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Income Tax Appellate Tribunal, KOLKATA ‘A’ BENCH, KOLKATA
Before: Shri P.M. Jagtap & Shri S.S. Viswanethra Ravi
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IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA ‘A’ BENCH, KOLKATA
Before Shri P.M. Jagtap, Accountant Member and Shri S.S. Viswanethra Ravi, Judicial Member
I.T.A. No. 24/KOL/ 2013 Assessment year : 2005-2006
Chainroop Bohra,....................................................................Appellant 1, Chandney Chowk Street, Kolkata-700 072 [PAN : ADBPB 5354 N]
-Vs.- Deputy Commissioner of Income Tax,...................................Respondent Central Circle-XXVII, Kolkata, 110, Shanti Pally, Aayakar Poorva, Kolkata-700 107 &
I.T.A. No. 25/KOL/ 2013 Assessment year : 2005-2006
Bimla Bohra,.............................................................................Appellant 1, Chandney Chowk Street, Kolkata-700 072 [PAN : ADEPB 2647 P] -Vs.-
Deputy Commissioner of Income Tax,...................................Respondent Central Circle-XXVII, Kolkata, 110, Shanti Pally, Aayakar Poorva, Kolkata-700 107 &
I.T.A. No. 26/KOL/ 2012 Assessment year : 2005-2006 Pradeep Bohra,........................................................................Appellant 1, Chandney Chowk Street, Kolkata-700 072 [PAN : ADEPB 2644 Q] -Vs.- Deputy Commissioner of Income Tax,...................................Respondent Central Circle-XXVII, Kolkata, 110, Shanti Pally, Aayakar Poorva, Kolkata-700 107
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&
I.T.A. No. 27/KOL/ 2013 Assessment year : 2005-2006
Alka Bohra,...............................................................................Appellant 1, Chandney Chowk Street, Kolkata-700 072 [PAN : AEAPB 0809 E]
-Vs.- Deputy Commissioner of Income Tax,...................................Respondent Central Circle-XXVII, Kolkata, 110, Shanti Pally, Aayakar Poorva, Kolkata-700 107
Appearances by: Shri Vikash Surana, FCA, for the assessees Shri Debashis Banerjee, JCIT, Sr. D.R., for the Department
Date of concluding the hearing : October 07, 2015 Date of pronouncing the order : October 09, 2015
O R D E R Per Shri P.M. Jagtap:- These four appeals filed by the four assessees against four separate orders of ld. Commissioner of Income Tax (Appeals), Central-II, Kolkata, all dated 29.10.2012 involve a common issue and the same, therefore, have been heard together and are being disposed of by a single consolidated order for the sake of convenience.
All the four assessees in the present case are individuals, who claimed exemption on account of long term capital gain arising from the sale of shares of M/s. Continental Fiscal Management Limited and M/s. Swastik Securities & Finance Limited in their returns of income filed for the year under consideration. The said returns filed by all the four assessees were initially processed by the Assessing Officer under section 143(1) of the Income Tax Act, 1961. A search and seizure action under section 132 was conducted in the case of one Shri Shyamsukha on
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24.10.2006. During the course of the said action, certain documents were found and seized from the residence of Shri Shyamsukha identified as pages 7 to 10 of Annexure-‘A’ indicating that cash of various persons including the four assessees in the present case was converted into cheque by way of the alleged accommodation entries in the form of purchase and sale of shares in order to claim the bogus long-term capital gain and this position was accepted even by Shri Shyamsukha in his statement recorded under section 132(4) of the Act. He also admitted of having acted as an intermediary to generate all these bogus transactions for earning certain commission. On the basis of these findings of the search conducted in the case of Shri Shyamsukha, assessments in the case of all the four assessees were reopened by the Assessing Officer and he issued notices under section 148 to all the four assessees on 20.12.2007 after recording the reasons. In reply, all the four assessees stated that the returns originally filed by them may be treated as the returns filed in response to the notices issued under section 148. During the course of assessment proceedings, all the four assessees denied of having any connection with Shri Shyamsukha. The Director of M/s. Ahilya Commercial Pvt. Limited, which had acted as a broker in the alleged bogus transactions of purchase and sale of shares also denied to have known Shri Shyamsukha in the statement recorded under section 131. It was, however, noted by the Assessing Officer that the said broker firm was also subjected to a search action in December, 2005, during the course of which undisclosed income of Rs.65,00,000/- was surrendered by it on account of receipt of commission for raising bogus long-term capital gain for its clients. He also noted that the details of share transactions as found recorded in the relevant documents seized from the residence of Shri Shyamsukha were tallying with the transactions declared by all the four assessees in their returns of income while claiming exemption on account of long term capital gain. He also took note of the fact that both the Companies, namely M/s. Continental Fiscal
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Management Limited and M/s. Swastik Securities & Finance Limited did not perform that well during the relevant period so as to encourage the assessees to make investment in their shares and to justify the long term capital gain claimed to be earned by them. He also found it to be very strange that the assessees did not make further investment in the said shares even after having earned astronomical returns by way of long term capital gain.
Based on his findings/observations as noted above, the Assessing Officer required the assessees to explain as to why their claim of long term capital gain arising from the sale of shares of the two Companies should not be treated as bogus and the corresponding amounts should not be added to their total income as unexplained cash credits in terms of section 68 of the Act. In reply, the following explanation was offered by the assessees :- “1. During the course of deposition/statement made u/s 131 of the I.T. Act, 1961 in the above mentioned proceeding before your honour, I had clearly stated that there was no business /financial relation whatsoever with Mr. Narendra Kumar Shyamsukha. Neither I know him personally. Further the directors of Ahilya Commercial Pvt. Ltd. Are neither related to me nor I know them personally.
No cash was converted into cheque by way of trading in shares of Continental Fiscal Management Ltd., Swastik Securities & Finance Ltd. As mentioned by your honour in the above mentioned notice. I have never paid any cash to a person called Narendra Kumar Shyamsukha. This fact was duly narrated by myself during the proceeding u/s 131 of the I.T. Act, 1961.
The long term capital gain earned by me on these transaction are duly supported by contract notes/bills (duly submitted) and are made through recognized stock exchange which can be verified. All the transactions were made through a/c payee cheque only. The conditions to be satisfied for a transaction to be long term capital gain are fully made.
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In order to make investment in share market it does not mean that one has to invest in those companies which are media friendly or are regularly mentioned in newspaper. There are so many listed companies who have given handsome/mindboddling return to the investor whom we have never heard of. Further, it entirely depend on the investor (i) when to invest, (ii) where to invest, (iii) how much to invest. It is not necessary that one must regularly invest in the same stock even if he/she gets handsome return in that. It all depends on the investment opportunity available at that particular time in the stock market.
Your honour, I have earned long term capital gain on those 2 companies’ shares which are disclosed fully. All the relevant papers/ submission as desired have duly been furnished to you. Only on the basis of the statement given by the so called Mr. Narendra Kumar Shyamsukha and the disclosure made by him as well as the directors of M/s. Ahilya Commercial Pvt. Ltd., the transaction should never be termed as bogus and should not be added to my total income as unexplained cash credit in terms of section 68 of the I.T. Act.
Therefore, on the basis of the above mentioned fact, the proceeding initiated u/s. 147 may please be dropped”.
The above explanation of the assessees was not found acceptable by the Assessing Officer. According to him, if the assessees were not known to Shri Shyamsukha, how it could be possible that papers showing transactions in shares made by the assessees were found from his possession. He also found it difficult to comprehend that if at all there were no such accommodation/ bogus transactions made by the assessees of purchase and sale of shares through Shri Shyamsukha, why did he admit to have earned commission income from such transactions and also offered the same for tax. He also found from the enquiry conducted through Inspector that M/s. JIT Software Solutions Pvt. Limited stated to be the purchaser of the shares did never exist at the address provided by the broker. On the basis of these adverse findings, the Assessing Officer arrived at a conclusion that Shri Shyamsukha through M/s. Ahilya
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Commercial Pvt. Limited had provided accommodation entries to the assessees for claiming exemption on account of bogus long term capital gain and accordingly the amounts of such alleged bogus long term capital gain were added by him to the total income of the assessees treating the same as unexplained cash credits under section 68 in the assessments completed under section 143(3) read with section 147 vide orders dated 31.12.2008.
Against the orders passed by the Assessing Officer under section 143(3) read with section 147, appeals were preferred by all the four assessees before the ld. CIT(Appeals). During the course of appellate proceedings before the ld. CIT(Appeals), it was pointed out that all the shares of the two Companies, viz. M/s. Continental Fiscal Management Limited and M/s. Swastik Securities & Finance Limited, were purchased by the assessees through the stock broker in financial year 2002-03 by making payment through account payee cheques. It was also pointed out that the investment made in the said shares was duly reflected in the Balance-sheets of the assessees as on 31.03.2003 and 31.03.2004 before the sale of the corresponding shares in financial year 2004-05. It was also brought to the notice of the ld. CIT(Appeals) that the sale proceeds of the said shares were received by the assessees through account payee cheques and all these transactions of purchase and sale of shares were duly supported by the Contract Notes issued by the concerned broker. It was contended that this direct evidence available on record showing the genuineness of the transactions in shares, however, was ignored by the Assessing Officer and the claim of the assessees for long term capital gain was held to be bogus by him on the basis of statement of third person, who was not even known to the assessees. It was submitted that even during the course of search, no evidence whatsoever was found from the possession of Shri Shyamsukha, which could prove that the assessees had paid any cash to him for converting into cheques as alleged by the
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Assessing Officer. It was also submitted that the broker’s name as appeared in the relevant documents was M/s. Ashika with whom the assessees, in fact, had not done any transaction of shares. It was argued that the Assessing Officer also did not allow any opportunity to the assessees to cross examine Shri Shyamsukha and, therefore, no adverse inference could be drawn against the assessees merely on the basis of declaration of some commission income by the said third person. It was contended that the genuineness of the claim of the assessees for long term capital gain was duly supported by a direct evidence in the form of broker’s note and payments made through account payee cheques at the relevant time and the additions made by the Assessing Officer by treating the same as bogus by invoking the provisions of section 68, were not sustainable.
The ld. CIT(Appeals) did not find merit in the submissions made on behalf of the assessees and proceeded to confirm the additions made by the Assessing Officer under section 68 treating the long term capital gain shown by the assessees as bogus for the following reasons given in paragraph 5.2 of his impugned order:- “On careful consideration of facts, I am not inclined to agree with the submission of the appellant that the documents seized from the possession of Mr. Shyamsukha have no evidentiary value or that there is no direct evidence that the appellant had paid the cash in lieu of cheque received for sale of shares. As per the provisions of section 292C of the Act, where any books of account or other documents are found in the possession or control of any person in the course of search or survey, it may, in any proceeding under the Act, be presumed that such books of account and other documents are true. In this case, search operation was conducted in the premises of Shri Narendra Shyamsukha and in the course of search page nos. 7 to 10 were seized as per bundle no. NKS/3. At the time of search, in the statement, it was stated by Shri Shyamsukha that the transactions noted on these papers are on account of bogus long term capital gain. Now, as per the provisions of section 292C, the first presumption is that the said seized papers
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belong to Shri Shyamsukha and the noting made on these papers are true. However, on the basis of this presumption, it cannot be concluded that the transactions of shares noted on these papers pertain to Shri Shyamsukha because he had not disclosed any long term capital gain on sale of shares as noted on the seized papers and, therefore, it cannot be concluded that the cash as per the seized paper was paid by Shri Shyamsukha. On the contrary, all the persons including the appellant, against whose name share transactions are written in the seized papers, had disclosed the same amount of long term capital gain in their respective return of income. It means that the transactions of shares recorded on the seized documents are true and the beneficiaries are those persons whose names are written on the seized documents. The details/ dates of purchase and sale of shares written on the seized papers match with the details furnished by the appellant in the course of appellate proceedings as well as declared in the return of income. Thus, it will not be correct to say that the seized documents have no evidentiary value. As per the seized papers the beneficiaries whose names are written on the seized papers including the appellant, had paid the cash to arrange the bogus long term capital gain. This fact cannot be denied or overlooked. The appellant has argued that it is on Mr. Shyamsukha to explain as to why he has kept the details of appellant’s share transactions carried on through the broker because the appellant do not have any relation at all with this person and did not pay any amount of cash to him. On careful consideration of facts, I find no substance in this argument of the appellant. Shri Shyamsukha was having details of share transaction of all those persons including the appellant in whose cases he had acted as an intermediary to facilitate the transactions of bogus capital gain. Otherwise, there is no reason that a third person would keep the details of share transactions of non- interested persons. It is not the case that Shri Shyamsukha was having any animosity with the appellant or for that matter with other persons that he would keep incriminating details of share transactions in the name of these persons with the hope that search operation u/s 132 would be conducted in his case and he would handover such details to the tax department. He was having the details of shares of all the persons as per the seized documents because he was involved in facilitating the accommodation entries of long term capital gain on behalf of all the beneficiaries mentioned in the seized documents. I also do not found any
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merit in the submission of the appellant that there is no direct evidence that any amount of cash was paid by the appellant. I am of the opinion that there could not be any eye witness for this, but, there are documentary and circumstantial evidences that the appellant had paid cash to obtain entry of long term capital gain. It is an open secret that during the financial years 2002-03, 2003-04 and 2004- 05, etc. the practice of taking accommodation entries of long term capital gain was rampant in Kolkata. Thus, the documents seized from the possession of Shri Shyamsukha cannot be ignored or cannot be treated as waste pieces of paper. The appellant has also argued that the name of the broker written on the seized paper is different than the broker through whom shares were purchased and sold. I am of the opinion that it might be possible because in this activity several persons and several brokers were involved. But, in any case, it does not mean that the transactions noted on the seized papers are not true. The appellant has relied on various judicial decisions, but they are distinguishable on facts and none of the decision is applicable to the facts of the appellant. In view of above, it is held that the AO was justified in making addition u/s 68 of the Act. The addition made by the AO is confirmed. The ground nos. 2 to 5 are dismissed”.
Aggrieved by the orders of the ld. CIT(Appeals), the assessees have preferred these appeals before the Tribunal.
The ld. Counsel for the assesses, at the outset, submitted that there were 13 persons in whose cases similar additions were made by the Assessing Officer under section 68 by treating their claim of long term capital gain arising from sale of shares as bogus by relying on the findings of search action conducted in the case of Shyamsukha. He submitted that all these thirteen persons disputed the said additions made by the Assessing Officer under section 68 by filing the appeals before the ld. CIT(Appeals) and when the ld. CIT(Appeals) confirmed the said additions in case of three assesses, namely Late Mrs. Kamala Devi Agarwal (L/R. Shri Ashok Kumar Gupta), Mr. Ashok Kumar Gupta and Mrs. Amita Gupta, appeals were preferred by the said three assessees before
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the Tribunal. He submitted that the ‘SMC’ Bench of this Tribunal has already disposed of the said appeals vide its appellate order dated 02.06.2015 passed in ITA Nos. 500-502/KOL/2013 accepting the genuineness of the similar claim of the said three assessees of long term capital gain arising from the similar type of transactions. He contended that the common issue involved in the case of the present four assesses thus is squarely covered in favour of the assessees by the said decision of the Tribunal rendered on 02.06.2015, wherein a similar issue has been decided by the Tribunal in favour of the assessees involving similar facts and circumstances of the case.
Ld. D.R., on the other hand, has not been able to show that there is any material distinction in the facts involved in the present case as compared to the facts involved in the case of Late Mrs. Kamala Devi Agarwal (L/R. Shri Ashok Kumar Gupta) in ITA No. 500/KOL/2013, Mr. Ashok Kumar Gupta in ITA No. 501/KOL/2013 and Mrs. Amita Gupta in ITA No. 502/KOL/2013, decided by the Tribunal vide its order dated 02/06/2015, wherein a similar issue has been decided by the Tribunal in favour of the assessees. He, however, submitted that there are various factors brought on record by the Assessing Officer which clearly indicate that the transactions of purchase of shares claimed to be made by the assessees were accommodation entries and capital gain arising from such transactions was bogus. He invited our attention to the relevant portion of the assessment order in order to highlight such factors as under:- (i) The details found recorded in the relevant documents seized from the possession of Shri Shyamsukha relating to the purchase and sale of transactions exactly tallied with the transactions declared by the assessees in support of their claim for long term capital gain.
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(ii) Shri Shyamsukha admitted that all these transactions were accommodation entries given by the concerned broker in order to facilitate the concerned persons including the assessees to claim bogus long term capital gain.
(iii) Shri Shyamsukha also admitted of having earned commission for helping the assessees to get the accommodation entries from the concerned broker and offered such commission as income to tax.
(iv) The two Companies whose shares were claimed to be purchased and sold by the assessees giving rise to the substantial amount of capital gain had no credential and even after earning exorbitant profit in the said shares, the assessees never made any further investment in the said shares.
(v) The broker through whom the transactions in question of purchase and sale of shares were made by the assessees got suspended subsequently by the Stock Exchange for indulging into unfair practices.
(vi) The party to whom shares were claimed to be sold by the assessees was not found in existence at the address given.
Ld. D.R. contended that all the above factors brought on record by the Assessing Officer were sufficient to indicate that the relevant transactions of purchase and sale of shares were nothing but accommodation entries and the capital gain arising from the same claimed as exempt by the assessees was bogus. He contended that all these factors brought on record by the Assessing Officer are clearly abnormal and this abnormality leads to the conclusion that the claim of the assessees for long term capital gain was bogus. He contended that this
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abnormality, however, has not been appreciated or considered by the Tribunal while accepting the claim of the assessees for long term capital gain in the case of Late Mrs. Kamala Devi Agarwal (L/R. Shri Ashok Kumar Gupta), Mr. Ashok Kumar Gupta and Mrs. Amita Gupta.
We have considered the rival submissions and carefully perused the relevant material available on record. It is no doubt true that there are various factors as pointed out by the Assessing Officer and further highlighted by the ld. D.R., which create a doubt about the genuineness of the claim of the assessees for long term capital gain arising from the sale of shares of two Companies. However, these factors were very much there even in the case of Late Mrs. Kamala Devi Agarwal (L/R. Shri Ashok Kumar Gupta)in ITA No. 500/KOL/2013, Mr. Ashok Kumar Gupta in ITA No. 501/KOL/2013 and Mrs. Amita Gupta in ITA No. 502/KOL/2013, decided by the Tribunal vide its order dated 02/06/2015 (supra) and it cannot be said that these factors highlighted by the Assessing Officer even in the said cases have not been considered or appreciated by the Tribunal while accepting the genuineness of the similar claim of the assessees for the long term capital gain. Moreover, these factors were in the nature of circumstantial evidence based mainly on the statement given by a third person, whereas there was a direct evidence in the form of purchase of shares by the assessees in financial year 2002-03 on payment made by account payee cheques, the reflection of the said shares as investment in the balance-sheets of the assessees as on 31.03.2003 and 31.03.2004 and sale of the said shares in the financial year 2004-05 by the assessees against the payments received again by account payee cheques. The claim of the assessees of these transactions in purchase and sale of shares was also duly supported by the contract notes issued by the concerned brokers. This direct evidence available on record was preferably relied upon by the Tribunal vide its order dated 02/06/2015 in the case of Late Mrs. Kamala Devi Agarwal (L/R. Shri Ashok Kumar
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Gupta)in ITA No. 500/KOL/2013, Mr. Ashok Kumar Gupta in ITA No. 501/KOL/2013 and Mrs. Amita Gupta in ITA No. 502/KOL/2013 (supra) over the circumstantial evidence brought on record by the Assessing Officer to come to the conclusion that the relevant transactions of purchase and sale of shares giving rising to long term capital gain to the assesses were genuine transactions and the additions made by the Assessing Officer under section 68 by treating the said transactions as bogus were not sustainable. Having regard to all the facts and circumstances of the case and the material available on record, we find no justifiable reason to take a different view than the one taken by the Tribunal in the case of Late Mrs. Kamala Devi Agarwal (L/R. Shri Ashok Kumar Gupta)in ITA No. 500/KOL/2013, Mr. Ashok Kumar Gupta vide order dated 02/06/2015 (supra) accepting the similar claim of the assessees for long term capital gain in the similar facts and circumstances. We, therefore, follow the decision of the ‘SMC’ Bench of this Tribunal in the cases of Late Mrs. Kamala Devi Agarwal (L/R. Shri Ashok Kumar Gupta) in ITA No. 500/KOL/2013, Mr. Ashok Kumar Gupta in ITA No. 501/KOL/2013 and Mrs. Amita Gupta in ITA No. 502/KOL/2013 (supra) and accept the claim of the assessees for long term capital gain as genuine. The additions made by the Assessing Officer under section 68 and confirmed by the ld. CIT(Appeals) treating the said capital gain as bogus, are accordingly deleted.
In the result, all these four appeals of the assessees are allowed. Order pronounced in the open Court on October 9, 2015.
Sd/- Sd/-
(S.S. Viswanethra Ravi) (P.M. Jagtap) Judicial Member Accountant Member Kolkata, the 9th day of October, 2015
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Copies to : (1) Chainroop Bohra, 1, Chandney Chowk Street, Kolkata-700 072
(2) Bimla Bohra, 1, Chandney Chowk Street, Kolkata-700 072
(3) Pradeep Bohra, 1, Chandney Chowk Street, Kolkata-700 072
(4) Alka Bohra, 1, Chandney Chowk Street, Kolkata-700 072
(5) Deputy Commissioner of Income Tax, Central Circle-XXVII, Kolkata, 110, Shanti Pally, Aayakar Poorva, Kolkata-700 107
(6) Commissioner of Income-tax (Appeals), Central- II, Kolkata (7) Commissioner of Income Tax, Kolkata (8) The Departmental Representative (9) Guard File
By order
Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S.