CHAMPABEN K PATEL, NAVI MUMBAI V. ACIT CEN CIR 13, MUMBAI

ITA 4817/MUM/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8798 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 05-01-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 20-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJIV DUTT
• Assessee Lawyers: SANJAY R PARIKH
• Keywords: Unexplained expenditure; Income from undisclosed sources; Search and seizure; Cost of acquisition; Revised return
• Section: 69C; 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, MUMBAI BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 4817/MUM/2009 (ASSESSMENT YEAR: 2005-06) SMT. CHAMPABEN K. PATEL ACIT, CENTRAL CIRCLE 13 A-2202, SAI PRIDE COOP HSG STY. 11TH FLOOR, OLD CGO BUILDING PLOT NO. 5, SECTOR 18 VS. M.K. ROD, MUMBAI 400020 SANPADA, NAVI MUMBAI 400705 PAN - AERPP 9645 P APPELLANT RESPONDENT APPELLANT BY: SHRI SANJAY R. PARIKH RESPONDENT BY: SHRI SANJIV DUTT O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A), CENTRAL VII, MUMBAI DATED 30.03.2009. ASSESSEE HAS RAISED T HE FOLLOWING THREE GROUNDS: - 1. THE C.I.T. (APPEALS) ERRED IN LAW AND FACTS IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING THE AMOUNT OF RS.2,68,165/-, BEING COST OF SHARES PURCHASED ON WH ICH CAPITAL GAINS HAD ARISING, ONLY ON THE GROUND THAT CAPITAL GAINS WAS OFFERED TO TAX AS INCOME FROM OTHER SOURCES AS PER STATEMENT MADE DURING THE COURSE OF SEARCH, IGNORING THE FACT THAT THE SAID COST WAS DULY EXPLAINED AND ACCEPTED AS PER THE STATEMEN T OF ACCOUNTS FILED ALONG WITH RETURN OF INCOME FOR A.Y. 2004-05 AND NO ADVERSE INFERENCE WAS DRAWN ABOUT THE SAME DURING T HE COURSE OF ASSESSMENT PROCEEDINGS PERTAINING TO THE YEAR IN WH ICH THE SAID SHARES WERE ACTUALLY ACQUIRED. 2.(A) THE C.I.T. (APPEALS) ERRED IN LAW AND FACTS I N CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN ADDING RS.1,39,251/- AS UNEXPLAINED MONEYS IN POSSESSION OF THE ASSESSEE, ATTRIBUTABLE TO REMUNERATION, ETC. PAID AT AN ESTIMATED RATE OF 5% OF GROSS SALES PROCEEDS OF RS.27,85,010/- TOWARDS ALLEGEDLY PURCHA SING BOGUS LONG TERM CAPITAL GAINS. (B) THE C.I.T. (APPEALS) ERRED IN LAW AND FACTS I N TREATING THE SAID ADDITION OF RS.1,39,251/-, MADE BY THE LEARNED ASSE SSING OFFICER AS UNEXPLAINED MONEYS, AS UNEXPLAINED EXPENDITURE U /S. 69C ITA NO. 4817/MUM/2009 SMT. CHAMPABEN K. PATEL 2 AND MODIFYING THE ASSESSMENT ORDER TO THAT EXTENT, WITHOUT APPRECIATING THAT THE APPELLANT WAS NOT FOUND TO HA VE INCURRED ANY SUCH EXPENDITURE AND THE ADDITION WAS MADE PURE LY ON THE BASIS OF CONJECTURES AND SURMISES BASED ON INFORMAT ION IN SOME OTHER CASES NOT RELATED TO THE APPELLANT AND WITHOU T AFFORDING ANY OPPORTUNITY TO THE APPELLANT TO REFUTE OR REBUT THE SAME. 3. THE APPELLANT PRAYS THAT (I) THE DISALLOWANCE OF RS.2,68,165/- BEING COST O F PURCHASE OF SHARES BE DELETED; (II) THE ADDITION OF RS.1,39,251/- MADE AS UNEXPLA INED EXPENDITURE BE DELETED AND (III) SUCH OTHER RELIEF, AS MAY BE DEEMED FIT IN T HE MATTER BY YOUR HONOURS, BE GRANTED. 2. AS SEEN FROM THE ABOVE THERE ARE TWO ISSUES FOR CON SIDERATION: (I) WHETHER THE ASSESSEE IS ENTITLED TO CLAIM COST OF S HARES WHICH IS NOT ALLOWED BY THE A.O.; AND (II) THAT THE ADDITION MADE AT 5% OF THE GROSS SALE PROCEEDS TOWARDS ALLEGEDLY PURCHASING BOGUS LONG TERM CAPITA L GAINS WAS TAXABLE IN THE HANDS OF THE ASSESSEE. 3. BRIEFLY STATED THERE WERE SEARCH AND SEIZURE OPERAT IONS IN THE FAMILY OF SHRI HARESH N. PATEL ON 10.01.2007. DURING THE SEAR CH PROCEEDINGS SHRI HARESH N. PATEL, ON BEHALF OF THE FAMILY DECLARED T HAT THE CAPITAL GAINS OBTAINED IN ASSESSMENT YEAR 2005-06, 2006-07 AND 20 07-08 ON SALE OF SHARES AND CONSEQUENT DECLARATION AS LONG TERM CAPI TAL COULD NOT BE PROVED AND ACCORDINGLY OFFERED TO TAX BY DECLARING THE AMO UNTS SHOWN AS CAPITAL GAINS IN RESPECTIVE HANDS. THE DETAILS OF THE RESPE CTIVE AMOUNTS ARE AS UNDER: - SL. NO. NAME NAME OF SCRIP A.Y. AMOUNT OF L.T.C.G. NO. OF SHARES 1 HARESH PATEL IFSL 2006-07 3364457 14400 2 - DO - - DO - 2007-08 582867 35600 3 KEJAL H. PATEL - DO - 2005-06 1196917 10000 4 KISHORE N. PATEL - DO - - DO - 7737544 40000 5 CHAMPABAI K. PATEL - DO - - DO - 2516844 20000 6 JETHABAI D. PATEL - DO - 2006-07 2431917 10000 7 KARSAN RS. PATEL - DO - 2005-06 1329897 10000 TOTAL 19160443 ITA NO. 4817/MUM/2009 SMT. CHAMPABEN K. PATEL 3 4. THE ASSESSEE, SMT. CHAMPABAI K. PATEL ACCORDINGLY F ILED RETURN OF INCOME UNDER SECTION 153A DECLARING LONG TERM CAPIT AL GAINS ORIGINALLY CLAIMED, AS UNDISCLOSED INCOME. IN COMPLETING THE A SSESSMENT, HOWEVER, THE A.O. HELD THAT THE ASSESSEE SHOULD HAVE OFFERED THE ENTIRE SALE PROCEEDINGS AS INCOME AND NOT LONG TERM CAPITAL GAINS ALONE AND ACCORDINGLY HE MADE AN ADDITION OF ` 2,68,165/- BEING THE DIFFERENCE BETWEEN THE SALE PR OCEEDS AND THE LONG TERM CAPITAL GAINS, REPRESENTED BY COST OF PURCHASE CLAIMED BY THE ASSESSEE. IN ADDITION TO THE ABOVE AMOUNT THE A.O. ALSO OF THE VIEW THAT GENERALLY AMOUNT OF 5% WAS PAID FOR ARRANGING BOGUS TRANSACTIONS AND ACCORDINGLY AN AMOUNT OF ` 1,39,251/- WAS BROUGHT TO TAX AS UNEXPLAINED EXPENDITURE AT 5% OF THE GROSS VALUE OF SALE PROCEE DS. THE CIT(A) CONFIRMED THE SAME, HENCE ASSESSEE IS IN APPEAL. 5. DRAWING OUR ATTENTION TO THE ASSESSMENT ORDER AND T HE STATEMENT GIVEN BY SHRI HARESH N. PATEL AND THE RETURNS FILED IN A.Y. 2004-05 ORIGINALLY AND THE RETURN FILED UNDER SECTION 153A, THE LEARNE D COUNSEL SUBMITTED THAT THE ASSESSEE HAS PURCHASED THE SHARES AT THE COST O F ` 2,68,165/- AND THIS AMOUNT WAS SHOWN IN THE BALANCE SHEET AS ON 31.03.2 004 AND THE RETURN FOR A.Y. 2004-05 WAS FILED ON 25.10.2004. THE ASSES SEE ALSO FILED RETURN FOR 2005-06 CLAIMING LONG TERM CAPITAL GAINS BY THE RET URN DATED 31.08.2005 AND FILED REVISED RETURN UNDER SECTION 153A CONSEQU ENT TO THE ADMISSION IN THE SEARCH PROCEEDINGS DECLARING TOTAL INCOME AT ` 26,64,250/- WHICH INTER ALIA INCLUDED THE CAPITAL GAINS SO CLAIMED OF ` 25,16,845/-. THE LEARNED COUNSEL SUBMITTED THAT IN THE COURSE OF SEARCH PROC EEDINGS NO INCRIMINATING MATERIAL WAS AVAILABLE BUT SHRI HARESH N. PATEL, IN THE COURSE OF SEARCH AND SUBSEQUENTLY IN MARCH 2007 HAS ADMITTED THAT THE GR OUP HAS CLAIMED CAPITAL GAINS WHICH COULD NOT BE JUSTIFIED AT THAT POINT OF TIME AND ACCORDINGLY OFFERED TO ADMIT ONLY LONG TERM CAPITAL GAINS BUT NOT THE GROSS SALE PROCEEDS. IT WAS HIS SUBMISSION THAT ASSESSEE HAS ORIGINALLY PURCHASED THE SHARES AND CLAIMED LONG TERM CAPITAL GAINS AFTE R SALE AND THESE ASPECTS HAVE NOT BEEN QUESTIONED BY THE A.O. AND REFERRED T O THE ORDER UNDER SECTION 153A FOR A.Y. 2004-05 IN WHICH THE SAID PUR CHASE WAS ADMITTED AND ACCEPTED EVEN IN THE PROCEEDINGS UNDER SECTION 153A . IT WAS HIS SUBMISSION THAT EVENTHOUGH LONG TERM CAPITAL GAINS CAN BE PROV ED BEFORE THE A.O. AT THE ITA NO. 4817/MUM/2009 SMT. CHAMPABEN K. PATEL 4 TIME OF SEARCH IN ORDER TO AVOID LITIGATION AND SAV E TIME AND ENERGY AND TO SETTLE MATTERS ASSESSEE HAS OFFERED THE INCOME BUT THERE IS NOTHING ON RECORD TO PROVE THAT CLAIMS OF THE ASSESSEE ARE NOT GENUINE. HE SUBMITTED THAT THE CIT(A) WHILE ACCEPTING THAT ASSESSEE HAS C LAIMED LONG TERM CAPITAL GAINS IN THE ORIGINAL RETURN CONFIRMED IT ON THE PR ETEXT THAT THE TRANSACTION WAS BOGUS WHICH WAS NOT THE BASIS FOR ADMISSION OF THE AMOUNT. HE REFERRED TO THE ORDER OF THE CIT(A)( PARA 5.3). IT WAS HIS S UBMISSION THAT THE ASSESSEE HAD OFFERED ONLY LONG TERM CAPITAL GAINS AND THIS S HOULD BE ONLY BROUGHT TO TAX AND NOT THE GROSS SALE PROCEEDS. FURTHER IT WAS ALSO HIS SUBMISSION THAT THE ASSESSEE HAS DISCLOSED HER PURCHASES IN THE BOO KS OF ACCOUNT AND THE PURCHASES CANNOT BE DISALLOWED SINCE THIS WAS AN AC COUNTED PURCHASE. ACCORDINGLY HIS SUBMISSION WAS THAT THE ASSESSEE WA S ENTITLED TO GET THE BENEFIT OF PURCHASE OF SHARES AND ONLY LONG TERM CA PITAL GAINS OFFERED SHOULD HAVE BEEN BROUGHT TO TAX. WITH REFERENCE TO THE OTH ER ISSUE OF ADDITION AS UNEXPLAINED EXPENDITURE HE FILED THE COORDINATE BEN CH DECISION IN THE GROUP CASE OF SHRI JETHALAL D. PATEL IN ITA NO. 401 4/MUM/2009 DATED 11 TH JUNE 2010 WHEREIN THIS ISSUE WAS CONSIDERED AND ADD ITION WAS DELETED. . SHRI JETHALAL D. PATEL IS ALSO A FAMILY MEMBER OF H ARESH N. PATEL FAMILY. HE PLEADED THAT THE ADDITION DESERVES TO BE DELETED. 6. THE LEARNED D.R., IN REPLY, SUBMITTED THAT THE ASSE SSEE ADMITTED THAT THE TRANSACTIONS WAS NOT GENUINE AND IN THAT EVENT THE ENTIRE SALE PROCEEDS RECEIVED BY THE ASSESSEE WAS BY WAY OF UNACCOUNTED INCOME AND THIS AMOUNT WAS CORRECTLY BROUGHT TO TAX SINCE THE TRANS ACTION IS NOT A GENUINE TRANSACTION. WITH REFERENCE TO THE ADDITION OF ` 139,251/- HE RELIED ON THE ORDERS OF THE A.O. AND CIT(A). 7. WE HAVE CONSIDERED THE ISSUE. AS SEEN FROM THE STAT EMENTS GIVEN BY SHRI HARESH N. PATEL THE ADMISSION OF LONG TERM CAP ITAL GAINS IS AS UNDER: - Q.15 DURING THE A.Y. 2005-06, YOUR WIFE SMT. KEJAL PATEL HAS PROFIT ON SALE OF SHARES OF RS.11,96,917/-, AND FOR THE A. Y. 2006-07, YOU HAVE RECEIVED CAPITAL GAINS OF RS.33,64,457/- ON TH E SALE OF THE SHARES OF INTERLINK FINANCIAL SERVICES WHICH WERE REQUIRED IN THE YEAR 17.12.03. PLEASE PROVIDE THE COPIES OF BROKERS NOTE S AND DETAILS OF PERSON FROM WHOM YOU HAVE PURCHASED THE SHARES OF I NTERLINK FINANCIAL SERVICE AND TO WHOM YOU HAVE SOLD THESE S HARES ITA NO. 4817/MUM/2009 SMT. CHAMPABEN K. PATEL 5 ANS 15: RIGHT NOW, I DO NOT HAVE ALL THESE DETAILS BUT THESE TRANSACTIONS WERE CARRIED OUT THROUGH ONE MR. MIRAN I WHO IS A CHARTERED ACCOUNTANT AND HAVING OFFICE AT NAVJIVAN SOCIETY, LAMINGTON ROAD. Q.16 PLEASE PROVIDE THE EXACT NAME & COMPLETE ADDRE SS OF MR. MIRANI? ANS 16: I SHALL PROVIDE THESE DETAILS LATER ON. FURTHER TO THIS, A STATEMENT WAS RECORDED OF SHRI H ARESH PATEL, MOTHER OF THE ASSESSEE, ON 9-3-2007 AT A-1202, 12 TH FLOOR, PRESIDENT PARK, SECTOR -29, NAVI MUMBAI DURING THE COURSE OF SEARCH & SEIZURE (P.O. OPERATIONS), BY INVESTIGATION AUTHORITIES, AN D THE RELEVANT EXTRACT THEREOF IS REPRODUCED HERE BELOW: - Q.1 PLEASE IDENTIFY YOURSELF AND CONFIRM THAT THE O ATH HAS BEEN ADMINISTERED ON YOU AND YOU HAVE BEEN MADE AWARE AB OUT THE CONSEQUENCES OF GIVING FALSE STATEMENTS ON OATH. ANS 1: I AM SHRI HARESH N. AGED 37 YEARS SON OF SHR I NANJI SHIVJI PATEL, RESIDING AT A-1202, PRESIDENT PATH, SECTOR -29, NAV I MUMBAI. I CONFIRM THAT THE OATH HAS BEEN STATEMENT ON OATH. Q.2 PLEASE STATE THE AMOUNT OF CAPITAL GAIN ON ACCO UNT OF SHARES SHOWN BY YOU AND YOUR FAMILY MEMBERS AND SUBMIT YOU R EXPLANATION IN THIS REGARD. ANS2: MYSELF, MY WIFE KEJAL H. PATEL, MY BROTHER KI SHORE N. PATEL, HIS WIFE CHAMPABEN PATEL, BY BROTHER IN LAW SHRI JETHAL ALBHAI D. PATEL AND MY PARTNER IN CERAMICS SHRI KERSHAN RS. PATEL HAVE SHOWN CAPITAL GAINS ON ACCOUNT OF TRANSACTIONS IN SHARES OF RS.1.91 CRORES. WE CONSIDER THAT THE SAID TRANSACTIONS ARE GENUINE. HO WEVER, WE DO NOT HAVE THE NECESSARY EVIDENCE AND DETAILS TO SUBSTANT IATE YOUR CLAIM. IN ORDER TO BUY PEACE OF MIND AND AVOID PENAL CONSEQUE NCES AND LONG TERM LITIGATION WE ARE WILLING TO DECLARE THE SAID CAPITAL GAINS SHOWN, AS INCOME FROM OTHER SOURCES IN THE RESPECTIVE A.YS AND PAY TAXES ACCORDINGLY. I REQUEST THE DEPARTMENT NOT TO INITIA TE PENAL AND PERSECUTION PROCEEDINGS AGAINST ME AND MY FAMILY ME MBERS, IN VIEW OF THE COOPERATION VOLUNTARILY OFFERED BY ME. AFTER EXTRACTING THE ABOVE STATEMENTS IN THE ORDER THE AO OPINED AS UNDER 9. THUS, THE ASSESSEE HIMSELF HAD ADMITTED THAT AL ONG WITH HIM OTHER MEMBERS OF THE GROUP AS DETAILED EARLIER IN H IS ORDER, HAD OBTAINED BOGUS LONG TERM CAPITAL GAINS AMOUNTING TO RS.1,91, 60,443/-. 8. AS CAN BE SEEN FROM THE EXTRACTS OF THE STATEMENTS IN ORDER TO BUY PEACE OF MIND AND PENAL CONSEQUENCES OF LONG TERM L ITIGATION, THEY DECLARED ITA NO. 4817/MUM/2009 SMT. CHAMPABEN K. PATEL 6 THE SAID CAPITAL GAIN SHOWN AS INCOME FROM OTHER SO URCES VIDE STATEMENT DATED 09.03.2007 EVENTHOUGH UNDER SECTION 132(4) ST ATEMENT ON 10.01.2007 THERE WAS NO DISCLOSURE AND ASSESSEE HAS PROMISED TO FURNISH THE DETAILS OF TRANSACTIONS AND IN FACT INCLUDED NA ME OF ONE SHRI MIRANI. THERE IS NOTHING ON RECORD TO SHOW THAT THE DEPARTM ENT HAS FOLLOWED UP THE ISSUE TO ITS LOGICAL CONCLUSION BY EXAMINING THE SA ID SHRI MIRANI OR PROVING THE PURCHASES/ SALES AS BOGUS. IT IS TRUE THAT ASSE SSEE AS PART OF THE DECLARATION GIVEN BY THE FAMILY MEMBER FILED THE RE TURN DECLARING THE CAPITAL GAINS ALONE AS INCOME FROM OTHER SOURCES. IF THE DE PARTMENT HAS TO PROVE THE TRANSACTION AS BOGUS THEN THEY SHOULD VERIFY TH E PURCHASES, SALES EXPENSES ETC BY A SUSTAINED INVESTIGATION. NOTHING HAS BEEN DONE IN THIS CASE EXCEPT DISALLOWING THE COST OF PURCHASE AND BR INGING IT TO TAX AS THE ASSESSEE ADMITTED THE LONG TERM CAPITAL GAINS AS IN COME UNDER OTHER SOURCES. THE CIT(A) ALSO, FURTHER ANALYSING THE STA TEMENT GIVEN, WAS OF THE OPINION THAT ASSESSEE HAS CONTRADICTED HERSELF. PAR A 5 OF THE CIT(A)S ORDER IS AS UNDER: - 5. ON CAREFUL CONSIDERATION OF THE FACTS AND THE C IRCUMSTANCES OF THE CASE, I DO NOT FIND ANY MERIT IN THE CONTENTIONS OF THE APPELLANT WHICH IN FACT, IS SELF-CONTRADICTORY, TO SAY THE LEAST. O N ONE HAD, THE APPELLANT CLAIMS THAT THE ENTIRE TRANSACTION WAS GENUINE AND ABOVE BOARD AS THE SAME WAS DULY REFLECTED IN THE RETURNS FILED FOR TH E RELEVANT YEARS, ON THE OTHER, THE SAME TRANSACTIONS HAVE BEEN ADMITTED TO BE UNDISCLOSED INCOME BEFORE THE AUTHORITIES ON MORE THAN ONE OCCA SION. SRI HARESH PATEL, ON BEHALF OF ALL THE FAMILY MEMBERS ETC IN T HE COURSE OF SEARCH HAD CATEGORICALLY ADMITTED THE SAID TRANSACTION AS UNDISCLOSED INCOME IN THE STATEMENT U/S 132(4) ON THE PLEA OF NON-AVAI LABILITY OF EVIDENCE AND ALSO IN ORDER TO CO-OPERATE WITH DEPARTMENT AND TO BUY PEACE AND ONCE AGAIN THE SAME HAS BEEN DISCLOSED IN THE RETUR N FILED IN RESPONSE TO NOTICE U/S 153A AS INCOME FROM OTHER SOURCES. IF AT ALL THE APPELLANT OR SRI HARESH PATEL WAS SO SURE OF THE GENUINENESS OF THE WHOLE TRANSACTION, THERE WAS NO NEED FOR SURRENDERING THE SAME AS UNDISCLOSED INCOME. IT MAY ALSO BE STATED HERE THAT THE APPELLANT, AT NO POINT OF TIME BEFORE FILING OF THE RETURN CHOSE TO RETRACT THE STATEMENT GIVEN U/S 132(4) AND EVEN TAXES WERE DULY PAID ON T HE SURRENDERED SUM. THUS, THE ENTIRE STORY OF A GENUINE TRANSACTIO N IS IRRELEVANT AT THIS POINT OF TIME IN THE LIGHT OF ABOVE FACTS AND THE A O WAS JUSTIFIED IN NOT RE-EXAMINING THE SAME IN THE LIGHT OF THE ARGUMENTS PLACED BEFORE HIM DURING ASSESSMENT PROCEEDINGS. ITA NO. 4817/MUM/2009 SMT. CHAMPABEN K. PATEL 7 9. PARA 5.1 AND 5.2 ARE WITH REFERENCE TO VARIOUS JUDI CIAL PRINCIPLES ABOUT VOLUNTARY NATURE OF STATEMENT AND ITS EFFECTIVENESS , WHICH ARE NOT MATERIAL IN THE FACTS OF THE CASE AS ASSESSEE HAS ADMITTED L ONG TERM CAPITAL GAINS AND FILED RETURN FOR THE LONG TERM CAPITAL GAINS AS INC OME FROM OTHER SOURCES, CONSEQUENT TO THE ADMISSION. HOWEVER, THE ISSUE IS WHETHER THE AMOUNT THAT HAS TO BE BROUGHT TO TAX IS THE GROSS AMOUNT O F SALE PROCEEDS OR ONLY THE LONG TERM CAPITAL GAINS. THIS WAS DECIDED BY TH E CIT(A) IN PARA 5.3 AS UNDER: - 5.3 IN SO FAR AS THE GRIEVANCE REGARDING THE ADDIT ION MADE BY THE AO ON THE GROSS AMOUNT OF SO-CALLED CAPITAL GAINS I S CONCERNED, IT IS EVIDENT FROM THE ABOVE FACTS THAT THE APPELLANT HAS ALL ALONG ADMITTED SUCH GAINS TO THE UNDISCLOSED INCOME LIABLE TO ASSE SSED AS INCOME FROM OTHER SOURCES. AS SUCH, THERE IS ABSOLUTELY NO MERIT FOR TAXING THE NET AMOUNT AND THE BALANCE AMOUNT BE TREATED AS COST OF SUCH TRANSACTION. IT IS A PURE AND SIMPLER CASE OF MONEY LAUNDERING EXERCISE GOING INTO VAIN AS A CONSEQUENCE OF SEARCH OPERATION. THE APPELLANT HAD MADE A CASH PAYMENT EQUIVALENT TO THE GROSS AMOUNT AND IN TURN RECEIVED THE AMOUNT IN THE FORM OF CHEQ UE. THEREFORE, WHAT IS TAXABLE AS UNDISCLOSED INCOME IS THE GROSS AMOUNT AND NOT THE NET AMOUNT, ONCE THE ENTIRE TRANSACTION IS FOUN D TO BE BOGUS AND ENGINEERED. THERE IS ABSOLUTELY NO QUESTION OF TAXI NG THE CAPITAL GAINS WHICH HAS BEEN ADMITTED TO BE NON-GENUINE EVEN BY T HE APPELLANT. ACCORDINGLY, THE ADDITION MADE ON THIS COUNT HAS SU FFICIENT JUSTIFICATION AND IS, THEREFORE, UPHELD . 10. WE ARE UNABLE TO SUBSCRIBE TO THE ABOVE OPINION AS THERE IS NOTHING ON RECORD THAT ASSESSEE HAS MADE CASH PAYMENT EQUIV ALENT TO THE GROSS AMOUNT AS ALLEGED BY THE CIT(A). MOREOVER ASSESSEE HAS FILED RETURN FOR EARLIER YEAR ADMITTING THE PURCHASE OF SHARES MUCH BEFORE THE SEARCH ACTION AND THE A.O. ACCEPTED THE RETURN FILED UNDER SECTIO N 153A ALSO FOR A.Y. 2004-05 WITHOUT DISTURBING THE PURCHASE OF SHARES. IN CASE IT IS THE ALLEGATION THAT ASSESSEE HAS PURCHASED SHARES FROM UNDISCLOSED INCOME THE SAME SHOULD HAVE BEEN BROUGHT TO TAX IN A.Y. 2004-0 5 AS THE PURCHASE OF SHARES WAS SUPPOSED TO HAVE BEEN TAKEN PLACE IN THA T YEAR. THE A.O. HAS ACCEPTED THE NIL RETURN FILED FOR THAT ASSESSMENT Y EAR WITHOUT CONSIDERING THE PURCHASE OF SHARES IN THAT YEAR AS OUTSIDE THE BOOKS OF ACCOUNT. SINCE THE INCOME DISCLOSED BY THE ASSESSEE WAS ONLY LONG TERM CAPITAL GAINS AND THERE IS NO OTHER EVIDENCE BROUGHT ON RECORD BY THE A.O. ABOUT THE NON- ITA NO. 4817/MUM/2009 SMT. CHAMPABEN K. PATEL 8 GENUINENESS OF THE PURCHASE OF SHARE OR SALE OF SHA RES (IN FACT NO INVESTIGATION WAS ON RECORD TO EXAMINE THIS ASPECT) THE ASSESSING OFFICERS ACTION IN DENYING THE BENEFIT OF PURCHASE CANNOT BE UPHELD. THE FAMILY MEMBERS OF ASSESSEE HAVE ADMITTED THE LONG TERM CAP ITAL GAINS OF VARIOUS FAMILY PERSONS NAMES IN RESPECTIVE ASSESSMENT YEARS AND HONOURED THE DISCLOSURE BY FILING RETURNS ACCORDINGLY. IN CASE T HE A.O. WANTS TO PROVE THAT THE TRANSACTION IS BOGUS THEN NECESSARY INVESTIGATI ONS CONDUCTED POST- SEARCH COULD HAVE BEEN PLACED ON RECORD SO AS TO UN DERSTAND WHETHER THE TRANSACTION IS REALLY A BOGUS ONE AS STATED BY THE A.O. IN PARA 9 OF A TRANSACTION OR NOT. WHATEVER MAY BE THE CONSIDERATI ONS, SRI HARESH PATEL HAS ADMITTED LONG TERM CAPITAL GAINS IN THE STATEME NT RECORDED ON 09.03.2007 AND ACCORDINGLY, ASSESSEE FILED THE LONG TERM CAPITAL GAINS AS UNDISCLOSED INCOME. IN VIEW OF THIS, WE ARE OF THE OPINION THAT THE ENTIRE SALE PROCEEDS CANNOT BE BROUGHT TO TAX AS UNDISCLOSED IN COME AND ASSESSEE IS ENTITLED TO CLAIM SET OFF OF THE PURCHASE COST. A.O . IS DIRECTED TO DELETE THE ADDITION OF ` 2,68,165/-. GROUND NO. 1 IS ALLOWED. 11. GROUND NO. 2 IS WITH REFERENCE TO CONSIDERING THE U NACCOUNTED EXPENDITURE FOR ARRANGING THE CAPITAL GAIN TRANSACT ION. THIS ISSUE WAS CONSIDERED BY THE COORDINATE BENCH VIDE ITA NO. 401 4/MUM/2009 DATED 11 TH JUNE 2010 WHEREIN, IN THE CASE OF SHRI JETHALAL D. PATEL, ANOTHER FAMILY MEMBER, THIS ISSUE OF 5% OF THE AMOUNT CONSIDERED A S COST INCURRED OUTSIDE THE BOOKS OF ACCOUNT, HAS BEEN EXAMINE AND HELD AS UNDER: - 5. WE HAVE HEARD THE LEARNED COUNSEL AND THE LEARN ED D.R. AND ALSO EXAMINED THE RECORD. THERE IS NO IOTA OF EVIDENCE I N THE COURSE OF SEARCH THAT THE ASSESSEE HAS PAID ANY AMOUNT TOWARD S BROKERAGE OR COMMISSION OR INCIDENTAL EXPENDITURE FOR EARNING TH E LONG TERM CAPITAL GAIN. IN THE COURSE OF SEARCH THE ASSESSEE HAS COME FORWARD AND OFFERED THAT THE LONG TERM CAPITAL GAIN REFLECTED B Y THE SALE IS IN FACT NOT GENUINE TRANSACTION AND ULTIMATELY OFFERED THE ENTI RE SALE PROCEEDS RECORDED AS INCOME, WITHOUT EVEN CLAIMING THE PURCH ASE COST WHICH RESULTED IN CAPITAL GAIN. NEITHER DURING THE STATEM ENT NOR DURING THE ENQUIRY THERE WAS ANY EVIDENCE OR ADMISSION WITH RE FERENCE TO PAYMENT OF 5% OF AMOUNT FOR THE SERVICES. THERE IS NO ENQUIRY WITH REFERENCE TO THE BROKERS ALSO. EVEN THOUGH THE CIT( A)S ORDER INDICATES THAT ONE M/S. G.R. PANDYA SHARE BROKING LTD. AND IT S DIRECTOR SHRI. NARENDRA SHAH HAS ADMITTED PROVIDING SUCH SERVICES AT 5%, IT IS NOT ON RECORD WHETHER THE SERVICES OF THE SAME PERSON WERE AVAILED. THE ITA NO. 4817/MUM/2009 SMT. CHAMPABEN K. PATEL 9 CIT(A) IN FACT ADMITS THAT THE NAMES OF SUCH PARTIE S HAVE NOT BEEN STATED IN THE ASSESSMENT ORDER BUT THIS IS ONLY A P RESUMPTION OF THE CIT(A) THAT SIMILAR AMOUNTS WOULD HAVE BEEN PAID WH ILE CONFIRMING THE AMOUNT. THERE IS NO EVIDENCE BEFORE THE A.O. AT THE TIME OF MAKING THE ADDITION. THE ADDITION CAN ONLY MADE ON EITHER ADMI SSION OR ON EVIDENCE WHICH IS NOT THE CASE HERE. SINCE THERE IS NEITHER ANY ADMISSION BY THE ASSESSEE NOR ADMISSION BY ANY BROK ER NOR THERE IS EVIDENCE DURING THE SEARCH, ADDITION OF 5% CANNOT B E MADE ON PRESUMPTIONS. IN VIEW OF THIS, ASSESSEES GROUNDS A RE ALLOWED AND A.O. IS DIRECTED TO DELETE THE ADDITION MADE. RESPECTFULLY FOLLOWING THE ABOVE, SINCE ADDITION IS MADE ON THE BASIS OF PRESUMPTIONS THE SAME CANNOT BE SUSTAINED. GROUND N O. 2 IS ALLOWED. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH JANUARY 2011. SD/- SD/- (D.K. AGARWAL) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 19 TH JANUARY 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A),CENTRAL VII, MUMBAI 4. THE CIT, CENTRAL IV, MUMBAI CITY 5. THE DR, C BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.