Shri Arun Kumar Goyal, Indore V. The ACIT 4(1), Indore

ITA 66/IND/2013

• Counselvise Citation: 6622714 RSA 2013
• Duration Of Justice: 2 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 03-09-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 01-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: S S MUNDRA; ARPIT MUNDRA CAS
• Keywords: Unexplained expenditure; Initiation of penalty proceedings
• Section: 14A; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, J.M. AND SHRI B.C.MEENA, A.M. I .T.A.NO. 48/IND/2013 A.Y. : 2007-08 ACIT, SHRI ARUNKUMAR 4(1), VS GOYAL, PROP. INDORE M/S.ANANT UPYOGI VASTU BHANDAR INDORE. APPELLANT RESPONDENT I.T.A.NO.66/IND/2013 A.Y. : 2007-08 SHRI ARUNKUMAR ACIT, GOYAL, PROP. VS 4(1), M/S.ANANT UPYOGI VASTU BHANDAR INDORE. INDORE APPELLANT RESPONDENT PAN NO. : ABKPG2577R -: 2: - 2 ASSESSEE BY SHRI S.S.MUNDRA AND SHRI ARPIT MUNDRA, CAS DEPARTMENT BY SHRI R. A. VERMA, SR. DR DATE OF HEARING : 03.09.2015 DATE OF PRONOUNCEMENT : 12 .09.2015 O R D E R PER GARASIA, J.M. THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER OF CIT(A-II, INDORE, DATED 26.11.2012 FOR THE ASSESSME NT YEAR 2007-08. I.T.A.NO. 48/IND/2013 DEPARTMENTS APPEAL : THE DEPARTMENT HAS TAKEN THE FOLLOWING GROUND OF AP PEAL :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN :- (I) DELETING THE ADDITION OF RS. 95,60,909/- MADE BY TH E ASSESSING OFFICER TREATING THE LTCG SHOWN ON SALE O F -: 3: - 3 SHARES (CLAIMED AS EXEMPT U/S 38 OF I. T. ACT) AS INCOME FROM OTHER SOURCES. 2. THE ASSESSEE HAS FILED THE RETURN DECLARING INCOME OF RS. 6,33,740/-. THE SHORT FACTS OF THE CASE ARE AS UNDER : 3. THAT THE ASSESSEE WAS ALLOTTED 50000 SHARES OF M/S PACE ELECTRONICS LTD, FOR RS.6,00,000/- ON 1/6/2005 AT RS.12/- PER SHARE. AFTER SOME TIME SHARES GOT SPLITTED IN RATIO OF 1:5 AND AS A RESULT HOLDING OF SUCH SHARES WENT UP IN THE HANDS OF THE ASSESSEE AT 2,50,000 SHARES OF FACE VALUE OF RS.2/ - PER SHARE. SUCH SHARES WERE CREDITED IN DEMAT A/C ON 11/8/06. ASSESSEE HAS A DEMAT A/C IN M/S ARIHANT CAPITAL MARKETS LIMITED. NORMALLY MARKET VALUE OF SHARES OF M/S PACE ELECTRONICS LTD, REMAIN S LOW. AT TIMES THERE ARE SUDDEN JUMPS IN ITS MARKET VALUE. AO ISSUED A LETTER U/S 133(6) OF THE INCOME- TAX ACT, 1961, TO BOMBAY STOCK EXCHANGE, ASKING THEM REGARDING VOLUME OF SHARE TRADING OF M/ S. PACE ELECTRONICS LTD. IN F.Y. 2005-06, F.Y 2006-07 AND -: 4: - 4 F.Y. 2007-08 IN DELIVERY SEGMENTS AND ALSO ASKING THEM ABOUT TOP FIVE BROKERS WHO PURCHASED AND SOLD THE SHARES. IT WAS ALSO ASKED WHETHER COMPANY WAS SUSPENDED FOR TRADE IN LAST THREE YEARS. SUCH INFORMATION FROM BSE WAS RECEIVED ON 26/10/09 AND AS PER ASSESSMENT ORDER, IT WAS PLACED ON RECORD. A LETTER WAS SENT BY AO U/S 133(6) OF THE INCOME-TAX ACT, 1961, TO M/S. PACE ELECTRONICS LIMITED. BUT NO SUBMISSION WAS MADE BY THAT COMPANY. ON VERIFICATION OF SHARE TRADING OF THIS SHARE, THE A O OBSERVED THAT THERE IS A SUDDEN RISE IN ITS SHARE VALUE FOR A SHORT PERIOD AND SUCH RISE COULD ONLY B E OF A COMPANY WITH STRONG FINANCIAL FUNDAMENTAL BUT M/S. PACE ELECTRONICS LTD. IS NOT A SOUND COMPANY AS ITS TURNOVER IN F.Y. 2005-06 WAS ONLY RS.8.09 CRORE AND P.E. RATIO WAS VERY HIGH. IT LEADS TO INDICATION THAT ACTIVITY OF INCREASE IN PRICE WAS MANIPULATIVE ONE. TRADING OF SHARES OF M/S PACE ELECTRONICS LTD, WAS RESTRICTED TO FEW BROKERS AND SO ITS MARKET VALUE WAS CONTROLLED BY THESE BROKERS. -: 5: - 5 THE COMPANY M/S. PACE ELECTRONICS LTD. IS A PENNY STOCK WHICH IS USED BY CERTAIN CATEGORIES OF PERSON S TO ENJOY THE BENEFIT U/S 10(38). THE AO PERSONALLY WENT TO MUMBAI ON 9/12/2009 TO LOCATE THIS COMPANY M/S. PACE ELECTRONICS LTD. THE AFORESAID COMPANYS ADDRESS WAS FOUND LOCKED. HE RECORDED STATEMENT OF THE SECRETARY OF THE CO-OPERATIVE SOCIETY, SHRI SHARAD KUMAR KEJRIWAL, WHO STATED THA T IN THE LAST 4 MONTHS, HE HAS NOT SEEN THIS OFFICE O PEN. HE RECORDED STATEMENT OF SECURITY SUPERVISOR, WHO STATED THAT HE HAS NOT SEEN THIS OFFICE OPEN. AS A RESULT, AO CAME TO THE CONCLUSION THAT EXISTENCE OF PACE ELECTRONICS LTD, AT B-5, GROUND FLOOR, OFF GIRGANM ROAD, JAMBULWADI, MUMBAI IS DOUBTFUL. THEREAFTER AO EXAMINED THE ASSESSEE IN WHICH IN REPLY TO Q. NO.29, SHRI ARUN KUMAR GOYAL STATED THAT HE PURCHASED THE SHARES OF M/S. PACE ELECTRONICS LTD. IN 2005. ASSESSEE STATED THAT HE PURCHASED VARIOUS SHARES ON ADVICE OF ONE SHRI PAPPUJI. THEREAFTER, AO EXAMINED ONE SHRI PRANEET -: 6: - 6 MAHESHWARI ALIAS PAPPUJI WHO STATED THAT HE ADVISES THE ASSESSEE NORMALLY REGARDING IPO'S. 4. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. C IT(A) HAS ALLOWED THE APPEAL BY OBSERVING AS UNDER :- 4. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND SEEN THE SUBMISSIONS OF APPELLANT. THE AO HAS NOWHERE DISPUTED ANY BASIC FACTS OF THE SHARE TRANSACTIONS OF M/S. PACE ELECTRONICS LTD. THE FACT S OF THE CASE ARE THAT APPELLANT PURCHASED 50000 SHARES OF M/S. PACE ELECTRONICS LTD. THROUGH PREFERENTIAL ALLOTMENT BY PAYMENT OF DEMAND DRAFT NO. 1964738 OF RS.6 LAKHS DATED 19/5/05 DRAWN ON UNION BANK OF INDIA FROM BANK ACCOUNT OF APPELLANT. THESE SHARES WERE ALLOTTED TO APPELLANT ON 1/6/05 AND WERE HELD IN PHYSICAL FORM UPTO 1/6/06 A S THE SHARES WERE HAVING A LOCK-IN-PERIOD OF 1 YEAR. THEREAFTER THEY WERE PUT IN D-MATERIALIZED FORM FROM 1/6/06. ON 11/8/06 THERE WAS A CORPORATE ACTION WHEREIN THESE 50000 SHARES OF FACE VALUE OF RS.10/- WERE CONVERTED INTO 2,50,000 SHARES OF FACE -: 7: - 7 VALUE OF RS.2/-. SUCH SHARES WERE THEREAFTER SOLD THROUGH SHARE BROKERS NAMELY ARIHANT CAPITAL MARKETS LTD. AND SANJAY C. BAXI SECURITIES P. LTD. BETWEEN 25/8/06 TO 4/10/06 IN THE BOMBAY STOCK EXCHANGE (BSE) AND TOTAL SALE CONSIDERATION OF RS.1.O1 CRORES WAS RECEIVED BY CHEQUES IN APPELLANT'S BANK A/C. THE AO HAS NOT RAISED ANY QUESTIONS REGARDING PURCHASE AND SALE OF SUCH SHARES. WHEN BOTH PURCHASE AND SALE ARE THROUGH CHEQUE, BOTH PURCHASE AND SALE ARE RECORDED IN BOOKS OF ACCOUNT AND SUCH SHARE HOLDING IS BEING REFLECTED IN BALANCE SHEET OF A.Y. 06-07 AS INVESTMENTS, WHEN SHARE TRANSACTION IS REFLECTED IN D-MAT A/C, BANK A/C AND BROKERS BILLS, WHEN PROOF I S PRODUCED REGARDING DIRECT PURCHASE OF SUCH SHARES FROM PACE ELECTRONICS LTD. AND SHARES ARE SOLD THROUGH SSE, SUCH TRANSACTIONS ARE CLEARLY GENUINE SHARE TRANSACTIONS AND NO VALID REASON IS GIVEN BY AO TO TREAT THEM AS MANIPULATED TRANSACTIONS. NOT AN IOTA OF EVIDENCE IS GATHERED BY AO TO DISPROVE SUCH TRANSACTIONS. -: 8: - 8 4.1 WHOLE GAMUT OF ISSUES RAISED IN ASSESSMENT ORDER ARE GENERAL DISCUSSIONS WITHOUT ANY RELEVANCE TO THE FACTS OF THE CASE. THE ISSUES LIKE WHETHER P ACE ELECTRONICS LTD. IS A PENNY STOCK AND WHETHER SOME BROKERS CARTEL HAVE MANIPULATED ABNORMAL RISE IN IT S PRICES, IS AN ISSUE WHICH COMES IN JURISDICTION OF SESR AND ON SPECIFIC QUERRY BY AO TO SSE (BOMBAY STOCK EXCHANGE) U/S 133(6) ON THE ISSUE WHETHER TRADING OF THIS STOCK OF M/S. PACE ELECTRONICS LTD. OR ITS TOP FIVE BROKERS WAS SUSPENDED BETWEEN 1/4/05 T O 31/3/08, SPECIFIC REPLY OF SSE DT. 21/10/2009 WAS RECEIVED BY AO, WHICH IS ON RECORD AND WHICH SAYS THAT NONE OF THE TOP FIVE TRADING MEMBERS OF THIS STOCK WAS SUSPENDED AND TRADING OF SUCH SECURITIES WAS NOT SUSPENDED FROM 1/4/05 TO 31/3/08. BESIDES THIS, REPLY OF BSE CONTAINS RATE OF SHARE AND VOLUM E OF TRANSACTIONS IN SHARES OF PACE ELECTRONICS LTD. AND THE RATE OF SALE BY APPELLANT TALLIES WITH IT A ND ON THE DATES WHEN APPELLANT HAS SOLD SUCH SHARES, LARGE VOLUME OF SUCH SHARES WERE FOUND TRANSACTED. THAT IS A VERY SPECIFIC ANSWER OF SSE WHICH IS -: 9: - 9 ENOUGH TO SETTLE ALL SPECULATIONS BY AO REGARDING ANY MANIPULATIONS IN SUCH TRADING. NO EVIDENCE WAS ADDUCED BY AO TO SHOW THAT APPELLANT WAS IN ANY WAY INVOLVED IN CREATING ARTIFICIAL PRICE RISE IN SHARES OF THIS COMPANY. IT IS A ADMITTED FACT THAT IN THE SHARE MARKET THE PRICES OF SHARES ARE NOT DETERMINED BY BUSINESS ACTIVITIES OF COMPANIES ALON E BUT THEY ARE DETERMINED MORE BY MARKET SENTIMENTS, GLOBAL NEWS, INDIAN POLITICAL SCENARIO, DEMAND- SUPPLY MECHANISM, TIPS AND RUMOURS. A. 4.1.1 DOUBT OF AO ON EXISTENCE OF THE COMPANY M/S PACE ELECTRONICS LTD. BY HIS PERSONAL VISIT TO MUMBAI ON 9/12/2009 IS NOT MATERIAL TO THE TRANSACTION IN QUESTION, AS FIRSTLY THE TRANSACTION S TOOK PLACE BETWEEN 19/5/05 AND 4/10/2006 AND STATUS OF THAT COMPANY IN DECEMBER, 2009 HAVE NO IMPACT ON SUCH TRANSACTIONS. BESIDE THIS EVEN BSE HAS CONFIRMED TRANSACTIONS OF SHARES OF SUCH COMPANY ON BOMBAY STOCK EXCHANGE FROM 1/4/2005 TO 31/3/08 AND THAT IS SUFFICIENT TO DISPEL THE DOUBTS OF THE AO. 4.1.2 THE STATEMENT OF APPELLANT RECORDED BY AO -: 10: - 10 ALSO ESTABLISHES THE FACT OF TRANSACTIONS OF SHARES OF M/S. PACE ELECTRONICS LTD. IN A DEVELOPING COUNTRY LIKE INDIA, SHARE MARKETS ARE STILL IN THE STAGE OF DEVELOPMENT AND IN SUCH SCENARIO TRANSACTION OF SHARES BY AVERAGE INVESTOR IS NOT DONE ON THE BASIS OF SOUND FINANCIAL PRINCIPLES BUT ON THE BASIS OF T IP OFFS. HOWEVER, ONCE APPELLANT ISSUED CHEQUE OF RS.6 LAKH ON 19/5/05 TO PROCURE DD FOR PURCHASE OF 50000 SHARES OF PACE ELECTRONICS LTD. THAT IS AMPLE PROOF OF BUYING OF SUCH SHARE AND ANY SPECULATION O N LACK OF KNOWLEDGE OF APPELLANT IN SHARE TRANSACTION WILL NOT COME TO ANY RESCUE OF THE AO. 4.1.3 CONSIDERING THAT NOTHING ADVERSE IS FOUND BY AO REGARDING PURCHASE AND SALE OF SHARES AS DISCUSSED IN PRECEDING PARAGRAPHS AND AS THE SALES ARE MADE AFTER HOLDING THE SHARES FOR OVER 1 YEAR, HENCE IT IS HELD THAT SUCH INCOME OF RS.95,60,909/ - IS EARNED FROM TRANSACTION OF SHARES OF M/S. PACE ELECTRONICS LTD. AND THE SAME IS HELD TO BE INCOME FROM LONG TERM CAPITAL GAIN. RELIANCE IN THIS REGAR D IS PLACED ON THE CASES OF BAIJNATH AGARWAL (2010) -: 11: - 11 133 'IT J (AGRA)(TM ) 129 AND SMT. ARZOO ANAND (2010) 14 ITJ 604 (INDORE TRIB.). AS A RESULT GROUN D NO. 1 OF THE APPEAL IS ALLOWED. GROUND NO. 2 IS EXPLANATORY TO GROUND NO. 1 AND IT IS ALSO ALLOWED. 5. THE LD. COUNSEL FOR THE ASSESSEE HAS FILED THE WRIT TEN SUBMISSION, WHICH READS AS UNDER :- THE SALE TRANSACTIONS OF THE RESPONDENT IS NOT THRO UGH ANY OF THE TOP 5 TRADING MEMBERS AS INFORMED BY BSE TO AO, RATHER ASSESSEE HAS ENTERED INTO SALE TRANSACTI ON OF SHARES THROUGH BROKERS SANJAY C BAXI SECURITIES PVT . LTD. AND ARIHANT CAPITAL MARKET LIMITED I.E. THROUG H SEBI REGISTERED BROKERS AND MEMBER OF BOMBAY STOCK EXCHANGE. THE AO HAS NO EVIDENCE TO SHOW THAT RESPONDENT WAS IN ANY WAY INVOLVED IN CREATING THE ARTIFICIAL PRIC ES IT IS AN ADMITTED FACT THAT THE STOCK EXCHANGE IS REGULATED AND CONTROLLED BY THE SEBI, ANY KIND OF -: 12: - 12 ABNORMALITIES AND PRICE MANIPULATION OF SCRIP OR AN Y CARTEL OF BROKERS IS TAKEN CARE OF BY THE SEBI AND IS COVERED UNDER ITS JURISDICTION. IN THE INSTANT CASE OF SHARES OF PACE ELECTRONICS LTD., THERE IS NOTHING A DVERSE WITH THE SEBI WHICH GOES TO PROVE THAT THERE ARE ABNORMALITIES AND PRICE MANIPULATION OF SCRIP BY BROKERS OR ANY CARTEL OF BROKERS. IT IS AND ADMITTED FACT THAT PRICE OF SHARES ARE N OT DETERMINED BY THE BUSINESS ACTIVITIES OF THE COMPAN Y BUT ARE DETERMINED MORE BY MARKET SENTIMENTS, GLOBA L NEWS, INDIAN POLITICAL SCENARIO AND TIPS/ RUMORS . THE AO HAS ALSO DOUBTED ON THE EXISTENCE OF THE COMPANY AND VISITED PERSONALLY TO MUMBAI ON 09/12/2009. THE SUBMISSION OF RESPONDENT IS AS UNDE R : - THAT ALL THE INFORMATION REGARDING THE COMPANY WAS AVAILABLE ON THE WEBSITE OF BOMBAY STOCK EXCHANGE A S WELL AS WITH REGISTRAR OF COMPANIES (ROC) AND OTHER STATUTORY BODIES. -: 13: - 13 THE SHARES OF THE COMPANIES ARE LISTED IN BOMBAY ST OCK EXCHANGE WHICH IS A PREMIER STOCK EXCHANGE OF INDIA . THE TRANSACTIONS OF ALLOTMENT OF SHARES AND ITS SAL E THEREOF WAS CARRIED OUT BETWEEN 19/05/2005 04/10/2006. THE STATUS OF THE COMPANY IN DECEMBER 2009 HAS NO NEXUS AND MATERIALITY WITH THE AOS OBSERVATIONS THAT COMPANY IS NOT IN EXISTENCE ON BA SIS OF HIS TRIP TO MUMBAI ON 09/12/2009 AND ARE INSIGNIFICANT. BOMBAY STOCK EXCHANGE HAS CATEGORICALLY CONFIRMED TRANSACTIONS OF SHARES OF SUCH COMPANY ON BOMBAY STOCK EXCHANGE BETWEEN 01/04/2005 31/03/2008. ALL THESE FACTS STATED ABOVE GO TO DISPEL OFF THE D OUBTS OF THE AO IN REGARD TO EXISTENCE OF THE COMPANY. THE LD. AO HAS RECORDED THE STATEMENT OF ONE SHRI SHARAD KUMAR KEJRIWAL AND MRITYUNJAN KUMAR SINGH DURING THE MUMBAI VISIT BEHIND THE BACK OF THE ASSESSEE, THESE ABOVE MENTIONED PEOPLE HAS NEITHER BEEN IDENTIFIED AND NOR ANY DOCUMENT IS AVAILABLE W ITH -: 14: - 14 THE AO WHICH REVEALS THEIR IDENTITY. THE STATEMENT RECORDED AS SUCH HAS NO LEGAL VALUE, EVEN OTHERWISE RECORDED STATEMENTS DOES NOT BRING OUT ANY INFORMAT ION, OR MATERIAL OR EVIDENCE WHICH MAY BE INTERPRETED IN A MANNER THAT TRANSACTIONS OF RESPONDENT ARE BOGUS. ALSO AO NEVER SUPPLIED THE INFORMATION COLLECTED BY HIM, MUCH LESS THE STATEMENTS OF PERSONS RECORDED B Y HIM TO REBUT THE INFERENCES AND ANALYSIS DRAWN BY H IM, IT IS JUDICIAL PROPOSITION OF LAW THAT THE AO OUGHT TO CONFRONT THE MATERIAL AND EVIDENCE TO ASSESSEE ON B ASIS OF WHICH IMPUGNED ADDITIONS WERE MADE. THE RATIO OF JUDGMENT OF PUNJAB & HARYANA HIGH COURT IN CASE OF CHIRANJI LAL STEEL ROLLING MILLS V/S. CIT (1972) 84 ITR 222 ARE SQUARELY APPLICABLE TO THE FACTS OF THE CASE THE INCOME-TAX OFFICER HAS THE POWER TO COLLECT EVIDENCE FROM ANY SOURCE BUT IT IS HIS DUTY TO PUT IT TO THE ASSESSEE BEFORE MAKING IT THE BASI S OF HIS ASSESSMENT. IF THE ASSESSEE DENIES THE INFORMATION COLLECTED BY THE INCOME-TAX OFFICER, IT -: 15: - 15 IS THE DUTY OF THE INCOME-TAX OFFICER TO SATISFY HIMSELF BY MAKING INDEPENDENT ENQUIRY FROM SOURCES CONSIDERED RELIABLE BY HIM SO AS TO DECIDE WHETHER THE INFORMATION PASSED ON TO HIM IS TRUE OR NOT. IF, AS A RESULT OF HIS OWN INDEPENDENT ENQUIRY HE COMES TO THE CONCLUSION THAT THE INFORMATION RECEIVED BY HIM IS TRUE, HE IS AT LIBERTY TO ACT THEREUPON AFTER DISCLOSING IT TO THE ASSESSEE AND AFFORDING HIM A REASONABLE OPPORTUNITY OF REBUTTING IT. BUT HE HAS NO RIGHT TO BURDEN THE ASSESSEE WITH AN EXTRA AMOUNT OF TAX ON VAGUE INFORMATION GIVEN TO HIM WITHOUT HIMSELF VERIFYING ITS TRUTHFULNESS OR RELIABILITY THE HONBLE SUPREME COURT IN CASE OF STATE OF KERALA V/S. K.T. SHADULI YUSUFF (1977) 39 STC 478 HAS HELD THAT ON PROVIDING THE COPY OF STATEMENTS OR T HE REPORTS OR THE MATERIAL, THE ASSESSEE IS ENTITLED T O SEEK RIGHT OF CROSS EXAMINATION. BUT IN THE INSTANT CAS E RESPONDENT WAS NOT PROVIDED RIGHT OF CROSS EXAMINAT ION -: 16: - 16 OF THE TWO PERSONS WHOSE STATEMENT ARE RECORDED AT MUMBAI. FURTHER SUPREME COURT IN CASE OF KISHANCHAND CHELLARAM V/S. CIT (1980) 19 CTR 360 HAS HELD THAT THE EVIDENCE TO BE USED AGAINST THE ASSESSEE MUST B E PROVIDED TO THE ASSESSEE AND AN OPPORTUNITY TO CONF RONT SHOULD BE GIVEN TO AN ASSESSEE ELSE IT CANNOT BE US ED AND NO ADVERSE INFERENCE CAN BE DRAWN ON SUCH MATERIAL [ALSO REFER KERALA BLUE FACTORY V/S. SALES TAX TRIBUNAL (1987) 66 STC 292 (SC)]. NOTICE U/S. 133(6) WAS SENT TO THE COMPANY ON THE G IVEN ADDRESS WHICH WAS DULY SERVED AND WAS NOT RETURN UN - SERVED, IT GOES TO PROVE THAT THE OFFICE OF THE COM PANY WAS SITUATED AT THE ADDRESS GIVEN. THE STATEMENT OF RESPONDENT RECORDED BY THE AO ESTABLISHES THE FACT THAT ASSESSEE HAS PURCHASED TH E SHARES OF PACE ELECTRONICS LIMITED FROM THE COMPANY (QUES. NO. 14 & 28 AS ASKED AND RECORDED BY AO). TH E SHARES IN COMMON PARLANCE BY AN INVESTOR ARE -: 17: - 17 PURCHASED ON THE BASIS OF THE MERE TIPS OR INTUITIO NS AND NOT ON THE BASIS OF ANY SOUND FINANCIAL PRINCIP LE AS SUCH THE OBSERVATIONS BY THE AO IN HIS ORDER AT PG. NO. 19,20 &21 HAS NO RELEVANCY TO HELD THAT ASSESSEE HA S ENGAGED HIMSELF IN MANIPULATED TRANSACTIONS IN ORDE R TO GET BENEFIT OF SECTION 10(38) OF THE ACT. THE RESPONDENT HAS GIVEN POINT WISE REPLY ON THE AO S OBSERVATIONS IN ASSESSMENT ORDER. THE LD. AO HAS ALLEGED THAT ASSESSEE HAS BROUGHT TH E UNACCOUNTED MONEY IN HIS BOOKS OF ACCOUNTS BUT AO FAILED TO BRING ANY EVIDENCE TO SHOW THAT UNACCOUNT ED CASH WAS GIVEN TO THE BROKERS IN ORDER TO RECEIVE T HE SALE PROCEEDS BY CHEQUE. SUSPICION, STRANGE COINCIDENCES AND GRAVE DOUBTS, HOWSOEVER STRONG IT MAY BE, CANNOT TAKE PLACE OF LEGAL PROOF. RELIANCE IS PLACED ON : - A. UMA CHARAN SHAW & BROTHERS V/S.CIT (1959) 37 ITR 271. -: 18: - 18 B. M.M. MATHEW V/S. STATE OF KERALA (1978) 42 STC 348 THE LD. AO FURTHER FAILED TO SHOW THAT LARGE NUMBER OF DOCUMENTS FILED BY THE ASSESSEE LIKE BROKER NOTE, CONTRACT NOTE, COPY OF BANK ACCOUNT, COPY OF SHARES CERTIFICATE, COPY OF DEMAT ACCOUNT WERE FALSE, FABR ICATED OR FICTITIOUS. RATHER IN THE CASE OF THE ASSESSEE B ROKER AS WELL AS STOCK EXCHANGE CONFIRMED THE ENTIRE TRANSACTION. THE LD. AO HAS ALLEGED THAT ONUS WAS ON THE ASSESSE E TO PROVE THAT TRANSACTIONS OF SHARES WERE GENUINE A ND BEYOND THE CONCEPT OF COLORABLE DEVICE FOR WHICH TH E ASSESSEE FAILED TO PROVE IT. THE CIT-A HAS HELD THA T ASSESSEE HAS FILED REQUISITE EVIDENCE TO ESTABLISH THE GENUINESS OF TRANSACTION AND TRANSACTION IS GENUINE . THERE IS NO EVIDENCE ON RECORD AS REFERRED IN ASSESSMENT ORDER TO PROVE THAT ASSESSEE HAS BROUGHT THE UNACCOUNTED MONEY IN HIS BOOKS OF ACCOUNTS -: 19: - 19 THROUGH SHAM AND ILLUSIONARY TRANSACTION. THAT THE BURDEN OF PROVING A TRANSACTION IS ALWAYS ON THE PERSON ASSERTING IT TO BE BOGUS AND THIS BURDEN HAS TO BE STRICTLY DISCHARGED BY ADDUCING LEGAL EVIDENCES OF A CHARACTER WHICH WOULD EITHER DIRECTLY PROVE THE FACT OF BOGUSNESS OR ESTABLISH CIRCUMSTANCES UNERRINGLY AND REASONABLY RAISING AN INFERENCE TO THAT EFFECT. THAT THERE WAS NO EVIDENCE EXCEPT THE SALE OF SHARES FETCHED HANDSOME PRICE WHICH WERE SUPPORTED BY OFFICIAL QUOTATION ISSUED BY BOMBAY STOCK EXCHANGE, THEREFORE THERE CANNOT BE ANY REASON TO DOUBT THE GENUINESS OF TRANSACTION. THE AO HAD FAILED TO ESTABLISH HIS CASE AND TO DISCHARGE THE REQUISITE BURDEN CAST ON HIM. IN THIS CASE, THERE IS NO EVIDENCE ON RECORD AS REF ERRED IN ASSESSMENT ORDER, TO PROVE THAT THE PROCEEDS REC EIVED AGAINST SALE OF SHARES REPRESENT RESPONDENTS UNACCOUNTED MONEY. HON'BLE APEX COURT IN THE CASE OF KISHAN CHAND CHELLA RAM V. CIT REPORTED IN -: 20: - 20 125 ITR 713 HAS HELD ' THAT THE BURDEN IS ON THE DEPARTMENT TO PROVE THAT THE MONEY BELONGS TO THE ASSESSEE BY BRINGING PROPER EVIDENCE ON RECORD AND THE ASSESSEE COULD NOT BE EXCEPTED TO CALL THE CONCERNED PERSON IN EVIDENCE TO HELP THE DEPARTMENT TO DISCHARGE THE BURDEN THAT LAY UPON IT'. SIMILAR VIEW HAS BEEN EXPRESSED BY THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT V. DAYA CHAND JAIN VAIDYA 98 ITR 280. THE CASE LAW OF SUPREME COURT IN THE CASE OF MC DOWELL LTD. V/S. COMMERCIAL TAX OFFICER 154 ITR 148 IS ON AN ENTIRELY DIFFERENT FACTS AND SITUATION AND HAS NO APPLICATION TO THE PRESENT CASE. THEREIN, TH E LIABILITY OF SALES TAX WAS SOUGHT TO BE AVOIDED WIT H REFERENCE TO THE INVOICING BY THE MANUFACTURER OF L IQUOR TO THE BUYERS, WHO THEMSELVES MADE THE PAYMENT OF EXCISE DUTY, THOUGH THE SAME WAS PAYABLE BY THE MANUFACTURER. THE HON'BLE SUPREME COURT AFFIRMED TH E ORDER OF THE HIGH COURT HEREIN IT WAS HELD THAT EXC ISE DUTY, WHICH WAS PAYABLE BY THE RESPONDENT BUT HAD -: 21: - 21 BEEN PAID BY THE BUYERS UNDER AN AMICABLE ARRANGEMENT, WAS ACTUALLY A PART OF TURNOVER OF THE RESPONDENT AND WAS, THEREFORE, LIABLE TO BE INCLUDE D FOR DETERMINING THE RESPONDENT'S LIABILITY FOR SALES TA X UNDER THE A.P. GENERAL SALES TAX ACT, 1957. IN THE PRESENT CASE, AS NOTICED, THE FACTS AND SITUATION REMAINS ENTIRELY DIFFERENT AND THE QUESTION IS ABOU T THE GENUINENESS OF THE TRANSACTIONS WHICH HAVE BEEN ACCEPTED BY THE CIT-APPEALS AFTER EXAMINING THE REC ORD AND ON RELEVANT CONSIDERATIONS. DURGA PRASHAD MORE 82 ITR 540 (SC) AND SUMATI DAYAL V/S. CIT 214 ITR 801 (SC) THE JUDGMENT OF THE SUPREME COURT IS ON DIFFERENT ISSUE AND IN DIFFEREN T CONTEXT WHICH DOES NOT EXIST IN RESPONDENT CASE AND AS SUCH SAID IS NOT APPLICABLE AT ALL ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. IN VIEW OF THE ABOVE SUBMISSION AND AN ADMITTED FA CT ASSESSEE HAS PURCHASED SHARES FROM COMPANY AND SOLD AFTER HOLDING THE SHARES OVER 1 YEAR; THE AO HAS AL SO NOT DISPUTED THIS FACT. SECURITY TRANSACTION TAX HA S -: 22: - 22 BEEN DULY PAID AS APPEARING FROM THE CONTRACT NOTE. THE LD. CIT (A) ON EXAMINING THE MATERIAL AND WRITTEN SUBMISSION GIVEN AT THE TIME OF HEARING HAS RIGHTL Y HELD THAT INCOME EARNED ON SALE OF SHARES AMOUNTING TO R S. 95,60,909/- IS TO BE ASSESSED AS LONG TERM CAPITAL GAINS IN THE HANDS OF THE ASSESSEE AND IS EXEMPT U/ S. 10(38) AS ASSESSEE HAS FULFILLED ALL THE CONDITIONS MENTIONED IN THE SECTION. IN VIEW OF THE ABOVE STATED FACTS AND THE CIRCUMSTA NCES OF THE FACTS IT IS VERY HUMBLY PRAYED THAT THE ORDER O F THE LD. CIT (A) BE KINDLY BE CONFIRMED AND SUSTAINED ON THE ISSUE RAISED BY THE AO IN THIS APPEAL. 6. THE LD. SENIOR D.R. COULD NOT BRING ANYTHING CONTRA RY TO THE FINDING OF THE LD. CIT(A) AND RELIED UPON TH E ORDER OF THE AO. 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PAR TIES AND HAVE PERUSED THE MATERIAL PLACED BEFORE US. THE ASSESSEE HAS ENTERED INTO SALE TRANSACTION THROUGH SHRI SANJ AY C. BAXI AND ARIHANT CAPITAL MARKETS BAXI THROUGH SEBI , REG ISTERED -: 23: - 23 BROKER AND MEMBERS OF STOCK EXCHANGE. IT IS AN ADMI TTED FACT THAT STOCK EXCHANGE IS REGULATED AND CONTROLLED BY SEBI IN THE CASE OF PACE ELECTRONICS AND NOTHING IS ADVERSE WITH SEBI, WHICH PROVES THAT THERE ARE ABNORMALITIES AND PRICE MANIPULATION OF SCRIP BY THE BROKER. THE SHARES ARE DETERMINED BY BUSINESS ACTIVITIES OF THE COMPANY. A LL THE INFORMATION REGARDING COMPANY WAS AVAILABLE ON THE WEB SITE OF BOMBAY STOCK EXCHANGE AS WELL AS REGISTRAR OF CO MPANIES. THE SHARES OF THE COMPANIES ARE LISTED IN BOMBAY ST OCK EXCHANGE, WHICH IS A PREMIER STOCK EXCHANGE OF INDI A. THE BOMBAY STOCK EXCHANGE HAS CATEGORICALLY CONFIRMED T HE TRANSACTION OF SHARES OF SUCH COMPANY OF BOMBAY STO CK EXCHANGE. THE AO HAS TRIED TO VERIFY THE IMPUGNED C OMPANY, BUT THE AO HAS NOT GIVEN ANY NOTICE TO THE ASSESSEE . THE COMPANY WAS IN EXISTENCE, BUT THE COMPANY WAS CLOSE D. THE AO HAS FAILED TO BRING ON RECORD WHETHER THE ASSESS EE IS INVOLVED IN BOGUS SHARE TRADING OR NOT. THE LD. CIT (A) HAS VERIFIED AND AFTER VERIFICATION, THE LD. CIT(A) HAS ALLOWED THE CLAIM. THEREFORE, OUR INTERFERENCE IS NOT CALLED FO R. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. -: 24: - 24 I.T.A.NO. 66/IND/2013 ASSESSEES APPEAL : 9. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL :- 1. THAT ON THE FACTS, IN LAW & IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN ENHANCING ASSESSMENT IN THE FOLLOWING MANNER:- A). RS. 19,560/- BY INVOKING THE PROVISIONS OF SECTION 14A BEING INTEREST EXPENDITURE ALLEGED TO HAVE BEEN INCURRED IN RELATION TO DIVIDEND INCOME NOT INCLUDIBLE IN TOTAL INCOME. B). RS.1,80,000/- BY ESTIMATING EXPENSES TOWARDS ELECTRICITY BILLS & PROPERTY TAX BEING ALLEGED UNEXPLAINED EXPENDITURE. C). RS. 1,63,000/- BY ESTIMATING THE EXPENSES ON FOOD, VEGETABLES, CLOTHING, MEDICINE, ELECTRONIC GADGETS, FURNITURE AND FIXTURES, AIR TRAVEL. HOTEL, SERVANTS , CAR MAINTENANCE PETROL/DIESEL ETC. @ RS. 60,000/- P.M. ON ACCOUNT OF ALLEGED LOW HOUSEHOLD -: 25: - 25 WITHDRAWALS. 2. THAT THE ISSUANCE OF NOTICE BY CIT(A) U/S 251(1) READ WITH 251(2) IS ARBITRARY, UNCALLED-FOR, BAD-IN - LAW & ILLEGAL UNDER THE FACTS & IN LAW. FURTHER NO OPPORTUNITY OF SHOWING CAUSE AGAINST SUCH ENHANCEMENT HAS BEEN OFFERED BY THE LD. CIT(A) AND AS SUCH THE ENHANCEMENT OF ASSESSMENT IS BAD IN LAW. 3. THAT THE ENHANCEMENT OF ASSESSMENT AS MADE BY THE LD. CIT(A) IS PURELY BASED ON SURMISES & CONJUNCTURE. THERE IS NO MATERIAL & IOTA OF EVIDENCE WITH THE LD. CIT(A) TO HOLD & CONCLUDE THAT THE INTEREST EXPENDITURE HAS BEEN INCURRED IN RELATION TO DIVIDEND INCOME, EXPENSE TOWARDS ELECTRICITY BILLS & PROPERTY TAX AS ESTIMATED IS UNEXPLAINED EXPENDITURE AND THE HOUSEHOLD WITHDRAWALS ARE LOW. THE ENHANCEMENT OF ASSESSMENT IS NOT ONLY ARBITRARY BU. UNWARRANTED ON FACTS & IN LAW. 4. THAT THE INITIATION OF PENALTY PROCEEDINGS U/S -: 26: - 26 271(1)(C) IS ARBITRARY UNCALLED-FOR, BAD-IN-LAW. 10. THE ASSESSEE IN HIS APPEAL HAS TAKEN THE GROUND REGARDING ISSUANCE OF NOTICE BY CIT(A) U/S 251(1) R EAD WITH SECTION 251(2) IS BAD IN LAW AND ILLEGAL. 11. THE SHORT FACTS OF THE CASE ARE THAT THE LD. CI T(A) WHILE ENHANCING THE INCOME OF RS. 10,560/-, RS. 1,18,000/ - AND RS. 1,63,000/- ON ACCOUNT OF DISALLOWANCE U/S 14A, ADDI TION ON ACCOUNT OF PROPERTY TAX AND ADDITION ON ACCOUNT OF HOUSE HOLD EXPENSES. THE LD. CIT(A) U/S 254 BEING A QUASI-JUDI CIAL POWER CAN EXERCISE IF THE FACTS AND CIRCUMSTANCES JUSTIFY AND INQUIRY HAS BEEN MADE ON SOME MATERIAL ON RECORD. THEREFORE , WITHOUT GIVING THE NOTICE, THE LD. CIT(A) HAS ENHANCED THE INCOME. 12. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. WE FIND FROM THE ORDER OF LD. CIT(A) THAT THE LD. C IT(A) HAS NOT GIVEN PROPER OPPORTUNITY OF HEARING BEFORE ENHANCEM ENT OF INCOME OF RS. 19,560/- ON ACCOUNT OF DISALLOWANCE U /S 14A, DISALLOWANCE OF HOUSE HOLD EXPENSES OF RS. 1.80 LAK HS AND ADDITION ON ACCOUNT OF PROPERTY TAX OF RS. 1,62,000 /-. WE, THEREFORE, REVERSE THE FINDING OF THE LD. CIT(A) AN D RESTORE THIS -: 27: - 27 ISSUE BACK TO THE FILE OF THE LD. CIT(A) AND LD. CI T(A) IS DIRECTED TO GIVE REASONABLE OPPORTUNITY OF HEARING TO THE AS SESSEE BEFORE PASSING THE ORDER. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. 14. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMISSED AND THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR ST ATISTICAL PURPOSES. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 12 TH SEPTEMBER, 2015. SD/- (B. C. MEENA) ACCOUNTANT MEMBER SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 12 TH SEPTEMBER, 2015. CPU* 4 -: 28: - 28