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TMI Blog2018 (8) TMI 508X X X X Extracts X X X X X X X X Extracts X X X X ..... rmission to add or to amend to any of the above grounds of appeal or to withdraw any of them." 2. The assessee is an Individual, derives income from house property, remuneration from partnership firm, capital gain from sale of shares and income from other sources. During the previous year relevant to the assessment year under consideration, the assessee was also engaged in the business of commodity broking. The assessee filed his return of income on 2nd October, 2010 declaring total income of Rs. 7,18,890/-. The assessee claimed exemption under section 10(38) of the IT Act in respect of Long Term Capital Gain of Rs. 72,61,309/- arising from sale of equity shares of M/s. Well Pack Papers & Containers Ltd. During the assessment proceedings, the AO questioned the allowability of the claim and rather doubted the genuineness of the transaction of long term capital gain. The assessee produced the relevant evidence in support of the claim which included purchase bills of the shares, confirmation of the broker through whom the shares were purchased, D-mat account statement showing holding of shares and sale of shares from the D-mat account, sale bills of shares sold, copy of account of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re sold after one year from the D-mat account of the assessee. Thus the ld. A/R has submitted that the assessee has produced all the relevant documents and evidences establishing the purchase of shares, dematerialization of the same and thereafter sale of shares from D-mat account against the consideration received through banking channel. The AO as well as the ld. CIT (A) has not disputed the sale of shares and receipt of consideration but have treated the transaction of long term capital gain and claim of exemption under section 10(38) as bogus. The ld. A/R has further contended that the assessee has purchased the shares in the month of November, 2008 and were duly recorded in the books of account and shown in the balance sheet of the assessee as on 31st March, 2009. Therefore, the shares which were already recorded in the books of account and shown in the Balance Sheet as on 31st March, 2009 cannot be treated as bogus transaction only because the assessee earned a huge capital gain due to the abnormal increase in the market price of the shares. He has further contended that the AO has relied upon the statement of Shri Mahesh Pancholi of M/s. Arihant Capital Market Ltd. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see individual to produce the Principal Officers of the assessee rather the AO ought to have summoned them if the examination of officers were considered necessary by the AO. The AO ought not to have asked the assessee to produce the principal officers of those companies. The ld. A/R has also relied upon the decision of Hon'ble Jurisdictional High Court in the case of Principal CIT vs. Shubh Mines Pvt. Ltd. dated 3rd May, 2016 in DBIT Appeal No. 96 of 2015 and submitted that Hon'ble High Court has held that in the absence of cogent evidence on record establishing that money shown to have received as share application money was, as a matter of fact, unaccounted money belonging to the assessee, the finding of the AO based on suspicion has rightly been held not sustainable in the eyes of law. He has then referred to the decision of Mumbai Bench of the Tribunal ( Special Bench) in the case of GTC Industries vs. ACIT, 164 ITD 1 and submitted that it was held that no addition can be made in the hands of the assessee if no direct evidence has been brought on record by the AO to hold that the assessee introduced his own unaccounted money by way of bogus long term capital gain. He has also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of accommodation entry to claim long term capital gain which is exempt from tax. The assessee was also given the Inspector's Report as well as the statement of Shri Mahesh Pancholi which was duly responded by the assessee during the assessment proceedings and, therefore, the assessee was given opportunity and confronted with the report of the Inspector Investigation, Indore as well as the statement of Shri Mahesh Pancholi. The ld. D/R has further submitted that the case law relied upon by the assessee are not applicable in the facts of the present case as in those cases the transactions were through banking channel whereas the assessee has claimed to have paid the purchase consideration in cash. She has relied upon the orders of the authorities below. 4. We have considered the rival submissions as well as the relevant material on record. The details of purchase and sale of shares in question are given by the AO in para 3.1 page 10 of the assessment order as under :- " Sale of Shares (Nov & Dec, 09) Rs.7408697/- Quantity Quantity Rates Transaction date Sd on Del + STT + Service tax + turnover tax Total 923 Rs.327.18 Nov, 26 991.06 561559 797 Rs.326. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... many fold, however, the same can be only a reason to conduct the enquiry to verify the genuineness of the claim but cannot be a basis of holding the transaction as bogus. The assessee has also recorded the transactions of purchase of shares in the books of accounts and as per the Balance Sheet as on 31st March, 2009 these shares have been shown in the Investment schedule of the assessee. The balance sheet as on 31st March, 2009 has been annexed by the AO to the assessment order and, therefore, it is part of the assessment record which shows the shares shown in the Balance Sheet as on 31st March, 2009. The facts of showing these shares in the Balance Sheet of the assessee for the preceding year and sale of these shares in the subsequent year in the month of November and December, 2009 is also not in dispute as the AO as well as the ld. CIT (A) has accepted this fact. The ld. CIT (A) has allowed the purchase consideration paid by the assessee from the addition made by the AO which shows that the purchase consideration was accepted by the ld. CIT (A). The ld. CIT (A) in para 4.2 of the impugned order has accepted this fact that the AO has not disputed the sale transaction pertaining t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the bank account of the assessee at page 40 of the paper book. In the mean time the said M/s Gravity Barter Pvt. Ltd. changed its status from private limited to a public limited and fresh certificate was issued by the Registrar of company on 05.02.2011 which is placed at page 43 of the paper book. Therefore, there is no reason to disbelief the fact of fresh certificate issued by the Registrar of companies on 05.02.2011 and hence, the date mentioned in the order of the Hon'ble Kolkata High Court as 18.04.2011 appears to be typographical mistake. Even otherwise these two dates do not have any effect on the genuineness of the transactions of purchase of equity shares by the assessee of M/s Gravity Barter Pvt. Ltd. The assessee though produced all the relevant records and evidences right from the purchase bills, certificate issued by the Registrar about the change of name, the communication between the assessee and the seller of the shares and thereafter, the amalgamation of M/s Gravity Barter Ltd. with M/s Oasis Cine Communication Ltd. which was duly approved by the Hon'ble High Court vide order dated 28.8.2011. The assessee in the mean time got the physical share certificate demater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he transaction does not arise however, the purchase consideration can be doubted by the AO if the shares were claimed to have been purchased against consideration paid in cash which is not in case of the assessee. The assessee has paid purchase consideration through cheque and therefore, even if the said consideration is found to be very less in comparison to the sale price at the time of sale of shares in the absence of any material or other facts detected or brought on record by the AO that the assessee has brought back his own unaccounted money in the shape of long term capital gain and has used the same as a device to avoid tax, the purchase consideration paid by the assessee cannot be doubted in the absence of any corroborating evidence. The Assessing Officer has not disputed that the fair market value of the shares of M/s Gravity Barter Ltd. was more than the purchase price claimed by the assessee. It may be a case that ensuring merger/amalgamation of the said company with M/s Oasis Cine Communication Ltd. the assessee might have anticipant the exceptional appreciation in the share price due to extraordinary event of merger/ amalgamation. However, the same cannot be a reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence produced by the assessee leave no scope of any doubt about the holding of the shares by the assessee." We further note that the decision of the AO holding the transaction as bogus and denying the claim of long term capital gain under section 10(38) of the Act is based on suspicion without any material evidence to controvert or disprove the evidence produced by the assessee. The enquiry conducted by the ITO Investigation Indore is not a conclusive finding of fact that the transaction of purchase of shares by the assessee is bogus particularly in view of admitted fact that these shares were held by the assessee and were duly materialized in the d-mat account. Therefore, until and unless a finding is given that the shares were acquired by the assessee from the person other than the broker claimed by the assessee, the mere suspicion how so ever strong may be, cannot be a basis of addition or disallowance of claim. As regards the statement recorded by the ITO Investigation Indore of one Shri Mahesh Pancholi, it is recorded by the AO that the said person was in the employment only for the past four years and further the said witness has not denied the confirmation issued by the b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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