DCIT, Cir 24(1), V. Sudhir Dhingra,

ITSSA 216/DEL/2006

• Counselvise Citation: [2017] 122 COUNSELVISE.COM (IT) 3251 (ITAT-DELHI)
• Duration Of Justice: 10 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 03-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 23-03-2017
• Assessment Year: misc
• Appeal Filed On: 06-10-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONA SINGH
• Assessee Lawyers: SHAILESH GUTPA
• Keywords: Bogus purchase; Source of fund; Accommodation entries; Block assessment
• Section: 142(1); 132; 15

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER I.T (SS)A . NO. 216 /DEL/20 06 BLOCK PERIOD 1.4.1990 TO 20.8.2000 DY. COMMISSIONER OF INCOME TAX, CIRCLE 24(1), ROOM NO. 238-B, CR BUILDING, NEW DELHI VS. SH. SUDHIR DHINGRA, F-25, RADHEY MOHAN DRIVE, VILL. FATEHPUR BENGADAIPUR, MEHRAULI, NEW DELHI (PAN: AAFPD7443K) (APPELLANT) (RESPONDENT) DEPARTMENT BY : MS. MONA SINGH, CIT(DR) ASSESSEE BY : SH. SALIL AGGARWAL, ADV. & SH. SHAILESH GUTPA, CA ORDER PER H.S. SIDHU, JM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXIII, NEW DELHI DATED 07.7.2006 PERTAINING TO BLOCK PERIOD 1.4.1990 TO 20.8.2000 ON THE FOLLOWING GROUNDS:- 2 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS THAT THE TRANSACTION IN RESPECT OF CAPITAL GAIN STOOD PROVED AND PROPERLY DISCLOSED BY THE APPELLANT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS THAT NO EVIDENC E HAD BEEN BROUGHT ON RECORD TO PROVE THAT THE TRANSACTION IN RESPECT OF CAPITAL GAIN SHOWN BY THE ASSESSEE WAS BOGUS. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELEING THE ADDITION OF RS. 1,16,36,360/- MADE BY THE AO. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN HOLDING THAT EVIDENCE USED BY T HE AO HAD NO EVIDENTIARY VALUE AND AS SUCH NO ADDITION COULD HAVE BEEN MADE. 2. THE BRIEF FACTS OF THE CASE ARE THAT A SEARCH AN D SEIZURE OPERATION U/S. 132 OF THE I.T. ACT, 1961, WAS CONDU CTED IN THE CASE OF SHRI MANOJ AGGARWAL AND M/S FRIENDS PORTFOLIO P LTD. ON 03.8.2000. THE ASSESSMENT U/S. 158BC OF THE INCOME TAX ACT WAS COMPLETED IN THE CASE OF M/S FRIENDS PORTFOLIO P. LTD. ON 29.8.2002. ON THE BASIS OF SEIZED MATERIAL AND RECORDS AND INF ORMATION SUBMITTED DURING THE COURSE OF SEARCH PROCEEDINGS AND INQUIRIES CONDUCTED DURING THE ASSESSMENT PROCEEDINGS IT WAS E STABLISHED THAT SH. MANOJ AGGARWAL, DIRECTOR OF M/S FRIENDS PORTI FOLIO P LTD. HAS BEEN GIVING BOGUS ACCOMMODATION ENTRIES TO VARIO US PERSONS. IT WAS ALSO FOUND DURING THE PROCEEDINGS THAT SH. SU DHIR DHINGRA HAD ALSO RECEIVED THE ACCOMMODATION ENTRIES BY WAY OF CHEQUES PAID AND RECEIVED IN LIEU OF UNACCOUNTED CASH RECEI VED AND GIVEN FROM M/S FRIENDS PORTFOLOIO P LTD. AO FOUND THAT THE AMOUNTS 3 CONSTITUTED THE UNDISCLOSED INCOME OF SH. SUDHIR DHIN GRA, IN SO FAR AS THE AMOUNTS WERE CHEQUES PAID AND RECEIVED IN LIE U OF ACCOUNTED CASH RECEIVED AND PAID. BEING FULLY SATISFIED THAT THE ASSESSEE, SH. SUDHIR DHINGRA, HAD RECEIVED ACCOMMODATION ENTRIES FROM M/S FRIENDS PORTFOLIO P. LTD. AND THE SAID AMOUNTS CONSTI TUTED THE UNDISCLOSED INCOME OF SH. SUDHIR DHINGRA, THE AO OF M/S FRIENDS PORTFOLIO P LTD. I.E. DCIT, CC-3, NEW DELHI RECOR DED HIS SATISFACTION IN WRITING IN THE LETTER DATED 13.2.2003 SENT TO THE AO. AFTER GIVING ALL THE DETAILS OF THE CASE, THE DCIT, STATED IN PARA 4 OF THE SAID LETTER AS UNDER:- THE PAPERS SEIZED DURING THE COURSE OF SEARCH AND INQUIRIES CONDUCTED DURING ASSESSMENT PROCEEDINGS THUS CLEARLY ESTABLISH THAT UNDISCLOSED INCOME BELONGING TO SH. SUDHIR DHINGRA HAS BEEN FOUND DURING THE COURSE OF SEARCH OF SH. MANOJ AGGARWAL. THIS INFORMATION IS BEING PASSED ON TO YOU FOR INITIATING PROCEEDINGS U/S. 158BC READ WITH SECTION 158BD SINCE THE JURISDICTION OVER SH. SUDHIR DHINGRA IS WITH YOU. 2.1 ON THE BASIS OF SATISFACTION OF THE AO OF M/S FRI ENDS PORTFOLIO P. LTD. THAT CERTAIN UNDISCLOSED INCOME BELONGED TO THE ASSESSEE, 4 SH. SUDHIR DHINGRA, AS PER THE MATERIAL FOUND DURIN G THE COURSE OF SEARCH ON M/S FRIENDS PORTFOLIO PVT. LTD. A NOTICE U /S. 153BC R.W.S. 158BD OF THE INCOME TAX ACT, WAS ISSUED TO THE ASSE SSEE ON 10.7.2003 AND DULY SERVED ON THE ASSESSEE, ASKING HI M TO FILE HIS TRUE AND CORRECT RETURN OF INCOME FOR THE BLOCK PERIO D I.E. 1.4.1990 TO 20.8.2000 WITHIN 21 DAYS OF RECEIPT OF THE NOTICE. IN RESPONSE TO THE NOTICE, THE ASSESSEE FILED THE RETURN OF INCOME I N FORM NO. 2B ON 21.8.2003 FOR THE BLOCK PERIOD, DECLARING TOTAL UN DISCLOSED INCOME AT NIL FOR THE BLOCK PERIOD. NOTICE U/S. 143(2 ) OF THE I.T. ACT, 1961 DATED 25.8.2003 WAS ALSO SERVED ON THE AS SESSEE ON 28.8.2003. IN RESPONSE TO THE STATUTORY NOTICES, THE AR OF THE ASSESSEE, ATTENDED THE PROCEEDINGS AND FILED THE DETAI LS AND FURTHER A DETAILED QUESTIONNAIRE DATED 5.1.2005 CALLING FOR INFORMATION U/S. 142(1) OF THE ACT WAS DULY SERVED ON THE ASSESSEE ALO NGWITH THE STATUTORY NOTICE U/S. 142(1) OF THE I.T. ACT, 1961 AND IN RESPONSE THERETO THE ASSESSEE FILED ITS REPLY DATED 28.6.2005. T HEREAFTER, THE AO ASSESSED THE INCOME OF THE ASSESSEE AT RS. 1,16,3 6,360/- VIDE HIS ORDER DATED 28.7.2005 PASSED U/S. 158BC R.W.S. 158BD OF THE INCOME TAX ACT, 1961 AND MADE THE ADDITIONS OF RS. 7 6,00,000/- ON ACCOUNT OF UNACCOUNTED CASH RECEIVED UNDER THE CO VER OF BOGUS TRANSACTION OF PURCHASE OF SHARES; RS. 40,12,000/- O N ACCOUNT OF UNACCOUNTED CASH PAID UNDER THE COVER OF BOGUS TRAN SACTION OF SALE 5 OF SHARES; AND RS. 24,360/- ON ACCOUNT OF UNACCOUNTE D CASH RECEIVED AGAINST THE BOGUS PAYMENTS OF BROKERAGE ETC ., AGGRIEVED WITH THE ASSESSMENT ORDER, ASSESSEE FILED THE APPEAL BEFORE THE LD. CIT(A) WHO VIDE HIS IMPUGNED ORDER DATED 07.7.20 16 DELETED THE ADDITIONS BY ALLOWING THE APPEAL OF THE ASSESSEE. 3. AGGRIEVED WITH THE IMPUGNED ORDER OF THE LD. CIT( A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 4. LD. DR RELIED UPON THE ORDER OF THE AO AND REITERA TED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL. 5. ON THE CONTRARY, LD. COUNSEL OF THE ASSESSEE RELIED UPON THE ORDER OF THE LD. CIT(A) AND STATED THAT LD. CIT(A) HA S PASSED A WELL REASONED ORDER WHICH DOES NOT NEED ANY INTERFERENCE AND REQUESTED THAT THE SAME MAY BE UPHELD. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RELEV ANT RECORDS, ESPECIALLY THE ORDER OF THE LD. CTI(A). W E FIND THAT LD. FIRST APPELLATE AUTHORITY HAS ELABORATELY DISCUSSED AN D ADJUDICATED THE ISSUE NO. 1 TO 3 RELATING TO ADDITION OF RS. 1,16,3 6,360/- I.E. RS. 76,00,000/- ON ACCOUNT OF UNACCOUNTED CASH RECEIVED UNDER THE COVER OF BOGUS TRANSACTION OF PURCHASE OF SHARES; RS . 40,12,000/- ON ACCOUNT OF UNACCOUNTED CASH PAID UNDER THE COVER OF BOGUS TRANSACTION OF SALE OF SHARES AND RS. 24,360/- ON ACC OUNT OF 6 UNACCOUNTED CASH RECEIVED AGAINST THE BOGUS PAYMENTS OF BROKERAGE ETC. AS UNDER:- THE GROUND OF APPEAL NO. 3 TO 7 TOGETHER CHALLENGE T HE ADDITION OF RS. 76,00,000/- AND RS. 40,12,000/- BEI NG UNDISCLOSED INCOME OF THE ASSESSEE. FURTHER THE GRO UND OF APPEAL NO. 8 CHALLENGES THE ADDITION MADE ON ACCO UNT OF BROKERAGE AND SERVICE TAX PAID AMOUNTING TO RS. 24,360/- ON PURCHASE AND SALE OF SHARES AS UNDISCLO SED INCOME. THE AO IN HIS ORDER OBSERVED THAT A SEARCH WAS CONDUCTED AT THE BUSINESS PREMISES M/S FRIENDS PORTF OLIO PVT LTD, 7/22 ANSARI ROAD, DARYA GANJ, DELHI AND IN THE RESIDENTIAL PREMISES OF ITS DIRECTOR, SHRI MANOJ AGG ARWAL ON 3.8.2000. DURING THE COURSE OF SEARCH VARIOUS PA PERS AND DOCUMENTS ETC. WERE SEIZED. DURING THE COURSE OF INVESTIGATION AND ASSESSMENT PROCEEDINGS BEFORE THE DCIT, CENTRAL CIRCLE 3, NEW DELHI, IT WAS FOUND THAT SHRI MANOJ AGGARWAL WAS GIVING BOGUS ACCOMMODATION ENTRI ES TO VARIOUS PERSONS. IT WAS ALSO FOUND THAT DURING TH E PROCEEDINGS THAT THE APPELLANT HAD ALSO RECEIVED ACCOMMODATION ENTRIES, THAT HE WAS RECEIVING CASH AND ISSUING CHEQUES THROUGH VARIOUS ACCOUNTS AND ONE OF 7 SUCH ACCOUNTS WAS ACCOUNT NO. 1224 WITH VIJAYA BANK, VIGYAN VIHAR, DELHI IN THE NAME OF M/S FRIENDS PORTF OLIO PVT. LTD. THE AO BROUGHT OUT IN HIS ORDER THE DETAILS O F CHEQUES ISSUED AND CHEQUES RECEIVED FROM M/S FRIEND S PORTFOLIO AS UNDER:- CHEQUES ISSUED BY THE ASSESSEE FOR PURCHASE OF SHARE S: CHEQUE NO. AMOUNT 535697 20,00,000 535696 15,00,000 CHEQUES RECEIVED BY THE ASSESSEE ON SALE OF SHARES 964155 10,00,000 964153 10,00,000 964154 10,00,000 964257 6,75,640 THE AO OBSERVED THAT IT WAS FOUND THAT THESE AMOUNTS CONSTITUTED THE UNDISCLOSED OF SH. SUDHIR DHINGRA IN SO FAR AS THESE AMOUNTS WERE CHEQUES PAID AND RECEIVED IN LIEU OF UNACCOUNTED CASH RECEIVED AND PAID. THE AO FURTHER OBSERVED IN HIS ORDER THAT THE LETTER F.NO. DCIT/CC-3/2002-03/642 DATED 13.2.2003 OF THE DCIT, CENTRAL CIRCLE 3, NEW DELHI WAS RECEIVED BY HIM CONTAINING SATISFACTION THAT UNDISCLOSED INCOME OF SH . 8 SUDHIR DHINGRA WAS FOUND DURING THE COURSE OF SEARCH OF SH. MANOJ AGARWAL. THEREFORE NOTICE U/S 1 58BD) WAS ISSUED. THE ASSESSEE CLAIMED TO HAVE PURCHASED 80 000 SHAERS OF M/S JAI PRAKASH INDUSTRIES LTD. ON 27.12.1 999 FOR RS. 76,00,000/- @RS.95/- PER SHARE AND SOLD THE SAME ON 22.2.2000 FOR RS.40,12,000/- TO M/S FRIEND S PORTFOLIO PVT LTD. INSPITE OF BEING GIVEN REPEATED OPPORTUNITIES BY THE AO, THE ASSESSEE COULD NOT FURNI SH ANY EVIDENCE REGARDING HAVING TAKEN THE DELIVERY OF THE SHARES CLAIMED TO HAVE BEEN PURCHASED NOR HE COULD G IVE ANY CONFIRMATION FROM M/S FRIENDS PORTFOLIO PTV LTD T HE BROKER THROUGH WHOM THE SO CALLED TRANSACTIONS HAD TAKEN PLACE. THE AO VERIFIED THE TRANSACTION FROM THE DELHI STOCK EXCHANGE AND WAS INFORMED THAT THERE WAS NO TRADING IN THESE SHARES AT THE DSE ON 27.12.99. H E THEREFORE HELD THAT SINCE THERE WAS NO QUESTION OF THE ASSESSEE HAVING PURCHASED THESE SHARES ON 27.12.99, IT PROVED THAT THE SO CALLED TRANSACTION OF PURCHASE OF SHARES WAS BOGUS. HE FURTHER HELD THAT SINCE THERE WAS NO PURCHASE, THE QUESTION OF THERE BEING ANY SALE OF THESE SHARES DID NOT ARISE AND HENCE THE TRANSACTION OF SALE WAS ALSO BOGUS. M/S FRIENDS PORTFOLIO PVT LTD HAD 9 BEEN GRANTED PERMISSION TO TRADE ONLY W.E.F 3.3.2000. THE AO IN HIS ORDER OBSERVED THAT THE ASSESSEE WAS PROVIDED WITH PHOTOCOPIES OF THE RELEVANT SEIZED MATER IAL WHICH WAS SEIZED AT THE TIME OF SEARCH OF SHRI MANOJ AGARWAL AND M/S FRIENDS PORTFOLIO PVT LTD AND ALSO T HE COPIES OF STATEMENTS OF SHRI MANOJ AGARWAL DATED 11.9.2000, 14.12.2000, 8.1.2001 AND 20A.2001 WHEREI N HE HAD ADMITTED THAT HE WAS IN THE BUSINESS OF ONLY GIVING BOGUS ACCOMMODATION ENTRIES AGAINST CASH AND THAT NO REAL TRANSACTIONS IN SHARES HAD TAKEN PLACE WHEREAS DESPITE BEING GIVEN REPEATED OPPORTUNITIES, T HE ASSESSEE COULD NOT FURNISH ANY EVIDENCE REGARDING H AVING TAKEN DELIVERY OF SHARES CLAIMED TO HAVE BEEN PURCHAS ED. FURTHER HE COULD ALSO NOT GIVE ANY CONFIRMATION FROM M/S FRIENDS PORTFOLIO. THE ONUS WAS ON THE ASSESSEE TO PR OVE THE GENUINENESS OF THE SO CALLED TRANSACTIONS OF SALE AND PURCHASE OF SHARES WHICH HE FAILED TO DISCHARGE. THEREFORE, IN VIEW OF ABOVE, THE AO HELD THAT THE AMO UNT OF RS.76,00,000/- FOR PURCHASE OF SHARES OF M/S JAY PRAKASH INDUSTRIES WAS UNDISCLOSED INCOME OF THE ASSESSEE. SIMILARLY THE AMOUNT OF RS. 4O,12,000/- CLAIMED TO HAVE BEEN RECEIVED ON ACCOUNT OF SALE OF 10 SHARES OF M/S JAY PRAKASH INDUSTRIES LTD WAS ALSO T REATED AS UNDISCLOSED INCOME OF THE ASSESSEE. IT WAS ALSO OBSERVED BY THE AO IN HIS ORDER THAT ASSESSEE HAD CLAIMED TO HAVE PAID II)' BROKERAGE AND SERVICE TAX TOTALING TO RS.24,360/- AT THE TIME OF PURCHASE AND SA LE OF SHARES. SINCE IT WAS HELD BY THE AO THAT NO PURCHAS E OR SALE OF SHARES HAD TAKEN PLACE, THE SUM OF RS.24,3 60/- WAS ALSO TREATED AS UNDISCLOSED INCOME OF THE ASSES SEE. IT WAS CONTENDED BY THE COUNSEL OF THE APPELLANT THAT TH E AO HAD NO MATERIAL TO ADJUDICATE THAT THE TRANSACTION S BY THE APPELLANT WERE BOGUS BECAUSE SUCH FINDING WAS GI VEN BY HIM ONLY ON THE BASIS OF STATEMENT OF THE THIRD PERSON, WHEREAS SECTION 158BD PROVIDE THAT THE AO MU ST BE SATISFIED THAT THERE AROSE A CASE OF UNDISCLOSED INCOME. FURTHER IT WAS CONTENDED THAT THE TRANSACTIONS REFERRED TO IN THE ORDER UNDER APPEAL DID NOT SPELL OUT AS TO WHICH OF THE TRANSACTIONS WERE BOGUS OR WHICH WAS OTHERWISE. ALL THE TRANSACTIONS ENTERED INTO BY THE APPELLANT WERE SUPPORTED BY ENTRIES IN THE REGULAR BOOK S OF ACCOUNT MAINTAINED AND WERE SUPPORTED BY COPIES O F BANK STATEMENT. IT WAS ARGUED THAT THERE WAS NO DOCUMENTARY EVIDENCE OR ANY MATERIAL ON RECORD TO SHO W 11 THAT REPRESENTATIVES OF MIS FRIENDS PORTFOLIO PT LTD WERE EXAMINED IN THE LIGHT OF . STATEMENT OF SHRI MANOJ AGGARWAL. IT WAS CONTENDED THAT SHRI MAJOJ AGGARWAL I N HIS STATEMENT DID NOT DIRECTLY IMPLICATE THE APPELLANT OR STATED THAT APPELLANT HAD OBTAINED AN ACCOMMODATION ENTRY FROM MIS FRIENDS PORTFOLIO PVT LTD AND THEREFORE HIS STATEMENT COULD NOT BE MADE BASIS BY THE AO FOR DETERMINING UNDISCLOSED INCOME OF THE APPELLANT. IT WAS FURTHER CONTENDED THAT PURCHASE OF SHARES IN QUESTION AND ITS SUBSEQUENT SALE TO MIS FRIENDS PORTFOLIO PV T LTD. WERE DISCLOSED IN REGULAR RETURN OF INCOME FOR AY 2 000- 2001 FILED ON 30.10.2000 AND WAS ASSESSED U/S 143(1)(A) OF TL1E ACT. COPIES OF ACKNOWLEDGMENT OF RETURN OF INCOME FOR A Y 2000-2001, COPY OF STATEMEN T OF CAPITAL GAIN FILED WITH THE SAID RETURN, COPY OF BANK STATEMENT REFLECTING THE ENTRIES OF CHEQUES ISSUED AND RECEIVED FROM MIS FRIENDS PORTFOLIO PVT LTD BY THE ASSESSEE, COPY OF ACCOUNT OF MIS FRIENDS PORTFOLIO PV T LTD IN THE BOOKS OF SHRI SUDHIR DHINGRA, COPY OF ACCOUNT OF SHRI SUDHIR DHINGRA IN THE BOOKS OF MIS FRIENDSP6RTFO LIO PVT LTD AND COPY OF BILLS & BROKER NOTES OF MIS FRIEND S PORTFOLIO PVT LTD SHOWING THE TRANSACTIONS OF SALE AND 12 PURCHASE OF SHARES AND COPY OF DETAILS SHOWING DISTINCTIVE NUMBERS OF SHARES OF MIS JAY PRAKASH INDUSTRIES LTD TRADED BY MIS FRIENDS PORTFOLIO PVT LTD FOR THE ASSESSEE WERE FILED. IT WAS CONTENDED THAT CAPITA L LOSS OF RS.36,12,3601- WAS DISCLOSED IN THE RETURN O F INCOME FOR AY 2000-01 AND THE SAID RETURN WAS PROCESSED U/SI43(1)(A) ON 27.12.2000 MUCH BEFORE TH E ISSUE OF NOTICE ULS. 158BD ON 10.7.2003. IT WAS ARG UED THAT INCOME FROM SALE I PURCHASE OF SHARE IN QUESTIO N WAS ALREADY DISCLOSED IN REGULAR RETURN OF INCOME THEREFORE THE INCOME COULD NOT BE COVERED WITHIN THE DEFINITION OF UNDISCLOSED INCOME GIVEN IN SECTION 15 8B(B). IT WAS CONTENDED THAT DIFFERENT HIGH COURTS HAVE HELD THAT AN INCOME WHICH STOOD DISCLOSED IN REGULAR RETURN OF INCOME COULD NOT BE HELD TO BE UNDISCLOSED AND ADDED IN BLOCK ASSESSMENT. THE APPELLANT HAS PLACED RELIANCE ON THE FOLLOWING CASE LAWS :- DANG & CO PVT LTD VS DCIT (2005) 94 ITD 29 (DEL) L.R. GUPTA & OTHERS VS UNION OFINDIA AND OTHERS (199 2) 194 ITR 32 (DEL) CIT VS RAVIKANT JAIN (2001) 258 ITR 141 (DEL) 13 CIT VS VIKRAM A. DOSHI AND AM (2002) 256 ITR 129 (BORN) BHAGWATI PRASAD KEDIA VS CIT (2001) 248 ITR 562 (CAL ) CIT VS RAJENDER PRASAD GUPTA (2001) 248 ITR 350 (RAJ ) NR PAPER BOARD VS. DCIT (2001) 248 ITR 528 (GUJ) FURTHER IT WAS CONTENDED THAT THE AO MADE THE ADDITION WITHOUT MAKING ANY INVESTIGATION IN THE APPELLANT'S CA SE. THUS THE PRINCIPAL LAID DOWN BY THE HON DELHI HIGH CO URT IN THE CASE OF AMITY HOTELS (P) LTD VS CIT 272 ITR 75 WAS NOT FOLLOWED IN THE APPELLANT'S CASE. NOW THE CONTENTION OF THE APPELLANT IS FOUND TO BE CORRECT. THE ASSESSMENT ORDER MAKES IT CLEAR THAT THE ONLY BASIS FOR CONSIDERING THE TRANSACTION OF RS.35,97,357/- AS UNDISCLOSED INCOME OF THE ASSESSE E IS THE STATEMENT OF SHRI MANOI AGARWAL AND THE INFORMATI ON FROM THE DELHI STOCK EXCHANGE TO THE EFFECT THAT SH. MANOJ AGARWAL WAS NOT THE MEMBER OF DELHI STOCK EXCHANGE WHEN THE APPELLANT'S SALE AND PURCHASE OF SHARES TOOK PLACE. IT IS A. FACT THAT THE APPELLANT HA D PURCHASED AND SOLD SHARES OF M/S JAY PRAKASH INDUSTR IES LTD FOR AN AGGREGATE CONSIDERATION OF RS.76,00,000/- A ND RS40,12,000/- RESPECTIVELY. THIS WAS REFLECTED BY T HE 14 APPELLANT IN HIS BALANCE SHEET AS ON 31.3.2000 AND I T WAS PROPERLY DECLARED TO THE DEPARTMENT WHEN RETURN FOR A Y 2000-2001 WAS F1LED ON 30.10.2000 MUCK PRIOR TO THE DATE OF SEARCH. SINCE THE ASSESSMENT WAS COMPLETED U/S 158BD, IT WAS INCUMBENT UPON THE AO TO BRING OUT ON RECORD THAT THE TRANSACTIONS TO THE EXTENT OF RS.76,00,OOO/- AND RS. 4,12,000/- REMAINED UNDISCLOSED TO THE DEPARTMENT AND THEREFORE COULD BE BROUGHT TO TAX U/S 158BD. THUS THE ASSESSMENT OF RS.76,OO,OOOI- AND RS4O,12,OOOI- AS UNDISCLOSED INCOME OF THE APPELLANT U/S 158BD WAS AGAINST THE LAW . NOW COMING TO THE FACTUM OF CAPITAL GAINS, SO FAR AS PURCHASE OF SHARES IS CONCERNED IT STANDS PROVED AN D PROPERLY DISCLOSED TO THE DEPARTMENT MUCH PRIOR TO THE DATE OF SEARCH IN THE BUSINESS AND RESIDENTIAL PREMI SES OF THE DIRECTOR SHRI MANOJ AGARWAL. DURING THE ASSESSM ENT PROCEEDINGS AS WELL AS DURING THE APPELLATE PROCEEDI NGS, THE APPELLANT HAD SUBMITTED EVIDENCES REGARDING PURCHASE OF SHARES AND HAD ALSO EXPLAINED THAT THE PAYMENT FOR PURCHASE OF THE SHARES WERE MADE. THROU GH ACCOUNT PAYEE CHEQUES. COPY OF MEMO OF CONTRACT NOTE NO. 294 DATED 27.12.99, COPY OF SALE BILL NO S264-3 012 15 DATED 27.12.99 WHICH ALSO GIVES DISTINCTIVE NUMBER OF SHARES AND THE COPY OF ACCOUNT OF THE APPELLANT IN TH E BOOKS OF M/S FRIENDS PORTFOLIO PVT LTD, ALL GO TO PRO VE THAT THE TRANSACTION OF PURCHASE HAD IN FACT TAKEN PLACE. THE PAYMENT WAS MADE BY THE APPELLANT THROUGH ACCOUNT PAYEE CHEQUES AND PHYSICAL DELIVERY OF SHARES WAS TA KEN BY THE APPELLANT ALONG WITH DULY FILLED AND SIGNED SHA RE TRANSACTION FORMS AND THIS FACT HAS BEEN BROUGHT OUT BY THE AO IN PAGE NO.7 AND 12 OF HIS ASSESSMENT ORDER, WHICH IPSO FACTO PROVES THAT THE APPELLANT HAD PURCHA SED 80000 SHARES OF JAY PRAKASH INDUSTRIES LTD @ RS.95/ - PER SHARE. SINCE THE PAYMENT WAS MADE THROUGH ACCOUN T PAYEE CHEQUES, UNLESS IT WAS BROUGHT OUT BY THE AO IN HIS ORDER THAT SUCH PAYMENT WAS NOT MADE THROUGH REGULAR BOOKS OF ACCOUNTS OF THE APPELLANT AND THE S OURCE OF THE FUND IN THE BANK WAS NOT PROVED, THE TRANSACT ION OF PURCHASE COULD NOT BE HELD TO BE BOGUS. SO FAR AS PHYSICAL DELIVERY OF SHARES TAKEN BY THE APPELLANT IS CONCERNED, SINCE THEY HAD ALREADY BEEN SOLD THE APPELLANT WAS LEFT WITH NO MEANS TO PROVE IT WITH ANY DOCUMENTARY EVIDENCE. SIMILARLY AS SALE WAS EFFECTED WITHIN A SHORT PERIOD OF ITS PURCHASE' HE WAS NOT IN A 16 POSITION TO GET HIS NAME REGISTERED IN THE BOOKS OF T HE COMPANY AS A SHARE HOLDER. COPY OF ACCOUNT OF M/S FRIENDS PORTFOLIO PVT LTD AS APPEARING IN THE BOOKS OF THE APPELLANT, THE STATEMENT OF ACCOUNT OF ACCOUNT NO. 410053401 OF LNG BARINGS BANK, NEW DELHI BRANCH AND THE COPY OF ACCOUNT OF CORPORATION BANK, GREATER KAI LASH, NEW DELHI OF ACCOUNT NO. 30031999 AND THE COY OF SAVING BANK ACCOUNT OF INDIAN BANK HAVING ACCOUNT NO 31091, ALL PROVE THAT THE PURCHASE OF THESE SHARES WA S MADE BY KNOWN SOURCES OF INCOME AND THEREFORE SUCH PURCHASE COULD NOT BE TERMED AS BOGUS PURCHASE. THIS HAD ALREADY BEEN DECLARED BY THE APPELLANT IN THE RET URN FOR A Y 2000-2001 FILED ON 30TH OCTOBER, 2000, THUS HALF THE TRANSACTION OF CAPITAL GAIN I.E. TO THE EXTENT OF PURCHASE OF SHARES WAS APPARENTLY GENUINE. SIMILAR I S THE POSITION IN RESPECT OF THE SALE OF THESE SHARES. TH E COPY OF CONTRACT NOTE DATED 22.2.2000 VIDE SETTLEMENT NO. DF 9950 AND THE PURCHASE BILL OF M/S FRIENDS PO RTFOLIO PVT LTD AND THE COPY OF ACCOUNT OF THE APPELLANT IN TH E BOOKS OF M/S FRIENDS PORTFOLIO PVT LTD WHICH PROVED THAT THE PAYMENT WAS MADE TO THE APPELLANT THROUGH ACCOUNT PAYEE CHEQUES, HAD ALSO BEEN BROUGHT OUT BY THE AO IN 17 HIS ASSESSMENT ORDER. ALL THESE PROVE THAT THE TRANSACTION OF SALE WAS ALSO GENUINE. THESE TRANSACTI ONS WERE BROUGHT INTO THE BOOKS OF THE APPELLANT AND WERE VERY WELL DISCLOSED TO THE DEPARTMENT IN THE RETURN F OR A Y 2000-2001. THIS RETURN AS ACCEPTED BY THE DEPARTMENT U/S 143(1) VIDE AO'S INTIMATION DATED 27.2.2001 WHICH RESULTED INTO REFUND OF RS.27,63,802/-. THE AO'S CONCLUSION THAT SINCE MIS FRIENDS PORTFOLIO PVT LTD W AS GRANTED PERMISSION BY THE DELHI STOCK EXCHANGE FOR TR ADE OF SHARES W.E.F 3.3.2000 ONLY AND THEREFORE THE PURC HASE AND SALE OF SHARES COULD NOT HAVE TAKEN PLACE, COULD NOT HAVE BEEN THE SOLE BASIS TO HOLD THAT SUCH TRANSACTION S WERE BOGUS. THE LETTER DATED 11.7 .2005 OF DELHI STOC K EXCHANGE MAKES IT CLEAR THAT MIS FRIENDS PORTFOLIO P VT LTD WAS ADMITTED AS A MEMBER OF THE STOCK EXCHANGE AT THE MEETING OF BOARD OF DIRECTORS HELD ON 4.11.99, SUBJEC T TO APPROVAL OF SEB!. THIS INDICATES THAT M/S FRIENDS PORTF OLIO PVT LTD WAS NOT A BOGUS-TRADER AND THOUGH HE TRADED WITH THE ASSESSEE PRIOR TO THE DATE OF PERMISSION I.E 3.3.2000, SUCH TRADE BEING AFTER 4.11.99 AND ALSO IN VIEW OF ALL THE OTHER OVERWHELMING EVIDENCES, AS DISCUSSE D ABOVE, CANNOT BE TERMED AS BOGUS. NO EVIDENCE WAS 18 FOUND AS A RESULT OF SEARCH IN THE BUSINESS AND RES IDENTIAL PREMISES OF SHRI MANOJ AGARWAL WHICH COULD PROVE THA T NO SHARES WERE ACTUALLY PURCHASED AND SOLD BY THE APPELLANT, THAT PAYMENT IN CASH WAS MADE BY THE APPELLANT TO M/S FRIENDS PORTFOLIO PVT LTD FOR PROVIDI NG ACCOMMODATION ENTRIES. WITHOUT BRINGING OUT THESE EVIDENCES ON RECORD, THE ADDITION WAS NOT WELL FOUNDE D AND WAS BASED SIMPLY ON SURMISES AND PRESUMPTIONS. A S A MATTER OF FACT IT HAS ALSO NOT BEEN PROVED BY THE AO AS TO WHAT WAS THE SOURCE OF CASH FOUND DEPOSITED IN TH E BANK ACCOUNT OF M/S FRIENDS PORTFOLIO PVT LTD IMMEDIATE LY PRIOR TO ISSUE OF CHEQUES TO THE APPELLANT, LET ALONE THAT IT WAS THE CASH GIVEN BY THE APPELLANT FOR SUCH DEPOSIT. IT APPEARS THAT THE AO WAS CARRIED AWAY BY THE STATEMENT OF SHRI MANOJ AGARWAL WHICH INDICATED THAT ACCOMMODATION ENTRIES WERE GIVEN TO CRETIN ASSESSES BUT IT HAS NOT BEEN BROUGHT OUT BY THE AO IN HIS ASSTT ORDE R THAT SHRI MANOJ AGARWAL'S STATEMENT DIRECTLY IMPLICATED THE APPELLANT ALSO. THE ASSESSMENT ORDER NOWHERE SPEAKS THAT MR. MANOJ AGARWAL HAD STATED THE NAME OF THE APPELLANT ALSO IN HIS STATEMENT OR HE HAD STATED THAT CASH WAS GIVEN TO HIM BY THE APPELLANT IN LIEU OF CHE QUES 19 RECEIVED BY HIM. THE RECEIPT OF CHEQUES BY THE APPEL LANT FROM M/S FRIENDS PORTFOLIO PVT LTD WAS NOT THE CONCLUSI VE PROOF THAT THESE WERE AGAINST THE CASH TRANSACTIONS BECAUSE THERE ARE NO EVIDENCES FOR PAYMENT OF CASH BY THE APPELLANT. ALL THESE GO TO PROVE THAT NOT EVEN AN IOTA OF EVIDENCE. HAS BEEN BROUGHT OUT ON RECORD TO PROV E THAT THE TRANSACTION OF CAPITAL GAIN WAS BOGUS AND THAT THE AMOUNT OF RS.76,OO,OOO/- AND RS4O,12,OOO/- FOR PURCHASE AND SALE OF SHARES WAS PAID IN CASH SO AS TO RECEIVE IT BACK THROUGH CHEQUES IN THE GARB OF SALE PROCEEDS OF THE SHARES. BECAUSE OF THESE REASONS ADDITION OF RS.76,00,000 AND RS.4O,12,000/- IS HERE BY. DELETED. SIMILARLY-THE ADDITION OF RS.24,360/- MAD E BY THE AO ON SURMISES, TREATING THE PAYMENT OF BROKERAGE' AND SERVICE TAX ON PURCHASE AND SALE OF SHARES AS UNACCOUNTED CASH WITHOUT BRINGING OUT ANY EVIDENCE O N RECORD, IS ALSO HEREBY DELETED. 7. ON GOING THROUGH THE AFORESAID FINDINGS OF THE LD. CIT(A), WITH REGARD TO ADDITIONS IN DISPUTE ARE CONCERNED, WE NO TE THAT THE ASSESSMENT ORDER MAKES IT CLEAR THAT THE ONLY BASIS FO R CONSIDERING THE TRANSACTION OF RS. 35,97,357/- AS UNDISCLOSED I NCOME OF THE ASSESSEE IS THE STATEMENT OF SH. MANOJ AGARWAL AN D THE 20 INFORMATION FROM THE DELHI STOCK EXCHANGE TO THE EFF ECT THAT SH. MANOJ AGARWAL WAS NOT THE MEMBER OF DELHI STOCK EXCHA NGE WHEN THE ASSESSEES SALE AND PURCHASE OF SHARES TOOK PLACE . IT IS A FACT THAT THE ASSESSEE HAD PURCHASED AND SOLD SHARES OF M/ S JAY PRAKASH INDUSTRIES LTD. FOR AN AGGREGATE CONSIDERATION OF RS. 76,00,000/- AND RS. 40,12,000/- RESPECTIVELY. WE FURTHER NOTE TH AT THIS WAS REFLECTED BY THE ASSESSE IN HIS BALANCE SHEET AS ON 31.3.2009 AND IT WAS ADEQUATELY DECLARED TO THE DEPARTMENT WHEN RETURN FOR AY 2000-2001 WAS FILED ON 30.10.2010 MUCH PRIOR TO THE DATE OF SEARCH. WE ARE OF THE VIEW THAT SINCE THE ASSESSMEN T WAS COMPLETED U/S. 158BD, THEREFORE, IT IS INCUMBENT UPON THE AO TO BRING OUT ON RECORD THAT THE TRANSACTIONS TO THE EXTEN T OF RS. 76,00,000/- AND RS. 40,12,000/- REMAINED UNDISCLOSE D TO THE DEPARTMENT AND THEREFORE COULD BE BROUGHT TO TAX U/S . 158BD. THUS THE ASSESSMENT RS. 76,00,000/- AND RS. 40,12,000/- A S UNDISCLOSED INCOME OF THE ASSESSEE U/S. 158 BD WAS AGAINST THE L AW. WE FURTHER NOTE THAT NO EVIDENCE WAS FOUND AS A RESULT O F SEARCH IN THE BUSINESS AND RESIDENTIAL PREMISES OF SHRI MANOJ AGAR WAL WHICH COULD PROVE THAT NO SHARES WERE ACTUALLY PURCHASED AND SOL D BY THE ASSESSEE, THAT PAYMENT IN CASH WAS MADE BY THE ASSES SSEE TO M/S FRIENDS PORTFOLIO PVT LTD FOR PROVIDING ACCOMMODATION E NTRIES. WITHOUT BRINGING OUT THESE EVIDENCES ON RECORD, THE ADD ITION WAS 21 NOT WELL FOUNDED AND WAS BASED SIMPLY ON SURMISES AN D PRESUMPTIONS. AS A MATTER OF FACT, IT HAS ALSO NOT BE EN PROVED BY THE AO AS TO WHAT WAS THE SOURCE OF CASH FOUND DEPOSIT ED IN THE BANK ACCOUNT OF M/S FRIENDS PORTFOLIO PVT LTD IMMEDI ATELY PRIOR TO ISSUE OF CHEQUES TO THE ASSESSEE, LET ALONE THAT IT WA S THE CASH GIVEN BY THE ASSESSEE FOR SUCH DEPOSIT. IT APPEARS TH AT THE AO WAS CARRIED AWAY BY THE STATEMENT OF SHRI MANOJ AGARWAL WHI CH INDICATED THAT ACCOMMODATION ENTRIES WERE GIVEN TO CER TAIN ASSESSES BUT IT HAS NOT BEEN BROUGHT OUT BY THE AO IN HIS ASSESSMENT ORDER THAT SHRI MANOJ AGARWAL'S STATEMENT D IRECTLY IMPLICATED THE ASSESSEE ALSO. MOREOVER, THE ASSESSM ENT ORDER NOWHERE SPEAKS THAT MR. MANOJ AGARWAL HAD STATED THE NAME OF THE ASSESSEE ALSO IN HIS STATEMENT OR HE HAD STATED THAT CASH WAS GIVEN TO HIM BY THE ASSESSEE IN LIEU OF CHEQUES RECEIVED B Y HIM. THE RECEIPT OF CHEQUES BY THE ASSESSEE FROM M/S FRIENDS PORTFOLIO PVT LTD WAS NOT THE CONCLUSIVE PROOF THAT THESE WERE AGAINST THE CASH TRANSACTIONS BECAUSE THERE ARE NO EVIDENCES FOR PAYME NT OF CASH BY THE ASSESSEE. ALL THESE GO TO PROVE THAT NOT EVEN AN IOTA OF EVIDENCE HAS BEEN BROUGHT OUT ON RECORD TO PROVE THAT THE TRANSACTION OF CAPITAL GAIN WAS BOGUS AND THAT THE AMOUN T OF RS.76,00,000/- AND RS. 40,12,000/- FOR PURCHASE AND SALE OF SHARES WAS PAID IN CASH SO AS TO RECEIVE IT BACK THROUGH C HEQUES IN THE 22 GARB OF SALE PROCEEDS OF THE SHARES. BECAUSE OF THES E REASONS THE ADDITION OF RS.76,00,000 AND RS.40,12,000/- WAS RIG HTLY DELETED AND SIMILARLY THE ADDITION OF RS. 24,360/- MADE BY THE AO WAS ON SURMISES, TREATING THE PAYMENT OF BROKERAGE AND SERV ICE TAX ON PURCHASE AND SALE OF SHARES AS UNACCOUNTED CASH WITH OUT BRINGING OUT ANY EVIDENCE ON RECORD WAS ALSO RIGHTLY DELETED B Y THE LD. CIT(A), WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE ACTION OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND DISMISS THE GROUND NOS. 1 TO 3 RAISED BY THE REVENUE. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STAN DS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/04/2017. SD/- SD/- (L.P. SAHU) (H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 03/04/2017 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES