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TMI Blog2019 (1) TMI 1350X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 of the Act which has been sustained by the CIT(A) is not justified under the facts and circumstances of the present case. We, therefore, set aside the order of the CIT(A) and direct the Assessing Officer to delete the addition. - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... her for next 3 months when it touched heights of approx. ₹ 125 each, i.e. a humongous rise of over 25000% over a very short period of just 14-15 months. These facts according to the Assessing Officer demanded a deeper study of the price movements and share market behaviour of the entities involved in trade and of the scrip as the share price movements and the profit earned by the beneficiaries were beyond human probabilities. He, therefore, conducted a deeper study as to whether the transactions were genuine investment transactions or sham ones and colourable device only to convert the unaccounted cash into tax exempt income and to ascertain as to whether the apparent was real. 5. The Assessing Officer during the course of assessment proceeding made elaborate enquiries about the history of the company namely M/s. Kyra Landscapes Limited as culled from money control site and observed that the very nature of the business of the company is dubious. It started as a chemical company and later on entered into technology space. Within one year it entered into real estate business. According to him though a company can surely change and keep changing its object clause and do whateve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined the data pertaining to this scrip from BSE and analysed the data so received and found that there were very limited persons dealing in shares of the company and many of them were involved in both buying and selling the same during this non-stop circuit shy upward movement. The broking firms involved were also limited and some of them were prima facie involved with their clients in this practice. These parties and the broking firms have been found to be involved in such practices by the SEBI on many previous occasions. He, therefore, held that the movement was meticulously planned and created and not genuine. 8. The Assessing Officer analysed the data pertaining to the entities involved in the trade of the scrip during the aforementioned periods and found that those entities, who were allotted shares on preferential basis in December, 2010, exited from the scrip fully (or were in the process of full exit) starting from Feb-Mar, 2012 i.e. one year after they purchased the shares thereby making them eligible for claiming exemption u/s10(38) and when optimum levels of share price had been achieved. 9. The Assessing Officer further noted that during a survey operation in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for one year and the same were sold on various dates from 05.03.2012 to 25.10.2012 for a price ranging from ₹ 98/- to ₹ 160/- through online trading and payment for the sale price after deducting Security Transaction Tax (S. T. T.), brokerage and other incidental charges was received in his regular and registered bank account with the depository on various dates. The rates at which shares have been sold are in conformity with the rates prevalent at the stock exchange, which is within the purview of SEBI. It was submitted that SEBI and depository are the witness of the prices on which shares in question had been sold and the assessee, in his return, declared such LTCG and claimed exemption u/s 10 (38) by filing the return voluntarily u/s 139 (1) on 05.09.2013. 12. However, the Assessing Officer was not satisfied with the explanation given by the assessee and observed that what is apparent in this case is not real. The relevant observation of the Assessing Officer at para 3.8.4 of the order at Page 68 reads as under :- "In his replies the assessee has mainly contended that since purchase was made through payment by RTGS and shares were allotted to him by the company, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the present case. 4. Thus in view of the elaborate discussion made above, I hereby hold the amount of ₹ 2,36,97,101/- introduced/ credited by the assessee out of these purported share sale receipts during the financial year 2012-13 (A.Y.2013-14) in his capital account as his income being unexplained cash credit u/s68 of the Income Tax Act (taxable at the rate of 30% as provided u/s115BBE. 14. The assessee made elaborate submission before the CIT(A). However, the Ld. CIT (A) also was not satisfied with the arguments advanced by the assessee and upheld the action of the Assessing Officer by observing as under :- "9. The facts of the case as well as submission made by the appellant have been gone through. The appellant has shown addition of ₹ 23697101/- in the capital account. It was explained to have received on account of long term capital gain from sale of shares and claimed the same as exempt u/s 10(38) of the Act. The appellant has purchased 2 lac equity shares of TCL Technology Ltd., a public limited company @ ₹ 10/- for ₹ 2Q lac on 21-12-2010 through preferential allotment scheme. Name of TGL Technology has been changed as M/s Kyra Landscape Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y compliance. All such transactions of purchase have been found in the nature of providing accommodations to benefit the preferential share holders. The AO has recorded the statement of the appellant and has found many discrepancies in the same for these transactions. The AO has confronted the above adverse findings to the appellant on 28- 03-2016. The AO has thus reached to the conclusion that the amount of ₹ 23697101/- represents unexplained cash credit and taxed the same u/s 68 of the Act. The AO has relied upon the decision of the Hon'ble ITAT, Delhi in the case Harish Win Chaddha vs. DCIT ITA No.3088, 3098, 3017/Del/2.005, Hon'ble Apex Court in the case of Sumati Dayal vs. CIT 214 ITR 801 (SC), Durga Prasad vs. CIT, Me Dowell vs. CTO, CIT vs. Mohan Kalan. The AR during the appellate proceedings has stated that the shares have been sold through the stock exchange by making payment of Security Transaction Tax. The AR has relied upon the payments made through the banking channels, sale and purchase of share done through demat account and contract notes of the brokers. The AR has relied upon different case laws of Hon'ble Courts in support of his submission. The detailed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant during the assessment proceedings. In this case it is noted that keeping in view the surrounding circumstances and by applying the test human probabilities, there are reasons to believe that the apparent is not real in this case. Reliance is placed on the decision of the Hon'ble Supreme Court in the CIT vs. Durga Prasad 82 ITR 540 (SC). The onus was on the appellant to explain the sum found credited in its books of account with satisfactory documentary evidence. The appellant has not discharged the onus cast upon him in this regard. The AO has shifted the onus on the appellant by confronting the adverse findings. The AO has noted in Para 3.8.10 of the assessment order that the sum has been credited by the appellant in the Capital Account for the relevant accounting period and therefore, it is part of books of account maintained by the appellant. Under the facts it is held that the AO was justified to make addition of ₹ 2,36,97,101/- on account of unexplained sum credited in the books of account of the appellant u/s 68 of the Act. The same is hereby confirmed. Grounds of appeal Nos.3 to 7 are dismissed. 15. Aggrieved with such order of CIT(A), the assessee is in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 68 were not applicable in the instant case and the addition made by the Assessing Officer was wholly illegal and unjustified. 6. BECAUSE, adverse inference in the matter c: realization of sale proceeds was based on extraneous information and statements as referred to in the orders passed by the authorities below and such information could not have constituted material for the purposes of assessment of consideration amounting to ₹ 2,36,97,101/- realised on sale of shares in TCL Technologies Ltd (name changed to Kayra Landscape Ltd.) and to treat the same as taxable in he hands of the appellant. -'7 BECAUSE the consideration (gross) aggregating ₹ 2,37,99,223/- realised on sale of shares that had been held by the appellant as Long Term Capital Asset (in the form of shares) was subjected to recoveries mad ? by the registered broker, which included Security Transaction Tax (STT) as payable to SEBI the market regulator with reference to sale price, the same was liable to be treated as exempt under section 10(38) of the Act and the authorities below have grossly erred under law as well as on facts in treating the same as income from other source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee right from the purchase of shares to sale of shares has been pointed out by the Assessing Officer. Referring to the Q.No. 5 and its answer in the statement of the assessee as reproduced at page 40 of assessment order he submitted that in the present case investment in the preferential issue of shares of TCL Technologies Ltd., a listed company, was made by the assessee on the advice of his close relative namely Sh. Sripal Jain in F.Y. 2010- 11 for which payment was made through his regular bank account with Shivalik Mercantile Co-operative Bank on 21.12.2010 out of funds available with the assessee. Consequently, shares were allotted to the assessee on 29.12.2010 and credited to his demat account with Global Capital Market Ltd. Thus, acquisition and holding of shares by the assessee is beyond any doubt. Referring to paper book pages 190 and 191 he submitted that notice U/s 131 was issued and statement of Sh. Sachin Jain as franchise of M/s Globe Capital Market Ltd. was recorded by the Assessing Officer on 18.02.2016 wherein he confirmed to have executed the order for sale of shares. In relation to Assessing Officer's observation that shares purchased at a nominal price have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.456 of 2007 (Bombay) 2. CIT Vs. Arun Kumar Aggarwal (HUF) & Ors, Tax Appeal No. 13 of 2011. (Jharkhand ) 3. CIT-I Vs. Maheshchandra G. Vakil [2013] 40 taxmann.com 326 (Gujarat) 4. CIT-I Vs. Himani M. Vakil [2014] 41 tadxdmann.com 425 (Gujarat) 5. DCIT Vs. Prempal Gandhi ITA No. 95/2017 Order dated 16.02.2017 (P&H) 6. Smt. Sikha Dhawan Vs. ITO vide ITA No.3035/Del/2018 Order dated 27.06.2018 7. Prakash Chandra Bhutoria Vs. ITO vide ITA No.2394/Kol/2017 order dated 27.06.2018 8. CIT Vs. Subodh Kumar Jain, ITA No. 474 of 2009 (Allahabad) 9. CIT Vs. Shyam Sundar Agarwal ITA No.533 of 2009 (Allahabad) 10. CIT Vs. Udit Narain Agrawal, ITA 560 of 2009 (Allahabad) 11. CIT Vs. Neeraj Kumar Jain ITA No.295 of 2010 (Allahabad) 12. CIT Vs. Smt. Sumitra Devi [2014] 49 taxmann.com 37 (Rajasthan) 13. CIT -13 Vs. Shyam R. Pawar [2015] 54 taxmann.com 108 (Bombay) 14. State of Karnataka Vs. Selvi J. Jayalilitha & Ors. [2017] 392 ITR 97 (SC) 15. Pr. CIT - 5 Vs. Laxman Industrial Resources Ltd., ITA No.169 of 2017 (Delhi) 16. CIT Vs. Annamalair Mills [2017] 393 ITR 293 (SC) 17. Ms. Amita Bansal Vs. CIT reported in [2017] 98 CCH 0128 AIIHC (Mumbai) 18. ACIT - 14 (3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... K Rajeshwari Vs. ITO vide ITA No.1723/Bang./2018 order dated 12.10.2018 17. The Ld. Counsel for the assessee in his rejoinder submitted that the various decisions relied on by the Ld. DR are not applicable to the facts of the present case and are distinguishable on facts. 18. So far as the decision in the case of Sanjay Bimlachand Jain (supra) is concerned he submitted that this is a judgment delivered by SMC Bench and fact was that payment for acquisition of shares was made in cash which remained unsubstantiated and finally it was held by the ITAT that it was an adventure in the nature of trade. Therefore, surplus was assessable as income from business and profession under section 28 of the Act. 18.1. So far as the decision in the case of Chandan Gupta (supra) is concerned he submitted that in this case the finding of fact was that alleged claim of sale of shares is false and concocted, as no actual purchase of shares took place, which is not the case here. 18.2. So far as the decision in the case of Balbir Chand Maini (supra) is concerned he submitted that in this case not only purchase of shares remained unproved, sale of shares was also held to have remained unproved as "s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer on the basis of elaborate enquiries made from the bankers of the assessee company, company allotting the shares and other shareholders, SEBI and the report of the investigation wing etc came to the conclusion that the amount of ₹ 2,36,97,101/- represents unexplained cash credit to be taxed u/s 68 of the IT Act 1961. We find the Ld. CIT(A) upheld the action of the Assessing Officer, the reasons of which are already reproduced in the preceding paragraph. It is the submission of Ld. Counsel for the assessee that the assessee has invested an amount of ₹ 20 lacs through RTGS on 21st December, 2010 from his savings bank account maintained with Shivalik Mercantile Cooperative Bank Ltd. in M/s. TCL Technology Limited against which two lac equity shares of ₹ 10 /- each under preferential allotment scheme were allotted on 29.12.2010. The shares so allotted were credited in the De-mat account of the assessee in due course and out of shares so held in the De-mat account, the assessee sold 1,58,033 shares from May, 2012 to October, 2012 for a price ranging from ₹ 98/- to ₹ 160/-through online trading through registered stock broker namely M/s. Globe Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been given to the Assessing Officer. Further in response to notice u/s 131 Sh. Sachin Jain, Frenchise of M/s. Globe Capital Market Ltd, appeared before the Assessing Officer and his statement was recorded wherein he has confirmed to have executed the order for sale of shares. Therefore, merely on the basis of preponderance of human probabilities the addition cannot be made in the hands of the assessee without disproving the various documents filed by the assessee. 22. We find the Hon'ble Bombay High Court in the case of CIT Vs. Mukesh Ratilal Marolia, in ITA No.456/Del/2007 Order dated 07.09.2011 has observed as under :- 3 The Assessee was carrying on business of manufacturing handkerchiefs as the proprietor of Rumal Manufacturing Company. In the Assessment Year in question the Assessee claimed that he had sold the shares of four companies, namely, M/s Alang Industrial Gases Ltd., Mobile Telecommunication Ltd., M/s Rashel Agrotech Ltd. and M/s. Sentil Agrotech Ltd, which were purchased during the year 1999-2000 and 2000-2001. The entire sale consideration amounting to ₹ 1,41,08,484/- was utilized for the purchase of a flat at Colaba, Mumbai and accordingly benefit of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court at Ranchi in the case of CIT Vs. Arun Kumar Agarwal (HUF) & Ors, Tax Appeal No. 13 of 2011, since report in [2013] DTR (Jharkhand) 219 order dated 13.07.2012 observed as under :- "10. We have considered the submissions of the learned counsel for the parties and we are of the considered opinion that the learned Assessing Officer was much influenced by the enqiury report which may has been brought on record by the efforts of the Assessing Officer and that enquiry report was prepared by the SEBI and from the observations made by the Assessing Officer himself, it is clear that after getting that enquiry report, the SEBI prima fade found involvement of some of the share brokers in unfair trade practices. Even in a case where the share broker was found involved in unfair trade practice and was involved in lowering and rising of the share price, and any person, who himself is not involved in that type of transaction, if purchased the share from that broker innocently and bonafidely and if he show his bonafide in transaction by showing relevant material, facts and circumstances and documents, then merely on the basis of the reason that share broker was involved in dealing in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossible to state that the view adopted by the Tribunal is, in any manner, unreasonable or perverse. Besides, the learned counsel for the appellant is not in a position to show that the Tribunal has placed reliance upon any irrelevant material or that any relevant material has been ignored, nor is he able to point out any material to the contrary so as to dislodge the concurrent findings of fact recorded by the Tribunal. Under the circumstances, the impugned order being based upon concurrent findings of fact recorded by the Tribunal upon appreciation of the evidence of record, does not give rise to any question of law, much less, a substantial question of law so as to warrant interference. The appeal is, accordingly, dismissed." 25. We find the Hon'ble Gujarata High Court in the case of CIT-I Vs. Himan M. Vakil [2014] 41 taxman.com 425 (Gujarat) has observed as under :- 4. As can be seen from the impugned order, the Tribunal, after appreciating the evidence on / record, has found that before the Assessing Officer the assessee had explained that the purchase transactions were made on the "Online Trading System" and these transactions were genuine. Earlier, that is prio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... njab & Haryana High Court in the case of Prem Pal Gandhi (supra) has observed as under :- 2."The following questions of law have been raised:- (i) Whether on the facts and in the circumstances of the case, Income Tax Appellate Tribunal has erred in law in upholding the order of the C1T(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 shares got dematerialized / worth of the company at the time of purchase./ sale of shares not proved - All suggest non-genuineness of the said transaction ? (ii) Whether on the facts and 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 ₹ 4,11,77,474/- made by the Assessing Officer on account of sham share transactions, whereas the CIT(A) himself had held that the assessee had not been able to substantiate the source of investment of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closely held company and that the trading on the National Stock Exchange was manipulated in any manner. 5 . Question (iv) has been dealt with in detail by the CIT (Appeals) and the Tribunal. Firstly, the documents on which the Assessing Officer relied upon in the appeal were not put to the assessee during the assessee during the assessee proceedings. The CIT (Appeals) 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. Accordingly, no question of law arises. 6 . In the result circumstances, the appeal is dismissed. 27. We find the Co-ordiante Bench of the Tribunal in the case of Smt. Shikha Dhawan (supra) has deleted similar addition by observing as under :- "8. I have heard the rival submissions and perused the material available on record. The assessee placed sufficient documentary e. .deuces 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 the authorities below and delete the addition of ₹ 19,51,357/-. The appeal of the assessee is, accordingly, allowed. 10. In the result, the appeal of the assessee is allowed." 28. We find the Kolkata Bench of the Tribunal in the case of Prakash Chand Bhutoria (supra) has dealt with identical issue where the long term capital gain on account of sale of shares of M/s Unno Industries Ltd. was denied by the Assessing Officer on the basis of report of the Investigation Wing of Kolkata and the Id. C1T(A) upheld the action of the Assessing Officer. On further appeal by the assessee, the Tribunal deleted the addition made by the Assessing Officer u/s 68 by observing as under :- "8. A perusal of the order of the AO demonstrate: that this addition was made merely on "suspicion" and in a routine and mechanical manner. This is clear from the fact that the AO refers to some 'Sharp Trading company' as one of the main ,manipulated company and whereas the assessee sola scrips in Unno Industries Ltd. The AO refers to various enquiri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore us. There cannot be any doubt about the transaction as has been observed by the Assessing Officer. The transactions were as per norms under controlled by the Securities Transaction Tax, brokerage service tax and cess, which were already paid. They were complied with. All the transactions were through bank. There is no iota of evidence over the above transactions as it were through demat format. Hence, we agree with the given findings of the Ld. Commissioner of Income Tax (Appeals ) in accepting the transactions as genuine too. In view of the fact findings we cannot reappreciate, recording is such, cannot be said to be perverse as it is not fact finding of the Ld. Tribunal alone. The commissioner of Income Tax came to the same fact finding. Concurrent fact finding itself makes the story of perversity, unbelievable. The "D" Bench of the Kolkata Tribunal in the case of Gautam Kumar Pincha vs. ITO, in I.T.A. No. 569/Kol/2017 dated 15.11.2017 at para 19 onwards held as follows: (i) M/s Classic Growers Ltd. vs. CIT [ITA No. 129 of 2012] (Cat HC) - In this case the Id AO found that the formal evidences produced by the assessee to support huge losses claimed in the tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oved, accounted for, documented and supported by evidence. It was also found that the assessee produced the contract notes, details of demat accounts and produced documents showing all payments were received by the assessee through banks. On these facts, the appeal of the revenue was summarily dismissed by High Court. 8.4. In the light of the documents stated i.e. (I to xiv) in Para 6(supra) we find that there is absolutely no adverse material to implicate the assessee to have entered gamut of unfounded/unwarranted allegations leveled by the AO against the assessee, which in our considered opinion has no legs to stand and therefore has to fall. We take note that the Id. DR could not controvert the facts supported with material evidences which are on record and could only rely on the orders of the AO/CIT(A). We note that in the absence of material/evidence the allegations that the assessee/brokers got involved in price rigging/manipulation of shares must therefore also fail. At the cost of repetition, we note that the assessee had furnished all relevant evidence in the form of bills, contract notes, demat statement and bank account to prove the genuineness of the transactions rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s: 9.1 We further find that the transaction of sale of shares by the assessee was duly backed by all evidences including Contract Notes, Demat Statement, Bank Account reflecting the transactions, the Stock Brokers have confirmed the transactions, the Stock Exchange has confirmed the transactions, the Shares have been sold on the online platform of the Stock Exchange and each trade of sale of shares were having unique trade no. and trade time. It is not the case that the shares which were sold on the date mentioned in the contract note were not traded price on that particular date. The Id AO doubted the transactions due to the high rise in the stock price but for that, the assessee could not be blamed and there was no evidence to prove that the assessee or any one on his behalf was manipulating the stock prices. The stock exchange and SEBI are the authorities appointed by the Government of India to ensure that there is no stock rigging or manipulation. The Id AO has not brought any evidence on record to show that these agencies have alleged any stock any stock manipulation against the assessee and or the brokers and or the Company. In absence of any evidence it cannot be said tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed the claim of assessee. Thus ground No. 1 of the revenue is dismissed. " We agree with the reasoning of the Tribunal on this point also. We do not find any reason to interfere with the impugned order. The suggested questions, in our opinion do not raise any substantial question of law. 9.3. We therefore hold that there is absolutely no adverse material to implicate the assessee to the entire gamut of unwarranted allegations leveled by the Id AO against the assessee, which in our considered opinion, has no legs to stand in the eyes of law. We find that the ld. DR could not controvert the arguments of the ld. AR with contrary material evidences on record and merely relied on the orders of the ld. Assessing Officer. We find that the allegation that the assessee and / or brokers getting involved in price rigging of SOICL shares fails. It is also a matter of record that the assessee furnished all evidences in the form of bills, contract notes, demat statements and the bank accounts to prove the genuiness of the transactions relating to purchase and sale of shares resulting in LTCG. These evidences were neither found by the Ld. Assessing Officer to be false or fabricated. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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