9911796707
TMI Blog2021 (11) TMI 320X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Income Tax Act, 1961 (for short Act‟), dated Nil. 2. Briefly stated, the assessee who is a trader in ferrous and non-ferrous metals had e-filed his return of income for A.Y 2014-15 on 16.09.2014, declaring a total income of ₹ 5,91,300/-. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the Act. 3. Controversy involved in the present appeal hinges around the declining of the assessee s claim for exemption u/s 10(38) of the Act of the Long Term Capital Gain (LTCG) of ₹ 23,23,344/- on sale of shares of M/s Sunrise Asian Ltd. [earlier named as M/s Santoshima Lease Finance And Investments (India) Ltd.]. Shorn of unnecessary details, the assessee had in its return of income claimed to have sold 5000 shares of M/s Sunrise Asian Ltd. (supra) for a consideration of ₹ 24,48,344/- after holding the same for a period of 2 years (approx). Long Term Capital Gain (LTCG) of ₹ 23,23,343/- on the aforesaid sale transaction was claimed by the assessee as exempt u/s 10(38) of the Act. After deliberating at length on the facts of the case, the A.O dubbed the assessee s claim of LTCG as an accommodation entry and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... process of merging of M/s Santoshima Tradelinks Limited and M/s Conart Traders Limited with M/s Sunrise Asian Ltd. This merger was approved by High Courts having jurisdiction. However the activities of reduction of shares of shareholders of M/s Sunrise Asian Ltd. giving leverage to the shareholders of M/s Santoshima Tradelinks Limited and M/s Conart Traders Limited on record date is also predetermined move with sole aim to benefit the beneficiaries in the subsequent period. The step of acquiring stake in a Public limited company incurring loss, merger of three entities, substantial increase in share capital of listed company convenient share allotment at the time of merger are the circumstantial evidences that the operators/promoters are determined to benefit the beneficiaries by arranging LTCG. b. Sale of shares and unusual rise in the price: Further the assessee has sold these 5000 shares for a sale consideration of ₹ 24,48,344/- in F.Y 2013-14 which is 19 times the increase of the cost price. It is pertinent to mention here that the normal returns on savings were 7.80% for F.Y 2012-13 and 18.70% for F.Y 2013-14 for BSE/Sensex. Whereas, the assessee has earned 1900% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olve the series of preconceived steps, the performance of each of which is depending on the others being carried out. The true nature of such share transactions lacked commercial contents, being artificially structured transactions, entered into with the sole intent, to evade taxes. It is in the backdrop of the aforesaid observations of the A.O that we shall hereinafter deal with the contentions advanced by the assessee in rebuttal of the same. We find that the assessee had off-line purchased 5000 shares of M/s Santoshima Tradelinks Limited on 17.11.2011 from M/s P. Saji Textiles Limited for a consideration of ₹ 1.25 lac i.e @ ₹ 25/- per share. Thereafter, the shares were sent for demat to his DP account and the same were credited much prior to the date on which the sale transaction was executed. As per the order of the Hon‟ble High Court of Bombay the company i.e M/s Santoshima Tradelinks Limited was amalgamated with M/s Sunrise Asian Limited on 28.06.2013 and the shares of M/s Sunrise Asian Limited were directly credited in the assessee s demat account. After holding the shares for a period of about 2 years (approx.) the assessee sold the same on the floor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eponderance of human probabilities. As is discernible from the assessment order, one of the major aspect that had weighed in the mind of the A.O for stamping the transaction of purchase/sale of shares of M/s Sunrise Asian Limited by the assessee as a structured transaction with a purpose of facilitating tax evasion in the garb of a bogus claim of tax exempt capital gain u/s 10(38) of the Act and laundering of his ill-gotten money; was the fact that within a short span there was a steep rise in the price of shares of M/s Sunrise Asian Limited i.e by 19 times, which trade pattern of the aforesaid company as per the A.O did not move along with the sensex wherein the normal returns were 7.80% for F.Y 2012-13 and 18.70% for F.Y 2013-14 for BSE/Sensex; and the financials of the company also did not show any reason for the extraordinary performance of its stock. In our considered view, though the aforesaid data gathered by the A.O being based on the facts cannot be faulted on our part, but we are unable to persuade ourselves to concur with him that for the said reason the assessee is to be held to have evaded taxes and laundered his unaccounted money by booking a bogus claim of LTCG that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase and sale of shares of M/s Sunrise Asian Limited by him, we are afraid that the unsubstantiated claim of the A.O that the assessee had converted his unaccounted money by taking fictitious LTCG in a pre-planned manner cannot be accepted. Our aforesaid view that in the absence of any evidence, whatsoever, to allege that money had changed hands between the assessee and the broker or any other person, or that some person provided the entry to convert unaccounted money for getting benefit of LTCG, the unsubstantiated claim of the department that the assesseee had taken recourse to a structured transaction for evading his taxes and laundering his unaccounted money in the garb of exempt LTCG u/s 10(38) of the Act is supported by the judgment of the Hon‟ble High Court of Delhi in the case of Pr. CIT Ors. Vs. Krishna Devi Ors. (2021) 110 CCH 9 (Del). In its aforesaid order it was observed by the Hon‟ble High Court, as under : 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 findings ..... 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 thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjectures made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the finding of fact against the Assessee, holding that the genuineness of share transaction was not established by him. However, this is quite different from the factual matrix at hand. Similarly, the case of Sumati Dayal v. CIT (supra) too turns on its own specific facts. The above-stated cases, thus, are of no assistance to the case sought to be canvassed by the Revenue. At this stage, we may herein observe that the ITAT, SMC , Mumbai in the case of Mr. Anraj Hiralal Shah (HUF) Vs. ITO, 19(1)(1), Mumbai, ITA No. 4514/Mum/2018 for A.Y 2014-15, had held, that the assessee s claim for exemption u/s 10(38) of LTCG arising on sale shares of M/s Sunrise Asian Ltd. (supra) could not be held to be bogus. In the case before the Tribunal, as in the case of the assessee before us, the A.O was tipped by the Investigation wing that the assessee had traded in shares of M/s Sunrise Asian Ltd. which fell within the category of suspicious transactions. The Tribunal while vacating the addition made/sustained by the lower authorities which had declined his claim for exemption u/s 10(38) of the Act, observed as under : 7. I have heard rival contentions and perused the record. I notice th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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