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TMI Blog2021 (11) TMI 321X X X X Extracts X X X X X X X X Extracts X X X X ..... ial with the department which would falsify the assessee s claim of having carried out genuine purchase/sale of shares of M/s Splash Media Ltd., we are unable to persuade ourselves to concur with the disallowance of the assessee s claim for exemption of LTCG u/s 10(38) of the Act. As we have held that the assessee had carried out genuine transaction of purchase/sale of shares, therefore, as a consequence thereto the addition u/s 69C of commission expenditure would also meet the same fate and is accordingly vacated. - Decided in favour of assessee. - ITA No.8059/MUM/2019 - - - Dated:- 29-10-2021 - Shri S. Rifaur Rahman (Accountant Member) And Shri Ravish Sood (Judicial Member) For the Assessee : Shri Ashok Taparia, A.R For the Revenue : Shri Sanjay J. Sethi, D.R ORDER PER RAVISH SOOD, J.M: The present appeal filed by the assessee is directed against the order passed by the CIT(A)-36, Mumbai dated 27.09.2019, which in turn arises from the order passed by the A.O under Sec. 143(3) r.w.s 147 of the Income Tax Act, 1961 (for short Act‟), dated 20.12.2017. 2. Briefly stated, the assessee had filed his return of income for A.Y 2011-12 on 24.06.2011, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sale consideration of ₹ 13,10,647/- as an unexplained credit u/s 68 of the Act. Also, the A.O made a further addition u/s 69C of ₹ 39,319/- i.e @ 3% of the amount of LTCG towards unaccounted commission which as per him would have been paid by the assessee for obtaining the aforesaid accommodation entry. Accordingly, the A.O vide his order u/s 143(3) r.w.s 147, dated 20.12.2017 assessed the income at ₹ 20,68,360/-. 4. Aggrieved, the assessee carried the matter before the CIT(A) who concurred with the view taken by the A.O and dismissed the appeal. 5. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. We have heard the ld. Authorised Representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them. 6. As is discernible from the assessment order, the A.O had after considering the facts of the case; investigations made by the Investigation wing of the department at Kolkata regarding 84 penny stocks (the assessee being one of them) a/w investigations conducted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pported by market factors. iii. Cumulative events in such transactions of shares revealed that same were devoid of any commercial nature and fell in the realm of not being bonafide and, hence, impugned long term capital gain is not allowable. iv. Failure of assessee to discharge his onus : The assessee has not been able to prove the unusual rise and fall of share price to be natural and based on the market forces. It is evident that such share transactions were closed circuit transactions and clearly structured one. v. Financial analysis of the penny stock companies : The networth of the penny stock company is negligible. Even though the networth of the company and the business activity of the company is negligible the share prices have been artificially rigged to unusual high. vi. Arranged transactions: The transactions entered by the assessee involve 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of the lower authorities, we find that genuineness of the aforesaid documentary evidence had not been dislodged by the lower authorities on the basis of any irrefutable material. As stated by the ld. A.R, and rightly so, the adverse inferences drawn by the A.O as regards the transactions of purchase/sale of shares of M/s Splash Media Ltd. by the assessee are backed by the information received by him from the Investigation wing and the unsubstantiated statements of third parties who are not connected with the assessee. Also, the A.O instead of disproving the contents of the aforesaid documentary evidence that was filed by the assessee in support of her claim of having made genuine purchase/sale of shares in question, had rather in disregard of the same chosen to remain guided by assumptions, presumptions, surmises and the principle of preponderance 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 transactions of purchase/sale of shares of M/s Splash Media Ltd. by the assessee as a structured transaction with a purpose of facilitating tax evasion in the garb of a bogus claim of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 15 scrips, had purchased the shares of M/s Splash Media Ltd. in a dematerialized form through her regular broker, viz. Emkay Global Financial Services Limited. Also, as can be gathered from the broker note, the assessee had paid the purchase consideration of the aforesaid shares through her bank account directly to her broker, viz. Emkay Global Financial Services Limited. Also, as observed by us hereinabove, the assessee had out of her aforesaid holding of 26000 shares (supra) sold 16,000 shares over the period i.e September, 2010 to February, 2011 on the floor of BSE through her regular broker, viz. Emkay Global Financial Services Limited and had received the sale proceeds from the said broker through banking channel. Copy of the demat account of the broker reflecting the receipt of shares from the assessee had also been filed by the assessee to support the authenticity of her aforesaid transaction of sale of shares. Backed by the aforesaid substantial documentary evidence filed by the assessee which beyond doubt substantiates the genuineness of the transaction of purchase and sale of shares of M/s Splash Media Ltd. by her, we are afraid that the unsubstantiated claim of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO made an attempt to delve into the question of infusion of Respondent's unaccounted money, but he did not dig deeper. Notices issued under Sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He 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 conjecture 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 successful ..... 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. On the basis of our aforesaid deliberations, in the backdrop of the fact that there is no material with the department which would falsify the assessee s claim of having carried out genuine purchase/sale of shares of M/s Splash Media Ltd., we are unable to persuade ourselves to concur with the disallowance of the assessee s claim for exemption of LTCG of ₹ 13,10,647/- u/s 10(38) of the Act. As we have held that the assessee had carried out genuine transaction of purchase/sale of shares, therefore, as a consequence thereto the addition u/s 69C of commission expenditure of ₹ 39,319/- would also meet the same fate and is accordingly vacated. 7. Resultantly, the appeal of the assessee is allowed in terms of our aforesaid observations. Order pronounced in the open court on 29.10.2021. - - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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