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TMI Blog2024 (6) TMI 536X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 2013-14 and Rs. 1,42,66,160 for Assessment Year 2014-15. Additions made in both the years are similar in nature relating to transaction of sale of shares, difference being in respect of scrips involved in each year and amount of sale consideration. 2.1. Assessee has also raised legal issue on re-assessment proceedings and assessment order passed thereafter u/s. 147 r.w.s. 143(3) for Assessment Year 2013-14 vide ground no.1 which has not been pressed in the course of hearing before us. Accordingly, ground no.1 for Assessment Year 2013-14 is dismissed as not pressed. 3. Brief facts of the case as culled out from records are that assessee is engaged in the business of buffing of SS utensils and labour job work. Return of income for Assessment Year 2013-14 was filed on 17.09.2013 reporting total income at Rs. 20,80,080/-. Case of the assessee was re-opened by issuing notice u/s. 148, dated 27.01.2017 based on information from the investigation wing of the Department that, the assessee had transacted in certain shares characterised by the Department as penny scrips. After necessary investigation and examination, this re-assessment proceeding was completed vide order u/s. 143(3) r. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee of A.H. 2013-14 59 to 60 6. Ledger Account of assessee from the books of stock broker, Arihant Capital Markets Ltd. & Ledger of Arihant Capital Markets Ltd. from the books of assessee of A.Y.2013-14 61 to 69 7. Following relevant documents in support of shares of Essar India Ltd. purchased in preferential offer: i) Letter dated 17/03/2011 written by assessee to Board of Directors of Essar India Ltd. expressing his desire to purchase the 1,00,000 shares of Essar India Ltd. in preferential allotment 70 ii) Copy of share application letter dated 28/04/2011 given by assessee to Board of Directors of Essar India Ltd. along with copy of cheque of Rs. 15,00,000/- issued for purchase of 1,00,000 shares in preferential allotment 71 to 73 iii) Copy of allotment letter dated 26/05/2011 issued by Essar India Ltd. allotting 30,000 shares at the premium of Rs. 40 per share having face value of Rs. 10 each share on 25/05/2011 against the payments made by assessee at Rs. 15,00,000/- 74 iv) Copy of bank statement of assessee with Malad Sahakari Bank Ltd. evidencing the payment of Rs. 15,00,000/- made for purchase of above named scrip on 06/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f shares of Out of City Travel Solutions Ltd. (Tilak Ventures Ltd.) purchased in preferential offer: i) Copy of share application letter dated 08/09/2012 given by assessee to Board of Directors of Out of City Travel Solutions Ltd. (Tilak Ventures Ltd.) along with a cheque of Rs. 11,50,000/-issued for purchase of 50,000 shares in preferential allotment 52 to 53 ii) Copy of Information Memorandum dated 29/08/2012 of Out of City Travel Solutions Ltd. (Tilak Ventures Ltd.) issued for allotment of shares on preferential basis 54 to 75 iii) Copy of allotment letter dated 20/10/2012 issued by Essar India Ltd. allotting 50,000 shares at the premium of Rs. 22 per share having face value of Rs. 1/ each share on 18/10/2012 against the payments made by assessee at Rs. 11,50,000/- 76 to 77 iv) Copy of bank statement of assessee with Malad Sahakari Bank Ltd. evidencing the payment of Rs. 11,50,000/- made for purchase of above named scrip on 13/10/2012 78 to 83 v) Copy of DMAT Statement of assessee with HDFC Bank evidencing the credit of 50,000 shares of Essar India Ltd. on 12/12/2012 84 to 89 6. Copy of ITR acknowledgement, Computation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of sale of shares in the aforesaid scrips in the respective years. Aggrieved, assessee went in appeal before the CIT(A). 8. Ld. CIT(A) has reproduced extensive literature on the concept of preponderance of probability in various countries and India, on the plugging of loopholes in the system for black money, various other doctrines and plethora of judicial precedents which is appreciated. However, we note that the same has not been related and their relevance mapped to the facts of the case and corroborative documentary evidences placed on record by the assessee at the assessment stage. 8.1. Ld. CIT(A) while giving his decision in para 7 for Assessment Year 2013-14, observes that payment through cheque and the receipt of the sale proceeds through bank cannot prove the genuineness of the transaction. According to him, even the transaction through stock exchange cannot give strength to the fabricated devises. He further observes that there may be absence of direct evidence that cash was introduced for obtaining the accommodation entry but circumstantial evidence is the evidence of various facts, if taken together, they may form a chain of circumstances leading to an inference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scussed as under: a) For order at Sr. No.1, it is submitted that this relates to period between 01.04.2014 to 11.03.2016, whereas assessee had sold the shares of Essar India Ltd. between 08.10.2012 and 27.02.2013. Shares of Out of City Travel Solutions were sold between 09.01.2014 and 04.03.2014 by following the prescribed procedures and applicable rules. Thus, this order has no relevance to the facts of the present case. b) For the order at Sr. No.2, proceedings initiated were dropped and no penalty was imposed. c) In respect of order at Sr. No.3, no investigation or enquiry of any kind was carried out against the assessee either by SEBI or by concerned stock exchange. Hence, this has no relevance or application to the case of the assessee. d) The order at Sr. No.4 is adjudicated in case of third parties which has no relevance or application to the case of the assessee since shares of Essar India Ltd. were allotted on preferential basis to the assessee and assessee invested his own funds. e) Facts in order at Sr. No.5 deal with physical shares stolen or counterfeited whereas in the case of the assessee these were sold on registered stock exchange out of DMAT account, acq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 10.2. For the above observations and findings, we place our reliance on the decision in the case of CIT vs. Jamnadevi Agrawal[2012] 20 taxmann.com 529 (Bom), wherein it was held that transactions of purchase and sale of shares cannot be considered to be bogus, when the documentary evidences furnished by the assessee establish genuineness of the claim. We also draw our force from the decision of Hon'ble High Court of Delhi in the case of PCIT v. Krishna Devi [2021] 126 taxmann.com 80 (Del) wherein the Court noticed that the reasoning given by the Assessing Officer to disbelieve the capital gain declared by the assessee, viz. astronomical increase in the price of shares, weak fundamentals of the relevant companies are based on mere conjectures. 10.3. Also, reliance placed by the ld. Assessing Officer on the report of investigation wing without further corroboration based on cogent material does not justify the conclusion that the impugned transaction is bogus, sham and part of racket of accommodation entries. It does not prove that the assessee has carried out the impugned transactions of purchase and sale of shares in connivance with the people who were involved in the alleged r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing prices. d. received the sale proceeds through stock market process in his bank account. 11.2. From the above, we note that ld. Assessing Officer has not brought on record any material to show that assessee was part of any group which was involved in the manipulation of share prices. Suspicion by the ld. Assessing Officer on the purchase and sale of shares is baseless. 12. Ld. Assessing Officer, while drawing the adverse conclusion noted about the cash trail in the accounts of entry providers. He based his conclusion on the finding of investigations done by the Investigation Wing rather than bringing on record any direct and cogent material to establish existence of such a cash trail where the assessee has transacted in cash. In this respect, ld. CIT(A) has supported the ld. Assessing Officer by stating that Assessing Officer cannot be expected to produce such evidences and has merely harped on general proposition of having circumstantial evidence leading to inference or presumption. In this respect in the absence of any corroborative material brought on record by the authorities below, we hold against drawing such inference or presumption. 13. We also note that in the firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ote of the provisions of Sec. 143(3) wherein the assessment is to be completed by the AO which also provides in subsection (3) that AO shall make an assessment by an order in writing, inter alia, "after taking into account all relevant material which he has gathered." Thus, by keeping the provisions of Sec. 142(3) read with section 142(2) and Sec. 143(3) in juxtaposition, we understand that it is a mandatory statutory requirement on the part of the AO to comply with the provisions of Sec. 142(3) in completing the assessment proceeding, failure of which may vitiate the entire assessment itself since this sub-section uses the word "shall". The only exception to this requirement is where an assessment is made u/s 144 which is not so in the present appeals before us. 14. As already noted above, Ld. CIT(A) dealt with extensive literature on the concept of preponderance of probability and other doctrines to dismiss the appeal of the assessee. According to us, the theory of preponderance of probability is applied to weigh the evidence of either side and draw a conclusion in favour of a party which has more favourable factor in his side. The conclusions have to be drawn on the basis of ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee 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 v. NRA Iron & Steel (P.) Ltd. 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. 6. The appeal is devoid of merits and it is dismissed with no order as to costs." ii) PCIT vs. Indravadan Jain HUF [2023] 156 taxmann.com 605 (Bom) wherein it was held: "Where shares were purchased by assessee on floor of stock exchange and not from broker, payment was made through banking channel, deliveries were taken in DMAT account where shares remained for more than one year, contract notes were issued and shares were also sold on stock exchange, there was no reason ..... X X X X Extracts X X X X X X X X Extracts X X X X
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