Shri Ramchand U Panjabi, Pune V. ACIT, Cent. Cir.2(1), Pune

ITA 669/PUN/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9868 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2002-2003
• Appeal Filed On: 18-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA; V ANANDARAJAN
• Keywords: Unexplained cash credit; Capital asset; Business income; Income from undisclosed sources; Search and seizure; Share purchase agreement; Opportunity of being heard; Principle of natural justice; Additional evidence; Question of law; Corroborative evidences; Accommodation entries; Block assessment; Retraction; Sham transactions; Penny stocks
• Section: 133A; 153A; 68

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER SL. NO. ITA NO. A.Y. NAME OF THE APPELLANT RESPONDENT 1 ITA NO. 659/PN/2011 2002-03 SRI MOTI UDHARAM PANJ ABI, MARBLE ARCH COOPERATIVE HOUSING SOCIETY, FLAT NO. 23/24, 6 TH FLOOR, GANESHKHIND ROAD, AUNDH, PUNE PAN NO.AARPP 2118D ACIT, CENTRAL CIRCLE 2(1), PUNE 2 ITA NO. 651/PN/2011 2002-03 SRI JEETENDRA PANJABI , A-1, GREEN PARK, OPP. DR. BECK & CO., NEHRUNAGAR, PIMPRI, PUNE, PAN NO. AHUPP 3805H ACIT, CENTRAL CIRCLE 2(1), PUNE 3 ITA NO. 652/PN/2011 2003-04 SRI JEETENDRA PANJABI -DO- 4 ITA NO. 653/PN/2011 2005-06 SRI JEETENDRA PANJABI -DO- 5 ITA NO.654/PN/2011 2002-03 SMT. KAUSHALYA SUNDER PANJABI, ASHIYANA PARK-11, AUNDH, PUNE 411 017. PAN NO. AHLPP 3774A ACIT, CENTRAL CIRCLE 2(1), PUNE 6 ITA NO.655/PN/2011 2003-04 SMT. KAUSHALYA SUNDER PANJABI -DO- 7 ITA NO.656/PN/2011 2002-03 MRS. JAIWANTI RAMCHAND PANJABI, 311, SINDH HOUSING SOCIETY, AUNDH, PUNE 411 017. PAN NO. AFQPP 5842J ACIT, CENTRAL CIRCLE 2(1), PUNE 8 ITA NO.657/PN/2011 2003-04 MRS. JAIWANTI RAMCHAND PANJABI -DO- 9 ITA NO.662/PN/2011 2002-03 SRI GOVIND UDHARAM PAN JABI, MARBLE ARCH COOPERATIVE HOUSING SOCIETY, FLAT NO. 23/24, 6 TH FLOOR, GANESHKHIND ROAD, AUNDH, PUNE. PAN NO. AARPP 2117N ACIT, CENTRAL CIRCLE 2(1), PUNE 10 ITA NO.663/PN/2011 2003-04 SRI GOVIND UDHARAM PA NJABI -DO- 11 ITA NO.665/PN/2011 2003-04 SRI SUNDERDAS UDHARAM PANJABI, MARBLE ARCH COOPERATIVE HOUSING SOCIETY, FLAT NO. 21, 6 TH FLOOR, GANESHKHIND ROAD, AUNDH, PUNE 411 018, PAN NO. AAZPP 3797N ACIT, CENTRAL CIRCLE 2(1), PUNE 12 ITA NO.675/PN/2011 SRI SUNDERDAS UDHARAM PANJAB I -DO- 13 ITA NO.666/PN/2011 2003-04 SRI NARESH RAM PANJAB I, A-1, GREEN PAR OPP: DR. BECK & CO.,NEHRU NAGAR, PIMPRI, PUNE 411 008 PAN NO. AHHTP 4310L ACIT, CENTRAL CIRCLE 2(1), PUNE 14 ITA NO.667/PN/2011 2005-06 SRI NARESH RAM PANJAB I -DO- 15 ITA NO.669/PN/2011 2002-03 SRI RAMCHAND UDHARAM PANJABI, MARBLE ARCH COOPERATIVE HOUSING SOCIETY, FLAT NO. 23/24, 6 TH FLOOR, GANESHKHIND ROAD, AUNDH, PUNE PAN NO. AARPP 2116P ACIT, CENTRAL CIRCLE 2(1), PUNE 16 ITA NO.670/PN/2011 2003-04 SRI RAMCHAND UDHARAM PANJABI -DO- 17 ITA NO.672/PN/2011 2002-03 SRI RAJKUMAR RAM PANJ ABI, 6, MAHARASHTRA COMMERCIAL HOUSE, PIMPRI, PUNE. PAN NO. ABKPP 6644A ACIT, CENTRAL CIRCLE 2(1), PUNE 18 ITA NO.673/PN/2011 2003-04 SRI RAJKUMAR RAM PANJ ABI -DO- 19 ITA NO.674/PN/2011 2005-06 SRI RAJKUMAR RAM PANJ ABI -DO- 2 20 ITA NO.676/PN/2011 2002-03 SMT. RADHA MOTI PANJA BI, C/O. JAYNA ENTERPRISES, A-61, H-BLOCK, MIDC, PIMPRI, PUNE 411 018 PAN NO. ADDPP 6246M ACIT, CENTRAL CIRCLE 2(1), PUNE 21 ITA NO.677/PN/2011 2003-04 SMT. RADHA MOTI PANJA BI -DO- 22 ITA NO.678/PN/2011 2002-03 MRS. USHA GOVIND PANJ ABI, MARBLE ARCH COOPERATIVE HOUSING SOCIETY, FLAT NO. 21, 6 TH FLOOR, GANESHKHIND ROAD, AUNDH, PUNE 411 018 PAN NO. ABKPP 6646C ACIT, CENTRAL CIRCLE 2(1), PUNE 23 ITA NO.679/PN/2011 2003-04 MRS. USHA GOVIND PANJ ABI -DO- 24 ITA NO.644/PN/2011 2003-04 JAYNA ENTERPRISES PVT . LTD. 6, MAHARASTRA COMMERCIAL HOUSE, PIMPRI, PUNE-18 PAN NO. AAACJ 4653K ACIT, CENTRAL CIRCLE 2(1), PUNE 25 ITA NO.723/PN/2011 2002-03 SRI NARESH RAM PANJAB I, A-1, GREEN PAR, OPP.DR. BECK & CO., NEHRUNAGAR, PIMPRI, PUNE 411 018. PAN NO. AHHTP 4310L ACIT, CENTRAL CIRCLE 2(1), PUNE ASSESSEE BY : SRI NEELESH KHANDELWAL DEPARTMENT BY : SRI V. ANANDARAJAN, CIT & MS. AN N KAPTHUAMA DATE OF HEARING : 11 -10-2012 DATE OF PRONOUNCEMENT : 31-10-2012 ORDER PER R.K. PANDA, AM : ALL THE ABOVE APPEALS FIELD BY THE RESPECTIVE ASSES SEES ARE DIRECTED AGAINST THE SEPARATE ORDERS OF THE LEARNED CIT(A), CENTRAL, PUNE. SINCE IDENTICAL GROUNDS HAVE BEEN TAKEN BY THE RESPECTIVE ASSESSEES IN ALL THESE APPEALS, THEREFORE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY TH IS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.659/PN/2011 (MOTI UDHARAM PANJABI) (A.Y. 200 2-03) : 2. FACTS OF THE CASE, IN BRIEF, ARE THAT A SEARCH A ND SEIZURE OPERATION WAS CONDUCTED IN THE ASSESSEES GROUP OF CASES ON 17-03 -2006. THE NAME OF THE ASSESSEE WAS IN THE WARRANT OF AUTHORISATION U/S.13 2 DATED 14-03-2006. AFTER THE CENTRALISATION OF THE CASE, NOTICE U/S.153A WAS ISS UED AND SERVED ON THE ASSESSEE. IN RESPONSE TO THE SAME IT WAS STATED BY THE ASSES SEE THAT THE RETURNS FILED EARLIER MAY BE TREATED AS RETURNS FILED IN RESPONSE TO NOTI CE U/S.153A. THE AO ISSUED 3 STATUTORY NOTICE U/S.143(2)/147 TO THE ASSESSEE AND THE ASSESSEE FILED THE DETAILS FROM TIME TO TIME. AFTER EXAMINING THE EVIDENCES C ONTAINED IN THE SEIZED MATERIALS AND ON THE BASIS OF SUBMISSIONS FILED FROM TIME TO TIME THE AO OBSERVED THAT THE ASSESSEE GROUP CLAIMED LONG TERM CAPITAL GAINS ON A CCOUNT OF PURCHASES AND SALE OF SHARES OF SILICON VALLEY TECHNOLOGIES LTD., DATABAS E FINANCE LTD. MEDIA MATRIX LTD, BAFFIN ENGINEERING PROJECT LTD., AND HAVEMORE FINANCE LTD. THE AO NOTED THAT SRI MOTI UDHARAM PANJABI IS THE KEY PERSON WHO TAKES ALL INVESTMENT RELATED AND FINANCIAL DECISIONS IN RESPECT OF HIMSELF AND A LL THE FAMILY MEMBERS. IN RESPONSE TO QUERY RAISED BY THE AO IT WAS SUBMITTED BY SRI MOTI UDHARAM PANJABI THAT HE INVESTS FOR HIMSELF AND FOR ALL THE FAMILY MEMBERS AND THAT THE ACTIONS TAKEN BY HIM ARE WITHIN THE KNOWLEDGE AND CONSENT OF RESP ECTIVE FAMILY CONCERNS AND PERSONS. THE AO THEREFORE CAME TO THE CONCLUSION T HAT THE STATEMENT MADE BY SRI MOTI UDHARAM PANJABI IS BINDING ON ALL OTHER FAMILY MEMBERS WHICH HAS ALSO BEEN CONFIRMED BY VARIOUS FAMILY MEMBERS ON VARIOUS OCCA SIONS AND IN THE STATEMENT RECORDED ON OATH FROM THEM. 3. THE AO NOTED THAT DURING THE COURSE OF SEARCH OP ERATIONS CERTAIN EVIDENCES WERE SEIZED/IMPOUNDED WHICH GO TO SHOW THAT THE LON G TERM CAPITAL GAINS BOOKED FOR VARIOUS ASST. YEARS ARE NOT GENUINE AND THE SAM E ARE BASED ON FICTITIOUS DOCUMENTS CREATED. EVIDENCES GATHERED FROM STOCK E XCHANGES AND BROKERS ARE ALSO IN LINE WITH THE EVIDENCES EMANATING FROM THE MATER IAL SEIZED/IMPOUNDED. SINCE THE ASSESSEE GROUP AS A WHOLE HAS SYSTEMATICALLY CR EATED DOCUMENTS/CORRESPONDENCES IN ORDER TO GIVE COLOUR O F GENUINE LONG TERM CAPITAL GAINS TO OTHERWISE FAKE TRANSACTIONS INVOLVING PURC HASE AND SALE OF VARIOUS SHARES, AND SINCE THE EVIDENCES FOUND ARE INTER RELATED AND THROW LIGHT ON THE MODUS OPERANDI ADOPTED, THE AO COVERING THE OVERALL SCHEM E OF THINGS DISCUSSED THOROUGHLY THE MODUS OPERANDI ADOPTED BY THE ASSESS EE FOR PURCHASE AND SALE OF 4 THE SHARES AND CAME TO THE CONCLUSION THAT THE ASSE SSEE HAS SHOWN LONG TERM CAPITAL GAIN WHICH IS BENEFICIAL TO HIM SINCE THERE WAS NI L TAX OR TAX @10% ON LONG TERM CAPITAL GAIN. 4. THE AO NOTED THAT THE ASSESSEE HAS PURCHASED 150 00 SHARES OF SILICON VALLEY TECHNOLOGIES LTD. @ RS.58.65 PER SHARE AND S OLD THESE @ RS.330/- PER SHARE. THE SHARES HAVE BEEN PURCHASED FROM BARKHA INVESTMENTS WHICH WAS LOCATED AT PATNA. THE ASSESSEE COULD NOT GIVE ANY REASONS FOR PURCHASING SHARES AT PATNA WHICH HAS MAGADH STOCK EXCHANGE AND WHERE TH E ASSESSEE HAD NO LINKS. SRIMOTI U. PANJABI COULD NOT PROVIDE ANY DETAILS RE GARDING CONTACT PERSONS IN M/S.BARKHA INVESTMENTS THROUGH WHOM THE TRANSACTION WAS DONE OR HOW CONTACT WITH THE BROKER WAS ESTABLISHED. ENQUIRIES REVEALE D THAT NO TRADING TOOK PLACE AT THE MAGADH STOCK EXCHANGE PATNA (THROUGH WHICH SALE OF SHARES IS CLAIMED TO HAVE BEEN MADE) AFTER 17-02-2004 AS IT WAS SUSPENDE D BY SEBI VIDE A NOTIFICATION ISSUED ON THAT DAY. AS SUCH IT WAS NOT EVEN A RECO GNISED STOCK EXCHANGE AS REQUIRED FOR CLAIMING EXEMPTION U/S.10(38). THE AO NOTED THAT SHARES ARE CLAIMED TO HAVE BEEN SOLD @ RS.330/- PER SHARE WHEREAS SHAR ES OF THE COMPANY WERE TRADING AT AN AVERAGE RATE OF RS.87/- PER SHARE ON BSE/NSE. MOREOVER, TRADING IN THE SHARE WAS VERY THIN, INDICATING LOW DEMAND FOR THE SHARE (ONLY 110 SHARES TRADED ON THE DATE WHEN THE ASSESSEE CLAIMS TO HAVE MADE THE SALE). WHEN CONFRONTED WITH THESE FACTS, THE ASSESSEE CHANGED H IS STAND AND CAME OUT WITH THE STORY THAT THE SALE WAS OFF-MARKET. THE AO NOTED THAT M/S. SILICON VALLEY TECHNOLOGY LTD. FITS THE PROFILE OF A TYPICAL PENN Y STOCK. THE COMPANY HAD NO STANDING IN THE MARKET. 5. SIMILARLY IN THE CASE OF DATABASE FINANCE LTD. H E OBSERVED THAT THE SHARES WERE PURCHASED @ 10.10 TO 12.10 PER SHARE FROM DHYA N STOCK BROKING PVT. LTD./MOHIT SECURITIES. HE OBSERVED THAT THE SHARES HAVE BEEN PURCHASED IN CASH 5 AND SHARES WERE TRANSFERRED ON 06-05-2002, 10-05-20 02, 03-07-2002 AND 05-07- 2002 TO D-MAT ACCOUNT JUST DEW DAYS BEFORE THE SALE . HE NOTED THAT M/S. DHYAN STOCK BROKING PVT. LTD. THROUGH THEIR LETTER DATED 17 TH MARCH, 2006 CONFIRMED THAT NEITHER THEY NOR THEIR SUB BROKER M/S. MOHIT SECURI TIES HAVE TRADED IN THE SHARES OF M/S. DATABASE FINANCE LTD. DURING FY 2001-02 & 2002 -03. HE NOTED THAT IN THE CASE OF SOME OF THE FAMILY MEMBERS THE SHARES WERE SOLD PRIOR TO THE DEMATERIALISATION. THE AO NOTED THAT DURING THE SU RVEY ACTION AT M/S. RAMA BUILDERS AND DEVELOPERS THE STATEMENT OF THE ASSESS EE WAS RECORDED WHEREIN HE HAD OFFERED INCOME OF RS.1,57,31,579/- BEING INCOME EARNED FROM TRANSACTIONS IN DATABASE FINANCIAL SHARES AS ADDITIONAL INCOME IN T HE HANDS OF RESPECTIVE FAMILY MEMBERS. HOWEVER, THE ASSESSEE HAS NOT DECLARED AN Y SUCH INCOME WHILE FILING THE RETURN OF INCOME. THE AO NOTED THAT THE CASE O F THE ASSESSEE FALLS WITHIN THE CATEGORY OF DENIAL OF DECLARATION MADE EARLIER AND IS NOT A CASE OF RETRACTION. THE AO ACCORDINGLY DISBELIEVED THE LONG TERM CAPITAL GA IN ON ACCOUNT OF SALE OF SHARES OF DATABASE FINANCE LTD. 6. IN THE CASE OF HAVEMORE CO. LTD. THE AO NOTED TH AT SHARES OF THIS COMPANY HAVE BEEN PURCHASED FROM VIJAY BHAGWANDAS CO. HE OBSERVED THAT FLOPPIES AND CDS SEIZED DURING SEARCH ON THE PANJABI GROUP PROVI DED CLEAR EVIDENCE OF FABRICATION OF RECORDS TO GIVE THE COLOUR OF GENUIN ENESS TO THE TRANSACTION IN RESPECT OF THESE SHARES. THE BROKER THROUGH WHOM PURCHASE IS CLAIMED TO HAVE BEEN MADE NAMELY, M/S. VIJAY BHAGWANDAS & CO. WAS DECLARED A DEFAULTER AND WAS BANNED FROM DOING ANY SHARE TRANSACTION AT BSE. AS IN OTH ER CASES, DISTINCTIVE NUMBERS, SHARE CERTIFICATE NUMBERS OF THE SHARES PURCHASED, DATE OF TAKING DELIVERY, ETC. WERE NOT PROVIDED BY THE ASSESSEE AND NO CORRELATION BET WEEN SHARES CLAIMED TO HAVE BEEN PURCHASED AND SOLD COULD BE ESTABLISHED BY THE ASSESSEE. M/S. HAVEMORE 6 FINANCE LTD. FITS THE PROFILE OF A TYPICAL PENNY S TOCK. IT HAS NO STANDING IN THE MARKET. THE AO ACCORDINGLY DISBELIEVED THE TRANSAC TIONS AS GENUINE. 7. IN THE CASE OF MEDIA MATRIX LTD. THE AO NOTED TH AT THE ASSESSEE GROUP HAS PURCHASED 9600 SHARES OF MEDIA MATRIX LTD. FROM MOH IT SECURITIES IN JULY 2001 @ RS.59.11 TO RS.60.51 PER SHARE. THESE SHARES HAV E BEEN STEADILY SOLD @ 47.50 TO 57.50 PER SHARE AFTER ONE SHARE HAS BEEN SPLIT I NTO TEN SHARES. HE OBSERVED FROM THE BROKERS NOTE PRODUCED BY THE ASSESSEE THAT TRA NSACTION HAS BEEN ENTERED THROUGH NATIONAL STOCK EXCHANGE. HOWEVER, NO PROOF OF PURCHASE OF SHARES WAS GIVEN. THE ASSESSEE PRODUCED LEDGER OF SUBHA FINAN CIAL SERVICES PVT. LTD. ACCORDING TO WHICH THE ENTIRE PAYMENT WAS MADE BY C ASH AND PHYSICAL DELIVERY WAS TAKEN. HE OBSERVED THAT THE SHARES WERE SOLD TH ROUGH DHYAN STOCK BROKING PVT. LTD. AND MOHIT SECURITIES WHO HAVE CATEGORICALLY ST ATED THAT THEY HAVE NOT DONE ANY PURCHASE AND SALE VIDE THEIR LETTER DATED 17-03 -2006. 8. SIMILARLY HE NOTED THAT THE ASSESSEE GROUP HAS P URCHASED SHARES OF BAFFIN ENGINEERING PVT. LTD. THROUGH SUBHA FINANCIAL SERVI CE PVT. LTD. @ RS.14.05 TO RS.15.05 PER SHARE. THIS TRANSACTION WAS ENTERED ON NATIONAL STOCK EXCHANGE THROUGH BROKER SUBHA FINANCIAL SERVICE PVT. LTD AN D THIS WAS CONFIRMED BY THE ASSESSEE IN RESPONSE TO THE QUERY NO.105 AND 106. HOWEVER, THE ASSESSEE WAS UNABLE TO TELL THE NAMES OF THE FAMILY MEMBERS WHO WERE REGISTERED WITH THE BROKER. THE SHARES WERE STEADILY PURCHASED ONLINE AS STATED IN RESPONSE TO QUESTION NO.103. THE AO OBSERVED THAT THE ASSESSEE AT FIRST CLAIMED THAT THE SHARES WERE SOLD THROUGH THE STOCK EXCHANGE. HOWEV ER, NSE VIDE LETTER DATED 07- 11-2007 SQUARELY DENIED THAT M/S. SUBHA FINANCIAL P VT. LTD. WAS AFFILIATED TO THEM. LETTER FROM NSE ALSO MENTIONED THAT NO SCRIP IN THE NAME OF M/S. BAFIN ENGINEERING PROJECTS LTD. WAS LISTED ON THAT STOCK EXCHANGE. THE ASSESSEE THEREAFTER CHANGED HIS STAND AND CLAIMED THAT THE S HARES WERE SOLD THROUGH 7 M/S.MOHIT SECURITIES BY MEANS OF AN OFF-LINE TRANSA CTION. SINCE THE TRANSACTION (IF ANY) WAS OFF-MARKET, THE AO WAS OF THE OPINION THAT EXEMPTION UNDER SECTION 10(38) IS NOT AVAILABLE. THE SHARES WERE CLAIMED T O HAVE BEEN SOLD AT RS.212.65 TO RS.280.50 WHEREAS, AT THE STOCK EXCHANGE, THEY WERE TRADING FOR RS.18.82 TO RS.19.02 ON THAT DAY. THEREFORE THE AO CONCLUDED T HAT THE ASSESSEE WAS NOT ABLE TO PROVE THE GENUINENESS EITHER OF PURCHASE OR SALE IN THIS CASE. HE NOTED THAT M/S. BAFFIN ENGINEERING PROJECTS LTD. FITS THE PROF ILE OF A TYPICAL PENNY STOCK AND IT HAD NO STANDING IN THE MARKET. THE AO ACCORDING LY DISBELIEVED THE TRANSACTION. 9. THE AO WROTE LETTERS TO VARIOUS BROKERS AND THE STOCK EXCHANGES. FROM THE REPLY RECEIVED FROM THOSE BROKERS AS WELL AS STOCK EXCHANGES HE OBSERVED THAT THERE COULD NOT HAVE BEEN ANY PURCHASE OF SHARES FR OM SUBHA FINANCIAL SERVICE PVT. LTD. BECAUSE IT IS NOT REGISTERED WITH THE ST OCK EXCHANGE. SIMILARLY BAFFIN ENGINEERING PVT. LTD. AND BAFNA ENGINEERING PROJECT S LTD. ARE NOT LISTED IN THE NATIONAL STOCK EXCHANGE, THEREFORE, THE PURCHASES A RE BOGUS. AS FAR AS MOHIT SECURITIES IS CONCERNED THE AO NOTED THAT THE MODUS OPERANDI IS SAME AS IN THE CASE OF DATABASE FINANCE LTD. 10. FROM THE VARIOUS EVIDENCES GATHERED BY THE AO I NCLUDING THE SEIZED MATERIAL, STATEMENT OF BROKERS DENYING THE TRANSACT IONS, REPLY RECEIVED FROM MAGADH STOCK EXCHANGE, BOMBAY STOCK EXCHANGE AND NA TIONAL STOCK EXCHANGE HE CAME TO THE CONCLUSION THAT THE ASSESSEE GROUP BOOK ED BOGUS LONG TERM CAPITAL GAINS AND INTRODUCED UNACCOUNTED INCOME INTO THE BO OKS/BANK ACCOUNTS IN THE GUISE OF LONG TERM CAPITAL GAINS. FURTHER THE ASSE SSEE GROUP HAD ADMITTED ADDITIONAL INCOME AT THE TIME OF SEARCH AND THE SAM E WAS IN LINE WITH THE EVIDENCES WHICH GO AGAINST THE CASE OF THE ASSESSEE. THE SUB SEQUENT DENIAL/RETRACTION ACCORDING TO THE AO WAS NOT SUBSTANTIATED BY ANY CO RROBORATIVE EVIDENCE AND REASONABLE EXPLANATION. IN VIEW OF THE ABOVE HE HE LD THAT THE TRANSACTIONS 8 INVOLVING PURCHASE AND SALE OF SHARES ARE SHAM AND THE LONG TERM CAPITAL GAINS REFLECTED IN THE RETURNS ARE NOT GENUINE. HE THERE FORE WAS OF THE OPINION THAT THE ENTIRE SALE PROCEEDS RECEIVED ON ACCOUNT OF SAID SA LE TRANSACTIONS HAS TO BE TREATED AS UNDISCLOSED INCOME. HE FURTHER OBSERVED THAT TH E EVIDENCES GATHERED CLEARLY SHOW THAT THE BOGUS CONTRACT NOTES/BILLS WERE ISSUE D BY THE BROKERS AND THE ACCOMMODATION ENTRIES PROVIDED FOR THE PURPOSE OF B ENEFITTING THE ASSESSEE BY BOOKING LONG TERM CAPITAL GAINS. THIS ACCORDING TO THE AO OBVIOUSLY COMES AT A PRICE TO THE ASSESSEE AND NO BROKER IN THE MARKET W OULD DO SUCH A THING BY ALSO RISKING THE LICENCE FREE OF COST. ACCORDING TO THE AO, THE MARKET RATE FOR THE ACCOMMODATION IS 6% OF THE SALE PROCEEDS RECEIVED T OWARDS THE COST OF ACCOMMODATION ENTRIES/BOGUS DOCUMENTS. HE OBSERVED THAT FOR THE IMPUGNED ASSESSMENT YEAR THE ASSESSEE HAD SHOWN THE LONG TER M CAPITAL GAIN OF RS.40,08,011/- WHEREAS THE SALE PROCEEDS CREDITED I N THE BOOKS/BANK ACCOUNTS AMOUNT TO RS.43,24,036/-. HE THEREFORE MADE ADDITI ON OF RS.43,24,036/- AS UNDISCLOSED INCOME AND MADE FURTHER ADDITION OF RS. 2,59,442/- BEING COMMISSION @6%. ACCORDINGLY, THE AO MADE ADDITION OF RS. 45,8 3,478/- ON ACCOUNT OF FICTITIOUS SALE OF SHARES AND FICTITIOUS CAPITAL GA IN INCLUDING BROKERAGE AND COMMISSION @6% THEREON. 11. IN APPEAL THE ASSESSEE STRONGLY CHALLENGED THE ORDER OF THE CIT(A). IT WAS SUBMITTED THAT THE AO RELIED ON IRRELEVANT INFORMAT IONS WHILE FINALISING THE ISSUE OF CAPITAL GAINS. IT WAS SUBMITTED THAT THE ASSESSEE HAD RECEIVED PHYSICAL DELIVERY OF SHARES, SHARES WERE DEMATERIALISED AND THEY WERE AC TUALLY TRANSFERRED FROM THE ACCOUNT OF THE ASSESSEE TO THE ACCOUNT OF THE BROKE R. THE COMPANIES ISSUED LETTERS TO THE ASSESSEE CONFIRMING THE OWNERSHIP OF THE SHA RES WHICH WERE FOUND BY THE DEPARTMENT DURING THE COURSE OF SEARCH PROCEEDINGS AND NO DEFECTS WERE POINTED OUT BY THE AO IN THE ENTIRE PURCHASE AND SALE OF S HARES. THE ASSESSEE ALSO FILED 9 DETAILED EXPLANATION IN RESPECT OF INDIVIDUAL SHARE S. VARIOUS DETAILS WERE FURNISHED BEFORE THE CIT(A). 12. ON THE BASIS OF THE DETAILS FURNISHED BY THE AS SESSEE THE LEARNED CIT(A) CALLED FOR A REMAND REPORT FROM THE AO. THE AO IN HIS REMAND REPORT STATED THAT THE TRANSACTIONS IN RESPECT OF SALE AND PURCHASE OF SHARES WERE INGENUINE DUE TO NON-AVAILABILITY OF THE FOLLOWING IMPORTANT DOCUMEN TS : (A) THE DISTINCTIVE NUMBERS AND CERTIFICATE NUMBERS OF SHARES THAT WERE PURCHASED; (B) THE DATE(S) OF TAKING DELIVERY OF IDENTIFIABLE SHARES FROM ASSESSEES SHARE BROKER; (C) DELIVERY OF TRANSFER DEEDS DULY SIGNED BY REGIS TERED SHARE HOLDER IN RESPECT OF SHARES THAT WERE TAKEN DELIVERY OF FROM THE SHARE B ROKER; AND (D) IDENTIFICATION OF/RELATIONSHIP WITH SHARES GIVE N FOR D-MAT WITH THOSE PURCHASED AND ULTIMATELY SOLD IN D-MAT FORM. 13. THE LEARNED CIT(A) GAVE A COPY OF THE REMAND RE PORT TO THE ASSESSEE FOR HIS COMMENTS. IN THE COMMENTS THE ASSESSEE STATED THAT THE AO HAS NOT DEALT WITH THE VARIOUS ISSUES RAISED BY HIM WHICH INCLUDE NON GRAN TING OF OPPORTUNITY TO CROSS EXAMINE THE EVIDENCES GATHERED AND RELIED UPON BY T HE AO. RELYING ON VARIOUS DECISIONS IT WAS SUBMITTED THAT IN ABSENCE OF CROSS EXAMINATION, THE EVIDENCES RELIED ON BY THE AO WHILE FRAMING THE ASSESSMENT OR DER DO NOT CARRY ANY EVIDENTIARY VALUE. IT WAS SUBMITTED THAT THE AO HAD TAKEN SOME NEW PLEA IN THE REMAND PROCEEDINGS. IT WAS SUBMITTED THAT THE REMA ND PROCEEDINGS SHOULD NOT BE USED BY THE AO TO IMPROVE OR TO ENLARGE THE ASSESSM ENT ORDER. THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF MUNDADA G ROUP OF CASES WAS RELIED UPON BY THE ASSESSEE WHEREIN THE ISSUE OF PENNY STOCK HA S BEEN DEALT WITH. 14. THE CIT(A) GAVE OPPORTUNITY TO THE AO AS PER HI S REQUEST TO APPEAR PERSONALLY BEFORE HIM. THE AO STATED THAT THE COMP ANIES WHOSE SHARES HAVE BEEN TRADED BY THE ASSESSEE DID NOT HAVE ANY TURNOVER IN THE RELEVANT PERIOD. THE EXPENSES CLAIMED WERE VERY MEAGRE. NO RESERVES WER E THERE. THEREFORE, THE MARKET VALUE OF THE SHARES SHOULD HAVE BEEN VERY NO MINAL AT THE TIME OF SALE. 10 15. IN RESPONSE TO THE ABOVE SUBMISSION OF THE AO B EFORE THE CIT(A) AS PER HIS LETTER DATED 08-02-2011 IT WAS SUBMITTED BY THE ASS ESSEE THAT FROM THE DATA FURNISHED BY THE AO IT IS OBVIOUS THAT THE COMPANIE S IN WHICH THE ASSESSEE HAS INVESTED EXISTS AND THESE COMPANIES ARE TRADED IN T HE STOCK EXCHANGE. IT WAS SUBMITTED THAT THE AO HAS NOT BROUGHT ON RECORD A S INGLE FACT TO SHOW THAT THE TRANSACTIONS WITH THE BROKERS, PURCHASE OF SHARES, HOLDING THE SAME IN D-MAT ACCOUNT, SELLING OF SHARES, RECEIPT OF MONEY ETC. A RE BOGUS. THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF JAYAPRAKA SH P. SURANA WAS RELIED UPON AND IT WAS SUBMITTED THAT THE INCOME HAS TO BE TREA TED AS INCOME FROM CAPITAL GAIN AND NOT UNDER THE HEAD INCOME FROM OTHER SOU RCES. 16. HOWEVER, THE LEARNED CIT(A) WAS NOT FULLY SATIS FIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. AS FAR AS THE ALLEGATION OF THE ASSESSEE THAT HE WAS NOT GIVEN A COPY OF THE EVIDENCE GATHERED BY THE DEPARTMENT O N WHICH RELIANCE HAS BEEN PLACED AND THEREFORE IT IS AGAINST THE RULES OF NAT URAL JUSTICE, THE LEARNED CIT(A) NOTED THAT THE ASSESSEE HAS NOT GIVEN SPECIFIC DETA ILS OF THE EVIDENCE WHICH WAS USED AGAINST HIM AND A COPY OF WHICH WAS NOT GIVEN TO HIM. HE NOTED THAT THE VARIOUS EVIDENCES USED BY THE AO ARE THE SEIZED/IMP OUNDED DOCUMENTS, INFORMATION GATHERED FROM STOCK EXCHANGES AND BROKE RS AND THE STATEMENTS OF THE KEY PERSONS OF THE GROUP SRI MOTI UDHARAM PANJABI A ND OTHER FAMILY MEMBERS. COPIES OF THESE EVIDENCES WERE AVAILABLE WITH THE A SSESSEE. THEREFORE, THE ALLEGATION OF THE ASSESSEE THAT EVIDENCES UTILISED AGAINST HIM WERE NOT GIVEN IS NOT CORRECT. 17. SO FAR AS THE ADDITION MADE IN RESPECT OF THE T RANSACTIONS OF VARIOUS SHARES THE LEARNED CIT(A) DISCUSSED THE ISSUE COMPANY WISE AND HELD THAT THE LONG TERM CAPITAL GAINS SHOWN BY THE VARIOUS FAMILY MEMBERS I N RESPECT OF SHARES OF SILICON VALLEY TECHNOLOGIES LTD., DATABASE FINANCE LTD., BA FFIN ENGINEERING PROJECTS AND 11 HAVEMORE CO. LTD. ARE NOT GENUINE. HE NOTED THAT T HE ASSESSEE DURING THE COURSE OF SURVEY HAD CATEGORICALLY STATED THAT TRANSACTION S RELATING TO DATABASE FINANCE LTD. ARE BOGUS AND THEREFORE CAME OUT WITH THE DECL ARATION OF UNDISCLOSED INCOME OF RS.1,57,31,579 ON ACCOUNT OF LONG TERM CAPITAL G AINS RELATING TO SHARES OF DATABASE FINANCE LTD. HOWEVER, HE HAD RETRACTED FR OM SUCH STATEMENT. RELYING ON A COUPLE OF DECISIONS HE HELD THAT THE CONTENTIO N OF THE ASSESSEE REGARDING THE GENUINENESS OF SHARES OF DATABASE FINANCE LTD. CANN OT BE ACCEPTED. THE SALE PROCEEDS CREDITED IN THE BOOKS/BANK ACCOUNT REPRESE NTS UNDISCLOSED INCOME OF THESE PERSONS. THE AO HAS CORRECTLY TREATED THE SA LE PROCEEDS ON ACCOUNT OF ALLEGED SALES OF SHARES AS UNDISCLOSED INCOME OF TH E RESPECTIVE PERSONS. HE ACCORDINGLY UPHELD THE ACTION OF THE AO IN TREATING THE SALE PROCEEDS OF THE SHARES AS UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE. HOWEVER, HE HELD THAT THE TRANSACTION OF SHARES OF MEDIA MATRIX LTD. HAS TO B E TREATED AS SHORT TERM CAPITAL GAIN. 18. THE LEARNED CIT(A) ALSO UPHELD THE ACTION OF TH E AO IN MAKING THE ADDITION, I.E.6% OF SALE PROCEEDS ON ACCOUNT OF COMMISSION FO R GIVING ACCOMMODATION ENTRIES AND FOR DOING BOGUS TRANSACTIONS/DOCUMENTAT ION ETC. OTHER THAN THE TRANSACTIONS RELATING TO THE SHARES OF MEDIA MATRIX LTD. WHICH ACCORDING TO HIM WAS GENUINE. 19. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. ON FACTS AND CIRCUMSTANCES PREVAILING IN THE CA SE AND AS PER PROVISIONS OF LAW, IT BE HELD THAT, ADDITION OF RS.45,83,478/- MADE AND A SSESSING THE SAME UNDER THE HEAD INCOME FROM OTHER SOURCES ON ACCOUNT OF ALLEGED FIC TITIOUS SALES OF SHARES AND FICTITIOUS CAPITAL GAIN INCLUSIVE OF BROKERAGE AND COMMISSION AT 6% IS UNWARRANTED, UNJUSTIFIED AND CONTRARY TO THE FACTS PREVAILING IN THE CASE AN D PROVISIONS OF LAW. IT FURTHER BE HELD THAT ADDITION MADE BY THE AO IN VIOLATION OF RULES OF NATURAL JUSTICE IS NOT TENABLE IN LAW. THE ADDITION MADE BY THE AO IN THIS RESPECT BE DELE TED. IT FURTHER BE HELD THAT THE INCOME IS NOT ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AS IS HELD BY THE AO, THE INCOME IS ASSESSABLE UNDER THE HEAD CAPITAL GAIN AS IS DECLARED BY THE APPELLANT. THE APPELLANT BE GRANTED JUST AND PROPER RELIEF IN THIS RESPECT. 12 2. WITHOUT PREJUDICE TO GROUND NO. 1 AND IN THE ALT ERNATIVE ON FACTS AND CIRCUMSTANCES PREVAILING IN THE CAUSE AND AS PER PR OVISIONS OF LAW, IT BE HELD THAT, COMMISSION AT 6% CONSIDERED BY THE AO AND CONFIRMED BY THE IST APPELLATE AUTHORITY IS IMPROPER, IMAGINARY AND ERRONEOUS AND IS BASED ON N O EVIDENCE. THE AMOUNT OF SO CALLED COMMISSION CONSIDERED BY THE AO & CONFIRMED BY THE IST APPELLATE AUTHORITY FOR THE PURPOSE OF COMPUTING THE INCOME BE DELETED. JU ST AND PROPER RELIEF BE GRANTED TO THE APPELLANT IN THIS RESPECT. 20. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SAME SUBMISSIONS AS MADE BEFORE THE AO AND THE CIT(A). HE SUBMITTED TH AT ALL THE PAPERS RELATING TO PURCHASE AND SALE OF SHARES, SHARE CERTIFICATES ETC . WERE SEIZED BY THE DEPARTMENT AND DOCUMENTS IN RESPECT OF EACH AND EVERY TRANSACT ION OF THE ASSESSEE GROUP IS IN THE SEIZED RECORD. HE SUBMITTED THAT THE SHARES WE RE PURCHASED THROUGH BROKERS, SHARE CERTIFICATES WERE RECEIVED, SHARE CERTIFICATE S BEARING THE SAME DISTINCTIVE NUMBERS WERE LATER SOLD FOR WHICH CAPITAL GAINS WER E EARNED. HE SUBMITTED THAT ALL THE SHARES PURCHASED WHETHER BY PAYMENT OF CONSIDER ATION IN CASH OR CHEQUE HAVE BEEN TRANSFERRED IN THE NAME OF THE ASSESSEE PRIOR TO MORE THAN ONE YEAR FROM THE DATE OF SALE WHICH IS EVIDENT FROM THE LETTERS OF T HE COMPANY, SHARE TRANSFER DEEDS, SHARE CERTIFICATE ETC. 21. REFERRING TO THE PURCHASE OF SHARES OF DATABASE FINANCE LTD. BY THE ASSESSEE SRI GOVIND UDHARAM PANJABI AS A SAMPLE CASE THE LEA RNED COUNSEL FOR THE ASSESSEE REFERRED TO REVERSE OF PAGE 1 OF PAPER BOOK AND SUB MITTED THAT VIDE BILL NO.A01057915, DATED 28-04-2001 SRI GOVIND UDHARAM P ANJABI HAS PURCHASED 700 SHARES OF DATABASE FINANCE LTD. REFERRING TO PAGE 2 OF THE PAPER BOOK THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO STATEMENT OF A CCOUNTS OF MOHIT SECURITIES ACCORDING TO WHICH THEY HAVE PURCHASED 700 SHARES O F DATABASE FINANCE LTD. FOR GOVIND UDHARAM PANJABI AS PER THEIR INVOICE DATED 2 7-04-2001 AND CONFIRMATION NO. A0105452. REFERRING TO REVERSE OF PAGE 2 HE SU BMITTED THAT MOHIT SECURITIES HAVE ISSUED MONEY RECEIPT FOR RS.9,687/- PAID BY CA SH ON ACCOUNT OF SHARE PURCHASE. REFERRING TO PAGE NOS. 6 AND 7 OF THE PA PER BOOK THE LEARNED COUNSEL 13 FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE SHARE TRANSFER APPLICATION DATED 10-04-2001. REFERRING TO PAGE NO. 5 OF THE P APER BOOK HE DREW THE ATTENTION OF THE BENCH TO THE LETTER ISSUED BY DATA BASE FINANCE LTD. TO SRI GOVIND UDHARAM PANJABI ON 07-05-2001 TRANSFERRING THE SHAR ES IN NAME OF GOVIND UDHARAM PANJABI. REFERRING TO PAGE NOS.8 TO 14 OF THE PAPER BOOK HE SUBMITTED THAT THE PHYSICAL SHARE CERTIFICATES ALLOTTED TO ON E MUKTHA NAGAR WERE SUBSEQUENTLY TRANSFERRED IN THE NAME OF GOVIND UDHARAM PANJABI W HICH CAN BE VERIFIED FROM THE REVERSE OF THE RESPECTIVE SHARE CERTIFICATES. REFE RRING TO PAGE NO. 4 OF THE PAPER BOOK HE DREW THE ATTENTION OF THE BENCH TO THE LETT ER ISSUED BY DATABASE FINANCE LTD. TO SRI GOVIND UDHARAM PANJABI REQUESTING HIM T O OPEN A D-MAT ACCOUNT FOR DEMATERIALISATION OF THE SHARES. REFERRING TO REVE RSE OF PAGE NO.15 OF THE PAPER BOOK HE DREW THE ATTENTION OF THE BENCH TO THE LETT ER FROM DATABASE FINANCE LTD. APPROVING SPLITTING OF SHARES AND TRANSFER TO D-MAT ACCOUNT. REFERRING TO PAGE NO.15 OF THE PAPER BOOK HE DREW THE ATTENTION OF TH E BENCH TO THE ACKNOWLEDGEMENT ISSUED BY COSMOS COOPERATIVE BANK L TD. PUNE DATED 28-06- 2002 ACKNOWLEDGING THE RECEIPT OF 7000 SHARES OF DA TABASE FINANCE LTD. FOR DEMATERIALISATION BY GOVIND UDHARAM PANJABI. REFER RING TO REVERSE OF PAGE NO.18 HE DREW THE ATTENTION OF THE BENCH TO THE TRANSACTI ON STATEMENT OF COSMOS COOPERATIVE BANK LTD. SHOWING DEMATERIALISATION OF SHARES AND ITS SUBSEQUENT SALE FROM THERE ON 03-07-2002. REFERRING TO PAGE NO.22 TO 36 OF THE PAPER BOOK THE LEARNED COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE INCOME TAX ACKNOWLEDGEMENT RECEIPT FOR ASST. YEAR 2002-03, COM PUTATION STATEMENT, COMPUTATION OF CAPITAL GAIN, PROFIT AND LOSS ACCOUN T AND BALANCE SHEET ETC. FOR THE YEAR ENDING 31-02-2002. REFERRING TO PAGE NOS.45 T O 46 HE DREW THE ATTENTION OF THE BENCH TO THE WEALTH TAX RETURN FILED BY GOVIND UDHARAM PANJABI. REFERRING TO PAGE NOS. 16 AND 17 OF THE PAPER BOOK HE DREW TH E ATTENTION OF THE BENCH TO 14 SALE BILL AND CONFIRMATION MEMO OF M/S. PRINCE SECU RITIES FOR SALE OF SHARES. REFERRING TO REVERSE OF PAGE NO.17 HE DREW THE ATTE NTION OF THE BENCH TO THE CHEQUE FOR RS.5,88,700/- DATED 04-07-2002 RECEIVED TOWARDS SALE OF SHARES. REFERRING TO PAGE NO.18 OF THE PAPER BOOK HE DREW T HE ATTENTION OF THE BENCH TO THE LEDGER ACCOUNT OF GOVIND UDHARAM PANJABI IN THE BOOKS OF M/S. PRINCE SECURITIES. REFERRING TO PAGE NO.19 OF THE PAPER B OOK HE DREW THE ATTENTION OF THE BENCH TO THE LEDGER ACCOUNT OF INVESTMENT IN SHARES AS APPEARING IN THE BOOKS OF THE ASSESSEE. REFERRING TO PAGE NO. 20 OF THE PAPE R BOOK HE DREW THE ATTENTION OF THE BENCH TO THE LEDGER ACCOUNT OF M/S. PRINCE SECU RITIES IN THE BOOKS OF THE ASSESSEE. REFERRING TO PAGE NOS. 37 AND 38 OF THE PAPER BOOK HE DREW THE ATTENTION OF THE BENCH TO THE WEALTH TAX ASSESSMENT ORDER FOR ASST. YEAR 2003-04. REFERRING TO PAGE NO.30 OF THE PAPER BOOK HE SUBMIT TED THAT THE INVESTMENT IN SHARES FOR FINANCIAL YEAR 2001-02 ARE APPEARING IN THE REGULAR BOOKS. HE SUBMITTED THAT THE REGULAR RETURNS OF THE ASSESSEE HAVE BEEN FILED BEFORE DUE DATES AND THE INVESTMENT HAS BEEN DULY REFLECTED IN THE R EGULAR BOOKS OF ACCOUNT. REFERRING TO REVERSE OF PAGE NO. 15 OF THE PAPER BO OK HE SUBMITTED THAT THE SAME SHOWS THE SPLIT OF SHARES AND ISSUE OF NEW SHARES D IRECTLY INTO THE D-MAT ACCOUNT. THE FACT THAT THE SHARES HAVE BEEN TRANSFERRED TO T HE D-MAT ACCOUNT CAN BE VERIFIED FROM THE CLIENT ID WHICH IS THE SAME IN TH E SAID LETTER AND THE ACKNOWLEDGEMENT OF DEPOSIT OF SHARES IN D-MAT ACCOU NT. 22. REFERRING TO PAGE NO. 32 OF THE PAPER BOOK-I HE DREW THE ATTENTION OF THE BENCH TO THE DECISION OF THE PUNE BENCH OF THE TRIB UNAL IN THE CASE OF SMT.SUREKHA BHAWATIPRASAD MUNDADA AND OTHER RELATED CASES VIDE CONSOLIDATED ORDER DATED 16-06-2010 AND SUBMITTED THAT THE TRIBU NAL IN THE SAID DECISION HAS ACCEPTED THE CONTENTION OF THE ASSESSEE THAT THE IN COME FROM PURCHASE AND SALE OF SHARES HAS TO BE TREATED AS CAPITAL GAIN AS AGAINS T BUSINESS INCOME TREATED BY THE 15 AO. HOWEVER, IN THE SAID DECISION IT WAS HELD THAT THE DATE OF TRANSFER OF SHARES TO THE D-MAT ACCOUNT OF THE ASSESSEE WAS TO BE CONSIDE RED AS THE DATE FOR COUNTING THE PERIOD OF HOLDING OF THE SHARES. IT HAS FURTHE R BEEN HELD THAT WHEN THE ASSESSEE RECEIVED SALE CONSIDERATION AND THE SAME HAS ENTERE D THE BANK ACCOUNT OF THE ASSESSEE AND THE SAME IS RECEIVED INCIDENTAL TO THE INVESTMENT IN SHARES WHICH ARE CAPITAL ASSETS, THEREFORE, INCOME, IF ANY, GENERATE D OUT OF THE SAME HAS TO BE TREATED AS CAPITAL GAINS, MAY BE LONG TERM OR SHORT TERM AN D CERTAINLY NOT INCOME FROM OTHER SOURCES. 23. REFERRING TO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SMT. SUNANDA JAYPRAKASH SURANA VIDE ITA NO. 1310/PN /2008 ORDER DATED 20-08- 2010 HE SUBMITTED THAT THE TRIBUNAL FOLLOWING THE D ECISION IN THE CASE OF MUNDADA GROUP HAS HELD THAT INCOME EARNED OUT OF SUCH PENNY STOCK HAS TO BE TAXED UNDER THE HEAD INCOME FROM CAPITAL GAINS IN VIEW OF THE FACT THAT IMPUGNED PENNY STOCK/SHARES ARE FINALLY FOUND CREDITED IN THE D-MA T ACCOUNT OF THE ASSESSEE. 23.1 REFERRING TO THE DECISION OF ITAT AGRA BENCH ( THIRD MEMBER) IN THE CASE OF ITO VS. SMT. BIBI RANI BANSAL REPORTED IN 133 TT J 394 (AGRA) (THIRD MEMBER) HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISION HAS HELD THAT ASSESSEE HAVING SUBMITTED COPIES OF CONTRACT NOTES, BILLS, SHARE CE RTIFICATES ALONG WITH DETAILS OF DEMAND DRAFT ISSUED FROM THE ACCOUNT OF THE BROKER TO SUBSTANTIATE THE SALE OF SHARES MADE BY HER AND THE AO HAVING FAILED TO ESTA BLISH THAT THE ASSESSEE HAD INTRODUCED HER OWN UNACCOUNTED MONEY IN THE SHAPE O F SALE PROCEEDS OF SHARES, THE TRANSACTION OF SALE OF SHARES CANNOT BE TREATED AS NON-GENUINE FOR THE REASON THAT THE BROKER MADE CONTRADICTORY STATEMENT AND THE ASS ESSEE WAS NOT ALLOWED TO CROSS EXAMINATION AND, THEREFORE, THE SALE CONSIDERATION DECLARED BY THE ASSESSEE IS ASSESSABLE AS CAPITAL GAIN AND NOT AS INCOME FROM U NDISCLOSED SOURCES. 16 24. HE SUBMITTED THAT SIMILAR VIEW HAS BEEN HELD BY ITAT AGRA BENCH (THIRD MEMBER) IN THE CASE OF BAIJNATH AGARWAL VS. ACIT R EPORTED IN 133 TTJ 129 (AGRA) (TM). REFERRING TO THE DECISION OF THE JODH PUR BENCH OF THE TRIBUNAL IN THE CASE OF DALPAT SINGH CHOUDHARY VS. ACIT REPORTED IN 143 TTJ 500 HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISION HAS HELD THA T WHERE THE ASSESSEE HAS PURCHASED SHARES MORE THAN ONE YEAR BEFORE THE DATE OF SALE AND PURCHASE WAS ACCEPTED AS GENUINE THE AO WAS NOT JUSTIFIED IN MAK ING ADDITION OF SALE PROCEEDS OF SUCH SHARES AS UNDISCLOSED INCOME OF THE ASSESSE E MERELY ON THE BASE OF STATEMENT OF THE BROKER THAT HE WAS ISSUING ACCOMMO DATION ENTRIES. 25. HE ALSO REFERRED TO THE FOLLOWING DECISIONS : 1. PRASHANT PRALHAD ASHEKAR VS. ITO VIDE ITA NO.881 /PN/2010 FOR A.Y 2003-04 ORDER DATED 28-03-2012. 2. MUKESH R. MAROLIA VS. ACIT REPORTED IN 6 SOT 247 (ITAT MUMBAI). 3. ACCHYALAL SHAW VS. ITO REPORTED IN 121 TTJ 695. (ITAT KOLKATA) 4. ACIT VS. J.R. SOLVENT INDUSTRIES (P) LTD.REPORTE D IN 24 DTR (CHD.) (TRIB) 387. 5. NISRAJ REAL ESTATE & EXPORT (P) LTD. VS. ACIT RE PORTED IN 31 DTR (JP) (TRIB) 456. 6. DCIT VS. SMT. HANSA CHOUDHARY REPORTED IN 143 TT J 76 (JD) (UO) HE SUBMITTED THAT THE ENTIRE TRANSACTION OF PURCHAS E AND SALE OF SHARES HAVE BEEN MADE THROUGH THE D-MAT ACCOUNT. TRANSACTIONS HAVE BEEN MOSTLY MADE IN CHEQUES, SALES AND PURCHASE ARE THROUGH DIFFERENT B ROKERS, THERE IS NO DOUBT ABOUT THE DELIVERY OF SHARES SINCE LETTERS HAVE BEEN RECE IVED FROM THE COMPANY, THE INVESTMENT OF SHARES ARE REFLECTED IN THE BALANCE S HEET OF RESPECTIVE YEARS, THEREFORE, THE GAIN FROM SUCH SALE OF SHARES HAS TO BE TREATED AS CAPITAL GAIN. 26. AS REGARDS THE ALLEGATION OF THE LEARNED CIT(A) THAT THE ASSESSEE HAD ADMITTED DURING THE SURVEY OPERATION THAT THE TRANS ACTIONS IN SHARES OF DATABASE FINANCE LTD. ARE NOT GENUINE FOR WHICH HE HAD DECLA RED AN AMOUNT OF 17 RS.1,57,31,579/- AS ADDITIONAL INCOME BUT WHILE FIL ING THE RETURN THE ASSESSEE DID NOT HONOUR SUCH DECLARATION, THE LEARNED COUNSEL FO R THE ASSESSEE SUBMITTED THAT THE DECLARATION WAS MADE IN A SURVEY PROCEEDING AND NOT DURING A SEARCH PROCEEDING. THE ASSESSEE HAD RETRACTED BY NOT DISCLOSING SUCH I NCOME IN THE RETURNS FILED. HE SUBMITTED THAT AT THE TIME OF SEARCH/SURVEY ALL PAP ERS RELATING TO THE PURCHASE AND SALE OF SHARES WERE FOUND AND THE ASSESSEE DID NOT PRODUCE A SINGLE PIECE OF ADDITIONAL EVIDENCE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HE SUBMITTED THAT IT IS NOT A CASE WHERE THE ASSESSEE CREATED AN Y NEW EVIDENCE. HE SUBMITTED THAT THE REVENUE AUTHORITIES WENT BLINDLY ON THE BA SIS OF THE DECLARATION MADE BY THE ASSESSEE DURING THE COURSE OF SURVEY. 27. REFERRING TO THE DECISION OF THE HONBLE KERALA HIGH COURT IN THE CASE OF PAUL MATHEWS AND SONS VS. CIT REPORTED IN 263 ITR 1 01 HE SUBMITTED THAT STATEMENT ELICITED DURING THE SURVEY OPERATION HAS NO EVIDENTIARY VALUE. REFERRING TO THE DECISION OF THE MADRAS HIGH COURT IN THE CAS E OF CIT VS. S. KHADER KHAN SON REPORTED IN 300 ITR 157 HE SUBMITTED THAT AN AD MISSION IS AN EXTREMELY IMPORTANT PIECE OF EVIDENCE BUT IT CANNOT BE SAID T HAT IT IS CONCLUSIVE AND IT IS OPEN TO THE PERSON WHO MADE THE ADMISSION TO SHOW THAT I T IS INCORRECT AND THAT THE ASSESSEE SHOULD BE GIVEN PROPER OPPORTUNITY TO SHOW THAT THE BOOKS OF ACCOUNT DID NOT CORRECTLY DISCLOSE THE CORRECT STATE OF FACTS. REFERRING TO THE SAID DECISION HE SUBMITTED THAT THERE IS WIDE DIFFERENCE BETWEEN PRO VISIONS OF SECTION 133A AND SECTION 132(4). ACCORDING TO LEARNED COUNSEL FOR TH E ASSESSEE SECTION 132(4) ENABLES THE AUTHORISED OFFICER TO EXAMINE A PERSON ON OATH AND ANY STATEMENT MADE BY SUCH PERSON DURING SUCH EXAMINATION CAN ALSO BE USED IN EVIDENCE UNDER THE ACT. HOWEVER, A STATEMENT RECORDED U/S.133A HAS GO T NO EVIDENTIARY VALUE FOR THE REASON THAT THE OFFICER IS NOT AUTHORISED TO ADMINI STER OATH AND TO TAKE ANY SWORN STATEMENT WHICH ALONE HAS EVIDENTIARY VALUE AS CONT EMPLATED UNDER THE LAW. HE 18 SUBMITTED THAT THE MATERIAL OR INFORMATION FOUND IN THE COURSE OF SURVEY PROCEEDING COULD NOT BE A BASIS FOR MAKING ANY ADDITION IN THE BLOCK ASSESSMENT. REFERRING TO THE SAID DECISION HE SUBMITTED THAT THE MATERIALS C OLLECTED AND THE STATEMENT RECORDED DURING THE SURVEY U/S.133A ARE NOT CONCLUS IVE PIECE OF EVIDENCE BY ITSELF. REFERRING TO THE CBDT INSTRUCTION DATED 10-03-2003 HE DREW THE ATTENTION OF THE BENCH TO THE FOLLOWING : INSTANCES HAVE COME TO THE NOTICE OF THE BOARD WHE RE ASSESSEES HAVE CLAIMED THAT THEY HAVE BEEN FORCED TO CONFESS THE UNDISCLOSED INCOME DURING THE COURSE OF THE SEARCH AND SEIZURE AND SURVEY OPERATIONS. SUCH CONFESSIONS, I F NOT BASED UPON CREDIBLE EVIDENCE, ARE LATER RETRACTED BY THE CONCERNED ASSESSEES WHIL E FILING RETURNS OF INCOME. IN THESE CIRCUMSTANCES, ON CONFESSIONS DURING THE COURSE OF SEARCH AND SEIZURE AND SURVEY OPERATIONS DO NOT SERVE ANY USEFUL PURPOSE. IT IS, THEREFORE, ADVISED THAT THERE SHOULD BE FOCUS AND CONCENTRATION ON COLLECTION OF EVIDENCE O F INCOME WHICH LEADS TO INFORMATION IN WHAT HAS NOT BEEN DISCLOSED OR IS NOT LIKELY TO BE DISCLOSED BEFORE THE INCOME-TAX DEPARTMENT. SIMILARLY, WHILE RECORDING STATEMENT D URING THE COURSE OF SEARCH AND SEIZURE AND SURVEY OPERATIONS NO ATTEMPT SHOULD BE MADE TO OBTAIN CONFESSION AS TO THE UNDISCLOSED INCOME. ANY ACTION ON THE CONTRARY SHA LL BE VIEWED ADVERSELY. FURTHER, IN RESPECT OF PENDING ASSESSMENT PROCEEDINGS ALSO, THE ASSESSING OFFICERS SHOULD RELY UPON THE EVIDENCES/MATERIALS GATHERED DURING THE COURSE OF SEARCH/SURVEY OPERATIONS OR THEREAFTER WHILE FRAMING THE RELEVANT ASSESSMENT OR DERS. 28. REFERRING TO THE DECISION OF HONBLE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. BHOGILAL MULCHAND REPORTED IN 96 ITD 344 HE SUBMITTED THAT EVEN STATEMENT GIVEN U/S.132(4) IS NOT CONCLUSIVE A ND A PERSON GIVING STATEMENT CAN RETRACT THE SAME UNDER CERTAIN CIRCUMSTANCES. REFERRING TO THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF MAYANK P ODDAR (HUF) VS. WEALTH TAX OFFICER REPORTED IN 262 ITR 633 HE SUBMITTED THAT T HE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD AS UNDER : 'THUS, UNLESS THE DEFINITION OF 'NET WEALTH' R/W TH E DEFINITION OF 'ASSET' AS PROVIDED IN S. 2(M) AND S. 2(EA), RESPECTIVELY, INCLUDES A BUILDIN G LET OUT TO A TENANT USED FOR COMMERCIAL PURPOSES, THE SAME CANNOT BE SUBJECTED T O WEALTH-TAX. EVEN IF THE ASSESSEE HAD INCLUDED THE SAME IN HIS RETURN, THAT WOULD NOT PRECLUDE THE ASSESSEE FROM C1AIMINQ THE BENEFIT OF LAW. THERE CANNOT BE ANY ESTOPPEL AQ AINST STATUTE. A PROPERTY, WHICH IS NOT OTHERWISE TAXABLE, CANNOT BECOME TAXABLE BECAUSE OF MISUNDERSTANDING OR WRONG UNDERSTANDING OF LAW BY THE ASSESSEE OR BECAUSE OF HIS ADMISSION OR ON HIS MISAPPREHENSION. IF IN LAW AN ITEM IS NOT TAXABLE, NO AMOUNT OF ADMISSION OR MISAPPREHENSION CAN MAKE IT TAXABLE. THE TAXABILITY OR THE AUTHORITY TO IMPOSE TAX IS INDEPENDENT OF ADMISSION. NEITHER THERE CAN BE ANY WAIVER OF THE RIGHT BY THE ASSESSEE. 19 THE DEPARTMENT CANNOT RELY UPON ANY SUCH ADMISSION OR MISAPPREHENSION IF IT IS NOT OTHERWISE TAXABLE.' 29. REFERRING TO THE DECISION OF HONBLE CHATTISGAR H HIGH COURT IN THE CASE OF ITO VS. VIJAYA KUMAR KESAR REPORTED IN 327 ITR 497 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD TH AT CONFESSION MADE BY THE ASSESSEE DURING SURVEY PROCEEDING IS NOT CONCLUSIVE AND IT IS OPEN TO THE ASSESSEE TO ESTABLISH BY FILING COGENT EVIDENCE THAT THE SAM E WAS NOT TRUE AND CORRECT. REFERRING TO THE SAID DECISION HE SUBMITTED THAT RE TRACTION MADE DURING THE ASSESSMENT PROCEEDING WAS ACCEPTED. THEREFORE, MUCH IMPORTANCE SHOULD NOT BE GIVEN TO THE STATEMENT OF THE ASSESSEE MADE DURING THE COURSE OF SURVEY WHICH HAS SUBSEQUENTLY BEEN RETRACTED BY NOT DISCLOSING THE S AME IN THE INCOME TAX RETURN FILED. 30. AS REGARDS THE REPORT OF THE AO DURING REMAND P ROCEEDINGS THAT DISTINCTIVE NUMBERS OF SHARES THAT WERE PURCHASED WERE NOT AVAI LABLE AND IDENTIFICATION/RELATIONSHIP WITH SHARES GIVEN FOR D -MAT WITH THOSE PURCHASED AND ULTIMATELY SOLD IN THE D-MAT FORM WERE ALSO NOT AVA ILABLE HE SUBMITTED THAT WHERE THE SHARES WERE RECEIVED IN CONSOLIDATED FORM , THOSE WERE SPLITTED SUBSEQUENTLY AND THEN TRANSFERRED TO THE D-MAT ACCO UNT WHICH WERE SUBSEQUENTLY SOLD. THIS ASPECT WAS NOT PROPERLY VERIFIED BY THE REVENUE AUTHORITIES. HE SUBMITTED THAT GIVEN AN OPPORTUNITY THE ASSESSEE IS IN A POSITION TO SATISFY THE AO THAT THE CONSOLIDATED SHARE CERTIFICATES OBTAINED A T THE TIME OF PURCHASE WERE SUBSEQUENTLY SPLITTED AND THE SAME SHARES CONTAININ G THE SAME DISTINCTIVE NUMBERS WERE TRANSFERRED TO THE D-MAT ACCOUNT WHICH WERE SU BSEQUENTLY SOLD. 31. REFERRING TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SMT. JAMNADEVI AGRAWAL REPORTED IN 328 ITR 656 HE SUBMITTED THAT THE 20 HONBLE HIGH COURT IN THE SAID DECISION HAS HELD TH AT THE FACT THAT SOME OF THE TRANSACTIONS WERE OFF-MARKET TRANSACTIONS CANNOT BE A GROUND TO TREAT THE TRANSACTIONS AS SHAM TRANSACTIONS. REFERRING TO TH E PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. AJAY SHANTILAL LALWANI & NEELES H SHANTILAL LALWANI REPORTED IN 145 TTJ 511 HE SUBMITTED THAT THE TRIBUNAL IN TH E SAID DECISION HAS HELD THAT MERELY BECAUSE THERE IS SUBSTANTIAL DELAY IN TRANSF ERRING THE SHARES FROM THE DATE OF PURCHASE TO THE D-MAT ACCOUNT AND THE TRANSACTIONS NOT BEING ROUTED THROUGH STOCK EXCHANGE, THE AO WAS NOT JUSTIFIED IN DOUBTIN G THE DECLARED DATE OF PURCHASE OF THE SHARES IGNORING THE EVIDENCES AVAILABLE WITH THE ASSESSEE IN HIS FAVOUR. THE EXEMPTION U/S.10(38) WAS ACCORDINGLY ALLOWED. 32. HE ALSO RELIED ON THE DECISION OF THE NAGPUR B ENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. KAMAL KUMAR S. AGRAWAL (INDL.) & O THERS REPORTED IN 133 TTJ 818, THE DECISION OF THE MUMBAI BENCH OF THE TRIBU NAL IN THE CASE OF ITO VS. MRS. RASILA N. GADA VIDE ITA NO. 1773/M/2010 ORDER DATED 08-08-2012 FOR ASST. YEAR 2006-07 AND OTHER CONNECTED APPEALS, THE DECIS ION OF THE HONBLE JHARKHAND HIGH COURT IN THE CASE OF CIT VS. ARUN KUMAR AGRAWA L(HUF) IN TAX APPEAL NO. 04/2011 AND OTHER CONNECTED APPEALS AND THE DECISIO N OF THE AMRITSAR SMC BENCH IN THE CASE OF ACIT VS. ANOOP KUMAR REPORTED IN 94 TTJ 299. 33. THE LEARNED DR ON THE OTHER HAND STRONGLY SUPPO RTED THE ORDERS OF THE AO AND THE CIT(A). HE SUBMITTED THAT ASSESSEE WAS UNA BLE TO FURNISH DISTINCTIVE NUMBERS OF SHARES CLAIMED TO HAVE BEEN PURCHASED. THERE WAS NO PROOF OF DATE OF DELIVERY. THE ASSESSEE FAILED TO FURNISH PROOF OF TAKING DELIVERY OF SHARES DULY IDENTIFIED BY THEIR DISTINCTIVE NUMBERS. ASSESSEE FAILED TO PRODUCE TRANSFER DEEDS DULY SIGNED BY THE REGISTERED SHAREHOLDER OF THE SH ARES TAKEN DELIVERY OF FROM THE SHARE BROKER. ASSESSEE FAILED TO PROVIDE SHARE CER TIFICATE NUMBERS. THE SHARES GIVEN FOR D-MAT COULD NOT BE RELATED TO THE SPECIFI C SHARES WHICH WERE PURCHASED 21 AND TAKEN DELIVERY OF BY THE ASSESSEE. THE LEGAL R ELEVANCE OF DISTINCTIVE NUMBERS, SHARE CERTIFICATE NUMBERS, THE SHARE TRANSFER FORMS , SHARE D-MAT REQUEST FORMS ETC. HAVE BEEN DISCUSSED IN DETAIL AND BROUGHT OUT VERY CLEARLY BY THE AO AND CONSTITUTE A PART OF THE CIT(A)S ORDER (PAGES 20-2 5). HE SUBMITTED THAT IT IS THE LEGAL REQUIREMENT FOR EACH SHARE TO HAVE A DISTINCT IVE NUMBER FOR IDENTIFICATION. SHARE TRANSACTIONS TAKE PLACE IN SPECIFIC SHARES, ( DULY IDENTIFIED BY THEIR DISTINCTIVE NUMBERS) AND NOT ON THE BASIS MERELY OF TOTAL NUMBE R OF SHARES BOUGHT OR SOLD). ALMOST ALL THE SHARES SOLD WERE DEMATTED JUST PRIOR TO SALE. IN ONE CASE, NAMELY, RADHA M. PANJABI, TRANSFER TO D-MAT ACCOUNT AND SAL E ARE CLAIMED TO HAVE TAKEN PLACE ON THE SAME DAY (06-05-02). IN YET ANOTHER C ASE, NAMELY KAUSHALYA S. PANJABI, SHARES ARE CLAIMED TO HAVE BEEN DEMATTED O N 06-05-02 BUT SALE WAS MADE ON 30-04-02, 02-05-02, AND 03-05-02, I.E. PRIOR TO BEING DEMATERIALISED, WHICH WAS NOT POSSIBLE UNDER THE RULES. SRI MOTI U. PANJABI, WHO, AS PER HIS OWN STATEMENT AS WELL AS THE STATEMENT OF OTHER FAMILY MEMBERS, WAS TAKING ALL THE INVESTMENT DECISIONS, WHEN CONFRONTED WITH THE LETTER OF DHYAN STOCK BROKING PVT. LTD. AND OTHER EVIDENCE, ADMITTED AN AMOUNT OF RS.1,57,31,57 9/- AS ADDITIONAL INCOME ON THIS COUNT IN HIS STATEMENT RECORDED WHEN SURVEY PR OCEEDINGS WERE STILL ON. M/S. DATABASE FINANCE LTD. HAS NO STANDING IN THE MARKET . THERE WAS NO TURNOVER. EXPENSES CLAIMED WERE VERY MEAGRE. THERE WERE NO R ESERVES, NO DIVIDEND DECLARED. IT WAS A TRUE PENNY STOCK AND FITTED THE PROFILE OF STOCKS THAT CAME TO ADVERSE NOTICE OF SEBI IN THE PENNY STOCKS SCAM. 34. THE LEARNED DR SUBMITTED THAT THERE IS NO DISPU TE TO THE FACT THAT MOST OF THE SHARES SOLD WERE HELD IN D-MAT ACCOUNT PRIOR TO SAL E AND MONEY WAS RECEIVED BY CHEQUE. THE REVENUE IS NOT DOUBTING THE SALE OF TH E SHARES. THE DISPUTE IS ONLY REGARDING THE PURCHASE OF SHARES WHICH ARE SUSPICIO US AND DOUBTFUL. HE SUBMITTED THAT SOME OF THE BROKERS HAVE DENIED TO HAVE MADE A NY TRANSACTION FOR THE ASSESSEE 22 AND THE SHARES DO NOT BEAR THE DISTINCTIVE NUMBERS. UNDER THESE CIRCUMSTANCES AND IN VIEW OF THE DETAILED DISCUSSION BY THE AO AND CI T(A) THE ORDER OF THE CIT(A) HAS TO BE UPHELD. 35. THE LEARNED DR FILED THE FOLLOWING CHART GIVING SCRIP-WISE DETAILS WHICH ARE AS UNDER : SUMMARY OF FINDINGS REGARDING PENNY STOCK TRANSACTI ONS OF SHRI MOTI U. PANJABI SL. NO. NAME OF COMPANY STATED TO HAVE BEEN PURCHASED FROM REMARKS 1. DATABASE FINANCE LTD. DHYAN STOCKBROKING PVT. LTD./MOHIT SECURITIES CLAIMED TO HAVE BEEN PURCHASED IN CASH. M/S. DHYAN STOCKBROKING PVT. LTD. THROUGH THEIR LET TER DATED 17 TH MARCH, 2006 CONFIRMED THAT NEITHER THEY, NOR THEIR SUB BRO KER, M/S. MOHIT SECURITIES, TRADED IN THE SHARES OF M/S. DATABASE F INANCE LTD. DURING FY 2001-02 & 2002-03. ASSESSEE WAS UNABLE TO FURNISH DISTINCTIVE NUMBERS OF SHARES CLAIMED TO HAVE BEEN PURCHASED. THERE WAS NO PROOF OF DATE OF DELIVERY. THE ASSESS EE FAILED TO FURNISH PROOF OF TAKING DELIVERY OF SHARES DULY IDENTIFIED BY THEIR DISTINCTIVE NUMBERS. ASSESSEE FAILED TO PRODUCE TRANSFER DEEDS DULY SIGN ED BY THE REGISTERED SHAREHOLDER OF THE SHARES TAKEN DELIVERY OF FROM TH E SHAREBROKER ASSESSEE FAILED TO PROVIDE SHARE CERTIFICATE NUMBER S THE SHARES GIVEN FOR D-MAT COULD NOT BE RELATED TO THE SPECIFIC SHARES WHICH WERE PURCHASED AND TAKEN DELIVERY OF BY THE A SSESSEE THE LEGAL RELEVANCE OF DISTINCTIVE NUMBERS, SHARE C ERTIFICATE NUMBERS, THE SHARE TRANSFER FORMS, SHARE D-MAT REQUEST FORMS ETC . HAVE BEEN DISCUSSED IN DETAIL AND BROUGHT OUT VERY CLEARLY BY THE AO AN D CONSTITUTE A PART OF THE CIT(A)S ORDER (PAGES 20-25). IT IS THE LEGAL REQUIREMENT FOR EACH SHARE TO HAVE A DISTINCTIVE NUMBER FOR IDENTIFICATI ON. SHARE TRANSACTIONS TAKE PLACE IN SPECIFIC SHARES, (DULY IDENTIFIED BY THEIR DISTINCTIVE NUMBERS) AND NOT ON THE BASIS MERELY OF TOTAL NUMBER OF SHAR ES BOUGHT OR SOLD). ALMOST ALL THE SHARES SOLD WERE DEMATTED JUST PRIOR TO SALE. IN ONE CASE, NAMELY, RADHA M. PANJABI, TRANSFER TO D-MAT ACCOUNT AND SALE ARE CLAIMED TO HAVE TAKEN PLACE ON THE SAME DAY (06-05- 02). IN YET ANOTHER CASE, NAMELY KAUSHALYA S. PANJABI, SHARES ARE CLAIM ED TO HAVE BEEN DEMATTED ON 06-05-02 BUT SALE WAS MADE ON 30-04-02, 02-05-02, AND 03- 05-02, I.E. PRIOR TO BEING DEMATERIALISED, WHICH WA S NOT POSSIBLE UNDER THE RULES. SRI MOTI U. PANJABI, WHO, AS PER HIS OWN STATEMENT AS WELL AS THE STATEMENT OF OTHER FAMILY MEMBERS, WAS TAKING ALL THE INVESTM ENT DECISIONS, WHEN CONFRONTED WITH THE LETTER OF DHYAN STOCKBROKING PV T. LTD. AND OTHER EVIDENCE, ADMITTED AN AMOUNT OF RS.1,57,31,579/- AS ADDITIONAL INCOME ON THIS COUNT IN HIS STATEMENT RECORDED WHEN SEARCH/SU RVEY PROCEEDINGS WERE STILL ON M/S. DATABASE FINANCE LTD. HAS NO STANDING IN THE M ARKET. THERE WAS NO TURNOVER. EXPENSES CLAIMED WERE VERY MEAGRE. THER E WERE NO RESERVES, NO DIVIDEND DECLARED. IT WAS A TRUE PENNY STOCK AN D FITTED THE PROFILE OF STOCKS THAT CAME TO ADVERSE NOTICE OF SEBI IN THE P ENNY STOCKS SCAM. 2 SILICON VALLEY TECHNOLOGY LTD. BARKHA INVESTMENTS, PATNA NO REASONS GIVEN FOR PURCHASING SHARES THROUGH AN U NKNOWN BROKER LOCATED IN FAR AWAY PATNA WHERE THE ASSESSEE HAD NO LINKS. SRI MOTI U. PANJABI COULD NOT PROVIDE ANY DETAILS REGARDING CON TACT PERSONS IN M/S. BARKHA INVESTMENTS THROUGH WHOM THE TRANSACTION WAS DONE OR HOW CONTACT WITH THE BROKER WAS ESTABLISHED. ENQUIRIES REVEALED THAT NO TRADING TOOK PLACE AT TH E MAGADH STOCK EXCHANGE PATNA (THROUGH WHICH SALE OF SHARES IS CLA IMED TO HAVE BEEN MADE) AFTER 7-02-2004 AS IT WAS SUSPENDED BY SEBI V IDE A NOTIFICATION ISSUED ON THAT DAY. AS SUCH IT WAS NOT EVEN A RECO GNISED STOCK EXCHANGE AS REQUIRED FOR CLAIMING EXEMPTION U/S.10(38). 23 SHARES ARE CLAIMED TO HAVE BEEN SOLD @ RS.230/- PER SHARE WHEREAS SHARES OF THE COMPANY WERE TRADING AT AN AVERAGE RATE OF R S.87/- PER SHARE ON BSE/NSE. MOREOVER, TRADING IN THE SHARE WAS VERY T HIN, INDICATING LOW DEMAND FOR THE SHARE (ONLY 110 SHARES TRADING ON TH E DATE WHEN THE ASSESSEE CLAIMS TO HAVE MADE THE SALE). WHEN CONFIRMED WITH THESE FACTS, THE APPELLANT CHAN GED HIS STAND AND CAME OUT WITH THE STORY THAT THE SALE WAS NOT OFF- MARKET. M/S. SILICON VALLEY TECHNOLOGY LTD. FITS THE PROFIL E OF A TYPICAL PENNY STOCK. THE COMPANY HAD NO STANDING IN THE MARKET. 3 HAVEMORE FINANCE LTD. VIJAY BHAGWANDAS & CO. FLOPPIES AND CDS SEIZED DURING SEARCH ON THE PANJAB I GROUP PROVIDED CLEAR EVIDENCE OF FABRICATION OF RECORDS TO GIVE TH E COLOUR OF GENUINENESS TO THE TRANSACTION IN RESPECT OF THESE CHARGES. TH E CDS SHOW THAT THE ASSESSEE THEMSELVES CREATED THE ENTIRE CORRESPONDEN CE (INCLUDING THE CONTRACT NOTE) BETWEEN THE BROKER AND THEMSELVES. A DETAILED ANALYSIS ON THE CONTENTS OF THE CDS IS AVAILABLE ON PAGES 49-52 OF CIT(A)S ORDER. THE BROKER THROUGH WHOM PURCHASE IS CLAIMED TO HAVE BEEN MADE NAMELY, M/S. VIJAY BHAGWANDAS & CO. WAS DECLARED A DEFAULTE R AND WAS BANNED FROM DOING ANY SHARE TRANSACTION AT BSE. AS IN OTHER CASES, DISTINCTIVE NUMBERS, SHARE CERTI FICATE NUMBERS OF THE SHARES PURCHASED, DATE OF TAKING DELIVERY, ETC. WER E NOT PROVIDED BY THE ASSESSEE AND NO CORRELATION BETWEEN SHARES CLAIMED TO HAVE BEEN PURCHASED AND SOLD COULD NE ESTABLISHED BY THE ASSE SSEE M/S. HAVEMORE FINANCE LTD. FITS THE PROFILE OF A TY PICAL PENNY STOCK. IT HAS NO STANDING IN THE MARKET. 4 BAFFIN ENGINEERING PROJECTS LTD. SUBHA FINANCIAL PVT. LTD., (MEMBER NSE) THE ASSESSEE AT FIRST CLAIMED THAT THE SHARES WERE SOLD THROUGH THE STOCK EXCHANGE. HOWEVER, NSE VIDE LETTER DATED 07-11-200 7, DENIED M/S. SUBHA FINANCIAL PVT. LTD. WAS AFFILIATED TO THEM. LATER FROM NSE ALSO MENTIONED THAT NO SCRIP IN THE NAME OF M/S. BAFIN E NGINEERING PROJECTS LTD. WAS LISTED ON THAT EXCHANGE THE ASSESSEE THEREAFTER CHANGED HIS STAND AND CLAIM ED THAT THE SHARES WERE SOLD THROUGH M/S. MOHIT SECURITIES BY MEANS OF AN O FF-LINE TRANSACTION SINCE THE TRANSACTION (IF ANY) WAS OFF-MARKET, EXEM PTION UNDER SECTION 10(38) IS NOT AVAILABLE. THE SHARES WERE CLAIMED TO HAVE BEEN SOLD AT RS.212 .65 TO RS.280.50 WHEREAS, AT THE STOCK EXCHANGE, THEY WERE TRADING F OR RS.18.82 TO RS.19.02 ON THAT DAY IN THE RESULT, THE ASSESSEE WAS NOT ABLE TO PROVE T HE GENUINENESS EITHER OF PURCHASE OR SALE IN THIS CASE M/S. BAFFIN ENGINEERING PROJECTS LTD. FITS THE PROF ILE OF A TYPICAL PENNY STOCK. IT HAD NO STANDING IN THE MARKET 5 MEDIA MATRIX LTD. MOHIT SECURITIES BROKERS NOTE PRODUCED. NO PROOF OF PURCHASE OF SHARES PROVIDED. PAYMENT WAS MADE IN CASH AS PER LEDGER ACCOUNT PROD UCED BY ASSESSEE M/S. MEDIA MATRIX LTD. FITS THE PROFILE OF A TYPICA L PENNY STOCK. IT HAD NO STANDING IN THE MARKET. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE CIT( A) BE UPHELD. 36. THE LEARNED DR ALSO DISTINGUISHED THE VARIOUS D ECISIONS RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE AND FILED THE FOLL OWING CHART : 1. MUKESH R. MAROLLA VS. ACIT,ITAT MUMBAI F BENCH , ORDER DATED 15-12-2005, (2006) 6 SOT 247 (MUMBAI) THE CASE IS DISTINGUISHABLE FROM CASES OF THE PANJA BI GROUP. IN THAT CASE, THERE WAS A CLEAR FINDING OF FACT THAT EVERY TRANSACTION HAD BEEN ACC OUNTED, DOCUMENTED AND SUPPORTED. EVEN EVIDENCES COLLECTED FROM THE THIRD PARTIES CONCERNE D WERE IN THE ASSESSEES FAVOUR. IN THE PRESENT CASE, MANY OF THE TRANSACTIONS ARE IN CASH, IN MANY CASES THIRD PARTIES INCLUDING STOCK EXCHANGES AND STOCK BROKERS HAVE MADE STATEMENTS WH ICH GO AGAINST THE ASSESSEE AS BROUGHT OUT CLEARLY BY THE AO AND THE CIT(A). 2. ACCHYALAL SHAW VS. ITO, ITAT KOLKATA B BENCH O RDER DATED 16-01-2009, (2009) 121 TTJ (KOL) 695; (2009) 19 DTR 177 24 IN THIS CASE, IT IS THE SALE AND NOT PURCHASE WHICH WAS OFF-MARKET. THE ISSUE BEFORE THE TRIBUNAL WAS WHETHER SALE TRANSACTION WAS GENUINE. THE STOC K BROKERS HAD CONFIRMED THE SALE BY THE ASSESSEE. 3. ACIT VS. J.R. SOLVENT INDUSTRIES (P) LTD., ITAT CHANDIGARH B BENCH ,ORDER DATED 31-10- 2008 (2009) 24 DTR (CHD) 387 THIS CASE TOO IS DISTINGUISHABLE. THE PURCHASE TRA NSACTIONS AS PER CONTRACT NOTES WERE DULY SUPPORTED BY BANK PASS BOOKS WHICH REFLECTED PAYMEN TS MADE FOR PURCHASE OF SHARES. THEY WERE ALSO FOUND DULY REFLECTED IN INVESTMENT ACCOUN T OF THE ASSESSEE. 4. NISRAJ REAL ESTATE & EXPORT (P) PTD. VS. ACIT.IT AT JAIPUR A BENCH ,ORDER DATED 15-05- 2009 (2009) 32 DTR (JP) 456 AO RELIED ON THE FACT THAT SUMMONS ISSUED BY HIM WE RE RETURNED UNSERVED. BUT SINCE SALES HAD BEEN PROVED, IT WAS HELD THAT SURELY PURCHASES MUST HAVE BEEN MADE. EVEN SO, ITAT DOUBTED THE NATURE OF THE PURCHASES AND SUSTAINED INVOKING OF SECTION 145(3) FOR MAKING BEST JUDGMENT ASSESSMENT. 5. DCIT VS. SMT. HANSA CHOUDHARY, ITAT JODHPUR BENC H,ORDER DATED 15-12-2011 (2012) 143 TTJ (JD) (UO) 76 WHOLLY DISTINGUISHABLE. THE PURCHASE OF SHARES WER E NOT DOUBTED BY AO BUT ACCEPTED. SALE CONSIDERATION TOO WAS ROUTED THROUGH BANKING CHANNE LS. HENCE IT WAS HELD THAT SALE CONSIDERATION COULD NOT BE CALLED ASSESSEES OWN MO NEY. 6. DALPAT SINGH CHOUDHARY VS. ACIT, ITAT JODHPUR BE NCH, 30-11-2011, (2012) 143 TTJ (JD) 500 : (2012) 65 DTR 148 DISTINGUISHABLE (I) PURCHASE WAS NOT OF DOUBTFUL NATURE (II) SHARES WERE DULY REFLECTED IN BALANCE SHEET O F THE ASSESSEE 7. BAIJNATH AGARWAL VS. ACIT, ITAT AGRA (THIRD MEMB ER), ORDER DATED 13-04-2010, (2010) 133 TTJ (AGRA) (TM) 129 : (2010) 40 SOT 475: (2010) 43 DTR 149 DISTINGUISHABLE. ALLOTMENT OF SHARES TO THE ASSES SEE HAD BEEN DULY PROVED, AND THERE WAS NO DISPUTE REGARDING THE PURCHASE OF THE SHARES IN AN EARLIER YEAR. 8. SMT. SUNANDA JAYAPRAKASH SURANA VS. ITO, ITAT PU NE BENCH A BENCH (A.Y. 2005-06) ORDER DATED 20-08-2010 IN THIS CASE INFACT THE ITAT HAS DOUBTED THE VERAC ITY OF CONTRACT NOTES AND THE GROUND RAISED BY ASSESSEE WAS DISMISSED. 9. JAYAPRAKASH P. SURANA VS. ITO, ITAT PUNE B BEN CH (A.Y. 2005-06 & 2006-07) ORDER DATED 30-11-2010. FOLLOWED BY PRECEDENT OF SUNANDA J. SURANA. HELD TO BE ONLY SHORT TERM CAPITAL GAIN AND NOT ENTITLED TO EXEMPTION UNDER SECTION 10(38). THIS W AS ON THE GROUND THAT ATLEAST THE SALES COULD NOT BE DOUBTED. 10. A. PRASHANT PRALHAD ASHTEKAR VS. ITO, ITAT PUNE A BENCH (A.Y. 2003-04) B. PRALHAD BABURAO ASHTEKAR VS. ITO, ITAT PUNE A BENCH (A.Y. 2003-04) ORDER DATED 28-03-2012 DISTINGUISHABLE. IN HIS RETURN OF INCOME UNDER SEC TION 153A ASSESSEE CLAIMED INCOME TO BE SHORT TERM CAPITAL GAIN (AND NOT LONG TERM CAPITAL GAIN WHICH IS EXEMPT UNDER SECTION 10(38). IN PRESENT CASE, ASSESSEE IS CLAIMING LONG TERM CAPITA L GAIN. THE ISSUE WAS WHETHER THE DIFFERENCE IN TAX BETWEEN LONG TERM CAPITAL GAIN (PER ORIGINAL RETURN OF INCOME) AND SHORT TERM CAPITAL GAIN PER 153A RETURN WAS CONCEALMENT SINCE IT WAS ONLY A FTER SEARCH/SURVEY THAT ASSESSEE CAME OUT WITH ADDITIONAL INCOME. THE CASE IS RELEVANT ONLY ON THE POINT OF CONCEALMENT. NOTABLY, THE A.Y. IN QUESTION WAS A.Y. 2003-04 AND THE ITAT FOUN D THAT SHARES IN QUESTION WERE DULY SHOWN IN BALANCE SHEET AS ON 01-04-2002. 25 11. ITO VS. SMT. BIBI RANI BANSAL, ITAT AGRA (THIRD MEMBER), ORDER DATED 13-04-2010 (2010) 133 TTJ (AGRA(TM) 394 : (2011) 44 SOT 500 : (2010) 43 DTR 279 WHOLLY DISTINGUISHABLE. PURCHASE OF SHARES WAS NOT IN DISPUTE AS THE COMPANY HAD DIRECTLY CONFIRMED THE SAME. 12. CIT VS. ARUN KUMAR AGRAWAL (HUF) VIDE TAX APPEA L NO.04/2011 ORDER DT. 13-07-2012 HIGH COURT OF JHARKHAND AT RANCHI. THE CASE IS WHOLLY DISTINGUISHABLE ON FACTS. IN TH AT CASE THERE WAS A CLEAR FINDING BY THE CIT(A) THAT THE PURCHASE OF SHARES WERE SHOWN BY THE ASSES SEES IN THEIR BALANCE SHEET FOR THE LAST FIVE YEARS AND THE GENUINENESS OF THE BOOKS OF ACCOUNT H AD NEVER BEEN QUESTIONED. MOREOVER, THE PAYMENT FOR PURCHASE HAD BEEN MADE THROUGH BANK, WH ICH WAS ALSO VERIFIED FROM THE BANK STATEMENT. 13. ACIT VS. ANOOP KUMAR 94 TTJ 299 (ITAT AMRITSAR SMC BENCH) ORDER DATED 28-12-2004 THE CASE IS ENTIRELY DISTINGUISHABLE. THE ISSUE BE FORE THE AMRITSAR BENCH IN THAT CASE WAS THE EFFECT OF RETRACTION OF A STATEMENT MADE UNDER 132( 4). NO INCRIMINATING MATERIAL WAS FOUND TO JUSTIFY THE ADDITIONS MADE. IT WAS HELD BY THE ITA T THAT THE DISCLOSURE WAS BALD AND HAD NO LEGS TO STAND ON. IN THE PRESENT CASE THERE ARE A NUMBE R OF FACTS AND CIRCUMSTANCES SUPPORTING THE AOS CONCLUSION. BESIDES, EVEN AS REGARDS THE EFFE CT OF RETRACTION, THE MORE RECENT DECISION OF THE AHMEDABAD BENCH IN KANTILAL C. SHAH 14 TAXMANN. COM 108 (AHD) IS AGAINST THE ASSESSEE. 14. ACIT VS. KAMAL KUMAR S. AGRAWAL AND OTHERS 133 TTJ 818 (ITAT NAGPUR BENCH) ORDER DATED 24-07-2009 THIS CASE TOO IS ENTIRELY DISTINGUISHABLE ON FACTS. THE ASSESSEE HAD DISCLOSED ALL THE SHARE TRANSACTIONS IN THE RETURNS FOR RELEVANT YEARS IN T HE NORMAL COURSE AND THE DEPARTMENT HAD ACCEPTED THE SAME. ALL THE PURCHASE TRANSACTIONS W ERE NOT OFF-MARKET TRANSACTIONS. THE PURCHASES HAD ALSO BEEN MADE AT PREVAILING MARKET R ATE QUOTED BY RECOGNISED STOCK EXCHANGE. NONE OF THESE FACTS EXIST IN THE PRESENT CASE. 15. ITO VS. MRS. RASILA N GADA VIDE ITA NO.1173/MUM /2010 ORDER DATED 08-08-2012 (ITAT MUMBAI) THE CASE IS WHOLLY DISTINGUISHABLE ON FACTS. THERE WAS A CLEAR FINDING OF FACT THAT THE ASSESSEE HAD PURCHASED THE SHARES AT MARKET RATE, FOR WHICH A CONFIRMATION FROM BOMBAY STOCK EXCHANGE WAS ALSO AVAILABLE. THE INVESTMENT IN SHARES HAD A LSO BEEN SHOWN IN THE BALANCE SHEET IN THE EARLIER YEAR. MOREOVER, THE AO HIMSELF HAD VERIFIE D THE TRANSACTION AND HAD NOT CHALLENGED THE PURCHASE OF SHARES. HE, HOWEVER, HELD THAT THE LTC G CLAIMED WAS NOT GENUINE SINCE THE BROKER HAD NOT PAID SECURITY TRANSACTION TAX AND BECAUSE T HE SHARES WERE HELD JOINTLY IN THE ACCOUNT OF THE BROKER EVEN THOUGH THE PAYMENT HAD BEEN MADE. IN ALL THESE ASPECTS, THERE IS ABSOLUTELY NO PARALLEL BETWEEN THE SAID CASE AND THE CASES OF THE PANJABI GROUP. 36.1 THE LEARNED COUNSEL FOR THE ASSESSEE IN HIS RE JOINDER SUBMITTED THAT THE ALLEGATION OF THE LEARNED DR THAT CERTAIN SHARES WE RE DEMATERIALISED SUBSEQUENT TO SALE IS NOT CORRECT. HE SUBMITTED THAT THE ASSESSE E HAD LODGED THE SHARES FOR DEMATERIALISATION PRIOR TO SALE. HOWEVER, SINCE IT TAKES SOME TIME CERTAIN SHARES WERE DEMATERIALISED LATER ON. REFERRING TO REVERSE OF PAGE 18 OF THE PAPER BOOK HE SUBMITTED THAT IN THE CASE OF SHARES OF DATABASE FI NANCE IT IS MENTIONED IN THE D- MAT STATEMENT PENDING DEMAT. THEREFORE, THE ASSE SSEE HAD PRESENTED THE SHARES FOR DEMATERIALISATION MUCH EARLIER TO THE DATE OF S ALE WHICH CAN BE VERIFIED FROM 26 THE D-MAT STATEMENT ITSELF. HE SUBMITTED THAT IN V IEW OF THE VARIOUS DECISIONS CITED AND FACTS NARRATED, THE LONG TERM CAPITAL GAI N/SHORT TERM CAPITAL GAIN DECLARED BY THE ASSESSEE HAS TO BE ALLOWED. 37. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECI SIONS CITED BEFORE US. WE FIND THE AO DISALLOWED THE LONG TERM CAPITAL GAIN DISCLO SED BY THE ASSESSEE ON THE GROUND THAT THE EVIDENCES SEIZED/IMPOUNDED DURING T HE COURSE OF SEARCH/SURVEY SHOW THAT THE LONG TERM CAPITAL GAINS BOOKED BY VA RIOUS MEMBERS OF THE GROUP FOR DIFFERENT ASST. YEARS ARE NOT GENUINE AND THE SAME ARE BASED ON FICTITIOUS DOCUMENTS CREATED. ACCORDING TO THE AO THE ASSESSE E GROUP WAS BOOKING BOGUS LONG TERM CAPITAL GAINS AND INTRODUCED UNACCOUNTED INCOME INTO THE BOOKS/BANK ACCOUNT IN THE GUISE OF LONG TERM CAPITAL GAINS WHI CH IS ALSO AS PER THE EVIDENCES GATHERED FROM THE SEIZED MATERIAL, STATEMENT OF BRO KERS DENYING TRANSACTIONS, REPLY RECEIVED FROM VARIOUS STOCK EXCHANGES ETC. IT IS A LSO THE CASE OF THE AO THAT THE ASSESSEE GROUP HAD ADMITTED ADDITIONAL INCOME AT TH E TIME OF SEARCH/SURVEY AND SUCH ADMISSION WAS IN LINE WITH THE EVIDENCES WHIC H GO AGAINST THE ASSESSEE. THE AO APART FROM TREATING THE LONG TERM CAPITAL GAIN D ECLARED BY THE ASSESSEE AS BOGUS TREATED THE SAME AS INCOME FROM OTHER SOURCES AND M ADE FURTHER ADDITION OF 6% OF THE AMOUNT CREDITED IN THE BOOKS AS COMMISSION EXPE NSES FOR SUCH ACCOMMODATION. 38. WE FIND IN APPEAL THE LEARNED CIT(A) ALSO UPHEL D THE ACTION OF THE AO. IT IS THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSES SEE THAT ALL THE SHARE TRANSACTIONS ARE GENUINE, THE SALES HAVE NOT BEEN DOUBTED BY THE REVENUE AND THEY HAVE ONLY DOUBTED THE PURCHASE OF THE SHARES. ACCORDING TO T HE LEARNED COUNSEL FOR THE ASSESSEE ALL THE SHARES WERE ROUTED THROUGH THE D-M AT ACCOUNT. THE PAPERS 27 RELATING TO PURCHASE AND SALE OF SHARES, SHARE CERT IFICATES WERE SEIZED BY THE DEPARTMENT AND DOCUMENTS IN RESPECT OF EACH AND EVE RY SHARE TRANSACTION OF THE ASSESSEE GROUP IS IN THE SEIZED RECORD. IT IS THE ARGUMENT OF LEARNED COUNSEL FOR THE ASSESSEE THAT THE SHARES WERE PURCHASED, SHARE CERT IFICATES WERE RECEIVED, THE SHARE CERTIFICATES BEARING THE SAME DISTINCTIVE NUMBERS WERE LATER SOLD FOR WHICH CAPITAL GAINS WERE DECLARED. 39. WE FIND THE LEARNED DR AT THE TIME OF HEARING B EFORE US FAIRLY ADMITTED THAT MOST OF THE SHARES THAT HAVE BEEN SOLD ARE FROM THE D-MAT ACCOUNT AND THE ISSUE IS RELATING TO THE GENUINENESS OF PURCHASE AND DATE OF PURCHASE OF THESE SHARES. IT IS THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSES SEE THAT CONSOLIDATED SHARE CERTIFICATES WERE OBTAINED AT THE TIME OF PURCHASE WHICH WERE SPLITTED INTO SMALLER DENOMINATION AND THE SAME DISTINCTIVE NUMBERS APPEA RING IN THE SPLITTED SHARES WERE SOLD AFTER DEMATERIALISATION. IT IS ALSO THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT OFF-MARKET TRANSACTIONS HAVE BEEN HELD TO BE GENUINE BY VARIOUS COURTS. 40. WE FIND THE PUNE BENCH OF THE TRIBUNAL IN THE C ASE OF AJAY SHANTILAL LALWANI & NEELESH SHANTILAL LALWANI (SUPRA) HAS HEL D AS UNDER : 8. CONSIDERING THE ABOVE SUBMISSIONS, WE FIND THAT SOME MATERIAL FACTS ARE UNDISPUTED THAT (I) SHARES PURCHASED WERE TRANSFERRED INTO D-M AT A/C. MAINTAINED BY THE ASSESSEE WITH HDFC BANK AND THE SHARES WERE SOLD ON THE DATE S MENTIONED IN THE TABLE REPRODUCED HEREINABOVE. THE ONLY DISPUTE IS REGARDI NG THE DATE AND MODE OF ACQUISITION OF THOSE SHARES IN QUESTION. THE ASSESSEE WAS NOT A BLE TO PROVE TO THE SATISFACTION OF THE AUTHORITIES BELOW THAT THE SAID SHARES WERE ACTUALL Y PURCHASED ON VARIOUS DATES DURING THE F.Y. 2004-05. THE ASSESSEE HAS TRIED TO MEET OU T OBJECTIONS RAISED BY THE A.O IN THIS REGARD. THE A.O NOTED THAT THE SHARES WERE CREDITED IN D-MAT A/C. ON 12.4.2005, AFTER LAPSE OF MORE THAN 20 TO 24 MONTHS FROM THE DATE OF PURCHASE CONTRACT NOTE I.E. 4.4.2003 AND 25.11.2005. THE SUBMISSION OF THE ASSESSEE IN T HIS REGARD REMAINED THAT THE ASSESSEE HAD PURCHASED THE SHARES OUTSIDE STOCK EXCHANGE DIR ECTLY FROM THE BROKER IN PHYSICAL FORM. THE ASSESSEE WAS HAVING NO D-MAT A/C. WHEN TH E SHARES WERE PURCHASED. D-MAT A/C. WAS OPENED ON 30TH NOVEMBER 2004 IN THE F.Y. 2 004-05. THE DATE OF PURCHASE OF SHARES IS 25.11.2003 AND NOT 25.11.2005. THE SAID D ATE FALLS IN THE A.Y. 2006-07. IT WAS EXPLAINED THAT SHARES WERE KEPT IN THE PHYSICAL FOR M TILL THE SHARES WERE HELD BY THE 28 ASSESSEE. WHEN THE ASSESSEE HAD DECIDED TO SELL THE SHARES, HE HAD SENT THE SHARES TO D.P. (STOCK HOLDING CORPORATION OF INDIA LTD.) FOR DEMAT ERIALIZATION. ASSESSEE HAD SUBMITTED A COPY OF D-MAT A/C. STATEMENT RECEIVED FROM THE D. P IN HIS FIRST SUBMISSION DATED 19.6.2008. THE D-MAT A/C. STATEMENTS REVEALED THAT THE SHARES D-MAT REQUEST WAS RECEIVED BY THE D.P. FROM THE ASSESSEE , AND AFTER SOME DAYS, D-MAT WAS CONFIRMED BY THE D.P. IT PROVES THAT THE SHARES WERE IN THE POSS ESSION OF THE ASSESSEE BEFORE DEMATERIALIZATION, EXPLAINED THE ASSESSEE. THE FACT THAT INVESTMENT IN PURCHASE OF SHARES DISCLOSED IN THE PRECEDING YEAR'S RETURN IS VERY WE LL ACCEPTED BY THE DEPARTMENT. THE ASSESSEE ALL ALONG DISPLAYED THE CHARACTERISTICS OF AN INVESTOR AND THERE WAS NOTHING ON RECORD TO SUGGEST THAT THE ASSESSEE HAD EVER INDULG ED IN ANY MANIPULATION IN THE MARKET. IT WAS SUBMITTED THAT WHILE COMPARING THE DATE OF P URCHASE OF SHARES IN PHYSICAL FORM OF THE ASSESSEE IN THE GIVEN DATA WITH THE DATE OF CRE DIT IN D-MAT A/C., THE A.O ERRED IN TOTALLY IGNORING THE FACT THAT AT THE TIME OF PURCH ASE OF AFORESAID COMPANIES SHARES, ASSESSEE WAS NOT HAVING D-MAT A/C. AND HENCE SHARES WERE PURCHASED IN PHYSICAL FORM WHICH WERE TRANSFERRED INTO D-MAT A/C. OPENED SUBSE QUENTLY. IT WAS SUBMITTED THAT DURING THE ASSESSMENT PROCEEDINGS, COPIES OF SHARE CERTIFICATES HELD BY THE ASSESSEE IN PHYSICAL FORM WERE ALSO PROVIDED TO THE A.O, WHICH CONTAINED COMPLETE RELEVANT DETAILS SUCH AS ADDRESS OF LATEST OFFICE OF THE COMPANY, SI GNATURE OF THE AUTHORIZED SIGNATORY ALONG WITH TWO DIRECTORS' SIGNATURES, VALUE OF SHAR ES WITH PAID UP AMOUNT OF SHARES PURCHASED IN EACH COMPANY, DATE OF ISSUE OF CERTIFI CATE, SERIAL NO., REGISTERED FOLIO, NUMBER OF SHARES WITH THEIR DISTINCTIVE NOS., DATE OF TRANSFER OF SHARES IN THE NAME OF ASSESSEE (REFLECTED ON THE BACK SIDE OF THE CERTIFI CATE) AND ALSO COPIES OF CONTRACT NOTE ALONG WITH BILLS ISSUED BY SHARE BROKER S.B. BHUTRA & CO. 9. IT WAS FURTHER SUBMITTED THAT DATE OF ALLEGED NO N-EXECUTION OF 70 SCRIPTS OF 23.11.2008 RELIED UPON BY THE A.O IN THE ASSESSMENT ORDER, FAL LS IN A.Y. 2009-10. SIMILARLY, THE A.O HAD NOT BEEN VIGILANT TO MENTION CORRECT NAME OF TH E COMPANY IN THE ASSESSMENT ORDER. THE NAME OF THE COMPANY IS SHIV OM INVESTMENTS AND CONSULTANCY LTD. AND NOT SHIV COMMUNICATIONS AS MENTIONED IN THE ASSESSMENT ORDER . THE A.O HAS THUS PROCEEDED ON THE BASIS NOT ONLY MISLEADING BUT INCORRECT FACTS. 10. REGARDING DENIAL OF STOCK EXCHANGE THAT S.B. BU THRA & CO., HAD NOT EXECUTED ANY TRADE ON 2.4.2003 IN OASIS CINE COMMUNICATION LTD. AND ALSO ON 23.11.2008 (CORRECT DATE IS 25.11.2003) IN SHIV OM COMMUNICATIONS IN ON LINE TRADING SYSTEMS OF THE EXCHANGE, THE SUBMISSION OF THE ASSESSEE REMAINED T HAT THE WORDS USED 'ONLINE TRADING SYSTEM OF THE EXCHANGE' ARE VERY IMPORTANT AS THE A SSESSEE HAS ALSO STATED THE SAME CLEARLY TO THE A.O IN HIS STATEMENT THAT THE TRANSA CTION IS NOT DONE BY HIM IN THE ONLINE SYSTEM OF THE EXCHANGE, BUT THE SHARES WERE PURCHAS ED OUTSIDE THE MARKET THROUGH THE BROKER. IT WAS SUBMITTED THAT THE A.O HAD ASKED THE COMPANY TO CONFIRM THE SHARE TRANSACTIONS. IN CASE OF SHIV OM INVESTMENTS AND CO NSULTANCY LTD, THE COMPANY VIDE ITS LETTER DATED 29.11.2008 ADDRESSED TO THE COMPANY HA D CONFIRMED IN BLACK AND WHITE THAT THE SAID SHARES HAVE BEEN TRANSFERRED ON THE GIVEN DATE. IT WAS SUBMITTED THAT IT IS FOR THE ASSESSEE TO HOLD THE SHARES IN PHYSICAL FORM OR DEM ATERIALIZED FORM. THE ASSESSEE COULD NOT BE PENALIZED EITHER FOR NOT OPENING D-MAT A/C. WHEN HE HAD PURCHASED SHARES IN THE PHYSICAL FORM. IT WAS FURTHER SUBMITTED BY THE ASSE SSEE THAT DURING THE INSPECTION OF RECORDS ALLOWED BY A.O. (AFTER COMPLETION OF ASSESS MENT AND FOR THE PURPOSE OF PREPARATION OF FIRST APPEAL), IT WAS NOTICED THAT T HE BROKER M/S. S.B. BUTHRA & CO. IN THEIR 29 LETTER DT. 10.11.2008 HAD INFORMED THE A.O THAT THE Y HAD TRANSACTIONS WITH SHRI AJAY LALWANI DURING F.Y. 2003-04 AS PER LEDGER ACCOUNT F URNISHED WITH THE SAID LETTER. FROM THE COPY OF THE LEDGER A/C. EXTRACT RECEIVED FROM T HE SAID BROKER, IT WOULD BE SEEN THAT THE NAMES OF BOTH THE COMPANIES THAT RELEVANT DETAILS I .E. QUANTITIES OF SHARES AND THE AMOUNT OF PURCHASES ARE DULY REFLECTED. IT WAS SUBMITTED T HAT THE ASSESSEE IS ASSESSED TO TAX SINCE A.Y. 1991-92 HAVING SUBSTANTIAL INCOME OUT OF WHICH , HE HAD PURCHASED SHARES; THE CONTRACT NOTE AND BILL ISSUED BY THE BROKER IS FULL AND COMPLETE SUPPORTING EVIDENCE FOR PURCHASE OF SHARES. 11. IN CASE OF OASIS CINE COMMUNICATIONS LTD., IT W AS SUBMITTED THAT SHARES WERE PURCHASED ON 4.4.2003, BUT GOT TRANSFERRED IN THE N AME OF ASSESSEE ON 23.4.2004. THE DELAY WAS DUE TO SOME PROCEDURE UNDERGONE AS THE SH ARE CERTIFICATES WERE RECEIVED AFTER TRANSFER IN THE NAME OF ASSESSEE BEARING ISSUE DATE OF 16.3.2004. IT WAS SUBMITTED THAT THE SHARES PURCHASED ARE RECORDED IN THE BOOKS OF ACCOU NT AND SHOWN IN THE BALANCE SHEET AS ON 31ST MARCH 2004. THE COPY OF THE BALANCE SHEE T WAS SUBMITTED ALONG WITH THE RETURN OF INCOME FOR THE A.Y. 2004-05. ALSO, THE AS SESSEE HAD RECEIVED THE CONTRACT NOTES AND BROKER'S BILL IN THE SAID YEAR ONLY WITHOUT ANY DELAY. THE D.P'S DATA ALSO SHOWS THAT THE ASSESSEE HAD SENT THE SHARES IN PHYSICAL FORM B Y SUBMITTING THE ORIGINAL SHARE CERTIFICATE TO THE D.P FOR DEMATERIALIZATION. 12. FROM ABOVE DISCUSSION, WE FIND THAT THE ASSESSE E HAD ADDRESSED THE DOUBTS RAISED ON THE DECLARED DATES OF PURCHASES OF ABOVE SHARES. TH E LD. D.R. HAS NOT BEEN ABLE TO REBUT THE ABOVE EXPLANATION OF THE ASSESSEE BEFORE US. AD MITTEDLY, IN THE PRESENT CASE BEFORE US; THE ASSESSEE HAD PURCHASED THE SHARES OUTSIDE STOCK EXCHANGE DIRECTLY FROM THE BROKER IN PHYSICAL FORM THOUGH D-MAT A/C WAS OPENED ON BELATE D DATE WITH THIS EXPLANATION THAT AT THE TIME OF PURCHASE OF SHARES, HE WAS NOT HAVIN G D-MAT A/C. AND ON OPENING OF D- MAT A/C., THE SHARES WERE TRANSFERRED TO THE SAME. BEFORE THE A.O COPIES OF THE SHARE CERTIFICATES HELD BY ASSESSEE IN PHYSICAL FORM WERE PROVIDED WHICH CONTAINED COMPLETE RELEVANT DETAILS SUCH AS ADDRESS OF REGISTERED OFFI CE OF THE COMPANY, SIGNATURES OF THE AUTHORIZED SIGNATORY ALONG WITH 2 DIRECTORS' SIGNAT URE, VALUE OF SHARES WITH PAID UP AMOUNT OF SHARES PURCHASED IN EACH COMPANY, DATE OF ISSUE OF CERTIFICATE, CERTIFICATE NO., REGISTERED FOLIO, NUMBER OF SHARES WITH THEIR DISTINCTIVE NUMBERS, DATE OF TRANSFER OF SHARES IN THE NAME OF ASSESSEE AND ALSO COPIES OF C ONTRACT NOTES ALONG WITH BILLS ISSUED BY SHARE BROKER S.B. BUTHRA & COMPANY. THE ASSESSEE ALSO FURNISHED RETURNS OF INCOME ALONG WITH BALANCE SHEET FOR THE A.YS. 2004-05 AND 2005-06 DURING WHICH PERIOD, ASSESSEE CLAIMED TO HAVE PURCHASED THOSE SHARES IN QUESTION, COPY OF CONTRACT NOTES ISSUED BY THE BROKER AND CONFIRMATIONS GIVEN BY SHI V OM INVESTMENTS AND CONSULTANCY LTD. AND BY BROKER. WE ARE THUS OF THE VIEW THAT ME RELY BECAUSE THERE WAS SUBSTANTIAL DELAY IN TRANSFERRING THE SHARES INTO D-MAT A/C. FR OM THE DATE OF PURCHASE AND THE TRANSACTIONS NOT ROUTED THROUGH CALCUTTA STOCK EXCH ANGE , THE A.O WAS NOT JUSTIFIED IN DOUBTING THE DECLARED DATE OF PURCHASE OF THE SHARE S IGNORING THE ABOVE EVIDENCES. IN THE CASE OF CIT VS. SMT. JAMNADEVI AGRAWAL & ORS., ITA NO. 40 OF 2010 (BOMBAY HIGH COURT - NAGPUR BENCH), COPY SUPPLIED, THE PROPERTY BROKER HAD STATED THE SHARE TRANSACTIONS AS SHAM AND BOGUS. HOWEVER, THE PURCHA SE AND SALE PRICE OF THE SHARES DECLARED BY THE ASSESSEE WERE IN CONFORMITY WITH TH E MARKET SALES PREVAILING ON THE RESPECTIVE DATES, THE RELATED COMPANY HAD CONFIRMED TO HAVE HANDED OVER THE SHARES PURCHASED BY THE ASSESSEE, SALE OF THE SHARES TO TH E RESPECTIVE BUYERS WAS ALSO SUPPORTED 30 BY THE DOCUMENTS, THE HON'BLE HIGH COURT HAS BEEN P LEASED TO UPHOLD THE FINDING OF THE TRIBUNAL THAT TRANSACTIONS WERE GENUINE. LIKEWISE I N THE CASE OF ACIT VS. KAMAL KUMAR S. AGRAWAL (IND.) & ORS (SUPRA) THAT NAGPUR BENCH O F THE TRIBUNAL HAS ALSO HELD THAT THE FACT THAT THERE WERE DIFFERENCE IN THE INFORMATION AS PER CONTRACT NOTES AND THAT RECEIVED FROM THE STOCK EXCHANGE IS NOT MATERIAL AS ADMITTED LY SOME OFF MARKET TRANSACTIONS WERE NOT REPORTED TO THE STOCK EXCHANGE, THEREFORE SUCH TRANSACTIONS CANNOT BE TREATED AS SHAM MERELY ON ACCOUNT OF SOME DISCREPANCIES AND THE SAL E PROCEEDS OF SHARES CANNOT BE TAXED UNDER SECTION 68 OF THE ACT. SIMILARLY, THE KOLKATA BENCH VS. ITO (SUPRA) HAS HELD THAT IN OFF MARKET TRANSACTIONS I N SHARES, ANY ENQUIRY FROM THE STOCK EXCHANGE WILL NOT YIELD RESULT IN FAVOUR OF REVENUE, REVENUE HAS TO SEE WHE THER THE SALE HAS BEEN EFFECTED OR NOT AS PER THE ACCEPTANCE AND ADMISSION OF THE RESPECTI VE STOCK BROKER. UNDER THESE CIRCUMSTANCES, WE SET ASIDE THE FIRST APPELLATE ORD ER TO THIS EXTENT THAT SHARES IN QUESTION WERE NOT PURCHASED ON THE DECLARED DATES AND DIRECT THE A.O TO ALLOW THE CLAIMED EXEMPTION U/S. 10(38) OF THE ACT ON THE LONG TERM C APITAL GAIN SHOWN BY THE ASSESSEE ON THOSE SHARES. THE GROUNDS OF THE APPEALS PREFERR ED BY THE ASSESSEE AGAINST THE DENIAL OF THE DEEMED EXEMPTION U/S. 10(38) OF THE ACT ON L ONG TERM CAPITAL GAIN ON SALE OF THE ABOVE SHARES ARE THUS ALLOWED. 13. LIKEWISE IN VIEW OF OUR DISCUSSION, WE DO NOT F IND INFIRMITY IN THE FIRST APPELLATE ORDER WHEREBY THE LD CIT(A) HAS RIGHTLY ACCEPTED THE COST OF PURCHASE/ACQUISITION OF SHARES AS STATED BY THE ASSESSEE. THE SAME IS UPHELD. THE GRO UNDS OF THE APPEALS PREFERRED BY THE REVENUE ARE THUS REJECTED. CONSEQUENTLY, APPEALS PR EFERRED BY THE REVENUE ARE DISMISSED AND THOSE PREFERRED BY THE ASSESSEE ARE ALLOWED. 41. WE FIND THE HONBLE JHARKHAND HIGH COURT IN THE CASE OF CIT VS. ARUN KUMAR AGRAWAL (HUF) (SUPRA) HAS HELD AS UNDER : 10. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEAR NED COUNSEL FOR THE PARTIES AND WE ARE OF THE CONSIDERED OPINION THAT THE LEARNED ASSE SSING OFFICER WAS MUCH INFLUENCED BY THE ENQIURY REPORT WHICH MAY HAS BEEN BROUGHT ON RE CORD BY THE EFFORTS OF THE ASSESSING OFFICER AND THAT ENQUIRY REPORT WAS PREPARED BY THE SEBI AND FROM THE OBSERVATIONS MADE BY THE ASSESSING OFFICER HIMSELF, IT IS CLEAR THAT AFTER GETTING THAT ENQUIRY REPORT, THE SEBI PRIMA FACIE FOUND INVOLVEMENT OF SOME OF T HE SHARE BROKERS IN UNFAIR TRADE PRACTICES. EVEN IN A CASE WHERE THE SHARE BROKER WA S FOUND INVOLVED IN UNFAIR TRADE PRACTICE AND WAS INVOLVED IN LOWERING AND RISING OF THE SHARE PRICE, AND ANY PERSON, WHO HIMSELF IS NOT INVOLVED IN THAT TYPE OF TRANSACTION , IF PURCHASED THE SHARE FROM THAT BROKER INNOCENTLY AND BONAFIDELY AND IF HE SHOW HIS BONAFI DE IN TRANSACTION BY SHOWING RELEVANT MATERIAL, FACTS AND CIRCUMSTANCES AND DOCUMENTS, TH EN MERELY ON THE BASIS OF THE REASON THAT SHARE BROKER WAS INVOLVED IN DEALING IN THE SH ARE OF A PARTICULAR COMPANY IN COLLUSION WITH OTHERS OR IN THE MANNER OF UNFAIR TR ADE PRACTICES AGAINST THE NORMS OF S.E.B.I AND STOCK EXCHANGE, THEN MERELY BECAUSE OF THAT FACT A PERSON WHO BONAFIDELY ENTERED INTO SHARE TRANSACTION OF THAT COMPANY THRO UGH SUCH BROKER THEN ONLY BY MERE ASSUMPTION SUCH TRANSACTIONS CANNOT BE HELD TO BE A SHAME TRANSACTION. FACT OF TINTED BROKER MAY BE RELEVANT FOR SUSPICION BUT IT ALONE N ECESSARILY DOES LEAD TO CONCLUSION OF ALL TRANSACTION OF THAT BROKER AS TINTED. IN SUCH C IRCUMSTANCES, FURTHER ENQUIRY IS NEEDED AND THAT IS FOR INDIVIDUAL CASE. SUCH FURTHER ENQUI RY WAS NOT CONDUCTED IN THAT CASE. 11. AT THIS JUNCTURE, IT WOULD BE RELEVANT TO MENTION H ERE THAT IT IS NOT DISPUTED BY THE REVENUE BEFORE US THAT THE SHARES OF THESE ASSESSEE S WERE ALREADY SHOWN IN THE EARLIER BALANCE SHEET SUBMITTED BY THE ASSESSEES, AND THERE FORE, IN THAT SITUATION, HOW THE REVENUE CONDEMNED THE TRANSACTION EVEN ON THE GROUN D OF STEEP RISE IN THE SHARES. IF WITHIN A PERIOD OF ONE YEAR, THE SHARE PRICE HAS RI SEN FROM RS.5 TO 55 AND FROM 9 TO 160 AND ONE PERSON WAS HOLDING THE SHARES MUCH PRIOR TO THAT START OF RISE OF THE SHARE, THEN 31 HOW IT CAN BE INFERRED THAT SUCH PERSON ENTERED INT O SHAM TRANSACTION FEW YEARS AGO AND PREPARED FOR GETTING THE BENEFIT AFTER FEW YEARS WH EN THE SHARE WILL START RISING STEEPLY. IN PRESENT CASE EVEN THERE WAS NO REASON FOR SUCH SUSP ICION WHEN THE SHARES WERE PURCHASED YEARS BEFORE THE UNUSUAL FLUCTUATION IN T HE SHARE PRICE. HERE IN THIS CASE, WE HAVE GIVEN EXAMPLE OF ONE OF THE TAX APPEAL WHEREIN THE SHARES WERE PURCHASED IN THE YEAR 2004 AND WERE SOLD IN THE YEAR 2006, WHICH IS SAID TO BE ONE OF THE CASE WHEREIN THE GAP IN THE PURCHASE AND SALE OF THE SHARES WAS NARR OWEST. IN OTHER CASES AS WE HAVE NOTICED FROM THE VARIOUS ORDERS OF THE C.I.T(APPEAL S) THAT, THE SHARES OF SOME OF THE COMPANIES WERE PURCHASED BY THE ASSESSEES EVEN FIVE YEARS AGO FROM THE TIME OF SALE AND THOSE PURCHASERS WERE ALREADY DISCLOSED IN THE BALA NCE SHEET OF THE ASSESSEE, THEN FROM ANY ANGLE, IT IS PROVED THAT THE ASSESSEES HAD HELD THE SHARES MUCH PRIOR TO 12 MONTHS OF THE SALE OF THE SHARES. 12. HENCE, THESE APPEALS ARE DISMISSED. 42. WE FIND THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS. SMT.JAMNADEVI AGRAWAL & OTHERS REPORTED IN 328 ITR 656 HAS HELD AS UNDER : 10. THE SOLE CONTENTION RAISED BY THE REVENUE IN T HESE APPEALS IS THAT THE ENTIRE LONG- TERM CAPITAL GAINS CLAIMED BY THE ASSESSEE REPRESEN TS UNDISCLOSED INCOME OF THE ASSESSEE BECAUSE : (A) MOST OF THE SALES OF THE SHARES EFFECTED BY THE GROUP ARE OF THE SAME COMPANIES AND THROUGH THE SAME BROKERS LOCATED AT C ALCUTTA, (B) PRADEEP KUMAR DAGA, THE PRINCIPAL BROKER HAS CO NFIRMED THAT THE TRANSACTIONS WITH THE HALDIRAM GROUP ARE SHAM AND E XPLAINED THE MODUS OPERANDI AS FOLLOWS : 'PARTY A WANTS TO CLAIM LONG-TERM CAPITAL GAIN AND APPROACHES ME THROUGH A PERSON 'X'. MR. X APPROACHES ME WITH TWO NAMES, I.E. THE BUYER (A) AND THE SELLER (B). MR. A BUYS THE SHARE OF THE COMPANY HELD BY THE SELLER B AT RS. 3 THROUGH MY TERMINAL. AFTER 365 DA YS OR ONE YEAR WHEN THE SHARE OF THE COMPANY HAS REACHED HIGH OF RS. 100, M R. X APPROACHES ME THROUGH MR. A WITH THE NAME OF A FRESH PURCHASER MR . C, WHO IS WILLING TO BUY THE SHARE OF MR. A AT RS. 100. MR. A (WHO WAS P REVIOUSLY THE PURCHASER AND WANTS TO AVAIL LTCG NOW) BECOMES THE SELLER AND SELLS HIS SHARES AT RS. 100 TO MR. C THROUGH MY TERMINAL. MR. C GIVES ME A CHEQUE OF RS. 100 FOR THE SHARES BOUGHT FROM MR. A AND SUB SEQUENTLY I PAY THE SALE PROCEEDS IN CHEQUE/DD TO MR. A AFTER DEDUCTING MY BROKERAGE. SUBSEQUENTLY, MR. A ON RECEIPT OF THE SALE PROCEEDS BY CHEQUES/DD PAYS MR. X, THE SAME PROCEEDS BY CHEQUES/DD PAYS MR. X T HE SAME AMOUNT BY CASH (NO. 2 ACCOUNT), I.E. RS. 100 AND MR. X PAYS T HE SAME TO MR. C. IN THIS WAY, MR. A CONVERTS THE BLACK MONEY INTO WHITE AND AVAILS LONG-TERM CAPITAL GAIN.' (C) THE SALE TRANSACTIONS WERE OFF-MARKET TRANSACTI ONS AND THE CALCUTTA STOCK EXCHANGE BY ITS LETTER DT. 26TH MAY, 2005 HAS CONFIRMED THAT QUITE A FEW OF THE TRANSACTIONS CARRIED OUT BY SHRI PRADEEP KUMAR DAGA WERE NOT BORNE ON THE RECORDS OF THE EXCHANGE AND THAT THE D ETAILS NOTED ON SOME OF THE OTHER CONTRACT NOTES DID NOT MATCH. (D) THERE WERE UNEXPLAINED CASH CREDITS IN SOME OF THE BUYERS' BANK ACCOUNTS PRIOR TO ISSUANCE OF CHEQUES TO THE ASSESS EES. 11. WE SEE NO MERIT IN THE ABOVE CONTENTIONS. THE F ACT THAT THE ASSESSEES IN THE GROUP HAVE PURCHASED AND SOLD SHARES OF SIMILAR COMPANIES THROUGH THE SAME BROKER CANNOT BE A GROUND TO HOLD THAT THE TRANSACTIONS ARE SHAM AND BOGUS, ESPECIALLY WHEN DOCUMENTARY EVIDENCE WAS PRODUCED TO ESTABLISH THE GENUINENESS OF THE CLAIM. 32 12. FROM THE DOCUMENTS PRODUCED BEFORE US, WHICH WE RE ALSO IN POSSESSION OF THE AO, IT IS SEEN THAT THE SHARES IN QUESTION WERE INF ACT PURCHASED BY THE ASSESSEES ON THE RESPECTIVE DATES AND THE COMPANY HAS CONFIRMED TO H AVE HANDED OVER THE SHARES PURCHASED BY THE ASSESSEES. SIMILARLY, THE SALE OF THE SHARES TO THE RESPECTIVE BUYERS IS ALSO ESTABLISHED BY PRODUCING DOCUMENTARY EVIDENCE. IT IS TRUE THAT SOME OF THE TRANSACTIONS WERE OFF-MARKET TRANSACTIONS. HOWEVER , THE PURCHASE AND SALE PRICE OF THE SHARES DECLARED BY THE ASSESSEES WERE IN CONFORMITY WITH THE MARKET RATES PREVAILING ON THE RESPECTIVE DATES AS IS SEEN FROM THE DOCUMENTS FURNISHED BY THE ASSESSEES. THEREFORE, THE FACT THAT SOME OF THE TRANSACTIONS WERE OFF-MAR KET TRANSACTIONS CANNOT BE A GROUND TO TREAT THE TRANSACTIONS AS SHAM TRANSACTIONS. 13. THE STATEMENT OF PRADEEP KUMAR DAGA THAT THE TR ANSACTIONS WITH THE HALDIRAM GROUP WERE BOGUS HAS BEEN DEMONSTRATED TO BE WRONG BY PRODUCING DOCUMENTARY EVIDENCE TO THE EFFECT THAT THE SHARES SOLD BY THE ASSESSEES WERE IN CONSONANCE WITH THE MARKET PRICE. ON PERUSAL OF THOSE DOCUMENTARY EVIDE NCE, THE TRIBUNAL HAS ARRIVED AT A FINDING OF FACT THAT THE TRANSACTIONS WERE GENUINE. NOTHING IS BROUGHT TO OUR NOTICE THAT THE FINDINGS RECORDED BY THE TRIBUNAL ARE CONTRARY TO THE DOCUMENTARY EVIDENCE ON RECORD. 14. THE TRIBUNAL HAS FURTHER RECORDED A FINDING OF FACT THAT THE CASH CREDITS IN THE BANK ACCOUNTS OF SOME OF THE BUYERS OF SHARES CANNO T BE LINKED TO THE ASSESSEES. MOREOVER, IN THE LIGHT OF THE DOCUMENTARY EVIDENCE ADDUCED TO SHOW THAT THE SHARES PURCHASED AND SOLD BY THE ASSESSEES WERE IN CONFORM ITY WITH THE MARKET PRICE, THE TRIBUNAL RECORDED A FINDING OF FACT THAT THE CASH C REDITS IN THE BUYERS' BANK ACCOUNTS CANNOT BE ATTRIBUTED TO THE ASSESSEES. NO FAULT CAN BE FOUND WITH THE ABOVE FINDING RECORDED BY THE TRIBUNAL. 15. RELIANCE PLACED BY THE COUNSEL FOR THE REVENUE ON THE DECISION OF THE APEX COURT IN THE CASE OF SUMATI DAYAL (SUPRA) IS WHOLLY MISPL ACED. IN THAT CASE, THE ASSESSEE THEREIN HAD CLAIMED INCOME FROM HORSE RACES AND THE FINDING OF FACT RECORDED WAS THAT THE ASSESSEE THEREIN HAD NOT PARTICIPATED IN RACES, BUT PURCHASED WINNING TICKETS AFTER THE RACE WITH THE UNACCOUNTED MONEY. IN THE PRESENT CAS E, THE DOCUMENTARY EVIDENCE CLEARLY SHOWS THAT THE TRANSACTIONS WERE AT THE RATE PREVAI LING IN THE STOCK MARKET AND THERE WAS NO QUESTION OF INTRODUCING UNACCOUNTED MONEY BY THE ASSESSEES. THUS, THE DECISION RELIED UPON BY THE COUNSEL FOR THE REVENUE IS WHOLLY DISTI NGUISHABLE ON FACTS. 16. FOR ALL THE AFORESAID REASONS, WE HOLD THAT THE DECISION OF THE TRIBUNAL IS BASED ON FINDING OF FACTS. NO SUBSTANTIAL QUESTION OF LAW ARISES FROM THE ORDER OF THE TRIBUNAL. ACCORDINGLY, ALL THESE APPEALS ARE DISMISSED. NO OR DER AS TO COSTS. 43. WE FIND IN THE INSTANT CASE SALE OF SHARES FROM THE D-MAT ACCOUNT HAS NOT BEEN PROVED TO BE FALSE. THE DISPUTE IS ONLY REGAR DING THE PURCHASE OF THE SHARES. SINCE THE ASSESSEE WAS NOT ABLE TO SATISFY THE REVE NUE AUTHORITIES WITH THE DISTINCTIVE NUMBERS OF THE ORIGINAL SHARES WHICH WE RE SUBSEQUENTLY DEMATERIALISED AND SOLD, THE LOWER AUTHORITIES HAD DOUBTED THE GEN UINENESS OF THE TRANSACTIONS. IT IS THE SUBMISSION OF THE LEARNED COUNSEL FOR THE AS SESSEE THAT HE IS IN A POSITION TO DEMONSTRATE BEFORE THE AO THAT THE CONSOLIDATED SHA RE CERTIFICATES RECEIVED ON PURCHASE OF THE SHARES IN PHYSICAL FORM WERE SUBSEQ UENTLY SPLITTED INTO SMALLER DENOMINATION AND THE SPLITTED SHARES WERE SENT FOR DEMATERIALISATION AND THE SHARES 33 BEARING THE SAME DISTINCTIVE NUMBERS WERE LATER SOL D. IN OTHER WORDS, THE DISTINCTIVE NUMBER OF THE SHARES SOLD AND THE SHARE S PURCHASED ARE THE SAME. THEREFORE, WE, IN THE INTEREST OF JUSTICE, DEEM IT PROPER TO RESTORE THE ISSUE TO THE FILE OF THE AO WITH THE DIRECTION TO GIVE AN OPPORT UNITY TO THE ASSESSEE TO SUBSTANTIATE WITH EVIDENCE TO HIS SATISFACTION THAT THE ASSESSEE HAS INFACT SENT THE CONSOLIDATED SHARE CERTIFICATES TO THE RESPECTIVE C OMPANIES FOR SPLITTING AND THE DISTINCTIVE NUMBERS OF SUCH SPLITTED SHARE CERTIFIC ATES WHICH HAS GONE TO THE D- MAT ACCOUNT AND SUBSEQUENTLY SOLD ARE SAME. WE ACC ORDINGLY RESTORE THE ISSUE TO THE FILE OF THE AO FOR DECIDING THE ISSUE AFRESH IN THE LIGHT OF OUR ABOVE OBSERVATIONS AND IN ACCORDANCE WITH LAW AFTER GIVIN G DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDIN GLY. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PU RPOSES. 44. SINCE WE RESTORE THE ISSUE TO THE FILE OF THE AO, T HEREFORE, THE ISSUE OF COMMISSION IS ALSO RESTORED TO THE FILE OF THE AO. IN CASE THE ASSESSEE IS ABLE TO PROVE THAT THE DISTINCTIVE NUMBERS IN THE SPLITTED SHARES FROM THE CONSOLIDATED SHARE CERTIFICATES ARE THE SAME WHICH HAVE SUBSEQUENTLY B EEN DEMATERIALISED AND LATER SOLD THEN THE LONG TERM CAPITAL GAIN DECLARED BY TH E ASSESSEE HAS TO BE ALLOWED AS GENUINE. IN OTHER WORDS, THE CHARGING OF COMMISSIO N AS ACCOMMODATION ENTRY WILL NOT SURVIVE. THE GROUNDS RAISED BY THE ASSESSEE AR E ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 45. THE GROUNDS IN THE REMAINING APPEALS ARE IDENTI CAL TO THE GROUNDS IN ITA NO. 659/PN/2011. WE HAVE ALREADY DECIDED THE ISSUE AND THE MATTER HAS BEEN RESTORED TO THE FILE OF THE AO WITH CERTAIN DIRECTI ONS. FOLLOWING THE SAME RATIO, WE RESTORE ALL THE APPEALS TO THE FILE OF THE AO FOR D ECIDING THE ISSUE AFRESH IN THE LIGHT OF OUR OBSERVATIONS IN ITA NO.659/PN/2011. 34 46. IN THE RESULT, THE APPEALS FILED BY THE RESPECT IVE ASSESSEES ARE ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS THE 31 ST DAY OF OCTOBER 2012 SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: THE 31 ST OCTOBER 2012 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A) (CENTRAL), PUNE 4. THE D.R, A PUNE BENCH 5. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE