DCIT, Ludhiana V. Sh. Sanjay Gupta, Ludhiana

ITSSA 11/CHANDI/2003

• Counselvise Citation: [2012] 124 COUNSELVISE.COM (IT) 7547 (ITAT-CHANDIGARH)
• Duration Of Justice: 9 year(s) 1 month(s) 30 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 11-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 12-03-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Keywords: Search and seizure; Loose papers; Document seized; Share purchase agreement; Documents seized
• Section: 131; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B, CHANDIGARH BEFORE MS SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER IT(SS)A NO.11/CHD/2003 BP ENDING 1.4.1989 TO 24.6.1999 D.C.I.T. V. SANJEEV GUPTA CENTRAL CIRCLE I 18, SAMPURAN COLONY, LUDHIANA LUDHIANA (APPELLANT) (RESPONDENT) DEPARTMENT BY : SMT. JYOTI KUMARI, CIT RESPONDENT BY: SHRI ASHWANI KUMAR DATE OF HEARING: 1.3.2012 DATE OF PRONOUNCEMENT: 11.05.2012 ORDER PER SUSHMA CHOWLA, JM THE APPEAL FILED BY THE DEPARTMENT IS DIRECTED AGAI NST ORDER PASSED BY THE CIT(A)-I, LUDHIANA DATED 5.12.2002. 2. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOW ING GROUNDS OF APPEAL: (I) THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON THE FAC TS OF THE CASE IN DELETING THE ADDITION OF RS. 2,36,68,000/- MADE BY THE AO ON ACCOUNT OF UNDISCLOSED INVESTMENT IN SHARES. (II) THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON TH E FACTS OF THE CASE IN DELETING THE ADDITION OF RS. 5.03,300/- OUT OF TOTAL ADDITION MADE AT RS. 7,53,300/- BY THE AO ON ACCOUNT OF COM MISSION EARNED ON SALE/PURCHASE OF SHARES. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROU NDS OF APPEAL ON OR BEFORE THE APPEAL IS HEARD AND DISPOSED OFF. IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SE T A SIDE AND THAT OF AOS RESTORED. 3. BRIEF FACTS OF THE CASE ARE THAT THE SEARCH AND SEIZURE OPERATION U/S 132 OF THE ACT WERE CONDUCTED AT THE RESIDENTIAL PR EMISES OF THE ASSESSEE ON 24.6.1999. DURING THE COURSE OF SEARCH VARIOUS DOCUMENTS, WERE FOUND AND SEIZED. NOTICE U/S 158BC OF THE ACT FOR BLOCK PERIOD FROM 1.4.1989 2 TO 24.6.1999 WAS ISSUED TO THE ASSESSEE. THE ASSES SEE FURNISHED THE RETURN OF INCOME FOR THE BLOCK PERIOD DECLARING UNDISCLOSE D INCOME OF RS. 2,50,000/- ON 15.6.2001. THE AO ISSUED A SHOW CAUS E NOTICE TO THE ASSESSEE TO FURNISH CLARIFICATION ON VARIOUS DOCUME NTS/ASSETS FOUND AND SEIZED DURING THE COURSE OF SEARCH AND SEIZURE OPER ATION. THE AO NOTED THAT THE ASSESSEE WAS RUNNING SHARE BROKERAGE CONCE RN IN THE NAME OF M/S S.G. AND CO., LUDHIANA WHICH WAS THE PROPRIETARY CO NCERN OF HIS MOTHER, SMT. SARITA GUPTA. THE ASSESSEE AND HIS MOTHER SAR ITA GUPTA FLOATED TWO PUBLIC LTD COMPANIES (I) M/S S.G. & CO. LUDHIANA AND (II) S.G. GLOBAL EXPORT LTD. OF WHICH THE ASSESSEE WAS MANAGING DIRE CTOR (M.D). THE AO OBSERVED THAT THE ASSESSEE WAS INDULGING IN MONEY L AUNDERING AND GAVE HAWALA ENTRIES WITH THE HELP OF HIS PUBLIC LIMITED COMPANY AND BROKER CONCERN OF HIS MOTHER. 4. DURING THE COURSE OF SEARCH AT THE BUSINESS AND RESIDENTIAL PREMISES OF THE ASSESSEE, ALMOST ALL THE SHARE CERTIFICATES OF M/S S.G. GLOBAL EXPORTS LTD. LUDHIANA WERE PHYSICALLY FOUND ON 24.6 .1999 AS PER ANNEXURE O, O1 AND O2 WHICH WERE SEIZED FROM THE BUSINESS PREMISES OF M/S S.G. AND CO., LUDHIANA. THE STATEM ENT OF THE ASSESSEE WAS RECORDED BY THE DDI ON 9.8.1999 TO EXPLAIN THE CIRCUMSTANCES UNDER WHICH THE ORIGINAL SHARE CERTIFICATES WERE FOUND FR OM THE RESIDENTIAL PREMISES OF THE ASSESSEE. THE ASSESSEE EXPLAINED THAT 18 SAMPURAN COLONY, LUDHIANA WAS THE REGD OFFICE OF THE COMPANY AND THE SHARE CERTIFICATE WERE RECEIVED BACK EITHER FOR TRANSFER OR CHANGE IN THE NAME OF THE COMPANY. THE ASSESSEE ADMITTED THAT NO RECORD/ REGISTER IN RESPECT OF RECEIPT OF SHARES FROM SHARE HOLDERS WAS BEING MAIN TAINED; EVEN RECORD OF CHANGE OF NAME OF THE COMPANY WAS NOT MAINTAINED BY THE ASSESSEE BUT WAS MAINTAINED BY THE SHARE TRANSFER AGENT M/S DIWA KSHI INVESTMENTS LTD. BUSINESS PREMISES OF THE SAID CONCERN WERE ALSO SEA RCHED ON 24.6.1999 AND NO RECORD WAS FOUND. NO TRANSFER DEED/S OR LET TER WERE FOUND ATTACHED WITH EVEN SINGLE SHARE CERTIFICATE FOR TRANSFER. TH E SHARE CERTIFICATES WERE 3 FOUND STAKED IN A BUNDLE WHICH WAS SERIALLY NUMBERE D AS PER ANNEXURE O. THE ASSESSEE IN REPLY DATED 5.7.2001 STATED T HAT THE SAID SHARE CERTIFICATE WORTH RS. 2.36 CRORE WERE EITHER PURCHA SED BY HIS ASSOCIATE CONCERN AND WERE RECEIVED FROM THE SHARE HOLDER FOR DEFICIENCY/TRANSFER. THE DETAILS WERE FILED AS PER SEPARATE ANNEXURE. T HE AO FOUND SHARE INWARD REGISTER AS PER SEIZED DOCUMENT NO. A-3 BUT NO ENTRY IN THIS REGISTER WERE MAINTAINED AFTER 6.9.1997 WHICH AS PE R THE AO ESTABLISHED THAT NO SHARE CERTIFICATES WERE RECEIVED FOR CHANGE OR TRANSFER. THE AO HELD IT IS EVIDENT THAT ALL THE SHARE CERTIFICATES FOUN D AT THE RESIDENCE OF THE ASSESSEE WERE OWNED BY THE ASSESSEE IN BENAMI N AMES. ACCORDINGLY THE FACE VALUE OF THE SHARE AT THE TIME OF SEARCH W AS TAKEN AS UNDISCLOSED INVESTMENT MADE BY THE ASSESSEE AND ADDITION OF RS. 2.36 CRORES WAS MADE. FURTHER THE ASSESSEE NOTED FROM THE EXAMINAT ION OF THE SEIZED MATERIAL THAT THE ASSESSEE HAD RECEIVED COMMISSION IN PURCHASE AND SALE TRANSACTION MADE IN RESPECT OF SHARE OF M/S S.G. GL OBAL EXPORT LTD. THE ASSESSEE DENIED HAVING GIVEN ANY ENTRIES OF CAPITAL GAIN IN THE NAME OF SHARES OF THE COMPANY DURING THE BLOCK PERIOD. FUR THER PLEA OF THE ASSESSEE WAS THAT THE INCOME EARNED FROM THE TRANSA CTION OF SALE AND PURCHASE OF SHARES OF M/S S.G. GLOBAL EXPORTS LTD WAS SURRENDERED AS THE INCOME OF THE BLOCK PERIOD IN THE RETURN OF INCOME FILED. THE AO ON THE PERUSAL OF CERTAIN DOCUMENTS SEIZED DURING THE COUR SE OF SEARCH FOUND THE ASSESSEE NOT TO HAVE TRULY DISCLOSED THE COMMISSION INCOME AND ACCORDINGLY COMPUTED THE INCOME IN THE HANDS OF TH E ASSESSEE ON THE BASIS OF THE ENTRIES ON LOOSE PAPERS FOUND DURING T HE COURSE OF SEARCH. AN ADDITION OF RS. 7,53,300/- WAS MADE IN THIS REG ARD. 5. BEFORE THE CIT(A) THE ASSESSEE FURNISHED DETAILE D CHART SHOWING THE DETAILS OF SHARE CERTIFICATES FROM AND THE OWNER OF THE SAID CERTIFICATES. OUT OF THE TOTAL SHARES NUMBERING 2393800, SHARE NU MBERING 734802 AS PER THE ASSESSEE BELONGED TO M/S S.G. & CO., PROPRI ETARY CONCERN OF SMT. SARITA GUPTA, MOTHER OF THE ASSESSEE. THE TOTAL SH ARE HOLDING OF M/S S.G. 4 & CO. WAS 10 LACS SHARES OF M/S S.G. GLOBAL EXPORT LTD. OUT OF WHICH 734802 SHARES WERE FOUND FROM THE REGD OFFICE OF TH E COMPANY OF THE ASSESSEE AND THE BALANCE SHARES FROM THE BUSINESS P REMISES OF M/S S.G. & CO. FURTHER 1053000 SHARES BELONGED TO M/S EXALT F IN CAP LTD. WHICH WAS SENT TO THE ASSESSEE FOR MAKING THEM FULLY PAID UP AND FOR CHANGE OF NAME OF THE SHARE CERTIFICATE, DUE TO CHANGE OF THE NAME OF THE COMPANY. CERTIFICATE FROM M/S EXALT FIN CAP LTD. WAS FILED W HICH OWNED TOTAL HOLDING OF 1091500 SHARES OF M/S S.G. GLOBAL EXPORT LTD. THE BALANCE SHARES 595198 BELONGED TO M/S DIWAKSHI INVESTMENTS LTD. WHICH WAS HELD AS CLOSING STOCK OF THE SAID COMPANY. THE COPIES O F THE BALANCE SHEET OF ALL THE THREE CONCERNS ALONG WITH THE COPIES OF THE IR CLOSING REGISTER AND CONFIRMATION WAS FURNISHED BEFORE THE CIT(A). AS NO NE OF THE SHARE CERTIFICATES FOUND AND SEIZED WERE IN THE NAMES OF THE ASSESSEE, IT WAS PLEADED THAT NO LIABILITY CAN BE FASTENED ON THE AS SESSEE SIMPLY BECAUSE THESE WERE FOUND FROM THE RESIDENCE OF THE ASSESSEE . THE CONTENTION OF THE ASSESSEE BEFORE THE CIT(A) IS INCORPORATED IN P ARA 2 AT PAGE 2 OF THE APPELLATE ORDER. 6. THE CIT(A) VIDE PARA 2.1 OF THE APPELLATE ORDER OBSERVED THAT THE AO HAD NOT BROUGHT ON RECORD ANY EVIDENCE OF MONEY LAUNDERING BUSINESS DONE BY THE ASSESSEE AT THE LEVEL OF INTRODUCTION O F CAPITAL IN THE SHARES OF COMPANY. THE CIT(A) HELD THAT ALLEGATION OF THE AO REGARDING THE ASSESSEE INDULGING IN HAWALA BUSINESS WAS BASED ON SURMISES AND CONJECTURES AND THE AO WAS INFLUENCED BY THE RECOVE RY OF SHARE CERTIFICATES OF M/S S.G. GLOBAL EXPORT LTD. FROM T HE PREMISES OF THE ASSESSEE, DURING THE COURSE OF SURVEY AND ALSO THE ABSENCE OF PROPER SHARE TRANSFER REGISTER/RECORD. IN VIEW OF THE DET AILS/DOCUMENTS FILED BY THE ASSESSEE INCLUDING CERTIFICATES OF THE RESPECT OWNERS OF THE SHARES, THE CIT(A) HELD THAT NO LIABILITY CAN BE FASTENED ON TH E ASSESSEE IN VIEW OF CLINCHING EVIDENCE PRODUCED WITH RESPECT TO OWNERSH IP OF THE SHARE CERTIFICATES. THE CIT(A) VIDE PARA 2.5 HELD AS UND ER: 5 2.5 I HAVE EXAMINED THIS ISSUE CAREFULLY. IT APPE ARS THAT THE AO HAS BASED HIS OBSERVATION ON SURMISES AND CONJECTUR ES, WITHOUT BRINGING ON RECORD ANY CLINCHING EVIDENCE, AND WITH OUT BRINGING OUT ANY UNHOLY NEXUS. HIS OBSERVATIONS WITH REGARD TO THE APPELLANTS INDULGING MONEY LAUNDERING AND HAWALA EN TRY BUSINESS ARE ALSO BASED ON MERE SUSPICION AS NO SUCH INSTANC E OR TRANSACTION HAS BEEN DETECTED BY HIM. HE HAS SIMPLY REACHED A CONCLUSION THAT THE CERTIFICATES FOUND AT THE PREMISES OF THE APPEL LANT BELONGED TO THE APPELLANT EVEN THOUGH THEY WERE IN THE NAMES OF DIFFERENT COMPANIES WHO ARE ALL INDEPENDENT ENTITIES, AND HAV E COME FORWARD TO CLAIM THESE SHARES, AS IS EVIDENT FROM THE COPI ES OF THE CERTIFICATES FILED BY THEM THE ADDITION ON THIS ACCOUNT WAS THUS DELETED BY TH E CIT(A). 7. THE CIT(A) ALSO DELETED THE ADDITION MADE ON ACC OUNT OF COMMISSION ON SALE / PURCHASE OF SHARE IN VIEW OF T HE INCOME OF RS. 2,50,000/- DISCLOSED BY THE ASSESSEE IN THE RETURN OF INCOME FILED FOR THE BLOCK PERIOD BEING THE INCOME DECLARED AFTER REDUCI NG THE EXPENSES. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A) ON BOTH THE ISSUES. 8. THE LD. DR FOR THE REVENUE PLACED RELIANCE ON TH E OBSERVATIONS OF THE CIT(A) AT PAGE 2. IT WAS FURTHER POINTED OUT T HAT SHARE CERTIFICATES OF M/S S.G. GLOBAL EXPORTS LTD. WERE FOUND AT THE RESI DENCE OF THE ASSESSEE WHICH WAS REGISTERED OFFICE OF THE COMPANY. FURTHE R CONTENTION OF THE LD. DR FOR THE REVENUE WAS THAT THE SANJEEV GUPTA WAS O NE OF THE DIRECTOR AND SHARE CERTIFICATES WERE FOUND FROM HIS PREMISES AND THE ONUS WAS UPON THE ASSESSEE TO EXPLAIN THE OWNERSHIP OF THE S AID SHARES. IT WAS FURTHER POINTED OUT BY THE LD. DR FOR THE REVENUE T HAT THERE IS NO EXPLANATION BEFORE THE AO THAT THE SAID SHARE BELON GS TO OTHER CONCERN, WHICH PLEA WAS PUT UP BEFORE THE CIT(A) WHO GAVE NO OPPORTUNITY TO THE AO TO EXAMINE THE SAME. THE LD. DR FOR THE REVENUE FURTHER SUBMITTED THAT THE LD. CIT(A) HAS NOT GIVEN ANY SPECIFIC FIND ING IN REGARD TO THE SAID ADDITION. IN RESPECT OF ADDITION MADE ON ACCOUNT O F BROKERAGE, THE LD. DR FOR THE REVENUE REFERRED TO THE SEIZED DOCUMENTS AND POINTED OUT THAT THE ESTIMATION OF INCOME ON THIS ACCOUNT IN THE HAN DS OF THE ASSESSEE, WAS ON THE LOWER SIDE. 6 9. THE LD AR FOR THE ASSESSEE IN REPLY SUBMITTED TH AT THE SHARES OF THE AFORESAID COMPANIES WERE FOUND FROM THE PREMISES OF THE ASSESSEE ON THE SEARCH BEING CONDUCTED ON 24.6.1999. THE LD AR FOR THE ASSESSEE STRESSED THAT THE REVENUE HAS FAILED TO RAISE ANY GROUND OF APPEAL OF NON GRANT OF OPPORTUNITY TO THE AO. OUR ATTENTION WAS DRAWN TO THE NOTING IN THE APPELLATE ORDER, WHERE THE ATTENDANCE OF DCIT HAS B EEN RECORDED. IT WAS FURTHER POINTED BY THE LD AR FOR THE ASSESSEE THAT M/S S.G. GLOBAL EXPORTS LTD. WAS A PUBLIC LTD. CO. ENGAGED IN THE BUSINESS OF EXPORT. THE LD AR FOR THE ASSESSEE REFERRED TO THE LIST OF SHARES PLA CED AT PAGE 3 OF THE PAPER BOOK WHICH IS DETAILED SHARE HOLDING OF DIFFERENT C ONCERNS. AT PAGE 4 OF THE PAPER BOOK, THE LD AR FOR THE ASSESSEE REFERRED TO THE CONFIRMATIONS OF M/S S.G. & CO. WHO HELD 10 LAKH EQUITY SHARES OF TH E SAID CONCERNS AND SHARES WERE FULLY PAID UP. THE SAID SHARES WERE SE NT TO THE ASSESSEE FOR TRANSFER OF THE NAME. THE LD AR FOR THE ASSESSEE H AS PLACED AT PAGE 7 OF THE PAPER BOOK A LETTER FROM M/S EXALT FIN CAP LTD. UNDER WHICH THE 933000 PARTLY PAID UP AND 33800 SHARES OF THE COMPA NY WERE BEING FORWARDED FOR GETTING NEW SHARER CERTIFICATES IN LI EU OF CHANGE IN NAME OF THE COMPANY. THE PLEA OF THE ASSESSEE WAS THAT THE SAID SHARES WERE SHOWN AS ON 31.3.1999 AND THE TOTAL HOLDING WAS 109 1500. OUR ATTENTION WAS DRAWN TO THE BALANCE SHEET AND THE LIST OF STOC K PLACED AT PAGES 8 TO 11 OF THE PAPER BOOK. THE BALANCE 653900 SHARES O F THE SAID CONCERN WERE HELD BY DIWAKSHI INVESTMENTS LTD AND CONFIRMAT ION OF THE SAID CONCERNS WAS PLACED AT PAGES 12 OF THE PAPER BOOK. THE LD AR FOR THE ASSESSEE POINTED OUT THAT IN THE BALANCE SHEET ENDI NG ON 31.3.1999, DIWAKSHI INVESTMENT LTD. HAD SHOWN THE SAID SHARES AS CLOSING STOCK. AS PER THE DOCUMENTS PLACED AT PAGES 13 TO 15 OF THE P APER BOOK AND ALSO ON 31.3.2000 AS PER DOCUMENTS PLACED AT PAGES 16 TO 18 OF THE PAPER BOOK. THE LD AR FOR THE ASSESSEE STRESSED THAT NONE OF TH E SHARE CERTIFICATES WERE IN THE NAME OF THE ASSESSEE AND ALL THE DOCUME NTS WERE BEFORE THE AO AS AUTHORISED IN THE INDEX FILED BEFORE THE TRIB UNAL. IN RESPECT OF 7 SECOND ADDITION MADE ON ACCOUNT OF BROKERAGE THE A SSESSEE POINTED OUT AT PAGE 21 OF THE PAPER BOOK REFLECTED TWO FIGURES OF BROKERAGE AND EVEN THE LIST OF EXPENSES IS INCORRECT AND THE ASSESSEE HAD DECLARED NET INCOME OF RS. 2,50,000/-. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL BEFORE US IS IN RELATION TO THE ADDITION ON ACCOUNT OF FACE VALUE OF THE SHARE CERTIFICATES FOUND FROM THE PREMISES OF THE ASSESSEE DURING THE COURSE OF SEARCH AND SEI ZURE OPERATION CARRIED OUT ON 24.6.1999. THE ASSESSEE IS AN INDIVIDUAL AN D WAS DIRECTOR IN TWO CONCERNS I.E. M/S S.G. CAPITAL SERVICES LTD. AND M/ S S.G. GLOBAL EXPORTS LTD. ANOTHER CONCERN IN THE NAME OF M/S S.G. AND C O LTD WAS THE PROPRIETARY CONCERN OF THE MOTHER OF THE ASSESSEE, SMT. SARITA GUPTA. REGD OFFICE OF M/S S.G. GLOBAL EXPORTS LTD WAS THE RESIDENTIAL ADDRESS OF THE ASSESSEE. THE SAID CONCERN WAS A PUBLIC LTD CO . DURING THE COURSE OF SEARCH SHARE CERTIFICATES OF THE SAID CONCERN HAVIN G FACE VALUE OF RS. 2,36,68,000 WERE FOUND FROM THE PREMISES OF THE ASS ESSEE AND WERE SEIZED AS PER ANNEXURE O, O1 AND O2. THE STATEMENT OF THE ASSESSEE WAS RECORDED ON 9.8.1999 TO EXPLAIN THE CIRCUMSTANCES U NDER WHICH THE SAID SHARE CERTIFICATES, WHICH ADMITTEDLY WERE NOT IN TH E NAME OF THE ASSESSEE, WERE FOUND FROM HIS POSSESSION. THE COPY OF SAID S TATEMENT IS PLACED AT PAGES 11 TO 37 OF THE PAPER BOOK FILED BY THE REVEN UE. THE PERUSAL OF THE SAID STATEMENT RECORDED IN PURSUANCE TO THE SUMMONS ISSUED U/S 131 OF THE ACT ON 9.8.1999 REFLECT AS FOLLOWS. THE ASSESSEE EX PLAINED THAT HE WAS DOING SALE AND PURCHASE OF SHARES IN THE BROKERAGE CONCERN M/S S.G. & CO. WHOSE PROPRIETOR WAS HIS MOTHER, AND THE ASSESS EE WAS AN AUTHORIZED SIGNATORY ON BEHALF OF HIS MOTHER. THE ASSESSEE EX PLAINED THE MODUS OPERANDI OF ITS BROKERAGE BUSINESS IN WHICH HE ADMI TTED THAT 25% OF HIS BUSINESS WAS THROUGH STOCK EXCHANGE AND THE BALANCE ABOUT 75% WAS DONE OUT OF STOCK EXCHANGE. IN THE CASH TRANSACTIONS I. E. BUSINESS OUTSIDE STOCK EXCHANGE, THE ADDRESSES OF THE BUYERS AND SELLERS W ERE NOT RECORDED. THE 8 ASSESSEE CLAIMS TO HAVE MAINTAINED NO BOOKS OF ACCO UNT FOR THE ABOVE SAID BUSINESS. IN REPLY TO THE QUERY RAISED REGARDING THE SALES AND PURCHASE OF SHARES OF THE COMPANIES IN WHICH THE ASSESSEE AND / OR HIS FAMILY MEMBERS WERE DIRECTORS THE ASSESSEE STATED THE NAMES OF THE COMPANIES AS UNDER: (A) M/S S.G. GLOBAL EXPORTS LTD (B) M/S S.G. CAPITAL SERVICES LTD. (C) M/S DIWAKSHI INVESTMENTS LTD (D) M/S EXALT FIN CAP LTD. (E) M/S S.G. STOCK SERVICES (F) M/S KINETIC STOCK AND SECURITIES LTD. (G) INCREMENTAL SECURITIES (P) LTD. 11. THE ASSESSEE THERE AFTER GAVE THE DETAILS OF CO MPLETE ADDRESSES OF THE COMPANIES, NAMES AND ADDRESSES OF THE DIRECTORS , TOTAL SHARE HOLDINGS OF THE PROMOTERS, PUBLIC HOLDING, DETAILS OF BANK A CCOUNT AND INCOME TAX RETURN DETAILS. IN REPLY INCORPORATED AT PAGES 19 TO 24 THE ASSESSEE HAS FURNISHED THE ABOVE SAID DETAILS OF ALL THE COMPANI ES IN WHICH HE OR HIS FAMILY MEMBERS WERE DIRECTORS. THE PERUSAL OF THE SAID DETAILS REVEALED THAT IN ALL THE CASES THE RETURNS OF INCOME AS ON T HE DATE OF RECORDING THE STATEMENT OF THE ASSESSEE AS ON 9.8.1999 THE RETURN S OF INCOME RELATING TO FINANCIAL YEAR 1997-98 WERE FILED. THE CONCERN M/S S.G. GLOBAL EXPORTS LTD. WAS A PUBLIC LTD WHERE PROMOTERS QUOTA BEING T WO CRORES OUT OF TOTAL CAPITAL OF ABOUT 5 CRORES. THE CONCERN M/S DIWAKSH I INVESTMENTS LTD. WAS WITHOUT ANY PUBLIC ISSUE AND FATHER AND WIFE OF THE ASSESSEE WERE THE DIRECTORS. THE ASSESSEE IN THE STATEMENT RECORDED ADMITTED THAT THE INCOME TAX RETURNS FOR FINANCIAL YEAR 1997-98 WAS F ILED BY THE SAID CONCERN WITH ITO, WARD - , LUDHIANA. NO PARTICU LARS OF THE SAID OFFICER WERE GIVEN BY THE ASSESSEE. WHEN QUERIED ABOUT THE SHARE CERTIFICATES (THERE WERE SHARE CERTIFICATES OF M/S S.G. GLOBAL E XPORTS LTD) FOUND FROM THE PREMISES, THE ASSESSEE EXPLAINED THAT THE SHARE CERTIFICATES HAD EITHER BE GIVEN FOR TRANSFER OR CHANGE IN NAME OF THE COMP ANY AND NEW 9 CERTIFICATES WERE TO BE ISSUE IN LIEU OF OLD SHARE CERTIFICATES AFTER CHANGE OF NAME OF THE COMPANY. THE RESIDENCE OF THE ASSES SEE WAS CLAIMED TO THE REGD OFFICE OF THE COMPANY. WHEN QUESTIONED ABOUT THE OLD AND NEW NAME OF THE COMPANY, THE ASSESSEE EXPLAINED THAT TH E OLD NAME WAS M/S S.G. GLOBAL EXPORTS LTD. BUT HE DID NOT KNOW THE NE W NAME OF THE COMPANY THOUGH THE APPROVAL REGARDING THE NEW NAME HAD ALREADY BEEN ISSUED BY THE ROC, JALANDHAR ABOUT 3-4 MONTHS BACK. AS PER THE ASSESSEE BOARD RESOLUTION FOR CHANGE IN NAME WAS MOVED IN JA N/FEB, 1999. THE DATE OF AGM FOR THE SAID PURPOSE WAS STATED TO BE N OT READILY REMEMBERED BY THE ASSESSEE. THE ASSESSEE WAS NOT ABLE TO STAT E THE EXACT NUMBER OF SHARES WHICH WAS RECEIVED ON TRANSFER OR ON ACCOUNT OF CHANGE OF NAME. THE COMPANY DID NOT HAVE ANY REGISTER/RECORD MAINTA INED FOR RECEIPT OF SHARES. NO RECORDS HAVE BEEN MAINTAINED BY THE COM PANY REGARDING THE RECEIPT OF NUMBER OF SHARES RECEIVED FOR TRANSFER O R ON ACCOUNT OF CHANGE OF NAME OF COMPANY. THOUGH THE ASSESSEE ADMITTED T HAT TRANSFER DEED COMPLETE IN ALL RESPECTS MUST BE ATTACHED WITH THE SHARE TO BE TRANSFERRED, THE ASSESSEE IN REPLY TO THE NEXT QUESTION OF NON FINDING OF SINGLE TRANSFER DEED ATTACHED WITH THE SHARE/S FOUND STACKED IN BUN DLES SERIALLY NUMBERED EXPLAINED THAT WHERE THE NAME OF THE COMPANY WAS TO CHANGED, NO TRANSFER DEED WAS REQUIRED AND IN RESPECT OF TRANSFER OF SH ARE/S HE DID NOT KNOW WHERE THE TRANSFER DEEDS WERE OR WERE WITH HIS TRAN SFER AGENT. THE ASSESSEE EXPLAINED THAT COMPANY WAS NOT MAINTAINING ANY RECORD IN RESPECT OF TRANSFER DEED/S AND OTHER DOCUMENTS SENT BY COMPANY TO HIS TRANSFER AGENTS. THE AO ASKED FOR THE RECORD AND TH E ASSESSEE EXPLAINED THAT THE SAID REGISTER MUST HAVE BEEN SEIZED DURING THE COURSE OF OPERATIONS ON 24.6.1999. IN RESPONSE TO ANOTHER QUERY THE ASSESSEE EXPLAINED THAT THE EARLIER NAME OF THE COMPANY M/S S.G. GLOBAL EXPORTS LTD WA S TINNA EXPORTS LTD AND ANOTHER COMPANY OF THE NAME OF TINNA OVERSEAS LTD. HAD FILED A SUIT AND AS PER THE ORDER OF THE COURT THE NAME OF THE COMPANY WAS CHANGED . THE SAID CHANGE WAS BY WAY OF STAMPING ON THE ORIGI NAL 10 CERTIFICATE. THE STATEMENT OF THE ASSESSEE WAS THE REAFTER TO BE RECORDED ON THE NEXT DATE AS PER THE REQUEST OF THE ASSESSEE. COPY OF THE SAID STATEMENT IS PLACED AT PAGES 11 TO 37 OF THE PAPER BOOK FILED BY THE REVENUE. DURING THE COURSE OF SEARCH, THE LIST OF SHARE CERTIFICATES FOUND FROM THE PREMISES OF THE ASSESSEE WAS PREPARED AS P ER ANNEXURES O O1 AND O2. COPIES OF WHICH ARE PLACED AT PAGES 1 TO 9 OF THE PAPER BOOK FILED BY THE REVENUE. 12. THE AO HAD ISSUED DETAILED QUESTIONNAIRE DATED 29.5.2001 TO THE ASSESSEE AND AS PER QUERY NO. 9 THE ASSESSEE WAS RE QUISITIONED AS UNDER: DURING THE COURSE OF SEARCH OPERATION IVPS/FDRS WO RTH RS. 1,09,450/- AND SHARE CERTIFICATE WORTH RS. 2,36,68, 000/- WERE FOUND AND SEIZED FROM YOUR RESIDENCE. YOU ARE REQUESTED TO PLEASE FURNISH THE SOURCE OF ACQUISITION OF THESE MOVABLE ASSETS FAILING WHICH THE ENTIRE INVESTMENTS IN THESE ASSETS WILL B E TREATED AS YOUR INVESTMENT FROM UNDISCLOSED SOURCES. 13. IN RESPONSE THE ASSESSEE VIDE LETTER DATED 5.7. 2001 SUBMITTED AS UNDER: AS REGARD SHARE CERTIFICATES WORTH RS. 2,36,68,000 /- FOUND AND SEIZED IT IS SUBMITTED THAT THESE SHARES HAVE BEEN EITHER PURCHASED BY OUR ASSOCIATE CONCERNS AND ALSO CAME FROM THE SH ARE HOLDERS FOR DEFACING/TRANSFER. THE DETAILS ARE ENCLOSED AS PER SEPARATE ANNEXURE. 14. THE CONTENTION OF THE ASSESSEE WAS THAT THE ABO VE SHARE CERTIFICATES OF M/S S.G. GLOBAL EXPORTS LTD FOUND FROM THE RESID ENCE PREMISES OF THE ASSESSEE, WHICH IS ALSO THE REGD OFFICE OF THE SAID COMPANY, DID NOT BELONG TO THE ASSESSEE AND IN FACT BELONG TO THE PE RSONS/COMPANY WHO HAD SENT THE SAME FOR EITHER TRANSFER IN THEIR NAMES OR FOR THE CHANGE OF NAME DUE TO CHANGE IN THE NAME OF THE COMPANY. THE TOTA L NUMBER OF SHARE CERTIFICATES FOUND FROM THE PREMISES AS PER ANNEXUR E O, O1 AND O2, THE COPIES OF WHICH ARE ENCLOSED AT PAGES 1 TO 9 OF THE PAPER BOOK FILED BY THE REVENUE, TOTAL TO 23,93,800 SHARES. THE BREAK UP OF THE SHARES HELD BY RESPECTIVE CONCERNS IS AS UNDER: 11 M/S S.G. AND CO. LUDHIANA 734802 SHARES M/S EXALT FINCAP LTD 1063800 SHARES M/S DIWAKSHI INVESTMENTS LTD 595198 SHARES 15. THE ASSESSEE HAS PLACED ON RECORD A COPY OF THE QUESTIONNAIRE OF THE AO DATED 29.6.2001 AT PAGES 1 TO 3 OF THE PAPER BOO K AND COPY OF REPLY DATED 5.7.2001 FILED BY THE ASSESSEE AT PAGES 4 TO 6 OF THE PAPER BOOK. THE PERUSAL OF THE ASSESSMENT ORDER PASSED BY THE A O DATED 26.7.2001 IN THE CASE OF THE ASSESSEE, ITSELF REFLECTED THAT THE AO HAS ACKNOWLEDGED THE REPLY OF THE ASSESSEE DATED 5.7.2001 FILED DURING T HE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSEE HAS EARLIER FILED PAPER BOOK DATED 21.7.2005 WHICH IS PLACED ON RECORD UNDER WHICH CONFIRMATION FROM M/S S.G. & CO. M/S EXALT FINCAP LTD AND M/S DIWAKSHI INVESTMENTS L TD ALONG WITH THE RELEVANT EVIDENCES FILED BY THE RESPECTIVE COMPANIE S WERE ANNEXED. WE PROCEED TO ANALYSIS THE SAID DOCUMENT FILED BY THE ASSESSEE. 16. AS PER THE CONFIRMATION FILED AT PAGE 4 OF THE PAPER BOOK DATED 21.7.2005, M/S S.G. & CO. CLAIMS TO BE THE OWNER OF 10 LAKHS EQUITY SHARES OF M/S S.G. GLOBAL EXPORTS LTD ON THE DATE O F SEARCH, WHICH WERE REFLECTED IN ITS BOOKS OF ACCOUNT. OUT OF THE TOTA L SHARES HELD, 734802 SHARES WERE FOUND IN THE POSSESSION OF THE ASSESSEE . M/S S.G. & CO. CLAIMS THAT ENTRY OF SAID SHARES SENT TO M/S S.G. G LOBAL EXPORTS LTD IS MADE IN ITS S TOCK LEDGER. COPY OF THE STOCK LEDGER ACCOUNT OF M/S S.G. & CO. IS ATTACHED AT PAGES 5 & 6 OF THE SAID PAPER BO OK AND THE SAID SHARES WERE ACCOUNTED FOR IN THE BOOKS OF ACCOUNT OF M/S S .G. & CO. THE SAID DOCUMENT WERE FILED BEFORE THE AO, THE CIT(A) AND E VEN BEFORE US. 17. THE TOTAL HOLDING OF EXALT FINCAP OF THE SHARES OF M/S S.G. GLOBAL EXPORTS LTD. WAS 1091500 SHARES, OUT OF WHICH 93300 0 SHARES WERE PARTLY PAID UP AND 130800 SHARES WERE FULLY PAID UP. DURI NG THE COURSE OF SEARCH OPERATIONS, THE SAID SHARES WERE FOUND FROM THE POSSESSION OF THE ASSESSEE AS THE SAME WERE SENT TO THE COMPANY FOR ISSUE OF NEW SHARE CERTIFICATES IN LIEU OF OLD SHARE CERTIFICATES DUE TO CHANGE IN THE NAME OF 12 THE COMPANY. THE CONFIRMATION OF EXALT FINCAP LTD IS PLACED AT PAGE 7 OF THE PAPER BOOK. THE LIST OF CLOSING STOCK AS ON 31 .3.2000 AND 31.3.1999 ARE PLACED AT PAGES 8 & 9 OF THE PAPER BOOK ALONG W ITH COPY OF BALANCE SHEET AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDI NG 31.3.2000 AT PAGES 10 & 11, IN WHICH THE INVESTMENT IN SHARES OF M/S S .G. GLOBAL EXPORTS LTD WAS REFLECTED. 18. THE CONCERN DIWAKSHI INVESTMENTS LTD. OWNED 663 900 EQUITY SHARES OF M/S S.G. GLOBAL EXPORTS LTD. WHICH WERE D ECLARED AS PART OF ITS STOCK. OUT OF TOTAL SHARE HOLDING, 595198 SHARES W ERE SENT TO THE COMPANY FOR TRANSFER OF SHARES IN THE NAME OF M/S D IWAKSHI INVESTMENTS LTD. THE CONFIRMATION OF THE SAID CONCERN IS PLAC ED AT PAGE 12 OF THE PAPER BOOK ALONG WITH BALANCE SHEET AND PROFIT AND LOSS ACCOUNT AS ON 31.3.1999 AND 31.3.2000 AT PAGES 13 & 14 AND 16 & 1 7 OF THE PAPER BOOK. THE LIST OF CLOSING STOCK AS ON 31.3.1999 AND AS ON 31.3.2000 REFLECTING THE SAID SHARES IN THE HANDS OF THE M/S DIWAKSHI IN VESTMENTS LTD. ARE PLACED AT PAGES 15 TO 18 OF THE PAPER BOOK. 19. CONSIDERING THE TOTALITY OF THE EVIDENCE AVAILA BLE ON RECORD AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WHERE THE SAID CONCERN ARE ASSESSED TO TAX AND HAD FILED THEIR INDIVIDUAL TAX RETURNS FROM YEAR TO YEAR AND INVESTMENTS IN EQUITY SHARES OF M/S S.G. GLOBAL EXPORTS LTD. HAVE BEEN DECLARED BY THEM AS CLOSING STOCK BOTH ON 31.3 .1999 AND 31.3.2000, IT ESTABLISHES THE STAND OF THE ASSESSEE THAT THE S AID SHARES ARE NOT THE LIABILITY OR THE ASSETS OF THE ASSESSEE. IN THE AB OVE SAID CIRCUMSTANCES WHERE THE ASSET FOUND IN POSSESSION OF THE ASSESSEE DURING THE COURSE OF SEARCH AT HIS PREMISES, HAVE BEEN JUSTIFIABLY EXPLA INED TO BE THE ASSETS OF THE PERSON IN WHOSE NAME THE SAME STANDS AND FURTHE R THE ONUS HAVING BEEN DISCHARGED BY THE SAID HOLDERS OF SHARES AND T HE SAME BEING REFLECTED IN THEIR RESPECTIVE BOOKS OF ACCOUNT, THERE IS NO M ERIT IN THE ORDER OF THE AO IN HOLDING THAT THE SHARE CERTIFICATE FOUND FROM THE RESIDENCE OF THE 13 ASSESSEE WERE OWNED BY THE ASSESSEE IN BENAMI NAMES . THE SAID SHARES WERE HELD BY THE ASSOCIATE CONCERNS OF THE ASSESSEE AND MERE OWNERSHIP BY THE FAMILY CONCERNS OF THE ASSESSEE WOULD NOT MA KE THE ASSESSEE THE OWNER OF THE ASSETS WHICH IN TURN HAVE BEEN DECLARE D BY THE RESPECTIVE CONCERNS AS PART OF THEIR CLOSING STOCK/INVESTMENTS AND THE SAME HAS BEEN SHOWN IN THE RETURN OF INCOME FILED BY THE SAID CON CERNS, BOTH FOR THE YEAR ENDING 31.3.1999 AND 31.3.2000. THE SEARCH OPERATI ON AT THE RESIDENTIAL PREMISES OF THE ASSESSEE ON 24.6.1999 ONLY FOUND TH E SAID CERTIFICATES AT THE SAID ADDRESS WHICH IS THE REGD OFFICE OF THE CO NCERN M/S S.G. GLOBAL EXPORTS LTD. THE EXPLANATION OF THE ASSESSEE WAS NO T ACCEPTED AS THE COMPANY WAS NOT MAINTAINING THE REGISTER/S FOR RECE IVING THE CERTIFICATES EITHER FOR TRANSFER OF NAME OR FOR ISSUING FRESH CE RTIFICATES BECAUSE OF CHANGE IN NAME OF THE COMPANY. IN THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE IN AGREEMENT WITH THE ORDER OF THE LD. CIT(A) IN DELETING THE SAID ADDITION. WE DISMISS T HE GROUND OF APPEAL NO. (I) RAISED BY THE REVENUE. 20. THE NEXT ISSUE RAISED IN PRESENT APPEAL IS IN R ESPECT OF THE ESTIMATION OF BROKERAGE INCOME IN THE HANDS OF THE ASSESSEE. DURING THE COURSE OF SEARCH OPERATION CERTAIN DIARIES WERE SEI ZED FROM THE POSSESSION OF THE ASSESSEE WHICH HAD CERTAIN NOTINGS. THE ASSE SSEE ADMITTED TO HAVE CARRIED ON THE BUSINESS OF BROKERAGE IN PURCHASE AN D SALE OF SHARES AND IN THE RETURN FILED FOR THE BLOCK PERIOD, OFFERED BROK ERAGE INCOME OF RS. 2,50,000/-. 21. THE AO ON PERUSAL OF THE DOCUMENT NO. 11 AT PAG PE 13 TO 15 ANNEXED TO A1-19 ESTIMATED THE BROKERAGE INCOME IN THE HANDS OF THE ASSESSEE AT RS.7,53,300/- . THE PHOTOCOPIES OF THE DOCUMENTS ARE PLACED AT PAGES 20 TO 23 OF PAPER BOOK DATED 21.7.2005. T HE PERUSAL OF THE SEIZED DOCUMENTS REFLECTED THAT AT PAGE 21 THERE AR E NOTINGS OF INCOMINGS AND OUTGOING FOR THE YEAR 1997-98 AND 1998-99. THE BROKERAGE 14 COMMISSION FOR ASSESSMENT YEAR 1997-98 IS REFLECTED AT RS. 502400/- AGAINST WHICH THE EXPENSES OF RS. 183900/- HAVE BEE N SHOWN. FURTHER AGAINST COMMISSION INCOME OF RS. 250900/- FOR THE Y EAR 1998-99, THE EXPENSES TOTAL TO RS. 1,43,052/-. THE COMMISSION O N THE SAID PAGES TOTAL TO RS. 7,53,300/- FOR THE TWO YEARS. IN ADDITION T O THE EXPENSES REFLECTED AT PAGE 21 OF THE PAPER BOOK, THE ASSESSEE HAD CLAI MED TO HAVE PAID COMMISSION OF RS. 213174/- AND RS. 123551/- AND UNL ISTED EXPENSES OF RS. 50,000/-. THE SAID NOTINGS ARE AS PER PAGE 20 OF THE PAPER BOOK. IN THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE WHERE THE NET INCOME REFLECTED AT RS. 79623/- IN THE SEIZED D IARY AND THE ASSESSEE HAS ALREADY DECLARED BROKERAGE INCOME OF RS. 2,50,0 00/-, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE GROUND OF APPEA L NO. (II) RAISED BY REVENUE. 22. IN THE RESULT, APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF MAY, 2012. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 11 TH MAY, 2012 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR