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TMI Blog2021 (7) TMI 943X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the facts of the case. 3. That the ld. CIT(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 in mentioning the fact that Ld. 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. Tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king channel and recognized stock exchange which quite just illegal and against the facts of the case. 6. Appellant craves to leave, add, amend, alter or modify of any ground before final date of hearing. 2. At the outset, Ld. Counsel for the assessee submitted that the common issue raised in the instant two appeals is against the finding of Ld. CIT(A) confirming the action of Ld. Assessing Officer denying the benefit of exemption u/s 10(38) of the Act for the Long Term Capital Gain earned by the assessee from sale of equity shares of listed company. Ld. Counsel for the assessee further submitted that in the case of Pratap Bajaj, Long Term Capital Gain of Rs. 28,92,830/- and in the case of Manorama Devi Sharma of Rs. 28,24,342/-arose from sale of equity shares of Sunrise Asian Limited ( in short 'SAL'). He also submitted that originally the assessee(s) purchased the shares of M/s.Conart Traders Ltd. but subsequently, M/s.Conart Traders Ltd. was merged with Sunrise Asian Limited (SAL), pursuant to order of Hon'ble Bombay High Court.Both the assessee(s) held the shares for more than 12 months and sold them during the year under appeal through recognized stock exchange and claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Shivnarayan Sharma & Ors (supra) wherein also LTCG from sale of the equity shares of same company namely M/s. SAL was under challenge. The equity shares were originally purchased in the name of M/s.Conart Traders Ltd. but later this company was merged with Sunrise Asian Limited. For better understanding we will like to go through the brief facts observed by this Tribunal in the case of Shivnarayan Sharma & Ors (supra), which reads as follows: 7. Brief facts in the case of Shri Shivnarayan Sharma are that the assessee is an individual engaged in the business of bus body building. E-return of income for Assessment Year 2014-15 filed on 29.9.2014 declaring income at Rs. 15,80,150/-. Case was selected for complete scrutiny assessment through CASS followed by issuance of notice u/s 143(2) and 142(1) of the Act. While examining the records and details filed by the assessee, Ld. A.O observed that the assessee has claimed exemption u/s 10(38) of the Act at Rs. 28,47,833/- on sale of equity shares in the name of the company Sunrise Asian Ltd. 6,000 equity shares of M/s. Conart Traders Ltd were purchased on 22.10.2011 at Rs. 1,50,000/- from P. Saji Textiles Limited. Pursuant to the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the transactions of sale of equity shares giving rise to the alleged LTCG at Rs. 28,47,833/- are sham which could not stand the test of human probability. 9. On-going through the facts of the instant two appeals in light of the above stated facts in case of Shivnarayan Sharma (supra) we find that the facts are verbatim similar as regard the company, period of holding, observation of the Ld. Assessing Officer and even the finding of ld. CIT(A). We further observe that this tribunal in the case of Shivnarayan Sharma & Ors (supra), while dealing with the issue of genuineness of Long Term Capital Gain from sale of shares of M/s. SAL decided the issue by placing reliance on the decision of Coordinate Bench Mumbai in the case of Dipesh Ramesh Vardhan vs. DCIT(supra) order dated 11.08.2020, decision of Coordinate Bench of Jaipur in the case of Ashok Agrawal vs. ACIT in ITANo.124/JP/2020 dated 18.11.2020 and also dealt with the decision of Hon'ble High Court of Delhi in the case of Suman Poddar(Supra) relied by the Ld. Sr. DR by relying on the latest judgment of Hon'ble High Court Delhi in the case of Pr. CIT vs. Krishna Devi & Others ITANo.125/2020 dated 15.01.2021 wherein Hon'ble H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the aforesaid case, the issue as to whether the legal evidence produced by the assessee has to guide our decision in the matter or the general observations based on statements, probabilities,' human behavior and discovery of the modus operandi adopted in earning alleged bogus LTCG and STCG, that have surfaced during investigations, should guide the authorities in arriving at a conclusion as to whether the claim is genuine or not has been discussed at length. And referring to legal proposition laid down by the Hon'ble Supreme Court that the burden of proving a transaction to be bogus has to be strictly discharged by adducing legal evidence held that the modus operandi, generalisation, preponderance of human probabilities cannot be the only basis for rejecting the claim of the assessee unless specific evidence is brought on record to controvert the validity and correctness of the documentary evidences produced, the same cannot be rejected. We are in complete agreement with the said view and in the instant case, we find that evidence produced by the assessee in support of his claim of purchase and sale of shares on the stock exchange have not been refuted by any adverse fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the order of the Id. CIT(Appeals) and the claim of the assessee u/s 10(38) is allowed. The matter is thus decided in favour of the assessee and against the Revenue. In the result, the ground of appeal so taken by the assessee is allowed. 26. In the result, the appeal of the assessee is allowed." 20. We have also observed that the above referred decision of Coordinate Bench of Mumbai and Jaipur has dealt in the issue of relating Long Term Capital Gain eared from sale of equity shares of M/s SAL holding it to be a genuine gain and in this context we also note that in the case of Shri Shivnarayahn Sharma and Prayank Jain the alleged company is M/s Conart Traders Ltd subsequently merged with M/s SAL under the order of Hon'ble Mumbai High Court and therefore the above stated decision will be squarely applicable in the case of these two assessee(s). 21. Further we observe that in the case of Govind Harinarayan Agrawal HUF, Manish Govind Agrawal HUF alleged issue of gain from share is from sale of equity shafes of Turbotech. Similar type of issue of the alleged bogus of Long Term Capital Gain from sale of shares of Turbotech came up before the Co-ordinate Bench held in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e inquiry should have done from these persons, whether they have provided any entry to the assessee, if the request for cross examination was not possible at that stage. Cross examination of a person in whose basis any adverse inference is drawn, then it cannot be primary evidence or material to nail the assessee and simply based on the statement no addition can be made. This has been held so by various courts, and also by Hon'ble Apex Court in the case of M/s Andaman Tiimber Industries vs. CCE (SC) reported in 127 DTR 241 has held as follows: "According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Delhi in its recent judgment dated 15.1.2021 in the case of PCIT V/s Krishna Devi & Others ITA No.125/2020 dealing with the similar issue of claim of exemption u/s 10(38) of the Act for Long Term Capital Gain from sale of equity shares has duly considered the judgment of Hon'ble Delhi High Court in the case of Suman Poddar V/s ITO (supra) and has decided against the revenue confirming the order of the Tribunal stating it to be the last fact finding authority who on the basis of evidence brought on record has rightly came to the conclusion that the lower tax authorities are not able to sustain the addition without any cogent material on record. Relevant extract of the judgment of Hon'ble Delhi High Court in the case of PCIT V/s Krishna Devi & Others is reproduced below:- "10. We have heard Mr. Hossain at length and given our thoughtful consideration to his contentions, but are not convinced with the same for the reasons stated hereinafter. 11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that "There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been received through banking channels." The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the respective assessee(s) deserves to be allowed as they have entered into the transactions of purchase and sales duly supported by the documents which have not found to be incorrect. The conditions provided u/s 10(38) of the Act have been fulfilled by the assessee(s) namely Shivnarayan Sharma, Sapan Shaw, Prayank Jain, Govind Harinarayan Agrawal (HUF) and Manish Govind Agrawal (HUF) as they have sold the equity shares held in Demat account and transactions performed on a recognised stock exchange through registered broker at the price appearing on the exchange portal and at the point of time of sale of equity shares, companies were not marked as shell companies by SEBI and nor the trading of these scrips were suspended. The assessee also deserves to succeed on the legal ground as no opportunity was awarded to cross examination the third person which were allegedly found to be providing accommodation entries and therefore no addition was called for in the hands of the assessee without providing opportunity of cross examination in view of the ratio laid down by Hon'ble Apex Court in the case of Andaman Timber Industries vs. CCE 281 CTR 241 (SC) that "not allowing the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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