VIKRAM KHANDELWAL, MUMBAI V. ACIT CEN CIR 33, MUMBAI

ITA 5037/MUM/2009

• Counselvise Citation: 503719914 RSA 2009
• Duration Of Justice: 6 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 18-02-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 03-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S M BANDI
• Keywords: Income from undisclosed sources; Opportunity of being heard; Principle of natural justice; Initiation of penalty proceedings; Accommodation entries; Commercial expediency; Penny stocks
• Section: 143(3); 153A; 234B; 133(6); 131; 132; 139

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER , AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA NOS.5037, 5035, 3897/MUM/2009, 729& 726/MUM/20 13 ASSESSMENT YEARS : 2005-06, 2006-07, 2007-08, 2005- 06, 2006-07 SHRI VI KRAM KHANDELWAL, 601-A, MILLENIUM GARDEN, UPPER GOVIND NAGAR, MALAD (W), MUMBAI- 400 064 PAN AADPK9699N VS. THE ASST. CIT CENT. CIR. 33 , OLD CGO BUILDING, M K ROAD, MUMBAI-400020 ( /APPELLANT) ( / RESPONDENT) / APPELLANT BY : SHRI S M BANDI / RESPONDENT BY : SHRI G M DOSS DATE OF HEARING : 10.09.2015 & 16.09.2015 DATE OF PRONOUNCEMENT : 09.10 . 2015 O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THE AFORESAID FIVE APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST SEPARATE ORDERS BY THE COMMISSIONER OF INCOME TAX (APPEALS) -VIII, MUMBAI,(HEREINAFTER CALLED THE CIT(A)) FOR THE ASSESSMENT YEARS 2005-0 6, 2006-07 AND 2007-08 WHICH INCLUDES TWO APPEALS AGAINST THE PENALTY ORDERS PAS SED U/S. 271(1)(C) FOR ASSESSMENT YEARS 2005-06 AND 2006-07 BY THE ASSESSI NG OFFICER AS AFFIRMED BY THE CIT(A). SINCE THE ISSUES INVOLVED IN QUANTUM ARE I DENTICAL, WE PROCEED TO DISPOSE OF THE APPEALS BY THIS CONSOLIDATED ORDER. VIKRAM KHANDELWAL ITA NOS.5037, 5035, 3897/MUM/2009, 729& 726/MUM/201 3 ASSESSMENT YEARS : 2005-06, 2006-07, 2007-08, 2005- 06, 2006-07 2 2. WE SHALL FIRST TAKE UP THE APPEAL IN ITA NO.5037 /MUM/2009 FOR ASSESSMENT YEAR 2005-06 AS THE LEAD CASE . THE GROUNDS OF APP EAL RAISED BY THE ASSESSEE IN MEMO OF APPEAL FILED AS WELL ADDITIONAL GROUNDS RAI SED ARE AS UNDER: 1.A) ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.2,67, 480/- MADE BY THE AO TO THE INCOME OF THE APPELLANT BY WAY OF DISALLOWING INTER EST PAID BY HIM. B) THE LD. CIT(A) FAILED TO APPRECIATE THAT Y OUR APPELLANT HAD ADVANCED INTEREST FREE LOAN OUT OF INTEREST FREE FUNDS AVAIL ABLE WITH HIM. C) IN REACHING TO THE CONCLUSION AND CONFIRMI NG SUCH ADDITION, THE LD. CIT(A) OMITTED TO CONSIDER RELEVANT FACTORS, CONSI DERATIONS , PRINCIPLES AND EVIDENCES WHILE HE WAS OVERWHELMED ,INFLUENCED AND PREJUDICED BY IRRELEVANT CONSIDERATIONS AND FACTORS. 2.A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.2,43, 303/- MADE BY THE AO TO THE INCOME OF THE APPELLANT TREATING THE SALE PROCEEDS ON SALE OF SHARES AS UNACCOUNTED INCOME AND FURTHER ERRED IN REJECTING THE CLAIM OF THE APPELLANT IN RESPECT OF SHORT TERM CAPITAL GAINS OF RS.2.27,416/- ON SALE OF SHAR ES. B) THE LD. AO FAILED TO APPRECIATE THAT THE PURCHASE AND SALE OF SHARES ARE GENUINE AND SUPPORTED BY SUFFICIENT MATERIALS A ND EVIDENCES. C) IN REACHING TO THE CONCLUSION AND MAKING S UCH ADDITION, THE LD. CIT(A) OMITTED TO CONSIDER RELEVANT FACTORS, CONSIDERATION S, PRINCIPLES AND EVIDENCES WHILE VIKRAM KHANDELWAL ITA NOS.5037, 5035, 3897/MUM/2009, 729& 726/MUM/201 3 ASSESSMENT YEARS : 2005-06, 2006-07, 2007-08, 2005- 06, 2006-07 3 HE WAS OVERWHELMED , INFLUENCED AND PREJUDICED BY I RRELEVANT CONSIDERATIONS AND FACTORS. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.12,16 5 MADE BY THE AO TO THE INCOME OF THE APPELLANT ON ACCOUNT OF COMMISSION PAID@5% O N SALE CONSIDERATION OF SHARES ON PLEA THAT SUCH SERVICE CHARGES ARE PAID TO OPERA TORS. 4) THE LD. CIT(A) ERRED IN HOLDING THAT THE INTERE ST U/S 234A, 234A(3) AND 234B IS MANDATORY. THE APPELLANT DENIES HIS LIABILI TY FOR SUCH INTEREST. 5) THE LD. CIT(A) ERRED IN HOLDING THAT THE GROUND RAISED DISPUTING INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) IS PREMATURE. THE APPELLANT DENIES HIS LIABILITY FOR SUCH PENALTY. THE ASSESSEE HAS RAISED FOLLOWING ADDITIONAL GROUND S OF APPEAL AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ADDITION MADE ARE BEYOND THE SCOPE OF PROVISIONS OF SECTION 153A AND HENCE INVALID AND THE SAME OUGHT TO BE DELETED. 3.THE BRIEF FACTS OF THE CASE ARE THAT A SEARCH OPE RATIONS U/S. 132 OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) WAS CO NDUCTED AT THE RESIDENTIAL/BUSINESS PREMISES OF THE BALAJI GROUP O F CASES ON 10.11.2006. THE ASSESSEE, BEING ONE OF THE DIRECTORS OF M/S. PREKSH A EXPORTS LTD. WAS , INTER-ALIA , COVERED IN THE SEARCH OPERATIONS AND A NOTICE U/S. 153A OF THE ACT DATED 08.08.2008 WAS DULY SERVED ON THE ASSESSEE BY THE R EVENUE. IN RESPONSE TO THE VIKRAM KHANDELWAL ITA NOS.5037, 5035, 3897/MUM/2009, 729& 726/MUM/201 3 ASSESSMENT YEARS : 2005-06, 2006-07, 2007-08, 2005- 06, 2006-07 4 SAID NOTICE U/S 153A OF THE ACT, THE ASSESSEE FILED RETURN OF INCOME ON 22.09.2008 DECLARING TOTAL INCOME OF RS.7,89,740/- WHICH WAS T HE SAME INCOME AS DECLARED IN THE ORIGINAL RETURN OF INCOME FILED U/S 139 OF THE ACT ON 28 TH FEBRUARY 2006. THE ASSESSEE IS THE PROPRIETOR OF KHANDELWAL SHEET PROC ESSORS, WHICH IS ENGAGED IN THE BUSINESS OF TRADING IN IRON AND STEEL APART FROM DO ING JOB WORK IN THE RELATED FIELD. 4. THE ASSESSEE HAS RAISED AN ADDITIONAL GROUND OF APPEAL AS DETAILED ABOVE WHICH IS TAKEN UP FIRST BY US. THE ASSESSEE SUBMITTED THA T THE ADDITIONS MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER DATED 29 TH DECEMBER 2008 PASSED U/S 143(3) OF THE ACT READ WITH SECTION 153A OF THE ACT ARE BEYOND THE SCOPE OF PROVISIONS OF SECTION 153A OF THE ACT AND HENCE ADD ITIONS MADE ARE INVALID AND THE SAME OUGHT TO BE DELETED BECAUSE THE ORIGINAL ASSES SMENT SHALL PREVAIL AS PER SCHEME OF THE ACT AND THE REVENUE IS PRECLUDED FROM MAKING FRESH ASSESSMENT U/S 143(3) OF THE ACT READ WITH SECTION 153A OF THE ACT EXCEPT WHEN THE SAID FRESH ASSESSMENT SO MADE IS BASED ON INCRIMINATING MATERI AL FOUND DURING THE COURSE OF SEARCH AND HENCE ASSESSMENT ORDER DATED 29 TH DECEMBER 2008 PASSED BY REVENUE U/S 143(3) OF THE ACT READ WITH SECTION 153A OF THE ACT IS BAD IN LAW, ILLEGAL AND LIABLE TO BE QUASHED AS THE SAME IS PASSED BY THE A SSESSING OFFICER BASED ON MATERIAL AVAILABLE ON RECORD FILED ALONG WITH RETUR N OF INCOME AND IS NOT BASED ON ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH OPERATIONS. THE CONTENTION OF THE ASSESSEE IS THAT HIS CASE ARE COV ERED IN ASSESSEES FAVOUR BY THE ORDER OF THE MUMBAI TRIBUNAL IN ASSESSEES OWN CASE IN ITA NOS. 1976, 1977 & 3896/MUM/2009 FOR ASSESSMENT YEAR 2001-02, 2002-03 & 2004-05 RESPECTIVELY WHEREBY THE TRIBUNAL HAS SET ASIDE THE ORDERS OF TH E CIT(A) AND DELETED THE VIKRAM KHANDELWAL ITA NOS.5037, 5035, 3897/MUM/2009, 729& 726/MUM/201 3 ASSESSMENT YEARS : 2005-06, 2006-07, 2007-08, 2005- 06, 2006-07 5 ADDITIONS MADE BY THE REVENUE FOR THE RELEVANT ASSE SSMENT YEARS UNDER APPEAL ON THE FINDINGS THAT THE SAID FRESH ASSESSMENTS MADE U /S 143(3) READ WITH SECTION 153A OF THE ACT ARE NOT BASED ON ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH OPERATIONS . THE CONTENTION OF THE ASSES SEE IS THAT SEARCH OPERATIONS WERE CONDUCTED ON 10.11.2006 AND THE ORIGINAL RETUR N OF INCOME WAS FILED ON 28 TH FEBRUARY 2006 BY THE ASSESSEE WITH REVENUE AND HENC E, THE ASSESSMENT U/S. 143(3) R.W.S 153A OF THE ACT CANNOT BE FRAMED AS TH E MATTER IS COVERED BY THE ABOVE STATED ORDERS OF THE MUMBAI TRIBUNAL IN THE A SSESSEES FAVOUR AS DETAILED ABOVE IN ASSESSEES OWN CASE FOR PRECEDING YEARS. THE LEGAL CONTENTION OF THE ASSESSEE IS CONSIDERED BY US AND WE HAVE OBSERVED T HAT THE ASSESSEE HAS FILED THE ORIGINAL RETURN OF INCOME U/S 139 OF THE ACT ON 28. 02.2006 FOR THE ASSESSMENT YEAR 2005-06 WHILE THE DATE OF SEARCH IS 10.11.2006. WE FIND THAT NO ASSESSMENT HAS BEEN FRAMED U/S. 143(3) OF THE ACT IN ORIGINAL PROC EEDINGS FOR THE ASSESSMENT YEAR 2005-06 AND ALSO THE TIME STIPULATED U/S. 143(2) OF THE ACT FOR ISSUE OF NOTICE FOR FRAMING SCRUTINY ASSESSMENT U/S 143(3) OF THE ACT I S ONE YEAR FROM THE END OF THE MONTH IN WHICH THE RETURN OF INCOME IS FILED FOR AS SESSMENT YEAR 2005-06 I.E. UP TO 28.02.2007 WHICH MEANS THAT THE REVENUE HAS RIGHT T O ISSUE NOTICE U/S 143(2) OF ACT TILL 28 TH FEBRUARY 2007 WHICH HAS NOT EXPIRED ON THE DATE OF SEARCH I.E. 10 TH NOVEMBER 2006. WE FIND THAT STILL THERE WAS TIME A VAILABLE WITH REVENUE FOR ISSUE OF NOTICE U/S 143(2) OF THE ACT FOR ASSESSMENT YEAR 2005-06 ON THE DATE OF SEARCH I.E. 10.11.2006 , TILL 28 TH FEBRUARY 2007 AND HENCE THE ASSESSMENT FOR THE SAI D ASSESSMENT YEARS HAS NOT ABATED AND THE REVENUE HAS RIGHTLY PROCEEDED TO FRAME ASSESSMENT U/S 143(3) OF THE ACT READ WITH SECTION 153A OF THE ACT WHICH ULTIMATELY VIKRAM KHANDELWAL ITA NOS.5037, 5035, 3897/MUM/2009, 729& 726/MUM/201 3 ASSESSMENT YEARS : 2005-06, 2006-07, 2007-08, 2005- 06, 2006-07 6 CULMINATED IN THE ORDERS OF THE ASSESSING OFFICER D ATED 29 TH DECEMBER 2008 WHOSE VALIDITY WE UPHOLD. HENCE, THE LEGAL CONTENTION RA ISED BY THE ASSESSEE IN THE ADDITIONAL GROUND THAT THE REVENUE COULD NOT HAVE F RAMED ASSESSMENT U/S. 143(3) R.W.S. 153A OF THE ACT FOR ASSESSMENT YEAR 2005-06 AND THE ADDITIONS MADE BY REVENUE ARE BEYOND THE SCOPE OF PROVISIONS OF SECTI ON 153A IS NOT ACCEPTABLE AND RESPECTFULLY REJECTED IN VIEW OF OUR FINDINGS ABOVE . 5. COMING TO THE MERITS OF THE CASE , THE ASSESSEE HAS RAISED GROUND NO 1 IN THE MEMO OF APPEAL FILED WHEREBY THE ASSESSEE IS AGGRIE VED BY THE DISALLOWANCE OF RS.2,67,480/- ON ACCOUNT OF INTEREST PAID BY THE AS SESSEE. THE ASSESSEE HAS DECLARED NET PROFIT OF RS.5,55,598/- FROM THE PROPR IETARY CONCERN M/S KHANDELWAL SHEET PROCESSORS. IN THE PROFIT AND LOSS ACCOUNT, THE ASSESSEE HAS DEBITED INTEREST OF RS.5,66,399/-. THE ASSESSING OFFICER NOTICED TH AT THE ASSESSEE HAS ADVANCED LOANS OF RS.14,86,000/- TO VARIOUS PARTIES WITHOUT CHARGING ANY INTEREST. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE IS CLAIMI NG INTEREST ON BORROWED FUNDS AND ON THE OTHER HAND, THE ASSESSEE HAS ADVANCED LOANS WITHOUT CHARGING ANY INTEREST. THE ASSESSING OFFICER CALLED FOR THE DETAILS ABOUT THE WORKING OF THE INTEREST PAYABLE AND WHY THE PROPORTIONATE DISALLOWANCE BE NOT MADE ON GRANTING INTEREST FREE LOANS OUT OF INTEREST BEARING LOANS RAISED BY THE ASSESSE E BUT NO EXPLANATION WAS FURNISHED BY THE ASSESSEE DURING THE COURSE OF ASSE SSMENT PROCEEDINGS. HENCE, THE ASSESSING OFFICER DISALLOWED THE INTEREST OF RS.2,6 4,480/- ON THE INTEREST FREE LOANS ADVANCED TO VARIOUS PARTIES ON PROPORTIONATE BASIS @18% ON THE INTEREST FREE LOANS ADVANCED BY THE ASSESSEE AS THE ASSESSEE HAS BORROW ED FUNDS @18% RATE OF INTEREST. VIKRAM KHANDELWAL ITA NOS.5037, 5035, 3897/MUM/2009, 729& 726/MUM/201 3 ASSESSMENT YEARS : 2005-06, 2006-07, 2007-08, 2005- 06, 2006-07 7 6. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE CONTENDED THAT HE HAD ITS OWN FUNDS TO THE TUNE OF RS.24,52,304/- AS CREDIT BALANCE OF THE CAPITAL ACCOUNT AND THE INTER EST FREE LOANS TO THE EXTENT OF RS.14,86,000/- WAS GRANTED AS ON 31.03.2005 AND THE ASSESSEES OWN FUNDS ARE SUFFICIENT TO COVER INTEREST FREE LOANS OF RS.14,86 ,000/- ADVANCED BY THE ASSESSEE. THE ASSESSEE ALSO CONTENDED THAT IN PAST THE REVENU E HAS ALLOWED THE DEDUCTION OF INTEREST PAID ON BORROWED FUNDS AND ALSO THE REVENU E IS NOT ABLE TO DEMONSTRATE THAT THE ASSESSEE HAS DIVERTED THE INTEREST BEARING FUNDS TOWARDS INTEREST FREE ADVANCES MADE BY THE ASSESSEE RATHER THE ASSESSEE S UBMITTED THAT IT HAS MIXED POOL OF FUNDS WHICH ARE OWN CAPITAL AS WELL BORROWE D FUNDS AND IT IS NOT POSSIBLE TO TRACE THE APPLICATION OF FUNDS. THE CIT(A) CALLED FOR THE REMAND REPORT FROM THE ASSESSING OFFICER. THE ASSESSING OFFICER SUBMITTED THAT THIS FIGURE OF RS.23,86,409/- IS NOTHING BUT ASSESSEES OWN CAPITAL BALANCE APPEA RING IN THE INDIVIDUAL BALANCE SHEET. AGAINST THIS OWN CAPITAL, THE ASSESSEE IS H AVING SEVERAL ASSETS SUCH AS RESIDENTIAL FLAT, INVESTMENT IN SHARES, JEWELLERY, PPF ETC. . THUS, THIS OWN CAPITAL OF THE ASSESSEE OF RS.23,86,409/- CANNOT BE CO-RELATED AND ATTRIBUTED TO THE INTEREST FREE ADVANCES OF RS.14,92,660/- APPEARING IN THE BA LANCE SHEET OF THE PROPRIETARY CONCERN OF THE ASSESSEE. THE CIT(A) RELYING UPON THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. ABHISHEK INDUSTRIES LTD 286 ITR 1(P&H HC) HELD THAT IT CANNOT BE CO-RELATED THAT T HE ASSESSEE HAS ADVANCED ITS OWN CAPITAL FOR GRANTING INTEREST FREE LOANS AND, H ENCE, REJECTED THE CONTENTION OF THE ASSESSEE AND AFFIRMED THE ORDERS OF THE ASSESSI NG OFFICER ON THIS GROUND. 7. AGGRIEVED BY THE ORDERS OF THE CIT(A), THE ASSES SEE IS IN APPEAL BEFORE US. VIKRAM KHANDELWAL ITA NOS.5037, 5035, 3897/MUM/2009, 729& 726/MUM/201 3 ASSESSMENT YEARS : 2005-06, 2006-07, 2007-08, 2005- 06, 2006-07 8 8. THE ASSESSEE CONTENDED THAT IT HAS ITS OWN FUNDS AVAILABLE TO THE TUNE OF RS.24,52,300/- AS INTEREST FREE FUNDS AS ITS CAPIT AL ON 31.03.2005 AND THERE IS A PRESUMPTION THAT THESE INTEREST FREE FUNDS IS AVAIL ABLE WITH THE ASSESSEE AND THE ASSESSEE HAS GRANTED INTEREST FREE LOANS OF RS.14,8 6,000/- FROM THESE OWN FUNDS AND HENCE NO DISALLOWANCE OF INTEREST EXPENDITURE I S CALLED FOR. THE ASSESSEE HAS PLACED RELIANCE ON THE DECISION OF HONBLE BOMBAY H IGH COURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD 313 ITR 340(BOM.HC ) . THE ASSESSEE ALSO CONTENDED THAT AS CAPITAL OF RS.12,62,000/- AS PER BALANCE SHEET OF THE ASSESSEE FIRM AS AT 31 ST MARCH 2005 IS ALSO AVAILABLE, SO THE TOTAL INTERE ST FREE OWN FUNDS AVAILABLE WITH THE ASSESSEE ARE TO THE TUNE OF RS.3 7,14,300/- AND THERE IS A PRESUMPTION THAT ASSESSEE HAS GRANTED INTEREST FREE LOANS OF RS.14,86,000/- OUT OF ITS OWN CAPITAL FUND WHICH IS INTEREST FREE AND HEN CE NO DIS-ALLOWANCE OF INTEREST IS CALLED FOR. 9. THE LEARNED DR, ON THE OTHER HAND, CONTENDED THA T IN THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD. (SUPRA) IT WAS PROVED THAT THE ASSESSEE HAS INVESTED ITS OWN INTER EST FREE FUNDS TOWARDS GRANTING OF INTEREST FREE ADVANCES/LOANS. THIS PRESUMPTION OF DEPLOYMENT OF OWN FUNDS FOR GRANT OF INTEREST FREE ADVANCES IS A REBUTTABLE PRE SUMPTION AND IN THE INSTANT CASE OF THE ASSESSEE , IT COULD NOT BE CO-RELATED THAT T HE ASSESSEE HAS UTILISED ITS OWN FUNDS FOR GRANT OF INTEREST FREE ADVANCES. HE FUR THER CONTENDED THAT INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE ARE ALREADY INVES TED IN OTHER ASSETS OF THE ASSESSEE AS PER THE BALANCE SHEET SUBMITTED SUCH AS RESIDENTIAL FLAT, SHARES, JEWELLERY, PPF ETC. AND IT CANNOT BE SAID THAT THE ASSESSEE HAS ADVANCED ITS OWN VIKRAM KHANDELWAL ITA NOS.5037, 5035, 3897/MUM/2009, 729& 726/MUM/201 3 ASSESSMENT YEARS : 2005-06, 2006-07, 2007-08, 2005- 06, 2006-07 9 INTEREST FREE FUNDS FOR GRANT OF INTEREST FREE LOAN OF RS.14,86,000/-. HE ALSO CONTENDED THAT THERE IS NO COMMERCIAL EXPEDIENCY SH OWN BY THE ASSESSEE IN GRANTING OF THESE LOANS AND, THEREFORE, THE ASSESSI NG OFFICER HAS RIGHTLY DISALLOWED THE INTEREST EXPENDITURE OF RS.2,64,480/-. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HA VE PERUSED THE MATERIAL AVAILABLE ON RECORD AND THE CASE LAWS RELIED UPON. WE FIND THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD. (SUPRA) HAS HELD THAT IF THERE ARE FUNDS AVAILABLE BOTH INTEREST-FREE FUNDS AND ALSO INTEREST BEARIN G LOANS TAKEN BY THE ASSESSEE , THEN A PRESUMPTION WO ULD ARISE THAT INVESTMENTS WOULD BE OUT OF INTEREST-FREE FUND AVAILABLE WITH T HE ASSESSEE PROVIDED THE INTEREST- FREE FUNDS ARE SUFFICIENT TO GRANT THE INTEREST FRE E LOANS. IN THE AFORE-STATED CASE, THERE WAS A FINDING OF FACT RECORDED BY THE CIT(A) AND THE ITAT THAT THE ASSESSEE HAS DEPLOYED ITS OWN FUNDS TOWARDS THE GRANT OF INT EREST FREE ADVANCES. THE RELEVANT EXTRACT FROM THE JUDGMENT OF HONBLE BOMBA Y HIGH COURT IN RELIANCE UTILITIES AND POWER LIMITED(SUPRA) IS REPRODUCED BE LOW : 8. WE HAVE HEARD LEARNED COUNSEL FOR BOTH THE PARTIES . IN OUR OPINION THE VERY BASIS ON WHICH THE REVENUE HAD SOUGHT TO CONTEND OR ARGUE TH EIR CASE THAT THE SHAREHOLDER FUNDS TO THE TUNE OF OVER RS. 172 CRORES WAS UTILISED FOR THE PURPOSE OF FIXED ASSETS IN TERMS OF THE BALANCE SHEET AS O N 31ST MARCH, 1999, IS FALLACIOUS. FIRSTLY, WE ARE NO T CONCERNED WITH THE BALANCE SHEET AS OF 31-3-1999. WHAT WOULD BE RELEVANT WOULD BE BALANCE SHEET AS ON 31-3-2000. APART FROM THAT, THE LEARNED COUNSEL HAS BEEN UNABLE TO POINT OUT TO US FROM THE BALANCE SHEET THAT THE BALANCE SHEET AS ON 31-3-1999 SHOWED THAT THE SHAREHOLDERS FUNDS WERE UTILIZED FOR THE PURPOSE OF FIXED ASSETS. TO OUR MIND THE PROFIT AND LOSS ACCOUNT AND THE BA LANCE SHEET WOULD NOT SHOW WHETHER SHAREHOLDERS FUNDS HAVE BEEN UTILISED FOR I NVESTMENTS. THE ARGUMENT HAS TO BE REJECTED ON THIS COUNT ALSO. 9. APART FROM THAT WE HAVE NOTED EARLIER THAT BOTH IN THE ORDER OF THE CIT (APPEALS) AS ALSO THE APPELLATE TRIBUNAL, A CLEAR FINDING IS REC ORDED THAT THE ASSESSEE HAD INTEREST- FREE FUNDS OF ITS OWN WHICH HAD BEEN GENERATED IN T HE COURSE OF THE YEAR COMMENCING FROM 1-4-1999. APART FROM THAT IN TERMS OF THE BALA NCE SHEET THERE WAS A FURTHER AVAILABILITY OF RS. 398.19 CRORES INCLUDING RS. 180 CRORES OF SHARE CAPITAL. IN THIS CONTEXT, IN OUR OPINION, THE FINDING OF FACT RECORDED BY CIT (APPEALS) AND ITAT AS TO AVAILABILITY OF INTEREST-FREE FUNDS REALLY CANNOT BE FAULTED. VIKRAM KHANDELWAL ITA NOS.5037, 5035, 3897/MUM/2009, 729& 726/MUM/201 3 ASSESSMENT YEARS : 2005-06, 2006-07, 2007-08, 2005- 06, 2006-07 10 10. IF THERE BE INTEREST-FREE FUNDS AVAILABLE TO AN ASSESSEE SUFFICIENT TO MEET ITS INVESTMENTS AND AT THE SAME TIME THE ASSESSEE HAD R AISED A LOAN IT CAN BE PRESUMED THAT THE INVESTMENTS WERE FROM THE INTEREST-FREE FUNDS A VAILABLE. .............. THE PRINCIPLE THEREFORE WOULD BE THAT IF THERE ARE FUNDS AVAILABLE BOTH INTEREST-FREE AND OVERDRAFT AND/OR LOANS TAKEN, THEN A PRESUMPTION WOULD ARISE THAT INVESTMENTS WO ULD BE OUT OF THE INTEREST-FREE FUND GENERATED OR AVAILABLE WITH THE COMPANY , IF THE INTEREST-FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENTS. IN THIS CASE THIS PRESUMPTION IS ESTABLISHED CONSIDERING THE FINDING OF FACT BOTH BY THE CIT (APPEALS) AND ITAT . 11. CONSIDERING THE ABOVE, IN OUR OPINION, THERE IS NO MERIT IN THIS APPEAL WHICH IS ACCORDINGLY DISMISSED. IN THE PRESENT CASE, THE ASSESSEE HAS TO BRING ON RECORD BY COGENT MATERIAL THAT ASSESSEE HAS BOTH THE FUNDS AVAILABLE I.E. INTEREST FREE FUNDS AND ALSO INTEREST BEARING FUNDS SUFFICIENT TO MEET THE ADVANCING OF I NTEREST FREE ADVANCE OF RS.14,86,000/-, THEN THERE WILL ARISE A PRESUMPTION THAT THE ASSESSEE HAS UTILIZED THE INTEREST FREE FUNDS AVAILABLE TO GRANT THE INTE REST FREE ADVANCE OF RS.14,86,000/- AND THE INITIAL AND PRIMARY ONUS IS ON THE ASSESSEE WHICH THE ASSESSEE NEEDS TO DISCHARGE. THE CONTENTION OF THE ASSESSEE THAT IT HAS TOTAL OWNED FUNDS OF RS.37,14,300/- AS AT 31 ST MARCH 2005 ALSO CANNOT BE ACCEPTED AS THE PERUSAL OF THE BALANCE SHEET REVEALS THAT THE ASSESSEE OWN CAPITAL IS RS.24,52,304.38 AS AT 31 ST MARCH 2005 IN HIS INDIVIDUAL BALANCE SHEET WHILE TH E CAPITAL OF RS 12,62,047.23 AS IN HIS PROPRIETARY CONCERN KHANDELWAL SHEET PROCES SOR AS AT 31 ST MARCH 2005 IS REFLECTED IN THE HEADING INVESTMENTS IN HIS INDIV IDUAL BALANCE SHEET MEANING THEREBY THAT THE SAID CAPITAL OF RS.12,62,047.23 IS INVESTED OUT OF THE OWN CAPITAL OF RS.24,52,304.38 AND OTHER FUNDS AVAILABLE WITH THE ASSESSEE IN HIS INDIVIDUAL BALANCE SHEET AND CANNOT BE CONSIDERED SEPARATELY F OR COMPUTING THE TOTAL OWN FUNDS DEPLOYED BY THE ASSESSEE. A PERUSAL OF THE BA LANCE SHEET OF THE ASSESSEE REVEALS THAT THE ASSESSEE HAS ALSO MADE SUBSTANTIAL INVESTMENTS IN BUSINESS ASSETS VIKRAM KHANDELWAL ITA NOS.5037, 5035, 3897/MUM/2009, 729& 726/MUM/201 3 ASSESSMENT YEARS : 2005-06, 2006-07, 2007-08, 2005- 06, 2006-07 11 AS WELL AS RESIDENTIAL FLATS, SHARES, JEWELLERY, PP F ETC APART FROM GRANTING THESE INTEREST FREE LOANS. IN OUR VIEW, THE INTEREST OF JUSTICE WILL BE BEST SERVED IF THE MATTER IS REMANDED TO THE FILE OF THE ASSESSING OFF ICER FOR FRAMING OF THE ASSESSMENT AFRESH DE-NOVO, WHEREBY AN OPPORTUNITY WILL BE GIVE N TO THE ASSESSEE IN ACCORDANCE WITH THE PRINCIPLES OF NATURAL JUSTICE TO BRING ON RECORD COGENT MATERIAL TO SUBSTANTIATE THAT HE HAS UTILIZED INTEREST FREE FUN DS FOR GRANTING OF THESE INTEREST FREE LOANS OR THE SAID INTEREST FREE LOANS ARE GRAN TED OUT OF COMMERCIAL EXPEDIENCY. WE ORDER ACCORDINGLY. 11. GROUND NO.2 OF THE APPEAL RELATES TO THE REJECT ION OF THE CLAIM OF THE ASSESSEE WITH RESPECT OF THE SHORT TERM CAPITAL GAI N OF RS.2,27,416/- ON SALE OF SHARE AND CONFIRMING THE ADDITION OF RS.2,43,303/- ON PROCEEDS FROM SALE OF SHARES AS UNACCOUNTED INCOME. 12. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE HAS DECLARED SHORT TERM CAPITAL GAIN OF RS.2,27,416/- ON THE SALE OF SHARE S OF STENLY CREDIT. LTD. FOR ASSESSMENT YEAR 2005-06. THERE WAS INVESTIGATION C ARRIED BY THE REVENUE AS WELL AS OTHER LAW ENFORCING AGENCIES, WHICH REVEALED THA T VARIOUS PERSONS ARE BENEFICIARIES OF BOGUS CAPITAL GAIN ON SALE OF CERT AIN SHARES AND THE INTENTION BEHIND THIS DUBIOUS EXERCISE IS TO BRING THEIR UNACCOUNTED INCOME IN THE MAINSTREAM BOOKS. WITH RESPECT TO THE SALE AND PURCHASE OF SHARES OF STENLY CREDIT LIMITED, THE ASSESSEE HAS SUBMITTED CONTRACT NOTES FROM THE SHAR E BROKER MURARI LAL GOENKA BEFORE THE ASSESSING OFFICER. NOTICES U/S. 133(6) OF THE ACT WERE ISSUED TO THE SAID BROKER MURARI LAL GOENKA AT HIS KOLKATA ADDRESS AND THE SAID NOTICES WERE RETURNED BACK UN-SERVED. THE ASSESSING OFFICER AFTER CONSID ERING THE REPLIES OF THE ASSESSEE VIKRAM KHANDELWAL ITA NOS.5037, 5035, 3897/MUM/2009, 729& 726/MUM/201 3 ASSESSMENT YEARS : 2005-06, 2006-07, 2007-08, 2005- 06, 2006-07 12 CAME TO THE CONCLUSION THAT THESE ALLEGED CAPITAL G AIN ON SALE OF PENNY STOCK OF STENLY CREDIT LIMITED IS NOTHING BUT ACCOMMODATION ENTRIES TO ENABLE THE ASSESSEE TO BRING THE UNACCOUNTED INCOME INTO THE BOOKS WHIC H IN THE OPINION OF THE ASSESSING OFFICER WAS BASED ON THE REPORTS OF INVES TIGATION WING OF THE REVENUE WHO HAD CONDUCTED ENQUIRIES INTO THE DEALING OF BRO KERS WHO WERE ENGAGED IN THE ACCOMMODATION ENTRIES THROUGH THESE PENNY STOCKS WH ERE BY UN-ACCOUNTED INCOME IS CONVERTED INTO THE BOOKS AS WELL THE NOTICES U/S 133(6) OF THE ACT RETURNED UN- SERVED AND THE ASSESSEE HAS NOT PRODUCED THE SAID B ROKER BEFORE THE ASSESSING OFFICER FOR VERIFICATION. IN VIEW OF THE ABOVE, TH E ENTIRE SALE CONSIDERATION OF RS.2,43,303/- DECLARED IN RESPECT OF THE ALLEGED SA LE OF SHARES OF STENLY CREDIT LIMITED IS BEING ADDED TO THE TOTAL INCOME OF THE A SSESSEE AS INCOME FROM OTHER SOURCES INSTEAD OF INCOME CLAIMED AS SHORT TERM C APITAL GAIN . 13. AGGRIEVED , THE ASSESSEE FILED FIRST APPEAL BE FORE THE CIT(A) AND CONTENDED THAT THE SHORT TERM CAPITAL GAIN OF RS.2,27,416/- I S SHOWN ON THE SALE OF SHARES OF STENLY CREDIT LTD. AS PER THE STATEMENT OF CAPITAL GAIN FILED ALONG WITH RETURN OF INCOME FILED WITH REVENUE AND THE SHARES HAVE BEEN PURCHASED THROUGH STOCK BROKER M/S. MURARI LAL GOENKA., AND ALL OTHER RELEV ANT DOCUMENTS WERE DULY SUBMITTED BEFORE THE ASSESSING OFFICER AND THE SHOR T TERM CAPITAL GAIN SHOULD BE ALLOWED TO BE TAX AS SHORT TERM CAPITAL GAIN. THE ASSESSEE SUBMITTED THAT THE SHARE BROKER ATTENDANCE COULD HAVE BEEN ENFORCED BY REVEN UE BY ISSUING SUMMONS U/S 131 OF THE ACT OR CALLING INFORMATION U/S 133(6) OF THE ACT FOR WHICH POWERS ARE DULY VESTED WITH THE AUTHORITIES UNDER THE ACT AND THE A SSESSEE CANNOT BE HELD LIABLE FOR NON-PRODUCTION OF THE SHARE BROKER BEFORE THE REVEN UE AUTHORITIES. HOWEVER, THE VIKRAM KHANDELWAL ITA NOS.5037, 5035, 3897/MUM/2009, 729& 726/MUM/201 3 ASSESSMENT YEARS : 2005-06, 2006-07, 2007-08, 2005- 06, 2006-07 13 CIT(A) REJECTED THE CONTENTIONS OF THE ASSESSEE HOL DING THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF THE TRANSACTION OF PUR CHASE AND SALE OF SHARES AND THE INFORMATION HAS BEEN RECEIVED FROM THE INVESTIGATIO N WING THAT VARIOUS PERSONS ARE BENEFICIARIES OF BOGUS CAPITAL GAIN ON SALE OF CERT AIN SCRIPTS KNOWN AS PENNY STOCK AND THE INTENTION BEHIND SUCH DUBIOUS EXERCISE IS T O BRING THEIR UNACCOUNTED INCOME INTO THE MAINSTREAM BOOKS. THE CIT(A) HELD THAT THE ASSESSEE HAS ROUTED BOTH THE SALE AND PURCHASE TRANSACTION OF SHARES STENLY CRED IT LIMITED THROUGH THE BROKER MURARI LAL GOENKA AND IT IS THE DUTY OF THE ASSESSE E TO PRODUCE THE BROKER FOR VERIFICATION SINCE THE CREDIT IS APPEARING IN THE B OOKS OF THE ASSESSEE AND HENCE, THE ONUS IS ON THE ASSESSEE TO SUBSTANTIATE THE GEN UINENESS OF THE TRANSACTION AND THE ASSESSEE FAILED TO PRODUCE THE SAID BROKER FOR VERIFICATION BEFORE THE AUTHORITIES BELOW AND NOTICES ISSUED U/S 133(6) OF THE ACT TO S AID BROKER HAS RETURNED UN- SERVED. THUS, THE CIT(A) UPHELD THE ORDERS OF THE A SSESSING OFFICER IN HOLDING THE SHORT TERM CAPITAL GAIN AS INCOME FROM OTHER SOU RCES . 14. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US . 15. THE ASSESSEE REITERATED ITS SUBMISSIONS AS MADE BEFORE THE AUTHORITIES BELOW AND CONTENDED THAT THE ADDITION HAS BEEN MADE BY TH E REVENUE BASED ON THE NEWSPAPER REPORTS AND IT HAS BEEN PRESUMED THAT THE ASSESSEE HAS INDULGED IN MANIPULATION IN PENNY STOCK TOWARDS THE ACCOMMODATI ON ENTRIES WHILE THERE IS NO SUCH COGENT EVIDENCE BEFORE THE REVENUE IN COMING T O THE SAID CONCLUSION AND THE SHORT TERM CAPITAL GAIN EARNED BY THE ASSESSEE IS TREATED AS INCOME FROM OTHER SOURCES BASED ON SURMISES, CONJECTURES AND PRESUMP TIONS . THE ASSESSEE SUBMITTED THAT THERE IS NO FINDING OF FACT THAT THE ASSESSEE HAS RECEIVED ANY VIKRAM KHANDELWAL ITA NOS.5037, 5035, 3897/MUM/2009, 729& 726/MUM/201 3 ASSESSMENT YEARS : 2005-06, 2006-07, 2007-08, 2005- 06, 2006-07 14 CONSIDERATION OUT OF BOOKS OF ACCOUNTS MAINTAINED B Y THE ASSESSEE. THE ASSESSEE DREW OUR ATTENTION TO THE DETAILS SUBMITTED BY THE ASSESSEE REGARDING THE SHORT TERM CAPITAL GAIN IN THE RETURN OF INCOME FILED WI TH THE REVENUE AND HE FURTHER DREW OUT ATTENTION TO THE BROKERS NOTES REGARDING SALE A ND PURCHASE OF SAID SHARES WHICH WAS MADE THROUGH THE BROKER MURARI LAL GOENKA. THE ASSESSEE ALSO SUBMITTED THAT HE HAD MADE PAYMENTS THROUGH BANKING CHANNELS FOR P URCHASE OF SHARES OF STENLY CREDIT LIMITED AND SIMILARLY PAYMENT FOR SALE OF SH ARES HAS BEEN RECEIVED THROUGH THE BANKING CHANNELS. THE ASSESSEE FURTHER SUBMITT ED THAT HE IS ALSO DEALING IN OTHER SHARES APART FROM SHARES OF STENLY CREDIT LTD . HENCE, THE ASSESSEE REITERATED THAT IT IS A GENUINE TRANSACTION AND THE SHORT TER M CAPITAL GAIN EARNED BY THE ASSESSEE OF RS 2,27,416/- ON THE SALE OF SHARES OF STENLY CREDIT LIMITED CANNOT BE TREATED AS INCOME FROM OTHER SOURCES. 16. THE LEARNED DR RELIED UPON THE ORDERS OF THE AU THORITIES BELOW. 17. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PE RUSED THE MATERIAL ON RECORD. WE HAVE OBSERVED THAT THE ADDITIONS HAVE B EEN MADE BASED UPON THE INVESTIGATION REPORT OF THE INVESTIGATION WING OF T HE INCOME TAX DEPARTMENT THAT SOME BROKERS IN COLLUSION WITH THE INVESTORS ARE EN GAGING IN THE MANIPULATION OF PENNY STOCKS WHEREBY ACCOMMODATION ENTRIES ARE ARRA NGED IN MANNER WHEREBY UNACCOUNTED INCOME IS BROUGHT INTO BOOKS. WE HAVE OBSERVED THAT THE ASSESSEE HAS PURCHASED 4500 SHARES OF STENLY CREDIT LTD. ON 17.12.2004 FOR RS.47,610.00 THROUGH THE BROKER MURARI LAL GOENKA VIDE CONTRACT NO 478/041217/3744 . WE HAVE OBSERVED THAT IN THE AFORE-STATED BROKERS CONTRACT NOTE FOR PURCHASE OF SHARES OF STENLY CREDIT LIMITED BY THE ASSESSEE, THERE IS NO MENTION OF SECURITY TRANSACTION VIKRAM KHANDELWAL ITA NOS.5037, 5035, 3897/MUM/2009, 729& 726/MUM/201 3 ASSESSMENT YEARS : 2005-06, 2006-07, 2007-08, 2005- 06, 2006-07 15 TAX(STT)/SERVICE TAX WHICH OUGHT TO HAVE BEEN CHARG ED BY THE BROKER FROM THE ASSESSEE TO BE DEPOSITED WITH GOVERNMENT WHICH ARE TAXES LEVIED BY GOVERNMENT ON SHARE TRANSACTIONS WHICH RAISES DOUBTS ABOUT THE CREDIBILITY OF SAID PURCHASE CONTRACT NOTE . WHILE DEALING IN THE SAME BROKER N OTE OF MORARILAL GOENKA FOR PURCHASE OF SAID SHARE, WHICH HAS BEEN PLACED IN TH E PAPER-BOOK, THE PROOF/EVIDENCE OF PAYMENT HAVING BEEN MADE THROUGH CHEQUES IS NOT BROUGHT ON RECORD BEFORE US WHILE IN THE SUBMISSIONS MADE BY L EARNED COUNSEL HE HAS STATED THAT THE PAYMENTS HAS BEEN MADE BY BANK AND ONLY CO PY OF LEDGER ACCOUNT IS PRODUCED WHILE BANK STATEMENT TO THAT EFFECT IS NOT PRODUCED BEFORE US TO REFLECT AND SUBSTANTIATE THAT THE PAYMENT FOR PURCHASE OF S AID SHARES HAVE BEEN MADE THROUGH BANKING CHANNELS ( WHILE BANK STATEMENT FOR OTHER PERIOD ARE ENCLOSED IN PAPER BOOK) WHICH ALSO CASTE SUSPICION ON THE ENTIR E MODUS OPERANDI OF THIS TRANSACTION ON THE TOUCH STONE OF PREPONDERANCE OF PROBABILITY. AT THE SAME TIME , WE ARE ALSO AWARE OF THE FACT THAT MERELY ON SUSPIC ION , NO ADDITION CAN BE MADE BY REVENUE AS SUSPICION CANNOT TAKE PLACE OF PROOF. I T IS ALSO OBSERVED THAT IN THE CONTRACT NOTE OF THE SAME BROKER MURARI LAL GOENKA DATED 15 TH MARCH 2005 BEARING NUMBER 538/050315/3744 FOR SALE OF 1500 SHARES OF S TENLY CREDIT LIMITED, THERE IS A CHARGE FOR SECURITIES TRANSACTION TAX AS WELL SERV ICE TAX AND THE ASSESSEE HAS RECEIVED PAYMENT FOR SALE OF SAID SHARES BY CHEQUE WHICH IS DULY CREDITED IN BANK ACCOUNT OF THE ASSESSEE FOR WHICH BANK STATEMENT IS ALSO PRODUCED BEFORE US. THE REVENUE HAS DOUBTED THIS BROKER BILL FOR PURCHASE O F SHARES OF STENLY CREDIT LIMITED AND TREATED THE TRANSACTION FOR SALE AND PURCHASE O F SHARES OF STENLY CREDIT LIMITED AS ACCOMMODATION ENTRIES TO FACILITATE THE CHANNELI ZING OF UNACCOUNTED MONEY OF VIKRAM KHANDELWAL ITA NOS.5037, 5035, 3897/MUM/2009, 729& 726/MUM/201 3 ASSESSMENT YEARS : 2005-06, 2006-07, 2007-08, 2005- 06, 2006-07 16 THE ASSESSEE INTO THE MAINSTREAM. THE REVENUE HAS ALSO ISSUED NOTICE U/S. 133(6) OF THE ACT TO THE SHARE BROKER MR. MURARI LAL GOENK A AT HIS KOLKATA ADDRESS BUT THE SAID NOTICES WERE RETURNED UN-SERVED. WE, THEREFOR E, HOLD THAT THE MATTER NEEDS TO BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FO R PROPER EXAMINATION AND DE-NOVO DETERMINATION WHEREBY THE ASSESSEE WILL BE REQUIRED TO BRING ON RECORD COGENT EVIDENCE TO PROVE THAT THESE TRANSACTIONS OF SALE A ND PURCHASE OF SHARE ARE NOT BOGUS TRANSACTIONS AND THESE TRANSACTIONS ARE NOT M ERELY ACCOMMODATION ENTRIES TO CHANNELIZE THE UNACCOUNTED MONEY OF THE ASSESSEE IN TO MAINSTREAM BOOKS. NEEDLESS TO SAY, THE ASSESSEE WILL BE GIVEN PROPER OPPORTUNITY OF BEING HEARD. WE ORDER ACCORDINGLY. 18. GROUND NO.3 RELATES TO THE COMMISSION @5% ON TH E SALE CONSIDERATION OF SHARES OF STENLY CREDIT LIMITED AMOUNTING TO RS.12, 165/- BEING ADDED AS INCOME OF THE ASSESSEE ON THE GROUND THAT THESE TRANSACTIONS OF SALE AND PURCHASE OF PENNY STOCKS ARE MERELY ACCOMMODATION ENTRIES TO CHANNELI ZE UN-ACCOUNTED MONEY INTO MAINSTREAM BOOKS OF THE ASSESSEE AND THE ASSESSEE H AS PAID 5% IN CASH TO THE OPERATORS WHO HAVE ARRANGED THESE BOGUS CAPITAL GAI N ON PENNY STOCKS. WE HAVE ALREADY DEALT WITH GROUND NO.2 DEALING WITH THE SHO RT TERM CAPITAL GAIN ON SALE OF THE SHARES OF STENLY CREDIT LIMITED BEING TREATED A S INCOME FROM OTHER SOURCES AND HAVE RESTORED THE MATTER TO THE FILE OF THE ASSESSI NG OFFICER FOR PROPER EXAMINATION AND DE-NOVO DETERMINATION AND AS THIS GROUND IS REL ATED TO GROUND NO.2, WE DISPOSE OF THIS GROUND ACCORDINGLY WHEREBY THE ASSESSING OF FICER WILL EXAMINE AND DECIDE THIS MATTER ALSO AFRESH AFTER GIVING PROPER OPPORTU NITY OF HEARING TO THE ASSESSEE. WE ORDER ACCORDINGLY. VIKRAM KHANDELWAL ITA NOS.5037, 5035, 3897/MUM/2009, 729& 726/MUM/201 3 ASSESSMENT YEARS : 2005-06, 2006-07, 2007-08, 2005- 06, 2006-07 17 19. THE ISSUES INVOLVED IN APPEAL ITA NO. 5035/MUM /2009 AND ITA NO. 3897/MUM/2009 FOR ASSESSMENT YEAR 2006-07 AND 2007- 08 ARE IDENTICAL AND OUR DECISION IN ITA NO. 5037/MUM/2009 FOR ASSESSMENT YE AR 2005-06 AS CONTAINED IN PRECEDING PARAS OF THIS ORDER SHALL APPLY MUTATIS MUTANDIS TO THE APPEAL FOR ASSESSMENT YEAR 2006-07 AND 2007-08. 20. THE ASSESSEE IS ALSO AGGRIEVED BY THE IMPOSITIO N OF PENALTY U/S 271(1)(C ) OF THE ACT OF RS.2,43,303/- AND RS.25,83,990/- BY THE ASSE SSING OFFICER AS CONFIRMED BY THE CIT(A) FOR ASSESSMENT YEAR 2005-06 AND 2006-07 FOR WHICH THE ASSESSEE IS IN APPEAL BEFORE US VIDE ITA NO. 729/MUM/2013 AND ITA NO. 726/MUM/2013 FOR ASSESSMENT YEARS 2005-06 AND 2006-07 RESPECTIVELY. THE PENALTY HAS BEEN LEVIED BASED ON THE ADDITIONS MADE IN THE QUANTUM PROCEEDI NGS WHICH WE HAVE DEALT IN DETAIL IN THIS ORDER WHILE ADJUDICATING QUANTUM APP EALS AS DETAILED IN PRECEDING PARAS OF THIS ORDER AND HAVE RESTORED THE QUANTUM ADDITIONS TO THE FILE OF THE ASSESSING OFFICER FOR DE-NOVO DETERMINATION. SINCE, WE HAVE SET ASIDE THE ORDERS OF THE ASSESSING OFFICER AS AFFIRMED BY THE CIT(A) IN QUANTUM PROCEEDINGS, CONSEQUENTLY THE PENALTY LEVIED BY THE ASSESSING OF FICER AS CONFIRMED BY THE CIT(A) SHALL NOT SURVIVE AND HENCE, SHALL BE ADJUDICATED B Y THE REVENUE AFTER DECIDING ON QUANTUM ADDITIONS IN DE-NOVO PROCEEDINGS. WE ORDER ACCORDINGLY. 21. THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 9 TH OCT. 2015. SD/- SD/- (SHAILENDRA KUMAR YADAV) (RAMIT KOCHAR) JUDICIAL MEMBER ACC OUNTANT MEMBER MUMBAI; DATED : 9 TH OCTOBER 2015. VIKRAM KHANDELWAL ITA NOS.5037, 5035, 3897/MUM/2009, 729& 726/MUM/201 3 ASSESSMENT YEARS : 2005-06, 2006-07, 2007-08, 2005- 06, 2006-07 18 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE C I T(A), MUMBAI. 4. THE C I T 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI