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TMI Blog2010 (9) TMI 1190X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Nos.20, 23 21/Agr/2010. It was pointed out that in all these Cross Objections there are delay between 44 to 50 days as the notice/memorandum of appeal filed by the Department was received by the servant of the assessee as the family members have gone out of Agra. The servant of the assessee is illiterate and was not aware of the gravity of the notice and forgot to give the notice to the assessee. The notices were given to the assessee only on 20.03.2010 and the assessees immediately approached their Counsel and filed Cross Objection in each case. It was pointed out that the delay was unintentional and may be condoned. The ld. D.R., on the other hand, vehemently contended that there is no reasonable cause on the part of the assessees to condone the delay. 3. After carefully considering the rival submissions and going through the application filed by the assessees for condonation of delay, we condone the delay in each of the case as we are of the view that the respective assessee was prevented by sufficient cause to file the Cross Objection in each of the case within time. 4. The ld. A.R., at the outset, pointed out that the facts involved in all these appeals are common. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. Similar addition has been made in the case of the other assessees except the change in figures. The CIT(A) has deleted the addition merely relying on the evidences submitted by the assessee. The onus is on the assessee to prove the genuineness of the share transactions. Since the assessee failed to prove the genuineness, therefore, the A.O. has rightly made the addition under section 68 of the Act. 6. The ld. A.R., on the other hand, referred to the Paper Book and the written submissions filed before the CIT(A) and pointed out that in this case the original assessment has been completed on 31.7.2001. The A.O. has given clear cut finding that the assessee has shown the Long Term Capital Gain (LTCG) and the interest income from other sources. The profit earned on sales of shares has duly been shown by the assessee in his income tax return and all the evidences relating to the purchases and sales of the shares were produced. There were LTCG on the sales of shares to the extent of ₹ 49,47,778/-. The A.O. had duly considered the evidences filed by the assessee. The LTCG on the sales of shares were duly shown in the income tax return, copy of which is available at page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or material on record that the transactions entered into was a bogus transaction. 9. We have carefully considered the rival submissions and perused the material on record along with the order of the Tax Authorities below. We noted that in each of the case the original assessment has been completed by the A.O. vide the orders detailed as under :- Jagjeet Kaur 31.07.2001 Ranjeeta Kaur 27.07.2001 Surjeet Singh HUF (A.Y. 1999-2000) 30.07.2001 Surjeet Singh HUF (A.Y. 2000-01) 03.12.2001 Gurinder Kaur 03.12.2001 10. In each of the case, the proceedings under section 147 of the Act was initiated by the A.O. by issue of notice dated 30.03.2006. By initiating the proceedings, the following reasons were recorded in the case of Smt. Jagjeet Kaur :- During the year the assessee has shown/worked out capital gain on sale of shares as under :- Name of the assessee Name of Share Co Date of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation and thus it was requested that the proceedings be dropped. It was also pointed out by subsequent letter that the proceedings reopened on 31.03.2006 stands barred by limitation. We noted that the original assessment in the case of Smt. Jagjeet Kaur was completed after accepting the Long Term Capital Gain (LTCG) on the sale of shares by observing as under :- 12. Now the question arise before us whether the initiation of proceedings under section 147 are valid or not. Whether the reasons recorded are bonafide or not on the facts of the case. Section 147 lays down as under :- 147. If the AO has reason to believe that any income chargeable to tax has escaped assessment for any A.Y., he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the a.y. concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year). Provided that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aped assessment. The words reason to believe cannot mean that the AO should have finally ascertained the facts by legal evidence. It only means that the AO forms a belief from the examination he makes and information that he receives. If he discovers or finds or satisfies prima-facie himself that the taxable income has escaped assessment, it would amount to saying that he has reason to believe that such income had escaped assessment. The justification for his belief is not to be judged from the standards of proof required for coming to a final decision. His formation of the belief is not a judicial decision, but an administrative decision. The decision to initiate the proceedings is not to be preceded by any judicial or quasi-judicial enquiry. Reason to believe has been the matter of judicial scrutiny by the apex court in several cases. In the case of Calcutta Discount Co Ltd v. ITO 41 ITR 191 (SC), it was observed that it is the duty of the assessee to disclose all the primary facts which have a bearing on the liability of income earned by the assessee being subjected to tax. It is for the AO to draw inferences from the facts and apply the law determining the liability of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld, were duly filed by the assessee and were examined by the A.O. while framing the original assessment. Therefore, it cannot be said that all these information were not available with the A.O. at the time of framing of the assessment, rather the assessee has submitted all these information and the A.O. thereupon came to the conclusion that the transaction entered into by the assessee was genuine one. 15. Now the question arise what new information is available with the A.O. on the basis of which he reopened the assessment. The assessment has been reopened as appeared from the reasons that the A.O. has received the information from the Investigation Wing who made the detailed enquiry and came to the conclusion in respect of the LTCG on sale of shares in mass cases that Yadav Co. and Navrang Capital Management Limited have provided bogus accommodation entries to the beneficiaries in the garb of sale of shares of different companies and accordingly he was of the view that the assessee has also taken the bogus entries and LTCG shown by the assessee on sale of shares through these brokers was not genuine. In other cases also such entries were treated as bogus accommodation entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2003 received in my office on 25th March, 2003 that one of my assessees M/s SFIL Stock Broking Limited had made bogus claim of long term capital gains shown as earned on account of sale/purchase of shares taken through bank account No.CA 3097, Corporation Bank, Karol Bagh, New Delhi in the name of R.K. Aggarwal Co. by obtaining entries for ₹ 6,00,000, ₹ 7,00,000 and ₹ 7,70,000 on 28th Feb., 1998, 28th February, 1998 and 1st March, 1998 respectively. He has directed the A.O. to get notices issued under section 148. Subsequently, I have been directed by the Addl. CIT-R8, New Delhi vide his letter No.Addl. CIT R- 8/2002-03/572 dt. 26th Aug., 2003 to initiate proceedings under s.148 in respect of cases pertaining to this ward. Thus, I have sufficient information in my possession to issue notice under s.148 in the case of M/s SFIL Stock Broking Ltd. on the basis of reasons recorded as above. When the matter went before the Hon ble High Court, the Hon ble High Court held, on the basis of the reasons recorded by the A.O., that the first sentence of the so-called reasons recorded by the A.O. is mere information received from the Dy. Director of IT (Inv.). The second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot justified, and on a reference, the High Court held that the reopening of the assessment u/s 147(a) was not valid. On appeal to the Supreme Court, the Hon ble Supreme Court held, affirming the decision of the High Court, that since the assessee had furnished particulars pertaining to the sum of ₹ 54,485, as not recoverable and had filed statements along with the original return disclosing full details of the interest suspense account, there was no failure on the part of the assessee to disclose fully and truly material facts necessary for the assessment and section 147(a) had no manner of application and was not attracted to the facts of the case. (iv) Idea Cellular vs. DCIT Others, 301 ITR 407 (Bom.) In this case, it was held that once all the material was placed before the A.O., in case he chooses not to deal with the several contentions raised by the petitioner in his final assessment, it could not be said that he had not applied his mind. Even the explanation of section 147 was not applicable. (v) CIT Another vs. Foramer France, 264 ITR 566 (SC) In this case, the Hon ble Supreme Court confirmed the order of the Allahabad High Court in the case of Foramer vs. CIT, 24 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the aforesaid cases and the provisions of section 147, the law on the reopening is very clear. Section 147 authorizes the A.O. to assess or reassess income chargeable to tax if he has reason to believe that the income for any A.Y. has escaped assessment. The reasons to believe must be bonafide. The A.O. must have relevant material on which a reasonable person could have formed the requisite belief. Whether the material conclusively proves escapement cannot be decided at the stage of formation of the belief. This section also does not authorize the A.O. to review the assessment at the grab of reopening. The A.O. in the reasons referred to the enquiries carried out in mass cases by the Investigation Wing but did not point out any enquiry or material in the case of the assessee. The detailed enquiry in mass cases has been made to be the basis of the reasons. The reasons nowhere speaks of the material collected during the enquiry relates to the assessee. The assessee has duly disclosed the capital gain earned by him which was duly enquired of by the A.O. while framing the assessment and the assessee has replied to all the queries raised by the A.O. The A.O. completed the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns to believe are bonafide prior to the expiry of four years from the end for the relevant A.Y. i.e. action under section 147 would have been taken by the A.O. by 31.03.2004. The A.O., in all these cases, has initiated the proceedings only on 30.03.2006 i.e. after expiry of four years. The action of the A.O., in our opinion, is barred by limitation. We, accordingly, on this basis also, annul the assessment in each of the cases as the facts involved in each of the case are similar. 19. Now coming to the merit of the case, we noted that the CIT(A) has given categorical finding that there is no material on record to controvert the assessee s claim of LTCG. The CIT(A) while examining the submission of the assessee along with the evidence filed by the assessee, written a letter to the Additional DIT (Inv.) being the letter no. A.No.CIT(A)- I/Agra/346/ITO-1(1)/Agra/07-08/1339 dated 27.11.2008. Similarly a letter no. A.No.CIT(A)- I/Agra/346/ITO-1(1)/Agra/2007-08/1318 dated 27.11.2008 was addressed to the A.O. as reproduced below:- With reference to the above pending appeal, you are requested to furnish to this office all materials, documents and other evidences received by you fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence to show that - - the companies whose shares were purchased by the appellant namely Status Management Limited., Crabtree Securities Ltd. are bogus/nonexistent, - their share prices were rigged by the appellant or others, - there were unexplained cash deposits in the accounts of/managed by the brokers which was so established by enquiries by the Wing or by the concerned Assessing Officers, - the appellant had not purchased and sold the shares, - the brokers M/s. Yadav Co. and M/s. Rakesh Nagar Co. have admitted to rigging share prices and providing share purchase and sale entries to various persons, including the appellant. In the assessment order originally passed u/s. 143(3) of the Act on 30.07.2001, long term capital gains on sale of shares was worked out at ₹ 41,35,662/- [Rs.49,47,778/- (-) ₹ 8,12,116/-] and charged to tax accordingly. No material/evidence is on record to controvert the same. 22. Although the ld. D.R. vehemently supported the order of the A.O., but could not adduce any evidence which may warrant our interference in the order of the CIT(A) so far it relates to the deletion of the addition made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on by observing as under :- (10) So in the given case also the department cannot treat the long term capital gains as assessee s income from other sources. There is no direct evidence. The statements of the brokers were recorded at the back of the assessee. An opportunity of cross-examination means and implies a clear opportunity after providing copies of such adverse statements to crossexamine. Otherwise also the statement of Shri Ashok Gupta is too vague to be of any evidentiary value. He has nowhere stated that the transaction of the assessee was bogus or not genuine. He has no corroborative evidence to show that the cash for drafts was received from the assessee. In the absence of any corroborative evidence his statement cannot be accepted as true on his mere ipse dixit. Shri Manoj Agarwal was not produced for cross-examination. From his statement no adverse inference can be drawn against the assessee. Shri Manoj Agarwal handed over a letter to D.D.I. (Inv) in which he stated that out of the total transactions, the transactions amounting to ₹ 100 crores were only book entries. So it follows as a necessary corollary that entire transactions were not ingenuine. He ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear. She sold these shares to J, a member of stock exchange. J in his letter has confirmed that transaction and the payment was made through cheque. The assessee has provided all the requisite evidences in support of all transactions. Simply because J could not produce his books of account or the quoted rate of shares in stock exchange being less or the transactions being not reported by J to the stock exchange, would not make a transaction bogus. The stock exchange has intimated the A.O. that they are only having information of the transactions between two members of the stock exchange and not otherwise. In the present case, the transaction was between a member and a non-member and therefore, such transactions were not reported in the stock exchange. Further, the credit in the bank account of J is by clearance. Therefore, the allegation of the A.O. that the amount was deposited in cash has no basis. The assessee has accepted having invested her funds on the advice of her father-in-law. The burden of proving a transaction is always on the person asserting it to be bogus and this burden has to be strictly discharged by adducing legal evidence of a character, which would either direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Assessing Officer could not have reopened the assessment. The assessee had made an investment in a company, evidence whereof was with the Assessing Officer. Therefore, the Assessing Officer could not have added the income, which was rightly deleted by the Commissioner (Appeals) as well as the Tribunal (16) Thus, the sum total of the foregoing discussions go to, cumulatively, establish that the assessee has been successful in proving the long term capital gain earned by him in this case. He has also established that he is exempt from tax qua long term capital gains as has been claimed. 11. In my opinion, this case is equally applicable in the case of the assessee. In the case of the assessee, purchase of the shares has duly been proved and there is no dispute on the purchase of the shares being made by the assessee. The shares were purchased in earlier year. The shares were transferred in the name of the assessee as has been confirmed by the company when enquired by the A.O. The assessee has submitted before the A.O., copies of the contract notes, copies of the sales bills, statement of account from the broker, old address of the broker, new address of the broker. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in the case of SMC Share Brokers Limited, 288 ITR 345 (Delhi) and that of Kishan Chand Chellaram, 125 ITR 713 (SC) and that of Umacharan Shaw Bros., 37 ITR 271 (SC). All those decisions lay down the proposition of the law that statement recorded at the back of the assessee cannot be used against the assessee until and unless the assessee has been given the opportunity to cross examine the person. Ld. D.R. was asked in the open Court whether any opportunity for cross examination was provided to the assessee in respect of the broker. The ld. D.R. expressed his inability as the record does not show that any such opportunity was provided. In almost similar circumstances, Hon ble Calcutta High Court in the case of Eastern Commercial Enterprises (210 ITR 103) observed as under :- At the earlier occasion he claimed all his sales to be genuine but before the Assessing Officer in the case of the assessee, he disowned the sales specifically made to the assessee. This statement can at the worst show that S is not a trustworthy witness and little value can be attached to what he stated either in his affidavit or in his cross examination by the Assessing Officer. His conduct n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prices have increased in 15 to 16 months by 16 times. Although the rate of ₹ 72/- was quoted on 28.11.2000 in M.P. Stock Exchange is apparent from page 11, para (iii) of the Assessment Order. It was further observed that in such a short period, share of no other reputed company has increased so much and the share market has also not shown such a rise. In my opinion, the share market is quite volatile and prices do fluctuate abnormally. It is seen that the shares dealt by the assessee were quoted at M.P. Stock Exchange at almost similar rates at which they were sold. The assessee is only a small shareholder of the company. He is not the director of the company or of the stock exchange. Under these circumstances how he can manipulate the prices is beyond one s comprehension. It is pertinent that the issue of abnormal increase in prices of the shares has come up for consideration before the ITAT, Agra Bench in the cases of Smt. Memo Devi (ITA No.396/Ag/2004 reported as 7 DTR 158) wherein the Co-ordinate Bench observed as under :- The assessee has no relation with the directors of the company and was in no way in the capacity to affect the market price of shares. The in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time. The payment of sale consideration also flown from the bank account of the broker where the fund came through clearing, not in cash. The decision of the lower authorities are influenced by the general observation of the Investigation Wing that arose a suspicion turned into conclusive proof in the minds of the authorities that everybody who has sold the shares at a high price has converted his unaccounted money through accommodation entries. This approach does not have any leg to stand. Hon ble Supreme Court in the case of Umacharan Shaw Bros vs. CIT, 37 ITR 271 (SC) has clearly laid down that suspicion howsoever strong cannot take place of proof. From the entire appreciation of evidence, I noted that Assessing Officer has failed to establish that the assessee has introduced his own unaccounted money in the shape of alleged sale proceeds of shares. Hon ble Supreme Court in the case of Kishan Chand Chellaram vs. CIT reported in 125 ITR 713 (SC) has observed that the amount cannot be assessed as undisclosed income of assessee in the absence of positive material brought by the Revenue to prove that the amount in fact belonged to assessee as the burden lay on the Revenue. 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock exchange Shri J.K. Jain. Shri J.K. Jain in his letter dt. 22nd Dec., 1999 has confirmed the transaction and the payment was made through cheque. The assessee has provided all the requisite evidences in support of all transactions. Simply because Shri J.K. Jain could not produce his books of account or the quoted rate of shares in Delhi Stock Exchange being less or the transactions being not reported by Shri J.K. Jain to the stock exchange would not make a transaction bogus. The Jaipur Stock Exchange has intimated the AO that they are only having information of the transactions between two members of the stock exchange and not otherwise. In the present case, the transaction was between a member and a non-member and therefore, such transactions were not reported in the stock exchange. Further, the credit in the bank account of Shri J.K. Jain is by clearance. Therefore, the allegation of the AO that the amount was deposited in cash has no basis. The assessee has accepted having invested her funds on the advice of her father-in-law. The burden of proving a transaction is always on the person asserting it to be bogus and this burden has to be strictly discharged by adducing legal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r that matter the companies whose shares were purchased and sold changed their premises or names as changed by virtue of being acquired by some other company the assessee cannot be held liable to stay in touch for all times to come. Similarly, no reasons are there to show that Shri Praveen Mittal was ever in a position to declare the transactions of an acquaintance broker as bogus transactions neither any evidence has been led nor reasons advanced to support how he could be considered to be a reliable person so as to ignore the evidences available on record i.e. contract notes of sale and of the specific shares of specific rates on specific dates. Shri Praveen Mittal was the witness of the Department, the onus was therefore on the Department to produce him and make him available for cross-examination by the assessee. Similarly, the evidence that the companies were not in existence at the address available with the Department does not detract from the assessee s claim in view of the documents available on record. The discrepancy in the amounts to the expenditure of ₹ 53,356 was because of consistent statement by the assessee that the share broker made a short payment and dispu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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