Commissioner of Income Tax vs Smt. Jamnadevi Agrawal and Others

J.P. Devadhar, J.—Heard learned Counsel for the parties.

By a common order dt. 24th July, 2009 [reported as Asstt. CIT v. Kamal Kumar S. Agrawal (Indl.) and Ors. (2010) 41 DTR (Nag) 105-- Ed.], which is impugned in these appeals, the Tribunal had disposed of 70 appeals filed by the Revenue. Although the impugned order of the Tribunal relates to 70 Assessees, the Revenue has filed appeals u/s 260A of the IT Act, 1961 only in respect of 43 Assessees. In respect of the remaining 27 Assessees, no appeals have been filed. To a query raised by the Court regarding the above discrepancy, learned Counsel for the Revenue stated that out of 27 Assessees, in case of 8 Assessees, appeals have not: been filed in view of the small tax effect and in the remaining 19 cases, the appeals have not been filed because the concerned CIT was of the opinion that no substantial question of low arises out of the common order of the Tribunal dt. 24th July, 2009.

In response to a further query as to why the Revenue considers these 43 appeals to be different form 19 cases where appeals have not been filed, the learned Counsel for the Revenue fairly stated that he does not find any difference in any of the appeals and submitted that lack of co-ordination between different commission rates has resulted in filing appeals in some cases and not filing appeals in other cases, even though there is a common order passed by the Tribunal. The learned Counsel for the Revenue while conceding that he is not in a position to find fault with the reasoning given by the Tribunal in deleting the additions made by the Assessees (sic--AO), submitted that these appeals be decided on merits in the light of the findings recorded by the AO and decision of the apex Court in Sumati Dayal Vs. Commissioner of Income Tax Bangalore, .

In all these cases, the Assessees had claimed/offered long-term capital gains on sale of shares of various listed companies, which were all accepted by the AO in the respective assessments. Thereafter, on account of search, proceedings were initiated u/s 153A of the Act, For easy reference, we may take facts in IT Appeal No. 41 of 2010. It is agreed between the parties that the decision in IT Appeal No. 41 of 2010 will apply to all the remaining 42 appeals.

In IT Appeal No. of 2010, the Respondent-Assessee had purchased 30,000 shares of M/s Authentic Investments & Finance Ltd. on 8th April, 1999 @ Re. 0.98 per share. These shares were claimed to have been sold on 7th July, 2000, 14th July, 2000 and 21st July 2000 at an average value of Rs. 33.81 per share. In the assessment year in question, the Assessee offered to tax the capital gains arising form sale of the above shares, amounting to Rs. 9,84,909 as a long-term capital gain. The same was accepted.

Subsequently, on 20th Jan, 2005, there was search action in the case of various Assessees belonging to a group known as Haldiram Group. It appears that on 30th March, 2005, the group offered additional income of Rs. 2 crores, out of which Rs. 3 lakhs were offered in the hands of the Assessee in IT Appeal No. 41 of 2010 for the asst. yr. 2004-05 and Rs. 7 lakhs in the asst. yr. 2005-06.

The AO on the basis of the seized material issued notice u/s 153A of the IT Act, 1961 for asst. yr. 2001-02 and subsequently passed an assessment order u/s 153A r/w Section 143(3) of the IT Act, 1961 on 20th Dec., 2006, wherein the AO computed the total income by disallowing the long-term capital gain and added the entire sale proceeds received on sale of shares amounting to Rs. 10,14,324 as income from undisclosed sources u/s 68 of the IT Act, 1961.

On appeal filed by the CIT(A) by his order dt. 19th April, 2007 held that Section 68 of the Act is not applicable to the facts of the present case and accordingly deleted the addition by following his decision in the case of Kamal Kumar Agrawal for the asst. yr. 2002-03.

On further appeal filed by the Revenue, the Tribunal by a common order dt. 24th July, 2009 dismissed all the 70 appeals filed by the Revenue, the lead matter being the appeal against Kamal Kumar Agrawal (Individual). Challenging the aforesaid order of the Tribunal, dt. 24th July, 2009, these 43 appeals have been filed by the Revenue and no appeals have been filed in the remaining cases. It is pertinent to note, that the Revenue has accepted the decision of the Tribunal in the case of Kamal Kumar Agrawal (Individual), which is the lead matter.

The sole contention raised by the Revenue in these appeals is that the entire long-term capital gains claimed by the Assessee represents undisclosed income of the assesses because:

(a) Most of the sales of the shares effected by the group are of the same companies and through the same brokers located at Calcutta.

(b) Pradeep Kumar Daga, the principal broker has confirmed that the transactions with the Haldiram Group are Sham and explained the modus operandi as follows:

Party A wants to claim long-term capital gain, and approaches me through a person X. Mr. X approaches me with two names, i.e. the buyer (A) and the seller (B). Mr. A buys the share of the company held by the seller B at Rs. 3 through my terminal. After 365 days or one year when the share of the company has reached high of Rs. 100 Mr. C. approaches me through Mr. A with the name of a fresh purchaser Mr. C. who is willing to buy the share of Mr. A at Rs. 100. Mr. A (who was previously the purchaser and wants to avail LTCG now) becomes the seller and sells his shares at Rs. 100 to Mr. C through my terminal. Mr. C gives me a cheque of Rs. 100 for the shares bought from Mr. A and subsequently I pay the sale proceeds in cheque/DD to Mr. A after deducting my brokerage. Subsequently, Mr. A on receipt of the sale proceeds by cheques/DD pays Mr. X, the same proceeds by cheques/DD pays Mr. X the same amount by cash (No. 2 account), i.e. Rs. 100 and Mr. X pays the same to Mr. C. In this way Mr. A converts the black money into white and avails long-term capital gain.

(c) The sale transactions were off-market transactions and the Calcutta Stock Exchange by its letter dt. 26th May, 2005 has confirmed that quite a few of the transactions carried out by Shri Pradeep Kumar Daga were not borne on the records of the exchange and that the details noted; on same of the other contract notes did not match.

(d) There were unexplained cash credits in some of the buyers bank accounts prior to issuance of cheques to the Assessees.

We see no merit in the above contentions. The fact that the Assessees in the group have purchased and sold shares of similar companies through the same broker cannot be a ground to hold that the transactions are sham and bogus, especially when documentary evidence was produced to establish the genuineness of the claim.

From the documents produced before us, which were also in possession of the AO, it is seen that the shares in question were infact purchased by the Assessees on the respective dates and the company has confirmed to have handed over the shares purchased by the Assessees. Similarly, the sale of the shares to the respective buyers is also established by producing documentary evidence. It is true that some of the transactions were off-market transactions. However, the purchase and sale price of the shares declared by the Assessees were in conformity with the market rates prevailing on the respective dates as is seen from the documents furnished by the Assessees. Therefore, the fact that some of the transactions were off-market transactions cannot be a ground to treat the transactions as sham transactions.

The statement of Pradeep Kumar Daga that the transactions with the Haldiram Group were bogus has been demonstrated to be wrong by producing documentary evidence to the effect that the shares sold by the Assessees were in consonance with the market price. On perusal of those documentary evidence, the Tribunal has arrived at a finding of fact that the transactions were genuine. Nothing is brought to our notice that the findings recorded by the Tribunal are contrary to the documentary evidence on record.

The Tribunal has further recorded a finding of fact that the cash credits in the bank accounts of some of the buyers of shares cannot be linked to the Assessees. Moreover, in the light of the documentary evidence adduced to show that the shares purchased and sold by the Assessees were in conformity with the market price, the Tribunal recorded a finding of fact that the cash credits in the buyers'' bank accounts cannot be attributed to the Assessees. No fault can be found with the above finding recorded by the Tribunal.

Reliance placed by the counsel for the Revenue on the decision of the apex Court in the case of Sumati Dayal (supra) is wholly misplaced. In that case, the Assessee therein had claimed income from horse races and the finding of fact recorded was that the Assessee therein had not participated in races, but purchased winning tickets after the race with the unaccounted money. In the present case, the documentary evidence clearly shows that the transactions were at the rate prevailing in the stock market and there was no question of introducing unaccounted money by the Assessees. Thus, the decision relied upon by the counsel for the Revenue is wholly distinguishable on facts.

For all the aforesaid reasons, we hold that the decision of the Tribunal is based on finding of facts. No substantial question of law arises from the order of the Tribunal. Accordingly, all these appeals are dismissed. No order as to costs.