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TMI Blog2024 (3) TMI 1361X X X X Extracts X X X X X X X X Extracts X X X X ..... babilities to make the additions without their being any material against the assessee. AO and CIT (A) has applied the concept of Human probabilities and held the above said scrip to be a penny stock without bring on record how the assessee is involved in any of the scrupulous activities or directly linked to one of the person who has involved in manipulation/rigging of share prices, entry operator or exit provider. Therefore, there is no material with the tax authorities to substantiate their findings that the impugned transaction is non-genuine. Therefore, we are inclined to allow the ground raised by the assessee. Addition on account of commission paid on alleged bogus share transaction - As already held that the transaction involving the LTCG is genuine and in favour of the assessee, the consequential addition relating to the above transaction is also deleted. Accordingly, we direct the AO to delete the above addition made u/s 69 - Decided in favour of assessee. - Shri Amit Shukla, Hon'ble Judicial Member And Shri S. Rifaur Rahman, Hon'ble Accountant Member For the Assessee Represented : Shri Anil Sathe. For the Department Represented : Shri Manoj Kumar Sinha. ORDER P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year which has been claimed exempt u/s 10(38) of the Act. Particulars/Scrip quantity Purchase Date Purchase value Sale date Sale value Gain / Loss SHREENATH Commercial and Finance Limited 362000* 04.03.2011 to 09.03.2011 40,37,842/- 28.12.2012 to 15.01.2013 2,97,26,257/- 2,56,67,731/- 5. Assessing Officer observed from the details filed by the assessee that assessee has earned Capital Gain of ₹.2,56,67,731/- from sale of shares of Shreenath Commercial and Finance Limited. Assessing Officer in his order from Page No. 3 to 13 has elaborately analysed various parameters with regard to claim of Bogus long term capital gain such as Findings of the Investigation Wing, Findings in the case of Assessee, Examination of persons with which assessee traded (Exit Entry provider) and analysis of cash trail (for the sake of brevity the same is not reproduced below). Assessing Officer issued summons under section 131 of the IT Act to the assessee and the statement of the assessee was recorded under oath on 13.11.2017. Subsequently, Assessing Officer issued notice under section 142(1) of the Act requiring assessee to explain with evidences why the Long Term Capital Gain should not be treated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale of shares are not been effected, for commercial purpose but to create artificial gains, with a-view to evade taxes. i. Transactions of shares were not governed by market factors prevalent at relevant time in such trade, but same were product of design and mutual connivance on part of assessee and the operators. ii. The assessee resorted to a preconceived scheme to procure longterm capital gains by way of price difference in share transactions not supported by market factors. iii. Cumulative events in such transactions of shares revealed that same were devoid of any commercial nature and fell in realm of not being bona fide and, hence, impugned long term capital gain is not allowable. iv. The order of SEBI referred above has also given the similar finding that the prices of the shares were determined artificial by manipulations and cannot be a product of market factors and commercial principals. e. Failure of Assessee to discharge his onus: The assessee has not been able to prove the unusal rise and fall of share prices to be natural and based on the market forces. It is evident that such share transactions were closed circuit transactions and clearly structured one. f. Ignoranc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 800 shares on 20.06.2005 at the rate of Rs. 485.65. the authorities held that the assessee had not tendered cogent evidence to explain as to how the shares in an unknown company worth Rs. 5/ had jumped to Rs. 485/ in no time. Addition confirmed Chandan Gupta Vs CIT [20151 54 taxmann.com 10 (Punjab Haryana) [2015] 229 Taxman 173 Hon ble Punjab Haryana High Court held that where assessee could not explain receipt of alleged share transactions profits credited in his bank accounts, then sale proceeds had to be added as income of assessee under section 68 Balbir Chand Maini vs CIT [20111 12 taxmann.com 276 (Punjab Haryand) [2011] 201 Taxman 94 (Punjab Haryana) (MAG.) / [2012] 340 ITR 161 (Punjab 247 CTR 468 (Punjab Haryana) Section 69 of the Income-tax Act, 1961 - Unexplained investments - Assessment year 1998-99 - During assessment proceedings, Assessing Officer found that assessee had purchased certain shares of a company at rate between Rs. 2.50 and Rs. 3.40 per share in month of April, 1997 and part of those shares were sold through a broker at Rs. 55 per share - He came to opinion that value of said shares could not be as high as Rs. 55 per share - He recorded statement of br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to how the share in an unknown company worth Rs. 11.15/- had jumped to average price Of Rs. 82/- in no time. 15. Thus considering the findings of the search/ survey, inquiries conducted in the case of assessee, brokers, operators and the entry providers and the nature of transaction entered into by the assessee the LTCG of Rs. 2,56,67,731/- claimed exempt u/ s 10(38) of the act by the assessee cannot be allowed and the amount of Rs. 2,97,26,257/- received as sales proceeds on sale of shares is being added to the total income of the assessee u/s 68 of the Act. Penalty proceeding u/ s 271 is initiated for furnishing inaccurate particulars of income with a view to concealment of income, 16. Further, an amount of Rs. 5,94,525/- i.e. 2% of Rs. 2,97,26,257/- (commission paid to the entry provider) is being added to the total income of the assessee u/s. 69C of IT Act, 1961 on account of unexplained expenditure. Penalty proceeding u/s 271(1)(c) is initiated for furnishing inaccurate particulars of income with a view to concealment of income. 7. Aggrieved, assessee preferred an appeal before the Ld. CIT (A) and filed detailed submissions. After considering the detailed submissions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in relying on certain judicial pronouncements facts of which were distinct and distinguishable, and ignoring other decisions including that of the jurisdictional High Court. 8. The learned Pr. CIT (A) erred upholding the addition of unexplained expenditure u/s 69C of Rs. 5,94,525/- being two percent of the sale proceeds on account of alleged commission expenses, without there being any corroborative evidence. 9. Without prejudice to the above and strictly in the alternative the learned CIT(A), erred in not appreciating that if the transaction of sale is to be treated as nongenuine, the addition should be restricted to Rs, 2,56,67,731 the net gain made by the appellant 10. The appellant craves leave to add, alter or amend any of the grounds of the appeal, at any time before or at the time of hearing. 9. At the time of hearing, Ld.AR of the assessee brought to our notice relevant facts relating to the case and reiterated the submissions made before the Ld. CIT (A) and contended the action of the Ld. CIT (A) in sustaining the action of the Assessing Officer. Ld.AR of the assessee submitted various documentary evidences in support of the Long Term Capital Gain transaction and he bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , has not issued any such notices or has not made any effort whatsoever to investigate/ examine the record. 4. As in the case of a Veena Chaturvedi, the appellant's case as well AO relied only on the investigation report, wherein there was no specific reference to the appellant. The assertions as in that case are absolutely bland assertions with no evidence whatsoever. 5. In the circumstances the case of the appellant is on all fours, with the case of Veena Chaturvedi, and the ratio decided therein needs to be followed in the case of the appellant as well. 12. On the other hand, Ld. DR objected to the submissions of the Ld.AR of the assessee and relied on the orders of the lower authorities by submitting that there is substance in the findings of the lower authorities. 13. Considered the rival submissions and material placed on record, We observe from the record that the scrip under consideration is same as in the case relied by the Ld AR and in the case of Veena Chaturvedi (supra) the coordinate bench has elaborately dealt with the issue under consideration. It considered the various issues associated with the scrip Shreenath Commercial and Finance Ltd and held it in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verage sale rate was between Rs. 79/- to Rs. 86/- per share. He has also stated that the entire shares of purchases through stock exchange by online through registered broker and the shares were purchased when the financial condition of the said company was good and the profits were substantially increased including the turnover which was in several crores. He has also stated that the assessee nor any of the family member had any connection or business with the promoters of the company or any kind of alleged exit providers. Now in the case of her husband, Shri Rajendra Chaturvedi, the coordinate bench on exactly similar facts and reasoning of the AO and CIT (A) has deleted the said addition. 20. The AO has observed that the prices of the shares had reached upto 500/- per share to show assessee has gained multifold, however, assessee had sold the price changing price between Rs. 79 to Rs. 86/- per share which was quoted price in the Bombay Stock Exchange on which rate such shares were traded and had bought the shares at average price of Rs. 20/- per share. However, the main point which has been discussed at length by the ld. AO in his order that in the case of exit providers, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the assessee, which has now been found by SEBI in its final order that there was no such manipulation by the these entities. In any case, firstly, the said SEBI order has nothing to do with the scrip of M/s. Shreenath Commercial Finance Ltd. and secondly, the revocation of this order by the SEBI in its final order dated 21/09/2017 itself demolishes the entire foundation of the AO s inference. 21. Apart from that, no enquiry either by the SEBI or any Government agencies has been done in the case of M/s. Shreenath Commercial Finance Ltd. or the broker from whom assessee has purchased online or the assessee or the family member. In so far as one of his observations that one Shri. Giriraj Kishore Agarwal was the promoter, Director of various entities including M/s. Shreenath Commercial Finance Ltd., he became the Director of this company on 10/11/2016. i.e., after more than 3 years, when the assessee had sold shares through Bombay Stock Exchange. In any case, the adverse inference of common link of Shri Giriraj Kishore Agarwal was discharged by the final SEBI order dated 29/11/2017. Therefore, tenuous connection made by the ld. AO to link M/s. Shreenath Commercial Finance Ltd. with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ider for bogus capital gain including the assessee, at least there has to be some prima facie or some mention about the assessee or about the scrip from such enquiry so as to draw some kind of adverse inference. 23. In so far as various reports of the ld. AO and ld. CIT (A) by and large are same and ld. AO has stated that nothing new has been brought on record. Though there are decisions cited by both the parties and also assessee had cited various decisions of the Hon ble Bombay High Court as mentioned above wherein the Hon ble Bombay High Court had held that where the transactions have been made both purchase and sales through online and there is no adverse material or information except with some brokers have stated in their statement that they have provided accommodation entry in various scrips in one such scrip involved, that does not lead to drawing any adverse inference to treat the share transactions as bogus done through stock exchange. 24. Be that as may be, we find that on exactly similar set of facts and identical finding, this Tribunal in the case of the assessee s husband Shri Rajendra Chaturvedi and Mrs. Pallavi Pandey supra, the Co-ordinate Bench has deleted the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and manipulated to yield bogus gain to various entities/individuals of which assessee was one. Thus, we find merit in the arguments of the Ld AR that assessee has furnished all the information. details, documentary evidences before the AO but the AO has not done any further verification to find out the truth or done anything to prove the money trail of the funds as has been alleged in the order. Under these circumstances, we are not in a position to sustain the order of Ld. CIT (A) upholding the order of AO wherein the long-term capital gain has been held to be nongenuine and bogus. 25. Once on the same set of facts the Co-ordinate Bench have deleted the said addition, then in the case of the assessee, no different view can be taken. Respectfully following the same, addition made by the ld. AO is deleted including the addition of alleged commission made u/s. 69C, which is deleted. Thus, on merits, appeal of the assessee is allowed. 26. However, in so far as validity of reopening is concerned, the same is left open and the same is purely academic and allow the appeal of the assessee on merits. 14. Further, there is no discrepancies in the documents filed by the assessee claiming th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... teel (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. 15. Therefore, we respectfully follow the ratio of the above decisions. In this case also, the Assessing Officer and Ld.CIT (A) has applied the concept of Human probabilities and held the above said scrip to be a penny stock without bring on record how the assessee is involved in any of the scrupulous activities or directly linked to one of the person who has involved in manipulation/rigging of share prices, entry operator or exit provider. Therefore, there is no material with the tax authorities to substantiate their findings that the impugned transaction is non-genuine. Therefore, we are inclined to allow the ground raised by the assessee. Accordingly the Ground Nos. 1 to 7 raised ..... X X X X Extracts X X X X X X X X Extracts X X X X
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