Income Tax Appellate Tribunal - Agra
Bibi Rani Bansal,W/O Shri Onkar ... 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.101/Agr/2005
Asst. Year: 2001-02
Income-tax Officer, 5 (1), Vs. Smt. Bibi Rani Bansal,
Firozabad. W/o. Shri Onkar Nath Bansal
109, Congress Road,
Purani Mandi, Firozabad.
(PAN : ACPPB 5331 C)
ITA No.92/Agr/2005
Asst. Year: 2001-02
Smt. Bibi Rani Bansal, Vs. Income-tax Officer, 5 (1),
W/o. Shri Onkar Nath Bansal, Firozabad.
109, Congress Road,
Purani Mandi, Firozabad.
(PAN : ACPPB 5331 C)
(Appellants) (Respondents)
Revenue by : Shri Mahesh Agarwal, C.A.
Assessee by : Shri S.R. Sahu, Jr. D.R.
ORDER
PER P.K. BANSAL, A.M.:
In these cases 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. Therefore, in view of the majority decision, the assessee's appeal is allowed while that of the Revenue is dismissed.
2. In the result, appeal of the assessee is treated as allowed and that of the Revenue is treated as dismissed.
2
(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.
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.101/Agr/2005
Asst. Year: 2001-02
Income-tax Officer, 5 (1), Vs. Smt. Bibi Rani Bansal,
Firozabad. W/o. Shri Onkar Nath Bansal
109, Congress Road,
Purani Mandi, Firozabad.
(PAN : ACPPB 5331 C)
ITA No.92/Agr/2005
Asst. Year: 2001-02
Smt. Bibi Rani Bansal, Vs. Income-tax Officer, 5 (1),
W/o. Shri Onkar Nath Bansal, Firozabad.
109, Congress Road,
Purani Mandi, Firozabad.
(PAN : ACPPB 5331 C)
(Appellants) (Respondents)
Revenue by : Shri Mahesh Agarwal, C.A.
Assessee by : Shri Deepak Tiwari, 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 points of difference on the following grounds arising due to the difference in opinion between the ld. Judicial Member and the ld. Accountant Member as referred to by them vide letter dt.17.2.2009 :-
Grounds raised in ITA No.92/Agr./2005 by the Assessee:
"(1) That the Ld CIT(A) has grossly erred both on facts and in law, in confirming the assessment of Rs.12,19,538/- as income from undisclosed sources as against "sale consideration of shares" declared by the assessee and, consequently, in not accepting the "Long Term Capital Gain" of Rs.11,40,826/-
as declared by the appellant from the said sale of shares.
4(2) That in view of the submissions, evidence and material placed on record, the Ld., CIT(A) as well as the AO was not justified in rejecting the claim of Long Term Capital Gain of Rs.11,40,826/- from sale of shares.
(3) That the order and findings of the authorities below are based purely on conjectures, surmises, suspicion and hypothesis and are liable to be set aside." The grounds raised in ITA No.101/Agr/2005 by Revenue :
"(1) That the learned Commissioner of Income Tax (Appeals)-II, Agra has erred in law and on facts in directing the Assessing Officer to tax out of the total amount of unexplained income of the assessee of Rs.12,19,538/-, the amount of Rs.5,98,000/- received through draft dated 20.01.2001 only in the assessment year 2001-2002 and to bring to tax the remaining amount in the assessment year 2002-2003 ignoring the fact that the assessee has followed mercantile system of accounting and accordingly she herself has claimed deduction under section 54F of the IT Act on the total amount of alleged capital gain in the year under consideration.
(2) That the decision of the learned Commissioner of Income Tax (Appeals) -
II, Agra being erroneous in law and on facts deserves to be quashed and that of the AO deserves to be restored."
2. The brief facts of the case are that the assessee filed her return of income on 31.10.2001 at Rs.2,08,100/- which included long term capital gain of Rs.11,40,826/- from sale of shares claimed exempt u/s 54F. As regards the Capital Gains, the assessee had furnished Contract Note, Bill and Statement of account from the share broker M/s. P.K. Jain & Associates, C-9, Moti Marg, Bapu Nagar, Jaipur, who was a registered SEBI broker vide Regd. No. IBN-160194012 and a member of Jaipur Stock Exchange under Code No.16-J-181. The case was taken up for scrutiny u/s. 143(2). During scrutiny, the assessee was informed that the letters written to the broker through whom shares were purchased and sold as well as to the company had returned unserved; Company premises at the given address had been taken over by the UPFC; the departmental enquiries at Jaipur revealed that M/s. P.K. Jain & Associates did not exist at that address and, as such, genuineness of the papers furnished by the assessee alongwith the return as well as replies furnished could not be established. The A.O. asked the assessee to prove the Long 5 Term Capital Gain and genuineness of the transactions relating thereto by producing the broker for examination. The assessee vide submissions dated 17.03.2004 provided the new address of the company at Noida and also submitted that the broker M/s. P.K. Jain & Associates was a registered member of Jaipur Stock Exchange till 21.07.2001 and that the assessee was making all efforts to locate the broker. Vide submission dated 23.03.2004 the assessee further appraised the A.O. of his efforts and that due to her limitations she was unable to gather requisite informations. However, since subsequent enquiries by the A.O. with the company confirmed that the alleged shares were duly registered in the name of the assessee, no doubt persisted regarding the acquisition of said shares. But as regards sale of shares the A.O. discarded all these evidences and submissions observing that the essential ingredients of sale were not fulfilled, assessee could not prove the identity of the buyer of the shares and also could not prove that the consideration actually passed from the buyer and, therefore, it cannot be said that transfer of right over the shares from the seller to the buyer has taken place. The A.O. has given his observations from page nos.6 to 10 of the Assessment Order and held that since the assessee could not prove the sale of shares and genuineness of receipts of money from sale of shares, so the entire amount of cheque/draft will be treated as income from undisclosed and unexplained sources. Accordingly, the A.O. treated the entire amount of Rs.12,19,538/- received against the sale proceed of shares as income from undisclosed and unexplained sources.
3. When the matter went before the CIT(A), the CIT(A) partly allowed the appeal of the assessee by observing as under :-
"(5.12) Considering the above facts and the legal position it is held that the AO was justified in holding that the share transactions were sham and bogus. The same have been shown just to convert the appellant's unaccounted income into white. The alleged sale proceeds of Rs.12,19,538/- represented the assessee's undisclosed income. Thus, AO's action, in principle, is upheld. However, since in this year the assessee has received only Rs.5,98,000/- vide draft dated 20.1.2001 and the balance amount was received in the next year by draft 6 dated 8.8.2001, in this only Rs.5,98,000/- are required to be added. The AO is directed to take necessary action to bring to tax the remaining amount in the next year i.e. A.Y. 2002-03. In the result, in this year addition to the extent of Rs.5,98,000/- is confirmed.
(6) In the result, the appeal is partly allowed.
4. When the matter came before the Tribunal, ld. Judicial Member (JM) decided the case in favour of the assessee while the ld. Accountant Member (AM) decided the case against the assessee. Ld. J.M. noted all the facts in para nos. 4 to 7 at page nos.2 to 7 of his Order while his finding is given in para no.11 from page 7 onwards. Considering all the material, the J.M. reached on the following conclusion:-
- Purchases are not in doubt
- Existence of M/s. P.K. Jain & Associates is established.
- Demand Draft was issued from the account of M/s. P.K. Jain & Associates being
Account No.6351026 with ABN Ambro Bank, Delhi.
- The money came to this account by transfer from the account of M/s. S.G. Fincap
Limited and not in cash
- Main ground for suspecting the sale of these shares by the A.O. is exorbitantly high sale
price and that a scam of large scale fictitious share transactions was detected by the Department.
- It is evident from records that the assessee has been co-operative throughout.
- Letters of M/s. P.K. Jain & Associates are not credible.
Ld. J.M. accordingly allowed the appeal of the assessee.
5. Ld. A.M. dissented on the basis of the case decided by this Tribunal in the case of Shri Baijnath Agarwal, Agra (ITA No.133/Agr/2005) and annexed copy of the order dated 10th February, 2009 in the case of Shri Baijnath Agarwal alongwith his order. His major point of difference are : -7
- Most of the enquiries remained un-responded from the assessee.
- Company did not respond to the letters of the A.O.
- Share prices were different at two different stock exchanges.
.- Cash was found deposited in the account from where the Demand Draft was issued.
- For 10,000 shares there were only two share certificates and thus purchases were in
doubt.
- Both the assessee and his broker have been highly reluctant to participate and co-operate
in the proceedings
6. The ld. A.R. contended before me that the assessee submitted all the evidences that were within his possession, power and capacity. Even after the assessment, he made all efforts to get information and even went to Delhi alongwith the A.O. for adequate enquiries. Purchase of shares stands fully proved. Sale price at the relevant time also stands proved. Moreover, shares were purchased in the earlier year and stand accepted by the Department. Abnormal increase in share prices is not an abnormal phenomena. The issue has been considered by Agra Bench in the case of Memo Devi, reported in 7 DTR 158. Assessee was neither a Director in the Company nor related to them. He also had no control over the Stock Exchange. As such, he was not in capacity to manipulate or rig the share prices. Reliance on the letters of the broker M/s. P.K. Jain & Associates, who admits of his dubious dealings, without testing them is a fatal mistake by the Department. The averments of the letters were disputed and did not inspire credence, yet the department simply relied on them without examining the broker and his books of accounts and without providing cross examination to the assessee. In the absence of letters of the broker being tested by the A.O. it can not be said that they are completely believable. Reliance was place on the decision in the case of case of SMC Share Brokers Limited, 288 ITR 345 (Delhi). The sale consideration was received through demand drafts from the account of the broker. No cash was 8 found credited in that account prior to issue of Demand Draft. Money came through transfer from the account of a limited company. In that situation, the Department has also not been able to establish on the basis of positive material that the sale consideration was actually against the cash given by the assessee. Therefore, the addition was not justified. Reliance was placed to the decision of ITAT, Delhi in the case of Naveen Gupta, reported in 5 SOT 94 and also on Kishan Chand Chellaram, 125 ITR 713 (SC). The entire assessment is based on surmises and suspicion that percolated in the light of ongoing investigation by the DDI Wing. It is trite that suspicion howsoever strong cannot take the place of evidence. For this, reliance was placed on the decision in the case of Umacharan Shaw & Bros. reported in 37 ITR 271 (SC). Thus he supported the order of the Ld. J.M. specially the findings given under para 11 of the order of the Ld. JM. Referring to page 73 on which the copy of the order of this bench in ITA No.112/Agr/2004 in the case of Ashok Kumar Lawania is placed, it was pointed out that Hon'ble Accountant Member was party to that case decided by the Agra Bench on 30.05.2008.
In that case also the issue was of long term capital gain from 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 Lawania'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 to which the Hon'ble A.M. was a party. 9
7. Referring to the information provided by Share Broker M/s. P.K. Jain & Associates, it was pointed out that this information is not credible. In the first letter dated 27.07.2004 he denied any transaction being entered into with the assessee and also mentions that bill dated 15.12.2000 in the name of the assessee seems to be fictitious one and appears to be only an accommodation entry. In the second letter dated 04.08.2004 he states that he had issued draft to the assessee and he received the cash from the assessee. In this letter he also mentions that cash received by him was routed through some bogus account and the balance came to his current Account No.6351026 from which the draft was issued by State Bank of Indore on behalf of ABN Ambro Bank. In this letter, he did not disclose all the accounts through which the cash was routed and even the name of the banker in which the current Account No.351026 exists. Vide letter dated 28.09.2004 he informed that he has received Rs.5,00,000/- from the assessee and the same was deposited in two Banks on 07.08.2001. Particulars of the Bank Accounts were not given. When further enquired vide letter dated 22.11.2004, he gives the details of the cash alleged to have been received but still did not disclose who were the owners of these companies, who was controlling them and what connection he had with these companies. He never pointed out that the cash was deposited into the Account of the assessee. Even the sequence of subsequent transaction was also not explained. By referring to the sequence of receipt of demand drafts by the assessee as well as by the broker and the deposit of the cash, he pointed out that this gives an unbelievable picture. The details were given as under :-
First transaction of January 2001 :
Cash allegedly received on 19.01.01 Rs.9,00,000
DD issued (as alleged against this cash) Rs.5,99,500
Balance remained with the broker Rs.3,00,500
Second Transaction of August 2001:
10
Cash allegedly received on 07.08.01 Rs.5,00,000
DD issued (as alleged against this cash) Rs.6,19,508
Excess received from broker Rs.1,19,508
Balance still remained with the Broker Rs.1,80,992
Thus, it was contended that the question is :-
i) Would any prudent person who is taking only an accommodation entry leave
three lac rupees with the broker for eight long months for no reason ?
ii) There is no evidence to show how the balance of Rs.1,80,992/- came back to the appellant and how the broker squired her account in his books ?
8. Thus, it was contended that the broker himself has changed his statement. Even the assessee was not provided any cross-examination. Thus, he relied on the order of ld. J.M.
9. Ld. D.R. pointed out that the assessee has merely given blank transfer forms and the shares were not transferred in the name of the purchaser. The broker has not confirmed the transaction. Therefore, the transaction of sale was not genuine one. On query from the Bench, whether any cross-examination was provided to the assessee in respect of the broker, the ld. D.R. expressed his inability. Ld. D.R. relied on the order of ld. Accountant Member.
10. 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 noted that while passing the dissent order the ld. A.M. has mainly relied on its separate order passed in the case of Shri Baijnath Agarwal (ITA No.133/Agr/2005). I have gone through the order of Shri Baijnath Agarwal and noted that in his dissent order in that case the ld. A.M. has relied on the decision of Shri Ashok Kumar Lavania (ITA No.112/Agr/2004). I have gone through the decision of Shri 11 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 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 12 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.
(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 13 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 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 14 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."
11. In my opinion, this case is equally applicable in the case of the assessee. In the case of the assessee, purchase of the shares has duly been proved and there is no dispute on the purchase of the shares being made by the assessee. The shares were purchased in earlier year. The shares were transferred in the name of the assessee as has been confirmed by the company when enquired by the A.O. The assessee has submitted before the A.O., copies of the contract notes, copies of the sales bills, statement of account from the broker, old address of the broker, new address of the broker. The identity of the broker is proved. Purchases were not doubted by the A.O. The demand draft for the sale consideration was issued from the account of M/s. P.K. Jain & Associates i.e. brokers. The money has not been deposited in cash in this account but has come to this account by way of transfer from the account of M/s. S.G. Fincap Limited. 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 is also not in dispute but rather the company has directly confirmed to the A.O. the purchase of the shares by the assessee in reply to the notice issued under section 133(6). 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 broker has not accepted the transaction but 15 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 statements of the broker couldn't be given any credence as he has stated differently vide different letters. Earlier he denied the transaction being entered into. Subsequently he has accepted that he has issued the draft after receiving the cash. Again he said that the cash was routed through some bogus account but he accepted that the draft has been made from his account. Subsequently, again he pointed out that he received cash of Rs.9,00,000/- and Rs.5,00,000/- while he has issued draft of Rs.5,99,500/- and Rs.6,19,508/- respectively. What happened to the balance amount? Nothing has been brought on record or stated by the broker. The assessee was not provided cross-examination. The statement has been recorded at the back of the assessee. This is a settled law that no addition can be sustained on the basis of the statement recorded at the back of the assessee and without giving opportunity to the assessee to cross examine the person who has given the statement at the back of the assessee. I have also gone through the decision of Delhi High Court in the case of SMC Share Brokers Limited, 288 ITR 345 (Delhi) and that of Kishan Chand Chellaram, 125 ITR 713 (SC) and that of Umacharan Shaw & Bros., 37 ITR 271 (SC). All those decisions lay down the proposition of the law that statement recorded at the back of the assessee cannot be used against the assessee until and unless the assessee has been given the opportunity to cross examine the person. Ld. D.R. was asked in the open Court whether any opportunity for cross examination was provided to the assessee in respect of the broker. The ld. D.R. expressed his inability as the record does not show that any such opportunity was provided. In almost similar circumstances, Hon'ble Calcutta High Court in the case of Eastern Commercial Enterprises (210 ITR 103) observed as under :-
"At the earlier occasion he claimed all his sales to be genuine but before the Assessing Officer in the case of the assessee, he disowned the sales specifically made to the assessee. This statement can at the worst show that S is not a trustworthy witness and little value can be attached to what he stated either 16 in his affidavit or in his cross examination by the Assessing Officer. His conduct neutralizes his value as a witness. A man indulged in double speaking cannot be said by any means a truthful man at any stage and no court can decide on which occasion he was truthful."
12. Further, as noted, the statement was recorded by the DDI, Investigation Wing, Agra and not by the Assessing Officer himself. Thus, the truthfulness of the statement remained untested by the Assessing Officer. ITAT, Delhi in the case of Rajeev Agarwal (139 Taxman 170 (Mag.)) has observed as under :-
"The mere reliance on the statement of third parties who were never examined by the Assessing Officer himself cannot be held to be sufficient to come to the finding that the transaction was not genuine and more so when there are other material and evidences to support the transaction."
13. Hon'ble Delhi High Court in the case of CIT Vs. SMC Share Brokers Ltd (288 ITR 345) also observed as under :-
"There is no doubt that the statement of Manoj Agarwal had evidentiary value but weight could not be given to it in proceedings against the assessee without it being tested under cross-examination. In the absence of statement being tested, it cannot be said that it should be believed completely to the prejudice of assessee."
14. 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 require that the order of the Co-ordinate Bench has to be followed.
17
15. I have also been nominated as Third Member in the case of Shri Baijnath Agarwal, ITA No.133/Agr/2005 which also I disposed of with my order of even date. In that case also I have held that the assessee's case is duly covered by the decision of the Division Bench in the case of Shri Ashok Kumar Lavania in ITA No.112/Agr/2004.
16. 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. The prices have increased in 15 to 16 months by 16 times. Although the rate of Rs.72/- was quoted on 28.11.2000 in M.P. Stock Exchange is apparent from page 11, para (iii) of the Assessment Order. It was further observed that in such a short period, share of no other reputed company has increased so much and the share market has also not shown such a rise. In my opinion, the share market is quite volatile and prices do fluctuate abnormally. It is seen that the shares dealt by the assessee were quoted at M.P. Stock Exchange at almost similar rates at which they were sold. 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 18 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."
17. 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."
18. In the stock Exchange when the transaction is entered into, the assessee 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 A.O. 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 made on 15.07.1999 was duly declared by the assessee in earlier years which stand accepted by the Revenue. 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 where the fund came through clearing, not in cash. The decision of the lower authorities 19 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.
19. 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 :-
"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."
20. 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 twisting statements of M/s P.K. Jain & Associates which remain untested by 20 the A.O. himself. 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 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."
21. 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') 21 Dilip Gargh vs. ITO - ITA No.470/Agr/2004 Gopal Prasad Agarwal vs. ACIT - ITA No.128/Agr/2004
22. 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 :-
"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 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 22 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."
23. Thus, in view of the aforesaid discussions, the decisions of the third member, the decisions of the coordinate benches, totality of the facts and circumstances and evidence on record, I am of the considered view that the action of the CIT(A) was not correct in confirming the assessment of Rs.12,19,538/- as the income from undisclosed sources as against the sale consideration of shares declared by the assessee. The CIT(A) was not justified in rejecting the claim of Long Term Capital Gain of the assessee from sale of shares. I accordingly direct the Assessing Officer to assess the income declared from the sale of shares under the head income from Long Term Capital Gain. Thus, the grounds no.1 & 2 of assessee's appeal should be allowed. Ground no.3 of assessee's appeal is consequential in nature, does not require any adjudication. So far the ground no.1 of Revenue's appeal is concerned, the same should stand dismissed as infructuous in view of my decision on grounds no.1 & 2 of assessee's appeal. Ground no.2 in Revenue's appeal is also consequential in nature and should stand dismissed.
24. 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/* 23 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