Prasad D Patil (HUF), Pune v. ACIT, Pune

ITA 1417/PUN/2012 | 2006-2007
Pronouncement Date: 29-07-2013 | Result: Allowed

Appeal Details

RSA Number 141724514 RSA 2012
Assessee PAN AFEPP7675K
Bench Pune
Appeal Number ITA 1417/PUN/2012
Duration Of Justice 1 year(s) 1 month(s) 7 day(s)
Appellant Prasad D Patil (HUF), Pune
Respondent ACIT, Pune
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2013
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 29-07-2013
Assessment Year 2006-2007
Appeal Filed On 22-06-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B PUNE BEFORE: SHRI G. S. PANNU ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR JUDICIAL MEMBER ITA NO S . 14 07 14 08 & 14 09 / P N/ 20 12 ASSESSMENT YEAR S : 2004 - 05 2005 - 06 & 2006 - 07 S MT. SMITA P. PATIL B - 14/15 ASHOKA HOUSING SOCIETY 3 NAYLORE ROAD KOREGAON PARK PUNE VS. ACIT CENTRAL CIRCLE 2(1) PUNE (APPELLANT) (RESPONDENT) PAN NO. A FEPP7675K ITA NO S . 141 0 141 1 & 14 1 2 /PN/20 12 ASSESSMENT YEAR S : 2004 - 05 2005 - 06 & 2006 - 07 MR. SOMNATH P. PATIL B - 14/15 ASHOKA HOUSING SOCIETY 3 NAYLORE ROAD KOREGAON PARK PUNE VS. ACIT CENTRAL CIRCLE 2(1) PUNE (APPELLANT) (RESPONDENT) PAN NO. A HRPP3186G ITA NO S . 141 3 141 4 & 14 15 /PN/20 12 ASSESSMENT YEAR S : 2005 - 06 & 2006 - 07 MR. PRASAD D. PATIL B - 14/15 ASHOKA HOUSING SOCIETY 3 NAYLORE ROAD KOREGAON PARK PUNE VS. ACIT CENTRAL CIRCLE 2(1) PUNE (APPELLANT) (RESPONDENT) PAN NO. AB FPP2109K ITA NO S . 141 6 & 14 17 /PN/20 12 ASSESSMENT YEAR S : 2005 - 06 & 2006 - 07 PRA SAD D. PATIL (HUF) B - 14/15 ASHOKA HOUSING SOCIETY 3 NAYLORE ROAD KOREGAON PARK PUNE VS. ACIT CENTRAL CIRCLE 2(1) PUNE (APPELLANT) (RESPONDENT) PAN NO. AB GPP3257R ITA NO S . 1418 1419 & 1420 /PN/20 12 ASSESSMENT YEAR S : 2004 - 05 2005 - 06 & 2006 - 07 BHAGYASHREE P. PATIL B - 14/15 ASHOKA HOUSING SOCIETY 3 NAYLORE ROAD KOREGAON PARK PUNE VS. ACIT CENTRAL CIRCLE 2(1) PUNE (APPELLANT) (RESPONDENT) PAN NO. ABQPP3275R 2 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE ITA NO . 142 1 /PN/20 12 ASSESSMENT YEAR S : 2006 - 07 MR. YASHRAJ P. PATIL B - 14/15 ASHOKA HOUSING SOCIETY 3 NAYLORE ROAD KOREGAON PARK PUNE VS. ACIT CENTRAL CIRCLE 2(1) PUNE (APPELLANT) (RESPONDENT) PAN NO. AB GPP3257R APPELLANT BY: DR. SUNIL PATHAK / SHRI NIKHIL PATHAK RESPONDENT BY: SHRI S.K. SINGH & SHRI Y.K. BHA SKAR DATE OF HEARING : 17 - 05 - 2013 DATE OF PRONOUNCEMENT : 29 - 07 - 2013 ORDER P ER R.S. PADVEKAR JM : - THIS BATCH OF FIFTEEN APPEALS ARE FILED BY THE DIFFERENT ASSESSEES W H O ARE THE FAMILY MEMBERS CLOSELY RELATED TO EACH OTHER. FACTS AS WELL AS ISSUES ARISING FROM THE GROUND S TAKEN BY THESE ASSESSEES ARE COMMON AND IDENTICAL HENCE THESE APPEALS ARE DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. ALL THE ASSESSEES HAVE TAKEN THE MULTIPLE GROUNDS WHICH ARE IDENTICAL SAVE T HE FIGURES MENTIONED THEREIN. AFTER ANALYZING THE GROUNDS TAKEN BY THESE ASSESSEES IN ALL THE ASSESSMENT YEARS THE FOLLOWING ISSUES HAVE EMERGED FOR OUR CONSIDERATION : (I) WHETHER THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFI CER BY TREATING THE SALE PROCEEDS RECEIVED ON SALE OF SHARES AS UNACCOUNTED INCOME OF THESE ASSESSEES WITHOUT APPRECIATING THAT NO INCRIMINATING EVIDENCE WAS FOUND IN THE COURSE OF SEARCH RELATING TO SAID ADDITION MADE AND HENCE AS THE ASSESSMENT WAS COMP LETED U/S. 153A T HE SAID ADDITIONS ARE NOT WARRANTED . (II) WHETHER THE LD. CIT(A) ERRED IN HOLDING THAT THE SALE PROCEEDS ON THE SALE OF THE SCRIPT WHICH ARE MENTIONED IN THE RESPECTIVE ASSESSMENT ORDER WAS TAXABLE AS UNACCOUNTED INCOME AS AGAINST CAPITAL GAIN OFFERED BY THE ASSESSEE . 3 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE (III) WHETHER THE LD. CIT(A) IS ERRED IN HOLDING THAT THERE WAS MANIPULATION IN THE PURCHASE AND SALE PR ICES OF THE SHARES WHICH ARE SOLD BY THE ASSESSEE AND DECLARED THE CAPITAL GAIN . (IV) WHETHER THE LD. CIT(A) ERRED IN CON FIRMING THE ADDITION ON ACCOUNT OF ALLEGED PAYMENT OF THE COMMISSION @ 6% FOR ARRANGING THE BOGUS TRANSACTIONS OF THE SHARES. 3. OUT OF THESE FIFTEEN CASES THE CASE OF SMT. BHAGYASHREE P. PATIL IS A LEAD CASE AS SUBMITTED BY BOTH THE PARTIES AND HENCE WE ARE NARRATING THE FACTS FROM THE ASSESSMENT FRAMED IN THE CASE OF THE SAID ASSESSEE S . 4 . THE FACTS WHICH ARE REVEALED FROM THE RECORD AS UNDER. A SEARCH AND SEIZURE OPERATION U/S. 153 OF THE INCOME - TAX ACT WAS CARRIED OUT ON 17 - 03 - 2006 AGAINST THESE ASSESSEES. ALL THESE ASSESSEES WERE ISSUED NOTICES U/S. 153A ON 01 - 03 - 2007 . T HE ASSESSING OFFICER HAS NOTED THAT IN THE COURSE OF THE SEARCH OPERATION CERTAIN INCRIMINATING EVIDENCES WERE SEIZED/ IMPOUNDED FROM WHICH IT WAS SUGGEST ED THAT THE LONG TERM C APITAL GAIN S DECLARED BY THE ASSESSEE ON THE SALE OF THE SHARES ARE NOT GENUINE AND THE SHARE TRANSACTIONS ARE BASED ON THE FICTITIOUS DOCUMENTS WHICH WERE CREATED BY THESE ASSESSEES. AS NOTED BY THE ASSESSING OFFICER EVIDENCE S WERE COLLECTED FROM THE STO CK EXCHANGES AND BROKERS . I T APPEARS THAT THE ASSESSING OFFICER ASKED THE ASSESSEE S FOR PRODUCING THE BROKERS WHO SAID TO HAVE DONE TRANSACTED IN THE SHARES FOR THE ASSESSEE. THE ASSESSING OFFICER ISSU ED THE NOTICES FROM TIME TO TIME AND THE ASSESSEE S HA VE FURNISHED THE EXPLANATIONS. IT IS STATED IN THE ASSESSMENT ORDER THAT THE ASSESSEE GROUP AS A WHOLE SYSTEMATICALLY CREATED DOCUMENTS/CORRESPONDENCE IN ORDER TO GIVE COLOUR OF GENUINE LONG TERM GAINS TO THOSE TRANSACTIONS WHICH ARE OTHERWISE FAKE TRANS ACTIONS BY SHOWING PURCHASE AND SALE OF VARIOUS SHARES. THE ASSESSING OFFICER ALSO STATED IN THE ASSESSMENT ORDER THAT SHOWING LONG TERM CAPITAL GAIN WAS BENEFICIAL TO THESE ASSESSEES AS EITHER THERE WAS 4 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE NO TAX OR TAX RATE OF 10% ON THE L . T . C . G . DEPENDING UPON THE RELEVANT PERIOD. 5 . THESE ASSESSEES HAVE ENTERED INTO THE TRANSACTIONS FOR THE PURCHASE AND SALES OF THE SHARES WHICH ARE CALLED A PENNY S TOCKS ARE SUMMARIZED AS UNDER: A). NAME: MRS. BHAGYASHREE P PATIL SR. NO. ASST. YEAR NAME OF SCRIP DATE O F PURCHASE NO. OF SHARES BROKERS NAME FROM WHOM SHARES ARE PURCHASED DATE OF SALE NO. OF SHARES BROKERS NAME FROM WHOM SHARES ARE SOLD 1 2 3 4 5 6 2004 - 05 2005 - 06 2005 - 06 2005 - 06 2005 - 06 2006 - 07 G TECH INFO LTD. FAST TRACK ENTERTAINMENT LTD. TALENT INFO LTD SANGOTRI CONSTRUCTION NIHARIKA IND. LTD PRRANETTA IND LTD 05.04.2002 06.05.2002 06.06.2002 16 300 14 500 10 500 T.H . VAKIL 27.12.2003 01.01.2004 23.02.2004 20 000 14 500 6 800 RUCHIRAJ INVESTMENTS 80000 SHARES SOLD THROUGH KNC SHARES & SECURITIES 20000 SHARES SOLD THROUGH DPS SHARES & SECURITIES 20000 SHARES SOLD THROUGH VIJAY BHAGWANDAS & CO & BALANCE 109000 SHAR ES SOLD THROUGH IL & FS INVESTMENT MAHASAGAR SECURITIES BUBNA STOCK BROKING BUBNA STOCK BROKING VRAJ FINANCE TOTAL 41 300 41 300 10.04.2003 16.04.2003 06.05.2003 22.05.2003 30.05.2003 03.06.2003 40 000 40 000 20 000 43 000 66 000 20 000 120000 SHRES PURCHASED FROM VIJAY BHAGWANDAS & CO. AND BALANCE 109000 SHARES PURCHASED FROM DPS SHARES AND SECURITIES 17.06.2004 18.06.2004 21.06.2004 22.09.2004 11.10.2004 16.12.2004 17.12.2004 21.12.2004 22.12.2004 23.12.2004 24.12.2004 2 7.12.2004 28.12.2004 29.12.2004 40 000 30 000 10 000 20 000 20 000 10 000 10 000 10 000 10 000 5 000 15 000 15 000 20 000 14 000 TOTAL 229 000 229 000 24.04.2003 28.04.2003 10 000 11 000 MAHASAGAR SECURITIES 17.06.2004 07.07.2004 16.07.2004 7 0 00 1 800 12 200 TOTAL 21 000 21 000 13.06.2003 09.06.2003 22 000 12 000 BUBNA STOCK BROKING BUBNA STOCK BROKING 18.06.2004 23.06.2004 15.07.2004 21.07.2004 22.07.2004 10 000 12 000 2 000 6 000 4 000 TOTAL 12 000 12 000 07.04.2004 08.04.2004 16.04.2004 300 000 170 000 280 000 VIJAY BHAGWANDAS & CO 27.05.2005 30.05.2005 31.05.2005 160 000 4000 000 190 000 TOTAL 750 000 750 000 5 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE B). NAME: PRASAD D PATIL SR. NO. ASST. YEAR NAM E OF SCRIP DATE OF PURCHASE NO. OF SHARES BROKERS NAME FROM WHOM SHARES ARE PURCHASED DATE OF SALE NO. OF SHARES BROKERS NAME FROM WHOM SHARES ARE SOLD 1 2 2004 - 05 2006 - 07 SANGOTRI CONSTRUCTION PRRANETTA IND LTD 04.06.2003 13.06.2003 1 000 21 000 BUBNA STOCK BROKING 08.06.2004 22.06.2004 1 000 21 000 BUBNA STOCK BROKING VRAJ FINANCE TOTAL 22 000 22 000 07.04.2004 13.04.2004 15.04.2004 500 000 610 000 630 000 DPS SHARES AND S ECURITIES 16.06.2005 17.06.2005 20.06.2005 21.06.2005 07.07.2005 08.07.2005 11.07.2005 3 0 0 000 300 000 250 000 150 000 200 000 300 000 240 000 TOTAL 1 740 000 1 740 000 C). NAME : M S. SMITA PATIL SR. N ASST. YEA R NAME OF THE SCRIP DATE OF PURCHA SE NO. OF SHARES BROKER'S NAME FROM WHOM SHARES ARE PURCHASED DATE OF SALE NO. OF SHARES BROKER'S NAME FROM WHOM SHARES ARE SOLD 1 2 3 4 5 6 2004 - 05 2005 - 06 2005 - 06 2005 - 06 2005 - 06 2006 - 07 G TECH INFO LTD. FAST TRACK ENTERTAINMENT LTD. TALENT INFO LTD SANGOTRI CONSTRUCTION NIHARIKA IND. LTD PRRANETTA IND LTD 05.04.2002 08.04.2002 16 000 13 000 T.H. VAKIL 13.01.2004 29 000 ACTION FINANCIAL SERVICES L TD. 80 000 SHARES SOLD THROUGH DPS SHARES & SECURITIES 1 7500 SHARES SOLD THROUGH ACTION FINANCE SERVICES & BALANCE 9 1000 SHARES SOLD THROUGH IL & FS INVESTM ENT MAHASAGAR SECURITIES BUBNA STOCK BROKING | BUBNA STOCK BROKING VRAJ FINANCE TOTAL 29 000 29000 24.04.2003 14.05.2003 20.05.2003 22.05.2003 03.06.2003 04.06.2003 35 200 24 800 50 000 41 000 29 500 8 000 97500 SHARES PURCHASED FROM VIJAY BHAGWANDAS & CO. AND BALANCE 91000 SHARES PURCHASED FROM DP S SHARES AND SECURITIES 02.06.2004 06.07.2004 13.09.2004 10.12.2004 14.12.2004 16.12.2004 18.12.2004 21.12.2004 22.12.2004 60000 20000 17500 31000 25000 3000 15000 7000 10000 TOTAL 188 500 188 500 24.04.2003 28.04.2003 05.08.2003 10 000 12 000 18 000 MAHASAGAR SECURITIES 16.06.2004 15.12.2004 22 000 18 000 TOTAL TOTAL 40 000 40 000 11.06.2003 20.06.2003 25.06.2003 10.06.2003 7 000 8 000 7 000 22 000 10 000 BUBNA STOCK BROKING BUBNA STOCK BROKING 0 2.07.2004 08.07.2004 13.07.2004 19.07.2004 20.07.2004 20 000 2 000 22 000 2 000 6 000 2 000 TOTAL TOTAL 10 000 10 000 06.04.2004 08.04.2004 13.04.2004 300 000 250 000 300 000 VIJAY BHAGWANDAS & CO. 12.05.2005 23.05.2005 27.0 5.2005 580 000 230 000 40 000 TOTAL TOTAL 850 000 850 000 6 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE D). NAME : SOMNATH PRASAD PATIL SR. NC ASST. YEA NAME OF THE SCRIP DATE OF PURCHA. NO. OF SHARES BROKER'S NAME FROM WHOM SHARES ARE PURCHASED DATE OF SA LE NO. OF SHARES BROKER'S NAME FROM WHOM SHARES SHARES ARE SOLD 1 2 3 4 5 6 2004 - 05 2005 - 06 2005 - 06 2005 - 06 2005 - 06 2006 - 07 G TECH INFO LTD. FAST TRACK ENTERTAIN MENT LTD. TALENT INFO LTD SANGOTRI CONSTUCTI ON NIHARIKA IND. LTD PRRANETTA IND LTD 05.04.2002 10 800 T.H. VAKIL 01.04.2003 21 500 RUCHIRAJ INVESTMENTS 80000 SHARES SOLD THROUGH KNC SHARES & SECURITI ES 17500 SHARES SOLD THROUGH RUCHIRAJ INVESTMENTS & BALANCE 94000 SHARES SOLD THROUGH IL & FS INVESTM E NT MAHASAGAR SECURITIES BUBNA STOCK BROKING BUBNA STOCK BROKING VRAJ FINANCE 22.05.2002 10 700 TOTAL 21 500 290 00 16.04.2003 19.05.2003 22.05.2003 23.05.2003 03.06.2003 08.07.2003 15.07.2003 25 000 50 000 44 000 35 000 20 000 9 500 8 000 07.06.2004 08.06.2004 09.06.2004 10.06.2004 14.06.2004 06.09.2004 07.09.2004 30.12.2004 31.12.2004 03.01.2005 04.01. 2005 06.01.2005 07.01.2005 10.07.2005 20000 20000 1 0000 10000 20000 6000 11500 20000 10000 7500 16500 15000 10000 15000 97500 SHARES PURCHASED FROM VIJAY BHAGWANDAS & CO. AND BALANCE 94000 SHARES PURCHASED FROM DPS SHARES AND SECURITIES TOTAL 191 500 191 500 24.04.2003 10 000 M AHASAGAR SECURITIES 16.06.2004 21 500 28.04.2003 11 500 15.12.2004 18 000 05.08.2003 18 000 TOTAL 39 500 39 500 23.04.2003 2 000 BUBNA STOCK BROKING 22.06.2004 20 000 11.06.2003 20 000 08.07.2004 2 000 TOTAL 22 000 22 000 11.06.2003 9 500 BUBNA STOCK BROKING 15.07.2004 2 000 22.07.2004 6 000 23.07.2004 1 500 TOTAL 9 500 9 500 12.04.2004 311 000 DPS SHARES & SECURI TIES 19.04.2005 250 000 08.04.2004 289 000 25.04.2005 150 000 26.04.2005 200 000 TOTAL 600 000 600 000 E). NAME : PRASAD D PATIL (HUF) SR. NC ASST. Y EAR NAME OF THE SCRIP DATE OF PURCHA NO. OF SHARES BROKER'S NAME FROM WHOM SHARES ARE PURCHASED DATE OF SALE NO. OF SHARES BROKER'S NAME FROM WHOM NO. SCRIP PURCHASE SHARES SHARES ARE SOLD 1 2005 - 06 FAST TRACK ENTERTAINMENT LTD. PRRANETTA IND LTD 11.11.2003 12 500 DPS SHARES & SECUR 20.01.2005 5500 IL & FS INVEST M E NT 110000 SHARES SOLD THROUGH IL & FS INVEST M E NT & BALANCE 640000 SHARES SOLD THROUGH KARVY STOCK BROKING 19.12.2003 13 000 27.01.2005 8000 28.01.2005 10000 01.02.2005 2000 2 2006 - 07 TOTAL 25 500 25 500 21.04.2004 21.04.2004 325 00 0 DPS SHARES & SECURI TIES 16.09.2005 19.09.2005 20.09.2005 21.09.2005 22.09.2005 23.09.2005 26.09.2005 14.10.2005 17.10.2005 18.10.2005 25.10.2005 03.01.2006 04.01.2006 05.01.2006 09.01.2006 12.01.2006 25 000 75 000 35 000 105 000 35 000 80 000 45 000 4 5 000 45 000 50 000 50 000 40 000 30 000 30 000 30 000 30 000 22.04.2004 425 000 TOTAL 750 000 750 000 7 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE F). NAME : YASHRAJ PRASAD PATIL SR. N O. ASST. YEA R NAME OF THE SCRIP DATE OF PURCHA SE NO. OF SHARES BROKER'S NAME FROM WHOM SHARES ARE PURCHASED DATE OF SALE NO. OF SHARES BROKER'S NAME FROM WHOM SHARES ARE SOLD 1 2006 - 07 PRRANETTA IND LTD 07.04.2004 21.04.2004 22.04.2004 630 000 270 000 479 101 DPS SHARES & SECURI TIES 08.08.2005 10.08.2005 11.08.2005 04.10.2005 05.10.2005 06.10.2005 07.10.2005 10.10.2005 11.10.200 5 13.10.2005 14.10.2005 17.10.2005 18.10.2005 20.10.2005 25.10.2005 03.01.2006 04.01.2006 05.01.2006 09.01.2006 12.01.2006 13.01.2006 250 000 300 000 80 000 50 000 50 000 30 000 40 000 100 000 30 000 45 000 45 000 50 000 35 000 25 000 25 000 25 000 30 000 40 000 30 000 30 000 69 101 630000 SHARES SOLD THROUGH VRAJ FINANCE 95000 SHARES SOLD THROUGH IL & FS INVESTMENT & BALANCE 654101 SHARES SOLD THROUGH KAR VY STOCK BROKING TOTAL 1 379 101 1 379 101 6 . ON THE BASIS OF THE EVIDENCE S FOUND AND ENQUIR IES MADE AS NOTED BY THE ASSESSING OFFICER THE FOLLOWING FACTS WERE REVEALED : (I) T HE PECULIAR PATTERN WAS EMERGED THAT THE SHARES H AVE B EEN PURCHASE D AT A NOMINAL PRICE BUT HA VE BEEN SOLD AT A VERY HIGH PRICE WITHIN A SHORT TIME . (II) T HE RISE SHOWN IN THE VALUE OF THE SHARES WAS PHENOMENAL WHICH DID NOT MEET THE EYE PARTICULARLY IN SHARP CONTRAST TO THE MARKET AND FINANCIAL STANDING OF THOSE COMPANIES . (III) THE DEMAT ACCOUNT HA S BE EN OPENED JUST BEFORE THE SALE OF SHARES OF THE ABOVE SCRIP AND SHARES HAVE BEEN TRANSFERRED TO THE DEMAT ACCOUNT SHORTLY BEFORE THE IR SALE. SO FAR AS INTERVENING PERIOD THAT IS PERIOD THE DATE OF PURCHASE OF THE ABOVE SHARES AND THE DATE OF DEMATERIAL IZATION NOTHING IS SHOWN . (IV) T HERE IS NO PROOF OF DELIVERY OF THE SHARES ALLEGEDLY PURCHASE BY THESE ASSESSEES . (V) T HERE IS NO EVIDENCE THAT IN THE INTERVENING PERIOD THE SHARES WERE EVER PHYSICALLY TRANSFERRED IN THE NAME OF THE ASSESSEE BEFORE DEMATER I A LIZATION . 8 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE (VI) E VEN THOUGH THE BROKERS WERE SITUATED AT KOLKATA AND AHMEDABAD THE PAYMENTS OF THE ALLEGED SALE THEREOF WERE RECEIVED BY MEANS OF DD S FROM BOMBAY . (VII) F ULL - FLEDGED ENQUIR IES WERE LAUNCHED BY THE BOMBAY STOCK EXCHANGE (BSE) AND SECURIT IES AND EXCHANGE BOARD OF INDIA (SEBI) INTO THE PURCHASE AND SALE OF THOSE SHARES AND IT WAS FOUND BY THEM THAT THE PRICES OF THE SHARES WERE MANIPULATED. THE ASSESSING OFFICER HAS NOTED THAT SEBI SUS PENDED SOME OF THE BROKERS INCLUDING THE BROKERS VIJAY BHA G WANDAS AND CO. DPS SHARES AND SECURITIES PVT. LTD AND T.H. VAKIL. IT APPEARS THAT ASSESSES INITIALLY TOOK THE STAND THAT AS NOTED BY THE ASSESSING OFFICER ALL THE SHARES IN RESPECT OF WHICH LONG TERM C APITAL GAIN HAS BEEN DECLARED W ERE PURCHASE D THROUG H THE STOCK EXCHANGE AND IT WAS DENIED THAT THERE WAS ANY OFF - MARKET TRANSACTION S . THE ASSESSING OFFICER MADE THE ENQUIRY WITH THE STOCK EXCHANGES AND I T WAS CONFIRMED BY THE SAID E XCHANGES THAT THE PURCHASE OF THE SHARES WERE NOT DONE ON - LINE. INDEPENDE NTLY LETTERS WERE ALSO ADDRESSED BY THE ASSESSING OFFICER TO THE BOMBAY STOCK EXCHANGE (BSE) AHMEDABAD STOCK EXCHANGE AND KOLKATA STOCK EXCHANGE AND THE SAID LETTERS ARE MADE ANNEXURES TO THE ASSESSMENT ORDER S . THE ASSESSING OFFICER ISSUED SUMMONS TO T HE BROKERS MORE PARTICULARLY TO M/S. VIJAY BHAGWANDAS & CO. DPS SHARES & SECURITIES PVT. LTD. AND M/S. MAH ASAGAR SECURITIES LTD. T HEIR STATEMENT S WERE RECORDED AND THE BROKERS DENIED HAVING SOLD THE SHARES TO THESE ASSESSEES AS NOTED IN PARA NO. 3.5 OF T HE ASSESSMENT ORDER IN THE CASE OF SMT. BHAGYASHREE PATIL. IT APPEARS THAT THE ASSESSEE S TOOK THE STAND THAT THE BROKERS HAVE GIVEN STATEMENT AGAINST THE ASSESSEE S TO SAVE THEIR OWN SKIN AND ALL THESE ASSESSEES REQUESTED FOR OPPORTUNITY TO CROSS EXAMINE T HOSE BROKERS. THE ASSESSING OFFICER DENIED THE REQUEST OF THE ASSESSEE S TO CROSS EXAMINE THE BROKER BY EXPRESSING HIS OPINION THAT THERE IS NOTHING RELEVANT IN THE ABOVE AS ALL THE STOCK EXCHANGES I.E. KOLKATA AHMEDABAD AND MUMBAI HAVE 9 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE CONFIRMED THAT N ONE OF THE SHARES HAVE BEEN PURCHASED IN ON - LINE TRADING. 6 .1 THE ASSESSING OFFICER ALSO RAISED A QUESTION ON THE CONTRACT NOTES ISSUED BY THE BROKERS AND IN HIS OPINION WHEN THE TRANSACTIONS ARE NOT DONE THROUGH THE STOCK EXCHANGES THEN HOW THOSE CONT RACT NOTES WERE ISSUED BY THE BROKERS. IN THE OPINION OF THE ASSESSING OFFICER AS THESE ASSESSEES HAVE DECLARED THE CAPITAL GAINS TO THE EXTENT OF RS. 11 65 61 434/ - THE ONUS IS ON THESE ASSESSEES TO PROVE THAT THE PURCHASE AND SALE TRANSACTION OF THE SHA RES ARE GENUINE . T HEREAFTER THE ASSESSING OFFICER PROCEEDED TO EXAMINE THE SCRIP - WISE TRANSACTION IN ALL THE CASE OF THE ASSESSEES. THE ASSESSING OFFICER PLACED HIS RELIANCE PARTICULARLY ON THE DENIAL MADE BY THE BROKERS FOR DEALING WITH THE SHARES ON BE HALF OF THESE ASSESSEES MORE PARTICULARLY M/S. VIJAY BHAGWANDAS & CO. DPS SHARES & SECURITIES PVT. LTD. AND M/S. MAHASAGAR SECURITIES LTD. 7 . THE ASSESSING OFFICER ALSO TOOK THE COGNIZANCE OF THE FACT THAT INVESTIGATION DEPARTMENT OF SECURITIES AND EXC HANGE BOARD OF INDIA (SEBI) IN THE CONTEXT OF THE IRREGULARITIES INVOLVING THE SCRIP OF FAST TRAC K ENTERTAINMENT PVT. LTD. HAS ALSO QUESTIONED THESE ASSESSEES. THE ASSESSING OFFICER PLACED RELIANCE ALSO ON THE INVESTIGATION MADE BY THE BOMBAY STOCK EXCHAN GE (BSE) IN THE SCRIP OF FAST TRAC K ENTERTAINMENT LTD . G - TECH INFO AND PRANNETA INDUSTRIES LTD. THE ASSESSING OFFICER HAS OBSERVED THAT IN THE CASE OF FAST TRACK ENTERTAINMENT LTD. IT WAS REVEALED BY THE BSE THAT SAID COMPANY HAS DECLARED VERY LOW INCOME OF RS.2.1 LACS AND MARGINAL NET PROFIT OF RS.1.1 LACS DURING THE F.Y. 2003 - 04. HOWEVER THE PRICE OF THE SAID SCRIP INCREASED FROM RS.13.16 TO RS.33.30 (153%) AND THE PRICE CONTINUED TO INCREASE AND REACH RS.60 DURING THE RELEVANT PERIOD I.E. 25 TH MARCH 2004 TO 30 TH JUNE 2004. IT IS ASSERTED BY THE ASSESSING OFFICER THAT DPS SHARES AND SECURITIES LTD. VIJAY BHAGWANDAS AND CO. ACTION FINANCIAL SERVICES AND OTHERS WERE 10 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE FOUND TO BE ACTING IN CONCERT WITH CERTAIN ENTITIES AND PROMOTERS IN OFF MARKET TRAN SACTI O NS IN THE SCRIP. THE ASSESSING OFFICER HAS ALSO NOTED THAT THE CLIENTS CONNECTED TO THE BROKERS ACCOUNTED FOR 71% OF THE TOTAL BUY ORDERS DURING THE PERIOD FROM 01 - 01 - 2004 TO 24 - 03 - 2004. THE ASSE SSING OFFICER HAS NOTED THAT IN SPITE OF THE SAID DEAL INGS NO DISCLOSURES WERE FILED BY THE COMPANY FAST TRACK ENTERTAINMENT LTD. UNDER THE SEBI REGULATIONS. THE ASSESSING OFFICER HAS NOTED THAT IT WAS REPORTED THAT ACTI O N WAS INITIATED AGAINST THE SAID BROKERS FOR ACTING IN CONCERT WITH PROMOTERS/CONNECTED ENTITIES AND ENTERING INTO CIRCULAR DEALS VIA MARKET AND OFF - MARKET TRANSACTIONS. IN A LL THESE TRANSACTIONS THE CHARGE OF NON - GENUINE OF TRANSACTION IS BASED ON THE INVESTIGATION CARRIED OUT BY BSE IN RESPECT OF TRADING IN SHARES OF FAST TRACK ENTERTAINM ENT LTD. AND P RANNETA INDUSTRIES BY M/S. VIJAY BHAGWANDAS SHAH DPS SHARES AND SECURITIES LTD. WHICH ALLEGEDLY MADE MAJOR ROLE IN INFLUENCING THE PRICE OF THOSE SHARES/SCRIPS. SAME WAY THE ASSESSING OFFICER HAS DISCUSSED EACH SCRIP IN THE ASSESSMENT ORDER TO MAKE OUT A CASE THAT ALL T HESE COMPANIES WERE NOT HAVING THE GOOD FINANCIAL STANDING AND IN RESPECT OF ALL INVESTEE COMPANIES THERE WAS RISE IN PRICES OF THE SHARES IN SHORT SPA N WHICH WAS UNBELIEVABLE. THE ASSESSING OFFICER THEREFORE RELYING ON THE STATEMENTS OF THE BROKERS DENYING THE TRANSACTIONS FACTS REPORTED BY MA GADH STOCK EXCHANGE BOMBAY STOCK EXCHANGE AND NATIONAL STOCK EXCHANGE CONCLUDED THAT THESE ASSESSEE S B OOKED BOGUS LONG TERM CAPITAL GAIN S (L . T . C . G . ) AND INTRODUCE D UNACCOUNTED INCOME INTO THE BOOKS/B ANK ACCOUNT S IN THE GUISE OF LONG TERM CAPITAL GAINS AND MADE THE ADDITION ON THE CHARGE OF FICTITIOUS PURCHASES/ SALE S OF THE SHARES INCLUSIVE OF BROKERAGE @ 6%. THE WORK ING OF THE BROKERAGE @ 6% HAS NOT BEEN SEPARATELY DISCUSSED. THE A SSESSING OFFICER MADE THE ADDITIONS OF THE ENTIRE SALE PROCEEDS ON SHARES SHOWN BY THE ASSESSEES TREATING THE SAME AS UNDISCLOSED INCOME. ALL THESE ASSESSEES CARRIED THE ISSUES BEFORE THE LD. CIT(A). 11 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE 8 . THE LD. CIT(A) DISCUSSED EACH AND EVERY SCRIP IN H IS DETAIL ED ORDERS. THE LD. CIT(A) DISCUSSED THE CONTRADICTION IN THE CONTRACT NOTES ISSUED BY THE BROKERS. THE LD. CIT(A) HAS OBSERVED THAT THE ALLEGEDLY CONTRACT NOTES ISSUED BY THE BROKERS GIVES THE IMPRESSION THAT THE SHARES TRANSACTIONS ARE ROUTED T HROUGH THE STOCK EXCHANGE WHEN IN REALITY NO TRANSACTIONS WERE CARRIED OUT FROM THE STOCK EXCHANGES. THE LD. CIT(A) ALSO REFERRED TO THE LETTER GIVEN BY ONE OF THE ASSESSEE TO SEBI DATED 06 - 10 - 2005 IN WHICH IT WAS CLAIMED BY HER THAT SHE HAS NOT CARRIED O UT ANY OF F - MARKET TRANSACTIONS AND THE SAID LETTER IS IN CONTRADICTION TO THE STAND OF THE ASSESSEE BEFORE THE ASSESSING OFFICER. THE LD. CIT(A) ALSO REFERRED TO THE STATEMENT GIVEN BY SHRI P.D. PATIL ONE OF THE ASSESSEE ON 18 - 03 - 2006 IN WHICH HE HAD ADM ITTED THAT THE SHARES OF FAST TRACKS WERE BROUGHT THROUGH STOCK EXCHANGES WHICH IS ALSO NO T CORRECT. THE LD. CIT(A) IS OF THE OPINION THAT ALL THESE ASSESSEES HAVE CREATED DOCUMENTS TO GIVE COLOUR OF GENUINENESS TO THE BOGUS TRANSACTIONS. IN THE OPINION OF THE CIT(A) THE DOCUMENTS PRODUCED BY THE ASSESSE S ARE NOT GENUINE AND THEREFORE IT WAS IMPERATIVE ON THE PART OF THESE ASSESSEES TO PRODUCE THE BROKERS TO JUSTIFY CLAIM OF GENUINENESS OF THEIR TRANSACTIONS. ACCORDING TO THE LD. CIT(A) THESE ASSESSEES WERE DUTY BOUND TO PRODUCE THE BROKERS AS THE ASSESSEES HAVE RELIED ON THE CONTRACT NOTES ISSUED BY THE BROKERS AND HENCE BURDEN WAS ON THESE ASSESSEES TO DISCHARGE BY SHOWING THAT IN FACT THE CONTRACT NOTES REFLECTS GENUINE TRANSACTIONS. AS THESE ASSESS EES FAILED TO PRODUCE THE BROKERS THE LD. CIT(A) CONCLUDED THAT THE BROKERS NOTES PRODUCED BY THESE ASSESSEES ARE NOT GENUINE AS THE BROKERS HAVE ALREADY DENIED IN THEIR STATEMENT HAVING ISSUED THOSE CONTRACT NOTES WHICH ARE AVAILABLE ON RECORD. 9 . THE LD. CIT(A) FURTHER OBSERVED THAT ONE OF THE ASSESSEE SHRI P.D. PATIL IS INVESTING IN STOCK S MARKET FROM 1996 AND ACCORDINGLY HE MUST BE FULLY AWARE OF THE DIFFERENCE BETWEEN A TRANSACTION ROUTED THROUGH STOCK EXCHANGE AND OFF - MARKET TRANSACTION. THE L D. CIT(A) FURTHER 12 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE NOTE D THAT WHEN THE BROKERS ADMITTED THE TRANSACTIONS WHICH WERE NOT ROUTED TH R OUGH THE STOCK EXCHANGE THEN ONLY THESE ASSESSEES TOOK THE STAND THAT THE TRANSACTIONS WERE CARRIED ON THROUGH THE OFF - MARKET. THE LD. CIT(A) ALSO NOTED THAT THE ASSESSEE S HA VE NOT BEEN ABLE TO POINT OUT AS TO WHY THE CONTRACT NOTE S WERE ISSUE D WHICH GAVE THE IMPRESSION THAT THE TRANSACTIONS WERE ROUTED THROUGH STOCK EXCHANGE BUT IN REALITY THE TRANSACTIONS WERE OFF - MARKET TRANSACTI O NS. ACCORDING TO THE LD. C IT(A) THE OFF - MARKET TRANSACTIONS ARE CONTRACTUAL TRANSACTI O NS BETWEEN TWO PRIVATE INDIVIDUALS AND THERE ARE CERTAIN FORMALITIES WHICH ARE TO BE COMPLETED W HEN THE OFF - MARKET TRANSACTIONS ARE UNDERTAKEN. THE LD. CIT(A) HAS NOTED THAT THE OFF - MARKET TRANS ACTIONS ARE SUBJECT ED TO CLO SER SCRUTINY BY THE STOCK EXCHANGES AND ALSO SEBI. H E THEREFORE EXPRESS ED HIS OPINION THAT IN SUCH SITUATION WHY THE BROKERS ARE TO TAKE RISK OF PENAL CONSEQUENCES IN RESPECT OF THOSE TRANSACTI ONS BY SHOWING THEM AS DONE ON S TOCK E XCHANGES. THE LD. CIT(A) FINALLY HELD THAT THE CONTRACT NOTES ISSUED BY THE BROKERS ARE NOT GENUINE AND THE TRANSACTIONS REPRESENTED BY THOSE CONTACT NOTES ARE ALSO BOGUS AND SHAM. IN PARA 15 OF HIS ORDER THE LD. CIT(A) HAS NOTED THAT THE SHARES C REDITED IN THE DEMAT ACCOUNT O F THESE ASSESSEES ARE NOT THE SAME SHARES WHICH ARE CLAIMED TO HAVE BEEN SHOWN IN PURSUANCE OF THE CONTRACT NOTES ISSUED BY THE BROKERS. 10 . HE HAS FURTHER OBSERVED THAT THE SHARES ARE SOLD AT EXORBITANTLY HIGH PRICE AND TH EREFORE THE TRANSACTIONS CANNOT BE BELIEVED AS A GENUINE ONE. T HE LD. CIT(A) HELD THAT THE TRANSACTIONS OF THE PURCHASE OF SHARES ARE NOT GENUINE AND ACCORDINGLY CONFIRMED THE VIEW OF THE ASSESSING OFFICER THAT THE PURCHASE ARE ONLY THE ACCOMMODATION ENT RIES BUT NOT THE ACTUAL PURCHASE OF THE SHARES. THE ASSESSEE ALSO TOOK A GROUND THAT AS NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF THE SEARCH AND PRINCIPLES OF NATURAL JUSTICE WERE NOT FOLLOWED WHILE FRAMING THE ASSESSMENT THE LD. CIT(A) REJ ECTED BOTH THE GROUNDS BY OBSERVING THAT ON A CAREFUL PERUSAL OF THE MATERIAL AVAILABLE ON RECORD 13 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE REVEALS THAT THE APPELLANTS CONTENTIONS THAT THE ADDITIONS WERE MADE ON PURELY PRESUMPTIONS AND SURMISES WITHOUT ANY INCRIMINATING EVIDENCES ARE NOT CORRECT . HE HAS FURTHER OBSERVED THAT THE ASSESSMENT OF THE ASSESSEE ARE BASED ON THE COGENT MATERIAL AND CONCRETE EVIDENCES. THE LD. CIT(A) SUPPORTED THE ASSESSMENT ORDER BY OBSERVING THAT THE ASSESSING OFFICER HAS IN DETAIL ELABORATED THE VARIOUS FACTS AND I NCRIMINATING EVIDENCES FOUND AS A RESULT OF SEARCH AND POST SEARCH INQUIRIES. THE LD. CIT(A) ALSO DISTINGUISHED THE CASE LAWS A ND DECISION RELIED ON BY THE ASSESSEES IN SUPPORT OF THE GROUND THAT IN THE CASE OF THE SEARCH ASSESSMENT THE SAME SHOULD BE BAS ED ON SOME MATERIAL W H ICH SHOULD BE FOUND IN CONSEQUENCES OF THE SEARCH AND SEIZURE OPERATION. IN SUM AND SUBSTANCE THE LD. CIT(A) PUT HIS STAMP OF APPROVAL ON THE ACTION OF THE ASSESSING OFFICER. THE OPERATIVE PART OF THE FINAL CONCLUSIONS AND FINDINGS OF THE LD. CIT(A) IN THE CASE OF SMT. BHAGYASHREE P. PATIL (LEAD CASE) FOR THE A.Y. 2006 - 07 WHICH HAVE BEEN FOLLOWED IN THE OTHER ASSESSMENT S AS WELL AS OTHER ASSESSEES ARE IN PARA NOS. 23 AND 24 OF HIS ORDER WHICH READ AS UNDER: 23. AS DISCUSSED IN THE PR ECEDING PARAGRAPHS THE SHARES CREDITED TO THE DEMAT ACCOUNT OF THE APPELLANT WERE NOT ACQUIRED BY HER THROUGH THE CONTRACT NOTES PRODUCED BY HER BEFORE THE ASSESSING OFFICER AS THESE CONTRACT NOTES WERE NOT FOUND GENUINE AS A RESULT OF INQUIRIES FROM VARI OUS STOCK EXCHANGES. THEREFORE ONUS WAS ON THE APPELLANT TO PROVE GENUINENESS OF PURCHASES OF THESE SHARES BY THE CONTRACT NOTES WHICH WERE PRODUCED BY HER BEFORE THE AO. HOWEVER SHE DID NOT DISCHARGE THIS ONUS. UNDER THE CIRCUMSTANCES I AM INCLINED TO HOLD THAT THESE SHARES WERE ACQUIRED FROM UNDISCLOSED SOURCES. AS DISCUSSED EARLIER SALES OF MOST OF THESE SHARES WERE DONE ON THE STOCK EXCHANGES AND WERE ROUTED THROUGH THE ELECTRONIC PLATFORM OF THESE STOCK EXCHANGES. HOWEVER THE PROCEEDS OF THE SALE AFTER DEDUCTING THE ALLEGED COST OF PURCHASES CANNOT BE TREATED AS CAPITAL GAINS BECAUSE OF THE FOLLOWING IMPORTANT FACTS RELATING TO THESE TRANSACTIONS. I) CREDIT OF THE RESPECTIVE SHARE IN THE DEMAT ACCOUNT OF THE APPELLANT WAS NOT IN PURSUANCE OF THE CONT RACT NOTES PRODUCED BY THE APPELLANT. THEREFORE THE ACQUISITION OF THE SHARES WAS FROM UNDISCLOSED SOURCES. II) THE SHARES WERE SOLD AT EXORBITANTLY HIGH PRICES WHICH RESULTED IN SUBSTANTIAL GAIN TO THE APPELLANT. HAD THE 14 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE REAL NATURE OF THE TRANSACTIONS NOT UNEARTHED BY THE DEPARTMENT THE APPELLANT WOULD HAVE BENEFITED BY THESE EXORBITANT SALE PRICES BY PAYING EITHER NIL TAX OR TAX AT A VERY NOMINAL RATE. THEREFORE THE ULTIMATE AIM OF THE APPELLANT WAS TO ACQUIRE THE EXORBITANT SALE PROCEEDS AT NIL OR VERY NOMINAL TAX RATE. UNDER THE CIRCUMSTANCES I AM INCLINED TO AGREE WITH THE CONTENTION OF THE AO THAT THERE WAS MANIPULATION INTO THE PURCHASE AND SALE PRICES OF THESE SHARES AND THE APPELLANT WAS ALSO PART OF THIS MANIPULATION AS SHE WAS ONE OF THE BENEFI CIARIES OF THIS MANIPULATION. THE AIM OF THE APPELLANT BY THESE MANIPULATED SALES AND PURCHASES WAS TO GET HER UNDISCLOSED INCOME CONVERTED INTO CAPITAL GAIN WITH NIL OR VERY NOMINAL TAX. THEREFORE ACQUISITION OF THESE SHARES CANNOT BE FOR INVESTMENT. THU S INCOME ARISING OUT OF SALE OF THESE SHARES CANNOT BE TAXED AS CAPITAL GAIN WHETHER LONG TERM CAPITAL GAIN OR SHORT TERM CAPITAL GAIN. THE INCOME HAS TO BE TREATED AS INCOME FROM UNDISCLOSED SOURCES. THE APPELLANT'S RELIANCE ON VARIOUS CASE LAWS IS ALSO MISPLACED AS THESE CASE LAWS ARE DISTINGUISHABLE ON FACTS. THE APPELLANT HAS NOT BROUGHT ON RECORD ANY CASE LAW WHICH IS APPLICABLE IN HER CASE WHERE TRANSACTIONS WERE NOT GENUINE. THEREFORE GROUND OF APPEAL NO.2 IS DISMISSED. 24. AS DISCUSSED EARLIER TH E TRANSACTIONS IN SHARES WERE METICULOUSLY PLANNED BY CREATING INGENUINE DOCUMENTS IN CONNIVANCE WITH THE RESPECTIVE SHARE BROKERS. THESE SHARE BROKERS GAVE ACCOMMODATION ENTRIES TO THE VARIOUS MEMBERS OF THE APPELLANT GROUP. UNDER THE CIRCUMSTANCES I AGR EE WITH THE CONTENTION OF THE AO THAT THE ACCOMMODATION ENTRIES AND BOGUS DOCUMENTS COME WITH A PRICE. THE AO WENT BY THE PREVAILING MARKET RATES AND TREATED 6% OF THE SALE PROCEEDS AS COST TOWARDS THESE TRANSACTIONS AND ADDED THE SAME TO THE INCOME OF THE APPELLANT FROM UNDISCLOSED SOURCES. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE I UPHOLD THE ADDITION MADE BY THE AO ON ACCOUNT OF COST OF ACCOMMODATION ENTRIES. THEREFORE GROUND OF APPEAL NO.3 IS DISMISSED. WE WOULD LIKE TO MENTION HERE THAT T HE LD. CIT(A) HAS DISCUSSED THE EACH SCRIP SEPARATELY BUT THERE IS REPRODUCTION OF THE ASSESSMENT ORDER AS WELL AS THE REPLIES FILED BY THE ASSESSEE IN HIS ORDER WHICH BECAME BULKY . 1 1 . ALL THESE ASSESSEES HAVE CHALLENGED THE IMPUGNED ORDERS OF THE LD. CIT(A) BEFORE US. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT THE LEAD CASE IN TH IS GROUP S OF SMT. BHAGYASHREE P. PATIL ITA NO. 1419/PN/2012 FOR THE A.Y. 2005 - 06. HE SUBMITS THAT BEFORE ONE DECADE OFF - MARKET TRANSACTIONS WERE KNOWN IN THE CAPITAL MARKET AND IT WAS NOT 15 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE NECESSARY THAT ALL THE SHARES TRANSACTIONS SHOULD HAVE BEEN ROUTED T HROUGH THE STOCK EXCHANGES . I N RESPECT OF THE ALLEGATION OF THE BOGUS CONTACT NOTES T HE LEARNED COUNSEL SUBMITS THAT THE ASSESSEE IS NOT AWARE WHAT THE STATEMENTS ARE GIVEN BY THOSE ASSESSEES BROKERS IN THE INVESTIGATION MADE EITHER OF THE DEPARTMENT OR BY THE SEBI. HE SUBMITS THAT LAW IS WELL SETTLED THAT NO MATERIAL OR EVIDENCE SHOULD BE USED AGAINST THE ASSESSEE WHICH IS COLLECTED BEHIND HIS BACK. HE ARGUES TH AT THE ASSESSEE S MADE SPECIFIC REQUEST FOR GIVING AN OPPORTUNITY TO CROSS - EXAMINE THOSE BROKERS WHICH HAVE ALLEGEDLY STATED THAT THE TRANSACTION S ARE NOT GENUINE. HE SUBMITS THAT IN THE ASSESSMENT ORDER S THE ASSESSING OFFICER H AS NOTED/RECORDED THAT THESE ASSESSEES MADE SPECIFIC REQUEST TO CROSS - EXAMINE THOSE B ROKERS WHO HAVE ALLEGEDLY STATED THAT THEY HAVE NOT DONE ANY TRANSACTIONS OF TH ESE COMPANIES OR THE ASSESSEES. HE ARGUES THAT THE STATEMENTS OF THOSE BROKERS APPEARS TO BE OF THE GENERAL NATURE AND THERE IS NO CATEGORICAL STATEMENT ANYWHERE IN THE ORDERS OF BOTH THE PARTIES WHICH WERE THE QUESTION SPECIFICALLY PUT TO THOSE SHARE BROKERS RELATING TO THESE ASSESSEE S . HE SUBMITS THAT MERELY ON THE BASIS OF CERTAIN STATEMENTS RECORDED WHICH ARE NOT EVE N PUT TO THE ASSESSEES NOR ANY OPPORTUNITY OF CROSS EXAMINATION IS PROVIDED HOW THOSE STATEMENT S CAN BE ADMISSIBLE EVIDENCE AGAINST THESE ASSESSEES. 1 1 . 1 HE FURTHER SUBMITS THAT THE MAIN THRUST OF THE DEPARTMENT IS ON THE RISE IN THE SALE PRICES OF THOSE SCRIP S . HE SUBMITS THAT IN THE COMMERCIAL TERMS IT IS WELL KNOWN THAT THE PRICES OF THE SCRIP ARE FLOWN WITH THE WINDS AND THE SENTIMENT S . HE REFERRED TO THE ASSESSMENT ORDER AS WELL AS THE ORDER OF THE LD. CIT(A) AND SUBMITS THAT IT IS ADMITTED FACT THA T THE PURCHASE PRICES OF THOSE SCRIPS ARE AS STATED IN THE ASSESSMENT ORDER S AND ALSO THE SALE PRICES BUT THE QUESTION WHICH THE REVENUE HAS TO ANSWER WHAT IS THE BASIS FOR ARRIVING AT THE CONCLUSION THAT THERE IS AN INFL ATION OF THE SALE PRICES BY THESE ASSESSEES IN ALLEGED CONNIVANCE WITH THE B ROKERS. HE SUBMITS THAT THE BURDEN WAS ON THE ASSESSING OFFICER TO ESTABLISH THAT THE PRICES AT WHICH THE SHARES WERE SOLD WERE NOT GENUINE 16 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE PRICES . M ERELY RAISING THE QUESTIONS WITHOUT ANY SUPPORTING B ALANCE SHEE T OR GROUND FACTS OR FI GURES ARE OF NO EVIDENTIAL VALUE FOR ARRIVING AT ANY CONCLUSION AGAINST THESE ASSESSEES. HE FURTHER SUBMITTED THAT THOUGH THE SHARES WERE PURCHASED IN THE PHYSICAL FORM IN THE OFF - MARKET TRANSACTIONS BUT SUBSEQUENTLY FOR THOSE SHAR ES JUMBO SHARE CERTIFICATE S WERE ISSUED BY THE RESPECTIVE INVESTEE COMPANIES AND THE SAME WERE FILED BEFORE THE ASSESSING OFFICER. HE ARGUES THAT THE INVESTEE COMPANIES HAVE CONFIRMED THAT THEY HAVE TRANSFERRED THE SHARES WHICH ARE ALLEGED TO BE THE BOGUS TRANSACTIONS ON THE NAME OF THESE ASSESSEES. 1 1 .2 HE FURTHER SUBMITS THAT THE ENTIRE CASE IS BASED ON THE ALLEGED DENIAL BY TWO TO THREE SHARE BROKERS TH R OUGH WHOM THE ASSESSEE S PURCHASE D AS WELL AS SOLD THE TRANSACTIONS. HE REFERRED TO THE PAPER BOOK W H ERE THE CHART IS FILED AND POINTED OUT THAT IN SOME OF THE SCRIP T HE SHARES WERE PURCHASED FROM THE SAME BROKERS AS WELL AS SOLD TH R OUGH THE SAME BROKERS. HE SUBMITS THAT WHEN THE SALE IS EFFECTED TH R OUGH AND SHARES ARE TRANSFERRED FROM DEMAT ACCOUNT H OW THE DEPARTMENT CAN QUESTION THE GENUINENESS OF TH OSE SALE TRANSACTIONS ? IT IS SOMETHING STRANGE THAT THE REVENUE SUSPECTED THE SALES DONE THROUGH THE DEMAT ACCOUNT ARE ALSO NON - GENUINE. HE SUBMITS THAT THE ASSESSING OFFICER HAS NOT APPRECIATE D THAT TH E ASSESSEE S HA VE SOLD THE SHARES THOUGH STOCK EXCHANGES AND THE SALE PRICES TALLIED WITH THE MARKET QUOTATIONS ON THE DATE OF SALES. HE RAISE D A QUESTION IN HIS ARGUMENT BY SUBMITTING THAT HOW THE SALE THROUGH THE STOCK EXCHANGE USING DEMAT ACCOUNT CAN BE MANIPULATED . T HE ENTIRE CA SE OF THE REVENUE IS BASED ON ONLY THE SUSPICION AND IT CANNOT BE SAID THAT THE SAME IS SUPPORTED BY SOME SUBSTANTIAL EVIDENCE. HE ARGUES THAT AS REGARD S THE OBJECTION THAT THE SALE PRICE S WERE IN SHARP CONTRAST TO THE FINANCIA L STANDING OF THE COMPANIES BUT T HE FACT REMAIN THAT THE SHARE MARKET IS DRIVEN BY SENTIMENTS AND THERE ARE SO MANY FACTORS AND REASONS FOR INCREASING IN THE VALUE OF THE SHARES. HE POINTS OUT THAT ANY OF THE ASSESSEE S IS NO WHERE CONNECTED WITH THE MANAGE MENT OF ANY INVESTEE COMPANIES AND 17 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE THERE IS NO EVIDENCE THAT THESE ASSESSEES HAVE RIGGED OR MANIPULATED THE SHARE PRICES. 1 2 . IN RESPECT OF THE OBSERVATION OF THE ASSESSING OFFICER THAT THE DEMAT ACCOUNTS WERE OPENED JUST BEFORE THE DATE OF SALE OF SHAR ES H E SUBMITS THAT THE DEMAT ACCOUNTS WERE OPENED MUCH PRIOR TO THE DATE OF THE SALE OF THE SHARES AND HENCE THERE IS NO MERIT IN THE CONTENTION OF THE ASSESSING OFFICER THAT IN RESPECT OF THE CHAR GE THAT THE ASSESSEE COULD NOT BE ABLE TO DEMONSTRATE THAT THEY HAVE RECEIVED THE PHYSICAL DELIVERY OF THE SHARES . HE SUBMITS THAT IN THE COURSE OF THE ASSESSMENT PROCEEDINGS I T WAS CLARIFIED TO THE ASSESSING OFFICER THAT THE SHARES WERE DELIVER ED TO THE ASSESSEE BY THE BROKERS . I T WAS ALSO EX PLAINED THAT THE PHYSICAL SHARE CERTIFICATE S WERE SENT TO THE INVESTEE COMPAN IES AND CLAIM OF THE ASSESSEE S W AS ENDORSED AS THE OWNERS ON THE PHYSICAL SHARES CERTIFICATE. THE LEARNED COUNSEL REFERRED TO PAGE NOS. 580 TO 663 OF THE PAPER BOOK - 2 WHERE THE DETAILS OF PHYSIC AL SHARE CERTIFICATE S ISSUED BY VARIOUS COMPANIES AND THE CORRESPONDENCE BETWEEN THESE ASSESSEES AND THE COMPANIES ARE PLACED. HE SUBMITS THAT THE ASSESSEE S HAVE ALSO FILED THE COPIES OF THE DEMAT ACCOUNT OF ALL THESE ASSESSEE S. H E REFERRED TO PAGE NOS. 584 OF THE PAPER BOOK - 2 WHICH IS A LETTER FROM FAST TRACK TO THE ASSESSEE FOR TRANSFER OF SHARES. HE ARGUES THAT THE SAID LETTER IS DATED 23 - 04 - 2003 AND THEREAFTER THERE IS ANOTHER LETTER DATED 16 - 02 - 2004 WHEREIN IT IS MENTIONED THAT CONSOLIDATED SHARE CERTIFICATES WERE ISSUED TO THE ASSESSEE. THE LEARNED COUNSEL REFERS TO PAGE NOS. 586 AND 587 OF THE COMPILATION AND SUBMITS THAT THE COPY OF THE JUMBO SHARE CERTIFICATE S WHICH IS PLACED ON RECORD CLEARLY SUPPORT THE ASSESSEE S THAT THE SAID JAMBO CERTIFIC ATE S ARE ISSUED IN VIEW OF THE ORIGINAL SHARE CERTIFICATE S AND HENCE THE ASSESSEES HAVE PURCHASED THE SHARES/SCRIP S AS SHOWN IN THE BOOKS OF ACCOUNT. HE ARGUES THAT AFTER RECEIPT OF THE JAMBO SHARE CERTIFICATE THESE ASSESSEES SENT THOSE SHARES FOR DEMAT ERIALIZATION. THE LEARNED COUNSEL REFERRED TO PAGE NO. 580 OF THE COMPILATION WHERE THE COPY OF THE DEMAT ACCOUNT IS FILED AND SUBMIT THAT 18 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE DEMAT ACCOUNT IS A CLEAR EVIDENCE TO SUPPORT THE CASE OF THE ASSESSEES THAT THE SHARES HAVE BEEN SUBSEQUENTLY CREATE D AND HENCE THOSE ARE NOT BOGUS SHARES. 1 2 .1 THE LEARNED COUNSEL SUBMI TS THAT AS THE SHARE TRANSACTIONS ARE PROPERLY REFLECTED IN THE BOOKS OF ACCOUNT AND DURING THE COURSE OF THE SEARCH NOTHING HAS BEEN FOUND TO SUGGEST THAT THERE WAS ANY MANIPULATION IN THE PURCHASE OF THE SHARES. HE SUBMITS THAT ONLY AFTER NECESSARY ENDORSEMENT THESE CERTIFICATES WERE SUBMITTED TO DP FOR DEMAT. HE ARGUES THAT THAT ALL THE STEPS REQUIRED FOR DEMATING WERE FOLLOWED BY THESE ASSESSEES WHICH CLEARLY INDICATE THAT ALL A NTERIOR STEPS - STARTING FROM PHYSICAL PURCHASE OF SHARES THROUGH BROKERS ENDORSEMENT IN COMPANYS RECORD REGARDING TRANSFER TILL SALE THOUGH STOCK EXCHANGES WERE FOLLOWED. THE LEARNED COUNSEL REFERRED TO THE COPY OF THE RETURN OF INCOME FILED IN THE COM PILATION AND SUBMITS THAT ALL THE SHARES TRANSACTIONS WERE DULY REFLECTED IN THE BALANCE SHEET. HE FURTHER ARGUES THAT ALL THE TRANSACTIONS ARE RECORDED IN THE REGULAR BOOKS OF ACCOUNT WHICH IS OTHERWISE NOT DISPUTED BY THE ASSESSING OFFICER. THE TRANSAC TIONS RECORDED IN REGULAR BOOKS OF ACCOUNT CANNOT BE GIVEN THE TREATMENT AS UN RECORDED TRANSACTIONS FOR ARRIVING AT THE CONCLUSION THAT THOSE ARE BOGUS OR NO N - GENUINE ONE. HE SUBMIT THAT THE ASSESSE HAVE PAID THE PURCHASE COST OF THE SHARES TO THE BROKERS AND NOWHERE IT IS DENIED BY THE ASSESSING OFFICER THAT IT IS NOT CORRECT. 1 2 .2 HE FURTHER ARGUES THAT ONE OF THE OBJECTION OF THE ASSESSING OFFICER IS THAT THE BROKERS FROM WHOM THESE ASSESSEE HAVE MADE TRANSACTIONS OF THE SHARES WERE SITUATED AT KOLKA TA AND AHMEDABAD WHILE THE PAYMENTS OF THE ALLEGED SALE WERE RECEIVED BY MEANS OF DDS FROM BOMBAY. THE LEARNED COUNSEL REFERRED TO THE PAGE NO. 371 OF PAPER BOOK AND SUBMITS THAT ONLY SOME BROKERS ARE NOT FROM THE BOMBAY THROUGH WHOM THE SHARES WERE SOLD BUT OTHERWISE MOST OF THE BROKERS ARE FROM BOMBAY ONLY. HE SUBMITS THAT THE ASSESSING OFFICER HAS NOT APPRECIATED THE FACT 19 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE THAT IN CASE OF CORE BANKING SYSTEMS IT IS POS SIBLE TO TAKE DD FROM ANY PLACE IN THE COUNTRY WHERE FACILITIES ARE AVAILABLE. HE VE HEMENTLY ASSAILED THE OBSERVATION OF THE ASSESSING OFFICER THAT SEBI AND STOCK EXCHANGES HAD CARRIED OUT ENQUIRIES IN RESPECT OF THE TRANSACTIONS CARRIED OUT BY THE BROKERS AND THEREFORE THE TRANSACTIONS ARE NOT GENUINE . HE SUBMITS THAT THE OBSERVATIONS OF THE ASSESSING OFFICER ARE GENERAL IN NATURE WITHOUT BRINGING ANY CONCRETE EVIDENCE TO INDICATE THAT THESE ASSESSEES WERE IN LEAGUE WITH THE BROKERS IN THE TRANSACTION OF SPECIFIC SCRIPS. HE ARGUES THAT THE ASSESSING OFFICER IS REFERRING ONLY THREE BROK ERS WHILE THE ASSESSEE HAD PURCHASED SHARES OF TALENT INFO SANGOTRI CONSTRUCTIONS AND NIHARIKA INDUSTRIES FROM OTHER BROKERS ALSO. HE ARGUES THAT EVEN IF THE ASSESSING OFFICER HAS MENTIONED IN THE ASSESSMENT ORDER THAT THERE WERE ENQUIRY BY SEBI OR BSE B UT THE FACT REMAIN NO ACTION IS TAKEN AGAINST ANY OF THESE ASSESSEE S . 1 3 . THE LEARNED COUNSEL REFERRED TO THE COPY OF STATEMENT OF SHRI VIJAY B. SHAH PAGE NOS. 361 TO 363 OF THE PAPER BOOK - 2 THE COPY OF THE STATEMENT OF SHRI PRATIK SHAH DIRECTOR OF D PS SHARES AND SECURITIES PAGE NOS. 364 TO 366 OF PAPER BOOK - 2 AND THE COPY OF THE STATEMENT OF SHRI MUKESH CHOKSI OF MAHASAGAR SECURITIES PAGE NOS. 367 TO 369 OF PAPER BOOK - 2 AND SUBMIT THAT IN RESPECT OF OTHER THREE SHARES NAMELY NIHARIKA SANGOTRI AND G - TECH SECURITIES T HERE IS NO EVIDENCE IN THE FORM OF STATEMENTS OF THE BROKERS THAT NO SUCH TRANSACTIONS HAVE BEEN TAKEN PLACE. HE SUBMITS THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSEE REQUESTED THE ASSESSING OFFICER FOR AN OPPORTUN ITY TO CROSS - EXAMINE THE BROKERS WHO HA VE ALLEGEDLY GIVEN STATEMENTS AGAINST THESE ASSESSEES BUT SAME WAS DENIED. HE REFERS TO THE COPY OF THE LETTERS WRITTEN TO THE VARIOUS BROKERS PAGE NOS. 200 - 214 OF THE PAPER BOOK - 1 AND SUBMIT THAT THE ASSESSEES HAVE REQUESTED TO THOSE BROKERS TO APPEAR BEFORE THE ASSESSING OFFICER IS EVIDENT THAT THE ASSESSEE WAS NOT HIDING OR AVOIDING TO PROVE THE TRANSACTIONS BUT FOR THE REASONS BEST KNOWN TO THOSE BROKERS THEY DID NOT APPEAR BEFORE THE 20 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE ASSESSING OFFICER. HE SUBM ITS THAT THE ASSESSEE SPECIFICALLY MADE REQUEST TO THE ASSESSING OFFICER TO ISSUE SUMMONS TO THOSE BROKERS U/S. 131 OF THE INCOME - TAX ACT BUT THAT WAS ALSO NOT CONSIDERED. HE ARGUES THAT BY PICKING UP FEW STATEMENTS OF SOME BROKERS W HICH ARE GENERAL IN NA TURE IN RESPECT OF SOME SCRIPS T HE ASSESSING OFFICER HAS MADE CASE OF ALLEGED BOGUS SHARE TRANSACTIONS AGAINST THE ASSESSEE S . THE LEARNED COUNSEL RELIED ON THE FOLLOWING PRECEDENTS IN SUPPORT OF THE PLEA THAT THE EVIDENCE COLLECTED BEHIND THE BACK OF THE ASSESSE SHOULD NOT BE USED AGAINST THEM UNLESS THE SAME IS CONFRONTED: I. KISHANCHAND CHELLARAM 125 ITR 713 (SC). II. PREMCHAND VS. ITO 49 ITR 561 (ALL). III. EMC (WORKS) P. L. VS. ITO 49 ITR 650. IV. ALOK AGARWAL VS. DCIT 67 TTJ 109. V. MONGA METALS P.L. VS. ACIT 67 TTJ 24 7. 1 4 . HE SUBMITS THAT SO FAR AS THE ALLEGED STATEMENT S OF THOSE THREE BROKERS ARE CONCERNED IT MAY BE A CASE WHEREIN THOSE BROKERS MAY NOT HAVE OFFERED THE INCOME EARNED BY THEM TO TAX AND THAT IS THE REASON WHY THEY MAY HAVE STATED THAT NO TRANSACTIONS WERE CARRIED OUT. HE SUBMITS THAT THE ASSESSING OFFICER AS WELL AS THE CIT(A) HAVE NOT APPRECIATED THE CONTACT NOTES RELATING TO THE SALE OF SHARES WHICH ARE ISSUED BY SAID BROKERS. HE SUBMITS THAT SHRI T.H. VAKIL NOWHERE STATED THAT THE TRANSACTIONS CA RRIED OUT WITH THE ASSESSEE ARE BOGUS AND HENCE THERE WAS NO REASON TO DOUBT GENUINENESS OF THE PURCHASE OF SHARES OF G - TECH WHICH ARE PURCHASED THROUGH THE SAID BROKERS. THE LEARNED COUNSEL REFERRED TO THE STATEMENT OF SHRI VIJAY BHAGWANDAS (COPY PLACED AT PAGE NOS. 361 TO 363 OF PAPER BOOK - 2) AND SUBMITS THAT THE SAID STATEMENT IS NOT SIGNED BY ANY AUTHORIZED OFFICER AND HENCE THE AUTHENTICITY OF THE SAID STATEMENT IS DOUBTFUL. HE SUBMITS THAT THE DOCUMENTARY EVIDENCE SHOULD BE GIVEN PREFERENCE OVER T HE ORAL EVIDENCE. 21 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE 1 5 . THE ASSESSEE HAS FILED SUFFICIENT DOCUMENTARY EVIDENCE IN THE FORM OF CONTRACT NOTES ISSUED BY BROKERS PHYSICAL SHARE CERTIFICATES CORRESPONDENCE WITH THE INVESTEE COMPANIES DEMAT ACCOUNT ETC. TO JUSTIFY THE SHARE TRANSACTIONS A ND HENCE THE ASSESSING OFFICER WAS NOT JUSTIFIED IN QUESTIONING THE GENUINENESS OF THE SHARE TRANSACTIONS. THE LEARNED COUNSEL PLACED HIS RELIANCE ON THE FOLLOWING DECISIONS: I. SMT. JAMNADEVI AGARWAL 328 ITR 656 (BOM). II. ACIT VS. SURENDRA PEETY & ORS. ITA NO S. 1157 TO 1161/PN/2008 ITAT PUNE ORDER DATED 20 - 09 - 2012. III. SHRI AVINASH KANTILAL JAIN VS. ACIT RANGE - I JALGAON ITA NO. 980/PN/2010 ORDER DATED 31 - 10 - 2012. IV. ITO VS. AJAY SHANTILAL LALWANI & ORS. 145 TTJ 511. V. SACHIN N MORAKHIA VS. ITO (M) ITA NO. 1122/M/20 12 ORDER DATED 01 - 06 - 2012. VI. ACIT VS. SMT. LATA SHAH ITA NO. 77/JOD/2000 ORDER DATED 19 - 01 - 2012. VII. JAFFERALI K RATTONSEY VS. DCIT MUMBAI ITA NO.5068/M/2009 ORDER DATED 25 - 01 - 2012. HE ENDS HIS ARGUMENT BY SUBMITTING THAT THE DECISION OF BOTH THE AUTHORITIES IS TOTALLY ERRONEOUS WITHOUT APPRECIATING THE FACTS AND THE EVIDENCE. HE PLEADED FOR ALLOWING THE APPEALS. 1 6 . PER CONTRA THE LD. CIT DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITS THAT FROM THE EVIDENCE COLLECTED BY THE INVESTIGATION WING MODUS OPERANDI OF THESE ASSESSEES HAS BEEN EXPOSED. HE SUBMITS THAT ONLY AFTER THE SEARCH OPERATION THE MODALITY ADOPTED BY THESE ASSESSEES FOR MAKING THEIR BLACK MONEY INTO WHITE MONEY CAME TO THE LIGHT. HE SUBMITS THAT BOTH THE AUTHORITIES BELOW HAVE C ONSIDERED EACH AND EVERY SCRIP IN WHICH THESE ASSESSEES HAVE ALLEGEDLY MADE THE TRANSACTIONS I.E. THE PURCHASE AND SALE . H E SUBMITS THAT THOUGH THERE IS NO EVIDENCE OF PURCHASE OF THE SHARES BUT ALL THE SHARES TRANSFERRED TO THE ASSESSEES DEMAT ACCOUNT A ND THEN O NLY THOSE SHARES ARE SOLD. HE 22 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE SUBMITS THAT THE EVIDENCE OF THE THREE BROKERS IS RELIABLE AS THEY HAVE MADE CATEGORICAL DENIAL IN RESPECT OF BROKERS NOTES P RODUCED BY THESE ASSESSEES. HE SUBMITS THAT THE ORDERS OF THE AUTHORITIES BELOW ARE SELF - E XPLANATORY AND ACCORDINGLY HE PLACED HIS RELIANCE ON THOSE ORDERS. 17 . WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND ANXIOUSLY CONSIDERED THE FACTS AS WELL AS THE ARGUMENTS. THERE ARE TWO CORE ISSUES TO BE ADJUDICATED (I) WHETHER THE ENTIRE SALE PROCEEDS OF THE SHARES RECEIVED BY THESE ASSESSEES CAN BE TREATED AS AN INCOME FROM UNDISCLOSED SOURCES ? AND (II) WHETHER THERE IS ANY JUSTIFICATION TO HOLD THAT THESE ASSESSEES HAVE PAID COMMISSION @ 6% WITHOUT HAVING ANY IOTA OF EVIDENCE IN THE POSSESSI ON OF THE DEPARTMENT. ALL THESE ASSESSEES ARE CLOSELY RELATED FAMILY MEMBERS. IT IS A CASE OF THE ASSESSING OFFICER THAT THESE ASSESSEES ENTERED INTO BOGUS TRANSACTIONS OF SHARES BY CREATING THE FICTITIOUS DOCUMENTS. THE ASSESSING OFFICER HAS STATED IN THE ASSESSMENT ORDER THAT DURING THE COURSE OF SEARCH OPERATION INCRIMINATING DOCUMENTS WERE FOUND. THESE ASSESSEES HAVE FILED THEIR REGULAR RETURN OF INCOME. THERE IS A CHARGE OF SHOWING THE BOGUS PURCHASE AND SALES OF THE FOLLOWING SCRIP BY THE REVENUE (A) FAST TRACK ENTERTAINMENT LTD. (B) G - TECH INFO LTD. (C) TALENT INFO LTD. (D) SANGOTRI CONSTRUCTIONS (E) NIHARIKA INDUSTRIES AND (F) PRRANETTA INDUSTRIES LTD. IT IS A CLAIM OF THE ASSESSEES THAT ALL THESE SHARES ARE PURCHASED FROM THE DIFFERENT BR OKERS IN THE OFF - MARKET TRANSACTIONS. THE BROKERS HAVE DONE THE DEALINGS AS CLAIMED BY THE ASSESSEE WHICH DETAILS ARE ALREADY GIVEN HERE - IN - ABOVE: M/S. VIJAY BHAGWANDAS & CO. DPS SHARES & SECURITIES PVT. LTD. T.H. VAKIL BUBNA STOCK BROKING VRAJ FINANC E RUCHIRAJ INVESTMENTS AND M/S. MAHASAGAR SECURITIES LTD. ETC. ON THE PERUSAL OF THE ASSESSMENT ORDERS IN THESE CASES WE FIND THAT THERE IS NO MENTION BY THE ASSESSING OFFICER IN RESPECT OF THE ALLEGED SEIZED DOCUMENTS. WE FIND THE INVESTIGATION WING C OLLECTED THE BROKERS NOTES AND CERTAIN OTHER DOCUMENTS IN RESPECT OF THE SHARE TRANSACTIONS WHICH HAVE BEEN ALREADY DECLARED BY THESE ASSESSEES IN THEIR REGULAR RETURNS OF INCOME. 23 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE 18 . AS PER THE ADMITTED FACTS AT THE TIME OF SALE OF THE ABOVE SHARES SAL E WAS DONE THROUGH TRANSFER S FROM THE DEMAT ACCOUNT. THE ASSESSING OFFICER HAS SUSPECTED THE CLAIM OF THE ASSESSEE THAT THESE SHARES TRANSACTIONS SHOWN BY THE ASSESSEE S ARE THE ARRANGE D TRANSACTIONS ON THE FACT THAT (I) THOSE SHARES WERE PURCHASE D AT NOMI NAL RATE AND SALE AT A HIGH PRICE IN A SHORT TIME (II) THERE IS NO PROOF OF DELIVERY OF THE SHARES (III) THERE IS NO EVIDENCE TO SHOW THAT THE SHARES WERE PHYSICALLY TRANSFERRED IN THE NAME BEFORE DEMATERIALIZATION (IV) THE DEMAT ACCOUNT WERE OPENED JUS T BEFORE THE SALE OF SHARES. THE LOCATIONS OF THE BROKERS WERE AT KOLKATA AND AHMEDABAD BUT THE PAYMENTS WERE MADE FROM BOMBAY. BOMBAY STOCK EXCHANGE (BSE) AND SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI) HAVE MADE THE ENQUIRIES AGAINST THE BROKERS VIJ AY BHAGWANDAS AND CO. DPS SHARES AND SECURITIES PVT. LTD AND T.H. VAKIL. 19 . MOREOVER THE STATEMENTS WERE ALSO RECORDED BY THE INVESTIGATION WING OF THE DEPARTMENT IN WHICH IT IS CLAIMED BY THE ASSESSING OFFICER THAT ALL THE BROKERS HAVE DENIED HAVING DONE TRANSACTIONS FOR THESE ASSESSEES. LET US DE AL WITH THE CHARGE OF THE ASSESSING OFFICER FOR MAKING OUT THE CASE THAT THE SHARE TRANSACTIONS CLAIMED BY THESE ASSESSEES ARE IN FACT IN THE NATURE OF THE ACCOMMODATION ENTRIES. AS PER THE CHART GIVEN HER E - IN - ABOVE IT IS SEEN THAT THE ASSESSEES HAVE PURCHASED THE SHARES IN DIFFERENT LOT FROM THE DIFFERENT BROKERS . I N CASE OF THE SOME SHARES LIKE TALENT INFO LTD. SANGOTRI CONSTRUCTIONS AND NIHARIKA INDUSTRIES LTD. THE SHARES WERE PURCHASED AND SOLD BY SA ME BROKERS. THE ASSESSING OFFICER PUT HIS MAIN THRUST ON THE STATEMENT GIVEN BY VIJAY BHAGWANDAS AND CO. DPS SHARES AND SECURITIES PVT. LTD AND T.H. VAKIL. ADMITTEDLY IN ALL THESE CASES THESE ASSESSEES MADE A SPECIFIC REQUEST FOR GIVING THE OPPORTUNITY TO CROSS - EXAMINE THE BROKERS W HO HAVE ALLEGEDLY DEPOSED AGAINST THESE ASSESSEES IN RESPECT OF THE CLAIM OF PURCHASE AND SALE OF THE SHARES. 24 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE 2 0 . THE ASSESSING OFFICER HAS ALSO RELIED ON THE CORRESPONDENCE MADE WITH BOMBAY STOCK EXCHANGE (BSE) AHMEDABAD STOCK EXCHANGE AND KOLKATA STOCK EXCHANGE . T HE ASSESSING OFFICER HAS ALSO MADE THE ANNEXURES OF THOSE CORRESPONDENCES TO THE ASSESSMENT ORDER S. B UT ALL THE EVIDENCE S WHICH IS USED FOR GIVING THE FINDING THAT THE SHARE TRANSACTIONS ON WHICH THESE ASSESSE ES HAVE DECLARED LONG TERM CAPITAL GAIN ARE BOGUS AND CAMOUFLAGED T HE ASSESSEE S HAVE NEVER GIVEN OPPORTUNITY TO CONFRONT THOSE PARTIES . I N FACT THE COMMUNICATION BETWEEN THE ASSESSING OFFICER WITH THE STOCK EXCHANGES IS CERTAINLY AN EVIDENCE WHICH IS GAT HERED BEHIND THE BACK OF THE ASSESSEE. LAW IS WELL SETTLED THAT NO EVIDENCE SHOULD BE USED WHICH ARE COLLECTED BEHIND THE BACK OF THE ASSESSEE U NLESS THE ASSESSEE IS GIVING OPPORTUNITY TO CONFRONT THE EVIDENCE USED AGAINST HIM OR HER . I N CASE O F SOME ASS ESSEE S I.E. P.D. PATIL W E FIND THAT THE ASSESSING OFFICER HAS NOTED THE STATEMENTS OF THE BROKERS WHO HAVE DEPOSED AGAINST THESE ASSESSEES IN THEIR CLAIM OF PURCHASE OF THE SHARES WERE PUT TO THE ASSESSEES AND ASSESSEES STATEMENTS WERE RECORDED. WE ALSO FIND THAT THE ASSESSEES HAVE CATEGORICALLY DENIED THE DEPOSITIONS OF THOSE BROKERS . A S PER THE STATEMENTS GIVEN BY TH O SE BROKERS I T IS STATED BY THEM THAT THEY HAVE NOT MAINTAINED ANY BOOKS OF ACCOUNT AND CONTRACT NOTES ARE ISSUED BY SOMEBODY ELSE. IT IS SEEN THAT THO UGH SOME BROKERS HAVE ALSO SOLD THE SHARES FOR THESE ASSESSEES MORE PARTICULARLY THE SCRIP OF FAST TRACK ENTERTAINMENT LTD. THEN HOW THE BROKERS ARE DENIED HAVING NOT DONE ANY TRANSACTIONS FOR THE ASSESSEES . 2 1 . T HE ASSESSING OFFICER HAS G ONE ON THE LOGIC THAT THE SHARES HAVE BEEN PURCHASED AT A VERY NOMINAL PRICE AND HAVE BEEN SOLD AT A VERY HIGH PRICE AND THE RISE OF THE VALUE OF THE SHARES IS SHARP CONTRAST IN A MARKET AND FINANCIAL STANDING OF THOSE COMPANIES. WE FIND THAT THE ASSESSIN G OFFICER HAS MADE VERY BLUNT STATEMENT IN THE ASSESSMENT ORDER WITHOUT BRINGING ANY MATERIAL ON RECORD HOW THE VALUE SHOWN AT THE TIME OF SALE AND HOW THE PRICES OF THE SHARE IS IN A SHARP CONTRAST IN 25 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE A MARKET AND FINANCIAL STANDING OF THE INVESTEE COMPAN IES . ADMITTEDLY THESE ASSESSEES HAVE SOLD THE SHARES THROUGH THE STOCK EXCHANGES A ND SALE PRICE IS AT PAR WITH THE MARKET PRICE ON THE DATE OF SALE. IF THE SALE IS MADE THROUGH THE STOCK EXCHANGES THEN HOW THE TRANSACTION CAN BE SAID TO BE MANIPULATED . I F THE CHARGE OF MANIPULATION IS MADE THEN THE BURDEN IS ON THE ASSESSING OFFICER TO ESTABLISH THE SAID CHARGE. 2 2 . IN RESPECT OF THE CHARGE OF THE ASSESSING OFFICER THAT THE SHARES WERE DEMATERIALIZE D TO THE DEMAT ACCOUNT FEW DAYS BEFORE THE DATE OF S ALE AND THEREAFTER THE SHARES ARE SOLD . I N OUR OPINION THIS ASPECT HAS ALREADY BEEN CONSIDERED BY THE OTHER C O - ORDINATE B ENCHES AS THERE ARE PLETHORA OF DECISIONS ON IDENTICAL CONTROVERSY INCLUDING THE DECISION OF THE JURISDICTIONAL HIGH COURT ON THE ISS UE OF OFF - MARKET TRANSACTIONS WHICH WE ARE GOING TO DISCUSS AT THE LATTER PART OF THIS ORDER . I N OUR OPINION WHEN THE SHARES ARE IN PHYSICAL FORM WITH THE ASSESSEE AND IT IS SUBSEQUENTLY DEMATERIALIZE D THAT ITSELF CANNOT BE THE GROUND A T LEAST ON THE FAC TS OF THESE CASES TO MAKE ONE OF THE PILLAR OF THE SUSPICION . I N TH ESE CASE S WE FIND THAT MOST OF THE COMPANIES HAVE ACKNOWLEDGED THAT THEY HAVE TRANSFERRED THE SHARES ON THE CLAIM OF THESE ASSESSEES . I T IS ALSO SEEN THAT IN CASE OF SOME OF THE INVESTE E COMPANIES SMALLER SHARE CERTIFICATE S ARE CONSOLIDATED AND JAMBO SHARE CERTIFICATE S ARE ISSUED WHICH ARE ALSO PLACED BY THESE ASSESSEES ON RECORD . F OR EXAMPLE THE FAST TRACK ENTERTAINMENT LTD. HAS ISSUED A LETTER TO THE ASSESSEE DATED 16 - 02 - 2004 COPY PL ACED AT PAGE NO. 585 OF THE COMPILATION OF PAPER BOOK - 2 IN RESPECT OF ISSUING THE JAMBO SHARE CERTIFICATE. 2 3 . THE ASSESSEES HAVE ALSO FILED THE COPY OF THE JAMBO SHARE CERTIFICATE S WHICH IS PLACED AT PAGE NOS. 586 TO 587 IN SUPPORT OF THE CASE OF THE ASS ESSEE . T HERE WAS A COMMUNICATION BETWEEN THE ASSESSEES AND THE COMPANIES IN RESPECT OF CONSOLIDATION OF THE SHARES AS WELL AS TRANSFERRED OF THE SHARES ON THE PERUSAL OF THE ORDER OF THE AUTHORITIES BELOW. WE DO NOT FIND THAT THE REVENUE AUTHORITIES HAVE MADE ANY 26 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE ENQUIRY WITH THE INVESTEE COMPANIES TO WHICH THE SHARES BELONG BUT ONLY ON THE VERSION OF THE THREE BROKERS THE ASSESSING OFFICER HAS ARRIVED AT ON ERRONEOUS CONCLUSION. WE FIND FORCE IN THE ARGUMENT OF THE ASSESSEE THAT AFTER ONLY GETTING THE J AMBO SHARE CERTIFICATE S THE SHARES WERE SENT FOR THE DEMATERIALIZATION (THE FACTUM OF DEMATERIALIZATION TO THE DEMAT ACCOUNT IS NOT DISPUTED BY THE A UTHORITIES BELOW ) . WE ALSO FIND THAT THE ASSESSEES HAVE GIVEN THE DETAILS TO SHOW THAT THE SHARES WERE TRA NSFERRED ON THE CLAIM BUT THE ENTIRE EVIDENCE FILED BY THE ASSESSEE S HAS BEEN IGNORED. WE HAVE PERUSED THE STATEMENTS GIVEN BY SHRI P.D. PATIL ONE OF THE ASSESSEE S U/S. 131 OF THE ACT TO WHOM THE STATEMENT OF THE BROKER WAS CONFRONTED AND CERTAIN QUESTIO NS WERE PUT TO HIM. THE ASSESSEES HAVE NOWHERE ADMITTED THAT THE DEPOSITION OR STATEMENT OF THE BROKERS ARE CORRECT . W HEN THE BROKER WAS NOT MADE AVAILABLE FOR CROSS - EXAMINATION TO THE ASSESSEES THEN HOW THE RELIANCE CAN BE PLACED BY THE ASSESSING OFFICE R FOR MAKING OUT THE CASE AGAINST THESE ASSESSEES . THERE IS NO DISPUTE ABOUT THE FACT THAT THERE IS A TIME GAP BETWEEN THE DATE OF PURCHASE OF THE SHARES AS CLAIMED BY THE ASSESSEE S ON THE BASIS OF THE BROKERS NOTES AND THE DATE OF DEMATERIALIZATION I.E. FOR CRE DITING TO THE DEMAT ACCOUNT. NOW THE QUESTION IS WHEN THE BROKERS NOTES ARE PRODUCED CAN THOSE BROKERS NOTES BEING A DOCUMENTARY EVIDENCE BE DISCARDED RELYING ON SOME DEPOSITION OR STATEMENTS OF THE BROKERS . FOR THE BEST REASON TO KNOWN THEM TO TH E THREE BROKERS DECLINE D TO HAVE DONE ANY TRANSACTION ON BEHALF OF THE ASSESSEE AND STATED THAT THE BROKERS NOTES WERE THE FORM OF ACCOMMODATION ENTRIES. BEFORE R ELYING ON THE STATEMENT S OF TH OSE BROKERS WHO HAVE STATED NOTES AS BOGUS TRANSACTIONS T HE AS SESSEE MUST HAVE BEEN GIVEN AN OPPORTUNITY TO CROSS - EXAMINE THOSE BROKERS AND WITHOUT C ROSS - EXAMINATION THE DOCUMENTARY EVIDENCE FILED BY THE ASSESSEE CANNOT BE TOTALLY DISCARDED. 2 4 . WE FIND THAT IN ALL THESE CASES NO INCRIMINATING MATERIAL HAS BEEN S EIZED EXCEPT THE BROKER NOTES. WE HAVE ALSO FIND THAT THESE ASSESSEES HAVE ALREADY SHOWN THE SHARE TRANSACTIONS IN THEIR BALANCE SHEET AND 27 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE THE SHARE TRANSACTIONS ARE DULY RECORDED IN THE REGULAR BOOKS OF ACCOUNT. THE CASE OF THE DEPARTMENT IS THAT EVEN I F THE SALES ARE MADE THROUGH THE DEMAT ACCOUNT ALL THESE ARE ARRANGED TRANSACTIONS AND HENCE THE ENTIRE MONEY RECEIVE D O N THE SALE OF THESE SHARES (EVEN THOUGH THE SALE IS MADE TH R OUGH THE DEMAT ACCOUNT AND THROUGH THE STOCK EXCHANGES) TO BE TREATED AS UNDISCLOSED INCOME OF THE SE ASSESSEE S . IT IS SOMETHING STRANGE THAT THE CHARGE MADE BY THE ASSESSING OFFICER THAT THE BROKERS ARE LOCATED AT DIFFERENT LOCATIONS LIKE AHMEDABAD AND KOLKATA BUT PAYMENTS ARE ROUTED FROM THE BOMBAY. IN OUR OPINION NOW A DAY S IT IS COMMON IN THE CORE - BANKING SYSTEM TO TRANSFER THE MONEY FROM ANY LOCATION TO ANOTHER LOCATION AND DUE TO THE ELECTRONIC MEDIA EVEN THE TRADING CAN BE DONE ON - LINE ON SMALL LAPTOP . H ENCE SUCH STATEMENT OF THE ASSESSING OFFICER IS HAVING NO MERIT. THE ASSESSING OFFICER HAS MADE THE GENERAL COMMENTS WITHOUT BRINGING ON RECORD ANY CONCRETE EVIDENCE TO INDICATE THAT THESE ASSESSEES WERE IN LEAGUE WITH THE BROKERS IN THE TRANSACTIONS OF THE SPECIFIC SCRIPS. THE ASSESSING OFFICER IS REFERRING AND RELYI NG CONVENIENTLY ONLY ON THE THREE BROKERS WHOSE NAMES ARE NOTED IN THE ASSESSMENT ORDER S WHO ALLEGEDLY DEPOSED AGAINST THESE ASSESSEES BUT THE FACT REMAIN THAT THESE ASSESSEES HAD PURCHASED T HE SHARES OF OTHER COMPANIES I.E. TALENT INFO SANGOTRI CONSTRUCT ION AND NIHARIKA INDUSTRIES FROM DIFFERENT BROKERS. 2 5 . IN RESPECT OF RELYING ON EVIDENCE OF THE STATEMENT OF ANY PARTY AGAINST THE ASSESSEE THE LAW IS WELL EXPLAINED BY THE HON'BLE SUPREME COURT IN THE CASE OF KISHANCHAND CHELLARAM (SUPRA). AS THE A SSESSEES HAVE NOT BEEN GIVEN ANY OPPORTUNITY TO CROSS - EXAMINE THE BROKERS THE RELIANCE PLACED ON THE STATEMENT OF THE SAID THREE BROKERS BY THE ASSESSING OFFICER FOR D RA WING ADVERSE INTERFERENCE AGAINST TH E SE ASSESSEES IS NOT PERMISSIBLE IN LAW. 2 6 . IN THE CASE OF SMT. JAMNADEVI AGARWAL (SUPRA) THERE WAS A SEARCH AND SEIZURE ACTION U/S. 153A . I N SAID CASE THE ASSESSMENTS WERE 28 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE COMPLETED WHEREIN THE ASSESSING OFFICER COMPUTED THE TOTAL INCOME BY DISALLOWING THE LONG TERM CAPITAL GAIN AND ADDED THE ENTIRE SALE PROCEEDS RECEIVED ON SALE OF THE SHARES TR EATING THE SAME AS INCOME FROM UNDISCLOSED SOURCES. IN THOSE CASES ALSO THE FOLLOWING CHARGES WERE MADE BY THE DEPARTMENT (I) MOST OF THE SALES OF THE SHARES EFFECTED BY THE GROUP ARE OF THE SAME COMPANIES T HROUGH THE SAME BROKERS LOCATED AT KOLKATA (II) THE PRINCIPAL BROKER HAS CONFIRMED THAT THE SHARE TRANSACTIONS WE RE SHAM AND ALSO EXPLAINED THE MODUS OPERANDI ADOPTED BY THOSE ASSESSEES (III) THE SALE TRANSACTIONS WERE OFF - MARKET TRANSACTIONS AND THE KOL KATA STOCK EXCHANGE BY ITS LETTER DATED 26 - 05 - 2005 HAS CONFIRMED THAT THE TRANSACTIONS CARRIED OUT BY PRINCIPAL BROKERS WERE NOT BORNE ON THE RECORDS OF THE STOCK EXCHANGE AND THE DETAILS NOTED ON THE CONTRACT NOTES DID NOT MATCH (IV) THERE WERE UNEXPLAIN ED CREDIT IN SOME OF THE BANK ACCOUNTS PRIOR TO ISSUANCE OF CHEQUE OF THE ASSESSEES THE HON'BLE HIGH COURT REJECTED ALL THE CHARGES AND HELD AS UNDER: 11. WE SEE NO MERIT IN THE ABOVE CONTENTIONS. THE FACT THAT THE ASSESSEES IN THE GROUP HAVE PURCHASED AN D SOLD SHARES OF SIMILAR COMPANIES THROUGH THE SAME BROKER CANNOT BE A GROUND TO HOLD THAT THE TRANSACTIONS ARE SHAM AND BOGUS ESPECIALLY WHEN DOCUMENTARY EVIDENCE WAS PRODUCED TO ESTABLISH THE GENUINENESS OF THE CLAIM. 12. FROM THE DOCUMENTS PRODUCED BEF ORE US WHICH WERE ALSO IN POSSESSION OF THE AO IT IS SEEN THAT THE SHARES IN QUESTION WERE INFACT PURCHASED BY THE ASSESSEES ON THE RESPECTIVE DATES AND THE COMPANY HAS CONFIRMED TO HAVE HANDED OVER THE SHARES PURCHASED BY THE ASSESSEES. SIMILARLY THE S ALE OF THE SHARES TO THE RESPECTIVE BUYERS IS ALSO ESTABLISHED BY PRODUCING DOCUMENTARY EVIDENCE. IT IS TRUE THAT SOME OF THE TRANSACTIONS WERE OFF - MARKET TRANSACTIONS. HOWEVER THE PURCHASE AND SALE PRICE OF THE SHARES DECLARED BY THE ASSESSES WERE IN CON FORMITY WITH THE MARKET RATES PREVAILING ON THE RESPECTIVE DATES AS IN SEEN FROM THE DOCUMENTS FURNISHED BY THE ASSESSEES. THEREFORE THE FACT THAT SOME OF THE TRANSACTIONS WERE OFF - MARKET TRANSACTIONS CANNOT BE A GROUND TO TREAT THE TRANSACTIONS AS SHAM TRANSACTIONS. 13. THE STATEMENT OF PRADEEP KUMAR DAGA THAT THE TRANSACTIONS WITH THE HALDIRAM GROUP WERE BOGUS HAS BEEN DEMONSTRATED TO BE WRONG BY PRODUCING DOCUMENTARY EVIDENCE TO THE EFFECT THAT J THE SHARES SOLD BY THE ASSESSEES WERE IN CONSONANCE WITH THE MARKET PRICE. ON PERUSAL OF THOSE I DOCUMENTARY EVIDENCE THE TRIBUNAL HAS 29 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE ARRIVED AT A FINDING OF FACT THAT THE TRANSACTIONS WERE GENUINE. NOTHING IS BROUGHT TO OUR NOTICE THAT THE FINDINGS RECORDED BY THE TRIBUNAL ARE CONTRARY TO THE DOCUMENTARY EVI DENCE ON RECORD. 14. THE TRIBUNAL HAS FURTHER RECORDED A FINDING OF FACT THAT THE CASH CREDITS IN THE BANK ACCOUNTS OF SOME OF THE BUYERS OF SHARES CANNOT BE LINKED TO THE ASSESSEES. MOREOVER IN THE LIGHT OF THE DOCUMENTARY EVIDENCE ADDUCED TO SHOW THAT T HE SHARES PURCHASED AND SOLD BY THE ASSESSEES WERE IN CONFORMITY WITH THE MARKET PRICE THE TRIBUNAL RECORDED A FINDING OF FACT THAT THE CASH CREDITS IN THE BUYERS' BANK ACCOUNTS CANNOT BE ATTRIBUTED TO THE ASSESSEES. NO FAULT CAN BE FOUND WITH THE ABOVE F INDING RECORDED BY THE TRIBUNAL. 15. RELIANCE PLACED BY THE COUNSEL FOR THE REVENUE ON THE DECISION OF THE APEX COURT IN THE CASE OF SUMATI DAYAL (SUPRA) IS WHOLLY MISPLACED. IN THAT CASE THE ASSESSEE THEREIN HAD CLAIMED INCOME FROM HORSE RACES AND THE FI NDING OF FACT RECORDED WAS THAT THE ASSESSEE THEREIN HAD NOT PARTICIPATED IN RACES BUT PURCHASED WINNING TICKETS AFTER THE RACE WITH THE UNACCOUNTED MONEY. IN THE PRESENT CASE THE DOCUMENTARY EVIDENCE CLEARLY SHOWS THAT THE TRANSACTIONS WERE AT THE RATE PREVAILING IN THE STOCK MARKET AND THERE WAS NO QUESTION OF INTRODUCING UNACCOUNTED MONEY BY THE ASSESSEES. THUS THE DECISION RELIED UPON BY THE COUNSEL FOR THE REVENUE IS WHOLLY DISTINGUISHABLE ON FACTS. 27 . IN THE CASE OF JAFFERALI K RATTONSEY (SUP RA) THE IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE ITAT MUMBAI. IN THE SAID CASE ALSO THE ASSESSE DECLARED THE LONG TERM CAPITAL GAIN TO THE EXTENT OF RS.4 94 51 910/ - I N RESPECT OF THE SALE OF THE SHARES OF SIX COMPANIES (ONE OF THE COMPAN Y IS PRANNETA INDUSTRIES LTD.). THE BROKER INVOLVED IN THE SAID CASE WAS M/S. MAHASAGAR PVT. LTD. T HERE W ERE ENQUIRIES ALSO MADE BY THE NSE AND BSE IN RESPECT OF THE CONTRACT NOTES FURNISHED BY THE SAID ASSESSEES. THE NSE INFORMED THAT THE BROKERS M/S. MAHASAGAR PVT . LTD. IS NEITHER HAVING REGISTERED TRADING MEMBER NOR A SUB - BROKER AFFILIATED TO ANY REGISTERED TRADING MEMBER OF THE STOCK EXCHANGES. IT WAS ALSO INFORMED THAT THE SHARES OF PRANNETA INDUSTRIES LTD. NOT LISTED ON THE EXCHANGE. IN THE SAID CASE STATEMEN T OF SHRI MUKESH CHOKSI DIRECTOR OF MAHASAGAR SECURITIES WAS RECORDED BY ISSUING THE SUMMONS U/S. 131 IN WHICH SHRI MUKESH CHOKSI SPECIFICALLY DENIED HAVING PURCHASE ANY SHARES FOR THE SAID ASSESSEE. IN THE SAID CASE ALSO THE CHARGE OF THE DEPARTMENT AGA INST THE ASSESSEE WAS IDENTICAL AS IN THE CASE OF THESE PRESENT ASSESSEES. AFTER CONSIDERING THE ENTIRE EVIDENCE THE TRIBUNAL 30 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE REJECTED THE CASE OF THE ASSESSING OFFICER THAT THE CAPITAL GAIN DECLARED BY THE ASSESSEE WAS ARRANGED TRANSACTIONS. THE OPERATI VE PART OF THE TRIBUNAL ORDER IS AS UNDER: 9.5. FROM THE ABOVE IT IS CLEAR THAT MR. MUKESH CHOKSI IS DOUBLE 'SPEAKING IN HIS STATEMENTS I.E. ONE GIVEN BEFORE THE A.O. AND THE ONE DURING CROSS EXAMINATION BEFORE THE A.O. UNDER THESE CIRCUMSTANCES ONE HAS T O SEE THE EVIDENTIARY VALUE OF A PERSON MAKING DOUBLE SPEAKING. WE FIND THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF EASTERN COMMERCIAL ENTERPRISES (SUPRA) HAS HELD THAT A MAN INDULGING IN DOUBLE SPEAKING CANNOT BE SAID BY ANY MEANS A TRUTHFUL MAN AT ANY STAGE AND NO COURT CAN DECIDE ON WHICH OCCASION HE WAS TRUTHFUL. WE FIND THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF MRS. UTTARA S. SHOREWALA (SUPRA) (IN WHICH ONE OF US - THE ACCOUNTANT MEMBER IS A PARTY) FOLLOWING THE DECISION OF HON'BLE CALCUT TA HIGH COURT UPHELD THE ORDER OF THE ID. CIT(A) IN HOLDING THAT THE A.O. CANNOT MAKE ANY ADDITION IN THE ASSESSEE'S HANDS DESPITE THE ASSESSEE NOT HAVING MADE ANY PAYMENT TO THE ENTITIES MENTIONED BY SHRI CHOKSI WHOSE STATEMENT IS BEING RELIED UPON BY HI M. THE CIT (A) ALSO NOTED THAT MR. MUKESH CHOKSI HAS BEEN VACILLATING RIGHT THROUGH AND HAS GIVEN DIFFERENT VERSIONS AT DIFFERENT STAGES OF THE PROCEEDINGS AND THEREFORE HIS EVIDENCE WAS UNRELIABLE. 9.6. IN VIEW OF THE ABOVE JUDICIAL DECISIONS THE STATEMEN T OF MR. MUKESH CHOKSI CANNOT BE A DECIDING FACTOR FOR REJECTING THE GENUINENESS OF THE PURCHASE OF SHARES BY THE ASSESSEE ESPECIALLY WHEN ALL OTHER SUPPORTING EVIDENCES FILED BY THE ASSESEE WERE NEITHER PROVED TO BE FALSE OR UNTRUE. WE FURTHER FIND MERIT IN THE SUBMISSION OF THE ID. COUNSEL FOR THE ASSESSE THAT THE DEMATERIALIZATION OF SHARES FROM PHYSICAL HOLDING IS A LENGTHY PROCESS AND TAKES CONSIDERABLE TIME. THEREFORE WHEN THERE IS NO DISPUTE TO THE DEMATERIALIZATION OF SHARES BEFORE THE DATE OF SALE THEREFORE THE SHARES WERE PURCHASED MUCH PRIOR TO THE DATE OF SALE. 9.7. THE CBDT CIRCULAR NO. 704 DTD. 28.4.1995 STATES THAT IT IS THE DATE OF BROKER'S NOTE THAT SHOULD BE TREATED AS THE DATE OF TRANSFER IN CASES OF SALE TRANSACTIONS OF SECURITIES PROV IDED SUCH TRANSACTIONS ARE FOLLOWED UP BY DELIVERY OF SHARES AND ALSO THE TRANSFER DEEDS. SIMILARLY IN RESPECT OF THE PURCHASERS OF THE SECURITIES THE HOLDING PERIOD SHALL BE RECKONED FROM THE DATE OF THE BROKER'S NOTE FOR PURCHASE ON BEHALF OF THE INVES TORS. THE CBDT CIRCULAR NO. 768 DTD. 24.6.1998 WAS ISSUED TO CLARIFY THE DETERMINATION OF DATE OF TRANSFER AND THE PERIOD OF HOLDING OF SECURITIES HELD IN DEMAT FORM. IT HAS BEEN STATED THERE IN THAT EARLIER CIRCULAR NO. 704 ISSUED BY THE CBDT RELATING TO THE 'DATE OF TRANSFER' AND 'PERIOD OF HOLDING' DOES NOT CHANGE EVEN WHEN SECURITIES ARE HELD IN THE DEMATERIALIZED FORM. THEREFORE IN VIEW OF THE ABOVE TWO CIRCULARS OF CBDT IT IS CLEAR THAT IN CASE OF SECURITIES THE 'DATE OF PURCHASE' HAS TO BE TAKEN FROM THE BROKER'S NOTE/CONTRACT NOTE AND THE PERIOD OF HOLDING IS ALSO TO BE RECKONED FROM THE 'DATE OF PURCHASE' AND NOT FROM THE 'DATE OF DEMATERIALIZATION'. SINCE THE HOLDING PERIOD OF THE SHARES AS PER THE 31 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE BROKERS NOTE AND ITS SUBSEQUENT SALE AFTER DEMATE RIALIZATION IS MORE THAN 12 MONTHS THEREFORE THE SHARES BECOME LONG TERM CAPITAL ASSET AND THE ASSESSEES CLAIM OF LONG TERM CAPITAL GAIN IS CORRECT. IN THIS VIEW OF THE MATTER WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE A.O. TO ACCEPT THE L ONG TERM CAPITAL GAIN DECLARED BY THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED. 28 . IN THE CASE OF SHRI AVINASH KANTILAL JAIN (SUPRA) THE IDENTICAL ISSUE HAS BEEN EXAMINED BY THE ITAT PUNE BENCHES PUNE (TO WHICH WE ARE THE PARTIES). THERE WAS IDENTICAL CHARGE OF THE ARRANGE D TRANSACTIONS. TH E TRIBUNAL DISMISSED THE CASE OF THE ASSESSING OFFICER AND HELD AS UNDER: 6. PER CONTRA THE LD. D.R. SUPPORTED THE ORDER OF THE LD CIT(A) ON THIS PAR TICULAR FINDING. WE FIND THAT IN THIS CASE THE ASSESSEE HAS FILED BROKERS NOTE I.E. FROM M/S. D.K. KHANDELWAL & CO. THE ASSESSEE HAS TAKEN CONSISTANT STAND THAT IT WAS OFF MARKET TRANSACTION AND AFTER PURCHASING THOSE SHARES THE ASSESSEE TRIED TO SELL OFF BUT HE COULD NOT DO SO. WE FURTHER FIND THAT THE ASSESSEE HAS REFLECTED THOSE TRANSACTIONS IN HIS BOOKS OF ACCOUNT. THE ASSESSEE HAS FILED THE PAPER BOOK IN WHICH HE HAS FILED THE BALANCE SHEET FOR THE F.Y. ENDING 31.3.2005 AND UNDER THE HEAD INVES TMENT AND DEPOSIT THE ASSESSEE HAS SHOWN THE SHARES OF PRIME CAPITAL MARKET (PAGE NO. 36 OF THE PAPER BOOK). WE FURTHER FIND THAT THE A.O HAS MADE THE GENERAL OBSERVATION IN RESPECT OF THE ENQUIRY INITIATED AGAINST THE BROKER M/S. D.B. KHANDELWAL & CO. BUT NO DETAILS ARE GIVEN IN THE ASSESSMENT ORDER WHETHER THE SAID ALLEGED ENQUIRY HAD ANY BEARING ON THE SHARE TRANSACTIONS OF THE ASSESSEE. THE ONLY RESERVATION OF THE A.O IS THAT THE ASSESSEE CONVERTED THE PHYSICAL SHARES IN THE ELECTRONIC FORM BY CRED ITING TO THE DEMAT ACCOUNT AFTER THE GAP OF 14 MONTHS. IN OUR OPINION THE PHYSICALLY HELD SHARES FOR 14 MONTHS BY THE ASSESSEE CANNOT BE THE CONCLUSIVE PROOF TO SHOW THAT THE PURCHASE DATE OF THE SAID SHARES SHOWN AS 17 TH MAY 2004 WAS NOT GENUINE. NEITHE R THE A.O NOR THE CIT(A) HAS DENIED THAT THE BROKER NEVER DENIED THE TRANSACTION OF THE ASSESSEE. 7. THE ASSESSEES CASE IS SQUARELY SUPPORTED BY THE DECISION OF ITAT MUMBAI BENCH IN THE CASE OF MUKESH R. MAROLIA (SUPRA) WHICH FACTS ARE IDENTICAL TO T HE CASE OF ASSESSEE. IN THE SAID CASE ALSO IT WAS CLAIMED THAT THE SAID ASSESSEE HAS PURCHASED 2 19 600 SHARES OF THE DIFFERENT COMPANIES. THE SHARES WERE SOLD THROUGH THE LISTED BROKERS. IN FACT THE BROKERS WHO CLAIMED TO HAVE SHOWN THE SAID SHARES R EFUSED THE TRANSACTIONS IN THE STATEMENT RECORDED U/S. 131 OF THE ACT IN SPITE OF THE FACT THAT EVEN THE STOCK EXCHANGE ALSO INFORMED THAT NO SUCH TRANSACTION WAS ENTERED INTO BY THE ASSESSEE THE TRIBUNAL HAS HELD AS UNDER : 10.3 PURCHASE AND SALE OF S HARES OUTSIDE THE FLOOR OF STOCK EXCHANGE IS NOT AN UNLAWFUL ACTIVITY. OFF - MARKET TRANSACTIONS 32 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE ARE NOT ILLEGAL. IT IS ALWAYS POSSIBLE FOR THE PARTIES TO ENTER INTO TRANSACTIONS EVEN WITHOUT THE HELP OF BROKERS. THEREFORE IT IS NOT POSSIBLE TO HOLD THAT THE TRANSACTIONS REPORTED BY THE ASSESSEE WERE QUITE SHAM ON THE LEGAL PROPOSITION ARRIVED AT BY THE CIT(A) THAT OFF - MARKET TRANSACTIONS ARE NOT PERMISSIBLE. THE ASSESSEE HAS STATED THAT THE TRANSACTIONS WERE MADE WITH THE HELP OF PROFESSIONAL MEDIATORS WHO ARE EXPERTS IN OFF - MARKET TRANSACTIONS. 10.4 (WHEN THE TRANSACTIONS WERE OFF - MARKET TRANSACTIONS THERE IS NO RELEVANCE IN SEEKING DETAILS OF SHARE TRANSACTIONS FROM STOCK EXCHANGES. SUCH ATTEMPTS WOULD BE FUTILE. STOCK EXCHANGES CANNOT GIVE DETAILS OF TRANSACTIONS ENTERED INTO BETWEEN THE PARTIES OUTSIDE THEIR FLOOR. THEREFORE THE RELIANCE PLACED BY THE ASSESSING AUTHORITY ON THE COMMUNICATIONS RECEIVED FROM THE STOCK EXCHANGES THAT THE PARTICULARS OF SHARE TRANSACTIONS ENTERED INTO BY THE ASSESSEE WERE NOT AVAILABLE IN THEIR RECORDS. THE ASSESSEE HAD MADE IT VERY CLEAR THAT THE TRANSACTIONS WERE NOT CONCLUDED ON THE FLOOR OF THE STOCK EXCHANGE. THE MATTER BEING SO THERE IS NO PROBATIVE VALUE FOR THE NEGATIVE REPLIES SOLICITED BY THE ASSESSING AU THORITY FROM THE RESPECTIVE STOCK EXCHANGE. WE ARE OF THE CONSIDERED VIEW THAT (THE MATERIALS COLLECTED BY THE ASSESSING AUTHORITY FROM THE STOCK EXCHANGES ARE NOT VALID TO DISPEL OR DISBELIEVE THE CONTENTIONS OF THE ASSESSEE.) 10.5 THE NEXT SET OF EVIDENC ES RELIED ON BY THE ASSESSING AUTHORITY ARE THE STATEMENTS OBTAINED FROM VARIOUS PARTIES. WHEN CERTAIN PERSONS LIKE RADHA ASHOK AND SANDEEP D. SHAH MADE NEGATIVE STATEMENTS AGAINST THE ASSESSEE PERSONS LIKE SATISH MANDOVARA AND MANGESH CHOKSI HAD GIVEN P OSITIVE STATEMENTS IN SUPPORT OF THE CONTENTION OF THE ASSESSEE. BUT THE ASSESSING AUTHORITY SOUGHT TO PICK AND CHOOSE THE STATEMENTS GIVEN BY VARIOUS PARTIES. WHILE ACCEPTING AND REJECTING SUCH STATEMENTS GIVEN BY THE PARTIES THE AO HAS MADE A MISTAKE OF ACCEPTING IRRELEVANT STATEMENTS AND REJECTING RELEVANT STATEMENTS. DURING THE RELEVANT PERIOD IN WHICH THE ASSESSEE TRANSACTED IN SHARES PERSONS LIKE RADHA ASHOK AND SANDEEP D. SHAH WERE NOT CARRYING ON THEIR BUSINESS OF BROKERS AS IN THE MANNER THEY CARRIED ON THE BUSINESS IN THE PAST. EVEN THEIR STOCK EXCHANGE MEMBERSHIPS WERE CANCELLED. IT WAS SHRI SATISH MANDOVARA WHO WAS CARRYING ON THE BUSINESS MAINLY FOR AND ON BEHALF OF SHRI MANGESH CHOKSHI DIRECTOR OF M/S. RICHMOND SECURITIES (P) LTD THOSE TWO PERSONS HAVE CATEGORICALLY ADMITTED BEFORE THE ASSESSING AUTHORITY THAT THEY HAD DEALINGS WITH THE ASSESSEE IN RESPECT OF THE SHARE TRANSACTIONS. THEY HAVE CONFIRMED THE TRANSACTIONS STATED BY THE ASSESSEE THAT HE HAD WITH THEM. THESE POSITIVE STATE MENTS MADE BEFORE THE ASSESSING AUTHORITY SUPPORTED THE CASE OF THE ASSESSEE. THERE IS NO FORCE IN THE ACTION OF THE ASSESSING AUTHORITY IN RELYING ON THE NEGATIVE STATEMENTS OF THE OTHER PARTIES WHOSE ROLE DURING THE RELEVANT PERIOD WAS EITHER IRRELEVAN T OR INSIGNIFICANT. THEREFORE IN THE FACTS AND CIRCUMSTANCES OF THE CASE IT IS OUR CONSIDERED VIEW THAT CERTAIN STATEMENTS RELIED 33 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE ON BY THE ASSESSING AUTHORITY DO NOT DILUTE THE PROBATIVE VALUE OF THE STATEMENTS GIVEN BY OTHER PERSONS IN FAVOUR OF THE ASSESSEE CONFIRMING THE SHARE TRANSACTIONS ENTERED INTO BY THE ASSESSEE. 10.6 THE ABOVE CIRCUMSTANCES HAVE MADE OUT A CLEAR CASE IN SUPPORT OF THE BOOK ENTRIES REFLECTING THE PURCHASE AND SALE OF SHARES AND ULTIMATELY SUPPORTING THE MONEY RECEIVED ON SALE OF SHARES AND FINALLY INVESTING THE SAME IN THE PURCHASE OF FLAT. THE CHAIN OF TRANSACTIONS ENTERED INTO BY THE ASSESSEE HAVE BEEN PROPERLY ACCOUNTED DOCUMENTED AND SUPPORTED BY EVIDENCES. 8. WE THEREFORE HOLD THAT THE LD CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE ASSESSEE HAS NOT PURCHASED THE SHARES ON 17.5.2004. WE ACCORDINGLY ALLOW THE GROUND NOS. 1 & 2 AND DIRECT THE A.O. TO GIVE THE BENEFIT OF THE EXEMPTION U/S. 10(38) OF THE ACT. 9. 10. 11. 12. THE REVENUE HAS OBJEC TED TO THE FINDING OF THE LD CIT(A) THAT THE GAINS ON THE SALE OF THE SHARES WHICH WERE PURCHASED IN THE OFF MARKET IS TO BE ASSESSED AS A CAPITAL GAIN ONLY. THE LD CIT(A) ACCEPTED THE CONTENTIONS OF THE ASSESSEE THAT THE SHARES OF THE M/S. PRIME CAPITAL MARKET LTD. WERE PURCHASED THROUGH THE BROKER M/S. D.K. KHANDELWAL & CO. THE LD CIT(A) ALSO NOTED THAT EVEN IF THE A.O HAS GIVEN THE REFERENCE IN RESPECT OF THE SEBI ENQUIRY AS WELL AS SUSPENSION OF THE LICENSE OF M/S. D.K. KHANDELWAL & CO. BUT AT THE SAME TIME IN RESPECT OF THE SHARES PURCHASED BY THE ASSESSEE AND SUBSEQUENTLY SOLD THROUGH DEMAT ACCOUNT NOTHING HAS BEEN BROUGHT ON RECORD. IN THE PRESENT CASE THE ASSESSEE HAS MAINTAINED THE BOOKS OF ACCOUNT AND THE ASSESSEE HAS ALSO REFLECTED THE PURCHASE TRANSACTION OF THE SHARES OF M/S. PRIME CAPITAL MARKET LTD. THE A.O. HAS NOT MADE ANY COMMENT IN RESPECT OF THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. THE ONLY RESERVATION OF THE A.O IS THAT THE ASSESSEE CONVERTED THE PHYSICAL SHARES INT O THE ELECTRONIC FORM BY CREDITING THE SAME IN THE DEMAT ACCOUNT AFTER 14 MONTHS. WE HAVE ALREADY HELD THAT THE ASSESSEE HAS PURCHASED THOSE SHARES ON 14 TH MAY 2004. ON OUR SAID FINDING THE GROUND NOS. 1 2 & 3 ARE TO BE DECIDED AGAINST THE REVENUE. 29 . AFTER EXAMINING FACTS AS WELL AS EVIDENCE ON RECORD IN THE BACK DROP OF THE LEGAL PRINCIPLES LAID DOWN IN ABOVE DECISIONS WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER HAS FAILED TO ESTABLISH A CLEAR CASE AGAINST THE ASSESSEES THAT THE SHAR E TRANSACTIONS ON WHICH THE LONG TERM CAPITAL GAINS HAVE BEEN DECLARED A RE SHAM AND CAMOUFLAGE . IN OUR CONSIDERED OPINION THE RELIANCE PLACED BY THE 34 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE ASSESSING OFFICER ON THE EVIDENCE WITHOUT AFFORDING OPPORTUNITY TO THE ASSESSEE TO CROSS - EXAMINE THE THRE E BROKERS WHO HAVE ALLEGEDLY DENIED THE ISSUANCE OF THE CONTRACT NOTES IS ALSO GOES IN FAVOUR OF THE ASSESSEES ON THE WELL SETTLED JU DICIAL PRINCIPLES THAT NO EVIDENCE SHOULD BE USED AGAINST THE ASSESSEE UNLESS THE ASSESSEE HAS BEEN GIVEN OPPORTUNITY TO CR OSS - EXAMINE THE DEPONENTS . MOREOVER AS ADMITTEDLY ALL THE SALES ARE R OUTED THROUGH THE DEMAT ACCOUNT CHARGE OF MANIPULATION BY THE ASSESSING OFFICER IS TOTALLY BASELESS . O NCE THE DOCUMENTARY EVIDENCE IS FILED BY THE ASSESSEE POINTING OUT SOME MINOR DIS CREPANCIES AND WITHOUT AFFORDING OPPORTUNITY TO CROSS - EXAMINE THE SAID BROKERS HAS NO WEIGHTAGE AS EVIDENCE IN THE JUDICIAL PROCEEDINGS. THE CHARGE OF SHARP RISE IN THE SHARE PRICES WITHOUT PROPER FINANCIAL FOOTING OF THE INVESTEE COMPANIES IS GENERAL CHA RGE AND IS NOT ESTAB LISHED BY THE ASSESSING OFFICER. W E ALSO HOLD THAT MERELY THERE IS A DELAY IN CON VERTING THE PHYSICAL SHARES INTO ELECTRONIC FORM I.E. THE DEMAT ACCOUNT THAT CANNOT BE THE CRITERIA TO HOLD THAT THE SHARES TRANSACTIONS ARE ARRANGE D AND CAMOUFLAGE D A S IN ALL THE CASES THE ASSESSEES HAVE RECORDED THEIR SHARE TRANSACTIONS IN THE REGULAR BOOKS OF ACCOUNT PRIOR TO THE DATE OF SEARCH . T HERE WAS HEAVY BURDEN ON THE ASSESSING OFFICER TO DESTROY THE CLAIM OF THE ASSESSEE BUT EXCEPT GOING ON THE G ENERAL PHILOSOPHY NOTHING HAS BEEN MADE OUT THE ASSESSING OFFICER TO SHOW THAT THE CLAIM OF THE ASSESSEE IN RESPECT OF THE SALE OF SHARES IS NOT CORRECT. WE THEREFORE HOLD THAT BOTH THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN HOLDING THAT THE ENTIRE SAL E PROCEEDS SHOWN BY THE ASSESSEES ARE OUT OF SHAM AND BOGUS ARRANGE D SHARE TRANSACTIONS. WE ALSO HOLD THAT ALL CONTRACT NOTES ARE GENUINE. WE THEREFORE ALLOW THE GROUNDS TAKEN BY THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO ACCEPT THE CLAIM OF THE LONG TERM AS WELL AS SHORT TERM CAPITAL GAIN S BY HOLDING THAT ALL THE PURCHASE S AND SALE S OF THE SHARES ARE THE GENUINE TRANSACTIONS. 35 ITA NOS. 1407 1408 1409 1410 1411 1412 1413 1414 1415 1416 1417 1418 1419 1420 & 1421/PN/2012 SMT. SMITA P. PATIL MR. SOMNATH P. PATIL MR. PRASAD D. PATIL PRASAD D. PATIL ( HUF) BHAGYASHREE P. PATIL & MR. YASHRAJ P. PATIL PUNE 3 0 . SO FAR AS THE ADDITION TOWARDS COME @ 6% IS CONCERNED IN OUR OPINION IT HAS NO BASE AT ALL NOR THERE IS ANY I OTA OF EVIDENCE . S AID ADDITION IS ONLY BASE D ON THE PRESUMPTION BY THE ASSESSING OFFICER AS IT IS CLEAR FROM ALL THE ASSESSMENT ORDER S . MOREOVER NOTHING WAS F OUND IN THE COURSE OF SEARCH ALSO AGAINST THESE ASSESSEES. WE THEREFORE HOLD THAT THE ADDITION OF THE ALLEGED PAYMENT OF COMMISSION @ 6% IS ALSO WITHOUT ANY MERIT AND ACCORDINGLY GROUNDS ARE ALSO DECIDED IN FAVOUR OF THESE ASSESSEES. 3 1 . THE LEARNED COUNSEL SUBMITS THAT IN THE CASE OF P.D. PATIL (HUF) THE PROCEEDINGS ARE INITIATED U/S. 147 BUT THE AS SESSEE IS NOT PRESSING THE SAID GROUND . A S THE ASSESSEE HAS NOT PRESS ED THE SAID GROUND CHALLENGING THE LEGALITY AND VALIDITY OF THE REASSESSMENT PROCEEDINGS THE SAME IS DISMISSED AS NOT PRESS ED . OTHER GROUNDS ARE ONLY ACADEMIC AND NO SPECIFIC ADJUDICAT ION IS REQUIRED. 3 2 . IN THE RESULT ALL THE APPEALS ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 29 - 07 - 20 1 3 SD/ - SD/ - ( G.S. PANNU ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE DATE D : 29 TH JULY 20 1 3 COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) CENTRAL PUNE 4 THE CIT CENTRAL PUNE 5 THE DR ITAT B BENCH PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE