9911796707
TMI Blog2024 (10) TMI 995X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be doubted with, the addition made by the AO with regard to estimated commission expenses is also liable to be deleted. Thus, orders of lower authorities are reversed. AO is directed to delete the addition u/s 68 of the act and allow assessee exemption u/s 10(38). Violation of principles of natural justice - As we completely agree with the finding of the ld. CIT (A) to the extent of the opportunity of cross examination not given to the assessee does not violate principles of natural justice because those statements were not sued for making the addition and issue is squarely covered against the assessee by the decision of Swati Bajaj [ 2022 (6) TMI 670 - CALCUTTA HIGH COURT ], this issue is not dealt with in Chirag Tej Prakash Dangi [ 2024 (2) TMI 1413 - ITAT MUMBAI ] so separate finding is given by us. Accordingly appeal of assessee is partly allowed. - Shri Prashant Maharishi, AM And Shri Raj Kumar Chauhan, JM For the Assessee : Shri Prakash G. Jhunjhunwala For the Revenue : Shri Ashok Kumar Ambastha, Sr. (DR), ORDER PER PRASHANT MAHARISHI, AM: 1. This appeal is filed by Mrs. Bhavna Lalit Jain [Assessee/appellant] for assessment year 2014 15 against appellate order passed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manipulation by the accommodation entry provider by rigging the price of the shares on stock exchange, providing exit providers for generation of long-term capital gain in the hands of several beneficiaries, which is claimed as exempt under section 10(38) of the act falsely. As assessee is also one of the beneficiaries who has earned long-term capital gain in the shares of the above company, the case of the assessee was reopened after recording of the reasons for reopening and obtaining necessary approval. as it was found that income chargeable to tax for the impugned assessment has escaped assessment, Therefore, notice under section 148 of the act was issued on 6/9/2016. 6. During the course of reassessment proceedings, assessee submitted that she has purchased 4000 shares on 26/3/2012 at a total consideration of Rs. 100,0000/ at the rate of Rs. 250 per share of Surabhi investment and chemicals Ltd. From Sarvottam advisory private limited by Bill dated 26/3/2012. The purchase consideration was paid from Axis bank account of the assessee which was acknowledged by the seller by issue of money receipt dated 26/3/2012. The assessee came into contact with the seller on the basis of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re in the above shares were transferred to the exchange. Assessee also submitted the price quotations of Bombay stock exchange on that date.to show this fact assessee submitted following evidence:- i. Sales bill come contract notes of the broker from 12/12/2013 to 26/12/2013. ii. Ledger account of the stockbroker iii. Bank statement disclosing the receipt of the sale consideration. iv. Demat statement to show that the sold quantity has gone out of it. 8. This has resulted into a long-term capital gain of ₹ 22,404,695. The assessee also submitted that the company who shares assessee has purchased and sold resulting into the above gain is an existing company, listed at the stock exchange, and with the Ministry of corporate affairs having corporate identification number wherein details about the company is mentioned along with the names of the directors of the company. 9. The learned assessing officer noted that on the basis of investigation carried out by the investigation Wing, the above sale of shares is found to be suspicious. The learned assessing officer issued summons under section 131 of the act along with the show cause notice to the assessee to justify why the above sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the stock market through various brokers, who statements have been recorded and confirmed that the shares of this company have been used for providing long-term capital gain and short-term capital gain which is bogus. The various exit providers have also confirmed the same. 11. The learned assessing Ofc therefore she issued a final show cause notice on 19/12/2017 asking the assessee as to why the sale consideration amounting to Rs. 23,404,695/ should not be added to her total income under section 68 of the act on account of sale of shares of the above company. The assessee submitted reply on 22/12/2017 reiterating the above evidence and also submitting that there is no evidence against the assessee. The learned assessing officer rejected the same and passed reassessment order under section 143 (3) read with section 147 of the act on 29/12/2017 determining total income of the assessee at Rs. 25,461,230/ . 12. Assessee aggrieved with the same, preferred the appeal before the learned CIT (A) challenging the reopening of the assessment as well as the additions on the merits of the case, the learned CIT A dismissed the appeal of the assessee. The learned CIT A also rejected the contenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer stating that. a. Assessee has earned abnormally huge capital gain on sale of shares of a company which does not have any financial strength to have resulted into such a huge capital gain. b. learned assessing officer has categorically found that the assessee is not aware about the financial of the company or its operation, directors etc. In the statement recorded of the assessee as well as the brother-in-law of the assessee also did not justify the investment made by the assessee in the above company. i. Merely submitting the paper documents does not help the case of the assessee. ii. Assessee has not justified the genuineness of the transaction as the price of the shares on stock exchange has substantial increased in the short span of time in such increases not in consonance with the financial results of the listed company. iii. Though the assessee has sold the shares on online platform of the Bombay stock exchange which has been correspondingly purchased by the entry operator/exit providers who are engaged in manipulating the sale price and the notices issued under section 133 (6) to the extent providers have remained not complied with. iv. Assessee in response to summons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d subdivision of shares. These shares were acquired in earlier years and for this the assessee has disclosed the same as an investment in her balance sheet for earlier years for which the return of income was filed. He submitted that the purchase is not disputed. With respect to the sale of the shares he submitted the sales bill, contract notes dated 31/12/2013 27/1/2014 placed at page number 2 5 of the paper books. He further submitted the Ledger account of the stockbroker placed at page number six, and the bank statement of the assessee wherein the receipt was received through banking channel on pay out from the Bombay stock exchange. He further referred to the Demat statement of the assessee wherein sale was recorded on 31/12/2013 wherein the number of shares has been transferred. He further referred to the Bhav copy to show that when the shares were sold the price of the script at Bombay stock exchange was the same. He further referred to the master data of the company in who shares the assessee has traded in the name of the company has changed to super space infrastructure Ltd which is listed and active. He further stated that there is a name of the various directors of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and bonus was issued by the above company. He submitted that the sale price in stock exchange is based on several factors such as market sentiment, risk appetite, market volatility, volume of trade, future growth of industry and return on investment. He further relied upon the decision of the honourable jurisdictional High Court in case of CIT versus Jamuna Devi Agarwal 328 ITR 5 65 wherein it has been held that if the purchase and sale of shares are in conformity with the market rate prevailing on respective dates, then the transaction cannot be held as nongenuine. He further relied upon the decision of the honourable Bombay High Court in case of CIT versus Shyam R Pawar (229 taxman 256) 14. With respect to the allegation of the learned assessing officer that the above transaction is sham because of the reason that the entry operators and exit providers were issued notices under section 133 (6) remained non complied with, he submitted that the assessee has sold the entire sales through online platform of Bombay stock exchange through computer-generated trading system. The assessee is unaware of corresponding buyers of trades executed at Bombay stock exchange. The assessee is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whereas the assessee had purchased the shares on 26/3/2012. Therefore, there is a difference in the period for which the seller of the share was ordered by SEBI. He further stated that in subsequent order of the SEBI on 30/9/2000 penalty of Rs. 2 lakhs on two shareholders, had been imposed, no penalty on the person from whom the assessee has purchased the shares was levied. He further stated that there is absolutely no reference of the assessee s name and transaction in the SEBI investigation and the SEBI as on today had not even issued any notice to the assessee. It was further stated that in any case, the shares purchased by the assessee cannot be believed since shares had been dematerialized on 5/7/2012 and the said certificate discloses the transfer of shares in the name of the assessee on 28/6/2012 and the period of holding such shares in assessee s Demat account exceeded 18 months. 18. He further stated that the learned AO s contention that the call record obtained from Mahanagar Telephone Nigam Ltd of the assessee and her relatives did not contain any incoming/outgoing calls made from/to the seller of the share and therefore the purchase of shares is disbelieved, he submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed before us by both the parties and mentioned in the assessment and appellate orders. 24. Brief facts of the case show that i. Assessee has purchased 4000 shares of Surabhi chemical and investments Ltd at the rate of Rs. 250 per share amounting to Rs. 10 lakhs on 26/3/2012 from sarvottam advisory private limited, shop number 1, Lalwani Bhavan, Opp. Kasturba Hospital, Sane Guruji Road, Satrasta Mahalaxmi, Mumbai 11 having permanent account number of AAMCS7291N through its director Vasudha Agarwal. ii. The assessee made payment to the above company by cheque number 7556 from her Axis bank account. iii. Sarvottam advisory services private limited has issued the receipt of the above sum by cheque number 7556 of Rs. 10 lakhs. iv. Assessee came to know that Sarvottam, advisory services private limited is a seller in the share from the advertisement published by the seller in the financial express dated March 2, 2012. v. The share certificate that has registered Folio number of 23 having distinctive number of 716651- 720650 4000 shares were issued and transferred in the name of the assessee on 28/06/2012. vi. The physical share certificate produced at page number 18 where in the transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xvi. xvi. Based on the above information, the assessee offered the sale consideration of Rs. 23,652,350 as consideration received on sale of shares whose cost of acquisition was Rs. 10 lakhs and claimed that she has on a long-term capital gain of Rs. 22,652,350/ which is exempt under section 10(38) of the act. xvii. The return of income was filed by the assessee on 31/1/2015 declaring total income of Rs. 956,480/ the income comprising in the above computation is income from house property, income from short term capital gain and income from other sources. 25. The learned assessing officer on receipt of information that assessee has made a transaction in a penny stock during financial year 2013 14 relevant to assessment year 2014 15 of Surabhi chemicals and investment Ltd selling 6,25,000 shares having the total sale consideration of Rs. 36,893,925. Based on this notice under section 148 of the act was issued to the assessee. During the assessment proceedings the learned assessing officer issued show cause notice to the assessee to explain the above transaction and issued summons under section 131 of the act to the assessee and to the brother-in-law of the assessee. When assessee w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the transaction of earning of the long-term capital gain, but the learned assessing officer further held that due to paucity of time further enquiries could not be completed. Based on this, he reached at a conclusion that the long-term capital gain on by the assessee is bogus. 26. When the matter reached before the learned CIT A, he dealt with the issue as under: 7. I have gone through the assessment order and submission made by the AR of the appellant. The facts of the case are that the appellant had claimed long-term capital gain as exempt amount in to Rs. 22,652,350/ . The AO had information from PDIT Kolkatavide letter dated 27/4/2015 regarding accommodation entry providers for long-term capital gain which involved entry operators, share brokers and money-launderers. Accordingly, the assessment of the assessee was reopened under section 147 of the act after recording reasons and after obtaining approval of the competent authority. The AO has given the details of transaction entered by the appellant, finding of investigation wing and concluded that the script dealt with by the appellant of Surabhi chemicals and investment Ltd was a penny stock which was used in providing acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of exemption of long-term capital gain under section 10(38) of the act based on the report of PDIT, investigation, Kolkata. In the said report of PDIT, investigation Kolkata there were several penny stocks which were identified and one such penny stock was that of Surabhi chemicals and investments Ltd in which the appellant had invested. The findings of the AO with reference to the investment in the said share was that the appellant was ignorant about the share transaction and stated in a statement that her brother-in-law Mr. Lalit Jain was aware about her investment. But the AO further held that Mr. Lalit general involved in steel trading business and not actively engaged in the share trading. Thereafter, the AO has given the details as to how the price of share of sewer be chemical and investment Ltd increased from Rs. 25.52 to Rs. 81.10 without there being any worthwhile profit earning ability of the said company. The AO is also reproduced the statement of the appellant and brother-in- law Mr. Lalit Jain in the assessment order. The AO is also given details about the companies who had sold the shares to the appellant and the companies to move the appellant subsequently sold the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guments of the revenue if no entry provider has named the assessee in any of his statements or revenue fails to file any such evidence. 8.5 from the facts of the appellant s case as dated by the AO, the appellant has given all the details short by the AO and there is no evidence that the appellant was named by any of the entry providers. Even there are no evidence of rigging of share prices with reference to the script of Surabhi chemicals and investments Ltd, in the investigation carried by Sebi. Merely because the price of the share of Surabhi chemicals and investments Ltd went up substantially cannot be the ground for disallowance of exemption under section 10(38) of the act in absence of any wooden says of naming the appellant by entry providers, evidence of cash payments for getting the entries all the evidence of rigging of prices of shares in question. 8.6 the AR also has relied upon the following decision of the jurisdictional High Court s and Supreme Court s 1. PCIT versus Renu Agarwal 456 ITR 249 (SC) 2. PCIT versus Indravadan Jain HUF 3. DCIT versus Parasben K Kochar 130 taxmann.com 177 (SC) 4. ITO versus Jamnadev Aggarwal 328 ITR 656 (Bom) 5. CIT versus Shyam R Pawar 22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct was issued to sarvottam advisory private limited, however no reply was received. The assessee was also asked to produce the same or to provide its current address. The assessee has given the purchase bill dated 26 March 2012 which is placed at page number 13 of the paper book. In this purchase bill, the permanent account number of the party from whom assessee purchased the shares are also mentioned. The payment is made by an account payee cheque which is also credited in the account of sarvottam advisory private limited. Other than that, the learned assessing officer did not make any enquiry with respect to the purchase of the shares. Maybe, the assessee did not produce that party, but purchase of shares was further confirmed when the identical shares were credited in the Demat account of the assessee. Therefore, purchase of shares could not have been doubted. It is also a fact that ld. AO has made the call details of sarvottam advisory services private Limited, thus, party was in existence at that time. With respect to those shares sale certificate dated 28/6/2012 was also placed before the learned assessing officer wherein the shares were transferred in the name of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether it is a synchronized trade with the broker of the buying party. 30. As per the company who shares are traded on the stock exchange, the assessee has submitted that the name of the above company has changed to super space infrastructure Ltd, it is also listed, and active. The name of the directors of the above company are also mentioned. Regarding the increase in the prices of the share of that company, the decision of the coordinate bench in case of Uday Agarwal and Shashi Bala Bajaj have dealt with this issue. The learned CIT A relied upon those decisions, which could not be found fault with. 31. The learned CIT A has also relied on the decisions of the honourable Bombay High Court and other high courts wherein on the identical facts and circumstances such additions are deleted. 32. Securities and Exchange board of India has passed an order against Sarvottam advisory private limited from whom the assessee has purchased shares, however the period of investigation was different then the period in which the assessee has purchased the shares from that party. Even in the subsequent order of the SEBI no penalty was imposed on Sarvottam advisory private limited. Therefore, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e not so important, overwhelming evidence are produced, that the capital gain exemption to the assessee can be denied. 38. In view of the above facts, we do not find any infirmity in the order of the learned CIT A in deleting the addition of Rs. 23,652,350/ made by the learned assessing officer and further deletion of the addition of Rs. 1,182,617 under section 69C of the act. In the result both the grounds of appeal are dismissed. 18. Facts of the case of the assessee are identical to the facts of the case of Mrs. Seema bafna [ supra] which is decided by the same bench. 19. Further we find that in case of 2024 (2) TMI 1413 - ITAT MUMBAICHIRAG TEJPRAKASH DANGI VERSUS ITO, WARD-26 (1) (5), MUMBAI identical issue was discussed and decided in favour of the assessee holding as under :- The assessee has filed this appeal challenging the order dated 14.12.2022 passed by the learned CIT(A), National Faceless Appeal Centre, Delhi and it relates to A.Y. 2014-15. The grievance of the assessee is that the learned CIT(A) was not justified in confirming the addition of Rs. 1.51 crores made by the Assessing Officer under section 68 of the I.T. Act, being sale process of shares alleged penny stoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO also took the view that the assessee may have incurred commission expenses in getting bogus long term capital gains and accordingly estimated the commission expenses incurred on procuring bogus long term capital gains as Rs. 7 lakhs and assessed the same u/s 69C of the Act. The learned CIT(A) confirmed the addition and hence the assessee has filed this appeal before the Tribunal. 5. The Learned AR submitted that the assessee is a regular investor in shares. He submitted that the assessee has purchased shares in physical mode by paying purchase consideration through banking channel. Subsequently, the shares were dematerialized. Later on, they were sold in the platform of the Bombay Stock Exchange. The sale consideration has been received by way of account payee cheque. He submitted that the assessee has furnished all the required documents to prove the factum of purchase and sale of shares. He submitted that the Assessing Officer did not find any deficiency/defect in the documents so furnished by the assessee. The learned AR submitted that all the companies are still active in the stock exchange and hence it cannot be considered as bogus companies. He submitted that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has affirmed the decision rendered by Hon'ble Allahabad High Court, wherein the Hon ble High Court had held that the Assessing Officer could not have made the addition on the basis of the facts pertaining to completely unrelated person. In the instant case also, the Assessing Officer has drawn adverse inference on the basis of the general report given by the Investigation Wing. 9. We heard the parties and perused the record. We notice that the assessing officer has primarily placed reliance on the report given by the Investigation wing of the Income tax department, Kolkata to arrive at the conclusion that the long term capital gains reported by the assessee is bogus in nature. We notice that the investigation report prepared by Investigation wing, Kolkatta is a generalized report with regard to the modus operandi adopted in manipulation of prices of certain shares and generation of bogus capital gains. We notice that the AO has placed reliance on the said report without bringing any material on record to show that the transactions entered by the assessee were found to be a part of manipulated transactions, i.e., it was not proved that the assessee has carried out the transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through these suspected brokers, on whom there was an investigation conducted by the Department. Once the onus on the Department was discharged, according to Mr. Sureshkumr, by the Revenue-Department, then, such a finding by the Tribunal raises a substantial question of law. The Appeal, therefore, be admitted. 4. Mr. Gopal, learned Counsel appearing on behalf of the Assessee in each of these Appeals, invites our attention to the finding of the Tribunal. He submits that if this was nothing but an accommodation of cash or conversion of unaccounted money into accounted one, then, the evidence should have been complete. Change of circumstances ought to have, after the result of the investigation, connected the Assessee in some way or either with these brokers and the persons floating the two companies. It is only, after the Assessee who is supposed to dealing in shares and producing all the details including the DMAT account, the Exchange at Calcutta confirming the transaction, that the Appeal of the Assessee has been rightly allowed. The Tribunal has not merely interfered with the concurrent orders because another view was possible. It interfered because it was required to interfere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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 March 2003. The present case related to 20,000 shares of Mantra Online Ltd for the total consideration of Rs. 25,93,150/-. These shares were sold and how they were sold, on what dates and for what consideration and the sums received by cheques have been referred extensively by the Tribunal in para 10. A copy of the DMAT account, placed at pages 36 37 of the Appeal Paper Book before the Tribunal showed the credit of share transaction. The contract notes in Form-A with two brokers were available and which gave details of the transactions. The contract note is a system generated and prescribed by the Stock Exchange. From this material, in para 11 the Tribunal concluded that this was not mere accommodation of cash and enabling it to be converted into accounted or regular payment. The discrepancy pointed out by the Calcutta Stock Exchange regarding client Code has been referred to. But the Tribunal concluded that itself, is not enough to prove that the transactions in the impugned shares were bogus/sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding that there is no allegation against the assessee that it has participated in any price rigging in the market on the shares of RFL. 3. Therefore we find nothing perverse in the order of the Tribunal. 4. Mr. Walve placed reliance on a judgement of the Apex Court in Principal Commissioner of Income tax (Central)-1 vs. NRA Iron Steel (P) Ltd (2019)(103 taxmann.com 48)(SC) 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. In the case of CIT vs. Jamnadevi Agarwal (supra), the Hon ble Bombay High Court held that the transactions of purchase and sale of shares cannot be considered to be bogus, when the documentary evidences furnished by the assessee establish genuineness of the claim. In the case of PCIT vs. Indravadan Jain (HUF) (supra), the broker through whom, the assessee had carried out the transactions have been alleged to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court affirmed the decision rendered by ITAT in deleting the addition of capital gains. 14. Accordingly, in the facts and circumstances of the case, we are of the view that the decisions rendered by the jurisdictional Hon ble Bombay High Court in the cases cited above shall apply to the present case, since the AO has not established that the assessee was involved in price rigging and further the AO did not find fault with any of the documents furnished by the assessee. 15. We noticed earlier that the AO has assessed the Sale consideration of shares as unexplained cash credit u/s 68 of the Act. It is pertinent to note that the purchase of shares made in an earlier year has been accepted by the revenue. The sale of shares has taken place in the online platform of the Stock exchange and the sale consideration has been received through the stock broker in banking channels. Hence, in the facts of the case, the sale consideration cannot be considered to be unexplained cash credit in terms of sec. 68 of the Act. 16. Since we have held that the sale transactions of shares cannot be doubted with, the addition made by the AO with regard to estimated commission expenses is also liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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