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TMI Blog2016 (12) TMI 1074X X X X Extracts X X X X X X X X Extracts X X X X ..... n of LTCG of the assessee arising out of sale of shares of G.K.Consultants Ltd - Decided in favour of assessee Addition of gift received from his co-brother - Held that:-On perusal of the documents submitted in the paper book, we are convinced to conclude that the gift received by the assessee from his co-brother is genuine which are duly supported by all the required documents in that regard. We hold that the assessee had duly proved the identity of the donor, genuineness of the transaction and creditworthiness of the donor in the instant case. We find that the gift received by the assessee from his relative also falls under the exception clause covered in the said definition in section 56(2)(v) of the Act. We hold that when all the documents prove the factum of gift by the assessee beyond any doubt, dismissing those documents summarily on the ground that there was no occasion to give the gift would be unjust - Decided in favour of assessee - I.T.A No. 19/Kol/2014 - - - Dated:- 2-12-2016 - Shri M. Balaganesh, AM And Shri S. S. Viswanethra Ravi, JM For the Appellant : Shri Subhas Agarwal, Advocate For the Respondent : Shri Sudipta Guha, JCIT ORDER Per Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntract note for purchase and sale of shares from the stock broker. c) Purchase transaction was effected by making payment in cash which is against the strict rules of SEBI and the Stock Exchange. d) No other shares were ever purchased by the assessee by making payment in cash. e) The assessee entered into transaction with Mr Rajendra Prasad Shah only for purchase and sale of shares of G.K.Consultants Ltd and apart from this, he had no transaction with Mr Rajendra Prasad Shah. f) The shares of G.K.Consultants Ltd were sent for Dematerialization by assessee only on 18.2.2005 and Demat request was confirmed on 18.3.2005. The assessee already had Demat account with Citi Bank, wherein the transaction of shares of reputed companies were recorded. But inspite of having other Demat account the assessee opened another Demat account with Citi Bank with Client ID 10398306 wherein he had only transaction of G.K.Consultants Ltd in that Demat account during the financial year 2004-05 relevant to Asst Year 2005-06. g) The assessee was asked to produce the broker with his books of accounts. The assessee expressed his inability to produce the broker and requested the ld AO to contact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and hence no STT could be made liable ; since the purchase cost was less than ₹ 20,000/- payments for them were made in cash and the said broker had duly confirmed the transactions before the ld AO and accordingly pleaded for acceptance of the claim of exemption of LTCG on sale of shares of G.K.Consultants Ltd. 2.4. The ld AO concluded that the transaction as a sham and colourful transaction whereby the assessee entered his undisclosed income in the regular channels taking the benefit of false LTCG in collusion and with direct help of broker Mr Rajendra Prasad Shah , who with the help of other agents, by circular and artificial and false trading, issued contract notes for transactions never happened. The false gains were given the colour of LTCG which is exempt from tax. Accordingly, he treated the claim of LTCG as undisclosed income of the assessee. 2.5. Before the ld CITA, the assessee submitted various documents in support of his claim which were subjected to remand proceedings by the ld AO. The assessee before the ld CITA tried to meet each and every allegation raised by the ld AO in his order. It was argued that both the broker M/s Satco Securities Financial Ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and sold by the assessee through him and he delivered such shares and also sold such shares, and payment was made by account payee cheque dated 24.3.2005 of HDFC Bank. In support of this, the share broker also produced the copy of the bank statement reflecting the above transaction , copy of IT returns filed by him with PAN and other explanations and details. It was also argued that just because the broker had not produced his books of accounts in response to notice u/s 131 of the Act, how the assessee could be held responsible for the same, especially when he had duly confirmed having transactions with the assessee and the veracity of the same. It was also argued that the confirmation filed by the broker was subjected to cross verification by Calcutta Stock Exchange Ltd by the ld AO who had stated that trade no. 1586 was not carried on. In this regard, it was argued that apart from issuing a letter to Calcutta Stock Exchange Ltd in respect of verification of shares of G.K.Consultants Ltd, the ld AO took no further steps when the stock exchange informed that there was no such transaction in it. The ld AO should have issued notice u/s 131 of the Act to Calcutta Stock Exchange Ltd an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny of the contentions of the assessee raised before him in his appellate order, he tried to meet each and every allegation of the ld AO regarding the subject mentioned addition with specific reference to the relevant pages of the paper book. He argued that the ld AO had factually erred in stating that the price of the share of G.K.Consultants Ltd during the relevant period as per the data obtained from MCA in as much as the price of the share during October and November 2004 as listed in Bombay Stock Exchange (BSE) was ₹ 6.60 and ₹ 8.40 per share respectively. He argued that the shares were traded in Calcutta Stock Exchange and the sale transaction had happened as per the prevailing market prices in the secondary market which are duly supported by the sufficient documentation as stated supra. He argued that it is not the case of the ld AO that the contract note given by the registered broker was fake or the contents mentioned therein are false. The shares were duly transferred in demat form. None of the documents submitted by the assessee and the broker were disputed or rebutted by the revenue except the fact that CSE had stated that there was no transaction vide Trade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase and the issue before us based on the materials available on record. We also find that it was never the case of the lower authorities that the subject mentioned transaction was part of any scam that cropped up in Kolkata. We find that the document relied upon by the revenue in terms of MCA data which is reflected in the annual report of G.K.Consultants Ltd (being a listed company) that trading of that share had happened in BSE in Oct and Nov 2004 at ₹ 6.60 and ₹ 8.40 respectively. Apart from these two months, no trading had happened in BSE with respect to the subject mentioned scrip. Hence it could be safely concluded that this scrip was thinly traded in BSE and accordingly the assessee brought the shares from CSE where it was traded, through a registered share broker in Kolkata. We also find that the allegation of the ld AO that no other shares were held in the demat account opened with Citibank vide account no. 10398306 is factually incorrect as the assessee was holding the shares of other two reputed companies namely Reliance Industries Ltd and Organo Ltd also in the said demat account. 2.9.1. We find that the assessee had duly submitted the following documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of the Hon ble Calcutta High Court in the case of CIT vs Emerald Commercial Ltd reported in (2002) 120 Taxman 282 dated 23.3.2001 , it was held that :- Admittedly the details of purchase and sale of shares were furnished. The payment and receipt were by account payee cheque. The identity of seller and purchaser was not in dispute. The disallowance was basically made on the ground that the assessee failed to produce the brokers for verification of the transaction. Following the view on a similar issue in the case of CIT vs Carbo Industrial Holdings Ltd (2000) 244 ITR 422 (Cal) , nonproduction of the share broker by the assessee did not disentitle it for claim of loss in a genuine transaction of shares, thus, the Tribunal s finding was based on material and not perverse. The findings of the ITO and the Commissioner (Appeals) were based on presumption. 2.9.3. We find that the revenue had made a remark that the subject mentioned shares of G.K.Consultants Ltd were bought by the assessee in off market which is against the rules framed by SEBI and others. We find from the Bye Laws of CSE placed on record in the paper book , that the said Bye Laws (vide Bye Law No. 9) permi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om his co-brother in the facts and circumstances of the case. 3.1. The brief facts of this issue is that the ld AO observed that there was a sum of ₹ 4,34,400/- which was credited to the bank account of the assessee, for which assessee explained the same to be gift received of USD 10000 from one Kirti S Zaveri of USA. The assessee also filed a confirmation letter from the said donor in support of his contention which was duly notarized. The ld AO observed that the date of letter was 06.01.2005 whereas it was said to be signed in presence of one Notary Public of USA who put the date as 01.06.2005. But the date put in his official seal was 03.03.2006. The ld AO concluded that the veracity of the very letter is doubtful. The assessee appeared before the ld AO and told that the donor was his co-brother. The ld AO observed that the assessee could not furnish the bank statement, balance sheet, income tax payment details in India or USA or nature of job / business of the donor. He concluded that the creditworthiness of the donor to give the gift was not proved by the assessee with necessary evidences. He also concluded that no evidence was furnished that the said person falls wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. For that on the facts and in the circumstances of the case, the Ld. CIT(A) erred in confirming the addition of ₹ 4,34,000/- made by the AO on account of gift received by the assessee. 3.3. The ld AR drew the attention of the bench to the various documents that were already filed before the lower authorities and further argued that the identity of the donor, genuineness of the transactions and creditworthiness of the donor have been proved beyond doubt in the various documents relied upon thereon and hence no addition could be made u/s 68 of the Act. Moreover, there was no need to prove the occasion to give the gift between the donor and donee. He argued that the gift received from the donor falls under the definition of relative provided in section 56(2) of the Act and hence on that count also, no addition could be made. He placed reliance on the co-ordinate bench decision of this tribunal in the case of Uma Sankar Agarwal vs DCIT in ITA Nos. 449 450/ Kol/2012 dated 5.9.2014 and Sunil Kumar Roy vs DCIT in ITA No. 1879/Kol/2010 dated 17.7.2014, in support of his contentions. In response to this, the ld DR argued that just because the monies have been routed thr ..... 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