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TMI Blog2019 (3) TMI 156X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee had made cash payment to the purchaser of M/s. UIL from assessee which happened in the electronic platform of BSE under the strict watch of SEBI. Since there is no evidence/material to suggest leave alone substantiate the modus operandi as suggested by the general report of Investigation Wing of the Department against the assessee, the claim of assessee of LTCG on sale of shares of M/s. UIL cannot be disallowed - Decided in favour of assessee.See PRAKASH CHAND BHUTORIA VERSUS ITO, WARD-35 (1) , KOLKATA [2018 (7) TMI 46 - ITAT KOLKATA] - Decided in favour of assessee. - I.T.A. No. 1533/Kol/2018 - - - Dated:- 27-2-2019 - Shri A. T. Varkey, JM For the Appellant : Shri Miraj D. Shah, AR For the Respondent : Smt. Madhumalati Ghosh, Addl., CIT ORDER PER SHRI A.T.VARKEY, JM This appeal filed by the assessee against the order of Ld. CIT(A)-10, Kolkata dated 21.05.2018 for AY 2014-15. 2. The main grievance of the assessee is against the action of Ld. CIT(A) in confirming the addition of ₹ 21,82,119/- which the assessee claimed as Long Term Capital Gain (LTCG) on sale of shares of M/s. Uno Industries Ltd. (in short M/s. UIL ). 3. The brief fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sale proceeds of the said shares through regular banking channels. With the aforesaid documents the assessee contended that it has discharged its onus of proving the genuineness of the transaction which happened on the electronic platform of the BSE, wherein the party who sell/buy the scrips are not known to either side. However, the AO taking note that in substance the assessee had purchased 2200 shares of M/s. UIL by incurring a cost of ₹ 1 lac as on 28.10.2011 and after one year when the investment in shares become eligible for LTCG it was sold at a huge profit for ₹ 22,82,119/- which is against the human probability and he took note of the Directorate of Investigation s letter dated 03.07.205 wherein the modus operandi of the penny stock company s shares being artificially rigged for the benefit of beneficiaries was explained in detail, so the AO did not accept the claim of assessee. In the assessment order, after discussing the modus perandi as reported by the Investigation Wing, the AO was of the opinion that the entire transaction leading to the LTCG of the shares of M/s. UIL is bogus and, therefore, he made the addition of ₹ 21,82,119/- as well as h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ji Suppliers Pvt. Ltd. sold 400 equity shares of M/s. BREPL to the assessee @ ₹ 250/- per share total consideration of ₹ 1 lac. We note that ₹ 1 lac has been paid through account payee cheque and the bank statement of Corporation Bank is found kept at page 3 of the paper book. Page 4 of the paper book evidences the share certificate of M/s. BREPL. Pages 5 to 7 of paper book reflects the transfer of equity shares of M/s. BREPL, Maharastra to the assessee HUF vide transfer dated 15.03.2012. It was brought to our notice that M/s. BREPL had issued bonus shares on 16.03.2012 in the ratio of 18:1 as on 31.03.2012 and the assessee received 7200 shares which is evidenced by Letter of Allotment of bonus share certificates placed at pages 8 and 9 of the paper book. We note that the investments have been duly reflected in the Balance Sheet of AY 2013-14 along with computation given at page nos. 10 to 12. So, we note that the investment of assessee has been accepted by the Revenue but only the later sale of it after amalgamation is not accepted. We note that a merger order has been passed by the Hon ble Bombay High Court in Company Petition No. 11 of 2012 which is placed from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scharged its burden of proving the genuinity of the transactions. We note that the AO/Ld. CIT(A) has not found fault with the aforesaid documents. It is not the case of the AO/Ld. CIT(A) that the aforesaid documents are false/or fabricated. There is no material which can be discerned from the AO s order from which we can infer that assessee s unaccounted cash has been routed through the purchaser of shares from assessee. What the AO/Ld. CIT(A) is the modus operandi of unscrupulous persons/brokers who in order to launder the black money adopts such pre-arranged transactions. However, such an inference can be drawn only if the AO is able to unravel as to who bought the scrips of M/s. UIL from the assessee in the BSE and then is able to at least establish a nexus between the assessee and the purchaser of shares of M/s. UIL from assessee. The AO failed to bring on board any material to suggest that the assessee had made cash payment to the purchaser of M/s. UIL from assessee which happened in the electronic platform of BSE under the strict watch of SEBI. Since there is no evidence/material to suggest leave alone substantiate the modus operandi as suggested by the general report of Inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nexure-I. 4. The equity shares of Unno Industries Ltd. were allotted pursuant upon merger of Pinnacle Vintrade Ltd. with Unno Industries Ltd. pursuant to sanction of scheme of arrangement by the Hon ble High Court at Bombay, I was issued 91000 equity shares of Unno Industries ltd. in lieu of my shareholding in Pinnacle Vintrade Ltd. The relevant gist of the scheme of arrangement sanctioned by the Hon ble High Court was communicated by the company to the Bombay Stock Exchange vide letter dated 12th February, 2013. A copy of the said letter downloaded from BSE website is enclosed for your ready reference. I also enclose Unno Industries Ltd. letter dated 12th February, 2013 and 7th March, 2013 communicating the issuance of shares in lieu shares of Pinnacle Vintrade Ltd. upon sanction of scheme of arrangement by the Hon ble Court. Annexure II 5. As the equity shares of Pinnacle Vintrade ltd. purchased were not listed, hence no Contract Notes were issued. However, copy of bill indicating purchase of said equity shares is enclosed. Annexure III 6. Equity shares of Pinnacle Vintrade Ltd., were directly purchased from Uniglory Developers Pvt. Ltd. 209, Vireshwar Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant Demat Account statements of Ashika Stock Broking Ltd. and Guiness Securities Ltd. reflecting the debit of shares of Unno Industries Ltd. upon sale are enclosed. (entries highlighted). Annexure VI . 5. The Ledger of the brokers of Ashika Stock Broking Ltd. and Guiness Securities Ltd. for the financial year 2013-14 are enclosed. Annexure VII. 6. Tamilnad Mercantile Ltd. bank Statement reflecting the receipts of sale consideration from the SEBI registered stock brokers (highlighting the said entries) is enclosed. Annexure VIII. 7. Out of sale consideration money of ₹ 3151423.00 from Unno Industries Ltd. a sum of ₹ 3150000.00 has been invested in equity shares of Glow Diam Designs Pvt. Ltd. All the evidences were attached as annexures as stated above. 6. The Assessing Officer in his order did not refer to any of these evidences. Instead at para 6 and 7 he concluded held as follows: 6. The details of purchase and sale of this particular scrip i.e. Unno Industries Ltd. (hereinafter referred as The Scrip) were examined in which shares were sold in June/August, 2013 at the price of ₹ 31,62,379/- and purchased ₹ 1,00,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in I.T.A. No. 3088 3107/2007 dated 31.12.2010, the addition made by the AO was confirmed. Aggrieved the assessee is in appeal before us. 8. A perusal of the order of the AO demonstrates 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 Compnay as one of the main ,manipulated company and whereas the assessee sold scrips in Unno Industries Ltd. The AO refers to various enquiries made by The Directors of Income Tax , Kolkata on project basis and that this resulted into unearthing of a huge syndicate of entry operators and share brokers and money lenders involved in providing of bogus accommodation entries. The report as the so-called project and the evidence collected by the DIT (Inv.), Kolkata etc have not been brought on record. It is well settled that any document relied upon by the AO for making an addition has to be supplied to the assessee and an opportunity should be provided to the assessee to rebut the same. In this case, general statements have been made by the AO and the addition is made based on such generalizations. The assessee has not been confronted wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner 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] (Cal HC) In this case the ld AO found that the formal evidences produced by the assessee to support huge losses claimed in the transactions of purchase and sale of shares were stage managed. The Hon ble High Court held that the opinion of the AO that the assessee generated a sizeable amount of loss out of prearranged transactions so as to reduce the quantum of income liable for tax might have been the view expressed by the ld AO but he miserably failed to substantiate that. The High Court held that the transactions were at the prevailing price and therefore the suspicion of the AO was misplaced and not substantiated. (ii) CIT V. Lakshmangarh Estate Trading Co. Limited [2013] 40 taxmann.com 439 (Cal) In this case the Hon ble Calcutta High Court held that on the basis of a suspicion howsoever strong it is not p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee have been proved, 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 ld. 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 genui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t para 9.1. to 9.4 held as follows: 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 ld 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 ld AO has not brought any evidence on record to show that these agencies have alleged any stock manipulation against the assessee and or the brokers and or the Company. In absence of any evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as rightly allowed 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 ld 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 AO. We find that the allegation that the assessee and / or Brokers getting invo2lved 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 genuineness of the transactions relating to purchase and sale of shares resulting in LTCG. These evidences were neither found by the ld AO to be false or fabricated. The facts of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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