Dhaval Shah, Pune V. TRO & AO.,

ITA 2235/PUN/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89086 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 04-02-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 30-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Unexplained cash credit; Unexplained investment; Income from undisclosed sources; Search and seizure; Salary income; Share purchase agreement; Source of fund; Cost of acquisition; Accommodation entries; Penny stocks
• Section: 143(3); 68; 69; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.2235/PN/2013 ASSESSMENT YEAR: 2005-06 SHRI DHAVAL SHAH, S.NO.69/1A/1A, FLAT NO.1101, S-2, WING A-11, GANGA SATELLITE, OPP. RAHEJA GARDEN, PUNE 411040 . APPELLANT PAN: ACAPS4161L VS. THE TAX RECOVERY OFFICER & ASSESSING OFFICER, RANGE 7, PUNE . RESPONDENT APPELLANT BY : SMT. DEEPA KHARE RESPONDENT BY : SHRI B.C. MALAKAR DATE OF HEARING : 10-02-2015 DATE OF PRONOUNCEMENT : 31-03-2015 ORDER PER SUSHMA CHOWLA, JM: THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER OF CIT(A)-III, PUNE, DATED 30.08.2013 RELATING TO ASSESSMENT YEAR 2005-0 6 AGAINST ORDER PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX A CT, 1961. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1 . THE LEARNED ASSESSING OFFICER HAS ERRED IN MAKI NG ADDITION OF RS.21,96,546/- ON ACCOUNT OF UNEXPLAINED CASH CREDI T FOR CAPITAL GAINS ON THE BASIS STATEMENT OF THIRD PARTY AND EVIDENCE COL LECTED BY THE DEPARTMENT WITHOUT GIVING OPPORTUNITY OF BEING HEAR D AS WELL AS CROSS EXAMINING THE PERSON CONCERNED AS PER RATIO OF CIT VS. RAJESHKUMAR (2008) 172 TAXMAN 74 (DEL.) 2. THE APPELLANT CRAVES RIGHT TO ADD, ALTER, DELETE, MODIFY OR AMEND ANY CHANGE OF ALL THE ABOVE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HEARING. 3. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS I N RELATION TO THE TREATMENT OF THE CASH CREDIT OF RS.21,96,546/-. ITA NO.2235/PN/2013 SHRI DHAVAL SHAH 2 4. THE BRIEF FACTS OF THE CASE ARE THAT, DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD DECLARED INCOME FROM SALARY AND IN COME FROM OTHER SOURCES. HOWEVER, INFORMATION WAS RECEIVED FROM THE INVESTIG ATION WING THAT THERE WAS MUCH MANIPULATION IN THE PURCHASE AND SALE OF SHARE S OF ROBINSON WORLDWIDE LTD., THEREFORE, REASONS WERE RECORDED UNDER SECTIO N 147 OF THE ACT AND NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED TO THE ASSE SSEE. THE ASSESSEE IN REPLY, STATED THAT THE RETURN FILED UNDER SECTION 139 OF T HE ACT BE TREATED AS RETURN FILED UNDER SECTION 148 OF THE ACT. THE ASSESSING OFFICE R VIDE PARA 4 OF THE ASSESSMENT ORDER OBSERVED THAT DURING THE COURSE OF SEARCH AND SEIZURE ACTION CONDUCTED BY THE INCOME-TAX DEPARTMENT, MUMBAI IN T HE MONTH OF JANUARY, 2007 AT THE OFFICE AND RESIDENTIAL PREMISES OF SEVERAL S TOCK BROKERS AND MANAGERS OF FINANCIAL COMPANIES, IT WAS FOUND THAT THERE WAS MU CH MANIPULATIONS IN THE PURCHASE AND SALE OF SHARES, IN PARTICULAR OF SHARE S OF ROBINSON WORLDWIDE LTD. THE ASSESSEE WAS ONE OF THE BENEFICIARIES, AS PER T HE INFORMATION RECEIVED BY ADDL.DIT (INVESTIGATION) WING-I, PUNE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF PURCHASE AND SALE OF SHARES ALONG WITH FURTHER EVIDENCES. THE ASSESS ING OFFICER ON THE PERUSAL OF DETAILS, NOTED THAT THE ASSESSEE HAD SHOWN PURCHASE S OF 25,000 SHARES OF ROBINSON WORLDWIDE LTD. FROM G.R. PANDYA SHARE BROK ING LTD., MUMBAI ON 04.07.2003 FOR TOTAL CONSIDERATION OF RS.98,781/- A ND ALL THE SHARES WERE SOLD FOR RS.41,11,565/-. THE ASSESSEE HAS SHOWN THE SALE OF ENTIRE SHARES DURING THE PERIOD 10.02.2005 TO 25.02.2005 THROUGH RENASSANCE SECURITIES LTD., MUMBAI AND HAD CLAIMED EXEMPTION FROM LONG TERM CAPITAL GA INS UNDER SECTION 10(38) OF THE ACT. THE ASSESSING OFFICER FURTHER NOTED THAT SEARCH AND SEIZURE ACTION WERE CONDUCTED IN THE CASE OF NARESH SABOO AND NARESH JA IN AND OTHER BENEFICIARIES IN THE SCRIP OF ROBINSON WORLDWIDE LTD. SURVEY ACT ION WAS ALSO CONDUCTED ON M/S. DPS SHARES AND SECURITIES LTD., WHO HAD ISSUED BOGUS BROKERS NOTE TO THE BENEFICIARIES AND THE SAME WAS ADMITTED BY THE SAID CONCERN. FURTHER, STATEMENT OF SHRI SUJAL SHAH, ONE OF THE BROKERS, W AS RECORDED ON 18.01.2007, IN ITA NO.2235/PN/2013 SHRI DHAVAL SHAH 3 WHICH HE ADMITTED THAT DURING THE YEARS 2003-04 AND 2004-05, HE ISSUED OFF MARKET PURCHASE BILLS IN THE YEAR 2005-06. AS AGAI NST THIS, THE ASSESSEE SUBMITTED THAT HE WAS HOLDING D-MAT ACCOUNT AND THR OUGH WHICH, THE TRANSACTIONS OF THE SHARES WERE CARRIED OUT. THE A SSESSING OFFICER NOTED THAT THE ASSESSEE HAD OPENED D-MAT ACCOUNT ON 03.02.2005, WH EREAS THE SHARES HAD BEEN PURCHASED IN JULY, 2003 AND D-MATED ON 03.02.2 005. THE D-MAT ACCOUNT WAS UTILIZED ONLY FOR THE PURPOSE OF TRANSACTIONS I N THE SCRIP UNDER CONSIDERATION. FURTHER, THE ENTIRE PURCHASE PRICE WAS PAID IN CASH . THE ASSESSING OFFICER WAS OF THE VIEW THAT D-MAT OF SCRIP SHARES WAS DONE AFT ER A LONG PERIOD BECAUSE OF BACKDATING OF SHARE PURCHASE TRANSACTIONS AND OTHER STAGES. THE ASSESSING OFFICER THUS, HELD THAT THE ASSESSEE WAS INVOLVED I N PENNY STOCK SHARES AND THE LONG TERM CAPITAL GAINS SHOWN BY THE ASSESSEE WERE NOT GENUINE AND HE HELD THAT THE ASSESSEE HAD INTRODUCED HIS UNACCOUNTED MO NEY THROUGH ACCOMMODATED TRANSACTION OF PURCHASE AND SALE OF PE NNY STOCK SHARES. ACCORDINGLY, AN ADDITION OF RS.41,11,565/- WAS MADE AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. 5. THE CIT(A) AFTER CONSIDERING THE VARIOUS RELIANC ES PLACED UPON BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AND IN TURN, RELYING ON THE RATIO LAID DOWN BY THE MUMBAI BENCH OF THE TRIBUNAL IN ARVIND M. KARIYA VS. ACIT IN ITA NO.7024/MUM/2010, DATED 30.01.2013, HEL D AS UNDER:- 7.6. IN THE PRESENT CASE THE APPELLANT HAS FILED EXTRACTS OF THE CASH BOOK FOR THE YEAR ENDING 31.03.2004 (RELEVANT FOR A.Y.20 04-05) AND THE BALANCE SHEET FOR THAT YEAR ATTACHED TO THE RETURN OF THE I NCOME FOR THE A.Y. 2004- 05 FILED ON 09.03.2005 TO EVIDENCE THE PURCHASE OF SHARES OF ROBINSON IMPEX LTD. TO MY MIND, THEREFORE, THE FACTS BECOME IMMEDIATELY DISTINGUISHABLE AT THE OUTSET. THE STATEMENT OF THE BROKER WHO HAD ARRANGED THE ACCOMMODATION ENTRIES HAS NOT BEEN REB UTTED. ON THE FACTS OF THE CASE, THEREFORE, IT IS SEEN THAT THE ASSESSI NG OFFICER HAS CORRECTLY HELD THAT THE APPELLANT HAS MANIPULATED THE PURCHAS E OF SHARES IN CASH WITH THE HELP OF THE BROKER. THE DELAYED DEMATERIAL IZATION OF THE SHARES IS NOT GENERALLY THE ACCEPTED PRACTICE IN SHARING TRAD ING AND RENDERS THE ENTIRE REGULATORY SYSTEM, PUT INTO PLACE BY SEBI AN D OTHER REGULATORY AUTHORITIES TO PREVENT MANIPULATION IN THE STOCK MA RKET BY BROKERS AND OTHER UNSCRUPULOUS PERSONS, A FAILURE. THEREFORE, I AM IN AGREEMENT WITH THE ASSESSING OFFICERS VIEW THAT, IN FACT THERE IS NO REAL PURCHASE OR SALE OF SHARE AT ALL. IT IS THE BROKER WHO HAS MANIPULA TED THE PURCHASE COST IN CASH, ARRANGE FOR THE SALE OF SHARES BY SHOWING THE HOLDING PERIOD TO BE ITA NO.2235/PN/2013 SHRI DHAVAL SHAH 4 MORE THAN 12 MONTHS AND ALSO ARRANGED FOR THE DEMAT ERIALIZATION OF THE SHARES JUST PRIOR TO SALE IN ORDER TO MAKE THE WHOL E TRANSACTION APPEARS GENUINE. THE FACTS OF THE CASE ARE THUS DISTINGUISH ABLE FROM MUKESH MAROLIA'S CASE (SUPRA). THE APPELLANT HAS ALSO PLA CED RELIANCE ON PUNE ITAT ORDERS [N THE CASES OF SHRI AVINASH KANTILAL J AIN (ITA NO. 980/PN/2010) AND SHRI AJAY SHANTILAL LALWANI AND NE ELESH SHANTILAL LALWANI (145 TTJ 511) BUT THESE ARE ALSO SEEN TO BE DISTINGUISHABLE. 7.7. THE BOMBAY ITAT IN THE CASE OF ARVIND M. KARIY A VS. ACIT IN ITA NO. 7024/MUM/2010 DATED 30.01.2013 WAS EXAMINING A SIMI LAR CASE WHERE IT WAS HELD THAT THE MERE FACT THAT SHARES PURCHASED H AVE BEEN SENT FOR DEMATERIALIZATION BY THE ASSESSEE, DOES NOT PROVE T HE GENUINENESS OF THE SAME, EVEN THOUGH THEY WERE TRANSACTED OFFLINE AND NOT ON THE FLOORS OF A STOCK EXCHANGE. THE ITAT HELD AS UNDER:- 18. 'THE ASSESSES HAS PLACED STRONG RELIANCE ON THE SALE TRANSACTION WHICH HAS BEEN ROUTED THROUGH DEMAT ACC OUNT AND HAS BEEN EXECUTED THROUGH BSE. THERE IS NO DISPUTE THAT THE SALE CONSIDERATION WAS RECEIVED BY THE ASSESSEE FROM THE SALE OF SHARES. WHAT IS DISPUTED IS THAT WHETHER THEY WERE ACTUALLY PURCHASED ON THE PURPORTED DATE AS CLAIMED BY THE A SSESSEE. THIS RAISES THE QUESTION WHETHER THE APPARENT CAN BE CON SIDERED AS THE REAL. AS LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS DURGA PRASAD MORE 82 ITR 540 (2002-TLOL-877-SC-I T), THE APPARENT MUST BE CONSIDERED AS REAL ONLY IT IS SHOW N THAT THERS ARE REASONS TO BELIEVE THAT THE APPARENT IS NOT THE REA L AND THAT TOO 'TAXING AUTHORITIES ARE ENTITLED TO LOOK INTO THE S URROUND CIRCUMSTANCES TO FIND OUT THE REALITY AND THE MATTE R HAS TO BE CONSIDERED BY APPLYING THE TEST OF HUMAN PROBABILIT Y. FOR THIS PREPOSITION WE DRAW SUPPORT FROM THE DECISION OF TH E HON'BLE SUPREME COURT IN THE CASE OF SUMATI DAYAL V/S CIT 2 14 ITR 0801 WHEREIN IN THE HON'BLE SUPREME COURT HAS THUS HELD: 'DISMISSING THE APPEAL, THAT THE SETTLEMENT COMMISS ION AFTER CONSIDERING THE SURROUNDING CIRCUMSTANCES AND APPLY ING THE TEST OF HUMAN PROBABILITIES HAD RIGHTLY CONCLUDED T HAT THE APPELLANT'S CLAIM ABOUT THE AMOUNT BEING HER WINNIN GS FROM RACES WAS NOT GENUINE. THEREFORE, THE PRESENT CAS E HAS TO BE CONSIDERED IN THE LIGHT OF HUMAN PROBABILITY. TH E TRANSACTION ABOUT PURCHASES OF SHARES IN PHYSICAL F ORM OF SUM COMPANIES WHOSE SHARE PRICES HAVE BEEN RIGGED B Y SOME FRAUDULENT OPERATORS CANNOT HAVE ANY DIRECT EVIDENCES. AN INFERENCE ABOUT SUCH A PURCHASE CONNI VED WITH SUCH COMPANIES HAVE TO BE DRAWN ON THE BASIS O F THE CIRCUMSTANCES AVAILABLE ON THE RECORD. AS POINTED OUT, THE SHARES HAVE BEEN TRANSFERRED WITHIN 4 DAYS OF THE D ATE OF PURCHASES RAISES AMPLE DOUBT ABOUT THE CREDIBILITY OF THE COMPANY. AS POINTED OUT IN ALL PROBABILITIES, THE COMPANY MUST HAVE BEEN INVOLVED IN SUCH FRAUDULENT TRANSACT IONS. POST YEAR 2000, IT IS IMPROBABLE THAT ANY PERSON WO ULD TRANSACT IN SHARES BY TAKING PHYSICAL DELIVERY OF T HE SHARES. WHEN MANY INSTANCES HAVE BEEN SURFACED RELATING TO BAD DELIVERY OR BOGUS SCRIPS, THE REGULATORY AUTHORITIE S HAVE MADE IT COMPULSORY TO TRANSACT THROUGH DEMAT ACCOUN T. 19. HAVING REGARD TO THE CIRCUMSTANCES AND THE COND UCT OF THE ASSESSEE AS DISCLOSED IN HIS STATEMENT U/S. 132(4) OF THE ACT AS WELL AS OTHER MATERIAL ON RECORD, INFERENCE COULD B E REASONABLY ITA NO.2235/PN/2013 SHRI DHAVAL SHAH 5 DRAWN THAT THE SHARES PURCHASED BY THE ASSESSES HAV E BEEN BACKDATED TO GIVE IT A COLOUR OF LONG TERM CAPITAL GAIN BY SHOWING THE PERIOD OF HOLDING FOR MORE THAN 12 MONTHS. 20. NEEDLESS TO SAY THAT INCOME TAX PROCEEDINGS ARE CIVIL PROCEEDINGS AND THE DEGREE OF PROOF REQUIRED IS BY PREPONDERANCE OF PROBABILITIES, THEREFORE APPLYING THE TEST OF PR EPONDERANCE OF PROBABILITIES AND CONSIDERING THE ENTIRE SEQUENCE O F EVENTS, THE REVENUE AUTHORITIES HAVE RIGHTLY CONCLUDED THAT THE ASSESSEE'S CLAIM ABOUT THE LONG TERM CAPITAL GAINS FROM THE SA LE OF SHARES IS NOT GENUINE. 21. THEREFORE, IT CANNOT BE SAID THAT THE EXPLANATI ON OFFERED BY THE ASSESSEE IN RESPECT OF THE SALE CONSIDERATION H AS BEEN REJECTED UNREASONABLY AND THAT THE FINDINGS THAT THE SAID AM OUNTS ARE INCOME OF THE ASSESSEE FROM OTHER SOURCES IS NOT BA SED ON EVIDENCE. ACCORDINGLY, FINDINGS OF THE LD. CIT(A) ARE CONFIRMED. GROUND NO.1 IS DISMISSED'. 7.8. IN THE APPELLANT'S CASE, THE SOURCE OF PURCHA SE OF SHARES IS BY WAY OF PAYMENT IN CASH. THE APPELLANT HAS PLACED ON RECORD THAT HE DOES NOT REMEMBER THE NAME OF THE PERSON FROM G R PANDYA SHA REBROKING LTD, WITH WHOM HE HAD TRANSACTED FOR PURCHASE OF THE SHA RES. HE DID NOT ALSO REMEMBER THE NAME OF PERSON FROM RENAISSANCE SECURI TIES LTD. WITH WHOM HE HAD TRANSACTED FOR SALE OF SHARES. THE VALU E OF THE SHARES OF ROBINSON IMPEX LTD. WHICH WAS PURCHASED FOR RS.3.90 IN JULY, 2003 IS SEEN TO HAVE JUMPED ALMOST 50 TIMES TO RS.145.25 AT THE TIME OF ITS SALE AT FEB 2005, THE DEMAT ACCOUNT OF THE APPELLANT WAS ALSO OPENED ONLY IN JAN 2005 AND THE SHARES WERE DEMATTED IMMEDIATELY T HEREAFTER IN FEB, 2005. ON EXAMINATION OF THE DEMAT ACCOUNT SHOWS THA T THE SHARES WHICH WERE DEMATTED ON 3.2.2005 ARE SOLD THROUGH RENAISSA NCE SECURITIES LTD. ON 11 TH , 15 TH , 17 TH , 21 ST AND 26 TH FEB, 2005. AT OTHER PLACE RELATING TO THE PHOTOCOPY OF THE PAGES OF APPELLANTS DEMAT ACCOUNT THE SHARES ARE SEEN TO HAVE BEEN SOLD THROUGH C.M. MEHTA SECURITIES LTD . THE PURCHASE OF THE SHARES IN CASH, THE HOLDING BY THE APPELLANT IN PHYSICAL FORMAT, THE NON RECOLLECTION OF THE NAMES OF THE PERSONS WITH WHOM HE HAS TRANSECTED, THE PHENOMENAL GROWTH IN THE SHARES OF ROBINSON WORD WI DE LTD. WHICH HAVE BEEN INVESTIGATED AND FOUND BY THE INVESTIGATION AG ENCIES TO BE ACCOMMODATION ENTRIES RELATING TO PENNY STOCKS AND THE REJECTION BY THE APPELLANT OF THE OPPORTUNITY OFFERED TO CROSS EXAMI NE THE BROKER WHO ADMITTED TO PROVIDING OFF MARKET ACCOMMODATION ENTR IES ALL POINT TO THE FACT THAT THERE IS NO GENUINE TRANSACTION RELATING TO THE PURCHASE OF THE SCRIPS IN QUESTION. THE ENTIRE TRANSACTIONS RELATIN G TO THE SALE AND PURCHASE OF SHARES HAVE BEEN ARRANGED IN ORDER FOR THE APPELLANT TO LAUNDER HIS UNACCOUNTED INCOME INTO ACCOUNTED INCOM E, THEREFORE, THE ALTERNATIVE CONTENTION THAT THE CAPITAL GAINS MAY B E TREATED AS SHORT TERM CAPITAL GAINS CANNOT BE ACCEPTED SINCE IT IS FOUND THAT THERE ARE NO GENUINE SHARE TRANSACTIONS AT ALL. CONSEQUENTLY, OR IGINAL GROUND OF APPEAL NO.1 FAILS. 6. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF C IT(A). 7. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE AS SESSEE POINTED OUT THAT DURING THE COURSE OF SEARCH, STATEMENT WAS RECORDED OF NARESH SABOO, WHO WAS FOUND TO HAVE GIVEN ACCOMMODATION ENTRIES, BUT THE NAME OF THE ASSESSEE WAS ITA NO.2235/PN/2013 SHRI DHAVAL SHAH 6 NOT FOUND IN THE LIST. OUR ATTENTION WAS DRAWN TO THE SHARE CERTIFICATE PLACED AT PAGE 20 OF THE PAPER BOOK ALONG WITH VOUCHERS FOR P AYMENT OF THE PURCHASE PRICE AT PAGES 21 AND 22 OF THE PAPER BOOK AND EVID ENCE OF MARKET VALUE OF SHARES AS ON DATE OF PURCHASE PLACED AT PAGE 26 OF THE PAPER BOOK. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE INVESTMENT WAS MADE BY THE ASSESSEE IN ASSESSMENT Y EAR 2004-05, WHICH WAS REFLECTED IN THE BALANCE SHEET PLACED AT PAGE 14 OF THE PAPER BOOK AND FURTHER, WHERE THE SALE WAS NOT IN DISPUTE, THERE WAS NO MER IT IN THE ORDERS OF THE AUTHORITIES BELOW. THE LEARNED AUTHORIZED REPRESEN TATIVE FOR THE ASSESSEE FURTHER CONTENDED THAT THE ASSESSING OFFICER PROCEE DED ON THE BASIS OF SEARCH PROCEEDINGS OF ANOTHER BROKER, WHO WAS NOT CONNECTE D TO THE ASSESSEE AND WHERE THE ASSESSING OFFICER HAD NOT POINTED OUT ANY CONNECTION / NEXUS WITH THE ASSESSEE AND WHERE EVEN OPPORTUNITY OF CROSS-EXAMIN ATION WAS NOT GIVEN BY THE ASSESSING OFFICER, THERE WAS NO MERIT IN THE SAID A DDITION. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE PLACED R ELIANCE ON THE RATIO LAID DOWN BY PUNE BENCH OF THE TRIBUNAL IN SMT. SMITA P. PATIL & ORS. VS. ACIT (2014) 159 TTJ (PUNE) 182 AND POINTED OUT THAT THE SHARES PURCHASED BY THE ASSESSEE THEREIN WERE ALSO PURCHASED THROUGH M/S. D PS SHARES AND SECURITIES LTD., AND THE TRIBUNAL HAD HELD THAT THE TRANSACTIO N OF PURCHASE WAS GENUINE, IN TURN RELYING ON THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN SMT. JAMNADEVI AGARWAL 328 ITR 656 (BOM). FURTHER RELIA NCE WAS PLACED ON THE RATIOS LAID DOWN IN THE FOLLOWING CASES:- I) AVINASH KANTILAL JAIN VS. ADDL.CIT (PUNE) ITA NO .980 & 1049/PN/2010, ORDER DATED 31.10.2012 II) CIT VS. SMT. DAMAYANTI M MAROLIA IN ITA NO.154 OF 2009, ORDER DATED 19.03.2009 (BOMBAY HIGH COURT) III) CIT VS. SHRI MUKESH RATILAL MAROLIA IN ITA NO. 456 OF 2007, ORDER DATED 07.09.2011 (BOMBAY HIGH COURT) 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE POINTED OUT THAT THE SHARES WERE PURCHASED IN JULY, 2003, WHICH WERE D-MATED ONLY IN ITA NO.2235/PN/2013 SHRI DHAVAL SHAH 7 OCTOBER, 2005 I.E. IMMEDIATELY BEFORE SALE OF SHARE S BETWEEN THE PERIOD 10.02.2005 TO 25.02.2005. FURTHER, RELIANCE WAS PL ACED ON THE OBSERVATIONS OF CIT(A) IN PARAS 7.5 AND 7.8 OF THE APPELLATE ORDER. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RELATION TO THE SALE TRANSACTION OF SHARES OF M/S. ROBINSON WORLDWIDE LTD. THE ASSESSEE HAD PURCHASED 25,000 SHARES OF M/S. ROBINSON WORLDWIDE LTD. FROM G.R. PANDYA SHARE BROK ING LTD., MUMBAI ON 04.07.2003 FOR TOTAL CONSIDERATION OF RS.98,731/-. THE COPIES OF CONTRACT NOTES OF G.R. PANDYA SHARE BROKING LTD., MUMBAI ARE PLACED O N RECORD, WHICH REFLECTS THE PURCHASE OF THE SAID SHARES. THE SAID SHARES W ERE TRANSFERRED IN THE NAME OF ASSESSEE AS PER THE SHARE CERTIFICATE DATED 17.1 0.2003. THE COPY OF THE SAID SHARE CERTIFICATE IS PLACED AT PAGE 20 OF THE PAPER BOOK. THE ASSESSEE HAD MADE CASH PAYMENTS FOR THE PURCHASE OF SAID SHARES AND THE COPY OF ACCOUNT OF ASSESSEE IN THE BOOKS OF SHARE BROKING COMPANY ALON G WITH CASH RECEIPTS ARE PLACED AT PAGES 21 AND 22 OF THE PAPER BOOK. THE A SSESSEE FURTHER CLAIMS THAT THE SAID CASH WAS DRAWN OUT OF HIS BOOKS AND THE RE LEVANT ENTRIES OF CASH IN HAND ARE ALSO PLACED ON RECORD AT PAGE 23 OF THE PA PER BOOK. THE ASSESSEE HAD PURCHASED THE SAID SHARES AT THE VARYING PRICE BETWEEN RS.3.85P TO RS.3.91P. IN SUPPORT OF THE RATES PREVALENT ON THE DATE OF PURCHASE, THE ASSESSEE HAS PLACED ON RECORD THE LIST ISSUED BY BO MBAY STOCK EXCHANGE, WHICH IS PLACED ON RECORD AT PAGES 26 ONWARDS OF TH E PAPER BOOK. THE ASSESSEE HAD SOLD THE SAID SHARES DURING THE PERIOD 10.02.2005 TO 25.02.2005 THROUGH RENASSANCE SECURITIES LTD., MUMBAI FOR TOTAL CONSIDERATION OF RS.41,11,565/-. THE COPY OF THE CONTRACT NOTE FOR THE SALE OF THE SHARES IS ALSO PLACED ON RECORD. THE SAID SHARES WERE SOLD AT PRI CE VARYING BETWEEN RS.145 TO RS.177/-. THE SALE PROCEEDS WERE RECEIVED BY WAY O F CHEQUES AND WERE DEPOSITED IN THE BANK ACCOUNT OF THE ASSESSEE WITH STANDARD CHARTERED BANK AND CONFIRMATION OF THE SAID BANK IS PLACED AT PAGE 39 OF THE PAPER BOOK. THE ASSESSEE HAD SOLD THE SAID SHARES THROUGH D-MAT ACC OUNT, WHICH WAS OPENED ON ITA NO.2235/PN/2013 SHRI DHAVAL SHAH 8 03.02.2005, ON WHICH DATE, THE SHARES WERE FIRST DE MATERIALIZED. THE D-MAT ACCOUNT WAS OPENED AFTER A GAP FROM THE DATE OF PUR CHASE OF THE SHARES AND THIS CREATED A DOUBT IN THE MINDS OF AUTHORITIES BELOW T HAT THE ASSESSEE HAD TRANSACTED IN THE SHARES IN ORDER TO GET THE ACCOMM ODATION ENTRIES FOR ARTIFICIAL DATES. FURTHER, THE ASSESSING OFFICER HAD RECEIVED INFORMATION THAT THERE WAS LARGE SCALE MANIPULATION IN THE PURCHASE AND SALE O F SHARES OF M/S. ROBINSON WORLDWIDE LTD. THE INCOME-TAX DEPARTMENT, MUMBAI H AD CONDUCTED SURVEY AND SEIZURE ACTIONS AT THE OFFICES AND RESIDENTIAL PREM ISES OF SEVERAL STOCK BROKERS AND MANAGERS OF FINANCIAL COMPANIES. DURING THE CO URSE OF SURVEY ACTION CONDUCTED ON M/S. DPS SHARES AND SECURITIES LTD. BY THE DIRECTORATE OF INVESTIGATION, MUMBAI, THE DIRECTOR OF BROKERAGE FI RM ADMITTED THAT DURING THE FINANCIAL YEARS, 2003-04, 2004-05 AND 2005-06, BOGU S MARKET PURCHASE BILLS AND IN SOME CASES, SALE BILLS HAD ALSO BEEN ISSUED TO T HE BENEFICIARIES. ACCOMMODATION BILLS WERE GIVEN TO THE BENEFICIARIES AS PER THE INSTRUCTIONS OF ONE SHRI NARESH SABOO AND NARESH JAIN. AS PER THE INVESTIGATION WING, APPELLANT WAS ONE OF THE BENEFICIARIES AND CONSEQUE NT THERETO, THE ASSESSING OFFICER REOPENED ASSESSMENT IN THE CASE OF ASSESSEE . 10. THE QUESTION WHICH ARISES BEFORE US IS THE TREA TMENT OF GAIN ARISING ON THE SAID TRANSACTION OF SALE, PURCHASE OF SHARES IS TO BE ASSESSED UNDER THE HEAD INCOME FROM LONG TERM CAPITAL GAINS AS CLAIMED BY T HE ASSESSEE OR UNDER THE HEAD INCOME FROM OTHER SOURCES AS DETERMINED BY THE AUTHORITIES BELOW. THE FIRST ASPECT TO BE CONSIDERED IN THE CASE OF ASSESS EE IS THAT THOUGH ENQUIRIES WERE MADE IN RESPECT OF SEVERAL COMPANIES AND BROKE RS, BUT THE NAME OF BROKER THROUGH WHOM THE ASSESSEE HAD TRANSACTED IN THE SHA RES OF M/S. ROBINSON WORLDWIDE LTD. DOES NOT APPEAR IN THAT SAID LIST. FURTHER, THE ASSESSEE HAS PRODUCED COMPLETE EVIDENCE VIS--VIS THE PURCHASE O F SHARES AND THE COPY OF SHARES CERTIFICATE EVIDENCING TRANSFER OF SHARES IN THE NAME OF ASSESSEE AND FURTHER SALE TRANSACTION THROUGH BROKERS, AGAINST W HICH THE ASSESSEE RECEIVED THE SALE AMOUNT THROUGH CHEQUE. IN THE TOTALITY OF THE ABOVE SAID FACTS AND ITA NO.2235/PN/2013 SHRI DHAVAL SHAH 9 CIRCUMSTANCES, WHERE THE ASSESSEE HAS PLACED ON REC ORD THE COMPLETE EVIDENCE OF PURCHASE AND SALE OF SHARES, MERELY BECAUSE THE SHARES WERE D-MATTED IN FEBRUARY, 2005 AND THEREAFTER, WERE SOLD IN THE MONTH OF FEBRUARY, 2005 ITSELF, DOES NOT ESTABLISH THE CASE OF AUTHORITIES BELOW, I N VIEW OF THE CIRCUMSTANTIAL EVIDENCE PRODUCED BY THE ASSESSEE. IN THE TOTALITY OF SAID EVIDENCES, WE HOLD THAT THE ASSESSEE HAD PURCHASED THE SAID SHARES AND ALSO THE COMPANY HAD TRANSFERRED THE SHARES IN THE NAME OF ASSESSEE AS E ARLY AS ON 17.10.2003, AGAINST WHICH THE PURCHASE PRICE WAS PAID IN CASH, WHICH IS RECORDED IN THE BOOKS OF ACCOUNT OF THE SHARE BROKER WHO IS THIRD P ARTY. FURTHER, THE SAID SHARES WERE PURCHASED IN THE FINANCIAL YEAR 2003-04 AND WE RE SHOWN AS INVESTMENT IN THE BALANCE SHEET AS ON 31.03.2003, COPY OF WHICH I S FILED ON RECORD. THESE SHARES WERE SOLD IN THE FINANCIAL YEAR 2004-05 ESTA BLISH THE CASE OF THE ASSESSEE IN HAVING TRANSACTED IN THE SALE AND PURCHASE OF TH E SAID SHARES. IN THE ENTIRETY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, WE HOLD THAT THE GAIN ARISING ON TRANSFER OF SHARES IS TO BE ASSESSED AS INCOME FROM LONG TERM CAPITAL GAIN IN THE HANDS OF THE ASSESSEE. 11. WE FURTHER FIND SUPPORT FROM THE RATIO LAID DOW N BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. SHRI MUKESH RATILAL MAROLIA I N INCOME TAX APPEAL NO.456 OF 2007, VIDE ORDER DATED 07.09.2011, WHEREIN IT WA S HELD AS UNDER:- 5. ON FURTHER APPEAL, THE ITAT BY THE IMPUGNED ORD ER ALLOWED THE CLAIM OF THE ASSESSEE BY RECORDING THAT THE PURCHAS E OF SHARES DURING THE YEAR 1999-2000 AND 2000-2001 WERE DULY RECORDED IN THE BOOKS MAINTAINED BY THE ASSESSEE. THE ITAT HAS RECORDED A FINDING THAT THE SOURCE OF FUNDS FOR ACQUISITION OF THE SHARES WAS T HE AGRICULTURAL INCOME WHICH WAS DULY OFFERED AND ASSESSED TO TAX IN THOSE ASSESSMENT YEARS. THE ASSESSEE HAS PRODUCED CERTIFICATES FROM THE AFO RESAID FOUR COMPANIES TO THE EFFECT THAT THE SHARES WERE IN-FAC T TRANSFERRED TO THE NAME OF THE ASSESSES. IN THESE CIRCUMSTANCES, THE DECISION OF THE ITAT IN HOLDING THAT THE ASSESSEE HAD PURCHASED SHARES O UT OF THE FUNDS DULY DISCLOSED BY THE ASSESSEE CANNOT LIE FAULTED. 6 SIMILARLY, THE SALE OF THE SAID SHARES FOR RS.1,4 1,08,484/- THROUGH TWO BROKERS NAMELY, M/S RICHMOND SECURITIES PVT . LTD. AND M/S.SCORPIO MANAGEMENT CONSULTANTS PVT. LTD. CANNOT BE DISPUTED, BECAUSE THE FACT THAT THE ASSESSEE HAS RECEIVED THE SAID AMOUNT IS NOT IN DISPUTE. IT IS NEITHER THE CASE OF THE REVENUE THAT THE SHARES IN QUESTION ARE STILL LYING WITH THE ASSESSEE NOR IT IS THE CAS E OF THE REVENUE THAT THE AMOUNTS RECEIVED BY THE ASSESSEE ON SALE OF THE SHA RES IS MORE THAN ITA NO.2235/PN/2013 SHRI DHAVAL SHAH 10 WHAT IS DECLARED BY THE ASSESSEE. THOUGH THERE IS S OME DISCREPANCY IN THE STATEMENT OF THE DIRECTOR OF M/S. RICHMAND SECU RITIES PVT. LTD. REGARDING THE SALE TRANSACTION, THE TRIBUNAL RELYIN G ON THE STATEMENT OF THE EMPLOYEE OF M/S. RICHMAND SECURITIES PVT. LTD. HELD THAT THE SALE TRANSACTION WAS GENUINE. 7 IN THESE CIRCUMSTANCES, THE DECISION OF THE ITAT IN HOLDING THAT THE PURCHASE AND SALE OF SHARES ARE GENUINE AND THEREFO RE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN HOLDING THAT T HE AMOUNT OF RS.1,41,08,484/- REPRESENTED UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE INCOME TAX ACT, 1961 CANNOT BE FAULTED. 8. IN THE RESULT, WE SEE NO MERIT IN THIS APPEAL AN D THE SAME IS DISMISSED WITH NO ORDER AS TO COSTS. 12. THE CIT(A) HAS GIVEN A FINDING IN PARA 7.6 THAT THE STATEMENT OF BROKER, WHO HAD ARRANGED THE ACCOMMODATION ENTRIES HAS NOT BEEN REBUTTED. HOWEVER, IT IS TO BE NOTED THAT THE ASSESSEE HAD NOT PURCHAS ED THE SHARES FROM THE SAID BROKER I.E. M/S. DPS SHARES AND SECURITIES LTD., BU T HAD MADE THE PURCHASES FROM ANOTHER BROKER I.E. G.R. PANDYA SHARE BROKING LTD., MUMBAI. FURTHER, NO EVIDENCE HAS BEEN BROUGHT ON RECORD TO ESTABLISH TH AT THE ASSESSEE HAD PURCHASED THE SHARES FROM M/S. DPS SHARES AND SECUR ITIES LTD. AND IN THE ABSENCE OF THE SAME, WE FIND NO MERIT IN THE ALLEGA TIONS OF AUTHORITIES BELOW THAT THE ASSESSEE HAD MANIPULATED THE PURCHASE OF SHARES IN CASH WITH THE HELP OF BROKER. 13. THE PUNE BENCH OF THE TRIBUNAL IN SMT. SMITA P. PATIL & ORS. VS. ACIT (SUPRA) HAS HELD THAT MERELY BECAUSE THERE WAS DELA Y IN CONVERTING PHYSICAL SHARES INTO ELECTRONIC FORM I.E. D-MAT, THAT COULD NOT BE THE CRITERIA TO HOLD THAT THE SHARE TRANSACTIONS WERE ARRANGED AND CAMOUFLAGE , AS IN ALL CASES THE ASSESSEE HAD RECORDED THEIR SHARE TRANSACTIONS IN R EGULAR BOOKS OF ACCOUNT PRIOR TO DATE OF SEARCH. IT WAS FURTHER POINTED OUT BY T HE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT IN THE CASE OF SMT. SMITA P. PATIL & ORS. VS. ACIT (SUPRA), THE TRANSACTION WAS WITH REGARD TO PU RCHASE OF SHARES OF M/S. FAST TRACK ENTERTAINMENT LTD., WHICH IN TURN WERE PURCHA SED THROUGH THE SHARE BROKER M/S. DPS SHARES AND SECURITIES LTD. AND THE TRIBUNA L HAD ACCEPTED THE SAID TRANSACTION AS GENUINE. FURTHER, PUNE BENCH OF THE TRIBUNAL IN SMT. SMITA P. ITA NO.2235/PN/2013 SHRI DHAVAL SHAH 11 PATIL & ORS. VS. ACIT (SUPRA), IN SIMILAR CIRCUMSTA NCES HAD HELD THAT THE TRANSACTION OF PURCHASE AND SALE OF SHARES OF M/S. FAST TRACK ENTERTAINMENT LTD. WAS A GENUINE TRANSACTION AND THE CLAIM OF LONG TER M CAPITAL GAIN WAS ALLOWED IN THE HANDS OF THE ASSESSEE THEREIN. IN THE TOTALITY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES AND THE CASE LAWS, WE FIND NO MERIT I N THE ORDER OF CIT(A) AND REVERSING THE SAME, WE DIRECT THE ASSESSING OFFICER TO COMPUTE THE INCOME IN THE HANDS OF THE ASSESSEE UNDER THE HEAD INCOME FROM L ONG TERM CAPITAL GAINS. THUS, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWED. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED ON THIS 31 ST DAY OF MARCH, 2015. SD/- SD/- (G.S. PANNU) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 31 ST MARCH, 2015 GCVSR COPY OF THE ORDER IS FORWARDED TO: - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-III, PUNE; 4) THE CIT-III, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE