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TMI Blog2018 (6) TMI 836X X X X Extracts X X X X X X X X Extracts X X X X ..... aper book, as under: "10. We have considered the rival contentions and carefully perused the evidence placed on record and orders of the authorities. It was admitted by the order of AO and CIT(A) that some communication was received f rom CCIT, Mumbai that Mr. Chokshi has given a statement that he has provided accommodation entries. How those statements are relevant to the assessee or whether any transactions of the assessees were specif ically stated is not forthcoming either f rom the orders of the authorities or from the documents furnished before us. In fact, neither the statement of Mr. Chokshi was provided to the assessees nor the cross-examination was allowed. The same was not even on record. Even though Ld. CIT(A) gave a f inding that the assessment was reopened on the basis of the communication of the CCIT, whether there was any statement enclosed or not could not be verif ied. Surprisingly, the A.O. himself informed assessee that reopening was not based on the statement of Mr. Chokshi. The communication given to assessee viz., Smt. Sarita Devi vide letter dated 16.03.2015 placed in paper book at page 85 is extracted hereunder for ready ref erence: "The scrutiny asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gains declared by the assessee should be assessed as capital gains only." 2. The only ground of the Revenue's appeals is with regard to correctness of exemption claimed u/s 10(38) of the IT Act. Grounds being identical, we reproduce grounds raised in the case of Smt. Sumanlata Agarwal: "1. The Ld. CIT(A) erred both on f acts and in law. 2. The CIT(A) ought to have upheld the order of A.O disallowing the exemption claimed u/s 10(38) of IT Act and treating the same as unexplained cash credit as the assessee's claim of LTCG is proved to be bogus. The assessee purchased shares through off market by paying cash and subsequently sold them through stock exchange to avail the exemptions u/s 10(38) of the IT Act. 3. The Ld. CIT(A) ought to have upheld the order of A.O relying on the Hon'ble ITAT, 'A' Bench in the case of Kamlchand Nathmal Lunia Vs ITO (ITA No. 436/Ahd/2013) wherein it was held that the purchase as well as the sale transactions of the scripts in question was not genuine and the purchase rate had not tallied with the rate as per BSE website and the purchases have also been made in cash. Only paper transactions have been made and no evidence of physical delivery of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the opinion that the purchase of shares was bogus and consequently the sale consideration shown was treated as unexplained investment and hence the assessee is not entitled to exemption u/s 10(38) of the IT Act. The operative portion of the order of the A.O reads as under: "6. To sum up the assessee claims that the shares were traded through NSE through broker M/s Alliance Intermediaries & Net Work Pvt Ltd and NSE conf irms no such sales and the brokers registration was cancelled long bef ore the purchase and sale of shares. The Assessee's claim of Long Term Capital gain is proved to be bogus, the amount of Rs. 49,89,478/- shown as sale proceeds and shares on which exemption u/s 10(38) claimed is disallowed. The said amount of Rs. 49,89,478/- said to be sale proceeds as mentioned above is treated as unexplained cash credit under the provisions of Sec. 68 of the Income Tax Act. 7. Further it is evident that the assessee has earned undisclosed income which is not disclosed to the department and the same was shown unexplained credits in the Capital account under the guise of exempt Capital Gains. Therefore, the assessee has concealed and f urnished inaccurate particulars of his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee's D-mat account on 15th and 17/5/07 and assessee has sold shares on 16th &18/05/07 respectively, gain derived f rom sale of such shares has to be treated as short term capital gain. In the process, AO has disbelieved assessee's claim that shares of M/s Jai Corporation Ltd were purchased in April'06 and were held on behalf of assessee in the pool account of M/s Alliance Intermediaries & Network Pvt. Ltd. In this context, it is to be observed that on perusal of the balance sheet of assessee f iled along with the return of income f or AY 2007- 08, copies of which are at page 62 of assesse's paper book, it is observed that assessee has shown investments in shares under the head 'current assets' for an amount of Rs. 32,68,789.45. The details of investment as f urnished in page 63 of the paper book shows investment in shares of M/s Jai Corporation Ltd at Rs. 1,58,080. Cash book maintained by assessee, extract of which is at page 92 of paper book also reveals that assessee has withdrawn the amount of Rs. 2 lakhs f rom the partnership firm M/s P. Satyanarayana and Sons on 01/04/06 and paid an amount of Rs. 1,58,293.70 to M/s Alliance Intermediaries & Network Pvt. Ltd. on 05/04/06. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld as under: "9.7 The CBDT Circular No. 704 dtd. 28.4.1995 states that it is the date of broker's note that should be treated as the date of transf er in cases of sale transactions of securities provided such transactions are followed up by delivery of shares and also the transf er deeds. Similarly, in respect of the purchasers of the securities, the holding period shall be reckoned f rom the date of the broker's note for purchase on behalf of the investors. The CBDT Circular No. 768 dtd. 24.6.1998 was issued to clarif y the determination of date of transf er and the period of holding of securities held in demat form. It has been stated there in that earlier Circular No. 704 issued by the CBDT relating to the "date of transf er" and "period of holding" does not change even when securities are held in the dematerialized form. Therefore in view of the above two circulars of CBDT it is clear that in case of securities the "date of purchase" has to be taken from the broker's note/contract note and the period of holding is also to be reckoned from the "date of purchase" and not from the "date of dematerialization". Since the holding period of the shares as per the broker's note and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment proceedings the assessee has furnished all the details to prove the genuineness of the purchases of the shares, in the form of purchase bill issued by the broker along with contract notes, copy of receipts / payments made for purchase of shares given by the brokers, copy of the account of the assessee in the books of M/s Alliance Intermediaries & Net Work (P) Ltd, copy of de-mat account, copy of shareholding certificate, copy of bank statement and the copy of the capital for the year ending on 31.03.2008. It was further contended that identical issue was considered by the ITAT in number of cases, listed in page 16 of the order of CIT(A): "1. Dalpat Singh Choudhary Vs ACIT (2012) 143 TTH (3d) 500. 2. DCIT Vs. Smt. Hansa Choudhary (2012) 143 TTJ (3d)(UO) 76. 3. Shri Vinay Kumar Agarwal Vs DCIT, in ITA No. 153/Hyd/2015. 4. Shri Paduchuri Jeevan Prashanth Vs. ITO, in ITA No. 452/Hyd/2015. 5. Ramesh Kumar Jain (HUF) Vs. DCIT, (2013) 144 ITD 383 (3d). 6. Kasturben H. Gada, Mumbai Vs Department of Income Tax, in ITA No. 1773/Mum/2010. 7. CIT Vs. Mukesh Ratilal Marolia, (2014) 88 CCH 027 ISCC. 8. Ravindrakumar Toshniwal, Mumbai Vs. Department of Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013 as reproduced in the assessment order which indicate generally the transactions undertaken by the group companies and there is no specif ic reference to the transactions of assessee in the statement. Surprisingly, this is not the f irst statement of Shri Mukesh Choksi. Earlier also on 26-04-2002, he has admitted to such bogus transaction in the Goldstar Finvest Pvt. Ltd., and Richmond Securities Pvt. Ltd., (as can be seen from the order of Satish N. Doshi HUF Vs. ITO in ITA No. 2329/Mum/2009). No action seems to have been taken to black list those companies and these companies were continuing the business later on also. In f act in the case of Ravindrakumar Toshniwal in ITA No. 5302/Mum/2008 dt. 24-02-2010 for AY. 2005-06, the ITAT in para 3 records the f act that the share transaction in the said case were verif ied and Shri Mukesh Choksi vide statement u/s. 131 conf irmed the transactions. Later in survey u/s. 133A on 30-11- 2007, Shri Mukesh Choksi has stated to have informed that the transaction was verif ied at his instance. The AO treated the transactions as bogus. It was the contention of Ld. Counsel that the veracity of so called statements f rom Shri Mukesh Choksi can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue has not come in appeal on that aspect. Theref ore, only issue to be considered is with the direction of the CIT(A) to tax the said amounts as 'income f rom other sources'. For the reasons stated above, we are not in agreement with the action of the A.O. either for reopening of assessment or f or treating the transactions as bogus, since the very basis for reopening the assessment was not provided to the assessee nor an opportunity was given to cross-examine the socalled Mr. Chokshi. There is no basis f or treating the said transactions as not genuine. Considering the documents placed on record and the case law relied, we have no hesitation in directing the A.O. to accept the long term capital gains and short term capital gains declared by Smt. Sarita Devi and short term capital gains declared by Ms. Nitika Kumari under the head "Capital Gains" only. The grounds are accordingly allowed". 16. The Ld. DR did not contradict the findings of the Tribunal and admitted that the facts are identical in the case on hand. Under these circumstances, we dismiss the appeals filed by the Revenue and allow the cross objections filed by the assessee. Pronounced in the open court on 15th Ju ..... X X X X Extracts X X X X X X X X Extracts X X X X
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