TRIUMPH SECURITIES LTD, MUMBAI V. ASST CIT CEN CIR 40, MUMBAI

ITA 4155/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0133 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 23-01-2017
• Assessment Year: 1999-2000
• Appeal Filed On: 06-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR P DANIEL
• Assessee Lawyers: R S KHANDELWAL
• Keywords: Rejection of books of accounts; Unexplained investment; Maximum Marginal Rate; Assessment record; Block assessment
• Section: 234B; 131; 69; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE S/ SHRI B.R. BASKARAN (AM) & SANDEEP GOSAIN (JM) I.T.A. NO. 4155 /MUM/20 14 (ASSESSMENT YEAR 1999 - 2000 ) I.T.A. NO. 4913/MUM/2004 (ASSESSMENT YEAR 1999 - 2000) TRIUMPH SECURITIES LTD. RADHA B HAVAN 1 ST FLOOR, 121 NAGINDAS MASTER ROAD FORT, MUMBAI - 400 023. VS. DCIT CC - 40 MUMBAI ( APPELLANT ) ( RESPONDENT ) PAN NO . AAACT2152P ASSESSEE BY SHRI R.S. KHANDELWAL & SHRI NEELKANTH KHANDELWAL DEPARTMENT BY DR. P. DANIEL DATE OF HEARING 1 9 . 4 . 201 7 DATE OF PRONOUNCEMENT 05 . 7 . 201 7 O R D E R PER B.R. BASKARAN (AM) : - BOTH THE APPEALS FILED BY THE ASSESSEE ARE RELATED TO AY 1999 - 2000. THE ITA NO.4913/M/2004 ARISE OUT OF ORIGINAL ASSESSMENT PROCEEDINGS AND THE OTHER APPEAL ARISE OUT OF SET ASIDE PROCEEDINGS. 2. THE APPEAL NUMBERED AS ITA NO.4913/M/2004 WAS ORIGINALLY DISPOSED OF BY THE TRIBUNAL ON 04 - 06 - 2010. SUBSEQUENTLY, VIDE ORDER DATED 13 - 01 - 2012 PASSED IN M.A.NO.513/MUM/2010 AGAINST THE MISCELLANEOUS APPLICATION FILED BY THE ASSESSEE, THE ORDER WAS RECALLED TO DISPOSE OF GROUND NO.5 AND ALSO THE ALTERNATIVE CONTENTIONS RAISED IN GROUND NO.3. ACCORDINGLY THE APPEAL NO.ITA NO.4913/M/2004 IS LISTED BEFORE US. WHILE DISPOSING OF THE APPEAL ON 04 - 06 - 2010, THE TRIBUNAL HAD RESTOR ED THE ADDITIONS RELATING TO CLIENTS TRIUMPH SECURITIES LTD. 2 INVESTMENTS/PURCHASES & SALES, ASSESSMENT OF PROFIT AND UN - RECONCILED DIFFERENCE. IN THE SET ASIDE PROCEEDINGS, THE AO SUSTAINED ALL THE ADDITIONS AND THE LD CIT(A) ALSO CONFIRMED THE SAME. HENCE, IN THE SECOND ROUND , THE ASSESSEE HAS FILED APPEAL NO.4155/MUM/2014 CHALLENGING THOSE ADDITIONS INCLUDING ALTERNATIVE CONTENTIONS RAISED IN ITA NO.4913/M/2004. THUS THE ALTERNATIVE CONTENTIONS RAISED IN BOTH THE APPEALS ARE IDENTICAL IN NATURE. 3. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF SHARE BROKING, INVESTMENT, TRADING IN SHARES AND SECURITIES. IT IS A MEMBER OF BOMBAY STOCK EXCHANGE. DURING THE COURSE OF ORIGINAL SCRUTINY PROCEEDINGS, THE ASSESSEES ACCOUNTS WERE SUBJECTED TO SPECIAL AUDIT U/S 142(2A) O F THE ACT BY THE ASSESSING OFFICER. THE SPECIAL AUDITOR HAD REPORTED THAT THE CLIENT CODE RECORDED AT THE TIME OF STRIKING THE DEAL WAS DIFFERENT FROM THE CLIENT CODE SHOWN IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND SUCH KIND OF DIFFERENCE ACCOUNT FOR 50% TO 55% APPROXIMATELY. THE SPECIAL AUDITORS PREPARED THE LIST OF CLIENT CODE MISMATCH CASES AND ALSO EXPRESSED THE VIEW THAT TRANSACTION WISE CONFIRMATIONS ARE REQUIRED TO BE OBTAINED TO SUBSTANTIATE THE CLAIM OF THE ASSESSEE THAT THEY ARE TRANSACTI ONS OF CLIENTS. BEFORE THE AO, THE ASSESSEE FURNISHED VARIOUS REASONS FOR THE CLIENT CODE MISMATCH AND ALSO EXPRESSED ITS DIFFICULTY IN OBTAINING CONFIRMATION LETTERS. IT ALSO SUBMITTED THAT THE SPECIAL AUDITORS HAD ORIGINALLY CALLED FOR CONFIRMATION LET TERS ONLY FOR TRANSACTIONS EXCEEDING RS.50.00 LAKHS AND FINALLY THEY HAVE REPORTED ALL THE TRANSACTIONS. 4. THE ASSESSEE FURTHER SUBMITTED THAT IT HAD PROVIDED CONFIRMATION LETTERS ON 21 - 10 - 2002, WHICH COVERS 54.28% OF THE TOTAL TURNOVER. SUBSEQUEN TLY ANOTHER SET OF CONFIRMATIONS COVERING 24.56% OF TRANSACTIONS WERE ALSO FILED BEFORE THE AO. THE TRANSACTIONS TO THE TUNE OF 1.54% WERE WITH INSTITUTIONAL CLIENTS AND HENCE THEY MAY NOT BE DOUBTED WITH. WITH REGARD TO THE REMAINING TRANSACTIONS COVER ING 19.62% OF TRANSACTIONS, THE ASSESSEE HAD SENT LEDGER TRIUMPH SECURITIES LTD. 3 ACCOUNT COPIES TO THE CONCERNED PARTIES ASKING FOR CONFIRMATION, BUT NOT RECEIVED. IN THIS REGARD THE ASSESSEE FURNISHED FOLLOWING EXPLANATIONS: - (A) AS THE MATTER PERTAINS TO FY 1998 - 99, SOME OF T HE CLIENTS MAY HAVE CHANGED THEIR ADDRESS. (B) SOME OF THE CLIENTS ARE HESITANT TO REPLY DUE TO THE PROBLEM THE COMPANY IS EXPERIENCING SINCE LAST ONE YEAR. (C) SOME OF THE CLIENTS ARE BUSY AND REQUIRE MORE TIME TO CHECK AND CONFIRM THE ACCOUNTS DUE TO FINALIZATION AND FILING OF THEIR RETURNS WHICH ARE DUE ON 31.10.2002. IN RESPECT OF 19.62% OF TRANSACTIONS, THE ASSESSEE REQUESTED THE AO TO INVOKE POWERS VESTED U/S 131 OF THE ACT TO GET THE CONFIRMATION FROM THE PARTIES. 5. THE AO, HOWEVER, TOOK T HE VIEW THAT IT WOULD BE POSSIBLE FOR THE ASSESSEE TO BOOK ITS OWN TRANSACTIONS UNDER A CLIENT CODE, I.E., TO SHOW AS IF IT WERE TRANSACTIONS OF CLIENTS. THE AO ALSO REJECTED THE REQUEST FOR ISSUING SUMMONS U/S 131 OF THE ACT TO THE CLIENTS. ACCORDINGLY HE TOOK THE VIEW THAT THE TRANSACTIONS COVERED BY CLIENT CODE CHANGES, IF NOT CONFIRMED BY THE CONCERNED CLIENT, SHALL BELONG TO THE ASSESSEE ONLY. ACCORDINGLY HE ASSESSED ENTIRE PURCHASES, WHERE THERE IS CLIENT CODE CHANGE AND CONFIRMATION NOT AVAILABLE , AGGREGATING TO RS.414.34 CRORES AS UNEXPLAINED INVESTMENT OF THE ASSESSEE U/S 69 OF THE ACT. THE AO ALSO ASSESSED THE DIFFERENCE BETWEEN PURCHASES AND SALES OF THOSE TRANSACTIONS AMOUNTING TO RS.53.50 CRORES AS INCOME OF THE ASSESSEE. 6. THE SPECIA L AUDITORS COMPARED THE VOLUME OF TRANSACTIONS ENTERED BY THE ASSESSEE WITH THE STATEMENT OBTAINED FROM STOCK EXCHANGE. THE PURCHASES AND SALES AS PER THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE RS.2221.94 CRORES AND RS.1743.37 CRORES, BOTH AGGREGATING TO RS.3,965.31 CRORES (WRONGLY REPORTED BY THE SPECIAL AUDITOR AS RS.3,695.31 CRORES). THE TOTAL TURNOVER AS PER THE TRIUMPH SECURITIES LTD. 4 CONFIRMATION RECEIVED FROM THE BSE WAS RS.4042.70 CRORES. HENCE THE AO ASKED THE ASSESSEE TO RECONCILE THE DIFFERENCE. THE ASSESSEE OBTAI NED A LETTER FROM SPECIAL AUDITOR, WHEREIN THEY CLARIFIED THAT THE AGGREGATE TURNOVER WAS RS.3965.31 CRORES. THE ASSESSEE FURTHER STATED THAT THE DIFFERENCE MAY BE ON ACCOUNT OF FOLLOWING REASONS: - (A) NO DELIVERY ITEMS OF FIRST AND LAST SETTLEMENT. (B ) ASSESSEE HAS ACCOUNTED TURNOVER ON SETTLEMENT WISE, WHEREAS BSE HAS ACCOUNTED THE TURNOVER ON DAY WISE. T HE AO TOOK THE VIEW THAT THE ASSESSEE IS TRYING TO RECONCILE THE DIFFERENCE BY OFFERING GENERAL EXPLANATIONS. HE ALSO OBSERVED THAT THE STOCK EXCH ANGE ALSO MAINTAIN ACCOUNTS ON SETTLEMENT DATE WISE AND NOT DAY WISE. ACCORDINGLY THE AO TOOK THE VIEW THAT THE DIFFERENCE IN TURNOVER AMOUNTING TO RS.77.39 CRORES SHOULD BE TAKEN AS UNACCOUNTED TURNOVER OF THE ASSESSEES PURCHASE/SALES TRANSACTIONS. ACC ORDINGLY HE ASSESSED THE SAME AS UNEXPLAINED INVESTMENT OF THE ASSESSEE U/S 69 OF THE ACT. 7. WHEN THIS MATTER REACHED THE TRIBUNAL IN THE FIRST ROUND, THE TRIBUNAL RESTORED BACK THE ISSUES WITH THE FOLLOWING OBSERVATIONS: - 7. GROUND NO. 3(A) AND 3(B) ARE ON THE ISSUE OF ADDITIONS FOR CLIENTS INVESTMENTS/PURCHASES AND POSITIVE DIFFERENCE BETWEEN SALES AND PURCHASES. THIS IS AGAINST THE ADDITION FOR DIFFERENCE IN TURNOVER. THIS ISSUE IS ALSO BEFORE THE SPECIAL BENCH. THE ASSESSEE RELIED ON THE DECISION OF HONBLE SUPREME COURT REPORTED IN 159 ITR 78 AND PLEADED THAT THE AO WAS DUTY BOUND TO ISSUE SUMMONS U/S 131, WHEN THE AO WAS REQUESTED TO DO SO. THESE ISSUES ARE SIMILAR TO THE ISSUES THAT HAVE COME UP BEFORE THE SPECIAL BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE IN THE BLOCK ASSESSMENT PROCEEDINGS. AS THE AO HAS TO HAVE THE BENEFIT OF THIS DECISION AND AS CERTAIN CLIENTS HAVE FURNISHED CONFIRMATIONS SUBSEQUENT TO THE ORDER OF THE CIT(APPEALS) AND AS CERTAIN CONFIRMATIONS WERE ALSO SUBM ITTED BEFORE THE CIT(APPEALS) AND THESE CONFIRMATIONS REQUIRE VERIFICATION, WE SET ASIDE THIS ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH THE LAW. TRIUMPH SECURITIES LTD. 5 8. IN GROUND NO.3(A) OF THE APPEAL FILED IN THE FIRST ROUND, THE ASSESSEE HAD U RGED CERTAIN ALTERNATIVE CONTENTIONS WITHOUT PREJUDICE TO MAIN CONTENTIONS. WE HAVE NOTICED EARLIER, THOSE ALTERNATIVE CONTENTIONS HAVE BEEN RECALLED BY THE TRIBUNAL, VIDE ITS MA ORDER (REFERRED SUPRA). 9. IN THE SET ASIDE PROCEEDINGS, THE AO REPEAT ED ALL THE THREE ADDITIONS WITH THE OBSERVATION THAT THE ASSESSEE HAS FAILED TO FURNISH SUPPORTING DOCUMENTS. BEFORE LD CIT(A), THE ASSESSEE DID NOT APPEAR AND HENCE THE LD CIT(A) ALSO CONFIRMED THE ADDITIONS. HENCE THE ASSESSEE HAS FILED APPEAL WHICH IS NUMBERED AS ITA 4155/M/2014 CHALLENGING THE ORDER PASSED BY LD CIT(A). 10. IN THE FIRST ROUND (ITA NO.4913/M/2004), THE TRIBUNAL HAD OMITTED TO DISPOSE OF GROUND NO.5 RELATING TO ADHOC DISALLOWANCE OF RS.50.00 LAKHS OUT OF THE PROFESSIONAL FEE PAID TO M/S TRIUMPH INTERNATIONAL FINANCE (INDIA) LTD TREATING THE SAME AS EXCESSIVE AND HENCE THE SAME HAS BEEN RECALLED BY THE TRIBUNAL IN THE MISCELLANEOUS APPLICATION FILED BY THE ASSESSEE. 11. WE SHALL FIRST DEAL WITH DISALLOWANCE OF RS.50.00 LAKHS MA DE OUT OF PROFESSIONAL FEE. THE ASSESSEE HAD PAID PROFESSIONAL FEE OF RS.108 LAKHS TO M/S TRIUMPH INTERNATIONAL (INDIA) LTD FOR SUPPLYING ITS RESEARCH INPUTS TO THE ASSESSEE. THE ASSESSEE FURNISHED COPY OF AGREEMENT ENTERED BETWEEN BOTH THE PARTIES AND A LSO PROVIDED THE LIST OF EMPLOYEES ENGAGED IN THE RESEARCH DIVISION OF THE ABOVE SAID COMPANY. THE AO NOTICED THAT THE ABOVE SAID COMPANY HAS ALSO RECEIVED A SUM OF RS.2.50 LAKHS FROM ANOTHER GROUP COMPANY NAMED M/S CLASSIC SHARES AND STOCK BROKING SERVIC ES LTD FOR SAME KIND OF SERVICES RENDERED BY IT. HENCE THE AO CONSIDERED THE PAYMENT OF RS.108 LAKHS MADE BY THE ASSESSEE COMPANY TO BE EXCESSIVE AND ACCORDINGLY DISALLOWED A SUM OF RS.50.00 LAKHS. THE LD CIT(A) ALSO CONFIRMED THE SAME. TRIUMPH SECURITIES LTD. 6 12. THE LD A .R SUBMITTED THAT THE QUANTUM OF PROFESSIONAL FEE WOULD DEPEND UPON NATURE OF SERVICES. HE SUBMITTED THAT THE ASSESSING OFFICER HAS NOT POINTED OUT AS TO HOW THE PAYMENT WAS EXCESSIVE VIS - - VIS THE SERVICES RECEIVED BY THE ASSESSEE. HE SUBMITTED THAT AN IDENTICAL DISALLOWANCE MADE BY THE AO IN AY 2000 - 01 HAS BEEN DELETED BY THE TRIBUNAL. HE SUBMITTED THAT THE RECIPIENT COMPANY IS ALSO A GROUP COMPANY AND IT HAS BEEN PAYING TAX AT MAXIMUM MARGINAL RATE. ACCORDINGLY, BY PLACING RELIANCE ON THE DECISION RE NDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF INDO SAUDI SERVICES (310 ITR 306), HE SUBMITTED THAT THE DISALLOWANCE U/S 40A(2)(A) IS NOT CALLED FOR WHEN THE PAYER AND PAYEE ARE PAYING TAX AT SAME RATE. 13. WE HEARD LD D.R, WHO SUPPORTED THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE. DURING THE COURSE OF HEARING, THE LD A.R ALSO FURNISHED COPIES OF INCOME TAX RETURN FILED BY M/S TRIUMPH INTERNATIONAL (INDIA) LTD, WHICH SHOWS THAT THE ABOVE SAID GROUP COMPANY IS PAYING TAX AT MAXIMUM MARGINAL RATE. HENCE THE DECISION RENDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF INDO SAUDI SERVICES (SUPRA) SHALL APPLY TO THE FACTS OF THE PRESENT CASE. ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THIS ADDITIO N. 14. THE ALTERNATIVE CONTENTIONS RAISED BY THE ASSESSEE ARE ALSO RAISED IN THE APPEAL FILED IN THE SECOND ROUND AND ALL OF THEM TOGETHER ARE DEALT HERE UNDER. 15. THE FIRST ISSUE CONTESTED IN THE APPEAL FILED IN ITA NO.4155/M/2014 PERTAINS TO T HE ADDITION OF RS.414.39 CRORES RELATING TO UNEXPLAINED INVESTMENT, BEING AGGREGATE VALUE OF PURCHASES INVOLVING CHANGE IN CLIENT CODES. THE SPECIAL AUDITORS HAD ASKED FOR CONFIRMATION FROM THE CONCERNED CLIENTS, WHEREVER THERE WAS CHANGE IN THE CLIENT COD E. ACCORDINGLY THE AO TOOK THE VIEW THAT SUCH KIND OF PURCHASES, IN THE ABSENCE OF CONFIRMATION LETTERS SHOULD BE TREATED AS TRIUMPH SECURITIES LTD. 7 UNEXPLAINED INVESTMENTS OF THE ASSESSEE. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS FURNISHED CONFIRMATION LETTERS TO THE TUNE OF RS.300.50 CRORES, OUT OF THE ABOVE SAID RS.414.39 CRORES, TO THE TAX AUTHORITIES AFTER THE COMPLETION OF ORIGINAL ASSESSMENT PROCEEDINGS. HE SUBMITTED THAT BOTH THE TAX AUTHORITIES HAVE SIMPLY OBSERVED THAT THE ASSESSEE HAS FAILED TO FURNISH THE CONFIRMAT ION LETTERS WITHOUT EXAMINING THE RECORD AND ACCORDINGLY REPEATED THE ADDITIONS. 16. THE LD A.R SUBMITTED THAT THE PURCHASES OF RS.414.34 CRORES CONSIST OF FOLLOWING ITEMS: - DELIVERY BASED SCRIPS RS. 71.46 CRORES NON - DELIVERY BASED SCRIPS RS.342.87 CRORES HE SUBMITTED THAT NEITHER THE ASSESSEE NOR THE CLIENTS IS REQUIRED TO MAKE ANY PAYMENT FOR NON - DELIVERY BASED SCRIPS (SPECULATIVE TRANSACTIONS) AND THEY ARE SETTLED BY PAYING THE DIFFERENCE. ACCORDINGLY HE SUBMITTED THAT THE ADDITION RELATING TO N ON - DELIVERY BASED SCRIPS (SPECULATIVE TRANSACTIONS) AMOUNTING TO RS.342.87 CRORES WOULD NOT RESULT IN ANY UNEXPLAINED INVESTMENT AND HENCE THE SAME IS LIABLE TO BE DELETED. WITH REGARD TO THE ADDITION OF RS.71.46 CRORES RELATING TO DELIVERY BASED SCRIPS, THE LD A.R SUBMITTED THAT THE ASSESSEE HAS ALREADY FILED CONFIRMATION LETTERS TO THE TUNE OF RS.60.24 CRORES. HE SUBMITTED THAT THE ASSESSEE HAS SUBSTANTIALLY PROVED THAT THESE TRANSACTIONS BELONG TO ITS CLIENTS AND FURTHER IT COULD NOT OBTAIN CONFIRMATIO N LETTERS FROM OTHER PERSONS DUE TO PASSAGE OF TIME AND DUE TO DISCONNECTION OF CONTACTS. ACCORDINGLY HE SUBMITTED THAT THERE IS NO REASON TO DISBELIEVE THE SUBMISSIONS OF THE ASSESSEE IN THIS REGARD. HE FURTHER SUBMITTED THAT THE BANKING TRANSACTIONS, OT HERWISE, SUPPORT THE SUBMISSIONS OF THE ASSESSEE. ACCORDINGLY HE SUBMITTED THAT THE ADDITION OF RS.71.46 CRORES RELATING TO DELIVERY BASED TRANSACTIONS IS ALSO LIABLE TO BE DELETED. TRIUMPH SECURITIES LTD. 8 17. THE LD A.R FURTHER SUBMITTED THAT THE ASSESSEE HAD DULY DECLARE D BROKERAGE INCOME ARISING FROM THE TRANSACTIONS REFERRED ABOVE. HE SUBMITTED THAT THE ASSESSING OFFICER HAS ACCEPTED THE BROKERAGE INCOME AND ASSESSED THE SAME AS INCOME OF THE ASSESSEE. HE SUBMITTED THAT THE AO, AFTER HAVING ACCEPTED THE BROKERAGE INCO ME FROM THESE TRANSACTIONS, SHOULD NOT HAVE TREATED THESE TRANSACTIONS AS ASSESSEES OWN TRANSACTIONS. HE FURTHER SUBMITTED THAT THE AO HAS NOT REJECTED THE BOOKS OF ACCOUNTS ALSO. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS FURNISHED CONFIRMATION LETTERS FROM MOST OF THE CLIENTS AND HENCE THOSE TRANSACTIONS CANNOT BE CONSIDERED TO BE ASSESSEES OWN TRANSACTIONS. 18. WITH REGARD TO THE ADDITION OF RS.53.50 CRORES RELATING TO THE PROFIT EARNED ON THE PURCHASE AND SALE OF SCRIPS (FOR WHICH CONFIRMATION FROM THE PARTIES WERE NOT FILED), THE LD A.R SUBMITTED THAT THE SAME IS LIABLE TO BE DELETED, AS THE ASSESSEE HAS SUBSTANTIALLY PROVED THAT THESE TRANSACTIONS BELONG TO THE CLIENTS, BY OBTAINING CONFIRMATION LETTERS FROM MOST OF THE PARTIES. IN THE ALTER NATIVE, HE SUBMITTED THAT THE ASSESSING OFFICER HAS ASSESSED THE PROFIT ONLY AND HE HAS IGNORED THE TRANSACTIONS RESULTING IN LOSS. HE SUBMITTED THAT THE LOSS ARISEN IN THOSE TRANSACTIONS AMOUNTED TO RS.103.48 CRORES AND IF IT IS SET OFF AGAINST THE PROFI T, THEN THERE WILL BE A NET LOSS OF RS.53.43 CRORES, WHICH WOULD REQUIRE NO ADDITION. HE SUBMITTED THAT THE SCRIPS PURCHASED AND SCRIPS SOLD ARE DIFFERENT SCRIPS IN MOST OF THE CASES AND HENCE THE AO WAS NOT LEGALLY CORRECT IN ARRIVING AT THE PROFIT WITHO UT MAKING ONE TO ONE LINK. 19. WITH REGARD TO THE ADDITION RELATING TO DIFFERENCE IN TURNOVER BETWEEN THE BOOKS OF THE ASSESSEE AND THE BSE RECORDS, THE LD A.R SUBMITTED THAT THE FINAL BALANCE SHOWN IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE IN THE ACCO UNT OF BSE AND THE BALANCE SHOWN IN THE BOOKS OF BSE VERY MUCH TALLIES AND HENCE THERE IS NO SCOPE FOR ANY DIFFERENCE IN THE TURNOVER. TRIUMPH SECURITIES LTD. 9 20. THE LD SPECIAL COUNSEL INITIALLY DISPUTED THE CLAIM OF THE ASSESSEE THAT CONFIRMATION LETTERS WERE FILED BEFORE THE AO. HOWEVER, AFTER VERIFICATION OF ASSESSMENT RECORDS, THE LD SPECIAL COUNSEL ADMITTED THAT THE CONFIRMATION LETTERS REFERRED TO BY THE ASSESSEE ARE AVAILABLE IN ASSESSMENT RECORDS. WITH REGARD TO VARIOUS CONTENTIONS RAISED BY THE ASSESSEE, THE LD SP ECIAL COUNSEL SUBMITTED THE ASSESSEE HAS NOT APPEARED BEFORE THE LD CIT(A) AND HENCE THE FIRST APPELLATE AUTHORITY WAS CONSTRAINED TO PASS EX - PARTE ORDER. ACCORDINGLY HE PRAYED THAT THESE MATTERS MAY BE RESTORED BACK TO THE FILE OF LD CIT(A). 21. IN T HE REJOINDER, THE LD A.R SUBMITTED THAT THE SPECIAL BENCH OF TRIBUNAL, WHILE CONSIDERING THE APPEAL OF THE ASSESSEE IN BLOCK ASSESSMENT PROCEEDINGS, HAS EXPRESSED THE VIEW THAT THE TRANSACTIONS CONFIRMED BY THE CLIENTS NEED NOT BE CONSIDERED AS ASSESSEES OWN TRANSACTIONS. THE AO HAS ALSO ASSESSED ONLY THE UNCONFIRMED PURCHASES. HE SUBMITTED THAT THE SPECIAL BENCH ALSO HAS EXPRESSED THE SAME VIEW. ACCORDINGLY HE SUBMITTED THAT THE VARIOUS CONTENTIONS OF THE ASSESSEE ARE RELATED TO SEEKING RELIEF IN ACCORD ANCE WITH THE METHODOLOGY ADOPTED BY THE AO ONLY AND FURTHER CERTAIN LEGAL CLAIMS HAVE BEEN MADE ON THE BASIS OF FACTS ALREADY AVAILABLE ON RECORD. THE LD A.R FURTHER SUBMITTED THAT BOTH THE AO AS WELL AS LD CIT(A) HAS PASSED THE IMPUGNED ORDERS UNDER THE WRONG IMPRESSION THAT THE ASSESSEE HAS NOT FURNISHED CONFIRMATION LETTERS, WHICH IS CONTRARY TO THE FACTS. HE FURTHER SUBMITTED THAT THIS SECOND ROUND OF PROCEEDINGS AND FURTHER SINCE THE MATTER REQUIRES APPRECIATION OF EVIDENCES ALREADY AVAILABLE ON REC ORD, HE SUBMITTED THAT THE TRIBUNAL MAY DECIDE THIS ISSUE BY CONSIDERING THOSE EVIDENCES. WE FIND MERIT IN THE SUBMISSIONS MADE BY LD A.R. ACCORDINGLY WE PROCEED TO DISPOSE OF ALL THE ISSUES. 22. WE HAVE HEARD RIVAL CONTENTIONS AND WE PREFER TO ADJUDICATE THE MAIN GROUNDS AS WELL AS ADDITIONAL GROUNDS TOGETHER, SINCE ALL PERTAIN TO THE ADDITION OF RS.414.34 CRORES MADE BY THE AO. WE HAVE GONE THROUGH THE ORDER DATED TRIUMPH SECURITIES LTD. 10 07 - 04 - 2010 PASSED BY THE SPECIAL BENCH OF TRIBUNAL IN THE ASSESSEES OWN CASE ON IT(SS)A NO.444/MUM/2004 RELATING TO THE BLOCK PERIOD ENDING 23 - 03 - 2001. WE NOTICE THAT THE SPECIAL BENCH DECIDED A LEGAL ISSUE FIRST AND THEREAFTER, ON MERITS OF ADDITION, IT HAS OBSERVED AS UNDER: - 52. NOW COMING TO THE MERITS OF ADDITIONS, WE FIND TH AT THE DEPARTMENT ITSELF HAS NOT TREATED THOSE TRANSACTIONS AS BENAMI, WHEREIN, THE ASSESSEE HAS FILED CONFIRMATIONS. LD COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT BEFORE LD CIT(A) CONFIRMATIONS WERE FILED, WHICH COULD NOT BE OBTAINED TILL THE CONCLUSION OF BLOCK ASSESSMENT, THEREFORE, IN THE INTEREST OF JUSTICE, MATTER BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE CONFIRMATIONS WHICH WERE FILED BEFORE LD CIT(A) AND TO DECIDE THE ISSUE IN CONFORMITY WITH THE FINDINGS OF THOSE CASES WHERE CONFIRMATIONS HAVE BEEN ACCEPTED. LD COUNSEL FOR THE ASSESSEE HAS POINTED OUT THE FALLACIES IN THE ADDITIONS MADE BY THE AO, WHICH WE HAVE NOTED IN HIS ARGUMENTS, THEREFORE, THE SAME HAVE TO BE TAKEN INTO CONSIDERATION BY THE AO BEFORE ARRIVING AT A NY CONCLUSION. THUS, THERE IS MERIT IN THE CONTENTIONS OF THE ASSESSEE AND ALSO IT IS THE CASE OF THE DEPARTMENT THAT THE TRANSACTIONS OF CLIENTS, WHICH HAVE BEEN CONFIRMED BY THE RESPECTIVE CLIENTS, SHALL NOT BE TAKEN AS THE TRANSACTIONS OF THE ASSESSEE , EVEN IF THERE IS A CHANGE IN CLIENT CODE. 23. WITH REGARD TO THE UNIQUE CLIENT CODE, THE LD A.R SUBMITTED THAT THE UNIQUE CLIENT CODE HAS BEEN MADE MANDATORY ONLY FROM 01 ST AUGUST, 2001. IN SUPPORT OF THE SAME, THE LD A.R INVITED OUR ATTENTION TO THE CIRCULARS ISSUED BY SEBI, WHICH ARE PLACED AT PAGES 52 TO 55 OF THE PAPER BOOK. ACCORDINGLY HE SUBMITTED THAT THE CLIENT CODE WAS NOT MANDATORY DURING THE YEAR UNDER CONSIDERATION. HE SUBMITTED THAT THE SOFTWARE OF BSE IS SO DESIGNED THAT IF THE BRO KER DOES NOT PUNCH THE CLIENT CODE, THE SOFTWARE WILL ASSUME IT TO BE THE TRANSACTION OF THE BROKER. HE INVITED OUR ATTENTION TO PAGE 48 OF THE PAPER BOOK, WHEREIN THE RULES REGARDING PRESUMPTION IS GIVEN. ACCORDINGLY HE SUBMITTED THAT THE SAID PRESUMPTI ON HAS BEEN PRESCRIBED FOR THE CONVENIENCE OF BSE AND HENCE IT CANNOT BE CONSIDERED AS A LEGAL PRESUMPTION. HENCE SUCH TRIUMPH SECURITIES LTD. 11 PRESUMPTION SHOULD NOT BE RELIED UPON TO TAKE THE VIEW THAT ALL THE TRANSACTIONS BELONG TO THE ASSESSEE. HE SUBMITTED THAT THE TRANSACTI ONS, WHICH HAVE BEEN CONFIRMED BY THE CONCERNED CLIENT, SHOULD BE TAKEN AS THE CLIENTS TRANSACTIONS. 24. IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS FURNISHED SUBSTANTIAL PORTION OF CONFIRMATION LETTERS BEFORE THE TAX AUTHORITIES DURING THE COUR SE OF ORIGINAL PROCEEDINGS. THE IMPUGNED ADDITION OF RS.414.34 CRORES RELATE TO THE TRANSACTIONS WHICH DID NOT HAVE CONFIRMATION LETTERS. THE TRIBUNAL, IN THE ORIGINAL PROCEEDINGS, HAS RESTORED BACK THIS ISSUE ONLY TO EXAMINE THE CONFIRMATION LETTERS FURN ISHED BY THE ASSESSEE SUBSEQUENT TO THE COMPLETION OF ORIGINAL ASSESSMENT PROCEEDINGS. THE LD SPECIAL COUNSEL OF THE DEPARTMENT ALSO CONFIRMED THAT THESE ADDITIONAL CONFIRMATION LETTERS ARE AVAILABLE IN THE ASSESSMENT RECORD. HOWEVER WE NOTICE THAT THE ASS ESSING OFFICER, WITHOUT EXAMINING THOSE CONFIRMATION LETTERS, HAS OBSERVED AS UNDER IN THE SET ASIDE PROCEEDINGS: - 8. DURING THE COURSE OF RE - ASSESSMENT PROCEEDINGS, THE AR OF THE ASSESSEE WAS FAILED TO FURNISH SUPPORTING DOCUMENTS WITH REGARD TO THE P URCHASE TRANSACTIONS OF RS.414,34,10,591/ - AND ALSO FAILED TO SUBSTANTIATE ITS CLAIM.. APPARENTLY, THE ABOVE SAID OBSERVATION OF THE AO IS AGAINST THE FACTS AVAILABLE ON RECORD. WE ALSO NOTICE THAT THE ASSESSEE HAS FURNISHED THE COPIES OF CONFIRMATION L ETTERS IN THE PAPER BOOK FILED BEFORE THE TRIBUNAL. 25. IN THE ORIGINAL ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS ACCEPTED THE TRANSACTIONS AS THAT OF THE CLIENTS, IF THE SAME WAS CONFIRMED BY THE CONCERNED CLIENT. HENCE, IN OUR VIEW, THE SA ID STAND OF THE REVENUE SHOULD BE FOLLOWED IN RESPECT OF THE TRANSACTIONS FOR WHICH CONFIRMATION HAS BEEN FILED BY THE ASSESSEE. WE ALSO FIND MERIT IN THE CONTENTIONS OF THE ASSESSEE THAT THE DISPUTE MAY BE SETTLED HERE ONLY INSTEAD OF SETTING ASIDE THE M ATTER TO THE FILE OF TRIUMPH SECURITIES LTD. 12 THE AO, SINCE THE CONFIRMATION LETTERS ARE ALREADY AVAILABLE IN THE ASSESSMENT RECORDS. THE DETAILS FURNISHED BY THE ASSESSEE CAN BE CATEGORIZED INTO THREE CATEGORIES AS UNDER: - (A) CASES WHERE CONFIRMATIONS HAVE BEEN FILED BY THE ASS ESSEE POST ORIGINAL ASSESSMENT PROCEEDINGS. (B) CASES WHERE CONFIRMATIONS ARE NOT AVAILABLE, BUT THE TRANSACTIONS COULD BE VERIFIED THROUGH OTHER EVIDENCES. (C) CASES WHERE CONFIRMATIONS/OTHER EVIDENCES ARE NOT AVAILABLE THESE DETAILS ARE AVAILABLE I N PAGES 37 TO 44 OF THE PAPER BOOK, WHICH ARE EXTRACTED BELOW: - TRIUMPH SECURITIES LTD. 13 TRIUMPH SECURITIES LTD. 14 TRIUMPH SECURITIES LTD. 15 TRIUMPH SECURITIES LTD. 16 26. THE ABOVE SAID DETAILS ARE TABULATED BELOW, FOR THE SAKE OF CONVENIENCE: - (RS. IN CRORES) (A) TRANX. , WH ERE CONFIRMATIONS ARE AVAILABLE DETAILS OF TRA NSACTIONS DELIVERY NON - DELIVERY TOTAL A. CONFIRMATIONS FURNISHED AFTER AOS ORDER 60.24 240.26 300.50 B. CONFIRMATIONS GIVEN AFTER CIT(A)S ORDER 7.15 52.03 59.18 --------- ---------- ---------- 67.39 292.29 359.68 ===== ====== = ==== (B) TRANX. , W HERE CONFIRMATIONS ARE NOT AVAILABLE, BUT OTHER EVIDENCES ARE AVAILABLE A. INSTITUTIONAL CLIENT 0.02 - 0.02 B. SIGNED COPIES ARE AVAILABLE 1.00 5.62 6.62 C. AGREEMENTS ARE AVAILABLE 0.06 0.65 0.71 D. NAME APPEARING IN BANK STATEMENT 2.07 39.36 41.43 --------- --------- -------- 3.15 45.63 48.78 ===== ==== ==== (C) NO CONFIRMATION/O THER EVIDENCE AVAILABLE 0.92 4.96 5.88 AGGREGATE OF A + B + C 71.46 342.88 414.34 TRIUMPH SECURITIES LTD. 17 27. THE ADDITION OF RS.359.68 CRORES FALLING IN (A) CATEGORY IS LIABLE TO BE DELETED, SINCE THOSE TRANSACTIONS HAVE BEEN CONFIRMED BY THE CONCERNED CLIENTS. WE NOTICE THAT THE ASSESSEE HAS FURNISHED THE COPIES OF CONFIRMATION LETTERS IN THE PAPER BOOK AND FURTHER THE LD SPECIAL COUNSEL OF THE REVENUE HAS ALSO CONFIRMED THAT THESE CONFIRMATIONS ARE ALSO AVAILABLE IN THE ASSE SSMENT RECORDS. WE HAVE ALSO EARLIER NOTICED THAT THE ASSESSING OFFICER HIMSELF, IN THE ORIGINAL ASSESSMENT PROCEEDINGS, DID NOT MAKE ANY ADDITION WHEREVER CONFIRMATIONS WERE AVAILABLE. HENCE, BY ADOPTING THE SAME METHODOLOGY, THE ADDITION OF RS.359.68 C RORES IS LIABLE TO BE DELETED. THE LD A.R SUBMITTED THAT IDENTICAL ADDITIONS MADE IN THE CASE OF FOLLOWING SISTER CONCERN HAVE BEEN DELETED BY LD CIT(A) AS WELL AS ITAT ON THE BASIS OF CONFIRMATION LETTERS FURNISHED BY THE ASSESSEE, WHICH ALSO SUPPORTS OU R VIEW: (A) M/S NH SECURITIES LTD IN AY 1999 - 2000 TO 2001 - 02 AND ALSO IN THE BLOCK ASSESSMENT. (B) M/S VN PAREKH SECURITIES LTD IN AY 1999 - 2000 AND 2000 - 01. (C) M/S CLASSIC SHARE AND STOCK BROKING SERVICES LTD IN AY 2001 - 02 AND BLOCK ASSESSMENT. (D) M/S KNP SECURITIES LTD IN AY 1999 - 2000 AND 2000 - 01. THE LD A.R SUBMITTED THAT THE AO HIMSELF DID NOT ADD SPECULATIVE PURCHASES IN THE BLOCK ASSESSMENT ORDER. 28. THE TRANSACTIONS FALLING IN (B) CATEGORY (SUPRA) WERE NOT SUPPORTED BY DIRECT CONFIRMATI ON LETTERS OF THE CLIENTS. HOWEVER, SINCE THE ASSESSEE HAS FURNISHED CONFIRMATION LETTERS FROM SUBSTANTIAL NUMBER OF CLIENTS, WE ARE OF THE VIEW THAT THE INDIRECT EVIDENCES FURNISHED BY THE ASSESSEE TO CORROBORATE ITS CLAIM THAT THEY BELONG TO CLIENTS ONL Y MAY BE ACCEPTED. THERE SHOULD NOT BE ANY DOUBT THAT THE TRANSACTIONS MADE BY INSTITUTIONAL CLIENTS SHOULD BELONG TO THAT INSTITUTION ONLY, SINCE THE SCOPE OF MANIPULATION IS ALMOST NIL. THE OTHER TRIUMPH SECURITIES LTD. 18 EVIDENCES LIKE SIGNED COPIES, AGREEMENTS, AND BANK TRANS ACTIONS, IN A WAY, PROVE THAT THESE TRANSACTIONS BELONG TO THE CONCERNED CLIENT ONLY. ACCORDINGLY WE ARE OF THE VIEW THAT THE TRANSACTIONS AGGREGATING TO RS.48.78 LAKHS FALLING IN (B) CATEGORY CAN ALSO BE CONSIDERED TO BELONG TO THE CLIENTS ONLY. ACCORDI NGLY WE DIRECT THAT THE ADDITION OF RS.48.78 CRORES SHOULD ALSO BE DELETED. 29. IN RESPECT OF TRANSACTIONS, WHERE CONFIRMATION/OTHER EVIDENCES ARE NOT AVAILABLE, THE SPECULATIVE TRANSACTIONS DOES NOT INVOLVE ANY INVESTMENT AND HENCE THE ADDITION OF RS. 4.96 CRORES IS LIABLE TO BE DELETED. THIS IS FOR THE REASON THAT THE AO HAS TREATED THE PURCHASES AS UNEXPLAINED INVESTMENTS AND THE PURCHASES MADE IN SPECULATIVE TRANSACTIONS (NON - DELIVERY), THE PURCHASE VALUE IS NOT TO BE GIVEN, BUT THE TRANSACTIONS SHAL L BE SETTLED BY SALES ON A PARTICULAR DATE AND ONLY THE DIFFERENCE OF PROFIT/LOSS SHALL BE RECEIVED/ GIVEN . ACCORDINGLY WE DIRECT THE AO TO DELETE THE ADDITION OF RS.4.96 CRORES RELATING TO SPECULATIVE TRANSACTIONS. 30. NOW WE ARE LEFT WITH THE ADDIT ION OF RS.0.92 CRORES OR RS.92.05 LAKHS RELATING PURCHASES OF DELIVERY BASED SCRIPS. WE ALSO NOTICE THAT THE SALES (NOT CONFIRMED BY THE CONCERNED PARTIES) OF DELIVERY BASED SCRIPS WAS RS.10.41 LAKHS. WHEN THE UNCONFIRMED PURCHASES HAS BEEN TAKEN AS THAT BELONGING TO THE ASSESSEE, IN OUR VIEW, THE UNCONFIRMED SALES SHOULD ALSO BE TAKEN AS THAT OF THE ASSESSEE. HENCE THE SALES VALUE OF DELIVERY BASED SCRIPS OF UNCONFIRMED ITEMS AMOUNTING TO RS.10,41,519/ - SHOULD BE AVAILABLE WITH THE ASSESSEE FOR MAKING P URCHASES/INVESTMENTS. ACCORDINGLY WE ARE OF THE VIEW THAT THE SALE VALUE OF RS.10.41 LAKHS SHOULD BE SET OFF AGAINST THE PURCHASE VALUE OF RS.92.05 LAKHS. ACCORDINGLY THE NET PURCHASE VALUE OF RS.81.64 LAKHS IS REQUIRED TO BE EXAMINED FURTHER. TRIUMPH SECURITIES LTD. 19 31. TH E LIST OF UNCONFIRMED TRANSACTIONS IS GIVEN IN PAGE 43 AND 44 OF THE PAPER BOOK. THE LIST CONSISTS OF FOLLOWING CORPORATE PARTIES: - (A) OXFORD FINSEC P LTD - 2,193 (B) DYNAVEST INDIA PVT LTD - 62,59,750 (C) MAX OPP INVESTMENT LTD - 16,60,750 ---------------- 79,22,693 ---------------- PURCHASES MADE IN THE NAME OF INDIVIDUAL AND NON - CORPORATE PARTIES ARE RS.12,83,179/ - . WE HAVE ALREADY HELD THAT THE FUNDS AVAILABLE WITH THE ASSESSEE AMOUNTING TO RS.10,41 ,519/ - SHOULD BE SET OFF AGAINST THE PURCHASE VALUE. SINCE THE TRANSACTIONS WITH THE INDIVIDUAL PARTIES ARE MANEUVERABLE, WE ARE OF THE VIEW THE SALE PROCEEDS MAY BE ADJUSTED AGAINST THE PURCHASES MADE IN THE NAME OF INDIVIDUAL PARTIES. ACCORDINGLY THE N ET INVESTMENT MADE IN THE NAME OF INDIVIDUAL PARTIES AMOUNTING TO RS.2,41,660/ - SHOULD BE CONSIDERED AS UN EXPLAINED AND THE ADDITION OF THE SAME, IN OUR VIEW, IS LIABLE TO BE CONFIRMED. 32. WITH REGARD TO THE PURCHASES MADE IN THE NAME OF CORPORATE PARTIES, THERE IS POSSIBILITY OF CROSS VERIFICATION OF THE SAME, SINCE THE CORPORATE ARE REQUIRED TO COMPLY WITH THE REQUIREMENTS OF COMPANIES ACT WITH REGARD TO FILING OF ANNUAL ACCOUNTS AND ALSO SHOULD COMPLY WITH THE REQUIREMENT OF FILING OF INCOME TAX RETURNS UNDER THE INCOME TAX ACT. WE HAVE ALSO NOTICED THAT THE ASSESSEE HAD REQUESTED THE ASSESSING OFFICER TO ISSUE SUMMONS TO ALL THE PARTIES INCLUDING THESE CORPORATE PARTIES, BUT THE AO HAS NOT HEEDED TO THE REQUEST OF THE ASSESSEE. IN THE NORMAL CI RCUMSTANCES, THE ADDITIONS RELATING TO THE ABOVE SAID CORPORATE PARTIES COULD HAVE BEEN SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR CONDUCTING VERIFICATION. HOWEVER, SINCE THE TRANSACTIONS PERTAIN TO FY 1998 - 99 AND FURTHER SINCE 18 YEARS HAVE ALREA DY ELAPSED, IT IS QUITE POSSIBLE THAT THOSE CORPORATE PARTIES MAY NOT ALSO HAVE OLD RECORDS AND THEIR IDENTIFICATION SOME TIMES, WOULD GIVE DIFFICULTY. SINCE THE ASSESSEE HAS OBTAINED CONFIRMATION TRIUMPH SECURITIES LTD. 20 LETTERS FROM MORE THAN 95% OF THE PARTIES, IT IS POSSIBLE THAT THE CLAIM OF THE ASSESSEE THAT THESE TRANSACTIONS BELONG TO THE RESPECTIVE CLIENTS CANNOT ALTOGETHER BE REJECTED. 33. IN VIEW OF THE PRACTICAL DIFFICULTIES AND ALSO CONSIDERING THE FACTS OF THE CASE, WE ARE OF THE VIEW THAT THIS ISSUE MAY BE S ETTLED BY ESTIMATING A PORTION OF PURCHASES AS UNEXPLAINED INVESTMENT OF THE ASSESSEE. ACCORDINGLY WE DIRECT THE AO TO ASSESS 50% OF THE VALUE OF RS.79,22,693/ - AS EXPLAINED INVESTMENT OF THE ASSESSEE. 34. IN VIEW OF THE FOREGOING DISCUSSIONS, THE ADD ITION TO THE EXTENT OF RS.2,41,660/ - + RS. 39,61,346/ - , BOTH AGGREGATING TO RS. 42,03,006/ - IS SUSTAINED AND ACCORDINGLY THE BALANCE AMOUNT OF ADDITION IS DIRECTED TO BE DELETED. 35. THE NEXT ISSUE RELATES TO THE ASSESSMENT OF PROFIT OF RS.53.50 CRORES OUT OF THESE TRANSACTIONS, I.E., TRANSACTIONS NOT CONFIRMED BY THE CLIENTS. THE DETAILS OF WORKINGS OF THE ABOVE SAID ALLEGED PROFIT OF RS.53.50 CRORES IS GIVEN IN THE ORIGINAL ASSESSMENT ORDER AS ANNEXURE. IN THE BODY OF ASSESSMENT ORDER, THE AO HAS OBSE RVED AS UNDER IN PAGE 17: - (1) THE PURCHASE AMOUNT OF THESE CLIENTS COMES TO RS.414,34,10,591/ - WHICH IS HELD AS ASSESSEES UNEXPLAINED INVESTMENTS U/S 69 OF THE IT ACT AND ADDED TO THE TOTAL INCOME. (2) THE DIFFERENCE OF SALES AND PURCHASES IS COMPUT ED AT RS.53,50,78,086/ - . THE SAME HAS BEEN COMPUTED AS PER DETAILS FURNISHED BY THE ASSESSEE AS PER THEIR LETTER DATED 29 - 01 - 02. THIS AMOUNT IS HELD AS UNDISCLOSED PROFITS OF THE ASSESSEE AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE FOR AY 99 - 2000. THE ABOVE SAID ADDITION OF RS.53.50 CRORES HAS BEEN CONFIRMED BY THE LD CIT(A) IN THE ORIGINAL ROUND. IN THE SET ASIDE PROCEEDINGS ALSO BOTH THE AO AND LD TRIUMPH SECURITIES LTD. 21 CIT(A) MADE THE VERY SAME ADDITION. FOR THE SAKE OF CONVENIENCE WE EXTRACT BELOW THE WORKINGS FURNI SHED BY THE ASSESSEE BEFORE THE AO. TRIUMPH SECURITIES LTD. 22 TRIUMPH SECURITIES LTD. 23 TRIUMPH SECURITIES LTD. 24 TRIUMPH SECURITIES LTD. 25 TRIUMPH SECURITIES LTD. 26 TRIUMPH SECURITIES LTD. 27 36. A CAREFUL ANALYSIS OF THIS STATEMENT WOULD REVEAL THAT THIS STATEMENT DOES NOT REVEAL PROFIT/LOSS FROM THE TRANSACTIONS. IT ONLY LISTS OUT THE TRANSACTIONS FOR WHICH CONFIRMATION FROM THE CONCERNE D CLIENTS IS AWAITED. THE UNCONFIRMED TRIUMPH SECURITIES LTD. 28 PURCHASES HAVE BEEN SHOWN AS LOSS AND UNCONFIRMED SALES HAVE BEEN SHOWN AS PROFITS. THUS, IT IS NOT A STATEMENT OF COMPUTATION OF PROFIT OR LOSS ARISING FROM TRADING IN SHARES. THUS THE VERY PRESUMPTION OF THE ASSESSI NG OFFICER THAT THE PROFIT HAS BEEN COMPUTED FROM PURCHASE AND SALE IS WRONG. SECONDLY, THE ASSESSING OFFICER HAS CONVENIENTLY ADDED THE PROFIT FIGURE OF RS.53.43 CRORES AND IGNORED THE LOSS FIGURE OF RS.103.48 CRORES. EVEN THOUGH THIS STATEMENT DOES NOT COMPUTE THE PROFIT/LOSS FROM TRADING OF SHARES, YET THE NET RESULT OF THE COMPUTATION RESULTS IN LOSS OF ABOUT RS.50.00 CRORES ONLY AND AS PER THE AOS PRESUMPTION NOTHING IS REQUIRED TO BE ADDED. THIRDLY, WE HAVE NOTICED EARLIER THAT THE ASSESSEE HAS OBTAINED AND FURNISHED CONFIRMATION LETTERS FROM MOST OF THE CLIENTS POST ORIGINAL ASSESSMENT PROCEEDINGS. IN THE EARLIER PARAGRAPHS, WHILE DISCUSSING THE ADDITION OF RS.414 CRORES MADE BY THE AO, WE HAVE DELETED THE ADDITIONS ON THE BASIS OF CONFIRMATIO N LETTERS OBTAINED FROM THE CONCERNED CLIENTS. ACCORDINGLY THE CONFIRMED TRANSACTIONS HAVE TO BE REMOVED FROM THE PRESENT LIST ALSO. FOR EXAMPLE, THE ASSESSEE HAS OBTAINED CONFIRMATION LETTER FROM ZE 101 ZENITH ENTERPRISES AND IT IS FINDING PLACE IN SER IAL NO.213 OF THE LIST EXTRACTED EARLIER. THE VERY SAME PARTYS NAME ALSO FINDS PLACE IN THE PRESENT LIST OF PROFIT/LOSS. THUS, THE TRANSACTIONS WHICH HAVE BEEN HELD BY US NOT BELONGING TO THE ASSESSEE ON THE BASIS OF CONFIRMATION LETTERS/ OTHER CIRCUMST ANTIAL EVIDENCES SHOULD BE REMOVED FROM THIS LIST. IF WE DO SO, WE SHALL BE LEFT WITH THE PARTIES AGAINST WHOM NO CONFIRMATION LETTERS/CIRCUMSTANTIAL EVIDENCES ARE AVAILABLE. THIS IS THE SAME AS LIST (E) PARTIES EXTRACTED EARLIER. THE UNCONFIRMED SALES OF DELIVERY BASED TRANSACTIONS WAS WORKED OUT AT RS.10,41,519/ - . IN OUR VIEW, THIS UNCONFIRMED SALE MAY BE TAKEN FOR CONSIDERING ADDITION. HOWEVER, SINCE THE SAME REPRESENTS SALE OF SHARES, WHICH COULD NOT BE MADE WITHOUT PURCHASE, ONLY THE PROFIT ELEM ENT EMBEDDED THEREIN COULD BE ASSESSED. IN THE ABSENCE OF DETAILS OF PURCHASES, IN OUR VIEW, THE PROFIT MAY BE ESTIMATED AT 30% OF THE SALES. ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY LD TRIUMPH SECURITIES LTD. 29 CIT(A) ON THIS ISSUE AND DIRECT THE AO TO SUSTAIN ADDITION TO TH E EXTENT OF 30% OF RS.10,41,519/ - . 37. THE NEXT ISSUE RELATES TO THE ADDITION RELATING TO U NRECONCILED TURNOVER. THE SPECIAL AUDITOR REPORTED THAT THE ASSESSEES TURNOVER AS PER BOOKS WAS CONSISTING OF PURCHASES OF SHARES OF RS.2221.94 CRORES AND SALE OF SHARES OF RS.1734.37 CRORES, BOTH AGGREGATING TO RS.3965.31 CRORES. (ORIGINALLY THE SPECIAL AUDITORS REPORTED THE AGGREGATE TURNOVER AS RS.3695.31 CRORES, BUT LATER CORRECTED THE SAME AS RS.3965.31 CRORES). HOWEVER, THE BSE REPORTED THE TURNOVER OF TH E ASSESSEE AS RS.4042.70 CRORES. THE SPECIAL AUDITOR FURTHER REPORTED THAT THE ASSESSEE IS IN THE PROCESS OF RECONCILING BOTH THE FIGURES. ACCORDINGLY, THE AO ASKED THE ASSESSEE TO FURNISH RECONCILIATION STATEMENT IN THE ORIGINAL ASSESSMENT PROCEEDINGS A ND ALSO PROPOSED TO ASSESS THE DIFFERENCE BETWEEN THE TURNOVER REPORTED IN THE BOOKS AND CONFIRMED BY BSE AS INCOME OF THE ASSESSEE. THE ASSESSEE EXPLAINED THAT THE DIFFERENCE MIGHT BE ON ACCOUNT OF FOLLOWING DIFFERENT ACCOUNTING SYSTEMS. THE AO WAS NOT CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE AND ACCORDINGLY ASSESSED THE DIFFERENCE OF RS.77.39 CRORES AS INCOME OF THE ASSESSEE. THE LD CIT(A) ALSO CONFIRMED THE SAME IN THE ORIGINAL ASSESSMENT PROCEEDINGS. IN THE SET ASIDE PROCEEDINGS ALSO, BOTH TH E AUTHORITIES CONFIRMED THE ADDITION. 38. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS WRITTEN A LETTER DATED 14.10.2002 TO BSE REQUESTING THEM TO SUPPLY TRADE DATA, WHICH WAS ASKED EARLIER IN AUGUST, 2002. HOWEVER THE BSE, VIDE ITS LETTER DATED 29 - 10 - 2002, REPLIED THAT IT HAS CALLED FOR THE DETAILS FROM THE CONCERNED DEPARTMENT AND WOULD SUPPLY THE SAME. THE LD A.R SUBMITTED THAT THE BSE DID NOT FURNISH THE DETAILS TILL THE DATE OF COMPLETION OF THE ASSESSMENT. SUBSEQUENTLY, THE ASSESSEE PURSUED THE MATTER DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE LD CIT(A) ALSO AND THE BSE WROTE A LETTER DATED 05 - 12 - 2003 DIRECTLY TO THE LD CIT(A) TRIUMPH SECURITIES LTD. 30 STATING THAT THE REQUEST OF THE ASSESSEE IS BEING PROCESSED AND A TURNOVER CERTIFICATE WILL BE ISSUED WITHIN NEXT EIGHT DAYS. THE LD A.R SUBMITTED THAT THE BSE ULTIMATELY DID NOT SUPPLY THE DETAILS AND HENCE THE ASSESSEE COULD NOT RECONCILE THE FIGURES. HE SUBMITTED THAT THE ASSESSEE STANDS BY THE TURNOVER REPORTED IN ITS BOOKS AND THE MISTAKE, IF ANY, WOULD HAVE OC CURRED AT THE END OF BSE ONLY. HE SUBMITTED THAT THE FINANCIAL LEDGER ACCOUNT BETWEEN THE ASSESSEE AND BSE HAS BEEN TALLIED, I.E., THERE IS NO DIFFERENCE IN THE FINANCIAL LEDGER BALANCE, WHICH INDIRECTLY CONFIRMS THAT THE TURNOVER REPORTED BY THE ASSESSEE IN THE BOOKS IS CORRECT. HE INVITED OUR ATTENTION TO PAGE 124 - 125 OF THE PAPER BOOK AND SUBMITTED THAT THE BSE HAS SHOWN A CREDIT BALANCE OF RS.23,147.86 AS ON 31 - 03 - 1999 IN ASSESSEES ACCOUNT. HE THEN INVITED OUR ATTENTION TO PAGE 135 OF PAPER BOOK AND SUBMITTED THAT VERY SAME BALANCE IS SHOWN IN THE ASSESSEES BOOK ALSO AS ON 27 - 03 - 1999. HE SUBMITTED THAT THE TRADING TRANSACTION ENTERED BETWEEN 27 - 03 - 1999 TO 31.03 - 1999 WILL FALL IN THE NEXT SETTLEMENT PERIOD AND ACCORDINGLY ACCOUNTED IN NEXT YEAR . AC CORDINGLY HE SUBMITTED THAT THE FINANCIAL LEDGER BALANCE WOULD NOT HAVE TALLIED, HAD THERE BEEN ANY DIFFERENCE IN THE TRADING TRANSACTIONS. 39. THE LD D.R, ON THE CONTRARY, PLACED HEAVY RELIANCE ON THE ORDER PASSED BY LD CIT(A). HE SUBMITTED THA T THE ASSESSEE HAS NOT ULTIMATELY RECONCILED THE DIFFERENCE AND HENCE THE ADDITION WAS MADE. 40. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. WE NOTICE THAT THE DOCUMENT, WHICH WAS RELIED UPON BY THE SPECIAL AUDITOR TO STATE THAT THERE IS A DIFFERENCE IN TURNOVER WAS NOT PRODUCED BEFORE US. THE AO HAS MADE THE IMPUGNED ADDITION ON THE BASIS OF CERTIFICATE ISSUED BY THE BSE. IT IS NOT THE CASE OF THE SPECIAL AUDITOR OR THE AO THAT THE DIFFERENCE HAS BEEN NOTICED FROM THE LEDGER ACCOUNT COP IES. THE LEDGER ACCOUNT COPIES ARE ORIGINAL BOOKS AND IF THE DIFFERENCE WAS NOTICED THERE FROM, THEN THE SAME WOULD CALL FOR FURTHER TRIUMPH SECURITIES LTD. 31 INVESTIGATION. WE NOTICE THAT THE BSE, DESPITE REPEATED REQUESTS FROM THE ASSESSEE, DID NOT FURNISH TRADE DATA. IN TH E ABSENCE OF CERTIFIED TRADE DATA SUPPLIED BY BSE, IN OUR VIEW, MERE RELIANCE ON THE CERTIFICATE ISSUED BY BSE MAY NOT BE SUFFICIENT WHEN THE ASSESSEE DISPUTES THE VERACITY OF THE SAID CERTIFICATE. THE VERY FACT THAT THE BSE WAS RELUCTANT TO SUPPLY TRADE DATA MAY SHO W THAT THERE MAY BE SOMETHING FISHY IN THE CERTIFICATE ISSUED BY THEM. 41. THE TRADING TRANSACTIONS ARE ULTIMATELY RECORDED IN MONEY TERMS IN THE FINANCIAL LEDGER. THE ASSESSEE HAS DEMONSTRATED THAT THERE IS NO DIFFERENCE IN THE CLOSING BA LANCE OF FINANCIAL LEDGER. HAD THERE BEEN ANY DIFFERENCE IN TRADING TRANSACTIONS, THE SAME WOULD HAVE REFLECTED IN THE FINANCIAL LEDGER ALSO AND BANK LEDGER ALSO. HENCE, IN OUR VIEW, THE FINANCIAL LEDGER INDIRECTLY CONFIRMS THAT THERE COULD NOT BE ANY DI FFERENCE IN TRADING TRANSACTIONS. 42. THE AGGREGATE TRANSACTIONS CONSIST OF PURCHASE TRANSACTIONS AS WELL AS SALES TRANSACTIONS. IT IS NOT CLEAR AS TO WHETHER THE ALLEGED DIFFERENCE IN TURNOVER WAS ON ACCOUNT OF PURCHASE TRANSACTION OR SALES TRANSACT ION OR ON ACCOUNT OF BOTH. THE OMISSION, IF ANY, OF PURCHASE AND SALE TRANSACTIONS WOULD HAVE DIFFERENT TAX IMPLICATIONS. FURTHER THE OMISSION, IF ANY, IS RELATED TO THE ASSESSEES OWN TRANSACTIONS OR CLIENTS TRANSACTIONS IS ALSO NOT KNOWN AND BOTH HAVE DIFFERENT TAX IMPLICATIONS. 43. IN VIEW OF THE FOREGOING DISCUSSIONS, WE ARE OF THE VIEW THAT THE AO HAS MADE THIS ADDITION ONLY ON SURMISES AND CONJECTURES WITHOUT ESTABLISHING THAT THE SAME HAS RESULTED IN SUPPRESSION OF INCOME OF THE ASSESSEE. ACC ORDINGLY WE HAVE NO OTHER OPTION BUT TO DELETE THIS ADDITION. TRIUMPH SECURITIES LTD. 32 44. THE ASSESSEE HAS ALSO CONTENDED THAT THE AO HAS ERRED IN CHARGING INTEREST U/S 234B AND 234C OF THE ACT. CHARGING OF INTEREST IS CONSEQUENTIAL IN NATURE AND HENCE THE SAME IS RESTORED T O THE FILE OF THE AO. 45. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE TREATED AS PARTLY ALLOWED. ORDER HAS BE E N PRONOUNCED IN THE COURT ON 5 .7 .201 7. SD/ - SD/ - (SANDEEP GOSAIN ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 5 / 7 / 20 1 7 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER , //TRUE COPY// ( DY./ASSTT. REGISTRAR) PS ITAT, MUMBAI