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TMI Blog2022 (2) TMI 1201X X X X Extracts X X X X X X X X Extracts X X X X ..... Long Term Capital Gain on account of sale of shares of M/s Esteem Bio Organic Food Processing Ltd. and consequently the exemption claimed u/s 10(38) of the Act. The grounds raised by the assessee are accordingly allowed. - ITA No1547/DEL/2019 - - - Dated:- 24-2-2022 - Shri R.K. Panda, Accountant Member And Shri N. K. Choudhry, Judicial Member For the Assessee : Sh. V. K. Tulsian, Adv. For the Revenue : Sh. Manu Chourasia, Sr. DR ORDER PER R.K. PANDA, AM, This appeal filed by the assessee is directed against the order dated 30.11.2018 of the learned CIT(A)-19, New Delhi, relating to Assessment Year 2015-16. 2. Facts of the case, in brief, are that the assessee is an individual and derives income as partner in the firm Jindal Aluminum Company, income from capital gains and income from other sources. He filed his return of income 17.03.2016, declaring taxable income of ₹ 3,62,440/- and claimed exempt income ₹ 46,41,079/-. 3. During the course of assessment proceedings, the AO asked the assessee to furnish certain documentary evidences to strengthen his claim of Long Term Capital Gain on account of sale of shares of M/s Ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also shared with SEBI and the SEBI after investigating 11 cases have found the allegation to be correct. The balance cases are still being investigated by SEBI. iii) The TOP 25 groups under each investigation directorate of the country were confronted in course of further investigation. Almost all of them barring a few have accepted having taken the entries for a commission. A sum of crores has been voluntarily surrendered by such assessees. iv) In Kolkata, where this investigation was started some of the beneficiaries who had taken entries of nearly ₹ 40 crores have voluntarily surrendered it for taxation without any further enquiry. v) Several assessees have filed revised return since the enquiry and have taken back their claim of exemption. 3.2. He further noted that the Securities and Exchange Board of India (SEBI) has in the recent past, passed some orders on the issue of manipulation of share market for providing accommodation entry of bogus LTCG. SEBI considering the inputs from Income Tax Department as well as from its own surveillance system and that of the stock exchanges has taken appropriate action in case of the suspect scripts. These ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NA 2011-12 NA NA NA NA NA 2012-13 14.92 6.43 3.94 2.55 2.51 2013-14 14.92 3.20 1.44 1.84 1.23 2014-15 24.86 3.40 2.32 1.23 0.07 3.6. The AO held that even though the net worth of the company and the business activity of the company is negligible the share prices have been artificially rigged by the group of operators including Shri Anil Agarwal of Mumbai to accommodate beneficiaries seeking long term capital gain and losses. According to him, no prudent businessman and particularly trader or investor in stock will invest in such penny scrip which is defunct and inoperative. Further, this company does not have any fixed assets. In spite of the above available public information i.e. a company with weak financi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not having healthy financial position. And despite not being a dividend paying company and suffering huge losses its shares were quoted at around ₹ 400/- per share. 3.8. Rejecting the various explanation given by the assessee and relying upon various decisions, the AO made addition of ₹ 48,33,944/- to the total income of the assessee by observing as under:- 13. The detailed analysis of evidences available on record and the case laws quoted above provide enough support against the arguments of the assessee that his share transactions are genuine. Thus, in view of the elaborate discussion made above, I hereby hold the amount of ₹ 46,93,198/- shows as sale of value of Esteem Bio shares during the financial year 2014-15 (AY 2015-16) stand disallowed u/s 69A and is added back to the total income. Further, it is typical that these transactions are carried out on a commission basis. From various statements, it is observed that commission @3% has been charged for providing arranged capital gain. Since assessee has received sale consideration of ₹ 46,93,198/-, an amount of ₹ 1,40,796/- (being 3% of ₹ 46,93,198/-) is being added u/s 69C as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rb of section 69C on the suo-motto observations without establishing the full prove case or pointing out the entire chains of the transactions to justify bogus transactions. 7. Whether the Ld. CIT (A) was justified to uphold the Ld. AO order who has wrongly arrive at a suo-motto conclusion solely based on various citations, by completely side tracking the evidence on record, which have nothing to do in the present matter which are totally contrary to law and a such the order suffers from patient illegality. 8. Whether the Ld. CIT(A) was justified to uphold the Ld. AO order on chargeability of interest in a mechanical way as well as initiation of penalty proceedings u/s 271(1)(c) of the Act. 6. The ld. counsel for the assessee submitted that the assessee, during the course of assessment proceedings, has filed following details before the AO as well as the Ld. CIT(A):- Sl. No. Particulars Page No. 1 Copy of Letter dt.05.12.17 with account copy Filed on Account of 5000 share purchase of M/s Esteem Bio. dt. 15/06/2012 with bank account with share certificate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Luthra Ors. in ITA No.6480/Del/2017 for AY 2014-15. 6.3. He submitted that despite opportunities granted by the Tribunal to substantiate as to in what manner investigations carried out by the Directorate of Investigations, Kolkata or the SEBI investigations have a link with the instant transactions entered into by the assessee, the Revenue has miserably failed till today to substantiate the same. 6.4. He submitted that the AO in the instant case, treated the genuine transactions of the sale of the shares of Esteem Bio Organic Food Processing Ltd. as ungenuine and thereby denying the benefit of Long Term Capital Gain claimed as exempt u/s 10(38) of the Act. He submitted that when the assessee has furnished all the requisite details and substantiated its claim of Long Term Capital Gain which is exempt u/s 10(38) of the Act, the ld. CIT(A) should not have rejected the claim of the assessee. He accordingly submitted that the order of the Ld. CIT(A) be setaside and grounds raised by the assessee should be allowed. 7. The Ld. DR, on the other hand, heavily relied on the order of the AO and the Ld. CIT(A). He submitted that the AO has clearly brought on record the modus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olkata and SEBI as mentioned by the AO at page 2 and 3 of the assessment order. We find when the case was fixed for hearing on 09.09.2021, the Bench vide order-sheet entry dated 09.09.2021 has passed the following order:- BENCH-A ITA NO. 1547/Del/2019 (AY 2015 -16) AMIT JINDAL VS. ITO WARD 59(3), NEW DELHI 09-09-2021 Present for the Assessee : Mr. V.K. Tulsian, Adv. Present for the Department: Mr. V.K. Kataria, Sr. DR. It is the say of the Ld. Representative that the assessment is based on the Report of the Directorate of Investigation, Kolkata with regard to the alleged racket of generating bogus entries of Long Term Capital Gains. The point made by the Ld. Representative is that the investigations do not link the assessee or his broker so far as the instant transactions are concerned. It is also his say that the decision dated 06.08.2019 of the Delhi Tribunal in the matter of Smt. Krishna Devi Ors. vs. ITO in ITA No. 1070/Del/2019 (AY 2015-16) Others covers the case of the assessee in as much as the facts discussed therein show that the dealings in the case before them were of similar scrip i.e. Esteem Bio Organic Food Proces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the date of SEBI Report. 9.1. We find, identical issue had come before the Coordinate Bench of the Tribunal in the case of Smt. Karunga Garg Ors. Vs ITO (supra) where the Tribunal while deciding the issue has allowed the claim of Long Term Capital Gain on sale of shares of M/s Esteem Bio Organic Food Processing Ltd. and consequently the claim of exemption u/s 10(38) of the Act. The relevant observation of the order of the Tribunal from para 19 onwards reads as under:- 19. We have carefully considered the orders of the authorities below and the relevant documentary evidences brought on record in the form of paper book in the light of Rule 18 (6) of ITAT Rules. Whether or not a person has discharged the burden cast upon him by the provisions of section 68 of the IT Act is always a question of fact. All that has to be seen by us is whether the appellant has discharged the initial onus cast upon him by the provisions of section 68 of the IT Act. 20. 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 accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O transferee in the scrip of M/s. Esteem Bio Organic Food Processing Ltd is given and in the said list also the names of the appellants do not find any place. At page 63 of the SEBI order-trading by trading in M/s. Esteem Bio Organic Food Processing Ltd - a further list of 25 persons is mentioned and once again the names of the appellants do not find place in this list also. 25. As mentioned elsewhere the brokers of the assessee namely ISG Securities Limited and SMC Global Securities Limited are stationed at New Delhi and their names also do not find place in the list mentioned here in above in the SEBI order. There is nothing on record to show that 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 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Udit Kalra Vs. ITO in ITA No.220/2019. We have carefully perused the order of the Hon ble High Court and on going through the said judgment we find that no question of law was formulated by the Hon ble High Court of Delhi in the said case and there is only dismissal of appeal in limine as the Hon ble High Court found that the issue involved is a question of fact. 29. As mentioned elsewhere the shares of M/s. Esteem Bio Organic Food Processing Ltd were suspended from trading in the stock exchange but that was from 29.06.2015 which is date of the order of the SEBI. The shares of two companies were purchased by the assessee in the month of February 2013 and November, 2012 which were sold in the month of February/ March 2014 and these transactions took place much before the report of the Investigation Wing and also before the order of the SEBI. 30. Considering the vortex of evidences, we are of the considered view that the assessee has successfully discharged the onus cast upon him by provisions of section 68 of the Act as mentioned elsewhere, such discharge of onus is purely a question of fact and therefore the judicial decisions relied upon by the DR would do no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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