ITO Ward-1 (1), New Delhi V. A&A Finvest (P) Ltd, New Delhi

ITA 2364/DEL/2008

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9597 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 23-09-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 20-06-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BK GUPTA
• Assessee Lawyers: ASHWANI TANEJA; DR RAKESH GUPTA
• Keywords: Reopening of assessment; Difference of opinion; Competent authority; Assessment record; Onus to prove; Reason to believe; Change of opinion
• Section: 143(3); 131; 68; 148; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A : NEW DELHI BEFORE SHRI I.P.BANSAL, JM AND SHRI R.C.SHARMA, AM ITA NO.2364/DEL/2008 ASSESSMENT YEAR : 2001-02 INCOME TAX OFFICER, WARD-1(1), NEW DELHI. VS. M/S A & A FINVEST (P) LTD., 14, SCHOOL LANE, BENGALI MARKET, NEW DELHI 110 001. PAN NO.AACCA8703G. (APPELLANT) (RESPONDENT) CROSS-OBJECTION NO.8/DEL/2009 ASSESSMENT YEAR : 2001-02 M/S A & A FINVEST (P) LTD., 14, SCHOOL LANE, BENGALI MARKET, NEW DELHI 110 001. PAN NO.AACCA8703G. VS. INCOME TAX OFFICER, WARD-1(1), NEW DELHI. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI B.K.GUPTA, SR.DR. ASSESSEE BY : DR.RAKESH GUPTA AND SHRI ASHWANI TANE JA. ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE REVENUE AND CROSS-O BJECTION BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 30.4.2008 FOR AY 2001-02, IN THE MATTER OF ORDER PASSED U/S 143(3)/147. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF SHARE B ROKING AS SUB BROKER FOR SHARES ITA-2364/D/2008& CO-8/D/2009 2 AND SECURITIES AND INVESTMENT. ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3), THEREAFTER ASSESSMENT WAS REOPENED BY ISSUE OF NOTI CE U/S 147, WHEREIN IT WAS OBSERVED THAT IN ORDER TO VERIFY THE CREDITOR DURIN G THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, A LETTER WAS SENT TO THE CO NCERNED AO, WHO HAS INFORMED VIDE ITS LETTER DATED 11.8.2004 THAT ONE SHRI RAJES H KUMAR, ALLEGED CREDITOR OF THE ASSESSEE WAS NOT AVAILABLE AT THE GIVEN ADDRESS AND THAT PAN NUMBER AND ADDRESS GIVEN BY THIS PERSON WAS DIFFERENT. ON ENQUIRY FRO M THE ADDRESSEE, IT WAS FOUND THAT SHRI RAJESH KUMAR ON THAT ADDRESS WAS DIFFEREN T PERSON. IT WAS THEREFORE OBSERVED THAT CONTENTION OF THE ASSESSEE WITH REGAR D TO ITS CLAIM OF TRANSACTION OF SHARES WITH SHRI RAJESH KUMAR AND CLAIM OF PAYMENTS TOWARDS OUTSTANDING AMOUNT AS ON 31.3.2001 WAS NOT FOUND TO BE CORRECT. ACCORDINGLY, NOTICE U/S 148 WAS ISSUED ON 28.3.2005. 3. FROM THE RECORD, WE FOUND THAT SHRI RAJESH KUMAR SOLD CERTAIN SHARES THROUGH ASSESSEE COMPANY. THE AMOUNT PAYABLE ON SA LE OF SHARES AMOUNTING TO RS.1,09,32,849/- WAS CREDITED IN ASSESSEES BOOKS A S AT THE YEAR END, AND SHOWN AS AMOUNT PAYABLE TO SHRI RAJESH KUMAR. SINCE THE INF ORMATION GIVEN BY THE CONCERNED AO OF SHRI RAJESH KUMAR WITH REGARD TO HI S ADDRESS AND PAN NUMBER WAS NOT FOUND TO BE CORRECT, THE GENUINENESS OF CRE DIT ENTRY OF RS.1.09 CRORES WAS DOUBTED BY THE AO. HOWEVER, TO EXPLAIN THE NATURE OF ITS BUSINESS, IT WAS SUBMITTED THAT ASSESSEE WAS WORKING AS A SUB BROKER AND WAS DOING TRANSACTIONS IN SHARES ON BEHALF OF VARIOUS CLIENTS. AS PER SEBI R EGULATIONS, THE ASSESSEE HAS OBTAINED APPLICATION FORM FOR CLIENT REGISTRATION I N WHICH THE REQUIRED DETAILS OF BANK ACCOUNT, PAN NUMBER ETC. WERE MENTIONED. THE ASSESSEE COMPANY HAD EXECUTED SUB BROKER CLIENT AGREEMENT WITH SHRI RAJE SH KUMAR ON 15.11.2000. FOR THE PURPOSE OF IDENTIFICATION OF THE CLIENT, THE CO MPANY OBTAINED COPY OF HIS RATION CARD. THE ASSESSEE BEING A SUB BROKER WAS DEALING IN SHARES OF VARIOUS CLIENTS THROUGH ITS MAIN BROKER IKM INVESTORS SERVICES LTD. (IKM IN SHORT). THE COPY OF REGISTRATION CERTIFICATE WITH SEBI WAS FILED BEFORE THE AO. THE AO FOUND THAT DURING THE YEAR UNDER CONSIDERATION SHRI RAJESH KUM AR SOLD 2,60,000 SHARES OF ITA-2364/D/2008& CO-8/D/2009 3 PADMINI POLYMERS IN DECEMBER 2000 ON WHICH ASSESSEE EARNED BROKERAGE OF RS.0.54 LAKHS. AFTER DEDUCTING THE BROKERAGE A NET CREDIT OF RS.1,09,36,999/- WAS GIVEN IN FAVOUR OF SHRI RAJESH KUMAR. THIS AMOUNT WAS CARRIED FORWARD AND PAID TO HIM OF VIDE THREE CHEQUES. THE CHEQUES WERE CLE ARED IN THE NORMAL COURSE OF BUSINESS ON 12 TH , 18 TH & 19 TH APRIL, 2001. IT WAS ALSO FOUND THAT SHARES OF PAD MINI POLYMERS WERE DELIVERED TO THE ASSESSEE COMPANY FOR SHRI RAJESH KUMAR FROM DEMAT ACCOUNT, WERE SOLD THROUGH THE MAIN BROKER IK M. THE ADDRESS MENTIONED IN THE D-MAT ACCOUNT IS RZ-B/5, VIJAY ENCLAVE, PALA M DABRI ROAD, NEW DELHI. THE CONCERNED AO OF RAJESH KUMAR WAS REQUESTED BY T HE AO OF ASSESSEE TO ISSUE SUMMONS AT THIS ADDRESS TO IDENTIFY SHRI RAJESH KUM AR AND TO FURTHER ASCERTAIN THE FACTS FROM THE DP ALANKRIT ASSIGNMENTS LTD. SINCE SHRI RAJESH KUMAR WAS NOT AVAILABLE AT THE ADDRESS GIVEN IN THE RECORD AND TH E PAN NUMBER WAS ALSO FOUND TO BE NOT CORRECT, THE AO TREATED THE TRANSACTION AS B OGUS AND ADDITION WAS MADE U/S 68 OF THE IT ACT. 4. BY THE IMPUGNED ORDER CIT(A) DELETED THE ADDITIO N AFTER RECORDING FOLLOWING FINDINGS:- 5.2 THEREFORE, IN THE NUTSHELL IT MAY BE SEEN THAT THE ONLY BASIS FOR THE AO TO TREAT THE TRANSACTION AS NOT GENUINE IS THAT THE CLIENT IS NOT TRACEABLE. ON THE OTHER HAND THE CLAIM OF THE APPELLANT IS THAT MERELY BECAUSE THE CLIENT IS NOT TRACEABLE THE TRAN SACTION COULD NOT BE SAID TO BE NON-GENUINE, PARTICULARLY IN VIEW OF NATURE OF BUSINESS OF THE APPELLANT COMPANY. THE APPELLANTS INTEREST IN THE TRANSACTION WAS MERELY OF BROKERAGE AND THE TRANSACTION PER-SE WAS NOT THAT OF APPELLANT COMPANY. IT WAS CARRIED OUT ON BEHALF OF A CLIENT SIMILAR TO NUMEROUS OTHER TRANSACTIONS ON BEHALF OF OTHER CLIE NTS. CONSIDERING ALL FACTS AND CIRCUMSTANCES I AGREE WITH THE APPELL ANT THAT THE TRANSACTION OF SALE OF SHARE BY APPELLANT COMPANY O N BEHALF OF SH. RAJESH KUMAR CANNOT BE SAID TO BE THE TRANSACTION O F APPELLANT COMPANY. IT IS THE NORMAL TRANSACTION ON BEHALF OF A CLIENT. MERELY BECAUSE A CLIENT IS NOT TRACEABLE NO LIABILITY CAN BE FASTENED ON THE APPELLANT COMPANY. THE CREDIT APPEARING IN THE NAM E OF SH. RAJESH KUMAR IN THE BOOKS OF THE APPELLANT IS NOT THE KIND OF CREDIT CONTEMPLATED U/S 68 OF THE IT ACT. THEREFORE, IT C ANNOT BE ITA-2364/D/2008& CO-8/D/2009 4 APPELLANTS ONUS TO PROVE THE IDENTITY & CREDIT WOR THINESS OF THE PARTY AND GENUINENESS OF THE TRANSACTIONS AS IS DON E IN THOSE CASES WHERE SOME FUNDS ARE OBTAINED FOR ITS OWN USE BY AN ASSESSEE. IN THE CASE OF A BROKER OR A COMMISSION AGENT THE ONUS IS DISCHARGED ONCE SOME EVIDENCE OR PROOF (AS MAY BE REQUIRED TO BE MA INTAINED BY IT AS PER THE RULES AND REGULATIONS GOVERNING ITS BUSINES S) ABOUT THE IDENTITY OF THE CLIENT IS PROVIDED. THEREFORE, SIN CE IN THIS CASE THE APPELLANT HAS PROVIDED ENOUGH PROOF AND DOCUMENTS A S WERE REQUIRED TO BE KEPT AS PER SEBI REGULATIONS ITS ONU S WAS DISCHARGED. 5.3 THE AO DID NOT HAVE ANY BASIS TO CONCLUDE THAT THE SHARES WERE OWNED BY THE APPELLANT COMPANY AND THEREFORE T HE SALE PROCEEDS OF THE SAME WOULD BE ADDED TO ITS INCOME. WHEN IT IS ALLEGED THAT WHAT IS APPARENT WAS NOT REAL, THE ONU S TO PROVE SUCH ALLEGATION IS ON THE PERSON MAKING ALLEGATION. THE AO DOES NOT HAVE ANY EVIDENCE EXCEPT THE FACT THAT SH. RAJESH KUMAR WHO WAS THE CLIENT OF THE APPELLANT COMPANY AND WAS PAID THE SA LE PROCEEDS OF SHARES COULD NOT BE LOCATED. THIS CANNOT BE THE BA SIS TO ALLEGE THAT THE APPELLANT COMPANY SOLD ITS OWN SHARES IN THE NA ME OF SH. RAJESH KUMAR SINCE THE TRANSACTION WAS CARRIED OUT IN THE NORMAL COURSE OF BUSINESS AS ALL THE RELEVANT DOCUMENTS SUGGESTED. TO GIVE AN ADVERSE FINDING ONE HAS TO HAVE SUFFICIENT EVIDENCE BEYOND DOUBT. THE AO HOWEVER, DID NOT HAVE ANY EVIDENCE TO MAKE T HAT ALLEGATION. THE REPEATED ASSERTION BY THE AO THAT ENTIRE BURDEN WAS ON THE APPELLANT IS HIGHLY MISPLACED. THERE CAN NOT BE AN Y EVIDENCE TO PROVE A NEGATIVE FACT THAT THE SHARES IN THE NAME O F SH. RAJESH KUMAR WERE NOT OWNED BY APPELLANT COMPANY. NEVERTH ELESS THE APPELLANT DID PROVE BY PROVIDING DMAT A/C OF SH. RA JESH KUMAR AND ALSO BY ASCERTAINING FROM THE COMPANY PADMINI POLYM ERS LTD. THAT THE SHARES WERE INFACT OWNED BY SH. RAJESH KUMAR. IT WAS ALSO TO BE NOTED THAT IN THE DP A/C AS WELL AS BANK A/C OF RAJ ESH KUMAR, THERE WERE MANY OTHER TRANSACTIONS NOT CONNECTED WITH THE APPELLANT COMPANY. IF THE ALLEGATION OF THE AO THAT RAJESH K UMAR WAS BENAMI OF APPELLANT COMPANY IS PRESUMED TO BE CORRE CT FOR THE SAKE OF ARGUMENT, ALL THE TRANSACTIONS IN THE DMAT & BAN K A/C OF RAJESH KUMAR HAVE TO BE HELD TO BE BELONGING TO APPELLANT COMPANY. HOWEVER THERE IS NO BASIS TO SUCH WILD ALLEGATION. IT IS ALSO CORRECT THAT THE BANK AS WELL AS DP IS OBLIGED TO ASCERTAIN THE IDENTITY AND ADDRESS OF THEIR CLIENT WHICH THEY MUST HAVE DONE. AS FOR THE DOUBTS OF THE AO IN NOT BEING ABLE TO TRACE RAJESH KUMAR, THERE CAN BE MANY POSSIBILITIES. SH. RAJESH KUMAR MIGHT HAVE IN VESTED HIS OWN UNACCOUNTED MONEY IN THE SHARES IN HIS OWN NAME. H E MIGHT HAVE PROVIDED INCORRECT DETAILS DELIBERATELY TO THE APPE LLANT COMPANY MERELY TO BE ABLE TO SELL THE SHARES IN THE MARKET. SIMILARLY HE MAY ITA-2364/D/2008& CO-8/D/2009 5 HAVE GIVEN BOGUS ADDRESS TO BANK & DP OR MUST HAVE CHANGED THE ADDRESS AFTER CARRYING OUT THE TRANSACTIONS. WHATE VER BE THE CASE, THE CREDIT IN THE NAME OF SH. RAJESH KUMAR CANNOT BE TR EATED AS APPELLANTS INCOME. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LIGHT OF EXPLANATION SUBMITTED BY THE APPELLANT COMPANY DULY SUPPORTED BY ALL RELEVANT DOCUMENTS, THE ADDITION O F RS.1,09,32,849 IS DELETED. 5. SO FAR AS ASSESSEES GROUND REGARDING VALIDITY O F REOPENING IS CONCERNED, THE CIT(A) HELD THAT ASSESSMENT WAS VALIDLY REOPENE D. THE CIT(A) HAD EXAMINED ASSESSMENT RECORDS WHEREIN IT WAS FOUND THAT WHILE COMPLETING ORIGINAL ASSESSMENT THE AO HAD ISSUED LETTERS TO DIFFERENT O FFICERS FOR VERIFICATION OF THE GENUINENESS OF THE CREDITORS OF THE ASSESSEE COMPAN Y. IN RESPECT OF ONE SH. RAJESH KUMAR IN WHOSE NAME A SUM OF RS.1.09 CRORES WAS OUT STANDING AS ON 31.3.2001, THE ITO, WARD-34(1) WHO HAD JURISDICTION OVER SH. R AJESH KUMAR WAS REQUESTED TO VERIFY THE CORRECTNESS OF THE SAME. ON VERIFICA TION IT WAS PRIMA-FACIE ESTABLISHED THAT SH. RAJESH KUMAR HAD GIVEN INCORRE CT PAN NUMBER WHICH BELONGED TO SOME OTHER RAJESH KUMAR. WHEREABOUTS O F THE REAL CREDITOR OF THE ASSESSEE COMPANY WERE NOT TRACEABLE. ACCORDINGLY, THE CIT(A) HELD THAT IN VIEW OF THIS SPECIFIC INFORMATION, THE AO HAS RIGHTLY FO RMED THE BELIEF THAT THE CREDIT STANDING IN THE NAME OF SH. RAJESH KUMAR WAS NOT GE NUINE AND THE INCOME OF THE ASSESSEE COMPANY HAD ESCAPED ASSESSMENT. 6. AGGRIEVED BY THE ORDER OF CIT(A), BOTH ASSESSEE AND REVENUE ARE IN APPEAL BEFORE US. THE REVENUE IS AGGRIEVED FOR CIT(A)S A CTION FOR DELETING THE ADDITION MADE U/S 68, WHEREAS ASSESSEE IS AGGRIEVED FOR HOLD ING THE REOPENING OF ASSESSMENT AS VALID. 7. IT WAS ARGUED BY LEARNED AR SHRI RAKESH GUPTA TH AT THERE IS NO BELIEF AS TO THE ESCAPEMENT OF ANY INCOME AND THAT THE REASONS R ECORDED BY THE AO TO THE EFFECT THAT TRANSACTION COULD NOT BE VERIFIED IS NO T A VALID REASON FOR REOPENING. HE CONTENDED THAT REOPENING WAS MERELY FOR MAKING ROVI NG ENQUIRIES WHICH IS INVALID ITA-2364/D/2008& CO-8/D/2009 6 IN THE EYE OF LAW. FOR THIS PURPOSE, RELIANCE WAS PLACED ON THE DECISION OF DELHI BENCH IN THE CASE OF STAR FERRO ALLOYS (P) LTD. 9 4 TTJ 28. HE FURTHER CONTENDED THAT ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) A ND REOPENING WAS MERELY A CHANGE OF OPINION. 8. ON THE OTHER HAND, LEARNED DR SHRI B.K.GUPTA CON TENDED THAT THERE WAS SUFFICIENT REASON FOR REOPENING AND AFTER RECORDING THE SAME AND GETTING PROPER APPROVAL FROM THE COMPETENT AUTHORITY, THE AO HAS I SSUED NOTICE U/S 148. HE CONTENDED THAT PARTICULARS FURNISHED BY THE ASSESSE E WITH REGARD TO SH. RAJESH KUMAR WAS NOT CORRECT, HE WAS NOT FOUND AT THE ADDR ESS GIVEN BY THE ASSESSEE NOR THE PAN NUMBER WAS FOUND TO BE CORRECT, WHICH AMOUN TS TO SUFFICIENT MATERIAL WITH THE AO FOR FORMING A BELIEF THAT THERE IS ESCA PEMENT OF INCOME. 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFU LLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND THE REASONS RECORDED B Y THE AO FOR REOPENING THE ASSESSMENT. FROM THE RECORD, WE FOUND THAT IN ORDE R TO VERIFY THE GENUINENESS OF THE CREDITOR, IN THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS THE AO HAS ISSUED LETTER TO THE CONCERNED AO IN WHOSE JURISDICTION SH RI RAJESH KUMAR, CREDITOR LIES. THE CONCERNED AO OF WARD 34(1) VIDE ITS LETTER DATE D 9.8.2004 REPLIED THAT SH. RAJESH KUMAR WAS NOT TRACEABLE AT THE GIVEN ADDRESS . AS PER THE PAN NUMBER GIVEN, THE ADDRESS OF SH. RAJESH KUMAR WAS B-24, GA NGA VIHAR, GOPAL PURI, DELHI-94 AND NOT A-636, AMAR COLONY, GOPAL PURI, EA ST DELHI. SH. RAJESH KUMAR, S/O SH. RAJPAL SINGH WAS A CIVIL CONTRACTOR AND DID NOT HAVE ANY BANK ACCOUNT WITH KARNATAKA BANK. HE WAS ASSESSED WITH ITO, WARD 38(2) AND DID NOT HAVE ANY DEALINGS WITH A & A FINVEST PVT.LTD. THE INFORMATION COLLECTED FROM KARNATAKA BANK IN RESPECT OF BANK ACCOUNT OF SH. RA JESH KUMAR DID NOT LEAD TO CORRECT ADDRESS BECAUSE EVEN THE ADDRESS OF INTRODU CER WAS INCORRECT. IT IS CRYSTAL CLEAR FROM THE LETTER OF THE AO DATED 9.8.2004 THAT CREDITOR OF THE ASSESSEE COMPANY HAD GIVEN WRONG INFORMATION TO THE ASSESSEE AND IT WAS PASSED ON BY THE ASSESSEE TO HIS AO. NEITHER THE ADDRESS OF SH. RAJ ESH KUMAR WAS CORRECT NOR THE ITA-2364/D/2008& CO-8/D/2009 7 PAN NUMBER GIVEN BY HIM. THE REASONS RECORDED BY T HE AO FOR REOPENING THE ASSESSMENT AND ISSUE OF NOTICE U/S 148 CLEARLY MENT IONS THAT INFORMATION WAS RECEIVED FROM THE CONCERNED ITO OF CREDITOR SHRI RA JESH KUMAR, WHO WAS NOT TRACEABLE AT THE ADDRESS AND THE PAN NUMBER GIVEN B Y HIM WAS ALSO NOT CORRECT, THUS THE TRANSACTION WITH REGARD TO CREDIT ENTRY OF RS.1,09,32,849/- COULD NOT BE VERIFIED. ON THE BASIS OF THIS REASON, AO WAS SATI SFIED THAT THERE IS ESCAPEMENT OF INCOME. AT THE TIME OF ISSUE OF NOTICE U/S 148, TH E AO IS NOT REQUIRED TO CONCLUSIVELY ESTABLISH THAT THERE IS ESCAPEMENT OF INCOME, MERE BONA-FIDE REASON TO BELIEVE THAT THERE IS ESCAPEMENT OF INCOME IS SU FFICIENT FOR ISSUE OF NOTICE U/S 148. HON'BLE SUPREME COURT IN THE CASE OF RAJESH J HAVERI STOCK BROKERS (P) LTD. 291 ITR 500 OBSERVED THAT THE EXPRESSION REASON TO BELIEVE IN SECTION 148 WOULD MEAN CAUSE OR JUSTIFICATION. IF THE AO HAS C AUSED OR JUSTIFIED TO KNOW OR SUPPOSE THAT INCOME HAD ESCAPED ASSESSMENT, HE CAN BE SAID TO HAVE REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. THE EX PRESSION CANNOT READ TO MEAN THAT THE AO SHOULD HAVE FINALLY ASCERTAINED THE FAC T BY LEGAL EVIDENCE OR CONCLUSION. WHAT IS REQUIRED IS REASON TO BELIEVE BUT NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME. AT THE STAGE OF ISSUE OF NOT ICE, THE ONLY QUESTION WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A REASONED PER SON SHOULD HAVE FORMED THE REQUISITE BELIEF IS SUFFICIENT. WHETHER MATERIAL W OULD CONCLUSIVELY THROUGH ESCAPEMENT OF INCOME IS NOT CONCERNED AT THE STAGE OF ISSUE OF NOTICE. THIS IS SO BECAUSE THE FORMATION OF BELIEF IS WITHIN THE REALM OF PERSONAL SATISFACTION OF THE AO. IN THE INSTANT CASE, ON THE BASIS OF REASON SO RECORDED, WE FOUND THAT THERE WAS SUFFICIENT MATERIAL ON THE BASIS OF WHICH A REA SONED PERSON COULD REASONABLY FORM THE REQUISITE BELIEF THAT THERE WAS ESCAPEMENT OF INCOME. AFTER GOING THROUGH THE REASONS RECORDED FOR REOPENING, WE ARE SATISFIED THAT CIT(A) WAS JUSTIFIED IN HOLDING THE REOPENING OF ASSESSMENT AS VALID. 10. IN THE RESULT, THE CROSS OBJECTION OF THE ASSES SEE IS BEING DISMISSED. ITA-2364/D/2008& CO-8/D/2009 8 11. WITH REGARD TO THE MERIT OF THE ADDITION, WE FO UND THAT ASSESSEE WAS WORKING AS SUB BROKER, BEING TRANSACTION IN SHARES AND SECURITIES ON BEHALF OF VARIOUS CLIENTS. AS PER SEBI REGULATIONS, THE ASSE SSEE COMPANY HAD OBTAINED APPLICATION FORM FOR ITS CLIENTS REGISTRATION FROM SHRI RAJESH KUMAR, WHICH DULY INCORPORATED THE REQUIRED DETAILS OF THE BANK ACCOU NT, PAN NUMBER ETC. THE ASSESSEE BEING A SUB BROKER THROUGH ITS MAIN BROKER IKM, SOLD THE SHARES OF SHRI RAJESH KUMAR. THE SHARES WERE BELONGING TO PADMINI POLYMERS. WHEN THE SHARES WERE SOLD BY THE ASSESSEE, AMOUNT WAS RECEIV ED ON BEHALF OF ITS CLIENT SHRI RAJESH KUMAR WHICH WAS CREDITED IN ITS BOOKS OF ACC OUNT IN THE NAME OF SHRI RAJESH KUMAR. THE TRANSACTION OF SALE WAS IN THE M ONTH OF DECEMBER 2000. AFTER RECEIPT OF AMOUNT, THE ASSESSEE PAID THE SAME TO SHRI RAJESH KUMAR THROUGH ACCOUNT PAYEE CHEQUE WHICH WAS CLEARED IN THE NORMA L COURSE OF BUSINESS ON 12 TH , 18 TH & 19 TH APRIL, 2001. TO SUBSTANTIATE THE RECEIPT OF PAYME NT ON BEHALF OF SHRI RAJESH KUMAR AND THE PAYMENT MADE TO SHRI RAJESH KU MAR, THE ASSESSEE HAD FILED COPY OF BANK STATEMENT ETC. THESE CHEQUES WERE TRA NSACTED BY KARNATAKA BANK, CONNAUGHT PLACE BRANCH OF SHRI RAJESH KUMAR. THE C OPIES OF DISCHARGED CHEQUES OBTAINED FROM STANDARD CHARTERED GRINDLAYS BANK WER E SUBMITTED BEFORE THE AO. THE SHARES SO SOLD WERE DELIVERED BY SHRI RAJESH KU MAR FROM HIS DEMAT ACCOUNT. COPY OF DEMAT ACCOUNT WITH DEPOSITORY PARTICIPANT M /S ALANKRIT ASSIGNMENTS LTD. WAS ALSO FILED BEFORE THE AO. THE TRANSACTION WHIC H RESULTED IN THE CREDIT IN THE NAME OF SHRI RAJESH KUMAR WAS DONE IN THE NORMAL CO URSE OF BUSINESS, ONLY OBJECTION AGAINST THE TRANSACTION WAS THAT THE ADDR ESS AND PAN NUMBER GIVEN BY SHRI RAJESH KUMAR WAS NOT CORRECT. THE CREDIT SO G IVEN IN THE ACCOUNT OF SHRI RAJESH KUMAR CANNOT BE TREATED AS LOANS OR ADVANCES OBTAINED BY THE ASSESSEE NOR IT WAS AKIN TO THE CREDIT WHICH IS COMPLETED U/S 16 8 OF THE IT ACT. THE AMOUNT SO RECEIVED WAS ON BEHALF OF SHRI RAJESH KUMAR ON ACCO UNT OF SALE OF SHARES OWNED BY SHRI RAJESH KUMAR. M/S PADMINI POLYMERS WHOSE S HARES WERE SO TRANSACTED HAD ALSO CONFIRMED THAT THESE SHARES WERE REGISTERE D IN THE NAME OF SHRI RAJESH KUMAR. THROUGH THIS TRANSACTION, NO AMOUNT WAS REC EIVED BY THE ASSESSEE FROM SHRI RAJESH KUMAR. IT WAS THE CHEQUE RECEIVED THRO UGH THE MAIN BROKER ON ITA-2364/D/2008& CO-8/D/2009 9 ACCOUNT OF SHARES OF SHRI RAJESH KUMAR SOLD THROUGH THE ASSESSEE. AS THE ASSESSEE WAS THE SUB BROKER DULY RECOGNIZED BY STOCK EXCHANG E, SUCH TYPE OF TRANSACTION CAN ONLY BE ENTERED INTO THROUGH THE APPROVED SUB B ROKERS AND THE ASSESSEE WAS ONE OF THEM. THE AMOUNT SO RECEIVED ON ACCOUNT OF SUCH SALE OF SHARES ALSO DID NOT REMAIN WITH THE ASSESSEE AND THE SAME WAS PAID BACK TO SHRI RAJESH KUMAR THROUGH ACCOUNT PAYEE CHEQUE. MERELY BECAUSE PAYME NT WAS MADE AFTER THREE MONTHS DUE TO THE REASON THAT PAYMENT IN RESPECT OF SOME OF THE SHARES WERE NOT RECEIVED BY THE ASSESSEE, CANNOT BE MADE A GROUND F OR TREATING THE SAME AS MONEY RECEIVED BY THE ASSESSEE ON ACCOUNT OF LOAN OR ADVA NCE WITHIN THE MEANING OF SECTION 68 OF THE IT ACT. IN THIS CASE, NO FUNDS W ERE RECEIVED BY THE ASSESSEE AND THE CREDIT AROSE BY WAY OF SALE PROCEEDS OF SHARES WHICH WERE OBTAINED FROM STOCK EXCHANGE THROUGH THE MAIN BROKER IKM. NO FAULT WAS FOUND BY THE AO WITH REGARD TO SALE OF SHARES, RECEIPT OF CHEQUE FROM ST OCK EXCHANGE THROUGH MAIN BROKER, PAYMENT OF CHEQUE, PAYMENT OF THE SAID AMOU NT TO SHRI RAJESH KUMAR THROUGH CHEQUE AFTER DEDUCTING ITS COMMISSION THERE FROM. THE AMOUNT SO RECEIVED WAS ALSO NOT IN THE NATURE OF LOANS OR ADV ANCES GIVEN BY SHRI RAJESH KUMAR TO THE ASSESSEE. ALL THE DOCUMENTS LIKE REGI STRATION CERTIFICATE WITH SEBI, AGREEMENT WITH MAIN BROKER IKM, CLIENT REGISTRATION FORM OF SHRI RAJESH KUMAR ALONGWITH SUB BROKER CLIENT AGREEMENT, RATION CARD ETC. WERE FILED BEFORE THE AO. COPY OF ACCOUNT OF COMPANY IN STANDARD CHARTERED GR INDLAYS BANK SHOWING THE CLEARING OF CHEQUES GIVEN BY THE ASSESSEE AS WELL A S COPY OF DISCHARGED CHEQUES OBTAINED FROM THE BANK WAS ALSO SUBMITTED BEFORE TH E AO. COPY OF DEMAT ACCOUNT OF SHRI RAJESH KUMAR IN THE DP ALANKRIT ASSIGNMENTS LTD. WAS ALSO SUBMITTED. THUS, THE TRANSACTION SO ENTERED BY THE ASSESSEE ON BEHALF OF ITS CLIENTS AND THE AMOUNT RECEIVED ON MATERIALIZATION OF TRANSACTION O F SALE OF SHARES ON BEHALF OF CLIENT AND ITS REPAYMENT CANNOT BE EQUATED WITH THE TRANSACTION OF LOAN OR ADVANCE BY SHRI RAJESH KUMAR TO THE ASSESSEE. THE ASSESSEE BEING A SUB BROKER REGISTERED WITH SEBI, WAS DOING THE BUSINESS OF SHARE TRANSACT ION ON BEHALF OF NUMBER OF CLIENTS, SHRI RAJESH KUMAR WAS ONE OF THEM. IN THE EARLIER YEARS ALSO, SIMILAR TRANSACTION WAS ENTERED BY THE ASSESSEE ON BEHALF O F SHRI RAJESH KUMAR AND THE ITA-2364/D/2008& CO-8/D/2009 10 AO HAS ONLY ALLEGED THE BALANCE STANDING IN HIS ACC OUNT AS ON THE LAST DATE OF THE YEAR. THERE IS NO DISPUTE TO THE FACT THAT THE SAL E PROCEEDS OF SHARES OF SHRI RAJESH KUMAR IN THE ASSESSEES BOOKS WERE LATER ON COLLECT ED BY HIM THROUGH ACCOUNT PAYEE CHEQUES, COPY OF WHICH WERE FILED BEFORE THE AO. EVEN THE ASSESSEE VIDE LETTER DATED 13.2.2006 FILED WITH THE AO ASKING HIM TO ISSUE SUMMON U/S 131 TO SHRI RAJESH KUMAR AND ALSO TO DP ALANKRIT ASSIGNMEN TS LTD. TO ASCERTAIN THE FACTS AS TO THE IDENTITY, BUT THE SAME REQUEST WAS NOT CO MPLIED WITH AND WITHOUT WHICH ADVERSE INFERENCE WAS TAKEN BY THE AO. FURTHERMORE , THE ASSESSEE COMPANY WAS NOT THE BENEFICIARY OF THE CREDIT BALANCE OF SHRI R AJESH KUMAR IN ANY MANNER. THE AMOUNT SO RECEIVED ON ACCOUNT OF SALE OF SHARES ON BEHALF OF SHRI RAJESH KUMAR IS REQUIRED TO BE APPRECIATED IN THE LIGHT OF SPECIFIC NATURE OF ASSESSEES BUSINESS, BEING A SUB BROKER. IN THE CAPACITY AS A BROKER, T HE ASSESSEE WAS ONLY EARNING COMMISSION ON THE TRANSACTION. THE TRANSACTION WHI CH RESULTED IN THE CREDIT IN THE NAME OF SHRI RAJESH KUMAR WAS NOT THE TRANSACTION O F THE ASSESSEE COMPANY AND THE INTEREST OF THE ASSESSEE COMPANY WAS CONFINED O NLY TO THE BROKERAGE OF RS.54,000/- IN THE WHOLE TRANSACTION. IT IS NOT TH E CASE OF THE AO THAT AMOUNT RECEIVED THROUGH BANKING CHANNEL WAS BOGUS OR THE C REDIT GIVEN IN ACCOUNT OF ITS CLIENT SHRI RAJESH KUMAR WAS BOGUS NOR IT IS THE CA SE OF THE AO THAT AMOUNT SO RECEIVED WAS ENJOYED BY THE ASSESSEE AS LOANS, NEIT HER OWNERSHIP OF THE SHARES BY SHRI RAJESH KUMAR WAS FOUND TO BE WRONG NOR THE TRA NSACTION OF SALE AND RECEIPT OF PAYMENT AS A SALE CONSIDERATION OF WHICH WAS FOU ND TO BE FALSE. KEEPING IN VIEW THE PECULIAR NATURE OF ASSESSEES BUSINESS, ME RELY BECAUSE THE CLIENTS ON WHOSE BEHALF ASSESSEE HAS ENTERED INTO SOME TRANSAC TION OF SALE OF SHARES AND ON WHICH IT HAS EARNED COMMISSION INCOME, THE AMOUNT S O RECEIVED AND CREDITED IN THE ACCOUNT OF SHRI RAJESH KUMAR CANNOT BE TREATED AS ASSESSEES MONEY FOR MAKING ANY ADDITION U/S 68 OF THE IT ACT. ASSESSEE S INTEREST IN THE BUSINESS WAS MERELY CONFINED TO THE BROKERAGE INCOME AND THE TRA NSACTION OF SALE AS A WHOLE PER-SE WAS NOT THAT OF THE ASSESSEE COMPANY. KEEPI NG IN VIEW ALL THE FACTS AND CIRCUMSTANCES AND THE DOCUMENTS FURNISHED TO SUBSTA NTIATE THE SALE OF SHARES, ITA-2364/D/2008& CO-8/D/2009 11 RECEIPT OF MONEY AND PAYMENT OF CHEQUES TO THE CLIE NTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELETING THE A DDITION MADE BY THE AO. 12. IN THE RESULT, BOTH THE APPEAL OF THE REVENUE A ND THE CROSS-OBJECTION OF THE ASSESSEE ARE DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER, 2009. SD/- SD/- (I.P.BANSAL) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 30.09.2009. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR