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TMI Blog2024 (4) TMI 1027X X X X Extracts X X X X X X X X Extracts X X X X ..... ).The aforesaid addition was deleted in quantum appeal. The High Court held that since the very foundation for imposition of penalty had become non-existent, penalty would not survive. Also in case of LRs Management. [ 2023 (5) TMI 351 - ITAT RAJKOT] it was held that Where quantum addition made by AO was deleted by Tribunal, there remained no basis for levy of penalty under Section 271(1)(c) of the Act. Thus once the quantum proceedings itself have been decided in favour of the assessee, there is no scope of levy of penalty under Section 271(1)(c) of the Act, we are here by dismissing the appeal filed by the Department. - Shri Siddhartha Nautiyal, Judicial Member And Shri Makarand Vasant Mahadeokar, Accountant Member For the Appellant : Shri Sudhendu Das, CIT DR For the Respondent : Shri Tushar P Hemani, Sr. Advocate Shri Parimalsinh B. Parmar, A.R. ORDER PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the Revenue against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short Ld. CIT(A) ), passed for Assessment Year 2014-15 deleting the levy of penalty under Section 271(1)(c) of the Act. 2. The Revenue has taken the following grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely on the basis of suspicious circumstances or presumption unless some cogent material evidence brought on record. In this regard, we draw support and guidance from the judgment of Hon ble Rajasthan High Court in the case of CIT vs. Sumitra Devi reported49taxmann.com 37 wherein it was held as under: 7. True it is that several suspicious circumstances were indicated by the AO but then, the findings as ultimately recorded by him had been based more on presumptions rather than on cogent proof. As found concurrently by the CIT(A) and the Tribunal, the AO had failed to show that the material documents placed on record by the assessee like broker's note, contract note, relevant extract of cash book, copies of share certificate, de-mat statement etc. were false, fabricated or fictitious. The appellate authorities have rightly observed that the facts as noticed by the AO, like the notice under s, 133(6) to the company having been returned unserved, delayed payment to the brokers, and dematerialisation of shares just before the sale would lead to suspicion and call for detailed examination and verification but then, for these facts alone, the transaction could not be rejected altogethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under section 10(38), in a preplanned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income-tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent's unaccounted money, but he did not dig deeper. Notices issued under sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Hon ble Delhi High Court (Supra),we hold that in absence of any specific finding against the assessee in the investigation wing report, the assessee cannot be held to be guilty or linked to the wrong acts of the persons investigated as far as long-term capital gain earned on sale of share of M/s Comfort Fincap Ltd is concern. 12.13 We also note that this Tribunal in the case of Parasben Kasturchand Kochar Mehta Lodha Co. Chartered Accountant vs. ITO bearing ITA No. 549/Ahd/2008 involving identical facts and circumstances has held as under: 7. We have gone through the relevant record and impugned order and heard both the parties. Assessee submitted that he is a customer of ICICI Bank and having demat account of ICICI Securities Ltd. and he has purchased shares through ICICI Securities Ltd. and money has been paid through banking channel. Copies of bank statement and Demat account have been submitted before the lower authorities. 8. Ld. A.R. also drawn our attention towards the statement of Edelweiss Broking Ltd. through the said company shares were sold and also shown us copy of the Contract Note and all these details were furnished before the lower authorities. The assessee has e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransactions of purchase and sale took place on the portal through registered brokers under the control of SEBI. M/s SAL has not been striked off as a shell company. Trading of shares of M/s SAL was permitted by SEBI. Primefacie, all the conditions provided u/s 10(38) of the Act seems to have been fulfilled by the assessee. 17. As regards the second issue raised is that assessee was not provided opportunity of cross examination, we observe that Ld. A.O has referred to some investigation carried out by the Department in the case of some brokers and other assessee(s) located at Kolkata and other places and there is a reference of the company M/s SAL. However it is not disputed that name of the assessee is not appearing in such report nor any evidence was found by the Ld. A.O which could indicate that assessee was also a part or connected to the alleged racket of providing accommodation entry of bogus LTCG nor any proof of any agreement between the assessee and other persons mentioned in the report has been found. So the basis of addition is primarily on the statement of third party as well as the information gathered from other sources. Perusal of the records shows that the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of which the assessee was adversely affected . 24. We accordingly in view of our above discussions, facts and circumstances of the case and respectfully following judicial precedents and the decisions of Co-ordinate benches squarely applicable on the instant cases, are of the considered view that in the case of the assessee(s) namely Shivnarayan Sharma, Sapan Shaw, Prayank Jain, Govind Harinarayan Agrawal (HUF) and Manish Govind Agrawal (HUF), the claim of exempt income u/s 10(38)of the Act of Long Term Capital Gain from sale of equity shares deserves to be allowed and no addition is called for the estimated brokerage expenses made in the hands of the assessee(s). Thus finding of Ld. CIT(A) is set aside and the Grounds raised by the assessee(s) in ITA Nos.889/Ind/2018, 474/Ind/2019, 206/Ind/2019, 60/Ind/2019,61/Ind/2019 and 987/Ind/2019 are allowed. 12.15 It is also important to note that the addition was made by the AO based on the statements/information received from the 3rd party, but no opportunity was afforded by the revenue for the cross-examination which is against the principles of natural justice as held by the Hon ble Apex Court in the case of Andaman Timber Industries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yablue Textile Pvt. Ltd. 50,000.00 Share of Priya holding Pvt. Ltd. 22,200.00 Shares of Adamji Building Premises 250.00 Shares of Priya Blue Industries Pvt. Ltd. 3,61,53,684.00 ULIP 15,000.00 Grand Total 12.18 Before parting it is also important to highlight that the learned DR at time of hearing vehemently relied upon the recent judgment of Hon ble Calcutta High Court in the case of PCIT vs. Swati Bajaj others reported in [2022] 446 ITR 56. However, we find that in the identical facts and circumstances Hon ble Delhi High Court and Bombay High Court (supra) has decided the issue in favour of the assessee. Moreover, the Hon ble Gujarat High Court in the case of PCIT Vs. Champalal Gopiram Agarwal in tax appeal No. 366 of 2023, involving identical facts and circumstances has dismissed the appeal of the Revenue at the admission stage, meaning thereby the order of the Tribunal was upheld. Thus, in view of the above discussion, we hold that the capital gain earned by the assessee cannot be held bogus merely based on some report/ finding unearthed in case of third party/parties in the given facts and circumstances unless cogent material is brought against particular assessee on record. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Gujarat High Court held that where revenue authorities passed a penalty order on basis of addition made to assessee's income under Section 69A, in view of fact that said addition had been deleted by Tribunal in quantum appeal, penalty order so passed by authorities below was also liable to be quashed. In the case of CIT (Exemptions) v. Ahmedabad Urban Development Authority 103 taxmann.com 82 (SC) , the Hon ble Supreme Court held that where AO having rejected assessee claim for exemption under Sections 11 and 12, passed a penalty order under Section 271(1)(c) for raising a false claim, in view of fact that assessee succeeded in quantum appeal and, thus, High Court set aside penalty order as well, SLP filed against said decision was to be dismissed. In the case of Roy Durlabhji 211 ITR 470 (Rajasthan) , the High Court held that where in quantum appeal, additions had already been deleted, no penalty under Section 271(1)(c) could be levied. In the case of CIT v. Shishpal 126 Taxman 5 (Rajasthan) , addition was made as unexplained investment under Section 69 and penalty was imposed under Section 271(1)(c).The aforesaid addition was deleted in quantum appeal. The High Court held ..... X X X X Extracts X X X X X X X X Extracts X X X X
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