S. Vimalchand, Bangalore v. DCIT, Bangalore

ITA 947/BANG/2010 | 2005-2006
Pronouncement Date: 23-03-2011 | Result: Allowed

Appeal Details

RSA Number 94721114 RSA 2010
Assessee PAN JULOF2002A
Bench Bangalore
Appeal Number ITA 947/BANG/2010
Duration Of Justice 7 month(s) 21 day(s)
Appellant S. Vimalchand, Bangalore
Respondent DCIT, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 23-03-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 23-03-2011
Date Of Final Hearing 06-04-2011
Next Hearing Date 06-04-2011
Assessment Year 2005-2006
Appeal Filed On 02-08-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE DR. O.K NARAYANAN VICE PRESIDENT AND SMT. P MADHAVI DEVI JUDICIAL MEMBER SN ITA NO. & ASST. YEAR ASSESSEE S/SHRI/SMT. REVENUE 1 513/BANG/2010 2001-02 VIMALA DEVI CHHAJER NO.64 SHANTHI BHAVAN A.M LANE CHICKPET CROSS BANGALORE. DCIT CENTRAL CIRCLE-1(3) BANGALORE 2 514/BANG/2010 2002-03 VIMALA DEVI CHHAJER NO.64 SHANTHI BHAVAN A.M LANE CHICKPET CROSS BANGALORE. DCIT CENTRAL CIRCLE-1(3) BANGALORE 3 515/BANG/2010 2003-04 VIMALA DEVI CHHAJER NO.64 SHANTHI BHAVAN A.M LANE CHICKPET CROSS BANGALORE. DCIT CENTRAL CIRCLE-1(3) BANGALORE 4 516/BANG/2010 2004-05 VIMALA DEVI CHHAJER NO.64 SHANTHI BHAVAN A.M LANE CHICKPET CROSS BANGALORE. DCIT CENTRAL CIRCLE-1(3) BANGALORE 5 517/BANG/2010 2005-06 VIMALA DEVI CHHAJER NO.64 SHANTHI BHAVAN A.M LANE CHICKPET CROSS BANGALORE. DCIT CENTRAL CIRCLE-1(3) BANGALORE 6 518/BANG/2010 2006-07 VIMALA DEVI CHHAJER NO.64 SHANTHI BHAVAN A.M LANE CHICKPET CROSS BANGALORE. DCIT CENTRAL CIRCLE-1(3) BANGALORE 7 519/BANG/2010 2004-05 CHETANA DEVI CHHAJER NO.64 SHANTHI BHAVAN A.M LANE CHICKPET CROSS BANGALORE. DCIT CENTRAL CIRCLE-1(3) BANGALORE 8 520/BANG/2010 2005-06 CHETANA DEVI CHHAJER NO.64 SHANTHI BHAVAN A.M LANE CHICKPET CROSS BANGALORE. DCIT CENTRAL CIRCLE-1(3) BANGALORE ITA NO.513 ./B/10 2 9 521/BANG/2010 2004-05 MEENA DEVI CHHAJER NO.64 SHANTHI BHAVAN A.M LANE CHICKPET CROSS BANGALORE. DCIT CENTRAL CIRCLE-1(3) BANGALORE 10 522/BANG/2010 2005-06 MEENA DEVI CHHAJER NO.64 SHANTHI BHAVAN A.M LANE CHICKPET CROSS BANGALORE. DCIT CENTRAL CIRCLE-1(3) BANGALORE 11 523/BANG/2010 2004-05 MANISH MUDITH CHHAJER (HUF) NO.64 SHANTHI BHAVAN A.M LANE CHICKPET CROSS BANGALORE. DCIT CENTRAL CIRCLE-1(3) BANGALORE 12 524/BANG/2010 2005-06 MANISH MUDITH CHHAJER (HUF) NO.64 SHANTHI BHAVAN A.M LANE CHICKPET CROSS BANGALORE. DCIT CENTRAL CIRCLE-1(3) BANGALORE 13 525/BANG/2010 2004-05 MANGILAL CHHAJER NO.64 SHANTHI BHAVAN A.M LANE CHICKPET CROSS BANGALORE. DCIT CENTRAL CIRCLE-1(3) BANGALORE 14 526/BANG/2010 2005-06 MANGILAL CHHAJER NO.64 SHANTHI BHAVAN A.M LANE CHICKPET CROSS BANGALORE. DCIT CENTRAL CIRCLE-1(3) BANGALORE 15 946/BANG/2010 2003-04 SHUSHEELA DEVI TAINWALA NO.121 WHEELER ROAD CROSS COX TOWN BANGALORE DCIT CENTRAL CIRCLE-1(4) BANGALORE 16 948BANG/2010 2005-06 RAVKANTH TAINWALA NO.35 WHEELER ROAD CROSS COX TOWN BANGALORE DCIT CENTRAL CIRCLE-1(4) BANGALORE 17 949/BANG/2010 2005-06 RAJESH TAINWALA NO.35 WHEELER ROAD CROSS COX TOWN BANGALORE. DCIT CENTRAL CIRCLE-1(4) BANGALORE ITA NO.513 ./B/10 3 18 947/BANG/2010 2005-06 S VIMALCHAND NO.107 1 ST FLOOR SOPHIAS CHOICE NO.1 ST. MARKS ROAD BANGALORE DCIT CENTRAL CIRCLE-1(3) BANGALORE 19 953/BANG/2010 2003-04 PUSHPA DEVI MEHTA NO.94 38 TH CROSS 6 TH MAIN V BLOCK JAYANAGAR BANGALORE. DCIT CENTRAL CIRCLE-1(4) BANGALORE 20 954/BANG/2010 2003-04 KALAVATHI MEHTA NO.94 38 TH CROSS 6 TH MAIN V BLOCK JAYANAGAR BANGALORE. DCIT CENTRAL CIRCLE-1(4) BANGALORE 21 955/BANG/2010 2003-04 CHANDRAKANTA MEHTA NO.94 38 TH CROSS 6 TH MAIN V BLOCK JAYANAGAR BANGALORE. DCIT CENTRAL CIRCLE-1(4) BANGALORE 22 956/BANG/2010 2003-04 VENNA S MEHTA NO.94 38 TH CROSS 6 TH MAIN V BLOCK JAYANAGAR BANGALORE. DCIT CENTRAL CIRCLE-1(4) BANGALORE 23 1000/BANG/2010 2003-04 VIJAY M NAGORI NO.93 N.R ROAD BANGALORE. ACIT CENTRAL CIRCLE-2(2) BANGALORE. 24 1001/BANG/2010 2003-04 AJAY M NAGORI NO.93 N.R ROAD BANGALORE. ACIT CENTRAL CIRCLE-2(2) BANGALORE. ITA NO.513 ./B/10 4 25 1002/BANG/2010 2003-04 MITESH JAIN NO.93 N.R ROAD BANGALORE. ACIT CENTRAL CIRCLE-2(2) BANGALORE. 26 1003/BANG/2010 2003-04 MOHANLAL SUMERMAL NO.93 N.R ROAD BANGALORE. ACIT CENTRAL CIRCLE-2(2) BANGALORE. 27 1004/BANG/2010 2003-04 SANJAY NAGORI NO.93 N.R ROAD BANGALORE. ACIT CENTRAL CIRCLE-2(2) BANGALORE. 28 1005/BANG/2010 2003-04 ASHOK KUMAR SUMERMAL NO.93 N.R ROAD BANGALORE. ACIT CENTRAL CIRCLE-2(2) BANGALORE. 29 1071/BANG/2010 2003-04 RAJENDRA KUMAR BHUTRA NO.10 & 11 GUPTA LAYOUT BANNERGHATTA ROAD BANGALORE ACIT CENTRAL CIRCLE-1(4) BANGALORE. 30 970/BANG/2010 2003-04 SURESH KUMAR CHOPRA NO.127/12 1 ST FLORR BULL TEMPLE ROAD K.G NAGAR BANGALORE. ACIT CENTRAL CIRCLE-1(1) BANGALORE. APPELLANT BY : SHRI H.N KHINCHA CHARTERED ACCO UNTANT RESPONDENT BY : SHRI HARSHA PRAKASH COMMISSIONE R OF INCOME-TAX ITA NO.513 ./B/10 5 O R D E R PER BENCH : THIS IS A BUNCH OF THIRTY APPEALS. ALL THESE APPEA LS ARE FILED BY THE ASSESSEES. THE ASSESSEES/INDIVIDUALS ARE BELON GING TO DIFFERENT GROUPS SUCH AS MEHTA GROUP CHAJJER GROUP TAINWA LA GROUP AND NAGORI GROUP ETC. 2. IN ALL THESE CASES THE MAIN ISSUE IS THE DETERM INATION OF THE NATURE OF SURPLUS EARNED BY THE ASSESSEES ON SALE O F SHARES HELD BY THEM. ALL THE ASSESSEES HAVE SOLD THEIR SHARES IN DIFFERENT COMPANIES IN THE PREVIOUS YEARS RELEVANT TO THE ASSESSMENT YE ARS UNDER APPEAL AND OFFERED THE SURPLUS AS LONG TERM CAPITAL GAINS FOR TAXATION. IN ALL THESE CASES OTHER THAN THE CASE OF NAGORI GROUP T HE ASSESSING OFFICER TREATED THE SURPLUS AS INCOME FROM OTHER S OURCES AGAINST THE CLAIM OF LONG TERM CAPITAL GAINS MADE BY THE ASSESS EES. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE MEDIUM O F PURCHASE AND SALE OF SHARES WAS ADOPTED BY THE ASSESSEES TO CONV ERT THEIR UNACCOUNTED MONEY TO ACCOUNTED MONEY UNDER THE HEAD LONG TERM CAPITAL GAINS ATTRACTING LEAST AMOUNT OF TAX AT 10 %. ITA NO.513 ./B/10 6 3. IN THE CASE OF ASSESSEES BELONGING TO NAGORI GRO UP THEY ALSO RETURNED THE SURPLUS OF SALE OF SHARES AS LONG TERM CAPITAL GAINS. BUT THE ASSESSING OFFICER TREATED THE LONG TERM CAPITAL GAINS AS SHORT TERM CAPITAL GAINS. WHEN THE MATTER WAS TAKEN BEFORE TH E CIT(A) HE SET ASIDE THE VIEW OF THE ASSESSING OFFICER AND TREATED THE SURPLUS AS INCOME FROM OTHER SOURCES AGAINST THE CONTENTION OF THE ASSESSEES THAT IT WAS LONG TERM CAPITAL GAINS AND ALSO AGAINST THE FINDINGS OF THE ASSESSING AUTHORITY THAT IT WAS SHORT TERM CAPITAL GAINS. 4. NOW IN ALL THESE APPEALS AT PRESENT PLACED BEFO RE US THE QUESTION IS WHETHER THE SURPLUS ARISING OUT OF THE SALE OF SHARES BY THESE ASSESSEES ARE IN THE NATURE OF LONG TERM CAPI TAL GAINS OR IN THE NATURE OF INCOME FROM OTHER SOURCES. 5. IN ADDITION TO THE ABOVE QUESTION OF DETERMINING THE NATURE OF SURPLUS ANOTHER ISSUE HAS BEEN RAISED BY VIMALA D EVI CHAJJER BELONGING TO CHAJJER GROUP. SHE HAS RETURNED AGRIC ULTURAL INCOME FOR THE ASSESSMENT YEARS 2001-02 2002-03 2003-04 200 4-05 2005-06 AND 2006-07. THE ASSESSING OFFICER TREATED PART O F THOSE AGRICULTURAL INCOME AS INCOME FROM OTHER SOURCES WHICH ACCORDIN G TO THE ASSESSEE IS NOT JUSTIFIED. ITA NO.513 ./B/10 7 6. THESE ARE THE OUT LINES OF THE DISPUTES ARISING IN THESE APPEALS. 7. THE RELEVANT ASSESSMENT YEARS INVOLVED IN THESE APPEALS ARE 2001-02 2002-03 2003-04 2004-05 2005-06 AND 200 6-07. ALL THESE APPEALS ARISE OUT OF THE ASSESSMENTS COMPLETED U/S 153A READ WITH SEC. 143(3) OF THE INCOME-TAX ACT 1961. 8. IN THE CASE OF MEHTA GROUP CONSISTING OF VEENA M EHTA CHANDRAKANTHA MEHTA PUSHPA DEVI MEHTA AND KALAVATH I MEHTA THE ASSESSING AUTHORITY AS WELL AS THE CIT(A) HAVE HELD THAT THE SURPLUS GENERATED OUT OF THE SALE OF SHARES WERE IN THE NAT URE OF INCOME FROM OTHER SOURCES. 9. SHRI S VIMALCHAND FOR THE ASSESSMENT YEAR 2005-0 6 HAS OFFERED LONG TERM CAPITAL GAINS ON SHARES HELD IN FAST TRAC K ENTERTAINMENT LTD. HE SOLD 50000 SHARES ON 13.4.2004 AND 28.4.2 004. THE SHARES WERE PURCHASED ON 7.4.2003 FOR RS.60 710/- AND THE SHARES WERE SOLD FOR RS.2 475 723/-. THE FOUR ASSESSES NAMELY VEENA MEHTA CHANDRAKANTHA MEHTA PUSHPA DEVI MEHTA AND KALAVATH I MEHTA HAVE SOLD 12000 SHARES EACH OF M/S DATA BASE FINANCE LTD . WHICH WERE ITA NO.513 ./B/10 8 PURCHASED ON 19.5.2001. IN THEIR CASES THE PURCHA SE PRICE WERE RS.15 120 PER HEAD WHEREAS THEY SOLD THE SHARES FO R AN AMOUNT OF RS.862 800 RS.877 800 RS.848 640 AND RS.850 800/- . THEY HAVE ALSO CLAIMED RELIEF U/S 54F AS THE SURPLUS WAS OFF ERED BY THEM AS LONG TERM CAPITAL GAINS. 10. IN THE CASE OF THE ASSESSEES BELONGING TO CHAJJ ER GROUP NAMELY MANGILAL CHAJJER CHETANA CHAJJER MEENA DEVI CHAJJ ER MANISH MUDITH CHAJJER AND VIMALA DEVI CHAJJER SHARES OF M/ S FAST TRACK ENTERTAINMENT LTD. M/S NAGESHWAR INVESTMENT PVT. L TD. AND STENLEY CREDIT CAPITAL LTD. WERE SOLD IN THE PREVIOUS YEAR WHICH WERE PURCHASED IN THE MONTHS OF APR MAY AND JUL OF 2002 AND IN THE MONTH OF APRIL 2003. THESE SHARES WERE SOLD FOR A CONSIDERATION RANGING FROM RS.576 950/- TO 1 246 680/-. 11. THE ASSESSEES SHUSHEELA DEVI TAINWALA RAJESH T AINWALA AND RAVIKANT TAINWALA BEONG TO TAINWALA GROUP HAVE SOLD SHARES FOR THE ASSESSMENT YEARS 2003-04 AND 2005-06. THE SHARES B ELONGED TO M/S DATA BASE FINANCE LTD AND FAST TRACK ENTERTAINMENT LTD. THE SHARES WERE PURCHASED IN THE MONTH OF MAY 2003 AND AUG 200 4. IN THIS CASE ALSO SALES WERE MADE FOR A PRICE MUCH HIGHER THAN T HE PURCHASE PRICE. ITA NO.513 ./B/10 9 12. IN THE CASE OF RAJENDRA KUMAR BHUTRA AND SURESH KUMAR CHOPRA THEY SOLD SHARES IN THE ASSESSMENT YEAR 2003 -04 OF M/S DATA BASE FINANCE LTD. THE SHARES WERE SOLD FOR PROFIT. 13. THE NATURE OF THE SALES OF SHARES TO DIFFERENT PARTIES AND THE NATURE OF SURPLUS ARISING OUT OF THOSE SALES WERE E XAMINED BY THE ASSESSING AUTHORITY IN THE LIGHT OF A SEARCH CONDUC TED U/S 132 OF THE INCOME-TAX ACT 1961. IT IS BECAUSE OF THAT SEARCH ALL THESE ASSESSMENTS HAVE BEEN COMPLETED U/S 153A READ WITH SEC. 143(3) OF THE INCOME-TAX ACT 1961. 14. REITERATING THE ENQUIRIES MADE AS A CONSEQUENCE OF THE SEARCH THE ASSESSING OFFICER HELD THAT ALL TRANSACTIONS OF SHARE SALES WERE DUBIOUS AND THE ASSESSEES WERE CONVERTING THEIR UNA CCOUNTED MONEY INTO ACCOUNTED MONEY THROUGH THE COLOURABLE DEVICE OF PURCHASE AND SALE OF SHARES. THE ASSESSING OFFICER HELD THAT TH E SHARES WERE PURCHASED FOR NORMAL PRICES AND THESE SHARES WERE S OLD FOR EXORBITANT PRICES AFTER ONE YEAR WHICH DOES NOT JUSTIFY THE N ORMAL BUSINESS PARAMETERS. HE HELD THAT EVEN THOUGH THE SHARES W ERE SOLD THROUGH BROKERS AND STOCK EXCHANGE THE ASSESSEES HAVE RETU RNED THE SALE ITA NO.513 ./B/10 10 PROCEEDS TO THE BROKERS SO THAT THE SURPLUS SALE VA LUE PAID BY THE BROKERS HAVE GONE BACK TO THEM AND ASSESSEES CONVE RTED THEIR UNACCOUNTED MONEY INTO ACCOUNTED MONEY. HE HELD TH AT THIS IS A COLOURABLE DEVICE IN CONVERTING BLACK MONEY INTO WH ITE MONEY THROUGH MEDIUM OF SALES OF SHARES BY ATTRACTING TA X AT A SOFT RATE OF 10%. HE FOUND THAT THE ASSESSEES HAVE NOT EXPLAINE D THE REASONS AS TO WHY THEY COULD FETCH EXORBITANT AMOUNT OF SALE PRIC ES. HE ALSO EXAMINED THE BUSINESS POTENTIAL OF THE COMPANIES W HOSE SHARES WERE SOLD BY THE ASSESSEES AND FOUND THAT THOSE COMPANIE S DO NOT HAVE ANY POTENTIAL FOR EARNING HIGH AMOUNT OF INCOME OR NET WORTH. THE ASSESSING OFFICER CARRIED OUT HIS INVESTIGATION AND ENQUIRIES ON THE BASIS OF THE ABOVE PREMISES AND CAME TO THE CONCLUS ION THAT THE TRANSACTIONS WERE DUBIOUS AND THE ASSESSEES WERE CO NVERTING THE BLACK MONEY INTO WHITE MONEY AND THEREFORE THE SURPLUS COULD NOT BE TREATED AS LONG TERM CAPITAL GAINS. HE ACCORDINGLY TREATED THE SURPLUS AMOUNTS OFFERED BY THE ASSESSEES AS INCOME FROM OTH ER SOURCES IN THE NATURE OF UNEXPLAINED CREDITS WITHIN THE MEANING OF SEC. 68 OF THE INCOME-TAX ACT 1961. THIS POSITION HAS BEEN CONFIR MED BY THE CIT(A). ITA NO.513 ./B/10 11 15. WE HEARD SHRI H.N KHINCHA THE LEARNED CHARTERE D ACCOUNTANT APPEARING FOR THE ASSESSEES WHO HAS ARGUED THE FAC TS AND LAW RELATING TO THESE CASES IN DETAIL. 16. THE LEARNED CHARTERED ACCOUNTANT CONTENDED THAT THE SHARES WERE PURCHASED BY THE ASSESSEES FOR THE PRICES PREV AILING AT THAT POINT OF TIME AND THE SHARES WERE THAT OF THE COMPANIES LISTED IN THE STOCK EXCHANGE. THEREFORE THERE IS NO REASON TO SUSPECT THE GENUINE PURCHASE OF SHARES. THESE SHARES WERE SHOWN IN THE BALANCE SHEET OF THE ASSESSEES AS INVESTMENT AT COST PRICE. THESE S HARES WERE SOLD IN THE PREVIOUS YEARS RELEVANT TO THE ASSESSMENT YEARS AGAIN ON THE FLOOR OF THE STOCK EXCHANGE. THE ASSESSEES HAVE SOLD THE SHARES THROUGH STOCK BROKERS ON THE FLOOR OF THE STOCK EXCHANGE. THEREFORE THERE CANNOT BE A HANKY PANKY IN THE MATTER OF SALES OF T HOSE SHARES. THE SHARES ARE PROPERLY DOCUMENTED AND REFLECTED IN THE RECORDS OF THE STOCK BROKER. THE PAYMENTS HAVE BEEN MADE BY THE S TOCK EXCHANGE THROUGH BANK INSTRUMENTS. THE SALES WERE MADE ON T HE PRICES OFFERED IN THE STOCK EXCHANGE ON THE DAYS OF SALES. THEREF ORE IN THE LIGHT OF THE ACCOUNTS MAINTAINED BY THE ASSESSEES AND IN THE LIGHT OF THE EXTERNAL EVIDENCES AVAILABLE IN THE HANDS OF THE BR OKERS AND THE STOCK ITA NO.513 ./B/10 12 EXCHANGE THERE IS NO MERIT IN QUESTIONING THE VERA CITY AND BONAFIDES OF THE SALES OF SHARES. 17. THE LEARNED CA FURTHER ARGUED THAT THE ASSESSIN G OFFICER HAS TRIED TO MAKE OUT A CASE AGAINST THE ASSESSEES ON T HE SO CALLED ENQUIRIES MADE BY HIM IN THE LIGHT OF THE SEARCH CA RRIED OUT U/S 132. HE CONTENDED THAT THE SEARCH IN FACT HAS BROUGHT O UT POSITIVE MATERIALS TO SUPPORT THE ARGUMENTS OF THE ASSESSEES . THE ENTIRE TRANSACTIONS WERE RECORDED IN THE REGULAR BOOKS OF ACCOUNT OF THE ASSESSEES. THE SHARES WERE LATER CONVERTED INTO DE -MAT FORM. SHARES CANNOT BE CONVERTED INTO DIGITAL FORM UNLESS THE SH ARES ARE GENUINE. IT IS ONLY BECAUSE THE SHARES WERE GENUINE THAT THE NA TIONAL DEPOSITORY AGENCY HAS CONVERTED THE PHYSICAL FORM OF SHARES OF THE ASSESSEES INTO DE-MAT FORM. THIS ITSELF IS AN IMPEACHABLE EV IDENCE TO SHOW THAT THE SHARES WERE ACTUALLY HELD BY THE ASSESSEES. IN THE COURSE OF SEARCH THE INVESTIGATING ASSESSING OFFICER COULD L AY HIS HANDS ON COPIES OF CONTRACT FOR THE SALE OF SHARES COPIES OF BILLS DE-MAT DETAILS AND ALL OTHER PARTICULARS REGARDING THE HOL DING AND SALE OF SHARES. THEREFORE IN FACT THE MATERIALS COLLECTED IN THE COURSE OF SEARCH REALLY SUPPORT THE CONTENTIONS OF THE ASSESS EES. THE SEARCH HAS NOT BROUGHT OUT ANY MATERIAL AGAINST THE CONTENTION OF THE ASSESSEES. ITA NO.513 ./B/10 13 NO INCRIMINATING MATERIALS WERE DETECTED IN THE COU RSE OF SEARCH AGAINST THE ASSESSEES IN THE MATTER OF PURCHASE AND SALE OF SHARES. THEREFORE THERE IS NO FORCE IN THE ARGUMENTS OF TH E REVENUE THAT THE SEARCH HAS STRENGTHENED THE PROPOSITION AND FINDING MADE OUT BY THE REVENUE. 18. HE HAS RELIED ON THE FOLLOWING DECISIONS IN SUP PORT OF HIS ARGUMENTS: 1) MUKESH R MAROLIA VS. ADDL. CIT 006 SOT 0247 (MUM) 2) ACIT VS. AJAY NAWANDAR 33 DTR 452 (MUM) 3) ITO VS. SRI ROSHANLAL IN ITA NO.1120/B/07 4) ITO VS. NAVEEN GUPTA ITA NO.696/DELHI/2002 5) MRS. KRISHNA DEVI KEJRIWAL VS. ITO 004 TAX CORP (AT ) 23069 (MUM) 6) ITO VS. SMT. NEELAM CHAWLA 006 DTR 0141 (DEL) 7) ITO VS. RAJIV AGARWAL (DELHI) 89 TTJ 1095 8) ACCHYALAL SHAW VS. ITO 121 TTJ 695 (CAL) 9) CIT VS. SMT. JAMNADEVI AGARWAL ITA NO.513 ./B/10 14 19. SHRI HARSHA PRAKASH THE LEARNED CIT APPEARING FOR THE REVENUE ON THE OTHER HAND ARGUED AT LENGTH ON THE BASIS OF THE FINDINGS RECORDED BY THE ASSESSING AUTHORITY IN HIS ORDER. THE LEARNED CIT HAS ARGUED THAT ALL THE ACTIVITIES ARE PART OF A NATION WIDE RACKET ENGAGED IN MONEY LAUNDERING THROUGH VARIOUS DUBIOUS METHODS. HE HAS TAKEN US TO THE VARIOUS RELEVANT OBSERVATIONS R EFLECTED IN THE ASSESSMENT ORDERS. HE ALSO EXPLAINED THE MODUS OPE RANDI OF THE ASSESSEES. MANY OF THE COMPANIES INVOLVED IN THESE TRANSACTIONS ARE NOT EXISTING AND THE EXISTING COMPANIES DO NOT HAV E ANY BUSINESS ACTIVITIES WORTH THEIR NAME. THEY ARE ONLY PAPER C OMPANIES. THEY ARE USED AS COLORABLE MEDIUM TO CONVERT THE UNACCOUNTED MONEY OF THE ASSESSEES. THIS IS A CASE OF MONEY LAUNDERING EVEN THOUGH SALES WERE MADE ON THE FLOOR OF STOCK EXCHANGE. THERE WAS A TA CIT AGREEMENT BETWEEN THE BROKERS AND THE ASSESSEES WHEREBY THE E XCESS CONSIDERATION RECORDED IN THE BOOKS WERE RETURNED B Y THE ASSESSEES TO THE BROKERS AND IN THAT VACUUM THE ASSESSEES WERE MANIPULATING THEIR UNACCOUNTED MONEY. ALL THESE MANIPULATIONS WERE B ROUGHT TO LIGHT AS A RESULT OF ENQUIRIES MADE BY THE SEARCH CARRIED OU T IN THE PREMISES OF THE ASSESSEES U/S 132. HE THEREFORE SUBMITTED TH AT THE ASSESSING OFFICER HAS RIGHTLY INVOKED SEC. 68 TO TREAT THE SU RPLUS INCOME AS INCOME FROM OTHER SOURCES. ITA NO.513 ./B/10 15 20. THE LEARNED CIT(A) CONTENDED THAT IN SPITE OF T HE DOCUMENTARY FRAMEWORK CONSISTENTLY CREATED BY THE ASSESSEES THEY HAVE NOT EXPLAINED THE REASONS AS TO WHY SHARES PURCHASED FO R NOMINAL VALUE COULD FETCH HUGE AMOUNT ON SALE MADE JUST AFTER ONE YEAR PERIOD. THERE MUST BE SOME REASONABLE EXPLANATION FOR THIS. THE COMPANIES WHOSE SHARES WERE PURCHASED BY THE ASSESSEES ARE N OT COMPANIES OF REPUTATION OR SUBSTANCE OR ASSETS OR BUSINESS PROS PECTUS. IN SUCH CIRCUMSTANCES IT IS HIGHLY IMPROBABLE TO PRESUME T HAT THE ASSESSEES COULD HAVE SOLD THE SHARES OF THOSE COMPANIES FOR S UCH HUGE SUM OF MONEY. 21. THE LEARNED CIT CONCLUDED THAT THE ASSESSING OF FICER HAS EXPLAINED THE ENTIRE SCHEME OF ACTIVITIES EXECUTED BY THE ASSESSEES AND HE HAS ESTABLISHED THAT THE TRANSACTIONS WERE DUBIO US AND THE CIT(A) HAS RIGHTLY CONFIRMED THE ASSESSMENT ORDERS IN THIS REGARD. HE THEREFORE SUBMITS THAT THE GROUNDS OF THE ASSESSEE S ON THIS POINT MAY BE DISMISSED. 22. WE HEARD BOTH SIDES IN DETAIL. ITA NO.513 ./B/10 16 23. IN THIS CONTEXT WE MAY REFER TO A DECISION OF ITAT MUMBAI BENCH IN THE CASE OF SHRI MUKESH R MAROLIA VS. ADD. CIT 006 SOT 0247. IN THIS CASE THE ASSESSEE HAD PURCHASED SHA RES FOR A LESSER AMOUNT AND THEREAFTER HE SOLD THE SHARES FOR HUGE A MOUNTS AND USING THE SALES PROCEEDS PURCHASED A PLOT AT COLABA BOM BAY. THE ASSESSEE HAD DISCLOSED THE SURPLUS AS LONG TERM CAPITAL GAIN S AND ALSO CLAIMED DEDUCTION U/S 54F. AFTER HEARING BOTH SIDES IN DET AIL AND IN THE LIGHT OF THE MATERIALS PLACED BEFORE THE TRIBUNAL THE TR IBUNAL CAME TO THE FOLLOWING FINDING: FOR A MOMENT EVEN IF ALL THE ABOVE EVIDENCES ARE IGNORED ONE CANNOT OVERLOOK THE PRESSURE OF THE EVIDENCE COMING OUT OF THE SURVEY CARRIED OUT BY THE DEPARTMENT IN THE BUSINESS PREMISES OF THE ASSESSEE. THERE WAS A SURVEY CARRI ED OUT BY THE DEPARTMENT IN THE BUSINESS PREMISES OF T HE ASSESSEE. IN THE COURSE OF SURVEY CONTRACT NOTES FOR SALE OF SHARES COPIES OF BILLS THEREOF PHOTO COPI ES OF SHARE CERTIFICATES ETC. WERE FOUND. THE PURCHASE AND SALE OF SHARES WERE ALSO RECORDED IN THE BOOKS OF ACCOUNTS. THE DEPARTMENT HAS NO CASE THAT THE SURV EY WAS A STAGED ENACTMENT. A SURVEY IS ALWAYS UNEXPECTED. SO IT IS NOT POSSIBLE TO PRESUME THAT THE ASSESSEE HAD COLLECTED CERTAIN FABRICATED DOCUMENTS AND KEPT AT HIS BUSINESS PREMISES SO AS TO HOODWINK THE SURVEY PARTY TO LEAD THEM TO BELIEVE THAT THE ITA NO.513 ./B/10 17 ASSESSEE HAD ENTERED INTO SHARE TRANSACTIONS. AT L EAST SUCH AN INFERENCE IS NOT POSSIBLE IN LAW. THE DEPARTMENT HAS NO DEFENCE AGAINST THE FORCIBLE ARGUMENT OF THE LEARNED COUNSEL THAT THE SURVEY CONDUCTED BY THE DEPARTMENT HAS OUT AND OUT UPHELD THE CONTENTION OF THE ASSESSEE THAT HE HAD PURCHASE D AND SOLD SHARES. WE FIND THIS SOLITARY EVIDENCE COLLECTED IN THE COURSE OF SURVEY IS SUFFICIENT TO ENDORSE THE BONAFIDES OF THE SHARE TRANSACTIONS MAD E BY THE ASSESSEE. 24. WE THINK THAT THE PRESENT CASES ARE ALSO IN THE SAME PLATFORM. IN THAT CASE THERE WAS A SURVEY AND IN THE PRESENT CAS E IT WAS A SEARCH. THE SEARCH HAS BROUGHT OUT LOTS OF DOCUMENTARY EVID ENCES TO SUPPORT THE CONTENTION OF THE ASSESSEES THAT THEY HAVE SOLD SHARES AS RECORDED IN THE BOOKS OF ACCOUNTS. THE SEARCH PARTY COULD FIND BOOKS OF ACCOUNTS WHEREIN ALL THESE TRANSACTIONS THE PURC HASE AND SALES HAVE BEEN PROPERLY ACCOUNTED. THE PARTICULARS OF PURCHA SE OF SHARES WERE AVAILABLE DURING THE SEARCH AS THE PART OF THE REC ORDS MAINTAINED BY THE ASSESSEES. THE PURCHASES HAVE BEEN PROPERLY RE CORDED THEREIN. LATER ON THE SHARES WERE CONVERTED INTO DE-MAT FOR M. THOSE DE-MAT PARTICULARS ARE ALSO AVAILABLE WITH THE ASSESSEES. CONTRACT NOTES FOR SALE OF SHARES WERE FOUND IN THE COURSE OF SEARCH. BROKERS NOTE ITA NO.513 ./B/10 18 ADVICES AND DETAILS OF PAYMENTS WERE AVAILABLE IN T HE COURSE OF SEARCH. THE PAYMENTS WERE MADE THROUGH BANK INSTRUMENTS. S UBJECT TO THE ALLEGATION OF THE REVENUE IF ONE TAKES A NORMAL VI EW OF BUSINESS TRANSACTIONS THE ABOVE DOCUMENTS ARE MORE THAN SUF FICIENT TO SUPPORT THE CONTENTION OF THE ASSESSEES THAT THEY HAVE BROU GHT AND SOLD SHARES FOR THE PRICES REFLECTED IN THEIR ACCOUNTS. THE AB OVE POSITIVE EVIDENCES COULD OVERCOME BY THE DEPARTMENT ONLY IF THE REVENUE CAN BRING MORE FORCEFUL EVIDENCES TO COUNTER THE ARGUME NTS OF THE ASSESSEES. SUCH EVIDENCES ARE NOT AVAILABLE. 25. NOW WHAT IS THE POSITION IN THE PRESENT CASES? IN SPITE OF THE SEARCH CARRIED OUT BY THE DEPARTMENT NO MATERIALS INCRIMINATING THE ASSESSEES IN THE MATTER OF SALES OF SHARES WERE FOU ND OR SEIZED. THERE WERE NO MATERIALS AVAILABLE WITH THE ASSESSEES WHI CH CAN SHOW THAT THE TRANSACTIONS WERE NOT THE REAL. TO CUT THE LON G STORY SHORT WE HAVE TO STATE THAT THE SEARCH COULD NOT BRING OUT A NY ADVERSE MATERIALS AGAINST THE STAND TAKEN BY THE ASSESSEES. 26. THIS IS THE CASE WITH THE SUBSEQUENT ENQUIRIES CONDUCTED BY THE ASSESSING OFFICER AS WELL. IN THE LIGHT OF CERT AIN GENERAL IMPRESSION THE ASSESSING OFFICER WAS IN FACT FRAMI NG OUT A CASE ON ITA NO.513 ./B/10 19 THE BASIS OF INTELLIGENT HYPOTHESIS. BEYOND THAT WE DO NOT THINK THAT THE FINDINGS MADE BY THE ASSESSING AUTHORITY HAVE A NY PROBATIVE VALUE IN THE EYES OF LAW. 27. THE PURCHASE OF SHARES HAVE BEEN PROVED BY THE PROCESS OF DE- MATING OF SHARES. SHARES HAVE BEEN REFLECTED IN TH E BALANCE SHEETS OF THE ASSESSEES. SHARES WERE SUBSEQUENTLY SOLD ON THE FLOOR OF STOCK EXCHANGE. THE SALES WERE ARRANGED THROUGH ACCREDITE D BROKERS. THE SALES PROCEEDS WERE RECEIVED FROM THE STOCK EXCHAN GE THROUGH BANK INSTRUMENTS. WHEN ALL THESE THINGS PUT TOGETHER TH E ASSESSEES HAVE MADE OUT A CLEAR CASE OF PURCHASE AND SALE OF SHARE S RESULTING IN SURPLUS IN THEIR RESPECTIVE HANDS. IN THE ABSENCE OF ANY EVIDENCES TO CONTRARY THE SURPLUS HAVE TO BE TREATED AS LONGTER M CAPITAL GAINS AS THE SHARES WERE HELD FOR A PERIOD OF MORE THAN ONE YEAR. THE REVENUE CANNOT DISBELIEVE THE DOCUMENTARY EVIDENCES AVAILAB LE WITH THE ASSESSEES AND TREAT THE SURPLUS AS INCOME FROM OTHE R SOURCES ONLY FOR THE REASON THAT THE SALE VALUE OF THE SHARES WERE H IGH WHEN COMPARED TO THE LOWER PURCHASE COST. WHY SUCH A HUGE MARGIN WAS THERE IS A MATTER TO BE PROBED INTO AND MADE OUT AGAINST THE A SSESSEE BY UNIMPEACHABLE EVIDENCES. AS FAR AS THESE CASES ARE CONCERNED THE REVENUE HAS MADE AN ATTEMPT TO EXPLAIN THE PROPOSIT IONS AGAINST THE ITA NO.513 ./B/10 20 ASSESSEE ONLY ON THE BASIS OF PRESUMPTIONS AND HYPO THESIS. SUCH PRESUMPTIONS AND HYPOTHESIS CANNOT BE TREATED AS SU BSTITUTE TO REASONABLE EVIDENCES HOW SO EVER INTELLIGENT AND P ERSUASIVE THEY MIGHT BE. 28. THEREFORE IN THE FACTS AND CIRCUMSTANCES OF TH E CASE WE HOLD THAT THE LOWER AUTHORITIES ARE NOT JUSTIFIED IN TRE ATING THE SURPLUS OF SALE OF SHARES IN THE HANDS OF THESE ASSESSEES AS U NEXPLAINED CASH CREDITS FALLING U/S 68 OF THE INCOME-TAX ACT 1961. THEREFORE THE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE ARE V ACATED. THE ASSESSING AUTHORITY IS DIRECTED TO TREAT THE SURPLU S AS LONG TERM CAPITAL GAINS AND THEREAFTER CONSIDER THE CLAIM OF EXEMPTIO N MADE BY THE ASSESSEES OF MEHTA GROUP U/S 54F OF THE INCOME-TAX ACT 1961. 29. NEXT WE WILL CONSIDER THE APPEALS OF THE ASSES SEES BELONGING TO NAGORI GROUP. THE ASSESSEES ARE SANJAY NAGORI AJA Y NAGORI MITESH JAIN MOHANLAL SUMARMAL VIJAY NAGORI AND ASHOK KUM AR SUMARMAL. THESE ASSESSEES ALSO HAD SURPLUS IN THE HANDS OF SA LE OF SHARES. THEY CLAIMED IT AS LONGTERM CAPITAL GAINS. THE ONLY DIF FERENCE IS THAT INSTEAD OF INVOKING SEC. 68 AS DONE IN THE CASE OF OTHER ASSESSEES THE ASSESSING OFFICER HAS TREATED THE SURPLUS AS SHORT TERM CAPITAL GAINS ITA NO.513 ./B/10 21 WHICH HAS BEEN LATER ON CONVERTED BY THE CIT(A) AS INCOME FROM OTHER SOURCES FALLING U/S 68. 30. THE CASE OF THE ASSESSING OFFICER WILL NOT STAN D IN THESE APPEALS AS IT IS PROVED BEYOND DOUBT THAT THE SHAR ES WERE HELD FOR A PERIOD OF MORE THAN ONE YEAR. THIS IS PROVED BEYON D DOUBT BY THE DE- MAT ACCOUNT OF THE ASSESSEE. THEREFORE THE SURPLU S CANNOT BE TREATED AS SHORT-TERM CAPITAL GAINS. 31. NOW COMING TO TREATING THE SURPLUS AS INCOME FR OM OTHER SOURCES IN THE NATURE OF UNEXPLAINED CREDITS FALLIN G U/S 68 WE FIND THAT THE FACTS OF THESE CASES ARE EXACTLY SIMILAR T O THE FACTS OF OTHER ASSESSEES. THOSE CASES HAVE ALREADY BEEN DISCUSSED AT LENGTH IN PARAGRAPHS ABOVE. THEREFORE WE HOLD THAT IN THE C ASE OF THESE ASSESSEES ALSO THE SURPLUS HAS TO BE TREATED AS LON G TERM CAPITAL GAINS. 32. THE REMAINING LAST ISSUE IS THE QUESTION OF DIS ALLOWANCE OF AGRICULTURAL INCOME IN THE HANDS OF THE VIMAL DEVI CHAJJER OF CHAJJER GROUP. VIMAL DEVI CHAJJER HAS RETURNED AGRICULTURA L INCOME FOR CONSECUTIVE ASSESSMENT YEARS 2001-02 TO 2006-07. T HE ASSESSING OFFICER HAS DISALLOWED A PORTION OF THE RETURNED AG RICULTURAL INCOME ITA NO.513 ./B/10 22 AND TREATED IT AS INCOME FROM OTHER SOURCES. WE HA VE GONE THROUGH THE DETAILED REASONING GIVEN BY THE ASSESSING AUTHO RITY. WE FIND THAT THE DISALLOWANCE MADE BY THE ASSESSING AUTHORITY IS JUST AND PROPER. THEREFORE THE ORDERS OF THE LOWER AUTHORITIES ON T HE QUESTION OF PARTIAL DISALLOWANCE OF AGRICULTURAL INCOME ARE UPHELD. 33. IN RESULT THE APPEALS FILED BY ALL THESE ASSES SEES EXCEPT VIMAL DEVI CHAJJER ARE ALLOWED. IN THE CASE OF VIMAL DEV I CHAJJER THE APPEALS ARE ALLOWED ON THE QUESTION OF SURPLUS ARIS ING ON SALE OF SHARES BUT DISMISSED THE GROUND AGAINST PARTIAL DIS ALLOWANCE OF AGRICULTURAL INCOME. THEREFORE HER APPEALS ARE TR EATED AS PARTLY ALLOWED. ORDERS PRONOUNCED ON WEDNESDAY THE 23RD DAY OF MARCH 2011 AT BANGALORE. SD/- SD/- (P MADHAVI DEVI) (DR. O.K NARAYANAN) JUDICIAL MEMBER VICE PRESIDENT VMS. ITA NO.513 ./B/10 23 COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REGISTRAR I TAT BANGALORE.