROVIDED TO HER FOR HER REPL Y, THEREBY, REMEDYING THE GRIEVANCE OF THE AR AS DISCUSSED ABOVE. THE AR VIDE HER LETTER DATED 23.12.2010 HAS SUBMITTED IN THIS REGARD AS UNDER: WE REFER TO THE DISCUSSIONS WE HAD WITH YOU IN CON NECTION WITH THE APPELLATE PROCEEDINGS IN THE CASE OF OUR ABOVE NAME D CLIENT FOR INCOME-TAX A.Y.2006-07. IN THIS CONNECTION AND FURTHER TO THE WRITTEN SUBMI SSIONS MADE ON 19 TH MARCH, 2010, 29 TH MARCH, 2010, 28 TH APRIL, 2010, LETTER DATED 10 TH MAY, 2010 AND LETTER DATED 3 RD DEC., 2010,WE SUBMIT AS UNDER :- GROUND OF APPEAL NUMBER 3(B) TREATMENT OF LONG TE RM CAPITAL GAIN RS.23,58,900/- ON SALE OF 10,000 SHARES OF INTERLIN K FINANCE (IFSL) (SAID SHARES) HELD AS INVESTMENTS, AS INCOME FROM O THER SOURCES. WE REFER TO THE COPY OF THE STATEMENT ON OATH OF MR .NARENDRA SHAH FURNISHED TO US BY YOU ON 2LST DEC.,2010 IN RESPON SE TO OUR SUBMISSION THAT THE AO HAS VIOLATED THE PRINCIPLES OF NATURAL JUSTICE ITA NO.2081/M/11 A.Y.06-07 URMILA BHABHERA 12 BY NOT GRANTING SUFFICIENT OPPORTUNITY TO THE APPEL LANT TO PRESENT HER CASE IN AS MUCH THERE IS NOT EVEN A WHISPER IN THE SHOW CAUSE NOTICE ABOUT THE STATEMENT RECORDED DURING THE SURV EY, THE BASIS ON WHICH HE HAS MADE THE IMPUGNED ADDITION AND THAT HE HAS NOT FURNISHED TO THE APPELLANT, EVEN BEFORE PASSING THE IMPUGNED ORDER, THE RELEVANT DOCUMENTS NAMELY, STATEMENT RECORDED, SUMMONS TO THVSL ETC ON THE BASIS OF WHICH HE HAS ARRIVED AT T HE CONCLUSION THAT THE TRANSACTIONS ARE BOGUS. IN THIS CONNECTION, WE SUBMIT THAT IN THE STATEMENT RECORDED THERE IS NOT EVEN A WHISPER ABOUT THE APPELLANT OR THE SCRIP , NAMELY IFSL WHOSE PURCHASE TRANSACTION IS HELD TO BE BOGUS. THE STATEMENT RECORDED REFERS TO THE BOGUS TRANSACTIONS AS REFERR ED TO IN ANNEXURE A OF THE SAID STATEMENT (REFER QUESTION AND ANSWER NO.4) WHICH CATEGORICALLY MENTION THE NAME OF THE CLIENT AND TH E SCRIPTS WHOSE TRANSACTIONS ARE BOGUS. AS SUCH, THE STATEMENT RECO RDED IS IN CONNECTION WITH CERTAIN BOGUS TRANSACTIONS AS MENTI ONED THEREIN IN THAT ANNEXURE -A AND CAN BY NO STRETCH OF IMAGINATI ON BE USED AGAINST THE APPELLANT. THE AO HAS GONE A BIT TOO FAR IN ASSUMING THAT ALL TRANSACTIONS BY THE SAID BROKER ARE BOGUS. IT WILL NOT BE OUT OF PLACE TO DRAW YOUR ATTENTION TO QUESTION AND ANSWER NUMBER 5 OF THE SAID STATEMENT WHEREIN IT HA S BEEN STATED ON OATH THAT THE SAID BOGUS TRANSACTIONS WERE WITHO UT DELIVERY OF SHARES. HOWEVER, IN THE CASE OF THE APPELLANT, SHAR ES HAVE BEEN DELIVERED TO THE DEMAT ACCOUNT AND AS SUCH ON FACTS DISTINGUISHABLE. FURTHER, WE SUBMIT THAT THE TRANSACTIONS FOR SALE A ND PURCHASE OF SHARES RE DULY SUPPORTED BY BILLS/CONTRACT NOTES WH ICH CLEARLY MENTION BROKERS (THVSL) SEBI REGISTRATION NUMBER, SERVICE TAX NO, ORDER NO OF THE TRADE, TRADE TIME, QUANTITY PURCHAS ED/SOLD ETC. FURTHER, THE PAYMENTS/RECEIPTS ARE MADE /RECEIVED T HROUGH ACCOUNT PAYEE CHEQUES/DRAFTS IN THE SUBSEQUENT YEAR. THE AP PELLANT HAS ALSO SUBMITTED (I) CERTIFICATE OF HOLDING OF SHARES BY THVSL ON BEHALF OF THE APPELLANT AND (II) TRANSACTION CUM HO LDING STATEMENT WHICH DULY REFLECT THE RECEIPT AND DELIVERY OF SHAR ES (III) RELEVANT EXTRACT OF DEMAT ACCOUNT REFLECTING THE DELIVERY OF SHARES. BASED ON THE TOTALITY AS STATED ABOVE, WE SUBMIT TH AT THE IMPUGNED ADDITION MADE BY THE AO IS MERELY ON THE BASIS OF S USPICION, CONJECTURES AND SURMISES AND IS NOT SUSTAINABLE IN LAW. 3.3.6. THE AR COULD NOT REBUT THE FINDINGS OF THE A O BY FURNISHING ANY CONTRARY EVIDENCES. FROM THE STATEMENT OF SHRI NARE NDRA R. SHAH RECORDED BY THE ACIT CENTRAL CIRCLE-. 11, MUMBAI AS DISCUSSE D IN THE ASSESSMENT ORDER IT IS EVIDENT THAT HE IS THE PROMOTER OF THE BROKER M/S.T.H. VAKIL SHARES & SECURITIES PVT. LTD WHO HAS ISSUED THE ALL EGED SALE BILLS/CONTRACT NOTES REGARDING THE SALE OF 10,000 SHARES OF INTERL INK FINANCE AND ITA NO.2081/M/11 A.Y.06-07 URMILA BHABHERA 13 INVESTMENT LTD DATED 02.04.2004, WHICH SHRI NARENDR A R.SHAH HAS CATEGORICALLY ADMITTED HAVING ISSUED WITHOUT RECEIV ING ANY CONSIDERATION & TRANSFER OF SHARES TO THE APPELLANT. OR IN OTHER WORDS HE HAS CATEGORICALLY ADMITTED THAT ALL THESE BILLS/CONTRAC T NOTES ARE MERE ACCOMMODATION BILLS/ENTRIES ISSUED BY THE SAID BROK ER. IT WAS ALSO CONFIRMED THAT NO ACTUAL TRANSACTIONS IN THIS REGAR D WERE CARRIED OUT BY THE SAID BROKER. THE ADJUSTMENT OF PURCHASE CONSIDE RATION BASED ON THE SAID CONTRACT NOTE / INVOICES ISSUED WERE ALSO CONF IRMED TO BE BOGUS. THESE FINDINGS OF THE AO AND THE EVIDENCES GATHERED BY THE AO PROVIDED TO THE APPELLANT/ AR AS DISCUSSED ABOVE ARE NOT REB UTTED BY THE AR BY FURNISHING ANY COGENT CONTRARY EVIDENCES. THEREFORE , ON ACCOUNT OF THESE CLINCHING EVIDENCES GATHERED BY THE AO AS A RESULT OF THE SYSTEMATIC ENQUIRIES CARRIED OUT AS DISCUSSED IN THE ASSESSMEN T ORDER PROVE BEYOND DOUBT THAT NO SUCH PURCHASE OF ALLEGED SHARES WERE MADE BY THE APPELLANT FROM THE BROKER M/S.T.H. VAKIL SHARES & SECURITIES PVT. LTD AS PER THE PURCHASE BILL/BROKER NOTE OR CONTRACT NOTE DATED 02.04.2004. HOWEVER, AT THE SAME TIME IT IS ALSO AN ADMITTED FA CT THAT 10,000 SHARES OF INTERLINK FINANCE AND INVESTMENT LTD ARE FOUND C REDITED OR DEPOSITED IN THE DEMAT ACCOUNT OF THE APPELLANT MAINTAINED WITH HAVEN FINANCIAL SERVICES PVT. LTD. WHICH IS THE DP HOLDERS OF CENTR AL DEPOSITORY SERVICES INDIA LTD. AS ON 31.03.2005. THESE SHARES ARE THERE AFTER SOLD BY THE APPELLANT THROUGH JITENDRA J. BHABHERA ANOTHER BROK ER ( HER HUSBAND) ON 18.04.2005 FOR A NET CONSIDERATION OF RS.24,94,900/ -. THE ENTIRE SALE CONSIDERATION RECEIVED THROUGH BANKING CHANNELS IS CREDITED IN HER BANK ACCOUNT NO. 1141000072191 MAINTAINED WITH HDFC BANK , ANDHERI (W), MUMBAI. THEREFORE, ON ACCOUNT OF THESE FACTS WHICH ARE NOT DISPUTED BY THE AO, IT IS EVIDENT THAT THE APPELLANT WAS HAVING 10,000 SHARES OF INTERLINK FINANCE AND INVESTMENT LTD AS ON 31.03 .2 005( AS IT IS CREDITED IN HER DEMAT A/C) WHICH WERE SOLD THROUGH JITENDRA J. BHABHERS VIDE CONTRACT NOTE NO.Y01305/969 DATED 18.04.2005. THE P URCHASE OF THESE SHARES FROM M/S.T.H. VAKIL SHARES & SECURITIES PVT. LTD IS ALREADY HELD IN- GENUINE OR BOGUS AS PER THE DETAILS AND EVIDENCES B ROUGHT ON RECORD AS DISCUSSED ABOVE. HOWEVER, IN VIEW OF THE FACT THAT THE SHARES WERE AVAILABLE WITH THE APPELLANT AS ON 31.03.2005, THE PURCHASE THEREOF IS NOT PROVED AND THE SOURCE THEREOF IS NOT EXPLAINED, THE REFORE, I FIND THAT THE APPELLANT MUST HAVE PURCHASED THESE SHARES IN CASH OUT OF HER UNDISCLOSED SOURCES OF INCOME ON OR BEFORE 31.03.20 05 I.E. BEFORE THESE SHARES WERE TRANSFERRED OR CREDITED TO THE DEMAT AC COUNT OF THE APPELLANT. THE AR HAS FAILED TO FURNISH THE AUTHORIZATION SLIP S BASED ON WHICH THESE SHARES WERE CREDITED TO THE DEMAT ACCOUNT OF THE AP PELLANT. THEREFORE, THE SOURCE FROM WHICH ACCOUNT THESE SHARES WERE TRANSFE RRED AND ALSO THE SOURCE OF ACQUISITION OF THESE SHARES ARE UNEXPLAIN ED. THE AR HAS NO EXPLANATION OF WHATSOEVER NATURE ON THIS ACCOUNT. A CCORDINGLY, IN VIEW OF THESE FACTS AVAILABLE ON RECORD I FIND THAT THE INV ESTMENT MADE BY THE APPELLANT FOR THE PURCHASE OF THESE SHARES ARE MADE OUT OF HER UNACCOUNTED INCOME EARNED OUT OF HER UNDISCLOSED SO URCES TO THE EXTENT OF RS.22,48,000/- I.E. BASED ON THE AVERAGE PURCHASE P RICE OF THESE SHARES AS ON 31.03.2005 QUOTED IN THE BOMBAY STOCK EXCHANG E. AS PER THE BSE TRADE DATA PROVIDED BY THE AR, THE PRICE QUOTED ON 31.03 .2005 OF THE SAID SCRIPT IS FOUND HIGH OF RS.228.50 AND LOW OF RS. 22 1.10 PER SHARE. ITA NO.2081/M/11 A.Y.06-07 URMILA BHABHERA 14 THEREFORE, THE AVERAGE PRICE OF THE DAY WORKS OUT T O RS. 224.80 PER SHARE. ACCORDINGLY, PRESUMING THAT THE APPELLANT HAS PURCH ASED THESE SHARES ON AVERAGE PRICE OF THE SCRIPT THE PURCHASE COST OF TH ESE SHARES IN THE HANDS OF THE APPELLANT WORKS OUT TO RS.22,48,000/- (I.E. RS.224.80 X 10000) AS ON THE DATE OF CREDIT OF THESE SHARES INTO THE DEMA T ACCOUNT OF THE APPELLANT. SINCE, THE ENTIRE SOURCE THEREOF IS UNEX PLAINED, THEREFORE, I FIND THAT THE AO IS FULLY JUSTIFIED IN TREATING THE PURC HASE COST OF THESE SHARES AMOUNTING TO RS.22,48,000/- AS HER UNDISCLOSED INC OME OR INVESTMENT. ACCORDINGLY, THE ADDITION MADE TO THIS EXTENT IS CO NFIRMED. FURTHER, THE APPELLANT HAS SOLD THESE SHARES FOR A SUM OF RS.24, 94,900/- ON 18.04.2005 I.E. IMMEDIATELY AFTER ITS PURCHASE, THE REFORE, THE ENTIRE GAIN THEREON DUE TO MY REASONS DISCUSSED IN THE PRECEDIN G PARAGRAPHS OF THIS ORDER IS TREATED AS BUSINESS INCOME OF THE APPELLAN T. ACCORDINGLY, THE ENTIRE ADDITION MADE ON THIS ACCOUNT AMOUNTING TO R S.24,94,900/- IS CONFIRMED I.E. RS.22,48,000/- ON ACCOUNT OF UNEXPLA INED INVESTMENT AND FURTHER RS.2,46,900/- ON ACCOUNT OF BUSINESS INCOME OF THE APPELLANT FOR THE RELEVANT ASSESSMENT YEAR. NO DEDUCTION ON ACCOU NT OF PURCHASE COST OF RS. 1,36,000/- IS ALLOWED TO THE APPELLANT AS NO SU CH PAYMENT IS MADE BY THE APPELLANT TO M/S.T.H. VAKIL SHARES & SECURITIES PVT. LTD BY THE APPELLANT. THE ENTIRE PURCHASE COST OF RS.22,48,000 /- DETERMINED ABOVE IS UNEXPLAINED. THE SALE VALUE OF RS.24,94,900/- IS TA KEN ON THE BASIS OF CONTRACT NOTE DATED 18.04.2005 FURNISHED BY THE APP ELLANT AS AGAINST SALE VALUE OF RS.23,58,900/- TAKEN BY THE AO IN THE ASSE SSMENT ORDER. THE APPELLANT WAS ISSUED A SHOW CAUSE U/S 251(1) OF THE ACT VIDE THIS OFFICE LETTER NO. CIT(A)-31/APPEAL/2010-11 DATED 30.12.201 0 BUT THE EXPLANATION THEREOF FURNISHED BY THE AR VIDE LETTER DATED 11.01.2011 IN VIEW OF THE FACTS DISCUSSED ABOVE ARE NOT FOUND TEN ABLE. THE ADDITION MADE ON THIS ACCOUNT IS THEREFORE, ENHANCED TO THE EXTENT OF RS.1,36,000/- (I.E. RS.24,94,900/- MINUS RS.23,58,900/-) AS DISCU SSED ABOVE U/S 251(1) OF THE ACT. SUBJECT TO THESE REMARKS, THIS GROUND O F APPEAL IS, THEREFORE, DISMISSED. 7.2 REFERRING TO THE ABOVE ORDER OF THE CIT(A) IT WAS THE SUBMISSION THAT THERE IS NO BASIS FOR TREATING THE AMOUNT OF P URCHASE AT RS.22,48,000/- AND CONFIRM THE ADDITION AS THE ASSE SSEE GOT THE SHARES TRANSFERRED INTO DEMAT ACCOUNT BY 31.03.05, WHICH F ACT WAS ALSO ACCEPTED BY THE LD. CIT(A). IF THE SHARES ARE PURCH ASED AS ALLEGED BY THE CIT(A) THEN, THE ADDITION OF THE AMOUNT CANNOT BE M ADE IN THIS ASSESSMENT YEAR AS THE SAID PURCHASES ARE MADE IN A SSESSMENT YEAR 2005-06. IT WAS SUBMITTED THAT ASSESSEE PURCHASED T HE SHARES ON 02.04.2004 AND SOLD THEM ON 18.04.2005 AND CORRECTL Y OFFERED THE LONG TERM CAPITAL GAIN. THE LD. DR HOWEVER RELIED ON THE ORDERS ABOVE. ITA NO.2081/M/11 A.Y.06-07 URMILA BHABHERA 15 7.3 WE HAVE CONSIDERED THE ISSUE. IT IS A FACT THAT THE ASSESSEE GOT THE SHARES TRANSFERRED TO DEMAT ACCOUNT AS ON 31.03.200 5 AND SOLD AS ON 18.04.2005. THEREFORE, ASSESSING THE PURCHASES COST EITHER AT RS.1,36,000/- OR AT RS.22,48,00/- AS DECIDED BY THE LD. CIT(A) DOES NOT ARISE IN THIS YEAR, AS THE TRANSACTION OCCURRED BEF ORE 31.03.05 I.E IN ASSESSMENT YEAR 2005-06. THEREFORE, ORDER OF CIT(A) ON THIS ISSUE SUSTAINING ADDITION OF SO CALLED PURCHASE COST, CAN NOT BE UPHELD. SINCE THERE IS NO VERIFIABLE EVIDENCE TO ESTABLISH WHETHE R THE ASSESSEE PURCHASED SHARES ON 02.04.04 AS CLAIMED, IT CAN AT BEST BE STATED THAT ASSESSEE PURCHASED THE SHARES AND TRANSFERRED THEM INTO DEMAT ACCOUNT AS ON 31.03.05. PARTIALLY MODIFYING THE ORDER OF AO AND CIT(A), WE ARE OF THE OPINION THAT THE GAIN EARNED BY THE ASSESSEE CA N BE BROUGHT TO TAX AS CAPITAL GAIN BUT AS SHORT TERM CAPITAL GAIN, AS THE RE IS EVIDENCE OF PURCHASE AS ON 31.03.05 AND SALE AS ON 18.04.05. SI NCE ASSESSEE CLAIMED ONLY AMOUNT OF RS.1,36,000/- AS COST, THERE IS NO NEED FOR ESTIMATING THE COST AT RS.22,48,000/- ON PRESUMPTIO NS AS WAS DONE BY THE CIT(A). THE TRANSACTION CAN BE MUCH BEFORE THAT DATE ALSO AS IT WILL TAKE TIME TO GET THEM INTO DEMAT ACCOUNT. IN THE CIRCUMSTANCES OF THE CASE, CONSIDERING THE EVIDENCE ON RECORD, WE DIRECT THE AO TO TREAT THE GAIN OFFERED BY THE ASSESSEE AS SHORT TERM CAPITAL GAIN AND DETERMINE THE TAX LIABILITY ACCORDINGLY. GROUND NO.4 IS ALLOWED P ARTIALLY. 8. GROUND NO.5 PERTAINS TO ADDITION OF RS.1,17,945/ - BEING ALLEGED COMMISSION PAID FOR ARRANGING LONG TERM CAPITAL GAI N. THE AO WAS OF THE OPINION THAT THE ASSESSEE HAS ARRANGED THE TRANSACT ION IN SUCH A WAY SO AS TO CLAIM EXEMPTION UNDER LONG TERM CAPITAL GAIN AND CALCULATED 5% OF THE AMOUNT AS COMMISSION PAID TO 3 RD PARTIES FOR ARRANGING THE SAID LONG TERM CAPITAL GAIN. THE LD. CIT(A) CONFIRMED THE SAM E AS HE HELD THAT TRANSACTION IS AN ACCOMMODATION TRANSFER FOR ARRANG ING LONG TERM CAPITAL GAIN OF UNDISCLOSED INCOME OF RS.23,48,900/-. ITA NO.2081/M/11 A.Y.06-07 URMILA BHABHERA 16 8.2 AFTER CONSIDERING THE RIVAL CONTENTIONS, WE ARE OF THE OPINION THAT THERE IS NO BASIS FOR ESTIMATING THE COMMISSION AND MAKING THE ADDITION AS WAS DONE BY THE AO. THE TRANSACTION IS NEITHER P ROVED AS AN ARRANGED ONE AND NOR THERE IS EVIDENCE ON RECORD THAT THE AS SESSEE ARRANGED TRANSACTION BY PAYING ANY COMMISSION. THE PRESUMPTI ONS CANNOT BE MADE WHILE BRINGING AN AMOUNT TO TAX AND NO NOTIONA L AMOUNT CAN BE BROUGHT TO TAX. CO-ORDINATE BENCHES IN VARIOUS OTHE R CASES ALSO CONSIDERED THIS ISSUE AND WAS CONSISTENT IN DELETIN G THE AMOUNT AS THERE IS NO EVIDENCE OF ASSESSEE PAYING ANY COMMISSION S O TO SUSTAIN THE ADDITION SO MADE. THEREFORE, THE ESTIMATED COMMISSI ON PAID OF RS.1,17,945/- IS HEREBY DELETED. THE GROUND NO.5 IS ALLOWED. 9. IN THE RESULT, ASSESSEE APPEAL IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH AUGUST, 2013. SD/- SD/- (DR. S.T.M. PAVALAN ) JUDICIAL MEMBER (B. RAMAKOTAIAH ) ACCOUNTANT MEMBER MUMBAI, DATED: 20/08/2013. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.