9911796707
TMI Blog2018 (2) TMI 2128X X X X Extracts X X X X X X X X Extracts X X X X ..... d of the year under the head sundry creditors cannot be sustained in law. Hence, we confirm the order of CIT (A) and dismiss this ground of appeal of the Revenue. Addition on account of interest in the profit and loss account - CIT (A) deleted the addition on the ground that the AO failed to establish any nexus between the interest bearing funds and advances given by the assessee - HELD THAT:- DR during the course of hearing supported the order of AO but could not controvert the above finding of CIT (A) by brining any cogent and positive material on record. Hence, we do not find any good and justifiable reason to interfere with the order of CIT(A), which is confirmed and this ground of appeal of Revenue is dismissed. Disallowance of expenses on personal use of the vehicles - HELD THAT:- We find that the AO has not given the basis of working out the disallowance of Rs. 25,000/- out of the vehicle expenses of Rs. 2,53,689/- claimed by the assessee. Adhoc disallowance of any genuine business expenditure of the assessee is not permitted in law. Therefore, we find no good reason to interfere with the order of CIT(A), which is confirmed and this ground of appeal of Revenue is dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ils submitted on 06.09.2007 it was explained that 9000 shares of Bolton Properties Limited were purchased by the assessee from M/s Stock Home (Prop. Anil Kumar Jhunjhunwala, member of the Magadh Stock Exchange Association Limited. The shares were purchased on 25.04.2003 @ Rs. 6.94 per share amounting to Rs. 62,460/- only. All payments were made in cash i.e. Rs. 17,000/-, Rs,18,000/-, Rs. 15,000/- and Rs. 12,460/- on 06.05.2003, 09.05.2003, 13.05.2003 and 16.05.2003 respectively. The shares were sold in two installments on 14.03.2005 and 23.03.2006, 6000 shares were sold on 14.03.2005 @ Rs. 390/- per share and the remaining 3000 shares were sold on 23.03.2005 @ Rs. 348/- per share. The payments were received vide cheque no. 890111 and 289270 for Rs. 23,35,666/- and Rs. 10,42,167/- on 17.03.2005 and 29.03.2005 respectively. The shares were purchased @ Rs. 6.94 per share and were sold @ Rs. 390/- and Rs. 348/- per share. The detailed enquiry had been conducted by the Investigation Wing of the Department at Kolkata regarding the phenomenal increase in the prices of such non-descript shares on which LTCG were shown by many assessees without paying any tax. The result of the enquiry has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a. The Stock Exchange was contacted to know the whereabouts of Shri Anil Kumar Jhunjhunwala. The Compliance Officer of the Stock Exchange stated that the above named person is neither residing at Patna nor doing share broking business since 1991. The format in Annexure-C for reporting the turnover figures of the members of the Exchange was supplied by the Compliance Officer in support of proof of business activities. It is clear from the above report that no transaction was carried out by the broker at Magadh Stock Exchange Association Limited during the relevant period. This makes it clear that the assessee has not purchased any share of Bolton Properties Limited during the year 2003-04. This view is further supported by the payment details submitted by the assessee which shows that the entire payment of Rs. 62,460/- was made in cash in May 2004. In the absence of confirmation from the selling broker and payment being made otherwise than through banking channel, the genuineness of the purchase transaction cannot be accepted. Once the purchase is found to be bogus, the question of allowing LTCG does not arise. Even otherwise the claim is not allowable in view of the discussion made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction done by him through Shri PK Agrawal. 6. The CIT (A) received the remand report dated 24.11.2008, wherein the AO mentioned as under :- Remand Report dated 24.11.2008: In the letter under reference, it has been directed to enquire specifically from the brokers namely (i) Ashok Kumar Kayan, Kolkata and (ii) P. K. Agrawal Co., Kolkata regarding the genuineness of the transaction done in the script of Bolton Properties Limited; that it may be submitted that the Addl, CIT, Range-I, Raipur had already made the enquiries from both of the brokers through whom the shares were sold, copy of letters of Addl. CIT and the replies received from the brokers is enclosed; that it may be mentioned that the Addl. CIT also called for, information u/s 133(6) from M/s Stock Home (Prop. Shri Anil Kumar Jhunjhunwala) through whom the assessee claimed to have purchased 9000 shares of Bolton Properties Limited; that copy of Jt. CIT, Range-2, Patna's letter F.No.4S92 dated 26.11.2007 is enclosed. Remand Report dated 25.11.2008: That the Gazette of India Extraordinary Part-III Section-4 published by Authority Securities and Exchange Board of India - Notification - Mumbai, the 3rd day of September 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee by cheque. The A.O was neither informed to the assessee during the course of assessment that the letter came back unserved from the address of M/s Stock Home and that the above share broker not doing any business from Magadh Stock Exchange Association Limited as well as no transaction was carried out by the above broker during the year under consideration nor any opportunity given by him to the assessee to explain it. The office address of the stockbroker M/s Stock Home changed from Pushpa Vihar, Boring Road, Patna 800001 to 401, Kumar Tower, Boring Cannal Road, Patna 800001 during the year 2006. Due to above the letter came back unserved from the above address. The above broker purchased 9000 shares of Bolton Properties from Kolkata Stock Exchange not from the Magadh Stock Exchange Association Limited for the assessee. The A.O had not given any opportunity to the assessee during the course of assessment so we are enclosing herewith a copy of affidavit issued by Anil Kumar Jhunjhunwala proprietor of M/s Stock Home to confirm the above transaction. In assessment order, the A.O has given the results of the enquiries made by department in case of share brokers M/s Ahilya C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concluded before the issue of direction by SEBI. So the above direction issued by SEBI is also irrelevant in this case. 10. After considering the submissions of assessee and remand report received from the AO, the CIT (A) deleted the addition made by the Assessing Officer. 11. Ld. DR has relied on the order of Assessing Officer. 12. On the other hand, ld. AR supported the order of CIT (A) and relied on the following decisions :- i) ITO Vs. Ravindra Sanghai (HUF), ITA No. 698//Kol/2010, vide order dated 22.05.2012; ii) ITO Vs. Khalil M. Bharwani (2015) 45 CCH 0275 (MumbaiTrib) iii) ACIT Vs. Shri Ranjitsingh D. Bindra, ITA No. 5534/Mum/2010, order dated 13.03.2013; and iv) CIT Vs. Kamal Kumar Agrawal, ITA No. 67 of 2010, order dated 23.09.2010. 13. We have heard rival submissions and perused the orders of lower authorities and materials available on record. In the instant case, the assessee has shown long term capital gain of Rs. 33,15,612/- and claimed exemption u/s.10(38) of the Act on the shares of M/s Bolton Properties Ltd. purchased for Rs. 62,460/-, which was sold for Rs. 33,77,833/-. The AO observed that the assessee has shown long term capital gain on sale of penny stocks lik ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e transaction. Liability is upon a person who claims that what is apparent is not real. Therefore, it was the AO who is to prove that the transactions are sham and not genuine. The AO did not make any enquiry nor issued Notice u/s 133(6) to the stock broker and Kolkata Stock Exchange, Kolkata. The appellant has claimed that the stock broker replied and confirmed the transactions in response to the Notice issued by the AO. The A.O simply relied upon the report of DDIT (Inv), Kolkata regarding survey u/s 133A conducted at M/s Ahilya Commercial Company Private Limited and M/s P.K. Agrawal Co. on 28.12.2004 and 20.03.2005. Thus, no enquiry was conducted by the AO with regard to transactions of sale of share made by the appellant in F. Y. 2004-05. Thus, the enquiry of the sale of scrip mentioned above by the appellant was not specifically conducted by the DDIT(Inv). However, the AO relied on such material in passing the assessment order on the above report made by DDIT(Inv.), Kolkata on 20.04.2004 and 20.03.2005. The AO reproduced very routinely the report of DDIT(Inv.), Kolkata in the assessment order, which contains statement of Shri P.K. Agrawal. Though the appellant has dealt with M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ablish the genuineness of the claim. From the documents produced, it is seen that the shares in question were in fact purchased by the assessees on the respective dates and the company has confirmed to have handed over the shares purchased by the assessees. Similarly, the sale of the shares to the respective buyers is also established by producing documentary evidence. It is true that some of the transactions were off-market transactions. However, the purchase and sale price of the shares declared by the assessees were in conformity with the market rates prevailing on the respective dates as is seen from the documents furnished by the assessees. Therefore, the fact that some of the transactions were off-market transactions cannot be a ground to treat the transactions as sham transactions. The statement of the broker P that the transactions with the H Group were bogus has been demonstrated to be wrong by producing documentary evidence to the effect that the shares sold by the assessees were in consonance with the market price. On perusal of those documentary evidence, the Tribunal has arrived at a finding of fact that the transactions were genuine. Nothing is brought on record to sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch presumption could be drawn by the AO merely on surmises and conjectures. In the absence of any cogent material in this regard, having been placed on record, the AO could not have reopened the assessment. The assessee had made an investment in a company, evidence whereof was with the AO Therefore, the AO could not have added income, which was rightly deleted by the CIT (A) as well as the Tribunal. It is settled law that suspicion, howsoever strong cannot take the place of legal proof Consequently, no question of law, much less a substantial question of law, arises for adjudication.-C. Vasantlal Co. vs. CIT (1962) 45 ITR 206 (SC), MO Thomakutty vs. CIT (1958) 34 ITR 501 (Ker) and Mukand Singh vs. Sales Tax Tribunal (1998) 107 STC 300 (Punjab) relied on; Umacharan Shaw Bros. vs. CIT (1959) 37 ITR 271 (Se) applied, Jaspal Singh vs. CIT (2006) 205 CTR (P H) 624 distinguished. 11. In Bainath Agrawal vs. ACIT, ITAT Agra Bench TM reported in (2010) 133 TTJ under the similar set of facts, the addition on account of Long Term Capital Gain as income from undisclosed sources was deleted by the Hon'ble Members. In ITa vs. Smt. Kusum Lata in the Order of ITA T, Jodhpur Bench reported in ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t giving opportunity to the assessee to cross examine the person who has given the statement at the back of the assessee. Further, the statement was recorded by the Dy. Director of IT, Investigation Wing, and not by the AO himself. Thus, the truthfulness of the statement remained untested by the Ao.-CIT vs. SMC Share Brokers Ltd. (2007) 210 CTR (Del) 353 . (2007) 288 ITR 345 (Del), Kishinchand Chellaram vs. CIT (1980) 19 CTR (SC) 360 . (1980) 125 ITR 713 (SC) , Umacharan Shaw Bros. vs. CIT (1959) 37 ITR 271 (SC) and CIT vs. Eastern Commercial Enterprises (1995) 123 CTR (Cal) 217 . (1994) 210 ITR 103 (Cal) applied. (Paras 11 12) The share market is quite volatile and prices do fluctuate abnormally. It is seen that the shares dealt by the assessee were quoted at Madhya Pradesh 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.-CIT vs. Anupam Kapoor (2007) 212 CTR (P H) 491 relied on; Smt. Memo Devi vs. Asstt. CIT (2008) 7 DTR (Agra)(Trib) 158 approved. (Para 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 49 DTR 312 dismissed the appeal of department observing Whether or not there was sale of shares and receipt of consideration thereof on appreciated value is essentially a' question of fact. CIT (A) and Tribunal have both given reasons in support of their findings and have found that at the time of transactions, the broker in question was not banned by SEBI and that assessee had produced copies of purchase bills, contract number share certificate, application for transfer of share certificate to demat account along with copies of holding statement in demat account, balance sheet as on 31st March, 2003, sale bill, bank account, demat account and official report and quotations of Calcutta Stock Exchange Association Ltd. on 23rd July, 2003. Therefore, the present appeal does not raise any question of law, much less any substantial question of law. 14. The Hon'ble Members of ITAT, Bilaspur Bench, which is the jurisdictional Bench of Income Tax Appellate Tribunal, in ITO-3, Bhilai vs. Shri Vishnu Kumar Agrawal, Bhilai in Appeal No. ITA No. 427/Nag/2008 for A.Y. 2005-06 in Order dated 25.06.2009 rejected the appeal of department replying On the Order of Hon'ble Punjab Haryana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant without bringing on record any adverse cogent evidence. 17. In the case of Shri Vishnu Kumar Agrawal, Bhilai (supra), the Hon'ble jurisdictional Tribunal has observed as under:- After hearing the rival submissions and carefully perusing the material available on record and keeping in view of the facts that without bringing out any material on record to prove the share Transaction of the assessee bogus, the claim of the assessee in respect of LTCG cannot be termed as bogus, which the AO has done in this case. We also find that in this case the assessee has produced before the AO the copy of ledger with purchase details, copy of bill issued by broker, copy of share certificates, letter of Stanely Securities Ltd. regarding transfer of shares, copy of request slip for dematerialization of shares into assessee's Demat Account with IDBI Bank, copies of contract notes, copy of delivery slip and copy of bank account reflecting credit of sale proceeds. We also find that the Ld. CIT(A) has passed a very speaking and justified order directing the AO to treat Rs. 27,22,370/- as LTCG on share transactions. For sake of convenience, we reproduce the relevant portion of his or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares, details of delivery of shares in and out from the appellant's Demat account. The sale consideration was received by account payee cheques/drafts. 2.8 There was no material before the A 0 which could have lead to a conclusion that the transaction was Simpliciter a device to camouflage activities to defraud the Revenue. In the case, under consideration, detailed explanation of the appellant supported by evidence was rejected by the AO more on presumptions and probabilities rather than on factual grounds. The presumption is so compelling that comparatively a small amount of investment made by the appellant during the previous year relevant to the A. Y. 2003-04 have grown into a very sizable amount ultimately yielding a fabulous sum in the assessment year under consideration. It appears that this itself is a provocation for the AO to jump into a conclusion that the transactions were bogus. But, in my consideration view, on assessment has to be completed on the basis of records and material evidence available before the A 0 and personal knowledge and excitement on events should not lead the AO to a state of affairs where salient evidences are overlooked. In the present case e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idences produced by the appellant and to allege that the apparent is not real. In the given facts and circumstances, such probability could not be construed as material gathered by the AO for substantiating his suspicious conclusions in the impugned assessment . 2.10 In the case under consideration, that a racket of booking fake and bogus LTCG has been busted by the Investigation Wing of Kolkata wherein similar transactions through similar brokers through similar demat accounts through similar bank accounts and through the similar stock exchange were unearthed exposing the connivance of stock brokers, sundry persons holding many bank accounts and others in booking fake LTCG penny stocks and thereby depriving the state of its legitimate dues I find that the AO made various observations for drawing adverse inference against the appellant. In my considered view, these observations 'of the AO are general in nature unsubstantiated on the strength of any evidence brought on record against the appellant. Such general observations relating to dubious transactions carried on in share market are of no avail to hold any adversity against the appellant since no evidence whatsoever was brou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tiated on the strength of the findings arrived at by the Hon ble Punjab Haryana High Court in the case of CIT Vs. Anupam Kapoor (2007) 212 CTR (P H) 491 wherein on exactly alike situation came up for consideration before the Hon ble Punjab Haryana High Court. 1.12 The Hon ble Punjab Haryana High Court has sustained the order of tribunal wherein it has been held that purchase contact note, contract note for sales, distinctive number of share purchased and sold, copy of share certificate and the quotation of shares on the date of purchase and sales were sufficient material to show that the transaction was not bogus but a genuine transaction. Following the judgement of Hon ble Punjab Haryana High Court in the case of CIT vs. Anupam Kapoor 212 CTR 491 and other case laws and facts and evidence mentioned in aforesaid paras, I am of the considered opinion that the LTCG transaction was not bogus but a genuine transaction . 19. It is seen that the A.O did not afford any opportunity of cross examination to the appellant to rebut the conclusions drawn by the A.O on the basis of statements recorded and enquiries conducted by way of commission issued u/s 131(1)(d). Now, the law is well settled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t also of proving the correctness or completeness of such return. In view of this provision, it can hardly be argued with any show of force that if the assessee desires the wholesale dealers, whose accounts are used against him, to be cross-examined in order to prove that his return is not incorrect or incomplete, he should not be conceded this opportunity. Apart anything else, the second part of the proviso itself confers this specific right on the assessee. It is difficult to conceive as to how the assessee would be able to disprove the correctness of the accounts of Haji P.K. Usmankutty or the other wholesale dealer, unless he is given a chance to cross-examine them with respect to the credibility of the accounts maintained by them. In view of the express provision of the second part of the proviso, the respondents had the undoubted right to cross-examine the wholesale dealers on the basis of whose accounts the returns of the asses sees were held to be incorrect and incomplete.-MurIimohan Prabhudayal vs. State of Orissa 26 STC 22 (Ori) relied on. Appukuty vs. State of Kerala, 14 STC 489 (Ker) and Jayantilal Thakorada's case 23 STC 11 (Guj) distinguished. 21. Thus on a true i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res to Demat A/c with Stock Holding Corporation of India Ltd., the shares of the company being listed with Calcutta Stock Exchange, the details of sale that are on record, the details of number of shares and their sale rate that are on record, the shares of the company were sold through delivery instruction of the depository account with Stock Holding Corporation of India Ltd., the sale consideration of the shares which was received through banking channel. 25. The AO has wrongly compared that onus of the appellant is the same as required in respect of cash credit entries. The Hon'ble Jodhpur Tribunal had the occasion to consider a case in respect of similar type of share transaction. The decision reported in (2006) 105 TTJ (Jd) 265 in the case of ITO v. Smt. Kusum Lata wherein the Hon'ble Bench held that the share transaction was not bogus. The Hon'ble Bench confirmed the order of CIT (A) who held that assessee has filed the requisite 'evidence to establish the genuineness of share transaction and merely because share broker could not report the transaction to Stock Exchange, it could not be said that the share transaction was bogus. The Hon'ble Bench further h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial on record to disprove the evidences as adduced by the appellant. The Hon'ble Supreme Court in the case of Sreelekha Banerjee and Others v. CIT 49 ITR 112 has held Before the department rejects such evidence, it must either show an inherent weakness in the explanation or rebut it by putting to the assessee some information or evidence which it has in its possession. The department can not be merely rejecting unreasonably a good explanation, convert good proof into no proof. The AO has based his conclusion on unfounded presumption and surmises. This also can not be approved. Reliance is placed to the Hon'ble Supreme Court decision in the case of Umacharan Shaw Bros. v. CIT 37 ITR 271. 26. Thus, in view of above facts and circumstances of the case as also decisions cited above, it is well established by the appellant regarding genuineness of share transaction and the appellant has sufficiently discharged the onus cast upon the appellant. AO's action is not well founded in position of law in adding entire amount of sale of shares as income from undisclosed and unexplained sources. Looking to the facts and circumstances of the case as also decisions cited above, I hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer merely on surmises and conjectures. The Tribunal took into consideration that it was only on the basis of a presumption that the Assessing Officer concluded that the assessee had paid cash and purchased the cheque. In the absence of any cogent material in this regard, having been placed on record, 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. The Nagpur Bench of the Tribunal in the case of ACIT vs. Kamal Kumar S. Agrawal (Indl.) and Ors. (2010) 133 TTJ (Nag) 818, has held as under :- The assessee earned capital gains during the period covered by s. 153A proceedings. It is also noted that all such transactions have been taken into consideration while filing the returns for these years in the normal course and the Department has also accepted the nature of such transactions. It is very important to note that no incriminating material has been found during the course of search which could have cast doubt on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of SEBI is different and the orders passed by them have different objectives such as orderly conduct of share markets and investor protection and, therefore, such order cannot be conclusive as regards the genuineness of the transactions. In this regard, it would not be out of place to mention that stock market operations are subject to different regulations and the interest of general public is protected by prohibiting the market intermediaries from indulging in unfair trade practices. The order of the SEBI relied on by the Revenue is mainly on the aspect of price rigging in such manner. Hence, the same cannot be of any assistance to the cause of the Revenue. Thus, on the basis of appreciation of facts and circumstances of the case as a whole and considering the documentary evidences on record, the share transactions cannot be considered as ingenuine/sham and, therefore, the sale proceeds of such share transactions cannot be taxed under s. 68. Sumati Dayal vs. CIT (1995) 125 CTR (SC) 124 : (1995) 214 ITR 801 (SC) and McDowell Co. Ltd. vs. CTO (1985) 47 CTR (SC) 126 : (1985) 154 ITR 148 (SC) distinguished. 17. The Kolkata Bench of the Tribunal in the case of ITO Vs. Ravindra Sanghai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction is stated in Para 3. The trade was made through delivery and not speculative in nature. The delivery was made through DP. 4. Photocopy of Contract Note Enclosed herewith. The Demat account no. is 10466543 with 11 F S Ltd. 5. As there is no bank transaction, copy of bank account is not applicable. 6. No margin money. No interest applicable on margin money. 7. The said transaction was off-market and no intimation was given to CSEA. But the AO was of the view that the Penny Stocks are barred from trading by SEBI and CSE. According to AO, the assessee has not informed the purchase of shares and according to him it is mandatory to inform, in case the transaction is off-market and in cash. The AO has not doubted the genuineness of sale on which assessee has earned capital gains. However, the AO treated the entire sale proceeds as income from undisclosed sources and assessed the same. Aggrieved, assessee preferred appeal before CIT(A), who after considering the submissions of the assessee and assessment order and various case laws deleted the disallowance by giving following finding in para 4.3 as under: 4.3. I have perused the assessment order and considered the submission of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form which were submitted to the Company for transferring in its name, which the company transferred by its letter dated 17.07.2004, which were later on submitted on 12.08.2005 for demat in the Demat Account of the assessee with HSBC Bank and later on the shares were sold through the online trading system of the Calcutta Stock Exchange through the Broker Murarilal Goenka and M/s. Shivam Stock Broking Pvt. Ltd. and each and every details of sale of shares were duly furnished in assessment proceedings. Hence, in the view of the assessee, the transactions giving rise to LTCG on sale of shares of Rs. 45,43,362/- is fully supported by all the necessary evidences mentioned above and therefore Assessing Officer was not justified to tax the entire sale proceeds on sale of shares as unexplained cash credit under section 68 of the Act. 6. The CIT(A), after going through the submissions on behalf of assessee accepted the contentions of assessee and granted relief as prayed. Same has been opposed before us on behalf of Revenue. The learned D.R., inter alia, submitted that CIT (A) erred in holding that long term capital gain received by assessee in the scrip Emerald Commercial Ltd. was genuine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by way of 20 share certificates of 500 shares each of the company Emrald Commercial Ltd. and such shares were duly transferred in the name of the assessee by letter of the company dated 17.07.2004 which aspect is also not found incorrect or manipulated. The physical shares received by assessee duly transferred in his name were thereafter demated by delivering them to HSBC, the demat Account holder and after demating the shares have continued to remain in the Demat A/c of assessee which aspect is also independently verified from the Demat Statement of assessee with HSBC. 9. The 4000 demated shares were thereafter sold through the Broker Shivam Stock Broking Pvt. Ltd. of the Calcutta Stock Exchange through online trading system and the balance shares numbering 6000 were duly sold through the Broker Murarilal Goenka of Calcutta Stock Exchange through online trading system. The Sales Bills/Contract filed by assessee for sale of the shares has not been disbelieved or disputed by Assessing Officer in any manner. The sale proceeds received on sale of shares have been duly received by A/c payee cheque' from the Brokers which were duly deposited in the bank account of assessee. This asp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be treated as such and not taxed as income from undisclosed sources. Accordingly the decision of the CIT (A) need no interference from our side. We uphold the same. 19. The Mumbai Bench of the Tribunal in the case of ACIT Vs. Shri Ranjitsingh D Bindra, ITA No. 5534/Mum/2010, vide order dated 13.03.2013, has held as under :- 3. The solitary common issue raised by the revenue in both the appeals is regarding the Long term capital gains treated by the Assessing Officer as undisclosed cash credit and deleted by the CIT(A). The common ground raised by the revenue is as under: On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in directing the Assessing Officer to treat the income as long term capital gains amounting to Rs. 29,09,675/- instead of income from undisclosed sources as considered by the AO without appreciating the facts and detailed investigation of the case. Before us the learned DR has submitted that the Assessing Officer has made an investigation and found that the assessee was first given speculation profit and against this profit the purchase cost of the shares of Blue Chip India Ltd was adjusted. This adjustment of purchasing of sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her submitted that Prince Securities has also given the confirmation memo in respect of the speculation profit arising from the transaction in the shares of Geometric Solutions and Hinduja Finance Ltd. The assessee applied for transfer of the shares to Blue Chip India Ltd., and received the communication dated 17.08.2002 and 31.08.2002 whereby the shares were transferred with distinctive numbers and certificate memos in the name of the assessee. Subsequently, the shares were demated in the Demat account of the assessee, which shows that the assessee was holding the shares and, therefore, the transaction cannot be said to be bogus. The learned AR has further submitted that the shares were sold through Prakash Nahata Co., who is a broker of Kolkata Stock Exchange. Sales bill in respect of the sale transactions were produced before the authorities below, as placed at pages 88 to 110 of the paper-book. M/s. Prakash Nahata Co. has also confirmed the transaction of sale vide letter dated 24.11.2006 in response to the notice issued by the Assessing Officer u/s. 133(6) of the Income Tax Act. The learned AR has further submitted that the sale consideration was received through banking chann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 10.11.03 284200 22.10.03 2,500 101000 23.10.03 2500 10.11.03 295875 23.10.03 2,500 102750 27.10.03 2500 12.11.03 376175 28.10.03 7,500 295875 29.10.03 12000 18.11.03 310000 29.10.03 7,000 284200 31.10.03 9500 18.11.03 500000 30.10.03 9,500 386175 01.11.03 15000 03.12.03 428500 05.11.03 10,000 395500 11.11.03 17500 - - 07.11.03 10,000 414500 - - - 13.11.03 10,000 428500 - - - The Assessing Officer doubted the transaction mainly on the ground that the shares were purchased as penny stocks at low price of 55 paise per share and the same were claimed to have been sold at Rs. 40 per share and thereby the assessee has shown Long term capital gains of Rs. 29,09,675. According to him it is not a genuine transaction because the assessee has converted its undisclosed income as Long term capital gains. The Assessing Officer has examined the assessee as well as called for various information by issue of notice u/s. 133(6) to the stock broker though which the assessee has purchased shares as well as from the stock broker to whom the assessee has sold the shares. It is evident that both the stock brokers have confirmed the transaction of purchase as well as sale. Apart from the confirmation, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the list of demat shares along with other shares f) The above shares were sold through the Calcutta stock Exchange broker namely Prakash Nahata Co. And the various contracts notes/bills in respect of sales made have been filed with me. g) After the sales were made, the shares were duly given delivery by demat slip No. 246061 dt.11.11.03, No. 21550 dt 1.11.03, No. 215539 dt. 31.10.03, No. 215538 dt.29.10.03, No. 215537 dt.29.10.03, No. 215536 dt.27.10.03, No. 215535 dt. 22.10.03, No. 215534 dt. 22.10.03, No. 215533 dt. 20.10.03, No. 215531 dt. 10.9.03 h) The appellant in his statement recorded u/s. 131 has confirmed the transaction both of purchase and sale of shares. i) The shares purchased of Bluechip have been duly shown in the balance sheet filed with the Department for the year ending 31- 03-2003 i.e. in the year in which the shares were purchased. j) The price at which the shares were purchased and later on sold are the prices of the shares prevailing at the material time of the transaction and this aspect of the matter is independently confirmed by the details obtained from the Bombay Stock Exchange. In my view when the appellant has himself categorically submitted that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, the assessee has discharged his onus to prove the holding of the shares and in the absence of any contrary evidence brought by the Assessing Officer on record, it cannot be said that the transaction of purchase shown by the assessee is not genuine. In the case of CIT Vs. Jamnadevi Agarwal (supra), the Hon'ble jurisdictional High Court while dealing with similar issue has observed and held as under: We see no merit in the above contentions. The fact that the assessees in the group have purchased and sold shares of similar companies through the same broker cannot be a ground to hold that the transactions are sham and bogus, especially when documentary evidence was produced to establish the genuineness of the claim. From the documents produced before us, which were also in the possession of the Assessing Officer, it is seen that the shares in question were in fact purchased by the assessees on the respective dates and the company has confirmed to have handed over the shares purchased by the assessees. Similarly, the sale of the shares to the respective buyers is also established by producing documentary evidence. It is true that some of the transactions were off-marke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the relevant evidence in support of the claim which has not been proved to be false, then the claim of the assessee cannot be denied. As far as the decision of the Chandigarh Bench of this Tribunal is concerned the same is not applicable in the facts of present case when there is no such glaring contradiction as pointed out by the Tribunal in the said case regarding the shares remained in the name of the assessee even long after the sale of the shares and non-availability of information. In the case in hand, the sale transaction has been duly executed through demat account and, therefore, there is no ambiguity or doubt about the transaction of sale. 20. The Hon ble Bombay High Court in the case of CIT Vs. Kamal Kumar Agrawal, ITA No. 67 of 2010, vide order dated 23.09.2010, has held as under:- 11) We see no merit in the above contentions. The fact that the assessees in the group have purchased and sold shares of similar Companies through the same Broker cannot be a ground to hold that the transactions are sham and bogus, especially when documentary evidence was produced to establish the genuineness of the claim. 12) From the documents produced before us, which were also in pos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the decision relied upon by the Counsel for the revenue is wholly distinguishable on facts. 16) For all the aforesaid reasons, we hold that the decision of the Tribunal is based on finding of facts. No substantial question of law arises from the order of the Tribunal. Accordingly, all these appeals are dismissed. No order as to costs 21. The Hon ble Bombay High Court in the case of CIT Vs. Mukesh Ratilal Marolia, (2012) 80 CCH 0407 (MumHC), has held as under:- PC, 1. Whether the ITAT was justified in deleting the amount of Rs. 1,41,08,484/- received by the Assessee on sale of the shares as unexplained investment under section 69 of the Income Tax Act, 1961 is the question raised in this Appeal. 2. The Assessment Year involved herein is A.Y.2001-2002. 3. The Assessee was carrying on business of manufacturing handkerchiefs as the proprietor of Rumal Manufacturing Company. In the Assessment Year in question the Assessee claimed that he had sold the shares of four companies, namely, M/s Alang Industrial Gases Ltd., Mobile Telecommunication Ltd., M/s Rashel Agrotech Ltd. and M/s. Sentil Agrotech Ltd, which were purchased during the year 1999-2000 and 2000-2001. The entire sale consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merit in this Appeal and the same is dismissed with no order as to costs. 22. The main contention of the Revenue in the instant case is that the purchase of 9000 shares of M/s Bolton Properties Ltd. were claimed to have been made by the assessee from M/s Stock Home, whose proprietor was Shri Anil Kumar Jhunjhunwala, Member of the Magadh Stock Exchange informed the AO that no such person named as Shri Anil Kumar Jhunjhunwala, proprietor of M/s Stock Home was known to them since 1991. Further the payments for purchases were made in cash. Thus, the AO doubted on the genuineness of purchase of said shares in April, 2003 for Rs. 33,15,612/-. 23. We find that the assessee has placed at page No. 19 to 20 of the paper book, copy of share certificates of M/s Bolton Properties Ltd. which shows that the said company endorsed the shares in the name of the assessee on 18.08.2003. Thus, we find that it is not in dispute that the assessee actually purchased the shares in question before 18th August 2003, which is during the previous year relevant to assessment year 2004-05. The return of income of the assessee in the assessment year 2004-05 has been accepted by the department and no action was t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 lakh per month. Considering that only four working days were left after the last wage payment was made the outstanding amount of Rs. 30,76,968/- appears to be unreasonable, excessive and without any basis. In view of the discussion, the wages outstanding as on 31.03.2005 i.e. Thursday could at best be Rs. 5 lakhs for the particular week. The combined wages for the last week and the outstanding amount of the earlier period cannot be more than Rs. 10 lakh. The assessee has shown creditor for wages at Rs. 30,76,968/-. Hence, the AO added Rs. 20,76,968/- as the unexplained labour/wage expenses to the total income of the assessee. 26. Against the order of AO, the assessee carried the matter before the CIT (A) and submitted that all books of account, bill, vouchers and wages sheets/register / muster roll etc produced before the A.O during the course of assessment. The A.O checked the all bills, vouchers, wages sheets / register / muster roll etc maintained by the assessee. He had not found any defects or mistake in books of account, bills, vouchers and wages sheets / register / muster roll maintained by the assessee. The assessee has not pointed out any specific mistake or defects in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vouchers, wages sheets / register / muster roll etc were produced and test checked. It remains an undisputed fact that the appellant did have permanent labour force as against presumption of the A.O that the entire work force is temporary. The A.O has not disputed the submission of the appellant that there was change in the nature of work inasmuch as the contracts executed during the year under consideration were more. labour intensive and thus, involved more cost on wages. It is seen that, the A.O has not pointed out any discrepancy in the books of accounts, bills/vouchers, nor did the A.O opine that the books of accounts were incomplete. It is settled principle of law that no addition can be made on the ground of lower GP rate, until and unless, the books of accounts have been rejected by the A.O, by invoking the provisions of Section 145, after giving the appellant a reasonable, opportunity of being heard. Further, it is equally settled legal position that the books of accounts cannot be rejected merely on the ground of low GP rate. Rather, the A.O has to bring on record specific defect in the books of accounts of the appellant as a result of which reasonable profits cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant, particularly, when it was for the appellant - considering the business interest - to organize the business affairs in the manner to the best of its business interest. As already stated, the accounts are statutorily audited and the declared version on the basis of such audited accounts was virtually accepted since there was no estimation of GP or NP. In the given facts and circumstances, there was no justification for making adhoc estimated disallowances out of expenses claimed, as held in Monarch Foods Pvt. Ltd. v. ACIT (1996) 54 TTJ (ARD.) 405 and Raj Enterprises v. ITO (1995) 51 TT J (Jaipur) 408. 33. When books were not rejected and when the income was not estimated and when the income returned was accepted as correct, without disturbing the same, it is not understood as to how in a scrutiny assessment such adhoc disallowances were permissible, particularly, when no evidence whatsoever was brought on record against the appellant to justify such adhoc disallowances. Since, the loss returned on the basis of audited books was accepted as correct, it is implied that, the correctness and genuineness of the expenses claimed in the accounts, which were subjected to Audit, stood u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k charges-In the preceding year assessee was doing the business of Kimam whereas in the year under consideration he changed its product to scented supari also-This change has led to higher cost in making the goods marketable Expenses incurred by the assessee are fully vouched and the payments are real Thus, the impugned disallowance of Rs. 2 lakhs on ad hoc basis on the ground that the expenses claimed by the assessee are excessive as compared to the expenses incurred in the immediately preceding year is unwarranted and uncalled for. Business expenditure-Allowability-Ad hoc disallowance of personal expenses-AO made a lump sum disallowance of Rs. 1 lakh out of conveyance expenses, repairing and maintenance expenses, traveling expenses and depreciation on the ground that personal element in the expenditure cannot be ruled out - Not justified-AO himself has noted in the assessment order that the expenses have been incurred for the purpose of the assessee's business-Accounts of the assessee have been duly audited under s. 44AB and the auditors have certified that no personal expenses have been debited to the P L a/c - AO has made the disallowance only on assumptions and presumption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . for making the impugned estimated addition, were extraneous, irrelevant and opposed to the facts obtaining from the record. The fate of the appellant could not be decided by the A.O. on mere surmises or probabilities (Northern Bengal Jute Mills Trading Co. Ltd. v. CIT (1968) 70 ITR 407 (Cal). The mere existence of reasons for suspicion would not tantamount to evidence (Cal. HC in Narayan Chandra Baidya v. CIT (1951) 20 ITR 287 (Cal.). The AO was not entitled to make pure guess and make the impugned assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the same. The rule of Law on this subject has been fairly and rightly stated bye Lahore HC in Seth Gurmukh Singh v. CIT (1944) 12 ITR 393 (Lah.) [Dhakeshwari Cotton Mills Ltd. v. CIT (1954) 26 ITR 775, 782 (SC)]. It was observed by the SC in Dy. Commissioner of Agricultural Income Tax and Sales Tax v. Travancore Rubber and Tea Co. (1967) 20 STC 520 that in all cases of taxation the burden of proving necessary ingredient laid down by law to justify taxation is upon the authorities. Since this was not proved against the appellant on the strength of evidence, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material on record to controvert the findings of CIT(A). In our considered opinion, the AO has not given any basis of his assuming that outstanding wages at the end of the year cannot be more than Rs. 10 lakhs. The DR also could not, during the course of hearing, substantiate the finding of AO of his arriving at such a conclusion. 31. In the above facts and circumstances of the case, in our considered opinion, the disallowance of labour and wages outstanding as at the end of the year under the head sundry creditors cannot be sustained in law. Hence, we confirm the order of CIT (A) and dismiss this ground of appeal of the Revenue. 32. Brief facts relating to the ground No. 3 are that the AO stated that the assessee has debited net amount of Rs. 9,50,975/- on account of interest in the profit and loss account. From the list of loans and advances to four parties namely Aarson Motors, Kedar Agrawal (HUF), Rahul Agrawal and TISCO. The assessee, in its reply dated 27.11.2007 has explained that it has received interest from Rahul Agrawal but has not received the same from others. He explained that he has received interest free loan from some family members and hence did not charge interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was held that: The A 0 has not brought on record anything which proves that there is any expenditure incurred towards earning of dividend income. The AO has not examined the accounts of the appellant and there is no satisfaction recorded by the AO about the correctness of the claim of the appellant and without the same he invoked Rule 8D. While rejecting the claim of the appellant with regard to expenditure or no expenditure, as the case may be, in relation to exempted income, the AO has to indicate cogent reasons for the same. The AO has not considered the claim of the appellant and straight away embarked upon computing disallowance under Rule 8D of the Rules on presuming the average value of investment at !j% of the total value. This is not permissible. 44. I find that the case of the appellant finds support from the decision in SSPDL Ltd. vs. Deputy Commissioner of Income-tax, Circle-3(2), Hyderabad [2013] 33 taxmann.com 447 (Hyderabad - Trib.) dated April 5,2013 wherein it was held that .. It was brought to notice that out of the above investments, investment in shares other than of subsidiary companies was not in the assessment year under consideration. It was made long back ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax -IV vs. Suzlon Energy Ltd. [2013] 33 taxmann.com 151 (Gujarat) dated April 3,2013 it was held that: Section 14A of the Income-tax Act, 1961 - Expenditure incurred in relation to income not includible in total income [Dividends] - Whether where investment was made by appellant in foreign subsidiaries, disallowance of interest expenditure under section 14A was not justified since dividend income from foreign subsidiaries, is taxable in India - Held, yes - Whether where appellant had own interest free funds many times over the investment made in Indian subsidiaries and further, there was no direct nexus between interest bearing borrowed funds and such investment, no disallowance of interest expenditure could be made under section 14A - Held, yes [Para 3.1 ] 46. In Director of Income-tax (IT)-II vs. BNP Paribas SA [2013] 32 taxmann.com 276 (Bombay) dated February 14,2013 it was held that: Section 14A of the Income-tax Act, 1961 - Expenditure incurred in relation to exempt income [Dividend] - Assessment year 2002-03 - During previous year appellant earned dividend income on shares and claimed same to be exempt under section 10(33) on plea that investment in shares was made f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not form part of the total income under the Act. In other words, sub-so (2) deals with cases where the appellant specifies a positive amount of expenditure in relation to income which does not form part of the total income under the Act and sub-s. (3) applies to cases where the appellant asserts that no expenditure had been incurred in relation to exempt income. In both cases, the AO, if satisfied with the correctness of the claim of the appellant in respect of such expenditure or no expenditure, as the case may be, cannot embark upon a determination of the amount of expenditure in accordance with any prescribed method, as mentioned in sub-so (2) of S. 14A. It is only if the AO is not satisfied with the correctness of the claim of the appellant, in both cases, that the AO gets jurisdiction to determine the amount of expenditure incurred in relation to such income which does not form part of the total income under the Act in accordance with the prescribed method, the prescribed method being the method stipulated in r. 8D. While rejecting the claim of the appellant with regard to the expenditure or no expenditure, as the case may be, in relation to exempt income, the AO would have t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim of the appellant with regard to the extent of such expenditure and such rejection must be for disclosed cogent reasons. It is then that the question of determination of such expenditure by the AO would arise. The requirement of adopting a specific method of determining such expenditure has been introduced by virtue of sub-s. (2) of S. 14A. Prior to that, the assessing was free to adopt any reasonable and acceptable method. Thus, the fact that sub-ss. (2) and (3) of S. 14A and r. 8D would operate prospectively (and, not retrospectively) does not mean that the AO is not to satisfy himself with the correctness of the claim of the appellant with regard to such expenditure. If he is satisfied that the appellant has correctly reflected the amount of such expenditure, he has to do nothing further. On the other hand, if he is satisfied on an objective analysis and for cogent reasons that the amount of such expenditure as claimed by the appellant is not correct, he is required to determine the amount of such expenditure on the basis of a reasonable and acceptable method of apportionment. So, even/en' the pre-r. 8D period, whenever the issue of S. 14A arises before an AO, he h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and overdraft and/ or loan taken then a presumption would arise that investments would be out of the interest free funds generated or available with the company, if the interest free funds were sufficient to meet the investments. Hon ble Allahabad High Court in case of CIT Vs. Radico Khaitan Ltd 274 ITR 354 (All), Hon ble Delhi High Court in case of CIT Vs. Tin Box Co. 260 ITR 637 (Del) and Hon ble Madras High Court in case of CIT Vs. South India Corporation (Agencies) Ltd .290 ITR 217 (Mad) are also in favour of the appellant. Looking to the facts and circumstances of the case as also decisions cited above, the disallowance made by the AO cannot be sustained. Hence, the disallowance is deleted. The appellant gets relief of Rs. 24,464/-. 36. We have heard rival submissions and perused the orders of lower authorities and materials available on record. In the instant case, the AO observed that the assessee has debited Rs. 9,50,975/- on account of interest in its profit and loss account. The assessee has given loans and advances to four parties which are not for the business purpose of the assessee and, therefore, he disallowed interest of Rs. 24,464/- by estimating the same @12% pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has not maintained log book and that personal use of vehicles cannot be denied by the assessee. We find that the AO has not given the basis of working out the disallowance of Rs. 25,000/- out of the vehicle expenses of Rs. 2,53,689/- claimed by the assessee. Adhoc disallowance of any genuine business expenditure of the assessee is not permitted in law. Therefore, we find no good reason to interfere with the order of CIT(A), which is confirmed and this ground of appeal of Revenue is dismissed. 46. Brief facts relating to ground No. 5 are that the AO has stated that the assessee has not shown any withdrawal for household expenses. The minimum expenses of the assessee per month cannot be less than Rs. 1,20,000/-. Therefore, the AO added the same to the total income of the assessee on account of low withdrawal. 47. The assessee carried the matter before the CIT (A) and submitted that the family of the assessee consists of five members and no school going children. The assessee was withdrawing Rs. 62,500/- for household expenses during the year under consideration. The assessee living with his own house and the living standard of the assessee is medium. The assessee was withdraw ..... X X X X Extracts X X X X X X X X Extracts X X X X
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