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TMI Blog2022 (12) TMI 1537X X X X Extracts X X X X X X X X Extracts X X X X ..... So many investors enter the capital market just to make it a chance by investing their surplus monies. They also end up with making investment in certain scrips (read penny stocks) based on market information and try to exit at an appropriate time the moment they make their profits. In this process, they also burn their fingers by incurring huge losses without knowing the fact that the particular scrip invested is operated by certain interested parties with an ulterior motive and once their motives are achieved, the price falls like pack of cards and eventually make the gullible investors incur huge losses. In this background, the only logical recourse would be to place reliance on the orders passed by SEBI pointing out the malpractices by certain parties and taking action against them. Since assessee or his broker is not one of the parties who had been proceeded against by SEBI, the transaction carried out by the assessee cannot be termed as bogus. We hold that the entire addition has been made based on mere surmise, suspicion and conjecture and by making baseless allegations against the assessee herein. Now another issue that arises is as to whether the ld. AO merely on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act in respect of long term capital gain derived from sale of shares of Sunrise Asian Ltd, in the facts and circumstances of the case. The inter connected issue involved therein is whether the ld. CIT(A) NFAC was justified in confirming the addition @ 2% of transaction amount of long term capital gain as unexplained expenditure u/s 69C of the Act in the facts and circumstances of the case. 3. We have heard the rival submissions and perused the materials available on record. The assessee is an individual and is a partner in a partnership firm M/s Diashine Exports. The assessee has been investing in shares and mutual funds for a long time. He had filed his return of income for the Asst Year 2014-15 on 15/09/2014 declaring total income of Rs 13,49,500/-. In the said return, the assessee claimed exemption u/s 10(38) of the Act in respect of long term capital gain derived from sale of shares of Sunrise Asian Ltd. The said return was duly processed u/s 143(1) of the Act. This was later sought to be reopened u/s 147 of the Act on the ground that the claim of exemption u/s 10(38) of the Act claimed by the assessee was on account of penny stock shares dealt by assessee which was held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05.2013 Receipt of Sale Proceeds from Fortune Equity Brokers (India) Ltd. Copy of bank statement with HDFC bank showing the receipt on Yes on 4th December 2017 21.05.213 Conformation of amount received on sale of shares from Fortune Equity Brokers India Ltd. Copy of Ledger Account with Fortune Equity Brokers (India) Ltd. for the period of 01.04.2013 to 31.03.2014 Yes on 4th December 2017 4. The ld. AO had relied on the findings of the investigation wing of Kolkata which are outlined in para 6 of his assessment order. The main grievance of the ld. AO is that rise in share price of Sunrise Asian Ltd is devoid of commercial principle or market factors ; that transactions are based on mutual connivance on part of assessee and operators ; that assessee resorted to preconceived scheme to procure bogus long term capital gains and hence the transactions are not bonafide ; that SEBI also passed an order holding that share prices were determined artificially by manipulations ; that these are close circuit transactions and are pre-structured; that assessee had failed to discharge his onus cast on him ; that net worth of Sunrise Asian Ltd is negligible and that its share prices were artificial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be treated as sham merely because they are done in off-market, if the assessee had discharged his onus of proving the fact that shares purchased by him were dematerialized in the Demat account and held by the assessee till the same were sold from the Demat account of the assessee. The transaction of holding the shares are reflected in Demat account and sale of shares are through Demat account. More so , when there is no dispute regarding the purchase price and sale price of shares. Our view is further fortified by the decision of Hon ble Jurisdictional High Court in the case of CIT vs Jamnadevi Agarwal reported in 328 ITR 656 (Bom). 6.4. We find that independent enquiries were conducted by Securities and Exchange Board of India (SEBI in short) and SEBI had passed a separate order in respect of the said scrip in which assessee had dealt. In the said order, SEBI had listed out the names and PAN of various persons who were involved in artificial price rigging of shares and the list of beneficiaries. The assessee s name or the broker through whom the assessee bought and sold the shares does not figure in the said list in the order of SEBI. Hence even SEBI does not allege any involvem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h proof may have to be inferred by a logical process of reasoning from the totality of the attending facts and circumstances surrounding the allegations/charges made and leveled. While direct evidence is a more certain basis to come to a conclusion, yet, in the absence thereof the Courts cannot be helpless. It is the judicial duty to take note of the immediate and proximate facts and circumstances surrounding the events on which the charges / allegations are founded and to reach what would appear to the Court to be a reasonable conclusion therefrom. The test would always be that what inferential process that a reasonable / prudent man would adopt to arrive at a conclusion . In the instant proceedings, the pattern of trading by the entities listed at Sr.no. 1-46 of Table VII in the scrip of Sunrise Asian coupled with the inter se connection amongst themselves and with the Company, based on the preponderance of probability, leads me to conclude that the trades executed in said scrip were manipulative in nature. 7.12. In view of the significant positive LTP contribution by the group of connected entities (listed in Table VII) by trading amongst themselves, it is concluded that connect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated against Noticee no. 87 i.e. DCB Plus N Holdings LLP, vide the SCN dated July 17, 2017 , stand disposed of in view of the Settlement Order dated January 21, 2021. 6.6. From the above order of SEBI , it is very clear that SEBI, based on its investigations and replies given by various parties, had ordered either to take action against certain parties or had discharged certain parties on the ground that they are not involved in the price manipulation. In any case, the assessee s name or the broker, through whom assessee transacted had not figured in the said list either in the restraint list or in the discharged list. Hence it could be safely concluded that the assessee herein is merely a gullible investor, who had resorted to make investment in the shares of Sunrise Asian Limited based on market information and had sold the shares in the secondary market in prevailing market prices. It is not the case of the revenue that assessee herein had directly sold the shares in the secondary market with clear knowledge of the name of the person to whom the said shares were sold. In secondary market transactions, the buyer and seller are not supposed to know each other unless it is a case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re importantly, it is bounden duty of the ld. AO to prove that the evidences furnished by the assessee to support the purchase and sale of shares as bogus. This view of ours is further fortified by the decision of Hon ble Delhi High Court in the case of PCIT vs Laxman Industrial Resources Ltd in ITA No. 169/2017 dated 14/03/2017. It is well settled that the suspicion however strong could not partake the character of legal evidence. Hence the greater onus is casted on the revenue to corroborate the impugned addition by controverting the documentary evidences furnished by the assessee and by bringing on record cogent material to sustain the addition. No evidence has been brought on record to establish any link between the assessee herein and the directors of Sunrise Asian Limited or any other person named in the assessment order being involved in any price rigging and also the exit provider. This onus is admittedly not discharged by the revenue in the instant case. 6.9. We find that the Co-ordinate Bench of this Tribunal in the case of Mukesh Ratilal Marolia vs Additional CIT reported in 6 SOT 247 (Mum ITAT) dated 15/12/2005 had held that personal knowledge and excitement on events s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale and purchase of shares are doubtful and not genuine. In relation to Assessee's 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 present Assessee utilized the scheme. 6. It is in that regard that we find that Mr.Gopal's contentions are well founded. The Tribunal concluded that there was something more which was required, which would connect the present 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 carried forward by the Revenue. There are 1,30,000 shares of Bolton Properties Ltd. purchased by the Assessee during the month of January 2003 and he continued to hold them till 31 Mar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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