JAFFERALI K RATTONSEY, MUMBAI V. DCIT CEN CIR 5, MUMBAI

ITA 5068/MUM/2009

• Counselvise Citation: 506819914 RSA 2009
• Duration Of Justice: 42 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2012
• Appeal Filed By: Assessee
• Assessment Year: misc
• Appeal Filed On: 01-01-1970
• Court: TRIBUNAL
• Department Lawyers: KUSUM INGALE
• Keywords: Unexplained cash credit; Unexplained investment; Capital asset; Income from undisclosed sources; Bonafide belief; Additional evidence; Corroborative evidences
• Section: 131; 68

Judgement Text

1 ITA NO.5068/MUM/2009 SHRI JAFFERALI K. RATTONSEY IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J , MUMBAI BEFORE SHRI D. MANMOHAN, V.P. AND SHRI R.K. PANDA, A.M. ITA NO. : 5068/MUM/2009 ASSESSMENT YEAR : 2006-07 SHRI JAFFERALI K. RATTONSEY C/O. DIMEXON DIAMONDS LTD. 804, RAHEJA CHAMBERS, 213, NARIMAN POINT, MUMBAI-400 021 PAN NO: AABPR 3348 D DCIT, CENT CIR 5, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400 020 (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI SHASHI TULSIYAN RESPONDENT BY : MISS. KUSUM INGALE DATE OF HEARING : 20.12.2011 DATE OF PRONOUNCEMENT : 25.01.2012 ORDER PER R. K. PANDA (AM) : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 19.06.2009 OF THE LD. CIT(APPEALS)- CENTRAL II, MUM BAI RELATING TO ASSESSMENT YEAR 2006-07. 2. THE GROUNDS OF APPEALS RAISED BY THE ASSESSEE AR E AS UNDER : 1. THE LEARNED CIT(APPEALS), ERRED IN CONFIRMING T HE FINDING OF THE ASSESSING OFFICER IN NOT CONSIDERING THE GAINS ON T HE SALE OF SHARES OF `. 4,94,51,910/- AS LONG TERM CAPITAL GAINS AND THERE BY ALSO CONFIRMING THE CONSEQUENT DENIAL OF EXEMPTION U/S.10(38) OF TH E INCOME-TAX ACT, 1961. 2 ITA NO.5068/MUM/2009 SHRI JAFFERALI K. RATTONSEY 2. THE LEARNED CIT(A), ERRED IN CONFIRMING THE FIND ING OF THE ASSESSING OFFICER THAT THE PURCHASE OF THE SHARES C AN BE CONSIDERED ONLY ON THE DATE OF DEMATERIALIZATION AND THEREFORE THE HOLDING PERIOD BECOMING LESS THAN 12 MONTHS HENCE, THE CAPITAL GAI NS OF `. 80,03,027/- (5,29,22,774 4,41,10,775) BE TAXED AS SHORT TERM CAPITAL GAINS. 3. THE LEARNED CIT(A) FURTHER ERRED IN HOLDING THAT THE PURCHASE VALUE OF THE SHARES SOLD BE TAKEN AT THE AVERAGE OF HIGH AND LOW PRICE OF THE SHARES TRADED ON THE NSE AND BSE ON THE DATE OF DEMATERIALIZATION VIZ. `. 4,41,10,775/- AND TREATING THE SAME AS UNEXPLAINED INVESTMENT IN THE SHARES. 4. WITHOUT PREJUDICE TO ABOVE, THE APPELLANT HAS MA DE INVESTMENT IN SHARES IN EARLIER YEAR WHICH WERE DULY REFLECTED IN THE BOOKS OF ACCOUNT OF THE APPELLANT, HENCE THE ADDITION OF `. 44110775/- UNEXPLAINED INVESTMENT FOR THE YEAR UNDER CONSIDERA TION MAY BE DELETED. 5. WITHOUT PREJUDICE TO ABOVE, THE TRANSACTION IN S HARES BEING GENUINE AND SUFFICIENT EVIDENCES WERE PRODUCED, THE LONG TERM CAPITAL GAINS SHOWN BY THE APPELLANT AS EXEMPT UNDER SECTIO N 10(38) OF THE INCOME-TAX ACT, 1961 MAY BE ACCEPTED AND ADDITIONS CONFIRMED BY THE CIT(A) MAY BE DELETED. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE IN RES PONSE TO NOTICE U/S.153A DATED 27.11.2006, THE ASSESSEE FURNISHED RETURN OF INCOME ON 29.12.2006 DECLARING TOTAL INCOME OF `. 68,01,840/-. THE INCOME OF THE ASSESSEE CONSISTS OF INCOME FROM HOUSE PROPERTY OF `. 2,54,100/- AND INTEREST OF `. 55,63,980/- RECEIVED FROM KIRTILAL KALIDAS DIAMOND EXPORTS. TH E ASSESSEE HAD SHOWN LONG TERM CAPITAL GAIN OF `. 4,94,51,910/- ON ACCOUNT OF SALE OF THE FOLLOWING SHARES WHICH WAS CLAIMED AS EXEMPT U/S.10 (38) OF THE I.T. ACT. SR.NO. NAME OF SCRIP TOTAL NO. OF SHARES 1 MICRO TECHNOLOGY 24,500 2 PRRANETA IND. 16,00,000 3 RADHE DEVELOPERS 22,500 4 ROYAL AIRWAYS 71,000 5 K. S. OILS LTD. 46,000 6 SANJEEVANI PARANT 10,000 3 ITA NO.5068/MUM/2009 SHRI JAFFERALI K. RATTONSEY 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED THE ASSESSEE TO FURNISH THE FOLLOWING DETAILS REGARDING THE TRANSACTIONS OF ABOVE MENTIONED SHARES. I) A COPY OF DEMAT ACCOUNT REFLECTING PURCHASE AND SALE OF SHARES. II) BROKERS NOTE SHOWING THE PURCHASES OF THESE SH ARES. III) BROKERS NOTE SHOWING THE SALES OF THESE SHARE S. IV) STATEMENT OF BANK ACCOUNTS WHICH SHOWS THE PAYM ENT MADE TO THE BROKER TOWARDS THE PURCHASES OF SHARES AND RECEIPTS FROM THE SALE OF SHARES 4.1 IN RESPONSE TO THE ABOVE, THE ASSESSEE FURNISHE D THE FOLLOWING :- I) COPIES OF CONTRACT NOTES ISSUED BY THE BROKER MA HASAGAR SECURITIES PVT LTD. FOR THE PURCHASE OF ABOVE MENTIONED SHARES , II) COPY OF LEDGER ACCOUNT OF MAHASAGAR SECURITIES PVT. LTD. IN THE BOOKS OF ASSESSEE. III) STATEMENT OF DEMAT ACCOUNT HELD WITH TECHNO SH ARES AND STOCKS LTD. 4.2 TO VERIFY THE ASSESSEES CLAIM OF PURCHASE OF T HE ABOVE SHARES, THE AO ISSUED SUMMON TO THE PRINCIPAL DIRECTOR OF MAHASAGA R SECURITIES PVT. LTD. ON 16.01.2008 REQUIRING HIM TO FURNISH THE BROKERS NOTE REGARDING THE PURCHASE OF THE ABOVE MENTIONED SHARES BY THE ASSES SEE AND THE COPY OF LEDGER ACCOUNT OF ASSESSEE IN THE BOOKS OF MAHASAGA R SECURITIES PVT. LTD. HE WAS DIRECTED TO FURNISH THE ABOVE INFORMATION ON OR BEFORE 04.02.2008. SINCE NO REPLY WAS RECEIVED, THE AO ISSUED ANOTHER SUMMON TO MAHASAGAR SECURITIES PVT. LTD. ON 05.05.2008 FOR FURNISHING T HE ABOVE DETAILS ON OR BEFORE 09.05.2008. HOWEVER, SINCE NO REPLY WAS RECE IVED, THE AO ISSUED ANOTHER SUMMON ON 21.07.2008. IN THE MEAN TIME, THE AO ASKED THE ASSESSEE TO PRODUCE THE DIRECTOR OF MAHASAGAR SECUR ITIES PVT. LTD. VIDE ORDER SHEET ENTRIES DATED 10.06.2008 AND 03.10.2008. HOWE VER, THE ASSESSEE ALSO DID NOT PRODUCE HIM FOR THE VERIFICATION OF HIS TRA NSACTIONS OF PURCHASE OF SHARES. 4 ITA NO.5068/MUM/2009 SHRI JAFFERALI K. RATTONSEY 4.3 THE AO SUBSEQUENTLY ISSUED NOTICE U/S.133(6) TO NATIONAL STOCK EXCHANGE (NSE) AND BOMBAY STOCK EXCHANGE (BSE) CALL ING FOR CERTAIN INFORMATION. THE STOCK EXCHANGES WERE SPECIFICALLY ASKED TO FURNISH THE DETAILS WHETHER THE SHARES MENTIONED ABOVE WERE TRA DED THROUGH THE STOCK EXCHANGES AS PER THE CONTRACT NOTES FURNISHED BY TH E ASSESSEE. THE DETAILS OF BROKER NOTES, TRADE NOS., SETTLEMENT NO. AND DAT E OF PURCHASE OF THESE SHARES WERE PROVIDED TO THE STOCK EXCHANGES. 4.4 IN RESPONSE TO THE NOTICE ISSUED U/S.133(6), T HE NSE VIDE LETTER DATED 15.07.2008 INFORMED THAT M/S. MAHASAGAR SECURITIES PVT LTD IS NEITHER A REGISTERED TRADING MEMBER NOR A SUB BROKER AFFILIAT ED TO ANY REGISTERED TRADING MEMBER OF STOCK EXCHANGE. FURTHER, THE SECURITIES OF THE COMPANY PARRANETA INDUSTRIES ARE NOT LISTED ON THE EXCHANGE. THE BSE VIDE LETTER DATED 16.7.2008 INFOR MED THAT M/S. MAHASAGAR SECURITIES PVT. LTD. IS NOT REGISTERED WI TH THE BSE. 4.5 THE AO SCRUTINIZED THE DEMAT A/C. HELD WITH TEC HNO SHARES AND STOCK LTD. AND FOUND THAT THE ABOVE MENTIONED SHARE S ARE DEMATERIALIZED IMMEDIATELY BEFORE THE DATE OF SALE I.E. EITHER ON THE SAME DATE OF SALE OR 2 TO 3 DAYS BEFORE THE SALE OF SHARES. THE AO, THEREFORE , ISSUED ANOTHER SHOW CAUSE NOTICE ASKING THE ASSESSEE TO EXPLAIN AS TO W HY THE LONG TERM CAPITAL GAIN CLAIMED BY THE ASSESSEE SHOULD BE ACCEPTED, SI NCE AS PER THE DEMAT A/C. STATEMENT THE SHARE HOLDING PERIOD IS LESS THA N 12 MONTHS AND AS PER THE PROVISION OF SECTION 2(42A) OF THE I.T. ACT, TH E SHARES SOLD BY THE ASSESSEE ARE SHORT TERM CAPITAL ASSET. 5 ITA NO.5068/MUM/2009 SHRI JAFFERALI K. RATTONSEY 4.6 IN RESPONSE TO THE SAME, THE ASSESSEE FURNISHED A REPLY WHICH THE AO REPRODUCED IN THE BODY OF THE ASSESSMENT ORDER AT P ARA 7.8 WHICH READS AS UNDER :- WITH REF TO YOUR LETTER DATED 09/09/2008, IT IS SUBMITTED THAT THE EXEMPTION CLAIM U/S.10(36) IS THE EXEMPTION GRANTED ON SHARES HELD FOR MORE THEN 12 MONTHS. IT IS SUBMITTED THAT THE SHARE S WERE PURCHASED FOR MORE THEN 12 MONTHS BEFORE THE SALE. WHEN THE S HARES WERE PURCHASED THE ASSESSEE ASSUME THAT THE SHARES WILL BE TRANSFERRED TO HIS DEMAT ACCOUNT WERE THEY WERE HELD IN THE POOL A CCOUNT OF THE BROKER AND THE ASSESEE WAS UNDER THE IMPRESSION THAT THEY WERE IN HIS ACCOUNT AND SHE WAS NOT AWARE THEY WERE NOT TRANSFE RRED IN THE MATERIAL FORM. HOWEVER, WHEN SHE WANTED TO SELL THI S SHARES AN ON INVESTIGATION IT WAS FOUND THAT THIS SHARES HAVE NO T TRANSFERRED IN THE NAME OF THE ASSESSEE THE ADVISOR SHOWN IGNORANCE AN D OPEN A NEW DEMANT ACCOUNT AND TRANSFER THE SAME BEFORE THE SAL E. THE ASSESSEE IS IN THE HABIT OF RELYING ON PORTFOLI O MANAGEMENT ADVISORS WHO ACT ON HIS BEHALF AND THE MANAGEMENT O F SUCH FUNDS AND SHARES IS ENTIRELY LEFT TO THEM TO ENSURE THAT THE PROCEDURAL ASPECT OF THE TRANSACTION ARE COMPLETED BY THE ADVISORS. THE ASSESSEE WAS NOT INTENDING TO CONDUCT ANY TRANSACTION IN ANY ILLEGAL MANNER BUT ABIDE BY THE LAW ABSOLUTELY. THIS LAPSE IF ANY IS DUE TO THE OVER SIGHT AND NOT INTENTIONAL. THE ASSESSEE BELIEVES THAT ONES SHE PURCHASED THE SHARES THE BROKERS NOTE AND THE BILL ARE SUFFICIENT EVIDEN CE THAT THE TRANSACTION IS COMPLETED. IN VIEW OF THE MAGNITUDE TRANSACTION AND LOOKING AT THE SPIRIT OF THE LAW IT IS HUMBLY SUBMITTED THAT THE C APITAL GAINS MAY BE CONSIDERED AS LONG TERM CAPITAL GAIN U/S.10(36) ON WHICH THE STT TIES PAID AND NOT SHORT TERM CAPITAL GAINS. 4.7 SUBSEQUENTLY, SHRI MUKESH CHOKSHI, DIRECTOR OF MAHASAGAR SECURITIES PVT. LTD. ATTENDED THE OFFICE OF THE AO ON 24.12.2008 IN RESPONSE TO THE SUMMONS ISSUED U/S.131 OF THE LT. ACT AND HI S STATEMENT WAS RECORDED U/S.131 OF THE I.T. ACT. IN THE SAID STATE MENT SHRI MUKESH CHOKSHI IN HIS REPLY TO QUESTION NO.7 TO 10 SPECIFICALLY D ENIED TO HAVE PURCHASED ANY SHARES FOR THE ASSESSEE BY HIS COMPANY MAHASAGA R SECURITIES PVT. LTD. HE ALSO STATED THAT, THE BROKERS NOTES FURNISHED B Y THE ASSESSEE, HAVE NOT BEEN ISSUED BY MAHASAGAR SECURITIES PVT. LTD. SINCE SHRI MUKESH CHOKSHI HAS CATEGORICALLY DENIED TO HAVE ISSUED ANY CONTRAC T NOTES AND DENIED TO 6 ITA NO.5068/MUM/2009 SHRI JAFFERALI K. RATTONSEY HAVE ANY TRANSACTION WITH THE ASSESSEE AND DENIED T O HAVE KNOWN THE ASSESSEE, THE AO ALLOWED AN OPPORTUNITY TO THE ASSE SSEE TO CROSS EXAMINATION. SHRI MUKESH CHOKSHI, DIRECTOR OF MAHA SAGAR SECURITIES PVT. LTD., WHICH THE ASSESSEE AVAILED. 4.8 IN RESPONSE TO THE QUESTIONS PUT BY THE REPRESE NTATIVE OF THE ASSESSEE TO SHRI MUKESH CHOKSHI IN PRESENCE OF THE AO SHRI M UKESH CHOKSHI REITERATED THAT HE HAS NOT PURCHASED ANY SHARES FOR THE ASSESSEE AND HAS NOT ISSUED ANY BROKERS NOTE. THEREFORE, THE AO CAME TO THE CONCLUSION THAT THE BROKERS NOTE FURNISHED BY THE ASSESSEE REGARDIN G THE ALLEGED PURCHASE OF SHARES ARE NOT GENUINE. 4.9 SIMULTANEOUSLY, SUMMONS WERE ALSO ISSUED TO THE BSE AND NSE ON 24.12.2008 TO FURNISH THE DETAILS OF TRADING CARRIE D OUT OF THE SHARES OF VARIOUS COMPANIES. THE BROKERS NOTE CLAIMED TO BE I SSUED BY MAHASAGAR SECURITIES PVT. LTD. WERE ALSO PROVIDED TO THE STOC K EXCHANGES TO VERIFY THE TRANSACTIONS. HOWEVER, BOTH THESE STOCK EXCHANGES V IDE LETTER DATED 26.12.2008 INFORMED THE AO THAT M/S. MAHASAGAR SECU RITIES PVT. LTD. IS NOT REGISTERED WITH THE STOCK EXCHANGE AND NO TRADING A S REFLECTED IN THE BROKERS NOTES WERE CARRIED OUT ON STOCK EXCHANGE. 4.10 THE AO FOUND FROM THE DEMAT ACCOUNT HELD WITH TECHNO SHARES AND STOCKS LTD. (DP ID 12031500, CLIENT ID 00011021) TH AT, THE SHARES WERE CREDITED IN THIS DEMAT ID BY TRANSFER FROM ANOTHER DP. TO VERIFY THE DPS FROM WHICH SHARES WERE CREDITED A SUMMONS U/S.131 O F THE I.T. ACT WAS ISSUED TO TECHNO SHARES AND STOCK LTD. ON 24.12.200 8. IN RESPONSE TO THIS 7 ITA NO.5068/MUM/2009 SHRI JAFFERALI K. RATTONSEY TECHNO SHARES AND STOCK LTD. FURNISHED THE DETAILS CALLED FOR. THE AO OBSERVED FROM THE DETAILS FURNISHED, THAT, THE ABOV E MENTIONED SHARES HAVE BEEN TRANSFERRED FROM MAINLY TWO DEPOSITORIES NAMEL Y-1. SUNCHAN SECURITIES AND 2. BANK OF INDIA. THE ASSESSEE ALSO CONFIRMED THAT HE DOES NOT HAVE ANY DEMAT ACCOUNT IN THESE TWO DEPOSITORIE S. THEREFORE, THE AO WAS OF THE OPINION THAT THERE IS NO QUESTION OF TRA NSFERRING THE SHARES FROM ONE DEMAT ACCOUNT OF ASSESS TO ANOTHER DEMAT ACCOUN T. ACCORDING TO THE AO IT IS QUITE CLEAR THAT, THE ASSESS WAS NOT HOLDI NG THE ABOVE MENTIONED SHARES BEFORE THE DATE OF DEMATERIALISATION IN THE DEMAT ACCOUNT HELD WITH TECNO SHARES AND STOCKS LTD. IN THE BACK DROP OF AB OVE MENTIONED FACTS GATHERED FROM THE INVESTIGATIONS CARRIED OUT AND TH E STATEMENT OF SHRI. MUKESH CHOKSEY THE AO CAME TO THE FOLLOWING CONCLU SIONS REGARDING THE PURCHASE AND SALE OF SHARES. I) ASSESSES HAD NO TRANSACTION WITH MAHASAGAR SECU RITIES. II) THE LEDGER ACCOUNT SHOWING THE TRANSACTIONS WI TH MAHASAGAR SECURITIES IS NOT GENUINE AS SHRI. MUKESH CHOKSEY, DIRECTOR OF MAHASAGAR SECURITIES HAS CATEGORICALLY DENIED OF HA VING THE TRANSACTION WITH THE ASSESSES. III) THE CONTRACT NOTES / BROKERS NOTES FURNISHED BY THE ASSEESSE ARE NOT GENUINE, AS SHRI. MUKESH CHOKSEY, DIRECTOR OF MAHAS AGAR SECURITIES HAS CATEGORICALLY DENIED TO HAVE ISSUED ANY CONTRACT NO TES TO THE ASSESSES. IV) THE REPLIES RECEIVED FROM THE B.S.E. AND N.S.E ALSO PROVES THAT, THE TRANSACTIONS AS APPEARING ON THE BROKERS NOTES FOR PURCHASE OF THE DISPUTED 8 ITA NO.5068/MUM/2009 SHRI JAFFERALI K. RATTONSEY SHARES HAVE NOT BEEN DONE THROUGH THE STOCK EXCHANG ES. THESE SHARES WERE NOT TRADED THROUGH THE STOCK EXCHANGES. V ) THE SHARES WERE NOT DEMATERIALIZED AFTER THE PU RCHASE. VI) THE SHARES GOT DEMATERIALIZED ONLY ON THE DAY O F SALE OR 2 TO 3 DAYS BEFORE THE DATE OF SALE. THE SHARES HAVE BEEN TRANS FERRED FROM THE ANOTHER D.P IN WHICH THE ASSESSEE HAS NO DEMAT ACCOUNT. VII) THE ASSESEE HAS NOT FURNISHED ANY EVIDENCE TO ESTABLISH THAT, THE SHARES WERE ACTUALLY PURCHASED BY HIM. ALL THESE FACTS ACCORDING TO THE AO ESTABLISHED THA T, THE PURCHASE OF SHARES AS CLAIMED BY THE ASSESSE ARE NOT GENUINE. 4.11 THE AO NOTED THAT THE ASSESSEE ONLY FURNISHED THE CONTRACT NOTES OF A BROKERS AND LEDGER ACCOUNT OF MAHASAGAR SECURITIES PVT. LTD. TO SUPPORT THE CLAIM OF PURCHASE OF SHARES. NO OTHER DOCUMENTARY E VIDENCE WAS FURNISHED TO PROVE THE GENUINENESS OF THE PURCHASES. SINCE TH E PERSON WHO WAS SUPPOSED TO SIGN OR ISSUED THESE CONTRACT NOTES HAS DENIED TO HAVE SIGNED AND ISSUED THE CONTRACT NOTES, THEREFORE, THE AO CA ME TO THE CONCLUSION THAT THESE DOCUMENTS ARE NOT GENUINE BUT FABRICATED. HE ALSO REJECTED THE CONTENTION OF THE ASSESSEE THAT HE WAS IN HABIT OF RELYING ON PORTFOLIO MANAGEMENT ADVISORS AND, THEREFORE, WAS NOT AWARE T HAT THE SHARES WERE NOT DEMATERIALIZED AFTER THE PURCHASE IN ABSENCE OF ANY EVIDENCE TO THIS EFFECT. THE AO COMPARED THE PRICES OF SHARE AT THE TIME OF PURCHASE AND THE PRICE AT THE TIME OF SALE OF SHARES AND NOTED THAT WITHIN A SPAN OF ONE YEAR, THE PRICES HAVE GONE UP FROM 18 TIMES TO 86 TIMES W HICH ACCORDING TO HIM 9 ITA NO.5068/MUM/2009 SHRI JAFFERALI K. RATTONSEY WAS ABNORMAL. THEREFORE, THE AO WAS OF THE OPINION THAT THE ENTIRE TRANSACTION OF PURCHASE AND SALE OF ALL THE SHARES ARE MANIPULATED, COLORABLE AND NOT GENUINE. THE ASSESSEE HAS TRIED TO MAKE IT GENUINE BY OBTAINING THE FABRICATED CONTRACT NOTES IN THE NAME OF THE BROKER MAHASAGAR SECURITIES PVT. LTD. SUCH A TRANSACTION, ACCORDING TO HIM, COU LD SQUARELY FALL INTO THE CATEGORY OF COLORABLE DEVICE AND CANNOT BE ALLOWED. FOR THIS PROPOSITION, THE AO RELIED ON THE DECISION OF THE HON'BLE SUPREME CO URT IN THE CASE OF MCDOWELL AND CO. LTD. REPORTED IN 154 ITR 148 AND V ARIOUS OTHER DECISIONS. RELYING ON VARIOUS DECISION THE AO HELD THAT THE EN TIRE AMOUNT OF `. 5,09,25,802/- BROUGHT IN THE BOOKS BY THE ASSESSEE UNDER THE HEAD CAPITAL GAINS IS NOTHING BUT UNACCOUNTED INCOME O F THE ASSESSEE WHICH IS LIABLE TO BE TAXED IN VIEW OF THE PROVISIONS OF SEC TION 68 OF THE I.T. ACT. SINCE THE ASSESSEE HAS DEDUCTED THE PURCHASE AMOUNT OF `. 14,01,123/- FROM THE SALES AND SHOWN LONG TERM CAPITAL GAINS OF `. 4,95,28,208/- AND SINCE HE HELD THE PURCHASES TO BE NOT GENUINE, THE AO DID NO T ALLOW THE DEDUCTION OF `. 14,01,123/-. 4.12 WITHOUT PREJUDICE TO THE ABOVE, THE AO HELD TH AT EVEN IF IT IS ASSUMED (THOUGH NOT ACCEPTED) THAT, SINCE THE ASSESSEE HAS SHOWN RECEIPTS FROM THE SALE, THEREFORE, THERE MAY BE PURCHASE OF SHARES ON OR BEFORE THE DATE OF SALE, THEN ALSO THE RECEIPTS FROM THE SALE OF SHARE S WOULD BECOME THE SHORT TERM CAPITAL GAIN AND NOT LONG TERM CAPITAL GAIN, A S THE HOLDING PERIOD BECOMES LESS THAN 12 MONTHS. THE DATE OF PURCHASE, IF AT ALL IS TO BE CONSIDERED, CAN BE CONSIDERED ONLY AS DATE OF DEMAT ERIALIZATION IN THE DEMAT ACCOUNT WITH TECHNO SHARES AND STOCKS LTD. IF THIS VIEW IS 10 ITA NO.5068/MUM/2009 SHRI JAFFERALI K. RATTONSEY CONSIDERED, THE PRICE OF THE SHARES ON THE DATE OF DEMATERIALIZATION WOULD THEN BECOME THE PURCHASE PRICE OF THE ASSESSEE. AS THE PURCHASE ON THIS DATE WAS NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNT, THEREFORE, IT HAS TO BE TREATED AS UNACCOUNTED PURCHASE AND THE ENTIRE PURC HASE AMOUNT BECOMES THE UNEXPLAINED INVESTMENT IN SHARES. THE AO ANALYS ED THE TOTAL PURCHASE PRICE ON THE DATE OF DEMATERIALIZATION OF SHARES WH ICH COMES TO `. 4,41,10,775/-. ACCORDING TO HIM THIS AMOUNT BECOME S THE UNEXPLAINED INVESTMENT IN SHARES, AS IT IS NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS. SINCE, THE TOTAL SALE RECEIPTS FROM THE SHARES HAS BEEN SHOWN AT `. 5,09,25,802/-, THEREFORE, THE SHORT TERM CAPITAL GA IN ON ACCOUNT OF SALE OF THE SHARES COMES TO `. 80,03,027/-. HOWEVER, AS THE ENTIRE RECEIPTS ON THE SALE OF SHARES HAVE BEEN TREATED AS UNACCOUNTED INC OME AND ADDED BACK TO THE TOTAL INCOME, THE AO DID NOT MAKE ANY SEPARATE ADDITION UNDER UNEXPLAINED INVESTMENT AND SHORT TERM CAPITAL GAIN. THUS, THE AO MADE AN ADDITION OF `. 5,09,25,802/- AS UNEXPLAINED CASH CREDIT U/S.68 OF THE I.T. ACT. 5. BEFORE THE LD. CIT(A) IT WAS SUBMITTED THAT THE PURCHASE OF THE SAID SHARES WAS GENUINE, THE SALE OF THE SAID SHARES ARE OUT OF THE BALANCE HELD IN THE DEMAT ACCOUNT OF THE ASSESSEE, THE SAID SHAR ES WERE TRANSFERRED ON THE FLOOR OF THE EXCHANGE, THERE ARE BILLS AND CONT RACT NOTES FOR EFFECTING SUCH TRANSFERS AND THE AMOUNT HAS BEEN RECEIVED BY ACCOUNT PAYEE CHEQUE SUBSTANTIALLY ESTABLISHING THE SOURCE OF THE RECEIP T. THEREFORE, THE PRIMARY ONUS TO ESTABLISH THE GENUINENESS OF THE TRANSACTIO N HAS BEEN ESTABLISHED BY THE ASSESSEE AND, THEREFORE, THE SAME IS NOT LIA BLE TO BE TAXED U/S.68 OF 11 ITA NO.5068/MUM/2009 SHRI JAFFERALI K. RATTONSEY THE I.T. ACT. IT WAS SUBMITTED THAT THE AO IN THE I NSTANT CASE, HAS NOT ONLY WEIGHED THE EVIDENCES IN TERMS OF BANK ACCOUNTS, AC COUNT PAYEE CHEQUES, BOOKS OF ACCOUNTS, CONTRACT NOTES ETC. AGAINST THE ASSESSEE BUT HE WENT AGAINST THESE EVIDENCES THEMSELVES WHICH IS NOT PER MISSIBLE IN LAW. IT WAS ACCORDINGLY, SUBMITTED THAT THE ENTIRE AMOUNT OF `. 5,09,35,802/- BEING THE ENTIRE RECEIPTS ON THE SALE OF THE SAID SHARES MADE BY THE AO AS UNEXPLAINED INCOME BE DELETED. 5.1 THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) TH AT THE SHARES WERE HELD FOR MORE THAN 12 MONTHS BEFORE THE DATE OF SAL E AND THE PAYMENT FOR THE PURCHASE WAS ALSO MADE TO MAHASAGAR SECURITIES PVT LTD. BY AN ACCOUNT PAYEE CHEQUE DRAWN ON HDFC BANK, TULSIANI CHAMBERS, NARIMAN POINT BRANCH, MUMBAI VIDE CHEQUE NO. 557060. THE SAID CHE QUE HAS BEEN CLEARED FROM THE ASSESSEES BANK ACCOUNT WITH HDFC BANK ON 05/12/2005. THE ASSESSEE WAS UNDER THE BONAFIDE BELIEF THAT THE SHA RES WOULD HAVE BEEN TRANSFERRED TO HIS DEMAT ACCOUNT AS THEY WERE HELD IN THE POOL ACCOUNT OF THE BROKER MAHASAGAR SECURITIES PVT. LTD AND THE AS SESSEE WAS UNDER A BELIEF THAT THEY WERE IN HIS ACCOUNT. HOWEVER, WHEN HE WANTED TO SELL THE SAID SHARES, HE FOUND THAT THE SAID SHARES HAVE NOT YET BEEN TRANSFERRED IN HIS NAME AND WHEN HIS PORTFOLIO MANAGEMENT ADVISOR, WHO WAS IN CHARGE OF HANDLING THE ADMINISTRATION AND THE PROCEDURAL PART , SHOWED IGNORANCE ABOUT THE SAME, THE ASSESSEE OPENED A NEW DEMAT ACC OUNT IN TECHNO SHARES AND STOCKS LTD. AND TRANSFERRED THE SAID SHA RES IN THE DEMAT ACCOUNT WITH TECHNO SHARES AND STOCKS LTD. BEFORE T HE SALE THEREOF. THE ASSESSEE HAVING RECEIVED THE SAID SHARES IN HIS DEM AT ACCOUNT WITH TECHNO 12 ITA NO.5068/MUM/2009 SHRI JAFFERALI K. RATTONSEY SHARES AND STOCKS LTD. PRESUMED THAT THE SAME WOULD BE TRANSFERRED BY MAHASAGAR SECURITIES PVT. LTD. AND DID NOT FURTHER VERIFY THE SOURCE OF THE SHARES. 5.2 IT WAS ARGUED THAT THE AO HAS RELIED ON THE FAL SIFIED STATEMENT OF DIRECTOR OF MAHASAGAR SECURITIES P. LTD AND HAS ONL Y CONSIDERED HIS DENIAL. THE ASSESSEE SUBMITTED CONFIRMATION LETTER FROM SUN CHAN SECURITIES STATING THAT SHARES WERE TRANSFERRED TO THE ASSESSEES DEMA T ACCOUNT ON INSTRUCTIONS FROM MAHASAGAR SECURITIES PVT. LTD. IT WAS SUBMITTED THAT SOME OF THE SAID SHARES WERE RECEIVED AS BONUS SHAR ES ON THE ORIGINAL SHARES PURCHASED BY THE ASSESSEE EARLIER AND SOME O F THE SAID SHARES INCLUDED SHARES WHICH WERE SPLIT AFTER THE PURCHASE OF THE ORIGINAL SHARES. THEREFORE, THE SAME REMAINING IN THE FORM OF SHARE S AND SECURITIES CANNOT BE DOUBTED AND THERE CANNOT BE LEVY AS CASH CREDIT IN RESPECT THEREOF. 5.3 IT WAS FURTHER SUBMITTED THAT SOME OF THE SAID SHARES WERE RECEIVED AS BONUS SHARES ARE OUT OF THE BALANCE HELD IN THE DEM AT ACCOUNT OF THE ASSESSEE, THE SAID SHARES WERE TRANSFERRED ON THE F LOOR OF THE EXCHANGE, THERE ARE BILLS AND CONTRACT NOTES FOR EFFECTING SU CH TRANSFERES AND THE AMOUNT HAS BEEN RECEIVED BY ACCOUNT PAYEE CHEQUE. THE ASSESSEE ALSO FILED CERTAIN ADDITIONAL EVIDENCES. 5.4 THE LD. CIT(A) SENT THE ADDITIONAL EVIDENCES F ILED BEFORE HIM TO THE AO AND CALLED FOR A REMAND REPORT FROM HIM. AFTER O BTAINING THE REMAND REPORT FROM THE AO AND AFTER CONSIDERING THE SUBMIS SIONS OF THE ASSESSEE TO 13 ITA NO.5068/MUM/2009 SHRI JAFFERALI K. RATTONSEY THE REMAND REPORT, THE LD. CIT(A) HELD THAT NO ADDI TION CAN BE MADE U/S.68 OF THE I.T. ACT IN THE INSTANT CASE. HE, HOWEVER, U PHELD THE ALTERNATE PROPOSITION OF THE AO IN TREATING THE SHORT TERM CA PITAL GAIN ON THE SALE OF THE SHARES AND THE UNEXPLAINED INVESTMENT IN THE AC QUISITION OF THE SAID SHARES. WHILE DOING SO, HE NOTED THE AO HAS ADOPTED TWO DIFFERENT STANDS, ON ONE HAND HE IS CHARGING ENTIRE SALE PROCEEDS OF THE IMPUGNED SHARES AS UNACCOUNTED INCOME U/S. 68 OF THE ACT AND ON THE OT HER HAND, HE IS CHARGING THE TOTAL SALE RECEIPT FROM THE IMPUGNED S HARES AS SHORT TERM CAPITAL GAIN. HE HAS FURTHER CHARGED TO TAX THE TOT AL PURCHASE PRICE OF THE IMPUGNED SHARES ON THE DATE OF DEMATERIALIZATION AS UNEXPLAINED INVESTMENT IN THE RELEVANT SHARES. ACCORDING TO HI M, THE AO CANNOT BE ALLOWED TO HAVE TWO DIFFERENT DECISIONS ON THE SAME SET OF FACTS. HE CAN EITHER TAX THE IMPUGNED TRANSACTION OF SHARES AS UN EXPLAINED CASH CREDIT U/S. 68 OF THE ACT OR AS SHORT TERM CAPITAL GAINS A S WELL AS UNEXPLAINED INVESTMENTS. ACCORDING TO HIM THE FACTS AND CIRCUMS TANCES PLACED BEFORE HIM AS WELL AS THE FACTS APPARENT FROM THE ASSESSME NT ORDER REVEAL THAT ENTIRE SALE PROCEEDS OF THE SHARES WERE RECEIVED ON THE SALE OF DEMATTED SHARES THROUGH THE REGISTERED BROKER I.E. M/S. TECH NO SHARES AND STOCKS LTD. 1. VIKAS BUILDING, GROUND FLOOR, 11 BANK STREE T, FORT, MUMBAI-400 001. THE SAID BROKER IS THE REGISTERED BROKER ON TH E BSE AND NSE HAVING REGISTRATION NO. INB 011033637 AND INB 231033631 RE SPECTIVELY. THE SAID BROKER IS REGULARLY ASSESSED TO INCOME-TAX BY ASSTT . COMMISSIONER OF INCOME-TAX. CIRCLE 4(2), MUMBAL AND HIS PAN NO. HAS BEEN FURNISHED BEFORE THE AO AS AAACT 4464G. THE SAID BROKER M/S. TECHNO SHARES & STOCKS LTD. 14 ITA NO.5068/MUM/2009 SHRI JAFFERALI K. RATTONSEY WAS IN TOUCH WITH THE AO AND HE HAS FURNISHED THE R EQUISITE INFORMATION BEFORE THE AO REGARDING THE SALE OF IMPUGNED SHARES . THE SAID BROKER HAS A WEBSITE KNOWN AS WWW.TECHNOWORLD.IN. THE SAID BROK ER M/S. TECHNO SHARES & STOCKS LTD. HAS UNAMBIGUOUSLY STATED THAT IT HAD CARRIED OUT THE TRANSACTIONS OF SALE OF IMPUGNED SHARES ON BEHALF O F THE ASSESSEE AND THAT NECESSARY CHARGES WERE PAID IN RESPECT OF THE SAME TO THE STOCK EXCHANGE AND THE SECURITIES TRANSACTION TAX (STT) IN RESPECT OF THE RELEVANT SALES OF IMPUGNED SHARES WERE ALSO PAID AS PER PROVISIONS OF LAW. THE ASSESSEE HAD ALSO PRODUCED THE RELEVANT CONTRACT NOTES FOR THE S ALE OF IMPUGNED SHARES FROM THE SAID BROKERS I.E. M/S. TECHNO SHARES AND S TOCKS LTD, COPY OF BROKERS ACCOUNT IN HIS BOOKS OF ACCOUNTS AND COPY O F HIS BANK STATEMENT EVIDENCING THE DETAILS OF RECEIPT OF THE SALE CONSI DERATION THROUGH THE AFORESAID M/S. TECHNO SHARES & STOCKS LTD. THE SALE CONSIDERATION WAS RECEIVED BY ACCOUNT PAYEE CHEQUES THROUGH BANKING C HANNELS AND FROM A REPUTED BSE/NSE BROKER WHO IS REGULARLY ASSESSED TO TAX BY ACIT CIRCLE- 4(2) MUMBAI. THESE RELEVANT SHARES TRADING HAVE BEE N ROUTED THROUGH PRESCRIBED AND MANDATORY CHANNELS WHICH ARE MONITOR ED BY SEBI, BSE, NSE ETC. NO ABNORMALITIES REPORTED BY ANY AGENCY. T HERE IS NO SEIZED MATERIAL FOUND NOR SEIZED BY ANY AUTHORITY U/S. 132 (1) OF THE ACT OR OTHERWISE ON THIS ISSUE. NEITHER ANY STATEMENT ON O ATH U/S. 132(4) OF THE ACT WAS RECORDED ON THIS ISSUE NOR ANY DISCLOSURE M ADE. THESE OVERWHELMING EVIDENCES HAVE NOT BEEN DISCOUNTED BY THE AO AND HE HAS NOT ASSAILED THE RELIABILITY, VALIDITY OR GENUINENESS O F SALE OF THE IMPUGNED LISTED SHARES. THE JURISDICTIONAL AO OF THE SAID TECHNO SH ARES & STOCKS LTD. HAS 15 ITA NO.5068/MUM/2009 SHRI JAFFERALI K. RATTONSEY ALSO NOT FOUND ANYTHING WRONG OR ANYTHING SUSPICIOU S ABOUT THE CAPACITY OR CREDITWORTHINESS OF THE SAID M/S. TECHNO SHARES & S TOCKS LTD. IN THE ASSESSMENT YEAR 2006-07 WITH REFERENCE TO THE SALE TRANSACTIONS OF THE IMPUGNED SHARES WITH THE ASSESSEE CONCERNED. THE CO RRESPONDING BROKERAGE INCOME EARNED ON THE SALE OF THESE LISTED SHARES HA VE BEEN ACCEPTED BY THE DEPARTMENT AND CHARGED TO TAX. STT HAS ALSO BEEN PA ID ON THE TRADING OF THESE LISTED SHARES. HE OBSERVED THAT IN VIEW OF TH ESE OVER-WHELMING EVIDENCES AND THE FACTS AND CIRCUMSTANCES, THE SALE PROCEEDS OF THE IMPUGNED SHARES CANNOT BE DISBELIEVED. AO HAS NOT D ISCUSSED ANY EVIDENCE TO ASSAIL THE SAID SALE TRANSACTION OF IMPUGNED SHA RES. ON THE OTHER HAND, THE MATERIAL EVIDENCES INDICATE THAT THE SALES OF T HE IMPUGNED SHARES HAVE GENUINELY TAKEN PLACE. RELYING ON A COUPLE OF DECI SIONS, HE HELD THAT ONCE THE IDENTITY OF THE CREDITOR, HIS CAPACITY TO ADVAN CE THE LOANS AND THE GENUINENESS OF THE SALE TRANSACTIONS ARE ESTABLISHE D THEN ONUS SHIFTS ON TO THE DEPARTMENT. SINCE THE ASSESSEE IN THE INSTANT C ASE HAS DISCHARGED THE PRIMARY ONUS CAST ON HIM AND THE AO HAS NOT BROUGHT ANY MATERIAL TO COUNTER THE OVERWHELMING EVIDENCES PRODUCED BY THE ASSESSEE, HE DELETED THE ADDITION MADE BY THE AO U/S.68 OF THE I.T. ACT. HE HOWEVER, UPHELD THE ACTION OF THE AO ON ACCOUNT OF THE ALTERNATE ADDITI ON MADE UNDER SHORT TERM CAPITAL GAIN AND UNEXPLAINED INVESTMENT AS DIS CUSSED IN PARA 11 AND 11.11 APPEARING ON PAGES 16 AND 17 OF THE ASSESSMEN T ORDER. ACCORDING TO THE LD. CIT(A) THE AO COULD NOT DISPROVE THE SALE P ROCEEDS OF THE IMPUGNED LISTED SHARES AND THE ASSESSEE ALSO COULD NOT SUCCE SSFULLY PROVE THE PURCHASE OF THE AFORESAID RELEVANT SHARES FROM THE SAID M/S. MAHASAGAR 16 ITA NO.5068/MUM/2009 SHRI JAFFERALI K. RATTONSEY SECURITIES P. LTD. ON THE SPECIFIED DATES AND THE E VIDENCES COLLECTED BY AO ARE SUFFICIENT TO HOLD THAT THE IMPUGNED LISTED SHA RES WERE NOT DEMATERIALIZED ON OR IMMEDIATELY AFTER THE ALLEGED DATES OF PURCHASES. THE IMPUGNED SHARES GOT DEMATERIALIZED PERHAPS ON OR AB OUT THE DATE OF SALE OF THE IMPUGNED LISTED SHARES. THE ASSESSEE HAS NOT F URNISHED SUFFICIENT EVIDENCES TO ESTABLISH THAT THE IMPUGNED SHARES WER E GENUINELY PURCHASED ON THE SPECIFIED DATE FROM THE SAID M/S. MSSP. HE A CCORDINGLY UPHELD THE ALTERNATE ACTION OF THE AO IN TAXING THE SHORT TERM CAPITAL GAIN OF `. 80,03,027/- AND UNEXPLAINED INVESTMENT OF `. 4,41,10,775/-. 6. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 7. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO PA GES 18 TO 43 OF THE PAPER BOOK DREW THE ATTENTION OF THE BENCH TO THE C OPIES OF CONTRACT NOTES AND PURCHASE BILLS OF THE SHARES PURCHASED FROM MAH ASAGAR SECURITIES PRIVATE LIMITED (MSPL). REFERRING TO PAPER BOOK PA GE 44 OF THE PAPER BOOK HE DREW THE ATTENTION OF THE BENCH TO THE COPY OF T HE BANK STATEMENT OF HDFC BANK EVIDENCING THE PAYMENT FOR PURCHASE OF SH ARES. REFERRING TO PAPER BOOK PAGE 45 OF THE PAPER BOOK THE LD. COUNSE L FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE COPY OF THE ACCOU NTANT PAYEE CHEQUE ISSUED TO MSPL BY THE ASSESSEE. REFERRING TO PAPER BOOK PAGES 46 TO 58 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE DRE W THE ATTENTION OF THE BENCH TO THE COPY OF THE LEDGER ACCOUNT OF MSPL IN THE BOOKS OF THE ASSESSEE. REFERRING TO PAPER BOOK PAGE 59 OF THE PA PER BOOK THE LD. COUNSEL 17 ITA NO.5068/MUM/2009 SHRI JAFFERALI K. RATTONSEY FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE COPY OF THE LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF MSPL. REFE RRING TO PAPER BOOK PAGES 62 TO 88 OF THE PAPER BOOK THE LD. COUNSEL FO R THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE COPIES OF THE CONTRAC T NOTES AND SALE BILLS OF ALL THE SHARES SOLD FROM TECHNO SHARES & STOCKS LTD. R EFERRING TO PAPER BOOK PAGES 89 TO 94 OF THE PAPER BOOK THE LD. COUNSEL FO R THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE COPY OF THE D-MAT ACC OUNT. REFERRING TO PAPER BOOK PAGE 95 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE COPY OF THE CONFIRMAT ION LETTER DTD. 28.10.2005 FROM SUNCHAN SECURITIES LIMITED ACCORDING TO WHICH THEY HAVE TRANSFERRED THE VARIOUS SHARES ON BEHALF OF MSPL TO THE DP ACCO UNT OF THE ASSESSEE WITH M/S TECHNO SHARES & STOCKS LIMITED. REFERRING TO P ARA 8 OF THE ASSESSMENT ORDER AT PAGE 11 & 12, THE LD. COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THE A.O. DOUBTED ONLY THE PURCHASES BUT DOES NOT DISPUT E THE SALE. HOWEVER, HE HAS MADE AN ADDITION U/S 68 OF THE ACT WHICH WAS DE LETED BY THE LD. CIT(A) AND FOR WHICH THE REVENUE IS NOT IN APPEAL BEFORE T HE TRIBUNAL. 7.1 HE SUBMITTED THAT THE ENTIRE ADDITION OF UNEXPL AINED INVESTMENT IS BASED ON THE STATEMENT GIVEN BY MR. MUKESH CHOKSI. REFERRING TO THE COPY OF STATEMENT OF MR. MUKESH CHOKSI RECORDED ON 24.12 .2008, A COPY OF WHICH IS PLACED AT PAPER BOOK PAGES 19 TO 23) HE SUBMITTE D THAT IN REPLY TO QUESTION NO. 7 MR. MUKESH CHOKSI SUBMITTED THAT HE DOES NOT KNOW THE ASSESSEE. SIMILARLY IN HIS REPLY TO QUESTION NO. 8 HE HAS STATED THAT THE TRANSACTIONS AS PER LEDGER ACCOUNT SHOWN TO HIM ARE NOT CARRIED OUT THROUGH 18 ITA NO.5068/MUM/2009 SHRI JAFFERALI K. RATTONSEY THEM. HE HAS STATED THAT THEIR NAME HAS BEEN WRONG LY USED AND NO TRANSACTION MENTIONED IN THE LEDGER HAS BEEN CARRIE D OUT. ACCORDING TO THEM MSPL HAS NO RELATION WITH THE ASSESSEE AND HIS WIFE. REFERRING TO THE CROSS EXAMINATION STATEMENT OF MR. MUKESH CHOKSI RE CORDED U/S 131 OF THE ACT BY THE ASSESSEE IN THE PRESENCE OF THE A.O. (CO PY OF WHICH IS PLACED AT PAPER BOOK PAGES 24 TO 26, THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE REPLY GIVEN BY MR. MU KESH CHOKSI IN RESPONSE TO QUESTION NO. 2 WHEREIN HE HAS CONFIRMED TO HAVE RECEIVED THE CHEQUES. REFERRING TO THE REPLY GIVEN BY MR. MUKESH CHOKSI D URING THE COURSE OF CROSS EXAMINATION, HE SUBMITTED THAT VIDE QUESTION NO. 4 HE HAD STATED THAT HE PREPARES THE ACCOUNT ON RECEIPT BASIS AND CHEQUE S RECEIVED BY HIM ARE ACCOUNTED AS A GENERAL RECEIPT AND ON WHICH THE COM MISSION EARNED BY HIM HAVE BEEN ACCOUNTED FULLY. HE SUBMITTED THAT FROM THE ABOVE IT CAN BE NOTED THAT MSPL HAS NOT DENIED RECEIPT OF MONEY BUT ONLY HAVE DENIED THE TRANSACTION ITSELF. HE SUBMITTED THAT IT IS A CASE WHERE THE RECEIPTS WERE RECORDED AS GENERAL RECEIPT AND IT IS THE CASE OF T HE ASSESSEE THAT THE ACCOUNTS OF THE BROKERS WERE NOT PROPERLY MAINTAINE D. MAINTENANCE OF ACCOUNTS NOT PROPERLY BY THE BROKER CANNOT BE A REA SON TO TREAT THE EVIDENCES OF THE ASSESSEE AS IN-SUFFICIENT AND THE ENTIRE TRANSACTION CANNOT BE TREATED AS BOGUS. HE SUBMITTED THAT SINCE THE SH ARES WERE DEMATERIALISED BEFORE THE DATE OF SALE IT CONFIRMS THE FACT THAT T HE SAID SHARES WERE IN FACT PURCHASED BY THE ASSESSEE PRIOR TO THE DE-MATERIALI SATION. REFERRING TO THE CONFIRMATION LETTER DTD. 28.10.2005 FROM SUNCHAN SE CURITIES WHICH WAS FILED BEFORE THE A.O. HE SUBMITTED THAT THE SAME CLEARLY STATES THAT THE SHARES 19 ITA NO.5068/MUM/2009 SHRI JAFFERALI K. RATTONSEY PURCHASED BY THE ASSESSEE WERE TRANSFERRED ON BEHAL F OF MSPL TO THE DP ACCOUNT. THEREFORE, THE ABOVE EVIDENCES CLEARLY AND CONCLUSIVELY PROVE THAT THE ASSESSEE HAS DULY DISCHARGED THE ONUS CAST UPON HIM. THE REVENUE HAS NOT BROUGHT ON RECORD ANYTHING TO SHOW THAT THESE A RE FALSE OR UNTRUE. 7.2. HE SUBMITTED THAT MR. MUKESH CHOKSI AT ONE TI ME DENIES TO HAVE MADE THE TRANSACTIONS WITH THE ASSESSEE OR EVEN KNOWING THE ASSESSEE. HOWEVER, DURING CROSS EXAMINATION HE HAS ACCEPTED TO HAVE RE CEIVED THE CHEQUE FROM THE ASSESSEE. THEREFORE THERE IS NO EVIDENTIARY VAL UE OF MR. MUKESH CHOKSI ON ACCOUNT OF DOUBLE SPEAKING. REFERRING TO THE DE CISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. EASTERN COMMERCIA L ENTERPRISES [1994] 210 ITR 103, HE SUBMITTED THAT THE HONBLE COURT IN THE SAID DECISION HAS OBSERVED THAT A MAN INDULGING IN DOUBLE SPEAKING CA NNOT BE SAID BY ANY MEANS A TRUTHFUL MAN AT ANY STAGE AND NO COURT CAN DECIDE ON WHICH OCCASION HE WAS TRUTHFUL. REFERRING TO THE DECISIO N OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT V. MRS. UTTARA S. SHOREWALA AND VICE VERSA IN ITA NO. 5506 & 5507/MUM/2009 AND C.O. NO. 107/MUM/2010 ORDER DTD. 25.05.2011 FOR A.Y. 2001-02 2002-03 HE S UBMITTED THAT THE TRIBUNAL FOLLOWING THE DECISION OF THE HONBLE CALC UTTA HIGH COURT HAS DISMISSED THE APPEAL FILED BY THE REVENUE AND ALLOW ED THE C.O. OF THE ASSESSEE ON ACCOUNT OF DOUBLE SPEAKING BY MR. MUKES H CHOKSI. 7.3 REFERRING TO THE CBDT CIRCULAR NO. 704 DT. 28.4 .95 (COPY OF WHICH IS PLACED AT PAPER BOOK PAGE 49) HE SUBMITTED THAT IT IS THE DATE OF BROKERS 20 ITA NO.5068/MUM/2009 SHRI JAFFERALI K. RATTONSEY NOTE THAT SHOULD BE TREATED AS THE DATE OF TRANSFER IN CASES OF SALE TRANSACTIONS OF SECURITIES PROVIDED SUCH TRANSACTIO NS ARE FOLLOWED UP BY DELIVERY OF SHARES AND ALSO THE TRANSFER DEEDS. SI MILARLY, IN RESPECT OF THE PURCHASERS OF THE SECURITIES, THE HOLDING PERIOD SH ALL BE RECKONED FROM THE DATE OF THE BROKERS NOTE FOR PURCHASE ON BEHALF OF THE INVESTORS. REFERRING TO CIRCULAR NO. 768 DT. 24.06.1998 ISSUED BY CBDT ( COPY OF WHICH IS PLACED AT PAPER BOOK PAGE 50) HE SUBMITTED THAT THE CIRCUL AR WAS ISSUED TO CLARIFY DETERMINATION OF THE DATE OF TRANSFER AND THE PERIO D OF HOLDING OF SECURITIES HELD IN DEMATERIALISED FORM. HE SUBMITTED THAT IN V IEW OF THE ABOVE TWO CIRCULARS ISSUED BY CBDT IT IS CRYSTAL CLEAR THAT I N CASE OF SECURITIES THE DATE OF PURCHASE IS CONCLUSIVELY TO BE TAKEN FROM THE BROKERS NOTE/CONTRACT NOTE AND THE PERIOD OF HOLDING IS ALS O TO BE RECKONED FROM THE DATE OF PURCHASE AND NOT FROM THE DATE OF DEMATERIA LISATION AS ALLEGED BY THE A.O. AND THE LD. CIT(A). HE SUBMITTED THAT DEM ATING OF THE SHARES IS A LENGTHY PROCESS WHICH TAKES ABOUT 6 TO 8 MONTHS OR EVEN MORE THAN THAT. THEREFORE, IN VIEW OF THE VARIOUS DOCUMENTS FURNISH ED BY THE ASSESSE THE PURCHASE OF SHARES ARE GENUINE, THE HOLDING PERIOD OF EACH SHARE IS MORE THAN 12 MONTHS AND THEREFORE THE SAME CANNOT BE REJ ECTED MERELY ON THE BASIS OF STATEMENT OF SHRI MUKESH CHOKSI WHO INDULG ES IN DOUBLE SPEAKING. HE ALSO RELIED ON THE FOLLOWING DECISIONS:- .01 COMMISSIONER OF INCOME-TAX VS. KORLAY TRADING CO. L TD 232 ITR 820) (CAL) - ,02 ACIT VS CLARIDGES INVESTMENT & FINANCES (P) LTD. [2 007) 18 SOT 390 (MUM) O3 ABHISHEK MOHATA VS INCOME TAX OFFICER (I.T.A NOS. 1 22 TO 124/KOL/2011) 04 DHAKESWARI COTTON MILLS LTD._V._COMMISSIONER_OF INC OME-TAX (26 ITR 775) (SC) 21 ITA NO.5068/MUM/2009 SHRI JAFFERALI K. RATTONSEY 00599_- ASSISTANT COMMISSIONER OF INCOME TAX VS. J.R. SOLVE NT INDUSTRIES (P) LTD. 24 DTR 387 (CHD) 05 ATMA RAM TULSYAN AND OTHERS ITA 495/ALL/2007 06 - INCOME TAX OFFICER V/S SMT. KUSUMLATA (2006) 105 T TJ JODH 265 07 COMMISSIONER OF INCOME-TAX VS. ANUPAM KAPOOR (299 I TR 179) (PH) 08 MANSI MODI (PODDAR) VS. ITO (ITA NO 1465/KOI/2010) 8. THE LD. D.R., ON THE OTHER HAND, HEAVILY RELIED ON THE ORDER OF THE LD. CIT(A). HE SUBMITTED THAT IN VIEW OF DENIAL OF MR. MUKESH CHOKSI THE TRANSACTIONS CANNOT BE ACCEPTED AS GENUINE. THE VA RIOUS DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSE ARE DISTINGUISHA BLE AND ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. HE ACCORDINGLY S UBMITTED THAT THE ORDER OF THE LD. CIT(A) SHOULD BE UPHELD. 9. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. IN THE INSTANT CASE THE A.O. MADE ADDITION OF RS. 5,09,25,802/- AS UNEXPLAINED CASH CREDIT HOLDING TH E SALE OF SHARES BY THE ASSESSEE AS BOGUS. WHILE DOING SO HE RELIED HEAVIL Y ON THE STATEMENT GIVEN BY MR. MUKESH CHOKSI WHEREIN HE HAS STATED THAT THE TRANSACTIONS OF PURCHASE OF SHARES ARE NOT CARRIED OUT THROUGH THEM AND THE NAME OF HIS COMPANY HAS BEEN WRONGLY USED AND NO TRANSACTION ME NTIONED IN THE LEDGER HAS BEEN CARRIED OUT THROUGH THEM. THE A.O. HAD AL SO ANOTHER PROPOSITION THAT THE TOTAL PURCHASE PRICE ON THE DATE OF DEMATE RIALISATION COMES TO RS. 22 ITA NO.5068/MUM/2009 SHRI JAFFERALI K. RATTONSEY 44110775/- WHICH BECOMES UNEXPLAINED INVESTMENT IN SHARES. AFTER DEDUCTING THE INVESTMENT IN SHARES FROM SALE PRICE THE SHORT TERM CAPITAL GAIN COMES TO RS. 80,03,027/-. HOWEVER, SINCE HE C ONSIDERED THE ENTIRE RECEIPT ON THE SALE OF SHARES AS UN- ACCOUNTED INCO ME AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE U/S 68 OF THE I .T. ACT HE DID NOT MAKE ANY SEPARATE ADDITION UNDER THE HEAD UNEXPLAINED I NVESTMENT AND SHORT TERM CAPITAL GAIN. 9.1 WE FIND THE LD. CIT(A) DELETED THE ADDITION U/S 68 ON THE GROUND THAT THE SALE OF SHARES HAS NOT BEEN DOUBTED BY THE A.O. IN THE ASSESSMENT PROCEEDINGS AS WELL AS DURING REMAND PROCEEDINGS AN D THE ASSESSEE HAS PROVED THE GENUINENESS OF THE SALE OF SHARES, THERE FORE, NO ADDITION CAN BE MADE U/S 68 OF THE ACT. THE REVENUE IS NOT IN APPE AL BEFORE US AGAINST THE SAID OBSERVATION OF THE LD. CIT(A). HOWEVER, THE L D. CIT(A) UPHELD THE ALTERNATE PROPOSITION OF THE A.O. THAT THE PURCHASE PRICE ON THE DATE OF DEMATERIALISATION OF SHARES BECOME UNEXPLAINED INVE STMENT IN THE HANDS OF THE ASSESSEE AND THE DIFFERENCE BETWEEN IN SALE AND PURCHASE OF SHARES HAS TO BE TREATED AS SHORT TERM CAPITAL GAIN SINCE THE ASSESSEE COULD NOT SUBSTANTIATE THE PURCHASES. THEREFORE, THE QUESTION THAT HAS TO BE ANSWERED IN THE GROUNDS RAISED BY THE ASSESSEE IS AS TO WHET HER THE PURCHASE OF SHARES BY THE ASSESSEE ARE GENUINE OR NOT AND WHETH ER THE HOLDING PERIOD IS MORE THAN 12 MONTHS OR NOT. 23 ITA NO.5068/MUM/2009 SHRI JAFFERALI K. RATTONSEY 9.2 WE FIND THE ASSESSEE BEFORE THE A.O. HAS FILED THE COPIES OF CONTRACT NOTES AND PURCHASE BILLS OF ALL THE SHARES PURCHASE D FROM MSPL (COPIES OF WHICH ARE PLACED AT PAPER BOOK PAGE 18 TO 43). SIM ILARLY THE BANK STATEMENT MAINTAINED WITH HDFC BANK SHOWS EVIDENCE OF PAYMENT TO MSPL. THE XEROX COPY OF THE ACCOUNT PAYEE CHEQUE ISSUED T O MSPL DTD. 1.12.05 FOR RS. 12,40.565/- IS PLACED AT PAPER BOOK PAGE 45 AND WAS ALSO FILED BEFORE THE A.O. AND CIT(A). THE COPY OF LEDGER A/C OF MSPL IN THE BOOKS OF THE ASSESSEE AND THE COPY OF THE LEDGER ACCOUNT OF THE ASSESSEE IN BOOKS OF MSPL WERE ALSO FILED BEFORE THE A.O. SIMILARLY THE COPIES OF CONTRACT NOTES AND SALE BILLS OF ALL THE SHARES TRANSFERRED TO TEC HNO SHARES & STOCKS LTD. WITH COPY OF D-MAT ACCOUNT AND COPY OF CONFIRMATION LETTER DTD. 28.10.2005 FROM SUNCHEM SECURITIES P. LTD. WERE ALSO FILED BEF ORE THE A.O. NOTHING WAS BROUGHT BY THE A.O. TO PROVE THAT ANY OF THESE EVID ENCES FILED BY THE ASSESSEE IS FALSE OR UNTRUE. THE REVENUE HAS BASICA LLY GONE ON THE STATEMENT OF MR. MUKESH CHOKSI WHO DENIED TO HAVE K NOWN THE ASSESSEE AND DENIED TO HAVE MADE ANY TRANSACTION WITH THE AS SESSEE ON ACCOUNT OF PURCHASE OF SHARES. THE RELEVANT QUESTIONS AND ANSW ERS OF MR. MUKESH CHOKSI RECORDED BY THE A.O. ON 24.12.2008, COPY OF WHICH IS PLACED AT PAPER BOOK PAGE NO. 19 TO 23 ARE AS UNDER. Q NO. 7:- DO YOU KNOW SHRI JAFFERALI K. RATTONSEY A ND SMT. HAMIDA RATTONSEY? ANS. NO. I DO NOT KNOW THEM. Q NO. 8:- I AM SHOWING YOU THE LEDGER ACCOUNT OF MA HASAGAR SECURITIES PVT. LTD. IN THE BOOKS OF SHRI J.K. RATTONSEY AND SMT. HAMIDA J. RATTONSEY. FROM THIS ACCOUNT IT IS SEEN THAT THE ASSESSEE HAVE CARRIED OUT REGULAR 24 ITA NO.5068/MUM/2009 SHRI JAFFERALI K. RATTONSEY TRANSACTION WITH MAHASAGAR SECURITIES PVT. LTD. P L. CONFIRM THE LEDGER ACCOUNT FURNISHED BY THE ASSESSEE WITH THE COPY OF LEDGER ACCOUNT OF J.K. RATTONSEY AND SMT. HAMIDA J. RATTONSEY APPEARING IN THE BOOKS OF MAHASAGAR SECURITIES PVT. LTD. ANS.: I HAVE SEEN THE LEDGER AND ON THE PERUSAL OF THE SAME I FOUND THAT THE TRANSACTIONS ARE NOT CARRIED OUT THROUGH US. IT SE EMS THAT OUR NAME HAS BEEN USED AND NO TRANSACTION MENTIONED IN THE LEDGE R HAVE BEEN CARRIED OUT THROUGH US. MAHASAGAR SECURITIES HAVE NO RELATIONS WITH THE J.K. RATTONSEY AND SMT. HAMIDA J. RATTONSEY. 9.3 ON THE BASIS OF THE ABOVE STATEMENT OF MR. MUKE SH CHOKSI THE LD. CIT(A) UPHELD THE ALTERNATE PROPOSITION OF THE A.O. THAT TOTAL PURCHASE PRICE ON THE DATE OF DEMATERIALISATION OF SHARES AMOUNTIN G TO RS. 4,41,10,775/- BECOMES UNEXPLAINED INVESTMENT SINCE THE PURCHASES ARE NOT RECORDED IN THE BOOKS OF THE ASSESSEE ON THAT DATE AND THE DIFF ERENCE BETWEEN THE SALE PRICE AND THE PURCHASE PRICE AMOUNTING TO RS. 80,03 ,027/- BECOMES SHORT TERM CAPITAL GAIN SINCE THE HOLDING PERIOD OF THE S HARES IS LESS THAN 12 MONTHS. 9.4 HOWEVER, WE FIND DURING THE COURSE OF CROSS EXA MINATION BY THE ASSESEE BEFORE THE A.O. ON 29.12.2008 MR. MUKESH CH OKSI CONFIRMED TO HAVE RECEIVED THE CHEQUES FROM THE ASSESSEE. THE R ELEVANT QUESTION NO. 2 AND ANSWER THEREOF IS AS UNDER:- Q.2. QUESTION PUT UP BY SHRI DIGANT BHATT WE HAVE ISSUED A CHEQUE FROM JAFFERALLI K. RATTONSEY, HAMIDA RATTONSEY FOR RS.12,40,565/- AND RS.11,91,378/- RESPECTIVELY, WHICH YOU HAVE RECEIVE D, KINDLY CONFIRM. 25 ITA NO.5068/MUM/2009 SHRI JAFFERALI K. RATTONSEY ANS. I CONFIRM THE ABOVE CHEQUES HAVE BEEN RECEIVED BY ME. SIMILARLY, REPLY GIVEN BY SHRI MUKESH CHOKSI TO QU ESTION NO. 3 TO 5 ARE AS UNDER:- Q.3 QUESTION PUT UP BY SHRI DIGANT BHATT - WE HAVE RECEIVED THE SHARES IN DEMAT ACCOUNT OF SHRI JAFFERALLI K. RATTONSEY AN D HAMIDA RATTONSEY FROM SUNCHAN SECURITIES LTD. ON YOUR BEHALF, KINDLY CONF IRM. ANS. I HAVE NOT GIVEN ANY INSTRUCTIONS. Q.4 QUESTION PUT UP BY DR. MAHESH AKHADE * IN THE S TATEMENT RECORDED U/S.131 OF THE IT. ACT ON 24.12.2008, YOU HAVE DENI ED IN THE ANSWER TO QUESTION NO.8, 9, 12 & 13 THAT MAHASAGAR SECURITIES PVT. LTD. AND ALLIANCE INTERMEDIARIES NETWORK PVT. LTD. HAS NO RELATIONSHI P TO THE ASSESSEES J.K. RATTONSEY, HAMIDA RATTONSEY, SUNAY MEHTA AND SAMIT MEHTA. YOU HAVE ALSO DENIED YOU HAVE ANY SHARE TRANSACTIONS WITH TH ESE PERSONS. KINDLY CONFIRM THE SAME. ANS. I AM PREPARING ACCOUNTS ON RECEIPT BASIS AND T HE CHEQUES RECEIVED BY ME ARE ACCOUNTED AS A GENERAL RECEIPTS AND ON WHICH THE COMMISSION EARNED BY ME HAS BEEN ACCOUNTED FULLY. HERE THE SHARES HAV E BEEN DELIVERED BY SUNCHAN SECURITIES, I HAVE NOT GIVEN ANY INSTRUCTIO NS TO SUNCHAN SECURITIES. Q.NO.5 QUESTION PUT UP BY DR. MAHESH AKHADE KINDL Y FURNISH THE STATEMENT OF BANK ACCOUNTS OF MAHASAGAR SECURITIES PVT. LTD. IN WHICH THE ABOVE MENTIONED TWO CHEQUES AMOUNTING TO RS.12,40,5 65/- AND RS.11,91,378/- HAVE BEEN DEPOSITED. ANS. AT PRESENT THEY ARE NOT AVAILABLE WITH ME, I W ILL FURNISH THE SAME AFTER RECEIPT OF THE SAME. 9.5 FROM THE ABOVE, IT IS CLEAR THAT MR. MUKESH CHO KSI IS DOUBLE SPEAKING IN HIS STATEMENTS I.E. ONE GIVEN BEFORE THE A.O. AN D THE ONE DURING CROSS 26 ITA NO.5068/MUM/2009 SHRI JAFFERALI K. RATTONSEY EXAMINATION BEFORE THE A.O. UNDER THESE CIRCUMSTAN CES ONE HAS TO SEE THE EVIDENTIARY VALUE OF A PERSON MAKING DOUBLE SPEAKIN G. WE FIND THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF EASTERN COMMERCI AL ENTERPRISES (SUPRA) HAS HELD THAT A MAN INDULGING IN DOUBLE SPEAKING CA NNOT BE SAID BY ANY MEANS A TRUTHFUL MAN AT ANY STAGE AND NO COURT CAN DECIDE ON WHICH OCCASION HE WAS TRUTHFUL. WE FIND THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF MRS. UTTARA S. SHOREWALA (SUPRA) (IN WH ICH ONE OF US THE ACCOUNTANT MEMBER IS A PARTY) FOLLOWING THE DECISIO N OF HONBLE CALCUTTA HIGH COURT UPHELD THE ORDER OF THE LD. CIT(A) IN HO LDING THAT THE A.O. CANNOT MAKE ANY ADDITION IN THE ASSESSEES HANDS DESPITE T HE ASSESSEE NOT HAVING MADE ANY PAYMENT TO THE ENTITIES MENTIONED BY SHRI CHOKSI, WHOSE STATEMENT IS BEING RELIED UPON BY HIM. THE CIT (A) ALSO NOTED THAT MR. MUKESH CHOKSI HAS BEEN VACILLATING RIGHT THROUGH AN D HAS GIVEN DIFFERENT VERSIONS AT DIFFERENT STAGES OF THE PROCEEDINGS AND THEREFORE HIS EVIDENCE WAS UNRELIABLE. 9.6 IN VIEW OF THE ABOVE JUDICIAL DECISIONS THE STA TEMENT OF MR. MUKESH CHOKSI CANNOT BE A DECIDING FACTOR FOR REJECTING TH E GENUINENESS OF THE PURCHASE OF SHARES BY THE ASSESSEE ESPECIALLY WHEN ALL OTHER SUPPORTING EVIDENCES FILED BY THE ASSESEE WERE NEITHER PROVED TO BE FALSE OR UNTRUE. WE FURTHER FIND MERIT IN THE SUBMISSION OF THE LD. COU NSEL FOR THE ASSESSE THAT THE DEMATERIALIZATION OF SHARES FROM PHYSICAL HOLDI NG IS A LENGTHY PROCESS AND TAKES CONSIDERABLE TIME. THEREFORE, WHEN THERE IS NO DISPUTE TO THE 27 ITA NO.5068/MUM/2009 SHRI JAFFERALI K. RATTONSEY DEMATERIALIZATION OF SHARES BEFORE THE DATE OF SALE , THEREFORE, THE SHARES WERE PURCHASED MUCH PRIOR TO THE DATE OF SALE. 9.7 THE CBDT CIRCULAR NO. 704 DTD. 28.4.1995 STATES THAT IT IS THE DATE OF BROKERS NOTE THAT SHOULD BE TREATED AS THE DATE OF TRANSFER IN CASES OF SALE TRANSACTIONS OF SECURITIES PROVIDED SUCH TRANSACTIO NS ARE FOLLOWED UP BY DELIVERY OF SHARES AND ALSO THE TRANSFER DEEDS. S IMILARLY, IN RESPECT OF THE PURCHASERS OF THE SECURITIES, THE HOLDING PERIOD SH ALL BE RECKONED FROM THE DATE OF THE BROKERS NOTE FOR PURCHASE ON BEHALF O F THE INVESTORS. THE CBDT CIRCULAR NO. 768 DTD. 24.6.1998 WAS ISSUED TO CLARI FY THE DETERMINATION OF DATE OF TRANSFER AND THE PERIOD OF HOLDING OF SECUR ITIES HELD IN DEMAT FORM. IT HAS BEEN STATED THERE IN THAT EARLIER CIRCULAR N O. 704 ISSUED BY THE CBDT RELATING TO THE DATE OF TRANSFER AND PERIOD OF H OLDING DOES NOT CHANGE EVEN WHEN SECURITIES ARE HELD IN THE DEMATERIALIZED FORM. THEREFORE IN VIEW OF THE ABOVE TWO CIRCULARS OF CBDT IT IS CLEAR THAT IN CASE OF SECURITIES THE DATE OF PURCHASE HAS TO BE TAKEN FROM THE BROKER S NOTE/CONTRACT NOTE AND THE PERIOD OF HOLDING IS ALSO TO BE RECKONED FROM T HE DATE OF PURCHASE AND NOT FROM THE DATE OF DEMATERIALIZATION. SINCE TH E HOLDING PERIOD OF THE SHARES AS PER THE BROKERS NOTE AND ITS SUBSEQUENT SALE AFTER DEMATERIALIZATION IS MORE THAN 12 MONTHS, THEREFORE , THE SHARES BECOME LONG TERM CAPITAL ASSET AND THE ASSESSEES CLAIM OF LONG TERM CAPITAL GAIN IS CORRECT. IN THIS VIEW OF THE MATTER WE SET ASIDE T HE ORDER OF THE LD. CIT(A) AND DIRECT THE A.O. TO ACCEPT THE LONG TERM CAPITAL GAIN DECLARED BY THE 28 ITA NO.5068/MUM/2009 SHRI JAFFERALI K. RATTONSEY ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THE GRO UNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED. 10. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 25.01.2012. SD/- D . MANMOHAN) VICE PRESIDENT SD/- ( R K PANDA ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED: 25.01.2012. RK COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT, CITY XVI, MUMBAI 4 CIT(A) 27, MUMBAI 5 DR BENCH D 6 MASTER FILE /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI