NOORJAHAN T. MUJAHID, MUMBAI V. ACIT 17(3), MUMBAI

ITA 960/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78796 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 01-04-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 02-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SAHU
• Assessee Lawyers: NEELKANTH KHANDELWAL
• Keywords: Unexplained expenditure; Business income; Income from undisclosed sources; Accommodation entries; Competent authority
• Section: 69C; 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI . . , , , BEFORE SHRI N.K. BILLAIYA , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIA L MEMBER . / ITA NO. 960 / MUM./ 2011 ( / ASSESSMENT YEAR : 20 0 6 07 ) MS. NOORJAHAN T. MUJAHID PLOT NO.131, YOUTH QURESHI APARTMENT 1 ST FLOOR, CATER ROAD OPP. JOGGERS PARK BANDRA (W), MUMBAI .. / APPELLANT V/ S ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 17 (3), PIRAMAL CHAMGERS LALBAUG, PAREL, MUMBAI 400 012 .... / RESPONDENT . / PERMANENT ACCOUNT NUMBER AIAPM8446N / ASSESSEE BY : MR. NEE LKANTH KHANDELWAL / REV ENUE BY : MR. R.K. SAHU / DATE OF HEARING 09 . 0 4 .201 4 / DATE OF ORDER 30.04.2014 / ORDER , / PER AMIT SHUKLA , J.M. THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE CHALLENGING THE IMPUGNED ORDER DATED 12 TH NOVEMBER 2012 , PASSED BY THE LEARNED COMMISSIONER (APPEALS) XXIX , MUMBAI, FOR THE QUANTUM MS. NOORJAHAN T. MUJAHID 2 OF ASSESSMENT PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) FOR THE ASSESSMENT YEAR 20 06 07 , VIDE WHICH, FOLLOWING GROUNDS HAVE BEEN RAISED: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN TREATING SHORT TERM CAPITAL GAIN OF ` 44,66,911 ON TRANSACTIONS IN SHARES OF KARUNA CABLES LTD. AS INCOME FROM UNDISCLOSED SOURCES ON THE GROUND THAT THE TRADES IN THE SAID SCRIP ARE NOT GENUINE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW , THE LEARNED C IT(A) ERRED IN UPHOLDING THE ACTION O F THE ASSESSING OFFICER IN MAKING AN ADDITION OF A SUM OF ` 2,23,345 BEING 5% OF THE SHORT TERM CAPITAL GAIN OF ` 44,66,911 AS UNEXPLAINED EXPENDITURE UNDER SECTION 69C. 2 . FACTS IN BRIEF : THE ASSESSEE IS AN INDIVIDUAL WHO HAD SHOWN SHORT TERM CAPITAL GAIN ON SALE OF SHARES , BESIDES INCOME FROM HOUSE PROPERTY , INCOME FROM OTHER SOURCES , AND INCOME FROM AGRICULTURE . DURING THE COURSE OF THE SCRUTINY PROCEEDINGS, THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO FURNISH THE EVIDENCE IN SUPPORT OF TRANSACTIONS RELATING TO SHORT TERM CAPITAL GAIN AND A DETAIL QUESTIONNAIRE WAS ISSUED ON 1 ST DECEMBER 2008, THE CONTENTS OF WHICH HAVE BEEN REPRODUCED AT PAGE 2 OF THE ASSESSMENT ORDER. FURTHER, THE ANOTHER QUESTIONNAIRE WAS IS SUED VIDE SHOW CAUSE NOTICE DATED 12 TH DECEMBER 2008, WHICH TOO HAVE BEEN INCORPORATED IN THE ASSESSMENT ORDER AT PAGE 3 AND 4. IN THE SHOW CAUSE NOTICE S , THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO SUBMIT THE DETAILS OF SALE S CONTRACT NOTE FOR THE ENTI RE TRANSACTION, COPY OF DEMAT ACCOUNT, COPY OF CAPITAL ACCOUNT , BALANCE SHEET FOR THE ASSESSMENT YEAR 2006 07, COPY OF ACCOUNT WITH SH AR E BROKER, NATURE AND SOURCES OF THE CREDIT APPEARING IN THE BANK ACCOUNT, ETC. IN RESPONSE, THE ASSESSEE SUBMITTED THAT IT HAS SHOWN NET SHORT TERM CAPITAL GAIN AT ` 1,12,44,403 , ON SALE OF MS. NOORJAHAN T. MUJAHID 3 SHARES. FURTHER, SHE HAS MAINTAINED COMPLETE BOOKS OF ACCOUNT WHICH WERE ALSO PRODUCED BEFORE THE ASSESSING OFFICER. BESIDES THIS, A LL THE REQUISITE DETAILS LIKE CAPITAL ACCOUNT, BALANC E SHEET, CONTRACT NOTES OF THE BROKER , BILLS, COPY OF ACCOUNT WITH THE BROKER M/S. VIJAY BHAGVANDAS, CONFIRMATION FROM THE SAID BROKER ABOUT THE PAYMENT OF SECURITY TRANSACT ION TAX (STT) ON THE TRANSACTION RELATING TO SALE AND PURCHASE OF SHARES ON BEHALF OF THE ASSESSEE WERE SUBMITTED BEFORE THE ASSESSING OFFICER . THIS HAS BEEN DISCUSSED IN THE ASSESSMENT ORDER AT PARA 4. FROM THE S AID DETAILS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD SHOWN SHORT TERM CAPITAL GAIN OF ` 44,66,911 ON THE TRANSACTION MADE IN A SCRIP NAMED AS KARUNA CABLES LTD. . THE ASSESSING OFFICER NOTED THAT THE SCRIP OF KARUNA CABLES IS A PENNY STOCK WHICH IS EITHER DELISTED OR NOT LISTED IN THE RECOGNISED STOCK EXCHANGE. THEREAFTER, THE ASSESSING OFFICER HAS GIVEN A GENERAL DESC RIPTION AND MODUS OPERANDI OF THE FABRICATED SHARE TRANSACTIONS UNDERTAKEN PARTICULARLY IN PENNY STOCK . THIS HAS BEEN DISCUSSED BY HIM IN DETAIL FROM PAGE S 5 TO 7 OF THE ASSESSMENT ORDER. WHAT IS THE SOURCE OF SUCH MODUS OPERANDI , HAS NOT BEEN DISCUSSED BY THE ASSESSING OFFICER NOR ANY ENQUIRY ON THE TRANSACTION CARRIED ON BY THE ASSESSEE THROUGH THE BROKER OR STOCK EXCHANGE HAS BEEN CONDUCTED. THEREAFTER, HE HAS ALSO TRIED TO ANALYSE THE SCRIP OF KARUNA CABLES WHETHER IT IS A PENNY STOCK OR NOT BY COMPARIN G ITS FINANCIAL RESULTS OF 31 ST MARCH 2005 AND 31 ST MARCH 2004 , WHICH HAS BEEN INCORPORATED BY HIM AT PAGE 8 AND 9 OF THE ORDER. FROM SUCH ANALYSIS, HE CONCLUDED THAT ; FIRSTLY, THE FLOATING SHARE CAPITAL IN THE MARKET WAS TOO LESS; SECONDLY, TOTAL SALES OF THE PRODUCTS OF THE COMPANY WA S TOO LOW; THIRDLY, FOR THE YEAR ENDING 31 ST MARCH 2004 AND 31 ST MARCH 2005, THE ASSESSEE HAS NOT DONE ANY SUBSTANTIAL BUSINESS SHARE HOLDING OF THE COMPANY IS ALSO QUITE LESS AND LASTLY , NO DIVIDEND HAS BEEN DECLARED. MS. NOORJAHAN T. MUJAHID 4 T HUS, THIS COMPANY DOES NOT PORTRAY ANY SIGN OF GROWTH AND, THEREFORE, THUS, THE TRANSACTION CARRIED OUT BY THE ASSESSEE IN SCRIP OF KARUNA CABLE IS NOTHING BUT A SHAM TRANSACTION AND IT IS CLEARLY A PENNY STOCK. THEREAFTER, THE ASSESSING OFFICER REFERRED TO THE ORDER PASSED BY THE SEBI WHICH WAS PASSED IN THE CASE OF KARUNA CABLE VIDE FINAL ORDER DATED 2 5 TH JULY 200 6 , WHICH WAS PROCURED BY THE ASSESSING OFFICER THROUGH WEBSITE. THE CONTENT OF THE ENTIRE SEBI ORDER HAS BEEN REPRODUCED FROM PAGE S 10 TO 19 OF THE A SSESSMENT ORDER. THE MAIN OBSERVATION GIVEN IN THE ORDER OF THE SEBI IS THAT KARUNA CABLE IS A COMPANY LISTED IN THE BSE AND NSE. THE VALUE OF THE SHARES INCREASED FROM ` 22.40 PER SHARE ON 10 TH FEBRUARY 2005 TO ` 159.50 PER SHARE ON 16 TH SEPTEMBER 2005, L EADING TO RISE OF 636% IN 153 TRADING DAYS. BESIDES THIS, THE ORDER ALSO PROHIBITED MANY OF ITS CLIENT INCLUDING MR. VIJAY BHAGWANDAS SHAH, NOT TO DEAL IN SUCH SECURITIES TILL FURTHER DIRECTIONS AND PENDING INVESTIGATION. THE SAID ORDER ALSO MENTIONS ABOUT THE PERSONS WHO HAVE APPLIED FOR PUBLIC ISSUE SHARE OF KARUNA CABLES AND MOST OF THEM APPEARD TO BE BENAMI . FROM THE ORDER OF THE SEBI, THE ASSESSING OFFICER CONCLUDED THAT THE TRADE IN KARUNA CABLES HAS BEEN TREATED AS FRAUDULENT AND NOT GENUINE BY THE SEBI AND VIJAY BHAGWANDAS & CO. HAS BEEN RESTRAINED BY THE SEBI TO TRADE AND DEAL IN THIS SHARE. 3 . BASED ON THE SE OBSERVATIONS AND FINDINGS OF THE SEBI, VIDE FINAL ORDER DATED 25 TH JULY 2006, THE ASSESSING OFFICER HELD THAT THE SHORT TERM CAPITAL GAIN OF ` 44,66,911 EARNED OUT OF TRADE IN SCRIP OF KARUNA CABLE IS NOT A GENUINE TRANSACTION AND, THEREFORE, THE INCOME SHOWN UNDER THE HEAD SHORT TERM CAPITAL GAIN IS TO BE TREATED AS INCOME FROM UNDISCLOSED SOURCES . THEREAFTER, HE ALSO ADDED COMMISSION INCOM E OF ` 2,23,345 UNDER SECTION 69C ON THE GROUND THAT AS PER THE MS. NOORJAHAN T. MUJAHID 5 PREVAILING MARKET RATE, THE BROKERAGE CHARGED IS AROUND 5% TO 7% FOR BOOKING THE BOGUS CAPITAL GAIN TO BRING THE UNACCOUNTED MONEY INTO BOOKS OF ACCOUNTS. 4 . THE LEARNED COMMISSIONER (APPEALS) T OO CONFIRMED THE SAID ACTION OF THE ASSESSING OFFICER AFTER OBSERVING THAT THE ASSESSEE HAS PURCHASED THE SHARES OF KARUNA CABLE ON 5 TH APRIL 2005 FOR A CONSIDERATION OF ` 8,10,589 WHICH HAS BEEN SOLD ON 13 TH SEPTEMBER 2005 FOR ` 52,77,500 AND SUCH A HUGE RISE IN VALUE OF SHARES CANNOT BE ACCEPTED. THE RELEVANT OBSERVATIONS AND FINDINGS OF THE LEARNED COMMISSIONER (APPEALS) AGAINST WHICH THE ASSESSEE IS IN APPEAL, IS AS UNDER: 4.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, ARGUMENTS OF THE ASSES SING OFFICER AND THE WRITTEN SUBMISSIONS OF THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT. THE APPELLANT HAS FILED WORKING OF CAPITAL GAINS WHICH INDICATES THAT THE SHARES OF KARUNA CABLES WERE PURCHASED ON 5.4.2005 FOR A CONSIDERATION OF ` 8,10,589. THEY HAVE BEEN SOLD ON 13.9.2005 FOR A CONSIDERATION NOF ` 52,77,500. AS PER THE DETAILS SUBMITTED THE SHARES HAVE BEEN PURCHASED ON VARIOUS DATES FROM 5.4.2005. THERE IS NO EVIDENCE OF ANY PURCHASE CONSIDERATION PAID ON PURCHASE OF THESE SHARES. IT CAN BE SEE N THAT THE APPELLANT HAS NOT SUCCESSFULLY PROVED THE ACQUISITION OF SHARES PARTICULARLY IN THE FACE OF ADVERSE FINDING GIVEN BY THE SEBI ORDER THAT BROKER SHRI VIJAY BHAGWANDAS SHAH WAS ENGAGED IN QUESTIONABLE TRANSACTIONS IN THE VERY SCRIPS. THE SEBI ORDE R HAS ALSO STATED THAT THERE WAS A PROCESS OF DEMATERIALIZATION AND REMATERIALISATION UNDERTAKEN IN THE VERY SCRIPS. THE TRANSACTIONS WITH SHRI VIJAY BHAGWANDAS SHAH ACCORDING TO THE CONFIRMATION OF ACCOUNTS FILED BY THE APPELLANT STANDS ONLY ON 1.9.2005. THEREFORE, THE THEORY THAT THE SHARES WERE PURCHASED WAY BACK IN THE FIRST WEEK OF APRIL 2005 CANNOT BE ACCEPTED. THERE IS ALREADY A FINDING THAT OPERATORS ENGAGED IN CIRCULAR TRADING IN THE SCRIPS OF KARUNA CABLE AT THE VERY SAME TIME IN THE MENTIONED PER IOD. APPARENTLY THE PRICE OF THE SCRIP WHICH DOES NOT HAVE ANY INTRINSIC WORTH HAS BEEN JACKED UP BY THE OPERATORS. THE BACK DATED CONTRACT AT A MINIMAL PRICE HAS BEEN ENTERED TO ACCOUNT FOR THE PURCHASES. THE TRANSACTIONS ARE NOT GENUINE AND THE ASSESSING OFFICER HAS RIGHTLY ADDED THE MS. NOORJAHAN T. MUJAHID 6 UNDISCLOSED INCOME OF ` 44,66,911 AS INCOME FROM UNEXPLAINED SOURCES. THE ADDITION IS UPHELD. 5 . ONE VERY SIGNIFICANT FACT WHICH CAN BE NOTED FROM THE AFORESAID FINDINGS OF THE LEARNED COMMISSIONER (APPEALS) IS THAT , ON THE ON E HAND, HE IS HOLDING THAT THERE IS NO EVIDENCE OF ANY PURCHASE CONSIDERATION PAID ON PURCHASE OF THESE SHARES AND ON THE OTHER HAND, HE HAS CONFIRMED THE ADDITION ON ACCOUNT OF NET INCOME FROM SALE OF SHARES AS UNDISCLOSED INCOME I.E., SALES ( ) PURCHASES . 6 . BEFORE US, THE LEARNED COUNSEL, MR. NEELKANTH KHANDELWAL, SUBMITTED THAT, FIRST OF ALL, THE SHARES OF KARUNA CABLE LTD. WERE LISTED IN BSE / NSE AND WERE ALSO FOUND TO BE TRADED DURING THE PERIOD OF ITS LISTING IN THE STOCK EXCHANGE WHEN THE ASSESSEE HA S PURCHASED AND SOLD THE SHARES . FURTHER, I N SUPPORT OF PURCHASE AND SALE OF SUCH SHARES, THE ASSESSEE HAS SUBMITTED CONTRACT NOTES ; THE PURCHASE AND SALE BILLS OF THE BROKER MR. VIJAY BHAGWANDAS & CO., BEFORE THE ASSESSING OFFICER. NOT ONLY THAT , THE PURC HASE AND SALE OF SHARES HAS BEEN DONE ONLINE THROUGH DEMAT ACCOUNT. HE FURTHER SUBMITTED THAT BETWEEN 1 ST APRIL 2005 AND SEPTEMBER 2005, THE ASSESSEE HAS PURCHASED AND SOLD VARIOUS SCRIPS THROUGH MR. VIJAY BHAGWANDAS & CO., AND ALL SUCH TRANSACTIONS HA VE B EEN DONE ONLINE THROUGH DEMAT ACCOUNT , THE DETAILS OF WHICH HAS BEEN PLACED IN THE PAPER BOOK FROM PAGE 6 AND 7. A COPY OF THE DEM AT ACCOUNT HAS ALSO BEEN FILED BEFORE US WHICH IS APPEARING AT PAGE 14 AND 15 FO THE PAPER BOOK. FROM THESE DETAILS, HE SUBMIT TED THAT FIRSTLY , IF VARIOUS TRANSACTIONS OF SCRIP THROUGH SAME BROKER HAS BEEN ACCEPTED BY THE ASSESSING OFFICER, THEN A PARTICULAR SCRIP PURCHASED AND SOLD DURING THE SAME PERIOD CANNOT BE HELD TO BE BOGUS ; AND SECONDLY, ONCE THE PURCHASE AND SALE HAD BE EN DONE ONLINE AND ROOTED THROUGH DEMAT ACCOUNT, THEN THE SAME CANNOT MS. NOORJAHAN T. MUJAHID 7 BE HELD TO BE NON GENUINE. HE FURTHER SUBMITTED THAT THE FINAL ORDER OF THE SEBI CAME IN JULY 2006, WHEREBY THE SEBI HAS PROHIBITED THE TRADING OF SHARES OF KARUNA CABLE AND DURING THE P ERIOD IN WHICH THE ASSESSEE HAS PURCHASED AND SOLD THE SAID SCRIP, THERE WAS NO S UCH PROHIBITION. M OREOVER, THE ASSESSEE HAS PURCHASED THESE SHARES IN THE OPEN MARKET THROUGH STOCK EXCHANGE, THEN NO ADVERSE INFERENCE SHOULD BE DRAWN. HE FURTHER POINTED OUT THAT THE PROHIBITION BY THE SEBI TO VIJAY BHAGWANDAS & CO., WAS NOT AS A BROKER BUT AS A TRADER AND THAT TOO FOR KARUNA CABLE S LTD. IN THE PRESENT CASE, WHEN THE ASSESSEE BOUGHT AND SOLD THE SHARE, THEN IT WAS A BONAFIDE TRANSACTION. HE ALSO REFERRED TO T HE SEBI ORDER IN SUPPORT OF HIS CONTENTION THAT MOST OF THE OBSERVATIONS DO NOT HAVE ANY BEARING INSOFAR AS THE ASSESSEES CASE IS CONCERNED. LASTLY, HE SUBMITTED THAT THE ASSESSING OFFICER HAD NOT CARRIED OUT ANY ENQUIRY EITHER FROM VIJAY BHAGWANDAS & CO. I.E., THE BROKER OR FROM THE STOCK EXCHANGE WHETHER SUCH TRANSACTIONS HAVE BEEN UNDERTAKEN OR NOT . IN THE ABSENCE OF ANY SUCH ENQUIRY, NO ADVERSE INFERENCE CAN BE DRAWN SIMPLY ON THE BASIS OF SUBSEQUENT ORDER OF THE SEBI , BANNING OR RESTRICTING THE TRADIN G OF SHARES OF KARUNA CABLE S LTD. IN SUPPOR T OF HIS CONTENTION, HE STRONGLY RELIED UPON THE DECISION OF THE HONBLE HIGH COURT OF JHARKHAND IN ARUN KUMAR AGARWAL, (2012) 26 TAXMAN.COM 113 AND OTHER DECISIONS OF THE TRIBUNAL, THE COMPILATION OF WHICH HAS BE EN FILED BEFORE US. 7 . ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE, MR. R.K. SAHU, SUBMITTED THAT, FIRST OF ALL, IN THIS CASE, THE ENTIRE TRANSACTION, PRIMA FACIE, APPEARS TO BE MAKE BELIEF ARRANGEMENT AND AGAINST THE HUMAN PROBABILITIES BE CAUSE EVEN THOUGH THE PURCHASES WERE MADE IN THE MONTH OF APRIL 2005, HOWEVER, THE SAME WERE MS. NOORJAHAN T. MUJAHID 8 DEBITED IN THE DEMAT ACCOUNT ONLY ON 31 ST AUGUST 2005 AND WITHIN THE SPAN OF FEW DAYS, THESE SHARES HAVE BEEN SOLD AT A STAGGERING FIGURE OF 52,77,500, AS AGAINST THE PURCHASE OF ` 8,10,589. THE ASSESSING OFFICER HAS CONCLUSIVELY BROUGHT ON RECORD THAT THE KARUNA CABLE WAS A BOGUS ENTITY WHICH HAS INFLATED ITS SHARE VALUE WITHOUT ANY BASIS. ALL THESE ARE DONE ONLY FOR GIVING ACCOMMODATION ENTRIES TO THE VARIOUS PERS ONS. HE REFERRED TO THE OBSERVATIONS AND THE FINDINGS OF THE SEBI , WHICH HAS BEEN INCORPORATED IN THE ASSESSMENT ORDER AND SUBMITTED THAT THE SEBI HAS COME TO A DEFINITE CONCLUSION THAT NOT ONLY THIS COMPANY WAS FRAUD BUT ALSO THEY HAVE INFLATED THE VALUE OF SHARES IN THE STOCK MARKET WITHOUT ANY SUBSTANCE AND MATERIAL OF THE COMPANY. HE ALSO FILED A COPY OF THE SEBI ORDERS IN THE CASE OF M/S. VIJAY BHAGWANDAS & CO., AND ALSO AGAINST THE DIRECTORS OF KARUNA CABLES WHEREIN ADVERSE INFERENCE HAS BEEN DRAWN AG AINST SUCH PERSONS BY THE LEARNED COMMISSIONER (APPEALS). HE ALSO RELIED UPON THE DECISION OF THE CO ORDINATE BENCH OF THE TRIBUNAL IN ARVIND N. KARIYA, ITA NO.7024/MUM./2010, WHEREIN THE TRIBUNAL IN PENNY STOCK CASE HAS DECIDED THE ISSUE AGAINST THE ASSES SEE. HE THUS, SUBMITTED THAT ONCE THE COMPETENT AUTHORITY UNDER A DIFFERENT ACT HAS CARRIED OUT THE INVESTIGATION AND HAS PASSED AN ORDER HOLDING THAT THE TRANSACTION CARRIED OUT BY KARUNA CABLE SHOULD BE PROHIBITED DUE TO VARIOUS REASONS SET OUT THEREIN T HEN THE TRANSACTIONS IN SUCH SHARES CANNOT BE ACCEPTED AS GENUINE AT ALL. MOREOVER, IT IS IMPROBABLE THAT THE VALUE OF ANY SHARES WITHIN THE SPAN OF FEW DAYS WILL RISE FROM ` 8 LAKHS TO MORE THAN ` 52 LAKHS AND THIS IMPROBABILITY HAS BEEN EXPOSED BY SEBI. THEREFORE, THE FINDINGS GIVEN BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED COMMISSIONER (APPEALS) SHOULD NOT BE DISTURBED AT ALL. MS. NOORJAHAN T. MUJAHID 9 8 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS, PERUSED THE RELEVANT FINDINGS OF THE AUTHORITIES BELOW AND THE M ATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE, THE ASSESSEE HAD SHOWN NET SHORT TERM CAPITAL GAIN AT ` 1,12,44,403, OUT OF WHICH THE NET SHORT TERM CAPITAL GAIN OF ` 44,66,911 ON THE TRANSACTIONS MADE IN THE SHARES OF KARUNA CABLES , HAS BEEN HELD TO BE BOGUS AND THE SAME HAS BEEN ADDED UNDER THE HEAD INCOME FROM OTHER SOURCES . FROM THE RECORDS, IT APPEARS THAT THE ASSESSEE H A S PURCHASED 40,000 SHARES OF KARUNA CABLES ON VARIOUS DATES RANGING BETWEEN 5 TH APRIL TO 7 TH MAY 2005, FOR SUMS AGGREGATING TO ` 8,10,589. THESE PURCHASES HAVE BEEN BOOKED THROUGH BROKER M/S. VIJAY BHAGWANDAS & CO. WHO IS A REGISTERED STOCK BROKER IN THE BSE. IN SUPPORT OF THIS PURCHASE , THE ASSESSEE HAS FILED CONTRACT NOTES AND BILLS WHICH HAVE BEEN PLACED IN THE PAPER BOOK FROM PA GE 16 TO 22. THE SHARES HAVE BEEN CREDITED TO THE DEMAT ACCOUNT OF THE ASSESSEE ON 31 ST AUGUST 2005. THE PAYMENT OF THE PURCHASE OF SHARES HAVE BEEN MADE THROUGH CHEQUE S WHICH ARE ALSO REFLECTED IN THE BANK ACCOUNT SUBMITTED BEFORE US. THE ASSESSEE HAS ALS O FURNISHED COPY OF CONFIRMATION ACCOUNT BY M/S. VIJAY BHAGWANDAS & CO., AND ALSO A CERTIFICATE THAT SECURITY TRANSACTION TAX HAS ALSO BEEN DEPOSITED ON PURCHASE AND SALE OF SUCH SHARES. THEREAFTER, THE ASSESSEE HAS SOLD THESE SHARES BETWEEN 8 TH SEPTEMBER 2005 TO 14 TH SEPTEMBER 2005 FOR SUMS AGGREGATING TO ` 55,7 2 ,500. THE SALE OF SHARES IS ALSO REFLECTED IN DEMAT ACCOUNT ON THESE DATES. ONE VERY IMPORTANT ISSUE WHICH HAS NOT BEEN REBUTTED BEFORE US IS THAT THESE SHARES HAVE BEEN PURCHASED AND SOLD THROUGH ONLINE ON THE FLOOR OF THE STOCK EXCHANGE. ANOTHER VERY IMPORTANT FACT WHICH IS TO BE NOTED THAT INSOFAR AS THE PURCHASE OF 40,000 SHARES OF KARUNA CABLES FOR SUMS AGGREGATING TO ` 8,10,589 IS CONCERNED , THE SAME HAS NOT BEEN DISPUTED AT ALL BECAUSE , NEITH ER THE ASSESSING OFFICER NOR THE LEARNED COMMISSIONER (APPEALS) HAS ADDED MS. NOORJAHAN T. MUJAHID 10 THIS SUM AS THE ADDITION WHICH HAS BEEN MADE IS BY TREATING THE NET SHORT TERM CAPITAL GAIN AS INCOME FROM OTHER SOURCES , I.E., THE NET AMOUNT OF SALE OF SHARES FOR SUMS AGGREGATIN G TO ` 44,66,911 WHICH IS SALES ( ) PURCHASES. ONCE THE PURCHASE OF SHARES HA S NOT BEEN DISPUTED THEN , EITHER THE SHARES ARE WITH THE ASSESSEE OR THE SAME MUST HAVE BEEN SOLD IN THE MARKET. THERE CANNOT BE A SITUATION WHERE PURCHASES ARE TO BE ACCEPTED AN D AT THE SAME TIME THE SALE OF THE SAME SHARES IS TO BE TREATED AS BOGUS OR FICTITIOUS. 9 . ANOTHER VERY IMPORTANT FACT WHICH IS APPARENT FROM THE RECORD IS THAT THE ASSESSEE HAS UNDERTAKEN TRANSACTION WITH M/S. VIJAY BHAGWANDAS & CO. BETWEEN THE PERIOD FROM 1 ST APRIL 2005 TO SEPTEMBER 2005, IN MORE THAN 17 SCRIPS FO R DIFFERENT COMPAN IES . OUT OF THIS, ONLY SALE TRANSACTION RELATING TO KARUNA CABLE HAS BEEN DISPUTED. THE A .O. HAS NOT CARRIED OUT ANY ENQUIRY EITHER FROM THE BROKER OR FROM STOCK EXCHANGE , WHETH ER SUCH TRANSACTIONS HAS BEEN UNDERTAKEN THROUGH STOCK EXCHANGE ON THE GIVEN DATES ESPECIALLY THE DATE OF SALE OF THESE TRANSACTIONS . ONCE THE TRANSACTION HAS BEEN UNDERTAKEN THROUGH DEMAT ACCOUNT AND THROUGH ONLINE AND ALSO THE STT HAS BEEN PAID ON SUCH T RANSACTION, THEN IT HAS TO BE PRESUMED THAT SALE TRANSACTION HAS ACTUALLY BEEN UNDERTAKEN ON THE VALUE WHICH WAS LISTED AT THE STOCK EXCHANGE AT THAT TIME. MUCH EMPHASIS HAS BEEN GIVEN BY THE A .O. AND THE LEARNED D .R. ON THE FINAL ORDER OF THE SEBI DATED 2 5 TH JULY 2006, WHEREIN THE SEBI HAS ANALYSED AND INVESTIGATED THE CREDIBILITY AND THE RELIABILITY OF KARUNA CABLE S LTD. AND ALSO THE POSSIBLE FRAUDULENT PRACTICE OF HIKING THE SHARE VALUE IN THE STOCK EXCHANGE BY LEAPS AND BOUNDS. SUCH SEBI ORDER, FI RST OF ALL, IS ONLY A CREDIBLE INFORMATION WHICH CA N ONLY G O TO CREATE A DOUBT , BUT AFTER HAVING RECEIVED SUCH INFORMATION, IT WAS MS. NOORJAHAN T. MUJAHID 11 INCUMBENT UPON THE ASSESSING OFFICER TO CARRY OUT NECESSARY ENQUIRY IN THE CASE OF THE ASSESSEE, AS TO WHET HER THE SHARES HAVE BEEN PURCHASED AND THE AMOUNT WHICH HAS BEEN RECEIVED IN THE BANK ACCOUNT OF THE ASSESSEE IS ALSO FICTITIOUS. SECONDLY, THE SEBI ORDER HAS, IN FACT, RECOGNISED THAT KARUNA CABLES LTD. WAS A LISTED COMPANY IN BSE AND NSE AND I T HAS ALSO ACCEPTED THAT ITS SHARE PRICE HAS ARISEN FROM ` 22.40 PER SHARE TO ` 159 PER SHARE DURING THE PERIOD FROM 10 TH FEBRUARY 2005 AND 16 TH SEPTEMBER 2005. IF UNDER SUCH PERIOD, ANY TRANSACTION HAS BEEN UNDERTAKEN BY ANY PERSON IN THE OPEN MARKET , THEN IT CANNOT BE HELD THAT SUCH PERSON WAS IN CONNIVANCE WITH THE SAID COMPANY. LASTLY, THE FINAL ORDER OF THE SEBI, IS MUCH AFTER THE TRANSAC TION UNDERTAKEN BY THE ASSESSEE, HENCE, NO ADVERSE INFERENCE CAN BE DRAWN SANS ANY INVESTIGATION OR ENQUIRY DONE BY THE ASSESSI NG OFFICER IN THE ASSESSEES CASE IN PARTICULAR . IN THE ENTIRE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS ONLY SPOKEN ABOUT GENERAL MODUS OPERANDI AND THE ORDER OF THE SEBI WITHOUT CARRYING OUT ANY INDEPENDENT ENQUIRY TO PROVE THAT THE ASSESSEE HAS NOT MA DE ANY SALES OR ANY UNACCOUNTED MONEY HAS BEEN ROUTED THROUGH THIS CHANNEL. WHAT IS APPARENT HAS TO BE TAKEN AS REAL, UNLESS ANY MATERIAL OR EVIDENCE HAS BEEN BROUGHT ON THE RECORD TO PROVE THE CONTRARY. ON THE PRESENT FACTS OF THE CASE, THE SHORT TERM CAP ITAL GAIN SHOWN BY THE ASSESSEE CANNOT BE HELD TO BE NON GENUINE SO AS TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES . THUS, IN VIEW OF THE FINDINGS AND OBSERVATIONS GIVEN ABOVE, GROUND NO.1, AS RAISED BY THE ASSESSEE IS ALLOWED. 10 . IN GROUND NO.2, T HE ASSESSEE HAS CHALLENGED THE ADDITION OF ` 2,23,345 ON ACCOUNT OF ALLEGED COMMISSION WHICH MUST HAVE BEEN PAID BY THE ASSESSEE FOR OBTAINING SHORT TERM CAPITAL GAIN OF ` 44,66,911. MS. NOORJAHAN T. MUJAHID 12 11 . SINCE WE HAVE ALREADY HELD THAT THE SHORT TERM CAPITAL GAIN SHOWN BY THE ASSESSEE IS ON ACCOUNT OF GENUINE PURCHASE AND SALE O F SHARES, HENCE, SUCH A HYPOTHE T ICAL ADDITION BASED ON PRESUMPTION CANNOT BE SUSTAINED. THUS, IN VIEW OF THE FINDINGS GIVEN IN GROUND NO.1, THIS GROUND IS ALSO TREATED AS ALLOWED. 12 . 11. IN THE RESULT, ASSESSEES APPEAL IS ALL O WED. 30 TH APRIL 2014 ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH APRIL 2014 SD / - . . N.K. BILLAIYA ACCOUNTANT MEMBER SD / - AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED : 30 TH APRIL 2014 / COPY OF THE ORDER FORWARDED TO : ( 1 ) / THE ASSESSEE ; ( 2 ) / THE REVENUE; ( 3 ) ( ) / THE CIT(A ) ; ( 4 ) / THE CIT, MU MBAI CITY CONCERNED ; ( 5 ) , , / THE DR, ITAT, MUMBAI ; ( 6 ) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SE CRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI