Vitnal Gandhi, President. - (1.) THIS appeal by the assessee for assessment year 1997-98 directed against order of CIT (Appeals) confirming addition made in the hand of the assessee.
(2.) The facts of the case briefly stated are that the assessee filed return disclosing income of Rs. 14,28,255 besides long-term capital gains of Rs. 25,06,535. The dispute in the present appeal relates to long-term capital gains shown by the assessee which was claimed as per following details : judgement_3471_tlit0_20050.htm 3. The assessing officer during the course of assessment proceedings asked the assessee to furnish details of share transactions and found that sale of shares of Chirau Finance Investment & Leasing Co. (CFIL) Ltd. was carried through Stock Broker M/s. J.K. Jain & Company. The other shares of M/s. Nishtha Finance and Investment (NFI) (India) Ltd. were sold through Stock Broker M/s. Rekha and Co. The assessing officer issued summons to these Brokers. The summons to M/s. J.K. Jain and Co. were received back with the remarks. No such firm exists at the given address. In response to summons to M/s. Rekha & Co. their authorized representative appeared but did not produce any books or records relating to sales affected on behalf of the assessee. The broker claimed that books of account were lost. In order to verify further facts, the assessing officer issued summons to two companies involved in transactions, namely, M/s Chirau Finance Investment and Leasing Co. Ltd. and M/s. Nistha Finance and Investment (I) Ltd. The Income-tax Inspector (IT) was also sent to the known address of these concerns but summons were received back with remarks that no such companies existed at the given address. It also gave a similar report. 4. The assessing officer confronted the assessee with the result of enquiries as per order sheet entries dated 22-12-1999 and required the assessee to furnish the names and addresses of the buyers and also gave documentary evidence to show that shares were actually sold by the brokers in assessees name. The assessee thereafter gave new address of M/s. J.K. Jain and Co. but showed his inability to furnish names and addresses of buyers of shares as shares were sold through the broker. However some names of buyers of shares of M/s. Chirau Finance Investment and Leasing Co. Ltd. were furnished. These are recorded in the assessment order. 5. The assessing officer issued fresh summons on 5-1-2000 to broker M/s. J.K. Jain and Co. He also issued summons to the purchasers of shares of M/s. Chirau Finance Investment & Leasing Co. Ltd. at the address given to him. As per the assessment order, there was no compliance of summons by M/s. J.K. Jain & Co. The summons to the purchasers could not be served for the reasons that either no such person was staying at the address given or address furnished was incomplete. A fresh attempt made to serve summon on M/s. Chirau Finance Investment and Leasing Co. Ltd. on 7-1-2000 also remained unsuccessful. 6. In the above back-drop the assessing officer confronted the assessee with the facts stated above and asked him as to why the following deposits in the name of the assessee and his minor son in bank Account with S.B.I., Nehru Place, New Delhi be not added as unexplained income of the assessee:- judgement_3471_tlit0_20051.htm 7. The assessment was again taken up by the assessing officer on 17-2-2000 when Shri P.K. Kundra, Advocate appeared on behalf of the assessee. After discussion, he offered to produce broker Shri J.K. Jain for examination of the assessing officer. The offer was accepted. He was also required to produce all the persons to whom 50,000 shares of Chirau Finance Investment & Leasing Ltd. were claimed to be sold by the assessee. However, the assessee did not comply with the above directions of the assessing officer, although several adjournments were granted to the assessee from time to time till 28-2-2000 as is recorded by the assessing officer at pages 4 and 5 of the assessment order. 8. The assessing officer accordingly concluded that claim relating to sale of shares was not substantiated by the assessee with any evidence. He also referred to entries in bank Account No. 1102556 of M/s. J.K. Jain and Co. with bank of Punjab, Karol Bagh, New Delhi from which money was remitted to bank Account No. 12846 with SBI, Nehru Place of the assessee as alleged sale consideration of shares. The assessing officer also found that money to bank Account No. 1102556 (M/s. J.K. Jain and Co.) was remitted from Account No. 1102283 with the same bank maintained in the name of M/s. Shubh Investments 23/7, Old Rajender Nagar, New Delhi. On above accounts the learned assessing officer has observed, "enquiries further revealed that whenever the money was remitted to assessees bank Account with SBI, Nehru Place, it was first deposited in cash in Account No. 1102283 and from there it was transferred to assessees account through Account No. 1102556". The assessing officer further observed that payments received on account of alleged sale of shares though Cheques were from amounts deposited in cash immediately before remittance to above bank account. He has further observed that M/s. Shubh investments was shown to be a Proprietorship concern of Shri Davender Kumar who was not found at the address available in Banks record nor his introductor Shri Mukesh Kumar could be located at the address given in Banks record. The assessing officer accordingly treated M/s. Shubh Investments as a bogus concern used by assessee to route his unaccounted money. At pages 6 and 7 of his order, the learned assessing officer has furnished a chart showing deposits of money in cash in above accounts and then its remittance to the account of the assessee. Likewise the assessing officer observed that source of deposit of Rs. 2,33,520 on 1-3-1997 and Rs. 1,16,760 on 4-2-1997 in assessees bank Account No. 12846 allegedly received by the assessee by way of sale proceeds of 6,000 shares of M/s. Chirau Finance Investment& Leasing Co. Ltd. could also not be explained. The above deposits were also treated as unexplained. 9. The alleged sale proceeds of Rs. 72,000 each of 2,000 shares of M/s, Nistha Finance & Investment (India) Ltd. were also treated as unexplained deposits with the finding that M/s. Rekha and Co. did not produce books of account or explained the source of deposits. A similar amount was found to be deposited in cash in bank account of M/s. Rekha & Co. with Indian Overseas Bank, Karol Bagh, New Delhi when funds were remitted to the accounts of the assessee. 10. The assessing officer also conducted inquiries from stock exchanges of Delhi, Jaipur and Kanpur which revealed that not a single transaction of shares of M/s. Chirau Investment & Leasing Co. Ltd. took place in the relevant period at Delhi and Jaipur Stock Exchanges. There was a lone reported transaction at Kanpur Stock Exchange on 24-9-1996 at the rate of Rs. 61 per share. The above transaction was held as in genuine as the balance-sheets of the said company revealed that book value of shares of the company worked out to Rs. 9.84 and Rs. 9.80 respectively as on 31-3-1996 and 31-3-1997. Net profit of company for the year ending 31-3-1996 and 31-3-1997 was meagre amount of Rs. 1,662 and Rs. 2,685. The assessing officer therefore, refused to accept that the shares of the company could be sold at the rate of Rs. 60 per share. Likewise only one transaction of sale of shares of M/s. Nistha Finance & Investment (India) Ltd. was found recorded and book value shown as on 18-12-1996 worked out to Rs. 5.15 per share. No AGM of that company was held nor any balance-sheet of company was prepared for the year ending 31-3-1996 and 31-3-1997. In the above circumstances, the assessing officer refused to believe that any prudent person would buy shares of above company at the rate of Rs. 36 per share. The transaction relating to sale of share of M/s. Nistha Finance & Investment (India) Ltd. was also disbelieved. Accordingly, the assessing officer held the total deposits Rs. 30,66,780 in bank account of assessee and his minor son was not explained and was assessees income from undisclosed sources. The above amount was added and treated as undisclosed income in the assessment order. 11. The assessee impugned above assessment in appeal before the Commissioner (Appeals) and contended that the assessee had given names and addresses of buyers of shares of M/s. Chirau Investment & Leasing Co. Ltd. during the course of assessment proceedings. It was further claimed that J.K. Jain and Company was available at the address furnished to the assessing officer. With regard to objection that M/s. Chirau Investment & Leasing Co. Ltd. and M/s. Nistha Finance Investment India Ltd. were not found at the addresses given, the assessee contended that shares of M/s. Chirau Investment & Leasing Co. Ltd. were directly allotted to the assessee by the company and therefore, the existence of said company could not be doubted. It was further contended that shares of this company were officially quoted and sold at quoted price. The assessee also relied upon confirmation letters from M/s. Rekha and Co. relating to sale of shares. The learned Commissioner (Appeals) as per point vi page 14 stated that M/s. Rekha & Co. had expressed its inability to confirm the genuineness of the transaction. It was found that names of the buyers were furnished by M/s. Abhayjeet Associate, Chartered Accountant. The alleged buyers could not be found at the address given and thereafter before the Commissioner (Appeals), M/s. Amarjeet Associates denied having furnished any certificate to the assessing officer. The plea was not pursued further. In order to verify the claim, the learned Commissioner (Appeals) issued summon to M/s. J.K. Jain & Co. during the course of Appellate proceedings at C-77, Sarojini Nagar, C-Scheme, Jaipur but those summons remain uncomplied with. The learned Commissioner (Appeals) has observed that the assessee had offered to produce broker Shri J.K. Jain before him and accordingly, dated 22-2-2000 was fixed. But in spite of the commitment the broker was not produced. The learned Commissioner (Appeals) further observed that assessees claim that amount in question was received through account payee cheques from the bank account of the broker had no substance as source of the same remains unexplained. The learned Commissioner (Appeals) further observed that Account No. 1102556 of M/s. J.K. Jain and Co. with bank of Punjab, Karol Bagh, New Delhi, showed that entire money was remitted from the said bank account to the bank account of the assessee relating to alleged sale of 4,400 shares of M/s. Chirau Investment & Leasing Co. Ltd. The money in account No. 1102556 was transferred from account No. 1102283 in the name of M/s. Shubh Investment where cash was deposited immediately before remittance to the brokers account. It was further found that Shri Davender Kumar the alleged owner of M/s. Shubh Investment was not available at the address given to the bank nor his introductor Shri Mukesh Kumar was traceable at the address available in bank record. Thus M/s. Shubh Investment was held to be a bogus account utilized to route the unaccounted money of the assessee. The learned Commissioner (Appeals) further observed that the chart given by the assessing officer at pages 6 and 7 of the assessment order clearly showed that there was a direct date-wise link with the transfer of money from the bank account of M/s. Shubh Investment (bogus concern) to the bank account of broker M/s. J.K. Jain and Co. The learned Commissioner (Appeals) further observed that deposit of Rs. 2,33,520 and Rs. 1,16,760 in February and March 1997 representing alleged sale proceeds of 600 shares of M/s. Chirau Investment & Leasing Co. Ltd. was also not explained. She made similar observations with regard to sales made through broker M/s. Rekha & Co. and held that source of deposit of Rs. 4,40,000 in cash in bank account of above party on 29-3-1997 also remained unexplained. 12. The learned Commissioner (Appeals) did not find any substance in the claim of the assessee that sale proceeds of the shares sold were received through brokers M/s J.K. Jain & Co. and M/s Rekha & Co. The learned Commissioner (Appeals) for the reasons already stated rejected alleged certificate of M/s. Amarjeet Associates giving names and addresses of buyers of M/s. Chirau Investment & Leasing Co. Ltd. (in short M/s. CFIL Ltd. The learned Commissioner (Appeals) confirmed the addition with the following observations: "Before me the assessee has tried to make out a fool proof case of income of capital gain by stating that the shares of the two companies were sold to the brokers M/s. J.K. Jain & Co. and M/s. Rekha & Co. and that the sale proceeds of the shares was received by the assessee and his minor son from the brokers by account payee cheques. A certificate of M/s. Amarjeet Associates, CAs. certifying the names and addresses of the buyers of shares of M/s. CFIL Ltd. has also been given. Certain evidence has been given on the acquisition of so-called shares. A confirmation letter of the broker has also been given. The appellant has relied on certain case laws to show that merely because the broker has failed to appears in response to the summons, it is not sufficient reason for disbelieving the transaction in the sale of shares in the case of CIT v. Cargo Industrial Holdings Ltd. 244 ITR 422 (Cal). In view of the entirety of evidence collected it is clearly a case of introduction of unaccounted income rather than a case of Capital Gain. The assessee has clearly offered to produce the stock brokers vide order sheet entry dated 7-2-2000 alongwith his books of account and bank statement but he has failed to produce the stock brokers. It is interesting to note that the assessee has filed a certificate of Amarjeet Associates & CAs., certifying the names and addresses of the so-called buyers of shares of M/s. CFIL Ltd., but none of the so-called buyers were found at the given address. It is even more interesting to note that two of the partners of M/s. Amarjeet Associates have denied to have issued any such letter/ certificate. Thus, it is clearly a case of false evidence in order to mislead investigation and to give an impression that a genuine transaction of sale of shares has been made through the stock brokers. With regard to the financial aspects of the so-called transaction, the chart given at pages 6 and 7 of the assessment order clearly shows that the amounts have been regularly deposited in cash in the bank account of M/s. Shubh Investment which is a proprietorship concern of Shri Davender Kumar. It has already been mentioned that M/s. Shubh Investment is a bogus concern and Shri Davender Kumar is not available at the address given in the bank record. The bank account of M/s. Shubb Investment contains cash deposits which have been transferred to the bank account of the broker M/s. J.K. Jain & Co. from where the broker has issued cheques to the appellant. With regard to the so-called sale proceeds the dates of transaction of three bank accounts almost tally. The assessee has argued that the amounts are not exactly the same. However, the amounts are enough to cover transaction to the assessee. With regard to the balance amounts, it is not the concern in these proceedings. It has been argued that it is for the broker to explain the source i.e., the source of deposit in the bank account of M/s. J.K. Jain & Co. In this connection, I would like to point out that the assessing officer has given enough evidence to prove that the account No. 1102556 of M/s. J.K. Jain & Co. has been used as a conduit from the bank account of M/s. Shubh Investment which is a bogus concern and which contains cash deposits. Therefore, in view of the detailed evidence collected, it was for the assessee to rebut the same and prove the genuineness of the transaction. Therefore, it is simply not a case where the assessee has been asked to prove the source of source. Looking to the overall circumstances, "I agree" with the assessing officer that the income of Rs. 30,66,780 will not be treated as income from Long Term Capital Gain and will be treated as income from undisclosed sources." The learned Commissioner (Appeals) also upheld the levy of interest under section 234B. The appeal filed by the assessee was dismissed. 13. The assessee being aggrieved has brought the appeal before the appellate Tribunal. 14. Shri T.R. Talwar, learned counsel for the assessee placed a chart of purchases and sales of shares effected by the assessee and the addition made by the assessing officer. He argued that entire sale consideration including cost price of share were added under section 68 of the Income Tax Act. The acquisition of share is duly explained in earlier years and there was no dispute on the same. Shri Talwar further submitted that shares of Chirau Finance Investment and Leasing Co. Ltd. were acquired directly from the company on 31-8-1995 by paying total consideration of Rs. 5 Lakhs. The share acquired had distinctive numbers. This clearly established that the company was a genuine company very much in existence. Even assessing officer in his order has referred to the balance sheets of company and worked out the value of shares with reference to assets possessed by the company. Therefore, observation that companies were not in existence are without any basis and unjustified. Similar was the position of other company M/s. Nishtha Finance and Investment (India) Ltd. Shri Talwar further submitted that sale of shares was fully supported by documentary evidence of vouchers issued by the brokers. The sale consideration was received through account payee cheques and this fact is not in dispute. Further shares were quoted in Stock Exchange as per evidence made available on pages 50 and 51 of the paper book. Turning to pages 50 and 51, we find that there is quotation of U.P. Stock Exchange, Kanpur dated 24-9-1996 showing sale of Chirau Finance Investment and Leasing Co. Ltd. at the rate of Rs. 58 to Rs. 60. In the same manner sale bills were issued in case of sale of shares of Nishtha Finance and Investment (India) Ltd. The amount was received through account payee cheques. 15. Shri Talwar further submitted that the assessee cannot be held responsible for conduct of brokers through whom transactions were effected. Shares were sold in January and February 1997 whereas enquiries by Income-tax department were conducted much later. The position could have been changed over the period. Even if it is held and presumed that share brokers were indulging in questionable and shady transactions that cannot affect the genuineness of transactions carried on by the assessee particularly in the background narrated above. Shri Talwar further submitted that sale transaction of shares cannot be treated as cash credits to apply provisions of section 68 of the Income Tax Act. It was further submitted that only a part of amount credited in bank account of Shubh Investments and that of broker M/s. J.K. Jain and Co. was transferred to the accounts of the assessee as sale proceeds. The revenue people did not treat Shubh Investments or M/s J.K. Jain as benamies of the assessee. Bank accounts maintained in the above names were not treated as bank account of the assessee. Shri Talwar further submitted that assessing officer had obtained complete details of above accounts and the same was available on record of the assessing officer. The learned departmental Representative accepted above position. In order to have complete picture, we asked the parties to give us total amounts credited in bank accounts of Shubh Investment and J.K. Jain and Co. The relevant information showed that more than a crore were deposited in accounts of Shubh Investment and J.K. Jain and Co. Shri Talwar further submitted that having regard to above figures no adverse inference can be drawn against the assessee. 16. Shri Talwar relied upon the following decisions: "1. Smt. R. Imbavalli v. Income Tax Officer (2004) 83 TTJ (Chennai) 352, Where amount was received by appellant- assessee as part of sale consideration and it was treated as sale receipt, it could not be assessed under section 68. 2. Shri Harish Kumar v. Dy. DIT (2003) 85 ITD 366 (Hyd.), Where it was held that before making an addition under section 68, the assessing officer has to exercise his discretion judiciously. In spite of the facts pointing in the direction of genuineness and identity of S and its creditworthiness not being in doubt, the addition having been made on presumptions, surmises and suspicions and, therefore, the judgment of the Supreme Court in CIT v. Smt. P.K. Noorjahan (1999) 237 ITR 570, applied to the facts of the instant case. Since the assessee had discharged burden of proving that sale transaction in diamonds was genuine and creditworthiness of purchasers had been proved beyond doubt the assessing officer was not justified in treating transaction as not been genuine. Therefore, the addition under section 68 was to be deleted. Cit v. Antartica Investment (P) Ltd. (2003) 262 ITR 493 (Del), It is pertinent to note that it was not the case of the assessing officer that any amount found credited in the bank account of the two companies had direct or indirect nexus with the assessee Co.
(3.) CIT v. Carbo Industrial Holdings Ltd. (2000) 244 ITR 422 (Cal.)/CIT v. Emerald Commercial Ltd. (2001) 250 ITR 539 (Cal.), Loss claimed on account of sale of shares - Purchase and sale of shares effected through share brokers - Full details of transaction and names of share brokers furnished - Payment by account payee cheques not disputed - Failure of appearance of a broker even after issue of summons would not disentitle assessee from claim of loss.;