ACIT, Ludhiana V. Sh. Pardeep Kumar Aggarwal, Ludhiana

ITA 407/CHANDI/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0131 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-02-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 16-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MIITTAL
• Keywords: Unexplained cash credit; Capital asset; Depreciation; Share purchase agreement; Earning of tax free income; Scheme of amalgamation; Commercial expediency
• Section: 14A; 133(6); 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.407/CHD/2015 (ASSESSMENT YEAR : 2011-12) THE A.C.I.T., VS. SH.PARDEEP KUMAR AGGARWAL, CIRCEL-2, VILLA NO.7, COUNTRY HOMES, LUDHIANA. LUDHIANA. PAN: ADGPA3453N (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.K. MIITTAL, DR RESPONDENT BY : SHRI SUDHIR SEHGAL DATE OF HEARING : 31.03.2016 DATE OF PRONOUNCEMENT : 11.04.2016 O R D E R PER RANO JAIN, A.M . : THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-I, LUDHIANA DATED 21.1.2015, RELATING TO ASSESSMENT YEAR 2011-12. 2. THE GROUND NOS.1, 2 AND 3 RAISED IN THE DEPARTMENTAL APPEAL READ AS UNDER : 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS BY DELETING ENTIRE ADDITION OF RS.2,67,55,708/- MADE B Y THE ASSESSING OFFICER U/S 68 OF THE INCOME TAX ACT. 2 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS AS HE FAILED TO APPRECIATE THAT THE ASSESSEE HAS ADOPTED A COLURABLE DEVICE AND THE ENTIRE TRANSACTIONS RELATING TO ACQUISITION OF THE SHARES OF THE AMALGAMATING COMPANY IN CASH, ALLOTMENT OF THE SHARES OF AMALGAMATED COMPANY AND FINAL SALE OF THESE SHARES IN THE KOLKATA STOCK EXCHANGE TO INDIVIDUALS/COMPANIES HAVING NO MEANS, WAS WITH THE PURPOSE OF AVAILING WRONG BENEFITS OF SECTI ON 10(38). 3. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY NOT ADHERING TO THE DIRECTION OF THE SUPREME COURT AS PROPOUNDED IN THE CASES OF CIT VS DURGA PRASAD MORE (1971) 82 ITR 540 AND SUMATI DAYAL VS CIT (1995) 214 ITR 801 TO JUDGE THE EVIDENCE BEFORE HIM BY APPLYING THE TEST OF HUMAN PROBABILITIES AND HE HAS IGNORED THE FOLLOWING ISSUES :- A. THE ASSESSEE HAD PURCHASED 36000 SHARES OF M/S BND NEO POLYMERS LTD. AT A COST OF RS.36 LAKHS FROM BROKER(S) IN KOLKATA IN CASH WHILE THE ASSESSEE RESIDES IN LUDHIANA. CIT(A) HAS NOT GIVEN A FINDING ON PURCHASES OF SHARES IN CASH BY THE ASSESSEE FROM KOLKATA AS THE ASSESSEE HAS NOT SHOWN INVESTMENT IN THE SHARES OF M/S BND NEO POLYMERS LTD. IN THE ASSESSMENT YEAR 2010-11. B. ASSESSEE DID NOT REFLECT INVESTMENT IN SHARES OF M/S BND NEO POLYMERS LTD. IN HIS BOOKS OF ACCOUNT BUT NEVERTHELESS SOLD THE SHARES IN A.Y. 2011-12. THE SAME IS EVIDENT FROM THE CAPITAL A/C AND BALANCE SHEET OF THE ASSESSEE FOR A.Y. 2010-11 AND A.Y. 2011-12 FILED BY THE ASSESSEE AND SUBMITTED TO CIT(A) IN PAPER BOOK FILED BY A.O. WHEREIN THERE IS A 3 VARIATION IN THE OPENING & CLOSING BALANCES. C. THE AMALGAMATED COMPANY M/S VINDUS HOLDINGS LTD. SHOWS NOMINAL PROFIT AND TURNOVER AND FOR THE PAST MANY YEARS ITS SHARE PRICE IS MANIPULATED TO BE AT AROUND RS. 300/- PER SHARE. THAT AFTER ENQUIRIES M/S VINDUS HOLDINGS HAS NOW BEEN DELISTED FROM KOLKATA STOCK EXCHANGE. D. THE SHARES OF M/S VINDUS HOLDINGS LTD. AS SOLD BY THE ASSESSEE WERE ALLEGEDLY PURCHASED BY PERSONS WHO ARE EITHER NOT TRACEABLE OR HAVE NOT REFLECTED SUCH INVESTMENTS IN THEIR RETURNS AND THE BANK A/C OF THE ALLEGED PURCHASES SHOWS HEAVY CASH DEPOSIT. 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSESSEE PURCHASED SHARES OF M/S BND LIMITED NUMBER ING 36000 SHARES OF RS.36 LACS IN CASH AS ON 4.8.2009. IN A SCHEME OF AMALGAMATION PRESENTED BEFORE THE HON'BLE CALCUTTA HIGH COURT, THE COMPANY GOT AMALGAMATED IN M/S VINDUS HOLDING LIMITED VIDE ORDER DATED 6.10.20 10. IN PURSUANCE OF HIGH COURT ORDER, THE ASSESSEE GOT ENTITLED TO 1080 EQUITY SHARES OF RS.10 EACH OF M/S VINDUS HOLDING LIMITED. THE SAID SHARES NUMBERING 96723 WERE SOLD BY THE ASSESSEE BETWEEN 16.2.2011 T O 28.2.2011 @ RS.300/- PER SHARE, FOR WHICH THE ASSES SEE RECEIVED SALE CONSIDERATION OF RS.2,89,43,382/-. T HE BALANCE SHARES WERE SOLD IN THE NEXT FINANCIAL YEAR . THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT 4 PROCEEDINGS BROUGHT ON RECORD VARIOUS FINANCIAL HIG HLIGHTS OF THE THREE AMALGAMATING COMPANIES, WHICH ARE REPRODUCED BY HIM IN HIS ORDER AT PARA 4.3. IN ORD ER TO ENQUIRE INTO THE GENUINENESS OF SHARES SOLD BY THE ASSESSEE, THE ASSESSING OFFICER ISSUED COMMISSION U NDER SECTION 131(1)(D) OF THE INCOME TAX ACT, 1961 (IN S HORT THE ACT), AS ON 28.10.2013. ON A REPORT SUBMITTE D BY THE INVESTIGATION WING, KOLKATTA WITH REFERENCE TO ASSESSING OFFICERS COMMISSION, FOLLOWING FACTS EME RGE : I) SUMMONS UNDER SECTION 131 OF THE ACT WERE ISSUED TO S/SHRI GAUTAM KUMAR AGRAHARI AND SUSHIL KUMAR KAYAN, THE BROKERS INVOLVED IN THE TRANSACTION FOR SALE OF SHARES. II) STATEMENTS UNDER SECTION 131 OF THE ACT, SHRI GAUTAM KUMAMR AGRAHARI, SHRI SAILEN KUMAR GHOSH AND SANJAY KUMAR RAM, DIRECTORS OF M/S VINDUS HOLDING LIMITED, WERE RECORDED, THE CROSS EXAMINATION OF WHICH WAS LATER ON PROVIDED TO THE ASSESSEE, AVERRED THAT THE SHARES OF M/S BND LIMITE D WERE SOLD IN CASH TO THE ASSESSEE BECAUSE THE SHARE S OF THIS COMPANY WERE UNQUOTED AND THAT SUCH SHARES CAN ONLY BE PURCHASED OFF MARKET IN CASH. III) ON CROSS EXAMINATION TAKEN BY THE ASSESSEE OF THE STATEMENT OF SHRI SANJAY KUMAR RAM, DIRECTOR OF ASHIRWAD TIEUP PRIVATE LIMITED, IDEAL FERTILIZER PV T. LTD. AND MORAN PLANTATION LTD., THE BROKERS INVOLVE D 5 IN THE PURCHASE OF SHARES, IT WAS STATED THAT SHARE S WERE SOLD TO THE ASSESSEE BY THEM. 4. THEREAFTER, THE ASSESSING OFFICER HIGHLIGHTED T HE FACT THAT THE SHARES OF THE COMPANY M/S VINDUS HOLD ING LIMITED WERE LISTED IN KOLKATTA STOCK EXCHANGE AND WERE CONSISTENTLY PRICED AT RS.300/- PER SHARE LEADING T O THE POSSIBILITY OF THE SAME BEING ARTIFICIALLY JACKED U P. ON AN ENQUIRY FROM KOLKATTA STOCK EXCHANGE, THE ASSESSING OFFICER BROUGHT ON RECORD THE FACT THAT SHARED SOLD THROUGH BROKER, SHRI GAUTAM KUMAR AGRAHARI TO FOUR PERSONS, NAMELY SHRI PREM LAL ROY, SHUTANUTI DISTRIBUTORS PVT. LTD., MURLIDHAR COMMERCIAL PVT. L TD. AND YASHODA MARKETING PVT. LTD. ON ENQUIRY MADE BY THE ASSESSING OFFICER, HE BROUGHT ON RECORD THE FACT TH AT SHRI PREM LAL RAY IS NOT TRACEABLE AND NOT FILING ANY RE TURN AND MONEY DEPOSITED IN HIS BANK ACCOUNTS IN CASH AR E OF OTHER PERSONS WHO ARE RECEIVING IT BACK BY CHEQUE O R THROUGH A NUMBER OF COLORABLE TRANSACTIONS. AS REG ARDS OTHER THREE ENTITIES BEING COMPANIES, IT WAS STATED THAT IN THE BALANCE SHEET OF THESE COMPANIES UNDER THE HEAD ING INVESTMENT, BOTH FOR LONG TERM INVESTMENT AND TRA DE INVESTMENTS, THE COMPANIES HAVE NIL INVESTMENTS. E VEN IN THE SCHEDULE OF CAPITAL GAIN IN THE RETURN FILED B Y THE COMPANY, NO CAPITAL GAIN WAS SHOWN BY THEM. EVEN T HE SPECULATIVE INCOME IS SHOWN TO BE NIL. IT WAS FURT HER BROUGHT ON RECORD THAT IN THESE COMPANIES THEY HAVE NEITHER INVESTMENT IN THE TRADE INVESTMENTS OF ANY 6 COMPANY AND HAS ALSO NOT SQUARED UP THE ACCOUNT OF ANY BUYING OR SELLING OF SHARES BECAUSE UNDER THE HEAD CAPITAL GAINS AND SPECULATIVE GAINS, THE INCOME I S RETURNED AT NIL. 5. ON THE BASIS OF ABOVE DETAILED FACTS BROUGHT ON RECORD AND BY CITING A NUMBER OF JUDGMENTS, THE ASS ESSING OFFICER CONCLUDED THAT THE ASSESSEE HAD FAILED TO E STABLISH THE GENUINENESS OF TRANSACTIONS REGARDING PURCHASE AND SALE OF EQUITY SHARES AND ENTIRE TRANSACTIONS WAS CONSIDERED AS AN ACCOMMODATION ENTRY. IN THIS WAY, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSES SEE FOR CAPITAL GAINS AMOUNTING TO RS.2,67,55,708/- AND ADD ED THIS AMOUNT BACK TO THE INCOME OF THE ASSESSEE UNDE R SECTION 68 OF THE ACT AS UNEXPLAINED CASH CREDITS. 6. BEFORE THE LEARNED CIT (APPEALS), THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD SOLD SHARES OF A LI MITED COMPANY IN WHICH THE PUBLIC IS SUBSTANTIALLY INTERE STED THROUGH A RECOGNIZED STOCK EXCHANGE. THE COMPLETE DETAILED OF SALE TRANSACTION IN THE FORM OF CONTRAC T NOTES, COPY OF DEMAT ACCOUNT, SHARE CERTIFICATE WERE BROUG HT ON RECORD. THE SALE AND PURCHASE OF SHARES CANNOT BE DOUBTED AS SUFFICIENT EVIDENCE HAS BEEN PROVIDED BY THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT THE ONLY REQUIREMENT TO CLAIM EXEMPTION UNDER SECTION 10(38) OF THE ACT IS THE INCOME ARISING FROM THE TRANSFER OF A LONG TERM CAPITAL ASSET BEING AN EQUITY SHARE IN A COMPA NY IS CHARGEABLE TO SECURITIES TRANSACTION TAX, WHICH IN 7 ASSESSEES CASE THE SAID CONDITION FULFILLED. AS R EGARDS THE ADDITION BEING MADE UNDER SECTION 68 OF THE ACT , THE ASSESSEE STATED THAT THE PROVISIONS OF THIS SECTION ARE APPLICABLE ONLY WHEN THE SUM IS IN THE FORM OF CRED ITS OR LOAN IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. IN T HE PRESENT CASE, THE ASSESSEE HAS NOT TAKEN ANY KIND O F LOAN NEITHER TAKEN ANY AMOUNT AS SHARE APPLICATION, THE CREDIT BALANCE OF WHICH STANDS IN THE BOOKS OF ACCOUNT. THE ASSESSEE HAS SOLD SHARES AND PROCEEDS OF SALE OF SH ARES WERE CREDITED IN HIS ACCOUNT AND WHOLE TRANSACTION IS A SALE TRANSACTION. THEREFORE, SECTION 68 OF THE ACT IS NOT APPLICABLE IN THE PRESENT CASE. SINCE THE ASSESSEE HAS ALREADY OFFERED THE INCOME FOR TAXATION IN THE RETU RN BUT THAT INCOME WAS EXEMPT UNDER SECTION 10(38) OF THE ACT, THEREFORE, BY ADDING THE SAME INCOME AGAIN IN THE R ETURN OF INCOME, IT WILL AMOUNT TO DOUBLE TAXATION, WHICH IS NOT PERMISSIBLE UNDER THE LAW. 7. THE SUBMISSIONS OF THE ASSESSEE WERE FORWARDED TO THE ASSESSING OFFICER, WHO FILED HIS REMAND REPO RT DATED 14.7.2014 BEFORE THE LEARNED CIT (APPEALS). THE MAIN THRUST OF THE SUBMISSION MADE BY THE ASSESSING OFFICER WAS THAT IN THE BALANCE SHEET OF THE PRESE NT YEAR FILED BY THE ASSESSEE IN THE LIST OF FIXED ASSET AN D DEPRECIATION, THE INVESTMENT ON SHARES IN BND NEOPOLYMERS PVT. LTD. IS NOT REFLECTED. THE DETAIL S OF CLOSING STOCK FILED BY THE ASSESSEE ALSO DO NOT SHO W INVESTMENT IN 36000 SHARES OF BND NEOPOLYMERS PVT. LTD. 8 DURING THE FINANCIAL YEAR ENDING AS ON 31.3.2009. NEITHER IN CAPITAL ACCOUNT, NOR IN BALANCE SHEET, THIS FIGU RE IS APPEARING. THE ASSESSING OFFICER APPREHENDED THAT THE ASSESSEE HAD MADE PAPER ARRANGEMENTS AND CREATED A SMOKE SCREEN BY FILING DOCUMENTS IN THE PAPER BOOK BEFORE THE CIT (APPEALS). FURTHER, IT WAS SUBMITTE D THAT BILL FOR PURCHASE OF 36000 SHARES OF BND NEOPOLYMER S PVT. LTD. FILED BY THE ASSESSEE IS DATED 4.8.2009. WHIL E IN THE SHARE CERTIFICATE, THE SHARES WERE TRANSFERRED IN T HE NAME OF THE ASSESSEE AS ON 19.10.2009. THIS FACT SHOWS THAT THE ASSESSEE WAS THE OWNER OF THE SHARES BY VIRTUE OF ALLEGED PURCHASE OF SHARES IN THE FINANCIAL YEAR 20 09-10, HOWEVER, THE BALANCE SHEET AND CLOSING STOCK DID NO T REFLECT THIS INVESTMENT. FURTHER AS REGARDS THE ST ATEMENT OF THE BROKER RECORDED, THE ASSESSING OFFICER STATE D THAT THE IDENTITY OF THE BROKER IS NOT MATERIAL BECAUSE IT IS A CASE OF ACCOMMODATION ENTRY. HENCE, THE PAPER ARRANGEMENTS HAVE BEEN MADE BY THE ASSESSEE TO PROV E THAT THE SHARE TRANSACTIONS ARE GENUINE TRANSACTION S. AS REGARDS THE COPY OF CASH FLOW STATEMENT FOR THE PER IOD IN WHICH THE SHARES WERE PURCHASED, THE ASSESSING OFFI CER DOUBTED THE GENUINENESS OF THE SAME AND AGAIN CONTE NDED THAT ALL THIS WAS A PAPER ARRANGEMENT MADE BY THE ASSESSEE. 8. REGARDING THE CONTENTION OF THE ASSESSEE THAT N O ADDITION UNDER SECTION 68 OF THE ACT CAN BE MADE, T HE VIEW OF THE ASSESSING OFFICER IN THE REMAND REPORT WAS T HAT 9 SINCE THE ENTIRE TRANSACTION HAS BEEN HELD AS TRANS ACTION OF ACCOMMODATION ENTRY, THE CLAIM THAT ONLY CAPITAL GAIN HAS BEEN ADDED IN THE ASSESSMENT AND SALE PROCEEDS, DOES NOT MERIT ANY CONSIDERATION. THE CASE LAW RELIED O N BY THE ASSESSEE WERE DISTINGUISHED BY THE ASSESSING OF FICER. 9. THE COMMENTS OF THE ASSESSING OFFICER WERE FORWARDED TO THE ASSESSEE, WHO FILED REJOINDER DATE D 6.8.2014 BEFORE THE LEARNED CIT (APPEALS). IT WAS STATED IN THE REJOINDER THAT IN THE ENQUIRY MADE BY THE AS SESSING OFFICER HIMSELF, THE PURCHASERS HAVE CONFIRMED THE TRANSACTION OF PURCHASE OF SHARES AND THE ASSESSING OFFICER HAS NOT POINTED OUT ANY KIND OF DISCREPANCY OR ANY ADVERSE REMARKS IN THE CASH FLOW STATEMENT GIVEN BY THE ASSESSEE. AS REGARDS THE CONTENTION OF THE ASSESSI NG OFFICER THAT THE INVESTMENTS WERE NOT SHOWN IN THE BALANCE SHEET OF THE ASSESSEE, IT WAS STATED THAT T HE ASSESSEE BEING AN INDIVIDUAL, DOES NOT MAINTAIN ANY PERSONAL BALANCE SHEET. SO ALL THE ASSETS OR LIABI LITIES HAVE BEEN SHOWN IN THE SAME BALANCE SHEET, WHEREIN HE HAS BEEN DOING HIS PROPERTY BUSINESS. THE INVESTM ENTS WERE DEBITED IN THE CAPITAL ACCOUNT OF THE ASSESSEE AND THE BALANCE SHEET AS FILED BEFORE THE ASSESSING OFF ICER CONTAINS THE BALANCE FIGURE OF CAPITAL ACCOUNT. IT WAS VEHEMENTLY CONTENDED THAT THE VIEW OF THE ASSESSING OFFICER THAT THE TRANSACTION WAS NOT GENUINE, IS TO TALLY BASED ON SUSPICION, SURMISES, DOUBTS AND CONJECTURE S. THE PURCHASE PART OF THE TRANSACTION WAS CONFIRMED BY THE 10 SELLERS AND THE SALE PART OF THE TRANSACTION WAS CO NFIRMED BY THE BROKERS IN PROCEEDINGS UNDER SECTION 133(6) OF THE ACT. IT WAS STATED THAT THE ASSESSING OFFICER HAS IGNORED THE FACTS THAT THE TRANSACTIONS ARE BEING ROUTED TH ROUGH COMPUTER VIA STOCK EXCHANGE. THEREFORE, THE ALLEGA TION OF THE ASSESSING OFFICER THAT THE TRANSACTIONS ARE NOT GENUINE, IS NOT AS PER LAW. THE ASSESSEE HAD PROPE R DEMAT ACCOUNT WITH HDFC BANK AND ALL THE TRANSACTIO NS HAVE BEEN VERIFIED AND EXAMINED BY THE ASSESSING OF FICER INDEPENDENTLY AND NO DISCREPANCY OF ANY KIND OF ADV ERSE MATERIAL OR DOCUMENT WAS POINTED OUT. RELYING ON A FEW JUDGMENTS OF THE I.T.A.T., CHANDIGARH BENCH IN VIEW OF THE SAID SUBMISSIONS, THE ASSESSEE CONTENDED THAT ADDIT ION MADE BY THE ASSESSING OFFICER IS ILLEGAL. 10. THE SUBMISSIONS OF THE ASSESSEE IN THIS REJOINDER WERE FURTHER SENT TO THE ASSESSING OFFICE R FOR HIS COMMENTS, WHICH WERE FILED BY HIM VIDE HIS LETTER D ATED 2.9.2014. BESIDES, THE SUBMISSIONS WHICH WERE MADE EARLIER BY HIM IN HIS REMAND REPORT, THE ASSESSING OFFICER STATED THAT IN THIS REPORT, MAINLY THE FACT THAT TW O CAPITAL ACCOUNTS OF THE ASSESSEE WERE FILED IN THE COURSE O F ASSESSMENT PROCEEDINGS. ONE WITH THE BALANCE SHEET , WHICH DID NOT REFLECT TRANSACTION OF PURCHASE OF SH ARES AND ONE DURING THE COURSE OF ASSESSMENT PROCEEDINGS , WHICH REFLECTED THE INVESTMENTS IN SHARES. THEREFO RE, THERE CANNOT BE A QUESTION OF TWO SEPARATE BALANCE SHEETS BEING A PERSONAL BALANCE SHEET AND AN OFFICIAL BALA NCE 11 SHEET. THE CONTENTION OF THE ASSESSING OFFICER WAS THAT THE ASSESSEE IS TRYING TO HIDE FACTS AND MAINTAININ G TWO SETS OF ACCOUNTS FOR DIFFERENT PURPOSES. ANOTHER N EW POINT RAISED BY THE ASSESSING OFFICER WAS THAT DETA ILED INVESTIGATIONS WERE CARRIED OUT IN RESPECT OF PURCH ASE AND SALE OF SHARES AND NOTICES UNDER SECTION 133(6) WER E ALSO ISSUED TO THE BROKERS. THE BROKERS CONFIRMED THAT THE SHARES WERE SOLD IN CASH TO THE ASSESSEE. HOWEVER, THE ASSESSEE HAS FAILED TO EXPLAIN THAT HOW HE TRANSFER RED THIS CASH FROM THE PLACE OF HIS RESIDENCE AT LUDHIANA TO THE BROKERS OF KOLKATTA IN THREE INSTALMENTS OF RS.11 L ACS, 12 LACS AND 13 LACS. THE CASE LAWS RELIED ON BY THE A SSESSEE WERE DISTINGUISHED BY THE ASSESSING OFFICER. ANOTH ER POINT RAISED BY THE ASSESSING OFFICER WAS THAT THE PRICE OF THE SCRIPT HAS NOT CHANGED OVER A PERIOD OF THREE Y EARS OR MORE. EVEN IN THE WORST TIME OF DEPRESSION AND BEA R PHASE THE PRICES OF THE SHARES OF M/S VINDUS HOLDING LIMITED HAS REMAINED STATIC AT RS.300 TO RS.310/-. HE STATED THAT THIS FACT GOES TO SHOW THAT THE PRICES OF THE SHARES HAVE BEEN ARTIFICIALLY MAINTAINED TO BENEFIT THE SHARE HOLDERS OF M/S VINDUS HOLDING LIMITED IN SHA M AND COLOURABLE TRANSACTION. IT WAS ALSO SATED THAT THE OPENING RATE, THE HIGH RATE, LOW RATE AND CLOSING RATE OF T HE SHARE PRICES ON A PARTICULAR DAY IN RESPECT OF M/S VINDUS HOLDING LIMITED ARE THE SAME. FURTHER, IT WAS STAT ED THAT THE ENQUIRIES MADE FROM THE PERSONS, WHO HAD PURCHA SED THE SHARES FROM THE ASSESSEE, THE FACT THAT THE TRA NSACTION IS NOT GENUINE, IS CORROBORATED. 12 11. IN A SECOND REJOINDER FILED BY THE ASSESSEE AS HIS COUNTER COMMENTS ON THE SECOND REMAND REPORT FI LED BY THE ASSESSING OFFICER, DETAILED SUBMISSIONS WERE MADE TO REITERATE THE SUBMISSIONS EARLIER MADE. THE EXPL ANATION WITH REGARD TO TWO BALANCE SHEETS RAISED BY THE ASS ESSING OFFICER WAS GIVEN BY THE ASSESSEE. IT WAS EXPLAINE D THAT THE INVESTMENTS IN SHARES WERE DEBITED IN THE CAPIT AL ACCOUNT THAT IS THE REASON WHY THE INVESTMENTS ARE NOT BEING REFLECTED INDEPENDENTLY IN THE BALANCE SHEET. WITH RESPECT TO THE ENQUIRIES MADE FROM THE PERSONS , WHO HAVE PURCHASED THE SHARES FROM THE ASSESSEE, IT WAS SUBMITTED THAT THE ASSESSEE HAS SOLD THE SHARES THR OUGH THE BROKERS, WHICH WERE ALSO CONFIRMED BY THE BROKE RS. THEREFORE, IN THE BACKGROUND OF THE FACT THAT THE B ROKERS HAVE NOT DENIED THE SALE TRANSACTION, PROPER CONTRA CT NOTES WERE ISSUED AND EVEN IN THE ENQUIRY MADE AT KOLKATTA STOCK EXCHANGE, THERE WERE THE RECORD OF TRANSACTIONS ENTERED BY THE ASSESSEE, THE GENUINENE SS OF THE TRANSACTION CANNOT BE CHALLENGED. AFTER MAKING DETAILED SUBMISSIONS, IT WAS PRAYED THAT SINCE THER E WERE NO MATERIAL BEFORE THE ASSESSING OFFICER WHICH COUL D HAVE LEAD TO A CONCLUSION THAT THE TRANSACTION WAS A DEV ICE TO CAMOUFLAGE ACTIVITIES TO DEFRAUD THE REVENUE, NO PRESUMPTION AGAINST THE ASSESSEE CAN BE RAISED. 12. THE LEARNED CIT (APPEALS) AFTER CONSIDERING T HE SUBMISSIONS OF THE ASSESSEE, VARIOUS REMAND REPORTS AND REJOINDERS ALLOWED THE ISSUE IN FAVOUR OF THE ASSES SEE BY 13 GIVING DETAILED FINDINGS WHICH ARE REPRODUCED AT PA GES 75 TO 81 OF HIS ORDER. THE VERDICT GIVEN BY THE LEARN ED CIT (APPEALS) WAS MAINLY ON THE BASIS OF THAT INVESTIGA TIONS WING AT KOLKATTA IN THEIR REPORT HAS CONFIRMED THAT THE SHARES WERE BOUGHT BY THE ASSESSEE IN CASH. THE FI NANCIAL ANALYSIS DONE BY THE ASSESSING OFFICER OF M/S VINDU S HOLDING LIMITED HAS NOTHING WITH MARKET PRICE OF IT S SHARES IN KOLKATTA STOCK EXCHANGE. THE SHARES OF T HE COMPANY WERE LISTED ON KOLKATTA STOCK EXCHANGE AND WERE SOLD AT THE PREVAILING MARKET PRICE. THE SALE AMOU NT WAS RECEIVED BY THE ASSESSEE FROM HIS BROKER AND NOT FR OM THE BUYERS OF THE SHARES AS BEING ELECTRONIC SALE. THE SELLER WOULD NOT BE IN THE KNOWLEDGE AS TO WHO HAD PURCHAS ED THE SHARES. THE SHARES AS SOLD WERE REFLECTED IN T HE ASSESSEES DEMAT ACCOUNT. FURTHER, HE FOUND HIMSEL F IN AGREEMENT WITH THE ASSESSEE THAT NON-REFLECTION OF SHARES IN ITS BALANCE SHEET AS INVESTMENT DOES NOT RAISE A NY SUSPICION. WITH REGARD TO ASSESSING OFFICERS CONT ENTION THAT SHARE PRICE OF THE M/S VINDUS HOLDING LIMITED WERE BEING STATIC, THE LEARNED CIT (APPEALS) MADE ANALYS IS OF A NUMBER OF COMPANIES TO SHOW THAT NO ADVERSE INFEREN CE CAN BE DRAWN BY THE FACT THAT MARKET PRICE OF THE S HARES OF THE COMPANY REMAINED STATISTIC FOR A LONGER PERI OD. IN VIEW OF THESE, THE LEARNED CIT (APPEALS) CONCLUDED THAT IT IS ESTABLISHED BY THE ASSESSEE THAT THE TRANSACTION OF SALE OF SHARES WAS GENUINE AND HE HAS SUFFICIENTLY DISCH ARGED THE ONUS CAST UPON HIM. IN VIEW OF THIS, HE DIRECT ED THE ASSESSING OFFICER TO DELETE THE ADDITION. 14 13. AGGRIEVED BY THIS, THE DEPARTMENT HAS COME UP IN APPEAL BEFORE US. THE LEARNED D.R. VEHEMENTLY A RGUED TAKING ASSISTANCE FROM THE FINDING GIVEN BY THE ASS ESSING OFFICER IN HIS ORDER AS WELL AS TWO REMAND REPORTS SUBMITTED BY HIM. 14. THE LEARNED COUNSEL FOR THE ASSESSEE MAINLY REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSIN G OFFICER AS WELL AS THE LEARNED CIT (APPEALS). THE THRUST OF HIS ARGUMENTS WAS THAT IN VIEW OF VARIOUS EVIDENCES FILED BY THE ASSESSEE AND ALSO ENQUIRIES CONDUCTED BY THE ASSESSING OFFICER HIMSELF, NO ADVERSE FINDING CAN B E ARRIVED AT WITH RESPECT TO THE GENUINENESS OF PURCH ASE OF SHARES AS WELL SALE OF SHARES. IN VIEW OF THIS, IT WAS PRAYED THAT THE ACTION OF THE LEARNED CIT (APPEALS) IN DELETING THE ADDITION BE SUSTAINED. 15. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. ON PERUSAL OF THE ORDER OF THE LEARNED CIT (APPEALS ), WE DO NOT FIND ANY INFIRMITY IN THE SAME. THIS KIND O F TRANSACTION INVOLVE TWO ASPECTS I.E. PURCHASE OF SH ARES AND SALE OF SHARES. THE CONTENTION OF THE ASSESSEE WAS THAT THE SHARES WERE PURCHASED IN THE PRECEDING ASSESSMENT YEAR THROUGH CASH. FOR THIS, THE CASH F LOW STATEMENT WAS FILED BY THE ASSESSEE AND ENQUIRIES W ERE CONDUCTED BY THE ASSESSING OFFICER FROM KOLKATTA ST OCK EXCHANGE, WHEREIN THE SHARES OF THE AMALGAMATING 15 COMPANY WERE LISTED. THE CONFIRMATION FROM KOLKATT A STOCK EXCHANGE AS WELL AS THE CONFIRMATION MADE BY THE BROKERS THROUGH WHOM THE SHARES WERE PURCHASED BY T HE ASSESSEE ARE ON RECORD, WHICH ARE IN FACT CULMINATI ON OF THE ENQUIRIES INITIATED BY THE ASSESSING OFFICER HI MSELF. NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE ASSES SING OFFICER TO ARRIVE AT THE FACT THAT THESE CONFIRMATI ONS RECEIVED FROM STOCK EXCHANGE OR MADE BY THE BROKERS IN THEIR STATEMENTS WERE NOT PROVED. IN SUCH CIRCUMST ANCES, WE CANNOT JUST BY INDULGING IN SURMISES BRUSH ASIDE THESE EVIDENCES ON RECORD. AS REGARDS THE CASH FLOW STAT EMENT, FROM THE PERUSAL OF THE ASSESSMENT ORDER, WE COULD NOT FIND ANY FINDING OR FACT RECORDED BY THE ASSESSING OFFICER, WHICH PROVES THAT SUCH CASH FLOW STATEMENT IS NOT C ORRECT. REGARDING MAINTAINABILITY OF TWO BALANCE SHEETS, TH E SAME WAS EXPLAINED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. WE ARE IN AGREEMENT WITH THE SUBMISSI ON OF THE ASSESSEE THAT THE ASSESSEE BEING AN INDIVIDUAL, HE MAY NOT BE MAINTAINING PERSONAL BOOKS OF ACCOUNT AN D INVESTMENTS WERE ROUTED THROUGH HIS CAPITAL ACCOUNT . THEREFORE, THE SAME WERE SUBTRACTED FROM HIS CAPITA L ACCOUNT FROM THE BALANCE SHEET BELONGING TO HIS PRO PERTY BUSINESS. THE ASSESSEE HAS DULY FILED HIS RETURN FOR EARLIER ASSESSMENT YEAR TOGETHER WITH BALANCE SHEET . IN VIEW OF ALL THESE EVIDENCES, WE CANNOT DENY THAT TH E SHARES WERE ACTUALLY PURCHASED BY THE ASSESSEE IN T HE EARLIER ASSESSMENT YEAR. ANOTHER CONTENTION RAISED BY THE ASSESSING OFFICER IN HIS REMAND REPORT WAS WITH RES PECT 16 TO THE DATE OF BILL AND DATE OF SHARE TRANSFER BEIN G 4.8.2009 AND 19.10.2009 RESPECTIVELY. WE DO NOT FI ND THIS FACT HAVING ANY RELEVANCE TO THE ISSUE IN QUESTION. SINCE IT MAY BE THE CASE THAT THE TRANSFER OF SHARES MAY REQUIRE SOME TIME TO EXECUTE DUE TO SOME PROCEDURAL DIFFICU LTIES. THE ASSESSING OFFICER HAS ALSO CAST ASPERSIONS ON T HE ASSESSEE AS TO HOW THE AMOUNT OF RS.2,89,43,382/- W AS TRANSFERRED TO THE PERSONS FROM WHOM THE SHARES WER E PURCHASED FROM LUDHIANA TO KOLKATTA. WE DO NOT FIN D THIS FACT TO BE OF ANY IMPORTANCE. THE FACT THAT ALL OTH ER EVIDENCES POINT TO THE FACT THAT ACTUALLY PURCHASES WERE MADE. IT IS NONE OF ASSESSING OFFICERS CONCERN AS TO HOW THE CASH WAS TRANSFERRED. 16. THE ASSESSING OFFICER HAS ALSO DOUBTED THE GENUINENESS OF THE COMPANY. THE SHARES PURCHASED WERE OF THE COMPANY BND LIMITED, WHICH LATER GOT AMALGAM ATED WITH M/S VINDUS HOLDING LIMITED. THE AMALGAMATION HAS BEEN EXECUTED BY THE ORDER OF THE HIGH COURT. THE COPY OF THE HIGH COURTS ORDER IS ON RECORD. IN THESE CIRCUMSTANCES HOW THE GENUINENESS OF THE COMPANY CA N BE DOUBTED. WE DO NOT UNDERSTAND. THE COMPANY M/S VINDUS HOLDING LIMITED IS A COMPANY LISTED IN THE KOLKATTA STOCK EXCHANGE AND THE STATEMENTS OF THE DIRECTORS OF THIS COMPANY WERE RECORDED BY THE ASSE SSING OFFICER IN KOLKATTA, WHEREBY THEY HAD CONFIRMED THE TRANSACTIONS OF SALE OF SHARE MADE BY THE ASSESSEE. THE 17 COMPANY WHICH IS LISTED IN A RECOGNIZED STOCK EXCHA NGE, THE IDENTITY OF SUCH A COMPANY CANNOT BE DOUBTED. 17. WITH RESPECT TO THE SALE ASPECT OF THIS TRANSACTION, AS STATED HEREINABOVE IN THE STATEMENT S OF THE BROKERS OF THE COMPANY, THEY HAVE CONFIRMED THE TRANSACTION OF SALE. THE COMPANY WHOSE SHARES WERE SOLD IS A COMPANY LISTED IN KOLKATTA STOCK EXCHANGE BEIN G A RECOGNIZED STOCK EXCHANGE. THE EVIDENCES IN THE FO RM OF CONTRACT NOTE, BANK ACCOUNT, DEMAT ACCOUNT, ETC. WE RE FILED BEFORE THE ASSESSING OFFICER, WHICH HAVE NOWH ERE BEEN DOUBTED BY THE ASSESSING OFFICER, NEITHER IN H IS ASSESSMENT ORDER, NOR ANY OF THE REMAND REPORTS FURNISHED BY HIM. THE BROKERS THROUGH WHOM SALE WA S MADE HAD ALSO CONFIRMED THE SALE OF SHARES. THE ASSESSING OFFICER HAS MADE THE DETAILED EXERCISE BY ANALYZING THE PERSONS WHO HAVE PURCHASED THE SHARES FROM THE ASSESSEE AND IN VIEW OF THE FACT THAT THES E PERSONS HAVE NOT SHOWN THE INVESTMENTS IN THEIR BAL ANCE SHEETS, THE ADVERSE VIEW HAS BEEN TAKEN BY HIM. AS WE UNDERSTAND THAT ANY TRANSACTION RELATING TO SALE OR PURCHASE OF SHARES THROUGH A STOCK EXCHANGE IS DONE THROUGH A BROKER REGISTERED IN STOCK EXCHANGE. THE TRANSACTION IS BETWEEN THE SELLER AND THE BROKER. THE SELLER NEVER KNOWS ON WHOSE BEHALF THE BROKER IS PURCHASING THE SHARES. A BROKER PURCHASES NUMBER OF SHARES OF A PARTICULAR COMPANY FROM THE STOCK EXC HANGE AS PER THE DEMAND MADE BY HIS CLIENTS ON THEIR BEHALF, 18 SIMILARLY HE SELLS THE SHARES OF THAT VERY COMPANY TO VARIOUS PERSONS THROUGH STOCK EXCHANGE AS PER THEIR REQUIREMENTS. THERE IS NO ONE TO ONE CONTACT BETWE EN THE SELLER AND PURCHASER OF THE SHARES. IN SUCH CIRCUMSTANCES, WE DO NOT FIND ANY RELEVANCE OF ANY ADVERSE FACT WITH REGARD TO THE PURCHASER OF SHARES IN THE PRESENT SCENARIO. THEREFORE, NO ADVERSE INFERENCE C AN BE DRAWN IN VIEW OF THE FACT THAT THE BUYERS OF THE SH ARES WERE NOT GENUINE. 18. THE FACT THAT THE MARKET PRICE OF THE SHARES O F THIS COMPANY WERE STATISTIC FOR A LONGER PERIOD, CA NNOT BE OF ANY SUBSTANCE SINCE MARKET PRICE OF ANY SHARE OF ANY COMPANY IS A RESULT OF NUMBER OF FACTORS WHICH CANN OT BE GENERALIZED AS DONE BY THE ASSESSING OFFICER. THER E MAY BE A NUMBER OF COMPANIES WHOSE PRICE REMAINS STABLE FOR A LONGER PERIOD. THIS FACT CANNOT PUT THE GENUINEN ESS OF THE COMPANY IN QUESTION. IN OUR VIEW, THIS IS ALSO NOT A RELEVANT FACT WITH REGARD TO PRESENT CONTROVERSY. THE COMPANY IS A ONE LISTED IN THE RECOGNIZED STOCK EXC HANGE. IN THIS CASE THE PRICES OF SHARES OF THE COMPANY AR E BEING TAKEN CARE OF BY THE SEBI ONLY. THERE IS NO FINDIN G OF FACT ON RECORD THAT THE SHARES WERE SOLD AT A PRICE OTHE R THAN THE ONE QUOTED IN THE STOCK EXCHANGE ON THE SAID DA TE. 19. THERE IS ANOTHER ASPECT OF THIS CASE THAT THE ASSESSEE HAS SOLD SHARES AT RS.2,89,43,383/-, THE C OST OF 19 ACQUISITION OF WHICH WAS RS.21,87,675/-. THE LONG TERM CAPITAL GAIN ARISING ON THE SAID TRANSACTION WAS RS.2,67,55,708/-, WHICH WAS SHOWN BY THE ASSESSEE I N HIS COMPUTATION OF INCOME AND WAS CLAIMED AS EXEMPT UND ER SECTION 10(38) OF THE ACT. THE ASSESSING OFFICER H AS MADE THE ADDITION OF RS.2,67,55,708/- STATING THE SAME T O BE ADDED UNDER SECTION 68 OF THE ACT. WE DO NOT FIND THIS ACTION OF THE ASSESSING OFFICER TO BE AS PER LAW. SECTION 68 OF THE ACT PROVIDES FOR ADDITION OF ANY AMOUNT APPEARING TO BE CREDITED TO THE ASSESSEE IN HIS BOO KS OF ACCOUNT DURING THE YEAR IN CASE THE ASSESSING OFFIC ER IS NOT SATISFIED AS TO THE GENUINENESS OF THE SAME. T HE CREDIT APPEARING IN ASSESSEES ACCOUNT IS AN AMOUNT OF RS.2,89,43,383/- BY DISALLOWING THE EXEMPTION UNDER SECTION 10(38) OF THE ACT AT RS.2,67,55,708/- CLAIM ED BY THE ASSESSEE. THE ASSESSING OFFICER IS NOT JUSTIFI ED IN INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT. THIS ALSO AMOUNTS TO DOUBLE TAXATION OR DOUBLE ADDITION OF TH E INCOME IN VIEW OF THE FACT THAT THE SAME AMOUNT HAS ACTUALLY BEEN SHOWN BY THE ASSESSEE AS HIS INCOME I N HIS COMPUTATION OF INCOME THOUGH THE SAME HAS ALSO BEEN CLAIMED AS EXEMPT UNDER SECTION 10(38) OF THE ACT. IN VIEW OF THE ABOVE, THE ACTION OF THE LEARNED CIT (A PPEALS) IN DELETING THE ADDITION IS JUSTIFIED AND IS HEREBY UPHELD. 20. BEFORE CONCLUDING THE ISSUE, WE WOULD LIKE TO DEAL WITH TWO MORE CONTENTIONS OF THE DEPARTMENT IN THE GROUNDS OF APPEAL RAISED IN THE PRESENT APPEAL. FI RSTLY, 20 THERE IS A MENTION OF APPLYING THE TEST OF HUMAN PROBABILITIES AS PROPOUNDED IN THE JUDGMENTS OF THE HON'BLE SUPREME COURT IN THE CASE OF DURGA PRASAD MORE (1971) 82 ITR 540 AND SUMATI DAYAL VS. CIT (1985) 2 14 ITR 801. WE ARE AWARE OF THE PROPOSITION LAID DOWN BY THE HON'BLE SUPREME COURT AND WE HUMBLY BOW DOWN BEFORE THE SAME. HOWEVER, IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE IN THE FACE OF NUMEROUS DOCUMENTARY EVIDENCES CRYING FOR BONAFIDE OF THE ASSESSEE AS AG AINST ONLY SUSPICION AND SURMISES IN FAVOUR OF THE DEPART MENT, WE DO NOT HESITATE TO HOLD THAT THE PROPOSITION LAI D DOWN BY THE HON'BLE SUPREME COURT IS NOT APPLICABLE IN T HE PRESENT CASE. EVEN THE ASSESSING OFFICER HAS NOT B EEN ABLE TO BRING ON RECORD ANY ADVERSE MATERIAL, ON HI S OWN INVESTIGATIONS, THE RESULTS HAVE BEEN IN FAVOUR OF THE ASSESSEE. SUSPICION, HOWSOEVER STRONG, CANNOT TAKE PART OF THE DOCUMENTARY EVIDENCES. SECOND CONTENTION OF THE DEPARTMENT WITH RESPECT TO THE PRICES BEING MANIPUL ATED AND LATER ON THE COMPANY DELISTED FROM THE STOCK EXCHANGE, WE WANT TO ADD THAT THE COMPANY WAS VERY MUCH IN EXISTENCE AT THE TIME OF TRANSACTION AND WH ATEVER HAPPEN LATER ON IS OF NO RELEVANCE. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DISMISSED. 21. THE GROUND NOS.4 AND 5 RAISED BY THE REVENUE READ AS UNDER : 4. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY DELETING DISALLOWANCE OF RS. 42,420/- U/S 14A OF THE INCOME TAX ACT RELYING UPON THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF LAKHANI 21 MARKETING LTD. IN ITA NO. 970/2008 WITHOUT APPRECIATING THAT THE AFORESAID JUDGEMENT PERTAINS TO ASSESSMENT YEAR 2001-02 AND IS PRIOR TO INSERTION O F RULE 8D. 5. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY NOT CONSIDERING THE CIRCULAR NO. 5/2014, DATED 11.02.2014 ISSUED BY THE CBDT. 22. THE ASSESSING OFFICER OBSERVED DURING THE ASSESSMENT PROCEEDINGS THAT THE ASSESSEE HAD INVEST MENTS OF RS.22,73,000/-, WHICH WERE NOT LIKELY TO EARN TA XABLE INCOME AND FINANCIAL EXPENSES HAVE ALSO BEEN DEBITE D AMOUNTING TO RS.28,84,700/-. THE CONTENTION OF THE ASSESSEE WAS THAT IT HAS ENOUGH OWNED FUNDS TO MAKE INVESTMENTS AND IT HAS NOT EARNED ANY TAX FREE INCO ME DURING THE YEAR, THEREFORE, NO DISALLOWANCE UNDER S ECTION 14A OF THE ACT CAN BE MADE. THE ASSESSING OFFICER REJECTING THE CONTENTION OF THE ASSESSEE DISALLOWED AN AMOUNT OF RS.42,420/- UNDER SECTION 14A OF THE ACT, COMPUTING THE SAME AS PER RULE 8D. 23. BEFORE THE LEARNED CIT (APPEALS), THE SAME CONTENTIONS WERE REITERATED AND RELIANCE WAS PLACED ON THE JUDGMENT OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF LAKHANI MARKETING INC IN ITA NO.970 OF 2008 DAT ED 2.4.2014, WHEREBY IT HAS BEEN HELD THAT WHERE THEE IS NO TAX FREE INCOME, ADDITION CANNOT BE MADE. THE LEAR NED CIT (APPEALS) RELYING ON THE SAME, ALLOWED THIS GR OUND IN FAVOUR OF THE ASSESSEE. 22 24. AGGRIEVED BY THIS, THE DEPARTMENT HAS COME IN APPEAL BEFORE US. THE LEARNED D.R. RELIED ON THE O RDER OF THE ASSESSING OFFICER, WHILE THE LEARNED COUNSEL FO R THE ASSESSEE RELIED ON THE ORDER OF THE LEARNED CIT (AP PEALS). 25. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. ON PERUSAL OF THE ORDER OF THE LEARNED CIT (APPEALS ), WE DO NOT FIND ANY INFIRMITY IN THE SAME AS THE PROPOS ITION LAID DOWN BY THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF LAKHANI MARKETING INC (SUPRA) IS SQUARELY APPLI CABLE TO THE FACTS OF THE PRESENT CASE, AS NO EXEMPT INCOME HAS BEEN EARNED BY THE ASSESSEE DURING THE YEAR. AS RE GARDS THE CONTENTION OF THE LEARNED D.R. THAT THE SAID JU DGMENT WAS DELIVERED BEFORE THE INSERTION OF RULE 8D, WE A RE OF THE VIEW THAT THE RULE 8D IS JUST A MECHANISM PROVI DED TO COMPUTE THE DISALLOWANCE UNDER SECTION 14A OF THE A CT. THE PROVISIONS OF THE RULES CAN NEVER PREVAILS OVER THE PROVISIONS OF THE ACT. THE JUDGMENT HAS BEEN GIVEN IN THE CONTEXT OF THE PROVISIONS OF THE SECTION. IF THE S ITUATION DEMANDS FOR NO DISALLOWANCE, THE COMPUTATIONAL PROV ISION DOES NOT COME INTO THE PICTURE AT ALL. IN VIEW OF THIS, WE UPHOLD THE ACTION OF THE LEARNED CIT (APPEALS) IN D ELETING THE DISALLOWANCE. THE GROUNDS RAISED BY THE REVENU E ARE DISMISSED. 26. GROUND NOS. 6 AND 7 READ AS UNDER : 23 6. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S BY DELETING DISALLOWANCE OF RS. 2,55,035/- U/S 36(L)(III) OF THE INCOME TAX ACT IN RESPECT OF 3 PERSONS NAMELY SH RI RAJEEV AGGARWAL, SHRI SURINDER GOYAL AND SMT. UPINDERJEET KAUR. 7. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS AS HE FAILED TO APPRECIATE THAT THE CONTENTION OF ASSES SEE ABOUT CLERICAL MISTAKE IN THE CASES OF SHRI RAJEEV AGGARWAL & SHRI SURINDER GOYAL IS NOT VERIFIABLE FROM THE RECORDS OF EARLIER ASSESSMENT YEAR. FURTHER, TH E ASSESSEE HAS NOT SUBSTANTIATED ITS CLAIM OF BUSINES S EXPEDIENCY EITHER DURING ASSESSMENT OR APPELLATE PROCEEDINGS IN RESPECT OF THESE 3 PERSONS. 27. DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD LOANS AND ADV ANCES AMOUNTING TO RS.1,73,22,253/-, ON WHICH NO INTEREST HAS BEEN CHARGED AND NO BUSINESS PURPOSE OF THE SAME WA S EVIDENT. RELYING ON THE JUDGMENT OF THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. ABHISHEK INDUSTRIES LTD., 286 ITR 1, AN ADDITION OF RS.6,22, 958/- WAS MADE AS FOLLOWS : NAME AMOUNT OF LOANS AND ADVANCES PERIOD (DAYS) DISALLOWANCE U/S 36(1)(III) ANJU BHATIA 23,00,000 329 2,48,778/- ISHAN AGGARWAL 15,10,000 240 1,19,145/- RAJEEV AGGARWAL 1,54,500/- 365 18,540/- SURINDER GOYAL 1,82,794/- 365 21,935/- UPINDERJEET KAUR 17,88,000 365 2,14,560/- 28. BEFORE THE LEARNED CIT (APPEALS), DETAILED SUBMISSIONS WERE MADE WITH REGARD TO THESE ADVANCES . IT WAS STATED THAT THE AMOUNT PERTAINING TO ISHAN AGGA RWAL REMAINED WITH HIM ONLY FOR FOUR MONTHS. AS REGARDS LOAN 24 TO UPINDERJEET KAUR, RAJEEV AGGARWAL AND SURINDER G OYAL, IT WAS STATED THAT IN FACT, INTEREST HAS BEEN CHARG ED ON THESE ADVANCES DURING THE YEAR. HOWEVER, ON ACCOUN T OF A CLERICAL MISTAKE, THE INTEREST WAS SHOWN AS LOANS AND ADVANCES. DOCUMENTARY EVIDENCES TO PROVE THE SAID MISTAKE WAS FILED WITH THE LEARNED CIT (APPEALS). AS REGARDS ANJU BHATIA, IT WAS STATED THAT THE ADVANCE S WERE GIVEN DURING THE COURSE OF BUSINESS ONLY. THE SUBMISSIONS AND EVIDENCES WERE FORWARDED TO THE ASSESSING OFFICER FOR HIS COMMENTS. THE ASSESSING OFFICER IN HIS REMAND REPORT DID NOT CONTROVERT ANY OF THE FACTUAL CLAIMS MADE BY THE ASSESSEE. CONSIDERING THESE, TH E LEARNED CIT (APPEALS) DELETED THE DISALLOWANCE WITH RESPECT TO INTEREST ON LOAN TO UPINDERJEET KAUR, RA JEEV AGGARWAL AND SURINDER GOYAL, WHILE CONFIRMING THE S AME WITH RESPECT TO ANJU BHATIA AND ISHAN AGGARWAL. 29. AGGRIEVED BY THIS, THE DEPARTMENT HAS COME UP IN APPEAL BEFORE US. THE LEARNED D.R. RELIED ON TH E ORDER OF THE ASSESSING OFFICER, WHILE THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE LEARNED CIT (AP PEALS). 30. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. ON PERUSAL OF THE ORDER OF THE LEARNED CIT (APPEALS ), WE OBSERVE THAT THE FINDING ON THIS GROUND HAS BEEN RE CORDED IN PARA 6.4, WHICH READS AS UNDER : 25 6.4 I HAVE CONSIDERED THE FACTS OF THE CASE, THE B ASIS OF ADDITION MADE BY THE ASSESSING OFFICER, THE ARGUMENT S OF THE AR DURING ASSESSMENT AS WELL AS APPELLATE PROCEE DINGS AND THE COMMENTS OF THE ASSESSING OFFICER IN THE REM AND REPORT. IT IS SEEN THAT THE AMOUNTS REPRESENTING AS LOAN IN RESPECT OF UPINDERJEET KAUR, RAJEEV AGGARWAL, SURIND ER GOYAL WERE IN FACTS AMOUNTS RECEIVED BY THE ASSESSEE IN EARLIER YEAR ON WHICH INTEREST HAD ALSO BEEN PAID BUT THE SAME WERE RECORDED MISTAKENLY AS LOANS AND ADVANCES. THE AMOUNT IN RESPECT OF UPINDERJEET KAUR WAS ON ACCOUNT OF PROPERTY ADVANCE RETURNED BACK. THEREFORE, THE DISALLOWANCE IN RESPECT OF THESE THREE CASES IS ON FACTUALLY WRONG BASIS. THE SAME IS DIRECTED TO BE DELETED. TH E ADVANCE GIVEN TO ISHAN AGGARWAL HAD REMAINED WITH HIM FOR FOUR MONTHS AND NO BUSINESS PURPOSE OF ADVANCING SU CH A LOAN HAD BEEN BROUGHT ON RECORD BY THE APPELLANT. SIMILARLY THE AMOUNT GIVEN TO ANJU BHATIA HAD BEEN CLAIMED TO BE ON ACCOUNT OF BUSINESS EXPEDIENCY BUT NO EVIDENCE TO SUBSTANTIATE THE SAID CLAIM HAVE BEEN B ROUGHT ON RECORD. THEREFORE, THE INTERESTS PERTAINING TO T HESE TWO ADVANCES HAVE BEEN CORRECTLY DISALLOWED BY PLACING RE LIANCE ON THE JUDGMENT OF HON'BLE PUNJAB AND HARYANA HIGH C OURT IN THE CASE ABHISHEK INDUSTRIES LTD. THE SAME IS THER EFORE CONFIRMED. 31. WE DO NOT FIND ANY INFIRMITY IN THE SAID FINDI NGS OF THE LEARNED CIT (APPEALS), SINCE HE HAD BEEN FAI R ENOUGH TO SUSTAIN THE DISALLOWANCE WITH REGARD TO T HOSE LOANS AND ADVANCES FOR WHICH ASSESSEE COULD NOT GIV E ANY PLAUSIBLE EXPLANATION OR EVIDENCE WITH REGARD TO COMMERCIAL EXPEDIENCY FOR GIVING SUCH ADVANCES. FO R THE DISALLOWANCE DELETED BY HIM, THERE WERE CLERICAL MI STAKES, WHICH HAVE BEEN EXPLAINED BY THE ASSESSEE AND THE ASSESSING OFFICER DID NOT CONTROVERT THE SAME DURIN G THE 26 REMAND. THE GROUNDS OF APPEAL RAISED BY THE REVENU E ARE DISMISSED. 32. GROUND NOS. 8 AND 9 RAISED BY THE REVENUE ARE AS UNDER : 8. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S BY DELETING ADDITION OF RS.16,10,000/- U/S 69 OF THE INCOME TAX ACT. 9. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY IGNORING THE FACT THAT THE ASSESSEE HAD NOT EXPLAINED THE SOURCES OF CASH DEPOSITS TO THE EXTENT OF RS. 16,10,000/-. 33. THE ASSESSING OFFICER OBSERVED THAT THERE WAS A CASH DEPOSITS OF RS.83,05,650/- IN THE HDFC BANK ACCOUNT OWNED BY THE ASSESSEE. THE EXPLANATION OF THE ASSESSEE WAS THAT THE CASH WAS RECEIVED ON TRANSACT ION OF SALE OF LAND AND WAS DULY RECORDED IN THE CASH BOOK . THE DEPOSIT IN THE BANK WAS MADE OUT OF THESE CASH AVAI LABLE ONLY. THE ASSESSING OFFICER REJECTING THE PLEA OF THE ASSESSEE MADE AN ADDITION OF RS.16,10,000/- AFTER F INDING OUT THAT FROM THE PERUSAL OF CASH FLOW STATEMENT FI LED BY THE ASSESSEE, THE ASSESSEE COULD EXPLAIN ONLY RS.67,93,950/-. 34. BEFORE THE LEARNED CIT (APPEALS), THE ASSESSEE REITERATED THE SAME CONTENTIONS, RELYING HEAVILY ON THE CASH FLOW STATEMENT FILED BY HIM. IT WAS STATED TH AT THE SALE CONSIDERATION OF VARIOUS LANDS ARE PROPERLY CR EDITED IN THE CASH BOOK. IN THE REMAND REPORT, THE ASSESS ING OFFICER CONTENDED THAT SINCE THE ASSESSEE HAD FILED TWO 27 CAPITAL ACCOUNTS, RELIANCE COULD NOT BE PLACED ON H IS CASH FLOW STATEMENT. AFTER CONSIDERING ALL THIS, THE LE ARNED CIT (APPEALS) DECIDED THE ISSUE IN FAVOUR OF THE ASSESS EE. 35. AGGRIEVED BY THIS, THE DEPARTMENT HAS COME UP IN APPEAL BEFORE US. THE LEARNED D.R. RELIED ON TH E ORDER OF THE ASSESSING OFFICER, WHILE THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE LEARNED CIT (AP PEALS). 36. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. THE LEARNED CIT (APPEALS) HAS RECORDED HIS FINDING AT PAGE 95, PARA 7.4 OF HIS ORDER, WHICH READS AS UNDER : 7.4 I HAVE CONSIDERED THE FACTS OF THE CASE, THE BAS IS OF ADDITION MADE BY THE ASSESSING OFFICER, THE ARGUMEN TS OF THE AR DURING ASSESSMENT AS WELL AS APPELLATE PROCEEDINGS AND THE COMMENTS OF THE ASSESSING OFFICER IN THE REMAND REPORT. IT IS SEEN THAT THE ASSESSING OFFICER HAD FILED EXPLA NATION REGARDING THE ACCOUNTABILITY OF CASH DEPOSITS BEFOR E THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS AND THE SAID EXPLANATION -HAD BEEN ACCEPTED BUT FOR AN AMOUNT OF RS.16,10,000/-. THE ASSESSING OFFICER HAS NOT DETAILED AS TO HOW THE ASSESSEE'S EXPLANATION WAS NOT ACCEPTABLE WITH REFERENCE TO RS.16,10,000/-. THE ASSESSEE HAS CLEARLY S HOWN THE RECEIPT OF SALE CONSIDERATION ON ACCOUNT OF SAL E OF VARIOUS LANDS AND CREDITING OF SUCH RECEIPTS IN ITS CASH BO OK AND ITS CONSEQUENT WITHDRAWAL AND DEPOSIT IN THE BANK ACCOUNT . THE CASH FLOW STATEMENT HAS NOT BEEN POINTED OUT TO BE INCORRECT NOR HAVE ANY OF THE SALES BEEN SHOWN TO BE NON-EXIS TING. THE COMMENTS OF THE ASSESSING OFFICER REGARDING TWO CAPITAL ACCOUNTS AND DIFFERENT EXPENSES HAVE ALREADY BEEN E XPLAINED BY THE AR DURING APPELLANT PROCEEDINGS BEING ON ACC OUNT OF 28 NON-RECORDING OF PERSONAL TRANSACTIONS IN ONE CAPIT AL ACCOUNT. SOME LOAN AMOUNTS, WHICH HAVE BEEN VERIFIED BY THE ASSESSING OFFICER, DID NOT FORM PART OF ONE CAPITAL A CCOUNT AND NO ADDITION ON ACCOUNT OF THIS WAS MADE IN THE ASSESS MENT ORDER. THE ISSUE OF CASH DEPOSITS AND THE TWO CAPIT AL ACCOUNTS ARE NOT RELATED AT ALL AND THEREFORE CANNOT FORM BA SIS TO REJECT ASSESSEE'S EXPLANATION WITH REGARD TO CASH DE POSITS. THEREFORE, THE IMPUGNED ADDITION IS DELETED. 37. ON PERUSAL OF THE SAME, WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS GIVEN BY THE CIT (APPEALS ). THE SUBMISSION OF TWO CAPITAL ACCOUNTS DOES NOT IN ANYW AYS BE CORRELATED TO THE CASH DEPOSITS IN BANK. THEREF ORE, THIS CONTENTION OF THE ASSESSING OFFICER IS TOTALLY DEVOID OF ANY MERITS. FURTHER, WE DO NOT UNDERSTAND AS ON WH AT BASIS THE ASSESSING OFFICER HAS MADE ADDITION OF RS.16,10,000/-. NOWHERE NEITHER IN ASSESSMENT ORDE R NOR IN REMAND, HE HAS DETAILED HIS REASONING. IN VIEW OF THIS, WE DO NOT HESITATE TO CONFIRM THE ORDER OF THE LEAR NED CIT (APPEALS). THE GROUNDS OF APPEAL RAISED BY THE REV ENUE ARE DISMISSED. 38. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF APRIL, 2016. SD/- SD/- (BHAVENESH SIANI) (RANO JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 11 TH APRIL, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE D R. ASSISTANT REGISTRAR, ITAT, CHANDIGARH