Sh. Chandan Gupta, Ludhiana V. ACIT, Ludhiana

ITA 552/CHANDI/2008

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68529 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 year(s) 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 21-01-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 06-06-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Gift; Business income; Principle of natural justice; Sham transactions
• Section: 133(6); 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R. SOOD, A.M AND MS. SUSHMA CHOWLA, J M ITA NO. 552/CHD/2008 ASSESSMENT YEAR : 2004-05 AND ITA NO. 161/CHD/2009 ASSESSMENT YEAR : 2005-06 CHANDAN GUPTA VS. A.C.I.T. C.C. VII 68-A, AGGAR NAGAR LUDHIANA LUDHIANA (APPELLANT) (RESPONDENT) APPELLANT BY SHRI NEERAJ JAIN RESPONDENT BY: SHRI AKHILESH GUPTA DATE OF HEARING 30.8.2013 DATE OF PRONOUNCEMENT 26.9.2013 O R D E R PER T.R.SOOD, A.M THESE APPEALS ARE DIRECTED AGAINST THE ORDER DATED 19.3.2008 AND 26.11.2008 OF THE LD. CIT(A)-II, LUDH IANA. THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF F BY THIS COMMON ORDER. ITA NO. 552/CHD/2008 2 IN THIS APPEAL THE ASSESSEE HAS RAISED FOLLOWING GROUNDS: 1 THE ORDER OF CIT(A)-II IS NOT SPEAKING ORDER ON ALL THE ISSUES OF GROUNDS OF APPEAL RAISED, HENCE THE ORDER OF CIT(A) SHOULD BE SET ASIDE. 2. THE ASSESSEE HAS GIVEN WRITTEN AS WELL AS VERBAL ARGUMENTS TO THE CIT(A)-II, LUDHIANA BUT THE VERBAL ARGUMENTS HAS NOT BEEN CONSIDERED. 3. THE CIT(A)-II HAS NOT CONSIDERED THE CORRECT FAC TS OF THE CASE AND HAS ARBITRARILY DISMISSED THE APPEAL ON TH E GROUND 2 OF LONG TERM PROFITS EARNED BY THE ASSESSEE ON DIFF ERENT SHARES SOLD DURING THE YEAR ALONG WITH DOCUMENTARY EVIDENCES IN THE SHAPE OF PAPER BOOK GIVEN TO HIM AND THE SAM E HAS NOT BEEN CONSIDERED. 4. THAT THE ENQUIRIES MADE AT THE BACK OF ASSESSEE FROM BROKERS, BANKS, STOCK EXCHANGE, REGISTRAR OF COMPAN IES OR FROM THE COMPANY COUNTRY CREDIT CAPITAL LTD. WERE N EVER CONFRONTED TO THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS HENCE VIOLATES THE PRINCIPLES OF NATURA L JUSTICE AND THIS POINT HAS NOT BEEN CONSIDERED BY THE CIT(A )-II, HENCE PROCEEDINGS SHOULD BE QUASHED ON THIS GROUND. 5. THE ASSESSMENT HAS BEEN COMPLETED ON THE BASIS O F M/S SURYA SCRIPTS (P) LTD. AND M/S SUNRISE STOCK SERVIC ES (P) LTD. AND ASSESSEE WAS NEVER CONFRONTED ON THIS ISSUE, HE NCE THE ASSESSMENT BASED IN VIOLATION TO THE PRINCIPLES OF NATURAL JUSTICE SHOULD BE QUASHED AND THIS POINT HAS NOT BE EN CONSIDERED BY THE CIT(A)-II, LDH. 6. THE A.O HAS NO POWERS TO ASK SOURCE OF SOURCE AN D THIS POINT HAS NOT BEEN CONSIDERED BY THE CIT(A)-II LUDH IANA HENCE THE ASSESSMENT SHOULD BE QUASHED ON THIS GROU ND. 7. THE CIT(A)-II HAS NOT CONSIDERED THIS ASPECT THA T A.O HAS NOT POWERS TO CHANGE THE HEAD OF INCOME DECLARE D IN THE RETURN OF INCOME FILED BY THE ASSESSEE AND THE SAME MAY PLEASE BE ACCEPTED. 8. THE A.O HAS CONSIDERED AND ASSESSED THE INCOME O F RS. 5129625/- U/S 68 WHICH IS CONTRARY TO LAW SINCE THE ASSESSEE HAS GIVEN COMPLETE DETAILS AND CIT(A)-II HAS NOT CO NSIDERED THE SAME HENCE THE ORDER OF THE CIT(A)-II IS BAD IN THE EYES OF LAW AND SHOULD BE SET ASIDE ON THIS ISSUE. 9. THAT LONG TERM CAPITAL GAINS EARNED ON THE SHARE S OF COUNTRY CREDIT CAPITAL LTD. COMES TO RS. 4861625/- WHEREAS THE A.O. HAS MADE THE ADDITION OF RS. 5129625/- BEI NG SALE VALUE IGNORING THE COST OF SHARES AND THE CIT(A)-II HAS NOT CONSIDERED THIS ISSUE. THE ADDITIONS OF THE SHARES MADE ARBITRARILY BY THE A.O. AND UPHELD BY THE CIT(A)-II LUDHIANA SHOULD BE DELETED. 10. THE ASSESSEE HAS FILED RETURN OF INCOME AT RS. 5847952/- WHICH INCLUDES LONG TERM CAPITAL GAINS OF RS. 5137580/- EARNED ON DIFFERENT SHARES. THE A.O HAS M ADE THE ADDITIONS OF RS. 5129625/- ARBITRARILY IGNORING THE COST OF SHARES WHICH WERE PURCHASED AND THE A.O. HAS NOT DO UBTED THE PURCHASE IN THE ASSESSMENT ORDER HENCE ARBITRAR Y 3 ADDITIONS MADE BY THE A.O. AND NOT CONSIDERED BY TH E CIT(A)- II SHOULD BE DELETED. 11. THAT THE QUESTIONNAIRE JURISDICTION BEFORE THE A.O. HAS NOT BEEN DECIDED BY THE CIT(A)-II LUDHIANA WHICH RE QUIRES ADJUDICATION, HENCE ORDER SHOULD SET ASIDE ON THIS ISSUE. 3. GROUNDS NO. 1 & 2 AT THE TIME OF HEARING, THE LD. COUNSEL OF THE ASSESSEE DID NOT MAKE MUCH ARGUMENTS IN RESPECT OF THESE GROUNDS. WHEN HE WAS CONFRONTED A BOUT THE ISSUES, HE SIMPLY STATED THAT THE LD. CIT(A) HAS NO T CONSIDERED MANY ISSUES. THEREFORE, THE MATTER SHOULD BE SET A SIDE. 4 ON THE OTHER HAND, THE LD. DR FOR THE REVENUE REF ERRED TO VARIOUS PARAS AND POINTED OUT THAT THE LD. CIT(A) H AS MET WITH EACH AND EVERY ARGUMENT OF THE ASSESSEE THROUGH PAR AS NO. 7 TO 17 AND THEREFORE, IT CANNOT BE SAID THAT IT IS NOT A SPEAKING ORDER OR THE ARGUMENTS OF THE ASSESSEE HAVE NOT BEE N CONSIDERED. 5 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE IMPUGNED ORDER CAREFULLY AND FIND THAT THE LD. CIT( A) HAS CONSIDERED ALL THE ARGUMENTS IN FACT VARIOUS ARGUME NTS MADE BEFORE US SEEMS TO HAVE BEEN MADE BEFORE HIM ALSO A ND ALL THE ASPECTS OF THESE ARGUMENTS HAVE BEEN CONSIDERED BY HIM AND ADJUDICATED THROUGH PARAS NO. 7 TO 16 AND THEREFORE , IT CANNOT BE SAID THAT THE LD. CIT(A) HAS NOT CONSIDERED THE ARGUMENTS OR HIS ORDER IS NOT A SPEAKING ORDER. ACCORDINGLY TH ESE GROUND ARE DISMISSED. 6 GROUNDS NO. 3 TO 10 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAD FILED RETURN OF INCOME DECLARING INCOM E OF RS. 58,47,952/- CONSISTING OF BUSINESS INCOME AND OTHER INCOME. INCOME FROM SHARES WAS ALSO INCLUDED IN THE RETURN. IT WAS PARTICULARLY NOTICED THAT A SUM OF RS. 51,37,580/- WAS SHOWN ON ACCOUNT OF LONG TERM CAPITAL GAINS ON WHICH TAX WAS LEVIED @ 10%. TO VERIFY THE GENUINENESS OF THESE TRANSACT IONS OF THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF PURCHA SE AND SALE OF SHARES. ON PERUSAL OF THE DETAILS FILED BY THE A SSESSEE IN THIS REGARD, IT WAS FURTHER NOTICED THAT THE MAIN I TEMS OF THE 4 PROFIT GENERATED WAS ON ACCOUNT OF SALE OF SHARES OF COUNTRY CREDIT CAPITAL LTD. THE DETAILS OF TRANSACTION IN RESPECT OF SHARE OF THIS COMPANY HAVE BEEN EXTRACTED BY THE AS SESSING OFFICER AT PAGE 2 OF THE ASSESSMENT ORDER WHICH IS AS UNDER: S N O. . SCRIPT NAME D.O.P NO. OF SHAR ES AMOUN T D.O.S NO. OF SHAR ES AMOUN T VAUL E PER SHAR E IN RS. PROFIT 1. COUNTRY CREDIT CAPITAL LTD. 05.04.0 2 3000 11400 11.11. 03 5000 52785 0 105/- 2. COUNTRY CREDIT CAPITAL LTD. 08.04.0 2 4000 16000 12.11. 03 5000 53160 0 106/- 3. COUNTRY CREDIT CAPITAL LTD. 15.04.0 2 1000 0 51000 09.12. 03 4500 47529 0 105/- 4. COUNTRY CREDIT CAPITAL LTD. 18.04.0 2 8000 44800 05.01. 04 5500 58723 5 106/- 5. COUNTRY CREDIT CAPITAL LTD. 22.04.0 2 6000 35400 09.01. 04 5000 53060 0 106/- 6. COUNTRY CREDIT CAPITAL LTD. 25.04.0 2 7000 42000 12.01. 04 2500 26317 5 105/- 7. COUNTRY CREDIT CAPITAL LTD. 29.04.0 2 5000 38000 19.01. 04 5000 52810 0 105/- 8. COUNTRY CREDIT CAPITAL LTD. 15.05.0 2 7000 29400 20.01. 04 2500 26217 5 105/- 9. COUNTRY CREDIT CAPITAL LTD. 22.01. 04 5000 55885 0 111/- 5 1 0. COUNTRY CREDIT CAPITAL LTD. 27.01. 04 4500 51196 5 113/- 1 1. COUNTRY CREDIT CAPITAL LTD. 28.01. 04 5500 62078 5 113/- 51296 25 FROM THE ABOVE IT WAS GATHERED THAT THE SHARES HAVE BEEN SHOWN TO BE SOLD RANGING FROM RS. 105 TO 113 WHEREA S NAV OF THE SHARES WAS ONLY RS. 7/- AND THEREFORE, THE ASSE SSING OFFICER PROCEEDED TO MAKE FURTHER INQUIRIES. THE AS SESSEE WAS ASKED TO PRODUCE THE SHARE BROKER I.E. M/S MODI SHA RE SHOPPE TO SUPPORT THE CLAIM. THE ASSESSEE FAILED TO PRODU CE THE SHARE BROKERS. EVEN SUMMONS WERE ISSUED U/S 131 OF THE I T ACT WHICH ALSO REMAINED UN-COMPLIED WITH. THEREAFTER TH E ASSESSING OFFICER WROTE A LETTER TO VARIOUS STOCK E XCHANGES IN THE COUNTRY TO FIND OUT WHETHER THE SHARES HAVE BEE N LISTED AND TRADED IN THE VARIOUS STOCK EXCHANGES. THE REP LY OF VARIOUS EXCHAGES HAVE BEEN SUMMARIZED IN TABLE 2 OF THE ASSESSMENT ORDER WHICH IS AS UNDER: TABLE 2 SR. NO. NAME OF STOCK EXCHANGE RESULT OF ENQUIRY 1 MADHYA PRADESH STOCK EXCHANGE, PALIKA PLAZA PHASE-II, INDORE AS PER REPLY DATED 20-11-2006 IT WAS INTIMATED THAT NO TRADING ON FLOOR OF MADHYA PRADESH STOCK EXCHANGE OF THE SHARES OF COMPANY MENTIONED ABOVE TOOK PLACE DURING RELEVANT PERIOD. 2 LUDHIANA STOCK EXCHANGE, FEROZE GANDHI MARKET, LUDHIANA AS PER REPLY DATED 18-11-2006 IT WAS INTIMATED THAT THE COMPANY IS LISTED WITH THE EXCHANGE SINCE 03-04-1996 BUT THERE HAS BEEN NO TRADING ON FLOOR OF THE EXCHANGE SINCE 23- 01-2002. HENCE THE TRADING FOR THE PERIOD IN QUESTION IS NIL. 3 AHMEDABAD STOCK EXCHANGE LTD., AMBAWADI AHMEDABAD AS PER REPLY DATED 22-11-2006 IT WAS INFORMED THAT THE ABOVE MENTIONED COMPANY IS NOT LISTED AT AHMEDABAD STOCK 6 EXCHANGE AND NO TRANSACTIONS HAVE BEEN ROUTED THROUGH THIS EXCHANGE. 4 DELHI STOCK EXCHANGE AS PER REPLY DATED 20-11-200 6 IT WAS INTIMATED THAT NO TRADING OF THESE SHARES OCCURRED ON THE FLOOR OF THE EXCHANGE DURING THE RELEVANT PERIOD. 5 MUMBAI STOCK EXCHANGE, DALAL STREET, MUMBAI. AS PER THE REPLY DATED 24-11- 2006 RECEIVED ON FAX DATED 18- 12-2006 THE STOCK EXCHANGE HAS INFORMED THAT THE COMPANY IS NOT LISTED WITH IT HENCE NO TRADING HAS EVER OCCURRED. 6. KOLKATA STOCK EXCHANGE ASSOCIATION LTD. 7 LYONS RANGE KOLKATA. AS ON DATE NO REPLY HAS BEEN RECEIVED FORM THE STOCK EXCHANGE BUT THE CONTENTIONS PUT FORTH IN THE ABOVE PARA ARE ALSO APPLICABLE HERE. THE AO IN RANGE V CALLED FOR SIMILAR INFORMATION FOR THE SAME COMPANY AND VIDE REPLY DATED 03-03-2006 IT WAS INTIMATED THAT THE SHARES OF M/S COUNTRY CREDIT CAPITAL LTD. ARE NOT LISTED WITH THE STOCK EXCHANGE. AS THE SHARES WERE NEVER LISTED BEFORE 03-03-2006 THERE IS NO QUESTION OF TRADING WHATSOEVER. 7 THE ASSESSING OFFICER HAS GIVEN THE REASONS FOR M AKING INQUIRIES FROM STOCK EXCHANGES PARTICULARLY FROM MA DHYA PRADESH STOCK EXCHANGE AND AHMEDABAD STOCK EXCHANGE VIDE FOLLOWING PARA IN THE ASSESSMENT ORDER: IT IS WORTHWHILE TO MENTION HERE THAT ENQUIRY LETT ERS TO MADHYA PRADESH STOCK EXCHANGE AND AHMEDABAD STOCK EXCHANGE WERE SENT WITH A SPECIFIED PURPOSE. AS AL READY MENTIONED THAT ASSESSMENT ON THE SAME ISSUE AS IN T HIS CASE WAS MADE IN CASE OF SHRI RAJNISH THAKUR BY THE ASSE SSING OFFICER OF RANGE V. LUDHIANA FOR ASSESSMENT YEAR 20 03-04. THE ASSESSING OFFICER OF RANGE V HAD DURING ASSESSM ENT MADE ENQUIRIES FROM FOUR STOCK EXCHANGES IN INDIA I .E. LUDHIANA, DELHI, MUMBAI, KOLKATA. NOW THE ASSESSEE I.E. SHRI RAJNISH THAKUR IS IN APPEAL BEFORE THE LD. CIT(A)-I I, LUDHIANA AND HAS CONTENDED THAT ALL SHARES OF A PARTICULAR COMPANY CANNOT BE SAID TO BE LISTED ALL OVER INDIA AND THE SHARESD OF M/S COUNTRY CREDIT CAPITAL LTD. ARE LISTED AT AHME DABAD AND MADHYA PRADESH STOCK EXCHANGE. HENCE THE UNDERSIG NED CALLED FOR INFORMATION FROM THESE TWO STOCK EXCHANG ES WHICH AS MENTIONED IN TABLE 2 ABOVE HAVE INTIMATED THAT T HE SHARES OF THIS COMPANY ARE NOT EVEN LISTED AT THESE STOCK EXCHANGES, SO NO QUESTION OF TRADING ARISES AT ALL. 7 8 THE ASSESSING OFFICER HAS ALSO MADE INQUIRIES FRO M COUNTRY CREDIT CAPITAL LTD. BY LETTER DATED 18.11. 2006 WHICH WAS LATER KNOWN AS CITY GOLD CREDIT CAPITAL LTD. (A S PER INFORMATION SUPPLIED BY LUDHIANA STOCK EXCHANGE). ENQUIRY LETTER WAS ISSUED TO THIS COMPANY REGARDING PURCHAS E AND SALE OF SHARES BY THE ASSESSEE VIDE LETTER DATED 9.11.20 06. THE SAID COMPANY BY REPLY DATED 8.12.2006 INFORMED THAT THE BOOKS OF THE COMPANY WERE LOST WHILE TRAVELING FROM ONE O FFICE TO ANOTHER ON 16.4.2004 AND COPY OF FIR WAS ENCLOSED. THE SAID COMPANY IN VIEW OF THESE FACTS SHOWED ITS INABILITY TO PROVIDE ANY INFORMATION. SHRI SHIV PURI WAS DIRECTOR OF TH E COUNTRY CREDIT CAPITAL LTD. LATER ON A SURVEY WAS CONDUCTE D IN THE PREMISES OF THE M/S SURYA SCRIPS PVT LTD. AND M/S S UNRISE STOCKS SERVICES PVT LTD. AND THEREAFTER IT WAS NOTE D THAT SHRI SHIV PURI WAS DIRECTOR IN THOSE COMPANIES ALSO. DU RING SURVEY CONDUCTED IN ABOVE STOCK BROKERS, STATEMENTS OF S/S HRI HARVINDER SINGH, DIRECTOR OF SUNRISE STOCK SERVICES PVT. LTD. AND SHRI NARAIN DUTT, MANAGER OF M/S SUNRISE STOCKS SERVICES PVT LTD. WERE RECORDED. SHRI NARAIN DUTT HAD STATE D THAT SALE BILLS OF COUNTRY CREDIT CAPITAL LTD. WERE ISSUED W ITHOUT ANY SALE OF SHARES AND PURCHASES WERE SHOWN AT RS. 3-4 PER SHARE AND SALE RATE SHOWN AT RS. 100-102 PER SHARE. IT W AS ALSO CONFIRMED BY HIM THAT THOUGH THE PURCHASE AND SALE BILLS WERE ISSUED ON THE SAME DATE BUT THE DATE IN PURCHASE BI LLS WAS SHOWN AS MORE THAN 12 MONTHS OLD. FURTHER IT WAS S TATED THAT CHEQUES WERE ISSUED AFTER RECEIPT OF EQUIVALENT AMO UNT OF CASH. THE ASSESSING OFFICER HIMSELF STATED IN THE ASSESSMENT ORDER THAT THOUGH THE STATEMENT IS THAT OF AN ACCOU NTANT BUT IT SHOWS THE MOTIVE OF THE ASSESSEE. 9 SINCE THE ASSESSEE HAS FAILED TO FURNISH ANY SUPP ORTING EVIDENCE REGARDING MARKET RATE OF THE SHARES, DATE OF PURCHASE AND SALE OF SHARES, THEREFORE, THE ASSESSING OFFICE R MADE INQUIRIES FROM REGISTRAR OF COMPANIES, JALANDHAR AN D SOUGHT COPY OF THE BALANCE SHEET AND PROFIT AND LOSS ACCOU NT. THE REGISTRAR VIDE LETTER NO. 4708 DATED 12.12.2006 SUP PLIED THE COPY OF BALANCE SHEETS. BALANCE SHEETS HAVE BEEN E XTRACTED AS UNDER: 8 PARTICULARS YEAR ENDING 31.3.2003 31.3.2004 SHARE CAPITAL (EQUITY SHARE OF 3200500 EACH OF RS. 10) 32005000 32005000 FIXED ASSETS 5695891 5693269 NET CURRENT ASSETS 22565313 22650432 SALE OF SHARE & SECURITIES 11971950 28831670 PROFIT/LOSS (-) 108311 (-)607 TOTAL LOSS C/F TO BALANCE SHEET (ACCUMULATED LOSSES) (-)2776082 (-)2776689 EARNING PER SHARE (-)0.03 0 NAV (NET ASSET VALUE) RS. 7.05 RS. 7.07 10 THE ASSESSING OFFICER WORKED OUT NAV OF THE SHAR ES AS ON 31.3.2003 AND 31.3.2004 AT RS. 7.05 AND 7.07 RES PECTIVELY. THE ASSESSING OFFICER NOTED THAT THE COMPANY WAS SU FFERING FROM LOSSES AND ACCUMULATED LOSSES INCREASED CONTIN UOUSLY FROM YEAR TO YEAR AND THEREFORE, THE VALUE OF THE SHARE COULD NOT HAVE BEEN MORE THAN THE NAV DISCLOSED IN THE BA LANCE SHEET. 11 THE ASSESSING OFFICER FROM THE DETAILS FILED BY THE ASSESSEE IN RESPECT OF ITS BANK ACCOUNTS WHERE THE SALE PROCEEDS OF THE SHARES WERE CREDITED ASCERTAINED TH E BANK ACCOUNT DETAILS FROM WHERE CHARGED ORIGINATED. INQU IRIES WERE MADE FROM THIS BANK THAT AN ACCOUNT NO. 63420000025 08 HDFC BANK, FEROZ GANDHI MARKET LUDHIANA AND EXTRACTED TH E FOLLOWING TABLE: S NO DATE OF CASH DEPOSIT AMOUNT OF CASH DEPOSIT DATE OF CLEARANCE BANK TO WHICH CREDITED 1 13.11.2003 RS. 3,90,000 15.11.2003 SBI MANDI KESA R GANJ, LUDHIANA 2 15.11.2003 RS. 5,00,000 3 17.11.2003 RS. 2,00,000 4 17.11.2003 RS. 80,000 18.11.2003 SBI MANDI KESAR 9 GANJ, LUDHIANA 5 20.11.2003 RS. 2,95,000 6 8.12.2003 RS. 1,12,000 7 8.12.2003 RS. 93,000 8 11.12.2003 RS. 5,00,000 15.12.2003 BOI BHARAT NAG AR CHOWK, LUDHIANA 9 8.1.2004 RS. 5,00,000 9.1.2004 -DO- 10 12.1.2004 RS. 7,50,000 13.1.2004 -DO- 11 4.2.2004 RS. 1,40,000 5.2.2004 -DO- FROM ABOVE THE ASSESSING OFFICER CONCLUDED THAT THE AMOUNTS OF THE CHEQUES PAID TO THE ASSESSEE BY MODI SHARE S HOPEE WERE ISSUED AFTER DEPOSITING CASH BY THE SHARE BROK ER IN HIS ACCOUNT. 12 TO VERIFY ALL THE FACTS, SUMMONS U/S 131 WAS ISS UED TO THE ASSESSEE FOR PERSONAL APPEARANCE. AFTER SOME OPPOR TUNITIES THE ASSESSEE FINALLY ATTENDED AND HIS STATEMENT WAS RECORDED ON 15.12.2006. AS PROMISED IN THE STATEMENT, THE L D. COUNSEL OF THE ASSESSEE VIDE LETTER DATED 18.12.2006 SUBMIT TED THAT THE SHARES WERE TRADED IN AHMEDABAD STOCK EXCHANGE AND DOCUMENTS RELATED TO THE SAME WERE SUBMITTED. THE ASSESSING OFFICER NOTED THAT THESE DOCUMENTS DID NOT BEAR ANY OFFICIAL STAMP AND WERE UNVERIFIABLE. THE ASSESSING OFFICER NOTED THAT AHMEDABAD STOCK EXCHANGE IN RESPONSE TO ENQUIRY U/S 133(6) HAD CLARIFIED THAT THE SHARES WERE NOT LISTED IN TH AT STOCK EXCHANGE AND NO TRADING IN THE SHARES OF COUNTRY CR EDIT CAPITAL LTD. HAS TAKEN PLACE. THEREFORE, THE SUB MISSIONS MADE BY THE ASSESSEE WERE FALSE AND THE ASSESSEE WA S TRYING TO HIDE BOGUS TRANSACTIONS OF SHARE OF COUNTRY CRE DIT CAPITAL LTD. . ON THE BASIS OF ABOVE ENQUIRIES THE ASSESS ING OFFICER CONCLUDED AS UNDER: A) THE ASSESSEE HAS DONE ALL THE SHARE TRANSACTION S THROUGH M/S MODI SHARE SHOPPE WHOSE PROPRIETOR IS S MT. BINDIA GUPTA AND SHRI RAJIT GUPTA, C.A HUSBAND OF T HE ABOVE SAID LADY DID THE TRANSACTION ON HIS BEHALF AS TOLD BY THE ASSESSEE IN HIS STATEMENT. THE ASSESSEE KNOWS SHRI RAJIV GUPTA SINCE MANY YEARS, STILL NEITHER HE NOR HIS WI FE WHO IS 10 PROPRIETOR OF MODI SHARE SHOPPE HAS COMPLIED WITH T HE SUMMONS ISSUED TWICE. B) THE ASSESSEE HAS FAILED TO PRODUCE THE SHARE BR OKER. C) ENQUIRIES FROM VARIOUS STOCK EXCHANGES HAVE REVE ALED THAT THE SHARES WERE NEVER LISTED OR TRADED. D) THE COMPANIES WHOSE SHARES WERE TRADED COULD NOT PRODUCE BOOKS OF ACCOUNT. E) INFORMATION FROM THE REGISTRAR OF COMPANIES JAL ANDHAR THAT THE COMPANY IS RUNNING IN LOSSES AND NAV PER S HARE OF THIS COMPANY WAS RANGING BETWEEN RS. 7.05 AND 7.85 DURING THIS PERIOD. THE VALUE OF THE SHARE COULD NEVER BE MORE THAN RS. 105/- AS CAN BE SEEN FROM THE SALE VALUE OF THE SHARES AS PER TABLE I. F) ENQUIRIES FROM THE BANKS REVEALED THAT THE CASH WAS DEPOSITED IN THE BANK ACCOUNT OF BROKER BEFORE THE ALLEGED SALE PROCEEDS OF SHARES WERE CLEARED FROM THE ACCOU NT AND DEPOSITED IN THE ACCOUNT OF THE ASSESSEE. THUS IT IS CLEAR THAT THE CHEQUES ISSUED BY THE SHARE BROKER WERE NO THING BUT ACCOMMODATING ENTRIES. G) THE STATEMENT OF THE ASSESSEE WAS RECORDED FROM WHERE MANY LOOSE ENDS CAN BE SEEN TO HAVE CREPT UP. THE ASSESSEE IS UNAWARE OF THE PURCHASE AND SALE AMOUNT OF THE S HARES OF COUNTRY CREDIT CAPITAL LTD. THOUGH IN HIS RETURN O F INCOME, THE INCOME FROM LONG TERM CAPITAL GAINS FORMS A SUB STANTIAL PART. THE ASSESSEE IS TOTALLY UNAWARE OF WHERE TH E SHARES OF THIS COMPANY ARE TRADED. THE KNOWLEDGE OF THE ASSE SSEE AS FAR AS DEMATERIALIZATION OF SHARES IS CONCERNED IS SKETCHY AND THE ASSESSEE IN THE STATEMENT RECORDED COULD NOT BE CONFIDENT ENOUGH ON QUERIES RELATED DEMAT ACCOUNT AND THE TRA NSACTIONS THROUGH IT. IN VIEW OF THE ABOVE DISCUSSION THE ALLEGED CLAIM O F SALE OF SHARES IS FALSE AND CONCOCTED AS NO ACTUAL TRANSACT ION OF S HARES TOOK PLACE. THE ASSESSEE INTRODUCED HIS OWN UNEXPLAINED MONEY IN THE GARB OF SALE OF SHARES AND HAS AVOIDED GIVING HIS DUE TAXES. ACCORDING TO SECTION 68 IF ANY SUM IS FOUND CREDITE D IN THE BOOKS OF THE ASSESSEE MAINTAINED FOR ANY PREVIOUS Y EAR AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME TAX AS INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR . IN THIS CASE ALSO THE ASSESSEE COULD NOT EXPLAIN TH E RECEIPT OF ALLEGED SHARE PROFITS CREDITED IN HIS BANK ACCOUNTS . THE EXPLANATION GIVEN BY THE ASSESSEE IS NOT AT ALL SAT ISFACTORY AS CAN BE SEEN FROM THE VARIOUS ENQUIRIES MENTIONED AB OVE. IT IS PROVED BEYOND DOUBT THAT THE SHARE TRANSACTIONS ENTERED INTO BY THE ASSESSEE A RE SHAM TRANSACTIONS AND OWN MONEY HAS BEEN INTRODUCED TO GET SHARE PROFITS. HENCE TH E AMOUNT OF RS. 51,29,625/-EQUIVALENT TO THE ALLEGED SALE VA LUE OF SHARES OF THE COMPANY I.E. M/S CITIGOLD CREDIT CAPI TAL LTD. IS TREATED AS THE INCOME OF THE ASSESSEE FROM UNDISCLO SED SOURCES U/S 68 OF THE IT ACT. 11 13 ON APPEAL IT SEEMS SOME ADDITIONAL GROUNDS WERE ALSO RAISED BEFORE THE LD. CIT(A) . PERUSAL OF THE RECO RD SHOWS THAT THE ADDITIONAL GROUNDS ARE RAISED MAINLY ON THE POI NT THAT THE ASSESSING OFFICER HAS MADE CERTAIN ENQUIRIES FROM S HARE BROKERS, STOCK EXCHANGES, COUNTRY CREDIT CAPITAL LT D. AND REGISTRAR OF COMPANIES AND THE SAME WERE NOT CONFRO NTED TO THE ASSESSEE. IT WAS ALSO STATED IN THE ADDITIONA L GROUNDS THAT THE STATEMENTS OF SURYA SCRIPS PVT LTD. AND M/S SUN RISE STOCKS SERVICES PVT LTD. WERE RECORDED AND THE ASSESSEE WA S NOT CONFRONTED WITH THE SAME. ADDITIONAL GROUNDS WERE FORWARDED BY THE LD. CIT(A) TO THE ASSESSING OFFICER FOR HIS REPORT/COMMENTS. THE ASSESSING OFFICER OBJECTED TO THE ADMISSION OF ADDITIONAL GROUNDS AND ALSO POINTED OU T THAT IN ASSESSMENT YEAR 2005-06 ALSO THE ISSUE OF BOGUS LON G TERM CAPITAL GAINS WERE INVOLVED AND DURING THE PROCEEDI NGS FOR THAT ASSESSMENT YEAR THE BROKER WAS SUMMONED WHO APPEARE D AND GAVE CATEGORICAL STATEMENT THAT THE ASSESSEE GAVE C ASH TO THE BROKER TO GIVE ENTRIES OF LONG TERM CAPITAL GAINS. ACCORDING TO THE ASSESSING OFFICER FULL OPPORTUNITY WAS GIVEN TO THE ASSESSEE TO CROSS-EXAMINE THE BROKER AND SUCH CROSS - EXAMINATION WAS ULTIMATELY MADE AND THE ASSESSEE CO ULD NOT CONTRADICT THE STATEMENT OF THE BROKER. 14 IN ADDITION TO THESE ADDITIONAL GROUNDS, DETAILE D SUBMISSIONS WERE MADE BEFORE THE LD. CIT(A). IT WA S MAINLY SUBMITTED THAT IN ADDITION TO INTEREST INCOME FROM THE FIRM THE ASSESSEE DERIVED INCOME FROM INTEREST ON FDR AND DI VIDEND ETC. THE ASSESSEE HAS ALSO EARNED CAPITAL GAIN FRO M VARIOUS COMPANIES AND SHARE OF OTHER COMPANIES WERE ALSO DE ALT BY THE ASSESSEE. THE ASSESSEE HAD ALSO EARNED SHORT TERM CAPITAL GAINS OF RS. 18841/- WHICH WAS OFFERED TO TAX. IN RESPECT OF SHARE OF CITY GOLD CREDIT COMPANY IT WAS STATED THA T THE SAME WAS SUPPORTED BY THE SALE PURCHASE BILLS, DEMAT ACC OUNT ETC. 15 IT WAS FURTHER CONTENDED WHEN CAPITAL GAINS EARN ED FROM THE DEALING IN SHARES OF OTHER COMPANIES WERE ACCE PTED THEN CAPITAL GAINS EARNED INCASE OF COUNTRY CREDIT CAPIT AL LTD. SHOULD ALSO HAVE BEEN ACCEPTED. THERE WAS NO FORCE IN THE FINDING THAT THE ASSESSEE HAD NOT PRODUCED VOUCHERS . ONCE 12 THE ASSESSEE HAD FURNISHED ALL THE DETAILS WHICH IS ACCEPTED BY THE ASSESSING OFFICER AND IF THE BROKER DOES NOT AP PEAR IN RESPONSE TO THE SUMMONS ISSUED BY THE ASSESSING OFF ICER NO FAULT CAN BE FOUND WITH THE ASSESSEE. IT WAS SUBMIT TED THAT THE ASSESSEE HAD FILED THE DETAILS AND EVIDENCE REGARDI NG LISTING OF THE SHARES IN AHMEDABAD STOCK EXCHANGE AND QUOTATIO NS OF PRICES PUBLISHED IN THE NEWS PAPERS, THEREFORE, IT CANNOT BE SAID THAT THE SHARES WERE NOT LISTED IN THE STOCK E XCHANGES. THERE WAS NO POINT IN MAKING ANY ENQUIRIES FROM THE COMPANY I.E. COUNTRY CREDIT CAPITAL LTD. BECAUSE ONCE SHAR ES ARE LISTED IN THE STOCK EXCHANGE THEN SAME ARE DEALT WITH PUBL IC INDEPENDENTLY AND THE COMPANY HAS NOTHING TO DO WIT H THE SAME. SIMILARLY VALUE OF THE SHARES DO NOT DEPEND UPON THE FIXED ASSETS OWNED BY THE COMPANY AS MENTIONED BY T HE ASSESSING OFFICER ON THE BASIS OF BALANCE SHEET OB TAINED FROM REGISTRAR OF COMPANIES AND SAME DEPENDS UPON THE DE MAND AND SUPPLY OF THE SHARES OF A PARTICULAR COMPANY. IT WAS ALSO SUBMITTED THAT SOME OF THE CHEQUES ISSUED BY THE BR OKER WERE AGAINST THE CHEQUE DEPOSITS RECEIVED BY THE BROKER AND IN ANY CASE THE ASSESSEE IS NOT CONCERNED WITH THE BANK AC COUNT OF THE BROKER AND HOW THE PAYMENTS HAVE BEEN MADE. SI MILARLY NO RELIANCE CAN BE PLACED ON THE SURVEY PROCEEDINGS IN CASE OF SURYA SCRIPS PVT LTD AND SUNRISE STOCK SERVICES PVT LTD. EVEN THE STATEMENT OF SHRI NARAIN DATT, ACCOUNTANT OF TH E ABOVE CONCERN HAS BEEN WRONGLY RELIED. THE ASSESSING OFF ICER HAS SIMPLY MISPLACED HIMSELF ONCE THE COMPANY IS LISTED IN THE STOCK EXCHANGE THE SHARES ARE SOLD AND CREDITED THR OUGH THE BROKER OF STOCK EXCHANGE AND COMPANY HAS NOTHING TO DO WITH THE SAME. 16 THE LD. CIT(A) CONSIDERED THESE SUBMISSIONS IN D ETAIL AND AFTER CONSIDERING THE REMAND REPORT RECEIVED BY HIM , DID NOT FIND FORCE IN THE SUBMISSIONS AND DECIDED THE ISSUE AGAINST THE ASSESSEE. 17 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMI TTED THAT IT IS WRONG ON THE PART OF THE ASSESSING OFFICER TO SAY THAT THE SHARES WERE NOT LISTED IN MP STOCK EXCHANGE AND AHM EDABAD STOCK EXCHANGE. THE ASSESSING OFFICER HAS NOT CONF RONTED THE 13 ASSESSEE WITH THE LETTERS WRITTEN BY THE STOCK EXCH ANGES AND THEREFORE, COULD NOT HAVE RELIED ON THIS INFORMATIO N. HE THEN REFERRED TO PAGE 237 AND 238 WHICH IS COPY OF LETTE R OF AHMEDABAD STOCK EXCHANGE AND CLEARLY SHOWS THAT THE RE WAS A TRADING IN THE SHARES OF COUNTRY CREDIT CAPITAL LTD . IN FACT SHARES WERE PLACED IN PERMITTED CATEGORY OF SHARE S WHICH IS DIFFERENT FROM LISTED SHARES. HE ALSO REFERRED TO PG 239 WHICH IS A COPY OF NEWS PAPER CUTTING WHICH SHOWS THE QUO TATIONS OF COUNTRY CREDIT CAPITAL LTD. HE ALSO REFERRED TO PA GE 236 OF THE PAPER BOOK WHICH IS A COPY OF LETTER WRITTEN BY DEL HI STOCK EXCHANGE ASSOCIATION LTD. IN THIS LETTER STOCK EXCH ANGE HAS CLEARLY STATED THAT THE DETAILS OF THE TRANSACTION IN CASE OF COUNTRY CREDIT CAPITAL LTD. WAS BEING GIVEN IN ANN EXURE A & B, THEREFORE, THE ASSESSING OFFICER WAS WRONG TO S TATE THAT NO TRADING HAS TAKEN PLACE WITH OUT REFERRING TO ANNEX URES A & B. HE ALSO REFERRED TO PAGE 235 OF THE PAPER BOOK WHI CH IS COPY OF THE LETTER WRITTEN BY MP STOCK EXCHANGE DIRECTLY TO THE ASSESSING OFFICER. HE SUBMITTED THAT IF THE COMPAN Y WAS NOT LISTED IN THAT EXCHANGE THEN HOW THE STOCK EXCHANGE WAS ABLE TO GIVE THE ADDRESS OF THE COMPANY. HE THEN REFERRE D TO PG 240 OF PAPER BOOK WHICH IS A COPY OF LETTER WRITTEN TO COUNTRY CREDIT CAPITAL LTD. IN WHICH IT IS STATED THAT THE COMPAN Y HAD CLEARLY STATED THAT THE BOOKS WERE IMPOUNDED DURING THE COU RSE OF SURVEY AND IT WAS STATED THAT COMPLETE SET OF BOOKS WAS LOST. ONCE THE COMPANY HAS MADE THIS STATEMENT THEN CONTR ADICTORY STATEMENT OF THE COMPANY SHOULD NOT BE RELIED. HE THEN REFERRED TO COPY OF BANK STATEMENT OF THE BROKER (C OPY OF WHICH IS AVAILABLE AT PG 228 TO 230) AND REFERRED TO VARI OUS ENTRIES AND POINTED OUT THAT ALL THE CHEQUES ISSUED TO THE ASSESSEE WERE NOT OUT OF CASH DEPOSITED BY THE BROKER BUT SO ME OF THE CHEQUES WERE ISSUED OUT OF FUNDS RECEIVED BY THE BR OKER THROUGH CLEARING. IN THIS REGARD HE REFERRED TO TH E DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN CASE OF CIT V. LAUL TRANSPORT CORPORATION, 214 TAXMAN 329 (PH) WHEREIN IT WAS HELD THAT MERELY BECAUSE CASH WAS DEPOSITED IN THE ACCOUNT OF SUNDRY CREDITOR THAT THE ASSESSEE IS NOT REQUIRED T O PROVE SOURCE OF SOURCE. HE THEN REFERRED TO PG 132 TO 139 OF PAPER BOOK WHICH IS A COPY OF STATEMENT OF SMT. BINDIYA G UPTA AND 14 SHRI SURESH KUMAR GUPTA. SMT. BINDIYA GUPTA WAS PR OPRIETOR OF MODI SHARE SHOPPEE UPTO OCTOBER, 2003 AND LATER ON THIS SHARE BROKERAGE WAS OWNED BY SHRI SURESH KUMAR GUPT A. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ASSE SSEE WAS KNOWING AND DEPENDENT ON THE ADVICE OF SHRI RAJIV G UPTA WHO WAS A C.A. AND SHARE BROKERAGE OF MODI SHARE SHOPPE E BEING DONE BY HIS WIFE INITIALLY AND LATER ON BY HIS FATH ER SHRI SURESH KUMAR GUPTA. HE REFERRED TO VARIOUS QUESTIONS AND ANSWERS IN CASE OF SMT. BINDIYA GUPTA AND SUBMITTED THAT SHE W AS NOT AWARE ABOUT THE KNITTY GRITTY OF SHARE BROKING. SI MILARLY STATEMENT OF SHRI SURESH KUMAR GUPTA CANNOT BE RELI ED ON BECAUSE HE DID NOT KNOW MANY DETAILS OF THE BUSINES S LIKE DEMAT ACCOUNT OF MODI SHARE SHOPPEE AND THE STATUS IN WHICH THE FIRM WAS RUNNING. IN ANY CASE FURTHER CROSS-EX AMINATION WAS NOT ALLOWED ON THE NEXT DAY WHICH WAS REQUESTED ON BEHALF OF THE ASSESSEE. HE FAIRLY ADMITTED THAT THE ASSES SING OFFICER HAD GIVEN TIME TO SHRI SURESH KUMAR GUPTA BUT HE DI D NOT TURN ON THE NEXT DAY. FURTHER THE STATEMENT OF SMT. BIN DIYA GUPTA AND SHRI SURESH KUMAR WERE RECORDED FOR ASSESSMENT YEAR 2005-06 AND THE SAME COULD NOT BE RELIED FOR ASSESS MENT YEAR 2004-05. 18 HE REFERRED TO THE DECISION IN CASE OF BAIJNATH AGGARWAL VS. ACIT, 43 DTR 149 (COPY FILED IN THE PAPER BOOK) AND MOHAL LAL JINDER VS. ITO AND OTHERS IN ITAS NO. 303 /CHD/2004 (COPY FILED IN THE PAPER BOOK). THE FACTS IN BOTH THE CASES WERE IDENTICAL TO THE FACTS OF THE CASE OF THE ASSE SSEE AND THE TRIBUNAL, AFTER EXAMINING THE FACTS HAD HELD THAT T HE TRANSACTIONS WERE GENUINE BECAUSE THE SAME WERE SUP PORTED BY SALE AND PURCHASE BILLS ETC. AND THEREFORE, THE SE DECISIONS SHOULD BE FOLLOWED. 19 HE REFERRED TO SECTION 48 OF THE ACT AND SUBMITT ED THAT EVEN IF THE VALUE OF THE SHARES WAS LESS THE ASSESS EE WAS NOT REQUIRED TO DECLARE THE MARKET VALUE OF THE SHARES WHILE COMPUTING THE CAPITAL GAINS BUT IN TERMS OF SECTION 48, FULL VALUE OF THE CONSIDERATION HAD TO BE SHOWN AS SALE CONSIDERATION AND THEREFORE, ASSESSEE HAS SHOWN TH E FULL CONSIDERATION WHICH WAS ACTUALLY RECEIVED. HE ALSO SUBMITTED 15 THAT IN ANY CASE ONCE THE ASSESSEE HAS SHOWN SALE A ND PURCHASE OF SHARES AND EVEN IF SAME IS HELD NOT TO BE GENUINE, THE SAME CANNOT BE TREATED AS INCOME U/S 68 OF THE ACT BECAUSE THE ASSESSEE HAS ALREADY DECLARED THIS TRAN SACTION BY WAY OF CAPITAL GAIN I.E. INCOME. 20 ON THE OTHER HAND, THE LD. DR FOR THE REVENUE S TRONGLY SUPPORTED THE ORDERS OF ASSESSING OFFICER AND THE L D. CIT(A). HE FURTHER SUBMITTED THAT THE LD. CIT(A) HAS CLEARL Y RECORDED THAT ALL ENQUIRIES WERE CONFRONTED TO THE ASSESSEE. ONCE THE STATEMENT OF THE SHARE BROKER WAS RECORDED WHEREIN SHE/HE ADMITTED THAT THE TRANSACTION FOR SALE AND PURCHASE OF SHARE OF COUNTRY CREDIT CAPITAL LTD. HAVE BEEN SHOWN AFTER RECEIVING CASH THEN NO FAULT CAN BE FOUND WITH THE ASSESSMENT . THE STATEMENT WAS RECORDED FOR ASSESSMENT YEAR 2005-06 BUT THE LD. CIT(A) HAS CONSIDERED THE SAME BECAUSE THE STAT EMENT WAS RECORDED BEFORE FINALIZATION OF APPELLATE PROCEEDIN GS. HE SUBMITTED THAT THERE IS NO FORCE IN THE CONTENTION THAT THE ASSESSING OFFICER HAS RELIED ON THE LETTER WRITTEN BY THE STOCK EXCHANGE WITHOUT CONSIDERING ANNEXURE A &B. HE FILE D COPY OF THE ANNEXURES AND POINTED OUT THAT IN THE ANNEXURES IT IS CLEARLY MENTIONED THAT NO TRADING IS REPORTED DURI NG THIS PERIOD WHICH MEANS THAT IN BOTH THE YEARS THERE WE RE NO TRADING IN THE DELHI STOCK EXCHANGE. SIMILARLY IF THE ASSESSEE HAS OBTAINED SOME INFORMATION FROM AHMEDABAD STOCK EXCHANGE WHO IS CLAIMING THAT THE SHARES WERE TRADE D DURING THIS PERIOD IN PERMITTED CATEGORY THEN THE ASSESS EE SHOULD HAVE OBTAINED INFORMATION TO THE EFFECT THAT SOME T RADING HAD TAKEN PLACE IN THE STOCK EXCHANGE BECAUSE AHMEDABAD STOCK EXCHANGE HAS CATEGORICALLY INFORMED THE ASSESSING O FFICER THAT NO TRADING HAS TAKEN PLACE IN THE SHARES OF COUNTRY CREDIT CAPITAL LTD. HE REFERRED TO THE DECISION OF MOHAN L AL JINDAL VS. ITO (SUPRA) AND SUBMITTED THAT IN THAT CASE THE TRI BUNAL HAS OBSERVED THAT THE ACTION OF THE ASSESSING OFFICER W AS MERELY BASED ON THE STATEMENT OF SHRI S.K. JAIN AND NO OPP ORTUNITY TO CROSS EXAMINE SHRI S.K. JAIN WAS GIVEN TO THE ASSES SEE WHEREAS IN THE PRESENT CASE THE ASSESSEE WAS ALLOWE D TO CROSS EXAMINE THE BROKER AND THE ASSESSING OFFICER HAS CO NDUCTED 16 THE DETAILED ENQUIRIES IN THIS CASE. HE ALSO RELIE D ON THE FOLLOWING CASE LAWS: SOM NATH MAINI VS. CIT, 306 ITR 414 (PH) SUMATI DAYAL VS. CIT, 214 ITR 801 (S.C) BALBIR CHAND MAINI VS. CIT & OTHER, 340 ITR 161 (P H) 21 IN THE REJOINDER THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE DECISIONS CITED BY THE DEPARTMENT ARE DIST INGUISHABLE. 22 WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY A ND FIND THAT THE LD. CIT(A) HAS DECIDED THE ISSUE AGAINST T HE ASSESSEE BY OBSERVING THAT THE EVIDENCE DISCUSSED BY THE ASS ESSING OFFICER AS WELL AS CATEGORICAL STATEMENT OF THE BRO KER THAT NO SALE OR PURCHASE OF SHARES WAS DONE BY THE ASSESSEE BUT ONLY ENTRIES OF CAPITAL GAIN WAS GIVEN TO THE ASSESSEE O N RECEIPT OF CASH PAYMENT. THE LD. CIT(A) RELIED ON THE STATEMEN T OF THE BROKER FOR ASSESSMENT YEAR 2005-06. IT WAS OBSERVE D THAT IT WOULD NOT MAKE ANY DIFFERENCE WHETHER STATEMENT WAS RECORDED FOR ASSESSMENT YEARS 2005-06 & 2004-05. THE LD. CI T(A) HAS ALSO DEALT WITH OTHER ARGUMENTS IN PARA 7 TO 17 OF HIS ORDER. 23 THOUGH THE LD. CIT(A) HAS CATEGORICALLY DEALT WI TH ALL THE ARGUMENTS IN DETAIL, WE WOULD LIKE TO DEAL WITH THE ARGUMENTS MADE BEFORE US. FIRST CONTENTION OF THE LD. COUNSE L OF THE ASSESSEE WAS THAT THE ASSESSEE WAS NOT CONFRONTED W ITH THE MATERIAL GATHERED FROM ENQUIRIES CONDUCTED, THEREFO RE, THE VIEW TAKEN BY THE REVENUE WAS NOT POSSIBLE. FIRST OF AL L WE WOULD LIKE TO REFER TO THE DECISION OF HON'BLE PUNJAB & H ARYANA HIGH COURT IN CASE OF SOM NATH MAINI VS. CIT, 306 ITR 41 4 (PH). IN THAT CASE ALSO THE ISSUE WAS WHETHER SHORT TERM CAP ITAL GAINS ON PURCHASE AND SALE OF SHARES OF 45000 SHARES OF A NKUR INTERNATIONAL LTD. WHICH WERE PURCHASED AT THE RAT ES VARYING FROM RS. 2.06 TO 3.01 PER SHARE AND SOLD AT THE RAT ES VARYING FROM RS. 47.75 TO RS. 55.00 PER SHARES. IN THAT CA SE IT WAS ALSO HELD THAT SHORT TERM CAPITAL GAINS WAS NOT GEN UINE AND BOGUS. THE ADDITION WAS CONFIRMED BY THE TRIBUNAL AND WHEN THE MATTER TRAVELED TO THE HON'BLE HIGH COURT, HON' BLE COURT GAVE THE FOLLOWING OBSERVATIONS/FINDINGS: 17 WE ARE UNABLE TO ACCEPT THE SUBMISSIONS MADE. THE BURDEN OF PROVING THAT INCOME IS SUBJECT TO TAX IS ON THE REVENUE BUT ON THE FACTS, TO SHOW THAT THE TRANSACTION IS GENUI NE BURDEN IS PRIMARILY ON THE ASSESSEE. THE ASSESSING OFFICER IS TO APPLY THE TEST OF HUMAN PROBABILITIES FOR DECIDING GENUI NENESS OR OTHERWISE OF A PARTICULAR TRANSACTION. MERE LEADIN G OF EVIDENCE THAT THE TRANSACTION WAS GENUINE, CANNOT B E CONCLUSIVE. SUCH EVIDENCE IS REQUIRED TO BE ASSESS ED BY THE ASSESSING OFFICER IN A REASONABLE WAY. GENUINENESS OF THE TRANSACTION CAN BE REJECTED EVEN IF THE ASSESSEE LE ADS EVIDENCE WHICH IS NOT TRUST-WORTHY, EVEN IF THE DEP ARTMENT DOES NOT LEAD ANY EVIDENCE ON SUCH AN ISSUE. 24 FROM ABOVE IT IS CLEAR THAT ONCE THE TRANSACTION IS DOUBTED THE BURDEN WAS ON THE ASSESSEE TO PROVE THA T THE TRANSACTION WAS GENUINE. IN CASE BEFORE US THE ASS ESSEE HAS SIMPLY FILED COPIES OF SALE AND PURCHASE BILLS AND NO OTHER EVIDENCE WAS FILED. THE ASSESSEE SHOWED ITS INABIL ITY TO PRODUCE THE BROKER AND DESPITE THE SUMMONS THE BROK ER DID NOT ATTEND THE PROCEEDINGS. THEREFORE, IN THIS BACKGRO UND THE ASSESSING OFFICER WAS LEFT WITH NO OPTION BUT TO CO NDUCT THE ENQUIRIES AT HIS OWN. THE MAIN ENQUIRY WAS CONDUCTE D FROM STOCK EXCHANGES TO ASCERTAIN WHETHER THE SHARES WER E LISTED IN ALL THE STOCK EXCHANGES AND WHETHER ANY TRADING TOO K PLACE IN THE SHARES. VARIOUS STOCK EXCHANGES CONFIRMED THA T EITHER THE SHARES WERE NOT LISTED IN STOCK EXCHANGES OR IN ANY CASE NO TRADING HAS TAKEN THE PLACE. THE REPLIES OF THE VA RIOUS STOCK EXCHANGES HAVE BEEN SUMMARISED IN TABLE 2 WHICH WE HAVE EXTRACTED ABOVE. THIS FACT WAS BROUGHT TO THE KNO WLEDGE OF THE ASSESSEE WHEN HIS STATEMENT WAS RECORDED ON 15. 12.2006 AND WHICH HAVE BEEN EXTRACTED BY THE ASSESSING OFFI CER IN THE ASSESSMENT ORDER. RELEVANT QUESTION AND ANSWER IS AS UNDER: QUESTION AS PER THE INFORMATION RECEIVED FROM MA NY STOCK EXCHANGES IT IS SEEN THAT THIS COMPANY (COUNTRY CRE DIT CAPITAL LTD) IS NOT LISTED WITH BOMBAY STOCK EXCHAN GE AND WAS LAST TRADED ON DSE ON 26.11.1996 AND THERE WAS NO TRANSACTION AFTER THAT PERIOD AND EVEN IN LUDHIANA STOCK EXCHANGE THERE IS NO TRANSACTION DURING THE PERIOD WHEN PURCHASE AND SALE HAS BEEN DONE ON YOUR BEHALF. KI NDLY TELL WHERE THESE SHARES WERE TRADED. IN THE ABSENCE OF ANY TRADING IN THE ABOVE MENTIONED RECOGNIZED STOCK EXC HANGE. ANSWER I DO NOT REMEMBER AT PRESENT BUT I WILL SU BMIT THE EVIDENCE LATER ON. 25 THUS ASSESSEE WAS CLEARLY INFORMED THAT VARIOUS STOCK EXCHANGES HAVE ALREADY INFORMED THAT NO TRADING HAS TAKEN 18 PLACE. THE ASSESSEE HAS TAKEN TROUBLE BY OBTAINING ONE LOOSE PAPER FROM AHMEDABAD STOCK EXCHANGE (WHICH IS PLACE D AT PAGES 237 AND 238 OF THE PAPER BOOK.) CAREFUL PERU SAL OF THIS TABLE SHOWS THAT IT IS NOT SIGNED BY ANYBODY. THE CONTENTION OF THE LD. COUNSEL OF THE ASSESSEE WAS THAT THE SHARES OF COUNTRY CREDIT CAPITAL LTD. WAS ALLOWED TO BE TRADED IN AH MEDABAD STOCK EXCHANGE IN THE PERMITTED CATEGORY. HE HAS EXPLAINED THAT PERMITTED CATEGORY IS ALL TOGETHER DIFFERENT FROM LISTED CATEGORY AND IN CASE OF PERMITTED CATEGORY THE C OMPLIANCE LEVEL IS MUCH LESS THEN THE COMPLIANCE REQUIRED IN CASE OF LISTED SHARE. WE DO NOT FIND ANY FORCE IN THIS CONT ENTION BECAUSE ALL THE STOCK EXCHANGES HAVE CLEARLY REPLIE D TO THE ASSESSING OFFICER THAT THESE SHARES HAVE NOT BEEN T RADED IN THEIR EXCHANGES. STOCK EXCHANGES ARE PUBLIC AUTHOR ITY AND THERE IS NO REASON TO DOUBT THE STATEMENTS OF THE E XCHANGES. EVEN IF ASSUMING FOR ARGUMENT SAKE THAT THE SHARES WERE TRADED IN AHMEDABAD STOCK EXCHANGE IN THE PERMITTE D CATEGORY AND IF THE ASSESSEE WAS ABLE TO OBTAIN TH E STATEMENT FROM THE AHMEDABAD STOCK EXCHANGE TO THIS EFFECT WH ICH IS NOT SIGNED BY ANYBODY THEN THE ASSESSEE COULD HAVE EASI LY OBTAINED MORE INFORMATION THAT THE SHARES WERE TRAD ED IN AHMEDABAD STOCK EXCHANGE. HE COULD HAVE ATLEAST AS KED THE REVENUE THAT MORE INFORMATION SHOULD BE GATHERED FR OM THE AHMEDABAD STOCK EXCHANGE WHICH HAS NOT BEEN DONE DE SPITE THE FACT THAT HE WAS MADE AWARE THAT THE SHARES ARE NOT BEING TRADED IN ANY OF THE STOCK EXCHANGES. AS OBSERVED BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CASE OF SOM NATH MAINI VS. CIT (SUPRA) THE BURDEN WAS WITH THE ASSES SEE TO PROVE THAT TRANSACTION WAS GENUINE. FURTHER MERE Q UOTATION IN A GUJARATI DAILY IN RESPECT OF TRADING QUOTES IN R ESPECT OF SHARE OF COUNTRY CREDIT CAPITAL LTD. IN AHMEDABAD S TOCK EXCHANGE IS CONCERNED, THE SAME HAS TO BE VIEWED IN THE LIGHT OF THE MODUS OPERANDI ADOPTED IN CASE OF BOGUS CAPI TAL GAINS. IN SUCH CASES SHARE OF SHELL COMPANIES OR NON AC TIVE COMPANIES WHICH ARE NOT TRADED IN ANY STOCK EXCHAN GE, ARE QUOTED IN A PARTICULAR DAILY IN RESPECT OF A PARTIC ULAR STOCK EXCHANGE AND THEN SAME IS USED TO GIVE AS EVIDENCE THAT THE SHARE PRICE WAS SO MUCH. SUCH SINGLE QUOTATION ITSE LF PROVE 19 THAT THE SHARES ARE NOT ACTIVELY TRADED IN THE PART ICULAR STOCK EXCHANGE. SOMETIMES ACTUAL TRANSACTION OF VERY SMA LL QUANTITY OF SHARES IS DONE SAY FOR 10 OR 100 SHARES TO CREAT E PROOF THAT SHARES ARE REGULARLY TRADED BUT SUCH QUOTATION HAS TO BE VIEWED IN THE LIGHT OF OVER ALL FACTS AND ENQUIRIES MADE IN A PARTICULAR CASE. IN CASE BEFORE US, OVER WHELMING EVIDENCE SHOW THAT BOGUS CAPITAL GAINS HAS BEEN GENERATED BY THE ASSESSEE AND THEREFORE, THESE QUOTATIONS IN A GUJA RATI DAILY WILL NOT HELP THE ASSESSEE. WE ALSO FIND THAT THER E IS NO MERIT IN THE CONTENTION THAT THE ASSESSING OFFICER HAS NO T CONSIDERED ANNEXURE A&B GIVEN BY DELHI STOCK EXCHANGE IN ITS L ETTER DATED NOV 20,2006 (COPY OF WHICH HAS BEEN REFERRED BY THE LD. COUNSEL OF THE ASSESSEE AT PAGE 236 OF THE PAPER BO OK). IN FACT THE LD. DR FOR THE REVENUE HAS FILED THE COPY OF THE ANNEXURE A&B CLEARLY STATES THAT NO TRADING REPORT ED DURING THIS PERIOD. ANNEXURE A REFERS TO PERIOD 1.4.2003 TO 31.3.2004 AND ANNEXURE B REFERS TO THE PERIOD 1.4.2002 TO 31. 3.2003, THEREFORE, FOR THE PERIOD UNDER CONSIDERATION THERE WAS NO TRADING IN THE SHARES OF COUNTRY CREDIT CAPITAL LTD . IN DELHI STOCK EXCHANGE. WE HAVE ALSO PERUSED PAGE 235 OF PA PER BOOK WHICH IS COPY OF THE LETTER WRITTEN BY MP STOCK EXC HANGE IN RESPONSE TO THE QUERY RAISED BY THE ASSESSING OFFIC ER U/S 133(6) OF THE ACT. NO DOUBT THIS LETTER MENTIONS T HE ADDRESS OF THE COMPANY. HOWEVER, CAREFUL READING OF THE LETTE R SHOWS THAT THE STOCK EXCHANGE HAS NOT DENIED OR CONFIRMED THE FACT WHETHER THE SHARES OF COUNTRY CREDIT CAPITAL LTD. WERE LISTED THERE OR NOT? HOWEVER, IT IS CATEGORICALLY MENTION ED THAT NO TRADING OF SHARES OF THIS COMPANY TOOK PLACE ON THE FLOOR OF THE EXCHANGE DURING THE PERIOD MENTIONED IN THE LETTER. 26 THE STATEMENT OF BROKER WHICH THE ASSESSING OFFI CER HAS RECORDED IN ASSESSMENT YEAR 2005-06 INRESPONSE TO S UMMONS, THE ASSESSEE WAS ALLOWED TO HAVE CROSS EXAMINATION OF THE SHARE BROKER AND SHARE BROKER HAS CLEARLY STATED TH AT THIS TRANSACTION WAS DONE AFTER RECEIVING THE CASH. THUS IT IS VERY CLEAR THAT THE ASSESSEE HAS BEEN CONFRONTED WITH TH E EVIDENCE AND OR ENQUIRIES MADE BY THE ASSESSING OFFICER. IT WAS CONTENDED THAT THE STATEMENT OF THE SHARE BROKER RE CORDED DURING ASSESSMENT YEAR 2005-06 CAN NOT BE RELIED IN THE 20 ASSESSMENT PROCEEDINGS OF ASSESSMENT YEAR 2004-05. WE DO NOT FIND ANY FORCE IN THE SUBMISSIONS FIRSTLY IT IS CLEAR THAT THE ASSESSEE FAILED TO PRODUCE THE BROKER AS HELD BY HO N'BLE PUNJAB & HARYANA HIGH COURT IN CASE OF SOM NATH MAI NI (SUPRA). THE ASSESSEE WAS DUTY BOUND TO PRODUCE TH E BROKER TO PROVE HIS CLAIM. SECONDLY IT IS SETTLED POSITIO N OF LAW THAT THE LD. CIT(A) HAS CO. TERMINUS POWERS WITH THE ASS ESSING OFFICER (REFER TO THE CASE OF CIT VS. KANPUR COLA S YNDIATE, 53 ITR 225 (SC). IN THIS CASE IT WAS HELD BY THREE JU DGE BENCH OF THE HON'BLE APEX COURT AS UNDER: THE APPELLATE ASSISTANT COMMISSIONER HAS PLENARY P OWERS IN DISPOSING OF AN APPEAL. THE SCOPE OF HIS POWERS IS CONTERMINOUS WITH THAT OF THE INCOME-TAX OFFICER. HE CAN DO WHAT THE ITO CAN DO AND CAN ALSO DIRECT HIM TO DO W HAT HE HAS FAILED TO DO. 27 THE STATEMENT WAS RECORDED BY THE ASSESSING OFFI CER IN ASSESSMENT YEAR 2005-06 BUT SAME WAS AVAILABLE BEFO RE THE LD. CIT(A) DURING APPEAL PROCEEDINGS, THEREFORE, T HE LD. CIT(A) HAS FULL RIGHT TO RELY ON THE STATEMENT. IN THIS R EGARD WE WOULD ALSO LIKE TO RECALL THE FAMOUS STATEMENT OF LORD MA CMILLAN, SMART V. LINCOLNSHIRE SUGAR CO. LTD. 20 TC 643, 671 (HL) WHERE HE OBSERVED THAT IT MAY BE A QUESTION WHETHER IT IS LEGITIMATE TO H AVE REGARD TO THE FACT THAT IT IS NOW KNOWN THAT THE PAYMENTS ARE IRREVOCABLE AND THAT THE CONTINGENCY OF REPAYMENT C AN NOW NEVER ARISE.A COURT OUGHT NOT TO SHUT ITS EYES TO THE TRUE FACTS IF IT SUBSEQUENTLY KNOWS THEM ALTHOUGH THESE FACTS COULD NOT HAVE BEEN KNOWN WHEN THE QUESTION ORIGINALLY AR OSE, AND OUGHT NOT TO RESORT TO GUESSING WHEN CERTAINTY IS A VAILABLE. 28 THIRD CONTENTION WAS THAT THE STATEMENT OF SMT. BINDIYA GUPTA AND SHRI SURESH KUMAR GUPTA ARE NOT RELIABLE BECAUSE THEY WERE EVEN NOT AWARE OF THE BASIC FACTS OF THE CASE AND SMT. BINDYA GUPTA HAS CLEARLY ADMITTED THAT SHE WAS NOT AWARE OF THE KNITTY GRITTY OF THE BUSINESS. IN THIS REGA RD HE REFERRED TO THE QUESTIONS AND ANSWERS DURING CROSS OBJECTION DURING WHICH SHRI SURESH KUMAR GUPTA HAS REPLIED THAT HE D OES NOT REMEMBER THE STATUS OF THE PROPRIETARY CONCERN FOR ALL THE YEARS. IT WAS FURTHER CONTENDED THAT PROPER TIME T O CROSS EXAMINE WAS NOT GIVEN BECAUSE THE LD. COUNSEL OF TH E ASSESSEE HAD SOUGHT FURTHER TIME TO CROSS EXAMINE SHRI SURES H KUMAR 21 GUPTA. IN THIS REGARD FIRST OF ALL WE WOULD LIKE T O REPRODUCE THE RELEVANT PORTION OF THE STATEMENT RECORDED BY THE A SSESSING OFFICER. 29 THE RELEVANT PORTION OF THE STATEMENT OF THE ASS ESSEE, SHRI CHANDAN GUPTA IS AS UNDER: QUESTION KINDLY TELL THE TOTAL NUMBER OF SHARES OF COUNTRY CREDIT CAPITAL LTD. YOU HAVE PURCHASED AND S OLD A ND ALSO THE PURCHASE AND SALE RATES. ANSWER AT PRESENT I DO NOT REMEMBER. QUESTION HOW MUCH AMOUNT WAS RECEIVED ON THE SALE OF THE SHARES? ANSWER AT PRESENT I DO NOT REMEMBER. QUESTION IN YOUR RETURN OF INCOME MAJOR SOURCE OF INCOME IS FROM CAPITAL GAIN IN THE ASSESSMENT YEAR 2004-05 ST ILL YOU ARE NOT ABLE TO MAKE OUT THE AMOUNT AT WHICH THE SHARES WERE SOLD. ANSWER AT PRESENT IMPUGNED DO NOT REMEMBER. QUESTION HAVE YOU ANY KNOWLEDGE ABOUT SHARE TRANS ACTIONS IN SHARES BEFORE FINANCIAL YEAR 2003-04 AND AFTER F INANCIAL YEAR 2004-05. ANSWER NO SHARE TRADING HAS BEEN DONE PRIOR TO FI NANCIAL YEAR 2003-04 AND NO SHARE TRANSACTION WAS MADE AFTE R FINANCIAL YEAR 2005-06. QUESTION WERE THESE SHARES PURCHASE AND SOLD AT M ARKET RATE AND DO YOU HAVE ANY EVIDENCE REGARDING THE SAM E. ANSWER AT PRESENT I DO NOT REMEMBER. BUT I WILL SUBMIT THE EVIDENCE LATER ON. 30 RELEVANT PORTION OF THE STATEMENT OF SMT. BINDYA GUPTA WHO IS THE PROPRIETOR OF MODI SHARE SHOPPEE UPTO OC TOBER, 2003 READS AS UNDER: QUESTION DO YOU KNOW THE NATURE OF BUSINESS TRAN SACTION CARRIED OUT BY SHRI CHANDAN GUPTA THROUGH M/S MODI SHARE SHOPPEE? ANSWER I AM NOT AWARE OF THE KNITTY GRITTIES OF S HARE TRADING AS SUCH BECAUSE MOST OF THE BUSINESS HAS BEEN HANDL ED BY MY FATHER-IN-LAW SHRI SURESH KUMAR GUPTA. BUT SHIR CHANDAN GUPTA HAS DEALT WITH M/S MODI SHARE SHOPPEE FOR THR EE TO FOUR YEARS FOR GETTING SHARE PROFITS. QUESTION I AM SHOWING YOU BANK A/C NO. 6342000002 508 OF M/S MODI SHARE SHOPPEE MAINTAINED WITH HDFC BANK, F EROZE GANDHI MARKET, LUDHIANA WHERE A NUMBER OF ENTRIES H AVE BEEN MARKED TOTALING APPROXIMATELY RS. 50 LAKHS WHI CH ARE IN NATURE OF CHEQUES ISSUED BY M/S MODI SHARE SHOPPEE TO SHRI 22 CHANDAN GUPTA. ALSO THERE IN CASH DEPOSITS OF SIMI LAR AMOUNTS IMMEDIATELY PROCEEDING THE ENTRIES RELATING TO CHEQUES ISSUED TO SHRI CHANDAN GUPTA. KINDLY EXPLA IN? ANSWER IN RESPONSE TO THIS QUERY I WOULD RESUBMIT THAT I MAY NOT BE ABLE TO EXPLAIN THE NATURE OF ENTRIES BU T ONE IMPORTANT THING WHICH I WOULD LIKE TO MENTION WHICH I AM WELL AWARE OF IS THAT THE CHEQUES ISSUED TO SHRI CHANDAN GUPTA ARE IN LIEU OF THE CASH WHICH HAS BEEN RECEIVED FRO M HIS BEHALF. QUESTION DO YOU MEAN TO SUGGEST THAT ALTHOUGH CHE QUES TOTALING TO APPROXIMATELY RS. 50 LAKHS HAVE BEEN IS SUED AFTER RECEIVING RS. 50 LAKHS IN CASH ON BEHALF OF SHRI CH ANDAN GUPTA. DO YOU MEAN TO SUGGEST THAT THE ENTRIES OF LONG TERM CAPITAL GAINS TAKEN BY SHRI CHANDAN GUPTA THROUGH M /S MODI SHARE SHOPPEE ARE BOGUS AND ALL ENTRIES HAVE BEEN R OUTED BY GIVING EQUIVALENT AMOUNT OF CASH. ANSWER I WOULD SUBMIT THAT I AM NOT SO CLEAR ABOU T THE NATURE OF ENTRIES HAS BEEN MENTIONED BEFORE BUT I A M FULLY AWARE OF THE FACT THAT ALL CHEQUES ISSUED TO SHRI C HANDAN GUPTA ARE IN LIEU OF CASH ACCEPTED ON HIS BEHALF. I WOULD FURTHER SUBMIT THAT IF COMPLETE DETAILS REGARDING T HE MODUS OPERANDI OF SHRI CHANDAN GUPTA REGARDING THESE ENTR IES IN REQUIRED THAT CAN BE CLARIFIED FROM MY FATHER-IN-LA W SHRI SURESH KUMAR GUPTA WHO SHALL BE ABLE TO PROVIDE COM PLETE DETAILS REGARDING THE RECEIPT OF CASH, THE BOGUS NA TURE OF ENTRIES AND OTHER NECESSARY DETAILS. I WOULD REEMP HASIZE THAT THERE IS NO DOUBT IN THIS FACT THAT CHEQUES HAVE BE EN ISSUED TO SHRI CHANDAN GUPTA OUT OF THE ACCOUNT OF M/S MOD I SHARE SHOPPEE AFTER RECEIVING EQUIVALENT AMOUNT OF CASH. AS CAN BE SEEN FROM THE ABOVE STATEMENT OF SMT. BIN DIA GUPTA IT IS VERY CLEAR THAT THOUGH SHE IS NOT AWARE OF TH E INTRICACIES OF THE BUSINESS OF SHARE TRADING. SHE IS WELL AWARE O F THE FACT THAT THE ASSESSEE SHRI CHANDAN GUPTA HAS PROVIDED C ASH TO THE FIRM/S MODI SHARE SHOPPEE FOR PROVIDING BOGUS E NTRIES OF LONG TERM CAPITAL GAINS. THIS SUBSTANTIATES THE EN QUIRIES CONDUCTED FROM THE BANKS AND OTHER SOURCES THAT THE ASSESSEE SHRI CHANDAN GUPTA HAS TAKEN BOGUS CAPITAL GAIN ENT RIES. BUT TO PROVE THE THINGS BEYOND DOUBT THE STATEMENT OF S HRI SURESH KUMAR GUPTA WAS ALSO RECORDED TO FURTHER CRYSTALLIZ E THE ISSUE. THE STATEMENT IS BEING REPRODUCED BELOW. 31 RELEVANT PORTION OF THE STATEMENT OF SHRI SURESH KUMAR GUPTA WHO WAS PROPRIETOR OF THE FIRM M/S MODI SHARE SHOPPEE AND FATHER OF SHRI RAJIV GUPTA IS AS UNDER: QUESTION KINDLY PROVIDE THE DETAILS OF NATURE OF TRANSACTIONS CARRIED OUT BY SHRI CHANDAN GUPTA THRO UGH M/S MODI SHARE SHOPPEE. 23 ANSWER SHRI CHANDAN GUPTA HAS TAKEN ENTRIES OF LO NG TERM CAPITAL GAINS AND IS PAID TAXES @ 10%. FURTHER THE ENTRIES REGARDING LONG TERM CAPITAL GAINS RELATE TO A COMPA NY BY THE NAME OF M/S COUNTRY CREDIT CAPITAL LTD. WHOSE NAME HAS CHANGED TO M/S COUNTRY GOLD CAPITAL LTD. NO TRADIN G OF THE SHARES OF THIS COMPANY HAVE TAKEN PLACE DURING THE RELEVANT YEARS IN WHICH SHRI CHANDAN GUPTA HAS TAKEN ENTRIES FOR LONG TERM CAPITAL GAINS. THE TRANSACTION IN THESE SHARE S HAVE TAKEN PLACE OFF MARKET AND NOT ON THE FLOOR OF ANY STOCK EXCHANGE. QUESTION CAN YOU FURTHER ELABORATE ON HOW THESE E NTRIES HAVE BEEN BOOKED. ANSWER THE MODUS OPERANDI IN THIS CASE IS VERY CL EAR. SHRI CHANDAN GUPTA HAS RECEIVED CHEQUES FROM THE ACCOUNT OF M/S MODI SHARE SHOPPEE MAINTAINED WITH HDFC BANK, FEROZ E GANDHI MARKET, LUDHIANA AFTER GIVING EQUIVALENT AMO UNT OF CASH. ALL THESE ENTRIES ARE BOGUS LONG TERM CAPITA L GAINS ENTRIES AS NO GENUINE SALE AND PURCHASE OF SHARES H AS OCCURRED. SHRI CHANDAN GUPTA HAS SIMPLY RECEIVED C HEQUES FOR ENTRIES OF LONG TERM CAPITAL GAINS AFTER GIVING EQUIVALENT AMOUNT OF CASH. THERE IS NO DOUBT THAT THESE ENTRI ES ARE BOGUS LONG TERM CAPITAL GAINS ENTRIES. CASH HAS BE EN RECEIVED ON BEHALF OF SHRI CHANDAN GUPTA ON NUMEROU S OCCASIONS AT DIFFERENT TIMES USUALLY AT ROOM NO. 23 6. LSE BUILDING OR IN BANK WHERE THE CASH WAS FINALLY DEPO SITED INTO THE ACCOUNT OF M/S MODI SHARE SHOPPEE. IT IS IMPOR TANT TO MENTION THAT ALL THE CASH HANDED OVER ON BEHALF OF SHRI CHANDAN GUPTA HAS NOT BEEN DIRECTLY DEPOSITED IN TH E BANK AS THE SAME WAS USED IN BUSINESS FOR MAKING PAYMENTS A ND CHEQUES WERE ISSUED TO SHRI CHANDAN GUPTA AGAINST B OTH REGULAR PAYMENT AND PART CASH DEPOSITED. BUT IT NE EDS TO BE REEMPHASIZED THAT ALL THE CHEQUES WHICH HAVE BEEN I SSUED TO SHRI CHANDAN GUPTA IS LIEU OF EQUIVALENT AMOUNT OF CASH RECEIVED ON HIS BEHALF. THIS IS TRUE FOR ASSESSMEN T YEAR 2005-06 AS WELL ASSESSMENT YEAR 2004-05. QUESTION SO IF IT IS SAID THAT SHRI CHANDAN GUPTA HAS TAKEN BOGUS LONG TERM CAPITAL GAINS BY GIVING YOU CASH IS EQUIVALENT AS SEEMS BY YOU STATEMENT ABOVE WILL IT BE TRUE. ANSWER YES, THE LONG TERM CAPITAL GAINS ENTRIES A RE UNDOUBTEDLY BOGUS. 32 RELEVANT PORTION OF CROSS EXAMINATION ALLOWED IS AS UNDER: PARTY NO. 1 CONSISTING OF SHRI SURESH KUMAR GUPTA PROP M/S MODI SHARE SHOPPEE AND SHRI RAJIV GUPTA, C.A SON OF SHRI SURESH KUMAR GUPTA. AND PARTY NO. 2 CONSISTING OF SHRI CHANDAN GUPTA THE AS SESSEE AND SHRI SUBHASH JAIN, C.A. LD. COUNSEL OF THE ASSE SSEE. P-2 QUESTION WHAT IS THE NAME OF ACCOUNTANT FOR F INANCIAL YEAR 2004-05? P-1 ANSWER I DO NOT REMEMBER AT PRESENT. 24 P-2 QUESTION HAVE YOU EVER RECEIVED CASH FROM SHR I CHANDAN GUPTA DIRECTLY DURING THE FINANCIAL YEAR 20 04-05 ON BEHALF OF M/S MODI SHARE SHOPPEE WHERE YOU ARE PROP ? P-1 ANSWER AS MUCH AS I REMEMBER THE CASH HAS BEE N RECEIVED ON BEHALF OF SHRI CHANDAN GUPTA ON DIFFERE NT OCCASION DURING THIS FINANCIAL YEAR (YEAR 2003-04 & 2004-05) TO THE BEST OF MY KNOWLEDGE. P-2 QUESTION COMPLETE DETAILS OF CASH BOOK WITH R EFERENCE TO SHRI CHANDAN GUPTA IN RELATION TO CASH? P-1 ANSWER KINDLY CLARIFY. P-2 QUESTION YOU HAVE STATED THAT THE CASH HAS BE EN RECEIVED FROM SHRI CHANDAN GUPTA IN FINANCIAL YEAR 2003-04 & 2004-05. CAN YOU GIVE DETAILS? P-1 ANSWER SHRI CHANDAN GUPTA USED TO GIVE CASH O N DIFFERENT OCCASIONS. THE ASSESSEE SHRI CHANDAN GUP TA USED TO SEND CASH ON DIFFERENT OCCASIONS. MY EARLIER ST ATEMENT (RECORDED BY ASSESSING OFFICER) GIVES VARIOUS DETAI LS WHICH CAN BE READ WITH. FURTHER DETAILS CAN BE OBTAINED FROM ACCOUNTANT. QUESTION PLEASE GIVE THE COMPLETE DETAILS OF DEPO SITORY BEING MAINTAINED BY THE M/S MODI SHARE SHOPPEE IN Y OUR PERSONAL NAME? ANSWER I DO NOT REMEMBER BUT THE ACCOUNTANT CAN E XPLAIN THE SAME. QUESTION WHAT IS THE NAME OF ACCOUNTANT FOR FINAN CIAL YEAR 2004-05? ANSWER I DO NOT REMEMBER AT PRESENT. P-2 QUESTION PLEASE LET ME KNOW STILL M/S MODI SH ARE SHOPPEE IS WORKING IN THE FINANCIAL YEAR 2005-06 AN D ONWARD? P-1 ANSWER I SO NOT REMEMBER THE STATUS OF THE PR OP. CONCERN OF ALL THESE YEARS. 33 THE ABOVE QUESTIONS AND ANSWERS OF THE STATEMENT OF SHRI CHANDAN GUPTA CLEARLY SHOW THAT THE ASSESSEE HAS NO T DONE ANY SHARE BUSINESS BEFORE FINANCIAL YEAR 2003-04 AN D AFTER FINANCIAL YEAR 2004-05 IN WHICH HE HAS EARNED CAPIT AL GAIN OF ABOUT 51 LAKHS. WHEN THE ASSESSEE WAS ABLE TO MAKE SUCH HUGE MONEY WE FAIL TO UNDERSTAND WHY THE ASSESSEE S TOPPED THIS BUSINESS. THE ASSESSEE ALSO WAS NOT AWARE WHA T IS THE MEANING OF THE DEMATERIALIZATION OF THE SHARE. IN FACT, DURING THE YEAR THE LD. COUNSEL OF THE ASSESSEE CLARIFIED THAT HE HAD GIVEN BLANK SHARE DELIVERY SLIPS TO THE BROKER. TH IS CLEARLY SHOW THAT CAPITAL GAIN WAS NOT GENUINE. WHEN THE A SSESSEE WAS CONFRONTED WITH THE ISSUE THAT THESE SHARES ARE NOT TRADED 25 IN ANY SHARE STOCK EXCHANGE THEN THE ASSESSEE SIMPL Y REPLIED THAT HE WILL FILE THE EVIDENCE LATER ON BUT NO EVID ENCE WAS EVER FILED. 34 WE DO NOT FIND ANY FORCE IN THE SUBMISSIONS THAT THE STATEMENT OF SMT. BINDIYA GUPTA CANNOT BE RELIED BE CAUSE SHE DID NOT KNOW THE KNITTY GRITTIES OF THE SHARE BUSIN ESS. SMT. BINDIYA GUPTA HAD CLEARLY STATED THAT IN RESPONSE T O THE QUESTION RELATING TO THE NATURE OF THE BUSINESS TRA NSACTION THAT THOUGH SHE WAS NOT AWARE OF THE KNITTY GRITTIES OF SHARE BUSINESS BUT SMT. BINDIYA GUPTA HAD VERY CATEGORICA LLY STATED THAT THE CHEQUES WERE ISSUED TO SHRI CHANDAN GUPTA IN RETURN OF CASH WHICH WERE IN THE NATURE OF ENTRIES. SIMIL ARLY SHRI SURESH KUMAR GUPTA HAS CATEGORICALLY STATED THAT TH E CHEQUES WERE ISSUED BY RECEIVING EQUIVALENT AMOUNT OF CASH. WHEN THE CROSS EXAMINATION WAS GIVEN TO THE ASSESSEE, THE AS SESSEE COULD NOT PROVE OTHERWISE SIMPLY BY SAYING THAT THE CROSS EXAMINATION SHOULD NOT BE RELIED BECAUSE THE ASSESS EE WAS NOT GIVEN FURTHER TIME. THIS IS PARTICULARLY NOT CORRE CT BECAUSE THE ASSESSEE WAS GIVEN THREE HOURS TO CROSS EXAMINE SHR I SURESH KUMAR GUPTA. IT IS ALSO PERTINENT TO KNOW THAT SHR I RAJIV GUPTA WHO THE ASSESSEE CLAIMS TO KNOW AND ON WHOSE ADVICE IT WAS STATED THAT THE ASSESSEE WAS CARRYING ON THE BUSINE SS IN SHARES, WAS ALSO PRESENT DURING CROSS EXAMINATION W HICH BECOME CLEAR FROM THE STATEMENT BECAUSE IT HAS BEEN MENTIONED VERY CLEARLY THAT PARTY NO. 1 CONSISTING OF SHRI SURESH KUMAR GUPTA PROP M/S MODI SHARE SHOPPEE AND SHRI RAJIV GUPTA, C.A SON OF SHRI SURESH KUMAR GUPTA AND PARTY NO. 2 CONSISTING OF SHRI CHANDAN GUPTA, THE ASSESSE E AND SHRI SUBHASH JAIN, C.A COUNSEL OF THE ASSESSEE. 35 THE ABOVE ANALYSIS IS CLEARLY SUPPORTED BY THE T EST OF HUMAN PROBABILITIES GIVEN BY THE HON'BLE APEX COURT IN CASE OF SUMATI DAYAL VS. CIT (SUPRA) WHICH WAS RELIED ON BY THE LD. DR FOR THE REVENUE. IN THAT CASE THE ASSESSEE CARRIED ON BUSINESS AS A DEALER IN ART PIECES, ANTIQUES AND CURIOS IN B ANGALORE. DURING THE ASSESSMENT YEAR 1971-72 SHE CLAIMED THAT SHE RECEIVED A TOTAL AMOUNT OF RS. 3,11,831 BY WAY OF R ACE WINNINGS IN JACKPOTS AND TREBLE EVENTS IN RACES AT TURF CLUBS IN 26 BANGALORE, MADRAS AND HYDERABAD. THE SAID AMOUNT WA S SHOWN BY THE APPELLANT IN THE CAPITAL ACCOUNT IN TH E BOOKS. FOR THE ASSESSMENT YEAR 1972-73 SHE CLAIMED RECEIPTS OF RS. 93,500 AS RACE WINNINGS IN TWO JACKPOTS AT BANGALOR E AND MADRAS AND THE SAID AMOUNT WAS CREDITED IN THE CAPI TAL ACCOUNT IN THE BOOKS. THE INCOME-TAX OFFICER INCLUDED THES E AMOUNTS AS INCOME FROM OTHER SOURCES AND ASSESSED THEM. TH E APPELLATE ASSISTANT COMMISSIONER CONFIRMED THE ORDE R. THE APPELLANT REFERRED THE MATTER TO THE SETTLEMENT COM MISSION. THE SETTLEMENT COMMISSION BY A MAJORITY HELD THAT T HE EXPLANATION OF THE ASSESSEE WAS NOT GENUINE FOR THE FOLLOWING REASONS: (I) THE APPELLANTS KNOWLEDGE OF RACING W AS VERY MEAGRE. (II) A JACKPOT IS A STAKE OF FIVE -EVENTS IN A SINGLE DAY AND ONE CAN BELIEVE A REGULAR AND EXPERIENCED PUNTE R CLEARING A JACKPOT OCCASIONALLY BUT THE CLAIM OF HAVING WON A NUMBER OF JACKPOTS IN THREE OR FOUR SEASONS NOT MERELY AT ON E PLACE BUT AT THREE DIFFERENT CENTRES, NAMELY, MADRAS, BANGALO RE AND HYDERABAD APPEARED, PRIMA FACIE, TO BE WILD AND CON TRARY TO STATISTICAL THEORIES AND EXPERIENCE OF FREQUENCIES AND PROBABILITIES.(III) THE APPELLANTS BOOKS DID NOT SHOW ANY DRAWINGS ON RACE DAYS OR ON THE IMMEDIATELY -PRECED ING DAYS FOR THE PURCHASE OF JACKPOT COMBINATION, TICKETS, W HICH ENTAILED SIZABLE AMOUNTS VARYING GENERALLY BETWEEN RS. 2,000 AND RS. 3,000. THE DRAWINGS RECORDED IN THE BOOKS COULD NOT BE CO- RELATED TO THE VARIOUS RACING EVENTS AT WHICH THE APPELLANT MADE THE ALLEGED WINNINGS. (IV) WHILE THE APPELLAN T'S CAPITAL ACCOUNT WAS CREDITED WITH THE GROSS AMOUNT OF RACE WINNINGS, THERE WERE NO DEBITS EITHER FOR EXPENSES AND PURCHA SES OF TICKETS OR FOR LOSSES, (V) IN VIEW OF THE EXCEPTIO NAL LUCK CLAIMED TO HAVE BEEN ENJOYED BY THE APPELLANT, HE R LOSS OF INTEREST IN RACES FROM 1972 ASSUMED SIGNIFICANCE. THE SETTLEMENT COMMISSION TOOK THE VIEW THAT WINNINGS I N RACING BECAME LIABLE TO INCOME-TAX FROM APRIL 1, 1972, BUT ONE WOULD NOT GIVE UP AN ACTIVITY YIELDING OR LIKELY TO YIE LD A LARGE INCOME MERELY BECAUSE THE INCOME WOULD SUFFER TAX AND THAT THE POSITION WOULD BE DIFFERENT, HOWEVER, IF THE C LAIM, OF WINNINGS IN RACES WAS FALSE AND WHAT WERE PASSED O FF AS SUCH WINNINGS REALLY REPRESENTED THE APPELLANT'S TAXABLE INCOME 27 FROM SOME UNDISCLOSED SOURCES ON THESE FACTS IT WAS HELD AS UNDER: HELD, DISMISSING THE APPEAL, THAT THE SETTLEMENT C OMMISSION AFTER CONSIDERING THE SURROUNDING CIRCUMSTANCES AND APPLYING THE TEST OF HUMAN PROBABILITIES HAD RIGHTLY CONCLUD ED THAT THE APPELLANTS CLAIM ABOUT THE AMOUNT BEING HER WINNIN GS FROM RACES WAS NOT GENUINE. THUS FROM ABOVE IT IS ABSOLUTELY CLEAR THAT SURROUN DING CIRCUMSTANCES AND HUMAN PROBABILITY WAS APPLIED AND UPHELD BY THE HON'BLE APEX COURT. WHEN THE FACTS IN CASE BEFORE US ARE EXAMINED ON THIS PRISM IT BECOMES ABSOLUTELY CLEAR THAT THE ASSESSEE HAD MISERABLY FAILED TO PROVE THE GENUINENESS OF THE TR ANSACTION OF SALE AND PURCHASE OF THE SHARES. 36 ANOTHER CONTENTION THAT THE ASSESSING OFFICER HA S NOT PRODUCED THE BALANCE SHEET OF COUNTRY CREDIT CAPITA L LTD. IN THE ASSESSMENT ORDER, IS OF NO ASSISTANCE TO THE CASE O F THE ASSESSEE. WHEN THIS CONTENTION IS EXAMINED IN THE OVERALL CIR CUMSTANCES OF THE CASE AS WELL AS TEST OF HUMAN PROBABILITIES THE N IT CAN BE EASILY SEEN THAT THE BALANCE SHEET SUPPLIED BY REGISTRAR O F COMPANIES ITSELF SHOWS THE VALUATION OF THE SHARES I.E. NAV H AS BEEN WORKED OUT AT RS. 7.05 AND RS. 7.07 ON 31.3.2003 AND 31.3. 2004 RESPECTIVELY. THERE IS NO MATERIAL MADE AVAILABLE BY THE ASSESSEE TO PROVE THAT THE VALUATION OF THE SHARE HAS GONE U P SO MUCH SO AS TO REACH MORE THAN RS. 100 PER SHARE. THE SHARE IS NOT BEING TRADED IN ANY STOCK EXCHANGES, THERE IS NO EXCEPTIO NAL CIRCUMSTANCE IN THE COMPANY COUNTRY CREDIT CAPITAL LTD. TO JUST IFY THE HIGH VALUATION. THEREFORE, THE TEST OF HUMAN PROBABILI TIES CLEARLY SHOWS THAT THE PRICE HAS BEEN SIMPLY JACKED UP IN ONE TRA NSACTION TO GIVE ACCOMMODATING ENTRIES IN FORM OF BOGUS CAPITAL GAIN . 37 WE HAVE ALSO PERUSED THE DECISION OF HON'BLE PUN JAB & HARYANA HIGH COURT IN CASE OF CIT V. LAUL TRANSPORT CORP (SUPRA). IN THAT CASE HON'BLE HIGH COURT HAS SIMP LY DECLINED TO INTERFERE WITH THE FINDINGS OF THE ORDERS OF THE LD. CIT(A) AS WELL AS THE TRIBUNAL BECAUSE THESE AUTHORITIES HAVE CAREFULLY PERUSED THE RELEVANT DOCUMENTS. EVEN IF IT IS ASSU MED THAT THE ASSESSEE IS NOT REQUIRED TO PROVE THE SOURCES OF SO URCES, IT 28 CANNOT BE DENIED THAT SOME CASH WAS DEPOSITED BY TH E BROKER ON CERTAIN DATES BEFORE ISSUING THE CHEQUES TO THE ASSESSEE. THIS ONLY FURTHER FORTIFIES THE CASE OF THE REVENU E THAT THE TRANSACTION WAS BOGUS. THERE IS OVER-WHELMING EVID ENCE AGAINST THE ASSESSEE AND MERE FACT THAT FEW CHEQUES HAVE BEEN ISSUED BY THE BROKER OUT OF THE PROCEEDS RECEI VED THROUGH CLEARING, WILL NOT ALTER THE RESULT OF OTHER EVIDEN CES GATHERED BY THE REVENUE. THE LD. COUNSEL OF THE ASSESSEE HAD RELIED ON THE DECISION OF CHANDIGARH BENCH OF THE TRIBUNAL IN MOHAN LAL JINDAL, ITA NO. 303/CHD/2004. NO DOUBT IN THAT CAS E THE FACTS ARE ALMOST IDENTICAL BUT THE TRIBUNAL ALLOWED THE A PPEAL OF THE ASSESSEE BECAUSE THE REVENUE HAD NOT CONDUCTED THE PROPER ENQUIRIES. IN FACT IT IS CLEARLY OBSERVED IN THE OR DER OF THE TRIBUNAL AT THE END OF PARA 11 THAT IN THE INSTANT CASE ALSO THE ADDITION HAD BEEN MADE ONLY ON THE BASIS OF STATEM ENT OF SHRI S.K. JAIN AND THE OPPORTUNITY TO CROSS EXAMINE HIM HAS NOT BEEN PROVIDED TO THE ASSESSEE. THEREFORE, THE FIN DINGS GIVEN IN THE AFORESAID REFERRED TO CASES ARE APPLICABLE T O THE FACTS OF THE PRESENT CASE . FURTHER IN PARA 13 IT WAS OBSERVED THAT THE REVENUE HAS NOT CONDUCTED ANY ENQUIRIES. RELEVANT PORTION READS AS UNDER: HOWEVER, THE ASSESSING OFFICER DID NOT MAKE ANY IN QUIRY EITHER FROM THE COMPANY WHOSE SHARES WERE PURCHASED AND SOLD BY THE ASSESSEE OR FROM THE SHARE BROKER THROU GH WHOM THE TRANSACTION TOOK PLACE. THEREFORE, IT CAN BE HELD THAT THE TRANSACTION ENTERED INTO BY THE ASSESSEE RELATING T O LONG TERM CAPITAL GAINS WAS NOT A SHAM TRANSACTION RATHER IT WAS A GENUINE TRANSACTION. AS SUCH THE ASSESSING OFFICER WAS NOT JUSTIFIED IN CONSIDERING THE CAPITAL GAIN EARNED B Y THE ASSESSEE AS NON GENUINE AND THE LD. CIT(A) WRONGLY CONFIRMED THE ACTION OF THE ASSESSMENT ORDER. 38 SIMILARLY THE DECISION RELIED ON BY THE LD. COUN SEL OF THE ASSESSEE IN CASE OF BAIJNATH AGGARWAL VS. ACIT (201 0) 133 TTJ (AGRA)(TM) IS OF NO ASSISTANCE TO THE ASSESSEE. FIRSTLY IN THAT CASE SHARES WERE OBTAINED BY THE ASSESSEE THRO UGH INITIAL PUBLIC OFFER. SECONDLY IN THAT CASE ALSO DETAILED ENQUIRIES WERE NOT MADE BY THE REVENUE AUTHORITIES WHEREAS IN CASE BEFORE US THE BROKER OF THE ASSESSEE HIMSELF CATEGO RICALLY ADMITTED THAT THE ASSESSEE HAD PAID CASH IN LIEU OF THE ENTRY OF CAPITAL GAIN. 29 39 IT WAS ALSO ARGUED BEFORE US THAT WHEN THE ASSES SEE HAD RETURNED AN ITEM OF INCOME UNDER THE HEAD CAPITAL GAIN THE PROVISIONS OF SECTION 48 WILL BE APPLICABLE. IT WA S SUBMITTED THAT SECTION 48 TALKS OF FULL VALUE OF THE CONSIDER ATION. THEREFORE, EVEN IF THE MARKET VALUE OF THE SHARES WAS LESS THE ASSESSEE HAS RIGHTLY DECLARED THE FULL AMOUNT OF CO NSIDERATION RECEIVED BY THE ASSESSEE. THIS ARGUMENT LOOKS ATTR ACTIVE ON THE FACE VALUE BUT HAS NO SUBSTANCE BECAUSE IN CASE BEFORE US THE ISSUE IS NOT WHAT IS THE CONSIDERATION RECEIVED BY THE ASSESSEE, THE ISSUE IS WHETHER THE TRANSACTION OF P URCHASE AND SALE OF SHARES IS GENUINE OR BOGUS. WE HAVE ALREADY HELD IN ABOVE NOTED PARAS THAT THE TRANSACTION IS BOGUS, TH EREFORE, THERE IS NO QUESTION OF ASSESSING THE SAME UNDER TH E HEAD CAPITAL GAIN. IT WAS FURTHER CONTENDED THAT IN ANY CASE THIS INCOME SHOULD NOT HAVE BEEN ASSESSED U/S 68 BECAUSE ONCE THE ITEM OF CREDIT HAS BEEN SHOWN AS INCOME OF THE ASSESSEE HIMSELF THEN SAME CAN NOT BE TREATED AS UNDISCLOSED INCOME U/S 68 OF THE ACT. SECTION 68 READS AS UNDER: WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR , AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION O F THE (ASSESSING) OFFICER, SATISFACTORY THE SUM SO CREDIT ED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR . 40 THE ABOVE CLEARLY SHOWS THAT WHAT CAN BE TAXED U /S 68 IS AN ITEM WHICH HAVE BEEN CREDITED IN THE BOOKS AND W HICH HAS NOT BEEN EXPLAINED BY THE ASSESSEE. THERE IS NO OT HER REQUIREMENT UNDER THIS SECTION. ONCE THE TRANSACTI ON OF PURCHASE AND SALE IS FOUND TO BE BOGUS THEN SALE PR OCEEDS HAS TO BE ADDED AS INCOME OF THE ASSESSEE U/S 68 BECAUS E MONEY RECEIVED ON THE BASIS OF BOGUS TRANSACTION HAS BEEN CREDITED BY THE ASSESSEE IN THE BOOKS OF ACCOUNT. THE SAME POSITION WAS UPHELD BY HON'BLE SUPREME COURT IN CASE OF CIT VS. P. MOHANAKALA, 291 ITR 278 (S.C). IN THIS CASE THE HON 'BLE SUPREME COURT WAS CONCERNED WHETHER THE GIFTS WHICH WERE PROVED TO BE BOGUS CAN BE ADDED U/S 68 OF THE ACT. THE HON'BLE SUPREME COURT MADE VARIOUS OBSERVATIONS AND THE RELEVANT PORTION AT PARA 24 READS AS UNDER: 30 24 WE ARE REQUIRED TO NOTICE THAT SECTION 68 OF TH E ACT ITSELF PROVIDES, WHERE ANY SUM IS FOUND CREDITED IN THE BO OKS OF THE ASSESSEE FOR ANY PREVIOUS YEAR THE SAME MAY BE CHA RGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE IF THE PRE VIOUS YEAR IF THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT TH E NATURE AND SOURCE OF SUCH SUMS FOUND CREDITED IN THE BOOKS OF THE ASSESSEE IS IN THE OPINION OF THE ASSESSING OFFICER NOT SATISFACTORY. SUCH OPINION FORMED ITSELF CONSTITUT ES APPELLATE AUTHORITY PRIMA FACIE EVIDENCE AGAINST THE ASSESSEE , VIZ., THE RECEIPT OF MONEY, AND IF THE ASSESSEE FAIL TO REBUT THE SAID EVIDENCE THE SAME CAN BE USED AGAINST THE ASSESSEE BY HOLDING THAT IT WAS A RECEIPT OF AN INCOME NATURE. 41 WE MAY REITERATE THAT CHANDIGARH BENCH OF THE TR IBUNAL IN CASE IN CASE OF ACIT V. AVTAR SINGH, ITA NO. 949/CH D/2011 HAS TAKEN SIMILAR VIEW. IN THAT CASE THE ASSESSEE HAS P URCHASED SHARES OF ARCEE ISPAT UDYOG @ RS. 100 PER SHARE AND LATER ON SOLD THE SAME AT RS. 10 PER SHARE AND CLAIMED CAPI TAL LOSS. AFTER DETAILED DISCUSSION IT WAS HELD THAT THIS TRA NSACTION WAS BOGUS AND THEREFORE, CAPITAL LOSS COULD NOT BE ALLO WED. IN THIS DECISION ONLY DIFFERENCE IS THAT THE ASSESSEE HAD C LAIMED BOGUS CAPITAL LOSS WHEREAS IN CASE BEFORE US THE AS SESSEE HAS CLAIMED BOGUS CAPITAL GAIN AND THEREFORE, RATIO OF THIS DECISION IS APPLICABLE. FURTHER HON'BLE PUNJAB & HARYANA HIG H COURT HAS CONFIRMED THE ADDITION IN CASE OF SOM NATH MAIN I VS. CIT (SUPRA) BY OBSERVING THAT THE BURDEN WAS ON THE ASS ESSEE TO PROVE THAT THE TRANSACTION WAS GENUINE. SIMILARLY OTHER DECISION RELIED ON BY THE LD. DR FOR THE REVENUE IN CASE OF BALBIR CHAND MAINI VS. CIT (SUPRA) IS ALSO SQUARELY APPLICABLE. IN THAT CASE ALSO THE ASSESSEE HAS PURCHASED SHARES @ RS. 2.50 TO 3.40 PER SHARE AND SOLD THE SAME AT RS. 55 PE SHSARE. AFTER DISCUSSION THE FACTS OF THE CASE AND ORDER OF THE TRIBUNAL WAS CONFIRMED BY HON'BLE PUNJAB & HARYANA HIGH COUR T. 42 IN VIEW OF THE DETAILED DISCUSSION, WE FIND NOTH ING WRONG WITH THE ORDER OF THE LD. CIT(A) AND CONFIRM THE SA ME. 43 IN THE RESULT, ASSESSEES APPEAL IN ITA NO. 552/ CHD/2008 IS DISMISSED. ITA NO. 161/CHD/2009 44 IN THIS CASE IDENTICAL DISPUTE IS INVOLVED REGAR DING BOGUS CAPITAL GAIN AND SINCE THE FACTS IN THIS CASE ARE I DENTICAL TO THE FACTS IN ASSESSEES CASE FOR ASSESSMENT YEAR 2004-0 5, 31 THEREFORE, FOLLOWING THE DECISION FOR ASSESSMENT Y EAR 2004-05 IN ITA NO. 552/CHD/2008 ADJUDICATED IN ABOVE NOTED PARAS, WE CONFIRM THE ORDER OF THE LD. CIT(A). 45 IN THE RESULT, ASSESSEES APPEAL IN ITA NO. 161/ CHD/2009 IS DISMISSED. 46 IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE S ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26.9.2013 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 26.9.2013 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR