9911796707
TMI Blog2024 (9) TMI 522X X X X Extracts X X X X X X X X Extracts X X X X ..... some third party or parties with the transactions carried out by the assessee. There were not brought any evidence from independent enquiry to corroborate the allegation. As such, the AO has highlighted various suspicious circumstances, but no addition can be made merely on the basis of suspicious circumstances or presumption unless some cogent material evidence brought on record. Thus, 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 Intech Ltd is concern. 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 - Decided in favour of assessee. - Shri George George K, Vice President And Shri Waseem Ahmed, Accountant Member For the Assessee : Shri Ravishankar S.V. Advocate For the Revenue : Shri Ramanathan, Addl. CIT (DR) ORDER PER WASEEM AHMED, ACCOUNTANT MEMBER: This is an appeal filed by the assessee against the order passed by the NFAC, Delhi dated 10/01/2024 in DIN No. ITBA/N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ange. Thereafter, the shares of the got split one into 10 shares, accordingly the assessee in lieu of 4000 shares got 40000 shares of impugned company which were sold during May 2010. The adjusted closing price of the shares at the time of splitting was Rs. 3.2 per share and earlier the same was more or less constant around Rs. 1.99 per share. However, the price of the share of impugned company started rising thereafter and within period of 4 months i.e. 23rd November 2009 reached to around Rs. 30 per share which represents an increase of 850%. 5. Further, the AO observed that the volume of the tractions in the shares of impugned company M/s Comfort Intech Ltd was very negligible during the period 17th July to 23 November 2009 when the price was increasing. Once the price reached as high as Rs. 30 per share the volume of trade phenomenal increased. The price of share remained constant in the range or Rs. 30 per share till June 2nd June 2010 and thereafter sharply decreased. The AO further noted that department has identified 20 major parties who purchased shares of the impugned company during the period of November 2009 to June 2010 and they were found and admitted being paper comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided for rebuttal, nor the opportunity of cross examination was provided. Therefore, no credence can be given to such material and statements. The assessee submitted that he sold impugned script through BSE and payment received through banking channel. 10. However, the learned CIT(A) after considering the assessment order and submission of the assessee sustained the addition made by the AO by observing as under: 6.4.1 Additions for sale of shares of Comfort Intech Ltd. The AO has dedicated almost the entire assessment order to this addition. The share of this entity has been clearly established as a penny stock share by a thorough analysis of the scrip, the graphic analysis of the price fluctuation and the other financials of the company. The SEBI orders regarding the manipulation of share price of this scrip have also taken into account by the AO. The modus operandi of providing entries has been discussed in detail. The Assessee has contended that the share transactions are duly reflected in the books of accounts furnished the copies of broker's contract notes and demat account to prove the genuineness of the transactions. These documents only reflect on the transactions hap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the impugned capital gain as bogus was that the investment was made by the assessee through offline mode and the price of share of the company M/s Comfort Intech Ltd increased manifolds in a short period of time. In this regard, firstly we note that the offline purchase of share is not prohibited under the statute. Secondly the price of the scripts of a company, having no financial base/business activity/profitability certainly gives rise to doubt about such an increase in the price. However, in the given case, the impugned company was engaged in business activity, and it was regularly showing income from operation. Further in our considered view, the sharp rise in the price of script cannot be a sole criterion for reaching to the conclusion that the price was rigged up to generate the long-term capital gain which is exempted under section 10(38) of the Act. Such observation during the assessment proceedings provides a reason to investigate the matter in detail and the same cannot take the place of the evidence. But in the case in hand, there was no enquiry conducted either by the SEBI or the stock exchange with respect to rigging up of the share price of M/s Comfort Intech Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re transaction was bogus but on the other hand the AO himself has allowed the cost of acquisition against the sale of shares, meaning thereby, the purchase of the shares has been admitted as genuine. The transactions of purchase and sales go hand in hand. In simple words, a sale is not possible without having the purchases. Thus, once purchases have been admitted as genuine, then corresponding sales cannot be doubted until and unless some adverse materials are brought on record. As such, we note that the AO in the present case has taken contradictory stand. On one hand, the AO is treating the entire transaction as sham transaction and on the other hand he s allowing the benefit of the cost of acquisition for the shares while determining the bogus long-term capital gain. 14.4 Going ahead, assuming the alleged scam might have taken place on generating LTCG to avoid the payment of tax. But it has to be established in each case, by the party alleging so, that this assessee in question was part of this arrangement. The chain of events and the live link of the assessee s action that he was involved in such rigging up of share price should be established based on cogent materials. The all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f broker is concerned, the assessee is no way concerned with the activity of the broker. Detailed finding has been recorded by CIT(A) to the effect that assessee has made investment in shares which was purchased on the floor of stock exchange and not from M/s Basant Periwal and Co. Against purchases payment has been made by account payee cheque, delivery of shares were taken, contract of sale was also complete as per the Contract Act, therefore, the assessee is not concerned with any way of the broker. Nowhere the AO has alleged that the transaction by the assessee with these particular broker or share was bogus, merely because the investigation was done by SEBI against broker or his activity, assessee cannot be said to have entered into ingenuine transaction, insofar as assessee is not concerned with the activity of the broker and have no control over the same. We found that M/s Basant Periwal and Co. never stated any of the authority that transaction in M/s Ramkrishna Fincap Pvt. Ltd. on the floor of the stock exchange are ingenuine or mere accommodation entries. The CIT(A) after relying on the various decision of the coordinate bench, wherein on similar facts and circumstances, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at he was not involved in rigging or any wrongdoing. The case laws relied by the authorities below are distinguishable from the present facts of the case in so far there was SEBI enquiry conducted and found guilty of wrong practices, but it is not so in the case on hand. 14.8 In our view, the income generated by the assessee cannot be held bogus only based on the modus operandi, generalisation, and preponderance of human probabilities. To hold income earned by the assessee as bogus, specific evidence has to be brought on record by the Revenue to prove that the assessee was involved in the collusion with the entry operator/ stockbrokers for such an arrangement. In absence of such finding, it is not justifiable to link the fact with the finding unearthed in case of some third party or parties with the transactions carried out by the assessee. Further the case laws relied by the AO are regarding the test of human probabilities which may be of greater impact but the same cannot used blindly without disposing off the evidence forwarded by the assessee. In simple words, there were not brought any evidence from independent enquiry to corroborate the allegation. As such, the AO has highlig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee 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 Intech Ltd is concern. 14.11 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 earned long term capital gain from the sale of companies share i.e. Alpha Graphic India Ltd. and Blazon Marbles. 9. In our considered opinion, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f as a shell company. Trading of shares of M/s SAL was permitted by SEBI. Prime facie, 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 has not been provided any access to such report nor any opportunity was provided to cross examine those persons who accepted to have provided a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 14.13 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 in Civil Appeal No. 4228 of 2006. Likewise, the Hon ble Apex court in the case of Kishinchand Chellaram reported in 125 ITR 713 held that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
