ACIT, UDAIPUR V. Smt. Sumitra Devi Gaur, RAJSAMAND

ITA 490/JODH/2009

• Counselvise Citation: 49023314 RSA 2009
• Duration Of Justice: 2 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 08-12-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 13-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G R KOKANI
• Keywords: Unexplained cash credit; Income from undisclosed sources; Share purchase agreement; Opportunity of being heard; Principle of natural justice; Capital Gains
• Section: 133(6); 205; 207; 131; 68

Judgement Text

1 ITA 490-09 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH JODHPUR. ( BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ) ITA NO. 490/JODH/2009 ASSTT. YEAR : 2006-07. THE ACIT, CIRCLE-2, VS. SMT. SUMITRA GAUR, PANCH RATNA UDAIPUR. COMPLEX, BHILWARA ROAD, KANKROLI (RAJSAMAND) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI G.R. KOKANI RESPONDENT BY : SHRI MAHENDRA GARGIEY A DATE OF HEARING : 08.12.2011. DATE OF PRONOUNCEMENT : 15.12.2011. ORDER DATED : 15/12/2011. PER R.K. GUPTA, J.M. THIS IS AN APPEAL BY DEPARTMENT AGAINST THE ORDER OF LD. CIT (A) RELATING TO ASSESSMENT YEAR 2006-07. 2. THE DEPARTMENT IS OBJECTING IN DELETING THE ADDI TION OF RS. 37,77,847/- MADE BY THE ASSESSING OFFICER UNDER SECTION 68 AND DELETING THE ADDITION OF RS. 1,88,890/- ON ACCOUNT OF ALLEGED COMMISSION PAID TO BROKER. 3. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT ASSESSEE HAS SHOWN LONG TERM CAPITAL GAIN FROM SALE OF SHARES AT RS. 37,77,847/-. THE DETAILS OF CAPITAL GAIN AND BRIEF FACTS OF THE CASE HAS BEEN D ISCUSSED AT PAGES 2 & 3 OF THE ORDER OF LD. CIT (A) ARE AS UNDER :- 2 IN THE ORDER THE AO HAS OBSERVED THAT THE ASSESSEE HAS SHOWN A LONG TERM CAPITAL GAIN FROM SALE OF SHARES AT RS.37,77,847/-. THE DETAILS ARE AS UNDER: PURCHASE NAME OF THE SHARES NAME OF THE BROKER PURCHASE QTY. TOTAL PUR. PRICE M/S. POONAM PHARMACEUTICALS LTD. V.K.SINGHANIA 5,300 35,616 M/S GAUTAM RESOURCES LTD. RENU PODDAR 1,200 24,324 M/S STAR LTCR BALLABH DAS DAGA 6,000 57,472 SALES NAME OF THE SHARES NAME OF THE BROKER SALE QTY. TOTAL SALE PRICE TOTAL PROFIT M/S. POONAM PHARMACEUTICALS LTD. M.BHIWANTIWALA & CO. 5,300 1,603,883 1,568,367 M/S GAUTAM RESOURCES LTD. AHILYA COMMERCIAL P. LTD. 1,200 119,777 95,453 M/S STAR LTCR - DO- 6,000 2,054,185 1,996,713 AS PER THE ABOVE DETAILS, THE ASSESSEE HAS PURCHASE D 6000 SHARES OF M/S STAR LTCR ON 19.01.2004, 5300 SHARE OF M/S. POONAM PHARMACEUTICALS LTD. AND 1200 SHARES OF M/S GAUTAM RESOURCES LTD. & 5300 @ 9.58, RS.6.72 AND RS.20.27 PER SHARE RESPECTIVELY WHILE T HEY WERE SHOWN TO HAVE BEEN SOLD BETWEEN THE PERIOD 80402005 AND 5.8. 2005 @ RS.342.36, RS.302.62 AND 99.81 RESPECTIVELY AGGREGATING TO RS. 36,60,435/-. THE TRANSACTIONS WERE MADE THROUGH BROKERS LOCATED AT C ALCUTTA. THE FACTS OF THE CASE ARE SIMILAR TO THE FACTS DISCUSSED IN THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2004-05 IN THE CASE OF THE ASSESSEE AND DISCUSSED IN THE APPELLATE ORDER DATED 21.01.2007 IN APPEAL NO.458/2 006-07 FOR ASSESSMENT YEAR 2004-05. THE ONLY CHANGE IN FACTS IS THAT THE APPELLANT PURCHASES THE SHARE OF M/S STAR LTCR ON 19.01.2004, 5,300 SHARES OF M/S. POONAM PHARMACEUTICALS LTD. AND 1200 SHARES OF M/S GAUTAM RESOURCES LTD. CONSIDERING THE FACT THAT THE COMPANY IS NOT VERY W ELL KNOWN AND SUCH 3 HUGE RISE IN THE PRICE IN SUCH SHORT SPAN OF TIME I S VERY UNLIKELY AND MORE SO KEEPING IN VIEW UNEARTHING OF RACKETS PROVIDING ENTRIES IN THE FORM OF LONG TERM CAPITAL GAIN THE ISSUE WAS INVESTIGATED I N DETAIL. THE AO ALSO RECORDED THE STATEMENT OF THE ASSESSEE. THE EXTRACT OF THE STATEMENT RECORDED ON OATH U/S 131 ALSO REPRODUCED IN THE ORD ER ON PAGE 3 & 4. FROM THE STATEMENT, THE AO CONCLUDED THAT (1) IN HIS S TATEMENT RECORDED U/S 131 ON 08.12.2008, THE ASSESSEE HAS BEEN DEALING IN SHARES FOR LAST 5 TO 6 YEARS. (II) THE SHARES IN RESPECT OF WHICH LTCG HAS BEEN SHOWN DURING THE YEAR UNDER CONSIDERATION HAVE BEEN SHOWN TO BE TRANSACTED THROUGH BROKER AT CALCUTTA, (III) THE ASSESSEE DID NOT RECE IVED ANY DIVIDEND NOR ANY ANNUAL REPORT DURING THE PERIOD OF MORE THAN ONE YE AR DURING WHICH THE ASSESSEE HAS SHOWN TO HAVE KEPT THE SHARES WITH HIM . (IV) THE LETTERS SEEKING INFORMATION U/S 133(6) SENT TO M/S BHIWANAI WALA AND COMPANY WERE RETURNED BACK AS UNSERVED BY THE POSTAL AUTHOR ITIES WITH REMARK THAT THE SAID ADDRESS ALWAYS REMAINS CLOSED. (V) THE COM PANY WHOSE SHARES HAVE BEEN TRADED BY THE ASSESSEE (POONAM CORPORATIO N LTD, ON PERUSAL OF THE LETTER HEAD, SOME DISCREPANCY FOUND. IN VIEW OF THE SIMILAR DISCUSSION AS MADE IN THE ASSESSMENT ORDER FOR PRECEDING ASSES SMENT YEARS, THE AO HELD THAT THE INCOME SHOWN AS LONG TERM CAPITAL GAI N WAS A SHAM TRANSACTION, IN REALITY THE ASSESSEE HAS NOT EARNED ANY LONG TERM CAPITAL GAIN. IT HAS BEEN USED TO BRING IN THE MONEY TO BUI LD UP CAPITAL B PAYING NO TAXED. THE SAME WAS LIABLE TO BE TAXED AS UNEXPLAIN ED CASH CREDIT U/S 68 OF THE ACT. THE AO, THEREFORE, ADDED A SUM OF RS.37,77 ,847/- U/S 68 OF THE ACT. 4. DETAILED SUBMISSIONS WERE FILED BEFORE LD. CIT ( A) AND IT WAS SUBMITTED THAT THE ASSESSEE HAS PURCHASES 1200 EQUITY SHARES OF M/S GA UTAM RESOURCES LTD., CALCUTTA THROUGH STOCK BROKER M/S RENU PODDAR, KOLKATTA, A M EMBER OF CALCUTTA STOCK EXCHANGE HAVING SEBI REGISTRATION NO.INB031066310 VIDE BROKE R NOTE NO. CL/23546D/0045(S) 4 DATED 26.03.2003 AT RS.24,324/-. THE PAYMENT WAS MA DE THROUGH ACCOUNT PAYEE DD NO.679060 DATED 09.04.2003 DRAWN AT SBBJ, CALCUTTA. THE ASSESSEE HAS PURCHASED 5300 SHARE OF M/S. POONAM PHARMACEUTICALS LTD. THROUGH S TOCK BROKER M/S V.K. SINGHANIYA & CO., KOLKATTA, A MEMBER OF CALCUTTA STOCK EXCHANGE HAVING SEBI REGISTRATION NO.INB030036312 VIDE BROKER NOTE NO. R030408 DATED 14.04.2003 (SETTLEMENT NO.2004309) AT RS.35,616/-.THE PAYMENT WAS MADE OUT OF CASH IN HAND AVAILABLE WITH THE ASSESSEE WHICH IS EVIDENT FROM THE CASH FLOW ST ATEMENT (ENCLOSED). THE ASSESSEE HAS PURCHASED 1200 SHARES OF M/S GAUTAM RESOURCES LTD. THROUGH STOCK BROKER M/S BALLABH DAS DAGA, KOLKATTA, A MEMBER OF CALCUTTA STOCK EXCH ANGE HAVING SEBI REGISTRATION NO.INB030492218 VIDE BROKER NOTE NO. 14 DATED 19.01 .2004 (SETTLEMENT NO.D- 2004500) AT RS.57,472/-. THE PAYMENT WAS MADE THROU GH ACCOUNT PAYEE DD NO.679060 DATED 09.04.2003 DRAWN AT SBBJ, CALCUTTA. THE ASSES SEE HAS RECEIVED CONSOLIDATED SHARE CERTIFICATES OF DISTINCTIVE NOS. FROM M/S. POONAM P HARMACEUTICALS LTD., CALCUTTA FOR 5300 SHARES AND M/S GAUTAM RESOURCES LTD., KOLKATTA FOR 1200 EQUITY SHARES AND M/S STAR LTCR OF 6000 SHARES, WHICH WERE DULY TRANSFERRED IN HER. THE ASSESSEE DEPOSITED SHARE CERTIFICATES INTO HIS D-MAT ACCOUNT NO.3020679-3147 1365 WITH ICICI BANK, UDAIPUR. THE COPIES OF SHARE CERTIFICATES ALONG WITH COVERIN G LETTER AND D-MAT ACCOUNT STATEMENT WERE FURNISHED TO THE AO DURING THE COURSE OF ASSES SMENT PROCEEDINGS. THE A/R ALSO SUBMITTED THE SHARE CERTIFICATE NO. REGISTERED FOLI O NO. DISTINCTIVE NOS AND NO. OF SHARES. THE ASSESSEE SOLD 5,300 EQUITY SHARES OF M/S. POONA M PHARMACEUTICALS LTD., CALCUTTA THROUGH STOCK BROKER M/S BHIWANAIWALA & CO., A MEMB ER OF CALCUTTA STOCK EXCHANGE HAVING SEBI REGISTRATION NO.INB030049211 VIDE BROKE R NOTE NO. 087, 89 ,90//050802, 4 & 5/33847 DATED 02.08.2005, 04.08.2005 & 05.08.20 05 SETTLEMENT NO.2006087, 89 & 5 90 FOR RS.16,03,883/-. THE ASSESSEE HAS SOLD 1200 S HARES OF M/S GAUTAM RESOURCES LTD. FOR A CONSIDERATION OF RS.1,19,777.76 THROUGH STOCK BROKER M/S AHILYA COMMERCIAL P. LTD., KOLKATTA, A MEMBER OF CALCUTTA STOCK EXCHANGE HAVING SEBI REGISTRATION NO.INB031093439 THROUGH BROKER NOTE NO.08 DATED 27. 05.2005 SETTLEMENT NO.D- 2006340. THE ASSESSEE HAS ALSO SOLD 1000 EQUITY SHA RES OF M/S STAR LTCR FOR RS.349150 THROUGH AHILYA COMMERCIAL P. LTD., KOLKATTA, A MEMB ER OF CALCUTTA STOCK EXCHANGE HAVING SEBI REGISTRATION NO.INB031093439 VIDE CONTR ACT NOTE NO.25 AND 16 DATED 08.04.2005/13.04.2005, SETTLEMENT NO.D-2006308/3111 DATED 08.04.2005/13.04.2005, AND SOLD 3000 SHARES THROUGH K.C.SOMNAI STOCK BROKI NG SERVICES P. LTD., KOLKATTA, A MEMBER OF CALCUTTA STOCK EXCHANGE HAVING SEBI REGIS TRATION NO.INB030757133, CONTRACT NO.1 DATED 08.04.2005, SETTLEMENT NO.D-200 6308 DATED 08.04.2005 FOR RS.10,47,450/-. THE RELEVANT BROKER NOTES AND CONTR ACT NOTES EVIDENCING THE SALE OF SHARES WERE PLACED BEFORE THE AO AND ALSO IN APPELLATE PRO CEEDINGS. THE SALE PROCEEDS WERE RECEIVED THROUGH A/C PAYEE CHEQUES AND DEPOSITED IN TO APPELLANTS BANK ACCOUNT. SIMILARLY THE DELIVERY OF SHARES ON SALE WAS EFFECT ED THROUGH DE-MAT ACCOUNT. 5. AS REGARDS THE CONTENTIONS OF THE AO OF THE SIG NIFICANT PRICE INCREASE OF SHARE IT IS SUBMITTED THAT THE PRICES OF SHARES ARE DETERMIN ED IN STOCK EXCHANGE AND DEPENDS ON MOOS AND SENTIMENTS OF CUSTOMERS. THE ASSESSEE HAS SOLD SHARES OF MANTA ON LINE LTD AS PER QUOTED PRICE OF STOCK EXCHANGE, THE COPY OF WHI CH HAS BEEN PLACED BEFORE THE AO AT THE TIME OF ASSESSMENT PROCEEDINGS AND THE SAME IS BEING FURNISHED HEREWITH FOR PERUSAL. THEREFORE, ANY SUSPICION OF THE AO AS REGARDS TO TH E PRICE FLUCTUATION IS BASELESS, AS REGARDS TO THE CONTENTION OF THE AO ABOUT THE PRICE S OF SHARES IN REFERENCE TO PERUSAL OF PROFIT AND LOSS ACCOUNT AND BALANCE SHEET OF THE CO MPANY DISCLOSED IN THE ANNUAL REPORT OF 6 THE COMPANY WITH MINUSCULE P & L IT IS STATED THAT PRICE OF THE SHARES DEPEND ON DEMAND AND SUPPLY CONCEPT AND BALANCE SHEET AND P&L ACCOUN T OF THE COMPANY IS NOT ONLY A CRITERIA. THE BUYER OF SHARES TAKES INTO CONSIDERAT ION VARIOUS FACTORS LIKE REPUTATION OF GROUP OF THE COMPANY, FUTURE SCOPE OF GROWTH OF THE COMPANY ETC. AS REGARDS THE PAYMENT MADE BY THE RELATIVE OF THE ASSESSEE AT KOL KATTA TO THE BROKER IN THREE INSTALLMENTS AGAINST PURCHASE CONSIDERATION IT IS S UBMITTED THAT IT WAS MADE TO HER AS PER HER CONVENIENCE. CASH PAYMENT MADE TO THE BROKER IN PEACE MEAL INSTEAD OF LUMP SUM DID NOT VITIATE THE SHARE OF TRANSACTION. AS REGARD S THE CONTENTION OF THE AO THAT BROKER COULD NOT BE TRACED OUT IT IS SUBMITTED THAT THE AD DRESS OF THE ALLEGED BROKER MIGHT HAVE CHANGED NOW AND, THEREFORE. HE COULD NOT BE TRACED AT THE GIVEN POINT OF TIME. OTHERWISE THE ALLEGED BROKER, AS FAR AS PRICE FLUCTUATION OF SHARES IS CONCERNED IT DEPENDS ON MARKET CONDITIONS. THE HONBLE PUNJAB AND HARYANA HIGH COU RT HELD IN THE CASE OF CHIRANJILAL STEEL ROLLING MILLS VS. CIT 84 ITR 222 THAT IT IS O PEN FOR AO TO COLLECT EVIDENCE FROM ANY SOURCE BUT IT IS HIS DUTY IT TO THE ASSESSEE BE FORE MAKING IT THE BASE OF HIS ASSESSMENT. 6. AS REGARDS INFERENCE OF THE AO ABOUT THE ENTIRE TRANSACTION BEING A SHAM TRANSACTION AND ACCOMMODATION ENTRY GIVEN BY THE BR OKER IN THE FROM OF SALE PROCEEDS OF SHARES IN LIEU OF CASH AND DISGUISED AS LONG TERM C APITAL GAIN BY THE ASSESSEE WHICH WAS BASED UPON PRESUMPTIONS LIKE PURCHASE TRANSACTION B EING BOGUS, UNUSUAL PRICE FLUCTUATION OF SHARES, COLLUSION BETWEEN THE BROKER AND THE COM PANY, IT IS SUBMITTED THAT THE INFERENCE DRAWN BY THE AO ARE BASED UPON WRONG PRES UMPTIONS AND NO EXISTENT FACTS AND HENCE PURE CONJECTURE AND SURMISE. THE CONCLUSION D RAWN ON THESE IMAGINARY AND NO EXISTENT ALLEGATIONS BY THE AO. AS AGAINST AOS CAS E BASED UPON WRONG PRESUMPTIONS AND NONEXISTENT FACTS AND HENCE PRESUMPTIONS ARE GR OSSLY ERRONEOUS. AND FAR FETCHED, THE 7 ASSESSEE PRODUCED ALL EVIDENCES WHICH WERE REQUIRED BY AO. THE AO FAILED TO BRING ANY MATERIAL ON RECORD EITHER TO REBUT THE EVIDENCES PR ODUCED BY THE ASSESSEE OR TO SUPPORT HIS CONCLUSIONS. IN SUPPORT OF THE SUBMISSIONS THE LD. A/R ALSO PLACED RELIANCE IN THE CASES OF CIT V/S DURGA PRASAD MORE 82 ITR 540 (SC), SUMAT I DAYAL V/S CIT 214 ITR 801 (SC), L.N.DALMIA V/S CIT 207 ITR 276 (CAL), CIT V/S SOPHIA FINANCE LTD 205 ITR 98 (DEL) AND MC DOWELL & CO. LTD V/S CIT 154 ITR 148 ( SC). 6.1. IN THIS RESPECT THE LD. A/R PLACED RELIANCE IN THE CASES OF (I) PULLONGODE RUBBER PRODUCE CO. P.LTD VS. STATE O F KERLA 91 ITR 18 (SC), (II) G.MURUGESA & BROS VS. CIT (1979) 83 ITR 432 (SC), ( III) CIT VS. BHANWAR LAL (1997) 225 ITR 870 (RAJ) AND (IV) JAGDISH CHANDRA GUPTA VS . ACIT (1996) 56 TTJ 337 (CHD.). 7. THE LD. A/R FURTHER STATED THAT THE APPELLANT H AS FURNISHED ALL EVIDENCES I.E. BROKER NOTE, CONTRACT NOTE, RELEVANT CASH FLOW STAT EMENT, BALANCE SHEET AS AT 31.03.2002, COPY OF SHARE CERTIFICATES ETC. WHICH WERE IN HIS P OSSESSION TO ESTABLISH THE GENUINENESS OF PURCHASE AND SALE TRANSACTION OF SHARES. THE SHA RES WERE LISTED IN CALCUTTA STOCK EXCHANGE AND WERE REGULARLY TRADED. THE TRANSACTION OF PURCHASE AND SALE OF SHARES WAS CARRIED OUT AT QUOTED PRICE OF STOCK EXCHANGE. THE IDENTITY OF BROKERS WERE BEYOND DOUBT AS THEY WERE REGISTERED BROKERS WITH SEBI. THE BROK ERS CONFIRMED THE ENTIRE TRANSACTION OF PURCHASE OF SHARES AND SALE THEREOF. THE SHARES RECEIVED IN PHYSICAL FORM WERE TRANSFERRED IN DE-MAT ACCOUNT OF THE APPELLANT WITH ICICI BANK, UDAIPUR. DELIVERIES OF SHARES WERE MADE FROM DE-MAT ACCOUNT OF THE APPELLA NT WHEN THESE WERE SOLD. THE FLUCTUATIONS IN THE MARKET RATES OF SHARES WERE A N ATURAL PHENOMENA, DEPENDS UPON MARKET CONDITIONS AND SENTIMENTS OF CUSTOMERS. IN T HE ABSENCE OF ANY EVIDENCE REGARDING 8 COLLUSION THE SUSPICION ABOUT MARKET RATE OF SHARES WERE WITHOUT ANY BASIS. THE AO HAS FAILED TO BRING ANY EVIDENCE TO SHOW THAT THE APPEL LANT HAS PAID UNACCOUNTED CASH TO THE BROKER IN ORDER TO RECEIVE SALE PROCEEDS OF SHARES BY CHEQUE. THERE IS NO COGENT MATERIAL OR EVIDENCE TO INDICATE THAT THE IMPUGNED SALE PROC EEDS OF SHARES REFLECTED UNACCOUNTED INCOME OF THE APPELLANT. 8. THE LD. A/R FURTHER CONTENDED THAT THE AO HAS N EITHER CONTROVERTED ANY MATERIAL EVIDENCE SUBMITTED BY THE APPELLANT NOR PROVED ANY ONE FAKE OR BOGUS. THE GENUINENESS OF SHARES THEREFORE, SHOULD NOT HAVE BEEN DENIED. R ATHER THE AO HAS GATHERED FEW IRRELEVANT INFORMATIONS AND UTILIZED ON THE BACK OF THE APPELLANT WITHOUT PROVIDING ANY OPPORTUNITY OF BEING HEARD TO THE APPELLANT SHOWS M UCH EAGERNESS OF THE AO TO TAX LONG TERM CAPITAL GAIN AS UNEXPLAINED CASH CREDIT. THE R EASON OF HOLDING ENTIRE LONG TERM CAPITAL GAIN TO BE TAXED AS UNEXPLAINED CASH CREDIT S U/S 68 OF THE ACT BY THE AO IS BASED ON HIS OWN ASSUMPTION, PRESUMPTIONS AND SUSPICION. THEREFORE, THE OPINION OF THE AO IGNORING ALL MATERIAL EVIDENCES IS BAD IN LAW, ARBI TRARY IN NATURE AND AGAINST NATURAL JUSTICE. IN THIS RESPECT THE LD. A/R PLACED RELIANC E IN THE CASE OF STATE OF KERALA VS. M.M. MATHEW IN WHICH IT HAS BEEN HELD THAT STRONG SUSPIC ION, STRANGE COINCIDENCES AND GRACE DOUBTS CANNOT TAKE THE PLACE OF LEGAL PROOF. IN VIE W OF THE ABOVE SUBMISSIONS, THE LD. A/R CONTENDED THAT THE AO WAS NOT JUSTIFIED IN REJE CTING THE CLAIM OF THE APPELLANT AND IN TAXING THE LONG TERM CAPITAL GAIN AS UNEXPLAINED CA SH CREDIT U/S 68 OF THE ACT. THE ACTION OF THE AO DESERVES DELETION. 9. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING T HE MATERIAL ON RECORD, THE LD. CIT (A) RECORDED HIS FINDING IN PARAS 9 TO 14 AT PAGES 8 TO 11 ARE AS UNDER :- 9 9. I HAVE CONSIDERED THE FACTS OF THE CASE AND SU BMISSION OF THE LD. A/R AND FOUND THAT SIMILAR ISSUE WAS DECIDED IN THE CASE OF THE APPELLANT FOR THE ASSESSMENT YEAR 2004-05 IN FAVOUR OF THE AP PELLANT VIDE APPELLATE ORDER DATED 21.02.2007 IN APPEAL NO.458/2006-07. TH E APPELLANT HAS SHOWN CAPITAL GAIN OF RS.37,77,847/- ON SALE OF SHA RES BETWEEN THE PERIOD 08.04.2005 TO 05.08.2005. THE PURCHASE AND SALE OF SHARES IS AS UNDER: PURCHASE NAME OF THE SHARES NAME OF THE BROKER PURCHASE QTY. TOTAL PUR. PRICE M/S. POONAM PHARMACEUTICALS LTD. V.K.SINGHANIA 5,300 35,616 M/S GAUTAM RESOURCES LTD. RENU PODDAR 1,200 24,324 M/S STAR LTCR BALLABH DAS DAGA 6,000 57,472 SALES NAME OF THE SHARES NAME OF THE BROKER SALE QTY. TOTAL SALE PRICE TOTAL PROFIT M/S. POONAM PHARMACEUTICALS LTD. M.BHIWANTIWALA & CO. 5,300 1,603,883 1,568,367 M/S GAUTAM RESOURCES LTD. AHILYA COMMERCIAL P. LTD. 1,200 119,777 95,453 M/S STAR LTCR - DO- 6,000 2,054,185 1,996,713 10. THE SHARES PURCHASED WERE OF M/S V.K.SINGHANIA. THE TRANSACTION WAS EFFECTED THROUGH A BROKER NAMELY M/ S M.BHIWANIWALA & CO. THE TRANSACTION OF PURCHASE AND SALE OF SHARES WERE EXECUTED AT PREVAILING MARKET RATE. THE IDENTITY OF BROKER WAS BEYOND DOUBT AS HE WAS A SEBI REGISTERED BROKER. THESE SHARES WERE ACQUIRE D IN PHYSICAL FORM AND THE APPELLANT RECEIVED CERTIFICATES BEARING SHARE C ERTIFICATES BARING SHARE CERTIFICATE NOS. AND DISTINCTIVE NOS OF SHARES MENT IONED ABOVE. PRIOR TO THEIR SALE, THESE SHARES WERE DEMATERIALIZED WITH S TOCK HOLDING CORPORATION OF INDIA LTD. THE DEMATERIALIZED SHARES WERE HELD IN APPELLANTS DE-MAT ACCOUNT WITH ICICI BANK, UDAIPUR . THE PAYMENT OF 10 PURCHASE CONSIDERATION WERE MADE IN CASH OUT OF AVA ILABLE CASH BALANCE WITH THE APPELLANT WHICH IS EVIDENT FROM THE CASH F LOW STATEMENT FURNISHED BEFORE ME AS WELL AS FURNISHED BEFORE THE AO ALSO. THESE SHARES WERE SOLD BY THE APPELLANT FOR A CONSIDERATION OF RS.37,77,84 7/- THROUGH STOCK BROKERS M/S M.BHIWANIWALA & CO. AND M/S ABHILYA COM MERCIAL P.LTD. KOLKATTA AND THE APPELLANT EARNED LONG TERM CAPITAL GAIN OF RS.36,60435/-. 11. THE APPELLANT FURNISHED ALL EVIDENCES I.E. BROK ER NOTE, CONTRACT NOTE RELEVANT EXTRACT OF CASH BOOK, BALANCE SHEET AS ON 31.03.2005 AND 31.03.2006, COPY OF SHARE CERTIFICATE ETC. WHICH W ERE IN HIS POSSESSION TO ESTABLISH GENUINENESS OF PURCHASE AND SALE OF SHARE S. THE AO FAILED TO BRING ANY EVIDENCE TO SHOW EITHER BACK DATING PURCH ASES OR COLLUSION BETWEEN THE BROKER AND THE COMPANY. THE AO ALSO FAI LED TO BRING ANY EVIDENCE TO SHOW THAT THE APPELLANT PAID UNACCOUNTE D CASH TO THE BROKERS IN ORDER TO RECEIVED SALE PROCEEDS OF SHARES BY CHE QUES. IN THE LIGHT OF THE ABOVE UNDISPUTED FACTS, THE FOLLOWING PRESUMPTIONS, ON THE BASIS OF WHICH THE AO CONCLUDED THAT THE ENTIRE TRANSACTION OF PUR CHASE AND SALE OF SHARES WAS A SHAM TRANSACTION AND AN ACCOMMODATION ENTRY G IVEN BY THE BROKER IN THE FORM OF SALE PROCEEDS OF SHARES IN LIE OF CA SH, HAVE TO BE CONSIDERED. THE AO FURTHER FAILED EITHER TO SHOW THAT A LARGE N UMBER OF DOCUMENTS LIKE BROKER NOTE, CONTRACT NOTE, RELEVANT EXTRACT O F CASH BOOK, COPY OF SHARE CERTIFICATES, DE-MAT STATEMENT ETC. FILED BY THE AP PELLANT WERE FALSE, FABRICATES OR FICTITIOUS OR TO REBUT APPELLANTS CL AIM REGARDING PURCHASE OF SHARES. RATHER THE BROKER CONFIRMED THE ENTIRE TRAN SACTION. THE RELIANCE PLACED BY THE AO ON FACTS LIKE NOTICE U/S 133(6) IS SUED TO THE COMPANY BEING RETURNED UNSERVED, DELAYED PAYMENT TO THE BRO KER, DISCREPANCIES IN THE NAME OF THE SELLER AS PER BROKER AND AS PER END ORSEMENT OF THE SHARE CERTIFICATE, CERTIFICATE FOR 5300, 1200 AND 6000 EQ UITY SHARES BEING RECEIVED FROM THE COMPANIES, DEMATERIALIZATION OF S HARES JUST BEFORE SALE ETC. WOULD ALTER AN AO AND AROUSE HIS SUSPICION FOR A DETAILED EXAMINATION AND VERIFICATION BUT THESE FACTS ALONE, IN THE ABSE NCE OF ANYTHING ELSE COULD 11 NOT NEGATE THE IMPUGNED TRANSACTION IN THE FACE OF OVERWHELMING EVIDENCES PRODUCED BY THE APPELLANT. MOREOVER, THE AO DID NOT CONFRONT THE APPELLANT ABOUT THE RESULT OF HIS ENQUIRY. THE RATIO OF THE JUDGMENT PF PUNJAB & HARIYANA HIGH COURT IN THE CASE OF CHIRANJ ILAL STEEL ROLLING MILLS VS. CIT 84 ITR 22 IS SQUARELY APPLICABLE TO T HE FACTS OF THE APPELLANTS CASE. THUS THE PRESUMPTION OF THE AO WA S WITHOUT ANY BASIS. 12. AS REGARDS THE PRESUMPTION OF THE AO THAT THE A PPELLANT PAID IN CASH IN LIEU OF ACCOMMODATION ENTRY GIVEN BY THE BROKER IN THE FORM OF SALE PROCEEDS OF SHARES, THE AO SQUARELY FAILED TO BRING ANY EVIDENCE ON RECORD TO SHOW THAT THE SALE TRANSACTION WAS FICTITIOUS AN D THE APPELLANT PAID CASH TO BROKER FOR OBTAINING CHEQUES IN THE FORM OF SALE PROCEEDS OF SHARES. WHILE THE APPELLANT PRODUCED BROKER NOTES IN SUPPOR T OF SALE PROCEEDS AND COULD SHOW THAT PROCEEDS WERE RECEIVED BY ACCOUNT P AYEE CHEQUES AND DEPOSITED IN THE APPELLANTS BANK ACCOUNT, THE AO C OULD NOT SHOW ANYTHING TO REBUT THE EVIDENCES PRODUCED BY THE APP ELLANT. THUS, THIS PRESUMPTION OF THE AO WAS WITHOUT ANY BASIS. 13. FROM THE ABOVE DISCUSSION, IT IS QUITE EVIDENT THAT THE AO FAILED TO SHOW THAT THE TRANSACTION FOR PURCHASE AND SALE OF SHARES WAS BOGUS AND THE APPELLANT PAID CASH TO THE BROKERS FOR AVAILING ACCOMMODATION ENTRY IN THE FORM OF SALE PROCEEDS OF SHARES. SUSPI CION, STRANGE COINCIDENCES AND GRAVE DOUBTS, HOW SO EVER STRONG I T MAY BE, CANNOT TAKE PLACE OF LEGAL PROOF. THEREFORE, THE AO ERRED IN TR EATING THE ENTIRE TRANSACTION OF LONG TERM CAPITAL GAINS AS A SHAM TR ANSACTION AND BRING IT TO TAX AS UNEXPLAINED CASH CREDIT U/S 68 OF THE INCOME TAX ACT, 1961. 14. AS REGARDS VARIOUS JUDGMENTS RELIED UPON BY THE AO, THE RATIO OF THESE TRANSACTIONS FOR PURCHASE AND SALE OF SHARES WAS FA BRICATED, FALSE AND FICTITIOUS. HOWEVER, THE AO DID NOT BEING ANY EVIDENCE ON RECORD TO ESTABLISH NON-GENUINENESS OF THE IMPUGNED TRANSACTI ON. MOREOVER, THE LD. A/R OF THE APPELLANT ELABORATELY DISTINGUISHED THES E JUDGMENTS. IN VIEW OF 12 THE ABOVE I HOLD THAT THE PURCHASE OF EQUITY SHARES WAS NOT BOGUS AND GENUINE AND THE PROFIT FROM SALE OF SHARES WAS ASSE SSABLE AS LONG TERM CAPITAL GAIN AND NOT AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. THEREFORE, THE AMOUNT OF RS.16,76,142/-(CORRECT `37 ,77,847/-) CANNOT BE TREATED AS CASH CREDIT U/S 68 OF THE ACT. THE STAND TAKEN BY THE AO IS NOT JUSTIFIED AND, THEREFORE, REJECTED. THE APPEAL IS A LLOWED ON THIS GROUND. SINCE THE ISSUE INVOLVED IN THIS CASE IS FULLY COVE RED BY THE DECISION IN THE CASE OF THE APPELLANT FOR ASSESSMENT YEAR 2006-07, I HOLD THAT THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION CREDIT U/S 68 OF THE ACT AS AGAINST CAPITAL GAIN DECLARED BY THE APPELLANT. THE ADDITIO N IS DELETED. THE APPEAL IS ALLOWED ON THIS GROUND. THE LD. CIT (A) ALSO DELETED THE ADDITION OF RS. 1, 88,890/- BY HOLDING THAT TRANSACTION OF PURCHASE AND SALE ALREADY HELD AS GENUINE. THEREFO RE, THERE IS NO QUESTION OF HOLDING THAT ASSESSEE HAS PAID ANY COMMISSION TO THE BROKER OVER AND ABOVE SHOWN BY ASSESSEE. 10. NOW THE DEPARTMENT IS IN APPEAL HERE BEFORE THE TRIBUNAL. 11. THE LD. D/R PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. PAGES 4 & 5 OF THE ORDER OF THE ASSESSING OFFICER WERE READ ALSO. 12. ON THE OTHER HAND, LD. COUNSEL OF THE ASSESSEE PLACED RELIANCE ON THE ORDER OF LD. CIT (A) AND ALSO FILED A COPY OF WRITTEN SUBMISSION . 13. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, WE FIND NO INFIRMITY IN THE FINDING OF LD. CIT (A). THE LD. CI T (A) HAS EXAMINED THE ISSUE IN THREAD BEAR AND FOUND THAT PURCHASE OF SHARES AS WELL AS S ALE OF SHARES ARE GENUINE. THE PURCHASE OF SHARES WERE MADE THROUGH SHRI V.K. SINGHANIA, RE NU PODDAR AND BALLABH DAS DAGA. THE SHARES WERE PURCHASED IN EARLIER YEARS AND WERE SOLD DURING THE YEAR UNDER CONSIDERATION. THE SHARES WERE SOLD THROUGH ANOTHE R BROKER I.E. M/S. M. BHIWANTIWALA & 13 CO., M/S. AHILYA COMMERCIAL P. LTD. ALL THE PURCHA SE AND SALE OF SHARES WERE DEMATIZED IN REGULAR COURSE OF TRANSACTION. CONFIRMATION OF PURCHASE OF SHARES THROUGH BROKERS WERE FILED. ALL THE SHARES ARE OF LISTED COMPANIES . THE SHARES WERE CREDITED TO DEMAT ACCOUNT OF THE ASSESSEE AND THEREAFTER ON SALE OF T HOSE SHARES THE ACCOUNT OF THE ASSESSEE WAS DEBITED THROUGH DEMAT ACCOUNT. THEREFORE, THER E IS NO QUESTION OF DOUBTING THE GENUINENESS OF TRANSACTIONS. THERE IS NO EVIDENCE THAT ASSESSEE HAS NOT PURCHASED THE SHARES IN EARLIER YEAR. THEY HAVE BEEN SHOWN IN TH E BALANCE SHEET AND THE BALANCE SHEET OF EARLIER YEAR HAS BEEN ACCEPTED. THE ASSESSEE HA S FILED BROKER NOTE, CONTRACT NOTE, RELEVANT EXTRACT OF CASH BOOK, BALANCE SHEET AS ON 31.3.2005 AND 31.3.2006, COPY OF SHARE CERTIFICATE ETC. AND ALL THESE DETAILS ESTABLISHED THAT THE WAS IN POSSESSION OF RESPECTIVE SHARES. THE OBJECTION OF THE AO WAS THAT NOTICE IS SUED UNDER SECTION 133(6) WERE RETURNED BACK AND PAYMENT TO BROKER WAS DELAYED AN D THERE WERE CERTAIN DISCREPANCIES IN THE NAME OF SELLERS AS BROKER AND AS PER ENDORSEMEN T IN THE SHARE CERTIFICATE. CLARIFICATION IN RESPECT OF THESE DEFICIENCIES WERE FILED BEFORE THE ASSESSING OFFICER WHICH WERE FILED BEFORE LD. CIT (A) ALSO. THEY WER E NOT APPRECIATED BY THE ASSESSING OFFICER BUT WERE APPRECIATED BY LD. CIT (A) AND THE N ONLY THE LD. CIT (A) FOUND THAT ALL THE TRANSACTIONS OF PURCHASE AND SALE OF SHARES ARE GENUINE. IT WAS ALSO NOT THE CASE OF THE DEPARTMENT THAT ASSESSEE REPAID THE SALE CONSIDERAT ION IN HAND. THERE IS NO SUCH EVIDENCE ON RECORD. THEREFORE, INFERENCE DRAWN BY ASSESSING OFFICER, IN OUR CONSIDERED VIEW WAS NOT CORRECT BY HOLDING THAT THE SHARE TRANSACTION A RE BOGUS. THE LD. CT (A) WAS JUSTIFIED IN HOLDING THAT SHARE TRANSACTIONS WERE GENUINE. A CCORDINGLY WE CONFIRM THE FINDING OF LD. CIT (A) AS THEY ARE FINDING OF FACT AND REMAINE D UNCONTROVERTED. 14 14. DELETION OF ADDITION OF RS. 1,88,890/- IS ALSO CONFIRMED AS THE ASSESSING OFFICER MADE THIS ADDITION ON THE BASIS THAT THE TRANSACTIO N OF SALE OF SHARES ARE ONLY ACCOMMODATION ENTRY AND ASSESSEE MUST HAVE PAID SOM E COMMISSION TO THE BROKER. WE HAVE ALREADY HELD THAT TRANSACTION OF PURCHASE AND SALE OF SHARES WERE GENUINE, THEREFORE, WE HOLD THAT THIS ADDITION WAS RIGHTLY DELETED BY L D. CIT (A). 15. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISM ISSED. 16. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 15 .12.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JODHPUR, COPY FORWARDED TO :- THE ACIT, CIRCLE-2, UDAIPUR. SMT. SUMITRA GAUR, KANKROLI, RAJSAMAND. THE CIT (A) THE CIT B THE D/R GUARD FILE (ITA NO. 490/JODH/2009) BY ORDER, AR ITAT JODHPUR.