Bhag Chand Chhabra HUF, Kolkata V. ITO, Ward 34(1), Kolkata, Kolkata

ITA 652/KOL/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1177 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 05-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: RAKESH JAIN
• Keywords: Unexplained cash credit; Fair market value; Onus to prove
• Section: 133(6); 68

Judgement Text

I.T.A. NO. 652/KOL./2017 ASSESSMENT YEAR: 2013-2014 PAGE 1 OF 12 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA SMC BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER I.T.A. NO. 652/KOL/2017 ASSESSMENT YEAR: 2013-2014 BHAG CHAND CHHABRA, HUF............................ .........................APPELLANT 26, STRAND ROAD, KOLKATA-700 001 [PAN: AAEHB 3652 H] -VS.- INCOME TAX OFFICER,.............................. .................RESPONDENT WARD-34(1), KOLKATA, AAYAKAR BHAWAN (POORVA), 110, SHANTI PALLY, KOLKATA-700 107 APPEARANCES BY: SHRI RAKESH JAIN, FCA, FOR THE ASSESSEE SHRI SOUMYAJIT DASGUPTA, JCIT, D.R., FOR THE DEPART MENT DATE OF CONCLUDING THE HEARING : SEPTEMBER 06, 201 7 DATE OF PRONOUNCING THE ORDER : OCTOBER 31, 2017 O R D E R PER SHRI P.M. JAGTAP, A.M. .: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-10, KOLKATA DA TED 22.02.2017. 2. IN GROUND NO. 1, THE ASSESSEE HAS CHALLENGED THE ACTION OF THE AUTHORITIES BELOW IN TREATING SPECULATION PROFIT OF RS.3,00,905/- AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE INC OME TAX ACT, 1961. 3. THE ASSESSEE IN THE PRESENT CASE IS A HUF, WHICH FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 25.01.20 14 DECLARING TOTAL INCOME OF RS.2,12,920/-. IN THE SAID RETURN, SPECUL ATION PROFIT OF RS.3,00,805/- CLAIMED TO BE EARNED THROUGH BROKER M /S. JAGTARNI COMMODITIES PVT. LIMITED FROM THE TRANSACTIONS MADE IN NATIONAL MULTI- I.T.A. NO. 652/KOL./2017 ASSESSMENT YEAR: 2013-2014 PAGE 2 OF 12 COMMODITY EXCHANGE OF INDIA LIMITED (IN SHORT NMCE ) WAS SHOWN BY THE ASSESSEE UNDER THE HEAD INCOME FROM BUSINESS AND P ROFESSION. IN ORDER TO VERIFY THE VERACITY OF THE SAID CLAIM MADE BY TH E ASSESSEE, NOTICES UNDER SECTION 133(6) OF THE ACT WERE ISSUED BY THE ASSESSING OFFICER TO THE BROKER M/S. JAGTARNI COMMODITIES PVT. LIMITED A ND EXCHANGE I.E. NMCE. IN RESPONSE, NMCE VIDE LETTER DATED 29.12.201 5 INFORMED THE ASSESSING OFFICER THAT THE ASSESSEE WAS NEVER REGIS TERED WITH THE EXCHANGE BY THE BROKER M/S. JAGTARNI COMMODITIES PV T. LIMITED AND EVEN THE SAID BROKER WAS NEVER ACTIVE ON THE EXCHANGE. T HE NOTICES ISSUED UNDER SECTION 133(6) BY THE ASSESSING OFFICER TO M/ S. JAGTARNI COMMODITIES PVT. LIMITED REMAINED UN-COMPLIED WITH. KEEPING IN VIEW THIS RESPONSE RECEIVED FROM THE CONCERNED PARTIES T O THE NOTICES ISSUED BY HIM UNDER SECTION 133(6), THE ASSESSEE WAS CALLE D UPON BY THE ASSESSING OFFICER TO OFFER ITS EXPLANATION AND PROD UCE EVIDENCE TO PROVE THE GENUINENESS OF ITS CLAIM OF SPECULATION PROFIT. THE ASSESSEE, HOWEVER, FAILED TO COMPLY WITH THIS REQUIREMENT AND THE ASSE SSING OFFICER ACCORDINGLY DID NOT ACCEPT THE CLAIM OF THE ASSESSE E FOR SPECULATION PROFIT AS GENUINE. HE TREATED THE SAID PROFIT AS UNEXPLAI NED CASH CREDIT UNDER SECTION 68 CHARGEABLE TO TAX IN THE HANDS OF THE AS SESSEE @ 30% AS PER THE PROVISIONS OF SECTION 115BBE OF THE ACT. 4. THE ACTION OF THE ASSESSING OFFICER IN TREATING THE SPECULATION PROFIT AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 CHARGEA BLE TO TAX @ 30% WAS CHALLENGED BY THE ASSESSEE IN THE APPEAL FILED BEFO RE THE LD. CIT(APPEALS) AND THE FOLLOWING SUBMISSIONS WERE MADE BY THE ASSE SSEE IN SUPPORT OF ITS CASE ON THIS ISSUE BEFORE THE LD. CIT(APPEALS): - 1. THE APPELLANT EARNED SPECULATION PROFIT OF RS. 3,00,805.26 AND THE SAME WAS SHOWN AS INCOME DURING THE YEAR ON ACCRUAL BASIS. 2. THE AMOUNT WAS NOT RECEIVED DURING THE FINANCIA L YEAR. IT WAS RECEIVED BY CHEQUE ON OR ABOUT 24.07.2013 AS PE R BANK STATEMENT [COPY ENCLOSED}. THUS, THE CREDIT IN THE BANK APPEARS IN NEXT FINANCIAL YEAR 2013-14 AND THEREFOR E COULD NOT BE CONSIDERED IN THE ASSESSMENT YEAR 2013-14. I.T.A. NO. 652/KOL./2017 ASSESSMENT YEAR: 2013-2014 PAGE 3 OF 12 3. THUS, THERE HAS BEEN NO RECEIPT DURING THE FINA NCIAL YEAR 2012-13 WHICH COULD BE HIT BY PROVISIONS OF SEC 68. THE REFLECTION OF AN INCOME WHERE JOURNAL ENTRY HAS BEE N PASSED COULD NOT BE EQUATED WITH THE CREDITS ENVISAGED U/S 68. 4. IN THE FACTS, THERE COULD NOT BE APPLICATION OF SEC 1158E ON THE AFORESAID AMOUNT. 5. THE SAID AMOUNT HAS BEEN TREATED AS UNDISCLOSED INCOME U/S 68 WHEREAS THERE WAS NO SUCH CREDIT IN THE BOOKS OF ACCOUNTS IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 20 13-14 AND THEREFORE THE PROVISIONS OF SEC 1158BE COULD NOT BE MADE APPLICABLE. 6. IN ANY CASE, THE IDENTITY OF THE CONCERNED BROK ER WAS DULY ESTABLISHED BY THE LD. AO HIMSELF. CHEQUE HAS BEEN ISSUED BY SUCH BROKER IN SUBSEQUENT FINANCIAL YEAR. NOTICE U/ S 133(6) WAS DULY SERVED UPON THE CONCERNED BROKER. 7. THE ASSERTIONS OF THE LD. A 0 COULD BE SUMMA RIZED AS UNDER: (A) PARA 2.1 OF ASSESSMENT ORDER '....... ASSESSEE HAS NOT BEEN REGISTERED WITH THE EXCHANGE BY THE BROKER, M/S JAG ATRANI COMMODITIES P. LTD .... (B)'NOTICE U/S 133(6) ISSUED TO M/S JAGTRANI COMMO DITIES HAS NOT BEEN COMPLIED WITH THOUGH THE NOTICE WAS DULY S ERVED ..... SUBMISSIONS BY THE APPELLANT: THIS INDICATES THE SO CALLED DEFAULT, IF ANY, HAS BEEN COMMITTED BY THE BROKER. IT IS SUBMITTED THAT FOR ANY DEFAULT ON PART OF THE BROKE R COULD NOT BE MADE BASIS FOR ANY ADVERSITY ON THE CLIENT. THIS SUBMISSION IS MADE ON THE BASIS OF RATIO DECIDED BY THE HON'BL E JURISDICTIONAL HIGH COURT IN FOLLOWING CASES:- ITO VS. MS. KHALIL M. BHARWANI (MUMBAI ITAT), INCO ME TAX APPEAL NO. 223 OF 2011, DATE OF JUDGEMENT: 27/11/20 15. CIT VS KUNDAN INVESTMENT LTD 130 TAXMAN 689 (CALCU TTA HIGH COURT) CIT VS EMERALD COMM .LTD 250 1TR 539 (CALCUTTA HIG H COURT) CIT VS DHAWAN INVESTMENT & TRADING CO LTD238 ITR48 6(CAI] 8. IN REPLY TO COMMUNICATION WITH NMCE, THE LD. A O HAS INCORPORATED REPLY FROM THE SAID INSTITUTION WHERE IT IS ASSERTED ........ WAS EXPELLED FROM THE MEMBERSHIP OF THE EXCHANGE WITH EFFECT FROM 15 TH MAY 2013...... SUBMISSIONS BY THE APPELLANT: THE EXPULSION OF ANY MEMBER FROM THE INSTITUTION IS AN INTERNAL MATTER BETWEEN THE BROKER AND THE INSTITUTION. SUCH ACT COULD NOT BE MADE BAS IS FOR ANY ADVERSITY ON THE APPELLANT. I.T.A. NO. 652/KOL./2017 ASSESSMENT YEAR: 2013-2014 PAGE 4 OF 12 9. SUBMISSIONS MADE BEFORE THE LD. AO ALONG WITH A NALYSIS OF CASE DECIDED BY THE HON'BLE CALCUTTA HIGH COURT ARE ENCLOSED, WHICH MAY KINDLY BE CONSIDERED. 5. THE LD. CIT(APPEALS) DID NOT FIND MERIT IN THE S UBMISSIONS MADE BY THE ASSESSEE AND PROCEEDED TO UPHOLD THE ACTION OF THE ASSESSING OFFICER IN TREATING THE SPECULATION PROFIT AS UNEXPLAINED C ASH CREDIT UNDER SECTION 68 FOR THE FOLLOWING REASONS GIVEN IN PARAG RAPH NO. 5 OF HIS IMPUGNED ORDER:- 5. HAVING CONSIDERED THE MATTER, AND THE SPECIFIC FINDINGS OF THE LD. AO, IT HAS TO BE SAID THERE REMAINS SUSPICI ONS ABOUT THE IMPUGNED TRANSACTIONS ENTERED INTO BY THE APPEL LANT, LEADING TO PURPORTED SPECULATION PROFITS. THE LETTE R OF THE NATIONAL MULTI COMMODITY EXCHANGE OF INDIA LTD. (NM CE) CANNOT BE BRUSHES ASIDE BY THE APPELLANT ON GROUNDS THAT HE HAD NOTHING TO DO WITH WHAT THE STATUS OF THE BROKE R WAS ON THE EXCHANGE. THIS COUPLED WITH THE FACT THAT THERE WAS NO RESPONSE TO THE NOTICE ISSUED BY THE LD. AO TO THE BROKER ASSUMES GREATER SIGNIFICANCE. I AM IN AGREEMENT WIT H THE LD. AO THAT THE TRANSACTIONS RELATING TO THE CLAIM OF S PECULATION PROFITS AS MADE BY THE APPELLANT COME WITHIN THE AM BIT OF 'SUSPICIOUS TRANSACTIONS', AND THEREFORE THE RULES OF, SUSPICIOUS TRANSACTIONS WOULD APPLY TO THE CASE. PA YMENT THROUGH BANKS, PERFORMANCE THROUGH STOCK EXCHANGE A ND OTHER SUCH FEATURES ARE ONLY APPARENT FEATURES. I T HIS CASE WHAT THE STOCK EXCHANGE HAS CONFIRMED BEFORE THE LD . AO GOES AGAINST THE APPELLANT-HUF. THEREFORE, I HAVE T O REACH THE INEVITABLE CONCLUSION THAT THE TRANSACTIONS AS DISCUSSED BY THE LD.AO FALL IN THE REALM OF 'SUSPICIOUS' AND DUBIOUS' TRANSACTIONS. THE LD. AO HAS THEREFORE NECESSARILY TO CONSIDER THE SURROUNDING CIRCUMSTANCES, WHICH HE INDEED HAS DONE IN A VERY METICULOUS AND CAREFUL MANNER. IN THE CASE OF WIN CHADHA VS.- CIT (INTERNATIONAL TAXATION) IN ITA NO .3088 & 3107/DEL/200S, THE HON'BLE DELHI ITAT, B'-BENCH HAS OBSERVED, ON 31.12.2010 AS UNDER: 'SUSPICIOUS AND DIBIOUS TRASANCTION HOW TO BE DE ALT WITH: 6.11. THE TAX LIABILITY IN THE CASES OF SUSPICIOUS TRANSACTIONS IS TO BE ASSESSED ON THE BASIS OF THE MATERIAL AVAI LABLE ON RECORD, SURROUNDING CIRCUMSTANCES, HUMAN CONDUCT, PREPONDERANCE OF PROBABILITIES AND NATURE OF INCRIM INATING INFORMATION/ EVIDENCE AVAILABLE WITH AO. I.T.A. NO. 652/KOL./2017 ASSESSMENT YEAR: 2013-2014 PAGE 5 OF 12 6.12. IN THE CASE OF SUMATI DAYAL -V.-CIT (1995) 8 0 TAXMAN 89 (SC), THE HON'BLE SUPREME COURT HAS DEALT WITH T HE RELEVANCE OF HUMAN CONDUCT, PREPONDERANCE OF PROBAB ILITIES AND SURROUNDING CIRCUMSTANCE, BURDEN OF PROOF AND I TS SHIFTING ON THE DEPARTMENT IN CASES OF SUSPICIOUS CIRCUMSTANCES, BY FOLLOWING OBSERVATIONS: ' ..... IT IS, NO DOUBT, TRUE THAT IN ALL CASES IN WHICH A RECEIPT IS SOUGHT TO BE TAXED AS INCOME, THE BURDEN LIES ON TH E DEPARTMENT TO PROVE THAT IT IS WITHIN THE TAXING PR OVISION AND IF A RECEIPT IS IN THE NATURE OF INCOME, THE BURDEN OF PROVING THAT IT IS NOT TAXABLE BECAUSE IT FALLS WITHIN EXEM PTION PROVIDED BY THE ACT LIES UPON THE ASSESSEE. BUT IN VIEW OF SECTION, 68, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF THE ASSESSEE FOR ANY PREVIOUS YEAR, THE SAME MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR IF THE EXPLANATION OFFERED BY THE ASSESSEE ABO UT THE NATURE AND SOURCE THEREOF IS, IN THE OPINION OF THE ASSESSING OFFICER, NOT SATISFACTORY. IN SUCH CASE THERE IS PR IMA FACIE EVIDENCE AGAINST THE ASSESSEE, VIZ., THE RECEIPT OF MONEY, AND IF HE FAILS TO-REBUT THE SAME, THE SAID EVIDENCE BE ING UNREBUTTED, CAN BE USED AGAINST HIM BY HOLDING THAT IT IS A RECEIPT OF AN INCOME NATURE. WHILE CONSIDERING THE EXPLANATION OF THE ASSESSEE, THE DEPARTMENT CANNOT, HOWEVER, ACT UNREASONABLY. ........... HAVING REGARD TO THE CONDUCT OF THE AP PELLANT AS DISCLOSED IN HER SWORN STATEMENT AS WELL AS OTHER M ATERIAL ON THE RECORD, AN INFERENCE COULD REASONABLY BE DRAWN THAT THE WINNING TICKETS WERE PURCHASED BY THE APPELLANT AFT ER THE EVENT. THE MAJORITY OPINION AFTER CONSIDERING SURRO UNDING CIRCUMSTANCES AND APPLYING THE TEST OF HUMAN PROBAB ILITIES HAD RIGHTLY CONCLUDED THAT THE APPELLANT'S CLAIM AB OUT THE AMOUNT BEING HER WINNING FROM RACES, WAS NOT GENUIN E. IT COULD NOT BE SAID THAT THE EXPLANATION OFFERED BY T HE APPELLANT IN RESPECT OF THE SAID AMOUNTS HAD BEEN R EJECTED UNREASONABLY AND THAT THE FINDING THAT THE SAID AMO UNTS WERE INCOME OF THE APPELLANT FROM OTHER SOURCES WAS NOT BASED ON EVIDENCE. ORDER OF THE AO ON THIS TECHNICAL PLEA WILL AMOUNT TO TAKING A LOPSIDED VIEW OF THE PROCEEDINGS. BESIDES, THE JPC HAS UNDERLINED THE IMPORTANCE OF REPORTS OF INVESTIGATI ON AGENCIES LIKE CBI, DRI, ED WHOSE WERE IN THE OFFING , AS THE RELEVANT INVESTIGATIONS WERE IN PROCESS. IN VIEW OF THESE OBSERVATIONS, WE DO NOT ACCEDE TO THE ASSESSEE'S PL EAS IN THIS BEHALF. THE ASSESSEE'S CONTENTIONS AND OBJECTIONS I N THIS BEHALF THAT THE MATERIAL AVAILABLE ON RECORD WAS NO T I.T.A. NO. 652/KOL./2017 ASSESSMENT YEAR: 2013-2014 PAGE 6 OF 12 ADMISSIBLE AS EVIDENCE AND THAT IT CANNOT BE RELIED ON BY THE AO, ARE DEVOID OF ANY MERIT AND ARE REJECTED OUTRIG HT ........ IN VIEW OF THE ABOVE DISCUSSION, I FIND NO INFIRMIT Y IN THE ORDERS OF THE LD. AO, AND I CONFIRM THE SAME. GROUN D NO 1 TAKEN BY THE APPELLANT STAND DISMISSED. 6. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CLAIM OF THE ASSESSEE OF HAVING EARNED THE SPECULATION PROFIT OF RS.3,00,805/- WAS DULY SUPPORTED BY THE CONTRACT NOTES ISSUED BY THE CONCERNED BROKER M/S. JAGTARNI COMMODITIES PVT. LIMITED AND THERE WA S NO REASON TO DOUBT THE GENUINENESS OF THE SAID CLAIM. HE SUBMITTED THA T THE BROKER WAS EXPELLED FROM THE MEMBERSHIP OF M/S. NMCE FROM 15 TH MAY, 2013, I.E. ONLY AFTER THE TRANSACTIONS OF THE ASSESSEE RESULTI NG INTO SPECULATIVE PROFIT. REFERRING TO THE RELEVANT PORTION OF THE LD . CIT(APPEALS)S ORDER AS CONTAINED IN PARAGRAPH NO. 5, HE SUBMITTED THAT THE CLAIM OF THE ASSESSEE FOR SPECULATIVE PROFIT WAS DISALLOWED MERELY ON THE BASIS OF SUSPICION AND NOT ON THE BASIS OF ANY COGENT OR CONVINCING REASON S. RELYING ON THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS.- CARGO INDUSTRIAL HOLDINGS LIMITED [244 ITR 422], HE CONTE NDED THAT THE CLAIM OF THE ASSESSEE FOR SPECULATIVE PROFIT CANNOT BE DENIE D MERELY BECAUSE THE BROKER FAILED TO APPEAR IN RESPONSE TO NOTICES ISSU ED BY THE ASSESSING OFFICER OR ON A MERE SUSPICION ABOUT GENUINENESS OF TRANSACTIONS. HE ALSO RELIED ON THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS.- EMERALD COMMERCIAL LIMITED [250 ITR 539], WHEREIN IT WAS HELD THAT NON-PRODUCTION OF SHARE BROKERS BY ASSESESE CO ULD NOT DISENTITLE IT FOR CLAIM OF LOSS IN A GENUINE TRANSACTION OF SHARE S. HE FURTHER RELIED ON THE DECISION OF THIS TRIBUNAL IN THE CASE OF RAHUL VS.- ITO (ITA NO. 140/KOL/2009 DATED 10.08.2007), WHEREIN THE GENUINE NESS OF SHARE TRANSACTIONS WAS ACCEPTED BY THE TRIBUNAL AS THE SA ME WERE DULY SUPPORTED BY THE CONTRACT NOTES AS WELL AS BANK STA TEMENTS. 7. THE LD. D.R., ON THE OTHER HAND, SUBMITTED THAT A SPECIFIC REPLY WAS RECEIVED BY THE ASSESSING OFFICER FROM THE CONCERNE D EXCHANGE IN I.T.A. NO. 652/KOL./2017 ASSESSMENT YEAR: 2013-2014 PAGE 7 OF 12 RESPONSE TO NOTICE ISSUED UNDER SECTION 133(6) THAT NEITHER THE ASSESSEE NOR THE BROKER HAD DONE ANY TRANSACTION AS CLAIMED BY THE ASSESSEE RESULTING INTO SPECULATIVE PROFIT. HE SUBMITTED THA T THE ASSESSEE WAS NOT EVEN REGISTERED WITH NMCE AND EVEN THE CONCERNED BR OKER M/S. JAGTARNI COMMODITIES PVT. LIMITED WAS NEVER ACTIVE ON NMCE A S CLEARLY INFORMED BY THE EXCHANGE. HE CONTENDED THAT THIS SPECIFIC IN FORMATION RECEIVED FROM M/S. NMCE WAS SUFFICIENT TO SHOW THAT THE CLAI M OF THE ASSESSEE OF SPECULATIVE PROFIT WAS NOT GENUINE AND THE AUTHORIT IES BELOW, THEREFORE, WERE FULLY JUSTIFIED IN TREATING THE SAME AS UNEXPL AINED CASH CREDIT UNDER SECTION 68. AS REGARDS THE CASE LAWS RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE IN SUPPORT OF THE ASSESSEES CASE, HE CONT ENDED THAT THE FACTS INVOLVED IN THE SAID CASES ARE ALTOGETHER DIFFERENT SINCE THERE WAS NO SUCH SPECIFIC ADVERSE INFORMATION RECEIVED AGAINST THE A SSESSEE FROM THE CONCERNED EXCHANGE. 8. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERV ED THAT IN ORDER TO VERIFY THE VERACITY OF THE CLAIM OF THE ASSESSEE OF HAVING EARNED SPECULATION PROFIT, ENQUIRY WAS MADE BY THE ASSESSI NG OFFICER WITH THE CONCERNED BROKER, NAMELY M/S. JAGTARNI COMMODITIES PVT. LIMITED AS WELL AS THE CONCERNED COMMODITY EXCHANGE NMCE BY ISSUING NOTICES UNDER SECTION 133(6) OF THE ACT. IN REPLY TO THE SAID NOT ICES, THERE WAS NO RESPONSE FROM THE BROKER. NMCE, HOWEVER, REPORTED T O THE ASSESSING OFFICER VIDE LETTER DATED 29.12.2015 THAT NEITHER T HE ASSESSEE NOR EVEN THE BROKER WAS EVER ACTIVE ON THEIR EXCHANGE. IT WA S ALSO INFORMED BY NMCE THAT M/S. JAGTARNI COMMODITIES PVT. LIMITED WA S EXPELLED FROM THE MEMBERSHIP OF THE EXCHANGE W.E.F. 15 TH MAY, 2013 FOR ISSUANCE OF FRAUDULENT CONTRACT NOTES. THE CONTENTION RAISED BY THE LD. COUNSEL FOR THE ASSESSEE IN THIS REGARD IS THAT THE TRANSACTION S IN QUESTION WERE ENTERED INTO BY THE ASSESSEE THROUGH THIS CONCERNED BROKER BEFORE HIS EXPULSION FROM THE MEMBERSHIP OF THE EXCHANGE FROM 15 TH MAY, 2013. HE HAS ALSO RELIED ON THE CONTRACT NOTES ISSUED BY THE SAID BROKER AS EVIDENCE OF THE TRANSACTIONS. IT IS, HOWEVER, OBSER VED THAT THE SAID BROKER I.T.A. NO. 652/KOL./2017 ASSESSMENT YEAR: 2013-2014 PAGE 8 OF 12 WAS INDULGING IN ISSUANCE OF FRAUDULENT CONTRACT NO TES PRIOR TO 15.05.2013 AS FOUND BY NMCE AND ON THE BASIS OF THI S FINDING, HE WAS EXPELLED FROM THE MEMBERSHIP OF THE EXCHANGE. THE G ENUINENESS OF THE CONTRACT NOTES ISSUED BY THE SAID BROKER EVEN PRIOR TO 15.05.2013 THUS WAS FOUND TO BE DOUBTFUL AND THE LETTER ISSUED BY N MCE STATING THAT HE WAS NEVER ACTIVE ON THE EXCHANGE FURTHER CORROBORAT ED THE SAME. IN SUPPORT OF THE ASSESSEES CASE, LD. COUNSEL FOR THE ASSESSEE HAS RELIED ON THE DECISIONS OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CARGO INDUSTRIAL HOLDINGS LIMITED (SUPRA) AND IN THE CASE OF EMERALD COMMERCIAL LIMITED (SUPRA) AS WELL AS THE DECISION OF THIS TRIBUNAL IN CASE OF RAHUL (SUPRA). AS RIGHTLY CONTENDED BY THE LD. D.R., THESE CASES CITED BY THE LD. COUNSEL FOR THE ASSESSEE, HOWEVER, ARE DISTINGUISHABLE ON FACTS, INASMUCH AS, THERE WAS NO ENQUIRY MADE BY TH E ASSESSING OFFICER IN THE SAID CASE DIRECTLY WITH THE CONCERNED STOCK EXC HANGE WHICH CLEARLY REVEALED THAT THE RELEVANT TRANSACTIONS WERE NOT DO NE THROUGH THE STOCK EXCHANGE AS CLAIMED BY THE ASSESSEE ON THE BASIS OF CONTRACT NOTES ISSUED BY THE BROKER. IN THE PRESENT CASE, SUCH ENQUIRY WA S MADE BY THE ASSESSING OFFICER, WHICH CLEARLY REVEALED THAT NOT ONLY THE ASSESSEE BUT EVEN THE CONCERNED BROKER WAS NEVER ACTIVE ON THE S TOCK EXCHANGE. IT ALSO REVEALED THAT THE SAID BROKER WAS INDULGING IN ISSUING FRAUDULENT CONTRACT NOTES WHICH RESULTED INTO HIS EXPULSION FR OM THE MEMBERSHIP OF THE EXCHANGE FROM 15 TH MAY, 2013. KEEPING IN VIEW ALL THESE FACTS OF THE CASE, I FIND MYSELF IN AGREEMENT WITH THE LD. CIT(A PPEALS) THAT THE GENUINENESS OF THE ASSESSEES CLAIM OF HAVING EARNE D THE SPECULATION PROFIT OF RS.3,00,905/- WAS NOT ESTABLISHED AND THE ASSESSING OFFICER, THEREFORE, WAS FULLY JUSTIFIED IN TREATING THE SAID AMOUNT AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 CHARGEABLE TO TAX AT T HE FLAT RATE OF 30%. I, THEREFORE, UPHOLD THE IMPUGNED ORDER OF THE LD. CIT (APPEALS) ON THIS ISSUE AND DISMISS GROUND NO. 1 OF THE ASSESSEES AP PEAL. 9. THE ISSUE RAISED IN GROUND NO. 2 RELATES TO THE DISALLOWANCE OF RS.1,00,000/- MADE BY THE ASSESSING OFFICER AND CON FIRMED BY THE LD. CIT(APPEALS) ON ACCOUNT OF ASSESSEES CLAIM FOR SHO RT-TERM CAPITAL LOSS. I.T.A. NO. 652/KOL./2017 ASSESSMENT YEAR: 2013-2014 PAGE 9 OF 12 10. IN THE RETURN OF INCOME FILED FOR THE YEAR UNDE R CONSIDERATION, A SHORT-TERM CAPITAL GAIN OF RS.1,12,118/- WAS DECLAR ED BY THE ASSESSEE AND THE SAME WAS SET OFF AGAINST A SHORT-TERM CAPITAL L OSS OF RS.1,00,000/- ARISING FROM THE SALE OF SHARES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE CLAIM OF THE ASSESSEE FOR SHORT-TE RM CAPITAL LOSS OF RS.1,00,000/- ARISING FROM THE SALE OF 25,000 SHARE S OF M/S. PAUL & CHAKRABORTY PVT. LIMITED WAS EXAMINED BY THE ASSESS ING OFFICER AND ON SUCH EXAMINATION, HE RECORDED THE FOLLOWING FINDING S:- (I) IT IS APPARENT FROM THE DETAILS SUBMITTED DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THE ASSESSEE-HUF ALL EGEDLY PURCHASED SHARES FROM BIMLA DEVI JAIN, WHO IS A MEM BER OF THE HUF AND PURPORTEDLY SOLD TO VIKASH B. JAIN (HUF), W HOSE KARTA IS ALSO A MEMBER OF THE ASSESSEE-HUF. (II) THE FAIR MARKET VALUE OF THE SHARES OF M/S. P AL & CHOKRABORTY PVT. LTD AS ON 31.03.2012 WAS RS.6.74/- , WHICH WAS ALLEGEDLY PURCHASED BY THE ASSESSEE @ RS.10/- P ER SHARE. (III) THE SHARE HOLDERS LIST OF M/S. PAUL & CHAKRA BORTY PVT. LTD. FOR THE F.Y. 2012-13 AND 2013-14, AS FILED WITH THE ROC, DOES NOT SHOW VIKASH B JAIN (HUF) AS A SHAREHOLDER. (IV) THE ENTIRE TRANSACTIONS WERE DONE THROUGH JOU RNAL ENTRIES AND THUS THERE WAS NO MONETARY INVOLVEMENT IN THE A LLEGED TRANSACTIONS. WHEN THE ABOVE FINDINGS WERE CONFRONTED BY THE ASSE SSING OFFICER TO THE ASSESSEE, THE ASSESSEE COULD NOT OFFER ANY SATISFAC TORY EXPLANATION, THE CLAIM OF THE ASSESSEE FOR SHORT-TERM CAPITAL LOSS O F RS.1,00,000/-, THEREFORE, WAS DISALLOWED BY THE ASSESSING OFFICER. 11. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ITS CLAIM FOR SHORT-TERM CAPITAL LOSS OF RS.1,00,000/- WAS CHALLENGED BY THE ASSESSEE IN THE APPEAL FILED BEFORE THE LD. CIT(APP EALS) AND THE FOLLOWING SUBMISSION WAS MADE ON BEHALF OF THE ASSESSEE IN SU PPORT OF ITS CASE ON THIS ISSUE:- I.T.A. NO. 652/KOL./2017 ASSESSMENT YEAR: 2013-2014 PAGE 10 OF 12 SUBMISSIONS REGARDING: DISALLOWANCE OF SHORT TERM CAPITAL LOSS : THE HUF HAS BEEN HAVING TRANSACTIONS WITH ITS MEMB ERS FROM TIME TO TIME. TRANSACTIONS WERE CARRIED ON IN OTHER SHAR ES ALSO THROUGH JOURNAL ENTRY. THERE WAS NOTHING UNUSUAL. THE PARTI CULAR LOSS IN SHARES OF PAUL & CHAKRAVARTY OCCURRED FOR TRANSACTI ON THROUGH JOURNAL ENTRY WITH THE RUNNING ACCOUNT WITH THE MEM BERS. INITIALLY, BIMLA DEVI JALN HAS BEEN HOLDING THE SHARES. HER NA ME AS SHAREHOLDER APPEARS IN THE MCA RECORDS. AS VIKASH B JAIN DID NOT SEND THE SHARES TO THE COMPANY, THE SAME COULD NOT BE REGISTERED IN THAT NAME. 12. THE ABOVE SUBMISSIONS MADE BY THE ASSESSEE DID NOT FIND FAVOUR WITH THE LD. CIT(APPEALS), WHO PROCEEDED TO CONFIRM THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING THE ASSESSEES CLA IM FOR SHORT-TERM CAPITAL LOSS BY OBSERVING AS UNDER:- 1. I FIND THAT IN THE MATTER OF THE IMPUGNED TRANS ACTIONS, THE LD. AO HAS RECORDED CLEAR AND COGENT FINDINGS, AND IN ASSESSMENT AS WELL AS IN APPEAL, THE APPELLANT HAS BEEN UNABLE TO PLACE ANY CLEAR REASONING OR EVIDENCE IN THE MAT TER. IN FACT, I FIND THAT THE APPELLANT HAS NOT DEFENDED HIMSELF AT ALL, BUT HAS PLACED CERTAIN IRRELEVANT CONSIDERATIONS IN THE MAT TER. 2. IN THE SAID CIRCUMSTANCES, I AM NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE LD. AO, WHICH ACCORDINGLY STAND CONFIRMED. THE GROUND IS ADJUDICATED AGAINST THE APPELLANT, AN D STANDS DISMISSED. 13. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE GENUINENESS OF THE RELEVANT TRANSACTIONS OF PURCHASE AND SALE OF S HARES RESULTING INTO SHORT-TERM CAPITAL LOSS WAS NEVER DOUBTED BY THE AS SESSING OFFICER AND THE CLAIM OF THE ASSESSEE FOR THE SHORT-TERM CAPITA L LOSS WAS DISALLOWED BY HIM MERELY BECAUSE THE SAID TRANSACTIONS WERE MA DE WITH THE FAMILY MEMBERS. HE CONTENDED THAT THERE IS NO BAR IN HAVIN G SUCH TRANSACTION ALONG WITH THE FAMILY MEMBERS AND THE OTHER TRANSAC TIONS OF SIMILAR NATURE MADE BY THE ASSESSEE WITH FAMILY MEMBERS THR OUGH JOURNAL ENTRIES WERE ACCEPTED BY THE ASSESSING OFFICER HIMSELF AS G ENUINE. HE SUBMITTED THAT RECURRING CURRENT ACCOUNT IS MAINTAINED BY THE ASSESSEE TO POST SUCH I.T.A. NO. 652/KOL./2017 ASSESSMENT YEAR: 2013-2014 PAGE 11 OF 12 TRANSACTIONS IN SHARES MADE BY THE ASSESSEE WITH FA MILY MEMBERS AND THIS IS THE REGULAR PRACTICE FOLLOWED BY THE ASSESS EE. 14. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE ORDERS OF THE AUTHORITIES BELOW IN SUPPORT OF THE REVENUES CASE ON THIS ISSUE. 15. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERV ED THAT THE GENUINENESS OF THE RELEVANT SHARE TRANSACTIONS RESULTING INTO S HORT-TERM CAPITAL LOSS OF RS.1,00,000/- WAS DOUBTED BY THE ASSESSING OFFICER ON THE GROUND THAT THESE WERE TRANSACTIONS MADE BY THE ASSESSEE WITH O THER FAMILY MEMBERS. AS CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE IN THIS REGARD, TRANSACTIONS OF SIMILAR NATURE WERE ENTERED INTO BY THE ASSESSEE WITH THE FAMILY MEMBERS AND THE SAID TRANSACTIONS MADE THROU GH JOURNAL ENTRIES WERE ACCEPTED BY THE ASSESSING OFFICER. ANOTHER REA SON GIVEN BY THE ASSESSING OFFICER TO DOUBT THE GENUINENESS OF THE R ELEVANT SHARE TRANSACTIONS WAS THAT THE FAIR MARKET VALUE OF THE RELEVANT SHARES AS ON 30/03/2012 WAS RS.6.75 PER SHARE WHILE THE ASSESSEE HAD PURCHASED THE SAID SHARES AT RS.10/- PER SHARE. IT IS, HOWEVER, O BSERVED THAT THE SHARES WERE PURCHASED BY THE ASSESSEE AT RS.10/- PER SHARE ON 01.11.2012 AND THERE IS NOTHING BROUGHT ON RECORD BY THE ASSESSING OFFICER TO SHOW THAT THE FAIR MARKET VALUE OF THE SAID SHARES AS ON THE DATE OF PURCHASE BY THE ASSESSEE WAS DIFFERENT FROM THE PURCHASE PRICE SHOW N BY THE ASSESSEE. AS REGARDS THE ALLEGATION OF THE ASSESSING OFFICER THA T THERE WAS NO MONETARY INVOLVEMENT IN THE TRANSACTIONS IN QUESTIO N, THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED ON RECORD THE COPIES OF CUR RENT ACCOUNTS OF THE CONCERNED FAMILY MEMBERS AS APPEARING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AT PAGE NOS. 27 & 28 OF HIS PAPER BOOK TO SHOW THAT THERE WERE SUBSTANTIAL MONETARY TRANSACTIONS BETWEEN THE PARTI ES AGAINST WHICH THE VALUE OF SHARE TRANSACTIONS IN QUESTION WAS ADJUSTE D. HAVING REGARD TO ALL THESE FACTS OF THE CASE, I AM OF THE VIEW THAT THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING THE SHORT-TERM CAPITAL AS CL AIMED BY THE ASSESSEE BY DOUBTING THE GENUINENESS OF THE RELEVANT SHARE T RANSACTION WAS NOT I.T.A. NO. 652/KOL./2017 ASSESSMENT YEAR: 2013-2014 PAGE 12 OF 12 WELL FOUNDED AND THE LD. CIT(APPEALS) WAS NOT JUSTI FIED IN UPHOLDING THE SAID ACTION OF THE ASSESSING OFFICER. I, THEREFORE, SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) ON THIS ISSUE AND DIR ECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE FOR SHOR T-TERM CAPITAL LOSS OF RS.1,00,000/-. GROUND NO. 2 OF THE ASSESSEES APPEA L IS ACCORDINGLY ALLOWED. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON OCTOBER 31, 2 017. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER KOLKATA, THE 31 ST DAY OF OCTOBER, 2017 COPIES TO : (1) BHAG CHAND CHHABRA, HUF, C/O. B. JAIN & CO., 2, ASHUTOSH MUKHERJEE ROAD, KOLKATA-700 020 (2) INCOME TAX OFFICER, WARD-34(1), KOLKATA, AAYAKAR BHAWAN (POORVA), 110, SHANTI PALLY, KOLKATA-700 107 (3) COMMISSIONER OF INCOME TAX (APPEALS)-10, KOLK ATA; (4) COMMISSIONER OF INCOME TAX ,KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, HEAD OF OFFICE/DDO INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.