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TMI Blog2024 (3) TMI 1155X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that there was a finding of fact that the purchase sale of shares occured on the platform of stock exchang, upon payment of STT and were supported by documentary ecidences and therefore there was no perversity in the order of this Tribunal. The Court further noted that there was no allegation against the assessee that he had participated in price rigging in the market and therefore dismissed the appeal of the Revenue. We concur with the view of the CIT(A) and uphold the impugned order of the CIT(A) deleting the addition - we direct the AO to allow the LTCG/exemption claimed by assessee u/s 10(38) on sale of shares of M/s Shaleen Textile Ltd. Decided against revenue. X X X X Extracts X X X X X X X X Extracts X X X X ..... in the form of bogus LTCG through rigging of the BSE and with active connivance of various entry operators who have confirmed that shares of M/s. Shaleen Textile have been used for providing bogus accommodation entry in the form of LTCG/STCG. And such modus-operandi has been confirmed by various exit providers who had stated that they have purchased shares of M/s. Shaleen Textile to provide bogus accommodation entry of LTCG/STCG. Thus AO was of the opinion that no prudent businessman would trade or invest in such penny stock. And thereafter, he recorded the statement of the assessee on 16.12.2016 and noted that he is an investor in stock market since last five (5) years and according to him, he could not explain why he invested in shares of M/s. Shaleen Textile especially when the financials of the company was weak. Further, according to the AO, assessee had no idea of the financials of this company. Therefore, he was of the view that the assessee failed to discharge the burden casted upon him to prove the LTCG claim. And taking note that the SEBI has suspended the sale of scrip of M/s. Shaleen Textile vide order dated 1st Jan, 2015, he disallowed the LTCG claim and added the enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... • Various share brokers have confirmed the fact that the shares of Shree Shaleen Textiles Limited have been used for providing entry of bogus LTCG/STCG • Various Exit Providers have confirmed that they have purchased the shares of Shree Shaleen Textiles Limited to provide entry of bogus LTCG/STCG. 6.3 Ld AO has relied on the mode of acquisition of the shares, unusual rise in the share prices, analysis of the transactions, financial analysis of penny stock companies and the enquires made on the operators of the bogus / paper entities wherein they have admitted that they are not doing any real business. In this regard, the appellant has submitted that the shares have been sold by the appellant on the floor of the stock exchange. As a result, it is not possible for the appellant to know the counter party purchasing the shares of the appellant. 6.4 In respect of Assessing Officer's reference to a list of the persons who have purchased the shares of the said Scrip sold by the appellant, the appellant has stated that the AO has never provided the appellant with the statements of the operators of the bogus/paper entities wherein they have stated that the appellant had t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of sale of shares g. Copy of demat account statement and ledger of broker 6.10 It is stated by the appellant that while concluding the assessment; the Ld. Assessing Officer has not disproved or pointed out any defect in the evidence submitted by the Appellant. 6.11 All the transactions are carried out through Banking Channels only and such Bank accounts are the regular Bank accounts of the Appellant. The Bank Statements highlighting the script-wise transaction are submitted before me in the Paperbook. 7.0 The appellant has made a detailed submission in support of its grounds of appeal which have been considered. It has been judicially held that if the appellant fails to offer an explanation of the source of particular receipt/credit appearing in the books/account or if the explanation given by the assessee is found to be not satisfactory by the A.O and if during the enquiry, he is satisfied that the entries are not genuine, then he has every right to add the said sum represented by such credit entry as income of the assessee. Therefore, prima facie onus is always on the assessee to prove the genuineness of such credit appearing in its books. In land mark cases like Kale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant might have incurred unaccounted expenditure on account of payment of commission to the entry operators and accommodation entry providers alleging them to have assisted the appellant to claim bogus Short Term Capital Gain. As a result, the Learned Assessing Officer added an amount of Rs. 4,61,600/- being 2% of the total sale consideration to the total income of the appellant u/s 69C of the Act. 11.2 During the appellant proceedings the appellant has referred to his explanation as provided for in the earlier grounds and stated that since there no accommodation entry is involved, there comes no question of commission upon the same. 11.3 I have considered the written submission made by the appellant and the assessment order of the AO. This ground of appeal is consequential to the main ground of the appeal regarding addition u/s 68 of the Act in respect of exempt LTCG claim. As ground no.2 has been decided in favour of the appellant, this ground is also decided in favour of the appellant. Accordingly, ground no. 3 of the appeal is allowed. 12.0 In the result, the appeal of the appellant is allowed." 4. The aforesaid action of Ld CIT(A) is assailed before us by revenue. We ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the burden to prove the transaction that it fulfills the eligibility to claim LTCG/exemption u/s 10(38) of the Act of Rs. 2,05,52,685/- on sale of shares of M/s. Shaleen Textile Ltd. We further note that the AO has primarily placed reliance on the report given by the Investigation wing of the Income tax department, Kolkatta in order to arrive at the conclusion that the LTCG claim made by the assessee is bogus in nature. We note that the investigation report prepared by Investigation wing, Kolkatta is a generalized report with regard to the modus operandi adopted in manipulation of prices of certain shares and generation of bogus capital gains. We find that the AO has placed reliance on the said report without bringing any material on record to show that the transactions entered by the assessee were found to be a part of racket manipulating share transactions in the stock exchange i.e., it was not proved that the assessee/or his broker has carried out the transactions of purchase and sale of shares in connivance with the person/entities which were involved in the alleged manipulation/rigging of prices of shares. The Ld A.R also brought to our notice that the regulator of stock mark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nothing turns on it. Further, it is noted that the AO relied on statements of brokers namely, Pravin Aggarwal (Director - Gateway Financial Services Ltd), Deepak Patwari (Controller of Destiny Securities Ltd) etc. Further, it is noted that they had not named assessee or his broker to be part of the modus operandi to convert assessee's black money to white. Moreover, these statements could not have been used against the assessee because it has not been tested on the touchstone of cross-examination as held by the Hon'ble Supreme Court in the case of Andaman Timber Industries Vs. CCE reported in (2015) 281 CTR 241 (SC) and in the case of CIT v Odeon Builders Pvt. Ltd. (2019) 418 ITR 315. Therefore, nothing turns on these statements of brokers. Thus, we find that no infirmity in the order passed by Ld. CIT(A) deleting the addition of Rs. 2,30,79,975/- + Rs. 4,61,600/- by passing the impugned order. 8. We also note that the issue of denying exemption u/s 10(38) of the Act in respect of shares of Shri Shaleen Textile Ltd came up before this Tribunal in several cases, and Tribunal allowed assessee's LTCG claim and exemption u/s 10(38) of the Act. Few cases are (i) Mrs Pratibha S. Mhatre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bers S003 and R121 of Sagar Trade Pvt Ltd. and Rockey Marketing Pvt. Ltd. respectively. Out of these two, only Rockey Marketing Pvt.Ltd. is listed in the appraisal report and it is stated to be involved in the modus-operandi. It is on this material that he holds that the transactions in sale and purchase of shares are doubtful and not genuine. In relation to Assessee's role in all this, all that the Commissioner observed is that the Assessee transacted through brokers at Calcutta, which itself raises doubt about the genuineness of the transactions and the financial result and performance of the Company was not such as would justify the increase in the share prices. Therefore, he reached the conclusion that certain operators and brokers devised the scheme to convert the unaccounted money of the Assessee to the accounted income and the present Assessee utilized the scheme. 6. It is in that regard that we find that Mr.Gopal's contentions are well founded. The Tribunal concluded that there was something more which was required, which would connect the present Assessee to the transactions and which are attributed to the Promoters/Directors of the two companies. The Tribunal re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observing as under: "10. We heard both sides in detail and perused rival contentions in the light of the records of the case and the paper book filed by the assessee. In the return of income filed by the assessee for the year under appeal, the purchase of flat at Colaba for a consideration of Rs. 2,06,72,904 was reflected. The assessee's contribution in the purchase of the flat was @ 70 per cent for which the investment amounted to Rs. 1,44,71,033. The source of investment was, among other things, the sale proceeds of shares of Rs. 1,41,08,484. This amount has been questioned by the revenue authorities. 10.1 The assessee has purchased the shares of four companies viz., Allan Industrial Gases Ltd., Mobile Telecom, Rashee Agrotech and Centil Agrotech, during the previous years relevant to the assessment years 1999-2000 and 2000-01. The books of account maintained by the assessee for both the years clearly reflected the purchase of those shares. The shares are reflected in the balance sheets filed by the assessee along with the returns of income for the assessment years 1999-2000 and 2000-01. Therefore, it is seen that as a prima facie evidence, the purchases of shares have been c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... culars of share transactions entered into by the assessee were not available in their records, is out of place. There is no evidential value for such reliance placed by the assessing authority. The assessee had made it very clear that the transactions were not concluded on the floor of the Stock Exchange. The matter being so, there is no probative value for the negative replies solicited by the assessing authority from the respective Stock Exchanges. We are of the considered view that the materials collected by the assessing authority from the Stock Exchanges are not valid to dispel or disbelieve the contentions of the assessee. 10.5 The next set of evidences relied on by the assessing authority are the statements obtained from various parties. When certain persons like Radha Ashok and Sandeep D. Shah made negative statements against the assessee, persons like Satish Mandovara and Mangesh Chokshi had given positive statements in support of the contention of the assessee. But, the assessing authority sought to pick and choose the statements given by various parties. While accepting and rejecting such statements given by the parties, the Assessing Officer has made a mistake of acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion that the transactions were bogus. But, whatever it may be, an assessment has to be completed on the basis of records and materials available before the assessing authority. Personal knowledge and excitement on events, should not lead the Assessing Officer to a state of affairs where salient evidences are over-looked. In the present case, howsoever unbelievable it might be, every transaction of the assessee has been accounted, documented and supported. Even the evidences collected from the concerned parties have been ultimately turned in favour of the assessee. Therefore, it is, very difficult to brush aside the contentions of the assessee that he had purchased shares and he had sold shares and ultimately he had purchased a flat utilizing the sale proceeds of those shares. 10.8 For a moment, even if all the above evidences are ignored, one cannot overlook the pressure of the evidence coming out of the survey carried out by the department in the business premises of the assessee. There was a survey carried out by the department in the business premises of the assessee. In the course of survey, contract notes for sale of shares, copies of bills thereof, photocopies of share cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... radeep Kumar Daga that the transactions with the Haldiram group were bogus has been demonstrated to be wrong by producing documentary evidence to the effect that the shares sold by the assessees were in consonance with the market price. On a perusal of those documentary evidence, the Tribunal has arrived at a finding of fact that the transactions were genuine. Nothing is brought to our notice that the findings recorded by the Tribunal are contrary to the documentary evidence on record. 14. The Tribunal has further recorded a finding of fact that the cash credits in the bank accounts of some of the buyers of shares cannot be linked to the assessees. Moreover, in the light of the documentary evidence adduced to show that the shares purchased and sold by the assessees were in conformity with the market price, the Tribunal recorded a finding of fact that the cash credits in the buyers' bank accounts cannot be attributed to the assessees. No fault can be found with the above finding recorded by the Tribunal. 15. Reliance placed by the counsel for the Revenue on the decision of the apex court in the case of Sumati Dayal [1995] 214 ITR 801 is wholly misplaced. In that case, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h banking channels and even Security Transaction Tax ("STT") has also been paid. The Assessing Officer also has not criticized the documentation involving the sale and purchase of shares. The Tribunal has also come to a finding that there is no allegation against assessee that it has participated in any price rigging in the market on the shares of RFL. 3. Therefore we find nothing perverse in the order of the Tribunal. 4. Mr. Walve placed reliance on a judgment of the Apex Court in Principal Commissioner of Income-tax (Central)-1 vs. NRA Iron & Steel (P.) Ltd.1 but that does not help the revenue in as much as the facts in that case were entirely different. 5. In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law." 15. For the various reasons discussed in the foregoing and following the judgments cited above, more particularly of the binding jurisdictional High Court in the cases of Shyam Pawar (supra), Ziauddin A Siddique ..... X X X X Extracts X X X X X X X X Extracts X X X X
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