ORDER

N.L. Dash, Judicial Member. - Aggrieved with the order of the learned CIT(A)-Siliguri, the assessee has come in second appeal before the Bench.

2. There are six grounds filed by the assessee appellant which are as follows :

"1. That on the facts and in the circumstances of the case, the learned Assessing Officer and CIT(A) both erred in having invoked provisions of section 68 on wrong interpretation of facts and more on suspicion disregarding the evidences filed and without bringing on record any evidence in support of their suspicion that bogus share transactions were recorded to avail of exemption under section 54F.
2. That the learned CIT(A) erred in having treated the capital gain of Rs. 9,68,972 as assessee's unexplained cash credit under section 68 when, in fact purchase and sale of shares through registered brokers of CSE were through bank, entries have been reflected in the books of account and the brokers have confirmed the transactions and hence such action of CIT(A) was purely on surmises, conjectures and hence not sustainable in the eye of law.
3. That further the learned CIT(A) misdirected himself in not having appreciated the fact duly confirmed by CSE and he himself that off-market transactions of shares is not illegal and in assessee's case sale of 14,000 shares out of 14,600 shares of M/s. Questfin were sold by broker in self code through CSE and remaining 600 shares on off-market trade and hence the treatment of genuine gain as unexplained cash credit is whimsical and uncalled for.
4. That without prejudice to the above, the case laws relied on by the CIT(A) to substantiate his suspicion are distinguishable on facts and hence his action in disregarding the assessee's genuine claim duly supported by proper evidence is arbitrary, unwarranted and bad in law.
5. That as the order of the learned CIT(A) is arbitrary, capricious and bad in law, the same should be quashed and your appellant be given such relief(s) as prayed for.
6. That the appellant craves leave to add, amend and modify the above grounds at the time of hearing of the appeal."

3. The learned Authorised Representative in the course of second appellate proceedings, submitted before the Bench that although there are six grounds but the only effective ground is ground No. 2. If this ground is considered then the other grounds are corollary to the main ground.

4. Stating in brief the factual aspect of the case the learned Authorised Representative submitted that the assessee is a partner of M/s. Awadh Motor and also deals in supply of old motor parts and iron materials. However, the assessee has not maintained any books of account for his own supply business. For the assessment year under consideration the appellant's return was selected for scrutiny and while completing the assessment the Assessing Officer made an addition of Rs. 9,68,972 under section 68 of the IT Act treating the same as income from other sources. The appellant had placed an order for certain number of shares in Quest Financial Ltd. to M/s. N.M. Lohia & Co., member of Calcutta Stock Exchange at the prevailing market rate. M/s. N.M. Lohia bought 14,600 shares on his account on 11-4-2001 which were sold through M/s. Bubna Stock Broking Services. Both the stock brokers are members of the Calcutta Stock Exchange. The learned Authorised Representative has given a detailed chart of the transactions vide para 2.4 of his written submissions as follows :

4.1 Further he has submitted that all the required documents like copies purchase bills, contract note, delivery challan, sales bills and contract notes issued by the selling broker, parties of ledger, party ledger account of both the transactions, copy of the de-mat account and all other required documents had been filed before the Assessing Officer. According to the learned Authorised Representative the Assessing Officer did not accept the transactions as genuine as because the Calcutta Stock Exchange denied the transactions of M/s. N.M. Lohia & Co. through the CSE's online trading mechanism. The learned Authorised Representative further admitted before the Bench that these are all off-market transactions. Relying on one order of the Mumbai Bench of the Tribunal in the case of Mukesh R. Marolia v. Addl. CIT [2006] 6 SOT 247 , the learned Authorised Representative submitted that the Mumbai Bench of the Tribunal in the said case has held that "when the transactions were off-market transactions, there is no relevance in seeking details of share transactions from stock exchanges. Such attempt is futile. Stock exchanges cannot give details of transactions entered into between the parties outside their floor. Therefore, the reliance placed by the assessing authority on the communications received from the stock exchanges that the particulars of share transactions entered into by the assessee were not available in their records, is out of place". They further held that "off-market transactions are not illegal".

4.2 Further the learned Authorised Representative has placed reliance on another case of the Mumbai Bench of the Tribunal in the case of Asstt. CIT v. Claridges Investments & Finances (P.) Ltd. [2007] 18 SOT 390 which is as follows :

"As the matter stands, we find that the assessee's transactions are supported by the movement of shares as reflected in de-mat account, movement of money as reflected in the bank account, entries in the books of accounts of the assessee, prevalent market quotations of the CSE, contract notes and delivery bills issued by the Kolkata brokers and their statements in response to the inquiries made by the Assessing Officer. Last but not the least the assessee has shown net profit of Rs. 16.16 crores. As against these the case of Revenue is that certain material information was not given in the contract note and columns in that respect were left blank. Copy of Form B was filed in CSE. For these reasons it is not verifiable as to whether the trades in question were done through the trading system of the exchange or not. The answer of the assessee to these deficiencies and irregularities is that he could not be held responsible for the same. It was not the assessee but the three Kolkata brokers who were members of the CSE.... The Assessing Officer does not have support from the special auditors, CSE or any other quarter to that effect whereas the assessee has relied upon cogent evidence and material. We hold that the Assessing Officer has acted upon grossly inadequate materials and his conclusions are in the realm of suspicion, conjectures and surmises...."

4.3 Further vide para 2.10, the learned Authorised Representative has contended that as far as the allegation that the de-mat account statement date of credit of shares of Questfin is 13-8-2002 and the date of debit for the same shares is 9-3-2005, it is submitted that the purchase of shares could be de-mated after some time as the de-mat account particulars of the appellant were not available in the records of the share broker at the relevant point of time. The delay of delivery of shares was on the appellant's part which M/s. Bubna Stock Broking Services Ltd. accommodated.

4.4 He also placed reliance on one Board's Circular No. 704, dated 28-4-1995 [(1995) 125 CTR (St.) 86] at para 2.11 of his written submissions which is as under :

"2. When the securities are transacted through stock exchanges, it is the established procedure that the brokers first enter into contracts for purchase/sale of securities and thereafter, follow it up with delivery of shares, accompanied by transfer deeds duly signed by the registered holders. The seller is entitled to receive the consideration agreed to as on the date of contract. The Board is of the opinion that it is the date of broker's note that should be treated as the date of transfer in cases of sale transactions of securities provided such transactions are followed up by delivery of shares and also the transfer deeds. Similarly, in respect of the purchasers of the securities, the holding period shall be reckoned from the date of the broker's note for purchase on behalf of the investors. In case the transactions take place directly between the parties and not through stock exchanges, the date of contract of sale as declared by the parties shall be treated as the date of transfer provided it is followed up by actual delivery of shares and the transfer deeds."

4.5 The learned Authorised Representative has tried to distinguish the facts of the case in Commissioner Of Income-Tax v. Vipin Batra [2007] 293 ITR 389ftn1Acchyalal Shaw v. ITO.htm (Delhi) relied by the learned CIT(A) on the ground that the facts of the present case are different as that case referred to bogus entries of long-term capital gains taken by the assessee from the share broker, whose bank and account numbers were identified. It had also been noted that no sale or purchase of share has actually taken place and the person who had operated the account had admitted in his statement that bogus transactions relating to sales and purchases of shares were done through this bank account and most of the beneficiaries had availed of relief under section 54F of the Act. But in the present case, the transactions are perfectly genuine, routed through proper channel, carried out at prevalent market rates and supported by proper bills and documents. In furtherance to the same, he also placed reliance on the decision of the Calcutta High Court in the case of Commissioner Of Income-Tax v. Korlay Trading Co. Ltd. [1998] 232 ITR 820 where the jurisdictional High Court has held as under :

"Once the assessee has furnished the name of the company, number of shares purchased, date of sale, amount of purchase money, amount of sale money, etc. the assessee had discharged its initial burden and if the broker did not maintain any accounts, the transaction could not be doubted for no fault of the assessee. Once the assessee had discharged its initial burden, no investigation or proper steps had been taken by the ITO to bring on record the materials to controvert the claim of the assessee."

4.6 He also placed reliance on another case of the Tribunal, Kolkata Bench in ITA Nos. 1678 and 1679/Kol/2004 for assessment year 2001-02 in the case of Anup Kumar Jayaswal where the Kolkata Bench has held as under:

"The fact remains that at no point of time the assessee had an opportunity to interact with the share issuing company as the assessee had not purchased shares directly from the company and that the alleged denial by the share issuing company about the transfer of the shares is better known to them and not to the assessee. As far as the assessee is concerned, the transaction of purchase and sale of 20,000 shares through the registered broker is proved by documentary evidence filed on record. The payments of sale proceeds of 20,000 shares were received by the assessee by account payee cheques. We find that the transaction has been entered into through a registered broker at prevalent market price and is supported by documentary evidence.... The transaction of sale and purchase of shares has been confirmed by the share broker both in his statement recorded under section 131 of the Act and also by an affidavit filed before the Assessing Officer. In these facts, we hold that no case of addition under section 68 of the Act is made by Revenue against the assessee and the fact of purchase and sale is proved by documentary evidence filed before Assessing Officer."

Further the learned counsel carried the attention of the Bench to different pages of his paper book in order to show the evidence of purchase, ledger of M/s. N.M. Lohia & Co. sale evidence, sale contract notes, client ledger, CSE's denial letter and etc.

5. On the other hand, the learned Departmental Representative strongly relied on the orders of the Assessing Officer and that of the learned CIT(A) and submitted that investment in the purchase and sale of property of Rs. 11,00,000 has been manipulated by the assessee.

6. On hearing the rival submissions, perusing the case record along with the case laws and placing reliance on various decisions it transpires that in a transaction like this (all off-market transactions) any enquiry from the stock exchange will not yield result in favour of the Revenue. The Revenue has to see whether the sale has been effected or not as per the documents and as per the acceptance and admission of the respective stock brokers. As it has been assertively argued by the learned Authorised Representative in this case that both the stock brokers had not denied the transactions and the capital gain has been shown, the Assessing Officer simply by casting doubt for alleged purchase of house property for Rs. 11,00,000 cannot treat the same as cash credit and cannot take the same in his cash credit. In our considered opinion, suspicion cannot replace the real evidential document. Simply by arguing it to be a case of manipulation the Revenue is not supposed to succeed in their contention without proper evidence. Holding this view of the matter on the factual matrix and respectfully following the case laws cited above we allow the assessee's second appeal.

7. In the result the assessee's second appeal is allowed.