Zakrullah Choudhary, Pimpri V. DCIT, Cen.Cir.2(3), Pune, Pune

ITA 669/PUN/2012

• Counselvise Citation: 66924514 RSA 2012
• Duration Of Justice: 1 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 17-02-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 30-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MUKESH VERMA
• Assessee Lawyers: S N DOSHI
• Keywords: Capital asset; Income from undisclosed sources; Principle of natural justice; Accommodation entries; Retraction; Penny stocks; Revenue expenditure
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER , AND SHRI R.K. PANDA, ACCOUNTANT MEMBER. ITA.NO.669/PN/2012 (ASSESSMENT YEAR 2005-06) ZIKRULLAH CHAUDHARY, YESHWANT NAGAR, TELCO-BHOSARI ROAD, PIMPRI, PUNE-18. PAN NO.ACPPC3582Q .. APPELLANT VS. DCIT CENTRAL CIRCLE-2(3), PUNE .. RESPONDENT ASSESSEE BY : SHRI S.N. DOSHI REVENUE BY : SHRI MUKESH VERMA DATE OF HEARING : 18-02-2014 DATE OF PRONOUNCEMENT : 04-03-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 20-02-2012 OF THE CIT(A) CENTRAL PUNE, RELATING TO ASSESSMENT YEAR 2005-06. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN INDIVIDUAL. A SEARCH U/S.132 OF THE I.T. ACT WAS CONDUCTED AT THE RESIDENTIAL PREMISES OF THE ASSESSEE ON 24-10-2007 WHICH WAS PART OF A S EARCH CONDUCTED IN THE CASE OF HABIBULLAH CHAUDHARY, CHETAN MEHTA AND VISHAL MALHOTRA GROUP OF PUNE CONSISTING OF ITS VARIOUS BUSINESS EN TERPRISES. IN RESPONSE TO NOTICE U/S.153A(A) THE ASSESSEE FILED RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS.97,58,950/-. 2 2.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED FROM THE RETURN OF INCOME FILED BY THE ASSESS EE THAT HE HAD DISCLOSED LONG TERM CAPITAL GAIN OF RS.65,97,975/- AND CLAIMED RS.27,50,883/- AS EXEMPT CAPITAL GAIN. THIS LONG T ERM CAPITAL GAIN HAS BEEN CLAIMED ON SALE OF SHARES OF M/S.TANU HEALTH C ARE LTD. AND M/S. COMFORT INTECH LTD. THE ASSESSING OFFICER OBSERVE D THAT THE ASSESSEE HAS PURCHASED THE SHARES FOR VERY NOMINAL PRICES AN D HAS SOLD THE SAME AT VERY HIGH PRICE TO CLAIM THE LONG TERM CAPITAL GAIN . FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE, THE ASSESSING OF FICER OBSERVED THAT THE ASSESSEE HAS ACQUIRED THE SHARES IN MARCH 2004 AND THE PAYMENT TOWARDS THE SAME HAS BEEN MADE ONLY AFTER ONE YEAR, I.E., A PRIL 2005. WHEN CONFRONTED ABOUT THIS, THE ASSESSEE STATED THAT HE HAD ASKED HIS BROKER TO BUY THE SAID STOCK FOR HIM AND THE PAYMENT WAS MADE BY HIM LATER ON. THE ASSESSING OFFICER THOROUGHLY DISCUSSED THE MODU S OPERANDI ADOPTED BY THE ASSESSEE AND CAME TO THE CONCLUSION THAT THE TRANSACTIONS IN PURCHASE AND SALE IS A SHAM TRANSACTION AND A COLOU RFUL DEVICE TO CHANNELIZE THE UNACCOUNTED INCOME EARNED IN THE CO URSE OF REGULAR BUSINESS. THE ASSESSING OFFICER, THEREFORE, ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THIS CAPITAL GAIN OF RS.93,48,858/- SHOULD NOT BE CONSIDERED AS INCOME FROM OTHER SOURCES. 2.2 IN RESPONSE TO THE SAME THE ASSESSEE FILED A LE TTER DATED 24-12-2009 (A COPY OF WHICH IS PLACED AT PAGE 5 OF THE PAPER B OOK) AND WHICH READS AS UNDER : SHRI ZIKRULLAH A. CHAUDHARY, SR.NO.150, PLOT NO.6, SUKHNENI IMPERIAL PASE-III, MORUWADI, PIMPRI, PUNE-18. 3 TO THE ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(3), 4 TH FLOOR, PMT BUILDING, SHANKAR SETH ROAD, SWARGATE, PUNE -411037. SUB : OUR SHARES DEALINGS OF M/S. TANU HEALTH CARE LTD . MUMBAI. RESPECTED SIR, PLEASE REFER TO OUR DISCUSSIONS HELD AND THE EXPLANATIO NS DEMANDED BY YOU, I HAVE TO STATE AS UNDER. THIS IS TO BRING TO YOUR KIND NOTICE THAT MY SHARES DEA LINGS OF M/S. TANU HEALTH LTD. PURCHASED THE SHARES OF M/S. TANU HEALTHCAR E LTD. THROUGH THE BROKERS BY PAYING ACCOUNT PAYEE CHEQUES. THE PUR CHASE & SALE OF SHARES ARE MADE THROUGH MY DEMAT ACCOUNT. SALE ARE A LSO MADE THROUGH THE BROKERS FOR WHICH I HAVE RECEIVED THE CHEQUES. A LL THESE DETAILS I HAVE SUBMITTED TO YOUR OFFICE. BUT THERE IS CONSTANT PRESSURE FROM YOUR OFFICE TO SURRE NDER THE INCOME EARNED FROM THE DEALINGS IN SHARE OF M/S TANU HEALTHCA RE LTD. AS SUCH TO BUY THE METAL PEACE AND TO CONCENTRATE ON MY BUSINES S AFFAIRS UNINTERRUPTEDLY I SUBMIT TO YOUR SUGGESTIONS. FURTHER, I ASSURE YOU THAT I WILL PAY THE INCOME TAX ON ABOVE INCOME, PROVIDED THE TAX LIABILITY IS ARRIVED AT WITHOUT INT EREST & PENALTY AS PROMISED BY YOU. THANKING YOU, YOURS FAITHFULLY, SD/- SHRI ZIKRULLAH A. CHAUDHARY 2.3 IN VIEW OF THE ABOVE THE ASSESSING OFFICER TREA TED THE CAPITAL GAIN OF RS.93,48,858/- DECLARED BY THE ASSESSEE AS INCOM E FROM OTHER SOURCES. 3. IN APPEAL THE LD.CIT(A) UPHELD THE ORDER OF THE ASSESSING OFFICER BY OBSERVING AS UNDER : 4. A CAREFUL PERUSAL OF THE MATERIAL AVAILABLE ON RECOR D REVEALS THAT THE AO, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, START ED INVESTIGATING THE TRANSACTION RELATING TO THE SALE AND PURCHASE OF T HE SHARES IN RESPECT OF WHICH LONG TERM CAPITAL GAIN HAS BEEN SHOWN BY THE AP PELLANT. HIS INVESTIGATION REVEALED CERTAIN FACTS WHICH MADE HIM B ELIEVE THAT THE CAPITAL GAIN, IN FACT, REPRESENTED HIS INCOME FROM OT HER SOURCES. ACCORDINGLY, HE ASKED THE APPELLANT TO SHOW CAUSE AS TO WHY THE WHOLE OF CAPITAL GAIN BE NOT TREATED AS INCOME FROM OTHER SOUR CES. AFTER THIS SHOW CAUSE, THE APPELLANT SUBMITTED TO HIS SUGGESTIONS TO TREA T THE CAPITAL GAIN 4 AS INCOME FROM OTHER SOURCES. THE RELEVANT PORTION OF THE ASSESSMENT ORDER IS REPRODUCED BELOW : 6. CAPITAL GAIN ON SALE OF PENNY STOCK (RS. 93,48,8 58/ - ): 6.1 A PERUSAL OF ASSESSEE'S RETURN OF INCOME SHOWS THAT T HE ASSESSEE HAS DISCLOSED LONG TERM CAPITAL GAIN OF RS. 65,97,975/- AND HAS CLAIMED RS. 27,50,883/- AS EXEMPT CAPITAL GAIN. THIS LTCG HAS BEEN CLAIMED ON SHARES OF M/S TANU HEALTHCARE LTD AND M/S COMFORT INTECH LTD (EARLIER KNOWN AS COMFORT FINVEST LTD). THE ASSESSEE HAS PURCHASED THESE SHARE S FOR VERY NOMINAL PRICE AND HAS SOLD AT A VERY HIGH PRICE TO CL AIM A LTCG. 6.2 THE MODUS OPERANDI ADOPTED BY THE ASSESSEE IS TYPICA L OF GETTING ACCOMMODATION ENTRIES OF LTCG FROM PURCHASE AND SALE OF PENNY STOCKS UNEARTHED IN OTHER CASES OF FAST TRACK FINACE LTD AND DATA FINANCE LTD. THOUGH THE SCRIP OF TANU HEALTH AND COMFORT INTECH H AVE BEEN FOUND TO BE LISTED IN BSE BUT THESE APPEAR TO BE DORMANT SHARES WI THOUT ANY TRADING IN THESE SHARES FOR A LONG TIME AS SEEN FROM LIST OF SHARES TR ADED AT NSE/BSE APPEARING IN THE ECONOMIC TIMES SUGGESTING THAT THE TR ADING IN SHARES IS RESTRICTED ONLY FOR SMALL PERIODS AND NOT DISTRIBUTED T HROUGHOUT THE YEAR. WHEN GONE THROUGH THE HISTORY AND PATTERN OF SHARE HO LDING IN RESPECT OF THESE COMPANIES, ONE GETS STUMBLED AT THE STARTLING FAC T AS TO HOW THE PATTERN OF SHARE HOLDING MOVES IN A TYPICAL MANNER OV ER A PERIOD OF SINGLE FINANCIAL YEAR. IT IS OBSERVED THAT THE PRICES OF THESE STOCKS START PICKING UP FROM MAY- JUNE OF A PARTICULAR F. Y. AND ARE AT PEA K IN THE MONTH OF OCTOBER AND START FALLING AS THE MONTH OF MARCH APPROACHES. TH E FINANCIAL RESULTS OF THESE COMPANIES ALSO SUGGEST THAT THESE COMPANIES HAVE NOM INAL TURNOVER AND THE ANNUAL RESULTS SHOW LOSS WHICH DOES NOT EXPLAIN SU CH VOLATILITY IN PRICES OF THESE COMPANIES WHENEVER TRADING IS TAKING PL ACE FOR SHARES OF THESE COMPANIES. IN THE RECENT PAST ENQUIRIES WITH STOC K BROKERS IN MUMBAI AND ENQUIRIES IN CASES OF BENEFICIARIES AT PUNE HAVE ESTABLISHED THE PRACTICE OF CLAIMING BOGUS LT CAPITAL GAINS BY CO NVERTING UNACCOUNTED MONEY THROUGH PURCHASE AND SALE PENNY STOCK COMPANY SH ARES AND IN A LARGE NUMBER OF CASES THE BROKERS AS WELL AS THE BENEF ICIARIES HAVE ADMITTED TO HAVE MANIPULATED THE PRICES OF PENNY STOC K COMPANIES. 6.3 DISCRETE ENQUIRIES HAVE REVEALED THAT THE ADDRESS OF TANU HEALTHCARE LTD AS PER PAN DATA IS I THAT OF A SMALL CY BER CAFE IN MUMBAI AND THE DISCRETE ENQUIRIES HAVE REVEALED THAT THERE I S NO OFFICE AT THAT ADDRESS AND IT IS ONLY A MAILING ADDRESS FROM WHERE THE DAK IS COLLECTED AT FREQUENT INTERVALS BY THE PERSONS CONNECTED WITH TANU HEALTHCARE. IN VIEW OF THESE FACTS, THESE COMPANIES APPEAR TO BE MERELY COM PANIES ON PAPER AND DESPITE OF EFFORTS THE FUNCTIONAL UNIT OF THESE CO MPANIES COULD NOT BE LOCATED. ACCORDINGLY, THE CAPITAL GAIN CLAIMED ON P URCHASE AND SALE OF SUCH DORMANT SHARES IS NOTHING BUT A COLORFUL DEVICE TO CON VERT UNACCOUNTED MONEY INTO LT CAPITAL GAIN WHICH IS ATTRACTS THE TAX @ 10% ONLY OR NO TAX OTHERWISE IT WOULD HAVE ATTRACTED A HIGHER RATE OF T AX. THOUGH IN HIS STATEMENT U/S 132(4) DURING THE COURSE OF SEARCH, THE A SSESSEE HAS STATED THAT THESE INVESTMENTS HAVE BEEN MADE AS PER THE ADVICE OF HIS FRIEND, THE TRANSACTION WHICH HE HAS ENTERED INTO DO NOT APPEAR T O BE NORMAL SHARE TRANSACTIONS. 6.4 IN ZIKRULLAH'S CASE, ON ONE OCCASION IT IS OBSERVE D THAT HE HAS ACQUIRED THE SHARES IN MARCH 2004 AND THE PAYMENT TOW ARDS THE SAME HAS BEEN MADE ONLY AFTER ONE YEAR I.E.IN APRIL 2005. WH EN CONFRONTED ABOUT THIS, ZIKRULLAH HAS STATED THAT HE HAD ASKED HIS BROKER TO BUY THE SAID STOCKS FOR HIM AND THE PAYMENT WAS MADE BY HIM LATER O N. NORMALLY WHILE GIVING SUCH ACCOMMODATION ENTRIES THE BROKER RAISES SOME NOMINAL BOOK PROFIT (SFCG) IN ACCOUNT OF CLIENT (BENEFICIARY) OI L PURCHASES/SALES OF SOME 5 KNOWN SHARES AND THEN AGAINST SUCH ACCUMULATED PROFITS, HE DEBITS THE COST OF PENNY STOCK SHARES AS IF THE SHARES ARE PURCHASED I N BACK DATE IN OFF MARKET AT A VERY NOMINAL RATE WHICH IS MET BY THE PR OFITS ALREADY GENERATED BY THE BROKER IN CLIENT'S ACCOUNT. THEREAF TER, THE BROKER IMMEDIATELY TRANSFERS THE PENNY STOCKS FOR DEMOTING AN D AFTER A SERIES OF MANIPULATIVE TRANSACTIONS THE PRICES OF THESE SHARES ARE INCREASED BY INTERNAL TRADING IN THE CARTEL AND THEN THESE SHARES ARE SOLD AT HIGH PRICES THROUGH SAME OR DIFFERENT BROKER OF THE CARTEL AND T HE SALE CONSIDERATION IS PAID THROUGH CHEQUE/DD IN LIEU OF THE CASH TAKEN WHI CH IS EQUIVALENT TO THE SALE PRICE PLUS THE AMOUNT OF COMMISSION CHARGED FO R GIVING THE ACCOMMODATION ENTRIES. THE TIME OF PURCHASE OF SHARES IS BACK DATED IN THE MANNER SO AS TO ENSURE THAT THEY ARE HELD FOR MORE THAN 12 MONTHS TO CLAIM THE PROFITS AS LTCG. SINCE THE ACTUAL TRANSACTI ONS ARE DONE ONLY WHEN THE BENEFICIARY APPROACHES THESE BROKERS FOR THE ACCOM MODATION ENTRY, PRACTICALLY THE SHARES ARE HELD ONLY FROM THE DATE OF DEMOTING THEM TILL DATE OF SALE BUT BY SHOWING THE PURCHASE IN OFF MARKET IN BACK DATE, THEY ARE SHOWN TO BE HELD FOR MORE THAN 12 MONTHS. HOWEVER , NO PROFIT ON SALE OF SHARES WHICH WERE USED TO BUY THE PENNY, STOCK SHARES HAVE BEEN DISCLOSED IN THE RETURNS OF ZIKRULLAH SUGGESTING THAT TH E PURCHASES SHOWN BY BROKER IN RESPECT OF PENNY STOCKS WAS MERELY AN ACCO MMODATION ENTRY AND NO PM-CHASES WERE MADE AT THAT TIME AND THE ENTRI ES ARE PASSED ONLY AFTERWARDS JUST BEFORE GETTING THE SHARES DEMOTED. WITH OUT PREJUDICE TO THE FACT THAT THESE ARE MERE ACCOMMODATION ENTRIES, E VEN THEN THE PROFITS CAN BE ONLY STCG AS THERE IS NO AUTHENTIC PROOF OF HO LDING THOSE SHARES BEFORE THE DATE OF DEMAT AND ACCORDINGLY TAXABLE @ 30% INSTEAD OF 10%. ZIKRULLAH HAD NOT SHOWN ANY INCOME FROM SALE OF SHARES BEFORE OR AFTER AY 05-06 AND HE HAS TRADED MAINLY IN THESE TWO SHARES ONLY . SHRI ZIKRULLAH DURING SEARCH COULD NOT GIVE SATISFACTORY EXPLANATION TO VARIOUS QUESTIONS POSED TO HIM SUCH AS WHY HE PREFERRED TO DO TRANSACTION IN THESE SHARES ONLY WHEN HE HAD NEVER DONE ANY TRANSACTION IN SHARES BEFORE. HE DID NOT KNOW ANYTHING ABOUT THESE COMPANIES SUCH AS LINE OF BU SINESS, THEIR PRODUCTS OR TURNOVER, PROFITABILITY ETC. HE STATED TH AT HE TRANSACTED IN THESE SHARES AS PER ADVICE OF HIS FRIEND. 6.5 WHEN SEEN IN THIS BACKGROUND, ALL THESE ASPECTS APPEAR TO BE ABNORMAL AND GIVE RISE TO A SUSPICION THAT THE TRANSACT IONS IN PURCHASE AND SALE IS A SHAM TRANSACTION AND A COLORFUL DEVICE TO CH ANNELIZE THE UNACCOUNTED INCOME EARNED IN THE COURSE OF REGULAR B USINESS. HENCE, THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THIS CAPITAL GAIN OF RS. 93,48,858/- SHOULD NOT BE CONSIDERED AS INCOME FROM O THER SOURCE. THE RELEVANT PORTION OF THE ASSESSEE'S REPLY VIDE LETTER DA TED 24.12.2009 IS AS UNDER: 'PLEASE REFER TO OUR DISCUSSIONS HELD AND THE EXPLANATIO NS DEMANDED BY YOU, I HAVE TO STATE AS UNDER. THIS IS TO BRING TO YOUR KIND NOTICE THAT MY SHARES DEA LINGS OF M/S. TANU HEALTHCARE LTD. MUMBAI, ARE GENUINE AND TRUE TRANSAC TIONS. THIS IS SO BECAUSE THE COMPANY IS LISTED, I PURCHASED THE SHARES OF M/S. TANU HEALTHCARE LTD. THROUGH THE BROKERS BY PAYING ACCOUN T PAYEE CHEQUES. THE PURCHASES &@ SALES OF SHARES ARE MADE THROUGH MY DEMAT AC COUNT. SALES ARE ALSO MADE THROUGH THE BROKERS FOR WHICH I HAVE RE CEIVED THE CHEQUES. AH THESE DETAILS I HAVE ALREADY SUBMITTED TO YOUR OFFI CE ALONG WITH THE BROKER NOTES. BUT THERE IS CONSTANT PRESSURE FROM YOUR OFFICE TO SURRE NDER THE INCOME EARNED FROM THE DEALINGS IN SHARES OF M/S. TANU HEALTH CARE LTD. AS SUCH TO BUY THE MENTAL PEACE AND TO CONCENTRATE ON MY BUSINE SS AFFAIRS UNINTERRUPTEDLY I SUBMIT TO YOUR SUGGESTIONS. 6 6.6 IN LIGHT OF THE ABOVE DISCUSSION AND THE ASSESSEE'S OWN ACCEPTANCE, THE INCOME OF RS.93,48,858 / - CLAIMED AS CAPITAL GAIN BY THE ASSESSEE IS TREATED AS INCOME FROM OTHER SOURCE. SINCE THE ASSESSEE HAS CONCEALED PARTICULARS OF THIS INCOME, SEPARATE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE I.T. ACT, ARE BEING INITIATED. 5. THE AO, IN VIEW OF THE ACCEPTANCE OF THE EXACT NATU RE OF THE TRANSACTION BY THE APPELLANT, FINALIZED THE ASSESSMENT W ITHOUT MAKING FURTHER INVESTIGATION. THE APPELLANT, INSTEAD OF HONO URING HIS STATEMENT GIVEN VIDE LETTER DT.24/12/2009 FILED APPEAL AGAINST THE ORDER OF THE AO OBJECTING TO HIS ACTION IN TREATING LONG TERM CAPITA L GAIN AS INCOME FROM OTHER SOURCES, EVEN THOUGH, THIS TREATMENT WAS DONE IN PURSUANCE OF HIS STATEMENT GIVEN VIDE LETTER DT.24/12/2009. IN HIS APP EAL, THE APPELLANT HAS STATED THAT THE AO ASSUMED THAT HE AGREED TO GET HIS CA PITAL GAIN ASSESSED AS INCOME FROM OTHER SOURCES. HE FURTHER STATED THAT T HE ASSESSMENT ORDER SHOULD BE CANCELLED AS IT DOES NOT HAVE LEGS TO STAND UP ON. 6. A CAREFUL PERUSAL OF A LETTER OF THE APPELLANT DT.24 /12/2009 DOES NOT LEAVE ANY DOUBT ON ITS INTERPRETATION. THE LETTE R, IN UNAMBIGUOUS TERMS, SURRENDERED THE INCOME EARNED BY THE APPELLANT FROM THE DEALING IN THE SHARE OF M/S. TANU HEALTH CARE LTD. BY SURRENDERING THIS INCOME, TH E APPELLANT PREVENTED THE AO FROM MAKING FURTHER INVESTIGATION. IT IS A SETTLED LAW THAT RETRACTION, IF ANY, HAS TO BE IMMEDI ATELY AFTER THE STATEMENT. THE PERSON WHO GIVES THE ORIGINAL STATEMENT HAS TO EXPLAIN DELAY IN GIVING RETRACTION. RETRACTION HAS TO BE SUPP ORTED BY SUITABLE EVIDEN C ES. IT IS A SETTLED LAW THAT ADMISSION / STATEMENT IS A G OOD PIECE OF EVIDENCE AND THE SAME CAN BE USED AGAINST THE PERSON WH O MAKES IT. THE REASON BEHIND THIS IS THAT A PERSON MAKING A STATEMENT STOPS THE OPPOSITE PARTY FROM MAKING FURTHER INVESTIGATION. THIS VIEW HA S BEEN HELD BY HON'BLE ITAT PUNE BENCH IN THE CASE OF HOTEL KIRAN V S. ACIT REPORTED IN (2002) 82 ITD 453. ALTHOUGH THIS DECISION HAS BEEN GIV EN WITH REFERENCE TO STATEMENT RECORDED U/S. 132(4), IT IS EQUALLY APPLI CABLE TO THE STATEMENT GIVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE HO N'BLE ITAT HAS HELD THAT GREAT EVIDENTIARY VALUE HAS BEEN ATTACHED TO THE STATEMENT U/S. 132(4) OF IT. ACT. THE RELEVANT PORTION IS REPRODUCE D BELOW :- '7. RIVAL SUBMISSIONS OF THE PARTIES AS WELL AS MATERIAL PLACE D BEFORE US AND THE CASE LAW REFERRED TO BY THE PARTIES HAVE BE EN CONSIDERED CAREFULLY. THE CRUCIAL QUESTION IS WHETHER THE ADDITI ON CAN BE MADE ON THE BASIS OF STATEMENT RECORDED U/'S. 132(4) WHICH IS ALLEGE D TO HAVE BEEN RETRACTED BY THE ASSESSEE. IT IS SETTLED LAW THAT ADMISSIO N BY A PERSON IS A GOOD PIECE OF EVIDENCE THROUGH NOT CONCLUSIVE AND TH E SAME CAN BE USED AGAINST A PERSON WHO MAKES IT. THE REASON BEHIND THIS IS A PERSON MAKING STATEMENT STOPS THE OPPOSITE PARTY FROM MAKING FURTHER INVESTIGATION. THIS PRINCIPLE IS ALSO EMBEDDED IN THE PROVISIONS OF THE EVI DENCE ACT. BUT THE STATEMENT RECORDED U/S. 132(4) IS ON A DIFFERENT FOOT ING. THE LEGISLATURE IN ITS WISDOM HAS PROVIDED THAT SUCH A STATEMENT MAY BE USED IN EVIDENCE IN ANY PROCEEDINGS UNDER THE IT, ACT, 1961. THEREFORE, IN OUR OPINION, GREAT EVIDENTIARY VALUE HAS BEEN ATTACHED TO SUCH STATEMENT. ' IN THE ABOVE JUDGMENT ITSELF, THE HON'BLE ITAT HAS L AID DOWN THE CONDITION IN WHICH ADMISSION MADE U/S. 132(4) CAN BE R ETRACTED. THE ADMISSION CAN BE RETRACTED ONLY IF IT WAS MADE INVOLUN TARILY I.E. OBTAINED UNDER COERCION, THREAT, DURESS, UNDUE INFLUENCE ETC. THE RELEVANT PORTION OF THE JUDGMENT IS REPRODUCED BELOW :- 7 '8. HOWEVER, THERE ARE EXCEPTIONS TO SUCH ADMISSION WHE RE THE ASSESSEE CAN RETRACT FROM SUCH ADMISSION. THE FIRST EXCEPTION EXISTS WHERE SUCH STATEMENT IS MADE INVOLUNTARILY I.E. OBTAINED UNDER COERCION, THREAT, DURESS, UNDUE INFLUENCE ETC. BUT THE BURDEN LIES ON THE PERSON MAKING SUCH ALLEGATIONS TO PROVE THAT STATEMENT WAS OBTAINED BY THE AFORESAID MEANS. THE SECOND EXCEPTION IS WHERE THE STATEMENT HAS BEEN GIVEN UNDER SOME MISTAKEN BELIEF EITHER OF FACT OR LAW. IT IS WELL SETT LED THAT THERE CANNOT BE ESTOPPEL AGAINST THE LAW. IF A PERSON IS NOT LIABLE TO TAX IN RESPECT OF ANY RECEIPT, HE CANNOT BE MADE LIABLE TO PAY TAX MERELY BECAUSE HE HAS AGREED TO PAY THE TAX IN THE STATEMENT UNDER S. 132. HE CAN ALWAYS RETRA CT IN SUCH SITUATION. FOR EXAMPLE, THE ASSESSEE MIGHT HAVE SOLD HIS AGRICULTURAL L AND AND NOT DECLARED ITS SALE PROCEEDS IN HIS INCOME-TAX RETURN. IF SUCH AGRICULTURAL LAND DOES NOT FALL WITHIN THE AMBIT OF THE WORDS 'CAPITAL ASSET' THEN NO TAX IS PAYABLE. IF THE ASSESSEE HAD OFFERED TO P AY TAX ON THE PROFITS ON SUCH SALE UNDER S. 132(4), IN OUR OPINION, HE CAN A LWAYS RETRACT FROM SUCH STATEMENT. SIMILARLY, IF THE ASSESSEE CAN SHOW THAT THE STATEMENT HAS BEEN MADE ON MISTAKEN BELIEF ON FACTS, HE CAN RETRACT FROM THE STATEMENT IF HE CAN SHOW THAT FACTS ON THE BASIS OF ADMISSION SO MADE W ERE INCORRECT. THIS IS WHAT HAS BEEN HELD BY THE HON'BLE SUPREME COUR T IN THE CASE OF PULLANGODE RUBBER PRODUCE CO. LTD. (SUPRA). 9. IN VIEW OF THE ABOVE DISCUSSIONS, WE ARE OF THE VIE W THAT ADMISSION MADE IN STATEMENT UNDER S. 132(4) HAS GREAT EV IDENTIARY VALUE AND IS BINDING ON A PERSON WHO MAKES IT. THEREFO RE, THE ADDITION CAN BE MADE ON THE BASIS OF SUCH ADMISSION BY USING THE SA ME IN EVIDENCE. THE LEGISLATURE WAS WELL AWARE THAT UNDER T HE GENERAL LAW MERE ADMISSION MAY NOT BE CONCLUSIVE ONE. THE IT ACT I S A SPECIFIC ACT AND ASSESSMENT HAS TO BE MADE ON THE BASIS OF MATERIAL GAT HERED BY THE AO. FOR THIS PURPOSE, VAST POWERS HAVE BEEN CONFERRED O N THE IT AUTHORITIES FOR MAKING INVESTIGATION INCLUDING THE PO WERS OF SEARCH. IF IN THE COURSE OF SUCH SEARCH, THE ASSESSEE MAKES SOME ADMI SSION, HE DEBARS THE AUTHORIZED OFFICER FROM MAKING FURTHER IN VESTIGATION. IN VIEW OF THIS, LEGISLATURE IN ITS WISDOM HAS PROVIDED TH AT SUCH STATEMENT CAN BE USED IN EVIDENCE AND THE ASSESSMENT CAN BE MADE O N THE BASIS OF SUCH STATEMENT. THE SANCTITY OF SUCH PROVISION WOULD BE LOST IF THE ASSESSEE IS ALLOWED TO CONTEND THAT NO ADDITION CAN BE M ADE ON THE BASIS OF SUCH ADMISSION. HOWEVER, SUCH ADMISSION CAN BE RET RACTED BY THE ASSESSEE ONLY IF THE CIRCUMSTANCES AS MENTIONED IN THE EARLIER PARAGRAPHS ARE ESTABLISHED BY THE ASSESSEE TO EXIST. ' UNDER THE CIRCUMSTANCES, THE ESTABLISHED LAW IS THAT ANY STATEMENT / ADMISSION UNLESS IT IS RECORDED UNDER COERCION, THREAT, DURESS OR UNDUE INFLUENCE HAVE GOOD EVIDENTIARY VALUE. IN THE PRESEN T CASE, THE STATEMENT WAS GIVEN IN WRITING TO THE AO. THERE IS NOT HING ON RECORD THAT THE STATEMENT WAS GIVEN UNDER COERCION, THREAT OR DURESS. UNDER THE CIRCUMSTANCES, THE APPELLANT CANNOT RETRACT THE SA ME. THEREFORE, THE AO WAS JUSTIFIED IN HIS ACTION IN TREATING THE LONG TE RM CAPITAL GAIN SHOWN BY THE APPELLANT AS INCOME FROM OTHER SOURCES. 3.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER TREATING THE LONG TERM CAPITAL GAIN AS INCOME FROM O THER SOURCES MERELY 8 ON THE BASIS OF THE LETTER FILED BY THE APPELLANT SURR ENDERING THE LONG TERM CAPITAL GAIN AROSE ON SALE OF SHARES OF M/S TANU HEALTH CARE LTD., WHICH LETTER WAS GIVEN UNDER CONSTANT PRESSURE FROM THE ASSESSING OFFICER AS SPECIFICALLY SO MENTIONED IN THE SAID LETTER ITSELF AN D WITHOUT EXAMINING AND CONSIDERING THE FACTUAL EVIDENCES AND SUBMISSION PRO VING THE GENUINENESS OF LONG TERM CAPITAL GAIN. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE BO TH THE LEARNED CIT(A) AND ASSESSING OFFICER HAVE ERRONEOUSLY RELIED ON SOME OF THE OBJECTIONABLE TRANSACTIONS OF SALE OF SHARES OF SOME OTHE R COMPANIES CONSIDERED AS DEALING IN PENNY STOCK AND HAVING ABSOLUT ELY NO RELEVANCE DIRECT OR INDIRECT TO THE GENUINE TRANSACTIONS OF SALE OF SHARES BY THE APPELLANT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE TH E LOWER AUTHORITIES HAVE ERRED IN MAKING THIS ADDITION BASED O N NOTIONAL AND IMAGINARY SITUATION AND TOTALLY UNSUBSTANTIATED. 4. THE ABOVE GROUNDS OF APPEAL MAY KINDLY BE ALLOWED TO BE AMENDED, ALTERED MODIFIED ETC., IN THE INTEREST OF NATURAL JUSTICE. 4. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALLE NGED THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE ASSESSEE IN HIS STATEMENT RECORDED DURING THE SEARCH U/S.132(4) HAD CLEARLY STATED TH AT THE TRANSACTIONS ARE GENUINE. REFERRING TO THE COPIES OF THE CONTRACT N OTES, HE SUBMITTED THAT THE PURCHASE AND SALES ARE THROUGH BROKER AND THEY HAVE BEEN ROUTED THROUGH THE DEMAT ACCOUNT OF THE ASSESSEE. THE PAY MENTS HAVE BEEN MADE AND RECEIVED BY CHEQUES AND THEREFORE THE TRAN SACTION SHOULD NOT BE DISBELIEVED MERELY BECAUSE THE PAYMENT HAS BEEN MAD E TO THE BROKER TOWARDS THE COST OF PURCHASE AFTER A LAPSE OF ONE Y EAR. HE SUBMITTED THAT THE ASSESSING OFFICER ONLY SUSPECTS AND HAS NOT FOU ND ANY DEFECT IN THE SAID TRANSACTIONS FOR WHICH HE FORCED THE ASSESSEE TO SURRENDER. 4.1 REFERRING TO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF AVINASH KANTILAL JAIN HE SUBMITTED THAT UND ER IDENTICAL FACTS AND CIRCUMSTANCES THE TRIBUNAL HAS TREATED THE CAPITAL GAIN RECEIVED ON TRANSFER OF SHARES AS LONG TERM CAPITAL GAIN AND TH EREBY ALLOWED THE DEDUCTION U/S.10(38). REFERRING TO THE DECISION OF THE MUMBAI BENCH OF 9 THE TRIBUNAL IN THE CASE OF MUKESH R. MAROLIA VS. A DDL.CIT HE SUBMITTED THAT IN THE SAID DECISION THE TRIBUNAL HA S HELD THAT PURCHASE AND SALE OF SHARES HAVING BEEN REGULARLY ACCOUNTED FOR BY THE ASSESSEE IN ITS BOOKS AND THIS FACT HAVING BEEN CONFIRMED IN S URVEY CONDUCTED BY THE DEPARTMENT, ADDITION OF SALE PROCEEDS OF SHARES U/S .69 COULD NOT BE MADE SOLELY ON THE BASIS OF FACT THAT TRANSACTIONS WERE NOT ROUTED THROUGH STOCK EXCHANGE. HE SUBMITTED THAT SINCE THE ASSESSEE WAS FORCED TO SURRENDER THE INCOME BY THE DEPARTMENT THROUGH PRESSURE, THER EFORE, THE ASSESSEE HAD NO OTHER OPTION BUT TO SURRENDER THE SAME UNDER COERCION. HE ALSO FILED A COPY OF THE PUNE BENCH OF THE TRIBUNAL IN T HE CASE OF MOTI UDHARAM PANJABI & OTHER CONNECTED APPEALS VIDE ORDE R DT. 31-10-2012 5. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND HEAVILY SUPPORTED THE ORDER OF THE CIT(A). HE SUBMITTED TH AT ANY INVESTIGATION BY THE DEPARTMENT IN TAX MATTERS STARTS WITH SUSPIC ION. THE ASSESSEE NEVER APPEARED BEFORE THE ASSESSING OFFICER AND WAS REPRESENTED BY HIS COUNSEL ONLY, THEREFORE, THE ASSESSEE CANNOT SAY TH AT HE MADE THE SURRENDER DUE TO COERCION. 5.1 REFERRING TO THE DICTIONARY MEANING OF COERCIO N AS PER WIKIPEDIA, HE SUBMITTED THAT COERCION IS THE PRACTICE OF FORCING ANOTHER PARTY TO ACT IN AN INVOLUNTARY MANNER BY US E OF INTIMIDATION OR THREATS OR SOME OTHER FORM OF PRESSURE OR FORCE, AND DESCRIBES A SET OF VARIOUS DIFFERENT SIMILAR TYPES OF FORCEFUL ACTIONS THAT VIOLATE THE FREE WILL OF AN INDIVIDUAL TO INDUCE A DESIRED RESPONSE. THE SE ACTIONS CAN INCLUDE, BUT ARE NOT LIMITED TO, EXTORT ION , BLACKMAIL , TORTURE , AND THREATS TO INDUCE FAVORS. IN LAW, COERCION IS C ODIFIED AS 10 A DURESS CRIME. SUCH ACTIONS ARE USED AS LEVERAGE, TO FORCE THE VICTIM TO ACT IN A WAY CONTRARY TO THEIR OWN INTERESTS. COERC ION MAY INVOLVE THE ACTUAL INFLICTION OF PHYSICAL PAIN/INJURY OR PSYCHO LOGICAL HARM IN ORDER TO ENHANCE THE CREDIBILITY OF A THREAT. THE THREAT OF FURTHER HARM MAY LEAD T O THE COOPERATION OR OBEDIENCE OF THE PERSON BEING COERCED. 5.2 HE SUBMITTED THAT COERCION MAY BE EITHER PHYSIC AL OR PSYCHOLOGICAL. HOWEVER, IN THE INSTANT CASE, THE A SSESSEE NEVER APPEARED BEFORE THE ASSESSING OFFICER, THEREFORE, THE QUESTI ON OF PHYSICAL OR PSYCHOLOGICAL COERCION DOES NOT ARISE AT ALL. HE S UBMITTED THAT THE ASSESSEE IN THE INSTANT CASE DOES NOT KNOW THE BROK ER WHO PURCHASED THE SHARES FOR HIM. IT IS QUITE UNBELIEVABLE THAT THE BROKER AT THE INSTANCE OF THE FRIEND OF THE ASSESSEE PURCHASED THE SHARES AT A VERY NOMINAL PRICE WITHOUT RECEIVING ANY PAYMENT AND SELLS THE SAME AF TER A PERIOD OF ONE YEAR AND GIVES BACK THE HUGE AMOUNT OF MONEY TO THE ASSESSEE. IT IS NOT POSSIBLE BY ANY PRUDENT OR SENSIBLE PERSON TO PART WITH SUCH HUGE AMOUNT TO A STRANGER. THEREFORE, WHEN THESE FACTS WERE DE TECTED BY THE ASSESSING OFFICER, THE ASSESSEE SURRENDERED THE INCOME. 5.3 REFERRING TO THE DECISION OF HONBLE BOMBAY HIG H COURT IN THE CASE OF RAMESHCHANDRA & CO. VS. CIT REPORTED IN 168 ITR 375 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID D ECISION HAS HELD THAT WHERE AN ASSESSEE HAS MADE THE STATEMENT OF FACTS H E COULD HAVE NO GRIEVANCE IF THE TAXING AUTHORITY TAXES HIM IN ACCO RDANCE WITH THAT STATEMENT. IF HE CAN HAVE NO GRIEVANCE HE COULD FI LE NO APPEAL. THEREFORE, IT IS IMPERATIVE IF THE ASSESSEES CASE IS THAT HIS STATEMENT HAS BEEN WRONGLY RECORDED OR THAT HE MADE IT IN A MISTA KEN BELIEF OF FACT OR 11 LAW, THEN HE COULD MAKE AN APPLICATION FOR RECTIFIC ATION TO THE PARTY WHICH PASSED THE ORDER BASED UPON THAT STATEMENT. UNTIL RECTIFICATION IS MADE THE APPEAL IS NOT COMPETENT. 5.4 REFERRING TO THE DECISION OF HONBLE KERALA HIG H COURT IN THE CASE OF MAHESH B. SHAH VS. CIT REPORTED IN 238 ITR 130 H E SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HAS HEL D THAT WHEN THE PETITIONER AGREED TO TREAT THE EXPENDITURE AS A CAP ITAL EXPENDITURE BOTH BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE THE REVISIONAL AUTHORITY AND WHEN NO EVIDENCE OR MATERIAL WAS FURNISHED TO S HOW THAT THE PETITIONER WAS COERCED TO MAKE A STATEMENT, NOTHING PREVENTED THE PETITIONER TO RETRACT THE SAME. THE ALLEGATION OF COMPULSION OR COERCION COULD NOT BE ACCEPTED ON A MERE STATEMENT. IN ABSEN CE OF ANY MATERIAL TO SHOW BEFORE THE AUTHORITIES OR BEFORE THE HIGH COUR T TO ESTABLISH THAT THIS WAS A REVENUE EXPENDITURE AND IT WAS EXPENDED WHOLL Y AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, THERE WAS NO SCOPE TO INTERFERE WITH THE ORDER OF THE CIT UNDER ARTICLE 226. 5.5 HE ALSO RELIED ON THE FOLLOWING DECISIONS : I. RAMANLAL KAMDAR VS. CIT REPORTED IN 108 ITR 73 II. STERLING MACHINE TOOLS VS. CIT REPORTED IN 123 I TR 181 5.6 THE LD. COUNSEL FOR THE ASSESSEE IN HIS REJOIND ER REFERRED TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF ESTER INDUSTRIES LTD. VS. CIT REPORTED IN 316 ITR 260 AND SUBMITTED THAT THE HONBLE HIGH COURT HAS HELD THAT ADMISSION IS NOT CONCLUSIVE EVI DENCE. REFERRING TO THE DECISION OF THE HONBLE MADRAS HIGH COURT IN TH E CASE OF CIT VS. K. BHUVANENDRAN REPORTED IN 303 ITR 235 HE SUBMITTED T HAT WHEN THERE WAS 12 NO EVIDENCE OR MATERIAL FOUND DURING THE COURSE OF SEARCH OPERATION AND THE STATEMENT RECORDED FROM THE ASSESSEE WAS SUBSEQ UENTLY RETRACTED AND REBUTTED AND WHEN THE SALE DEED DISCLOSED THE SALE CONSIDERATION, IT IS FOR THE REVENUE TO SHOW THAT WHAT WAS DISCLOSED IN THE SALE DEED IS NOT THE CORRECT SALE CONSIDERATION. THE STATEMENT COULD NO T BE THE BASIS FOR MAKING ANY ADDITION. HE ACCORDINGLY SUBMITTED THAT EVEN THOUGH THE ASSESSEE HAS SURRENDERED THE AMOUNT DUE TO COERCION BY THE DEPARTMENT THE SAME CANNOT BE THE BASIS FOR AN ADDITION IN ABS ENCE OF ANY CONTRARY MATERIAL AT THE POSSESSION OF THE REVENUE. 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND IN THE INSTANT CASE THE ASSESSEE DECLARED LONG TERM CAPITAL GAIN OF RS.93,48,858/- O N ACCOUNT OF SALE OF SHARES OF M/S. TANU HEALTH CARE LTD. AND COMFORT IN TECH LTD. AND CLAIMED RS.27,58,883/- AS EXEMPT. WE FIND THE ASSE SSING OFFICER DISALLOWED THE CLAIM OF SUCH LONG TERM CAPITAL GAIN OF SHARES OF M/S. TANU HEALTH CARE LTD. AND COMFORT INTECH LTD.ON THE GROUND THAT THE ASSESSEE HAS PURCHASED THE SHARES FOR A VERY NOMINA L PRICE WHICH WAS SOLD AT A VERY HIGH PRICE TO CLAIM LONG TERM CAPITA L GAIN AND WHEN CONFRONTED THE ASSESSEE SURRENDERED THE SAME INCOME . ACCORDINGLY, THE ASSESSING OFFICER TREATED THE CLAIM OF LONG TERM CA PITAL GAIN OF RS.93,48,858/- AS INCOME FROM OTHER SOURCES. 6.1 WE FIND THE LD.CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE IN HIS LETTER IN UN AMBIGUOUS TERMS 13 SURRENDERED THE INCOME EARNED BY HIM FROM THE DEALI NG IN SHARES OF M/S. TANU HEALTH CARE LTD. AND M/S. COMFORT INTECH LTD. BY SURRENDERING THIS INCOME THE ASSESSEE PREVENTED THE ASSESSING OF FICER FROM MAKING ANY FURTHER INVESTIGATION AND THERE WAS NO RETRACTI ON IMMEDIATELY AFTER THE STATEMENT. 6.2 IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT HE HAS SURRENDERED THE INCOME DUE TO COERCION BY THE DEPAR TMENT SINCE THERE WAS CONSTANT PRESSURE TO SURRENDER THE SAID INCOME. IT IS ALSO THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE SHARES WERE PURCHASED THROUGH BROKER BY ACCOUNT PAYEE CHEQUES A ND THE SALE OF SHARES WERE THROUGH HIS DEMAT ACCOUNT THROUGH THE B ROKER AND THE AMOUNTS HAVE BEEN RECEIVED BY CHEQUE. IT IS THE CA SE OF THE REVENUE THAT THE SURROUNDING CIRCUMSTANCES POINT OUT THAT THE TR ANSACTIONS ARE BOGUS AND A COLOURABLE DEVICE TO CONVERT THE BLACK MONEY INTO WHITE. WHEN THIS WAS CONFRONTED TO THE ASSESSEE, THE ASSESSEE S URRENDERED THE INCOME. THEREFORE, THE ORDER OF THE CIT(A) BEING JUSTIFIED BE UPHELD. 6.3 FROM THE VARIOUS DETAILS FURNISHED BY THE ASSES SEE WE FIND THE COST OF PURCHASE OF SHARES OF M/S. TANU HEALTH CARE LTD. WERE MADE AFTER A LAPSE OF MORE THAN ONE YEAR FROM THE DATE ON WHICH SHARES WERE PURCHASED BY THE BROKER. THE ASSESSEE WAS NOT KNOW N TO THE BROKER. DURING THE COURSE OF SEARCH THE STATEMENT OF THE AS SESSEE WAS RECORDED WHEREIN HE HAS STATED THAT THE SALE TRANSACTIONS WE RE DONE AS PER ADVICE OF HIS FRIEND SHRI ANAND JAJU, PUNE WHO HAS EXPERTI SE IN SHARE MARKET. THE RELEVANT QUESTION AND ANSWER OF THE ASSESSEE AR E AS UNDER : 14 Q.NO.11 IN YOUR STATEMENT RECORDED ON OATH ON 24-10 -2007, YOU WERE ASKED ABOUT YOUR INVESTMENT IN SHARES OF TANU HEA LTHCARE P. LTD. AS IT APPEARS THE TRANSACTION APPEARS TO BE A COLOURAB LE TRANSACTION WHEREIN THE PAYMENT FOR ACQUIRING SHARES WAS MADE AFT ER A LAPSE OF MORE THAN ONE YEAR FROM THE DATE ON WHICH THE SHARES WERE ACTUALLY ACQUIRED BY YOU. DO YOU HAVE TO OFFER YOUR COMMENT ABOUT TH IS? ANS : AS STATED EARLIER, I HAVE ENTERED INTO THIS TRANSA CTION WITH A GENUINE BELIEF TO EARN SOME PROFIT. ACCORDINGLY, I HAVE MAD E CHEQUE PAYMENT FOR THIS INVESTMENT AND HAVE RECD. BACK SOME HANDSOME RETUR NS THROUGH CHEQUES ONLY. AS STATED EARLIER, THIS WAS DONE AS PER A DVICE OF MY FRIEND SHRI ANAN JAJU FROM PUNE WHO HOLD EXPERTISE IN SHARE MARKET INVESTMENT. TO THE BEST OF MY KNOWLEDGE, THE ENTIRE TRANSACTION I S GENUINE AND ACCOUNTED FOR. 6.4 FROM THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE WE FIND THE ASSESSEE IS NOT KNOWN TO THE BROKER AND MADE TH E TRANSACTION OF PURCHASE OF SHARES ON THE ADVICE OF HIS FRIEND AND THE COST OF PURCHASE OF SHARES WAS NOT GIVEN TO THE BROKER. ONLY A FEW DAY S BEFORE THE SALE OF SHARES THE PAYMENT HAS BEEN MADE AND THE ASSESSEE A FTER SELLING THE SHARES GOT HUGE AMOUNT OF PROFIT. IT IS STRANGE TO BELIEVE THAT A PERSON NOT KNOWN TO THE ASSESSEE WILL INVEST IN THE PURCHASE O F SHARES ON BEHALF OF HIS UNKNOWN CLIENT WITHOUT RECEIVING ANY MONEY AND AFTER A PERIOD OF ONE YEAR WILL GIVE AWAY AN AMOUNT OF ABOVE RS.90 LA KHS PROFIT WITHOUT RETAINING THE SAME FOR HIMSELF. EVEN THE MIDDLEMAN , I.E. IN THE INSTANT CASE, FRIEND OF THE ASSESSEE WHO HAD EXPERTISE IN P URCHASE AND SALE OF SHARES HAS NOT MADE ANY PROFIT FOR HIMSELF AND HAS GIVEN AWAY THE MONEY TO THE ASSESSEE WHICH IS VERY SUBSTANTIAL. ALL THE SE THINGS IN OUR OPINION ARE AGAINST HUMAN PROBABILITIES. 6.5 WE FIND THE HONBLE SUPREME COURT IN THE CASE O F SUMATI DAYAL VS. CIT REPORTED IN 214 ITR 801 HAS HELD AS UNDER : IT IS NO DOUBT TRUE THAT IN ALL CASES IN WHICH A REC EIPT IS SOUGHT TO BE TAXED AS INCOME, THE BURDEN LIES UPON THE DEPARTMENT TO PROVE THAT IT IS WITHIN THE TAXING PROVISION AND IF A RECEIPT IS IN TH E NATURE OF INCOME, THE 15 BURDEN OF PROVING THAT IT IS NOT TAXABLE BECAUSE IT F ALLS WITHIN AN EXEMPTION PROVIDED BY THE ACT LIES UPON THE ASSESSEE. (S EE PARIMISETTI SEETHARAMAMMA [1965] 57 ITR 532 AT PAGE 536). BUT, IN VIEW OF SECTION 68 OF THE ACT, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF THE ASSESSEE FOR ANY PREVIOUS YEAR, THE SAME MAY BE CHARGED T O INCOME TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR IF THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE NATURE AND SOURCE THEREOF IS, I N THE OPINION OF THE ASSESSING OFFICER, NOT SATISFACTORY. IN SUCH A CASE THE RE IS, PRIMA FACIE, EVIDENCE AGAINST THE ASSESSEE, VIZ., THE RECEIPT OF MON EY, AND IF HE FAILS TO REBUT IT THE SAID EVIDENCE BEING UNREBUTTED, CAN BE USED AGAINST HIM BY HOLDING THAT IT WAS A RECEIPT OF AN INCOME NATURE. W HILE CONSIDERING THE EXPLANATION OF THE ASSESSEE THE DEPARTMENT CANNOT, HOWE VER, ACT UNREASONABLY. (SEE SREELEKHA BANERJEE'S CASE [1963] 4 9 ITR (SC) 112 AT PAGE 120). IN THE INSTANT CASE, THE AMOUNT IS CREDITED IN THE CAP ITAL ACCOUNT IN THE BOOKS OF THE APPELLANT. THE APPELLANT HAS OFFERED HER EXPLANATION ABOUT THE SAID RECEIPTS BEING HER WINNINGS FROM RACES. THE SAI D EXPLANATION HAS BEEN CONSIDERED IN THE LIGHT OF THE SWORN STATEMENT OF THE APPELLANT DATED JANUARY 6, 1973, AND OTHER MATERIAL ON RECORD . THE INCOME TAX OFFICER AND THE APPELLATE ASSISTANT COMMISSIONER HAVE NO T ACCEPTED THE EXPLANATION OFFERED BY THE APPELLANT. THE TWO MEMBE RS CONSTITUTING THE MAJORITY IN THE SETTLEMENT COMMISSION HAVE ALSO TAKEN THE SAME VIEW. THERE IS NO DISPUTE THAT THE AMOUNTS WERE RECEIVED BY THE APPELLANT FROM VARIOUS RACE CLUBS ON THE BASIS OF WINNING TICKET S PRESENTED BY HER. WHAT IS DISPUTED IS THAT WERE THEY REALLY THE WINNING S OF THE APPELLANT FROM THE RACES. THIS RAISES THE QUESTION WHETHER THE APP ARENT CAN BE CONSIDERED AS THE REAL. AS LAID DOWN BY THIS COURT THE APPARENT MUST BE CONSIDERED THE REAL UNTIL IT IS SHOWN THAT THERE ARE R EASONS TO BELIEVE THAT THE APPARENT IS NOT THE REAL AND THAT THE TAXING AUT HORITIES ARE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT TH E REALITY AND THE MATTER HAS TO BE CONSIDERED BY APPLYING THE TEST OF HU MAN PROBABILITIES. (SEE : CIT V. DURGA PRASAD MORE [1971] 82 ITR 540 (S C), AT PAGES 545, 547). 6.6 WE FIND THE HONBLE SUPREME COURT IN THE CASE O F CIT VS. DURGA PRASAD MORE REPORTED IN 82 ITR 540 HAS HELD AS UND ER : THOUGH AN APPARENT STATEMENT MUST BE CONSIDERED REAL UNTIL IT WAS SHOWN THAT THERE WERE REASONS TO BELIEVE THAT THE APPA RENT WAS NOT THE REAL, IN A CASE WHERE A PARTY RELIED ON SELF SERVING RECITALS IN DOCUMENT, IT WAS FOR THAT PARTY TO ESTABLISH THE TRUTH OF THOSE RECI TALS. THE TAXING AUTHORITIES ARE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY OF SUCH RECITALS. 16 6.7 WE FURTHER FIND THAT THE ASSESSEE DURING THE CO URSE OF ASSESSMENT PROCEEDINGS HAS SURRENDERED THE INCOME AFTER THE MO DUS OPERANDI AS DISCUSSED BY THE ASSESSING OFFICER IN THE BODY OF T HE ASSESSMENT ORDER WAS CONFRONTED. IT IS A FACT THAT THE ASSESSEE NEV ER APPEARED BEFORE THE ASSESSING OFFICER AND WAS ALWAYS REPRESENTED BY HIS ADVOCATE. THEREFORE, THE SUBMISSION OF THE LD. COUNSEL FOR TH E ASSESSEE THAT THE ASSESSEE HAS SURRENDERED THE INCOME DUE TO COERCION IN OUR OPINION IS NOT SUBSTANTIATED. IT IS ONLY AFTER THE DEPARTMENT CON FRONTED THE MODUS OPERANDI ADOPTED BY THE ASSESSEE THAT THE ASSESSEE SURRENDERED THE INCOME BEFORE THE ASSESSING OFFICER. 6.8 WE FIND THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF RAMESHCHANDRA AND CO. (SUPRA) HAS HELD AS UNDER : THE JUDGMENT OF THIS COURT IN JIVATLAL PURTAPSHI'S C ASE [1967] 65 ITR 261 WAS, AS THE TRIBUNAL HELD, SQUARELY APPLICABLE. IT WAS STATED BY THIS COURT (AT P. 266) THAT ' WHAT IS VOLUNTARILY ACCEPTED CANN OT GIVE RISE TO A GRIEVANCE WHICH CAN BE TAKEN FURTHER IN APPEAL. IN THE APPEAL MEMO, WHICH WAS FILED BY THE DEPARTMENT, THE ONLY GROUND T AKEN WAS THAT THE DELETION OF THE ITEM BY THE APPELLATE ASSISTANT COMMISSI ONER WAS ERRONEOUS. THE SAID GROUND WAS OBVIOUSLY UNSUSTAINABLE, SI NCE THERE COULD BE NO ERROR ON THE PART OF THE APPELLATE ASSISTA NT COMMISSIONER IN ACCEPTING THE CONCESSION WHICH WAS MADE BY THE DEPARTM ENT BEFORE HIM. IN THESE CIRCUMSTANCES, THE PRELIMINARY CONTENTIONS, WH ICH WERE RAISED ON BEHALF OF THE ASSESSEE BEFORE THE TRIBUNAL, WERE E NTITLED TO SUCCEED AND THE TRIBUNAL SHOULD HAVE HELD IN FAVOUR OF THE A SSESSEE THAT THE APPEAL OF THE DEPARTMENT IN RESPECT OF THE DELETION OF THE SAID ITEM WAS NEITHER COMPETENT NOR CAPABLE OF BEING ENTERTAINED BY THE TRIBUNAL.' MR. THAKKAR, LEARNED COUNSEL FOR THE ASSESSEE, RELIED UP ON THE JUDGMENT OF THE PUNJAB AND HARYANA HIGH COURT IN CHHAT MULL AGGARWAL V. CIT [1979] 116 ITR 694, 696. THE COURT WAS CALLED UPON T O DECIDE, INTER ALIA, THIS QUESTION : ' WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE TRIBUNAL WAS, IN LAW, RIGHT IN HOLDING THAT IN THE ABSENCE OF A RECTIFICATION APPLICATION AND IN THE ABSENCE OF AN AFFIDAVIT OF TH E ASSESSEE EXPLAINING THE CIRCUMSTANCES WHICH MISLED THE ASSESSEE TO GIVE HIS CON SENT TO THE 17 ADDITION OF RS. 15,000, NO APPEAL COULD LIE TO THE A PPELLATE ASSISTANT COMMISSIONER ? ' IT SAID, IN ANSWER, THAT IT COULD NOT BE HELD AS A MAT TER OF LAW THAT THE REMEDY OF APPEAL UNDER THE ACT COULD NOT BE AVAILED OF BY THE ASSESSEE WITHOUT HAVING FILED A RECTIFICATION APPLICATION BE FORE THE INCOME TAX OFFICER IN A CASE WHERE THE ORDER OF THE INCOME TAX OFFICER SHOWED THAT THE ASSESSEE HAD AGREED TO THE ADDITION TO THE INCOME. THERE WAS NO PROVISION IN THE ACT WHEREIN THE REMEDY OF APPEAL AG AINST THE ORDER OF THE INCOME TAX OFFICER OR OF THE APPELLATE ASSISTANT C OMMISSIONER WAS BARRED IF THE IMPUGNED ORDER MENTIONED THAT THE ORD ER HAD BEEN PASSED ON THE AGREEMENT OF THE ASSESSEE. THE PROVISIONS OF THE A CT ENTITLED AN ASSESSEE TO FILE AN APPEAL AGAINST THE ORDER OF THE INCO ME TAX OFFICER BEFORE THE APPELLATE ASSISTANT COMMISSIONER WHERE THE ASSE SSEE DENIED HIS LIABILITY TO BE ASSESSED UNDER THE ACT. IT WAS A DIF FERENT MATTER IF THE APPELLATE ASSISTANT COMMISSIONER CAME TO THE CONCLUSION T HAT THE ORDER WAS PASSED ON THE ADMISSION OF THE ASSESSEE AND THE ASSESSEE WA S UNABLE TO EXPLAIN THAT THE ADMISSION WAS WRONGLY RECORDED UND ER SOME MISTAKEN BELIEF OF FACT AND LAW. IN THAT CASE, THE AP PELLATE ASSISTANT COMMISSIONER COULD DISMISS THE APPEAL ON MERITS BUT IT CO ULD NOT BE HELD AS MATTER OF LAW THAT NO APPEAL WAS COMPETENT. IT WAS NO DOUBT TRUE THAT IN A CASE WHERE THE ADMISSION OF THE ASSESSEE HAD BEEN WRO NGLY RECORDED IN THE ASSESSMENT ORDER, IT WAS OPEN TO THE ASSESSEE TO FIL E A PETITION FOR RECTIFICATION; BUT IF THE ORDER WAS APPEALABLE, IT W AS EQUALLY OPEN TO THE ASSESSEE TO AVAIL OF THE REMEDY OF APPEAL AND THE APPEL LATE AUTHORITY WOULD HAVE TO DECIDE THE APPEAL ON MERITS. NOR WAS IT NECESSARY FOR THE ASSESSEE TO FILE AN AFFIDAVIT IN SUPPORT OF HIS SUBMISSIONS I N ALL CASES. THE ASSESSEE MIGHT CHOOSE TO FILE AN AFFIDAVIT IN SUPPORT OF HIS SUBMISSIONS AND, IF HE CHOSE NOT TO FILE IT, THE CIRCUMSTANCES AP PEARING ON THE FILE HAD TO BE JUDGED IN THE LIGHT OF THE MATERIAL AVAILABLE AND IF THERE WERE SUFFICIENT CIRCUMSTANCES ON THE FILE TO COME TO THE CO NCLUSION THAT THE ADMISSION MADE BY THE ASSESSEE WAS NOT BINDING ON HIM, HE WOULD BE ENTITLED TO THE RELIEF IN APPEAL. WITH GREAT RESPECT TO THE LEARNED JUDGES OF THE PUNJA B AND HARYANA HIGH COURT WHO DECIDED CHHAT MULL AGGARWAL'S CASE [1979] 1 16 ITR 694, WE ARE UNABLE TO AGREE. WHERE AN ASSESSEE HAS MADE A STATEME NT OF FACTS, HE CAN HAVE NO GRIEVANCE IF THE TAXING AUTHORITY TAXES HIM IN ACCORDANCE WITH THAT STATEMENT. IF HE CAN HAVE NO GRIEVANCE, HE CAN FILE NO APPEAL. THEREFORE, IT IS IMPERATIVE, IF THE ASSESSEE'S CASE IS TH AT HIS STATEMENT HAS BEEN WRONGLY RECORDED OR THAT HE MADE IT UNDER MISTA KEN BELIEF OF FACT OR LAW , THAT HE SHOULD MAKE AN APPLICATION FOR RECTIFI CATION TO THE AUTHORITY WHICH PASSED THE ORDER BASED UPON THE STATEMENT. UNTIL RECTIFICATION IS MADE, AN APPEAL IS NOT COMPETENT. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE TR IBUNAL WAS RIGHT IN THE CONCLUSION TO WHICH IT CAME AND WE ANSWER THE QUE STION IN THE NEGATIVE AND IN FAVOUR OF THE REVENUE. THE ASSESSEE SHALL PAY TO THE REVENUE THE COSTS OF THE R EFERENCE. 18 6.9 SINCE THE ASSESSEE IN THE INSTANT CASE HAS SURR ENDERED THE INCOME BEFORE THE ASSESSING OFFICER FOR WHICH THE ASSESSIN G OFFICER DID NOT PROCEED FOR ANY FURTHER ENQUIRY AND COMPLETED THE A SSESSMENT BY TREATING THE LONG TERM CAPITAL GAIN AS INCOME FROM OTHER SOU RCES AND SINCE THE SURROUNDING CIRCUMSTANCES OF THE CASE ALSO PROVE TH AT THE TRANSACTIONS IN PURCHASE AND SALE OF SHARES IS JUST A COLOURABLE DE VICE ESPECIALLY WHEN THE ASSESSEE HAD NOT DONE ANY SUCH TRANSACTION IN T HE PRECEDING OR SUBSEQUENT YEAR AND THE ASSESSEE EVEN DOES NOT KNOW THE BROKER PERSONALLY, THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) CONFIRMING THE ACTION OF THE ASSESSING OFFICER. WE ACCORDINGLY UPHOLD THE SAME. GROUNDS RAISED BY THE ASSESSEE ARE ACCOR DINGLY DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 04-03-2014. SD/- SD/- (SHAILENDRA KUMAR YADAV ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER SATISH PUNE, DATED 04 TH MARCH 2014 COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A) CENTRAL, PUNE 4. THE CIT CENTRAL, PUNE 5. THE DR A BENCH, PUNE. 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE