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TMI Blog2018 (6) TMI 1451X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of ITAT, Delhi Bench in the case of Meenu Goel vs ITO (supra) followed by judgement of Jurisdictional P&H High Court which is binding. There is no other material available on record to rebut the claim of the assessee of exemption claimed u/s 10(38) of the Act. - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... oner of Income Tax (Appeals) that the appellant did not divulge the name of the person who advised her to buy the shares of MIs. Turbo Tech Engineering Ltd. and appellant did not have basic knowledge of share trading are irrelevant considerations either to bring to tax long term capital gain under section 68 of the Act or deny claim of exemption under section 10(38) of the Act and therefore, the addition made and confirmed is invalid. 2.8 That various adverse findings and conclusions recorded by the learned Commissioner of Income Tax (Appeals) are factually incorrect and contrary to record, legally misconceived and untenable. 2.9 That the learned Commissioner of Income Tax (Appeals) has erred in concluding without any basis that assessee has introduced his unaccounted income in the form of long term capital gain by manipulating the penny stock. 3 That the learned Commissioner of Income Tax (Appeals) has also erred both in law and on facts in not allowing depreciation of cost incurred on purchase of shares and sold by the appellant in the next year. It is therefore, prayed that it be held that exemption denied and addition made and sustained by the learned Commissioner o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... name 28.11.2011. Later on out of these 6000 shares were sold on 30.07.2013 and 31.07.2013 (500+5500=6000) through the broker M/s Indus Portfolio Pvt. Ltd, for a total sale consideration of ₹ 19,53,372/-. 8.2. On going through the information made available prima facie it is found that the assessee indulged in bogus Long Term Capital Gain and claimed the above amount as exempt u/s. 10(38) of the Act, 1961. It is also found that the above scrip M/s. Turbo Tech Pvt. Limited, which the assessee purchased, was involved in providing bogus accommodation entries in the shape of bogus Long Term Capital Gains. " 3.1. All these facts were brought to the notice of the assessee by the Assessing Officer in the show cause dated 19/12/2016 and the appellant was asked to explain why transactions may not be held to be accommodation entry. The Assessing Officer also referred to the Investigation conducted by the Investigation Wing Kolkata and particularly referred to the statements of Sh.Anil Kumar Khemka recorded u/s 131 of the Act wherein it was stated by these persons that M/s Turbo Tech Ltd was used for the purpose of providing accommodation entries. After considering the facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd even if there was one, the benefit to the assessee was as a result of genuine transaction. The assessee has miserably failed to discharge this onus and therefore, the only inescapable conclusion is that like thousand other individuals the assessee has also taken entry of bogus LTCG by paying unaccounted income. 10.1. It is true that in cases in which a receipt is sought to be taxed as income, the burden lies on the Department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within exemption provided by the Act, lies upon the assessee. But, in view of Section 68 of the Act, where any sum is found credited in the books of the assessee for any previous year; the same may be charged to income tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. To reiterate, the burden of proof, cast upon the assessee to prove that the claim of long term capital gain as exempt u/s 10(38), is not discharged in the instant case. " 3.2. The Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight to cross examine the witnesses. Also whatever they have stated in their statement is no gospel truth and cannot be applied blindly to our case. 3. Statements of four persons incorporated by the Ld. AO in assessment order are incomplete. Ld. AO has incorporated only a part of statement in the assessment order according to his choice, which is again against the basic principles of law. 4. Ld. AD has also enclosed copy of some order of SEBI. This order also was never confronted to the appellant during assessment proceedings. Moreover, the order which is not very legible, seems to be passed in year 2015, whereas the appellant had purchased the shares in year 2011 and sold them in year 2013. It was evident from this document only that no action has been taken by the SEBI against the company during the period when the appellant holds the shares. 5. Documents incorporated by the Ld. AD in the assessment order at Page 20 to 22 are not at all legible. Therefore appellant is not in a position to comment on these documents. 6. Ld. AO has raised objection regarding the cash purchase of shares and that shares were dematerialize few days back only from the date of sale. In this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ker, ITAT Mumbai Bench in ITA No. 3801/Mum/2011 Sunil Prakash, ITAT Mumbai Bench in ITA No. 6494/Mum/2014 Pardeep Kumar Aggarwal 159 ITD 54 (Chandigarh) Sri Dolarrai Hemani, ITAT Kolkata Bench in ITA No. 19/Kol/2014 Indravadan Jain HUF, ITAT Mumbai Bench in ITA No. 4861/Mum/2014 Kamla Devi S Doshi, ITAT Mumbai Bench in ITA No. 1957/Mum/2015 Surya Prakash Toshniwal, ITAT Kolkata Bench in ITA No. 1213/Kol/2016 Sunita Jain, ITAT Ahmedabad Bench in ITA No. 501 & 502/Ahd/2016 Pratik Suryakant Shah, 77 taxmann.com 260 (Ahmedabad-Trib) Copy of all these judgements are enclosed herewith. 12. Ld. AD also erred in' making addition u/s 68 of the Act, although the impugned addition should not be made under this section. As per the requirement of law, appellant need not to maintain any books of accounts and in absence of books of accounts, no addition could be made U/S 68 of the Act. 13. That the GOA No.5 is regarding issuance of notice u/s 143(2), which was issued by the ITO, Ward-27(4), New Delhi. ITO, Ward-27(4), New Delhi has no jurisdiction over the case of the appellant and hence notice issued was without jurisdiction and invalid. In view of above s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd sold at higher rates through the series of off-market transactions created by the broker with vested interest. The share prices are artificially rigged through off market transactions. This hike is not supported by the fundamentals of the company. 3.6 To fully appreciate the issue at hand it is relevant to take notice of these commonly known notorious facts about the modus operandi of converting the unaccounted funds through willing dubious entities. Reference in this regard can also be made to the following decisions:- (a) CWT v, Rohtas Industries Limited, 67 ITR 283 (SC), wherein it was held that- "In the absence of any direct evidence, a judicial or quasijudicial Tribunal can base its conclusions on the basis of what are known as notorious facts bearing in mind the principles of Section 144 of the Evidence Act." (b) Attar Singh Gurmukh Singh v. ITD,"191 ITR 667 (SC), wherein, while interpreting the provisions of Section 40A(3), it was held that- "In interpreting a taxing statute, the court cannot be oblivious of the proliferation of black money which is under. circulation in our country." 3.7 It may now be relevant to refer to the various facts which emerge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erified from the Calcutta Stock Exchange since the vital colums in the said broker bill such as Order No, Trade No. & Trade Time was left blank. 3.9 As per appellant's own version, the shares were purchased M/s Shree Ji Broking Pvt Ltd on 22.11.2011 directly in cash and not through recognized stock exchange. Moreover, as per the documents on record the shares were purchased in the name of appellant on 22.11.2011 whereas the payment of the same as made only on 24.11.2011. Thus as per the facts on record the shares were purchased in the name of the appellant even before the payment was made. Further, from all the aforesaid facts, it is evident that the meager investment of ₹ 6,000 made by the appellant on 22.11.2011 went up to more than ₹ 19 lakhs within a period of 24 months. Such a steep rise in value of investment is not within the realm of human probability. In these circumstances, it is evident that the transaction was as an arranged affair between the appellant and the accommodation entries providers and this fact has been duly admitted by Sh. Anil Kumar Khemka and Nikhil Jain referred to above. From the facts discussed above it is evident that M?s Turbo Tech ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the normal share market transactions in which they are ordinarily carried out. Taking all the steps together, final conclusion does not accord with the human probabilities. The Hon'ble Supreme Court in the case of CIT v. Durga Prasad More 82 ITR 540 held as under: "It is a story that does not accord with human probabilities. It is strange that High Court found fault with the Tribunal for not swallowing that story. If that story is found to be unbehevable as the Tribunal has found and in our opinion, rightly that the decisions remains that the consideration for the sale proceeded from the assessee and therefore, it must be assumed to be his money. " 3.13 Generally, it is expected that apparent is real but it is not sacrosanct. 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. It is highly improbable that share price of a non descript company can go up by almost 50 times, in a short span of time. The taxing authorities are not required to put on blinkers while looking at the documents produced before them. They are entitled to look into the surrounding circumstances to fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure claimed to have been incurred in the earlier years is therefore not genuine and cannot be claimed and allowed as expenditure during the current year. The addition made by AO is accordingly enhanced to ₹ 19,51,357/-. 3.18. In the result the appeal of the appellant is dismissed with enhancement as above." 6. Ld. Counsel for the assessee reiterated the submissions made before the authorities below and submitted that an inquiry conducted in the cases of other assessees and statements referred to by the AO in the assessment order have not been confronted to the assessee. The assessee has not been named by any of these persons for indulging in taking accommodation entries. He has, therefore, submitted that such evidence cannot be read in evidence against the assessee and relied upon the decision of the Hon'ble Supreme Court in the case of Kishan Chand Chela Ram 125 ITR 713 (SC). He has submitted that for claiming exemption u/s 10(38) of the Act, the assessee shall have to prove twin conditions i.e. the income arise from the transfer of long term capital asset and being equity share in a company where the transfer of sale of such equity share is entered into on or afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udes a copy of purchase bill dated 22.02.2010; a copy of share transfer form in the favour of the assessee; Copy of bank statement highlighting the payment made against the share purchased; Transaction statement of the stock broker i.e. Pace Stock Broking Services (P) Ltd., account; copy of bank statement in which sale proceed from the sale of shares received; copy of calculation of long term capital gain, which was not faulted by the AO. However, the lower authorities have not considered the aforesaid documents and rejected all the claims made by the assessee by relying on the report of the Investigation Wing and thereby made the addition, which is not sustainable in the eyes of law. I further find that the AO has given detailed explanation in the order regarding the modus operandi of bogus LTCG scheme but failed to substantiate how the assessee fell in the purview of the same without bringing any material on record and proving that the assesssee was directly involved in the so called bogus transaction. I further note that the addition in dispute made by the AO and upheld by the Ld. CIT(A) u/s 68 as unexplained credit instead of long term capital gain as claimed by the assessee, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial year 2005-06 and the AO was directed to reopen the case of the assessee for the assessment year 2006-07 on this issue? (iii) Whether the Hon'ble ITAT has erred in ignoring an important aspect that in such cases of sham transactions of shares showing abnormal hike in their value, where the facts themselves speak loud and clear, the AO is justified to even draw an inference from the attendant circumstances? (iv) Whether on the facts and in the circumstances of the case, the Hon'ble Income Tax Appellate Tribunal has erred in law in upholding the order of the CIT(A) deleting the addition of ₹ 12,59,000/- made by the AO on the basis of seized document on the grounds that the AO has not pointed out as to how the figures of ₹ 12.59 lacs has been worked out ignoring the fact that the assessee himself in his reply to the AO had tried to explain the source of the receipts of ₹ 12,59,000/- instead of challenging the working out of the said figure by the AO? 3. The first three questions of law raised in this appeal are covered against the appellant by an order and judgment of a Division Bench of this Court dated 16.02.2017 in ITA-18-2017 titled as The Pr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition u/s 68 of the Act be made against the assessee. 7. On the other hand, Ld. Sr. DR relied upon the orders of the authorities below. 8. I have heard the rival submissions and perused the material available on record. The assessee placed sufficient documentary evidences before the AO which are copy of the shares certificates with transfer form, copy of debit note issued by Shreeji Broking (P) Ltd., copy of cash receipt of Shreeji Broking (P) Ltd., copy of the account statement of the assessee in the books of the broker, copy of ledger account of Indus Portfolio (P) Ltd., copy of evidence for payment of securities transaction tax and copy of the bank statement of the assessee to show that the assessee had entered into genuine transaction of purchase of share which were later on sold through the broker on recognized stock exchange after payment of STT. The claim of the assessee for sale of shares has been supported by the documentary evidences which have not been rebutted by the authorities below. Whatever inquiry was conducted in the cases of other parties and statement recorded of several persons namely Sh. Anil Khemka, Sh. Sanjay Vohra and Sh. Bidyoot Sarkar as referred in ..... 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