ANITA BHATIA, MUMBAI V. ITO WD 19(3)(1), MUMBAI

ITA 6953/MUM/2013

• Counselvise Citation: 695319914 RSA 2013
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 25-07-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 29-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMIT KUMAR
• Assessee Lawyers: Y P TRIVEDI AW SMT USHA DALAL
• Keywords: Unexplained cash credit; Salary income; Share purchase agreement; Assessment record
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI . , , , BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDI CIAL MEMBER . / ITA NO. 6953 /MUM./ 2013 ( / ASSESSMENT YEAR : 200 5 06 ) M / S . ANITA BHATIA 301, MANGAT SIMRAN 28 TH ROAD, BANDRA (WEST) MUMBAI 400 050 .. / APPELLANT V/S INCOME TAX OFFICER WA RD 19(3)(1), MUMBAI .... / RESPONDENT ./ PERMANENT ACCOUNT NUMBER AAAKPB1553H / ASSESSEE BY : SHRI Y.P. TRIVEDI A/W SMT. USHA DALAL / REVENUE BY : SHRI SUM IT KUMAR / DATE OF HEARING 05 .08.2014 / DATE OF ORDE R 28.08.2014 / ORDER , / PER AMIT SHUKLA , J.M. THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE CHALLENG ING THE IMPUGNED ORDER DATED 18 TH OCTOBER 2013, PASSED BY THE LEARNED COMMISSIONER (APPEALS) XVIII, MUMBAI, FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ), FOR THE ASSESSMENT YEAR 2005 06. M / S . ANITA BHATIA 2 2. THE S OLE GROUND RAISED BY THE ASSESSEE IS THAT THE LEARNED COMMISSIONER (APPEALS) HAS ERRED IN LAW AND ON FACTS IN TREATING THE LONG TERM CAPITAL GAIN OF ` 46,74,945, ON ACCOUNT OF SALE OF SHARES CLAIMED AS EXEMPT BY THE ASSESSEE M, TO BE TAXED AS UNEXPLAINED CA SH CREDIT UNDER SECTION 68, WITHOUT APPRECIATING THE FACTS OF THE CASE. 3. FACTS IN BRIEF : WHILE SCRUTINISING THE RETURN OF INCOME OF THE ASSESSEE, THE ASSESSING OFFICER NOTED THAT BESIDES SALARY INCOME OF ` 74,000, AND INCOME FROM OTHER SOURCES OF ` 2,76,2 24, THE ASSESSEE HAD SHOWN INCOME FROM LONG TERM CAPITAL GAIN OF ` 46,74,945, ON SALE OF SHARES WHICH WAS CLAIMED AS EXEMPT UNDER SECTION 10(38). THE TRANSACTION OF SHARES WERE IN RESPECT OF TWO SECURITIES NAMELY , SHUKUN CONSTRUCTIONS AND FAST TRACK ENTERT AINMENT LTD. THE PURCHASE AND SALE DETAILS ALONG WITH THE SALE VALUE OF SHARES AND LONG TERM CAPITAL THEREIN , HAS BEEN INCORPORATED BY THE ASSESSING OFFICER IN THE FOLLOWING MANNER: PURCHASE DETAILS DATE NAME OF THE SCRIP QUANTITY SETTLEMENT NO. NAME OF THE BROKER 08.08.2003 FAS T TRACK FI 33,500 0304093 VIJAY BHAGWAN DAS & CO. 112A, STOCK EXCHANGE TOWER, DALAL STREET, MUMBAI 23 31.07.2003 SHUKUN CONSTRUCTIONS 15,200 0304087 DO M / S . ANITA BHATIA 3 SALE DETAILS DATE NAME OF THE SCRIP QUANTITY SETTLEMENT NO. NAME OF THE BROKER 23.02.2005 SHUKUN CONSTRUCTIONS 1,00,000 0405231 KOTAK SECURITIES, BHAKTAWAR, 1 ST FLOOR, 229, NARIMAN POINT, MUMBAI 24.02.2005 SHUKUN CONSTRUCTION 52,000 0405232 DO 03.03.2005 FAST TRACK FI 15,000 0405237 DO 04.3.2005 FAST TRACK FI 18,5 00 0405238 DO NAME OF CO. NO.OF SHARES F.V. DATE OF PUR. COST COST DATE OF SALE SALE VALUE LONG TERM GAIN SHUKUN CONST. 15200 ` 10 31.07.03 58261.12 23.02.05 (1,00,000 SHARES) 24.02.05 (52,000 SHARES) 1406430.24 757054.65 2105223.65 FAST TRAC K E NTERTAIN MENT 33500 ` 10 08.08.03 85668.24 03.03.05 (15,000 SHARES) 04.03.05 (18,500 SHARES) 1190636.18 464754.06 2569722.00 TOTAL: 4674945.65 4. THE ASSESSING OFFICER THEREAFTER CARRIED OUT VARIOUS ENQUIRIES WITH REGARD TO THE SALE AND PURCHASE OF SHARES AND BEFORE THAT HE HAS DISCUSSED THE MODUS OPERANDI ADOPTED BY THE VARIOUS ASSESSEE IN DEALING OF PENNY STOCK TO GENERATE CAPITAL THROUGH MONEY LAUNDERING. HE HAS DISCUSSED VARIOUS STEPS ADOPTED BY THE OPERATORS IN SUCH MODUS OPERANDI. THEREAFTER, HE HAS ANALYSED FINANCIAL RESULTS OF M / S . ANITA BHATIA 4 SHUKUN CONSTRUCTION AND FAST TRACK ENTERTAINMENT LTD., WHICH HAS BEEN DEALT IN PARA 6 TO 8 OF THE ASSESSMENT ORDER AND CAME TO THE CONCLUSION THAT FIRSTLY, PAID UP CAPITAL OF THE COMPANIES WERE TOO LESS; SECONDLY, SALE SHOWN BY THEM WERE TOO MEAGER I.E., IN CASE OF SHUKUN CONSTRUCTION FOR THE YEAR ENDED 31 ST MARCH 2005, THE SALE WAS ` 2.09 MILLION AND IN CASE OF FAST TRACK ENTERTAINMENT, IT WAS JUST FEW THOUSANDS ; THIRDLY, THE PROFIT BEFORE TAX WAS ALMOST NEGLIGIBLE ; AND LASTLY, SHARE HOLDING OF THESE COMPANIES WERE ALSO VERY LESS AS THE EQUITY BASE WAS VERY LOW. THE ASSESSING OFFICER CALLED FOR THE ENTIRE DETAILS FROM THE ASSESSEE WITH REGARD TO THE TRANSACTION OF SHARES UNDERTAKEN BY THE BROKER , LEDGER ACCOUNT OF THE BR OKER IN THE BOOKS OF THE ASSESSEE AND OTHER DETAILS OF THE SALES MADE. FROM THESE DETAILS, HE NOTED THAT THE PURCHASE OF SHARES HAVE BEEN MADE BY THE BROKER, SHRI VIJAY BHAGWANDAS, HOWEVER, NO PAYMENT HAS BEEN MADE AGAINST THE PURCHASES . THE PAYMENT WAS CL AIMED TO HAVE BEEN ADJUSTED AGAINST THE SPECULATION PROFIT EARNED BY THE ASSESSEE AND THERE WAS A DEBIT BALANCE IN THE ACCOUNT OF THE BROKER IN THE BOOKS OF THE ASSESSEE AT THE TIME OF PURCHASE . FROM THE DETAILS OF THE SPECULATION PROFITS WHICH HAS BEEN IN CORPORATED IN PAGE 8 OF THE ASSESSMENT ORDER, HE NOTED THAT THE NET RESULT IN THE SPECULATION PROFIT WAS ONLY ` 979.26 , SO THERE WAS NO QUESTION OF HAVING ANY DEBIT BALANCE AS CLAIMED BY THE ASSESSEE. THE COPY OF THE ACCOUNT OF VIJAY BHAGWANDAS, AS SUPPLIE D BY THE ASSESSEE FOR THE PERIOD 1 ST APRIL 2003 TO 31 ST MARCH M / S . ANITA BHATIA 5 2004, HAS BEEN INCORPORATED AT PAGE 9 OF THE ASSESSMENT ORDER WHICH READS AS UNDER: DATE B.NO. DEBIT ( ` ) CREDIT ( ` ) 29.07.2003 GM/19/119029 87401.67 0 31.07.03 GM21/121036 0 58260.21 08.08. 03 GM271/127022 0 85668.24 11.09.03 GM50/150022 0 50326.24 20.11.03 GMA1/100032 51822.66 0 07.01.04 GMD6/100040 77329.09 0 17.01.04 GME3/10051 0 42436.37 18.02.04 GMG7/100072 0 81013.86 19.03.04 GMJ1/100044 0 42197.69 216553.42 359903.61 31.03.04 BAL/C/F 143350.19 359903.61 359903.61 5. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE TOTAL PAYMENT DUE FOR THE PURCHASE OF THE SHARES OF THESE TWO COMPANIES WAS ` 1,43,929, AS ON 8 TH AUGUST 2003, BUT THE PAYMENT WAS ADJUSTED ONLY FOR ` 87,401 AND T HE REST AMOUNT OF ` 56,528, HAS NOT BEEN PAID BY THE ASSESSEE AT THAT POINT OF TIME WHICH IS AGAINST THE STOCK EXCHANGE RULE , BECAUSE THE AMOUNT HAS TO BE PAID IMMEDIATELY WITHIN THE SETTLEMENT PERIOD. THAT APART, ON 11 TH NOVEMBER 2003, THERE WAS A TRADING LOSS OF ` 50,326, WHICH MEANS WHATEVER TRADING PROFIT HAS BEEN EARNED BY THE ASSESSEE TILL 8 TH AUGUST 2003, HAS BEEN DILUTED AND THE PAYMENT MADE AGAINST THE PURCHASE HAS BEEN COMPROMISED . ALL THESE CIRCUMSTANCES, NEGATES THE THEORY OF THE ASSESSEE THAT T HE M / S . ANITA BHATIA 6 PAYMENT HAS BEEN MADE FOR THE PURCHASE OF THE SHARES. HE ALSO ANALYSED THE ASSESSMENT RECORD OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2003 04 AND 2004 05 AND FOUND THAT NO PROFIT ON THE TRADING OR CAPITAL GAIN HAS BEEN SHOWN BY THE ASSESSEE IN THE RETURN OF INCOME. THIS G OES TO PROVE THAT THE CONTENTION RAISED BY THE ASSESSEE REGARDING ADJUSTMENT OF PURCHASE AGAINST THE SPECULATION / TRADING PROFIT EARNED BY THE ASSESSEE IS TOTALLY FABRICATED. THE ASSESSEES REPLY TO THE ASSESSING OFFICER VIDE LETTER DATE D 19 TH JULY 2007, WAS AS UNDER: 1. SHARES OF SHUKUN CONSTRUCTIONS AND FAST TRACK HAS BEEN PURCHASED DURING THE YEAR 2003 - 04 FROM MONEYS LYING TO THE CREDIT OF THE ASSESSEE WITH THE BROKER VIJAY BHAGWANDAS ON ACCOUNT OF OTHER TRANSACTIONS THROUGH THE BRO KER. A STATEMENT OF THE TOTAL TRANSACTIONS FOR THE YEAR 2003 - 04 IS ENCLOSED ALONG WITH LEDGER OF BROKER IN THE BOOKS OF THE ASSESSEE. 2. THE SAID SHARES HAVE BEEN PURCHASED IN PHYSICAL FORM AS THEY WERE NOT LISTED WITH CDSUNSDL FOR DEMAT. COPIES OF CONTR ACT NOTES ARE ENCLOSED ALONG WITH COPY OF LETTER ADDRESSED TO THE ASSESSEE DELIVERING THE SHARE CERTIFICATES TO THE ASSESSEE D~/Y TRANSFERRED IN THE NAME OF THE ASSESSEE. ALSO ENCLOSED IS A COPY OF A LETTER FROM SHUKUN CONSTRUCTION INFORMING THE ASSESSE E OF A SPLIT IN THE SHARES AND REQUESTING THE ASSESSEE TO SURRENDER THE SHARE CERTIFICATES SO AS TO ENABLE THE COMPANY TO ISSUE FRESH CERTIFICATE OF NEW FACE VALUE OF RS.1. ALSO ENCLOSED IS A COPY OF A LETTER FROM SHUKUN CONSTRUCTION AND FAST TRACK DELIV ERING THE JUMBO CERTIFICATE FOR DULY CONSOLIDATED SHARES AND ALSO INFORMING THE ASSESSEE THAT THE COMPANY IS NOW LISTED WITH CDSUNSDL AND ADVISING THE ASSESSEE TO DEMATERIALIZE THE SHARES. 3. NO ONE HAD ADVISED THE ASSESSEE TO PURCHASE THE SAID SHARES. T HEY WERE PURCHASED SOLELY ON THE DECISION OF ASSESSEE HERSELF. 4. AS EXPLAINED IN PARA 1 THE SHARES WERE PURCHASED OUT OF MONEYS LYING TO THE CREDIT OF THE ASSESSEE WITH THE BROKER VIJAY BHAGWANDAS ON ACCOUNT OF OTHER TRANSACTIONS THROUGH THE BROKER. M / S . ANITA BHATIA 7 5. THE SALES PROCEEDS FROM THE SALE OF THE SAID SHARES WERE DEPOSITED IN THE BANK ACCOUNT WITH UNION BANK OF INDIA. A XEROX COPY OF THE BANK STATEMENT ALONG WITH SUMMARY HAS ALREADY BEEN SUBMITTED AND IS ON RECORD. 6. THE SHARES HAVE BEEN SOLD IN DEMAT FOR M. COPY OF DEMAT ACCOUNT IS ENCLOSED HEREWITH. 7. AS STATED EARLIER NO ONE HAS TOLD THE ASSESSEE TO EITHER BUY OR SELL THE SAID SHARES. THE ASSESSEE IS WELL EDUCATED AND DID HER OWN ANALYSIS BY GATHERING INFORMATION FROM TIME TO TIME ON THE INTERNET FROM VARIOUS STOCK MARKET RELATED SITES. ONCE, CONVINCED SHE MADE AN INVESTMENT AND WHEN SHE GOT THE RETURN SHE EXPECTED ON HER INVESTMENT SHE SOLD THE SHARES. 6. THE ASSESSING OFFICER , THEREAFTER, ISSUED SUMMONS TO THE ASSESSEE TO APPEAR BEFORE HIM, HOWEVER, IN RESPONSE, THE ASSESSEE DID NOT APPEAR FOR EXAMINATION BY THE ASSESSING OFFICER. THE ASSESSING OFFICER FURTHER PROCEEDED TO ANALYSE A T SHARE TRADING IN THE STOCK EXCHANGE OF SHUKUN CONSTRUCTION AND NOTED THAT THE ASSESSEE HAS PURCHASED THE SAID SHARES AT A PRICE LOWER THAN THE PRICE QUOTED IN THE STOCK EXCHANGE AND VERY FEW TRADING HAS BEEN CARRIED OUT ON THESE SCRIPS. HE ALSO ANALYSED THE DEMANT ACCOUNT OF THE ASSESSEE AND FOUND THAT THESE TWO SHARES IN THE ACCOUNT OF THE ASSESSEE HAD BEEN SHOWN TO HAVE BEEN DEMATERIALIZED ONLY ON 17 TH FEBRUARY 2005, AND ON 19 TH FEBRUARY 2005 . THIS WAS AFTER A LONG GAP WHEN THE ASSESSEE HAS CLAIMED TO HAVE PURCHASED THESE SHARES IN JULY / AUGUST 2003. WITHIN THE SPAN OF 15 DAYS, AFTER DEMATERIALISATION, THE ASSESSEE HAS S OLD ALL THESE SHARES ON HUGE PROFITS , WHICH IS QUITE IMPROBABLE. HE ALSO NOTED THAT IN THE RETURN OF INCOME, FILED FOR THE ASSESSMENT YEAR 2003 04 AND 2004 05, NOTHING IN RESPECT OF THESE SHARES HAVE BEEN M / S . ANITA BHATIA 8 MENTIONED. THUS, HE CAME TO THE CONCLUSION THAT THE ASSESSEE WAS UNABLE TO GIVE ANY CONCRETE MATERIAL OR ANY PROPER EXPLANATION IN SUPPORT OF GENUINENESS OF THE TRANSACTION OF SHARES AND RESULTANT LONG TERM CAPITAL GAIN. THUS, HE TREATED THE ENTIRE TRANSACTION TO BE BOGUS AND ADDED THE ENTIRE CREDITS OF ` 46,76,945, AS UNEXPLAINED CASH CREDIT UNDER SECTION 68, AFTER DETAIL DISCUSSION STARTING FROM PAGE 17 TO 23 OF THE ASSESSMENT ORDER. THE SUM AND SUBSTANCE OF H IS FINDINGS ARE AS UNDER: (I) THE ASSESSEE HAS UNABLE TO EXPLAIN WHY THE SHARES HAVE BEEN PURCHASE D OF F MARKET WHEN THEY ARE AVAILABLE IN THE MARKET; (II) IN THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2004 05, THERE IS NO REFLECTION OF PURCHASE OF SHARES WHICH INDICATES THAT THE PURCHASE OF THE SHARES HAVE BEEN DELIBERATELY BACK DATED; (III) THE ASSESSEE HA S CLAIMED TO HAVE PURCHASED THE SHARES BETWEEN JULY / AUGUST 2003, BUT THE PAYMENT HAS NOT BEEN MADE BY THEM AT THE TIME OF PURCHASE AND THERE IS NO MENTION IN THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2003 04 AND 2004 05; (IV) T HE SHARES HAVE BEEN PURCHAS ED @ ` 3.83 AND ` 2.55 AND THEY HAVE BEEN SOLD AT AN AVERAGE RATE OF ` 14.63 AND M / S . ANITA BHATIA 9 ` 79.70 WITHOUT ASSESSEE BEING HAVING MUCH KNOWLEDGE AND STUDY ABOUT THE MARKET AS TO WHEN THESE SHARES WHICH HAVE BEEN BOUGHT AT SUCH A LOWER RATE WILL GIVE SUCH A HIGH YIELD WITHIN A SPAN OF 1 YEARS; (V) T HE SHARES HAVE BEEN PURCHASED IN JULY / AUGUST 2003, BUT IT HAS BEEN DEMATERIALIZED IN THE DEMAT ACCOUNT ON 17 TH FEBRUARY 2005 AND 19 TH FEBRUARY 2005 AND HAVE BEEN SOLD BETWEEN 23 RD FEBRUARY TO 4 TH MARCH 2005; (VI) I N SUCH A SITUA TION, THE EXPLANATION OFFERED BY THE ASSESSEE IS WHOLLY UNTENABLE AND IT IS NOTHING BUT A SHAM TRANSACTION. IN SUPPORT OF THIS CONCLUSION, HE HAS ALSO REFERRED TO THE DECISION OF THE TRIBUNAL, CHANDIGARH BENCH, IN ACIT V/S SOM N ATH MA I NI, [2006] 100 TTJ 91 7 (CHD.) AND DECISIONS OF THE HONBLE SUPREME COURT DECISION IN MCDOWELL & CO. V/S CTO, [1985] 154 ITR 1 48 (SC) AND SUMATI DAYAL V/S CIT, [1995] 214 ITR 801 (SC). 7. IN THE FIRST APPEAL, T HE LEARNED COMMISSIONER (APPEALS) TOO CONFIRMED THE FINDINGS AND THE C ONCLUSION DRAWN BY THE ASSESSING OFFICER AFTER DISCUSSING THE SAME IN DETAIL . HE HAS MERELY REITERATED THE SAME OBSERVATION AND THE FINDING BY THE ASSESSING OFFICER IN THE ORDER, WHICH HAS BEEN DEALT FROM PAGE 8 TO 12 OF THE APPELLATE ORDER. M / S . ANITA BHATIA 10 8. BEFORE US, TH E LEARNED SENIOR COUNSEL FOR THE ASSESSEE, SHRI Y.P. TRIVEDI, AFTER EXPLAINING THE ENTIRE FACTS SUBMITTED THAT THE ASSESSEE HAS PURCHASED SHARES THROUGH BROKER, SHRI VIJAY BHAGWANDAS AND CO. ON 31 ST JULY 2003 AND 8 TH AUGUST 2003, AND THE SAME WERE SOLD BET WEEN 23 RD FEBRUARY 2005 TO 4 TH MARCH 2005. SINCE SHRI VIJAY BHAGWANDAS, HAD DIED IN JULY 2006, THEREFORE, HE WAS NOT AVAILABLE FOR TESTIFY THE ENTIRE TRANSACTION. THE GENUINENESS OF THE PURCHASE OF THE SCRIPS CAN BE ESTABLISHED FROM THE FOLLOWING DOCUMENTS AND MATERIAL PLACED ON RECORD: I) PURCHASE BILL OF THE BROKER WHICH IS APPEARING AT PAGE 2 AND 3 OF THE PAPER BOOK; II) LETTER FROM THE COMPANIES SHUKUN CONSTRUCTION AND FAST TRACK ENTERTAINMENT LTD., WHO HAVE CONFIRMED THAT THEY HAVE RECEIVED THE SHARES FOR PHYSICAL TRANSFER IN THE NAME OF THE ASSESSEE AND HAVE ALSO ACKNOWLEDGED THE RECEIPT OF SHARES FOR TRANSFER. THESE LETTERS ARE APPEARING AT PAGE 5 AND 7 OF THE PAPER BOOK. III) THE SHARES WERE SUBSEQUENTLY DEMATED WITH KOTAK SECURITIES LTD., DETAILS OF WHICH A RE APPEARING AT PAGE 8 OF THE PAPER BOOK. IV) THE SALES W ERE MADE THROUGH KOTAK SECURITIES LTD., WHICH IS A REPUTED FIRM AND THE AMOUNT WAS RECEIVED M / S . ANITA BHATIA 11 THROUGH CHEQUE AND THE ENTRE TRANSACTION HAS BEEN CONFIRMED BY WAY OF LEDGER ACCOUNT OF THE KOTAK SECURITIES L TD. AND ALSO THE RECEIPT OF SALE CONSIDERATION HAS BEEN REFLECTED IN BANK ACCOUNT. V) BEFORE THE AUTHORITIES BELOW, THE ASSESSEE HAD SHOWN THAT SHE WAS DEALING WITH THE SAID BROKER FOR A VERY LONG TIME WHICH IS EVIDENT FROM THE FACT THAT SEVERAL SHARES WERE PURCHASED AND SOLD BY THE ASSESSEE THROUGH SHRI VIJAY BHAGWANDAS IN THE EARLIER YEARS AND THE SAID TRANSACTIONS HAS ALSO BEEN INCORPORATED BY THE ASSESSING OFFICER IN PARA 11 / PAGE 8 OF THE ASSESSMENT ORDER. A COPY OF THE ACCOUNT WITH THE BROKER SHOWS THA T THERE HAS BEEN REGULAR TRANSACTION AND AT THE TIME OF PURCHASE OF SHARES THERE WAS A CREDIT BALANCE OF ` 87,401, IN THE BOOKS OF THE BROKER AND THERE WERE FURTHER TRANSACTIONS OF ASSESSEE GIVING THE MONEY TO THE BROKER FOR THE PURPOSE OF SHARES . VI) IN THE BALANCE SHEET FOR THE ASSESSMENT YEAR 2004 05, THE SAID PURCHASE OF SHARES ARE DULY REFLECTED AS INVESTMENT, THE COPY OF THE SAME IS APPEARING AT PAGE 10 OF THE PAPER BOOK WHICH FACT HAS BEEN NEGATED BY THE AUTHORITIES BELOW . M / S . ANITA BHATIA 12 VII) THE COPY OF THE LEDGER ACCO UNT AND BANK ACCOUNT SHOWS THAT THE ASSESSEE HAD A RUNNING ACCOUNT WITH THE BROKER WHICH CONTINUED ALSO IN THE SUBSEQUENT YEAR WHERE THERE WERE MORE TRANSACTIONS WITH THE SAME BROKER. 9. THUS, HE SUBMITTED THAT ON THESE FACTS AND MATERIAL PLACED ON RECORD, I T CANNOT BE HELD THAT PURCHASE AND SALE OF THESE SHARES ARE NOT GENUINE. IN SUPPORT OF HIS CONTENTION THAT UNDER SUCH CIRCUMSTANCES, THE TRIBUNAL AND VARIOUS COURTS HAVE TAKEN A FAVOURABLE VIEW HE HAS REFERRED TO FOLLOWING : I) SMT. JIMIT R. SHAH V/S ITO , ITA O.3643/MUM./2007, ORDER DATED 5 TH JANUARY 2010; II) RAMESH MATKAR (HUF) V/S ACIT, ITA NO.6302/MUM./2009, ORDER DATED 24 TH SEPTEMBER 2010; III) PUSHPA R. SHAH V/S ITO, ITA NO.2669/MUM./2006, ORDER DATED 29 TH JULY 2008; AND IV) MUKESH R. MAROLIA V/S ACIT, ITA NO.1201/MUM./2005, ORDER DATED 15 TH DECEMBER 2005. 10. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUBMITTED THAT ALL THE MATERIAL PLACED BY THE ASSESSEE HAS BEEN DEEPLY SCRUTINISED AND ANALYSED BY THE ASSESSING OFFICER AFTER DETAI L ENQUIRY AND INVESTIGATION . IT WAS AFTER EXAMINING THE EVIDENCES AND EXPLANATION OF THE ASSESSEE , THE ASSESSING OFFICER HAS FOUND THE ENTIRE TRANSACTION OF PURCHASE AND SALE OF THE ASSESSEE AS SHAM. HE FURTHER REFERRED TO THE VARIOUS FINDING GIVEN BY THE ASSESSING OFFICER AND ALSO THE MANNER IN WHICH THE LEARNED COMMISSIONER (APPEALS) HAS M / S . ANITA BHATIA 13 CONFIRMED THE SAID FINDING AND CONCLUSION OF THE ASSESSING OFFICER. THUS, HE STRONGLY RELIED UPON THE ORDER OF THE ASSESSING OFFICER AS WELL AS THE LEARNED COMMISSIONER ( APPEALS). 11. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE RELEVANT FINDINGS OF THE AUTHORITIES BELOW AND THE MATERIAL AVAILABLE ON RECORD. THE ENTIRE ISSUE REVOLVES AROUND , WHETHER THE TRANSACTION OF SALE OF SHARES IN THIS YEAR WHICH HAS BEEN ALLEGEDLY P URCHASED BY THE ASSESSEE IN THE YEAR 2003 IS GENUINE OR NOT. THE FACTS WHICH HAVE CULLED OUT FROM THE RECORDS ARE REITERATED AGAIN FOR BETTER APPRECIATION. T HE ASSESSEE HAD SHOWN PURCHASES OF 15,200 SHARES OF SHUKUN CONSTRUCTION, ON 31 ST JULY 2003 AND 33,0 00 SHARES OF FAST TRACK ENTERTAINMENT LTD., ON 8 TH AUGUST 2003, FOR SUMS AGGREGATING TO ` 1,43,930. THESE SHARES HAVE BEEN SOLD FOR SUMS AGGREGATING TO ` 48,18,875. AFTER DEDUCTING THE PURCHASE PRICE OF ` 1,43,930, LONG TERM CAPITAL GAIN OF ` 46,74,945 , HA D BEEN SHOWN IN THE RETURN OF INCOME AND CLAIMED AS EXEMPT UNDER SECTION 10(38) . THE SOURCE OF PURCHASE OF SHARES HAS BEEN EXPLAINED BY THE ASSESSEE THAT SHE HAD A RUNNING ACCOUNT WITH THE BROKER SHRI VIJAY BHAGWANDAS WITH WHOM SHE HAD REGULAR TRANSACTIONS OF SALE AND PURCHASE OF SHARES AND AT THE TIME OF PURCHASE, THERE WAS A DEBIT BALANCE OF ` 87,401. TH I S DEBIT BALANCE HAVE BEEN ADJUSTED TOWARDS THE PURCHASE OF SHARES. THEREAFTER, THE ASSESSEE HAD ALSO MADE FURTHER PAYMENTS TO THE SAID BROKER WHICH HAS B EEN EXPLAINED FROM THE COPY OF THE ACCOUNT OF THE BROKER . THE M / S . ANITA BHATIA 14 PURCHASE OF THE SHARES HAS ALSO BEEN TRIED TO BE PROVED BY THE FACT THAT THE COMPANY S H UKUN CONSTRUCTION, AND FAST TRACK ENTERTAINMENT LTD., HAVE WRITTEN LETTER TO THE ASSESSEE WAY BACK IN OCTOB ER 2003, FOR TRANSFERRING THE SHARES IN THE NAME OF THE ASSESSEE . THE COPIES OF SUCH LETTERS HAVE BEEN PLACED IN THE PAPER BOOK FROM PAGE 5 TO 7. THAT APART, ONE VERY IMPORTANT FACT POINTED OUT BY THE LEARNED SR. COUNSEL , THAT IN THE BALANCE SHEET AS ON 31 ST MARCH 2004, THESE SHARES HAVE BEEN SHOWN AS INVESTMENT. THIS FACT ITSELF, HE SUBMITTED THAT , GOES TO PRIMA - FACIE SHOW THAT PURCHASES WERE MADE IN THE FINANCIAL YEAR 2003 04 AS CLAIMED BY THE ASSESSEE AND ONCE THE PURCHASES HAVE BEEN MADE, THEN THE SALE TRANSACTIONS CANNOT BE DOUBTED , BECAUSE THE SAME SHARES HAVE BEEN SOLD AFTER DEMATERALISING AND THROUGH BANKING CHANNELS. ON THE OTHER HAND, THE ASSESSING OFFICER HAS TRIED TO NEGATE THE EXPLANATION OF THE ASSESSEE REGARDING PURCHASES BY STATING THAT THE S TORY , THAT THE ASSESSEE HAD RUNNING ACCOUNT AND DEBIT BALANCE WITH BROKER IS NOT CORRECT, BECAUSE THE ASSESSEE HAD NOT INCURRED ANY HUGE PROFIT IN THE EARLIER TRANSACTION WITH THE BROKER AND AS ON DATE OF PURCHASE OF SHARES, THE ASSESSEE DID NOT HAD THE RE QUISITE AMOUNT WITH THE BROKER FROM WHOM THE PURCHASES HAVE BEEN ALLEGED TO BE PURCHASED. HE HAS FURTHER NEGATED THE ASSESSEES CONTENTION BY PLACING ON RECORD THAT IN THE ASSESSMENT YEAR 2003 04 AND 2004 05, THERE IS NO INCOME SHOWN FROM THE SALE OR PURCH ASE OF THE SHARES OR UNDER THE HEAD CAPITAL GAIN HE HAS ALSO OBSERVED THAT WHY THE SHARES HAVE BEEN PURCHASED OF F MARKET , WHEN M / S . ANITA BHATIA 15 THE SAME WERE AVAILABLE IN THE OPEN STOCK MARKET. TO PROVE HIS CONTENTION, THE ASSESSING OFFICER HAS ALSO ANALYSED THE FINANCIA L RESULTS OF THESE TWO COMPANIES AND FOUND THAT THESE ARE PENNY STOCK COMPANIES AND HAD NO EQUITY BASE , SO HOW THE VALUE OF THE SHARES OF THESE COMPANIES HAS GONE UP IN LEAPS AND BOUNDS IN SUCH A SHORT SPAN. BESIDES THIS, HE HAS ALSO TAKEN AN ADVERSE VIEW FROM THE FACT THAT THE SHARES PURCHASED IN THE EARLIER YEARS HAVE BEEN DEMATERIALISED IN THIS YEAR AND WITHIN THE SHORT SPAN OF FEW DAYS HAVE BEEN SOLD ON SUCH A HIGH PRICE . ON THESE FACTS, HE HELD THAT THE ENTIRE TRANSACTION OF PURCHASE AND SALE OF SHARES IS COMPLETELY NON GENUINE TRANSACTIONS. 12. PRIMA FACIE, THE OVERALL FINDING AND CONCLUSION DRAWN BY THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER (APPEALS) APPEARS TO BE QUITE APPEALING, HOWEVER, THE BASIC FACTS ON RECORD REGARDING PURCHASES HAVE NOT BEEN PROPERLY APPRECIATED. FOR INSTANCE, BOTH THE AUTHORITIES HAVE HELD THAT IN THE EARLIER ASSESSMENT YEAR, TRANSACTION OF SHARES HAVE NOT BEEN DISCLOSED , WHICH FACT IS CONTRARY TO THE BALANCE SHEET AS ON 31 ST MARCH 200 4 , WHICH IS FOR THE FINANCIAL YEAR 1 ST APRIL 2003 TO 31 ST MARCH 2004, WHEREIN THE ASSESSEE HAS REFLECTED THESE SHARES AS INVESTMENT. THIS FACT HAS BEEN COMPLETELY IGNORED. SECONDLY AND MOST IMPORTANTLY , WHILE MAKING THE ADDITION, THE ASSESSING OFFICER HAS TAKEN THE NET OF SALES , THAT IS , SAL E MINUS PURCHASE FOR THE PURPOSE OF MAKING THE ADDITION , BECAUSE THE TOTAL M / S . ANITA BHATIA 16 SALES OF THESE SHARES AGGREGATED TO ` 48,18,875, WHEREAS PURCHASE OF THE SHARES WAS AT ` 1,43,930 AND ACCORDINGLY, NET SALES SHOWN AS LONG TERM CAPITAL GAIN WAS AT ` 46,74,945. IF T HE PURCHASES WERE NON GENUINE OR BOGUS OR THE ENTIRE EXPLANATION OF SHARE TRANSACTION IS SHAM, THEN THE ENTIRE ADDITION OF SALE SHOULD HAVE BEEN ADDED BY THE ASSESSING OFFICER UNDER SECTION 68, AS IT WAS THIS AMOUNT OF ` 48,18,875, WHICH WAS CREDITED IN TH E BOOKS OF ACCOUNT IN THIS YEAR. NO DOUBT, IT IS A CASE OF PENNY STOCK AND MANY SUCH TRANSACTIONS ARE COLOURED TRANSACTIONS FOR MONEY LAUNDERING , HOWEVER, FOR PROVING SUCH A TRANSACTION TO BE BOGUS, THE FACTS AND EVIDENCES HAVE TO BE REAPPRAISED OBJECTIVEL Y AND NOT PARTLY OBJECT IVE AND PARTLY ON PRESUMPTION AND SURMISES. IF ON THE ONE HAND, THE ASSESSING OFFICER IS ACCEPTING THE FACT THAT TRANSACTIONS OF SHARES WITH THE SAID BROKER WERE CARRIED OUT IN THE EARLIER YEARS , THEN TO ASSUME THAT ONLY O N TH ESE PAR TICULAR SCRIP S , BOTH HAVE COLLUDED FOR MONEY LAUNDERING HAVE TO BE PROVED . THIS CAN ONLY BE DONE BY PROVING THAT THE PURCHASE OF SHARES WAS ENTIRELY BOGUS OR WERE NON EXISTENT TRANSACTIONS . THIS IS MORE SO , IN THIS CASE WHEN THE TWO COMPANIES HAVE GIVEN A LETTER FOR TRANSFERRING THE SHARES IN THE NAME OF THE ASSESSEE IN OCTOBER 2003. THE ASSESSING OFFICER C OULD HAVE CARRIED OUT SOME ENQUIRIES FROM THESE TWO COMPANIES DIRECTLY , WHETHER THE ASSESSEE HAD MADE ANY PURCHASES IN THE EARLIER YEAR S OR NOT . IF THE F ACTUM OF PURCHASE IS NOT DISPROVE D , THEN THE SALE OF THE SAME VERY SHARES CANNOT BE TREATED AS BOGUS , WHEN THE SALE TRANSACTION IS PRIMA FACIE QUITE APPARENT AS THE M / S . ANITA BHATIA 17 MONEY HAS BEEN RECEIVED THROUGH THE BANKING CHANNELS. THUS, U NDER THE FACTS AND CIRCUMSTANC ES, WE ARE OF THE OPINION THAT THIS ENTIRE ISSUE SHOULD BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE VERACITY OF THE PURCHASE OF SHARES IN THE FINANCIAL YEAR 2003 04 AND ALSO, WHETHER THE BALANCE SHEET AS ON 31 ST MARCH 2004, HAS BEEN AL ONG WITH THE RETURN OF INCOME OR NOT , AS IT IS A VERY CRUCIAL POINT TO JUDGE THE ENTIRE TRANSACTION. THE ASSESSING OFFICER MAY CARRY OUT NECESSARY ENQUIRY AND INVESTIGATION IN THIS REGARD AND TO ADJUDICATE THE ISSUE AFRESH AFTER GIVING DUE AND EFFECTIVE OPP ORTUNITY OF HEARING TO THE ASSESSEE. THUS, THE GROUND RAISED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 13. 1 3 . IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTI CAL PURPOSES. 28 TH AUGUST 2014 ORDER PRONOUNCED IN THE OPEN COURT O N 28 TH AUGUST 2014 SD/ - . D. KARUNAKARA RAO ACCOUNTANT MEMBER SD/ - AMIT SHU KLA JUDICIAL MEMBER MUMBAI, DATED : 28 TH AUGUST 2014 M / S . ANITA BHATIA 18 / COPY OF THE ORDER FORWARDED TO : (1) / THE ASSESSEE ; (2) / THE REVENUE; (3) ( ) / THE CIT(A ) ; (4) / THE CIT, MUMB AI CITY CONCERNED ; (5) , , / THE DR, ITAT, MUMBAI ; (6) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SEC RETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI