Income Tax Appellate Tribunal - Agra
Baijnath Agarwal, Agra vs Assessee on 13 April, 2010
IN THE INCOME TAX APPELLATE TRIBUNAL
AGRA BENCH, AGRA
BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER AND
SHRI P.K. BANSAL, ACCOUNTANT MEMBER
ITA No.133/Agr/2005
Asst. Year: 2001-02
Shri Baijnath Agarwal, Vs. Asst. C.I.T. 4(1), Agra.
Prop. M/s. Baijnath Scrap Centre,
21/5, Jeoni Mandi, Agra.
(PAN : ABJPA 4867 B)
(Appellant) (Respondent)
Appellant by : Dr. Rakesh Agarwal, C.A.
Respondent by: Shri S.R. Sahu, Jr. D.R.
ORDER
PER P.K. BANSAL, A.M.:
In this case the difference arose between the Members of the Division Bench hearing this appeal. Therefore, the matter was referred to the opinion of the ld. Third Member. The ld. Third Member has agreed with the view taken by the ld. Judicial Member that the CIT(A) has erred on facts as well as in law in upholding the order of the Assessing Officer treating the income under the head Long Term Capital Gain as sham and bogus and taxing the same under the head income from other sources. Therefore, in view of the majority decision, the assessee's appeal is partly allowed.
2. In the result, appeal of the assessee is treated as allowed in part.
(Order pronounced in the open Court on 13.04.2010).
Sd/- Sd/-
(R.K. GUPTA) (P.K. BANSAL)
Judicial Member Accountant Member
Place: Agra
Date: 13th April, 2010.
2
PBN/*
Copy of the order forwarded to:
1. Appellant
2. Respondent By Order
3. CIT concerned
4. CIT (Appeals) concerned
5. DR, ITAT, Agra Bench, Agra
6. Guard File Assistant Registrar
Income-tax Appellate Tribunal, Agra
True Copy
3
IN THE INCOME TAX APPELLATE TRIBUNAL
AGRA BENCH, AGRA
BEFORE SHRI P.K. BANSAL, ACCOUNTANT MEMBER
(AS THIRD MEMBER)
ITA No.133/Agr/2005
Asst. Year: 2001-02
Shri Baijnath Agarwal, Vs. Asst. C.I.T. 4(1), Agra.
Prop. M/s. Baijnath Scrap Centre,
21/5, Jeoni Mandi, Agra.
(PAN : ABJPA 4867 B)
(Appellant) (Respondent)
Appellant by : Dr. Rakesh Gupta, C.A.
Respondent by: Shri S.K. Mishra, Sr. D.R.
ORDER
Hon'ble President under section 255(4) of the Income-tax Act, 1961 ('the Act' hereinafter) has nominated me to decide the following points of difference between the ld. Accountant Member and the ld. Judicial Member as referred to by them vide letter dt.16.02.2009 :-
"(1) The ld. CIT(A)-II has erred on facts as well as in law while upholding the AO's action of treating the income under the head long-term capital gain as sham and bogus and taxing the same under head income from other sources. The income disclosed by the assessee under head long-term capital gain is liable to be assessed only under that head and the same cannot be treated as income from any undisclosed source. Therefore, there arises no point of additional tax liability on this point."
2. The brief facts of the case are that the assessee filed his return of income on 29.10.2001 declaring an income of Rs.10,65,588/- which includes the Long Term Capital Gain (LTCG) of Rs.9,55,365/-. The assessee applied vide application no.2163 for the allotment of shares in M/s. B.T. Technet Limited. Share application money of Rs.25,000/- was sent through D.D. No.376096 dated 01.09.1999 drawn at Vijaya Bank, Jeoni Mandi, Agra. The assessee received allotment letter dated 04.10.1999 showing the folio number P00084. Two share certificates of 4 5000 shares each showing the distinctive numbers and certificate numbers were also received by the assessee. The assessee has duly shown the investment. These shares were sold at the rate of Rs.106/- through the broker M/s. Agarwal & Co. being the member of Delhi Stock Exchange. On the sale of shares, the assessee has shown LTCG. The A.O. did not accept the genuineness of the sale transaction and observed that the assessee could not produce the broker. The identity of the buyer and the seller was also not established. He also doubted that in just 14 months time the prices of the shares cannot be increased by more than 11 times. The CIT(A) confirmed the order of the A.O. When the matter went before the Tribunal, the ld. Judicial Member (J.M.) accepted the genuineness of transactions while the ld. Accountant Member (A.M.) did not agree with the decision of the J.M. and has written a dissenting order. The ld. J.M. has noted that :-
i) The assessee has proved the allotment of shares in the previous year 1999-2000 and duly disclosed the same in his return for the relevant A.Y. The same were accepted by the A.O.
ii) The shares were sold through the stock broker who was member of the Delhi Stock Exchange and registered with SEBI.
iii) Identity of the broker was confirmed by the Delhi Stock Exchange in Departmental enquiry
iv) The assessee has filed copy of the contract notes, bills and account statements.
v) The broker has filed an affidavit confirming the sale of shares.
vi) The sale consideration of the shares was paid by the broker through demand draft out of his bank account.
vii) The assessee has provided necessary material.
viii) The A.O. and the CIT(A) have acted merely on suspicion than on substance.
ix) Merely the broker could not be produced cannot be the basis for taking the adverse inference. The moment the shares are handed over after receipt of the full consideration, no adverse view can be taken.5
x) The onus is on the Revenue to prove that the black money of the assessee was converted into white money through the transaction.
xi) The rate of Rs.106/- per share was duly proved by the assessee.
3. The ld. A.M. was of the view that :-
i) The assessee could not submit the information on various factual areas of the transactions.
ii) No details in the annual return of the Company regarding the share holder were available.
iii) The market rate of the shares on 18.11.2000 at Delhi Stock Exchange varied from Rs.260/- to Rs.860/- while it stood quoted at Rs.123/- and Rs.118/- on 17.11.2000 and on 20.11.2000 respectively at M.P. Stock Exchange.
iv) The draft from the broker's account was issued against the cash deposit in the said account.
v) The case of Ashok Kumar Lavania vs. ACIT was not applicable as in that case the Revenue has accepted the genuineness of the transaction while in the case of the assessee, purchase and acquisition of the shares was also doubted.
4. The ld. A.R. before me contended that during the A.Y. the assessee sold 10000 shares which were held by him in M/s. B.T. Technet Limited. The shares were acquired by the assessee by way of allotment of the shares from the company. The assessee applied for allotment of the shares vide application no.2163 alongwith demand draft No.376096 dated 01.09.1999 drawn at Vijaya Bank, Jeoni Mandi, Agra for Rs.25,000/-. Thereafter he received an allotment advice bearing date of allotment as 04.10.1999. The balance amount of Rs.75,000/- was sent to the company through an account payee demand draft No.377370 dated 21.03.2000 drawn on Vijaya Bank. Both the demand drafts were made out of the same bank account No.5038 belonging to the assessee. The folio no. of the assessee was P00084. The assessee received two share certificates for 5000 hares each. The copy of the share application money, allotment letter and share certificates were placed on Paper Book. Thus, it was contended that the assessee has 6 supplied all the evidence regarding the purchase and evidence namely copy of share application, copy of acknowledge of share application, copy of letter of allotment, copies of share certificates, copy of bank account from where the payment was made for the shares. It was pointed out that the assessee has received the annual report of the company for which attention was drawn towards pages 13 to 35 of the Paper Book. Thus, it was contended that the purchase of holding of the shares by the assessee was duly proved in respect of the sale of shares. It was submitted that these shares were sold through M/s. Agarwal & Co., Stock & Share Broker. The broker was a member of the Delhi Stock Exchange and was registered with SEBI having Registration No INB050098315 as is evident from the Contract note no.23, bill no.P30-1811 which was duly submitted with the department. Identity of the broker was confirmed by Delhi Stock Exchange in departmental enquiry. Against the sale, the broker has issued the contract note, bill and account statement, copies of which was duly filed during the assessment proceedings. Copies of these were also brought to our knowledge at pages 36 to 41 of the Paper Book. The assessee also asked the broker to present before the Department. The broker confirmed the sale of shares on behalf of the assessee through declaration dated 15.01.2004, a copy of which is available at page 43 of the Paper Book. It was pointed out, referring to the declaration that the declaration duly confirmed that the broker has sold 10000 shares of M/s. B.T. Technet Limited vide bill No. P-30-1811 dated 18.11.2000 for and on behalf of the assessee. It was also certified in the declaration that the broker has made payment of Rs.10,57,900/- against the aforesaid bill through two demand drafts and the broker has also deducted the DD charges from the assessee. The broker has also given his PAN as AADPK 4129M in the declaration. The summons issued by the department on remand proceedings were also served on the broker and the departmental Inspector also approached at the doorstep of the broker. Referring to page no.10 of the order of CIT(A), it was pointed out that the Inspector could locate the broker at the Ghaziabad address but he refused to state anything about the share transaction and said that he 7 would give the statement only after consulting his C.A. Shri K.K. Jain. The department was having all the powers to get the desired information from the broker. In the absence of any adverse statement of the broker or any material evidence against the assessee, how the department can be justified in concluding that the assessee had given his undisclosed cash to the broker and in turn the broker has provided him the entries in the Long Term Capital Gain. The assessee does not have any link with the buyer. He sold the shares through the broker. It was pointed out that the CIT(A) has concluded that as the broker did not appear before the Department for recording his statement, the transaction is not genuine. This approach of the CIT(A) is totally illegal. The identity of the broker is duly proved as he was registered with the SEBI. He is an Income Tax assessee and PAN was given in the declaration. The broker has issued all the necessary documents like contract note, sale bill, copy of account. The broker has also confirmed the sale of shares. The notices and the summons were duly served by the department on the broker. The Department's Inspector has also personally contacted the broker. The broker has not given any adverse or negative statement regarding the sale of shares with the assessee. The payment of the sale consideration of the shares were received by the assessee through account payee draft issued from bank account of broker maintained at Indian Overseas Bank, New Delhi. Mere deposit of the cash by the broker before issue of sale consideration does not create any adverse evidence against the assessee as many parties may buy shares in cash. The assessee does not have any control over the affairs of an independent outside party like broker. The broker was neither a relative nor a business associate of the assessee. He was an independent and outside party. The shares were not purchased through broker and were directly allotted by the company to the assessee. In view of these facts, it was contended that the non- presence of the broker cannot convert a genuine transaction into a non-genuine transaction. So far the conduct and status of the company are concerned, it was contended that the assessee was neither a Director nor was he in the control of the company. The shares were directly allotted by 8 issuing two share certificates alongwith letter of allotment. Company was duly registered under Companies Act, 1956. The statement on oath of the one of the Directors of the company Shri S.K. Gupta was also recorded. Companies Act does not prohibit any company to allot its shares in the lot of 5000 shares and no adverse inference can be drawn on this basis. So far the price of the shares in the Stock Exchange is concerned, it was contended that no small investor like the assessee has any control over the price mechanism of any Stock Exchange. The price of shares either on market or off market transaction is decided by multiplicity of the factors like demand and supply forces, varieties of buying interest of buyers in shares of a particular company, personal needs of various sellers, action of market speculators and other countless factors. Neither the assessee nor any other such investor has any control over the market price and trading volume of various stock exchange. The rate list acquired by the department from M.P. Stock Exchange itself indicates the dates and rates quoted at the M.P. Stock Exchange ranging from Rs.12.90 to Rs.150/- between 28.03.2000 to 27.11.2000. The assessee was not having any control over the price and volume of shares traded in the M.P. Stock Exchange or Delhi Stock Exchange. On that basis no adverse inference can be drawn as the assessee has sold the shares through a registered share broker. He does not have any connectivity with the buyer of his shares. In the ordinary course of business when the shares are sold through a registered broker, the seller is not interested in knowing the identity and whereabouts of the buyer. Even Income Tax Act does not require that the assessee should maintain such record. The cash deposited in the account of the broker cannot be the basis for not accepting the transaction of the assessee. The assessment has been completed under section 143(3) of the Act. Deep investigation was carried out but no evidence has been brought on record which may prove that the assessee has deposited cash in the bank account of the broker. The inference has been drawn merely on surmises and conjectures. There is no direct evidence against the assessee that he has paid cash to anybody to purchase the impugned demand draft. So far the conduct of the assessee is 9 concerned; the assessee has submitted all the evidences regarding sale and purchase of the shares alongwith the return filed under section 139. The assessee has replied to all the queries raised by the department and co-operated with the A.O. in making the assessment. The assessee had made complete efforts to assist the department in presenting the broker as is evident from the facts on record. The conduct of the assessee had never been different from a normal investor. The shares purchased by the assessee was a capital asset within the meaning of section 2(14) of the Act. It was a Long Term Capital Gain within the meaning o section 2(29B) of the Act as the shares were held by the assessee for more than 12 months and purchase and holding of shares was not questioned in the A.Y. 2000-01 where the transaction was duly disclosed by the assessee. The transfer of shares was made by making delivery of the shares alongwith duly executed transfer deed. The ld. A.R. pointed out that the case of the assessee is duly covered by the decision of this Bench in the case of Ashok Kumar Lavania, ITA No.112/Agr/2004. Ld. Accountant Member was also party to that case decided by Agra Bench on 30.05.2008. In that case also the issue was Long Term Capital Gain from the sale of shares which were purchased @ Rs.4/- per share and sold @ Rs.65/- to Rs.84/- per share. The brokers M/s. JRD Stock Brokers and Manoj Agarwal of Friends Portfolio affirmed in statements that they were providing accommodation entries at a commission of 0.25 to 0.50%. Accordingly, in that case entire sale proceeds plus commission @ 1% was added as income from undisclosed sources. After analyzing the evidences placed by the assessee, Hon'ble Bench allowed the appeal and held the transaction as genuine. Hon'ble A.M. has tried to distinguish this case mainly for the reasons that in Ashok Kumar Lavania's case purchase of shares was not in dispute and, therefore, all that the assessee had done was to realize his confirmed asset at the extent rate. In the assessee's case also the purchase of shares stands proved through the direct confirmation by the company in response to the notice of the AO u/s.133(6). Therefore, the assessee's case is not different from the case of Ashok Kumar Lavania.
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5. Referring to para no.7 of the order of the ld. Accountant Member, it was contended that the observation of the ld. A.M. was not correct that the assessee failed to produce the broker. The assessee had entered into only one transaction for the sale of shares. He did not have any subsequent transaction with the broker. It was difficult for the assessee to produce the broker. The identity of the broker was not denied. In the case of Ashok Kumar Lavania also one of the broker in respect to the shares of M/s. Tactful Investment was M/s. Agarwal & Co. For this, my attention was drawn towards page no. 3 of the order of Ashok Kumar Lavania and it was pointed out that the identity of the broker was duly accepted by the same Bench consisting of the same ld. Members. Attention was also drawn towards the decision of Third Member in the case of Smt. Sunia Oberoi vs. ITO in ITA No.273/Agr/2004 for the A.Y. 1995-96, 30 DTR (Agra) (TM) (Trib) 474 at page 476. It was contended that the assessee was not in a position to compel the share broker for confirming the share transaction, as she was neither a Director nor having large scale dealings with the broker over the years so as to show that she was personally in a position to compel the broker on account of the magnitude of the transaction done through them. Referring to para no.8 of the order of ld. A.M., it was contended that the assessee cannot be held responsible if the company has not filed details of the share holding with the Registrar of the Companies (ROC). In this regard reliance was placed on the decision of this Tribunal in the case of Smt. Seema Gargh vs. ITO, ITA No.252/Agr/2005, a copy which is available at page 111 to 135 of the compilation. Referring to that, it was pointed out from page 112 that Smt. Seema Gargh has also sold 9500 shares of M/s B.T. Technet Limited in whose case the Tribunal has accepted the LTCG and has also accepted the existence of the company. Since the decision of Smt. Seema Gargh relate to the shares of the same company, therefore, this decision of the Co- ordinate Bench is binding on the Tribunal. Ld. A.M. tried to distinguish the case of Ashok Kumar Lavania on the basis that the purchase was accepted in that case, while in the case of the 11 assessee the purchase of the shares is not disputed and for this my attention was drawn to page nos.33 & 34 of the order of CIT(A). Ld. A.M. has also doubted the price being quoted in the Stock Exchange. It was pointed out that the prices of the Stock Exchange are not within the domain of the assessee and for this, attention was drawn towards the decision of Smt. Seema Gargh (supra), page no.112 of the compilation and pointed out that the prices of the shares were duly accepted by this Tribunal in that case. Regarding cash deposited in the account of the broker, reliance was placed on the decision of this Tribunal in the case of Ashok Kumar Agarwal vs. ACIT, ITA No.129/Agr/2004, copy of which is available at page nos.62 to 80 of the compilation and referring to para no.35 at page no.77, it was pointed out that in that case also the cash was deposited by the broker in his account and the Tribunal has accepted the genuineness of the transaction. Thus, it was contended that the order of the ld. A.M. is based on suspicion, surmises and conjectures. Referring to the decision of the Hon'ble Supreme Court in the case of Umacharan Shah & Bros. reported in 37 ITR 271 (SC), it was contended that the suspicion howsoever is strong cannot take the place of actuality. Thus, the ld. A.R. vehemently relied on the order of the ld. J.M. and contended that the L.T.C.G. shown by the assessee was genuine one and it was not a bogus transaction.
6. Ld. D.R. vehemently relied on the order of the ld. A.M. and reiterated the facts from the assessment order given at page nos.2 & 3. Referring to para no.3, it was contended that the assessee has not proved that any transaction of the shares of M/s. B.T. Technet Limited was effected through Delhi Stock Exchange or through the broker M/s. Agarwal & Co. Notice under section 133(6) sent to the broker at the New Delhi address was received back with the remark of the Postal authorities "left without address". The person from whom the assessee has purchased the shares is unknown/unidentified. The party to whom the shares were sold is also unknown/unidentified. The company, shares of which were allegedly transacted, has not 12 confirmed the purchase and transfer of shares. The broker is not traceable/identifiable at the given address. Thus, it was contended that the transaction was in doubt. The assessee was given proper opportunity. No evidence that the assessee has applied for this share was furnished. No corresponding evidence with the company regarding purchase of shares and deposit of the money later on was furnished. Delhi Stock Exchange confirmed that no trade reported during this period. The increase in the value of the shares is high from normal and unrealistic. In just 14 months, prices of the shares have allegedly increased by 11 times. This is totally unbelievable. The only conclusion from this can be drawn is that the entire transaction is stage managed. The A.O. has given a finding on the peculiar facts of the case that it cannot be said that the addition was made merely on surmises and suspicion. My attention was drawn to page no.6 of the order of the CIT(A). Merely the assessee has submitted the document does not mean that the transaction is genuine. He carried me to the order of ld. A.M. and contended that the onus is on the assessee to prove the genuineness of the transaction. Regarding case law as relied on by the ld. D.R., it was contended that the facts in those cases are different and not applicable to the facts of the case in the case of the assessee. The sum of Rs.10,57,900/- represented the assessee's undisclosed income and the order of the A.O. be upheld.
7. I have carefully considered the rival submissions alongwith the orders of the Tax Authorities below as well as the order of my ld. colleague Members. I have gone through the decision of Shri Ashok Kumar Lavania in ITA No.112/Agr./2004 which was decided by the Bench constituting of same ld. J.M. and ld. A.M. vis-à-vis the facts of the case of the assessee. In that case also the transaction of sales has not been accepted by the A.O. as he doubted the sale prices and also relied on the statement of Shri Ashok Gupta, Director of M/s. JRD Stock Brokers Pvt. Ltd. who stated that as a matter of fact there was no actual purchase and sale of shares as was reflected in the contract notes issued by M/s. JRD Stock Brokers Pvt. Ltd. to the 13 beneficiaries. In that case the assessee claimed Long Term Capital Gain of Rs.25,14,770/- and claimed exemption under section 54EA of the Act. The LTCG was shown on account of sale of shares through the brokers. The assessee submitted the copies of bills, share certificates, contract notes etc. during the course of assessment proceedings alongwith details of demand draft through which the sale proceeds has been received. It was also pointed out that the purchases were made through broking concern M/s. JRD Stock Brokers Pvt. Ltd. The A.O. noticed that the shares were purchased @ Rs.4/- per share and sold @ Rs.65/- to Rs.84/- per share. The A.O. was of the view that the transactions were not genuine and are only accommodation entries. The broker pointed out that he was engaged in giving bogus entries for the purchase and sale of the shares on commission basis. When the matter traveled to the Tribunal, the Tribunal deleted the addition by observing as under :-
"(10) So in the given case also the department cannot treat the long term capital gains as assessee's income from other sources. There is no direct evidence. The statements of the brokers were recorded at the back of the assessee. An opportunity of cross-examination means and implies a clear opportunity after providing copies of such adverse statements to cross-examine. Otherwise also the statement of Shri Ashok Gupta is too vague to be of any evidentiary value. He has nowhere stated that the transaction of the assessee was bogus or not genuine. He has no corroborative evidence to show that the cash for drafts was received from the assessee. In the absence of any corroborative evidence his statement cannot be accepted as true on his mere ipse dixit. Shri Manoj Agarwal was not produced for cross-examination. From his statement no adverse inference can be drawn against the assessee. Shri Manoj Agarwal handed over a letter to D.D.I. (Inv) in which he stated that out of the total transactions, the transactions amounting to Rs.100 crores were only book entries. So it follows as a necessary corollary that entire transactions were not in-genuine. He has also not named this assessee.
With regard to Agarwal & Company, there are no adverse comments in the Assessment Order against the assessee. The A.O. has not said anything about the transactions entered through this broker. Whereas the assessee has produced :
i) copies of sales and purchase bills;
ii) share certificates and transfer letters;
iii) contract notes;
iv) duly transferred share certificates received from the companies;
and
v) affidavit.
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(11) There is no doubt, in such cases, the brokers become the witnesses of the department. The department has got statements of these brokers which are used against the assessee. Irrespective of the fact that the statements were recorded at the back of the assessee and that the assessee was or was not afforded opportunity for cross-examination, when overwhelming documentary evidences are produced by the assessee, the burden shifts on the Revenue to explain away them. Every time the statements cannot help the department. How the above mentioned evidences could be ignored ? The Revenue has to give reasons for rejecting them. These are important documents, some of them arise under the provisions of the Companies Act. The brokers were never confronted with the evidences produced by the assessee. The apparent has to be treated as a real unless proved otherwise. Long ago Hon'ble Supreme Court has laid this law while rendering the celebrated decision in the case of CIT Vs. Daulat Ram Rawatmal (1964) 53 ITR 574 (SC). The assessee has countered the statements of brokers by way of his duly sworn-in affidavit. We have examined the entire evidences placed in the paper book of the assessee.
(12) In the case of ITO vs. Smt. Kusumlata reported in (2006) 105 TTJ (Jd.) 265, copy placed at page no.4 of assessee's Paper Book (judgements relied), the Hon'ble Jodhpur Bench has held as under :-
"For making addition under section 69, the Department is required to prove to the hilt that the impugned transactions are bogus. The burden cast on the Department is very high which is required to be discharged conclusively in this case; there is no such evidence. The assessee has purchased shares from MS. These purchases are evidenced from the contract note. The payment was made by cheque. These shares were transferred in the name of the assessee. The assessee held these shares for more than one year. She sold these shares to J, a member of stock exchange. J in his letter has confirmed that transaction and the payment was made through cheque. The assessee has provided all the requisite evidences in support of all transactions. Simply because J could not produce his books of account or the quoted rate of shares in stock exchange being less or the transactions being not reported by J to the stock exchange, would not make a transaction bogus. The stock exchange has intimated the A.O. that they are only having information of the transactions between two members of the stock exchange and not otherwise. In the present case, the transaction was between a member and a non-member and therefore, such transactions were not reported in the stock exchange. Further, the credit in the bank account of J is by clearance. Therefore, the allegation of the A.O. that the amount was deposited in cash has no basis. The assessee has accepted having invested her funds on the advice of her father-in-law. The burden of proving a transaction is always on the person asserting it to be bogus and this burden has to be strictly discharged by adducing legal evidence of a character, which would either directly prove the fact of bogusness or establish circumstances unerringly and reasonably raising an inference to that effect. The assessee made payment for the purchase from her own 15 sources through banking channel. The shares were transferred in the name of the assessee and were held by her for more than one year. There is no relationship between the party from whom the assessee purchased the shares and the party to whom these were sold. The shares were delivered after its sale and the assessee did not remain in possession of those shares. From the above facts, it is established that the assessee acquired the shares to earn profit. There is no evidence except speculation that this profit is not from the sale of shares. The A.O. has failed to establish his case and to discharge the requisite burden cast on him. The Authorised Representative has filed the requisite quotation of 18th July, 1996 along with the requisite proof of transactions of 9000 shares along with transfer of share certificate. Therefore, in the given facts and circumstances of the case, the CIT(A) has correctly come to the conclusion that the assessee has dealt in these shares and these transactions cannot be held bogus. The deletion of addition of Rs.4,99,062/- is confirmed."
(13) The above decision clearly helps the case of the assessee.
(14) Credence cannot be given to the statements of the persons who themselves admit and have dubious dealings as against the documentary evidences produced by the assessee.
(15) Moreover, when purchases have not been doubted or disputed by the Revenue in this case, the decision of Hon'ble Punjab & Haryana Court relied by learned A.R. in the case of CIT vs. Anupam Kapoor reported in (2008) 299 ITR 179 (P&H) is very much relevant. The held portion of this decision is extracted herein below :-
"Held, dismissing the appeals, that there was no material before the Assessing Officer which could have led to a conclusion that the transaction was a device to camouflage activities to defraud the Revenue. No such presumption could be drawn by the Assessing Officer merely on surmises and conjectures. The Tribunal took into consideration that it was only on the basis of a presumption that the Assessing Officer concluded that the assessee had paid cash and purchased the cheque. In the absence of any cogent material in this regard, having been placed on record, the Assessing Officer could not have reopened the assessment. The assessee had made an investment in a company, evidence whereof was with the Assessing Officer. Therefore, the Assessing Officer could not have added the income, which was rightly deleted by the Commissioner (Appeals) as well as the Tribunal"
(16) Thus, the sum total of the foregoing discussions go to, cumulatively, establish that the assessee has been successful in proving the long term capital gain earned by him in this case. He has also established that he is exempt from tax qua long term capital gains as has been claimed."
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8. In my opinion, this case is equally applicable in the case of the assessee. In the case of the assessee, allotment of the shares has duly been proved and there is no dispute on the purchase of the shares through allotment to the assessee in the assessment year 1999-2000. The shares were purchased in earlier year. The shares were allotted in the name of the assessee. The assessee has submitted before the A.O., copies of the contract notes, copies of the sales bills, statement of account from the broker, address of the broker. The identity of the broker is proved. I also noted that in the case of Ashok Kumar Lavania, ITA No.112/Agr/2004 (supra) the shares have been sold by the assessee through various brokers. One of the brokers through whom the shares were sold was M/s. Agarwal & Co, 315 DSE Building, Asaf Ali Road, Delhi. In the case of the assessee also the broker to whom the shares were sold is the same i.e. M/s. Agarwal & Co. The identity of M/s. Agarwal & Co. has not been disputed in that case. In this case, the Revenue cannot be permitted to take a different view. The demand draft for the sale consideration was issued from the account of M/s Agarwal & Co , broker. The ld. A.M. has distinguished the decision of Ashok Kumar Lavania. On the basis of that, in Ashok Kumar Lavania's case purchase of the shares was not in dispute. While in fact in assessee's case the purchase of shares through direct allotment is also not in dispute. The ld. A.M. was also the party to that decision. I noted that in this case the A.O. has doubted the sale consideration because the share price has increased tremendously. I noted that in the case of Ashok Kumar Lavania also the assessee has purchased the share @ Rs.4/- per share and sold @ Rs.65/- to 84/- per share. In that case also the A.O. has not accepted the transaction but on the basis of the evidence the Tribunal has accepted the transaction to be genuine one as there was no corroborative evidence to support the statement of the broker. In this case, I noted that the statement of the broker was not recorded. The transaction was treated as non genuine as the assessee could not produce the broker. It is on record in the order of the CIT(A) that the inspector was able to locate the broker at his address at Ghaziabad but he did not deny the transaction but rather stated to give the statement after having 17 the consultation with his CA. The assessee has submitted the confirmation of the broker dated 15.01.2004 which was rejected as it was not on the stamp paper duly signed by the witnesses. The revenue also observed that the broker was avoiding the department. This in my opinion cannot be the ground to hold the transaction to be a non-genuine transaction. The assessee has given the address of the broker and proved the identity of the broker, even the bank account of the broker is also on record of the department. The transaction through the same broker has been accepted to be genuine in the case of Ashok Kumar Lavania.
9. Under these facts, I am of the opinion that the case of the assessee is duly covered by the Division Bench of this Tribunal in the case of Ashok Kumar Lavania in ITA No.112/Agr/2004 which has been decided by the Bench constituting of the same very learned Members. Judicial discipline demands that on the similar facts the Bench is bound to follow its earlier decisions. The principles of judicial discipline requires that the order of the Co-ordinate Bench has to be followed.
10. I also noted from the Assessment Order and the order of the CIT(A) that while scrutinizing the evidence filed by the assessee and framing the order, their minds were influenced with the other consideration that the value of the shares has tremendously increased which was abnormal and indicates that the entire transaction is managed one. In my opinion, the share market is quite volatile and prices do fluctuate abnormally. I also noted from the case of Smt. Seema Gargh vs. ITO in ITA No.252./Agr/2005 on which the ld. A.R. has vehemently relied that the assessee has sold the shares of M/s. B.T. Technet Limited. The assessee before me has also sold the shares belonging to M/s. B.T. Technet Limited. In that case, I noted that the assessee has sold 9500 shares of M/s. B.T. Technet Limited on 16.11.2000 @ Rs.114/- per share. When the matter travelled to the Tribunal about the non-genuineness of the price at which the 18 shares were sold, the Tribunal accepted the sale value of the shares. In the case of the assessee, the assessee has sold the shares @ Rs.106/- per share on 18.11.2000 i.e. nearer to the date of 16.11.2000. Under these facts, there cannot be any reason not to accept the value of the shares sold @ Rs.106/- per share. The decision of coordinate bench is binding on this tribunal. The assessee is only a small shareholder of the company. He is not the director of the company or of the stock exchange. Under these circumstances how he can manipulate the prices is beyond one's comprehension. It is pertinent that the issue of abnormal increase in prices of the shares has come up for consideration before the ITAT, Agra Bench in the cases of Smt. Memo Devi (ITA No.396/Ag/2004 - reported as 7 DTR 158) wherein the Co-ordinate Bench observed as under :-
"The assessee has no relation with the directors of the company and was in no way in the capacity to affect the market price of shares. The increase in share prices by more than 25 times too cannot be the basis to assume that the transaction was bogus. Abnormal fluctuation in share prices is a normal phenomena - the learned counsel for the assessee filed a chart showing low and high prices of some quoted shares during the 52 weeks as per Economic Times dated 27.02.2007 from which it can be seen that some shares increased even by more than 100 times."
11. In almost similar circumstances the Hon'ble Punjab & Haryana High Court in the case of CIT Vs. Anupam Kapoor (299 ITR 179) has also observed as under :-
"The Tribunal was right in rejecting the appeal of the revenue by holding that the assessee was simply a shareholder of the company. He had made the investment in a company in which he was neither a director nor was he in control of the company. The assessee had taken shares from the market, the shares were listed and the transaction took place through a registered broker of the stock exchange. There was no material before the AO, which could have lead to a conclusion that the transaction was simpliciter a device to camouflage activities to defraud the Revenue. No such presumption could be drawn by the AO, merely on surmises and conjectures."
12. The revenue is also influenced that the assessee could not prove the name and address of the buyer of the shares. In the stock Exchange when the transaction is entered into, the assessee 19 is not aware of about the buyer of the shares. He enters into transaction only through a share broker. Therefore, the observation of the A.O. that the assessee could not identify the buyer cannot be the basis of regarding the transaction to be non-genuine one. I also noted that the revenue has been influenced with the fact that the assessee has delivered the blank transfer share certificates to the broker when the delivery of the shares were given. Since the deal has to take place between the brokers, the assessee has to give only blank transfer share certificate to the broker without mentioning the name of the buyer. There is nothing wrong in my opinion and this is a usual practice in the business. From the entire appreciation of the evidence, I noted that the assessee had acquired the shares, the purchase of which was duly declared by the assessee in earlier years which stand accepted by the Revenue. That assessment has not been reopened. The shares were sold through stock brokers who were registered with the Stock Exchange. Shares were sold at the prices quoted at the Stock Exchange at the relevant time. The payment of sale consideration also flown from the bank account of the broker but the broker has deposited the cash in his account as per the revenue. I have also gone through the decision of Ashok Kumar Agarwal, ITA No.129/Agr/2004 on which the ld. AR has vehemently relied. In that case, I noted that this Bench vide order dated 03.04.2006 in respect of the cash deposited in the account of the broker has held as under :-_ "As regards the objections of the ld. CIT(A), we agree with the arguments forwarded by ld. Counsel for the assessee that the assessee had made the purchases and sale of shares through account payee cheque or draft. If the broker had sold the shares in cash and deposited the same in his i.e. in the bank account of broker concern, is beyond the control of the assessee. Also as regards the second objection of the ld. CIT(A) that no. of persons have allegedly done such transactions during the same period. We are of the view that the ld. CIT(A) has not provided the details of such no. of persons and also have not linked transactions of such no. of persons to the transactions of the assessee from which it could be proved that the transactions carried out by the assessee are a sham transaction. The ld. CIT(A) has referred to the name of one person i.e. Shri Ashok Kumar Lavania whose appeal was pending before him, which does not prove the transaction of the assessee as bogus or sham transaction. As regards the next objection of the ld. CIT(A) that the assessee and his group has shown 20 such capital gain in other years also. The ld. CIT(A) has not brought on record whether such capital gain were a sham transaction and have not approved any linkage with the transaction of the assessee which could further approve that the assessee's transactions were bogus and sham transactions."
13. This finding of the Tribunal is equally applicable to the case of the assessee and I cannot take any adverse view about the genuineness of the transaction on the basis that the broker M/s. Agarwal & Co has deposited the cash in his bank account before issuing the draft for the sale consideration to the assessee. There is no evidence on record that broker was a relative or associate of the assessee. The assessee, in my opinion, 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 observation of the Investigation Wing that arose a suspicion turned into conclusive proof in the minds of the authorities that everybody who has sold the shares at a high price has converted his unaccounted money through accommodation entries. This approach does not have any leg to stand. Hon'ble Supreme Court in the case of Umacharan Shaw & Bros vs. CIT, 37 ITR 271 (SC) has clearly laid down that suspicion howsoever strong cannot take place of proof. From the entire appreciation of evidence, I noted that Assessing Officer has failed to establish that the assessee has introduced his own unaccounted money in the shape of alleged sale proceeds of shares. Hon'ble Supreme Court in the case of Kishan Chand Chellaram vs. CIT reported in 125 ITR 713 (SC) has observed that "the amount cannot be assessed as undisclosed income of assessee in the absence of positive material brought by the Revenue to prove that the amount in fact belonged to assessee as the burden lay on the Revenue".
14. In almost similar circumstances the ITAT, Delhi 'C' Bench in the case of ITO vs. Naveen Gupta (5 SOT 94), copy of which is placed by ld. A.R., has observed as under :- 21
"Nevertheless, it is also noteworthy that the A.O. has failed to establish that in lieu of the aforesaid sale proceeds, the assessee has surreptitiously introduced his unaccounted money in the bank account. After having perused the entire material that is available on record, there is no averment, much less any evidence, with the Revenue in this regard. While there may be enough grounds with the AO to carry out the impugned verification exercise to test the efficacy of the transactions resulting in long term material gains in the hand of the assessee but there is no cogent material or evidence to indicate that the impugned sale proceeds reflected unaccounted income of the assessee."
15. It was the duty of the A.O. to bring on record sufficient 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 actually his income from undisclosed sources. The only material to support such conclusion of the lower authorities is either the findings of the DDI in general investigations or the observation that the assessee could not prove the transaction to be genuine one. This is the settled law in view of the decision of the Hon'ble Supreme court in the case of Daulat Ram Rawatmull 87 ITR 349 (SC) that the apparent is real. Onus is on the person who alleges apparent is not real. None of the judicial precedent supports the case of the Revenue. While making addition as income from undisclosed sources burden on the department is very heavy to establish that the alleged receipt was actually income of the assessee from the undisclosed sources. Jodhpur Bench of the ITAT in the case of ITO Vs. Smt. Kusumlata (reported in 105 TTJ 265), copy of which is placed in the compilation of the assessee, held as under :-
"10. For making addition under s.69 of the Act, the Department is required to prove to the hilt that the impugned transactions are bogus. The burden cast on the Department under s.69C (sic-69) of the Act is very high which is required to be discharged conclusively in this case; there is no such evidence. The assessee has purchased shares from M/s Maheshwari Sons. These purchases are evidenced from the contract note. The payment was made by cheque. These shares were transferred in the name of the assessee. The assessee held these shares for more than one year. She sold these shares to the member of stock exchange Shri J.K. Jain. Shri J.K. Jain in his letter dt. 22nd Dec., 1999 has confirmed the transaction and the payment was made through cheque. The 22 assessee has provided all the requisite evidences in support of all transactions. Simply because Shri J.K. Jain could not produce his books of account or the quoted rate of shares in Delhi Stock Exchange being less or the transactions being not reported by Shri J.K. Jain to the stock exchange would not make a transaction bogus. The Jaipur Stock Exchange has intimated the AO that they are only having information of the transactions between two members of the stock exchange and not otherwise. In the present case, the transaction was between a member and a non-member and therefore, such transactions were not reported in the stock exchange. Further, the credit in the bank account of Shri J.K. Jain is by clearance. Therefore, the allegation of the AO that the amount was deposited in cash has no basis. The assessee has accepted having invested her funds on the advice of her father-in-law. The burden of proving a transaction is always on the person asserting it to be bogus and this burden has to be strictly discharged by adducing legal evidence of a character which would either directly prove the fact of bogusness or establish circumstances unerringly and reasonably raising an inference to that effect."
16. I have also gone through various other decisions on similar issue under the similar facts and I noted that this Tribunal had consistently accepted the genuineness of the share transaction. Those cases are as under :-
ITO vs. Sunita Gupta - ITA No.881/Del/2004 (Delhi Bench 'SMC') Dilip Gargh vs. ITO - ITA No.470/Agr/2004 Gopal Prasad Agarwal vs. ACIT - ITA No.128/Agr/2004
17. I also noted that the case of the assessee is duly covered by the decision of the Third Member in the case of Smt. Sunita Oberoi vs. ITO (Agra) (TM) ITA No.273/Agr/2004 A.Y. 1995-96 dated 07.08.2009, 30 DTR (Agra) (TM) (Trib.) 474 in which on difference of opinion on the question under the similar circumstances whether the assessee can be said to have discharged her burden to prove the genuineness of the transaction in shares of M/s. Prasidh Exports Limited and M/s. K.L.P. Finance Limited or that the burden had shifted on the Revenue that can be held to have not discharged by them, the decision to uphold accepting of alleged profit on alleged share of M/s. Prasidh Exports Limited and M/s. K.L.P. Finance Limited as income from other sources instead of assessee has claimed the capital gain is a correct decision or not. The Hon'ble Third Member has held as under :-
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"In another order of the Tribunal in ITA No.881/Del/2004, dt. 28th May, 2004 in the case of Smt. Sunita Gupta which has been followed in Sanjay Kumar Bansal (supra) the Tribunal held likewise. It is therefore to be held that the statement of Shri Praveen Mittal the person on whose request the associates M/s Haseeja & Gulati introduced Shri Maheshwari to Punjab National Bank on account No.8627 was not a person who could comment that 90 per cent of the transactions from the said bank account Punjab National Bank-8627 were bogus transactions. Shri Mittal claimed to know Shri Maheshwari only as he visited another friend conducting business from the same premises and as such he was not capable to comment upon the nature of work done by Shri Maheshwari could hardly be having intimate knowledge of Shri Praveen Mittal personally who could only claim knowledge of public facts namely that Shri Maheshwari was a broker registered with Kanpur Stock Exchange dealing in new public issues having an office at Antariksh Bhawan, New Delhi for which purpose Shri Mittal requested his friends Haseeja and Gulati to introduce Shri Maheshawri to their bankers for opening an account. How he became aware of the categorical information to assert that the transactions done by Shri Maheshwari's account No.8627 were sham does not inspire any confidence. The statements have been recorded at the back of the assessee and although have been confronted however have been recorded in the case of different assessees. But in the present case the concerned persons whose statements have been relied upon were not made available to the assessee for cross-examination. That these facts are identical to the present case is not disputed by the Revenue. The explanation of the assessee rebutting the statements confronted to the assessee in the facts of that case are to be taken into consideration and therefore the action of the Revenue cannot be in accordance if seen in the light of the Supreme Court decision in the case of Kishinchand Chellaram (supra). The discrepancy explained in the amounts as per the contract notes and drafts received on account of the differential due to dispute withheld by the brokers cannot be discarded without any cogent reasons. The explanation has consistently been given by the assessee despite this nothing has been led by the Department to discard it. The statements of the witness heavily relied upon the Department have already been seen as having been based on no evidence and have already been discarded by Co-ordinate Benches and even they do not disprove the explanation of the assessee pertaining to the dispute with the broker.
In yet another case of ITO vs. Rajiv Aggarwala (2004) 89 TTJ (Del) 1095, Delhi Tribunal held in the context of statements given by Shri Shankar Hari Maheshwari and Shri Praveen Mittal considered the statements recorded by the Dy. Director of IT (Inv.) of Mr. Shanklar Hari Maheshwari and Mr. Praveen Mittal; the assessee did not furnish the address of the said company; the fact that the assessee could not adduce evidence in support of his claim of purchase of shares; that the assessee failed to adduce any evidence regarding transfer of shares in his name; and that the assessee has failed to even furnish the name and address of the person to whom the shares were sold.
The only reason to make the addition is that confirmation from the share brokers could not be filed by the assessee and summons issued to the said persons were not served and returned unserved and the names and addresses of the buyer 24 to whom the ultimately shares were sold through the broker were not known to the assessee. The assessee was not in a position to compel the share broker for confirming the transaction, she being neither a director nor having large scale dealings with the brokers over the years so as to show that she was personally in a position to compel them on account of the magnitude of transaction done through them. It was her father who knew the brokers and she acted on his advice and had no contact thereafter. The reasoning that summons issued to the parties came back unserved cannot by itself be held against the assessee as whether the share broker continues the business or discontinues the same or changed the addresses or for that matter the companies whose shares were purchased and sold changed their premises or names as changed by virtue of being acquired by some other company the assessee cannot be held liable to stay in touch for all times to come. Similarly, no reasons are there to show that Shri Praveen Mittal was ever in a position to declare the transactions of an acquaintance broker as bogus transactions neither any evidence has been led nor reasons advanced to support how he could be considered to be a reliable person so as to ignore the evidences available on record i.e. contract notes of sale and of the specific shares of specific rates on specific dates. Shri Praveen Mittal was the witness of the Department, the onus was therefore on the Department to produce him and make him available for cross-examination by the assessee. Similarly, the evidence that the companies were not in existence at the address available with the Department does not detract from the assessee's claim in view of the documents available on record. The discrepancy in the amounts to the expenditure of Rs.53,356 was because of consistent statement by the assessee that the share broker made a short payment and disputed the remaining amount. The Department has thus proceeded entirely on suspicion and surmises if seen in the light of the orders of the Tribunal. The claim of the assessee in regard to the first issue is to be allowed".
18. The judicial discipline demands that the decision of the ld. Third Member should be followed by me. I, accordingly, following the decision of the ld. Third Member and in view of aforesaid discussion, agree with the view taken by the ld. J.M. and hold that the CIT(A) has erred on facts as well as in law in upholding the order of the A.O. treating the income under the head L.T.C.G. as sham and bogus and taxing the same under the head income from other sources. The income disclosed by the assessee is chargeable to tax as L.T.C.G. and cannot be treated as income from any undisclosed sources. Thus, the question referred to me is decided in favour of the assessee.
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19. The matter will now go before the Regular Bench for deciding the appeal in accordance with the majority opinion.
Sd/-
(P.K. BANSAL) Accountant Member Place: Agra Date: 9th February, 2010.
PBN/* Copy of the order forwarded to:
1. Appellant
2. Respondent By Order
3. CIT concerned
4. CIT (Appeals) concerned
5. DR, ITAT, Agra Bench, Agra
6. Guard File Assistant Registrar Income-tax Appellate Tribunal, Agra True Copy