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TMI Blog2021 (6) TMI 966X X X X Extracts X X X X X X X X Extracts X X X X ..... iginal allottee of equity shares of Kappac Pharma Ltd. which were subsequently transferred in the name of respective assessee(s). Assets are in the nature of equity shares which are not part of a business stock and have been held for more than 12 months so will comes under the category of Long Term Capital Asset. The equity shares are sold through recognized stock exchange (Bombay Stock Exchange) and security transactions tax have been paid on this transaction. Part of purchase and sale - Purchase is off line and made in cash. AO has raised doubt on the purchases being made in cash but there is no bar under the law to make purchase in cash. In all these cases equity shares were purchase from Shah Sons Propon Private Limited. PAN No. of the seller was provided before both the lower authorities. The seller namely Shah Sons Propon Private Limited purchased equity shares in November 2010 and was originally allotted the shares by Kappac Pharma Ltd. which is a company registered at Mumbai. Genuineness of the documents namely share certificate placed is not doubted. For sure the details of shareholder would be available on the portal of the Registrar of Company where annual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e directly from the shareholder and sold through a registered broker and nothing adverse has been found by the revenue authorities and KPL is not held to be a penny stock company. Addition is purely based on the report of the investigation wing carried out in the case of other persons finding no mention or the involvements of assessee(s) in any of such report and thus, the claim of the LTCG has been rightly made as exempt income u/s 10(38) - Decided in favour of assessee. - ITA No.464/Ind/2019, ITA No.465/Ind/2019, ITA No.466/Ind/2019 - - - Dated:- 25-5-2021 - Shri Manish Borad,Accountant Member And Mis Madhumita Roy, Judicial Member For the Appellant : Shri Girish Agrawal, Mis. Nisha Lahoti Shri Vijay Bansal, ARs For the Revenue : Shri Harshit Bari, Sr. DR ORDER PER BENCH The above captioned appeals filed at the instance of different assessees pertaining to Assessment Year 2014-15 are directed against the order of Commissioner of Income Tax (Appeals)-II (in short Ld.CIT ], Indore dated 14.01.2019, 24.01.2019 14.01.2019 which are arising out of the order u/s 143(3) of the Income Tax Act 1961(In short the Act ) dated 25.11.2016 frame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) has erred in considering the script from which the assessee has earned Long Term Capital Gain as Penny Stock a term nowhere define under the Income Tax Act as any other law for the time being in force, which is quite unjust, illegal and against the facts of the case. 4. That the Ld. CIT(A) has erred in confirming the disallowance of claim of assessee of exempted LTCG based on information/statement gathered by investigation wing of the department, without any opportunity to cross examine such persons and without providing such documents for assessee s comments, which is quite unjust, illegal and against the facts of the case. 5. That the Ld. CIT(A) has erred in confirming the disallowing of claim of exempted income based on wrong analysis of the financial and prices of the shares, which is quite unjust, illegal and against the facts of the case. 6. That the Ld. CIT(A) has erred in mentioning the fact that Learned AO has tried to conduct inquires during assessment proceedings, in confirming disallowance, whereas no such inquiries have been carried out, which is quite unjust, illegal and against the facts of the case. 7. That the Ld. CIT(A) has erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) has erred in confirming the addition of ₹ 61,380/-, without any evidence against the assessee, which is quite unjust illegal and against the facts of the case. 10. Appellant craves to leave, add, amend, alter or modify of any ground before final date of hearing. 5. From perusal of all the above grounds we observe that common issue relates to genuineness of claim of Long Term Capital Gain (in short LTCG) u/s 10(38) of the Act from sale of equity shares of Kappac Pharma Limited(in short KPL). Following details of LTCG claim and addition made by the Ld. AO will be helpful to address the common issue: a) in case of Prakash Javia HUF, 3000 equity shares of Kappac Pharma Limited were purchased on 25.06.2012 at ₹ 36,000/- and sold on 06.03.2014 at ₹ 2,14,962/- giving rise to LTCG at ₹ 21,11,075/-. Ld. AO made the addition for gross receipts from sale (without deducting brokerage) at ₹ 21,50,700/-. b) in case of Jayesh Javia HUF, 2,000 equity shares of Kappac Pharma Limited were purchased on 18.10.2012 at ₹ 24,000/- and sold on 07.03.2014 at ₹ 14,33,937/- giving rise to LTCG at ₹ 14,09,939/- and this claim denie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lleged transactions of purchase and sale of equity shares of Kappac Pharma Limited is a sham transaction which cannot stand test of human probability and in holding so ld. CIT(A) relied on various judgments which are part of his finding appearing in para 4 of the impugned order at pages 11 to 15. 10. Now the assessee is in appeal before the Tribunal. Ld. counsel for the assessee referred to the detailed submission running from pages 1 to 27 placed on record. Reference made to the paper book running from pages 1 to 26, containing various details and evidences which were placed before the lower authorities. 11. Ld. counsel for the assessee also submits that the alleged transactions of sale of equity shares of Kappac Pharma Limited was carried out through recognized stock exchange and the transactions fulfilled all the parameters provided in section 10(38) of the Act as equity shares are Long Term Capital Asset held for more than 12 months and sold on a recognized stock exchange through registered broker namely Kotak Securities Limited after paying Securities Transaction Tax. 12. It is also submitted that the alleged information received by the Ld. AO from investigation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01.10.2019 (I.T.A.T., Mumbai) x. Karuna Garg [2019] 109 taxmann.com 403 dated 06.08.2019 (I.T.A.T., Delhi) xi. Vidhi Malhotra [2019] 101 taxmann.com 361 dated 20.12.2018(I.T.A.T., Delhi) xii. Saurabh Mittal ITA No. 16 of 2018 dated 29.08.2018 (I.T.A.T., Jaipur) xiii. Pramod Kumar Lodha [2018] 100 taxmann.com 8 dated 16.07.2018 (I.T.A.T., Jaipur) xiv. Rungta Properties ITA No. 105 of 2016 dated 08.05.2017 (Calcutta HC) xv. M/s. Alpine Investments ITA No. 620 of 2018 dated 26.08.2008 (Culcutta HC) 17. With regard to the claim that the assessee had fulfilled all the conditions of section 10(38) of the Act and the claim of LTCG is bonafide, lawful and complies with the provisions of section 10(38) of the Act and sale consideration received on the sale of these shares cannot be treated as income of the assessee, reliance placed on judgment of Hon'ble Apex Court in the Case of Dilip Kumar and Company ors Civil Appeal No.3327 of 2007 dated 30.07.2018 and the judgment of Hon'ble Bombay High Court in the case of Balmukund Acharya 310 ITR 310 (Bom). 18. Ld. counsel for the assessee also submitted that the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding the shares for more than 12 months, respective assessee(s) sold their holding of Kappac Pharma Ltd. through a registered broker namely Kotal Securities Ltd on the recognized stock exchange namely Bombay Stock Exchange Ltd and Long term Capital Gain calculated in each case have been shown in the income tax returns as exempt income u/s 10(38) of the Act. 23. During the assessment proceedings the assessing officer on the basis of report of the investigation carried out by the Investigation Wing of Income Tax Department at various brokers in other parts of the country, lack of information from the purchaser of equity shares sold by one of the assessee namely Prakash Javia HUF and raising doubt on the abnormal increase of the share price of Kappac Pharma Ltd. which in no way could termed as a fair market value looking to the financial position, gross sales and income shown by the listed company KPL and based on all these observations concluded that the alleged transactions of sale of equity shares of KPL are bogus, Kappac Pharma Ltd. is a penny stock company, and the assessee has adopted a colorable devise to convert unaccounted money into accounted money by arranging bogus L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pac Pharma Ltd. which were subsequently transferred in the name of respective assessee(s). 26. We, further note that as far as conditions provided in section 10(38) of the Act are concerned the same are duly fulfilled in the instant case Section 10(38) of the Act reads as follows: any income arising from the transfer of a long-term capital asset, being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust where a)The transaction of sale of such equity share or unit is entered into on or after the date on which Chapter VII of the Finance (No. 2) Act, 2004 comes into force; and b) Such a transaction is chargeable to securities transaction tax under that Chapter . xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 27. From perusal of above section we observe that following conditions are to be satisfied to claim income exempt u/s 10(38) a. Asset transferred should be a long term capital asset b. Asset transferred should be either equity share or units of equity oriented fund or units of a business trust c. Transaction of sale of such equity share or units of equity oriented fund or units of a business trust i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce amount in the bank account of the assessee which is registered in the DMAT Account. In the instant case, no flaw or any inconsistency has been found by the Revenue authorities with all these transaction of purchase and sale. 31.Further the aspect that whether Kappac Pharma Ltd is a penny stock company or not has been dealt in detail by I.T.A.T., Kolkata Bench in the case of Yogendra Dalmia (supra) wherein the Tribunal after considering another decision of Bangalore Tribunal in the case Canara Bank vs. JCIT held the transaction from sale of equity shares of Kappac Pharma Limited as genuine and also allowed the claim of assessee of LTCG from the sale of equity shares of Kappac Pharma Ltd. and also deleted the alleged commission expenditure added by Ld. AO for arranging the bogus LTCG. The relevant extract of decision of Coordinate Bench Kolkata in the case of Yougendra Dalmia (supra) is reproduced below: Para 6 Next comes assessee s latter appeal ITA No.775/Kol/2018 seeking to reverse both the lower authorities action treating his sale proceeds amounting to ₹ 1,81,009/- derived from sale of shares in M/s GCM Securities Pvt. Ltd and Kappac Pharma Ltd. has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct and his failure to act in conformity with the principles of natural justice, we do not think we can remand the matter to the appropriate authority. We must set his order aside. Para 8 The appeal is, accordingly, allowed. The judgment and order under appeal is set aside. The order of the appropriate authority dated 31-5-1993 is quashed. [emphasis supplied] 33. We, therefore, in the totality of facts and in view of the ratios laid down by Hon'ble Courts and decision of Coordinate Benches squarely applicable on the instant issue raised before us, are of the considered view the alleged transaction of purchase and sale of equity shares of Kappac Pharma Ltd. are not bogus as the respective assessee(s) have duly charged there onus to prove the genuineness of purchase and sale of equity shares of listed company KPL (listed in Bombay Stock Exchange) by placing necessary documents to prove that the purchase are directly from the shareholder and sold through a registered broker and nothing adverse has been found by the revenue authorities and KPL is not held to be a penny stock company. 34. Further, with regard to the alleged addition we find that the it is purely ..... X X X X Extracts X X X X X X X X Extracts X X X X
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