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TMI Blog2018 (1) TMI 1429X X X X Extracts X X X X X X X X Extracts X X X X ..... s raised the following grounds :- 1. Whether in law and on facts circumstances of the case, the CIT(A) has erred in deleting the addition of ₹ 1,98,28,636/- made by the AO by treating Long Term Capital Gain as income from undisclosed sources. 3. Brief facts of the case are that the AO observed that the shares on sale of which LTCG of ₹ 1.95,39,611/- was shown and exemption u/s.10(38) of the Act was claimed were held barely for little more than one year to qualify the same as long term capital asset. The cost of the shares was ₹ 2,69,400/- and sale consideration was ₹ 1,98,28,636/-. He observed that several assessees of Raipur have shown LTCG on sale of penny stocks like the assessee and on enquiry in the case Shri P.K. Agrawal Co, broker, it was found that the transaction were of dubious nature. It was further held that scrips were not of reputed companies and there cannot be appreciation of 18-20 times in the prices of such scrips. The AO held that that the assessee has converted his unaccounted income into white income through LTCG and in this process has paid tax at 10% against the normal rate of tax. 4. In appeal before the CIT(A), the AR o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied on the following judicial pronouncements:- i) CIT vs. Anupam Kapoor (2008) 299 ITR 179 (P H); ii) ACIT vs. Kamal Kumar S. Agrawal (Indl.) and Ors. (2010) 133 TTJ (Nag) 818 5. The CIT(A) called for a remand report from the AO, wherein the AO observed that the assessment order in this case was framed keeping in view the inquiry conducted by the Investigation Wing of the Department at Kolkata regarding phenomenal increase in the prices of non-descript shares on which LTCG was shown by the assessees without paying any tax and the assessee is one of them. The inquiries of the Investigation Wing at Kolkata have more than established that there was a systematic manipulation of the share prices in Kolkata Stock Exchange and unaccounted cash of numerous assessees was used through series of transactions to jack up the prices of shares of paper companies to arrange huge Long Term Capital Gain. These facts have come into light in the survey conducted in the case of M/s. P. K. Agrawal Co. She has also referred to the inquiry conducted in the case or share brokers. Shri Prakash Chand Nahta Co. and Shri Murarilal Goenka, Kolkata which was discussed in the assessment order. She ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t must be remembered that a decision is a precedent on its own facts. Each case presents its own features. The income-tax authorities and Tribunals are supposed to apply the ratio of a decision to the facts of particular cases with due care .. 7. Finally, the assessee has contended that the issue is covered by the decisions of Hon'ble Jurisdictional Tribunal in the case of ACIT-1(1) vs Vrindra Kumar Agrawal in ITA No.19/BLPR/2011 (A.Yr.2005-06) dated 08.02.2012, ACIT vs Smt. Lata Agrawal ITA No.466/Nag/08, ACIT vs Vishnu Kumar Agrawal ITA No.427/Nag/08. 8. The CIT(A) after considering the submissions of the assessee deleted the addition made by the AO. 9. Ld. DR has relied on the order of Assessing Officer. 10. On the other hand, ld. AR supported the order of CIT(A) and relied on the following decisions :- i) ITO Vs. Ravindra Sanghai (HUF), ITA No.698//Kol/2010, vide order dated 22.05.2012; ii) ITO Vs. Khalil M. Bharwani (2015) 45 CCH 0275 (MumbaiTrib) iii) ACIT Vs. Shri Ranjitsingh D. Bindra, ITA No.5534/Mum/2010, order dated 13.03.2013; and iv) CIT Vs. Kamal Kumar Agrawal, ITA No.67 of 2010, order dated 23.09.2010. 11. We have heard rival submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus, the appellant has neither dealt in the shares of the above companies nor through the above share broker. Therefore, the outcome of inquiry in those cases cannot he blindly applied to his case. Therefore, the action of treating LTCG as income from undisclosed sources on the basis of general inquiries conducted in some other cases cannot be approved. Admittedly, the sales were made through registered stock exchange after payment of security transactions tax. there is no dispute regarding correctness of the evidences such as contract notes; transfer of the shares in the appellant's name; share certificate; dematerialization of the shares; prevailing, rates on the date of transactions; etc. The appellant has established that the shares Multiplus Resources Ltd. are still listed for trading. In the case of Shri Vishnu Kumar Agrawal, Bhilai (supra), the Hon'ble jurisdictional Tribunal has observed as under. After hearing the rival submissions and carefully the material available on record and keeping in view of the, facts that without bringing out any material on record to prove the share transaction of the assessee bogus, the claim of the assessee in respect of LTCG cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n declared by the assessee was false and the transaction was not genuine. In response to a notice under section 148 of the Income-tax Act, 1961, the assessee submitted his reply and furnished evidence in support of his claim of long-term capital gain. The Assessing Officer held that the assessee failed to lead evidence to support his claim of long-term capital gain and considered the amount of ₹ 1,74,552 as unexplained credit and it was added in the income of the assessee. The Commissioner (Appeals) deleted the addition holding that the Assessing Officer had not discharged his onus and there was no material or evidence with the Assessing Officer to come to the conclusion that the transaction shown by the assessee was a bogus transaction. The Commissioner (Appeals) took the view that if a company was not available at the given address, it could not conclusively prove that the company was non-existent. The Tribunal took into consideration that the Assessing Officer had not dealt with all the documents placed before him and had simply presumed that the transaction was bogus and held that the purchase contract note, contract note for sales, distinctive numbers of shares purchased ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t been approached by the AO at all. Thus, on appreciation of documentary evidences submitted by the assessee, the genuineness of the transactions appears to be established. As regards the aspect of off market transactions, it is noted that neither these are illegal nor prohibited and only some of the compliances have to be made by the brokers. As regard the aspect of such compliances, it is not the case that all the off market transactions have not been reported by the concerned brokers to the stock exchange as per rules and even otherwise, any failure on the part of the brokers in doing such compliance cannot make the contract between the assessee and the broker illegal or void as the broker may face the consequences for his default under relevant statute. It is also noted that all the transactions are not off market transactions, hence, the AO s approach to pick and choose only such instances which are favourable to him cannot justify such addition. The Departmental Representative has also argued that there were differences in the information as per contract notes and as per information received from the stock exchange which fact is also not material because when some off market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount of Capital Gain from Penny Stock. 3. The brief facts leading to the above issue are that assessee has shown LTCG of ₹ 11,34,213/- on sale of 7000 equity shares of Multiplus Resources and 15000 shares of South Indian Bank and credited to the capital account of the assessee. The AO while going through the capital account of assessee noted this fact and observed that the assessee has not discharged the initial onus of proving the identity, creditworthiness and genuineness of transaction. According to AO, there is no proper evidence brought on record to prove the genuineness of transaction as claimed to have been made by the assessee. According to AO, Calcutta Stock Exchange Ltd. (CSE) also negated transactions. The AO also referred the issue that the trading of shares in the above stated company was barred/suspended by CSE and SEBI after SEBI detected malpractices in the said shares. According to AO, the assessee has made purchases through S. B. Bhutra Co. in the scrip through Shri Narayan Rajkumar Mercantiles Ltd. But according to CSE vide letter dated 18.12.2007 the following transactions were reported: Name of the scrip Name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh banking channel. The various legal pronouncements, relied upon by the appellant, also support its contentions. In view of the above, it is held that the capital gain shown by the appellant on sale of shares is genuine and the AO was not justified in adding the sale proceeds as income from undisclosed sources. The addition of ₹ 11,34,213/- is deleted. Ground no. 2 3 are allowed. Aggrieved, now revenue is in appeal before us. 4. We have heard rival submissions and gone through facts and circumstances of the case. We find that the assessee has filed all necessary details and documentary evidence qua purchases made from Stock brokers including copies of contract notes issued by broker. The assessee has also filed details of share credited in Demat account of assessee. This fact has not denied by Ld. Sr. DR during the course of hearing before us. No doubt the payments are made by cash as noted by AO in his assessment order qua the purchase of these shares but sale is supported by bank statement. We find that the payments are received through banking channels and assessee's claim of LTCG cannot be disturbed by the fact that some of the companies were indulged in malpr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by SEBI for indulging in penny stock transaction during the year 2005 which is relevant to the current year under consideration. So the CIT(A) erred in holding that the transaction was genuine without appreciating the fact that broker M/s. Badri Prasad and Sons though whom assessee has claimed to have purchased the shares has clearly denied the executing of any share transaction of M/s. Emerald Commercial Ltd. on 06.05.2004, the date on which assessee has claimed to have purchased 10,000 shares. Purchase transactions are out of cash in hand which was on account of gift received by assessee from his relatives. Purchase of shares was off bolt and such purchases are not reflected in the stock exchange. In this background the learned D.R requested to set aside the order CIT(A) and to restore that of Assessing Officer. On the other hand the learned A.R. for the assessee supported the order of the CIT(A). 7. After going through the rival submissions and material on record we find that Assessing Officer rejected the claim of long term capital gain on shares and brought the same to tax as unexplained cash credit under section 68 of the Act The stand of the assessee has been that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to verify the cash in hand of ₹ 3,45,602/-. According to Assessing Officer the cash in hand is not substantiated. In this regard the stand of the assessee has been that assessee was given a gift of ₹ 1,01,000/- by his father Shri Mohamed All Bharwani on 26.5.2003 and by his elder brother Shri Munir M. Bharwani of ₹ 1,28,000/- on 26.5.2003 being on the occasion of assessee's birthday. Assessee has stated that in the returns of income for the A.Y.2004-05, in the case of his father and brother, the gifts in question have been duly reflected. Copies of the relevant returns of income alongwith capital accounts have been furnished before CIT(A) at relevant point of time and in this background it was the stand of the assessee that because of these gifts from the aforesaid two persons that there was so much cash in hand with the assessee. This fact has not been looked into by the Assessing Officer at relevant point of time. 10. The observation of the Assessing Officer that the transaction is not genuine and is engineered with a sole intention to show long term capital gain which is liable to a lower rate or income tax is because of (i) off market transaction, (ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rranged in such a way that no consideration was paid by the assessee except a nominal amount and major part of the consideration was allegedly adjusted against speculation profit. The Assessing Officer has pointed out that Prince Securities have not transacted in shares of Blue Chip India Ltd. for any other client except the transaction in question. It does not have any demat account. The assessee stated to have purchased the shares in the month of April 2002 whereas the shares were demated in August 2002 and October 2003 i.e. almost one and half years after the alleged purchase. There is no explanation in this regard as to why the assessee demated the shares just before the alleged sale of the shares. The transaction of sale of shares in Kolkata Stock Exchange without any explanation is not a normal human behaviour, when the assessee is having account with sub-broker in Mumbai. The Assessing Officer received the information from Bombay Stock Exchange that the shares of Blue Chip India Ltd., was not traded on the Stock Exchange on the dates given by the assessee. Thus, the learned DR has submitted that the facts and circumstances of the case clearly shows that the assessee has mani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ah Vs. ITO in ITA No. 6108/Mum/2009 dated 15.12.2010. iii. CIT Vs. Jamnadevi Agarwal 328 ITR 656 He has further submitted that similar issue has been decided in favour of the assessee in all these decisions. In the case of Jamnadevi Agarwal, the Hon'ble High Court has held that even the statement of stock broker's denial of transaction was proved to be wrong by producing documentary evidence to the effect that the shares sold by the assessee were in consonance with the market price. He has further submitted that the decision in the case of Som Nath Maini (supra), relied upon by the Assessing Officer is not applicable to the facts of the case in hand because in the said case the Tribunal has found that the records of the broker was not available and shares remained in the name of the assessee even long time after the sale of shares therefore, the transaction does not stand the test of probability, whereas in the case of the assessee there is no such lack of availability of record or defect in the transaction of sale. He has supported the order of the CIT(A). 5. We have considered the rival submissions as well as the relevant material on record. The assessee claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.11.03 10,000 428500 - - - The Assessing Officer doubted the transaction mainly on the ground that the shares were purchased as penny stocks at low price of 55 paise per share and the same were claimed to have been sold at ₹ 40 per share and thereby the assessee has shown Long term capital gains of ₹ 29,09,675. According to him it is not a genuine transaction because the assessee has converted its undisclosed income as Long term capital gains. The Assessing Officer has examined the assessee as well as called for various information by issue of notice u/s. 133(6) to the stock broker though which the assessee has purchased shares as well as from the stock broker to whom the assessee has sold the shares. It is evident that both the stock brokers have confirmed the transaction of purchase as well as sale. Apart from the confirmation, the assessee has also produced relevant documentary evidence in support of the transaction of purchase and sale. There is no dispute as regards the shares were demated in the demat account of the assessee and, thereafter sold to M/s. Prakash Nahata Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en filed with me. g) After the sales were made, the shares were duly given delivery by demat slip No.246061 dt.11.11.03, No.21550 dt 1.11.03, No.215539 dt. 31.10.03, No.215538 dt.29.10.03, No.215537 dt.29.10.03, No.215536 dt.27.10.03, No.215535 dt. 22.10.03, No.215534 dt. 22.10.03, No.215533 dt. 20.10.03, No.215531 dt. 10.9.03 h) The appellant in his statement recorded u/s. 131 has confirmed the transaction both of purchase and sale of shares. i) The shares purchased of Bluechip have been duly shown in the balance sheet filed with the Department for the year ending 31- 03-2003 i.e. in the year in which the shares were purchased. j) The price at which the shares were purchased and later on sold are the prices of the shares prevailing at the material time of the transaction and this aspect of the matter is independently confirmed by the details obtained from the Bombay Stock Exchange. In my view when the appellant has himself categorically submitted that the transaction entered into by him were off market, there is no reason why it could not be believed especially in view of the fact that the necessary evidence required to support a transaction is duly submitted in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction of purchase shown by the assessee is not genuine. In the case of CIT Vs. Jamnadevi Agarwal (supra), the Hon'ble jurisdictional High Court while dealing with similar issue has observed and held as under: 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 the possession of the Assessing Officer, it is seen that the shares in question were in fact 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 doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arh Bench of this Tribunal is concerned the same is not applicable in the facts of present case when there is no such glaring contradiction as pointed out by the Tribunal in the said case regarding the shares remained in the name of the assessee even long after the sale of the shares and non-availability of information. In the case in hand, the sale transaction has been duly executed through demat account and, therefore, there is no ambiguity or doubt about the transaction of sale. 18. The Hon ble Bombay High Court in the case of CIT Vs. Kamal Kumar Agrawal, ITA No.67 of 2010, vide order dated 23.09.2010, has held as under:- 11) 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. 12) From the documents produced before us, which were also in possession of the Assessing Officer, it is seen that the shares in question were in fact purchased by the assessees on the respective dates and the Company has confirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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