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TMI Blog2015 (12) TMI 1119X X X X Extracts X X X X X X X X Extracts X X X X ..... e two parties except change in figure of long term capital gains, they are taken up together and disposed off by this common order for the sake of convenience. 2.1. The brief facts of this issue is that the assessee claimed long term capital gains from transactions in shares of M/s Continental Fiscal Management Limited and M/s Swastik Securities & Finance Ltd. There was a search and seizure operation u/s 132 of the Act conducted in the premises of one Shri Narendra Kumar Shyamsukha on 24.10.2006 wherein inter alia various incriminating materials were found and seized. One such seized document vide page numbers 7 to 10 of the loose paper bunch marked as NKS /3 seized from his premises revealed certain notings regarding certain persons including the assessee. In the course of search, the statement of Shri Narendra Kumar Shyamsukha was recorded and he was asked to explain the notings made on the seized documents under reference. In response, it was stated by him that the seized papers contain the details of bogus long term capital gain taken by the persons appearing in the seized papers. It was further stated that these persons had laundered cash aggregating to Rs. 1,49,50,000/- and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s by making the following observations:- "The documents on which the assesee have relied upon only speaks about the process of transacting in listed shares and does not prove the genuineness of the transaction itself. The furnishing of particulars is not enough and mere payment by account payee cheque is neither sacrosanct nor can make a non genuine transaction a genuine one. Relied on Precision Finance vs CIT reported in 208 ITR 462 (Cal). I, therefore, infer that the activities of all members of the family including the assessee were a product of a design to receive the bogus entry of the L.T.C.G.. I, therefore, add the entire alleged L.T.C.G. as unexplained cash credit u/s 68 of the IT Act, 1961." 2.2. On first appeal, the Learned CITA dismissed the ground raised by the assessee and confirmed the addition made by the Learned AO. Aggrieved, the assessee is in appeal before us . The grounds raised in the case of Chandralekha Baid alone are reproduced herein below as the same grounds are raised for other assesses also except with change in figures :- 2(a) On the facts and in the circumstances of the case, the learned CIT(A) erred in holding that the appellant had paid cash mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d CIT(A) erred in invoking the provisions of Section 292C of the Income-tax Act, 1961, in raising presumption in respect of recordings in documents seized from the premises of a third party viz. Shri Narendra Shyamsukha, in the unrelated case of the appellant. 2(g) On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the addition of rs.14,02,678/- made u/s. 68 of the Act, on the basis of nil/insufficient materials and evidences." 2.3. The Learned AR argued that the Learned CIT(A) erred in holding that the assessee had paid cash money to one Shri Narendra Kumar Shyamsukha to arrange for bogus long term capital gains in shares of M/s Continental Fiscal Management Limited and one of M/s Swastik Securities &Finance Ltd , simply on the basis of certain papers found during a search in the premises of th said Shri Narendra Kumar Shyamsukha, inspite of the complete denial by the assessee and also the concerned stock broker in this regard and also presence of all the relevant papers and documents establishing the genuineness of the transaction in shares concerned. The assessees also submitted in support of their transactions with the aforementioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Kumar and that Suresh Kumar was an intermediary of beneficiaries on whose behalf bogus capital gain was booked. However, on the seized documents there is no mention of Suresh Kumar and further Shri Narendra Kumar Shyamsukha also did not provide the address of Suresh Kumar and hence there is no credibility that could be attached to the statement given by Shri Narendra Kumar Shyamsukha. He further argued that even during the course of cross examination proceedings, Shri Narendra Kumar Shyamsukha could not prove that the assesses had paid any cash to him or any other person. 2.4. In response to this, the Learned DR vehemently supported the orders of the lower authorities. 2.5. We have heard the rival submissions and perused the materials available on record. We find lot of force in the arguments of the Learned AR that just because Sri Narendra Kumar Shyamsukha had disclosed the commission income on the transactions of shares in his returns, the assesses are in no manner concerned with such disclosure and no adverse inference could be drawn against the assesses for such disclosure of commission income by a third party. 2.5.1 We find that the assesses have categorically denied maki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n u/s 292C of the Act would have to be applied only in the hands of Shri Narendra Kumar Shyamsukha in the facts and circumstances of this case . Strangely we find that no addition has been made in the hands of Shri Narendra Kumar Shyamsukha with regard to the subject mentioned capital gains as unexplained cash credit and the assessments have been completed in his hands by just accepting the commission income offered by him on all these transactions. The Presumption contemplated u/s 292C of the Act is not available against the third parties (ie the assesses herein). We place reliance on the decision of the coordinate bench of this tribunal in the case of Niranjan Kumar Agarwal vs ACIT in ITA No. 558 / Kol /1998 wherein it was held that : "the books and documents on which the department relied upon solely were not found from the premises of the assessee. No involvement of the assessee with such books has been established in any way like the assessee himself writing the books etc. therefore, there would be no onus on the part of the assessee to disprove the genuineness of recitals in the aforesaid seized books. Burden of proving lies fully with the department to show beyond doubt th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. These shares were sold during the Asst Year 2005- 06 through a registered broker with Calcutta Stock Exchange who had given proper contract notes evidencing the sale of shares and made payment of sale proceeds to the assesses by account payee cheques. We also find that the revenue had not brought any evidence on record that the documents comprising of purchase bills, contract notes, delivery challans and demat account were found to be false or fabricated. We hold that the transactions cannot be treated as bogus merely on the basis of the statement of Shri Narendra Kumar Shyamsukha, unless some independent enquiry has been conducted and a finding has been drawn by the Stock Exchange that these transactions are bogus. We find that this is a case wherein the assesses had carried out all their transactions through a recognized medium i.e through a registered share broker and Calcutta Stock Exchange, wherein the price of shares are determined by the market forces and assesses have bought the shaers when the price was low through their Demat accounts and duly accounted for it in their respective books and when they found a hike in the price of these shares, they sold them to make a ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whom the sale proceeds of shares were received by the assesses and hence the resultant long term capital gains thereon cannot be doubted with. Hence there is no scope for making any addition u/s 68 of the Act in the facts and circumstances of the case. 2.5.9. This issue is squarely covered by the coordinate bench decision of this tribunal in the case of Ashok Kumar Gupta and Mrs Amita Gupta vs DCIT in ITA Nos. 500-502 / Kol / 2013 dated 2.6.2015. The relevant operative portion of the said order is reproduced herein below:- "6. I have heard the rival contentions and carefully gone through orders of the Tax Authorities Below. I noted the fact in each of the cases, the shares which has been sold by the assessee were brought during the financial year 2002-03 and were shown in the balance sheet as on 31-03-2003 and 31-03-2004. The shares were sold only during the impugned assessment year. The shares were purchased by making the payment through account payee cheque. Similarly, the shares were sold by receiving of the account payee cheque through the broker Ahilya Commercial Pvt. Ltd. It is not the case that the shares were brought or sold through cash. The statement of Broker CMFL was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom 1.4.1962, the computation of disallowance is provided in Rule 8D of the IT Rules. Rule 8D of the Rules came into effect from 24.3.2008. We find that the Hon'ble Bombay High Court in the case of Godrej & Boyce Manufacturing case reported in 328 ITR 81 (Bom) had held that provisions of Rule 8D could be made applicable only from Asst Year 2008-09. The assessment year under appeal for all the assesses before us is Asst Year 2005-06 and hence the Learned AO erred in invoking Rule 8D of the Rules for making disallowance u/s 14A of the Act. We also find that there is absolutely no discussion in the entire assessment order for all the assesses regarding the following facts :- a) Whether there is any receipt of exempt income which has been claimed by the assesses? b) Whether any expenditure was incurred by the assessee for the purpose of earning exempt income? In the absence of these factual findings, the Learned AO cannot straight away resort to make disallowance u/s 14A of the Act and hence the addition made on this account for all the assesses are deleted. Accordingly, the grounds raised by all the assesses in this regard are allowed. 4. In the result, the appeals of the resp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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