Income Tax Appellate Tribunal - Mumbai
Paresh M. Kariya (Huf), Mumbai vs Assessee on 13 May, 2015
आयकर अपील य अ
धकरण, मुंबई यायपीठ मुंबई ।
IN THE INCOME TAX APPELLATE TRIBUNAL "C "
BENCH, MUMBAI
सव ी आई.पी.बंसल, या यक सद य. एवं ी राजे , लेखा सद य के सम
BEFORE SHRI I.P. BANSAL, JM AND RAJENDRA, AM
आयकर अपील सं./I.T.A. No.7023/MUM/2010
( नधा रण वष / Assessment Year : 2004-05.
Shri Paresh M. Kariya (HUF), बनाम/ The ACI T, Cen. Cir.12,
13, Kathiawad Co.Op.Hsg.Soc. Vs. R.No.803, 8 t h Floor,
Ltd., Gulmohar Cross Road Old CGO Bldg., MK Road,
No.2, JVPD Scheme, Mumbai 400 020
Mumbai 400 049
थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AABHP 6818C
(अपीलाथ /Appellant) .. ( यथ / Respondent)
Appellant by Shri B.V. Jhaveri
Respondent by Shri Premanand J
सनु वाई क" तार$ख / Date of Hearing : 05/05/2015
घोषणा क" तार$ख /Date of Pronouncement : 13/05/2015
आदे श / O R D E R
PER I.P.BANSAL, J.M:
This is an appeal filed by the assessee and it is directed against order passed by Ld. CIT(A)-37, Mumbai dated 08/07/2010 for assessment year 2004-05. Grounds of appeal read as under:
" 1. On facts and in circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in confirming the sale consideration of Rs. 55,98,486/-, claimed as giving rise to long term capital gains, as unexplained cash credit u/s.68.
2. On facts and in circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs. 2,79,924/- being 5% of the sale consideration of Rs. 55,98,486/- as unexplained expenditure u/s. 69C on account of commission/service charges payable to the broker."
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2. The assessee in the present case is part of Kariya Group. A search was conducted at Kariya Group and persons connected with the said group on 18/1/2007. As per para-3 of the assessment order the search was conducted on the main allegation that the assessees of the above group had obtained artificial capital gain by manipulating share transactions by obtaining bogus back dated purchases of shares and received shares in physical format. Those shares have been sold at stock exchanges either in open market or through engineered transaction and, thus, these assessees are availing artificial/bogus capital gain and, thus, are gaining the entailing benefit of taxation either at lower rate or exemption. In such process, the capital gain shown by the present assessee from the sale of shares of three companies has been treated as unexplained money in possession of the assessee attributable to bogus long time capital gain and an amount of Rs.81,02,761/- was added to the income of the assessee.
2.1 Further, the AO added a sum of Rs. 4,05,138/- to the aforementioned amount on the ground that assessee might have paid certain fee or commission or remuneration for obtaining these bogus long term capital gain and this amount is calculated @5% on the sale price of shares. The detail of shares upon which assessee had earned capital gain are described in para-6 of the assessment order. In the said chart details have been given in respect of shares dealt by the assessee and for the sake of convenience the same are reproduced.
S. Name Quan- Sale Sales Purchas Purchas Mode of Actual Date
No tity Date Consider- e date e cost paying gain of
. ation purchas credit
e cost in
Dema
t A/c.
1. M/s.Robinso 15000 23.11.0 25,04,275 22.04.03 22,074/- 2482201
n Worldwise 4
Trade Ltd. 25.11.0
(also known 4
by the name 30.11.0
M/s.Robinso 4
n Impex India
Ltd.
2 M/s. 11175 02.07.0 4197361 18.04.02 112500 4084862
Shalimar 0 3
3 आयकर अपील सं./I . T . A . N o . 7 0 2 3 / M U M / 2 0 1 0
( नधा रण वष / A s s e s s m e n t Y e a r : 2 0 0 4 - 0 5 .
Agro Product To
19.03.0
4
3. M/s. G. Tech 36000 13.10.0 14,01,125/ 13.05.02 45,360 1355765/
Info Trading 3 - -
Ltd. 15.10.0
3
23.10.0
3
03.11.0
3
2.2 So far as it relates to observation of AO with regard to shares of
Robinson Worldwide Trade Ltd. and G Tech Info Trading Ltd., it is noticed that these shares were purchased by the assessee through M/s. DPS Shares and Securities Pvt. Ltd.(DPS) and director of DPS Shri Sujal C. Shah in his statement recorded on oath under section 131 of the Income Tax Act,1961 (the Act) during the course of survey under section 133A of the Act on 18/1/2007 carried out by Income Tax Investigation Authorities stated that he had not actually carried out any purchase transaction in the said scrip but had merely issued accommodation bills. The AO also during the course of assessment proceedings examined another director namely, Shri Pratik C. Shah on 18/11/2008 and relevant portion of his statement is also reproduced in the assessment order in which he stated that about 4 or 5 years back the said concern had issued certain bills relating to purchase of shares of M/s. Robinson Worldwide Trade Ltd., M/s. Fast Track Entertainment Ltd., and M/s. G Tech.Info Training Ltd., which were issued without any actual purchases having been made by DPS and these were accommodation bills. For the supposed purchases made by DPS of these scrips, DPS has issued speculation bills out of which speculation gain was shown to be earned by those indenting third parties and, therefore, there was no transaction at all from where those speculation gain could have arisen. Those speculation gain did not form part of DPS's books. The speculation gain bills issued to the third parties were bogus without any basis or without any transaction.
2.3 In respect of shares of G Tech Info Training Ltd., the AO also summoned Shri Sanjay R. Shah and he was asked to produce the details of 4 आयकर अपील सं./I . T . A . N o . 7 0 2 3 / M U M / 2 0 1 0 ( नधा रण वष / A s s e s s m e n t Y e a r : 2 0 0 4 - 0 5 .
transactions relating to sale of shares of G Tech Info Trading Ltd. to the assessee. The said Shri Sanjay R. Shah vide his letter dated 27/11/2008 and 2/12/2008 had denied to have made any transaction with assessee or Kariya Group. It is in these facts, AO considered the sale price of shares to M/s. Robinson Worldwide Ltd. and M/s. G Tech Info Training Ltd. as non- genuine transaction and added the sale price of shares to the income of the assessee.
2.4 Regarding share transaction of M/s. Shalimar Agro Products Ltd., it was noticed that those shares were purchased by the assessee from M/s. Shreenidhi Broking on various dates. The AO called for details from Shreenidhi Broking under section 133(6) of the Act. Vide letter dated 27/11/2008, the copies of ledger account and copies of the computerized purchase bills were submitted. It was mentioned that 1,06,500 shares of M/s. Shalimar Agro Products Ltd. were purchased for a consideration of Rs.85,775/- on 24/04/2002 and such purchase price was adjusted against the total credit balance lying to the assessee's credit on 31/3/2002. It was further mentioned that since the transaction pertained prior to 31/3/2002, the physical records were destroyed. It is in this manner, AO has treated the said transaction also as non-genuine and added the said amount to the income of the assessee.
3. Aggrieved, assessee filed an appeal before Ld. CIT(A).
4. Ld. CIT(A) has confirmed the action of AO in respect of two scrips namely G- Tech Info Training and M/s. Shalimar Agro Products Ltd. However, in respect of Robinson Worldwide Ltd., Ld. CIT(A) has observed that the same pertains to financial year 2004-05 relevant to A.Y 2005-06 which was also confirmed by Ld. CIT(A) in respect of that assessment year and to that extent the addition was duplicate and to that extent Ld. CIT(A) has reduced the addition for the year under consideration. Consequential to that, 5% commission is also reduced which is calculated at Rs.1,25,214/-.
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The sustenance of addition by Ld. CIT(A) has been challenged by the assessee in these grounds of appeal.
5. Ld.AR has submitted the synopsis of his arguments, copy of which was also given to Ld.DR. So far as it relates to shares of M/s. Shalimar Agro Products Ltd., the sequence of events with reference to documentary evidence in the paper book is as under:
(i) The assessee purchased 15,000 shares of M/s. Shalimar Agro Products Ltd. at Rs.7 .50 per share on 10th April, 2002 through M/s. Shreenidhi Stock & Broking for the aggregate sum of Rs.l,12,500/-. (Page 47).
(ii) The assessee had to receive a sum of Rs.1,19,432.10 from M/s.
Shreenidhi Stock & Broking on 1.4.2002 and therefore, against the said amount, a sum of Rs.1,12,500/- payable by the assessee was adjusted.
(iii) M/s. Shalimar Agro Products Ltd. transferred 15,000 shares in the name of the assessee and delivered the share certificates to the assessee on 30-4- 2002 (Pages 49 to 51).
(iv) M/s. Shalimar Agro Products Ltd. forwarded an extract of Share Transfer Register and Member Register of the company on 20-06-2007 (pages 52 to
68). Further, the share certificates for 15,000 shares were duly transferred in the name of the assessee.
(v) The assessee filed his return of income for the year ended 31.3.2003 relevant to the A.Y. 2003-04 on 22nd September, 2003 enclosing the Balance Sheet wherein the purchase of shares of M/s.Shalimar Agro Products Ltd. for Rs. 1,12,500/- are reflected (Pages 24 and 25).
(vi) The assessee had sent the said Share Certificates to M/s. Action Financial Services (India) Ltd. which is registered with NSDL, for de-materialising on 5th May, 2003 (See pages 69 & 70).
(vii) On de-materialization of 15,000 shares the assessee got credit in his Demat Account on 28th May, 2003 (Page 71).
(viii) Out of 15,000 shares of Rs.10/- each, the assessee sold 4,250 shares. Thereafter these shares were split into shares of Re.1/- each on 12th July, 2003. The said shares were sold by the assessee at the Stock Exchange through M/s. Shreenidhi Stock and Broking, the Sub- broker and M/s. Vidyut Devendrakumar which is the main broker registered with the BSE. The details of the sale of these shares are as under:
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5.1 It was submitted by Ld. AR that the aforesaid sequence of events would prove that the assessee has purchased 15000 shares of Shalimar Agro Products Ltd. through M/s. Shreenidhi Stock Broking, which was off market transaction and the payments of the purchase consideration was made through credit balance of the assessee with the said concern. The assessee received shares in physical form which were duly transferred in the name of the assessee. The purchases were duly shown and declared in the return of income filed for assessment year 2003-04. Those shares were also dematerialized and credited to the Demat account of the assessee and were sold at stock exchange through M/s. Shreenidhi Stock Brokers from time to time and in piecemeal, in the months June 2003 to March 2004 and, therefore, the sale of these shares cannot be disputed or doubted. It was submitted that all these evidences were filed before AO as well as Ld. CIT(A) and no adverse comment has been made against these evidences, therefore, sustenance of disallowance is contrary to the evidence available 7 आयकर अपील सं./I . T . A . N o . 7 0 2 3 / M U M / 2 0 1 0 ( नधा रण वष / A s s e s s m e n t Y e a r : 2 0 0 4 - 0 5 .
on record which has been ignored by the AO as well as Ld. CIT(A) and addition in this regard has been made on the basis of presumptions and surmises without bringing any evidence to contradict the aforementioned documentary evidence submitted by the assessee, copies of which are filed in the paper book.
5.2 So far as it relates to share of M/s. G- Tech Info Training, the sequence of events is narrated as under:
(a) The assessee purchased 36,000 shares M/s. G- Tech Info Training Ltd.
through Mr. Sanjay R. Shah on 13th May, 2002 for the aggregate consideration of Rs.45,360/- which was off market transaction (Pages 26 &
27).
(b) The aforesaid purchase consideration of Rs.45,360/- was adjusted against the speculation profit of Rs.1,49,600/- earned by the assessee and taxed in the hands of the assessee for A.Y. 2003-04. (Pages 28 and 21 & 23)
(c) The said shares were delivered to the assessee in physical form with the duly executed Transfer Form (Page 29).
(d) The said shares were duly transferred in the name of the assessee by M/s. G- Tech Info Training Ltd. and delivered to the assessee on 3rd July, 2002. (Page 30).
(e) M/s. G- Tech Info Training Ltd. issued to the assessee a Jumbo Certificate for 36,000 shares on 22nd April, 2003. (Page 31 & 32).
(f) The assessee filed his return of income for the year ended 31.3.2003 relevant to the A.Y. 2003-04 on 22nd September, 2003 enclosing the Balance Sheet wherein the purchase of the said shares for Rs.45,3601- are reflected. (Pages 24 & 25).
(g) The assessee had lodged the aforesaid shares for de- materialisation with M/s. Action Financial Services (India) Ltd. which is registered with NSDL, on 16th July, 2003. The said shares were de- materialised and credited into the Demat account of the assessee on 28th July, 2003 (Page 35).
(h) The said shares were sold by the assessee at the Stock Exchange through M/s. Shreenidhi Stock and Broking, the Sub-broker and M/s. vidyut Devendrakumar which is the main broker registered with the BSE. The details of the sale of these shares are as under:
Date of sale No. of shares Page no. of bill Date on which Page no. for demat account demat account.
was debited October, 2003 27,500 42-44 Various dates in 40 the month of October, 2003 November, 2003 8,500 46 4th November, 45 2003
i) The assessee asked for the cross-examination of Mr. Sanjay R. Shah both before the Assessing Officer and the CIT(A) as he had filed the letter before the Assessing Officer disowning the transactions entered into for the assessee for purchase and sale of shares whereby the assessee had earned speculation profits in A.Y. 2003-04 and purchased the shares of M/s. G- Tech Info 8 आयकर अपील सं./I . T . A . N o . 7 0 2 3 / M U M / 2 0 1 0 ( नधा रण वष / A s s e s s m e n t Y e a r : 2 0 0 4 - 0 5 .
Training Ltd. The aforesaid request of the assessee has not been acceded to. (Pages 144 & 145) 5.3 It was further submitted that aforementioned sequence of events would prove that the assessee had purchased 36000 shares of M/s .G-Tech Info Training through Mr. Sanjay R. Shah and purchase consideration was paid by adjusting the profit on sale of shares. The shares sold by the assessee were obtained in physical form and thereafter they were duly transferred in the name of the assessee by G-Tech Info Training in their record. The purchase of these shares were also declared by the assessee in his return of income for A.Y 2003-04, which was filed on 22/9/2003. These shares were dematerialized and accordingly, credited to the Demat account of the assessee on 28/07/2003 and shares were sold by the assessee at stock exchange through M/s. Shreenidhi Stock Broking in the month of October and November, 2003. Therefore, it was submitted that addition in this regard is also required to be deleted.
5.4 It was further submitted that for shares of M/s. Robinson Worldwide Ltd. were treated by the AO in the same manner, as were shares of the aforementioned two companies were treated. However, Ld. CIT(A) found that sale of shares of the company pertain to financial year 2004-05, relevant to A.Y.2005-06 and AO had made unintentional duplicate addition of the receipt to the extent of Rs.25,04,275/- and consequent brokerage of 5% calculated at Rs.1,25,214/- and in A.Y.2005-06 the said addition has already been confirmed by his order dated 16/11/2009. Thus, the addition in the present year is duplicate addition and in this manner Ld. CIT(A) had deleted the sale consideration of shares of Robinson Worldwide Ltd., amounting to Rs.25,04,275/- and brokerage of 5% of Rs.1,25,215/-. Such addition upheld by Ld. CIT(A) in respect of assessment year 2005-06 was challenged in the appeal filed before Tribunal and Tribunal vide its order dated 30/12/2011 passed in ITA No.790/Mum/2010 has deleted the addition with the following observations:
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"8. We have considered the rival submissions carefully and find force in the submissions of the Ld. Counsel of the assessee. The ld. CIT(A) has dismissed the appeal of the assessee mainly on generalization that there was a Penny Stock scam which was unearthed by the Department and also that assessee has not been able to prove the purchase of shares and it was an accommodation transaction as stated by the directors of M/s. DPS Shares & Securities Pvt. Ltd. The ld. CIT(A) as well as the Ld. DR has mainly relied on the decision of the Hon'ble Supreme Court in the case of Sumati Dayal vs. CIT [supra]. In that case the facts were as under:
The appellant carried on business as a dealer in art pieces, antiques and curios at Bangalore. During the assessment year 1971-72, she claimed that received a total amount of Rs.3,11,831 by way of race winnings in jackpots and treble events in races at Turf Clubs in Bangalore, Madras and Hyderabad. The said amount was shown by the appellant in the capital account in the books. For the assessment year 1972-73, she claimed receipts of Rs.93500/- as race winnings in two jackpots at Bangalore and Madras and the said amount was credited in the capital account in the books. The Income-tax Officer The included the amount as income from other sources and assessed them. The appellant referred matter to the Settlement Commission. The Settlement Commission by a majority held that the explanation of the assessee was not genuine for the following reasons: (i) The appellant's knowledge of racing is very meagre. (ii) A jackpot is a stake of five events in a single day and one can believe a regular and experienced punter clearing a jackpot occasionally but the claim of the appellant to have won a number of jackpots in three or four seasons not merely at one place but at three different centres, namely, Madras, Bangalore and Hyderabad appears, prima facie, to be wild and contrary to the statistical theories and experience of the frequencies and probabilities. (iii) The appellant's books do not show any drawings on race days or on the immediately preceding days for the purchase of jackpot combination tickets, which entailed sizable amounts varying generally between Rs. 2,000 and Rs. 3,000. The drawings recorded in the books cannot be co-related to the various racing events at which the appellant made the alleged winnings. (iv) While the appellant's capital account was credited with the gross amounts of race winnings, there were no debits either for expenses and purchase of tickets or for losses. (v) In view of the exceptional luck claimed to have been enjoyed by the appellant, her loss of interest in races from 1972 assumes significance. Winnings in racing became liable to income-tax from April 1, 1972, but one would not give up an activity yielding or likely to yield a large income merely because the income would suffer tax. The position would be different, however, if the claim of winnings in races was false and what were passed off as such winnings really represented the appellant's taxable income from some undisclosed sources.
On the above facts it was held as under:
"Held, dismissing the appeal, the Settlement Commission after considering the surrounding circumstances and applying the test of human probabilities has rightly concluded that the appellant's claim about the amount being her winnings from races is not genuine."
From the above decision it is clear that human probabilities or circumstantial evidences can be taken into account for deciding an issue. However, in that case the circumstances were so strong against that the documentary evidence was ignored by the Hon'ble apex court. But in the case of the assessee before us it shows that circumstantial evidence is not so over whelming and rather the documentary evidence clearly proves the transactions.
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9. First let us deal with the contentions of the Ld. DR that some papers in the paper book at page nos.42 to 45 were not traceable in the file of the AO. The second allegation vide letter dated 11-11-11 is that the company M/s Robinson Worldwide Trade Ltd is not in existence. Pages 42 and 43 of the paper book, which is a copy of the transfer form signed by the transferor and the transferee. Page 4 is a copy of the covering letter by the company to the assessee transferring the shares by way of a jumbo certificate i.e. one consolidated certificate in the name of the assessee and page-45 is a copy of the share certificate. It has been pointed out that such papers were filed with the AO with the letter dated 5-11-08 along with annexure K and copy of this letter has been furnished before us which is placed on records. In the column dealing with annexure K it is stated that various documents are being furnished to prove the genuineness of purchases which includes the transfer form placed at pages 42 and 43 and copy of the share certificate at page 45. This makes it clear that documents were filed before the AO because it has not been denied that letter dated 5-11-08 was filed before the AO. In any case, during the hearing photo copies of 150 certificates issued in the name of the assessee by splitting the jumbo certificate, have been filed, which show that shares were in the name of the assessee. A document from the Ministry of Corporate Affairs, Government of India from the cite http://www,.mca,gov.in serial Nos.1 & 2 of the same read as under:
Old Name New Name (1) Robinson Impex (India) Ltd. Sun And Shine Worldwide Ltd. (2) M/s Robinson Worldwide Trade Ltd Sun And Shine Worldwide Ltd.
This clearly shows that Robinson Impex (India) Ltd. as well as M/s Robinson Worldwide Trade Ltd were merged and the new name of the company is Sun And Shine Worldwide Ltd. The above extract has been taken on 12-12-2011 which shows that the company is very much in existence even as on today. This is further supported by another extract from M/s. DPS Shares & Securities Pvt. Ltd taken from www.bseindia.com. This extract shows the following information: "Outcome of EGM 02-05-2011 18:36 M/s Robinson Worldwide Trade Ltd has informed that the shareholders at the Extra Ordinary General Meeting (EGM) of the company held on May 02,2011, inter alia, have taken the following decisions:
1) To chance to the name of the company from "M/s RPBINSON WORLDWIDE TRADE LTD." TO "SUN AND SHINE WORLDWIDE LTD." This confirms that the name of the company was changed in the Extra Ordinary General Meeting held on 2-5-2011. Perhaps because of the change of name, the AO has not been able to confirm the existence of the company. The third document is also taken from the BSE site shows that shares were traded on 6-9-2011 at Rs.36.75. This clearly shows that shares of the company are still being traded but under the new name. In the light of these documents, we find no merit in the objection raised in the letter of the DCIT -12, addressed to the CIT DR, which was placed before us.
10. The second important issue on the basis of which the claim of the assessee for capital gain was held to be bogus was the statement of director of M/s. DPS Shares & Securities Pvt. Ltd. The AO has fairly given cross examination to the assessee of the director of M/s. DPS Shares & Securities Pvt. Ltd. Shri Pratik Shah director of M/s. DPS Shares & Securities Pvt. Ltd was cross examined by the representative of the assessee Shri Ketan Mehta on 20-11- 2008 and AO has reproduced the whole cross examination. The question and answer to Qs. Nos.22 & 34 read as under:
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Q.22. You have slated in your statement u/s. 13] on ]8.iJ.2008 that all the bogus bills were issued by you at the instruction of Mr.Naresh Saboo and Mr. Shirish C.Shah. Do you agree with the same? Ans. Yes I agree. The bogus bills were issued by .ny company at the instructions of Mr.Naresh Saboo. As these hills were bogus and off market transaction. the physical shares which were given by us to the said Ms..Jigna A.Kariya were received by us from Naresh Sahoo and were forwarded by us to Ms.Jigna .A. Kariya, because these transactions were not on the floor, the said physical shares had not conic' from BSE. Hence this was an accommodation transaction, we received the shares from Naresh Sahoo and forwarded to Ms..Jigna A.Kariya.
Q.34. Do you want to say anything else?
Ans. Yes. All these accommodation hills/bogus bills were given by our company for the accommodation of the said assessees for the LTCG purpose and the delivery of physical shares which were given by us to the said assessees were received by us from Mr.Naresh Saboo and handed over to the said assessees.
The above clearly shows that the so called bogus shares were issued on the instructions of Shri Naresh Saboo. Before us it was denied that assessee has anything to do with Shri Naresh Saboo. Neither the AO nor the ld. CIT(A) has brought any material on record to show that Shri Naresh Saboo has some connection with the assessee. Even ld. CIT DR has not placed any evidence to show that Shri Naresh Saboo was acting on behalf of the assessee. Secondly, Shri Pratik Shah in answer to both question Nos.22 & 34 has clearly admitted that physical delivery of the shares was given to the assessee. Now the question is how assessee is going to find out whether this transaction was bogus when physical delivery has been handed over to the assessee. The authorities below have also doubted the source for purchases. As pointed out by the Ld. Counsel assessee has earned speculation profit amounting to Rs.28,941/- which has been included in the return of income under the head 'income from other sources' for A.Y 2004-05, a copy of the computation is on pages 22 & 23 of the paper book and this has been accepted by the department. The assessee has also filed the balance sheet in which investment in shares has been shown at Rs.1,45,06,054/- and in the annexure showing the details of investment in M/s Robinson Worldwide Trade Ltd shares have been included at 15500 shares amounting to Rs.28810.54. This purchase has to be treated as accepted because this balance sheet was filed in A.Y 2004-05 and no adverse inference has been taken in that year. These documents are available at pages 24 to 26 of the paper book. The assessee had also filed the contract note for sale and purchase of shares generating speculating profit filed at pages 36 & 37 of the paper book. The contract note for purchase of 15500 shares of M/s Robinson Worldwide Trade Ltd from M/s. DPS Shares & Securities Pvt. Ltd has been filed at page-38 of the paper book and the particulars read as under:
Order No . Trade No. Trade Time Quantity Kind of Security Purchase Rate Brokerage Rate Plus Amount Brokerage Net Rate 29926007 0002407 10:22:45 15500 ROBINSON 1.45 0.02 1.47 22785.00 IMP PHY :
TOTAL: 22785.00 The above particulars would not indicate that it was a bogus transaction. In any case, assessee has no need to know whether the transaction was bogus or not because even invoice has been issued by M/s. DPS Shares & Securities Pvt. Ltd for purchase of these shares, copy of which is placed at page 39 of the paper book and delivery was also given which is at page 40 of the paper book. Later on assessee filed an application for transfer of these shares and we have already discussed the particulars of transfer form. Ultimately, a jumbo share
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certificate showing 15500 shares was issued by the company, copy of which is at page 45 of the paper book. Later on assessee lodged a demat request with Action Financial Services (India) Ltd. for demat of 15500 shares of M/s Robinson Worldwide Trade Ltd and copy of that request is available at page 46. The demat account statement of the assessee with Action Financial Services (India) Ltd. shows that 15500 shares have been dematerialised. We fail to understand how the shares were actually transferred in physical form and later on dematerialised and how this whole process can be called bogus. This cannot be called bogus unless the connivance of M/s Robinson Worldwide Trade Ltd and Action Financial Services (India) Ltd. is also alleged and proved. But no enquiry seems to have been conducted with these entities. Ultimately, the shares have been sold through Anugrah Stock and Broking Pvt. Ltd. on various dates as under:
Date Quantity
09-12-2004 3000
13-12-2004 3000
04-01-2005 6000
o6-01-2005 3500
The contract notes for the above sales are placed in the paper book at pages 48 to 55. The above sales have been reflected in the later demat account with Action Financial Services (India) Ltd., copy of which is at pages 57 and 58 of the paper book. From the above it is clear that assessee has proved the purchases as well as the sales transactions. The shares have been sold through BSE and it is not alleged that these transactions are also off market. All these facts clearly prove that the transactions are genuine and the same cannot be doubted unless and untill the other participants like depository known as Action Financial Services (India) Ltd. is also proved to be bogus or in connivance with the Penny Stock scam and even the sale conducted through Anugrah Stock and Broking Pvt. Ltd. is proved to be bogus. In our opinion, when overwhelming documentary evidence is available to prove the purchase and sale transactions part of which has already been accepted by the revenue in A.Y 2004-05, then a mere statement by the broker who has sold the shares to the assessee that this was an accommodation entry cannot lead to a conclusion that the whole transaction was bogus. In these circumstances, we are of the view that the sale and purchase of the shares stand proved and should be assessed under the head capital gains." (emphasis by us) 5.5 It was submitted that addition upheld by Ld. CIT(A) in the present year are at par with the additions considered by the Tribunal in respect of A.Y.2005-06 and thus, the issue regarding addition of these shares is covered by aforementioned decision of Tribunal in asssessee's own case for A.Y 2005-06 by the aforementioned order.
5.6 It was further submitted that according to the decision of Tribunal in the case of Mukesh R. Marolia vs. Addl. CIT, 6 SOT 247 (Mum), it was held that purchase and sale of shares outside floor of stock exchange is not an unlawfull activity. Off market transaction, are not illegal. It is always 13 आयकर अपील सं./I . T . A . N o . 7 0 2 3 / M U M / 2 0 1 0 ( नधा रण वष / A s s e s s m e n t Y e a r : 2 0 0 4 - 0 5 .
possible for the parties to enter into transactions even without the help of brokers. When the transactions are off market transactions, there is no relevance in seeking details of share transactions from stock exchange as such attempt would be futile. Stock exchange cannot give details of transactions entered into between parties outside their floors. Therefore, reliance placed by AO on the communications received from the stock exchanges that the particular share transactions entered into by the assessee were not available in their record will be out of place.
5.6 Ld. AR also placed reliance on the decision in the case of Pushpa R. Shah vs. ITO in ITA No.2669/Mum/2006 for assessment year 2002-03 and Remesh G. Shah vs. ITO, ITA No.2670/Mum/2006 for assessment year 2002-03 order dated 29/07/2008, wherein such transaction made through brokers registered with SEBI and also being assessed to income tax and in the circumstances where shares were duly transferred from assessee's Demat account and sale consideration having been received through account payee cheque then the sale price could not be added to the income of the assessee. Thus, it was pleaded by Ld. AR that the impugned addition should be deleted and appeal filed by the assessee should be allowed.
6. On the other hand, it was submitted by Ld. DR that assessee could not substantiate the purchase of the shares and since purchase of the shares could not be substantiated, the later sale thereof cannot be considered to be genuine. It was submitted that shares were shown to be purchased for a very low consideration and sold at a higher rate. Thus, all it was an arrangement just to introduce assessee on-money in the shape of sale consideration of the shares. He submitted that according to the facts of the case, Ld. CIT(A) has rightly upheld the addition and his order should be upheld. The appeal filed by the assessee should be dismissed.
7. We have heard both the parties and their contentions have carefully been considered. The sequence of dates has already been narrated in the 14 आयकर अपील सं./I . T . A . N o . 7 0 2 3 / M U M / 2 0 1 0 ( नधा रण वष / A s s e s s m e n t Y e a r : 2 0 0 4 - 0 5 .
above part of this order in respect of share transactions of both the companies. The assessee had purchased 15000 shares of Shalimar Agro Products Ltd. @ Rs.7.50 per shares on10/04/2002 through Shreenidhi Stock & Broking for aggregating to a sum of Rs.1,12,500/-and evidence relating to such purchase is filed at page 47 of the paper book. As per evidence filed at page 48 of the paper book, the assessee as on 1/4/2002 was having credit balance of Rs.1,19,432/-. Against the said outstanding credit balance an amount of Rs.1,12,500/- has been debited on account of purchase price of 15000 shares of Shalimar Agro Products and thus, even after the purchase of those shares the credit balance of the assessee with Shreenidhi Share & Broking was Rs. 6,932.10. At page 49 to 51 of the paper book, copy of three letters issued by Shalimar Agro Products Ltd. dated 30/4/2002 are placed, accordingly, 8000,4200 and 2800 shares were transferred in the name of the assessee on 30/4/2002. In these letters distinctive numbers of share certificates have been given. Later on, assessee obtained certificate from Shalimar Agro Products Ltd., which is dated 20/06/2007 vide which extract of Share Transfer Register and Member Register of the company was granted, copy of which has been filed at page 53 to 68 of the paper book. At page 69 to 70, copy of form of Demat is filed which is dated 5/5/2003 vide which assessee had submitted Demat of the shares of Shalimar Agro Products Ltd.and at pages 71 to 140, the details of sales of these shares are filed. At page 24 the balance sheet of the assessee as on 31/3/2003 is filed, wherein total investment is shown at Rs.8,32,213.24. The schedule of which is filed at page 25 of the paper book. The details is as under:
Name of the Company No. of Shares Amount
Investment in Shares 360,540.00
ICICI Safety Bonds-2000 10,000.00
ICICI Safety Bond 2001 20,000.00
ICICI Safety Bond 2002 70,000.00
Public Provident fund 183,813.24
Shalimar Agro Products Ltd. (15000 shares) 112,500.00
G-tech Info Training Ltd. (36000 shares) 45,360.00
IDBI Flexi Bonds-2003 30,000.00
8,32,213.24
15 आयकर अपील सं./I . T . A . N o . 7 0 2 3 / M U M / 2 0 1 0
( नधा रण वष / A s s e s s m e n t Y e a r : 2 0 0 4 - 0 5 .
7.1 Thus, it can be seen from the above that in the balance sheet submitted by the assessee to the Department in respect of A.Y 2003-04, shares of Shalimar Agro Products Ltd. were also outstanding and quantity thereof was also mentioned.
7.2 Similarly, in respect of shares of G-Tech Info Trading the purchase voucher is placed at page 20 & 27 of the paper book. 36000 shares were purchased for a sum of Rs.45,360/- and the said purchase price was adjusted against profit shown by the assessee in the return of income at Rs.1,49,600/-, copy of which is placed at page 21 of the paper book. These shares are also outstanding in the investment schedule which has already been reproduced in para-7 of the order. These shares were received by the assessee in physical form as per letter issued by Shri Sanjay R. Shah, copy of which is filed at page 29 of the paper book. The same is also substantiated by letter issued by G-Tech Info Trading vide letter dated 3/7/2002,copy of which is placed at page 30 of the paper book, wherein they have certified that 36000 shares of G-Tech Info Training Ltd. have been duly transferred in the name of the assessee and certificate numbers have also been mentioned along with folio number. Later on, jumbo certificate was issued by G-Tech Info Training Ltd. vide letter dated 22/4/2003 vide certificate No.20245, and copy of this letter is filed at page
-31 of the paper book and on page 32, copy of jumbo certificate has been filed. These shares were dematerialized as per evidence filed in the share of deposit form with the depository namely Action Financial Services India Ltd on 16/7/2003, copy of this evidence is filed at page34 to 35 of the paper book and these shares have been sold according to the evidence filed at pages 40 to 46 of the paper book.
7.3 From the above facts, it is clear that shares of both these companies were shown to be held by the assessee in the balance sheet filed with the Department in respect of A.Y 2003-04. There is no material on record to show that the return filed by the assessee showing purchases of these 16 आयकर अपील सं./I . T . A . N o . 7 0 2 3 / M U M / 2 0 1 0 ( नधा रण वष / A s s e s s m e n t Y e a r : 2 0 0 4 - 0 5 .
shares in A.Y 2003-04 has ever been disturbed by the Revenue. The Revenue has also not contradicted any of the aforementioned evidence submitted by the assessee to support the impugned transactions. Moreover, under similar facts and circumstances, one of the transactions which was added by the AO in respect of shares of M/s. Robinson Worldwide Ltd., was deleted by Ld. CIT(A) on the ground that it pertains to A.Y 2005-06 has been already deleted by the Tribunal in the case of assessee itself. The relevant portion of the Tribunal's order has already been reproduced in para 5.4 of this order. The facts of that transaction and the impugned transactions are not materially different. Therefore, the impugned transactions in the facts and circumstances of the case are covered by the aforementioned decision of the Tribunal in assessee's own case in respect of assessment year 2005-06. Respectfully following the said decision of Tribunal given in respect of present assessee with regard to assessment year 2005-06, we are of the opinion that Ld. CIT(A) has committed an error in upholding the addition. Accordingly, the impugned addition as pleaded in Ground No.1 & 2 are deleted and ground No.1 & 2 are allowed.
8. In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 13/05/2015 आदे श क" घोषणा खल ु े यायालय म+ ,दनांकः 13/05/2015 को क" गई ।
Sd/- Sd/-
राजे (RAJENDRA) आई.पी.बंसल (I.P.BANSAL)
लेखा सद य /ACCOUNTANT MEMBER या यक सद य /JUDICIAL MEMBER मुंबई Mumbai; ,दनांक Dated 13/05/2015 17 आयकर अपील सं./I . T . A . N o . 7 0 2 3 / M U M / 2 0 1 0 ( नधा रण वष / A s s e s s m e n t Y e a r : 2 0 0 4 - 0 5 .
आदे श क त"ल#प अ$े#षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आय0 ु त(अपील) / The CIT(A)-
4. आयकर आय0 ु त / CIT
5. 1वभागीय त न3ध, आयकर अपील$य अ3धकरण, मब ुं ई / DR, ITAT, Mumbai
6. गाड फाईल / Guard file.
आदे शानस ु ार/ BY ORDER, स या1पत त //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मबुं ई / ITAT, Mumbai व. न.स.Vm , Sr. PS