ACIT, BIKANER V. Shri Shri Deepak Agarwal, BIKANER

ITA 650/JODH/2007

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54390 (ITAT-JODHPUR)
• Duration Of Justice: 4 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 29-11-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 24-08-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: U C JAIN
• Keywords: Unexplained investment; Share purchase agreement
• Section: 131; 68; 69; 54; 12; 11; 15

Judgement Text

1 ITA 650(2)-7 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH JODHPUR. ( BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ) ITA NO. 650/JODH/2007 ASSTT. YEAR : 2003-04. THE ACIT, CIRCLE-1, VS. SHRI DEEPAK AGARWAL BIKANER. C/O M/S. SHIV DEEP INDUSTRIES, BEECHWAL IND. AREA, BIKANER. (APPELLANT) (RESPONDENT) C.O. NO. 51/JODH/2007 ( ARISING OUT OF ITA NO. 650/JODH/2007 ) ASSTT. YEAR : 2003-04. SHRI DEEPAK AGARWAL, VS. THE ACIT, CIRCLE-1, BIKANER. BIKANER. (CROSS OBJECTOR) (RESPONDENT) APPELLANT BY : SHRI SUNIL MATHUR RESPONDENT BY : SHRI U.C. JAIN DATE OF HEARING : 29.11.2011. DATE OF PRONOUNCEMENT : 09.12.2011. ORDER DATED : 09/12/2011. PER R.K. GUPTA, J.M. THIS IS AN APPEAL BY DEPARTMENT AND A CROSS OBJECT ION BY ASSESSEE AGAINST THE ORDER OF LD. CIT (A) RELATING TO ASSESSMENT YEAR 20 03-04. 2 2. GROUND NO. 1 IN APPEAL OF THE DEPARTMENT IS AGAI NST DELETING ADDITION OF RS. 38,79,420/- OUT OF TOTAL ADDITION OF RS. 40,28,420/ - MADE BY ASSESSING OFFICER UNDER SECTION 68 OF THE IT ACT. 3. THE ASSESSEE THROUGH HIS CROSS OBJECTION HAS CHA LLENGED THE REMAINING AMOUNT OF RS. 1,49,000/- SUSTAINED BY LD. CIT (A). 4. SINCE BOTH THE GROUNDS ARE INTER-LINKED, THEREFO RE, THEY ARE DISPOSED OFF TOGETHER. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E PURCHASED 50000 EQUITY SHARES OF MANTRA ONLINE LTD. FROM ATN TELEFILMS LTD. @ RS. 2. 22 PER SHARE FOR RS. 1,11,000/- THROUGH RECOGNIZED STOCK BROKER M/S. BUBNA STOCK BR OKING SERVICES LTD. THE SHARES WERE PURCHASED ON 11.6.01. AFTER HAVING PURCHASED, THE SHARES WERE TRANSFERRED IN FAVOUR OF ASSESSEE BY THE COMPANY ON 28.06.01. THE SHARES WERE LATER ON SOLD THROUGH REGISTERED BROKER M/S. PRAKASH NAHATA & CO. FROM 24.07.02 TO 2 3.12.02 IN THE CALCUTTA STOCK EXCHANGE. CONSEQUENTLY RS. 40,28,420/- AROSE AS LON G TERM CAPITAL GAIN. THE APPELLANT MADE AN INVESTMENT OF RS. 41,00,000/- IN THE BONDS OF RURAL ELECTRIFICATION LTD. AND CLAIMED EXEMPTION U/S 54 EC OF THE I.T. ACT WITH RE GARD TO ENTIRE SUM OF LONG TERM CAPITAL GAIN. THE ASSESSING OFFICER MADE ADDITION OF BOTH SUMS I.E. THE AMOUNT OF LONG TERM CAPITAL GAIN AS WELL AS THE INVESTMENT IN THE BONDS OF RURAL ELECTRIFICATION LTD. 6. WHILE MAKING THE ADDITION UNDER SECTION 68 AND A DDITION OF RS. 41 LACS UNDER SECTION 69 ON ACCOUNT OF UNEXPLAINED INVESTMENT IN PURCHASE OF REC BONDS, THE ASSESSING OFFICER PLACED RELIANCE ON VARIOUS CASE L AWS I.E. IN CASE OF VISP (P) LTD., 186 CTR 718 (MP), IN CASE OF KALE KHAN MOHD. HANIF, 50 ITR 1 (S. C.). BEFORE MAKING THE ABOVE STATED ADDITIONS, THE ASSESSING OFFICER FOUND THAT THERE WAS DIFFERENCE BETWEEN OPENING CAPITAL SHOWN IN THE BALANCE SHEET AND CLOS ING CAPITAL ACCOUNT, AND ACCORDINGLY 3 THE ASSESSING OFFICER STARTED ENQUIRY. THEREAFTER, THE ASSESSEE FILED COPIES OF CAPITAL ACCOUNT AND DETAILS OF SALE OF SHARES AS WELL AS DE TAILS OF INVESTMENT AND DIFFERENCE FOUND IN THE OPENING CAPITAL ACCOUNT AS WELL AS IN CLOSIN G CAPITAL ACCOUNT AS PER BALANCE SHEET WAS EXPLAINED. THE ASSESSING OFFICER NOTED THAT SHARES HAVE BEEN PURCHASED ON 20.6.2001 THROUGH M/S. BUBNA STOCK BROKING SERVICES LTD. THE ASSESSING OFFICER NOTED THAT THESE SHARES WERE PURCHASED IN CASH. THEREAFT ER, THE ASSESSING OFFICER NOTED THAT ASSESSEE HAS SOLD ALL THESE SHARES THROUGH M/S. PRA KASH NAHATA & CO. WHO IS MEMBER OF CALCUTTA STOCK EXCHANGE. THE ASSESSING OFFICER ALS O NOTED THAT THESE SHARES WERE DEMATERIALIZED ON LATER STAGE. THEREFORE, HE DOUBTE D THE GENUINENESS OF THE TRANSACTION IN PURCHASE AND SALE OF SHARES. ASSESSEE WAS REQUIRED TO FILE DETAILS. DETAILS WERE FILED. THE ASSESSING OFFICER MADE FURTHER ENQUIRY ALSO AND IT WAS FOUND THAT M/S. BUBNA STOCK BROKING SERVICES LTD. HAS SURRENDERED ITS LICENCE I N THE YEAR OF 1997 AND, THEREFORE, THERE IS NO QUESTION OF PURCHASE OF ANY SHARES THROUGH IT IN THE YEAR 2001. THE ASSESSING OFFICER DREW CONCLUSION THAT ASSESSEE HAS MANIPULAT ED TRANSACTION UNDER THE GARB OF PURCHASE AND SALE OF SHARES AND, THEREFORE, ENTIRE SALE CONSIDERATION WAS ADDED UNDER SECTION 68 BY THE ASSESSING OFFICER. 7. ASSESSEE PREFERRED APPEAL BEFORE LD. CIT (A). D ETAILED SUBMISSIONS WERE FILED BEFORE HIM WHICH ARE TABULATED IN PARAS 4.1 TO 5.19 AT PAGES 7 TO 22 OF LD. CIT (A) ARE AS UNDER :- 4.1. DURING THE COURSE OF APPELLATE PROCEEDING, T HE LD. AR OF APPELLANT HAS FILED WRITTEN SUBMISSION, THE RELEVANT EXTRACT OF SAME PERTAINING TO REBUTTAL OF CASE LAW CITED BY THE ASSESSING OFFICER IS BEING REPRODUCED FOR BETTER APPRECIATION. (A) IN THE INSTANT CASE OF ASSESSEE THE CASE LAW OF M.P. HIGH COURT HAS NO APPLICATION. THE HONOURABLE HIGH COURT LAID DOW N THIS 4 PRINCIPLE IN A CASE WHEN THE PURCHASE WAS BOGUS AND THE CREDITORS STANDING IN THE ACCOUNTS WERE MERELY PAPER ENTRY. I N OTHER WORDS IT WAS A RULING ABOUT THE APPLICABILITY OF SEC. 68 IN CASE OF TRADE CREDITORS BEING BOGUS OR FICTITIOUS. WHEREAS, THE L D. ASSESSING OFFICER SOUGHT TO APPLY THIS RULING IN REFERENCE TO THE SALE OF SHARES. BOTH THE ISSUES ARE HETEREOGICALLY OPPOSITE . THE IMPUGNED CASE LAW WAS FOR PURCHASES AND TRANSACTIONS IN QUES TION INVOLVED SALE OF SHARES. (B) THEN. A O QUOTED THE CASE OF KALE KHAN MOHR. HA NIF V. CIT (1963) 50 ITR 1 (HON'BLE SUPREME COURT) AT THE BOTT OM OF PAGE NO. 9 AND GAVE FOUR LINE CITATION. IF YOUR HONOUR PERUSE THE SAID CASE YOU WOULD NOT FIND ANY SUCH RATIO CULLED OUT. EVEN IN ANY WRITE UP PART YOU WONT FIND SUCH SENTENCES. (C) THE. A O QUOTED THE CASE OF STATE OF RAJ. V. BA SANT NAHATA (2005) 8 JT 171 (S C). THE CASE WAS NOT WITH REFERENCE TO INCOME TAX ACT AND IT RELATED TO REGISTRATION ACT AND EVIDENCE ACT. IT WAS HELD IN DHAKESWARI COTTON MILL LTD. V. CIT (1955) 2 7 ITR 126 (S C) THAT TECHNICAL RULES OF EVIDENCE CAN NOT APPLY T O INCOME TAX PROCEEDING. (D) THE CASE OF CIT V. DURGA PRASAD MORE 82 ITR 540 WAS QUOTED WHICH HELD THAT THE TAXING AUTHORITIES ARE NOT REQU IRED TO PUT ON BLINKERS WHILE LOOKING AT THE DOCUMENTS PRODUCED BE FORE THEM. THEY ARE ENTITLED TO LOOK INTO THE SURROUNDING CIRC UMSTANCES TO FIND OUT THE REALITY OF THE RECITALS MADE IN THOSE DOCUM ENTS. HERE THE ASSESSING OFFICER WAS PUTTING ON BLINKERS HE WAS GO ING BY PRECONCEIVED NOTION THAT THE TRANSACTION WAS NOT RE AL. HE FAILED TO APPRECIATE THE POSITIVE AND CLINCHING EVIDENCE PUT FORTH. THE COUNSEL OF ASSESSEE ATTENDED ALL THE PROCEEDINGS AN D PROVIDED ALL INFORMATION CALLED FOR. THE ASSESSING OFFICER HIMSE LF DID NOT ASK FOR ANY FURTHER INFORMATION. THE ATTENDANCE OF THE COUNSEL OF THE ASSESSEE ON 16.03.06 & 20.03.06 WERE TESTIMONY TO T HIS EFFECT. 5 APART FROM THIS IT IS ALSO DISHEARTENING THAT THE L D. ASSESSING OFFICER DID NOT RECOGNIZE THE COUNSEL OF ASSESSEE E VEN AFTER ELAPSE OF A SEVERAL MONTHS FROM THE DATE OF HIS POSTING. W HEREAS HE IS A SENIOR PRACTITIONER OF THE BIKANER AND HE HAD BEEN APPEARED BEFORE HIM IN NUMBER OF CASES IN THE PAST INCLUDING THAT O F THE ASSESSEE. LOOKING TO THE ENTIRE GAMUT OF FACTS AND CIRCUMSTAN CES, JCIT, RANGE-1, BIKANER DROPPED THE PENALTY PROCEEDING INI TIATED U/S 131 OF I.T. ACT. (E) HELD IN CIT V. RAMESHWAR PRASAD BANGLA (1968) 6 8 ITR 653 (ALL.) IN A CASE OF CIRCUMSTANTIAL EVIDENCES THE TO TALITY OF THE CIRCUMSTANCES HAS GOT TO BE TAKEN INTO CONSIDERATIO N AND COMBINED EFFECT OF ALL THOSE CIRCUMSTANCES IS DETERMINATIVE OF THE QUESTIONS AS TO WHETHER OR NOT A PARTICULAR FACT IS PROVED. T HE RATIO OF ABOVE REFERRED CASE AND THAT OF 82 ITR 540 WORK IN FAVOUR OF THE APPELLANT. THE ENTIRE SEQUENCE OF EVENTS SHOWS THAT ASSESSING OFFICER WAS ONLY BENT UPON FRAMING HIGH PITCHED ASS ESSMENT AND NOT INTERESTED IN ANY FURTHER EVIDENCE. (F) THE S. C. IN CASE OF CIT V. SUN ENGINEERING WOR KS (P) LTD. 107 ITR (S. C.) 209 HELD THAT IT IS NEITHER DESIRABLE N OR PERMISSIBLE TO PICK OUT A WORD OR A SENTENCE FROM THE JUDGMENT OF THE SUPREME COURT DIVORCED FROM THE CONTEXT OF THE QUESTION UND ER CONSIDERATION AND TREAT IT COMPLETE LAW DECLARED BY THE COURT. THE JUDGMENT MUST BE READ AS A WHOLE AND THE OBSERVATIO N FROM THE JUDGMENT HAVE TO BE CONSIDERED IN THE LIGHT OF QUES TION, WHICH WERE BEFORE THE COURT. THE APPELLANT URGED THAT THE CASES CITED BY ASSESSI NG OFFICER ARE OUT OF CONTEXT AND OUT OF PLACE, THEY A RE DISTINCT AS WELL AS DISTINGUISHABLE FOR THE INSTANT CASE OF THE ASSE SSEE. HENCE THEY ARE NOT APPLICABLE AND MAY KINDLY BE NOT USED AGAIN ST THE ASSESSEE. 4.2. THE COUNSEL OF APPELLANT CONTESTED THE APPLICA TION OF THE PROVISION OF SEC. 68 AND CONTENDED THAT IT HAS NO ROLE TO PLA Y IN THE INSTANT CASE. IN 6 THE TRANSACTION UNDERLYING THE SALE OF SHARES THERE IS FIRST DEBIT ENTRY RELATING TO SHARES AND THEREAFTER THERE IS CREDIT E NTRY RELATING TO RECEIPT OF MONEY. THE PROVISIONS OF SEC. 68 PERTAIN TO CASH CR EDIT. IT MEANS THOSE TRANSACTIONS WHERE AMOUNT IF FOUND CREDITED IN BOOK S OF ACCOUNTS AS A RESULT OF LOAN, DEPOSIT, CREDIT PURCHASES ETC. THE SAID SECTION HAS APPLICATION IN THE CASE OF ASSESSEE THE SHARES WERE SOLD AND SA LE PROCEEDS WERE RECEIVED, THE DEBIT ENTRY PRECEDED THE CREDIT ENTRY . THE SALE OF SHARES IS AKIN TO SALE OF GOODS. BOTH TRANSACTIONS BRING INTO EXISTENCE SUNDRY DEBTORS. ANY REALIZATION THERE FROM IS CONSIDERATIO N OF ASSETS (SHARE OR STOCK) SOLD. THE RECEIPT OF SALE PROCEED/REALIZATIO N FROM DEBTORS DO NOT PARTAKE THE CHARACTER OF CASH CREDIT. IF FOR THE SA KE OF ARGUMENT IT IS CONSIDERED THAT THE SEC. 68 AS APPLICABLE IN RELATI ON TO REALIZATION FROM DEBTORS, THEN THERE CAN NOT BE ANY CASH SALE. AS A RESULT OF CASH SALE SUM IS CREDITED TO THE BOOKS OF ACCOUNTS AND THE ASSESSEE WILL HAVE TO GIVE SATISFACTORY EXPLANATION AND ONUS WILL BE CAST UPON HIM TO PROVE THE IDENTITY, GENUINENESS AND CREDITWORTHINESS. IN CASE OF CASH SALE OR REALIZATION FROM DEBTORS/BROKERS THE PROVISIONS OF SEC. 68 CANNOT HAVE ANY SAY. 4.3. IT WAS ALSO ARGUED THAT THEE IS ANOTHER JUSTIF ICATION FOR THIS POINT OF VIEW BECAUSE WHEN MONEY IS REALIZED/RECEIVED FROM D EBTORS IT DOES NOT BRING INTO BEING NEW OR ADDITIONAL RESOURCES, ALTHO UGH IT BRINGS IN CASH. THE BRINGING INTO BEING OF CASH IS SIMPLY ROTATION OF ASSETS. IN A BALANCE SHEET BOTH SUNDRY DEBTORS AND CASH ARE ASSETS. THEY KEEP SWAPPING. FROM SWAPPING NEITHER THE ADDITIONAL RESOURCES NOR THE I NCOME GET GENERATED. THE MOTIVE OF INCOME TAX IS TO TAX THE INCOME AND K EEP WATCH OVER THE RESOURCE MOBILIZATION THROUGH THE LETHAL AND FICTIO NAL PRO. OF SEC. 68 OF THE I.T. ACT. 4.4. ALTERNATIVE ARGUMENT CONSIDERING THE PROV. OF SEC. 68 BEING APPLICABLE, ATTENTION WAS DRAWN TO POINT 9 OF THE A SSESSMENT ORDER IN WHICH IT WAS ACCEPTED THAT VOUCHERS RELATING TO PUR CHASE AND SHARES WERE FURNISHED. FURTHER IT WAS STATED THAT THE ASSESSEE OFFERED HIMSELF FOR 7 EXAMINATION AND COMPLETE BOOKS OF ACCOUNT, BANK STA TEMENTS WERE PRODUCED. THE ACCOUNT STATEMENT OF ASSESSEE WITH ST OCK HOLDING CORPORATION, A CHART SHOWING SALE AN PURCHASE OF SH ARES WERE FURNISHED, AS REGARDS THE COMPLIANCE WITH IDENTITY, GENUINENESS A ND CREDITWORTHINESS. (A) IT WAS CONTENDED THAT THE TRANSACTION WAS EFFEC TED THROUGH SEBI REGISTERED STOCK BROKER WHO ALSO HAPPENS TO BE MAIN MEMBER OF THE CALCUTTA STOCK EXCHANGE LTD. HIS IDENTITY STAND S PROVED. (B) THE PAYMENTS WERE RECEIVED THROUGH ACCOUNT PAYE E DRAFTS AND WERE DEPOSITED IN THE BANK ACCOUNT OF ASSESSEE MAIN TAINED AT THE SBBJ, RCP COLONY, BIKANER. THE SHARES WERE TRANSFER RED FROM THE DEMAT ACCOUNT OF THE ASSESSEE TO THE DEMAT ACCOUNT OF THE STOCKBROKER. THE STOCK STATEMENT OF STOCK HOLDING P ROVED THE SAME. THE ASSESSMENT ORDER ITSELF IS TESTIMONIAL FO R SAME. THE PERUSAL OF THE STATEMENT FROM STOCK HOLDING REVEALS THAT THE TRANSACTIONS HAVE BEEN ROUTED THROUGH THE STOCK EXC HANGE. THE SETTLEMENT NUMBERS AS GIVEN IN THE CONTRACT NOTE AN D ACCOUNT STATEMENTS ARE SAME AND THE ASSESSEE IN PURSUANCE O F SALE TRANSFERRED THE SHARES DIRECTLY TO THE STOCK EXCHAN GE ACCOUNT OF THE ST6OCK BROKER. THE SALE OF SHARES WAS EFFECTED AT T HE PRICE GIVEN IN THE NEWSPAPER. THUS, THE GENUINENESS OF TRANSACTION IS ESTABLISHED BEYOND DOUBT. ANY DELIVERY OF SHARES DIRECTLY TO TH E STOCK EXCHANGE THROUGH CPMBID OF BROKER DURING THE COURSE OF ROLLING MARKET SETTLEMENT, SPEAKS VOLUMES ABOUT THE VERACIT Y OF TRANSACTION. MOREOVER BOTH THE BROKERS BUYING & SE LLING HAVE CONFIRMED TRANSACTIONS. THEIR COPY OF A/C DULY CONF IRMED WERE PRODUCED. (C) FOR CREDITWORTHINESS IT IS SUBMITTED THAT THE S ALE WAS TO THE RECOGNIZED STOCK EXCHANGE OF CALCUTTA. WHEN SALE IS DIRECTLY TO STOCK EXCHANGE, IT IS THEIR SOLEMN DUTY TO MAKE PAY MENT OF THE SALE PROCEEDS. THE STOCK EXCHANGES HAVE RIGOROUS AND IMP ECCABLE MECHANISM FOR ENSURING THE TIMELY PAYMENT AND DELIV ERY. IN ORDER 8 TO CARRY OUT THE BOUNDEN DUTY THE STOCK EXCHANGES H AVE MEMBERS UNDER THEIR AEGIS AND CONTROL OF THEIR OWN AS WELL AS THE WATCH DOG NAMELY SEBI. THE VALUATION OF THE MEMBERSHIP OF RE COGNIZED STOCK EXCHANGE RUN INTO LACS OF RUPEES BECAUSE OF I TS COVETED POSITION OWING TO THE AFFILIATION WITH THE STOCK EX CHANGE. THUS, THE CREDIT WORTHINESS OF TRANSACTION IS ALSO BEYOND DOU BT. 4.5. IT WAS URGED THAT THE ASSESSING OFFICER WAS QU ITE CONVINCED ABOUT THE GENUINENESS OF THE TRANSACTION. SINCE HE WAS A WARE THAT TRANSACTIONS HAVE BEEN ROUTED THROUGH STOCK EXCHANGE. HE PROCUR ED THE DETAILED ACCOUNT STATEMENT FROM STOCK HOLDING CORPORATION ON HIS OWN AND COMPARED IT WITH THE MATERIAL ON RECORD. IT WAS ALS O ARGUED THAT IF HEAD NOT BEEN SATISFIED ABOUT THE COMPLETENESS OF INFORMATIO N, HE WOULD HAVE CALLED FOR MORE, WHEN THE COUNSEL OF ASSESSEE APPEA RED ON THE DESIGNATED DATES OF HEARINGS I.E. 16.03.06 & 20.03.06. 4.6. IN SUPPORT OF HIS VIEW THE AR OF APPELLANT REL IED UPON THE CASES CITED AT 195 CTR 226, 180 CTR 116 (R H C), 176 CTR (RAJ.495, 26 TW 501, 87 ITR 395 (S.C), 107 ITR 938 (S C). ALL THE CASES WERE PERUSED AND TAKEN INTO ACCOUNT. 4.7. NOW COMING ON TO THE FACTS OF THE CASE THE ASS ESSEE PURCHASED 50000 EQUITY SHARES OF MANTRA ONLINE LTD. FROM ATN TELE FILMS LTD. @ RS. 2.22 PER SHARE FOR RS. 1,11,000/- THROUGH RECOG NIZED STOCK BROKER M/S BUBNA STOCK BROKING SERVICES LTD. THE SHARES WERE P URCHASED ON 11-06- 01 THE PHOTOCOPIES OF THE SHARES WERE FURNISHED. TH E SELLER OF SHARES ATN TELEFILM LTD. WAS HAVING REGISTERED FOLIO NO. 1392, THE SHARES CARRIED DISTINCTIVE NO. FROM 23684001 TO 23734000 AND CERTI FICATE NO. 4321 TO 4325. EACH CERTIFICATE CARRIED 10,000 SHARES. AFTER HAVING PURCHASED SHARES THE ASSESSEE SENT THE SHARE CERTIFICATES TOG ETHER WITH TRANSFER DEEDS TO THE COMPANY MANTRA ONLINE LTD. THE COMPANY EFFEC TED TRANSFER IN FAVOUR OF THE ASSESSEE ON 28-06-01 AND ASSIGNED REG N. FOLIO NO. 2198 AND TRANSFER NO. 2201. A ZEROX OF TRANSFER LETTER RECEI VED FROM COMPANY WAS 9 FURNISHED. THE LETTER AND SHARE CERTIFICATES BOTH S IGNIFIES THAT 50000 SHARES WERE TRANSFERRED IN FAVOUR OF THE ASSESSEE ON 28-06 -01. 4.8. THE 50000 SHARES OF MANTRA ONLINE WERE PURCHA SED IN PHYSICAL FORM THROUGH BROKER AND THE ASSESSEE BECAME SHAREHO LDER. THE SHARES OF COMPANY WERE TRANSFERRED IN THE NAME OF THE ASSESSE E ON 28.06.2001 BY THE COMPANY. THE ASSESSEE IS FURNISHING INTERALIA A CERTIFICATE FROM THE PRACTICING COMPANY SECRETARY TO THE EFFECT THAT SH. DEEPAK AGARWAL HELD 50000 SHARES OF MANTRA ONLINE. THE CERTIFICATE BY A N INDEPENDENT PROFESSIONAL CERTIFYING THE HOLDING OF SHARES IS A CLINCHING EVIDENCE. IN THE MATTER OF COMPANIES, COMPANY SECRETARY IS AN EXPERT . HIS CERTIFICATES ARE RELIED UPON BY ALL INCLUDING GOVT. AGENCIES. THUS, IN THE FACE OF THIS CONCLUSIVE EVIDENCE AND OTHER RECORDS IT IS ABOVE A BROAD THAT THE ASSESSEE WAS THE HOLDER OF 50000 SHARES OF MANTRA ONLINE FRO M 28.06.01. 4.9. THE NEXT POINT WHICH IS PERTINENT IS THE PAYMENT OF CONSIDERATION FOR THE PURCHASE OF SHARES. IT WAS THE FINDING OF A O THAT SHARES WERE PURCHASED IN CREDIT. IN REBUTTAL TO THIS ALLEG ATION THE ATTENTION WAS DRAWN TO THE FINANCIAL STATEMENTS OF RELEVANT P ERIOD I.E. FINANCIAL YEAR 2001-02. THE FINANCIAL STATEMENT DID NOT FIGURE OUT THE NAME OF BROKER M/S BUBNA STOCK BROKING SERVICES LTD. IN THE CATEGORY OF SUNDRY CREDITORS IN THE LIABILITIES SID E. THE PAYMENT WAS MADE IN CASH ON 20-06-01 AT KOLKATTA BY THE ASS ESSEE WHEN HE WAS THERE. THE ASSESSEE HAS TAKEN AWAY A SUM OF RS. 2,00,000.00 OUT OF CASH AVAILABLE WITH HIM WHILE GOING TO KOLKA TTA ON 08.06.2001. HE HAS PURCHASED 50000 SHARES OF MANTRA ONLINE ON 11.06.2001 AND AFTER WARD A SUM OF RS. 1,11,000.00 WAS PAID TO BUBNA STOCK BROKING COMPANY LTD. THE SAID BROKER HA S ISSUED MONEY RECEIPT TO THE ASSESSEE AND PHOTOCOPY OF THE SAME WAS PRODUCED. A COPY OF CASHBOOK WAS ALSO PRODUCED. IN BALANCE SHEET 10 OF A.Y. 2002-03 THERE WAS NO OUTSTANDING TO BROKER. THERE WAS A MONEY RECEIPT FROM BROKER. 4.10. AS REGARDS TAKING PHYSICAL DELIVERY OF SHARES RATHE R THAN DEMATERIALIZED DELIVERY IT WAS STATED THAT AT THE T IME OF TRANSACTION THE ASSESSEE WAS NOT HAVING ANY DEMAT ACCOUNT IN BI KANER IT WAS SUBMITTED THAT THERE WAS HARDLY ONE DEPOSITORY FOR DEMAT ACCOUNTS. SO THE PHYSICAL MODE OF TRANSACTION IN SHARES WAS R ESORTED TO. THERE IS NO STATUTORY REQUIREMENT WHICH CALL FOR DE LIVERY / KEEPING OF SHARES IN DEMAT FORM ONLY. PURCHASING AND KEEPIN G SHARES IN PHYSICAL FORM WAS VERY MUCH PERMITTED. THE SHARES O F MANTRA ONLINE WERE PURCHASED OFF MARKET. THE TRANSACTION W AS FACILITATED BY THE STOCK BROKER M/S BUBNA STOCK BROKING SERVICE S LTD. WHO CHARGED CONSIDERATION IN THE FORM OF BROKERAGE @ RS . 02 PER SHARE WHICH IS EVIDENT FROM THE BILL. THE OFF MARKET ROUT E OF PURCHASE IS MOST CONVENIENT ROUTE WHEN THE TRANSACTION INVOLVES SHARES IN PHYSICAL FORM. BECAUSE LODGING OF PHYSICAL SHARES D ELIVERY IN STOCK EXCHANGE IS VERY TEDIOUS TASK. AT THAT POINT OF TIM E THE APPREHENSION OF BAD DELIVERY WAS LOOMING LARGE. HEN CE FOR THE PURPOSE OF SAFETY AND SECURITY THE BROKER ARRANGED FOR THE SHARES FROM ONE OF ITS TRUSTED CLIENT. WHEN SELLER BEING K NOWN TO THE BROKER THE ASSESSEE GOT GREATER GUARANTEE ABOUT GEN UINENESS OF DELIVERY, THE APPREHENSION OF BAD DELIVERY WAS THER EFORE ALLEVIATED. AS FOR THE SELLING PRICE PREVAILING AS ON THE DATE OF TRANSACTION, ZEROX OF QUOTATIONS OF THE CALCUTTA STOCK EXCHANGE LTD. WERE PRODUCED AND RATE WAS ALSO CONFIRMED BY THE EXCHANG E. THE PURCHASE PRICE OF ASSESSEE TALLIES WITH THE QUOTATI ON OF SHARES PREVAILING AT THE STOCK EXCHANGE. THERE IS NO DISCR EPANCY ON THE PRICE FRONT. 4.11. THE AR OF ASSESSEE DREW ATTENTION TO THE PROVISIONS OF SEC. 108(1) OF THE COMPANIES ACT, 1956 WHICH DEALS WITH THE TRA NSFER OF SHARES AND DEBENTURES. A ZEROX OF THE SECTION 108 WAS FURN ISHED. FROM 11 PERUSAL OF SECTION IT REVEALED THAT THE SECTION PRO VIDES FOR PROCEDURE FOR THE TRANSFER OF SHARES AND DOES NOT P UT ANY EMBARGO ON THE TRANSFER OF SHARES QUOTED AT THE STOCK EXCHA NGE. NOTHING IS CONTAINED IN THE SEC. 108(1) WHICH CALLS FOR SEEKIN G THE APPROVAL OR CLEARANCE OF STOCK EXCHANGE IN CASE OF TRANSFER OF QUOTED SHARES. THE SHARES ARE FREELY TRANSFERABLE SUBJECT TO THE F ULFILMENT OF THE REQUIREMENT OF SECTION 108 OF THE COMPANIES ACT, 19 56. THERE IS NO REQUIREMENT THAT QUOTED SHARES WILL BE TRANSFERR ED ONLY IF THEY HAVE BEEN DEALT AT THE STOCK EXCHANGE. 4.12. AS FOR NON QUOTING OF DISTINCTIVE NUMBER ON THE PUR CHASE BILL OF SHARES. IT WAS STATED THAT THERE IS NO COLUMN EARMA RKED FOR THE SAME IN THE FORMAT PRESCRIBED FOR THE PURCHASE BILL . THE ZEROX OF SHARE CERTIFICATE AND THE TRANSFER LETTER FROM COMP ANY CARRY ALL THE TECHNICAL PARTICULARS SUCH AS DISTINCTIVE, FOLIO AN D CERTIFICATE NUMBER. SO, NO ADVERSE INFERENCE IS CALLED FOR. 4.13. THE ATTENTION WAS DRAWN TO ANALOGOUS CASES OF MRS. ALPANA PALIWAL VS. ITO 67 TTJ 636 AND ARJUN MALHOTRA V. JC IT 84 TTJ 269 IN THOSE CASES THE QUOTED SHARES WERE SOLD FOR CASH AND TRANSACTIONS WERE OFF MARKET. THE DEPARTMENT DID NO T RAISE ANY OBJECTION TO IT. FURTHER IN THE LATTER CASE THE PRI CE OF SHARES QUOTED AT STOCK EXCHANGE ON THE RELEVANT DATE WAS HELD TO BE GUIDING FOR THE OTHERWISE OFF MARKET PURCHASE. 4.14. THE AO HAS PUT FORTH THE ARGUMENT THAT THE LONG TER M CAPITAL GAIN EARNED BY ASSESSEE IS RATHER SHORT TERM CAPITAL GAI N. THE SHARES WERE DEMATERIALIZED ON 23.04.02. WHEN PERIOD IS REC KONED FROM THIS DATE, THE HOLDING PERIOD OF SHARES WOULD BE LE SS THAN 12 MONTH AND CONSEQUENTLY THE GAIN ARISING FROM SALE SHARES WOULD BE SHORT TERM CAPITAL GAIN. IN THIS CONNECTION IT WAS CONTEN DED BY APPELLANT THAT IT IS TANTAMOUNT TO TURNING BLIND EYE TOWARDS ALL THE POSITIVE EVIDENCES INVOLVING THE SEBI REGISTERED BROKER, CER TIFICATE BY COMPANY SECRETARY AND STOCK EXCHANGE MEMBER AS WELL AS THE 12 COMPANY ITSELF BESIDES THE RECORD OF ASSESSEE HIMSE LF. THE DATE OF DEMATERIALIZATION OF SHARES 23-04-02 CANNOT BE CONS TRUED AS THE DATE OF PURCHASE. 4.15. IT WAS ELABORATED IN WRITTEN SUBMISSION THAT DEMATE RIALIZATION IS THE PROCESS BY WHICH SHARES IN PHYSICAL FORMS ARE C ONVERTED INTO ELECTRONIC FORM. FOR DEMATERIALIZATION ORIGINAL SHA RES IN PHYSICAL FORMS HAVE TO BE SURRENDERED TO THE DEPOSITORY. THE DEPOSITORY THROUGH ITS OWN PROCESS APPROACH THE REGISTRAR TO T HE COMPANIES AND CONVERT PHYSICAL SHARES INTO ELECTRONIC FORM. F OR THIS WORK DEPOSITORY CHARGE FEES FROM THE CLIENT. THE MERE CH ANGE OF FORM CAN NOT BE CONSIDERED AS DATE OF PURCHASE. THE ASSE SSEE HAS TIME AND AGAIN REITERATED AND PUT FORTH ALL EVIDENCES IN SUPPORT OF THE FACT THAT THE SHARES WERE PURCHASED ON 11-06-01 THR OUGH INDEPENDENT STOCK BROKER AND PARTY. THE PAYMENT WAS MADE AND DELIVERY OBTAINED ON 20.06.01. THE SAID SHARES WERE REGISTERED IN THE NAME OF ASSESSEE ON 28-06-01 BY THE COMPANY. TH E BACKSIDE OF SHARE CERTIFICATE AND LETTER FROM THE COMPANY IS TE STIMONY TO THE REGISTRATION OF ASSESSEE AS MEMBER OF THE COMPANY H OLDING 50000 SHARES. IT IMPLIES THAT THE ASSESSEE BECAME MEMBER OF THE COMPANY ON 28.06.01. ANY SUBSTITUTION OF PURCHASE DATE IS W ILFUL AND CONTRARY TO LAW. THE SHARES OF COMPANY WERE TRANSFE RRED IN THE NAME OF THE ASSESSEE ON 28.06.2001 BY THE COMPANY. THE ASSESSEE FURNISHED INTERALIA A CERTIFICATE FROM THE PRACTICI NG COMPANY SECRETARY TO THE EFFECT THAT SH. DEEPAK AGARWAL HEL D 50000 SHARES OF MANTRA ONLINE. THE CERTIFICATE BY AN INDEPENDENT PROFESSIONAL CERTIFYING THE HOLDING OF SHARES IS A CLINCHING EVI DENCE. THUS, IN THE FACE OF THIS CONCLUSIVE EVIDENCE AND OTHER RECO RDS IT IS ABOVE ABROAD THAT THE ASSESSEE WAS THE HOLDER OF 50000 SH ARES OF MANTRA ONLINE FROM 28.06.01. 4.16. IT WAS STATED BY AO THAT AS PER THE AO ALL THE 5000 0 SHARES WERE SOLD THROUGH THE STOCK BROKER PRAKASH NAHATA & CO., WHEREAS AS 13 PER THE STATEMENT FROM DEPOSITORY STOCK HOLDING COR PORATION STATES THAT OUT OF 50000 TWO TRANSFERS ON DATED 07-08-02 A ND 19-08-02 FOR 8005 AND 2000 SHARES RESPECTIVELY WERE MADE TO HDFC , BANK, WHEREAS THE BALANCE WAS TO C.M. PRAKASH NAHATA & CO . 4.17. IN THIS CONNECTION IT WAS ARGUED THAT THE STOCK BRO KER PRAKASH NAHATA & CO. LIKE ALL THE MAIN MEMBER WAS HAVING MI NIMUM TWO DEMAT ACCOUNTS. ONE ACCOUNT THAT IS CALLED CMBPID I S THE ACCOUNT FROM WHICH DELIVERIES ARE MADE DIRECTLY TO THE STOC K EXCHANGE ON THE SETTLEMENT DATE. WHEREAS THE OTHER ACCOUNT IS M EANT FOR HOLDING SECURITIES ON BEHALF OF THE CLIENTS. IN THE CASE OF BROKER PRAKASH NAHTA CM PRAKASH NAHATA IS THE CMBPID A/C WHICH IS DIRECTLY CONNECTED WITH STOCK EXCHANGE FOR PAY IN AND PAY OU T PURPOSES. WHEREAS A DEMAT ACCOUNT WITH HDFC ACCOUNT IS FOR HO LDING SECURITIES ON BEHALF OF THE CLIENT. THE 10,005/- SH ARES REFERRED ABOVE WERE TRANSFERRED TO THAT HDFC ACCOUNT OF THE BROKER. 4.18. STATEMENT OF ASSESSEE WAS RECORDED U/S 131 OF THE I .T. ACT AND IT WAS INTERPRETED THAT THE ASSESSEE WAS OBLIVIOUS OF THE PURCHASE AND SALE OF SHARES. TO THIS IT WAS EXPLAINED THAT THE C ONTENTION IS OFFSHOOT OF DAY DREAMING AND WILD IMAGINATION. HE H AS TERMED ENTIRE TRANSACTION OF SHARES AS ADJUSTMENT, ALTHOUG H HE HAD EXAMINED THE ENTIRE GAMUT OF DOCUMENTS, BOOKS OF AC COUNTS AND VOUCHERS AND COULD NOT POINT OUT ANY DISCREPANCY / DEFECT THEREIN. THE HYPOTHESIS WITHOUT REASON AND BASIS IS A NULLIT Y. IT IS THE ASSESSEE WHO HIMSELF PURCHASED SHARES, MADE PAYMENT FOR SHARES, GOT IT REGISTERED IN HIS NAME, OPENED DEMAT ACCOUNT , MADE DECISION REGARDING SALE OF SHARES, GAVE DELIVERY INSTRUCTION , THE SALE PROCEEDS WERE DEPOSITED IN HIS OWN BANK ACCOUNT AND LATER ON INVESTED THE SAME IN BONDS. THE VIEW PINT OF AO IN THE FACE OF THE PREPONDERANCE OF POSITIVE EVIDENCE, WAS REQUESTED T O BE NOT TENABLE. 14 4.19. IN RELATION TO FAILURE TO MAKE DELIVERY DIRECTLY TO THE CMBPID A/C MAINTAINED AT THE STOCK EXCHANGE DURING THE COURSE OF ROLLING MARKET SETTLEMENT IT WAS CONTENDED BY THE APPELLANT THAT HE WAS NOT WELL VERSED IN HANDLING OF DEMAT ACCOUNT. THERE FORE, HE COULD NOT EXECUTE DELIVERY INSTRUCTIONS ON THE SETTLEMENT DATE. ON THAT DATE THEREFORE, THE BROKER RELEASED SHARES FROM HIS OWN ACCOUNT IN ORDER TO MEET THE PAY OUT OBLIGATION ON THE SETTLEM ENT DATE. DELIVERY OF SHARES IS TO BE INVARIABLY TENDERED BY THE STOCK BROKER TO THE STOCK EXCHANGE AT ANY COST ON THE SETTLEMENT DATE, OTHERWISE THE EXCHANGE CALL FOR AUCTIONING OF SHARES NOT DELI VERED TO IT. THE DEFAULTING BROKER IN THAT CASE HAD TO BEAR THE BRUN T OF NOT ONLY THE PRICE FLUCTUATIONS BUT ALSO THE PENALTY FOR SHORT S ELLING. IN THE INSTANT CASE OF ASSESSEE ON TWO SETTLEMENT THE BROK ER ARRANGED FOR SECURITIES ON ITS OWN AFTER HAVING APPRECIATING THA T HIS CLIENT I.E. ASSESSEE IS GRAPPLED WITH OPERATIONAL PROBLEM ALTHO UGH HE IS FLUSH WITH SHARES AND HAS GOT GOOD REPUTATION. 8. THEREAFTER, THE LD. CIT (A) MADE ENQUIRY DIRECTL Y AND THE DETAILS OF ENQUIRY MADE BY HIM ARE DISCUSSED IN PARAS 5.20 TO 5.22 AT PAGES 22 TO 25 ARE AS UNDER :- 5.20 I HAVE MADE INQUIRIES WITH DEPOSITORY NAMELY STOCK HOLDING CORPORATION OF INDIA. OPP. DRM OFFICE, BIKANER., WH ERE THE APPELLANT WAS MAINTAINING DEMAT ACCOUNT AND THE CALCUTTA STOCK EX CHANGE LTD., WHERE THE SHARES WERE PURPORTED TO HAVE BEEN TRADED. THE DEPOSITORY HAS CONFIRMED THAT SHARES WERE DEMATED AND TRANSFERRED TO BROKER AT THE TIME OF SALE. THE DETAILS ARE IN AGREEMENT WITH THE CONT RACT NOTES ISSUED BY THE BROKER. THE RESULT OF INQUIRY MADE WITH THE CALCUTTA STOCK EXCHANGE LTD IS AS UNDER: - 15 S. NO. DATE OF SALE CONTRACT NO. NO. OF SHARES RATE SETTLEMENT NO. WHETHER TRANSACTION CONFIRM BY CALCUTTA STOCK EXCHANGE OR NOT 1 24.07.2002 15 1000 100 2003385 YES 2 25.07.2002 14 1000 91 2003386 YES 3 26.07.2002 16 5005 85 2003387 YES 4 30.07.2002 12 2000 84.5 2003389 YES 5 07.08.2002 11 4000 91 2003395 YES 6 12.08.2002 7 2000 85 2003398 YES 7 01.11.2002 5 3000 92 2003451 YES 8 04.11.2002 9 5000 94 2003451 YES 9 10.12.2002 18 1500 112 2003475 YES 10 16.12.2002 17 13000 90 2003479 YES 11 19.12.2002 17 2000 74.5 2003482 YES 12 23.12.2002 5 10495 60 2003484 YES TOTAL 50000 THE INQUIRY WITH CALCUTTA STOCK EXCHANGE REVEALED T HAT ALL THE TRANSACTIONS WERE DULY RECORDED AND CONFIRMED BY TH EM EXCEPT THE ONE EFFECTED ON DATED 19.12.02. THE ASSESSEE SOLD 2 000 SHARES OF MANTRA ONLINE @ RS. 74.50 PER SHARE ON 19.12.02 AND THE SALES CONSIDERATION WORKS OUT TO RS. 1,49,000/-, WHICH WA S NOT CONFIRMED. 5.21. FURTHER THE APPELLANT ESTABLISHED THE ENTIRE SALE PROCEEDS FROM SALE OF EQUITY SHARES INTO THE BONDS OF RURAL ELECTRIFICATION AND WAS ELIGIBLE FOR DEDUCTION U/S 54 EC OF THE I.T . ACT. THE ASSESSEE MADE INVESTMENT OF THE SALES PROCEEDS INTO THE BONDS WITHIN THE STIPULATED PERIOD OF SIX MONTHS. PHOTOCO PY OF BONDS WERE PRODUCED AND EXAMINED. THE INVESTMENT IN BONDS WAS MADE WITHIN SIX MONTHS FROM THE SALE OF SHARES. D.D. RECEIVED OUT OF THE SALE PROCEEDS OF SHARES INVESTMENT IN BONDS U/S 54 EC DATE AMOUNT DATE AMOUNT 29-07-02 99,900.00 12-12-02 8,00,000.00 30-07-02 90,900.00 26-12-02 13,00,000.00 30-07-02 4,22,922.50 05-02-03 6,00,000.00 02-08-02 1,69,000.00 05-02-03 6,00,000.00 16 12-08-02 3,63,600.00 03-03-03 8,00,000.00 16-08-02 1,69,000.00 07-11-02 7,45,200.00 13-12-02 1,67,850.00 19-12-02 11,68,700.00 24-12-02 1,48,800.00 26-12-02 6,29,070.30 TOTAL 41,74,942.80 TOTAL 41,00,000.00 5.22. (A) THE SALE TRANSACTIONS WERE EXECUTED THROU GH STOCK EXCHANGE. THE EXCHANGE BARRING THE ONE TRANSACTION CONFIRMED ALL TRANSACTIONS ITS DATE, RATE AND AMOUNT. THE FINER DETAILS SUCH AS TR ADE NO., ORDER NO., AND TIMING SQUARELY TALLIES WITH THE ONE MANIFESTED ON THE CONTRACT NOTES ISSUED BY BROKER. IN VIEW OF THE RESULT OF IN QUIRY WITH STOCK EXCHANGE I UPHOLD THE ADDITION AMOUNTING TO RS. 1,4 9,000/- REPRESENTING SALE OF 2000 SHARES ON 19.12.02 AS THE SAME IS NOT CONFIRMED BY THE EXCHANGE AS HAVING BEEN ENTERED TH ROUGH IT. (B) WHEREAS IN THE LIGHT OF OVERALL FACTS, CIRCUMST ANCES, DETAILED DELIBERATION AND POSITIVE EVIDENCES AS WELL AS RESU LT OF INQUIRIES MADE FROM STOCK EXCHANGE AND DEPOSITORY I DELETE THE BAL ANCE ADDITION OF RS. 38,79,420/- (RS. 40,28,420/- - 1,49,000/-). THU S THE SAID ADDITION STANDS DELETED AND APPELLATE COMES OUT SUCCESSFUL T O THAT EXTENT. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 9. THE LD. CIT (A) NOTED THAT ONE TRANSACTION I.E. SALE OF 2000 SHARES MADE ON 19.12.2002 REMAINED UNVERIFIABLE WHICH WAS EQUIVALE NT TO RS. 1,49,000/-. ACCORDINGLY, TO THIS EXTENT THE SALE OF SHARES WERE NOT ACCEPTED AND THE ADDITION WAS SUSTAINED AND THE REMAINING ADDITION WAS DELETED BY LD. CIT (A) I.E. OF RS. 38,79,420/-. 10. AS STATED ABOVE, BOTH ARE IN APPEAL HERE BEFORE THE TRIBUNAL. 17 11. THE LD. CIT D/R SUPPORTED THE ORDER OF ASSESSIN G OFFICER. THE ORDER OF ASSESSING OFFICER WAS EXPLAINED ALSO. ATTENTION OF THE BENCH WAS DRAWN AT PAGES 1 & 2 OF THE PAPER BOOK AND ALSO PAGE 23 OF THE ORDER OF LD. CIT (A). IT WAS FURTHER SUBMITTED THAT A REMAND REPORT WAS ALSO FILED BY ASSESSING OF FICER WHEREBY VARIOUS OBJECTIONS WERE RAISED WHICH WAS NOT APPRECIATED IN RIGHT PERSPECTI VE BY LD. CIT (A). ACCORDINGLY HE SUBMITTED THAT ORDER OF ASSESSING OFFICER IS LIABLE TO BE RESTORED AND ORDER OF LD. CIT (A) IS LIABLE TO BE SET ASIDE. 12. ON THE OTHER HAND, THE LD. A/R PLACED RELIANCE ON THE ORDER OF LD. CIT (A). REGARDING THE SURRENDER OF LICENCE BY THE BROKER M/ S. BUBNA STOCK BROKING SERVICES LTD., IT WAS SUBMITTED THAT M/S. BUBNA STOCK BROKIN G SERVICES LTD. WAS MEMBER OF TWO STOCK EXCHANGES I.E. CALCUTTA STOCK EXCHANGE AND NA TIONAL STOCK EXCHANGE. THE MEMBERSHIP OF NATIONAL STOCK EXCHANGE WAS SURRENDER ED IN 1997. HOWEVER, MEMBERSHIP OF CALCUTTA STOCK EXCHANGE WAS NOT SURRE NDERED. ATTENTION OF THE BENCH WAS DRAWN AT PAGE 1 OF THE PAPER BOOK WHERE A CERTI FICATE OF CALCUTTA STOCK EXCHANGE IS PLACED. IT WAS FURTHER SUBMITTED THAT CALCUTTA STO CK EXCHANGE HAS INFORMED THE ASSESSING OFFICER DIRECTLY THAT THE SHARES WERE PUR CHASED BY ASSESSEE AND THEY WERE SETTLED. FURTHER RELIANCE WAS PLACED ON THE WRITTE N SUBMISSIONS PLACED ON RECORD. 13. WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED THEM CAREFULLY. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERI AL ON RECORD, WE FIND THAT THERE IS NO INFIRMITY IN THE FINDING OF LD. CIT (A). THE LD. C IT (A) HAS ASCERTAINED ALL THE FACTUAL ASPECTS OF THE CASE BY MAKING DIRECT ENQUIRY FROM T HE STOCK EXCHANGE BY WHICH IT WAS FOUND THAT THE SHARES PURCHASED BY ASSESSEE WERE SO LD DURING THE YEAR UNDER CONSIDERATION ON THE AMOUNT OF CONSIDERATION SHOWN BY ASSESSEE. ONLY ONE TRANSACTION 18 WAS NOT VERIFIED. ACCORDINGLY, ADDITION OF RS. 1,49 ,000/- WAS SUSTAINED BY LD. CIT (A). IT IS SEEN THAT THE SHARES WERE PURCHASED IN ASSESSMEN T YEAR 2002-03. THE ASSESSING OFFICER REOPENED THE ASSESSMENT FOR 2002-03 AND ONE OF THE REASONS FOR REOPENING OF THE ASSESSMENT WAS IN RESPECT TO INVESTMENT MADE IN PUR CHASE OF SHARES THROUGH M/S. BUBNA STOCK BROKING SERVICES LTD. AFTER REOPENING OF THE ASSESSMENT, NO ADDITION WHATSOEVER WAS MADE ON ACCOUNT OF INVESTMENT IN SHARES. THE A PPEAL OF THE DEPARTMENT FOR THE ASSESSMENT YEAR 2002-03 WAS ALSO FIXED ON THE SAME DATE FOR HEARING HERE BEFORE THE TRIBUNAL AND WE HAVE SEEN THE ORDERS OF THE ASSESSI NG OFFICER AND LD. CIT (A) AND FOUND THAT NO ADDITION ON ACCOUNT OF INVESTMENT IN SHARES FOR ASSESSMENT YEAR 2002-03 WAS MADE. THEREFORE, IT IS ESTABLISHED BEYOND DOUBT TH AT ASSESSEE HAS PURCHASED SHARES DURING THE ASSESSMENT YEAR 2002-03 WHICH WERE SHOWN IN THE BALANCE SHEET AND THE ASSESSING OFFICER HAS EXAMINED THIS ASPECT AND HAS NOT DRAWN ANY ADVERSE INFERENCE. IT IS SEEN THAT IN SUBSEQUENT YEAR I.E. IN THE YEAR UN DER CONSIDERATION THE ASSESSEE SOLD THESE SHARES THROUGH M/S. PRAKASH NAHATA & CO. ANOTHER ST OCK BROKER AND THE SALE CONSIDERATION WAS RECEIVED THROUGH PROPER BANKING C HANNEL. THE SHARES LISTED WERE DEMATIZED BEFORE SELLING OF THE SAME. SHARE CERTIF ICATES WERE FILED SHOWING TRANSFER IN THE NAME OF THE ASSESSEE AND THEN SOLD THE SAME. C ONFIRMATION FROM M/S. PRAKASH NAHATA & CO. WAS ALSO FILED. NO CONTRARY FACTS WER E BROUGHT ON RECORD THAT THESE TRANSACTIONS ARE NOT GENUINE OR ASSESSEE HAS POSSES SED CASH UNDER THE GARB OF SALE TRANSACTION. WITHOUT BRINGING ANY MATERIAL ON RECO RD OR ANY EVIDENCE DIRECTLY, ADVERSE INFERENCE DRAWN AGAINST ASSESSEE WAS NOT JUSTIFIED. COPY OF BANK STATEMENT THROUGH WHICH THE SALE CONSIDERATION WAS RECEIVED IS PLACED AT PAGES 1 AND 62. COPY OF ACCOUNT OF M/S. PRAKASH NAHATA & CO. IS PLACED AT PAGES 62A AN D 62B. COPY OF SHARE ACCOUNT IS 19 PLACED AT PAGE 63. COPY OF BILL DATED 26.6.2001 ISS UED BY M/S. BUBNA STOCK BROKING SERVICES LTD., COPY OF CLIENTS LEDGER ACCOUNT IN A CCOUNT OF M/S. BUBNA STOCK BROKING SERVICES LTD, COPY OF LETTER DATED 28.6.2001 FROM M /S. MANTRA ONLINE LTD. CONFIRMING THE TRANSFER OF 50,000 SHARES IN THE NAME OF ASSESSEE, COPY OF CERTIFICATE FROM M/S. SAROJ RAY & ASSOCIATES, FIRM OF COMPANY SECRETARIES CERTIFYIN G TRANSFER OF 50,000 SHARES IN THE NAME OF ASSESSEE, COPY OF RECEIPT DATED 20.6.2001 I SSUED BY M/S. BUBNA STOCK BROKING SERVICES LTD., COPY OF SHARE CERTIFICATES FOR 50,00 0 SHARES AT THE BACK OF WHICH THE NAME OF ASSESSEE IS REGISTERED AS TRANSFEREE AND COPY OF DEMATERIALISATION REQUEST FORM & RECEIPT NO. 01805 DATED 3/4/2002 ARE PLACED IN THE PAPER BOOK AT PAGES 64 TO 75. COPY OF CONTRACT NOTE IE. FORM A AND BILLS ISSUED BY M/S. P RAKASH NAHATA & CO. IN RESPECT OF SALE OF 50,000 SHARES IS PLACED IN THE PAPER BOOK AT PAG ES 76 TO 98. 13.1. AFTER GOING THROUGH ALL THESE DETAILS AND CER TIFICATES, NO DOUBT REMAINS THAT THE TRANSACTIONS WERE GENUINE. THE LD. CIT (A) HAS EX AMINED ALL THESE TRANSACTIONS AND HAVE ALREADY VERIFIED DIRECTLY FROM STOCK EXCHANGE AND F ROM THE PARTIES. THEREFORE, IN OUR CONSIDERED VIEW, THE ASSESSING OFFICER WAS NOT JUST IFIED IN NOT ACCEPTING THE CLAIM OF ASSESSEE. 14. THE LD. CIT (A) HAS CONFIRMED AN ADDITION OF RS . 1,49,000/- FOR THE REASON THAT CONFIRMATION IN RESPECT OF THIS TRANSACTION HAS NOT BEEN RECEIVED. THERE MAY BE SO MANY REASONS FOR NOT CONFIRMING THIS TRANSACTION BUT THE FACT REMAINS THAT THESE SHARES WERE ALSO SOLD BY ASSESSEE AND AMOUNT OF CONSIDERATION HAS BE EN RECEIVED THROUGH PROPER BANKING CHANNEL. THEREFORE, IN OUR VIEW, LD. CIT (A) WAS NO T JUSTIFIED IN CONFIRMING THE ADDITION OF RS. 1,49,000/-. IN VIEW OF THESE FACTS AND CIRC UMSTANCES, WE HOLD THAT LD. CIT (A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 38 LACS O R ODD AND WAS NOT JUSTIFIED IN CONFIRMING 20 THE ADDITION OF RS. 1,49,000/-. ACCORDINGLY THE SA ME IS DELETED. THIS GROUND OF THE DEPARTMENT FAILS AND THE ONLY GROUND IN THE CROSS O BJECTION OF THE ASSESSEE IS ALLOWED. 15. SECOND ISSUE IN THE APPEAL OF THE DEPARTMENT IS AGAINST DELETING THE ADDITION OF RS. 41 LACS MADE UNDER SECTION 69. 16. THE ASSESSING OFFICER MADE ADDITION BY OBSERVIN G THAT THERE WAS NO FUND AVAILABLE WITH THE ASSESSEE OF HIS OWN. THEREFORE, THIS ADDITION WAS MADE UNDER SECTION 69C. 17. IT WAS ARGUED THAT OUT OF THE SALE CONSIDERATIO N ON ACCOUNT OF SALE OF SHARES, THE ASSESSEE HAS MADE INVESTMENT IN REC BOND AND HAS CL AIMED DEDUCTION UNDER SECTION 54EC AS PER PROVISIONS OF LAW. THE LD. CIT (A) WAS SATISFIED WITH THE ARGUMENT OF THE ASSESSEE THAT AMOUNT OF SALE CONSIDERATION ON ACCOU NT OF SALE OF SHARES WAS AVAILABLE WITH THE ASSESSEE AND FROM THE SAME AMOUNT THE ASSESSEE HAS PURCHASED REC BOND. THEREFORE, THERE IS NO QUESTION OF TREATING THE SAM E AS UNEXPLAINED INVESTMENT IN REC BONDS. ACCORDINGLY, LD. CIT (A) DELETED THE ADDITI ON AND ALSO DIRECTED TO ALLOW DEDUCTION UNDER SECTION 54EC. 18. THE LD. D/R HAS PLACED RELIANCE ON THE ORDER OF ASSESSING OFFICER. 19. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSES SEE PLACED RELIANCE ON THE ORDER OF THE CIT (A). 20. AFTER CONSIDERING THE ORDERS OF THE ASSESSING O FFICER AND LD. CIT (A), WE FIND NO INFIRMITY IN THE FINDING OF LD. CIT (A). SOURCE OF INVESTMENT IN REC BONDS HAS ALREADY BEEN EXPLAINED AS THE SAME WAS RECEIVED ON ACCOUNT OF SALE OF SHARES. THE ASSESSING OFFICER MADE ADDITION ON ACCOUNT OF SALE OF SHARES AS WELL AS ADDITION ON ACCOUNT OF INVESTMENT ALSO. THIS TANTAMOUNT TO DOUBLE ADDITIO N. WE HAVE ALREADY CONFIRMED THE 21 ORDER OF LD. CIT (A) DELETING THE ADDITION ON ACCOU NT OF SALE OF SHARES AND THE SAME AMOUNT WAS AVAILABLE WITH THE ASSESSEE FOR MAKING I NVESTMENT IN REC BONDS. THEREFORE, WE CONFIRM THE ORDER OF LD. CIT (A) IN THIS RESPECT ALSO. 21 NEXT ISSUE IS IN RESPECT TO DEDUCTION UNDER SECT ION 54EC. 22. THIS IS A CONSEQUENTIAL GROUND TO GROUND NO. 1 OF THE DEPARTMENT. WE HAVE ALREADY HELD THAT THERE WAS A GENUINE SALE TRANSACT ION OF SHARES. THE ASSESSEE HAS INVESTED THE AMOUNT OUT OF SALE CONSIDERATION RECEI VED ON ACCOUNT OF SALE OF SHARES AND HAS CLAIMED DEDUCTION AS PER SECTION 54EC WHICH IS ALLOWABLE. THEREFORE, WE HOLD THAT LD. CIT (A) WAS JUSTIFIED IN DIRECTING THE ASSESSIN G OFFICER TO ALLOW DEDUCTION UNDER SECTION 54EC. ACCORDINGLY, WE CONFIRM THE ORDER OF LD. CIT (A) ON THIS ISSUE ALSO. 23. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISM ISSED AND CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. 24. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 09 .12.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JODHPUR, COPY FORWARDED TO :- THE ACIT, CIRCLE-1, BIKANER. SHRI DEEPAK AGARWAL, BIKANER. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 650(2)/JODH/2007) BY ORDER, AR ITAT JODHPUR. 22