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TMI Blog2018 (8) TMI 276X X X X Extracts X X X X X X X X Extracts X X X X ..... umentary evidence on record have not been disputed by the authorities below and there is no rebuttal to the explanation of assessee. No adverse material have been brought on record against the assessee. Further, no proper enquiry have been conducted by the A.O. on the documentary evidences filed by assessee. Whatever statements have been referred to in the order were general in nature with whom assessee did not have any transaction. As relying on Meenu Goel vs. ITO [2018 (3) TMI 1020 - ITAT DELHI] assessee has entered into genuine transaction of sale and purchase and therefore, satisfied the conditions of Section 10(38) of the I.T. Act. The assessee is entitled for exemption under the same provision. - decided in favour of assesse - ITA.No.389/Del./2018 - - - Dated:- 2-8-2018 - SHRI BHAVNESH SAINI, JUDICIAL MEMBER For The Assessee : Shri Raj Kumar, C.A. And Shri Sumit Goel, C.A. For The Revenue : Shri S.L. Anuragi, Sr. D.R. ORDER This appeal by assessee has been directed against the order of the Ld. CIT(A)-XXVI, New Delhi, dated 28.12.2017, for the A.Y. 2014-2015 on the following grounds : 1. That under the facts and circumstances, both the lower autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gged the price of shares. The A.O. referred to some report of the SEBI order and statements of certain persons i.e., Mr. Somain Choudhary and Mr. Sanjay Vora etc. The assessee replied each and every query of the A.O. supported by documentary evidence to show that assessee entered into genuine transaction and that none of the enquiries conducted at the back of the assessee are relevant to assessee and have also have not been confronted to assessee. Therefore, no additions should be made. The A.O. however, did not accept the contention of assessee and held that the claim of long term capital gains is prima facie bogus. A.O. accordingly made addition of ₹ 47,16,264/-. The Ld. CIT(A) on the same reasoning as given by the A.O. based on investigation conducted by the Income Tax Department and Order of SEBI, confirmed the addition and dismissed the appeal of assessee. 3. The Learned Counsel for the Assessee has reiterated the submissions made before the authorities below and submitted that the assessee sold the shares of two companies above for which long term capital gains was earned and claimed exemption under section 10(38) of the I.T. Act. In the case of HPC, shares were purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be taken as evidence to prove the transaction as non- genuine. In the interim SEBI report dated 29.06.2015, name of the assessee was not included in the list of dubious entities and also large number of persons which were included in the report dated 29.06.2015 were given clean chit by SEBI vide interim report dated 06.09.2017. Thus, the assessee was never listed by SEBI as doubtful person. The report of the Investigation Wing, Kolkata is not relevant to the case of the assessee. A.O. referred to statements of Mr. Somain Choudhary and Mr. Sanjay Vora with whom assessee has no transaction. Their statements are not subjected to cross-examine, therefore, cannot be read in evidence against the assessee. The objections of the A.O. are incorrect. Learned Counsel for the Assessee in support of the above contention relied upon the following decisions : (i) Pr. CIT vs. Prempal Gandhi ITA.No.95 of 2017 dated 18.01.2018 (P H ) (HC). (ii) Pr. CIT vs. Shri Hitesh Gandhi ITA.No.18 of 2017 dated 16.02.2017 (P H ) (HC) (iii) Meenu Goel vs. ITO ITA.No.6235/Del./2017 dated 19.03.2018 (ITAT) (Delhi, SMC-Bench) (iv) Chander Prakash vs. ITO ITA.No.6880/Del./2017 dated 12.03 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... misconceived and, misplaced. 2.3 That the learned Commissioner of Income Tax (Appeals) has confirmed the above addition and denied exemption without confronting the material/investigation to appellant and also providing cross examination of the parties on whose statements reliance has been placed in impugned order of assessment and therefore order so made is in disregard of principles of natural justice is vitiated. 2.4 That further more the learned Commissioner of Income Tax (Appeals) has sustained the addition on mere speculation, generalized statements, theoretical assumptions and allegations and assertions, without there being any supporting evidence and is therefore not in accordance with law. 2.5 That learned Commissioner of Income Tax (Appeals) has failed to appreciate that once the broker of the assessee M/s Indus Portfolio (P) Ltd. had neither denied and nor disputed the genuineness of transaction, the conclusion arrived in the order is highly whimsical, arbitrary, illogical and wholly untenable. 2.6 That the learned Commissioner of Income Tax (Appeals) while sustaining the above addition has arbitrarily and, mechanically rejected the explanation an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investigated transactions in 84 penny stock shares quoted on BSE and examined on oath a large number of brokers, promoters and entry operators. As a result of this investigations, large number of individuals had been identified who had taken such accommodation entries and a number of such individual had surrendered the accommodation entry for taxation purposes. The Assessing Officer pointed out that the assessee was also beneficiary of the accommodation entries. In this regard the Assessing Officer pointed out the following facts:- 8. The assessee is one such beneficiary who has taken the entry of ₹ 19,39,357/- during the assessment year 2014-15 under consideration along with other so many persons. Thus the facts of this case, therefore, should not be viewed in isolation but as one of the beneficiary in the larger aforementioned scheme. 8.1. During the course of assessment proceedings, the AR of the assessee furnished written submissions enclosing copies of computation bank statements and furnished the details of long term capital gain. The assessee purchased the 10,000 shares of M/s Turbo Tech Engineering Ltd. off market on 22.11.2011 from M/s Shree Ji Broking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As is evident from the investigation the actual source of this credit is the unaccounted cash of the assessee. The assessee was asked to explain the source of this credit. The explanation offered that it is sale proceeds of shares are found to be not only unsatisfactory but false. The assessee has been confronted with all the evidence gathered and the issues mentioned in the foregoing paragraphs. The explanation of the assessee is general in nature that as the transaction is through Stock Exchange and the payment is by cheque, the transactions should be treated as genuine. The background of the scheme given in the beginning of the 'order clearly shows that both the requirements are in built in the scheme and does not ipso facto prove genuineness of transaction. The SEBI after thorough investigation has certified that such transactions are rigged and are carried out to convert Black money into white. That being so, the credit in the bank account of the assessee cannot be treated as explained and is therefore, liable to be added under section 68 of the Act. The evidence gathered has to be evaluated in the background of what the Hon'ble Supreme Court referred to as the test ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m, copy of bank statement, copy of Demat account, and copy of account from the broker M/s Indus Portfolio P. Ltd are enclosed herewith. 2. Ld. AO has mentioned several persons in his assessment order including Sh. Anil Khemka, Sh. Sanjay Vohra, Bidyoot Sarkar and Sh. Nikhil Jain on which Income tax survey were conducted by the department. In this regard, it is to submit that the appellant has no direct or indirect relation with any of these persons or with the Director/Promotors of the company M/s Turbotech Engineering Ltd. or any of their subsidiary or associate companies or concerns. Appellant never dealt with them and the Ld. AO also fails to provide any evidence which establishes any kind of relationship, between the appellant and these persons. Broker of the appellant is M/s Indus Portfolio P. Ltd and the Ld AO could not mention any evidence or material which shows that my broker is involved in any kind of manipulation of shares. Ld. AO also didn't confront copies of statement recorded of Sh. Anil Khemka, Sh. Sanjay Vohra, Bidyoot Sarkar and Sh. Nikhil Jain to the appellant during assessment proceedings and enclosed copies of their statement in the assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ease and decrease in market rates of shares on stock exchange always based on market forces and are determined on the basis of so many factors. It is not within the power of appellant to manipulate the rates of shares on stock exchange. Merely because there is, a sharp increase in the rates of shares, no adverse inference could be drawn only on the basis of mere suspicion and in absence of any direct or cogent evidence. 9. Ld AO has alleged in his assessment order that the appellant was not produced before him for recording of statement. In this regard, it is to submit that the appellant had delivered a baby few time back only and she was not in a position to appear before the Ld. AO due to her medical condition. We had made this request before the Ld AO also along with medical certificate and requested him to pass the assessment order on the basis of documents/information available on record. 10. Case laws relied upon by the Ld AO are distinguishable on the facts and circumstances of the present appeal and hence are not applicable. 11. Appellant's case is covered by following judgements: Hitesh Gandhi, ITA No. 180 of 2017( P H High Court) Prem P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l gains on shares, there is rampant practice of routing the unaccounted cash in the form of long term capital gains and claiming the same as exempt/ concessional tax rate. The general modus operandi adopted by such type of persons is as under: ( i) With the collusion of broker, shares are purchased of an unknown company with dubious background for miniscule consideration. For this purpose, the broker issues a fake brokerage note. ( ii) The companies in which shares are traded are usually in league with the broker and the broker undertakes offmarket transactions to accommodate the appellant. ( iii) After a year, the shares are sold back by the buyer. ( iv) In the meantime, the shares prices are rigged by the concerned broker/company to an abnormally high level. ( v) The shares are sold by the buyer and sale consideration is received. The sale consideration is in fact first paid by the buyer in cash to the broker. This cash consideration which is- introduced in a banking channel by routing through a number of accounts, finally reaches the accounts of the broker. With this amount, the broker pays the consideration to the buyer. ( vi) Thus the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t proceedings following facts emerge:- i) During the course of proceedings u/s 131(1) of the IT Act before the Investigation Wing Sh. Anil Kumar Khemka stated that his brokerage company was being used for providing accommodation entries in various scrips and M/s Turbo Tech Ltd was once such scrip. ii) The financials of the penny stock M/s Turbo Tech Ltd. and movement of the price is abrupt, unrealistic and not based upon any realistic parameters. The history of investment in shares made by the appellant also generally reveals that she has not been dealing in shares on a regular basis. It has also been found that entries of LTCG have also been taken by other members of the family of the appellant. iii) The purchase of these shares were claimed to be through off market deals and not through Stock Exchange and the shares were not entered in D'mat account even upto one week before they were actually sold and the sale is through stock exchange. The appellant furnished the account copy of the D'mat account wherein it was observed that the said shares were D'materialized only a month before they were actually sold. The date of dematerialization is only on 11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is true until and unless it is disproved. Here in the instant case, the Managing Director and other Director Shri Nikhil Jain Shri Anil Kumar Khemka on 02.06.2015 30.03.2015 of Abhinandan Stock Broking Pvt. Ltd. Devshyam Stock Broking Pvt.ltd, had categorically stated that they were involved in providing accommodation entries regarding sale and purchase of shares through his companies. Therefore, human probabilities have also to be applied to comprehend the transactions and to see the real intention behind entering into these transactions. In similar circumstances, the honourable Gauhati High Court of CIT Vs Sanghamitra Bharali (361 ITR 481) had held that the capital gains are sham transactions entered only to give colour of genuineness and therefore, held that the capital gain arising out of these transactions cannot be believed as genuine and upheld taxing the said amount as unaccounted income brought into books in the guise of exempted capital gains. 3.12. The Assessing Officer has referred to the issue of the organized racket of generating bogus entries of long term capital gains which is exempt from tax and has discussed the modus operandi of this operation in p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T ITA No. 18/2017 (Mumbai High Court Nagpur Bench) II. Ratnakar M. Pujari V/s ITD ITA No. 995/Mum/2012 (res) dated 03/08/2016 III. Kamalchand Nathimal Lunia V/s ITO in ITA No. 436/Ahd./2013 (lTAT Ahmedabad) IV. Sh. Sanjay Ashok Jain in ITA No. 4185/Mum/2015 and ITA No. 4186/Mum/2015 (lTAT Mumbai) V. Santlal Gupta in ITA No. 2802 (Mum/20B (ITAT Mumbai) Kantadevi Gupta in ITA No. 2829/Muml2016 VI. Sudhir Balraj Jumani HUF ITA No. 1570/Ahd/2012 (ITA Ahd.) VII. Disha N. Dalwani ITA No. 6398/Mum/2012 ITAT Mumbai. VIII Zakrullah Choudhary, Pimpri V/s ACIT in ITA No. 669/PN/2012 DATED 18/02/2014. 3.15. Keeping in view the aforesaid factual and legal position, the addition made by the Assessing Officer is confirmed. These grounds of appeal are dismissed. 3.16. During the course of appellate proceedings it was noted that the actual sale proceeds received by the appellant during the year was ₹ 19,51,357/- against which the appellant had claimed cost of acquisitions of ₹ 12,000/- and shown the amount of ₹ 19,39,357/- as LTCG. In view of the fact that the transaction was accommodation entry, the whole of sale proceeds amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ok. He has further submitted that on identical facts, ITAT SMC Bench, Delhi in the case of Meenu Goel vs ITO in ITA No.6235/Del/2017 for AY 2014-15 vide order dated 19.03.2018 relying upon the decision of Hon ble Punjab Haryana High Court in the case of Pr.CIT vs Prem Pal Gandhi in ITA No.95-2017 vide order dated 18.01.2018, allowed the claim of the assessee. The findings of the Tribunal in para 6 to 8 are reproduced as under:- 6. I have heard both the parties and perused the relevant records available with me, especially the orders of the revenue authorities and the case law cited by both the parties. I note that assessee has earned Long Term Capital Gain amounting to ₹ 18,46,600/- during the financial year 2013-14 and the same has been claimed exempt under Section 10(38) of Income Tax Act, 1961. The assessee had purchased of 45,000/- shares of Unisys Software Holding Industries Ltd amounting ₹ 9,38,600/- at a premium of ₹ 20.85 per share in physical form. Out of the aforesaid 45000/- Shares assessee sold of 8000 Shares only i.e. 17.77%. Thus, the major part of the Shares i.e. 82.33% are still in the hand of the assessee. In my view the the assessee just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence, the said case laws are not applicable in the present case. However, in my considered opinion, the issue in dispute is squarely covered by the various decisions of the ITAT and the Hon ble High Courts including the recent decision dated 18.1.2018 of the Hon ble High Court i.e. Hon ble High Court of Punjab Haryana in the case of PCIT (Central), Ludhiana vs. Prem Pal Gandhi passed in ITA No. 95 of 2017. Decision dated 18.1.2018 of the Hon ble High Court of Punjab Haryana in the case of PCIT (Central), Ludhiana vs. Prem Pal Gandhi passed in ITA No. 95 of 2017 wherein it has been held as under:- 2. The following questions of law have been raised:- ( i) Whether on the facts and in the circumstances of the case, the Hon ble Income Tax Appellate Tribunal has erred in upholding the order of the CIT(A) deleting the addition of ₹ 4,11,77,474/- made by the AO on account of sham share transactions ignoring an important aspect that the transaction of shares showing their purchase price at ₹ 11,00,000/- and sale consideration at ₹ 4,23,45,295/- within a period of less than two years / purchases of shares made in cash not cheque that too before sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eciation actually represented the assessee s income from undisclosed sources. In ITA- 18-2017 also the CIT(Appeals) and the Tribunal held that the AO had not produced any evidence whatsoever in support of the suspicion. On the other hand, although the appreciation is very high, the shares were traded on the National Stock Exchange and the payments and receipts were routed through the bank. There was no evidence to indicate for instance that this was a closely held company and that the trading on the National Stock Exchange was manipulated in any manner. 5. In these circumstances, following the judgment in ITA-18-2017, it must be held that there is no substantial question of law in the present appeal. 6. Question (iv) has been dealt with in detail by the CIT(A) and the Tribunal. Firstly, the documents on which the AO relied upon the appeal were not put to the Assessee during the assessment proceedings. The CIT(A) nevertheless considered them in detail and found that there was no co-relation between the amounts sought to be added and the entries in those documents. This was on an appreciation of facts. There is nothing to indicate that the same was perverse or irrational. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 10(38) of the Act have been satisfied in the case of the assessee. The assessee has been able to prove that she has entered into the genuine transaction of purchase and sale of shares and the sale consideration is received from broker through banking channel. The brokers have not denied the transaction with the assessee. The assessee rooted the transaction of sale of shares through recognized stock exchange after making payment of STT. In similar circumstances, ITAT SMC Bench, Delhi in the case of Meenu Goel vs ITO (supra) following the decision of Jurisdictional Hon ble P H High Court in the case of Pr.CIT vs Prem Pal Gandhi (supra) deleted the similar addition. Therefore, the issue is covered in favour of the assessee by 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. 9. Keeping in view of the above discussion and the material on record, in the light of the order of the Tribunal in the case of Meenu Goel vs ITO (supra), I set aside the orders of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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