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TMI Blog2022 (1) TMI 1037X X X X Extracts X X X X X X X X Extracts X X X X ..... er has ignored the various documentary evidences which were in favour of the assessee. As findings recorded by ld. CIT(A) are quite exhaustive whereby he has discussed the basis on which the Assessing Officer had made the additions. While allowing relief to the assessee, CIT(A) has specifically held that there is no adverse comment in the form of general and specific statement by the Pr. Officer of stock exchange or by the company whose shares were involved in these transactions and he held that Assessing Officer only quoted facts pertaining to various completely unrelated persons whose statement were recorded and on the basis of unfounded presumptions - the name of the appellants were neither quoted by any of such persons nor any material relating to the assessee was found at any place where investigation was done by the investigation Wing. CIT(A) relying on various orders of Lucknow Benches and other Benches has allowed relief to the assessee by placing reliance on the evidences filed by the assessee before Assessing Officer. Thus find no adversity in the order of ld. CIT(A) specifically keeping in view the fact that Lucknow Benches in a number of cases after relying on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lved in these cases was below monetary limit prescribed by CBDT vide Circular No. 70/2019 dated 8.8.2019. However, later on CBDT vide Circular No. 23/2019 dated 6.9.2019 and dated 16.09.2019 had decided that Departmental appeal may be filed on merits as an exception to the said circular where Board by way of special order direct for filing of appeal in cases involved in organized tax evasion activities. It was submitted that after the issuance of such circulars dated 6.9.2019 and 16.9.2019 the Department got ready for filing appeals in these cases as in these cases the assessee had declared long term capital gain on shares through an organized activity but due to onset of Corona and due to further lockdown there was a delay in filing the appeals. It was submitted that the delay in filing the appeals has occurred due to exceptional circumstances beyond the control of Department which may be condoned and the appeals be heard on merits. 4. The ld. AR objected to the condonation of delay and submitted that the delay has occurred not due to reasons beyond the control of Revenue but due to further Circular No. 23/2019 whereby certain exceptions were made to Circular No. 17 whereby mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mined the stock brokers through whom the shares were purchased and sold. It was submitted that ld. CIT(A) has passed detailed orders wherein he has relied on a number of case laws decided by ITAT, Lucknow Benches and wherein the Hon'ble ITAT had allowed relief to various assessees by placing reliance on the evidences on record. It was submitted that ld. DR has not commented on any of the evidences which were filed before Assessing Officer which included sale and purchases bills, STT payment and Demat accounts of the assessee and further the payments has been made through banking channel. The ld. AR in this respect heavily placed reliance on the orders of ld. CIT(A). 8. I have heard the rival parties and have perused the material placed on record. I find that Assessing Officer has made the additions on the basis of an investigation conducted by DDIT whereby a racket involving thousands of crores of rupees was unearthed and wherein on the basis of statements recorded by investigation department of certain operators and stock brokers the Revenue had come to the conclusion that various persons were engaged in arranging long term capital gains through the medium of manipulating s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereby that the appellant became the physical owner of these shares. The assessee effected sales of these shares when the prices started appreciating in lots at various intervals as per the details submitted before AO and reproduced in the assessment order. AO found that there was an abnormal increase in the value of shares of the scrip that was actually innocuous. However, during the appellate proceedings it is seen that appellant submitted all the relevant facts and details and the evidences of sale/purchase and bank accounts. Assessing Officer has made any enquiry from the share broker M/s. Sajendra Mookim or Kolkata Stock Exchange seeking specific information pertaining to these transactions undertaken by the appellant. Directorate of Income Tax (System) had uploaded the information pertaining to the trading run by the penny stocks and that the information pertaining to the assessee was available in the ITD module under the EPS facility in a tab labeled Penny Stocks . AO perused the information available on the system and utilized the same in finalizing the assessment. Therefore, AO on the basis of the detailed and comprehensive enquiries made by Investigation Wing, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese facts, AO still made the addition. The AO has only quoted facts pertaining to various completely unrelated persons whose statements were recorded and on the basis of unfounded presumption, addition was made in the hands of the appellant. It is seen from records that name of the appellant is neither quoted by any of the beneficiaries who surrendered the income nor any material is found at any place where investigation was done by Kolkata, Investigation Wing, in which the name of the appellant, broker or the scrip was found to be mentioned. SEBI has prima facie not found involvement of the concerned company in any unfair trade practices and has allowed the trading of the same on public portal. Therefore, because of that fact the same script has been purchased and sold by many investors through various brokers across the country, leading to some bogus transaction, or the promoters of the Scrip company were in collusion for providing certain sham transactions, such transactions of the appellant cannot be held to be a sham transaction only by mere assumption unless any specific material is found against the appellant. AO made addition only on the basis of general information t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was held in Tribunal decision rendered in the case of Smt. Manju Bansal V Income Tax Officer - 1(1), Lucknow in ITA No. 70/LKW/2011 dated 12/03/2015 after relying upon the case of Mohit Agarwal vs. ACIT in I.T.A. No. 171/Lkw/2008 dated 28/11/2008 that when overwhelming documentary evidences are produced by the assessee, the burden shifts on the AO to explain away them. Only the investigation report cannot be relied upon by AO for making any addition. Hew the above mentioned evidences could be ignored? The AO has to give cogent reasons for rejecting them. These are important documents, some of them arising under the provisions of the Companies Act. No third party investigation was done by AO to prove that the evidence brought on record by appellant is forged. The brokers were never confronted with the evidences produced by the assessee. The apparent has to be treated as real unless proved otherwise. Long ago Hon'ble Supreme Court has laid this law while rendering the celebrated decision in the case CIT Vs. Daulat Ram Rawatmal [1964] 53 ITR 574 (SC). Lastly the Long Term capital Gain claimed by the assessee as exempt income u/s. 10(38) of tie Income Tax Act, 1961 was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the plea and we find that the CIT(Appeals) while deleting the addition has held as follows. 2.5. I have considered the facts of the case, assessment record, submission of AR and position of law, in my opinion, appellant deserves to succeed. At the time of making assessment, the AO on the basis that the appellant could not furnish any evidence to prove that the shares were actually transferred from his name and there was no actual sale of shares and the money allegedly received as sale consideration of shares was in fact appellant's own money which was routed through the help of some unscrupulous person and hence made an addition of ₹ 19,51,038/- as income from undisclosed and unexplained sources u/s. 68 of 7.7. Act. On the other hand during the course of assessment as well as appellate proceedings the AR's of the appellant filed written submission along with documents and vehemently opposed the AO's action inviting attention to the facts of the case, the main points which have not been properly considered by the AO or have been totally ignored which are as under:- i) The shares were applied and allotted directly from the company Focus Industrial Resourc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansaction. The decision reported in 13 SOT 61 in the case of ITO vs. Smt. Kusum Lata wherein the Hon'ble Bench held that the share transaction was not bogus. The Hon'ble Bench confirmed the order of CIT(A) who held that assessee has filed the requisite evidence to establish the genuineness of share transaction and merely because share broker could not report the transaction to Stock Exchange, it could not be said that the share transaction was bogus. The Hon'ble Bench further held that the burden of proving a transaction is a/ways on the person asserting it to be bogus and this burden has to be strictly discharged by adducing legal evidences of a character which would either directly prove the fact of bogusness or establish circumstances unerringly and reasonably raising an inference to that effect. The Bench held that there was no evidence except speculation that this profit was not from the sale of shares. The AO had failed to establish his case and to discharge the requisite burden cast on him. xi) In this case as rightly pointed out by the AR's, there is no evidence on record as referred in assessment order, to prove that the proceeds received against sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT 37 ITR 271. (2.7) Thus in view of above facts and circumstances of the case it is well established by the appellant regarding genuineness of share transaction and he has sufficiently discharged the onus cast upon him. AO's action is not well founded in position of law in adding entire amount of sale of shares as income from undisclosed and unexplained sources u/s. 68 of I.T. Act. Therefore, I am deleting the entire amount of ₹ 19,51,038/-. However, the AO is directed to assess the long term capital gains of ₹ 17,54,237/- as shown by the appellant. The Tribunal has upheld the finding. It had held that the assess was in possession of the shares in question and had sold the said shares in course of ordinary transaction of sale of shares at stock exchange and if the broker did not file any evidence since the same were seized by the Revenue Department, there is no fault with the assesses. From the aforesaid facts it is dear that the shares in question were allotted to the assessee in the public issue which were held in Demat a/c of Stock Holding Corporation of India Ltd. The shares were transferred to Abhipra Capital Ltd,. The sale consideration was re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract note dated 10.11.2003, sale bill dated 17.11.2003 of purchases and sale of shares by Contract Note dated 26.2.2005? 3. Whether the Tribunal rightly disallowed ₹ 11,77,000/- received from the sale of shares and being not liable to be exempted as long term capital gains, when the share were purchased in November, 2003 and sold in February, 2005 as per contract notes of purchase and sales of shares? Whether the Tribunal was justified in holding that purchase of 1,000 shares by assessee was unexplained, ignoring the fact that purchase of such shares was not doubted by the A.O.? However, in view of the finding recorded by the assessing officer for addition to be made under section 68 of the Act without allowing any deduction in respect of cost of acquisition of the shares, it necessarily flows from such finding that the assessing officer did not believe the case of the assessee of purchase of the shares in question. Accordingly, the additional question does not arise in this case. The sole addition, which is subject matter of dispute in the instant appeal, relates to addition of ₹ 11,77,000/-/which according to the assessee was long term capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mat account of the assessee, for the first time in November 2004. It cannot be denied that the fact of purchase transaction being recorded late in the Demat passbook raises a doubt as to its genuineness and it is also true that this evidence is relevant to the decision on the point in issue in this case, yet, this was not the only evidence relevant to the issue. There exists other evidence, adduced by the assessee in this case, in shape of contract notes; bank transactions pertaining to payment for purchase and sale of share and other material relied upon by the CIT(Appeals). Such other relevant evidence ought to have been a/so looked at in entirety and thereafter conclusion as to genuineness of the transaction should have been drawn. It may have been open to the Tribunal to declare any piece of evidence relied by the CIT(Appeals) to be irrelevant or unreliable. That having not been done, it could not have side-stepped the evidence and/or the reasoning of the CIT(Appeals), especially, because the order of the Tribunal is one of reversal. A three Judge bench of the Supreme Court, in Udhavdas Kewslram Vs. CIT (1967) 66 ITR 462 (SC) held: The Tribunal was undoubte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Assessing Officer do not find mention in the assessment order and only such points are taken note of on which the assessee's explanations are rejected and additions/disallowances are made. Applying the principles laid down by the observations of the Punjab and Haryana High Court, I find that if the entire material pertaining to these transactions like DMAT statements, Contract Notes of purchase and sale of shares and source of funds to acquire the shares that had been placed by the assessee before the AO at the time when the assessment was being made and the AO, applied his mind to that material and did not express anything contrary about the evidence placed by appellant then in such circumstances it shows that the evidence placed by the appellant has been accepted by AO. AO then cannot go ahead and make an addition on part evidence available with him where there is no mention of the transactions done by appellant or by her broker. AO was specifically asked to file any specific material against the appellant vide this office letter No. CIT(A)-I/KNP/Penny Stock/201718/11 dated 04.03.2018 asking following information: The above noted appeal against the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 443/Kol/2017 for AY 2013-14 held in exactly similar facts and circumstances that no addition can be made in the hands of appellant. Hon'ble Allahabad High Court in the case of K.N. Agarwal Vs. CIT (1991) 189 ITR 769 (All), relevant extract of the said judgment are given hereunder:- Indeed, the orders of the Tribunal and the High Court are binding upon the Assessing Officer and since he acts in a quasi-judicial capacity, the discipline of such functioning demands that he should follow the decision of the Tribunal or the High Court, as the case may be. He cannot ignore it merely on the ground that the Tribunal's order is the subject matter of revision in the High Court or that the High Court's decision is under appeal before the Supreme Court. Permitting him to take such a view would introduce judicial indiscipline, which is not called for even in such cases. It would lead to a chaotic situation. True it is that the dilemma of the Revenue is also real and substantial in such cases, but such a situation cannot be provided for by judicial interpretation by courts, but only by an appropriate agency. Therefore respectfully, following the law laid down by j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not taken this exercise and has not brought on record any adverse evidence to prove that the capital gain disclosed by appellant is not genuine. Accordingly, the addition of ₹ 5,41,223/- is deleted. Appeal is partly allowed. 9. The above findings recorded by ld. CIT(A) are quite exhaustive whereby he has discussed the basis on which the Assessing Officer had made the additions. While allowing relief to the assessee, the ld. CIT(A) has specifically held that there is no adverse comment in the form of general and specific statement by the Pr. Officer of stock exchange or by the company whose shares were involved in these transactions and he held that Assessing Officer only quoted facts pertaining to various completely unrelated persons whose statement were recorded and on the basis of unfounded presumptions. He further held that the name of the appellants were neither quoted by any of such persons nor any material relating to the assessee was found at any place where investigation was done by the investigation Wing. The ld. CIT(A) relying on various orders of Lucknow Benches and other Benches has allowed relief to the assessee by placing reliance on the evidences fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d tax and accordingly framed the assessment order under Section 143(3) of the Act at the total income of ₹ 1,09,12,060/-, making an addition of ₹ 96,75,939/- under Section 68 read with 115BBE of the Act on account of bogus LTCG on sale of penny stocks of a company named M/s. Gold Line International Finvest Limited. The appeal before the CIT(A) was dismissed and additions were confirmed with the observation that the Respondent had introduced unaccounted money into the books without paying taxes. Further appeal filed by the Respondent before the learned ITAT was allowed in her favour, and the additions were deleted vide the Impugned Order, relevant portion whereof reads as under: 21. A perusal of the assessment order clearly shows that the Assessing officer was carried away by the report of the Investigation Wing Kolkata. It can be seen that the entire assessment has been framed by the Assessing Officer without conducting any enquiry from the relevant parties or independent source or evidence but has merely relied upon the statements recorded by the Investigation Wing as well as information received from the Investigation Wing. It is apparent from the Assessment Ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the brokers were suspended by the SEBI nor there anything on record to show that the two brokers of the appellants mentioned here in above were involved in the alleged scam. The Assessing Officer has not even considered examining the brokers of the appellants. It is a matter of the fact that SEBI looks into irregular movements in share prices on range and warn investor against any such unusual increase in shares prices. No such warnings were issued by the SEBI. 26. There is no dispute that the statements which were relied by the Assessing Officer were not recorded by the Assessing Officer in the assessment proceedings but they were preexisting statements recorded by the Investigation Wing and the same cannot be the sole basis of assessment without conducting proper enquiry and examination during the assessment proceedings itself. In our humble opinion, neither the Assessing Officer conducted any enquiry nor has brought any clinching evidences to disprove the evidences produced by the assessee. The report of Investigation Wing is much later than the dates of purchase/sale of shares and the order of the SEBI is also much later than the date of transactions transacted and nowhe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue to establish that the investment made in such companies was an accommodation entry. Thus the Court should take the aspect of human probabilities into consideration that no prudent investor would invest in penny scrips. Considering the fact that the financials of these companies do not support the gains made by these companies in the stock exchange, as well as the fact that despite the notices issued by the AO, there was no evidence forthcoming to sustain the credibility of these companies, he argues that it can be safely concluded that the investments made by the present Respondents were not genuine. He submits that the AO made sufficient independent enquiry and analysis to test the veracity of the claims of the Respondent and after objective examination of the facts and documents, the conclusion arrived at by the AO in respect of the transaction in question, ought not to have been interfered with. In support of his submission, Mr. Hossain relies upon the judgment of this Court in Suman Poddar v. ITO, [2020] 423 ITR 480 (Delhi), and of the Supreme Court in Sumati Dayal v. CIT, (1995) Supp. (2) SCC 453. 9. Mr. Hossain further argues that the learned ITAT has erred in holdin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited, 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 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 13. The learned ITAT, being the last fact-finding authority, on the basis of the evidence brought on record, has rightly come to the conclusion that the lower tax authorities are not able to sustain the addition without any cogent material on record. We thus find no perversity in the Impugned Order. 14. In this view of the matter, no question of law, much less a substantial question of law arises for our consideration. 15. Accordingly, the present appeals are dismissed. 11. The above judgment of Hon'ble Delhi High Court has been followed by ITAT, Lucknow Benches in the following case laws wherein under similar facts and circumstances the ITAT has decided the issue in favour of the assessees. i) Shri Achal Gupta Vs. ITO 3(1) Kanpur in ITA No. 501/Lkw/2019 dated 16-12-2020 for the A.Y. 2015-16 decided by the Hon'ble ITAT Lucknow Bench 'A' Lucknow. ii) Smt. Sabreen vs. ITO - 3(4), Kanpur in ITA No. 498/Lkw/2019 vide order dated 20/07/2021. iii) Shri Surendra Kumar Gupta vs. Dy. CIT in I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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