TMI Blog2021 (7) TMI 493X X X X Extracts X X X X X X X X Extracts X X X X ..... wise and therefore, there is no doubt that the Assessing Officer has merely proceeded to arrive at his conclusion that the transaction. As taking into consideration the entire aspect of the matter in the absence of any independent enquiry made by the Ld. A.O as already observed by us respectfully relying upon the judgment passed by Hon ble Delhi Bench in the case of Swati Luthra [ 2019 (7) TMI 526 - ITAT DELHI] on the identical facts keeping in view of the orders passed by SEBI, we do not hesitate to observe that holding the said M/s Turbo Tech Engineering Ltd as a penny stock company by the authorities below without any corroborative evidence is uncalled for and unjustified. Such action is erroneous arbitrary whimsical and suffers from the principle of surmise and conjecture. Thus, the disallowance of the claim made by the assessee towards the Long Term Capital Gainbeing bogus based only on mere surmise and conjecture.Thus, the disallowance of the claim made by the assessee towards the Long Term Capital Gain is bad in law and liable to be quashed. Consequentially the addition of 3% of brokerage is also of no basis - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... n exemption is bogus; in fact no real capital gain have been earned by the assessee as the observation made by Ld. A.O, rather the same has been introduced from undisclosed sources. Ultimately the exemption on account of Long Term Capital Gain to the tune of ₹ 23,25,000/- on the said alleged penny stock was not accepted and added to the total income of the assessee u/s 68 of the Act on the alleged grounds of income from undisclosed sources. The Ld. A.O further increased the brokerage and commission @3% of the transaction at ₹ 69,750/- alleging managing of the transaction of Long Term Capital Gain u/s 68 of the Act. These Additions were further been confirmed by Ld. CIT(A)-II, Indore. Hence, the instant appeal before us. 3. At the time of hearing of the instant appeal Ld. Counsel for the assessee submitted before us as follows:- 1) The Genuineness of transaction was sought to be proved before the Revenue with help of following evidences:- (i) Statement of Long Term Capital Gain. (ii) Debit note for purchase of shares of Turbo Tech Engineering Limited. (iii) Physical Share Transfer form evidencing shares of Turbo Tech Engineering Limited in assesse's name. (iv) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and such transaction is chargeable to security transaction tax under that Chapter. 8. In the present case, both twin conditions are satisfied. The appellant has purchased the 5000 shares through broker Shah Space Manager Pvt. Ltd, Vadodra and sold the shares holding the same for more than 12 months and therefore it is long term capital asset and the shares are equity shares of M/s Turbo tech Engineering Ltd. Before the authorities below the appellant filed the copy of the shares transfer form, copy of contract note issued by Anand Rathi Shares and Stock Brokers, copy of form evidencing payment of securities transaction tax on transaction entered in a recognized stock exchange, as submitted by Ld. AR. Needless to mention that those documents are filed before us by way of a Paper Book. 9. It is further submitted that the share price is always determined by the market mechanism at any given point of time because there is a robust system of the stock exchange which is transparent, open and equitable, and the appellant has also sold the shares on such a platform at a price which was a reflection of the market price derived through the interplay of the forces of market demand and supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow that the persons investigated, including entry operators or stock brokers, have named that the appellant was in collusion with them. No finding specifically against the appellant has been made in the Investigation team the report whereof is available before us and this cannot be any ground for holding the appellant guilty or linked to the wrong facts of the persons investigated. 16. In the instant case, the appellant is not connected with M/s Turbo Tech Engineering Ltd. or their promoters, directors or any other person who exercised any control over M/s Turbo tech Engineering Ltd or any so-called entry operator. As a matter of fact, no element is available showing that the appellant has indulged in any such questionable activity or has been part of the modus operandi as alleged by the Ld. A.O. 17. It is further apparent from Page 36 of the Paper Book filed before us that the appellant earned Long Term Capital Gain in ICI CI Bank, transactions whereof has not been doubted. 18. No independent Enquiry from concerned parties to transaction has also been made by the Ld. A.O as it appears from the records. 19. We find that this scrips of M/s Turbo Tech Engineering Pvt. Ltd has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 2 per share Total purchase consideration paid ₹ 20, 000/- ₹ 20, 000/- ₹ 20, 000/- ₹ 20, 000/- Date of shares sold 23.07.2013 06.09.2013 19.10.2013 24.09.2013 (3000 shares), 03.09.2013 (3000 shares) and 10.09.2013 (4000 shares) (10000 shares) (10000 shares) Sale Price per share ₹ 314.88, ₹ 276.70 ₹ 178. 85 ₹ 182.60 ₹ 151.25 and ₹ 164.189 per share per share per share per share Total sale consideration ₹ 20,55,146/- ₹ 27,67,036/- ₹ 17,88,463/ - - ₹ 18,25,780/- Long Term Capital Gain Declared ₹ 20,35,146/- ₹ 27,47,036/- ₹ 17,68,463/- ₹ 18,02, 780/- DOCUMENTARY EVIDENCES SUBMITTED BEFORE AO AND CIT(A): Share Purchase Documents Pg 15 to 17 of PB Since the issues involved in all the appeals are identical and documents submitted are also same, thus, Ms. Swati Luthra's (ITA No. 6480/Del/2017) case may be taken as lead case and the issue may be decided accordingly. Share Certificate Pg 18 of PB Share Transfer Pg 19 to 21 of PB Form Contract Note issued by DP Pg 24 to 27 of PB Assessee's bank statement P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urbotech are Penny Stock companies and the scrips have been used to provide bogus LTCG to various 8 beneficiaries. Reliance was placed on various statements, like of Sh, Nikhil Jain, Sh. Sanjay Vora, Sh. Rakesh Somani, Sh. Anil Kumar Khemka and Sh. Bidyoot Sarkar, which were all recorded before DDIT (Inv), Kolkata, wherein, the aforesaid persons had admitted that the scrip of M/s Esteem Bio and M/s Turbotech were used to provide bogus LTCG to various beneficiaries. Thereafter, the Assessing Officer after explaining the modus operandi of bogus LTCG held that the transactions of the assessee were sham transactions and the LTCG so declared of a sum of ₹ 41,85,762/- was nothing but unexplained Cash Credit under section 68 of the Act to be taxed @ 30% under section 115BBE of the Income Tax Act, 1961 in the hands of the assessee. 6. In the first appeal, the Ld. Commissioner of Income Tax (Appeals) confirmed the order of the AO by observing that the documents submitted as evidence to prove the genuineness of the transaction are make believe documents to cover up the true nature of the transactions, as it is revealed that the purchase and sale of shares are arranged transactions to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Esteem Bio and M/s Turbotech were suspended temporarily is misconceived, as vide Adjudication Orders dated 06.09.2017 in the case of M/s Esteem Bio and 25.11.2014 in the case of M/s Turbotech, SEBI has found no irregularities in the trading of such scrips nor it has found its directors involved in any price rigging (said orders were placed in the paper book at pages 3 to 13 and 14 to 18 of PB - II) and thus, the reliance placed by AO on interim order of SEBI is uncalled for and unjustified. It was further argued that the AO has relied on various statements of alleged entry operators which have surfaced directly in the order of assessment and were never confronted by ld AO during the course of assessment 11 proceedings. Further, in the first appeal filed by assessee against the said order of assessment, the said issue of cross examination was raised before ld. CIT (A) which was never provided to the assessee. Thus, it was submitted that as the statements of alleged entry operators have never been confronted to the assessee and they have also not been produced for cross examination, even though specific request for the same was made by assessee before ld CIT (A), the assessment so ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sunita Khemka vs ACIT in ITA No. 389/Del/2018 dated 02.08.2018. Copy of order of Hon'ble ITAT Delhi in the case of Chander Prakash vs ITO in ITA No. 6880/Del/2017 dated 12.03.2018. Copy of order of Hon'ble ITAT Kolkata in the case of Prakash Chand Bhutoria vs ITO in ITA No. 2394/Kol/2017 dated 27.06.2018. Copy of order of Hon'ble ITAT Delhi in the case of Mukta Gupta vs ITOin ITA No. 2766/Del/2018 dated 26.11.2018. Copy of order of Hon'ble ITAT Kolkata in the case of Mahavir Jhanwar vs ITO in ITA No. 2474/Kol/2018 dated 01.02.2019. Copy of order of Hon'ble ITAT Delhi in the case of Sh. Rajev Agarwal & sons vs ITO in ITA No. 872/Del/2018 dated 21.01.2019. Copy of order of Hon'ble ITAT Delhi in the case of Sanjeev Jain vs ITO in ITA No. 3381/Del/2017 dated 15.01.2019. Copy of order of Hon'ble ITAT Delhi in the case of Smt. Jyoti Gupta vs ITO in ITA No. 3510/Del/2018 dated 06.11.2018. Copy of order of Hon'ble ITAT Delhi in the case of Vidhi Malhotra vs ITO in ITA No. 93/Del/2018 dated 20.12.2018. Copy of order of Hon'ble ITAT Delhi in the case of Smt. Simi Verma vs ITO in ITA No. 3387/Del/2018 dated 06.11.2018. Copy of order of Hon'ble ITAT Delhi in the case of Smt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. The Revenue could not point out any specific defect with regards to the documents so submitted by assessee. In our considered view, effect of a transaction which is supported by documentary evidences cannot be brushed aside on suspicion or probabilities without pointing out any defect therein. 13. In the instant case, the Assessing Officer himself observed that the movement in price of shares of M/s Esteem Bio and M/s 16 Turbotech were without any backing of financial performance of the said companies. In our considered view, the above factor at best was a pointer or cause for careful scrutiny of the transaction by the Assessing Officer but from it cannot be concluded that transactions were sham. It is a matter of common knowledge that prices of shares in the share market depends upon innumerable factors and perception of the investor and not alone on the financial performance of the company. Further, we also find from record that Ld. AO also didn't confront copies of statements recorded by Investigation Wing, Kolkata of Sh, Nikhil Jain, Sh. Sanjay Vora, Sh. Rakesh Somani, Sh. Anil Kumar Khemka and Sh. Bidyoot Sarkar to the appellant during assessment proceedings and me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and 18 wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. In view the above, we are of the opinion th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antial question of law arises in the present appeal. This appeal is accordingly dismissed." 15. On going through the aforesaid judgment, we find that no question of law was formulated by Hon'ble High Court of Delhi in the said case and there is only dismissal of appeal in limine and the Hon'ble High Court found that the issue involved is a question of fact as held by Hon'ble Apex Court in Kunhayyammed vs State of Kerala reported in 245 ITR 360 and also in CIT vs. Rashtradoot (HUF) reported in 412 ITR . Even on merits and facts, the said judgment in the case of Udit Kalra vs ITO (supra) is distinguishable as in that case the scrips of the company were delisted on stock exchange, whereas, in the instant case, the interim order of SEBI in the cases of M/s Esteem Bio and M/s Turbotech have been cooled down by subsequent order of SEBI placed by assessees in its paper book. Thus, the case of Udit Kalra vs ITO relied by ld. DR is clearly distinguishable on facts and is not applicable to the facts of assessee. Thus, we hold that the case of assessee is factually and materially distinguishable from the facts of the case of Udit Kalra vs ITO so relied by ld DR. 16. We further find that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to put assessee under liability. However, in the present case, the entire documentary evidence on record has not been disputed by the authorities below and there is no rebuttal to the explanation of assessee. No other adverse materials have been brought on record against the assessee. Further, no proper enquiry has been conducted by the A.O. on the documentary evidences filed by assessee. Whatever statements have been referred to in the order was general in nature with whom assessee did not have any transaction. Considering the totality of the facts and circumstances of the case, we hold that assessee has entered into genuine transaction of sale and purchase of shares and therefore, satisfied the conditions of Section 10(38) of the I.T. Act. The assessee is entitled for exemption under the same provision. We accordingly, set aside the orders of the authorities below and delete the addition of ₹ 41,85,762/-. Appeal of assessee is allowed. 20. We have further considered the judgement passed in the matter of Udit Kalra (Supra) as relied upon by the Ld. DR before us in support of the case made out by the Revenue. It appears that the challenges made in the appeal before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the revenue to hold otherwise and therefore, there is no doubt that the Assessing Officer has merely proceeded to arrive at his conclusion that the transaction being bogus based only on mere surmise and conjecture. 22. Thus, taking into consideration the entire aspect of the matter in the absence of any independent enquiry made by the Ld. A.O as already observed by us respectfully relying upon the judgment passed by Hon'ble Delhi Bench in the case of Swati Luthra Vs ITO, Ward 51(5), Delhi (Supra) on the identical facts keeping in view of the orders passed by SEBI, we do not hesitate to observe that holding the said M/s Turbo Tech Engineering Ltd as a penny stock company by the authorities below without any corroborative evidence is uncalled for and unjustified. Such action is erroneous arbitrary whimsical and suffers from the principle of surmise and conjecture. Thus, the disallowance of the claim made by the assessee towards the Long Term Capital Gain to the tune of ₹ 23,25,000/- in our humble opinion is bad in law and liable to be quashed. We order accordingly. Consequentially the addition of 3% of brokerage to the tune of ₹ 69,750/-is also of no basis. The said ..... X X X X Extracts X X X X X X X X Extracts X X X X
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