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TMI Blog2011 (7) TMI 1295X X X X Extracts X X X X X X X X Extracts X X X X ..... ineness of the Long term capital gain which was dis-regarded by the AO by linking with the SEBI s report. It is further observed that the Revenue has not brought any material on record to the effect that neither the assessee nor the family members of the assessee are responsible for inflation/deflation of the share market which is evident from the share transactions submitted by the assessee. It is further observed that the AO has simply added the long term capital gain and commission ignoring the evidences which was already available with the Revenue authorities. Keeping in view of the above facts we are of the considered view that the ratio laid down by the Hon ble Apex Court in the case of SUMATI DAYAL VERSUS COMMISSIONER OF INCOME-TAX [ 1995 (3) TMI 3 - SUPREME COURT] , on which the Revenue has relied is not at all applicable to the present facts. Therefore, we set aside the orders of the Revenue authorities. Also, the Revenue s presumption is based on suspicion, capricious and probabilities and without any contradictory material against the one submitted by the assessee in respect of genuineness of the transactions - Decision in favour of Assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... add to, abridge and/or rescind any or all of the above grounds." 2.1. For other assessment years the amounts of capital gain as mentioned in ground no.3 is varying. Similarly in all other cases the grounds are common but the figures alleged are different for different assessment years. 3. The brief facts of the case are that while passing the order u/s 153A of the IT Act in the case of all the assesses for all the impugned assessment years the AO has treated the Long Term Capital gain declared by the assessee for all the assessment years as income from undisclosed sources and again an amount of commission of 2% on the Long term capital gain has also been treated as income from undisclosed sources by observing that :- "In this case a search & seizure operation was carried out in different business as well as residential premises of M/s. Maithan Group of cases on 20.09.2007 and on subsequent dates. The assessee belongs to this group. Her locker No.7193 with Calcutta Safe Deposit Volt, was searched and jewelleries worth ₹ 12,10,734/- was found. Accordingly, Notice u/s 153A of the I.T.Act was served upon the assessee. The assessee filed return u/s 153A dt. 10.10.2008 showing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by 307% from the period from April, 2005 to November, 2005. Subsequently though the ban on trading on the scrip was revoked, the SEBI did not absolve the said two brokers from the charges framed against them. This two brokers as well as the company was engaged in manipulating of the share price since long back though the matter caught attention of the SEBI in the month of April, 2005. In reply the assessee has quoted the following case laws. "1) Hon'ble Kolkata High Court in the case of CIT vs Korlay Trading Co. Ltd. (1998) 232 ITR 820 (Cal). 2) Hon'ble ITAT in the case of ACIT vs Claridges Investment & Finance Pvt Ltd. (2007) 18 SOT 390 (Mum) 3) Hon'ble Kolkata Bench of the ITAT in the case of Anup Kumar Jayaswal in ITA Nos. 1678/Kol./2004 & 1679/Kol/2004 for A.Y. 2001-02. 4) Eastern Commercial Enterprise, (1994) 210 ITR 103 (Cal) 5) C.Vasantilal & Co. (1962) 45 ITR 206 (SC)." None of the case laws have ordered to accept the trading result of the scrip banned by SEBI and suspended the concerned brokers on the allegation of manipulating price of the scrip. Hon'ble Kolkata High Court in the case of Korlay Trading Co.Ltd. (1998) 232 ITR 820 (Cal) has ordered that the tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concluded by observing as under :- "4.8. In the above cycle of rise and fall of share prices, the assessee and his family members were always a winner. It is totally against the human probabilities and realities of human life . More over the unusual increase share prices of shares of certain companies were verified by SEBI and it was found that the brokers Shri Sunil Kedia and Sri Ashish Stock Broking Pvt. Ltd were mainly involved in jacking up the prices of the scripts in question . Accordingly Shri Sunil Kedia and M/S Ashish Stock Broking Pvt. Ltd were suspended from trading by interim order dated 30.11.2005 and subsequently the same was confirmed after affording opportunity of hearing vide SEBI orders dated 31.05.2006. In the said orders the modus operandi followed by the brokers and promoters of the Company to increase the share prices and motive behind it were discussed as under : "Securities and Exchange Board of India (hereinafter referred to as SEBI) noticed sharp price variation in the shares of various companies (with low market capitalization) including Globe Stocks and Securities Limited (hereinafter referred to as the company) listed on Calcutta Stock Exchange Asso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransactions which ultimately resulted in the creation of misleading appearance of trading in the securities market. The above facts and circumstances establish the full and active involvement of the Broker. It is already established that the trades of the Broker in the shares of the company inter alia created a misleading appearance of trading in the securities market and thereby, violated the provisions of FUTP Regulations as mentioned above in this order, it is sufficiently obvious that the Broker had failed to comply with his duties as expected of a SEBI Registered intermediary and instead became a party to the manipulation in the shares of the company to the detriment of genuine investors." 4.9. In the said orders of SEB1 the modus operandi followed by the borkers to increase the share prices of M/s Globe Stocks & Securities Ltd were illustrated as under- "2.16 Globe Stocks & Securities Ltd. is another of the "small cap'' listed Companies at CSE which witnessed a significant price increase during the period under scrutiny. The share price of the company increased from ₹ 19. 10 to ₹ 77.65, i.e. a rise of 307% increase in 4 months 10 days. The shares of the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd figure makes it crystal clear that the trading volumes in the shares of these companies have invariably been created by a few brokers trading among themselves and through matched transactions (i.e.clients allowed to place simultaneously both buy and sale orders of same quantity at the same price in the selected shares), often executed on a single terminal of the broker. Clearly, the ultimate objective behind the creation of a false market in these shares, was to legitimizing the gains of certain clients. The SEBI also after making through verification and analysis came on same conclusion as under - In sum, it is evident from the above analysis of the five companies., all of which are listed in CSE, that the brokers have followed a common modus operandi of artificially inflating the price and creating false volumes through continuous self deals executed on the same terminal and cross deals amongst themselves, thereby not only enriching themselves but also aiding and abetting the process of legitimizing the gains." 4.11. The submission of the asseesee that it has nothing to do with the role played by certain persons in artificially inflating the price of the share in questions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that 6. A.O. has made the above-mentioned additions in the hand of the assessee relying on the folIowing evidences. (a) The deposition of Sri Subhas Chander Agarwala, the alleged key figure of M/s Maithan Group made u/s.132(4) of the I.T. Act in which he allegedly admitted to have introduced unaccounted income in the form of LTCG. (b) The statement of Sri Arun Khemka, Director of M/s Globe Stock and Securities Ltd. who reportedly claimed that he arranged accommodation entries in the form of bogus LTCG to the members of Maithan Group which included the assessee. (c) The assessee disclosed Long-term capital gain on the sale of her share of M/s Globe Stock and Securities Ltd. in Asstt. years 2003-04 to 2006-07 and also on the sale of shares of M/s Shree Nidhi Trading Co. Ltd. in Asstt. Years 2007-08. The Ld. A.O. pointed out that the value of shares of these companies had increased enormously over a short period e.g. the share of M/s Globe Stock and Securities Ltd. was sold @ ₹ 5.02 per share on 06.2.02 when the assessee purchased it from Sri Sunil Kedia. These shares were sold @Rs.60 per share in the month of March 2003 through Broker M/s Ashish Stock Broking Pvt. Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Agarwala himself but is not at all binding on the assessee. But the Ld. CIT(A) disregarded all these submissions of the A.R. and dismissed the assessee's all the five appeals. The assessee is now in second appeals before the Hon'ble Tribunal. 8. The assessee makes the following submissions against the evidences on the basis of which the Ld. A.O./CIT(A) have treated the assessee's Long-term capital gain as her undisclosed income. (a) A copy of deposition of Sri Subhas Chander Agarwala made u/s. 132(4) of the I.T. Act was not provided to the assesee and the assessee was not given an opportunity of cross-examining him. On this ground alone, this evidence cannot be used against her. The ld. A.O. has described him as the key person of M/s Maithan Group which had no basis at all. Again, Sri Agarwala was not authorized by the assessee to make any admission / confession on her behalf. In the above circumstances, the alleged deposition of Sri Agarwala cannot be used as evidence against the assessee. Even assuming but not admitting that Sri Agarwala made any admission, on a perusal of the orders of the Ld. A.O./CIT(A), it may kindly be seen that Sri Agarwala made an admission in gener ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment cannot be taken into evidence in respect of assessee's LTCG arising on the sale of shares of these two companies. (c) The Ld. A.O. has also relied on the alleged order of SEBI dt.30. 11 .05. In this case also, a copy of the order was not furnished to the assessee. Again, even assuming but not admitting that SEBI took legal steps against the Share Brokers M/s Ashish Stock Broking Pvt. Ltd., Sunil Kedia and Sanjoo Kabra for manipulation in share prices, unless it is proved that the assessee also conspired with these persons, it cannot be said that she was a party for artificial increase in the prices of the shares. In the Asstt. Order, the Ld. A.O. has nowhere given even a hint that the assessee conspired with the Share Brokers for selling her shares of the three companies on the sale of which she derived LTCG as disclosed by her. If so, no adverse inference could be drawn against her for getting a good price on the sale of her shares resulting in Longterm capital gain disclosed in her Returns. 9. In this connection attention of the Hon'ble Bench is invited to a copy of the consolidated order passed by C-Bench, Kolkata in ITA No.1210 to 1213(Kol)/2009 dt.13.l 1.09 in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to introduce her undisclosed income in the form of LTCG. 10. The assessee also invites the kind attention of the Hon'ble Bench to a copy of order in the case of DCIT vs Jagdish Prasad Goel in ITA No.542/Kol/201 0 dt. 13.4.11. In this case, the Ld. A.O. found that the assessee disclosed LTCG on sale of shares of M/s Bolton Properties Ltd. and M/s Bluechip. The A.O. collected a CD from Kolkata Stock Exchange and after comparing it with the Contract notes issued by Share Broker M/s Bubna Stock Broking Services Ltd. found some discrepancies in the numbers of shares sold and also the date of sale of these shares. He therefore treated the LTCG as unexplained cash credits in the hand of the assessee on the ground that the transactions were not genuine and the assessee used colourable device in connivance with the Stock Brokers to introduce his undisclosed income in the guise of share transactions in these shares. But on appeal, the Ld. CIT(A) deleted the additions and accepted the assessee's claim of LTCG on the basis of documentary evidences e.g. Contract notes regarding purchase / sale of shares, Demat Account of the assessee. The Ld. CIT(A) pointed out that the adverse information ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s income from undisclosed sources in all the five Asstt. Years may kindly be deleted." 4.1. In addition to this he further filed the Calcutta Stock Exchange quotations in respect of all the transactions entered by all the assesses for all the assessment years. 5. On the other hand, the ld. DR appearing on behalf of the Revenue heavily relied on the orders of the revenue authorities and reiterated the findings which were already recorded by us in the preceding paragraphs and contended that the ld. CIT(A) has properly analysed the facts by applying the ratio of the decision of the Hon'ble Apex Court in the case of Sumati Dayal vs CIT (supra). Therefore, he requested to upheld the same. 6. After hearing the rival submissions and on careful perusal of materials available on record, we consider fit to analyse the transactions entered by all the assesses in respect of all the shares as supplied by the assessee which are as under :- As per the details filed by the assessee obtained from Calcutta Stock Exchange in respect of Globe Stocks and Securities Ltd. the following information is available. Smt.Rita Devi M/s.Globe Stocks and Securities and Securities Ltd. Date of Transaction V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hree Nidhi Trading Co.Ltd. 16.11.2004* 81100 17 6.00 6.00 6.00 6.00 16.12.2004* 45850 18 20.00 22.80 19.90 22.80 22.12.2004* 30000 10 30.20 30.20 30.00 30.20 18.12.2006* 13600 18 158.95 159.00 158.95 158.95 21.12.2006* 4700 10 158.95 159.00 158.95 159.00 M/s. Offshore FInvest Ltd. 01.12.2003 55000 6 1 0.10 10.50 10.10 10.50 24.12.2004 47700 23 166.00 166.00 165.00 165.80 27.12.2004 31100 19 165.90 166.00 165.90 166.00 Shri Subodh Agarwalla On comparison of the above table with that of the one which were analysed by the ld. CIT(A) and the SEBI report which was recorded in the impugned order by the ld. CIT(A), it is observed that the SEBI has analysed the transactions for the period April, 2005 to November, 2005 in respect of M/s. Globe Stocks and securities Ltd. only and nowhere they have mentioned in respect of share transactions of M/s.Nidhi Trading Co. Ltd. and M/s. Offshore Finvest Ltd.. But however, in the case of the assesses the revenue has disbelieved the long term capital gain gained by the assessee as well as family members of the assessee. In respect of M/s. Nidhi Trading Ltd. and M/s. Offshore Finvest Ltd al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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