9911796707
TMI Blog2022 (11) TMI 523X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year 2015-2016 and was not in existence when the AO passed the assessment order on 27.11.2017 and thereby the order setting aside the assessment order is bad in law and needs to be set-aside. 4. That the order of the PI CIT Chandigarh setting aside the order of assessment which has been passed consequent upon the reassessment proceedings initiated by the AO to verify the genuineness of the claim of the appellant with regard to the long term capital gain from the sale of shares of CCL International is bad in law and needs to be set aside. 5. That the PL CIT Chandigarh has erred in law in setting aside the order passed by the AO wherein issue pertaining to purchase and sale of the shares in question has been thoroughly examined and thrashed after due application of mind by the AO is bad in law and needs to be set-aside. 6. That the appellant craves leave to add, amend, delete any of the grounds of appeal at any time before the appeal is finally heard and decided." 2. The hearing in the present case took place on 4.07.2022 and 05.07.2022 and concluded on 07.07.2022. 3. However, before addressing the grievance of the assessee, it is first necessary to address the delay of on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Sharma appearing on behalf of the assessee submitted that the AO has passed a reasoned order after enquiring in detail on all these issues. Referring to the record, it was submitted that the AO was conscious of the scam in penny stock company cases and passed the order after making all possible enquiries from all sources on the issues and none of these evidences in the impugned order are shown to be incorrect. The case has been set aside by the ld. PCIT purely on suspicions relying on a case which has no applicability to the facts of the present case. The evidence on record considered by the AO, it was submitted, remains unrebutted. The ld. AR invited attention to the enquiries made by the AO in the course of hearing at the assessment stage. It was his submission that the AO in the order passed has extracted the reasons for resorting to proceedings u/s. 147. On a reading of the reasons extracted, it was submitted that the AO was well and fully aware that Directorate of Investigation had unearthed a large scale scam of bogus Long Term Capital Gain in penny stocks sales/purchase. The assessee's case was consequently looked into in detail so as to examine the claim of Long Term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee's mother Smt. Harjeet Kaur and assessee's father Shri Kanwaljeet Singh Toor who were also assessed at Delhi. The assessee's AO, it was submitted, enquired into the issue from the Assessing Officer at Delhi in the context of the findings of the DCIT (Investigation). The details of the purchase and sale rates, it was submitted, were all seen by the AO. This fact is evident from the office note available in the record of the Department itself. 8.3. It was clarified that 'NSE' inadvertently used by him while arguing and also recorded in the submissions etc. is an inadvertent mistake as it is not the case of the assessee that any transaction took place on the NSE. The shares, it was submitted, were traded only on the 'BSE' and the assessee whenever by mistake has used NSE means to say that it was traded on the Stock Exchange which is BSE. Thus, the inadvertent user of NSE may be understood to mean BSE the relevant Stock Exchange and not NSE. This mistake, it was submitted, has occurred many times where instead of 'BSE' reference is made to 'NSE'. He agreed that the said share was never available for sale or purchase or any transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awareness of the seriousness of the issue is also extracted hereunder for completeness: In this case information has been received from the Directorate of Income Tax (Investigation) Kolkata that large scale tax evasion in the form of bogus long term capital gain claimed by various beneficiaries through the use of penny stocks being sold/purchases to facilitate these transaction. It has come to notice that Sh. Trivikram Singh Toor has taken benefit of bogus long term capital gain by using scripts of penny stock name CCL International during F.Y. 2012-13 i.e. A.Y. 2013-14. The assessee has sold 750000 shares of CCL international Ltd. for an amount of Rs. 9,90,89,257/-. This was a sham transaction in which unaccounted cash was routed back via layers of broker and entry operators. The assessee declared income form house property at Rs. 13,24,753/- and income from other sources at Rs. 12,03,000/-. The assessee filed a revised return declaring income of Rs. 1,47,00,760/-. In the revised return income from business has been shown at Rs. 1,22,82,998/-. The transaction regarding sale of share of CCL International Ltd., (Sale amount of Rs. 99,089,257/-) has not been disclosed in thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... providing accommodation entries to M/s. CCL International Ltd. through his following five concerns:- i. Sinjan Infrastructure Ltd. ii. Sinjan Food and Beverages Ltd. iii. Sinjan Equities Pvt. Ltd. iv. Sinjan Developers Pvt. Ltd. v. Sinjan Realtors Pvt. Ltd. He however denied knowing the assessee directly or indirectly. Name of all such buyers of the shares of M/s. CCL International Ltd. who have been taken out from the ITD Systems. List is enclosed. None of the buyers of the shares of CCL International sold by the assessee is matching with the list of concerns mentioned by Sh. Devesh Upadhay through which he provided accommodation entries to CCL International. Independent inquiries and submissions of the assessee have further revealed that M/s. CCL International is a reputed company which is regularly traded on BSE since last so many years and thus it does not fall under the category of "Penny Stock". Copy of summary of if financial, obtained internet, for last few years taken out from Internet are placed on record. It has further been observed that the assessee sold his shares of CCL International at an average price of Rs. 131 per share during the period of June 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he term "Penny Stock" is used for those stocks where the value of stock is extremely low so that its prices can be manipulated by artificially raising its price for a short period. These companies are paper/shell Companies with no business. By no stretch of imagination M/s. CCL International Ltd. can be clubbed in this category. The above comments have also been forwarded to the DDIT (Inv.) vide letter dated 28.03.2016. Since no reply has been received till 31.03.2016 hence this order is being passed without drawing any adverse inference. However, if any adverse information is received in future then appropriate remedial measures may be taken. The option of taking remedial measures is kept open as no "clean chit" has been given to the assessee in the assessment order. It has also been noted that the DDIT (Inv.), Patiala, has also recommended Search or Survey operation in case of M/s. CCL International Ltd. vide his letter dated 22.12.2015. No such action has been taken by the Investigation Wing of New Delhi till date. If any such action is taken in future and evidences of stock manipulation are unearthed then remedial measures will be taken in the case of assessee as well. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the office note which was obtained by the assessee under RTI it was submitted that the AO after carrying out due enquiries and looking at all the documents and evidences available on record passed the order conscious of the fact that there was a n allegation of the Directorate of Investigation, Calcutta that there was a scam of bogus Long Term Capital Gain indulged into by some parties in the sale of share of M/s. CCL International Ltd. 8.7. It was submitted that not only the reasons recorded in the assessment order bring out this fact but the detailed office note further clarifies that the AO of the assessee followed up with the AO at Delhi wherein similar claims in regard to the father and mother of the present assessee i.e. Shri Kanwaljeet Singh Toor and Smt. Harjeet Kaur Toor for the very same assessment year on the very same allegation were being looked into. The AO at Delhi, DCIT, Central Circle-27, Delhi, it was submitted, also appended on office note to the cases of Shri Kanwaljeet Singh Toor and Smt. Harjeet Kaur Toor, the parents of the assessee. This Office Note had been considered and also been extracted in the office note of the present case wherein the allegatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SLP against the said order of the Delhi High Court had been filed by any person or any agencies like SEBI or Income Tax Department. Accordingly, it was concluded that the issue had attained finality. It was emphasized that it has been noted that no evidence of the manipulation of stock of M/s. CCL International Ltd. was available on record and even on the date of the office note, stock was being traded at Rs. 96/- per share despite the fact that the entire stock market was in a bearish phase. Considering the price for the specific period, it was concluded that there is no stock manipulation and there was no information of any enquiry conducted by SEBI regarding manipulation of stock and infact M/s. CCL International Ltd. had declared a dividend during the period and assessee had disclosed receipt of Rs. 36000/-. Thus, on the basis of these facts considering the fact that the shares were also through BSE after paying ST and in the absence of any manipulation it was concluded that the evidence suggests that it is not a penny stock company. It was submitted that it had been noticed that there was no sharp peaks or vitality in daily price. None of these facts, it was argued are shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up by the AO in the office note as under: "The assessee has made investment of Rs. 30 Lac on 07.03.2011 in purchase of shares of JVtys AAR Infrastructure. The assessee has been allotted Rs. 3 lac shares of M/s. AAR Infrastructure. Subsequently AAR Infrastructure was amalgamated with M/s. CCL International Pvt. Ltd. on 09.02.2012 with the order of the Hon'ble Delhi High Court that order of Delhi High Court has not been objected by any of the competent authority. Thus the order of the Hon'ble Delhi High Court of amalgamation has attained finality. If, subsequently any adverse information is received in the case of trading of share of M/s. CCL International then the case of the assessee can be reopened accordingly. This case has been decided after discussion with the Addl. CIT, Range-6, Mohali from time to time." 9. In the said background, attention was invited to the impugned order specific para 2 wherein the Show Cause Notice issued to the assessee has been extracted. For ready reference, same is reproduced hereunder: "From the perusal of the records, it is seen that Sh. Trivikram Singh Toor had sold 75000 shares of CCL International Ltd. for an amount of Rs. 9,90,89,2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITAT in the case of Shri Anip Rastogi and others dated 08.01.2019 was not available to the AO and accordingly, since it was not part of the record of the AO, the exercise of Revisionary power u/s. 263 by the ld. PCIT in the circumstances was contrary to law as while exercising the powers u/s. 263, the ld. PCIT is to consider the record as available to the AO. 9.2. Addressing the aforesaid Show Cause Notice, it was submitted that the reasons set out in (i) and (ii) of the same were conjectures and surmises the facts more or less stood considered in the assessment order and these observations do not detract from the fact that allegation of penny stock already stood investigated, enquired into and considered in detail by the AO before the passing of the order. Thus, it was argued that this is another attempt of the department to re-look at the very same facts and is an attempt without any basis to come to a view contrary to the view taken by the AO. Such an exercise, it was argued is not permissible u/s. 263 and is strongly opposed. 9.3. Inviting attention to (iii) of the aforesaid Show Cause Notice, it was submitted that therein the origin of the basis of the order passed by the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal Gain on the sale of 750000 shares of M/s. CCL International Ltd. were all addressed. Specific emphasis was laid on the detailed replies extracted in the order in para 5 sub-para (i) (ii) and (iii) reproduced as under: 5. That the assessee during their assessment proceedings vide his reply dated 20.09.2017 submitted as under:- That the perusal of the record would reveal that the above noted assessee paid an amount of Rs. 30,00,000/- vide Cheque No. 281886 dated 07.03.2011 towards the purchase of 3,00,000 shares of company named and styled as AAR Infrastructure. The amount has been withdrawn from the Account No. 00561000197723 with the HDFC Bank. A copy of the bank account has already been furnished. 2. That the perusal of the record would reveal that the company named and styled as M/s. AAR Infrastructure was amalgamated with M/s. CCL International Pvt. Ltd. vide an order dated 09.02.2012 of the Hon'ble Delhi High Court. A copy of the said order passed by the High Court is being enclosed for your perusal and record. The perusal of the said order would reveal that as a result of amalgamation the above noted assessee became entitle to 7,50,000 shares of the said amalgama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the account for the period from -1.03.2011 to 31.03.2013 is being enclosed for your perusal and record. This contains the details with regard to the each sale is again being appended for your perusal and record along with the computation chart. The perusal of this would further reveal that sale bills for the sale of shares have duly been issued and STT has been charged in the said bills. It is also evident from the perusal of the said account that the shares which has been sold were sold at rates which were there on the BSE. I am also enclosing herewith following documents for your perusal/record and verification:- (i) Copy of allotment letter dated 07.03.2011 issued by AAR Infrastructure Ltd. showing the total number of shares at 3,00,000 and having total value at Rs. 30,00,000/-. The certificate also shows that the Client ID No. 10910718 is held by the above noted assessee. The perusal of this would a/so reveal that the allotment of the shares has been made on the basis of approval accorded by the board of directors in its meeting held on 01.03.2011. The particulars with regard to the payment made by the assessee and the receipt thereof by the company duly stamped are also m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s well as the copy of Saving Bank Account of the assessee with the HDFC Bank as per details in para-4 above is being enclosed for your perusal and record. Regarding the purchase and sales of shares during the period prior to the year under consideration it is submitted that no purchases or sales of shares were undertaken by the above noted assessee. 9.5. Specific attention was also invited to the arguments on facts as canvassed before the ld. PCIT extracted at page 8 and 9. Heavy reliance was placed on the arguments and evidences relied upon before the ld. PCIT and the AO to show that the Revisionary powers were wrongly exercised. For the sake of completeness, these are reproduced hereunder: "I am also enclosing herewith a copy of letter dated 24.03.2012 with regard to the issue of 7,50,000 equity shares of M/s. CCL International Ltd. under the amalgamation scheme.. The perusal of this would further reveal that the 250 shares of CCL International Ltd. has been issued in lieu of 100 shares of AAR Infrastructure Ltd. The value of each share of CCL International Ltd. was determined at Rs. 21- per share and thereby the cost of each share would worked out to Rs. 21- per share of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty from where the rental income has been received by the assessee situated in Ambala the said property was purchased by the above noted assessee through a sale deed dated 22.08.2007. A copy of the sale deed is being enclosed for your perusal and record. The requisite details of the income as shown by the above noted assessee are appended in the computation chart. The difference in the original return filed and the return filed in response to the notice u/s. 148 is due to non availability of the TDS and other details. With regard to the income of Rs. 12282998/- the said income is from speculation business as shown in the computation chart filed by the above noted assessee. In view of the nature of the business of the no books of accounts are required to be maintained by the above noted assessee. 2. That requisite details are being enclosed for your perusal and record. 3. That the assessee at the relevant period was unmarried and was residing with his parents and their family. 4. That a copy of the d-mat account maintained by the above noted assessee is being thus there is no de-mate account except his own account. 5. That the copies of the sale-account maintained by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.03.2011 and the proceeds of the said cheque were paid from the SB A/c No. 00561000197723 with the HDFC Bank. A copy of the bank account is being enclosed for your perusal and record. The shares so allotted were existing in the D-MAT account IDL1083 maintained with Master Capital Services by the above noted assessee. A copy of account is also being enclosed for your perusal and record. It is submitted that the said company was amalgamated with another company named and styled as M/s. CCL International as per the orders passed to that effect by the Hon'ble Delhi High Court. A copy of the order is being enclosed for your perusal and record. It is submitted that from the perusal of the D-Mat account maintained by the above noted assessee a copy of which has been filed that the assessee was allotted 750000 shares of M/s. CCL International Ltd. after amalgamation order passed by the Hon'ble Delhi High Court dated 9-02-2012. It is also submitted that as per the record the value of the said share was at Rs. 21- per share. The assessee has sold only 750000 shares during the period from 26.06.2012 to 09.11.2012 vide a sale bills issued by the Master Capital services. The perusal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and entries in the D-mat account of the assessee the copies of which I have already filed during the earlier hearing. I have also filed copies of the sale bills and the copy of the bank account in which the sale proceeds of shares has been transferred. The perusal of the record would also reveal that there is no cash transaction either at the time of purchase or at the time of sale of the shares under consideration. The banking transaction when taken cannot in any manner be termed as penny stocks. It is submitted that the sales of shares has taken place a number of time and at various rates as per the prevailing rates at the NSE. I may also draw you kind attention to the Judgment of the Hon'ble Bombay High Court in the case of CIT Vs Mukesh Ratilal Marolia in appeal No. 456/2007 decided on 7.09.2011 has confirmed the order of the IT AT with regard to the sale transaction of sale and purchase of shares. A copy of the judgment is being enclosed for your perusal and record. It is also to bring to your kind notice that the ITAT Mumbai Bench in the case of Farrah Marker Vs ITO is has been held that long term capital gain on sale of penny stocks cannot be treated as bogus and unexpl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asked to produce the following document/information:- i) Date of opening of DMA T account. ii) Copy of bank account from where shares were purchased. iii) How were the shares purchased, directly or through broker. iv) Order of High Court v) Share transaction entered into by the assessee before this date. vi) Why is the name of the share not appearing in the DMAT account. vii) Copies of invoices for purchase and sale. The case was adjourned for 05/02/2021." 9.9. The reply of the assessee in para 4 from page 28 to 30 again explaining the very same things was heavily relied upon. Referring to page 30 it was submitted that after going through the very same information, the ld. PCIT at page 39 para 7 records the fact that assessee purchased 300000 shares of M/s. AAR Infrastructure by direct placement. The Directors of the company are named. The ld. PCIT further observe in para 8 that M/s. AAR Infrastructure got amalgamated with another company M/s. CCL International Ltd. on 19.02.2012 and Ms. Rama Gupta and Shri Akash Gupta were Directors of amalgamated company also and were noticed to be common in M/s. AAR Infrastructure and M/s. CCL International Ltd. On these facts, no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclusion in para 22 that there was failure of the AO to make enquiries/verification to arrive at correct and complete facts and to apply the correct law and thus, this makes assessment order erroneous and prejudicial to the interests of the revenue was strongly assailed as being based purely on suspicions. 9.11. It was his vehement submission that the entire exercise is an exercise to relook at the very same information and apart from suspicions, no error has been pointed out by the ld. PCIT to justify the action. Supporting the assessment order, it was his submission that all the invoices supporting the transactions which had been made available to the AO were before the ld. PCIT also. These evidences, it was argued have not been upset by the ld. PCIT. The basis of the charts tabulated by her in the impugned order was questioned by the ld. AR. It was submitted that these are not from the BSE official site and what is the source of those charts, it was submitted, has been left unaddressed. These, it was submitted, were not confronted to the assessee and is another attempt to arouse suspicions with no basis. 10. Inviting attention to the Paper Book filed on behalf of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. 10.3. Attention was invited to the query raised at Sr. No. 5 which required the assessee to provide list of share brokers through whom share trading for this share and during the specific period had been done. Attention was invited to question No. 6 at page 16 to show that the assessee was required to provide the details of all the long term capital gain that has been earned by the assessee and his family members since 01.04.2009. Attention was invited to question No. 7 at page 16 to provide the list of all investments made in different shares over a period of last three years i.e. 31.03.2010, 31.03.2011, 31.03.2012 and 31.01.2013. Attention was invited to question No. 8 at page 16 to give the details of assessee's family members and their profession. Attention was invited to question No. 9 at page 16 to give the details of D-Mat statements for the period 01.04.2009 to 31.03.2013. Attention was invited to question No. 10 at page 16 to give copy of bank statements maintained by the assessee and dependent family members for the year under consideration with narration of each debit/credit entry. Attention was invited to question No. 12 at page 16 to explain source of each cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the orders passed to that effect by the Hon'ble Delhi High Court. A copy of the order is being enclosed for your perusal and record. It is submitted that from the perusal of the D-Mat account maintained by the above noted assessee a copy of which has been filed that the assessee was allotted 750000 shares of M/s. CCL International Ltd. after amalgamation order passed by the Hon'ble Delhi High Court dated 9-02-2012. It is also submitted that as per the record the value of the said share was at Rs. 2/- per share. The assessee has sold only 750000 shares during the period from 26.06.2012 to 09.11.2012 vide a sale bills issued by the Master Capital services. The perusal of the copy of the bills copies of which are being enclosed and the copy of the D-MAT account copies of which are also being filed clearly indicate that the shares has been sold @ applicable/quoted at the NSE of each day of sale. The sale rate was the same as was the rate of the share on the said date as per NSE. The NSE showing the trading of the share of Ms CCL International Ltd. It is also correct that the said sale of the shares has dully been declared and claimed as exempt u/s. 10(38) of the Income tax u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closed the long term capital gain arising from the sale of the said shares of the amalgamated company while filing the return of income for the year under consideration. I am also enclosing herewith a copy of the letter dated 24.03.2012 issued by the CCL International Ltd. the perusal of which would reveal and confirm the facts mentioned above. Thus it is clear that the investment for all intents and purposes was made by the assessee for the purchase of shares on 07.03.2011 which were sold after 26.06.2012 which is beyond the period of 12 months and thus the capital gain arising there from has been correctly returned as long term capital gain as per the provisions of section 48 of the Income Tax Act. This fact is further confirmed by the sales statement of the shares issued by the authorized broker of the shares who has duly charged the STT on the sale of the said shares. Since the sale of shares is subject to STT as such the capital gain arising to the assessee is eligible for exemption u/s. 10(38) of the Income Tax Act. This claim has been made by the assessee by filing the return of income for the year under consideration. The perusal of the copy of account of the assessee with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24.03.2012 there was a converted balance of 750000/- shares of CCL against 3,00,000 shares of M/s. AAR Infrastructure Ltd. Further perusal of the same would reveal that against the said opening balance on the date of amalgamation i.e. 20.06.2012 the said shares were amalgamated and new shares numbering 7,50,000 of the CCL International Ltd. were shown as opening balance in the books of the Master Capital Services Ltd. Further perusal of the same would reveal that the first sale of 36331 shares took place on 26.06.2012 and the last sale of 43726 shares took places on 09.11.2012. A copy of the sale account maintain by M/s. Master Capital Services is being enclosed for your perusal and record. 3. That the perusal of the bank account of the above noted assessee as well as the de-mat account and sale account maintained with the master capital would reveal that all the sale proceeds of the shares has been credited to the bank account of the assessee and no part of it has ever been paid in cash. Thus it is evident that all the sale proceeds of the shares were credited to the account of the assessee with the Master Capital Services Ltd. A copy of which is being enclosed and the payments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration for your perusal and record. I am also enclosing herewith a copy of the financial statement for the year ended on 31.03.2013 issued by the Master Capital Services Ltd. indicating there in the sales of shares and the payment made to the above noted assessee. I am also enclosing herewith copy of details containing the sales of shares during the year under consideration issued by Master Capital Service Ltd. showing the global bills date wise and settlement thereof. I am also enclosing herewith the details of account code No. L-1084 held by the above noted assessee with Master Capital Services Ltd. for the year under consideration. I am also enclosing herewith a copy of the letter of allotment dated 07.03.2011 issued by AAR Infrastructure Ltd. vide which 3,00,000 shares for Rs. 30,00,000/- has been allotted in favour of the above noted assessee having DPID No. IN301143 and Client ID No. 10910718 and certificate No. 048 for your perusal and record. I am also enclosing herewith a copy of letter dated 24.03.2012 with regard to the issue of 7,50,000 equity shares of M/s. CCL International Ltd. under the amalgamation scheme.. The perusal of this would further reveal that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(3) of the Income Tax Act, 1961-Requisition of information u/s. 142(1) of the Income Tax Act, 1961 regarding Trivikram Singh Kaur Toor, H. No. 2040, Phase-10, Mohali for the assessment year 2013-14. PAN-AIJPT2871K Dear Sir, Please refer to the personal discussions held in the above noted case at the time of last hearing held on 29.09.2017. In this connection it is submitted that I have already filed the details of the purchase of the shares along with the details with regard to amalgamation orders of the High Court as well as the conversion of the shares and entries in the D-mat account of the assessee the copies of which I have already filed during the earlier hearing. I have also filed copies of the sale bills and the copy of the bank account in which the sale proceeds of shares has been transferred. The perusal of the record would also reveal that there is no cash transaction either at the time of purchase or at the time of sale of the shares under consideration. The banking transactions when taken cannot in any manner be termed as panney stocks. It is submitted that the sales of shares has taken place a number of time and at various rates as per the prevailing rates at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs Faithfully, Sd/- (M.R. Sharma) Advocate for the assessee. 11.1. Inviting attention to pages 45 to 47, it was submitted, that again the assessee vide letter dated 16.10.2017 had brought to the notice of the AO that prior to this year, the assessee has no income on account of Long Term Capital Gain from sale of shares. It is only in the year under consideration that the assessee and both his parents had made the transaction. The cases of the assessee's father as well as the mother for similar reasons were under scrutiny before the AO on account of similar allegations. Copies of the orders passed by the AO at Delhi were relied upon and placed before the AO of the assessee. It was his submission that the Office Note of the AO at Delhi has been taken into consideration by the AO of the assessee and forms part of the Office Note and has already been referred to. Referring to page 46 of this reply to the AO, it was submitted that the assessee has made a prayer that similar claim of Long Term Capital Gain from sale of shares of the very same company has been returned by the father and the mother of the assessee. Similar reasons and facts and circumstances in the context of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 to 63 on 20.09.2017 wherein after explaining background in para-1, the specific details were made available in para 2, copy of the D-Mat account with the assessee's broker M/s. Master Capital Services showing balance of the shareholding as on 18.11.2017 was shown to the AO. Inviting attention to Paper Book page 64, it was his submission that the assessee's AO called forth information u/s. 133(6) from the assessee's broker M/s. Master Capital Services on 16.10.2017 requiring the broker to confirm as under: "Sir/Madam, Sub:- Calling for information u/s. 133 (6) of I.T. Act in the case of Tiivikram Singh Toor, House No. 1026, Phase-10, Mohali for F.Y. 2012-13 relevant to A.Y. 2013-14, -regarding. Kindly refer to the above subject. The case of above said assessee is pending in scrutiny before the undersigned. In relation to the same you are requested to furnish the following:- A) Copy of the D-Mat Account through which share trading has been done by the assessee. B) Details of sale/purchase share transactions made during the period 01-04-2012 to 31.3.2013 i.e. Copy of ledge: account maintained by you. Please intimate when the D-mat account was opened and initial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lted for not looking into something which was not available to him and the exercise of Revisionary Power on this ground, it was submitted, is not in accordance with law. 11.5. Even otherwise, on merits it was his submission that internal page 3 of the said order would show that the triggering factor was the statement of Shri Jai Kishan Poddar who was the Director of the brokering firm M/s. Consortium Capital Pvt. Ltd. in the case of Shri Anip Rastogi. The assessee had sold shares of M/s. CCL International Ltd. as per page 10 of the order through M/s. Mansukh Securities & Finance Ltd. (internal page 10) Paper Book page 178. The connivance etc. if any of these two Brokers is not relevant as in the facts of the present case it is M/s. Master Capital Services. In the facts of the said case before Single Member Bench, the assessee had the statement of Director Shri Jai Kishan Poddar and entries and transactions with M/s. Mansukh Securities Finance Ltd. remained unaddressed. The statement that he was giving bogus entries was on record. In the facts of the present case, there is no such statement of M/s. Master Capital Services. On the contrary, the Broker has supported by their independ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the fact that in the meantime 'Vivad Se Vishwas Scheme' 2020 was brought into play by the Finance Ministry. The assessee therein chose to settle the issue under the said Scheme and in those circumstances, the M.A. 484/Del/2019 filed immediately after the passing of the order in ITA 3809/Del/2018 was withdrawn subsequently. This fact, it was submitted, is evidenced from Paper Book page 183 & 184 which would show that the M.A. was withdrawn on 18.04.2022. Accordingly, it was his submission that no precedent can be sought to be laid down by the aforesaid decision. On the other hand reliance was placed upon decision dated 18.01.2021 of the ITAT Lucknow Bench in the case of Smt. Sarita Gupta Vs ITO (ITA No. 503/Lkw/2019), copy of which is available at pages 1 to 8 of the case-law Paper Book filed on 04.07.2022. Referring to the said decision, specific attention was invited to the fact that the Division Bench in ITA-503/Lkw/2019 considering the sale of M/s. CCL International Ltd. and noting that the purchase and sale took place from the D-Mat Account, considering the Contract Note of the Broker M/s. Edelwise Financial Advisors and relying upon decision of the ITAT in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... broker, M/s. Indianivesh Securities Pvt. Ltd. (who is the member of BSE and registered with SEBI). The shares were sold in the open market. The appellant has fulfilled all the condition u/s. 10(38) of the Income Tax Act, 1961. The appellant has already filed National Security Depository Limited generated Demat Account and the broker statement relating to the sale of share in our paper book, also relevant demat statement highlighting the shares purchased has already been submitted before the Ld. AO. (b) The appellant has earned long term capital gain through genuine purchase and sale of shares of the listed companies in normal course. There was no default on the part of the appellant. Moreover, the appellant has earned the income strictly following the norms and guidelines of SEBI. If M/s. CCL International has been identified as BSE Listed penny stock, the appellant is not even remotely connected with these companies. She was not at all in a position to influence the purchase and sale prices of their shares. Hardship cannot be brought on the appellant, if default is made by company which is listed in the BSE. c) In support of the genuineness of the transaction the appellant pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and sold them in the year 2012. Coming to the financials, as culled out from the records, the revenue from the operation of M/s. CCL International Ltd. from March, 2010 to March, 2012 was between Rs. 55.25 crore to Rs. 79 crore. Thus, it cannot be held that it was mere a paper entity. From a bare perusal of the history of listing and trading of shares and the quote of Bombay Stock Exchange as quoted in the assessment order, it clearly reflects that as on 06.02.2010, the closing price was Rs. 50 and there was a steady increase and within the period of 4 years the price had reached up to Rs. 609 on 25.11.2014. Nowhere, it has been pointed out that the rise was beyond the cap laid down by the SEBI, because the price of the scrip cannot rise beyond the cap prescribed by the SEBI. If the shares have been purchased and sold from the stock exchange on a quoted price with proper contract number, trade time and after paying STT, then it is very difficult to assume that the sale proceeds received from sale of such shares is bogus, especially when purchase of shares are not in dispute. This inter alia means assessee was in possession of shares which were also dematerialised. To prove that suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the said scrip noticed from 06.02.2010 to 09.12.2016 as noticed in para 9, it has been held that the increase and decrease in the share price was like normal scrip and the said shares were traded in all the years on the Stock Exchange. In the facts of the said case, assessment orders for 2013-14 and 2014-15 assessment year in the case of M/s. CCL International Ltd. passed u/s. 143 had also been filed to show that the said company is genuine and was regularly assessed to tax by the Department. Considering this fact, the addition was deleted. For ready reference, from Paper Book page 17 (internal page 9) of the said order, the relevant finding in para 10 is extracted hereunder: "10. Nowhere the evidences filed by the assessee has been rebutted or any inquiry whatsoever has been conducted by the Assessing Officer or by the ld. CIT(A) to prove that assessee was involved in any clandestine manner for routing its own unaccounted money. If the assessee has filed the entire evidences relating to purchase which is mostly through cheque shown in the earlier years and also filed all the details of sale transactions and the shares which have been routed through Demat account and sold thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the trades being carried out of said scrip, it would show that it is a normal trading activity. On the other hand, attention was invited to Paper Book page 47 to show that on 04.07.2012 the specific share was opening at Rs. 122.50 and the day's high was Rs. 126/-. Day's low was Rs. 120/- and it closed at Rs. 124.20. The number of shares which were traded at the BSE on that specific date was 221236 and the number of trades which took place was 305. The total turnover on the said date for this share on the BSE Stock Exchange was 27538688. Referring to the chart, it was submitted, that every day's transaction would show that the number of trades and the number of shares every day's price of the said scrip on the opening and closing of every day is showing a normal cycle as of every other scrip and there is no aberration. 11.12. Attention was invited to Paper Book page 48 to 51 which would show the movement of the share/scrip from 31.12.2012 to 01.06.2012. The rates noticed by the ld. PCIT from unstated sources possibly could be on account of not factoring the Corporate action. It was submitted that the shares listed on the BSE have been subjected to Corporate actio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed relief on identical facts and circumstances. The trading in this very company has been repeatedly held to be genuine. The impugned order, accordingly, it was his prayer, maybe quashed. 13. The ld. CIT-DR on the other hand inviting attention to the impugned order submitted that in the facts of the present case, the ld. PCIT is fully justified to pass the order. Specific attention was invited to the Office Note of the AO where it was argued the AO himself has been careful to observe that in case in future something contrary or otherwise is found suitable action would be then taken. Referring to the order of the ITAT in the case of Anip Rastogi, it was his submission that the Revenue has noticed this order of the ITAT which has in very clear terms held that the transactions pertaining to M/s. CCL International Ltd. were sham and bogus and pertained to a penny stock company, hence, the order passed by the AO cannot be said to be an order which is valid in the eyes of law as herein admittedly the AO has not carried out sufficient and due enquiries. It was argued that had these enquiries been made, the AO would have seen that the entire documentation trail relied upon by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , from 20.09.2012 it repeatedly remained at Rs. 724/- upto 12.11.2012. Accordingly, the ld. PCIT has given a finding that it was never below Rs. 505.25 during the period 26.06.2012 to 17.12.2012 at internal page 39 of her order. In the said backdrop, an opportunity was given to the assessee, however, no one appeared. 13.3. In paras 7 and 8, it was submitted, the ld. PCIT took note of the fact that in M/s. AAR Infrastructure and in M/s. CCL International Ltd. with which M/s. AAR Infrastructure got amalgamated, Smt. Rama Gupta and Shri Akash Gupta were Directors. The assessee was allotted certain shares in the amalgamated company. The assessee was allotted 750000 shares in M/s. CCL International Ltd. in lieu of 300000 shares held in M/s. AAR Infrastructure which are claimed to have been sold during 26.08.2012 to 09.11.2012 and for a total sale consideration of Rs. 9,90,89,257/-. At page 40 of the impugned order, it was submitted the ld. PCIT took note of the fact that M/s. CCL International Ltd. was amalgamated in May, 1996. Originally it was called Gupta Cements and it was changed to Chirava Cements and again in 2008, the name of Chirava Cements was changed to M/s. CCL Internationa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amalgamation was made effective 01.04.2011 by the order dated 09.02.2011 of Hon'ble Delhi High Court. 3. On 01.04.2011 i.e. before the amalgamation the share of M/s. CCL International was being traded between Rs. 8 and Rs. 9 which was as per the financial position of the company. 4. Suddenly after amalgamation the share price starts rising and reaches peak and then starts declining. The assessee claims to have sold the share in this period. 13.5. Thus, the enquiries made by the AO, it was submitted, were meaningless. In the said backdrop the facts as emerged when the ITAT came to examine the case of Anip Rastogi, it was his submission that the fact that the assessment order was erroneous and prejudicial to the interests of the Revenue is clearly demonstrated. Heavily relying upon this order of the ITAT it was his submission that the impugned order may be upheld. 13.6. Reliance was also placed upon the decision of the Hon'ble Calcutta High Court dated 14.06.2022 in the case of PCIT Calcutta Vs Swati Bajaj & ors (copy filed running into 150 pages). It was submitted, that in the facts of the said case, 90 appeals filed against the common order dated 26.06.2019 by ITAT C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of advice available in the public domain and thus, the allegation that it was a bogus share was sought to be contested wherein the following specific argument has been raised: "27...........Further it is submitted that in one of the trading done by the assessee namely with regard to the shares of the CCL International, a reputed TV Channel, ZEE Bis.com had given a buy call widely published in the media and therefore to state that the transaction was bogus is unsustainable, more so when the assessees stock broker is a public sector undertaking. Further it is submitted that merely because there is escalation of the price of the shares, it cannot be stated that the transaction is bogus.........." 17.1. Accordingly, it was his submission that before the Hon'ble Calcutta High Court, the occasion to consider whether the M/s. CCL International Ltd. was a genuine or a bogus company never arose. Hence, it was his submission that the said decision is not applicable to the assessee. 18. Since the ld. CIT-DR was still on his leg advancing the case of the Revenue wherein reference had been made to the decision of the Calcutta High Court in the case of CIT Vs Swati Bajaj da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts on the basis of which the answer to the said question can be determined. 20.2. The assessee in the facts of the present case has sold the shares of M/s. CCL International Ltd. which were acquired as a result of amalgamation of M/s. CCL International Ltd. with M/s. AAR Infrastructure wherein the assessee had originally invested a certain amount. It is an accepted fact that the Amalgamation Scheme under the aegis of the Hon'ble Delhi High Court has attained finality. The number of shares received by the assessee as a result of the amalgamation is not the issue for determination in the present proceedings. 20.3. The next relevant fact is that these shares of M/s. CCL International Ltd. were sold by the assessee at a specific price. The Assessing Officer as extracted in the order itself, we find was conscious of the report of DDIT (Investigation) Calcutta wherein it was highlighted that bogus Long Term Capital Gain claims etc. were being claimed by various parties. This scam unearthed was noticed to have been facilitated by various persons for the benefit of un-named functionaries wherein money was being laundered in order to evade tax by claiming bogus sales and purchase in p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ......... In the answers given above you have given details of how the shares of M/s. CCL International Ltd. International Ltd. were purchased. From the replies given during assessment proceedings it is seen that the share of CCL International Ltd. were never purchased by you. In fact these were issued to you as per the scheme of amalgamation. This itself shows that the transaction with regard to the shares of CCL International is not genuine." 20.4.2. Similarly at page 43 vide para 13, the ld. PCIT again makes the following observations to discard the evidences available on record: (Page 43 of the impugned order) 13. Coming back to the transaction declared by the assessee, apparently the shares were purchased by the assessee by making payment through banking channel. The company was amalgamated as per the order of Hon'ble Delhi High Court and the assessee got shares in the amalgamated company. These shares were claimed to have been sold through a broker and thus there appears nothing wrong in the transaction. However, if the issue is investigated in proper perspective the following points emerge:- 1. The assessee purchased shares of M/s. AAR Infrastructure Limited thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to for the said well settled legal proposition. In the facts of the present case, the suspicion harbored by the Revenue have not been translated into hard facts. In the facts of the present case, we have seen that all due and relevant enquiries have been made by the AO before the passing of the order u/s. 143(3)/147. The arguments that scamsters have admitted to launder money by indulging in dubious manipulative practices of buying and selling shares in penny stock companies and making bogus Long Term Capital Gain claims is an issue of alarm and concern for all concerned. However, this general alarming information to act as a valid sword to set aside the assessment order has to be first shown to be based on relevant, material and specific facts relatable to the assessee. Subsequent to the passing of the assessment order some relevant specific information should be brought on record by the Revenue. What we have seen is only suspicions. We have seen the Office Note recorded by the AO in the facts of the present case wherein he has cross checked the factum of genuineness of the assessee's claim from another AO at Delhi, Central Circle 27, Jhandewala Extn. The AO of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... text of the question under consideration and treat it to be the complete law declared by the court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before the court. A decision of the Supreme Court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, courts must carefully try to ascertain the true principle laid down by the decision." The Apex Court in very clear terms in Goodyear India v State 188 ITR 402 (SC) has held that "A precedent is an authority only for what it actually decides and not for what may remotely or even logically follow from it; and a decision on a question that has not been argued cannot be treated as a precedent". The Courts have repeatedly castigated the rash approach of a casual and careless reading of the decisions. The Courts have repeatedly held; "To lift a sentence from a judgment, as if it is an independent provision in a statute and emphasise it as declaring the law, will result in unanticipated and unexpected consequences". Infact the Hon'ble Apex Court in CWT v Karan Singh 200 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipulated the transactions cannot be given. The presumption cannot be drawn that merely because one Broker Shri Jai Kishan Poddar and some other somehow were so influential as per their claims hence could manipulate the Stock Exchange qua a specific company then all Brokers were similarly influential. This rash and irresponsible reasoning cannot be accepted. It would be a pre-postreous and impossible argument and cannot be accepted. 20.6. In the facts of the present case, the shares are held in the D-Mat account with the broker L 1083 we have seen the invoices and the supporting documents. They were sold on the Stock Exchange i.e. BSE; on specific dates at the rates as prevalent on the Stock Exchange. The rates, dates and amounts are corroborated from the bank accounts, the Broker's account and the concerned BSE Stock Exchange. No contrary evidence has been filed by the Revenue. The suspicions and conjectures in the absence of any evidence have no relevance whatsoever. The argument that subsequently the share price rose and the fact that the assessee sold it at a lesser price on an earlier date is a suspicion which cannot be taken as an evidence that the share price was rigged. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 10/- and sometimes even going as low as Rs. 1.8. Similarly, Lupin, who is trading at Rs. 660/- was trading at Rs. 2/- about two decades ago. Bajaj Finance today trading at Rs. 7181/- was ranging between Rs. 34/- or so and for almost half a decade in early 2000 and infact going much lower. Titan another well established scrip trading today at Rs. 2622/- in 2000 was trading at Rs. 2.6 and this is talking only of blue chip companies (http://groww.in/blog/penny-stocks-that-became-multibagger-stocks) Thus, the presumption drawn by the Revenue that merely because a particular company at a particular point of time is not doing well and hence, it necessarily is a sham company is an argument without any basis. The fact remains that the said company is still listed on the Stock Exchange is a fact on record. The fact that after the sale, the price of the share rose substantially is not disputed. However, its relevance for deciding whether the company was bogus or the transactions of the assessee were sham is not established. The sale at the Stock Exchange is a fact not in dispute. In the facts of the case before the Hon'ble Kolkata High Court in the case of Swati Bajaj at page 17 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said company has been brought on record by the Revenue. Thus, in the absence of any such fact or evidence, small cap companies/penny stock companies cannot by one stroke be painted to be companies whose share prices necessarily are capable of being manipulated. It would act as a death blow to the entrepreneurial spirit of the country. Every small cap company/penny stock company enters the business environment with the aspiration to become a multi bagger blue chip company someday. In the business world, the discussions on dreams and aspirations of penny stock companies rising up to become mid cap and large cap companies are galore. We find no good basis to entertain the unsubstantiated suspicion that all smallcap companies/penny stock companies are to be treated to be tainted pariahs and hence, the bonafide transactions entered into by the public on this count itself are to be treated as sham manipulated transactions leading to disallowance of their gains or losses. Such an action would amount to laying down the law that transactions only in Blue Chip, Large Cap companies only are to be accepted. The creation of such an environment by a judicial order where a headstart is given o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has pointed out this frequent user. We have seen that the counsel also pointed out that the assessee has also used BSE (Bombay Stock Exchange) at many places. The argument has also been advanced on behalf of the assessee that the user of NSE instead of BSE at times was used by mistake and only to highlight the fact that sale was made through the requisite Stock Exchange. The ld. AR has candidly agreed that this share was never available on the National Stock Exchange and it has only been available on the Bombay Stock Exchange and the assessee has sold its shares on the specific dates on the Bombay Stock Exchange. Our attention has also been invited to the specific Contract Notes to show that the sale of the specific share was through the Bombay Stock Exchange. Accordingly, we find that on account of this repeated bonafide inadvertent repeated mistake of the assessee in referring to the transactions through the Stock Exchange i.e. Bombay Stock Exchange, the relevant facts are not eroded. The assessee inadvertently has used NSE multiple times. This mistake considering the fact that the share trading of the specific company is always on the Bombay Stock Exchange is supported by the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e engaged the services of the said broker have trusted his intelligence/financial acumen of such a broker to make serious investments. To allow all transactions entered into by the parties with such a broker would be a case of punishing the wrong person who has trusted the wily broker in good faith. The tax authorities must seriously examine such rash statements of the brokers and highlight in the order the fact that they have taken the issue to its logical conclusion for the civil and criminal acts of fraud, mismanagement and violations of law qua the clients and infarctions of law qua the Regulatory Authorities. There may be many reasons ranging from unscrupulous transactions contrary to the client or vis-à-vis the Stock Exchange which the broker would be keen to evade and avoid. Hence, by accepting an estimated addition the broker cleverly evades penal consequences of Detection and discovery of client fund mis-management. These statements of surrender by Brokers it cannot be over emphasized should be treated with utmost caution in the interests of the economic activity in the country and as a safeguard to the trusting citizens who engage and pay for the services of these ..... X X X X Extracts X X X X X X X X Extracts X X X X
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