ASST CIT 25(2), MUMBAI V. PRATIKSHA SHAH, MUMBAI

ITA 3479/MUM/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9583 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 19-04-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 15-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H N SINGH
• Assessee Lawyers: SASHI TULSIAN
• Keywords: Unexplained cash credit; Unexplained investment; Unexplained expenditure; Gift; Business income; Income from undisclosed sources; Search and seizure; Salary income; Loose papers; Share purchase agreement; Source of fund; Question of law; Cost of acquisition; Speculation loss; Difference of opinion; Deemed dividend; Validity of assessment; Accommodation entries; Block assessment; Capital receipt; Onus to prove; Penny stocks; Change of opinion
• Section: 143(3); 54F; 153A; 14A; 260A; 133(6); 131; 68; 263; 132; 10

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI , . . , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NOS.1422 & 1423/MUM/2010 ASSESSMENT YEARS: 2005-06 AND 2006-07 SMT. PRATIKSHA SHAH, A-602, EKTA MILAN, DEVKI NAGAR, EKSAR VILLAGE, BORIVALI (W), MUMBAI / VS. ACIT, CENTRAL CIRLE-11, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400020 ( !' # /ASSESSEE) ( $ / REVENUE) P.A. NO.AAFPM4838D ITA NO.4655/MUM/2012 ASSESSMENT YEAR: 2005-06 ACIT-25(2), C-11, PRATYAKSHAKAR BHAVAN, ROAD NO.108, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI-400051 / VS. SMT. PRATIKSHA SHAH, A-602, EKTA MILAN, DEVKI NAGAR, EKSAR VILLAGE, BORIVALI (W), MUMBAI ( $ / REVENUE) ( !' # /ASSESSEE) P.A. NO. AAFPM4838D ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 2 ITA NO.3479/MUM/2014 ASSESSMENT YEAR: 2006-07 ACIT-25(2), C-11, PRATYAKSHAKAR BHAVAN, ROAD NO.108, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI-400051 / VS. SMT. PRATIKSHA SHAH, A-602, EKTA MILAN, DEVKI NAGAR, EKSAR VILLAGE, BORIVALI (W), MUMBAI ( $ / REVENUE) ( !' # /ASSESSEE) P.A. NO. AAFPM4838D $ / REVENUE BY SHRI H.N.SINGH CIT-DR & SHRI RAJAT MITTAL -DR !' # / ASSESSEE BY SHRI SASHI TULSIAN % $& ' # ( / DATE OF HEARING : 13/09/2017 ' # ( / DATE OF PRONOUNCEMENT 03/10/2017 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THIS BUNCH OF FOUR APPEALS OUT OF WHICH THE ASSESSE E IS AGGRIEVED FOR ASSESSMENT YEAR 2005-06 AND 2006-0 7, WHEREAS, IN THE APPEALS OF THE REVENUE DELETING THE PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREINAF TER THE ACT) HAS BEEN CHALLENGED. FIRST, WE SHALL TAKE UP T HE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2005-06 (ITA NO.1422/MUM/2010), WHEREIN, THE ASSESSEE HAS FILED APPLICATION UNDER RULE 11 OF THE APPELLATE TRIBUNAL RULES ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 3 1963 BY PLACING RELIANCE UPON THE DECISION FROM HON 'BLE APEX COURT IN THE CASE OF NTPC LTD. VS CIT 229 ITR 383 (SC), WHICH WAS FOLLOWED BY SPECIAL BENCH OF THE TR IBUNAL IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. VS D CIT (ITA NOS.5018 TO 5022 AND 5059/MUM/2010, CHALLENGING THE CONFIRMATION OF ADDITION OF ` 69,07,803/- MADE BY ASSESSMENT U/S 153A OF THE ACT ON THE GROUND THAT N O INCRIMINATING MATERIAL WAS FOUND OR SEIZED DURING T HE COURSE OF SEARCH REFLECTING UNDISCLOSED INCOME. IT WAS ALSO PLEADED THAT NO NOTICE U/S 143(2) OF THE ACT WAS EV ER SERVED UPON/GIVEN TO THE ASSESSEE WITHIN THE STIPUL ATED PERIOD. THE BENCH ASKED THE LD. DR WHETHER ANY NOT ICE U/S 143(2) OF THE ACT WAS GIVEN TO THE ASSESSEE. T HE LD. DR AFTER GOING THROUGH THE RECORD FAIRLY ADMITTED T HAT NO NOTICE U/S 143(2) WAS GIVEN TO THE ASSESSEE, AS IS APPARENT FROM THE ASSESSMENT ORDER. CONSIDERING THE DECISION OF THE SPECIAL BENCH (SUPRA) AND THE DECISION IN THE CASE OF NTPC LTD.(SUPRA) FROM HON'BLE APEX COURT, WE ADMIT THE L EGAL GROUND RAISED BY THE ASSESSEE. ASSESSEE HAS ALSO FI LED WRITTEN SUBMISSIONS, COPY GIVEN TO THE LD. DR AND S UCH SUBMISSIONS ARE KEPT ON RECORD. ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 4 2. THE ASSESSEE, BEFORE US, HAS STRONGLY CONTENDED THAT NO NOTICE U/S 143(2) OF THE ACT WAS EVER SERVE D UPON THE ASSESSEE. THIS FACTUAL MATRIX WAS FAIRLY ACCEPT ED BY THE LD. DR, THEREFORE, IN THE LIGHT OF THIS ADMISSION, WE SHALL EXAMINE THE LEGALITY OF ASSESSMENT AND CONSEQUENT ADDITION U/S 153A OF THE ACT. THE FACTS, IN BRIEF, ARE THAT A SEARCH AND SEIZURE OPERATION U/S 132(1) OF THE ACT WAS CARRIED OUT AT THE RESIDENTIAL PREMISES OF THE ASSE SSEE WHICH LEAD TO SEIZURE OF JEWELLERY ` 9,27,000/-, 18/01/2007, FROM THE LOCKER AND BUNDLES OF LOOSE PA PERS MARKED AS ANNEXURE-A1, A2 AND A3 CONTAINING THE D ETAILS REGARDING PERSONAL ACTIVITIES WERE SEIZED. THE NOTI NG ON THE LOOSE PAPERS HAD NO BEARING ON BUSINESS TRANSACTION OF THE ASSESSEE IN PURCHASE AND SALE OF THE SHARES. EVEN IN THE ASSESSMENT ORDER, THE LD. ASSESSING OFFICER DOES NO T MAKE ANY REFERENCE TO ANY INCRIMINATING MATERIAL OR EVID ENCE FOUND DURING THE COURSE OF SEARCH IN RELATION TO AD DITION SO MADE. THE LD. ASSESSING OFFICER DURING PROCEEDINGS U/S 132 MADE ENQUIRIES ABOUT PURCHASE AND SALE OF SHARE S OF ROBINSON IMPEX INDIA LTD. (NOW KNOWN AS ROBINSON WO RLD WIDE TRADE LTD.). THESE SHARES TRANSACTIONS WERE M ADE ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 5 THROUGH TWO BROKERS NAMELY M/S DPS SHARES AND SECURITIES PVT. LTD. AND M/S PRUTHVI BROKERS & SHAR ES HOLDING PVT. LTD. THE PURCHASE TRANSACTION WERE D ONE THROUGH M/S DPS SHARES AND SECURITY PVT. LTD. AND T HE SERVICES OF M/S PRUTHVI BROKERS & SHARES HOLDING PV T. LTD. UTILIZED FOR THE SALE OF SHARES. THE LD. ASSESSING OFFICER RECORDED THE STATEMENT OF ONE OF THE DIRECTOR OF DP S SHARES AND SECURITIES PVT. LTD. TO THE EFFECT THAT THESE T RANSACTIONS WERE NOT PART OF THE OFFICIAL ACCOUNT AND ONLY ACCOMMODATION ENTRIES WERE PROVIDED. ON THE BASIS O F THIS STATEMENT, THE LD. ASSESSING OFFICER WAS OF THE VIE W THAT THE ASSESSEE OBTAINED ARTIFICIAL CAPITAL GAINS BY MANIPULATING SHARE TRANSACTIONS. HOWEVER, THE DOCUMENTS/ PAPERS FOUND AND SEIZED DURING THE COURS E OF SEARCH DID NOT CORROBORATE THE CONCLUSION ARRIVED A T BY THE OFFICERS THAT THE TRANSACTION IS SHARES OF M/S ROBI NSON IMPEX INDIA LTD. WERE NOT GENUINE. HOWEVER, THE LD. ASSESSING OFFICER MADE THE ADDITION AND THE FIRST A PPELLATE AUTHORITY CONFIRMED THE SAME. 2.1. SO FAR AS, THE ISSUE OF LEGALITY AND CONSEQUE NT ADDITION U/S 153A OF THE ACT IS CONCERNED, WE NOTE THAT THE ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 6 ASSESSEE FILED ITS RETURN OF INCOME U/S 139(1) OF T HE ACT ON 12/08/2005. THE DEPARTMENT, IN TERMS OF SECTION 143 (2) OF THE ACT HAS AN OPTION TO PEAK UP THE PROCEEDING BY ISSUANCE OF NOTICE. HOWEVER, NO SUCH NOTICE WAS IS SUED BY THE LD. ASSESSING OFFICER. AT THE TIME OF SEARCH O N 18/01/2007, THE PROCEEDINGS FOR THE IMPUGNED ASSESS MENT YEAR HAD BECOME FINAL AS THE PERIOD PRESCRIBED FOR ISSUANCE OF NOTICE U/S 143(2) HAD ALREADY EXPIRED. THE RELE VANT EXTRACT OF THE PROVISION OF SECTION 153A OF THE ACT IS REPRODUCED HEREUNDER FOR READY REFERENCE AND ANALYS IS:- '153A. ASSESSMENT IN CASE OF SEARCH OR REQUISITION. (1) NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 1 39, SECTION 147, SECTION 148, SECTION 149, SECTION 151 AND SECTION 153, IN THE CASE OF A PERSON WHERE A SEARCH IS INITIATED UNDER SECTION 132 OR BOOKS OF ACCOUNT, OT HER DOCUMENTS OR ANY ASSETS ARE REQUISITIONED UNDER SEC TION 132A AFTER THE 31ST DAY OF MAY, 2003, THE ASSESSING OFFICER SHALL (A) ISSUE NOTICE TO SUCH PERSON REQUIRING HIM TO FURNIS H WITHIN SUCH PERIOD, AS MAY BE SPECIFIED IN THE NOTI CE, THE RETURN OF INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS ; (B) ASSESS OR REASSESS THE TOTAL INCOME OF SIX ASSESSME NT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR REL EVANT TO THE PREVIOUS YEAR IN WHICH SUCH SEARCH IS CONDUC TED OR REQUISITION IS MADE : PROVIDED THAT THE ASSESSING OFFICER SHALL ASSESS OR REASSESS THE TOTAL INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SUCH SIX ASSESSMENT YEARS: PROVIDED FURTHER THAT ASSESSMENT OR REASSESSMENT, I F ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 7 ANY, RELATING TO ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF SIX ASSESSMENT YEARS REFERRED TO IN THIS SUB- SECTION PENDING ON THE DATE OF INITIATION OF THE SEARCH UNDER SECTION 132 OR MAKING OF REQUISITION UNDER SECTION 132A, AS THE CASE MAY BE, SHALL ABATE. (2) IF ANY PROCEEDING INITIATED OR ANY ORDER OF ASS ESSMENT OR REASSESSMENT MADE UNDER SUB-SECTION (1) HAS BEEN AN NULLED IN APPEAL OR ANY OTHER LEGAL PROCEEDING, PROVIDED THAT SUCH REVIVAL SHALL CEASE TO HAVE EFFE CT, IF SUCH ORDER OF ANNULMENT IS SET ASIDE.' 2.2. IF THE AFORESAID PROVISION OF THE ACT IS ANALYZED, IT MAKES CLEAR THAT IT APPLIES TO A PERSO N IN WHOSE CASE A SEARCH IS INITIATED U/S.132 OF THE ACT , 1961 OR WHOSE BOOKS OF ACCOUNTS, OTHER DOCUMENTS OR ANY ASSETS ARE REQUISITIONED U/S. 132A OF THE ACT AFTER 31/05/2003. SECTION 153A OF THE ACT PROVIDES THAT W HERE A SEARCH IS INITIATED U/S 132 OF THE ACT THE ASSESS ING OFFICER SHALL 'ASSESS OR REASSESS THE TOTAL INCOME OF SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSME NT YEAR' RELEVANT TO THE PREVIOUS YEAR IN WHICH THE SE ARCH IS CONDUCTED OR REQUISITIONED IS MADE. THE 1 ST PROVISO STATES THAT THE ASSESSING OFFICER SHALL 'ASSESS OR REASSES S THE TOTAL INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING W ITHIN SUCH SIX ASSESSMENT YEARS' WHILE THE 2 ND PROVISO STATES THAT THE ASSESSMENT OR REASSESSMENT RELATING TO THE SAID SIX ASSESSMENT YEARS 'PENDING' ON THE DATE OF INITIATIO N OF THE ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 8 SEARCH U/S. 132 OF THE ACT SHALL 'ABATE'. THEREFORE, IN CASE WHERE ASSESSMENT HAS BEEN ABATED THE ASSESSING OFFI CER CAN MAKE ADDITION EVEN IF NO INCRIMINATING MATERIAL HAS BEEN FOUND DURING THE COURSE OF SEARCH. IT THUS FOL LOWS THAT ASSESSMENT OR REASSESSMENTS WHICH ARE NOT PEND ING (CONCLUDED) ON THE DATE OF INITIATION OF SEARCH SHA LL NOT ABATE. THEREFORE WHEN THERE IS NO ABATEMENT THE AO CAN FRAME THE ASSESSMENT U/S. 153A OF THE ACT ONLY ON T HE BASIS OF INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH. IN THIS RESPECT IT WOULD BE USEFUL TO TAKE NOTE OF THE FOLLOWING FACTS IN THE CASE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. THE RELEVANT DATES ARE SUMMARI ZED HEREUNDER:- SR. NO. PARTICULARS A.Y. 2005 - 06 1. DATE OF SEARCH 18/01/2007 2. ORIGINAL RETURN OF INCOME WAS FILED ON 12/08/200 5 3. ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 NO ORDER 4. ORDER PASSED U/S 143(2) OF THE INCOME TAX ACT, 1961 FOR FRAMING ASSESSMENT U./ S 143(3) OF THE INCOME TAX ACT, 1961 (TWELVE MONTHS FROM THE END OF THE MONTH IN WHICH THE RETURN IS FURNISHED 31/08/2006 5. STATUS OF ASSESSMENT DATE OF SEARCH CONCLUDED/NO T PENDING 2.3. FROM THE ABOVE CHART GIVEN IT IS CLEAR THAT T HE ASSESSEE FILED THE ORIGINAL RETURN ON 12/08/2005, ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 9 THEREFORE, ON THE DATE OF SEARCH I.E. ON 18/01/2007 TIME LIMIT FOR ISSUE OF NOTICE U/S. 143(2) OF THE ACT HAD EXPIRED. THEREFORE, THERE WAS NO ASSESSMENT PENDING IN THE CASE OF ASSESSEE FOR THE YEAR UNDER CONSIDERATI ON ON DATE OF SEARCH AND IN SUCH A CASE THERE WAS NO QUES TION OF ABATEMENT. THUS, ASSESSING OFFICER CAN MAKE THE ADD ITION ONLY ON THE BASIS OF INCRIMINATING MATERIAL FOUND D URING THE COURSE OF SEARCH. IN CASE OF ASSESSEE THERE WAS NO SUCH INCRIMINATING MATERIAL OR EVIDENCE FOUND DURING THE COURSE OF SEARCH IN ORDER TO SUPPORT OF THE ADDITION AND T HE ALLEGED ADDITION WAS MERELY BASED UPON THE STATEMENT OF ONE OF THE DIRECTORS OF M/S. DPS SHARES AND SECURITIES PVT. L TD. FROM WHOM PURCHASE TRANSACTIONS WERE MADE. HOWEVER, THER E WAS NO INCRIMINATING MATERIAL OR EVIDENCE WAS FOUND DURING SEARCH. THE DECISION OF THE TRIBUNAL IN THE CASE OF GURINDER SINGH BABA VS DCIT 28 TAXMAN.COM 328 (MUM. ), ON IDENTICAL FACTS, IN FAVOUR OF THE ASSESSEE. THE RELEVANT PORTION FROM THE ORDER (PAGES 269 TO 277 OF PAPER B OOK-II) IS REPRODUCED HEREUNDER:- 'THE ASSESSEE FOR ASSESSMENT YEAR 2005-06 HAD FILED RETURN OF INCOME ON 18.08.2005 DECLARING TOTAL INCO ME OF RS. 9,61,000/-. SUBSEQUENTLY THERE WAS SEARCH CONDUCTED IN CASE OF THE ASSESSEE AND ITS FAMILY ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 10 MEMBER U/S. 132 OF THE ACT ON 05.01.2007. CONSEQUEN T TO THE SEARCH ASSESSMENT PROCEEDINGS WERE INITIATED WS. 153A OF THE ACT. THE AO DURING THE ASSESSMENT PROCEEDINGS FOR A. Y. 2005-06 FOUND THAT THE ASSESSEE HAD CREDITED A SUM OF RS. 93,72,310/- TO HIS CAPITA L ACCOUNT WITH NARRATION RECEIPT TOWARDS GIFTS AO OBSERVED THAT ASSESSEE COULD NOT PROVE THAT THE ASSESSEE HAD RECEIVED THESE AMOUNTS AS GENUINE GIFT S. HE THEREFORE ADDED THE SAME U/S. 68 OF THE ACT... I N APPEAL CIT(A) CONFIRMED THE ADDITIONS MADE BY AO UNDER SECTION 68 OF THE ACT IN RELATION TO THE LOAN TAKEN BY THE ASSESSEE. 4. WE FIRST TAKE UP THE ISSUE RELATING TO LEGAL VAL IDITY OF ADDITION MADE UNDER SECTION 153A OF THE ACT BECAUSE THIS IS A BASIC ISSUE HAVING A BEARING ON OUTCOME O F THE APPEAL. THE ASSESSEE HAD RAISED THE LEGAL DISPUTE BEFORE CIT(A). IT WAS SUBMITTED THAT UNDER THE PROVISIONS OF SECTION 153A, IN CASE, THERE WAS A SE ARCH CONDUCTED IN CASE OF THE ASSESSEE THE AO SHALL ASSE SS OR REASSESS THE TOTAL INCOME OF SIX ASSESSMENT YEAR S IMMEDIATELY PRECEDING ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE SEARCH WAS CONDUCTED. THE SECTION ALSO PROVIDES THAT ASSESSMENT OR REASSESSMENT RELATING TO THE SAID SIX ASSESSMENT YEARS PENDING ON THE DATE OF INITIATION OF SEARCH WOULD ABATE. IN THE PRESENT CASE, IT WAS POI NTED OUT, THAT ASSESSMENT HAD BEEN PROCESSED UNDER SECTI ON 143(1) AND NO NOTICE UNDER SECTION 143(2) HAD BEEN ISSUED. THEREFORE, ASSESSMENT HAD BECOME FINAL AND WAS NOT PENDING AND THEREFORE, THERE WAS NO QUESTION OF ABATEMENT. IN SUCH A CASE, NO ADDITION COULD BE MADE UNLESS THERE WAS SOME MATERIAL FOUND DURING THE COURSE OF SEARCH. SINCE NO MATERIAL WAS FOUND DURING THE COURSE OF SEARCH, NO ADDITION COUL D BE MADE LEGALLY UNDER SECTION 153A OF THE ACT IN CASES WHERE ASSESSMENT WAS NOT PENDING...... DECISION OF THE ITAT 6.1 'THE SPECIAL BENCH IN THE CASE OF ALL CARGO GLO BAL LOGISTICS LTD. (SUPRA), HAS HELD THAT THE PROVISION S OF SECTION 153A COME IN TO OPERATION I F A SEARCH OR REQUISITION IS INITIATED AFTER 31.05.2003 AND ON SATISFACTION OF THIS CONDITION, THE AO IS UNDER OBL IGATION TO ISSUE NOTICE TO THE PERSON REQUIRING HIM TO FURN ISH THE RETURN OF INCOME FOR SIX YEARS IMMEDIATELY PRECEDIN G THE YEAR SEARCH. THE SPECIAL BENCH FURTHER HELD THAT IN CASE ASSESSMENT HAS ABATED, THE AO RETAINS THE ORIG INAL JURISDICTION AS WELL AS JURISDICTION UNDER SECTION 153A FOR WHICH ASSESSMENT SHALL BE MADE FOR EACH ASSESSMENT YEAR SEPARATELY. THUS IN CASE WHERE ASSESSMENT HAS ABATED THE AO CAN MAKE ADDITION IN THE ASSESSMENT, EVEN IF NO INCRIMINATING MATERIAL HAS BEEN FOUND BU T IN OTHER CASE THE SPECIAL BENCH HELD THAT THE ASSESSME NT ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 11 UNDER SECTION 153A CAN BE MADE ON THE BASIS OF INCRIMINATING MATERIAL WHICH IN THE CONTEXT OF RELE VANT PROVISIONS MEANS BOOKS OF ACCOUNT AND OTHER DOCUMEN T FOUND IN THE COURSE OF SEARCH BUT NOT PRODUCED IN T HE COURSE OF ORIGINAL ASSESSMENT AND UNDISCLOSED INCOM E OR PROPERTY DISCLOSED DURING THE COURSE OF SEARCH. IN THE PRESENT CASE, THE ASSESSMENT HAD BEEN COMPLETED UNDER SUMMARY SCHEME UNDER SECTION 143(1) AND TIME LIMIT FOR ISSUE OF NOTICE UNDER SECTION 143(2) HAD EXPIRED ON THE DATE OF SEARCH. THEREFORE, THERE WAS NO ASSESSMENT PEN DINE IN THE CASE AND IN SUCH A CASE THERE WAS NO QUESTION OF ABATEMENT. THEREFORE, ADDITION COULD BE MADE ONLY ON THE BASIS OF INCRIMINATING MATERIAL FOUND DURING SEARCH.' 2.4. IF THE AFORESAID ORDER OF THE TRIBUNAL IS KEP T IN JUXTAPOSITION WITH THE FACTS OF THE PRESENT APPEAL, WE NOT THAT A SEARCH ACTION U/S. 132 OF THE ACT IS NOT MEANT TO DISTURB THE COMPLETED ASSESSMENT IN RESPECT OF WHIC H NOTHING INCRIMINATING IS DISCOVERED. IT IS ALSO NO TED THAT WHILE COMING TO THE PARTICULAR DECISION, THE BENCH DULY PLACED THE RELIANCE ON THE JUDGMENT PASSED BY MUMBAI SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ALL CA RGO GLOBAL LOGISTICS LTD VS DEPUTY COMMISSIONER OF INCO ME- TAX, CENTRAL CIRCLE-44, MUMBAI REPORTED AT 137 ITD 287 (PAGE NO 193-236 OF THE PAPER BOOKII). THE RELEVANT EXTRACT OF THE DECISION IS AS UNDER: 'THUS, QUESTION RAISED BEFORE THE SPECIAL BENCH NO. 1 IS ANSWERED AS UNDER: A. IN ASSESSMENT THAT ARE ABATED, THE ASSESSING OFFICER RETAINS THE ORIGINAL JURISDICTION AS WELL A S ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 12 JURISDICTION CONFERRED ON HIM UNDER SECTION 153A FO R WHICH ASSESSMENTS SHALL BE MADE FOR EACH OF THE SIX ASSESSMENT YEARS SEPARATELY. B. IN OTHER CASES, IN ADDITION TO THE INCOME THAT HAS ALREADY BEEN ASSESSED, THE ASSESSMENT UNDER SECTION 153A WILL BE MADE ON THE BASIS OF INCRIMINATING MATERIAL, WHICH IN THE CONTEXT OF REL EVANT PROVISIONS MEANS - BOOKS OF ACCOUNT, OTHER DOCUMENTS, FOUND IN THE COURSE OF SEARCH BUT NOT PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT, AND UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEARCH '. 2.5. IT IS FURTHER NOTED THAT THE HON'BLE JURISDIC TIONAL HIGH COURT OF BOMBAY APPROVED THE DECISION OF THE S PECIAL BENCH OF THE TRIBUNAL VIDE ORDER DATED 21/04/2015 ( PAGE NOS. 237-268 OF THE PAPER BOOK II). THE RELEVANT PO RTION OF THIS ORDER IS REPRODUCED HEREUNDER:- '29. WE ARE NOT IN AGREEMENT WITH MR. PINTO THAT TH ESE OBSERVATIONS ARE MADE IN PASSING OR THAT THEY ARE N OT BINDING ON US BECAUSE THE ESSENTIAL CONTROVERSY BEF ORE THE BENCH WAS SOMEWHAT DIFFERENT. HE URGES THAT WAS ONL Y IN RELATION TO THE LEGALITY AND VALIDITY OF THE ORDER OF THE COMMISSIONER UNDER SECTION 263 OF THE IT ACT. HAD T HAT BEEN THE CASE, THE DIVISION BENCH WAS NOT REQUIRED TO TRACE OUT THE HISTORY OF SECTION 153A OF THE IT ACT AND T HE POWER THAT IS CONFERRED THERE UNDER. WHEN REVENUE ARGUED BEFORE THE DIVISION BENCH THAT THE POWER UND ER SECTION 153A CAN BE INVOKED AND EXERCISED EVEN IN CASES WHERE THE SECOND PROVISO TO SUB-SECTION (1) IS NOT APPLICABLE THAT THE DIVISION BENCH WAS REQUIRED TO EXPRESS A SPECIFIC OPINION. THE PROVISION DEALS WITH THOSE CASES WHERE ASSESSMENT OR REASSESSMENT, IF ANY, RELATING TO THE ASSESSMENT YEARS FALLING WITHIN THE PERIOD OF SIX A SSESSMENT YEARS REFERRED TO IN SUB-SECTION (1) OF SECTION 153 A WERE PENDING. IF THEY WERE PENDING ON THE DATE OF THE IN ITIATION OF THE SEARCH UNDER SECTION 132 OR MAKING OF REQUISITION UNDER SECTION 132A, AS THE CASE MAY BE, THEY ABATE. IT IS ONLY PENDING PROCEEDINGS THAT WOULD ABATE AND NOT W HERE THERE ARE ORDERS MADE OF ASSESSMENT OR REASSESSMENT AND WHICH ARE IN FORCE ON THE DATE OF INITIATION OF THE SEARCH OR ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 13 MAKING OF THE REQUISITION. AS THAT SPECIFIC ARGUMEN T WAS CANVASSED AND DEALT WITH BY THE DIVISION BENCH AND THAT IS HOW IT WAS CALLED UPON TO INTERPRET SECTION 153A OF THE IT ACT, THEN, EACH OF THE ABOVE CONCLUSIONS RENDERED B Y THE DIVISION BENCH WOULD BIND US. 30. EVEN OTHERWISE, WE AGREE WITH THE DIVISION BENC H WHEN IT OBSERVES AS ABOVE WITH REGARD TO THE AMBIT AND SCOPE OF THE POWERS CONFERRED UNDER SECTION 153A OF THE ACT. SINCE WE ARE NOT REQUIRED TO TRACE OUT THE HIS TORY AND WE CAN DO NOTHING BETTER THAN TO REPRODUCE THE OBSERVATIONS AND CONCLUSIONS AS ABOVE THAT WE ARE N OT REPEATING THE SAME. EVEN IF THE EXERCISE OF POWER U NDER SECTION 153A IS PERMISSIBLE STILL THE PROVISION CAN NOT BE READ IN THE MANNER SUGGESTED BY MR. PINTO. NOT ONLY THE FINALISED ASSESSMENT CANNOT BE TOUCHED BY RESORTING TO THOSE PROVISIONS, BUT EVEN WHILE EXERCISING THE POWER CAN BE EXERCISED WHERE A SEARCH IS INITIATED UNDER SECTION 132 OR BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ANY ASSETS ARE REQUISITIONED UNDER SECTION 132A AFTER 31ST MARCH, 2003. THERE IS A MANDATE TO ISSUE NOTICES UNDER SECTION 153(1)(A) AND ASSESS OR REASSESS THE TOTAL INCOME O F SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSME NT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SUCH SE ARCH IS CONDUCTED OR REQUISITION IS MADE. THUS, THE CRUC IAL WORDS 'SEARCH' AND 'REQUISITION' APPEAR IN THE SUBSTANTIVE PROVISION AND THE PROVISOS. THAT WOULD THROW LIGHT ON THE ISSUE OF APPLICABILITY OF THE PROVISIO N. IT BEING ENACTED TO A SEARCH OR REQUISITION THAT ITS CONSTRU CTION WOULD HAVE TO BE ACCORDINGLY. THAT IS THE CONCLUSION REAC HED BY THE DIVISION BENCH IN MURLI AGRO (SUPRA) WITH WHICH WE RESPECTFULLY AGREE. THESE ARE THE CONCLUSIONS WHICH CAN BE REACHED AND UPON READING OF THE LEGAL PROVIS IONS IN QUESTION. 31. WE, THEREFORE, HOLD THAT THE SPECIAL BENCH'S UNDERSTANDING OF THE LEGAL PROVISION IS NOT PERVERS E NOR DOES IT SUFFER FROM ANY ERROR OF LAW APPARENT ON TH E FACE OF THE RECORD. 2.6. SIMILARLY, ON IDENTICAL FACTS/ISSUE, RELIANCE CAN BE PLACED UPON THE FOLLOWING JUDICIAL PRONOUNCEMENT S:- (I) IN THE CASE OF NIKKI AGARWAL V ACIT IN ITA NO 879/M/2011, THE HON'BLE ITAT, MUMBAI BENCH (PAGE NO . '7 ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 14 278-295 OF THE PAPER BOOK-II) HELD AS UNDER:- 'THE FOLLOWING GROUNDS OF APPEAL WERE RAISED BY THE ASSESSEE IN C.O. NO 204/M/2013: '1. THE LD CIT (A) ERRED IN LAW AND FACTS IN HOLDIN G THAT THE AO WAS EMPOWERED TO MAKE ADDITIONS IN THE ORDER PASSED U/S 153A OF THE ACT IN RESPECT OF COMPLETED ASSESSMENT EVEN IN THE ABSENCE OF INCRIMINATING MAT ERIAL FOUND AS A RESULT OF SEARCH. 2. THE ACIT ERRED IN LAW AND AS WELL AS IN THE FACT S IN MAKING ADDITION OF RS. 34,87,500/- ON ACCOUNT OF SALE PROC EEDS OF SHARES OF DATABASE FINANCE LTD AND RS. 1,74,375/- ON ACCOUNT OF UNEXPLAINED EXPENSES RELATING TO LONG TERM CAPITAL GAIN ON SALE OF SHARES AND DATABASE FINANCE LTD IN THE ORDER PAS SED U/S 153A EVEN IN THE ABSENCE OF INCRIMINATING MATERIAL FOUND AS A RESULT OF SEARCH.' (II) IDENTICALLY, THE TRIBUNAL RELYING UPON THE DECISION/S, IN THE CASE OF SHRI GOVIND AGARWAL V ACTT IN ITA NO 3389/M/2011 DATED 10.01.2014 (1TAT, MUMBAI) HAS HELD AS UNDER: '6. DURING THE PROCEEDINGS BEFORE US, SHRI DEVENDRA MEH TA, ID COUNSEL FOR THE ASSESSEE RAISED THE ABOVE MENTIO NED GROUNDS AND QUESTIONING THE ADDITIONS AND THE VALID ITY OF THE ASSESSMENT U/S 153A OF THE ACT. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE SUBMITTED VARIOUS ARGUMENT S BEFORE US, WHICH ARE COMMON TO THE ONES ALREADY MENTIONED IN DETAIL AND ADJUDICATED BY US IN CONNECTION WITH THE APPEALS FILED IN THE CASE OF SHRI GOVIND AGARWAL VS. ACTT V IDE ITA NOS.3389/M/2011 (AY: 2002-2003) AND ITA NO. 3390/M/2011 (AY: 2004-2005) VIDE ORDER DATED 10.01. 2014. FOR THE SAKE OF COMPLETENESS OF THIS ORDER, RELEVANT PO RTIONS OF THE SAID ORDER OF THE TRIBUNAL (SUPRA) ARE REPRODUCED H ERE UNDER: .......... 17. RAJASTHAN HIGH COURT JUDGMENT IN THE CASE OF JA I STEEL ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 15 (INDIA) (SUPRA), VIDE PARA 18, IT IS CATEGORICALLY MENTIONED THAT 'THE REQUIREMENT OF ASSESSMENT OR REASSESSMENT UNDE R THE SAID SECTION (153A) HAS TO BE READ IN THE CONTEXT O F SECTIONS 132 OR 132A OF THE ACT, INASMUCH AS, IN CASE NOTHIN G INCRIMINATING IS FOUND ON ACCOUNT OF SEARCH OR REQU ISITION, THEN THE QUESTION OF REASSESSMENT OF THE CONCLUDED ASSESSMENTS DOES NOT ARISE, WHICH WOULD MORE REITERATION.............'. THUS, THE JUDGMENT OF HO NBLE HIGH COURT IN THE CASE OF JAI STEEL LTD, SUPRA AND ABOVE DECISION S OF THE TRIBUNAL ARE CATEGORICAL IN CONCLUDING THAT, IN CAS E OF THE CONCLUDED ASSESSMENTS LIKE THE PRESENT ONE, THE ADD ITIONS ARE MADE ONLY BASED ON THE INCRIMINATING MATERIAL DISCO VERED DURING THE SEARCH ACTION. THE FACTS OF THE JAI STE EL LTD (SUPRA) ARE IDENTICAL TO THE PRESENT ONE IE AO MADE ADDITI ONS BY REASSESSING U/S 153A ON THE COMPLETED ASSESSMENT U/S 143(1) OF THE ACT. THUS, CONSIDERING THE JUDGMENT IN THE CASE OF THE JAI STEEL LTD (SUPRA), THE ARGUMENTS ON THE LEGAL I SSUE RAISED BEFORE US STANDS COVERED. THEREFORE, CONSIDERING TH E RAIASTHAN HIGH COURT JUDGMENT IN THE CASE OF JAI STEELS LTD, SUPRA, WE HAVE NO DIFFICULTY IN (I) UPHOLDING THE ISSUE OF NO TICE U/S 153A OF THE ACT AND (2) IN DISAPPROVING THE MAKING OF THE IMPUGNED ADDITIONS U/S 68 AND 14A OF THE ACT, WHICH ARE NOT BACKED BY THE INCRIMINATING MATERIALS. IN T HE ABSENCE OF INCRIMINATING MATERIAL, THE ROLE OF THE AO IS ONLY TO REITERATE THE RETURNED INCOME FILED IN RESPONSE TO THE NOTICE U/S 153A OF THE ACT. ACCORDINGLY, IN SUBSTANCE, THE COM MON LEGAL ISSUE RAISED IN THE GROUNDS FOR BOTH THE APPE ALS OF THE ASSESSEE (ITA NO 3389&3390/M/2011) IS ALLOWED. 7. FROM THE ABOVE, IT IS EVIDENT THAT THE ARGUMENTS RELATING TO THE VALIDITY OF THE NOTICE U/S 153 ARE DISAPPROV ED. CONSEQUENTLY, WE CONFIRM THE VALIDITY OF THE NOTICE ISSUED U/S 153A OF THE ACT. HOWEVER, CONSIDERING THE JUDGMENT OF THE RAJASTHAN HIGH COURT JUDGMENT IN THE CASE OF JAI ST EEL (INDIA) LTD AND OTHER ORDERS OF THE TRIBUNAL (SUPRA ), WE ARE OF THE OPINION THAT THE ADDITIONS MADE BY THE AO IN T HE ABSENCE OF ANY INCRIMINATING MATERIAL ARE NOT SUSTAINABLE. ACCORDINGLY, ADDITIONS ARE DELETED AND THE GROUND NOS. & 2 RAISED BY THE ASSESSEE ARE ALLOWED. 8. IN THE RESULT, CROSS OBJECTION OF THE ASSESSEE I S ALLOWED.' ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 16 (III) IN ANOTHER CASE OF B. R. MACHINE TOOLS PVT. LTD V ACIT IN ITA NO 4174 TO 41771MUM/2013 THE HON'BLE IT AT MUMBAI BENCH (PAGE NOS 296-305 OF THE PAPER BOOK-II) HELD AS UNDER: '19. IN THE CASE BEFORE US, SEARCH TOOK PLACE ON TH E NEW MANAGEMENT AND ADMITTEDLY NO DOCUMENT AS SUCH WAS FOUND WHICH INDICATED THAT THERE WAS CERTAIN INCOME BELONGING TO THE ASSESSEE, WHICH HAD NOT BEEN DISCLOSED TO THE DEPARTMENT IN THE IMPUGNED ASSESSMENT YEARS. SINCE THE SEARCH WAS ON THE NEW MANAGEMENT, THE ASSESSEE COMPANY BECAME THE PERSON OTHER THEN THE PERSON SEARCHED. IN THESE CIRCUMSTANCES, ISSUE OF NOTICE U/S 153C AND ASSESSMENT TO BE FRAMED UNDER THIS PROVISION IS IMPERATIVE, AS THE PROVISIO N IS NON OBSTANTE. IN THESE CIRCUMSTANCES, THE FOLLOW ING HAVE TO BE TAKEN INTO CONSIDERATION ARE A) WHETHER THERE IS ANY INCRIMINATING MATERIAL, INDICATING INCOME NOT DECLARED BEFORE THE REVENUE AUTHORITIES AND B) WHETHER THE ASSESSMENT IN ANY ASSESSMENT YEARS OR ANY ASSESSMENT YEAR IN WHICH NOTICE U/S 153C IS PENDING. IF THE ANSWER TO BOTH THESE QUESTIONS ARE IN THE NEGATIVE THEN THE ASSESSMENT TO BE FRAMED SHALL BE AS PER THE RATIO LAID DOWN IN THE CASE OF SPECIA L BENCH DECISION IN THE ALL CARGO AND DELHI HIGH COUR T IN THE CASE OF ANIL KUMAR BHATIA. 20. IT WOULD BE WORTH MENTIONING THAT EVEN IN THE C ASE OF PRATIBHA INDUSTRIES (SUPRA), AS QUOTED BY THE DR , THE RATIO LAID DOWN IS THE VALIDITY OF ISSUE OF NOT ICE U/S 153A AND ASSESSMENT TO BE FRAMED U/S 143(3)/153A BUT IT HAS ALSO BEEN SPECIFIED THEREIN, THAT IF THERE IS NO INCRIMINATING MATERIAL FOUND THE ASSESSMENT TO BE FRAMED SHALL BE AT THE FIGURE WHIC H STANDS FINALIZED. THIS DECISION CANNOT AID THE DR, ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 17 BECAUSE, THE DECISION IS ON THE ISSUE OF FRAMING OF THE ASSESSMENT UNDER SECTION 143(3)1153A, WHICH HAS BEEN ACCEPTED BY THE AR. THE DECISION IN PRATIBHA INDUSTRIES, WAS ON THE ISSUE WHETHER THE ASSESSMENT FRAMED U/S 143(3)1153C IS LEGALLY CORREC T, IN CASE, THERE IS NO INCRIMINATING MATERIAL AGAINST THE ASSESSEE. 21. SINCE THERE IS NO MATERIAL INDICATING INCOME NO T FORMING PART OF THE REGULAR ASSESSMENT, NO FURTHER ADDITION CAN BE MADE, AS HELD IN THE CASE OF PRATIB HA INDUSTRIES, THE ASSESSMENT UNDER SECTION 143(3)/153 C SHALL BE 'INCOME ASSESSED ORIGINALLY + ZERO = INCOM E ASSESSED NOW'. IN ANY CASE, SINCE THE ASSESSMENT HAS BEEN FINALIZED, 2ND PROVISO, REGARDING ABATEMEN T OF PROCEEDINGS, SHALL NOT BE THERE AS THERE IS NOTH ING WHICH IS PENDING'. (IV) IN ANOTHER SIGNIFICANT DECISION, THE MUMBAI BENCH OF THE TRIBUNAL IN ACIT VS PRATIBHA INDUSTRIE S LTD. (141 ITD 151) MADE AN ELABORATE DISCUSSION BY EXPLA INING THE SCOPE OF THE PROVISION (PAGE NO 312-354 OF THE PAPER BOOK) AND HELD AS UNDER:- '50. WE FIND THERE IS COMPLETE DISHARMONY IN THE CIRCUMSTANCE, BECAUSE, THE ACT ALLOWS SIX ASSESSMEN TS YEARS TO BE OPEN VIDE SECTION 153A FOR BEING ASSESSED OR REASSESSED TO ASCERTAIN TOTAL INCOME, THEREFORE, TH E AO IS BOUND TO PASS AN ORDER SUNDER SECTION 153A READ WIT H 143(3), WHICH, ACCORDING THE ANIL KUMAR BHATIA (SUPRA), 'SU CH DETERMINATION IN THE ORDERS PASSED UNDER SECTION 15 3A WOULD BE SIMILAR TO THE ORDERS PASSED IN ANY REASSE SSMENT, WHERE THE TOTAL INCOME DETERMINED IN THE ORIGINAL ASSESSMENT ORDER AND THE INCOME THAT ESCAPED ASSESSMENT ARE CLUBBED TOGETHER AND ASSESSED AS THE TOTAL INCOME '. THEREFORE, THE AO, ACCORDINGLY HAS TO STOP SHORT IN THESE PROCEEDING S AND RESTRICT HIMSELF TO THE INCOME ALREADY DETERMINED/ASSESSED IN THE ALREADY CONCLUDE D ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 18 PROCEEDINGS FOR THE YEAR(S), WHETHER UNDER SECTION 143(1) OR 143(3). THUS IT IS A CASE OF VALID NOTICE UNDER SEC TION 153A, WITH NO UNDISCLOSED INCOME TO BE CLUBBED WITH INCOME ORI G INALL Y ASSESSED AND FINALIZED. HOWEVER, IT HAS TO BE ADDED HERE THAT PROCEEDINGS UNDER SECTION 153A A RE LINKED TO THE SEARCH HAVING BEEN INITIATED ON THE PERSON, NOT WITH THE DOCUMENTS FOUND AND SEIZED, THE DOCUMENTS SO FOUND AND SEIZED, MAY BECOME USEFUL TO THE AG FOR MAKING AN ASSESSMENT OF TOTAL INCOME UNDER SECTION 153A READ WITH 143(3) '. (V) SIMILAR VIEW WAS TAKEN BY THE TRIBUNAL IN THE CASE OF NEETA DOSHI & MANISHA DOSHI IN ITA NO 439 AND 441/[IF12010 (PAGE NO. 355-371 OF THE PAPER BOOK-H) DATED 30/11/2015. IDENTICALLY, THE TRIBUNA L IN THE CASE OF ZEENAT P. SANGHAVI VS DCIT IN ITA NO. 8026/MUM/2010 (PAGE NO. 372-393 OF THE PAPER BOOK-I I) VIDE ITS ORDER DATED 19/12/2014 AND ALSO IN THE CAS E OF JIGNESH P. SHAH VS DCIT IN ITA NO 1553 & 3173/M/201 0, VIDE ORDER DATED 13/02/2015. (PAGE NO 394-405 OF TH E PAPER BOOK-I1) TOOK SIMILAR VIEW. THE HON'BLE CALC UTTA HIGH COURT IN LMJ INTERNATIONAL LTD. VS. DCIT (2008 ) 119 TTJ (KOL) 214 (PAGE NO 406-418 OF THE PAPER BOO K- I1): HELD THAT WHERE NOTHING INCRIMINATING IS FOUND IN THE COURSE OF SEARCH RELATING TO ANY ASSESSMENT YEARS, THE ASSESSMENTS FOR SUCH YEARS CANNOT BE DISTURBED; ITE MS OF REGULAR ASSESSMENT CANNOT BE ADDED BACK IN THE ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 19 PROCEEDINGS UNDER S. 153C WHEN NO INCRIMINATING DOCUMENTS WERE FOUND IN RESPECT OF THE DISALLOWED AMOUNTS IN SEARCH PROCEEDINGS. IT IS ALSO NOTED TH AT THE TRIBUNAL IN THE CASE OF HUSBAND (SHRI BRIJESH D. SH AH) OF THE PRESENT ASSESSEE ON IDENTICAL ISSUE, VIDE ORDER DATED 03/02/2016 ITA NOS. 1417 TO 1420/MUM/2010 (PAGE NO. 419-427 OF THE PAPERBOOK-II), DECIDED IN FAVOUR OF THE ASSESSEE. THE RELEVANT PORTION FROM THE ORDER IS RE PRODUCED HEREUNDER:- THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINS T THE ORDER OF LD. CIT(A) FOR THE ASSESSMENT YEARS 2002-03 TO 2 005-06, IN THE MATTER OF ORDER PASSED UNDER SECTION 153A RE AD WITH SECTION 143(3) OF THE INCOME TAX ACT. 2. IN ADDITION TO THE GROUNDS TAKEN IN THE APPEAL, THE ASSESSEE HAS TAKEN THE ADDITIONAL GROUND IN THE A.Y .2003-04 WHICH READS AS UNDER: THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.11,63 ,400/- IN THE ASSESSMENT U/S 153A OF THE I.T. ACT AS NO RELEV ANT OR INCRIMINATING MATERIAL OR EVIDENCE WAS FOUND OR SEI ZED DURING THE COURSE OF SEARCH REFLECTING UNDISCLOSED INCOME. 3. SIMILAR ADDITIONAL GROUNDS HAVE BEEN TAKEN IN A LL THE YEARS UNDER CONSIDERATION. ON MERITS, THE ASSESSEE HAS CHALLENGED THE ADDITION MADE ON ACCOUNT OF SALE PRO CEEDS OF SHARES UNDER SECTION 68 OF THE INCOME TAX ACT INSTE AD OF ASSESSING THE NET CAPITAL GAINS EARNED THEREON. 4. THE ADDITIONAL GROUND SO RAISED BY THE ASSESSE E IS PURELY LEGAL. KEEPING IN VIEW THE DECISION OF HONB LE SUPREME COURT IN THE CASES OF NATIONAL THERMAL POWE R CORPORATION, 229 ITR 383 AND JUTE CORPORATION OF IN DIA LTD., 187 ITR 688, WE ACCEPT THE ADDITIONAL GROUND WHICH IS PURELY LEGAL IN NATURE FOR ADJUDICATION. 5. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS AN INDIVIDUAL ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 20 EARNING INCOME FROM SALARY, BUSINESS, CAPITAL GAIN S AND OTHER SOURCES. HE IS AN INVESTOR IN SHARES AND SECU RITIES AND ALSO INVESTS THROUGH INITIAL PUBLIC OFFER (IPO) OR THROUGH SECONDARY MARKET. ALL GAINS ARISING FROM THE SAME ARE OFFERED BY HIM AS LONG TERM OR SHORT TERM CAPITAL G AINS DEPENDING ON THE PERIOD OF HOLDING AND TAXES ARE PA ID AS PER PROVISIONS OF LAW. SEARCH AND SEIZURE OPERATIONS U /S 132(1) OF THE INCOME-TAX ACT, 1961 WERE CARRIED OUT IN PRE MISES OF THE ASSESSEE ON THE ALLEGATION THAT THE ASSESSEE OB TAINED ARTIFLCIAL CAPITAL GAIN BY MANIPULATING SHARE TRANS ACTIONS. HOWEVER, DURING THIS SEARCH, NO INCRIMINATING DOCUM ENT, PAPER, EVIDENCE ETC. WERE FOUND OR SEIZED SO AS TO PROVE OR ESTABLISH THE SAID ALLEGATION. ON RECEIPTS OF NOTIC ES U/S. 153A, THE ASSESSEE FILED HIS RETURNS AND THE LD. A.O. COM PLETED HIS ASSESSMENTS U/S. I 53A R.W.S 143(3) ON 24.12.08 BY A CONSOLIDATED ASSTT. ORDER FOR ASSTT. YEARS 2001-02 TO 2007- 08, WHEREIN ADDITION WAS MADE ON ACCOUNT OF SALE PR OCEEDS OF SHARES U/S.68 OF I.T. ACT. 6. IT WAS ARGUED BY LD. A.R. THAT THE ENTIRE ASSESS MENT FOR ALL THE YEARS UNDER APPEAL PASSED UNDER SECTION 153A IN THE ASSESSEES CASE IS ULTRAVIRES THE PROVISIONS OF THE SAID SECTION. THE LD. A.R. SUBMITTED THAT A BARE PERUSA L OF SECTION 153A MAKES IT CLEAR THAT IT APPLIES TO A PERSON IN WHOSE CASE A SEARCH IS INITIATED U/S 132 OF THE ACT, OR WHOSE BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ANY ASSETS ARE REQUISIT IONED U/S 132A AFTER 31.05.2003. SECTION 153A PROVIDES THAT WHERE A SEARCH IS INITIATED U/S 132 THE ASSESSING OFFICER S HALL ASSESS OR REASSESS THE TOTAL INCOME OF SIX ASSESSMENT YEAR S IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE SEARCH IS CONDUCTED OR R EQUISITION IS MADE. THE 1 ST PROVISO STATES THAT THE ASSESSING OFFICER SHALL ASSESS OR REASSESS THE TOTAL INCOME IN RESPE CT OF EACH ASSESSMENT YEAR FALLING WITHIN SUCH SIX ASSESSMENT YEARS WHILE THE 2 ND PROVISO STATES THAT THE ASSESSMENT OR REASSESSMENT RELATING TO THE SAID SIX ASSESSMENT YE ARS PENDING ON THE DATE OF INITIATION OF THE SEARCH U NDER SECTION 132 SHALL ABATE. IT THUS FOLLOWS THAT AS SESSMENTS OR REASSESSMENTS WHICH ARE NOT PENDING ON THE DATE OF INITIATION OF SEARCH SHALL NOT ABATE. THE LD. A.R. FURTHER DRAWN OUR ATTENTION TO THE FOLLOWING CHART INDICATI NG STATUS OF ASSESSMENT ON THE DATE OF SEARCH ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 21 SR NO PARTICULARS A.Y.2002- 03 A.Y.2003- 04 A.Y.2004- 05 A.Y.2005- 06 1. DATE OF SEARCH 18/01/2007 18/01/2007 18/01/2007 18/01/2007 2 ORIGINAL RETURN OF INCOME WAS FILED ON 31.07.2002 30.09.2003 22.09.2004 31.08.2005 3 INCOME DECLARED IN THE ORIGINAL RETURN WAS ACCEPTED U/S 143(1) ON 31.03.2004 31.03.2005 N.A. 03.08.2006 4 ORDER PASSED U/ S 143(3) NO ORDER NO ORDER 26.12.2006 NO ORDER 5 DUE DATE FOR ISSUE OF NOTICE U/S143(2) FOR FRAMING ASSESSMENT U/S 143(3) 31.07.2003 30.09.2004 N.A. 31.08.2006 6 STATUS OF ASSESSMENT ON THE DATE OF SEARCH CONCLUDED/NOT PENDING CONCLUDED/NOT PENDING CONC LUDED/NOT PENDING CONCLUDED/NOT PENDING 7. RELIANCE WAS PLACED ON THE THE DECISION OF MUMBA I SPECIAL BENCH IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD VS DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-44, MUMB AI REPORTED AT 137 ITD 287. THE RELEVANT EXTRACT OF THE DECISION I S AS UNDER: THUS, QUESTION RAISED BEFORE THE SPECIAL BENCH NO. 1 IS ANSWERED AS UNDER: A. IN ASSESSMENT THAT ARE ABATED, THE ASSESSING OFF ICER RETAINS THE ORIGINAL JURISDICTION AS WELL AS JURISD ICTION CONFERRED ON HIM UNDER SECTION 153A FOR WHICH ASSESSMENTS SHALL BE MADE FOR EACH OF THE SIX ASSES SMENT YEARS SEPARATELY B. IN OTHER CASES, IN ADDITION TO THE INCOME THAT H AS ALREADY BEEN ASSESSED, THE ASSESSMENT UNDER SECTION 153A WILL BE MADE ON THE BASIS OF INCRIMINATING MATERIAL , WHICH IN THE CONTEXT OF RELEVANT PROVISIONS MEANS - BOOKS OF ACCOUNT, OTHER DOCUMENTS, FOUND IN THE COURSE OF SEARCH BUT NOT PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT, AND UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEARCH. 8. THE LD. A.R. FURTHER RELIED ON THE DECISION OF J URISDICTIONAL HIGH COURT OF BOMBAY IN THE ABOVE CASE VIDE ITS ORDER DA TED 21.04.15 WHEREIN COURT HAS APPROVED THE ORDER OF ITAT SPECIAL BENCH AND HAS HELD AS UNDER: 29. WE ARE NOT IN AGREEMENT WITH MR. PINTO THAT TH ESE ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 22 OBSERVATIONS ARE MADE IN PASSING OR THAT THEY ARE N OT BINDING ON US BECAUSE THE ESSENTIAL CONTROVERSY BEF ORE THE BENCH WAS SOMEWHAT DIFFERENT. HE URGES THAT WAS ONL Y IN RELATION TO THE LEGALITY AND VALIDITY OF THE ORDER OF THE COMMISSIONER UNDER SECTION 263 OF THE IT ACT. HAD T HAT BEEN THE CASE, THE DIVISION BENCH WAS NOT REQUIRED TO TR ACE OUT THE HISTORY OF SECTION 153A OF THE IT ACT AND THE POWER THAT IS CONFERRED THEREUNDER. WHEN THE REVENUE ARGUED BEFOR E THE DIVISION BENCH THAT THE POWER UNDER SECTION 153A CA N HE INVOKED AND EXERCISED EVEN IN CASES WHERE THE SECON D PROVISO TO SUB-SECTION (1) IS NOT APPLICABLE THAT T HE DIVISION BENCH WAS REQUIRED TO EXPRESS A SPECIFIC O PINION. THE PROVISION DEALS WITH THOSE CASES WHERE ASSESSME NT OR REASSESSMENT, IF ANY RELATING TO THE ASSESSMENT YEA RS FALLING WITHIN THE PERIOD OF SIX ASSESSMENT YEARS REFERRED TO IN SUB- SECTION (1) OF SECTION 153A WERE PENDING. IF THEY W ERE PENDING ON THE DATE OF THE INITIATION OF THE SEARCH UNDER SECTION 132 OR MAKING OF' REQUISITION UNDER SECTION 132A, AS THE CASE MAY BE, THEY ABATE. IT IS ONLY PENDING PRO CEEDINGS THAT WOULD ABATE AND NOT WHERE THERE ARE ORDERS MADE OF ASSESSMENT OR REASSESSMENT AND WHICH ARE IN FORCE ON THE DATE OF INITIATION OF THE SEARCH OR MA KING OF THE REQUISITION. AS THAT SPECIFIC ARGUMENT WAS CANVASSE D AND DEALT WITH BY THE DIVISION BENCH AND THAT IS HO W IT WAS CALLED UPON TO INTERPRET SECTION 153A OF THE IT ACT , THEN, EACH OF THE ABOVE CONCLUSIONS RENDERED BY THE DIVIS ION BENCH WOULD BIND US. 30. EVEN OTHERWISE, WE AGREE WITH THE DIVISION BENC H WHEN IT OBSERVES AS ABOVE WITH REGARD TO THE AMBIT AND SCOP E OF THE POWERS CONFERRED UNDER SECTION 153A OF' THE ACT . SINCE WE ARE NOT REQUIRED TO TRACE OUT THE HISTORY AND WE CAN DO NOTHING BETTER THAN TO REPRODUCE THE OBSERVATIONS A ND CONCLUSIONS AS ABOVE THAT WE ARE NOT REPEATING THE SAME. EVEN IF THE EXERCISE OF POWER UNDER SECTION 153A IS PERMISSIBLE STILL THE PROVISION CANNOT BE READ IN T HE MANNER SUGGESTED BY MR. PINTO. NOT ONLY THE FINALISED ASSE SSMENT CANNOT BE TOUCHED BY RESORTING TO THOSE PROVISIONS, BUT EVEN WHILE EXERCISING THE POWER CAN HE EXERCISED WH ERE A SEARCH IS INITIATED UNDER SECTION 132 OR BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ANY ASSETS ARE REQUISITIONED UNDER SECTION 132A AFTER 31ST MARCH, 2003. THERE IS A MANDATE TO ISSUE NOTICES UNDER SECTION 1 53(1)(A) AND ASSESS OR REASSESS THE TOTAL INCOME OF SIX ASSE SSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR REL EVANT TO THE PREVIOUS YEAR IN WHICH SUCH SEARCH IS CONDUCTED OR REQUISITION IS MADE. THUS, THE CRUCIAL WORDS 'SEARC H' AND 'REQUISITION' APPEAR IN THE SUBSTANTIVE PROVISION A ND THE PROVISOS. THAT WOULD THROW LIGHT ON THE ISSUE OF AP PLICABILITY OF THE PROVISION. IT BEING ENACTED TO A SEARCH OR R EQUISITION THAT ITS CONSTRUCTION WOULD HAVE TO BE ACCORDINGLY. THAT IS THE ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 23 CONCLUSION REACHED BY THE DIVISION BENCH IN MURLI A GRO (SUPRA) WITH WHICH WE RESPECTFULLY AGREE. THESE ARE THE CON CLUSIONS WHICH CAN BE REACHED AND UPON READING OF THE LEGAL PROVISIONS IN QUESTION. 31. WE, THEREFORE, HOLD THAT THE SPECIAL BENCHS UNDERSTANDING OF THE LEGAL PROVISION IS NOT PERVERS E NOR DOES IT SUFFER FROM ANY ERROR OF LAW APPARENT ON THE FAC E OF THE RECORD.. 9. FURTHER RELIANCE WAS PLACED ON THE DECISION OF I TAT BOMBAY IN THE CASE OF SHRI GURINDER SINGH BAWA VS. DCIT, 28 TAXMANN.COM 328, WHEREIN IT WAS HELD THAT THE PROVI SIONS OF SECTION 153A COME INTO OPERATION IF A SEARCH OR REQ UISITION IS INITIALED AFTER 31.05.2003 AND ON SATISFACTION OF T HIS CONDITION, THE AO IS UNDER OBLIGATION TO ISSUE NOTICE TO THE PERSO N REQUIRING HIM TO FURNISH THE RETURN OF INCOME FOR SIX YEARS IMMED IATELY PRECEDING THE YEAR SEARCH. IN CASE ASSESSMENT HAS ABATED, TH E AO RETAINS THE ORIGINAL JURISDICTION AS WELL AS JURISDICTION UNDER SECTION 153A FOR WHICH ASSESSMENT SHALL BE MADE FOR EACH ASSESSMENT YEAR SEPARATELY. THUS IN CASE WHERE ASSESSMENT HAS ABATE D THE AO CAN MAKE ADDITION IN THE ASSESSMENT, EVEN IF NO INCRIMI NATING MATERIAL HAS BEEN FOUND. BUT IN OTHER CASE THE ASSESSMENT UN DER SECTION 153A CAN BE MADE ON THE BASIS OF INCRIMINATING MATE RIAL WHICH IN THE CONTEXT OF RELEVANT PROVISIONS MEANS BOOK OF AC COUNT AND OTHER DOCUMENT FOUND IN THE COURSE OF SEARCH BUT NOT PROD UCED IN THE COURSE OF ORIGINAL ASSESSMENT AND UNDISCLOSED INCOM E OR PROPERTY DISCLOSED DURING THE COURSE OF SEARCH. IN THE PRESE NT CASE, THE ASSESSMENT HAD BEEN COMPLETED UNDER SUMMARY SCHEME UNDER SECTION 143(1) AND TIME LIMIT FOR ISSUE OF NOTICE U NDER SECTION 143(2) HAD EXPIRED ON THE DATE OF SEARCH. THEREFORE , THERE WAS NO ASSESSMENT PENDING IN THE CASE AND IN SUCH A CASE T HERE WAS NO QUESTION OF ABATEMENT. THEREFORE, ADDITION COULD B E MADE ONLY ON THE BASIS OF INCRIMINATING MATERIAL FOUND DURING SE ARCH. 10. RELIANCE WAS ALSO PLACED ON THE DECISION OF CO- ORDINATE BENCH IN THE CASE OF PRUTHVI INDUSTRIES 141 ITD 15 1, V.R. MACHINE TOOLS PVT. LTD. IN ITA NO.4174 TO 4177/M/20 13, ZEENAT P. SANGHAVI IN ITA NO.8026/M/2010 ORDER DATED 19.12 .14 AND IN THE CASE OF JIGNESH P. SHAH IN ITA NO.1553 & 3173/M /2010 ORDER DATED 13.02.15 AS PLACED ON RECORD. RELIANCE WAS A LSO PLACED ON THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUN AL IN THE CASE OF ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 24 LMJ INTERNATIONAL LTD. 119 TTJ 214 WHEREIN IT WAS H ELD THAT WHERE NOTHING INCRIMINATING IS FOUND IN THE COURSE OF SEA RCH RELATING TO ANY ASSESSMENT YEARS, THE ASSESSMENTS FOR SUCH YEAR S CANNOT BE DISTURBED. ITEMS OF REGULAR ASSESSMENT CANNOT BE A DDED BACK IN THE PROCEEDINGS UNDER S.153C WHEN NO INCRIMINATING DOCU MENTS WERE FOUND IN RESPECT OF THE DISALLOWED AMOUNTS IN SEARC H PROCEEDINGS. 11. IN VIEW OF THE ABOVE PROPOSITION OF LAW, IT WAS CONTENDED BY THE LD. A.R. THAT SINCE NO INCRIMINATING MATERIAL O R EVIDENCE WAS FOUND IN COURSE OF SEARCH AT THE ASSESSEES PREMIS ES TO SUPPORT THE AOS CONTENTION THAT IMPUGNED TRANSACTIONS IN SHARE S OF VARIOUS COMPANIES WERE NOT GENUINE, THE ADDITION MADE UNDER SECTION 153A HAS NO LEGS TO STAND. 12. ON THE OTHER HAND, THE LD. D.R. VEHEMENTLY ARGU ED THAT DURING THE COURSE OF SEARCH, IT WAS GATHERED THAT A SSESSEE HAD OBTAINED ARTIFICIAL CAPITAL GAIN BY WAY OF SHARE TR ANSACTION OF VARIOUS STOCK COMPANIES. HE FURTHER CONTENDED THAT THE DIRECTOR OF SUCH COMPANY HAD ALSO ADMITTED IN HIS STATEMENT THA T THEY HAVE ISSUED BOGUS ACCOMMODATION BILLS FOR FACILITATING C APITAL GAIN TO THE ULTIMATE BENEFICIARIES AND FOR WHICH THEY HAVE NOT HANDED OVER THE BILLS TO THE BENEFICIARIES. RELIANCE WAS PLACED ON THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF O. ABDUL R AZAK 350 ITR 71 WHEREIN IT WAS HELD THAT WHERE ADDITION WAS MADE BY AO ON THE BASIS OF CLEAR ADMISSION MADE BY THE ASSESSEE FOR T HE STATEMENT RECORDED UNDER SECTION 132(4) AND THE ASSESSEE HAVI NG NOT PROVED ANY THREAT OR COERCION AND FURTHER HAVING FAILED TO PROVE THE AMOUNT SHOWN IN THE DOCUMENTS WERE THE ONLY PAYMENTS MADE, THE TRIBUNAL WAS HELD TO BE NOT RIGHT IN DELETING THE A DDITIONS. RELIANCE WAS ALSO PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MUKUNDRAY K. SHAH 290 ITR 433 WHEREIN IT WA S HELD THAT THE DIARY SEIZED DURING THE SEARCH WAS REVEALING TH AT COMPANY IN WHICH ASSESSEE HAD SUBSTANTIAL INTEREST AND WHICH H AD ACCUMULATED PROFITS, ADVANCED MONIES TO CLOSELY RELATED PARTNER SHIP FIRMS IN WHICH ALSO ASSESSEE WAS A PARTNER WHICH AMOUNTS WER E WITHDRAWN BY ASSESSEE AND UTILIZED FOR PURCHASE OF RBI BONDS, IT WAS HELD THAT AMOUNT WAS ADVANCED FOR THE BENEFIT OF THE ASSESSEE BY USING THE TWO FORMS AS CONDUCES AND THE SAID AMOUNT WAS RIGHT LY ASSESSED AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE IN BLO CK ASSESSMENT. ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 25 13. RELIANCE WAS ALSO PLACED ON THE DECISION OF THE ITAT DELHI BENCH IN CASE OF RUBBER ENTERPRISES PVT. LTD. 88 IT D 95 WHEREIN IT WAS HELD THAT ONUS OF PROOF THAT COMMISSION PAID WA S GENUINE, THE ASSESSEE SHOULD MISERABLY FAILED TO DEMONSTRATE THA T SERVICES WERE RENDERED TO IT AND FAILED TO DISCHARGE ONUS, THEREF ORE NOT ENTITLED TO DEDUCTION TO COMMISSION PAID. RELIANCE WAS ALSO PL ACED ON THE DECISION OF RAJESH JHAVERI STOCK BROKERS PVT. LTD. IN SUPPORT OF THE PROPOSITION THAT INTIMATION UNDER SECTION 143(1)(A) CANNOT BE TREATED AN ORDER BY ISSUING AND THERE BEING NO ISSU E UNDER SECTION 143(1)(A), THE QUESTION OF CHANGE OF OPINION DOES N OT ARISE. THE LD. D.R. ALSO RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CALCUTTA KNITWEARS 43 TAXMAN.COM 446 , SUJIT SINGH CHAVRA ORDER DATED 25.10.96. 14. THE LD. D.R. ALSO HAS DRAWN OUR ATTENTION TO TH E BUDGET SPEECH OF FINANCE MINISTER EXPLAINING THE PROVISION S OF FINANCE BILL, 2003 AND ALSO DEPARTMENTAL CIRCULAR NO.7 OF 2 003 DATED 05.09.2003 WHEREIN IT WAS STATED THAT THE AO SHALL REASSESS THE TOTAL INCOME OF EACH OF SIX ASSESSMENT YEARS. ASSESSMENT OR REASSESSMENT, IF ANY, RELATING TO ANY ASSESSMENT YE AR FALLING WITHIN PERIOD OF SIX ASSESSMENT YEARS PENDING ON THE DATE OF INITIATION OF SEARCH UNDER 132 OR REQUISITION UNDER SECTION 132A AS THE CASE MAY BE SHALL ABATE. 15. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND A LSO DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS REFERRED BY LOWER AUTHORITIES IN THEIR RESPECTIVE ORDER AS WELL AS CI TED BY LD. A.R. AND D.R. DURING THE COURSE BEFORE US, IN THE CONTEXT OF FACTUAL MATRIX OF THE INSTANT CASES BEFORE US. FROM THE RECORD, WE F OUND THAT A SEARCH WAS CARRIED OUT UNDER SECTION 132(1) ON THE ASSESSE ES PREMISES ON 18.01.07 ON THE ALLEGATION THAT ASSESSEE OBTAINED A RTIFICIAL CAPITAL GAINS. HOWEVER, NOWHERE IN THE ASSESSMENT ORDER TH E AO HAS STATED ANY INCRIMINATING DOCUMENT, PAPER OR EVIDENC E FOUND DURING SEARCH IN ALLEGATION OF BOGUS CAPITAL GAIN. HOWEVE R, ON THE BASIS OF STATEMENT OF DIRECTOR OF THE COMPANIES FROM WHOM AS SESSEE HAS EARNED CAPITAL GAIN, THE AO HAS MADE ADDITION BY DE CLINING ASSESSEES CLAIM OF CAPITAL GAIN. THE ASSESSEE HAD ALREADY FILED INCOME TAX RETURNS FOR ALL THE ASSESSMENT YEARS UND ER CONSIDERATION SHOWING THE CAPITAL GAINS ON IMPUGNED SALE OF SHARE S AND ACCEPTED U/S 143(L) OF THE ACT FOR A.Y. 2002-03, 20 03-04 ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 26 AND 2005-06 AND U/S 143(3) OF THE ACT FOR A.Y. 2004 -05 PRIOR TO THE DATE OF SEARCH. AS PER THE CHART OF STATUS O F ASSESSMENT ON THE DATE OF SEARCH, AS REFERRED ABOVE IN PARA 6 OF THE ORDER NO ASSESSMENT AS SUCH COULD BE SAID TO BE 'PENDING' ON THE DATE OF INITIATION OF SEARCH AND AS SUCH, COULD NOT HE SAID TO HAVE ABATED' IN THE L IGHT OF THE CONTEXTUAL AND HARMONIZED READING OF THE SECOND PROVISO TO SECTION 153A(L) OF THE ACT . HOWEVER, FOR A.Y. 2005-06 ON THE DATE OF SEARCH THE TIME LIM IT FOR ISSUE OF NOTICE U/S 143(2) HAD EXPIRED AND AS SUCH NO PROCEEDING COULD BE INITIATED FOR THE SAID YEAR WHI CH IMPLIES THAT THE SAID ASSESSMENT WAS NOT PENDING ON THE DAT E OF SEARCH. NOW, APPLYING THE PRINCIPLE OF LAW LAID DOW N BY THE ITAT SPECIAL BENCH IN THE CASE OF ALL CARGO GLOBAL LOGISTIC LTD. (SUPRA), 137 ITD 287, WHICH WAS CONFIRMED BY T HE HONBLE BOMBAY HIGH COURT VIDE ITS ORDER DATED 21-4 -2015, TO THE FACTS OF THE INSTANT CASE, WE CAN REACH TO T HE CONCLUSION THAT NO ASSESSMENT WAS PENDING AND SINCE NO INCRIMI NATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH, THE ADDITIONS SO MADE WERE NOT JUSTIFIED. OUR VIEW IS ALSO SUPPOR TED BY THE DECISION OF COORDINATE BENCH (BOMBAY) IN CASE OF SH RI GURINDER SINGH BAWA (SUPRA), PRUTHVI INDUSTRIES (SU PRA), V.R.MACHINE TOOLS PVT. LTD. (SUPRA) AND IN THE CASE OF ZEENAT P. SANGHAVI (SUPRA), AS DISCUSSED ABOVE. 16. IN VIEW OF ABOVE DISCUSSION, SINCE NO INCRIMIN ATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH, THE ADDITION MADE UNDER SECTION 153A, WHEN THE ASSESSMENT WAS NO T PENDING, WAS NOT JUSTIFIED. 17. AS WE HAVE DECIDED THE LEGAL ISSUE IN FAVOUR OF THE ASSESSEE, WE ARE NOT GOING INTO MERITS OF THE ADDIT IONS SO MADE. 18. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE HEREBY ALLOWED. 2.7. WE NOTE THAT THE TRIBUNAL IN THE CASE OF HUSBAND OF THE ASSESSEE, WHICH IS ALSO PART OF THE SAME SEARCH AND SEIZURE OPERATION U/S 132(1) OF THE ACT AND THAT TOO ON IDENTICAL FACTS/ISSUE CLEARLY HELD THAT NO ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 27 INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH, CONSEQUENTLY, THE ADDITION MADE U/S 153A OF THE ACT, WHEN THE ASSESSMENT WAS NOT PENDING, IS NOT JU STIFIED. THE LD. DR DID NOT DISPUTE THIS FACTUAL MATRIX. APP LYING THE RATIO/PRINCIPLE LAID DOWN IN THE CASE OF ALL CA RGO LOGISTIC LTD. (SUPRA), WHICH WAS CONFIRMED BY HON'B LE JURISDICTION HIGH COURT, VIDE ORDER DATED 21/04/201 5, WE CAN REACH TO THE CONCLUSION THAT NO ASSESSMENT WAS PENDING AND SINCE NO INCRIMINATING MATERIAL WAS FOU ND DURING SEARCH, THE ADDITION SO MADE WAS UNJUSTIFIED . OUR VIEW ALSO FIND SUPPORT IN THE CASE OF GURINDER SING H BABA (SUPRA), PRUTHVI INDUSTRIES 141 ITD 151, V.R. MACHI NE TOOLS PVT. LTD. (ITA NO.4174 TO 4177/MUM/2013), ZEE NAT P SANGHVI (ITA NO.8026/MUM/2010) ORDER DATED 19/12/2014 AND JIGNESH P. SHAH (ITA NO.1553 AND 3173/MUM/2010) ORDER DATED 13/02/2015 ALONG WITH TH E DECISION OF THE COORDINATE BENCH IN THE CASE OF LMU INTERNATIONAL LTD. (119 TTJ 214). THE SUM AND SUBS TANCE AND THE RATIO LAID DOWN IN THE AFORESAID CASES IS T HAT, WHERE NO INCRIMINATING MATERIAL IS FOUND DURING THE COURSE OF SEARCH RELATING TO ANY ASSESSMENT YEARS, THEN TH E ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 28 ASSESSMENT FOR SUCH YEAR CANNOT BE DISTURBED. UNCONTROVERTEDLY, NO INCRIMINATING MATERIAL WAS FOU ND, THEREFORE, RESPECTFULLY FOLLOWING THE AFORESAID DEC ISIONS, THIS LEGAL ISSUE IS DECIDED IN FAVOUR OF THE ASSESS EE. 3. SO FAR AS, THE MERITS OF THE APPEAL IS CONCERNE D, SINCE, THE ISSUE IS COMMON FOR ASSESSMENT YEAR 2005 -06 AND 2006-07, IT CAN BE DISPOSED OFF BY THIS COMMON ORDER. THE FACTS, IN BRIEF, ARE THAT ORIGINALLY FOR BOTH T HE YEARS UNDER CONSIDERATION, THE DETAILS ARE SUMMARIZED AS UNDER:- SR. NO. A.Y. DATE OF FILING ORIGINAL RETURN TOTAL INCOME AS PER ORIGINAL RETURN DATE OF NOTICE ISSUED U/S 153A DATE OF FILING RETURN U/S 153A TOTAL INCOME AS PER RETURN U/S 153A 1. 2005- 06 12.08.2005 NIL 07.02.2008 07.03.2008 NIL 2. 2006- 07 04.10.2006 16,56,982 07.02.2008 07.03.2008 16.56,98 2 3.1. THE LD. ASSESSING OFFICER FRAMED ASSESSMENT U/S 153A R.W.S 143(3) OF THE ACT, BY PASSING CONSOL IDATED ORDER FOR ASSESSMENT YEAR 2001-02 TO 2007-08, ON 24/12/2008, DETERMINING THE TOTAL INCOME OF THE ASS ESSEE AT DIFFERENT FIGURES MAKING THE FOLLOWING ADDITIONS :- ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 29 GROUNDS A.Y. 2005-06 A.Y. 2006-07 ADDITION ON ACCOUNT OF ALLEGED BOGUS LONG TERM CAPITAL GAINS ON SALE OF SHARES OF ROBINSON IMPEX LTD. ` 65,78,860/ - 15,23,130/- ADDITION ON ACCOUNT OF ALLEGED EXPENDITURE INCURRED FROM UNDISCLOSED SOURCE TOWARDS PURCHASING COMMISSION TOWARDS PURCHASING THE SHARES ` 3,28,943/ - 76,156/- TOTAL ADDITIONS ` `` ` 69,07,803/ - ` `` ` 15,99,286/ - 3.2. AGAINST THE AFORESAID DECISIONS, THE ASSESSEE FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY, WHEREIN, THE ADDITIONS WERE CONFIRMED AS UNEXPLAINED CASH CR EDIT U/S 68 OF THE ACT AND THE ADDITION OF ` 65,78,860/- (ASSESSMENT YEAR 2005-06) AND ` 15,23,130/- (ASSESSMENT YEAR 2006-07) ON ACCOUNT OF ALLEGED BOGUS LONG TERM CAPITAL GAINS ON THE SALE OF SHARES OF ROBINSON IMP EX PVT. LTD., IT IS NOTED THAT THE ASSESSEE CHALLENGED THE ADDITIONS BEFORE THE LD. FIRST APPELLATE AUTHORITY UNDER DIFF ERENT SECTION, WHEREAS, THE LD. ASSESSING OFFICER MADE AD DITION OF THE AFOREMENTIONED AMOUNTS AND THE FIRST APPELLA TE AUTHORITY CONFIRMED THE SAME AS UNEXPLAINED CASH CR EDIT U/S 68 OF THE ACT. NO CROSS OBJECTION OR CROSS APPE AL HAS BEEN FILED BY THE REVENUE AGAINST CONFIRMATION OF A DDITIONS UNDER DIFFERENT SECTION BY THE FIRST APPELLATE AUTH ORITY. THE WHOLE ISSUE REVOLVES AROUND WHETHER, THE IMPUGN ED ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 30 AMOUNTS OF ` 65,78,860/- (ASSESSMENT YEAR 2005-06) AND ` 15,23,130 (ASSESSMENT YEAR 2006-07), BEING SALE PROCEEDS OF SHARES OF M/S ROBINSON IMPEX LTD. CAN B E TREATED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE AC T. THE ASSESSEE PURCHASED 50000 SHARES OF M/S ROBINSON WOR LD WIDE TRADE LTD. (FORMERLY KNOWN AS M/S ROBINSON IMP EX (INDIA) LTD.) FOR ` 76,052/- THROUGH M/S DPS SHARES AND SECURITIES PVT. LTD. (BSE CLEARING NO. 151, SEBI REGISTRATION NO. INB010986539), THE COPIES OF BILL FOR THE PURCHASES AS WELL AS THE LEDGER COPY OF BROKER ARE AVAILABLE AT PAGES 121 TO 123 OF THE PAPER BOOK. THE PURCHASE OF THESE SHARES WAS DULY REFLECTED BY THE ASSESSEE IN THE BALANCE SHEET FOR ASSESSMENT YEAR 2004-05, FILED AL ONG WITH RETURN OF INCOME OF THE SAID YEAR. THE COPY OF THE RETURN OF INCOME AND LIST OF INVESTMENT FOR ASSESSM ENT YEAR 2004-05 WAS FILED WITH THE INCOME TAX RETURN REFLECTING 50000 SHARES OF M/S ROBINSON IMPEX LTD. ARE AVAILABLE AT PAGES 124 TO 129 OF THE PAPER BOOK. TH E BENCH ASKED THE LD. COUNSEL FOR THE ASSESSEE WITH RESPECT TO SOURCE OF THE PURCHASE COST OF SHARES, IT WAS EXPLA INED THAT COST WAS SETTLED AGAINST THE SALE PROCEEDS OF SHARE S OF M/S ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 31 PAN PACKING OF ` 93,919/- SOLD BY THE ASSESSEE DURING FINANCIAL YEAR 2003-04 (RELEVANT TO ASSESSMENT YEAR 2004- 05) THROUGH THE SAME BROKER, WHICH WAS PURCHASED IN FINANCIAL YEAR 2002-03 AND WHICH WAS DULY REFLECTED IN THE BALANCE SHEET OF FINANCIAL YEAR 2002-03 (RELEVA NT TO ASSESSMENT YEAR 2003-04) UNDER THE HEAD INVESTMENT IN SHARES. TO SUBSTANTIATE ITS CLAIM, THE LD. COUNSEL FOR THE ASSESSEE INVITED OUR ATTENTION TO PAGES 129.1 TO 12 9.6 OF THE PAPER BOOK CONTAINING THE COPY OF THE SALE BILL ALONG WITH CONTRACT NOTE, LIST OF INVESTMENT FOR ASSESSME NT YEAR 2003-04, EVIDENCING THE SHARES OF PAN PACKING AND STATEMENT OF SHORT TERM CAPITAL GAIN/LOSS FOR FINAN CIAL YEAR 2003-04. THE SHARES OF M/S ROBINSON IMPEX (IN DIA) LTD. WERE PURCHASED IN PHYSICAL FORM AND DULY TRANS FERRED IN THE NAME OF THE ASSESSEE. THE FACE VALUE OF THES E SHARES WAS ` 10 EACH AND SHARES CERTIFICATE WERE RECEIVED IN LO T OF 100 SHARES. THE DETAILS OF PHYSICAL SHARE CERTIFIC ATE OF 50000 SHARES (GIVING THE CERTIFICATE NUMBERS, DISTI NCTIVE NUMBERS, FOLIO NUMBERS AND NUMBER OF SHARES ALONG W ITH SAMPLE COPY OF ONE CERTIFICATE OF 100 SHARES IS AVA ILABLE AT PAGES 130 TO 131.10 IS AVAILABLE AT PAPER BOOK). TH E LD. ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 32 COUNSEL EXPLAINED THAT, THEREAFTER, THE ASSESSEE AP PLIED FOR CONSOLIDATION OF ALL THE SMALL CERTIFICATE OF 100 S HARES EACH INTO ONE JUMBO CERTIFICATE OF 50000 SHARES, WHICH W AS RECEIVED FROM THE COMPANY, WHICH IS BEARING DISTINC TIVE NUMBERS 1293001 TO 1343000, CERTIFICATE NO.75084, F OLIO NUMBER T 82 AND THE CORRESPONDENCE LETTER FROM THE COMPANY ARE AVAILABLE AT PAGES 132 TO 133 OF THE PA PER BOOK. IT WAS ALSO ASKED BY THE BENCH FROM THE LD. C OUNSEL FOR THE ASSESSEE WHETHER ALL THESE DOCUMENTS WERE M ADE AVAILABLE TO THE LD. ASSESSING OFFICER/LD. COMMISSI ONER OF INCOME TAX (APPEAL). IT WAS SPECIFICALLY EXPLAINED THAT THESE DOCUMENTS WERE VERY MUCH MADE AVAILABLE BEFOR E BOTH THE AUTHORITIES. IT WAS ALSO EXPLAINED THAT TH E ASSESSEE HAD D-MAT ACCOUNT WITH ORIENTAL BANK OF COMMERCE (FORMERLY GLOBAL TRUST BANK) WITH CLIENT I D NO.80055254 IN WHICH THESE SHARES WERE DEMATERIALIZ ED ON 21/09/2004 FOR WHICH OUR ATTENTION WAS INVITED T O COPY OF THE DE-MAT STATEMENT SHOWING DEMATERIALIZATION O F 50000 SHARES OF M/S ROBINSON IMPEX INDIA LTD. AND S ALE THROUGH M/S PRUTHVI BROKERS AND SHARES HOLDINGS PVT . LTD. DURING FINANCIAL YEAR 2005-06 (PAGES 135 TO 13 8 OF ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 33 THE PAPER BOOK). IT IS NOTED THAT OUT OF THESE 5000 0 SHARES (PURCHASE IN FINANCIAL YEAR 2003-04) 43000 SHARES W ERE SOLD ON DIFFERENT DATES DURING RELEVANT FINANCIAL Y EAR 2004-05 AND BALANCE 7000 SHARES WERE SOLD ON DIFFER ENT DATES DURING FINANCIAL YEAR 2005-06 RELEVANT TO ASSESSMENT YEAR 2006-07. ALL THESE SHARES (50000) W ERE SOLD THROUGH M/S PRUTHVI BROKERS AND SHARES HOLDING S PVT. LTD. RESULTING IN LONG TERM CAPITAL GAIN OF ` 65,135,500/- AND ` 15,12,490/-. THE DETAILS OF WHICH ARE SUMMARIZED HEREUNDER:- DATE BROKERS NAME PURCHASE (QTY.) PURCHASE (AMT.) SALE (QTY) SALE (AMT.) 04.04.2003 DPS SHARES & SECURITIES PVT. LTD. 43,000 65,360 SALE OF SHARES IN A.Y. 2006-07 04.04.2003 PRUTHVI BROKERS & SHAREHOLDERS PVT. LTD. 1,000 1,94,088 PRUTHVI BROKERS & SHAREHOLDERS PVT. LTD. 4,200 7,22,231 PRUTHVI BROKERS & SHAREHOLDERS PVT. LTD. 2 000 3,79,575 PRUTHVI BROKERS & SHAREHOLDERS PVT. LTD. 3,000 5,68,080 PRUTHVI BROKERS & SHAREHOLDERS PVT, LTD. 7,500 14,39,935 PRUTHVI BROKERS & SHAREHOLDERS PVT. LTD. 5,700 9,98,369 PRUTHVI BROKERS & SHAREHOLDERS PVT. LTD. 1,400 2,34,822 PRUTHVI BROKERS & SHAREHOLDERS PVT. LTD. 1,000 1,03,600 PRUTHVI BROKERS & SHAREHOLDERS PVT. LTD. 7,500 8,16,925 PRUTHVI BROKERS & SHAREHOLDERS PVT. 9,500 11,21,235 ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 34 LTD. TOTAL 43,000 65,360 43,000 65,78,860 LONG TERM CAPITAL GAIN 65,13,500 DATE BROKERS NAME PURCHASE (QTY.) PURCHASE (AMT.) SALE (QTY) SALE (AMT.) 04.04.2003 DPS SHARES & SECURITIES PVT. LTD. 7,000 10,640 SALE OF SHARES IN A.Y. 2006-07 26.05.2005 PRUTHVI BROKERS & SHAREHOLDERS PVT. LTD. 1,000 2,16,580 27.05.2005 PRUTHVI BROKERS & SHAREHOLDERS PVT. LTD. 2,000 4,37,180 01.06.2005 PRUTHVI BROKERS & SHAREHOLDERS PVT. LTD. 3,000 6,53,340 06.06.2005 PRUTHVI BROKERS & SHAREHOLDERS PVT. LTD. 1,000 2,16,030 TOTAL 7,000 10,640 7000 15,23,130 LONG TERM CAPITAL GAIN 15,12,490 3.3. M/S PRUTHVI BROKERS AND SHARES HOLDINGS PVT. LTD. IS LISTED ON BOMBAY STOCK EXCHANGE (BSE) UNDER SCRIP CODE NO 532154. THE BROKER IS ASSESSED TO INCOME TA X HAVING PAN-AABCP3901B, SEBI REGISTRATION NO.INB011059830, CLEARING NO.529, SERVICE TAX NO.AABCP3901BST001. COPIES OF SALE BILLS ISSUED BY THE BROKER ARE AVAILABLE AT PAGES 138.1 TO 138.15 (ASSE SSMENT YEAR 2005-06) AND 138.18 TO 138.21 (ASSESSMENT YEAR 2006-07). THE LEDGER COPY IN THE PAPER BOOKS OF PRU THVI BROKERS AND SHARES HOLDINGS PVT. LTD AND CONFIRMATI ON OF SALE FROM THE BROKER ARE AVAILABLE AT PAGES 138.16 TO 138.17 (ASSESSMENT YEAR 2005-06) AND 138.22 TO 138. 25 ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 35 (ASSESSMENT YEAR 2006-07) OF THE PAPER BOOK. THE P OOL ACCOUNT OF M/S PRUTHVI BROKERS AND SHARES HOLDINGS PVT. LTD. HAVING CLIENT ID NO.80055254 WITH ORIENTAL BAN K OF COMMERCE, SHOWING DELIVERY OF SHARES OF M/S ROBINSO N IMPEX LTD. TO THE POOL ACCOUNT AND SUBSEQUENTLY DEL IVERY OF SHARES FROM THIS POOL ACCOUNT TO BOMBAY STOCK EXCHANGE ON SALE OF SHARES IS AVAILABLE AT PAGES 14 1 TO 152 (ASSESSMENT YEAR 2005-06) AND 167 TO 171 (ASSESSMEN T YEAR 2006-07) IS AVAILABLE IN THE PAPER BOOK. THE RELEVANT COPIES OF TRADE FILES RECEIVED BY M/S PRUTHVI BROKE RS AND SHARES HOLDINGS PVT. LTD., FROM BSE, FOR THE SETTLE MENT PERIOD CONFIRMING THE SALE TRANSACTIONS OF M/S ROBI NSON IMPEX LTD. UNDER CLIENT CODE NO.D003 ARE AVAILABLE AT PAGES 153 TO 166 (ASSESSMENT YEAR 2005-06) AND 172 TO 175 (ASSESSMENT YEAR 2006-07). ALL THESE EVIDENCES CLEARLY FORTIFIES THE CLAIM OF THE ASSESSEE REGARDI NG GENUINENESS OF SALE TRANSACTION. AS EXPLAINED BY TH E LD. COUNSEL FOR THE ASSESSEE, THESE DOCUMENTS WERE DULY MADE AVAILABLE TO LD. ASSESSING OFFICER AS WELL AS TO TH E FIRST APPELLATE AUTHORITY. IT IS NOTEWORTHY THAT THE SAL E PROCEEDS WERE DULY RECEIVED BY THE ASSESSEE BY WAY OF ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 36 ACCOUNT PAYEE CHEQUE, WHICH WERE CREDITED IN HDFC B ANK, ACCOUNT NO. 0601330003532 OF THE FORT BRANCH OF HDF C. COPIES OF BANK STATEMENT ARE AVAILABLE AT PAGES 176 TO 177 OF THE PAPER BOOK. THE ASSESSEE CLAIMED LONG TERM C APITAL GAINS OF ` 65,13,500/- (ASSESSMENT YEAR 2005-06) AND ` 15,12,490/- (ASSESSMENT YEAR 2006-07) AND CLAIMED EXEMPTION OF THE SAME U/S 10(38) OF THE ACT. THE LD . ASSESSING OFFICER DISBELIEVED THE CLINCHING EVIDENC ES AND MADE ADDITION BY PLACING RELIANCE UPON THE STATEMEN T RECORDED ON 18/01/2007, BEFORE THE INVESTIGATION WI NG, OF SHRI PRATIK C. SHAH, DIRECTOR OF M/S DPS SHARES & SECURITIES PVT. LTD. AND BY THE ASSESSING OFFICER O N 18/11/2008 BY TENDERING THAT THE PURCHASE BILLS AND THE CONTRACT NOTES IN RESPECT OF 50000 SHARES WERE OFF MARKET AND WERE NOT REGISTERED WITH BSE, THEREFORE, THESE ARE BOGUS ACCOMMODATION BILLS. THIS STATEMENT OF MR. SH AH HAS BEEN REPRODUCED IN THE ASSESSMENT ORDER AND HEA VILY RELIED UPON BY THE LD. ASSESSING OFFICER WHILE MAKI NG THE ADDITION. RELYING UPON THE STATEMENT THE LD. ASSESS ING OFFICER MADE THE FOLLOWING CONCLUSION:- I. THE ASSESSEE WAS NOT ABLE TO PRODUCE THE PARTIES FR OM ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 37 WHOM THE PURCHASE AND SALES OF SHARE TRANSACTIONS W ERE MADE AND PROVE THE GENUINENESS OF TRANSACTIONS, PARTICULARLY PURCHASE PARTY M/S DPS SHARE & SECURIT IES PVT. LTD. (PARA 4.1 OF THE ASSESSMENT ORDER). II. THE ASSESSEE HAS NOT BEEN ABLE TO PROVE FROM WHOM I T HAS PURCHASED THE SHARES OF M/S ROBINSON WORLDWIDE. (PARA 10.2.1 OF THE ASSESSMENT ORDER). III. THE ASSESSEE HAS NOT BEEN ABLE TO PROVE FROM WHOM I T HAS RECEIVED PHYSICAL DELIVERY OF SHARES OF M/S ROB INSON WORLDWIDE IN LIGHT OF THE STATEMENT OF M/S DPS SHAR E & SECURITIES PVT LTD (PARA 10.2.2 OF THE ASSESSMENT ORDER). IV. IT HAS NOT BEEN ABLE TO PROVE WITH DOCUMENTARY EVIDENCE THE ACTUAL DATE ON WHICH IT HAS RECEIVED P HYSICAL DELIVERY OF SHARES SINCE THE DE-MAT DELIVERY OF SHA RES HAS BEEN RECEIVED NEAR ABOUT THE DATE OF SALE OF SHARES (PARA 10.2.3 OF THE ASSESSMENT ORDER) V. THE PLEA OF THE ASSESSEE THAT AROUND 4-5 YEARS BACK IT WAS NOT MANDATORY TO CONDUCT TRANSACTIONS ON THE BS E IS AN AFTERTHOUGHT. MOREOVER THE ASSESSEE HAS NOT F ILED ANY DOCUMENTARY EVIDENCES TO PROVE WHETHER IT HAD RECEIVED ANY SUCH PERMISSION FROM BSE FOR OFF MARKE T TRANSACTIONS (PARA 10.2.4 OF THE ASSESSMENT ORDER) VI. ENQUIRIES WERE CONDUCTED BY ISSUING NOTICE U/S 133( 6) OF THE ACT WITH THE PURCHASE BROKER. (PARTS 9 OF THE ASSESSMENT ORDER). NO INQUIRY WAS HOWEVER MADE IN THE CASE OF SALES BROKER M/S. PRUTHVI BROKERS & SHAREHOLDINGS PVT. LTD. VII. WITH REGARDS TO THE ALLEGED COMMISSION AT 5 PERCENT , THE ASSESSING OFFICER RELIED ON THE DECISION OF SUM ATI DAYAL REPORTED AT 214 ITR 801 TO STATE THAT IT IS APPARENT THAT WHEN THE ASSESSEE HAS OBTAINED ARTIFI CIAL ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 38 CAPITAL GAIN HE WOULD HAVE TO PAY SOME SORT OF COMPENSATION TO THE OPERATORS SINCE THE OPERATORS H AVE CARRIED OUT THIS ILLEGAL ACTIVITY AT A LARGE SCALE. FURTHER, RELIANCE WAS PLACED ON THE ORDER OF THE CIT(A) IN T HE CASE OF SHRI ASHOK MEHTA WHEREIN THE CIT(A) HAD CONFIRME D PAYMENT OF COMMISSION AT THE RATE OF 5 PERCENT. (PARA 10.2.5 OF THE ASSESSMENT ORDER). 3.4. ON APPEAL, BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEAL), THE FACTS WERE CONSIDERED AND BROADLY, FOLLOWING CONCLUSION WAS ARRIVED AT BY THE FIRST APPELLATE AUTHORITY. I. THE LD. CIT(A) HAS DISCUSSED THE MODUS OPERANDI ADOPTED BY OPERATORS IN GENERAL FOR FABRICATING SHA RE TRANSACTIONS RESULTING IN ARTIFICIAL/BOGUS CAPITAL GAINS. II. THE DIRECTOR OF MIS. DPS SHARES & SECURITIES PVT. L TD., SHRI PRATIK SHAH IN HIS STATEMENT U/S. 131 OF THE ACT HA S STATED THAT THE TRANSACTIONS OF SHARES OF M/S. ROBI NSON WERE NOT GENUINE. III. THE PURCHASE OF SHARES WAS NOT MADE THROUGH BANKING CHANNELS AND WAS SHOWN THROUGH SPECULATION INCOME. IV. NEITHER BROKERAGE NOR SERVICE CHARGES WERE CHARGED ON SPECULATION TRANSACTIONS NOR ON PURCHASE OF SHARES OF MIS. ROBINSON. V. IN THE CONTRACT NOTES, THE ASSESSEE/CLIENT PAN IS N OT MENTIONED. VI. THE STATEMENT OF SHRI SUJAL C. SHAH RECORDED U/S. 1 31, DIRECTOR OF M/S. DPS SHARES & SECURITIES PVT. LTD., RECONFIRMS THAT THE ASSESSEE HAD NOT PURCHASED SHAR ES OF MIS. ROBINSON. VII. FURTHER, THE ASSESSEE WAS ALLOWED TO CROSS-EXAMINE M/S. DPS SHARES & SECURITIES PVT. LTD. AND THE BROK ER MIS. DPS SHARES & SECURITIES PVT. LTD. CONCEDED THA T ALL ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 39 THE BILLS AND CONTRACT NOTES INCLUDING THE SHARES O F M/S. ROBINSON ISSUED BY THEM WERE FOR ACCOMMODATION PURPOSES. VIII. ENQUIRIES WERE MADE FROM BSE WHICH SHOWS AND 'TRADE FILES' OF THE BROKER M/S. DPS SHARES & SECURITIES P VT. LTD. WAS SHOWN TO THE ASSESSEE WHEREIN THE TRANSACTIONS OF SPECULATION GAINS, WHICH WERE THE SOURCE OF PURCHASE OF SHARES OF M/S ROBINSON WORLDWIDE TRADE, WERE NOT REFLECTED. 3.5. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF K EPT IN JUXTAPOSITION AND ANALYZED, NOW QUESTION ARISES WHE THER THE SALE PROCEEDS OF SHARES OF ROBINSON WORLWIDE LT D. CAN BE TREATED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT FOR THE YEARS UNDER CONSIDERATION, IT SEEMS THAT THE WH OLE ADDITION WAS MADE BY THE ASSESSING OFFICER AND CONF IRMED BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL) IS B ASED UPON THE STATEMENT OF THE DIRECTORS OF M/S DPS SHAR ES & SECURITIES PVT. LTD., THE LD. ASSESSING OFFICER HAS ALSO CONSIDERED THE STATEMENT OF SHRI SUJAT C. SHAH U/S 131 OF THE ACT DATED 18/01/2007 (PAGE-19 OF THE ASSESSMENT ORDER), WHICH IS REPRODUCED HEREUNDER FOR ANALYSIS: - 'Q. 1. PLEASE IDENTIFY YOURSELF PLEASE ALSO CONFIRM THA T AN ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 40 OATH HAS BEEN ADMINISTERED ON YOU AND THE CONSEQUEN CES OF GIVING A FALSE STATEMENT IS EXPLAINED TO YOU. ANS. I AM SUJAL CHANDRAKANT SHAH, S/O. MR. CHANDRAK ANT K. SHAH. I CONFIRM THAT AN OATH HAS BEEN ADMINISTER ED ON ME AND THE CONSEQUENCES OF GIVING A FALSE STATEMENT HAS BEEN EXPLAINED TO ME. Q. 2 WHAT ARE YOUR SOURCES OF INCOME? ANS: STOCK BROKERAGE. Q.3 PLEASE EXPLAIN IT IN DETAIL. ANS. MY CARD IS SUSPENDED BY BSE, I HAVE TAKEN NSE TERMINAL-SHIP FROM ONE OF THE NSE BROKER, WHO CHARG ES ME 1.5% BROKERAGE, IN RETURN, I CHARGE MY VARIOUS CLIE NTS 3.0%. Q. 4 PLEASE GIVE THE NAME OF THE BROKER FOR WHOM YO U ARE DOING TRADING BUSINESS. ANS. EXCEL MERCANTILE PRIVATE LTD. HE IS A NSE BROK ER. Q. 5 SINCE WHEN YOU HAVE STARTED THIS BROKERAGE BUS INESS? ANS. I STARTED THIS IN JUNE, 2006. BEFORE THAT I US ED TO TRADE ON MY TERMINAL FOR VARIOUS CLIENTS. Q. 6 OTHER THAN THE SO CALLED BROKERAGE BUSINESS DO NE BY YOU, HAVE YOU EVER UNDERTOOK ANY OTHER TYPE OF BUSI NESS IN SHARES IN ANY OTHER MANNER. IF SO, PLEASE DESCRIBED IN DETAILS. ANS. APART FROM THIS FOR THE YEAR 2003 - 04 AND 2004-05, WE HAD ISSUED OFF-MARKET PURCHASE BILLS IN THE YEAR 05 - 06. Q. 7 TO WHOM FOR AND IN WHAT SCRIPS YOU HAD BEEN INDULGING IN OFF-MARKET OPERATIONS? ANS. MR. NARESH JAIN & NARESH SABOO HAVING OFFICE A T BLUE MOON CHAMBERS, N M ROAD, FORT, MUMBAI 400001. ON KNOWING THAT WE WERE IN FINANCIAL CRUNCH AND TO FACILITATE OUR MARKET OBLIGATION I.E. PAY-IN OF BSE, APPROACHED US AND ASKED THAT THEY WOULD BE HELPFUL TO US FINANCIALLY, PROVIDED WE GIVE ACCOMMODATION OF BILL S TO THEIR CLIENTS. Q. 8 WHO GIVES THE NAME OF CLIENTS AND HOW THEY CAM E INTO CONTACT WITH YOU? ANS. WE HAVE NO DIRECT CONTACT WITH THE BENEFICIARI ES. MR. NARESH JAIN & NARESH SABOO USED TO GIVE THE NAME OF ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 41 BENEFICIARIES WITH ADDRESSES TO US AND AS DESIRED B Y THEM, WE USED TO GIVE OFF MARKET BILLS/ACCOMMODATION BILL S. Q. 9 PLEASE STATE WHETHER THESE BILLS WERE GENUINE? ANS. THESE TRANSACTIONS WERE NOT ON THE BSE TERMINA L, AND HENCE WERE NOT GENUINE. Q. 10 PLEASE EXPLAIN THE MODUS OPERANDI ADOPTED BY YOU, FOR THE ABOVE OFF-MARKET/NON GENUINE TRANSACTION AN D IN WHAT WAY THE BENEFICIARIES ARE BENEFITED? ANS. AS STATED ABOVE, THIS TRANSACTION WERE ONLY ACCOMMODATION BILLS, GIVEN BY US IN THE NAME OF ULT IMATE BENEFICIARIES, AS REQUIRED BY SHRI NARESH SABOO AND SHRI NARESH JAIN. WE HAVE NEVER HANDED OVER THESE BILLS TO THE BENEFICIARIES DIRECTLY. IN FACT, WE WON'T BE ABLE T O RECOGNIZE THE BENEFICIARIES TO WHOM WE HAVE ISSUED THE BILLS. WE ARE NOT IN A POSITION EVEN TO GIVE THE DISTINCTIVE NUMB ERS OF THE SHARES, AS IN REALITY, NO TRANSACTION WAS DONE ON THE BSE FLOOR. Q. 11 WHETHER THE SHARES WERE LISTED ON THE BSE? ANS. THESE SHARES WERE NOT TRADED ON THE FLOOR ON B SE, AS THESE SHARES WERE NOT LISTED ON BSE. IN THE YEAR 20 03-04 AND 2004-05 (F. Y), THIS COMPANIES WERE NOT LISTED IN BSE. BUT THE SAID COMPANIES WERE LISTED IN BSE IN 2005-0 6. I WANT TO FURTHER CLARIJI THAT WHEN WE ISSUED THE PUR CHASE BILL AT THAT TIME, THE COMPANY WAS NOT LISTED IN BS E.' Q. 12 PLEASE STATE, THE NAME OF THE COMPANIES, FOR WHICH YOU HAVE ISSUED BOGUS BILLS, AS PER THE REQUIREMENT OF SHRI NIARESH SABOO AND SHRI NARESH JAIN OR ANY OTHER PER SON. ANS. WE HAVE ISSUED THE BOGUS BILLS ON THE INSTRUCT IONS OF MR. NARESH JAIN AND NARESH SABOO IN ONLY ONE COMPAN Y, WHICH IS M/S. ROBINSON WORLDWIDE LTD. APART FROM TH IS, I HAVE ISSUED SOME BILLS IN M/S. FASTTRACT ENTERTAINM ENT LTD. AS PER THE DIRECTIONS FROM MR. SIRISH C. SHAH, HAVING ADDRESS AT MEGHDOOT APT., FOURTH FLOOR, MARI NE DRIVE, MUMBAI. Q. 13 WHAT IS THE QUANTUM OF SHARES OF M/S. ROBINSON WORLDWIDE LTD AND WS. FASTTRACT ENTERTAINMENT AROUND 8-10 LAC SHARES. ANS. AS THIS MATTER IS OLD, I DON'T EXACTLY REMEMBE R THE ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 42 QUANTUM, BUT AS PER MY MEMORY, IN M/S. ROBINSON WORLDWIDE LTD AROUND 40 LAC SHARES, AND IN FASTTRAC K ENTERTAINMENT AROUND 8 10 LAC SHARES. Q. 14 HAVE YOU MAINTAINED ANY REGISTER FOR THE ABOV E OPERATION? ANS. WE HAVE MAINTAINED THE DETAILS IN COMPUTER. I AM SUBMITTING HEREWITH A HARD AND SOFT COPY OF THE DOCUMENTS/DATA FOR YOUR PERUSAL. Q. 15 HAD YOU BEEN ACCEPTING OR PAYING CASH REGARDI NG THE ABOVE TRANSACTIONS FROM ANYBODY? ANS. I HAVE NOT ACCEPTED OR PAID ANY CASH REGARDING THE WHOLE OPERATION FROM ANYBODY, EXCEPT FOR THE COMMIS SION @ ONE PAISE PER SHARE, IN CASH FROM SHRI NARESH SABOO AND THE SAME AMOUNT OF ONE PAISE PER SHARE WAS RECEIVED BY US FROM MR. SIRISH C. SHAH S/O. MR. CHANDULAL SHAH. Q. 16 FROM THE DATA FURNISHED BY YOU, IT IS SEEN TH AT YOU HAVE GIVEN QUANTITY OF SHARES AND RATE ONLY. HOWEVE R, NO INFORMATION IS AVAILABLE ABOUT THE SALES. PLEASE EX PLAIN THE SAME. ANS. AS STATED EARLIER, MY WORK WAS LIMITED TO THE EXTENT OF ISSUING OF PURCHASE BILL AS PER THE REQUI REMENT OF SHRI NARESH SABOO TO THE ULTIMATE BENEFICIARIES, WHO ARE KNOWN ONLY TO SHRI NARESH SABO. JAM NOT AWARE, AT WHAT RATE AND WHEN THE ULTIMATE BENEFICIARIES HAVE SOLD THESE SHARES. HENCE THESE DATA ARE NOT AVAILABLE WITH ME. Q. 23 I ONCE AGAIN DRAW YOUR ATTENTION TO THE STATE MENT, GIVEN ABOVE BY YOU THAT YOU HAVE ISSUED BOGUS PURCH ASE BILLS AND IN VERY FEW CASES, SALES HILLS ARE ALSO E SPECIALLY AS PER THE REQUIREMENTS OF SHRI NARESH SABOO AND NA RESH JAIN, YOU HAVE FURTHER STATED THAT YOU HAVE NOT BEE N ISSUED THE BILLS DIRECTLY TO THE BENEFICIARIES AND EVEN YO U HAVE NOT ACCEPTED OR PAID/GIVEN ANY CASH DO YOU CONFIRM THE SAME? ANS. YES I DO CONFIRM WHAT I HAVE STATED ABOVE.' 3.6. IT IS ALSO NOTED THAT THE LD. ASSESSING OFFIC ER ALSO PLACE RELIANCE UPON THE STATEMENT DATED 18/11/ 2008, RECORDED U/S 131 OF THE ACT, OF SHRI PRATIK C. SHAH AND ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 43 THUS THE WHOLE ADDITION IS BASED UPON BOTH THESE STATEMENTS, BUT AT THE SAME TIME, NO EVIDENCE WAS B ROUGHT ON RECORD BY THE LD. ASSESSING OFFICER, CORROBORATI NG THE STATEMENTS, IGNORING THE DOCUMENTS/EVIDENCES FILED BY THE ASSESSEE, WHICH ARE SUMMARIZED HEREUNDER:- ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 44 3.7. TOTALITY OF FACTS CLEARLY INDICATES THAT THE SALE OF SHARES BY THE ASSESSEE AND GETTING THE SALE PROCEED S BY CHEQUE IS NOT IN DISPUTE. THE ASSESSEE GOT THE SHAR ES DE- MATED IN THE BSE, WHICH IS ALSO NOT IN DISPUTE. TH E SOURCE OF INVESTMENT IN THE SHARES, AS MENTIONED EA RLIER, IN EARLIER PARAS OF THIS ORDER IS ALSO EXPLAINED BY THE ASSESSEE. UNDER THESE CIRCUMSTANCES, IT IS AN ACCEP TED PRINCIPLE OF LAW THAT DOCUMENTARY EVIDENCE HAS TO G IVE PRECEDENCE OVER THE ORAL STATEMENT UNLESS AND UNTIL IT IS CORROBORATED WITH DOCUMENTARY EVIDENCE. THE WHOLE C ASE OF THE REVENUE IS BASED UPON THE STATEMENTS, WHICH IS NOT CORROBORATED WITH FACTS. THUS, WE ARE OF THE VIEW T HAT ADDITION CANNOT BE SUSTAINED MERELY ON THE BASIS OF STATEMENT IGNORING THE DOCUMENTARY EVIDENCES BROUGH T ON RECORD BY THE ASSESSEE. OUR VIEW FINDS SUPPORT FROM THE DECISION FROM HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS SHRI OM PRAKASH JAIN ITXA NO 1242 OF 2008 (BORN) WHERE IN THE HON'BLE BOMBAY HIGH COURT HAS H ELD AS UNDER (PAGE NOS 428-431 OF THE PAPER BOOK -II). THE RELEVANT PORTION FROM THE AFORESAID ORDER IS REPROD UCED HEREUNDER:- ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 45 6. ON BEHALF OF THE ASSESSEE, THE LEARNED COUNSEL S UBMITS THAT WHEN THERE WAS DOCUMENTARY EVIDENCE AVAILABLE, IT WAS OPEN TO THE LEARNED TRIBUNAL TO COME TO THE CONCLUSIO N THAT THE STATEMENT OF THE ASSESSEE WHICH WAS RETRACTED WERE GIVEN UNDER DURESS OR COERCION. IT IS FURTHER SUBMITTED T HAT IN THE CASE OF SANJAY JAM, THE TRIBUNAL PROCEEDED ON THE FOOTING T HAT THE DOCUMENTS WERE PRODUCED AND IN THESE CIRCUMSTANCES, DELETED THE ADDITIONS. NO FAULT CAN BE FOUND WITH THIS APPROACH OF THE TRIBUNAL. 7. IN SO FAR AS OTHER ASSESSES ARE CONCERNED, IT IS POINTED OUT THAT THE DOCUMENTARY EVIDENCE WAS AVAILABLE BEFORE THE A. 0. BUT THE A. 0. AND CIT(A) HAVE NOT CONSIDERED THE SAME AN D THE MATTER HAS BEEN REMANDED BACK FOR RECONSIDERATION. 8. AFTER HEARING THE LEARNED COUNSEL, WE ARE OF THE OPINION THAT THE ORDER OF THE TRIBUNAL CANNOT BE SUSTAINED, IN THE FIRST INSTANCE APART FROM THE RETRACTED STATEMENT OF 21.1 .2004, SUBSEQUENT STATEMENT MADE ON 25.3.2004 HAS NOT BEEN CONSIDERED SECONDLY, THERE WAS DOCUMENTARY EVIDENCE ON RECORD THE A. 0. WHILE CONSIDERING WHETHER THE RETR ACTION WAS UNDER DURESS OR COERCION HAD ALSO TO CONSIDER T HE GENUINENESS OF THE DOCUMENTS WHICH WERE PRODUCED AS THIS IS DOCUMENTARY EVIDENCE. THE TEST OF EVIDENTIARY VALUE OF THE ORAL EVIDENCE AND THE DOCUMENTARY EVIDENCE HAS TO B E BORNE IN MIND THE A.O. WILL HAVE TO COMPLY WITH THE SETTLED PRINCIPLE OF LAW. DOCUMENTARY EVIDENCE IFGENUINE MUST PREVAIL OV ER THE ORAL STATEMENT. WE HOWEVER, DO NOT PROPOSE TO GO INTO TH ESE ISSUE AS THEY HAVE NOT BEEN CONSIDERED OR ANSWERED. WE PROPO SE TO REMAND THE MATTERS FOR FRESH CONSIDERATION OF THE A . 0. ON ALL THESE ASPECTS. 3.8. LIKEWISE, THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CHANDRAKANT N. SETH (2004) 89 TTJ (CAL) 417(PAGE NOS. 432-441 OF THE PAPER BOOK - II) HELD THAT ' IN THE ABSENCE OF ANY LINK OR NEXUS ESTABLISHED BY THE A 0, EITHER DIRECTLY OR CIRCUMSTANTIAL EVIDENCES SO AS TO CONCLUSIVELY SHOW THAT D WAS CARRYING ON BUSINESS FOR AN ON BEHALF OF THE ASSESSEE, AO WAS N OT ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 46 JUSTFLED IN TREATING D AS BENAMIDAR OF ASSESSEE ONL Y ON THE BASIS OF CONTRARY ORAL STATEMENT OF D AND MAKING ADDITION IN THE HANDS OF ASSESSEE.' 3.9. LIKEWISE, THE THIRD MEMBER BENCH OF THE DELHI TRIBUNAL IN INDIA SEED HOUSE VS. ACIT (2000) 69 TTJ (DEL) (TM) 241(PAGE NOS 442-472 OF THE PAPER BO OK - II): HELD AS UNDER: 'SEARCH & SEIZURE BLOCK ASSESSMENT COMPUTATION OF UNDISCLOSED INCOME AO MADE ADDITION OF PEAK INVESTMENT ON UNA CCOUNTED SALES ON THE BASIS OF STATEMENT OF P, MANAGING PARTNER OF AS SESSEE FIRM HOWEVER, ASSESSEE IS ABLE TO PROVE FROM A SEIZED PA PER ITSELF THAT IT WAS MAKING PURCHASES ON CREDIT AND WAS MAKING PAYMENTS FROM REALIZATION OF SALES SUCH PAPER CANNOT BE IGNORED THERE IS NO MATERIAL WITH THE AO TO ARRIVE AT THE FIGURE OF PEAK INVESTMENT SAID PAPER FALSIFIES THE STATEMENT GIVEN AT THE TIME OF SEARCH NO ADDITION CAN BE MADE MERELY ON THE BASIS OF STATEMENT WHICH IS FULLY PROVED TO BE INCORRECT THUS THERE WAS NO JUSTIFICATION FOR MAKING ANY ADDITION ON ESTIMATE BASIS.' 3.10. IF THE AFORESAID JUDICIAL PRONOUNCEMENTS ARE KEPT IN JUXTAPOSITION WITH THE FACTS OF THE PRESENT APPEAL AND ANALYZED, IT IS TO BE NOTED THAT BOTH THE DIREC TORS OF THE BROKER, M/S. DPS SHARES & SECURITIES HAVE STATE D THAT THE ALLEGED ACCOMMODATION ENTRIES HAVE BEEN ISSUED BY THEM ON THE INSTRUCTIONS OF THIRD PERSONS, SHRI NAR ESH SABOO AND SLUI SHIRISH C. SHAH. THESE STATEMENTS AR E GENERAL IN NATURE AND NO REFERENCE HAS BEEN MADE TO THE ASSESSEE AT ALL. FURTHER, IN HIS STATEMENT, SHRI PR ATIK C. ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 47 SHAH HAS STATED THAT HE HAD NOT CHARGED ANY SERVICE TAX ON THE SAID TRANSACTIONS AND HAS NOT PAID SERVICE T AX TO THE GOVERNMENT. THIS SHOWS THAT THE BROKER, M/S. DP S SHARES 8Z SECURITIES IS AN INTERESTED PARTY AND THE REFORE NO RELIANCE CAN BE PLACED ON THEIR STATEMENT. AT TH IS JUNCTURE, IT WOULD ALSO BE RELEVANT TO REFER TO THE JUDGMENT OF THE HON'BLE MUMBAI TRIBUNAL IN THE CASE OF SRI BHAGVANDAS GORDHANDAS VS. DCIT IN ITA NO. 5021/MUNI196 (PAGE NOS 473-498 OF THE PAPER BOOK I I) RENDERED UNDER SOMEWHAT SIMILAR CIRCUMSTANCES. IN T HE SAID CASE, THE ASSESSEE SRI BHAGWANDAS GORDHANDAS (BG), PROPRIETOR OF M/S. BHAGWANDAS GORDHANDAS (MBG) WAS ENGAGED IN THE BUSINESS OF SHARE BROKING, SHARE JOBBING AND TRADING IN SHARES. A SEARCH WAS CONDUCTED IN THE CASE OF A BROKER M/S. T.H. VAKIL ( MTHV) IN AUGUST 1992. DURING THAT SEARCH, SRI RAJCN C. VA KIL (RCV), PROP OF MTHV ADMITTED ABOUT TRANSFERRING OF HAWALA LOSSES TO A NUMBER OF SHARE BROKERS, INCLUDI NG THE ASSESSEE-ASSESSEE. RELYING ON THE ADMISSION/ STATEM ENT OF RCV, THE A.0 TREATED NINE TRANSACTIONS OF THE AS SESSEE WITH MTHV TO BE NON-GENUINE AND MEANT SIMPLY FOR ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 48 TRANSFERRING FICTITIOUS SPECULATION LOSSES AGGREGAT ING TO RS. 59,41,5001- TO THE ASSESSEE. GIVEN THE AFORESAI D FACTS, THE HON'BLE TRIBUNAL AT PARA 27 OF THE ORDER RULED AS UNDER: ....THE DEPONENT OR DECLARANT IS HIMSELF TAINTED IN AS MUCH AS HE HIMSELF IS INVOLVED IN THE TRANSACTIONS AND HIS ABOVE STATEMENT PARTAKES THE NATURE OF A SELF- EXPLANATORY STATEMENT IN THE CIRCUMSTANCES AN IMPORTANT CHARACTERISTIC, SO ESSENTIAL FOR RELIABILITY OF STATEMENT OF THE DEPONENT, OF BEING UNINTERESTED OR NON- INTERESTED, WHICH, LENDS CREDENCE, BASED ON IMPARTIALITY, TO THE DEPOSITION GETS LOST. AS A RES ULT MERELY A BARE STATEMENT OF SUCH A TAINTED, DEPONENT , MAY NOT JUSTIFIABLY BE TREATED AS SUFFICIENT ENOUGH TO FASTEN THE LIABILITY ON ANOTHER PERSON, SAY ASSESSE E, WHEN THAT ANOTHER PERSON (ASSESSEE) IS DENYING THE FACTS CONTAINED IN THAT STATEMENT AND IS ALLEGING THE SAM E TO BE INCORRECT . 3.11. IN THE LIGHT OF THE FOREGOING DECISION/FINDI NGS OF VARIOUS JUDICIAL AUTHORITIES, THERE IS NO DISPUTE T HAT THE ASSESSEE HAD PURCHASED THE SHARES OF M/S. ROBINSON WORLDWIDE TRADE LIMITED FOR WHICH THE ASSESSEE HAS SUBMITTED THE PURCHASE BILLS & LEDGER ACCOUNT OF TH E PURCHASE BROKER. THE ASSESSEE HAD SETTLED THE PURCH ASE COST AGAINST THE SALE PROCEEDS OF SHARES OF MIS. PA N PACKAGING OF RS. 93,919/- SOLD DURING THE F.Y 2003- 04 ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 49 RELEVANT TO A.Y. 2004-05. THE SAID TRANSACTIONS AND EVEN THE PURCHASES HAVE BEEN ACCEPTED BY THE DEPARTMENT WHILE PASSING THE ORDER U/S. 153A R.W.S. 143(3) OF THE ACT FOR A. Y. 2004-05. ORIGINALLY, THE SHARES WERE ISSU ED IN PHYSICAL FORMAT WHICH GOT TRANSFERRED IN ASSESSEE'S NAME ON 14.06.2003. THE SAID FACT CAN BE ASCERTAINED FRO M THE LETTER RECEIVED BY THE ASSESSEE FROM MIS. ROBINSON WORLDWIDE TRADE LIMITED. THE SHARES OF THE ASSESSEE WERE CONSOLIDATED AND THE ASSESSEE WAS ISSUED JUMBO SHAR E CERTIFICATE. THEREAFTER, THE SAID SHARES WERE DEMAT ERIALIZED TO DE-MAT ACCOUNT OF THE ASSESSEE HELD WITH ORIENTA L BANK OF COMMERCE (FORMERLY KNOWN AS GLOBAL TRUST BANK). SUCH DE-MATED SHARES WERE SOLD THROUGH M/S. PRUTHVI BROK ERS & SHAREHOLDINGS PVT. LTD. AS CAN BE SEEN FROM THE SAL E BILLS SUBMITTED BY THE ASSESSEE. FURTHER, THE PAYMENTS FO R THE SALE OF SAID SHARES HAVE BEEN RECEIVED BY THE ASSES SEE THROUGH ACCOUNT PAYEE CHEQUES. THE ASSESSING OFFIC ER HAS FURTHER RELIED ON THE SO-CALLED CROSS-EXAMINATI ON CONDUCTED IN THE CASE OF THE ASSESSEE. FIRST AND FO REMOST, IT IS SUBMITTED BY THE ASSESSEE THAT DIRECTORS OF T HE BROKER, M/S. DPS SHARES & SECURITIES PVT. LTD. HAVE NOWHERE ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 50 SPECIFICALLY STATED IN THEIR RESPECTIVE STATEMENTS THAT THEY HAVE ISSUED ACCOMMODATION ENTRIES TO THE ASSESSEE. T HERE IS NO LIVE LINK BETWEEN THE STATEMENT AND THE ASSESSEE. THEY HAVE SIMPLY STATED THAT THEY ISSUED ACCOMMODATION ENTRIES ON INSTRUCTIONS OF CERTAIN TH IRD PARTIES. FURTHER, NO STATEMENTS OF SUCH THIRD PARTI ES HAVE BEEN CONFRONTED TO THE ASSESSEE. IN SUCH A CASE, NO QUESTION OF CROSS-EXAMINATION OF THE BROKER ARISES WHEN THERE IS NO SPECIFIC STATEMENT WITH REGARDS TO THE ASSESSEE. 3.12. IT IS FURTHER NOTED THAT THE ALLEGED CROSS- EXAMINATION AS HELD WAS NOT CONDUCTED IN CONTEXT OF THE ASSESSEE. DURING THE COURSE OF CROSS-EXAMINATION PROCEEDINGS, THE PURCHASE DOCUMENTS WHICH HAVE BEEN STATED TO BE ACCOMMODATION BILLS PERTAIN TO SHRI BR IJESH D. SHAH AND WHICH DO NOT BELONG TO THE ASSESSEE. TH E RELEVANT EXTRACT OF SAID STATEMENT IS EXTRACTED HER EUNDER: 'Q . 5 I AM SHOWING YOU THE CONTRACT NOTE AND BILL FOR PUR CHASE OF SHARES OF ROBINSON IMPEX ISSUED BY YOUR COMPANY TO SHRI BRIJESH SHAH AND SINT. PRATIKSHA SHAH, LATE SHRI SH REEVALLABH DAMANI AND SMT. SAROJ DEVI DAMANI, FOR E.G. BILLS A S UNDER: BILL DATE NAME OF THE PARTY QUANTITY AMOUNT BOUGHT/ SOLD ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 51 04/04/03 BRIJESH D. SHAH 79500 120840 BOUGHT THIS CONTRACT NOTE/BILL IS IN THE NAME OF SHRI BRIJ ESH SHAH, ISSUED BY YOUR COMPANY M/S. DPS SHARES & SECURITIES P. LTD. PLEASE CONFIRM WHETHER YOU HAVE ISSUED THIS AND WHO HAS SIGNED THE SAID CONTRACT NOTE/BILL. WHETHER HE IS AUTHORIZED TO SIGN. ANS. THIS BILL AN D CONTRACT NOTE ARE GIVEN BY OUR COMPANY TO BRIJESH SHAH AND O THERS WHICH ARE OFF MARKET AND NOT REGISTERED WITH THE BS E. THE CONTRACT IS NOT SIGNED BY ANY OF THE DIRECTORS. Q. 7 I AM SHOWING YOU THE LEDGER COPY OF SH BRIJESH SHAH ISSUED BY DPS SHARES AND SECURITIES PVT. LTD. FOR F. Y. 20 03-04 ANS. YES. THIS IS OUR LEDGER COPY. Q. 17 YOU HAVE SAID IN YOUR STATEMENT DATED 21/11/0 8 THAT YOU CHARGE SERVICE TAX BUT NOT PAID TO GOVERNMENT. IS I T TRUE? ANS. YES. I HAVE COLLECTED SERVICE TAX FROM THE CLI ENT ON HIS CONTRACT NOTE AND NOT PAID TO THE GOVERNMENT AS THE SE TRANSACTIONS WERE NOT DONE ON THE FLOOR AND WERE OF F MARKET AND NOT GENUINE SO WE DID NOT PAY THE SERVIC E TAX TO THE GOVERNMENT. IN THE BILL OF SHRI BRIJESH SHAH WE HAVE NOT COLLECTED THE SERVICE TAX.' 3.13. UNDISPUTEDLY, THE SO-CALLED CROSS- EXAMINATION WAS NOT CONDUCTED WITH REGARDS TO THE ASSESSEE, BUT WAS CONDUCTED IN THE CASE OF SHRI BRI JESH D. SHAH. THE HON'BLE MUMBAI TRIBUNAL IN THE CASE OF SHRI BRIJESH D. SHAH HAS DECIDED THE CASE IN FAVOUR OF ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 52 THE SAID ASSESSEE IN ITA NOS. 1417 TO 1420/MUM/2010 (PAGE NO. 419-427 OF THE PAPERBOOK-II) DATED 03/02/2016. IT IS WORTH MENTIONING THAT THE ASSESSI NG OFFICER AS WELL AS THE LD. CIT(A) HAS NOT DOUBTED T HE SALES MADE BY THE ASSESSEE THROUGH D-MAT ACCOUNT. I T IS A FUNDAMENTAL PRINCIPLE THAT THERE CANNOT BE A SALE WITHOUT A PURCHASE. THEREFORE, THE FACT OF PURCHASE MADE BY THE ASSESSEE CANNOT BE DOUBTED AS THE SAME HAS ULTIMATELY BEEN RESULTED IN CONVERSION OF SHARE S IN ELECTRONIC FORM AND CREDIT OF THE SAME IN THE D- MA T ACCOUNT. ONCE THE SHARES ARE CREDITED TO THE D-MAT ACCOUNT SALES ARE EFFECTED THROUGH THE STOCK EXCHAN GE. THE ASSESSING OFFICER HAS NOT BROUGHT OUT ANYTHING TO REMOTELY SUGGEST THAT THE SALES MADE BY THE ASSESSE E ARE NOT GENUINE. IN SUCH A SITUATION, RELIANCE CAN BE P LACED ON THE JUDGEMENT OF HON 'ME JHARKHAND HIGH COURT IN THE CASE OF CIT VS. ARUN KUMAR AGARWAL (HUF) & OTHE RS IN TAX APPEAL NO. 4 OF 2011 DATED 13.07.2012 (PAGE NO. 499-508 OF THE PAPERBOOK-II) WHEREIN THE HON'BLE HI GH COURT HELD AS UNDER: ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 53 '10. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEAR NED COUNSEL FOR THE PARTIES AND WE ARE OF THE CONSIDERED OPINION TH AT THE LEARNED ASSESSING OFFICER WAS MUCH INFLUENCED BY THE ENQUIR Y REPORT WHICH MAY HAS BEEN BROUGHT ON RECORD BY THE EFFORTS OF TH E ASSESSING OFFICER AND THAT ENQUIRY REPORT WAS PREPARED BY THE SF81 AND FROM THE OBSERVATIONS MADE BY THE TAX APPEAL NO.4 O F 2011 WITH ANALOGOUS CASE ASSESSING OFFICER HIMSELF, IT IS CLE AR THAT AFTER GETTING THAT ENQUIRY REPORT, THE SEBI PRIMA FACIE F OUND INVOLVEMENT OF SOME OF THE SHARE BROKERS IN UNFAIR TRADE PRACTICES. EVEN IN A CASE WHERE THE SHARE BROKER WA S FOUND INVOLVED IN UNFAIR TRADE PRACTICE AND WAS INVOLVED IN LOWERING AND RISING OF THE SHARE PRICE, AND ANY PERSON, WHO HIMSELF IS NOT INVOLVED IN THAT TYPE OF TRANSACTION, IFPURCHASED T HE SHARE FROM THAT BROKER INNOCENTLY AND BONAJIDELY AND IF HE SHO W HIS BONAFLDE IN TRANSACTION BY SHOWING RELEVANT MATERIAL, FACTS AND CIRCUMSTANCES AND DOCUMENTS, THEN MERELY ON THE BAS IS OF THE REASON THAT SHARE BROKER WAS INVOLVED IN DEALING IN THE SHARE OF A PARTICULAR COMPANY IN COLLUSION WITH OTHERS OR IN T HE MANNER OF UNFAIR TRADE PRACTICES AGAINST THE NORMS OF SE. B. I AND STOCK EXCHANGE, THEN MERELY BECAUSE OF THAT FACT A PERSON WHO BONAFIDELY ENTERED INTO SHARE TRANSACTION OF THAT C OMPANY THROUGH SUCH BROKER THEN ONLY BY MERE ASSUMPTION SU CH TRANSACTIONS CANNOT BE HELD TO BE A SHAME TRANSACTI ON. FACT OF TINTED BROKER NAY BE RELEVANT FOR SUSPICION BUT IT ALONE NECESSARILY DOES LEAD TO CONCLUSION OF ALL TRANSACT ION OF THAT BROKER AS TINTED. IN SUCH CIRCUMSTANCES, FURTHER EN QUIRY IS NEEDED AND THAT IS FOR INDIVIDUAL CASE. SUCH FURTHER ENQUI RY WAS NOT CONDUCTED IN THAT CASE.' 3.14. THE MUMBAI BENCH OF THE TRIBUNAL IN THE CA SE OF SHRI ARVIND KARIYA & OTHERS VS. ACIT CENTRAL CIR CLE - 12, MUMBAI IN THE ITA NO. 787-791/MUM/2010 DATED 30/12/2011, (PAGE NO 509-526 OF THE PAPERBOOK-II) H ELD AS UNDER- ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 54 '8. .........NOW THE QUESTION IS HOW ASSESSEE IS GO ING TO FIND OUT WHETHER THIS TRANSACTION WAS BOGUS WHEN PH YSICAL DELIVERY HAS BEEN HANDED OVER TO THE ASSESSEE. THE AUTHORITIES BELOW HAVE ALSO DOUBTED THE SOURCE FOR PURCHASES. AS POINTED OUT BY THE LD. COUNSEL ASSESS EE HAS EARNED SPECULATION PROFIT AMOUNTING TO RS. 28,9411- WHICH HAS BEEN INCLUDED IN THE RETURN OF INCOME UNDER THE HEA D 'INCOME FROM OTHER SOURCES' FOR A. Y 2004-05, A COPY OF THE COMPUTATION IS ON PAGES 22 & 23 OF THE PAPER BOOK A ND THIS HAS BEEN ACCEPTED BY THE DEPARTMENT. THE ASSESSEE H AS ALSO FILED THE BALANCE SHEET IN WHICH INVESTMENT IN SHAR ES HAS BEEN SHOWN AT RS, 1,45,06,054/- AND IN THE ANNEXURE SHOW ING THE DETAILS OF INVESTMENT IN MIS ROBINSON WORLDWIDE TRA DE LTD SHARES HAVE BEEN INCLUDED AT 15500 SHARES AMOUNTING TO RS.26810.54. THIS PURCHASE HAS TO BE TREATED AS ACC EPTED BECAUSE THIS BALANCE SHEET WAS FILED IN A. Y 2004-0 5 AND NO ADVERSE INFERENCE HAS BEEN TAKEN IN THAT YEAR. THES E DOCUMENTS ARE AVAILABLE AT PAGES 24 TO 26 OF THE PA PER BOOK THE ASSESSEE HAD ALSO FILED THE CONTRACT NOTE FOR S ALE AND PURCHASE OF SHARES GENERATING SPECULATING PROFIT FI LED AT PAGES 36 & 37 OF THE PAPER BOOK. THE CONTRACT NOTE FOR PU RCHASE OF 15500 SHARES OF M / S ROBINSON WORLDWIDE TRADE LTD FROM M/S. DPS SHARES & SECURITIES PVT. LTD HAS BEEN FILED AT PAGE-38 OF THE PAPER BOOK AND THE PARTICULARS READ AS UNDER: THE ABOVE PARTICULARS WOULD NOT INDICATE THAT IT WA S A BOGUS TRANSACTION. IN ANY CASE, ASSESSEE HAS NO NEED TO KN OW WHETHER THE TRANSACTION WAS BOGUS OR NOT BECAUSE EVEN INVOICE HA S BEEN ISSUED BY M/S. DPS SHARES & SECURITIES PVT. LTD FOR PURCHASE OF THESE SHARES, COPY OF WHICH IS PLACED AT PAGE 39 OF THE PAPER BOO K AND DELIVERY WAS ALSO GIVEN WHICH IS AT PAGE 40 OF THE PAPER BOOK L ATER ON ASSESSEE FILED AN APPLICATION FOR TRANSFER OF THESE SHARES AND WE HAVE ALREADY DISCUSSED THE PARTICULARS OF TRANSFER FORM. ULTIMATE LY, A JUMBO SHARE CERTIFICATE SHOWING 15500 SHARES WAS ISSUED BY THE COMPANY, COPY OF WHICH IS AT PAGE 45 OF THE PAPER BOOK. LATER O N ASSESSEE LODGED A DEMAT REQUEST WITH ACTION FINANCIAL SERVICES (INDI A) LTD. FOR DEMAT OF 15500 SHARES OF M/S ROBINSON WORLDWIDE TRADE LTD AND COPY OF THAT REQUEST IS AVAILABLE AT PAGE 46. THE DEMAT ACCO UNT STATEMENT OF THE ASSESSEE WITH ACTION FINANCIAL SERVICES (INDIA) LTD. SHOWS THAT 15500 SHARES HAVE BEEN DEMATERIALISED. WE FAIL TO U NDERSTAND HOW THE SHARES WERE ACTUALLY TRANSFERRED IN PHYSICAL FORM AND LATER ON DEMATERIALISED AND HOW THIS WHOLE PROCESS CAN BE CAL LED BOGUS. THIS CANNOT BE CALLED BOGUS UNLESS THE CONNIVANCE O F M/S ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 55 ROBINSON WORLDWIDE TRADE LTD AND ACTION FINANCIAL S ERVICES (INDIA) LTD. IS ALSO ALLEGED AND PROVED. BUT NO ENQ UIRY SEEMS TO HAVE BEEN CONDUCTED WITH THESE ENTITIES. ULTIMATELY, THE S HARES HAVE BEEN SOLD THROUGH ANUGRAH STOCK AND BROKING PVT. LTD. ON V ARIOUS DATES AS UNDER: DATE QUANTITY 09-12-2004 3000 13-12- 2004 30 00 04-01- 2005 6000 O6-01-2005 3500 THE CONTRACT NOTES FOR TH E ABOVE SALES ARE PLACED IN THE PAPER BOOK AT PAGES 48 TO 55. THE ABOVE SALES HAVE BEEN REFLECTED IN THE LATER DEMAT ACCOUNT WITH ACTION FINANCIAL SERVICES (INDIA) LTD, COPY OF WHICH IS AT PAGES 57 AN D 58 OF THE PAPER BOOK. FROM THE ABOVE IT IS CLEAR THAT ASSESSEE HAS PRO VED THE PURCHASES AS WELL AS THE SALES TRANSACTIONS. THE SHARES HAVE BEE N SOLD THROUGH BSE AND IT IS NOT ALLEGED THAT THESE TRANSACTIONS ARE ALSO OFF MARKET. ALL THESE FACTS CLEARLY PROVE THAT THE TRANSACTIONS ARE GENUINE AND THE SAME CANNOT BE DOUBTED UNLESS AND UNTILL THE OTHER P ARTICIPANTS LIKE DEPOSITORY KNOWN AS ACTION FINANCIAL SERVICES (INDI A) LTD. IS ALSO PROVED TO BE BOGUS OR IN CONNIVANCE WITH THE PENNY STOCK SCAM AND EVEN THE SALE CONDUCTED THROUGH ANUGRAH STOCK AND BROKI NG PVT. LTD. IS PROVED TO BE BOGUS. IN OUR OPINION, WHEN OVERWHELM ING DOCUMENTARY EVIDENCE IS AVAILABLE TO PROVE THE PURCHA SE AND SALE TRANSACTIONS PART OF WHICH HAS ALREADY BEEN ACCEPTED B Y THE REVENUE IN A. Y 2004-05, THEN A MERE STATEMENT BY THE BROKER WHO HAS SOLD THE SHARES TO THE ASSESSEE THAT THIS WAS AN ACCOMMODATION ENTRY CANNOT LEAD TO A CONCLUSION THAT THE WHOLE TRANSACTION WAS BOGUS. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE SALE AND PU RCHASE OF THE SHARES STAND PROVED AND SHOULD BE ASSESSED UNDER THE HE AD CAPITAL GAINS.' 3.15. IN ANOTHER CASE, THE MUMBAI BENCH OF THE TRIBUNAL, LATE SMT. KANCHANBEN J. SHAH VS. ITO, THE ITA NO. 6544/MUM/2011 DATED 18/02/2016, (PAGE NO 527- 540 OF THE PAPERBOOK-II) HAS HELD AS UNDER: '4. AGGRIEVED BY THE ORDERS DATED 16. 08.201] OF THE CIT(A), THE ASSESSEE FILED APPEAL WITH THE TRIBUNAL. THE LD. CO UNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS MADE BEFORE THE AUTHORITIES BELOW WHICH ARE NOT REPEATED FOR SAKE OF BREVITY. T HE LD. COUNSEL FOR THE ASSESSEE STATED BEFORE US THAT THE 10000 SH ARES OF ROBINSON IMPEX (INDIA) LIMITED WAS PURCHASED ON 04- 04-2003 VIDE PHYSICAL DELIVERY FROM DPS SHARES AND SECURITI ES PRIVATE LIMITED WHO ARE SEBI APPROVED REGISTERED BROKER WIT H BSE WHICH ARE DULY EVIDENCED BY CONTRACT NOTES ISSUED BY THE SAID BROKER ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 56 WHICH IS PLACED AT PAGE 29-30 PAPER BOOKFILED BEFOR E THE TRIBUNAL. THE ID. COUNSEL STATED BEFORE US SAID SHARES WERE TRANSFERRED IN FAVOUR OF THE ASSESSEE ON 30-04-2003 VIDE SHARE CERTIFICAT E ISSUED BY THE COMPANY WHICH IS PLACED AT PAGE 30 OF THE PAPER BOO K FILED WITH THE TRIBUNAL. THE ID. COUNSEL STATED BEFORE US THAT PAYMENT OF THE SAID 10000 SHARES OF ROBINSON IMPEX (INDIA) LIMITED AGGREGATING TO RS. 13210.43 WAS SETTLED THROUGH SPECULATIVE PRO FIT OF RS. 13168.67 EARNED BY THE ASSESSEE IN THE SHARES OF MA STEK LIMITED ON 04-04-2003 WHICH IS ALSO SUPPORTED BY CONTRACT N OTES ISSUED BY DPS SHARES AND SECURITIES PRIVATE LIMITED WHICH ARE PLACED AT PAPER BOOK PAGE 2 7-28. THE LD. COUNSEL STATED BEFO RE US THAT THE SPECULATIVE PROFIT OF RS 13168.67 EARNED BY THE ASS ESSEE WAS DULY DECLARED AND DISCLOSED TO THE REVENUE AND OFFERED F OR TAXATION BY THE ASSESSEE IN THE RETURN OF INCOME FILED WITH THE REVENUE WHICH IS PLACED AT PAPER BOOK PAGE 42-46 FOR THE ASSESSMENT YEAR 2004-05. THE ID. COUNSEL STATED BEFORE US THAT PURCHASE OF 10000SHARES OF ROBINSON IMPEX (INDIA) LIMITED WERE DULY DECLARED AND DISCLOSED TO THE REVENUE IN THE RETURN OF INCOME FILED WITH THE REVENUE FOR FINANCIAL YEAR 2 003- 04 (ASSE SSMENT YEAR 2004-05) WHICH IS PLACED AT PAGE 42-46 OF PAPER BOO K. THE SAID 10000 SHARES OF ROBINSON IMPEX (INDIA) LIMITED WERE DE- MATTED IN THE MONTH OF JUNE 2004 IN FAVOUR OF THE A SSESSEE WHICH IS PLACED AT PAGE 32 OF PAPER BOOK THE ID. COUNSEL STA TED THAT THE TRANSACTIONS OF SALE AND PURCHASE OF SHARES ARE GEN UINE ALTHOUGH THERE ARE DISCREPANCIES IN TRADE LOG WITH BSE AT THE TIME OF PURCHASE AS DETAILED BY A 0 IN THE ASSESSME NT ORDER WHICH IS A MISTAKE OF BROKER. THE ID. COUNSEL STATED THAT THE SALE OF 10000 ROBINSON IMPEX INDIA LIMITED WAS ALSO UNDERTAKEN THROUGH REGISTERED SHARE BROKER AND CONT RACT NOTES ARE PLACED AT PAGE 21-26 OF PAPER BOOK AND PA YMENTS WERE RECEIVED BY CHEQUE, THE RELEVANT BANK STATEMENTS AR E PLACED AT PAGE II OF PAPER BOOK WHERE SALE PROCEED CHEQUES WE RE CREDITED . THE ID. COUNSEL OF THE ASSESSEE DREW OUR ATTENTION TO REMAND REPORT SUBMITTED BY THE A0 TO THE CIT(A) WHE REBY MR. RAJKUMAR MASALIA DID NOT APPEAR BEFORE THE A 0 FOR CROSS EXAMINATION THREE TIMES ON 18.2.2009, 29.04.2009 AN D 09.11.2009 WHILE THE ASSESSEE REPRESENTATIVE WAS DULY PRESENT BEFORE THE AO ON THOSE DATES. THE A0 IN REMAND REPORT HAS CONFIRMED THAT BSE HAS CONFIRMED THE SALE TRANSACTION OF 10000 ROBINSON IM PEX (INDIA) ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 57 LIMITED WHICH WAS SOLD BY THE ASSESSEE ON 10-06-200 4. THE LD. COUNSEL RELIED UPON THE DECISION OF MUMBAI TRIBUNAL IN THE CASE OF MR. JAGDISH H.SHAH IN ITA NO. 6557/MUM/2011 VIDE OR DERS DATED 05/09/2012 FOR THE ASSESSMENT YEAR 2005-06, WHEREBY ON THE IDENTICAL FACTS, INCOME EARNED ON SALE OF SHARES OF ROBINSON IMPEX (INDIA) LIMITED HAS BEEN ACCEPTED TO BE INCOM E ASSESSABLE UNDER THE HEAD 'LONG TERM CAPITAL GAIN'. THE LD. COUNSEL HAS ALSO FILED A TABULATION SHOWING SIMILAR ITY OF FACTS BETWEEN THE CASE OF THE ASSESSEE AND THAT OF JAGDIS H H SHAH(SUPRA). THE TABULATION FURNISHED BY THE ASSESSEE DEPICTS TH E SIMILARITY IN SCRIP INVOLVED, ASSESSMENT YEAR INVOLVED, THE BROKE R INVOLVED, ENQUIRIES BY THE AO FROM BSE , ETC. . APART THERE-F ROM, IT HAS ALSO BEEN POINTED OUT THAT THE SAME AO AS WELL AS THE SA ME CIT(A) HAVE RENDERED THE DECISIONS ON THE SAME DATES IN THE CAS E OF JAGDISH H SHAH(SUPRA) AS WELL AS THE ASSESSEE. UNDER THESE CIRCUMSTANCES, IT HAS BEEN POINTED OUT THAT THE IMP UGNED ORDERS OF THE LOWER AUTHORITIES ARE UNSUSTAINABLE AND THAT IN COME FROM SALE OF THE SHARES OF ROBINSON IMPEX (INDIA) LIMITED BE ACCEPTED AS LONG TERM CAPITAL GAIN AS RETURNED BY THE ASSESSEE. THE RELIANCE IS ALSO PLACED ON THE SIMILAR CASE ON IDENTICAL FACTS IN TH E CASE OF NIKUNJ J SHAH V. ITO IN ITA NO. 6545/MUM/2011 WHEREBY MUMBAI TRIBUNAL VIDE ORDERS DATED 31/07/2015 HAS ACCEPTED THE INCOM E FROM SALE OF SHARES OF ROBINSON IMPEX (INDIA) LIMITED AS INCOME ASSESSABLE UNDER THE HEAD LONG TERM CAPITAL GAIN AS RETURNED. 7. FOLLOWING THE AFORESAID PRECEDENT WE HEREBY ALLO W THE APPEAL OF THE ASSESSEE, AND DIRECT THE AO TO ACCEPT THE LONG TERM CAPITAL GAIN AS RETURNED BY THE ASSESSEE.' 3.16. IN ANOTHER CASE, THE HYDERABAD BENCH OF TH E TRIBUNAL IN ITO VS. AARTI ALITTAL REPORTED, (2013) 37 CCH 0227 (HYD. TRIB.) (PAGE NO 541-571 OF THE PAPERBOOK -II), HELD AS UNDER: 'IN CONSONANCE WITH THE FUNDAMENTAL PRINCIPLE THAT THERE CANNOT BE A SALE WITHOUT A PURCHASE, IF THE PURCHAS E OF SHARES BY THE ASSESSEES IS DISBELIEVED, THERE CANNOT BE CO NSEQUENT SALE OF THE SAID SHARES BY THE ASSESSEE. THEREFORE, THE FACT OF THE ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 58 PURCHASES CANNOT BE DOUBTED, SINCE THE SAME ULTIMAT ELY RESULTED IN CONVERSION OF SHARES INTO ELECTRONIC FO RM AND CREDIT OF THE SAME IN THE DMAT ACCOUNT. ONCE IT IS CREDIT ED TO THE DMAT ACCOUNT THE SALES ARE EFFECTED THROUGH THE FL OOR OF THE STOCK EXCHANGE. THE AO HAS NOT BROUGHT OUT ANYTHING TO EVEN REMOTELY SUGGEST THAT THE SALE TRANSACTIONS WERE AR RANGED BY THE ASSESSEE. THERE IS NO MENTION IN THE ENTIRE ORD ER ABOUT THE IDENTITY OF THE PARTY WHO HAS PURCHASED THE SAME TH ROUGH ELECTRONIC STOCK EXCHANGE, THE NEXUS BETWEEN THE AS SESSEES AND THE SAID PARTY COULD NOT BE ESTABLISHED. THE MO ST CRUCIAL ASPECT WHICH COULD BE CONSIDERED AS INCRIMINATING I N SUCH TRANSACTIONS MAY RELATE TO A CASE WHERE COMPENSATOR Y PAYMENTS ARE MADE BY THE SELLER TO THE BUYER. NO EV IDENCE HAS BEEN BROUGHT ON RECORD THAT THE ASSESSEE'S OF THIS GROUP HAVE MADE ANY SUCH COMPENSATORY PAYMENT TO THE BUYER OF THE STOCKS. IN THE ABSENCE OF ANY SUCH OBSERVATION, AS SUBMITTED BY THE ASSESSEE 'S, THE CIT(A) WAS CORRECT IN HOLDI NG THE VIEW THAT THE SALE TRANSACTIONS CANNOT BE DOUBTED ON SUSPICIO N. MOREOVER, THESE ARE THE CASES IN WHICH THE TRANSACT IONS HAVE TAKEN PLACE THROUGH THE FLOOR OF THE STOCK EXC HANGE AND SECURITIES TRANSACTIONS TAX HAVE BEEN PAID. IN VIEW OF THESE EVIDENCES WHICH HAVE NOT BEEN REBUTTED BY THE A. 0., IT IS DIFFICULT TO HOLD THAT THE SALE TRANSACTIONS ARE N ON- GENUINE AND THE PROCEEDS THEREOF ARE LIABLE TO BE TAXED UNDER T HE HEAD OTHER SOURCES. ON THE BASIS OF THE REPORT RECEIVED FROM S EBI, UPON ENQUIRIES GOT CONDUCTED THAT SOME OF THE BROKERS NA MED ABOVE HAVE BEEN SUSPENDED FOR SOME ACT OF OMISSION AND COMMISSION, THE AO HELD THAT THE TRANSACTIONS ENTER ED THROUGH THESE BROKERS ARE NOT GENUINE. BUT MERELY B ASED ON SUCH A REPORT, SUCH TRANSACTIONS CANNOT BE TREATED AS SHAM MERELY/OR SOME DISCREPANCIES OR ADVERSE REPORT BY T HE SEBI IT IS FOUND THAT THE A0 HAS NOT BROUGHT OUT ANY MATERI AL TO ESTABLISH THE FINAL OUTCOME OF THE ENQUIRY INITIATE D BY SEBI AND SPECIFIC SHARES PURCHASED BY THE ASSESSEE IN CO URSE OF MAKING INVESTMENT. THEREFORE, IT IS NOT POSSIBLE TO TAKE ANY ADVERSE VIEW ON THE BASIS OF MERE SUSPICION THAT SE BI HAD INITIATED SOME ACTION AND FOUND THE BROKERS VIOLATI NG THE RULES OF SEBI THE CIT(A) IS FURTHER CORRECT IN HOLDING TH AT NOTWITHSTANDING THE OBSERVATIONS OF THE AO THAT THE PURCHASES ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 59 AND SALES OF SHARES WERE MADE WITH REFERENCE TO PEN NY STOCKS WHICH WERE PURCHASED AT A NOMINAL PRICE AND SOLD AT A VERY HIGH PRICE, SINCE ALL THE SALE TRANSACTIONS WERE MA DE THROUGH STOCK EXCHANGES THERE IS HARDLY ANY SCOPES FOR PRIC E MANIPULATION, IT IS ALL THE MORE SO, SINCE THE ASSE SSEE HAS PAID STT. EVEN WITH REGARD TO THE OBSERVATION OF THE ASS ESSING OFFICER THAT THE ASSESSEE BEFORE PURCHASING THE SHA RES THE ASSESSEES DID NOT TAKE INTO ACCOUNT THE FINANCIAL S TANDING OF THE COMPANIES, THE CIT(A) WAS CORRECT IS OBSERVI NG THAT THE SHARE MARKET IS GENERALLY SENTIMENT DRIVEN AND THE ASSESSEES CANNOT REMAIN STATIC. EVEN THE ABSENCE OF EXPERIENCE OF THE ASSESSEES IN TRANSACTION OF THE S HARES EXCEPT DEALING IN THESE PENNY STOCKS, DOES NOT CLINCH THE ISSUE AGAINST THE ASSESSEE. THIS MAY AT THE MOST LEAD TO A SUSPIC ION BUT THE SAME CANNOT BE TREATED AS CONCLUSIVE TO DRAW ANY AD VERSE INFERENCE AGAINST THE ASSESSEES TO THE EFFECT THAT THE TRANSACTIONS ARE NOT GENUINE. SIMILARLY, EVEN THE O PENING OF DMA T ACCOUNTS AT CALCUTTA, A REMOTE PLACE MAY GIV E RISE TO A SUSPICION, BUT THE SAME CANNOT LEAD TO AN Y ADVERSE INFERENCE AGAINST THE ASSESSEE. IN COURSE OF HEARIN G, THE ASSESSEE 'S HAD PRODUCED ITS BOOKS, THERE IS NO FIN DING IN THE ASSESSMENT ORDER THAT PAYMENTS WERE NOT MADE TO THE BROKERS SIMILARLY THERE IS NO OBSERVATION IN THE ORDER THAT THE SALES WERE ARRANGED BETWEEN THE ASSESSEE 'S AND THE BUYER . IN THE ABSENCE OF ANY COGENT FINDING BY THE AO THE OBSERVA TION MERELY RAISES SOME SUSPICION BUT THIS SUSPICION CAN NOT TAKE THE PLACE OF PROOF EVEN WITH REGARD TO THE ENQUIRY GOT CONDUCTED BY THE ASSESSING OFFICER THROUGH THE DOT CALCUTTA, WHICH REVEALED THAT MOST OF THE BROKERS AND THE COM PANIES WERE NOT TRACEABLE, THE CJT(A) IS CORRECT IN CONCLU DING THAT MERE FAILURE TO TRACE THE BROKERS AND COMPANIES CAN NOT BE HELD AS FATAL TO THE TRANSACTION OF BOTH PURCHASE AND SALE, WHEN THE DETAILS OF WHICH HAVE BEEN DULY EXPLAINED BY THE ASSESSEES. THE ASSESSEE, IN OUR CONSIDERED OPINION, HAS DULY DISCH ARGED THE ONUS THAT LIES ON IT, IN ESTABLISHING THE GENUINENE SS OF THE TRANSACTIONS, AND THAT BEING SO, IT IS FOR THE REVE NUE TO DISPROVE THE CLAIM OF THE ASSESSEE, BY BRINGING ON RECORD TH E EVIDENCE TO THE CONTRARY, AS HELD BY THE HON'BLE MADRAS HIGH CO URT IN THE CASE OF CIT VS GOBI TEXTILES LTD (294 ITR 663).' ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 60 3.17. FURTHER, IN THE ASSESSMENT ORDER, THE ASSESS ING OFFICER HAS STATED THAT TRADE FILES OF M/S. DPS SHA RES & SECURITIES PVT LTD SHOW THAT THERE WAS DISCREPANCIE S IN THE NUMBER OF SHARES TRADED FOR EARNING THE SPECULATION GAIN WHICH WHERE THE SOURCE OF PURCHASE OF SHARES OF M/S . ROBINSON WORLDWIDE PVT. LTD WITH REGARDS TO THE SAM E IT IS SUBMITTED THAT THE ASSESSEE CANNOT BE FAULTED FOR T HE FAILURE OF THE BROKER M/S. DPS SHARES & SECURITIES FOR NOT NOTIFYING THE STOCK EXCHANGE REGARDING ITS TRANSACT IONS AND DOES NOT RENDER THE PURCHASES MADE BY THE ASSESSEE NON- GENUINE. IT IS TO BE NOTED THAT THE ASSESSING OFFIC ER HAD CONFRONTED THE ASSESSEE WITH SUCH DISCREPANCIES AND DESPITE OF THE SAME THE ASSESSEE HAD MAINTAINED THA T THE TRANSACTIONS ENTERED BY HIM WERE GENUINE. THUS , THE MERE STATEMENT IS NOT ENOUGH TO FASTEN LIABILIT Y UPON THE ASSESSEE WHEN THE ASSESSEE IS DENYING ALLEGATIO N CONTAINED IN THE STATEMENT AND THERE IS NO CORROBOR ATION OF THE STATEMENT, WHEREAS, THE STAND OF THE ASSESSEE I S CORROBORATED WITH DOCUMENTARY EVIDENCE, WHICH HAS N OT BEEN DISAPPROVED BY THE REVENUE, BECAUSE, IN THE PR ESENT CASE, EVERY TRANSACTION OF PURCHASE AND SALE OF SHA RES OF ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 61 M/S. ROBINSON IMPEX LTD HAS BEEN DULY ACCOUNTED, DOCUMENTED AND SUPPORTED BY DOCUMENTARY EVIDENCES. FURTHER, THE SEARCH ACTION IN THE CASE OF THE ASS E SSEE HAS ALSO NOT RESULTED IN DISCOVERY OF ANY EVIDENCE WHAT SOEVER TO PROVE THAT THE IMPUGNED TRANSACTIONS WERE NOT GENUINE. THUS, APART FROM AN UNCORROBORATED STATEME NT OF THIRD PARTY, THE DEPARTMENT HAS NO EVIDENCE TO D ISLODGE THE CLAIM OF THE ASSESSEE. 3.18. IT IS ALSO NOTED THAT THE IMPUGNED ADDITIONS WERE CONFIRMED BY THE LD. COMMISSIONER OF INCOME TA X (APPEAL) ON THE FOLLOWING GROUNDS. (I) THE ASSESSEE WAS ALLEGEDLY PART OF SOME PENNY STOCK SCAM INVOLVING BOOKING OF BOGUS CAPITAL GAINS DETECTED BY THE INVESTIGATION WING. (II) THE DIRECTOR OF M/S. DPS SHARES & SECURITIES PVT. LTD IN HIS STATEMENT RECORDED U/S 131 OF THE INCOME-TAX ACT, 1961 AND IN COURSE OF CROSS EXAMINATION HAD STATED THAT BILL RELATING TO IMPUGNED SHARES OF MIS. ROBINSON IMPEX LTD WERE NOT GENUINE. (III) U/S. 68 OF THE INCOME-TAX ACT, 1961, IT WAS FOR THE ASSESSEE TO EXPLAIN THE NATURE AND SOURCE OF THE SUMS CREDITED IN HIS BOOKS OF ACCOUNT AND IN THE INSTANT CASE, THE APPELLANT HAD ALLEGEDLY FAILED TO EXPLAIN THE PURCHASES OF PENNY STOCK AND THE SALES THEREOF. (IV) THUS, THE ALLEGED CAPITAL GAINS OF RS. 65,78,60/- F OR A,Y. 2005-06 AND RS. 15,23,130 FOR A.Y. 2006-07 WAS CHARGEABLE TO TAX U/S 68 OF THE INCOME-TAX ACT, 1961, 3.19. AS FAR AS THE ALLEGATION OF PENNY STOCK SCAM , ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 62 BUSTED BY THE INVESTIGATION WING IS CONCERNED, IT I S OBSERVED THAT NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE MERELY ON THE BASIS OF A GENERAL REPOR T OF THE INVESTIGATION WING UNLESS THE ASSESSEE IS PROVE D TO BE A PART OF IT BY BRINGING TANGIBLE EVIDENCE ON RE CORD. IN THE ASSESSEE'S CASE, ADMITTEDLY NO EVIDENCE WAS FOU ND DURING THE COURSE OF SEARCH TO PROVE THAT THE ASSES SEE WAS PART OF ANY SUCH ALLEGED SCAM OR THAT HE HAD BO OKED ARTIFICIAL CAPITAL GAINS. THE ENTIRE ADDITION IN TH E CASE OF THE ASSESSEE, CASE RESTS MERELY ON THE STATEMENT OF THIRD PARTY. AS ALREADY DISCUSSED ABOVE, AN UNCORROBORATED & UNSUBSTANTIATED STATEMENT OF THIRD PARTY DOES NOT HAVE ANY EVIDENTIARY VALUE. RELIANCE CAN BE PLACED UPON THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. W.D. ESTATE PVT. LT D. [19931 45 ITD 473 (MUM) (PAGE NOS 572-586 OF THE PAPER BOOK), WHEREIN ADDITIONS WERE MADE ON ACCOUNT OF ON MONEY RECEIVED BY THE ASSESSEE IN RESPECT OF SAL E OF PROPERTY. THE CIT(A) CONFIRMED THE ADDITION PARTLY AFTER BEING INFLUENCED BY A REPORT PUBLISHED BY MINISTRY OF FINANCE WHEREIN PREVALENCE OF NOTORIOUS PRACTICE OF ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 63 PAYMENT OF BLACK MONEY IN REAL ESTATE TRANSACTION I N METROPOLITAN CITY OF BOMBAY WAS DISCUSSED THE TRIBU NAL DELETED THE ADDITIONS. IN THIS CASE, THERE WAS AN A DVERSE STATEMENT BY ONE OF THE DISGRUNTLED EMPLOYEES OF TH E ASSESSEE. FURTHER, THE COMPARABLE CASES IN THE VICI NITY SUGGESTED PAYMENT OF ON MONEY. DESPITE ALL THESE FA CTS, THE TRIBUNAL HELD THAT ADDITIONS COULD NOT BE MADE ON T HE BASIS OF REPORT PREPARED BY THE EXPERTS IN THE MINI STRY OF FINANCE. A SURVEY REPORT WHICH HIGHLIGHTED PREVAILI NG PRACTICE COULD NOT BE ADEQUATE SUBSTITUTE FOR TANGI BLE EVIDENCE. THE OBSERVATION MADE BY THE LD. COMMISSIO NER OF INCOME TAX (APPEAL), WHILE AFFIRMING THE ADDITIO NS IS REPRODUCED HEREUNDER:- 'IT IS HELD THAT SECTION 68 IS SQUARELY APPLICABLE IN THIS CASE AND SINCE THE APPELLANT NEITHER SATISFACTORILY EXPLAINED THE PURCHASES OF PENNY STOCK NOR THE SALES THEREOF THE NATURE AND SO URCE OF THE INCOME CREDITED TO THE BOOKS OF ACCOUNT REMAIN NOT PROPERLY EXPLAINED. THEREFORE THE ALLEGED CAPITAL GAIN OF RS . 65,78,860/- IS CHARGEABLE TO TAX U/S 68 OF THE ACT. WHEREAS THE LD . ASSESSING OFFICER HAS CHARGED SUCH SUM OF RS. 65,78,860/- AS UNEXPLAINED MONEY IN POSSESSION OF THE APPELLANT, THE SAME IS C ONFIRMED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT.' 3.20. THE ABOVE OBSERVATION WITH RESPECT TO CAPITA L GAIN IS FACTUALLY INCORRECT, BECAUSE, IT IS THE SUM TOTAL OF ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 64 SALE PROCEEDS RECEIVED ON SALE OF 50,000 SHARES OF ROBINSON IMPEX (INDIA) LTD. THE LONG TERM CAPITAL G AINS CLAIMED BY THE ASSESSEE IS RS. 65,13,500/- FOR A.Y. 2005-06 AND RS. 15,12,490 FOR A.Y. 2006-07. THUS, T HE LD. CIT(A) HAS TREATED THE SALE PROCEEDS RECEIVED O N SALE OF SHARES OF ROBINSON AS UNEXPLAINED CASH CREDIT U/S 6 8 OF THE INCOME-TAX ACT, 1961 FOR A.Y. 2005-06 AND A.Y. 2006- 07 RESPECTIVELY. IN THIS REGARD, IT IS SUBMITTED TH AT THE SAID SECTION IS NOT APPLICABLE TO THE CASE OF THE APPELL ANT. SECTION 68 OF THE INCOME-TAX ACT, 1961 READS AS UND ER: '68. CASH CREDITS.WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOU S YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERE D BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFI CER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PR EVIOUS YEAR.' 3.21. THE SCOPE OF SECTION 68 WAS EXPLAINED BY THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF ANI L RICE MILLS VS. CIT (2006) 282 ITR 236 (ALL) (PAGE N OS 587-602 OF THE PAPER BOOK - II)IN THE FOLLOWING WOR DS: 'UNDER SECTION 68, IF ANY SUM IS FOUND CREDITED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 65 EXPLANATION OFFERED BY HIM IS NOT IN THE OPINION OF THE AO, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME TAX AS INCOME OF THE ASSESSEE OF THAT PREVIO US YEAR. THEREFORE WHAT HAS TO BE ENQUIRED INTO BY THE ASSESSING AUTHORITY IS ABOUT THE NATURE AND SOURCE OF THE DEPOSIT. IF THE EXPLANATION WITH REGARD TO NATURE AND SOURCE IS FOUND UNSATISFACTORY, ONLY THE N THE AMOUNT SO CREDITED MA Y BE TREATED AS INCOME. ASSESSEE HAS TO PROVE THREE CONDITIONS (1) IDENTITY OF THE CREDITORS (2) CAPACITY OF SUCH CREDITOR TO ADVA NCE MONEY AND (3) GENUINENESS OF THE TRANSACTION. IF ALL THE AFORESAID THREE CONDITIONS ARE PROVED, THE BURDEN SHIFTS TO THE REVENUE TO PROVE THAT THE AMOUNT BELONGS TO THE ASSESSEE. THE ASSESSEE CANNOT BE ASKED TO PROVE THE SOURCE OF SOURCE OR THE ORIGIN OF ORIGIN.' 3.22. IF THIS ISSUE IS VIEWED WITH THE ANGLE OF SE CTION 68 OF THE ACT IS CONCERNED, IT IS NOTED THAT THE IMPUG NED SALE PROCEEDS WERE RECEIVED THROUGH MIS. PRUTHVI BROKERS & SHARE HOLDINGS PVT. LTD. THE SAID COMPANY IS LISTED IN BSE UNDER SCRIP CODE NO. 532154 AND IS ASSESSED TO INCO ME TAX UNDER PAN AABCP3901B. THE SEBI REGN NO. IS [NB 011059830, CLEARING NO. 529. THUS, THE IDENTITY OF THE BROKER IS FULLY ESTABLISHED. 3.23. SO FAR AS, THE CAPACITY/CREDITWORTHINESS OF THE CREDITOR IS CONCERNED, SINCE, M/S. PRUTHVI BROKERS & SHAREHOLDINGS PVT. LTD IS A SEBI REGISTERED BROKER ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 66 AND A REGULAR INCOME TAX ASSESSEE WITH A REGULAR SOURCE OF INCOME AND A DISTINCT PAN NO. AABCP390113, ITS CREDITWORTHINESS AS A SHARE BROKER IS WELL ESTABLISHED. FURTHER, THE PAYMENTS F OR SALE PROCEEDS BEING MADE BY M/S. PRUTHVI BROKERS & SHAREHOLDINGS PVT. LTD THROUGH REGULAR BANKING CHANNELS, THE POOL ACCOUNT OF M/S. PRUTHVI BROKERS & SHAREHOLDINGS PVT. LTD IN ORIENTAL BANK OF COMMERCE (PAGES 141 TO 152 FOR A.Y. 2005-06 AND PAGES 167 TO 171 FOR A. F. 2006-07 OF THE PAPER BOOK) SHOWING THE IMPUGNED SALE ON BEHALF OF THE APPELLANT AND COPY OF TRADE FILES RECEIVED BY M/S. PRUTHVI BROKERS & SHAREHOLDINGS PVT. LTD FROM THE BSE (COPY ENCLOSED AT PAGES 153 TO 166 FOR A. F. 2005-06 AND PAGES 172 TO 175 FOR A. Y. 2006-07 OF THE PAPER BOOK) SHOWING SALE OF ROBINSON SHARES ALL GO TO PROVE THE CAPACITY OF M/S. PRUTHVI BROKERS & SHAREHOLDINGS PVT. LTD TO CONDUCT THE SALE ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 67 TRANSACTIONS ON BEHALF OF THE APPELLANT.. FURTHER, THE LEDGER COPY OF THE APPELLANT IN THE BOOKS OF M/ S. PRUTHVI BROKERS (PAGES 138.16 TO 138.17 FOR A. Y. 2005-06 AND PAGES 138.22 TO 138.25 FOR A. Y. 2006- 07 OF THE PAPER BOOK) ALSO PROVES ITS CAPACITY TO CONDUCT THE IMPUGNED SHARE TRANSACTIONS ON BEHALF OF THE ASSESSEE. THUS, THE CAPACITY TO CONDUCT THE IMPUGNED SHARE TRANSACTIONS ON BEHALF OF THE ASSESSEE STANDS ESTABLISHED. 3.24. SO FAR AS THE GENUINENESS OF THE SALE TRANSACTION OF ROBINSON SHARES IS CONCERNED, IT HAS BEEN PROVED CONCLUSIVELY FROM THE TRADE FILES RECEIVED FROM THE BOMBAY STOCK EXCHANGE FOR THE IMPUGNED SETTLEMENT PERIOD WHEREIN THE BSE HAS CONFIRMED THE SALE TRANSACTION OF M/S. ROBINSON IMPEX LTD UNDER CLIENT CODE D003 (PAGES 75-94 OF THE PAPER BOOK). FURTHER, THE DE- ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 68 MAT A/C WITH ORIENTAL BANK OF COMMERCE (FORMERLY KNOWN AS GLOBAL TRUST BANK) (IN 301071) WITH CLIENT ID NO. 80055254 SHOWING THE DEMATERIALIZATION AND SUBSEQUENT SALE OF 50000 SHARES OF ROBINSON BY THE APPELLANT THROUGH PRUTHVI BROKERS & SHAREHOLDINGS P. LTD. DURING A.Y. (PAGES 134 OF THE PAPER BOOK) ALSO GOES A LONG WAY TO PROVE THE GENUINENESS OF THE IMPUGNED TRANSACTIONS. THUS, THE IMPUGNED SALE TRANSACTIONS WERE DULY CONDUCTED THROUGH A RECOGNIZED STOCK EXCHANGE AND ALSO CONFIRMED BY THE BSE. THE SALE PROCEEDS WERE RECEIVED THROUGH M/S. PRUTHVI BROKERS BY WAY OF ACCOUNT PAYEE CHEQUE WHICH WERE CREDITED IN HDFC BANK, FORT BRANCH A/C NO. 0601330003532 (BANK STATEMENT AVAILABLE AT PAGES 176 TO 177 OF THE PAPER BOOK). THUS, THE SALE PROCEEDS WERE ALSO RECEIVED THROUGH REGULAR BANKING CHANNELS. AS SUCH, THE GENUINENESS OF THE ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 69 IMPUGNED TRANSACTIONS IS PROVED BEYOND DOUBT. THE TOTALITY OF FACTS CLEARLY ESTABLISHES THAT THE (I) IDENTITY OF M/S. PRUTHVI BROKERS & SHAREHOLDINGS PV T. LTD (II) THE CREDITWORTHINESS OR CAPACITY OF THE SA ID BROKER TO CONDUCT THE IMPUGNED TRANSACTIONS ON BEHA LF OF THE APPELLANT AND (III) THE GENUINENESS OF THE I MPUGNED TRANSACTIONS, BY PLACING ON RECORD CONCLUSIVE DOCUMENTARY EVIDENCES HAS BEEN DISCHARGED AND THUS THE ONUS CAST UPON THE ASSESSEE OF PROVING THE NATU RE AND SOURCE OF THE CONCERNED CREDITS IN HIS BOOKS OF ACCOUNT. IN SUCH AN EVENTUALITY, THE BURDEN SHIFTED ON THE REVENUE TO DISPROVE THE CLAIM OF THE ASSESSEE BY BR INGING ON RECORD SOME TANGIBLE EVIDENCE. IN THE ABSENCE OF ANY SUCH MATERIAL TO DISLODGE THE CLAIM OF THE ASSESSEE OR DISBELIEVE THE EVIDENCES FILED BY HIM, NO ADDITION ON ACCOUNT OF ANY UNEXPLAINED CASH CREDITS U/S 68 OF T HE ACT COULD BE MADE BY THE REVENUE. THUS, THE LD. COMMISSIONER OF INCOME TAX (APPEAL) UNJUSTIFIABLY CONFIRMED THE ADDITION, WHICH IS MERELY BASED UPON SUSPICION. WE ARE OF THE VIEW THAT SUSPICION CANNOT TAKE THE SHAPE OF EVIDENCE, HOWEVER STRONG IT MAY BE. ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 70 3.25. SO FAR AS THE GENUINENESS OF PURCHASE OF 50,000 SHARES OF M/S. ROBINSON IMPEX LTD IN A.Y. 2004-05 I S CONCERNED, WE HAVE ALREADY DEALT WITH THIS ISSUE IN EARLIER PARAS OF THIS ORDER. THE TIME LIMIT FOR PAS SING INTIMATION U/S 143(1) OF THE ACT WAS 31/03/2006 AND FOR ISSUING NOTICE U/S 143(2) OF THE ACT WAS 31/08/200 5 FOR MAKING REGULAR ASSESSMENT. THUS THE ASSESSING OFFIC ER HAD NEITHER ISSUED ANY NOTICE U/S 143(2) OF ACT NOR MADE ANY INTIMATION ULS 143(1) OF THE ACT. THEREFORE, IT IS ESTABLISHED THAT THE CONCERNED ASSESSING OFFICER A CCEPTED THE PURCHASE OF 50,000 SHARES OF M/S. ROBINSON IMPE X LTD DURING THE SAID YEAR AGAINST DISCLOSED SOURCES. HOW EVER, THIS SHOWS THAT ASSESSING OFFICER DULY ACCEPTED THE GENUINENESS OF PURCHASE OF 50,000 SHARES OF M/S. ROBINSON WORLDWIDE TRADE LTD BY THE APPELLANT DURIN G F.Y. 2003-04 (RELEVANT TO A.Y. 2004-05) AGAINST EXPLAINE D SOURCES. FURTHER, EVEN AFTER THE SEARCH OPERATION U /S 132 OF THE ACT ASSESSMENT U/S 153A OF THE ACT FOR A .Y. 2004-05 WAS COMPLETED BY THE AO ON 24/12/2008 AT TH E RETURNED FIGURE THUS ACCEPTING THE PURCHASE OF 50,0 00 SHARES OF ROBINSON AGAINST SALE PROCEEDS OF PAN ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 71 PACKAGING. COPY OF THE SAID ORDER U/S 153A OF THE A CT FOR A.Y. 2004-05 IS AVAILABLE AT (PAGES 71 TO 97 OF THE PAPER BOOK). ACCORDINGLY, IN ASSESSMENT FRAMED U/S 153A O F THE ACT FOR THE SUBSEQUENT YEAR I.E. A.Y. 2006-07, IN T HE ABSENCE OF ANY MATERIAL CHANGE IN FACTS, THE ASSESS ING OFFICER WAS NOT JUSTIFIED IN TAKING A CONTRARY VIEW THAT THE EARNING OF SPECULATION PROFIT OF ` 15,12,490 FOR A.Y. 2006- 07 AND PURCHASE OF SHARES OF ROBINSON FOR ` 76,052/- DURING F.Y. 2003-04 RELEVANT TO A.Y. 2004-05 WERE B OGUS ONLY ON THE BASIS OF AN UNSUBSTANTIATED STATEMENT O F THIRD PARTY SANS ANY MATERIAL FOUND IN COURSE OF SE ARCH. VARIOUS COURTS AND TRIBUNALS HAVE TIME AND AGAIN HE LD IN A PLETHORA OF CASES THAT POWER OF REVIEW IS NOT AVA ILABLE TO THE ASSESSING OFFICER UNDER THE ACT AND IN THE ABSE NCE OF ANY MATERIAL CHANGE IN FACTS, A DIFFERENT VIEW THAN TAKEN IN EARLIER YEARS CANNOT BE TAKEN. 3.26. SO FAR AS, THE STATEMENT AND SUBSEQUENT CROS S- EXAMINATION OF SRI PRATIK C. SHAH BY THE ASSESSEE A ND THE PURCHASE TRANSACTIONS BEING OFF MARKET, THE ASS ESSEE MADE THE FOLLOWING SUBMISSIONS BEFORE THE ASSESSING ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 72 OFFICER VIDE LETTER DATED 08/12/2008 REPRODUCED ON PAGE 14 OF ASSESSMENT ORDER PARA NO.10: 'YOUR HONOUR HAS MENTIONED THAT THE DIRECTOR OF MS. DPS SHARE & SECURITIES PVT. LTD. IN THEIR STATEMENT ON 18.01. 2007 STATED ON OATH THAT 'THEY HAVE ISSUED ONLY BOGUS ACCOMMODATION BILLS FOR FACILITATING CAPITAL GAIN T O THE ULTIMATE BENEFICIARIES AND FOR WHICH THEY HAVE NOT HANDED OV ER THE BILLS TO THE BENEFICIARIES. FURTHER NO TRANSACTIONS WERE DON E ON BSE LTD' IT IS NOTED THAT WHILE ENTERING INTO TRANSACTION FO R PURCHASE AND SALE OF SHARES, GENERALLY CLIENT IS NO T REQUIRED TO ENQUIRE ABOUT, WHETHER THE TRANSACTIONS ENTERED BY HIM/ HER WITH THE BROKER WERE IN TURN ENTERED BY HIM THR OUGH RECOGNISED STOCK EXCHANGE. ONCE THE TRANSACTION IS ENTERED INTO FOR PURCHASE OF SHARES WITH SEBI- REGI STERED BROKER AND THE BROKER ISSUED THE INVOICE FOR THE SA ME, THEN THERE IS NO NEED TO VERIFY THE TRANSACTIONS EN TERED BY HIM WERE INFORMED TO THE EXCHANGE OR NOT. THE TRANSACTION OF SHARES SOMETIMES USED TO TAKE PLACE OFF MARKET, WHICH REMAINED TO BE INTIMATED TO THE STOCK EXCHANGE I.E. THE PURCHASE AND SALE OF SHARES OUTSI DE THE FLOOR OF STOCK EXCHANGE IS NOT AN UNLAWFUL ACTIVITY . OFF MARKET TRANSACTIONS ARE NOT ILLEGAL. IT IS ALWAYS P OSSIBLE FOR THE PARTIES TO ENTER INTO TRANSACTIONS EVEN WITHOUT THE HELP ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 73 OF BROKERS. FURTHER IT MIGHT BE POSSIBLE IN THE CA SE OF THE ASSESSEE, THE BROKERS MAY NOT HAVE CARRIED OUT MY TRANSACTION THROUGH THE STOCK EXCHANGE AND IT WERE OFF MARKET TRANSACTIONS AND INTIMATION FOR WHICH WAS NO T GIVEN TO THE STOCK EXCHANGE BY THE BROKER. BUT THIS IS NOT SUFFICIENT TO CONCLUDE THAT THE TRANSACTION OF PURCHASE OF SHARES WAS DONE BY THE ASSESSEE WITH TH E SAID BROKERS WERE NOT GENUINE TRANSACTION AS NO INCRIMINATING DOCUMENT OR EVIDENCE INDICATING ANY DOUBTFULNESS IN THE BONA-FIDES OF THE SHARE TRANSAC TION WERE FOUND IN THE COURSE OF SEARCH.' 3.27. IT IS NOTEWORTHY THAT ON THE DATE OF PURCHASE OF SHARES OF M/S. ROBINSON IMPEX INDIA LTD. THE SAI D SHARES WERE NOT LISTED IN THE BSE. THIS ALSO EXPLAI NS THE OBVIOUS REASON BEHIND THE IMPUGNED PURCHASE TRANSACTIONS BEING OFF-MARKET. HOWEVER, SUBSEQUENTL Y, ON BEING LISTED, THE SALES OF THE SAID SHARES WERE CARRIED OUT THROUGH THE BSE AND THE BSE CONFIRMED T HE SALE TRANSACTIONS OF THE SAID SHARES OF M/S. ROBINS ON IMPEX LTD UNDER ITS CLIENT CODE NO. D003. EVEN OTHERWISE, IT IS PERTINENT TO NOTE HERE THAT THE PU RPORTED ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 74 STATEMENT OF SHRI PRATIK C. SHAH, DIRECTOR OF M/S. DPS SHARES & SECURITIES PVT. LTD., BEING THE SOLE SO-CA LLED EVIDENCE SO EMPHATICALLY RELIED UPON BY THE AO AND THE LD. CIT(A) PERTAINS ONLY TO THE PURCHASE OF SHARES OF M/S. ROBINSON IMPEX LTD. AGAINST SALE PROCEEDS OF SHARES OF PAN PACKAGING THROUGH THE SAID BROKER DUR ING F.Y. 2003-04 AND AS SUCH PERTAINS ONLY TO A.Y. 2004 -05. THE ASSESSMENT PURSUANT TO SEARCH U/S 153A OF THE A CT FOR THE SAID A.Y. 2004-05 WERE COMPLETED BY THE AO WITHOUT MAKING ANY ADDITION ON THE SAID COUNT. THE SAID STATEMENT OF SHRI PRATIK C. SHAH HOWEVER, HAS NO RELEVANCE TO THE SALE OF THE IMPUGNED SHARES DURING F.Y. 2004-05 RELEVANT TO A.Y. 2005-06 AND F.Y. 2005-06 RELEVANT TO AN. 2006-07 THROUGH M/S. PRUTHVI BROKER S & SHAREHOLDINGS PVT. LTD WHICH HAS BEEN DULY CONFIR MED BY THE BSE AND BY M/S. PRUTHVI BROKERS & SHAREHOLDINGS PVT. LTD. THUS, AS FAR AS THE IMPUGNE D SALE PROCEEDS OF RS. 65,78,860/- FOR F.Y. 2004-05 RELEVANT TO A.Y. 2005-06 AND RS. 15,23,130/- FOR F. Y. 2005-06 RELEVANT TO A.Y. 2006-07 ARE CONCERNED, BOT H THE ASSESSING OFFICER AND THE LD. CIT(A) HAVE FAIL ED TO ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 75 BRING ON RECORD ANY MATERIAL WHATSOEVER TO PROVE TH AT THE SAME DID NOT PERTAIN TO SALE OF SHARES OF M/S. ROBINSON IMPEX LTD THROUGH M/S. PRUTHVI BROKERS & SHAREHOLDINGS PVT. LTD BUT REPRESENTED ASSESSEE'S OWN UNDISCLOSED MONEY. THUS, THE ASSESSEE HAVING CLEARLY EXPLAINED THE NATURE AND SOURCE OF THE CRED ITS IN HIS BANK ACCOUNT TO THE EXTENT OF RS. 65,78,860/- F OR F.Y. 2004-05 RELEVANT TO AN. 2005-06 AND RS. 15,23,130/- FOR F.Y. 2005-06 RELEVANT TO A.Y. 2006-07, NO ADDITION IN RESPECT OF THE SAID AMOUNT U/S 68 OF THE ACT CAN BE MADE FOR A.Y. 2005-06 AND A.Y 2006-07. IT IS ALSO NOTED THAT APART FROM DOUBTING THE VALIDITY OF PURCHASE TRANSACTIONS OF ROBINSONS FOR F.Y. 2003-04 RELEVANT TO A.Y. 2004-05, EVEN THE AO HAS FAILED TO DISLODGE TH E SALE OF THE SAID SHARES DURING F.Y. 2004-05 AND F.Y. 200 5-06 RELEVANT TO A.Y. 2005-06 AND A.Y. 2006-07 BY ANY CL EAR CUT FINDING IN THE ASSESSMENT ORDER. FURTHER, THE L D. CIT(A) HAS HIMSELF OBSERVED IN PARA 2.2.1, PAGE 13 OF HIS ORDER UNDER THE HEADING 'BRIEF FACTS OF THE CASE AND ASSESSING OFFICER'S CONCLUSIONS' AS UNDER: ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 76 '2.1.8. ......ROBINSON SHARES WERE SOLD PARTLY DURING A. V. 2005-06 AND PARTLY DURING A. Y. 2006-07 THROUGH BROKERS M/S. PRUTHVI BROKERS & SHAREHOLDERS (P) LTD. THE SA LE PROCEEDS WERE RECEIVED BY THE APPELLANT THROUGH BRO KER BY ACCOUNT PAYEE CHEQUE WHICH WAS CREDITED IN THE APPELLANT'S BANK. THE APPELLANT HAD EXPLAINED BEFOR E THE LD. ASSESSING OFFICER THAT ON SALES OF ROBINSON SHARES THE DELIVERY WAS GIVEN TO THE POOL ACCOUNT O F THE SAID MIS. PRUTHVI BROKERS & SHAREHOLDINGS PVT. LTD. AND FROM THIS POOL ACCOUNT THE IMPUGNED SHARES OF ROBINSON WERE DELIVERED TO THE BOMBAY STOCK EXCHANG E, THE BSE HAD CONFIRMED THE SALE TRANSACTIONS OF THE SAID ROBINSON SCRIP' 3.28. THUS, THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) HAVE INDIRECTLY ACCEPTED THAT THE AMOUNT OF ` 65,78,860/- CREDITED IN THE BANK ACCOUNT OF THE APPELLANT REPRESENTED THE SALE PROCEEDS OF SHARES O F ROBINSON THROUGH IDENTIFIED SOURCE. ACCORDINGLY, TH ERE WAS NO DOUBT REGARDING THE NATURE AND SOURCE OF THE SAID AMOUNT, CONSEQUENTLY, NO ADDITION WAS CALLED F OR U/S 68 OF THE ACT, FOR A.Y. 2005-06 AND A.Y. 2006-0 7. AS SUCH, EVEN IF FOR ARGUMENT'S SAKE, IT IS ASSUMED WITHOUT ACCEPTING THAT THE PURCHASE OF 50,000 SHARE S OF ROBINSON ON 04/04/2003 FOR RS. 76,052/- AGAINST SALE PROCEEDS OF PAN PACKAGING SHARES REMAINED UNEXPLAINED, THE SAID ASPECT PERTAINED TO A.Y. 2004 - 05 AND HAD NOTHING TO DO WITH THE ASSESSMENT FOR A. Y. ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 77 2005-06 AND A.Y. 2006-07. THE UNDISPUTED SALE OF 50,000 SHARES OF ROBINSON FOR RS. 65,78,860/- AND R S. 15,23,130 DURING A.Y. 2005-06 AND A.Y. 2006-07 FULL Y EXPLAINED THE RELEVANT CREDITS IN THE BANK ACCOUNT OF THE APPELLANT. THUS, NO ADDITION WAS CALLED FOR U/S 68 OF THE ACT FOR A.Y. 2005-06 AND A.Y. 2006-07 . THE RATIO LAID DOWN FROM HON'BLE DELHI HIGH COURT IN THE CASE OF KISHAN LAL JEWELS (P) LTD. VS. ACIT (2006) 26 SOT 3 0 (DEL) (PAGE NOS. 603-611 OF THE PAPER BOOK - II) SUPPORTS THE CASE OF THE ASSESSEE, WHEREIN IT WAS H ELD AS UNDER: 'INCOME - CASH CREDIT - SCOPE AND VALIDITY OF ADDITI ON U/S 68 - IN EVERY CASE OF APPLICATION OF SECTION 68, NATURE AND SOURCE OF SUM FOUND CREDITED HAVE FIRST TO BE EXAMINED - EVEN THOUGH THERE WAS ENOUGH EVIDENCE ON RECORD TO TREAT PURCHASE OF DIAM ONDS AS BOGUS, AMOUNTS CREDITED TO THE ACCOUNT OF EXPORT SALES COULD NOT BE STRAIGHTWAY ADDED U/S 68 WHERE SALE CONSIDERATION WAS CLAIMED TO HAVE BEEN RECEIVED THR OUGH BANKING CHANNELS WITH NAMES AND ADDRESSES OF PURCHASERS WHO REMITTED THE AMOUNT WITHOUT EXAMINING THE CREDIT ENTRIES AND BACKGROUND OF PURCHASERS - THOUGH THE BURDEN OF PROOF IS ON ASSESSEE, QUESTION OF DISCHARGE THEREOF IS REQUI RED TO BE DECIDED ON EXAMINATION AND APPRAISAL OF MATERIAL ON RECORD.' 3.29. REFERENCE CAN BE MADE TO THE FOLLOWING CASE LAWS WHEREIN UNDER SOMEWHAT SIMILAR CIRCUMSTANCES AS IN THE CASE OF THE PRESENT ASSESSE E, ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 78 IT WAS CONSISTENTLY HELD THAT WHERE THE ASSESSEE PR OVED THE (I) IDENTITY OF CREDITOR (II) CREDITWORTHINESS OF CREDITOR (III) GENUINENESS OF TRANSACTIONS, NO ADDITION COUL D BE MADE U/S 68 OF THE INCOME-TAX ACT, 1961: (I) THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF FARRAH MARKER VS. INCOME TAX OFFICER, (2016) 46 CC H 0535 (MUM. TRIB.), HAS HELD AS UNDER: '3.4.2 IT IS ALSO SEEN THAT, AS CONTENDED BY THE AS SESSEE, THERE IS NO EVIDENCE ON RECORD TO SHOW THAT ANY ACTION OR ENQUIRY WAS CARRIED OUT EITHER BY THE SEBI OR BSE IN RESPEC T OF THE ALLEGED MANIPULATION OR PROPPING UP OF THE PRICE RA TE MOVEMENT OF THE 'SAID SHARES' OF SHUKUN CONSTRUCTIO NS LTD., AS HAS BEEN ASSESSED BY THE AO. WE FIND FROM THE DE TAILS FILED BY THE ASSESSEE ON RECORD IN PURSUANCE OF THE QUERY BY THE AO IN THE COURSE OF ASSESSMENT PROCEEDINGS, THAT TH E SHARES OF SHUKUN CONSTRUCTIONS LTD. IS LISTED ON BSE AND T HAT THE SALE TRANSACTION OF THE 'SAID SHARES' BY THE ASSESS EE IS AT THE RATE QUOTED ON THE DATE OF SALE HAS BEEN CONFIRMED BOTH BY BSE AND THE CONCERNED STOCK BROKER M/S. KHAMBATTA SECURITIES LTD. IT IS STRANGE THAT THE AO HAS MADE THE ADDITION UNDER SECTION 68 OF THE ACT TREATING THE ENTIRE SAL E PROCEEDS OF THE 'SAID SHARES' RECEIVED BY THE ASSES SEE THROUGH REGULAR BANKING CHANNELS FROM STOCK BROKER REGISTERED WITH SEB1, M/S. KHAMBATTA SECURITIES LTD , WHICH FACTS HAVE BEEN CONFIRMED BY THE SAID STOCK BROKER. IN OUR CONSIDERED VIEW, IN THESE FACTUAL CIRCUMSTANCES, TH E ASSESSEE HAS DISCHARGED THE ONUS REQUIRED UNDER SEC TION 68 OF THE ACT AS SHE HAS ESTABLISHED THE IDENTITY OF T HE PAYER, SOURCE OF FUNDS RECEIVED ON SALE OF THE SAME SHARES AND THE GENUINENESS OF THE TRANSACTION. 3.4.3 THE ADDITION UNDER SECTION 68 OF THE ACT IN THE CAS E ON ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 79 HAND, IT APPEARS, HAS BEEN MADE ONLY BECAUSE THE AO PRESUMED THE PURCHASES OF THE 'SAID SHARES' OF M/S. SHUKUN CONSTRUCTIONS LTD. WERE NOT MADE ON THE DATE AS DIS CLOSED BY THE ASSESSEE, BUT WAS BACKDATED AND AN ARRANGED TRANSACTION, AND NOT BECAUSE THERE WAS ANY IRREGULA RITY IN THE SALE OF THE SAID SHARES. WE FIND FROM THE MATER IAL ON RECORD THAT THE PURCHASES OF THE SAID SHARES WERE D ULY DISCLOSED UNDER THE HEAD INVESTMENT IN THE AUDITED BALANCE SHEET AS ON 31.03.2004 RELEVANT TO A. Y 2004-05. IN THIS CONTEXT WE CONCUR WITH THE AVERMENTS OF THE LEARNED A. R. FOR THE ASSESSEE THAT IF THERE WAS ANY ADVERSE MATE RIAL IN RESPECT OF THE PURCHASES OF THE 'SAID SHARES', THE AO OUGHT TO HAVE OR WOULD HAVE PROCEEDED TO INITIATE PROCEED INGS FOR RE- OPENING THE ASSESSMENT FOR A. Y 2004-05 WHILE CONCLUDING THE ASSESSMENT FOR A. 1. 2005-06, THE YE AR UNDER CONSIDERATION, ON 31.12.2007 OR THEREAFTER TI LL 31.03.2011, WHICH HE HAS NOT DONE.' (II) IN ANOTHER CASE OF TULIP HOTELS (P) LTD. VS. DCIT (2010) 37 SOT 77 (MUMBAI) (TM) IT WAS HELD AS UNDER :- 'REVENUE HAS DOUBTED THE GENUINENESS MERELY ON THE BASIS OF PRESUMPTION AND SUSPICION IGNORING THE DOCUMENTA RY EVIDENCES PRODUCED BY THE ASSESSEE, WHICH ESTABLISH THE GENUINENESS OF TRANSACTION ASSESSEE HAS DULY ESTA BLISHED THE IDENTITY OF THE CREDITOR, CREDITWORTHINESS OF T HE CREDITOR AND ALSO GENUINENESS OF THE TRANSACTION ADDITION MADE AND CONFIRMED BY LOWER AUTHORITIES UNDER S. 68 ARE LIABLE TO BE DELETED ' THE JODHPUR BENCH OF THE TRIBUNAL IN ACIT VS. CHANDRESH KUMAR MAHESHWARI (2009) 120 TTJ (JD) 132(PAGE NOS 640-643 OF THE PAPER BOOK II) HELD A S UNDER: ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 80 'INCOME - CASH CREDIT - GENUINENESS OF SHARE TRANSA CTION - AMOUNT CLAIMED BY ASSESSEE AS LONG-TERM CAPITAL GAI NS ON SALE OF SHARES DISBELIEVED BY AO AS NOT GENUINE AND ADDITION MADE UNDER S. 68 NOT JUSTIFIED IN THE FAC TS AND CIRCUMSTANCES OF THE CASE - ASSESSEE PRODUCED ON RECORD SHARE CERTIFICATE WITH DISTINCTIVE NUMBERS ISSUED B Y CSL, A PUBLIC LIMITED COMPANY - THESE SHARES WERE SOLD BY ASSESSEE THROUGH BROKER R - NO ENQUIRY WAS MADE BY AO FROM C SL WHOSE SHARES WERE LISTED ON THE STOCK EXCHANGE - NO ENQUI RY ALSO MADE BY ASSESSEE FROM THE STOCK EXCHANGE AS TO TRADING O F THESE SHARES - ON THE CONTRARY, ASSESSEE HAD PRODUCED THE LETTER OF THE BROKER GIVING THE DETAILS OF SHARES PURCHASED A ND SOLD ON BEHALF OF THE ASSESSEE MENTIONING THEREIN THE COMMI SSION CHARGED BY HIM AS WELL AS PROCEEDS AVAILABLE WITH H IM FOR PURCHASE OF SHARES AS WELL AS REALIZATION OF THE SA LE PROCEEDS AND CREDITING THE SAME TO THE BANK ACCOUNT OF THE A SSESSEE - CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION.' 3.30. THE RATIO LAID DOWN IN THE CASE OF ITO VS. NAVEEN GUPTA (2006) 5 SOT 94 (DEL) (PAGE NOS 730- 738 OF THE PAPER BOOK - II) SUPPORTS THE CASE OF TH E ASSESSEE, WHEREIN, IT WAS HELD AS UNDER: 'INCOME FROM UNDISCLOSED SOURCES - CASH CREDITS - ADDITION - VALIDITY - LONG TERM CAPITAL GAIN FROM SALE OF SHARES OF COMPANY 'A' - COMPANY LISTED ON DELHI STOCK EXCHANGE - NO MATERIAL BROUGHT ON RECORD BY THE AO TO SHOW THAT ASSESSEE HAD SURREPTITIOUSLY INTRODUCED H IS UNACCOUNTED MONEY IN GUISE OF SALE PROCEEDS - SALE PROCEEDS COULD NOT BE ADDED UNDER S. 68.' THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. CLARIDGES INVESTMENT & FINANCE (P) LTD. (2007) 18 SOT ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 81 390 (MUMBAI) (PAGES 644-706 OF THE PAPER BOOK-11) H ELD AS UNDER: 'BUSINESS INCOME - BUSINESS LOSS - ASSESSEE A SHARE BROKER HAD SHARE TRANSACTIONS WITH THREE KOLKATA BASED BRO KERS - ASSESSEE 'S TRANSACTIONS ARE SUPPORTED BY MOVEMENT OF SHARES AS REFLECTED IN DEMAT ACCOUNT, MOVEMENT OF MONEY AS REFLECTED IN BANK ACCOUNT, ENTRIES IN THE BOOKS OF ACCOUNT OF ASSESSEE, PREVALENT MARKET QUOTATIONS OF CSE, CONTR ACT NOTES AND DELIVERY BILLS ISSUED BY KOLKATA BROKERS AND TH EIR STATEMENTS IN RESPONSE TO ENQUIRIES MADE BY THE AO AND ASSESSEE HAD SHOWN NET PROFIT OF RS. 16.18 CRORES - THE CONCLUSIONS OF THE AO THAT 'THESE TRANSACTIONS WERE SHOWN ONLY IN ORDER TO GENERATE LOSS OR PROFIT AND WERE N OT GENUINE SHARE TRANSACTIONS' COULD NOT BE REACHED FO R REASON ONLY OF DEFICIENCIES AND IRREGULARITIES IN THE DOCUMENTATION AT THE END OF KOLKATA BROKERS - AO HA S ACTED UPON GROSSLY INADEQUATE MATERIAL AND HIS CONCLUSION S ARE IN THE REALM OF SUSPICION, CONJECTURE AND SURMISES - B USINESS LOSS CLAIMED BY ASSESSEE WAS ALLOWABLE AS SHOWN IN ITS BOOKS OF ACCOUNT.' 3.31. THE HON'BLE DELHI HIGH COURT IN CIT VS. DIVINE LEASING & FINANCE LTD. (2008) 299 ITR 268 (DEL) (PA GE NOS 707-726 OF THE PAPER BOOK - 11) HELD THAT 'A DISTIL LATION OF THE PRECEDENTS YIELDS THE FOLLOWING PROPOSITIONS OF LAW IN CONTEXT OF S. 68. THE ASSESSEE HAS TO PRIMA FACIE PROVE (1) THE IDENTITY OF THE CREDITOR/SUBSCRIBER ( 2) THE GENUINENESS OF THE TRANSACTION NAMELY, WHETHER IT H AS BEEN TRANSMITTED THROUGH BANKING OR OTHER INDISPUTA BLE CHANNELS; (3) THE CREDITWORTHINESS OR FINANCIAL STR ENGTH OF ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 82 THE CREDITOR/ SUBSCRIBER. IF RELEVANT DETAILS OF TH E ADDRESS OR PAN IDENTITY OF THE CREDITOR/ SUBSCRIBER ARE FURNISHED TO THE DEPARTMENT ALONG WITH COPIES OF TH E SHAREHOLDERS REGISTER, SHARE APPLICATION FORMS, SHA RE TRANSFER REGISTER ETC. IT WOULD CONSTITUTE ACCEPTAB LE PROOF OR ACCEPTABLE EXPLANATION BY THE ASSESSEE. THE DEPARTM ENT WOULD NOT BE JUSTIFIED IN DRAWING AN ADVERSE INFERE NCE ONLY BECAUSE THE CREDITOR/ SUBSCRIBER FAILS OR NEGL ECTS TO RESPOND TO ITS NOTICES.' HELD FURTHER THAT 'ASSESSE E COMPANY HAVING RECEIVED SUBSCRIPTION TO THE PUBLIC/ RIGHTS ISSUES THOUGH BANKING CHANNELS AND FURNISHED COMPLE TE DETAILS OF THE SHAREHOLDERS, NO ADDITION COULD BE M ADE UNDER S. 68 IN THE ABSENCE OF ANY POSITIVE MATERIAL OR EVIDENCE TO INDICATE THAT THE SHAREHOLDERS WERE BENAMIDARS OR FICTITIOUS PERSONS OR THAT ANY PART O F THE SHARE CAPITAL REPRESENTED COMPANY'S OWN INCOME FROM UNDISCLOSED SOURCES.' THE BENCH OF CALCUTTA TRIBUNAL IN THE CASE OF V.T.R MARKETING VS. ACIT (2005) 1 SOT 205 (KOL) (PAGES NO S. 727-729 OF PAPER BOOK- II) HELD AS UNDER: 'INCOME FROM DISCLOSED SOURCES CASH CREDITS GEN UINENESS OF TRANSACTIONS AND IDENTITY AND CREDITWORTHINESS O F CREDITORS CREDITORS CONFIRMED THEIR STATEMENT OF ACCOUNT ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 83 AS APPEARING IN THE ACCOUNTS OF THE ASSESSEE THE LOAN TRANSACTIONS THROUGH BANK AND THE CREDITORS INCOME- TAX ASSESSEES AND THEIR INCOME-TAX ASSESSMENT THEREIN T ALLY WITH THOSE OF THE ACCOUNT BOOKS OF THE ASSESSEE AO WAS INFORMED ABOUT THE NEW ADDRESS OF THE CREDITORS VIDE COMMUNI CATION OF THE ASSESSEE IN WRITING IN THESE CIRCUMSTANCES, T HE ASS ESSEE HAS DISCHARGE ITS ONUS TO PROVE THE IDENTITY AND TH E CREDITWORTHINESS OF THE CREDITORS AND ALSO THAT THE LOAN TRANSACTIONS ARE GENUINE. IN THE ABSENCE OF ANY MAT ERIAL TO DISBELIEVE THE EVIDENCE FILED BY THE ASSESSEE, NO C ASE OF ADDITION FOR UNEXPLAINED CREDITS IS MADE OUT BY THE REVENUE AND HENCE THE ADDITION IS DELETED.' IN THE LIGHT OF THE FOREGOING DISCUSSION AND THE JU DICIAL PRONOUNCEMENTS, MENTIONED HEREINABOVE, WE FIND THAT THE PURCHASE AND SALE OF SHARES OUTSIDE THE FLOOR O F STOCK EXCHANGE IS NOT AN UNLAWFUL ACTIVITY MEANING THEREB Y OFF MARKET TRANSACTIONS ARE NOT ILLEGAL UNLESS AND UNTI L CONTRARY MATERIAL IS BROUGHT ON RECORD. THE ASSESSE E IN THE PRESENT APPEAL, GOT THE SHARES DE-MATED ON THE BOMBAY STOCK EXCHANGE AND THE SALE PROCEEDS WERE RECEIVED THROUGH BANKING CHANNEL, THEREFORE, SO FAR AS, PURCHASE OF SHARE IS CONCERNED (OFF MARKET TRANSACT ION), THE DETAILS CANNOT BE PROVIDED BY THE STOCK EXCHANG E AND SUCH STOCK EXCHANGE CAN MERELY PROVIDE THE DETA ILS OF SALE. THEREFORE, THERE WAS NO RELEVANCE IN SEEK ING THE DETAILS OF PURCHASE TRANSACTIONS WHICH WERE ENTERED INTO ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 84 BETWEEN THE PARTIES OUTSIDE THE FLOOR OF THE STOCK EXCHANGE. THEREFORE, THE RELIANCE PLACED BY THE LD . ASSESSING OFFICER ON THE COMMUNICATION RECEIVED FRO M STOCK EXCHANGE THAT THE PARTICULARS OF SHARES TRANSACTIONS (PURCHASE TRANSACTION) ENTERED INTO BY THE ASSESSEE WERE NOT AVAILABLE IN THEIR RECORDS, IS OU T OF PLACE. THERE IS NO EVIDENTIARY VALUE FOR SUCH RELIA NCE, MORE SPECIFICALLY, WHEN THE ASSESSEE HAS CATEGORICA LLY CONTENDED THAT THE TRANSACTIONS WERE NOT ENTERED IN TO AT THE FLOOR OF THE STOCK EXCHANGE. THE COORDINATE BE NCH OF THE TRIBUNAL IN THE CASE OF MUKESH R. MAROLIA VS AD DL. CIT (2006) 6 SOT 247 (MUM.) ORDER DATED 15/12/2005 HELD AS UNDER:- THIS APPEAL IS FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2001-02. IT IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A)- XV AT MUMBAI ON 24-12-2004 AND ARISES OUT OF THE AS SESSMENT COMPLETED UNDER SECTION 143(3) OF THE INCOME-TAX AC T, 1961. 2. THE ASSESSEE IS CARRYING ON THE BUSINESS OF MANU FACTURING HANDKERCHIEF AS THE PROPRIETOR OF M/S. RUMAL MANUFA CTURING COMPANY. THE ASSESSEE HAD FILED ITS RETURN OF INCOM E FOR THE IMPUGNED ASSESSMENT YEAR FOR A TOTAL INCOME OF RS. 4,28,219 ADDED BY AN AGRICULTURAL INCOME OF RS. 6,000. THE I NCOME RETURNED BY THE ASSESSEE INCLUDED BUSINESS INCOME, INCOME FR OM OTHER SOURCES AND ALSO LONG-TERM CAPITAL GAINS ON SALE OF SHARES AND SALE OF OFFICE PREMISES. 3. THE ASSESSEE HAD PURCHASED A RESIDENTIAL FLAT AT COLABA, MUMBAI DURING THE RELEVANT PREVIOUS YEAR. THE FLAT WAS JOI NTLY PURCHASED WITH HIS WIFE. ASSESSEE'S SHARE IN THE FLAT IS 70 P ER CENT AND THE SHARE OF WIFE IS 30 PER CENT. THE LONG-TERM CAPITAL GAINS DECLARED BY THE ASSESSEE ON SALE OF SHARES AND OFFICE PREMIS ES WERE ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 85 ACCORDINGLY CLAIMED AS DEDUCTION UNDER SECTION 54E AS AGAINST THE PURCHASE OF THE SAID FLAT. ACCORDING TO THE ASSESSE E, THE INVESTMENT IN THE FLAT WAS MADE OUT OF THE SALE PRO CEEDS OF SHARES AND OFFICE PREMISES THEREBY UTILIZING THE SALE CONS IDERATION FOR THE PURCHASE OF ELIGIBLE ASSET FOR CLAIMING DEDUCTION U NDER SECTION 54E. 4. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESS ING OFFICER HELD ON THE BASIS OF ENQUIRIES MADE BY HIM T HAT THE CLAIM OF THE ASSESSEE REGARDING PURCHASE OF SHARES WAS BOGUS AND NO SUCH SHARES WERE PURCHASED BY THE ASSESSEE AND CONSEQUENTLY THE SALE OF SHARES ALSO WAS BOGUS. THEREFORE, THE ASSESSING OFFICER CAME TO THE CONCLUS ION THAT THE FUNDS DEPOSITED BY THE ASSESSEE IN HIS BANK ACCOUNT AS THE SALE PROCEEDS OF THE SHARES AND UTILIZED FOR THE PURCHASE OF FLAT AT COLABA, REMAINED UNEXPLAINED. THE SA LE PROCEEDS OF SHARES ACCOUNTED BY THE ASSESSEE HAS BEEN TREATED BY THE ASSESSING AUTHORITY AS UNEXPLAINED MONEY. THE SALE PROCEEDS OF SHARES WAS RS. 1,41,08,484. IN THE ABOVE CIRCUMSTANCES, THE SAID AMOUNT HAS BEEN ADDED BY THE ASSESSING AUTHORITY UNDER SECTION 69 OF THE INCOM E-TAX ACT, 1961. FURTHER AS A CONSEQUENCE OF THE ABOVE FIND ING, THE ASSESSING OFFICER DECLINED THE CLAIM OF DEDUCTION MA DE BY THE ASSESSEE UNDER SECTION 54E. IN EFFECT, THE AM OUNT INVESTED BY THE ASSESSEE IN THE PURCHASE OF RESIDENTI AL FLAT AT COLABA, MUMBAI HAS BEEN TREATED BY THE ASSESSING AUTHORITY AS UNEXPLAINED INVESTMENT AND FURTHER PERPE TU- ATED BY THE REFUSAL TO GRANT DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 54E, WHICH OFCOURSE IS ONLY A N INEVITABLE CONSEQUENCE. THERE WERE ANOTHER TWO CREDITS IN THE BANK STATEMENT OF THE ASSESSEE'S MINOR SON WHIC H TOTALLED TO RS. 6,61,063. THE ASSESSING OFFICER HAS A DDED THIS AMOUNT ALSO AS UNEXPLAINED INVESTMENT UNDER SECT ION 69. ANOTHER DEPOSIT OF RS. 2 LAKHS WAS IN THE ACCOUNT OF ASSESSEE'S MINOR DAUGHTER. ACCORDING TO THE ASSESSEE, THE SAID AMOUNT WAS GIFTED TO HIS DAUGHTER BY HIS CO-BROTHER WHO IS A NON-RESIDENT. THE PAYMENT WAS ROUTED THROUGH NRE ACCOUNT. BUT, THE EXPLANATION WAS NOT ACCEPTED BY T HE ASSESSING AUTHORITY RESULTING IN THE ADDITION OF RS. 2 LAKHS AS UNEXPLAINED CASH CREDIT UNDER SECTION 68. 5. THE ABOVE THREE ADDITIONS WERE TAKEN IN FIRST APPEAL. THE CIT(A) CONSIDERED THE GROUNDS RAISED BY THE ASSESSEE AGAINST THE ADDITION OF RS. 1,41,08,484 MADE BY THE ASSESSING AUTHORITY UNDER SECTION 69. THE CIT(A) CONF IRMED THE ADDITION UPHOLDING THE FINDING OF THE ASSESSING AUTHORITY THAT THE PURCHASE OF SHARES WAS BOGUS. THE MAIN THRUST OF THE CIT(A) TO ARRIVE AT THE ABOVE FINDING W AS THAT THE SHARE TRANSACTIONS WERE CARRIED OUT BY THE ASSESS EE OUTSIDE THE STOCK EXCHANGE AND NOT THROUGH ANY REGISTERE D BROKER. THE CIT(A) HELD THAT THE RESPONSIBILITY OF THE ASSESSEE IS GREATER IN PROVING THE BONA FIDES OF SUCH OF F- MARKET TRANSACTIONS. IN FACT, WHILE ARRIVING AT HIS CONCLUSION, THE CIT(A) DID NOT APPROVE THE MODE OF SHAR E TRANSACTIONS ADOPTED BY THE ASSESSEE, OFF THE STOCK EXCHANGE. THE ADDITION WAS THEREFORE CONFIRMED. AS A N ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 86 OBVIOUS CONSEQUENCE, THE DISALLOWANCE OF CLAIM OF DEDUCTION UNDER SECTION 54E WAS ALSO UPHELD. REGARDING THE REMAINING TWO ADDITIONS ALSO, THE CIT(A) AGREED WITH THE ASSESSING AUTHORITY THAT THE ASSESSEE HAS NOT PRO VED THE BONA FIDES OF THOSE AMOUNTS. THOSE TWO ADDITIONS A LSO HAVE BEEN CONFIRMED. THE FIRST APPEAL WAS ACCORDINGLY DISMISSED BY THE CIT(A). THE ASSESSEE IS AGGRIEVED AND THEREFORE, THE SECOND APPEAL BEFORE US. 6. THE GROUNDS RAISED BY THE ASSESSEE IN THIS APPEA L READ AS UNDER : '1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT (A) ERRED IN HAVING CONFIRMED THE HIGH-PITCHED ASSESSMENT ON AN ALLEGED UNEXPLAINED INVESTMENT/INCOME OF RS. 1,5 4,53,250 AS AGAINST RETURNED BY THE ASSESSEE AT RS. 4,78,290 WI THOUT CONSIDERING THE FACT THAT THE PURCHASES AND SALES O F SHARES AND SUBSEQUENT INVESTMENT IN HOUSE PROPERTY WERE MADE T HROUGH ACCOUNTED AND DISCLOSED MONEY/SOURCE ONLY. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE ASSESSING OFFICER AND THE LD. CIT(A) ACTED ARBITRAR ILY IN HAVING TREATED THE DEPOSITS TOTALLING TO RS. 1,41,08,484 A S UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE ACT DISBELIEVING THE ACTUAL STATE OF AFFAIRS THAT THE SAID SUM WAS DEPOSITED TO THE BANK OUT OF SALE PROCEEDS OF SHARES OF DIFFERENT COMPANIES THRO UGH ACCOUNT PAYEE CHEQUES, THE DETAILS OF WHICH WERE MADE AVAIL ABLE TO THE REVENUE AUTHORITIES WITH EVIDENCE AND ALSO REFLECTE D IN THE RETURN OF INCOME. 3. THAT THE REVENUE AUTHORITIES FURTHER ERRED IN NO T HAVING ALLOWED DEDUCTION UNDER SECTION 54F IN SPITE OF THE FACT TH AT OUT OF THE SALE PROCEEDS OF SHARES AMOUNTING TO RS. 1,41,08,484 AND OFFICE PREMISES OF RS. 2,32,358, INVESTMENT TOWARDS PURCHA SE OF A FLAT WAS MADE AND HENCE, IN TERMS OF SECTION 54F OF THE ACT, THE ASSESSEE WAS ENTITLED TO DEDUCTION UNDER THAT SECTI ON. 4. THAT THE REVENUE AUTHORITIES ACTED CAPRICIOUSLY IN HAVING DISBELIEVED THE SOURCE FOR PURCHASE OF SHARES OUT O F LONG-TERM CAPITAL GAINS AND AGRICULTURAL INCOME AND WRONGLY I NVOKED THE PROVISIONS OF SECTION 69 OF THE ACT IGNORING THE EX PLANATION AND DETAILS OF YEAR-WISE INCOME FROM AGRICULTURE WHICH WAS USED FOR PURCHASE OF SHARES AND IN SUPPORT OF WHICH CASH BOO K WAS FILED BEFORE THEM AND HENCE, THE ALLEGATION OF NON-GENUIN E TRANSACTION IS BASELESS. 5. THAT THE ASSESSING OFFICER AND THE LD. CIT(A) GR OSSLY ERRED IN HAVING IGNORED THE CONFIRMATIONS OF BROKERS/SUB-BRO KERS/THEIR ASSISTANT IN RESPECT OF SHARE TRANSACTIONS AND INVO KED PROVISIONS OF SECTION 69 ON MERE SUSPICION HOLDING THAT ALL THE T RANSACTIONS WERE BOGUS AND NOT GENUINE. 6(A) THAT THE LD. CIT(A) MISDIRECTED HIMSELF IN HAV ING UPHELD THE ADDITION OF RS. 6,61,063 UNDER SECTION 69 OF THE AC T BEING THE BANK BALANCE OF THE MINOR SON ON THE ALLEGED GROUND OF NON- DISCLOSURE OF CASH DEPOSITS AS INCOME, IN SPITE OF THE FACT THAT THE ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 87 SAID INCOME WAS ALREADY INCLUDED IN THE ASSESSEE'S HAND UNDER SECTION 64(1A) AND THE SAID SUM REPRESENTED THE REF UND OF OUTSTANDING LOAN CREDIT FROM RAINBOW INDUSTRIES THR OUGH ACCOUNT PAYEE CHEQUES. 6(B) THAT THE REVENUE AUTHORITIES HAVE MADE THE SAI D ADDITION UNDER SECTION 69 OF THE ACT ON THE ALLEGED GROUND O F LACK OF EVIDENCE OF SUCH REFUND AND THIS ACT WAS ARBITRARY AND UNCALLED FOR INASMUCH AS THE TRANSACTION WAS THROUGH BANKING CHA NNEL AND THE IDENTITY AND GENUINENESS OF THE TRANSACTION COULD H AVE BEEN EASILY FOUND OUT. 7. THAT THE LEARNED CIT(A) FELL IN ERROR IN CONFIRM ING THE ADDITION OF RS. 2,00,000 UNDER SECTION 68 OF THE ACT BEING T HE BANK DEPOSIT IN THE ASSESSEE'S MINOR DAUGHTER'S BANK ACCOUNT ON THE ALLEGED GROUND OF LACK OF GENUINENESS AND CREDITWORTHINESS, IN SPITE OF THE FACT THAT THE MONEY WAS GIVEN BY ASSESSEE'S CO-BROT HER AS GIFT THROUGH CHEQUE ISSUED ON BANK OF INDIA, MUMBAI, CON FIRMATION AND BANK STATEMENT OF THE SAID CO-BROTHER WERE FILED. 8. THAT THE ORDER OF THE LEARNED CIT(A) IS ARBITRAR Y, UNWARRANTED, WITHOUT ANY MERIT AND BAD IN LAW, THE SAME SHOULD B E QUASHED AND THE ASSESSEE BE GIVEN SUCH RELIEF(S) AS PRAYED FOR.' 7. BEFORE PROCEEDING FURTHER, IT IS NECESSARY TO DI SCUSS IN BRIEF, THE FACTS RELATING TO THE THREE ADDITIONS DISPUTED IN T HE PRESENT APPEAL. AS FAR AS THE ADDITION OF RS. 1,41,08,484 IS CONCER NED, THE FACTS RELATED TO CERTAIN TRANSACTIONS OF PURCHASE AND SAL E OF SHARES ACCOUNTED BY THE ASSESSEE. THE FUNDS NECESSARY FOR PURCHASING THE FLAT AT COLABA WERE RAISED BY THE ASSESSEE BY S ELLING THE SHARES. THE SALE PROCEEDS OF SHARES WERE BROUGHT IN TO THE BANK ACCOUNT OF THE ASSESSEE. ACCORDING TO THE ASSESSEE, HE HAD PURCHASED 1,41,400 SHARES OF M/S. ALLAN INDUSTRIAL GASES LIMITED; 11,500 SHARES OF MOBILE TELE-COMMUNICATIONS LIMITED ; 34,000 SHARES OF RASHEL AGRO TECH LTD., AND 27,700 SHARES OF CENTIL AGRO TECH LTD. THE TOTAL NUMBER OF SHARES THUS PURCHASED BY THE ASSESSEE WAS 2,19,600. THE PURCHASES WERE MADE THRO UGH M/S. RUSHAB INVESTMENTS, RADHA ASHOK AND ANIL SECURITIES . THE PURCHASES WERE MADE DURING THE PERIOD FROM FEBRUARY TO AUGUST 1999 I.E., DURING THE PREVIOUS YEAR PERIODS RELEVAN T TO THE ASSESSMENT YEARS 1999-2000 AND 2000-01. ALL THE 2,1 4,600 SHARES WERE SOLD BY THE ASSESSEE DURING THE PERIOD APRIL 2000 TO FEBRUARY 2001, WHICH IS THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL. THE SHARES WERE SOLD THROUGH M/S. RICHMOND SECURITIES PVT. LTD., AND M/S. SCORPIO MAN AGEMENT. THE ASSESSING AUTHORITY MADE ENQUIRIES REGARDING THE BO NA FIDES OF THE PURCHASE AND SALE OF THOSE SHARES. HE HAD ISSUED NO TICE AND SUMMONS TO THE CONCERNED PARTIES TO EXPLAIN THE NAT URE OF TRANSACTIONS THEY HAD WITH THE ASSESSEE. THE ASSESS ING OFFICER HAS DISCUSSED THE DETAILS OF THE ENQUIRIES CONDUCTED BY HIM IN A DETAILED MANNER IN THE ASSESSMENT ORDER. AS A RESUL T OF THE ENQUIRIES, ASSESSING OFFICER SOUGHT TO DISBELIEVE T HE PURCHASE OF SHARES RECORDED BY THE ASSESSEE FOR THE FOLLOWING R EASONS : (I)THAT RADHA ASHOK, THE BROKER HAS INFORMED THAT H E NEVER SOLD ANY SHARES TO THE ASSESSEE. ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 88 (II)THAT SANDEEP D. SHAH, PROPRIETOR OF RUSHAB INVE STMENTS STATED IN HIS STATEMENT RECORDED UNDER SECTION 131 THAT HE NEVER SOLD ANY SHARES TO THE ASSESSEE. (III)THAT THE BILLS ISSUED BY AMI SECURITIES WERE C OLOUR PHOTOSTAT COPIES OF UNUSED BILLS. (IV)THAT NATIONAL STOCK EXCHANGE OF INDIA HAS INFOR MED THAT THE SHARES OF M/S. MOBILE TELE COMMUNICATIONS LIMITED S AID TO BE SOLD BY AMI SECURITIES WERE NEVER AVAILABLE FOR TRADING IN THE CAPITAL MARKET SEGMENT OF THE EXCHANGE. (V)THAT AMI SECURITIES WAS EXPELLED FROM THE MEMBER SHIP OF THE STOCK EXCHANGE WITH EFFECT FROM FEBRUARY 20, 1999. (VI)THAT THE PURCHASE AND SALE OF SHARES ARE NOT RE FLECTED IN THE RECORDS OF BOMBAY STOCK EXCHANGE. (VII)THAT ASSESSEE HAD NO FUNDS WITH HIM FOR THE PU RCHASE OF THE SHARES. (VIII)THAT THE INTERCONNECTED STOCK EXCHANGE OF IND IA HAS INFORMED THAT NO TRANSACTIONS WERE CARRIED OUT BY R ICHMOND SECURITIES PVT. LTD. IN RESPECT OF THE ASSESSEE. (IX)THAT ANOTHER BROKER SCORPIO MANAGEMENT CEASED T O BE A MEMBER OF THE NATIONAL STOCK EXCHANGE WITH EFFECT F ROM FEBRUARY 20, 1999. (X)THAT SHRI MUKESH CHOKSHI, DIRECTOR OF RICHMOND S ECURITIES PVT. LTD., HAS MADE A STATEMENT THAT HE HAD NOT ISSUED A NY BILL TO THE ASSESSEE; (XI)THAT THE ADIT (INV.) AT HYDERABAD HAS INFORMED THAT ACCORDING TO M/S. CENTIL AGRO TECH., THE ASSESSEE HAD NEVER H ELD ANY OF ITS SHARES. (XII)THAT THE ASSESSEE DID NOT PRODUCE MR. SATHISH STATED TO BE A BROKER. EVEN THOUGH THE ASSESSEE HAS INFORMED THAT ALL THE PAYMENTS EXCEPT THAT OF RS. 11,55,750 WERE RECEIVED FROM M/S. RICHMOND SECURITIES PVT. LTD. THE ASSESSEE HAD ALSO RECEIVED MONIES FROM RUSHAB INVESTMENTS AND TRIPATHI SALES C ORPORATION, BUT THE LATTER TWO RECEIPTS WERE NOT DISCLOSED BY H IM. THE GENUINENESS OF THE TRANSACTIONS WERE NOT ESTABLISHE D FOR THE FAILURE OF THE ASSESSEE TO IDENTIFY THE REAL PERSONS BEHIND THE BROKERS THROUGH WHOM PURCHASE AND SALE WERE SAID TO BE MADE . (XIII)THAT THE ASSESSEE COULD NOT PROVE THE CREDITW ORTHINESS OF THE PARTIES INVOLVED IN THE TRANSACTIONS AND ALSO THEIR IDENTITY AND THEREFORE, HAS FAILED IN PROVING THE GENUINENESS OF THE TRANSACTIONS AS SUCH. THIS FAILURE IS IN SPITE OF NUMBER OF OPPO RTUNITIES GIVEN BY THE ASSESSING AUTHORITY BY ISSUING NOTICE UNDER SEC TION 142(1). 7.1 ON ADJUDICATING THE ISSUE OF ADDITION OF RS. 1, 41,08,484, THE LEARNED COMMISSIONER OF INCOME-TAX ARRIVED AT THE F OLLOWING CONCLUSION : ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 89 'BUT THE MOST IMPORTANT POINT IS THE VERACITY OF TH E TRANSACTIONS CONDUCTED BY THE APPELLANT. THE OFF-MARKET TRANSACT IONS ARE NOT RECOGNIZED TRANSACTIONS, PARTICULARLY WHEN ALL THE SHARES TRANSACTED ARE QUOTED SHARES. WHEN THE SHARE TRANSA CTION IS NOT THROUGH STOCK EXCHANGE, GREATER RESPONSIBILITY IS T HERE WITH THE APPELLANT AND MORE PARTICULARLY WHEN IT IS NOT COND UCTED THROUGH A REGISTERED BROKER. IF SUCH OFF-MARKET TRANSACTIONS ARE RECOGNIZED, THEN WHAT IS THE NECESSITY OF CONDUCTING TRANSACTIO NS THROUGH STOCK EXCHANGE ? WHAT IS THE NEED OF THE REGULATORY AUTHORITY LIKE SEBI. ON APPRECIATION OF THE EVIDENCE COLLECTED BY THE ASSESSING OFFICER, BOTH THE PURCHASE AND SALES CLAIMED TO HAV E BEEN MADE BY THE APPELLANT ARE FOUND TO BE NON-GENUINE. HENCE , THE ADDITION MADE BY THE ASSESSING OFFICER ON THIS ACCOUNT UNDER SECTION 69 OF THE ACT IS QUITE JUSTIFIED. IT IS, THEREFORE, CONFI RMED.' 7.2 REGARDING THE NEXT ADDITION OF RS. 6,61,063, IT WAS MADE UNDER SECTION 69 AS UNACCOUNTED INVESTMENT AGAINST THE CREDITS REFLECTED IN THE BANK ACCOUNT OF THE ASSESSEE'S MIN OR SON, MASTER PRATIK. IN THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSING OFFICER HAS NOTICED THAT THE ASSESSEE HAD SHOWN A S UM OF RS. 35,490 UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. THIS INTEREST INCOME CAME OUT OF THE BANK ACCOUNT OF ASSESSEE'S M INOR SON. THE ASSESSING OFFICER FOUND THAT THERE WERE TWO DEPOSIT S IN THE NAME OF ASSESSEE'S MINOR SON TOTALLING TO RS. 6,61,063, THE SOURCE OF WHICH HAVE NOT BEEN PROPERLY EXPLAINED. THEREFORE, IT WAS ADDED. IN FIRST APPEAL, THE CIT(A) ALSO AGREED THAT NO EVI DENCE WAS PRODUCED BY THE ASSESSEE TO PROVE THE SOURCE OF THE SUM OF RS. 6,61,063 REPRESENTED BY FIXED DEPOSITS IN THE NAME OF ASSESSEE'S MINOR SON. THE CONTENTION OF THE ASSESSEE WAS THAT THE SAID AMOUNT WAS OUTSTANDING AS A LOAN CREDIT WITH M/S. R AINBOW INDUSTRIES AT TARDEO, MUMBAI. IT WAS FURTHER EXPLAI NED BY THE ASSESSEE THAT THE SAID AMOUNT WAS REPAID BY M/S. RA INBOW INDUSTRIES WHICH WAS IN TURN REFLECTED BY THE FIXED DEPOSITS. 7.3 THE THIRD ADDITION IS THE AMOUNT OF RS. 2 LAKHS MADE UNDER SECTION 68. THIS AMOUNT HAS BEEN REFLECTED IN THE A CCOUNTS OF THE ASSESSEE'S MINOR DAUGHTER MISS ZANKHANA. ACCORDING TO THE ASSESSEE, THE AMOUNT WAS GIFTED BY ASSESSEE'S CO-BR OTHER. HIS EXPLANATION WAS NOT ACCEPTED BY THE ASSESSING AUTHO RITY AS WELL AS THE CIT(A). THEREFORE, THE SAID ADDITION WAS ALSO C ONFIRMED. 8. THE ABOVE THREE MENTIONED ADDITIONS CONFIRMED BY THE CIT(A) ARE THE SUBJECT-MATTER OF THIS APPEAL. WE WILL FIRS T CONSIDER THE ADDITION OF RS. 1,41,08,484. 8.1 SHRI S.K. TULSIAN, THE LEARNED COUNSEL APPEARIN G FOR THE ASSESSEE MADE EXTENSIVE ARGUMENTS AGAINST THE ADDIT ION. HIS CONTENTIONS ARE SUMMARIZED BELOW. 8.2 THE FOREMOST ARGUMENT OF THE LEARNED COUNSEL IS THAT THE CASE OF THE ASSESSEE REGARDING PURCHASE AND SALE OF SHAR ES WAS FULLY SUPPORTED BY THE DETAILS COLLECTED IN THE COURSE OF SURVEY CONDUCTED BY THE DEPARTMENT IN THE BUSINESS PREMISE S OF THE ASSESSEE. THERE WAS A SURVEY CARRIED OUT BY THE DEP ARTMENT IN THE BUSINESS PREMISES OF THE ASSESSEE. COPIES OF CONTRA CT NOTES FOR SALE OF SHARES, COPIES OF BILLS THEREOF, PHOTOCOPIE S OF SHARE ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 90 CERTIFICATES ETC., WERE FOUND IN THE COURSE OF SURV EY. IT IS THE CASE OF THE LEARNED COUNSEL THAT THESE DETAILS COLLECTED BY THE DEPARTMENT BY ITSELF IS THE BEST TESTIMONY FOR THE CASE OF THE ASSESSEE THAT HE HAD PURCHASED AND SOLD SHARES RESU LTING IN CAPITAL GAINS WHICH WAS UTILIZED BY HIM FOR THE PUR CHASE OF FLAT AT COLABA. 8.3 THE LEARNED COUNSEL SUBMITTED THAT AS FAR AS TH E SHARE TRANSACTIONS ARE CONCERNED, NOT ONLY THE DEPARTMENT COLLECTED POSITIVE EVIDENCES IN THE COURSE OF SURVEY, IN SUPP ORT OF THE ACCOUNTS OF THE ASSESSEE REGARDING PURCHASE AND SAL E OF SHARES, BUT ALSO TO BE NOTED THAT NO INCRIMINATING DOCUMENT OR EVIDENCE INDICATING ANY DOUBTFULNESS IN THE BONA FIDES OF TH E SHARE TRANSACTIONS WERE FOUND IN THE COURSE OF SURVEY. IT IS THE CASE OF THE LEARNED COUNSEL THAT SURVEY WAS DONE BY THE DEP ARTMENT WITHOUT ANY PRIOR NOTICE AND ALMOST SURPRISINGLY AN D THEREFORE, WHAT WAS FOUND IN THE COURSE OF SURVEY SHOULD BE AC CEPTED ON ITS FACE VALUE. 8.4 THAT THE ASSESSEE HAD SUBMITTED NUMBER OF EVIDE NCES BEFORE THE ASSESSING AUTHORITY TO PROVE THE GENUINENESS OF THE SHARE TRANSACTIONS. THE ASSESSING AUTHORITY HAD RELIED ON THE NEGATIVE REPLIES RECEIVED FROM BOMBAY STOCK EXCHANGE, THE NA TIONAL STOCK EXCHANGE AND THE INTERCONNECTED STOCK EXCHANGE OF I NDIA TO REJECT THE EXPLANATIONS OF THE ASSESSEE WITHOUT REC OGNIZAING THE BASIC FACT THAT THOSE SHARE TRANSACTIONS WERE OFF-M ARKET TRANSACTIONS AND OBVIOUSLY THERE WOULD BE NO RECORD S REGARDING THOSE TRANSACTIONS WITH THOSE STOCK EXCHANGES. THE ASSESSING AUTHORITY WAS MAKING ENQUIRIES WITH THOSE STOCK EXC HANGES KNOWING THAT THE ENQUIRY RESULTS WOULD BE FUTILE. S UCH NEGATIVE ANSWERS CANNOT BE USED AGAINST THE ASSESSEE AS POSI TIVE EVIDENCE. THE ASSESSING OFFICER HIMSELF KNEW THAT THOSE ENQUI RIES WOULD SERVE NO PURPOSE. 8.5 THAT THE FACT THAT SUMMONS COULD NOT BE SERVED ON FEW BROKERS WHICH HAS BEEN USED AGAINST THE ASSESSEE, E VENTHOUGH THE IDENTITY OF THE BROKERS WERE NOT DISPUTED BY TH E ASSESSING AUTHORITY. THE BILLS ISSUED BY THOSE BROKERS IN RES PECT OF SHARE TRANSACTIONS WERE FOUND IN THE COURSE OF SURVEY ITS ELF. THE LEARNED COUNSEL FURTHER SUBMITTED THAT THE PURCHASES OF ALL THE SHARES WERE DULY RECORDED, DISCLOSED IN THE RETURN OF INCOME FI LED BY THE ASSESSEE FOR THE ASSESSMENT YEARS 1999-2000 AND 200 0-01. THAT THE PURCHASES WERE MADE OUT OF THE IDENTIFIED AND D ISCLOSED FUNDS; THAT THE SALE OF THE SHARES WERE DULY DISCLOSED IN THE RETURNS FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2001-02; TH AT THE PERSONS THROUGH WHOM MOST OF THE PURCHASE AND SALES WERE TRANSACTED HAD CONFIRMED THE TRANSACTIONS WITH THE ASSESSEE; THAT THE PROCEEDINGS FROM THE SALE OF SHARES WERE RECEIV ED BY THE ASSESSEE BY ACCOUNT PAYEE CHEQUES AND PAY ORDERS. T HE ASSESSEE HAD PRODUCED LETTERS FROM VARIOUS COMPANIES CONFIRM ING THE HOLDING OF SHARES BY THE ASSESSEE DURING THE RELEVA NT PERIOD. THAT THE PURCHASE AND SALES OF SHARES WERE OFF-MARKET TR ANSACTIONS AND AS SUCH THE COMMUNICATIONS FROM VARIOUS STOCK EXCHA NGES WERE WHOLLY IRRELEVANT. ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 91 8.6 THE LEARNED COUNSEL OF THE ASSESSEE FURTHER EXP LAINED ON THE FACTS OF THE CASE. HE HAS FILED DETAILED PAPER BOOK CONTAINING SUCH DETAILS. THE BREAK UP OF PURCHASE AND SALE OF SHARE S ARE FURNISHED. THE LEARNED COUNSEL SUBMITTED THAT MOST OF THE PURC HASE AND SALE OF SHARES WERE CARRIED OUT THROUGH SHRI SATISH MAND OVARA, MEDIATOR, WHO IS A SPECIALIST IN OFF-MARKET TRADING OF SHARES. SHRI SATISH MANDOVARA WAS THE ASSISTANT OF SHRI MANGESH CHOKSHI, DIRECTOR OF M/S. RICHMOND SECURITIES PVT. LTD. BOTH SHRI SATISH MANDOVARA AND SHRI MANGESH CHOKSHI IN THE RESPECTIV E STATEMENTS RECORDED UNDER SECTION 31 OF THE INCOME-TAX ACT HAV E CONFIRMED THAT THE TRANSACTIONS ARE ENTERED INTO BY THEM WITH THE ASSESSEE WERE GENUINE. REGARDING THE SOURCE OF INVESTMENTS, THE ASSESSEE HAS EXPLAINED BEFORE THE ASSESSING OFFICER THAT HE HAD AGRICULTURAL INCOME WHICH REFLECTED IN THE RETURNS FILED FOR THE ASSESSMENT YEARS 1990-91 TO 2001-02. THE LEARNED COUNSEL INVIT ED OUR ATTENTION TO THE CASH ON HAND AVAILABLE WITH THE AS SESSEE FOR VARIOUS YEAR ENDINGS DETAILED IN THE PAPER BOOK. 8.7 THE LEARNED COUNSEL SUBMITTED THAT THE ASSESSIN G OFFICER HAS ERRED IN APPRECIATING THE STATEMENTS GIVEN BY SHRI SATISH MANDOVARA. SHRI SATISH MANDOVARA IS THE PROPRIETOR OF M/S. RUSHAB INVESTMENTS WHICH IS DIFFERENT FROM THE OTHER RUSHA B INVESTMENTS REFERRED TO BY THE ASSESSING OFFICER. AS THE PROPRI ETOR OF M/S. RUSHAB INVESTMENTS HE HAS BEEN FILING RETURNS OF IN COME. IT WAS ALSO STATED BY HIM THAT HE GOT SHARES OF THE CONCER NED COMPANIES TRANSFERRED IN THE NAME OF THE ASSESSEE. THE LEARNE D COUNSEL FURTHER SUBMITTED THAT THE ABOVE EVIDENCE PROVED BE YOND ANY REASONABLE DOUBT THAT THE ASSESSEE HAD ACTUALLY PUR CHASED AND SOLD SHARES. 8.8 IN FACT, DENIAL OF SHRI SANDEEP D. SHAH ANY TRA NSACTION WITH THE ASSESSEE, THE LEARNED COUNSEL SUBMITTED THAT HE HAD CATEGORICALLY STATED THAT AS PROPRIETOR OF M/S. RUS HAB INVESTMENTS, THE BUSINESS WAS DISCON- TINUED WITH EFFECT FROM 19 97, WHEREAS, IN FACT THE IMPUGNED SHARES WERE PURCHASED BY THE ASSE SSEE FROM M/S. RUSHAB INVESTMENTS DURING THE ACCOUNTING YEARS 1998-99 AND 1999-2000. HE EXPLAINED THAT DURING THIS PERIOD SHRI SATISH MANDOVARA CARRIED ON THE BUSINESS IN THE NAME AND S TYLE OF M/S. RUSHAB INVESTMENTS AND HE HAS CATEGORICALLY CONFIRM ED THE SALE OF THE IMPUGNED SHARES TO THE ASSESSEE. THEREFORE, THE ASSESSING OFFICER HAS ERRED IN RELYING ON THE DENIAL OF SHRI SANDEEP D. SHAH. 8.9 THE LEARNED COUNSEL FURTHER SUBMITTED THAT EVEN THOUGH SUMMONS ISSUED TO VARIOUS COMPANIES COULD NOT BE SE RVED, THE COMMUNICATIONS RECEIVED FROM RELEVANT STOCK EXCHANG ES PROVED THAT THOSE SHARES WERE QUOTED SHARES WHICH SHOWED T HAT THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE WERE GENU INE. 8.10 REGARDING THE SALE OF THE SHARES, THE LEARNED COUNSEL SUBMITTED THAT IN THE LIGHT OF STATEMENTS MADE AVAI LABLE BEFORE THE ASSESSING AUTHORITY IT WAS MADE CLEAR THAT THE SHAR ES WERE SOLD THROUGH SHRI SATISH MANDOVARA WHO WAS AN ASSISTANT OF SHRI MANGESH CHOKSHI, THE DIRECTOR OF M/S. RICHMOND SECU RITIES PVT. LTD. THE SALES ARE SUPPORTED BY THE DETAILS ISSUED BY M/S. RICHMOND SECURITIES PVT. LTD. PAYMENTS WERE ISSUED BY CHEQUES. THE BANK ACCOUNTS WERE IDENTIFIED. SHRI MANDOVARA P AID THE MONEY ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 92 TO THE ASSESSEE OUT OF THE COLLECTIONS MADE FROM VA RIOUS JOBBERS. EVEN THE CHEQUES WERE ISSUED ON BEHALF OF M/S. RICH MOND SECURITIES PVT. LTD. AS INSTRUCTED BY SHRI MANGESH CHOKSHI. IT WAS THE CASE THAT M/S. SCORPIO MANAGEMENT CONSULTANCY P VT. LTD. ALSO THAT THE IDENTITY OF THE SAID COMPANY AS A BROKER W AS NEVER DOUBTED. EVEN THOUGH THE SALES TRANSACTIONS WERE OF F-MARKET TRANSACTIONS, THEY WERE DOCUMENTED AND SUPPORTED BY VARIOUS EVIDENCES. 8.11 THEREFORE, THE LEARNED COUNSEL SUBMITTED THAT THERE IS NO BASIS FOR SUSTAINING AN ADDITION OF RS. 1,41,08,484 . 9. SHRI R.K. SINGH, THE LEARNED COMMISSIONER OF INC OME-TAX WHO APPEARED FOR THE REVENUE PLACED THE CASE OF THE REV ENUE IN DETAIL BEFORE THE BENCH. HE STATED THAT THE ASSESSING OFFI CER HAS MADE CONCLUSIVE ENQUIRIES IN A VERY EXTENSIVE MANNER TO PROVE THAT THE PURCHASE AND SALE OF SHARES CLAIMED BY THE ASSESSEE WERE ONLY PAPER TRANSACTIONS FOR CREATING ACCOUNTABLE MONEY F OR PURCHASING THE FLAT IN COLABA. THE LEARNED COMMISSIONER SUBMIT TED THAT IT IS QUITE MAGICAL TO BELIEVE THAT A SMALL AMOUNT OF MON EY INVESTED BY THE ASSESSEE IN SHARES OF CERTAIN COMPANIES MULTIPL IED ASTRONOMICALLY WITHIN A VERY SHORT SPAN OF TIME AND THE SHARES SOLD FOR A HIGH AMOUNT ASMUCH AS RS. 1,41,08,484, WHICH CONVENIENTLY SUPPORTED ASSESSEE'S INVESTMENT IN THE PURCHASE OF FLAT AT COLABA. 9.1 THE LEARNED COMMISSIONER SUBMITTED THAT THE ABO VE TRANSACTIONS WERE VERY INCREDIBLE AND THAT INCREDIB ILITY IS FURTHER COMPOUNDED BY THE FACT THAT THE ENTIRE TRANSACTIONS WERE MADE OUTSIDE STOCK EXCHANGE. THEY WERE ALL OFF-MARKET TR ANSACTIONS. WHEN ALL THE ABOVE FACTS ARE READ TOGETHER, IT IS, TO BE CLEARLY SEEN THAT THE ASSESSEE HAS MADE UP A STORY REGARDING THE PURCHASE AND SALE OF SHARES SO AS TO MAKE OUT A CASE OF NON-EXIS TING CAPITAL GAINS. 9.2 HE STATED THAT THE OFF-MARKET TRANSACTIONS AS S TATED BY THE ASSESSEE WAS NOT PROPER. RADHA ASHOK, THE BROKER HA S CONFIRMED IN HIS STATEMENT BEFORE THE ASSESSING AUTHORITY THA T HE NEVER SOLD ANY SHARES TO THE ASSESSEE. SHRI SANDEEP D. SHAH, P ROPRIETOR OF M/S. RUSHAB INVESTMENTS MADE A SIMILAR STATEMENT BE FORE THE ASSESSING AUTHORITY. BILLS OF AMI SECURITIES WERE F ORGED AND UNUSED BANK BILLS WERE UTILIZED BY THE ASSESSEE TO GIVE A TRUE PICTURE OF TRANSACTIONS. THE BROKER HAS BEEN EXPELLED FROM THE STOCK EXCHANGE MUCH BEFORE TRANSACTIONS TOOK PLACE. IN TH E ABOVE CIRCUMSTANCES, IT IS, TO BE SEEN THAT THE ASSESSEE HAS FAILED TO ESTABLISH THE IDENTITY AS WELL AS THE CREDITWORTHIN ESS OF THE BROKERS INVOLVED IN THE CASE. 9.3 THE LEARNED COMMISSIONER FURTHER CONTENDED THAT IT IS CLEAR FROM THE STATEMENT OF MR. MANGESH CHOKSHI, PROPRIET OR OF M/S. RICHMOND SECURITIES PVT. LTD. THAT ASSESSEE'S MONEY WAS ROUTED THROUGH SHRI SATISH MANDOVARA WHO IS A BROKER. 9.4 THE LEARNED COMMISSIONER SUBMITTED THAT IF THE ENTIRE FACTUAL MATRIX OF THE CASE IS EXAMINED IN A LOGICAL MANNER, IT IS, VERY CLEAR THAT THE ASSESSEE WAS BUILDING UP A STORY OF PURCHA SE AND SALE OF SHARES BY MAKING FALSE ENTRIES IN THE BOOKS OF ACCO UNT AND ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 93 ARRANGING FORGED DOCUMENTS TO SUPPORT SUCH ENTRIES. THIS IS VERY CLEAR FROM THE STATEMENTS EXTRACTED BY THE ASSESSIN G OFFICER FROM THE CONCERNED PARTIES. STATEMENTS GIVEN BY THOSE PA RTIES DO REALLY QUASH THE CONCOCTED STORY MADE OUT BY THE ASSESSEE. 9.5 THE LEARNED COMMISSIONER FURTHER CONTENDED THAT THE ASSESSING OFFICER AS WELL AS THE CIT(A) HAVE EXAMIN ED THE ISSUE IN A VERY EXHAUSTIVE MANNER EXPLAINING EACH AND EVERY INSTANCE OF EVIDENCE AND HAVE PASSED VERY SPEAKING ORDERS AND H AVE CONCLUSIVELY ARRIVED AT A FINDING THAT THE AMOUNT O F RS. 1,41,08,484 STATED TO BE RECEIVED BY THE ASSESSEE O N SALE OF SHARES WAS ONLY BOGUS AND NOT REAL. HE, THEREFORE, SUBMITTED THAT THE ADDITION MAY BE CONFIRMED IN THE HANDS OF THE A SSESSEE. 10. WE HEARD BOTH SIDES IN DETAIL AND PERUSED RIVAL CONTENTIONS IN THE LIGHT OF THE RECORDS OF THE CASE AND THE PAPER BOOK FILED BY THE ASSESSEE. IN THE RETURN OF INCOME FILED BY THE ASSE SSEE FOR THE YEAR UNDER APPEAL, THE PURCHASE OF FLAT AT COLABA F OR A CONSIDERATION OF RS. 2,06,72,904 WAS REFLECTED. THE ASSESSEE'S CONTRIBUTION IN THE PURCHASE OF THE FLAT WAS @ 70 P ER CENT FOR WHICH THE INVESTMENT AMOUNTED TO RS. 1,44,71,033. T HE SOURCE OF INVESTMENT WAS, AMONG OTHER THINGS, THE SALE PROCEE DS OF SHARES OF RS. 1,41,08,484. THIS AMOUNT HAS BEEN QUESTIONED BY THE REVENUE AUTHORITIES. 10.1 THE ASSESSEE HAS PURCHASED THE SHARES OF FOUR COMPANIES VIZ., ALLAN INDUSTRIAL GASES LTD., MOBILE TELECOM, RASHEE AGROTECH AND CENTIL AGROTECH, DURING THE PREVIOUS YEARS RELE VANT TO THE ASSESSMENT YEARS 1999-2000 AND 2000-01. THE BOOKS O F ACCOUNT MAINTAINED BY THE ASSESSEE FOR BOTH THE YEARS CLEAR LY REFLECTED THE PURCHASE OF THOSE SHARES. THE SHARES ARE REFLECTED IN THE BALANCE SHEETS FILED BY THE ASSESSEE ALONG WITH THE RETURNS OF INCOME FOR THE ASSESSMENT YEARS 1999-2000 AND 2000-01. THEREFO RE, IT IS SEEN THAT AS A PRIMA FACIE EVIDENCE, THE PURCHASES OF SHARES HAVE BEEN CONTEMPORANEOUSLY ENTERED INTO THE BOOKS OF AC COUNT OF THE ASSESSEE. 10.2 THE ASSESSEE HAS BEEN DECLARING AGRICULTURAL I NCOME IN HIS RETURNS OF INCOME FOR THE ASSESSMENT YEARS FROM 199 0-91 TO 2001- 02. THE TOTAL AGRICULTURAL INCOME RETURNED BY THE A SSESSEE UP TO THE ASSESSMENT YEAR 1999-2000 WAS AT RS. 7,57,883. THE AMOUNT INVESTED IN THE PURCHASE OF SHARES AS ON 31-3-1999 WAS RS. 4,48,160. THE CASH AVAILABLE WITH THE ASSESSEE BY W AY OF AGRICULTURAL INCOME WAS MUCH HIGHER THAN THE INVEST MENT MADE BY THE ASSESSEE IN THE PURCHASE OF SHARES AS ON 31-3-1 999. AFTER MAKING THE INVESTMENTS IN THE SHARES, THE ASSESSEE HAD A SURPLUS CASH BALANCE OF RS. 3,09,000 AS ON 1-4-1999. THEREA FTER, THE ASSESSEE HAS FURTHER RETURNED AN AGRICULTURAL INCOM E OF RS. 66,000 FOR THE ASSESSMENT YEAR 2000-01. THE AMOUNT INVESTE D IN THE PURCHASE OF SHARES IN THE YEAR ENDING ON 31-3-2000 WAS RS. 2,57,020. AGAIN THE ASSESSEE HAD A CASH BALANCE THE REOF OF RS. 1,18,771. THEREFORE, IT IS, VERY CLEAR THAT THE INV ESTMENT MADE BY THE ASSESSEE IN SHARES DURING THE PREVIOUS PERIODS RELEVANT TO THE ASSESSMENT YEARS 1999-2000 AND 2000-01 WAS SUPPORTE D BY CASH GENERATED OUT OF AGRICULTURAL INCOME. THE ABOVE AGR ICULTURAL INCOME HAVE BEEN CONSIDERED IN THE RESPECTIVE ASSES SMENTS. ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 94 THEREFORE, THE CONTENTION OF THE ASSESSING AUTHORIT Y THAT THE ASSESSEE HAD NO SUFFICIENT RESOURCEFULNESS TO MAKE INVESTMENTS IN THE SHARES IS UNFOUNDED. 10.3 PURCHASE AND SALE OF SHARES OUTSIDE THE FLOOR OF STOCK EXCHANGE IS NOT AN UNLAWFUL ACTIVITY. OFF-MARKET TR ANSACTIONS ARE NOT ILLEGAL. IT IS ALWAYS POSSIBLE FOR THE PARTIES TO ENTER INTO TRANSACTIONS EVEN WITHOUT THE HELP OF BROKERS. THER EFORE, IT IS NOT POSSIBLE TO HOLD THAT THE TRANSACTIONS REPORTED BY THE ASSESSEE WERE QUITE SHAM ON THE LEGAL PROPOSITION ARRIVED AT BY THE CIT(A) THAT OFF-MARKET TRANSACTIONS ARE NOT PERMISSIBLE. T HE ASSESSEE HAS STATED THAT THE TRANSACTIONS WERE MADE WITH THE HEL P OF PROFESSIONAL MEDIATORS WHO ARE EXPERTS IN OFF-MARKE T TRANSACTIONS. 10.4 WHEN THE TRANSACTIONS WERE OFF-MARKET TRANSACT IONS, THERE IS NO RELEVANCE IN SEEKING DETAILS OF SHARE TRANSACTIO NS FROM STOCK EXCHANGES. SUCH ATTEMPTS WOULD BE FUTILE. STOCK EXC HANGES CANNOT GIVE DETAILS OF TRANSACTIONS ENTERED INTO BE TWEEN THE PARTIES OUTSIDE THEIR FLOOR. THEREFORE, THE RELIANC E PLACED BY THE ASSESSING AUTHORITY ON THE COMMUNICATIONS RECEIVED FROM THE STOCK EXCHANGES THAT THE PARTICULARS OF SHARE TRANS ACTIONS ENTERED INTO BY THE ASSESSEE WERE NOT AVAILABLE IN THEIR RE CORDS, IS OUT OF PLACE. THERE IS NO EVIDENTIAL VALUE FOR SUCH RELIAN CE PLACED BY THE ASSESSING AUTHORITY. THE ASSESSEE HAD MADE IT VERY CLEAR THAT THE TRANSACTIONS WERE NOT CONCLUDED ON THE FLOOR OF THE STOCK EXCHANGE. THE MATTER BEING SO, THERE IS NO PROBATIV E VALUE FOR THE NEGATIVE REPLIES SOLICITED BY THE ASSESSING AUTHORI TY FROM THE RESPECTIVE STOCK EXCHANGES. WE ARE OF THE CONSIDERE D VIEW THAT THE MATERIALS COLLECTED BY THE ASSESSING AUTHORITY FROM THE STOCK EXCHANGES ARE NOT VALID TO DISPEL OR DISBELIEVE THE CONTENTIONS OF THE ASSESSEE. 10.5 THE NEXT SET OF EVIDENCES RELIED ON BY THE ASS ESSING AUTHORITY ARE THE STATEMENTS OBTAINED FROM VARIOUS PARTIES. W HEN CERTAIN PERSONS LIKE RADHA ASHOK AND SANDEEP D. SHAH MADE N EGATIVE STATEMENTS AGAINST THE ASSESSEE, PERSONS LIKE SATIS H MANDOVARA AND MANGESH CHOKSHI HAD GIVEN POSITIVE STATEMENTS I N SUPPORT OF THE CONTENTION OF THE ASSESSEE. BUT, THE ASSESSING AUTHORITY SOUGHT TO PICK AND CHOOSE THE STATEMENTS GIVEN BY VARIOUS PARTIES. WHILE ACCEPTING AND REJECTING SUCH STATEMENTS GIVEN BY TH E PARTIES, THE ASSESSING OFFICER HAS MADE A MISTAKE OF ACCEPTING I RRELEVANT STATEMENTS AND REJECTING RELEVANT STATEMENTS. DURIN G THE RELEVANT PERIOD IN WHICH THE ASSESSEE TRANSACTED IN SHARES, PERSONS LIKE RADHA ASHOK AND SANDEEP D. SHAH WERE NOT CARRYING O N THEIR BUSINESS OF BROKERS AS IN THE MANNER THEY CARRIED O N THE BUSINESS IN THE PAST. EVEN THEIR STOCK EXCHANGE MEMBERSHIPS WERE CANCELLED. IT WAS SHRI SATISH MANDOVARA WHO WAS CAR RYING ON THE BUSINESS MAINLY FOR AND ON BEHALF OF SHRI MANGESH C HOKSHI, DIRECTOR OF M/S. RICHMOND SECURITIES PVT. LTD. THOS E TWO PERSONS HAVE CATEGORICALLY ADMITTED BEFORE THE ASSESSING AU THORITY THAT THEY HAD DEALINGS WITH THE ASSESSEE IN RESPECT OF T HE SHARE TRANSACTIONS. THEY HAVE CONFIRMED THE TRANSACTIONS STATED BY THE ASSESSEE THAT HE HAD WITH THEM. THESE POSITIVE STAT EMENTS MADE BEFORE THE ASSESSING AUTHORITY SUPPORTED THE CASE O F THE ASSESSEE. THERE IS NO FORCE IN THE ACTION OF THE ASSESSING AU THORITY IN RELYING ON THE NEGATIVE STATEMENTS OF THE OTHER PARTIES WHO SE ROLE DURING ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 95 THE RELEVANT PERIOD WAS EITHER IRRELEVANT OR INSIGN IFICANT. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS, OUR CONSIDERED VIEW THAT CERTAIN STATEMENTS RELIED ON BY THE ASSES SING AUTHORITY DO NOT DILUTE THE PROBATIVE VALUE OF THE STATEMENTS GIVEN BY OTHER PERSONS IN FAVOUR OF THE ASSESSEE CONFIRMING THE SH ARE TRANSACTIONS ENTERED INTO BY THE ASSESSEE. 10.6 THE ABOVE CIRCUMSTANCES HAVE MADE OUT A CLEAR CASE IN SUPPORT OF THE BOOK ENTRIES REFLECTING THE PURCHASE AND SALE OF SHARES AND ULTIMATELY SUPPORTING THE MONEY RECEIVED ON SALE OF SHARES AND FINALLY INVESTING THE SAME IN THE PURCHA SE OF FLAT. THE CHAIN OF TRANSACTIONS ENTERED INTO BY THE ASSESSEE HAVE BEEN PROPERLY ACCOUNTED, DOCUMENTED AND SUPPORTED BY EVI DENCES. 10.7 THEREFORE, WE FIND THAT THE EXPLANATIONS OF TH E ASSESSEE SEEMS TO HAVE BEEN REJECTED BY THE ASSESSING AUTHOR ITY MORE ON THE GROUND OF PRESUMPTION THAN ON FACTUAL GROUND. T HE PRESUMPTION IS SO COMPELLING THAT COMPARATIVELY A S MALL AMOUNT OF INVESTMENT MADE BY THE ASSESSEE DURING THE PREVIOUS YEAR PERIOD RELEVANT TO THE ASSESSMENT YEARS 1999- 2000 AND 200 0-01 HAVE GROWN INTO A VERY SIZABLE AMOUNT ULTIMATELY YIELDIN G A FABULOUS SUM OF RS. 1,41,08,484 WHICH WAS USED BY THE ASSESS EE FOR THE PURCHASE OF THE FLAT AT COLABA. THE SEQUENCE OF THE EVENTS AND ULTIMATE REALIZATION OF MONEY IS QUITE AMAZING. THA T ITSELF IS A PROVOCATION FOR THE ASSESSING OFFICER TO JUMP INTO A CONCLUSION THAT THE TRANSACTIONS WERE BOGUS. BUT, WHATEVER IT MAY B E, AN ASSESSMENT HAS TO BE COMPLETED ON THE BASIS OF RECO RDS AND MATERIALS AVAILABLE BEFORE THE ASSESSING AUTHORITY. PERSONAL KNOWLEDGE AND EXCITEMENT ON EVENTS, SHOULD NOT LEAD THE ASSESSING OFFICER TO A STATE OF AFFAIRS WHERE SALIE NT EVIDENCES ARE OVER-LOOKED. IN THE PRESENT CASE, HOWSOEVER UNBELIE VABLE IT MIGHT BE, EVERY TRANSACTION OF THE ASSESSEE HAS BEEN ACCO UNTED, DOCUMENTED AND SUPPORTED. EVEN THE EVIDENCES COLLEC TED FROM THE CONCERNED PARTIES HAVE BEEN ULTIMATELY TURNED IN FA VOUR OF THE ASSESSEE. THEREFORE, IT IS, VERY DIFFICULT TO BRUSH ASIDE THE CONTENTIONS OF THE ASSESSEE THAT HE HAD PURCHASED S HARES AND HE HAD SOLD SHARES AND ULTIMATELY HE HAD PURCHASED A F LAT UTILIZING THE SALE PROCEEDS OF THOSE SHARES. 10.8 FOR A MOMENT, EVEN IF ALL THE ABOVE EVIDENCES ARE IGNORED, ONE CANNOT OVERLOOK THE PRESSURE OF THE EVIDENCE CO MING OUT OF THE SURVEY CARRIED OUT BY THE DEPARTMENT IN THE BUS INESS PREMISES OF THE ASSESSEE. THERE WAS A SURVEY CARRIED OUT BY THE DEPARTMENT IN THE BUSINESS PREMISES OF THE ASSESSEE. IN THE CO URSE OF SURVEY, CONTRACT NOTES FOR SALE OF SHARES, COPIES OF BILLS THEREOF, PHOTOCOPIES OF SHARE CERTIFICATES ETC., WERE FOUND. THE PURCHASE AND SALE OF SHARES WERE ALSO FOUND RECORDED IN THE BOOKS OF ACCOUNT. THE DEPARTMENT HAS NO CASE THAT THE SURVEY WAS A STAGED ENACTMENT. A SURVEY IS ALWAYS UNEXPECTED. SO, IT IS NOT POSSIBLE TO PRESUME THAT THE ASSESSEE HAD COLLECTED CERTAIN FAB RICATED DOCUMENTS AND KEPT AT HIS BUSINESS PREMISES SO AS T O HOODWINK THE SURVEY PARTY TO LEAD THEM TO BELIEVE THAT THE A SSESSEE HAD ENTERED INTO SHARE TRANSACTIONS. ATLEAST SUCH AN IN FERENCE IS NOT POSSIBLE IN LAW. THE DEPARTMENT HAS NO DEFENCE AGAI NST THE FORCIBLE ARGUMENT OF THE LEARNED COUNSEL THAT THE S URVEY CONDUCTED BY THE DEPARTMENT HAS OUT AND OUT UPHELD THE CONTEN TION OF THE ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 96 ASSESSEE THAT HE HAD PURCHASED AND SOLD SHARES. WE FIND THAT THIS SOLITARY EVIDENCE COLLECTED IN THE COURSE OF SURVEY IS SUFFICIENT TO ENDORSE THE BONA FIDES OF THE SHARE TRANSACTIONS MA DE BY THE ASSESSEE. 10.9 THEREFORE, IN SHORT ON THE BASIS OF THE INTERN AL EVIDENCES AVAILABLE WITH THE ASSESSEE AND THE FACT THAT THE S ALE PROCEEDS WERE COLLECTED THROUGH BANK ACCOUNTS AND COUPLED WI TH THE EXTERNAL EVIDENCE OF SURVEY AND STATEMENT OF PARTIE S, WE HAVE TO HOLD THAT THE SALE PROCEEDS OF RS. 1,41,08,484 HAS BEEN EXPLAINED. THEREFORE, THE SAID ADDITION IS DELETED. 11. AS WE HAVE HELD THAT THE SUM OF RS. 1,41,08,484 HAS BEEN EXPLAINED BY THE ASSESSEE, THE ASSESSEE IS ENTITLED FOR THE BENEFIT OF SECTION 54E AGAINST THE PURCHASE OF FLAT AT COLA BA, IN ACCORDANCE WITH LAW. THE ASSESSING AUTHORITY IS, THEREFORE, DI RECTED TO GRANT THE BENEFIT OF SECTION 54E TO THE ASSESSEE. 12. NEXT WE WILL CONSIDER THE ADDITION OF RS. 6,61, 063. THE CASE OF THE ASSESSEE WAS THAT THE AMOUNT REPRESENTED THE RE ALIZATION OF LOAN OUT-STANDING WITH M/S. RAINBOW INDUSTRIES. AS PER THE LEDGER COPY OF ACCOUNT OF M/S. RUSHAB INVESTMENTS (PAGE 15 9 OF THE PAPER BOOK), THERE WAS AN OPENING BALANCE AS ON 1-4 -2000 AMOUNTING TO RS. 6,61,063.43. THERE ARE ALSO PAYMEN T ENTRIES BY CHEQUES FOR RS. 1,61,063.43 AND RS. 5 LAKHS. THIS S TATEMENT OF ACCOUNT HAS BEEN CONFIRMED BY THE PROPRIETOR OF M/S . RUSHAB INDUSTRIES. HE HAS ALSO FURNISHED HIS ASSESSMENT PA RTICULARS BEFORE THE ASSESSING AUTHORITY. THEREFORE, IN SUCH CIRCUMS TANCES, WITHOUT ANY FURTHER ENQUIRIES AND COLLECTION OF EVIDENCE, I T IS NOT POSSIBLE FOR THE ASSESSING AUTHORITY TO COME TO A FINDING AG AINST THE ASSESSEE. THE ASSESSEE HAS EXPLAINED THE AVAILABILI TY OF CASH NECESSARY FOR MAKING BANK DEPOSITS WITH THE HELP OF HIS ACCOUNTS AND ACCOUNT OF COPIES OF THE OTHER PARTY ALONG WITH HIS CONFIRMATION. IN THESE CIRCUMSTANCES, WE FIND THAT THE ADDITION OF RS. 6,61,063.43 IS NOT JUSTIFIED. THEREFORE, IT IS, DELETED. 13. THE LAST POINT IS REGARDING THE ADDITION OF RS. 2 LAKHS. THE ASSESSEE HAS FURNISHED THE DETAILS OF THE REMITTANC E OF THE SAID AMOUNT BY SHRI RAVINDRA KUMAR TAILOR WHO IS IN NEW ZEALAND. HE IS THE CO-BROTHER OF THE ASSESSEE. HE HAD ISSUED CH EQUE NO. 251788 DATED 13-3-2001 DRAWN ON HIS NRE ACCOUNT 276 22 WITH BANK OF INDIA, MUMBAI CENTRAL BRANCH. WHEN THE REMI TTANCE OF MONEY IS SUPPORTED BY BANKING DOCUMENTS, THERE IS N O REASON TO DISBELIEVE THE VERSION OF THE ASSESSEE AND MAKE AN ADDITION THERETO. IT IS NOT JUSTIFIED. THIS ADDITION IS ALSO THEREFORE DELETED. 14. IN RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE AFORESAID DECISION OF THE TRIBUNAL WAS AFFIRMED BY HON'BLE JURISDICTIONAL HIGH COURT (CIT VS MUKESH R. MAROLIA) (ITA NO.456 OF 2007) ORDER DATED 07/09/201 1 BY ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 97 OBSERVING THAT THE SALE OF SAID SHARES WAS THROUGH TWO BROKERS NAMELY RICHMOND SECURITIES PVT. LTD. AND M/ S SCORPIO MANAGEMENT CONSULTANT PVT. LTD. CANNOT BE DISPUTED BECAUSE THE FACT THAT THE ASSESSEE RECEIVE D THE AMOUNT IS NOT IN DISPUTE. IT WAS NEITHER THE CASE O F THE REVENUE THAT THE SHARES IN QUESTION WERE STILL LYIN G WITH THE ASSESSEE NOR IT WAS THE CASE OF THE REVENUE THA T THE AMOUNT RECEIVED BY THE ASSESSEE ON SALE OF SHARES W AS MORE THAN WHAT WAS DECLARED BY THE ASSESSEE. IT IS ALSO NOTED THAT THE RATIO LAID DOWN BY THE TRIBUNAL IN T HE CASE OF GREEN INFRA LTD. VS. ITO (2013) 38 TAXMANN.COM 2 53 (MUM) WHEREIN THE ASSESSEE COLLECTED SHARE PREMIUM ON ALLOTMENT OF SHARES OF FACE VALUE OF ` 10/- EACH AT A PREMIUM OF ` 490/- PER SHARE. THE ASSESSEE CREDITED THE SAID AMOUNT IN THE BALANCE SHEET UNDER THE HEAD SH ARE PREMIUM ACCOUNT BY CLAIMING THAT IT WAS A CAPITAL RECEIPT NOT EXIGIBLE TO TAX. THE LEARNED ASSESSING OFFICER TAXED THE SHARE PREMIUM UNDER SECTION 56(1) R.W.S. 68 OF THE ACT AS INCOME FROM OTHER SOURCES. THE QUESTION BEFORE THE BENCH WAS SINCE THE ENTIRE TRANSACTION R ELATING TO ALLOTMENT OF SHARES WAS DONE THROUGH BANKING CHA NNEL ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 98 AND THE ASSESSEE INVESTED SALE PREMIUM IN ITS THREE SUBSIDIARY COMPANIES SECTION 68 IS NOT APPLICABLE A ND THE CASE WAS DECIDED IN FAVOUR OF THE ASSESSEE. THE REVENUE CHALLENGED THE DECISION BEFORE THE HON'BLE JURISDICTIONAL HIGH COURT WHEREIN THE HON'BLE HIGH COURT VIDE ORDER DATED 25.01.2017 (2017) 78 TAXMANN.COM 3 40 (BOM) HELD THAT WHERE THE IDENTITY OF THE SUBSCRIBE S IS CONFIRMED, GENUINENESS OF ENTIRE TRANSACTION WAS RECORDED IN THE BOOKS OF ACCOUNT/REFLECTED IN THE FINANCIAL STATEMENT AND SINCE THE SUBSCRIPTION WAS DONE THROUGH BANKING CHANNELS, THE ORDER OF THE TRIBUNAL WAS UPHELD BY THE HON'BLE HIGH COURT. THE RELEVANT PORT ION FROM THE ORDER OF THE HON'BLE HIGH COURT IS REPRODU CED HEREUNDER FOR READY REFERENCE: - 1. THIS APPEAL UNDER SECTION 260A OF THE INCOME TAX ACT, 1961 (THE ACT) CHALLENGES THE ORDER DATED 23 RD AUGUST, 2013 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL (THE TRIBUNAL). THE IMPUGNED ORD ER IS IN RESPECTOF ASSESSMENT YEAR 2011-12. 2. MR. CHHOTARAY, THE LEARNED COUNSEL URGES ONLY THE FOLLOWING QUESTIONS OF LAW FOR OUR CONSIDERATIO N : (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT AN AMOUNT OF RS.490/ PER SHARE ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 99 RECEIVED BY THE RESPONDENT ASSESSEE CONSTITUTED SHARE PREMIUM OF THE ASSESSEE COMPANY? (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL WAS JUSTIFIED IN DISAGREEING WITH INVOCATION OF SECTION 68 OF THE AC T TO TAX SHARE PREMIUM? (III) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL IS JUSTIFIED IN HOLDING THAT BECAUSE ITS SUBSIDIARY COMPANY HAS STARTED MANUFACTURING AND THEREFORE INTEREST INCOME FROM FIXED DEPOSIT IS TO BE CHARGED AS BUSINESS INCOME? REGARDING QUESTION NO.(II): 1. (A) BEFORE THE TRIBUNAL, THE REVENUE RAISED A NEW PLEA VIZ. THAT THE SO CALLED SHARE PREMIUM HAS ALSO TO BE JUDGED ON THE TOUCHSTONE OF SECTION 68 O F THE ACT WHICH PROVIDES FOR CASH CREDIT BEING CHARGE D TO TAX. THE IMPUGNED ORDER OF THE TRIBUNAL ALLOWED THE ISSUE TO BE RAISED BEFORE IT FOR THE FIRST TIME , OVERRULING THE OBJECTION OF THE RESPONDENT ASSESSEE . (B) THE IMPUGNED ORDER EXAMINED THE APPLICABILITY O F SECTION 68 OF THE ACT ON THE PARAMETERS OF THE IDENTITY OF THE SUBSCRIBER TO THE SHARE CAPITAL, GENUINENESS OF THE TRANSACTION AND THE CAPACITY OF THE SUBSCRIBER TO THE SHARE CAPITAL. IT FOUND THA T THE IDENTITY OF THE SUBSCRIBERS WAS CONFIRMED BY VIRTUE OF THE ASSESSING OFFICER ISSUING A NOTICES UNDER SECTION 133(6) OF THE ACT TO THEM. FURTHER, IT HOLD S THAT THE REVENUE ITSELF MAKES NO GRIEVANCE OF THE IDENTITY OF THE SUBSCRIBERS. SO FAR AS THE GENUINENESS OF THE TRANSACTION OF SHARE SUBSCRIBER IS CONCERNED, IT CONCLUDES AS THE ENTIRE TRANSACTIO N IS RECORDED IN THE BOOKS OF ACCOUNTS AND REFLECTED IN THE FINANCIAL STATEMENTS OF THE ASSESSEE SINCE THE SUBSCRIPTION WAS DONE THROUGH THE BANKING CHANNELS AS EVIDENCED BY BANK STATEMENTS WHICH ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 100 WERE EXAMINED BY THE TRIBUNAL. WITH REGARD TO THE CAPACITY OF THE SUBSCRIBERS THE IMPUGNED ORDER RECORDS A FINDING THAT 98% OF THE SHARES IS HELD BY IDFC PRIVATE EQUITY FUNDII WHICH IS A FUND MANAGER OF IDFC LTD. MOREOVER, THE CONTRIBUTIONS IN IDFC PRIVATE EQUITY FUND-II ARE ALL BY PUBLIC SECTO R UNDERTAKINGS. (C) MR.CHHOTARAY THE LEARNED COUNSEL FOR THE REVENUE STATES THAT THE IMPUGNED ORDER ITSELF HOLDS THAT SHARE PREMIUM OF RS.490/ PER SHARE DEFIES ALL COMMERCIAL PRUDENCE. THEREFORE IT HAS TO BE CONSIDERED TO BE CASH CREDIT. WE FIND THAT THE TRIBUNAL HAS EXAMINED THE CASE OF THE REVENUE ON THE PARAMETERS OF SECTION 68 OF THE ACT AND FOUND ON FACTS THAT IT IS NOT SO HIT. THEREFORE , SECTION 68 OF THE ACT CANNOT BE INVOKED. THE REVENUE HAS NOT BEEN ABLE TO SHOW IN ANY MANNER THE FACTUAL FINDING RECORDED BY THE TRIBUNAL IS PERVERSE IN ANY MANNER. (D) THUS, QUESTION NO.(II) AS FORMULATED DOES NOT G IVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW AND THUS NO T ENTERTAINED. IN AFORESAID ORDER THE HON'BLE JURISDICTIONAL HIGH COURT HAS CLEARLY HELD THAT SINCE THE IDENTITY OF THE SUB SCRIBER IS ESTABLISHED. THE ENTIRE TRANSACTION WAS RECORDED IN THE BOOKS OF ACCOUNT, THE FINANCIAL STATEMENTS OF THE ASSESSEE WERE FOUND TO BE CORRECT, THE TRANSACTION WAS DONE THROUGH BANKING CHANNEL THEREFORE THE TRIBUNAL WAS HELD TO BE JUSTIFIED THAT THE CASE OF THE REVEN UE IS NOT HIT BY SECTION 68 OF THE ACT AND THE FACTUAL FI NDING RECORDED BY THE TRIBUNAL WAS JUSTIFIED. IN THE PRES ENT ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 101 CASE OF THE ASSESSEE ALSO NO INCRIMINATING MATERIAL WAS FOUND OUT BY THE REVENUE, THE SHARES WERE DE-MATED, THE SALE WAS EFFECTED AT THE FLOOR OF THE BOMBAY STOCK EXCHANGE, THE MONEY WAS RECEIVED THROUGH BANKING CHANNEL, IDENTITY OF THE PARTIES IS NOT IN DISPUTE, THEREFORE THE ADDITION CANNOT BE AFFIRMED ON THE BASIS OF THE STATEMENT OF A THIRD PARTY. THUS, THE RATIO LAID DO WN IN THE AFORESAID CASE AND THE CONCLUSION ARRIVED AT CL EARLY SUPPORTS THE CASE OF THE ASSESSEE. IN ANOTHER CASE IN CIT VS. GAGANDEEP INFRASTRUCTURE PVT. LTD. [2017] 394 I TR 680 (BOM), ORDER DATED 20.03.2017, WHEREIN ON THE I SSUE WHETHER THE TRIBUNAL WAS JUSTIFIED IN DELETING THE ADDITION OF ` 7,53,50,000/- MADE U/S. 68 OF THE ACT, BEING SHARE CAPITAL/SHARE PREMIUM RECEIVED DURING THE YEA R AND THE LD. ASSESSING OFFICER ADDED THE SAME AS UNEXPLAINED CASH CREDIT. THE HON'BLE JURISDICTIONAL HIGH COURT CONSIDERING THE DECISION FROM THE HON'BLE APE X COURT IN CIT VS. LOVELY EXPORTS P. LTD. [2009] 319 ITR (STATUE 5) (SC), HELD THAT IT DOES NOT ENTITLE THE REVENUE TO ADD THE SAME TO THE INCOME OF THE ASSESSEE AS UNEXPLAINED CASH CREDIT, FURTHER SUPPORTS THE CASE OF THE ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 102 ASSESSEE BY HOLDING THAT THE THREE ESSENTIAL TESTS LAID DOWN BY THE COURTS, NAMELY, THE GENUINENESS OF THE TRANSACTIONS, IDENTITY AND CAPACITY OF THE INVESTOR S OF THE SHARE APPLICATION MONEY ALONG WITH PREMIUM HAD ALRE ADY BEEN EXAMINED BY THE TRIBUNAL AND ON FACTS THE TRIB UNAL WAS SATISFIED. THIS JUDICIAL PRONOUNCEMENT FURTHER SUPPORTS THE CASE OF THE ASSESSEE. THUS, CONSIDERIN G THE VARIOUS JUDICIAL PRONOUNCEMENTS AND THE FACTUAL MAT RIX, DISCUSSED HEREINABOVE, FOLLOWING THE RATIO LAID DOW N THEREIN THE APPEAL OF THE ASSESSEE, ON MERIT ALSO, DESERVES TO BE ALLOWED. 4. SO FAR AS, THE ADDITION OF ` 3,28,943/- ON ACCOUNT OF PAYMENT OF COMMISSION BY THE ASSESSEE FOR OBTAIN ING ACCOMMODATION ENTRY IN RESPECT OF SALE OF SHARES TH ROUGH SHARE BROKER (ASSESSMENT YEAR 2005-06) AND IDENTICA LLY ` 76,156/- FOR ASSESSMENT YEAR 2006-07, ON ACCOUNT OF ALLEGED COMMISSION PAID TOWARD PURCHASE OF LONG TER M CAPITAL GAINS, IS CONCERNED, ON THE BROAD REASONING CONTAINED IN THE EARLIER PARAS OF THIS ORDER, WHILE DISPOSING OFF THE ALLEGED ADDITION MADE U/S 68 OF THE ACT, WE FIND THAT ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 103 THE LD. ASSESSING OFFICER ADDED THESE IMPUGNED AMOU NTS, BEING 5% OF ` 65,78,860/- (ASSESSMENT YEAR 2005-06) AND ` 15,23,130/- (ASSESSMENT YEAR 2006-07) AS UNEXPLAINE D MONEY IN POSSESSION OF THE ASSESSEE AS COMMISSION (REMUNERATION). AS PER THE LD. ASSESSING OFFICER T HE ASSESSEE MUST HAVE PAID THESE IMPUGNED AMOUNTS FOR ENGINEERING LONG TERM CAPITAL GAINS ON SALE OF SHAR ES OF M/S ROBINSON IMPEX PVT. LTD., WHICH WAS AFFIRMED BY THE FIRST APPELLATE AUTHORITY BY MAKING THE FOLLOWING OBSERVATION:- 'I HAVE CAREFULLY AND DISPASSIONATELY CONSIDERED TH E FACTS AND CIRCUMSTANCES OF THE CASE. I HAVE ALREADY CONFI RMED SUCH FINDINGS GIVEN BY THE LD. ASSESSING OFFICER WHILE D ECIDING GROUND NO. 1 VIDE PARA 2.3.13 ABOVE. AS A COROLLARY , THE ADDITION OF RS.76,1561- MADE IS ACCORDINGLY CONFIRM ED. GROUND NO. 2 IS THEREFORE DISMISSED.' 4.1. WE FIND THAT THE ADDITION HAS BEEN MADE SOLELY ON T HE BASIS OF PRESUMPTION WITHOUT BRINGING ANY MATERIAL ON RECORD TO PROVE THAT THE ASSESSEE PAID SUCH COMMISS ION TO THE BROKER. EVEN OTHERWISE, NOTHING INCRIMINATING W AS FOUND DURING SEARCH TO PROVE THAT THE ASSESSEE MADE SUCH UNDISCLOSED PAYMENTS TO THE BROKER AS HAS BEEN ALLE GED BY THE REVENUE. THE OBSERVATION OF THE LD. ASSESSING OFFICER ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 104 AT PARA 7 (PAGE25) OF THE CONSOLIDATED ASSESSMENT O RDER U/S 153A OF THE ACT IS WITHOUT ANY BASIS. IN EARLIE R PARAS OF THIS ORDER, WE HAVE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THE ADDITION ON ACCOUNT OF ALLEGED CAPITAL GAIN ON SALE OF SHARES WAS EXPLAINED ONE AS THE SALE PROCEEDS WERE RECEIVED THROUGH BANKING CHANNEL. THE OBSERVATION/ALLEGATION THAT SUCH COMMISSION WAS PAY BLE BY THE ASSESSEE AT THE RATE OF 5% TO 7% OF THE CAPITAL GAIN AMOUNT IS WITHOUT ANY BASIS/EVIDENCE. THE RATIO LAI D DOWN IN THE DECISION IN UMACHARAN SHAW AND BROS VS. CIT 37 ITR 271 (PAGE NOS. 225 TO 231 OF THE PAPER BOOK - II)THAT 'SUSPICION, HOWSOEVER STRONG CANNOT TAKE TH E PLACE OF LEGAL PROOF'. FURTHER, IT IS AN ACCEPTED P RINCIPLE OF LAW THAT AN ASSESSMENT BASED ON NO MATERIAL AT ALL OR BASED ON INADEQUATE MATERIAL, IS BAD IN LAW, SUPPOR TS THE CASE OF THE ASSESSEE. REFERENCE CAN ALSO BE MAD E TO THE FOLLOWING DECISIONS:- A. DBAKESWARI COTTON MILLS LTD. VS. CIT (1954) 26 ITR 775 (SC) B. RAJ MOHAN SAHA VS. CIT (1964) 52 ITR 231 (ASSAM) C. CIT VS. GOKALDAS HUKUMEHAND (1943) 11 ITR 462 (BORN) ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 105 D. RAM DATTA SITA RAM OF BASTI (1947) 15 ITR 61 (ALL) E. NARAYAN CHANDRA BAIDYA VS. CIT (1951) 20 ITR 287 IN EARLIER PARAS OF THIS ORDER, WE HAVE ALREADY ELABORATED THAT THE SALE OF SHARES OF M/S. ROBINSON IMPEX LTD DURING ASSESSMENT YEAR 2005-06 AND A.Y. 2006-07 HAS BEEN PROVED BY THE APPELLANT BY FILING CONCLUSIVE DOCUMENTARY EVIDENCES ON RECORD AND HAS ALSO BEEN DULY CONFIRMED BY THE BROKER M/S. PRUTHVI BROKERS & SHAREHOLDINGS P. LTD. THE SAID SALE OF SH ARES FOR RS. 65,78,860/- OF A.Y. 2005-06 AND RS. 15,23,130 F OR A.Y. 2006-07 THROUGH M/S. PRUTHVI BROKERS & SHAREHOLDING S PVT. LTD HAVE NOT BEEN SUCCESSFULLY DISPUTED EITHER BY THE ASSESSING OFFICER OR THE LD. CIT(A). THUS, THE QUES TION OF PAYMENT OF 5% OF THE SALE PROCEEDS DURING A.Y. 2005 -06 AND A.Y. 2006-07 BY WAY OF ALLEGED UNDISCLOSED REMUNERATION DOES NOT ARISE. THE ASSESSING OFFICER HAS ONLY DISPUTED THE PURCHASE OF SHARES FOR RS. 76,052 /- AGAINST SALE OF SHARES PROCEEDS OF PAN PACKAGING DU RING A.Y. 2004-05 ON THE BASIS OF STATEMENT OF DIRECTOR OF M/S. DPS SHARES & SECURITIES PVT. LTD. WHICH, AS EXPLAIN ED EARLIER, HAS NO RELEVANCE FOR DISPROVING THE SALE ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 106 TRANSACTIONS CONDUCTED THROUGH M/S. PRUTHVI BROKERS & SHAREHOLDINGS P. LTD DURING A.Y. 2005-06 AND A.Y.20 06- 07. FURTHER, THE ALLEGED STATEMENT OF SHRI PRATIK S HAH, BEING THE SOLE SO-CALLED EVIDENCE RELIED UPON BY TH E ASSESSING OFFICER, ALSO DOES NOT, IN ANY MANNER HIN T AT ANY SUCH PAYMENT OF UNACCOUNTED REMUNERATION OF 5% ON SALE PROCEEDS BY THE ASSESSEE. THE RATIO LAID DO WN IN S.F. WADIA-VS-ITO (19-ITD-306) THAT THE BURDEN OF P ROVING THAT THE ASSESSEE HAS INCURRED ANY UNEXPLAINED EXPENDITURE WHICH IS ASSESSABLE U/S.69C OF THE I.T. ACT IS ON THE DEPARTMENT. SIMILAR VIEWS HAVE BEEN TAKEN IN THE CASES OF YOGESHWAR PRASAD (16-TTJ-175) NAREN SINGH BHATTI (40-TTJ-381) AND PRADIP C. PATEL (58-TTJ-409 ). IN THE INSTANT CASE, THIS BURDEN HAS NOT BEEN DISCHARG ED. THE LD. ASSESSING OFFICER HAS ADDED THE AFORESAID AMOUNTS ON THE BASIS OF INFORMATION IN POSSESSION O F THE DEPARTMENT. THIS IS NOTHING BUT HEARSAY. SINCE, THE BURDEN OF PROOF IN THIS CASE HAS NOT BEEN DISCHARGE D BY THE REVENUE, THEREFORE, THE ADDITION SO MADE, IS DI RECTED TO BE DELETED. THUS, THIS GROUND OF THE ASSESSEE IS ALSO ALLOWED. ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 107 5. NOW, WE SHALL TAKE UP THE APPEALS OF THE REVENUE (ITA NO.4655/MUM/2012 AND 3479/MUM/2014) OF ` 22,95,995/- FOR ASSESSMENT YEARS 2005-06 AND ` 5,47,821/- FOR THE ASSESSMENT YEAR 2006-07 RESPECTIVELY, WHEREIN, THE FIRST APPELLATE AUTHORIT Y DELETED THE PENALTY IMPOSED U/S 271(1)(C) OF THE ACT. 6. THE CONTENTION OF THE LD. DR IS THAT, WHILE GRANTIN G RELIEF TO THE ASSESSEE, THE FIRST APPELLATE AUTHORI TY IGNORED THE FACTS, WHEREAS, THE LD. COUNSEL FOR THE ASSESSE E, DEFENDED THE ORDER OF THE LD. COMMISSIONER OF INCOM E TAX (APPEAL) IN DELETING THE PENALTY. 6.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS A ND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NO TED THAT THE FIRST APPELLATE AUTHORITY DELETED THE PENALTY B ECAUSE THE ADDITION WAS MADE MERELY ON THE BASIS OF STATEM ENT OF ONE OF THE DIRECTORS AND THE BROKER DID NOT CONFIRM ED THE PURCHASE. THERE IS UNCONTROVERTED FINDING THAT THE ASSESSEE WAS HAVING CONSOLIDATED SHARE CERTIFICATE RECEIVED FROM THE COMPANY AND THE COPIES OF LETTER RECEIVED WERE FILE D BEFORE THE ASSESSING OFFICER. THIS FINDING OF THE LD. COMM ISSIONER ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 108 OF INCOME TAX (APPEAL) RATHER SUPPORTS THE CASE OF THE ASSESSEE NOT ONLY ON QUANTUM ADDITION BUT ON PENALT Y ALSO. THE CASES RELIED UPON BY THE FIRST APPELLATE AUTHOR ITY, MORE SPECIFICALLY ON PAGE-18 SUPPORTS THE CASE OF T HE ASSESSEE WHICH ARE NOT BEING REPEATED. THE FINDING OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL) WAS NOT CONTROVERTED BY THE REVENUE. THEREFORE, WE DONT F IND ANY INFIRMITY IN THE ORDER OF THE FIRST APPELLATE AUTHO RITY. EVEN OTHERWISE, WHILE DEALING WITH THE QUANTUM ADDITION, IN EARLIER PARAS OF THIS ORDER, SINCE, WE HAVE ALLOWED THE APPEAL OF THE ASSESSEE IN PRECEDING PARAS OF THIS O RDER BY HOLDING THAT THE ADDITION WAS NOT JUSTIFIED, THEREF ORE, THIS APPEAL OF THE REVENUE HAS REMAINED FOR ACADEMIC INT EREST ONLY. EVEN OTHERWISE, WHEN THE QUANTUM ON THE BASI S OF WHICH PENALTY WAS IMPOSED U/S 271(1)(C) OF THE ACT REMAINS NO MORE REMAINED IN EXISTENCE, THEREFORE, WE ARE OF THE VIEW THAT PENALTY IMPOSED U/S 271(1)(C) WILL NOT SURVIVE . OUR VIEW FIND SUPPORT FROM THE DECISION IN K.C. BUILDER S VS ACIT (2004) 265 ITR 562 (SC) AND THE RATIO LAID DOW N IN CIT VS S.P. VIZ, 176 ITR 76 (PATNA). EVEN OTHERWISE , WHEN THE QUANTUM ADDITION IS DELETED, THERE REMAINS NO B ASIS AT ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 109 ALL FOR LEVYING THE PENALTY FOR CONCEALMENT OR FURN ISHING INACCURATE PARTICULARS. THE PENALTY CANNOT STAND ON ITS LEGS WHEN ADDITION ON THE BASIS OF WHICH THE PENALTY WAS IMPOSED REMAINS NO MORE IN EXISTENCE, THUS, THE APP EALS OF THE REVENUE ARE DISMISSED. FINALLY, THE APPEALS OF THE ASSESSEE ARE ALLOWED AN D THAT OF THE REVENUE ARE DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 13/09/2017. SD/- (N.K. PRADHAN) SD/- (JOGINDER SINGH) ' # / ACCOUNTANT MEMBER $ # / JUDICIAL MEMBER MUMBAI; - DATED : 03/10/2017 E{T| FA CAFA 9 F{X~{T? P.S ITA NOS. 1422 & 1423/MUM/2010, ITA NO.4655/MUM/2012 & ITA NO.3479/MUM/2014 SMT. PRATIKSHA SHAH 110 !%$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. ./01 / THE ASSESSEE 2. 201 / THE RESPONDENT. 3. 3 3 4# , ( ./ ) / THE CIT, MUMBAI. 4. 3 3 4# / CIT(A)- , MUMBAI 5. 6$7# , 3 ./(. + , / DR, ITAT, MUMBAI 6. 8!9 / GUARD FILE. ! / BY ORDER, 26/## //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI