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TMI Blog2024 (10) TMI 1081X X X X Extracts X X X X X X X X Extracts X X X X ..... n made when assessee has discharged her initial onus by producing all the evidence. AO should have penetrated those evidence and thrown back onus on the assessee, which is lacking. Regarding the ignorance of the assessee with respect to the financial statements of the company who shares assessee purchased, it is clear from the statement that assessee stated that Mr Lalit Jain has carried out these transactions being part of the family. It is not unusual that brother-in-law of the assessee carried on these transactions. Mr Jain in statement has replied to most of the queries. However admittedly, he failed to answer who are the directors and what is the business of the company, but those questions are not so important, when overwhelming evidence are produced, that the capital gain exemption to the assessee can be denied. No infirmity in the order of CIT-A in deleting the addition - Decided in favour of assessee. - 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. ITA number 1120/M/2024 is filed by The Income Tax Officer-28 (3) (1), Nav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion entry of long-term capital gain (LTCG) which resulted into unearthing of a huge syndicate of entry operator, share broker and money-laundering who are involved in providing bogus accommodation entries of long-term capital gain, long-term capital loss and others. During the investigation it was also observed that large-scale manipulation has been/is being done in market price of shares of certain companies listed on Bombay stock exchange by certain persons working in a syndicate to provide accommodation entries of tax-exempt long-term capital gain to large number of people s in lieu of unaccounted cash. In this case, the assessee has filed return of income on 31/1/2015 but the capital gain was shown by her in return of income for assessment year 2014-15 at Rs. 22,652,350/ and claimed exempt long-term capital gain from transaction on which securities transaction tax is paid. Information has been received regarding transaction in penny stock shares entered by Shrimati Seema Parasmal Soni [ALGPS6788Q] with a view to earning of exempt long-term capital gain on which no tax liability arises. It has been gathered that assessee has entered this transaction in penny stock which are str ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer recorded the findings in the case of the assessee as under: - a. The assessee in her return of income does not show substantial trading activity or investment in shares of listed company and as per the statement she does not even know as to whether she has made transaction in share market during last 6 years and she was completely ignorant about the share transaction of Surabhi chemical and investments Ltd. Further she denied having ever seen the share certificate of the above company and expressed complete ignorance about utilisation of funds out of the sale proceeds of the shares. The AO found that on the one hand in return of income of the assessee exempt long-term capital gain of Rs. 22,652,350/ has been declared on the other hand the assessee herself is showing complete ignorance about the transaction on which such exempt long-term capital gain is claimed. It was stated by her that her brother-in-law may answer all the queries. Therefore, the statement of his brother-in-law was also recorded wherein it is seen that he is involved in steel trading business and besides having irregular share activities is also not actually actively engaged in share trading. The learned asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h are unaware about the nature of the business of the company, directors, place of business, whether it was a profit making or loss-making concern and even after purchase, financial performance of the same company was not tracked., h. The AO has issued a notice under section 133 (6) of the act to the person from whom the shares were acquired, however no response was received, and he was not produced. He further relied on the statement of some of the beneficiaries and noted about suspicious exit providers. 6. Thus, the AO issued a show cause notice once again on 5/12/2017 which was replied to by the assessee on 19/12/2017. The assessee submitted the details of the long-term capital gain providing. i. Copies of Purchase bill giving name and address of the party along with PAN ii. Details of Payment by cheque for purchase iii. Receipt of sellers of shares to the assessee iv. Bank account of assessee where shares purchase consideration paid. v. Photocopy of physical shares of the above company vi. Demat account where the physical shares were dematerialised. vii. Copy of Financial express where the sellers of the shares issued notice of sale of the shares. viii. Notice of Bonus and spli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al. 11. The learned departmental representative vehemently supported the order of the learned assessing 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 sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee. He further stated that there was a corporate announcement of the company for issue of bonus shares and 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 infrastruc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares at fair market price prevailing at the relevant point of time further the shares have been also subdivided 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. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it transaction of the assessee for the reason that the period of investigation pertain to 10/4/2013 24/9/2013 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 dematerialised 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/outgoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perused the orders of the learned lower authorities. We have also carefully considered the several decisions cited 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xv. This payment has been received by the assessee through the broker in the Axis bank account of the assessee. 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 summ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased on this show cause notices were issued to the assessee which was replied by the assessee substantiating 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 one 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 PD ITA Calcutta wide 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 wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be relied as credible evidence for making the addition. 8.1 the AO has made the addition of rejecting the claim of exemption of long-term capital gain under section 10 (38) of the act based on the report of PD ITO, investigation, Kolkata. In the said report of PD 80, investigation Calcutta there were several penny stocks which were identified and one such penny stock was that of sewer be 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was versus DCIT (supra) and assessee Bella Bajaj versus ITO (supra) have opined that there would not be any merit in the arguments 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 soon to-be chemicals and investments Ltd, in the investigation carried by Sebi. Merely because the price of the share of soon-to-be 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchase, the assessing officer made an enquiry at paragraph number 6.7 of the order wherein a notice under section 133 (6) of the act 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with LFC securities private limited who sold shares on behalf of the assessee and issued contract notes and sale bills to enquire whether it is a synchronised 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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