ACIT CIR 19(3), MUMBAI v. ISLAMUDDIN MANSURI, MUMBAI

ITA 5050/MUM/2008 | 2004-2005
Pronouncement Date: 23-02-2010 | Result: Dismissed

Appeal Details

RSA Number 505019914 RSA 2008
Assessee PAN AALPM2994A
Bench Mumbai
Appeal Number ITA 5050/MUM/2008
Duration Of Justice 1 year(s) 6 month(s) 15 day(s)
Appellant ACIT CIR 19(3), MUMBAI
Respondent ISLAMUDDIN MANSURI, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 23-02-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted I
Tribunal Order Date 23-02-2010
Date Of Final Hearing 25-11-2009
Next Hearing Date 25-11-2009
Assessment Year 2004-2005
Appeal Filed On 08-08-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I: MUMBAI BEFORE SHRI R.S. PADVEKAR (JM) AND SHRI. B. RAMAKOTAIAH (AM) ITA NO. 5050/MUM/2008 (ASSTT. YEAR : 2004-05) ASST. COMMISSIONER OF INCOME-TAX APPELLANT CIRCLE 19(3) PIRAMAL CHAMBERS PAREL MUMBAI 400 012 V/S. SHRI ISLAMUDDIN MANSURI RESPONDENT NOVELTY FURNISHINGS 249 NAVAL KUNJ LINKING ROAD OFF NATIONAL COLLEGE BANDRA (WEST) MUMBAI-400050 PAN : AALPM2994A ITA NO. 5051/MUM/2008 (ASSTT. YEAR : 2004-05) ASSISTANT COMMISSIONER OF INCOME-TAX APPELLANT CIRCLE 19(3) PIRAMAL CHAMBERS PAREL MUMBAI 400 012 V/S. IQBAL HUSSEIN MANSURI RESPONDENT NOVELTY FURNISHINGS 249 NAVAL KUNJ LINKING ROAD OFF NATIONAL COLLEGE BANDRA (WEST) MUMBAI-400050 PAN : AAKPM5640E APPELLANT BY :MS. VANDANA SAGAR SR. A.R RESPONDENT BY :MR. VIJAY KOTHARI : O R D E R : PER R.S. PADVEKAR J.M THE REVENUE HAS FILED THESE TWO APPEALS CHALLENGING THE IMPUGNED ORDERS OF THE LD CIT(A)- XIX MUMBAI DATED 23.5.20 08 FOR THE A.Y. 2004-05 AND THESE APPEALS RELATE TO TWO DIFFERENT ASSESSEES WHO ARE THE MEMBERS OF MANSURI FAMILY. THE ISSUES AS WELL AS THE FACTS ARE IDENTICAL IN BOTH THESE ITA NO. 5050 & 5051/MUM/2008 2 APPEALS HENCE FOR THE SAKE OF CONVENIENCE THESE APPEALS ARE DISPOSED OF BY THIS COMMON ORDER. 2. THE REVENUE HAS TAKEN THE MULTIPLE GROUNDS WH ICH ARE IDENTICAL IN BOTH THESE APPEALS WHICH READ UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE LD CIT(A) XIX MUMBAI ERRED IN HOLDING THAT THE LONG TERM CAPITAL GAIN RECEIVED BY THE ASSESSEE IN THE SCRIP SURYADEEP SALT & CHEMICAL WAS A GENUINE TRANSACTION ESPECIALLY WHEN THE CIT(A) HAS NOT COUN TERED THE DEEP INVESTIGATION DONE BY THE A.O. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD CIT(A) ERRED IN DELETING THE ADDITION MADE BY A.O. ESPECIA LLY WHEN SOME OF THE FACTUAL ASPECT HAS BEEN WRONGFULLY INTERPRETED BY C IT(A). 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD CIT(A) ERRED IN HOLDING THAT THE TRANSACTION WAS GENUINE W ITHOUT APPRECIATING THE FACTS OF THE CASE UNDER CONSIDERATION. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD CIT(A) ERRED IN CONCLUDING THAT THE TRANSACTION OF SURYADE EP SALT IS GENUINE ONE WHEN THE RATIO OF THE CASE OF SOMNATH MANI (100 TTJ 917) CLEARLY SAYS IF FACTS AND CIRCUMSTANCES SO WARRANT THAT IT DOES NOT ACCORD WITH THE TEST OF HUMAN PROBABILITIES TRANSACTIONS HAVE BEEN HELD TO BE NON- GENUINE. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD CIT(A) ERRED HOLDING THAT THE ADDITION OF 15% OF CAPITAL G AIN AS COMMISSION FOR ARRANGING THE GIFT IS UNWARRANTED IN THE SITUATION WHEN THERE IS A CONFESSIONAL STATEMENT OF MR. SHAH TO RECEIVE THE C OMMISSION AND OPPORTUNITY TO CROSS EXAMINE HAS BEEN GIVEN TO ASSE SSEES. THE CONTROVERSY BEFORE US IS IN RESPECT OF THE ALL EGED BOGUS TRANSACTIONS ENTERED INTO BY BOTH THESE ASSESSEES IN RESPECT OF THE PENNY STOCK M/S. SURYADEEP SALT CHEMICALS AND REFINERY WORKS LTD. ( IN SHORT M/S. SURYADEEP LTD.) AND THEREBY ALLEGEDLY DECLARING INFLATED LON G TERM CAPITAL GAIN AND ALSO TAKING ADVANTAGE BY PAYING TAX AT LOW RATE. 3. THE FACTS WHICH REVEAL FROM THE RECORD ARE AS UN DER : ITA NO. 5050 & 5051/MUM/2008 3 A) THE INVESTIGATION WING OF THE INCOME TAX DEPART MENT MUMBAI CARRIED OUT THE INVESTIGATION AND IT WAS FOUND THAT SOME OPERATORS/SHARE BROKERS WERE MANIPULATING THE SHARE PRICES OF THE P ENNY STOCK AND ALLEGEDLY LAUNDERING THE BLACK MONEY IN THE MARKET UNDER THE GRAB OF CAPITAL GAIN. DURING THE COURSE OF THE INVESTIGATION STATEMENT O F ONE SHRI NARENDRA R. SHAH AS PER REVENUE WHO WAS THE KEY PLAYER IN PRO VIDING THE ACCOMMODATION ENTRIES OF THE SCRIPT M/S. SURYADEEP LTD. WAS RECORDED ON 16.6.2006 AND 9.10.2006. IN THE STATEMENT GIVEN TO DDI (INVESTIGATION) SHRI NARENDRA R. SHAH STATED THAT FOLLOWING COMPANIES N AMELY DRISHTI SECURITIES PVT. LTD. D.R. PANDYA SHARE BROKING LTD. AND T.H. VAKIL SHARES AND SECURITIES PVT. LTD. HAVE BEEN DOING THE BUSINESS O F SHARE BROKING AND IN SOME CASES THOSE THREE COMPANIES HAD ISSUED BOGUS BILLS IN ORDER TO GIVE ACCOMMODATION ENTRIES TO VARIOUS PERSONS. HE FURTH ER STATED THAT THE SHARES OF M/S. SURYADEEP LTD. WERE AVAILABLE WITH HIM AND HE HAD GIVEN THOSE SHARES ALONG WITH ACCOMMODATIVE PURCHASE BILLS TO THE INT ERESTED PARTIES. THE PARTIES WHO PURCHASED THE SAID SHARES SOLD THE SAME THROUGH ITS BROKER IN THE OPEN MARKET AND SHRI SHAH HELPED THE PARTIES TO ARR ANGE THE TRANSACTION OF THE SAID SHARES BY SHOWING THE HIGHER MARKET PRICES AND THE PARTY I.E. THE SELLERS OF THE SHARES COULD DECLARE THE CAPITAL GAI N BY SHOWING THE INFLATED PRICES OF THE SHARES. FOR DOING THE SAID JOB THE COMMISSION WAS PAID TO HIM AT THE RATE OF 2 TO 3% OF THE CAPITAL GAIN. B) HE ALSO STATED THAT HE USED TO GIVE THE CASH TO HIS AGENTS WHO IN TURN USED TO PURCHASE THOSE SHARES FOR HIS CLIENTS AT TH E HIGHER RATE THAN PREVAILING MARKET PRICES. HE ALSO STATED THAT HE HAD DIFFERENT PROPRIETARY CONCERNS LIKE (I) ABHIJAI INVESTMENTS (II) M/S. SANJEEV & CO. ( III) M/S. ABHISHEK FINANCE & INVESTMENT CORPORATION AND (IV) M/S. NARENDRA SHA H AND HE USED TO DEPOSIT THE CASH IN THE BANK ACCOUNT ON THE ABOVE PROPRIETA RY CONCERNS AND THE AMOUNTS USED TO BE TRANSFERRED TO THE BROKERS/AGENT S. SHRI SHAH FURTHER DEPOSED THAT THE ABOVE COMPANIES NAMELY DHRISHTI S ERVICE PVT. LTD. D.R. PANDYA SHARE BROKING LTD. ETC. WERE SHOWN AS IN THE TRADING OF THE SHARES ON FICTITIOUS BASIS AND THEY USED TO ISSUE THE BILL S AND CONTRACT NOTES. FOR DOING THE SAID TRANSACTIONS THE BENEFICIARY PARTIE S USED TO GIVE THE CASH TO ITA NO. 5050 & 5051/MUM/2008 4 THE SAID SHRI SHAH AND THAT CASH WAS USED FOR ARRA NGING THE BOGUS TRANSACTIONS. C) THE SUM AND SUBSTANCE AS OBSERVED BY THE A.O IS THAT SHRI NARENDRA SHAH HAS CATEGORICALLY ACCEPTED THAT HE HAS PROVIDE D THE ACCOMMODATION ENTRIES TO VARIOUS INDIVIDUALS IN THE SCRIPT OF M/S . SURYADEEP LTD. THE A.O HAS ALSO OBSERVED THAT SHRI SHAH ALSO ADMITTED THAT HE HAS RECEIVED 15% CASH AS A CONSIDERATION FOR ARRANGING THOSE BOGUS ACCOMMODA TIVE TRANSACTIONS. THE A.O HAS REPRODUCED THE PART OF THE STATEMENTS RECOR DED FROM SHRI NARENDRA SHAH ON DIFFERENT DATES ON PAGE NOS. 10 TO 16 OF THE ASSESSMENT ORDER. AS PER THE STATEMENT GIVEN BY SHRI NARENDRA SHAH HE H AS REPEATED THE STORY IN RESPECT OF USING THE PENNY STOCK FOR CONVERTING THE BLACK MONEY INTO THE WHITE MONEY BY SHOWING THE HIGHER MARKET PRICES OF THE SAME. THE SPECIFIC QUESTION WAS PUT TO SHRI NARENDRA R SHAH IN RESPECT OF THE PURCHASE AND SALE OF THE SCRIPT OF M/S. SURYADEEP LTD. IN HIS STATEM ENT HE HAD STATED THAT 1 11 500 SHARES OF M/S. SURYADEEP LTD. WERE PURCHAS ED ON BEHALF OF THE VARIOUS MEMBERS OF MANSURI FAMILY THROUGH M/S. DH RISHTI SECURITIES PVT. LTD. AND M/S. ACTION FINANCES SERVICES LTD. SHRI NAREND RA SHAH SUBMITTED INFORMATION TO DDI(INVT)/ A.O. WHICH IS MENTIONED AS PAGE NO. 1 OF THE ASSESSMENT ORDER SHOWING THE DETAILS OF THE NAMES OF THE MANSURI FAMILY MEMBERS AND BILL DATE NUMBER SETTLEMENT PERIOD Q UANTITY OF SHARES THE AMOUNT AND PAYMENT DETAILS ETC. HE ALSO FURNIS HED THE ADDRESSES OF M/S. ACTION FINANCES SERVICES LTD. AND M/S. DHRISHTI SEC URITIES PVT. LTD. HE ALSO STATED THAT THE 4 58 500 SHARES OF M/S. SURYADEEP LTD. WERE PURCHASED BY HIM ON BEHALF OF VARIOUS MEMBERS OF MANSURI FAMILY THROUGH M/S. SHARE PRO SERVICE LTD. HE ALSO STATED THE DETAILS OF THE PAR TIES FROM WHOM M/S. SHARE PRO SERVICE LTD. HAD ACQUIRED THE SHARES OF M/S. SU RYADEEP LTD.. AS PER THE STATEMENT OF SHRI NARENDRA SHAH HE HAD ACQUIRED T HE SHARES OF M/S. SURYADEEP LTD. THROUGH THE ABOVE REFERRED BROKERS FROM THE FOLLOWING PARTIES: 1. HARESH UDASHI 2. CHANDULAL SANGHVI 3. ANIL WADWA 4. MANISH PATHANI 5. PADMA JANI 6. NARENDRA JANI ITA NO. 5050 & 5051/MUM/2008 5 7. SHIVANI SHAH 8. RAJESH TAKWANI 9. M/S. INVENTURE GROWTH AND SECURITIES PVT. LTD. 10. ACTION FINANCES SERVICES INDIA LTD. 4. THE A.O HAS NOTED THAT THE NOTICES U/S. 131(6) U /S. 131(6) WERE SERVED CALLING THE INFORMATION FROM THE ABOVE PARTIES. O UT OF THE 8 PARTIES THE NOTICES ISSUED TO 6 PARTIES WERE RETURNED AS UN-SER VED. THE ASSESSEES FURNISHED THE DETAILS OF THE TRANSACTIONS IN RESPEC T OF THOSE PARTIES/PERSONS WHO HAD DEALINGS WITH M/S. DHRISHTI SERVICES PVT. L TD. AND M/S. SHARE PRO SECURITIES LTD. THE ASSESSEES ALSO PRODUCED THE PR OGRESS NOTE ISSUED BY M/S. DHRISHTI SECURITIES PVT. LTD. AND M/S. SHARE PROS S ECURITIES CONFIRMING THE SALE AND PURCHASE OF THE SHARES INCLUDING THE SHARES OF M/S. SURYADEEP LTD.. SO FAR AS M/S. INVENTURE GROWTH AND SECURITIES PVT. LT D. IS CONCERNED THEY FILED THE DETAILED REPLY TO THE A.O. DENYING THAT THERE W AS ANY TRANSACTION TAKEN PLACE DURING THE PERIOD FROM 1.4.03 TO 31.3.2004 IN RESPECT OF THE SCRIPT SURYADEEP LTD.. THE SAID COMPANY HAS ALSO DENIED T HAT M/S. DHRISHTI SERVICES PVT. LTD. HAVE PURCHASED THE SHARES OF M/S. SURYADE EP LTD. FROM THEM AS NO TRADING ACCOUNT WAS OPENED WITH THE SAID BROKER FI RM. M/S. INVENTURE GROWTH AND SECURITIES PVT. LTD. EXPRESSED THEIR INABILITY TO ISSUE THE COPY OF THE ACCOUNT IN RESPECT OF THE TRANSACTIONS ENTERED INT O WITH M/S. DHRISHTI SERVICES PVT. LTD IN RESPECT OF THE SCRIPT SURYADEEP LTD. AS THE SAID BROKER COMPANY HAS NOT OPENED ANY TRADING ACCOUNT WITH THEM. IT WA S FURTHER INFORMED BY THE SAID PARTY THAT AS THERE WAS NO DELIVERY OF THE SCR IPT BY THE SELLING PARTY TO M/S. DRISHTI SERVICES PVT. LTD. NO DETAILS OF OFF MARKET TRANSACTION AND THE INTIMATION GIVEN TO THE CONCERNED STOCK EXCHANGE WE RE NOT POSSIBLE TO GIVE. THE A.O ALSO CALLED FOR THE DETAILS FROM M/S. ACTIO N FINANCES SERVICES INDIA LTD. IN RESPECT OF THE TRANSACTION OF M/S. DHRISHTI SERVICES PVT. LTD. AND THE SAID PARTY INTIMATED THAT THE ACCOUNT WAS OPENED ON LY IN THE MONTH OF MARCH 2003 AND THERE IS NO QUESTION OF HAVING ANY TRANSAC TION WITH THE SAID PARTY PRIOR TO THE SAID DATE. THE INFORMATION WAS ALSO C ALLED FROM M/S. INVENTURE GROWTH AND SECURITIES PVT. LTD. WITH WHOM THE ASSES SEES HAD OPENED THE DEMAT ACCOUNT AND IT WAS FOUND THAT THE DEMAT ACCOU NT WAS OPENED BY THE ASSESSEES ALONG WITH OTHER FAMILY MEMBERS ON 11.12. 2002 AND FOR OPENING ITA NO. 5050 & 5051/MUM/2008 6 THE DEMAT A/C. SHRI NARENDRA SHAH HAD INTRODUCED T HE ASSESSEES AS NOTED BY THE A.O. THE A.O HAS GIVEN THE DETAILS OF THE DEMA T A/C. IN RESPECT OF THESE TWO ASSESSEES AS WELL AS OTHER MEMBERS OF THE MANSU RI FAMILY ON PAGE NOS. 19 TO 23 OF THE ASSESSMENT ORDER. 5. THE STATEMENT OF THE DEMAT A/C. OF THESE TWO AS SESSEES WHICH ARE RELEVANT FOR US IS AS UNDER : (I) STATEMENT OF ACCOUNTS AS ON 21.11.2006 ( ISLAMUDDIN B. MANSURI) FOR THE PERIOD FROM 11.12.2002 TO 21.11.2006 ISIN : INE823E01019 SURYAD EEP SAL TREF-EQ DATE TRANSACTION PARTICULARS CREDIT DEBIT CURRENT BALANCE 11.12.2002 OPENING BALANCE 0.000 4.2.2003 INTDEP-CR 9178886 4000.000 4000.000 5.2.2003 INTDEP-CR 9203003 CTRBO IN602751 5000.000 9000.000 11.3.2003 OF-CR TD-252176 TX-703187 1201120100007011 10000.000 19000.000 21.4.2004 INTDEP-DR 24940098 CTRBO IN 300271 10119283 6000.000 13000.000 21.4.2004 INTDEP-DR 24940122 CTRRBO IN300271 10119283 300.00 12700.000 21.4.2004 INTDEP-DR 24940105 CTRBO IN300271 10119283 10000.000 2700.000 5.5.2004 INTDEP-DR 245425911 CTRBO IN300271 10119283 2700.000 0.000 21.11.2006 CLOSING BALANCE 0.000 ITA NO. 5050 & 5051/MUM/2008 7 (II) STATEMENT OF ACCOUNTS AS ON 21.11.2006 (IQBAL B. MANSURI) FOR THE PERIOD FROM 11.12.202 TO 21.11.2006 ISIN : INE823E1010 SURYADEEP SALTREF-EQ DATE TRANSACTION PARTICULARS CREDIT DEBIT CURRENT BALANCE 11.12.2002 OPENING BALANCE 0.000 11.3.2003 OF-CR TD-252172 TX-703179 1201120100007011 21000.000 21000.000 19.3.2003 INTDEP-CR 9820048 CTRBO IN602751 10000.000 31000.000 12.4.2004 INTDEP-DR 24591353 CTRBO IN300271 10119283 11000.000 20000.000 12.4.2004 INTDEP-DR 24591297 CTRBOIN300271 10119283 10000.000 10000.000 12.4.2004 INTDEP-DR 24591332 CTRBO IN300271 10119283 10000.000 0.000 21.11.2006 CLOSING BALANCE 0.000 6. THE A.O HAS NOTED THAT AFTER EXAMINING THE DETAI LS OF THE DEMAT A/C. AND SHARE TRANSACTIONS ENTERED INTO BY THESE TWO A SSESSEES THE FOLLOWING FACTUAL SITUATION WAS NOTICED. THE ASSESSEES NAMEL Y SHRI ISLAMMUDIN MANSURI HAS PURCHASED THE 57000 SHARES AND DEMATERIALIZED O NLY 19000 SHARES. SO FAR AS THE ANOTHER ASSESSEES IS CONCERNED I.E. IQB AL MANSURI HE HAD PURCHASED 31000 SHARES AND ALL THE 31000 SHARES WER E DEMATERIALIZED. THE A.O AFTER EXAMINING THE DEMAT ACCOUNTS AND OTHER MA TERIAL ON RECORD CONCLUDED AS UNDER : I) THE DEMAT ACCOUNT HAS BEEN OPENED ONLY FOR THE TRANSACTION OF SURYADEEP SALT AND CHEMICAL SHARES. II) ALL THE MEMBERS OF MANSURI FAMILY HAS OPENED TH E DEMAT ACCOUNT ON THE SAME DATE I.E. 11.12.2002. III) SHRI NARENDRA SHAH HAS INTRODUCED THEM FOR OPE NING THE DEMAT ACCOUNT. IV) AS PER THE ABOVE CHART THERE IS THE HUGE DIFFE RENCE BETWEEN SHARES TRANSACTED BY THE FAMILY AND SHARES DE-MATER IALISED BY THEM. ITA NO. 5050 & 5051/MUM/2008 8 THE MANSURI FAMILY HAS PURCHASED 4 93 400 SHARES BUT ONLY 1 75 000 SHARES HAS BEEN DE-MATERIALISED BY THEM. V) SHARE HAS BEEN DE-MATERIALISED BY THE ASSESSEES AFTER THE LAPSE OF SUBSTANTIAL PERIOD OF TIME. SHARES HAS BEEN PU RCHASED BY THEM IN DECEMBER 2002. DEMAT ACCOUNT OPENED ON 11.12.2002 AND DE- MATERIALISATION OF SHARES HAS BEEN DONE IN THE MONT H OF MARCH 2003. VI) THE DEMAT ACCOUNT HAS BEEN UTILIZED ONLY FOR TH E PURPOSE OF THE TRANSACTION IN THE SCRIP UNDER CONSIDERATION. VII) THE DEPOSITORY HAS GIVEN THE ACCOUNT OF STATEM ENT OF HOLDINGS OF ALL THE MANSURI FAMILY MEMBERS FROM THE PERIOD FROM DECEMBER 2002 TO NOVEMBER 2006. BY GOING THROUGH THAT ACCOUNT IT IS FOUND THAT EXCEPT THE SCRIP UNDER CONSIDERATION ASSESSEES HAS NOT DONE ANY INVESTMENT/TRADING ACTIVITY IN ANY OTHER SHARES. T HIS FACT GIVES A FURTHER SUPPORT OF THE OPINION THAT THE ASSESSEES H AS ONLY TRANSACTED IN THESE SHARES FOR HAVING THE ACCOMMODATION ENTRY FOR THE ARTIFICIAL CAPITAL GAIN. 7. AFTER EXAMINING THE DETAILS FILED BY THE ASSESS EES IN RESPECT OF THE PURCHASE AND SALE OF THE SHARES AN AMOUNT PAID FO R THE PURCHASES AND AMOUNT RECEIVED FOR THE SALES THE A.O HAS NOTED TH AT NEITHER THE PAYMENT HAS BEEN PAID AT THE TIME OF THE PURCHASE OR THE SALES NOR THE CONSIDERATION HAS BEEN RECEIVED AT THE TIME OF SALE AND THERE IS A SU BSTANTIAL TIME GAP BETWEEN THE TRANSACTION RECEIPT OR PAYMENT OF THE CONSIDERA TION. THE A.O HAS GIVEN THE DETAILS IN RESPECT OF THE DATE OF THE PURCHASE QUANTITY OF SHARES PAYMENT DETAILS ETC. IN RESPECT OF BOTH THESE ASSESSEES O N PAGE NO. 25 TO 26 OF THE ASSESSMENT ORDER. THE A.O HAS ALSO NOTED THAT OUT OF 4 93 400 SHARES PURCHASED BY THE MEMBERS OF THE MANSURI FAMILY ONL Y 175000 SHARES HAD BEEN DEMATERIALIZED BY THEM. MOREOVER REST OF TH E SHARES HAD BEEN SOLD BY PHYSICAL DELIVERY AND FULL SALE CONSIDERATION IN RE SPECT OF THE SALE OF THE SHARES WERE NOT RECEIVED BY THE ASSESSEES TILL 31.3.2004. THE ASSESSEES FILED THE ITA NO. 5050 & 5051/MUM/2008 9 PROGRESS NOTE IN RESPECT OF THE ASSESSEES AS WELL A S THE OTHER MEMBERS OF THE MANSURI FAMILY AND AS PER THE PROGRESS NOTE IT WAS FOUND THAT ALL THE SHARES HAS BEEN PURCHASED BETWEEN 23.10.2002 TO 31.10.2002 AT THE PRICE OF RS. 2/- TO RS. 3/- PER SHARE. SO FAR AS THE PRESENT ASSESS EES ARE CONCERNED MR. IQBAL HUSSAIN HAD PURCHASED THE SHARES ON 30.11.2002 AND MR. ISLAMUDDIN PURCHASED THE SHARES ON DIFFERENT DATES FROM 18.11. 2002 TO 10.12.2002. MR. IQBAL HUSSAIN MANSURI PURCHASED TOTAL 31000 SHARES WHILE ISLAMUDDIN MANSURI PURCHASED 57000 SHARES AND THE SAID SHARES WERE PUR CHASED FROM DRISHTI SECURITIES PVT. LTD. (DSPL) AND M/S. SHARE PRO SECU RITIES LTD. (SPS). BOTH THE BROKERS HAVE CONFIRMED THAT THEY HAVE PURCHASED THE SHARES OF SURYADEEP LTD. FROM DIFFERENT PERSONS WHICH DETAILS ARE GIVE N BY THE A.O BY WAY OF CHART ON PAGE NO. 30 OF THE ASSESSMENT ORDER. THE A.O PR OCEEDED TO EXAMINE THE SOURCE OF ACQUISITION OF THE SHARES BY THE PERSONS WHO HAD CLAIMED TO HAVE SOLD SHARES TO M/S. DSPL AND M/S. SPS AND HE EXAMIN ED THE PROGRESS NOTE SUBMITTED BY THE ASSESSEES AND OBSERVED THAT THE WH OLE TRANSACTION WAS ARRANGED IN SUCH A WAY SO THAT THE SCRIPT SURYADEE P LTD. MAY COME INTO MARKET TO DUMMY PERSON AND THEREAFTER IT WOULD BE GIVEN TO THE ASSESSEES FOR THE PURPOSE OF SHOWING ARTIFICIAL CAPITAL GAIN. THE A.O HAS GIVEN ANALYSIS IN RESPECT OF THE PERSONS HOLDING THE SHARES OF SU RYADEEP LTD. WHO SOLD THE SHARES TO M/S. DHRISHTI SECURITIES PVT. LTD. AND M/ S. SHARE PRO SECURITIES LTD. ON PAGE NO. 31 TO 38 OF THE ASSESSMENT ORDER. 8. THE A.O AFTER ANALYSING THE PROGRESS NOTE RECOR DED HIS FINAL CONCLUSIONS AS UNDER - (I) THE RESPECTIVE PERSONS WHO HAVE SOLD SHARES TO M/S. DHRISHTI SECURITIES PVT. LTD. AND M/S. SHARE PRO SECURITIES LTD ARE THE SPECULATORS OF THE MARKET AND THE MAIN SOURCE OF IN COME IS THEIR SPECULATION BUSINESS. (II) THE SAID PERSONS PURCHASED THE SCRIPT SURYADEE P LTD. IN THE MONTHS OF JULY TO SEPTEMBER 2002 FROM M/S. DHRISHTI SECURITIES AS WELL AS M/S. SHARE PRO SECURITIES AND THE SAME HAVE AGAI N BEEN SOLD TO THE SAME SHARE BROKERS IN THE MONTHS OF OCTOBER TO DEC EMBER 2002. ITA NO. 5050 & 5051/MUM/2008 10 (III)THE SPECULATION PROFIT FROM THE TRANSACTIONS H AD BEEN USED FOR THE PURCHASE OF THE SHARES OF THE SURYADEEP LTD IN THE MONTHS OF OCTOBER TO DECEMBER 2002. IN SUM AND SUBSTANCE THOUGH THE A.O HAD ADMITTED THAT THE CONCERNED PERSONS NAMELY RAJESH TAKWANI SHIVANI SHAH BHARA T TAKWANI CHANDULAL SANGHVI NARESH JANI PARMAR BEN JANI ETC. HAVE EA RNED THE SPECULATION PROFIT BY DEALING IN THE SHARES BUT AT THE SAME TIME THE A.O DID NOT ACCEPT THE FACT THAT IN FACT IT WAS TRUE PROFIT AS SHOWN BY THOSE PERSONS. 9. THE A.O ISSUED THE SHOW CAUSE NOTICES TO THE ASS ESSEES IN WHICH THE DETAILS OF THE EVIDENCES COLLECTED BY THE INVESTIGA TION WING WERE GIVEN. THE SHOW CAUSE NOTICES ISSUED BY THE A.O TO THE ASSESSE ESS ARE REPRODUCED ON PAGE NOS. 42 TO 46 OF THE ASSESSMENT ORDER. THE AS SESSEES FILED THE REPLY TO THE A.O WHICH IS COMMON IN BOTH THE CASES EXCEPT N O OF SHARES AND DATES ON 22.12.206 DENYING ALL THE ALLEGATIONS MADE BY THE A.O. THE SUMMERY OF THE REPLY GIVEN BY THE ASSESSEES TO THE A.O IS AS UNDER : A. DETAILS RELATING TO THE CAPITAL ASSET HELD BY M E I.E. 153000 SHARES OF M/S. SURYADEEP SALT REFINERIES & CHEMICALS WORKS LTD. B. DATE OF ACQUISITION AND COST OF ACQUISITION OF THE CAPITAL ASSET I.E. SHARES OF M/S. SURADEEP SALT REFINERIES & CHEMICALS WORKS LTD. (CHART GIVING DATES ON WHICH THE SHARES WERE PURCHA SED ENCLOSED MARKED AS ANNEXURE 1). C. BROKER/SUB-BROKER FROM WHOM THE CAPITAL ASSET W AS PURCHASED (COPIES OF THE BILLS ISSUED AND DELIVERY NOTES OF T HE BROKER ENCLOSED MARKED AS ANNEXURE 2). D. THE DETAILS OF SHARES RECEIVED IN PHYSICAL/DEM ATERIALIZED FORM I.E. 115000 SHARES IN PHYSICAL FORM AND 38000 SHARES IN D-MAT FORM. ITA NO. 5050 & 5051/MUM/2008 11 E. DATE ON WHICH THE SHARES RECEIVED IN PHYSICAL FO RM WERE LODGED FOR TRANSFER WITH THE 15.12.2006. F. DATE ON WHICH THE SHARES LODGED IN PHYSICAL FORM WHICH THE COMPANY WERE TRANSFERRED IN MY NAME (XEROX COPIES O F THE COVERING LETTER RECEIVED AT THE TIME OF TRANSFER SHARE CERTI FICATES SHOWING THE TRANSFER OF SHARES IN MY NAME ENCLOSED HEREWITH MAR KED AS ANNEXURE 3). G. DATE ON WHICH THE SHARES DULY TRANSFERRED IN MY NAME WERE LODGED WITH M/S. INVENTURE GROWTH & SECURITIES LTD. (A DEPOSITORY PARTICIPANT) FOR HOLDING SHARES IN DEMATERIALIZED F ORM. (COPIES OF THE LODGMENT RECEIPTS ENCLOSED HEREWITH MARKED AS ANNEX URE 4). H. THUS ALL THE SHARES OF M/S. SURYADEEP SALT REFI NERIES & CHEMICALS WORKS LTD CAME TO BE HELD BY ME IN DEMATERIALIZED F ORM WITH THE DEPOSITORY PARTICIPANT (COPY OF THE STATEMENT ISSUE D BY THE DEPOSITORY PARTICIPANT ENCLOSED HEREWITH MARKED AS ANNEXURE 5). I. THE BENEFICIAL OWNERSHIP IN THE EQUITY SHARES OF M/S. SURYADEEP SALT REFINERIES & CHEMICALS WORKS LTD. WERE TRANSFE RRED BY ME ON VARIOUS DATES THROUGH M/S. T.H. VAKIL SHARES AND SE CURITIES PVT. LTD. A REGISTERED BROKER OF BOMBAY STOCK EXCHANGE. (COPI ES OF THE BILLS ISSUED BY THE BROKER IS ENCLOSED HEREWITH MARKED A S ANNEXURE 6). J. I RECEIVED THE FULL VALUE OF CO NSIDERATION ON THE TRANSFER OF THE CAPITAL ASSET THROUGH NORMAL BANKING CHANNELS (COPY OF THE BANK STATEMENT REFLECTING THE RECEIPT OF PAYMENTS FROM THE BROKER ENCLOSED HEREWITH MARKED AS ANNEXURE 7). K. ON SALE OF THE EQUITY SHARES I HAVE DULY EXECUTED TRANSFER INSTRUCTIONS TO THE DEPOSITORY PARTICIPANT. THE INCOME UNDER THE HEAD LONG TERM CAPITAL GAINS HAS ACCORDINGLY BEEN COMPUTED. ITA NO. 5050 & 5051/MUM/2008 12 10. IN SUM AND SUBSTANCE THE ASSESSEES DENIED THE ALLEGATION OF THE A.O THAT THE SHARE TRANSACTION IN RESPECT OF SURYADEEP LTD. WERE NOT GENUINE. THE ASSESSEES ALSO RELIED ON THE CBDT CIRCULAR NOS. 704 DT. 28.4.95 AND 768 DT. 24.6.1998 AND CONTENDED THAT THE PERIOD OF HOLD ING OF THE SHARES HAS TO BE ACCOUNTED FROM THE DATE OF RECEIPT OF THE SCRIPT WI TH THE TRANSFER FORMS DULY SIGNED. THE ASSESSEES ALSO DENIED ALL THE ALLEGATI ONS MADE BY SHRI NARENDRA SHAH. THE ASSESSEES CONTENDED THAT THERE WERE MANY CONTRADICTIONS IN THE STATEMENTS GIVEN BY SHRI NARENDRA SHAH AND HENCE T HE SAME SHOULD NOT BE RELIED ON AS SAME ARE WITHOUT ANY CREDIT WORTHINESS . THE ASSESSEES POINTED OUT THAT IN THE STATEMENT RECORDED ON 31.10.2006 IN ANSWER TO QUESTION NO.3 SHRI NARENDRA SHAH HAS DEPOSED THAT THE SHARES WERE GENUINELY TRADED BUT WHEN HE WAS THREATEN WITH THE DIER CONSEQUENCES OF THE PROSECUTION HE CHANGED HIS STAND AND MADE FALSE AND CONTRADICTORY STATEMENTS. THE ASSESSEES ALSO TOOK THE CONTENTION THAT THE STATEME NT OF SHRI NARENDRA SHAH ARE CONTRADICTORY TO THE EVIDENCES AVAILABLE ON THE RECORD. THE ASSESSEES ALSO CONTENDED THAT ALL THE SHARES HAD BEEN DEMATERIALIZ ED AND THE SALE TRANSACTIONS WERE ROUTED THROUGH THE D-MAT A/CS ONL Y. 11. THE A.O REJECTED ALL THE CONTENTIONS OF THE AS SESSEES BY GIVING HIS DETAILED REASONING WHICH ARE ON PAGE NOS. 49 TO 56 OF THE ASSESSMENT ORDER AND RELYING ON THE STATEMENT OF NARENDRA SHAH AS WE LL AS THE INVESTIGATION MADE BY THE DDI FINALLY CONCLUDED AS UNDER : 1) THE STATEMENT OF SHRI NARENDRA SHAH CANNOT BE NE GLECTED AS THE OPPORTUNITY TO CROSS EXAMINE SHRI NARENDRA SHAH HAS BEEN GIVEN TO SHRI ABDULLA MANSURI AT THE TIME OF RECORDING OF TH E STATEMENT THE ANOTHER FAMILY MEMBER AND STATEMENTS OF SHRI NARENDRA SHAH ARE RELIABLE. 2. THE BOMBAY STOCK EXCHANGE INFORMED THAT NO TRANS ACTIONS OF SHARES/SCRIPTS HAS BEEN REPORTED IN THE EXCHANGE IN RESPECT OF THE PURCHASES OF SHARES OF M/S. SURYADEEP LTD BY THE AS SESSEES AND HENCE THOSE WERE OFF MARKET TRANSACTIONS. MOREOVE R THE ASSESSEES DID NOT REPORT/INFORM THE BOMBAY STOCK EXCHANGE IN RESP ECT OF THE OFF ITA NO. 5050 & 5051/MUM/2008 13 MARKET TRANSACTIONS ENTERED INTO BY THE ASSESSEES A ND THAT WAS AGAINST THE CIRCULAR ISSUED BY THE EXCHANGE DT. 12.12.1994. 3. THE SHARES HAVE BEEN PURCHASED BY ALL THE MEMBER S OF MANSURI BETWEEN THE PERIOD FROM OCTOBER 2002 TO DECEMBER 20 02 BUT THE PAYMENTS HAVE BEEN MADE BETWEEN FEBRUARY 2003 TO AP RIL 2003 AND WHY THE PAYMENT HAD NOT BEEN PAID BY THE ASSESSEES AT THE TIME OF THE PURCHASE OF THE SHARES HAD NOT BEEN EXPLAINED BY TH EM. MOREOVER AFTER THE SALE OF THE SHARES THE AMOUNT/CONSIDERAT ION HAS NOT BEEN RECEIVED BY THE ASSESSEES IMMEDIATELY. THE A.O ALSO REJECTED THE EXPLANATION OF THE ASSESS EES THAT THE SALE PROCEEDS HAD BEEN DEPOSITED LATE IN THE BANK A CCOUNT DUE TO THE DISPUTE AS TO THE RATE DIFFERENCE. THE A.O WAS OF THE VIEW THAT IF THERE WAS DISPUTE IN RESPECT OF THE RATE THEN THE ASSESS EES COULD HAVE LODGED THE COMPLAINT TO THE INVESTOR SERVICES CELL (ISC) OF THE BOMBAY STOCK EXCHANGE AND THE COMPLAINT WOULD HAVE BEEN PL ACED BEFORE THE INVESTOR GRIEVANCES REDRESSAL COMMITTEE. 12. THE A.O. HAS NOTED THAT AS PER THE RECORD IN T HE PAST THE ASSESSEES NOR ANY OF HIS FAMILY MEMBERS HAVE ENTERED INTO AN Y TRANSACTIONS IN RESPECT OF THE SALE AND PURCHASE OF THE SHARES BUT IN THIS YEAR NOT ONLY THE ASSESSEES BUT THE WHOLE FAMILY MEMBERS WERE ENGAGED THEMSELVE S IN HUGE TRANSACTIONS OF AND PURCHASE OF SHARES ONLY OF ONE SCRIPT I.E. M/S. SURYADEEP LTD. THE SCRIPT WAS PURCHASED ON A NOMINAL RATES AND THE SAM E WAS SOLD IN THE SHORT SPAN OF TIME FOR THE HUGE CONSIDERATION I.E. THE PU RCHASE PRICE OF THE SCRIPT WAS RS. 2/- TO 4/- PER SHARE BUT THE SAME WAS SETTL ED AT BETWEEN RS. 65/- TO RS. 75/- PER SHARE. THE A.O. ALSO CONSIDERED THE E DUCATIONAL QUALIFICATIONS OF THE MEMBERS OF THE WHOLE MANSURI FAMILY AND ACCORDI NGLY CONCLUDED THAT CONSIDERING THE EDUCATIONAL QUALIFICATIONS OF THE F AMILY MEMBERS IT DID NOT GIVE ANY INDICATION THAT THEY COULD UNDERSTAND THE MARKET PARAMETERS ON THEIR OWN. THE A.O ALSO CONCLUDED THAT AFTER ANALYSING T HE FINANCIAL RESULTS OF THE COMPANY WHY ANY PERSON MAY BE ATTRACTED TO PURCHASE THE SHARES AS THE SAID COMPANY HAD HUGE CARRY FORWARD LOSSES VERY NOMINAL ASSET AND VERY ORDINARY TURNOVER AND THE SAID COMPANY WAS NOT EVEN DECLARIN G THE DIVIDEND AND HENCE ITA NO. 5050 & 5051/MUM/2008 14 IN VIEW OF THE A.O IT WAS IMPOSSIBLE THAT ANY INVE STOR WOULD GO AHEAD FOR THE PURCHASE OF SHARES OF SUCH COMPANY. THE A.O HAS AL SO NOTED THAT THE MANSURI FAMILY AS SUCH HAS ACQUIRED 6.25% OF THE EQUITY SHA RES OF THE SAID COMPANY AND IN THE OPINION OF THE A.O THE APPROACH OF THE MANSURI FAMILY INCLUDING THE ASSESSEES WAS DIFFICULT TO UNDERSTAND. HE THEREFO RE FINALLY CONCLUDED THAT THE ENTIRE TRANSACTIONS WERE ONLY WITH THE MOTIVE TO CO NVERT THE BLACK MONEY INTO THE WHITE MONEY AND IT WAS A NON-GENUINE TRANSACTIO N. 13. SO FAR AS THE ANOTHER ISSUE WHICH IS IN RESPECT OF THE PERIOD OF HOLDING IS CONCERNED THE A.O HAS NOTED THAT IT WAS CIRCULAR SALE AND PURCHASE OF THE SHARES BETWEEN THE DIFFERENT INDIVIDUALS AND M/S. D SPL & M/S. SPS. THE A.O HAS ALSO NOTED THAT NONE OF THE PARTIES FROM WHOM M /S. SPS AND M/S. DSPL CLAIMED TO HAVE PURCHASED THE SHARES HAVE TAKEN TH E ACTUAL DELIVERY OF THE SHARES. THE SHARES REMAINED AS A STOCK OF M/S. SPS AND M/S. DSPL EVEN THOUGH ON PAPER AND IT WAS SHOWN AS PURCHASE AND S ALE TRANSACTION TOOK PLACE. THE A.O ALSO NOTED THAT AFTER THE AMENDMENT OF THE ACT THE LONG TERM CAPITAL GAIN ON THE SALE OF THE SHARES/SECURIT IES IS BEING TAXED AT THE RATE OF 10% AND HENCE THE ASSESSEES HAS CHOSEN THI S PATH TO CONVERT THE BLACK MONEY INTO THE WHITE MONEY. THE A.O ALSO REL IED ON THE DIFFERENT PRECEDENTS INCLUDING THE DECISION OF THE HONBLE SU PREME COURT IN THE CASE OF MC DOWELL AND CO. LTD. 154 ITR 148 (S.C.) AND AZ ADI BACHAO ANDOLAN 263 ITR 706 (S.C.) AND CONCLUDED THAT IT WAS THE DEVICE USED BY THE ASSESSEES FOR AVOIDANCE OF THE LEGITIMATE TAX. THE A.O ALSO RELI ED ON THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASE OF SUMATI DAYAL 214 ITR 801 AND DURGA PRASAD MORE (82 ITR 540) AND IN HIS VIEW AFTER THE APPLICATION OF THE TEST OF HUMAN PROBABILITIES IT IS VERY DIFFICULT TO CONCLU DE THAT LONG TERM CAPITAL GAIN DECLARED BY THE ASSESSEES WERE GENUINE. HE THEREF ORE MADE THE ADDITION IN RESPECT OF THE PROFIT/CAPITAL GAIN DECLARED BY THE ASSESSEES ON THE SALE OF THE SHARES OF M/S. SURYADEEP LTD. TREATING THE SAME AS UNEXPLAINED CASH CREDIT. MOREOVER RELYING ON THE STATEMENT OF SHRI NARENDRA SHAH THAT HE HAS RECEIVED 15% OF THE PROFIT EARNED BY THE ASSESSEES IN CASH AS COMMISSION/CONSIDERATION FOR ARRANGING THE ACCOMMOD ATION ENTRIES MADE THE ADDITIONS OF RS.6 86 994/- IN THE CASE OF MR. ISLAM UDDIN MANSURI AND RS. 8 13 209/- IN THE CASE OF IQBAL HUSSAIN MANSURI. ITA NO. 5050 & 5051/MUM/2008 15 14. BEING AGGRIEVED BY THE HIGH PITCHED ASSESSMENTS MADE BY THE A.O BOTH THE ASSESSEES CHALLENGED THE ADDITION BEFORE T HE LD CIT(A). AFTER ANALYSING THE EVIDENCE AND MATERIAL ON RECORD THE LD CIT(A) DELETED THE ENTIRE ADDITIONS AND BY GIVING HIS FINAL FINDINGS A S UNDER: 6.11 HAVING SO HELD I PROCEED TO CONSIDER THE THR EE QUESTIONS THAT ARE FRAMED ABOVE. 6.12. AS REGARDS THE FIRST ISSUE IS CONCERNED VIZ. WHETHER THE CREDITS IN THE BANK ACCOUNTS OF THE ASSESSEES ARE ON ACCOUNT O F SALE OF SHARES OF M/S. SURYADEEP SALT & CHEMICALS LTD. (SSCL) IT IS SEEN THAT T.H. VAKIL SHARE & SECURITIES PRIVATE LIMITED HAS MADE PAYMENT S TO THE ASSESSEES AGAINST CONTRACT NOTES AND BILLS FOR SALE OF SHARES OF M/S. SURYADEEP SALT & CHEMICALS LTD. (SSCL) BY THE ASSESSEES. THE ASS ESSEES HAS PRODUCED THESE BILLS AND CONTRACT NOTES DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS ALSO DURING THE COURSE OF APPELLATE PROCEEDINGS. THE ASSESSEES HAS GIVEN DELIVERY OF SHARES BY HANDING O VER 53 000 SHARES IN PHYSICAL FORM AND 31 000 SHARES FROM HIS DEPOSIT ORY ACCOUNT. THE A.O. HAS ALSO ADMITTED THAT THE ASSESSEES HAS RECE IVED THE PAYMENTS FROM T.H. VAKIL SHARE & SECURITIES P. LTD. THE A.O . HAS NOT DOUBTED THE GENUINENESS OF TRANSACTION OF SALE OF SHARES THROUG H T.H. VAKIL SHARE & SECURITIES P. LTD. NOR HAS HE QUESTIONED THE VERACI TY AND GENUINENESS OF THE DOCUMENTS/EVIDENCE RELATING TO SALE OF SHARES. IN THESE CIRCUMSTANCES IT HAS TO BE ACCEPTED THAT THE ASSES SEES HAS RECEIVED CONSIDERATION ON TRANSFER OF SHARES OF M/S. SURYAD EEP SALT & CHEMICALS LTD. (SSCL) FROM T.H. VAKIL SHARE & SECURITIES P. L TD. IN THESE CIRCUMSTANCES IT IS HELD THAT THE CREDITS IN THE B ANK ACCOUNT ARE ON ACCOUNT OF THE SALE CONSIDERATION RECEIVED ON TRANS FER OF SHARES OF M/S. SURYADEEP SALT & CHEMICALS LTD. (SSCL). ACCORDINGL Y THE FINDING OF THE A.O THAT THE SALE CONSIDERATION IS THE UNEXPLAINED INCOME OF THE ASSESSEES CANNOT BE UPHELD. 6.13. THE SECOND ISSUE WHICH ARISES FOR CONSIDERAT ION WHETHER THE ASSESSEES WAS THE OWNER OF SHARES OF M/S. SURYADEEP SALT & CHEMICALS ITA NO. 5050 & 5051/MUM/2008 16 LTD. (SSCL). FROM THE DOCUMENTS AND EVIDENCES PLAC ED ON RECORD I FIND THAT THE ASSESSEES WAS HOLDING IN HIS OWN NAME 53 000 SHARES IN PHYSICAL FORM AND 31 000 SHARES IN DEMATERIALIZED F ORM. M/S. SURYADEEP SALT & CHEMICALS LTD. (SSCL) HAS TRANSFER RED THE SHARES HELD IN PHYSICAL FORM IN ASSESSEESS OWN NAME. THE SHAR ES HELD BY THE ASSESSEES IN DEMATERIALIZED FORM CAME TO BE HELD BY HIM ON TRANSFER THROUGH THE ELECTRONIC MODE INTO HIS DE-MAT ACCOUNT . THESE EVIDENCES ARE IRREFUTABLE AND HAVE NOT BEEN DOUBTED BY THE A. O. THERE IS NOTHING ELSE ON RECORD TO CONTRADICT THIS FACT. AS A MATTE R OF FACT THE A.O. HIMSELF HAS ADMITTED THAT THE ASSESSEES WAS THE OWN ER OF SHARES OF M/S. SURYADEEP SALT & CHEMICALS LTD. (SSCL). THE P AYMENT TOWARDS SUCH PURCHASE WAS MADE THROUGH CHEQUE. 6.14. THE LAST ISSUE WHICH ARISES FOR CONSIDERATIO N IS WHAT WAS THE PERIOD OF HOLDING OF SHARES OF M/S. SURYADEEP SALT & CHEMICALS LTD. (SSCL) BY THE ASSESSEES. THE ASSESSEES HAS CLAIMED THAT HE HAD PURCHASED THE SHARES THROUGH THEIR SUB-BROKER SHAR E-PRO SECURITIES AND DRISHTI SECURITIES PVT. LTD. BOTH THESE SUB-BR OKERS ARE REGISTERED WITH SEBI AND HAVE ISSUED TO THE ASSESSEES CONTRACT NOTES/BILL OF DELIVERY FOR PURCHASE OF SHARES. THESE BILLS/CONTR ACT NOTES CLEARLY SHOW THAT THE TRANSACTION WAS AN OFF MARKET DEAL AND THA T THEY HAD AFFECTED DELIVERY OF SHARES IN PHYSICAL FORM. THE RATE AT W HICH THE SHARES WERE SOLD TO THE ASSESSEES WAS AS PER THE PREVAILING PRI CES ON THE BOMBAY STOCK EXCHANGE. THE SHARES SO DELIVERED TO THE ASS ESSEES ALONG WITH THE TRANSFER FORMS WERE LODGED FOR TRANSFER BY THE ASSESSEES. THE SHARES WHICH WERE TRANSFERRED IN THE NAME OF ASSE SSEES CONTINUED TO BE HELD BY THE ASSESSEES IN PHYSICAL FORM. THE SAM E IS EVIDENCED BY THE LETTER OF M/S. SURYADEEP SALT & CHEMICALS LTD. (SSCL) INTIMATING THE ASSESSEES THAT THE SHARES HAVE BEEN TRANSFERRED IN ASSESSEESS NAME IN THE REGISTER OF SHAREHOLDERS MAINTAINED U/S. 150 OF THE COMPANIES ACT 1956. IN THE ANNUAL RETURN FILED BY M/S. SURYADEEP SALT & CHEMICALS LTD. (SSCL) WITH ROC AS PER THE PROVISIONS OF S. 1 59 THE NAME OF THE ASSESSEES APPEARS AS A SHAREHOLDER. AS PER THE PROV ISIONS OF S. 164 OF THE COMPANIES ACT 1956 THESE DOCUMENTS/REGISTERS A RE PRIMA-FACIE ITA NO. 5050 & 5051/MUM/2008 17 EVIDENCES OF OWNERSHIP OF SHARES. THE DOCUMENTS/REG ISTERS HAVE NOT BEEN DISPUTED BY THE A.O. AND ACCORDINGLY THE DATE OF OWNERSHIP OF SHARES BY THE ASSESSEES HAS TO BE TAKEN AS DATE OF PURCHASE I.E. 13.11.2002 29.11.2002 12.12.2002 13.12.202 AND 1 6.12.2002. THE ASSESSEES CAME TO BE THE OWNER OF SHARES OF M/S. SU RYADEEP SALT & CHEMICALS LTD. (SSCL) ON THE SHARES BEING LODGED BY THE ASSESSEES WITH M/S. SURYADEEP SALT & CHEMICALS LTD. (SSCL) FOR TR ANSFER. THE EXACT DATE OF RECEIPT OF SHARE CERTIFICATES WITH THE TRA NSFER FORMS FROM THE BROKERS SHARE PRO SECURITIES PVT. LTD AND DRISHTI S ECURITIES PVT. LTD. IS EVIDENCED BY THE DELIVERY NOTES OF THE CONCERNED BR OKERS. IN TERMS OF THE CIRCULAR ISSUED BY CBDT THE PERIOD OF HOLDING OF SHARES IN CASE OF AN OFF-MARKET TRANSACTION IS FROM THE DATE OF CONTR ACT OF SALE AS DECLARED BY THE PARTIES IN CASE IT IS FOLLOWED BY ACTUAL DELIVERY OF SHARES AND THE TRANSFER DEEDS. FOLLOWING THE CIRCULAR ISS UED BY CBDT THE DATE OF TRANSFER OF SHARES OF SSCL WOULD BE 13.11.2002 29.11.202 12.12.2002 13.12.2002 AND 16.12.202 (I.E. THE DAT E OF CONTRACT OF SALE). THUS IN THE CASE OF THE ASSESSEES THE PERIO D OF HOLDING WOULD BEGIN FROM THE DATE OF CONTRACT OF PURCHASE AND WO ULD END ON THE DATE OF CONTRACT OF SALE. THE DATES OF CONTRACT OF PURC HASE WERE 13.11.2002 29.11.2002 12.12.202 13.12.2002 AND 16.12.2002. THE ASSESSEES BECAME THE OWNERS OF SHARES ON 28.12.2002.THE DATES OF CONTRACT OF SALE WERE 30.12.2003 02.01.204 06 01.2004 07.01. 2004 08.01.2004 09.01.2004 AND 12.01.2004. THUS THE PE RIOD OF HOLDING OF SHARES WOULD BE FOR A PERIOD EXCEEDING ONE YEAR. A CCORDINGLY THE GAIN ARISING ON TRANSFER OF 84 000 SHARES OF M/S. SURYAD EEP SALT & CHEMICALS LTD. (SSCL) WOULD BE ASSESSABLE AS INCOME UNDER THE HEAD LONG TERM CAPITAL GAINS. 6.15 HAVING SO ARRIVED AT THE CONCLUSION ON FACTS I PROCEED TO CONSIDER THE VARIOUS CASE LAWS RELIED UPON BY THE A .O. THE FIRST CASE RELIED UPON BY THE A.O. IS SOMNATH MANI 100 TTJ 91 7 (CHD). IN THIS CASE THE ITAT HELD THE GENUINENESS OF TRANSACTION OF PURCHASE AND SALE OF SHARES WAS NOT PROVED. THE ITAT HELD THAT MEREL Y ON THE BASIS OF PAYMENT OF CHEQUE COULD NOT MAKE THE TRANSACTION GE NUINE. IN THE CSE ITA NO. 5050 & 5051/MUM/2008 18 BEFORE ITAT THERE WERE NO TRANSACTION AT STOCK EXC HANGES AT RELEVANT TIMES WHEN SHARES WERE PURCHASED AND SOLD. FURTHER THE SHARES REMAINED WITH THE ASSESSEES EVEN AFTER THE SALE OF SHARES. THE RECORDS OF THE BROKERS WERE ALSO NOT PRODUCED. SET WITH TH E SAID FACTS THE ITAT HELD THAT THE TRANSACTION WAS NOT GENUINE. IN THE CASE OF THE ASSESSEES ALL EVIDENCES/DOCUMENTS ESTABLISH THAT THE ASSESSEE S WAS THE OWNER OF SHARES AND THAT GAIN HAD ARISEN ON TRANSFER OF SHAR ES. ACCORDINGLY RELIANCE PLACED ON THIS DECISION IS MISPLACED. THE NEXT TWO CASES RELIED ON BY THE A.O ARE MC DOWELL & CO. LTD. 154 ITR 148 (SC) AND AZADI BACHAO ANDOLAN 263 ITR 706 (SC). IN THESE CASES T HE HONBLE SUPREME COURT HAS CONSIDERED THE ISSUE OF TAX PLANN ING BY ADOPTING ACTS WHICH HAVE DOUBTFUL OR QUESTIONABLE CHARACTER AS TO THEIR BONA FIDES AND RIGHTEOUSNESS. MCDOWELLS CASE IN SUBSTA NCE CAN HAVE APPLICATION ONLY WHERE COLORABLE OR ARTIFICIAL DEVI CES ARE ADOPTED AND NOT TO TRANSACTIONS WHICH ARE OTHERWISE LEGITIMATE AND ARE UNDERTAKEN BONA FIDE IN THE ORDINARY COURSE. AS STATED ABOVE THERE IS NOTHING ON RECORD TO HOLD THAT THE TRANSACTION OF PURCHASE/SAL E OF SHARES OF SSCL WAS NOT GENUINE. IN FACT THE EVIDENCES/DOCUMENTS A T EVERY SEQUENCE OF EVENTS CLEARLY SHOW THAT THE TRANSACTION WAS BON A FIDE AND GENUINE. MERELY BECAUSE OF THE HOLDING PERIOD OF SHARES IS I N EXCESS OF ONE YEAR THE TRANSACTION CANNOT BE DUBBED TO BE AN EXERCISE IN TAX PLANNING OR EVASION. ASSUMING FOR A MOMENT THAT THE PERIOD OF HOLDING OF SHARES WAS LESS ONE YEAR COULD IT STILL BE SAID THAT THE ASSESSEES HAD INDULGED INTO A TRANSACTION FOR TAX PLANNING PURPOSES? THE NEXT CASE RELIED UPON BY THE A.O IS THE CASE OF HOUSING DEVELOPMENT & FIN ANCE CORP. LTD. (ITA NO. 2913/M/95 DATED 12.9.2005). IN THIS CASE THE ITAT ON FACTS HELD THAT THE TRANSACTION WAS OF A FINANCIAL LEASE AND NOT A LEASE ENTITLING THE ASSESSEES TO 100% DEPRECIATION. THE SAID CONCLUSION WAS ARRIVED AT BASED ON THE FACTS THAT THE TRANSACTION WAS PURE AND SIMPLE FINANCIAL ARRANGEMENT. THE A.O. HAS RELIED ON THE DECISION IN CASE OF SUMATI DAYAL 214 ITR 801 (SC). IN THE SAID CASE O N THE FINDINGS RECORDED THAT THE CLAIM OF WINNINGS IN HORSE RACES WAS NOT JUSTIFIED THE HONBLE SUPREME COURT HELD THAT ON PREPONDERANCE OF PROBABILITY THE TRANSACTION WAS NOT GENUINE. IN THE CASE OF THE AS SESSEES THE A.O HIMSELF HAS ACCEPTED THAT THE ASSESSEES HAD PURCHA SED THE SHARES IN ITA NO. 5050 & 5051/MUM/2008 19 NOVEMBER/DECEMBER 2002. ONLY BECAUSE THE ASSESSEES CLAIMED THE GAINS ARISING UNDER THE HEAD LONG TERM CAPITAL GAI N THE A.O. HAS NOT ACCEPTED THE PERIOD OF HOLDING FOR VARIOUS REASONS. THE REASONS SO ASCRIBED ARE CONTRARY TO THE PROVISIONS OF S. 2(14) AND 2(47) AS ALSO THE PROVISIONS OF COMPANIES ACT AND TRANSFER OF PROPERT Y ACT. THE RATES AT WHICH PURCHASES AND SALES HAVE BEEN MADE ARE NOT IN DISPUTE. ACCORDINGLY IT CANNOT BE SAID THAT THE CLAIM MADE BY THE ASSESSEES WAS AGAINST THE TEST OF HUMAN PROBABILITIES. THE A.O. HAS ALSO RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F DURGA PRASAD MORE 82 ITR 540(SC). AS HELD BY THE HONBLE SUPREME COU RT THE A.O. HAS THE POWER TO LOOK INTO THE SURROUNDING CIRCUMSTANCE S TO FIND OUT THE REALITY. BUT WHILE DOING SO THE A.O CANNOT MERELY IGNORE THE APPARENT WHICH IS EVIDENCED BY REQUISITE RECORDS AND DOCUMEN TS. IN SUCH A CASE THE AO IS DUTY BOUND TO FALSIFY THE ASSESSEESS CLA IM BY MORE CONVINCING AND APPEALING EVIDENCE. IN THE CASE OF THE ASSESSE ES THE A.O. AFTER CONSIDERING THE EVIDENCES/DOCUMENTS HAS HELD THAT T HE ASSESSEES HAD PURCHASED THE SHARES IN NOVEMBER/DECEMBER 2002. HE HAS ALSO NOT DISPUTED THAT THE ASSESSEES HAS RECEIVED CONSIDERAT ION FROM T.H. VAKIL SHARE & SECURITIES PVT. LTD. IN PURSUANCE TO THE CO NTRACTS AND BILLS ISSUED FOR SALE OF SHARES BY THE ASSESSEES. HOWEVE R THE A.O. HAS ASSESSED SUCH GAINS AS UNEXPLAINED INCOME OF THE AS SESSEES. ONCE THE PURCHASES AND SALE OF SHARES OF SHARES ARE ACCEPTED IT WOULD BE UNJUST TO SAY THAT THE CREDITS ARE NOT THE SALE PROCEEDS O F SHARES BUT IS THE CASH INTRODUCED IN THE FORM OF SALE OF SHARES. THE LAST DECISION RELIED ON BY THE A.O. IS THE CASE OF MID EAST PORTFOLIO MA NAGEMENT LTD. 217 ITR 87 (MUM). IN THE SAID CASE THE HONBLE ITAT SE T ASIDE THE ASSESSMENT ORDER TO THE FILE OF THE A.O. FOR CONSID ERING THE NATURE OF THE LEASE AGREEMENTS (VIZ. WHETHER THE TRANSACTIONS WER E FINANCIAL ARRANGEMENTS OR WERE PURE LEASE TRANSACTIONS). IN T HE CASE OF THE ASSESSEES AS STATED EARLIER THE A.O HAS ACCEPTED THE PURCHASE AS ALSO THE SALE OF SHARES. HE HAS DISBELIEVED THE CLAIM O F THE ASSESSEES FOR VARIOUS REASONS WHICH HAVE BEEN DEALT WITH AT LENG TH HEREINABOVE. THE REASONS RECORDED BY THE A.O. HAVE BEEN HELD TO BE E RRONEOUS. IN THESE FACTS THE RELIANCE SO PLACED IS IMPROPER. ITA NO. 5050 & 5051/MUM/2008 20 6.16 TO SUMMARIZE THE WHOLE ISSUE RELATING TO THE ADDITION OF RS.54 23 390/- AS UNEXPLAINED CASH CREDITS IN THE LIGHT OF THE ABOVE DISCUSSIONS SINCE THE SALE PROCEEDS FROM SALE OF S HARES HAVE NOT BEEN DISPROVED BY THE AO THE ADDITION DOES NOT STAND TO LOGIC OR UNDER ANY PROVISION OF LAW. THE PURCHASE OF THE SHARES WERE DEEPLY ANALYZED BY THE AO BUT HAVE ALSO NOT BEEN DISPROVED. WITH REG ARD TO INVESTIGATING SOURCE OF SOURCES THE HON. GUJARAT HIGH COURT IN T HE CASE OF DCIT VS. ROHINI BUILDERS {256 ITR 360 } HAS UPHELD THAT THE ASSESSEES CAN NOT ASKED TO PROVE THE SOURCE OF SOURCE WHILE CASH CRED ITS ARE BEING EXAMINED. AOS EFFORTS TO INVESTIGATE SOURCE OF IN COME IS THEREFORE NOT SUPPORTED BY JUDICIAL PRONOUNCEMENTS. RELYING UPON VARIOUS CONFLICTING STATEMENTS OF SHRI NARENDRA SHAH AND IGNORING EVIDE NCES WHICH SUPPORT THE PURCHASE AND SALE OF M/S. SURYADEEP SALT & CHEM ICALS LTD. (SSCL) SHARES THE AO HAS NOT APPRECIATED THE FACTS AND PO SITION OF LAW IN THE RIGHT PERSPECTIVE. 6.17. AFTER DUE CONSIDERATION OF THE FACTS AND CIR CUMSTANCES AS WELL AS THE PROVISIONS OF LAW AND VARIOUS JUDICIAL PRONOUNCEMENTS AS ELABORATED ABOVE I AM OF THE OPINION THAT THE CLAI M OF LONG TERM CAPITAL GAINS THROUGH SALE OF SHARES OF M/S. SURYAD EEP SALT & CHEMICALS LTD. (SSCL) BY THE APPELLANT CANNOT BE DISPUTED AND CANNOT BE TREATED AS UNEXPLAINED CASH CREDITS. AS A RESULT THE ADDI TION OF RS. 54 23 390/- MADE BY THE AO IS DELETED. THIS GROUND OF THE APPELLANT IS ALLOWED . 7. THE NEXT GROUND RELATES TO THE ADDITION MADE OF RS. 8 13 209/- ON ACCOUNT OF THE STATEMENT OF SHRI NARE NDRA SHAH WHEREIN HE HAD DEPOSED THAT HE HAS RECEIVED 15% OF THE PROF ITS EARNED BY THE ASSESSEES IN CASH AS A CONSIDERATION FOR ARRANGING THE ACCOMMODATION ENTRIES. I FIND THAT THE ASSESSEES WAS NOT GIVEN A N OPPORTUNITY OF CROSS- EXAMINING SHRI NARENDRA SHAH. I HAVE HELD THAT THE TRANSACTIONS OF PURCHASE/SALE OF SHARES OF M/S. SURYADEEP SALT & CH EMICALS LTD. (SSCL) WERE GENUINE TRANSACTIONS. THERE IS NO EVIDENCE TO SHOW THAT THE ASSESSEES HAD PAID ANY AMOUNT TO SHRI NARENDRA SHAH AS CONSIDERATION. THERE IS AN APPARENT CONTRADICTION IN THE STATEMENT OF SHRI NARENDRA SHAH IN THIS REGARD. IN THE STATEMENT RECORDED ON OATH ON 16.06.2206 SHRI NARENDRA SHAH HAS STATED THAT HE WAS CHARGING 2% TO 3% AS HIS ITA NO. 5050 & 5051/MUM/2008 21 CHARGES. IN THE STATEMENT RECORDED ON 31.10.2006 S HRI NARENDRA SHAH HAS STATED THAT HE RECEIVED 15% OF THE PROFITS EARN ED BY THE ASSESSEES. IN THE OTHER QUESTIONS SHRI NARENDRA SHAH AT SOME PLACES HAS SAID THAT THE TRANSACTIONS ENTERED INTO BY THE ASSESSEES WERE GENUINE TRANSACTIONS. HOWEVER AT SOME OTHER PLACE HE HAS S AID THAT THE TRANSACTIONS ENTERED INTO BY THE ASSESSEES WERE GE NUINE TRANSACTIONS. HOWEVER AT SOME OTHER PLACE HE HAS SAID THAT THE TR ANSACTION WAS MERELY AN ACCOMMODATION ENTRY. IN VIEW OF THESE AP PARENT GLARING FALLACIES IN THE STATEMENT OF SHRI NARENDRA SHAH I HAVE HELD THAT THE STATEMENT CANNOT BE GIVEN CREDENCE TO AS IT SUFFERS FROM LACK OF LOGICAL COHERENCE. IN THE CIRCUMSTANCES IT IS HELD THAT N O ADDITION CAN BE MADE ON ACCOUNT OF THE DEPOSITION MADE BY HIM THAT HE HAD RECEIVED RS.8 13 209/- IN CASH AS CONSIDERATION FOR ARRANGIN G THE ACCOMMODATION ENTRIES. APART FROM THE CONFLICTING STATEMENTS TH ERE ARE NO OTHER SUPPORTING EVIDENCES LIKE DEPOSIT IN ANY BANK ACCOU NT ROUGH NOTING FOUND DURING THE COURSE OF SEARCH ETC. WHICH SUPPO RT THE STATEMENT MADE. MERELY ON THE BASIS OF A STATEMENT WHICH WA S ALSO INCONSISTENT AND CONSIDERING THAT NO INSTANCE OF ANY COMMISSION PAYMENTS WAS EITHER SUPPORTED BY EVIDENCE OR CONFRONTED WITH THE ASSESSEES WITH SPECIFIC DETAILS THESE ARE NO GROUNDS TO ESTIMATE SUCH COMMISSION @ 15% AND TREAT THEM AS UNEXPLAINED INCOME OR CASH CR EDITS. ACCORDINGLY THE ADDITION OF RS.8 13 209/- IS DELETED. 15. THE FINDINGS GIVEN BY THE LD CIT(A) ARE IDENTIC AL OR ALSO COMMON IN CASES OF BOTH THE ASSESSEES SAVE THE FIGURES AND SOME DATES OF TRANSACTIONS. IN SUM AND SUBSTANCE THE LD CIT(A) DID NOT AGREE W ITH THE CONCLUSION DRAWN BY THE A.O AND DELETED THE ENTIRE ADDITIONS. NOW THE REVENUE IS IN APPEAL BEFORE US. 16. WE HAVE GIVEN OUR ANXIOUS CONSIDERATIONS TO THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. WE HAVE ALSO C AREFULLY CONSIDERED THE FACTS OF THE CASES AS NOTED BY BOTH THE AUTHORITIES BELOW. BOTH THESE ASSESSEES ARE THE MEMBERS OF THE MANSURI FAMILY. I T IS ALLEGED THAT THE MEMBERS OF THE MANSURI FAMILY HAD ENTERED INTO BOGU S OFF MARKET ITA NO. 5050 & 5051/MUM/2008 22 TRANSACTIONS OF THE SHARES POPULARLY KNOWN AS PEN NY STOCK THROUGH THE SUB- BROKERS SHOWING THE SALE PRICE OF THE SHARES AT IN FLATED PRICES AND THEREBY DECLARING THE CAPITAL GAIN TREATED THE SAME AS LON G TERM CAPITAL GAIN AND PAID LESS TAX AT THE RATE OF 10%. AS PER THE FACTS ON RECORD BOTH THESE ASSESSEES CLAIMED TO HAVE ACQUIRED THE SHARES OF M/ S. SURYADEEP LTD. BY WAY OF ACCOMMODATION ENTRIES THROUGH THE SUB-BROKERS. T HE ALLEGED SHAM TRANSACTIONS OF THE SHARES (PENNY STOCK) WERE INVES TIGATED BY THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT MU MBAI AND IT WAS FOUND THAT ONE SHRI NARENDRA R SHAH WAS THE MAIN KEY PLAY ER IN PROVIDING THE ACCOMMODATION ENTRIES OF THE SCRIPT M/S. SURYADEEP LTD. THE A.O HAS ALSO NOTED THAT THE CONCERNED PERSONS NAMELY RAJESH TAK WANI SHIVANI SHAH BHARAT TAKWANI CHANDULAL SANGHVI NARESH JANI PAR MAR BEN JANI ETC. FROM WHOM ORIGINALLY THE SHARES WERE PURCHASED HAVE EAR NED THE SPECULATION PROFIT BY DEALING IN THE SHARES. ON THE BASIS OF THE DE POSITION MADE BY SHRI NARENDRA R. SHAH FURTHER INVESTIGATION WAS CARRIED OUT. IN THE FINAL STATEMENT RECORDED ON 16.6.2006 AND 9.10.2006 SHR I NARENDRA R SHAH STATED THAT M/S. DHRISHTI SECURITIES PVT. LTD. G.R . PANDYA SHARE BROKING LTD. AND T.H. VAKIL SHARES & SECURITIES PVT. LTD. WERE DOING THE SHARE BROKING BUSINESS AND IN SOME CASES THOSE COMPANIES HAVE I SSUED BOGUS BILLS TO VARIOUS PERSONS IN FORM OF ACCOMMODATION ENTRIES. HE ALSO STATED THAT HE HAD FOUR PROPRIETORY CONCERNS NAMELY (I)M/S. ABHIJ AI INVESTMENT (II) M/S. SANJEEV & CO. (III) M/S. ABHISHEK FINANCE & INVES TMENT CORPN. AND (IV) M/S. NARENDRA SHAH AND THROUGH THE SAID CONCERNS H E WAS OPERATING THE SHARE TRANSACTIONS OF THE BENEFICIARIES. IN THE SA ID STATEMENT HE ALSO STATED THAT HE HAS RECEIVED THE COMMISSION TO THE EXTENT O F 2 TO 3% ON THE CAPITAL GAIN DECLARED BY THE BENEFICIARY PARTIES. HE COULD NOT PROVIDE THE DETAILS OF THE ALLEGED BENEFICIARY PARTIES IN HIS INITIAL STAT EMENT. HE FURTHER STATED THAT THE PURCHASE BILLS OF PENNY STOCK WERE ISSUED TO BENEFICIARIES FOR DECLARING AN ARTIFICIAL CAPITAL GAINS AND ALL THE BOGUS BILLS WE RE ISSUED BY THE ABOVE REFERRED COMPANIES I.E. DHRISHTI SECURITIES PVT. LTD. T.H. VAKIL SHARES & SECURITIES PVT. ETC.. 17. IN RESPECT OF THE MODUS OPERANDI BY ISSUING THE BOGUS BILLS FOR THE ACCOMMODATION ENTRIES FOR DECLARING THE SPECULATION PROFIT AS WELL AS CAPITAL GAIN HE STATED THAT HE WAS TO TAKE THE CASH FROM THE BENEFICIARIES WHICH WAS ITA NO. 5050 & 5051/MUM/2008 23 EQUIVALENT TO THE SPECULATION PROFIT + THE COMMISSI ON/SERVICE CHARGES TO THE EXTENT OF 0.5% OF THE SPECULATION PROFIT. IN HIS INITIAL STATEMENT I.E. DT. 16.6.2006 AND 9.10.2006 PART OF WHICH IS PRODUCED IN THE ASSESSMENT ORDER OF THE A.O THE ASSESSEESS NAMES WERE NOT MENTION ED. IT APPEARS THAT THE FURTHER STATEMENT OF SHRI NARENDRA SHAH WERE ALSO R ECORDED ON 19.10.2006 AND 31.10.2006 IN WHICH AS NOTED BY THE A.O AS PE R THE STATEMENT GIVEN BY SHRI NARENDRA SHAH M/S. DHRISHTI SECURITIES PVT. L TD. AND M/S. SHARE PRO SECURITIES LTD. WERE SUB-BROKERS AND THE MAIN BROK ERS WERE M/S. ANGEL BROKING LTD. AND M/S. ACTION FINANCIAL SERVICES LT D. SHRI NARENDRA SHAH FURTHER STATED THAT SHRI ABDULLAH MANSURI ONE OF T HE MEMBERS OF THE MANSURI FAMILY APPROACHED HIM THROUGH THE DIRECTOR OF M/S. INVENTURE GROWTH AND SECURITIES LTD. HE FURTHER STATED THAT 1 11 500 S HARES OF M/S. SURYADEEP LTD. WERE PURCHASED ON BEHALF OF VARIOUS MEMBERS OF THE MANSURI FAMILY THROUGH M/S. DHRISHTI SECURITIES PVT. LTD. WHICH IN TURN HAS PURCHASED THE SAME FROM ACTIONAL FINANCIAL SERVICES LTD. HE AL SO STATED THAT THE SHARES WERE ORIGINALLY HELD BY DIFFERENT PERSONS LIKE HAR ESH UDASHI CHANDULAL SANGHVI ANIL WADHWA PADMA JANI NARESH JANI SHIV ANI SHAH RAMANLAL SHAH ETC. IN RESPECT OF THE SALE OF THE SHARES BY THE MEMBERS OF THE MANSURI FAMILY HE DEPOSED THAT IT WAS DONE THROUGH BSE BY T.H. VAKIL SHARES AND SECURITIES PVT. LTD. HIS STATEMENT WAS AGAIN RECOR DED ON 21.10.2006 IN WHICH HE REPEATED THE STORY BUT WITH SOME CONTRADICTIONS AS RIGHTLY ARGUED BY THE LD. CONSULE. IT IS PERTINENT TO NOTE THAT AS PER HIS ANSWER TO THE QUESTION NO. 6 (STATEMENT DT. 31.10.2006) HE STATED THAT HE USE D TO TAKE COMMISSION AT 15% OF PROFIT EARNED BY THE CONCERNED PARTIES FOR A RRANGING THE ACCOMMODATION ENTRIES AND ACCORDINGLY HE HAS TAKEN THE 15% FROM THE MEMBERS OF THE MANSURI FAMILY ON THE SCRIPT OF M/S. SURYADEEP LTD. AND THE SAID PROFIT WAS TAKEN IN THE FORM OF CASH. HE ALSO STATED THAT HE SOLD THE SHARES THROUGH THE BOMBAY STOCK EXCHANGE GIVING SOU DA TO ONE KUNAL VAKIL WHO WAS THE DIRECTOR OF THE T.H. VAKIL SHARES SHARE S & SECURITIES PVT. LTD. AND THE SALES TRANSACTION HAS BEEN APPEARED IN THE BSE TRADING LIST. 18. THE MAIN THRUST OF THE A.O IS ON THE STATEMENTS GIVEN BY SHRI NARENDRA SHAH FOR MAKING ADDITIONS THOUGH HE TRIED HIS SOME EFFORTS TO VERIFY HIS STATEMENTS TO CORROBORATE SAME WITH OTHER MATERIAL. BUT AS IN OUR OPINION ITA NO. 5050 & 5051/MUM/2008 24 SHRI SHAH CHANGED HIS STATEMENTS AND THERE ARE MANY CONTRAICTIONS ITS CREDITWORTHINESS IS DOUBTFUL. IT IS PERTINENT TO NO TE HERE THAT BOTH THE ASSESSEES HAD DEMAT ACCOUNT WITH M/S. INVENTURE GR OWTH AND SECURITIES PVT. LTD. WHICH DETAILS ARE GIVEN BY THE A.O ON PAGE N O. 19 AND AS PER THE DETAILS THE DEMAT ACCOUNT OF BOTH THE ASSESSEES WE RE OPENED ON 11.12.2002. IT IS ALSO SEEN THAT THERE ARE TRANSACTIONS IN THE DEMAT ACCOUNT OF BOTH THESE ASSESSEES PAGE NO. 22 AND 23 OF THE ASSESSMENT ORD ER AND HENCE IT IS CLEAR THAT THE SHARES WERE DEMATERIALIZED AND THEREAFTER MAJOR TRANSACTIONS OF THE SALES AND PURCHASES OF THE SCRIPT M/S. SURYADEEP L TD. WERE MADE. MOREOVER IT IS ALSO SEEN THAT ASSESSEES PRODUCED SUB-BROKERS NOTES AND CONFIRMATIONS IN RESPECT OF SCRIPT M/S. SURYADEEP LTD. AND THAT BEIN G IMPORTANT PIECE OF EVIDENCE HAS NOT BEEN CONSIDERED BY THE A.O. BUT CO NVENIENTLY IGNORED. ANOTHER ASPECT WHICH HAS BEEN CONSIDERED BY THE A.O IS IN RESPECT OF THE DELAY IN THE PAYMENTS ON THE PURCHASE OF THE SHARES AS WELL AS THE SALES OF THE SHARES. 19. NOW THE CORE QUESTION WHICH ARISES FOR OUR CO NSIDERATION IS TO WHAT EXTENT THE DEPOSITIONS MADE BY SHRI NARENDRA SHAH SHOULD BE GIVEN CLEAN WEIGHTAGE WHICH CREDIT WORTHINESS ARE DISPUTED AS SAME ARE HEAVILY RELIED ON BY THE A.O. FOR CONCLUDING THAT THE ASSESSEES AN D OTHER MEMBERS OF MANSURI FAMILY WERE INDULGED IN HAWALA TRANSACTIONS BY USING DEVICE OF PENNY STOCK OF M/S. SURYADEEP LTD? ADMITTEDLY IN THIS CASE FOR THE PURPOSE OF THE TRANSACTIONS TWO SUB-BROKERS WERE INVOLVED NAMELY M/S. DHRISHTI SECURITIES PVT. LTD. AND M/S. SHARE PRO SECURITIES LTD. IT IS ALSO PERTINENT TO NOTE THAT THE SUB-BROKERS NOTES WERE ISSUED BY M/S. DHRISHTI SECURITIES PVT. LTD. AND M/S. SHARE PRO SECURITIES PVT. LTD. IN RESPECT OF T HE SALE AND PURCHASE TRANSACTIONS OF THE SHARES OF M/S. SURYADEEP LTD. THE A.O. HAS RELIED ON THE REPLY GIVEN BY THE INVENTURE SECURITIES PVT. LTD. B UT THAT WAS THE MAIN BROKER AND THE ENTIRE DEALING WAS DONE BY M/S. DHRISHTI SE CURITIES PVT. LTD. AS SUB- BROKER. AS PER THE DEPOSITION OF SHRI NARENDRA SHAH (PAGE NO. 12 OF THE ASSESSMENT ORDER) THE MAIN BROKER FOR M/S. DHRISHT I SECURITIES PVT. LTD. WAS M/S. ANGEL BROKING LTD. AND IT IS CERTAINLY STRANGE HOW THE INFORMATION RECEIVED FROM INVENTURE GROWTH AND SECURITIES PVT. LTD IS RELIED ON BY THE A.O. WHEN SHRI SHAH KEEP CHANGING HIS STATEMENTS AL SO IN RESPECT OF MAIN BROKERS. ITA NO. 5050 & 5051/MUM/2008 25 20. THERE ARE SERIOUS CONTRADICTIONS IN THE DEPOSIT IONS OF SHRI NARENDRA SHAH. AS PER THE INITIAL DEPOSITIONS OF SHRI NAREN DRA SHAH HE HAS STATED THAT HE RECEIVED 2 TO 3% COMMISSION ON THE PROFITS/CAPIT AL GAINS DECLARED BY THE BENEFICIARIES LIKE THE ASSESSEES BUT IN THE SUBSEQU ENT STATEMENT HE HAS STATED THAT HE HAS RECEIVED 15% COMMISSION OF PROFI TS EARNED BY THE ALLEGED BENEFICIARIES LIKE THE MEMBERS OF THE MANSURI FAMIL Y. THE STATEMENT RELIED ON BY THE A.O ARE TOTALLY SILENT IN RESPECT OF BOTH TH ESE ASSESSEES. THE A.O. HAS ALSO OBSERVED THAT THE BSE HAS INFORMED THAT NO SUC H TRANSACTIONS WERE ROUTED THROUGH STOCK EXCHANGES BUT AT THE SAME TIME IT IS CASE OF THE A.O. THAT ENTIRE SCRIPT TRANSACTIONS WERE OFF MARKET TRA NSACTIONS AND IF TRANSACTIONS ARE OFF MARKET THEN SAME CAN NEVER BE ROUTED THROUG H THE STOCK EXCHANGES. 21. THE A.O TRIED TO MAKE THE CASE THAT AS PER INFO RMATION GIVEN BY THE BSE NO SHARES HAVE BEEN TRADED BUT AS PER THE DEP OSITIONS OF SHRI NARENDRA SHAH PART OF THE SHARES OF M/S SURYADEEP LTD. WERE SOLD THROUGH THE BSE ONLY AND THAT SHOWS THAT THERE IS CONTRADICTIONS IN RESPECT OF THE INFORMATION ON RECORD. IT MEANS THAT AGAIN ON THIS ASPECT ALSO THERE IS NO CONSISTENCY IN THE DEPOSITION OF SHRI NARENDRA SHAH. THOUGH ONE O F THE MEMBER OF THE MANSURI FAMILY WAS PRESENT AT THE TIME OF THE ASSES SMENT AND HE WAS ALLOWED THE OPPORTUNITY TO CROSS-EXAMINE SHRI NARENDRA SHAH BUT IT IS NOT CLEAR WHETHER THE OPPORTUNITY TO CROSS-EXAMINE SHRI NAREN DRA SHAH WAS ALSO GIVEN TO BOTH THESE ASSESSEES. SO FAR AS THE REFERENCE O F THE LETTERS OF THE MAIN BROKERS NAMELY M/S. INVENTURE GROWTH AND SECURITIES PVT. LTD AND ACTION FINANCIAL SERVICES LTD. IS CONCERNED IT PERTAINS T O THE STAGE WHEN THE ASSESSEES HAD PURCHASED THE SHARES. IT IS PERTINEN T TO NOTE HERE THAT AS PER THE CASE OF THE A.O THE ENTIRE SHARE TRANSACTION O F M/S SURYADEEP LTD. WAS AN OFF MARKET TRANSACTION BUT AT THE SAME TIME M/ S. DHRISHTI SECURITIES PVT. LTD. AND M/S. SHARE PRO SERVICES LTD. ACCEPTED AND ADMITTED THAT THEY WERE INVOLVED IN THE SHARE TRANSACTIONS OF M/S SURYADEE P LTD. ON BEHALF OF BOTH THE ASSESSEES. BOTH THE SUB-BROKERS HAVE GIVEN THE DET AILS OF THE PARTIES WHO HAD SOLD THE SHARES OF M/S SURYADEEP LTD. TO THE AS SESSEE THROUGH ABOVE SUB- BROKERS AS WELL AS ALSO PRODUCED THE CLIENTS LEDGE R ACCOUNT AS APPEARING IN THEIR BOOKS OF ACCOUNT. HENCE AS RIGHTLY CONCLUDE D BY THE LD CIT(A) THAT THE CONTRADICTIONS IN THE DEPOSITION OF SHRI NARENDRA S HAH AS WELL AS THE EVIDENCE ITA NO. 5050 & 5051/MUM/2008 26 PRODUCED BY M/S. DHRISHTI SECURITIES PVT. LTD. AND M/S. SHARE PRO SECURITIES PVT. LTD. (SUB-BROKER) CAN BE TOTALLY DISCARDED ? THOUGH THE A.O HAS PUT HIS EFFORTS TO MAKE OUT A CASE OF ALLEGED HAWALA TRANSA CTIONS BY USE OF DEVICE OF PENNY STOCK BUT IN OUR HUMBLE OPINION THE EVIDE NCE AND MATERIAL RELIED BY THE A.O IF ARE EXAMINED IN TOUCHTONE OF THE GENERAL PRINCIPLES OF THE EVIDENCE ACT SAME CAN NOT STAND TO SUPPORT THE FINDINGS OF THE A.O. AS THERE ARE MANY OF MISSING LINKS. THERE IS NO DISPUTE THAT THE ASS ESSEES HAD OPENED THE DEMAT A/CS. AND MAJOR SHARE TRANSACTIONS OF M/S SU RYADEEP LTD. WERE ROUTED THROUGH THE SAID ACCOUNTS. THERE IS NO BAR FOR DOI NG THE SHARE TRANSACTION IN PHYSICAL FORM. M ERELY BECAUSE PART OF THE SHARE TRANSACTIONS ARE DEALT IN THE PHYSICAL FORM AND PART OF THE SHARE TR ANSACTIONS ARE IN THE DEMATERIALIZED FORM THAT CANNOT BE THE BASE FO R SUSPECTING THE BONA FIDES OF THE TRANSACTION. 22. THE A.O HAS ALSO STATED THAT THERE WAS A GAP IN RESPECT OF THE PAYMENTS OF THE CONSIDERATION. IN OUR OPINION MERELY BECAUSE THE PAYMENTS ARE NOT MADE ON THE DATES OF T HE TRANSFER OF THE SHARES EITHER THROUGH THE DEMAT A/C. OR BY WAY OF A PHYSICAL DELIVERY THE A.O. CANNOT QUESTION THE BONA FIDES OF THE TRANSACTION UNLESS AND UNTIL VARY TRANSACTION ITSE LF IS DENIED BY THE OTHER PARTY. AFTER CONSIDERING THE TOTALITY OF THE FACTS AND AND MATERIAL ON RECORD WE AGREE WITH THE FINDINGS OF T HE LD CIT(A) THAT THE HIGH PITCH ADDITIONS MADE BY THE A.O. IN BOTH THESE CASES WHICH ARE BASED ON THE STATEMENTS AND DEPOSI TIONS OF SHRI NARENDRA SHAH CAN NOT BE SUSTAINED. 23. AFTER GIVING OUR ANXIOUS CONSIDERATIONS TO THE REASONS GIVEN BY THE LD CIT(A) WE CONCUR WITH HIS FINDING THAT THE TRASACTIONS OF PURCHASE AND SALE OF THE SHARES OF M/S. SURYADEE P LTD. AS CLAIMED BY THE ASSESSEES CANNOT BE DOUBTED. ACCORDI NGLY GROUND NOS. 1 TO 4 IN BOTH APPEALS ARE DISMISSED 24. NOW THE NEXT IS IN RESPECT OF DELETING THE AD DITION TOWARDS ALLEGED PAYMENT OF 15% COMMISSION TO SHRI SHAH FOR ARRANGING ALLEGED ACCOMMODATION ENTRIES. THE A.O. ALSO MADE A DDITION AT ITA NO. 5050 & 5051/MUM/2008 27 15% OF CAPITAL GAIN DECLARED BY THE ASSESSES WHICH IS IN RESPECT OF COMMISSION PAID TO SHRI SHAH. WE HAVE ALREADY HELD THAT THERE IS NO CREDITWORTHINESS TO THE DEPOSITIONS MADE BY SHRI SHAH AS HE KEPT CHANGING HIS STATEMENTS. MOREOVER THERE IS AL SO CONTRADICTIONS ON THIS ISSUE AS AT ONE STAGE HE STA TED THAT HE WAS PAID 2 TO 3% COMMISSION AND IN SUBSEQUENT STATEMENT S HE STATED THAT HE WAS PAID 15% COMMISSION?. OTHER THAN CONTRA DICTORY STATEMENTS OF SHRI SHAH NOTHING IS ON RECORD TO CO RROBORATE THE STATEMENT OF SHRI SHAH. IT IS ALSO NOT THE CASE OF THE A.O. THAT SHRI SHAH HAS DECLARED ANY COMMISSION AS STATED BY HIM. ONLY LAST PARA OF THE ASSESSMENT ORDER DEALS WITH THIS ADDITI ON AND ON PERUSAL OF REASONS THIS ADDITION IS ONLY MADE ON TH E BASIS OF CONTRADICTORY STATEMENTS OF SHRI SHAH AND NOTHING M ORE. IN OUR OPINION LD. CIT(A) RIGHTLY DELETED THE ADDITION AND WE CONCUR WITH SAME. IN THE RESULT GROUND NO. 5 IS DISMISSED IN B OTH THE APPEALS. OTHER GROUNDS ARE GENERAL IN NATURE. 25. IN THE RESULT BOTH APPEALS OF THE REVENUE ARE D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23RD FEBRUA RY 2010. SD/- SD/- (B. RAMKOTAIAH) (R.S. PADVEKAR) ACCOUNTANT MEMBER JUDICIAL MEM BER MUMBAI ON THIS 23RD DAY OF FEBRUARY 2010. :US COPY TO: 1. APPELLANT 2. RESPONDENT 3.THE CIT(A)- III MUMBAI 4.THE CIT -3 MUMBAI 5.THE DR I BENCH MUMBAI 6.GUARD FILE BY ORDER TRUE COPY ASSTT..REGISTRAR ITAT MUMBAI. ITA NO. 5050 & 5051/MUM/2008 28 US DATE INITIALS 1. DRAFT DICTATED ON 4/1/10 --------------- SR.P.S. 2. DRAFT PLACED BEFORE AUTHORITY 5/1/10 --------- ----- SR.P.S. 3. DRAFT PROPOSED & PLACED ----------- ---------- --- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED ----------- ----------- -- JM/AM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO ----------- ------------ - SR.P.S. THE SR. P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON --------- ----------- -- SR.P.S. 7. FILE SENT TO THE BENCH CLERK --------- --------- ---- SR.P.S. 8. DATE ON WHICH FILE GOES TO THE ------- --------- ---- 9. DATE OF DISPATCH OF ORDER --------- --------- ----