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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 ..... h assessee can bring forth the identity of the buyers of his shares and their creditworthiness. Sale proceeds are received through the stock market process into the pre-identified bank account of the seller i.e., the assessee which cannot be tainted as unexplained or unaccounted or undisclosed money for the addition made u/s. 68 by the ld. Assessing Officer. From the perusal of the statement of assessee recorded by the AO during the course of assessment for Assessment Year 2013-14 as reproduced in the impugned order demonstrates that he is a long-term investor, investing since year 2006 and is aware of his DMAT account, brokers through whom transactions were undertaken, shares in which he had invested and stock market operations. AO 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 AO on the purchase and sale of shares is baseless. AO 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 materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... untant Member For the Assessee : Shri Rajkumar Singh, AR For the Revenue : Smt. Mahita Nair,Sr. DR ORDER PER BENCH: These two appeals filed by the assessee are against the orders of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, vide order nos.TBA/NFAC/S/250/2023-24/1055776011(1), dated 06/09/2023 and ITBA/NFAC/S/250/2023-24/1055776991(1), dated 15.05.2023 and passed against the assessment orders by the Assistant Commissioner of Income Tax- 31(1), Mumbai u/s. 143(3) r.w.s. 147 and 143(3) of the Income-tax Act(hereinafter referred to as the Act ), dated 28.12.2017 and 29.12.2016 and for AY 2013-14 and 2014-15, respectively. 2. Grounds taken by the assessee are in respect of addition made u/s. 68 by denying exemption claimed u/s. 10(38) of the Act for the sale proceeds of listed equity shares alleged as penny stock amounting to Rs. 1,65,26,324/- for Assessment Year 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 proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d below for ease of reference. Sr. No. Particulars of Documents Enclosed Page No. 1. Copy of contract notes of stock broker, Bonanza Portfolio Ltd. for shares of Essar India Ltd. sold on the floor of Stock Exchange of BSE between 08/10/2012 to 12/10/2012 1 to 10 2. Copy of contract notes of stock broker, Arihant Capital Markets Ltd. for shares of Essar India Ltd. sold on the floor of Stock Exchange of BSE between 12/11/2012 to 01/03/2013 11 to 48 3. D'mat Statement of assessee with HDFC Bank Ltd. reflecting the immediate debit of shares of Essar India Ltd. on sale 49 4. Bank Statement of assessee with HDFC Bank highlighting the immediate receipt of sale proceeds of shares of Essar India Ltd. on sale 50 to 58 5. Ledger Account of assessee from the books of stock broker, Bonanza Portfolio Ltd. Ledger of Bonanza Portfolio Ltd. from the books of assessee 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f contract notes of stock broker, Arihant Capital Markets Ltd. for sale of 50,000 shares of Out of City Travel Solutions Ltd. (Tilak Ventures Ltd.) sold on the floor of Stock Exchange of BSE between 09/01/2014 to 03/03/2014 1 to 39 2. D'mat Statement of assessee with HDFC Bank Ltd. reflecting the immediate debit of shares of Out of City Travel Solutions Ltd. (Tilak Ventures Ltd.) on sale 40 to 45 3. Bank Statement of assessee with HDFC Bank highlighting the immediate receipt of sale proceeds of shares of Out of City Travel Solutions Ltd. (Tilak Ventures Ltd.) on sale 46 to 48 4. Ledger Account of assessee from the books of stock broker, Arihant Capital Markets Ltd. of A.Y.2014-15 49 to 51 5. Following relevant documents in support of 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. (T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various accounts to provide accommodation to the assessee and that assessee has failed to discharge his onus to prove the unusual rise and fall of share prices. Ld. Assessing Officer also placed heavy reliance on the doctrine of preponderance of human probability to hold that the assessee is indulged in bogus and dubious share transactions since he had not been able to adduce cogent evidences in this regard. Ld. Assessing Officer also noted that assessee did not produce the purchasers of the shares sold by him. Ld. Assessing Officer, thus completed the assessment by making an addition u/s68 of the Act towards sale consideration received by the assessee on the transaction 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 docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orders of SEBI furnished by ld. Sr.DR are tabulated as under: Sr. No. Date of Order Order Passed Under Section Order Passed Against 1 17th July, 2019 Section 15-1 read Rule 5 Arihant Capital Markets Ltd. 2 20th July, 2017 Section 15-1 read Rule 5 Insight Multitrading Pvt. Ltd. 3 31 May, 2019 Section 15-1 read Rule 5 1. Goodpoint Impex Pvt. Ltd. 2. Shallot Tie-Up Pvt. Ltd. 3. Topwell Properties Pvt. Ltd. 4. Shallot DealtradePvt. Ltd. 4 25th August, 2022 Section 15-1 read Rule 5 Essaar India Ltd. 5 26th April, 2023 Settlement Order Arihant Capital Markets Ltd. 9.2. On each of the above orders, assessee has made his submission which is discussed 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lleged penny stocks which sets out the modus operandi adopted in the business of providing entries for bogus capital gains. The conclusion drawn by the ld. Assessing Officer of implicating the assessee is un-supported by any cogent material on record. The finding arrived at by the ld. Assessing Officer is thus purely an assumption based on conjectures and surmises. In our thoughtful considerations to the facts and circumstances of the case, it is not in controversy that assessee has discharged his burden by submitting the relevant documents, details of which are already extracted above by way of index of the two paper books. 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 Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of his DMAT account, brokers through whom transactions were undertaken, shares in which he had invested and stock market operations. He produced all the relevant documentary evidences before the ld. Assessing Officer in support of his deposition in the statement recorded. From all of this, we notice that assessee has a. purchased the shares under preferential allotment by making payment through banking channel. b. dematerialized the shares purchased by credit to the DMAT account and were later sold out of the same holding. c. sold the shares on the platform of recognised stock exchange on the then prevailing 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ext, we note that section 142(2) empowers the AO to make such enquiry as he considers necessary. The discretion is on the AO under the said section. However, having conducted such enquiry as provided in Sec. 142(2), it is incumbent upon the AO u/s. 142(3) to give an opportunity of being heard in respect of any material gathered on the basis of any enquiry done u/s. 142(2) and proposed to be utilised for the purpose of the assessment. It is important to note that Sec. 142(3) uses the word shall which makes it mandatory requirement on the part of the AO to comply with it. 13.3. We also take note 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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