9911796707
TMI Blog2023 (9) TMI 1566X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO s inference. 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 general observation in respect of share brokers on whom survey action was conducted by Directorate of Investigation Wing of Kolkata who had allegedly accepted the role in providing accommodation entry of bogus/ long term capital gain first of all such a reference is wholly out of context because assessee has not dealt with any of these brokers. Two statements of such brokers were also provided to the assessee by the AO but no way they were connected to the assessee nor assessee has dealt with them nor is assessee s name figuring anywhere. The assessee had made transaction of purchase and sale of shares through RBK Share Broking Limited against which there is no such enquiry or information that this broking entity was involved in any kind of accommodation entry. Although these brokers have given the list of various scrips in which they have done the trading in shares for providing accommodation entry and one of the scrip mentioned was M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dual and promoter of Shreepati Group Builders and Developers, who had filed her return of income for A.Y. 2013-14 at Rs. 63,51,310/- on 28/03/2015. Later on assessee s case was reopened u/s. 147 by issuance of notice u/s. 148 dated 19/10/2016, on the ground that information has been received from Directorate of Investigation Wing of Kolkata that assessee availed LTCG by showing investment in penny stock company in the scrip of M/s. Shreenath Commercial Finance Ltd. which was claimed as exempt by the assessee u/s. 10(38) amounting to Rs. 7,28,88,736/-. The relevant reasons incorporated in the assessment order reads as under:- An information has been received from the Directorate of Investigation that an organized racket of generating bogus entries of LTCG in penny stock have been unearthed as a result of investigation carried out throughout the country. As a result of this investigation, 64811 beneficiaries who have taken bogus entries of LTCG amounting to Rs 38,000 crores have been identified. Smt. Veena Chaturvedi having PAN ADCPC8995K who is assessed in this circle has also availed of such an entry of Rs 8,29,88,876/ The same is reflected in the return of Income for AY 2013-14 by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he shares were not acquired through any preferential allotment; b. Impugned shares were purchased and sold online on the Recognized Stock Exchange; c. The payment of purchase was made and consideration for sale was received through banking channels; d. The transaction of sale and purchase of shares was effected through a reputed Registered Broker; e. STT was duly paid on the impugned transactions f. The assessee or her family has no connection of whatsoever nature with the Promoters of the company, Shreenath Commercial and Finance Limited. 6. Besides this, assessee also submitted following evidences in support of the said transaction:- a. Copy of contract note for purchase and sale of shares of the company b. Copy of Demat Account reflecting receipt and transfer of shares of the company c. Extract of ledger account of Share Broker in assessee's books of accounts d. Bank Statement reflecting payment on purchase and receipt of consideration on sale of shares of the company. 7. The ld. AO after detailed discussion has treated the entire long term capital gain of Rs. 8,29,88,876/- as bogus and added u/s. 68. First of all, he has referred to the information received from Investigati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er important point noted by the ld. AO that, certain enquiries were also done in the case of exit providers who had purchased the shares of M/s. Shree Nath Commercial Finance Ltd from the Chaturvedi family. The details of these six entities have been reproduced in the assessment order and one such company which he has drawn adverse inference is with regard to Moryo Industries Ltd and other entities also and he noted that SEBI vide its Interim Order dated 04/12/2014 in the case of Moryo Industries Ltd has noted that M/s. Moryo group who had been providing funds to the various companies buying the shares from the allottees, related to one Shri Giriraj Kishore Agarwal who was the common promoter of various entities including M/s. Shree Nath Commercial Finance Ltd. These entities have received funds from M/s. Moryo Industries Ltd in the form of investment on loans and advances and these funds have been transferred with other entities providing exchange to the allottees. One important fact which he has relied upon and gathered those information, rather his observations are flowing from the Interim order dated 04/12/2014 of the SEBI, who has banned these exit providers vide its Interim o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of LTCG to the beneficiaries. 10. The ld. CIT (A) in his very detail order has confirmed the addition by and large incorporating same details and reasoning given by the ld. AO in the assessment order. 11. Before us ld. Counsel, first of all submitted that, this issue is squarely covered by the decision of the Co-ordinate Bench in the case of assessee s husband Shri Rajendra Chaturvedi and M/s. Pallavi Pandey in ITA No.7124 7581/Mum/2019. The facts and circumstances of the assessee s case and the said case were identical, which has been stated to be as under:- a. In both the cases the issue under consideration was addition u/s 68 of the Act of sale proceeds of shares of Shreenath Commercial and Finance Limited, by alleging long term capital gain claimed as exempt u/s 10(38) of the Act on sale of said shares as bogus. b. The decision to purchase and sell the shares was taken by Mr. Rajendra Chaturvedi, husband of the assessee, on behalf of all the members of his family. c. The shares held by the Chaturvedi Family were purchased during March, 2011 and sold during period beginning from August, 2012 to February, 2013 on the recognised stock exchange through reputed brokers. d. In both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -11 and immediately they were split and prices were rigged from Rs. 25.4/- on 01.04.2011 to approximately Rs. 500/- (Page 21 of the Assessment Order) On the above basis the Ld. A.O. has alleged that the financials, business profile, trading volume and correlation with SENSEX on the stock exchange, did not justify the increase in the share price of the company and that the share prices were manipulated and rigged by the operators. [Ld. CIT(A)'s findings on this aspect, which are identical to those of Ld. A.O.'s, are contained in para 5.8 to para 5.13 on pages 23 through 29 of Ld. CIT(A)'s Order] Assessee's Submission: In his statement recorded u/s 131 of the Act on 04.05.2016 during the course of impugned assessment proceedings, Shri Rajendra Chaturvedi, husband of the appellant, in response to question no. 10 had stated that he had some knowledge about trading of shares and that he handled the trading/investment in shares/securities on behalf of his family members, including his wife, the appellant, as they have no knowledge about trading in shares (Page 10 of the Assessment Order). Accordingly, Shri Rajendra Chaturvedi, has made investments in almost 50+ scrips on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was checked and the decision to sell the scrip was taken. (Page 11 to 12 of the Assessment Order) Accordingly, the assessee's shares of Shreenath Commercial and Finance Limited were sold on 16.01.2013, 18.01.2013 and 21.01.2013 at average rates of Rs. 86/-, Rs. 81 and Rs. 791- respectively through recognised stock exchange at prevailing market prices. The shares of Shreenath Commercial and Finance Limited held by other members of the assessee's family were also sold during a similar period Therefore, the decision of purchase and sale of shares of Shreenath Commercial and Finance Limited was purely a business decision for assessee and her family, based on factors such as price movement of the scrip, low risk involved, market information, etc, and not only on the basis of the financial performance of the said company Moreover, nowhere in his statement recorded u/s 131 of the Act, has Shri Rajendra Chaturvedi ever admitted to being involved in any alleged racket of rigging or manipulation of prices of any shares or providing/obtaining accommodation entries of bogus LTCG/Loss or any other nature, In the case of Swati Luthra vs. ITO [2020] 115 taxmann.com 167 (Delhi - Trib.). [P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ily (Pages 23 and 24 of the Assessment Order). The Ld. A.O. has further mentioned an order passed by SEBI on 04.12.2014 in the case of Moryo Industries Limited vide order no. WTM/RKA/140/ISD/2014, one of the six alleged exit providers of the impugned shares for the Chaturvedi family. On the basis of the said order, the Ld. A.O. has endeavoured to depict a nexus between Moryo Industries Limited, Essar India Limited, Rupak Developers Private Limited, Insight Multitrading Private Limited, (4 of the 6 alleged exit providers of the impugned shares for the Chaturvedi family) and Shreenath Commercial and Finance Limited, as all the concerns allegedly have a common promoter i.e. Mr. Giriraj Kishore Agarwal (Page 25 of the Assessment Order) The Ld. A.O. had reiterated that on verification of trading details of the scrip M/s Shreenath Commercial and Finance Limited, it is seen that the 6 alleged exit providers (refer table on page 23 of the Assessment Order) have purchased shares from assessee and her family to provide accommodation entry in terms of LTCG and that the said alleged exit providers were banned in the order passed by SEBI on 04.12.2014 in the case of Moryo Industries Limited. Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 persons/entities do not contain the name of either Shreenath Commerical and Finance Limited or the appellant or any members of her family. the asses 0.2 3 Moreover, the said Interim SEBI Order dated 04.12.2014, has been later revoked vide Final Order dated 21 September, 2017 vide Order No. SEBI/WTM/MPB/EFD-1-DRA-IV/32/2017 by holding that there were no adverse findings against the impugned persons/entities with respect to their role in the price manipulation in the scrip of Moryo Industries Limited. [Pages 180 through 189 of the Legal Paperbook (Part 2)] In this regard, it is the appellant's submission that the impugned assessment order was passed on 24.11.2017 i.e. after the above mentioned Final SEBI Order was passed on 21.09.2017 revoking the Interim SEBI Order on which the Ld. A.O. had placed reliance. However, the Ld. A.O. conveniently chose to ignore the same. Further, there has been no enquiry either by the SEBI or by any other Government Agency in the case of the appellant, her family or Shreenath Commercial and Finance Limited. As stated in Ld. A.O.'s contention, he had also endeavoured to depict a connection between Shreenath Commercial and Finance Limited and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment Order) The Ld. A.O. had also reproduced the relevant extracts of the statements of 4 share brokers who had stated that they had facilitated various paper/bogus entities to trade in shares of Shreenath Commercial and Finance Limited for providing accommodation entry of bogus LTCG. These statements were provided to the assessee and also confronted to her husband Mr. Rajendra Chaturvedi The Ld. A.O. further stated that as per the statement of one Mr. Ritesh Jain, it is alleged that M/s. Manu Stock Broking is a broking house for some of the exit providers related to sale of shares by Chaturvedi Family (Page 30 of the Assessment Order). [Ld. CIT(A)'s findings on this aspect, which are identical to those of Ld. A.O.'s, are contained in para 5.21 on pages 34 through 40 of Ld. CIT(A)'s Order] Assessee's Submission: The assessee submits that the 4 alleged share brokers whose statements were provided to the assessee by the Ld, A.O., are not known to the assessee or her family respect o The assessee and her family have entered into transaction of purchase and sale of shares through the following reputed registered brokers Kotak Securities Limited Geojit BNP Paribas Limi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hom have replied and submitted the requisite details. (Pages 39 through 40 of the Assessment Order) On verification of financial statements submitted by a few of the other alleged exit providers, the Ld. A.O. concluded that they have offered meagre income for taxation, have no substantial fixed or current assets, do not have a major employee base, and accordingly, these are paper/bogus entities which are not doing any real business and have been used for providing accommodation entries [Ld. CIT(A)'s findings on this aspect, which are identical to those of Ld. A.O.'s, are contained in para 5.25 and para 5.26 on pages 45 through 46 of the Ld. CIT(A)'s Order] Assessee's Submission: The persons/entities to whom notice u/s 133(6) of the Act were issued are not known to the assessee or members of her family. The assessee has not entered into any kind of transaction with the said parties. The Ld. A.O. himself has not been able to establish the nexus between the parties and the In the assessment order itself, the Ld. A.O. has admitted that most of the parties have replied that they DO NOT have any transaction with the assessee (Page 39 of the Assessment Order), The Ld. A.O. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... VC/2022-23), discuss the same issue i.e. which entry provider sold the shares of Shreenath Commercial and Finance Limited to Veena Chaturvedi. Accordingly, in respect of this aspect, the second report is taken as the base for the purpose of this submission. The second report makes a reference to the hearing conducted on 14.12.2022, wherein the Hon'ble Bench had requested/directed the Ld. DR to submit a factual report based on evidences/documents available with the AO regarding any information called for from the BSE or other Stock Exchange to arrive at the conclusion that the assessee had purchased penny stock from entry providers and sold the same to exit providers to avail the benefit of bogus LTCG. In para 6 of the second report, names of 9 persons have been reproduced, who have allegedly sold shares of Shreenath Commercial and Finance Limited to Veena Chaturvedi on the basis of raw trading data of Shreenath Commercial and Finance Limited. In subsequent para 7 of the second report, it has been stated that the need for enquiries by Assessing Officer during the course of assessment proceedings did not arise, as the enquiries were already made with BSE regarding raw trading dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Calcutta High Court in the case of PCIT vs. Swati Bajaj [ITAT/6/2022]. The decision in the said case takes a different view from that of the other High Courts. It casts the onus of proving the genuineness of the transaction on the assessee. However, with utmost repsect it is submitted that the decision in the case of Swati Bajaj should not be followed for the following reasons: a. There are several decisions of the Hon'ble Jurisdictional High Court of Bombay, which are in favour of the assessee in respect of the issue under consideration. It is a well settled position in law that the decision of the Hon'ble Jurisdictional High Court would have higher precedence value than the decision of the Hon'ble Non-Jurisdictional High Court on the Tribunal. Reliance is placed on the decision of the Hon'ble ITAT, Mumbai in the case of Sint. Priyanka Miglani and others (ITA No. 2531/Mum/2021). [Para 5.23 from Pages 167 to 168 of the Legal Paperbook (Part 2)]. The relevant operative extract is reproduced as under: 5.23. We find that the Id. DR before us vehemently relied on the recent decision of Hon'ble Calcutta High Court in the case of PCIT vs Swati Bajaj reported in 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ai in the case of Nishit Rameshchandra Shah (ITA No. 116/Mum/2022), wherein the decision in the case of Swati Bajaj (supra) has been distinguished. [Page 130 to 137 of the Legal Paperbook (Part 2)] f Without prejudice to the above, reliance is also placed on a very recent decision of Hon'ble Jurisdictional High Court of Bombay in the case of PCIT vs Indravadan Jain, HUF Income Tax Appeal No. 454 of 20181, wherein the deletion of capital gains on alleged penny stock u/s 68 of the Act was upheld by the Hon'ble Jurisdictional High Court. When there are conflicting judgements of various High Courts, the Hon'ble Supreme Court in the case of Vegetable Products 188 ITR 192 (SC), had held that the construction that is favourable to the assessee should be adopted. Hence, on the basis of this principle, it is our humble submission that the decision of the Hon'ble Calcutta High Court rendered against the assessee, may not be followed in view of the favourable decision of the Hon'ble Jurisdictional High Court of Bombay. 14. During the hearing we had inquired from the Ld. Counsel, firstly, the status of the company; secondly, whether the trading of the company was ever banne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rice movement of scrip not backed by financial performance' above, which are summarised as under: 1. The shares were purchased in March, 2011 when financial performance of the company was good and profits had increased substantially as compared to previous year. 2. The shares held by the assessee were sold in January, 2013 when there was requirement of funds. The shares held by her family were sold during similar period. 3. The decision to purchase and sell the impugned shares was taken by assessee's husband, on behalf of the entire family, which was a purely business decision, based on factors such as price movement of the scrip, low risk involved, market information, etc. and not only on the basis of the financial performance of the said company. 4. The impugned shares were purchased from the market based on movement of the scrip. This is NOT a case of preferential allotment of shares where the future plans and relationship with promoters plays a vital role to decide the investment decision. The business profile shows that the company was not engaged in to any substantial activity The business profile shows that the company was not having any future plans which could attr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TCG/Trading Loss The whole process of rigging value of shares on the stock market was a prearranged and a managed process for booking accommodation entry of bogus LTCG/STCG in garb of sale proceeds on sale of shares 1. There was no preferential allotment of shares in the assessee's case. 2. The shares were purchased and sold on recognised stock exchange at prevailing market prices through reputed brokers. 3. Payment for purchase and sale were made /received through banking channels 4. The assessee had provided all documentary evidences during course of assessment and appellate proceedings. 5. There has been no enquiry by SEBI or any other agency on the assessee or her family members. 6. The assessee or her family had no connection with either the share brokers or alleged exit providers mentioned by the Ld. A.O. 7. There is no mention of assessee's name in any material or statements confronted by the Ld. A.O. to assessee. 8. Neither the assessee nor her family members are aware of any alleged modus operandi adopted for rigging and manipulation of prices of impugned shares for purpose of providing accommodation entries of bogus LTCG/Loss. 9. There is no allegation regarding i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made investments in more than 50 scrips on behalf of himself and his family members and the investment in the shares of M/s. Shreenath Commercial Finance Ltd. was made by him only on behalf his wife, the assessee. The average purchase rate of the shares was Rs. 20/- per share and average 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 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld. AO was that in the case of exit providers, SEBI has given an adverse remark and all the observation on preliminary investigation by SEBI has been referred and relied upon the AO, therefore, the inference drawn by the ld. AO about the purchase of the scrips by these entities from 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have stated that they had any transaction with the assessee. Further, ld. AO has not provided and how these entities were connected with scrip of M/s. Shreenath Commercial Finance Ltd. and how they were involved in the alleged modus operandi adopted by the accommodation entry provider for bogus capital gain including the assessee, at least there has to be some primafacie 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 transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ific defect or infirmity as these were issued as per the system of the recognised stock exchange through registered brokers. Similarly, the Ld. CIT(A) has upheld the order of AO by holding that the assessee is beneficiary of a big racket whereby the prices of the shares were rigged 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
