DCIT CEN CIR 33, MUMBAI V. ASHA V MEHTA, MUMBAI

ITA 6405/MUM/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2755 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 07-01-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 19-10-2012
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Keywords: Search and seizure; Document seized; Share purchase agreement; Bonafide belief; Additional evidence; Documents seized
• Section: 143(3); 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & SHRI SANJAY GARG (JM) I.T.A. NO. 6 405 /MUM/ 20 1 2 (ASSESSMENT YEAR 200 3 - 0 4 ) I.T.A. NO. 6998/MUM/2012 (ASSESSMENT YEAR 2003 - 04) DCIT C C - 33 ROOM NO. 32(2) GROUND FLOOR A AYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. VS. SMT. ASHA V. MEHTA A - 119, SATYAM SHOPPING CENTRE M.G. ROAD GHATKOPAR EAST MUMBAI - 400 077. ( APPELLANT ) ( RESPONDENT ) PAN NO . ACPPM9115R ASSESSEE BY SHRI RAKESH JOSHI DEPARTMENT BY SHRI A.B. KOLI DATE OF HEARING 25.8. 201 6 DATE OF PRONOUNCEMENT 21 . 9 . 201 6 O R D E R PER B.R. BASKARAN (AM) : - BOTH THESE APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST THE ORDERS PASSED BY LEARNED CIT(A) - 41, MUMBAI FOR A.Y. 2003 - 04. 2. THE A PPEAL NUMBERED AS 6405/MUM/2012 IS RELATED TO THE QUANTUM ASSESSMENT PROCEEDINGS AND OTHER APPEAL RELATES TO THE PENALTY LEVIED U/S. 271(1)(C) OF THE I.T. ACT. 3. IN THE QUANTUM PENALTY PROCEEDINGS THE REVENUE IS AGGRIEVED BY THE DECISION OF LEARNED CIT(A) IN HOLDING TH AT THE LONG TERM CAPITAL GAIN OF ` 1.44 CRORES CANNOT BE ASSESSED AS UNDISCLOSED INCOME OF THE ASSESSEE AND ALSO IN DELET ING THE ADDITION OF ` 7.20 LAKHS RELATING TO ALLEGED COMMISSION EXPENSES INCURRED ON GENERATION OF BOGUS LONG TERM CAPITAL GAINS. SMT. ASHA V. MEHTA 2 4. F ACTS RELATING TO THE ISSUE ARE STATED IN BRIEF. THE ASSESSEE FILED HER RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION DECLARING A TOTAL INCOME OF ` 3,96,993/ - ON 10.9.2003. SUBSEQUENTLY SEARCH AND SEIZURE ACTION U/S. 132 OF THE ACT WAS CONDUCTED IN THE HANDS OF THE ASSESSEE ON 14.2.2006. IN RESPONSE TO THE NOTICE ISSUED U/S. 153A OF THE ACT, THE ASSESSEE FILED RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION DECLARING SAME TOTAL INCOME OF ` 3,96,993/ - . IN THE RETURN OF INCOME, T HE ASSESSEE ALSO DECLARED LONG TERM CAPITAL GAIN ARISING ON SALE OF SHARES OF ` 1.44 CRORES OF A COMPANY NAMED M/S DATABASE FINANCE LTD AND CLAIMED THE SAME AS EXEMPT. HOWEVER, T HE ASSESSING OFFICER TREATED PURCHASE AND SALE OF SHARES AS BOGUS TRANSACTIONS AND ACCORDINGLY ASSESSED LONG TERM CAPITAL GAIN OF ` 1.44 CRORES AS INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCES. THE ASSESSING OFFICER ALSO ADDED 5% OF THE LONG TERM CAPITAL GAIN AS EXPENSES INCURRED BY THE ASSESSEE IN ARRANGING BOGUS TRANSACTIONS. WHEN THE MATTER WAS CARRIE D TO THE TRIBUNAL, THE ASSESSEE SUBMITTED NEW EVIDENCES IN SUPPORT OF PURCHASES AND ALSO RAISED VARIOUS CONTENTIONS AGAINST THE VIEW TAKEN BY THE AO. THE TRIBUNAL CONSIDERED VARIOUS OBJECTIONS RAISED BY THE AO , SET ASIDE MOST OF THEM AND FINALLY RESTORED THE MATTER TO TH E FILE OF THE ASSESSING OFFICER IN ORDER TO EXAMINE THE TRANSACTIONS RELATING TO PURCHASE OF SHARES. PURSUANT THERETO THE PRESENT ASSESSMENT ORDER WAS PASSED BY THE ASSESSING OFFICER U/S. 143(3) READ WITH SECTION 254 OF THE ACT. THE ASSESSE E HAD PURCHASE D SHARES FROM M/S. GR PANDYA SHARE BROKING LTD. ACCORDINGLY, THE ASSESSING OFFICER WROTE A LET TER TO THE AS SESSEE ON 9.7.2011 REQUIRING THE ASSESSEE TO PRODUCE THE ABOVE SAID BROKER TO PROVE HER CLAIM OF PURCHASE OF SHARES THROUGH HIM. HOWEV ER, THE ASSESSEE DID NOT PRODUCE THE BROKER. THEREAFTER THE ASSESSING OFFICER WROTE A LETTER TO M/S. GR PANDYA SHARE BROKING LTD. AND THE BORKER DENIED THE TRANSACTIONS. LATER, THE BROKER FILED ANOTHER LETTER STATING THAT THE BALCONY OF ITS OFFICE COLLAPSE D IN THE RAINY SEASON AND ALL RECORDS WERE LOST IN TH AT MISHAP. IT WAS FURTHER STATED IN THAT LETTER THAT THEY WERE UNDER BONAFIDE BELIEF THAT THERE WAS NO CLIENT BY NAME ASHA MEHTA WITH THEM. SMT. ASHA V. MEHTA 3 5. IT IS PERTINENT TO NOTE HERE THAT THE ASSESSEE HAD FI LED AN AFFIDAVIT DATED 4.5.2010 OBTAINED FROM SHRI NARE N DRA SHAH , DIRECTOR OF M/S. GR PANDYA SHARE BROKING L TD. IN THAT AFFIDAVIT, SHRI NARENDRA SHAH CONFIRMED THE TRANSACTIONS CARRIED ON BY THE ASSESSEE THROUGH M/S. GR PANDYA SHARE BROKING LTD. WHEN THIS AFFIDAVIT WAS CONFRONTED WITH M/S. GR PANDYA SHARE BROKING LTD., THE SAID BROKING FIRM STATED THAT SHRI NARENDRA SHAH WAS DIRECTOR FOR THE PERIOD FROM JUNE 2004 TO FEBRUARY 2006. SINCE AFFIDAVIT WAS GIVEN BY MR. NARENDRA SHAH IN MAY 2010, THE ASSESSING OF FICER TOOK THE VIEW THAT THE SAID AFFIDAVIT CANNOT BE RELIED UPON. IN THE ABSENCE OF ANY OTHER MATERIAL, THE ASSESSING OFFICER TOOK THE VIEW THAT THERE WAS NO REASON TO CHANGE THE VIEW TAKEN BY HIM IN THE ORIGINAL ASSESSMENT PROCEEDINGS. ACCORDINGLY HE HE LD THAT THE LONG TERM CAPITAL GAIN OF ` 1.44 CRORES DECLARED BY THE ASSESSEE WAS NOT GENUINE AND ACCORDINGLY ASSESSED THE SAME AS INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCES AND ALSO ADDED 5% THEREOF AS EXPENSES INCURRED IN PROCURING BOGUS LONG TERM CA PITAL GAIN. LEARNED CIT(A) DELETED BOTH THE ADDITIONS AND HENCE THE REVENUE HAS FILED THESE APPEALS BEFORE US. 6. IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) SET ASIDE THE VIEW TAKEN BY THE AO AND HELD THAT THE LONG TERM CAPITAL GAINS DECLARED BY TH E ASSESSEE SHOULD BE ACCEPTED. HENCE THE LD CIT(A) ALSO DELETED THE ADDITION RELATED TO ALLEGED COMMISSION PAID BY THE ASSESSEE. THE RELEVANT OBSERVATIONS MADE BY THE LD CIT(A) ARE EXTRACTED BELOW: - . REGARDING THE SECOND OBJECTION BASED ON THE REPORT OF DFL COMPANY DATED 06.08.2007, THE HON'BLE TRIBUNAL HAS HELD THAT THIS REPLY SHOULD NOT HAVE BEEN TAKEN INTO CONSIDERATION FOR THE REASON THAT THIS REPLY WAS DATED 06.08.2007, ON WHICH DATE, THE ASSESSEE WAS NOT A SHAREHOLDER OF DFL COMPANY AND THEREFORE , THE NAME OF THE ASSESSEE WAS NOT APPEARING IN THE LIST OF SHARE HOLDERS OF THAT COMPANY. IT WAS HELD THAT THE SHARES WERE PURCHASED ON 05.04.2001 WHICH FALLS UNDER THE AY 2002 - 03 AND THE SAME WERE SOLD IN OCTOBER 2002 WHICH FALLS DURING THE PERIOD OF AY 2003 - 04. IT WAS FURTHER STATED THAT THE COMPANY HAS NOWHERE STATED ABOUT THE LIST OF SHAREHOLDERS FOR THE AY 2002 - 03. THEREFORE, IT WAS HELD THAT THE LETTER DATED 06.08.2007 WAS NOT FOR THE PERIOD OF 2002 - 03 WHEN THE SHARES WERE PURCHASED AND SOLD. THUS, T HE TRIBUNAL HAS HELD THAT NOT MUCH WEIGHT/CREDENTIAL SHOULD HAVE BEEN GIVEN TO THE LETTER OF THE SMT. ASHA V. MEHTA 4 COMPANY. REGARDING THE THIRD OBJECTION THAT SHRI G.R. PANDYA, PARTNER OF M/S. GRPBL SHARE BROKER HAVE DENIED THE TRANSACTION, THE CONFIRMATION OF M/S. G.R. PAN DYA SHARE BROKING LTD. WAS SUBMITTED DURING THE APPELLATE PROCEEDINGS IN WHICH HE HAS CONFIRMED THE ACCOUNT OF THE ASSESSEE IN THEIR BOOKS OF ACCOUNT. HOWEVER, THE CIT(A) HAS NOT ADMITTED THE SAME BY HOLDING THAT THESE WERE ADDITIONAL EVIDENCES. ON THIS IS SUE, THE HON'BLE TRIBUNAL HAS HELD THAT THE CIT(A) SHOULD HAVE SOUGHT REMAND REPORT AFTER VERIFYING FROM THE BROKER AND THEN SHOULD HAVE DECIDED THE ASPECT. SINCE THE PURCHASES WERE MADE BY THE ASSESSEE, THEREFORE, M/S. G.R. PANDYA SHARE BROKING LTD. AND T HE AMOUNT OF CONSIDERATION WAS ADJUSTED TOWARDS CREDIT BALANCE OF THE ASSESSEE IN THE BOOKS OF ACCOUNT OF THE BROKER. THEREFORE, THE ISSUE WAS SET - ASIDE FOR RE - CONSIDERATION AND RE - VERIFICATION. FROM THE PERUSAL OF THE ORDER OF THE TRIBUNAL, IT IS CLEAR TH AT THE TRIBUNAL HAS DECIDED THE ISSUE, EXCEPT THE RE - EXAMINATION OF CONFIRMATION OF SHRI G.R.PANDYA FILED BEFORE THE ID. CIT(A) AS ADDITIONAL EVIDENCE WHICH WAS NOT ADMITTED. EVEN THE TRIBUNAL HAS GIVEN THE CITATION OF CASES IN THE CASE OF MUKESH R. MAROLI , PRASMAL NATA AND IN THE CASE OF RAMADEVI CHAUDHARY WHERE IT WAS HELD THAT SIMILAR ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. IN THE ASSESSMENT ORDER, THE AO HAS HELD THAT THE ASSESSEE HAS FILED THE AFFIDAVIT OF SHRI NARENDRA SHAH BEFORE THE TRIBUN AL WHO HAS CONFIRMED THAT HE WAS A DIRECTOR OF M/S. G.R. PANDYA SHARE BROKING LTD. AT THAT TIME. BUT THE AR OF THE APPELLANT HAS SUBMITTED THAT NO AFFIDAVIT WAS SUBMITTED BEFORE THE HON'BLE TRIBUNAL OR THE CIT(A) BUT THE ASSESSEE HAS FILED A CONFIRMATION O F ACCOUNT OF M/S. G.R. PANDYA SHARE BROKING LTD. BEFORE THE HONBLE CIT(A) AS ADDITIONAL EVIDENCE WHICH WAS NOT ADMITTED. IN VIEW OF THESE FACTS, IT IS CLEAR THAT THE ASSESSEE HAS NOT SUBMITTED ANY AFFIDAVIT BEFORE THE TRIBUNAL NOR IT IS MENTIONED ANYWHERE IN THE ORDER OF THE TRIBUNAL EXCEPT THE CONFIRMATION OF SHRI G.R. PANDYA WHICH WAS SUBMITTED BEFORE THE TRIBUNAL AND BEFORE THE ID. CIT(A) AS ADDITIONAL EVIDENCES. NOW IN THE FRESH ADJUDICATION THE QUESTION BEFORE THE AO WAS TO CONFIRM WHETHER THE CONFIRM ATION SUBMITTED BY M/S. G.R. PANDYA SHARE BROKING LTD. WAS CORRECT OR NOT. THE AO HAS WRITTEN LETTER TO M/S. G.R. PANDYA SHARE BROKING LTD. AS MENTIONED IN THE ASSESSMENT ORDER. SHRI G. R. PANDYA HAS FILED LETTER DATED 09.11.2011 IN WHICH IT WAS MENTIONED THAT THE BALCONY OF ESPLANADE BUILDING WAS QUITE OLD STRUCTURE AND COLLAPSED IN THE RAINY SEASON ON 01.07.2005 AND THE OLD RECORDS WERE DESTROYED IN THIS MISHAP. HOWEVER, IT WAS MENTIONED THAT THE NAME OF MRS. ASHA MEHTA WAS NOT THERE IN THEIR RECORD. NOW THE INTERPRETATION OF THIS LETTER HAS TO BE MADE WHEN IT WAS STATED THAT THE BUILDING WAS COLLAPSED AND THE OLD RECORDS WERE NOT TRACEABLE THEN HOW CAN IT BE CONFIRMED THAT MR. ASHA MEHTA WAS NOT THE CLIENT OF THE BROKER FOR AY 2003 - 04. FOR THIS PURPOSE, T HE HON'BLE TRIBUNAL HAS ALREADY DECIDED THAT THE SHARES WERE PURCHASED ON 04.05.2001 WHICH FALLS DURING THE PERIOD RELATING TO AY 2002 - 03 AND THE SAME WERE SOLD IN OCTOBER 2002 WHICH RELATES TO AY 2003 - 04. THUS, THE COMPANY HAS NOWHERE STATED ABOUT THE SHA REHOLDERS FOR THE AY 2002 - 03 BECAUSE THE LETTER WAS ISSUED BY THEM ON 06.08.2007. THEREFORE, IT CANNOT BE SAID THAT THIS REPLY WAS SMT. ASHA V. MEHTA 5 FOR THE PERIOD 2002 - 03 WHEN THE SHARES WERE PURCHASED AND SOLD BY THE ASSESSEE. IT WAS CONCLUDED BY THE TRIBUNAL THAT NOT MUC H WEIGHT/CREDENTIAL SHOULD HAVE BEEN GIVEN TO THE LETTER OF THE COMPANY. FROM THIS FINDING OF THE TRIBUNAL IT IS CLEAR THAT THE LETTER DATED 09.11.2011 OF M/S. G.R. PANDYA SHARE BROKING LTD. HAS CLARIFIED THAT DUE TO COLLAPSE OF THE BUILDING, BOOKS OF ACCO UNT WERE NOT AVAILABLE AND CONFIRMED THAT THE ASSESSEE, MRS. ASHA MEHTA WAS NOT THEIR CLIENT IS ONLY FOR THE PERIOD RELEVANT TO 2011 - 12 AND NOT FOR AY 2001 - 02. FURTHER, THE HON'BLE TRIBUNAL HAS HELD THAT THE SHARES WERE PURCHASED BY THE ASSESSEE IN AY 200 2 - 03 WHICH WERE DULY DECLARED IN THE BALANCE - SHEET FILED ALONG WITH THE RETURN OF INCOME AND DULY ASSESSED U/S. 153A BY THE SAME AO. THE TRIBUNAL HAS ALSO HELD THAT IF THERE WAS ANY DOUBT OF GENUINENESS OF THE SHARES, THE DEPARTMENT SHOULD NOT HAVE ACCEPTE D THE BALANCE - SHEET FOR THE AY 2002 - 03. THE HON'BLE TRIBUNAL HAS ALSO DISCUSSED THE DECISIONS ON SIMILAR ISSUE DECIDED BY THE TRIBUNAL SPECIFICALLY IN THE CASE OF MUKESH R. MAROLIA VS. ADDL. CIT (6 247) WHERE IT WAS HELD AS UNDER : - FOR A MOMENT, EVEN I F ALL THE ABOVE EVIDENCES ARE IGNORED, ONE CANNOT OVERLOOK T HE PRESSURE OF THE EVIDENCE COMING OUT OF THE SURVEY CARRIED OUT BY THE DEPARTMENT IN THE BUSINESS PREMISES OF THE ASSESSEE. THERE WAS A SURVEY CARRIED OUT BY THE DEPARTMENT IN THE BUSINESS PREMIS ES OF THE ASSESSEE. IN THE COURSE OF SURVEY, CONTRACT NOTES FOR SALE OF SHARES, COPIES OF BILLS THEREOF, PHOTOCOPIES OF SHARE CERTIFICATES ETC. WERE FOUND. THE PURCHASE AND SALE OF SHARES WERE ALSO FOUND RECORDED IN THE BOOKS OF ACCOUNT. THE DEPARTMENT HAS NO CASE THAT THE SURVEY WAS A STAGED ENACTMENT. A SURVEY IS ALWAYS UNEXPECTED. SO, IT IS NOT POSSIBLE TO PRESUME THAT THE ASSESSEE HAD COLLECTED CERTAIN FABRICATED DOCUMENTS AND KEPT AT HIS BUSINESS PREMISES SO AS TO HOODWINK THE SURVEY PARTY TO LEAD THEM TO BELIEVE THAT THE ASSESSEE HAD ENTERED INTO SHARE TRANSACTIONS. ATLEAST SUCH AN INFERENCE IS NOT POSSIBLE IN LAW. THE DEPARTMENT HAS NO DEFENCE AGAINST THE FORCIBLE ARGUMENT OF THE LEARNED COUNSEL THAT THE SURVEY CONDUCTED BY THE DEPARTMENT HAS OUT AND OUT UPHELD THE CONTENTION OF THE ASSESSEE THAT HE HAD PURCHASED AND SOLD SHARES. WE FIND THAT THIS SOLITARY EVIDENCE COLLECTED IN THE COURSE OF SURVEY IS SUFFICIENT TO ENDORSE THE BONAFIDES OF THE SHARE TRANSACTIONS MADE BY THE ASSESSEE. THEREFORE, IN SHOR T ON THE BASIS OF THE INTERNAL EVIDENCES AVAILABLE WITH THE ASSESSEE AND THE FACT THAT THE SALE PROCEEDS WERE COLLECTED THROUGH BANK ACCOUNTS AND COUPLED WITH THE EXTERNAL EVIDENCE OF SURVEY AND STATEMENT OF PARTIES, WE HAVE TO HOLD THAT THE SALE PROCEEDS OF RS. 1,41,08,484/ - HAS BEEN EXPLAINED. THEREFORE, THE SAID ADDITION IS DELETED'. SMT. ASHA V. MEHTA 6 SIMILARLY IN THE CASE OF RAJNUDEVI CHOUDHARY VS. ITO,THE ORDER OF THE TRIBUNAL HAS BEEN CONFIRMED BY THE HON'BLE MUMBAI HIGH COURT. IN THE DECISIONS RELIED ON BY THE AR OF THE APPELLANT, THE HON'BLE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOL DING THAT THE SEIZED DOCUMENTS HAS PROVED THAT THE TRANSACTION WAS GENUINE. EVEN IN THE PRESENT CASE, THE HON'BLE TRIBUNAL IN PARA 7.1 OF ITS ORDER HAS HELD THAT THER E ARE AMPLE EVIDENCES THAT THE ASSESSEE HAS PURCHASED THESE SHARES ON 04.05.2001. THE PURCHASE NOTE WAS FOUND DURING THE COURSE OF SEARCH WHICH WAS RECORDED IN THE PANCHNAMA ITSELF. THEREFORE, IT CANNOT BE SAID THAT THERE WAS NO EVIDENCE. IT IS AN UNDISPUT ED POINT THAT IN THE PRESENT CASE THE EVIDENCES WERE FOUND AND SEIZED RELATING TO THE SALE OF SHARES THROUGH BOMBAY STOCK EXCHANGE AND THE DEMATERIALIZATION OF THE SHARES IN THE NAME OF THE ASSESSEE AND PAYMENTS RECEIVED THROUGH ACCOUNT PAYEE CHEQUES. EVEN THE AD DID NOT HAVE ANY SECOND OPINION ABOUT THE SALE OF THESE SHARES IN THE NAME OF THE ASSESSEE. THE DISPUTE WAS RELATING TO THE PURCHASE OF THESE SHARES WHICH WERE PURCHASED FROM M/S. G.R. PANDYA SHARE BROKING LTD. BY MAKING THE PAYMENT THROUGH CREDIT ENTRY IN THE HANDS OF THE ASSESSEE AND THE BALANCE AMOUNT OF RS.7,000/ - BY CASH. THE PURCHASE OF THESE SHARES WERE RECORDED IN THE BALANCE - SHEET FOR THE AY 2002 - 03 WHICH WERE DULY EXAMINED AND ACCEPTED BY THE SAME ASSESSING OFFICER BY PASSING ORDER U/S. 1 43(3) R.W.S. 153A OF THE I.T. ACT. IN TOTALITY OF FACTS AND CIRCUMSTANCES AND THE DECISION OF HON'BLE TRIBUNAL, ON THE SAME ISSUE AS STATED ABOVE, IT IS HELD THAT THE AD HAS NO ADVERSE EVIDENCE AGAINST THE ASSESSEE EXCEPT A LETTER OF THE BROKER IN WHICH HE HAS STATED THAT ITS OFFICE BUILDING WAS COLLAPSED AND NO RECORD WAS AVAILABLE OF THE EARLIER YEARS. THUS, THE CONFIRMATION SUBMITTED BY THE APPELLANT IN THE SHAPE OF CONFIRMED COPY OF ACCOUNT OF THE ASSESSEE IN THE BOOKS OF ACCOUNT OF M/S. G.R. PANDYA SHA RE BROKER (P) LTD. HAS TO BE ACCEPTED AS THERE IS NO ADVERSE EVIDENCE AGAINST IT. MOREOVER, IN THE SECOND ASSESSMENT PROCEEDING , THE ASSESSING OFFICER HAD MADE INQUIRY FROM THE COMPANY, M/S. G.R. PANDYA SHARE BROKERS (P) LTD. REGARDING THE PURCHASE OF SHAR ES BY THE ASSESSEE. IN ITS REPLY, M/S. G.R. PANDYA SHARE BROKER (P) LTD HAS NOT DISPROVED THEIR CONFIRMATION GIVEN OF ADDITIONAL EVIDENCE, RATHER IT WAS MENTIONED THAT THE RECORDS RELATING TO A . Y . 2002 - 03 WERE DESTROYED DUE TO COLLAPSE OF BUILDING IN 2005, HENCE NOT AVAILABLE. FURTHER, ALL THE DOCUMENTS RELATING TO PURCHASE/SALE, D EMATERIALIZATION IN THE NAME OF THE ASSESSEE, PAYMENT RECEIVED BY ACCOUNT PAYEE CHEQUE ETC. WERE FOUND AND SEIZED DURING SEARCH. THEREFORE, RELIANCE CANNOT BE PLACED ONLY ON THE S TATEMENT OF THE HUSBAND OF THE ASSESSEE WHICH IS NOT CORROBORATED BY ANY DOCUMENTARY EVIDENCE AND DECIDED BY THE TRIBUNAL. KEEPING IN VIEW ALL THESE FACTS AND CIRCUMSTANCES AND THE FINDING OF THE TRIBUNAL, IT IS HELD THAT THE ADDITION MADE BY THE AO IS NOT SUSTAINABLE , HENCE DELETED. THE GROUND OF APPEAL IS ALLOWED . SMT. ASHA V. MEHTA 7 7. THE LD D.R SUBMITTED THAT THE ASSESSING OFFICER HAS LISTED OUT THE VARIOUS REASONS IN PAGE NO.8 & 9 OF THE ASSESSMENT ORDER FOR REJECTING THE CLAIM OF LONG TERM CAPITAL GAINS. HE SUBMI TTED THAT, EVEN THOUGH THE TRIBUNAL HAS RESTORED THE MATTER TO VERIFY THE PURCHASE OF SHARES, YET THE AO COULD NOT EXAMINE THE GENUINENESS OF PURCHASE OF SHARES, SINCE THE BROKER M/S G.R. PANDYA SHARE BROKING LTD COULD NOT FURNISH ANY EVIDENCE. HENCE THE AO COULD NOT FOLLOW THE DIRECTIONS GIVEN BY THE TRIBUNAL AND HENCE HE HAD NO OTHER OPTION, BUT TO TAKE THE VERY SAME VIEW ON THE BASIS OF EXISTING MATERIALS. HE SUBMITTED THAT THE AFFIDAVIT WAS OBTAINED BY THE ASSESSEE FROM ONE THE DIRECTORS O M/S G.R. PAN DYA SHARE BROKING LTD, WHERE AS THE SAID PERSON WAS HOLDING DIRECTORSHIP FOR OTHER PERIOD. HE SUBMITTED THAT THE RETURN OF INCOME FOR AY 2002 - 03 WAS ORIGINALLY FILED WITHOUT BALANCE SHEET. HOWEVER, IN THE RETURN FILED U/S 153A THE ASSESSEE HAS FURNISHED STATEMENT OF AFFAIRS WITHOUT AFFIXING SIGNATURE THEREON. ACCORDINGLY, THE LD D.R SUBMITTED THAT THE ORDER PASSED BY AO SHOULD BE RESTORED. 8. ON THE CONTRARY, THE LD A.R SUBMITTED THAT THE TRIBUNAL HAS RESTORED THE MATTER TO THE FILE OF THE AO ONLY TO VERIFY THE PURCHASES, WHERE AS THE AO HAS EXCEEDED THE LIMITS BY RELYING ON OTHER REASONING T O TAKE THE VERY SAME VIEW. HE SUBMITTED THAT ALL THE OBJECTIONS RAISED BY THE AO WERE ALREADY DULY ADDRESSED BY THE TRIBUNAL. WITH REGARD TO THE PURCHASES, THE BROKER M/S G.R PANDYA SHARE BROKING LTD HAS FILED CONFIRMATION LETTER AND LATER ONE OF THE DIRECTORS GAVE AFFIDAVIT CONFIRMING THE TRANSACTIONS. HOWEVER, BEFORE THE AO THE SAID BROKER HAS DENIED THE TRANSACTIONS UNDER THE MISCONCEIVED NOTION WITHOUT BRING ING ANY MATERIAL IN SUPPORT OF THE SAME. THE BROKER HAS SPECIFICALLY STATED THAT IT IS NOT IN POSSESSION OF RECORDS. HE SUBMITTED THAT ALL THESE POINTS HAVE BEEN DULY CONSIDERED BY LD CIT(A) IN DECIDING THIS ISSUE IN FAVOUR OF THE ASSESSEE. 9. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. WE HAVE GONE THROUGH THE ORDER DATED 08 - 03 - 2010 PASSED BY THE CO - ORDINATE BENCH AND WE SMT. ASHA V. MEHTA 8 NOTICE THAT THE TRIBUNAL HAS RESTORED THE MATTER TO THE FILE OF THE AO WITH THE FOLLOWING OBSERVATION: - 11 WE H AVE ALSO GONE THROUGH VARIOUS OTHER DETAILS I.E., PURCHASE AND SALE OF SHARES, SALE CONSIDERATION AND SHARE CERTIFICATE DULY TRANSFERRED IN THE NAME OF THE ASSESSEE AND THEREAFTER TRANSFERRED THE SHARES IN THE NAME OF PURCHASERS TO WHOM THE SHARES WERE SOL D BY THE ASSESSEE UNDER DE - MAT ACCOUNT. THE SHARES WERE DEMATERIALIZED AND THEREAFTER THE SHARES WERE SOLD THROUGH DE - MAT ACCOUNT WHICH PROVES THAT THE SHARES WERE GENUINE. THE DEPARTMENT IS ALSO NOT DOUBTING THE SALE OF SHARES. 11.1 ONCE IT IS HELD T HAT THE SHARES ARE GENUINE, THEN IT CANNOT BE SAID THAT THE ASSESSEE HAS NOT PURCHASED THE SHARES OR WAS NOT THE OWNER OF THE SHARES. THEREFORE, AS STATED IN THE FOREGOING PARAS THAT NO MUCH CREDENTIAL SHOULD HAVE BEEN GIVEN TO THE LTTER OF M/S DFL WHOSE SHARES WERE PURCHASED BY THE ASSESSEE THROUGH THE BROKER. THERE IS NOTHING ON RECORD TO SUGGEST THAT THESE SHARES ARE BACK DATED. THEREFORE, IT HAS TO BE TAKEN THAT THE SHARES WERE PURCHASED ON THE DATE AS SHOWN BY THE ASSESSEE. HOWEVER, AS STATED ABOVE THAT THE SHARE BROKER THROUGH WHOM THESE SHARES HAVE PURCHASED HAD DENIED THE TRANSACTIONS; HOWEVER, ON A LATER STAGE, THE SAME BROKER HAS CONFIRMED THE ACCOUNT SHOWING PURCHASE OF SHARES AND THEREAFTER ADJUSTED THE AMOUNT OF PURCHASE CONSIDERATION TOWARD S CREDIT BALANCE OF THE ASSESSEE APPEARING ITS BOOKS OF ACCOUNT. THIS ASPECT HAS NOT BEEN EXAMINED BY THE LOWER AUTHORITIES. THEREFORE, FOR THIS PURPOSE, WE SET ASIDE THE MATTER TO THE FILE OF THE AO TO VERIFY THIS ASPECT AND AFTER AFFORDING REASONABLE O PPORTUNITY OF BEING HEARD TO THE ASSESSEE, THE ISSUE BE DECIDED AFRESH. THE ABOVE SAID DECISION OF THE TRIBUNAL HAS TO BE READ WITH THE OBSERVATIONS MADE BY IT IN THE FOLLOWING PARAGRAPHS IN ORDER TO UNDERSTAND THE SAME: - 9 THIRD OBJECTION IS THAT S HRI G R PANDYA, THE PARTNER OF M/S GRPBL SHARE BROKER HAVE DENIED THE TRANSACTION. IT WAS STATED BY THE LD COUNSEL OF THE ASSESSEE THAT OUT OF FEAR AT THAT POINT OF TIME, MR. G.R. PANDYA HAD DENIED; HOWEVER, DURING THE APPELLATE PROCEEDINGS HE HAS CONFIRM ED THE ACCOUNT OF THE ASSESSEE IN THEIR BOOKS OF ACCOUNT. THE CIT(A) HAS NOT ADMITTED THE SAME BY HOLDING THAT THESE ARE ADDITIONAL EVIDENCE. IN OUR CONSIDERED VIEW, THE CIT(A) SHOULD HAVE SOUGHT REMAND REPORT AFTER VERIFYING FROM THE BROKER AND THEN SHO ULD HAVE DECIDED THIS ASPECT. 9.1 SINCE THE PURCHASES WERE MADE THROUGH M/S GRPBL AND THE AMOUNT OF CONSIDERATION HAS BEEN ADJUSTED TOWARDS CREDIT BALANCE OF THE ASSESSEE IN THE BOOKS OF ACCOUNT OF THE BROKER , THEREFORE, IN OUR CONSIDERED VIEW, THIS A SPECT NEED RE - VERIFICATION. SMT. ASHA V. MEHTA 9 9.2 AS STATED ABOVE, THE DEPARTMENT HAS ACCEPTED THE BALANCE SHEET OF AY 2002 - 03 THAT THESE SHARES WERE PURCHASED IN AY 2002 - 03. NOW, THE DEPARTMENT WANTS TO HOLD THAT THESE SHARES WERE NOT GENUINE. IN OUR VIEW, THE DEPARTM ENT SHOULD NOT HAVE ACCEPTED THE BALANCE SHEET OF AY 2002 - 03 WHILE COMPLETING THE ASSESSMENT OF AY 2002 - 03 U/S 153A. ANYWAY, AS STATED ABOVE, THIS ASPECT NEEDS RE - VERIFICATION. 10. WE NOTICE THAT THE ASSESSEE DID NOT FILE ANY CONFIRMATION LETTER OF M/S GR PANDYA SHARE BROKERS LTD IN SUPPORT OF CLAIM OF PURCHASE OF SHARES BEFORE THE AO . IT APPEARS THAT SHRI G.R PANDYA HAD INITIALLY DENIED THE TRANSACTIONS. THEREAFTER THE ASSESSEE OBTAINED CONFIRMATION LETTER FROM M/S GR PANDYA SHARE BROKING LTD AFTE R COMPLETION OF ASSESSMENT PROCEEDINGS AND HENCE SUBMITTED THE SAME BEFORE THE LD CIT(A). SINCE THE LD CIT(A) DID NOT ADMIT THE SAME, THE ASSESSEE PLACED THE SAME AS AN ADDITIONAL EVIDENCE BEFORE THE TRIBUNAL IN THE FIRST ROUND. THE COPY OF THE SAID LETT ER IS PLACED AT PAGE 4 OF THE PAPER BOOK. A PERUSAL OF THE SAME SHOWS THAT THE CLIENT ID OF THE ASSESSEE WAS GIVEN AS 1301190000005334 AND THE LEDGER ACCOUNT COPY FOR THE PERIOD FROM 01.01.2001 TO 31.03.2002 IS ALSO GIVEN. HENCE THE TRIBUNAL HAS ADMITT ED ADDITIONAL E VIDENCE. SINCE THERE WAS CONTRADICTION BETWEEN THE STATEMENT GIVEN BY SHRI G.R PANDYA AND THE CONFIRMATION LETTER, THE TRIBUNAL THOUGH IT FIT TO RESTORE THE MATTER TO THE FILE OF THE AO IN ORDER TO RESOLVE THIS CONTRADICTION. ACCORDINGLY, WE ARE OF THE VIEW THAT THE TRIBUNAL HAS NOT KEPT ALL THE MATTERS OPEN, BUT RESTORED THE ISSUE ONLY TO VERIFY THE PURCHASES AND IF ANYTHING TURNS OUT AGAINST THE ASSESSEE, THEN THE AO WAS DIRECTED TO DECIDE THE MATTER IN ACCORDANCE WITH THE LAW. 11. IN THE SET ASIDE PROCEEDINGS, THE SHARE BROKER M/S GR PANDYA SHARE BROKING LTD DID NOT FURNISH ANY DOCUMENT IN SUPPORT OF ITS STATEMENT THAT THE ASSESSEE WAS NOT ITS CLIENT. IT HAS CLAIMED THAT THE RECORDS WERE DESTROYED. HENCE THE LD CIT(A) HAS RIGHTLY PO INTED OUT THAT THE SHARE BROKER COULD NOT DENY THE TRANSACTION WITHOUT EXAMINING ITS RECORDS. 12. WE HAVE NOTICED EARLIER THAT THE ASSESSEE HAS FILED AN AFFIDAVIT OBTAINED FROM ONE OF THE DIRECTORS OF THE SHARE BROKING COMPANY AND THE AO DID NOT SMT. ASHA V. MEHTA 10 CONS IDER THE SAME FOR THE REASON THAT HE WAS HOLDING THE POST OF DIRECTOR DURING THE PERIOD FROM JUNE 2004 TO FEB, 2008, WHEREAS THE IMPUGNED TRANSACTIONS HAVE BEEN CARRIED OUT DURING THE FY 2001 - 02 AND 2002 - 03. IN OUR VIEW, THE AFFIDAVIT IS BEING GIVEN BY A PERSON WHO IS HAVING KNOWLEDGE OF THE TRANSACTIONS AND THE DIRECTOR SHRI NARENDRA SHAH GAVE THE AFFIDAVIT, SINCE HE WAS HAVING THE KNOWLEDGE OF THE TRANSACTIONS. THERE IS NO RESTRICTION THAT A PERSON HOLDING DIRECTORSHIP IN 2004 SHOULD NOT EXAMINE THE OTH ER RECORDS AND ACQUIRE KNOWLEDGE . HENCE WE ARE NOT ABLE TO AGREE WITH THE REASONING GIVEN BY THE AO TO REJECT THE AFFIDAVIT GIVEN BY THE DIRECTOR OF SHARE BROKING FIRM. 13. THUS, WE NOTICE THAT THE AO COULD NOT EXAMINE THE DETAILS OF PURCHASE TRANSAC TIONS AS DIRECTED BY THE TRIBUNAL, SINCE THE CONCERNED BROKER DID NOT CO - OPERATE. FURTHER, WE NOTICE THAT THE AO DID NOT MAKE ANY ATTEMPT TO COLLECT DETAILS FROM THE RETURN OF INCOME FILED BY M/S G.R PANDYA SHARE BROKING LTD. ON THE CONTRARY, THE ASSESSE E HAS FURNISHED CONFIRMATION LETTER AND AN AFFIDAVIT IN SUPPORT OF THE PURCHASE TRANSACTIONS. WE HAVE NOTICED EARLIER THAT M/S G.R PANDYA SHARE BROKING LTD HAS DENIED THE TRANSACTIONS OUT OF AIR, I.E., WITHOUT BRINGING ANY MATERIAL. THE BROKING FIRM COUL D NOT HAVE ALSO BROUGHT ANY MATERIAL AGAINST THE ASSESSEE, SINCE THEY HAVE CLAIMED THAT THEIR RECORDS HAVE BEEN DESTROYED. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THE AO WAS NOT JUSTIFIED IN TAKING ADVERSE VIEW IN THE MATTER. 14. WE HAVE EA RLIER NOTICED THAT THE ASSESSEE HAS SOLD THE SHARES THROUGH ANOTHER BROKER BY DEMATERIALIZING THE SAME. THE DEMATERIALIZATION OF SHARES WOULD NOT HAPPEN WITHOUT PHYSICAL SHARES. WE HAVE NOTICED THAT THE TRIBUNAL HAS ALREADY GIVEN FINDING THAT THE GENUINE NESS OF SHARES CANNOT BE DOUBTED. THE ONLY DISPUTE, IN OUR VIEW, WAS WITH REGARD TO THE MODE AND TIME OF PUR CHASE OF SHARES AND THE CLAIM OF THE ASSESSEE IN THIS REGARD COULD NOT BE PROVED BY THE AO AS WRONG. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THE LD CIT(A) WAS JUSTIFIED IN REVERSING THE ORDER PASSED BY THE AO AND DIRECTING THE AO TO ACCEPT THE LONG TERM CAPITAL GAIN DECLARED BY THE ASSESSEE. SMT. ASHA V. MEHTA 11 HENCE THE ESTIMATED ADDITION MADE TOWARDS EXPENSES WAS ALSO RIGHTLY DELETED BY LD CIT(A). ACCORDI NGLY WE UPHOLD THE ORDER PASSED BY LD CIT(A). 15. WE SHALL NOW TAKE UP THE APPEAL FILED BY THE REVENUE CHALLENGING THE CANCELLATION OF PENALTY LEVIED BY THE AO U/S 271(1)(C) OF THE ACT. IN THE EARLIER PARAGRAPHS, WE HAVE UPHELD THE ORDER PASSED BY LD CIT(A) IN CANCELLING THE ADDITIONS MADE BY THE AO. WE NOTICE THAT THE LD CIT(A) HAS DELETED THE PENALTY ON THE GROUND THAT THE ADDITIONS MADE BY THE AO STOOD DELETED. WE NOTICE THAT THE LD CIT(A) HAS DELETED THE PENALTY ON CORRECT REASONING AND HENCE OR DER DOES NOT CALL FOR ANY INTERFERENCE. 16. IN THE RESULT, BOTH THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 21 . 9 .2016 SD/ - SD/ - (SANJAY GARG ) (B.R.BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 21 / 9 / 20 1 6 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) PS ITAT, MUMBAI