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TMI Blog2023 (5) TMI 728X X X X Extracts X X X X X X X X Extracts X X X X ..... s case, SEBI has given a clear-cut answer that assessee and other who are named as exit providers are not at all involved any kind of price rigging of shares of this company. This was available with lower authorities When all these details have been produced by the assessee before the learned assessing officer, the assessee has discharged his initial onus under section 68 of the act. After that it is the duty of the learned assessing officer to throw back the onus back on assessee by making a concrete enquiry with respect to the evidence submitted by the assessee and if any adverse information is collected by him, to confront the assessee with that information. The case before us is that AO has relied upon the report of the investigation wing from Calcutta to make the addition. AO was also of the view that securities and board of India has carried out any enquiry against the assessee and those exist providers holding that they are involved in the price rigging of the shares of the company. Thus, the regulator who monitors, whether there is any irregularity committed by the assessee in transaction of shares has exonerated and categorically held that assessee is not at all i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. a) The Ld. CIT (A) has erred in confirming the addition made by the Ld. AO for Rs. 5,18,95.425/- w/s 68 of the Income Tax Act, 1961 being the amount of Long Term Capital Gains on Sale of Shares of Pine Animation Limited without considering the facts and circumstances of the case. The same be considered and the additions be deleted. b) The Ld. CIT (A) has erred in treating the transaction for sale of shares of Pine Animation Limited, a listed entity as bogus and proceeded to continue to confirm the addition made by the Ld. AO without considering the facts and circumstances of the case. The same be considered and the additions be deleted. c) The CIT(A) has erred in confirming the addition made for Rs. 5.18.95,425/- of the Ld. AO u/s 68 of the Income Tax Act, 1961 without appreciating that the assessee had duly proved the Identity and Nature of the Source of the credit of sale proceeds were explained and proved. The additions made are merely on assumptions, which are not sustainable in law. d) The CIT (A) has failed to appreciate that the Ld. AO has made the additions by merely relying on external data, information from BSE, third party statements etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on oath of Mr. Anuj Agarwal wherein nowhere has the AO mentioned that the assessee's name was referred by Mr. Anuj Agarwal. The Ld. AO has made the addition based on the general statement without considering the facts and circumstances of the case. The same be considered and the additions be deleted. m) The Ld. AO had not granted an opportunity to the assessee for cross-examination of evidences in his possession. The same be considered and the additions be deleted. n) The Ld. AO has failed to prove with evidence that any unaccounted money was received by the operators from the assessee. The same be considered and the additions be deleted. o) The Ld. AO as well as the Ld. CIT (A) has failed to consider that the assessee had filed complete set of documents for preferential allotment of share and trading in shares for past many years. The same be considered and the additions be deleted. p) The Ld. AO as well as the Ld. CIT (A) has failed to consider the fact that the assessee till date holds 12, 00,000 equity shares of the alleged penny stock Company, Pine Animation Ltd. Had the assessee been the intentional beneficiary to the said price rigging he would hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) The Ld. CIT (A) has erred in treating the transaction for sale of shares of Pine Animation Limited, a listed entity as bogus and proceeded to continue to confirm the addition made by the Ld. AO without considering the facts and circumstances of the case. The same be considered and the additions be deleted. C) The CIT(A) has erred in confirming the addition made for Rs. 2,10,02,400/- of the Ld. AO u/s 68 of the Income Tax Act, 1961 without appreciating that the assessee had duly proved the Identity and Nature of the Source of the credit of sale proceeds were explained and proved. The additions made are merely on assumptions, which are not sustainable in law. d) The CIT (A) has failed to appreciate that the Ld. AO has made the additions by merely relying on external data, information from BSE, third party statements etc. without proving assessee's involvement in the price rigging. The Order passed on such basis is bad in law and needs to be quashed. e) The Ld. CIT (A) has failed to appreciate that nowhere do the information available prove the assessee as a beneficiary of the alleged bogus entry. f) The Ld. AO as well as the Ld. CIT(A) has failed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortunity to the assessee for cross-examination of evidences in his possession. The same be considered and the additions be deleted. n) The Ld. AO has failed to prove with evidence that any unaccounted money was received by the operators from the assessee. The same be considered and the additions be deleted. o) The Ld. AO as well as the Ld. CIT (A) has failed to consider that the assessee had filed complete set of documents for preferential allotment of share and trading in shares for past many years. The same be considered and the additions be deleted. p) The Ld. AO as well as the Ld. CIT (A) has failed to consider the fact that the assessee till date holds 12.00.000 equity shares of the alleged penny stock Company, Pine Animation Ltd. Had the assessee been the intentional beneficiary to the said price rigging he would have sold all the shares held by him. The fact that the assessee has sold only part shares retaining a major lot till date justifies that he is not a party/beneficiary to price rigging. The same be considered and the additions be deleted. q) The Ld CIT(A) has failed to consider the fact that even if the buyers are doubtful or of suspicious char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pening was provided to the assessee. The objections were filed on 6 December 2017, which was disposed on 8 December 2017. 07. Assessee has sold 555,000 shares of Pine Animation Limited of purchase value of Rs.5, 55,000/- and earned a Long Term Capital Gain therein of Rs.5, 11, 39,061/-, which was claimed as exempt. The learned Assessing Officer asked the assessee to prove the genuineness of the above transactions. 08. Assessee submitted the purchase bill of shares, bank account statements, and Demat Account and broker notes for the sale of shares. It was contended that the shares were sold on a stock exchange through the broker and payments have been received also through the stock exchange by the broker and in turn paid to the assessee. 09. The learned Assessing Officer noted that there is a specific investigation in several companies listed on stock exchange, the prices of such companies were rigged, and the transactions are not genuine. The learned Assessing Officer thereafter noted that the shares in which the assessee has traded was originally having a name of M/s Four K Animation Limited , later on merged with Pine Animation Limited, registered with Registrar of Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und that 23 parties has purchased 555,000/- shares of the assessee. Accordingly, notices under Section 133(6) of the Act were issued to all of them. The income returned by these companies shows that they have very low income and did not have any credentials to buy those shares. Accordingly, the learned Assessing Officer issued show cause notice under Section 15 December 2017, which was replied by the assessee on 29 December 2017. 011. The assessee submitted the copy of the bank passbook, sale bill of shares, purchase bill of shares, copies of the ledger of the broker, detail of application and copy of letter from the company for allotment of shares and copy of the order issued by Securities Exchange Board of India (SEBI) dated 19 September 2017. Assessee also asked cross-examination of parties whose statement is mentioned by the learned Assessing Officer. The assessee also categorically stated that none of the parties whose statements are recorded by the learned Assessing Officer or investigation wing Kolkata, has not at all named the assessee. The assessee also submitted that in the order of the SEBI, there is no allegation against the assessee or the broker through whom the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h March, 2016 at Rs.14,27,610/- was assessed at Rs.2,30,06083/-. 015. Assessee also preferred the appeal against the assessment order for A.Y. 2015-16 before the learned CIT (A). 016. Therefore, as both the appeals i.e. appeal for A.Y. 2014-15 and 2015-16 were pending before the learned CIT (A) on similar ground; he passed a common order on 30 October 2019, dismissing the appeal of the assessee for both the years. Therefore, against the order of the learned CIT (A) for both the years, assessee is in appeal before us. 017. The learned Authorized Representative submitted that i. A company called M/s Four K Animation Limited has received a Pre-approval from Bombay Stock Exchange Limited for the issue of 1, 50, 00,000 equity shares of face value of Rs.10 each on preferential basis on 23rd November, 2011. Assessee has participated in the preferential offer for two lac shares at Rs. 10each. Accordingly, the assessee deposited purchase consideration through banking channel in the bank account of M/s Four K Animation Limited, maintained with Allahabad Bank, Bombay. Assessee made payment through RTGS as per page no.24 of the Paper Book ii. On 4 February 2013, assessee was gra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom 22nd May, 2013 to 30th January, 2015 as there was a huge rise in the trading volume and price of the script. He submitted that there was an interim order passed by the SEBI in case of assessee also being one of the preferential allottees listed at Serial no.71. He further referred to paragraph no.9 of that order, wherein the SEBI had categorically held that its investigation did not find any adverse evidence against them to show any connection or nexus with Pine Animation Limited or its promoter s directors or promoter related entities or any role in price manipulation, volume manipulation in the script of above company. xiv. SEBI by that order has categorically held that violation of Provisions of SEBI Act, securities contract regulation Act as well as PFUTP regulations were not observed in the case of the assessee company. He specifically referred to page no.7 of that order wherein assessee name is mentioned at serial no.12 out of 114 entities. xv. Para no.10 of that SEBI order has categorically held that there is no adverse finding against the assessee. xvi. That when SEBI, who is the regulatory authority to find out any manipulation in the price of shares of any sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned and CIT A has merely followed the order of the AO and confirmed the addition. 019. He relied upon several judicial precedents to support that the addition cannot be made. He relied on the decision of honourable Bombay High Court in case of CIT versus Shyam S Pawar 54 taxmann.com 108, honourable Delhi High Court in case of principal Commissioner of income tax versus Krishna Devi and others ITA 125/2020 126 taxmann.com 80. 020. The learned departmental representative vehemently supported the orders of the lower authorities and submitted that the honourable Bombay High Court in case of Sanjay Bimalchand Jain 89 taxmann.com 196 and honourable Calcutta High Court in case of principal Commissioner of income tax versus Swati Bajaj 139 taxmann.com 352 as well as the honourable Delhi High Court in case of suman Poddar versus ITO 112 taxmann.com 329 squarely covered the issue in favour of the assessee. 021. The learned authorized representative submitted that in the decision of honourable Delhi High Court in case of Krishna Devi considered the various proposition lay down by the decision of the honourable Delhi High Court in case of Suman Poddar. Further, the decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income tax Department Kolkata where in the companies are found to be operated by the accommodation entry providers by providing bogus long term capital gain in listed securities by price manipulations. That report is exhaustive, available in public domain, covers several companies and discuss modus operandi of the conversion of unaccounted income by coloring it with purported genuine transaction. 027. Addition with respect to provision of section 68 are required to be tested with respect to peculiar facts and circumstances of the person providing the credit and his financial standing and whether the transaction between the parties are not tainted. No judicial precedents can be said to give a straitjacket answer to these questions. The reason being these are facts specific issues. Applying one decision to the different facts will lead to violation that judicial precedent. In the case of Government of Karnataka v. Gowramma (2007), the Hon. Supreme Court held that reliance on the decision without looking into the factual background of the case before it is clearly impermissible. A decision is a precedent on its own facts. Each case presents its own features. It is not everything s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee and if any adverse information is collected by him, to confront the assessee with that information. 031. The case before us is that the learned assessing officer has relied upon the report of the investigation wing from Calcutta to make the addition. The learned assessing officer was also of the view that securities and board of India has carried out any enquiry against the assessee and those exist providers holding that they are involved in the price rigging of the shares of the company. However, we state the facts in case of transactions of the assessee as well as by others in this company. i. SEBI carried out investigation in price rigging of shares of Pine Animation limited for the trading period May 22, 2013 to 30, January 2015. ii. It investigated Preferential Allotment made by it of Rs 24.7 Crores to 92 Allottees during 2012-13. Assessee is one of them. iii. Investigation was with respect to violation of SEBI Act 1992, SCRA 1956 and SEBI Prohibition of Fraudulent and Unfair Trade Practices Relating to - Securities Market 0 Regulation 2003. iv. Ad Interim ex parte order was passed on 8/5/2015 restraining 178 entities from accessing securities Market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apply to the preferential allottees who were allotted the shares at rate of Rs. 10/- per share but these preferential allottes have been let off. Therefore, the standard of weak fundamentals cannot be applied in the case of the appellants especially when on the same footing the preferential allottees have been let off. We are of the opinion that it is business prudence to purchase at a lesser price and sell it at a higher price when the market is up thereby earning profits. Making profits in our opinion cannot be termed illegal or manipulative or fraudulent or violative of the PFUTP Regulations. 36. The finding that the investments made by the appellants cannot be termed as a regular investment made in the ordinary course of business or trading as the Company had weak fundamentals and financials is based on surmises and conjectures and cannot be a ground to charge the appellants. The finding that the appellants had purchased the shares pursuant to a pre-decided scheme with an assurance of a profitable exit at a manipulated price is purely based on surmises and conjectures without any corroborative evidence. This finding cannot be based on a preponderance of probabilities espec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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