9911796707
TMI Blog2024 (6) TMI 984X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee filed his Return of Income on 25.09.2014 showing total income of Rs. 4,71,380/-. The return was taken up for scrutiny assessment and made an addition of Rs. 1,09,67,348/- being bogus Long Term Capital gain on sale of penny stock scrip. 4. Aggrieved against the same, the assessee filed appeal before Ld. CIT(A). The Ld. CIT(A) held that the assessee purchased 13000 shares of M/s. Transcend Commerce Ltd. on 18.10.2012 by making cheque payment from Mehsana Sahakari Bank Ltd. which was debited on 20.10.2012 through share broker M/s. Jintana Vanijya Pvt. Ltd. and recognized stock exchange. On merger of M/s. Transcend Commerce Ltd on 16.05.2013, the assessee was allotted 28860 shares of M/s. SRK Industries Ltd. Thereafter the shares were subdivided into Rs. 5/- face value of 57720 shares. The above shares were sold by the assessee during 13.11.2013 to 20.11.2013 in various lots for a consideration of Rs. 1,04,95,967/- and received the consideration through RTGS, after paying the Securities Transaction Tax. Thus both the purchase and sales are done through banking channel and recognized stock exchange. After verification of the bank accounts of the assessee the Ld. CIT(A) dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; 18.11.2013 20700 3744649 19.11:2013 21075 3851545 20.11.2013 4795 874900 Total 57720 1,04,95,967/- 10 Date of Sale As above 11 Amount of Sale Rs. 1,04,95,967/- 12 Amount received through Received through RTGS 13 Broker and Address for sale Shah investor's home ltd. SIH.L House, Opp. Ambawadi Jain Temple, Ahmedabad. The perusal of information in table above indicates that the shares were purchased in the year 2012 for an amount of Rs. 1,30,000/- through cheque and the assessment year is 2013-14. Thereafter, the shares were dematerialized and credited to the account of appellant on 08.11.2012 for a few months before they are sold on 13.11.2013 to 20.11.2013 through BOLT of recognized stock market. As per record the appellant was not promoter of the company of which shares have been purchased, hence the shares can be held in physical form which were dematerialized only on 08.11.2012. The payments for sale of shares have also been received through banking channel. Therefore, no question can be raised on the timeline of the transaction. 4.1 It is also noticed that the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant for a period of more than 12 months from the date of cheque debited in his bank account i.e. 18.12.2012. AR discussed that this was shown as investments in the books of accounts." 5. The Revenue is in appeal before us deleting the addition made by the Ld. CIT(A). The Ld. Sr. D.R. Smt. R. Malarkodi appearing for the Revenue strongly relied upon the observations made by the assessing officer in the assessment order and submitted in the facts of the case, the capital gain which has been made by the assessee are bogus penny stocks, hence the addition made is liable to be restored. 6. Per contra, the Ld. Counsel Shri Anil Kshatriya appearing for the assessee reiterated the submissions made before Ld. CIT(A). He further submitted that the assessee is an individual and engaged in trading of shares and also Partner in Golden Developers. The assessee also purchased various other shares namely Valchand Nagar, Adani Enterprise, Power Grid, Adani Power, India Bulls and sold the same during the financial year. Both purchase and sale of shares were done through banking channels through recognized stock exchange and through brokers. The shares were kept in Demat account and then so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opportunity of cross examination was provided to the assessee, on the basis of whose statements reliance has been placed to hold that the sale of shares was sham/bogus. 7.1. The Hon'ble Supreme Court in the case of Parasben Kasturchand Kochar [2021] 130 taxmann.com 177 (SC) held that the assessee-individual was engaged in business of trading in shares claimed long term capital gains arising out of sale of shares as exemption under section 10(38). The Assessing officer denied claim and made certain additions into assessee's income on the ground that said gains were earned through bogus penny stock transactions and companies to whom sold shares belonged were bogus in nature. The Tribunal observing that assessee by submitting records of purchase bills, sale bills, demat statement, etc., had discharged his onus of establishing said transactions to be fair and transparent, same not being earned from bogus companies was eligible for exemption under section 10(38) of the Act. The High court by impugned order held that no substantial question of law arose from Tribunal's order. The SC dismissed the SLP against said impugned order. In the above case, the Gujarat High Court while p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, bank statement of broker, demat account showing transfer in and out of shares, as also abstract of transactions furnished by stock exchange, Assessing Officer was not justified in treating capital gain arising from sale of shares as unexplained cash credit." 8. The Co-ordinate Bench of this Tribunal in the case of ITO Vs. Shri Nileshkumar Dashratbhai Patel (in ITA No. 55/Ahd/2020 dated 16.08.2022) considered the very same script of SRK Industries Ltd. and allowed the Long Term Capital Gain claimed by the assessee by observing as follows: "10. We have heard the rival contentions of both the parties and perused the materials available on record. In the present case, the long term capital gain declared by the assessee on sale of shares of M/s SRK Industries Limited for Rs. 1,04,55,043/- was treated as bogus and manipulated, leading to the addition by the AO under section 68 of the Act. The view of the AO was based on certain factors which have been elaborated in the preceding paragraph. However, the ld. CIT-A, subsequently, was pleased to delete the addition made by the AO, holding the impugned long term capital gain as genuine. 10.1 The 1st controversy arises before us whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g-term capital gain. It is important to note that the AO in assessment order has also made the addition of Rs. 209200/- being 2 percent of the long-term capital gain which the assessee incurred in arranging alleged bogus long-term capital gain. Admittedly, the same was deleted by the learned CIT-A, the revenue has not challenge the same before the ITAT. Thus, it is transpired is this that such expenses were not bogus in nature. Certainly, the impugned expenses have direct nexus with the alleged so-called bogus long-term capital gain but the revenue has not challenge the deletion of the same. Thus, it is construed that the impugned amount was admitted as genuine which is again contradictory to the stand taken by the AO. 10.2 It was also alleged that the price of the share of M/s SRK Industrires Ltd. was increased manifolds in a short period of time which was not believed by the authorities below on the principles of preponderance of human probabilities in the given facts and circumstances. The rise in the price of the scripts of a company, having no financial base/business activity/profitability certainly gives rise to the doubt about such increase in the price. But in our conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egation as discussed above implies that there was cash exchanged for taking exempted income by way of long term capital gain by way of cheque through banking channels. This allegation that cash had changed hands, has to be brought on record by the Revenue but we find that there is no such whisper in the order of the AO. There was no information brought on record suggesting that there was exchange of cash against the long-term capital gain shown by the assessee. Likewise we also note that the assessee has discharged the onus imposed under section 68 of the Act by furnishing the necessary documentary evidence in support of the identity, genuineness of transaction and creditworthiness of the parties. Therefore the same cannot be made subject to tax under the provisions of section 68 of the Act. 10.5 We also note that there was no dispute raised by the Revenue with respect to the following facts: 1. Purchase consideration of share was made through cheque 2. Share was duly dematerialized in demat account 3. Shares were sold through stock exchange after the payment of STT. The transactions have been confirmed by brokers. 4. The payment are received through ECS through demat acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we have to travel beyond it after ignoring the same. Furthermore, while delivering the justice, we have to ensure in this process that culprits should only be punished and no innocent should be castigated. An innocent person should not suffer for the wrongdoings of the other parties. In the case on hand, admittedly there was no evidence available on record suggesting that the assessee or his broker was involved in the rigging up of the price of the script of SRK Industries Ltd. Thus, it appears that the assessee acted in the given facts and circumstances in good-faith. 10.9 In holding so we draw support and guidance from the judgment of Hon'ble Delhi High court in case of Pr. CIT vs. Smt. Krishna Devi reported in 126 taxmann.com 80 where it was held as under: 11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding 4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon it under the provisions of Section 68 of the Act. It is recorded that "There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been received through banking channels." The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained. 12. Mr. Hossain's submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long term capital gain. But in this case, neither statement was supplying to the assessee nor cross examination was allowed by the ld. A.O. Therefore, in our considered opinion, assessee has discharged his onus and no addition can be sustained in the hands of the assessee. 10.12 At this juncture we also feel pertinent to refer the order of coordinate bench of Indore in case of Shivnarayan Sharma & Ors bearing ITA Nos. 889/Ind/2018, 474,206,60,987/Ind/2019, where in identical fact and circumstances held as under: 16. Since we are adjudicating the above stated common issue on the basis of above assessee namely Shri Shivnarayan Sharma, we note that the assessee purchased 6000 equity shares of Conart Traders Ltd on 22.10.2011 at a cost of Rs. 1,50,000/- . There is no restriction under the law to purchase equity shares on off line mode. Vide order dated 22.3.2013 of the Hon'ble Mumbai High Court M/s Conart Traders Limited was merged with M/s SAL and in lieu there of 6000 shares of M/s SAL were received by the assessee in its demat account. After holding the equity shares for more than 12 months since purchased on 22.10.2011, assessee sold the shares of M/s SAL during the period Apri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered view that the claim of Long Term Capital Gain made by the respective assessee(s) deserves to be allowed as they have entered into the transactions of purchase and sales duly supported by the documents which have not found to be incorrect. The conditions provided u/s 10(38) of the Act have been fulfilled by the assessee(s) namely Shivnarayan Sharma, Sapan Shaw, Prayank Jain, Govind Harinarayan Agrawal (HUF) and Manish Govind Agrawal (HUF) as they have sold the equity shares held in Demat account and transactions performed on a recognised stock exchange through registered broker at the price appearing on the exchange portal and at the point of time of sale of equity shares, companies were not marked as shell companies by SEBI and nor the trading of these scrips were suspended. The assessee also deserves to succeed on the legal ground as no opportunity was awarded to cross examination the third person which were allegedly found to be providing accommodation entries and therefore no addition was called for in the hands of the assessee without providing opportunity of cross examination in view of the ratio laid down by Hon'ble Apex Court in the case of Andaman Timber Indust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against particular assessee on record. Therefore, we don't find any reason to disturb the finding of the learned CIT(A) and direct the AO to delete the addition made by him. Hence the grounds of Revenue's appeal are dismissed. 11. In the result, the appeal of the Revenue is dismissed." 8.1 Similarly, the Co-ordinate Bench of Mumbai Tribunal in the case of Smt. Geeta Khare Vs. ACIT in ITA No. 4267/Mum/2018 dated 29.05.2019 treated the Long Term Capital Gain on sale of shares of SRK Industries Ltd. as a genuine transaction and granted exemption u/s. 10(38) of the Act by observing as follows: 7.10. In view of the aforesaid findings in the facts and circumstances of the case and respectfully following the various judicial precedents relied 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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