Shri Nilesh Shantilal Lalwani, Jalgaon v. ITO, Ward 1(1), Jalgaon, Jalgaon

ITA 60/PUN/2010 | 2006-2007
Pronouncement Date: 18-11-2011 | Result: Allowed

Appeal Details

RSA Number 6024514 RSA 2010
Assessee PAN AAEPL3257C
Bench Pune
Appeal Number ITA 60/PUN/2010
Duration Of Justice 1 year(s) 10 month(s) 4 day(s)
Appellant Shri Nilesh Shantilal Lalwani, Jalgaon
Respondent ITO, Ward 1(1), Jalgaon, Jalgaon
Appeal Type Income Tax Appeal
Pronouncement Date 18-11-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 18-11-2011
Date Of Final Hearing 21-09-2011
Next Hearing Date 21-09-2011
Assessment Year 2006-2007
Appeal Filed On 13-01-2010
Judgment Text
THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B PUNE BEFORE SHRI I.C. SUDHIR (JM) AND SHRI G.S. PANNU (AM) ASSESSEE BY : SHRI NIKHIL PATHAK DEPARTMENT BY:SHRI PRAYAG JHA DATE OF HEARING : 22.9.11 DATE OF PRONOUNCEMENT: .11.11 ORDER PER I.C. SUDHIR JM THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDER O N THE FOLLOWING GROUNDS : 1. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE C IT(A) ERRED IN TREATING THE INCOME BY THE ASSESSEE FROM UNDISCLOSED SOURCES AS CAPITAL GAINS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE CIT(A) ERRED BY ACCEPTING THE COST OF PURCHASE/ACQUISITION OF THE S HARES AS STATED BY ASSESSEE CONTRADICTING HIS OWN FINDINGS IN THE APP ELLATE ORDER THAT THE PURCHASE CONTRACT NOTES ARE NOT GENUINE AND THAT TH E SHARES WERE NOT PURCHASED BY THE ASSESSEE IN F.Y. 2003-04. 3. ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CAS E THE CIT(A) IGNORED THE FACT THAT ONCE THE DOCUMENTS/EVIDENCES PRODUCED BY THE ASSESSEE HAVE BEEN PROVED TO BE FABRICATED THE ONLY LOGICAL CONC LUSION THAT CAN BE DRAWN IS SR.NO ITA NO. ASSTT.YEAR APPELLANT VS. RESPONDENT 1. 163/PN/2010 2006 - 07 I.T.O WARD 1(1) JALGAON VS. SHRI AJAY SHANTILAL LALWANI 56 JAY NAGAR JALGAON PAN: AAEPL 3257C 2. 164/PN/2010 2006 - 07 - DO - VS. SHRI NEELESH SHANTILAL LALWANI 56 JAY NAGAR JALGAON PAN: AACPL 9296P 3. 60/PN/2010 2006 - 07 SHRI NILESH SHANTILAL LALWANI 56 JAY NAGAR JALGAON VS. I.T.O WARD 1(1) JALGAON 4. 61/PN/201 0 2006 - 07 SHRI AJAY SHANTILAL LALWANI 56 JAY NAGAR JALGAON PAN: AAEPL 3257C VS. I.T.O WARD 1(1) JALGAON ITA . NOS.163& 164 /PN/2010 &60 & 61/PN/2010 SHRI. AJAY S. LALWANI A.YS. 2006-07 PAGE OF 13 2 THAT THE WHOLE TRANSACTION IS A SHAM TRANSACTION AN D ASSESSEE HAS TRIED TO INTRODUCE HIS UNDISCLOSED INCOME IN THE GUISE OF LO NG-TERM CAPITAL GAIN. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE CIT(A) ERRED BY APPLYING THE DECISION OF HONBLE H.C. OF PUNJAB AN D HARYANA DELIVERED IN THE CASE OF ANUPAM KAPOOR (299 ITR 179) WHEN THE FACTS OF THE CASES ARE DISTINGUISHABLE. 2. THE ASSESSEE ON THE OTHER HAND HAS IMPUGNED TH E FIRST APPELLATE ORDER ON THE FOLLOWING GROUNDS : 1] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE AP PELLANT HAD FAILED TO PROVE THAT THE DELIVERY OF THE SHARES WAS TAKEN IN F.Y. 2003-04 AND THEREFORE THE GAIN ARISING ON SALE OF SHARES WAS T O BE TAXED AS SHORT TERM CAPITAL GAIN BY ASSUMING THE DATE ON WHICH THE SHAR ES WERE TRANSFERRED TO THE D-MAT ACCOUNT AS THE DATE OF PURCHASE OF SHARES . 2] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT TH E APPELLANT HAD PURCHASED THE SHARES OF M/S. OASIS CINE COMMUNICATI ON LTD. ON 04.04.2003 AND HAD ALSO PURCHASED THE SHARES OF SHIV OM INVEST MENT AND CONSULTANCY LTD. ON 24.11.2003 AND ACCORDINGLY THE GAIN ARISIN G ON SALE OF SHARES WAS A LONG TERM CAPITAL GAIN EXEMPT U/S. 10(38). 3] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASSESSEE COULD NOT SATISFACTORILY EXPLAIN THE GENUINENESS OF THE CONTR ACT NOTES ISSUED BY THE BROKERS AND THEREFORE THE ASSESSEE HAD FAILED TO P ROVE THAT THE SHARES WERE PURCHASED BY HIM IN F.Y. 2003-04. 4] THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED TH AT - A. THE ASSESSEE HAD PURCHASED THE SHARES OF OASIS CINE COMMUNICATION LTD. AND SHIV OM INVESTMENT AND CONSULTANCY LTD. I N F.Y. 2003-04. ITA . NOS.163& 164 /PN/2010 &60 & 61/PN/2010 SHRI. AJAY S. LALWANI A.YS. 2006-07 PAGE OF 13 3 B. THE NAME OF THE ASSESSEE WAS ENDORSED ON THE SH ARE CERTIFICATE OF THE SAID COMPANIES IN F.Y. 2003-04 ONLY AND THUS THE ASSESSEES OWNERSHIP OF THESE SHARES WAS ESTABLISHED IN F.Y. 2003-04. C. WHEN THE ASSESSEE HAD ESTABLISHED THAT THE SHA RES WERE TRANSFERRED IN HIS NAME IN F.Y. 2003-04 ONLY THERE WAS NO JUS TIFICATION FOR HOLDING THAT THE ASSESSEE BECAME THE OWNER OF THE SHARES WHEN T HEY WERE CREDITED TO HIS D-MAT ACCOUNT. D. THE SHARE BROKERS THROUGH WHOM THE SHARES WERE PURCHASED HAD ALSO ACCEPTED OF RECEIPT OF THE AMOUNT FROM THE ASSESSE E AND ALSO THE FACT THAT THE TRANSACTION OF PURCHASE OF SHARES WAS A GENUINE TRANSACTION. E. THE SHARES WERE PURCHASED BY THE ASSESSEE THRO UGH OFF MARKET TRADE AND THEREFORE THERE WAS NO SUCH TRANSACTION ON THE KOLKATTA STOCK EXCHANGE. F. THE ASSESSEE HAD FILED THE RETURN FOR A.Y. 2004- 05 ON 31.10.2004 AND HAD DULY SHOWN THE PURCHASE OF SHARES OF ABOVE REFE RRED COMPANIES IN THE BALANCE SHEET FILED ALONG WITH THE RETURN. 3. WE HAVE HEARD AND CONSIDERED THE ARGUMENTS ADVAN CED BY THE PARTIES IN VIEW OF THE ORDERS OF THE AUTHORITIES BELOW MATERI AL AVAILABLE ON RECORD AND THE DECISIONS RELIED UPON. 4. THE RELEVANT FACTS ARE THAT THE A.O DENIED CLA IMED EXEMPTION U/S. 10(38) OF THE ACT IN RESPECT OF LONG TERM CAPITAL GAIN MAI NLY ON THE BASIS THAT THERE WAS A SUBSTANTIAL DELAY IN TRANSFERRING THE SHARES INTO D -MAT A/C. FROM THE DATE OF PURCHASE TRANSACTIONS STATED TO HAVE BEEN MENTIONE D ON THE CONTRACT NOTES WERE NOT ROUTED THROUGH THE CALCUTTA STOCK EXCHANGE THE ASSESSEE WAS UNABLE TO GIVE ANY SATISFACTORY EXPLANATION ABOUT THE GENUINENESS OF THE CONTRACT NOTES ISSUED BY THE SHARE BROKER AND ACQUISITION OR DELIVERY OF SHA RES AND SUFFICIENT PROOF REGARDING THE POSSESSION OF SHARES AS ON THE DATE OF PURCHASE WAS NOT THERE. THE DETAILS OF THESE TRANSACTIONS ARE BEING REPRODUCED HEREUNDER : ITA . NOS.163& 164 /PN/2010 &60 & 61/PN/2010 SHRI. AJAY S. LALWANI A.YS. 2006-07 PAGE OF 13 4 NAME OF THE COMPANY DATE OF CONTRACT NOTE TRADE NO. SETTLEMENT NO. QUANTITY OF SHARES RATE INCLUDING BROKERAGE AMOUNT OASIS CINE COMMUNICATIONS 02-04-2003 - 2004305D 10000 2.32 23200 SHIV OM INVESTMENT 24-11-2003 - 2004462D 10000 1.00 10200 TOTAL SALE CONTRACT NOTE (M/S. SWADHA SECURITIES PVT. LTD . NAME OF THE COMPANY DATE OF CONTRACT NOTE TRADE NO. SETTLEMENT NO. QUANTITY OF SHARES RATE INCLUDING BROKERAGE AMOUNT OASIS CINE COMMUNICATIONS 12-04-05 4333 2006329R 3000 298.55 8 95 650/- 23-04-05 4421 2006336R 1500 298.95 4 47 975/- 27-04-05 4459 2006340 1000 295.06 2 95 060/- 9-06-05 4529 2006349R 1000 294.66 2 94 660/- 13-06-05 4540 2006351R 1000 294.66 2 94 660/- 13-05-05 4347 20063305 2500 298.10 7 43 491/- 10000 29 71 496/- SHIV OM INVESTMENT 22-07-05 570 2006380R 3 000 197.00 5 90 100 12-98-05 647 2006395R 3 000 196.95 5 93 850 24-11-05 937 938 2996460R 2 000 196.70 3 93 400 09-12-05 958 2006471R 1 000 197.00 1 96 700 12-12-05 968 2006472R 1 000 196.70 1 96 700 TOTAL 10 000 19 67 750 THE LD CIT(A) HAS ACCEPTED THE FINDING OF THE A.O THAT THERE IS NO SUFFICIENT AND VALID EVIDENCE AVAILABLE WITH THE ASSESSEE TO PROVE THAT THE SHARES WERE ACTUALLY ACQUIRED FOLLOWED BY DELIVERY IN THE RELEVANT FINAN CIAL YEAR. THE LD CIT(A) HAS HOWEVER ALLOWED SHORT TERM CAPITAL GAINS TREATING THE DATES OF THE ACQUISITION OF THE SHARES AS ON THE DATE OF TRANSFER OF SHARES TO THE APPELLANTS D-MAT A/C. ON THE UNDISPUTED SALES OF THOSE SHARES. THE PARTIES ARE T HUS IN CROSS APPEALS. THE ASSESSEE HAS BASICALLY QUESTIONED THE FIRST APPELLA TE ORDER TREATING THE DATE OF ITA . NOS.163& 164 /PN/2010 &60 & 61/PN/2010 SHRI. AJAY S. LALWANI A.YS. 2006-07 PAGE OF 13 5 ACQUISITION OF THE SHARES AS THE DATE OF TRANSFER O N THOSE SHARES IN THE ASSESSEE D- MAT A/C. INSTEAD OF THE DECLARED DATE OF ACQUISITIO N OF THOSE SHARES BY THE ASSESSEE. THE REVENUE ON THE OTHER HAND HAS QUES TIONED FIRST APPELLATE ORDER ACCEPTING THE COST OF PURCHASE/ACQUISITION OF THE S HARES AS STATED BY ASSESSEE. 5. IN SUPPORT OF THE GROUNDS OF THE APPEALS PREFERR ED BY THE REVENUE THE LD. D.R. HAS BASICALLY PLACED RELIANCE ON THE ASSESSME NT ORDER. HE SUBMITTED THAT THE LD CIT(A) ON ONE HAND HAS UPHELD THE FINDINGS OF T HE A.O THAT PURCHASE CONTRACT NOTES OF THE SHARES ARE NOT GENUINE AND THAT THE SH ARES WERE NOT PURCHASED BY THE ASSESSEE IN F.Y. 2003-04 BUT ON THE OTHER HAND HE HAS ACCEPTED THE COST OF PURCHASE/ACQUISITION OF THE SHARES AS STATED BY THE ASSESSEE. THE LD. D.R. SUBMITTED THAT THE DOCUMENTS/EVIDENCE PRODUCED BY THE ASSESSEE HAVE BEEN FOUND TO BE FABRICATED THE ONLY LOGICAL CONCLUSION THAT CAN BE DRAWN THAT THE WHOLE TRANSACTION IS A SHAM TRANSACTION. HE SUBMITTED TH AT THE ASSESSEE HAS TRIED TO INTRODUCE HIS UNDISCLOSED INCOME IN THE GUISE OF L ONG TERM CAPITAL GAIN. 6. THE LD. A.R. ON THE CONTRARY TRIED TO JUSTIFY THE FIRST APPELLATE ORDER TO THE EXTENT QUESTIONED BY THE REVENUE. HE SUBMITTED T HAT THERE IS NO DISPUTE THAT THE SHARES WERE SOLD THE ONLY DISPUTE BEFORE THE A.O W AS REGARDING THE DATE OF PURCHASE OF THOSE SHARES AS THE A.O WAS HAVING DOU BT ON THE DATE OF PURCHASE OF THOSE SHARES AS DECLARED BY THE ASSESSEE. IN SUPPO RT OF DECLARED DATE OF ACQUISITION OF SHARES THE ASSESSEE HAD FILED SUFFICIENT EVIDEN CE. THE ASSESSEE HAD PURCHASED EQUITY SHARES OF (I) OASIS CINE COMMUNICATION LTD. AND (II) SHIV OM INVESTMENT AND CONSULTANCY LTD. LISTED ON A RECOGNIZED STOCK EX CHANGE VIS. THE CALCUTTA STOCK EXCHANGE AND THE SALE TRANSACTION WAS COVERED BY SE CURITY TRANSACTION TAX. THESE PURCHASES ARE DULY DISCLOSED IN THE RELEVANT YEAR S BALANCE SHEET. THE ASSESSEE HAD ALSO DISCLOSED INVESTMENT IN PURCHASE OF SHARES IN THE RETURN FURNISHED FOR THE PRECEDING A.Y. 2004-05. THUS MERELY BECAUSE THERE IS SOME GENERAL TENDENCY OF ITA . NOS.163& 164 /PN/2010 &60 & 61/PN/2010 SHRI. AJAY S. LALWANI A.YS. 2006-07 PAGE OF 13 6 SOME FEW TRADERS ENGAGED IN RIGGING UP THE MARKET THE SAME SHOULD NOT DEPRIVE THE ASSESSEE FROM PROFIT ARISING FROM GENUINE SALES WHICH HAS ACTUALLY RESULTED IN LONG TERM CAPITAL GAIN WHICH IS EXEMPT U/S. 10(38) OF THE ACT. THE LD. A.R. ALSO TRIED TO MEET OUT THE OBJECTIONS RAISED IN THIS REG ARD BY THE AUTHORITIES BELOW WHICH WE WILL DISCUSS IN OUR FINDING IN SUCCEEDING PARAGRAPHS. HE DREW OUR ATTENTION TO PAGE NOS. 16 TO 50 OF THE PAPER BOOK I .E. COPIES OF REMAND REPORT OF THE A.O; REPLY OF THE ASSESSEE TO THE REMAND REPORT ; RETURN OF INCOME ALONG WITH BALANCE SHEET FOR THE A.YS. 2004-05 AND 2005-06; PH YSICAL SHARE CERTIFICATES OF OASIS CINE COMMUNICATION LTD. AND SHIV OM INVESTMEN T AND CONSULTANCY LTD; D- MAT A/C. STATEMENT; D-MAT REQUEST APPLICATION FORMS IN RESPECT OF OASIS CINE COMMUNICATION LTD. AND SHIV OM INVESTMENT AND CONSU LTANCY LTD; D-MAT A/C. CLIENT MASTER REPORT RECEIVED FROM STOCK HOLDING CO RPORATION OF INDIA LTD; CONTRACT NOTES ISSUED BY THE BROKER AND S.B. BHUTRA & CO.; C ONFIRMATION GIVEN BY SHIV OM INVESTMENT AND CONSULTANCY LTD; CONFIRMATION GIVEN BY BROKER; STATEMENT RECORDED OF THE ASSESSEE; AND REPLY OF THE KOLKATTA STOCK E XCHANGE ASSOCIATION LTD. THE LD. A.R. ALSO PLACED RELIANCE ON THE FOLLOWING DECISION S : I) NISRAJ REAL ESTATE & EXPORT (P) LTD. VS. ASSIST ANT COMMISSIONER OF INCOME TAX (2009) 31 DTR (JP) (TRIB) 456 II) CIT VS. SMT. JAMNADEVI AGARWAL & OTHERS INCOME TAX APPEAL NO.40 41 AND 151 OF 2010 (BOMBAY HIGH COURT NAGPUR BENCH ) III) ACIT VS. KAMAL KUMAR S. AGRAWAL (INDL.) & ORS. (2010) 133 TTJ (NAG) 818. IV) ACCHYALAL SHAW VS. ITO (2009) 121 TTJ (KOL.) 6 95. V) ANUPAM KAPOOR 299 ITR 179 ( PUN. & HAR.) ITA . NOS.163& 164 /PN/2010 &60 & 61/PN/2010 SHRI. AJAY S. LALWANI A.YS. 2006-07 PAGE OF 13 7 THE LD. A.R. ALSO TRIED TO DISTINGUISH THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SMT. SUREKHA BHAGVATIPRASAD MUNDADA VS. ITO & ORS. ITA NO. 1332/PN/2008 & ORS. DT. 16 TH JUNE 2010. HE SUBMITTED THAT IN THAT CASE FACTS A RE DISTINGUISHABLE AS THERE NO PHYSICAL SHARE CERTIFIC ATE WAS AVAILABLE TRANSFER WAS DENIED BY STOCK EXCHANGE AND BEFORE THE TRIBUNAL AS SESSEE CHANGED ITS STAND WITH THE EXPLANATION THAT SHARES WERE PURCHASED FROM OFF MARKET AND NOT FROM THE STOCK EXCHANGE. THERE WAS NO CONFIRMATION BY THE COMPANY AND DELIVERY OF SHARES WERE MADE DIRECTLY IN THE D-MAT A/C. 7. THE LD. D.R. SUBMITTED THAT THE CLAIMED SHARE T RANSACTIONS ARE BOGUS AS THERE IS NO EVIDENCE OF PURCHASE BY THE ASSESSEE AN D REFERRED CONTENTS OF PAGE NOS. 4 TO 13 OF THE ASSESSMENT ORDER. THE LD. D.R. ALSO REFERRED PAGE NO. 50 OF THE PAPER BOOK I.E. INFORMATION FURNISHED BY THE KOLKAT TA STOCK EXCHANGE ASSOCIATION LTD. TO THE A.O ON 23.11.2003 AND 2.4.2003 THAT M /S. S.B. BHUTRA & CO. HAD NOT EXECUTED ANY TRANSACTION IN THE SCRIPTS OF SHIV OM INVESTMENT AND CONSULTANCY LTD. AND OASIS CINE COMMUNICATION LTD. EITHER IN PHYSICA L OF D-MAT FORM IN THE ONLINE TRADING SYSTEM OF EXCHANGE. 8. CONSIDERING THE ABOVE SUBMISSIONS WE FIND THAT SOME MATERIAL FACTS ARE UNDISPUTED THAT (I) SHARES PURCHASED WERE TRANSF ERRED INTO D-MAT A/C. MAINTAINED BY THE ASSESSEE WITH HDFC BANK AND THE SHARES WERE SOLD ON THE DATES MENTIONED IN THE TABLE REPRODUCED HEREINABOVE. THE ONLY DIS PUTE IS REGARDING THE DATE AND MODE OF ACQUISITION OF THOSE SHARES IN QUESTION. T HE ASSESSEE WAS NOT ABLE TO PROVE TO THE SATISFACTION OF THE AUTHORITIES BELOW THAT THE SAID SHARES WERE ACTUALLY PURCHASED ON VARIOUS DATES DURING THE F.Y. 2004-05. THE ASSESSEE HAS TRIED TO MEET OUT OBJECTIONS RAISED BY THE A.O IN THIS REGA RD. THE A.O NOTED THAT THE SHARES WERE CREDITED IN D-MAT A/C. ON 12.4.2005 AF TER LAPSE OF MORE THAN 20 TO 24 ITA . NOS.163& 164 /PN/2010 &60 & 61/PN/2010 SHRI. AJAY S. LALWANI A.YS. 2006-07 PAGE OF 13 8 MONTHS FROM THE DATE OF PURCHASE CONTRACT NOTE I.E . 4.4.2003 AND 25.11.2005. THE SUBMISSION OF THE ASSESSEE IN THIS REGARD REMAINED THAT THE ASSESSEE HAD PURCHASED THE SHARES OUTSIDE STOCK EXCHANGE DIRECTLY FROM THE BROKER IN PHYSICAL FORM. THE ASSESSEE WAS HAVING NO D-MAT A/C. WHEN THE SHARES W ERE PURCHASED. D-MAT A/C. WAS OPENED ON 30 TH NOVEMBER 2004 IN THE F.Y. 2004-05. THE DATE OF PUR CHASE OF SHARES IS 25.11.2003 AND NOT 25.11.2005. THE SAID DATE FALLS IN THE A.Y. 2006-07. IT WAS EXPLAINED THAT SHARES WERE KEPT IN THE PHYSI CAL FORM TILL THE SHARES WERE HELD BY THE ASSESSEE. WHEN THE ASSESSEE HAD DECIDED TO SELL THE SHARES HE HAD SENT THE SHARES TO D.P. (STOCK HOLDING CORPORATION OF INDIA LTD.) FOR DEMATERIALIZATION. ASSESSEE HAD SUBMITTED A COPY OF D-MAT A/C. STATEME NT RECEIVED FROM THE D.P IN HIS FIRST SUBMISSION DATED 19.6.2008. THE D-MAT A /C. STATEMENTS REVEALED THAT THE SHARES D-MAT REQUEST WAS RECEIVED BY THE D.P. FROM THE ASSESSEE AND AFTER SOME DAYS D-MAT WAS CONFIRMED BY THE D.P. IT PROVES T HAT THE SHARES WERE IN THE POSSESSION OF THE ASSESSEE BEFORE DEMATERIALIZATIO N EXPLAINED THE ASSESSEE. THE FACT THAT INVESTMENT IN PURCHASE OF SHARES DISCLOSE D IN THE PRECEDING YEARS RETURN IS VERY WELL ACCEPTED BY THE DEPARTMENT. THE ASSESSEE ALL ALONG DISPLAYED THE CHARACTERISTICS OF AN INVESTOR AND THERE WAS NOTHIN G ON RECORD TO SUGGEST THAT THE ASSESSEE HAD EVER INDULGED IN ANY MANIPULATION IN THE MARKET. IT WAS SUBMITTED THAT WHILE COMPARING THE DATE OF PURCHASE OF SHARES IN PHYSICAL FORM OF THE ASSESSEE IN THE GIVEN DATA WITH THE DATE OF CREDIT IN D-MAT A/C. THE A.O ERRED IN TOTALLY IGNORING THE FACT THAT AT THE TIME OF PURCHASE OF A FORESAID COMPANIES SHARES ASSESSEE WAS NOT HAVING D-MAT A/C. AND HENCE SHAR ES WERE PURCHASED IN PHYSICAL FORM WHICH WERE TRANSFERRED INTO D-MAT A/C. OPENED SUBSEQUENTLY. IT WAS SUBMITTED THAT DURING THE ASSESSMENT PROCEEDINGS C OPIES OF SHARE CERTIFICATES HELD BY THE ASSESSEE IN PHYSICAL FORM WERE ALSO PROVIDED TO THE A.O WHICH CONTAINED COMPLETE RELEVANT DETAILS SUCH AS ADDRESS OF LATES T OFFICE OF THE COMPANY SIGNATURE OF THE AUTHORIZED SIGNATORY ALONG WITH TWO DIRECTOR S SIGNATURES VALUE OF SHARES WITH PAID UP AMOUNT OF SHARES PURCHASED IN EACH COMPANY DATE OF ISSUE OF CERTIFICATE ITA . NOS.163& 164 /PN/2010 &60 & 61/PN/2010 SHRI. AJAY S. LALWANI A.YS. 2006-07 PAGE OF 13 9 SERIAL NO. REGISTERED FOLIO NUMBER OF SHARES WITH THEIR DISTINCTIVE NOS. DATE OF TRANSFER OF SHARES IN THE NAME OF ASSESSEE (REFLECT ED ON THE BACK SIDE OF THE CERTIFICATE) AND ALSO COPIES OF CONTRACT NOTE ALONG WITH BILLS ISSUED BY SHARE BROKER S.B. BHUTRA & CO. 9. IT WAS FURTHER SUBMITTED THAT DATE OF ALLEGED N ON-EXECUTION OF 70 SCRIPTS OF 23.11.2008 RELIED UPON BY THE A.O IN THE ASSESSMENT ORDER FALLS IN A.Y. 2009-10. SIMILARLY THE A.O HAD NOT BEEN VIGILANT TO MENTION CORRECT NAME OF THE COMPANY IN THE ASSESSMENT ORDER. THE NAME OF THE COMPANY IS SHIV OM INVESTMENTS AND CONSULTANCY LTD. AND NOT SHIV COMMUNICATIONS AS MEN TIONED IN THE ASSESSMENT ORDER. THE A.O HAS THUS PROCEEDED ON THE BASIS NOT ONLY MISLEADING BUT INCORRECT FACTS. 10. REGARDING DENIAL OF STOCK EXCHANGE THAT S.B. BU THRA & CO. HAD NOT EXECUTED ANY TRADE ON 2.4.2003 IN OASIS CINE COMMUNICATION LTD. AND ALSO ON 23.11.2008 (CORRECT DATE IS 25.11.2003) IN SHIV OM COMMUNICATI ONS IN ONLINE TRADING SYSTEMS OF THE EXCHANGE THE SUBMISSION OF THE ASSESSEE REM AINED THAT THE WORDS USED ONLINE TRADING SYSTEM OF THE EXCHANGE ARE VERY I MPORTANT AS THE ASSESSEE HAS ALSO STATED THE SAME CLEARLY TO THE A.O IN HIS STAT EMENT THAT THE TRANSACTION IS NOT DONE BY HIM IN THE ONLINE SYSTEM OF THE EXCHANGE B UT THE SHARES WERE PURCHASED OUTSIDE THE MARKET THROUGH THE BROKER. IT WAS SUBM ITTED THAT THE A.O HAD ASKED THE COMPANY TO CONFIRM THE SHARE TRANSACTIONS. IN CASE OF SHIV OM INVESTMENTS AND CONSULTANCY LTD THE COMPANY VIDE ITS LETTER DA TED 29.11.2008 ADDRESSED TO THE COMPANY HAD CONFIRMED IN BLACK AND WHITE THAT THE SAID SHARES HAVE BEEN TRANSFERRED ON THE GIVEN DATE. IT WAS SUBMITTED TH AT IT IS FOR THE ASSESSEE TO HOLD THE SHARES IN PHYSICAL FORM OR DEMATERIALIZED FORM. THE ASSESSEE COULD NOT BE PENALIZED EITHER FOR NOT OPENING D-MAT A/C. WHEN H E HAD PURCHASED SHARES IN THE PHYSICAL FORM. IT WAS FURTHER SUBMITTED BY THE ASS ESSEE THAT DURING THE INSPECTION OF RECORDS ALLOWED BY A.O. (AFTER COMPLETION OF ASS ESSMENT AND FOR THE PURPOSE OF ITA . NOS.163& 164 /PN/2010 &60 & 61/PN/2010 SHRI. AJAY S. LALWANI A.YS. 2006-07 PAGE OF 13 10 PREPARATION OF FIRST APPEAL) IT WAS NOTICED THAT T HE BROKER M/S. S.B. BUTHRA & CO. IN THEIR LETTER DT. 10.11.2008 HAD INFORMED THE A.O T HAT THEY HAD TRANSACTIONS WITH SHRI AJAY LALWANI DURING F.Y. 2003-04 AS PER LEDGER ACCOUNT FURNISHED WITH THE SAID LETTER. FROM THE COPY OF THE LEDGER A/C. EXTRACT R ECEIVED FROM THE SAID BROKER IT WOULD BE SEEN THAT THE NAMES OF BOTH THE COMPANIES THAT RELEVANT DETAILS I.E. QUANTITIES OF SHARES AND THE AMOUNT OF PURCHASES AR E DULY REFLECTED. IT WAS SUBMITTED THAT THE ASSESSEE IS ASSESSED TO TAX SINC E A.Y. 1991-92 HAVING SUBSTANTIAL INCOME OUT OF WHICH HE HAD PURCHASED SHARES; THE C ONTRACT NOTE AND BILL ISSUED BY THE BROKER IS FULL AND COMPLETE SUPPORTING EVIDENCE FOR PURCHASE OF SHARES. 11. IN CASE OF OASIS CINE COMMUNICATIONS LTD. IT W AS SUBMITTED THAT SHARES WERE PURCHASED ON 4.4.2003 BUT GOT TRANSFERRED IN THE N AME OF ASSESSEE ON 23.4.2004. THE DELAY WAS DUE TO SOME PROCEDURE UNDERGONE AS TH E SHARE CERTIFICATES WERE RECEIVED AFTER TRANSFER IN THE NAME OF ASSESSEE B EARING ISSUE DATE OF 16.3.2004. IT WAS SUBMITTED THAT THE SHARES PURCHASED ARE RECORDE D IN THE BOOKS OF ACCOUNT AND SHOWN IN THE BALANCE SHEET AS ON 31 ST MARCH 2004. THE COPY OF THE BALANCE SHEET WAS SUBMITTED ALONG WITH THE RETURN OF INCOME FOR T HE A.Y. 2004-05. ALSO THE ASSESSEE HAD RECEIVED THE CONTRACT NOTES AND BROKE RS BILL IN THE SAID YEAR ONLY WITHOUT ANY DELAY. THE D.PS DATA ALSO SHOWS THAT THE ASSESSEE HAD SENT THE SHARES IN PHYSICAL FORM BY SUBMITTING THE ORIGINAL SHARE C ERTIFICATE TO THE D.P FOR DEMATERIALIZATION. 12. FROM ABOVE DISCUSSION WE FIND THAT THE ASSESSE E HAD ADDRESSED THE DOUBTS RAISED ON THE DECLARED DATES OF PURCHASES OF ABOVE SHARES. THE LD. D.R. HAS NOT BEEN ABLE TO REBUT THE ABOVE EXPLANATION OF THE ASS ESSEE BEFORE US. ADMITTEDLY IN THE PRESENT CASE BEFORE US; THE ASSESSEE HAD PURCH ASED THE SHARES OUTSIDE STOCK EXCHANGE DIRECTLY FROM THE BROKER IN PHYSICAL FORM THOUGH D-MAT A/C WAS OPENED ON BELATED DATE WITH THIS EXPLANATION THAT AT THE TIME OF PURCHASE OF SHARES HE WAS ITA . NOS.163& 164 /PN/2010 &60 & 61/PN/2010 SHRI. AJAY S. LALWANI A.YS. 2006-07 PAGE OF 13 11 NOT HAVING D-MAT A/C. AND ON OPENING OF D-MAT A/C. THE SHARES WERE TRANSFERRED TO THE SAME. BEFORE THE A.O COPIES OF THE SHARE CER TIFICATES HELD BY ASSESSEE IN PHYSICAL FORM WERE PROVIDED WHICH CONTAINED COMPLET E RELEVANT DETAILS SUCH AS ADDRESS OF REGISTERED OFFICE OF THE COMPANY SIGNAT URES OF THE AUTHORIZED SIGNATORY ALONG WITH 2 DIRECTORS SIGNATURE VALUE OF SHARES WITH PAID UP AMOUNT OF SHARES PURCHASED IN EACH COMPANY DATE OF ISSUE OF CERTIFI CATE CERTIFICATE NO. REGISTERED FOLIO NUMBER OF SHARES WITH THEIR DISTINCTIVE NUMB ERS DATE OF TRANSFER OF SHARES IN THE NAME OF ASSESSEE AND ALSO COPIES OF CONTRACT NO TES ALONG WITH BILLS ISSUED BY SHARE BROKER S.B. BUTHRA & COMPANY. THE ASSESSEE A LSO FURNISHED RETURNS OF INCOME ALONG WITH BALANCE SHEET FOR THE A.YS. 2004- 05 AND 2005-06 DURING WHICH PERIOD ASSESSEE CLAIMED TO HAVE PURCHASED THOSE SH ARES IN QUESTION COPY OF CONTRACT NOTES ISSUED BY THE BROKER AND CONFIRMATIO NS GIVEN BY SHIV OM INVESTMENTS AND CONSULTANCY LTD. AND BY BROKER. WE ARE THUS OF THE VIEW THAT MERELY BECAUSE THERE WAS SUBSTANTIAL DELAY IN TRANS FERRING THE SHARES INTO D-MAT A/C. FROM THE DATE OF PURCHASE AND THE TRANSACTIONS NOT ROUTED THROUGH CALCUTTA STOCK EXCHANGE THE A.O WAS NOT JUSTIFIED IN DOUB TING THE DECLARED DATE OF PURCHASE OF THE SHARES IGNORING THE ABOVE EVIDENCES . IN THE CASE OF CIT VS. SMT. JAMNADEVI AGRAWAL & ORS. ITA NO. 40 OF 2010 (BOMBA Y HIGH COURT NAGPUR BENCH) COPY SUPPLIED THE PROPERTY BROKER HAD STAT ED THE SHARE TRANSACTIONS AS SHAM AND BOGUS. HOWEVER THE PURCHASE AND SALE PRI CE OF THE SHARES DECLARED BY THE ASSESSEE WERE IN CONFORMITY WITH THE MARKET SAL ES PREVAILING ON THE RESPECTIVE DATES THE RELATED COMPANY HAD CONFIRMED TO HAVE HANDED OVER THE SHARES PURCHASED BY THE ASSESSEE SALE OF THE SHARES TO TH E RESPECTIVE BUYERS WAS ALSO SUPPORTED BY THE DOCUMENTS THE HONBLE HIGH COURT HAS BEEN PLEASED TO UPHOLD THE FINDING OF THE TRIBUNAL THAT TRANSACTIONS WERE GENUINE. LIKEWISE IN THE CASE OF ACIT VS. KAMAL KUMAR S. AGRAWAL (IND.) & ORS (SUPRA ) THAT NAGPUR BENCH OF THE TRIBUNAL HAS ALSO HELD THAT THE FACT THAT THERE WER E DIFFERENCE IN THE INFORMATION AS PER CONTRACT NOTES AND THAT RECEIVED FROM THE STOCK EXCHANGE IS NOT MATERIAL AS ITA . NOS.163& 164 /PN/2010 &60 & 61/PN/2010 SHRI. AJAY S. LALWANI A.YS. 2006-07 PAGE OF 13 12 ADMITTEDLY SOME OFF MARKET TRANSACTIONS WERE NOT R EPORTED TO THE STOCK EXCHANGE THEREFORE SUCH TRANSACTIONS CAN NOT BE TREATED AS SHAM MERELY ON ACCOUNT OF SOME DISCREPANCIES AND THE SALE PROCEEDS OF SHARES CAN NOT BE TAXED UNDER SECTION 68 OF THE ACT. SIMILARLY THE KOLKATA BENCH VS. ITO (SUP RA) HAS HELD THAT IN OFF MARKET TRANSACTIONS I N SHARES ANY ENQUIRY FROM THE STOCK EXCHANGE WILL NOT YIELD RESULT IN FAVOUR OF REVENUE REVENUE HAS TO SEE WHETHER THE SALE HAS BEEN EFFECTED OR NOT AS PER THE ACCEPTANCE AND ADMISSION OF THE RESPECTI VE STOCK BROKER. UNDER THESE CIRCUMSTANCES WE SET ASIDE THE FIRST APPELLATE ORD ER TO THIS EXTENT THAT SHARES IN QUESTION WERE NOT PURCHASED ON THE DECLARED DATES A ND DIRECT THE A.O TO ALLOW THE CLAIMED EXEMPTION U/S. 10(38) OF THE ACT ON THE LON G TERM CAPITAL GAIN SHOWN BY THE ASSESSEE ON THOSE SHARES. THE GROUNDS OF THE A PPEALS PREFERRED BY THE ASSESSEE AGAINST THE DENIAL OF THE DEEMED EXEMPTION U/S. 10(38) OF THE ACT ON LONG TERM CAPITAL GAIN ON SALE OF THE ABOVE SHARES ARE THUS ALLOWED. 13. LIKEWISE IN VIEW OF OUR DISCUSSION WE DO NOT F IND INFIRMITY IN THE FIRST APPELLATE ORDER WHEREBY THE LD CIT(A) HAS RIGHTLY ACCEPTED THE COST OF PURCHASE/ACQUISITION OF SHARES AS STATED BY THE ASS ESSEE. THE SAME IS UPHELD. THE GROUNDS OF THE APPEALS PREFERRED BY THE REVENUE ARE THUS REJECTED. CONSEQUENTLY APPEALS PREFERRED BY THE REVENUE ARE DISMISSED AND THOSE PREFERRED BY THE ASSESSEE ARE ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 18TH NOVEMBER 2011. SD/- SD/- ( G.S. PANNU ) ACCOUNTANT MEMBER (I.C. SUDHIR ) JUDICIAL MEMBER PUNE DATED THE 18TH NOVEMBER 2011 US COPY OF THE ORDER IS FORWARDED TO : ITA . NOS.163& 164 /PN/2010 &60 & 61/PN/2010 SHRI. AJAY S. LALWANI A.YS. 2006-07 PAGE OF 13 13 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT -II NASHIK 4. THE CIT(A)-II NASHIK 5. THE D.R. A BENCH PUNE 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARYR INCOME TAX APPELLATE TRIBUNAL PUNE