9911796707
TMI Blog2024 (10) TMI 995X X X X Extracts X X X X X X X X Extracts X X X X ..... ture Ltd)was disbelieved by the learned assessing officer on reopening of the assessment and sale consideration of Rs. 23,404,695/- added under section 68 of the income tax act was confirmed by the learned CIT - A holding that reassessment and addition under section 68 is correctly made. Therefore, assessee has challenged, reopening of the assessment as well as the addition on merits on several counts. 3. At the beginning of the hearing, the learned authorized representative categorically submitted that ground number 1 against the reopening of the assessment is not pressed and therefore same is dismissed. 4. This leaves us with the only aspect in this appeal with respect to the addition made under section 68 of the income tax act and denial of claim of exemption under section 10(38) of the act. 5. Brief facts of the case shows that assessee is an individual earning income from other sources, income from house property filed her return of income on 31/1/2015 at a total income of Rs. 2,056,540. Subsequently the information has been received from The Principal Director of Income Tax (Investigation) Kolkata regarding investment made by various entities in penny stock and providing b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shares were Dematerialized in the Demat account of the assessee. These shares were shown into the balance sheet of the earlier years of the assessee as an investment. Assessee also submitted the corporate announcement for bonus and subdivision of the shares. To support its contention assessee submitted:- i. Purchase bill dated 26/3/2012. ii. Bank statement disclosing the payment made on 27/3/2012. iii. Money receipt issued by the seller of the shares dated 26/3/2012. iv. Advertisement published in the financial express by the seller for sale of shares. v. Shares certificate in physical form dated 28/6/2012 transferred in the name of the assessee. vi. The Matt statement of the assessee to show that the above purchase of the shares have been entered. vii. The corporate announcement for bonus and subdivision of shares made by the company. viii. Annual accounts of the assessee to show that the above investment is shown as an investment. 7. These shares were sold at an average rate of Rs. 58.51 per share resulting into a sale consideration of Rs. 23,404,695/- at platform of the Bombay stock exchange through the share broker LFC private limited by contract notes and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to the findings of the investigation wing of Kolkata where from the report was received based on which reopening was made. This was extracted at paragraph number 8 -14 of the assessment order. The learned assessing officer thereafter referred the statement of the assessee in paragraph number 14, he reached at the conclusion that assessee was not having a clear answer. He further referred that the above company was a very small company and does not have any substantial business. Therefore, the profit earned by the assessee from the above company is not genuine. The price of the shares have also moved significantly in absence of any financial backing. He referred to in paragraph number 17 the names of the various exit providers wherein it was held that the volume has been contributed by the beneficiaries of bogus long term gain. The learned assessing officer reached at the conclusion that: - i. The financial of the company were very poor during the period when the preferential shares were allotted. ii. The business profile shows that the company was not engaged into any substantial activity as well as any future plans which could attract investors from all over India to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee also filed a case law compiler action containing 11 decisions wherein the additions made in the similar manner is deleted. He further referred to the several judicial precedents wherein shares of the same company were dealt with and addition on identical basses made by the learned that lower authorities was deleted. He specifically referred to the latest decision of the coordinate bench in ITA number 3256/M/2022 four assessment year 2014 - 15 in case of ChiragTej PrakashDangiversus ITO of C bench dated 20/2/2024 wherein the addition is deleted. The assessee also submitted a fact sheet of the whole transaction. 14. The learned authorized representative vehemently submitted that issue is squarely covered in favour of the assessee by the decision of the coordinate bench he specifically referred to paragraph number 9 - 15 of the above decision. 15. It was further submitted that arguments of the assessee are similar to the arguments advanced by the assessee in case of Mrs. Seema Bafna { ITA no 1102/M/2024 ) which is also heard on the same date along with this appeal. 16. The learned departmental representative vehemently supported the order of the learned lower authorities.it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee and her relatives show that neither the assessee nor any of his relative had any incoming/outgoing calls made from or to Sarvottam advisory private limited from whom assessee has claimed to have made the purchases of the share and therefore the purchase of share is bogus. vii. The learned CIT - A deleted the addition merely based on the judicial precedents and submission made by the assessee and therefore the order of the learned CIT - A is not sustainable. 12. The learned authorized representative submitted a paper book containing 88 pages. It was submitted that assessee has claimed long-term capital gain exempt under section 10(38) of the act on sale of shares of Surabhi chemical and investment Ltd. The shares were purchased on 27/3/2012 in quantity of 4000 shares for Rs. 10 lakhs. Further on 23/8/2012 the company issued bonus shares of 36,000 shares and further the shares of the company were split resulting into total acquisition of 4 lakhs shares for a cost of Rs. 10 lakhs. To substantiate the same the assessee has submitted the purchase bill dated 26/3/2012, the bank statement disclosing the payment made on 27/3/2012 for purchase consideration. Money receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the shares, but the payment has been made through banking channels and same has not been disputed. Off market purchase of shares is not prohibited. This investment was also disclosed in the balance sheet of the earlier years. The shares were also transferred in the Demat account of the assessee. To the sale the entire sale of shares was made through online mechanism on floor of Bombay stock exchange through/broker M/s LFC securities private limited on making the payment of securities transaction tax, service tax and stem duty et cetera. The shares were also delivered by the assessee through Demat account on sale of the shares. With respect to the statement of the assessee on oath recorded under section 131 of the act it was submitted that assessee has declared the transaction as genuine. He further submitted that the securities and Exchange board of India had not issued any notice to the assessee and has not claimed any adverse charges against the assessee and stockbroker of the assessee to establish the involvement of the assessee in manipulation of share prices. The learned assessing officer has not disproved the transaction and has not pointed out a single discrepancy in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct to the allegation of the learned assessing officer that in response to summons issued under section 131 of the act, assessee could not justify the genuineness of the transaction, he submitted that assessee appeared before the learned assessing officer and categorically confirmed the genuineness of the transaction of purchase and sale of shares and also filed the copies of the contract made, confirmation of stockbroker, purchase bill, payment receipt, share certificate, Demat statement, bank statements, rate publication of Bombay stock exchange and advertisement issued by the seller in the newspaper. He further referred that open offer for buyback of shares and other documents are also submitted before the learned assessing officer. 16. He further submitted that the contention of the learned departmental representative that assessee has purchased the shares at the rate of Rs. 250 per share against the prevailing share price of Rs 2.52 per share is devoid of any merit. He submitted that assessee has purchased the shares at the prevailing market price at the rate of Rs. 250/- and further the listed company had made public offer to buy back the shares on 14/3/2012 at the rate of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly presumed that the purchase of shares by the assessee is non genuine. 19. When ld. AO has call records of Sarvottam Advisory services Pvt Ltd, that itself proves that that party exist, so issue of notice u/s 133 (6) to that party and its non-compliances does not go against the assessee. 20. He further referred to the decision of the honourable jurisdictional High Court and other courts as under: - i. PCIT versus Indravadan Jain HUF (ITA number 454 of 2018) Bombay High Court ii. CIT versus Shyam R Pawar 54 taxmann.com 108 Bombay High Court iii. CIT versus jamnadevi Agarwal 20 taxmann.com 529 Bombay High Court iv. PCIT versus Krishna Devi 126 taxmann.com 80 Delhi High Court v. CIT v Nilesh Jain HUF 163 taxmann.com 229 (MP) vi. PCIT V Ambalal Chimanlal Patel 162 taxmann.com 892 (Gujarat) vii. PCIT versus Kishore Kumar Mohapatra 162 taxmann.com 4 (Orissa) viii. PCIT versus Mahapatra 160 taxmann.com 567 (Orrisa) ix. PCIT versus Renu Agarwal (all about) 153 Taxman.com 578 x. PCIT versus Rita Aggarwal (Rajasthan) 152 taxmann.com 181 21. He further referred to the several decisions of the coordinate benches wherein the similar addition made under section 68 with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . For the deposit of bonus shares and stock split, the respective corporate action was taken. On 30 July 2012 nine shares for one share held by the assessee was issued at bonus and on 10 April 2013 there was a stock split from the face value of Rs. 10 per share to Rs. 1 per share. Therefore the 40,000 shares after the bonus became 4 lakhs shares available with the assessee. x. These shares were disclosed by the assessee in her balance sheet as at 31st of March 2013 at an investment of Rs. 10 lakhs. xi. The return for assessment year 2013 - 14 was also filed by the assessee. xii. Subsequently through LFC securities private limited the assessee sold. a) 1,61,500 shares at the rate of Rs. 58.65 per share is on 31 December 2013 resulting into a sale consideration of Rs. 9,464,871 by contract note number 20,512 as per settlement number 1314190. b) Subsequently on 1 January 2014 assessee sold 73,000 shares of the above company at a rate of Rs. 58.60 per share resulting into total sale consideration of Rs. 4,274,604 vide contracts note number 20633 and settlement number 1314191. c) On 6 January 2014 assessee further sold 75,500 shares at the rate of Rs. 58.70 resulting into a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion on behalf of the family. He explained that he is doing this activity for the last six - seven years as an investor. In answer to question number 12 also he gave the name of various companies which are held by the family and himself as an investment. With respect to the transaction of Surabhi chemicals and investment Ltd, he submitted that the shares were purchased from Sarvottam Advisory services private limited, transferred in the Demat account of the assessee and thereafter sold and has earned profits. Regarding the decision of purchase of the shares, he submitted that the issue is very old and therefore he is not able to give the name of the person who advised for purchase of the above share. He categorically stated that except Sarvottam advisory services private limited he has not purchased the shares from anybody else. Thereafter the learned assessing officer issued notice under section 133 (6) of the act to sarvottam advisory private limited however no reply was received. During statement recorded of Mr. Lalit Jain, he/she was shown copy of the statement of Mr. Rahul dated 19/6/2015 wherein it was confessed he has obtained the bogus long-term capital gain as an accommodat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s supported by contract notes and hence, the long-term capital gain on was genuine and not bogus. However, the AO did not accept the contention of the appellant and rejected the claim of exemption of long-term capital gain made by the appellant under section 10(38) of the act and made the addition of the said amount of Rs. 22,652,350/- as unexplained cash credit under section 68 of the act. The AO also made the addition of Rs. 1,182,617/- as commission expense incurred for taking accommodation entry as unexplained expenditure under section 69C of the act. Aggrieved by the said addition, the appellant is in appeal and has raised 04 grounds which are adjudicated as under. 8 Ground number 1 and 2 are relating to rejection of the claim of exemption of long-term capital gain made by the appellant under section 10(38) of the act and about the addition of the said amount of Rs. 22,652,350/- as unexplained cash credit under section 68 of the act. As both these grounds are relating to the same issue of the addition, there being adjudicated together. In raising these grounds, the appellant has submitted that the long-term capital gain was on unlisted securities on which STT was paid, the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was made was not earning any profit but still the stock prices increased which was the result of rigging. 8.2 the AR of the appellant in his written submission dated 28/11/2023 submitted that there are direct judicial decisions of honourable jurisdictional High Court of Bombay and ITA T regarding allowability of long-term capital gain on sale of shares of Surabhi chemicals and investment Ltd and similar stocks which were considered as penny stock by the AO. It was submitted that in case of a new spirit Sarkar versus ITO (ITA number 390/M/2020 dated 7/6/21) the long-term capital gain earned on investment made in the scrip of Surabhi chemicals and investment Ltd was allowed and the order of the AO and the CIT - A, set-aside. Similar there were two other decisions of ITAT Kolkata in case of Udit Agarwal versus DCIT (ITA number 1839/Kol/2017 dated 26/12/2018 and assessee Bala Bajaj versus ITO (ITA number 1457/Kol/2018 dated 16/11/2018) in which the appellant had earned capital gain from sale of shares of soon-to be chemical and investments Ltd. 8.3 the basic finding of the jurisdictional ITAT in case of a new spirit the circa versus ITO (supra) was that when the appellant files a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of unfounded presumptions. 8.8 in the case of PCIT versus Parasben Kasturchand Kochar, the Gujarat High Court in 130 taxmann.com 176 (Gujarat) held as under: - Xxxxxxx 8.9 I have gone through all these judicial pronouncements which are in favour of the appellant. In all the decisions the judicial view is that if shares are purchased by the appellant for which the appellant provides necessary evidence and the rates at which the sales are purchased and sold are in conformity with the prevailing market rates on the date of purchase/sale, the transaction in question cannot be treated as transactions. If the assessee is able to submit the records of purchase bills, sale beans, Demat statement and discharges the onus of establishing the transaction is to be fair and transparent, the long-term capital gain earned on such transaction of shares are eligible for exemption under section 10(38) of the act. 8.10 thus, respectfully following the decisions of honourable Supreme Court, jurisdictional High Court on the issue and especially the decision of ITAT are referred supra which are with reference to the shares of soon-to-be chemical and investments Ltd, the AO is directed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . When the assessing officer is having the details about the call record of the person who sold the shares to the assessee, wherein the question now remains of failure on the part of the assessee to produce the seller before the assessing officer. In view of such overwhelming evidence of purchase of the shares, we find that existence of the shares in the Demat account of the company cannot be denied or rejected. 29. Now the issue comes with the sales made by the assessee. Undoubtedly the assessee has sold the shares on the electronic exchange platform of Bombay stock exchange through the registered broker. The sale of the shares is time and dated stamp transaction as per the contract notes. The transaction of sale was entered through registered broker. The pay-out has happened on account of settlement of the transaction by the Bombay stock exchange. When the shares are sold on a platform of stock exchange, through the broker of the assessee, and another broker would buy such shares on behalf of his clients. Though the learned assessing officer has found that the clients who purchased the shares but, did not make any enquiry whether those are accommodation entry provider or not. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mental representative, which were also relied upon before the learned CIT appeal by the assessee, binds us judicially, unless divergent and distinguishing features are pointed out. No such efforts were made before us. 35. Hon. Delhi High Court in the case of Pr. CIT v. Smt Krishna Devi [[2021] 126 taxmann.com 80/279 Taxman 148 (Delhi)] has commented on the scope and applicability of Doctrine of Preponderance of probabilities held that evidence produced by the assessee overpowers the principle of preponderance and observed as follows:- "However, the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent". 36. Even the grounds of appeal raised by the learned AO before us is reliance on circumstantial evidence mentioned in the assessment order wherein abnormal price rise in the share of Surabhi chemical and investment Ltd without having strong financial status is challenged. The ground did not challenge that the impugned capital gain earned by the assessee has been proved as a sham transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y stocks are stated in brief. During the course of assessment proceedings, the Assessing Officer noticed that the assessee has disclosed long term capital gains of Rs. 1.45 crores arising out of sale of shares and claimed the same as exempt under section 10(38) of the Act. The relevant details thereof are tabulated below:- Name of scrip Sale value Long term capital gain Radford Global Ltd. (Earlier known as PS Global Ltd) 39,19,667 38,19,670 Surbhi Chemicals & Investment Ltd. 92,19,378 87,19,378 Pyramid Trading & Finance Ltd. (Now known as Mishka Finance & Trading Ltd) 20,14,740 19,89,740 151,53,785 145,28,788 4. The Assessing Officer noticed that all the three companies mentioned above have been identified as 'penny stock' by the Investigation Wing, Kolkata, in which prices of the shares have been rigged in order to generate bogus capital gains/capital losses. The Assessing Officer also noticed from the report prepared by the Investigation wing of Kolkata that the prices of shares of certain penny stock companies have gone up unusually and the same was not commensurate with the financial results of these companies. Accordingly, the Assessing Officer asked t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s submission, he placed reliance on the following decisions : i) PCIT Vs. Indravadan Jain HUF (ITA No. 454 of 2018)(Bom) ii) PCIT Vs. Ziauddin A. Siddiquie (ITA No. 2012 of 2017) (Bom) iii) CIT Vs. Shyam R. Pawar (54 taxmann.com 108)(Bom) iv) CIT Vs. Smt. Jamnadevi Agrawal (20 taxmann.com 529 (Bom) v) Pr. PCIT Vs. Smt. Krishna Devi (126 Taxmann.com 80 (Del) 6. The Learned AR further submitted that the companies M/s. Radford Global Ltd. and M/s. Mishka Finance Ltd. were subjected to scrutiny by the SEBI and Interim orders passed by the SEBI against both the above said companies, have been revoked subsequently. In respect of Surbhi Chemicals & Investment Ltd., SEBI has not passed any adverse order. The Learned AR also submitted that the assessee has not been subjected to any inquiry by the SEBI. Accordingly he contended that the Assessing Officer was not justified in disbelieving the transactions carried on by the assessee are not genuine by placing reliance on the general investigation report given by the Investigation Wing of Kolkata. 7. On the contrary, the learned DR heavily placed reliance on the order passed by the Assessing Officer. He submitted that the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies mentioned above, has since been revoked. In any case, it is stated by Ld A.R that the transactions carried on by the assessee were not subjected to scrutiny by SEBI at all. 10. We notice from the statement recorded by the AO from the assessee u/s 131 of the Act that the assessee herein is a Chartered Accountant. In the statement, the assessee has specifically stated that he is a long term investor, meaning thereby, he would not be watching the share price movements on day to day basis. Hence, we are unable to understand as to how that AO could observe that the assessee herein was ignorant of stock market operations. We also notice that the assessee has (a) purchased these shares by paying consideration through banking channels (b) dematerialized the shares and kept the same in the Demat account. (c) sold the shares through stock exchange platform (d) received the sale consideration through banking channels. Further, the shares have entered and exited the demant account of the assessee. We notice that the AO himself has not found any defect/deficiencies in the evidences furnished by the assessee with regard to purchase and sale of shares. As noticed earlier, the AO h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on which heavy reliance is placed by Mr. Sureshkumar. While it is true that the Commissioner extensively referred to the correspondence and the contents of the report of the Investigation carried out in paras 20, 20.1, 20.2 and 21 of his order, what was important and vital for the purpose of the present case was whether the transactions in shares were genuine or sham and bogus. If the purchase and sale of shares are reflected in the Assessee's DMAT account, yet they are termed as arranged transactions and projected to be real, then, such conclusion which has been reached by the Commissioner and the Assessing Officer required a deeper scrutiny. It was also revealed during the course of inquiry by the Assessing Officer that the Calcutta Stock Exchange records showed that the shares were purchased for code numbers S003 and R121 of Sagar Trade Pvt Ltd. and Rockey Marketing Pvt. Ltd. respectively. Out of these two, only Rockey Marketing Pvt. Ltd. is listed in the appraisal report and it is stated to be involved in the modus-operandi. It is on this material that he holds that the transactions in sale and purchase of shares are doubtful and not genuine. In relation to Assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itial or basic onus, then such conclusion of the Tribunal cannot be termed as perverse. The conclusions as recorded in para 12 of the Tribunal's order are not vitiated by any error of law apparent on the face of the record either. 7. As a result of the above discussion, we do not find any substance in the contention of Mr. Suresh kumar that the Tribunal misdirected itself and in law. We hold that the Appeals do not raise any substantial question of law. They are accordingly dismissed. There would no order as to costs. 8. Even the additional question cannot be said to be substantial question of law, because it arises in the context of same transactions, dealings, same investigation and same charge or allegation of accommodation of unaccounted money being converted into accounted or regular as such. The relevant details pertaining to the shares were already on record. This question is also a fall out of the issue or question dealt with by the Tribunal and pertaining to the addition of Rs. 25,93,150/-. Barring the figure of loss that is stated to have been taken, no distinguishable feature can be or could be placed on record. For the same reasons, even this additional question c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of shares were not doubted. Under these set of facts, the Hon'ble Bombay High Court held as under:- "....The CIT(A) came to the conclusion that respondent bought 3000 shares of RFL, on the floor of Kolkatta Stock Exchange through registered share broker. In pursuance of purchase of shares the said broker had raised invoice and purchase price was paid by cheque and respondent's bank account has been debited. The shares were also transferred into respondent's Demat account where it remained for more than one year. After a period of one year the shares were sold by the said broker on various dates in the Kolkatta Stock Exchange. Pursuant to sale of shares the said broker had also issued contract notes cum bill for sale and these contract notes and bills were made available during the course of appellate proceedings. On the sale of shares respondent effected delivery of shares by way of Demat instruction slips and also received payment from Kolkatta Stock Exchage. The cheque received was deposited in respondent's bank account. In view thereof, the CIT(A) found there was no reason to add the capital gains as unexplained cash credit under section 68 of the Act. The Tribunal while dism ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be doubted with. Accordingly, we set aside the order passed by Ld CIT(A) and direct the AO to delete the impugned additions made by him." 20. The above decision has considered following judicial pronouncements :- * Principal Commissioner of Income Tax (Central) - 1 Versus NRA Iron & Steel Pvt. Ltd. - 2019 (3) TMI 323 - Supreme Court * PR. COMMISSIONER OF INCOME TAX-1 KANPUR Versus RENU AGGARWAL - 2023 (7) TMI 288 - SC Order * Principal Commissioner of Income Tax - 31, Mumbai Versus Indravadan Jain, HUF - 2023 (7) TMI 1091 - BOMBAY HIGH COURT * Principal Commissioner of Income Tax - 3 Mumbai Versus Ziauddin A Siddique - 2022 (3) TMI 1437 - BOMBAY HIGH COURT * Principal Commissioner of Income Tax -12 Versus Smt. Krishna Devi, Hardev Sahai Gupta (Garg), Smt. Bindu Garg - 2021 (1) TMI 1008 - DELHI HIGH COURT * Commissioner of Income Tax-13 Versus Mr. Shyam R. Pawar - 2014 (12) TMI 977 - BOMBAY HIGH COURT * Commissioner of Income-tax Versus. Smt. Jamnadevi Agrawal - 2010 (9) TMI 81 - Bombay High Court * Smt. Karuna Garg, Smt. Karuna Garg, Bindu Garg, Krishna Devi, Hardev Sahai Gupta (Garg) Versus Income Tax Officer Ward - 39 (4), Ward - 38 (3), New Delhi - 2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
