9911796707
TMI Blog2024 (6) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... pital gains on sale of shares as not genuine. AO has not made any enquiry or independent investigation and relied on the statements. The fact remains that the assessee is a regular investor in shares and has submitted the requisite details in respect of purchase and sale of shares and were not disproved. The transaction of sale of shares is through SEBI registered broker of BSE NSE supported with the sale bills cum contract notes subjected to Securities Transaction Tax(STT) and the demat account statement reflecting debits on the sale of shares and the sale proceeds are received through banking channel. A.O has not established that the assessee was involved in the price rigging of the shares and also any enquiry was conducted by the SEBI and BSE. Hon ble Tribunal dealt on the same scrip of share and for the same assessment year and has allowed the appeal. Accordingly, considering all we set aside the order of the CIT(A) and direct the assessing officer to delete the additions u/sec 68 69C of the Act and we allow the grounds of appeal in favour of the assessee. - Shri B R Baskaran, Accountant Member And Shri Pavan Kumar Gadale, Judicial Member For the Appellant : Shri. Nishit Gand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exemption is denied simply on mere hearsay. without even remotely refuting the detailed evidences and documents furnished by the Assessee and without there being any evidence to even remotely support the action of the Ld. AO; and; iv. In any case, the additions are unsustainable in as much as the same are made relying on statements of some third parties without confronting the same to the Appellant, as also without providing an opportunity to cross examine the parties despite specific requests and despite acknowledging that the said requests were made by the Appellant before both the AO as well as the CIT(A); 3.3. In the facts and circumstances of the case and in law the additions made by the Ld. AO deserves to be deleted in toto. 4.1. In the facts and circumstances of the case and in law the Ld. CIT(A) erred in confirming the action of the Ld. AO in making an addition of Rs, 75,391/- being alleged commission on the sale of shares and treating the same as unexplained expenditure u/s 69C of the Act. 4.2. While doing so, the Ld. CIT(A) failed to appreciate that the said addition at 1% of the sale value of shares being Rs, 75,39,089/- is based purely on assumptions and surmises withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alt on the purchase confirmation, sale contract notes, bank statement and demat account, statements in respect of shares purchase and sale, modus operandi, report of the Kolkata Investigation Wing, statements recorded U/sec131 of the Act and has doubted the earning of long term capital gains on shares. Further the AO find that there is no correlation of price rise and the financial/ fundamental statements of the company. Finally the AO was not satisfied with the explanations and material information and observed that the transactions are not genuine and made addition of sale proceeds u/sec 68 of the Act of Rs, 75,39,089/-and estimated commission expenditure u/sec 69C of the Act @ 1% of the sale value which worked out to Rs, 75,391/- and assessed the total income of Rs, 85,58,460/-and passed the order u/sec 143(3) of the Act dated 29.12.2016. 3. Aggrieved by the order, the assessee has filed an appeal before the CIT(A). Whereas the CIT(A) dealt on grounds of appeal, the statement of facts, findings of the AO and submissions in respect of the transaction of sale of shares. But the CIT(A) has confirmed the action of the AO and dismissed the assessee appeal. Aggrieved by the CIT(A)orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has sold the shares of M/s SRK Industries Ltd during the F.Y 2013-14 in the specific period from 26.06.2013 to 05.09.2013. The assessee has substantiated the submissions with copy of the broker note, global delivery report, financial statements of the assessee ledger account issued by broker Bonanza portfolio Ltd, copy of Demat statement issued by NSDL, copy of bank statement reflecting net payments received from the broker tallying with sale value of shares of the assessee referred at page 58 to 59 of the paper book. 6. The Ld.AR contentions are that the assessee has filed the documentary evidence to justify the genuineness of the purchases, sales and the long term capital gains as the assessee has sold the shares on the recognized stock exchange where the STT has been paid in respect of listed shares and the shares are held for more 12 months. The Ld.AR demonstrated the sale cum contract notes, computation of long term capital gains, ledger account of stock broker at page 58 to 64 of the paper book. The Ld.AR relied on the Global report of the share transactions and demat account statement. Further the Ld.AR relied on the material information and submissions made before the CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. The CIT[A] has observed that the A.O. himself has stated that SEBI had conducted independent enquiry in the case of the said broker and in the scrip of RFL through whom respondent had made the said transaction and it was conclusively proved that it was the said broker who had inflated the price of the said scrip in RFL. The CIT[A] also did not find anything wrong in respondent doing only one transaction with the said broker in the scrip of RFL. The CIT[A] came to the conclusion that respondent brought 3000 shares of RFL, on the floor of Kolkata Stock Exchange through registered share broker. In pursuance of purchase of shares the said broker had raised invoice and purchase price was paid by cheque and respondent's bank account has been debited. The shares were also transferred into respondent's Demat account where it remained for more than one year After a period of one year the shares were sold by the said broker on various dates in the Kolkata Stock Exchange. Pursuant to sale of shares the said broker had also issued contract notes cum bill for sale and these contract notes and bills were made available during the course of appellate proceedings. On the sale of shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessee utilized the scheme Para 5] The Tribunal concluded that there was something more which was required, which would connect the assessee to the transactions and which are attributed to the promoters/directors of the two companies. The Tribunal referred to the entire material and found that the investigation stopped at a particular point and was not cared forward by the revenue. A copy of the DMAT account, placed before the Tribunal showed the credit of share transaction. The contract notes in Form-A with two brokers were available which gave details of the transactions. The contract note is a system generated and prescribed by the stock exchange. From this material, the Tribunal concluded that this was not mere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al gain on share transaction was added to income of assessee-CIT(A) deleted addition-Tribunal upheld order passed by CIT(A) and dismissed appeal of revenue-Held, assessee sold shares through MTL shares and Stock Broker limited which was SEBI registered Stock Broker-Payment for sale of shares was received through banking channels-All documentary evidence being in favour of assessee, deletion of addition made by CIT(A) was upheld by Tribunal-All these documentary evidences in favour of assessee were rejected by AO merely on basis of some casual replies given by assessee to AO- Documentary evidences were in favour of assessee and CIT(A) had passed very reasoned and speaking order-Dividend amount was received with regard to holding of shares and said amount was disclosed by assessee in his return of income and exemption was claimed accordingly-Thus, addition being without any logical basis was deleted-Revenue's appeal dismissed. Held: The CIT(A) examined the matter and the comments of the Assessing Officer in the remand report. It has been recorded by the CIT(A) that the purchase of shares in the financial year 2006-07 for an amount of Rs, 11 lakhs had been physically transferred i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransactions as sham transactions Tribunal has arrived at a finding of fact that the transactions were genuine-Nothing has been brought on record to show that the findings recorded by the Tribunal are contrary to the documentary evidence-Also, no fault can be found with the finding recorded by the Tribunal that the cash credits in the buyers' bank accounts cannot be attributed to the assessees. Therefore, the decision of the Tribunal is based on findings of fact and no substantial question of law arises. The fact that the assessees in the group have purchased and sold shares of similar companies through the same broker cannot be a ground to hold that the transactions are sham and bogus, especially when documentary evidence was produced to establish the genuineness of the claim. From the documents produced, it is seen that the shares in question were in fact purchased by the assessees on the respective dates and the company has confirmed to have handed over the shares purchased by the assessees. Similarly, the sale of the shares to the respective buyers is also established by producing documentary evidence. It is true that some of the transactions were off-market transactions. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under: 1. The following question of law is proposed: Whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was justified in deleting the addition of Rs, 1,03,33,925/- made by AO u/s 68 of the I.T. Act, 1961, ignoring the fact that the shares were bought/acquired from off market sources and thereafter the same was demated and registered in stock exchange and increase in share price of Ramkrishna Fincap Ltd. is not supported by the financials and, therefore, the amount of LTCG of Rs, 1,03,33,925/- claimed by the assessee is nothing but unaccounted income which was rightly added u/s 68 of the IT. Act, 1961? 2. We have considered the impugned order with assistance of the learned Counsels and we have no reason to interfere. There is a finding of fact by the Tribunal that the transaction of purchase and sale of the shares of the alleged penny stock of shares of Ramkrishna Fincap Ltd. ( RFL ) is done through stock exchange and through the registered Stock Brokers. The payments have been made through banking channels and even Security Transaction Tax ( STT ) has also been paid. The Assessing Officer also has not criticized the documentation involv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court The Supreme Court dismissed the petition. Decision of the Allahabad High Court (printed below) affirmed. Petition for Special Leave to Appeal (C) No. 13033 of 2023. Petition under article 136 of the Constitution for special leave to appeal from the judgment and order dated July 6, 2022, of the Allahabad High Court in I. T. A. No. 44 of 2022. The judgment of the High Court (coram: SURYA PRAKASH KESARWANI and JAYANT BANERJI JJ.) ran as follows: JUDGMENT Heard Sri Krishna Agarawal, learned counsel for the appellant. This appeal under section 260A of the Income-tax Act, 1961 has been filed challenging the order dated January 17, 2022, passed by the Income- tax Appellate Tribunal, Lucknow Bench 'SMC' Lucknow in IT. A. No. 205 of 2020 (assessment year 2014-15). The basic question involved in the present appeal is with regard to deletion of some amount which was added by the Assessing Officer on the allegation of penny stock. The appeal of the respondent-assessee was allowed against the assessment order The appeal filed by the assessee was allowed by the Commissioner (Appeals)Against the appellate order the Revenue had filed the aforesaid income-tax appeal which has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anted relief observing at Page 5 Para 7.1.1 to 9 of the order as under: 7.1.1. From the above tabulation, it could be seen that the assessee had exited from the market by selling the shares once there was heavy selling of the shares of SRK Industries Ltd on the fear element being setting in for further reduction of prices. We find that these after Jan 2014, these shares were heavily traded in the open market. In any case, it is not for the revenue to decide as to at what time the assessee should exit from his holding of shares in the open market. It is for the assessee to decide. The revenue cannot step into the shoes of the assessee and decide the purchase and sale transactions of shares and the timing together with the pricing thereon. Reliance in this regard is placed has been rightly placed by the ld AR on the decision of Hon ble Supreme Court in the case of CIT vs Dhanrajgiri Raja Narasingirji reported in 91 ITR 544 (SC). 7.2. We find that the ld AR pleaded that in an online platform, there would be no nexus between the purchasers and the seller and the delivery of shares and payments would be made through their respective stock brokers. Hence the ld AO ought to have summoned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erely because the alleged purchasers list given by the ld AO in his assessment order had not responded to notice u/s 133(6) of the Act, no adverse inference could be drawn on the assessee for the default committed by those alleged purchasers. The ld AO could have very well resorted to issuance of summons u/s 131 of the Act to those alleged purchasers and / or take necessary action on them in the manner known to law for non-compliance from their side. We hold that the assessee need not discharge her onus of bringing on record the alleged purchasers especially when the shares were sold in the open market in an online platform. Accordingly, the assessee need not prove the identity, creditworthiness of those alleged purchasers of shares and the genuineness of transactions within the meaning of section 68 of the Act. The assessee has received the sale proceeds of shares from her broker M/s Sharekhan Limited. The assessee had shown the credit in the name of M/s Sharekhan Limited in her books. Hence the assessee had duly discharged her onus by furnishing the entire sale details made through the registered stock broker M/s Sharekhan Limited. We find that the ld AO had not even bothered to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a question vide Question No. 24 that assessee had purchased very few shares of well reputed companies during the year like Indus Ind Bank, Crompton Greaves, Larsen and Toubro etc. We find that the ld AO in para 13.4 of his order had observed that on examination of Shri Shivajirao Jondhale on oath u/s 131 of the Act, it was noticed that he had also invested in the shares of SRK Industries Ltd only based on an advice of his friend. Based on this, the ld AO had concluded that the whole basis of purchase of this share is a pre-knowledge of rigging of price and subsequently taking accommodation entry for Long term capital gains. We find from the demat statements for the period 1.4.2012 to 31.3.2013 and 1.4.2013 to 31.3.2014, the assessee had dealt in various reputed scrips and had duly dematted the same and all these transactions are duly reflected in the demat statements issued by the depository participant. 7.6. We find that the ld DR made general submissions with regard to the investigations carried out by Kolkata Income Tax Department after identifying 84 scrips to be penny stocks and the modus operandi adopted by those scrips with the connivance of various entry operators, brokers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeals of the assessee are allowed.----- 7.8. It would be pertinent to address the case law relied upon by the ld DR before us on the decision of Hon ble Bombay High Court (Nagpur Bench) in the case of Sanjay Bimalchand Jain vs Pr.CIT (Nagpur) reported in (2018) 89 taxmann.com 196 (Bombay) dated 10.4.2017 on the impugned issue. From the facts of Sanjay Bimalchand Jain supra, we find that (i) in that case, the broker company through which the shares were sold did not respond to AO s letter regarding the names and address and bank account of the person who purchased the shares sold by the assessee ; (ii) Moreover, at the time of acquisition of shares of both the companies by the assessee, the payments were made in cash ; (iii) The address of both the companies were interestingly the same ; (iv) The authorized signatory of both the companies were also the same person ; (v) The purchase of shares of both the companies was done by that assessee through broker, GSSL and the address of the said broker was incidentally the address of the two companies. Based on these crucial facts, the Hon ble Bombay High Court rendered the decision in favour of the revenue. None of these factors were pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied upon hereinabove, we hold that the ld CITA was not justified in upholding the action of the ld AO in bringing the long term capital gains on sale of shares of SRK Industries Ltd in the sum of Rs 2,26,36,372/- as unexplained income of the assessee treating the same as just an accommodation entry. The ld AO is directed to grant exemption u/s 10(38) of the Act in the sum of Rs 2,26,36,372/- to the assessee. Accordingly, the ground raised by the assessee is allowed. 8. Both the parties before us agreed that the facts in ITA No. 694/Mum/2018 in the case of Shri Shashikant B Mhatre (HUF) are identical to that of Smt Geeta Khare supra except with variance in figures and name of the scrip that was dealt with. Both the parties before us stated that identical reasoning was given by both the lower authorities for denying the claim of exemption u/s 10(38) of the Act to the assessee. The decision rendered in the case of Smt Geeta Khare would apply with equal force for this assessee also and accordingly, the ground raised by the assessee in ITA No. 694/Mum/2018 is allowed. 9. In the result, both the appeals of the assessee are allowed 15. The Hon ble Supreme Court in the case of Principal C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion and the revenue could not make out a case that there is unaccounted money transactions took place in the hands of the assessee and the AO has relied on the investigation report and treated the long term capital gains on sale of shares as not genuine. Further the A.O. has not made any enquiry or independent investigation and relied on the statements. The fact remains that the assessee is a regular investor in shares and has submitted the requisite details in respect of purchase and sale of shares and were not disproved. The transaction of sale of shares is through SEBI registered broker of BSE NSE supported with the sale bills cum contract notes subjected to Securities Transaction Tax(STT) and the demat account statement reflecting debits on the sale of shares and the sale proceeds are received through banking channel. The A.O has not established that the assessee was involved in the price rigging of the shares and also any enquiry was conducted by the SEBI and BSE. Further as discussed in the above paragraphs, the Hon ble Tribunal dealt on the same scrip of share and for the same assessment year and has allowed the appeal. Accordingly, considering facts, circumstances, ratio o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
