SHRI MAHESH SOMAIYA, MUMBAI V. THE ACIT 14(1), MUMBAI

ITA 6230/MUM/2007

• Counselvise Citation: 623019914 RSA 2007
• Duration Of Justice: 4 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 17-10-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 10-10-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P C MAURYA
• Keywords: Share purchase agreement

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI B.R. MITTAL (JUDICIAL MEMBER) AND SHRI R.K. PANDA (ACCOUNTANT MEMBER) ITA NO. 6230/MUM/2007 ASSESSMENT YEAR-2004-05 SHRI MAHESH SOMAIYA, C/O BIPIN JEWELLER, 128, TRIMURTI MARKET ZAVERI BAZAR, MUMBAI-400 002 PAN-AOCPS 5145L VS. THE ACIT 14(1), MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SASHI TULSIYAN RESPONDENT BY: SHRI P.C. MAURYA DATE OF HEARING :18.10.2011 DATE OF PRONOUNCEMENT:18.11.11 O R D E R PER B.R. MITTAL, JM : THE ASSESSEE HAS FILED THIS APPEAL FOR ASSESSMENT Y EAR 2004-05 AGAINST ORDER OF LD. CIT(A) DT. 23 RD AUGUST, 2007. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS AS TO WHETHER LD. CIT(A) HAS ERRED IN REJECTING THE ASSESSEES CLAIM OF LONG TE RM CAPITAL GAINS OF RS. 71,61,169/-ON SALE OF SHARES 3. THE RELEVANT FACTS ARE THAT ASSESSEE FILED RETUR N ON 13.3.2006 DECLARING TOTAL INCOME OF RS. 72,93,810/- WHICH INCLUDED INTE R-ALIA LONG TERM CAPITAL GAIN OF RS. 71,61,169/-. 4. THE ASSESSEE IS AN INDIVIDUAL AND IS A PARTNER I N M/S. BIPIN JEWELLERY. HE DERIVES INCOME FROM BUSINESS BY WAY OF REMUNERAT ION, CAPITAL GAIN AND INCOME FROM OTHER SOURCESL. ITA NO. 6230/M/2007 2 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ASKED FOR DETAILS IN RESPECT OF CAPITAL GAIN SHOWN BY ASSESSEE ON PURCHASE AND SALE TRANSACTIONS OF 35,000 SHARES OF STENLY SE CURITIES LTD AND 10,000 SHARES OF AMLUCKIE INVESTMENT CO.LTD. AS PER BILLS OF PURCHASES FURNISHED BY ASSESSEE, AO HAS STATED THAT PURCHASES WERE MADE ON 12 TH APRIL, 2002 OF SHARES OF 10,000 OF AMLUCKIE INVESTMENT CO.LTD. AT RS. 50,200/- AND 35,000 SHARES OF STENLY SECURITIES AT RS. 82,950/-. THE AO HAS STATED THAT SAID SHARES OF AMLUCKIE INVESTMENT CO.LTD. WERE SOLD O N 18 TH NOVEMBER, 2003 TO 27 TH NOV. 2003 AT RS. 17,09,050/- AND SHARES OF STENLY SECURITIES WERE SOLD ON 17 TH DECMBER, 2003 TO 5 TH FEBRUARY, 2004 AT RS. 55,82,919/-. THE AO HAS SUMMARIZED THE DETAILS OF PURCHASES AND SALES TRANS ACTION IN PARA 5.1. AND PARA 5.2 OF ASSESSMENT ORDER. 6. THE AO IN ORDER TO VERIFY GENUINENESS OF ABOVE T RANSACTIONS ISSUED LETTER TO M/S. STENLY SECURITIES LD., M/S. AMBLUCKI E INVESTMENT CO. LTD. & M/S. V.K. SINGHANIA & CO., THE BROKER THROUGH WHOM ASSES SEE PURCHASED SHARES. HE HAS STATED THAT NONE OF THEM COMPLIED WITH EXCEP T M/S. V.K. SINGHANIA & CO. THE AO FURTHER STATED THAT ASSESSEE FILED BANK ACCOUNT WITH BANK OF RAJASTHAN FOR THE PERIOD 1.4.2003 TO 31.3.2004 REFL ECTING SALE PROCEEDS OF SHARES OF RS. 72,91,969/-, SUMMARY OF BANK ACCOUNT WITH STANDARD CHARTERED BANK SHOWING CASH WITHDRAWAL OF RS. 9400 AND CASH D EPOSITED OF RS. 11,000/- FOR THE PERIOD ENDED 31.3.2004 AND ALSO FI LED CONFIRMATION LETTER DT. 7.10.2006 FROM M/S. V.K. SINGHANIA & CO., WHO HAD B OUGHT 10000 SHARES OF M/S. AMBLUCKIE INVESTMENT CO., AND 35000 SHARES OF STENLY SECURITIES FOR ASSESSEE AND ALSO FILED CASH PAYMENT RECEIPT OF RS. 50,200/- AND RS. 82,950/- RESPECTIVELY. THE AO STATED THAT ASSESSEE ALSO FIL ED COPY OF LEDGER IN HIS BOOKS OF ACCOUNT REFLECTING CASH TRANSACTIONS. THE ASSESSEE ALSO FILED DEMAT ACCOUNT SHOWING 35,000 SHARES OF STENLY SECURITIES ON 13.12.2003 AND 10000 SHARES OF AMBLUCKIE INVESTMENT CO., ON 12.12.2003. THE AO STATED THAT M/S. V.K. SINGHANIA & CO., VIDE ITS LETTER DT. 19.12.200 6 STATED THAT PURCHASE TRANSACTION WAS DONE OFF MARKET AND IN PHYSICAL FO RM AND ALSO FURNISHED ITA NO. 6230/M/2007 3 DETAILS WHICH WERE EARLIER FURNISHED BY ASSESSEE LI KE PURCHASE BILLS, LEDGER ACCOUNT FOR CASH RECEIPT. 7. HOWEVER, AO HAS STATED THAT SAID TRANSACTIONS WE RE CARRIED OUT IN A PLANNED MANNER TO CAPITALIZE THE BLACK MONEY BY TAK ING BENEFIT OF LOWER RATE OF TAXATION BY CLAIMING LONG TERM CAPITAL GAIN. TH E PURCHASE PAYMENTS WERE MADE IN CASH AND NOT THROUGH NORMAL BANKING CHANNEL . THEREFORE, IT CANNOT BE VERIFIED FROM AUTHENTIC SUPPORTING DOCUMENTS SUC H AS BANK ACCOUNT. NATURE OF TRANSACTION ITSELF LOOKS SUSPICIOUS FROM THE MANNER IT HAS BEEN CONDUCTED I.E. ABNORMAL APPRECIATION IN THE VALUE O F SHARES, THE MODE OF PAYMENT FOR PURCHASE OF SHARES, NOT DOING TRANSACTI ON THROUGH NORMAL SHARE DEALING PROCEDURES, NO AUTHENTIC DOCUMENT PRODUCED IN COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS ETC. THE ASSESSEE HAS SHOWN TO HAVE RECEIVED SALE PROCEEDS THROUGH CHEQUE OR DD WHEREAS PURCHASES WER E CONSCIOUSLY MADE IN CASH TO FACILITATE MANIPULATION. THE AO STATED THA T SUCH INCIDENTS OF RIGGING PENNY STOCK PRICES FOR THE PURPOSE OF MONEY LAUNDER ING HAVE BEEN DETECTED BY DEPARTMENT EARLIER ALSO. THEREFORE AO CONSIDERE D SAID SHARE TRANSACTIONS NOT GENUINE AND CONSIDERED CLAIM OF LONG TERM CAPIT AL GAIN AS INCOME OF THE ASSESSEE FROM OTHER SOURCES U/S. 56 OF THE ACT. BE ING AGGRIEVED, ASSESSEE FILED APPEAL BEFORE LD. CIT(A). 8. THE LD. CIT(A) HAS STATED THAT IN VIEW OF DECISI ON OF HONBLE APEX COURT IN THE CASE OF CIT VS DURGA PRASAD MORE 82 IT R 540, THE SURROUNDING CIRCUMSTANCES HAVE TO BE CONSIDERED TO SEE AS TO WH ETHER TRANSACTION OF PURCHASE AND SALE OF SHARES ARE GENUINE OR NOT. TH EREAFTER, LD. CIT(A) VIDE PARA-6 OF IMPUGNED ORDER HAS CONFIRMED ACTION OF AO WHICH IS AS UNDER: IT CAN BE SEEN IN THIS CASE THAT THE APPELLANT WAS HAVING A NOMINAL INCOME BY WAY OF SHARE OF PROFIT IN THE FIR M BIPIN JEWELLERS AND ON ACCOUNT OF SALARY DURING THE YEAR ENDING 31. 3.2003. HIS INCOME FROM SHARE OF PROFIT STOOD AT RS. 23,034/- A ND HIS SALARY AS PARTNER STOOD AT RS. 1,32,000/- ONLY. OUT OF THIS, THE APPELLANT HAD INVESTED A SUM OF RS. 1 LAKH IN THE PPF AND IDBI FL EXIBONDS, THUS LEAVING HARDLY ANY AMOUNT FOR PURPOSES OF HOUSEHOLD EXPENSES OR INVESTMENT. IT WAS ALSO APPARENT THAT THE APPELLAN T HAD NEVER INVESTED ANY AMOUNT IN SHARES AND SECURITIES IN THE PAST AND THIS IS ITA NO. 6230/M/2007 4 THE FIRST TIME THAT THE PURCHASE OF A SUBSTANTIAL N UMBER OF SHARES IN THE TWO COMPANIES WAS SHOWN BY THE APPELLANT. IT I S AGAIN SURPRISING THAT THE ALLEGED PURCHASES WERE MADE THROUGH BROKER S NAMELY V.K. SINGHANIA & CO. AND M. BHIWANIWALA & CO. LOCATED AT CALCUTTA. IT IS NOT UNDERSTOOD UNDER WHAT CIRCUMSTANCES THE APPELLA NT LOCATED AT MUMBAI COULD GET IN TOUCH WITH THE CALCUTTA BASED B ROKERS. THE AO WAS RIGHT IN HIS REMARK THAT SINCE THE ALLEGED PURC HASE OF SHARES WERE MADE OFF MARKET, THERE IS NO AUTHENTICITY WITH REGA RD TO THE DATE ON WHICH THE SHARES WERE PURCHASED AND IT WAS OPEN FOR MANIPULATION WITH THE HELP OF THE BROKERS. IT MAY NOT BE OUT OF PLACE TO MENTION HERE THAT DURING THAT PERIOD SUCH INCIDENTS OF MANI PULATING THE PURCHASES AND RIGGING PENNY STOCK PRICES FOR PURPOS ES OF MONEY LAUNDERING WERE PREVALENT. EVEN THE PAYMENTS FOR S O CALLED PURCHASES HAVE NOT BEEN MADE IN CHEQUE TO PROVE THA T IN FACT THE PURCHASES WERE ACTUALLY MADE ON THESE DATES. THE S OURCE OF INVESTMENT OF RS. 1,33,150/- IN CASH ITSELF IS NOT EXPLAINED CONSIDERING THE MEAGER AMOUNT OF INCOME EARNED BY THE APPELLANT AND WITH HARDLY ANY SURPLUS LEFT. IT IS AGAIN SURPRISING THAT THE PRICES OF THE SHARES OF BOTH THE INSIGNIFICANT COMPANIES SHOT UP MORE THAN 50 TIMES. THESE SHARES WERE DEMATERIALIZED ON 12.9.2003 AND 13.12.2 003 I.E. A LITTLE BEFORE THE SALE. IN MAY OPINION, CONSIDERING ALL T HE SURROUNDING FACTS AND CIRCUMSTANCES, I AM OF THE VIEW THAT THIS WAS O NLY A DEVICE USED BY THE APPELLANT FOR THE PURPOSES OF CONVERTING THE UNACCOUNTED MONEY INTO EXPLAINED MONEY WITHOUT PAYING PROPER TA XES. THEREFORE, I HOLD THAT THE CLAIM THAT PURCHASES WERE MADE ON 1 2.4.2002 AND 12.12.2002 OFF MARKET WAS NOT PROVED AND THE EVIDEN CE FURNISHED IN THE FORM OF BILLS FROM THE BROKERS CANNOT BE RELIED . BESIDES, THE APPELLANT WAS NOT HAVING ANY CASH AND IN THE ABSENC E OF ANY CASH AVAILABLE WITH THE APPELLANT THERE WAS NO QUESTION OF BUYING THE SHARES. MOREOVER, THE FACT THAT APPELLANT HAD NEVE R INDULGED IN SHARE TRADING IN THE PAST AND CHOSE TO INVEST IN THE SHAR ES THAT TOO THROUGH BROKERS AT CALCUTTA ITSELF WAS VERY UNNATURAL AND D IFFICULT TO BELIEVE. CONSIDERING ALL THE FACTS AND RELYING ON THE APEX C OURT JUDGEMENT IN THE CASE OF DURGAPRASAD MORE, I HOLD THAT APPARENT IN THIS CASE WAS NOT THE REAL AND THE ENTIRE EXERCISE WAS MANIPULATE D BY THE APPELLANT TO CONVERT ITS BLACK MONEY INTO EXPLAINED INCOME BY PAYING NO TAX/LOWER TAXES. THE AO HAD RIGHTLY PLACED RELIANC E TO THE APEX COURT JUDGEMENT IN THE CASE OF MCDOWELL & CO. LTD. VS CTO 154 ITR 148. THEREFORE, THE ACTION OF THE AO IN TREATING THE AMO UNT OF RS. 72,91,969/- AS INCOME FROM OTHER SOURCES WAS FULLY JUSTIFIED. ACCORDINGLY, THIS GROUND OF APPEAL IS REJECTED. HENCE, ASSESSEE IS IN FURTHER APPEAL BEFORE TRIBUNA L. 9. THE LD. AR SUBMITTED THAT AO HAS DOUBTED GENUINE NESS OF SHARE TRANSACTION MERELY BECAUSE PURCHASE CONSIDERATION W AS MADE IN CASH AND IT WAS OFF MARKET TRANSACTION IN PHYSICAL FORM. LD. AR REFERRED TO PAGES 16 & 17 OF PAPER BOOK WHICH ARE COPIES OF LETTERS FROM AMBLUCKIE INVESTMENT CO ITA NO. 6230/M/2007 5 LTD. AND STENLY SECURITIES LTD. RESPECTIVELY AND SU BMITTED THAT SAID COMPANIES VIDE THEIR LETTERS DT. 29.6.2002 AND 31.1 2.2002 RESPECTIVELY AFTER TRANSFERRING SHARES IN THE NAME OF ASSESSEE RETURNE D SHARE SCRIPTS GIVING CERTIFICATE NOS. FOLIO NOS AS WELL AS DISTINCTIVE NOS OF SHARES. HE SUBMITTED THAT LATER ON SAID SHARES WERE DEMATERIALIZED AND R EFERRED TO PAGES 12 TO 15 OF PAPER BOOK TO SUBSTANTIATE HIS SUBMISSION I.E. C OPIES OF REQUEST FORM FOR DEMATERIALIZATION OF SHARES OF ABOVE COMPANIES. HE FURTHER REFERRED TO PAGES 23 & 24 OF PAPER BOOK WHICH IS COPY OF PURCHASE BIL LS OF 10000 SHARES OF AMBLUCKIE INVESTMENT CO. LTD., AND PAGES 25 & 26 O F PAPER BOOK WHICH IS A COPY OF PURCHASE BILL FOR PURCHASE OF 35000 SHARES OF STENLY SECURITIES THROUGH BROKER M/S.V.K. SINGHANIA & CO. HE SUBMITT ED THAT SAID SHARES WERE SOLD THROUGH RECOGNIZED BROKER AND COPIES OF B ILLS ARE PLACED AT PAGES 27 TO 33 IN RESPECT OF SALE OF SHARES OF AMBLUCKIE INVESTMENT CO AND PAGES 34 TO 43 OF PAPER BOOK IN RESPECT OF SALE OF SHARES OF STENLY SECURITIES. THE LD. AR SUBMITTED THAT SAID BROKER M/S. V.K. SINGHAN IA & CO. VIDE ITS LETTER DT. 7 TH OCTOBER, 2006 CONFIRMED DIRECTLY TO AO THAT HE PU RCHASED ABOVE SHARES ON BEHALF OF ASSESSEE AND REFERRED PAGES 44 OF PAPE R BOOK TO SUBSTANTIATE HIS SUBMISSION. HE SUBMITTED THAT SAID SHARE BROKE R ALSO SENT COPY OF LEDGER ACCOUNT TO AO, COPY OF WHICH IS PLACED AT PAGE 45 O F PAPER BOOK. THE LD. AR SUBMITTED THAT ALL REQUISITE DETAILS IN RESPECT OF PURCHASE AND SALE OF ABOVE SHARES WERE FILED BEFORE AO. HE SUBMITTED T HAT SALE PROCEEDS WERE RECEIVED BY ASSESSEE BY ACCOUNT PAYEE CHEQUE. HE F URTHER REFERRED TO PAGE 46 OF PAPER BOOK WHICH IS COPY OF BANK STATEMENT OF ASSESSEE FOR THE PERIOD 1.4.2003 TO 31.3.2004 AND SUBMITTED THAT ASSESSEE H AD SUFFICIENT FUND IN HIS BANK ACCOUNT. THEREFORE OBSERVATION MADE BY AUTHOR ITIES BELOW THAT HE DID NOT HAVE SUFFICIENT MONEY TO PURCHASE SHARES IS CON TRARY TO FACTS ON RECORD. LD. AR FURTHER SUBMITTED THAT LD. CIT(A) HAS NOT CO RRECTLY CONSIDERED THE CASE OF CIT VS DURGA PRASAD MORE(SUPRA), AS IN THA T CASE DOCUMENTS FURNISHED WERE SELF SERVING DOCUMENTS UNLIKE IN THE CASE OF ASSESSEE, WHERE DOCUMENTS FURNISHED BEFORE AO WERE OF 3 RD PARTIES AND AS SUCH THEY WERE NOT SELF SERVING DOCUMENTS. LD. AR RELYING ON DECI SION OF APEX COURT IN THE CASE OF CIT VS S.P. JAIN 87 ITR 370 SUBMITTED THA T FAILURE TO TAKE INTO ITA NO. 6230/M/2007 6 ACCOUNT RELEVANT MATERIAL AND ACTING ON CONJECTURES AND SURMISES IS NOT JUSTIFIED IN DRAWING AN ADVERSE INFERENCE. LD. AR RELYING ON DECISION OF KOLKATA HIGH COURT IN THE CASE OF CIT VS KORLAY TRD G, CO. LTD. 232 ITR 820 232 ITR 820 SUBMITTED THAT IF ASSESSEE FURNISHED R ELEVANT DOCUMENTS, ASSESSEE HAS DISCHARGED ITS INITIAL BURDEN AND IF AO STILL DOUBTED TRANSACTION, HE IS TO BRING ON RECORD THE MATERIAL TO CONTROVERT CLAIM OF THE ASSESSEE. HE FURTHER SUBMITTED THAT CLAIM OF ASSESSEE COULD NOT BE DENIED MERELY ON PRESUMPTIONS AND ASSUMPTION. LD. AR FILED COPIES O F FOLLOWING CASES AND SUBMITTED THAT SIMILAR ISSUE HAS BEEN CONSIDERED BY ITAT IN FAVOUR OF ASSESSEE. 1) SMT. SAROJBALA A. JAIN VS DCIT - ITA NO. 3356/M/07 2) ACCHYALAL SHAW VS ITO 19 DTR (KOL) 177 3) ACIT VS GAURAV P. SHAH ITA NO. 1537/M/06 4) SHRI AMARNATH JAIN VS DCIT ITA NO. 3355/M/07 5) ITO VS SANDEEP R. SHOREWALA-HUF ITA NO. 5722-23/M /07 6) ITO VS VARUNADEVI SHOREWALA-HUF ITA NO. 1611/M/07 10. LD. AR SUBMITTED THAT LONG TERM CAPITAL GAIN ON SALE OF SHARES IS GENUINE. 11. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDERS OF AUTHORITIES BELOW. HE SUBMITTED THAT ASSESSEE MADE PAYMENT FOR PURCHAS E OF SAID SHARES IN CASH THOUGH HE HAD BANK ACCOUNT. HE SAID THAT CASH PAYMENT WAS MADE TO MANIPULATE PURCHASE OF SHARES. LD. DR FURTHER SUBM ITTED THAT ASSESSEE IS A RESIDENT OF MUMBAI BUT ENTERED INTO TRANSACTION THR OUGH A BROKER WHO IS KOLKATA BASED. HE SUBMITTED THAT ASSESSEE HAD NEVE R ENTERED INTO ANY TRANSACTION IN THE PAST NOR IN FUTURE EXCEPT TRANSA CTIONS UNDER CONSIDERATION. HE FURTHER SUBMITTED THAT BOTH COMPANIES NAMELY A MBLUCKIE INVESTMENT CO., AND STENLY SECURITIES ARE NOT WELL KNOWN COMPA NIES AND THEREFORE APPRECIATION OF PRICES AS SHOWN IS NOT GENUINE. THE LD. DR FURTHER SUBMITTED THAT ASSESSEE DEMATERIALISED SHARES JUST THREE MONTHS PRIOR TO SALE OF SHARES. THEREFORE AO RIGHTLY CONSIDERED SA ID SHARE TRANSACTIONS AS ITA NO. 6230/M/2007 7 BOGUS. THE LD. DR FURTHER REFERRED PARA-6 OF ORDER OF LD. CIT(A) AND SUBMITTED THAT ASSESSEE DID NOT HAVE SUFFICIENT CAS H TO PURCHASE SAID SHARES. HE FURTHER SUBMITTED THAT CASES CITED BY LD. AR, CO PIES PLACED AT PAGES 2 TO 32 OF PAPER BOOK-II ARE NOT RELEVANT AS EVERY CASE H AS TO BE DECIDED LOOKING INTO THE FACTS OF A PARTICULAR CASE. HE SUBMITTED THAT GROUND OF APPEAL TAKEN BY ASSESSEE BE DISMISSED BY CONFIRMING ORDER OF LD. CIT(A). 12. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH PARTIES AND ORDERS OF AUTHORITIES BELOW AND SU BMISSIONS OF LD. REPRESENTATIVES OF BOTH PARTIES. WE OBSERVE THAT A O HAS DOUBTED GENUINENESS OF TRANSACTION MAINLY ON THE GROUND THA T ASSESSEE MADE CASH PAYMENT FOR PURCHASE OF SHARES OF BOTH COMPANIES NA MELY AMBLUCKIE INVESTMENT CO. LTD., AND STENLY SECURITIES LTD. THO UGH HE HAD A BANK ACCOUNT. FURTHER AO HAS STATED THAT SHARES OF BOTH COMPANIES WERE PENNY STOCK AND THEREFORE APPRECIATION OF VALUE BY 34 TIM ES IN THE CASE OF SHARES OF AMBLUCKIE INVESTMENT CO. AND 67 TIMES IN THE CASE O F SHARES OF STENLY SECURITIES IS NOT POSSIBLE. HOWEVER, WE OBSERVE TH AT ASSESSEE FILED COPIES OF PURCHASE AND SALES BILLS OF BROKERS THROUGH WHOM HE ENTERED INTO TRANSACTIONS FOR PURCHASE AND SALE OF SHARES OF BOT H COMPANIES. THE ASSESSEE ALSO FILED DETAILS OF SHARES TRANSFERRED I N HIS NAME GIVING DISTINCTIVE NOS. FOLIO NOS. ALONGWITH CONFIRMATION LETTERS FROM RESPECTIVE COMPANIES, COPIES PLACED AT PAGES 16 AND 17 OF PAPER BOOK EVID ENCING THAT SAID SHARES WERE TRANSFERRED IN THE NAME OF ASSESSEE-COMPANY. WE ALSO OBSERVE THAT ASSESSEE GOT THOSE SHARES DEMATERIALIZED AND IT IS POSSIBLE ONLY IF ASSESSEE WAS IN POSSESSION OF SHARE CERTIFICATES IN HIS NAME . HAD THERE BEEN NO VALID SHARE CERTIFICATES IN ASSESSEES FAVOUR, IT COULD N OT HAVE BEEN POSSIBLE FOR ASSESSEE TO GET THOSE SHARES IN HIS DEMAT ACCOUNT. THEREFORE, IT IS EVIDENT THAT ASSESSEE PURCHASES THESE SHARES I.E. 10000 SHA RES OF AMBLUCKIE INVESTMENT CO. AND 35000 SHARES OF STENLY SECURITIE S. WE OBSERVE THAT AO ALSO ENQUIRED FROM BROKER TO CONFIRM AS TO WHETHER SAID BROKER NAMELY V.K. SINGHANIA & CO. HAD PURCHASED SHARES UNDER CONSIDER ATION ON BEHALF OF ASSESSEE AND SAID BROKER VIDE ITS LETTER DT. 7 TH OCTOBER, 2006 COPY PLACED AT ITA NO. 6230/M/2007 8 PAGE 44 OF PAPER BOOK CONFIRMED TO AO THAT HE PURCH ASED 10000 SHARES OF AMBLUCKIE INVESTMENT CO.LTD. AND 35000 SHARES OF ST ENLY SECURITIES LTD. FOR ASSESSEE AND RECEIVED AMOUNT IN CASH. ON PERUSAL O F SAID LETTER, IT IS OBSERVED THAT DETAILS OF TRANSACTION AND BILL NO. H AVE ALSO BEEN GIVEN. NOT ONLY THIS, THE SAID BROKER ALSO ENCLOSED COPY OF LE DGER ACCOUNT OF ASSESSEE WHICH IS PLACED AT PAGE 45 OF PAPER BOOK. WE FURTH ER OBSERVE THAT ASSESSEE ALSO FILED COPIES OF SALE BILLS SAME ARE PLACED AT PAGES 27 TO 43 OF PAPER BOOK. THE AO HAS NOT BROUGHT ANYTHING ON RECORD TO PROVE THAT THERE WAS ANY CONNIVANCE BETWEEN ASSESSEE AND SHARE BROKER AN D PURSUANT THERETO HE RECEIVED PAYMENTS THROUGH ACCOUNT PAYEE CHEQUES. C ONSIDERING ABOVE FACTS, WE ARE OF THE CONSIDERED VIEW THAT PURCHASE OF SHARES WHICH HAVE BEEN DOUBTED BY AO IS NOT SUPPORTED BY ANY COGENT M ATERIAL. THE AO HAS NOT ESTABLISHED THAT CONTRACT NOTES ETC WERE BOGUS OR FABRICATED OR THAT NO PAYMENTS WERE IN FACT MADE BY ASSESSEE ON PURCHASE OF SHARES AND/OR NO PAYMENTS WERE RECEIVED BY ACCOUNT PAYEE CHEQUE ON S ALE OF SAID SHARES. FURTHER THERE IS NO EVIDENCE ON RECORD BROUGHT BY D EPARTMENT TO SHOW THAT SHARE PRICES WERE ARTIFICIALLY INFLATED BY ASSESSEE AND/OR BROKER. FURTHER, NO MATERIAL HAS BEEN PLACED ON RECORD BY DEPARTMENT TO ESTABLISH THAT INFORMATION CONTAINED IN CONTRACT NOTE WAS FALSE. ON THE OTHER HAND AS MENTIONED HEREINABOVE, ON SALE OF SHARES, DELIVERY OF SHARES WAS MADE THROUGH ASSESSEES DEMAT ACCOUNT AND SALE PROCEEDS WERE RECEIVED THROUGH ACCOUNT PAYEE CHEQUE. CONSIDERING ABOVE FACTS, WE ARE OF THE CONSIDERED VIEW THAT AUTHORITIES BELOW WERE NOT JUSTIFIED TO D OUBT THE GENUINENESS OF TRANSACTION AS ASSESSEE HAS ESTABLISHED BY DOCUMENT ARY EVIDENCES THAT PURCHASES AS WELL AS SALES OF SHARES OF ABOVE NAMED BOTH COMPANIES IS GENUINE. 13. A SIMILAR ISSUE CAME UP BEFORE HONBLE KOLKATA HIGH COURT IN THE CASE OF CIT VS KEDARNATH AGGARWAL HUF IN ITA NO. 6/2011 AN D THE HONBLE KOLKATA HIGH COURT VIDE ITS ORDER DT. 2.2.2011 OBSERVED THA T WHEN ASSESSEE HAD SUBMITTED COMPLETE DOCUMENTARY EVIDENCE TO PROVE HI S TRANSACTIONS OF PURCHASE AND SALE OF THOSE SHARES AND AO COULD NOT BROUGHT ANYTHING ON ITA NO. 6230/M/2007 9 RECORD TO PROVE THAT THERE WAS ANY CONNIVANCE BETWE EN ASSESSEE AND BROKER TO PROVE THAT EVIDENCES PRODUCED WERE FALSE OR FICT IOUS. HENCE CAPITAL LOSS INCURRED BY ASSESSEE ON SALE OF SHARES IS A GENUINE LOSS AND COULD NOT BE DENIED. THUS, THEIR LORDSHIPS CONFIRMED THE ORDER OF TRIBUNAL BY REJECTING THE APPEAL FILED BY DEPARTMENT. THE ITAT KOLKATA B ENCH IN THE CASE OF ACCHYALAL SHAW VS ITO(SUPRA) HAS ALSO HELD THAT WHE N ASSESSEE HAS SHOWN CAPITAL GAIN FROM SALE OF SHARES IN OFF MARKET TRAN SACTION AND SAID TRANSACTIONS IF CONFIRMED BY SHARE BROKER, AO IS NO T JUSTIFIED IN MAKING ADDITION OF THE AMOUNT OF CAPITAL GAINS U/S. 68 OF THE ACT. THEREFORE FOLLOWING THE SAID DECISION OF ITAT KOLKATA BENCH, WE ARE OF THE CONSIDERED VIEW THAT AO WAS NOT JUSTIFIED TO DOUBT TRANSACTION S OF PURCHASE OF SHARES MERELY BECAUSE IT WAS OFF MARKET TRANSACTION. 14. WE ALSO AGREE WITH LD. AR THAT DECISION OF DURG A PRASAD MORE (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE CASE BEFORE U S AS IN THAT CASE IT IS OBSERVED THAT THESE WERE ONLY SELF SERVING DOCUMENT S BUT IN THE CASE BEFORE US, DOCUMENTS FILED ARE OF THIRD PARTY DOCUMENTS. ON THE OTHER HAND, DEPARTMENT HAS NOT BROUGHT ANY COGENT MATERIAL ON R ECORD TO PROVE THAT SAID DOCUMENTS ARE NOT GENUINE. THEREFORE, WE HOLD THAT AUTHORITIES BELOW ARE NOT JUSTIFIED IN TREATING THE LONG TERM CAPITAL GAI N SHOWN BY ASSESSEE ON ACCOUNT OF SALE OF SHARES OF AMBLUCKIE INVESTMENT C O.LTD. AND STENLY SECURITIES LTD. AS NOT GENUINE. HENCE, WE VACATE O RDERS OF AUTHORITIES BELOW BY ALLOWING GROUND OF APPEAL TAKEN BY ASSESSEE. TH EREFORE, WE HOLD THAT AMOUNT OF RS. 71,61,169/- SHOWN BY ASSESSEE UNDER T HE HEAD LONG TERM CAPITAL GAIN IS GENUINE AND NOT TO BE TREATED AS IN COME FROM OTHER SOURCES U/S. 56 OF THE ACT. 15. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOW ED. ORDER PRONOUNCED ON THIS 18 TH DAY OF NOVEMBER, 2011 SD/- SD/- ( R.K. PANDA) (B.R. MITTAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 18 TH NOVEMBER, 2011 ITA NO. 6230/M/2007 10 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR B BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NO. 6230/M/2007 11 DATE INITIALS 1. DRAFT DICTATED ON: 15.11.2011 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 16.11.2011 SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: SR. PS/PS 6. ORDER PRONOUNCED ON: SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: SR. PS/PS 9. DATE ON WHICH FILE GOES TO AR 10. DATE OF DISPATCH OF ORDER: