Income Tax Appellate Tribunal - Mumbai
Chanchalben Birawat, Mumbai vs Assessee on 20 February, 2015
आयकर अपील य अ धकरण, मुंबई यायपीठ "ई" मुंबई IN THE INCOME TAX APPELLATE TRIBUNAL "E " BENCH, MUMBAI BEFORE S/SHRI JOGINDER SINGH (JM) AND B.R.BASKARAN (AM) सव ी ी, जो ग दर संह, या यक सद य एवं बी.आर.बा करन, लेखा सद य आयकर अपील सं./I.T. A. No. 989, 990 and 982/Mum/2010 ( नधा रण वष / Assessment Years : 2004-05 to 2006-07) Shri Vasantraj Birawat, बनाम/ Asstt.Commissioner of Income 105/106, 305/306- B Block Vs. Tax -
Deepak Jyoti tower, Central Circle -14,
G D Ambedkar Marg, Old CGO Building,
Kalachowki, M K Road,
Mumbai-400033 Mumbai-400020
(अपीलाथ /Appellant) .. ( यथ / Respondent)
थायी ले ख ा सं . /जीआइआर सं . /PAN/GIR No. :AACPB5785B आयकर अपील सं./I.T. A. No. 983, 984 and 985/Mum/2010 ( नधा रण वष / Assessment Years : 2004-05 to 2006-07) Shri Uttamchand Birawat, बनाम/ Asstt.Commissioner of Income 105/106, 305/306- B Block Vs. Tax -
Deepak Jyoti tower, Central Circle -14,
G D Ambedkar Marg, Old CGO Building,
Kalachowki, M K Road,
Mumbai-400033 Mumbai-400020
(अपीलाथ /Appellant) .. ( यथ / Respondent)
थायी ले ख ा सं . /जीआइआर सं . /PAN/GIR No. :AAHPB9195Q आयकर अपील सं./I.T. A. No. 986, 987 and 988/Mum/2010 ( नधा रण वष / Assessment Years : 2004-05 to 2006-07) Shri Kiranraj Birawat, बनाम/ Asstt.Commissioner of Income 105/106, 305/306- B Block Vs. Tax -
Deepak Jyoti tower, Central Circle -14,
G D Ambedkar Marg, Old CGO Building,
Kalachowki, M K Road,
Mumbai-400033 Mumbai-400020
(अपीलाथ /Appellant) .. ( यथ / Respondent)
2 ITA. No.986/M/2010 and other cases
थायी ले ख ा सं . /जीआइआर सं . /PAN/GIR No. :AACPB9890K आयकर अपील सं./I.T. A. No. 966 and 967/Mum/2010 ( नधा रण वष / Assessment Years : 2005-06 and 2006-07) Shri Anish Birawat, बनाम/ Asstt.Commissioner of Income 105/106, 305/306- B Block Vs. Tax -
Deepak Jyoti tower, Central Circle -14,
G D Ambedkar Marg, Old CGO Building,
Kalachowki, M K Road,
Mumbai-400033 Mumbai-400020
(अपीलाथ /Appellant) .. ( यथ / Respondent)
थायी ले ख ा सं . /जीआइआर सं . /PAN/GIR No. :AHXPB3008R आयकर अपील सं./I.T. A. No. 978 and 979/Mum/2010 ( नधा रण वष / Assessment Years : 2005-06 & 2006-07) Shri Ankit Birawat, बनाम/ Asstt.Commissioner of Income 105/106, 305/306- B Block Vs. Tax -
Deepak Jyoti tower, Central Circle -14,
G D Ambedkar Marg, Old CGO Building,
Kalachowki, M K Road,
Mumbai-400033 Mumbai-400020
(अपीलाथ /Appellant) .. ( यथ / Respondent)
थायी ले ख ा सं . /जीआइआर सं . /PAN/GIR No. : AHXPB3007A आयकर अपील सं./I.T. A. No. 972 and 973/Mum/2010 ( नधा रण वष / Assessment Years : 2005-06 & 2006-07) SMt. Chanchalben Birawat, बनाम/ Asstt.Commissioner of Income 105/106, 305/306- B Block Vs. Tax -
Deepak Jyoti tower, Central Circle -14,
G D Ambedkar Marg, Old CGO Building,
Kalachowki, M K Road,
Mumbai-400033 Mumbai-400020
(अपीलाथ /Appellant) .. ( यथ / Respondent)
थायी ले ख ा सं . /जीआइआर सं . /PAN/GIR No. :AAMPB2975P 3 ITA. No.986/M/2010 and other cases आयकर अपील सं./I.T. A. No. 974 and 975/Mum/2010 ( नधा रण वष / Assessment Years : 2005-06 and 2006-07) Smt.Kalaben Birawat, बनाम/ Asstt.Commissioner of Income 105/106, 305/306- B Block Vs. Tax -
Deepak Jyoti tower, Central Circle -14,
G D Ambedkar Marg, Old CGO Building,
Kalachowki, M K Road,
Mumbai-400033 Mumbai-400020
(अपीलाथ /Appellant) .. ( यथ / Respondent)
थायी ले ख ा सं . /जीआइआर सं . /PAN/GIR No. :ADSPB9905A आयकर अपील सं./I.T. A. No. 968 and 969/Mum/2010 ( नधा रण वष / Assessment Years : 2005-06 & 2006-07) Shri Avani Birawat, बनाम/ Asstt.Commissioner of Income 105/106, 305/306- B Block Vs. Tax -
Deepak Jyoti tower, Central Circle -14,
G D Ambedkar Marg, Old CGO Building,
Kalachowki, M K Road,
Mumbai-400033 Mumbai-400020
(अपीलाथ /Appellant) .. ( यथ / Respondent)
थायी ले ख ा सं . /जीआइआर सं . /PAN/GIR No. :AHJPB5561H आयकर अपील सं./I.T. A. No. 970 and 971/Mum/2010 ( नधा रण वष / Assessment Years : 2005-06 and 2006-07) Smt.Shweta Anish Birawat, बनाम/ Asstt.Commissioner of Income 105/106, 305/306- B Block Vs. Tax -
Deepak Jyoti tower, Central Circle -14,
G D Ambedkar Marg, Old CGO Building,
Kalachowki, M K Road,
Mumbai-400033 Mumbai-400020
(अपीलाथ /Appellant) .. ( यथ / Respondent)
थायी ले ख ा सं . /जीआइआर सं . /PAN/GIR No. :AVBPS7750A 4 ITA. No.986/M/2010 and other cases आयकर अपील सं./I.T. A. No. 980 and 981/Mum/2010 ( नधा रण वष / Assessment Years : 2005-06 and 2006-07) Smt.Veenaben Birawat, बनाम/ Asstt.Commissioner of Income 105/106, 305/306- B Block Vs. Tax -
Deepak Jyoti tower, Central Circle -14,
G D Ambedkar Marg, Old CGO Building,
Kalachowki, M K Road,
Mumbai-400033 Mumbai-400020
(अपीलाथ /Appellant) .. ( यथ / Respondent)
थायी ले ख ा सं . /जीआइआर सं . /PAN/GIR No. :ADSPB9905A आयकर अपील सं./I.T. A. No. 7399 and 7411/Mum/2010 ( नधा रण वष / Assessment Years : 2005-06 and 2006-07) Shri Uttamchand Birawat बनाम/ Asstt.Commissioner of Income HUF, Vs. Tax -
105/106, 305/306- B Block Central Circle -14,
Deepak Jyoti tower, Old CGO Building,
G D Ambedkar Marg, M K Road,
Kalachowki, Mumbai-400020
Mumbai-400033
(अपीलाथ /Appellant) .. ( यथ / Respondent)
थायी ले ख ा सं . /जीआइआर सं . /PAN/GIR No. :AAAFK4838L आयकर अपील सं./I.T. A. No. 6946 & 6947/Mum/2010 ( नधा रण वष / Assessment Years : 2005-06 & 2006-07) Shri Kiranraj Birawat, बनाम/ Asstt.Commissioner of Income HUF Vs. Tax -
105/106, 305/306- B Block Central Circle -14,
Deepak Jyoti tower, Old CGO Building,
G D Ambedkar Marg, M K Road,
Kalachowki, Mumbai-400020
Mumbai-400033
(अपीलाथ /Appellant) .. ( यथ / Respondent)
थायी ले ख ा सं . /जीआइआर सं . /PAN/GIR No. :AAAHB4420M 5 ITA. No.986/M/2010 and other cases आयकर अपील सं./I.T. A. No. 7400 & 7401/Mum/2010 ( नधा रण वष / Assessment Years : 2005-06 & 2006-07) Shri Vasantraj Birawat, बनाम/ Asstt.Commissioner of Income HUF Vs. Tax -
105/106, 305/306- B Block Central Circle -14,
Deepak Jyoti tower, Old CGO Building,
G D Ambedkar Marg, M K Road,
Kalachowki, Mumbai-400020
Mumbai-400033
(अपीलाथ /Appellant) .. ( यथ / Respondent)
थायी ले ख ा सं . /जीआइआर सं . /PAN/GIR No. :AAAHB4200M आयकर अपील सं./I.T. A. No.976/Mum/2010 ( नधा रण वष / Assessment Year : 2005-06) Smt.Sweta Kiranraj Birawat, बनाम/ Asstt.Commissioner of Income 105/106, 305/306- B Block Vs. Tax -
Deepak Jyoti tower, Central Circle -14,
G D Ambedkar Marg, Old CGO Building,
Kalachowki, M K Road,
Mumbai-400033 Mumbai-400020
(अपीलाथ /Appellant) .. ( यथ / Respondent)
थायी ले ख ा सं . /जीआइआर सं . /PAN/GIR No. :AHHPB8970C आयकर अपील सं./I.T. A. No.977/Mum/2010 ( नधा रण वष / Assessment Year : 2006-07) Smt.Akshata Birawat, बनाम/ Asstt.Commissioner of Income 105/106, 305/306- B Block Vs. Tax -
Deepak Jyoti tower, Central Circle -14,
G D Ambedkar Marg, Old CGO Building,
Kalachowki, M K Road,
Mumbai-400033 Mumbai-400020
(अपीलाथ /Appellant) .. ( यथ / Respondent)
थायी ले ख ा सं . /जीआइआर सं . /PAN/GIR No. :AIYPB322E 6 ITA. No.986/M/2010 and other cases अपीलाथ ओर से / Appellant by S/Shri Rajiv Khandelwal, Nagin Parekh and Ms. Hital Panchal यथ क# ओर से/ Respondent by Shri Manjunatha Swamy सन ु वाई क# तार'ख / Date of Hearing : 14.1.2015 घोषणा क# तार'ख /Date of Pronouncement : 20.2.2015 आदे श / O R D E R Per Bench:
All these assessees have filed these appeals challenging the orders passed by ld CIT(A) in their respective hands for the assessment years mentioned in the cause title against their respective names. Since the issues urged in these appeals are identical in nature and further since all the assessees belong to same family, all these appeals were heard together and they are being disposed of by this common order, for the sake of convenience.
2. All these assessees are aggrieved by the decision of Ld CIT(A) in confirming the assessment of Sale proceeds of shares declared by each of them as Income from Other Sources by rejecting the claim of Long term Capital gains.
3. The facts relating to the cases are stated in brief. All these assessees belong to "Birawat" group and all of them are family members. The revenue carried out search and seizure operations are the residential premises of Birawat group u/s 132 of the Act. Consequent thereto, the present assessments were completed by the AO u/s 153A of the Act in the hands of the assessees cited above except in the cases of "Shweta K Birawat" and "Akshata Birawat", in whose hands the assessments were completed u/s 153C of the Act. It is pertinent to note that the department did not unearth any incriminating material during the course of search. All 7 ITA. No.986/M/2010 and other cases these assessees filed returns of income, wherein they, inter alia, declared income arising on sale of shares under the head "Capital Gains".
4. The AO noticed that the Investigation wing of the department have found that a person named Shri Narendra R Shah was using the names of two entities viz., M/s G.R Pandya Share Broking Ltd and M/s T.H. Vakil Shares & Securities Pvt Ltd, to issue bogus purchase bills relating to the shares of companies named "M/s Interlink Financial services Ltd" and "M/s Data Finance Ltd". The investigation wing also recorded a statement of Shri Narendra R Shah on 09-10-2006, wherein he confirmed the above said fact. He also stated that he had issued bogus purchase bills on the instructions of Shri Paras Chplot and Shri Shirish Shah, both were called 'Operators'.
5. The AO noticed that the assessees herein have also purchased shares of M/s Interlink financial services Ltd. They had received the shares in their respective Demat accounts from other Demat accounts, most of the times by transfer from Demat accounts belonging to M/s T.H. Vakil Shares & Securities Pvt Ltd and M/s Amizara Securities & Finance P. Ltd. All these assessees had claimed to have purchased the shares in physical form from M/s Amizara Securities & Finance P Ltd (a sub-broker). It was claimed that the physical share certificates were held by the above said broker on behalf of the assessees, since at that point of time these assessees did not have any Demat accounts. Subsequently, after opening the Demat accounts in the name of the assessees, the shares were transferred from the Demat account of the above said sub-broker.
6. In the sworn statement, Shri Narendra R Shah had stated that the Demat account belonging to M/s T.H. Vakil Shares & Securities P Ltd was opened on 22.12.2004 only. He also stated that he had not purchased any shares of M/s Interlink Financial Services Ltd on behalf of sub-broker M/s 8 ITA. No.986/M/2010 and other cases Amizara Securities and Finance P Ltd or on behalf of Birawat group prior to the above said date. He further stated that purchase bills were issued to the persons who wanted to generate artificial capital gains. He also confirmed that the bills were issued without executing any actual sale and purchase of the shares. Hence the AO took the view that the shares of Interlink Financial Services Ltd were not actually purchased by these assessees, but they have obtained only accommodation bills.
7. These assessees had also purchased and sold shares of "M/s Suryadeep Salt Refinery & Chemicals Works Ltd". The AO made enquiries with the above said company. The Director of the above said company, vide his letter dated 20.11.2008, submitted that the names of these assessees do not find place in their records and further his company has not received any request from them for transfer of shares to their names. The shares of "M/s Suryadeep Salt Refinery & Chemicals Works Ltd" were also seen purchased through the sub-broker, i.e., M/s Amizara Securities & Finance P Ltd.
8. Hence, the AO asked these assessees to produce anybody from M/s Amizara Securities & Finance P Ltd. But, according to the AO, these assessees did not produce the sub-broker.
9. With the facts mentioned above, the AO came to the following conclusions:-
"11. The picture that emerges is that M/s T.H. Vakil Shares & Securities Pvt ltd have confirmed that they never actually bought any shares on behalf of the assessees of this group and the so called purchase bills attributable to them are bogus, as these bills were mere accommodation bills, not backed by any real transactions. M/s Suryadeep Salt Refinery & Chemicals Works Ltd have confirmed that none of the assessee's in this group ever held any shares in the company M/s Suryadeep Salt Refinery & Chemicals Works Ltd. The persons from M/s Amizara Securities & Finance P Ltd were never produced. Thus, the purchases of aforesaid shares being bogus were confirmed. When purchases themselves are 9 ITA. No.986/M/2010 and other cases bogus, the logical inference is that the whole transaction involving supposed earning of long term capital gains/ short term capital gains was bogus and engineered. It is also logical to infer that the assessee would have paid certain remuneration or fee or commission or any such amount for obtaining these bogus gains. As per information in possession of the Department, a sum of 5% of the total proceeds would have been paid."
10. The AO also noticed that the shares of the above said two companies and also that of other companies were found credited to the Demat account of the assessees only few days prior to their respective sales. However, they had claimed to have purchased shares much earlier and thus claimed Long term Capital gains on their sales. These assessees produced all the relevant documents to prove the claim of purchases before the assessing officer. However, the AO disbelieved all those documents. These assessees also sought an opportunity to cross verify Shri Narendra R Shah, on whose statement the AO had placed much reliance. With regard to M/s Amizara Securities & Finance P Ltd (sub- broker), these assessees furnished last known address of the sub-broker as 170/172, Kalba devi, 3rd floor, Kalbadevi Road, Mumbai-400 002 and also stated that the sub-broker has vacated from the above said address. Accordingly, these assessees furnished the reason for not producing M/s Amizara Securities & Finance P Ltd (AFSL). It was also pointed out to the AO that the search did not reveal any incriminating documents and further none of the members have stated that these share transactions are bogus in their respective statements taken from each of them separately. They further stated that they do not have any connection with M/s T.H. Vakil Shares & Securities Pvt Ltd or with Shri Narendra R Shah. Accordingly they pleaded before the AO that the Capital gains declared by them are genuine transactions.
10 ITA. No.986/M/2010 and other cases11. The AO was not convinced with the submissions made by these assessees. Accordingly, the Assessing officer came to the following conclusions:-
"I. The Transactions related to shares are bogus and to convert the black money in the books by showing the capital gains.
II. Neither these shares were held by the assessee nor on their behalf by M/s ASFL and M/s T.H. Vakil Shares & Securities Pvt Ltd as claimed.
III. Most importantly, the accounts of M/s ASFL and M/s T.H. Vakil Shares & Securities Pvt Ltd from where these shares were transferred into demat account of the assessees of Birawat group were opened on 06.03.2004 and 22.12.2004 as confirmed by the Central Depository Services India Ltd, vide their letter dated 26.11.2008. The assessees of Birawat Group has claimed that broker M/s AFSL or M/s T.H. Vakil has purchased shares for them and kept the same in their own demat account upon purchase. This has been proved incorrect.
IV. Regarding purchase of shares of Interlink financial Services Ltd in physical form as claimed by assessees of Birawat Group nothing could be produced to substantiate their claim that these were purchased and kept by them for more than twelve months. Nothing has been brought on record to prove the genuineness of share transactions of this company (Interlink financial services Ltd). Further they also failed to produce any person from M/s AFSL. Therefore the entire sale proceeds claimed to have been received on sale of shares of IFSL shall be taxed as income from other sources in the hands of assessees of Birawat Group in the respective assessment years."
Accordingly, the AO assessed the entire amount of sale proceeds of shares as income of the assessees under the head Income from other sources. It is pertinent to note that these assessees have also purchased and sold shares of other reputed companies like Aravind Mills, Mahindra & Mahindra, Oriental Bank, Telco etc. However, the AO assessed the sale proceeds relating to them also as income from other sources, since he 11 ITA. No.986/M/2010 and other cases held that the sub-broker AFSL had issued bogus bills. Further, the AO recognized the date of purchase of shares as the date on which they were credited in the Demat accounts and accordingly expressed the view that these assessees have not "held or possessed" shares for a period exceeding one year in order to claim the gains as Long term Capital gains.
12 The AO further held that these assessees would have spent 5% of the gross amount for obtaining accommodation bills for purchase and sale of shares. Accordingly he assessed 5% of the gross sale receipts as unexplained money in possession of the assessee.
13. These assessees carried the matters by filing appeals before Ld CIT(A). The first appellate authority discussed in detail on the modus operandi adopted for engineering bogus capital gains using penny stocks and also discussed about the order passed by SEBI. Accordingly he upheld the decision of the AO in assessing the gross receipts as income of these assessees under the head Income from other sources. He also upheld the assessment of 5% of gross receipts also as income of these assessees. Aggrieved, all these assessees have filed these appeals before us. It is pertinent to note that these assessees had also raised certain legal grounds before Ld CIT(A), but they did not find favour with him.
14. We shall first consider the arguments advanced by both the parties on merits. The contentions of Ld A.R were summarized as under:-
(a) The revenue did not unearth any incriminating material during the course of search which indicated that the Long term capital gains disclosed by these assessees are bogus in nature.
(b) All the assessees were examined independently and none of them disclosed anything about the bogus nature of transactions.
(c) The assessing officer has primarily relied upon the statement taken from Shri Narendra R Sha on 09-10-2006, i.e., much prior to the date of search that took place on 10-01-2007. The assessees 12 ITA. No.986/M/2010 and other cases have requested for an opportunity to cross examine Shri Narendra R Shah. However no such opportunity was given to these assessees by the assessing officer and hence he is not entitled to rely upon the statement given by Shri Narendra R Shah.
(d) These assessees, in fact, did not indulge in any type of transaction with Shri Narendra R Shah. These assessees have purchased shares from the sub-broker named M/s AFSL and they have sold the shares through other brokers named M/s Yogesh /M/s Niche. Both the brokers are not connected to each other. Further M/s AFSL was not connected to Shri Narendra R Shah.
(e) Even in the statement taken from Narendra R shah, he has only stated that he did not carry any transaction with Birawat group.
He has only stated that he had given bogus bills for trading in shares of Interlink financial services Ltd and Database Finance Ltd. Further, he has stated that the bills were issued through M/s G.R. Pandia and M/s T.H. Vakil. However, these assessees have purchased shares of Interlink Financial Services Ltd only from M/s AFSL and not from Shri Narendra R Shah or his group of companies. Hence his statement could not be relied upon to take adverse inference against the assessees.
(f) Shri Narendra R Shah had stated that he has given bogus bills on the instructions of two operators named Shri Paras Chalot and Shri Shirish Shah. However, the AO did not make any type of enquiry with the above said two operators to find out the veracity of Shri Narendra R Shah, i.e., the AO has accepted the same on the face of it.
(g) Shri Narendra R Shah did not state anything about the collusion between him/group with M/s AFSL, through whom the assessee had purchased the shares. The assessee had purchased the shares through M/s AFSL only and further there was no relationship between the assessee and Shri Narendra R Shah/his group. This is further vindicated by the fact that Shri Narendra R Shah has himself stated that he has not purchased shares on behalf of M/s AFSL or Birawat Group.
(h) Hence, the AO is trying to link the assessees with the statement of Shri Narendra R Shah only on surmises and conjectures.
(i) Another allegation of the AO was that the assessees did not produce M/s AFSL before him. However, these assessees have 13 ITA. No.986/M/2010 and other cases given the last known address of M/s AFSL and have also further stated that it has vacated the said place. Since the assessees have given proper reasons for not producing M/s AFSL, the AO was not justified in drawing adverse inference in this matter. The Ld A.R also placed reliance on the following case law to contend that the transactions cannot be considered to be non-genuine, merely because the brokers do not present themselves before the AO.
Emerald Commercial Ltd 250 ITR 539 (Cal)
Currency Investment Co. Ltd 241 ITR 494 (Cal)
Carbo Industrial Holdings Ltd 244 ITR 422 (Cal)
Janki Textiles & Industries Ltd 264 ITR 579 (Gau)
(j) With regard to the purchase of Shares of M/s Suryadeep Salt Refinery & Chemicals Works Ltd, the Ld A.R submitted that they were purchased through the Sub-broker and further they have been transferred to the Demat account of the assessees by the Sub- broker. Later all these shares have been sold through the Demat account only through some other broker. He further submitted that the assessees, as investors, are not concerned about the Demat account, from where these shares were received and in fact none of the investors in the Country are aware about the same. He further submitted that the shares could not be sold unless they have been purchased. Accordingly he submitted that the AO should not have rejected the claim of purchase of shares of M/s Suryadeep Salt Refinery & Chemicals Works Ltd merely on the basis of a letter given by a Director of the said company, when other materials furnished by the assessee clearly show the genuineness of the transactions. In any case, the AO has not given an opportunity to cross examine the director of M/s Suryadeep Salt Refinery & Chemicals Works Ltd.
(k) The Ld A.R submitted that in the following cases, it has been held that the purchases are to be considered to be genuine, if sales are found to be genuine.
Balaji Textile Industries P Ltd 49 ITD 177 (Mum)
Nangalia fabrics P Ltd 220 Taxmann 17 (Guj)
Surana Traders 92 ITD 212 (Mum)
(l) The assessing officer has not proved that the purchases made from M/s AFSL and the shares received from M/s AFSL were bogus.
14 ITA. No.986/M/2010 and other cases(m) The assessees have received part of shares from the Demat account of M/s T.H. Vakil Shares & Securities P Ltd, a concern belonging to Shri Narendra R Shah. He submitted that the investors are concerned with receipt of shares only in their demat account and they are not concerned about the demat account from where they were received. Accordingly he submitted that these assessees were not aware about the fact that some of the shares were received from M/s T.H. Vakil Shares & Securities P Ltd.
(n) With regard to the observations made by the AO about the holding period, the Ld A.R submitted that the AO was not correct in law in stating that the period of holding should be taken from the date of Demat credit. The Ld A.R submitted that the period of holding should be considered from the date of broker contract note as explained by Instruction No.704 dated 26.4.1995 issued by the CBDT and also by the Tribunal in the case of Max Telecom Ventures Ltd (114 ITD 46)(Asr).
(o) These assessees have sold shares through M/s Yogesh Securities, who does not have any type of relationship either with Shri Narehdra R Shah or M/s AFSL. The Ld A.R submitted that there will be complete relationship between the parties in the cases of tainted transactions, as they are normally entered with collusion between them. M/s Yogesh Securities was a registered broker with BSE.
(p) The AO has considered the purchase and sale of shares of Blue chip companies also as non-genuine without assigning any reason.
(q) The AO has accepted the speculation profits declared by some of the assessees as genuine. Hence, he was not justified in not accepting the other transactions in shares.
(r) The AO has not brought on record any material to show that the purchase and sale transactions were not at arms length prices. Further, no evidence were found or brought on record to show that these assessees were having unaccounted cash and they have converted the same into accounted money through the impugned transactions.
15 ITA. No.986/M/2010 and other cases(s) The AO has not rejected the books of account. In this regard, the Ld A.R placed reliance on the decisions of Hon'ble Supreme Court reported in 66 ITR 462; 37 ITR 151 and 26 ITR 775.
(t) The Ld A.R submitted that the apparent should be considered to be real until it is shown otherwise (214 ITR 801)(SC); (87 ITR
349)(SC). He further submitted that the totality of facts should be considered while completing the assessment (176 ITR 535)(SC).
15. The Ld D.R furnished his contentions by way of written submissions. For the sake of convenience, we have extracted the relevant points below:-
(a) The assessees have claimed to have purchased shares from M/s ASFL. However, the shares were transferred to the Demat account of the assessees from the Demat accounts of AFSL and T.H. Vakil Shares & Securities P Ltd.
(b) Shri Narendra R Shah has admitted to have issued bogus purchase bills of shares two companies (Interlink Financial Services ltd and Database Finance Ltd), by using the name of two entities, viz., M/s T.H. Vakil Shares & Securities and M/s G.R Pandya Share Broking Ltd.
(c) The admission of Shri Narendra R Shah proves that the assessees have not, in reality, purchased the shares of M/s Interlink Financial Services Ltd. He has further admitted that he has not purchased shares on behalf of Birawat Group.
(d) The assessees have admitted in the reply to Q No.5 that they have not entered the details of purchases in the books.
(e) The enquiries made with M/s Suryadev Salt Refinery & Chemicals works Ltd clearly show that the assessees have also, in reality, not purchased those shares also.
(f) M/s AFSL was not produced before the AO and hence the claim of purchase of shares through M/s AFSL was also proved to be bogus.
(g) The claim of these assessees that they have held the shares for more than 12 months was proved to be incorrect. The claim that 16 ITA. No.986/M/2010 and other cases the brokers held the shares on behalf of these assessees was also materially incorrect.
(h) The assessees have admitted that the sale proceeds can be taken as their income from other sources.
(i) The sale proceeds of shares declared by the assessee could be assessed as income u/s 68 of the Act as per the following decisions.
Aravind Karia (ITA No. 7024/M/2010 dated 30.1.2013) Major Metals ltd Vs. Union of India (359 ITR 450)(Bom) Luminant Investment Pvt ltd (42 Taxmann 14)
(m) The assessees did not have Demat accounts on the date of purchase.
(n) The company, M/s Interlink Financial Services Ltd has split the shares on 8.7.2005 and also declared dividend on 24.9.2005. The assessees have not explained whether and when the shares were sent the shares for splitting up. They have also not declared dividends.
(o) At the time of dematerialization, the assessees have to produce Purchase bills, payment details, service tax details and broker notes. However these details were not furnished by the assessees.
16. In the rejoinder, the Ld A.R submitted that these assessees have accounted for the purchase of shares in the books of account and they have never admitted that the gains arising on sale of shares may be assessed as income from other sources. He further submitted that the entire assessments have been framed on the basis of statement given by Shri Narendra R Shah, which was not confronted with the assessees. He further submitted that the statement was taken from Shri Narendra R Shah prior to the date of search.
17. We have heard the rival contentions and perused the record. The admitted facts are that the search operations did not reveal any incriminating material, meaning thereby, no evidence was found during the course of search in order to doubt about the veracity of the Long term 17 ITA. No.986/M/2010 and other cases Capital gains declared by the assessees. We notice that the assessing officer has fully relied upon the information given by the Investigation wing of the department with regard to the alleged penny stocks and their price rigging. We have earlier noticed that the investigation wing has furnished the Statement recorded from a person named Shri Narendra R Shah to the AO and in that statement, he had admitted to have issued bogus purchase bills for purchase of shares in the companies of M/s Interlink Financial Services Ltd and M/s Data Finance Ltd. The assessees herein had also purchased shares of M/s Interlink Financial Services Ltd through a sub-broker named M/s AFSL. Since the assessees have purchased shares of M/s Interlink Financial Services Ltd, the Assessing officer as well as Ld CIT(A) have taken the view the assessees have also purchased accommodation bills and accordingly declared bogus Long term Capital gains. Accordingly, the tax authorities have taken the view that the assessees have introduced their unaccounted money in the form of Long Term Capital gains. Accordingly they have rejected the claim of Long term Capital gains and assessed the gross receipts as Income from other sources. It is pertinent to note that the tax authorities have also assessed the sale proceeds arising on sale of other companies also as Income from other sources, even though the shares of M/s Interlink Financial Services Ltd alone was found to fall in the category of Penny stocks, whose prices were alleged to have been rigged.
18. Now the issue that requires examination is whether the evidences / materials available in the case of these assessees were sufficient enough to entertain the view so taken by the tax authorities, i.e., whether these assessees can be considered to have taken the accommodation bills with the intention of generating bogus Long term Capital gains.
18 ITA. No.986/M/2010 and other cases19. We have already noticed that the assessing officer has fully placed reliance on the Statement given by Shri Narendra R Shah. Admittedly this statement was taken by the Investigation wing on 09-10-2006, i.e., much prior to the date of search conducted on 10-01-2007 in the hands of these assessees. Though Shri Narendra R Shah has admitted to have given bogus bills in respect of shares of M/s Interlink Financial Services Ltd, yet he has categorically stated that he has not purchased or sold shares of the above said companies prior to 22.12.2004 (date of opening of demat account) on behalf of M/s ASFL (sub-broker) or the Birawat Group. He has further stated that he has not purchased or sold shares of M/s Interlink Financial Services Ltd prior to 22.12.2004. However, the claim of the assessees is that they have purchased the shares of M/s Interlink Financial Services Ltd were purchased much prior to 22.12.2004. Thus, even according to the statement of Shri Narendra R Shah, he has not purchased the Shares of M/s Interlink Financial Services Ltd prior to 22.12.2004. It is nobody's case that the assessees have purchased the shares of the above said company after 22.12.2004. Thus, we are of the view that, from the statement given by Shri Narendra R Shah, it may not be possible to presume that the shares purchased by the assessees are bogus purchases, more particularly in view of the fact that the department has not established that there was link between Shri Narendra R Shah and M/s ASFL.
20. We notice that the assessees herein have asked for cross examination of Shri Narendra R Shah, since the AO has totally relied upon his statement. However, such an opportunity for cross examination was not given to the assessees. Further Shri Narendra R Shah has stated that he has issued accommodation bills at the instance of two operators viz., Shri Paras Chalot and Shri Shirish Shah. However, there is no information on record to the effect that these two operators were examined by the 19 ITA. No.986/M/2010 and other cases department. Hence, we find merit in the contentions of the ld A.R that the statement given by Shri Narendra R Shah should not have been relied upon on the face of it, without corroborating the same with other independent evidences.
21. The claim of the assessees is that they have purchased the shares from M/s ASFL. In this regard, the case of the assessees is that they have furnished all the relevant details to support the claim of purchase of shares. The AO has rejected the claim of purchases, only for the reason that the assessees have failed to produce anybody from M/s ASFL. However, we notice that the assessees have tried to locate the above said broker, but could not find it, since the broker had vacated its office. This fact, we notice, was brought to the notice of the assessing officer. However, we notice that the AO did not take any further steps to trace M/s ASFL. Under these set of facts, in our view, the AO should not have drawn adverse inference against the assessees, when they have expressed their inability for the reasons stated above.
22. The AO has taken the view that the assessees have opened the Demat account only subsequently and the shares have come to their Demat account from other Demat accounts only few days prior to the date of sale. Accordingly, the AO has expressed the view that the period of holding should be computed from the date on which the shares have come to the credit of Demat accounts. However, the submissions of the assessees in this regard are that they had purchased the shares in physical form and the said shares were held by the sub-broker on their behalf. After the assessees have opened the Demat accounts, the shares were transferred to their account by the sub-broker. The Assessees have cited the CBDT circular to submit that the period of holding of shares should be computed on the basis of broker's note for purchase of shares. Another observation made by the AO was that the shares have come to the Demat 20 ITA. No.986/M/2010 and other cases account of the assessees from M/s T.H. Vakil Shares & securities P Ltd., a concern belonging to Shri Narendra R Shah. In this regard, the assessees have submitted that they, as investors, are not concerned about the Demat accounts from which the shares have been received. Similarly in the case of shares of M/s Suryadeep Salt Refinery and Chemicals Ltd also, these assessees have received shares through Demat account. Hence the procedure for name transfer of physical shares shall not apply to it. Hence the letter written by the director of that company may not have much relevance.
23. In this regard, we find force in the submissions made by the assessees. As per the CBDT circular, referred earlier, the date of purchase of shares should be recognized as the date on which the broker has issued the contract notes. Hence, we are unable to agree with the view taken by the AO that the date of purchase should be considered as the date on which the shares were credited to Demat account. The undisputed fact remains that the assessees have opened the Demat account only subsequent to the date of purchase of shares. Hence, in the absence of a Demat account, one could have purchased the shares in physical form only. Though the assessee has furnished the details of purchases of shares, we notice that the AO has rejected them without examining them. This approach of the assessing officer, in our view, was not appreciable at all. When the assessees are furnishing the necessary details available with them and if the AO feels that they are not reliable then he should have conducted further investigation and brought any other material on record to disprove the claims put forth by the assessees. However, the AO has taken adverse inferences against the assessees without causing further examination of the materials furnished by the assessees. Further, we are aware that there is no compulsion under any law that the shares should be held only in Demat account form only. As per the trade practice, in our 21 ITA. No.986/M/2010 and other cases knowledge, the broker is liable to deliver the shares which were purchased on behalf of the clients and in this connection only the broker contract notes are issued. We further notice that the submissions of the assessees that the shares were in the possession of the broker were also rejected without making further examination.
24. The Ld D.R, in his written submissions, has stated that the assessees have to produce purchase bills, payment details, service tax payment details, broker books of account at the time of dematerialization. The said submissions do not appear to be correct as per the prevailing practice. For dematerialization, to our knowledge, only the share certificates have to be furnished. However, in the instant case, the sub- broker has got the shares dematerialized the share certificates and then transferred them to the account of the assessees herein. We have already noticed that the assessing officer has not taken any steps or brought any material on record to show that the claim of purchase of shares in physical form from M/s ASFL was wrong. In the absence of such an exercise, in our view, it may not be proper on their part to suspect the receipt of shares in Demat account.
25. Another point, which is pertinent to note is that all these shares have been sold through another broker through BSE. Hence, there is merit in the contentions of the Ld A.R that, in the absence of purchase of shares, it would not be possible to sell the shares. The Ld A.R also submitted that, if it were bogus transactions, then both purchases and sales would have been routed through the same broker. Further, we notice that the AO has assessed the sale proceeds realized on sale of shares of reputed companies also as income from other sources. The said action of the assessing officer would only show that he has proceeded to assess the gross receipts realized on sale of shares as income from other sources only on presumptions, surmises and conjectures without bringing 22 ITA. No.986/M/2010 and other cases any credible evidence on record to refute the claim of the assessee. We have already noticed that the ld CIT(A) has upheld the assessment order on this issue, simply on the basis of SEBI report without ensuring that the assessees herein have also participated in the clandestine deals. Further the fact that the revenue, during the course of search operations, did not unearth any evidence about existence of unaccounted money or any document to disprove the claim of earning of Long Term Capital Gain would only go to prove that there was no evidence to suspect the claim of Long term Capital Gains declared by these assessees.
26. During the course of hearing, the Ld D.R submitted that the assessees have confessed about the non accounting of purchases and further submitted that they have also agreed for the addition of gross sale proceeds as income from other sources. The ld D.R also furnished a copy of sworn statement recorded from Shri Uttamchand Birawat u/s 131 of the Act on 23.4.2007. Apparently, the Ld D.R is referring to the answer given to Q. No.2 and Q. No.11. The relevant questions and answers are extracted below, for the sake of convenience:-
Q 2 You have stated several times that you shall submit the details of capital gains on account of transactions in shares. However, you have not yet submitted the said details such as Name of the scrip, date of purchase, name & address of the purchase broker, number of shares, Amount and similarly the details of sale etc. Please explain.
Ans.: As stated earlier, the necessary details called for are not readily available with us. We are trying to trace out these details and shall submit the same as soon as we are able to trace out the same.
.......
Q 11 On similar lines narrated in Question No. 10, the total LTCG claimed by you and your family members on account of transactions shown of "A" or "B" group stocks of BSE works out to Rs.3.08 crores, approx. As per facts mentioned above, the period of holding shown by you is bogus and accordingly the purchases shown by you are also not genuine. Hence the said LTCG is artificial and bogus. Please explain.23 ITA. No.986/M/2010 and other cases
Ans.: As stated in my statements dtd 25-1-07, 31-1-07 and 05-04- 07, I am trying to trace out the details of capital gains of Rs.10,22,64,376/- (which includes the above Rs.3.08 cr.) and shall submit the same. In case, I am unable to trace out and furnish the required details, I hereby undertake to declare the same as our income for the respective asst. years in the hands of respective assessees. Since I have voluntarily agreed to declare this income, if I fail to submit the details, I request the Department to grant immunity from penalty u/s 271(1)(c) of the I.T Act.
A careful perusal of the above said questions and answers would show that the view expressed by ld D.R does not appear to be correct.
27. In view of the foregoing discussions, we are of the considered view that there was no credible material with the department to disprove the claim of Long term Capital gains made by these assessees in their respective returns of income. Accordingly we set aside the orders of Ld CIT(A) passed in the respective hands of the assessees herein on this issue and direct the assessing officer to delete the assessment of gross sale receipts as income from other sources in all the years under consideration and accordingly direct the AO to accept the LTCG declared by these assessees in all the years under consideration.
28. Since we have upheld the disclosure of LTCG, the question of assessing 5% of the Gross sale receipts as unaccounted income of assessees does not arise. Accordingly, we set aside the orders of ld CIT(A) on this issue and direct the assessing officer to delete this addition in the hands of all the assessees in all the assessment years under consideration.
29. The assessees have also urged following legal grounds before us:-
(I) In the case of following assessees, no warrant executed in their name. Hence the assessments completed u/s 153A were not valid.24 ITA. No.986/M/2010 and other cases
(i) Uttamraj A Birawat (HUF) - ITA No.7399/M/10 & 7411/M/10 relating to assessment years 2005-06 and 2006-07 respectively.
(ii) Kiranraj U Birawat (HUF) - ITA No.6946/M/10 & 6947/M/10 relating to assessment years 2005-06 and 2006-07 respectively.
(iii) Vasantraj A Birawat (HUF) - ITA No.7400/M/10 & 7401/M/10 relating to assessment years 2005-06 and 2006-07 respectively.
(II) In the following cases, no incriminating material was found and further the assessments of following assessment years do not abate, i.e., these years fall in the category of completed assessments, since the date for issuing the notice u/s 143(2) has expired as on the date of search. Hence no addition could be made in the absence of any incriminating material as per the decision of jurisdictional Bombay High Court's decision rendered in the case of Murali Agro Products Ltd (36 taxmann.com 523) and the Special Bench decision rendered in the case of All Cargo Global Logistics Ltd (18 ITR (T)
105)(Mum)(SB).
(a) Assessment year 2004-05 in the case of Uttamchand A Birawat, Vasantraj A Birawat and Kiranraj A Birawat in ITA No.983/M/10, 989/M/10 and 986/M/10 respectively.
Following cases in AY 2005-06. ITA No. Date of filing return
(a) Vasantraj A Birawat ITA No.990/M/2010 31.10.2005
(b) Kiranraj U Birawat ITA No.987/M/2010 31.10.2005
(c) Ankit Birawat ITA No.978/M/2010 01.12.2005
(d) Chanchalaben Birawat- ITA No.972/M/2010 01.12.2005
(e) Kalaben Birawat - ITA No.974/M/2010 01.12.2005
(f) Avani Birawat - ITA No.968/M/2010 08.12.2005
(g) Veenaben Birawat - ITA No.980/M/2010 01.12.2005
(h) Uttamchand A Birawat(HUF)-ITA.No.7399/M/2010 08.12.2005
(i) Kiranraj A Birawat(HUF)- ITA No.6946/M/2010 31.10.2005 25 ITA. No.986/M/2010 and other cases
(j) Vasantraj A Birawat(HUF) -ITA No.7400/M/2010 08.12.2005
(k) Shweta K Birawat - ITA No.976/M/2010 14.12.2005 (III) In the case of Shweta K Birawat (ITA 976/M/10 relating to AY 2005 06) and Akshata Birawat (ITA No.977/M/10 relating to AY 2006-07), the assessments were completed u/s 153C of the Act.
However, the assessing officer of searched person did not record satisfaction as required under the provisions of sec. 153C.
30. We do not find it necessary to adjudicate the above said legal grounds, since we have decided the issue relating to the additions in favour of the assessee.
31. In the result, all the appeals filed by all the assessees are allowed.
The above order was pronounced in the open court on 20th Feb , 2015.
घोषणा खल ु े यायालय म, -दनांकः 20th Feb , 2015 को क# गई ।
sd sd (जो ग दर संह/ JOGINDER SINGH) ( बी.आर.बा करन / B.R. BASKARAN) या यक सद य / JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER मंब ु ई Mumbai: 20th Feb,2015. व. न.स./ SRL , Sr. PS
आदे श क! " त$ल%प अ&े%षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आयु0त(अपील) / The CIT(A)- concerned
4. आयकर आयु0त / CIT concerned
5. 1वभागीय त न ध, आयकर अपील'य अ धकरण, मुंबई / DR, ITAT, Mumbai concerned
6. गाड5 फाईल / Guard file.
आदे शानस ु ार/ BY ORDER, true copy सहायक पंजीकार (Asstt. Registrar) आयकर अपील'य अ धकरण, मुंबई /ITAT, Mumbai