COMMISSIONER OF INCOME TAX Vs. ARUN KUMAR AGARWAL

JUDGEMENT

(1.) Heard the counsel for the parties. These bunch of Tax Appeals are arising out of the order passed by the I.T.A.T. Dated 29.4.2010 whereby the I.T.A.T has dismissed the appeals of the Revenue and upheld all the separate orders passed by the Commissioner of Income Tax (CIT) (Appeals) whereby the CIT (Appeals), Jamshedpur vide order dated 8.5.2009 set aside the order passed by the A.O. and held that the income declared by the assessee under the heading 'Long Term Capital Gain' is correct declaration given by the assessees.

(2.) The brief facts of the case are that all theses assessees submitted their Returns of income and therein they claimed that they purchased certain shares of various companies and those shares were sold after a period of 12 months, and therefore, the share transactions of all the assessees resulted into a long term capital gain only. The Assessing Officer examined each and individual case of the assessee, however, substantially in all the orders, the Assessing Officer took note of the fact that the Securities & Exchange Board of India (SEBI) finding unusual rise in the share of some of the companies was of the opinion that there may be a prima facie case of violation of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Security Market) Regulation, 2003 and ordered a detailed enquiry under Section 11B and 114 of the Security & Exchange Board of India Act, 1992. In the enquiry, findings were recorded against eleven Stock Brokers and their trading was suspended by the Kolkata Stock Exchange from buying and selling the securities. The Assessing Officer in detail considered the report of the SEBI and referred the case of one of the Company M/s Srinidhi Trading Ltd. whose shares had market value Rs. 9.02 as on 11.3.2004 which reached to Rs. 160.10 as on 29.8.2005. In the SEBI's enquiry report that was one of the case whereby it has been held that it may be result of the bogus dealings by these brokers. After giving detailed facts of the enquiry report in all the orders and particularly with respect to the above company, M/s Srinidhi Trading Ltd. and M/s Ahilya Commercial Pvt. Ltd., Kolkata and their share dealings running in crores of rupees, the Assessing Officer has observed that in the facts and circumstances of transactions of all these assesses are identical to the cases surveyed and investigated by the D.I.T.(Inv.), Kolkata. Thus, the modus operandi adopted by the Brokers of the assessee is also identical with one adopted by M/s Ahilya Commercial Pvt. Ltd. On the basis of this, the Assessing Officer held that the transaction of the purchase of the shares and sale thereof is not genuine and is a sham transaction. We may again mention here that the Assessing Officer considered the facts of each case separately in its separate order for each assesses.

(3.) In Appeal, the C.I.T.(Appeals), Jamshedpur also considered the facts of the each case separately by giving reference of the purchase of shares by the assessees and sale thereof. In most of the cases, the C.I.T. (Appeals) found that the purchase of the shares were shown by the assessees in their Balance Sheet of the last five years and genuineness of the Books of Accounts was never questioned. In one of the case, for example, in the Tax Appeal No. 14 of 2011, before us, there is a transaction of shares of the same company namely M/s Srinidhi Trading Ltd. for which it has been noticed that the shares of this company having market value Rs. 9.02 on 9.3.2004 jumped to Rs. 160 as on 31.3.2006 and before that on 29.8.2005 to Rs. 159.53. The C.I.T. (Appeals) considering the facts of this assessee found that the assessee purchased the shares of the said company, but, purchase transaction is supported by the documents and the payment was made through the Bank and it is verified well from the Bank Statement and from the Bank Account number of EXIS Bank Ltd. The shares remained in the possession of the assessee. The fact of shares remaining in possession of the assessee is verifiable from the Statement of assessee's D. MAT account number which has been given in the order. The shares is disclosed in the Balance Sheet as on 31.3.2004 and 31.6.2005. The shares were sold in the financial year 2006-07. The sale transaction was also verifiable. We have given this one of the example because of the reason that the Assessing Officer in all the cases gave instances of the transaction of this one company namely M/s Srinidhi Trading Ltd. from the report of the SEBI. So far as other assessees are concerned, even if they have not dealt with shares of the M/s Srinidhi Trading Ltd. or through M/s Ahilya Commercial Pvt. Ltd. or any tinted Broker, transaction of those assessees were also declared sham transaction by the Assessing Officer merely on the basis that the transaction of these assessees are identical to the transaction of the shares of the companies whose share price fluctuated and there is steep rise in the share price. The Assessing Officer admittedly did not proceed to hold enquiry after the receipt of the contract note and other material document submitted by the assessees in these cases and did not enquire the matter from the Brokers from whom the assessees purchased the shares.