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TMI Blog2020 (1) TMI 771X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Year: 2014-15) - - - Dated:- 2-1-2020 - SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER Appellant by: None Respondent by: Ms. Sumathi Venkatraman, JCIT ORDER PER RAMIT KOCHAR, ACCOUNTANT MEMBER: This appeal filed by assessee is directed against appellate Order dated 28.06.2019 passed by learned Commissioner of Income Tax (Appeals)-7, Chennai (hereinafter called the CIT(A) ), in ITA No.231(T- 14)/CIT(A)-7/2016-17 for assessment Year (ay) 2014-15, the appellate proceedings before learned CIT(A) had arisen from assessment order dated 31.12.2016 passed by learned Assessing Officer (hereinafter called the AO ) for ay: 2014-15 u/s.143(3) of the Income-tax Act, 1961 (hereinafter called the Act ). 2. The grounds of appeal raised by assessee in memo of appeal filed with the Income-Tax Appellate Tribunal, Chennai (hereinafter called the Tribunal ) reads as under:- 1. The order of the Ld. Commissioner of Income-Tax (Appeals) is against law as well as facts. The action of the CIT (A) in dismissing the appeal is unjustified, arbitrary and against law. 2. The learned Commissioner of Income Tax (Appeals) has erred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss this evidence is put before him and he is given an opportunity to controvert the evidence. In this case, the AO relies only on a report as the basis for the addition. The evidence based on which the report is prepared is not brought on record by the AO nor is it put before the assessee. 7. The appellant submits that neither the CIT (A) nor the A.O has failed to adduce any evidence that there was an accommodation of cash being converted into mainstream income. The A.O's order was purely based on suspicion and surmises and based the department's investigation report made against a set of stack(sic. stock) brokers. The AO has not made any independent investigation nor has he gathered any evidence against the appellant to hold that the impugned share sales are not genuine. On the contrary the Appellant has produced the evidence for holding the shares in physical form earlier and then dematerialized the shares later and sold through a recognized stock exchange and the sale proceeds were received through proper banning(sic. banking) channels. Such chain of transactions cannot be held as Bogus or sham merely on suspicion or surmises by the AO. 8. The appellant s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y both the rival parties . The Revenue on its part although objected to grant of stay of outstanding demand of tax and interest but did not raise any objection to grant of early hearing of the appeal announced by the Bench for 09.10.2019. The Bench while disposing off stay petition was pleased to place a condition for grant of early hearing of appeal that assessee will not seek adjournment when appeal will come up for hearing before the Bench unless for genuine and bonafide reasons. When , now this assessee s appeal in ITA no. 2324/Chny/2019 for ay: 2014-15 came up for hearing before the Bench on 09.10.2019 , the assessee and/or its learned counsel did not appear before the Bench nor any application for adjournment is moved by assessee and/or its learned counsel before the Bench. The learned DR on its part has strenuously argued for confirming the orders passed by authorities below. Now, with this back ground when conditions imposed in the order passed by the Bench on 13.09.2019 disposing of stay petition are blatantly infringed/violated , the Bench decided to proceed to adjudicate this appeal filed by assessee in ITA no. 2342/Chny/2019 for ay: 2014-15 after hearing learned DR and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company. The AO further observed that payment for aforesaid share purchase of Turbotech Engineering Limited did not took place through banking channel and payment for purchase of shares was made in cash as reflected in cash receipt issued by M/s Shivani Tradecom Private Limited vide their letter dated 24.11.2011. The AO also observed that these are alleged cash purchases , there is no proof of assessee having bought these shares on that particular date. The AO also observed that share transfer form is witnessed by a person named Mr. T.B.Patel residing at Ahmedabad. The AO observed that assessee could not explain as to how assessee who is based in Chennai has dealt with Mumbai based company namely M/s.Shivani Tradecom Pvt. Ltd. for purchasing these shares and as to how it is witnessed by a person located in Ahmedabad. The AO observed that assessee could not prove that all three parties namely assessee, the seller and witness were present at the same place at the same time when share transfer deed stood executed by all the three aforesaid persons. The AO further observed that assessee has not furnished travel details to indicate that all three persons were in-fact present at the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - - Other Operating Income - - 0.00 - - Total Income From Operations - - 0.00 - - EXPENDITURE Consumption of Raw Materials - - - - - Purchase of Traded Goods - - - - - Increase/Decrease in Stocks - - - - - Power Fuel - - - - - Employees Cost - 0.04 0.01 0.02 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -0.09 -0.13 -0.04 -0.03 -0.03 Prior year adjustments - - - - - Extra ordinary items - - - - - Net profit/(Loss) for the period -0.09 -0.13 -0.04 -0.03 -0.03 The AO also brought on record movement of price of the share of M/s.Turbotech Engineering Ltd. on BSE for last one year which has varied from ₹ 19.65 to ₹ 518/- during the financial year, which as per AO clearly defy economic rationale as financials of the said company Turbotech Engineering Limited reveals no revenue earned by company for last year which has not changed during last four years and these significant price variation reveals a pattern in the manipulation of the share price of the said company namely M/s Turbotech Engineering Limited, which is re-produced hereunder: 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... variation in price traded of share of M/s Turbotech Engineering Limited which varied from ₹ 19.65 to ₹ 518/- per share during financial year itself which is not supported by financials of the said company and there is no economic rationale or justification for such price movement in share prices of Turbotech Engineers Limited in last one year ranging from ₹ 19.65 to ₹ 518/- per share. Thus, as per AO there is no justification for such variation in share price of said company namely M/s.Turbotech Engineering Ltd. from ₹ 19.65 to ₹ 518 per share during the year under consideration, while for last four years the finances of the said company had remain same wherein there is no revenue/income reported by said company M/s.Turbotech Engineering Ltd. neither there has been investments made by said company to justify such share price variation from ₹ 19.65 to ₹ 518/- per share. The AO further observed that only reason for such a huge variation in share price from ₹ 19.65 to ₹ 518/- per share during the year is that said company namely Turbotech Engineers Limited and a group of brokers, chartered accountants and entry operators have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssumptions without any cogent evidences. It was claimed by assessee that she has furnished all documentary evidences to support that transactions for purchase and sale of shares was genuine . It was also claimed by assessee that AO did not made any independent inquiries to disallow claim of exemption filed by assessee u/s 10(38) of the 1961 Act. It was also claimed that principles of natural justice are not adhered to by AO as the statements and documents obtained at the back of the assessee were not provided to assessee for rebuttal and for cross examination of persons who have given incriminating statements against assessee . The assessee also relied upon several judicial precedents to support her contentions before learned CIT(A) and prayed for allowing exemption claimed by assessee u/s 10(38) of the 1961 Act. The learned CIT(A) was pleased to dismiss appeal filed by assessee by holding that principles of natural justice has been duly adhered to by AO as show cause notice was duly issued by the AO to the assessee before disallowing exemption claimed u/s 10(38) of the 1961 Act and also learned CIT(A) observed that assessee has not submitted evidences in support of contentions and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest thereon. The learned counsel for assessee namely Mr. S.Mohan, FCA and Ms Lekha, FCA appeared when stay petition was heard by tribunal . Based on totality of circumstances of the case and after hearing both the parties, the tribunal was pleased to grant early hearing of the appeal with the condition that the assessee will not seek adjournment unless for genuine and bonafide reasons. The date of hearing was announced in open court in the presence of both the parties which date was noted by both the parties. It was made clear that no separate notice will be sent by tribunal. The details are culled out in para 3 of this order. That is how, this appeal came to be heard on 09.10.2019 and when this appeal was called for hearing none appeared for assessee nor any adjournment letter was filed, which is reflective of the conduct of the assessee which is in blatant violation of direction of the tribunal disposing of stay petition . 7.2 We have observed that assessee is individual and she is partner in partnership firms. The assessee filed its return of income for impugned ay: 2014-15 on 29.07.2014 declaring total income of ₹ 4,99,910/-. The assessee s case was selected by R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring previous year 2013-14 relevant to ay: 2014-15, while purchase of said shares were made just two years back at ₹ 2 per share. It is pertinent to mention that assessee has no experience in dealing in share market and these transactions in shares of Turbotech Engineering Ltd. are solitary transactions undertaken by assessee and no transactions in shares were ever undertaken by assessee prior to and after the aforesaid alleged transactions in shares of Turbotech Engineering Ltd.. Investigations were conducted by various government and regulatory and enforcement authorities/agencies of Government of India which indicated that said company M/s Turbotech Engineering Ltd. is a company with little or no inherent value and its shares prices were rigged and manipulated with an intention of conversion of unaccounted money into apparently genuine income to claim exemption u/s 10(38) of the 1961 Act. We have also observed that the AO independently carried out enquires by issuing notices u/s 133(6) of the 1961 Act to Bombay Stock Exchange. The BSE replied that assessee has not dealt in any other shares except dealing in shares of Turbotech Engineering Ltd. . The assessee is not a regu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available in public domain and assessee cannot complain that she was not confronted with SEBI order, Financial Statements and Prices prevailing on stock exchanges. The AO has elaborately brought this in its assessment orders and it is not the case of the assessee even before learned CIT(A) that these financial datas, share price of M/s Turbotech Engineering Limited on stock exchanges, SEBI order / BSE order etc were perverse finding. Even before learned CIT(A), no evidences were filed by assessee to rebut contentions/findings of the AO and merely it is stated that principles of natural justices was infringed, cross examination was not allowed, statements were not provided and additions were made on assumptions, surmises and conjectures. These are all bogies raised by assessee to protract litigation while fact of the matter is that the assessee has not come out clean on this claim of exemption u/s 10(38) which is a bogus claim raised by assessee. The assessee has not brought any cogent evidences even before learned CIT(A) to prove that these transactions in shares of Turbotech Engineering Ltd. were not bogus/sham transactions before the AO and rather it was a genuine transactions. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial collected by other government agencies. In this case, the AO himself has conducted inquiries which clearly points to one and only irresistible conclusion that these gains earned by assessee were bogus and sham transactions to convert her unaccounted money into legitimate money through circuitous route of sale and purchase of listed shares of M/s Turbotech Engineering Limited which is a penny stock and the assessee is trying to take advantage of exemption provision as enshrined u/s 10(38) of the 1961 Act. The onus was on assessee to prove that long term capital gains claimed by her as an exempt income u/s 10(38) of the 1961 Act were genuine gains and assessee was entitled for claiming exemption u/s 10(38) of the 1961 Act, keeping in view decision of Constitution Bench of Hon ble Supreme Court in the case of Commissioner of Customs( Import), Mumbai v. Dilip Kumar and Company Ors. in Civil Appeal No. 3327 of 2007, judgment dated 30.07.2018 Keeping in view entire factual matrix of the case, we are of the considered view that long term capital gains earned by assessee to the tune of ₹ 39,77,886/- on purchase and sale of shares of M/s Turbotech Engineering Ltd. are bogus/sham ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llows: Balance Sheet of Cressanda Solution ---- in Rs. Cr. -------------- Mar 16 Mar 15 Mar 14 Mar 13 Mar 12 12 mths 12 mths 12 mths 12 mths 12 mths EQUITIES AND LIABILITIES SHAREHOLDER FUNDS Equity Share Capital 30.36 30.36 30.36 30.36 9.00 Total Share Capital 30.36 30.36 30.36 30.36 9.00 Reserves and Surplus - -0.65 -0.82 0.63 - 8.89 Total Reserves and Surplus - -0.65 -0.82 0.63 - 8.89 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.04 0.05 0.06 0.00 Non-Current Investments 0.00 0.00 0.00 1.09 1.09 Long Term Loans and Advances 18.96 18.87 24.11 25.11 0.00 Other Non- Current Assets 10.21 10.60 0.15 0.77 0.65 Total Non- Current Assets 29.20 29.50 24.31 27.03 1.74 Current Assets Inventories 0.00 0.00 0.00 0.70 0.00 Trade 0.00 0.00 29.13 26.01 0.00 Receivables Cash and Cash Equivalents 0.10 0.23 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IP and Stock in Trade 0.00 0.00 0.70 0.00 0.00 Employee Benefit Expenses 0.05 0.04 0.03 0.06 0.00 Depreciation and Amortization Expenses 0.01 0.01 0.01 0.01 0.00 Other Expenses 0.14 0.28 2.14 0.41 0.04 Total Expenses 0.20 0.32 8.02 0.57 0.04 Mar 16 Mar 15 Mar 14 Mar 13 Mar 12 12 mths 12 mths 12 mths 12 mths 12 mths Profit/Loss before Exceptional, Extra Ordinary Items and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cept such contention would only make decision of judicial authorities fallacy. 11. evidences put forth by Revenue regarding entry operation fairly leads to conclusion that assessee is one of beneficiaries of accommodation entry receipts in form of longterm capital gains. assessee has failed to prove that share transactions are genuine and could not furnish evidences regarding sale of shares except copies of Page 7 of 10 contract notes, cheques received against overwhelming evidences collected by Revenue regarding operation of entire affairs of assessee. This cannot be case of intelligent investment or simple and straight case of tax planning to gain benefit of longterm capital gains. earnings @ 491% over period of 5 months is beyond human probability and defies business logic of any business enterprise dealing with share transactions. net worth of company is not known to assessee. Even brokers who coordinated transactions were also unknown to assessee. All these facts give credence to unreliability of entire transaction of shares giving rise to such capital gains. ratio laid down by Hon'ble Supreme Court in case of Sumati Dayal vs. CIT, 214 ITR 801 is squarely applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th arguments of assessee that he was denied right of cross examination of individuals whose statements led to enquiry. ld. AR argument that no question of law has been framed in case of Udit Kalra also does not make any tangible difference to decision of this case. Since additions have been confirmed based on enquiries by Revenue, taking into consideration ratio laid down by various High Courts and Hon'ble Supreme Court, our decision is equally applicable to receipts obtained from all three entities. Further, reliance is also placed on orders of various Courts and Tribunals listed below. MK. Rajeshwari vs. ITO in ITA No.17231Bangl2018, order dated 12.10.2018. Abhimanyu Soin vs. ACIT in ITA No. 9511Chdl2016, order dated 18.04.2018. Sanjay Bimalchand Jain vs. ITO 89 taxmann.com 196. Dinesh Kumar Khandelwal, HUF vs. ITO in ITA No. 58 591Nagl2015, order dated 24.08.2016. Ratnakar M Pujari vs. ITO in IT No. 9951Muml2012, order dated 03.08.2016. ITA 841/2019 Page 9 of 10 Disha N. Lalwani vs. ITO in ITA No. 6398 I Mum I 2012, order dated 22.03.2017. ITO vs. Shamim. M Bharwoni [20 16] 69 taxmann.com 65. Usha Chandresh Shah Vs ITO in ITA No. 6858 I Mum I 2011, order dated 26.09.2014. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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