ACIT, UDAIPUR V. Shri Raj Kumar Soni, UDAIPUR

ITA 611/JODH/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54430 (ITAT-JODHPUR)
• Duration Of Justice: 1 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 07-12-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 18-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G R KOKANI
• Assessee Lawyers: D C AGARWAL
• Keywords: Unexplained cash credit; Unexplained investment; Business income; Income from undisclosed sources; Share purchase agreement; Additional evidence; Accommodation entries
• Section: 133A; 133(6); 131; 68; 69

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR (BEFORE SHRI R.K. GUPTA AND SHRI .N.L. KALRA ) ITA NO.611/JU/2009 & 501/JODH/2010 ASSESSMENT YEAR : 2005-06 & 2006-07 PAN: AJEPS 4718 A THE ACIT VS. SHRI RAJ KUMAR SONI CIRCLE- 2 6-SSSHANTIVAN COLONY, BEDLA ROAD UDAIPUR FATEHPURA, UDAIPUR (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI G.R. KOKANI ASSESSEE BY : SHRI D.C. AGARWAL DATE OF HEARING: 14-12-2011 DATE OF PRONOUNCEMENT: 16-12-2011 ORDER PER N.L. KALRA, AM:- THE REVENUE HAS FILED APPEALS AGAINST RESPECTIVE ORDERS OF THE LD.CIT, UDAIPUR DATED 16-09-2009 AND 06-07-2010 FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07 RESPECTIVELY. 2.0 THE ISSUES INVOLVED IN BOTH THE APPEALS ARE THE SAME. THEREFORE, THESE APPEALS ARE BEING DISPOSED OFF BY A SINGLE CONSOLIDATED ORDER F OR THE SAKE OF CONVENIENCE. 3.1 THE GROUNDS OF APPEAL RAISED BY THE REVENUE FOR THE ASSESSMENT YEAR 2005-06 ARE AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD.CIT(A) HAS ERRED IN:- 1. DELETING THE ADDITION OF RS. 29,50,797/- AS UNEX PLAINED CASH CREDIT U/S 68 OF THE ACT MADE BY THE AO 2 2. ENTERTAINING THE ADDITIONAL DETAILS WHICH WEE NO T PRODUCED BEFORE TO VIOLATING THE RULE 46A 3.2 THE LD.CIT(A) IN HIS ORDER HAS MENTIONED THE FA CTS, FINDINGS OF THE AO, ASSESSEES SUBMISSIONS BEFORE HIM AND THEREAFTER HE HAS RECORD ED HIS FINDINGS. IT IS THEREFORE, USEFUL TO REPRODUCE THE PARA 3 TO 8 OF THE LD.CIT(A)S ORD ER AS UNDER:- THE AO HAS OBSERVED THAT THE ASSESSEE HAS SHOWN L ONG TERM CAPITAL GAIN FROM SALE OF 62500 EQUITY SHARES OF TA LENT INFOWAYS LTD FOR RS.30,36,875 @ RS. 48.25 TO 48.75 PER SHARE AGA INST THE PURCHASE RATE OF RS. 1.25 TO RS.L.40 PER SHARE. THE TRANSACT ION WAS EFFECTED THROUGH A BROKER LOCATED AT MUMBAI NAMELY M/S. GOLD STAR FINVEST P. LTD CONSIDERING THE FACT THAT THE COMPANY IS NOT VE RY WELL KNOWN AND SUCH A HUGE RISE IN THE PRICE IN SUCH A SHORT SPAN OF TIME IS VERY UNLIKELY AND MORE SO KEEPING IN VIEW UNEARTHING OF RACKETS PROVIDING ENTRIES IN THE FORM OF LONG TERM CAPITAL GAIN, THE ISSUE WAS INVESTIGATED BY THE AO IN DETAIL. FURTHER A LETTER WAS SENT TO THE BROKER M/S GOLDSTA R FINVEST P. LTD TO VERIFY THE GENUINENESS OF THE TRANSACTION ON 17.09.2007 WHICH WAS RETURNED WITH THE POSTAL REMARKS LEFT. IN THE MEANTIME IT WAS GATHERED THAT A SURVEY U/S 133A OF THE IT ACT B Y INVESTIGATION WING, MUMBAI WAS CONDUCTED ON 28.06.2006, IN THE CA SE OF M/S MAHASAGAR SECURITIES P LTD IN WHICH SH MUKESH M CHO KSI IS A DIRECTOR. THE SURVEY REVEALED THAT SHRI MUKESH M CH OKSI WAS GIVING 'ACCOMMODATION ENTRIES', BUSINESS LOSS, ETC AS PER REQUIREMENT OF HIS CUSTOMERS AGAINST RECEIPT OF EQUIVALENT AMOUNT O F CASH AND HIS COMMISSION. SHRI MUKESH M CHOKSI ISSUED CHEQUES IN THE NAMES OF BENEFICIARIES FROM THE BANK A/C OF VARIOUS CONCERNE D FLOATED BY HIM, M/S GOLD STAR FINVEST P LTD BEING ONE OF THEM. 3 A STATEMENT ON OATH OF SHRI MUKESH M CH OKSI U/S 131 OF THE IT ACT WAS RECORDED BY ADIT, INVESTIGATION, UNI T V(3), MUMBAI IN WHICH HE DESCRIBED HIS MODUS OPERANDI BY STATING THAT HE IS JUST AN ACCOMMODATION ENTRY PROVIDER TO VARIOUS NEEDY CL IENTS AGAINST RECEIPT OF CASH AND IN LIEU OF COMMISSION. IN THIS BACKGROUND A COMMISSION U/S 13 L(D) WAS ISSUED TO ADIT, INVESTIG ATION, UNIT-V(3), MUMBAI TO VERIFY THE GENUINENESS OF THE TRANSACTION IN THE CASE OF THE ASSESSEE. THE ADIT, INVESTIGATION, UNIT-V(3), MUMBA I EXAMINED SHRI MUKESH M CHOKSI ON OATH U/S 131 ON 19.11.2007. IN THE STATEMENT SO RECORDED IN REPLY TO QUESTION NO 2, 3 & 4 HE REAFFIRMED THAT HE IS IN THE BUSINESS OF ISSUING ACCOMMODATION BILLS TO THE PURCHASERS AND SELLERS AGAINST THE BROKERAGE OF 0.1 5% OF THE TRANSACTION VALUE. HE ALSO CONFESSED THAT HE HAS IS SUED SALE CONFIRMATION MEMOS AGAINST THE FUND PROVIDED TO HIM . THE RELEVANT PART OF THE STATEMENT IS REPRODUCED AS UNDER : Q.2 PLEASE STATE WHETHER SHRI RAJ KUMAR SONI & SMT LATA SONI HAVE ALSO MADE ADJUSTMENT OF THEIR SURPLUS CASH BY WAY O F GIVING YOU CASH AND IN LIEU OF THE SAME BY TAKING CHEQUE FROM YOU E QUIVALENT TO THE AMOUNT OF CASH AFTER REDUCING YOUR COMMISSION OF 0. 15% FOR PROVIDING ACCOMMODATION ENTRIES? ANS : I M DOING THE BUSINESS OF ISSUING ACCOMMODATI ON BILLS TO THE PURCHASERS AND SELLER AGAINST THE BROKERAGE OF 0.15 % OF THE TRANSACTION VALUE. SO FAR AS SHRI RAJKUMAR SONI & S MT LATA SONI IS CONCERNED I DO NOT KNOW THEM PERSONALLY AND I HAVE NOT RECEIVED CASH FROM THEM BUT I HAVE ISSUED SALES CONFIRMATION MEMO S AGAINST THE 4 FUND PROVIDED TO ME. I DO NOT KNOW WHETHER SHRI RAJ KUMAR SONI & SMT LATA SONI HAS MADE ANY ADJUSTMENT OF THEIR SURP LUS CASH, I DO NOT KNOW THEM PERSONALLY NOR DO THEY KNOW ME. Q 3: PLEASE STATE WHETHER PURCHASES AND SALES BILLS AND SHARES CERTIFICATES, ETC ISSUED BY SMT LATA SONI & SHRI RA JKUMAR SONI FOR THE SHARES OF TALENT INFOWAYS LTD., WERE BOGUS AND THER E WAS NO ACTUAL AND GENUINE TRANSACTION OF SUCH SHARES. ANS : IN THIS REGARD,I WOULD LIKE TO STATE THAT THE SHARES CERTIFICATES OF TALENT INFOWAYS LTD WERE NOT BOGUS BUT THE TRANSACT ION HAS TAKEN PLACE OF MARKET. Q. 4 : PLEASE SEND THE RELEVANT PORTION OF BANK STA TEMENT AND BOOKS OF ACCOUNTS WHEREIN THE RECEIPTS OF CASH AMOUNTS AND P AYMENTS OF CHEUQES AS WELL AS ENTRIES RECORDED FOR PURCHASE AN D SALES AS SHOWN TO HAVE BEEN MADE FOR ABOVE SHARES, I.E., TALENT INFOW AYS LTD, ARE DULY REFLECTED. ANS: SINCE I AM ISSUING THE ACCOMMODATION BILLS TO VARIOUS PARTIES IT IS DIFFICULT FOR ME TO IDENTITY THE FUNDS RECEIVED BY ME SPECIFICALLY VIS- A-VIS PARTIES AND IT IS ALSO NOT POSSIBLE TO LINK CORRESP ONDING ENTRIES VIS-A-VIS PURCHASE AND SALES OF SHARES. HENCE IT IS NOT POSSI BLE FOR ME TO GIVE ANY BANK STATEMENT AND BOOKS OF ACCOUNTS OF RELEVANT TRANSACTIONS . THEREFORE THE ASSESSEE VIDE THIS OFFICE LETTER NO 1 811 DATED 29.1 1.2007 WAS ISSUED A DETAILED SHOW CAUSE REQUIRING T HE ASSESSEE TO FILE REPLY/EXPLANATION ON 07.12.2007. IN THAT RESPONSE A DETAILED REPLY WAS SUBMITTED BY ASSESSEE ON 14.12.2007. FROM THE DETAI LED DISCUSSION ABOVE, IT 5 IS CLEAR THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF THE TRANSACTION ON THE OTHER HAND FROM THE INVESTIGATIO N CARRIED OUT BY INVESTIGATION WING, MUMBAI AND U/S 131(D) BY THIS O FFICE, IT IS REVEALED THAT ASSESSEE IS ONE OF THE BENEFICIARIES OF SHRI M UKESH M CHOKSI AND THE CONCERNS FLOATED BY HIM. THE ASSESSEE HAS FAILED TO CONTROVERT THE FINDINGS OF THE INVESTIGATIONS DONE BY THE DEPARTME NT IN HIS SPECIFIC CASE. ALL THE ABOVE GOES ON TO PROVE THAT THE TRANS ACTIONS DISGUISED AS LONG TERM CAPITAL GAIN IS A SHAM TRANSACTION. IT IS IN F ACT, NONE OTHER THAN AN ACCOMMODATION ENTRY PROVIDED BY THE BROKER IN LIEU OF CASH. THE AO FURTHER OBSERVED THAT FROM THE DISCUSSION MA DE IN THE ASSESSMENT ORDER IT WAS CLEAR THAT THE ASSESSEE CAM E INTO THE CONTACT OF THE BROKER SOMEWHERE IN THE FIRST QUARTER/SECOND QUARTE R OF THE YEAR 2004. IN TURN THE BROKER HAS ISSUED HIM A BILL OF PURCHASE BACK D ATED IN 2003. THEN THE SHARES WERE SHOWN TO HAVE SOLD IN DE-MAT FORM IN THE YEAR 2004 SO AS TO COVER A PERIOD OF TWELVE MONTHS IN ORDER TO SHOW LONG TERM CAPITAL GAIN, THE ASSESSEE RECEIVED A DEMAND DRAFT/CHEQUE IN LIEU OF SALE CONS IDERATION. IN THE ENTIRE TRANSACTION IT CAN BE SAID THAT ALTHOUGH THE SALE W ERE VERIFIABLE BUT THE PURCHASE IS BOGUS. ALL THE EVIDENCES GO ON TO PROVE THAT THE BROKER WITH THE COLLISION OF THE COMPANY ISSUED BACK DATED PURCHASE BILL TO THE ASSESSEE AGAINST THE SALE SHOWN IN THE REAL TIME. IN FACT, THIS TRANSACTION H AS BEEN USED TO BRING IN HIS INCOME FROM UNDISCLOSED SOURCES IN THE FORM OF LTCG ON SALE OF SHARES. THE.ASSESSEE PAID UNACCOUNTED MONEY IN CASH WHICH W AS DEPOSITED BY THE BROKER IN SOME OF HIS ACCOUNTS THEN THE ASSESSEE RE CEIVED THE SAME BACK IN THE FORM OF CHEQUE/DRAFT FROM THE BROKER AS ALLEGED SAL E CONSIDERATION. BY ABOVE TRANSACTION, THE ASSESSEE HAS MASQUERADED ITS UNDIS CLOSED INCOME AS LTCG ON SHARES. THEREBY MAKING THE SAME WHITE BY PAYING TAXES @ 10% . IN FACT THE AMOUNT SHOWN AS THE LTCG IS LIABLE TO BE TAXED AS UNEXPLAI NED CASH CREDIT U/S. 68 OF THE ACT. SINCE THE ASSESSEE HAS BROUGHT IN THE UNEX PLAINED CASH IN THE BOOKS DISCUSSING THE SAME IN THE FORM OF LTCG ON SHARES T O BUILD UP ITS CAPITAL THE 6 ASSESSEE CANNOT USE DUBIOUS METHOD OF TAX PLANNING TO BRING IN THE MONEY IN THE BOOKS. THE AO PLACED RELIANCE IN THE CASE OF MC DOWELL & CO. VS. CTO 154 ITR 148 (SC) IN WHICH IT WAS HELD THAT COLOURAB LE DEVICES CANNOT BE PART OF TAX PLANNING AND IT IS WRONG TO ENCOURAGE AVOIDN ESS OF TAX BY DELICIOUS METHOD. IN VIEW OF THE ABOVE DISCUSSION, THE AO HEL D THAT THE INCOME SHOWN AS LTCG IN THE SHAM TRANSACTION, IN REALITY THE ASS ESSEE HAS NOT EARNED ANY LTCG. BUT IT HAS USED TO BRING IN THE MONEY TO BUIL D UP CAPITAL BY PAYING TAXES AT LOWER RATE. THE AO, THEREFORE, TAXED RS. 2 9,50,797 AS UNEXPLAINED CASH CREDIT U/S.68 OF THE ACT. 4. APPELLANT CASE: DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ID. AR SUBMITTED THAT APPELLANT FURNISHED VARIOUS DETAILS ASKED FOR. THE AO HAS ACCEPTED THE FACTS THAT THE APPELLANT FURNISHED VARIOUS DETAILS WHICH WERE ASKED FOR AND ALSO ACCEPTED THAT FILED WRITTEN SUBMISSION AND FURNISHE D COPIES OF BANK ACCOUNT. DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT SOLD 62500 EQUITY-SHARES OF TALENT INFOWAYS LTD AMOUNTING TO RS.30,36,875/-W HICH WERE PURCHASED IN THE YEAR 2003 AT A COST OF RS.80,078/- AND EARNE D LONG TERM CAPITAL GAINS OF RS. 29,50,797/-. THE APPELLANT PURCHASED S HARES OUT OF CAPITAL BALANCE. TO SUPPORT IT, THE APPELLANT SUBMITTED COP Y OF CAPITAL ACCOUNT AS APPEARING IN AUDITED BALANCE SHEET OF THE FIRM BEFO RE THE AO. HE FURTHER SUBMITTED THAT APPELLANT SUBMITTED DETAILS IN THE F ORM OF CONTRACT NOTE, BILL AND RECEIPTS OF PAYMENT IN RESPECT OF PURCHASE OF S HARES, CORRESPONDENCE WITH BROKER FOR TRANSFER OF SHARE CERTIFICATE, CONT RACT NOTE AND BILL OF BROKER IN RESPECT OF SALE OF SHARES. ALL TRANSACTIONS WERE MADE THROUGH BANKING CHANNEL ONLY AND THE SAME HAS BEEN ACCEPTED BY THE AO. THE APPELLANT WHILE FILING RETURN OF INCOME OPTED FOR TAXABILITY OF LTC G ON SHARES WITHOUT INDEXATION U/S. 112 AND PAID INCOME TAX THEREON. DU RING THE ASSESSMENT PROCEEDINGS, THE AO HAS ALSO ENQUIRED FROM MR. MUKE SH CHOKSI AND HIS; - $TATEMENT ON OATH WAS TAKEN U/S 131 OF IT ACT, IN WHICH HE CONFIRMED AT QUESTION-2 THAT HE DOES NOT KNOW MR. RAJKUMAR SONI AND HAS NOT RECEIVED 7 ANY CASH, AS ALLEGED MODUS OPEMNDI AND IN QUESTION-3 ALSO CONFIRMED THAT SHARE CERTIFICATES OF TALENT INFOWAYS LTD. WERE ALS O NOT BOGUS. IN SUPPORT OF HIS SUBMISSION, PLACED RELIANCE IN THE CASE OF A RA JENDRAN & ORS. VS. ACIT (MAD) (2006) 155 TAXMAN 364 IN WHICH IT HAS BEEN HE LD THAT WHEN THE ASSESSEE HAD ESTABLISHED ALL THE REQUIREMENTS OF AC T. REJECTION OF THOSE EXPLANATIONS IS DEFINITELY DUE TO ARBITRARY AND UNR EASONABLE EXERCISE OF POWER. THE AR FURTHER MADE RELIANCE ON THE FOLLOWIN G CASE LAWS: 1) CIT VS. ORISSA CORPORATION P. LTD. 159 ITR 78 (SC); 2) LALCHAND BHAGAT AMBICA RAM VS. CIT 37 ITR 288 (SC); 3) NATIONAL TEXTILES VS. CIT 249 ITR 125 (GUJ) AND 4) S.L. GANERIWAL VS. CIT 192 ITR 347 (RAJ.). IN VIEW OF THE ABOVE, THE ID. AR SUBMITTED THAT THE AO INDULGED IN SUSPICIONS, CONJECTURES AND SURMISES WITHOUT VAL ID REASONS AND ARBITRARILY MADE ADDITION OF RS.29,50,797/- AS UNE XPLAINED CASH CREDIT IS NOT JUSTIFIED AND DESERVES TO BE DELETED. 5. DECISION ; I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISS ION OF THE ID. AR AND FOUND THAT THE AO HAS BASED HIS ASSESSMENT O N THE ENQUIRY BY SENDING LETTERS U/S. 133(6) OF THE ACT TO M/S. GOLD STAR FINVEST P. LTD. THE APPELLANT PURCHASED 62,500 EQUITY SHARES OF TALENT INFOWAYS LTD. VIDE CONTRACT NO. CC/2003/067/6(R) DATED 07.04.2003, SET TLEMENT DATED 07.04.2003 @ RS.1.25 TO RS.1.35 PER SHARE THROUGH G OLDSTAR FINVEST P. LTD. AND SEB1 REGN. NO.23093243 1. THE APPELLANT HA S ALSO FURNISHED COPY OF TRANSFER OF SHARE CERTIFICATES ISSUED BY THE COM PANY TALENT INFOWAYS LTD. SHOWING THE FOLLOWING DETAILS VIDE LETTER NO.SH/TRF /2003/T0001418/L DT 31.05.2003. TRANSFER NO.1418; FOLIO NO.R59; CERTIFI CATE NO. FROM 101897 TO 101908; DISTINCTIVE NO. FROM 0004730001 T O 0004790000 - 60000 SHARES AND CERTIFICATE NO. FROM 10910 TO 101911; DISTINCTIVE NO. 0004791001 TO 0004793000 - 2000 SHARES, CERTIFICATE NO 101913; DISTINCTIVE NO. FROM 0004793501 TO 0004794000 - 500 SHARES. 8 FURTHER THE APPELLANT HAS SOLD 20,000 EQUITY SHARES OF M/S. TALENT INFOWAYS LTD. FOR RS. 9,75,000/- THROUGH GOLDSTAR F INVEST P. LTD. (SEBI REGN. NO. 230932431 ) VIDE CONTRACT NOTE NO.CC/2004/118/5 (R) DATED 22.06.2004, SETTLEMENJDATED 22.06.2004 (A) RS. 48.75; 20.000 EQUITY SHARES OF M/S TALENT INFOWAYS LTD. FOR RS. 9,55,000/- THROUGH GOL D FINVEST P. LTD. (SEBI REGN.NO. 230932431) VIDE CONTRACT NO.CC/2004/120/5( R) DT 24.06.2004: SETTLEMENT DATED 24.06.2004JGLRS.48.25 PER SHARE; 2 2.500 EQUITY SHARES OF M/S TALENT INFOWAYS LTD. FOR RS. 10,96,875/- THR OUGH GOLD FINVEST P. LTD. (SEBI REGN. NO. 230932431) VIDE CONTRACT NO.CC /2004/122/12(R) DT 28.06.2004; SETTLEMENT DATED 28.06.2004 @ RS.48.75 PER SHARE. THE COPY OF CONTRACT NOTE HAS ALSO BEEN FURNISHED WHICH IS PLAC ED ON RECORD. THIS CONTRACT NOTE BEARS THE SEBI REGN. NO. 230932431. THE COPY O F THE CONTRACT NOTE WAS ALSO FURNISHED TO THE AO AT THE TIME OF ASSESSM ENT PROCEEDINGS. IF THE LETTER ISSUED U/S. 133(6) OF THE ACT, RETURNED BACK UNCLAIMED, THE AO COULD HAVE MADE INQUIRY FROM SEBI AND COME TO CONCLUSION. TREATING THE SALE THROUGH BROKER M/S. GOLDSTAR FINVEST P. LTD. AS BOG US DOES NOT HOLD GOOD AS THE APPELLANT HAS RECEIVED THE SALE PROCEEDS THROUG H ACCOUNT PAYEE CHEQUE. THE APPELLANT PAID THE PURCHASE CONSIDERATION IN CA SH BY WITHDRAWING THE SAME FROM THE CAPITAL ACCOUNT OF THE APPELLANT. THE REFORE, THIS CANNOT BE A REASON FOR DISBELIEVING THE GENUINENESS OF THE TRAN SACTION. THE APPELLANT HAS RECEIVED THE SALE PROCEEDS THROUGH ACCOUNT PAYE E CHEQUES/DRAFTS AND THIS FACT ALSO ADMITTED BY THE AO IN THE ASSESSMENT ORDE R. THE AO HAS GIVEN THE REASON FOR TREATING THE PURCHA SE AND SALE OF SHARES AS SHAM TRANSACTION ON THE BASIS OF INFORMAT ION COLLECTED U/S. 133(6) OF THE ACT FROM BROKER/STOCK EXCHANGE. AS AG AINST THIS, THE APPELLANT HAS FURNISHED ALL THE RELEVANT DETAILS, S UCH AS PURCHASE OF SHARES, DE-MATING OF SHARES, SALE OF SHARES, RECEIPT OF SAL E PROCEED, FILING OF RETURN OF INCOME FOR EARLIER ASSESSMENT YEARS SHOWING SHARES IN THE BALANCE AND ACCOUNT CONFIRMATION. THUS THE SUBSTANTIVE PART OF THE ISSUE OF DISPUTE HAS BEEN PROVED BEYOND DOUBT BY THE APPELLANT. UNDO UBTEDLY, THE 9 APPELLANT HAS FURNISHED CONCRETE DOCUMENTARY EVIDEN CE FOR PURCHASE AND SALE OF SHARES AND EARNING AMOUNT OF CAPITAL GAIN A S DISCUSSED ABOVE. THE AO SIMPLY DOUBTED THE TRANSACTION OF PURCHASE AND S ALE OF SHARES ON THE GROUND OF NON-PAYMENT OF PURCHASE AMOUNT. AGAINST T HIS CLAIM, THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO REBUT THE PLE A OF THE APPELLANT. IN VIEW OF THE DOCUMENTARY EVIDENCE FURNISHED BY THE I D.AR SUBSTANTIATING THE CLAIM OF CAPITAL GAIN, THE AO WAS NOT JUSTIFIED IN REJECTING THE CLAIM OF THE APPELLANT. AS FAR AS TREATMENT OF THE SALE PROCEEDS AS CASH CR EDIT U/S. 68 OF THE ACT IS CONCERNED, THE SAME IS NOT CALLED FOR. AS P ER SECTION 68 OF THE ACT WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF A N ASSESSEE AND THE ASSESSEE OFFERS NO EXPLANATION, THE SUM SO CREDITED MAY BE C HARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE. IN THIS CASE, NO SUM H AS BEEN CREDITED IN THE BOOKS, AS THE PAYMENT OF PURCHASE OF SHARES WAS MA DE AND THE SALE PROCEED OF SHARES HAS BEEN RECEIVED THROUGH BANK. THUS, IT IS PROVED THAT THE SALE PROCEED IS AGAINST THE PURCHASE OF SHARES. THEREFOR E, THE AMOUNT OF RS.29,50,797/- CANNOT BE TREATED AS CASH CREDIT U/S . 68 OF THE ACT. THE STAND TAKEN BY THE AO IS NOT JUSTIFIED. HENCE THE ADDITI ON MADE BY THE AO IS DELETED. THE APPEAL IS ALLOWED ON THIS GROUND . 3.3 WE HAVE HEARD BOTH THE PARTIES. THE AO IN HIS O RDER AT PAGE 6 REQUIRED THE ASSESSEE TO FURNISH CERTAIN DETAILS. IN RESPONSE TO THIS QUERY, THE ASSESSEE FILED THE REPLY VIDE LETTER DATED 14 TH DEC. 2007. IN THIS REPLY, THE ASSESSEE EXPLAINED T HE SOURCE OF CASH, PERSON TO WHOM CASH PAID, PLACE OF PAYMENT IS NOT R EMEMBERED, NO MEDIATOR INVOLVED, COPY OF SHARE CERTIFICATES, COPY OF TRANSFER DEED B EING NOT KEPT, THE RECEIPT OF ANNUAL REPORT IS REMEMBERED, COPY OF SHARE CERTIFICATE REC EIVED AFTER TRANSFER IN HIS NAME, COPY OF DE-MAT ACCOUNT AND COPY OF BANK ACCOUNT. FROM TH E PERUSAL OF THE APPELLANTS CASE AS MENTIONED BY THE LD.CIT(A), IT IS CLEAR THAT THE AS SESSEE HAS NOT PLACED ANY ADDITIONAL 10 EVIDENCE. MOREOVER, THE ONUS WAS ON THE REVENUE TO HAVE ESTABLISHED BEFORE US THE RELEVANT ADDITIONAL EVIDENCES, IF ANY, FILED BEFORE THE LD.CIT(A). THE DETAILS FROM THE EVIDENCES WHICH WERE ALREADY PRODUCED BEFORE THE AO CANNOT BE CONSIDERED AS ADDITIONAL EVIDENCES. HENCE, WE DO NOT FEEL THAT THERE IS VIOL ATION OF RULE 46A. 3.4 WE HAVE ALSO CONSIDERED THE FACT THAT THE ASSES SEE IS HAVING INCOME FROM HOUSE PROPERTY, INCOME FROM OTHER SOURCES , LONG TERM CAP ITAL GAIN AND BUSINESS INCOME. THE BUSINESS INCOME IS INTEREST AND REMUNERATION FROM T HE FIRM. IT IS NOWHERE MENTIONED IN THE ASSESSMENT ORDER THAT ASSESSEE HAS MAINTAINED T HE BOOKS OF ACCOUNT IN WHICH SALE PROCEEDS OF THE SHARES WERE CREDITED. THE SALE PROC EEDS OF SHARES WERE CREDITED IN THE BANK ACCOUNT. WHEN MONIES ARE DEPOSITED IN BANK, TH E RELATIONSHIP I.E. CONSTITUTED BETWEEN THE BANKER AND THE CUSTOMER IS ONE OF DEBTO R AND CREDITOR AND NOT OF TRUSTEE AND BENEFICIARY. THE PASS BOOK SUPPLIED BY THE BANK TO ITS CUSTOMER IS NOT BOOKS OF ACCOUNT MAINTAINED BY THE BANK AND IT IS NOT THE ACCOUNT BO OK OF THE ASSESSEE. SUCH PASS BOOK IS NOT MAINTAINED B THE BANK UNDER THE INSTRUCTION OF CLIENT. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS BHAI CHAND G GANDHI, 1 41 ITR 67 HELD THAT THE PASS BOOK SUPPLIED BY THE BANK TO THE ASSESSEE CANNOT BE REGA RDED AS A BOOK OF THE ASSESSEE. SUCH CREDIT IN THE PASS BOOK MAY FALL WITHIN THE AMBIT O F SECTION 69 AS UNEXPLAINED INVESTMENT AND NOT IN SECTION 68 OF THE INCOME TAX ACT, 1961. THE LD.CIT(A) HELD THAT THE AMOUNT COULD NOT HAVE BEEN ADDED U/S 68 OF THE ACT. THE RE VENUE IN ITS GROUNDS OF APPEAL HAS NOWHERE MENTIONED THAT SUCH ADDITION SHOULD BE CONS IDERED U/S 69 OF THE ACT. WE THEREFORE, HOLD THAT THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 29,50,797/-. ITA NO. 501/JODH/2010 ASSESSMENT YEAR 2006-07 11 4.1 THE GROUND OF APPEAL NO. 1 OF THE REVENUE FOR T HE ASSESSMENT YEAR 2006-07 IS SIMILAR TO THE GROUNDS OF APPEAL FOR THE ASSESSMENT YEAR 2005-06. 4.2 THE LD.CIT(A) HAS FOLLOWED HIS DECISION FOR THE EARLIER ASSESSMENT YEAR. WE THEREFORE, HOLD THAT THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 12,07,985/ MADE U/S 68 OF THE ACT. THUS GROUND NO. 1 OF THE RE VENUE IS DISMISSED. 5.1 THE SECOND GROUND OF REVENUE IS THAT THE LD. CI T(A) HAS ERRED IN DELETING THE ADDITION OF RS. 624/- AS COMMISSION PAID ON ABOVE A DDITION OUT OF UNDISCLOSED INCOME. 5.2 THE LD.CIT(A) IN PARA 4.1 TO 5.3 OF HIS ORDER H AS REFERRED TO THIS ISSUE AND THESE PARAGRAPHS ARE REPRODUCED AS UNDER:- 4.1 (A.OS CASE) THE FINDINGS OF THE A.O. GIVEN IN THE ASSTT. ORDER FOR MAKING THE ABOVE ADDITION ARE AS U NDER:- 'AS PER MODUS OPERANDI OF SHRI MUKESH M.CHOKSI HE CHARGE COMMISSION RS.624 FOR PROVIDING ACCOMMODA TION ENTRY WHICH THE ASSESSEE HAS PAID IN CASH TO THE AL LEGED BROKER TO GET THE AFORESAID ACCOMMODATION ENTRY. THE SAME HAS NOT BEEN DISCLOSED IN THE BOOKS OF ACCOUNT. THEREFORE, THE COMMISSION SO PAID IS LIABLE TO BE TAXED AS UNDISCL OSED CASH PAYMENT IN THE HANDS OF THE ASSESSEE. COMMISSI ON ON ABOVE ACCOMMODATION ENTRY OF RS. 12,07,895 AMOUNTIN G TO RS. 624 IS ADDED TO THE INCOME OF THE ASSESSEE. ' 4.2. APPELLANT'S CASE THAT THE ID AO WHILE COMPLETING THE ASSESSMENT MADE ADDITIONS AMOUNTING TO RS.624 AS COMMISSION WOULD HAVE BEEN PAID TO SHARE BROKER ON SURMISES BASIS WI THOUT ANY EVIDENCE, WHICH IS UNJUSTIFIED AND BAD IN LAW D UE TO THE FOLLOWING FACTS. DURING THE YEAR UNDER CONSIDERATION THE APPELLANT S OLD 32000 EQUITY SHARES OF SACHETA METALS LTD AMOUNTING TO RS. 1,283,498 WHICH WERE PURCHASED IN THE YEAR APRI L, 12 2004 AT A COST OF RS.75,513 AND EARNED LONG-TERM CAPITAL GAINS OF RS. 1,207,985. THE AFORESAID TRANSACTION WERE MADE THROUGH SHARE B ROKER ONLY AND DURING ASSESSMENT PROCEEDINGS APPELLANT SUBMITTED THE - - CONTRACT NOTES - CONTAINING DETAILS OF SERVICE TAX, BROKERAGE, OTHER LEVIES; - BILLS - CONTAINING SERVICE TAX, TRANSACTION CHARGES ON PERUSAL OF THE SAME YOUR HONOUR COULD APPRECIATE THAT THE BROKER HAS ALREADY STATED THE VARIOUS CHARGES M ADE BY THEM IN THERE CONTRACT NOTE AND BILLS AS ALREADY PR ODUCED BEFORE THE ID AO, IN ADDITION TO IT NO OTHER CHARGE S HAS BEEN PAID BY APPELLANT. THE ID AO WITHOUT ANY VALID REASONS, ARBITRARILY AN D ON SURMISES BASIS MADE ADDITIONS STATING AS COMMISSION PAYMENT WITH THE BIASED VIEW ONLY IN THE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE APPELLANT CASE IS SQUARELY COVERED BY THE FOLLOWING JUDICIAL PRONOUNCEMENTS - A RAJENDRAN & ORS VS. ASST COMMISSIONER OF INCOME-TAX (MAD). 2006-(155)-TAXMANN-0364-MAD; 2006- (204)-CTR-0009-MAD (REFER ANNJHON'BLE HIGH COURT HELD THAT - WJIEN THE ASSESSEE HAVE ESTABLISHED ALL THE REQUIREMENTS OF I T ACT,... REJECTION OF THOSE EXPLANATIONS IS DEFINITELY DUE T O ARBITRARY AND UNREASONABLE EXERCISE OF POWER. '10) IN THE CASE OF RAJKUMAR DAYA SHANKAR VS. CIT (1972) 32 TAXATION 49 (ALL) WHEREIN IT WAS HELD THAT ' THE DISALLOWANCE 13 WAS BASED ON NO VALID REASONS AND WAS ARBITRARY. ..DISALLOWANCE WAS NOT JUSTIFIED'. UNDER THE ABOVE FACTS AND CIRCUMSTANCE OF THE CASE, THE ID AO INDULGED IN SUSPICIONS, CONJECTURES AND SURMISES FOR MAKING WITHOUT VALID REASON AND ARBITRARILY ADDITIO N OFRS.624 AS UNDISCLOSED COMMISSION BASED ON SURMISE S /AD- HOC BASIS IS UNJUSTIFIED, UNWARRANTED AND BAD IN LA W AND THE SAME DESERVES TO BE DELETED. 4.3.DECISION. I HAVE CONSIDERED THE FACTS OF THE CASE. THE A.O. HAS MADE THE ADDITION ON THE GROUND THAT COMMISSION PAYMENT FOR PURCHASE AND SALE OF SHARES HAS NOT BEEN SHOWN IN THE BOOKS OF ACCOUNT. BUT THE ASSESSEE MUS T HAVE PAID IT IN CASH TO BE BROKER. THEREFORE , COMMISSION IS LIABLE TO BE TAXE D AS UNDISCLOSED CASH PAYMENT FOR THE ACCOMMODATION ENTRY. THE LEARNED A/ R. HAS VEHEMENTLY DENIED OF ANY PAYMENT AS THE BROKER HAS ALREADY DED UCTED THE BROKERAGE WHILE ISSUING CHEQUE FOR SALE CONSIDERATION. ON GOING THR OUGH THE FACTS AND SUBMISSIONS IT IS SEEN THAT IT IS VERY COMMON THING THAT A BROKER HAS PROVIDED THE SERVICES FOR PURCHASE AND SALE OF SHARES AND HAS DE DUCTED HIS BROKERAGE FROM THE SALE PROCEED ITSELF AND PAID TO THE APPELLANT THE B ALANCE AMOUNT. DUE TO THIS REASON, THE APPELLANT HAS NOT SHOWN THE PAYMENT OF BROKERAGE . IN VIEW OF THIS POSITION, THERE IS NO CASE FOR MAKING ANY ADDITION AND THE ADDITION MADE BY THE A.O. AMOUNTING TO RS. 624 IS DELETED. 5.3 WE HAVE HEARD BOTH THE PARTIES. WE AGREE WITH T HE FINDINGS OF THE LD.CIT(A). THE BROKER HAS ALREADY CHARGED THE COMMISSION AND THE S AME STANDS PAID. WE FEEL THAT 14 LD.CIT(A) IS FAIR AND REASONABLE AND DO NOT FEEL T O INTERFERE IN THE FINDINGS OF THE LD.CIT(A) 6.0 IN THE RESULT, THE APPEALS OF THE REVENUE ARE D ISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 16-12-2011. SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JODHPUR DATED: 16/12/2011 MISHRA COPY TO: 1. THE ACIT, CIRCLE- 2,UDAIPUR 2. SHRI RAJ KUMAR SONI, UDAIPUR 3.THE LD. CIT (A) BY ORDER 4.THE CIT 5.THE D/R 6.THE GUARD FILE (ITA NO.611/JU/09 & 501/JODH/10) A .R.. ITAT: JODHPUR 15 16 17 18