ACIT,Circle - 31,, Kolkata v. Bajrang lal Agarwal (HUF),, Kolkata

ITA 1592/KOL/2009 | 2006-2007
Pronouncement Date: 25-03-2011

Appeal Details

RSA Number 159223514 RSA 2009
Bench Kolkata
Appeal Number ITA 1592/KOL/2009
Duration Of Justice 1 year(s) 6 month(s) 15 day(s)
Appellant ACIT,Circle - 31,, Kolkata
Respondent Bajrang lal Agarwal (HUF),, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 25-03-2011
Appeal Filed By Department
Bench Allotted A
Tribunal Order Date 25-03-2011
Date Of Final Hearing 17-03-2011
Next Hearing Date 17-03-2011
Assessment Year 2006-2007
Appeal Filed On 10-09-2009
Judgment Text
1 A IN THE INCOME TAX APPELLATE TRIBUNAL BENCH- A KO LKATA [ . . . . . . . . . .. . . .. . !' ] BEFORE SHRI B.R.MITTAL JUDICIAL MEMBER & SRI C.D. RAO ACCOUNTANT MEMBER # # # # / ITA NO. 1592 (KOL) OF 2009 $%& '( / ASSESSMENT YEAR 2006-07 ASSTT.COMMISSIONER OF INCOME-TAX CIRCLE-31 KOLKATA. BAJRANGLAL AGARWAL (HUF) KOLKATA. (PAN-AAEHB3667A) (+ / APPELLANT ) - % - - VERSUS - (/0+ / RESPONDENT ) + 1 2 !/ FOR THE APPELLANT: / SRI P.C. NAYAK /0+ 1 2 ! / FOR THE RESPONDENT: / SRI S.L. KOCHAR !3 / ORDER ( . . . . . . . . ) (B.R.MITTAL) JUDICIAL MEMBER : THE DEPARTMENT HAS FILED THIS APPEAL AGAINST THE ORDER OF LD. C.I.T.(A)-XIX KOLKATA DATED 10/06/2009 FOR ASSESSMENT YEAR 2006-0 7 ON THE FOLLOWING GROUND :- THE AO TREATED THE SUM OF RS.32 46 426/- AS UNEXPLAINED CASH CREDIT U/S 68 SINCE THE ALLEGED LONG TERM CAPITAL GAIN OF RS.32 46 426/ - SHOWN BY THE ASSESSEE IS FICTITIOUS. THE AO OBSERVED DURING THE COURSE OF AS SESSMENT PROCEEDINGS THAT AS PER THE RULES OF THE STOCK EXCHANGE EVERY TRANSACTION HAS TO BE ROUTED THROUGH THE EXCHANGE AND IN CASE IT IS NOT ROUTED THE INFORMA TION HAS TO BE GIVEN TO THE EXCHANGE IN RESPECT OF THE TRANSACTIONS BY THE CONC ERNED BROKER BY THE CLOSE OF DAY. SINCE NONE OF THESE HAPPENED IN ASSESSEES CASE THE ALLEGED PURCHASE TRANSACTIONS WERE NOT TREATED AS GENUINE. THE LD. CIT(A) DELETE D THE ADDITION WITHOUT CONSIDERING THESE FACTS. SO SECOND APPEAL IS SUGGESTED IN THIS GROUND ALSO SINCE A QUESTION OF LAW IS INVOLVED REGARDING GENUINENESS OF SHARE TRANSACTIONS ALLEGED TO BE MADE BY THE ASSESSEE. 2. THE RELEVANT FACTS GIVING RISE TO THIS APPEAL A RE THAT THE ASSESSEE ORIGINALLY FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION SHOWING TOTAL INCOME OF RS.21 11 638/- WHICH WAS SUBSEQUENTLY REVISED A T RS.21 32 843/-. THE ASSESSEE HAS MAINLY DERIVED INCOME FROM RENT CAPITAL GAINS AND OTHER SOURCES. THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT ON A TOTAL INCOME OF RS.53 79 270/- MAKING THEREBY AN 2 ADDITION OF RS.32 46 426/- U/S. 68 OF THE ACT BEING THE PROFIT ON SALE OF SHARES OF M/S. POONAM PHARMACEUTICALS LTD. AND M/S. SHREE SECURITI ES LTD. WHICH WAS RETURNED BY THE ASSESSEE AS LONG-TERM CAPITAL GAINS (LTCG). 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS TH E A.O. OBSERVED THAT THE ASSESSEE HAS SHOWN LTCG ON SALE OF SHARES OF M/S. POONAM PHA RMACEUTICALS LTD. AND M/S. SHREE SECURITIES LTD. THE A.O. OBSERVED THAT THE A SSESSEE HAD PURCHASED 13 400 SHARES OF M/S. POONAM PHARMACEUTICALS LTD. ON 25/3/2003 @ RS.7.02 PER SHARE THROUGH THE BROKER M/S. AHILYA COMMERCIAL PVT. LTD. AND 17 000 SHARES OF M/S.SHREE SECURITIES LTD. ON 16/2/2004 @ RS. 6.77 PER SHARE THROUGH THE BROKER M/S. PRADIP KUMAR DAGA. HE FURTHER OBSERVED THAT 3 500 SHARES AND 2 900 SHA RES OF M/S. POONAM PHARMACEUTICALS LTD. WERE SOLD ON 16/8/2005 AND 17/8/2005 RESPECTIV ELY. THESE SALES WERE MADE BY THE ASSESSEE THROUGH THE BROKER M/S. AHILYA COMMERCIAL PVT. LTD. THE ASSESSEE FURTHER SOLD 5 000 SHARES 1000 SHARES AND 1 000 SHARES OF M/S. SHREE SECURITIES LTD. ON 5/9/2005 20/9/2005 AND 28/9/2005 RESPECTIVELY THROUGH THE SH ARE BROKER SANJU KABRA. AS A RESULT OF SALE TRANSACTIONS OF THE ABOVE MENTIONED SHARES OF M/S. POONAM PHARMACEUTICALS LTD. AND M/S. SHREE SECURITIES LTD. THE ASSESSEE HAD EA RNED PROFIT OF RS.32 46 426/- [RS.33 38 744 RS.92 318]. IN ORDER TO ASCERTAIN THE GENUINENESS OF THE TRANSACTIONS THE A.O. CALLED FOR INFORMATION CALCUTTA STOCK EXCH ANGE U/S. 133(6) OF THE ACT. IN RESPONSE THE CALCUTTA STOCK EXCHANGE INFORMED THAT M/S. PRADIP KUMAR DAGA HAD TRADED IN THE SCRIPS OF M/S. SHREE SECURITIES LTD. ON 16/2/2004 IN THE ON-LINE TRADING SYSTEM OF THE EXCHANGE. THE A.O. HOWEVER OBSERVE D THAT THE TRADE NUMBERS AND ORDER NUMBERS APPEARING IN THE CONTRACT NOTES WERE NOT TA LLYING WITH THOSE OF THE DATE AVAILABLE WITH THE CALCUTTA STOCK EXCHANGE. IN REGA RD TO THE PURCHASE TRANSACTIONS OF THE SCRIPS OF M/S. POONAM PHARMACEUTICALS LTD. ON 25/3/ 2003 BY M/S. AHILYA COMMERCIAL PVT. LTD. IT WAS INFORMED BY THE CALCUTTA STOCK EX CHANGE THAT THE SAID BROKER HAD NOT TRADED THE SAID SCRIPS IN THE ON-LINE TRADING SYSTE M OF THE EXCHANGE. IT WAS ALSO INTIMATED BY THE CALCUTTA STOCK EXCHANGE THAT M/S. AHILYA COMMERCIAL PVT. LTD. WAS GUILTY OF JACKING UP THE PRICES OF SOME OF THE SCRI PS AND IT WAS SUSPENDED FROM THE EXCHANGE. THE A.O. FURTHER OBSERVED THAT THERE WAS ABNORMAL RISE IN THE PRICE OF THE SCRIPS OF THE AFORESAID TWO COMPANIES WHICH GAVE R ISE SUSPICION TO HIM ABOUT THE 3 GENUINENESS OF THE TRANSACTION. CONSIDERING THE ABO VE THE A.O. DOUBTED THE GENUINENESS OF THE TRANSACTIONS AND THEREFORE MAD E THE ADDITION OF RS.32 46 426/- U/S. 68 OF THE ACT CONSIDERING THE LTCG DECLARED BY THE ASSESSEE AS NOT GENUINE. 4. BEING AGGRIEVED THE ASSESSEE FILED APPEAL BEFO RE THE LD. C.I.T.(A). THE LD. C.I.T.(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HELD THAT THE A.O. WAS NOT JUSTIFIED IN TREATING THE LTCG AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT. THE LD. C.I.T.(A) HAS STATED THAT THERE IS NO EVIDENCE TO S UGGEST THAT THE ASSESSEE INTRODUCED HIS OWN MONEY IN THE BOOKS OF ACCOUNT IN THE GARB OF LT CG. THE LD. C.I.T.(A) HAS ALSO OBSERVED THAT THE A.O. HAS NOT MADE ADDITION U/S. 6 8 OF THE ACT OF THE ENTIRE SALE PROCEEDS OF THE SHARES BUT HAS DEDUCTED THE PURCHA SE PRICE OF THOSE SHARES WHICH IS CONTRARY TO THE CONCLUSION DERIVED BY HIM. THE LD. C.I.T.(A) ALSO CONSIDERED SEVERAL ORDERS OF THE TRIBUNAL AND DECISIONS OF HIGH COURTS AND SOME OF THEM ARE AS UNDER :- A) ITO VS. RAJ KUMAR AGARWAL [ITA NO. 1130 (KOL)/2007] B) CIT VS. CARBO INDUSTRIAL HOLDINGS LTD. [244 ITR 42 2 (CAL)] C) CIT VS. EMERALD COMMERCIAL LTD. [250 ITR 539 (CAL)] D) MUKESH R. MAROLIA VS. ACIT [(2006) 6 SOT 247 (MUM) ] E) ACIT VS. SWAPAN KUMAR BISWAS [ITA NO. 121 (KOL)/200 8] F) DCIT VS. SHRI BHAGWATI PRASAD AGARWAL [ITA NO.1230 (KOL)/2008] G) SHRI JAYANT HIMANI VS. ITO [ITA NO. 340 (KOL)/2007] H) SHRI ACCHYALAL SHAW VS. ITO [ITA NO. 1977 (KOL)/200 8] I) CIT VS. KORLAY TRADING CO. LTD. [232 ITR 820 (CAL) ] J) ACIT VS. RITU KAKRANIA [ITA NO. 939 (KOL)/2008] K) ITO VS. KANTA KANCHAN RANI [ITA NO. 238 (KOL)/2007 ] THE LD. C.I.T.(A) THEREFORE DELETED THE ADDITION OF RS.32 46 426/- MADE U/S. 68 OF THE ACT AND DIRECTED THE A.O. TO TREAT THE SAID GAIN OF RS.32 46 426/- AS LTCG. THE RELEVANT PORTION OF THE ORDER OF LD. C.I.T.(A) IS AS UNDER : - (8) I HAVE CONSIDERED THE SUBMISSION OF THE APPE LLANT AND PERUSED THE ASSESSMENT ORDER AND REASONS FOR MAKING THE ADDITION U/S. 68 O F THE I.T. ACT. I HAVE ALSO GONE THROUGH THE ASSESSMENT RECORDS MAINTAINED BY THE A. O. DURING THE RELEVANT PREVIOUS YEAR THE APPELLANT HAS SOLD SHARES OF POONAM PHARM A AND SHREE SECURITIES LTD. WHICH RESULTED INTO GAIN OF RS.32 46 426/-. THE SAID GAIN WAS RETURNED BY THE APPELLANT AS LONG TERM CAPITAL GAIN AND CLAIMED THE EXEMPTION U/ S. 10(38) OF THE I.T.ACT. HOWEVER THE A.O. HAS TREATED THE GAIN ON SALE OF S HARES AS UNEXPLAINED CASH CREDIT U/S 68 OF THE I.T. ACT IN THE HANDS OF THE ASSESSEE. ON PERUSAL OF DOCUMENTS FILED BY THE APPELLANT IT IS OBSERVED FROM THE BALANCE-SHEET AS ON 31.3.2003 THAT THE APPELLANT HAS SHOWN INVESTMENT IN THE SHARES OF POONAM PHARMA TOT ALLING TO 13400 SHARES PURCHASED 4 ON 25.3.2003. AS PER THE DEMAT ACCOUNT MAINTAINED W ITH DEPOSITORY PARTICIPANT M/S. DAULAT SECURITIES LTD. THE SAID 13400 SHARES WERE CREDITED IN THE DEMAT ACCOUNT OF THE APPELLANT. SIMILARLY ON PERUSAL OF BALANCE SHEET A S ON 31.3.2004 IT IS SEEN THAT THE APPELLANT HAS PURCHASED 17000 SHARES OF SHREE SECUR ITIES LTD. ON 16.2.2004. THE 13400 SHARES OF M/S. POONAM PHARMA WHICH WERE PURCHASED D URING A.Y. 2003-04 WERE ALSO REFLECTED IN THE BALANCE SHEET AS ON 31.3.2004. THE 17000 SHARES OF SHREE SECURITIES LTD. PURCHASED ON 16.2.2004 WERE CREDITED IN THE DE MAT ACCOUNT OF THE APPELLANT ON 26.2.2004. THUS IT IS OBSERVED FROM THE BALANCE SH EET AS WELL AS DEMAT ACCOUNT THAT AS ON 31.3.2004 THE APPELLANT WAS HOLDING 13400 SHARE S OF POONAM PHARMA AND L700 SHARES OF SHREE SECURITIES LTD. DURING ASSESSMENT Y EAR 2005-06 THE APPE1LANT HAS SOLD 7000 SHARES OF POONAM PHARMA AND THE ASSESSMENT FOR THE SAID YEAR WAS COMPLETED BY THE ACIT CIRCLE- 31 U/S. 143(3)(II) OF THE ACT. DU RING THE RELEVANT PREVIOUS YEAR I.E. A.Y. 2006-07 THE APPELLANT HAD FURTHER SOLD 6400 S HARES OF POONAM PHARMA AND 7000 SHARES OF SHREE SECURITIES LTD. THE BALANCE 10000 S HARES OF SHREE SECURITIES HAS BEEN SHOWN AS CLOSING BALANCE AS ON 31.3.2006. THE SHARE S SO SOLD BY THE APPELLANT HAS BEEN DEBITED IN THE DEMAT ACCOUNT OF THE APPELLANT AND H E HAS RECEIVED THE SALE PROCEEDS BY CHEQUE FROM THE SAID BROKERS. (9) THE A.O. HAS NOT ACCEPTED THE CLAIMED OF THE APPELLANT MERELY ON THE BASIS OF INFORMATION RECEIVED FROM THE CALCUTTA STOCK EXCHAN GE. IN THE OPINION OF A.O. THE PURCHASES MADE BY THE APPELLANT IN THE SCRIPS OF PO ONAM PHARMA AND SHREE SECURITIES LTD. WERE NOT GENUINE BECAUSE IN THE CASE OF SCRIP S OF POONAM PHARMA THE BROKER M/S. AHILYA COMMERCIAL PVT. LTD. HAD NOT CARRIED OUT THE TRANSACTION ON THE ON-LINE TRADING SYSTEM OF THE EXCHANGE AND IF THE TRANSACTION HAD B EEN DONE OUT OF STOCK EXCHANGE SAME WAS NOT INFORMED TO THE STOCK EXCHANGE. IN THE CASE OF SCRIP OF SHREE SECURITIES LTD. THOUGH AS PER THE INFORMATION OF THE STOCK E XCHANGE THE TRANSACTION WAS DONE ON THE ON-LINE SYSTEM OF THE EXCHANGE THE TRADE NUMB ER APPEARING ON THE CONTRACT NOTES WERE NOT MATCHING WITH THE RECORD MAINTAINED BY THE STOCK EXCHANGE. UNDER THE CIRCUMSTANCES IT WAS HELD BY THE A.O. THAT THE PUR CHASE TRANSACTIONS OF THESE SCRIPS WERE NOT GENUINE AND CONSEQUENTLY THE SALE TRANSAC TIONS WERE ALSO NOT GENUINE. ON THE OTHER HAND THE APPELLANT HAS PRODUCED THE EVIDENCE S IN THE FORM OF RECORDING OF INVESTMENT IN PRECEDING YEARS BALANCE SHEETS CONTR ACT NOTES BANK STATEMENT AND DEMAT ACCOUNT. WHILE ARRIVING ON HIS CONCLUSION THE AO H AD ALSO MADE OBSERVATIONS REGARDING PRICE RIGGING AND SUSPENSION OF BROKERS F ROM THE EXCHANGE ETC. HOWEVER I AM OF THE OPINION THAT MERELY FOR THE REASON THAT E ITHER THE BROKER HAS NOT REPORTED THE OFF-MARKET TRANSACTION TO THE EXCHANGE OR THERE WAS ANY DISCREPANCY ON ACCOUNT OF TRADE NUMBERS RECORDED ON CONTRACT NOTES VIS--VIS IN THE RECORD OF THE EXCHANGE THE PURCHASE TRANSACTIONS MADE BY THE APPELLANT CANNOT BE TREATED AS FICTITIOUS OR NOT GENUINE. THE EVIDENCES PRODUCED BY THE APPELLANT CA NNOT BE BRUSHED ASIDE MERELY ON THE BASIS OF INFORMATION RECEIVED FROM THE STOCK EX CHANGE WITHOUT BRINGING ANYTHING POSITIVE ON RECORD TO CONTROVERT OR TO PROVE THAT T HE EVIDENCES PRODUCED BY THE APPELLANT WERE FALSE AND FICTITIOUS. IF THE BROKERS HAD NOT C OMPLIED ANY RULE & REGULATION OF THE STOCK EXCHANGE FOR THAT THE APPELLANT CANNOT BE HE LD RESPONSIBLE AND HE CANNOT BE PUNISHED FOR THE SAME. HAD THE PURCHASE TRANSACTION BEEN FICTITIOUS THE SHARES WOULD HAVE NOT BEEN CREDITED TO THE DEMAT ACCOUNT OF THE APPELLANT. IT IS NOT THE CASE OF THE A.O. THAT THE SHARES WHICH WERE CREDITED TO THE DEM AT ACCOUNT OF THE APPELLANT DID NOT EXIST AT ALL. ONCE THE SHARES HAS BEEN CREDITED TO THE DEMAT ACCOUNT AND ALSO APPEARING IN THE BALANCE-SHEET OF THE APPELLANT FOR THE YEAR ENDED ON 31.3.2003 TO 31.3.2005 I AM OF THE OPINION THAT THERE IS NO REASON TO DISBELIEV E THE TRANSACTIONS. FURTHER THERE IS NO 5 MATERIAL ON RECORD TO PROVE THAT THERE WAS ANY CONN IVANCE BETWEEN THE BROKERS AND THE APPELLANT. AN OFF-MARKET TRANSACTION OF PURCHASE OR SALE OF THE SHARES IS ALSO A GENUINE TRANSACTION AND IT CANNOT BE SAID THAT IF THE SHAR E TRANSACTIONS HAS NOT BEEN ROUTED THROUGH THE STOCK EXCHANGE THE TRANSACTIONS WERE N OT GENUINE. THERE IS ALSO NO EVIDENCE TO SUGGEST THAT THE APPELLANT HAS INTRODUC ED HIS OWN MONEY IN THE BOOKS OF ACCOUNT IN THE GARB OF LONG TERM CAPITAL GAINS. THE SUSPICION CANNOT REPLACE THE REAL EVIDENTIAL DOCUMENTS. THE A.O. HAS MADE ADDITION OF RS.32 46 426/- U/S. 68 OF THE ACT. THE AMOUNT OF RS.32 46 426/- IS THE NET GAIN ON SAL E OF SHARES SHOWN BY THE APPELLANT. IT MEANS THAT A.O. HAS NOT MADE ADDITION U/S. 68 OF TH E ENTIRE SALE PROCEEDS OF THE SHARES BUT HAS DEDUCTED THE PURCHASE PRICE OF SHARES AT RS .92 318/- WHICH IS CONTRARY TO THE CONCLUSION DERIVED BY HIM. UNDER THE CIRCUMSTANCES I AM OF THE OPINION THAT THE A.O. WAS NOT JUSTIFIED IN TREATING THE LONG TERM CAPITAL GAINS AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE I.T. ACT. HENCE THIS APPEAL BY THE DEPARTMENT. 5. DURING THE COURSE OF HEARING THE LD. DEPARTMEN TAL REPRESENTATIVE RELIED ON THE ORDER OF THE A.O. HE SUBMITTED THAT THE TRANSACTIO NS IN RESPECT OF THE SHARES UNDER CONSIDERATION WERE NOT ROUTED THROUGH CALCUTTA STOC K EXCHANGE IN SPITE OF THE FACT THAT AS PER BY-RULES OF THE STOCK EXCHANGE EVERY TRANSA CTION HAS TO BE ROUTED THROUGH STOCK EXCHANGE. HE FURTHER SUBMITTED THAT THE STOCK BROK ER M/S. AHILYA COMMERCIAL PVT. LTD. WAS FOUND GUILTY OF JACKING UP THE PRICES OF SOME O F THE SCRIPS BY SEBI AND THE SAID BROKER WAS ALSO SUSPENDED. THE LD. DEPARTMENTAL RE PRESENTATIVE SUBMITTED THAT THE A.O. HAS RIGHTLY HELD THAT THE ASSESSEE HAS NOT ACT UALLY EARNED THE CAPITAL GAINS AS CLAIMED BY HIM AND HE INTRODUCED HIS OWN UNACCOUNTE D MONEY INTO THE BOOKS AND CREDITED THE SAME IN THE FORM OF LTCG. THE LD. DEP ARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ORDER OF THE A.O. SHOULD BE CONFIRMED BY V ACATING THE ORDER OF LD. C.I.T.(A). 6. ON THE OTHER HAND THE LD. A/R OF THE ASSESSEE MADE HIS SUBMISSIONS JUSTIFYING THE ORDER OF LD. C.I.T.(A). HE SUBMITTED THAT 13 4 00 SHARES OF M/S. POONAM PHARMACEUTICALS LTD. WERE PURCHASED BY THE ASSESSEE IN ASSESSMENT YEAR 2003-04 AND OUT OF WHICH 7 000 SHARES WERE SOLD BY THE ASSESSEE IN THE ASSESSMENT YEAR 2005-06 SHOWING THE PROFIT OF RS.20 42 460/-. HE SUBMITTED THAT THE DEPARTMENT ACCEPTED THE SAID TRANSACTION AS GENUINE AND WHEREAS IN THE ASSE SSMENT YEAR UNDER CONSIDERATION THE DEPARTMENT HAD DOUBTED THE SALE OF BALANCE 6 400 SH ARES OF THE ABOVE COMPANY AS BOGUS. HE REFERRED PAGE-1 OF THE PAPER BOOK WHICH CONTAINED THE DETAILS OF THE PURCHASE AND SALE OF 13 400 SHARES OF POONAM PHARMA CEUTICALS LTD. TO SUBSTANTIATE HIS 6 ABOVE SUBMISSION. THE LD. A/R ALSO REFERRED PAGE-2 OF THE PAPER BOOK WHICH IS A STATEMENT OF DEMAT ACCOUNT AND SUBMITTED THAT THE S AID SHARES WERE ENTERED IN THE ASSESSEES DEMAT ACCOUNT ON 23/4/2003. HE FURTHER REFERRED PAGE-3 OF THE PAPER BOOK WHICH IS ALSO A COPY OF DEMAT ACCOUNT AND SUBMITTED THAT THE SALE OF 7 000 SHARES OF M/S. POONAM PHARMACEUTICALS LTD. IN THE PRECEDING A SSESSMENT YEAR I.E. ASSESSMENT YEAR 2005-06 WERE DEBITED AND ONLY THE BALANCE 6 4 00 SHARES WERE CARRIED FORWARD IN THE ASSESSMENT YEAR UNDER CONSIDERATION WHICH WERE SOLD AND NOT DISPUTED BY THE DEPARTMENT. THE LD. A/R ALSO REFERRED PAGE-4 OF THE PAPER BOOK WHICH IS ALSO A COPY OF DEMAT ACCOUNT AND SUBMITTED THAT THE BALANCE 6 400 SHARES OF M/S. POONAM PHARMACEUTICALS LTD. WERE SOLD AND DEBITED TO THE A SSESSEES DEMAT ACCOUNT. THE LD. A/R ALSO REFERRED PAGE-7 OF THE PAPER BOOK WHICH I S A COPY OF THE BANK STATEMENT FOR THE PERIOD 22/9/2002 TO 30/4/2003 AND SUBMITTED THA T THE ASSESSEE MADE THE PAYMENTS OF RS.94 068/- TO THE BROKER FOR PURCHASE OF SHARES OF M/S. POONAM PHARMACEUTICALS LTD. BY ACCOUNT PAYEE CHEQUE. HE SUBMITTED THAT THE ASS ESSEE ALSO RECEIVED THE SALE PROCEEDS OF THE SHARES SOLD BY ACCOUNT PAYEE CHEQUE . SIMILARLY IN RESPECT OF 17 000 SHARES OF M/S. SHREE SECURITIES LTD. THE LD. A/R S UBMITTED THAT THE SAME WERE PURCHASED BY THE ASSESSEE IN ASSESSMENT YEAR 2004-05 THROUGH THIS STOCK BROKER WHO WAS A MEMBER OF CALCUTTA STOCK EXCHANGE IN THE ASSESSMENT YEAR 2004-05 AND THE PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES. HE REFERRED PA GE-8 OF THE PAPER BOOK TO SUBSTANTIATE HIS SUBMISSION THAT THE PAYMENT OF RS. 1 15 090/- WAS MADE ON 23/2/2004. HE SUBMITTED THAT THE SAID SHARES WERE SOLD BY THE ASSESSEE IN THE BREAK-UP OF 5 000 SHARES ON 05/9/2005 1000 SHARES ON 20/9/2005 AND 1 000 SHARES ON 28/9/2005 FOR AGGREGATE SUM OF RS.13 51 588/- AND REFERRED PAGE-1 OF THE PAPER BOOK WHICH CONTAINS THE ABOVE DETAILS. HE SUBMITTED THAT THE BALANCE 1 0 000 SHARES WERE CARRIED FORWARD TO NEXT ASSESSMENT YEAR AND THE A.O. HAS NOT DOUBTED T HE INVESTMENT IN RESPECT OF CARRIED FORWARD BALANCE SHARES TO THE NEXT YEAR. THE LD. A /R ALSO REFERRED PAGE-5 OF THE PAPER BOOK WHICH IS A COPY OF DEMAT STATEMENT AND SUBMIT TED THAT THE SAID 17 000 SHARES WERE CREDITED TO THE ASSESSEES ACCOUNT ON 26/2/200 4. HE SUBMITTED THAT THE SALE OF 7 000 SHARES AND CARRY FORWARD OF BALANCE 10 000 SH ARES OF M/S. SHREE SECURITIES LTD. ARE ALSO DULY REFLECTED IN THE DEMAT ACCOUNT AND RE FERRED PAGE-6 OF THE PAPER BOOK TO 7 SUBSTANTIATE HIS SUBMISSION. THE LD. A/R SUBMITTED THAT THE ASSESSEE FILED ALL THE SUPPORTING EVIDENCES TO ESTABLISH THE GENUINENESS O F THE SHARE TRANSACTIONS ENTERED INTO FOR PURCHASE AND SALE OF SHARES. HE SUBMITTED THAT THE ASSESSEE DISCHARGED THE PRIMARY ONUS CAST UPON HIM. THE LD. A/R FURTHER SUBMITTED THAT THE SHARES WERE PURCHASED AND SOLD THROUGH REGISTERED BROKER OF THE CALCUTTA STOC K EXCHANGE AND THE PURCHASE AMOUNT WAS PAID BY ACCOUNT PAYEE CHEQUES AND THE SALE PROC EEDS WERE ALSO RECEIVED BY ACCOUNT PAYEE CHEQUES WHICH WERE NOT DOUBTED BY TH E A.O. THE LD. A/R SUBMITTED THAT THERE IS NO DUTY UPON THE ASSESSEE TO SEE WHET HER THE BROKERS MADE COMPLIANCE WITH THE REGULATIONS WHICH ARE IMPOSED UPON THEM BY THE CALCUTTA STOCK EXCHANGE. HE SUBMITTED THAT THE A.O. HAS ARRIVED AT THE CONCLUSI ON THAT THE PURCHASE AND SALE TRANSACTIONS WERE NOT GENUINE MERELY ON THE BASIS O F AN INFORMATION RECEIVED FROM CALCUTTA STOCK EXCHANGE BUT CALCUTTA STOCK EXCHANG E IN ITS REPLY NOWHERE MENTIONS THAT PURCHASE TRANSACTIONS MADE BY THE ASSESSEE THR OUGH THE BROKERS WERE NOT GENUINE. THE LD. A/R SUBMITTED THAT THE SHARES OF M/S. POONA M PHARMACEUTICALS LTD. PURCHASED IN ASSESSMENT YEAR 2003-04 WERE DULY APPEARED IN TH E BALANCE SHEET FILED ALONG WITH THE RETURN OF INCOME AND PART OF THE SHARES SOLD IN ASS ESSMENT YEAR 2005-06 WERE ACCEPTED BY THE DEPARTMENT. HE SUBMITTED THAT THE SHARES OF M/S. SHREE SECURITIES LTD. WERE PURCHASED IN FINANCIAL YEAR 2003-04 AND THE SAME WE RE ALSO APPEARING IN THE BALANCE SHEET FILED AS ON 31/3/2004 ALONG WITH THE RETURN O F INCOME FOR ASSESSMENT YEAR 2004- 05. THE LD. A/R RELYING ON THE ORDER OF THIRD MEMB ER I.T.A.T. AGRA BENCH IN THE CASE OF BAIJNATH AGARWAL VS. ACIT [(2010) 43 DTR 149] SU BMITTED THAT IF THE A.O. IS INFLUENCED BY THE GENERAL OBSERVATION OF THE INVEST IGATING WING THE TRANSACTION CANNOT BE CONSIDERED AS BOGUS AND ACCORDINGLY IN THE SAI D CASE THE TRIBUNAL DISAPPROVED THE APPROACH OF THE A.O. TO DOUBT THE GENUINENESS OF TH E TRANSACTION AND HELD THAT THE INCOME DISCLOSED BY THE ASSESSEE IS CHARGEABLE TO T AX AS LTCG AND CANNOT BE TREATED AS INCOME FROM UNDISCLOSED SOURCES. THE LD. A/R SUBMI TTED THAT THE ABOVE CASE APPLIED TO THE CASE OF THE ASSESSEE AND THE ORDER OF THE LD. C .I.T.(A) SHOULD BE CONFIRMED. 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE PART IES. WE HAVE ALSO PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND EVIDENCE ON REC ORD INCLUDING THE DOCUMENTS SUBMITTED IN THE PAPER BOOK. THE ISSUE BEFORE US IS WHETHER THE ASSESSEE HAS RIGHTLY 8 CLAIMED THE LTCG IN THE SUM OF RS.32 46 426/- OUT O F SALE OF SHARES OF M/S. POONAM PHARMACEUTICALS LTD. & M/S. SHREE SECURITIES LTD. O R WHETHER THE A.O. WAS JUSTIFIED IN TREATING THE TRANSACTIONS AS BOGUS AND AS SUCH UNEX PLAINED CASH CREDIT U/S. 68 OF THE ACT. WE HAVE ALREADY NARRATED THE FACTS OF THE CASE ABOV E. ON PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW AS ALSO THE EVIDENCES FILED BY TH E ASSESSEE IN THE PAPER BOOK WHICH INCLUDED DEMAT ACCOUNT WE OBSERVE THAT THE ASSESSE E HAD CLAIMED LTCG OUT OF THE TRANSACTIONS OF THE FOLLOWING SHARES :- DETAILS OF PURCHASE OF SHARES : NAME OF COMPANY NO. OF SHARES PURCHASED DATE OF PURCHASE RATE PER SHARE NAME OF BROKER POONAM PHARMACEUTICALS LTD 13 400 25/3/2003 (AY 03-04) 7.02 AHILYA COMMERCIAL P. LTD SHREE SECURITIES LTD. 17 000 16/2/2004 (AY 04-05) 6.77 PRADIP KUMAR DAGA DETAILS OF SALE OF SHARES : NAME OF COMPANY NO. OF SHARES SOLD DATE OF SALE RATE PER SHARE NAME OF BROKER POONAM PHARMACEUTICALS LTD 7 000 3 500 2 900 08/6/2004 (AY 05-06) 16/8/2005 17/8/2005 (AY 06-07) 298.8 302.9 302.9 AHILYA COMMERCIAL P. LTD. SHREE SECURITIES LTD. 5 000 1 000 1 000 05/9/2005 20/9/2005 28/9/2005 (AY 06-07) 200.1 200.2 199.9 SANJU KABRA FROM THE ABOVE CHART IT WOULD BE EVIDENT THAT OUT OF 13 400 SHARES OF M/S. POONAM PHARMACEUTICALS LTD. THE ASSESSEE HAD SOLD 7 000 S HARES IN ASSESSMENT YEAR 2005-06 AND THE BALANCE 6 400 SHARES WERE SOLD DURING THE ASSES SMENT YEAR UNDER CONSIDERATION. THE SHARES SOLD IN ASSESSMENT YEAR 2005-06 HAS BEEN ACC EPTED VIDE ASSESSMENT ORDER PASSED U/S. 143(3) OF THE ACT. IT IS FURTHER EVIDENT FROM THE ABOVE CHART THAT OUT OF 17 000 SHARES OF M/S. SHREE SECURITIES LTD. PURCHASED DURI NG ASSESSMENT YEAR 2004-05 THE 9 ASSESSEE HAD SOLD 7 000 SHARES DURING THE ASSESSMEN T YEAR UNDER CONSIDERATION LEAVING BEHIND 10 000 SHARES WHICH WERE SHOWN AS CLOSING B ALANCE AS ON 31/3/2006. WE ALSO OBSERVE THAT THE SHARES SOLD WERE DULY DEBITED IN T HE DEMAT ACCOUNT OF THE ASSESSEE AND THE SALE PROCEEDS WERE RECEIVED BY HIM FROM THE RES PECTIVE BROKERS THROUGH ACCOUNT PAYEE CHEQUES AND THE SAME ARE DULY REFLECTED IN TH E ASSESSEES BANK ACCOUNT. 7.1. AS A RESULT OF SALE OF 6 400 SHARES OF M/S. POONAM PHARMACEUTICALS LTD. AND 7 000 SHARES OF M/S. SHREE SECURITIES LTD. DURING THE ASS ESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE HAS EARNED PROFIT OF RS.32 46 426/- WHICH HE CLAIMED AS LTCG. THE A.O. ENQUIRED THE MATTER FROM THE CALCUTTA STOCK EXCHANG E AND ON THE BASIS OF THEIR INFORMATION HE FOUND DISCREPANCY IN SUCH SHARE TRA NSACTIONS AS THE DETAILS FURNISHED BY THE ASSESSEE WERE NOT TALLYING WITH THOSE OF CALCUT TA STOCK EXCHANGE. THE A.O. FURTHER OBSERVED THAT THE PURCHASE OF SHARES OF THE AFORESA ID TWO COMPANIES THROUGH THE BROKERS VIZ. M/S.AHILYA COMMERCIAL P. LTD. AND P RADIP KUMAR DAGA HAVE NOT BEEN ROUTED THROUGH CALCUTTA STOCK EXCHANGE AND FURTHER THE BROKERS M/S. AHILYA COMMERCIAL P. LTD. AND SANJU KARBA WERE SUSPENDED F ROM THE MEMBERSHIP OF CALCUTTA STOCK EXCHANGE. THE A.O. FURTHER OBSERVED ABNORMAL RISE IN THE SALE PRICE OF THE SCRIPS OF THE AFORESAID TWO COMPANIES. THE EXPLANATION OFF ERED BY THE ASSESSEE WAS NOT FOUND TO BE SATISFACTORY TO THE A.O. WHO HAS ULTIMATELY TREATED THE TRANSACTIONS AS BOGUS AND ADDED THE SUM OF RS.32 46 426/- TO THE TOTAL INCOME OF THE ASSESSEE U/S. 68 OF THE ACT. THE ASSESSEE WAS SUCCESSFUL IN APPEAL BEFORE THE LD . C.I.T.(A) WHICH GIVES RISE TO THE PRESENT DEPARTMENTAL APPEAL. 7.2. FROM THE ENTIRE APPRECIATION OF THE FACTS AN D EVIDENCES ON RECORD WE OBSERVE THAT THE ASSESSEE HAD ACQUIRED THE SHARES THE PURC HASE OF WHICH WAS DULY DECLARED BY HIM IN THE EARLIER ASSESSMENT YEARS WHICH STOOD AC CEPTED BY THE DEPARTMENT. IT HAS NOT BEEN BROUGHT ON RECORD OR EVEN POINTED OUT BY THE L D. DEPARTMENTAL REPRESENTATIVE DURING COURSE OF HEARING THAT THE ASSESSMENT FOR AS SESSMENT YEAR 2005-06 HAD BEEN REOPENED. FURTHER THE SHARES WERE PURCHASED AND SO LD THROUGH STOCK BROKERS AND AS PER CONTRACT NOTES/BILLS ETC. WHICH WERE ISSUED BY THO SE SHARE BROKERS THEY WERE FOUND TO BE REGISTERED WITH THE CALCUTTA STOCK EXCHANGE. ON PERUSAL OF THE ASSESSMENT ORDER WE 10 OBSERVE THAT WHILE SCRUTINIZING THE EVIDENCE FILED BY THE ASSESSEE AND FRAMING THE ASSESSMENT ORDER THE A.O. WAS INFLUENCED WITH OTHE R CONSIDERATION THAT THE SHARE BROKERS WERE FOUND GUILTY AND THUS SUSPENDED BY THE CALCUTTA STOCK EXCHANGE. THE A.O. ALSO ALLEGED THAT THE SALE PRICE OF THE SHARES WAS ABNORMALLY HIGH WHICH LED HIM TO DOUBT THE GENUINENESS OF SALE TRANSACTIONS. HOWEVE R THERE IS NO MATERIAL ON RECORD WHICH COULD LEAD TO A CONCLUSION THAT THE TRANSACTI ONS WERE SIMPLICITIER A DEVICE TO CAMOUFLAGE ACTIVITIES TO DEFRAUD THE REVENUE. IN OU R CONSIDERED OPINION THE A.O. IS NOT JUSTIFIED TO DRAW PRESUMPTION ON SURMISES AND CONJE CTURES TO HOLD THAT TRANSACTIONS ARE NOT GENUINE. HENCE IN THE ABSENCE OF ANY COGENT M ATERIAL IN THIS REGARD PLACED ON RECORD WE FIND NO VALID REASON TO ENDORSE THE VIEW OF THE A.O. IT HAS BEEN HELD IN SEVERAL JUDICIAL PRONOUNCEMENTS THAT SUSPICION HOWS OEVER STRONG CANNOT TAKE PLACE AS LEGAL PROOF AND WE MAY REFER IN THIS CONNECTION THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. ANUPAM KA POOR [299 ITR 179 (P&H)]. 7.3. WE FURTHER OBSERVE THAT IDENTICAL ISSUE HAS B EEN DEALT WITH BY THE THIRD MEMBER I.T.A.T. AGRA BENCH IN THE CASE OF BAIJNATH AGARWA L VS. ACIT (SUPRA). IN THAT CASE BY APPLYING THE RATIO LAID DOWN IN THE CASE OF CIT VS. DAULATRAM RAWATMULL [87 ITR 349 (SC)] AND FOLLOWING THE DECISION IN THE CASE OF ITO VS. SMT. KUSUMLATA [105 TTJ (JD) 265] IT HAS BEEN HELD AS UNDER :- THERE IS NO EVIDENCE ON RECORD THAT BROKER WAS A RE LATIVE OR ASSOCIATE OF THE ASSESSEE. THE ASSESSEE DOES NOT HAVE ANY CONTROL ON THE BANK ACCOUNT OF THE BROKER WHERE THE FUND CAME THROUGH CLEARING NOT IN CASH. THE DECISION OF THE LOWER AUTHORITIES ARE INFLUENCED BY THE GENERAL OBSERVATI ON OF THE INVESTIGATION WING THAT CREATED A SUSPICION IN THE MINDS OF THE AUTHORITIES THAT EVERYBODY WHO HAS SOLD THE SHARES AT A HIGH PRICE HAS CONVERTED HIS UNACCOUNTE D MONEY THROUGH ACCOMMODATION ENTRIES. THIS APPROACH DIES NOT HAVE ANY LEG TO STAND. AO HAS FAILED TO ESTABLISH THAT THE ASSESSEE HAS INTRODUCE D HIS OWN UNACCOUNTED MONEY IN THE SHAPE OF ALLEGED SALE PROCEEDS OF SHARES IT WAS THE DUTY OF THE AO TO BRING ON RECORD SUFFIC IENT EVIDENCES AND MATERIAL TO PROVE THAT THE DOCUMENTS FILED BY THE ASSESSEE WERE BOGUS FALSE OR FABRICATED AND THE LONG-TERM CAPITAL GAIN SHOWN BY HIM WAS ACTUALL Y HIS INCOME FROM UNDISCLOSED SOURCES. THE ONLY MATERIAL TO SUPPORT SUCH CONCLUS ION OF THE LOWER AUTHORITIES IS EITHER THE FINDINGS OF THE DDI IN GENERAL INVESTIGA TIONS OR THE OBSERVATION THAT THE ASSESSEE COULD NOT PROVE THE TRANSACTION TO BE GENU INE ONE. WHILE MAKING ADDITION AS INCOME FROM UNDISCLOSED SOURCES BURDEN ON THE DE PARTMENT IS VERY HEAVY TO ESTABLISH THAT THE ALLEGED RECEIPT WAS ACTUALLY INC OME OF THE ASSESSEE FROM THE 11 UNDISCLOSED SOURCES. THEREFORE THE CIT(A) HAS ERR ED ON FACTS AS WELL AS IN LAW IN UPHOLDING THE ORDER OF THE A0 TREATING THE INCOME U NDER THE HEAD LONG-TERM CAPITAL GAIN AS SHAM AND BOGUS AND TAXING THE SAME UNDER TH E HEAD INCOME FROM OTHER SOURCES. THE INCOME DISCLOSED BY THE ASSESSEE IS C HARGEABLE TO TAX AS LONG-TERM CAPITAL GAIN AND CANNOT BE TREATED AS INCOME FROM A NY UNDISCLOSED SOURCES. 7.4. CONSIDERING THE TOTALITY OF THE FACTS AND CIR CUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE AFORESAID THIRD MEMBER D ECISION IN THE CASE OF BAIJNATH AGARWAL VS. ACIT (SUPRA) WE ARE OF THE CONSIDERED OPINION THAT THE LD. C.I.T.(A) HAS RIGHTLY DELETED THE ADDITION OF RS.32 46 426/- WHI CH WAS MADE BY THE A.O. AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT. WE THE REFORE UPHOLD THE ORDER OF LD. C.I.T.(A) ON THIS ISSUE AND DISMISSED THE GROUND OF APPEAL OF THE DEPARTMENT. 8. IN THE RESULT THE APPEAL OF THE REVENUE IS DIS MISSED. 4 !3 '5! 6 5% 7 48 THIS ORDER IS PRONOUNCED IN OPEN COURT ON 25.03.2011 SD/- SD/- ( . .. . . .. . ) !' ( . . . . . . . . ) (C.D.RAO) ACCOUNTANT MEMBER (B.R.MITTAL) JUDICIAL MEMBER ( (( ( ' ' ' ') )) ) DATE: 25 -03-2011 !3 1 /$$9 :!9';- COPY OF THE ORDER FORWARDED TO : 1. + / THE APPELLANT : THE A.C.I.T. CIRCLE-31 KOLKATA. 2 /0+ / THE RESPONDENT : BAJRANGLAL AGARWAL (HUF) 2-B ROW LAND ROAD KOL-20 3. $3% () : THE CIT(A)-XIX KOLKATA. 4. $3%/ THE CIT KOL- 5 . ?$7 /$% / DR ITAT KOLKATA BENCHES KOLKATA 6 . GUARD FILE . 09 /$/ TRUE COPY !3%5/ BY ORDER (DKP) @ A / DY/ASSTT. REGISTRAR .