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TMI Blog2019 (1) TMI 1464X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee actually paid any amount in cash to any person in consideration of cheque received by him from the authorized share broker. In absence of such a material being brought on record by the revenue, in my considered opinion, the transaction of the assessee which is supported by overwhelming documentary evidences cannot be impeached merely because share prices rose abnormally or other persons were involved in generation of bogus Long Term Capital Gain. - Decided in favour of assessee - ITA No. 3509/Del/2018 - - - Dated:- 24-1-2019 - Sh. N. S. Saini, Accountant Member For the Assessee : Sh. M. P. Gupta, Adv. For the Revenue : Sh. S. L. Anuragi, Sr. DR ORDER This is an appeal filed by the assessee against the order of CIT(A)-16, New Delhi dated 27.03.2018. 2. The sole issue involved in this appeal, the CIT(A) erred in confirming the action of the AO in not accepting the claim of the assessee for exemption of Long Term Capital Gain of ₹ 23,51,714/- u/s 10(38) of the Income Tax Act, 1961. 3. The Assessing Officer observed that the assessee has claimed exemption u/s 10(38) of the Act on the following Long Term Capital Gains on sale of shares of M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per share. He observed that the company M/s Turbotech Engineering Ltd. has authorized and paid up share capital of ₹ 24 crores in the financial years 2010-11 and 2011-12. In these years itself, it has issued 2,40,00,000/- shares of ₹ 10/- face value. The earnings per shares were in minus i.e. ₹ 0.01 crore on 31.03.2011 and on 31.03.2012. The company in the past years also showed negative EPS. In spite of this, the assessee purchased the shares of M/sTurbotech Engineering Ltd. runs contrary to the share trading principles whereby generally shares of companies showing positive EPS are preferred. This raises doubts about the genuineness of the objectives of the investment. Further he observed that if we go through the balance sheet of the listed penny stocks, it is found that they have no actual financial credentials to support their share movement pattern. Almost all the companies have no fixed assets, no turnover,, no profitability and neither they pay any taxes. This shows that these are made specifically for the purpose of providing bogus Long Term Capital Gain to beneficiaries. He further observed that prices of shares of M/s Turbotech Engineering Pvt. Ltd. w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. The Assessing Officer observed that the notice u/s 133(6) of the Act was issued to the above entities but no response was received from them corroborating the fact that these exit providers are paper companies created with a design to create an artificial demand for the shares of penny stock scripts and provide bogus Long Term Capital Gain. 8. He further observed that statement of Sh. Praveen Kumar Agarwal was recorded on 11.02.2015 wherein in reply to question No. 13, he admitted that the trading for a list of companies shown to him including Natural Housing Pvt. Ltd. has been done by him and stated that the companies were formed by me by appointing different dummy directors for providing accommodation entry to different beneficiaries. The clients are registered for rigging of price of different scripts for providing bogus Long Term Capital Gain. 9. The Assessing Officer further observed that a final show-cause notice dated 21.12.2016 was issued to the assessee as to why on the basis of evidences during the course of assessment proceedings, the Long Term Capital Gain of ₹ 23,51,714/- should not be treated as bogus and added to the income of the assessee. The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Supreme Court, Hon ble High Court and Tribunal in various case laws. Hence, he concluded that the Long Term Capital Gain shown by the assessee was a sham to introduce black money into the books of accounts of the assessee and therefore, held that the same is to be treated as undisclosed income of the assessee. 10. Being aggrieved by the said order of the Assessing Officer, the assessee carried the matter in appeal before the CIT(A). 11. The CIT(A) confirmed the action of the AO observing that documents submitted as evidences to prove the genuineness of transaction are themselves found to serve as smoke screen to cover up the true nature of transactions in the facts and circumstances of the case as it is revealed that purchase and sale of shares are arranged transactions to create bogus profit in the garb of tax exempt Long Term Capital Gain by well organized network of entry providers with the sole motive to sell such entries to enable the beneficiary to account for the undisclosed income for a consideration or commission. 12. Before me, the AR of the assessee submitted that the assessee has filed computation of income which is placed at page nos. 9 10 of the paper b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Andaman Timber Industries Vs Commissioner of Excise Kolkata-II, no addition can be made relying on the statements of persons whose cross examination has not been allowed to the assessee and that would make the assessment order ab initio void. 14. He relied on the decision of Ahmadabad Bench of the Tribunal in the case of Ketul Kumar D Jaiswal Vs ITO in ITA No. 546/Ahd/2015, order dated 28.09.2017 where it was held that there being no direct or material evidence against the assessee to hold that the share transactions were not genuine, the addition made by the AO u/s 68/69 of the Act are not warranted and the same were deleted. It was submitted that even the payment for acquisition of share made in cash was not disputed but was accepted and the assessee s appeal was allowed. 15. He further submitted that the Delhi Bench of the Tribunal in the case of Mohit Hora (HUF) Vs ITO in ITA No. 410/Del/2018 for the assessment year 2014-15, order dated 12.03.2018 and submitted that the appeal of the assessee was allowed. He further relied on the decision of the Hon ble Punjab Haryana High Court in the case of Pr. CIT(Central), Ludhiana Vs Prem Pal Gandhi in ITA No. 95/2017, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Assessing Officer also observed that the trading in shares of M/s Turbotech Engineering Ltd. was suspended by the Bombay Stock Exchange vide notice dated 01.01.2015. It was also observed by the Assessing Officer in his order that statement of Sh. Praveen Kumar Agarwal was recorded on 11.02.2015 wherein in reply to question no. 13 he stated that companies were formed by him by appointing different dummy directors for providing accommodation entries to different beneficiaries. The clients were registered for rigging of price of different scripts for providing bogus Long Germ Capital Gain. In respect of denial of opportunity of cross examination of Sh. Sanjay Vora and Sh. Praveen Kumar Agarwal whose statements were referred by the AO but opportunity of cross examination of them was not allowed to the assessee, the AO observed that the principles of natural justice can be said to be violated only when a prejudice is caused to the assessee because of the same. In the instant case, as the abnormal increase in value of shares itself shows that the Capital Gain derived by the assessee was not genuine. In these facts of the case, the Assessing Officer held that the Long Term Capital G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by him from the authorized share broker. In absence of such a material being brought on record by the revenue, in my considered opinion, the transaction of the assessee which is supported by overwhelming documentary evidences cannot be impeached merely because share prices rose abnormally or other persons were involved in generation of bogus Long Term Capital Gain. Thus, in my considered opinion, the addition made u/s 68 of the Act of ₹ 23,51,714/- by the revenue is unsustainable. My above view finds support from the decision of Delhi SMC Bench of the Tribunal in the case of Smt. Sikha Dhawan Vs ITO in ITA No. 3035/Del/2018 in assessment year 2014-15 wherein vide order dated 27.06.2018 where shares of the same company was involved and the similar documents were furnished by the assessee, the Tribunal has held as under: 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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